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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
 
                                   FORM 10-K
 
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   (MARK ONE)
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998

                                               OR

      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM __________ TO __________
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                        COMMISSION FILE NUMBER: 0-22645
 
                            LAMALIE ASSOCIATES, INC.
             (Exact name of Registrant as specified in its charter)
 
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                   FLORIDA                                       59-2776441
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                     Identification Number)
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                          200 PARK AVENUE, SUITE 3100
                         NEW YORK, NEW YORK 10166-0136
                                 (212) 953-7900
               (Address, including zip code, and telephone number
       including area code, of Registrant's principal executive offices)
 
     Securities registered pursuant to Section 12(b) of the Act: None
 
     Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share
 
     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]
 
     The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant on May 11, 1998 (assuming solely for these
purposes that all directors, executive officers and 10% or greater stockholders
are affiliates), based on the closing price of the Common Stock on the Nasdaq
National Market as of such date, was approximately $94,062,320.
 
     The number of shares of the Registrant's Common Stock outstanding as of May
11, 1998 was approximately 5,672,416.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     There is incorporated by reference in Part II and Part III of this Annual
Report on Form 10-K certain of the information contained in the Registrant's
proxy statement for its annual meeting of stockholders to be held July 7, 1998,
which will be filed by the Registrant within 120 days after February 28, 1998.
 
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                               TABLE OF CONTENTS
 
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PART I.
Item 1.           Business....................................................     3
Item 2.           Properties..................................................    12
Item 3.           Legal Proceedings...........................................    12
Item 4.           Submission of Matters to a Vote of Security Holders.........    13
PART II.
Item 5.           Market for the Registrant's Common Equity and Related           13
                  Stockholder Matters.........................................
Item 6.           Selected Consolidated Financial Data........................    14
Item 7.           Management's Discussion and Analysis of Financial Condition     15
                  and Results of Operations...................................
Item 7A.          Quantitative and Qualitative Disclosures about Market           22
                  Risk........................................................
Item 8.           Financial Statements and Supplementary Data.................    22
Item 9.           Changes in and Disagreements with Accountants on Accounting     22
                  and Financial Disclosure....................................
PART III.
Item 10.          Directors and Executive Officers of the Registrant..........    22
Item 11.          Executive Compensation......................................    22
Item 12.          Security Ownership of Certain Beneficial Owners and             22
                  Management..................................................
Item 13.          Certain Relationships and Related Transactions..............    22
PART IV.
Item 14.          Exhibits, Financial Statement Schedule, and Reports on Form     22
                  8-K.........................................................
Signatures....................................................................    40
Financial Statement Schedules.................................................    42
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                                     PART I
 
ITEM 1.  BUSINESS
 
GENERAL
 
     LAI is one of the largest and fastest growing executive search firms in the
world. LAI provides consulting services aimed specifically at solving its
clients' leadership needs by identifying, evaluating and recommending qualified
candidates for senior level positions. The Company, which conducts business
under the name "LAI Ward Howell," principally serves Fortune 500 and large
private companies. LAI provides executive search services exclusively on a
retained basis, and charges a fee typically equal to one-third of the first year
cash compensation for the position being filled.
 
     LAI has developed a knowledge-based search practice organized around eight
industry groups and one functional group. The industry groups execute searches
for clients in the following business sectors: automotive; communications,
entertainment and technology; consumer products and services; energy and natural
resources; financial services; health care and pharmaceuticals; industrial; and
insurance and risk management. The functional group executes searches for
specific functional positions, including board of directors, human resources and
legal. These practice groups enable LAI's consultants to better understand each
client's business strategy and industry and position LAI as a consulting partner
to its clients. LAI's clients are among the most prominent companies in their
industries and include General Motors, Lucent Technologies, PepsiCo, Enron,
Lehman Brothers, Bristol-Myers Squibb, AlliedSignal and Prudential. LAI's fee
revenue has grown from $21.1 million in fiscal 1994 to $61.8 million in fiscal
1998, representing a compound annual growth rate of approximately 31%. This
growth rate compares favorably with the approximately 22% average compound
annual growth rate experienced by LAI's nine largest competitors during the same
period.
 
RECENT ACQUISITIONS
 
     LAI recently completed two acquisitions which have significantly expanded
the Company's practice group coverage, provided broader geographic reach and
enhanced the Company's competitive position. On February 27, 1998, LAI completed
the acquisition of Ward Howell International, Inc. ("WHI"), which was the ninth
largest executive search firm in the United States with fee revenue of $26.5
million for the year ended December 31, 1997. On January 2, 1998, LAI completed
the acquisition of Chartwell Partners International, Inc. ("CPI"), a prominent
executive search firm based in California specializing primarily in the
financial services industry. CPI had fee revenue of $3.4 million for the year
ended December 31, 1997. The acquisitions of WHI and CPI strengthened LAI's
existing practice groups, particularly in the areas of financial services,
health care and technology, and added new practice groups in the areas of
automotive, insurance, and media and entertainment. These acquisitions also have
expanded the Company's domestic office network, adding six new offices and
providing an active presence on the West Coast with offices in Los Angeles, San
Francisco and Phoenix. On a pro forma combined basis assuming the Company's
acquisitions of WHI and CPI were completed on March 1, 1997, LAI's fee revenue
for fiscal 1998 was $91.7 million.
 
EXECUTIVE SEARCH INDUSTRY OVERVIEW
 
     Executive search represents a $6.5 billion global market and is generally
separated into two broad fee-based categories: retained search firms and
contingency search firms. Retained search firms fulfill their clients' senior
leadership needs by identifying, evaluating, assessing and recommending
qualified candidates for senior level positions, typically with cash
compensation of $100,000 and above. Contingency search firms, on the other hand,
focus primarily on mid-level positions with cash compensation of less than
$150,000. Both types of firms normally are paid a fee for their services equal
to approximately one-third of the guaranteed first year cash compensation for
the position being filled.
 
     Retained search firms currently serve the majority of the Fortune 500 as
well as numerous other organizations, including government agencies,
professional organizations and fast-growing entrepreneurial companies. Retained
firms are compensated for an assignment whether or not they are successful in
placing a
 
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recommended candidate. Contingency search firms also serve large corporations;
however, their primary focus is on small and medium sized companies. Unlike
retained search firms, contingency search firms are not compensated for an
assignment unless they successfully complete a search and place a recommended
candidate.
 
     According to Kennedy Information, a leading industry publication, revenue
in the executive search industry historically has been divided almost evenly
between retained and contingency search firms; however, retained search firms
are estimated to employ only one-third of the consultants in the industry. Thus,
the average fee revenue per consultant for retained firms is substantially
higher than for contingency firms. Moreover, the predictable revenue stream
associated with a retained search enables a retained firm, such as LAI, to
devote more personnel and greater resources to an assignment than a contingency
search firm whose revenue is not assured. LAI believes this difference in
payment structure enables retained search firms to provide clients with more
value-added consulting services than contingency search firms.
 
     The executive search industry has experienced consistent growth over the
past 20 years. Global executive search industry revenue has grown at a 17%
compound annual growth rate from approximately $3.5 billion in 1993 to
approximately $6.5 billion in 1997. Kennedy Information expects industry growth
to continue at a 15% annual rate, with revenue projected to reach $10.0 billion
by the year 2000.
 
                 GLOBAL EXECUTIVE SEARCH INDUSTRY REVENUE GRAPH
 
     The global executive search industry is highly fragmented, consisting of
more than 4,000 firms. In 1997, more than 80% of retained firms and
approximately 90% of contingency firms generated fewer than $2 million in
revenues. The top ten search firms, all of which operate on a retained basis,
accounted for approximately 11% of global industry revenue in 1997. However,
Kennedy Information predicts that these top ten firms will increase their market
share at an accelerating rate as they continue to offer clients increased
geographic reach, broader industry coverage, greater industry expertise and more
sophisticated technology and research support.
 
     LAI believes that a number of trends have caused and will continue to cause
the executive search industry to experience significant growth. These trends
include:
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     Greater Demand for Managers with Broad Leadership Skills.  Many companies
are facing a rapidly changing business environment due to an increase in
domestic and international competition, an increase in deregulation and more
widespread use of technology. The need to respond to this dynamic environment
and remain competitive has caused many companies to set higher standards for
their senior level executives. As these standards become more stringent, more
companies are looking outside their organizations to fill positions
traditionally reserved for internal candidates. The process of identifying and
evaluating executives is becoming increasingly difficult and, as a result, a
growing number of companies are relying on executive search firms to solve their
senior management and leadership needs. According to a study published in 1997
by Coopers & Lybrand HR Advisory Group, nearly two-thirds of the companies
surveyed reported using executive search professionals to recruit and hire
senior level executives.
 
     Rapid Growth in Outsourcing.  Many companies are outsourcing non-core
activities to reduce costs and increase efficiencies. These organizations often
engage independent, third party specialists to provide many non-revenue
generating functions that were previously performed in-house. Among the
functions most commonly outsourced are human resource and personnel functions,
including executive recruitment and hiring.
 
     Growth of Multinational Business.  The expansion of companies abroad and
the integration of global markets has created a growing demand for international
search capabilities. Consultants located in the country in which a position is
to be filled are often better able to identify candidates and execute searches
due to their familiarity with the local business community and culture and
available pool of executive candidates. Likewise, consultants located in the
country from which the search is originated often will better understand the
client's business strategy and recruitment needs. Executive search firms have
responded by forming affiliations with executive search firms in foreign
countries and by directly acquiring or opening foreign offices. LAI believes
that the ability to complete executive searches on a worldwide basis is an
important factor in attracting and retaining multinational clients.
 
     Increase in Executive Turnover.  In the past, it was common for executives
to spend an entire career with one or two organizations. However, in today's
rapidly changing business environment, executives often advance their careers by
working for a number of different organizations in various geographic locations.
Executive turnover has been particularly high in such growth industries as
health care and technology. This increase in executive turnover has intensified
the competition for highly qualified executives and forced many companies to
recruit executives on a more frequent basis.
 
     Increase in Executive Compensation Levels.  Compensation levels for
executives have increased considerably over the past several decades. According
to a study published in 1997 by William M. Mercer, Incorporated, the average
annual cash compensation for chief financial, chief executive and chief
operating officers grew at compound annual growth rates of 5.7%, 4.2% and 3.1%,
respectively, between 1992 and 1996. This increase in executive compensation,
among other factors, has caused many companies to be more rigorous in their
hiring practices, often retaining an executive search firm to assist in the
identification and evaluation of qualified candidates. In addition, because fees
for executive search firms are based on the compensation levels for positions
they are engaged to fill, higher executive compensation has translated into
higher executive search fees.
 
BUSINESS STRATEGY
 
     LAI's objective is to be a global leader in providing comprehensive
consulting services aimed specifically at solving its clients' senior leadership
needs. The key elements of LAI's business strategy include:
 
     Attract, Motivate and Retain High Quality Search Consultants.  LAI has been
successful in attracting, motivating and retaining highly productive executive
search consultants as a result of its premium reputation, performance-based
consultant compensation and stock incentive plans. The Company's compensation
system is primarily based on consultant performance, which is measured by the
amount of fee revenue each consultant generates. Management believes that its
performance-based compensation system is among the most competitive in the
industry. LAI's ability to attract talented consultants is demonstrated by the
large number of consultants who previously held senior level positions with
leading companies in LAI's targeted
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industry sectors. In addition, LAI believes its status as a public company
provides it with a strong competitive advantage in attracting and retaining
highly qualified consultants through ownership of Common Stock and participation
in the Company's stock incentive plans. The Company believes that equity
ownership by its consultants fosters a team-oriented working environment and
aligns the interests of its consultants with its investors. The Company has
experienced an average annual turnover rate among its consultants of less than
8% over the last five fiscal years.
 
     Build on Knowledge-Based Practice Groups.  LAI believes a thorough
understanding of both its clients and the industries in which they operate are
among the most significant factors in obtaining and completing search
assignments. Accordingly, LAI has developed a knowledge-based search practice
organized around eight industry groups and one functional group. The industry
groups execute searches for clients in the following business sectors:
automotive; communications, entertainment and technology; consumer products and
services; energy and natural resources; financial services; health care and
pharmaceuticals; industrial; and insurance and risk management. The functional
group executes searches for specific functional positions, including board of
directors, human resources and legal. Each practice group is coordinated under
the direction of a Practice Leader who establishes the marketing and search
strategies for that practice group. LAI intends to continue to build its
existing and expand into new practice groups by (i) hiring consultants with
substantial experience and significant client relationships in the Company's
targeted industry sectors and (ii) completing strategic acquisitions. The
acquisitions of WHI and CPI strengthened LAI's existing practice groups,
particularly in the areas of financial services, health care and technology, and
added new practice groups in the areas of automotive, insurance, and media and
entertainment.
 
     Build Long-Term, Consultative Relationships.  LAI strives to develop
long-term relationships by becoming a consulting partner with its clients. To
position itself as a consulting partner, the Company works closely with clients
to gain an in-depth understanding of their unique organizational structure,
history, operations, culture, strategic objectives and leadership needs. In
addition, the Company's focus on knowledge-based practice groups enables its
consultants to provide more specialized and efficient service to LAI's clients.
Each of LAI's 30 largest clients, based on fiscal 1998 fee revenue, had been a
client for an average of approximately seven years as of February 28, 1998. More
than 65% of the Company's fiscal 1998 fee revenue was attributable to companies
for which LAI conducted one or more searches during the prior two fiscal years.
 
     Capitalize on Research and Technology.  LAI believes that its industry
specialization and technological capabilities enable it to consistently provide
superior research and, ultimately, deliver higher quality search results to its
clients. LAI's 116 associates, researchers and IT professionals provide timely
industry, company and compensation information to consultants using numerous
information sources. LAI also maintains a proprietary database containing
professional information on more than 100,000 executive candidates. Consultants
can query this database on a variety of attributes, including demographic
information, work experience, compensation and personal interview results. LAI's
wide area computer network provides remote document sharing and data search
capabilities, groupware features and real-time updates on ongoing search
engagements.
 
     Reduce Search Cycle Times.  LAI believes that the ability to reduce the
time required to perform a search ("cycle time") will be a key differentiating
factor among executive search firms in the future. In an effort to reduce its
average cycle time, LAI is investing in technology upgrades, refining its
research process, strengthening its knowledge-based practice groups and closely
evaluating each step of the placement process. Reduced cycle times would enable
LAI's consultants to complete more assignments in a given period of time,
resulting in increased client satisfaction, higher fee revenue per consultant
and enhanced profitability.
 
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GROWTH STRATEGY
 
     LAI has competed successfully in the executive search industry and has
capitalized on the growing demand for executive search services. LAI's fee
revenue has increased from $21.1 million in fiscal 1994 to $61.8 million in
fiscal 1998, representing a compound annual growth rate of 31%. On a pro forma
basis assuming the acquisitions of WHI and CPI were completed on March 1, 1997,
LAI's fee revenue was $91.7 million in fiscal 1998. LAI's growth has been
achieved by increasing the number of consultants at existing offices, improving
fee revenue per consultant, opening new offices and successfully executing and
integrating strategic acquisitions. LAI intends to continue to extend the reach,
breadth and penetration of its services both domestically and internationally
through internal and external growth. The key elements of LAI's growth strategy
include:
 
     Leverage Existing and Develop New Client Relationships.  LAI intends to
increase fee revenue by obtaining additional search engagements from existing
clients and by developing relationships with new clients. LAI focuses on
accounts from which it obtains, or believes it can obtain, a significant number
of search assignments ("focused accounts"). LAI invests significant resources in
its focused accounts to better understand their business strategies and culture
and eventually position the Company as a consulting partner to its clients.
Accordingly, LAI emphasizes long-term relationships with its clients, rather
than one-time projects or assignments. Consultants also spend substantial time
marketing LAI's services to carefully selected prospective clients within their
practice groups. Search assignments often are awarded after a small number of
search firms are invited to make presentations to a prospective client's senior
management or Board of Directors. In fiscal 1998, LAI obtained search
engagements from a majority of the presentations in which it participated. The
Company attributes its success to its knowledge-based practice groups and
consultative approach as well as the premium reputation LAI has developed.
 
     Expand Existing and Selectively Open New Offices.  LAI has added and
intends to continue adding experienced, highly qualified executive search
consultants to its practice. The Managing Partner of each office is responsible
for recruiting new consultants to LAI, and a significant factor in determining
the Managing Partner's compensation is the success of these efforts. During
fiscal 1998, LAI added a net total of 12 consultants to new and existing
offices, excluding consultants added in connection with the acquisitions of WHI
and CPI. LAI also continually evaluates the desirability of opening new offices.
Since early 1997, the Company has opened offices in Boston, Massachusetts;
Stamford, Connecticut; Pittsburgh, Pennsylvania; Austin, Texas and London,
England.
 
     Consolidate Fragmented Industry; Leverage Public Company Status.  LAI
believes that acquisitions provide an efficient, cost-effective method to
increase the Company's number of consultants, expand its client base, strengthen
and expand its practice group coverage and broaden its geographic reach. Given
the highly fragmented nature of the executive search industry, the Company
believes numerous acquisition opportunities exist. In addition, LAI believes its
status as the only U.S. based publicly traded company focused exclusively on
executive search makes it an attractive consolidation partner and provides it
with an acquisition currency and the financial flexibility to effectively pursue
this aspect of its growth strategy. LAI completed two acquisitions in fiscal
1998 and is actively pursuing additional acquisitions in strategic locations
throughout the world.
 
     Penetrate International Markets.  Revenue in the global executive search
industry has grown at a 17% compound annual growth rate from approximately $3.5
billion in 1993 to approximately $6.5 billion in 1997 and includes more than
4,000 search firms. The industry is expected to continue to grow at a 15% annual
rate with global revenue projected to reach $10.0 billion by the year 2000. LAI
believes that global search fulfillment capabilities are critical to attracting
and retaining multinational clients. Historically, LAI has offered its clients
global search fulfillment capabilities through its membership in Amrop
International, an international alliance of independent search firms. However,
to better leverage its knowledge-based expertise and technological capabilities,
capitalize on its existing relationships with multinational clients and ensure
the quality and consistency of its services, LAI recently initiated an
international strategy of directly owning offices in major business and
financial centers around the world. In May 1998, LAI opened an office in London,
England and is currently targeting other major markets in which to establish
offices. In international
 
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markets where LAI does not own an office, it will continue to provide clients
with search fulfillment capabilities by using existing and developing new
referral relationships with executive search firms located in those markets.
Through these referral relationships, LAI executes domestic search assignments
on behalf of non-U.S. executive search firms and refers to such firms
international search assignments for LAI's domestic clients.
 
     Since continuing as a member of Amrop International was incompatible with
the Company's international expansion strategy, LAI announced its withdrawal
from Amrop International in May 1998. Searches derived from membership in Amrop
International accounted for approximately 3% of LAI's fiscal 1998 fee revenue.
However, LAI has built strong referral relationships with many Amrop members
throughout the world and expects to maintain these relationships to continue
providing clients with global search fulfillment capabilities in markets where
LAI does not directly own an office. LAI believes that its global search
capabilities will be enhanced by its strategy of direct ownership of
international offices.
 
SERVICES
 
     LAI provides executive search services exclusively on a retained search
basis for Fortune 500 and large private companies. The Company typically is
retained to identify candidates to fill its clients' senior leadership
positions, which range from brand managers and controllers to chief operating
and chief executive officers. The average first year cash compensation of
positions for which LAI conducted searches in fiscal 1998 was approximately
$226,000.
 
     LAI serves its clients in a consultative capacity by (i) assessing the
client's existing management capabilities, corporate culture and business
strategies, (ii) evaluating the client's industry position and major
competition, (iii) determining the relevant business experience, skills and
personal characteristics that a qualified candidate should possess, (iv)
identifying, contacting and interviewing potential candidates, (v) developing
detailed candidate reports and making recommendations to the client regarding
the most qualified candidates, (vi) advising the client with respect to
appropriate compensation and benefits and (vii) monitoring the quality of its
search procedures with client surveys and other client feedback mechanisms.
 
     In providing high quality executive search services, the Company uses a
team-oriented approach rather than relying on the reputation of a few key
consultants. Each of LAI's consultants is expected to develop and maintain an
expertise in one or two industries and build long-term relationships with a
limited number of clients. To maintain a high level of quality on a consistent
basis, consultants employ LAI's standard executive search process for each new
search assignment, regardless of how similar the parameters of the new search
may be to other search assignments previously conducted by LAI. At the start of
each search assignment, LAI and its client jointly develop detailed candidate
and job specifications and establish a search strategy that targets specific
industries and companies that are expected to produce the most appropriate
candidates. LAI's consultants and research staff then contact potential
candidates, distribute job specifications and client promotional materials,
conduct extensive telephone and personal interviews, and check references of
those candidates who appear most qualified for the position. Because most
candidates are successfully employed and not seeking to change jobs, initial
contact must be conducted discreetly.
 
     After meeting with job candidates, LAI submits to the client confidential
candidate reports regarding those candidates who LAI believes are the most
qualified. Each report contains a detailed business history of the candidate,
results of LAI's preliminary reference checks and LAI's assessment of the
candidate's relevant business experience, qualifications, personal
characteristics and suitability. LAI then assists in the introduction of
selected candidates to the client and administers the interview process. When
the client is ready to extend an employment offer, LAI facilitates the
negotiation of employment terms and the transition by the candidate to the
employ of the client.
 
     LAI has also recently begun to provide a new service offering, known as
"selection services," to complement its core executive search practice.
Selection services typically involves searches for mid-to senior-level positions
with cash compensation in the $75,000 to $125,000 range, frequently for a client
seeking to fill multiple positions under a single search engagement. LAI's
approach to selection services is similar to its other
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executive searches, in that search consultants evaluate the needs of each client
and develop appropriate job specifications and profiles. However, selection
services frequently differs from other executive searches in the way the
successful job candidate is located. In traditional executive search, LAI
identifies and seeks out specific candidates who ordinarily are not actively
looking to change jobs. In a selection services engagement, by contrast, LAI
invites inquiries from interested candidates in response to a job posting
advertised either in print, such as in The Wall Street Journal, or on the
Internet, and then evaluates, analyzes and ranks the candidates based on
inquiries and responses received. The Company supplements this data with highly
focused research, using LAI's proprietary database and other information
sources. To expand and manage selection services more efficiently, the Company
recently licensed an Internet-based software program. This software will enable
LAI to use the Internet to advertise job opportunities, solicit responses and
gather relevant employment histories from interested candidates; search, sort
and evaluate the resulting database; and pre-select interested candidates based
on pre-determined criteria. Job candidates will also be able to complete job
applications on-line, submit writing samples and complete skill assessment
worksheets.
 
     Similar to traditional executive searches, LAI's fee for selection services
is usually based on a percentage of the first year cash compensation for each
position filled, though selection services engagements may include other minimum
or contingent fee provisions. Although the average first year cash compensation
for the position being filled is typically less for a selection services
engagement than for LAI's core executive search practice, the Company can
achieve lower costs and higher profit margins on selection services because
these engagements involve multiple assignments of the same type and are less
labor intensive. The volume and efficiencies typically associated with selection
services provide LAI with an opportunity to enhance both total fee revenue and
average fee revenue per consultant. In addition, offering selection services
provides LAI's consultants with the ability to cross-sell a new service offering
to both new and existing clients.
 
MARKETING AND CLIENTS
 
     The Company's marketing strategy includes three primary components:
capitalize on its knowledge-based practice groups and long-term client
relationships; penetrate the domestic market through its regional office
structure and the international market through direct ownership of offices in
major business and financial centers around the world; and implement a global
branding program. LAI believes that its industry specialization and
technological capabilities enable it to consistently provide superior research
and, ultimately, deliver higher quality search results to its clients.
 
     Knowledge-Based Practice Groups.  LAI has developed a knowledge-based
search practice organized around eight industry groups and one functional group.
The industry groups execute searches for clients in the following business
sectors: automotive; communications, entertainment and technology; consumer
products and services; energy and natural resources; financial services; health
care and pharmaceuticals; industrial; and insurance and risk management. The
functional group executes searches for specific functional positions, including
board of directors, human resources and legal. Each practice group is
coordinated by a Practice Leader who is responsible for developing new business
and maintaining a high standard of service in that practice group. To achieve
these objectives, each group's Practice Leader (i) establishes the marketing and
search strategies for the particular practice group, (ii) identifies focused
accounts and targets clients within that practice group's business sector and
(iii) facilitates and assists the marketing activities of other consultants in
the practice group. Each Practice Leader has substantial industry expertise,
frequently having held one or more executive positions in the group's business
sector prior to becoming a search consultant. Additionally, LAI's Practice
Leaders have an average of approximately 13 years of experience in the executive
search industry.
 
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     The following table sets forth certain information regarding LAI's practice
groups. The companies listed in this table are clients with which the Company
anticipates having a continuing significant relationship in the future and
includes both (i) companies that are either the largest or among the largest
clients in the indicated practice group based on the Company's pro forma fiscal
1998 fee revenue received from such clients and (ii) companies that have been
clients for several years or more.
 
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                                       % OF PRO FORMA
                                        FISCAL 1998
           PRACTICE GROUP              FEE REVENUE(1)              SELECTED CLIENTS
-----------------------------------------------------------------------------------------------
 
 Financial Services                         24.5%       Banc One, Banco Santander, Lehman
                                                        Brothers, Societe Generale
-----------------------------------------------------------------------------------------------
 Communications, Entertainment and          20.4        America Online, GTE, IBM, Lucent
   Technology                                           Technologies
-----------------------------------------------------------------------------------------------
 Health Care and Pharmaceuticals            14.3        Bristol-Myers Squibb, Columbia/HCA,
                                                        Schering-Plough, PhyMatrix
-----------------------------------------------------------------------------------------------
 Consumer Products and Services             10.8        Grand Metropolitan, Home Depot, Kohler,
                                                        PepsiCo
-----------------------------------------------------------------------------------------------
 Industrial                                  9.0        AlliedSignal, Cooper Industries,
                                                        General Electric, Georgia Pacific
-----------------------------------------------------------------------------------------------
 Insurance and Risk Management               6.7        Equitable, Prudential, Zurich Kemper
-----------------------------------------------------------------------------------------------
 Energy and Natural Resources                6.5        Amerada Hess, Enron, Pennzoil
-----------------------------------------------------------------------------------------------
 Automotive                                  3.7        B.F. Goodrich, General Motors
-----------------------------------------------------------------------------------------------
 Functional (Board of Directors,             4.1        Eastman Chemical, Gillette, Lockheed
   Human Resources, Legal)                              Martin, Waste Management
-----------------------------------------------------------------------------------------------
</TABLE>
 
---------------
 
(1) Includes LAI, WHI and CPI fee revenue for their fiscal years ended February
    28, 1998, December 31, 1997 and December 31, 1997, respectively.
 
     LAI's practice groups enable its consultants to better understand each
client's business strategy and industry and position LAI as a consulting partner
to its clients. LAI emphasizes long-term relationships with clients, rather than
one-time projects or assignments. Each of LAI's 30 largest clients, based on
LAI's fiscal 1998 fee revenue, had been a client for an average of approximately
seven years as of February 28, 1998. In addition, more than 65% of the Company's
fiscal 1998 fee revenue was attributable to companies for which LAI conducted
one or more searches during the prior two fiscal years.
 
     Domestic and International Offices.  To complement its knowledge-based
practice groups, the Company has established 17 domestic offices and one
international office in cities that are key business centers for one or more of
the Company's practice groups. Each major office is run by a Managing Partner
who has complete fiscal responsibility for that office. The Managing Partner's
principal responsibilities include overseeing day-to-day operational and
administrative matters at the local office level, providing assistance to
consultants in that office, assuring quality control in business development and
search execution, hiring and supervising office personnel and serving on an
internal operations committee. While compensation for other consultants is based
primarily on individual performance, compensation for Managing Partners is based
largely on the profitability of their respective local office, as well as on
their ability to successfully recruit highly qualified consultants to LAI. Since
consultants have greater opportunities to develop relationships with clients and
prospective clients in close geographic proximity, they normally focus on, but
do not limit their efforts to, clients in the region served by their particular
office. Over time, consultants seek to establish deep roots in the community and
develop strong links with local business, government and cultural leaders. LAI's
domestic offices are located in Atlanta, Austin (Texas), Barrington (Illinois),
Boston, Chicago, Cleveland, Dallas, Encino (California), Houston, Lake Geneva
(Wisconsin), Los Angeles, New York, Phoenix, Pittsburgh, San Francisco, Stamford
and Tampa. In addition, LAI has an office located in London, England.
 
                                       10
<PAGE>   11
 
     Branding Initiatives.  The Company historically has relied primarily on
client referrals and the efforts of its consultants, particularly its Practice
Leaders, to market the Company's services. More recently, LAI also has
implemented a global branding program to supplement the marketing efforts of the
Company's consultants. The global branding program is designed to significantly
increase LAI's visibility. The program involves (i) strengthening LAI's
reputation in cities where LAI offices are located through local event
sponsorship, board participation and local public relations, (ii) enhancing
LAI's reputation in the industries served by the Company's knowledge-based
practice groups through trade journal advertising, targeted mailings, and
participation in industry associations and conferences and (iii) building both a
national and global reputation through news releases, participation in industry
forums and issuance of specialized reports.
 
     Blocking Arrangements.  Either by agreement with clients or for marketing
or client relations purposes, executive search firms frequently refrain from
recruiting employees of a client, and possibly other entities affiliated with
that client, for a specified period of time (a "blocking" arrangement). LAI
actively manages its blocking arrangements and seeks to mitigate any adverse
effects of blocking by strengthening its long-term relationships with focused
accounts, shortening the length of the off-limits period and by resisting
requests for blocking arrangements with clients who do not engage LAI for
multiple assignments. Additionally, in recent years market conditions and
industry practices have resulted in blocking arrangements that are becoming
narrower in scope and shorter in duration.
 
RESEARCH AND TECHNOLOGY
 
     LAI believes that its industry specialization and technological
capabilities enable it to consistently provide superior research and,
ultimately, deliver higher quality search results to its clients. Search
consultants must understand a client's industry, competitors and business
strategies and be able to readily identify the universe of most qualified
executive candidates. LAI's 116 associates, researchers and IT professionals
support the Company's consultants by, among other things, gathering and
analyzing information obtained from numerous electronic databases, trade
journals and directories, the Internet and other sources. LAI also maintains a
proprietary database containing professional information on more than 100,000
executive candidates. Consultants can query this database on a variety of
attributes, including demographic information, work experience, compensation and
personal interview results. LAI's wide area computer network provides remote
document sharing and data search capabilities, groupware features and real-time
updates on ongoing search engagements. LAI is committed to continually upgrading
its proprietary database and other information sources to enable LAI's
consultants to retrieve relevant information quickly and efficiently.
 
     The Company's support functions, including its research department, are
coordinated from its Tampa, Florida office. In the search process, the principal
function of LAI's research department is to support the Company's consultants by
gathering and analyzing information on the industries and companies expected to
produce the most qualified candidates. LAI's research professionals also support
the Company's business development activities by providing target lists, data on
past LAI searches and information on companies and executives in target
industries. LAI's researchers typically have had professional research or
library training and experience prior to joining LAI, and many have
undergraduate and graduate degrees in such fields as library science. LAI's
research staff is organized by practice group, with most researchers
specializing in one or two specific industries. Unlike many of its competitors,
LAI researchers do not work exclusively for particular executive search
consultants. LAI believes its focused approach facilitates the development of
specialized expertise, promotes a consistent culture and cooperation across the
firm and standardizes communication and training.
 
PROFESSIONAL STAFF AND EMPLOYEES
 
     At April 30, 1998, LAI had 386 full time employees, of which 114 were
executive search consultants, 116 were associates, researchers or IT
professionals and 156 were administrative and support staff. LAI has never been
a party to any collective bargaining agreement and considers relations with its
employees to be good.
 
     LAI's search professionals are categorized either as consultants,
consisting of partners and principals, or as associates. Associates are junior
search professionals who generally do not directly execute search
 
                                       11
<PAGE>   12
 
assignments, but assist partners and principals by performing research and other
functions. After several years of experience and satisfactory performance, an
associate will be considered for promotion to the position of principal. If a
principal continues to develop and generate revenue, the principal will be
offered the opportunity to advance to the position of partner. Promotions depend
on a variety of factors, including productivity and business development. As a
matter of corporate philosophy, LAI strives to hire as associates only those
individuals it believes have the potential to become productive consultants.
 
     LAI's consultants (excluding those who joined LAI in connection with the
recent acquisitions of WHI and CPI) have been employed by the Company for an
average of approximately four years. LAI has experienced an average annual
turnover rate among its consultants of less than 8% over the last five fiscal
years. At April 30, 1998, there were 94 partners, 20 principals and 41
associates. Most of LAI's consultants held senior level positions with leading
companies in LAI's targeted industry sectors and had experience in the executive
search business prior to joining LAI. LAI's consultants have, on average,
approximately 11 years of experience in the executive search industry.
 
     LAI has been able to attract and retain some of the most productive
executive search consultants in the industry as a result of its premium
reputation, performance-based consultant compensation system and stock incentive
plans. The Company believes the salaries, commissions, bonuses and profit
sharing it pays to its consultants are among the industry's highest as a
percentage of fee revenue generated. Although consultants are paid base
salaries, a significant portion of most consultants' compensation consists of
incentive compensation that is dependent primarily upon the amount of fee
revenue they generate.
 
COMPETITION
 
     The executive search industry is highly competitive. It is estimated that
there are more than 4,000 executive search firms worldwide. There are relatively
few barriers to entry and new competitors frequently enter the market. While LAI
faces competition to some degree from all firms in the industry, the Company
believes its most direct competition comes from other retained search firms. In
particular, LAI competes with the largest firms in the industry: Heidrick &
Struggles, Inc., Korn/Ferry International, SpencerStuart & Associates, Russell
Reynolds Associates, Inc. and Egon Zehnder International. To a lesser extent,
LAI also faces competition from smaller boutique or specialty firms that may
compete in certain regional or functional markets and from in-house human
resource departments of clients and prospective clients. Some of LAI's
competitors possess greater resources and name recognition than LAI. Each firm
with which LAI competes is also a competitor in seeking to attract the most
productive search consultants. In the Company's experience, the executive search
business is more quality-sensitive than price-sensitive. As a result, LAI
competes on the level of service it offers, reflected by its knowledge-based
practice groups and individual client focus, and, ultimately, the quality of its
search results.
 
ITEM 2.  PROPERTIES
 
     The Company leases all of its office locations. As of February 28, 1998,
the Company leased an aggregate of approximately 155,186 square feet of office
space under leases calling for future minimum lease payments of approximately
$23.2 million and with remaining terms of between one and nine years (exclusive
of renewal options exercisable by LAI). LAI believes that its facilities are
adequate for its current needs and that it will not have difficulty leasing
additional office space to satisfy anticipated future needs.
 
ITEM 3.  LEGAL PROCEEDINGS
 
     From time to time the Company has been involved in litigation incidental to
its business. LAI currently is not a party to any litigation the adverse
resolution of which, in management's opinion, would be likely to have a material
adverse effect on the Company's business, financial condition or results of
operations.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
     There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended February 28, 1998.
                                       12
<PAGE>   13
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "LAIX."
 
     The following table sets forth, for the periods indicated, the range of
high and low closing sale prices for the Common Stock, as reported on the Nasdaq
National Market since trading began on July 2, 1997, in connection with the
Company's initial public offering, at $12.00 per share, under the symbol LAIX.
 
<TABLE>
<CAPTION>
                                                               HIGH       LOW
                                                              -------   -------
<S>                                                           <C>       <C>
FISCAL YEAR 1998:
Second Quarter (from July 2, 1997)..........................  $21.250   $15.875
Third Quarter...............................................   22.875    17.750
Fourth Quarter..............................................   21.250    16.375
FISCAL YEAR 1999:
First Quarter (through May 11, 1998)........................  $23.250   $19.500
</TABLE>
 
     On May 11, 1998, the last reported sales price of the Common Stock on the
Nasdaq National Market was $20.00 per share. As of May 11, 1998, there were
approximately 145 holders of record of the Common Stock.
 
     LAI does not intend to pay any cash dividends for the foreseeable future
but instead intends to retain earnings, if any, for the future operation and
expansion of LAI's business. Any determination to pay dividends in the future
will be at the discretion of the Company's Board of Directors and will be
dependent upon LAI's results of operations, financial condition, contractual
restrictions, restrictions imposed by applicable law and other factors deemed
relevant by the Board of Directors. Moreover, the Company's credit facilities
prohibit payment of dividends without the consent of the lender.
 
     During the fiscal year ended February 28, 1998, the Company issued 25,707
and 189,677 shares of its Common Stock, without registration under the
Securities Act of 1933 (the "Securities Act"), to consultants in connection with
the acquisitions of WHI and CPI, respectively. The Company believes that all
such transactions were exempt from registration pursuant to Section 4(2) and/or
Rule 701 under the Securities Act.
 
     On July 8, 1997, the Company completed its initial public offering under a
Registration Statement on Form S-1 effective July 1, 1997 (Securities and
Exchange Commission file number 333-26027) covering 2.3 million shares of its
Common Stock. Net proceeds from the offering were approximately $24.7 million,
of which approximately $3.9 million was used to repay all outstanding
indebtedness under the Company's credit facilities, approximately $9.7 million
was paid in connection with the Company's acquisitions of WHI and CPI and the
balance was used for general corporate purposes including working capital.
 
                                       13
<PAGE>   14
 
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following table sets forth selected financial and other data of LAI for
fiscal years ended February 1994 through 1998 and as of the last day of each of
those fiscal years. The Statement of Operations Data for, and Balance Sheet Data
as of the end of, fiscal 1995 through 1998, are derived from the audited
Consolidated Financial Statements of the Company. The Statement of Operations
and Other Data for, and Balance Sheet Data as of the end of, fiscal 1994 are
derived from the unaudited Consolidated Financial Statements of the Company and,
in the opinion of management, include all adjustments (consisting of normal and
recurring adjustments) necessary to present fairly the results of operations and
financial position of the Company for such periods and as of such dates. The
financial data shown below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Report.
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED FEBRUARY 28 OR 29,
                                               --------------------------------------------------------------
                                                                                                        PRO
                                                                                                       FORMA
                                                 1994       1995       1996       1997       1998     1998(1)
                                               --------   --------   --------   --------   --------   -------
                                                      (IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
<S>                                            <C>        <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Fee revenue, net.............................  $ 21,144   $ 28,262   $ 35,088   $ 46,437   $ 61,803   $91,730
Compensation and benefits....................    17,725     23,991     30,693     39,928     46,513    69,053
General and administrative expenses..........     2,080      2,333      4,467      6,685      8,680    13,736
                                               --------   --------   --------   --------   --------   -------
  Operating income (loss)....................     1,339      1,938        (72)      (176)     6,610     8,941
Net interest income (expense)................        14         (6)       (40)      (376)       197      (649)
                                               --------   --------   --------   --------   --------   -------
  Income (loss) before provision for income
    taxes....................................     1,353      1,932       (112)      (552)     6,807     8,292
Provision for income taxes...................        97        671         90         15      2,927     3,807
                                               --------   --------   --------   --------   --------   -------
         Net income (loss)...................  $  1,256   $  1,261   $   (202)  $   (567)  $  3,880   $ 4,485
                                               ========   ========   ========   ========   ========   =======
Diluted earnings per share...................                                              $   0.82
                                                                                           ========
Pro forma net income (loss)(2)...............  $    785   $  1,121   $   (202)  $   (567)  $  3,880   $ 4,485
                                               ========   ========   ========   ========   ========   =======
Pro forma diluted earnings per share.........                                                         $  0.90
                                                                                                      =======
Diluted weighted average shares
  outstanding................................                                                 4,751     4,961
OTHER DATA:
Number of consultants employed as of fiscal
  year end...................................        38         46         54         62        111
Average fee revenue per consultant employed
  during entire fiscal year..................  $602,000   $689,000   $706,000   $740,000   $989,000
Average cash compensation of positions filled
  (3)........................................  $172,000   $180,000   $196,000   $226,000   $226,000
</TABLE>
 
<TABLE>
<CAPTION>
                                                                         AS OF FEBRUARY 28 OR 29,
                                                              ----------------------------------------------
                                                               1994     1995      1996      1997      1998
                                                              ------   -------   -------   -------   -------
<S>                                                           <C>      <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Working capital (deficit)...................................  $1,723   $ 1,439   $  (485)  $   617   $ 9,815
Total assets................................................   9,885    12,193    18,300    25,561    88,916
Total long-term debt........................................     264       143        63     2,037     9,125
Total stockholders' equity..................................   2,121     2,325     2,509     2,627    35,471
</TABLE>
 
---------------
 
(1) The unaudited pro forma financial information for the year ended February
    28, 1998 (i) reflects the results of operations of LAI as if the
    acquisitions of WHI and CPI were completed on March 1, 1997, (ii) assumes
    that the WHI and CPI consultants were paid according to the LAI consultant
    compensation plan, the effect of which was to decrease compensation and
    benefits expense and increase operating income by approximately $3.6
    million, (iii) reflects an increase in goodwill amortization and a decrease
    in net interest income as a result of the two acquisitions and (iv) was
    prepared using the historical audited financial statements of WHI and CPI
    for the year ended December 31, 1997.
(2) For periods prior to November 1, 1994, the Company had elected to be taxed
    as an S corporation for federal and certain state income tax purposes. The
    pro forma net income (loss) for each period shown reflects a provision for
    income taxes as if the Company were a C corporation for income tax purposes
    during such periods at an assumed effective tax rate of 42%.
(3) Represents the average first year cash compensation of positions for which
    LAI conducted searches during the fiscal year.
 
                                       14
<PAGE>   15
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
     The following presentation of management's discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the Company's Consolidated Financial Statements, the Notes
thereto and other financial information included herein.
 
OVERVIEW
 
     LAI is one of the largest and fastest growing executive search firms in the
world. The Company derives substantially all of its revenue from fees for
professional services, which are billed exclusively on a retained basis. LAI's
fees typically equal one-third of the anticipated first year cash compensation
for the positions being filled. If the actual compensation package for a
successfully placed candidate varies from the amount anticipated at the time of
the engagement, an appropriate adjustment may be made to LAI's search fee. The
Company recognizes fee revenue as clients are billed, generally over a 60 to 90
day period following the acceptance of a search assignment. In addition, clients
usually are required to reimburse LAI for out-of-pocket expenses incurred in the
search process.
 
     LAI's fee revenue has grown from $21.1 million in fiscal 1994 to $61.8
million in fiscal 1998, representing a compound annual growth rate of
approximately 31%. LAI's fee revenue for fiscal 1998, on a pro forma combined
basis assuming the acquisitions of WHI and CPI were completed on March 1, 1997,
was $91.7 million. This growth has been achieved by (i) increasing the number of
consultants at existing offices, (ii) improving fee revenue per consultant and
(iii) opening and acquiring new offices. Since its initial public offering on
July 1, 1997, the Company has completed two acquisitions, which added a net
total of six offices and 37 consultants. See "-- Acquisitions." The Company also
opened new offices in Boston, Massachusetts and Stamford, Connecticut in fiscal
1997, and in Pittsburgh, Pennsylvania in fiscal 1998. Including acquisitions,
the Company added a net total of 65 consultants during the three-year period
ended February 28, 1998, representing a 141% increase to its consulting staff.
Fee revenue per consultant employed for an entire fiscal year was approximately
$706,000, $740,000 and $989,000 for fiscal 1996, 1997 and 1998, respectively.
This improvement was due to greater consultant productivity, an increased mix of
more senior level executive searches and to an overall rise in executive
compensation. The average first year cash compensation of positions for which
LAI conducted searches in fiscal 1996, 1997 and 1998 was approximately $196,000,
$226,000, and $226,000, respectively.
 
     The largest component of the Company's operating expenses consists of
compensation and benefits paid to its executive search consultants, executive
officers and administrative and support personnel. LAI believes it has been able
to attract and retain some of the most productive executive search consultants
in the industry as a result of its premium reputation, its performance-based
consultant compensation system and its status as a public company, which
provides consultants with the opportunity to build wealth through direct equity
ownership and participation in the Company's stock incentive plans. Compensation
and benefits expense represented approximately 75.3% of fee revenue in fiscal
1998. The Company believes the compensation and benefits it pays to its
consultants, as a percentage of fee revenue generated, is among the highest in
the industry.
 
     General and administrative expenses consist of occupancy expense associated
with the Company's leased premises, costs associated with the Company's
investments in information technology and marketing and other general office
expenses. LAI benefits from the reduced costs associated with locating a
majority of its administrative support operations in Tampa, Florida. In
addition, the Company believes that all of its systems are year 2000 compliant.
 
ACQUISITIONS
 
     As part of its growth strategy, the Company expects to continue to pursue
strategic acquisitions as an efficient way to increase its number of
consultants, expand its client base, strengthen and expand its practice group
coverage and broaden its geographic reach in both domestic and international
markets. Since its initial
 
                                       15
<PAGE>   16
 
public offering on July 1, 1997, the Company completed two acquisitions, which
were recorded under the purchase method of accounting. The Company amortizes
goodwill over 30 years.
 
     WHI Acquisition.  LAI completed the acquisition of WHI on February 27,
1998. WHI was the ninth largest executive search firm in the United States with
fee revenue of $26.5 million for the year ended December 31, 1997. WHI's fee
revenue grew at a 21.5% compound annual growth rate from $10.0 million in 1992
to $26.5 million in 1997. LAI acquired WHI for approximately $19.5 million. The
purchase consideration consisted of (i) approximately $8.8 million in cash, (ii)
$7.6 million in subordinated promissory notes payable over three years, accruing
interest on the unpaid balance at the rate of 5.0% per annum and (iii)
approximately 190,000 shares of Common Stock.
 
     CPI Acquisition.  LAI completed the acquisition of CPI on January 2, 1998.
CPI was a prominent executive search firm based in California that specialized
primarily in the financial services industry. CPI's fee revenue was $3.4 million
for the year ended December 31, 1997. The Company acquired CPI for approximately
$3.1 million. The purchase consideration consisted of (i) approximately $1.4
million in cash, (ii) a convertible subordinated promissory note of the Company
in the principal amount of $1.25 million payable over three years, accruing
interest on the unpaid balance at the rate of 6.75% per annum and convertible
into shares of Common Stock at each anniversary date at the prices specified in
the asset purchase agreement and (iii) approximately 26,000 shares of Common
Stock.
 
PRO FORMA FINANCIAL INFORMATION
 
     The unaudited pro forma financial information for the year ended February
28, 1998 reflects the results of operations of LAI assuming the acquisitions of
WHI and CPI were completed on March 1, 1997. The historical audited financial
statements of WHI and CPI for the year ended December 31, 1997 were used in
preparing the unaudited pro forma financial information.
 
     The unaudited pro forma financial information assumes that the WHI and CPI
consultants were paid according to LAI's consultant compensation plan, which
decreased compensation and benefits expense and increased operating income by
approximately $3.6 million. The unaudited pro forma financial information also
reflects an increase in goodwill amortization of approximately $810,000 and a
decrease in net interest income of approximately $960,000 as a result of the two
acquisitions. The unaudited pro forma financial information does not reflect (i)
expected cost savings which may be achieved through facilities, technology and
general and administrative integration or (ii) expected costs of planned
upgrades to WHI's and CPI's management information systems. Such items are not
reflected because they are not factually determinable or estimable.
 
RESULTS OF OPERATIONS
 
     The following table sets forth, for the periods indicated, selected
statement of operations data as a percentage of fee revenue:
 
<TABLE>
<CAPTION>
                                                                PERCENTAGE OF FEE
                                                                     REVENUE
                                                              ---------------------
                                                                   YEAR ENDED
                                                               FEBRUARY 28 OR 29,
                                                              ---------------------
                                                              1996    1997    1998
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Fee revenue, net............................................  100.0%  100.0%  100.0%
Compensation and benefits...................................   87.5    86.0    75.3
General and administrative expenses.........................   12.7    14.4    14.0
                                                              -----   -----   -----
Operating income (loss).....................................   (0.2)   (0.4)   10.7
Net interest income (expense)...............................   (0.1)   (0.8)    0.3
                                                              -----   -----   -----
Income (loss) before provision for income taxes.............   (0.3)   (1.2)   11.0
Provision for income taxes..................................    0.3      --     4.7
                                                              -----   -----   -----
Net income (loss)...........................................   (0.6)%  (1.2)%   6.3%
                                                              =====   =====   =====
</TABLE>
 
                                       16
<PAGE>   17
 
FISCAL 1998 COMPARED WITH FISCAL 1997
 
     Fee revenue.  Fee revenue increased $15.4 million, or 33.1%, to $61.8
million for fiscal 1998 from $46.4 million for fiscal 1997. The increase in fee
revenue was primarily a result of an increase in the number of consultants and
an increase in the average fee revenue per consultant. At the end of fiscal
1998, the Company employed a total of 111 consultants, which represents a net
increase of 49 consultants since the beginning of fiscal 1998 and reflects the
37 consultants added in connection with the acquisitions of WHI on February 27,
1998 and CPI on January 2, 1998. The average fee revenue per consultant employed
for the entirety of the periods being compared increased 33.6% to $989,000 in
fiscal 1998 from $740,000 in fiscal 1997.
 
     Compensation and benefits.  Compensation and benefits increased $6.6
million, or 16.5%, to $46.5 million for fiscal 1998 from $39.9 million for
fiscal 1997. The increase was primarily due to compensation and benefits
associated with the growth in the number of consultants and the increase in fee
revenue per consultant. As a percentage of fee revenue, compensation and
benefits decreased to 75.3% for fiscal 1998 from 86.0% for fiscal 1997 primarily
due to a decrease in cash compensation paid to consultants in connection with
the Company's adoption of a revised compensation plan for consultants effective
March 1, 1997. The decrease in compensation and benefits as a percentage of fee
revenue also was due to spreading compensation and benefits for LAI's
administrative and support staff, which are primarily fixed, over a greater fee
revenue base.
 
     General and administrative expenses.  General and administrative expenses
increased $2.0 million, or 29.8%, to $8.7 million for fiscal 1998 from $6.7
million for fiscal 1997. These changes were the result of additional
infrastructure costs related to business expansion, including increased
occupancy and IT expenses. As a percentage of fee revenue, general and
administrative expenses decreased to 14.0% for fiscal 1998 from 14.4% for fiscal
1997.
 
     Operating income (loss).  Operating income was $6.6 million for fiscal
1998, as compared to a loss of $176,000 for fiscal 1997. This change was
primarily the result of an increase in fee revenue and decreases in compensation
and benefits and general and administrative expenses as a percentage of fee
revenue.
 
     Net interest income (expense).  The Company received net interest income of
$197,000 for fiscal 1998, as compared to net interest expense incurred of
$376,000 for fiscal 1997. This change was a result of the Company repaying all
outstanding indebtedness under its credit facilities with proceeds from the
issuance of Common Stock during its initial public offering, as well as
investment earnings from the remaining net proceeds.
 
     Provision for income taxes.  The effective tax rate for fiscal 1998 of
43.0% varied from the statutory rate of 34.0% due to state and local income
taxes and because certain expenses, including a portion of meals, entertainment
and dues expense and premiums on keyperson life insurance policies, are
non-deductible for income tax purposes.
 
FISCAL 1997 COMPARED WITH FISCAL 1996
 
     Fee revenue.  Fee revenue increased $11.3 million, or 32.3%, to $46.4
million for fiscal 1997 from $35.1 million for fiscal 1996. The increase in fee
revenue was primarily a result of an increase in the number of consultants and
an increase in the average fee revenue per consultant. At the end of fiscal
1997, the Company employed a total of 62 consultants, which represents a net
increase of 8 consultants since the beginning of fiscal 1997. The average fee
revenue per consultant employed for the entirety of the periods being compared
increased 4.8% to $740,000 in fiscal 1997 from $706,000 in fiscal 1996. The
average first year cash compensation of positions for which LAI conducted
searches increased by 15.3% to $226,000 in fiscal 1997 from $196,000 in fiscal
1996. During fiscal 1997, LAI opened two new offices, which generated
approximately $1.7 million of fee revenue.
 
     Compensation and benefits.  Compensation and benefits increased $9.2
million, or 30.1%, to $39.9 million for fiscal 1997 from $30.7 million for
fiscal 1996. The increase was primarily due to compensation and benefits
associated with the growth in the number of consultants and the increase in fee
revenue per consultant. As a percentage of fee revenue, compensation and
benefits decreased to 86.0% for fiscal 1997 from
 
                                       17
<PAGE>   18
 
87.5% for fiscal 1996 primarily due to spreading compensation and benefits for
LAI's administrative and support staff, which are primarily fixed, over a
greater fee revenue base.
 
     General and administrative expenses.  General and administrative expenses
increased $2.2 million, or 49.7%, to $6.7 million for fiscal 1997 from $4.5
million for fiscal 1996. As a percentage of fee revenue, general and
administrative expenses increased to 14.4% for fiscal 1997 from 12.7% for fiscal
1996. These increases were primarily due to increases in occupancy costs
associated with lease renewals at three of LAI's offices and the opening of two
new offices in Stamford, Connecticut and Boston, Massachusetts, as well as an
increase in marketing expenses to implement a program to enhance LAI's name
recognition.
 
     Operating income (loss).  Operating loss increased $104,000 to $176,000 for
fiscal 1997 from $72,000 for fiscal 1996, and as a percentage of fee revenue to
0.4% for fiscal 1997 from 0.2% for fiscal 1996. These increases were primarily
due to the increase in general and administrative expenses, partially offset by
lower compensation and benefits as a percentage of fee revenue.
 
     Net interest income (expense).  Net interest expense increased $336,000 to
$376,000 for fiscal 1997 from $40,000 for fiscal 1996. The increase constitutes
interest expense on indebtedness incurred to fund leasehold improvements at two
of LAI's offices, as well as interest on compensation deferred pursuant to the
Company's deferred compensation plan.
 
     Provision for income taxes.  The effective tax rate for fiscal 1997 of
(2.8)% varied from the statutory rate of 35.0% due to state and local income
taxes and because certain expenses, including a portion of meals, entertainment
and dues expense and premiums on keyperson life insurance policies, are
non-deductible for income tax purposes.
 
UNAUDITED QUARTERLY RESULTS
 
     The following table sets forth certain unaudited quarterly operating
information of the Company for fiscal 1997 and fiscal 1998. This information has
been prepared on the same basis as the audited Consolidated Financial Statements
contained elsewhere in this Report and, in the opinion of management, includes
all adjustments, consisting solely of normal and recurring adjustments,
necessary for the fair presentation of the information for the periods
presented. The financial data shown below should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. Results for any previous
fiscal quarter are not necessarily indicative of results for the full year or
for any future quarter.
 
<TABLE>
<CAPTION>
                                                                     QUARTER ENDED
                       ---------------------------------------------------------------------------------------------------------
                       MAY 31,    AUGUST 31,   NOVEMBER 30,   FEBRUARY 28,   MAY 31,    AUGUST 31,   NOVEMBER 30,   FEBRUARY 28,
                         1996        1996          1996           1997         1997        1997          1997           1998
                       --------   ----------   ------------   ------------   --------   ----------   ------------   ------------
                                                                    (IN THOUSANDS)
<S>                    <C>        <C>          <C>            <C>            <C>        <C>          <C>            <C>
Fee revenue, net.....  $11,107     $11,506       $11,706        $12,118      $13,725     $16,773       $15,349        $15,956
Operating income
  (loss).............      131         216          (200)          (323)       1,377       1,745         1,701          1,787
Net income (loss)....       (5)          8          (244)          (326)         702       1,016         1,056          1,106
</TABLE>
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company relies primarily upon cash flows from operations and available
borrowings under its credit facilities to finance its operations. During fiscal
1996, 1997 and 1998, cash flows from operations were $1.6 million, $(653,000)
and $2.9 million, respectively. To provide additional liquidity, during fiscal
1998 the Company obtained a commitment letter for credit facilities providing
for maximum borrowings of $15.0 million. In May 1998, this commitment was
increased to $25.0 million. Borrowings under this facility will bear interest at
variable rates. See Note 4 to Consolidated Financial Statements.
 
     Capital expenditures totaled approximately $2.5 million, $1.8 million and
$2.2 million for fiscal 1996, 1997 and 1998, respectively. These expenditures
consisted primarily of purchases of office equipment, upgrades to information
systems and leasehold improvements. Investments in whole life insurance policies
intended to fund the Company's deferred compensation plan were $779,000, $1.0
million and $2.1 million in fiscal 1996, 1997 and 1998, respectively.
 
                                       18
<PAGE>   19
 
     Cash provided by financing activities was approximately $23.6 million
during fiscal 1998, including $24.7 million from the sale of Common Stock in the
Company's initial public offering. During fiscal 1998 the Company issued $8.8
million of subordinated debt in connection with the WHI and CPI acquisitions.
Cash provided by financing activities was approximately $2.7 million during
fiscal 1997, which included $1.7 million of net borrowings under a term loan and
$926,000 in proceeds from sales of Common Stock (net of Common Stock
repurchases) to newly hired and promoted consultants as part of LAI's strategy
to increase the breadth of stock ownership among its consultants. During fiscal
1996, cash provided by financing activities was approximately $416,000,
consisting primarily of proceeds from sales of Common Stock (net of Common Stock
repurchases) to newly hired and promoted consultants.
 
     The Company believes that funds from operations, its expanded credit
facilities and availability of equity capital will be sufficient to meet its
anticipated working capital, capital expenditure, debt repayment and general
corporate requirements on both a short-term and long-term basis.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for
financial statements for periods beginning after December 15, 1997. Management
believes the effect of adopting SFAS 130 would not have a material impact on the
accompanying consolidated financial statements.
 
     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. Management has not yet determined the effect
of adopting SFAS 131.
 
     If February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pension and Other Post Retirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other post retirement benefit plans.
SFAS 132 is effective for fiscal years beginning after December 15, 1997;
earlier application is encouraged. Management has implemented SFAS 132 for the
year ended February 28, 1998.
 
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance
for capitalizing and expensing the costs of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management believes the effect
of adopting SOP 98-1 would not have a material impact on the accompanying
consolidated financial statements.
 
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
 
     The discussion above and other portions of this document contain some
forward-looking statements. Forward-looking statements also may be included in
other written and oral statements made or released by the Company and its
representatives. You can identify forward-looking statements by the fact that
they do not relate strictly to historical or current facts. They may include
words such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe" and other words and terms of similar meaning. Forward-looking
statements describe our expectations today of what we believe is most likely to
occur or reasonably achievable in the future, but they do not predict or assure
any future occurrence and may turn out to be wrong. In particular, forward
looking statements in this document include those regarding the Company's
business strategy and its growth and expansion plans and strategies.
Forward-looking statements are subject to both known and unknown risks and
uncertainties and can be affected by inaccurate assumptions the Company might
make. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary
 
                                       19
<PAGE>   20
 
materially. The Company does not undertake any obligation to publicly update any
forward-looking statements to reflect new information or future events or
occurrences.
 
     The Company wishes to caution readers that, in addition to the business,
economic and legal factors that affect executive search firms generally, as well
as other important factors included elsewhere in this document, described in
other documents filed with the Securities and Exchange Commission or otherwise
publicly disclosed, the important factors discussed below could affect the
Company's actual results and could cause future events or circumstances to
differ materially from those expressed in any forward-looking statements made by
or on behalf of the Company. Other factors besides those discussed here could
also affect the Company's actual results.
 
     Dependence on Attracting and Retaining Qualified Executive Search
Consultants.  LAI's success depends upon its ability to attract and retain
qualified executive search consultants who possess the skills and experience
necessary to fulfill its clients' executive search needs. Competition for
qualified consultants is intense and many firms in LAI's industry have
experienced high consultant turnover rates. There can be no assurance that LAI
will continue to be successful in identifying and hiring consultants with
substantial experience and established client relationships. The majority of
LAI's executive search consultants are not subject to any employment, non
competition or similar agreement. Any impairment of LAI's ability to retain
existing or attract additional qualified consultants could have a material
adverse effect on LAI's business, financial condition and results of operations.
 
     Portability of Client Relationships.  LAI's success depends upon the
ability of its executive search consultants to develop and maintain strong,
long-term relationships with its clients. When a consultant leaves one search
firm and joins another, clients that have established relationships with the
departing consultant may move their business to the consultant's new employer.
The failure to retain its most productive consultants or maintain the quality of
service to which its clients are accustomed, and the ability of a departing
consultant to move business to his or her new employer, could have a material
adverse effect on LAI's business, financial condition and results of operations.
 
     Growth Through Acquisitions.  A key component of LAI's growth strategy is
to acquire executive search firms that expand the breadth of its practice groups
and strategically extend the Company's geographic presence, including
internationally. There can be no assurance that LAI will continue to
successfully identify suitable acquisition candidates and complete acquisitions
on terms beneficial to the Company and its stockholders.
 
     Management of Growth.  The Company currently is experiencing rapid growth
that could strain the Company's managerial, financial, administrative and
operational resources. To effectively manage its growth, the Company may be
required to improve its internal operational processes and controls, expand its
technological and financial systems, assimilate divergent corporate cultures of
acquired executive search firms, eliminate or consolidate redundant
capabilities, and maintain the consistency and high quality of its services.
There can be no assurance that LAI can continue to successfully manage its
growth.
 
     Competition.  The executive search industry is extremely competitive and
highly fragmented. There can be no assurance that LAI will be able to continue
to compete effectively with existing or potential competitors or that
significant clients or prospective clients of LAI will not decide to perform
search services using in-house personnel.
 
     Blocking Arrangements.  Executive search firms frequently agree to refrain,
for a specified period of time, from recruiting employees of a client and
possibly affiliates of such client, when conducting searches on behalf of other
clients (a "blocking" arrangement). As LAI's client base grows and as LAI
acquires additional executive search firms, blocking arrangements increasingly
may impede LAI's growth or its ability to attract and serve new clients, which
could have a material adverse effect on LAI's business, financial condition and
results of operations.
 
     Risks of International Operations.  LAI recently opened an office in
London, England and is pursuing further international expansion. LAI is subject
to certain risks that are inherent in conducting international business, such as
exposure to currency fluctuations, difficulties in integrating and standardizing
operational
                                       20
<PAGE>   21
 
procedures and corporate cultures, potentially adverse tax consequences,
difficulties in staffing and managing foreign operations and the burden of
complying with a wide variety of foreign laws and regulations. There can be no
assurance that one or more of such risks will not have a material adverse effect
on the Company's business, financial condition and results of operations.
 
     Reliance on Information Processing Systems.  LAI's success depends in large
part upon its ability to gather, store, retrieve and process substantial amounts
of information. To achieve its operational goals and to remain competitive, LAI
believes that it must continue to automate its search execution process and
further improve its information processing system. If LAI does not maintain an
information processing system that provides the capabilities necessary for LAI
to compete effectively, LAI's business, financial condition and results of
operations could be materially adversely affected.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     The Company will be required to include additional disclosures regarding
certain quantitative and qualitative information about market risk exposures
beginning with the fiscal year ending February 28, 1999.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     Financial Statements, including Notes thereto and certain reports on
portions thereof by independent certified public accountants (collectively,
"Financial Statements"), are included in this Report beginning on Page 24 and
are incorporated by reference.
 
ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
     None
 
                                    PART III
 
     The information called for by Item 10 through 13, below, of this Report has
been omitted in accordance with the General Instructions to Form 10-K
promulgated by the Securities and Exchange Commission (the "Commission"). The
Registrant will file with the Commission in June 1998, pursuant to Regulation
14A, a definitive proxy statement relating to the Registrant's Annual Meeting of
Stockholders on July 7, 1998 (the "Proxy Statement"), to elect directors,
approve the Registrant's 1998 Omnibus Stock and Incentive Plan and ratify the
appointment of Arthur Andersen LLP as the Registrant's firm of independent
certified public accountants for the fiscal year ending February 28, 1999. The
information required by these Items will be included in the Proxy Statement and
is incorporated herein by reference.
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Information to be included in the Proxy Statement under the heading
"Management" is hereby incorporated by reference as indicated above.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     Information to be included in the Proxy Statement under the headings
"Management," "Compensation Committee Report" and "Stock Performance Graph" is
hereby incorporated by reference as indicated above.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Information to be included in the Proxy Statement under the heading
"Security Ownership" is hereby incorporated by reference as indicated above.
 
                                       21
<PAGE>   22
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information to be included in the Proxy Statement under the heading
"Management -- Certain Relationships and Transactions" is hereby incorporated by
reference as indicated above.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (a) The following documents are filed as a part of this Report:
 
          1. Financial Statements beginning on Page 24 of this Report, as
     follows:
 
<TABLE>
<S>                                                           <C>
Report of Independent Certified Public Accountants..........    24
  Consolidated Balance Sheets...............................    25
  Consolidated Statements of Operations.....................    26
  Consolidated Statements of Stockholders' Equity...........    27
  Consolidated Statements of Cash Flows.....................    28
  Notes to Consolidated Financial Statements................    29
</TABLE>
 
          2. Financial Statement Schedules
 
<TABLE>
<S>                                                           <C>
Report of Independent Certified Public Accountants..........    42
Schedule II: Valuation on and Qualifying Accounts...........    43
</TABLE>
 
          3. Exhibits.
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
-------        -----------
<C>       <C>  <S>
  2.1 (4)  --  Agreement and Plan of Merger dated February 27, 1998, by and
               among Lamalie Associates, Inc., LAI Mergersub, Inc. and Ward
               Howell International, Inc.
  2.2 (4)  --  Asset Purchase Agreement dated December 29, 1997, by and
               among Lamalie Associates, Inc., Chartwell Partners
               International, Inc. and David M. DeWilde
  3.1 (1)  --  Articles of Incorporation of the Registrant as now in effect
  3.2 (1)  --  Bylaws of the Registrant as now in effect
  4   (1)  --  Form of Common Stock Certificate
 10.1 (3)  --  1997 Omnibus Stock and Incentive Plan
 10.2 (1)  --  Non-Employee Directors' Stock Option Plan
 10.3 (1)  --  Profit Sharing Plan
 10.4 (1)  --  1997 Employee Stock Purchase Plan
 10.5 (1)  --  Form of Agreement for Deferred Compensation Plan
 10.6 (1)  --  Managing Partners' Compensation Plan+
 10.7 (1)  --  Partners' Compensation Plan+
 10.8 (1)  --  Employment Agreement for Mr. Gow+
 10.9      --  1998 Omnibus Stock and Incentive Plan
 10.10(1)  --  Employment Agreement for Mr. Rothschild+
 10.11(2)  --  Form of Indemnification Agreement entered into with certain
               Directors and Officers
 10.12(1)  --  Directors' Deferral Plan
 10.13(3)  --  Employment Agreement with Robert L. Pearson dated October 8,
               1997
</TABLE>
 
                                       22
<PAGE>   23
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
-------        -----------
<C>       <C>  <S>
 10.14(4)  --  Form of Employment Agreement for former Ward Howell
               International, Inc. Shareholders
 21.1 (5)  --  Subsidiaries of the Registrant
 23.2      --  Consent of Arthur Andersen LLP
</TABLE>
 
---------------
 
(1) Incorporated by reference to the correspondingly numbered exhibit to the
    Registrant's Registration Statement on Form S-1 (File No. 333-26027),
    originally filed April 29, 1997, as amended and as effective July 1, 1997.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
    Registrant's Quarterly Report on Form 10-Q for the quarter ended May 31,
    1997, filed August 8, 1997.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
    Registrant's Quarterly Report on Form 10-Q for the quarter ended November
    30, 1997, filed January 13, 1998.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
    Registrant's current Report on Form 8-K filed March 13, 1998.
(5) Incorporated by reference to the correspondingly numbered exhibit to the
    Registrant's Registration Statement on Form S-1 (File No. 333-52075),
    originally filed May 7, 1998, including as subsequently amended.
 +  Confidential treatment has been granted with respect to portions of this
    Exhibit.
 
     (b) Reports on Form 8-K.
 
     The Company did not file a Current Report on Form 8-K during the fourth
fiscal quarter of the period covered by this Report. On March 17, 1998, the
Company filed a Form 8-K reporting the acquisition of Ward Howell International,
Inc. ("WHI"), the ninth largest executive search firm in the United States, and
Chartwell Partners, Inc. ("CPI"), a prominent executive search firm based in
California specializing primarily in the financial services industry. Such
report included financial statements of WHI and CPI and pro forma financial
information related to these acquisitions.
 
                                       23
<PAGE>   24
 
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To Lamalie Associates, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Lamalie
Associates, Inc. (a Florida corporation) and subsidiaries as of February 28,
1997 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended February 28, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     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, the financial statements referred to above present fairly,
in all material respects, the financial position of Lamalie Associates, Inc. and
subsidiaries as of February 28, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
February 28, 1998, in conformity with generally accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
Tampa, Florida,
April 8, 1998
 
                                       24
<PAGE>   25
 
                            LAMALIE ASSOCIATES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              FEBRUARY 28,   FEBRUARY 28,
                                                                  1997           1998
                                                              ------------   ------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>
                                         ASSETS:
Current assets:
  Cash and cash equivalents.................................    $ 1,662        $23,780
  Accounts receivable, less allowance of $850 and $2,120,
     respectively...........................................     14,238         22,219
  Prepaid expenses..........................................      1,033          1,420
  Refundable income taxes...................................         58          1,822
                                                                -------        -------
          Total current assets..............................     16,991         49,241
                                                                -------        -------
Property and equipment, net.................................      4,184          5,612
Deferred tax assets.........................................      1,958          4,185
Goodwill, net...............................................         --         24,790
Cash value of life insurance................................      2,255          4,363
Other assets................................................        173            725
                                                                -------        -------
          Total assets......................................    $25,561        $88,916
                                                                =======        =======
 
                          LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Accounts payable and accrued liabilities..................    $ 2,089        $ 7,191
  Payable to former WHI stockholders........................         --          8,592
  Accrued compensation......................................     13,255         20,573
  Current maturities of long-term debt......................        387          3,070
  Current deferred tax liabilities..........................        643             --
                                                                -------        -------
          Total current liabilities.........................     16,374         39,426
                                                                -------        -------
Accrued rent................................................      1,038          1,013
Deferred compensation.......................................      3,872          6,951
Long-term debt, less current maturities.....................      1,650          6,055
                                                                -------        -------
Commitments and contingencies
Stockholders' equity:
  Preferred stock; $0.01 par value; 3,000,000 shares
     authorized; no shares issued and outstanding...........         --             --
  Common stock; $0.01 par value; 35,000,000 shares
     authorized; 3,075,000 and 5,576,446 shares issued and
     outstanding, respectively..............................         31             56
  Additional paid-in capital................................      4,087         32,873
  Subscriptions receivable..................................       (153)            --
  Retained earnings (accumulated deficit)...................     (1,338)         2,542
                                                                -------        -------
          Total stockholders' equity........................      2,627         35,471
                                                                -------        -------
          Total liabilities and stockholders' equity........    $25,561        $88,916
                                                                =======        =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                       25
<PAGE>   26
 
                            LAMALIE ASSOCIATES, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                       YEAR ENDED
                                                       ------------------------------------------
                                                       FEBRUARY 29,   FEBRUARY 28,   FEBRUARY 28,
                                                           1996           1997           1998
                                                       ------------   ------------   ------------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>            <C>            <C>
Fee revenue, net.....................................    $35,088        $46,437        $61,803
Operating expenses:
  Compensation and benefits..........................     30,693         39,928         46,513
  General and administrative.........................      4,467          6,685          8,680
                                                         -------        -------        -------
          Total operating expenses...................     35,160         46,613         55,193
                                                         -------        -------        -------
Operating income (loss)..............................        (72)          (176)         6,610
                                                         -------        -------        -------
Interest income......................................        117            125            887
Interest expense.....................................       (157)          (501)          (690)
                                                         -------        -------        -------
          Net interest income (expense)..............        (40)          (376)           197
                                                         -------        -------        -------
Income (loss) before provision for income taxes......       (112)          (552)         6,807
Provision for income taxes...........................         90             15          2,927
                                                         -------        -------        -------
Net income (loss)....................................    $  (202)       $  (567)       $ 3,880
                                                         =======        =======        =======
Basic net income (loss) per common share.............    $ (0.07)       $ (0.18)       $  0.85
                                                         =======        =======        =======
Weighted average common shares.......................      2,921          3,199          4,573
                                                         =======        =======        =======
Diluted net income (loss) per common and common
  equivalent share...................................    $ (0.07)       $ (0.18)       $  0.82
                                                         =======        =======        =======
Weighted average common and common equivalent
  shares.............................................      2,921          3,199          4,751
                                                         =======        =======        =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                       26
<PAGE>   27
 
                            LAMALIE ASSOCIATES, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                                    RETAINED
                                    COMMON STOCK     ADDITIONAL                    EARNINGS/         TOTAL
                                   ---------------    PAID-IN     SUBSCRIPTIONS   (ACCUMULATED   STOCKHOLDERS'
                                   SHARES   AMOUNT    CAPITAL      RECEIVABLE       DEFICIT)        EQUITY
                                   ------   ------   ----------   -------------   ------------   -------------
                                                                 (IN THOUSANDS)
<S>                                <C>      <C>      <C>          <C>             <C>            <C>
BALANCE AS OF FEBRUARY 28,
  1995...........................  2,278     $23      $ 2,943        $  (72)        $  (569)        $ 2,325
Redemption of common stock.......   (100)     (1)        (136)           --              --            (137)
Issuance of common stock.........    612       6          845          (851)             --              --
Reduction of subscriptions
  receivable from stockholders...     --      --           --           524              --             524
Net loss.........................     --      --           --            --            (202)           (202)
                                   -----     ---      -------        ------         -------         -------
BALANCE AS OF FEBRUARY 29,
  1996...........................  2,790      28        3,652          (399)           (771)          2,510
Redemption of common stock.......   (345)     (3)        (509)           --              --            (512)
Issuance of common stock.........    630       6          944          (950)             --              --
Reduction of subscriptions
  receivable from stockholders...     --      --           --         1,196              --           1,196
Net loss.........................     --      --           --            --            (567)           (567)
                                   -----     ---      -------        ------         -------         -------
BALANCE AS OF FEBRUARY 28,
  1997...........................  3,075      31        4,087          (153)         (1,338)          2,627
Redemption of common stock.......    (50)     (1)         (76)           --              --             (77)
Initial public offering of common
  stock..........................  2,300      23       24,628            --              --          24,651
Other issuance of common stock...    251       3        4,183            --              --           4,186
Reduction of subscriptions
  receivable from stockholders...     --      --           --           153              --             153
Amortization of discounted
  options........................     --      --           51            --              --              51
Net income.......................     --      --           --            --           3,880           3,880
                                   -----     ---      -------        ------         -------         -------
BALANCE AS OF FEBRUARY 28,
  1998...........................  5,576     $56      $32,873        $   --         $ 2,542         $35,471
                                   =====     ===      =======        ======         =======         =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                       27
<PAGE>   28
 
                            LAMALIE ASSOCIATES, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED
                                                              ------------------------------------------
                                                              FEBRUARY 29,   FEBRUARY 28,   FEBRUARY 28,
                                                                  1996           1997           1998
                                                              ------------   ------------   ------------
                                                                            (IN THOUSANDS)
<S>                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................    $  (202)       $  (567)       $ 3,880
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation and amortization.............................        449            768            885
  Amortization of goodwill..................................         --             --             17
  Amortization of discounted options........................         --             --             51
  Deferred income taxes.....................................       (738)          (276)          (897)
  Changes in assets and liabilities
    Accounts receivable, net................................     (3,796)        (4,679)        (1,367)
    Prepaid expenses........................................       (218)          (331)          (319)
    Refundable income taxes.................................        465         (1,146)        (1,707)
    Other assets............................................        (35)           (36)          (532)
    Accounts payable and accrued liabilities................      1,843           (155)           361
    Accrued compensation....................................      2,362          3,376           (493)
    Accrued rent............................................        122            531            (25)
    Deferred compensation...................................      1,314          1,862          3,079
                                                                -------        -------        -------
         Net cash provided by (used in) operating
           activities.......................................      1,566           (653)         2,933
                                                                -------        -------        -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in life insurance................................       (779)        (1,048)        (2,109)
Purchases of property and equipment.........................     (2,483)        (1,825)        (2,187)
Acquisition of WHI..........................................         --             --          1,318
Acquisition of CPI..........................................         --             --         (1,387)
                                                                -------        -------        -------
         Net cash used in investing activities..............     (3,262)        (2,873)        (4,365)
                                                                -------        -------        -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings..................................................         --          3,995             --
Repayments of debt..........................................         --         (2,262)        (1,783)
Redemption of certificate of deposit........................        109             --             --
Proceeds from issuance of common stock......................        524          1,197         25,410
Payments to redeem common stock.............................       (217)          (271)           (77)
                                                                -------        -------        -------
    Net cash provided by financing activities...............        416          2,659         23,550
                                                                -------        -------        -------
    Net (decrease) increase in cash and cash
    equivalents.............................................     (1,280)          (867)        22,118
Cash and Cash Equivalents, at beginning of period...........      3,809          2,529          1,662
                                                                -------        -------        -------
Cash and Cash Equivalents, at end of period.................    $ 2,529        $ 1,662        $23,780
                                                                =======        =======        =======
Supplemental disclosures of cash flow information --
Cash paid for interest......................................    $     8        $   204        $   145
Cash paid for income taxes..................................        362          1,437          4,691
Supplemental disclosures of non-cash activities --
Debt issued in connection with acquisitions.................         --             --          8,802
Equity issued in connection with acquisitions...............         --             --          3,580
Payable in connection with acquisitions.....................         --             --          8,592
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                       28
<PAGE>   29
 
                            LAMALIE ASSOCIATES, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1998
 
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION
 
     Lamalie Associates, Inc. and its wholly-owned subsidiaries ("LAI" or the
"Company") provide consulting services aimed specifically at solving its
clients' leadership needs by identifying, evaluating and recommending qualified
candidates for senior level positions. LAI provides executive search services
exclusively on a retained basis from 16 regional offices located throughout the
United States.
 
INITIAL PUBLIC OFFERING & REINCORPORATION
 
     The Company completed its initial public offering (the "IPO") of 2,300,000
shares of common stock on July 1, 1997. The proceeds of $24.7 million, net of
underwriters' discounts and other offering costs, were used to repay outstanding
indebtedness under the Company's credit facilities, to finance business
acquisitions and to provide additional working capital. On June 3, 1997, in
connection with the IPO, the Company reincorporated from Delaware to Florida.
 
STOCK SPLIT
 
     On June 3, 1997, in connection with the IPO, the Company effected a 1,000
for one stock split of each outstanding share of common stock. All share related
data in these consolidated financial statements have been adjusted retroactively
to give effect to this event as if it had occurred at the beginning of the
earliest period presented.
 
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.
 
CASH AND CASH EQUIVALENTS
 
     The Company considers all highly-liquid investment instruments with
original maturities of three months or less to be cash equivalents.
 
PROPERTY AND EQUIPMENT
 
     Office furniture and equipment are stated at cost less accumulated
depreciation. Effective March 1, 1996, the Company adopted the straight-line
method of depreciation for all newly acquired assets. All assets acquired prior
to March 1, 1996, are depreciated using an accelerated method. The effect of the
change in depreciation methods on newly acquired assets is not material to the
Company's financial statements. Depreciation is provided over the assets'
estimated useful lives of 7 years for office furniture and equipment and 5 years
for software. Leasehold improvements are stated at cost less accumulated
amortization using the straight-line method over the related remaining lease
terms which range from 2 to 9 years. Repair and maintenance costs which do not
extend the useful lives of the assets are expensed as incurred.
 
                                       29
<PAGE>   30
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
GOODWILL
 
     Goodwill relates to acquisitions made during the year ended February 28,
1998 (see Note 2), and is being amortized on a straight-line basis over thirty
years. Accumulated amortization as of February 28, 1998, was approximately
$17,000.
 
REVENUE RECOGNITION
 
     The Company derives substantially all of its revenues from fees for
professional services, which are recognized as fee revenue as clients are
billed, generally over a 60- to 90-day period commencing with the initial
acceptance of a search. Fee revenue is presented net of adjustments to original
billings.
 
INCOME TAXES
 
     The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Deferred tax assets and liabilities are
measured by applying enacted statutory tax rates applicable to the future years
in which the related deferred tax assets or liabilities are expected to be
settled or realized. Provision for income taxes consists of the taxes payable
for the current period and the change during the period in deferred tax assets
and liabilities.
 
NET INCOME (LOSS) PER COMMON SHARE
 
     Basic net income (loss) per common share was determined by dividing the net
income (loss) by the weighted average number of shares of common stock
outstanding during the year. Diluted net income (loss) per common and common
equivalent share was determined by dividing the net income (loss) by the
weighted average number of shares of common stock outstanding and dilutive
common equivalent shares from stock options using the treasury stock method and
from the convertible debt assuming conversion upon issuance. (See Note 4)
 
     Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, shares of common stock issued by the Company during the 12 months
preceding the IPO have been included in the calculation of weighted average
shares of common stock outstanding as if the shares were outstanding for all
periods presented.
 
CONCENTRATION OF CREDIT RISK
 
     Financial instruments which potentially expose the Company to concentration
of credit risk consist primarily of accounts receivable. Credit risk arising
from receivables is minimal due to the large number of clients comprising the
Company's customer base. The customers are concentrated primarily in the
Company's U.S. market areas. Credit losses in the past have not been material.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amounts of the Company's financial instruments as of February
28, 1997 and 1998, approximate fair value.
 
NEWLY ISSUED ACCOUNTING STANDARDS
 
     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained
 
                                       30
<PAGE>   31
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for financial statements for periods
beginning after December 15, 1997. Management believes the effect of adopting
SFAS 130 would not have a material impact on the accompanying consolidated
financial statements.
 
     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. Management has not yet determined the effect
of adopting SFAS 131.
 
     In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pension and Other Post Retirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other post retirement benefit plans.
SFAS 132 is effective for fiscal years beginning after December 15, 1997;
earlier application is encouraged. Management has implemented SFAS 132 for the
year ended February 28, 1998.
 
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance
for capitalizing and expensing the costs of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management believes the effect
of adopting SOP 98-1 would not have a material impact on the accompanying
consolidated financial statements.
 
RECLASSIFICATIONS
 
     Certain prior year balances have been reclassified in order to conform to
the current year financial statement presentation.
 
(2) ACQUISITIONS
 
     On February 27, 1998, the Company completed the acquisition by merger of
Ward Howell International, Inc. ("WHI"). WHI and its subsidiary were merged into
a wholly-owned subsidiary of the Company and WHI was the surviving corporation
in the merger. The purchase price was approximately $19.5 million including $7.6
million in notes payable and approximately 190,000 shares or $3.1 million of
common stock. The remaining $8.8 million of the purchase consideration was
payable to the former WHI stockholders as of February 28, 1998, and is accrued
for in the accompanying consolidated balance sheets. Also, additional
acquisition costs of approximately $3.1 million have been accrued for in the
accompanying consolidated balance sheets. The acquisition was accounted for as a
purchase with goodwill being recognized for the excess of the purchase amount
over the fair market value of the assets acquired.
 
     On January 2, 1998, the Company acquired Chartwell Partners International,
Inc. ("CPI"). The acquisition cost was approximately $3.1 million and consisted
of approximately $1.4 million cash, a $1.25 million convertible subordinated
note payable, and approximately 26,000 shares or $424,000 of common stock. The
acquisition was accounted for as a purchase with goodwill being recognized for
the excess of the purchase amount over the fair market value of the assets
acquired.
 
                                       31
<PAGE>   32
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Had the acquisitions of WHI and CPI been completed on March 1, 1996 and
1997, respectively, the combined pro forma unaudited results of operations would
have been as follows for the year ended February 28:
 
<TABLE>
<CAPTION>
                                                               1997       1998
                                                              -------    -------
                                                                (IN THOUSANDS,
                                                                  EXCEPT PER
                                                                 SHARE DATA)
                                                                 (UNAUDITED)
<S>                                                           <C>        <C>
Fee revenue, net............................................  $74,193    $91,730
Net income..................................................    2,943      4,485
Basic net income per common share...........................     0.86       0.94
Diluted net income per common and common equivalent share...     0.86       0.90
</TABLE>
 
     The unaudited pro forma combined results of operations for the years ended
February 28, 1997 and 1998 were prepared using the financial statements of WHI
and CPI for the years ended December 31, 1996 and 1997, respectively.
 
(3) PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following as of February 28:
 
<TABLE>
<CAPTION>
                                                               1997     1998
                                                              ------   ------
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Office furniture and equipment..............................  $2,884   $3,934
Leasehold improvements......................................   2,305    2,614
Software....................................................     721    1,672
                                                              ------   ------
                                                               5,910    8,220
Less: accumulated depreciation and amortization.............  (1,726)  (2,608)
                                                              ------   ------
                                                              $4,184   $5,612
                                                              ======   ======
</TABLE>
 
                                       32
<PAGE>   33
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(4) LONG-TERM DEBT
 
     Long-term debt consists of the following as of February 28:
 
<TABLE>
<CAPTION>
                                                               1997     1998
                                                              ------   ------
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Notes payable to former WHI stockholders dated February 27,
  1998, payable in three equal annual installments plus
  accrued interest bearing interest at 5.0%.................  $   --   $7,552
Convertible subordinated promissory note to a former CPI
  stockholder, dated January 2, 1998, payable in three equal
  annual installments plus accrued interest, bearing
  interest at 6.75%, and convertible into shares of common
  stock at each anniversary date at prices specified in the
  asset purchase agreement..................................      --    1,250
Term loan dated March 1996, payable in monthly principal
  installments of $23,810 plus accrued interest secured by
  accounts receivable, repaid in full during fiscal 1998....   1,733       --
Notes payable due to former LAI stockholders, non-interest
  bearing (interest imputed at 6.5%), payable in three equal
  annual installments maturing through April 2000...........     304      254
Notes payable to former WHI stockholders bearing interest
  from 5.8% to 9.5% maturing through February 2003..........      --       69
                                                              ------   ------
                                                               2,037    9,125
Less: current maturities of long-term debt..................    (387)  (3,070)
                                                              ------   ------
                                                              $1,650   $6,055
                                                              ======   ======
</TABLE>
 
     Maturities of long-term debt are as follows (in thousands):
 
<TABLE>
<CAPTION>
YEAR ENDING                                                   AMOUNT
-----------                                                   ------
<S>                                                           <C>
February 28, 1999...........................................  $3,070
February 29, 2000...........................................   3,070
February 28, 2001...........................................   2,971
February 28, 2002...........................................       7
February 28, 2003...........................................       7
                                                              ------
                                                              $9,125
                                                              ======
</TABLE>
 
     The Company maintains a line of credit which provides for maximum
borrowings of $6.5 million bearing interest at the bank's prime rate (8.5% at
February 28, 1998). Interest is payable monthly and the principal balance is due
upon demand. The line of credit is collateralized by accounts receivable with
borrowings limited to 75% of qualifying receivables. Additionally, the Company
is required to comply with certain working capital and liquidity covenants. The
Company was in compliance with the terms and covenants of its debt agreements as
of February 28, 1997 and 1998. No amounts were outstanding under the line of
credit as of February 28, 1997 or 1998. During fiscal 1998, the Company obtained
a commitment letter for credit facilities providing for maximum borrowings of
$15.0 million. Subsequent to year end, this commitment was increased to $25.0
million.
 
                                       33
<PAGE>   34
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) INCOME TAXES
 
     Significant components of the provision for income taxes are summarized as
follows:
 
<TABLE>
<CAPTION>
                                               FEBRUARY 29,   FEBRUARY 28,   FEBRUARY 28,
                                                   1996           1997           1998
                                               ------------   ------------   ------------
                                                             (IN THOUSANDS)
<S>                                            <C>            <C>            <C>
Current:
  Federal....................................     $ 662          $ 235          $2,931
  State......................................       166             56             893
                                                  -----          -----          ------
                                                    828            291           3,824
                                                  -----          -----          ------
Deferred:
  Federal....................................      (591)          (220)           (683)
  State......................................      (147)           (56)           (214)
                                                  -----          -----          ------
                                                   (738)          (276)           (897)
                                                  -----          -----          ------
                                                  $  90          $  15          $2,927
                                                  =====          =====          ======
</TABLE>
 
     The provision for income taxes differs from the amount computed by applying
the U.S. federal corporate tax rate to income before provision for income taxes
as follows:
 
<TABLE>
<CAPTION>
                                               FEBRUARY 29,   FEBRUARY 28,   FEBRUARY 28,
                                                   1996           1997           1998
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Statutory U.S. federal income tax rate.......       35.0%         35.0%          34.0%
  Meals, entertainment and dues..............     (101.0)        (31.2)           2.1
  Keyperson life insurance premiums..........       (6.6)         (3.8)            .5
  State taxes, net of federal benefit........       (7.3)         (2.8)           6.4
                                                  ------         -----          -----
     Effective income tax rate...............      (79.9)%        (2.8)%         43.0%
                                                  ======         =====          =====
</TABLE>
 
     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding amounts used for income tax reporting purposes.
As of February 28, 1998, the Company has changed its method of reporting for
income
 
                                       34
<PAGE>   35
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
taxes from the cash basis to the accrual basis. Significant components of the
Company's deferred tax assets and liabilities as of February 28, 1997 and 1998,
are as follows:
 
<TABLE>
<CAPTION>
                                                               1997      1998
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Deferred tax assets:
  Accounts payable and accrued liabilities..................  $   766   $   124
  Accrued compensation......................................    4,539        --
  Accrued rent..............................................      415       408
  Allowance for uncollectible accounts......................       --       595
  Deferred compensation.....................................    1,549     2,798
  Net operating loss carryforward...........................       --     2,207
  Other.....................................................       70        35
                                                              -------   -------
          Total deferred tax assets.........................    7,339     6,167
                                                              -------   -------
Deferred tax liabilities:
  Accrued compensation......................................       --      (117)
  Accounts receivable, net..................................   (5,757)       --
  Liability for change in tax method........................       --    (1,241)
  Prepaid expenses..........................................     (261)       --
  Property and equipment, net...............................       (6)     (623)
  Other.....................................................       --        (1)
                                                              -------   -------
          Total deferred tax liabilities....................   (6,024)   (1,982)
                                                              -------   -------
          Net deferred tax asset............................  $ 1,315   $ 4,185
                                                              =======   =======
</TABLE>
 
     The Company has net operating loss carryforwards of approximately $5.5
million, expiring in 2018. Approximately $4.2 million of this amount relates to
the acquisition of WHI (see Note 2). The remaining $1.3 million relates to the
change from calendar to fiscal year end for tax reporting purposes.
 
(6) EMPLOYEE BENEFIT PLANS
 
PROFIT SHARING PLAN
 
     The Company maintains a defined contribution retirement plan covering
substantially all employees. As of February 28, 1997 and 1998, the Company has
accrued for contributions totaling approximately $2,183,000 and $1,585,000,
respectively, which are included in accrued compensation in the accompanying
consolidated balance sheets.
 
DEFERRED COMPENSATION PLAN
 
     The Company has deferred compensation agreements with 59 of its employees.
Under the terms of the agreements, employees elect to defer a portion of their
compensation to be received, together with accrued interest, upon termination of
the agreements, as defined. The present value of the obligation is recorded as
deferred compensation in the accompanying consolidated balance sheets. Interest
is earned on deferred amounts at a rate determined annually by the Company (8.5%
at February 28, 1998).
 
     The Company is the beneficiary of whole life insurance policies with an
aggregate cash surrender value of approximately $2,255,000 and $4,363,000, and
an aggregate face amount of $14,725,000 and $13,450,000, as of February 28, 1997
and 1998, respectively. Proceeds from the policies are intended to fund the
deferred compensation agreements.
 
EMPLOYEE STOCK PURCHASE PLAN
 
     The Company maintains an employee stock purchase plan (the "ESPP") covering
all eligible employees meeting length of service requirements as specified in
the ESPP. An aggregate of 200,000 shares of common
 
                                       35
<PAGE>   36
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
stock is reserved for issuance under the ESPP. Eligible employees are given the
right to purchase shares of common stock two times a year at a price equal to
85% of the then current market price of the common stock.
 
STOCK OPTION PLANS
 
     The Company has two employee stock option plans, the 1997 Omnibus Stock and
Incentive Plan (the "1997 Plan") and the 1998 Omnibus Stock and Incentive Plan
(the "1998 Plan"). Under the 1997 Plan and the 1998 Plan, incentive stock
options, nonqualified stock options, stock appreciation rights, performance
units, performance shares, restricted stock, restricted stock units and stock
not subject to restrictions may be granted to employees of the Company at prices
determined at the time of grant. Generally, incentive stock options,
nonqualified stock options, restricted stock and restricted stock units will
vest each year beginning on the first anniversary of the date of grant at 20-25%
per year and will expire after 10 years. An aggregate of 950,000 and 1,000,000
shares of common stock are reserved for issuance under the 1997 Plan and the
1998 Plan, respectively. Certain options under the 1997 Plan which have been
granted to executive officers of the Company vest immediately upon the Company's
stock price exceeding specified closing prices for a specified length of time as
determined by the Board of Directors. If the specified criteria are not met, the
options become 100% exercisable six years from the date of grant.
 
     The Company also maintains a non-employee directors' stock plan (the
"Directors' Stock Plan"). An aggregate of 80,000 shares of common stock are
reserved for issuance under the Directors' Stock Plan. Among other provisions,
outside directors will annually receive options to purchase 5,000 shares of
common stock at an exercise price equal to the market price of the common stock
on the date of grant. The options will vest fully on the first anniversary of
the date of grant and expire after five years.
 
     The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25 ("APB 25"), under which approximately
$51,000 of compensation expense has been recognized for options with an exercise
price less than the market price on the date of grant. In October 1995, the FASB
issued SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
which was effective for fiscal years beginning after December 15, 1995. SFAS 123
allows companies to continue following the accounting guidance of APB 25, but
requires pro forma disclosure of net income and earnings per share for the
effects on compensation expense had the accounting guidance of SFAS 123 been
adopted.
 
                                       36
<PAGE>   37
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company adopted SFAS 123 for disclosure purposes during the year ended
February 28, 1998. For SFAS 123 purposes, the fair value of each option grant
has been estimated as of the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions; risk-free
interest rates ranging from 5.56 to 6.43 percent, depending on the date of
grant, expected life of 7 years, dividend rate of zero percent, and expected
volatility of 45 percent. Using these assumptions, the fair value of the stock
options granted in the year ended February 28, 1998, is approximately
$10,934,000, which would be amortized as compensation expense over the vesting
period of the options. Had compensation cost been determined consistent with
SFAS 123, utilizing the assumptions detailed above, the Company's net income and
net income per share, as reported would have been the following pro forma
amounts (in thousands except per share data):
 
<TABLE>
<CAPTION>
                                                               1998
                                                              ------
<S>                                                           <C>
Net Income
  As reported...............................................  $3,880
  Pro forma.................................................   3,399
Basic net income per common share
  As reported...............................................  $ 0.85
  Pro forma.................................................    0.74
Diluted net income per common and common equivalent share
  As reported...............................................  $ 0.82
  Pro forma.................................................    0.72
</TABLE>
 
     A summary of the status of the Company's stock option plans as of February
28, 1998, and for the year then ended is presented in the table and narrative
below:
 
<TABLE>
<CAPTION>
                                                                        1998
                                                             --------------------------
                                                                            WEIGHTED
                                                                            AVERAGE
                                                              SHARES     EXERCISE PRICE
                                                             ---------   --------------
<S>                                                          <C>         <C>
Outstanding -- beginning of year...........................         --       $   --
Granted....................................................  1,211,615        15.97
                                                             ---------       ------
Outstanding -- end of year.................................  1,211,615       $15.97
                                                             =========       ======
</TABLE>
 
<TABLE>
<CAPTION>
                                                       OPTIONS OUTSTANDING
                                      -----------------------------------------------------
                                           NUMBER            WEIGHTED-         WEIGHTED-
                                         OUTSTANDING          AVERAGE           AVERAGE
                                            AS OF            REMAINING          EXERCISE
RANGE OF EXERCISE PRICES              FEBRUARY 28, 1998   CONTRACTUAL LIFE       PRICE
------------------------              -----------------   ----------------   --------------
<S>                                   <C>                 <C>                <C>
$7.50...............................        67,500            9.3 years          $ 7.50
12.00 -- 17.88......................       538,500            9.4 years           13.12
19.13 -- 19.56......................       605,615           10.0 years           19.45
</TABLE>
 
     As of February 28, 1998, options to purchase an aggregate of 1,211,615
shares were outstanding with a weighted average fair value of $9.02. No options
were exercisable as of February 28, 1998. No options were granted during the
years ended February 29, 1996 or February 28, 1997.
 
                                       37
<PAGE>   38
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) NET INCOME (LOSS) PER SHARE
 
     The Company adopted SFAS 128, "Earnings per Share" during the year ended
February 28, 1998. Accordingly, basic and diluted earnings per share ("EPS") are
shown on the face of the accompanying consolidated statements of operations. The
following is a reconciliation of the numerator and denominator of basic EPS to
diluted EPS.
<TABLE>
<CAPTION>
                                                          FOR THE YEARS ENDED
                              ---------------------------------------------------------------------------
                                       FEBRUARY 29, 1996                      FEBRUARY 28, 1997
                              ------------------------------------   ------------------------------------
                                INCOME                       PER-      INCOME                       PER-
                                (LOSS)         SHARES       SHARE      (LOSS)         SHARES       SHARE
                              (NUMERATOR)   (DENOMINATOR)   AMOUNT   (NUMERATOR)   (DENOMINATOR)   AMOUNT
                              -----------   -------------   ------   -----------   -------------   ------
                                                            (IN THOUSANDS)
<S>                           <C>           <C>             <C>      <C>           <C>             <C>
BASIC EPS
Income available to common
 stockholders...............     $(202)         2,921       $(0.07)     $(567)         3,199       $(0.18)
Effect of Dilutive
 Securities Options.........        --             --                      --             --
Convertible promissory
 note.......................        --             --                      --             --
                                 -----          -----                   -----          -----
DILUTED EPS
Income available to common
 stockholders + assumed
 conversions................     $(202)         2,921       $(0.07)     $(567)         3,199       $(0.18)
                                 =====          =====       ======      =====          =====       ======
 
<CAPTION>
                                      FOR THE YEARS ENDED
                              ------------------------------------
                                       FEBRUARY 28, 1998
                              ------------------------------------
                                INCOME                       PER-
                                (LOSS)         SHARES       SHARE
                              (NUMERATOR)   (DENOMINATOR)   AMOUNT
                              -----------   -------------   ------
                                         (IN THOUSANDS)
<S>                           <C>           <C>             <C>
BASIC EPS
Income available to common
 stockholders...............    $3,880          4,573       $0.85
Effect of Dilutive
 Securities Options.........        --            121
Convertible promissory
 note.......................        14             57
                                ------          -----
DILUTED EPS
Income available to common
 stockholders + assumed
 conversions................    $3,894          4,751       $0.82
                                ======          =====       =====
</TABLE>
 
     Options to purchase 605,615 shares of common stock at prices ranging from
$19.13 to $19.56 per share were outstanding as of February 28, 1998, but were
not included in the computation of diluted EPS because the options' exercise
prices were greater than the average market price of common shares.
 
(8) COMMITMENTS AND CONTINGENCIES
 
OPERATING LEASES
 
     The Company leases certain office equipment and real property under
noncancellable operating leases.
 
     Future minimum lease payments under these leases are as follows:
 
<TABLE>
<CAPTION>
YEAR ENDING                                                     AMOUNT
-----------                                                 --------------
                                                            (IN THOUSANDS)
<S>                                                         <C>
February 28, 1999.........................................     $ 4,606
February 29, 2000.........................................       4,078
February 28, 2001.........................................       3,394
February 28, 2002.........................................       2,802
February 28, 2003.........................................       2,511
Thereafter................................................       5,788
                                                               -------
                                                               $23,179
                                                               =======
</TABLE>
 
     Rent expense totaled approximately $1,769,000, $2,947,000 and $3,396,000
during the years ended February 29, 1996, February 28, 1997, and February 28,
1998, respectively. Certain real property leases provide for periods of free
rent or escalating lease payments throughout the lease term. In accordance with
generally accepted accounting principles, rent expense is recognized ratably
over the term of the agreement.
 
                                       38
<PAGE>   39
                            LAMALIE ASSOCIATES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
LETTERS OF CREDIT
 
     As of February 28, 1998, the Company has standby letters of credit totaling
approximately $417,000. The letters of credit, which are required by certain
lessors as security deposits, expire between October and December 1998.
 
LITIGATION
 
     The Company is involved in various legal actions arising in the normal
course of business. While it is not possible to determine with certainty the
outcome of these matters, in the opinion of management, the eventual resolution
of these claims and actions outstanding will not have a material adverse effect
on the Company's financial position or results of operations.
 
                                       39
<PAGE>   40
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of the 29th day of
May, 1998.
 
                                          LAMALIE ASSOCIATES, INC.
 
                                          By:     /s/ ROBERT L. PEARSON
                                            ------------------------------------
                                                     Robert L. Pearson,
                                               President and Chief Executive
                                                           Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                      TITLE                    DATE
                      ---------                                      -----                    ----
<S>                                                    <C>                                <C>
 
                /s/ ROBERT L. PEARSON                     President, Chief Executive      May 29, 1998
-----------------------------------------------------        Officer and Director
                  Robert L. Pearson                          (Principal Executive
                                                                   Officer)
 
                 /s/ JACK P. WISSMAN                       Executive Vice President,      May 29, 1998
-----------------------------------------------------       Chief Financial Officer
                   Jack P. Wissman                           (Principal Financial
                                                                   Officer)
 
               /s/ PHILIP R. ALBRIGHT                       Vice President, Finance       May 29, 1998
-----------------------------------------------------      and Controller (Principal
                 Philip R. Albright                           Accounting Officer)
 
                 /s/ JOE D. GOODWIN                                Director               May 29, 1998
-----------------------------------------------------
                   Joe D. Goodwin
 
                 /s/ RODERICK C. GOW                               Director               May 29, 1998
-----------------------------------------------------
                   Roderick C. Gow
 
                  /s/ RAY J. GROVES                                Director               May 29, 1998
-----------------------------------------------------
                    Ray J. Groves
 
                 /s/ JOHN F. JOHNSON                               Director               May 29, 1998
-----------------------------------------------------
                   John F. Johnson
 
                /s/ RICHARD W. POGUE                               Director               May 28, 1998
-----------------------------------------------------
                  Richard W. Pogue
 
                  /s/ JOHN C. POPE                                 Director               May 29, 1998
-----------------------------------------------------
                    John C. Pope
</TABLE>
 
                                       40
<PAGE>   41
 
<TABLE>
<CAPTION>
                      SIGNATURE                                      TITLE                    DATE
                      ---------                                      -----                    ----
<S>                                                    <C>                                <C>
 
               /s/ JOHN S. ROTHSCHILD                              Director               May 29, 1998
-----------------------------------------------------
                 John S. Rothschild
 
                 /s/ DAVID L. WITTE                                Director               May 29, 1998
-----------------------------------------------------
                   David L. Witte
</TABLE>
 
                                       41
<PAGE>   42
 
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To Lamalie Associates, Inc.:
 
     We have audited in accordance with generally accepted auditing standards,
the financial statements of Lamalie Associates, Inc. included in this Form 10-K
and have issued our report thereon dated April 8, 1998. Our audits were made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the index in item 14(a)(2) is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
 
                                          ARTHUR ANDERSEN LLP
 
Tampa, Florida,
  April 8, 1998
 
                                       42
<PAGE>   43
 
                                                                     SCHEDULE II
 
                            LAMALIE ASSOCIATES, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                           BALANCE AT    CHARGED TO   AMOUNT ADDED   BALANCE AT
                                          BEGINNING OF    COST AND      THROUGH        END OF
DESCRIPTION                                  PERIOD       EXPENSES    ACQUISITIONS     PERIOD
-----------                               ------------   ----------   ------------   ----------
<S>                                       <C>            <C>          <C>            <C>
Year ended February 29, 1996
  Deducted from asset account:
     Allowance for doubtful accounts....      $275          $350          $ --         $  625
Year ended February 28, 1997
  Deducted from asset account:
     Allowance for doubtful accounts....       625           225            --            850
Year ended February 28, 1998
  Deducted from asset account:
     Allowance for doubtful accounts....       850           450           820          2,120
</TABLE>
 
                                       43