U.S. initial public offering. Reflecting our growing emphasis on the U.S. market, we completed our U.S. initial public offering on June 18, 2002, selling 6.9 million common shares at $14 per share and generating net proceeds of $88.1 million. Proceeds of the offering were used to pay down both short-term and long-term debt, which greatly strengthened our balance sheet and reduced interest costs. In connection with our U.S. initial public offering, we
Selling, occupancy and administration. Selling, occupancy and administration expenses increased by $9.6 million, or 27%, to $44.9 million in 2002 from $35.3 million in 2001. As a percentage of total revenue, selling, occupancy and administration expenses decreased to 20% in 2002 from 23% in 2001. This decrease was due to efforts to ensure that certain fixed costs remained constant while revenue grew.
Year ended December 31, 2001 compared to year ended December 31, 2000
loan at a fixed interest rate equal to the Canadian dollar interest swap rate quoted by the lender plus 1.375%. As of December 31, 2002, $50 million had been drawn on this facility.
We are exposed to interest rate risk in connection with our credit facilities. We had approximately $50.0 million of floating rate bank debt outstanding at December 31, 2002. Each 100 basis point increase in the interest rates charged on the balance of our outstanding floating rate debt as of December 31, 2002 will result in a $0.3 million decrease in our net earnings.
The amounts allocated to client relationships were determined by a discounting of the expected future net cash flows from commissions with consideration given to remaining economic lives, renewals, and associated expenses. Non-competition covenants value were determined using an income approach with consideration given to economic benefits associated with having the covenants in place versus damages that would ensue absent the agreements; and in the case of trademarks, a cash flow royalty savings approach addressing the economic benefits of the trademarks to the Company was used. The balance of the excess purchase price is allocated to goodwill.
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All material inter-company accounts and transactions have been eliminated. Certain reclassifications have been made to prior years’ financial statements to conform to the current year presentation.
For the years ended December 31, 2002, 2001 and 2000, amortization has been comprised of the following:
Long-term debt at December 31, 2002, includes the estimated value of the financial liability of $5,940 relating to put options on 730 common shares, exercisable at a price of C$17.00 per share, issued to former owners of Flanagan who are officers and employees of the Company. The put options are exercisable as follows:
Under U.S. GAAP, comprehensive income is measured in accordance with Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income” (SFAS 130). This standard defines comprehensive income as all changes in equity other than those resulting from investments by owners and distributions to owners and includes the change in unrealized gains (losses) on debt and equity securities and foreign currency translation adjustments. Under Canadian GAAP unrealized gains and losses (arising from a temporary decline in value) equity securities are not recorded and foreign currency translation adjustments are presented as movements in the cumulative translation account. Certain disclosures required by SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, have not been included as such disclosures related to the Company’s investments in debt and equity securities are immaterial to the overall financial statement presentation.
In accordance with Section 3062 and SFAS No. 142, the Company completed its impairment testing on the balance of goodwill and intangible assets as of January 1, 2002 and January 1, 2003. Based on the testing performed, no impairment losses were incurred.
Section 3475 is effective for disposal activities initiated by an enterprise’s commitment to a plan on or after May 1, 2003 (although earlier adoption is encouraged) and replaces the disposal provisions of Section 3061, “Property, Plant and Equipment”, and the previous Section 3475, “Discontinued Operations”. The Company will adopt prospectively Section 3475 effective January 1, 2003 and does not anticipate that the provisions of the section will have a material impact on its financial position or results of operations.