SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-50161
FORE HOLDINGS LLC
(Exact name of registrant as specified in its charter)
| Illinois | 36-3974824 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
100 Half Day Road; Lincolnshire, Illinois 60069; 847-295-5000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
HEWITT HOLDINGS LLC
(Former Name, Former Address & Former Fiscal Year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
FORM 10-Q
FOR THE PERIOD ENDED
JUNE 30, 2004
INDEX
2
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| June 30, 2004 |
September 30, 2003 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current Assets |
||||||
| Cash and cash equivalents |
$ | 5,912 | $ | 5,937 | ||
| Client receivables and unbilled work in process, less allowances of $22 at June 30, 2004 and $221 at September 30, 2003 |
— | 744 | ||||
| Prepaid expenses and other current assets |
1 | 113 | ||||
| Total current assets |
$ | 5,913 | $ | 6,794 | ||
| Non-Current Assets |
||||||
| Property and equipment, net |
223,805 | 229,912 | ||||
| Related party deferred rent receivable (Note 6) |
3,744 | 3,928 | ||||
| Due from owners |
1,344 | 739 | ||||
| Deferred loan costs, net |
859 | 905 | ||||
| Investment in Hewitt Associates (Note 1) |
15,935 | 15,960 | ||||
| Investment in Overlook Associates (Note 2) |
2,638 | 3,181 | ||||
| Total non-current assets |
248,325 | 254,625 | ||||
| Total Assets |
$ | 254,238 | $ | 261,419 | ||
| LIABILITIES | ||||||
| Current Liabilities |
||||||
| Accounts payable and accrued expenses |
$ | 24 | $ | 2,002 | ||
| Current portion of long-term debt |
9,190 | 8,733 | ||||
| Total current liabilities |
9,214 | 10,735 | ||||
| Long-Term Liabilities |
||||||
| Debt, less current portion |
198,363 | 205,314 | ||||
| Other long-term liabilities |
— | 738 | ||||
| Total long-term liabilities |
198,363 | 206,052 | ||||
| Total Liabilities |
$ | 207,577 | $ | 216,787 | ||
| Commitments and Contingencies (Note 8) |
||||||
| Owners’ Capital |
||||||
| Paid-in capital and accumulated earnings |
$ | 45,840 | $ | 44,542 | ||
| Accumulated other comprehensive income |
821 | 90 | ||||
| Total owners’ capital |
46,661 | 44,632 | ||||
| Total Liabilities and Owners’ Capital |
$ | 254,238 | $ | 261,419 | ||
The accompanying notes are an integral part of these financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(Unaudited)
(Dollars in thousands)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| HR services revenues before reimbursements |
$ | — | $ | 494,886 | $ | — | $ | 1,453,262 | ||||||||
| Rental revenues from Hewitt Associates |
5,712 | — | 17,137 | — | ||||||||||||
| Other rental revenues |
— | — | — | 1,722 | ||||||||||||
| Total revenues before reimbursements (net revenues) |
5,712 | 494,886 | 17,137 | 1,454,984 | ||||||||||||
| Reimbursements |
— | 12,862 | — | 40,396 | ||||||||||||
| Total revenues |
5,712 | 507,748 | 17,137 | 1,495,380 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Compensation and related expenses, excluding restricted stock award compensation |
— | 318,806 | — | 940,224 | ||||||||||||
| Restricted stock award compensation |
— | 5,649 | — | 35,193 | ||||||||||||
| Reimbursable expenses |
— | 12,862 | — | 40,396 | ||||||||||||
| Other operating expenses |
1,975 | 93,050 | 5,887 | 275,854 | ||||||||||||
| Selling, general and administrative expenses |
90 | 25,909 | 393 | 72,411 | ||||||||||||
| Total operating expenses |
2,065 | 456,276 | 6,280 | 1,364,078 | ||||||||||||
| Operating income |
3,647 | 51,472 | 10,857 | 131,302 | ||||||||||||
| Other expenses, net: |
||||||||||||||||
| Interest expense |
(3,572 | ) | (8,573 | ) | (10,827 | ) | (26,035 | ) | ||||||||
| Interest income |
11 | 752 | 33 | 2,016 | ||||||||||||
| Gain on sales of property |
— | 10,695 | 1,119 | 28,161 | ||||||||||||
| Other income (expense), net |
449 | 361 | 1,761 | 382 | ||||||||||||
| (3,112 | ) | 3,235 | (7,914 | ) | 4,524 | |||||||||||
| Income before owner distributions |
$ | 535 | $ | 2,943 | ||||||||||||
| Income before taxes, minority interest, and owner distributions |
54,707 | 135,826 | ||||||||||||||
| Provision for income taxes |
18,219 | 44,811 | ||||||||||||||
| Income after taxes and before minority interest and owner distributions |
36,488 | 91,015 | ||||||||||||||
| Minority interest |
7,499 | 18,351 | ||||||||||||||
| Income after taxes and minority interest and before owner distributions |
$ | 28,989 | $ | 72,664 | ||||||||||||
| (1) | On July 1, 2003, FORE Holdings distributed the shares of Hewitt Associates, Inc. Class B common stock it previously held to its owners, with the exception of certain owners resident outside the United States who continue to hold their shares through FORE Holdings. The distribution reduced FORE Holdings’ ownership interest in Hewitt Associates, Inc. to approximately 2%. Accordingly, the Company no longer consolidates the results of Hewitt Associates, Inc. The Company accounted for the remaining investment in Hewitt Associates, Inc. using the equity method of accounting through January 28, 2004, when the shareholders of Hewitt Associates, Inc. elected a majority of independent directors to its Board, upon which time the Company began accounting for the remaining investment in Hewitt Associates, Inc. using the cost method of accounting. As a result, the Company’s consolidated statements of operations for the three and nine months ended June 30, 2004, do not include the consolidated results from operations for Hewitt Associates, Inc., however, for the three and nine months ended June 30, 2003, the Company’s consolidated results do. Please see the pro forma financial statements presented on a consistent basis in Note 3. |
The accompanying notes are an integral part of these financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| Nine Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Income before owner distributions |
$ | 2,943 | ||||||
| Income after taxes and minority interest and before owner distributions |
$ | 72,664 | ||||||
| Adjustments to reconcile income before owner distributions and income after taxes and minority interest and before owner distributions to net cash provided by operating activities: |
||||||||
| Depreciation |
6,000 | 63,216 | ||||||
| Amortization |
46 | 24,832 | ||||||
| Restricted stock awards |
— | 30,847 | ||||||
| Deferred income taxes |
— | 24,014 | ||||||
| Minority interest |
— | 18,351 | ||||||
| Equity in earnings from unconsolidated investments |
(1,848 | ) | (904 | ) | ||||
| Gain on sales of property |
(1,119 | ) | (28,161 | ) | ||||
| Director stock compensation |
— | 75 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Client receivables and unbilled work in process |
744 | 5,215 | ||||||
| Prepaid expenses and other current assets |
112 | (448 | ) | |||||
| Related party deferred rent receivable |
184 | — | ||||||
| Due from owners |
(806 | ) | — | |||||
| Deferred contract costs |
— | (4,925 | ) | |||||
| Accounts payable and accrued expenses |
(1,978 | ) | (4,639 | ) | ||||
| Advanced billings to clients |
— | 11,787 | ||||||
| Deferred contract revenues |
— | — | ||||||
| Employee deferred compensation and accrued profit sharing |
— | (19,386 | ) | |||||
| Other long-term liabilities |
— | (1,639 | ) | |||||
| Net cash provided by operating activities |
4,278 | 190,899 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment |
— | (44,529 | ) | |||||
| Cash paid for acquisitions, net of cash received |
— | (63,697 | ) | |||||
| Distributions from equity investment |
1,499 | 66 | ||||||
| Proceeds from sale of property |
488 | 84,027 | ||||||
| Increase in other assets |
— | (9,954 | ) | |||||
| Net cash provided by investing activities |
1,987 | (34,087 | ) | |||||
| Cash flows from financing activities: |
||||||||
| Capital contributions (distributions), net |
3 | (143,748 | ) | |||||
| Proceeds from exercise of Hewitt Associates stock options |
— | 303 | ||||||
| Short-term borrowings |
— | <|||||||