<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to
-------------- ---------------
Commission file number 0-25890
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International Alliance Services, Inc.
- - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2769024
- - ------------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
10055 Sweet Valley Drive, Valley View, Ohio 44125
- - --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) 216-447-9000
---------------------------
NOT APPLICABLE
- - --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
Outstanding At
Class of Common Stock July 31, 1997
--------------------- ----------------
Par value $.01 per share 37,886,655
-----------
Exhibit Index is on page 16 of this report.
Page 1 of 18 Pages
<PAGE> 2
INTERNATIONAL ALLIANCE SERVICE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION: Page
<S> <C>
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Income -
Three and Six Months Ended June 30, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flow -
Six Months Ended June 30, 1997 and 1996 5
Notes to the Consolidated Condensed Financial Statements 6-7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 2 - Changes in Securities 12
Item 4 - Submissions of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
INTERNATIONAL ALLIANCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- ---------
(unaudited) (audited)
ASSETS
<S> <C> <C>
Investments:
Fixed maturities held to maturity,
at amortized cost $ 15,013 $ 15,481
Securities available for sale, at fair value:
Fixed maturities 43,540 35,471
Equity securities 8,725 9,213
Mortgage loans 3,684 3,685
Short-term investments 1,015 4,799
-------- --------
Total investments 71,977 68,649
Cash and cash equivalents 27,994 39,874
Accounts receivable, less allowance
for doubtful accounts of $313 and
$284, respectively 18,238 7,610
Excess of cost over net assets of business
acquired, net of accumulated amortization
of $716 and $33, respectively 41,443 6,048
Net assets held for disposal 22,286 22,999
Other assets 30,207 22,150
-------- --------
TOTAL ASSETS $212,145 $167,330
======== ========
LIABILITIES
Losses and loss expenses payable $ 43,987 $ 41,099
Unearned premiums 19,796 18,637
Notes payable and capitalized leases 6,733 3,211
Income taxes 4,235 1,994
Accrued expenses 4,527 5,355
Other liabilities 15,272 5,712
-------- --------
TOTAL LIABILITIES 94,550 76,008
-------- --------
SHAREHOLDERS' EQUITY
Common stock 375 338
Additional paid-in capital 105,001 80,446
Retained earnings 10,460 6,842
Net unrealized appreciation of investments
(net of tax) 1,759 3,696
-------- --------
TOTAL SHAREHOLDERS' EQUITY 117,595 91,322
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $212,145 $167,330
======== ========
</TABLE>
See the accompanying notes to the Consolidated Condensed Financial Statements.
-3-
<PAGE> 4
INTERNATIONAL ALLIANCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1997 1996 1997 1996
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $ 21,088 $ 7,346 $ 37,384 $ 16,666
Expenses:
Operating expenses 10,349 476 16,524 2,486
Losses and loss adjustment expenses 4,594 3,901 9,423 8,471
Policy acquisition expenses 3,114 1,660 5,345 3,407
-------- -------- -------- --------
Total expenses 18,057 6,037 31,292 14,364
-------- -------- -------- --------
Income from continuing operations before
income tax expense 3,031 1,309 6,092 2,302
Income tax expense 798 538 1,750 876
-------- -------- -------- --------
Income from continuing operations 2,233 771 4,342 1,426
Loss from discontinued operations (179) -- (713) --
-------- -------- -------- --------
Net income $ 2,054 $ 771 $ 3,629 $ 1,426
======== ======== ======== ========
Earnings per common and common share equivalents:
Primary and fully diluted:
Income from continuing operations $ .06 $ .04 $ .11 $ .08
Loss from discontinued operations -- -- (.01) --
-------- -------- -------- --------
Net income per share $ .06 $ .04 $ .10 $ .08
======== ======== ======== ========
Weighted average common and common share
equivalents, primary and fully diluted: 52,022 16,956 51,329 16,956
======== ======== ======== ========
</TABLE>
See the accompanying notes to the Consolidated Condensed Financial Statements.
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<PAGE> 5
INTERNATIONAL ALLIANCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
--------- ---------
(unaudited)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,792 $ 2,751
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturities, held to maturity (209) --
Purchases of fixed maturities, available for sale (9,501) (8,549)
Purchase of equity securities -- (248)
Redemption of fixed maturities, held to maturity 600 --
Sale of fixed maturities, available for sale 2,658 7,195
Sale of equity securities 663 270
Principal receipts on mortgage loans 1 782
Change in short-term investments 3,784 (1,741)
Change in long-term investments -- 90
Business acquisitions, net of cash acquired (23,958) --
Acquisition of property and equipment (818) (125)
-------- --------
Net cash used in investing activities (26,780) (2,326)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from debt 1,822 --
Repayment of debt (2,201) (30)
Proceeds from stock issuances 5,487 --
Pre-merger dividends paid to parent -- (875)
Pre-merger capital contribution -- 298
-------- --------
Net cash provided by (used in) financing activities 5,108 (607)
-------- --------
Net decrease in cash and cash equivalents (11,880) (182)
Cash and cash equivalents at beginning of period 39,874 2,694
-------- --------
Cash and cash equivalents at the end of period:
Continuing operations 27,994 2,512
Discontinued operations 755 --
-------- --------
Total cash and cash equivalents at end of period $ 28,749 $ 2,512
======== ========
</TABLE>
See the accompanying notes to the Consolidated Condensed Financial Statements.
-5-
<PAGE> 6
INTERNATIONAL ALLIANCE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL
In the opinion of management of International Alliance Services, Inc.
(the "Company"), the accompanying unaudited consolidated condensed
interim financial statements reflect all adjustments necessary to
present fairly the financial position of the Company as of June 30,
1997 and the results of its operations and cash flows for the periods
ended June 30, 1997 and 1996. The results of operations for such
interim periods are not necessarily indicative of the results for the
full year. The 1996 consolidated balance sheet was derived from the
Company's audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996. Certain reclassifications have
been made to the 1996 financial statements to conform to the 1997
presentation.
2. CALCULATION OF EARNINGS PER COMMON AND COMMON SHARE EQUIVALENTS
Income from continuing operations for the three and six months ended
June 30, 1997 was adjusted to reflect the effect of all interest
savings and benefits and the related tax effects under the modified
treasury stock method. The computation of fully diluted earnings per
share under the modified treasury stock method resulted in no
reportable dilution for the periods ended June 30, 1997. Modifications
to income were not required for the periods ended June 30, 1996.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
------------------ ----------------
Primary and Fully Diluted Primary and Fully Diluted
------------------------- ------- -----------------
(in thousands) (in thousands)
<S> <C> <C>
Income from continuing operations $ 2,233 $ 4,342
Interest expense reduction net of tax 89 178
Interest income net of tax 556 848
------- -------
Adjusted income from continuing operations 2,878 5,368
Loss from discontinued operations (179) (713)
------- -------
Adjusted net income $ 2,699 $ 4,655
======= =======
</TABLE>
The Company computed earnings per common and common share equivalents
under the modified treasury stock method as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
Primary and Fully Diluted: 1997 1996 1997 1996
------- ------ ------ -------
<S> <C> <C> <C> <C>
Weighted average common shares 35,900 16,956 35,207 16,956
Additional stock equivalents less 20% limitation
on assumed repurchase 16,122 -- 16,122 --
------ ------ ------ ------
52,022 16,956 51,329 16,956
====== ====== ====== ======
</TABLE>
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<PAGE> 7
INTERNATIONAL ALLIANCE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3. DISCONTINUED OPERATIONS
Effective July 23, 1997, the Company completed the sale of
substantially all of its Environmental Services Group by selling the
stock of certain U.S. companies and certain Canadian assets for
$24,000,000 (which approximates book value) made up of $8,000,000 in
cash and interest bearing notes in the amount of $16,000,000. The notes
will be paid to the Company as follows:
$8,000,000 due 7/23/98
$1,000,000 due 7/23/99
$7,000,000 due 7/23/99
In addition, there is an option to purchase the stock of Republic
Environmental Systems (Cleveland), Inc. that must be exercised by
August 17, 1997. The option to purchase is subject to certain due
diligence conditions. The related results of operations reflected as
discontinued operations include the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
------------------ -----------------
<S> <C> <C>
Revenues $ 8,537 $ 16,088
======== ========
Loss before taxes $ (125) $ (915)
Income tax expense (benefit) 54 (202)
-------- --------
Net loss $ (179) $ (713)
======== ========
</TABLE>
Net assets of the discontinued operations at June 30, 1997 consist of
(in thousands):
<TABLE>
<S> <C>
Cash $ 755
Accounts receivable, net 6,481
Property, plant and equipment, net 20,137
Excess of cost over net assets of
businesses acquired, net 3,286
Other assets 1,546
Accounts payable (2,755)
Accrued environmental costs (2,736)
Accrued expenses and other liabilities (4,428)
--------
TOTAL $ 22,286
========
</TABLE>
4. ACQUISITIONS
During the second quarter 1997, the Company acquired 100% of the stock
of Network Plus, Inc., Next Risk Management Inc., Connecticut Escrow
Company, Marvel Consultants, Inc., Environmental Safety Systems, Inc.
and ZA Business Services, Inc. and certain assets of Surety Associates
Ltd. and Eric Group, Inc. for an aggregate of 1,785,645 shares of its
common stock, warrants to purchase 90,000 shares of its common stock
for prices ranging from $12.94 to $13.06 and cash of $9,397,000. These
acquisitions have been accounted for by the purchase method of
accounting.
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<PAGE> 8
INTERNATIONAL ALLIANCE SERVICES, INC.
-------------------------------------
ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF
----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
International Alliance Services, Inc. (the "Company") is a provider of
integrated business services through its IASI Business Services Group,
and of niche market insurance products through its IASI Insurance
Services Group. The Business Services Group, formed in December 1996,
provides a wide range of outsourced services to small and mid-size
companies, including tax services, financial planning, benefits
administration, retirement planning, workers' compensation
administration, and professional employment placement. The Company
markets its business, specialty insurance and bonding products
throughout the United States.
RESULTS OF OPERATIONS
---------------------
For the three months ended June 30, 1997 and 1996, the Company reported
income from continuing operations of $2,233,000 ($.06 per common share)
and $771,000 ($.04 per common share), respectively. The $1.5 million
increase in revenues for the three month period comes as a result of
the dramatic growth that the Company has experienced since last year in
both the Insurance Services and Business Services Groups. The largest
component of the increase is primarily due to the increase in
professional fees, increases in earned premiums, lower loss and loss
adjustment expense development spread over higher premium production
and the initial consolidation of the operations comprising the Business
Services Group.
For the six months ended June 30, 1997 and 1996, the Company reported
income from continuing operations of $4,342,000 ($.11 per common share)
and $1,426,000 ($.08 per common share), respectively. The $2.9 million
increase in income from continuing operations for the six months ended
June 30, 1997 over the same period 1996 is also attributable to
increased earned premiums, lower loss and loss adjustment expense
development spread over higher premium production, and the further
consolidation of the operations comprising the Business Services Group.
The aforementioned income from continuing operations excludes revenues
and earnings from the Company's discontinued environmental services
business substantially all of which was sold in July 1997.
SEGMENT INFORMATION
-------------------
The following table presents revenues from the Company's continuing
operations by segment for the three and six months ended June 30, 1997
and 1996 (in thousands):
<TABLE>
<CAPTION>
Revenues
Three Months Ended June 30,
---------------------------
1997 % 1996 %
------- ------- ------- -------
<S> <C> <C> <C> <C>
Insurance Services Group $12,984 62% $ 7,346 100%
Business Services Group 8,104 38% -- --
------- ------- ------- -------
TOTAL $21,088 100% $ 7,346 100%
======= ======= ======= =======
<CAPTION>
Revenues
Six Months Ended June 30,
1997 % 1996 %
------- ------- ------- -------
<S> <C> <C> <C> <C>
Insurance Services Group $24,368 65% $16,666 100%
Business Services Group 13,016 35% -- --
------- ------- ------- -------
TOTAL $37,384 100% $16,666 100%
======= ======= ======= =======
</TABLE>
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<PAGE> 9
Revenues from the Company's Insurance Services Group are comprised of the
following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Premiums earned $8,355 $5,909 $16,421 $12,497
Net investment income 1,311 805 2,628 1,629
Net gain on investments 1,070 530 2,034 599
Commission Income 2,207 71 3,182 116
Other 41 31 103 1,825
------- ------- ------- -------
$12,984 $ 7,346 $24,368 $16,666
======= ======= ======= =======
</TABLE>
INSURANCE SERVICES GROUP
- - ------------------------
For the three months ended June 30, 1997, the Insurance Services Group reported
an increase in premiums earned of $2,446,000 (41%) on an increase in net written
premium of $2,643,000 (44%) to $8,640,000 over the prior year period. The
favorable impact on earned premium was effected by net written premium written
in the second half of 1996 as well as the continued growth in general liability
coverages. However the increase was offset by the diversion of Contract Surety
premium into the Gulf program referenced below, subject to new reinsurance
arrangements which will direct premium from Gulf to the Insurance Services Group
in future quarters. On a gross written basis, the Insurance Services Group
reported an increase of $3,843,000 (44%) to $12,521,000 for the three months
ended June 1997 over the prior year period. This increase is attributable to the
growth in general liability premiums.
For the six months ended June 30, 1997, the Insurance Services Group reported
increases in premiums earned of $3,924,000 (31%). Gross written premium totaled
$23,870,000 at June 30, 1997 compared to $20,129,000 at June 30, 1996, for an
increase of $3,741,000 (19%). On a net written basis, the Insurance Services
Group reported an increase of $2,254,000 (15%) to $16,976,000 from $14,722,000.
These increases were effected by the same factors which impacted the quarter
results.
For the three and six months ended June 30, 1997 commission income from the
Insurance Services' agency operations increased by $2,136,000 and $3,066,000,
respectively, to $2,207,000 and $3,182,000, respectively. The increase is
attributable to the impact of a bond treaty with Gulf Insurance Company that
culminated from the acquisition of certain assets of Midwest Indemnity
Corporation in January 1997.
Investment income was $2.4 million and $4.7 million for the three and six months
ended June 30, 1997, respectively, and includes approximately $1.1 million and
$2.0 million of gains from the sale of equity securities for the respective
three and six months periods. Investment income of approximately $1,156,000 and
$2,277,000 for the three and six months ended June 30, 1997, respectively, was
earned on investment assets totaling $71,977,000 as of June 30, 1997. The
annualized return on invested assets was approximately 6.3%.
Other income increased by $10,000 for the three months ended June 30, 1997 from
June 30, 1996. For the six months ended June 30, 1997 other income decreased by
$1,722,000 due in large part to non-recurring income from the American Sentinel
transaction recorded in the first quarter 1996.
BUSINESS SERVICES GROUP
- - -----------------------
For the quarter ended June 30, 1997, the Business Services Group reported
revenues of $8.1 million consisting primarily of professional fees and
commissions earned. For the six months ended June 30, 1997, the Business
Services Group reported revenues of $13.0 million, which also consists primarily
of professional fees and commissions earned.
A significant portion of the revenues generated by the Business Services Group
are attributable to SMR & Co. Business Services which have been consolidated for
the entire six month period of 1997. Four months of revenues for M&N Risk
Management, M&N Enterprises, Inc., MFC, Inc., (collectively the M&N Companies),
The Benefits
-9-
<PAGE> 10
Group Agency, Inc., TBG South Agency, Inc. and TBG Investment Advisors Agency,
Inc. (collectively TBG) and five months of revenue for Midland Consultants, Inc.
have been included in the Business Services Group's totals for 1997. Marvel,
Next Risk and ERIC were all merged into the Business Services Group during the
second quarter. These results are included in the Company's results of
operations for the six months ended June 30, 1997, which reflects revenues from
the date of acquisition of each of those companies. Z-A Business Services, Inc.,
which was acquired on June 30, 1997, was only included in the Company's
consolidated balance sheet for this period.
EXPENSES
- - --------
Total expenses increased $12 million to $18.1 million for the quarter ended June
30, 1997, from $6.1 million for the same period in 1996 and are primarily
attributable to the increase in operating expenses reflecting the impact of
general corporate expenses, the initial consolidation of the Business Services
Group and the acquisitions made by the Insurance Services Group.
Total expenses increased $16.9 million to $31.3 million for the six months ended
June 30, 1997 from $14.4 million for the six months ended June 30, 1996. Such
increase is primarily due to the increase in operating expenses which reflects
the impact from the initial consolidation of the Company's Business Services
Group and acquisitions made by the Insurance Services Group.
Loss and loss adjustment expense decreased as a percentage for the three months
ended June 30, 1997 and 1996 and represents 55% and 66%, respectively. For the
comparable six month period ended June 30, 1997 and 1996, such expenses
represent 57% and 68%, respectively. The Company reported increases in loss and
loss adjustment expense for the three and six months ended June 30, 1997 over
the comparable 1996 periods of $693,000 and $952,000, respectively. Such
increases are attributable to the increased premium volume for liability
coverages over last year.
Policy acquisition costs increased $1,454,000 from $1,660,000 for the three
months ended June 30,1996 to $3,114,000 at June 30, 1997 and $1,938,000 from
$3,407,000 for the six months ended June 30, 1996 to $5,345,000 at June 30,
1997. These increases correspond directly to the increase in premium volume. For
the three months ended June 30, 1997 and 1996, such costs represent
approximately 36% and 28% of premium written. For the six months ended June 30,
1997 and 1996, policy acquisition costs represent 32% and 23%, respectively.
INCOME TAXES
- - ------------
The Company recorded an income tax provision of $798,000 and $1,750,000 for the
three and six months ended June 30, 1997, respectively, reflecting an estimated
effective tax rate of approximately 26% and 29%, respectively. As the Business
Services Group earnings continue to become a larger portion of the Company's
earnings the effective tax rate will increase.
DISCONTINUED OPERATIONS
- - -----------------------
In February 1997, the Company signed a non-binding letter of intent and
confidentiality agreement to sell the Company's environmental services
operations. Consummation of the transaction occurred in July 1997. The Company
reported a loss from operations related to its discontinued environmental
services business of $179,000, net of a tax provision of $54,000, on revenues of
$8,537,000 for the three months ended June 30, 1997. The loss from discontinued
operations for the six months ended June 30, 1997 was $713,000, net of a tax
benefit of $202,000 on revenues of $16,088,000. Such quarterly operating loss is
typical for this business due to seasonality.
OTHER
- - -----
The Company's 1997 consolidated condensed balance sheet includes an increase in
excess of cost over net assets of businesses acquired of $35.4 million from $6.0
million to $41.4 million, which relates directly to the acquisitions made during
the six months ended June 30, 1997. As a result of the nature of the assets and
liabilities acquired there are no material identifiable intangible assets or
liabilities.
-10-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
The Company generated $9,792,000 and $2,751,000 in cash through operating
activities for the six months ended June 30, 1997 and 1996, respectively. The
increase in cash flow is due to increased profits, funds realized through
investment transactions and loss reserves on an increasing volume of liability
coverages, which have slower payout patterns than property coverages. In
addition, cash from operating activities increased over the prior period due to
profits recognized from the initial consolidation of its Business Services
Group. Further, the Company raised $5.2 million through a private placement in
April 1997. The Company has made certain business acquisitions utilizing $16.5
million in cash financed, in part, through internal cash flow operations and
cash on hand. At June 30, 1997 and 1996, the Company had cash and investments,
excluding mortgage loans of $96.3 million and $61.9 million, respectively.
Management believes the Company currently has sufficient cash, investments, and
lines of credit to fund current operations and expansion thereof.
------------------------------
Statements included in the Form 10-Q, which are not historical in nature, are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The amount of the charges to
discontinued operation with respect to the Company's environmental services
business will depend on a number of factors, including the outcome of any
related negotiations and final determination of the net realizable values of
assets to be sold or transferred. In addition, the Company's Annual Report on
Form 10-K contain certain other detailed factors that could cause the Company's
actual results to materially differ from forward-looking statements made by the
Company.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
---------------------------
ITEM 2 - CHANGES IN SECURITIES
------------------------------
(c) Issuances of unregistered shares during the three months ended
June 30, 1997:
All transactions listed below involve the issuance of shares of Common Stock by
the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended.
On April 1, 1997, in connection with the acquisition of Next Risk Management,
Inc., the Company paid $238,000 in cash and issued 112,174 shares of Common
Stock and warrants to purchase an additional 65,000 shares of Common Stock at
$13.06 per share in exchange for all the outstanding shares of capital stock of
Next Risk Management, Inc.
On April 1, 1997, in connection with the acquisition of Connecticut Escrow
Company, the Company paid $150,000 in cash and issued 28,986 shares of Common
Stock and warrants to purchase an additional 25,000 shares of Common Stock at
$12.94 in exchange for all the outstanding shares of capital stock of
Connecticut Escrow Company.
On April 1, 1997, in connection with the acquisition of Surety Associates, Ltd.,
the Company issued 23,188 shares of Common Stock in exchange for certain assets
of Surety Associates, Ltd.
On April 2, 1997, in connection with the acquisition of Network Plus, Inc., the
Company issued 90,100 shares of Common Stock in exchange for all the outstanding
shares of capital stock of Network Plus, Inc.
On May 30, 1997, in connection with the acquisition of Marvel Consultants, Inc.,
the Company paid $800,000 in cash and issued 129,025 shares of Common Stock in
exchange for all the outstanding shares of capital stock of Marvel Consultants,
Inc.
On June 16, 1997, in connection with the acquisition of Environmental Safety
Systems, Inc., the Company paid $800,000 in cash and issued 480,000 shares of
Common Stock for all the outstanding shares of Environmental Safety Systems,
Inc.
On June 30, 1997, in connection with the acquisition of ZA Business Services,
Inc., the Company paid approximately $6.2 million in cash and issued 922,172
shares of Common Stock for all the outstanding shares of Zelenkofske-Axelrod &
Co., Ltd.
-12-
<PAGE> 13
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
At the Company's Annual Meeting of Shareholders held on May 6, 1997, the
following matters were submitted to a vote of stockholders:
1) The election of the following individuals to the Board of Directors to
serve until the 2000 Annual Meeting of Shareholders.
Shares For Shares Withheld
---------- ---------------
Michael G. DeGroote 28,140,669 23,986
Harve A. Ferrill 28,138,399 26,256
2) The approval of 1996 Employee Stock Option Plan.
Shares For Shares Against Shares Abstained
---------- -------------- ----------------
25,390,337 105,088 52,259
3) The approval of the Agent's 1997 Stock Option plan.
Shares For Shares Against Shares Abstained
---------- -------------- ----------------
25,363,300 127,471 56,913
4) The approval of the grant of options to three non-employee directors to
purchase 50,000 shares of Common Stock of the Company.
Shares For Shares Against Shares Abstained
---------- -------------- ----------------
24,920,973 171,894 39,956
5) The approval of the appointment of KPMG Peat Marwick LLP as independent
accounts for fiscal year 1997.
Shares For Shares Against Shares Abstained
---------- -------------- ----------------
28,134,328 9,940 20,387
6) Upon such other business as may properly come before said meeting, or any
adjournment thereof.
Shares For Shares Against Shares Abstained
---------- -------------- ----------------
27,938,292 145,167 81,196
-13-
<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits
2.1 Asset Purchase Agreement, dated as of July 7, 1997, by and
among Republic Environmental Systems (Fort Erie) Ltd.,
Republic Environment Systems (Brantford) Ltd., Republic
Environmental Systems (Pickering) Ltd., Philip Enterprises
Inc. and Republic Environmental Systems, Inc. (filed as
Exhibit 2.1 to the Company's Report on Form 8-K dated July 23,
1997 and incorporated herein by reference).
2.2 Share Purchase Agreement, dated as of July 13, 1997, by and
among Philip Environmental (Delaware), Inc., Republic
Environmental Systems, Inc., Republic Environmental Recycling,
Inc., Republic Environmental Systems (Technical Services
Group), Inc. Republic Environmental Systems (Pennsylvania),
Inc., Republic Environmental Systems (Transportation Group),
Inc. and Chem-Freight, Inc. (filed as Exhibit 2.2 to the
Company's Report on Form 8-K dated July 23, 1997 and
incorporated herein by reference).
27.1 FINANCIAL DATA SCHEDULE
(b) Report on Form 8-K
(1) The Company's Current Report on Form 8-K dated July 23, 1997,
reporting the sale of substantially all of the Company's
assets of the liquid and solid hazardous and non-hazardous
waste treatment, storage, disposal and transportation
business.
-14-
<PAGE> 15
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
International Alliance Services, Inc.
-------------------------------------
(Registrant)
Date: August 14, 1997 By: /s/ GREGORY J. SKODA
--------------- --------------------
Gregory J. Skoda
Chief Financial Officer
-15-
<PAGE> 16
INTERNATIONAL ALLIANCE SERVICES, INC.
-------------------------------------
EXHIBIT INDEX
-------------
Exhibit Number: Page No.
(27) Financial Data Schedule (SEC only) . . . . . . . . . . . 17-18
-16-
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<ARTICLE> 7
<CIK> 0000944148
<NAME> INTERNATIONAL ALLIANCE SERVICES INC.
<MULTIPLIER> 1,000
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 7
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12,497
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<INCOME-TAX> 876
<INCOME-CONTINUING> 1,426
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