Fiscal Years Ended Six Months Ended June 30, June 30, 2000 1999 2000 ----------- ----------- -------- (Audited) (Unaudited) Revenue...... $26,286 $27,126 $19,711 Net income (3,268) 45 7,064 (loss).......
CRG is an executive compensation and benefits organization that provides the design, marketing, funding and administration of non-qualified plans. CRG is headquartered in Los Angeles, California and has affiliated offices in seven other cities. Prior to the acquisition, there was no material relationship between CRG and Clark/Bardes.
On June 21, 2000, we acquired all of the capital stock of Pearl Meyer & Partners, Inc. for a total purchase price of $25.9 million, excluding expenses. The purchase price consisted of a cash payment of $21.9 million and the issuance of 250,000 shares of our common stock with a value of $4.0 million. Acquisition expenses were $720,000. The $22.6 million cash portion of the purchase price was borrowed under our line of credit.
On June 13, 2000, we acquired the working capital and equipment, and assumed certain liabilities of W.M. Sheehan & Company, Inc. ("Sheehan"). The purchase price was $367,000 cash. The acquisition has been accounted for as a purchase and the goodwill will be amortized over twenty years.
Our operating results can fluctuate considerably, especially when compared on a consecutive quarterly basis. We can experience large increases in revenue in the fourth quarter and operating results may be affected by a number of other factors, including:
o new or enhanced programs and services by us or our competitors and client acceptance or rejection of these programs;
Year Ended December 31, Variances- Operating Results Inc. (Dec.) --------------------------- --------------- 2000 1999 1998 00/99 99/98 -------- -------- -------- -------- ------- Revenue First year......... $31,660 $33,547 $13,379 (5.6)% 150.7% Renewal............ 46,928 39,981 32,029 17.4% 24.8% ------- ------- ------- ---- ---- Total...... 78,588 73,528 45,408 6.9% 61.9% Commission expense... 30,486 36,158 26,350 (15.7)% 37.2% ------- ------- ------- ----- ---- Gross profit......... 48,102 37,370 19,058 28.7% 96.1% % of revenue 61.2% 50.8% 42.0% 20.4% 21.1% ------- ------- ------- ---- ---- Expenses General and administrative....... 22,766 15,525 12,924 46.6% 20.1% % of revenue 29.0% 21.1% 28.5% 37.2% (25.8)% Amortization of intangibles.......... 3,339 2,095 323 59.4% 548.6% % of revenue 4.2% 2.8% 0.7% 49.1% 300.6% ------- ------- ------- ---- ----- Total...... 26,105 17,620 13,247 48.2% 33.0% Operating income..... $21,997 $19,750 $ 5,811 11.4% 239.9% % of revenue 28.0% 26.9% 12.8% 4.2% 109.9%
Income taxes in 2000 were $5.8 million or an effective tax rate of 33.7% compared with $6.1 million or an effective tax rate of 40.8% in 1999.
As a financial company with strong operating cash flow, we have little need to retain substantial cash balances. We use the net cash from operating activities to pay down existing debt, fund capital expenditures and finance small acquisitions. We expect that large future acquisitions will be financed primarily through externally available funds. However, we can offer no assurance that such funds will be available and, if so, on terms acceptable to us.
Since September 1997, we have completed fourteen acquisitions. At any point in time, we may also be considering several other potential acquisitions. Future acquisitions may require substantial expenditures that will be financed through cash from operations, bank debt as well as future debt and/or equity offerings. We cannot assure you that funds will be available through the capital markets and, if so, on terms acceptable to us.