Item 1 - Business - -----------------
General
The Metzler Group, Inc. (the "Company" or "Metzler") is a leading nationwide provider of consulting services to electric, gas and water utilities and other energy and utility-related businesses. The Company offers a wide range of consulting services designed to assist its clients in succeeding in a business environment of changing regulation, increasing competition and evolving technology.
The Metzler Group acts as a holding company that manages five direct wholly-owned subsidiaries: Metzler & Associates, Inc., the company's initial operating subsidiary, and four companies acquired during 1997. The Company acquired L.E. Burgess Consulting, Inc. ("Burgess") as of January 1997; Resource Management International, Inc. ("RMI") as of July 1997; Reed Consulting Group, Inc. ("Reed") as of August 1997; and Sterling Consulting Group, Inc. ("Sterling") as of December 1997. For financial reporting purposes, each of these transactions (the "Acquisitions") was accounted for using the pooling of interests method. The consolidated financial statements of the Company included herein only give retroactive effect to the acquisitions of RMI and Reed. As a result, the financial position, results of operations and cash flows are presented as if RMI and Reed had been consolidated for all periods presented.
The Company believes that several competitive factors distinguish it from other participants in the consulting market, including: (i) established energy utility expertise developed over more than fifteen years of providing consulting services to the energy utility industry; (ii) deep-rooted client relationships supporting multiple engagements; and (iii) a wide range of industry-specific services that enables the Company to be a single-source provider of consulting services to energy utilities while maintaining advanced skill sets in each area.
The Company's growth strategy is to: (i) capitalize on current energy industry dynamics supporting increased reliance on consulting services; (ii) continue to build a complementary spectrum of consulting services through acquisitions; (iii) expand its client base in both domestic and international markets while further penetrating its existing client base; (iv) continue to recruit and retain highly skilled professionals; and (v) consolidate the fragmented utility consulting industry by leveraging its public company status.
The Company maintains its principal executive offices at 520 Lake Cook Road, Suite 500, Deerfield, Illinois 60015. The Company's telephone number is (847) 914-9100.
Services
The Company has performed consulting assignments for more than 200 utility industry clients. The Company's clients include the 50 largest investor-owned electric utilities (IOUs) and the 20 largest gas distribution companies in the United States. The Company's clients also include gas and water companies and other utility ownership structures such as holding companies, electric cooperatives, public power agencies and state regulatory commissions. The Company also serves independent power producers, co-generators and power marketers, suppliers to the utility industry and oil and gas exploration and production companies.
The Company currently derives the majority of its revenues from consulting engagements with electric utility companies and substantially all of its revenues from utilities. Much of the Company's recent growth in this area has arisen from the business opportunities presented by the trend to deregulate the electric utility industry and introduce increased competition.
Background. The energy utility industry is one of the largest industries in the United States, with revenues in excess of $250 billion. The gas distribution industry has undergone deregulation and is now approaching a fully competitive market, giving rise to expanded consulting needs. The electric utility industry is in the early stages of deregulation and therefore provides the greatest opportunities for energy utility consulting as industry participants seek to address the ramifications of deregulation and position themselves in anticipation of these changes. The Company believes that the water industry will undergo deregulation in the mid-term future and will give rise to increased demand for consulting services.
Like other businesses, energy utilities are increasingly turning to outside consulting firms to assist in or lead the process by which the utility industry addresses fundamental changes. In general, businesses engage consultants because: (i) the pace of change is eclipsing the companies' internal resources; (ii) many enterprises lack the depth and breadth of experience to identify, evaluate and implement the full range of possible options and solutions; (iii) outside specialists often enable their clients to develop better solutions in shorter time frames; (iv) purchasing consulting expertise converts fixed labor costs to variable costs and can be more cost-effective; and (v) consultants can often formulate more objective advice, free of internal cultural or political forces.
Utility Consulting Opportunity. The energy utility industry represents a significant market for consulting services. Industry sources estimate that the market for utility consulting in the U.S. was $3.0 billion, or 6% of the $50 billion total market for consulting services in 1996, and that this market will grow at a rate of 15% per year through 2000.
This demand for consulting services is driven in significant part by the revolutionary change facing the U.S. electric utility industry as it begins to convert from a regulated regional monopoly structure to an increasingly competitive environment. Historically, due to the significant fixed costs inherent in generating and transmitting electricity, electric utilities were viewed as natural local monopolies, operating as integrated entities to generate, transmit and distribute retail electricity within defined geographic retail service areas without competition from other suppliers.
As a result of recent market, regulatory and legislative factors, competition in the electric utility industry is being encouraged at both the state and federal regulatory levels, but the transformation to a competitive market is proceeding unevenly. Although deregulation of the transportation and telecommunications industries was accomplished relatively rapidly, deregulation of the electric utility industry has been more difficult due to the complex and overlapping regulatory web imposed by over 200 federal and state bodies and the presence of a large number of separate, regulated companies. Accordingly, implementation of the change will likely unfold on a state-by-state basis over the next decade and may well face challenges from utilities and state and local governments.
Deregulation and the introduction of competition have created a significant need for consulting services that provide solutions to the current problems facing electric utilities as well as other energy-related businesses today. The changing competitive environment has forced the entire utility industry to confront an evolving range of strategic options and challenges, most of which are unfamiliar to companies that have operated under a paradigm of monopolistic assumptions since inception. Emerging strategies and challenges presently identified include the following:
Management Consulting
- - Strategic Planning. A number of energy utilities are abandoning their traditional integrated corporate structure and are organizing into distinct divisions responsible for power generation, transmission, distribution, and billing and customer service in an effort to provide these services more efficiently and effectively. These divisions need to formulate their own strategies, develop their own administrative infrastructure and implement their own marketing campaigns. As energy utilities are faced with increasing competition, many have either consummated or announced mergers and other
consolidations. This trend is expected to continue as energy utilities seek to achieve economies of scale, increase geographic coverage, eliminate redundant infrastructure, increase market leverage, reduce their cost of capital and expand their customer base. After a combination is consummated, the new entity often faces the difficult process of combining separate operations and infrastructure to achieve the desired efficiencies.
- Marketing and Customer Service. In a fully deregulated utility market, end users select their provider, much as they can choose their provider of long-distance and cellular telephone services. Even other major utilities such as telecommunications and cable companies or independent suppliers can compete to provide energy to customers. In response, energy utilities, which have historically enjoyed a captive customer base, are developing marketing and sales skills to attract and retain customers, develop customer awareness and loyalty enhancement programs in order to establish brand identity and provide innovative services.
- Operations Management. Energy utilities must reduce their costs in order to improve margins and to offer more competitive prices. Many energy utilities are already engaging in significant restructuring efforts, including process redesigns, deploying innovative information systems and technologies and redefining staffing and skill-mix requirements.
Information Technology
- Systems Planning. In general, the energy utility industry has been slow to adopt the latest information technologies. Pressures from deregulation have compelled organizations to improve the quality of products and services, shorten response times, reduce costs and strengthen customer relationships. Increasingly, organizations are addressing these issues by utilizing information technology solutions that facilitate the rapid and flexible collection, analysis and dissemination of information. Rapid technological advances and competitive pressures are forcing energy utilities to replace antiquated systems with new technology and to undertake major, critical systems projects.
Economic and Regulatory
- Market Analysis/Economic Services. In order to meet the increased expectations of the competitive marketplace, energy utilities are evaluating new value-added services, such as the ability to monitor and control electrical power usage with computerized metering devices. Energy utilities have access to homes and businesses through their existing connections, and they possess a significant infrastructure and related property easements. In addition, energy utilities have long-standing billing relationships with virtually every home and business in their service area. These factors may permit energy utilities to offer their customers a variety of new services--from security services in the near future, to telecommunications services and direct access video services in the distant future. In addition, many energy utilities are redirecting and redeploying assets through diversification initiatives, primarily within traditional business sectors such as energy services, fuel resources and services, and energy project investments.
- Regulatory Policy. The advent of utility deregulation has created a rapidly changing and uncertain regulatory landscape. Utilities are increasingly turning to outside consultants for ongoing assessment of regional and national directions, as well as to map new strategies as needed to incorporate regulatory changes.
Engineering and Technical
- Transmission Distribution Planning. Changes in utilities almost always have an effect on their service delivery profiles. These new strategies require modification to the distribution network, long line transmission grid and the operation of base and peak-load power plants. Integration of these technical services into new business plans is becoming an almost mandatory piece of all new profiles.
Marketing and Sales
The Company markets its services directly to mid-level to senior executives of energy and utility-related businesses from its headquarters near Chicago, Illinois and through each of its subsidiaries. The Company employs a variety of business development and marketing techniques to communicate directly with current and prospective clients, including on-site presentations to senior utility executives, industry seminars featuring presentations by the Company's personnel and authoring of articles and other publications regarding the energy utility industry and the Company's methodologies.
A significant portion of new business arises from prior client engagements. In addition, the Company expects to leverage the client relationships of firms it acquires by cross-selling its existing services. Clients frequently expand the scope of engagements during delivery to include follow-on complementary activities.
Also, the Company's on-site presence affords it the opportunity to become aware of, and to help define, additional project opportunities as they are identified by the client. The strong client relationships arising out of many engagements often facilitate the Company's ability to market additional capabilities to its clients in the future. In addition, the Company's senior management team actively meets with energy and utility-related businesses that have not yet engaged the Company and newly appointed senior managers in energy and utility- related businesses where the Company has worked in the past to make them aware of the Company's capabilities.
Human Resources
As of February 1, 1998, the Company's personnel consisted of approximately 525 employees. The Company's success depends in large part on attracting, retaining and motivating talented, creative and experienced professionals at all levels. In connection with its hiring efforts, the Company employs internal recruiters, retains several executive search firms and relies on personal and business contacts to recruit professionals with significant utility industry or consulting experience. The Company's consultants are drawn from utility and related industries, including engineering, construction and telecommunications, and from accounting and other consulting organizations.
To assist in further development of its employees, the Company has developed mentor programs. The Company also develops its consultants through a training program, as well as review of precedent from prior Company engagements. The Company promotes loyalty and continuity of its consultants by offering packages of base and incentive compensation and benefits that it believes are significantly more attractive than those offered by the consulting industry in general.
In addition to the employees discussed above, the Company supplements its consultants on certain engagements with independent contractors, many of whom are former employees of the Company. The Company believes that its practice of retaining independent contractors on a per-engagement basis provides it with greater flexibility in adjusting professional personnel levels in response to changes in demand for its services.
Competition
The market for consulting services to energy and utility-related businesses is intensely competitive, highly fragmented and subject to rapid change. The market includes a large number of participants from a variety of market segments, including general management or marketing consulting firms, the consulting practices of national accounting firms, and local or regional firms specializing in utility services. Many information technology consulting firms also maintain significant practice groups devoted to the utility industry. Many of these companies are national and international in scope and have greater personnel, financial, technical and marketing resources than the Company. The Company believes that its experience, reputation, industry focus and broad range of services will enable it to compete effectively in its marketplace.
Item 2
Item 2 - Properties - -------------------
The Company's headquarters are currently located in 10,000 square feet of leased office space in Deerfield, Illinois. The Company owns or leases office space as listed below. The Company believes that additional space will be required as its business expands geographically and that it will be able to obtain suitable space as needed.
The Company maintains principal offices in the following locations:
United States International ------------- ------------- Austin, TX Philadelphia, PA Copenhagen, Denmark Boston, MA Phoenix, AZ Manila, Philippines Chicago, IL Portland, OR Melbourne, Australia Houston, TX Richardson, TX Prague, Czech Republic Los Angeles, CA Sacramento, CA New York City, NY Washington, DC Orlando, FL
Item 3
Item 3 - Legal Proceedings - --------------------------
The Company is currently defending a lawsuit which was commenced against RMI prior to its acquisition by the Company. RMI is the defendant in an action involving approximately $1.1 million in stated claims and other unspecified compensatory damages that arose in connection with a co-generation construction project in Connecticut with respect to which RMI provided consulting services. The complaint also seeks punitive damages. The plaintiff claims that the RMI consultant was hired with broad responsibilities for the design, construction and budgeting of a proposed $1.0 million co-generation project that reached $2.0 million before it was abandoned. The plaintiff has subsequently filed for bankruptcy. The Company believes that the plaintiff's claims are beyond the scope of RMI's engagement responsibilities and that the Company has meritorious defenses to this claim. RMI and the plaintiffs have reached a tentative settlement which does not involve the payment by RMI of any material amount. The settlement is subject to approval by the backruptcy court. Because this lawsuit was identified at the time the Company acquired RMI, a specific indemnification escrow was established with 85,105 shares, escrowed at a price of $23.17 per share, the market value at the date of consumation of the acquisition. However, no assurance can be given that the settlement will be approved or that, if the proposed settlement is not finalized, the value of the escrowed shares will be sufficient to cover damages that the Company may ultimately be responsible for in connection with this lawsuit.
From time to time, the Company is party to other lawsuits, none of which the Company believes are material.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------
At a special meeting held November 21, 1997 at the Company's headquarters, the Company submitted for approval to its stockholders resolutions to (i) amend the Company's amended and restated Certificate of Incorporation to increase the authorized Common Stock to 75,000,000 shares and (ii) increase the number of shares of the Company's Common Stock available for issuance pursuant to the Incentive Plan to 3,000,000, and to provide for adjustments from time to time in the number of shares available for issuance pursuant to the Incentive Plan so that the number of shares available for issuance under the Incentive Plan remains at a constant 15% of the number of outstanding shares of the Company's Common Stock.
The results of those votes are as follows:
Part II
Item 5
Item 5 - Market for the Registrant's Common Stock and Related Stockholder - ------------------------------------------------------------------------- Matters - -------
The Company's Common Stock is traded on the Nasdaq National Market under the symbol "METZ". The following table shows the range of reported high and low sales information for the Company's Common Stock, for the fiscal periods indicated, as reported on the Nasdaq National Market. (See Note 14 to Consolidated Financial Statements).
The Company had 33 holders of record of its Common Stock at March 13, 1998 and approximately 1,032 beneficial owners. The Company has never paid a cash dividend on its Common Stock and does not expect to pay a cash dividend on its Common Stock in the foreseeable future.
Item 6
Item 6 - Selected Financial Data - --------------------------------
The selected financial data set forth below should be read in conjunction with the Company's Financial Statements and related Notes thereto and with "Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations - -------------
Statements included in the Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical in nature, are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended by Public Law 104-6. When used in this section, the words "anticipate," "believe," "intends", "estimate," and "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company cautions readers that forward-looking statements, including without limitation, those relating to the Company's future business prospects, revenues, working capital, liquidity, and income, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward looking statements, due to several important factors herein identified, among others, and other risks and factors identified from time to time in the Company's reports with the SEC.
This Management's Discussion and Analysis of Financial Condition and Results of Operations relates to the Consolidated Financial Statements included in this annual report on Form 10-K, which present Metzler & Associates, RMI and Reed on a consolidated basis for all periods presented.
Overview
The Metzler Group, Inc. is a leading nationwide provider of consulting services to electric, gas and water utilities and other energy and utility- related businesses. The Company offers a wide range of consulting services designed to assist its clients in succeeding in a business environment of changing regulation, increasing competition and evolving technology. The Company's service offerings include: (i) management consulting; (ii) information technology; (iii) economic and regulatory; and (iv) engineering and technical.
The Company derives substantially all of its revenues from fees for professional services, which are billed at standard hourly or daily rates or provided on a fixed-bid basis. Over the last three years, the substantial majority of the Company's revenues have been generated under standard hourly or daily rates billed on a time-and-expenses basis. Clients are typically invoiced on a monthly basis with revenue recognized as the services are provided.
The Company's most significant expenses are project personnel costs, which consist of consultant salaries and benefits, and travel-related direct project expenses. Project personnel are typically full-time professionals employed by the Company, although the Company supplements its project professional personnel through the use of independent contractors. The Company retains contractors for specific client engagements on a task-specific, per diem basis during the period their expertise or skills are required. The Company believes that retaining contractors on a per-engagement basis provides it with greater flexibility in adjusting professional personnel levels in response to changes in demand for its services.
Acquisitions
As part of its growth strategy, the Company expects to continue to pursue complementary acquisitions to expand its geographic reach, expand the breadth and depth of its service offerings and enhance the Company's consultant base. In furtherance of this growth strategy, the Company has acquired five additional consulting firms during 1997. Each of these five transactions was accounted for as a pooling of interest.
As of January 1, 1997, the Company acquired Burgess in exchange for 63,272 shares of Common Stock (valued at approximately $0.9 million at the closing). At the closing, Burgess' sole stockholder also entered into a three-year employment agreement with Burgess providing for a base salary, performance bonus and
other standard benefits. Burgess, based in the Chicago area, provides litigation, regulatory policy support and operations management consulting services to electric and natural gas utilities.
As of July 31, 1997, the Company acquired substantially all of the common stock of RMI in exchange for 3,205,767 shares of Common Stock (valued at approximately $75.3 million at the closing) and acquired the remaining minority interests in exchange for cash. Approximately 18% of the Common Stock issued in this transaction were placed in an escrow to secure the general and specific indemnity obligations of the selling shareholders. RMI, based in Sacramento, California, is a leading provider of consulting services to gas, water and electric utilities, with operations in the western and eastern United States and international marketplace. RMI's operations complement the Company's existing management consulting and information technology services and expand the Company's service offerings to include a broad range of engineering and technical and economic and regulatory services.
As of August 15, 1997, the Company acquired substantially all of the common stock of Reed in exchange for 777,600 shares of Common Stock (valued at approximately $17.6 million at the closing) and acquired the remaining minority interests in exchange for cash. Ten percent of the Common Stock issued in this transaction was placed in an escrow to secure the indemnity obligations of the selling stockholders. Reed, based in the Boston area, provides strategic planning, operations management and economic and regulatory services to electric and natural gas utilities. Reed's operations complement the Company's existing services and client base and expand the Company's presence in the northeast United States and internationally.
As of December 1, 1997, the Company acquired substantially all of the common stock of Sterling in exchange for 578,727 shares of Common Stock (valued at approximately $15.2 million at the closing) and acquired the remaining minority interest in exchange for cash. Approximately 10% of the Common Stock issued in this transaction were placed in an escrow to secure the general indemnity obligations of the selling shareholders. Sterling, based in Houston, Texas, provides strategy development and implementation, competitive analysis, change management and other consulting services principally to oil and gas exploration and production companies. Sterling's operations expand the Company's service offerings to non-utility energy businesses.
Also as of December 1, 1997, the Company acquired all of the common stock of Reed Stowe & Co., Inc. ("Reed-Stowe") in exchange for 45,000 shares of Common Stock (valued at approximately $1.2 million at the closing). All of the capital stock of Reed-Stowe was immediately contributed by the Company to Reed, and Reed-Stowe became a wholly-owned subsidiary of Reed. Reed-Stowe, based in Richardson, Texas, provides litigation and regulatory policy support and other consulting services to municipalities and energy utilities.
Results of Operations
The following table sets forth, for the periods indicated, selected statement of operations data as a percentage of revenues:
1997 Compared to 1996
Revenues. Revenues increased 31.6% to $83.7 million in 1997 from $63.6 million in 1996. This increase was the result of continued strong demand for the Company's management consulting, engineering and technical, and economic and financial services for the electric and energy-related industries. The growth in revenues was due to increases in both the number and average size of client projects.
Gross Profit. Gross profit consists of revenues less cost of services, which includes consultant salaries, benefits and travel-related direct project expenses. Gross profit grew 60.5% to $34.1 million in 1997 from $21.2 million in 1996. Gross profit as a percentage of revenues was 40.8% in 1997 compared to 33.4% in 1996. The improvement in gross profit margins was driven primarily by increased utilization of the Company's professional consultants.
Merger Related Costs. During 1997, the Company incurred merger related costs of $1.3 million related to acquisitions accounted for as poolings of interests. The merger costs include legal, accounting and other transaction- related fees and expenses. There were no acquisitions or corresponding related costs in the prior-year period.
Selling, General and Administrative Expenses. Selling, general and administrative expenses include salaries and benefits of management and support personnel, facilities costs, recruiting and training, direct selling, outside professional fees and all other corporate costs. Selling, general and administrative expenses for 1997 increased approximately 16.0% to $18.1 million from $15.6 million in 1996. The pro forma adjustments for 1996 include an increase in officer compensation of $1.0 million to reflect the impact of a compensation plan adopted July 1, 1996. After giving effect to this pro forma adjustment, selling, general and administrative expenses for 1997 increased approximately 9.0% to $18.1 million from the pro forma $16.6 million for 1996. This increase is largely attributable to the overall higher business volume in 1997, partially offset by economies of scale and increased efficiency in certain support functions.
Other Expense (Income). In 1997 interest income increased to $1.1 million due to average cash and cash equivalents outstanding of $27.6 million in 1997. The cash and cash equivalents balance primarily relates to the proceeds from the initial public offering that was completed in October,1996.
Income Taxes. For the first nine months of 1996, one the Company's subsidiaries was taxed under Subchapter S of the Internal Revenue Code. Under the provisions of Subchapter S, federal income taxes were the responsibility of the stockholders as were certain state income taxes. Accordingly, the consolidated statement of operations for 1996 does not include a provision for federal or certain state income taxes for this subsidiary during the period January 1, 1996 through October 3, 1996. The pro forma tax adjustment for this period includes additional federal and state taxes that would have been required had the S-corporation election not been in effect and the net tax benefit relating to the pro forma compensation expense adjustment described above.
1996 Compared to 1995
Revenues. Revenues increased 13.9% to $63.6 million in 1996 from $55.8 million in 1995. This increase was caused by increased demand for management consulting services in the electric utility industry and increased selling and business development efforts. These factors generated increases in both the number of client projects and the average size of client projects.
Gross Profit. Gross profit increased 13.4% to $21.2 million in 1996 from $18.7 million in 1995. Gross profit as a percentage of revenues was 33.4% in 1996 compared to 33.5% in 1995. The gross profit
percentage was largely consistent year to year based on comparable utilization rates in both periods for the Company's full time professional personnel.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased 12.4% to $15.6 million in 1996 from $17.8 million in the prior year. As a percentage of revenues, selling, general and administrative expenses decreased to 24.6% in 1996 from 31.9% in 1995. In connection with the change in the taxable status of one of the Company's subsidiaries from a C corporation to an S corporation commencing January 1, 1996, the Company eliminated all other incentive compensation programs for certain key executives. Effective July 1, 1996, in contemplation of the termination of the S-corporation status in connection with the closing of the Company's initial public offering of common stock, the Company adopted a new executive compensation plan. The pro forma adjustments for 1996 and 1995 reflect the impact of this compensation plan. The pro forma adjustment for 1996 includes an increase in executive compensation of $1.0 million while the pro forma adjustment for 1995 incorporates a decrease in executive compensation of $2.8 million. After giving effect to these pro forma adjustments, selling, general and administrative expenses would represent $16.6 million, or 26.2% of revenues, in 1996 and $15.0 million, or 26.9% of revenues, in 1995. The increase in selling, general and administrative expenses was due primarily to higher business volume, offset in part by increased efficiency in certain administrative functions.
Income Taxes. Effective January 1, 1996, the stockholders of one of the Company's subsidiaries elected to be taxed under Subchapter S of the Internal Revenue Code. As an S corporation, net income from January 1, 1996 was taxable for federal (and some state) income tax purposes directly to the subsidiaries' stockholders. The S-corporation status was terminated October 4, 1996 upon the completion of the Company's initial public offering of its Common Stock. Accordingly, the consolidated statement of operations for 1996 does not include a provision for federal or certain state income taxes for this subsidiary during the period January 1, 1996 through October 3, 1996.
Unaudited Quarterly Results
The following tables set forth certain unaudited quarterly operating information for each of the 9 quarters ending December 31, 1997. These data have been prepared on the same basis as the audited financial statements contained elsewhere in this Form 10-K and include all normal recurring adjustments necessary for the fair presentation of the information for the periods presented, when read in conjunction with the Company's Consolidated Financial Statements and related Notes thereto. Results for any previous fiscal quarter are not necessarily indicative of results for the full year or for any future quarter.
Revenues and operating results fluctuate from quarter to quarter as a result of a number of factors, such as the significance of client engagements commenced and completed during a quarter, the number of business days in a quarter and employee hiring and utilization rates. The timing of revenues varies from quarter to quarter because of the Company's sales cycle, the ability of clients to terminate engagements without penalty, the size and scope of assignments and general economic conditions. Because a significant percentage of the Company's expenses are relatively fixed, a variation in the number of client assignments or the timing of the initiation or the completion of client assignments can cause significant variations in operating results from quarter to quarter. Furthermore, the Company has on occasion experienced a seasonal pattern in its operating results, with a smaller proportion of the Company's revenues and lower operating income occurring in the fourth quarter of the year or a smaller sequential growth rate than in other quarters.
Liquidity and Capital Resources
Operating activities provided net cash flows of $6.4 million, $5.9 million and $1.2 million in 1997, 1996 and 1995, respectively. In 1997, the cash flow from operations is primarily the result of net income, increases in accounts payable, accrued liabilities and income taxes payable balances offset by an increase in accounts receivable. The increase in accounts receivable is primarily due to a 48% increase in revenue in the fourth quarter of 1997 versus the corresponding period in the prior year.
Investing activities used net cash flows of $1.7 million, $1.8 million and $.8 million in 1997, 1996 and 1995, respectively. Historically investing activities have not required significant cash flows.
Net cash (used in) provided by financing activities was ($16.7) million, $28.8 million and ($.1) million in 1997, 1996 and 1995, respectively. In 1997, the Company completed the acquisition of RMI in a transaction accounted for as a pooling of interests. In August 1997, the Company completed another acquisition of privately owned Reed in a transaction also accounted for as a pooling of interests. In connection with these acquisitions and the Sterling acquisition, the Company made cash payments totaling approximately $9.7 million to acquire shares of the combining enterprises held by certain minority stockholders. The Company also made payments of approximately $3.6 million to repay principal and accrued interest on long term debt and line of credit obligations of RMI.
Also, in 1997, the Company repaid notes payable to two stockholders in the aggregate amount of $1.0 million. The notes, each with a principal amount of $0.5 million, bore interest at a rate of 10%. The Company repaid notes payable to other officers aggregating $0.8 million under various other pre-existing arrangements at RMI and Reed.
During the period from January 1, 1996 to October 4, 1996, one of the Company's subsidiaries was taxed as an S corporation. Approximately $3.5 million of net income for the period during which the subsidiary was an S corporation was distributed to former S-corporation shareholders and included in their personal taxable income. These amounts were distributed to the former S- Corporation stockholders in 1997.
The Company believes that the cash and cash equivalents as of year-end, the net proceeds of approximately $37 million from the secondary stock offering completed in February 1998, together with funds generated by operations, will provide adequate cash to fund its anticipated cash needs, which may include future acquisitions of complementary businesses, at least through the next twelve months. Thereafter, the Company anticipates that its cash requirements related to future operations and potential acquisitions will be funded with cash generated from operations and short-term borrowings. The Company currently anticipates that it will retain all of its earnings for development of the Company's business and does not anticipate paying any cash dividends in the foreseeable future.
The Company believes that the effect of the millenium on its internal information systems will have an immaterial impact on the Company.
Recently Issued Financial Accounting Standards
The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," in June 1997. In addition to net income, comprehensive income includes items recorded directly to stockholders' equity such as the income tax benefit related to the exercise of certain stock options. This statement establishes new standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997. Adoption of this standard will only require additional financial statement disclosure detailing the Company's comprehensive income.
In June of 1997, the FASB also issued SFAS No. 131,"Disclosures about Segments of an Enterprise and Related Information." The Company will be required to adopt the new standard for the year ending December 31, 1998, although early adoption is permitted. This statement requires use of the "management approach" model for segment reporting. The management approach model is based on the way the Company's management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure,
management structure, or any other manner in which management disaggregates a company. The Company will adopt this statement in fiscal year 1998. The effect of applying this standard is not expected to be significant.
Item 8
Item 8 - Consolidated Financial Statements and Supplemental Data - ----------------------------------------------------------------
The Consolidated Financial Statements of the Company are annexed to the report as pages through. An index to such materials appears on page F- 1.
Item 9
Item 9 - Changes in and Disagreement with Accountants on Accounting and - ----------------------------------------------------------------------- Financial Discussions - ---------------------
Not applicable
Part III
The information required by this Part III will be provided in the definitive proxy statement for the Company's 1997 Annual Meeting of Stockholders (involving the election of directors), which definitive proxy statement (the "Proxy Statement") will be filed pursuant to Regulation 14A no later than 120 days following the Company's fiscal year ended December 31, 1997, and is incorporated herein by this reference to the extent provided below.
Item 10
Item 10 - Directors and Executive Officers of the Registrant - -------------------------------------------------------------
Information in response to this item is incorporated by reference herein from the section of the Proxy Statement captioned "Board of Directors - Director Compensation," "Management Compensation" and "Compliance with Section 16(a) of the Exchange Act."
Item 11
Item 11 - Executive Compensation - --------------------------------
Information in response to this item is incorporated by reference herein from the section of the Proxy Statement captioned "Board of Directors - Director Compensation" and "Management Compensation."
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------
Information in response to this item is incorporated by reference herein from the section of the Proxy Statement captioned "Stock Ownership of Directors, Executive Officers and Principal Holders."
Item 13
Item 13 - Certain Relationships and Related Transactions - --------------------------------------------------------
Information in response to this item is incorporated by reference herein from the section of the Proxy Statement captioned "Certain Relationships and Related Transactions."
Part IV
Item 14
Item 14 - Exhibits, Financial Statements and Reports on Form 8-K - -----------------------------------------------------------------
The consolidated financial statements filed as part of this report are listed in the accompanying Index to Consolidated Financial Statements. The exhibits filed as part of this report are listed in the accompanying Exhibit Index.
On October 14, 1997, the Company filed with the Securities and Exchange Commission, an interim report on Form 8-K/A showing the condensed consolidated financial statements of Resource Management International, Inc. and subsidiaries as of June 30, 1997.
On October 14, 1997, the Company filed with the Securities and Exchange Commission, an interim report on Form 8-K/A showing the consolidated financial statements of Resource Management International, Inc. and subsidiaries as of December 31, 1997 and the pro forma condensed combining financial statements as of December 31, 1997.
On October 21, 1997, the Company filed with the Securities and Exchange Commission, an amended interim report on Form 8-K/A showing the condensed consolidated proforma financial statements of Resource Management International, Inc. and subsidiaries as of June 30, 1997.
On October 21, 1997, the Company filed with the Securities and Exchange Commission, an amended interim report on Form 8-K/A showing the consolidated financial statements of Resource Management International, Inc. and subsidiaries as of December 31, 1997 and the pro forma condensed combining financial statements as of December 31, 1997.
THE METZLER GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders The Metzler Group, Inc.:
We have audited the consolidated balance sheets of The Metzler Group, Inc. and subsidiaries as of December 31, 1997 and 1996 and the related statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Resource Management International, Inc., a wholly owned subsidiary, which financial statements reflect total assets constituting 27 percent and 24 percent as of December 31, 1997 and 1996, respectively, and total revenues constituting 53 percent, 56 percent and 67 percent for each of the years in the three-year period ended December 31, 1997, respectively, of the related consolidated totals. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Resource Management International, Inc., is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Metzler Group, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles.
(signed) KPMG Peat Marwick LLP
February 11, 1998, except for Note 14, as to which the date is March 5, 1998 Chicago, Illinois
THE METZLER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
See accompanying Notes to the Consolidated Financial Statements.
THE METZLER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying Notes to the Consolidated Financial Statements.
THE METZLER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
See accompanying Notes to the Consolidated Financial Statements.
THE METZLER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying Notes to Consolidated Financial Statements.
THE METZLER GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
The Metzler Group, Inc. (the ''Company'') is a leading provider of consulting services to energy-based and related industries. The Company's services include: (i) management consulting; (ii) information technology; (iii) economic and regulatory; and (iv) engineering and technical. The Company's operating subsidiaries include Burgess Consulting, Inc. ("Burgess"), Metzler & Associates, Inc. (''Metzler & Associates''), Reed Consulting Group, Inc. ("Reed"), Resource Management International, Inc. (''RMI'') and Sterling Consulting Group, Inc ("Sterling"). The Company is headquartered in Chicago, Illinois and has regional offices in various cities within the United States, and international offices in Denmark, Australia, Czechoslovakia Republic and the Philippines.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in which it is reasonably possible that there could be a change in the estimates in the near term include the calculation of contingency reserves and revenue recognized on long-term contracts.
Cash and Cash Equivalents
Cash equivalents are comprised of highly liquid instruments with original maturities of 90 days or less.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives, ranging from three to forty years, of the various classes of property and equipment. Amortization of leasehold improvements is computed over the shorter of the lease term or the estimated useful life of the asset.
Intangible Assets
Intangible assets consist principally of goodwill (excess of purchase price over the fair value of net assets acquired) and covenants not to compete. Goodwill is being amortized using the straight-line method from ten to forty years. The non-compete covenants are recorded at cost and are being amortized over their respective terms of 33 to 72 months.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments approximates fair value because of the short maturity of those instruments.
Revenue Recognition
The Company recognizes revenues as the related services are provided. Certain contracts are accounted for on the percentage of completion method whereby revenues are recognized based upon costs incurred in relation to total estimated costs at completion. Provision is made for the entire amount of estimated losses, if any, at the time when they are known.
Stock Based Compensation
The Company utilizes the intrinsic value-based method of accounting for its stock-based compensation arrangements.
Income Taxes
Income taxes, including pro forma calculations, are accounted for in accordance with the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Prior to January 1, 1996, Metzler & Associates had operated as a C- corporation. Effective January 1, 1996, the stockholders of Metzler & Associates elected to be taxed under Subchapter S of the Internal Revenue Code. During such period, federal income taxes were the responsibility of Metzler & Associates' stockholders as were certain state income taxes. As of the effective date of the election, Metzler & Associates was responsible for Federal built-in-gain taxes to the extent applicable. Accordingly, the consolidated statement of operations for the year ended December 31, 1996 provides for such taxes. The S-corporation election terminated in connection with the consummation of the initial public offering of the Company's common stock on October 4, 1996.
Pro Forma Adjustments (unaudited)
The pro forma adjustments during the years 1996 and 1995 reflect the impact of a Metzler & Associates compensation plan effective July 1, 1996. The pro forma adjustments for 1996 include an increase to officer compensation expense of $1,019,460. The pro forma adjustments for 1995 include a decrease to officer compensation expense of $2,775,293.
The pro forma adjustments for 1996 include federal and additional state income tax expense of $1,799,403 that would have been required had Metzler & Associates not made the S-corporation election effective January 1, 1996, partially offset by a reduction in taxes that would have been incurred had Metzler & Associates adopted the officers' compensation plan referred to above. The pro forma adjustments for 1995 include additional federal and state income tax expense of $1,110,117, that would have been required had
Metzler & Associates' compensation expense decreased in 1995 to the level commensurate with the compensation plan adopted effective July 1, 1996, as noted above.
Earnings per Share
For the years ended December 31, 1997, 1996 and 1995, earnings per share was computed in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share", which the Company adopted during the fourth quarter of 1997. Weighted-average and equivalent shares outstanding include the dilutive effect of common stock options aggregating 486,543, 186,164 and 0 for the years ended December 31, 1997, 1996 and 1995, respectively.
Foreign Currency Translation
The balance sheets of the Company's foreign subsidiaaries are translated into U.S. dollars using the year-end exchange rate, and sales and expenses are translated using the average exchange rate for the year. The resulting translation gains or losses are recorded as a separate component of stockholders' equity as a cumulative translation adjustment.
Reclassifications.
Certain 1996 and 1995 amounts have been reclassified to conform with the 1997 presentation.
3. Business Combinations
In January 1997, the Company issued 63,272 shares of common stock for all of the outstanding common stock of Burgess. The stockholder's equity and operations of Burgess were not material in relation to those of the Company. As such, the Company recorded the combination by restating stockholders' equity as of January 1, 1997 without restating prior period statements of operations to reflect the pooling-of-interest combination.
On July 31, 1997, the Company issued 3,205,767 shares of common stock for substantially all the outstanding common stock of RMI. Additionally, on August 15, 1997, the Company issued 777,600 shares of common stock for substantially all of the outstanding common stock of Reed. Each of the transactions was accounted for as a pooling of interests. The consolidated financial statements have been restated as if RMI and Reed had been combined for all periods presented. The Company's consolidated statement of operations for the year ended December 31, 1997 includes revenues and net income from RMI and Reed totaling $28,906,082 and $1,528,688, respectively, through the dates of acquisition. The consolidated statements of operations for years ended December 31, 1996 and 1995 have been restated to reflect revenues of $41,460,368 and $42,357,626, respectively. The consolidated statement of operations for the year ended December 31, 1996 has been restated to reflect a net loss from RMI and Reed totaling $1,119,045. The consolidated statement of operations for the year ended December 31, 1995 has been restated to reflect net income from RMI and Reed totaling $759,597.
In December 1997, the Company issued 578,727 shares of common stock for substantially all of the outstanding common stock of Sterling. Additionally, in December 1997, the Company issued 45,000 shares of common stock for substantially all of the outstanding common stock of Reed-Stowe. The Company contributed all of the Reed-Stowe stock to the Company's Reed subsidiary. Each of these transactions was accounted for using the pooling of interest method of accounting. The consolidated financial statements have not been restated since these acquisitions were deemed immaterial.
In May 1996, RMI purchased the outstanding shares of SRC and SRC Group. The acquired companies provide consulting and technical research services to governmental agencies, public and private utilities, research institutions and industrial firms located throughout the world. RMI paid approximately $313,000 in cash for combined net assets of approximately $134,000. The acquisition has been accounted for by the purchase method of accounting. The excess of the purchase price over the fair value of net assets acquired has been recorded as goodwill which is being amortized on a straight-line basis over ten years. The operating results of the acquired companies are included in RMI's results of operations from the date of acquisition. Pursuant to the SRC and SRC Group purchase agreement, RMI entered into employment and covenant not to compete agreements with certain officers of the acquired companies. These agreements provide for the officers to receive salaries totaling approximately $600,000 annually through May 1998, bonus payments totaling $480,000 and covenant payments totaling approximately $120,000. The covenant payments are to be paid out with interest in monthly installments over a 36-month period.
4. Initial Public Offering
On October 4, 1996 the Company completed an initial public offering of its common stock in which 3,450,000 shares were sold by the Company, along with an additional over-allotment of 427,500 shares, resulting in proceeds of approximately $37 million, net of issuance costs of approximately $4 million.
Concurrent with the completion of the initial public offering and in accordance with an agreement entered into during July 1996 between the Company and its founding shareholder, the Company redeemed 2,571,428 shares of the founding shareholder's common stock and issued to the shareholder a promissory note for $7,975,000. See Note 12 of the Notes to Consolidated Financial Statements regarding repayment of the promissory note.
5. Property and Equipment
Property and equipment, at cost, as of December 31 consisted of:
6. Lines of Credit
The Company had $1,772,500 and $4,900,000 available under lines of credit at December 31, 1997 and 1996, respectively. Amounts outstanding at December 31 are as follows:
At December 31, 1997, the Company had letters of credit available of $1,500,000 of which $606,653 has been utilized. The letters of credit expire at various dates through December 31, 2000.
7. Lease Commitments
The Company leases its office facilities and certain equipment under operating and capital lease arrangements which expire at various dates through 2002 with renewal options of two to five years.
Operating Leases
The Company leases office facilities under noncancelable operating leases which include fixed or minimum payments plus, in some cases, scheduled base rent increases over the term of the lease and additional rents based on the Consumer Price Index. Certain leases provide for monthly payments of real estate taxes, insurance and other operating expenses applicable to the property. The total amount of the base rent payments is being charged to expense as incurred. In addition, the Company leases equipment under noncancelable operating leases.
Future minimum annual lease payments, for the years subsequent to 1997 and in the aggregate, are as follows:
The Company also subleases some of these buildings to others under noncancelable operating leases. The leases expire through November 1998, without renewal options. Future minimum rentals to be received for the year ending December 31, 1998, is $77,020.
Rent expense for operating leases entered into by the Company and charged to operations amounted to $3,417,639, $3,072,500 and $2,660,513 for the years ended December 31, 1997, 1996, and 1995, respectively.
Capital Leases
The Company leases certain equipment under capital lease agreements which expire through May 2000. Future minimum payments under the capital lease agreements are as follows:
8. Income Tax Expense (Benefit)
Income tax expense (benefit) consists of the following:
Income tax expense (benefit) differs from the amounts estimated by applying the statutory income tax rates to income before income tax expense (benefit) as follows:
Deferred income taxes result from temporary differences between years in the recognition of certain expense items for income tax and financial reporting purposes. The source and income tax effect of these differences are as follows:
9. Long-Term Incentive Plan
On June 30, 1996, the Company adopted a Long-Term Incentive Plan which provides for common stock, common stock-based, and other performance incentives to employees, consultants, directors, advisors, and independent contractors of the Company. The maximum number of shares of common stock, which may be issued and sold under the plan, is 3,000,000 shares. As of December 31, 1997, the Company has 2,246,115 options outstanding at a weighted average exercise price of $16.79 per share which was equal to the estimated fair market value of common stock at the dates of grant. As of December 31, 1997, 13,500 options were exercisable. In general, the options are exercisable in three or four annual installments commencing on the second anniversary of the date of grant.
The Company applies APB Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for its plan. Accordingly, no compensation cost has been recognized. Had compensation cost for the plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method of FASB Statement 123, Accounting for Stock-Based Compensation, (FASB 123), the Company's compensation expense for the years ended December 31, 1997 and 1996 would have been increased by $1,113,000 and $102,000, respectively, net of related income taxes. As a result, the Company's pro forma net earnings available to common stockholders and earnings per common and common equivalent shares would have been reduced to the pro forma amounts indicated below:
The weighted average fair value of options granted in 1997 and 1996 was $4.07 and $2.00 respectively. For purposes of calculating compensation cost under FASB 123, the fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used in the model for grants made in 1997 and 1996:
Additional information on the shares subject to options is as follows:
The following table summarizes information about stock options outstanding at December 31, 1997 and 1996:
10. Employee Benefit Plans
The Company maintains three profit sharing and pension plans (Metzler & Associates Profit Sharing and Savings Plan and Trust, RMI, Inc. 401(k) and Profit Sharing Plan, and RMI Utility Purchase Pension Plan).
The Metzler & Associates Profit Sharing and Savings Plan and Trust covers certain employees upon the completion of one year of service. Participants may contribute up to 15% of their eligible compensation. The Company, at its discretion, makes profit sharing contributions.
Under the RMI, Inc. 401(k) and Profit Sharing Plan, eligible employees may contribute up to 12% of their compensation to this plan and the Company matches a percentage of employees' contributions as determined by the Board of Directors. The Company may also make an annual profit sharing contribution at its discretion. Employees are eligible to participate after age 21 and six months of service. After the second year of service, vesting of all contributions made by the Company occurs ratably at 20% per year.
The RMI Utility Money Purchase Pension Plan was amended prior to January 1, 1997, to freeze entry into the plan and benefits accruals. Participants are not allowed to make contributions to this plan.
The Company, as sponsor of the plans, uses independent third parties to provide administrative services to the plans. The Company has the right to terminate the plans at any time.
The Company contributions to the various plans which were charged to operations were the following:
11. Long-term Debt
Long-term debt at December 31 consists of the following:
Future aggregate annual maturities of long-term debt as of December 31, 1997, are as follows:
12. Related-Party Transactions
During January 1996, the Company entered into note payable agreements with two officers. The notes, each with a principal amount of $500,000, bear interest at a rate of 10%. The notes matured on December 31, 1996 and were repaid on January 2, 1997. In addition, the Company had notes payable outstanding to related parties including RMI and Reed employees, officers, and stockholders. The notes are without collateral, bear interest at rates ranging from 5% to 10%, and mature during 1997 and 1998.
In May 1996, the Company made an advance of $725,000 to an officer as part of an employment agreement and entered into a note receivable agreement with the officer. The note receivable bore interest at a rate of 6%. The note, plus accrued interest, was repaid on November 8, 1996.
During July 1996, the Company entered into an agreement with its founding shareholder, whom, at that time, was the beneficial owner of 15% of the Company's common stock, to redeem 2,571,428 shares of the shareholder's common stock in exchange for a promissory note in the amount of $7,975,000. The redemption value per share was negotiated by the Company's other executive officers, who collectively owned the remaining 85% of the Company's common stock at the time of the agreement. The Company redeemed the stock on October 4, 1996 in accordance with the agreement and repaid the promissory note within 30 days of the redemption.
13. Supplemental Noncash Investing and Financing Activities and Cash Flow Information
During 1996, RMI recorded equipment under capital leases of $207,484 and recorded an obligation under capital lease of the same amount in connection with acquisition of SRC and SRC Group (Note 3).
14. Subsequent Events
On February 11, 1998, the Company completed a registration statement on Form S-3 for a secondary offering of its common stock, par value $.001. Through the offering, the Company issued an additional 1,500,000 shares of its common stock which yielded net proceeds to the Company of approximately $37 million.
On March 5, 1998, the Board of Directors authorized a three-for-two stock split to be distributed on April 1, 1998, to shareholders of record on March 18, 1998. All references in the consolidated financial statements to number of shares and per share amounts of the Company's common stock have been retroactively restated to reflect the increased number of common shares outstanding.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: March 31, 1998
THE METZLER GROUP, INC.
By: /s/ Robert P. Maher ----------------------------------------------- Robert P. Maher Chairman, President and Chief Executive Officer
By: /s/ James F. Hillman ----------------------------------------------- James F. Hillman Chief Financial Officer
By: /s/ Gerald R. Lanz ----------------------------------------------- Gerald R. Lanz Chief Operating Officer
By: /s/ Peter B. Pond ----------------------------------------------- Peter B. Pond Director
By: /s/ James T. Ruprecht ----------------------------------------------- James T. Ruprecht Director
By: /s/ Mitchell H. Saranow ----------------------------------------------- Mitchell H. Saranow Director
EXHIBIT INDEX
(1) Incorporated by reference from the Registrant's Registration Statement on Form S-1 (Registration No. 333-9019) filed with the SEC on July 26, 1996.
(2) Incorporated by reference from the Registrant's Amendment No. 1 to Registration Statement on Form S-1 (Registration No. 333-9019) filed with the SEC on September 4, 1996.
(3) Incorporated by reference from the Registrant's Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-9019) filed with the SEC on September 20, 1996.
(4) Incorporated by reference from the Registrant's Registration Statement on Form S-3 (Registration No. 333-40489) filed with the SEC on November 18, 1997.
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(5) Incorporated by reference from the Registrant's Amendment No. 1 to Registration Statement on Form S-3 (Registration No. 333-40489) filed with the SEC on February 12, 1998.
(6) Incorporated by reference from the Registrant's Regisration Statement on Form S-8 (Registration No. 333-30265) filed with the SEC on June 27, 1997.
(7) Incorporated by reference from the Registrant's 8-K filed with the SEC on August 14, 1997.
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