-----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, ChDHQRs2fKwJvPzBClFy2m0gQNH5AkHUssnKWDwkTP7PimzAlBw930Wwc7mDdbCH WcTrps873SU5hsKj0+kchg== 0001047469-99-005222.txt : 19990215 0001047469-99-005222.hdr.sgml : 19990215 ACCESSION NUMBER: 0001047469-99-005222 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990131 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TMP WORLDWIDE INC CENTRAL INDEX KEY: 0001020416 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133906555 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21571 FILM NUMBER: 99534477 BUSINESS ADDRESS: STREET 1: 1633 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2129774200 MAIL ADDRESS: STREET 1: 1633 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: January 28, 1999 TMP WORLDWIDE INC. ------------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware 0-21571 13-3906555 ------------------- ------------------------- -------------------- (State of (Commission File No.) (I.R.S. Employer Incorporation) Identification No.) 1633 Broadway, New York, New York 10019 -------------------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-977-4200 -------------- Item 2. ACQUISITION OR DISPOSITION OF ASSETS. On January 28, 1999, pursuant to the terms of the Scheme Implementation Agreement, dated August 17, 1998, as amended (the "Agreement"), TMP Worldwide Inc. ("TMP") acquired, through a wholly-owned subsidiary, all of the outstanding capital stock and options to purchase such stock, of Morgan & Banks Limited ("M&B") for an aggregate of approximately 5,450,000 shares of common stock, $.001 par value, of TMP ("TMP Common Stock"), and such share amount considers the effect of options that can be converted into TMP stock. M&B provides human resource services to both the public and private sectors in Australasia. The employment related services provided by M&B include consulting, permanent recruitment (selection) and temporary contracting. As a result of the transaction, M&B became an indirect wholly-owned subsidiary of TMP and the former shareholders of M&B became stockholders of TMP. For the six months ended September 30, 1998, M&B's revenue was approximately A$204.6 million ($133.6 million) and net income was approximately A$7.7 million ($5.1 million). For the year ended March 31, 1998, M&B's revenue was A$330.4 million ($235.8 million) and net income was A$11.0 million ($7.9 million). The pro forma impact of the transaction is set forth in Item 7 of this Report. 2 Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS. (a) (i) Financial Statements of Morgan & Banks Limited for the six months ended September 30, 1998, filed herewith as Exhibit 99.1. (ii) Financial Statements of Morgan & Banks Limited for the year ended March 31, 1998, filed herewith as Exhibit 99.2. (b) Unaudited Pro Forma Condensed Combined Financial Information. 3 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The Unaudited Pro Forma Condensed Combined Financial Information reflects financial information which gives effect to the Company's acquisition of all the outstanding stock of M&B and the assumed replacement of all options to acquire M&B stock with options to purchase TMP stock in exchange for the issuance of approximately 5,150,000 shares of TMP's Common Stock and approximately 300,000 options to purchase shares of TMP Common Stock (the "Transaction"). The share amounts and option amounts were calculated using an exchange formula based on a per share price for M&B shares of 4.65 Australian dollars, translated at 0.6292 US dollar per Australian dollar for the periods presented and gives effect to 70,421,773 M&B shares and 3,866,625 M&B options outstanding at January 27, 1999. The Pro Forma Financial Information included herein reflects the use of the pooling-of-interests method of accounting, after giving effect to the pro forma adjustments discussed in the accompanying notes. Such financial information has been prepared from, and should be read in conjunction with, the historical consolidated financial statements and notes thereto of TMP and M&B. The Pro Forma Condensed Combined Financial Information (i) gives effect to the Transaction, (ii) gives effect, in the Combined Statement of Operations for the year ended December 31, 1997, to the acquisition, in August 1997, of all the outstanding stock of Austin Knight Limited, ("Austin Knight"), for a purchase price of approximately $47.2 million, and (iii) includes the adjustments described in the notes hereto. The Pro Forma Condensed Combined Balance Sheet gives effect to the Transaction as if it had occurred on September 30, 1998, combining the balance sheets of TMP at September 30, 1998 with that of M&B as of September 30, 1998. The Pro Forma Condensed Combined Statements of Operations give effect to the Transaction as if it had occurred at the beginning of the earliest period presented, combining the results of TMP for the nine months ended September 30, 1998 and each year in the three-year period ended December 31, 1997 with those of M&B for the nine months ended September 30, 1998 and each year in the three-year period ended March 31, 1998, respectively. The results for M&B for the three months ended March 31, 1998 are included in the Pro Forma Condensed Combined Statement of Operations for both the year ended December 31, 1997 and the nine months ended September 30, 1998. When translated at the appropriate exchange rates for the December 31, 1997 and September 30, 1998 periods, revenue was approximately $62.1 million and $54.9 million, net income was approximately $2.0 million and $1.7 million, and the effect on the diluted net income per share was $0.06 and $0.05, respectively. In addition, the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1997 includes the results of Austin Knight for the period prior to its acquisition by TMP on August 26, 1997. The consolidated financial statements of M&B included in the Pro Forma Condensed Combined Financial Information utilize Australian GAAP (which substantially conforms to US GAAP) and were translated at the following exchange rates: Australian dollars were translated to US dollars at the rate of 0.5933, 0.6318, 0.7137, 0.7874 and 0.7455, respectively, with respect to the Balance Sheet at September 30, 1998 and the Statement of Operations for the nine months ended September 30, 1998 and the years ended March 31, 1998, 1997 and 1996. The Statement of Operations of Austin Knight included in the December 31, 1997 Pro Forma Condensed Combined Statement of Operations was translated from British Pounds Sterling to US dollars at the rate of 1.634 US dollars per British Pound Sterling. The Pro Forma Condensed Combined Statements of Operations presented do not include any potential cost savings. The Company believes that it may be able to reduce salaries and related costs and office and general expenses as it eliminates duplication of overhead. However, there can be no assurance that the Company will be successful in effecting any such cost savings. The Pro Forma Condensed Combined Financial Information is unaudited and is not necessarily indicative of the consolidated results which actually would have occurred if the above transactions had been consummated at the beginning of the periods presented, nor does it purport to present the future financial position and results of operations for future periods. 4 TMP WORLDWIDE INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET SEPTEMBER 30, 1998 (IN THOUSANDS) (UNAUDITED)
TMP MORGAN & BANKS PRO FORMA WORLDWIDE INC. LIMITED ADJUSTMENTS COMBINED -------------- ---------------- ------------- ----------- ASSETS Current assets: Cash and cash equivalents...................... $ 12,855 $ 11,263 $ -- $ 24,118 Accounts receivable, net....................... 317,048 25,284 -- 342,332 Work-in-process................................ 16,367 -- -- 16,367 Deferred income taxes.......................... -- 1,114 -- 1,114 Prepaid and other.............................. 19,385 2,418 -- 21,803 -------------- ------- ------ ----------- Total current assets....................... 365,655 40,079 -- 405,734 Property and equipment, net...................... 49,928 7,894 -- 57,822 Deferred income taxes............................ 4,084 117 -- 4,201 Intangibles, net................................. 184,463 5,412 -- 189,875 Other assets..................................... 5,473 27 -- 5,500 -------------- ---------- --------- ----------- $ 609,603 $ 53,529 $ -- $ 663,132 -------------- ---------- --------- ----------- -------------- ---------- --------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................... $ 254,864 $ 4,121 $ -- $ 258,985 Accrued expenses and other liabilities......... 50,808 27,380 6,000 (a) 84,188 Accrued restructuring costs.................... 20,902 -- -- 20,902 Deferred revenue............................... 13,923 -- -- 13,923 Deferred income taxes.......................... 13,519 34 -- 13,553 Current portion of long-term debt.............. 8,908 167 -- 9,075 -------------- ---------- --------- ----------- Total current liabilities.................. 362,924 31,702 6,000 400,626 Long-term debt, less current portion............. 128,581 4,511 -- 133,092 Other liabilities................................ -- 1,007 -- 1,007 Minority interests............................... -- 475 -- 475 Stockholders' equity: Common stock................................... 27 -- 5 (b) 32 Class B common stock........................... 2 -- -- 2 Common stock of Morgan & Banks Limited......... -- 1,392 (1,392)(c) -- Additional paid-in capital..................... 171,973 2,841 1,387(b,c) 176,201 Foreign currency translation adjustment........ (543) 172 -- (371) Retained earnings (deficit).................... (53,361) 11,429 (6,000)(a) (47,932) -------------- ---------- --------- ----------- Total stockholders' equity................. 118,098 15,834 (6,000) 127,932 -------------- ---------- --------- ----------- $ 609,603 $ 53,529 $ -- $ 663,132 -------------- ---------- --------- ----------- -------------- ---------- --------- -----------
- ------------------------ (a) To accrue for costs to be incurred in connection with the Transaction. (b) Represents par value of the 5,150 shares to be issued in connection with the Transaction, excluding options that could be exercised by current holders of M&B options, based on the number of outstanding M&B Shares as of the balance sheet date. (c) Par value of the M&B Shares is reclassified as additional paid-in capital net of the par value of the newly issued TMP Common Stock. 5 TMP WORLDWIDE INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
TMP MORGAN & BANKS PRO FORMA WORLDWIDE INC. LIMITED COMBINED -------------- --------------- ----------- Revenue: Commissions and fees.......................................... $297,854 $ 50,719 $348,573 Temporary contracting......................................... -- 133,501 133,501 --------- -------- -------- Total revenue............................................. 297,854 184,220 482,074 --------- -------- -------- Operating expenses: Salaries and related costs.................................... 164,012 45,061 209,073 Temporary contracting costs................................... -- 111,227 111,227 Office and general............................................ 91,060 17,727 108,787 Amortization of intangibles................................... 6,403 365 6,768 CEO bonus..................................................... 1,125 -- 1,125 Merger costs.................................................. 9,577 -- 9,577 --------- -------- -------- Total operating expenses.................................. 272,177 174,380 446,557 --------- -------- -------- Operating income................................................ 25,677 9,840 35,517 Interest expense, net........................................... (7,507) (137) (7,644) Other expense, net.............................................. (842) (1) (843) --------- -------- -------- Income before provision for income taxes, minority interests and equity in losses of affiliates................................ 17,328 9,702 27,030 Provision for income taxes...................................... 7,735 3,728 11,463 Minority interests.............................................. -- (17) (17) Equity in losses of affiliates.................................. (297) -- (297) --------- -------- -------- Net income...................................................... $ 9,296 $ 5,991 $ 15,287 --------- -------- -------- --------- -------- -------- Net income per common and Class B common share: Basic......................................................... $ 0.32 $ 0.45(a) Diluted....................................................... $ 0.31 $ 0.44(a) Weighted average shares outstanding: Basic......................................................... 29,142 34,206(a) Diluted....................................................... 29,949 35,135(a)
- ------------------------ (a) Gives effect to the additional shares and options expected to be issued in connection with the Transaction, including M&B's weighted average basic and diluted shares outstanding for the periods, which were 69,239 and 70,899, respectively, multiplied by the Exchange Ratio of 0.07314. 6 TMP WORLDWIDE INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
TMP AUSTIN KNIGHT MORGAN & BANKS PRO FORMA WORLDWIDE INC. LIMITED(A) ADJUSTMENTS SUBTOTAL LIMITED COMBINED -------------- ------------- ----------- ---------- -------------- ----------- Revenue: Commissions and fees.......... $310,619 $ 34,800 $ -- $345,419 $ 71,950 $417,369 Temporary contracting......... -- -- -- -- 163,831 163,831 -------- -------- --------- -------- -------- -------- Total revenue............. 310,619 34,800 -- 345,419 235,781 581,200 -------- -------- --------- -------- -------- -------- Operating expenses: Salaries and related costs.... 172,528 28,480 -- 201,008 60,342 261,350 Temporary contracting costs... -- -- -- -- 136,185 136,185 Office and general............ 101,176 5,758 -- 106,934 25,258 132,192 Amortization of intangibles... 6,269 -- 1,323(b) 7,592 558 8,150 CEO bonus..................... 1,500 -- -- 1,500 -- 1,500 -------- -------- --------- -------- -------- -------- Total operating expenses................ 281,473 34,238 1,323 317,034 222,343 539,377 -------- -------- --------- -------- -------- -------- Operating income................ 29,146 562 (1,323) 28,385 13,438 41,823 Interest expense, net........... (8,813) (244) (2,896)(c) (11,953) (247) (12,200) Other income (expense), net..... (181) 1,547 -- 1,366 (22) 1,344 -------- -------- --------- -------- -------- -------- Income before provision for income taxes, minority interests and equity in losses of affiliates................. 20,152 1,865 (4,219) 17,798 13,169 30,967 Provision for income taxes...... 9,571 1,442 (1,158)(d) 9,855 5,153 15,008 Minority interests.............. 143 -- -- 143 153 296 Equity in losses of affiliates.. (33) -- -- (33) -- (33) -------- -------- --------- -------- -------- -------- Net income...................... 10,405 423 (3,061) 7,767 7,863 15,630 Preferred stock dividends....... (123) -- -- (123) -- (123) -------- -------- --------- -------- -------- -------- Net income applicable to common and Class B common stockholders.................. $ 10,282 $ 423 $(3,061) $ 7,644 $ 7,863 $ 15,507 -------- -------- --------- -------- -------- -------- -------- -------- --------- -------- -------- -------- Net income per common and Class B common share: Basic......................... $ 0.38 $ 0.48(e) Diluted....................... $ 0.37 $ 0.47(e) Weighted average shares outstanding: Basic......................... 27,224 32,234(e) Diluted....................... 27,716 32,857(e)
- ------------------------ (a) For the period January 1, 1997 through the date of the acquisition by TMP of Austin Knight on August 26, 1997. (b) To record amortization of intangibles arising from the acquisition of Austin Knight, as if such acquisition occurred on January 1, 1997. Such amortization is based on a 30 year life and is computed on an intangible asset of $59,523, amortized for eight months. (c) To record interest expense on borrowings in connection with the acquisition of Austin Knight, as if such acquisition occurred on January 1, 1997. Debt of $47,208 at 9.2% for eight months. 7 TMP WORLDWIDE INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) (d) To record the tax benefit on interest expense of $2,896 on borrowings for the acquisition of Austin Knight, at an estimated tax rate of 40%. (e) Gives effect to the additional shares and options expected to be issued in connection with the Transaction, including M&B's weighted average basic and diluted shares outstanding for the period, which were 68,489 and 70,289, respectively, multiplied by the Exchange Ratio of 0.07314. 8 TMP WORLDWIDE INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
TMP MORGAN & BANKS PRO FORMA WORLDWIDE INC. LIMITED COMBINED -------------- ---------------- ----------- Revenue: Commissions and fees.......................................... $223,319 $ 61,084 $284,403 Temporary contracting......................................... -- 113,299 113,299 --------- -------- -------- Total revenue............................................. 223,319 174,383 397,702 --------- -------- -------- Operating expenses: Salaries and related costs.................................... 122,964 45,507 168,471 Temporary contracting costs................................... -- 93,585 93,585 Office and general............................................ 74,252 21,944 96,196 Amortization of intangibles................................... 4,440 292 4,732 Special compensation.......................................... 52,019 -- 52,019 --------- -------- -------- Total operating expenses.................................. 253,675 161,328 415,003 --------- -------- -------- Operating income (loss)......................................... (30,356) 13,055 (17,301) Interest expense, net........................................... (14,216) (27) (14,243) Other income (expense), net..................................... (755) 141 (614) --------- -------- --------- Income (loss) before provision for income taxes, minority interests and equity in earnings of affiliates................ (45,327) 13,169 (32,158) Provision for income taxes...................................... 4,125 4,812 8,937 Minority interests.............................................. 434 583 1,017 Equity in earnings of affiliates................................ 114 -- 114 --------- -------- -------- Net income (loss)............................................... (49,772) 7,774 (41,998) Preferred stock dividends....................................... (210) -- (210) --------- -------- -------- Net income (loss) applicable to common and Class B common stockholders.................................................. $(49,982) $ 7,774 $(42,208) --------- -------- -------- --------- -------- -------- Net income (loss) per common and Class B common share: Basic......................................................... $ (2.24) $ (1.55) Diluted....................................................... $ (2.24) $ (1.55) Weighted average shares outstanding: Basic......................................................... 22,280 27,229(a) Diluted....................................................... 22,280 27,229(a)
- ------------------------ (a) Gives effect to the additional shares and options expected to be issued in connection with the Transaction, including M&B's weighted average basic and diluted shares outstanding for the period, which were 67,664 and 69,895, respectively, multiplied by the Exchange Ratio of 0.07314. 9 TMP WORLDWIDE INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
TMP MORGAN & BANKS PRO FORMA WORLDWIDE INC. LIMITED COMBINED -------------- ---------------- ----------- Revenue: Commissions and fees.......................................... $183,674 $ 44,881 $228,555 Temporary contracting......................................... -- 61,768 61,768 --------- -------- -------- Total revenue............................................. 183,674 106,649 290,323 --------- -------- -------- Operating expenses: Salaries and related costs.................................... 100,162 31,701 131,863 Temporary contracting costs................................... -- 49,503 49,503 Office and general............................................ 57,310 17,032 74,342 Amortization of intangibles................................... 3,237 118 3,355 --------- -------- -------- Total operating expenses.................................. 160,709 98,354 259,063 --------- -------- -------- Operating income................................................ 22,965 8,295 31,260 Interest income (expense), net.................................. (10,654) 77 (10,577) Other income (expense), net..................................... (1,057) 123 (934) --------- -------- -------- Income before provision for income taxes, minority interests and equity in losses of affiliates................................ 11,254 8,495 19,749 Provision for income taxes...................................... 5,100 3,136 8,236 Minority interests.............................................. 435 326 761 Equity in losses of affiliates.................................. (279) -- (279) --------- -------- -------- Net income...................................................... 5,440 5,033 10,473 Preferred stock dividends....................................... (210) -- (210) --------- -------- -------- Net income applicable to common and Class B common stockholders.................................................. $ 5,230 $ 5,033 $ 10,263 --------- -------- -------- --------- -------- -------- Net income per common and Class B common share: Basic......................................................... $ 0.24 $ 0.38(a) Diluted....................................................... $ 0.23 $ 0.37(a) Weighted average shares outstanding: Basic......................................................... 22,045 26,925(a) Diluted....................................................... 22,497 27,409(a)
- ------------------------ (a) Gives effect to the additional shares and options expected to be issued in connection with the Transaction including M&B's weighted average basic and diluted shares outstanding for the period, which were 66,718 and 67,152, respectively, multiplied by the Exchange Ratio of 0.07314. 10 (c) Exhibits: Exhibit 2.1 - Scheme Implementation Agreement, dated August 17, 1998, as amended, between Morgan & Banks Limited and TMP Worldwide Inc. (incorporated by reference to TMP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). Exhibit 23.1 - Consent of Pannell Kerr Forster. Exhibit 99.1 - Financial Statements of Morgan & Banks Limited for the six months ended September 30, 1998. Exhibit 99.2 - Financial Statements of Morgan & Banks Limited for the year ended March 31, 1998. Exhibit 99.3 - Press Release, dated January 28, 1999. 11 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. TMP WORLDWIDE INC. By: /S/ THOMAS G. COLLISON ------------------------ Thomas G. Collison Vice Chairman Dated: February 11, 1999 12 EX-23.1 2 EXHIBIT 23.1 Exhibit 23.1 The Board of Directors Morgan & Banks Limited Level 11, Grosvenor Place 225 George Street SYDNEY, NSW 2000 CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS We hereby consent to the inclusion of our report dated 16 June 1998, except for Note 2 of Notes to and forming Part of the Consolidated Financial Statements, for which the date is 21 September 1998, relating to the consolidated balance sheets of Morgan & Banks Limited as at 31 March 1998 and 1997, and the consolidated profit and loss statements and cash flow statements for each of the years in the three year period ended 31 March 1998 appearing in the Form 8-K of TMP Worldwide Inc. dated 28 January 1999. Sydney Australia 10 February 1999 Pannell Kerr Forster, P.C. PANNELL KERR FORSTER EX-99.1 3 EXHIBIT 99.1 Exhibit 99.1 MORGAN & BANKS LIMITED CONSOLIDATED PROFIT AND LOSS ACCOUNTS (IN AUSTRALIAN DOLLARS)
FOR THE SIX MONTHS ENDED 30 SEPTEMBER -------------------- 1998 1997 $000 $000 --------- --------- (UNAUDITED) Sales revenue............................................................ 204,624 160,141 --------- --------- --------- --------- Operating profit before depreciation, amortisation, interest and income tax.................................................................... 15,638 14,114 Depreciation, amortisation and interest.................................. 3,296 2,969 --------- --------- Operating profit before income tax....................................... 12,342 11,145 Income tax attributable to operating profit.............................. 4,547 4,219 --------- --------- Operating profit after income tax........................................ 7,795 6,926 Outside equity interests in operating profit after income tax............ 59 262 --------- --------- Operating profit after income tax attributable to members of Morgan & Banks Limited.......................................................... 7,736 6,664 Retained profits at the beginning of the financial year.................. 12,526 8,699 --------- --------- Total available for appropriation........................................ 20,262 15,363 Dividends provided for or paid........................................... -- (3,693) --------- --------- Retained profits at the end of the financial period..................... 20,262 11,670 --------- --------- --------- ---------
See notes attached hereto. 1 MORGAN & BANKS LIMITED CONSOLIDATED BALANCE SHEETS (IN AUSTRALIAN DOLLARS)
30 SEPTEMBER 31 MARCH 1998 1998 $000 $000 ------------- ----------- (UNAUDITED) CURRENT ASSETS Cash................................................................... 18,984 14,488 Receivables............................................................ 44,588 39,446 Other.................................................................. 3,306 2,357 ------ ----------- TOTAL CURRENT ASSETS................................................... 66,878 56,291 ------ ----------- NON-CURRENT ASSETS Receivables............................................................ 46 46 Plant and equipment.................................................... 13,306 14,152 Intangibles............................................................ 9,121 9,308 Other.................................................................. 3,242 2,993 ------ ----------- TOTAL NON-CURRENT ASSETS............................................... 25,715 26,499 ------ ----------- TOTAL ASSETS........................................................... 92,593 82,790 ------ ----------- CURRENT LIABILITIES Accounts payable....................................................... 47,371 43,665 Borrowings............................................................. 281 481 Provisions............................................................. 5,931 9,530 ------ ----------- TOTAL CURRENT LIABILITIES.............................................. 53,583 53,676 ------ ----------- NON-CURRENT LIABILITIES Borrowings............................................................. 7,604 8,121 Provisions............................................................. 2,920 1,613 ------ ----------- TOTAL NON-CURRENT LIABILITIES.......................................... 10,524 9,734 ------ ----------- TOTAL LIABILITIES...................................................... 64,107 63,410 ------ ----------- NET ASSETS............................................................. 28,486 19,380 ------ ----------- ------ ----------- Shareholders' Equity Issued capital......................................................... 7,135 2,308 Reserves............................................................... 289 3,895 Retained profits....................................................... 20,262 12,526 ------ ----------- Shareholders' equity attributable to members of Morgan & Banks Limited............................................ 27,686 18,729 Outside equity interests in controlled entities........................ 800 651 ------ ----------- TOTAL SHAREHOLDERS' EQUITY............................................. 28,486 19,380 ------ ----------- ------ -----------
See notes attached hereto. 2 MORGAN & BANKS LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN AUSTRALIAN DOLLARS)
FOR THE SIX MONTHS ENDED 30 SEPTEMBER ---------------------- 1998 1997 $000 $000 ---------- ---------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers.......................................................... 201,150 154,739 Payments to suppliers and employees.............................................. (187,234) (140,683) Interest received................................................................ 176 101 Borrowing costs including interest and cost of finance paid...................... (301) (319) Dividends received............................................................... -- -- Income taxes paid................................................................ (4,221) (3,654) -------- -------- Net cash provided by operating activities........................................ 9,570 10,184 -------- -------- CASH FLOWS TO INVESTING ACTIVITIES Payments for additional share in controlled entities............................. -- (665) Payment for plant and equipment.................................................. (1,919) (5,786) Proceeds from sale of plant and equipment........................................ 1 -- -------- -------- Net cash used in investing activities............................................ (1,918) (6,451) -------- -------- CASH FLOWS TO FINANCING ACTIVITIES Proceeds from issuance of shares................................................. 623 -- Repayments of borrowings......................................................... (508) (179) Payments under hire purchase contracts........................................... (304) (304) Dividends paid................................................................... (3,492) (3,308) -------- -------- Net cash used in financing activities............................................ (3,681) (3,791) -------- -------- Net increase (decrease) in cash held............................................. 3,971 (58) Cash at the beginning of the year................................................ 14,488 11,067 Effects of exchange rate changes on the balances of cash held in foreign currencies at the beginning of the year........................................ 525 146 -------- -------- Cash at the end of the period.................................................... 18,984 11,155 -------- -------- -------- -------- Non-cash financing and investing activities During this and the previous six month period, there were no non-cash financing and investing transactions.
See notes attached hereto. 3 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (IN AUSTRALIAN DOLLARS) (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The consolidated condensed interim financial statements included herein have been prepared by Morgan and Banks Limited ("M&B"), without audit in accordance with applicable Accounting Standards and other professional requirements, and comply with other requirements of the law. Although certain information and footnote disclosures normally included in M&B's annual financial statements prepared in accordance with generally accepted accounting principles in Australia ("Australian GAAP") have been condensed or omitted pursuant to such rules and regulations, M&B believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and notes thereto included in M&B's year end report dated March 31, 1998. M&B follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods may not be indicative of annual results. NOTE 2. RECONCILIATION OF ISSUED CAPITAL
($000) -------- Balance at 31 March, 1998.................................. 2,308 Shares issued in connection with the exercise of options............................................... 623 Share premium being classified to issued capital as a result of changes in Australian Corporation Law which eliminated the par value amount per common share... 4,204 -------- Balance at 30 September, 1998.............................. 7,135 -------- --------
4 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) (UNAUDITED) NOTE 3. RECONCILIATIONS FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Reconciliation of operating profit after income tax for the six months ended 30 September,
1998 1997 $000 $000 --------- --------- (UNAUDITED) Operating profit after income tax attributable to members of Morgan & Banks Limited.................................................................... 7,736 6,664 Settlement of litigation*................................................................... 998 -- --------- --------- Net income in accordance with US Generally Accepted Accounting Principles............................................................ 6,738 6,664 --------- --------- --------- ---------
Reconciliation of shareholders' equity at
30 September, 31 March, 1998 1998 $000 $000 --------- --------- Shareholders' equity attributable to members of Morgan & Banks Limited.................................................................... 27,686 18,729 Settlement of litigation*................................................................... 998 -- --------- --------- Shareholders' equity in accordance with US Generally Accepted Accounting Principles............................................................ 26,668 18,729 --------- --------- --------- ---------
* For US GAAP, this settlement will be recorded in October, 1998 because that is when the favorable court decision was delivered. - -------------------------- Under Australian GAAP, companies were not allowed to use the equity method of accounting for investments in associates in the consolidated profit and loss statement or balance sheet. Instead companies record the investment at cost and bring to account dividend income. US GAAP requires investments in associates to be accounted for under the equity method after elimination of unrealised profits on transactions with associates. The adjustment was not material and therefore not included in the summary of differences. Under Australian GAAP, no cost attributable to executive options has been recognised in the profit and loss statement. Under US GAAP the compensation cost is zero for each year ended to date. Under Australian GAAP, Operating Income before Depreciation, Amortization, Interest and Income Tax is an appropriate measure. M&B understands that this measure is not recognized under US GAAP. 5 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) (UNAUDITED) NOTE 3. RECONCILIATIONS FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED) The disclosure of operating expenses as required under US GAAP are included below. This disclosure is not an Australian GAAP requirement.
SIX MONTHS ENDED 30 SEPTEMBER -------------------- 1998 1997 $000 $000 --------- --------- Cost of sales.............................................................................. 124,379 88,944 Salary and related costs................................................................... 48,926 40,567 Office and general expenses................................................................ 19,670 18,888 Amortisation of intangibles................................................................ 395 418 --------- --------- Total operating expenses................................................................... 193,370 148,817 --------- --------- --------- ---------
NOTE 4. SUBSEQUENT EVENT. On January 28, 1999, pursuant to the terms of the Scheme Implementation Agreement, dated August 17, 1998, as amended (the "Agreement"), TMP Worldwide Inc. ("TMP") acquired, through a wholly-owned subsidiary, all of the outstanding capital stock and options to purchase such stock, of M&B for an aggregate of approximately 5,450,000 shares of common stock, $.001 par value, of TMP ("TMP Common Stock"), and such share amount considers the effect of options that can be converted into TMP Common Stock. NOTE 5. EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED 30 SEPTEMBER ---------------------------------------- 1998 1997 $ $ ------------ ------------ Basic earnings per share................................................ 0.110 0.097 Diluted earnings per share.............................................. 0.109 0.093 NUMBER NUMBER ------------ ------------ Weighted average number of ordinary shares outstanding during the six months: Used in the calculation of basic earnings per share................... 69,785,579 69,239,148 Used in the calculation of diluted earnings per share................. 73,166,329 72,988,023
The prior period numbers have been adjusted to reflect the capital reconstruction for the purposes of comparability. 6 EX-99.2 4 EXHIBIT 99.2 Exhibit 99.2 INDEPENDENT AUDITOR'S REPORT TO MEMBERS SCOPE We have audited the financial statements of Morgan & Banks Limited for the financial years ended 31 March 1998, 1997 and 1996 as set out on pages 2 to 26 included herein. The financial statements include the consolidated accounts of the economic entity comprising the company and the entities it controlled at each year's end or from time to time during the financial year. The company's directors are responsible for the preparation and presentation of the financial statements and the information they contain. We have conducted an independent audit of these financial statements in order to express an opinion on them to the members of the company. Our audit has been conducted in accordance with Australian Auditing Standards which do not differ in any material respects from generally accepted auditing standards in the United States of America to provide reasonable assurance as to whether the financial statements are free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial statements are presented fairly in accordance with Australian Accounting Standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and statutory requirements so as to present a view which is consistent with our understanding of the company's and the economic entity's financial position, and the results of their operations and their cash flows. The names of the entities controlled during all or part of, or at the end of, the financial year, but of which we have not acted as auditors are set out in Note 32 to the financial statements. We have, however, received sufficient information and explanations concerning these controlled entities to enable us to form an opinion on the consolidated accounts. The audit opinion expressed in this report has been formed on the above basis. AUDIT OPINION In our opinion, the financial statements of Morgan & Banks Limited are properly drawn up: (a) so as to give a true and fair view of - the state of affairs as at 31 March 1998 and 1997 and the profit and cash flows for the financial years ended 31 March 1998, 1997 and 1996 of the company and the economic entity; and - the other matters required by Divisions 4, 4A and 4B of Part 3.6 of the Corporations Law to be dealt with in the financial statements; (b) in accordance with the provisions of the Corporations Law; and (c) in accordance with applicable Australian Accounting Standards and other mandatory professional reporting requirements. /s/ Pannell Kerr Forster /s/ A.P. WHITING - ---------------------------- ---------------------------- Pannell Kerr Forster A.P. Whiting Chartered Accountants Partner New South Wales Partnership Sydney, 16 June 1998, except for Note 2 of Notes to and Forming Part of the Consolidated Financial Statements, for which the date is 21 September 1998. 1 MORGAN & BANKS LIMITED CONSOLIDATED PROFIT AND LOSS ACCOUNTS (IN AUSTRALIAN DOLLARS)
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 NOTES $000 $000 $000 --------- --------- --------- --------- Sales revenue.......................................................... 4 330,364 221,467 143,057 --------- --------- --------- Operating profit before depreciation, amortisation, interest and income tax.................................................................. 25,466 20,002 13,440 Depreciation, amortisation and interest................................ 6,312 3,276 2,046 --------- --------- --------- Operating profit before abnormal items and income tax.................. 3 19,154 16,726 11,394 Abnormal loss before income tax........................................ 5 703 -- -- --------- --------- --------- Operating profit before income tax..................................... 18,451 16,726 11,394 Income tax attributable to operating profit............................ 6 7,220 6,118 4,200 --------- --------- --------- Operating profit after income tax...................................... 11,231 10,608 7,194 Outside equity interests in operating profit after income tax.......... 214 741 437 --------- --------- --------- Operating profit after income tax attributable to members of Morgan & Banks Limited........................................................ 11,017 9,867 6,757 Retained profits at the beginning of the financial year................ 8,699 4,848 2,499 Retrospective adjustments for the introduction of AASB 1028............ -- -- (123) --------- --------- --------- Total available for appropriation...................................... 19,716 14,715 9,133 Dividends provided for or paid......................................... 7,190 6,016 4,285 --------- --------- --------- Retained profits at the end of the financial year...................... 12,526 8,699 4,848 --------- --------- --------- --------- --------- ---------
The above Profit and Loss Accounts are to be read in conjunction with the attached Notes. 2 MORGAN & BANKS LIMITED CONSOLIDATED BALANCE SHEETS (IN AUSTRALIAN DOLLARS)
AS AT 31 MARCH -------------------- 1998 1997 NOTES $000 $000 ----------- --------- --------- CURRENT ASSETS Cash................................................................................... 22 14,488 11,067 Receivables............................................................................ 9 39,446 30,175 Other.................................................................................. 10 2,357 1,844 --------- --------- TOTAL CURRENT ASSETS................................................................... 56,291 43,086 --------- --------- NON-CURRENT ASSETS Receivables............................................................................ 11 46 42 Plant and equipment.................................................................... 12 14,152 10,385 Intangibles............................................................................ 13 9,308 10,147 Other.................................................................................. 14 2,993 2,339 --------- --------- TOTAL NON-CURRENT ASSETS............................................................... 26,499 22,913 --------- --------- TOTAL ASSETS........................................................................... 82,790 65,999 --------- --------- CURRENT LIABILITIES Accounts payable....................................................................... 15 43,665 34,029 Borrowings............................................................................. 16 481 665 Provisions............................................................................. 17 9,530 8,230 --------- --------- TOTAL CURRENT LIABILITIES.............................................................. 53,676 42,924 --------- --------- NON-CURRENT LIABILITIES Borrowings............................................................................. 18 8,121 5,915 Provisions............................................................................. 19 1,613 1,719 --------- --------- TOTAL NON-CURRENT LIABILITIES.......................................................... 9,734 7,634 --------- --------- TOTAL LIABILITIES...................................................................... 63,410 50,558 --------- --------- NET ASSETS............................................................................. 19,380 15,441 --------- --------- --------- --------- Shareholders' Equity Issued capital......................................................................... 21 2,308 2,283 Reserves............................................................................... 8 3,895 3,664 Retained profits....................................................................... 12,526 8,699 --------- --------- Shareholders' equity attributable to members of Morgan & Banks Limited............................................................ 18,729 14,646 Outside equity interests in controlled entities........................................ 31 651 795 --------- --------- TOTAL SHAREHOLDERS' EQUITY............................................................. 19,380 15,441 --------- --------- --------- ---------
The above Balance Sheets are to be read in conjunction with the attached Notes. 3 MORGAN & BANKS LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN AUSTRALIAN DOLLARS)
FOR THE YEAR ENDED 31 MARCH ---------------------------------- 1998 1997 1996 NOTES $000 $000 $000 ----------- ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers............................................... 322,055 216,454 135,179 Payments to suppliers and employees................................... (296,859) (192,397) (122,187) Interest received..................................................... 188 220 259 Borrowing costs including interest and cost of finance paid........... (472) (99) (165) Dividends received.................................................... -- 151 -- Income taxes paid..................................................... (7,217) (6,577) (4,025) ---------- ---------- ---------- Net cash provided by operating activities............................. 23(a) 17,695 17,752 9,061 ---------- ---------- ---------- CASH FLOWS TO INVESTING ACTIVITIES Payments for businesses acquired 23(b) -- -- (102) Payments for investments in controlled entities....................... 23(b) -- (6,647) -- Payments for additional shares in controlled entities................. (665) (1,075) -- Payment for investments -- -- (1,491) Payment for plant and equipment....................................... (9,407) (4,558) (4,324) Proceeds from sale of plant and equipment............................. 155 104 -- Long-term loans to related bodies corporate........................... (4) -- (61) ---------- ---------- ---------- Net cash used in investing activities................................. (9,921) (12,176) (5,978) ---------- ---------- ---------- CASH FLOWS TO FINANCING ACTIVITIES Proceeds from borrowings.............................................. 2,900 6,815 -- Repayments of borrowings.............................................. (179) (1,500) -- Payments under hire purchase contracts................................ (608) (608) (359) Proceeds from exercise of options..................................... 420 -- -- Dividends paid........................................................ (7,148) (5,325) (4,060) ---------- ---------- ---------- Net cash used in financing activities................................. (4,615) (618) (4,419) ---------- ---------- ---------- Net increase (decrease) in cash held.................................. 3,159 4,958 (1,336) Cash at the beginning of the year..................................... 11,067 6,141 7,514 Effects of exchange rate changes on the balances of cash held in foreign currencies at the beginning of the year..................... 262 (32) (37) ---------- ---------- ---------- Cash at the end of the year........................................... 22 14,488 11,067 6,141 ---------- ---------- ---------- ---------- ---------- ---------- Non-cash financing and investing activities........................... 23(c) Financing arrangements................................................ 23(d)
The above Statements of Cash Flows are to be read in conjunction with the attached Notes. 4 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (IN AUSTRALIAN DOLLARS) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted by the economic entity comprising the chief entity Morgan & Banks Limited and its controlled entities are stated in order to assist in a general understanding of the financial statements. These policies have been consistently applied except as otherwise indicated. The financial statements, which constitute a general purpose financial report, have been drawn up in accordance with applicable Accounting Standards and other mandatory professional requirements, and comply with other requirements of the law. ACCOUNTS PAYABLE Accounts payable represent the principal amounts outstanding at balance date. The carrying amounts of accounts payable approximate net fair values. NON-CURRENT ASSETS The carrying amounts of non-current assets do not exceed the net amounts that are expected to be recovered through the cash inflows and outflows arising from their continued use and subsequent disposal. The expected net cash flows included in determining the recoverable amount have not been discounted to their present values. DEPRECIATION AND AMORTISATION OF PLANT AND EQUIPMENT Items of plant and equipment are depreciated over their estimated useful lives using the straight line method. Leasehold improvements are amortised over the period of the lease. GOODWILL Goodwill, representing the excess of the cost of acquisition over the fair values of the net assets acquired, is being amortised over the period of time during which benefits are expected to arise. The period over which goodwill is being amortised is reviewed annually and does not exceed 20 years. RECEIVABLES Trade accounts receivable, amounts due from related parties and other receivables represent the principal amounts due at balance date less any provisions for doubtful debts and approximate net fair value. EMPLOYEE ENTITLEMENTS AASB 1028 Accounting for Employee Entitlements was adopted as at 1 April 1995. The net effect of the adoption was accounted for against profits at that date. The adjustment to retained profits net of the tax effect of $69,000 was $123,000. REVENUE RECOGNITION Income from contracting activities is brought to account when earned. All other fee income is brought to account when billed. 5 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SUPERANNUATION The economic entity contributes to superannuation funds which provide benefits to employees and contractors and their dependants on retirement, total and permanent disability or death. The economic entity's commitment in respect of these accumulation funds is limited to making the specified contributions as required by the relevant award and legislation. The economic entity's contributions to the superannuation funds are expensed in the profit and loss accounts as incurred. TRANSLATION OF FOREIGN CURRENCY TRANSACTION Transactions in foreign currencies are initially measured and brought to account at the rate of exchange in effect at the date of each transaction. As foreign controlled entities are self sustaining, the assets and liabilities are translated into Australian currency at rates of exchange current at balance date, while its revenue and expenses are translated at the average of rates ruling during the year. Exchange differences arising on translation are taken to the foreign currency translation reserve. Foreign currency monetary items outstanding at balance date have been translated at the spot rates current at balance date. Exchange differences arising on the translation of foreign currency borrowings designated as hedges of investments in controlled foreign entities are taken to the foreign currency translation reserve. BORROWINGS Bank loans are recognised in the financial statements on the basis of the nominal amounts outstanding at balance date plus accrued interest. The carrying amounts of borrowings approximate net fair values. 6 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 2. RECONCILIATIONS FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Reconciliation of operating profit after income tax for the year ended 31 March,
1998 1997 1996 $000 $000 $000 --------- --------- --------- Operating profit after income tax attributable to members of Morgan & Banks Limited.......................................................... 11,017 9,867 6,757 Deferred income taxes............................................................. -- 7 (7) --------- --------- --------- Net income in accordance with US Generally Accepted Accounting Principles.................................................. 11,017 9,874 6,750 --------- --------- --------- --------- --------- --------- Reconciliation of shareholders' equity at 31 March, 1998 1997 1996 $000 $000 $000 --------- --------- --------- Shareholders' equity attributable to members of Morgan & Banks Limited.......................................................... 18,729 14,646 9,495 Deferred income taxes............................................................. -- -- 7 --------- --------- --------- Shareholders' equity in accordance with US Generally Accepted Accounting Principles.................................................. 18,729 14,646 9,502 --------- --------- --------- --------- --------- ---------
Generally accepted accounting principles in Australia ("Australian GAAP") as utilized by the Company differ in certain respects from generally accepted accounting principles in the United States ("US GAAP"). With respect to the Company's financial statements, these differences primarily relate to accounting for income taxes. Australian GAAP stipulates that an announcement of the Government's intention to change the rate of company income tax in advance of the periods in which the change will apply is adequate evidence for deferred tax balances to be restated. US GAAP requires the adjustment in the year that a change in tax rate is effective. The provision for employee entitlements prepared in accordance with AASB 1028 "Accounting for Employee Entitlements" substantially approximates the required provision under US GAAP. As such the provision for employee entitlements for 1996, 1997 and 1998 as prepared under Australian GAAP require no adjustment. In order to reflect the adoption of AASB 1028 in 1996, and therefore US GAAP in preceding years, the adjustment booked through opening retained profits in 1996 has been reversed and effected through net income in 1994 and 1995. Under Australian GAAP, companies were not allowed to use the equity method of accounting for investments in associates in the consolidated profit and loss statement or balance sheet. Instead companies record the investment at cost and bring to account dividend income. US GAAP requires investments in associates to be accounted for under the equity method after elimination of unrealised profits on transactions with associates. The adjustment was not material and therefore not included in the summary of differences. Under Australian GAAP, no cost attributable to executive options has been recognised in the profit and loss statement. Under US GAAP the compensation cost is zero for each year ended to date. 7 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 2. RECONCILIATIONS FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED) Under Australian GAAP, Operating Income before Depreciation, Amortization, Interest and Income Tax is an appropriate measure. The Company understands that this measure is not recognized under US GAAP. Under Australian GAAP the item identified as an abnormal loss is characterized as an extraordinary item under US GAAP. This is not appropriate under US GAAP and would be treated as an operating expense. The disclosure of operating expenses as required under US GAAP are included below. This disclosure is not an Australian GAAP requirement.
1998 1997 1996 $000 $000 $000 --------- --------- --------- Cost of sales.................................................................... 190,816 118,853 66,403 Salary and related costs......................................................... 84,548 57,794 42,523 Office and general expenses...................................................... 35,390 27,869 22,846 Amortisation of intangibles...................................................... 782 371 158 --------- --------- --------- Total operating expenses......................................................... 311,536 204,887 131,930 --------- --------- --------- --------- --------- ---------
8 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 3. OPERATING PROFIT
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- Operating profit before income tax has been determined after: (A) CREDITING AS REVENUE: Dividends received/receivable Associated entities............................................................ -- 151 189 --------- --------- --------- --------- --------- --------- Interest: Others......................................................................... 188 229 259 --------- --------- --------- --------- --------- --------- (B) CHARGING AS EXPENSE: Net expenses resulting from movements in provision for: Amortisation of goodwill....................................................... 782 274 158 Amortisation of leasehold improvements......................................... 1,318 565 299 Depreciation of plant and equipment............................................ 3,866 2,402 1,692 Employee entitlements.......................................................... 204 748 278 --------- --------- --------- 6,170 3,989 2,427 --------- --------- --------- --------- --------- --------- Borrowing Costs: Interest expense other persons................................................. 440 116 -- Hire purchase interest charges................................................. 94 147 156 --------- --------- --------- 534 263 156 --------- --------- --------- --------- --------- --------- Other: Net bad and doubtful debts expense............................................. 814 671 781 Goodwill written off........................................................... -- 97 -- (Gain) loss on sales/write-off of plant & equipment............................ (1) (11) 24 Operating lease rental expense................................................. 7,293 5,493 3,769 --------- --------- --------- 8,106 6,250 4,574 --------- --------- --------- --------- --------- ---------
NOTE 4. OPERATING REVENUE
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- Sales revenue.................................................................... 330,364 221,467 143,057 Interest......................................................................... 188 229 259 Dividends........................................................................ -- 151 189 Proceeds from sales of non-current assets........................................ 155 104 -- --------- --------- --------- Total operating revenue.......................................................... 330,707 221,951 143,505 --------- --------- --------- --------- --------- ---------
9 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 5. ABNORMAL ITEM In August 1997, the Company commenced operations in Jakarta, Indonesia. The Company closed its Jakarta, Indonesia office in March 1998 due to continued political unrest and instability. The costs of opening and closing its Jakarta Indonesia office and the related tax effect as shown below.
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- INDONESIAN OPERATION Set-up of operations............................................................. 494 -- -- Office closure costs............................................................. 209 -- -- --------- --------- --------- 703 -- -- Income tax expense............................................................... 8 -- -- Outside equity interest.......................................................... (2) -- -- --------- --------- --------- 709 -- -- --------- --------- --------- --------- --------- ---------
NOTE 6. INCOME TAX
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- The amount provided in respect of income tax differs from the amount prima facie payable on operating profit. The difference is reconciled as follows: Prima facie tax on operating profit at 36%....................................... 6,642 6,021 4,102 Add tax effect of: (Over)/Under provision in prior years.......................................... (35) 95 -- Entertainment not allowable.................................................... 181 174 194 Goodwill amortisation.......................................................... 266 93 57 Non-deductible expenses........................................................ 30 114 23 Abnormal item not allowable (Note 5)........................................... 8 -- -- Deduct tax effect of: Overseas income tax differential............................................... 128 (334) (78) Non-assessable profit of overseas subsidiaries................................. -- -- (30) Exempt income.................................................................. -- (45) (68) --------- --------- --------- Income tax attributable to operating profit...................................... 7,220 6,118 4,200 --------- --------- --------- --------- --------- ---------
NOTE 7. EVENTS SUBSEQUENT TO BALANCE DATE No matter or circumstance has arisen since the end of the financial year that has significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity, in subsequent financial years. 10 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 8. RESERVES
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Share premium account.......................................................................... 4,204 3,809 Foreign currency translation reserve........................................................... (309) (145) --------- --------- 3,895 3,664 --------- --------- --------- --------- MOVEMENTS IN RESERVES Share premium account: Balance at beginning of the financial year................................................... 3,809 2,399 Exercise of 250,000 options at a premium of $1.58 per share.................................. 395 -- Issue of 275,170 ordinary shares at a premium of $5.124 per share............................ -- 1,410 --------- --------- Balance at end of the financial year......................................................... 4,204 3,809 --------- --------- --------- --------- Foreign currency translation reserve: Balance at beginning of the financial year................................................... (145) (7) Exchange differences arising from the translation of the net assets of self-sustaining foreign operations......................................................................... (164) (138) --------- --------- Balance at end of the financial year........................................................... (309) (145) --------- --------- --------- ---------
NOTE 9. CURRENT RECEIVABLES
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Trade accounts receivable...................................................................... 40,422 31,374 Provision for doubtful debts................................................................... (2,012) (1,837) --------- --------- 38,410 29,537 Non-trade accounts receivable from: Other debtors................................................................................ 1,036 638 --------- --------- 39,446 30,175 --------- --------- --------- --------- Amounts receivable in foreign currencies New Zealand dollars.......................................................................... 6,137 4,789 British pounds............................................................................... 1,980 1,814 Singapore dollars............................................................................ 568 1,447 Hong Kong dollars............................................................................ 1,352 1,736 Trade accounts receivable are subject to normal terms of trade which provide for settlement within seven to fourteen days. Non-trade accounts receivable are due within various periods of less than 12 months.
NOTE 10. OTHER CURRENT ASSETS
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Prepayments.................................................................................... 2,357 1,844 --------- --------- --------- ---------
11 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 11. NON-CURRENT RECEIVABLES
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Loans to related bodies corporate.............................................................. 46 42 --------- --------- --------- ---------
NOTE 12. PLANT AND EQUIPMENT
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Leasehold improvements At cost...................................................................................... 6,992 3,421 Provision for amortisation................................................................... 2,535 1,172 --------- --------- 4,457 2,249 --------- --------- Plant and equipment At cost...................................................................................... 19,882 14,364 Provision for depreciation................................................................... 10,187 6,228 --------- --------- 9,695 8,136 --------- --------- Total plant and equipment at cost.............................................................. 26,874 17,785 Provision for depreciation and amortisation.................................................... 12,722 7,400 --------- --------- 14,152 10,385 --------- --------- --------- ---------
NOTE 13. INTANGIBLES
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Goodwill--at cost.............................................................................. 10,551 10,608 Accumulated amortisation....................................................................... 1,243 461 --------- --------- 9,308 10,147 --------- --------- --------- ---------
12 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 14. OTHER NON-CURRENT ASSETS
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- Future income tax benefits -- timing differences.............................................. 2,684 2,339 -- tax losses.......................................................... 309 -- ----------- ----------- 2,993 2,339 ----------- ----------- ----------- -----------
NOTE 15. CURRENT ACCOUNTS PAYABLE
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- Trade accounts payable........................................................................ 6,683 4,264 Other creditors: Commissions/bonus accrual................................................................... 13,108 10,392 On hire contractor's wages.................................................................. 11,412 9,876 Employee related taxes accrued.............................................................. 3,190 1,370 Other general accruals...................................................................... 9,272 8,127 ----------- ----------- 43,665 34,029 ----------- ----------- ----------- ----------- Amounts payable in foreign currencies: New Zealand dollars......................................................................... 7,089 6,032 British pounds.............................................................................. 3,589 2,898 Singapore dollars........................................................................... 746 548 Hong Kong dollars........................................................................... 740 848
NOTE 16. CURRENT BORROWINGS
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- Hire purchase creditors (Note 24)--secured*................................................... 481 486 Bank loan--secured............................................................................ -- 179 ----------- ----------- 481 665 ----------- ----------- ----------- -----------
- ------------------------ * Partly secured by a first ranking fixed charge over the book debts of the chief entity to an amount of $1 million, and also secured by the assets acquired. NOTE 17. CURRENT PROVISIONS
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- Dividends..................................................................................... 3,497 3,196 Taxation...................................................................................... 4,581 3,772 Employee entitlements......................................................................... 1,452 1,262 ----------- ----------- 9,530 8,230 ----------- ----------- ----------- -----------
13 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 18. NON-CURRENT BORROWINGS
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- Hire purchase creditors (Note 24)--secured*................................................... 91 600 Commercial bills--unsecured (Note 23(d))...................................................... 8,030 5,315 ----------- ----------- 8,121 5,915 ----------- ----------- ----------- -----------
- ------------------------ * Partly secured by a first ranking fixed charge over the book debts of the chief entity to an amount of $1 million, and also secured by the assets acquired. NOTE 19. NON-CURRENT PROVISIONS
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- Employee entitlements......................................................................... 996 983 Deferred income taxation...................................................................... 617 736 ----------- ----------- 1,613 1,719 ----------- ----------- ----------- -----------
NOTE 20. FOREIGN CURRENCY MONETARY ITEMS Current and non-current assets and liabilities not effectively hedged to a date at least 12 months after balance date:
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- British pounds: Current assets.............................................................................. 1,029 577 Non-current assets.......................................................................... 729 636 ----------- ----------- 1,758 1,213 ----------- ----------- ----------- ----------- New Zealand dollars: Non-current assets.......................................................................... 8,658 10,629 Current liabilities......................................................................... (7,139) (7,452) ----------- ----------- 1,519 3,177 ----------- ----------- ----------- ----------- Hong Kong dollars: Current assets.............................................................................. 1,433 930 Non-current assets.......................................................................... 345 441 ----------- ----------- 1,778 1,371 ----------- ----------- ----------- ----------- Singapore dollars: Current assets.............................................................................. 256 966 Non-current assets.......................................................................... 389 216 ----------- ----------- 645 1,182 ----------- ----------- ----------- -----------
14 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 21. ISSUED CAPITAL The Shareholders of the company approved a capital reconstruction of three-new-shares-for-one-old at a General Shareholders' Meeting on 25 February 1998.
AS AT 31 MARCH ------------------------ 1998 1997 $000 $000 ----------- ----------- ISSUED Ordinary shares: 69,239,148 (1997: 22,829,716) ordinary shares of 3.33 cents (1997: 10 cents) each fully paid...................................................................................... 2,308 2,283 ----------- ----------- ----------- ----------- Shares issued (all issued prior to capital reconstruction): During the current year 250,000 ordinary shares of $0.10 each were issued at a premium of $1.58 per share following the exercise of options......................................... 25 -- ----------- ----------- ----------- ----------- During the prior year 275,170 ordinary shares of $0.10 each were issued at a premium of $5.124 per share as partial consideration for the acquisition of 64.5% of Morgan & Banks Limited, New Zealand...................................................................... -- 28 ----------- ----------- ----------- -----------
OPTIONS Prior to the capital reconstruction and during the year 788,750 options were issued under the Morgan & Banks Employee Share Option Scheme and 530,000 options were issued under the new Morgan & Banks Executive Option Plan. Of such amounts, 188,500 options (1997: 212,250) were forfeited under the Morgan & Banks Employee Share Option Scheme and 50,000 were forfeited under the Morgan & Banks Executive Option Plan. During the year ended March 31, 1998, 250,000 options were exercised. As at 31 March 1998, unissued shares, following the capital reconstruction, under all option plans were as follows:
SHARES UNDER EXERCISE EXERCISE ISSUE DATE OPTION PRICE PERIOD - ------------ ------------- --------- ------------------------ 10/11/1994 600,000 $ 0.5600 10/11/1997-09/11/1999 21/04/1995 769,875 $ 0.5233 21/04/1998-20/04/2000 19/08/1996 1,863,000 $ 1.2167 19/08/1999-17/08/2001 17/10/1997 1,440,000 $ 3.4733 17/10/2000-17/10/2002
15 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 22. CASH
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Cash........................................................................................... 7,671 8,076 Short-term deposits............................................................................ 6,817 2,991 --------- --------- 14,488 11,067 --------- --------- --------- ---------
For the purposes of the statements of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. The average floating interest rate for short-term deposits is 5.39%. NOTE 23. NOTES TO THE STATEMENTS OF CASH FLOWS (A) RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO OPERATING PROFIT AFTER INCOME TAX:
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- Operating profit after income tax.................................................... 11,231 10,608 7,194 Depreciation and amortisation...................................................... 5,184 2,967 1,991 Amortisation of goodwill........................................................... 782 274 158 Goodwill written-off............................................................... -- 97 -- Hire purchase interest charges..................................................... 94 146 -- (Gain) loss on sales/write-off of non-current assets............................... (1) (11) 24 Provision for doubtful debts....................................................... 175 216 550 Abnormal item...................................................................... 198 -- -- Changes in assets and liabilities net of effects of purchases of new businesses: Increase/(decrease) in income taxes payable........................................ 787 (124) 771 (Decrease)/increase in provision for deferred income tax........................... (120) 254 (135) (Increase) in future income tax benefit............................................ (664) (590) (461) (Increase) in trade debtors........................................................ (8,675) (5,013) (7,878) (Increase) in other debtors and prepayments........................................ (910) (684) (375) Increase in trade creditors........................................................ 2,482 1,487 1,111 Increase in other creditors........................................................ 6,928 7,377 5,857 Decrease in lease liabilities -- -- (24) Increase in employee entitlements.................................................. 204 748 278 --------- --------- --------- Net cash provided by operating activities............................................ 17,695 17,752 9,061 --------- --------- --------- --------- --------- ---------
(B) ENTITIES ACQUIRED During the 1997 financial year the economic entity acquired the remaining 71.38% interest in Morgan & Banks, New Zealand in a number of stages. These acquisitions were financed through the issue of shares and cash as detailed below. As a result of the issue of shares, the chief entity became the beneficial owner of 16.1% of the issued capital of Morgan & Banks, New Zealand. This beneficial ownership was on-sold at 16 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 23. NOTES TO THE STATEMENTS OF CASH FLOWS (CONTINUED) cost to Maldon Holdings Limited, a wholly owned controlled entity, and therefore not reflected in the statements of cash flows. During the 1996 financial year, the economic entity acquired the trading operations of Westside Employment (Aust) Pty Limited. Details of the acquisitions are as follows:
FOR THE YEAR ENDED 31 MARCH --------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- ----- Consideration 275,170 ordinary shares of Morgan & Banks Limited issued at $5.224 per share............................................................... -- 1,437 -- Cash............................................................................. -- 7,557 102 --------- --------- --- -- 8,994 102 Equity interest at date of acquisition............................................. -- 1,491 -- --------- --------- --- -- 10,485 102 --------- --------- --- Fair value of net assets acquired Current Assets Cash........................................................................... -- 910 -- Trade debtors.................................................................. -- 3,947 -- Sundry debtors and prepayments................................................. -- 264 -- Non-Current Assets Plant and equipment............................................................ -- 1,792 -- Intangible assets.............................................................. -- 929 -- Investments.................................................................... -- 68 -- Future income tax benefit...................................................... -- 346 -- Current Liabilities Trade creditors................................................................ -- (1,194) -- Provisions and accruals........................................................ -- (3,816) -- Related party payable.......................................................... -- (19) -- Bank loan--secured............................................................. -- (179) -- --------- --------- --- Net assets acquired.............................................................. -- 3,048 -- Goodwill on acquisition.......................................................... -- 7,437 102 --------- --------- --- -- 10,485 102 --------- --------- --- --------- --------- --- Cash consideration................................................................. -- 7,557 102 Less: Cash balances acquired....................................................... -- 910 -- --------- --------- --- Cash outflow....................................................................... -- 6,647 102 --------- --------- --- --------- --------- ---
On 1 April 1997, an additional 7.5% of the ordinary shares of Morgan & Banks (Hong Kong) Limited was acquired. On 24 January 1997, an additional 16.5% of the ordinary shares of Morgan & Banks (Hong Kong) Limited was also acquired. 17 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 23. NOTES TO THE STATEMENTS OF CASH FLOWS (CONTINUED) (C) NON-CASH FINANCING AND INVESTING ACTIVITIES During the 1997 financial year the chief entity acquired plant and equipment with an aggregate fair value of $72,315 (1996: $814,440) by means of hire purchase contracts. During the 1997 financial year the chief entity issued 275,170 ordinary shares as part consideration of the acquisition of 64.5% of the ordinary shares of Morgan & Banks Limited, New Zealand (refer to Note 23(b)). These transactions are not reflected in the statements of cash flows. (D) FINANCING ARRANGEMENTS
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- FACILITIES SUMMARY Bank loan facilities............................................................... -- 179 -- Fixed rate commercial bill facility................................................ 2,500 -- -- Fixed and variable rate commercial bill acceptance/discount facility............... 2,630 5,675 -- Interchangeable overdraft or fixed and variable rate commercial bill acceptance/discount facility..................................................... 8,196 1,992 -- Overdraft facilities............................................................... -- 447 2,000 --------- --------- --------- 13,326 8,293 2,000 --------- --------- --------- --------- --------- --------- USED AT BALANCE DATE Bank loan facilities............................................................... -- 179 -- Fixed rate commercial bill facility................................................ 2,500 -- -- Fixed and variable rate commercial bill acceptance/discount facility............... 2,630 5,315 -- Interchangeable overdraft or fixed and variable rate commercial bill acceptance/discount facility..................................................... 2,900 -- -- --------- --------- --------- 8,030 5,494 -- --------- --------- --------- --------- --------- --------- UNUSED AT BALANCE DATE Fixed and variable rate commercial bill acceptance/discount facility............... -- 360 -- Interchangeable overdraft or fixed and variable rate commercial bill acceptance/discount facility..................................................... 5,296 1,992 -- Overdraft facilities............................................................... -- 447 2,000 --------- --------- --------- 5,296 2,799 2,000 --------- --------- --------- --------- --------- ---------
The bank loan facility was repaid in August 1997. The fixed rate commercial bill facility matures in August 2001 with a fixed interest rate of 5.74%. The fixed and variable rate commercial bill acceptance/discount facility and the interchangeable facility are subject to annual review, with the exception of $2,630,000 of the commercial bill facility which matures in 2000. The commercial bill facility of $2,630,000 and an additional amount of $796,000 of the interchangeable facility may only be drawn in New Zealand dollars. 18 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 23. NOTES TO THE STATEMENTS OF CASH FLOWS (CONTINUED) An interest rate option was taken out on the fixed and variable commercial bill acceptance/discount facility drawn in New Zealand dollars until 15 September 1998. The interest rate cap is 8.50%. Interest rates on the interchangeable overdraft and fixed and variable rate commercial bill acceptance/ discount facility are determined by reference to the prevailing bank bill or overdraft rate as applicable. NOTE 24. COMMITMENTS FOR EXPENDITURE
AS AT 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- CAPITAL EXPENDITURE CONTRACTED FOR AT 31 MARCH BUT NOT PROVIDED FOR: Payable: Not later than 1 year.............................................................. 76 426 179 --------- --------- --------- --------- --------- --------- NON-CANCELLABLE OPERATING LEASES WITH A TERM OF MORE THAN ONE YEAR--COMMITMENTS NOT PROVIDED FOR: Payable: Not later than 1 year.............................................................. 7,056 5,892 3,894 Later than 1 year but not later than 2 years....................................... 6,332 5,193 3,500 Later than 2 years but not later than 5 years...................................... 13,742 12,757 7,091 Later than 5 years................................................................. 867 3,866 2,501 --------- --------- --------- 27,997 27,708 16,986 --------- --------- --------- --------- --------- --------- HIRE PURCHASE AGREEMENTS--ANALYSIS OF COMMITMENTS: Payable: Not later than 1 year.............................................................. 516 608 586 Later than 1 year but not later than 2 years....................................... 94 516 586 Later than 2 years but not later than 5 years...................................... -- 94 552 --------- --------- --------- Total minimum lease payments......................................................... 610 1,218 1,724 Future finance charges............................................................... (38) (132) (249) --------- --------- --------- 572 1,086 1,475 --------- --------- --------- --------- --------- --------- Current liability (Note 16).......................................................... 481 486 445 Non-current liability (Note 18)...................................................... 91 600 1,030 --------- --------- --------- 572 1,086 1,475 --------- --------- --------- --------- --------- ---------
The average interest rate for hire purchase liabilities is 10.776%. NOTE 25. SUPERANNUATION COMMITMENTS The economic entity contributes to accumulation plans to provide benefits to permanent employees and contractors as required by Superannuation Guarantee legislation. The economic entity does not guarantee the performance of these funds. The economic entity's commitment in respect of these accumulation plans is limited to making the specified contributions as required by the relevant award and legislation. 19 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 25. SUPERANNUATION COMMITMENTS (CONTINUED) Funds are available for the purposes of the fund to satisfy all benefits that would have been vested under the fund in the event of the termination of the fund or the voluntary or compulsory termination of employment of each employee member. NOTE 26. CONTINGENT LIABILITIES MORGAN & BANKS LIMITED Particulars and estimated maximum amounts of contingent liabilities arising in respect of: Morgan & Banks New Zealand Limited has had proceedings issued against the company for an amount of NZ$5.9 million. These proceedings are in relation to the acquisition of the claimant's business in New Zealand prior to Morgan & Banks New Zealand Limited becoming a controlled entity of the Group. The directors of Morgan & Banks Limited are of the opinion that the claim is without substance and accordingly the action will be vigorously defended. Bank guarantees provided to third parties at 31 March 1998 amount to $1,402,987 (1997: $1,286,391, 1996: $1,286,391). In order to secure certain financing facilities, a deed of cross guarantee and indemnity has been signed between Morgan & Banks Limited, Morgan & Banks New Zealand Limited, and Maldon Holdings Limited to guarantee payment and indemnify against losses. 20 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 27. REMUNERATION OF AUDITORS
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- Total of all remuneration received or due and receivable for the audit and review of financial reports by: Auditors of the chief entity........................................................... 95 82 67 Other auditors......................................................................... 85 56 27 --------- --------- --------- 180 138 94 --------- --------- --------- Total of all remuneration received or due and receivable for other services by: Auditors of the chief entity........................................................... 71 124 68 Other auditors......................................................................... 35 3 8 --------- --------- --------- 106 127 76 --------- --------- --------- 286 265 170 --------- --------- --------- --------- --------- ---------
NOTE 28. DIRECTORS' INCOME
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- Aggregate of income paid or payable or otherwise made available from entities within the economic entity and any related parties:............................................... 5,545 5,298 3,452 --------- --------- --------- --------- --------- ---------
The total income reported above excludes income of directors of wholly-owned controlled corporations who are executives but not directors of the chief entity and who are required as part of their executive duties to be directors of controlled entities. Directors of the chief entity in office at any time during the financial years 1998, 1997 and 1996 were: W S Cutbush I G Burns A A Cox G K Morgan M Hinves A W Whatmore A R Banks P S Laidlaw
NOTE 29. EXECUTIVES' INCOME
FOR THE YEAR ENDED 31 MARCH ------------------------------- 1998 1997 1996 $000 $000 $000 --------- --------- --------- Total income received, or receivable by executive officers (including income received or receivable from related parties) whose total income exceeds $100,000................... 7,624 6,997 6,442 --------- --------- --------- --------- --------- ---------
21 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 29. EXECUTIVES' INCOME (CONTINUED) Number of executive officers whose total income exceeds $100,000:
FOR THE YEAR ENDED 31 MARCH ------------------------------------------- 1998 1997 1996 NUMBER NUMBER NUMBER ------------- ------------- ------------- $100,000-$109,899................................................................... -- -- 1 $110,000-$119,999................................................................... 1 -- 1 $120,000-$129,999................................................................... 1 -- -- $130,000-$139,999................................................................... -- 1 3 $140,000-$149,999................................................................... 1 1 1 $150,000-$159,999................................................................... -- 1 -- $160,000-$169,999................................................................... 1 1 1 $180,000-$189,999................................................................... 2 -- -- $190,000-$199,999................................................................... -- -- 1 $200,000-$209,999................................................................... -- 1 -- $210,000-$219,999................................................................... -- 1 1 $220,000-$229,999................................................................... 1 1 2 $240,000-$249,999................................................................... 1 -- 1 $250,000-$259,999................................................................... 1 1 1 $260,000-$269,999................................................................... -- 1 -- $270,000-$279,999................................................................... -- 1 -- $290,000-$299,999................................................................... 1 1 1 $300,000-$309,999................................................................... 2 2 -- $320,000-$329,999................................................................... -- -- 2 $340,000-$349,999................................................................... -- 1 -- $350,000-$359,999................................................................... 1 1 -- $370,000-$379,999................................................................... 1 1 -- $390,000-$399,999................................................................... 1 -- -- $430,000-$439,999................................................................... 1 -- -- $450,000-$459,999................................................................... 1 -- -- $470,000-$479,999................................................................... -- -- 1 $500,000-$509,999................................................................... -- -- 2 $550,000-$559,999................................................................... 1 3 -- $560,000-$569,999................................................................... 1 -- -- $570,000-$579,999................................................................... 1 -- -- $590,000-$599,999................................................................... -- -- 2 $670,000-$679,999................................................................... -- 2 -- $690,000-$699,999................................................................... 2 -- --
The total income reported above includes the income of executive directors. This is also included in the income of all directors reported in Note 28. NOTE 30. SEGMENT INFORMATION INDUSTRY SEGMENTS The economic entity operates in the field of human resource services. 22 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 30. SEGMENT INFORMATION (CONTINUED) GEOGRAPHICAL SEGMENTS The economic entity operated in the following geographic segments during the year--Australia, the United Kingdom, New Zealand and Asia. A statement of operations of geographical segments are as follows:
TOTAL REVENUE TOTAL ASSETS AS AT ------------------------------- ------------------------------------- YEAR ENDED 31 MARCH ------------------------------- 31 MARCH 31 MARCH 31 MARCH (A$ THOUSAND) 1998 1997 1996 1998 1997 1996 - ----------------------------------------------- --------- --------- --------- ----------- ----------- ----------- Australia...................................... 235,738 179,952 122,645 53,913 38,803 35,512 United Kingdom................................. 37,091 23,951 15,504 5,190 3,941 2,221 Asia........................................... 11,092 9,144 5,356 6,203 6,083 2,470 New Zealand*................................... 46,786 8,904 -- 17,484 17,172 -- --------- --------- --------- ----------- ----------- ----------- Consolidated................................... 330,707 221,951 143,505 82,790 65,999 40,203 --------- --------- --------- ----------- ----------- ----------- --------- --------- --------- ----------- ----------- -----------
OPERATING PROFIT BEFORE TAX AND GOODWILL OPERATING PROFIT GOODWILL AMORTISATION AMORTISATION BEFORE TAX YEAR ENDED 31 MARCH ------------------------------- ------------------------------- ------------------------------- (A$ THOUSAND) 1998 1997 1996 1998 1997 1996 1998 1997 1996 - --------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Australia............ 17,753 14,259 10,163 (9) (106) (19) 17,744 14,153 10,144 United Kingdom....... 526 531 239 -- -- -- 526 531 239 Asia................. 839 1,934 1,150 (262) (153) (139) 577 1,781 1,011 Asia (abnormal loss).............. (703) -- -- -- -- -- (703) -- -- New Zealand*......... 818 373 -- (511) (112) -- 307 261 -- --------- --------- --------- --------- --------- --------- --------- --------- --------- Consolidated......... 19,233 17,097 11,552 (782) (371) (158) 18,451 16,726 11,394 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
- ------------------------ There were no material intersegment sales. * The results for New Zealand for 1997 are for the period 1 February to 31 March 1997. NOTE 31. OUTSIDE EQUITY INTEREST
AS AT 31 MARCH -------------------- 1998 1997 $000 $000 --------- --------- Outside equity interest in controlled entities comprises: Share capital..................................................................................... 25 33 Foreign currency translation reserve.............................................................. 60 (31) Retained profits.................................................................................. 566 793 --------- --------- 651 795 --------- --------- --------- ---------
23 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 32. CONTROLLED ENTITIES
PERCENTAGE OF SHARES HELD -------------------- AS AT 31 MARCH COUNTRY OF -------------------- FORMATION/ 1998 1997 CONTROLLED ENTITY INCORPORATION % % - ------------------------------------------------------------------------------- --------------- --------- --------- SHARES HELD BY MORGAN & BANKS LIMITED Morgan & Banks Management Services Pty Ltd..................................... Australia 100 100 Credential Check Pty Ltd....................................................... Australia 100 100 Labour LinQ Pty Ltd............................................................ Australia 100 100 Alectus Personnel Pty Ltd...................................................... Australia 100 100 Tristram Investments Limited................................................... Australia 100 100 The Labour LinQ Business Solution Pty Ltd j.................................... Australia 100 100 Morgan & Banks Reward Consulting Pty Ltd....................................... Australia 100 100 Morgan & Banks Investor No. 1 Pty Ltd.......................................... Australia 100 100 H. Neumann International Pty Ltd............................................... Australia 67.5 67.5 S.B.N. Convenience Pty Limited................................................. Australia 100 100 M&B Search Pte Ltd bd.......................................................... Singapore 75 67.5 Maldon Holdings Limited a...................................................... New Zealand 100 100 Morgan & Banks Holdings Ltd a.................................................. UK 100 100 Morgan & Banks Recruitment Ltd a............................................... Hong Kong 100 100 Health Resources International Pty Limited k................................... Australia 100 -- H. Neumann International Limited a............................................. New Zealand 47.5 47.5 PT Morgan Nusantara ac......................................................... Indonesia 99 -- SHARES HELD BY MALDON HOLDINGS LIMITED Morgan & Banks New Zealand Limited ag.......................................... New Zealand 100 100 SHARES HELD BY MORGAN & BANKS NEW ZEALAND LIMITED Compuforce Recruitment Limited ae.............................................. New Zealand 100 100 Alectus Recruitment Consultants Ltd a.......................................... New Zealand 100 100 H. Neumann International Limited a............................................. New Zealand 47.5 47.5 Sibson & Company Limited ae.................................................... New Zealand 100 100 Compubank Limited e............................................................ New Zealand -- 100 Executive Leasing & Consulting Ltd a........................................... New Zealand 100 100 Job Bank (NZ) Ltd e............................................................ New Zealand -- 100 Labour Linq Limited a.......................................................... New Zealand 100 100 MB Management Systems Ltd e.................................................... New Zealand -- 100 Job Index Limited af........................................................... New Zealand 100 -- H. Neumann International Limited............................................... Australia 27.5 27.5
24 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 32. CONTROLLED ENTITIES (CONTINUED)
PERCENTAGE OF SHARES HELD -------------------- AS AT 31 MARCH COUNTRY OF -------------------- FORMATION/ 1998 1997 CONTROLLED ENTITY INCORPORATION % % - ------------------------------------------------------------------------------- --------------- --------- --------- SHARES HELD BY MORGAN & BANKS HOLDINGS LTD Morgan & Banks PLC a........................................................... UK 100 100 Morgan & Banks Payroll Services Ltd al......................................... UK 100 100 SHARES HELD BY MORGAN & BANKS RECRUITMENT LTD Morgan & Banks (Hong Kong) Ltd ad.............................................. Hong Kong 75 67.5 SHARES HELD BY MORGAN & BANKS (HONG KONG) LTD The Wright Company (S) Pte Ltd b............................................... Singapore 100 100 The Wright Company (Beijing) Ltd a............................................. Hong Kong 100 100 The Wright Company (Guangzhou) Ltd a........................................... Hong Kong 100 100 H. Neumann International (Asia) Ltd ah......................................... Hong Kong 95 100 The Wright Company (M) Sdn Bhd a............................................... Malaysia 100 100 Maston Development Limited a................................................... Hong Kong 100 100 PT Morgan Nusantara ac......................................................... Indonesia 1 --
- ------------------------ All controlled entities carried on business in their countries of incorporation. a Controlled entities audited by other member firms of the Pannell Kerr Forster worldwide association. b Controlled entities audited by firms other than Pannell Kerr Forster worldwide association. c Incorporated on 26 February 1997. d Acquired an additional 16.5% effective 24 January 1997 and an additional 7.5% effective 1 April 1997. e Controlled entity wound up. f Incorporated 12 June 1997. g Name changed from Morgan & Banks Limited on 5 March 1998. h Name changed from The Wright Company (Shanghai) Ltd. on 12 December 1997. j Name changed from Inform International Pty Ltd on 1 August 1997. k Incorporated on 20 May 1997. l Name changed from Morgan & Banks Executive Leasing Ltd on 7 March 1997. On 24 January 1997, the economic entity acquired an additional 16.5% of the share capital of Morgan & Banks (Hong Kong) Ltd for $1,075,635 and the additional percentage of the operating results were included in Profit and Loss Accounts from that date. During the 1998 financial year the economic entity 25 MORGAN & BANKS LIMITED NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN AUSTRALIAN DOLLARS) NOTE 32. CONTROLLED ENTITIES (CONTINUED) acquired a further 7.5% of the share capital of Morgan & Banks (Hong Kong) Ltd for an amount of $664,778. The acquisition took place on 1 April 1997 and the operating results of the increased ownership interest was included in the profit and loss account from that date. NOTE 33. EARNINGS PER SHARE
FOR THE YEAR ENDED 31 MARCH ---------------------------------------- 1998 1997 1996 $ $ $ ------------ ------------ ------------ Basic earnings per share--before abnormal items......................... 0.169 0.144 0.10 Basic earnings per share--after abnormal items.......................... 0.159 0.144 0.10 NUMBER NUMBER NUMBER ------------ ------------ ------------ Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share................... 69,239,148 68,489,148 67,663,638 ------------ ------------ ------------ ------------ ------------ ------------
Diluted earnings per share is not materially different from basic earnings per share and is therefore not disclosed in the accounts. The prior year numbers have been adjusted to reflect the capital reconstruction for the purposes of comparability. NOTE 34. RELATED PARTY TRANSACTIONS During the financial period to 31 March 1998 the following transactions took place with related parties: Dividends totalling $1,555,334 (1997: $1,501,253, 1996: $1,522,260) were paid during the year to entities associated with directors, this being in accordance with normal shareholder entitlements. An amount of $20,000 (1997: $20,000, 1996: $20,000) was paid under a sponsorship agreement to Geoff Morgan Motor Sports, a director related entity of Mr G K Morgan. Director related entities of non-executive directors, Mr W S Cutbush, Mr A A Cox, Mr A W Whatmore and joint managing directors, Mr G K Morgan and Mr A R Banks, have from time to time utilised the services of the economic entity, this being in the normal course of business and on standard terms and conditions. 26 EX-99.3 5 EXHIBIT 99.3 Exhibit 99.3 FOR IMMEDIATE RELEASE CONTACT: Lavine Surtani January 28, 1999 (212) 445-8262 lsurtani@bsmg.com Jim Treacy (212) 527-8604 jtreacy@tmp.com TMP WORLDWIDE ACQUIRES MORGAN & BANKS PURCHASE OF ONE OF THE WORLD'S LARGEST SELECTION AND SEARCH FIRMS STRENGTHENS TMP'S GLOBAL "INTERN-TO-CEO" RECRUITMENT STRATEGY New York, January 28, 1999 - TMP Worldwide (NASDAQ: TMPW; ASX: TMP), the leading provider of global recruiting solutions, including the dominant Internet careers portal, Monster.com, today announced it has acquired Morgan & Banks Limited of Sydney, Australia in a pooling of interests transaction for approximately 5,450,000 TMP Worldwide shares, including the effect of Morgan & Banks options outstanding. The acquisition, the largest in TMP's history, is expected to be immediately accretive. In August, 1998, TMP announced its intention to acquire Morgan & Banks, the largest executive selection and search firm in Australasia and one of the largest in the world. Morgan & Banks reported revenues of US$ 129.0 million (approximately A$ 204 million) for the six-months-ended September 30, 1998. On a proforma basis, the combined companies would have reported revenues of US$ 473.0 million (approximately A$ 750 million) for the first nine months of 1998. - more - TMP/Morgan & Banks Page 2 "This acquisition is a particularly significant one for our company," said Andrew J. McKelvey, chairman and CEO of TMP Worldwide. "First, this acquisition is about people, Morgan & Banks brings 1,100 terrific new employees into the TMP family. Second, filling mid-level positions in the $50,000 to $150,000 compensation range (known as `selection'), is an essential piece of TMP's `intern to CEO' strategy. The Morgan & Banks acquisition greatly expands our selection opportunities on Internet, and secures TMP's global leadership position in this segment of the recruitment industry." Under the terms of the agreement, Andrew Banks, joint managing director and co-founder of Morgan & Banks, has agreed to join the board of directors of TMP Worldwide this year. "Morgan & Banks is extremely pleased to join the TMP global recruitment network," said Andrew Banks. "We're excited by the traditional and online recruitment opportunities the combined strengths of TMP and Morgan & Banks will create, both in the U.S. and internationally." With the acquisition, TMP now owns the two leading career Web sites in Australia, Job Hound (WWW.MORGANBANKS.COM.AU) and Monster.com/Australia (WWW.MONSTER.COM.AU). "I've continually been impressed with Morgan & Banks' Internet strategy," said Jeff Taylor, CEO of TMP Interactive. "Their leading Web site, Job Hound, will merge with Monster.com/Australia to form the leading careers portal in Australia. Adding Job Hound's traffic, job listings and Internet team strengthens our dominant Internet strategy worldwide." -more- TMP/Morgan & Banks Page 3 Founded in 1985, Morgan & Banks' global operations have more than 1,100 employees in five countries, namely Australia, New Zealand, Singapore, Hong Kong and the United Kingdom. Morgan & Banks offers a range of advanced and comprehensive executive selection, search and consulting services. Founded in 1967, TMP Worldwide (NASDAQ: TMPW; ASX: TMP), now with more than 4,750 employees in 21 countries, is the online recruitment leader and one of the world's largest recruitment advertising agency networks, and now one of the world's largest search and selection agencies. TMP Worldwide is also the world's largest yellow page advertising agency and a provider of direct marketing services. The company's clients include more than 70 of the FORTUNE 100 and more than 400 of the FORTUNE 500 companies. Monster.com (www.monster.com), the flagship product of the Interactive Division of TMP Worldwide, is the leading, global online network for careers, connecting the most progressive companies with the most qualified career-minded individuals. Monster.com is committed to leading the market by offering innovative technology and superior services that give consumers and businesses more control over the recruiting process. The Monster.com network consists of sites in the United States, Canada, United Kingdom, Netherlands, Australia, and is coming soon to Belgium, France, and Germany. # # # -----END PRIVACY-ENHANCED MESSAGE-----