EX-99.4 4 0004.txt PROFORMA FINANCIAL STATEMENTS Exhibit 99.4 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY The following unaudited pro forma consolidated financial information gives effect to the acquisition of BL&P Engineers, Inc. ("BL&P") by HLM Design, Inc. ("HLMD") as if it had occurred on May 1, 1998 and May 1, 1999, respectively, in the case of the Unaudited Pro Forma Consolidated Statements of Income of the Company for the fiscal year ended April 30, 1999 and the nine months ended January 28, 2000, and on January 28, 2000, in the case of the Unaudited Pro Forma Consolidated Balance Sheet of the Company. The acquisition will be accounted for using the purchase method of accounting. The total cost of the acquisition has been preliminarily allocated to the acquired assets and assumed liabilities on the assumption that the historical amounts of assets and liabilities recorded in the accompanying pro forma financial information approximate their respective fair values. The actual allocation of purchase cost, however, and the resulting effect on income may differ from the pro forma amounts included herein. The pro forma consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of what the Company's financial position or results of operations would have been had the transaction occurred as of the above-referenced dates or of the financial position or results that may be reported by the Company in the future. The pro forma consolidated financial information should be read in conjunction with the historical consolidated financial statements of HLMD and other historical financial statements of BL&P and the footnotes thereto. HLM DESIGN, INC. AND AFFILIATES PROFORMA CONSOLIDATED STATEMENT OF INCOME (FOR THE ACQUISITION) FOR THE YEAR ENDED APRIL 30, 1999 (Unaudited)
Historical ---------------------------- BL&P HLM Engineers ProForma Design, Inc. Inc. Adjustments ProForma ------------ --------- ----------- -------- REVENUES: Fee Income $ 29,299,883 $ 4,417,430 785,375 (1) 34,502,688 Reimbursable Income 8,457,770 88,258 - 8,546,028 ---------- ---------- ---------- ---------- Total Revenues 37,757,653 4,505,688 785,375 43,048,716 ---------- ---------- ---------- ---------- CONSULTANT EXPENSE 7,525,208 5,109 - 7,530,317 ---------- ---------- ---------- ---------- PROJECT EXPENSES: Direct Expenses 742,633 669,573 21,621 1,433,827 Reimbursable expenses 1,504,094 43,063 - 1,547,157 ---------- ---------- ---------- ---------- Total project expenses 2,246,727 712,636 21,621 2,980,984 ---------- ---------- ---------- ---------- NET PRODUCTION INCOME 27,985,718 3,787,943 763,754 32,537,415 DIRECT LABOR 8,139,460 1,643,030 616,523 (1) 10,399,013 INDIRECT EXPENSES 17,110,728 1,531,098 73,256 (2) 18,715,082 ---------- ---------- ---------- ---------- OPERATING INCOME 2,735,530 613,815 73,975 3,423,320 ---------- ---------- ---------- ---------- OTHER EXPENSE: Interest Expense, net 719,611 61,383 388,426 (3) 1,169,420 Other income - (9,107) - (9,107) ---------- ---------- ---------- ---------- Total Other Expense 719,611 52,276 388,426 1,160,313 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 2,015,919 561,539 (314,451) 2,263,007 INCOME TAX 942,707 210,128 (117,668) (4) 1,035,167 ---------- ---------- ---------- ---------- NET INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM 1,073,212 351,411 (196,783) 1,227,840 MINORITY INTEREST IN EARNINGS 326 - - - ---------- ---------- ---------- ---------- NET INCOME BEFORE EXTRAORDINARY ITEM 1,072,886 351,411 (196,783) 1,227,840 EXTRAORDINARY ITEM FOR EARLY EXTINGUISHMENT OF DEBT, NET OF TAX OF $171,842 280,849 - - 280,849 ---------- ---------- ---------- ---------- NET INCOME $ 792,037 $ 351,411 $ (196,783) $ 946,991 ========== ========== ========== ========== NET INCOME PER SHARE Basic $ 0.39 $ 0.45 ========== ========== Diluted $ 0.39 $ 0.45 ========== ========== NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA Basic 2,048,974 2,098,974 ========== ========== Diluted 2,048,974 2,098,974 ========== ==========
See notes to proforma financial statements. 1 Unaudited ProForma Consolidated Statement of Income (For the Acquisition) For the Year Ended April 30, 1999 (1) Reflects the change in revenue recognition from the method used by BL&P, which was the percentage of completion method for longer term contracts (those six months in duration or longer) and the completed contract method for the contracts with shorter durations to the HLMD method, which is the percentage of completion method for all contracts. (2) Reflects the amortization over a period of 25 years of approximately $4.0 million in goodwill as a result of the acquisition of BL&P. (3) Reflects an increase in interest expense for subordinated promissory notes as well as a borrowing made under the Company's line of credit to fund the acquisition of BL&P. (4) Reflects the net decrease in the provision for income taxes resulting from adjustments (1) through (3) above, computed using the historical effective income tax rate of BL&P. 2 HLM DESIGN, INC. AND AFFILIATES PROFORMA CONSOLIDATED BALANCE SHEET (FOR THE ACQUISITION) AS OF JANUARY 28, 2000 (Unaudited)
Historical ------------------------------ BL&P HLM Engineers ProForma ASSETS: Design, Inc. Inc. Adjustments ------------ ---------- ----------- Current Assets: Cash and cash equivalents $ 83,700 $ 70,322 - Trade and other receivables, less allowance for doubtful accounts of $401,641 and 337,119, respectively 9,913,959 1,667,723 - Costs and estimated earnings in excess of billings on uncompleted contracts 8,707,771 414,765 60,418 (1) Costs incurred under completed contract method 627,154 (627,154) (1) Prepaid expenses and other 581,895 12,916 - ---------- ---------- ----------- Total current assets 19,287,325 2,792,880 (566,736) ---------- ---------- ----------- Other Assets: Goodwill, net 8,227,620 - 1,776,453 (4) Other 938,942 5,921 - ---------- ---------- ----------- Total other assets 9,166,562 5,921 1,776,453 ---------- ---------- ----------- Property and equipment, net 2,452,053 406,162 (78,037) (2) ---------- ---------- ----------- TOTAL ASSETS $30,905,940 $3,204,963 $1,131,680 ========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current maturities of long-term debt and capital lease obligations $1,325,363 $ 98,620 (98,620) (5) Accounts payable 8,012,710 121,756 - Billings in excess of costs and estimated earnings on uncompleted projects 1,106,050 86,735 207,205 (1) Accrued construction administration costs for contracts under completed contract method - 160,106 (160,106) (1) Billings for contracts under completed contract method - 1,081,106 (1,081,106) (1) Accrued expenses and other 3,043,305 121,019 - ---------- ---------- ----------- Total current liabilities 13,487,428 1,669,342 (1,132,627) ---------- ---------- ----------- LONG-TERM DEBT AND OTHER 7,724,009 767,234 2,732,766 (5) ---------- ---------- ----------- TOTAL LIABILITIES 21,211,437 2,436,576 1,600,139 ---------- ---------- ----------- STOCKHOLDERS' EQUITY: Common stock 2,355 10,000 (9,950) (4) Preferred stock 100 (100) (3) Additonal paid in capital and other 7,431,962 43,895 212,305 (4) Retained earnings 2,259,354 1,242,699 (1,199,021) (1)-(5) Treasury stock - (528,307) 528,307 (3) Other comprehensive income 832 - - ---------- ---------- ----------- TOTAL STOCKHOLDERS' EQUITY 9,694,503 768,387 (468,459) ---------- ---------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,905,940 $3,204,963 $1,131,680 ========== ========== =========== ASSETS: ProForma -------- Current Assets: Cash and cash equivalents 154,022 Trade and other receivables, less allowance for doubtful accounts of $401,641 and 337,119, respectively 11,581,682 Costs and estimated earnings in excess of billings on uncompleted contracts 9,182,954 Costs incurred under completed contract method - Prepaid expenses and other 594,811 ---------- Total current assets 21,513,469 ---------- Other Assets: Goodwill, net 10,004,073 Other 944,863 ---------- Total other assets 10,948,936 ---------- Property and equipment, net 2,780,178 ---------- TOTAL ASSETS $35,242,583 ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current maturities of long-term debt and capital lease obligations 1,325,363 Accounts payable 8,134,466 Billings in excess of costs and estimated earnings on uncompleted projects 1,399,990 Accrued construction administration costs for contracts under completed contract method - Billings for contracts under completed contract method - Accrued expenses and other 3,164,324 ---------- Total current liabilities 14,024,143 ---------- LONG-TERM DEBT AND OTHER 11,224,009 ---------- TOTAL LIABILITIES 25,248,152 ---------- STOCKHOLDERS' EQUITY: Common stock 2,405 Preferred stock - Additonal paid in capital and other 7,688,162 Retained earnings 2,303,032 Treasury stock - Other comprehensive income 832 ---------- TOTAL STOCKHOLDERS' EQUITY 9,994,431 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,242,583 ==========
See notes to proforma financial statements. 3 Notes to Unaudited ProForma Consolidated Balance Sheet (For the Acquisition) As of January 28, 2000 (1) Reflects the change in revenue recognition from the method used by BL&P, which was for longer term contracts (those six months in duration or longer) the percentage of completion was used and for the contracts with shorter durations the completed contract method was used, to the HLMD method, which is for all contracts the percentage of completion method is used. (2) Reflects the sale of certain assets prior to the acquisition of BL&P. (3) Reflects redemption preferred stock and retirement of treasury stock of BL&P. (4) Reflects the acquisition of BL&P by HLMD effective April 29, 2000 and the preliminary allocation of purchase price of BL&P based on the estimated fair value of the net assets acquired. This assumes that the historical amounts of assets and liabilities recorded by BL&P as of January 28, 2000 represent their fair values at that date. The amount of the goodwill and the corresponding amortization actually recorded may ultimately differ from these amounts, depending upon the actual fair value of net assets acquired upon consummation of the acquisition. The estimated purchase price allocation consists of the following: Cash paid for BL&P $1,460,000 Subordinated debt issued 2,040,000 Issuance of 50,000 shares of HLM common stock 256,250 BL&P debt paid at closing 767,234 --------- Total purchase cost $4,523,484 Less estimated fair value of net assets acquired 2,692,089 --------- Goodwill $1,831,395 ========== (5) Reflects the borrowing made under HLMD's line of credit to fund the acquisition of BL&P, and subordinated debt issued net of the debt of BL&P, which was repaid as of the acquisition date as summarized below: Subordinated debt issued $2,040,000 Line of credit proceeds 2,227,234 ---------- Total proceeds $4,267,234 Less: Payoff of BL&P Debt (767,234) ---------- Debt outstanding $3,500,000 ========== Cash paid for BL&P $1,460,000 Payoff of BL&P debt 767,234 ---------- Line of credit drawn $2,227,234 ========== 4 HLM DESIGN, INC. AND AFFILIATES PROFORMA CONSOLIDATED STATEMENT OF INCOME (FOR THE ACQUISITION) FOR THE NINE MONTHS ENDED JANUARY 28, 2000 (Unaudited)
Historical ----------------------------- BL&P HLM Engineers ProForma Design, Inc. Inc. Adjustments ProForma ------------ --------- ----------- -------- REVENUES: Fee Income $ 35,212,629 $ 4,349,150 569,623 (1) 40,131,402 Reimbursable Income 2,883,291 138,463 - 3,021,754 ---------- ---------- ---------- ---------- Total Revenues 38,095,920 4,487,613 569,623 43,153,156 ---------- ---------- ---------- ---------- CONSULTANT EXPENSE 10,782,675 1,500 - 10,784,175 ---------- ---------- ---------- ---------- PROJECT EXPENSES: Direct Expenses 587,959 325,148 22,325 935,432 Reimbursable expenses 1,564,673 166,907 - 1,731,580 ---------- ---------- ---------- ---------- Total project expenses 2,152,632 492,055 22,325 2,667,012 ---------- ---------- ---------- ---------- NET PRODUCTION INCOME 25,160,613 3,994,058 547,298 29,701,969 DIRECT LABOR 7,403,527 1,219,121 480,810 (1) 9,103,458 INDIRECT EXPENSES 15,701,374 1,645,042 73,256 (2) 17,419,672 ---------- ---------- ---------- ---------- OPERATING INCOME 2,055,712 1,129,895 (6,768) 3,178,839 ---------- ---------- ---------- ---------- OTHER EXPENSE: Interest Expense, net 757,893 48,732 291,319 (3) 1,097,944 Other - 25,117 - 25,117 ---------- ---------- ---------- ---------- Total Other Expense 757,893 73,849 291,319 1,123,061 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 1,297,819 1,056,046 (298,087) 2,055,778 INCOME TAX 608,858 395,905 (111,751) (4) 893,012 ---------- ---------- ---------- ---------- NET INCOME $ 688,961 $ 660,141 $ (186,336) $ 1,162,766 ========== ========== ========== ========== NET INCOME PER SHARE Basic and diluted $ 0.29 $ 0.48 ========== ========== NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA Basic and diluted 2,351,702 2,401,702 ========== ==========
See notes to proforma financial statements. 5 Notes to Unaudited ProForma Consolidated Statement of Income (For the Acquisition) For the Nine Months Ended January 28, 2000 (1) Reflects the change in revenue recognition from the method used by BL&P, which was the percentage of completion method for longer term contracts (those six months in duration or longer) and the completed contract method for the contracts with shorter durations to the HLMD method, which is the percentage of completion method for all contracts. (2) Reflects the amortization over a period of 25 years of approximately $4.0 million in goodwill as a result of the acquisition of BL&P. (3) Reflects an increase in interest expense for subordinated promissory notes as well as a borrowing made under the Company's line of credit to fund the acquisition of BL&P. (4) Reflects the net decrease in the provision for income taxes resulting from adjustments (1) through (3) above, computed using the historical effective income tax rate of BL&P. 6