UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM
8-K/A
(Amendment
#1)
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
January 9,
2007
Date of
Report (Date of earliest event reported)
Huron
Consulting Group Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware |
000-50976 |
01-0666114 |
|
(State
or other jurisdiction |
(Commission |
(IRS
Employer |
|
of
incorporation or organization) |
File
Number) |
Identification
Number) |
550
West Van Buren Street
Chicago,
Illinois
60607
(Address
of principal executive offices)
(Zip
Code)
(312)
583-8700
(Registrant’s
telephone number, including area code)
_____________________
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Explanatory
Note
On
January 4, 2007, Huron Consulting Group Inc. announced that it had entered into
a definitive agreement to acquire Glass & Associates, Inc. (“Glass”)
pursuant to a Stock Purchase Agreement by and among Glass, the shareholders of
Glass, Huron Consulting Group Holdings LLC, and Huron Consulting Group Inc.,
dated as of January 2, 2007 and joinder agreements by and between certain
Glass shareholders and Huron Consulting Group Holdings LLC, dated as of
January 2, 2007. This transaction was consummated on January 9, 2007.
A Current Report on Form 8-K was filed on January 10, 2007 reporting the
completion of acquisition of assets. Pursuant to Item 9.01(a)(4), audited
financial statements of the business acquired and related pro forma financial
information are being filed by this amendment.
Item
9.01 Financial
Statements and Exhibits.
| (a) |
Financial
statements of business acquired. |
The
financial statements of Glass & Associates, Inc., as of December 31, 2006
and for the year then ended, together with the accompanying Report of
Independent Auditors, are set forth in Exhibit 99.1.
| (b) |
Pro
Forma Financial Information. |
The
unaudited pro forma financial information is set forth in
Exhibit 99.2.
| (d) |
Exhibits. |
| 23.1 |
Consent
of independent accountants. |
| 99.1 |
Financial
statements of Glass & Associates, Inc., as of December 31, 2006
and for the year then ended. |
| 99.2 |
Unaudited
pro forma financial information. |
- 1
- -
SIGNATURE
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.
|
Huron
Consulting Group Inc. | |||
|
(Registrant) | |||
|
Date: |
March 28,
2007 |
/s/
Gary L. Burge | |
|
Gary
L. Burge | |||
|
Vice
President, | |||
|
Chief
Financial Officer and Treasurer |
- 2
- -
EXHIBIT
INDEX
|
Exhibit
Number |
Description | |
|
23.1
|
Consent
of independent accountants.
| |
|
99.1
|
Financial
statements of Glass & Associates, Inc., as of December 31, 2006
and for the year then ended.
| |
|
99.2
|
Unaudited
pro forma financial information.
|
EXHIBIT
23.1
CONSENT
OF INDEPENDENT ACCOUNTANTS
We hereby
consent to the incorporation by reference in the Registration Statements on Form
S-8 (Nos. 333-119697 and 333-137107) of Huron Consulting Group Inc. of our
report dated March 28, 2007 relating to the financial statements of Glass
& Associates, Inc., which appears in Exhibit 99.1 of this Current Report on
Form 8-K/A.
/s/
PricewaterhouseCoopers LLP
Chicago,
Illinois
March 28,
2007
EXHIBIT
99.1
GLASS
& ASSOCIATES, INC.
FINANCIAL
STATEMENTS
INDEX
|
Report
of Independent Auditors |
1 |
| Balance Sheet at December 31, 2006 |
2 |
| Statement of Income for the year ended December 31, 2006 |
3 |
| Statement of Stockholders’ Equity for the year ended December 31, 2006 |
4 |
| Statement of Cash Flows for the year ended December 31, 2006 |
5 |
| Notes to Financial Statements |
6 |
Report
of Independent Auditors
To the
Board of Directors and Stockholders of Glass & Associates,
Inc.:
In our
opinion, the accompanying balance sheet and the
related statement of income, of stockholders’ equity, and of cash flows present
fairly, in all material respects, the financial position of Glass &
Associates, Inc. at December 31, 2006, and the results of its operations and its
cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
/s/
PricewaterhouseCoopers LLP
Chicago,
Illinois
March 28,
2007
- 1
- -
GLASS
& ASSOCIATES, INC.
BALANCE
SHEET
(In
thousands)
|
December 31,
2006 |
||||
|
Assets |
||||
|
Current
assets: |
||||
|
Cash
and cash equivalents |
$ |
2,533 |
||
|
Receivables
from clients, net |
543 |
|||
|
Unbilled
services |
498 |
|||
|
Other
current assets |
243 |
|||
|
Total
current assets |
3,817 |
|||
|
Fixed
assets, net |
215 |
|||
|
Deposits |
23 |
|||
|
Goodwill |
4,721 |
|||
|
Total
assets |
$ |
8,776 |
||
|
Liabilities
and Stockholders’ Equity |
||||
|
Current
liabilities: |
||||
|
Accounts
payable |
$ |
561 |
||
|
Accrued
expenses |
155 |
|||
|
Accrued
payroll and related benefits |
1,746 |
|||
|
Client deposits |
651 |
|||
|
Bank
borrowings |
1,000 |
|||
|
Current
portion of notes payable |
2,637 |
|||
|
Total
current liabilities |
6,750 |
|||
|
Non-current
liabilities: |
||||
|
Notes
payable, net of current portion |
618 |
|||
|
Deferred
lease incentives |
51 |
|||
|
Total
non-current liabilities |
669 |
|||
|
Contingencies |
¾ |
|||
|
Stockholders’
equity: |
||||
|
Common
stock; $0.01 par value; 10,000 shares authorized; 1,250 shares
issued;
736
shares outstanding |
¾ |
|||
|
Treasury
stock |
(3,753 |
) | ||
|
Additional
paid-in capital |
1,584 |
|||
|
Notes
receivable for issuance of common stock |
(302 |
) | ||
|
Retained
earnings |
3,828 |
|||
|
Stockholders’
equity |
1,357 |
|||
|
Total
liabilities and stockholders’ equity |
$ |
8,776 |
||
The accompanying notes are an integral part of the
financial statements.
- 2
- -
GLASS
& ASSOCIATES, INC.
STATEMENT
OF INCOME
(In
thousands)
|
Year
Ended
December 31,
2006 |
||||
|
Revenues
and reimbursable expenses: |
||||
|
Revenues |
$ |
24,331 |
||
|
Reimbursable
expenses |
2,067 |
|||
|
Total
revenues and reimbursable expenses |
26,398 |
|||
|
Direct
costs and reimbursable expenses (exclusive
of depreciation and amortization shown
in
operating expenses): |
||||
|
Direct
costs |
19,584 |
|||
|
Reimbursable
expenses |
2,067 |
|||
|
Total
direct costs and reimbursable expenses |
21,651 |
|||
|
Operating
expenses: |
||||
|
Selling,
general and administrative |
4,444 |
|||
|
Depreciation
and amortization |
86 |
|||
|
Total
operating expenses |
4,530 |
|||
|
Operating
income |
217 |
|||
|
Interest
expense, net |
(131 |
) | ||
|
Net
income |
$ |
86 |
||
The
accompanying notes are an integral part of the financial
statements.
- 3
- -
GLASS
& ASSOCIATES, INC
STATEMENT
OF STOCKHOLDERS’ EQUITY
(In
thousands)
|
Common
Stock |
Treasury
Stock |
Additional
Paid-In
Capital |
Notes
Receivable
for
Issuance
of
Common
Stock |
Retained
Earnings |
Stockholders’
Equity |
||||||||||||||
|
Balance
at December 31, 2005 |
$ |
¾ |
$ |
(3,967 |
) |
$ |
1,550 |
$ |
(145 |
) |
$ |
3,990 |
$ |
1,428 |
|||||
|
Net
income |
86 |
86 |
|||||||||||||||||
|
Issuance
of common stock in exchange
for notes receivable |
214 |
34 |
(248 |
) |
¾ |
||||||||||||||
|
Repayments
on notes receivable |
91 |
91 |
|||||||||||||||||
|
Dividends
paid |
(248 |
) |
(248 |
) | |||||||||||||||
|
Balance
at December 31, 2006 |
$ |
¾ |
$ |
(3,753 |
) |
$ |
1,584 |
$ |
(302 |
) |
$ |
3,828 |
$ |
1,357 |
|||||
The
accompanying notes are an integral part of the financial
statements.
- 4
- -
GLASS
& ASSOCIATES, INC.
STATEMENT
OF CASH FLOWS
(In
thousands)
|
Year
Ended December 31,
2006 |
||||
|
Net
income |
$ |
86 |
||
|
Adjustments
to reconcile net income to net cash provided by operating
activities: |
||||
|
Depreciation
and amortization |
86 |
|||
|
Allowances
for doubtful accounts |
50 |
|||
|
Changes
in operating assets and liabilities: |
||||
|
Decrease
in receivables from clients |
1,094 |
|||
|
Increase
in unbilled services |
(328 |
) | ||
|
Increase
in other current assets |
(13 |
) | ||
|
Increase
in deposits |
(5 |
) | ||
|
Increase
in accounts payable and accrued expenses |
448 |
|||
|
Increase
in accrued payroll and related benefits |
1,293 |
|||
|
Decrease
in client retainers |
(481 |
) | ||
|
Decrease
in deferred lease incentives |
(13 |
) | ||
|
Net
cash provided by operating activities |
2,217 |
|||
|
Cash
flows from investing activities: |
||||
|
Purchases
of fixed assets |
(200 |
) | ||
|
Net
cash used in investing activities |
(200 |
) | ||
|
Cash
flows from financing activities: |
||||
|
Borrowings
under line of credit |
1,000 |
|||
|
Repayments
on line of credit |
(264 |
) | ||
|
Repayments
on notes payable |
(1,147 |
) | ||
|
Dividends
paid |
(248 |
) | ||
|
Repayments
on notes receivable exchanged for issuances of common stock |
91 |
|||
|
Shares
repurchased |
(63 |
) | ||
|
Net
cash used in financing activities |
(631 |
) | ||
|
Net
increase in cash and cash equivalents |
1,386 |
|||
|
Cash
and cash equivalents: |
||||
|
Beginning
of the period |
1,147 |
|||
|
End
of the period |
$ |
2,533 |
||
|
Non-cash
financing activity: |
||||
|
Issuance
of common stock in exchange for notes receivable |
$ |
248 |
||
|
Issuance
of notes payable in exchange for shares repurchased |
$ |
254 |
||
The accompanying notes are an integral part of the
financial statements.
- 5
- -
GLASS
& ASSOCIATES, INC.
NOTES
TO FINANCIAL STATEMENTS
1. Description
of Business
Glass
& Associates, Inc. (the “Company”), a Delaware S Corporation formed in 1995,
is a turnaround and restructuring consulting firm that provides advice and
leadership to troubled businesses in the United States and Europe.
2. Summary of Significant
Accounting Policies
Basis
of Presentation
The
accompanying financial statements reflect the results of operations and cash
flows for the year ended December 31, 2006.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts that are reported in the
financial statements and accompanying disclosures. Actual results may differ
from these estimates.
Revenue
Recognition
The
Company recognizes revenues in accordance with Staff Accounting Bulletin (“SAB”)
No. 101, “Revenue Recognition in Financial Statements,” as amended by SAB No.
104, “Revenue Recognition” when persuasive evidence of an arrangement exists,
the related services are provided, the price is fixed or determinable and
collectibility is reasonably assured. These services are primarily rendered
under arrangements that require the client to pay on a time-and-expense basis.
Fees are based on the hours incurred at agreed-upon rates and recognized as
services are provided. Revenues related to fixed-fee engagements are recognized
based on estimates of work completed versus the total services to be provided
under the engagement. Losses, if any, on fixed-fee engagements are recognized in
the period in which the loss first becomes probable and reasonably estimable.
The Company also earns revenues on a performance-based fee basis and recognizes
such revenues when all performance criteria are met. Direct costs incurred on
engagements are expensed in the period incurred.
Expense
reimbursements that are billable to clients are included in total revenues and
reimbursable expenses. Reimbursable expenses are recognized as revenue in the
period in which the expense is incurred.
Differences
between the timing of billings and the recognition of revenue are recognized as
unbilled services. Revenues recognized for services performed but not yet billed
to clients have been recorded as unbilled services in the accompanying balance
sheet.
Direct
Costs and Reimbursable Expenses
Direct
costs (exclusive of depreciation and amortization) and reimbursable expenses
consists primarily of billable employee compensation and their related benefit
costs, the cost of outside consultants and subcontractors assigned to revenue
generating activities and direct expenses and administrative costs to be
reimbursed by clients.
- 6
- -
GLASS
& ASSOCIATES, INC.
NOTES
TO FINANCIAL STATEMENTS
Allowances
for Doubtful Accounts and Unbilled Services
The
Company maintains allowances for doubtful accounts and for services performed
but not yet billed for estimated losses. Receivables from clients and unbilled
services are valued at management’s estimate of the amount that will ultimately
be collected. The allowance for doubtful accounts and unbilled services is based
on specific identification of uncollectible accounts and the Company’s
historical collection experience. The allowance for doubtful accounts at
December 31, 2006 totaled $0.5 million. The Company deemed that an
allowance for unbilled services was not necessary at December 31,
2006.
Customer
Concentration
To the
extent receivables from clients become delinquent, collection activities
commence. At December 31, 2006, no single client balance is considered
large enough to pose a significant credit risk. During 2006, the Company had one
client that generated $3.0 million, or 12.4%, of the Company’s revenues.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Fixed
Assets
Fixed
assets are stated at cost, less accumulated depreciation and amortization
totaling $0.5 million at December 31, 2006. Fixed assets consist of
computers, furniture and fixtures, and leasehold improvements. Computers and
furniture and fixtures are depreciated on a straight-line basis over two to five
years. Leasehold improvements are amortized over the lesser of the estimated
useful life of the assets or the initial term of the lease.
Goodwill
Goodwill
represents the excess of the cost of an acquired entity over the net of the
amounts assigned to assets acquired and liabilities assumed. Under the
provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and
Other Intangible Assets,” goodwill is required to be tested for impairment on an
annual basis and between annual tests whenever indications of impairment exist.
Impairment exists when the carrying amount of goodwill exceeds its implied fair
value, resulting in an impairment charge for this excess. Management performed
its annual goodwill impairment assessment as of December 31, 2006 and
determined that no impairment of goodwill existed as of that date.
Income
Taxes
The
Company is organized as an S Corporation and as such, its taxable income is
included with that of its members for purposes of determining federal, state and
local income taxes. Therefore, no income tax expense has been recorded in the
accompanying financial statements.
Fair
Value of Financial Instruments
Cash and
cash equivalents are stated at cost, which approximates fair market value. The
carrying values for receivables from clients, unbilled services, accounts
payable and other accrued liabilities reasonably approximate fair market value
due to the nature of the financial instrument and the short-term maturity of
these items.
- 7
- -
GLASS
& ASSOCIATES, INC.
NOTES
TO FINANCIAL STATEMENTS
Segment
Reporting
The
Company operates under one segment that provides turnaround and restructuring
consulting services to its clients.
Accordingly, segment information is not applicable.
3. Notes
Payable
At
December 31, 2006, the Company had notes payable with certain stockholders
consisting of the following (in thousands):
|
Description |
Maturity |
Aggregate
Outstanding Principal |
Due
in
2007 |
Due
in
2008 |
Due
in
2009 |
Due
in
2010 |
|||||||||||||
|
6%
Promissory Notes |
June
2007 |
$ |
2,146 |
$ |
2,146 |
$ |
¾ |
$ |
¾ |
$ |
¾ |
||||||||
|
6%
Promissory Notes |
January
2008 |
428 |
214 |
214 |
¾ |
¾ |
|||||||||||||
|
6%
Promissory Notes |
May
2008 |
428 |
214 |
214 |
¾ |
¾ |
|||||||||||||
|
6%
Promissory Notes |
January
2010 |
253 |
63 |
63 |
63 |
64 |
|||||||||||||
|
Total |
$ |
3,255 |
$ |
2,637 |
$ |
491 |
$ |
63 |
$ |
64 |
4. Borrowings
The
Company has a revolving line of credit facility with JPMorgan Chase Bank under
which it may borrow up to $1 million. Interest on outstanding borrowings
accrues at the prime rate. The line of credit is secured by substantially all of
the Company’s assets. At December 31, 2006, the Company had borrowings
against the line of credit in the amount of $1 million, which bore a
current interest rate of 8.25%.
5. Lease Commitments and
Guarantees
The
Company leases office space and equipment from various parties under
non-cancelable operating lease agreements. All leases are classified as
operating and generally require the Company to pay fixed monthly payments. Total
rent expense for the year ended December 31, 2006 approximated
$0.5 million. Future minimum lease payments under these leases, including
scheduled rent increases and net of rental income from subleases are as follows
(in thousands):
|
Year |
Amount |
|||
|
2007 |
$ |
460 |
||
|
2008 |
253 |
|||
|
2009 |
111 |
|||
|
2010 |
102 |
|||
|
2011 |
53 |
|||
|
Thereafter |
45 |
|||
|
Total |
$ |
1,024 |
||
At
December 31, 2006, the Company had outstanding a letter of credit in the
amount of approximately $0.1 million, which serves as security for its
office lease in New York.
- 8
- -
GLASS
& ASSOCIATES, INC.
NOTES
TO FINANCIAL STATEMENTS
6. Related
Parties
During
2006 the Company entered into various related party transactions with TECT
Corporation, an aerospace company owned by a member of the Company’s Board of
Directors who is also a stockholder in the Company. The Company provided
consulting services to TECT at favorable pricing and terms. Revenues from TECT
during the year ended December 31, 2006 totaled approximately
$0.6 million. Of this amount, $7,000 was included in accounts receivable at
December 31, 2006.
7. Divestiture-related
Charges
In
connection with the selling of the Company to Huron Consulting Group Inc. (see
note 9), the Company recorded related employee bonus of approximately
$2.8 million and legal fees of approximately $0.5 million during the
year ended December 31, 2006.
8. Contingencies
From time
to time, the Company is involved in various legal and other matters arising out
of the ordinary course of business. Although the outcome of these matters cannot
presently be determined, in the opinion of management, disposition of these
matters will not have a material adverse effect on the financial position or
results of operations of the Company.
9. Subsequent
Event
On
January 9, 2007, Huron Consulting Group Inc. (“Huron”) acquired the Company
for $30.0 million in cash paid at closing, subject to a working capital
adjustment. Additional purchase consideration may be payable by Huron if
specific performance targets are met over the next four years. Also, additional
payments may be made based on the amount of revenues Huron receives from
referrals made by certain continuing employees of Glass over the next four
years. The Company used a portion of the proceeds from the sale to repay in full
the amounts outstanding under its notes payable and line of credit (see notes 3
and 4 above). In connection with the acquisition, the Company will be liable for
severance payments to certain employees totaling approximately
$0.5 million.
- 9
- -
EXHIBIT
99.2
HURON
CONSULTING GROUP INC.
UNAUDITED
PRO FORMA FINANCIAL INFORMATION
The
following unaudited pro forma financial information reflects the estimated
effect of the acquisition of Glass & Associates, Inc. (“Glass”) by Huron
Consulting Group Inc. (the “Company”).
The
unaudited pro forma consolidated balance sheet as of December 31, 2006
combines the respective balance sheets of the Company and Glass as if the
acquisition was consummated as of the balance sheet date. The unaudited pro
forma consolidated statement of income for the year ended December 31, 2006
combine the respective statements of income of the Company and Glass as if the
acquisition was consummated at the beginning of the period presented.
The
unaudited pro forma balance sheet and consolidated statement of income are based
on the purchase method of accounting and the pro forma adjustments as described
in the accompanying notes. Such pro forma adjustments give effect to
transactions that are directly attributable to the acquisition and are factually
supportable.
Pursuant
to the stock purchase agreement, additional purchase consideration is payable in
cash to the sellers of Glass if specific performance targets are met over the
next four years. The amount of additional purchase consideration that may become
payable is not determinable at this time and therefore, the pro forma statements
do not reflect the potential impact of such contingent payments.
The
allocation of the purchase price is preliminary and is subject to refinement
pending the completion of a valuation of the intangible assets acquired.
The
unaudited pro forma financial information should be read in conjunction with
Glass’ audited financial statements and notes thereto as of and for the year
ended December 31, 2006, which are filed as Exhibit 99.1 to this Current
Report on Form 8-K/A, as well as the Company’s consolidated financial statements
and notes thereto as of and for the year ended December 31, 2006 included
in the Company’s Annual Report on Form 10-K.
The
unaudited pro forma consolidated financial information is not necessarily
indicative of what actually would have occurred if the acquisition had been
effective for the periods presented and should not be taken as representative of
our future consolidated results of operations or financial
position.
- 1
- -
Huron
Consulting Group Inc.
Unaudited
Pro Forma Consolidated Balance Sheet
As
of December 31, 2006
(In
thousands)
|
Company |
Glass
|
Pro
Forma Adjustments |
Note |
Pro
Forma
Consolidated |
||||||||||||
|
Assets |
||||||||||||||||
|
Current
assets: |
||||||||||||||||
|
Cash
and cash equivalents |
$ |
16,572 |
$ |
2,533 |
$ |
(10,000 |
) |
1 |
$ |
9,105 |
||||||
|
Receivables
from clients, net |
41,848 |
543 |
¾ |
42,391 |
||||||||||||
|
Unbilled
services, net |
22,627 |
498 |
¾ |
23,125 |
||||||||||||
|
Income
tax receivable |
3,637 |
¾ |
¾ |
3,637 |
||||||||||||
|
Deferred
income taxes |
15,290 |
¾ |
¾ |
15,290 |
||||||||||||
|
Other
current assets |
6,435 |
243 |
¾ |
6,678 |
||||||||||||
|
Total
current assets |
106,409 |
3,817 |
(10,000 |
) |
100,226 |
|||||||||||
|
Property
and equipment, net |
27,742 |
215 |
¾ |
27,957 |
||||||||||||
|
Deferred
income taxes |
5,433 |
¾ |
¾ |
5,433 |
||||||||||||
|
Deposits
and other assets |
2,294 |
23 |
(364 |
) |
1 |
1,953 |
||||||||||
|
Intangible
assets, net |
4,238 |
¾ |
5,000 |
2 |
9,238 |
|||||||||||
|
Goodwill |
53,328 |
4,721 |
(4,721 |
) |
3 |
81,928 |
||||||||||
|
28,600 |
2 |
|||||||||||||||
|
Total
assets |
$ |
199,444 |
$ |
8,776 |
$ |
18,515 |
|
$ |
226,735 |
|||||||
|
Liabilities
and Stockholders’ Equity |
||||||||||||||||
|
Current
liabilities: |
||||||||||||||||
|
Accounts
payable |
$ |
2,684 |
$ |
561 |
$ |
¾ |
$ |
3,245 |
||||||||
|
Accrued
expenses |
12,712 |
155 |
677 |
1 |
16,994 |
|||||||||||
|
3,200 |
1 |
|||||||||||||||
|
250 |
1 |
|||||||||||||||
|
Accrued
payroll and related benefits |
41,649 |
1,746 |
¾ |
43,395 |
||||||||||||
|
Deferred
revenues / client retainers |
4,035 |
651 |
¾ |
4,686 |
||||||||||||
|
Current
portion of bank borrowings |
8,000 |
1,000 |
(1,000 |
) |
3 |
8,000 |
||||||||||
|
Current
portion of notes payable and capital
lease obligations |
1,282 |
2,637 |
(2,637 |
) |
3 |
1,282 |
||||||||||
|
Total
current liabilities |
70,362 |
6,750 |
490 |
77,602 |
||||||||||||
|
Non-current
liabilities: |
||||||||||||||||
|
Deferred
compensation and other liabilities |
1,169 |
¾ |
¾ |
1,169 |
||||||||||||
|
Notes
payable and capital lease obligations, net
of current portion |
1,000 |
618 |
(618 |
) |
3 |
1,000 |
||||||||||
|
Bank
borrowings, net of current portion |
¾ |
¾ |
20,000 |
1 |
20,000 |
|||||||||||
|
Deferred
lease incentives |
10,333 |
51 |
¾ |
10,384 |
||||||||||||
|
Total
non-current liabilities |
12,502 |
669 |
19,382 |
32,553 |
||||||||||||
|
Stockholders’
equity |
116,580 |
1,357 |
(1,357 |
) |
3 |
116,580 |
||||||||||
|
Total
liabilities and stockholders’ equity |
$ |
199,444 |
$ |
8,776 |
$ |
18,515 |
$ |
226,735 |
||||||||
See
accompanying notes.
- 2
- -
Huron
Consulting Group Inc.
Unaudited
Pro Forma Consolidated Statement of Income
For
The Year Ended December 31, 2006
(In
thousands, except per share amounts)
|
Company |
Glass
|
Pro
Forma Adjustments |
Note |
Pro
Forma Consolidated |
||||||||||||
|
Revenues
and reimbursable expenses: |
||||||||||||||||
|
Revenues |
$ |
288,588 |
$ |
24,331 |
$ |
¾ |
$ |
312,919 |
||||||||
|
Reimbursable
expenses |
33,330 |
2,067 |
¾ |
35,397 |
||||||||||||
|
Total
revenues and reimbursable expenses |
321,918 |
26,398 |
¾ |
348,316 |
||||||||||||
|
Direct
costs and reimbursable expenses (exclusive
of depreciation and
amortization
shown
in operating expenses): |
||||||||||||||||
|
Direct
costs |
163,569 |
19,584 |
(2,235 |
) |
4 |
178,143 |
||||||||||
|
(2,775 |
) |
5 |
||||||||||||||
|
Intangible
assets amortization |
2,207 |
¾ |
1,300 |
6 |
3,507 |
|||||||||||
|
Reimbursable
expenses |
33,506 |
2,067 |
¾ |
35,573 |
||||||||||||
|
Total
direct costs and reimbursable expenses |
199,282 |
21,651 |
(3,710 |
) |
217,223 |
|||||||||||
|
Operating
expenses: |
||||||||||||||||
|
Selling,
general and administrative |
65,926 |
4,444 |
(33 |
) |
5 |
69,837 |
||||||||||
|
(500 |
) |
7 |
||||||||||||||
|
Depreciation
and amortization |
9,201 |
86 |
1,190 |
6 |
10,477 |
|||||||||||
|
Total
operating expenses |
75,127 |
4,530 |
657 |
80,314 |
||||||||||||
|
Operating
income |
47,509 |
217 |
3,053 |
50,779 |
||||||||||||
|
Other
expense |
(687 |
) |
(131 |
) |
(1,180 |
) |
8 |
(1,998 |
) | |||||||
|
Income
before provision for income taxes |
46,822 |
86 |
1,873 |
48,781 |
||||||||||||
|
Provision
benefit for income taxes |
20,133 |
¾ |
801 |
9 |
20,934 |
|||||||||||
|
Net
income |
$ |
26,689 |
$ |
86 |
$ |
1,072 |
$ |
27,847 |
||||||||
|
Earnings
per share: |
||||||||||||||||
|
Basic |
$ |
1.63 |
$ |
1.70 |
||||||||||||
|
Diluted |
$ |
1.54 |
$ |
1.61 |
||||||||||||
|
Weighted
average shares used in calculating earnings per share: |
||||||||||||||||
|
Basic |
16,359 |
16,359 |
||||||||||||||
|
Diluted |
17,320 |
17,320 |
||||||||||||||
See
accompanying notes.
- 3
- -
Huron
Consulting Group Inc.
Notes
to Unaudited Pro Forma Financial Information
| (1) |
This
adjustment is to record the funding and costs of the acquisition, which
consisted of the following (in thousands): |
|
Cash
paid at closing |
$ |
10,000 |
||
|
Borrowings |
20,000 |
|||
|
Working
capital adjustment accrual |
677 |
|||
|
IRS
Section 338(h)(10) election |
3,200 |
|||
|
Transaction
costs |
364 |
|||
|
Finders
fee |
250 |
|||
|
Total
purchase price |
$ |
34,491 |
In
connection with the acquisition, the Company borrowed $20.0 million under
its bank credit agreement to fund the acquisition of Glass. Such borrowings bear
a current interest rate of 5.9%. Also, pursuant to the stock purchase
agreement, the purchase price will include a working capital
adjustment.
| (2) |
The
purchase price was allocated, based on a preliminary valuation, as follows
(in thousands): |
|
Net
assets purchased |
$ |
3,404 |
||
|
Liabilities
assumed |
(2,513 |
) | ||
|
Customer
contracts |
1,300 |
|||
|
Customer
relationships |
1,500 |
|||
|
Non-competition
agreements |
2,200 |
|||
|
Goodwill |
28,600 |
|||
|
Total
purchase price |
$ |
34,491 |
| (3) |
This
adjustment is to eliminate Glass’ debt, which the Company did not assume,
and to eliminate Glass’ historical goodwill and equity as part of purchase
accounting. |
| (4) |
This
adjustment is to record contractual obligations pursuant to employment
agreements entered into between the Company and certain Glass employees in
connection with the acquisition and to reverse their
respective salaries recorded on Glass’ financial statements.
|
| (5) |
This
adjustment is to reverse bonuses paid by Glass to its employees relating
to the acquisition. |
| (6) |
This
adjustment is to record estimated amortization expense for identifiable
intangible assets, calculated as follows (in
thousands): |
|
Intangible
Asset |
Value |
Estimated
Useful
Life |
2006
Amortization |
|||||||
|
Customer
contracts |
$ |
1,300 |
6
months |
$ |
1,300 |
|||||
|
Customer
relationships |
$ |
1,500 |
24
months |
$ |
750 |
|||||
|
Non-competition
agreements |
$ |
2,200 |
60
months |
440 |
||||||
$ |
1,190 |
|||||||||
- 4
- -
Huron
Consulting Group Inc.
Notes
to Unaudited Pro Forma Financial Information (continued)
| (7) |
This
adjustment is to reverse legal fees incurred by Glass relating to the
acquisition. |
| (8) |
This
adjustment is to record interest expense relating to borrowings of
$20.0 million on the acquisition date, calculated as follows (in
thousands): |
|
Borrowings |
$ |
20,000 |
||
|
Interest
rate (on acquisition date) |
5.9 |
% | ||
|
Interest
expense |
$ |
1,180 |
The
$20.0 million of borrowings bear interest at LIBOR plus a spread, which is
based on the Company’s debt to earnings before interest, depreciation and
amortization ratio, as specified in the credit agreement. A variance of 0.125%
in the interest rate would have a $25,000 pro forma effect on pre-tax
income.
| (9) |
This
adjustment is to record the income tax effect of the afore-mentioned pro
forma adjustments and also to record an income tax provision as if Glass
had filed its income tax returns on a consolidated basis with the Company,
calculated as follows (in thousands): |
|
Salaries
adjustment (see note 4 above) |
$ |
(2,235 |
) | |
|
Bonus
adjustment (see note 5 above) |
(2,808 |
) | ||
|
Intangible
assets amortization expense (see note 6 above) |
2,490 |
|||
|
Legal
fees reversal (see note 7 above) |
(500 |
) | ||
|
Interest
expense (see note 8 above) |
1,180 |
|||
|
Income
before taxes, before pro forma adjustments |
(86 |
) | ||
|
Subtotal
(income) / expense |
(1,959 |
) | ||
|
Tax
rate |
40.9 |
% | ||
|
Provision
for taxes |
$ |
801 |
- 5
- -