SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 24, 1995
Audits & Surveys Worldwide, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-7675 13-1809586
(Commission File Number) (I.R.S. Employer Identification No.)
650 Avenue of the Americas, New York, NY 10111
Address of Principal Executive Offices) (Zip Code)
(212) 627-9700
(Registrant's Telephone Number, Including Area Code)<PAGE>
Item 7. Financial Statements, Pro Forma Information and
Exhibits.
Item 7(a) of Registrant's Current Report on Form 8-K, dated (Date
of earliest event reported) March 24, 1995, is hereby amended to
include the financial statements of Audits and Surveys, Inc.
("A&S") for the year ended December 31, 1994. The financial
statements have been audited by Deloitte & Touche LLP and have
been found to present fairly the financial position of A&S and
results of operations in conformity with generally accepted
accounting principles.
Item 7(b) of the above referenced Form 8-K is hereby further
amended to include the pro forma financial information required
by this Item.
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AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
Independent Auditors' Report
Consolidated Financial Statements for the
Years Ended December 31, 1994,
November 28, 1993, November 29, 1992 and for the
One-Month Ended December 31, 1993,
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Audits and Surveys Worldwide, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
Audits and Surveys, Inc. and Subsidiaries as of December 31, 1994
and November 28, 1993 and the related consolidated statements of
income, stockholders' equity and cash flows for the years ended
December 31, 1994, November 28, 1993 and November 29, 1992, and
the consolidated statements of income and stockholders' equity
for the one-month ended December 31, 1993. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Audits and Surveys, Inc. and Subsidiaries as of December 31,
1994 and November 28, 1993 and the results of their operations
and their cash flows for the years ended December 31, 1994,
November 28, 1993 and November 29, 1992 and results of their
operations for the one-month ended December 31, 1993 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 17, 1995
(March 24, 1995 as to Notes 4 and 14)
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AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, November 28,
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash $ 754,309 $ 449,196
Accounts receivable (Note 1):
Billed (net of allowance for
doubtful accounts
of $128,985 and $-0-) 7,413,448 4,494,736
Unbilled 1,947,728 2,519,769
Prepaid expenses 699,799 580,040
Deferred income taxes (Notes 1 and 6) 195,638 42,325
Other current assets 303,633 141,386
Total current assets 11,314,555 8,227,452
PROPERTY AND EQUIPMENT (Note 1):
Furniture and fixtures 367,660 379,436
Equipment 1,566,316 1,438,646
Leasehold improvements 2,729,239 2,750,700
Assets held under capital
leases (Note 5) 222,862 222,862
Total 4,886,077 4,791,644
Less accumulated depreciation
and amortization 2,361,638 1,971,427
Property and equipment - Net 2,524,439 2,820,217
DUE FROM OFFICERS/STOCKHOLDERS
(Note 10) 36,869 299,007
CASH SURRENDER VALUE OF OFFICERS' LIFE
INSURANCE 293,270 269,295
DEFERRED INCOME TAXES (Notes 1 and 6) 792,840 170,995
INVESTMENTS IN AND ADVANCES TO
AFFILIATES
(Notes 1 and 2) - 213,366
DEFERRED MERGER COSTS (Note 14) 1,112,703 -
OTHER ASSETS (Note 3) 403,771 641,337
TOTAL ASSETS $16,478,447 $12,641,669
</TABLE>
See notes to consolidated financial statements.
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AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, November 28,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 2,940,633 $ 1,466,657
Accrued payroll and bonuses 3,432,680 4,372,654
Notes payable to officers/
stockholders (Note 10) 1,500,000 390,806
Customer billings in excess of
revenues earned (Note 1) 4,613,145 2,137,211
Income taxes payable 595,065 -
Current portion of long-term debt
(Note 4) 366,000 392,799
Current portion of capital lease
obligations (Note 5) 44,211 40,991
Total current liabilities 13,491,734 8,801,118
LONG-TERM DEBT, NET OF CURRENT
PORTION (Note 4) 439,802 891,920
CAPITAL LEASE OBLIGATIONS, NET OF
CURRENT PORTION (Note 5) 104,362 152,119
MINORITY INTEREST 54,122 -
DEFERRED COMPENSATION (Note 7) 292,953 332,586
ACCRUED RENT (Note 8) 963,736 1,208,537
Total liabilities 15,346,709 11,386,280
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' EQUITY (Notes 9 and 13):
Common stock, no par value, 10,000
shares authorized and issued 14,286 14,286
Additional paid-in capital 333,960 15,000
Retained earnings 1,167,656 1,807,780
Cumulative foreign currency
translation adjustment (Note 1) (3,846) (52,947)
1,512,056 1,784,119
Treasury stock, at cost (2,558
and 3,556 shares, respectively) (380,318) (528,730)
Total stockholders' equity 1,131,738 1,255,389
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 16,478,447 12,641,669
</TABLE>
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AUDITS AND SURVEYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
One-Month
Year Ended Ended Year Ended Year Ended
December 31, December 31, November 28, November 29,
1994 1993 1993 1992
<S> <C> <C> <C> <C>
REVENUES (Note 1) $43,917,562 $2,567,725 $40,173,592 $35,366,950
COSTS AND EXPENSES:
Direct costs 17,815,370 929,736 14,878,003 12,765,193
Selling, general and
administrative expenses 20,695,880 1,759,487 18,845,577 15,765,152
Incentive bonuses (Note 10) 3,946,991 343,205 5,182,502 5,365,587
Stock bonuses (Note 9) 778,959 - - -
Provision in connection with
retirement agreement
(Note 10) 341,000 - - -
Interest expense 205,788 12,559 167,940 128,395
Gain on sale of investment
in affiliate (Note 2) (1,335,052) - - -
Other (income) - net (400,112) (54,631) (385,842) (360,058)
Total costs and expenses 42,048,824 2,990,356 38,688,180 33,664,269
INCOME BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES 1,868,738 (422,631) 1,485,412 1,702,681
PROVISION (BENEFIT) FOR INCOME
TAXES (Notes 1 and 6) 852,442 (960,454) 161,884 169,256
NET INCOME $1,016,296 $537,823 $1,323,528 $1,533,425
</TABLE>
See notes to consolidated financial statements.
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AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 1, 1991 $10,000 $14,286 $15,000 $1,875,501 $2,338 $319,349
Net income - - 1,533,425 - - -
Distributions to
stockholders (Note 9) - - - (2,055,844) - -
BALANCE, NOVEMBER 29, 1992 10,000 14,286 15,000 1,353,082 2,338 319,349
Net income - - - 1,323,528 - -
Purchase of treasury shares
(Note 9) - - - - 1,478 254,091
Issuance of treasury shares
to an officer pursuant to
a stockholders'
agreement (Note 9) - - - - (260) (44,710)
Distributions to
stockholders
(Note 9) - - - 1,807,780 3,556 528,730
BALANCE, NOVEMBER 28, 1993,
as of previously reported 10,000 14,286 15,000 1,807,780 3,556 528,730
Adjustment to record
acquisition of
Audits & Surveys,
Canada Ventures,
Inc. (Note 1) - - - (145,150) - -
BALANCE, NOVEMBER 28, 1993,
as restated 10,000 14,286 15,000 1,662,630 3,556 528,730
Net income - - - 537,823 - -
BALANCE, DECEMBER 31, 1993 10,000 14,286 15,000 2,200,453 3,556 528,730
Net income - - - 1,016,296 - -
Stock bonuses (Note 9) - - 318,960 - (998) (148,412)
Distributions to
stockholders
(Note 9) - - - - - -
BALANCE, DECEMBER 31, 1994 10,000 14,286 $333,960 1,167,656 2,558 380,318
</TABLE>
See notes to consolidated financial statements.
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AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, November 28, November 29,
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,016,296 $1,323,528 $1,533,425
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 530,849 549,179 418,231
Provision for bad debts 152,782 - 34,480
Deferred income taxes 13,360 15,448 (23,944)
Deferred compensation 29,960 24,862 16,346
Loss on investment in affiliate - 17,040 84,067
Amortization of deferred charges 23,643 42,661 34,833
Increase in cash surrender value
of officers' life insurance (23,975) (79,286) (76,546)
Accrued rent (244,104) 36,074 (31,789)
(Income) loss from investment
accounted for on the
equity method (72,000) (6,856) 9,234
Gain on sale of affiliate (1,335,052) - -
Stock bonuses to officers 467,372 - -
Minority interest 48,742 - -
Changes in operating assets
and liabilities:
Accounts receivable (3,205,415) (509,684) 404,581
Prepaid expenses (62,721) (257,721) (205,818)
Other current assets (61,285) (61,448) 16,661
Other assets (17,662) 35,908 (5,333)
Accounts payable and accrued
expenses 1,553,184 162,422 48,019
Accrued payroll and bonuses 361,796 316,105 301,930
Customer billings in excess of
revenues earned 1,880,944 (175,444) 828,475
Payment of deferred compensation (69,593) - -
Income taxes payable 837,412 - -
Other 104,306 - -
Net cash provided by operating
activities 1,928,839 1,432,788 3,386,852
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to affiliates - (63,959) (16,667)
Loans to officers/stockholders (110,554) (122,558) (92,712)
Repayment of officer/stockholders' loans 170,976 87,584 224,212
Purchases of property and equipment (253,344) (841,673) (264,813)
Investment in subsidiary - (56,458) -
Proceeds from sale of affiliate 1,500,000 - -
Payment of deferred merger costs (1,112,703) - -
Net cash provided by (used in)
investing activities 194,375 (997,064) (149,980)
-9-<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to
officers/stockholders 1,500,000 390,806 710,304
Principal payments on notes payable
to officers/stockholders (390,806) (710,304) (767,202)
Proceeds from long-term debt - 254,091 350,000
Principal payments on long-term debt (406,980) (329,251) (200,000)
Proceeds from short-term
borrowings - bank 750,000 - -
Repayment of short-term
borrowings - bank (1,500,000) - -
Principal payments on capital
lease obligations (41,229) (29,752) -
Distributions to stockholders (2,049,093) (868,830) (2,055,844)
Purchase of treasury shares - (254,091) -
Issuance of treasury shares - 44,710 -
Net cash used in financing
activities (2,138,108) (1,502,621) (1,962,742)
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 49,122 (38,668) (14,300)
NET INCREASE (DECREASE) IN CASH 34,228 (1,105,565) (1,259,830)
CASH, BEGINNING OF YEAR 720,081 1,554,761 294,931
CASH, END OF YEAR 754,309 449,196 1,554,761
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 161,061 $ 141,024 $ 109,100
Income taxes $ 1,125 $ 223,645 $ 196,791
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Capital lease obligation incurred for
purchase of equipment $222,862
</TABLE>
See notes to consolidated financial statements.
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AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation - The consolidated financial
statements include the accounts of Audits and Surveys, Inc. ("A&S"),
and its majority owned subsidiaries, Audits & Surveys Europe Ltd.
("A&SE") and Audits & Surveys - Canada Ventures Inc. ("A&SC") and
Audits & Surveys Pacific - ("A&SP"). All significant intercompany
transactions and balances have been eliminated.
As of December 1, 1993, A&S purchased 92.56% of the outstanding shares
of A&SC, a related New York holding company. A&SC holds a 50%
interest in Totum Audits & Surveys ("Totum"), a Canadian partnership
involved in marketing research services. The purchase price was paid
for by the elimination of approximately $211,000 of loans due from
officers/stockholders. The transaction represents a combining of two
companies under common control and was accounted for as a pooling of
interests. As a result of this transaction, A&S's equity was reduced
by approximately $145,000, representing A&S's share of cumulative
losses through November 30, 1993. The historical financial statements
of A&S have not been restated to reflect this acquisition as the
impact on such financial statements is not significant.
Business Activity - A&S provides custom marketing research services
and sales tracking information internationally.
Fiscal Year - Through November 28, 1993, A&S's fiscal year was
reported on a 52/53-week period which ended on the Sunday closest to
November 30th. The fiscal years ended November 28, 1993 and
November 29, 1992 were 52-week periods. Effective November 29, 1993,
A&S adopted a calendar year for financial reporting purposes.
Investments in Affiliates - The equity method of accounting was used
by A&S when it had a 20 percent to 50 percent interest in other
companies. Under the equity method, original investments are recorded
at cost and adjusted for A&S's share of earnings or losses and
distributions. At December 31, 1994, A&S did not have any investments
accounted for by the equity method.
Property and Equipment - Property and equipment are stated at cost
less accumulated depreciation and amortization. Depreciation of
furniture and fixtures and equipment is provided using accelerated
methods over five to ten years. Amortization of leasehold
improvements and assets held under capital leases is provided using
the straight-line method over the lease term.
Revenue Recognition - The accompanying financial statements have been
prepared using the percentage-of-completion method of accounting for
certain contracts and, therefore, take into account the revenue, cost
and estimated earnings on contracts not yet completed. Income is
recognized on the excess of contract price over direct costs in the
percentage that actual costs to date relate to total estimated costs
to be incurred. At the time a loss on a contract becomes known, the
entire amount of the estimated loss is recognized in the financial
statements. In some instances, billing arrangements allow for amounts
billed to exceed the revenue recognized, thus resulting in a
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liability. In those cases where revenue recognized exceeds billings
to customers, an unbilled receivable is recorded.
-12-<PAGE>
Revenues for the distribution of certain marketing research
information is recognized pro rata over the life of the contract.
Income Taxes - Due to its acquisition of Audits & Surveys, Canada
Ventures, Inc., A&S terminated its S corporation status. While A&S
was an S corporation, the provision for income taxes reflected
New York City general corporation tax and the tax for other states
which did not recognize S corporation status, while there was no
provision for Federal income taxes on the earnings of A&S as such
earnings were taxed directly to the stockholders.
Due to the termination of its status as an S corporation on December
1, 1993, A&S is now subject to Federal in addition to applicable state
and local income taxes on taxable income earned.
Effective November 30, 1992, A&S adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, deferred income taxes are recognized for
the tax consequences of differences between the bases of assets and
liabilities for income tax and financial statement reporting, based on
enacted tax laws. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized.
Translation of Foreign Currencies - Financial statements of A&S are
reported in U.S. dollars based on the determination that the U.S.
dollar is A&S's functional currency. A&SE, using the pound as its
functional currency, translates its financial statements into U.S.
dollars. Assets and liabilities are translated at the rates of
exchange in effect at year end; common stock and additional paid-in
capital are translated using historical rates and revenue and expense
accounts are translated at the average rates of exchange in effect
during the period. Translation adjustments are reflected as a
separate component of stockholders' equity.
Reclassification - Certain items in the 1993 financial statements have
been reclassified to conform to the current presentation.
2. INVESTMENTS IN AND ADVANCES TO AFFILIATES
At November 29, 1992, A&S had an investment of $17,040 in Computer
Tracking Inc. Such investment, recorded at an original cost of
$100,000, was written down during 1992. The balance of $17,040 was
written off in 1993.
At November 28, 1993 and November 29, 1992, A&S owned 22.5 percent of
IPSA Argentina ("IPSA"), an affiliated company engaged in the same
line of business as A&S. Such investment amounted to $92,949 and
$84,986 at November 28, 1993 and November 29, 1992, respectively.
On November 28, 1994, effective December 6, 1994, A&S sold its
investment in IPSA for an aggregate of $1,500,000, thereby realizing a
net gain of $1,335,052.
At November 28, 1993, A&S had advanced funds amounting to $104,305
which were used to capitalize A&SP formed subsequent to year-end. A&S
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owns approximately 51 percent of this entity. Such funds,
representing initial capital of $56,458 and a loan of $47,847, are
included in investments in and advances to affiliates in the
accompanying consolidated balance sheet for the year ended
November 28, 1993.
Investments in and advances to affiliates also includes $16,112
advanced to Totum Audits & Surveys, a Canadian affiliate, at November
28, 1993.
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3. OTHER ASSETS
Other assets consist of the following :
December 31, November 28,
1994 1993
Deferred charges $265,932 $430,216
Security deposits 137,839 118,187
Tax deposit (Note 6) - 92,934
$403,771 $641,337
Deferred charges represent commission payments made in connection with
the sublease of a portion of A&S's premises. Such amounts have been
deferred and are being amortized over the lease terms of the related
subleases.
4. LONG-TERM DEBT
Long-term debt consists of the following:
December 31, November 28,
1994 1993
Term loan payable to a bank, with
interest at 1/2 percent above the
prime rate, due in quarterly
installments of $50,000 through
March 1994. Such loan is
collateralized by leasehold
improvements and the
assignment of a sublease. $ - $ 100,000
Note payable to a bank with interest
at 1 percent above 3 the prime
rate, due in quarterly installments
of $62,500 beginning March 1994
through September 1997. 687,500 937,500
Installment note payable to a finance
company, due in monthly installments
of $2,310 including interest at the
rate of 12.35 percent. This note is
collateralized by certain computer
equipment and matures in
February 1996. 27,991 52,484
Note payable to a former stockholder
with interest at 7 percent
per annum, due in quarterly
installments of principal and
interest of $23,574 through
December 1995, at which time
any unpaid principal and interest
is due. 90,311 194,735
Total 805,802 1,284,719
Less current portion 366,000 392,799
Long-term portion $439,802 $891,920
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A&S has an available credit facility with a bank, aggregating
$2,500,000. Such facility is collateralized by accounts receivable.
The credit facility, as amended on March 24, 1995, contains customary
affirmative and negative covenants including those requiring A&S to
maintain certain financial ratios and minimum levels of net worth.
Long-term debt matures in each of the years subsequent to December 31,
1994, as follows:
Year Ending
December 31, Amount
1995 366,000
1996 252,302
1997 187,500
$805,802
5. CAPITAL LEASE OBLIGATIONS
During 1993, A&S entered into lease agreements for computer and office
equipment that have been accounted for as capital leases due to the
provisions of the lease agreements. The equipment has been recorded
in the accompanying consolidated financial statements at the present
value of the future minimum lease payments.
At December 31, 1994, future minimum lease payments are as follows:
Year Ending
December 31, Amount
1995 53,210
1996 53,210
1997 53,210
1998 6,168
Total future minimum
lease payments 165,798
Less amounts representing
interest 17,225
Present value of future
minimum lease payments
(including $44,211
payable currently) $148,573
Accumulated depreciation related to assets held under capital
leases at December 31, 1994 was $92,859.
6. INCOME TAXES
As discussed in Note 1, A&S adopted SFAS No. 109 as of November 30,
1992. The cumulative effect of this change in accounting principle
was immaterial and there was no effect on the provision for income
taxes for the year. In connection with the termination of A&S's S
corporation status, a cumulative Federal and New York State deferred
tax asset of $759,421 was recognized with an offsetting credit to the
provision for income taxes.
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The tax effects of temporary differences which give rise to the net
deferred tax asset at December 31, 1994 and November 28, 1993 are as
follows:
December 31, November 28,
1994 1993
Deferred income tax assets:
Accrued rent $ 431,983 $116,619
Basis of leasehold
improvements 229,546 38,945
Deferred compensation 131,313 29,695
Accrued vacation pay 129,716 25,410
Other 65,920 2,651
Total 988,478 213,320
Less current portion 195,638 42,325
Long-term portion $792,840 $170,995
Deferred income taxes for the year ended November 29, 1992
arose primarily from the items listed above.
The components of the provision (benefit) for income taxes for the
years ended December 31, 1994, November 28, 1993, November 29, 1992
and for the one month ended December 31, 1993 are as follows:
<TABLE>
<CAPTION>
One-Month
Year Ended Ended Year Ended Year Ended
December 31, December 31, November 28, November 29,
1994 1993 1993 1992
<S> <C> <C> <C> <C>
Current 839,081 (171,934) $ 146,436 $ 193,200
Deferred 13,361 (29,099) 15,448 (23,944)
Effect of
termination of
S corporation
election - (759,421) - -
$852,442 $(960,454) $161,884 $169,256
</TABLE>
The following reconciles federal taxes at the statutory rate to the
tax expense recorded in the financial statements for the year ended
December 31, 1994:
Federal taxes at statutory rate $680,844
State taxes, net of federal benefit 109,871
Other 61,727
$852,442
While an S corporation, A&S was required to maintain a tax deposit to
cover the untaxed income between A&S's fiscal year-end and December
31. Such tax deposit amounted to $92,934 at November 28, 1993 and was
included in other assets in the accompanying consolidated balance
sheet. The tax deposit at December 31, 1994 amounted to $87,388 and
is included in other current assets in the accompanying consolidated
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balance sheet, since A&S has requested a refund from the Internal
Revenue Service.
7. DEFERRED COMPENSATION
A&S is a party to deferred compensation agreements with certain key
employees. Amounts due under such agreements amounted to $292,953 and
$332,586 at December 31, 1994 and November 28, 1993, respectively.
The costs related to these agreements for the years ended December 31,
1994, November 28, 1993, and November 29, 1992 and for the one-month
period ended December 31, 1993 were $29,960, $24,863, $16,346, and $0,
respectively.
8. ACCRUED RENT
A&S has entered into various lease agreements which provide for
scheduled rent increases and free rent periods. In accordance with
generally accepted accounting principles, rent expense has been
recorded on the straight-line basis over the life of the leases. At
December 31, 1994 and November 28, 1993, accrued rent represents that
portion of rent expense (net of sublease income) which has not yet
been paid.
9. STOCKHOLDERS' EQUITY
In December 1992, A&S acquired 1,477.594 shares from a former officer
pursuant a stockholders' agreement for an aggregate cost of $254,091.
Additionally, A&S issued stock to another officer of A&S pursuant to a
stockholders' agreement. Such stock (260 shares) was issued from
treasury shares for $44,710.
On July 21, 1994, A&S issued 998 shares of common stock to certain key
employees, some of whom were already shareholders of A&S. The
additional shares are the subject of new agreements ("Redemption
Agreements") covering such shares which provide for, among other
things, the purchase of such shares during and/or after termination of
employment at a price equal to book value, as defined. In all cases,
other than the death of a shareholder, the Redemption Agreements
provide A&S with the right of first refusal. Upon the death of a
shareholder, A&S would be obligated to reacquire such shares. In
connection with this transaction, A&S charged $778,959 to operations
representing the estimated fair value of the stock of $467,372 plus
the estimated tax cost to the recipients of $311,587. Upon the
effectiveness of the merger agreement (Note 14), all existing
redemption agreements will terminate.
During the years ended December 31, 1994, November 28, 1993 and
November 29, 1992 and for the one month ended December 31, 1993, A&S
declared and paid distributions of $2,049,093, $868,830, $2,055,844
and $0, respectively.
10. RELATED PARTY TRANSACTIONS
Due from officers/stockholders at December 31, 1994 and November 28,
1993 consists primarily of notes receivable from certain officers
and/or stockholders of A&S. Such notes are noninterest-bearing and
are repayable on demand.
Notes payable to officers/stockholders represent amounts payable to
certain officers/stockholders of A&S pursuant to promissory notes.
-18-<PAGE>
Such notes are term loans with monthly principal payments due,
commencing on February 1, 1995, and bear interest at 7.75 percent at
December 31, 1994. The notes payable to officers/stockholders that
were outstanding at November 28, 1993 were repaid during 1994.
A&S is obligated under various incentive compensation agreements with
certain key employees. Such agreements provide for incentive bonuses
based on the financial performance of their respective divisions.
Total incentive bonuses including those A&S contributions to the
defined contribution plan (Note 12), amounted to approximately
$3,947,000, $5,183,000, and $5,366,000 in the years ended December 31,
1994, November 28, 1993, November 29, 1992, respectively, and $343,000
for the one month ended December 31, 1993.
On January 31, 1994, A&S entered into an agreement with one of its
shareholders who owned approximately 9% of A&S's outstanding stock
("Retirement Agreement"), which provided for, among other things, the
payment of salary, incentive bonuses and special bonuses and the
repurchase of the shareholder's stock on November 30, 1995 at a price
equal to two times the book value of those shares determined as of the
redemption date. On August 19, 1994 the shareholder died. On
February 9, 1995 A&S entered into a revised agreement with the estate
of the deceased shareholder which amends A&S's obligations under the
Retirement Agreement and provides for aggregate payments of $341,000
through August, 1995 in full settlement of all obligations to the
estate. Additionally, the estate will not be required to redeem the
shares of common stock held by them. During fiscal 1993, A&S accrued
approximately $82,000 of incentive bonus for this individual.
11. ECONOMIC DEPENDENCY AND CONCENTRATION OF CREDIT RISK
Approximately 21 percent, 32 percent, and 34 percent of A&S's revenues
for the years ended December 31, 1994, November 28, 1993 and November
29, 1992, respectively, and 36 percent for the one month ended
December 31, 1993 were derived from one client.
12. DEFINED CONTRIBUTION PLAN
A&S sponsors a defined contribution plan covering substantially all of
its employees. Contributions to the plan amounted to $192,934,
$200,737 and $219,907 for the years ended December 31, 1994,
November 28, 1993, November 29, 1992, respectively, and $15,773 for
the one month ended December 31, 1993. A&S contributions are
determined by management annually.
13. COMMITMENTS AND CONTINGENCIES
A&S is obligated under agreements with its shareholders
("Shareholders' Agreements") which provide for, among other things,
the purchase of a shareholder's stock during and/or after termination
of employment. The Shareholders' Agreements provide A&S with a right
of first refusal in all circumstances other than the death of a
shareholder, in which case A&S would be obligated to redeem the
deceased shareholder's stock at a price equal to six times the
weighted average earnings of A&S (as defined in the Shareholders'
Agreements). In instances other than the death of a shareholder, A&S
may reacquire stock at a price based on a book value formula as
defined in each shareholder's agreement. Upon the effectiveness of
the merger agreement (Note 14), all existing shareholders agreements
will terminate.
-19-<PAGE>
Operating Leases - A&S is obligated under lease agreements for office
space which expire at various dates through February 28, 2003. Under
the terms of the leases A&S is obligated to pay its portion of
operating costs and real estate tax increases. Rent expense for the
years ended December 31, 1994, November 28, 1993 and November 29, 1992
was approximately $1,600,695, $1,610,876, and $1,549,094,
respectively, and $122,074 for the one month ended December 31, 1993.
Rental income for each of the years ended December 31, 1994,
November 28, 1993 and November 29, 1992 was $936,708 and $78,059 for
the one month ended December 31, 1993.
Future minimum lease commitments and sublease income at December 31,
1994 are as follows:
Year Ending Lease Sublease
December 31, Commitment Income
1995 $ 1,513,082 $ 974,004
1996 1,500,454 977,587
1997 1,500,748 1,017,000
1998 1,700,782 1,064,833
1999 1,715,507 1,099,000
Thereafter 5,251,559 3,480,167
$13,182,132 $8,612,591
14. MERGER AGREEMENT
On August 11, 1994, A&S and The Triangle Corporation ("Triangle")
signed a Merger Agreement (as amended as of October 7, 1994,
January 6, 1995, January 31, 1995 and February 8, 1995, the "Merger
Agreement") pursuant to which A&S would be merged with and into
Triangle (the "Merger"). The Merger Agreement provides that Triangle
will be the surviving corporation of the Merger and the separate
existence of A&S would cease. The name of the merged corporation (the
"Combined Company") would be "Audits & Surveys Worldwide, Inc." Each
share of Triangle's common stock outstanding prior to the consummation
of the Merger would remain outstanding following the consummation of
the Merger. Each share of A&S's common stock outstanding prior to the
Merger would be exchanged for 1,407.565 shares of Triangle's common
stock, subject to adjustment under certain circumstances. Upon
consummation of the Merger, the holders of Triangle's common stock
immediately prior to the Merger would own 20% of the Combined
Company's common stock and the holders of A&S's common stock
immediately prior to the Merger would own 80% of the Combined
Company's common stock.
The Merger was consummated on March 24, 1995. For accounting
purposes, the Merger will be treated as a purchase, with A&S deemed to
be the acquiring party and Triangle deemed to be the acquired party.
Inasmuch as Triangle's operations are limited, the purchase price will
be allocated among the fair value of Triangle's net assets acquired.
Any excess purchase price will be charged to paid-in capital.
Accordingly, no goodwill will be recorded in connection with this
transaction. A&S has incurred approximately $1,113,000 in Merger-
related costs. Such costs are included as deferred merger costs at
December 31, 1994.
* * * * * *
-20-<PAGE>
AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
The accompanying unaudited pro forma consolidated financial information is
presented to illustrate the effects of certain adjustments to the
historical financial statements of the Triangle Corporation ("Triangle")
and Audits and Surveys, Inc. ("A&S") as if the Merger and subsequent change
in name to Audits & Surveys Worldwide, Inc. (The "Company" or the "Combined
Company") had occurred on the first day of the earliest periods presented
in the Pro Forma Consolidated Results of Operations.
The unaudited pro forma consolidated financial data should be read in
conjunction with the notes thereto appearing herein and also in conjunction
with the year-end financial statements and notes thereto of Triangle
included in Triangle's Annual Report on Form 10-K for the year ended
December 31, 1994, and year-end historical statements and notes thereto of
A&S for the year ended December 31, 1994, included herein.
The unaudited pro forma results of operations are presented for
informational purposes only and do not purport to represent the actual
results and financial position of the Combined Company had the Merger
occurred on the dates described above, nor are they necessarily indicative
of the future operating results of the Combined Company after the Merger.
<TABLE>
<CAPTION>
($$ in thousands)
A&S, Inc. Triangle
Three Months Three Months Dis-
Ended Ended continued Pro
March 31, March 31, Opera- Forma
1995 1995 tions(3) Adjusted Adjustments Pro Forma
<S> <C> <C> <C> <C> <C> <C>
REVENUES $13,313 $851 (851) $13,313 - $13,313
COSTS AND EXPENSES:
Costs of sales - 659 (659) - - -
Direct costs 6,358 - - 6,358 - 6,358
Selling, general and
administrative
expenses 5,674 626 (186) 6,114 124 (4) 5,990
Incentive bonuses 464 - - 464 - 464
Provision for merger
expenses - 83 - 83 (83)(5) -
Gain on elimination of
employment contract - (445) - (445) 445 (6) 0
Interest expense 60 - - 60 - 60
Other income - net (172) (10) - (182) - (182)
12,384 913 (845) 12,452 238 12,690
INCOME (LOSS) BEFORE
PROVISION FOR
INCOME TAXES 929 (62) (6) 861 (238) 623
-21-<PAGE>
PROVISION FOR INCOME TAXES 362 0 0 362 (138)(2) 224
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS $567 ($62) ($6) $499 ($100) $399
NET INCOME (LOSS) FROM
DISCONTINUED OPERATIONS - - - $6 $6
NET INCOME - - - - $ 405
WEIGHTED AVERAGE SHARES
OUTSTANDING (7) - - - - 13,094,755
INCOME (LOSS) PER COMMON
SHARE (7) - - - - -
Income (loss) from continuing
operations - - - - $0.03
Income (loss) from discontinued
operations - - - - $0.00
Net Income - - - - $0.03
</TABLE>
-22-<PAGE>
AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
($$ in Thousands)
A&S, Inc. Triangle Discon-
Year Ended Year Ended tinued
December 31, December 31, Opera- Adjust-
1994 1994 tions(3) Adjusted ments Pro Forma
<S> <C> <C> <C> <C> <C> <C>
REVENUES $43,918 $3,024 ($3,024) $43,918 - $43,918
COSTS AND EXPENSES:
Costs of sales - 2,516 (2,516) - - -
Direct costs 17,815 - - 17,815 - 17,815
Selling, general and
administrative
expenses 20,696 1,597 (816) 21,477 955 (1) 22,212
(220) (4) -
Incentive bonuses 3,947 - - 3,947 (2,304) (1) 1,643
Stock bonuses 779 - - 779 - 779
Provision for merger
expenses - 300 - 300 (300) (5) -
Provision in connection
with retire-
ment agreement 341 - - 341 - 341
Interest expense 206 (52) - 154 - 154
Other income - net (1,735) - - (1,735) - (1,735)
42,049 4,361 (3,332) 43,078 (1,869) 41,209
INCOME (LOSS) BEFORE
PROVISION FOR
INCOME TAXES 1,869 (1,337) 308 840 1,869 2,709
PROVISION FOR INCOME
TAXES 853 0 0 853 366 (2) 1,219
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS $1,016 ($1,337) $308 ($13) $1,503 $1,490
(NET INCOME (LOSS) FROM
DISCONTINUED OPERATIONS - - - ($308) - ($308)
NET INCOME - - - - - $1,182
WEIGHTED AVERAGE SHARES
OUTSTANDING (7) - - - - - 13,094,755
INCOME (LOSS) PER COMMON
SHARE (7)
Income (loss) from
continuing operations - - - - - $0.11
Income (loss) from
discontinued operations - - - - - ($0.02)
-23-<PAGE>
Net Income - - - - - $0.09
</TABLE>
-24-<PAGE>
AUDITS AND SURVEYS, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Consolidated Results of
Operations
(1) Adjustment to eliminate the portion of compensation paid to
the principal stockholders and certain employees of A&S
which is in excess of amounts provided under new
compensation contracts which went into effect December 1,
1994.
(2) To provide for income taxes on pro forma pretax income and
to reflect a benefit from The Triangle Corporation's
operating losses that would be derived from filing a
consolidated tax return. No benefit has been reflected for
utilization of Triangle's net operating loss carry forwards
as its impacts is not expected to be significant.
(3) To reflect the elimination of the results of operations of
the remaining business which management plans to dispose of.
Prior to disposal of the remaining businesses, the results
of operations will be reported in the Company's consolidated
results as discontinued operations.
(4) To reflect elimination of certain duplicative overhead costs
which management has specifically identified to be
eliminated as a result of the merger. The principal office
of Triangle will be closed on or before May 31, 1995 and all
corporate employees, except for Mr. Bellows, will be
terminated on or before June 30, 1995. The adjustment for
the year ended December 31, 1994 and for the three months
ended March 31, 1995 includes the following:
December 31, March 31,
1994 1995
Payroll and related fringes $145,000 $41,000
Rents and utilities at corporate
offices 40,000 15,000
Professional fees/miscellaneous 35,000 68,000
220,000 124,000
(5) To eliminate expenses incurred by Triangle which are
directly attributable to the merger.
(6) To reverse the gain realized from the forgiveness of a
portion of the former employment contract between Mr.
Bellows and Triangle upon consummation of the merger.
(7) Pro forma net income per share is based on Triangle's
weighted average shares outstanding plus 100% of the shares
received by A&S's shareholders upon the consummation of the
merger.
-25-<PAGE>
Exhibit Description
Number
(27) Financial Data Schedule.
-26-<PAGE>
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 hereunto duly authorized.
Audits & Surveys worldwide, Inc.
Date: May 15, 1995 By: /s/ Anthony Timiraos
Anthony Timiraos
Executive Vice President-
Finance and Chief
Financial Officer
-27-<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information for Audits & Surveys Worldwide, Inc.
extracted from the Balance Sheet and Statement of Income for the period ended
December 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000099703
<NAME> AUDITS & SURVEYS WORLDWIDE, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 754,309
<SECURITIES> 0
<RECEIVABLES> 9,490,161
<ALLOWANCES> (128,985)
<INVENTORY> 0
<CURRENT-ASSETS> 11,314,555
<PP&E> 4,886,077
<DEPRECIATION> (2,361,638)
<TOTAL-ASSETS> 16,478,447
<CURRENT-LIABILITIES> 13,491,734
<BONDS> 544,164
<COMMON> 14,286
0
0
<OTHER-SE> 1,117,452
<TOTAL-LIABILITY-AND-EQUITY> 16,478,447
<SALES> 0
<TOTAL-REVENUES> 43,917,562
<CGS> 0
<TOTAL-COSTS> 17,815,370
<OTHER-EXPENSES> 24,642,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 205,788
<INCOME-PRETAX> 1,868,738
<INCOME-TAX> 852,442
<INCOME-CONTINUING> 1,016,296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,016,296
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
