<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended Commission File No. 0-27682
May 31, 1996
GLOBE BUSINESS RESOURCES, INC.
Incorporated under the IRS Employer
laws of Ohio Identification No. 31-1256641
1925 Greenwood Avenue
Cincinnati, Ohio 45246
Phone: (513) 771-8221
____________________
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 _____
As of June 20, 1996, 4,308,209 shares of the Registrant s common
stock, no par value, were outstanding.
____________________
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GLOBE BUSINESS RESOURCES, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
Page No.
________
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - 3
February 29, 1996 and May 31, 1996
Consolidated Statement of Income - 4
Three Months Ended May 31, 1995 and 1996
Consolidated Statement of Cash Flow - 5
Three Months Ended May 31, 1995 and 1996
Notes to Consolidated Financial Statements 6
Item 2. Managements Discussion and Analysis of 7
Financial Condition and Results of
Operations
Part II. Other Information
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 6. Exhibits and Reports on Form 8-K. 10
<PAGE>
PART I - FINANCIAL INFORMATION
GLOBE BUSINESS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
February 29, May 31,
1996 1996
____________ __________
(Unaudited)
ASSETS:
Cash $ 133 $ 146
Accounts receivable, less allowance
for doubtful accounts of $327 and
$328, respectively 3,530 3,666
Prepaid expenses 509 736
Rental furniture, net 37,407 40,432
Property and equipment, net 2,675 2,782
Other, net 207 210
_________ _________
Total assets $44,461 $47,972
_________ _________
_________ _________
LIABILITIES AND SHAREHOLDERS EQUITY:
Accounts payable $ 3,473 $ 4,363
Customer deposits 1,189 1,231
Accrued compensation 1,569 908
Accrued taxes 447 769
Deferred income taxes 1,793 2,015
Accrued interest payable 120 140
Other accrued expenses 633 565
Debt 10,573 12,493
_________ _________
Total liabilities 19,797 22,484
_________ _________
_________ _________
Common stock and other shareholders
equity:
Common stock, no par, 10,000,000
shares authorized, 4,254,369
shares issued and outstanding 18,549 18,549
Retained earnings 10,199 11,023
Fair market value in excess of
historical cost of acquired net
assets attributable to related
party transactions (4,084) (4,084)
_________ _________
Total common stock and other
shareholders equity 24,664 25,488
Total liabilities and shareholders
equity $44,461 $47,972
_________ _________
_________ _________
The accompanying notes are an integral part of these financial
statements.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands except per share data)
For the three months ended,
May 31, May 31,
1995 1996
___________ _________
(Unaudited)
Revenues:
Furniture rentals $ 8,879 $ 9,430
Furniture sales 3,383 3,683
_________ _________
12,262 13,113
_________ _________
Costs and expenses:
Cost of furniture rentals 2,090 2,467
Cost of furniture sales 1,855 2,203
Warehouse and delivery 1,723 1,785
Occupancy 1,446 1,389
Selling and advertising 1,801 1,868
General and administration 1,555 1,846
_________ _________
10,470 11,558
_________ _________
Operating income 1,792 1,555
Other(income)expense:
Interest expense 568 224
Other 19 (25)
_________ _________
587 199
Income before income taxes 1,205 1,356
Provision for income taxes 483 532
_________ _________
Net income 722 824
Preferred stock dividends 130 -
_________ _________
Net income applicable to common stock $ 592 $ 824
_________ _________
_________ _________
Earnings per common share:
Net income $ .23 $ .19
_________ _________
_________ _________
Weighted average number of common
shares outstanding 2,558 4,254
The accompanying notes are an integral part of these financial
statements.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
For the three months ended,
May 31, May 31,
1995 1996
_________ _________
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 722 $ 824
Adjustments to reconcile net income
to net cash provided by operating
activities:
Rental furniture depreciation 1,148 1,363
Other depreciation and amortization 207 211
Provision for losses on accounts
receivable (84) (11)
Provision for deferred income taxes - 222
Loss on sale of property and equipment 1 1
Book value of furniture sales and
rental buyouts 2,256 2,819
Changes in assets and liabilities:
Accounts receivable 266 (125)
Other assets, net 16 (3)
Prepaid expenses 50 (227)
Accounts payable 517 890
Customer deposits 65 42
Accrued compensation (758) (661)
Accrued taxes 248 322
Accrued interest payable (6) 20
Other accrued expenses (15) (8)
_________ _________
Net cash provided by operating
activities 4,633 5,679
_________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental furniture (5,910) (7,207)
Purchases of property and equipment (125) (320)
GranTree Corporation debenture retirement - (59)
_________ _________
Net cash used in investing activities (6,035) (7,586)
_________ _________
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on the revolving credit
agreements 14,704 17,624
Repayments on the revolving credit
agreements (13,562) (15,626)
Principal payments under capital
lease obligations (87) (78)
_________ ________
Net cash provided by financing activities 1,055 1,920
_________ _________
Net (decrease)increase in cash (347) 13
Cash at beginning of period 732 133
_________ _________
Cash at end of period $ 385 $ 146
_________ _________
_________ _________
The accompanying notes are an integral part of these financial
statements.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
NOTE 1 -- PRESENTATION OF INTERIM INFORMATION
_____________________________________________
In the opinion of the management of Globe Business Resources,
Inc. ( Globe or the Company ), the accompanying unaudited
consolidated financial statements include all adjustments
considered necessary to present fairly its financial position as
of May 31, 1996, and the results of its operations and its cash
flows for the three months ended May 31, 1995 and 1996. Interim
results are not necessarily indicative of results for a full
year.
The consolidated financial statements and notes are presented
in accordance with the requirements of Form 10-Q, and do not
contain certain information included in the Company s audited
consolidated financial statements and notes in its Form 10-K for
the fiscal year ended February 29, 1996.
NOTE 2 -- EARNINGS PER SHARE
____________________________
Earnings per share in the first quarter of fiscal 1996 is
determined by dividing net income applicable to common stock by
the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Earnings per
share in the first quarter of fiscal 1997 is determined by
dividing net income by the weighted average number of shares of
common stock. The exercise of a warrant to purchase shares of
the Company s common stock in February 1996 caused the dilutive
effect of stock options to become less than 3% in the first
quarter of fiscal 1997. Net income applicable to common stock is
net income reduced by preferred stock dividends. Outstanding
stock options and warrants are common stock equivalents.
NOTE 3--RENTAL FURNITURE:
________________________
February 29, May 31,
1996 1996
____________ _________
(Unaudited)
Furniture on rental $30,814 $32,869
Furniture on hand 12,811 14,221
_______ _______
43,625 47,090
Accumulated depreciation (6,218) (6,658)
_______ _______
$37,407 $40,432
_______ _______
_______ _______
NOTE 4 -- SUBSEQUENT EVENTS
___________________________
On June 13, 1996, Globe acquired the assets of privately
owned Interim Quarters, Inc. for $5.7 million in cash and 86,700
shares of Globe s common stock plus or minus up to a $500,000
adjustment at the conclusion of an audit by Price Waterhouse LLP.
Interim Quarters, based in Dallas, Texas, provides short-term
housing to transferring or temporarily assigned corporate
personnel, new hires, trainees and consultants. Interim Quarters
has an inventory of over 800 leased housing units in the
Dallas/Ft. Worth metropolitan area and has annual revenues of
slightly more than $10 million.
On June 19, 1996, Globe acquired the assets of privately-
owned Instant Office Furniture, Inc. for approximately $0.7
million in cash. Instant Office Furniture, based in Costa Mesa,
California, rents and sells office furniture to a variety of
customers in southern California. Annual revenues are
approximately $1 million.
<PAGE>
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis should be read in
conjunction with the Company's Consolidated Financial Statements
beginning on page 3.
GENERAL
Globe operates in the rent-to-rent segment of the furniture
rental industry and rents quality office and residential
furniture to a variety of corporate and individual customers. The
Company sells residential and office furniture that no longer
meets its showroom condition standards for rental and offers
new furniture for sale through its showrooms and its account
executives. The Company s fiscal year ends on February 28/29.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated
certain income statement data as a percentage of total revenues
and certain gross profit data as a percentage of respective
furniture rentals and furniture sales revenues.
Three Months Ended
May 31,
___________________
1995 1996
________ _______
Revenues:
Furniture rentals 72.4% 71.9%
Furniture sales 27.6 28.1
______ ______
Total revenues 100.0% 100.0%
Gross profit:
Furniture rentals 76.5% 73.8%
Furniture sales 45.2 40.2
______ ______
Total gross profit 67.8 64.4
Operating expenses 53.2 52.5
______ ______
Operating income 14.6 11.9
Interest/other 4.8 1.6
______ ______
Income before taxes 9.8% 10.3%
______ ______
______ ______
Impact of GranTree acquisition
In January 1993, Globe acquired GranTree Corporation
( GranTree ) for $9.3 million. Until November 1995, the
Company's reported cost of revenues was favorably impacted as
furniture was sold to retail customers or bought out by lease
customers because of two factors: (i) the adoption of fresh-start
reporting in March 1992, at which time GranTree reduced the net
book value of its rental furniture by approximately $7.1 million,
and (ii) the $3.3 million amount by which the book value of
GranTree exceeded the purchase price paid by the Company
(collectively, the GranTree Gross Profit Accounting Effects").
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The following table sets forth for the periods indicated the
dollar amount of the GranTree Gross Profit Accounting Effects and
certain income statement data as a percentage of total revenues
adjusted to exclude the GranTree Gross Profit Accounting Effects.
Three Months Ended May 31,
1995 1996
________ ________
(dollars in thousands)
GranTree Gross Profit
Accounting Effects $534 $ -
Adjusted to exclude the
GranTree Gross Profit
Accounting Effects: As a Percentage of Total Revenues
_________________________________
Total gross profit 63.5% 64.4%
Operating expenses 53.2 52.5
______ _____
Operating income 10.3 11.9
Interest/other 4.8 1.6
______ _____
Income before income taxes 5.5% 10.3%
______ _____
______ _____
Due to the significant impact of the GranTree acquisition
and the related GranTree Gross Profit Accounting Effects on the
Company's operations and financial results, the Company's
historical results of operations and period-to-period comparisons
will not be indicative of future results.
Comparison of First Quarter Fiscal 1997 to First Quarter Fiscal
1996
Total revenues of $13.1 million increased $0.9 million, or
6.9%, in the first quarter of fiscal 1997 from $12.3 million in
the first quarter of fiscal 1996. Total California revenues,
which declined 15% from the fourth quarter of fiscal 1995 to the
fourth quarter of fiscal 1996, declined 2% in the first quarter
of fiscal 1997 compared to the first quarter of fiscal 1996 but
increased 7% in May 1996 as compared to May 1995, indicative of
an improving revenue trend in California.
Rental revenues of $9.4 million in the first quarter of
fiscal 1997 increased 6.2% from $8.9 million in the first quarter
of fiscal 1996. The growth in monthly rent roll (monthly rental
payments required by outstanding furniture leases), which was
1.0% at the beginning of the first quarter of fiscal 1997
compared to the beginning of the first quarter of fiscal 1996,
improved to 10.3% above the comparable prior year period at the
end of the first quarter of fiscal 1997. Sales revenues of $3.7
million increased $0.3 million, or 8.9%, in the first quarter of
fiscal 1997 from $3.4 million in the first quarter of fiscal
1996.
Gross profit of $8.4 million in the first quarter of fiscal
1997 increased $0.1 million, or 1.5%, from $8.3 million in the
first quarter of fiscal 1996 and declined as a percentage of
revenues to 64.4% from 67.8% over the same period. Excluding the
GranTree Gross Profit Accounting Effects, gross profit margin
increased from 63.5% in fiscal 1996 to 64.4% in fiscal 1997.
Operating expenses of $6.9 million in the first quarter of
fiscal 1997 increased 5.6% from $6.5 million in the first quarter
of fiscal 1996 due in part to increased general and
administrative expenses related to Globe becoming a public
company in February 1996. As a percentage of total revenues,
expenses declined to 52.5% from 53.2% over the same period.
<PAGE>
As a result of the changes in revenues, gross profit and
operating expenses discussed above, operating income decreased
13.2% from $1.8 million, or 14.6% of revenues in the first
quarter of fiscal 1996 to $1.6 million, or 11.9% of revenues in
the first quarter of fiscal 1997. Excluding the GranTree Gross
Profit Accounting Effects, operating income increased 23.6% from
$1.3 million in fiscal 1996, to $1.6 million in fiscal 1997 and
as a percentage of revenues increased from 10.3% to 11.9% over
the same period.
Interest/other expense decreased $0.4 million, or 66.1%,
from $0.6 million in the first quarter of fiscal 1996 to $0.2
million in the first quarter of fiscal 1997 and as a percentage
of total revenues decreased from 4.8% to 1.6% over the same
period. The decreased expense for fiscal 1996 was due primarily
to lower interest costs from lower debt balances in the first
quarter of fiscal 1997.
Income before income taxes increased $0.2 million, or 12.5%,
to $1.4 million in the first quarter of fiscal 1997 and as a
percentage of revenues increased from 9.8% in the first quarter
of fiscal 1996 to 10.3% in the first quarter of fiscal 1997.
Excluding the GranTree Gross Profit Accounting Effects, income
before income taxes as a percentage of revenues increased from
5.5% in fiscal 1996 to 10.3% in fiscal 1997.
The Company s effective tax rate, which includes federal,
state and local taxes, approximated the statutory rate in the
first quarter of fiscal 1996 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
In February 1996, the Company raised net proceeds of
approximately $17.4 million in an initial public offering of its
common stock. The Company used those proceeds to: (i) pay a
portion of the Company s outstanding bank debt, (ii) prepay an
outstanding note to the Company s primary lender and (iii) redeem
all outstanding shares of the Company s redeemable preferred
stock plus accrued dividends.
At the completion of the initial public offering, a new
$30.0 million line of credit (the 1996 Credit Agreement )
replaced the credit agreement in place at that time (the 1995
Credit Agreement ). Interest rates for this new line of credit
are based upon a leverage formula, which is currently the lesser
of the prime rate or LIBOR plus 175 basis points. In June 1996,
Globe used $6.4 million in cash for two acquisitions (see note 4
to the consolidated financial statements). As a result, at June
20, 1996, the new line of credit provided total unused credit
facilities of approximately $10.9 million, which will be
available for acquisitions and general corporate purposes.
The Company's principal use of cash is for furniture
purchases. The Company purchases furniture to replace furniture
which has been sold and to maintain adequate levels of rental
furniture to meet existing and new customer needs. Furniture
purchases increased from $5.9 million in the first quarter of
fiscal 1996 to $7.2 million in the first quarter of fiscal 1997
reflecting an increase of $216,000 in monthly rent roll during
the first quarter of fiscal 1997 as compared to a $51,000 decline
in monthly rent roll during the first quarter of fiscal 1996.
The increase in furniture purchases was also reflected in the
increase in accounts payable during the first quarter of fiscal
1997.
Capital expenditures were $0.1 million and $0.3 million in
the first quarter of fiscal 1996 and 1997, respectively.
Acquisitions of property and equipment financed through capital
leases, and not reflected in the preceding capital expenditure
data, were $0.1 million and $0 over the same period.
In the first quarter of fiscal 1996 and 1997, net cash
provided by operations was $4.6 million and $5.7 million,
respectively, generating $1.4 and $1.9 million, respectively,
less cash than was necessary to fund investing activities. The
1995 Credit Agreement and the 1996 Credit Agreement provided
sufficient financing for the Company's cash requirements in the
first quarter of fiscal 1996 and 1997, respectively.
<PAGE>
PART II
ITEM 1
Legal Proceedings
_________________
NONE
ITEM 4
Submission of Matters to a Vote of Security Holders
___________________________________________________
NONE
ITEM 6
Exhibits, Financial Statement Schedules and Reports on Form 8-K
________________________________________________________________
(a) Exhibits: 27 Financial data schedule
(b) Reports on Form 8-K filed during the first quarter of 1996:
None
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Globe Business Resources, Inc.
By: Sharon G. Kebe
_________________________________
Senior Vice President-Finance and
Treasurer
Signed: June 28, 1996 (Principal Financial Officer)
<PAGE>
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<PERIOD-END> MAY-31-1996
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<ALLOWANCES> 328
<INVENTORY> 40,432
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<PP&E> 6,318
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