<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-27612
DATA PROCESSING RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3931443
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4400 MACARTHUR BOULEVARD, SUITE 610
NEWPORT BEACH, CA 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 752-9111
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
--- ---
Number of shares of common stock outstanding as of April 30, 1996 is 7,329,000.
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DATA PROCESSING RESOURCES CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of April 30, 1996 and July 31, 1995 3
Condensed Statements of Income for the Three and Nine Months Ended April 30, 1996 and 1995 4
Condensed Statement of Shareholders' Equity (Deficit) as of April 30, 1996 5
Condensed Statements of Cash Flows for the Nine Months Ended April 30, 1996 and 1995 6
Notes to Condensed Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13
PART II. OTHER INFORMATION 14
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE 15
</TABLE>
2
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DATA PROCESSING RESOURCES CORPORATION
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $29,379,000 $ 248,000
Accounts receivable 7,719,000 6,256,000
Receivables from affiliates 122,000 343,000
Prepaid expenses and other current assets 124,000 86,000
Deferred tax asset 243,000 263,000
----------- -----------
Total current assets 37,587,000 7,196,000
Property:
Furniture and fixtures 170,000 120,000
Equipment 794,000 333,000
----------- -----------
964,000 453,000
Less accumulated depreciation (334,000) (225,000)
----------- -----------
Property, net 630,000 228,000
Other assets 36,000 199,000
----------- -----------
$38,253,000 $ 7,623,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,944,000 $ 2,460,000
Income taxes payable 114,000 1,411,000
Line of credit -- 836,000
Current portion of long term debt -- 653,000
----------- -----------
Total current liabilities 3,058,000 5,360,000
Long-term debt -- 3,656,000
Mandatorily redeemable Series A preferred stock -- 1,485,000
SHAREHOLDERS' EQUITY (DEFICIT) :
Common stock-- 20,000,000 shares authorized;
7,329,000 and 4,000,000 shares issued and outstanding
as of April 30, 1996 and July 31, 1995, respectively 34,472,000 2,000
Additional paid-in-capital 1,580,000 --
Accumulated deficit (857,000) (2,880,000)
----------- -----------
Total shareholders' equity (deficit) 35,195,000 (2,878,000)
----------- -----------
$38,253,000 $ 7,623,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
<PAGE> 4
DATA PROCESSING RESOURCES CORPORATION
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
------------------------------ -------------------------------
1996 1995 1996 1995
---- ---- ---- ----
HISTORICAL
----------
<S> <C> <C> <C> <C>
Revenues $14,815,000 $12,780,000 $42,015,000 $35,253,000
Costs and expenses:
Cost of professional services 11,780,000 10,338,000 33,248,000 28,443,000
Selling, general and administrative expenses 1,606,000 1,434,000 4,841,000 4,128,000
----------- ----------- ----------- -----------
Total costs and expenses 13,386,000 11,772,000 38,089,000 32,571,000
----------- ----------- ----------- -----------
Operating income 1,429,000 1,008,000 3,926,000 2,682,000
Interest income 137,000 -- 137,000 --
Interest expense (80,000) (205,000) (393,000) (610,000)
Write-off of deferred financing fees (1) (140,000) -- (140,000) --
----------- ----------- ----------- -----------
Income before provision for income taxes 1,346,000 803,000 3,530,000 2,072,000
Provision for income taxes 523,000 326,000 1,412,000 848,000
----------- ----------- ----------- -----------
Net income $ 823,000 $ 477,000 $ 2,118,000 $ 1,224,000
=========== =========== =========== ===========
Net income per share $ 0.13 $ 0.10 $ 0.38 $ 0.25
=========== =========== =========== ===========
Weighted average common shares used in
the calculation of historical net income
per share 6,550,000 4,926,000 5,512,000 4,926,000
=========== =========== =========== ===========
PRO FORMA
---------
Historical operating income $ 1,429,000 $ 1,008,000 $ 3,926,000 $ 2,682,000
Founder compensation -- 136,000 -- 437,000
----------- ----------- ----------- -----------
Pro forma operating income $ 1,429,000 $ 1,144,000 $ 3,926,000 $ 3,119,000
=========== =========== =========== ===========
Historical net income $ 823,000 $ 477,000 $ 2,118,000 $ 1,224,000
Write-off of deferred financing fees
(net of tax)(1) 86,000 -- 86,000 --
Founder compensation (net of tax)(2) -- 80,000 -- 258,000
----------- ----------- ----------- -----------
Pro forma net income $ 909,000 $ 557,000 $ 2,204,000 $ 1,482,000
=========== =========== =========== ===========
Pro forma net income per share $ 0.14 $ 0.11 $ 0.40 $ 0.30
=========== =========== =========== ===========
Weighted average common shares used in
the calculation of pro forma net income
per share 6,550,000 4,926,000 5,512,000 4,926,000
=========== =========== =========== ===========
</TABLE>
(1) Write-off of deferred financing fees associated with the repayment of the
long-term debt.
(2) Effect of the elimination of that portion of the founder compensation which
exceeded the pro rata maximum annual amount under the founder's present
agreement with the Company.
The accompanying notes are an integral part of these
condensed financial statements.
4
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DATA PROCESSING RESOURCES CORPORATION
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common stock
-------------------------------- Additional Accumulated
Shares Amount paid-in-capital deficit Total
------------- ----------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 1, 1995 4,000,000 $ 2,000 $ -- $(2,880,000) $(2,878,000)
Net income -- -- -- 2,118,000 2,118,000
Accretion to redemption value on Series
A preferred stock -- -- -- (95,000) (95,000)
Conversion of Preferred Shares
into common Shares 592,000 -- 1,580,000 -- 1,580,000
Exercise of Stock Options 11,000 14,000 -- -- 14,000
Issuance of Common Shares in
initial public offering 2,726,000 34,456,000 -- -- 34,456,000
--------- ----------- ---------- ----------- -----------
BALANCE, APRIL 30, 1996 7,329,000 $34,472,000 $1,580,000 $ (857,000) $35,195,000
========= =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
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DATA PROCESSING RESOURCES CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,118,000 $ 1,224,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 109,000 55,000
Deferred income taxes 20,000 --
Changes in operating assets and liabilities:
Accounts receivable (1,463,000) (821,000)
Receivables from affiliates 221,000 (280,000)
Prepaid expenses and other assets 125,000 (115,000)
Accounts payable and accrued liabilities 484,000 1,382,000
Income taxes payable (1,297,000) 764,000
----------- -----------
Net cash provided by operating activities 317,000 2,209,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property (511,000) (84,000)
Decrease in restricted investment -- 250,000
----------- -----------
Net cash (used in) provided by investing
activities (511,000) 166,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 34,456,000 --
Repayment of long-term debt (4,309,000) (16,000)
Repayment of line of credit, net (836,000) (2,370,000)
Proceeds from exercise of stock options 14,000 --
Proceeds from line of credit -- 528,000
Repayment of notes payable to shareholder -- (1,350,000)
Proceeds from notes - other -- 4,250,000
Proceeds from issuance of preferred stock, net -- 1,393,000
Repayment of notes payable to former
shareholders -- (4,755,000)
----------- -----------
Net cash provided by (used in) financing
activities 29,325,000 (2,320,000)
----------- -----------
Net increase in cash 29,131,000 55,000
Cash and cash equivalents, beginning of period 248,000 25,000
----------- -----------
Cash and cash equivalents, end of period $29,379,000 $ 80,000
=========== ===========
Supplemental information-cash paid for:
Interest $ 408,000 $ 536,000
=========== ===========
Income taxes $ 2,689,000 $ 94,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
6
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DATA PROCESSING RESOURCES CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1996
1. GENERAL
Business
Data Processing Resources Corporation (the Company), which was
incorporated in California on August 15, 1984, is a leading regional specialty
staffing company providing information technology services to a diverse group of
corporate clients.
Interim Financial Data
The interim financial data as of April 30, 1996 and for the three and
nine months ended April 30, 1996 and 1995 is unaudited. The information reflects
all adjustments, consisting only of normal recurring entries, that, in the
opinion of management, are necessary to present fairly the financial position
and results of operations of the Company for the periods indicated. Results of
operations for the interim periods are not necessarily indicative of the results
of operations for the full fiscal year.
Selected Pro Forma Operating Income, Net Income and Net Income Per Share
Selected pro forma operating income and net income has been presented
to reflect the effect of the reduction of founder compensation which exceeds the
proportionate $450,000 maximum amount that can be received under the founder's
present agreement with the Company (net of tax in the net income calculation).
Selected pro forma net income per share has been computed by dividing
selected pro forma net income by the weighted average number of shares of common
stock outstanding during the period. Weighted average common and common
equivalent shares included common shares, stock options using the treasury stock
method and the assumed conversion of all outstanding shares of preferred stock
into shares of common stock. For periods prior to the conversion of the
redeemable preferred stock, such stock has been treated as common share
equivalents in calculating net income per share. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin Topic 4D, stock options granted
during the twelve months prior to the date of the initial filing of the
Company's Form S-1 Registration Statement have been included in the calculation
of common equivalent shares using the treasury stock method, as if they were
outstanding as of the beginning of each period presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property
The cost of furniture, fixtures and equipment is depreciated using
accelerated methods based on the estimated useful lives of the related assets,
generally five to seven years.
Revenue Recognition
The Company recognizes professional and contract services revenues as
services are performed.
7
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DATA PROCESSING RESOURCES CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109). SFAS 109 is an asset and
liability approach that requires the recognition of 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. In estimating
future tax consequences, the Company generally considers all expected future
events other than the enactment of changes in the tax law or rates.
3. LONG-TERM DEBT
Effective March 1995, the Company obtained a revolving line of credit
and term loan with a financial institution (the Credit Agreement). The revolving
line of credit, which permitted borrowing up to the lesser of $5,000,000 or 85%
of eligible accounts receivable, and the term loan, which permitted indebtedness
up to $4,250,000, were collateralized by substantially all of the assets of the
Company. The outstanding principal balances of the revolving line of credit and
term loan bore interest at the prime rate (8.25% as of April 30, 1996) plus 1.0%
and 2.5%, respectively. The Credit Agreement contained various covenants,
including the maintenance of defined financial ratios. The Company was in
compliance with all such covenants except for certain non-financial covenants as
to which the Company received a waiver. All outstanding borrowings under the
Credit Agreement were repaid with the proceeds from the initial public offering
(see Note 4).
Long-term debt consisted of the following at July 31, 1995:
<TABLE>
<S> <C>
Term loan due to financial institution, bearing interest at bank's prime rate
plus 2.5%, principal and interest payable in monthly installments
approximating $101,000, based on a set amortization
schedule beginning October 1, 1995 through March 1, 2000 $4,250,000
Equipment term loan with bank, interest payable monthly at bank's prime rate
plus 2.0%, principal payable in monthly installments of $1,729 through
March 15, 1998 55,000
Obligation under covenant not to compete entered into with former shareholders
on February 28, 1994, payable annually in five equal installments of $1,000
on the anniversary of the agreement 4,000
----------
4,309,000
Less current portion (653,000)
----------
$3,656,000
==========
</TABLE>
8
<PAGE> 9
DATA PROCESSING RESOURCES CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1996
4. SHAREHOLDERS' EQUITY
Initial Public Offering
On March 5, 1996 the Company completed an initial public offering (the
"Offering") of 2,726,000 shares of its common stock at an offering price of
$14.00 per share for net proceeds of $34.5 million.
Preferred Stock Conversion
The Company had 2,001,480 authorized shares of Preferred Stock, of
which 1,480 shares had been designated Series A Convertible Preferred Stock as
of July 31, 1995. Immediately prior to the consummation of the Offering, the
outstanding shares of Series A Convertible Preferred Stock automatically
converted into an aggregate of 592,000 shares of common stock. The shares of
Series A Convertible Preferred Stock were canceled upon said conversion and
ceased to be authorized.
5. RELATED PARTY TRANSACTIONS
In fiscal 1994, one of the Company's larger clients desired to
outsource its entire information systems department through an employee leasing
arrangement. Because the Company does not provide such employee leasing services
and was unable to provide a comparable employment benefit package to consultants
working for this company, a separate company, Information Technology Resources,
Inc. ("ITR"), was formed by the founder of the Company and certain other
persons, including certain former employees of the client, with the founder
owning approximately 75.6% of the outstanding capital stock. As a result of this
arrangement, the Company provides certain management services to ITR to support
its operations, for which the Company receives a management fee pursuant to a
management services agreement. Management fees earned by the Company were
$750,000 and $687,000 the nine months ended April 30, 1996 and 1995,
respectively. ITR also contracts with the Company for technical consultants to
meet its staffing needs. For the nine months ended April 30, 1996 and 1995, the
Company recorded revenues of $3,855,000 and $2,412,000 from ITR for technical
consultants.
Receivables from affiliates includes a receivable from ITR related to these
management services and amounted to $98,000 and $79,000 as of April 30, 1996 and
July 31, 1995, respectively. The Company has trade accounts receivable for
technical consultants due from ITR of $554,000 and $397,000 as of April 30, 1996
and July 31, 1995, respectively, which are included in accounts receivable in
the accompanying balance sheets. The Company from time to time has made advances
to ITR to assist it with its working capital needs. These advances are provided
on a short-term, unsecured basis, do not bear interest and have a balance of $0
and $240,000 as of April 30, 1996 and July 31, 1995, respectively.
9
<PAGE> 10
DATA PROCESSING RESOURCES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to the historical information contained herein, the following
discussion in this Form 10-Q includes forward-looking statements which
involve risk and uncertainties, including but not limited to risks inherent
in the Company's growth strategy, acquisition risks, dependence on certain
clients, dependence on availability of qualified technical consultants and
other factors discussed in the Company's filings with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS-GENERAL
The following discussion contains certain unaudited quarterly pro forma
financial information for the three months and nine months ended April 30, 1996,
compared to the three months and nine months ended April 30, 1995 which gives
effect to the elimination of that portion of the founder compensation for each
period which exceeded the $450,000 maximum annual amount that the founder can
receive under the present agreement with the Company and the write-off of the
deferred financing fees of $86,000 (net of taxes).
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 30, 1995
Revenues. Total revenues increased $2.0 million, or 15.9%, to $14.8
million for the three months ended April 30, 1996 as compared to $12.8 million
for the three months ended April 30, 1995. This increase resulted primarily from
increased billings to the Company's existing clients due to: (i) new information
technology projects; (ii) increased demand in the networking and communications
market; (iii) the opening of the Denver office; (iv) a broadening of the types
of services being provided; and (v) increased demand for the most highly skilled
consultants who are billed at higher hourly rates. The above increases were
offset by the performance of the San Francisco branch which contributed
$520,000 to total revenues in the 1996 period, down from $1.0 million in the
comparable 1995 period.
Cost of Professional Services. Cost of professional services increased
$1.4 million, or 13.9%, to $11.8 million for the three months ended April 30,
1996, as compared to $10.3 million for the three months ended April 30, 1995. As
a percentage of revenues, however, cost of professional services decreased for
the three months ended April 30, 1996 to 79.5%, as compared to 80.9% for the
prior year period. This improvement reflects the modest price increases which
the Company has been able to implement and a change in service mix, with an
increased component of higher margin client/server and networking and
communications services in the 1996 period. These improvements are offset by
lower margins incurred as a result of a fixed price project, which was
substantially completed during the quarter.
Selling, General and Administrative Expenses. On a pro forma basis,
selling, general and administrative expenses increased approximately $308,000 to
$1.6 million for the three months ended April 30, 1996, as compared to $1.3
million for the three months ended April 30, 1995. Pro forma selling, general
and administrative expenses increased as a percentage of revenues to 10.8% for
the three months ended April 30, 1996, as compared to 10.2% for the three months
ended April 30, 1995. This increase as a percentage of revenues primarily
resulted from several factors, including: (i) higher commissions as a percentage
of revenues reflecting the higher commission rates paid for higher margin
billings; (ii) higher depreciation resulting from the Company's investment in
accounting and information systems; and (iii) investment in additional
management personnel and corporate infrastructure required to support planned
Company growth.
10
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DATA PROCESSING RESOURCES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Income. On a pro forma basis, operating income increased
$285,000, or 24.9% to $1.4 million for the three months ended April 30, 1996
from $1.1 million for the same period in 1995. As a percentage of revenues,
operating income increased, on a pro forma basis, to 9.6% for the three months
ended April 30, 1996 as compared to 9.0% for the three months ended April 30,
1995. This increase as a percentage of revenues reflects the improvement in cost
of professional services as a percentage of revenue, offset in part by the
increase in selling, general and administrative expenses.
Interest Expense. Interest expense decreased to $80,000 for the three
months ended April 30, 1996 from $205,000 for the three months ended April 30,
1995. The decrease in interest expense reflects lower borrowing costs resulting
from the refinancing transactions in March 1995 and reduction of interest
expense due to the retirement of the long-term debt from the proceeds of an
initial public offering (the "Offering").
Interest Income. Interest income was $137,000 for the three months
ended April 30, 1996. The increase in interest income reflects the interest
income from the investment of the proceeds of the Offering.
Write-off of Deferred Financing Fees. Write-off of deferred financing
fees arose from the retirement of the long-term debt by use of the proceeds of
the Offering.
NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO NINE MONTHS ENDED APRIL 30, 1995
Total Revenues. Total revenues increased $6.8 million, or 19.2%, to
$42.0 million for the nine months ended April 30, 1996 as compared to $35.2
million for the nine months ended April 30, 1995. This increase resulted
primarily from increased billings to the Company's existing clients due to: (i)
new information technology projects; (ii) increased demand in the networking and
communications market; (iii) the opening of the Denver office; (iv) a broadening
of the types of services being provided; and (v) increased demand for the most
highly skilled consultants who are billed at higher hourly rates. The above
increases were offset by the performance of the San Francisco branch which
contributed $1.7 million to total revenues in the 1996 period, down from $2.5
million in the comparable 1995 period.
Cost of Professional Services. Cost of professional services increased
$4.8 million, or 16.9%, to $33.2 million for the nine months ended April 30,
1996 as compared to $28.4 million for the nine months ended April 30, 1995. As a
percentage of revenues, however, cost of professional services decreased for
the nine months ended April 30, 1996 to 79.1% as compared to 80.7% for the
prior year period. This improvement reflects the modest price increases which
the Company has been able to implement and a change in service mix, with an
increased component of higher margin client/server and network and
communications services in the 1996 period.
Selling, General and Administrative Expenses. On a pro forma basis
selling, general and administrative expenses increased approximately $1.2
million to $4.8 million for the nine months ended April 30, 1996, as compared to
$3.7 million for the nine months ended April 30, 1995. Pro forma selling,
general and administrative expenses also increased as a percentage of revenues
to 11.5% for the nine months ended April 30, 1996, as compared to 10.5% for the
nine months ended April 30, 1995. This increase as a percentage of revenues
primarily resulted from several factors, including: (i) higher commissions as a
percentage of revenues reflecting the higher commission rates paid for higher
margin billings; (ii) higher depreciation resulting from the Company's
investment in accounting and information systems; and (iii) investment in
additional management personnel and corporate infrastructure required to support
planned Company growth.
11
<PAGE> 12
DATA PROCESSING RESOURCES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Income. On a pro forma basis, operating income increased
$807,000, or 25.9% to $3.9 million for the nine months ended April 30, 1996 from
$3.1 million for the same period in 1995. As a percentage of revenues, operating
income increased on a pro forma basis to 9.3% for the nine months ended April
30, 1996 as compared to 8.8% for the nine months ended April 30, 1995. This
increase as a percentage of revenues reflects the improvement in cost of
professional services as a percentage of revenue, offset in part by the increase
in selling, general and administrative expenses.
Interest Expense. Interest expense decreased to $393,000 for the nine
months ended April 30, 1996 from $610,000 for the nine months ended April 30,
1995. The decrease in interest expense reflects lower borrowing costs resulting
from the refinancing transactions in March 1995 and reduction of interest
expense due to the retirement of the long-term debt from the proceeds of the
Offering.
Interest Income. Interest income was $137,000 for the nine months ended
April 30, 1996. The increase in interest income reflects the interest income
from the investment of the proceeds of the Offering.
Write-off of Deferred Financing Fees. Write-off of deferred financing
fees arose from the retirement of the long-term debt by use of the proceeds of
the Offering.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and net working capital totaled $29.4 million
and $34.5 million, respectively, as of April 30, 1996. The primary sources of
cash generated from operations in the nine months ended April 30, 1996 were net
income and an increase in accounts payable and accrued liabilities, offset by
payments of income taxes payable and an increase in accounts receivable. The
Company used $5.1 million in cash to pay off outstanding borrowings under the
Credit Agreement and generated cash from financing activities of $34.5 million
in proceeds from the Offering completed early in March 1996.
The Credit Agreement currently provides for a term loan and a revolving
line of credit totaling $9.25 million. The Company has repaid all outstanding
borrowings under the Credit Agreement with a portion of the proceeds from the
initial public offering. The Company is currently finalizing negotiations for a
new $20.0 million secured credit facility, which includes both working capital
and acquisition lines of credit.
The Company anticipates that its primary uses of working capital in
future periods will be for acquisitions, the internal development of new
branches and the funding of increases in accounts receivable. Although the
Company intends to use its common stock to make acquisitions to the extent
possible, potential acquisition candidates may require that all or a significant
portion of the purchase price be paid in cash. The Company cannot predict to
what extent new branches will be added through acquisitions as compared to
internal development. The Company's ability to grow through acquisitions is
dependent on the availability of suitable acquisition candidates and the terms
on which such candidates may be acquired, which may be adversely affected by
competition for such acquisitions. The Company anticipates that the opening of
new branches will require an investment of approximately $150,000 to $200,000 to
acquire equipment and supplies and to fund operating losses for the initial
nine- to twelve-month period of operations which management believes will
generally be required for a new branch to achieve profitability. The Company
expenses the costs of opening a new branch as incurred, except for the cost of
equipment and other capital assets, which are capitalized. Generally,
expenditures for such capital assets for a new branch will be less than $50,000.
There can be no assurance that future branches will achieve profitability within
a nine- to twelve-month period after opening, if at all.
12
<PAGE> 13
DATA PROCESSING RESOURCES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company believes that the proceeds from the Offering, together with
cash flow from operations and borrowings under the new credit facility when it
is finalized, will be sufficient to meet the Company's presently anticipated
working capital needs for at least the next 12 months.
13
<PAGE> 14
DATA PROCESSING RESOURCES CORPORATION
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
On March 5, 1996 the Company completed an initial public offering
(the "Offering") of 2,726,000 shares of its common stock at an
offering price of $14.00 per share for net proceeds of $34,456,000.
Immediately prior to the consummation of the Offering, the outstanding
shares of Series A Convertible Preferred Stock automatically converted
into an aggregate of 592,000 shares of common stock. The shares of
Series A Convertible Preferred Stock were canceled upon said
conversion and ceased to be authorized.
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to Vote of Security Holders
Not applicable
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newport Beach, State of
California, on the 14TH DAY OF JUNE, 1996.
DATA PROCESSING RESOURCES CORPORATION
By: /s/ MICHAEL A. PIRAINO
--------------------------------------
Michael A. Piraino, Senior Vice President
and Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERNALLY
PREPARED FINANCIAL STATEMENTS FOR THE 9 MONTHS ENDED APRIL 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR PERIOD ENDED APRIL
30,1996.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 29379
<SECURITIES> 0
<RECEIVABLES> 7719
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37587
<PP&E> 964
<DEPRECIATION> 334
<TOTAL-ASSETS> 38253
<CURRENT-LIABILITIES> 3058
<BONDS> 0
0
0
<COMMON> 34472
<OTHER-SE> 1580
<TOTAL-LIABILITY-AND-EQUITY> 38253
<SALES> 0
<TOTAL-REVENUES> 42015
<CGS> 0
<TOTAL-COSTS> 33248
<OTHER-EXPENSES> 4841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 533
<INCOME-PRETAX> 3530
<INCOME-TAX> 1412
<INCOME-CONTINUING> 2118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2118
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
