-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fs/WAAPbowusLd+x/GcvA/GSkiuf51dsJePULUIy8N4tskTTQUcRTAQdn0Hj3sUz +SRdlZwBfYRs8+I5uvGGqg== 0000950134-99-000685.txt : 19990208 0000950134-99-000685.hdr.sgml : 19990208 ACCESSION NUMBER: 0000950134-99-000685 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981125 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAFFMARK INC CENTRAL INDEX KEY: 0001017968 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 710788538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-20971 FILM NUMBER: 99522368 BUSINESS ADDRESS: STREET 1: 302 EAST MILLSAP CITY: FAYETTEVILLE STATE: AR ZIP: 72703 BUSINESS PHONE: 5019736000 MAIL ADDRESS: STREET 1: 302 EAST MILLSAP CITY: FAYETTEVETTE STATE: AR ZIP: 72703 8-K/A 1 AMENDMENT NO.1 TO FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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): November 25, 1998 STAFFMARK, INC. (Exact name of registrant as specified in its charter) Delaware 0-20971 71-0788538 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 302 East Millsap Road Fayetteville, Arkansas 72703 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 973-6000 2 Item 2. Acquisition or Disposition of Assets This Form 8-K/A amends the Form 8-K filed on December 9, 1998. In this connection, on November 25, 1998, StaffMark, Inc. (the "Company") consummated a transaction, whereby Robert Walters plc, a company registered under the Companies Act of 1985 of Great Britain, as amended ("Robert Walters") became an indirect wholly-owned subsidiary of the Company (the "Transaction"). Robert Walters is a London-based international recruitment consultancy operating in 14 cities in ten countries and specializing in placing accounting, finance and information technology professionals on a contract, temporary and permanent basis with clients in the commercial, industrial and finance sectors. The consideration paid to the Robert Walters stockholders in the Transaction consisted of 6,687,704 shares of the Company's common stock. The purchase price was determined as a result of direct negotiations with Robert Walters. The Transaction will be accounted for as a pooling-of-interests. Item 7. Financial Statements and Exhibits (a) As noted in the Form 8-K filed on December 9, 1998, to which this Form 8-K/A relates, audited financial statements of the business acquired were included in the Company's Definitive Proxy Statement which was filed with the Securities and Exchange Commission (the "Commission") on September 25, 1998, under the Securities Exchange Act of 1934, as amended. As a result, the financial information required under Item 7(a) and Item 7(b) of Form 8-K are not applicable to the Transaction and have, therefore, been excluded from this filing. (b) Pro Forma Financial Information. (c) Exhibits. The Merger Agreement relating to the Transaction was filed as part of the Company's Definitive Proxy Statement filed with the Commission on September 25, 1998 and was referenced in Form 8-K filed on December 9, 1998, to which this Form 8-K/A relates. 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. STAFFMARK, INC. (Registrant) Dated: February 5, 1999 By: /s/ Terry C. Bellora -------------------------- Terry C. Bellora Chief Financial Officer 3 STAFFMARK, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION Introduction to Unaudited Pro Forma Financial Statements On November 25, 1998, StaffMark consummated a transaction whereby Robert Walters became an indirect wholly-owned subsidiary of the Company. Robert Walters is a London-based international recruitment consultancy operating in 14 cities in ten countries and specializing in placing accounting, finance and information technology professionals on a contract, temporary and permanent basis with clients in the commercial, industrial and finance sectors. The following unaudited pro forma balance sheet as of September 30, 1998, and the unaudited pro forma statements of income for the nine months ended September 30, 1998 and for the year ended December 31, 1997 give effect to the Transaction using the pooling-of-interests method of accounting as well as other pro forma adjustments as outlined below. StaffMark incurred certain non-recurring expenses related to the Transaction of approximately $23.8 million. These expenses include, but are not limited to, professional fees, printing fees, fees of financial advisors, and restructuring expenses including elimination of redundant offices, severance plans and other expenses directly related to the Transaction, as well as one-time payments to executive directors of Robert Walters to harmonize their executive compensation with that of the StaffMark consolidated group. Transaction related expenses were recorded in the period in which the Transaction was concluded. Because the foregoing charges are non-recurring in nature, they have not been reflected in the accompanying pro forma statements of income. The following unaudited pro forma financial statements present StaffMark and give effect to: (i) the Transaction with the Company for all periods presented; (ii) other significant purchase business combinations consummated since January 1, 1997 as if the transactions were consummated as of the beginning of 1997; (iii) the adjustment to compensation expense for the difference between historical compensation paid to certain owners of previous purchase business combinations and the employment contract compensation negotiated in conjunction with the respective acquisitions and (iv) the adjustment to record income taxes related to the taxation of certain acquisitions as S corporations prior to the consummation of the acquisitions. Pro forma income tax expense is based upon a combined effective tax rate of 41% for periods beginning on or after January 1, 1997. The unaudited pro forma statement of income for the year ended December 31, 1997 has been revised to reflect the restatement related to the pooling-of-interests transactions with Brady & Company, Inc. and Enterprise Systems Associates, Inc. This presentation is consistent with the financial statement presentation to be included in the Company's Form 10-K for the year ended 1998. 4 STAFFMARK, INC. UNAUDITED PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1998
Robert Walters ------------------------------------------------------------ As Reported in Reporting Basis U.S. GAAP ASSETS StaffMark British Pounds(a) Conversion(b) in British Pound -------------- ----------------- --------------- ---------------- CURRENT ASSETS: Cash and cash equivalents $ 5,827 (pound) 3,410 (pound) 3,410 Accounts receivable, net of allowance for doubtful accounts 96,733 24,750 24,750 Prepaid expenses and other 4,851 1,108 1,108 Deferred income taxes 1,538 -- - --------------- ---------------- ---------------- --------------- Total current assets 108,949 29,268 -- 29,268 PROPERTY AND EQUIPMENT, net 15,894 2,907 2,907 INTANGIBLE ASSETS, net 319,425 -- 4,645(c) 4,645 OTHER ASSETS 995 20 20 --------------- ---------------- ---------------- --------------- $ 445,263 (pound) 32,195 (pound) 4,645 (pound) 36,840 =============== ================ ================ =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued liabilities $ 7,304 (pound) 11,638 (pound) 11,638 Payroll and related liabilities 30,077 -- - Reserve for workers' compensation claims 7,018 -- - Income taxes payable 3,467 3,763 3,763 --------------- ---------------- ---------------- --------------- Total current liabilities 47,866 15,401 -- 15,401 LONG-TERM DEBT 138,808 1,674 1,674 OTHER LONG-TERM LIABILITIES 17,034 1,585 1,585 DEFERRED INCOME TAXES 2,511 13 13 STOCKHOLDERS' EQUITY: Common stock 222 1,229 1,229 Paid-in capital 193,545 7,052 7,052 Retained earnings 45,277 5,241 4,645(c) 9,886 Accumulated other comprehensive income -- -- - --------------- ---------------- ---------------- --------------- Total stockholders' equity 239,044 13,522 4,645 18,167 --------------- ---------------- ---------------- --------------- $ 445,263 (pound) 32,195 (pound) 4,645 (pound) 36,840 =============== ================ ================ ================ Robert Walters ------------------------- Restated Pro Forma Exchange As Translated Historical Merger ASSETS Rate to U.S. Dollars Combined Results Adjustments Pro Forma --------- --------------- ---------------- ------------ ----------- CURRENT ASSETS: Cash and cash equivalents 1.69810 $ 5,791 $ 11,618 $ -- $ 11,618 Accounts receivable, net of allowance for doubtful accounts 1.69810 42,028 138,761 -- 138,761 Prepaid expenses and other 1.69810 1,881 6,732 -- 6,732 Deferred income taxes 1.69810 -- 1,538 -- 1,538 ------------ ----------- ----------- ----------- Total current assets 49,700 158,649 -- 158,649 PROPERTY AND EQUIPMENT, net 1.69810 4,936 20,830 -- 20,830 INTANGIBLE ASSETS, net 1.69810 7,888 327,313 -- 327,313 OTHER ASSETS 1.69810 34 1,029 -- 1,029 ------------ ----------- ----------- ----------- $ 62,558 $ 507,821 $ -- $ 507,821 ============ =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued liabilities 1.69810 $ 19,762 $ 27,066 $ 23,800(d) $ 50,866 Payroll and related liabilities 1.69810 -- 30,077 -- 30,077 Reserve for workers' compensation claims 1.69810 -- 7,018 -- 7,018 Income taxes payable 1.69810 6,390 9,857 -- 9,857 ---------- ------------ ----------- ----------- ----------- Total current liabilities 26,152 74,018 23,800 97,818 LONG-TERM DEBT 1.69810 2,843 141,651 -- 141,651 OTHER LONG-TERM LIABILITIES 1.69810 2,691 19,725 -- 19,725 DEFERRED INCOME TAXES 1.69810 22 2,533 -- 2,533 STOCKHOLDERS' EQUITY: Common stock 1.69810 2,087 2,309 (1,968)(e) 289 (52)(f) Paid-in capital 1.69810 11,975 205,520 1,968 (e) 207,159 (329)(f) Retained earnings 1.69810 16,787 62,064 (23,800)(d) 37,712 (552)(f) Accumulated other comprehensive income 1.69810 -- -- 933 (f) 933 ------------ ----------- ----------- ----------- Total stockholders' equity 30,849 269,893 (23,800) 246,093 ------------ ----------- ----------- ----------- $ 62,558 $ 507,821 $ -- $ 507,821 ============ =========== =========== ===========
The accompanying notes are an integral part of this balance sheet. 5 STAFFMARK, INC. NOTES TO UNAUDITED PRO FORMA BALANCE SHEET As of September 30, 1998 (a) Records the balance sheet of Robert Walters as of September 30, 1998 as reported in British pounds. (b) Records adjustments to conform the basis of accounting used in preparing Robert Walters' historical financial results to U.S. generally accepted accounting principles ("GAAP"). (c) Adjustment to record capitalization of intangible assets related to Robert Walters' purchase business combinations in accordance with U.S. GAAP, which was formerly written off to Stockholders' Equity in accordance with U.K. GAAP. Intangible assets related to these combinations totaled approximately (pound)4.7 million and are expected to be amortized over periods ranging from thirty to forty years. (d) Adjustment to record certain non-recurring expenses related to the Transaction totaling approximately $23.8 million. Since these charges are nonrecurring in nature, they have not been reflected in the accompanying pro forma statements of income. (e) Adjustment to record issuance of StaffMark Common Stock in exchange for all of Robert Walters' outstanding shares. The excess of the par value of Robert Walters' outstanding shares over the par value of the StaffMark Common Stock will be transferred to Paid-In Capital. (f) Adjustment to record the balance of Accumulated Other Comprehensive Income in accordance with U.S. GAAP. This balance represents the accumulated total of adjustments related to the translation of Robert Walters' historical financial statements to U.S. dollars. 6 STAFFMARK, INC. UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Robert Walters ------------------------------------------------------------------------------ Adjusted to Average As Reported in Reporting Basis U.S. GAAP Exchange As Translated StaffMark British Pounds(a) Conversion(b) in British Pounds Rate to U.S. Dollars ------------ ----------------- --------------- ----------------- ------- --------------- SERVICE REVENUES $ 535,101 (pound) 113,262 (pound) 113,262 1.65039 $ 186,926 COST OF SERVICES 398,735 80,598 80,598 1.65039 133,018 ----------- --------------- ------------ --------------- ---------- Gross profit 136,366 32,664 -- 32,664 53,908 OPERATING EXPENSES: Selling, general and administrative 83,852 25,659 (866)(c) 24,793 1.65039 40,918 Depreciation and amortization 8,442 734 90(d) 824 1.65039 1,360 Non-recurring merger costs 1,656 -- -- 1.65039 -- ----------- --------------- ------------ --------------- ---------- Operating income 42,416 6,271 776 7,047 11,630 ----------- --------------- ------------ --------------- ---------- OTHER INCOME (EXPENSE): Interest expense (3,835) (96) (96) 1.65039 (158) Other, net (251) -- 1.65039 -- ----------- --------------- ------------ --------------- ---------- INCOME BEFORE INCOME TAXES 38,330 6,175 776 6,951 11,472 INCOME TAX PROVISION 15,403 2,468 2,468 1.65039 4,073 ----------- --------------- ------------ --------------- ---------- Net income (loss) $ 22,927 (pound) 3,707 (pound) 776 (pound) 4,483 $ 7,399 =========== =============== ============ =============== ========== BASIC NET INCOME PER COMMON SHARE $ 1.05 =========== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 21,809 =========== DILUTED NET INCOME PER COMMON SHARE $ 1.01 =========== DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 22,660 =========== Pro Forma Restated Pro Forma Combined Purchase Historical Merger StaffMark & Business Combined Results Adjustments Robert Walters Combinations(h) Pro Forma ---------------- ----------- -------------- --------------- ---------- SERVICE REVENUES $ 722,027 $ -- $ 722,027 $ 11,284 $ 733,311 COST OF SERVICES 531,753 -- 531,753 7,932 539,685 ------------ ---------- ------------ ----------- ---------- Gross profit 190,274 -- 190,274 3,352 193,626 OPERATING EXPENSES: Selling, general and administrative 124,770 1,429(g) 126,199 1,904 128,103 Depreciation and amortization 9,802 -- 9,802 202 10,004 Non-recurring merger costs 1,656 -- 1,656 -- 1,656 ------------ ---------- ------------ ----------- ---------- Operating income 54,046 (1,429) 52,617 1,246 53,863 OTHER INCOME (EXPENSE): Interest expense (3,993) -- (3,993) (429) (4,422) Other, net (251) -- (251) -- (251) ------------ ---------- ------------ ----------- ---------- INCOME BEFORE INCOME TAXES 49,802 (1,429) 48,373 817 49,190 INCOME TAX PROVISION 19,476 -- 19,476 335 19,811 ------------ ---------- ------------ ----------- ---------- Net income (loss) $ 30,326 $ (1,429) $ 28,896 $ 482 $ 29,378 ============ ========== ============ =========== ========== BASIC NET INCOME PER COMMON SHARE $ 1.06 $ 1.01 $ 1.03 ============ ============ ========== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 28,497(e) 28,497(e) 28,582(i) ============ ============ ========== DILUTED NET INCOME PER COMMON SHARE $ 1.02 $ 0.98 $ 0.99 ============ ============ ========== DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 29,621(f) 29,621(f) 29,706(j) ============ ============ ==========
The accompanying notes are an integral part of this statement. 7 STAFFMARK, INC. NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME For the Nine Months Ended September 30, 1998 (a) Records the financial results of Robert Walters for the period from January 1, 1998 through September 30, 1998 as reported in British pounds. (b) Records adjustments to conform the basis of accounting used in preparing Robert Walters' historical financial results to U.S. GAAP. (c) Adjustment to record compensation expense related to Robert Walters' Share Option Schemes in accordance with U.S. GAAP. Options under the Share Option Schemes are exercisable between three and ten years after the grant date, dependent on the achievement of certain financial targets over any three year period. Accordingly, the Share Option Schemes have been considered variable plans under Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees." Compensation expense was computed as the sum of (i) the net equity in the share options, determined as the product of the outstanding share options and the difference between the period-ending market price of the Robert Walters' shares and the grant price, amortized over the remaining vesting period and (ii) the net equity value of share options exercised during the period. For purposes of computing this adjustment, the minimum possible vesting period of three years from grant date was used to determine the amortization period. Information regarding the outstanding share options as of September 30, 1998 was as follows:
OUTSTANDING GRANT DATE SHARE OPTIONS GRANT PRICE ----------------------- --------------------- -------------------- July 15, 1996 929,231 (pound) 0.7066 August 15, 1997 326,392 3.0205 April 21, 1998 40,000 5.4500 June 3, 1998 70,000 5.0667
(d) Adjustment to record the amortization of intangible assets related to Robert Walters' purchase business combinations in accordance with U.S. GAAP. Intangible assets related to these combinations totaled approximately (pound)4.7 million and are being amortized over periods ranging from thirty to forty years. (e) Represents the sum of StaffMark's historical weighted average shares outstanding plus 6,687,704 shares of StaffMark Common Stock that were issued to the stockholders of Robert Walters in conjunction with the Transaction. (f) Includes the shares discussed in Note (e) above and the dilutive effect of StaffMark's stock options and Robert Walters' share options and SAYE schemes adjusted for the share exchange ratio of .272 as shown below.
WEIGHTED DESCRIPTION AVERAGE SHARES ---------------------------------------------------- --------------------- Restated Historical Basic Weighted Average Shares 28,497,046 Dilutive Effect: StaffMark Stock Option Plan 851,135 Robert Walters' Share Option Scheme 272,507 ------------ Pro Forma Diluted Weighted Average Shares 29,620,688 ============
8 (g) Adjustment to remove compensation expense recognized in accordance with Robert Walters' Share Option and SAYE Schemes which will not be incurred subsequent to the Transaction. (h) Represents the financial results of Progressive Resources, Inc., Progressive Personnel Resources, Inc., Progressive Personnel Resources of New Jersey, Inc., and Strategic Computer Resources, LLC (collectively referred to as "Progressive") for the period from January 1, 1998 through the date of acquisition as adjusted to: (i) reflect the compensation level the owners have agreed to receive from StaffMark subsequent to the acquisition; (ii) reflect the amortization expense relating to the intangible assets recorded in conjunction with the acquisition; (iii) reflect interest expense relating to debt incurred in conjunction with the acquisition; and (iv) reflect the incremental provision for federal and state income taxes as if Progressive had recognized income tax expense in accordance with StaffMark's effective tax rate. (i) Includes the shares discussed in Note (e) above and the effect of shares issued in conjunction with the purchase business combination discussed in Note (h) as shown below.
WEIGHTED DESCRIPTION AVERAGE SHARES ----------------------------------------------------- ---------------- Restated Historical Basic Weighted Average Shares 28,497,046 Effect of Shares Issued for Progressive 85,218 ------------ Pro Forma Basic Weighted Average Shares 28,582,264 ============
(j) Includes the shares discussed in Note (f) above and the effect of shares issued in conjunction with the purchase business combination discussed in Note (h) as shown below.
WEIGHTED DESCRIPTION AVERAGE SHARES ----------------------------------------------------------- ------------------- Restated Historical Diluted Weighted Average Shares 29,620,688 Effect of Shares Issued for Progressive 85,218 ------------ Pro Forma Diluted Weighted Average Shares 29,705,906 ============
9 STAFFMARK, INC. UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997
Robert Walters ----------------------------------------------------------------------------- Adjusted to Average As Reported in Reporting Basis U.S. GAAP Exchange As Translated StaffMark British Pounds(a) Conversion(b) in British Pounds Rate to U.S. Dollars ----------- ----------------- ------------- ----------------- -------- --------------- SERVICE REVENUES $ 445,268 (pound) 90,806 (pound) -- (pound) 90,806 1.63831 $ 148,768 COST OF SERVICES 343,018 61,299 -- 61,299 1.63831 100,427 ----------- -------------- ------------- -------------- ----------- Gross profit 102,250 29,507 -- 29,507 48,342 OPERATING EXPENSES: Selling, general and administrative 67,858 21,312 2,826(c) 24,138 1.63831 39,546 Depreciation and amortization 5,389 592 8(d) 600 1.63831 983 ----------- -------------- ------------- -------------- ----------- Operating income 29,003 7,603 (2,834) 4,769 7,812 ----------- -------------- ------------- -------------- ----------- OTHER INCOME (EXPENSE): Interest expense (1,362) -- -- -- 1.63831 -- Other, net 731 97 -- 97 1.63831 160 ----------- -------------- ------------- -------------- ----------- INCOME BEFORE INCOME TAXES 28,372 7,700 (2,834) 4,866 7,972 INCOME TAX PROVISION 11,611 2,645 -- 2,645 1.63831 4,333 ----------- -------------- ------------- -------------- ----------- Net income (loss) $ 16,761 (pound) 5,055 (pound) 2,834 (pound) 2,221 $ 3,639 ----------- -------------- ------------- -------------- ----------- BASIC NET INCOME PER COMMON SHARE $ 0.97 =========== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 17,321 =========== DILUTED NET INCOME PER COMMON SHARE $ 0.94 =========== DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 17,827 =========== Pro Forma Restated Pro Forma Combined Purchase Historical Merger StaffMark & Business Combined Results Adjustments Robert Walters Combinations(h) Pro Forma --------------- ----------- -------------- --------------- --------- SERVICE REVENUES $ 594,036 $ -- $ 594,036 $ 82,487 $ 676,523 COST OF SERVICES 443,445 -- 443,445 58,568 502,013 --------- --------- ----------- ---------- ---------- Gross profit 150,592 -- 150,592 23,919 174,511 OPERATING EXPENSES: Selling, general and administrative 107,404 (4,630)(g) 102,774 16,365 119,139 Depreciation and amortization 6,372 -- 6,372 1,851 8,223 --------- --------- ----------- ---------- ---------- Operating income 36,815 4,630 41,445 5,703 47,148 --------- --------- ----------- ---------- ---------- OTHER INCOME (EXPENSE): Interest expense (1,362) -- (1,362) (2,857) (4,219) Other, net 891 -- 891 13 904 --------- --------- ----------- ---------- ---------- INCOME BEFORE INCOME TAXES 36,344 4,630 40,974 2,859 43,833 INCOME TAX PROVISION 15,944 -- 15,944 1,172 17,116 --------- --------- ----------- ---------- ---------- Net income (loss) $ 20,400 $ 4,630 $ 25,030 $ 1,687 $ 26,717 ========= ========= =========== ========== ========== BASIC NET INCOME PER COMMON SHARE $ 0.85 $ 1.04 $ 1.08 ========= =========== ========== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 24,009(e) 24,009(e) 24,786(i) ========= =========== ========== DILUTED NET INCOME PER COMMON SHARE $ 0.82 $ 1.01 $ 1.05 ========= =========== ========== DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 24,782(f) 24,782(f) 25,558(j) ========= =========== ==========
The accompanying notes are an integral part of this statement. 10 STAFFMARK, INC. NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME For the Year Ended December 31, 1997 (a) Records the financial results of Robert Walters for the year ended December 31, 1997 as reported in British pounds. (b) Records adjustments to conform the basis of accounting used in preparing Robert Walters' historical financial results to U.S. GAAP. (c) Adjustment to record compensation expense related to Robert Walters' Share Option Schemes in accordance with U.S. GAAP. Options under the Share Option Schemes are exercisable between three and ten years after the grant date, dependent on the achievement of certain financial targets over any three year period. Accordingly, the Share Option Schemes have been considered variable plans under Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees." Compensation expense was computed as the sum of (i) the net equity in the share options, determined as the product of the outstanding share options and the difference between the period-ending market price of the Robert Walters' shares and the grant price, amortized over the remaining vesting period and (ii) the net equity value of share options exercised during the period. For purposes of computing this adjustment, the minimum possible vesting period of three years from grant date was used to determine the amortization period. Information regarding the outstanding share options as of December 31, 1997 was as follows:
OUTSTANDING GRANT DATE SHARE OPTIONS GRANT PRICE ----------------------- --------------------- -------------------- July 15, 1996 1,046,679 (pound) 0.7066 August 15, 1997 371,000 3.0205
(d) Adjustment to record the amortization of intangible assets related to Robert Walters' purchase business combinations in accordance with U.S. GAAP. Intangible assets related to these combinations totaled approximately (pound)4.7 million and are being amortized over periods ranging from thirty to forty years. (e) Represents the sum of StaffMark's historical weighted average shares outstanding plus 6,687,704 shares of StaffMark Common Stock that were issued to the stockholders of Robert Walters in conjunction with the Transaction. (f) Includes the shares discussed in Note (e) above and the dilutive effect of StaffMark's stock options and Robert Walters' share options and SAYE schemes adjusted for the share exchange ratio of .272 as shown below.
WEIGHTED DESCRIPTION AVERAGE SHARES --------------------------------------------------------- ------------------- Restated Historical Basic Weighted Average Shares 24,009,220 Dilutive Effect: StaffMark Stock Option Plan 505,908 Robert Walters' Share Option Scheme 266,597 ------------------- Pro Forma Diluted Weighted Average Shares 24,781,725 ===================
(g) Adjustment to remove compensation expense recognized in accordance with Robert Walters' Share Option and SAYE Schemes which will not be incurred subsequent to the Transaction. 11 (h) Represents the financial results of Progressive, Strategic Legal Resources, LLC ("SLR"), Structured Logic Company, Inc.("SLC"), Expert Business Systems, Inc.("EBS"), Global Dynamics, Inc.("Global"), and Flexible Personnel, Inc., Great Lakes Search Associates, Inc. and HR America, Inc. (collectively "Flexible") for the period from January 1, 1997 through the earlier of the date of acquisition or December 31, 1997 as adjusted to: (i) reflect the compensation level the owners agreed to receive from StaffMark subsequent to the acquisition; (ii) reflect the amortization expense relating to the intangible assets recorded in conjunction with the acquisitions; (iii) reflect interest expense relating to debt incurred in conjunction with the acquisitions; and (iv) reflect the incremental provision for federal and state income taxes as if the acquired companies had recognized income tax expense in accordance with StaffMark's effective tax rate. (i) Includes the shares discussed in Note (e) above and the effect of shares issued in conjunction with the purchase business combinations discussed in Note (h).
WEIGHTED DESCRIPTION AVERAGE SHARES -------------------------------------------------------------- ------------------- Restated Historical Basic Weighted Average Shares 24,009,220 Effect of Shares Related to the Following Acquisitions: Progressive 211,496 SLR 46,320 SLC 245,898 EBS 67,242 Global 170,348 Flexible 35,447 ---------------- Pro Forma Basic Weighted Average Shares 24,785,971 ================
(j) Includes the shares discussed in Note (f) above and the effect of shares issued in conjunction with the purchase business combinations discussed in Note (h).
WEIGHTED DESCRIPTION AVERAGE SHARES -------------------------------------------------------------- ------------------- Restated Historical Diluted Weighted Average Shares 24,781,725 Effect of Shares Related to the Following Acquisitions: Progressive 211,496 SLR 46,320 SLC 245,898 EBS 67,242 Global 170,348 Flexible 35,447 ------------------ Pro Forma Diluted Weighted Average Shares 25,558,476 ==================
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