--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 8-K/A
--------------------------------
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: December 19, 2001
(Date of earliest event reported)
INSIGNIA FINANCIAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE COMMISSION FILE NUMBER 56-2084290
(State of Incorporation) (1-14373) (I.R.S. Employer Identification No.)
200 PARK AVENUE, NEW YORK, NEW YORK 10166
(Address of Principal Executive Officers) (Zip Code)
(212) 984-8033
(Registrant's Telephone Number, Including Area Code)
--------------------------------------------------------------------------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Report on Form 8-K dated December
19, 2001 and filed on December 28, 2001 as set forth in the pages attached
hereto:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired:
(i) Consolidated Financial Statements for Insignia Bourdais Holding
(formerly Societe Financiere Bourdais) as of March 31, 2001 and
March 31, 2000 and for the years then ended, with Report of
Independent Auditors, and the six month periods ended September
30, 2001 and 2000 (unaudited).
(b) Pro Forma Financial Information:
(i) Unaudited Pro Forma Condensed Consolidated Statements of Income
for the nine months ended September 30, 2001 and the year ended
December 31, 2000.
(ii) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 2001.
(iii) Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
(c) Exhibits
The following are furnished as exhibits to this report:
Exhibit No.
10.1 Share Purchase Agreement, dated as of December 16, 2001, between
Jean Claude Bourdais and others listed therein as sellers,
Insignia Financial Group, Inc. and Insignia France SARL as buyer.*
23.1 Consent of ERNST & YOUNG Audit.
99.1 Press release dated December 19, 2001. *
---------------
* Previously filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Adam B. Gilbert
-------------------------------
Adam B. Gilbert
Executive Vice President
DATE: March 4, 2002
REPORT OF ERNST & YOUNG AUDIT, INDEPENDENT AUDITORS
ON INSIGNIA BOURDAIS HOLDING
(FORMERLY SOCIETE FINANCIERE BOURDAIS)
PREPARED AS OF MARCH 31, 2001
We have audited the accompanying consolidated balance sheets of Insignia
Bourdais Holding (formerly Societe Financiere Bourdais) as of March 31, 2001 and
2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended.
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 audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial position of Insignia Bourdais
Holding (formerly Societe Financiere Bourdais) as at March 31 2001 and March 31,
2000, and the consolidated results of its operations and its cash-flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
Paris, February 15, 2002
ERNST & YOUNG Audit
Jean Louis ROBIC
1. FINANCIAL STATEMENTS
1.1 CONSOLIDATED BALANCE SHEETS
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
------------------------------------------------------------------
(IN FRENCH FRANCS) (IN FRENCH FRANCS)
ASSETS AUDITED AUDITED UNAUDITED UNAUDITED
Cash and cash equivalents FF 115,398,239 FF 101,894,995 FF 86,652,284 FF 87,625,491
Receivables, net of allowance 56,543,434 39,492,764 62,769,077 56,979,148
Prepaid expenses 1,428,970 320,021 353,246 142,827
Restricted cash 26,270,495 31,726,681 22,133,295 31,407,211
Property and equipment 49,257,366 49,666,203 45,694,041 46,428,934
Costs in excess of net assets of acquired businesses 24,441,325 9,295,523 22,282,614 8,201,932
net of amortization of FF 4,425,258 (March 2001)
and of FF 1,640,387 (March 2000)
Deferred taxes 7,844,067 6,193,300 3,784,067 5,170,558
Other assets 9,300,222 8,182,825 8,755,511 10,326,131
------------------------------------------------------------------
TOTAL ASSETS FF 290,484,118 FF 246,772,312 FF 252,424,135 FF 246,282,232
=================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable FF 49,622,204 FF 47,309,302 FF 21,977,940 FF 28,333,530
Commissions payable 6,158,883 6,567,898 7,629,311 11,805,969
Accrued employee profit sharing 11,745,129 6,934,369 259,497 4,914,464
Accrued and sundry liabilities 16,186,103 10,348,705 14,569,352 9,701,709
Restricted cash 26,270,495 31,726,681 22,133,295 31,407,211
Deferred taxes 505 264,288 505 481
Borrowings 1,148,876 6,645,567 926,293 982,804
Obligations under Finance Leases 42,105,582 45,520,620 40,358,953 43,802,806
Contingencies and litigation 5,478,526 3,067,450 5,478,526 3,316,255
------------------------------------------------------------------
TOTAL LIABILITIES FF 158,716,303 FF 158,384,880 FF 113,333,672 FF 134,265,229
MINORITY INTEREST 6,950,226 9,782,551 7,179,521 6,868,282
STOCKHOLDERS' EQUITY
Common Stock, par value FF 10 per share 5,601,400 5,601,400 5,601,400 5,601,400
- authorized 560,140 shares
Additional paid-in capital 319,584 319,584 319,584 319,584
Retained earnings 118,896,605 72,683,897 125,989,958 99,227,737
------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY FF 124,817,589 FF 78,604,881 FF 131,910,942 FF 105,148,721
------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY FF 290,484,118 FF 246,772,312 FF 252,424,135 FF 246,282,232
=================================================================
See accompanying notes.
1.2.CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31 SIX MONTH PERIOD ENDED SEPTEMBER 30
2001 2000 2001 2000
----------------------------------------------------------------------------
(IN FRENCH FRANCS) (IN FRENCH FRANCS)
AUDITED AUDITED UNAUDITED UNAUDITED
REVENUES
REAL ESTATE SERVICES FF 329,829,816 FF 280,864,421 FF 113,499,624 FF 151,771,722
----------------------------------------------------------------------------
COSTS AND EXPENSES
Real estate services (145,112,963) (122,814,625) (46,627,026) (64,715,057)
Provision for retirement indemnities (1,081,076) (329,061) - (468,804)
Administrative (96,513,034) (76,334,788) (54,075,927) (40,653,735)
Depreciation (5,682,339) (5,042,988) (3,284,262) (2,900,471)
(248,389,412) (204,521,462) (103,987,215) (108,738,067)
----------------------------------------------------------------------------
OPERATING INCOME 81,440,404 76,342,959 9,512,409 43,033,655
OTHER INCOME AND EXPENSES
Gain (loss) on sales of investments 3,652,148 (559,175) 2,909,975 (1,131,437)
Provisions for losses and contingencies (2,543,905) (230,000) (300,000) 220,000
Capital gains on marketable securities 4,059,097 1,278,357 1,480,451 1,746,254
Interest income on Restricted cash 1,377,795 694,035 603,000 677,173
Equity earnings 1,084,938 1,293,530 1,652,837 361,616
Interest expense (2,391,264) (2,149,476) (1,248,186) (1,093,371)
Other income 1,974,970 2,423,239 730,292 915,236
Amortization of goodwill (2,784,871) (1,640,387) (2,886,658) (1,093,592)
Minority interests (4,278,956) (5,379,148) (658,767) (2,434,000)
----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES (GROUP SHARE) 81,590,356 72,073,934 11,795,353 41,201,534
Provision for income taxes (32,760,010) (29,476,893) (4,702,000) (16,707,786)
----------------------------------------------------------------------------
NET INCOME FF 48,830,346 FF 42,597,041 FF 7,093,353 FF 24,493,748
============================================================================
See accompanying notes.
1.3 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL
(in French Francs) COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS (1) TOTAL
------------ ----------- --------------- --------------
Balances at March 31, 1999 FF 5,601,400 FF 319,584 FF 30,638,336 FF 36,559,320
Dividends paid - - (673,724) (673,724)
Net income - - 42,719,285 42,719,285
(April 1, 1999 through March 31, 2000)
------------ ----------- --------------- --------------
Balances at March 31, 2000 5,601,400 319,584 72,683,897 78,604,881
Dividends paid - - (2,617,638) (2,617,638)
Net income - - 48,830,346 48,830,346
(April 1, 2000 through March 31, 2001)
------------ ----------- --------------- --------------
Balances at March 31, 2001 FF 5,601,400 FF 319,584 FF 118,896,605 FF 124,817,589
============ ========== ============== ==============
1) Of which restricted retained earnings FF 559,846 (March 2001) and
FF 556 862 (March 2000).
See accompanying notes.
POST BALANCE SHEET EVENTS :
SHARE AND WARRANT ISSUES:
On December 19, 2001 the shareholders approved a 37,702 shares issue with
par value of 10 FF and issue premiums of FF 447,36 FF per share. The
shares were issued in the context of the buyback of all minority
interests in Insignia Bourdais Holdings's subsidiaries.
On the same date, the Company issued 87,080 warrants with the following
conditions:
(1) Warrant issue price: FF 24,11 per warrant totaling 87,080
XFF24, 11 = 2,099,499 (the Company granted loans to each
warrant holder so that no cash was collected as a result of
the issue).
(2) Exercisable from January 1st 2004 to January 31st 2004
(3) Each warrant entitles the holder to acquire one newly issued
share for a price corresponding to the "market value" of
Insignia Bourdais Holding (determination of "market value" in
purchase agreement with Insignia Financial Group) at a
minimum price of FF 241,13 per share.
(4) Warrants are pledged to guarantee the FF 2,099,499 loans to
holders
(5) Call and put options between Insignia Financial Group and warrant
holders.
1.4. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31 SIX MONTH PERIOD ENDED SEPTEMBER 30
In French Francs 2001 2000 2001 2000
-------------------------------------------------------------------------
Audited Audited Unaudited Unaudited
OPERATING ACTIVITIES
NET (LOSS) INCOME FF 48,830,346 FF 42,597,041 FF 7,093,353 FF 24,493,748
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Allocation to minority interests 4,278,956 5,379,148 658,767 2,434,000
Depreciation of tangible & intangible assets 5,682,339 5,042,988 3,284,262 2,900,471
Amortization of additional acquired businesses 2,784,871 1,640,387 2,886,658 1,093,592
Net gain (loss) on sale of investments (3,652,148) 559,175 (2,909,975) 1,177,239
Provision for losses and contingencies 2,543,905 (230,000) 300,000 (95,200)
Provisions for pensions costs 1,081,076 329,061 - (336,774)
Deferred income taxes (1,914,553) 2,672,906 4,060,000 758,933
Other 229,075 - - -
CHANGE IN OPERATING ASSETS AND LIABILITIES :
Receivables (18,938,935) (7,746,031) (6,225,643) (17,486,384)
Prepaid expenses (1,108,949) 149,440 1,075,724 177,194
Rent Security Deposits (283,033) (288,419) (426,041) (184,096)
Accounts payable 2,312,902 6,652,849 (27,644,264) (18,975,772)
Commissions payable (409,015) 1,470,428 5,238,071
Accrued employee profit sharing 4,810,760 (11,485,632) (2,019,905)
Accrued and sundry liabilities 5,837,398 10,875,278 (1,616,750) (646,996)
-------------------------------------------------------------------------
Cash provided by (used in) operating activities 52,084,995 67,633,823 (29,479,113) (1,471,879)
INVESTING ACTIVITIES
Additions to property and equipment (7,765,717) (3,732,101) (774,774) (1,102,353)
Proceeds from capital lease financings 1,137,258 165,396 1,053,837 1,202,982
Acquisitions of investments (2,951,631) (109,434) (36,486) (2,219,501)
Proceeds from sale of investments 7,580,976 - 3,617,000 -
-------------------------------------------------------------------------
Cash provided by (used in) investing activities (1,999,114) (3,676,139) 3,859,577 (2,118,872)
FINANCING ACTIVITIES
Dividends paid (6,699,078) (1,490,906) (42,000) (3,298,176)
Principal repayments on Finance Lease obligations (3,415,038) (3,295,966) (1,746,629) (1,717,814)
Borrowings (5,496,691) 5,116,369 (222,584) (5,662,763)
Purchase of minority interests in consolidated companies (20,971,830) (14,489,373) (1,115,206) -
-------------------------------------------------------------------------
Cash used in financing activities (36,582,637) (14,159,876) (3,126,419) (10,678,753)
Net increase in cash and cash equivalents 13,503,244 49,797,808 (28,745,955) (14,269,504)
Cash and cash equivalents at the beginning of the year 101,894,995 52,097,187 115,398,239 101,894,995
-------------------------------------------------------------------------
Cash and cash equivalents at the end of the year FF 115,398,239 FF101,894,995 FF 86,652,284 FF 87,625,491
=========================================================================
See accompanying notes
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PRESENTATION
The Bourdais group (or the "Group"), incorporated and headquartered in Paris, is
a real estate services company with operations throughout France. The Group
provides diversified real estate services including brokerage, appraisal,
property management, investment sales, development, redevelopment and consulting
services and other services to owners and users of real estate.
The consolidated financial statements include the accounts of the entities
listed below:
(1) Insignia Bourdais Holding SAS (formerly Societe Financiere Bourdais)
(2) Insignia Bourdais SAS (formerly Bourdais SA)
(3) Insignia Bourdais Gerance SAS (formerly Bourdais Gerance)
(4) Insignia Bourdais Mediterranee SARL
(5) Insignia Bourdais Rhones Alpes SAS (formerly Bourdais Rhones Alpes SA)
(6) Insignia Bourdais Expertises SAS (formerly Bourdais Expertises SA)
(7) Insignia Bourdais Consultants SARL
All significant intercompany balances and transactions have been eliminated.
REVENUE RECOGNITION
Real estate services revenue includes commercial leasing, property management,
investment sales, consulting, and commission revenue related to real estate
sales.
Such revenues are recorded when the related services are performed or at closing
in the case of real estate sales. Leasing commissions that are payable upon
tenant occupancy, payment of rent or other specified events are recognized upon
the occurrence of such events.
OTHER COMPREHENSIVE INCOME
The Company has no other comprehensive income.
2.2 CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following
[OBJECT OMITTED]
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
------------------------------------------------------------------------------
(In French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNUDITED
Cash in bank FF 103,308,305 FF 100,432,781 FF 2,049,610 FF 81,492,083
Cash in hand 10,754 3,843 - -
Money market investments 12,079,180 1,458,371 84,602,674 6,133,408
------------------------------------------------------------------------------
FF 115,398,239 FF 101,894,995 FF 86,652,284 FF 87,625,491
===============================================================================
2.3 RECEIVABLES
Accounts receivable consist primarily of property management fees and cost
reimbursements. Commissions receivable consist primarily of brokerage and
leasing commissions from users of the Company's real estate services.
Receivables, which are all due within one year, consist of the following:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
---------------------------------------------------------------------------
(IN FRENCH FRANCS) (IN FRENCH FRANCS)
AUDITED AUDITED UNAUDITED UNAUDITED
Fees receivable FF 19,241,719 FF 19,073,227 FF 22,362,705 FF 30,177,011
Refurbishment expenses to be reimbursed 18,847,347 - 16,742,483 3,007,384
by lessors
Property management fees receivable 1,235,502 1,038,457 1,722,273 1,901,956
Corporate Tax (instalements paid in
excess of expense ) 855,914
Receivable with non-consolidated affiliated
companies :
SPGI 6,301,985 6,696,637 - 6,854,187
Martel & Bourdais 4,354,506 6,430,557 - 4,828,742
Engerand & Gardy 2,259,849 1,655,715 2,623,525 1,989,236
FDS 1,900,764 - 2,293,264 1,900,764
Belvar 1,501,339 1,001,339 1,501,341 -
SCI 160 Haussmann 683,918 742,101 683,920 692,102
Easy Buro - - - 1,800,000
Miscellaneous 1,929,829 2,999,423 16,552,889 6,123,130
---------------------------------------------------------------------------
58,256,758 39,637,456 64,482,401 60,130,426
Less : provision for losses (1,713,324) (144,692) (1,713,324) (151,278)
---------------------------------------------------------------------------
FF 56,543,434 FF 39,492,764 FF 62,769,077 FF 59,979,148
===========================================================================
2.4 INTANGIBLE ASSETS
The Company's intangible assets consist of property management contracts and
costs paid in excess of net assets of acquired businesses.
Property management contracts are fully amortized as of March 31, 2001. These
contracts were amortized using the straight-line method over 5 years.
Costs in excess of net assets of acquired businesses are also amortized by the
straight-line method, over 5 years. They are comprised of the excess of purchase
price paid by the Company in successive acquisitions of minority interests in
Bourdais SA in 1999 and 2001.
2.5 RESTRICTED CASH
Restricted cash consisted of FF 26,270,495 at March 31, 2001 and FF 31,726,681
at March 31, 2000, corresponding to bank accounts opened for clients of the
property management line of service. The same balance is shown on the asset and
on the liability sides.
2.6 PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets, typically ranging from 3 years (IT equipment) to 25 years
(headquarters property disposed of in December 2001)
Property and equipment consist of the following:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
-------------------------------------------------------------------
(In French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNAUDITED
Property (held under Finance lease) FF 60,560,000 FF 60,560,000 FF 60,560,000 FF 60,560,000
IT equipment 10,165,039 8,480,290 10,517,629 8,974,506
Commercial softwares 2,556,051 2,015,331 2,566,811 2,262,051
Furniture and fixtures 5,709,609 3,447,974 5,800,413 3,969,308
Leasehold improvements 1,285,026 7,884,229 2,850,092 1,375,796
Other equipment 2,397,334 787,025 99,049 99,236
-------------------------------------------------------------------
82,673,059 83,174,849 82,393,994 77,240,897
Less : Accumulated depreciation (33,415,693) (33,508,646) (36,699,953) (30,811,963)
-------------------------------------------------------------------
FF 49,257,366 49,666,203 FF 45,694,041 FF 46,428,934
====================================================================
2.7 MINORITY INTEREST
Minority interests consist of:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
---------------------------------------------------------
AUDITED AUDITED UNAUDITED UNAUDITED
BOURDAIS SA 8.60% 11.99% 8.60% 11.99%
BOURDAIS RHONE ALPES 8.92% 12.28% 8.92% 12.28%
BOURDAIS MEDITERRANEE 9.51% 12.87% 9.51% 12.87%
BOURDAIS EXPERTISES 16.06% 19.17% 16.06% 19.17%
BOURDAIS GERANCE 0.67% 0.50% 0.67% 0.50%
BOURDAIS CONSULTANTS ASSOCIES 13.05% 16.28% 13.05% 16.28%
2.8 ACQUISITIONS
At March 31, 2000, cost in excess of net assets amount to FF 9,295,523 and refer
to Societe Financiere Bourdais' stake in Bourdais SA.
During the year ended March 31, 2001, Societe Financiere Bourdais increased its
stake in Bourdais SA; a consolidated subsidiary. Cost in excess of net assets in
connection with this acquisition amounted to FF 17,930,673 and is included in
"Cost in excess of net assets of acquired businesses" in the accompanying
balance sheet.
During the six month period ended September 30, 2001, Insignia Bourdais Holding
SAS (formerly Societe Financiere Bourdais) increased its stake in Insignia
Bourdais SAS (formerly Bourdais SA). Cost in excess of net assets in connection
with this acquisition amounted to FF 727 947.
2.9 FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, restricted cash, receivables
and payables approximate their respective fair values due to the short term
nature of these accounts.
The carrying value of capital lease obligations approximate their fair value as
such obligations bear interest which is based upon a floating rate which
re-prices quarterly.
The carrying value of borrowings/current accounts with shareholders approximate
fair value because such borrowings bear interest at market rates.
2.10 ACCOUNTS PAYABLE
Accounts payable consist of the following:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
---------------------------------------------------------------
(In French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNAUDITED
Suppliers payable FF 10,949,613 FF 7,928,914 FF 913,793 FF 2,621,112
Employee compensation and benefits 18,873,236 16,096,240 14,379,357 15,853,560
Corporate tax payable 8,989,355 13,405,185 - 3,931,495
VAT payable 10,667,825 9,719,697 6,501,842 5,650,523
Other accounts payable 142,175 159,266 182,948 276,840
---------------------------------------------------------------
FF 49,622,204 FF 47,309,302 FF 21,977,940 FF 28,333,530
===============================================================
2.11 ACCRUED AND SUNDRY LIABILITIES
Accrued and sundry liabilities consist of the following:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
-------------------------------------------------------------------
(In French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNAUDITED
Accrued paid holidays FF 4,889,504 FF 4,635,141 FF 3,609,150 FF 3,355,775
Accrued taxes (training, Organic, professional tax) 4,172,081 3,114,494 6,134,060 5,140,342
Deferred revenue 3,150,876 144,656 3,150,876 876
Accrued fees to be retroceded 1,427,000 1,321,000 1,163,000 479,200
Payable on refurbishment Haussmann building 1,200,000 - - -
Other accrued and sundry liabilities 1,346,642 1,133,414 512,266 725,516
-------------------------------------------------------------------
FF 16,186,103 FF 10,348,705 FF14,569,352 FF 9,701,709
===================================================================
2.12 CONTINGENCIES AND LITIGATION
Accruals of contingencies and litigations consist of the following:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
----------------------------------------------------------------------
(In French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNAUDITED
Pension costs FF 3,828,526 FF 2,747,450 FF 3,828,526 FF 3,216,255
Provisions for litigations 1,650,000 320,000 1,650,000 100,000
----------------------------------------------------------------------
FF 5,478,526 FF 3,067,450 FF 5,478,526 FF 3,316,255
======================================================================
Net allowances to provisions for litigations amount to FF 1,330,000. The amount
is included in "Provision for losses and contingencies" in the Statement of
Income. Other allowances relate to current accounts and receivables.
2.13 INCOME TAX
Deferred income tax assets and liabilities are recorded to reflect the tax
consequences on future years of temporary differences of revenue and expense
items for financial statement and income tax purposes. 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
amounts used for income tax purposes. Significant components of the deferred tax
assets are as follows:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
----------------------------------------------------------------------
(In thousands of French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNAUDITED
Employee profit sharing (tax deductible when paid) FF 4,237,136 FF 2,972,673 FF 91,860 FF 1,826,371
Retirement indemnities accrued (tax deductible when paid) 1,356,447 1,007,490 1,356,447 1,139,520
Fees and expenses deferred on account of SAB 101 431,335 315,277 431,335 621,666
Amortization of acquired contracts 816,317 844,887 816,317 816,317
Finance leases capitalized - Head-office office building 576,305 584,588 575,391 574,257
Finance leases capitalized - other (IT) 46,554 37,299 43,650 44,045
Other 379,973 431,086 469,067 148,382
----------------------------------------------------------------------
FF 7,844,067 FF 6,193,300 FF 3,784,067 FF 5,170,558
=====================================================================
For financial reporting purposes, income before income taxes includes the
following components:
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
-------------------------------------------------------------------------------
(IN FRENCH FRANCS) (IN FRENCH FRANCS)
AUDITED AUDITED UNAUDITED UNAUDITED
Pretax income (loss) group share FF 81,590,356 FF 72,073,934 FF 11,795,353 FF 41,201,534
Minority interest 4,278,956 5,379,148 658,767 2,434,000
-------------------------------------------------------------------------------
TOTAL PRETAX INCOME FF 85,869,312 FF 77,453,082 FF 12,454,120 FF 43,635,534
===============================================================================
Significant components of the provision for income taxes are as follows :
MARCH 31 SEPTEMBER 30
2001 2000 2001 2000
---------------------------------------------------------------------------------
(In French Francs) (In French Francs)
AUDITED AUDITED UNAUDITED UNAUDITED
Current FF (34,674,563) FF (26,803,987) FF (642,000) FF (15,948,853)
Deferred 1,914,553 (2,672,906) (4,060,000) (758,933)
---------------------------------------------------------------------------------
FF (32,760,010) FF (29,476,893) FF (4,702,000) FF (16,707,786)
=================================================================================
Reconciliation of income tax computed at the French statutory rate to income tax
expense for last two fiscal years is shown below (In FF):
March 31, 2001 March 31, 2000
------------------------------------------------------------------
(In French Francs) (In French Francs)
------------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
------------------------------------------------------------------
AUDITED AUDITED
Tax at French statutory rates FF 31,291,223 36.44% FF 28,446,872 36.67%
Effect of change in tax rates 97,500 0.11% - 0.00%
Effect of non-deductible goodwill amortization 1,014,528 1.18% 601,530 0.78%
Other 356,759 0.42% 428,491 0.55%
------------------------------------------------------------------
FF 32,760,010 38.15% FF 29,476,893 38.00%
==================================================================
Income tax payments were approximately FF 38,974,000 in the year ended March 31,
2001 and FF 54,191,000 in the year ended March 31, 2000.
2.14 COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
The group employees benefit from the real-estate industry bargaining Agreement
(Convention Collective de l'Immobilier). The applicable collective bargaining
agreement that was negotiated between employers' and employees' unions contain
provisions regarding the status of employees, and address the following matters:
duration of trial period and notice of termination; termination and retirement
entitlements; indemnification for absence due to illness, maternity or injury;
exceptional holidays for family reasons; seniority bonus; and additional
retirement benefits.
Total retirement benefits accrued and included in accounts payable in the
accompanying a balance sheets as at March 31, 2001 amount to FF 3,828,526 and FF
2,747,450 as at March 31, 2000.
Total retirement benefits accrued and included in accounts payable in the
accompanying unaudited balance sheets as at September 30, 2000 amount to FF
3,828,526 and FF 3,216,255 as at September 30, 2000.
Additionally, the group employees benefit from the French legal compulsory
regime for interested salaried employees. In this context, the amount of the
benefit is calculated each year, based on the legal compulsory formula and
accrued.
Total commitments accrued and included in accounts payable in the accompanying
balance sheet amount to FF 11,745,129 and FF 6,934,369 as at March 31, 2000).
Total commitments accrued and included in accounts payable in the accompanying
balance sheet amount to FF 259,497 as at September 30, 2001 and FF 4,914,464 as
at September 30, 2000.
2.15 OPERATING LEASES
The Company leases office space under non-cancelable operating leases. Minimum
annual rentals under operating leases for the five fiscal years ending after
March 31, 2001 and thereafter are as follows (In French Francs):
MARCH 31
2001 2000
------------------------------------------
(In French Francs)
AUDITED AUDITED
March 31, 2002 FF 9,183,022 FF 9,490,458
March 31, 2003 6,985,639 9,183,022
March 31, 2004 3,873,984 6,985,639
March 31, 2005 2,962,008 3,873,984
March 31, 2006 2,962,008 2,962,008
Thereafter 2,962,008 5,924,016
------------------------------------------
TOTAL MINIMUM PAYMENTS FF 28,928,669 FF 38,419,127
==========================================
Rental expense, which is recorded on a straight-line basis, was approximately FF
9,490,000 in fiscal year 2001 and FF 5,067,000 in fiscal year 2000.
All the leases are subject to renewal options and annual escalation based on the
National Construction Price Index.
CAPITAL LEASE
As at March 31, 2001 and 2000, finance lease obligations are as follows :
MARCH 31
2001 2000
------------------------------------------
(In French Francs)
Companies headquarters building FF 40,874,085 FF 42,774,985
IT Equipment 1,231,497 2,745,635
------------------------------------------
FF 42,105,582 FF 45,520,620
==========================================
The Company's headquarters in Paris is held through a floating rate capital
lease that started in December 1989 and will end on March 31, 2008. The contract
is indexed on the EURIBOR rate.
The lease provides for a transfer of title of the property at the end of the
lease term for a payment of FF 25,000,001.
Lease payments made under that lease were FF 4,008,159 in 2001 and FF 3,572,614
in 2000. Principal repayments for the companies headquarters lease obligations
for the next five years are as follows :
MARCH 31
2001 2000
------------------------------------------
(In French Francs)
March 31, 2002 FF 2,005,339 FF 1,900,900
March 31, 2003 2,115,582 2,005,339
March 31, 2004 2,231,956 2,115,582
March 31, 2005 2,354,806 2,231,956
March 31, 2006 2,484,497 2,354,806
Thereafter 29,681,905 32,166,402
------------------------------------------
TOTAL PRINCIPAL REPAYMENTS FF 40,874,085 FF 42,774,985
==========================================
Amortization of the capital lease asset is included in depreciation.
(b) PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Statements of Income
for the nine months ended September 30, 2001 and the year ended December 31,
2000 and Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 2001 give effect to the acquisition of Societe Financiere Bourdais
("Groupe Bourdais" or "Bourdais") and related borrowings under Insignia's
revolving credit facility, as if effected at that date, in the case of the pro
forma consolidated balance sheet, or on January 1, 2000, in the case of the pro
forma consolidated statements of income. The pro forma consolidated statement of
income for the year ended December 31, 2000 includes the results of Bourdais
for its fiscal year ended March 31, 2001.
Insignia, through its subsidiary Insignia France SARL, acquired all of the
outstanding share capital of Groupe Bourdais on December 19, 2001. Headquartered
in Paris, France and founded in 1954, Bourdais is one of France's premier
commercial real estate services companies with operations in eight offices in
Greater Paris (Ile de France region), Lyon, Aix and Marseille. The base purchase
price for Bourdais was approximately $21.4 million, comprised of $17.4 million
paid in cash and the issuance of 402,645 shares of Insignia's common stock
(valued at approximately $4 million). The cash portion of the purchase was
funded by borrowings on Insignia's revolving credit facility and cash on hand at
closing. Additional purchase consideration of up to approximately $25 million is
contingent on the future performance of Bourdais over the three years ending
December 31, 2004. The acquisition has been accounted for as a purchase and is
substantially comprised of goodwill and other intangibles. Group Bourdais
adopted the name Insignia Bourdais from the date of closing.
The pro forma statements have been prepared by management of Insignia and are
based on the historical financial statements of Insignia and Bourdais, giving
effect to the transaction under the purchase method of accounting and to the
assumptions and adjustments in the accompanying Notes to Unaudited Pro Forma
Condensed Consolidated Financial Statements. These pro forma statements may not
be indicative of the actual results that may have occurred if the combinations
had been in effect on the dates indicated or which may be experienced in the
future. These pro forma financial statements should be read in conjunction with
the historical financial statements and footnote disclosures of (i) Insignia
included on Form 10-K filed with the Securities and Exchange Commission ("SEC")
on March 28, 2001 and Form 10-Q filed with the SEC on November 14, 2001,
incorporated herein by reference, and (ii) Insignia Bourdais Holding (formerly
Societe Financiere Bourdais), included elsewhere herein.
INSIGNIA FINANCIAL GROUP, INC.
(i) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(In thousands, except per share data)
HISTORICAL PRO FORMA
---------- OTHER INCOME
INSIGNIA BOURDAIS ADJUSTMENTS STATEMENT
-------------------------------------------------- -----------------
REVENUES (Unaudited)
Real estate services $ 569,486 $ 27,084 $ -- $ 596,570
Property operations
3,189 3,189
-------------------------------------------------- -----------------
572,675 27,084 -- 599,759
COSTS AND EXPENSES
Real estate services 526,408 23,037 428 (a) 550,068
195 (b)
Property operations 2,376 2,376
Indemnity settlement 1,500 1,500
Administrative 8,781 8,781
Depreciation 13,971 651 (202) (a) 14,420
Property depreciation 810 810
Amortization of intangibles 20,020 560 (560) (c) 20,125
105 (c)
-------------------------------------------------- -----------------
573,866 24,248 (34) 598,080
-------------------------------------------------- -----------------
Operating Income (1,191) 2,836 34 1,679
OTHER INCOME AND EXPENSES
Provisions for loss on Internet investments (8,920) (8,920)
Provisions for losses and contingencies (391) 190 (d) (201)
Gain on sales of investments 1,092 (1,092) (d) --
Interest and other income 4,919 811 87 (b) 5,507
(310) (d)
Interest expense (10,681) (270) 245 (a) (11,381)
(675) (e)
Foreign currency gains 356 356
Equity earnings 1,288 318 (318) (d) 1,288
Minority interests (292) 292 (f) --
-------------------------------------------------- -----------------
(Loss) income before income taxes (14,229) 4,104 (1,547) (11,672)
Benefit (provision) for income taxes 5,780 (1,642) 619 (g) 4,757
-------------------------------------------------- -----------------
Net (loss) income (8,449) 2,462 (928) (6,915)
Preferred stock dividends (750) -- -- (750)
-------------------------------------------------- -----------------
Net (loss) income available to common
shareholders $ (9,199) $ 2,462 $ (928) $ (7,665)
-------------------------------------------------- -----------------
EARNINGS PER COMMON SHARE:
Basic $ (0.42) $ (0.34)
---------------- -----------------
Assuming dilution $ (0.42) $ (0.34)
---------------- -----------------
Weighted average common shares and
assumed conversions:
Basic 21,932 403 (e) 22,335
---------------- ----------------- -----------------
Assuming dilution 21,932 403 (e) 22,335
---------------- ----------------- -----------------
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
INSIGNIA FINANCIAL GROUP, INC.
(i) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
(In thousands, except per share data)
HISTORICAL PRO FORMA
---------- OTHER INCOME
INSIGNIA BOURDAIS ADJUSTMENTS STATEMENT
------------------------------------------------ ----------------
(Audited)
REVENUES
Real estate services $ 875,151 $45,809 $ -- $ 920,960
Property operations 5,212 5,212
------------------------------------------------ ----------------
880,363 45,809 -- 926,172
COSTS AND EXPENSES
Real estate services
776,505 33,709 571 (a) 811,045
260 (b)
Property operations 4,214 4,214
Internet based businesses 17,168 17,168
Administrative 16,355 16,355
Depreciation 13,679 789 (268) (a) 14,200
Property depreciation 1,623 1,623
Amortization of intangibles 25,894 387 (387) (c) 26,034
140 (c)
------------------------------------------------ ----------------
855,438 34,885 316 890,639
------------------------------------------------ ----------------
Operating Income 24,925 10,924 (316) 35,533
OTHER INCOME AND EXPENSES
Provisions for loss on Internet
investments (18,435) (18,435)
Provisions for losses and
contingencies (353) 169 (d) (184)
Life insurance proceeds 19,100 19,100
Gain on sale of marketable
securities 811 811
Gain on sales of investments 507 (507) (d) --
Interest and other income 8,454 1,029 122 (b) 9,267
(338) (d)
Interest expense (13,061) (332) 293 (a) (14,225)
(1,125) (e)
Foreign currency gains 1,365 1,365
Equity earnings 1,455 151 (151) (d) 1,455
Minority interests 900 (594) 594 (f) 900
------------------------------------------------ ----------------
Income before income taxes and cumulative
effect of a change in accounting
principle 25,514 11,332 (1,259) 35,587
Provision for income taxes (3,727) (4,550) 504 (g) (7,773)
------------------------------------------------ ----------------
Income before cumulative effect of a change
in accounting principle 21,787 6,782 (755) 27,814
Cumulative effect of a change in accounting
principle, net of applicable taxes (30,420) -- -- (30,420)
------------------------------------------------ ----------------
Net (loss) income (8,633) 6,782 (755) (2,606)
Preferred stock dividends (890) -- -- (890)
------------------------------------------------ ----------------
Net (loss) income available to common
shareholders $ (9,523) $ 6,782 $ (755) $(3,496)
------------------------------------------------ ----------------
EARNINGS PER COMMON SHARE:
Basic
Income before cumulative effect
of a change in accounting
principle $ 0.99 $ 1.25
---------------- ----------------
Net loss $ (0.45) $ (0.16)
---------------- ----------------
Assuming dilution
Income before cumulative effect
of a change in accounting
principle $ 0.89 $ 1.12
---------------- ----------------
Net loss $ (0.35) $ (0.10)
---------------- ----------------
Weighted average common shares and
assumed conversions:
Basic 21,200 403 (e) 21,603
---------------- ---------------- ----------------
Assuming dilution 24,428 403 (e) 24,831
---------------- ---------------- ----------------
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
INSIGNIA FINANCIAL GROUP, INC.
(ii) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2001
(In thousands)
HISTORICAL
---------- NET ASSET OTHER PRO FORMA
INSIGNIA BOURDAIS ADJUSTMENTS ADJUSTMENTS BAL. SHEET
------------------------------------------------------------------ ---------------
ASSETS (Unaudited) (h) (i)
Cash and cash equivalents $ 50,086 $ 12,016 $ (9,603) $ (2,399) $ 50,100
Receivables 137,302 8,704 (1,868) 144,138
Mortgage loans held for sale 14,458 14,458
Restricted cash 26,651 3,069 (3,069) 26,651
Property and equipment 71,500 6,336 (5,910) 71,926
Real estate interests 70,390 70,390
Investments 5,332 5,332
Property management contracts 17,302 1,035 18,337
Costs in excess of net assets acquired 319,226 3,090 (3,090) 12,527 331,753
Other assets 61,831 1,788 407 3,126 67,152
------------------------------------------------------------------ ---------------
TOTAL ASSETS $ 774,078 $ 35,003 $ (23,133) $ 14,289 $ 800,237
------------------------------------------------------------------ ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 11,093 $ 3,048 $ -- $ -- $ 14,141
Commissions payable 43,285 1,058 44,343
Accrued incentives 35,381 36 35,417
Accrued and sundry liabilities 85,339 2,780 88,119
Restricted cash -- 3,069 (3,069) --
Mortgage warehouse line of credit 12,527 12,527
Obligations under finance lease -- 5,596 (5,487) 109
Notes payable 167,671 128 15,000 182,799
Real estate mortgage notes payable 15,796 15,796
------------------------------------------------------------------ ---------------
TOTAL LIABILITIES 371,092 15,715 (8,556) 15,000 393,251
Minority interests -- 996 (996) --
Stockholders' Equity:
Common stock 224 777 (777) 4 228
Preferred stock 3 -- 3
Additional paid-in capital 417,755 44 (44) 3,996 421,751
Notes receivable for Common Stock (1,932) (1,932)
Retained earnings (6,603) 17,471 (12,760) (4,711) (6,603)
Accumulated other comprehensive income loss (6,461) (6,461)
------------------------------------------------------------------ ---------------
TOTAL STOCKHOLDERS' EQUITY 402,986 18,292 (13,581) (711) 406,986
------------------------------------------------------------------ ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 774,078 $ 35,003 $ (23,133) $ 14,289 $ 800,237
------------------------------------------------------------------ ---------------
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
INSIGNIA FINANCIAL GROUP, INC.
(iii) NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS
(a) As a condition precedent to closing, a capital lease arrangement (together
with the associated debt obligations) on the head office location of Bourdais
was assumed by a company owned by the seller with the consent of the finance
lessor. Such entity subleased the premises to the acquired entity under an
operating lease that expires in December 2010. The removal of historical
depreciation and interest charges related to the capital lease and the provision
for rental expense under terms of the operating lease are reflected as
adjustments to pro forma earnings.
(b) As a part of the Bourdais acquisition, the present value of future other
lease obligations of Bourdais pertaining to the difference between the rental
rates pursuant to that lease and current market rents is recorded as an asset.
Adjustments are made to reflect the applicable market rent and interest on the
favorable lease asset.
(c) Under purchase accounting, adjustments are made to eliminate amortization
expense of pre-acquisition goodwill of Bourdais and to include estimated
amortization of purchase price allocated to property management contracts. The
portion of purchase price allocated to goodwill is not amortized in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and
Other Intangible Assets. The amortization provisions of SFAS No. 142 apply to
goodwill acquired after June 30, 2001. Amortization is not provided for other
acquired intangibles, consisting of backlog, trademarks and franchises, as
valuations of these present intangibles are not complete at the date of this
report. Further, the amount of such other intangibles existing and their
recognition's during the pro forma periods presented is unknown.
(d) Bourdais was a family owned business that held investments, including excess
working capital, which Insignia did not wish to acquire. During the periods
prior to closing, the identified investments were sold and the proceeds
therefrom, together with the excess cash calculated pursuant to the terms of the
purchase agreement, were segregated into a restricted cash account at closing.
These proceeds will be paid to the sellers as soon as practical after closing.
To the extent the identified investments had not been sold at closing, such
investments were transferred to the sellers. All income or loss associated with
such investments, together with earnings on the excess cash determined under the
purchase agreement, is excluded from pro forma earnings.
(e) Insignia paid the initial purchase price from borrowings of $15 million on
its revolving credit facility, cash on hand and the issuance of 402,645 shares
of its common stock (valued at approximately $4 million). Interest on the
borrowed funds is at LIBOR plus 2.25% for the periods presented [estimated at
7.5% for the year ended March 31, 2001 and 6% for the nine months ended
September 30, 2001]. A 1/8 of a percent change in interest rates would change
pro forma interest by less than $20,000 for each of the periods presented.
(f) Under the terms of the purchase agreement, all historical minority equity of
consolidated subsidiaries was acquired. An adjustment is made to eliminate such
minority interest from pro forma earnings.
(g) Income taxes are provided on pro forma adjustments at the effective tax rate
of 40%.
(h) Represents the purchase adjustments to historical assets and liabilities of
Bourdais under the terms of the purchase agreement and under purchase
accounting. See also Notes (a) and (d) above with respect to excluded assets and
liabilities of Bourdais pursuant to the terms of the purchase agreement.
(i) Represents the adjustments to reflect Insignia's funding of the acquisition
and the related allocation of purchase consideration under purchase accounting.
Purchase price allocated to goodwill and other acquired intangibles is as
follows:
[ ] Goodwill $12,527,000
[ ] Property management contracts 1,035,000
[ ] Favorable lease 2,126,000
[ ] Other 1,000,000
-------------
Total 16,688,000
-------------
Other intangibles present in the Bourdais purchase include backlog, trademarks
and franchises. Tentative estimates of value of such intangibles approximate an
aggregate $1 million. Insignia's evaluation of these intangibles has not been
finalized as of the date of this report.
OTHER NOTES
NOTE 1
The financial statements of Insignia Bourdais Holding have been translated from
French Francs to US Dollars using exchange rates of 7.20 for the statements of
income for the nine months ended September 30, 2001 and year ended December 31,
2000 and 7.21 for the September 30, 2001 balance sheet. The exchange rates
represent the estimated average rate of exchange between the French Franc and US
Dollar for each period, in the case of the statements of income, and the end of
period exchange rate, in the case of the balance sheet.
NOTE 2
Certain items in this report may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and, as
such, may involve known and unknown risks, uncertainties and other factors which
may cause these pro forma financial statements to be materially different from
future results, performance, or achievements expressed or implied by such
forward-looking statements. You can identify such statements by the fact that
they do not relate strictly to historical or current facts. Actual results will
be affected by a variety of risks and factors, including, without limitation,
the valuation and allocation of intangibles acquired in the Bourdais
transaction, economic conditions, real estate risks and financing risks.
Such forward-looking statements speak only as of the date of this
report. The Company expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances upon which any such
statement is based.
(c) EXHIBITS
23.1 Consent of ERNST & YOUNG Audit
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 15, 2002, with respect
to the financial statements of Insignia Bourdais Holdings (formerly Societe
Financiere Bourdais) included in Form 8-K/A of Insignia Financial Group, Inc.
dated March 4th 2002.
ERNST & YOUNG Audit
Paris, France
March 1, 2002