Registration
No. 333-169224
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 4
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CTPARTNERS EXECUTIVE SEARCH
LLC
[to be known as CTPartners Executive Search Inc.]
(Exact name of registrant as
specified in its charter)
|
|
|
|
|
Delaware
|
|
7361
|
|
52-2402079
|
(State of
incorporation)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(IRS Employer
Identification No.)
|
1166 Avenue of the Americas
3rd Floor
New York, NY 10036
Phone:
(212) 588-3500
(Address, including
zip code, and telephone number, including area code, of
registrants principal executive offices)
Brian M. Sullivan
Chief Executive Officer
CTPartners Executive Search Inc.
1166 Avenue of the Americas
3rd Floor
New York, NY 10036
Phone:
(212) 588-3500
Fax:
(212) 688-5754
(Name, address,
including zip code, and telephone number, including are code, of
agent for service)
With a copy to:
Howard Groedel, Esq.
Ulmer & Berne LLP
1660 West
2nd
Street, Suite 1100
Cleveland, OH
44113-1448
Phone:
(216) 583-7000
Fax:
(216) 583-7001
Approximate Date of Commencement of Proposed Sale to the
Public: As soon as practicable after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 (the
Securities Act), check the following
box: o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering: o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering: o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering: o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company þ
|
|
|
|
|
(Do not check if a smaller reporting company)
|
|
|
CALCULATION
OF REGISTRATION FEE
|
|
|
|
|
|
|
Title of Each Class of
|
|
|
Proposed Maximum
|
|
|
Amount of
|
Securities to be Registered
|
|
|
Aggregate Offering Price
|
|
|
Registration Fee
|
Common stock, par value $0.001 per share
|
|
|
37,153,844
|
|
|
2,649.07 (1)
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
$2,459.85 of which has been
previously paid.
|
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement on
Form S-1
shall thereafter become effective in accordance with
Section 8(a) of the Securities Act or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and
may be changed. We and the selling stockholders may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
|
SUBJECT TO COMPLETION, DATED
NOVEMBER 24, 2010
PROSPECTUS
2,307,692 Shares
CTPartners
Executive Search Inc.
Common
Stock
This is an initial public offering of shares of common stock of
CTPartners Executive Search Inc.
CTPartners is offering 1,869,220 of the shares to be sold in
this offering. The selling stockholders identified in this
prospectus are offering an additional 438,472 shares.
CTPartners will not receive any of the proceeds from the sale of
the shares being sold by the selling stockholders.
Prior to this offering, there has been no public market for our
common stock. It is currently estimated that the initial public
offering price per share will be between $12.00 and $14.00. We
have applied to list our common stock on the NYSE Amex Equities
stock exchange under the symbol CTP.
See Risk Factors beginning on page 8 to read
about factors you should consider before buying shares of our
common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
Total
|
|
Initial public offering price
|
|
$
|
|
|
|
$
|
|
|
Underwriting discount
|
|
$
|
|
|
|
$
|
|
|
Proceeds, before expenses, to CTPartners
|
|
$
|
|
|
|
$
|
|
|
Proceeds, before expenses, to the selling stockholders
|
|
$
|
|
|
|
$
|
|
|
To the extent that the underwriters sell more than
2,307,692 shares of common stock, the underwriters have the
option to purchase up to an additional 346,154 shares from
us at the initial public offering price less the underwriting
discount.
|
|
William
Blair & Company |
C.L. King & Associates |
The date of this prospectus
is ,
2010.
TABLE OF
CONTENTS
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the
shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
ii
SUMMARY
This summary highlights certain information appearing
elsewhere in this prospectus and in the documents we incorporate
by reference. After you read this summary, you should read and
consider carefully the more detailed information and financial
statements and related notes that we include in
and/or
incorporate by reference into this prospectus, especially the
section entitled Risk Factors. If you invest in our
shares, you are assuming a high degree of risk.
Business
Summary
We are a leading global retained executive search firm. We
believe that with 21 global offices, over 300 search
professionals and staff, and a significant revenue base, we are
able to compete effectively with other global retained executive
search firms. We help our clients build stronger leadership
teams by facilitating the recruitment and hiring of senior
executives, officers and board members. Our retained executive
search services focus on successfully making placements for our
clients in a timely manner. We provide these services through 15
offices in the Americas, Europe and Asia Pacific, as well as
through a licensing arrangement with six associated offices in
Latin America (we refer to such offices as our associated
offices in Latin America). In 2009, we were engaged to
perform 962 searches, including 667 performed directly by us and
295 performed by our associated offices in Latin America, and we
generated net revenue of $73.9 million and operating income
of $5.7 million. Included in our 2009 net revenue is
$250,650 in license fees from our associated offices in Latin
America.
Our organizational structure is designed to provide high
quality, industry-focused executive search services to our
clients worldwide. Our executive search consultants are
dedicated to specific industry verticals and are leading experts
in their given sectors. We believe that industry specialization
enables us to better understand our clients cultures,
operations, business strategies and industries. Our five largest
industry practice groups are financial services, professional
services, life sciences, technology/media/telecom and
consumer/industrial.
We have a diverse group of clients located throughout the world
and in a variety of industries. From January 1, 2005
through September 30, 2010, we performed more than 4,400
searches for over 1,400 clients, including some of the leading
Fortune 1000, FTSE 100, DAX and CAC 40 companies, private
equity and venture capital firms and their portfolio companies.
No single client accounted for more than 5% of our revenue in
2009, 2008 or 2007.
We believe that we are the only global retained executive search
firm to track and publish the key quality metrics that drive
success in our business, and to have these metrics examined by
an independent registered public accounting firm. These include
(i) placement success rate; (ii) average days to
placement; and (iii) stick rate (which we define as the
percentage of candidates placed at a client that remain in the
same, similar or elevated position over the measurement period).
In 2009, our placement success rate was 78% and our average days
to placement was 124. For candidates placed from January 1,
2008 to June 30, 2009 (the most recent period for which our
results have been examined by our independent registered public
accounting firm), our stick rate was 90%. We believe that this
performance significantly exceeds the performance of our major
competitors.
We use a proprietary search process, SearchSigma, and
proprietary technology and communication tools,
ClientNet®,
to successfully execute our retained searches. SearchSigma was
developed based on analyzing three years of detailed client
surveys. In our analysis, we identified the common criteria and
timetables our clients expect from a successful search. Based
upon our findings, we structured SearchSigma as a workflow
process with six distinct segments and milestones at
48 hours, 7 days, 14 days, 40 days,
75 days and 100 days designed to complete
a successful placement within 100 days of our engagement.
SearchSigma also enables our executive search consultants and
clients to actively monitor the status of each search and make
adjustments to the search process as necessary.
We believe that a high level of communication and process
transparency with our clients is very important to their level
of satisfaction and to the ultimate success of our searches. The
cornerstone of our
1
client communication is our proprietary system,
ClientNet®.
Through
ClientNet®,
our clients can access password-protected information over the
internet to check the status of their search engagements.
Another important element of our transparency and accountability
is the audit that we offer to conduct at the
40-day
milestone. This key process step is executed by one of our
executive search consultants who is not otherwise involved in
the particular search. This executive search consultant contacts
the client to assess the progress of the search and to gather
client feedback along with any suggested refinements to the
process.
Our
Industry
The executive search business is highly fragmented, consisting
of several large global firms and several thousand smaller firms
that are generally focused on a specific geographic region or on
a specific vertical sector. We believe that there are a number
of positive trends that are contributing to the growth of the
executive search industry:
|
|
|
|
|
Increasing Competition for Talent. Corporate
governance reforms, increased public scrutiny of board members
and the baby boom generation retiring from the
workforce are contributing to an increase in competition among
companies for executive level talent.
|
|
|
|
|
|
Corporate Governance Reforms. The significant
influence of large institutional shareholders, rise in
shareholder activism and turbulent market conditions have led to
an increased focus on director qualifications and independence
and best practices in the leadership selection process.
|
|
|
|
|
|
Globalization. As businesses increasingly compete on
a global scale, their need for senior executives with specific
skills in various parts of the world also increases.
|
|
|
|
Greater Need for Diverse Management and
Directors. Many companies seek to augment their senior
leadership with professionals that provide unique or
differentiated skills and backgrounds.
|
Many organizations lack the internal skills necessary to address
these issues and identify, assess and recruit the best senior
executives in this environment. As a result, we believe
organizations will increasingly rely on executive search firms
to fill positions and meet critical objectives.
Our Key
Competitive Strengths
We believe our key competitive strengths are:
|
|
|
|
|
Intense Focus on the Timely and Successful Completion of
Searches. Our performance-based business philosophy and
incentive compensation structure is designed to focus our
executive search consultants and other employees on successfully
making the placements for which we are retained within our
stated goal of 100 days from our engagement.
|
|
|
|
Highly Disciplined, Milestone-Driven Approach to Executing
Searches. We rigorously and consistently apply a
detailed workflow process, which we call SearchSigma, with six
distinct segments and milestones at 48 hours,
7 days, 14 days, 40 days, 75 days and
100 days that enhances our ability to
successfully and expeditiously identify and place candidates for
our clients.
|
|
|
|
|
|
An Industry Leader in Utilizing Key Performance Metrics to
Manage Our Business. We actively track and publish the
performance metrics (placement percentage, days to placement and
stick rate) which are critically important to clients, and we
have these results examined by an independent registered public
accounting firm. We believe our clients value having such data
and that the availability of this data enhances our ability to
both satisfy clients and win new engagements.
|
|
|
|
|
|
High Level of Transparency and Accountability with
Clients. Through
ClientNet®,
our proprietary client communication system, and the audit that
we offer to conduct at the 40 day milestone for each
search, our clients have the ability to actively monitor and
participate in their search engagements.
|
2
|
|
|
|
|
Global Firm with Deep Domain Expertise. With 21
offices in 13 countries throughout Asia, Europe, North America
and South America and deep domain expertise in specific industry
verticals, we serve our clients global businesses and
talent needs and are well positioned to identify and qualify
relevant candidates.
|
|
|
|
Organization and Incentives Structured to Drive Collaboration
and Best Outcome for the Client. Our compensation
structure and one-firm culture motivates our executive search
consultants to source the team they believe is best-suited for
each situation and are driven to deliver results for the client.
We believe this creates a strong team culture, with all members
of the team aligned around the goal of quickly making a
successful placement.
|
Our
Growth Strategy
Our goal is to strengthen our position as a leading provider of
retained executive search services through the following
strategies:
|
|
|
|
|
Continue to Increase our Penetration of Existing
Clients. Over the past three years, approximately 70%
of our retained executive search engagements came from clients
who had previously used our services, many of which are large,
global companies that are continually seeking to add talented
senior executives to their management teams. We have a
significant opportunity to continue to expand our relationships
these clients.
|
|
|
|
Continue to Deepen Expertise in Targeted Industry
Practices. We intend to maintain our model of offering
deep industry domain expertise to our clients by continuing to
add talented executive search consultants to all of our practice
areas.
|
|
|
|
Expand Global Presence. Driven by the locations of
both clients and recruiting talent, we intend to open additional
offices around the world, expanding our global footprint and
enhancing our market presence and our execution capabilities.
|
|
|
|
Make Strategic Targeted Hires and Acquisitions. We
intend to continue to hire new executive search consultants as
demand for our services continues to grow and as we identify
talent in the marketplace.
|
|
|
|
Expand Board Placement and Advisory Practice. We
expect that increased corporate governance regulation and an
increased focus on board member qualifications and
accountability will drive meaningful growth and demand for board
advisory services. We also expect that this practice will be a
driver of our core executive search business as we gain access
to new clients at the board level.
|
Risks
That We Face
Our business is subject to numerous risks, as discussed more
fully in the section entitled Risk Factors
immediately following this prospectus summary. If we cannot
attract and retain qualified executive search consultants, our
business, financial condition and results of operation would
suffer. To the extent our clients delay or reduce hiring senior
executives due to an economic downturn or economic uncertainty
our results of operations will be adversely affected. If we lose
the services of one or more members of our senior management
team or if we fail to limit departing executive search
consultants from moving business and other executive search
consultants to another employer, our business could be
negatively impacted. Demand for our services could decline if we
fail to maintain our professional reputation and brand name.
Our
Corporate Information
We were incorporated on April 4, 1980 as Christian and
Timbers, Inc. In 2003, Christian and Timbers, Inc. contributed
all of its assets to a newly formed Delaware limited liability
company, Christian & Timbers LLC. In 2007, we changed
our name to CTPartners Executive Search LLC. Prior to the
effectiveness of the registration statement of which this
prospectus is a part, we will convert from a Delaware limited
liability company to a C corporation organized under
the laws of the state of Delaware.
3
Our principal executive offices are located at 1166 Avenue of
the Americas, 3rd Floor, New York, New York 10036 and
our telephone number is
(212) 588-3500.
Our corporate website address is www.ctnet.com. We do not
incorporate the information contained on, or accessible through,
our corporate website into this prospectus, and you should not
consider it part of this prospectus. For convenience in this
prospectus, CTPartners, we,
us, and our refer to CTPartners
Executive Search, Inc. and its subsidiaries, taken as a whole,
unless otherwise noted.
The
Offering
|
|
|
Common stock offered by us
|
|
1,869,220 shares |
|
Common stock offered by the selling stockholders
|
|
438,472 shares |
|
Common stock to be outstanding after this offering
|
|
6,830,769 shares |
|
Proposed NYSE Amex Equities trading symbol
|
|
CTP |
|
|
|
Use of proceeds
|
|
We estimate that we will receive proceeds of approximately
$22.6 million from this offering, after deducting
underwriting discounts and commissions, assuming the shares are
offered at $13.00 per share, which is the midpoint of the
estimated offering price range shown on the front cover page of
this prospectus. The estimated offering expenses payable by us
are approximately $1.6 million, substantially all of
which have been paid prior to the date of this prospectus. We
expect to use the net proceeds from this offering to pay
approximately $4.5 million to cash out the value of
performance units granted to certain of our executive search
consultants, to pay approximately $4.3 million in tax costs
resulting from our conversion from a limited liability company
to a C corporation, to prepay in full a promissory
note, with an outstanding principal balance of approximately
$1.9 million, issued by the Company to the former chief
executive officer of the Company and his family trust, to prepay
approximately $1.6 million in certain convertible
promissory notes with certain executive search consultants, to
hire executive search consultants and for general corporate
purposes. See Use of Proceeds on page 18. We
will not receive any proceeds from the sale of shares by the
selling stockholders. |
|
|
|
Dividend policy
|
|
We currently expect to retain future earnings, if any, for use
in the operation and expansion of our business and do not intend
to declare or pay any cash dividends on our common stock in the
foreseeable future. |
|
Risk factors
|
|
An investment in our common stock involves a high degree of
risk. You should read and consider the information set forth
under the heading Risk Factors beginning on
page 8 and all other information included in this
prospectus before deciding to invest in our common stock. |
The number of shares of our common stock that will be
outstanding after this offering is based upon the number of
shares of common stock outstanding as of the date of this
prospectus, and does not include (i) 1,000,000 shares
of common stock that are reserved for future grants, awards or
sale under our 2010 equity incentive plan or (ii) up to
250,830 shares of common stock that will be issued upon the
vesting (108,784 shares of common stock will vest in 2011,
103,946 shares of common stock will vest in 2012 and 38,100
shares of common stock will vest in 2013) of certain grants made
in connection with the employment of certain executive search
consultants.
Unless otherwise indicated, the information in this prospectus
reflects and assumes no exercise by the underwriters of their
option to purchase additional shares of common stock from us to
cover over-allotments.
4
SUMMARY
CONSOLIDATED FINANCIAL DATA
The following tables set forth our summary consolidated
statement of income for each of the fiscal years ended
December 31, 2007, 2008 and 2009, and for the nine months
ended September 30, 2009 and 2010, and our summary
consolidated balance sheet data as of September 30, 2010.
The summary consolidated statement of income data for fiscal
years 2007, 2008 and 2009 are derived from our audited,
consolidated, financial statements included elsewhere in this
prospectus. The summary consolidated statement of income data
for the nine months ended September 30, 2009 and 2010, and
our summary consolidated balance sheet data as of
September 30, 2010, have been derived from our unaudited
financial statements included elsewhere in this prospectus, and
include, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of such data. Our historical results do not
necessarily indicate results that may be expected for any future
period. You should read these tables along with our
Managements Discussion and Analysis of Financial
Condition and Results of Operations, Risk
Factors and our consolidated financial statements and
related notes included elsewhere in this prospectus.
Summary
Consolidated Statement of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
116,628,010
|
|
|
$
|
105,715,730
|
|
|
$
|
73,860,740
|
|
|
$
|
50,571,384
|
|
|
$
|
86,010,878
|
|
Reimbursable expenses
|
|
|
4,304,209
|
|
|
|
4,994,766
|
|
|
|
2,727,182
|
|
|
|
1,966,539
|
|
|
|
2,806,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
120,932,219
|
|
|
$
|
110,710,496
|
|
|
$
|
76,587,922
|
|
|
$
|
52,537,923
|
|
|
$
|
88,817,465
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
87,650,465
|
|
|
$
|
82,640,507
|
|
|
$
|
48,571,747
|
|
|
$
|
33,886,938
|
|
|
$
|
62,440,526
|
|
General and administrative
|
|
|
26,182,635
|
|
|
|
23,027,095
|
|
|
|
19,412,165
|
|
|
|
13,417,296
|
|
|
|
16,409,122
|
|
Reimbursable expenses
|
|
|
4,777,021
|
|
|
|
5,117,286
|
|
|
|
2,942,669
|
|
|
|
2,081,188
|
|
|
|
2,926,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
118,610,121
|
|
|
$
|
110,784,888
|
|
|
$
|
70,926,581
|
|
|
$
|
49,385,422
|
|
|
$
|
81,776,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
2,322,098
|
|
|
$
|
(74,392
|
)
|
|
$
|
5,661,341
|
|
|
$
|
3,152,501
|
|
|
$
|
7,041,270
|
|
Net interest expense
|
|
|
687,521
|
|
|
|
596,385
|
|
|
|
409,034
|
|
|
|
276,909
|
|
|
|
197,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
1,634,577
|
|
|
$
|
(670,777
|
)
|
|
$
|
5,252,307
|
|
|
$
|
2,875,592
|
|
|
$
|
6,843,427
|
|
Income tax expense
|
|
|
308,485
|
|
|
|
537,389
|
|
|
|
463,698
|
|
|
|
491,502
|
|
|
|
45,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,326,092
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
4,788,609
|
|
|
$
|
2,384,090
|
|
|
$
|
6,797,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
Summary
Consolidated Balance Sheet Data:
The pro forma balance sheet data as of September 30, 2010
gives effect to (i) the consummation of the corporate
conversion, (ii) the sale by us of 1,869,220 shares of
our common stock at an assumed initial public offering price of
$13.00 per share, the midpoint of the range set forth on the
front cover of this prospectus, after deducting underwriting
discounts and commissions and approximately $400,000 of offering
expenses which had not been paid by us as of September 30,
2010 and (iii) the use of the estimated net proceeds
therefrom, as described in Use of Proceeds.
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
|
(Unaudited)
|
|
|
Cash
|
|
$
|
13,600,540
|
|
|
|
23,522,230
|
|
Total assets
|
|
|
46,825,829
|
|
|
|
55,534,519
|
|
Long-term liabilities
|
|
|
6,955,172
|
|
|
|
2,662,175
|
|
Total liabilities
|
|
|
41,499,133
|
|
|
|
34,925,137
|
|
Redeemable member units
|
|
|
54,923,448
|
|
|
|
|
|
Members/shareholders equity (deficit)
|
|
|
(49,596,752
|
)
|
|
|
20,609,382
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Adjusted EBITDA
|
|
$
|
4,420,200
|
|
|
$
|
2,187,868
|
|
|
$
|
7,732,265
|
|
|
$
|
4,648,182
|
|
|
$
|
8,871,659
|
|
Capital expenditures
|
|
$
|
2,822,500
|
|
|
$
|
679,749
|
|
|
$
|
129,692
|
|
|
$
|
66,668
|
|
|
$
|
540,551
|
|
Number of new search assignments
|
|
|
981
|
|
|
|
889
|
|
|
|
667
|
|
|
|
471
|
|
|
|
796
|
|
Number of executive search consultants (as of period end)
|
|
|
77
|
|
|
|
81
|
|
|
|
77
|
|
|
|
78
|
|
|
|
88
|
|
Average revenue per executive search
|
|
$
|
117,600
|
|
|
$
|
110,100
|
|
|
$
|
103,500
|
|
|
$
|
101,800
|
|
|
$
|
101,100
|
|
Non-GAAP Financial
Measure:
Management defines Adjusted EBITDA as net income (loss) plus
income tax expense, net interest expense, depreciation and
amortization expense and non-cash equity-based compensation
expense. We exclude non-cash equity-based compensation expense
because the timing and amount of such compensation is closely
correlated to the hiring of executive search consultants which
varies significantly over time and, therefore, is not indicative
of operating performance and reduces the comparative value of
Adjusted EBITDA. Adjusted EBITDA should not be considered as an
alternative to generally accepted accounting principles
(GAAP) net income or net cash provided by operating
activities. Adjusted EBITDA has important limitations as an
analytical tool because it excludes some, but not all, items
that affect net income and net cash provided by operating
activities. You should not consider Adjusted EBITDA in isolation
or as a substitute for analysis of our results as reported under
GAAP. Since Adjusted EBITDA may be defined differently by other
companies in our industry, our definition of Adjusted EBITDA may
not be comparable to similarly titled measures of other
companies, thereby diminishing its utility. We believe, however,
that the presentation of Adjusted EBITDA in this prospectus
provides information useful to investors in assessing our
financial condition and results of operations.
Management uses Adjusted EBITDA to:
|
|
|
|
|
compare our operating performance with other publicly traded
entities in our industry, without regard to capital structure,
historical cost basis or financing methods; and
|
6
|
|
|
|
|
compare our operating performance in different periods on a
consistent basis by excluding decisions made in prior periods
that relate to the structure or financing of our business.
|
The following table presents a reconciliation of the GAAP
financial measures of net income to the non-GAAP financial
measure of Adjusted EBITDA, on a pro forma basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Net income (loss)
|
|
$
|
1,326,092
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
4,788,609
|
|
|
$
|
2,384,090
|
|
|
$
|
6,797,511
|
|
Income tax expense
|
|
|
308,485
|
|
|
|
537,389
|
|
|
|
463,698
|
|
|
|
491,502
|
|
|
|
45,916
|
|
Net interest expense
|
|
|
687,521
|
|
|
|
596,385
|
|
|
|
409,034
|
|
|
|
276,909
|
|
|
|
197,843
|
|
Depreciation and amortization
|
|
|
964,397
|
|
|
|
1,190,947
|
|
|
|
1,243,554
|
|
|
|
967,884
|
|
|
|
862,414
|
|
Non-cash equity-based compensation expense
|
|
|
1,133,705
|
|
|
|
1,071,313
|
|
|
|
827,370
|
|
|
|
527,797
|
|
|
|
967,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
4,420,200
|
|
|
$
|
2,187,868
|
|
|
$
|
7,732,265
|
|
|
$
|
4,648,182
|
|
|
$
|
8,871,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider and evaluate the risks and
uncertainties described below before making an investment
decision. The occurrence of any of the following risks and
uncertainties could harm our business, financial condition,
results of operations or growth prospects. As a result, the
trading price of our common stock could decline, and you could
lose all or part of your investment.
Risks
Related to Our Business
Our
inability to attract and retain qualified executive search
consultants would adversely affect our business, financial
condition and results of operations.
Our success depends upon our ability to attract and retain
executive search consultants who possess the skills and
experience necessary to fulfill our clients needs. In
addition, our ability to grow the Company is dependent on
increasing our overall number of qualified executive search
consultants. Our ability to hire and retain qualified executive
search consultants could be impaired by any diminution of our
reputation, decrease in compensation levels relative to our
competitors, modifications of our compensation philosophy or
competitor hiring programs. If we cannot attract, hire and
retain qualified executive search consultants, our business,
financial condition and results of operations would be adversely
affected.
A
significant or prolonged economic downturn would have a material
adverse effect on our results of operations.
Our results of operations are affected by the level of business
activity of our clients, which in turn is affected by general
economic conditions and the level of economic activity in the
industries and markets that they serve. On an aggregate basis,
our clients may be less likely to hire as many senior executives
during economic downturns and periods of economic uncertainty.
To the extent our clients delay or reduce hiring senior
executives due to an economic downturn or economic uncertainty,
our results of operations will be adversely affected, as
evidenced by our results of operations for 2008 and 2009. During
the recent economic downturn our net revenues significantly
decreased from $116.6 million in 2007 to $73.9 million
in 2009. A continued economic downturn or period of economic
uncertainty and a decline in the level of business activity of
our clients would have a material adverse effect on our
business, financial condition and results of operations.
Global
economic developments and conditions in the geographic regions
and industries from which we derive a significant portion of our
revenue could negatively affect our business, financial
condition and results of operations.
Demand for our services is affected by global economic
conditions and the general level of economic activity in the
geographic regions and industries in which we operate. The
concentration of our business in certain geographic regions
and/or industries exacerbates this risk. For example, over 40%
of our net revenue in 2009 was derived from providing our
services to the financial services industry. When conditions in
the global economy, including the credit markets, deteriorate,
or economic activity slows, companies may hire fewer permanent
employees and some companies, as a cost-saving measure, may
choose to rely on their own human resources departments rather
than third-party search firms to find talent. Certain of the
geographic regions and industries in which we operate have
recently deteriorated significantly and may remain depressed for
the foreseeable future. As evidenced by our net revenue results
for 2008 and 2009, our business was directly and negatively
affected by the global economic downturn. If the national or
global economy or credit market conditions in general
deteriorate, or the demand for our services in a significant
industry decreases, our cash flows, business, financial
condition and results of operations would be adversely affected.
8
We
depend substantially on a limited number of key personnel who
would be difficult to replace. If we lose the services of these
individuals, our business would be adversely
affected.
Our continued growth and success depend in large part on the
managerial and leadership skills of our senior management team,
particularly Brian M. Sullivan, our chief executive officer, and
David C. Nocifora, our chief operating and chief financial
officer. We rely on our senior management team to market our
business, manage our globally dispersed business operations and
hire and retain qualified executive search consultants. The
success of our growth efforts depends on significant management
attention to integration and coordination. The loss of the
services of either member of our senior management team would
have a material adverse effect on our business, financial
condition and results of operations. We have no reason to
believe that we will lose the services of either of these
individuals in the foreseeable future; however, we currently
have no effective replacement for either of these individuals
due to their experience, reputation in the industry and
significant role in our operations.
If we
are unable to prevent our executive search consultants from
taking our clients or our executive search consultants with them
to a competitor our business, financial condition and results of
operations could suffer.
Our success depends upon our ability to develop and maintain
strong, long-term relationships with our clients. Although we
work on building these relationships between our firm and our
clients, in many cases, one or two executive search consultants
have primary responsibility for a client relationship.
Additionally, a limited number of executive search consultants
have primary responsibility for a disproportionate share of our
business. In 2009, for example, our top three executive search
consultants had primary responsibility for generating business
equal to approximately 12% of our net revenues, and our top
10 executive search consultants had primary responsibility
for generating business equal to approximately 28% of our net
revenues.
Since we do not enter into non-competition agreements with our
executive search consultants, our executive search consultants
are not contractually prohibited from leaving or joining one of
our competitors and some of our clients could choose to use the
services of that competitor instead of us. We may also lose
clients if the departing executive search consultant has
widespread name recognition or a reputation as a specialist in
executing searches in a specific industry or management
function. Although our employment contracts prohibit former
executive search consultants from soliciting any of our
employees for a period of one year, we may lose additional
executive search consultants if they choose to join the
departing executive search consultant at another executive
search firm. If we fail to limit departing executive search
consultants from moving business or recruiting our executive
search consultants to a competitor, our business, financial
condition and results of operations could be adversely affected.
If we
are unable to maintain our professional reputation and brand
name our business would be adversely affected.
We depend on our overall professional reputation and brand name
recognition to secure new engagements and hire qualified
executive search consultants. In 2007, we changed our brand from
Christian & Timbers to CTPartners. While we believe we
have established our brand in the market, a number of our
competitors have more established and better name recognition
than us. Our success also depends on the individual reputations
of our executive search consultants. We obtain many of our new
engagements from existing clients or from referrals by those
clients. A client who is dissatisfied with our work can
adversely affect our ability to secure new engagements. If our
reputation is negatively affected, including poor performance or
our brand awareness does not continue to increase, we may
experience difficulties in competing successfully for both new
engagements and qualified executive search consultants. Failure
to maintain our professional reputation and brand name could
have a material adverse effect on our business, financial
condition and results of operations.
9
Because
existing clients may restrict us from recruiting their employees
we may be unable, or be perceived by prospective clients as
being unable, to fill existing or prospective executive search
assignments, and prospective clients may not engage us, impeding
our growth.
Clients frequently require us to refrain from recruiting certain
of their employees when conducting executive searches on behalf
of other clients. These restrictions generally remain in effect
for no more than one year following the commencement of an
engagement. However, the specific duration and scope of the
off-limits arrangements depend on the length of the client
relationship, the frequency with which the client engages us to
perform searches and the potential for future business with the
client. If a prospective client believes that we are overly
restricted by these off-limits arrangements from recruiting the
employees of our existing clients, these prospective clients may
not engage us to perform their executive searches, and as a
result, our business, financial condition and results of
operations could be adversely affected.
We
face aggressive competition and if we are unable to compete
effectively, it would have a material adverse affect on our
business, financial condition and results of
operations.
The global executive search industry is extremely competitive
and highly fragmented. We compete with other large global
executive search firms and smaller specialty firms. Some of our
competitors possess greater financial and other resources,
greater name recognition and longer operating histories than we
do in particular markets or practice areas. Additionally,
specialty firms can focus on regional or functional markets or
on particular industries. To the extent our competitors are
better capitalized and have access to greater financial and
other resources, these competitors may be better positioned to
attract executive search consultants, expand their business and
weather any economic downturns. There are limited barriers to
entry into the search industry and new search firms continue to
enter the market. Many executive search firms that have a
smaller client base may be subject to fewer off-limits
arrangements. In addition, our clients or prospective clients
may decide to perform executive searches using in-house
personnel. Finally, competitors sometimes reduce their fees in
order to attract clients and increase market share. Because we
typically do not discount our fees, we may experience some loss
of net revenue. We may not be able to continue to compete
effectively with existing or potential competitors. Our
inability to meet these competitive challenges would have a
material adverse effect on our business, financial condition and
results of operations.
We
rely heavily on information management systems and any
interruptions or loss of key client data could adversely affect
our business.
Our success depends upon our ability to store, retrieve, process
and manage substantial amounts of information. To achieve our
goals, we must continue to improve, upgrade and invest in our
information management systems. We may be unable to license,
design and implement, in a cost-effective and timely manner,
improved information systems that allow us to compete
effectively. In addition, business process reengineering efforts
may result in a change in software platforms and programs. In
addition to the cost of licensing, designing and implementing
new information systems, such efforts may present transitional
problems. Finally, although our data center is maintained at a
third-party location, if we experience any interruptions or loss
in our information processing capabilities or loss of key client
data, our business, financial condition and results of
operations could be adversely affected.
We
face the risk of liability in the services we perform and
significant uninsured liabilities could have a material adverse
affect on our business, financial condition and results of
operations.
We are exposed to potential claims with respect to the executive
search process. A client could assert a claim for violations of
off-limits arrangements, breaches of confidentiality agreements
or professional malpractice. In addition, candidates and client
employees could assert claims against us. Possible claims
include failure to maintain the confidentiality of the
candidates employment search or for discrimination or
other violations of employment laws or professional malpractice.
In various countries, we are subject to data protection laws
impacting the processing of candidate information. We maintain
professional liability insurance in amounts and coverage that we
believe are adequate, however, we cannot guarantee that our
insurance will
10
cover all claims or that coverage will always be available or
sufficient. Significant uninsured liabilities could have a
material adverse effect on our business, financial condition and
results of operations.
Our
inability to successfully integrate executive search consultants
may have an adverse effect on our business.
Much of our net revenue growth since 2004 is due to adding
additional executive search consultants in different geographic
locations. We expect to continue to grow by, among other things,
selectively adding executive search consultants. We may not,
however, be able to identify appropriate executive search
consultants, consummate such additions on satisfactory terms or
integrate the acquired practices effectively and profitably into
our existing operations. Our future success will depend in part
on our ability to complete the integration of executive search
consultants successfully into our operations. Failure to
successfully integrate recently hired executive search
consultants and complementary practices may adversely affect our
profitability by creating operating inefficiencies that could
increase operating expenses as a percentage of net revenues and
reduce operating income. Further, the clients of recently hired
executive search consultants may choose not to move their
business to us.
We may
not be able to manage effectively our expanding operations,
which may impede our growth and/or negatively impact our
performance.
Since 2004, we have experienced a period of rapid growth. This
places a significant strain on our managerial and operational
resources. Our number of employees grew from 88 as of
December 31, 2004 to 319 as of September 30, 2010,
mainly as a result of adding executive search consultants and
staff supporting such executive search consultants. To
accommodate our future expected growth, we may need to implement
new or upgraded operating and financial systems, procedures and
controls throughout many different locations. These efforts may
not be successful. Additionally, opening new office locations
may strain our financial and management resources. Our failure
to expand and integrate these systems, procedures and office
locations efficiently could cause our expenses to increase
disproportionately and our net revenues to decline or grow more
slowly than expected, which could have a material adverse effect
on our business, financial condition and results of operations.
Our
multinational operations may be adversely affected by economic,
social, political and legal risks.
We generate substantial net revenue outside the United States.
We offer our services through seven locations outside the U.S.
(excluding our associated offices in Latin America). We are
exposed to the risk of changes in economic, social, political
and legal conditions inherent in international operations, which
could have a significant impact on our business, financial
condition and results of operations. In particular, we conduct
business in countries where the legal systems, local laws and
trade practices are unsettled and evolving. Commercial laws in
these countries are sometimes vague, arbitrary and
inconsistently applied. Under these circumstances, it is
difficult for us to determine at all times the exact
requirements of such local laws. If we fail to comply with local
laws, our business, financial condition and results of
operations could suffer. In addition, the global nature of our
operations poses challenges to our management as well as our
financial and accounting systems. Failure to meet these
challenges could have a material adverse effect on our business,
financial condition and results of operations.
A
significant currency fluctuation between the U.S. dollar and
other currencies could adversely impact our operating
income.
With operations in the Americas, Europe and Asia Pacific, we
conduct business using various currencies. In 2009, 37% of our
fee revenue was generated outside of North America. As we
typically transact business in the local currency, our
profitability may be impacted by the translation of foreign
currency financial statements into U.S. dollars.
Significant long-term fluctuations in relative currency values,
in particular an increase in the value of the U.S. dollar
against foreign currencies, could have a material adverse effect
on our profitability and our business, financial condition and
results of operations.
11
The
failure to timely align our cost structure with net revenue
could have a material adverse affect on our business, financial
condition and results of operations.
We must ensure that our costs and workforce continue to be in
proportion to demand for our services. In particular, local laws
in some of the countries we operate in make it more difficult
and time consuming to appropriately adjust staffing levels.
Failure to timely align our cost structure and headcount with
net revenue could have a material adverse effect on our
business, financial condition and results of operations.
Our
inability to access credit, or if we are only able to do so at
significantly higher costs, could limit our ability to grow and
harm our business, financial condition and results of
operations.
In the current economic environment, banks may strictly enforce
the terms of our credit agreement. Although we are currently in
compliance with the financial covenants of our revolving credit
facility, a further deterioration of economic conditions may
negatively impact our business resulting in our failure to
comply with these covenants in the future, which could limit our
ability to borrow funds under our revolving credit facility. We
may not be able to secure alternative financing or may only be
able to do so at significantly higher costs, and this could harm
our business, financial condition and results of operations.
Risks
Related to this Offering and Ownership of Our Common
Stock
There
is no established trading market for our common stock, and the
market price of our common stock may be highly volatile or may
decline regardless of our operating performance.
There has been no public market for our common stock prior to
this offering. If you purchase shares of our common stock in
this offering, you will pay a price that was not established in
the public trading markets. The initial public offering price
for our shares will be determined through negotiations among the
underwriters, the selling stockholders and us. This initial
public offering price may vary from the market price of our
common stock following this offering. If you purchase shares of
our common stock in this offering, you may not be able to resell
your shares above the initial public offering price, and you may
suffer a loss on your investment. In addition, an active trading
market for our common stock following this offering may not
develop or, if developed, may not be sustained. An inactive
market may also impair our ability to raise capital to continue
to fund operations by selling common stock and may impair our
ability to acquire other companies or assets by using our common
stock as consideration.
Broad market and industry factors also may adversely affect the
market price of our common stock, regardless of our actual
operating performance. Factors that could cause wide
fluctuations in our stock price may include, among other things:
|
|
|
|
|
general economic conditions;
|
|
|
|
actual or anticipated variations in our financial condition and
operating results;
|
|
|
|
overall conditions or trends in our industry;
|
|
|
|
addition or loss of significant clients;
|
|
|
|
changes in the market valuations of companies perceived by
investors to be comparable to us;
|
|
|
|
announcements by us or our competitors of significant
acquisitions, strategic partnerships or divestitures;
|
|
|
|
announcements of lawsuits filed against us;
|
|
|
|
additions or departures of key personnel;
|
|
|
|
changes in the estimates of our operating results or changes in
recommendations by any securities or industry analysts that
elect to follow our common stock; and
|
|
|
|
sales of our common stock by us or our stockholders, including
sales by our directors and officers.
|
12
In addition, the stock market in general has experienced extreme
price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of companies.
These broad market and industry fluctuations, as well as general
economic, political and market conditions such as recessions,
interest rate changes or international currency fluctuations,
may negatively impact the market price of our common stock.
These fluctuations may be even more pronounced in the trading
market for our common stock immediately following this offering.
In addition, in the past, following periods of volatility in the
overall market and the market price of a particular
companys securities, securities class action litigation
has often been instituted against these companies. We may be the
target of this type of litigation in the future. Securities
litigation, if instituted against us, could result in
substantial costs and a diversion of our managements
attention and resources, whether or not we are successful in
such litigation.
Requirements
associated with being a public company will increase our costs,
as well as divert company resources and managements
attention, and affect our ability to attract and retain
qualified board members and executive officers.
Prior to this offering, we have not been subject to the
reporting requirements of the Securities Exchange Act of 1934 or
the other rules and regulations of the SEC or any securities
exchange relating to public companies. We will comply with
Section 404(a) (managements report on financial
reporting) under the Sarbanes-Oxley Act for the year ending
December 31, 2011. To comply with this statute, we will be
required to document and test our internal control procedures.
During such process, we may discover areas of our internal
controls that need further attention and improvement.
Implementing any appropriate changes to our internal controls
may require specific compliance training of our directors,
officers and employees, entail substantial costs in order to
modify our existing accounting systems and take a significant
period of time to complete. Such changes may not, however, be
effective in maintaining the adequacy of our internal controls,
and our failure to maintain that adequacy, or any inability to
produce accurate financial statements on a timely basis as a
result, could increase our operating costs, harm our ability to
run our business and cause us to fail to meet our reporting
obligations. Our failure to have adequate internal controls
could undermine investor confidence, which could adversely
affect our stock price. Furthermore, failure to comply with
Section 404 could potentially subject us to sanctions or
investigations by the SEC, the NYSE Amex Equities stock exchange
or other regulatory bodies.
We are working with our legal, independent accounting and
financial advisors to identify those areas in which changes or
enhancements should be made to our financial and management
control systems to manage our growth and obligations as a public
company. Some such areas include corporate governance, corporate
control, internal audit, disclosure controls and procedures, and
financial reporting and accounting systems. We have made, and
will continue to make, changes in these and other areas.
However, the expenses that will be required in order to prepare
adequately for becoming a public company could be material.
In addition, being a public company could make it more difficult
or more costly for us to obtain certain types of insurance,
including directors and officers liability
insurance, and we may be forced to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the
same or similar coverage. The impact of these events could also
make it more difficult for us to attract and retain qualified
persons to serve on our board of directors, our board committees
and our executive team.
Our
principal stockholders may exert substantial influence over us
and may exercise their control in a manner adverse to your
interests.
Upon completion of this offering and assuming no exercise of an
option to purchase additional shares by the underwriters, our
senior management and executive search consultants will own an
aggregate of 4,523,077 shares, or 66.2% of our outstanding
common stock. More specifically, seven members of our senior
management and executive search consultants will own,
collectively, 3,311,974 shares, or 48.5%, of our
outstanding common stock. Because a limited number of persons
may exert substantial influence over us, transactions could be
difficult or impossible to complete without the support of those
persons. It is possible that these persons will exercise control
over us in a manner adverse to your interests. For more
information
13
regarding ownership of our outstanding stock, see the section of
this prospectus entitled Principal and Selling
Stockholders.
Future
sales of our common stock may cause our stock price to
decline.
If our existing stockholders sell, or indicate an intention to
sell, substantial amounts of our common stock in the public
market following this offering, the market price of our common
stock could decline. These sales might also make it more
difficult for us to sell additional equity securities at a time
and price that we deem appropriate. Upon completion of this
offering, we will have 6,830,769 shares of common stock
outstanding. Of these outstanding shares, all of the shares of
our common stock sold in this offering will be freely tradable
in the public market, except for any shares held by our
affiliates as defined in Rule 144 of the Securities Act.
We, each of our directors and executive officers and
substantially all of our existing equityholders, including the
selling stockholders, have agreed, for a period of 180 days
after the date of this prospectus, not to (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, or otherwise dispose
of or transfer any shares of common stock or any securities
convertible into or exchangeable or exercisable for common stock
or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or
indirectly, the economic consequences of ownership of common
stock or any securities convertible into or exchangeable for any
shares of common stock, without prior written consent of William
Blair & Company, L.L.C., other than shares of common
stock issued in this offering, under our 2010 equity incentive
plan or upon exercise of stock options granted pursuant to our
2010 equity incentive plan.
Additionally, our directors, executive officers and
substantially all of our existing equityholders, including the
selling stockholders, have agreed with the underwriters, subject
to certain exceptions, not to sell any shares of our common
stock or securities convertible into, or exercisable, or
exchangeable for, shares of our common stock, without the prior
written consent of William Blair & Company, L.L.C.,
except as follows:
|
|
|
|
|
commencing on the first anniversary of the date of this
prospectus, each such person may sell up to one-third of the
shares of common stock held by such person as of the date of
this prospectus;
|
|
|
|
commencing on the second anniversary of the date of this
prospectus, each such person may sell up to two-thirds of the
shares of common stock held by such person as of the date of
this prospectus; and
|
|
|
|
commencing on the third anniversary of the date of this
prospectus, each such person may sell one hundred percent of the
shares of common stock held by such person as of the date of
this prospectus.
|
After the expiration of the
lock-up
agreements, up to 4,523,077 restricted securities may be sold
into the public market in the future without registration under
the Securities Act to the extent permitted under Rule 144.
Of these restricted securities, 1,507,692 shares will be
available for sale on the first anniversary of the date of this
prospectus, 1,507,692 shares will be available for sale on
the second anniversary of the date of this prospectus and
1,507,693 shares will be available for sale on the third
anniversary of the date of this prospectus, in each case subject
to volume or other limits under Rule 144.
Furthermore, 1,000,000 shares are available for grant under our
2010 equity incentive plan following the closing of this
offering, and, if issued or granted, will become eligible for
sale in the public market once permitted by provisions of
various vesting agreements,
lock-up
agreements and Rule 144, as applicable. We intend to file a
registration statement on
Form S-8
under the Securities Act to register 1,000,000 shares of
our common stock for issuance under our 2010 equity incentive
plan. Additionally, up to 250,830 shares of common stock
will be issued upon the vesting (108,784 shares of common stock
will vest in 2011, 103,946 shares of common stock will vest in
2012 and 38,100 shares of common stock will vest in 2013) of
certain grants made in connection with the employment of certain
executive search consultants. For additional information, see
the section of this prospectus entitled
Shares Eligible for Future Sale. If these
additional shares of common stock are, or if it is perceived
that they will be, sold in the public market, the trading price
of our common stock could decline.
14
If
securities or industry analysts do not publish research or
reports about our business, if they adversely change their
recommendations regarding our common stock, or if our operating
results do not meet their expectations, our stock price and
trading volume could decline.
The trading market for our common stock will be influenced by
the research and reports that securities or industry analysts
publish about us or our business. We do not have any control
over these reports or analysts. If any of the analysts who cover
our company downgrades our stock, or if our operating results do
not meet the analysts expectations, our stock price could
decline. Moreover, if any of these analysts ceases coverage of
our company or fails to publish regular reports on our business,
we could lose visibility in the financial markets, which in turn
could cause our stock price and trading volume to decline.
We
currently do not intend to pay dividends on our common stock
and, as a result, your only opportunity to achieve a return on
your investment is if the price of our common stock
appreciates.
We currently do not expect to declare or pay dividends on our
common stock in the foreseeable future. Instead, we anticipate
that all of our earnings in the foreseeable future will be used
in the operation and growth of our business. Any determination
to pay dividends in the future will be at the discretion of our
board of directors. In addition, our ability to pay dividends on
our common stock is currently limited by the covenants of our
credit facility and may be further restricted by the terms of
any future debt or preferred securities. Accordingly, your only
opportunity to achieve a return on your investment in our
company may be if the market price of our common stock
appreciates and you sell your shares at a profit. The market
price for our common stock may never exceed, and may fall below,
the price that you pay for our common stock.
You
will experience immediate and substantial dilution in the book
value of your common stock as a result of this
offering.
The initial public offering price of our common stock is
considerably more than the net tangible book value per share of
common stock after this offering and our corporate conversion.
This reduction in the value of your equity is known as dilution.
This dilution occurs in large part because our earlier investors
paid substantially less than the initial public offering price
when they purchased their equity. Investors purchasing common
stock in this offering will incur immediate dilution of $9.98
share of common stock, based on the assumed initial public
offering price of $13.00 per share, which is the midpoint of the
price range listed on the front cover page of this prospectus.
For a further description of the dilution that you will
experience immediately after this offering, see the section of
this prospectus entitled Dilution.
Our
management will have broad discretion over the proceeds we
receive in this offering and might not apply the proceeds in
ways that increase the value of your investment.
Our management will have broad discretion to use our net
proceeds from this offering, and you will be relying on their
judgment regarding the application of these proceeds. Our
management might not apply our net proceeds of this offering in
ways that increase the value of your investment. We expect to
use the net proceeds from this offering to cash out the value of
performance units granted to certain of our executive search
consultants, to pay the tax costs resulting from our conversion
from a limited liability company to a C corporation,
to prepay in full a promissory note issued by the Company to the
former chief executive officer of the Company and his family
trust, to prepay certain convertible promissory notes with
certain executive search consultants, to hire executive search
consultants and for general corporate purposes. Our management
might not be able to yield a significant return, if any, on any
investment of these net proceeds. You will not have the
opportunity to influence our decisions on how to use our net
proceeds from this offering.
15
Anti-takeover
provisions in our charter documents and under Delaware law could
make an acquisition of us, which may be beneficial to our
stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current
management.
Provisions in our certificate of incorporation and bylaws may
delay or prevent an acquisition of us or a change in our
management. These provisions include:
|
|
|
|
|
a board of directors whose members can only be dismissed for
cause;
|
|
|
|
the right of the board of directors to elect a director to fill
a vacancy created by the expansion of the board of directors;
|
|
|
|
the ability of the board of directors to alter our bylaws
without obtaining stockholder approval;
|
|
|
|
the prohibition on actions by written consent of our
stockholders;
|
|
|
|
the limitation on who may call a special meeting of stockholders;
|
|
|
|
the establishment of advance notice requirements for nominations
for election to our board of directors or for proposing matters
that can be acted upon at stockholder meetings;
|
|
|
|
the ability of our board of directors to issue preferred stock
without stockholder approval, which would increase the number of
outstanding shares and could thwart a takeover attempt; and
|
|
|
|
the requirement of at least 75% of the outstanding common stock
to amend any of the foregoing provisions.
|
In addition, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware
General Corporation Law, which limits the ability of
stockholders owning in excess of 15% of our outstanding voting
stock to merge or combine with us. Although we believe these
provisions collectively provide for an opportunity to obtain
greater value for stockholders by requiring potential acquirors
to negotiate with our board of directors, they would apply even
if an offer rejected by our board were considered beneficial by
some stockholders. In addition, these provisions may frustrate
or prevent any attempts by our stockholders to replace or remove
our current management by making it more difficult for
stockholders to replace members of our board of directors, which
is responsible for appointing the members of our management.
16
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains statements that do not directly or
exclusively relate to historical facts. As a general matter,
forward-looking statements reflect our current expectations and
projections relating to our financial condition, results of
operations, plans, objectives, future performance and business.
We generally identify forward looking statements by terminology
such as outlook, believes,
expects, potential,
continues, may, will,
should, seeks,
approximately, predicts,
intends, plans, estimates,
anticipates, or the negative version of those words
or other comparable words, but the absence of these words does
not necessarily mean that a statement is not forward-looking.
Any forward-looking statements contained in this prospectus are
based upon our historical performance, current plans, estimates,
expectations and other factors we believe are appropriate under
the circumstances. The inclusion of this forward-looking
information should not be regarded as a representation by us,
the underwriters or any other person that the future plans,
estimates or expectations contemplated by us will be achieved.
Such forward-looking statements are subject to various risks and
uncertainties and assumptions relating to our operations,
financial results, financial condition, business prospects,
growth strategy and liquidity. If one or more of these or other
risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, our actual results may vary
materially from those indicated in these statements.
The following uncertainties and factors, among others (including
the factors described in the section entitled Risk
Factors in this prospectus), could affect our future
performance and cause actual results to differ materially from
those expressed or implied by forward-looking statements:
|
|
|
|
|
our expectations regarding our revenues, expenses and operations
and our ability to sustain profitability;
|
|
|
|
our ability to recruit and retain qualified executive search
consultants to staff our operations appropriately;
|
|
|
|
our ability to expand our customer base and relationships,
especially given the off-limit arrangements we are required to
enter into with certain of our clients;
|
|
|
|
further declines in the global economy and our ability to
execute successfully through business cycles;
|
|
|
|
our anticipated cash needs;
|
|
|
|
our anticipated growth strategies and sources of new revenues;
|
|
|
|
unanticipated trends and challenges in our business and the
markets in which we operate;
|
|
|
|
social or political instability in markets where we operate;
|
|
|
|
the impact of foreign currency exchange rate fluctuations;
|
|
|
|
price competition;
|
|
|
|
the ability to forecast, on a quarterly basis, variable
compensation accruals that ultimately are determined based on
the achievement of annual results;
|
|
|
|
the mix of profit and loss by country;
|
|
|
|
our ability to estimate accurately for purposes of preparing our
consolidated financial statements; and
|
|
|
|
our spending of the net proceeds from this offering.
|
These factors should not be construed as exhaustive and should
be read in conjunction with the other cautionary statements that
are included in this prospectus.
Any forward-looking statement made by us in this prospectus
speaks only as of the date on which it is made. Unless required
by law, we do not undertake any obligation to update or review
any forward-looking statement, whether as a result of new
information, future developments or otherwise. You should,
however, review the factors and risks we describe in the reports
we will file from time to time with the Securities and Exchange
Commission after the date of this prospectus.
17
USE OF
PROCEEDS
We estimate that we will receive net proceeds of approximately
$22.6 million from the sale of shares of common stock in
this offering at the assumed initial public offering price of
$13.00 per share, the midpoint of the range set forth on the
front cover of this prospectus, after deducting underwriting
commissions and discounts of $1.7 million. The estimated
offering expenses payable by us are
approximately $1.6 million, substantially all of which
have been paid prior to the date of this prospectus. We will not
receive any proceeds from the sale of shares by the selling
stockholders.
A $1.00 increase (decrease) in the assumed initial public
offering price of $13.00 per share, the midpoint of the range
set forth on the front cover of this prospectus, would increase
(decrease) the net proceeds from this offering by
$1.8 million, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses
payable by us.
We plan to use the net proceeds of this offering as follows:
|
|
|
|
|
approximately $4.5 million to cash out the value of
performance units granted to certain of our executive search
consultants;
|
|
|
|
approximately $4.3 million to pay the tax costs resulting
from our conversion from a limited liability company to a
C corporation;
|
|
|
|
approximately $1.9 million to prepay in full a promissory
note issued by the Company in September 2004 to the former chief
executive officer of the Company and his family trust in
connection with the repurchase of equity by the Company (such
note, with an outstanding principal balance of
$1.8 million, accrues interest at a fixed rate of 5% per
annum, has no stated maturity and provides for a minimum annual
principal and interest payment of $300,000 and additional
payments of up to a maximum of 1.5% of the Companys prior
calendar year net revenue if the Company meets certain operating
performance benchmarks);
|
|
|
|
approximately $1.6 million to prepay certain convertible
promissory notes issued by the Company in June 2008 to certain
of our executive search consultants (such notes, which are
described in more detail under Certain Relationships and
Related Party Transactions, pay interest, on a quarterly
basis, at a fixed rate of 5% per annum and are due and payable
on June 16, 2013);
|
|
|
|
hiring executive search consultants; and
|
|
|
|
for general corporate purposes.
|
Pending uses of the net proceeds from this offering, we intend
to invest the remaining net proceeds in short-term,
interest-bearing investment grade securities.
DIVIDEND
POLICY
We currently expect to retain future earnings, if any, for use
in the operation and expansion of our business and do not intend
to declare or pay any cash dividends on our common stock in the
foreseeable future. Our ability to pay cash dividends on our
common stock is limited by covenants in our revolving credit
facility and may be further restricted by the terms of any
future debt or preferred securities.
18
CAPITALIZATION
The following sets forth:
|
|
|
|
|
our actual capitalization as of September 30, 2010; and
|
|
|
|
our capitalization on a pro forma, as adjusted, basis to give
effect to:
|
|
|
|
|
|
our corporate conversion, pursuant to which each of our
outstanding member units will convert into shares of common
stock at a ratio of 1:5.269;
|
|
|
|
|
|
the sale by us of 1,869,220 shares of our common stock at
an assumed initial public offering price of $13.00 per share,
the midpoint range set forth on the front cover of this
prospectus, after deducting underwriting discounts and
commissions and approximately $400,000 of offering expenses
which had not been paid by us as of September 30,
2010; and
|
|
|
|
|
|
the use of the estimated net proceeds therefrom, as described in
Use of Proceeds.
|
You should read the following table together with our
consolidated financial statements and the related notes included
elsewhere in this prospectus and the information under Use
of Proceeds, Selected Consolidated Financial
Data, Managements Discussion and Analysis of
Financial Condition and Results of Operations, and
Certain Relationships and Related Party Transactions.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
|
(Unaudited)
|
|
|
Cash
|
|
$
|
13,600,540
|
|
|
$
|
23,522,230
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
1,382,235
|
|
|
$
|
281,235
|
|
Long-term debt, less current maturities
|
|
|
3,915,300
|
|
|
|
753,164
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
5,297,536
|
|
|
$
|
1,034,399
|
|
|
|
|
|
|
|
|
|
|
Redeemable member units
|
|
$
|
54,923,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members/stockholders equity:
|
|
|
|
|
|
|
|
|
Members equity (deficit), 858,469 member units outstanding
|
|
$
|
(49,596,752
|
)
|
|
|
|
|
Preferred stock, 1,000,000 shares authorized, no shares issued
and outstanding
|
|
|
|
|
|
|
|
|
Common stock, par value $0.001 per share; 30,000,000 shares
authorized, 6,830,769 shares issued and outstanding
|
|
|
|
|
|
$
|
6,831
|
|
Paid-in capital
|
|
|
|
|
|
$
|
23,241,873
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
$
|
(2,275,801
|
)
|
Retained earnings (deficit)
|
|
|
|
|
|
$
|
(363,521
|
)
|
|
|
|
|
|
|
|
|
|
Total members/stockholders equity (deficit)
|
|
$
|
(49,596,752
|
)
|
|
$
|
20,609,382
|
|
|
|
|
|
|
|
|
|
|
19
CORPORATE
CONVERSION
Prior to the effectiveness of the registration statement of
which this prospectus is a part, we will convert from a Delaware
limited liability company to a C corporation
organized under the laws of the State of Delaware. In order to
consummate such a conversion, a certificate of conversion will
be filed with the Department of State of the State of Delaware
prior to the effectiveness of the registration statement, of
which this prospectus is a part. In connection with this
conversion, all of our outstanding member units will be
automatically converted into shares of common stock at a ratio
of 1:5.269.
DILUTION
Dilution is the amount by which the initial offering price paid
by the purchasers of the common stock to be sold in this
offering exceeds the net tangible book value per share of common
stock after this offering and our corporate conversion. Our net
tangible book value as of September 30, 2010 was
$5.3 million, or $1.09 per share of common stock (for
purposes of this calculation, we have assumed the conversion of
our outstanding member units into shares of common stock at a
ratio of 1:5.269). We have calculated this amount by:
|
|
|
|
|
subtracting our total liabilities from our total tangible
assets; and
|
|
|
|
dividing the difference by the number of shares of our common
stock outstanding.
|
After giving effect to the corporate conversion and to the sale
of 1,869,220 shares of our common stock by us in this
offering at the assumed public offering price of $13.00 per
share, the midpoint of the price range set forth on the front
cover page of this prospectus, and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us in connection with this offering, our net
tangible book value as of September 30, 2010 would have
been $20,609,382 million, or $3.02 per share of our common
stock. This amount represents an immediate increase in net
tangible book value of $1.93 per share to existing stockholders
and an immediate dilution of $9.98 per share to new investors.
The following table illustrates this dilution per share giving
effect to the corporate conversion that will be effective prior
to the effectiveness of the registration statement, of which
this prospectus is a part:
|
|
|
|
|
Initial public offering price per share
|
|
$
|
13.00
|
|
Net tangible book value per share prior to this offering as of
September 30, 2010
|
|
$
|
1.09
|
|
Increase in net tangible book value per share attributable to
new investors purchasing shares in this offering
|
|
$
|
1.93
|
|
Net tangible book value per share after this offering
|
|
$
|
3.02
|
|
Dilution in net tangible book value per share to new investors
|
|
$
|
9.98
|
|
|
|
|
|
|
A $1.00 increase (decrease) in the assumed initial public
offering price of $13.00 per share, the midpoint of the price
range set forth on the front cover page of this prospectus,
would increase (decrease) our net tangible book value by
$1.8 million, our net tangible book value per share after
this offering by $0.26 per share, and the dilution to new
investors in this offering by $0.74 per share, assuming the
number of shares of common stock offered by us, as set forth on
the front cover page of this prospectus, remains the same and
after deducting the estimated underwriting commissions and
discounts and offering expenses payable by us.
The following table summarizes, on an adjusted basis, as of
September 30, 2010 and after giving effect to the corporate
conversion and this offering, the differences between the
existing stockholders and the new investors in this offering
with respect to the number of shares purchased from us, the
total consideration paid, and the average price per share paid
before deducting the underwriting commissions and discounts and
estimated offering expenses payable by us. The calculations,
with respect to shares purchased by new investors
20
in this offering, reflect an assumed initial public offering
price of $13.00 per share, the midpoint of the price range set
forth on the front cover page of this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Price
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Per Share
|
|
|
Existing stockholders
|
|
|
4,523,077
|
|
|
|
66.2
|
%
|
|
$
|
11,200,000
|
|
|
|
27.2
|
%
|
|
$
|
2.48
|
|
New investors
|
|
|
2,307,692
|
|
|
|
33.8
|
|
|
|
30,000,000
|
|
|
|
72.8
|
|
|
|
13.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,830,769
|
|
|
|
100.0
|
%
|
|
$
|
41,200,000
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A $1.00 increase (decrease) in the assumed initial public
offering price of $13.00 per share, the midpoint of the price
range set forth on the front cover page of this prospectus,
would increase (decrease) total consideration paid by new
investors in this offering by $2.3 million and would
increase (decrease) the percentage of total consideration paid
by new investors by 1.4%, before deducting the estimated
underwriting discounts and commissions and offering expenses
payable by us in connection with this offering.
If the underwriters option to purchase additional shares
is exercised in full, the percentage of our shares held by
existing equity owners would decrease to approximately 63.0% and
the percentage of our shares held by new stockholders would
increase to approximately 37.0%.
21
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated statement of operations
data for the fiscal years ended December 31, 2007, 2008 and
2009, and balance sheet data as of December 31, 2007, 2008
and 2009, set forth below have been derived from our audited
consolidated financial statements and notes thereto. Our audited
consolidated financial statements have been audited by
McGladrey & Pullen, LLP, an independent registered
public accounting firm. The summary consolidated statement of
operations data for the nine months ended September 30,
2009 and 2010, and our summary consolidated balance sheet data
as of September 30, 2009 and 2010, have been derived from
our unaudited financial statements included elsewhere in this
prospectus, and include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of such data. The unaudited
operations data for the nine month period ended
September 30, 2010 is not necessarily indicative of the
results that may be expected for the year ended
December 31, 2010.
The selected historical consolidated financial data should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the Companys audited consolidated financial statements
and the notes thereto.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Year Ended December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
116,628,010
|
|
|
$
|
105,715,730
|
|
|
$
|
73,860,740
|
|
|
$
|
50,571,384
|
|
|
$
|
86,010,878
|
|
Total revenue
|
|
|
120,932,219
|
|
|
|
110,710,496
|
|
|
|
76,587,922
|
|
|
|
52,537,923
|
|
|
|
88,817,465
|
|
Operating income (loss)
|
|
|
2,322,098
|
|
|
|
(74,392
|
)
|
|
|
5,661,341
|
|
|
|
3,152,501
|
|
|
|
7,041,270
|
|
Net income (loss)
|
|
$
|
1,326,092
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
4,788,609
|
|
|
$
|
2,384,090
|
|
|
$
|
6,797,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,401,133
|
|
|
$
|
3,666,370
|
|
|
$
|
5,093,700
|
|
|
$
|
3,465,110
|
|
|
$
|
13,600,540
|
|
Accounts receivable, net
|
|
|
16,520,569
|
|
|
|
10,659,319
|
|
|
|
15,351,547
|
|
|
|
15,040,306
|
|
|
|
24,398,253
|
|
Total assets
|
|
|
28,794,319
|
|
|
|
23,413,497
|
|
|
|
27,876,100
|
|
|
|
26,183,942
|
|
|
|
46,825,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued compensation
|
|
|
14,619,537
|
|
|
|
13,279,390
|
|
|
|
13,425,668
|
|
|
|
12,214,477
|
|
|
|
28,314,729
|
|
Long-term liabilities
|
|
|
7,689,418
|
|
|
|
8,946,758
|
|
|
|
7,326,138
|
|
|
|
6,669,359
|
|
|
|
6,955,172
|
|
Total liabilities
|
|
|
33,663,527
|
|
|
|
31,435,261
|
|
|
|
29,550,531
|
|
|
|
29,052,991
|
|
|
|
41,499,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable member units
|
|
|
45,727,810
|
|
|
|
44,739,130
|
|
|
|
30,937,827
|
|
|
|
31,500,595
|
|
|
|
54,923,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members equity (deficit)
|
|
$
|
(50,597,017
|
)
|
|
$
|
(52,760,894
|
)
|
|
$
|
(32,612,258
|
)
|
|
$
|
(35,023,317
|
)
|
|
$
|
(49,596,752
|
)
|
22
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with the section titled Selected Financial
Data and our financial statements and related notes
appearing elsewhere in this prospectus. Our actual results could
differ materially from those anticipated in the forward-looking
statements included in this discussion as a result of certain
factors, including, but not limited to, those discussed in
Risk Factors and Special Note Regarding
Forward-Looking Statements included elsewhere in this
prospectus.
Overview
We are a leading provider of retained executive search services
to clients on a global basis. We provide these services through
15 offices in the Americas, Europe and Asia Pacific, as well as
through a licensing arrangement with six associated offices in
Latin America. We help our clients build stronger leadership
teams by facilitating the recruitment and hiring of
C-level executives (chief executive officers, chief
operating officers, chief financial officers, chief information
officers and chief technology officers), other senior executives
and board members. Our retained executive search services focus
on successfully making placements for our clients in a timely
manner.
We use a proprietary search process and proprietary technology
and communication tools to successfully execute our retained
searches. Also, we believe that we are the only global retained
executive search firm to track and publish key quality metrics
that drive success in our business, and to have these metrics
examined by an independent registered public accounting firm.
These include (i) placement success rate; (ii) average
days to placement; and (iii) stick rate. In 2009, our
placement success rate was 78% and our average days to placement
was 124. For candidates placed from January 1, 2008 to
June 30, 2009 (the most recent period for which our results
have been examined by our independent registered public
accounting firm auditor), our stick rate was 90%. For purposes
of tracking our performance metrics, we include the performance
of our associated offices in Latin America.
Our organizational structure is designed to provide high
quality, industry-focused executive search services to our
clients worldwide. Our partners are dedicated to specific
industry verticals and are leading experts in their given
sectors. Our support teams of researchers and associates are
organized by industry practice group in various geographic
locations. We believe that industry specialization enables us to
better understand our clients cultures, operations,
business strategies and industries. Executive search consultants
in our industry practice groups bring an in-depth understanding
of the market conditions and strategic and management issues
faced by clients within their specific industry. Our five
largest industry practice groups are financial services,
professional services, life sciences, technology/media/telecom
and consumer/industrial.
We leverage our industry specialization with local geographic
knowledge and contacts to provide clients with comprehensive
executive search services. We believe that our global presence
enables us to more effectively serve our clients who have
operations throughout the world. We have wholly-owned operations
in eight U.S. cities and in seven
non-U.S. locations.
Our wholly-owned
non-U.S. operations
are in Canada, China, France, Hong Kong, Singapore, Switzerland
and the United Kingdom. In addition to our wholly-owned
operations, our associated offices in Latin America are located
in Brazil, Chile, Colombia, Mexico, Peru and Venezuela. In 2009,
we placed candidates in 301 U.S. searches and 409
non-U.S. searches,
of which 186 were executed by our associated offices in Latin
America.
We have a diverse group of clients located throughout the world
in a variety of industries. From January 1, 2005 through
September 30, 2010, we have performed more than
4,400 searches for over 1,400 clients, including some
of the leading Fortune 1000, FTSE 100, DAX and CAC
40 companies as well as private equity and venture capital
firms and their portfolio companies. No single client accounted
for more than 5% of our revenue in 2007, 2008 or 2009.
As of September 30, 2010, we had 88 executive search
consultants and 231 other employees and our associated offices
in Latin America had 17 executive search consultants and 57
other employees. We have our
23
headquarters in New York, New York and our corporate,
administrative and research functions are located in our office
in Cleveland, Ohio.
In 2009, we generated net revenue and operating income of $73.9
and $5.7 million, respectively. For financial reporting
purposes, we do not consolidate the operations of our associated
offices in Latin America. We include the license revenue we
receive from our associated offices in Latin America as a
component of net revenue. Included in our 2009 net revenue
is $250,650 in license fees received from our associated offices
in Latin America.
Impact of
Our Initial Public Offering
The completion of this offering will have near and long-term
effects on our results of operations. In the near term, we will
incur a one-time tax cost of approximately $4.3 million in
connection with our conversion from a limited liability company
to a C corporation. Over the long-term, our results
of operations will be affected by the recurring costs of being a
public company, including changes in board and executive
compensation, the costs of compliance with the Sarbanes-Oxley
Act of 2002, the costs of complying with the rules and
regulations of the SEC and NYSE Amex Equities stock exchange,
and increased insurance, accounting, legal and investor
relations costs. Additionally, as a result of our conversion to
a C corporation, we will be taxed as a C
corporation at the federal and state level. These costs are not
reflected in our historical results.
Components
of Our Statement of Operations
Revenue
Net Revenue. Our executive search services are provided
on a retained basis. Net revenue is comprised of the following
four components:
|
|
|
|
|
Fee Revenue. The vast majority of our revenue for
retained executive search and board advisory services is
received as retainer fees (which we refer to as fee
revenue). Our retainer fee is typically equal to 33% of
the first year total cash compensation for the position being
filled. Generally, our retainer fee is paid in three sequential
monthly installments commencing in the month of our engagement
by the client.
|
|
|
|
Indirect Expenses Billed to Clients. For each
engagement, we are paid a flat fee, generally $9,000, to cover
certain costs associated with the search process. These costs
include:
|
|
|
|
|
|
research and research tools;
|
|
|
|
legal, human resource and other outside services; and
|
|
|
|
the development and maintenance of our proprietary database and
communication systems.
|
|
|
|
|
|
Supplemental Fees. We are paid supplemental fees
in the following circumstances:
|
|
|
|
|
|
Uptick: in the event that the actual total cash
compensation paid to a placed candidate exceeds the estimated
compensation on which our retained fees were based, we typically
are paid, at the time of placement, an amount equal to 33% of
the difference between the actual total cash compensation paid
and the estimate; and
|
|
|
|
Pick-Up:
in the event that a client hires a candidate for a position
other than the position identified in the original search
assignment, we typically are paid 30% of the first years
total cash compensation for the position filled.
|
|
|
|
|
|
License Revenue. For services rendered by our
associated offices in Latin America, we are paid a license fee
equal to a percentage of the gross fees billed to clients. The
license fee is 3% for the first year of affiliation and 6%
thereafter.
|
24
In addition to the components of our net revenue, we also track
certain performance metrics that drive revenue. In the executive
search industry, revenue in any given period is driven by:
|
|
|
|
|
the number of search assignments;
|
|
|
|
the number of executive search consultants;
|
|
|
|
executive search consultant productivity, measured by average
annualized net revenue per executive search consultant; and
|
|
|
|
average revenue per executive search.
|
Since we are paid license fees by our associated offices in
Latin America, and we do not employ the executive search
consultants in those offices, we exclude our associated offices
in Latin America in tracking the revenue drivers listed above.
We believe that by excluding such results we get a better
picture of what is driving core revenue.
Reimbursements and Reimbursed Expenses. We are generally
reimbursed by our clients for the direct expenses associated
with our search activity on their behalf. These direct expenses
include travel, other
out-of-pocket
expenses and third-party costs, and we report such
reimbursements as a separate component of total revenue. In
addition, we record such direct expenses as a separate component
of operating expenses when incurred. We manage our business on
the basis of net revenue (before reimbursements and reimbursed
expenses), since we believe that this is the most accurate
reflection of our services.
Operating
Expenses
Compensation and Benefits Expenses. We utilize a
combination of base salary, revenue and volume bonuses and
equity compensation to compensate our employees. Brief
descriptions of each component are as follows:
|
|
|
|
|
Base Salary. Each executive search
consultants base salary is determined based upon his or
her prior experience and history of revenue generation. Under
the revenue and volume bonus plans described below, we deduct
the base salary of each executive search consultant from any
bonus paid.
|
|
|
|
Revenue Bonus. Each executive search consultant is
paid a tiered bonus based upon the amount of collected revenue
that is credited to such consultant. The higher the revenue
credited, the higher the percentage of such revenue that is paid
to the executive search consultant as a bonus and thus accrued
by us as an expense. As a result of this tiered bonus system,
the mix of individual consultants performance levels can
significantly affect the total amount of compensation expense we
record. All collected fee revenue is credited to executive
search consultants as follows: 20% to the originator, 30% to the
executive search consultant or team of executive search
consultants that contributed to converting a lead into a
committed engagement and 50% to the executive search consultants
that execute the search. Our revenue bonus is not discretionary
and is not based upon total firm profitability.
|
|
|
|
Volume Bonus. We pay a volume bonus to our
executive search consultants based upon the total amount of
collected revenue originated by an executive search consultant.
Our volume bonus is not discretionary and is not based upon
total firm profitability.
|
|
|
|
Signing Bonus. We may pay a signing bonus as part
of recruiting new executive search consultants to the Company.
|
|
|
|
Equity Compensation. Following the completion of
this offering, we may grant equity compensation to our executive
officers and executive search consultants in order to:
|
|
|
|
|
|
align our employees interest with those of our
stockholders;
|
|
|
|
facilitate ownership of our common stock by our executive
officers and executive search consultants; and
|
25
|
|
|
|
|
attract and retain talent.
|
|
|
|
|
|
Other Employee Compensation: We pay our
associates, researchers and administrative and support staff
based upon a combination of base salary, performance-based
bonuses and discretionary bonuses.
|
General and Administrative Expenses. General and
administrative expenses are comprised primarily of rent,
depreciation, business development, professional fees,
communications and IT, networking costs and insurance.
Incremental increases in revenue do not necessarily result in
proportional increases in general and administrative expenses.
Income Tax Expense. Prior to this offering, we were
treated as a partnership for federal income tax purposes and, as
a result, we did not incur any federal income tax expenses.
Prior to the effectiveness of the registration statement of
which this prospectus is a part, we will convert to a Delaware
C corporation and our outstanding member units will
be converted into shares of common stock. From and after such
conversion, we will be taxed as a C corporation at
the federal and state level.
Results
of Operations
The following tables summarize, for the periods indicated, our
results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Month Period
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
116,628,010
|
|
|
$
|
105,715,730
|
|
|
$
|
73,860,740
|
|
|
$
|
50,571,384
|
|
|
$
|
86,010,878
|
|
Reimbursable expenses
|
|
|
4,304,209
|
|
|
|
4,994,766
|
|
|
|
2,727,182
|
|
|
|
1,966,539
|
|
|
|
2,806,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
120,932,219
|
|
|
$
|
110,710,496
|
|
|
$
|
76,587,922
|
|
|
$
|
52,537,923
|
|
|
$
|
88,817,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
87,650,465
|
|
|
$
|
82,640,507
|
|
|
$
|
48,571,747
|
|
|
$
|
33,886,938
|
|
|
$
|
62,440,526
|
|
General and administrative
|
|
|
26,182,635
|
|
|
|
23,027,095
|
|
|
|
19,412,165
|
|
|
|
13,417,296
|
|
|
|
16,409,122
|
|
Reimbursable expenses
|
|
|
4,777,021
|
|
|
|
5,117,286
|
|
|
|
2,942,669
|
|
|
|
2,081,188
|
|
|
|
2,926,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
118,610,121
|
|
|
$
|
110,784,888
|
|
|
$
|
70,926,581
|
|
|
$
|
49,385,422
|
|
|
$
|
81,776,195
|
|
Operating income (loss)
|
|
$
|
2,322,098
|
|
|
$
|
(74,392
|
)
|
|
$
|
5,661,341
|
|
|
$
|
3,152,501
|
|
|
$
|
7,041,270
|
|
Net interest expense
|
|
|
687,521
|
|
|
|
596,385
|
|
|
|
409,034
|
|
|
|
276,909
|
|
|
|
197,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
1,634,577
|
|
|
$
|
(670,777
|
)
|
|
$
|
5,252,307
|
|
|
$
|
2,875,592
|
|
|
$
|
6,843,427
|
|
Income tax expense
|
|
|
308,485
|
|
|
|
537,389
|
|
|
|
463,698
|
|
|
|
491,502
|
|
|
|
45,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,326,092
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
4,788,609
|
|
|
$
|
2,384,090
|
|
|
$
|
6,797,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2010 Compared to Nine Months
Ended September 30, 2009
Net Revenue. Net revenue increased $35.4 million, or
70.1%, to $86.0 million in the first nine months of 2010
from $50.6 million in the first nine months of 2009. The
increase in net revenue was the result of an increase in the
number of search assignments on which we were engaged, an
increase in the number of
26
executive search consultants employed by us and an increase in
our executive search consultant productivity, as set forth below
(this data excludes the operations of our associated offices in
Latin America):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
Percentage
|
|
|
September 30,
|
|
Increase/
|
|
Increase/
|
Performance Metrics
|
|
2009
|
|
2010
|
|
(Decrease)
|
|
(Decrease)
|
|
Number of new search assignments
|
|
|
471
|
|
|
|
801
|
|
|
|
330
|
|
|
|
70.1
|
%
|
Number of executive search consultants (as of period end)
|
|
|
78
|
|
|
|
88
|
|
|
|
10
|
|
|
|
12.8
|
|
Productivity, as measured by average annualized net revenue per
executive search consultant
|
|
$
|
864,000
|
|
|
$
|
1,303,000
|
|
|
$
|
439,000
|
|
|
|
50.8
|
|
Average revenue per executive search
|
|
$
|
101,800
|
|
|
$
|
101,100
|
|
|
$
|
(700
|
)
|
|
|
(0.7
|
)
|
Compensation and Benefits Expenses. Compensation and
employee benefits expense increased $28.5 million, or
84.3%, to $62.4 million in the first nine months of 2010
from $33.9 million in the first nine months of 2009. As a
percentage of net revenue, compensation and benefits increased
to 72.6% in the first nine months of 2010 from 67.0% in the
first nine months of 2009. The increase in compensation and
benefits expense was primarily the result of a
$17.8 million increase in bonus compensation for executive
search consultants in the first nine months of 2010, which was
the direct result of higher consolidated net revenue in the
first nine months of 2010 as compared to the first nine months
of 2009. Additionally, in the first nine months of 2010 we
(i) hired 62 new employees; (ii) incurred an expense
of approximately $1.4 million in connection with grants and
signing bonuses made to newly hired executive search
consultants; (iii) incurred a $1.2 million non-cash
expense in connection with our mandatorily redeemable membership
units; (iv) incurred an expense of $1.1 million in
connection with the revaluation of our performance unit plan;
(v) incurred an expense for the full amount of salary and
bonus owed to Brian M. Sullivan, our chief executive officer and
David C. Nocifora, our chief operating and financial officer,
which were voluntarily reduced in 2009, resulting in a
$1.0 million incremental increase in compensation and
benefits expenses; and (vi) removed temporary base salary
reductions made in 2009. The following table summarizes
compensation and benefits expenses as a percentage of net
revenue for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
2009
|
|
2010
|
|
Compensation and benefits expenses as a percentage of net revenue
|
|
|
67.0
|
%
|
|
|
72.6
|
%
|
General and Administrative Expenses. General and
administrative expenses increased $3.0 million, or 22.3%,
to $16.4 million in the first nine months of 2010 from
$13.4 million in the first nine months of 2009. The
increase primarily reflects an increase in spending for
recruiting new employees, expenses associated with hiring
temporary employees and increased marketing expenses that
reflect an improvement in global economic conditions. Because
our revenue increased more than our general and administrative
expenses, general and administrative expenses as a percentage of
net revenue declined to 19.1% in the first nine months of 2010
from 26.5% in the first nine months of 2009. The following table
summarizes general and administrative expenses as a percentage
of net revenue for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
2009
|
|
2010
|
|
General and administrative expenses as a percentage of net
revenue
|
|
|
26.5
|
%
|
|
|
19.1
|
%
|
Operating Income. Operating income increased
$3.9 million to $7.0 million in the first nine months
of 2010 from $3.2 million in the first nine months of 2009.
As discussed above, the increase reflects the fact that our net
revenues increased more than our expenses during the first nine
months of 2010.
Net Interest Expense. Net interest expense decreased
$79,066, or 28.6%, to $197,843 in the first nine months of 2010
from $276,909 in the first nine months of 2009. The decrease in
net interest expense reflects a lower average outstanding
balance under our revolving credit facility in the first nine
months of 2010 as compared to the first nine months of 2009.
27
Income Before Taxes and Income Tax Expense. In the first
nine months of 2010, we reported income before taxes of
$6.8 million and recorded income tax expense of $45,916, as
compared to income before taxes of $2.9 million and income
tax expense of $491,502 in the first nine months of 2009. The
reduction in income tax expense was primarily due to changes in
the effective state and local tax rates in the jurisdictions
where the Company operates. In both periods we were not subject
to federal income taxes because we were taxed as a partnership
under federal tax law. Accordingly, no provision or liability
for income taxes was recorded for federal income taxes in our
consolidated financial statements since any income or loss was
included in the tax returns of our members. The income tax
expense recorded in the first nine months of 2010 and 2009
represents state and local taxes in those jurisdictions that do
not recognize entities taxed as a partnership.
Prior to the effectiveness of the registration statement of
which this prospectus is a part, we will convert from a Delaware
limited liability company to a Delaware C
corporation and each of our outstanding member units will be
converted into shares of common stock. From and after such
conversion, we will be taxed as a C corporation at
the federal and state level. If we had been taxed as a
C corporation in the first nine months of 2010 and
2009, and assuming a 40% effective tax rate, we would have
reported additional income tax expense of approximately
$2.7 million in the first nine months of 2010 and
$1.2 million in the first nine months of 2009.
Fiscal
Year Ended December 31, 2009 Compared to Fiscal Year Ended
December 31, 2008
Net Revenue. The deterioration in global economic
conditions began to affect our business in the fourth quarter of
2008 and continued through most of 2009. As a result, our net
revenue decreased $31.8 million, or 30.1%, to
$73.9 million in 2009 from $105.7 million in 2008. The
decrease in net revenue was the result of a decrease in the
number of search assignments on which we were engaged, a
reduction in the number of executive search consultants employed
by us, a decrease in our executive search consultant
productivity and a decrease in the average revenue per executive
search, as set forth below (the results set forth below exclude
the operations of our associated offices in Latin America):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Percentage
|
Performance Metric
|
|
2008
|
|
2009
|
|
(Decrease)
|
|
(Decrease)
|
|
Number of new search assignments
|
|
|
889
|
|
|
|
667
|
|
|
|
(222
|
)
|
|
|
(24.9
|
)%
|
Number of executive search consultants (as of period end)
|
|
|
81
|
|
|
|
77
|
|
|
|
(4
|
)
|
|
|
(4.9
|
)
|
Productivity, as measured by average annualized net revenue per
executive search consultant
|
|
$
|
1,305,000
|
|
|
$
|
959,000
|
|
|
$
|
(346,000
|
)
|
|
|
(26.5
|
)
|
Average revenue per executive search
|
|
$
|
110,100
|
|
|
$
|
103,500
|
|
|
$
|
(6,600
|
)
|
|
|
(6.0
|
)
|
Compensation and Benefits Expenses. Compensation and
employee benefits expense decreased $34.0 million, or
41.2%, to $48.6 million in 2009 from $82.6 million in
2008. The decrease in compensation and benefits expense was
principally the result of a $20.0 million decrease in bonus
compensation earned by our executive search consultants in 2009.
Pursuant to the terms of our revenue and volume bonus plans,
executive search consultant bonus compensation is directly tied
to revenue and, therefore, 2009 executive search consultant
bonus compensation was significantly lower than we would expect
to pay in a normal operating environment. We decreased our base
salary, payroll tax and benefit expense by $9.6 million,
primarily related to workforce reductions and temporary base
salary reductions for staff and executive management.
Performance-based bonuses for our associates, researchers and
administrative personnel also decreased by $1.6 million,
primarily due to the reduced number of search assignments.
Additionally, Brian M. Sullivan, our chief executive officer,
and David C. Nocifora, our chief operating and chief financial
officer, agreed to voluntarily reduce their base salaries and
bonuses in 2009, resulting in a one-time cost savings of
$1.4 million. Finally, we eliminated discretionary bonuses
for non-revenue producing staff and executive management and
reduced over-time expense. At December 31, 2009 we had 256
total employees, down 13.8%, compared to 297 total employees at
December 31, 2008. Because we were able to reduce
compensation and benefit expenses more than our revenue
declined, compensation and benefit expenses as a percentage of
28
net revenue declined to 65.8% in 2009 from 78.2% in 2008. The
following table summarizes compensation and benefits expenses as
a percentage of net revenue for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008
|
|
2009
|
|
Compensation and benefits expenses as a percentage of net revenue
|
|
|
78.2
|
%
|
|
|
65.8
|
%
|
General and Administrative Expenses. General and
administrative expenses decreased $3.6 million, or 15.7%,
to $19.4 million in 2009 from $23.0 million in 2008.
The decrease primarily reflects savings associated with cost
containment initiatives, including a reduction in business
development expenses of $650,000, cancellation of television
advertising, a cost savings of $400,000 and cancellation of the
production of our internally produced magazine, a cost savings
of $250,000. Because we were not able to reduce our general and
administrative expenses in proportion with the decline in our
net revenue, general and administrative expenses as a percentage
of net revenue increased to 26.3% in 2009 from 21.8% in 2008.
The following table summarizes general and administrative
expenses as a percentage of net revenue for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008
|
|
2009
|
|
General and administrative expenses as a percentage of net
revenue
|
|
|
21.8
|
%
|
|
|
26.3
|
%
|
Operating Income. Operating income increased
$5.7 million to $5.6 million in 2009 from a loss of
$(74,392) in 2008. The increase in operating income was
primarily due to our ability to reduce our overall expenses more
than our revenue declined.
Net Interest Expense. Net interest expense decreased
$187,351, or 31.4%, to $409,034 in 2009 from $596,385 in 2008.
The decrease in net interest expense primarily reflects a lower
average outstanding balance under our revolving credit facility
in 2009 as compared to 2008.
Income Before Taxes and Income Tax Expense. In 2009, we
reported income before taxes of $5.3 million and recorded
income tax expense of $463,698, as compared to 2008 when we
reported a loss before taxes of $(670,777) and income tax
expense of $537,389. In both 2009 and 2008, we were not subject
to federal income taxes because we were taxed as a partnership
under federal tax law. Accordingly, no provision or liability
for income taxes was recorded for federal income taxes in our
consolidated financial statements since any income or loss was
included in the income tax returns of our members. The income
tax expense recorded in 2009 and 2008 represents state and local
taxes in those jurisdictions that do not recognize entities
taxed as a partnership.
Prior to the effectiveness of the registration statement of
which this prospectus is a part, we will convert from a Delaware
limited liability company to a Delaware C
corporation and each of our outstanding member units will be
converted into shares of common stock. From and after such
conversion, we will be taxed as a corporation at the federal and
state level. If we had been taxed as a C corporation
in 2009 and 2008 and assuming a 40% effective tax rate, we would
have reported additional income tax expense of approximately
$2.1 million in 2009 and a tax credit against income tax
expense of approximately $268,000 in 2008.
Fiscal
Year Ended December 31, 2008 Compared to Fiscal Year Ended
December 31, 2007
Net Revenue. Net revenue decreased $10.9 million, or
9.4%, to $105.7 million in 2008 from $116.6 million in
2007. The decrease in net revenue was the result of a decrease
in the number of search assignments on which we were engaged, a
decrease in our executive search consultant productivity and a
29
decrease in the average revenue per executive search, as set
forth below (the below results exclude the operations of our
associated offices in Latin America):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Percentage
|
|
|
December 31,
|
|
Increase/
|
|
Increase
|
Performance Metric
|
|
2007
|
|
2008
|
|
(Decrease)
|
|
(Decrease)
|
|
Number of new search assignments
|
|
|
981
|
|
|
|
889
|
|
|
|
(92
|
)
|
|
|
(9.4
|
)%
|
Number of executive search consultants (as of period end)
|
|
|
77
|
|
|
|
81
|
|
|
|
4
|
|
|
|
5.2
|
|
Productivity, as measured by average annualized net revenue per
executive search consultant
|
|
$
|
1,515,000
|
|
|
$
|
1,305,000
|
|
|
$
|
(210,000
|
)
|
|
|
(13.9
|
)
|
Average revenue per executive search
|
|
$
|
117,600
|
|
|
$
|
110,100
|
|
|
$
|
(7,500
|
)
|
|
|
(6.4
|
)
|
The decrease in our net revenue in 2008 was largely a function
of a significant decline in our business in the fourth quarter
of 2008, as the economy and hiring activity deteriorated
rapidly. In the fourth quarter of 2008 our net revenue decreased
$9.9 million, or 35.9%, as compared to the fourth quarter
of 2007. Similarly, the number of search assignments on which we
were engaged in the fourth quarter of 2008 declined by 65, or
29.0%, to 159 as compared to 224 in 2007.
Compensation and Benefits Expenses. Compensation and
employee benefits expense decreased $5.0 million, or 5.7%,
to $82.6 million in 2008 from $87.7 million in 2007.
The decrease in compensation and employee benefits expense was
primarily the result of a $7.1 million decrease in bonus
compensation for executive search consultants in 2008, which was
directly a result of lower consolidated net revenue in 2008 as
compared to 2007, pursuant to our bonus plan. The decrease in
bonus compensation paid to executive search consultants was
partially offset by a $3.1 million increase in base salary
expense as a result of hiring activity early in 2008 and
severance-related expenses later in 2008. At December 31,
2008 we had 297 total employees, down 11.9% compared to 337
total employees at December 31, 2007. Because we were not
able to reduce our compensation and employee benefit expense in
proportion with the decline in our net revenue, compensation and
employee benefit expense as a percentage of net revenue
increased to 78.2% in 2008 from 75.2% in 2007. The following
table summarizes compensation and benefits expenses as a
percentage of net revenue for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2008
|
|
Compensation and benefits expenses as a percentage of net revenue
|
|
|
75.2
|
%
|
|
|
78.2
|
%
|
General and Administrative Expenses. General and
administrative expenses decreased $3.2 million, or 12.2%,
to $23.0 million in 2008 from $26.2 million in 2007.
The decrease was primarily due to cost containment efforts
related to a reduction in expenses associated with the
recruitment of executive search consultants and other employees,
a cost savings of approximately $1.0 million, a reduction
in our expenses for professional fees and outsourcing, a cost
savings of approximately $900,000, and the cancellation of our
annual firm meeting, a cost savings of approximately $500,000.
Because we were able to reduce our general and administrative
expenses in proportion with the decline in our net revenue,
general and administrative expenses as a percentage of net
revenue decreased to 21.8% in 2008 from 22.4% in 2007. The
following table summarizes general and administrative expenses
as a percentage of net revenue for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2008
|
|
General and administrative expenses as a percentage of net
revenue
|
|
|
22.4
|
%
|
|
|
21.8
|
%
|
Operating Income. Operating income decreased
$2.4 million, or 104.3%, to a loss of $(74,392) in 2008
from $2.3 million in 2007. The decrease in consolidated
operating income was primarily due to the sharp decline in net
revenue in the fourth quarter of 2008.
30
Net Interest Expense. Net interest expense decreased
$91,136, or 13.3%, to $596,385 in 2008 from $687,521 in 2007.
The decrease in net interest expense primarily reflects a lower
average outstanding balance under our revolving credit facility
in 2008 as compared to 2007.
Income Before Taxes and Income Tax Expense. In 2008, we
reported a loss before taxes of $(670,777) and recorded income
tax expense of $537,389, as compared to income before taxes of
$1.6 million and a recorded income tax expense of $308,485
in 2007. In both 2008 and 2007, we were not subject to federal
income taxes because we were taxed as a partnership under
federal tax law. Accordingly, no provision or liability for
income taxes was recorded for federal income taxes in our
consolidated financial statements since any income or loss was
included in the tax returns of our members. The income tax
expense recorded in 2008 and 2007 represents state and local
taxes in those jurisdictions that do not recognize entities
taxed as a partnership.
Prior to the effectiveness of the registration statement of
which this prospectus is a part, we will convert from a Delaware
limited liability company to a Delaware C
corporation and each of our outstanding member units will be
converted into shares of common stock. From and after such
conversion, we will be taxed as a C corporation at
the federal and state level. If we had been taxed as a
C corporation in 2008 and 2007 and assuming a 40%
effective tax rate, we would have reported a credit against
income tax expenses of approximately $268,000 in 2008 and
additional income tax expense of approximately $653,000 in 2007.
Selected
Quarterly Financial Data
The following table sets forth our selected unaudited quarterly
consolidated financial data for fiscal 2008 and 2009 and for the
first, second and third quarters of 2010. The information for
each of these periods has been derived from our unaudited
consolidated financial statements, which have been prepared on
the same basis as the audited consolidated financial statements
included in this prospectus and, in the opinion of management,
reflect all adjustments, consisting only of normal and recurring
adjustments necessary to fairly state our results of operations
for the periods presented. These quarterly operating results are
not necessarily indicative of our operating results for any
future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
Sept. 30,
|
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
29,785,642
|
|
|
$
|
29,880,404
|
|
|
$
|
28,497,966
|
|
|
$
|
17,551,718
|
|
|
$
|
16,340,645
|
|
|
$
|
14,549,295
|
|
|
$
|
19,681,444
|
|
|
$
|
23,289,356
|
|
|
$
|
25,774,725
|
|
|
$
|
29,804,993
|
|
|
$
|
30,431,162
|
|
Reimbursable expenses
|
|
|
1,255,797
|
|
|
|
1,278,654
|
|
|
|
1,355,317
|
|
|
|
1,104,998
|
|
|
|
703,242
|
|
|
|
616,654
|
|
|
|
646,643
|
|
|
|
760,643
|
|
|
|
831,901
|
|
|
|
1,004,430
|
|
|
|
970,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
31,041,439
|
|
|
$
|
31,159,058
|
|
|
$
|
29,853,283
|
|
|
$
|
18,656,716
|
|
|
$
|
17,043,887
|
|
|
$
|
15,165,949
|
|
|
$
|
20,328,087
|
|
|
$
|
24,049,999
|
|
|
$
|
26,606,626
|
|
|
$
|
30,809,423
|
|
|
$
|
31,401,418
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and expenses
|
|
$
|
22,785,001
|
|
|
$
|
22,524,579
|
|
|
$
|
22,272,982
|
|
|
$
|
15,057,945
|
|
|
$
|
11,902,566
|
|
|
$
|
9,764,192
|
|
|
$
|
12,220,180
|
|
|
$
|
14,684,809
|
|
|
$
|
17,624,649
|
|
|
$
|
21,653,528
|
|
|
$
|
23,162,351
|
|
General and administrative
|
|
|
5,800,927
|
|
|
|
6,364,715
|
|
|
|
5,712,061
|
|
|
|
5,149,392
|
|
|
|
4,375,563
|
|
|
|
4,365,114
|
|
|
|
4,676,619
|
|
|
|
5,994,869
|
|
|
|
5,126,317
|
|
|
|
5,494,580
|
|
|
|
5,792,323
|
|
Reimbursable expenses
|
|
|
1,331,613
|
|
|
|
1,277,239
|
|
|
|
1,363,888
|
|
|
|
1,144,546
|
|
|
|
658,598
|
|
|
|
672,616
|
|
|
|
749,974
|
|
|
|
861,481
|
|
|
|
808,924
|
|
|
|
1,123,521
|
|
|
|
989,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
29,917,541
|
|
|
$
|
30,166,533
|
|
|
$
|
29,348,931
|
|
|
$
|
21,351,883
|
|
|
$
|
16,936,727
|
|
|
$
|
14,801,922
|
|
|
$
|
17,646,773
|
|
|
$
|
21,541,159
|
|
|
$
|
23,559,890
|
|
|
$
|
28,271,629
|
|
|
$
|
29,944,669
|
|
Operating income (loss)
|
|
$
|
1,123,898
|
|
|
$
|
992,525
|
|
|
$
|
504,352
|
|
|
$
|
(2,695,167
|
)
|
|
$
|
107,160
|
|
|
$
|
364,027
|
|
|
$
|
2,681,314
|
|
|
$
|
2,508,840
|
|
|
$
|
3,046,736
|
|
|
$
|
2,537,794
|
|
|
$
|
1,456,749
|
|
Net interest expense
|
|
|
168,991
|
|
|
|
145,805
|
|
|
|
153,705
|
|
|
|
127,884
|
|
|
|
97,640
|
|
|
|
90,512
|
|
|
|
88,757
|
|
|
|
132,125
|
|
|
|
80,793
|
|
|
|
59,816
|
|
|
|
57,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
954,907
|
|
|
$
|
846,720
|
|
|
$
|
350,647
|
|
|
$
|
(2,823,051
|
)
|
|
$
|
9,520
|
|
|
$
|
273,515
|
|
|
$
|
2,592,557
|
|
|
$
|
2,376,715
|
|
|
$
|
2,965,943
|
|
|
$
|
2,477,978
|
|
|
$
|
1,399,514
|
|
Income tax expense
|
|
|
(77,591
|
)
|
|
|
(117,766
|
)
|
|
|
(82,083
|
)
|
|
|
(259,949
|
)
|
|
|
(161,679
|
)
|
|
|
(102,954
|
)
|
|
|
(226,869
|
)
|
|
|
27,804
|
|
|
|
(109,484
|
)
|
|
|
(111,332
|
)
|
|
|
174,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
877,316
|
|
|
$
|
728,954
|
|
|
$
|
268,564
|
|
|
$
|
(3,083,000
|
)
|
|
$
|
(152,159
|
)
|
|
$
|
170,561
|
|
|
$
|
2,365,688
|
|
|
$
|
2,404,519
|
|
|
$
|
2,856,459
|
|
|
$
|
2,366,646
|
|
|
$
|
1,574,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
and Capital Resources
General. Our primary sources of liquidity are cash, cash
flow from operations and borrowing availability under our
revolving credit facility. We continually evaluate our liquidity
requirements, capital needs and availability of capital
resources based on our operating needs. We believe that our
existing cash
31
balances together with the funds expected to be generated from
operations and funds available under our committed revolving
credit facility will be sufficient to finance our operations for
the foreseeable future.
The following table summarizes our cash flow for the periods
shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
Net cash provided by operating activities
|
|
$
|
1,154,866
|
|
|
$
|
6,383,441
|
|
|
$
|
89,281
|
|
Net cash (used in) investing activities
|
|
|
(2,822,500
|
)
|
|
|
(679,749
|
)
|
|
|
(129,692
|
)
|
Net cash provided by (used in) financing activities
|
|
|
2,971,776
|
|
|
|
(3,124,536
|
)
|
|
|
1,207,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
$
|
1,304,142
|
|
|
$
|
2,579,156
|
|
|
$
|
1,167,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash. Cash at December 31, 2009 was
$5.1 million, as compared to $3.7 million at
December 31, 2008 and $2.4 million at
December 31, 2007.
Cash Flow from Operating Activities. In 2009, cash
provided by operating activities was $89,281, principally
reflecting net income of $4.8 million partially offset by
decreases in accrued expenses and other assets and liabilities.
Cash provided by operating activities was $6.4 million in
2008, principally reflecting a decrease in our accounts
receivable and an increase in our accounts payable offset by our
net loss; and $1.2 million in 2007, principally reflecting
our net income.
Cash from Investing Activities. In 2009, cash used in
investing activity was $129,692, mainly for capital
expenditures, as compared to $679,749 in 2008 and
$2.8 million in 2007, $2.0 million of which related to
leasehold improvements resulting from our move of offices in New
York in April 2007.
Cash from Financing Activities. In 2009, cash received
from financing activity was $1.2 million, primarily as a
result of borrowing against our credit facility offset by
payments made on notes issued to repurchase units from former
members of CTPartners Executive Search LLC. Cash used in
financing activities in 2008 was $3.1 million primarily
resulting from paying down our credit facility and repaying
notes issued to repurchase units from former members of
CTPartners Executive Search LLC, partially offset by the
issuance of a convertible note to the members of CTPartners
Executive Search LLC in the amount of $2.7 million. Cash
from financing activities in 2007 was $3.0 million
primarily as a result of increased borrowing on our credit
facility and the receipt of proceeds from the issuance of member
units, which was partially offset by our repurchase of units
from former members of CTPartners Executive Search LLC.
|
|
|
|
|
Lines of Credit: Since March 2004, we have had a
committed revolving credit facility. Under our credit facility,
we may borrow U.S. dollars at LIBOR plus 3.25%. A facility
fee is charged even if no portion of the credit facility is
used. Our credit facility expires on April 30, 2012. The
borrowings outstanding under our credit facility were
$4.6 million at December 31, 2009 and
$2.7 million at December 31, 2008. As of
November 23, 2010, we had $0.2 million outstanding
under our credit facility and we had $9.8 million available
to borrow. The facility is secured by substantially all of our
assets, including certain accounts receivable balances. We are
required to meet, and are currently in compliance with, certain
financial condition covenants on a quarterly basis, including a
maximum leverage ratio, minimum fixed charge ratio, minimum net
worth and maximum capital expenditures. Our revolving credit
facility restricts our ability to pay dividends.
|
|
|
|
|
|
Convertible Note: On June 16, 2008, we
entered into identical convertible promissory notes with certain
of our executive search consultants of CTPartners Executive
Search LLC, pursuant to which we raised $2.7 million. The
notes, of which an aggregate of $2.5 million is currently
outstanding, pay interest, on a quarterly basis, at a fixed rate
of 5% per year and are due and payable on June 16, 2013.
Upon conversion, each holder will receive a number of shares of
common stock obtained by (i) dividing the amount to be converted
by $50.41 (the agreed upon value of a member unit for purposes
of converting the notes) and (ii) multiplying this number by
5.269 (the conversion ratio of which our member units will
convert to shares of common stock).
|
32
Off-Balance Sheet Arrangements. We do not have
off-balance sheet arrangements, special purpose entities,
trading activities or non-exchange traded contracts.
Contractual Obligations. The following table presents the
Companys known contractual obligations and commitments to
make future payments under certain contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due for the Years Ended December 31,
|
|
Contractual
Obligations:
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
2.57
|
|
|
|
|
|
|
|
|
|
|
$
|
2.93
|
|
Line of credit
|
|
|
4.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.68
|
|
Notes payable redemption of members units
|
|
|
1.07
|
|
|
|
1.21
|
|
|
|
0.65
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
2.95
|
|
Office space and equipment lease obligations
|
|
|
8.50
|
|
|
|
6.40
|
|
|
|
5.90
|
|
|
|
5.50
|
|
|
|
5.30
|
|
|
|
9.60
|
|
|
|
41.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
14.37
|
|
|
$
|
7.73
|
|
|
$
|
6.67
|
|
|
$
|
8.08
|
|
|
$
|
5.31
|
|
|
$
|
9.60
|
|
|
$
|
51.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application
of Critical Accounting Policies and Estimates
General. Managements Discussion and Analysis of
Financial Condition and Results of Operations is based upon our
consolidated financial statements, which have been prepared
using accounting principles generally accepted in the United
States of America (GAAP). Our significant accounting policies
are discussed in Note 1, Summary of Significant Accounting
Policies, in the notes to our consolidated financial statements.
The preparation of our consolidated financial statements
requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and
liabilities. Management bases its estimates on historical
experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual amounts may differ from these estimates under
different assumptions or conditions. If actual amounts are
ultimately different from previous estimates, the revisions are
included in our results of operations for the period in which
the actual amounts become known.
An accounting policy is deemed to be critical if it requires an
accounting estimate to be made based on assumptions about
matters that are highly uncertain at the time the estimate is
made, and if different estimates that reasonably could have been
used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the
financial statements. Management believes the following critical
accounting policies reflect its more significant estimates and
assumptions used in the preparation of our consolidated
financial statements:
Revenue Recognition. Substantially all revenue is derived
from fees for professional services related to executive search
services. Revenue before reimbursements of direct expenses
(net revenue) consists of: retainer fees; indirect
expenses billed to clients; supplemental fees (fees
contractually due to the Company if the actual compensation of
the placed candidate exceeds the estimated compensation on which
the retainer fee was based or the client hires other candidates
presented by the Company for positions not related to the
original search assignment); and license revenue. Since retainer
fees and indirect expenses are generally not contingent upon
placement of a candidate, our assumptions primarily relate to
establishing the period over which our services are performed.
The period over which we recognize revenue may not directly
correspond to the length of a search because revenue recognition
is aligned with our assumptions regarding the provision of
services during the engagement. These assumptions determine the
timing of revenue recognition and profitability for the reported
period. If these assumptions do not accurately reflect the
period over which revenue is earned, revenue and profit could
differ. We annually review our assumptions with regard to the
establishment of the period over which our services are
performed to ensure that our revenue recognition policy is in
accordance with generally accepted accounting principles.
Retainer fees and indirect expenses from executive search
engagements are recognized over the expected period of
performance in proportion to the estimated personnel time
incurred to fulfill our obligations under the engagements. Any
supplemental fees are recognized upon the occurrence of the
event triggering the payment of a supplemental fee.
33
Accounts Receivable and Allowances for Doubtful Accounts.
Accounts receivable from our clients are recorded at the
invoiced amounts and do not bear interest. Our invoices
generally require payment upon receipt, and accounts greater
than 90 days past due are considered delinquent. We
determine an allowance for a delinquent account based upon an
analysis of several factors, including the aging of the account,
historical write-off experience and an analysis of the specific
account. Actual collections of accounts receivable could differ
from our estimates due to macro-economic conditions, changes in
the executive search industry or a specific clients
financial condition.
Recently
Adopted Financial Accounting Standards
In July 2009, the Financial Accounting Standards Board
(FASB) issued the FASB Accounting Standards
Codification (the ASC). The ASC has become the
single source of non-governmental accounting principles
generally accepted in the United States (GAAP)
recognized by the FASB in the preparation of financial
statements. The ASC does not supersede the rules or regulations
of the Securities and Exchange Commission (SEC),
therefore, the rules and interpretive releases of the SEC
continue to be additional sources of GAAP for the Company. The
Company adopted the ASC as of July 5, 2009. The ASC does
not change GAAP and did not have an effect on the Companys
financial position, results of operations or cash flows.
The Financial Accounting Standards Board issued new guidance on
accounting for uncertainty in income taxes. The Company adopted
this new guidance for the year ended December 31, 2009.
Management evaluated the Companys tax position and
concluded that the Company had taken no uncertain tax positions
that require adjustment to the financial statements to comply
with the provisions of this guidance.
34
BUSINESS
Company
Overview
We are a leading provider of retained executive search services
to clients on a global basis. We provide these services through
15 offices in the Americas, Europe and Asia Pacific, as well as
through our six associated offices in Latin America. We help our
clients build stronger leadership teams by facilitating the
recruitment and hiring of C-level executives, other
senior executives and board members. Our retained executive
search services focus on successfully making placements for our
clients in a timely manner. We believe that we are the only
global retained executive search firm to track and publish the
key quality metrics that drive success in our business, and to
have these metrics examined by an independent registered public
accounting firm. These include: (i) placement success rate;
(ii) average days to placement; and (iii) stick rate.
In 2009, our placement success rate was 78% and our average days
to placement was 124. For candidates placed from January 1,
2008 to June 30, 2009 (the most recent period for which our
results have been examined by our independent auditor), our
stick rate was 90%. For purposes of tracking our performance
metrics, we include the performance of our associated offices in
Latin America. We believe that this performance significantly
exceeds the performance of our major competitors. We use a
proprietary search process and proprietary technology and
communication tools to successfully execute our retained
searches. In 2009, we were engaged to perform 962 searches,
including 667 performed directly by us and 295 performed by our
associated offices in Latin America, and we generated net
revenue and operating income of $73.9 and $5.7 million,
respectively. Included in 2009 net revenue is $250,650 in
license fees from our associated offices in Latin America.
We believe that our proven and proprietary retained executive
search process, SearchSigma, differentiates us from our peers.
SearchSigma was developed based on analyzing three years of
detailed client surveys. In our analysis, we identified the
common criteria and timetables our clients expect from a
successful search. We then developed a proprietary search
process to respond accordingly. Based on our findings, we
structured SearchSigma as a workflow process with six distinct
segments and milestones, at 48 hours, 7 days,
14 days, 40 days, 75 days and 100 days,
designed to complete a successful placement within 100 days
of our engagement. SearchSigma also enables our executive search
consultants and our clients to actively monitor the status of
each search and make adjustments to the search process as
necessary. Our focus on the SearchSigma process enhances our
ability to successfully and expeditiously identify and place
candidates with our clients within our stated goal of
100 days from our engagement.
We believe that a high level of communication and process
transparency with our clients is very important to their level
of satisfaction and to the ultimate success of our searches. The
cornerstone of our client communication is our proprietary
system,
ClientNet®.
Through
ClientNet®,
our clients can access password-protected information over the
internet to check the status of their search engagements.
Another important element of our transparency and accountability
is the audit that we offer to conduct at the
40-day
milestone. This key process step is executed by one of our
executive search consultants who is not otherwise involved a
particular search. This executive search consultant contacts the
client to assess the progress of the search and to gather client
feedback along with any suggested refinements to the process. We
have found the
40-day audit
process to be very helpful in ensuring that a search is tracking
as planned and that any necessary adjustments are made early in
the process.
Our organizational structure is designed to provide high
quality, industry-focused executive search services to our
clients worldwide. Our executive search consultants are
dedicated to specific industry verticals and are leading experts
in their given sectors. Our support teams of researchers and
associates are organized by industry practice group in various
geographic locations. We believe that industry specialization
enables us to better understand our clients cultures,
operations, business strategies and industries. Executive search
consultants in our industry practice groups bring an in-depth
understanding of the market conditions and strategic and
management issues faced by clients within their specific
industry. Our five largest industry practice groups are
financial services, professional services, life sciences,
technology/media/telecom and consumer/industrial.
We have a diverse group of clients located throughout the world
and in a variety of industries. From January 1, 2005
through September 30, 2010, we have performed more than
4,400 searches for over 1,400
35
clients, including some of the leading Fortune 1000, FTSE 100,
DAX and CAC 40 companies as well as private equity and
venture capital firms and their portfolio companies. No single
client accounted for more than 5% of our revenue in any of 2009,
2008 or 2007.
Historically, we have been successful in both adding new clients
and generating repeat business from existing clients. We believe
that our disciplined adherence to our proprietary search process
has enabled us to develop a strong and loyal client base. Over
the past three years, approximately 70% of our retained search
engagements came from clients who had previously used our
services. At the conclusion of each search, we solicit client
feedback with a client satisfaction survey. Our surveys provide
us with critical feedback to gauge client satisfaction as well
as feedback that we utilize to continually evaluate and improve
our processes and performance. In 2009, 169 clients completed
client satisfaction surveys, and 96% of such surveys stated that
the client planned to use our services in the future.
We believe that our global presence enables us to more
effectively serve our clients who have operations throughout the
world. We leverage our industry specialization with local
geographic knowledge and contacts to provide clients with
comprehensive executive search services. We have wholly-owned
operations in eight U.S. cities and in seven
non-U.S. locations.
Our wholly-owned
non-U.S. operations
are in Canada, China, France, Hong Kong, Singapore, Switzerland
and the United Kingdom. In addition to our wholly-owned
operations, our associated offices in Latin America are located
in Brazil, Chile, Colombia, Mexico, Peru and Venezuela. In 2009,
we placed candidates in 301 U.S. searches and 409
non-U.S. searches,
of which 186 were executed by our associated offices in Latin
America.
As of September 30, 2010, we had 88 executive search
consultants and 231 other employees, all of whom were full-time
employers, and our associated offices in Latin America had 17
executive search consultants and 57 other employees. Our
principal executive offices are located in New York, New York.
Our corporate, administrative and research functions are located
in our office in Cleveland, Ohio.
History
Our origins date back to 1980 when we were known as
Christian & Timbers. We grew through the late 1990s
with a primary focus on the technology sector. In 2004, Brian M.
Sullivan joined the Company as our chief executive officer.
Prior to joining us, Mr. Sullivan served as Vice Chairman
of Heidrick & Struggles International, which he joined
upon its acquisition of Sullivan & Company, the
financial services-focused executive search firm he founded in
1988.
Mr. Sullivan and our other senior leaders embarked on a
strategy to broaden our recruiting focus from the technology
sector to include all major sectors and global regions. In 2007,
we renamed the Company CTPartners Executive Search LLC to
reflect the firms new and expanding identity. Since 2004,
we have added approximately 66 net new executive search
consultants and 165 other employees and opened eight new
offices. Additionally, beginning in 2007, we have entered into
licensing relationships with our associated offices in Latin
America, expanding our global reach into Brazil, Chile,
Colombia, Mexico, Peru and Venezuela. Our net revenue grew from
$27.0 million in 2004 to $116.6 million in 2007, a
compound annual growth rate of 70%. We believe our 2007 net
revenue of $116.6 million is a good representation of our
ability to scale the business. Due to the global economic
crisis, our net revenue declined 9.4% in 2008 and 30.1% in 2009.
Reflecting the improvement in the global economy and our
continued market penetration, our net revenue grew 70.1% in the
first nine months of 2010 compared to the first nine months of
2009.
Committed to delivering performance, quality and results, we
believe that we are the first executive search firm to represent
a competitive alternative to the large firms that have otherwise
defined the search industry. We pride ourselves on being the
leader in providing transparency and client accountability. This
approach has defined our strategic initiatives and we believe is
the cornerstone of our success.
Executive
Search Industry Overview
The executive search business is highly fragmented, consisting
of several large global firms and several thousand smaller firms
that are generally focused on a specific geographic region or on
a specific
36
vertical sector. We believe our most direct competition comes
from the following five global retained executive search
firms: Egon Zehnder International, Heidrick &
Struggles International (NASDAQ: HSII), Korn/Ferry International
(NYSE: KFY), Russell Reynolds Associates, Inc. and Spencer
Stuart.
Executive search firms are generally separated into two broad
categories: retained search firms and contingency search firms.
Retained search firms generally operate on an exclusive basis
for a specific search and are compensated for their services
regardless of whether they are successful in placing a candidate
with the client. Retained executive search firms typically focus
on C-level and other senior level executive and
board of director positions, and the fee for such services is
typically 33% of the first year total cash compensation for the
position being filled. The fee for a retained executive search
is typically paid in three installments. Contingency executive
search firms are generally not hired on an exclusive basis and
are only compensated upon placing a recommended candidate, and
the fee for such services is typically 25% of the first year
base salary of the position being filled.
We believe that there are a number of positive trends that are
contributing to the growth of the executive search industry.
Some of the more significant trends include:
Increasing Competition for Talent. We believe that there
are two fundamental drivers behind the increasing competition
for senior level executive and board talent. First, as the
baby boom generation retires, there are fewer
qualified candidates available for senior executive and board
positions. Most organizations lack the internal skills necessary
to identify, assess and recruit the best candidates in this
environment. Second, corporate governance changes have reduced
the number of boards on which any one individual can sit, both
by the explicit adoption of policies implementing limits and by
the increase in the amount of time that a director must spend
fulfilling
his/her
obligations. Furthermore, the increased scrutiny that board
members face has reduced the number of individuals willing to
serve as a director of a public company. Thus, companies realize
the need to search externally for executives to fill key
functional or specialty areas.
Corporate Governance Reforms. We believe that companies
have an increased focus on maintaining a high level of
independence in their corporate governance processes. The
significant influence of large institutional shareholders, rise
in shareholder activism and turbulent market conditions have led
to an increased focus on director qualifications and
independence and best practices in the leadership selection
process. Furthermore, public company boards are required to
field independent directors that meet certain qualifications,
such as financial expertise and risk management skills. As a
result of these trends, we believe there is an increased need to
hire external executive search professionals to ensure these key
objectives are met by finding and placing suitable candidates.
Globalization. As businesses increasingly compete on a
global scale, their need for senior executives with specific
skills in various parts of the world also increases. Many
companies do not have the ability to identify and recruit talent
in diverse geographic locations. The process of identifying and
evaluating strong candidates internationally can be time
consuming and difficult due to language barriers and cultural
differences, and as a result companies increasingly rely on
executive search firms to help fill these critical positions.
Greater Need for Diverse Management and Directors. In
response to a rapidly changing and competitive business
environment and increasing regulatory requirements, many
companies are seeking greater diversity of skills, background
and perspective at the senior executive level. Many companies
seek to augment their senior leadership with professionals who
provide unique or differentiated skills and backgrounds. In most
cases, global executive search firms are best positioned to help
companies find these senior executives.
Our Key
Competitive Strengths
We believe our key competitive strengths are:
Intense Focus on the Timely and Successful Completion of
Searches. Our performance-based business philosophy and
incentive compensation structure is designed to focus our
executive search consultants and other employees on successfully
making the placements for which we are retained within our
stated goal of 100 days from engagement. We believe this is
a very important factor in satisfying our clients. That in turn
enables us to win follow-on business from these clients and
further establish our reputation to win business
37
from new clients. Because we consider client satisfaction to be
the leading driver of new engagements, we place an intense focus
on the execution and measurement of our search progress through
our proprietary SearchSigma process. We determine our success
based on how well we deliver for our clients more so than on how
many engagements we receive. We believe that this differentiates
us from most of our competition.
Highly Disciplined, Milestone-Driven Approach to Executing
Searches. We rigorously and consistently apply a detailed,
highly structured process, which we call SearchSigma, to each of
our searches. SearchSigma is a proprietary process we developed
based on analyzing three years of client surveys. Through this
effort, we identified the common criteria and timetables our
clients expect from a successful search. We then developed a
proprietary search process to respond accordingly. Based on our
findings, we structured SearchSigma as a workflow process with
six distinct segments and milestones at
48 hours, 7 days, 14 days, 40 days,
75 days and 100 days designed to complete
a successful placement within 100 days of our engagement.
SearchSigma also enables our executive search consultants and
our clients to actively monitor the status of each search and
make adjustments to the search process as necessary. We believe
that our SearchSigma process, which includes significant ongoing
communication with our clients, enhances our ability to
successfully and expeditiously identify and place candidates.
An Industry Leader in Utilizing Key Performance Metrics to
Manage Our Business. We believe that the execution of an
executive search can and should be measured. Because we know
placement percentage, days to placement and stick-rate
percentage are critically important to clients, we actively
track and publish these factors. Furthermore, we have the
calculation of these metrics examined by our independent
registered public accounting firm, and we publish the data on
our website. Placement percentage is the percentage of total
retained executive searches that result in a placement. Our
placement percentage for 2009 was 78%. Average days to placement
is the average days from our engagement on a search project to
the date of acceptance by the candidate. Our average days to
placement in 2009 was 124 days. In calculating our average
days to placement, we (i) include pick-ups, instances in
which we identify a candidate for one position but the client
hires that candidate for another position, resulting in a single
day to placement, as well as instances in which the client
changes the scope of the engagement after the engagement has
begun, typically resulting in a longer search process and
(ii) exclude hold periods, instances where an engagement is
put on a formal hold as a result of client inactivity or at a
clients request. Lastly, stick rate is the percentage of
candidates placed at a client that remain in the same, similar
or elevated position over the measurement period. For candidates
placed from January 1, 2008 to June 30, 2009 (the most
recent period for which our results have been examined by our
independent registered public accounting firm), our stick rate
was 90%. For purposes of tracking and reporting these
performance metrics, we include the performance of our
associated offices in Latin America. We believe that we are the
only firm in our industry to track and publish these metrics,
and to have these metrics examined by an independent registered
public accounting firm. We believe that our clients value having
such data and that the availability of this data enhances our
ability to both satisfy clients and win new engagements.
High Level of Transparency and Accountability with
Clients. We believe that a high level of communication and
process transparency with our clients is very important to our
clients level of satisfaction and to the ultimate success
of our searches. The cornerstone of our client communication is
our proprietary system,
ClientNet®.
Through
ClientNet®,
our clients can access password-protected information over the
internet to check the status of their search engagements.
ClientNet®
provides an opportunity for clients to access information on
candidates and communicate with the search team. This dynamic
interface enables clients to follow and engage in the search
process in a way not offered by any significant competitor.
Another important element of our transparency and accountability
is the audit that we offer to conduct at the
40-day
milestone for each search. This key step is executed by one of
our executive search consultants who is not otherwise involved
in the particular search. This executive search consultant
contacts the client to assess the progress of the search and to
gather client feedback. We believe the
40-day audit
process is very helpful in ensuring that a search is tracking as
planned and to make any necessary adjustments early in the
process. Our chief executive officer reviews the results of
every 40-day
audit.
38
Finally, at the conclusion of each search, we solicit client
feedback with a client satisfaction survey. Our surveys provide
us with critical feedback to gauge client satisfaction as well
as feedback that we utilize to continually evaluate and improve
our processes and performance.
Global Firm with Deep Domain Expertise. Our approach has
been to build out deep domain expertise in specific industry
verticals. This enables us to quickly understand our
clients businesses and talent needs and identify relevant
candidates. Furthermore, given our focus on retained executive
search and the resulting contact network we have developed, we
often have one-call access to the most qualified candidates. We
are well positioned to serve clients throughout the world
through 21 offices in 13 countries throughout Asia, Europe,
North America and South America. Regardless of client or
executive search consultant location, we field the most relevant
team based on industry expertise.
Organization and Incentives Structured to Drive Collaboration
and Best Outcome for the Client. We have deliberately
developed and maintained a one-firm culture. Our compensation
structure places a significant emphasis on being engaged and
successfully executing searches. Our executive search
consultants are motivated to source the team they believe is
best-suited for each situation and are driven to deliver results
for the client. The compensation of all members of each search
team is affected by the successful placement of each search. We
believe this creates a strong team culture, with all members of
the team aligned around the goal of quickly making a successful
placement.
Our
Growth Strategy
Continue
to Increase our Penetration of Existing Clients
Many of our clients are large, global companies that are
continuously seeking to add talented senior executives to their
management teams. We are focused on serving our clients
needs in all of their geographic locations. Reflecting their
high level of satisfaction with our performance, our clients
have rewarded us with a high level of repeat business. Over the
past three years, approximately 70% of our retained search
engagements came from clients who had previously used our
services. We intend to continue to focus on delivering for our
clients, thereby giving us the opportunity to further expand our
relationships with them.
Continue
to Deepen Expertise in Targeted Industry Practices
We intend to maintain our model of offering deep industry domain
expertise to our clients. Our core strengths are in financial
services, professional services, life sciences,
technology/media/telecom and consumer/industrial. We intend to
continue to add talented executive search consultants to all of
our practice areas. Because of our distinctive SearchSigma
process, culture and compensation structure, we believe that we
are able to attract high-performing executive search
professionals.
Expand
Global Presence
Our firm has significant geographic reach, having made
placements in 38 countries in 2008 and 2009. Driven by the
locations of both clients and recruiting talent, we intend to
open additional offices around the world. We believe that we
have a substantial opportunity to grow as we expand our global
footprint, thereby enhancing our market presence and our
execution capabilities. We have wholly-owned operations in eight
U.S. cities, including our global headquarters in New York,
New York. Our wholly-owned international operations are located
in Canada, China, France, Hong Kong, Singapore, Switzerland and
the United Kingdom. Additionally, we entered into a licensing
relationship with our associated offices in Latin America,
expanding our global reach into Brazil, Chile, Colombia, Mexico,
Peru and Venezuela.
Make
Strategic Targeted Hires and Acquisitions
Our ability to attract and retain executive search consultants
is the key to our success. For this reason, we are focused on
maintaining a distinctive culture, a stimulating work
environment and a compelling, performance-based compensation
structure. We intend to continue to hire new executive search
consultants as demand for our services continues to grow and as
we identify talent in the marketplace. After completion of this
offering, we plan to use our common stock as part of our
compensation program to attract highly qualified
39
executive search consultants. While we continue to focus on
organic growth in revenue and profitability, we recognize the
possibility of expansion opportunities through future
acquisitions.
Expand
Board Placement and Advisory Practice
In May 2009, we hired a team of seasoned board advisory
professionals with a strong track record and extensive
relationships. We expect that increased corporate governance
regulation and an increased focus on board member qualifications
and accountability will drive meaningful growth and demand for
board advisory services. We intend to build out this service
offering to meet rising demand. We also expect this practice
will be a driver of our core executive search business as we
gain access to new clients at the board level.
Our
Services
Retained
Executive Search
Our retained executive search services are used to fill
executive level positions, such as chief executive officers,
chief financial officers, chief operating officers, chief
information officers and other senior executive officers, as
well as board of directors positions. Our executive search
consultants work closely with our clients to identify, assess
and place qualified candidates. Our clients are primarily from
five large industry verticals: financial services, professional
services, life sciences, technology/media/telecom and
consumer/industrial.
Our retained search engagements are typically led by executive
search consultants with vertical market expertise and one-call
access to the most sought-after talent in each market.
Supporting our executive search consultants is a team of
experienced recruiting associates and research professionals,
many with decades of experience utilizing executive search
industry best practices. We work closely with our clients to
understand their business strategy and develop a profile of the
ideal candidate. Once the position is defined, the research team
identifies appropriate individuals through the use of our
proprietary databases and other search media. In addition, the
team consults with its established network of sources to help
identify individuals with the right backgrounds and professional
abilities. Leveraging our network of resources and research
capabilities, we strive to develop an extensive list of
potential candidates, who are then carefully screened through
face-to-face
meetings, phone interviews
and/or video
conferences. The client is then presented with a specified
number of qualified candidates to interview. We conduct
third-party reference checks throughout the process. Our
executive search consultants actively participate in
negotiations until a final offer is made and accepted.
Throughout the process, we maintain ongoing communication with
our client and actively involve them in the process.
In 2009, we utilized our proprietary SearchSigma process to
identify and place 710 candidates, including 186 placements made
by our associated offices in Latin America. Every aspect of our
search process is oriented to achieving the desired outcome of
placing the right individual at the right firm as swiftly and
efficiently as possible. Based on a three-year analysis of
client surveys, we have designed SearchSigma, a workflow process
with six distinct segments and milestones, described in more
detail as follows:
Milestone #1 48 Hours. During the first
48 hours, we develop a strategy that includes
identification of the internal resources and personnel needed in
the search, scoping the necessary geographic reach of the
search, determination of the appropriate title of the position
offered, creating a description of the ideal candidate and the
identification of the top 20 source companies. Identifying the
best internal team is largely based on industry expertise. Once
the team is in place, the lead partner chooses the breadth of
geographic reach based on title and description of position.
Milestone #2 7 Days. After seven days,
we hold a kick-off meeting with the client at which we present
our overarching search strategy, including our research and
recruiting approach, as well as a detailed position description
that embodies the required leadership characteristics. Clients
receive a competitive analysis and an assessment of the market.
With a two-way sharing of information, we begin the process by
identifying the unique priorities, challenges, and opportunities
that characterize a particular clients search assignment.
Milestone #3 14 Days. After
14 days, we hold a
follow-up
meeting with the client to confirm our strategy, present
industry research and provide our view on candidate backgrounds
reviewed to date. At this
40
point we will have typically identified two benchmark candidates
and spoken with at least 20 potential candidates. The client is
asked to approve our strategy at this milestone.
Over the next several weeks, the team consults with its
established network of resources and searches proprietary
databases containing profiles of approximately one million
executives to assist in identifying individuals with the right
background, cultural fit and abilities. An initial list of
candidates is carefully screened through
face-to-face
meetings, phone interviews or video conferences.
Milestone #4 40 Days. After
40 days, we have conferred with at least 50% of the
identified candidates, interviewed at least five prospects and
presented at least three candidates to the client. At this time,
we also offer to conduct our
40-day audit
which provides us with the opportunity to course-correct our
search strategy and target candidate profile, if necessary.
Milestone #5 75 Days. After
75 days, our team has conferred with approximately 90% of
the identified candidates, the client has been presented with
two qualified candidates, and we have secured two alternative
qualified candidates should a final offer not be made or
accepted.
Milestone #6 100 Days. At the
100-day
mark, we have typically successfully identified and placed the
clients ideal candidate. At the conclusion of each search,
we solicit client feedback with a client satisfaction survey.
Our surveys provide us with critical feedback to gauge client
satisfaction as well as feedback that we utilize to continually
evaluate and improve our processes and performance. The survey
findings are used to rank our executive search consultants which
are then reviewed and posted internally and are considered in
making decisions with regard to internal promotions,
illustrating our commitment to exceeding the expectations of our
clients.
Board
Advisory
We approach our board advisory practice with the same rigor,
discipline and processes as we apply to our executive search
services. This includes utilizing an overarching search
strategy, research, regular status reviews, mid-search audit and
a methodology where candidates are identified from a formal
search process. We are generally paid a flat fee for our board
advisory services.
Our board advisory practice is designed to help boards evaluate
the strength and diversity of their board as well as their
overall effectiveness. Many boards are facing growing regulatory
and shareholder pressure to increase their diversity,
independence and expertise. Our in-depth assessments help to
focus directors on these key priorities and to make them aware
of issues that can impact effectiveness. Since establishing this
practice in May 2009 through September 30, 2010, we have
conducted eight board assessments.
To support our board placement and advisory practice, we
established an advisory group comprised of 14 former chief
executive officers and directors currently serving on multiple
boards to provide us with insight and perspectives on board
service, challenges, and best practices. Through this resource,
we obtain independent opinions on candidates track records
from our advisory group. We believe that our advisory group
broadens our access to qualified individuals and ensures an
optimal fit.
Our
Industry-Focused Practice Areas
Our organizational structure is designed to provide high quality
executive search services to our clients worldwide. Our team of
executive search consultants is organized by industry practice
group in various geographic locations. We believe that industry
specialization enables us to better understand our clients
cultures, operations, business strategies and industries and the
respective markets for senior executive candidates. All of our
executive search consultants perform searches for specific
C-level and other senior executives. This includes
chief financial officers, chief information officers, chief
legal officers, chief marketing officers and chief human
resources officers.
We operate our executive search business in five broad industry
practice groups: financial services, professional services, life
sciences, technology/media/telecom and consumer/industrial.
Executive search
41
consultants in our industry practice groups bring an in-depth
understanding of the market conditions and strategic and
management issues faced by clients within their specific
industry. Additionally, our executive search consultants have
established networks of sources which often provide one-call
access to the most sought after talent. The relative sizes of
these industry practice groups, as measured by the percentage of
2009 net revenue and the number of executive search
consultants as of December 31, 2009, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percentage of
|
|
Executive Search
|
Industry Practice
Group
|
|
2009 Net Revenue
|
|
Consultants
|
|
Financial services
|
|
|
43
|
%
|
|
|
32
|
|
Professional services
|
|
|
17
|
|
|
|
13
|
|
Life sciences
|
|
|
18
|
|
|
|
13
|
|
Technology/media/telecom
|
|
|
12
|
|
|
|
14
|
|
Consumer/industrial
|
|
|
10
|
|
|
|
5
|
|
Within each broad industry practice group there are a number of
industry subsectors. For example, within the financial services
practice group our business is diversified among a number of
industry subsectors, including asset and wealth management,
capital markets, financial technology, hedge funds, investment
banking, private equity, commercial banking and insurance.
Executive search consultants from each of these industry
practice groups are located across our various offices. We
believe this operational structure provides our clients with
superior services.
Executive search consultants often focus in one or more
subsectors to provide clients with even deeper market
intelligence and candidate knowledge specific to their industry.
We have international teams that focus on the following
subsectors:
|
|
|
|
|
Association &
Not-for-Profit
|
|
|
|
Cleantech & Alternative Energy
|
|
|
|
Commercial Banking
|
|
|
|
Conservation
|
|
|
|
Federal Consulting, Government Relations & Public
Policy
|
|
|
|
Financial Technology
|
|
|
|
Global Security/Risk Management
|
|
|
|
Inclusion
|
|
|
|
Insurance
|
|
|
|
Legal, Compliance, Regulatory & Governance
|
|
|
|
Legal Services
|
|
|
|
Real Estate
|
|
|
|
Semiconductor
|
Our
Executive Search Consultants and Other Employees
As of September 30, 2010, we had 319 full-time
employees consisting of 88 executive search consultants, 75
associates, 32 researchers and 124 administrative and support
staff, excluding the 74 individuals employed by our associated
offices in Latin America. We believe the high caliber, extensive
experience and motivation of our professionals are critical
factors to our success. We utilize a combination of base salary,
revenue and volume bonuses, discretionary bonuses and equity
compensation to compensate our employees. The average age of our
executive search consultants is 47 years.
Our associates and researchers support the efforts of our
executive search consultants with candidate sourcing and
identification by making initial contact with candidates and
performing other search-related
42
functions. We train our associates and researchers, as well as
new executive search consultants, in the use of our proprietary
retained executive search process and communication systems.
Additionally, we periodically hold training and development
programs for our associates and researchers. As a result of our
strong development culture, we have made a significant number of
internal promotions. Over the past five years, we have promoted
17 associates to executive search consultants. Promotion to
executive search consultant is based on a variety of factors,
including demonstrated superior execution and business
development skills, the ability to identify solutions to complex
issues, personal and professional ethics, a thorough
understanding of the market and the ability to develop and build
effective teams.
We believe we have been able to attract and retain some of the
most productive executive search consultants. Over the past five
years, we have hired 55 executive search consultants with
previous search backgrounds and strong specialty expertise. We
consider relations with our employees to be good.
Clients
We have a diverse group of clients located throughout the world
in a variety of industries. From January 1, 2005 through
September 30, 2010, we have performed more than
4,400 searches for over 1,400 clients, including some
of the leading Fortune 1000, FTSE 100, DAX and CAC
40 companies as well as private equity and venture capital
firms and their portfolio companies. No single client accounted
for more than 5% of our revenue in 2009, 2008 or 2007.
Historically, we have been successful in both adding to our
client base and generating repeat business from existing
clients. We believe that our dedication to successfully
completing our retained searches in a timely and structured
manner has enabled us to develop a strong and loyal client base.
This has resulted in highly recurring revenue from our existing
clients. For example, over the past three years, approximately
70% of our engagements came from clients who had previously used
our services. In 2009, we had 110 clients that retained us to
perform more than one search for them.
Marketing
Our executive search consultants market our executive searches
through targeted client calling, industry networking and various
referral sources. These efforts are assisted by our proprietary
databases which provide our executive search consultants with
real-time information as to contacts made by their colleagues
with particular referral sources, candidates and clients. In
addition, we benefit from a significant number of referrals
generated by our reputation for high quality service and
successfully completing assignments, as well as repeat business
resulting from our ongoing client relationships.
We publicize and build our brand awareness through interviews
with the major business and trade publications and have
periodically utilized television advertisements on syndicated
media outlets such as CNBC. We regularly sponsor speeches and
host presentations before industry and management groups. We
regularly participate in relevant conferences and forums and
leading roundtable discussions on topics of interest. For
example, we host an Annual Institute on director and committee
independence to help enhance the quality of board governance.
Similarly, in 2010 we co-hosted the First Annual Board of
Directors Institute in Human Resources. In addition, we
periodically distribute publications to existing and potential
clients highlighting emerging trends and noteworthy engagements.
Executive search firms frequently are required to refrain from
recruiting employees of a client for a specified period of time,
typically extending for one year from the initiation of the
search assignment. We carefully manage these off-limits
conditions by attempting to limit the scope of any such
agreement.
Research
and Information Management
Our research efforts are maximized through a centralized
research effort based in our office in Cleveland, Ohio. We use
our proprietary database and other available technology to
conduct research focused on identifying targeted candidates
based on client-specific requirements.
43
Research is largely based on our robust, growing proprietary
candidate database. Our database consists of approximately one
million unique candidate profiles. The database connects
pre-screened candidates to client information offering a concise
opportunity for first round due diligence.
A significant value-added benefit of our database is driven by
our dynamic client interface,
ClientNet®,
which enables clients to access candidate-specific details
throughout their placement process.
ClientNet®
captures candidate-specific data over time thus ensuring
continuous search momentum and providing an efficient process
for our clients.
Competition
The executive search industry is highly competitive and
fragmented. Our most direct competition comes from the larger
executive search firms that compete on a global scale, including
Egon Zehnder International, Heidrick & Struggles
International (NASDAQ: HSII), Korn/Ferry International
(NYSE: KFY), Russell Reynolds Associates, Inc. and Spencer
Stuart. We primarily compete with these competitors based upon
our relationships with the key decision-makers, as well as our
reputation for offering a unique value proposition to our
clients. In large part, the genesis of our differentiation is an
intense focus on making timely, successful placements that match
the needs of our clients. To ensure that we are meeting our
clients as well as our expectations, we carefully track our
placement rate, average days to placement and stick rate.
Furthermore, our size and culture enable us to quickly adapt to
current market conditions and demands.
Offices
Our principal executive offices are located in New York, New
York, and our corporate, administrative and research functions
are located in our office in Cleveland, Ohio. Our operations are
based in the following locations:
|
|
|
|
|
U.S. Locations
|
|
Non-U.S. Locations
|
|
Associated Offices
|
|
Boston, MA
|
|
Geneva, Switzerland
|
|
Bogota, Colombia
|
Chicago, IL
|
|
Hong Kong
|
|
Caracas, Venezuela
|
Cleveland, OH
|
|
London, United Kingdom
|
|
Lima, Peru
|
Columbia, MD
|
|
Paris, France
|
|
Mexico City, Mexico
|
Miami, FL
|
|
Shanghai, China
|
|
Santiago, Chile
|
New York, NY
|
|
Singapore
|
|
Sao Paulo, Brazil
|
Redwood Shores, CA
|
|
Toronto, Canada
|
|
|
Washington, DC
|
|
|
|
|
All of our offices are leased. We do not own any real property.
Legal
Proceedings
From time to time we are involved in litigation incidental to
our business. We are currently not party to any litigation, the
adverse resolution of which, in managements opinion, would
be likely to have an adverse effect on our business, financial
condition or results of operations.
44
MANAGEMENT
Executive
Officers and Directors
The following table lists our executive officers and members of
our board of managers as of September 30, 2010. In
connection with this offering, we will convert from a Delaware
limited liability company, managed under the direction of our
board of managers, to a Delaware corporation managed under the
direction of a board of directors. Accordingly, the following
table also lists those individuals who have agreed to join our
board of directors upon completion of this offering. Upon
completion of this offering, we expect that our board of
directors will consist of the following five identified
individuals, four of whom will be independent directors. In the
biographical paragraphs that follow, service with
Christian & Timbers, LLC and CTPartners Executive
Search, LLC is reflected as service with us. Other than as
described below, there are no family relationships between our
managers and executive officers or between our executive
officers and the individuals who have agreed to join our board
of directors upon completion of this offering.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Brian M. Sullivan
|
|
|
57
|
|
|
Chief Executive Officer, Manager and Director
|
David C. Nocifora
|
|
|
51
|
|
|
Chief Operating Officer, Chief Financial Officer, Secretary and
Manager
|
Scott M. Birnbaum
|
|
|
50
|
|
|
Director*
|
Michael C. Feiner
|
|
|
68
|
|
|
Director*
|
Thomas R. Testwuide, Sr.
|
|
|
65
|
|
|
Director*
|
Betsy L. Morgan
|
|
|
42
|
|
|
Director*
|
|
|
|
*
|
|
This individual has agreed to join
the board of directors upon completion of this offering.
|
Brian M. Sullivan has served as our chief executive
officer since joining us in September 2004. Prior to joining us,
Mr. Sullivan served as Vice Chairman of
Heidrick & Struggles International, which he joined
upon its acquisition of Sullivan & Company, the
financial services industry search firm he founded in 1988. In
2008, Mr. Sullivan was named to BusinessWeeks Top 50
List of the Worlds Most Influential Headhunters.
Mr. Sullivan received a B.S. degree from Lehigh University
and a M.B.A. from Denver University. We believe
Mr. Sullivans qualifications to serve on our board of
directors include his knowledge of, and years of leadership
with, the Company and the retained executive search industry.
David C. Nocifora has served as our chief financial
officer since June 1994, and as our chief operating officer
since 2003. Previously, Mr. Nocifora served as
Division Controller for Jaite Packaging, a division of
Sealright Co., Inc., and Accounting Manager for Tremco, a
division of Goodrich Corporation. Mr. Nocifora is a
Certified Public Accountant in the State of Ohio. He received
his B.S. degree in Accounting from Ohio Northern University and
a M.B.A. from Lake Erie College.
Scott M. Birnbaum has agreed to serve as a member of our
board of directors upon completion of this offering. Since May
2010, Mr. Birnbaum has served as an Operating Executive for
Kohlberg & Company, LLC, a leading U.S. private
equity firm which specializes in acquiring middle market
companies. Prior to joining Kohlberg & Company, LLC,
Mr. Birnbaum was the President and Senior Managing Director
of Ameriquest Capital Group, a leading private equity firm
specializing in making investments in companies engaged in
financial and business services, a firm he founded in 2002.
Prior to founding Ameriquest Capital Group, Mr. Birnbaum
was Senior Partner and Practice Leader of Mercer Management
Consulting now known as Oliver Wyman, an international
management consulting firm. We believe Mr. Birnbaums
qualifications to serve on our board of directors include his
extensive experience in the consulting industry and broad
knowledge of the various financial and business models as well
as his knowledge of the capital markets.
Michael C. Feiner has agreed to serve as a member of our
board of directors upon completion of this offering.
Mr. Feiner is the founder of Michael C. Feiner Consulting,
Inc., a consulting firm specializing in advising companies on
human capital strategies, organization development and
leadership effectiveness. He has served as its President since
the firms founding in 1996. Mr. Feiner also serves as
a professor and the Sanford C. Bernstein & Co. Ethics
Fellow for Columbia Business School where he has been teaching
since
45
2003. Mr. Feiner worked for Pepsi-Cola Company from 1975 to
1995. He served as Senior Vice President and Chief People
Officer for Pepsis beverage operations worldwide from 1989
until his retirement in 1995. His book, The Feiner Points of
Leadership: The 50 Basic Laws That Will Make People Want To
Perform Better For You, was selected by the Toronto Globe
and Mail as the Best Business Book of 2004. We believe Mr.
Feiners qualifications to serve on our board of directors
include his extensive experience related to human capital,
organizational development and assessing management
effectiveness.
Thomas R. Testwuide, Sr. has agreed to serve as a
member of our board of directors upon completion of this
offering. Since March 2010, Mr. Testwuide has served as the
Chairman of the Board and Chief Executive Officer of Skana
Aluminum Company, an aluminum products manufacturer in
Manitowoc, Wisconsin. From February 2005 to May 2010,
Mr. Testwuide served as Chairman of the Board and Chief
Executive Officer of Plymouth Foam Incorporated, a leading
manufacturer of rigid and soft foam products for building
insulation and protective packaging applications. Since December
2001, he has served as Chairman of the Board of Torginol, Inc.,
a manufacturer of specialty coating products for seamless
flooring systems and epoxy resin paints. Mr. Testwuide
previously served as Chairman of the Board, Chief Executive
Officer and President of Schreier Malt Company, a malt
production company with operations in the United States, Canada
and China, and which was awarded the Wisconsin Manufacturer of
the Year Grand Award in 1994. We believe
Mr. Testwuides qualifications to serve on our board
of directors include his knowledge and experience gained from
service on the boards of various private companies, and his
leadership roles in managing several global businesses.
Betsy L. Morgan has agreed to serve as a member of our
board of directors upon completion of this offering.
Ms. Morgan currently serves on the National Advisory Board
of The Poynter Institute, a school for journalists and
journalism teachers based in St. Petersburg, Florida, the
Strategic Advisory Board of The Journal Register Company, a
leader in local news and information serving approximately 1,000
communities in ten states, and the Board of Directors of
Vertical Acuity, an Atlanta-based digital media company. From
October 2007 to June 2009, Ms. Morgan served as Chief
Executive Officer of The Huffington Post, a leading news and
opinion website. Prior to joining The Huffington Post,
Ms. Morgan spent approximately 10 years in various
positions at CBS, including serving as Senior Vice President for
CBS Interactive and General Manager of CBSNews.com where she was
in charge of the networks
24-hour
broadband, on-demand news service. In addition to her experience
in the media and communications industry, Ms. Morgan spent
several years in investment banking while working in the media
and entertainment group of Schroders, a global asset management
company. She received her BA in Political Science and Economics
from Colby College and an MBA from the Harvard Business School.
We believe Ms. Morgans qualifications to serve on our
board of directors include her knowledge and experience gained
from service on the boards of various private companies and her
leadership roles in various businesses.
The Board
of Directors
In connection with this offering, we will convert from a
Delaware limited liability company to a C
corporation organized under the laws of the State of Delaware.
From and after our conversion, our certificate of incorporation
and bylaws will provide that our business and affairs will be
managed under the direction of a board of directors, which will
consist of a number of directors to be fixed from time to time
by a resolution of the board. Immediately following the
completion of this offering, we expect that our board of
directors will consist of five directors. Each of our directors
will hold office until a successor has been elected and
qualified or until his or her earlier death, resignation or
removal.
Director
Independence
Under our corporate governance principles, a majority of our
board will consist of independent directors. An
independent director is a director who meets the
NYSE Amex definition of independence and other applicable
independence standards under SEC guidelines as determined by our
board of directors. For a director to be considered independent,
our board of managers must determine that the director does not
have any direct or indirect material relationships with the
Company other than as a director or a shareholder. Our board of
managers has determined that each of Messr. Birnbaum, Feiner and
Testwuide and Ms. Morgan
46
satisfy the independence criteria (including the enhanced
criteria with respect to members of the Audit Committee) set
forth in the applicable NYSE Amex listing standards and SEC
rules.
Committees
of the Board of Directors
Upon completion of this offering, our board of directors will
establish an audit committee, a compensation committee and a
nominating and corporate governance committee, and will adopt
charters providing for the authority, powers and operation of
each such committee. The composition of such committees will be
determined at that time and directors will serve on these
committees until their resignation or until otherwise determined
by our board. The responsibilities of each committee are
described below:
Audit Committee. Upon completion of this offering, we
will have an audit committee that consists of three independent
directors. Each member of the audit committee will be
independent and at least one member will qualify as an
audit committee financial expert as that term is
defined by applicable SEC rules. Our audit committees
responsibilities include:
|
|
|
|
|
Appointing, approving the compensation of, and overseeing the
work of our independent auditor;
|
|
|
|
|
|
Evaluating the qualifications, performance and independence of
our independent auditor;
|
|
|
|
Reviewing the scope of our audit and approving all audit and
non-audit services rendered by our independent auditor;
|
|
|
|
Reviewing our annual and quarterly financial statements with our
management and independent auditor;
|
|
|
|
Reviewing the integrity and accuracy of our financial reporting
processes;
|
|
|
|
Reviewing our internal control policies and procedures;
|
|
|
|
Reviewing and resolving any disagreements between our management
and our independent auditor in connection with our financial
reporting;
|
|
|
|
Reviewing our policies, and discussing with management as
appropriate, relating to financial risk assessment and financial
risk management;
|
|
|
|
Establishing procedures for receiving, retaining and treating
the confidential, anonymous submission by our employees of
concerns regarding questionable accounting or auditing matters;
|
|
|
|
Reviewing and approving all related party transactions involving
us and our directors, executive officers or holders of more than
five percent of our voting securities; and
|
|
|
|
Preparing the audit committee report required by SEC rules.
|
Compensation Committee. Upon completion of this offering,
we will have a compensation committee that will consist of three
directors. Each member of the committee shall be independent, a
non-employee director for purposes of
Rule 16b-3
under the Exchange Act, and an outside director for
purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended. The compensation committees
responsibilities include:
|
|
|
|
|
Approving, overseeing, and evaluating the Companys
compensation policies and programs;
|
|
|
|
Reviewing and approving the compensation of our executive
officers, including our chief executive officer;
|
|
|
|
Overseeing and administering our cash and equity incentive plans;
|
|
|
|
Reviewing and making recommendations to our board of directors
with respect to director compensation; and
|
|
|
|
Preparing such reports on executive compensation that the SEC
requires us to include in our annual proxy statement.
|
47
Nominating and Corporate Governance Committee. Upon
completion of this offering, we will have a nominating and
corporate governance committee that will consist of three
independent directors. This committees responsibilities
will include:
|
|
|
|
|
Identifying individuals qualified to become directors and
committee members;
|
|
|
|
Recommending to our board of directors the persons to be
nominated for election as directors and to each of the
boards committees;
|
|
|
|
Developing and recommending to the board corporate governance
principles; and
|
|
|
|
Overseeing the annual performance review of the board and its
committees.
|
Compensation
Committee Interlocks and Insider Participation
The members of our compensation committee will be appointed
prior to the completion of this offering. No member of our
compensation committee will have been an officer or employee of
the Company during the last fiscal year.
During 2009 and the portion of 2010 prior to this offering,
decisions regarding executive officer compensation were made by
our full board of managers, which was comprised solely of
employees of the Company, including Brian M. Sullivan, our
chief executive officer, and David C. Nocifora, our chief
operating and chief financial officer. All members of our board
of managers participated in deliberations with regard to the
determination of executive compensation except with regard to
their own compensation. None of our executive officers currently
serves, or in the past has served, as a member of the board of
directors or the compensation committee of any entity that has
one or more executive officers serving on our board of
directors. Effective September 1, 2010,
Messrs. Sullivan and Nocifora became the sole members of
our board of managers.
Code of
Ethics
Upon completion of this offering, we will adopt a code of ethics
applicable to our directors, officers, employees, consultants
and contractors. Our code of ethics will be available upon
completion of this offering on our corporate website at
www.ctnet.com. In addition, we intend to post on our
website all disclosures that are required by law or the NYSE
Amex Equities stock exchange listing standards concerning any
amendments to, or any waivers from, any provision of this code.
48
EXECUTIVE
COMPENSATION
General
Our compensation programs are intended to enable us to attract,
motivate, reward and retain the management and executive search
consultants required to achieve our corporate objectives, and
thereby increase stockholder value. Our compensation programs
for executive search consultants and other professionals place a
significant emphasis on the successful engagement and execution
of searches. To accomplish our goals of incentivizing total
company success and making placements for our clients, we
utilize a combination of base salary, revenue and volume bonuses
and equity-based compensation.
Prior to the effective date of this prospectus, our compensation
decisions were made by the executive committee of CTPartners
Executive Search LLC which consisted exclusively of senior-level
employees. Upon the completion of this offering, we will have a
compensation committee comprised of three independent directors.
The compensation committee will be responsible for overseeing,
administering and evaluating our executive compensation programs
and policies. The recommendations of our chief executive officer
will be solicited by the compensation committee with respect to
compensation for our named executive officers other than the
chief executive officer. To date, we have not paid any
consultant to advise the Company regarding compensation matters,
although the compensation committee may elect to do so in the
future.
Our named executive officers are Brian M. Sullivan, our
chief executive officer, and David C. Nocifora, our chief
operating and chief financial officer.
Employment
Agreements
Pursuant to their existing employment agreements, the base
salaries for Messrs. Sullivan and Nocifora, for 2010 are
$400,000 and $450,000 respectively. In addition to base salary,
Mr. Sullivan is eligible to receive a bonus of up to
$1,250,000 based on the operating performance of the Company for
2010, of which $450,000 has been paid to date. Mr. Nocifora
is eligible to receive a bonus of up to $375,000 based on the
operating performance of the Company for 2010, of which $225,000
has been paid to date. Based on the performance of the Company
to date, we expect to pay each of Messrs. Sullivan and
Nocifora the entire amount of their potential bonuses prior to
the effective time of this offering. On September 1, 2010,
we entered into new employment agreements with Mr. Sullivan
and Mr. Nocifora, which will be effective upon the
completion of this offering and will supercede their existing
employment agreements. The material terms and conditions of the
September 1 agreements are summarized below:
Brian M. Sullivans Employment Agreement. Its
principal provisions include the following:
|
|
|
|
|
The term of the agreement is three years;
|
|
|
|
He shall serve as chief executive officer of the Company, and
for so long as he serves as the highest-ranking officer of the
Company, he is to be nominated by the Companys corporate
governance and nominating committee for re-election as a
director;
|
|
|
|
His annual base salary is $750,000;
|
|
|
|
Based upon his achievement of performance measures determined by
the compensation committee, he will be eligible to receive an
annual cash incentive bonus determined by the compensation
committee with a target annual bonus opportunity of between 75%
and 150% of his annual base salary; and
|
|
|
|
The compensation committee shall consider granting him an equity
award under our 2010 equity incentive plan.
|
David C. Nociforas Employment Agreement. Its
principal provisions include the following:
|
|
|
|
|
The term of the agreement is three years;
|
|
|
|
|
|
He shall serve as chief operating officer, chief financial
officer and secretary of the Company;
|
49
|
|
|
|
|
His annual base salary is $500,000;
|
|
|
|
Based upon his achievement of performance measures determined by
the compensation committee, he will be eligible to receive an
annual cash incentive bonus determined by the compensation
committee with a target annual bonus opportunity of between 50%
to 100% of his annual base salary; and
|
|
|
|
The compensation committee shall consider granting him an equity
award under our 2010 equity incentive plan.
|
The employment agreements for Messrs. Sullivan and Nocifora
also provide for compensation in the event of termination of
their employment due to death or disability, without cause, and
by the executive for good reason, and upon a change of control.
In general, these employment agreements contain the following
termination-related provisions:
Termination Due to Death or Disability. Severance
payments equal to any unpaid portion of the executives
accrued base salary, any unpaid accrued bonus from prior years,
and any other unpaid amounts and benefits to which the executive
is entitled as of the termination under any of our compensation
plans and programs.
Termination Without Cause or by the Executive for Good
Reason. Severance payments equal to the executives
base salary for 18 months plus an amount equal to a pro
rata portion of the executives target cash bonus for the
year in which such termination occurs, plus any unpaid bonus
from prior years, and any other unpaid amounts and benefits to
which the executive is entitled as of the termination under any
of our compensation plans and programs.
Severance. Receipt of any severance and benefits upon
termination without cause or for good reason is conditioned on
the executive signing a release and waiver of claims in a form
satisfactory to us.
Non-Competition. Our executive officers are also
generally prohibited from disclosing confidential information
and trade secrets, soliciting any employee, vendor or client for
one year following termination of their employment and working
with or for any competing companies during their employment and
for one year thereafter, except if Messrs. Sullivan or Nocifora
are terminated without cause or terminate for good reason.
Termination upon a Change of Control. Severance payments
are payable upon termination beginning with the date six months
prior to the Change of Control and ending two years after the
Change of Control in an amount equal to the executives
base salary for 18 months plus an amount equal to a pro
rata portion of the executives target cash bonus amount
for the year in which such termination occurs.
Change of Control. Occurs if (i) any person who was
not a stockholder of the Company becomes the direct or indirect
beneficial owner of 30% or more of our voting securities,
(ii) there is a reorganization, merger, consolidation or a
sale of substantially all of the assets of the Company which
would result in our then current shareholders owning less than
50% of our voting securities; (iii) there is a change in
the board of directors such that the individuals who then served
on the board cease to constitute at least a majority of the
board of directors; or (iv) we liquidate, dissolve or sell
substantially all of our assets. In the event that any amount,
right or benefit paid or payable to the executive under his
employment agreement or any other plan, program or arrangement
would constitute an excess parachute payment under
Section 280G of the Code, subject to the excise tax imposed
by Section 4999 of the Code, then the Company shall make a
gross-up
payment equal to any such excise tax, plus any taxes, interest
or penalties arising from the receipt of the
gross-up
payment. In addition, in the event that any payments would cause
the executive to incur a penalty tax under Section 409A of
the Code, then the Company shall make a gross-up payment equal
to any such penalty tax, plus any taxes, interest or penalties
arising from the receipt of the
gross-up
payment.
50
2010
Equity Incentive Plan
General
Set forth below is a summary of our 2010 equity incentive plan
(the 2010 equity incentive plan), which is qualified
in its entirety by the specific language of the 2010 equity
incentive plan, a copy of which is attached as an exhibit to the
registration statement of which this prospectus is a part. The
2010 equity incentive plan will be in effect upon the completion
of this offering.
The purpose of the 2010 equity incentive plan is to promote the
interests of the Company and our stockholders by
(i) attracting, retaining and motivating employees,
non-employee directors and independent contractors (including
prospective employees, non-employee directors and independent
contractors), (ii) motivating such individuals to achieve
long-term Company goals and to further align their interest with
those of the Companys stockholders by providing incentive
compensation opportunities tied to the performance of the common
stock of the Company and (iii) promoting increased
ownership of our common stock by such individuals.
Summary
of the 2010 Equity Incentive Plan
Types of Awards. The 2010 equity incentive plan provides
for the grant of options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code of
1986, as amended (the Code), nonqualified stock
options, stock appreciation rights, restricted stock, restricted
stock unit and performance stock unit awards, stock awards and
other equity-based and equity-related awards.
Plan Administration. The 2010 equity incentive plan will
be administered by the compensation committee of the board of
directors or a subcommittee thereof, or such other committee our
board of directors designates (the Committee).
Subject to the terms of the 2010 equity incentive plan and
applicable law, the Committee has discretion to administer the
2010 equity incentive plan, including, but not limited to, the
authority to (i) grant awards, (ii) to determine the
persons to whom awards are granted, (iii) determine the
type of awards to be granted to a participant,
(iv) determine the number of awards to be granted, the
number of shares of our common stock or cash or other property
to which an award may relate and the date of the awards,
(v) determine the terms, conditions, restrictions and
performance criteria relating to any awards, (vi) determine
whether, to what extent, and under what circumstances awards may
be settled, cancelled, forfeited, exchanged or surrendered,
(vii) construe and interpret the 2010 equity incentive plan
and any award, (viii) proscribe, amend and rescind rules
and regulations with regard to the 2010 equity incentive plan,
(ix) determine the terms and provisions of any agreement
entered into in connection with an award, and (x) make any
other determination deemed necessary or advisable for the
administration of the 2010 equity incentive plan.
Stock Subject to the Plan. Subject to adjustment for
changes in capitalization, the maximum aggregate number of
shares of our common stock that may be delivered pursuant to
awards granted under the 2010 equity incentive plan is 1,000,000
(the Plan Share Limit). Shares of our common stock
that are issued in an award shall again become available for
awards under the following circumstances:
|
|
|
|
|
any shares subject to an award that remain unissued upon the
cancellation, surrender, exchange or termination of such award
without having been exercised or settled;
|
|
|
|
any shares subject to an award that are retained by the Company
as payment of the exercise price or tax withholding obligations
with respect to an award;
|
|
|
|
a number of shares equal to the number of previously owned
shares of common stock surrendered to the Company as payment of
the exercise price of an option or to satisfy tax withholding
obligations with respect to an award;
|
|
|
|
|
|
to the extent an award is paid or settled in cash, a number of
shares with respect to such payment or settlement; and
|
51
|
|
|
|
|
in the event of the exercise of a stock appreciation right
granted in relation to an option, a number of shares equal to
the excess of the number of shares subject to the stock
appreciation right over the number of shares delivered upon the
exercise of the stock appreciation right.
|
Changes in Capitalization. In the event of any stock
dividend or extraordinary dividend or other distribution is
declared (whether in the form of cash, shares of common stock or
other property), or there occurs any recapitalization, stock
split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange
or other similar corporate transaction or event, the Committee
will make equitable adjustments and other substitutions to
awards under the 2010 equity incentive plan in the manner it
determines to be appropriate or desirable.
Source of Shares. Any shares issued under the 2010 equity
incentive plan consist, in whole or in part, of authorized and
unissued shares of common stock or of treasury shares.
Eligible Participants. Any employees of the Company
(including officers of the Company, whether or not they are
directors of the Company), independent contractors to the
Company and non-employee directors of the Company are eligible
to receive awards under the 2010 equity incentive plan.
Termination of Employment or Service. Unless otherwise
determined by the Committee:
|
|
|
|
|
in the event that the employment of a participant with the
Company, or the service of a non-employee to the Company,
terminates for any reason other than cause, death, disability or
retirement, then:
|
|
|
|
|
|
each vested award shall remain exercisable for
45 days; and
|
|
|
|
|
|
each non-vested award shall terminate at the time of such
termination.
|
|
|
|
|
|
in the event that the employment of a participant with the
Company, or the service of a non-employee to the Company,
terminates as a result of death, disability or retirement, the
treatment of each outstanding award shall be determined by the
Committee in its sole discretion; and
|
|
|
|
|
|
in the event that the employment of a participant with the
Company, or the service of a non-employee to the Company,
terminates for cause, then each outstanding award, whether or
not exercisable, shall terminate as of the time of such
termination.
|
Performance Based Compensation. The Committee may make
awards hereunder to certain employees that are intended to
qualify as performance-based compensation under
Section 162(m) of the Code. The exercisability
and/or
payment of such awards may be subject to the achievement of
performance goals and to certification of such achievement in
writing by the Committee. Such performance goals shall be
established in writing by the Committee not later than the time
period prescribed under Section 162(m). All provisions of
such Awards which are intended to qualify as performance-based
compensation will be construed in a manner to so comply.
Amendment and Termination. Subject to (i) any
applicable law or government regulation, (ii) any
requirement that must be satisfied if the 2010 equity incentive
plan were intended to be a stockholder approved plan for
purposes of Section 162(m) of the Code and (iii) the
rules of the NYSE Amex Equities stock exchange, our board of
directors may, at any time, suspend or terminate the 2010 equity
incentive plan or revise or amend it in any respect whatsoever
without the approval of our stockholders, provided that
stockholder approval shall be required to increase the Plan
Share Limit.
Term. Unless earlier terminated by our board of
directors, the right to grant awards under the 2010 equity
incentive plan shall terminate on the day last preceding the
tenth anniversary of the effectiveness of the 2010 equity
incentive plan.
Performance
Unit Plan
CTPartners Executive Search LLC had a performance unit plan
which will be terminated prior to the effectiveness of the
registration statement of which this prospectus is a part. The
performance unit plan worked much like a stock appreciation
rights plan, in that units were granted to participants with a
value equal to the
52
value of CTPartners Executive Search LLCs member units at
the date of grant and were cashed out at a price equal to the
spread between the value of CTPartners Executive Search
LLCs member units at the time of exercise and their date
of grant value. Therefore, the participant only received the
increase in value from the date of grant to the date of
exercise. We will use a portion of the proceeds of this offering
to pay out the value of the performance units granted pursuant
to this plan, which will include a payment, based on the assumed
initial public offering price of $13.00 per share of our common
stock, which is the midpoint of the price range listed on the
front cover page of this prospectus, of approximately $207,679
to Mr. Sullivan and a payment of approximately $197,602 to Mr.
Nocifora. The pay out value of each performance unit is equal to
the difference between the initial public offering price of our
common stock and the date of grant value of each performance
unit on an as-converted basis. In 2009, the named executive
officers received the following grants of performance units:
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Units
|
|
Grant Price
|
|
Brian M. Sullivan
|
|
|
3,770
|
|
|
$
|
35.00
|
|
David C. Nocifora
|
|
|
2,980
|
|
|
$
|
35.00
|
|
Retirement
Plans
The Company sponsors a noncontributory defined benefit cash
balance plan which covers our U.S. employees, including our
named executive officers, who meet certain eligibility
requirements. Participants accrued benefits are based on
account balances which are maintained for each individual and
are credited with additions equal to a percentage of
compensation as defined in the plan. Participants balances
are also credited with interest in accordance with the plan. The
plan was frozen effective December 31, 2008 and no benefit
accruals were made in 2009 nor will future benefit accruals be
earned by participants.
The Company also sponsors a defined contribution plan whereby
our U.S. employees, including our named executive officers,
meeting the Plans eligibility requirements may elect to
defer a portion of their compensation. The maximum allowable
employee deferral is adjusted each year subject to certain
limitations. The Company has no obligation to make any
contributions to this plan. In addition, the Company also
sponsors a qualified defined contribution discretionary profit
sharing plan which covers U.S. employees meeting certain
eligibility requirements. Neither Mr. Sullivan nor
Mr. Nocifora received any benefits under either of these
plans in 2009.
Perquisites
and other Personal Benefits
We provide our executives with the same benefits that are
provided to all employees generally, including medical, dental
and vision benefits, group term life insurance, and
participation in the Companys global pension schemes.
Summary
Compensation Table
The following table sets forth information with respect to our
chief executive officer and chief operating and chief financial
officer, the only two persons who were serving as executive
officers of the Company at the end of our last fiscal year,
ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and Principal
|
|
|
|
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Position
|
|
Year
|
|
Salary(1)
|
|
($)
|
|
($)(4)
|
|
($)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
($)
|
|
Brian M. Sullivan,
|
|
|
2009
|
|
|
$
|
282,500
|
|
|
$
|
150,000(2
|
)
|
|
$
|
131,950
|
|
|
$
|
|
|
|
$
|
0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
564,450
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Nocifora,
|
|
|
2009
|
|
|
$
|
282,500
|
|
|
$
|
75,000(3
|
)
|
|
$
|
104,300
|
|
|
$
|
|
|
|
$
|
0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
461,800
|
|
Chief Operating and Financial Officer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Salary includes
contributions to our 401(k) Plan for Messrs. Sullivan and
Nocifora of $22,000 and $14,125, respectively.
|
53
|
|
|
(2) |
|
Mr. Sullivan was entitled to
receive, pursuant to the terms of his then-effective employment
agreement with the Company, a base salary of $400,000 and bonus
of $1,100,000 in 2009, but voluntarily agreed to reduce his base
salary to $282,500 and bonus to $150,000 for 2009 in connection
with the Companys cost-saving initiatives.
|
|
(3) |
|
Mr. Nocifora was entitled to
receive, pursuant to the terms of his then-effective employment
agreement with the Company, a base salary of $450,000 and bonus
of $300,000 in 2009, but voluntarily agreed to reduce his base
salary to $282,500 and bonus to $75,000 for 2009 in connection
with the Companys cost-saving initiatives.
|
|
(4) |
|
The amounts shown in this column
reflect the fair value of performance units granted in 2009 at
their respective grant dates. We describe the valuation
assumptions used in measuring the fair value of these
performance units in Note 6 of our audited consolidated
financial statements included herein.
|
Outstanding
Equity Awards at December 31, 2009
As of the period ended December 31, 2009, the following
named executive officers had the following unvested performance
units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market
|
|
|
|
|
Equity
|
|
Equity
|
|
|
|
|
|
|
|
Market
|
|
Awards:
|
|
or Payout
|
|
|
|
|
Incentive
|
|
Incentive
|
|
|
|
|
|
|
|
Value
|
|
Number of
|
|
Value of
|
|
|
|
|
Plan
|
|
Plan
|
|
|
|
|
|
|
|
of
|
|
Unearned
|
|
Unearned
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
|
|
Number of
|
|
Shares of
|
|
Shares,
|
|
Shares,
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Units of
|
|
Units or
|
|
Units or
|
|
|
Number of
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Stock
|
|
Other
|
|
Other
|
|
|
Securities
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Stock
|
|
that
|
|
Rights
|
|
Rights
|
|
|
Underlying
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
that
|
|
Have
|
|
that have
|
|
that
|
|
|
Unexercised
|
|
Unearned
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
have not
|
|
Not
|
|
not
|
|
have not
|
Name
|
|
Options
|
|
Options
|
|
Options
|
|
Price
|
|
Date
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested(4)
|
|
Brian M. Sullivan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,737
|
(1)(3)
|
|
$
|
0(5
|
)
|
David C. Nocifora
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,314
|
(2)(3)
|
|
$
|
0(6
|
)
|
|
|
|
(1) |
|
1,257 of these performance units
vested on June 30, 2010; 967 of these performance units vest on
December 31, 2010; 1,257 of these performance units vest on
June 30, 2011; 1,256 of these performance units vest on
June 30, 2012.
|
|
|
|
(2) |
|
993 of these performance units
vested on June 30, 2010; 1,334 of these performance units vest
on December 31, 2010; 993 of these performance units vest
on June 30, 2011; 994 of these performance units vest on
June 30, 2012.
|
|
|
|
(3) |
|
These performance units will be
cashed out in connection with this offering. See
Performance Unit Plan.
|
|
|
|
(4) |
|
There was no market for our
performance units as of December 31, 2009. The payout value
was determined by subtracting the grant date value of the
performance units from the value of the performance units as of
December 31, 2009. In both instances, the performance units
were valued pursuant to the performance unit plan in accordance
with a valuation model based on our
12-months
trailing performance. See Note 6 of our audited
consolidated financial statements included herein.
|
|
|
|
(5) |
|
We will, in connection with the
termination of our performance unit plan, use a portion of the
proceeds of this offering to pay out the current value of these
performance units, resulting in a payment, based on the assumed
initial public offering price of $13.00 per share of our common
stock, which is the midpoint of the price range listed on the
front cover page of this prospectus, of approximately $140,755
to Mr. Sullivan.
|
|
|
|
(6) |
|
We will, in connection with the
termination of our performance unit plan, use a portion of the
proceeds of this offering to pay out the current value of these
performance units, resulting in a payment, based on the assumed
initial public offering price of $13.00 per share of our common
stock, which is the midpoint of the price range listed on the
front cover page of this prospectus, of approximately $119,754
to Mr. Nocifora.
|
Director
Compensation
During fiscal 2009, none of the members of our board of managers
received any compensation in his capacity as a member of the
board of managers.
Prior to the completion of this offering, we intend to adopt a
director compensation plan to compensate our directors who are
not our employees. Under this policy, each such director will
receive an annual retainer of $40,000 payable as follows:
(i) $20,000 ($5,000 per quarter) in cash and
(ii) $20,000 in restricted stock units granted under our
2010 equity incentive plan. The restricted stock units will vest
on the first anniversary of their date of grant. In addition,
the chairman of each of the audit committee, the compensation
committee and the nominating and corporate governance committee
will receive an annual cash retainer of $10,000, $7,500 and
$7,500, respectively, payable at the end of each quarter.
Members of the audit committee, compensation committee and
nominating and corporate governance committee will each receive
$2,500, $1,000 and $1,000, respectively. We will reimburse the
reasonable expenses our non-employee directors incur in
connection with attending board and committee meetings.
54
PRINCIPAL AND
SELLING STOCKHOLDERS
The following table sets forth, as of November 14, 2010,
information concerning the beneficial ownership of our common
stock prior to this offering, after giving effect to the
conversion of our outstanding member units to shares of common
stock at a ratio of 1:5.269 and after giving effect to this
offering by:
|
|
|
|
|
each selling stockholder;
|
|
|
|
each holder of more than 5% of our common stock;
|
|
|
|
each of our named executive officers;
|
|
|
|
each of our directors; and
|
|
|
|
all of our directors and named executive officers as a group.
|
Beneficial ownership is determined in accordance with the rules
of the SEC and thus represents voting or investment power with
respect to our common stock. Unless otherwise indicated below,
to our knowledge, the persons and entities named in the table
have sole voting and sole investment power with respect to all
shares beneficially owned and subject to applicable community
property laws. Shares of our common stock subject to options or
warrants that are currently exercisable or exercisable within
60 days of November 14, 2010 are deemed to be
outstanding and to be beneficially owned by the persons holding
the options or warrants for the purpose of computing the
percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage
ownership of any other person.
Beneficial ownership is based upon 941,690 of our member units
outstanding as of November 14, 2010, and assumes the
conversion of such units to shares of common stock at a ratio of
1:5.269. Unless otherwise noted, the address of each stockholder
is
c/o CTPartners
Executive Search Inc., 1166 Avenue of the Americas,
3rd Floor, New York, NY 10036.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially
|
|
|
|
|
|
Shares Being
|
|
|
Shares Beneficially
|
|
|
|
|
|
|
Owned Prior to this
|
|
|
|
|
|
Offered In this
|
|
|
Owned After this
|
|
|
|
|
Name of Beneficial
Owner
|
|
Offering(1)(2)
|
|
|
Percent
|
|
|
Offering
|
|
|
Offering
|
|
|
Percent
|
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian M.
Sullivan(3)
|
|
|
1,311,338
|
|
|
|
26.4
|
%
|
|
|
131,134
|
|
|
|
1,180,207
|
|
|
|
17.3
|
%
|
David C.
Nocifora(4)
|
|
|
262,279
|
|
|
|
5.3
|
%
|
|
|
26,228
|
|
|
|
236,051
|
|
|
|
3.5
|
%
|
Scott M.
Birnbaum**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C.
Feiner**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Testwuide,
Sr.**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Betsy L.
Morgan**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All named directors and executive officers as a group
(6 persons)
|
|
|
1,573,617
|
|
|
|
31.7
|
%
|
|
|
157,362
|
|
|
|
1,416,258
|
|
|
|
20.8
|
%
|
5% or Greater Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Kohn
|
|
|
722,132
|
|
|
|
14.6
|
%
|
|
|
72,214
|
|
|
|
649,918
|
|
|
|
9.5
|
%
|
Burke St.
John(5)
|
|
|
442,735
|
|
|
|
8.9
|
%
|
|
|
44,279
|
|
|
|
398,456
|
|
|
|
5.8
|
%
|
William Houchins
|
|
|
377,065
|
|
|
|
7.6
|
%
|
|
|
37,709
|
|
|
|
339,356
|
|
|
|
5.0
|
%
|
Brendan Burnett
|
|
|
303,255
|
|
|
|
6.1
|
%
|
|
|
30,327
|
|
|
|
272,928
|
|
|
|
4.0
|
%
|
Umesh Ramakrishnan
|
|
|
261,178
|
|
|
|
5.3
|
%
|
|
|
26,117
|
|
|
|
235,061
|
|
|
|
3.4
|
%
|
Other Selling Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JECOSP, LP
|
|
|
32,287
|
|
|
|
|
*
|
|
|
3,230
|
|
|
|
29,057
|
|
|
|
|
*
|
Jeffrey E. Christian Family Trust
|
|
|
64,580
|
|
|
|
1.3
|
%
|
|
|
6,460
|
|
|
|
58,120
|
|
|
|
|
*
|
Sylvain Dhenin
|
|
|
66,044
|
|
|
|
1.3
|
%
|
|
|
6,607
|
|
|
|
59,437
|
|
|
|
|
*
|
Pete
Metzger(6)
|
|
|
67,551
|
|
|
|
1.4
|
%
|
|
|
6,755
|
|
|
|
60,796
|
|
|
|
|
*
|
Keith Macomber
|
|
|
60,907
|
|
|
|
1.2
|
%
|
|
|
6,091
|
|
|
|
54,816
|
|
|
|
|
*
|
Dierdre
Kenny(7)
|
|
|
63,388
|
|
|
|
1.3
|
%
|
|
|
6,338
|
|
|
|
57,050
|
|
|
|
|
*
|
Diane Segalen
|
|
|
55,506
|
|
|
|
1.1
|
%
|
|
|
5,553
|
|
|
|
49,953
|
|
|
|
|
*
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially
|
|
|
|
|
|
Shares Being
|
|
|
Shares Beneficially
|
|
|
|
|
|
|
Owned Prior to this
|
|
|
|
|
|
Offered In this
|
|
|
Owned After this
|
|
|
|
|
Name of Beneficial
Owner
|
|
Offering(1)(2)
|
|
|
Percent
|
|
|
Offering
|
|
|
Offering
|
|
|
Percent
|
|
|
Alex Eymieu
|
|
|
44,784
|
|
|
|
|
*
|
|
|
4,478
|
|
|
|
40,306
|
|
|
|
|
*
|
Robert Voth
|
|
|
33,931
|
|
|
|
|
*
|
|
|
3,393
|
|
|
|
30,538
|
|
|
|
|
*
|
Helga Long
|
|
|
27,767
|
|
|
|
|
*
|
|
|
2,777
|
|
|
|
24,990
|
|
|
|
|
*
|
David Burton
|
|
|
26,343
|
|
|
|
|
*
|
|
|
2,634
|
|
|
|
23,709
|
|
|
|
|
*
|
Florence Magne
|
|
|
26,343
|
|
|
|
|
*
|
|
|
2,634
|
|
|
|
23,709
|
|
|
|
|
*
|
Ernest Brittingham
|
|
|
18,124
|
|
|
|
|
*
|
|
|
1,812
|
|
|
|
16,312
|
|
|
|
|
*
|
Dennis Grant
|
|
|
18,124
|
|
|
|
|
*
|
|
|
1,812
|
|
|
|
16,312
|
|
|
|
|
*
|
David Merwin
|
|
|
18,124
|
|
|
|
|
*
|
|
|
1,812
|
|
|
|
16,312
|
|
|
|
|
*
|
Alain Leclerc
|
|
|
14,921
|
|
|
|
|
*
|
|
|
1,491
|
|
|
|
13,430
|
|
|
|
|
*
|
Martin Mendelsohn
|
|
|
14,921
|
|
|
|
|
*
|
|
|
1,491
|
|
|
|
13,430
|
|
|
|
|
*
|
Chris Seabourne
|
|
|
5,269
|
|
|
|
|
*
|
|
|
527
|
|
|
|
4,742
|
|
|
|
|
*
|
John Higgins
|
|
|
14,911
|
|
|
|
|
*
|
|
|
1,491
|
|
|
|
13,420
|
|
|
|
|
*
|
Kathryn Yap
|
|
|
13,172
|
|
|
|
|
*
|
|
|
1,317
|
|
|
|
11,855
|
|
|
|
|
*
|
Dona Roche-Tarry
|
|
|
6,148
|
|
|
|
|
*
|
|
|
616
|
|
|
|
5,532
|
|
|
|
|
*
|
Hamish Shaw
|
|
|
6,148
|
|
|
|
|
*
|
|
|
616
|
|
|
|
5,532
|
|
|
|
|
*
|
Loran Kaminsky
|
|
|
5,269
|
|
|
|
|
*
|
|
|
527
|
|
|
|
4,742
|
|
|
|
|
*
|
|
|
|
*
|
|
Less than 1%.
|
|
**
|
|
This individual has agreed to join
the board of directors upon completion of this offering.
|
|
(1) |
|
The number and percentage of shares
beneficially owned is determined in accordance with
Rule 13d-3
of the Exchange Act, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under
such rule, beneficial ownership includes any shares as to which
the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to
acquire within 60 days of November 14, 2010 through
the exercise of any option, warrant or other right. Unless
otherwise indicated below, each person has sole voting power or
investment power, or both, with respect to the shares shown as
beneficially owned.
|
|
(2) |
|
Assumes conversion of each of our
outstanding member units to shares of common stock at a ratio of
1:5.269.
|
|
|
|
(3) |
|
Includes (a) 1,224,746 shares
of common stock held by Revenant, Inc., which is wholly-owned by
Mr. Sullivan and (b) 57,132 shares of common stock
issuable to Mr. Sullivan in connection with the conversion
of his convertible promissory note with the Company described in
greater detail under Certain Relationships and Related
Party Transactions.
|
|
|
|
(4) |
|
Includes 2,613 shares of
common stock issuable to Mr. Nocifora in connection with
the conversion of his convertible promissory note with the
Company described in greater detail under Certain
Relationships and Related Party Transactions.
|
|
|
|
(5) |
|
Includes 388,936 shares of common
stock held by LBS Group Inc., which is wholly-owned by
Mr. St. John.
|
|
|
|
(6) |
|
Includes 2,613 shares of
common stock issuable to Mr. Metzger in connection with the
conversion of his convertible promissory note with the Company
described in greater detail under Certain Relationships
and Related Party Transactions.
|
|
|
|
(7) |
|
Includes 2,613 shares of
common stock issuable to Ms. Kenny in connection with the
conversion of her convertible promissory note with the Company
described in greater detail under Certain Relationships
and Related Party Transactions.
|
56
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On June 16, 2008, we entered into identical convertible
promissory notes with certain of our employees pursuant to which
we raised an aggregate of $2.7 million including a note
with Mr. Sullivan, our chief executive officer, in the
amount of $1,000,000 and a note with Mr. Nocifora, our
chief operating and chief financial officer, in the amount of
$25,000. We have the right to prepay the notes at any time. The
notes, of which an aggregate of $1.6 million is currently
outstanding, pay interest, on a quarterly basis, at a fixed rate
of 5% per annum and are due and payable on June 16, 2013.
Prior to the effectiveness of the registration statement of
which this prospectus is a part, we have entered into a note
prepayment and conversion agreement with each holder pursuant to
which each holder had the option to be repaid in full, to be
repaid in part in cash and to convert the remaining balance of
the note to shares of common stock or to convert the entire
outstanding balance of the note to shares of common stock. We
will use a portion of the proceeds of this offering to prepay
any portion of the outstanding balance of the notes to holders
electing to be repaid in cash. Upon conversion, each holder will
receive a number of shares of common stock obtained by (i)
dividing the amount to be converted by $50.41 (the agreed upon
value, for purposes of converting the notes, of a member unit)
and (ii) multiplying this number by 5.269 (the conversion ratio
by which our member units will convert to shares of common
stock). Pursuant to his note prepayment and conversion agreement
with the Company, Mr. Sullivan will receive (i) a cash
payment of $453,400 and (ii) 57,132 shares of common
stock. Pursuant to his note prepayment and conversion agreement
with the Company, Mr. Nocifora will receive
2,613 shares of common stock.
CTPartners Executive Search LLC had a performance unit plan
which was terminated prior to the effectiveness of the
registration statement of which this prospectus is a part. The
performance unit plan worked much like a stock appreciation
rights plan, in that units were granted to participants with a
value equal to the value of CTPartners Executive Search
LLCs member units at the date of grant and were cashed out
at a price equal to the spread between the value of CTPartners
Executive Search LLCs member units at the time of exercise
and their date of grant value. Therefore, the participant only
received the increase in value from the date of grant to the
date of exercise. Mr. Sullivan, our chief executive
officer, was granted a total of 7,670 units under the plan
and Mr. Nocifora, our chief operating and chief financial
officer, was granted a total of 7,980 units under this
plan. We will use a portion of the proceeds of this offering to
pay out the value of all performance units in accordance with
the terms of the performance unit plan, which will include a
payment, based on the assumed initial public offering price of
$13.00 per share of our common stock, which is the midpoint of
the price range listed on the front cover page of this
prospectus, of approximately $207,679 to Mr. Sullivan and a
payment of approximately $197,602 to Mr. Nocifora.
57
DESCRIPTION OF
CAPITAL STOCK
The following description of our capital stock is intended as
a summary only and is qualified in its entirety by reference to
our certificate of incorporation and bylaws to be in effect at
the closing of this offering, which are filed as exhibits to the
registration statement of which this prospectus forms a part,
and to the applicable provisions of the Delaware General
Corporation Law (DGCL).
General
Upon completion of this offering, our authorized capital stock
will consist of 30,000,000 shares of common stock, par
value $0.001 per share, and 1,000,000 shares of preferred
stock, par value $0.001 per share, the rights and preferences of
which may be established from time to time by our board of
directors.
As of November 14, 2010, we had (assuming the conversion of
each of our outstanding member units to shares of common stock
at a ratio of 1:5.269 and the conversion of certain convertible
promissory notes with Executive Search Consultants) issued and
outstanding 4,961,549 shares of common stocks held by
57 holders of record. Additionally, up to
250,830 shares of common stock that will be issued upon the
vesting (108,784 shares of common stock will vest in 2011,
103,946 shares of common stock will vest in 2012 and 38,100
shares of common stock will vest in 2013) of certain grants made
in connection with the employment of certain executive search
consultants.
The following description summarizes the terms of our capital
stock. Because it is only a summary, it does not contain all the
information that may be important to you. For a complete
description, you should refer to our certificate of
incorporation and bylaws, as in effect immediately following the
closing of this offering, copies of which have been filed as
exhibits to the registration statement of which this prospectus
is a part.
Common
Stock
Assuming the automatic conversion of all of our member units for
our common stock immediately prior to the closing of this
offering, there will be 6,830,769 shares of our common
stock outstanding upon the closing of this offering.
Additionally, up to 250,830 shares of common stock will be
issued upon the vesting (108,784 shares of common stock will
vest in 2011, 103,946 shares of common stock will vest in 2012
and 38,100 shares of common stock will vest in 2013) of certain
grants made in connection with the employment of certain
executive search consultants.
Holders of our common stock will be entitled to one vote for
each share held of record on all matters submitted to a vote of
the stockholders. Holders of our common stock will not have any
cumulative voting rights in the election of our directors.
Except as required by law or our certificate of incorporation
and bylaws, the vote of a majority of the shares represented in
person or by proxy at any meeting at which a quorum is present
will be sufficient for the transaction of any business at a
meeting. Subject to preferences held by, or that may be granted
to, any outstanding shares of preferred stock, holders of our
common stock are entitled to receive ratably any dividends
declared by our board of directors out of funds legally
available for that purpose. Our common stock will have no
preemptive rights, conversion rights or other subscription
rights or redemption or sinking fund provisions.
In the event of our liquidation, dissolution or winding up,
holders of our common stock will be entitled to share ratably in
all assets remaining after payment of all debts and other
liabilities and any liquidation preference of any outstanding
preferred stock. The shares to be issued by us in this offering
will be, when issued and paid for, validly issued, fully paid
and non-assessable.
Preferred
Stock
Our board of directors will be authorized, subject to any
limitations prescribed by law, without stockholder approval, to
issue from time to time up to an aggregate of
1,000,000 shares of preferred stock, in one or more series,
each series to have such rights and preferences, including
voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences as our board of directors
determines. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of
58
holders of any preferred stock that may be issued in the future.
Issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of our
outstanding voting stock. We currently have no shares of
preferred stock outstanding and we have no present plans to
issue any shares of preferred stock.
Anti-Takeover
Effects of our Certificate of Incorporation and Bylaws
The provisions of Delaware law, our certificate of incorporation
and our bylaws described below may have the effect of delaying,
deferring or preventing another party from acquiring control of
us and encouraging persons considering unsolicited tender offers
or other unilateral takeover proposals to negotiate with our
board of directors rather than pursue non-negotiated takeover
attempts. These provisions include the items described below.
Board Composition and Filling Vacancies. Our board of
directors will be elected annually to serve until the next
annual meeting of stockholders. Our certificate of incorporation
provides that directors may be removed only for cause and then
only by the affirmative vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
Furthermore, any vacancy on our board of directors, however
occurring, including a vacancy resulting from an increase in the
size of our board, may only be filled by the affirmative vote of
a majority of our directors then in office even if less than a
quorum. The limitations on removal of directors and treatment of
vacancies has the effect of making it more difficult for
stockholders to change the composition of our board of directors.
No Written Consent of Stockholders. Our certificate of
incorporation provides that all stockholder actions are required
to be taken by a vote of the stockholders at an annual or
special meeting, and that stockholders may not take any action
by written consent in lieu of a meeting. This limit may lengthen
the amount of time required to take stockholder actions and
would prevent the amendment of our bylaws or removal of
directors by our stockholders without holding a meeting of
stockholders.
Meetings of Stockholders. Our certificate of
incorporation and bylaws provide that only a majority of the
members of our board of directors then in office and our
Chairman of the Board and Chief Executive Officer may call
special meetings of stockholders and only those matters set
forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders. Our bylaws
limit the business that may be conducted at an annual meeting of
stockholders to those matters properly brought before the
meeting.
Advance Notice Requirements. Our bylaws establish advance
notice procedures with regard to stockholder proposals relating
to the nomination of candidates for election as directors or new
business to be brought before meetings of our stockholders.
These procedures provide that notice of stockholder proposals
must be timely given in writing to our corporate secretary prior
to the meeting at which the action is to be taken. Generally, to
be timely, notice must be received at our principal executive
offices not less than 90 days nor more than 120 days
prior to the first anniversary date of the Companys proxy
statement for the preceding year. Our bylaws specify the
requirements as to form and content of all stockholders
notices. These requirements may preclude stockholders from
bringing matters before the stockholders at an annual or special
meeting.
Amendment to Certificate of Incorporation and Bylaws. As
required by the Delaware General Corporation Law, any amendment
of our certificate of incorporation must first be approved by a
majority of our board of directors, and if required by law or
our certificate of incorporation, must thereafter be approved by
a majority of the outstanding shares entitled to vote on the
amendment and a majority of the outstanding shares of each class
entitled to vote thereon as a class, except that the amendment
of the provisions relating to the issuance of undesignated
preferred stock, the amendment of our bylaws, removal of
directors, stockholder action, and the amendment of our
certificate of incorporation must be approved by not less than
75% of the outstanding shares entitled to vote on the amendment,
and not less than 75% of the outstanding shares of each class
entitled to vote thereon as a class. Our bylaws may be amended
by the affirmative vote of a majority of the directors then in
office, subject to any limitations set forth in the bylaws; and
may also be amended by the
59
affirmative vote of at least 75% of the outstanding shares
entitled to vote on the amendment, or, if our board of directors
recommends that the stockholders approve the amendment, by the
affirmative vote of the majority of the outstanding shares
entitled to vote on the amendment, in each case voting together
as a single class.
Undesignated Preferred Stock. Our certificate of
incorporation provides for 1,000,000 authorized shares of
preferred stock. The existence of authorized but unissued shares
of preferred stock may enable our board of directors to render
more difficult or to discourage an attempt to obtain control of
us by means of a merger, tender offer, proxy contest or
otherwise. For example, if in the due exercise of its fiduciary
obligations, our board of directors were to determine that a
takeover proposal is not in the best interests of our
stockholders, our board of directors could cause shares of
preferred stock to be issued without stockholder approval in one
or more private offerings or other transactions that might
dilute the voting or other rights of the proposed acquirer or
insurgent stockholder or stockholder group. In this regard, our
certificate of incorporation grants our board of directors broad
power to establish the rights and preferences of authorized and
unissued shares of preferred stock. The issuance of shares of
preferred stock could decrease the amount of earnings and assets
available for distribution to holders of shares of common stock.
The issuance may also adversely affect the rights and powers,
including voting rights, of these holders and may have the
effect of delaying, deterring or preventing a change in control
of us.
Limitation of Liability and Indemnification Matters. Our
certificate of incorporation and bylaws include provisions that
limit the liability of our officers and directors for monetary
damages for breach of their fiduciary duty as officers and
directors, except for liability that cannot be eliminated under
the DGCL. Any amendment or repeal of these provisions will
require the affirmative vote of at least 75% of the outstanding
shares entitled to vote on such amendment or repeal, and any
such amendment or repeal shall be prospective only. Our
certificate of incorporation and bylaws also provide that
officers and directors will be indemnified to the fullest extent
permitted under Delaware law, including against losses that they
may incur in investigations and legal proceedings resulting from
their services to us, which may include services in connection
with takeover defense measures.
Anti-takeover
Effects of Section 203 of the Delaware General Corporation
Law
Upon completion of this offering, we will be subject to the
provisions of Section 203 of the DGCL. In general,
Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in a business combination
with an interested stockholder for a three-year
period following the date that this stockholder becomes an
interested stockholder, unless the business combination is
approved in a prescribed manner. Under Section 203 of the
DGCL, a business combination between a corporation and an
interested stockholder is prohibited unless it satisfies one of
the following conditions:
|
|
|
|
|
before the stockholder became interested, our board of directors
approved either the business combination or the transaction
which resulted in the stockholder becoming an interested
stockholder;
|
|
|
|
upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least eighty-five percent (85%) of the
voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the
voting stock outstanding (but not the outstanding voting stock
owned by the interested stockholder), shares owned by persons
who are directors and also officers, and employee stock plans,
in some instances; or
|
|
|
|
at or after the time the stockholder became interested, the
business combination was approved by our board of directors of
the corporation and authorized at an annual or special meeting
of the stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by
the interested stockholder.
|
Section 203 of the DGCL defines a business combination to
include:
|
|
|
|
|
any merger or consolidation involving the corporation and the
interested stockholder;
|
60
|
|
|
|
|
any sale, transfer, pledge or other disposition involving the
interested stockholder of ten percent (10%) or more of the
assets of the corporation;
|
|
|
|
subject to exceptions, any transaction that results in the
issuance of transfer by the corporation of any stock of the
corporation to the interested stockholder;
|
|
|
|
subject to exceptions, any transaction involving the corporation
that has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially
owned by the interest stockholder; and
|
|
|
|
the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
|
In general, Section 203 of the DGCL defines an interested
stockholder as any entity or person beneficially owing fifteen
percent (15%) or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or
controlling or controlled by the entity or person.
A Delaware corporation may opt out of this provision by express
provision in its original certificate of incorporation or by
amendment to its certificate of incorporation or bylaws approved
by its stockholders. However, we have not opted out of, and do
not currently intend to opt out of, this provision. The statute
could prohibit or delay mergers or other takeover or change in
control attempts and, accordingly, may discourage attempts to
acquire us.
Listing
We have applied to have our common stock quoted on the NYSE Amex
Equities stock exchange and have reserved the symbol
CTP.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock will be
American Stock Transfer & Trust Company.
61
SHARES ELIGIBLE
FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock, and we cannot predict what effect, if any, market
sales of shares of common stock or the availability of shares of
common stock for sale will have on the market price of our
common stock. Future sales of substantial amounts of our common
stock in the public market, or the perception that substantial
sales may occur, could materially and adversely affect the
prevailing market price of our common stock and could impair our
future ability to raise capital through the sale of our equity
at a time and price we deem appropriate. Furthermore, because
only a limited number of shares will be available for sale
shortly after this offering due to existing contractual and
legal restrictions on resale as described below, there may be
sales of substantial amounts of our common stock in the public
market after the restrictions lapse. This may adversely affect
the prevailing market price and our ability to raise capital in
the future.
Sales of
Restricted Shares
Upon completion of this offering, we will have
6,830,769 shares of common stock outstanding. Of these
shares of common stock, the 2,307,692 shares of common
stock being sold in this offering, plus any shares issued upon
exercise of the underwriters option to purchase additional
shares, will be freely tradable without restriction under the
Securities Act, except for any such shares which may be held or
acquired by an affiliate of ours, as that term is
defined in Rule 144 promulgated under the Securities Act,
which shares will be subject to the volume limitations and other
restrictions of Rule 144 described below. The remaining
4,523,077 shares of common stock held by our existing
stockholders upon completion of this offering and up to
250,830 shares of common stock that will be issued upon
vesting (108,784 shares of common stock will vest in 2011,
103,946 shares of common stock will vest in 2012 and 38,100
shares of common stock will vest in 2013) of certain grants made
in connection with the employment of certain executive stock
consultants will be restricted securities, as that
phrase is defined in Rule 144, and may be resold only after
registration under the Securities Act or pursuant to an
exemption from such registration, including, among other things,
the exemptions provided by Rule 144 of the Securities Act,
which are summarized below. Taking into account the
lock-up
agreements described below and the provisions of Rule 144,
additional shares of our common stock will be available for sale
in the public market as follows:
|
|
|
|
|
no shares of restricted securities will be available for
immediate sale on the date of this prospectus; and
|
|
|
|
|
|
up to 4,773,907 (including up to 250,830 shares of common
stock which is subject to vesting) shares of our common
stock will be available for sale after the expiration of the
lock-up agreements and pursuant to Rule 144.
|
Rule 144
The availability of Rule 144 will vary depending on whether
shares of our common stock are restricted and whether they are
held by an affiliate or a non-affiliate. For purposes of
Rule 144, a non-affiliate is any person or entity that is
not our affiliate at the time of the sale and has not been our
affiliate during the preceding three months.
In general, under Rule 144, once we have been a reporting
company subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act for at least
90 days, an affiliate who has beneficially owned shares of
our restricted common stock for at least six months would be
entitled to sell within any three month period any number of
shares that does not exceed the greater of:
|
|
|
|
|
1% of the number of shares of common stock then outstanding,
which will equal approximately 68,300 shares immediately
after consummation of this offering; or
|
|
|
|
the average weekly trading volume of our common stock on the
open market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to that sale.
|
62
In addition, any sales by our affiliates under Rule 144 are
also subject to manner of sale provisions and notice
requirements and to the availability of current public
information about us. Our affiliates must comply with all the
provisions of Rule 144 (other than the six-month holding
period requirement) in order to sell shares of our common stock
that are not restricted securities, such as shares acquired by
our affiliates either in this offering or through purchases in
the open market following this offering. An
affiliate is a person that directly, or indirectly
through one or more intermediaries, controls, is controlled by,
or is under common control with, an issuer.
Similarly, once we have been a reporting company for at least
90 days, a non-affiliate who has beneficially owned shares
of our restricted common stock for at least six months would be
entitled to sell those shares without complying with the volume
limitation, manner of sale and notice provisions of
Rule 144, provided that certain public information is
available. Furthermore, a non-affiliate who has beneficially
owned our shares of restricted common stock for at least one
year will not be subject to any restrictions under Rule 144
with respect to such shares, regardless of how long we have been
a reporting company.
We are unable to estimate the number of shares that will be sold
under Rule 144 since this will depend on the market price
for our common stock, the personal circumstances of the
stockholder and other factors.
Lock-up
Agreements
We, each of our directors and executive officers and
substantially all of our existing equityholders, including the
selling stockholders, have agreed, for a period of 180 days
after the date of this prospectus, not to (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, or otherwise dispose
of or transfer any shares of common stock or any securities
convertible into or exchangeable or exercisable for common stock
or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or
indirectly, the economic consequences of ownership of common
stock or any securities convertible into or exchangeable for any
shares of common stock, without prior written consent of William
Blair & Company, L.L.C., other than shares of common
stock issued in this offering, under our 2010 equity incentive
plan or upon exercise of stock options granted pursuant to our
2010 equity incentive plan.
Additionally, our directors, executive officers and
substantially all of our existing equityholders, including the
selling stockholders, have agreed with the underwriters, subject
to certain exceptions, not to sell any shares of our common
stock or securities convertible into, or exercisable or
exchangeable for, shares of our common stock, without the prior
written consent of William Blair & Company, L.L.C.,
except as follows:
|
|
|
|
|
commencing on the first anniversary of the date of this
prospectus, each such person may sell up to one-third of the
shares of common stock held by such person as of the date of
this prospectus;
|
|
|
|
commencing on the second anniversary of the date of this
prospectus, each such person may sell up to two-thirds of the
shares of common stock held by such person as of the date of
this prospectus; and
|
|
|
|
commencing on the third anniversary of the date of this
prospectus, each such person may sell one hundred percent of the
shares of common stock held by such person as of the date of
this prospectus.
|
See Underwriting. William Blair & Company,
L.L.C., in their discretion on behalf of the underwriters, may
release any of the securities subject to these
lock-up
agreements at any time without notice.
Immediately following the consummation of this offering,
stockholders subject to
lock-up
agreements will hold 4,523,077 shares of our common stock,
representing about 66.2% of our outstanding shares of common
stock after giving effect to this offering, or about 61.1% of
our then outstanding shares of common stock if the
underwriters option to purchase additional shares is
exercised in full.
63
UNDERWRITING
The underwriters named below have severally agreed, subject to
the terms and conditions set forth in the underwriting agreement
by and among the underwriters, the selling stockholders and us,
to purchase from the selling stockholders and us the respective
number of shares of common stock set forth opposite each
underwriters name in the table below. William
Blair & Company, L.L.C. is acting as the Sole
Book-Running Lead Manager and C.L. King & Associates,
Inc. is acting as Co-Manager for this offering.
|
|
|
|
|
|
|
Number of
|
|
Underwriter
|
|
Shares
|
|
|
William Blair & Company, L.L.C.
|
|
|
|
|
C.L. King & Associates, Inc.
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
This offering will be underwritten on a firm commitment basis.
In the underwriting agreement, the underwriters have agreed,
subject to the terms and conditions set forth therein, to
purchase the shares of common stock being sold pursuant to this
prospectus at a price per share equal to the public offering
price less the underwriting discount specified on the cover page
of this prospectus. According to the terms of the underwriting
agreement, the underwriters either will purchase all of the
shares or none of them. In the event of default by any
underwriter, in certain circumstances, the purchase commitments
of the non-defaulting underwriters may be increased or the
underwriting agreement may be terminated.
The representative of the underwriters has advised us that the
underwriters propose to offer the shares of common stock to the
public initially at the public offering price set forth on the
cover page of this prospectus and to selected dealers at such
price less a concession of not more than
$ per share. The
underwriters may allow, and such dealers may re-allow, a
concession not in excess of
$ per share to certain
other dealers.
The underwriters will offer the shares subject to prior sale and
subject to receipt and acceptance of the shares by the
underwriters. The underwriters may reject any order to purchase
shares in whole or in part. The underwriters expect that we and
the selling stockholders will deliver the shares to the
underwriters through the facilities of The Depository
Trust Company in New York, New York on or
about ,
2010. At that time, the underwriters will pay us and the selling
stockholders for the shares in immediately available funds.
After commencement of the public offering, the underwriters may
change the public offering price and other selling terms.
We have granted the underwriters an option, exercisable within
30 days after the date of this prospectus, to purchase up
to an aggregate of 346,154 additional shares of common stock at
the same price per share to be paid by the underwriters for the
other shares offered hereby solely for the purpose of covering
over-allotments, if any. If the underwriters purchase any such
additional shares pursuant to this option, each of the
underwriters will be committed to purchase such additional
shares in approximately the same proportion as set forth in the
table above. The underwriters may exercise the option only for
the purpose of covering excess sales, if any, made in connection
with the distribution of the shares of common stock offered
hereby. The underwriters will offer any additional shares that
they purchase on the terms described above.
The underwriters have reserved for sale in a directed share
program, at the initial public offering price, up to
[ * ] shares of common stock in this offering for
our employees and other related persons. Purchases of the
reserved shares would reduce the number of shares available for
sale to the general public. The underwriters will offer any
reserved shares which are not so purchased to the general public
on the same terms as the others shares being sold in this
offering.
64
The following table summarizes the compensation to be paid by us
and the selling stockholders to the underwriters. This
information assumes either no exercise or full exercise by the
underwriters of their over-allotment option:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Per
|
|
|
Without
|
|
|
With
|
|
|
|
Share
|
|
|
Over-Allotment
|
|
|
Over-Allotment
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Underwriting discounts and commissions paid by us
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Underwriting discounts and commissions paid by the selling
stockholders
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Proceeds, before expenses, to us
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Proceeds to selling stockholders
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
We will pay the offering expenses of the selling stockholders,
except for the underwriting discounts and commissions associated
with the shares of common stock sold by the selling
stockholders. We estimate that our total expenses for this
offering, excluding the underwriting discounts and commissions,
will be approximately $1.6 million.
We, each of our directors and executive officers and
substantially all of our existing equityholders, including the
selling stockholders, have agreed, for a period of 180 days
after the date of this prospectus, not to (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, or otherwise dispose
of or transfer any shares of common stock or any securities
convertible into or exchangeable or exercisable for common stock
or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or
indirectly, the economic consequences of ownership of common
stock or any securities convertible into or exchangeable for any
shares of common stock, without prior written consent of William
Blair & Company, L.L.C., other than shares of common
stock issued in this offering, under our 2010 equity incentive
plan or upon exercise of stock options granted pursuant to our
2010 equity incentive plan.
Additionally, our directors, executive officers and
substantially all of our existing equityholders, including the
selling stockholders, have agreed with the underwriters, subject
to certain exceptions, not to sell any shares of our common
stock or securities convertible into, or exercisable or
exchangeable for, shares of our common stock, without the prior
written consent of William Blair & Company, L.L.C., except
as follows:
|
|
|
|
|
commencing on the first anniversary of the date of this
prospectus, each such person may sell up to one-third of the
shares of common stock held by such person as of the date of
this prospectus;
|
|
|
|
commencing on the second anniversary of the date of this
prospectus, each such person may sell up to two-thirds of the
shares of common stock held by such person as of the date of
this prospectus; and
|
|
|
|
commencing on the third anniversary of the date of this
prospectus, each such person may sell one hundred percent of the
shares of common stock held by such person as of the date of
this prospectus.
|
The 180-day
lock-up
period applicable to us will automatically be extended if
(i) during the last 17 days of the
lock-up
period, we issue an earnings release or material news or a
material event relating to us occurs, or (ii) prior to the
expiration of the
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
lock-up
period, then the
lock-up
period will automatically be extended and the restrictions
described above will continue to apply until the expiration of
the 18-day
period beginning on the issuance of the earnings release or the
announcement of the material news or the occurrence of the
material event, as applicable, unless William Blair &
Company, L.L.C. waives, in writing, such extension. This
extension will not apply if the publication of research reports
by the underwriters during the period around the expiration of
this lock-up
period is no longer restricted by applicable law or regulation.
65
Any shares of common stock purchased in the directed share
program will not be subject to the lock-up period described
above (although a director or executive officer could otherwise
be subject to a lock-up agreement as a director or executive
officer).
The agreement does not extend to transfers or dispositions
(i) by gift or (ii) to any trust for the direct or
indirect benefit of the stockholder or the immediate family of
the stockholder; provided the donee, trustee, distributee or
transferee, as the case may be, agrees to be bound by the
foregoing restrictions for the duration of the lock-up periods.
We may grant options and issue common stock under existing stock
option plans and issue shares in connection with any outstanding
convertible securities or options during the
lock-up
periods.
In determining whether to consent to a transaction prohibited by
these restrictions, William Blair & Company, L.L.C.
will take into account various factors, including the length of
time before the
lock-up
expires, the number of shares requested to be sold, the
anticipated manner and timing of sale, the potential impact of
the sale on the market for the common stock, the restrictions on
publication of research reports that would be imposed by
Financial Industry Regulatory Authority rules, market conditions
generally, and the reason for the requested release.
The representative has informed us that the underwriters will
not confirm, without client authorization, sales to their client
accounts as to which they have discretionary authority. The
representative has also informed us that the underwriters intend
to deliver all copies of this prospectus via electronic means,
via hand delivery or through mail or courier services. A
prospectus in electronic format may be made available on
Internet websites or through other online services maintained by
the underwriters or their affiliates. Other than the prospectus
in electronic format, the information on any underwriters
or any of its affiliates websites and any information
contained in any other website maintained by an underwriter or
any of its affiliates is not part of this prospectus or the
registration statement of which this prospectus forms a part,
has not been approved
and/or
endorsed by us or the underwriters and should not be relied upon
by investors.
In the underwriting agreement, we and the selling stockholders
have made certain representations and warranties to the
underwriters and have agreed to indemnify the underwriters and
their controlling persons against certain liabilities, including
liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect
thereof.
In connection with this offering, the underwriters and other
persons participating in this offering may engage in
transactions which affect the market price of the common stock.
These may include stabilizing and over-allotment transactions
and purchases to cover syndicate short positions. Stabilizing
transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the common stock. An
over-allotment, or short sale, involves selling more shares of
common stock in this offering than are specified on the cover
page of this prospectus, which results in a syndicate short
position. The underwriters may cover this short position by
purchasing common stock in the open market or by exercising all
or part of their over-allotment option. If the underwriters sell
more shares than they have the right to purchase from us
pursuant to the underwriting agreement, a naked short position,
the position can only be closed out by buying shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there could be downward
pressure on the price of the shares in the open market after
pricing that could adversely affect investors who purchase in
this offering. In addition, the representative may impose a
penalty bid. This allows the representative to reclaim the
selling concession allowed to an underwriter or selling group
member if shares of common stock sold by such underwriter or
selling group member in this offering are repurchased by the
representative in stabilizing or syndicate short covering
transactions. These transactions, which may be effected on the
NYSE Amex Equities stock exchange or otherwise, may stabilize,
maintain or otherwise affect the market price of the common
stock and could cause the price to be higher than it would be
without these transactions. The underwriters and other
participants in this offering are not required to engage in any
of these activities and may discontinue any of these activities
at any time without notice. We and the underwriters make no
representation or prediction as to whether the underwriters will
engage in such transactions or choose to discontinue any
transactions engaged in or as to the direction or magnitude of
any effect that these transactions may have on the price of our
common stock.
66
Prior to this offering, there has been no public market for our
common stock. Consequently, we, the selling stockholders and the
representative of the underwriters have negotiated to determine
the initial public offering price. We and they have considered
current market conditions, our operating results in recent
periods, the market capitalization of other companies in our
industry and estimates of our potential.
We have applied to have our common stock approved for listing on
the NYSE Amex Equities stock exchange and have reserved the
symbol CTP.
In the ordinary course of business, some of the underwriters and
their affiliates have provided, and may in the future provide,
investment banking, commercial banking, and other services to us
for which they have received, and may in the future receive,
customary fees or other compensation.
67
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
In September 2009, the Company dismissed Grant Thornton LLP as
the Companys independent public accounting firm. Grant
Thorntons report on the consolidated financial statements
of the Company for the year ended December 31, 2008 did not
contain an adverse opinion or a disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or
accounting principles. During the year ended December 31,
2008 and the subsequent period during 2009 prior to their
dismissal, there were no (i) disagreements with Grant
Thornton on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure,
which, if not resolved to Grant Thorntons satisfaction,
would have caused Grant Thornton to make reference thereto in
its report on the consolidated financial statements of the
Company or (ii) reportable events (as defined in
Item 304(a)(1)(v) of
Regulation S-K).
We have furnished Grant Thornton with a copy of the foregoing
disclosure and requested that Grant Thornton furnish us with a
letter addressed to the Securities and Exchange Commission
stating whether Grant Thornton agrees with the statements made
herein and, if not, stating the respects in which it does not
agree. A copy of the letter will be filed as an exhibit to the
registration statement of which this prospectus is a part.
In September 2009, the Company retained McGladrey &
Pullen, LLP to be the Companys independent registered
public accounting firm. Our board of managers approved the
dismissal of Grant Thornton and the retention of McGladrey
& Pullen. Prior to engaging them, we did not consult with
McGladrey & Pullen with regard to (i) the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that
might be rendered, and neither a written report nor oral advice
was provided to the Company that McGladrey & Pullen
concluded was an important factor considered by the Company in
reaching a decision as to an accounting, auditing or financial
reporting issue or (ii) any matter that was the subject of
a disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K)
or reportable event (as defined in Item 304(a)(1)(v) of
Regulation S-K).
LEGAL
MATTERS
The validity of the shares of common stock offered hereby will
be passed upon by us by Ulmer & Berne LLP, Cleveland,
Ohio. Certain legal matters in connection with this offering
will be passed upon for the underwriters by McDermott
Will & Emery LLP, Chicago, Illinois.
EXPERTS
The consolidated financial statements appearing in this
prospectus and in the registration statement have been audited
by McGladrey & Pullen, LLP, an independent registered
public accounting firm, as stated in their report appearing
elsewhere herein, and are included in reliance upon such report
and upon the authority of such firm as experts in accounting and
auditing.
68
WHERE YOU CAN
FIND MORE INFORMATION
We have filed a registration statement, of which this prospectus
is a part, on
Form S-1
with the SEC relating to this offering. This prospectus does not
contain all of the information in the registration statement and
the exhibits and financials statements included with the
registration statement. References in this prospectus to any of
our contracts, agreements or other documents are not necessarily
complete, and you should refer to the exhibits attached to the
registration statement for copies of actual contracts,
agreements or other documents.
You may read and copy the registration statement, the related
exhibits and other material we file with the SEC at the
SECs Public Reference Room in Washington, D.C. at
100 F Street, N.E., Washington, D.C. 20549. You
can also request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. The SEC also maintains an internet site that contains
reports, proxy and information statement and other information
regarding issuers that file with the SEC. The web site address
is
http://www.sec.gov.
You may also request a copy of these filings, at no cost, by
writing to us at 1166 Avenue of the Americas, 3rd Floor,
New York, NY 10036 or telephoning us at
(212) 588-3500.
Upon the effectiveness of the registration statement, we will be
subject to the information requirements of the Exchange Act and,
in accordance with the Exchange Act, will file periodic reports,
proxy and information statements and other information with the
SEC. Such annual, quarterly and current reports, proxy and
information statements and other information can be inspected
and copied and the locations set forth above. We will report our
financial statements on a year ended December 31. We intend
to furnish our stockholders with annual reports containing
consolidated financial statements audited by our registered
public accounting firm and with quarterly reports containing
unaudited consolidated financial statements for each of the
first three quarters of each fiscal year.
69
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers
CTPartners Executive Search LLC and Subsidiaries
Cleveland, Ohio
We have audited the accompanying consolidated balance sheets of
CTPartners Executive Search LLC and Subsidiaries as of
December 31, 2009 and 2008, and the related consolidated
statements of operations, members equity (deficit) and
cash flows for each of the years in the three year period ended
December 31, 2009. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits 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. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of CTPartners Executive Search LLC and Subsidiaries as
of December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the
three year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles.
As described in Note 2 to the consolidated financial
statements, effective January 1, 2007, the Company adopted
certain provisions of the Financial Accounting Standards
Boards Accounting Standards Codification Topic
No. 480, Distinguishing Liabilities from Equity, for
the Companys mandatorily redeemable units and adopted
Accounting Standards Update
No. 2009-04,
Accounting for Redeemable Equity Instruments for the
Companys redeemable member units.
/s/ McGladrey &
Pullen, LLP
Cleveland, Ohio
September 2, 2010
F-2
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
5,093,700
|
|
|
$
|
3,666,370
|
|
Accounts receivable, net
|
|
|
15,351,547
|
|
|
|
10,659,319
|
|
Other receivables
|
|
|
790,975
|
|
|
|
932,805
|
|
Prepaid expenses
|
|
|
1,671,510
|
|
|
|
2,098,893
|
|
Other
|
|
|
550,425
|
|
|
|
488,745
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
23,458,157
|
|
|
|
17,846,132
|
|
Leasehold Improvements and Equipment, net
|
|
|
3,714,657
|
|
|
|
4,858,201
|
|
Other Assets
|
|
|
703,286
|
|
|
|
709,164
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,876,100
|
|
|
$
|
23,413,497
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Redeemable Member Units and Members Equity
(Deficit)
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
960,742
|
|
|
$
|
762,293
|
|
Line of credit
|
|
|
4,660,027
|
|
|
|
2,711,716
|
|
Accounts payable
|
|
|
647,473
|
|
|
|
2,945,705
|
|
Accrued compensation
|
|
|
13,425,668
|
|
|
|
13,279,390
|
|
Accrued business taxes
|
|
|
1,115,697
|
|
|
|
1,056,344
|
|
Accrued expenses
|
|
|
1,414,786
|
|
|
|
1,733,055
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
22,224,393
|
|
|
|
22,488,503
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Long-term debt, less current maturities
|
|
|
4,240,053
|
|
|
|
5,241,488
|
|
Deferred rent
|
|
|
1,697,122
|
|
|
|
1,888,558
|
|
Pension liability
|
|
|
569,005
|
|
|
|
684,941
|
|
Mandatorily redeemable member units
|
|
|
628,810
|
|
|
|
926,781
|
|
Other
|
|
|
191,148
|
|
|
|
204,990
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
7,326,138
|
|
|
|
8,946,758
|
|
Redeemable Member Units
|
|
|
30,937,827
|
|
|
|
44,739,130
|
|
Members Equity (Deficit)
|
|
|
(32,612,258
|
)
|
|
|
(52,760,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,876,100
|
|
|
$
|
23,413,497
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
F-3
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
FOR THE YEARS
ENDED DECEMBER 31, 2009, 2008 AND 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net revenue
|
|
$
|
73,860,740
|
|
|
$
|
105,715,730
|
|
|
$
|
116,628,010
|
|
Reimbursable expenses
|
|
|
2,727,182
|
|
|
|
4,994,766
|
|
|
|
4,304,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
76,587,922
|
|
|
|
110,710,496
|
|
|
|
120,932,219
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
48,571,747
|
|
|
|
82,640,507
|
|
|
|
87,650,465
|
|
General and administrative
|
|
|
19,412,165
|
|
|
|
23,027,095
|
|
|
|
26,182,635
|
|
Reimbursable expenses
|
|
|
2,942,669
|
|
|
|
5,117,286
|
|
|
|
4,777,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,926,581
|
|
|
|
110,784,888
|
|
|
|
118,610,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
5,661,341
|
|
|
|
(74,392
|
)
|
|
|
2,322,098
|
|
Financial Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(499,838
|
)
|
|
|
(708,171
|
)
|
|
|
(765,382
|
)
|
Interest income
|
|
|
90,804
|
|
|
|
111,786
|
|
|
|
77,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(409,034
|
)
|
|
|
(596,385
|
)
|
|
|
(687,521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
5,252,307
|
|
|
|
(670,777
|
)
|
|
|
1,634,577
|
|
Income tax expense
|
|
|
(463,698
|
)
|
|
|
(537,389
|
)
|
|
|
(308,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,788,609
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
1,326,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per weighted average member unit
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
$
|
6.54
|
|
|
$
|
0.98
|
|
|
$
|
4.55
|
|
All other equity units
|
|
$
|
4.53
|
|
|
$
|
(2.01
|
)
|
|
$
|
0.34
|
|
Basic and diluted weighted average member units outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
|
238,046
|
|
|
|
238,046
|
|
|
|
238,046
|
|
All other equity units
|
|
|
660,267
|
|
|
|
626,399
|
|
|
|
600,739
|
|
See Notes to Consolidated Financial Statements.
F-4
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
FOR THE YEARS
ENDED DECEMBER 31, 2009, 2008 AND 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Receivable
|
|
|
Other
|
|
|
Members
|
|
|
|
|
|
|
Members
|
|
|
from Members
|
|
|
Comprehensive
|
|
|
Equity
|
|
|
|
Units
|
|
|
Equity (Deficit)
|
|
|
Purchase of Units
|
|
|
Income (Loss)
|
|
|
(Deficit)
|
|
|
Balance, January 1, 2007
|
|
|
931,567
|
|
|
$
|
(5,786,040
|
)
|
|
$
|
(1,352,433
|
)
|
|
$
|
(226,771
|
)
|
|
$
|
(7,365,244
|
)
|
Adoption of certain provisions of FASB ASC 480
|
|
|
|
|
|
|
(702,534
|
)
|
|
|
|
|
|
|
|
|
|
|
(702,534
|
)
|
Adoption of FASB ASU
2009-04
|
|
|
|
|
|
|
(30,806,731
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,806,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as restated, January 1, 2007
|
|
|
931,567
|
|
|
|
(37,295,305
|
)
|
|
|
(1,352,433
|
)
|
|
|
(226,771
|
)
|
|
|
(38,874,509
|
)
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
1,326,092
|
|
|
|
|
|
|
|
|
|
|
|
1,326,092
|
|
Change due to cumulative translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,644
|
|
|
|
8,644
|
|
Change in pension funding status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(153,741
|
)
|
|
|
(153,741
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,659
|
)
|
|
|
(17,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,163,336
|
|
Change in fair value of redeemable member units
|
|
|
|
|
|
|
(14,921,079
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,921,079
|
)
|
Equity-based compensation
|
|
|
33,167
|
|
|
|
1,133,705
|
|
|
|
|
|
|
|
|
|
|
|
1,133,705
|
|
Member units issued
|
|
|
12,502
|
|
|
|
518,029
|
|
|
|
(518,029
|
)
|
|
|
|
|
|
|
|
|
Member units redeemed
|
|
|
(16,878
|
)
|
|
|
(292,897
|
)
|
|
|
|
|
|
|
|
|
|
|
(292,897
|
)
|
Member payments received on notes receivable
|
|
|
|
|
|
|
|
|
|
|
1,194,432
|
|
|
|
|
|
|
|
1,194,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
960,358
|
|
|
|
(49,531,455
|
)
|
|
|
(676,030
|
)
|
|
|
(389,527
|
)
|
|
|
(50,597,012
|
)
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
(1,208,166
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,208,166
|
)
|
Change due to cumulative translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,572,336
|
)
|
|
|
(1,572,336
|
)
|
Change in pension funding status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,150,479
|
)
|
|
|
(1,150,479
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,000
|
)
|
|
|
(60,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,990,981
|
)
|
Change in fair value of redeemable member units
|
|
|
|
|
|
|
988,680
|
|
|
|
|
|
|
|
|
|
|
|
988,680
|
|
Equity-based compensation
|
|
|
11,853
|
|
|
|
1,071,313
|
|
|
|
|
|
|
|
|
|
|
|
1,071,313
|
|
Member units redeemed
|
|
|
(10,824
|
)
|
|
|
(252,291
|
)
|
|
|
|
|
|
|
|
|
|
|
(252,291
|
)
|
Member distributions
|
|
|
|
|
|
|
(711,582
|
)
|
|
|
|
|
|
|
|
|
|
|
(711,582
|
)
|
Member payments received on notes receivable
|
|
|
|
|
|
|
|
|
|
|
574,871
|
|
|
|
|
|
|
|
574,871
|
|
Discount on convertible promissory notes
|
|
|
|
|
|
|
156,108
|
|
|
|
|
|
|
|
|
|
|
|
156,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
961,387
|
|
|
|
(49,487,393
|
)
|
|
|
(101,159
|
)
|
|
|
(3,172,342
|
)
|
|
|
(52,760,894
|
)
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
4,788,609
|
|
|
|
|
|
|
|
|
|
|
|
4,788,609
|
|
Change due to cumulative translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
530,342
|
|
|
|
530,342
|
|
Change in pension funding status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,327
|
|
|
|
187,327
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,790
|
)
|
|
|
(7,790
|
)
|
Forgiveness of intercompany debt
|
|
|
|
|
|
|
(171,877
|
)
|
|
|
|
|
|
|
171,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,498,488
|
|
Change in fair value of redeemable member units
|
|
|
|
|
|
|
13,801,303
|
|
|
|
|
|
|
|
|
|
|
|
13,801,303
|
|
Equity-based compensation
|
|
|
(77
|
)
|
|
|
827,370
|
|
|
|
|
|
|
|
|
|
|
|
827,370
|
|
Member units redeemed
|
|
|
(16,387
|
)
|
|
|
(12,988
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,988
|
)
|
Member payments received on notes receivable
|
|
|
|
|
|
|
|
|
|
|
34,463
|
|
|
|
|
|
|
|
34,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
944,923
|
|
|
$
|
(30,254,976
|
)
|
|
$
|
(66,696
|
)
|
|
$
|
(2,290,586
|
)
|
|
$
|
(32,612,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
F-5
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
FOR THE YEARS
ENDED DECEMBER 31, 2009, 2008 AND 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,788,609
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
1,326,092
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,243,554
|
|
|
|
1,190,947
|
|
|
|
964,397
|
|
Loss on equipment disposals
|
|
|
227,222
|
|
|
|
343,979
|
|
|
|
|
|
Equity-based compensation
|
|
|
827,370
|
|
|
|
1,071,313
|
|
|
|
1,133,705
|
|
Amortization of discount on convertible promissory notes
|
|
|
34,307
|
|
|
|
16,937
|
|
|
|
|
|
Forgiveness of convertible promissory note
|
|
|
(75,000
|
)
|
|
|
|
|
|
|
|
|
Change in fair value of mandatorily redeemable member units
|
|
|
(297,971
|
)
|
|
|
(58,662
|
)
|
|
|
282,908
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(4,288,444
|
)
|
|
|
5,240,245
|
|
|
|
(2,614,485
|
)
|
Accrued compensation
|
|
|
122,147
|
|
|
|
(812,656
|
)
|
|
|
2,641,355
|
|
Accrued business taxes
|
|
|
(59,353
|
)
|
|
|
303,362
|
|
|
|
(409,706
|
)
|
Accounts payables
|
|
|
(2,322,945
|
)
|
|
|
2,084,920
|
|
|
|
(2,245,666
|
)
|
Accrued expenses
|
|
|
(970,365
|
)
|
|
|
(76,047
|
)
|
|
|
2,009,441
|
|
Deferred rent
|
|
|
191,436
|
|
|
|
288,375
|
|
|
|
123,067
|
|
Pension liability
|
|
|
187,327
|
|
|
|
(1,150,479
|
)
|
|
|
(153,741
|
)
|
Prepaid expenses
|
|
|
502,835
|
|
|
|
(649,968
|
)
|
|
|
(661,431
|
)
|
Other assets
|
|
|
(21,459
|
)
|
|
|
(140,659
|
)
|
|
|
(1,241,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
89,281
|
|
|
|
6,383,441
|
|
|
|
1,154,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of leasehold improvements and equipment
|
|
|
(129,692
|
)
|
|
|
(679,749
|
)
|
|
|
(2,822,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on notes payable redemption of
members units
|
|
|
(370,169
|
)
|
|
|
(1,156,876
|
)
|
|
|
(1,253,331
|
)
|
Net proceeds (payments) on revolving credit facility
|
|
|
1,948,311
|
|
|
|
(3,931,414
|
)
|
|
|
3,562,270
|
|
Principal payments on note payable bank
|
|
|
(392,124
|
)
|
|
|
(270,244
|
)
|
|
|
(238,698
|
)
|
Redemption of member units
|
|
|
(12,988
|
)
|
|
|
(252,291
|
)
|
|
|
(292,897
|
)
|
Payments received on members notes receivable
|
|
|
34,463
|
|
|
|
574,871
|
|
|
|
1,194,432
|
|
Proceeds from convertible promissory notes
|
|
|
|
|
|
|
2,673,000
|
|
|
|
|
|
Payments on convertible promissory notes
|
|
|
|
|
|
|
(50,000
|
)
|
|
|
|
|
Member distributions
|
|
|
|
|
|
|
(711,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,207,493
|
|
|
|
(3,124,536
|
)
|
|
|
2,971,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
1,167,082
|
|
|
|
2,579,156
|
|
|
|
1,304,142
|
|
Effect of foreign currency on cash
|
|
|
260,248
|
|
|
|
(1,313,919
|
)
|
|
|
(5,803
|
)
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
3,666,370
|
|
|
|
2,401,133
|
|
|
|
1,102,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
$
|
5,093,700
|
|
|
$
|
3,666,370
|
|
|
$
|
2,401,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
563,500
|
|
|
$
|
645,671
|
|
|
$
|
766,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
490,276
|
|
|
$
|
489,188
|
|
|
$
|
188,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non Cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of redeemable member units
|
|
$
|
(13,801,303
|
)
|
|
$
|
(988,680
|
)
|
|
$
|
14,921,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-6
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting Policies
|
Description of Business CTPartners Executive
Search LLC, along with its subsidiaries (collectively,
CTPartners or the Company), is a retained executive search firm
with domestic and international executive search capabilities.
The Company operates in the Americas, Europe and Asia Pacific.
The Company also has a licensing arrangement with its associated
offices in Latin America.
Principles of Consolidation The consolidated
financial statements of the Company are prepared in conformity
with accounting principles generally accepted in the United
States of America (GAAP). The consolidated financial statements
include the accounts of CTPartners Executive Search LLC and its
wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with GAAP
requires management to make significant estimates and
assumptions that affect the reported amounts of assets and
liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Concentration of Risk The Company maintains
balances at financial institutions which may, at times, exceed
amounts federally insured in the U.S. and foreign
countries. No losses have been incurred on such deposits.
Revenue Recognition. Substantially all revenue is derived
from fees for professional services related to executive search
services. Revenue before reimbursements of direct expenses
(net revenue) consists of: retainer fees; indirect
expenses billed to clients; supplemental fees (fees
contractually due to the Company if the actual compensation of
the placed candidate exceeds the estimated compensation on which
the retainer fee was based or the client hires other candidates
presented by the Company for positions not related to the
original search assignment); and license revenue. Retainer fees
and indirect expenses from executive search engagements are
recognized over the expected period of performance in proportion
to the estimated personnel time incurred to fulfill our
obligations under the engagements. Any supplemental fees are
recognized upon the occurrence of the event triggering the
payment of a supplemental fee.
Reimbursements The Company incurs
out-of-pocket
expenses that are generally reimbursed by its clients, which are
accounted for as revenue in its consolidated statements of
operations.
Accounts Receivable The Company extends
unsecured credit to customers under normal trade agreements,
which generally require payments within 30 days. Accounts
greater than 90 days past due are considered delinquent.
Accounts receivable are written off when deemed uncollectable.
The allowance for doubtful accounts is based upon
managements review of delinquent accounts and an
assessment of the Companys historical evidence of
collections. The Company also provides a reserve for billing
adjustments based upon historical experience. The allowance for
doubtful accounts and billing adjustments amounted to $1,012,000
and $966,000 at December 31, 2009 and 2008, respectively.
Leasehold Improvements and Equipment
Depreciation is provided using the
straight-line
method over the useful life of equipment, or in the case of
leasehold improvements, the shorter of the life of the
improvement or the length of the lease as follows:
|
|
|
Leasehold improvements
|
|
3-10 years
|
Office furniture, fixtures and equipment
|
|
5-7 years
|
Computer equipment and software
|
|
3-5 years
|
The Company periodically reviews the value of long-lived assets
for impairment. There were no impairment write-downs for 2009,
2008, or 2007. Leasehold improvements and equipment are carried
at cost less allowances for depreciation and amortization.
Ordinary maintenance and repairs are charged against
F-7
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting
Policies (Continued)
|
earnings when incurred. Additions and major repairs are
capitalized if they extend the useful life of the related asset.
Deferred Rent The Company recognizes rent
expense on the straight-line basis over the term of the lease.
Deferred rent is recognized for the excess of rental expense
over rental payments. The portion of deferred rent which will
not be recognized into the statement of operations within one
year is included as a long-term liability on the consolidated
balance sheets at December 31, 2009 and 2008.
Mandatorily Redeemable Member Units and Redeemable Member
Units The Companys member units are
divided into various unit classes which contain similar economic
and voting rights. Profits and losses are allocated according to
the Amended and Restated Operating Agreement. As discussed in
Note 2 to the consolidated financial statements, and
effective January 1, 2007, the Company has adopted current
accounting guidance in regards to accounting for certain
financial instruments with characteristics of both liabilities
and equity and for the classification and measurement of
redeemable securities. This guidance requires companies with
mandatorily redeemable features in their equity instruments to
be classified separately from equity. The Company has recorded
as mandatorily redeemable the member units the Company is
obligated to repurchase upon the death of a member. The Company
has recorded the remaining member units as redeemable, all of
which contain a put option giving the unit holder the right, but
not the obligation, to sell their units back to the Company upon
an age and years of service formula (relevant milestone) defined
in the Unit Purchase Agreement. The Companys obligation to
make payments is limited to 5% of its operating income less a
working capital reserve, and only in years where it achieves a
10% operating profit. Any payments required to be made are to be
paid under a note with a five year term plus interest. During
the three years ended December 31, 2009, no member units
were exercised or put under this agreement. The settlement price
for both the mandatorily redeemable units and the redeemable
units is the unit value based on the Formula Value (defined
below) in the Unit Purchase Agreement in effect at the date of
the relevant milestone.
The Company used its internal valuation method to measure the
fair value per unit for all unit valuations. This method is
based on a formula whose inputs are a factor of the trailing
twelve months of revenue, less debt as defined in the Unit
Purchase Agreement (the Formula Value). No changes
have been made in the valuation method for the three years ended
December 31, 2009. The Company has reflected those member
units with mandatory redemption features as a long-term
liability and the member units with a redemption option as
redeemable member units on its consolidated balance sheets. The
change in fair value for those units with mandatory redemption
features are included in compensation and benefits in the
consolidated statements of operations. The change in fair value
for the member units with a redemption option are included as a
component of members equity (deficit). Such guidance did
not apply historically to CTPartners as a private company.
Equity-Based Compensation The Company
accounts for equity-based compensation based on the formula
defined in its Unit Purchase Agreement and recognizes
compensation expense over the requisite service period using the
straight-line method. Units are periodically issued under the
Companys Performance Unit Plan solely at managements
discretion. The Company measures compensation expense related to
the performance units at each measurement date using the
intrinsic value method.
Income Taxes CTPartners is a limited
liability company that passes through income and losses to its
members. As a result, the Company is not subject to any
U.S. federal or state income taxes, as the related tax
consequences are reported at the individual members level
and are not reported within the Companys consolidated
financial statements. The Company may be subject to minimum
state taxes in certain states that assess capital taxes or taxes
based on gross receipts. The Companys subsidiaries may be
subject to entity-level income taxes in their respective foreign
jurisdictions.
F-8
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting
Policies (Continued)
|
Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and
deferred liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of
enactment.
The Financial Accounting Standards Board issued new guidance on
accounting for uncertainty in income taxes. The Company adopted
this new guidance effective January 1, 2009. Management
evaluated the Companys tax position and concluded that the
Company had taken no uncertain tax positions that require
adjustment to the consolidated financial statements to comply
with the provisions of this guidance. With few exceptions, the
Company is no longer subject to tax examinations by
U.S. federal, state, or local tax authorities for years
prior to 2006. For non-US locations, the Company is no longer
subject to audit examinations prior to 2006, except for the
United Kingdom which extends to 2004. When and if applicable,
potential interest and penalty costs are accrued as incurred,
with expenses recognized in general and administrative expenses
in the consolidated statements of operations.
Foreign Currency Remeasurement and
Transactions For all foreign operations, the
functional currency is the local currency. Assets and
liabilities of these operations are translated at the exchange
rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from the use of differing
exchange rates from period to period are included as a component
of accumulated other comprehensive income (loss) within
members equity (deficit). Gains and losses from foreign
currency transactions are included in operating results for the
period. For 2009, 2008, and 2007, net foreign currency losses
included in net income (loss) were $915,000, $325,000, and
$55,000, respectively.
In 2009, the Company forgave a portion of its intercompany loan
to its French subsidiary and needed to adjust accumulated other
comprehensive income on the balance sheet for the cumulative
amount of foreign currency adjustments relating to this portion
of the intercompany loan.
Since the currency effect of the change in the intercompany debt
flowed through comprehensive income (loss) as expense while the
debt was outstanding, the Company recorded the currency effect
of the debt forgiveness through comprehensive income (loss) as
income when the debt was forgiven.
Accumulated Other Comprehensive Income (Loss)
The Companys accumulated other comprehensive income (loss)
is comprised of, and related to, the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cumulative translation adjustments
|
|
$
|
(1,051,638
|
)
|
|
$
|
(1,753,857
|
)
|
|
$
|
(181,521
|
)
|
Pension funding status
|
|
|
(1,116,893
|
)
|
|
|
(1,304,220
|
)
|
|
|
(153,741
|
)
|
Other
|
|
|
(122,055
|
)
|
|
|
(114,265
|
)
|
|
|
(54,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,290,586
|
)
|
|
$
|
(3,172,342
|
)
|
|
$
|
(389,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments The Company measures
the fair values of its financial instruments in accordance with
accounting guidance that defines fair value, provides guidance
for measuring fair value and requires certain disclosures. The
guidance also discusses valuation techniques, such as the market
approach (comparable market prices), the income approach
(present value of future income or cash flow) and the cost
approach (cost to replace the service capacity of an asset or
replacement cost). The guidance establishes a fair
F-9
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting
Policies (Continued)
|
value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels.
The following is a brief description of those three levels:
|
|
|
|
|
Level 1: Observable inputs such as quoted prices
(unadjusted) in active markets that are accessible at the
measurement date for identical, unrestricted assets or
liabilities.
|
|
|
|
Level 2: Inputs other than quoted prices that are
observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are not active.
|
|
|
|
Level 3: Unobservable inputs that reflect the
reporting entitys own assumptions.
|
The Companys assets or liabilities carried at fair value
are the mandatorily redeemable member units as described in
Note 2, the performance units as described in Note 6
and the pension plans assets as described in Note 7.
The carrying value of all other assets and liabilities does not
differ materially from fair value.
Recently Adopted Accounting Standards The
Company follows accounting standards established by the
Financial Accounting Standards Board (FASB) to ensure consistent
reporting of financial condition, results of operations, and
cash flows. References to Generally Accepted Accounting
Principles (GAAP) in these footnotes are to the FASB
Accounting Standards
Codificationtm,
sometimes referred to as the Codification or ASC. The
Codification was effective for periods ending on or after
September 15, 2009.
Recently Issued Accounting Pronouncements The
FASB issued Accounting Standards Update (ASU)
2009-05,
Fair Value Measurements and Disclosures (Topic
820) Measuring Liabilities at Fair Value. ASU
2009-05
provides clarification that in circumstances in which a quoted
price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value
of such liability using one or more of the techniques prescribed
by the update. ASU
2009-05 is
effective for the Company beginning January 1, 2010. The
Company is currently evaluating the impact that adoption will
have on its consolidated financial statements.
The FASB issued ASU
2010-06,
Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value
Measurements, to provide more and improved disclosures about
fair value measurements. This ASU affects all entities that are
required to make disclosures about recurring and nonrecurring
fair value measurement.
The new disclosures and clarifications of existing disclosures
are effective for annual reporting periods beginning after
December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the rollforward
of activity in Level 3 fair value measurements. Those
disclosures are effective for fiscal years beginning after
December 15, 2010.
Basic and Diluted Earnings per Unit Basic and
diluted net income (loss) per unit is presented in conformity
with the two-class method. The Class E units contain
certain preference items related to income (loss) allocations
and distributions. All other units share in the allocation of
income (loss) and distributions equally. Participating units are
allocated their portion of net income (loss) and consist of
units subject to clawback and the mandatorily redeemable member
units. The Company has not included the units that would be
issued if the convertible promissory notes were converted
because the conversion price is out of the money for all periods
presented. The potentially dilutive units related to the
convertible promissory notes were approximately 51,000 and
52,000 as of December 31, 2009 and 2008, respectively.
F-10
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting
Policies (Continued)
|
Income (loss) allocated to the unit holders in computing
weighted average earnings per unit as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net income (loss) as reported
|
|
$
|
4,788,609
|
|
|
$
|
(1,208,166
|
)
|
|
$
|
1,326,092
|
|
Less: Income (loss) allocated to other participating member units
|
|
|
240,920
|
|
|
|
(183,916
|
)
|
|
|
37,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) used for earnings per share
|
|
$
|
4,547,689
|
|
|
$
|
(1,024,250
|
)
|
|
$
|
1,288,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Class E units
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
1,078,435
|
|
|
$
|
|
|
|
$
|
81,748
|
|
(Losses)
|
|
|
|
|
|
|
(478,004
|
)
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
711,582
|
|
|
|
|
|
Previously allocated losses
|
|
|
478,004
|
|
|
|
|
|
|
|
1,000,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,556,439
|
|
|
$
|
233,578
|
|
|
$
|
1,082,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
All other equity units
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
2,991,250
|
|
|
$
|
|
|
|
$
|
206,302
|
|
(Losses)
|
|
|
|
|
|
|
(1,257,828
|
)
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,991,250
|
|
|
$
|
(1,257,828
|
)
|
|
$
|
206,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Net Income per Share Upon
the conversion from a limited liability company to a
C-corporation (corporation), all of the Companys
outstanding units will automatically convert into shares of
common stock. The December 31, 2009 unaudited net income
per share, calculated below, assumes a 1 to 5.269
unit-to-share
ratio upon conversion. The Companys unaudited pro forma
income tax footnote has been prepared as if the Company were
taxable as a corporation since its inception. The Company can
make no guarantee that a conversion to a corporation will occur.
|
|
|
|
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
Taxable income
|
|
$
|
5,108,562
|
|
Income tax
|
|
|
1,981,552
|
|
Numerator:
|
|
|
|
|
Net income
|
|
|
2,807,057
|
|
Denominator:
|
|
|
|
|
Weighted average common shares used to compute net income per
share
|
|
|
6,830,769
|
|
|
|
|
|
|
Pro forma net income per share
|
|
$
|
0.41
|
|
|
|
|
|
|
As a consequence of the anticipated conversion to a corporation,
the Company will be required to change its tax filings from cash
to accrual basis. As of December 31, 2009 the Company
anticipated a one-time tax expense of approximately
$4.3 million in 2010 as a result of this change.
F-11
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting
Policies (Continued)
|
Unaudited Pro Forma Incomes Taxes The Company
has operated as a limited liability company since 2004. The
following pro forma disclosures for the years ended
December 31, 2009, 2008, and 2007 have been prepared as if
the Company had been taxable as a corporation since inception.
The pro forma income tax expense for the year ended
December 31, 2009 was $1,981,552, which is net of $11,000
for a pro forma deferred tax asset related to the non-deductible
portion of bonus expense not paid within two and one-half months
after year-end as required by the Internal Revenue Code.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
US income
|
|
$
|
5,082,289
|
|
|
$
|
5,648,426
|
|
|
$
|
6,232,177
|
|
Non-US income (loss)
|
|
|
(293,680
|
)
|
|
|
(6,856,592
|
)
|
|
|
(4,906,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
4,788,609
|
|
|
|
(1,208,166
|
)
|
|
|
1,326,092
|
|
Temporary differences and nondeductible expenses
|
|
|
319,953
|
|
|
|
145,859
|
|
|
|
1,125,768
|
|
Utilization of net operating loss carryover
|
|
|
|
|
|
|
|
|
|
|
(2,358,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income
|
|
|
5,108,562
|
|
|
|
(1,062,307
|
)
|
|
|
92,949
|
|
Current expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal tax
|
|
|
1,736,911
|
|
|
|
(361,185
|
)
|
|
|
31,603
|
|
State and local tax
|
|
|
255,428
|
|
|
|
(53,115
|
)
|
|
|
4,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,992,339
|
|
|
|
(414,300
|
)
|
|
|
36,250
|
|
Deferred expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(9,404
|
)
|
|
|
90,201
|
|
|
|
(263,797
|
)
|
State and local
|
|
|
(1,383
|
)
|
|
|
13,265
|
|
|
|
(38,794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,787
|
)
|
|
|
103,466
|
|
|
|
(302,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,981,552
|
|
|
$
|
(310,834
|
)
|
|
$
|
(266,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Members Equity
(Deficit): If the Company converts from a limited
liability company to a corporation, all of the member units
outstanding will automatically convert into shares of common
stock of CTPartners Executive Search, Inc. at a 1 to 5.269
conversion ratio. Unaudited pro forma stockholders equity,
as adjusted for the assumed conversion of the member units is
set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
As
|
|
|
Pro Forma
|
|
|
Stockholders
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Equity (Deficit)
|
|
|
Members equity (deficit)/stockholders equity
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
|
|
|
$
|
6,831
|
|
|
$
|
6,831
|
|
Additional paid-in capital
|
|
|
|
|
|
|
31,559,806
|
|
|
|
31,559,806
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(2,290,586
|
)
|
|
|
(2,290,586
|
)
|
Mandatorily redeemable member units
|
|
|
628,810
|
|
|
|
(628,810
|
)
|
|
|
|
|
Redeemable member units
|
|
|
30,937,827
|
|
|
|
(30,937,827
|
)
|
|
|
|
|
Members deficit/accumulated deficit
|
|
|
(32,612,258
|
)
|
|
|
(3,991,414
|
)
|
|
|
(36,603,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity (deficit)/stockholders equity
(deficit)
|
|
$
|
(1,045,621
|
)
|
|
$
|
(6,282,000
|
)
|
|
$
|
(7,327,621
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Basis of
Presentation and Significant Accounting
Policies (Continued)
|
The pro forma common stock represents the aggregate par value of
the common stock. The pro forma additional paid-in capital
represents the aggregate carrying value of the member units less
the aggregate par value.
The increase in the accumulated deficit is attributed to a
$4,300,000 one time tax charge due to the conversion to a
corporation and $1,982,000 of accrued tax related to
non-deductible compensation expense.
|
|
Note 2.
|
Mandatorily
Redeemable Member Units and Redeemable Member Units
|
The effects of adopting FASB ASC Topic 480 for mandatorily
redeemable units and ASU
2009-04 for
redeemable member units as of and for the years then ended
December 31, 2008 and 2007 on the consolidated balance
sheets, consolidated statements of operations and consolidated
statements of cash flows are included in the schedule below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
Effect of
|
|
|
Consolidated Balance
Sheets
|
|
Reported
|
|
Adoption
|
|
As Restated
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
$
|
8,019,977
|
|
|
$
|
926,781
|
|
|
$
|
8,946,758
|
|
Redeemable Member Units
|
|
|
|
|
|
|
44,739,130
|
|
|
|
44,739,130
|
|
Members Deficit
|
|
|
(7,094,983
|
)
|
|
|
(45,665,911
|
)
|
|
|
(52,760,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
Effect of
|
|
|
|
|
Reported
|
|
Adoption
|
|
As Restated
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Deficit
|
|
$
|
(7,365,244
|
)
|
|
$
|
(31,509,265
|
)
|
|
$
|
(38,874,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
Effect of
|
|
|
Consolidated Statements of
Operations
|
|
Reported
|
|
Adoption
|
|
As Restated
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
82,581,845
|
|
|
$
|
58,662
|
|
|
$
|
82,640,507
|
|
Operating loss
|
|
|
(15,730
|
)
|
|
|
(58,662
|
)
|
|
|
(74,392
|
)
|
Net loss
|
|
|
(1,149,504
|
)
|
|
|
(58,662
|
)
|
|
|
(1,208,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
Effect of
|
|
|
|
|
Reported
|
|
Adoption
|
|
As Restated
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
87,367,557
|
|
|
$
|
282,908
|
|
|
$
|
87,650,465
|
|
Operating income
|
|
|
2,605,006
|
|
|
|
(282,908
|
)
|
|
|
2,322,098
|
|
Net income
|
|
|
1,609,000
|
|
|
|
(282,908
|
)
|
|
|
1,326,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
Effect of
|
|
|
Consolidated Statements of Cash
Flows
|
|
Reported
|
|
Adoption
|
|
As Restated
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,266,828
|
)
|
|
$
|
58,662
|
|
|
$
|
(1,208,166
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of mandatorily redeemable member units
|
|
|
|
|
|
|
58,662
|
|
|
|
58,662
|
|
F-13
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 2.
|
Mandatorily
Redeemable Member Units and Redeemable Member
Units (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
Effect of
|
|
|
|
|
Reported
|
|
Adoption
|
|
As Restated
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,609,000
|
|
|
$
|
(282,908
|
)
|
|
$
|
1,326,092
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of mandatorily redeemable member units
|
|
|
|
|
|
|
282,908
|
|
|
|
282,908
|
|
A reconciliation of the fair value of the Companys
redeemable member units is summarized as follows:
|
|
|
|
|
Balance as of January 1, 2007
|
|
$
|
30,806,731
|
|
Change in fair value redeemable units
|
|
|
14,921,079
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
$
|
45,727,810
|
|
Change in fair value redeemable units
|
|
|
(988,680
|
)
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
$
|
44,739,130
|
|
Change in fair value redeemable units
|
|
|
(13,801,303
|
)
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
$
|
30,937,827
|
|
|
|
|
|
|
The Companys mandatorily redeemable member units are
measured at fair value and have been classified as a
Level 3 liability.
The changes in fair value of the mandatorily redeemable member
units are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Balance, beginning of year
|
|
$
|
926,781
|
|
|
$
|
985,443
|
|
|
$
|
702,534
|
|
Unrealized (gains) losses
|
|
|
(297,971
|
)
|
|
|
(58,662
|
)
|
|
|
282,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
628,810
|
|
|
$
|
926,781
|
|
|
$
|
985,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 3.
|
Leasehold
Improvements and Equipment
|
The components of the leasehold improvements and equipment at
December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Leasehold improvements
|
|
$
|
3,522,433
|
|
|
$
|
3,540,880
|
|
Office furniture, fixtures and equipment
|
|
|
2,201,861
|
|
|
|
2,249,770
|
|
Computer equipment and software
|
|
|
3,182,493
|
|
|
|
3,019,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,906,787
|
|
|
|
8,809,945
|
|
Accumulated depreciation and amortization
|
|
|
(5,192,130
|
)
|
|
|
(3,951,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,714,657
|
|
|
$
|
4,858,201
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the years ended
December 31, 2009, 2008, and 2007 was $1,243,554 and
$1,190,947, and $964,397, respectively.
Notes Payable Bank: The Company is a
party to a credit and security agreement (the Amended and
Restated Credit and Security Agreement or Credit
Agreement) with a bank which includes both a revolving
credit facility and a term loan. The Agreement, as amended,
provides for the revolving credit facility to expire on
August 29, 2012. Under the terms of the revolving credit
facility, the Company may borrow an
F-14
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 4.
|
Long-Term
Debt (Continued)
|
amount equal to the lesser of $10 million or the
Borrowing Base (the Companys eligible accounts
receivable as defined in the Credit Agreement), with interest
calculated at 325 basis points above the LIBOR rate as
defined in the revolving credit agreement (the adjusted LIBOR
rate), which was 0.23% at December 31, 2009. The balance
owed under the revolving credit facility at December 31,
2009 and 2008 was $4,660,027 and $2,711,716, respectively.
Additionally, the Company has issued letters of credit related
to office lease agreements secured by the Credit Agreement in
the amounts of $3,008,000 and $3,456,000 as of December 31,
2009 and 2008, respectively. Available borrowings under the
revolving credit facility was $6,992,000 at December 31,
2009.
The term loan was fully paid as of December 31,
2009. At December 31, 2008 the balance was $392,124
and bore interest at 250 basis points above the adjusted
LIBOR rate.
The loans under the Credit Agreement are secured principally by
accounts receivable and equipment. Additionally, the Company is
required to maintain specified leverage and fixed charge
coverage ratios as defined in the Credit Agreement. The Credit
Agreement also requires the Company to maintain a minimum net
worth based on a formula in the Credit Agreement.
Notes Payable Redemption of Members
Units: In 2005, the Company assumed the debt of
Christian & Timbers, Inc. (the predecessor entity to
the Company). The debt consisted of a note to the founder of
Christian & Timbers, Inc. and notes to other former
shareholders of Christian & Timbers, Inc. Also from
time to time, the Company purchases member units from former
members in the form of notes, payable over 5 years. The
total due on these notes amounted to $2,757,659 and $3,127,827
at December 31, 2009 and 2008, respectively.
The note to the founder of Christian & Timbers, Inc.
provides for minimum annual principal and interest payments of
$300,000, provided that net profits are at least break-even on a
rolling six month basis. Additional payments could be required
to increase total payments to 1.5% of the prior calendar
years net revenues, provided that the Company achieves
certain operating performance benchmarks. The amount payable in
the future is based on the Companys estimated future
results.
Convertible Promissory Notes: In 2008, the Company
issued convertible promissory notes to certain unit holders. The
notes bear a fixed annual interest rate of 5% and are due and
payable in 2013. The notes can be prepaid by the Company at any
time without penalty. The notes bear a conversion feature which
gives the holders the option, but not the obligation, to convert
any part or all of the unpaid principal due on the note into
units of the Company, at the price defined in the notes purchase
agreement. The price of the Companys member unit is
calculated per the Unit Purchase Agreement.
The convertible notes contain a nondetachable (embedded)
conversion feature. The conversion feature in the notes is
deemed beneficial because the embedded conversion feature was
deemed
in-the-money
at the date of issuance. The conversion feature is recognized
and measured by allocating a portion of the proceeds equal to
the value of the conversion feature to members equity
(deficit).
At December 31, 2009 and 2008, the outstanding balance of
convertible notes was $2,548,000 and $2,623,000, respectively.
At the date of issuance, the fair value of the beneficial
conversion feature was $156,108. Interest expense related to
amortization of the debt discount was $34,307 and $16,937 for
2009 and 2008, respectively.
The fair value of the notes payable-redemption of members
units approximates carrying value. The fair value of the
convertible promissory notes cannot be determined due to their
related party nature.
F-15
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 4.
|
Long-Term
Debt (Continued)
|
Long-term debt consists of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Notes payable redemption of members units
|
|
$
|
2,757,659
|
|
|
$
|
3,127,827
|
|
Note payable bank
|
|
|
|
|
|
|
392,124
|
|
Convertible promissory notes, net of discount of $104,864 and
$139,171
|
|
|
2,443,136
|
|
|
|
2,483,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,200,795
|
|
|
|
6,003,780
|
|
Less current portion of long-term debt
|
|
|
960,742
|
|
|
|
762,293
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,240,053
|
|
|
$
|
5,241,488
|
|
|
|
|
|
|
|
|
|
|
The schedule for future payments to be made on long-term debt is
as follows:
|
|
|
|
|
2010
|
|
$
|
960,742
|
|
2011
|
|
|
1,151,355
|
|
2012
|
|
|
634,767
|
|
2013
|
|
|
2,453,931
|
|
|
|
|
|
|
|
|
$
|
5,200,795
|
|
|
|
|
|
|
The Company is obligated under lease arrangements for office
space and office equipment expiring in various years through
2017. Future annual required payments as of December 31,
2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
|
|
|
|
|
|
|
|
|
Space
|
|
|
Equipment
|
|
|
Total
|
|
|
2010
|
|
$
|
8,325,366
|
|
|
$
|
142,403
|
|
|
$
|
8,467,769
|
|
2011
|
|
|
6,356,755
|
|
|
|
89,366
|
|
|
|
6,446,121
|
|
2012
|
|
|
5,821,871
|
|
|
|
59,116
|
|
|
|
5,880,987
|
|
2013
|
|
|
5,504,973
|
|
|
|
9,286
|
|
|
|
5,514,259
|
|
2014
|
|
|
5,315,819
|
|
|
|
|
|
|
|
5,315,819
|
|
Thereafter
|
|
|
9,604,609
|
|
|
|
|
|
|
|
9,604,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,929,393
|
|
|
$
|
300,171
|
|
|
$
|
41,229,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The minimum future payments to be received as of
December 31, 2009 on
sub-leases
of certain office space, which expire in 2011, are as follows:
|
|
|
|
|
2010
|
|
$
|
1,149,514
|
|
2011
|
|
|
213,051
|
|
|
|
|
|
|
|
|
$
|
1,362,565
|
|
|
|
|
|
|
Rent expense (excluding sublease rental income) for the years
ended December 31, 2009, 2008, and 2007 was $9,707,223,
$9,945,497, and $10,142,827, respectively. Sublease rental
income for the years ended December 31, 2009, 2008, and
2007 was $1,460,307, $1,782,390, and $1,981,786, respectively,
and is included in general and administrative expenses as an
offset to rent expense in the consolidated statements of
operations.
F-16
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 6.
|
Non-Qualified
Unit Purchase Plan and Performance Unit Plan
|
The Company maintains a member unit purchase plan and a
performance unit plan for the benefit of its officers and key
employees. The plans are administered by a committee that has
the discretionary authority to issue member units to eligible
employees. The member units are valued under both plans in
accordance with the Formula Value as defined in the Unit
Purchase Agreement, which is a valuation model based on the
Companys
12-month
trailing performance and is more fully described in Note 1.
The purpose of the member unit purchase plan is to encourage
ownership in the Company by its senior executives, to at times
award units to new executives, and to reward performance as an
enhancement to cash compensation. All member units are fully
vested upon issuance, but in certain cases units are subject to
a clawback provision, which places the obligation on the unit
holder to surrender a portion of the member units if their
employment with the Company is terminated before a specified
period, typically three years. The total fair value of
member units issued during the years ended December 31,
2009, 2008, and 2007 was $34,000, $823,000 and $2,058,000,
respectively. Total compensation expense related to the plans
was $827,370, $1,071,313 and $1,133,705 for the years ended
December 31, 2009, 2008, and 2007, respectively.
A summary of the status of the Companys member units
subject to the clawback provisions as of December 31, 2009,
and changes during the year ended December 31, 2009, is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
Member
|
|
|
Grant-Date
|
|
Member Units Subject to
Clawback
|
|
Units
|
|
|
Fair Value
|
|
|
Member units subject to clawback at December 31, 2008
|
|
|
57,157
|
|
|
$
|
37.43
|
|
Granted
|
|
|
923
|
|
|
|
36.91
|
|
Expiration of clawback provisions
|
|
|
(35,095
|
)
|
|
|
32.31
|
|
Forfeited
|
|
|
(1,000
|
)
|
|
|
52.67
|
|
|
|
|
|
|
|
|
|
|
Member units subject to clawback at December 31, 2009
|
|
|
21,985
|
|
|
$
|
44.88
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was approximately $990,000
of unrecognized compensation expense related to member units
subject to clawback provisions granted under the plan. This
expense is expected to be recognized over a weighted-average
period of 1.3 years.
The purpose of the performance unit plan is to reward executive
performance with any potential increase in the fair value of the
Company over the fair value at the date of the performance unit
issuance. Performance units generally vest over a three-year
period. The value of a performance unit is limited to the excess
value, if any, of the fair value over the value at the date of
issue. Compensation expense (income) recorded under the plan for
the years ended December 31, 2009, 2008, and 2007 was
($78,605), $123,638, and $0, respectively. Total performance
units outstanding at December 31, 2009 was 122,073.
A summary of the Companys non-vested performance units as
of December 31, 2009, and changes during the year ended
December 31, 2009, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
Performance Units
|
|
Units
|
|
|
Fair Value
|
|
|
Total non-vested performance units at December 31, 2008
|
|
|
46,106
|
|
|
$
|
40.89
|
|
Granted
|
|
|
71,830
|
|
|
|
35.00
|
|
Vested
|
|
|
(16,687
|
)
|
|
|
39.52
|
|
Forfeited
|
|
|
(1,100
|
)
|
|
|
35.00
|
|
|
|
|
|
|
|
|
|
|
Total non-vested units at December 31, 2009
|
|
|
100,149
|
|
|
$
|
33.26
|
|
|
|
|
|
|
|
|
|
|
F-17
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 6.
|
Non-Qualified
Unit Purchase Plan and Performance Unit
Plan (Continued)
|
The Companys performance units are measured at fair value
and have been classified as a Level 3 liability.
The changes in fair value of the performance units are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance, beginning of year
|
|
$
|
123,638
|
|
|
$
|
|
|
Unrealized (gains) losses
|
|
|
(78,605
|
)
|
|
|
123,638
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
45,033
|
|
|
$
|
123,638
|
|
|
|
|
|
|
|
|
|
|
The Company sponsors a noncontributory defined benefit cash
balance plan covering United States employees who meet certain
eligibility requirements. Participants accrued benefits
are based on account balances maintained for each individual
which are credited with additions equal to a percentage of
compensation as defined in the plan. Participants balances
are also credited with interest in accordance with the plan. The
Companys funding policy has been to contribute to the plan
the amount actuarially determined necessary to fund the benefit
obligation. The Company contributed $0, $1,234,362, and
$1,765,567 for the years ended December 31, 2009, 2008, and
2007, respectively. The Company recorded pension expense of
$71,393, $733,694, and $1,722,009 for the years ended
December 31, 2009, 2008, and 2007, respectively. The plan
was frozen effective December 31, 2008. No future benefit
accruals will be earned by participants.
The Company (i) recognizes the overfunded or underfunded
status of the plan, measured as the difference between plan
assets at fair value and the benefit obligation, as an asset or
liability in its consolidated balance sheet;
(ii) recognizes changes in that funded status in the year
in which the changes occur through comprehensive income;
(iii) recognizes as a component of other comprehensive
income the gains and losses and prior service costs or credits
that arise during the period but are not recognized as
components of net periodic benefit costs; and (iv) measures
plan assets and obligations as of the date of the
employers fiscal year end.
The Company uses December 31 as its annual measurement date.
F-18
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 7.
|
Retirement
Plans (Continued)
|
The fair value of the plans assets at December 31,
2009, by asset category and fair value hierarchy level, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
Asset Category
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
$
|
148,882
|
|
|
$
|
148,882
|
|
|
$
|
|
|
|
$
|
|
|
Fixed income
|
|
|
1,798,972
|
|
|
|
1,798,972
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
116,423
|
|
|
|
116,423
|
|
|
|
|
|
|
|
|
|
Stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mid cap
|
|
|
250,440
|
|
|
|
250,440
|
|
|
|
|
|
|
|
|
|
Large cap
|
|
|
94,340
|
|
|
|
94,340
|
|
|
|
|
|
|
|
|
|
Fixed Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government obligations
|
|
|
1,037,413
|
|
|
|
1,037,413
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
1,454,639
|
|
|
|
|
|
|
|
1,454,639
|
|
|
|
|
|
Money market funds
|
|
|
85,856
|
|
|
|
85,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,986,965
|
|
|
$
|
3,532,326
|
|
|
$
|
1,454,639
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average asset allocations of the Companys
pension benefits at December 31, 2009 and 2008 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
Plan Assets
|
|
|
|
2009
|
|
|
2008
|
|
|
Asset Category:
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
|
41
|
%
|
|
|
20
|
%
|
Stocks
|
|
|
7
|
%
|
|
|
8
|
%
|
Fixed income
|
|
|
50
|
%
|
|
|
68
|
%
|
Money market funds
|
|
|
2
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Selected actuarially determined information for the defined
benefit plan follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in Benefit Obligation
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation, beginning of year
|
|
$
|
5,427,348
|
|
|
$
|
4,477,173
|
|
Service cost
|
|
|
|
|
|
|
769,444
|
|
Interest cost
|
|
|
270,858
|
|
|
|
212,205
|
|
Actuarial cost
|
|
|
(123,433
|
)
|
|
|
156,494
|
|
Benefits paid
|
|
|
(18,803
|
)
|
|
|
(187,968
|
)
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
5,555,970
|
|
|
$
|
5,427,348
|
|
|
|
|
|
|
|
|
|
|
F-19
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 7.
|
Retirement
Plans (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
4,742,407
|
|
|
$
|
4,442,046
|
|
Actual return on plan assets
|
|
|
263,361
|
|
|
|
(746,031
|
)
|
Company contribution
|
|
|
|
|
|
|
1,234,362
|
|
Benefits paid
|
|
|
(18,803
|
)
|
|
|
(187,970
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
4,986,965
|
|
|
$
|
4,742,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Funded Status
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation at end of year
|
|
$
|
(5,555,970
|
)
|
|
$
|
(5,427,348
|
)
|
Fair Value of plan assets at end of year
|
|
|
4,986,965
|
|
|
|
4,742,407
|
|
|
|
|
|
|
|
|
|
|
Underfunded status, amount recognized as a long-term liability
on the consolidated balance sheet
|
|
$
|
(569,005
|
)
|
|
$
|
(684,941
|
)
|
|
|
|
|
|
|
|
|
|
The following expected benefit payments reflect expected future
service and payments in the form of monthly annuities. The plan
allows a lump sum payment option that has not been included in
this projection.
|
|
|
|
|
2010
|
|
$
|
621,753
|
|
2011
|
|
|
570,860
|
|
2012
|
|
|
587,986
|
|
2013
|
|
|
605,626
|
|
2014
|
|
|
623,794
|
|
2015-2019
|
|
|
1,338,753
|
|
Amounts recognized in accumulated other comprehensive income
(loss) consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Net loss
|
|
$
|
1,116,893
|
|
|
$
|
1,304,220
|
|
|
$
|
153,741
|
|
Prior service cost (credit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,116,893
|
|
|
$
|
1,304,220
|
|
|
$
|
153,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit Cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
|
|
|
$
|
769,444
|
|
|
$
|
1,765,567
|
|
Interest cost
|
|
|
270,858
|
|
|
|
212,205
|
|
|
|
121,818
|
|
Expected return on plan assets
|
|
|
(236,611
|
)
|
|
|
(247,955
|
)
|
|
|
(165,376
|
)
|
Amortization of prior service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
|
37,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
71,393
|
|
|
$
|
733,694
|
|
|
$
|
1,722,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 7.
|
Retirement
Plans (Continued)
|
Other changes in plan assets and benefit obligations recognized
in other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net (gain) loss
|
|
$
|
(187,327
|
)
|
|
$
|
1,150,479
|
|
|
$
|
153,741
|
|
Prior service cost (credit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive income (loss)
|
|
$
|
(187,327
|
)
|
|
$
|
1,150,479
|
|
|
$
|
153,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost and other
comprehensive income (loss)
|
|
$
|
(115,934
|
)
|
|
$
|
1,884,173
|
|
|
$
|
1,826,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated net loss for the defined benefit pension plan that
will be amortized from accumulated other comprehensive income
(loss) into net periodic benefit cost over the next fiscal year
is $29,000.
The assumptions used in the actuarial present value of the
projected benefit obligations and to determine net periodic
benefit costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Discount rate
|
|
|
5.00
|
%
|
|
|
4.85
|
%
|
|
|
4.85
|
%
|
Expected return on assets
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Rate of compensation increases
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The plans investment strategy is to invest in a
diversified portfolio of equity and fixed-income securities,
with the objective of providing long-term growth with
conservative investments with characteristics of limited
volatility. The long term rate of expected return of 5% is based
on the investment mix in the plan.
The Company also sponsors a defined contribution plan (the
Profit Sharing Plan) whereby U.S. employees
meeting the Plans eligibility requirements may elect to
defer a portion of their compensation into the Plan. The maximum
allowable employee deferral is adjusted each year is subject to
certain limitations. The Company has no obligation to make any
contributions to the Plan. For 2009, 2008 and 2007, the Company
made voluntary contributions of $0, $285,000 and $230,512,
respectively.
In addition, the Company also sponsors a qualified defined
contribution discretionary profit sharing plan which covers U.S.
employees meeting certain eligibility requirements. The Company
made cash contributions to the plan of $273,500, $242,600 and
$626,600 for the years ended December 31, 2009, 2008 and
2007, respectively. Most employees outside of the U.S. are
covered by statutorily required retirement plans. In certain
cases the Company makes voluntary, discretionary contributions
to supplement the mandated minimum funding requirements. The
Company complies with the funding requirements in all countries,
and has no unfunded future liabilities.
The Companys gross deferred tax assets amounted to
$4.6 million at December 31, 2009. The entire balance
relates to the Companys foreign subsidiaries net
operating loss carryforwards. The Company has recorded a full
valuation allowance against these deferred tax assets because it
has determined it is more likely than not that they will not be
realized in the near term.
F-21
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 8.
|
Income
Taxes (Continued)
|
Net operating losses by foreign location are as follows:
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
|
|
2009
|
|
|
Expiration
|
|
United Kingdom
|
|
$
|
17,435,711
|
|
|
No expiration
|
France
|
|
|
1,943,591
|
|
|
No expiration
|
Switzerland
|
|
|
648,765
|
|
|
2015
|
Singapore
|
|
|
195,023
|
|
|
No expiration
|
Hong Kong
|
|
|
1,261,715
|
|
|
No expiration
|
China
|
|
|
179,990
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
$
|
21,664,795
|
|
|
|
|
|
|
|
|
|
|
F-22
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 9.
|
Enterprise
Geographic Concentrations
|
The Company operates in three principal geographic regions: the
Americas, Europe and Asia Pacific. The revenue, operating income
(loss), depreciation and amortization, capital expenditures and
assets, by region, for the years ended December 31, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
46,374,844
|
|
|
$
|
69,468,324
|
|
|
$
|
82,829,848
|
|
Europe
|
|
|
22,753,379
|
|
|
|
29,658,797
|
|
|
|
30,019,538
|
|
Asia Pacific
|
|
|
4,732,517
|
|
|
|
6,588,609
|
|
|
|
3,778,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before reimbursable expenses
|
|
|
73,860,740
|
|
|
|
105,715,730
|
|
|
|
116,628,010
|
|
Reimbursable expenses
|
|
|
2,727,182
|
|
|
|
4,994,766
|
|
|
|
4,304,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
76,587,922
|
|
|
$
|
110,710,496
|
|
|
$
|
120,932,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
5,854,660
|
|
|
$
|
6,792,642
|
|
|
$
|
7,101,821
|
|
Europe
|
|
|
435,142
|
|
|
|
(6,516,747
|
)
|
|
|
(3,820,073
|
)
|
Asia Pacific
|
|
|
(628,461
|
)
|
|
|
(350,287
|
)
|
|
|
(959,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,661,341
|
|
|
$
|
(74,392
|
)
|
|
$
|
2,322,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
756,013
|
|
|
$
|
686,278
|
|
|
$
|
551,417
|
|
Europe
|
|
|
428,127
|
|
|
|
447,842
|
|
|
|
393,450
|
|
Asia Pacific
|
|
|
59,414
|
|
|
|
56,827
|
|
|
|
19,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,243,554
|
|
|
$
|
1,190,947
|
|
|
$
|
964,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
126,948
|
|
|
$
|
95,789
|
|
|
$
|
2,337,370
|
|
Europe
|
|
|
2,002
|
|
|
|
553,658
|
|
|
|
267,985
|
|
Asia Pacific
|
|
|
742
|
|
|
|
30,302
|
|
|
|
217,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
129,692
|
|
|
$
|
679,749
|
|
|
$
|
2,822,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
14,763,726
|
|
|
$
|
14,321,942
|
|
|
$
|
16,623,544
|
|
Europe
|
|
|
10,309,723
|
|
|
|
7,312,430
|
|
|
|
10,865,844
|
|
Asia Pacific
|
|
|
2,802,651
|
|
|
|
1,779,125
|
|
|
|
1,304,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,876,100
|
|
|
$
|
23,413,497
|
|
|
$
|
28,794,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
13,600,540
|
|
|
$
|
5,093,700
|
|
Accounts receivable, net
|
|
|
24,398,253
|
|
|
|
15,351,547
|
|
Other receivables
|
|
|
358,685
|
|
|
|
790,975
|
|
Prepaid expenses
|
|
|
2,235,572
|
|
|
|
1,671,510
|
|
Other
|
|
|
916,352
|
|
|
|
550,425
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
41,509,402
|
|
|
|
23,458,157
|
|
Leasehold Improvements and Equipment, Net
|
|
|
3,369,974
|
|
|
|
3,714,657
|
|
Other Assets
|
|
|
1,946,453
|
|
|
|
703,286
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,825,829
|
|
|
$
|
27,876,100
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Redeemable Member Units and Members Equity
(Deficit)
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
1,382,235
|
|
|
$
|
960,742
|
|
Line of credit
|
|
|
|
|
|
|
4,660,027
|
|
Accounts payable
|
|
|
870,116
|
|
|
|
647,473
|
|
Accrued compensation
|
|
|
28,314,729
|
|
|
|
13,425,668
|
|
Accrued business taxes
|
|
|
1,378,653
|
|
|
|
1,115,697
|
|
Accrued expenses
|
|
|
2,598,228
|
|
|
|
1,414,786
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
34,543,961
|
|
|
|
22,224,393
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Long-term debt, less current maturities
|
|
|
3,915,300
|
|
|
|
4,240,053
|
|
Deferred rent
|
|
|
1,850,056
|
|
|
|
1,697,122
|
|
Pension liability
|
|
|
|
|
|
|
569,005
|
|
Mandatorily redeemable member units
|
|
|
1,130,861
|
|
|
|
628,810
|
|
Other
|
|
|
58,955
|
|
|
|
191,148
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
6,955,172
|
|
|
|
7,326,138
|
|
|
|
|
|
|
|
|
|
|
Redeemable Member Units
|
|
|
54,923,448
|
|
|
|
30,937,827
|
|
Members Equity (Deficit)
|
|
|
(49,596,752
|
)
|
|
|
(32,612,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,825,829
|
|
|
$
|
27,876,100
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
F-24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net revenue
|
|
$
|
30,431,162
|
|
|
$
|
19,681,444
|
|
|
$
|
86,010,878
|
|
|
$
|
50,571,384
|
|
Reimbursable expenses
|
|
|
970,256
|
|
|
|
646,643
|
|
|
|
2,806,587
|
|
|
|
1,966,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
31,401,418
|
|
|
|
20,328,087
|
|
|
|
88,817,465
|
|
|
|
52,537,923
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
23,162,351
|
|
|
|
12,220,180
|
|
|
|
62,440,526
|
|
|
|
33,886,938
|
|
General and administrative
|
|
|
5,792,323
|
|
|
|
4,676,619
|
|
|
|
16,409,122
|
|
|
|
13,417,296
|
|
Reimbursable expenses
|
|
|
989,995
|
|
|
|
749,974
|
|
|
|
2,926,547
|
|
|
|
2,081,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,944,669
|
|
|
|
17,646,773
|
|
|
|
81,776,195
|
|
|
|
49,385,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,456,749
|
|
|
|
2,681,314
|
|
|
|
7,041,270
|
|
|
|
3,152,501
|
|
Interest expense, net
|
|
|
(57,235
|
)
|
|
|
(88,757
|
)
|
|
|
(197,843
|
)
|
|
|
(276,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,399,514
|
|
|
|
2,592,557
|
|
|
|
6,843,427
|
|
|
|
2,875,592
|
|
Income tax benefit (expense)
|
|
|
174,900
|
|
|
|
(226,869
|
)
|
|
|
(45,916
|
)
|
|
|
(491,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,574,414
|
|
|
$
|
2,365,688
|
|
|
$
|
6,797,511
|
|
|
$
|
2,384,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per weighted average unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
$
|
1.71
|
|
|
$
|
4.01
|
|
|
$
|
7.38
|
|
|
$
|
4.01
|
|
All other equity units
|
|
$
|
1.71
|
|
|
$
|
2.00
|
|
|
$
|
7.38
|
|
|
$
|
2.00
|
|
Basic weighted average units outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
|
238,046
|
|
|
|
238,046
|
|
|
|
238,046
|
|
|
|
238,046
|
|
All other equity units
|
|
|
652,462
|
|
|
|
648,964
|
|
|
|
649,526
|
|
|
|
658,351
|
|
Diluted income per weighted average unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
$
|
1.62
|
|
|
$
|
4.01
|
|
|
$
|
7.00
|
|
|
$
|
4.01
|
|
All other equity units
|
|
$
|
1.62
|
|
|
$
|
2.00
|
|
|
$
|
7.00
|
|
|
$
|
2.00
|
|
Diluted weighted average units outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
|
238,046
|
|
|
|
238,046
|
|
|
|
238,046
|
|
|
|
238,046
|
|
All other equity units
|
|
|
702,016
|
|
|
|
648,964
|
|
|
|
699,080
|
|
|
|
658,351
|
|
See Notes to Condensed Consolidated Financial Statements.
F-25
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,797,511
|
|
|
$
|
2,384,090
|
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
862,414
|
|
|
|
967,884
|
|
Loss on leasehold improvements and equipment disposals
|
|
|
563,311
|
|
|
|
84,481
|
|
Equity-based compensation
|
|
|
967,975
|
|
|
|
527,797
|
|
Change in fair value mandatorily redeemable member units
|
|
|
502,051
|
|
|
|
(273,106
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(9,013,459
|
)
|
|
|
(4,488,483
|
)
|
Accrued compensation
|
|
|
14,645,104
|
|
|
|
(1,273,595
|
)
|
Accrued business taxes
|
|
|
(40,525
|
)
|
|
|
(135,165
|
)
|
Accounts payables
|
|
|
226,192
|
|
|
|
(2,539,524
|
)
|
Accrued expenses
|
|
|
1,101,578
|
|
|
|
418,646
|
|
Deferred rent
|
|
|
(140,768
|
)
|
|
|
(639,720
|
)
|
Pension liability
|
|
|
(569,005
|
)
|
|
|
140,495
|
|
Prepaid expenses
|
|
|
(572,569
|
)
|
|
|
522,759
|
|
Other receivables
|
|
|
430,712
|
|
|
|
(132,087
|
)
|
Other assets
|
|
|
(1,633,720
|
)
|
|
|
95,306
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
14,126,802
|
|
|
$
|
(4,340,222
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Purchase of leasehold improvements and equipment
|
|
$
|
(540,551
|
)
|
|
$
|
(66,668
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Payments on notes payable redemption of
members equity
|
|
$
|
(661,158
|
)
|
|
$
|
(238,320
|
)
|
Net (payments) proceeds on revolving credit facility
|
|
|
(4,660,027
|
)
|
|
|
2,825,193
|
|
Principal payments on note payable bank
|
|
|
|
|
|
|
(218,434
|
)
|
Redemption of member units
|
|
|
|
|
|
|
(12,988
|
)
|
Payments received on members notes receivable
|
|
|
28,035
|
|
|
|
34,463
|
|
Payments on convertible promissory notes
|
|
|
(50,000
|
)
|
|
|
(75,000
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
$
|
(5,343,150
|
)
|
|
$
|
2,314,914
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
$
|
8,243,101
|
|
|
$
|
(2,091,976
|
)
|
Effect of foreign currency on cash
|
|
|
263,739
|
|
|
|
1,890,716
|
|
Cash:
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
5,093,700
|
|
|
|
3,666,370
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
$
|
13,600,540
|
|
|
$
|
3,465,110
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
F-26
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
|
|
Note 1.
|
Basis of
Presentation
|
The accompanying unaudited condensed consolidated financial
statements include the accounts of CTPartners Executive Search
LLC, together with its subsidiaries (together
CTPartners or the Company) and have been
prepared in accordance with accounting principles generally
accepted in the United States for interim financial information
and with the instructions to
Form 10-Q
and the requirements of
Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted
in the United States of America for complete financial statement
presentation.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine
month period ended September 30, 2010 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 2010.
The balance sheet at December 31, 2009 has been derived
from the audited financial statements at that date but does not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The interim financial statements contained in this report should
be read in conjunction with the audited consolidated financial
statements and footnotes presented elsewhere in this
registration statement.
|
|
Note 2.
|
Accounts
Receivable
|
The allowance for doubtful accounts and reserve for billing
adjustments at September 30, 2010 and December 31,
2009 was $1,259,000 and $1,012,000 respectively.
|
|
Note 3.
|
Pro Forma
Information
|
Unaudited Pro Forma Net Income per Share Upon
the conversion from a limited liability company to a
C-corporation (corporation), all of the Companys
outstanding units will automatically convert into shares of
common stock. The September 30, 2010 unaudited net income
per share, calculated below, assumes a 1 to 5.269
unit-to-share
ratio upon conversion. The Companys unaudited pro forma
income tax footnote has been prepared as if the Company were
taxable as a corporation since its inception. The Company can
make no guarantee that a conversion to a corporation will occur.
|
|
|
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
Taxable income
|
|
$
|
5,892,387
|
|
Income tax
|
|
|
2,074,992
|
|
Numerator:
|
|
|
|
|
Net income
|
|
|
4,722,519
|
|
Denominator:
|
|
|
|
|
Weighted average common shares used to compute net income per
share
|
|
|
6,830,769
|
|
|
|
|
|
|
Pro forma net income per share
|
|
$
|
0.69
|
|
|
|
|
|
|
As a consequence of the anticipated conversion to a corporation,
the Company will be required to change its tax filings from cash
to accrual basis. As of September 30, 2010 the Company
anticipates a one-time tax expense of approximately
$4.3 million in 2010 as a result of this change.
Unaudited Pro Forma Incomes Taxes The Company
has operated as a limited liability company since 2004. The
following pro forma disclosure for the nine months ended
September 30, 2010 has been prepared as if the Company had
been taxable as a corporation. The pro forma income tax expense
for the nine months ended September 30, 2010 was
$2,074,992, which is net of $223,000 for a pro forma deferred
tax asset related to the non-deductible portion of bonus expense
not paid within two and one-half months after year-end as
required by the Internal Revenue Code.
F-27
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
Note 3.
|
Pro Forma
Information (Continued)
|
|
|
|
|
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30, 2010
|
|
|
US income
|
|
$
|
4,914,955
|
|
Non-US income
|
|
|
1,882,556
|
|
|
|
|
|
|
Net income
|
|
|
6,797,511
|
|
Temporary differences and nondeductible expenses
|
|
|
971,897
|
|
Utilization of net operating loss carryover
|
|
|
(1,877,021
|
)
|
|
|
|
|
|
Taxable income
|
|
|
5,892,387
|
|
Current expense:
|
|
|
|
|
Federal tax
|
|
|
2,003,411
|
|
State and local tax
|
|
|
294,620
|
|
|
|
|
|
|
|
|
|
2,298,031
|
|
Deferred expense:
|
|
|
|
|
Federal
|
|
|
(194,444
|
)
|
State and local
|
|
|
(28,595
|
)
|
|
|
|
|
|
|
|
|
(223,039
|
)
|
|
|
|
|
|
Total income tax expense
|
|
$
|
2,074,992
|
|
|
|
|
|
|
Unaudited Pro Forma Members Equity
(Deficit) If the Company converts from a limited
liability company to a corporation, all of the member units
outstanding will automatically convert into shares of common
stock of CTPartners Executive Search, Inc. at a 1 to 5.269
conversion ratio. Unaudited pro forma stockholders equity
(deficit), as adjusted for the assumed conversion of the member
units is set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
As
|
|
|
Pro Forma
|
|
|
Stockholders
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Equity(Deficit)
|
|
|
Members equity (deficit)/stockholders equity
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
|
|
|
$
|
6,831
|
|
|
$
|
6,831
|
|
Additional paid-in capital
|
|
|
|
|
|
|
56,047,478
|
|
|
|
56,047,478
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(2,275,081
|
)
|
|
|
(2,275,081
|
)
|
Mandatorily redeemable member units
|
|
|
1,130,861
|
|
|
|
(1,130,861
|
)
|
|
|
|
|
Redeemable member units
|
|
|
54,923,448
|
|
|
|
(54,923,448
|
)
|
|
|
|
|
Members deficit/accumulated deficit
|
|
|
(49,596,752
|
)
|
|
|
(4,099,911
|
)
|
|
|
(53,696,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity (deficit)/stockholders equity
(deficit)
|
|
$
|
6,457,557
|
|
|
$
|
(6,374,992
|
)
|
|
$
|
82,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4.
|
Basic and
Diluted Earnings Per Unit
|
Basic and diluted earnings per member unit is presented in
conformity with the two-class method. The Class E units
contain certain preference items related to income (loss)
allocations and distributions. All other member units share in
the allocation of income (loss) and distributions equally.
Participating member units are allocated their portion of net
income (loss) and consist of member units subject to clawback
and the mandatorily redeemable member units.
F-28
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
Note 4.
|
Basic and
Diluted Earnings Per Unit (Continued)
|
Income allocated to the unit holders in computing basic income
per weighted average member unit is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net income as reported
|
|
$
|
1,574,414
|
|
|
$
|
2,365,688
|
|
|
$
|
6,797,511
|
|
|
$
|
2,384,090
|
|
Less income allocated to other participating units
|
|
|
50,059
|
|
|
|
114,523
|
|
|
|
249,690
|
|
|
|
114,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used for earnings per share
|
|
$
|
1,524,355
|
|
|
$
|
2,251,165
|
|
|
$
|
6,547,821
|
|
|
$
|
2,269,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
407,483
|
|
|
$
|
475,861
|
|
|
$
|
1,756,120
|
|
|
$
|
475,850
|
|
Previously allocated losses/(losses)
|
|
|
|
|
|
|
478,004
|
|
|
|
|
|
|
|
478,004
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
407,483
|
|
|
$
|
953,865
|
|
|
$
|
1,756,120
|
|
|
$
|
953,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other member units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
1,116,872
|
|
|
$
|
1,297,300
|
|
|
$
|
4,791,701
|
|
|
$
|
1,316,034
|
|
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,116,872
|
|
|
$
|
1,297,300
|
|
|
$
|
4,791,701
|
|
|
$
|
1,316,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income allocated to the unit holders in computing diluted income
per weighted average member unit is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net income as reported
|
|
$
|
1,574,414
|
|
|
$
|
2,365,688
|
|
|
$
|
6,797,511
|
|
|
$
|
2,384,090
|
|
Less income allocated to other participating units
|
|
|
47,500
|
|
|
|
114,523
|
|
|
|
236,947
|
|
|
|
114,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used for earnings per share
|
|
$
|
1,526,914
|
|
|
$
|
2,251,165
|
|
|
$
|
6,560,564
|
|
|
$
|
2,269,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class E units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
386,651
|
|
|
$
|
475,861
|
|
|
$
|
1,666,496
|
|
|
$
|
475,850
|
|
Previously allocated losses/(losses)
|
|
|
|
|
|
|
478,004
|
|
|
|
|
|
|
|
478,004
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
386,651
|
|
|
$
|
953,865
|
|
|
$
|
1,666,496
|
|
|
$
|
953,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other member units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
1,140,263
|
|
|
$
|
1,297,300
|
|
|
$
|
4,894,068
|
|
|
$
|
1,316,034
|
|
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,140,263
|
|
|
$
|
1,297,300
|
|
|
$
|
4,894,068
|
|
|
$
|
1,316,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company has incurred approximately $1,200,000 in costs
related to the Companys initial public offering during the
nine months ended September 30, 2010. These costs are
included in Other Assets on the consolidated balance sheet.
These costs will be netted against the proceeds of the initial
public offering upon consummation.
|
|
Note 6.
|
Leasehold
Improvements and Equipment
|
The components of the leasehold improvements and equipment as of
September 30, 2010 and December 31, 2009 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
Leasehold improvements
|
|
$
|
3,569,181
|
|
|
$
|
3,522,433
|
|
Office furniture, fixtures, and equipment
|
|
|
2,212,599
|
|
|
|
2,201,861
|
|
Computer equipment and software
|
|
|
3,639,705
|
|
|
|
3,182,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,421,485
|
|
|
|
8,906,787
|
|
Accumulated depreciation and amortization
|
|
|
(6,051,511
|
)
|
|
|
(5,192,130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,369,974
|
|
|
$
|
3,714,657
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the three and nine
months ended September 30, 2010 was $286,119 and $862,414
respectively, and for the three and nine months ended
September 30, 2009 was $296,235 and $967,884 respectively.
The Company, under the terms of its revolving credit facility,
may borrow an amount equal to the lesser of $10 million or
the Borrowing Base (the Companys eligible
accounts receivable as defined in the Credit Agreement), with
interest calculated at 325 basis points above the LIBOR
rate as defined in the revolving credit agreement (the adjusted
LIBOR rate), which was 0.26% at September 30, 2010. The
balance owed under the revolving credit facility at
September 30, 2010 and December 31, 2009, was $0 and
$4,660,027 respectively. Additionally, the Company had issued
letters of credit related to office lease agreements secured by
the Credit Agreement in the amount of $3,008,000 as of
September 30, 2010 and December 31, 2009. Available
borrowings under the revolving credit facility were
approximately $10,000,000 at September 30, 2010.
|
|
Note 8.
|
Non-Qualified
Unit Purchase Plan and Performance Unit Plan
|
The Company maintains a member unit purchase plan and a
performance unit plan for the benefit of its officers and key
employees. The plans are administered by a committee that has
the discretionary authority to issue member units to eligible
employees. The member units are valued under both plans in
accordance with the Formula Value as defined in the Unit
Purchase Agreement, which is a valuation model based on the
Companys
12-month
trailing performance. All member units are fully vested upon
issuance, but in certain cases units are subject to a clawback
provision, which places the obligation on the unit holder to
surrender a portion of the member units if their employment with
the Company is terminated before a specified period, typically
one year.
F-30
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
Note 8.
|
Non-Qualified
Unit Purchase Plan and Performance Unit
Plan (Continued)
|
A summary of the status of the Companys member units
subject to clawback provisions for the nine month period ending
September 30, 2010, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
Member Units Subject to Clawback
|
|
Units
|
|
|
Fair Value
|
|
|
Member units subject to clawback at December 31, 2009
|
|
|
21,985
|
|
|
$
|
44.88
|
|
Granted
|
|
|
6,668
|
|
|
|
55.80
|
|
Expiration of clawback provisions
|
|
|
(16,868
|
)
|
|
|
42.50
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member units subject to clawback at September 30, 2010
|
|
|
11,785
|
|
|
$
|
53.50
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010, there was approximately $631,000
of unrecognized compensation expense related to member units
subject to clawback provisions granted under the plan. This
expense is expected to be recognized over a weighted-average
period of one year.
The total fair value of member units issued during the nine
months ended September 30, 2010 and 2009 was $588,302 and
$369 respectively. Total compensation expense related to the
plan for the three and nine months ended September 30, 2010
was $592,444 and $967,975 respectively. Total compensation
expense for the three and nine month period ending
September 30, 2009 was $213,356 and $527,797 respectively.
The purpose of the performance unit plan is to reward executive
performance with any potential increase in the fair value of the
Company over the fair value at the date of the performance unit
issuance. Units generally vest over a three-year period. The
value of a performance unit is limited to the excess value, if
any, of the fair value over the value at the date of issue.
A summary of the Companys non-vested performance units for
the nine months ended September 30, 2010, is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
Performance Units
|
|
Units
|
|
|
Fair Value
|
|
|
Total non-vested performance units at December 31, 2009
|
|
|
100,149
|
|
|
$
|
33.26
|
|
Granted
|
|
|
29,100
|
|
|
|
30.28
|
|
Vested
|
|
|
(42,344
|
)
|
|
|
38.14
|
|
Forfeited
|
|
|
(200
|
)
|
|
|
38.21
|
|
|
|
|
|
|
|
|
|
|
Total non-vested units at September 30, 2010
|
|
|
86,705
|
|
|
$
|
35.66
|
|
|
|
|
|
|
|
|
|
|
Compensation expense recorded under the plan for the three and
nine months ended September 30, 2010 was $522,917 and
$1,135,853 respectively. There was no compensation expense
recorded under the plan for the three and nine months ended
September 30, 2009.
F-31
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
Note 8.
|
Non-Qualified
Unit Purchase Plan and Performance Unit
Plan (Continued)
|
The change in fair value of the performance units are summarized
as follows:
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
45,033
|
|
Unrealized losses
|
|
|
306,468
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
|
351,501
|
|
Unrealized losses
|
|
|
306,468
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
|
657,969
|
|
Unrealized losses
|
|
|
522,917
|
|
|
|
|
|
|
Balance at September 30, 2010
|
|
$
|
1,180,886
|
|
|
|
|
|
|
|
|
Note 9.
|
Mandatorily
Redeemable Member Units and Redeemable Member Units
|
The Company has reflected those member units with mandatory
redemption features as a long-term liability and the member
units with a redemption option as redeemable member units on its
consolidated balances sheets. The change in fair value for those
member units with mandatory redemption features are included in
compensation and benefits in the consolidated statements of
operations. The change in fair value for the member units with a
redemption option are included as a component of members
equity (deficit).
As of September 30, 2010 and December 31, 2009, the
liability for mandatorily redeemable member units was $1,130,861
and $628,810 respectively. The expense included in compensation
and benefits in the consolidated statements of operations for
the three and nine months period ended September 30, 2010
was $104,978 and $502,051 respectively. The credit for the three
and nine month periods ended September 30, 2009 was
($24,864) and ($273,106) respectively.
The change in fair value of the mandatorily redeemable member
units are summarized as follows:
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
628,810
|
|
Unrealized losses
|
|
|
198,536
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
|
827,346
|
|
Unrealized losses
|
|
|
198,537
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
|
1,025,883
|
|
Unrealized losses
|
|
|
104,978
|
|
|
|
|
|
|
Balance at September 30, 2010
|
|
$
|
1,130,861
|
|
|
|
|
|
|
As of September 30, 2010 and December 31, 2009, the
fair value of the redeemable member units was $54,923,448 and
$30,937,827 respectively. The increase in the fair value,
included as a component of members equity (deficit), for
the three and nine months ended September 30, 2010 was
$5,582,019 and $23,985,621 respectively. The decrease in the
fair value for the three and nine months ended
September 30, 2009 was $(10,666) and $(12,686,434)
respectively.
|
|
Note 10.
|
Defined
Benefit Cash Balance Plan
|
The Company fully funded its defined benefit cash balance plan
during the nine months ended September 30, 2010. Total
contributions to the plan were $720,000 for the nine months
ended September 30, 2010. The Company did not make any
contributions for the nine months ended September 30, 2009.
F-32
CTPARTNERS
EXECUTIVE SEARCH LLC AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
Note 11.
|
Enterprise
Geographic Concentrations
|
The Company operates in three principal geographic regions: the
Americas, Europe and Asia Pacific. The revenue, operating income
(loss), depreciation and amortization, and capital expenditures,
by region, for the three and nine months period ended
September 30, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
21,258,130
|
|
|
$
|
13,681,003
|
|
|
$
|
56,003,864
|
|
|
$
|
34,815,339
|
|
Europe
|
|
|
6,047,388
|
|
|
|
4,040,149
|
|
|
|
20,246,157
|
|
|
|
11,797,090
|
|
Asia Pacific
|
|
|
3,125,644
|
|
|
|
1,960,292
|
|
|
|
9,760,857
|
|
|
|
3,958,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before reimbursements
|
|
|
30,431,162
|
|
|
|
19,681,444
|
|
|
|
86,010,878
|
|
|
|
50,571,384
|
|
Reimbursements
|
|
|
970,256
|
|
|
|
646,643
|
|
|
|
2,806,587
|
|
|
|
1,966,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total regions
|
|
$
|
31,401,418
|
|
|
$
|
20,328,087
|
|
|
$
|
88,817,465
|
|
|
$
|
52,537,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
1,044,397
|
|
|
$
|
3,598,133
|
|
|
$
|
4,551,923
|
|
|
$
|
5,004,987
|
|
Europe
|
|
|
(265,632
|
)
|
|
|
(543,200
|
)
|
|
|
699,972
|
|
|
|
(998,992
|
)
|
Asia Pacific
|
|
|
677,984
|
|
|
|
(373,619
|
)
|
|
|
1,789,375
|
|
|
|
(853,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,456,749
|
|
|
$
|
2,681,314
|
|
|
$
|
7,041,270
|
|
|
$
|
3,152,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
167,154
|
|
|
$
|
192,795
|
|
|
$
|
503,620
|
|
|
$
|
650,952
|
|
Europe
|
|
|
91,848
|
|
|
|
89,447
|
|
|
|
281,863
|
|
|
|
271,832
|
|
Asia Pacific
|
|
|
27,117
|
|
|
|
13,993
|
|
|
|
76,931
|
|
|
|
45,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
286,119
|
|
|
$
|
296,235
|
|
|
$
|
862,414
|
|
|
$
|
967,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
250,127
|
|
|
$
|
|
|
|
$
|
315,535
|
|
|
$
|
66,668
|
|
Europe
|
|
|
98,535
|
|
|
|
|
|
|
|
105,247
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
119,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
348,662
|
|
|
$
|
|
|
|
$
|
540,551
|
|
|
$
|
66,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets by geographic concentrations are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
25,183,970
|
|
|
$
|
14,763,726
|
|
Europe
|
|
|
13,446,465
|
|
|
|
10,309,723
|
|
Asia Pacific
|
|
|
8,195,394
|
|
|
|
2,802,651
|
|
|
|
|
|
|
|
|
|
|
Total regions
|
|
$
|
46,825,829
|
|
|
$
|
27,876,100
|
|
|
|
|
|
|
|
|
|
|
F-33
|
|
Note 11.
|
Enterprise
Geographic Concentrations (Continued)
|
2,307,692 Shares
of Common Stock
Prospectus
Dated ,
2010
|
|
William
Blair & Company |
C.L. King & Associates
|
Through and
including ,
2010 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealers obligation to
deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.
PART II
INFORMATION NOT
REQUIRED IN PROSPECTUS
|
|
ITEM 13.
|
Other
Expenses of Issuance and Distribution.
|
The following table sets forth all expenses other than the
underwriting discounts and commissions, payable by the
registrant in connection with the sale of the common stock being
registered. All amounts shown are estimates except for the SEC
registration fee.
|
|
|
|
|
Securities and Exchange Commission Registration Fee
|
|
$
|
2,460
|
|
Financial Industry Regulatory Authority Filing Fee
|
|
|
3,950
|
|
NYSE Amex Equities stock exchange Listing Fee
|
|
|
50,000
|
|
Legal Fees and Expenses
|
|
|
300,000
|
|
Printing Expenses
|
|
|
90,000
|
|
Blue Sky Fees
|
|
|
7,500
|
|
Transfer Agent Fees
|
|
|
15,000
|
|
Accounting Fees and Expenses
|
|
|
775,000
|
|
Miscellaneous
|
|
|
360,000
|
|
|
|
|
|
|
Total
|
|
$
|
1,603,910
|
|
|
|
|
|
|
All expenses (other than underwriting discounts and commissions)
will be borne by the Company in connection with the sale of the
common stock being registered.
|
|
ITEM 14.
|
Indemnification
of Officers and Directors
|
Section 145(a) of the Delaware General Corporation Law
(DGCL) provides, in general, that a corporation may
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the
corporation), because he or she is or was a director, officer,
employee, or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including
attorneys fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by the person in
connection with such action, suit, or proceeding, if he or she
acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
Section 145(b) of the DGCL provides, in general, that a
corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation
to procure a judgment in its favor because the person is or was
a director, officer, employee, or agent of the corporation, or
is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys fees) actually and
reasonably incurred by the person in connection with the defense
or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, except
that no indemnification shall be made with respect to any claim,
issue, or matter as to which he or she shall have been adjudged
to be liable to the corporation unless and only to the extent
that the Court of Chancery or other adjudicating court
determines that, despite the adjudication of liability but in
view of all of the circumstances of the case, he or she is
fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or other adjudicating court shall
deem proper.
II-1
Section 145(e) of the DGCL provides that expenses
(including attorneys fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it
shall ultimately be determined that such person is not entitled
to be indemnified by the corporation as authorized by
Section 145 of the DGCL.
Section 145(e) of the DGCL further provides that such
expenses (including attorneys fees) incurred by former
directors and officers or other employees or agents of the
corporation may be so paid upon such terms and conditions as the
corporation deems appropriate.
Section 145(g) of the DGCL provides, in general, that a
corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person
and incurred by such person in any such capacity, or arising out
of his or her status as such, whether or not the corporation
would have the power to indemnify the person against such
liability under Section 145 of the DGCL.
Our bylaws that will be in effect upon the completion of this
offering will provide that we will indemnify, to the fullest
extent permitted by the DGCL, any person who was or is made or
is threatened to be made a party or is involved in any actual or
threatened action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that he
or she, or a person of whom he or she is the legal
representative, is or was one of our directors or officers or,
while serving as one of our directors or officers, is or was
serving at our request as a director, officer, employee, or
agent of another corporation or of another entity, against all
liability and loss suffered and expenses (including
attorneys fees) reasonably incurred by such person,
subject to limited exceptions relating to indemnity in
connection with a proceeding (or part thereof) initiated by such
person. Our bylaws that will be in effect upon completion of
this offering will further provide for the advancement of
expenses to each of our officers and directors.
Our certificate of incorporation that will be in effect upon
completion of this offering will provide that, to the fullest
extent permitted by the DGCL, as the same exists or may be
amended from time to time, our directors shall not be personally
liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director. Under Section 102(b)(7) of
the DGCL, the personal liability of a director to the
corporation or its stockholders for monetary damages for breach
of fiduciary duty can be limited or eliminated except:
|
|
|
|
|
for any breach of the directors duty of loyalty to the
corporation or its stockholders;
|
|
|
|
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
|
|
|
|
under Section 174 of the DGCL (relating to unlawful payment
of dividend or unlawful stock purchase or redemption); or
|
|
|
|
for any transaction from which the director derived an improper
personal benefit.
|
We also intend to maintain a general liability insurance policy
which covers certain liabilities of directors and officers of
our company arising out of claims based on acts or omissions in
their capacities as directors or officers, whether or not we
would have the power to indemnify such person against such
liability under the DGCL or the provisions of our certificate of
incorporation or bylaws.
In connection with the sale of common stock being registered
hereby, we intend to enter into indemnification agreements with
each of our directors and our executive officers. These
agreements will provide that we will indemnify each of our
directors and such officers to the fullest extent permitted by
law and by our certificate of incorporation or bylaws.
II-2
In any underwriting agreement we enter into in connection with
the sale of common stock being registered hereby, the
underwriters will agree to indemnify, under certain conditions,
us, our directors, our officers and persons who control us,
within the meaning of the Securities Act, against certain
liabilities.
|
|
ITEM 15.
|
Recent
Sales of Unregistered Securities
|
The following sets forth information regarding all unregistered
securities sold since July 1, 2007:
|
|
|
|
1.
|
On January 1, 2007, we issued an aggregate of 25,000
performance units to executive search consultants pursuant to
our performance unit plan, which was terminated prior to the
effectiveness of this registration statement. The performance
unit plan worked much like a stock appreciation rights plan, in
that units were granted to participants with a value equal to
the value of our member units at the date of grant and were
cashed out at a price equal to the spread between the value of
CT Partners Executive Search LLCs member units at the time
of exercise and their date of grant value.
|
|
|
|
|
|
Therefore, the participant only received the increase in value
from the date of grant to the date of purchase. The grants made
in 2007 were made with a grant price of $38.21 per member unit.
These grants were made in connection with the employment of
certain executive search consultants and we received no
consideration in connection therewith. The grants were exempt
from registration pursuant to Rule 701 under the Securities Act
or pursuant to Section 4(2) under the Securities Act.
|
|
|
|
|
2.
|
On January 1, 2008, we issued an aggregate of 35,850
performance units to executive search consultants pursuant to
our performance unit plan, which was terminated prior to the
effectiveness of this registration statement. The grants made in
2008 were made with a grant price of $53.60 per member unit.
These grants were made in connection with the employment of
certain executive search consultants and we received no
consideration in connection therewith. The grants were exempt
from registration pursuant to Rule 701 under the Securities
Act or pursuant to Section 4(2) under the Securities Act.
|
|
|
|
|
3.
|
On July 1, 2009, we issued an aggregate of 71,830
performance units to executive search consultants pursuant to
our performance unit plan, which was terminated prior to the
effectiveness of this registration statement. These grants were
made in connection with the employment of certain executive
search consultants and we received no consideration in
connection therewith. The grants made in 2009 were made with a
grant price of $35.00 per member unit. The grants were exempt
from registration pursuant to Rule 701 under the Securities
Act or pursuant to Section 4(2) under the Securities Act.
|
|
|
|
|
4.
|
On March 1, 2010, we issued an aggregate of 29,100
performance units to executive search consultants pursuant to
our performance unit plan, which was terminated prior to the
effectiveness of this registration statement. The grants made in
2010 were made with a grant price of $30.28 per member unit.
These grants were made in connection with the employment of
certain executive search consultants and we received no
consideration in connection therewith. The grants were exempt
from registration pursuant to Rule 701 under the Securities
Act or pursuant to Section 4(2) under the Securities Act.
|
|
|
|
|
5.
|
On August 1, 2010, we granted an executive search
consultant 20,000 member units, 6,668 of which vested
immediately with the remaining vesting on the first and second
anniversary of the date of grant. The grant was made as part of
an offer of employment for an executive search consultant. This
grant was exempt from registration under Section 4(2) of
the Securities Act, as a sale not involving a public offering,
or pursuant to Rule 701 under the Securities Act.
|
|
|
|
|
6.
|
On August 2, 2010, we granted an executive search
consultant 2,000 member units, which vest on the first, second
and third anniversary of the date of grant. The grant was made
as part of an offer of employment for an executive search
consultant. This grant was exempt from
|
II-3
registration under Section 4(2) of the Securities Act, as
a sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
|
|
|
7.
|
On August 3, 2010, we granted an executive search
consultant 1,700 member units, which vest on the first, second
and third anniversary of the date of grant. The grant was made
as part of an offer of employment for an executive search
consultant. This grant was exempt from registration under
Section 4(2) of the Securities Act, as a sale not involving
a public offering, or pursuant to Rule 701 under the
Securities Act.
|
|
|
|
|
8.
|
On April 1, 2010, we granted an executive search consultant
3,000 member units. The units are subject to a three-year
clawback and were made as part of renegotiating the compensation
package for one of our executive search consultants. This grant
was exempt from registration under Section 4(2) of the
Securities Act, as a sale not involving a public offering, or
pursuant to Rule 701 under the Securities Act.
|
|
|
|
|
9.
|
On April 1, 2010, we granted an executive search consultant
9,500 member units. The units are subject to a three-year
clawback and were made as part of an offer of employment for an
executive search consultant. This grant was exempt from
registration under Section 4(2) of the Securities Act, as a
sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
|
|
|
|
10.
|
On January 18, 2010, we granted an executive search
consultant 1,500 member units. The units are subject to a
three-year clawback and were made as part of an offer of
employment for an executive search consultant. This grant was
exempt from registration under Section 4(2) of the
Securities Act, as a sale not involving a public offering, or
pursuant to Rule 701 under the Securities Act.
|
|
|
|
|
11.
|
On January 6, 2010, we granted an executive search
consultant 1,000 member units. The units are subject to a
three-year clawback and were made as part of an offer of
employment for an executive search consultant. This grant was
exempt from registration under Section 4(2) of the
Securities Act, as a sale not involving a public offering, or
pursuant to Rule 701 under the Securities Act.
|
|
|
|
|
12.
|
On September 9, 2009, we granted an executive search
consultant 3,000 member units. The units are subject to a
three-year clawback and were made as part of an offer of
employment for an executive search consultant. This grant was
exempt from registration under Section 4(2) of the
Securities Act, as a sale not involving a public offering, or
pursuant to Rule 701 under the Securities Act.
|
|
|
|
|
13.
|
On July 20, 2009, we granted an executive search consultant
3,000 member units. The units are subject to a three-year
clawback and were made as part of an offer of employment for an
executive search consultant. This grant was exempt from
registration under Section 4(2) of the Securities Act, as a
sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
|
|
|
|
14.
|
On July 20, 2009, we granted an executive search consultant
3,500 member units. The units are subject to a three-year
clawback and were made as part of an offer of employment for an
executive search consultant. This grant was exempt from
registration under Section 4(2) of the Securities Act, as a
sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
|
|
|
|
15.
|
On May 28, 2009, we granted an executive search consultant
5,000 member units. The units are subject to a three-year
clawback and were made as part of an offer of employment for an
executive search consultant. This grant was exempt from
registration under Section 4(2) of the Securities Act, as a
sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
II-4
|
|
|
|
16.
|
On May 11, 2009, we granted an executive search consultant
2,500 member units. The units are subject to a three-year
clawback and were made as part of an offer of employment for an
executive search consultant. This grant was exempt from
registration under Section 4(2) of the Securities Act, as a
sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
|
|
17.
|
On June 16, 2008, we entered into identical convertible
promissory notes with certain of the executive search
consultants of CT Partners Executive Search LLC, pursuant to
which we raised $2.7 million. The notes paid interest at a
fixed rate of 5% per year. The notes can be prepaid at any time,
provided that the holder of the note has the right to convert
the note to equity in the event that we give notice of our
intent to prepay. The convertible notes were issued to
accredited investors pursuant to Regulation D under the
Securities Act.
|
|
|
18.
|
On October 1, 2008, we granted an executive search
consultant 2,750 member units. The units are subject to a
three-year clawback and were made as part of an offer of
employment for an executive search consultant. This grant was
exempt from registration under Section 4(2) of the
Securities Act, as a sale not involving a public offering, or
pursuant to Rule 701 under the Securities Act.
|
|
|
19.
|
On July 1, 2008, we granted an executive search consultant
3,500 member units. The units are subject to a three-year
clawback and were made as part of an offer of employment for an
executive search consultant. This grant was exempt from
registration under Section 4(2) of the Securities Act, as a
sale not involving a public offering, or pursuant to
Rule 701 under the Securities Act.
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Document
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement
|
|
2
|
.1
|
|
Form of Plan of Conversion of CTPartners Executive Search LLC
into CTPartners Executive Search Inc.
|
|
3
|
.1
|
|
Form of Certificate of Incorporation of CTPartners Executive
Search Inc., to be in effect upon completion of the
offering
|
|
3
|
.2
|
|
Form of Bylaws of CTPartners Executive Search Inc., to be in
effect upon completion of the offering
|
|
4
|
.1
|
|
Form of CTPartners Executive Search Inc. Common Stock
Certificate**
|
|
5
|
.1
|
|
Opinion of Ulmer & Berne LLP*
|
|
10
|
.1
|
|
Form of Indemnification Agreement, by and between CTPartners
Executive Search Inc. and each of its Directors and Executive
Officers
|
|
10
|
.2
|
|
Employment Agreement with Brian M. Sullivan dated
September 1, 2010
|
|
10
|
.3
|
|
Employment Agreement with David C. Nocifora dated
September 1, 2010
|
|
10
|
.4.
|
|
Form of 2010 equity incentive plan of CTPartners Executive
Search Inc. to be in effect upon effectiveness of
conversion
|
|
10
|
.5
|
|
Second Amended and Restated Credit and Security Agreement Among
JPMorgan Chase Bank, NA and CTPartners Executive Search LLC
dated November 19, 2010**
|
|
10
|
.6
|
|
Revised Letter of Agreement (Affiliation and License Agreement)
between CTPartners Executive Search LLC and HS Andean Holding
Corporation dated April 26, 2007
|
|
10
|
.7
|
|
Form of Convertible Promissory Note of CTPartners Executive
Search LLC
|
|
10
|
.8
|
|
Form of Note Prepayment and Conversion Agreement
|
|
16
|
|
|
Letter re Change in Certifying Accountant
|
|
21
|
|
|
List of Subsidiaries
|
|
23
|
.1
|
|
Consent of Ulmer & Berne LLP (included in
Exhibit 5.01)*
|
|
23
|
.2
|
|
Consent of Independent Registered Public Accounting Firm,
McGladrey & Pullen, LLP**
|
|
99
|
.1
|
|
Consent of Director Designee, Scott M. Birnbaum
|
|
99
|
.2
|
|
Consent of Director Designee, Michael C.
Feiner
|
II-5
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Document
|
|
|
99
|
.3
|
|
Consent of Director Designee, Thomas R. Testwuide, Sr.
|
|
99
|
.4
|
|
Consent of Director Designee, Betsy L. Morgan
|
previously
filed
* To be filed by
amendment.
** filed herewith
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
The undersigned hereby undertakes as follows:
|
|
|
|
|
For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be
part of this Registration Statement as of the time it was
declared effective; and
|
|
|
|
For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
|
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, CTPartners Executive Search LLC has duly caused this
Amendment No. 3 to the registrants registration
statement on
Form S-1
to be signed on its behalf by the undersigned, thereunto duly
authorized, in Cleveland, Ohio on November 24, 2010.
CTPartners Executive Search LLC
|
|
|
|
By:
|
/s/ David
C. Nocifora
|
Name: David C. Nocifora
Title: Chief Operating and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed below by
the following persons in the capacities and on the dates
indicated below.
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Brian
M. Sullivan
Brian
M. Sullivan
|
|
Chief Executive Officer and Member of
the Board of Managers
(Principal Executive Officer)
|
|
November 24, 2010
|
|
|
|
|
|
/s/ David
C. Nocifora
David
C. Nocifora
|
|
Chief Operating and Chief Financial
Officer and Member of the Board of Managers (Principal
Accounting Officer)
|
|
November 24, 2010
|
II-7
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Document
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement
|
|
2
|
.1
|
|
Form of Plan of Conversion of CTPartners Executive Search LLC
into CTPartners Executive Search Inc.
|
|
3
|
.1
|
|
Form of Certificate of Incorporation of CTPartners Executive
Search Inc., to be in effect upon completion of the
offering
|
|
3
|
.2
|
|
Form of Bylaws of CTPartners Executive Search Inc., to be in
effect upon completion of the offering
|
|
4
|
.1
|
|
Form of CTPartners Executive Search Inc. Common Stock
Certificate**
|
|
5
|
.1
|
|
Opinion of Ulmer & Berne LLP*
|
|
10
|
.1
|
|
Form of Indemnification Agreement, by and between CTPartners
Executive Search Inc. and each of its Directors and Executive
Officers
|
|
10
|
.2
|
|
Employment Agreement with Brian M. Sullivan dated
September 1, 2010
|
|
10
|
.3
|
|
Employment Agreement with David C. Nocifora dated
September 1, 2010
|
|
10
|
.4.
|
|
Form of 2010 equity incentive plan of CTPartners Executive
Search Inc. to be in effect upon effectiveness of
conversion
|
|
10
|
.5
|
|
Second Amended and Restated Credit and Security Agreement Among
JPMorgan Chase Bank, NA and CTPartners Executive Search LLC
dated November 19, 2010**
|
|
10
|
.6
|
|
Revised Letter of Agreement (Affiliation and License Agreement)
between CTPartners Executive Search LLC and HS Andean Holding
Corporation dated April 26, 2007
|
|
10
|
.7
|
|
Form of Convertible Promissory Note of CTPartners Executive
Search LLC
|
|
10
|
.8
|
|
Form of Note Prepayment and Conversion Agreement
|
|
16
|
|
|
Letter re Change in Certifying Accountant
|
|
21
|
|
|
List of Subsidiaries
|
|
23
|
.1
|
|
Consent of Ulmer & Berne LLP (included in
Exhibit 5.01)*
|
|
23
|
.2
|
|
Consent of Independent Registered Public Accounting Firm,
McGladrey & Pullen, LLP**
|
|
99
|
.1
|
|
Consent of Director Designee, Scott M. Birnbaum
|
|
99
|
.2
|
|
Consent of Director Designee, Michael C. Feiner
|
|
99
|
.3
|
|
Consent of Director Designee, Thomas R. Testwuide, Sr.
|
|
99
|
.4
|
|
Consent of Director Designee, Betsy L. Morgan
|
previously
filed
* To be filed by
amendment.
** filed herewith
S-1