<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported): January 7, 1997
The Vincam Group, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Florida 59-2462823
- ----------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2850 Douglas Road, Coral Gables, Florida 33134
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(305) 460-2350
---------------------------------------------------
(Registrant's telephone number including area code)
Not applicable
--------------------------------------------------------------
(Former name and former address, if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
The following audited financial statements of Staff Administrators, Inc. are
filed with this amendment to this Current Report on Form 8-K:
Page
Number
--------
Independent Auditors' Report ........................................F- 1
Consolidated Balance Sheets at December 31, 1995 and 1996 ...........F- 2
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 ...................................F- 3
Consolidated Statements of Changes in Stockholders' Deficit
for the years ended December 31, 1994, 1995 and 1996 ...............F- 4
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 ...................................F- 5
Notes to Consolidated Financial Statements ..........................F- 6
(b) Pro Forma Financial Information
The following unaudited pooled combined pro forma financial information of The
Vincam Group, Inc. and Staff Administrators, Inc. is filed with this amendment
to this Current Report on Form 8-K:
Page
Number
--------
Pooled Combined Pro Forma Financial Information .....................F-12
Pooled Combined Pro Forma Balance Sheet at December 31, 1996 ........F-13
Pooled Combined Pro Forma Statement of Income for the year
ended December 31, 1996 ............................................F-14
Pooled Combined Pro Forma Statement of Income for the year
ended December 31, 1995 ............................................F-15
Pooled Combined Pro Forma Statement of Income for the year
ended December 31, 1994 ............................................F-16
Notes to Pooled Combined Pro Forma Financial Information ............F-17
(c) Exhibits
Exhibit
No.
---------
23 Consent of Ehrhardt Keefe Steiner & Hottman PC
<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.
THE VINCAM GROUP, INC.
--------------------------
Registrant
Dated: March 14, 1997 By:/s/ STEPHEN L. WAECHTER
--------------------------
Stephen L. Waechter
Chief Financial Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Staff Administrators, Inc. and Subsidiaries
Denver, Colorado
We have audited the accompanying consolidated balance sheets of Staff
Administrators, Inc. and Subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, changes in stockholders' deficit,
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Staff
Administrators, Inc. and Subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ EHRHARDT KEEFE STEINER & HOTTMAN PC
- ---------------------------------------
Ehrhardt Keefe Steiner & Hottman PC
Denver, Colorado
January 31, 1997
F-1
<PAGE>
STAFF ADMINISTRATORS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
DECEMBER 31,
---------------------------
1995 1996
------------ ------------
Assets
Current assets:
Cash and cash equivalents ...................... $ 257,298 $ 352,740
Investments .................................... 639,232 149,626
Restricted cash (Note 2) ....................... 1,226,915 1,017,877
Accounts receivable, less allowance for
doubtful accounts of $0 and $100,000
in 1995 and 1996, respectively ................ 1,279,820 2,288,404
Due from affiliates (Note 9) ................... 86,228 126,362
Deferred tax asset (Note 5) .................... 665,899 904,000
Prepaid expenses and other current assets ...... 111,148 43,993
------------ ------------
Total current assets ....................... 4,266,540 4,883,002
Property and equipment - net (Note 3) .............. 179,952 248,185
Deferred tax asset - long-term (Note 5) ............ 243,149 523,235
Other assets ....................................... 101,930 69,295
------------ ------------
Total assets ....................................... $ 4,791,571 $ 5,723,717
============ ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses .......... $ 1,554,543 $ 1,549,918
Accrued salaries, wages and payroll taxes ...... 1,436,195 2,424,395
Reserve for claims ............................. 1,425,727 1,775,385
Income taxes payable (Note 5) .................. 496,500 354,150
Current portion of long-term borrowings (Note 4) 106,759 39,163
------------ ------------
Total current liabilities .................. 5,019,724 6,143,011
Long-term borrowings, less current portion (Note 4). 142,638 16,326
Reserve for claims ................................. 545,823 1,374,188
------------ ------------
Total liabilities .......................... 5,708,185 7,533,525
------------ ------------
Commitments and contingencies (Notes 2, 6, 7, and 9)
Stockholders' deficit (Note 10)
Common stock, no par value; 10,000 shares
authorized, 200 shares issued and
outstanding in 1995 and 1996 .... ............. 200 200
Accumulated deficit ............................ (916,814) (1,810,008)
------------ ------------
Total stockholders' deficit ................ (916,614) (1,809,808)
------------ ------------
Total liabilities and stockholders' deficit ........ $ 4,791,571 $ 5,723,717
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
STAFF ADMINISTRATORS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenues ......................................... $ 33,310,475 $ 55,824,216 $ 77,975,919
------------- ------------- ------------
Direct costs:
Salaries, wages and employment taxes
of worksite employees ....................... 29,288,492 49,707,987 70,464,960
Health care and workers' compensation ........ 1,864,096 2,991,211 3,952,049
State unemployment taxes and other ........... 316,903 410,574 346,727
------------- ------------- ------------
Total direct costs ....................... 31,469,491 53,109,772 74,763,736
------------- ------------- ------------
Gross profit ..................................... 1,840,984 2,714,444 3,212,183
------------- ------------- ------------
Operating expenses
Administrative personnel ..................... 665,094 1,303,912 1,461,023
Sales and marketing .......................... 274,302 717,229 1,163,341
Other general and administrative ............. 814,540 1,523,289 1,919,920
Provision for doubtful accounts .............. -- 24,090 100,000
Depreciation and amortization ................ 13,066 37,241 57,942
------------- ------------- ------------
Total operating expenses ................. 1,767,002 3,605,761 4,702,226
------------- ------------- ------------
Operating income (loss) .......................... 73,982 (891,317) (1,490,043)
Interest income, net ............................. 19,936 104,463 78,662
------------- ------------- ------------
Income (loss) before taxes ....................... 93,918 (786,854) (1,411,381)
(Provision for) benefit from income taxes (Note 5) (39,832) 229,806 518,187
------------- ------------- ------------
Net income (loss) ................................ $ 54,086 $ (557,048) $ (893,194)
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
STAFF ADMINISTRATORS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Deficit
Year Ended December 31, 1994, 1995, and 1996
<TABLE>
<CAPTION>
Common Stock
------------------------- Accumulated
Shares Amount Deficit Total
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 ........................ 200 $ 200 $ (405,747) $ (405,547)
Purchase of business .............................. -- -- (8,105) (8,105)
Net income ........................................ -- -- 54,086 54,086
----------- ------------ ------------ -----------
Balance at December 31, 1994 ...................... 200 200 (359,766) (359,566)
Net loss .......................................... -- -- (557,048) (557,048)
----------- ------------ ------------ -----------
Balance at December 31, 1995 ...................... 200 200 (916,814) (916,614)
Net loss .......................................... -- -- (893,194) (893,194)
----------- ------------ ------------ -----------
Balance at December 31, 1996 ...................... 200 $ 200 $(1,810,008) $(1,809,808)
=========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
STAFF ADMINISTRATORS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ 54,086 $ (557,048) $ (893,194)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization ...................... 13,066 37,241 57,942
Deferred income taxes benefit ...................... (136,657) (553,622) (518,187)
Issuance of note payable for expenses .............. 158,348 49,299 --
Changes in operating assets and liabilities:
Restricted cash .................................. (645,830) (581,085) 209,038
Accounts receivable .............................. (618,828) (371,228) (1,008,584)
Due from affiliates .............................. -- (17,789) (40,134)
Prepaid expenses and other assets ................ (56,550) (121,528) 99,790
Accounts payable and other accrued expenses ...... 812,362 1,137,931 841,225
Reserve for claims ............................... 764,371 1,207,179 1,178,023
----------- ----------- -----------
Net cash provided by (used in) operating activities .... 344,368 229,350 (74,081)
----------- ----------- -----------
Cash flows from investing activities:
Investments .......................................... (271,166) (165,486) 489,606
Purchases of equipment ............................... (60,947) (97,966) (137,054)
Proceeds from sale of equipment ...................... -- -- 10,879
Investment in acquired company ....................... (8,105) -- --
----------- ----------- -----------
Net cash (used in) provided by investing activities .... (340,218) (263,452) 363,431
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on borrowings ..................... (32,750) (33,000) (193,908)
----------- ----------- -----------
Net cash used in financing activities .................. (32,750) (33,000) (193,908)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents ... (28,600) (67,102) 95,442
Cash and cash equivalents at beginning of year ......... 353,000 324,400 257,298
----------- ----------- -----------
Cash and cash equivalents at end of year ............... $ 324,400 $ 257,298 $ 352,740
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest .......................................... $ 175 $ 0 $ 2,443
=========== =========== ===========
Income taxes ..................................... $ 0 $ 3,010 $ 134,074
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
STAFF ADMINISTRATORS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Staff Administrators, Inc. and Subsidiaries (the "Company") was incorporated in
1991 as a Colorado corporation and is a Professional Employer Organization
("PEO") that provides a comprehensive personnel management system which
encompasses a broad range of services, including benefits and payroll
administration, medical and workers' compensation programs, tax filings,
personnel records management, liability management, and other human resource
services. The Company operates primarily in the state of Colorado with an office
also located in California.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Staff Administrators of Colorado, Inc. and Staff
Administrators of California, Inc. (formed in 1995) and a 51% owned subsidiary,
Staff Administrators of Western Colorado, Inc. (acquired in 1994). All
significant intercompany transactions have been eliminated.
Minority Interest
- -----------------
The Company has absorbed the entire losses of Staff Administrators of Western
Colorado, Inc. for the period ended December 31, 1994 and the years ended
December 31, 1995 and 1996, as the aggregate losses are in excess of the
minority interest investment.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include bank deposits and short-term investments with
original maturities of three months or less.
Investments
- -----------
The Company's investments consist of debt securities issued by U.S. government
entities and local municipalities with contractual maturities of less than one
year from the date of purchase. All investments are classified as held to
maturity and are carried at amortized cost which approximates fair value.
Realized gains and losses, if any, are computed based on specific identification
of the securities sold.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Maintenance and repairs are charged
to expense as incurred; renewals and betterments are capitalized. The cost of
property and equipment is depreciated over the estimated useful lives of the
related assets using the straight-line method. The estimated useful lives of
property and equipment range from three to ten years.
PEO Service Fees and Worksite Employee Payroll Costs
- ----------------------------------------------------
The Company accounts for PEO service fees and the related direct payroll costs
using the accrual method. Under the accrual method, PEO service fees are
recognized as unbilled revenues and the related direct payroll costs are accrued
as a liability during the period in which wages are earned by the worksite
employee.
Reserve for Claims
- ------------------
Effective April 1, 1994, the Company began a workers' compensation policy
whereby the Company was self-insured for all claims up to an aggregate stop loss
amount. Accrued workers' compensation claims are based on an estimate of
reported and unreported losses, net of amounts covered under the applicable
insurance policy, for injuries occurring on or before the balance sheet date.
F-6
<PAGE>
The loss estimates are based on several factors including the Company's current
experience, relative health care costs, regional influences and other factors.
While estimated losses may not be paid for several years, an accrual for the
estimated value of outstanding claims is maintained with changes in the accrual
reflected as a component of direct costs in the period of the change. Estimates
are based on actuarial amounts. These estimates are continually reviewed and any
adjustments are reflected in operations as they become known, and are subject to
material change.
Income Taxes
- ------------
The Company records the amount of taxes payable or refundable currently or in
future years for temporary differences between the consolidated financial
statement basis and income tax basis based on the current enacted tax laws.
Temporary differences are differences between the tax basis of assets and
liabilities and their reported amounts in the consolidated financial statements
that will result in taxable or deductible amounts in future years. The Company's
temporary differences result primarily from workers' compensation reserve for
claims, depreciation and accrued worksite employee expenses.
Concentration of Credit Risk
- ----------------------------
Cash accounts potentially subject the Company to concentration of credit risk.
The Company places its cash with high credit quality financial institutions. At
December 31, 1996, there was approximately $300,000 in one bank in excess of the
federally insured limit.
Use of Estimates
- ----------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ materially from those
estimates. The most significant estimate made by the Company is for workers'
compensation claim reserves.
Fair Value of Financial Instruments
- -----------------------------------
The carrying amounts of financial instruments including cash and cash
equivalents, restricted cash, receivables, accounts payable and accrued expenses
approximated fair value as of December 31, 1995 and 1996, because of the
relatively short maturity of these instruments.
Due to rates currently available to the Company for borrowings which are similar
to terms on the remaining maturities, the fair value of existing borrowings
approximates carrying value.
Reclassifications
- -----------------
Certain reclassifications have been made to the consolidated financial
statements for the years ended December 31, 1994 and 1995 to conform with the
1996 presentation.
NOTE 2 - RESTRICTED CASH
At December 31, 1995 and 1996, investments with a carrying value of $1,226,915
and $1,017,877, respectively, are pledged as collateral under an outstanding
letter-of-credit agreement with a bank. As of December 31, 1995 and 1996, no
amounts were outstanding on the letter-of-credit.
F-7
<PAGE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
-----------------------
1995 1996
---------- ----------
Computer equipment .......... $ 158,151 $ 248,318
Furniture and equipment ..... 59,769 80,584
Leasehold improvements ...... 18,914 40,780
Vehicle ..................... 22,939 --
Signs ....................... 1,089 5,296
---------- ----------
260,862 374,978
Less accumulated depreciation (80,910) (126,793)
---------- ----------
$ 179,952 $ 248,185
========== ==========
NOTE 4 - LONG-TERM BORROWINGS
Borrowings at December 31, 1995 and 1996 are as follows:
December 31,
---------- ----------
1995 1996
---------- ----------
Notes payable (unsecured) to
a former shareholder ....... $ 41,750 $ --
Note payable (unsecured)
for state unemployment
taxes, maturing in 1998
with monthly
payments of $5,565 ......... 207,647 55,489
---------- ----------
249,397 55,489
Less current maturities ..... (106,759) (39,163)
---------- ----------
$ 142,638 $ 16,326
========== ==========
The future maturities of long-term borrowings at December 31, 1996 are as
follows:
Year Ending December 31,
1997 ........ $ 39,163
1998 ........ 16,326
----------
$ 55,489
==========
NOTE 5 - INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the consolidated
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the consolidated
financial statements and tax basis of assets and liabilities using the enacted
tax rates in effect for the year in which the differences are expected to
reverse. The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that, based on available evidence are not expected to
be realized.
F-8
<PAGE>
The provision for federal and state income taxes consists of the following:
Year Ended December 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
Current
Federal ............. $ 165,758 $ 308,777 $ --
State ............... 8,724 16,251 --
---------- ---------- ----------
174,482 325,028 --
---------- ---------- ----------
Deferred
Federal ............. (127,917) (527,093) (492,278)
State ............... (6,733) (27,741) (25,909)
---------- ---------- ----------
(134,650) (554,834) (518,187)
---------- ---------- ----------
$ 39,832 $(229,806) $(518,187)
========== ========== ==========
The net current and long-term deferred tax assets in the accompanying
consolidated balance sheets include the following:
December 31,
----------------------
1995 1996
---------- ----------
Current deferred tax asset:
Allowance for doubtful accounts ......... $ -- $ 39,240
Accrued vacation ........................ 7,018 8,175
Accrued bonus - officers ............... 47,088 --
Reserve for workers' compensation claims. 559,455 696,661
Net operating losses ................... -- 142,826
Accrued settlement fees ................. 52,487 15,583
Other ................................... (149) 1,515
---------- ----------
$ 665,899 $ 904,000
========== ==========
Long-term deferred tax asset
Reserve for workers' compensation claims. $ 214,181 $ 539,227
Depreciation ............................ (20,498) (22,395)
Accrued settlement fees ................. 52,538 --
Other ................................... (3,072) 6,403
---------- ----------
$ 243,149 $ 523,235
========== ==========
During 1996, the Company requested a change, for income tax purposes, in the
method of accounting for its workers' compensation loss reserves. As a result,
the Company recorded a deferred tax asset relating to the reserves and an
increase in income taxes payable of approximately $300,000 and $775,000 as of
December 31, 1994 and 1995, respectively. Under the provisions of the Internal
Revenue Code (IRC), once the change is formally approved, the Company can
amortize over three years the payment of taxes due for changes resulting in
taxable income and can recognize currently deductions resulting from the change
in method. The Company has classified as long-term those taxes resulting from
this change which it expects to pay in more than one year.
During the years ended December 31, 1995 and 1996, the Company recognized a
deferred tax benefit of approximately $0 and $142,826, respectively, from the
utilization of net operating loss carryforwards. There are approximately
$455,000 of net operating losses available for carryforward at December 31,
1996, which expire in 2009.
F-9
<PAGE>
Realization of the above deferred tax assets is dependent on generating
sufficient taxable income in the future to offset the deductible temporary
differences generating the deferred tax assets. Although realization is not
assured, management believes that it is more likely than not that all of the
deferred tax asset will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced if estimates of future taxable
income are reduced.
The following is a reconciliation of income taxes at the federal statutory rate
with income taxes recorded by the Company for the years ended December 31, 1994,
1995 and 1996.
December 31,
---------------------------------
1994 1995 1996
---------- ---------- ----------
Computed income taxes at statutory rate 34% ..$ 31,932 $(267,530) $(452,670)
State income taxes, net of federal
income tax benefit .......................... 3,099 (25,966) (43,935)
Other ........................................ 4,801 63,690 (21,582)
---------- ---------- ----------
$ 39,832 $(229,806) $(518,187)
========== ========== ==========
NOTE 6 - OPERATING LEASES
The Company leases various office facilities under operating leases. Rental
expense relating to all operating leases was $46,135, $114,088 and $132,156 in
1994, 1995 and 1996, respectively. At December 31, 1996, future minimum rental
payments under noncancelable operating leases are as follows:
Year Ending December 31,
1997 ......$ 113,465
1998 ...... 66,089
1999 ...... 23,740
----------
$ 203,294
==========
NOTE 7 - CONTINGENCIES
The Company is a defendant in various lawsuits and claims arising in the normal
course of business. Management believes it has valid defenses in these cases and
is defending them vigorously. While the results of litigation cannot be
predicted with certainty, management believes, based on the advice of the
Company counsel, the final outcome of such litigation will not have a material
adverse effect on the Company's consolidated financial position or results of
operations. As of December 31, 1995 and 1996, the Company had accrued all
amounts deemed to be probable losses.
During 1996, the Company was notified by the Internal Revenue Service of an
audit of its 1994 federal income tax return. It is uncertain as to the outcome
of the audit, accordingly, no amount has been accrued in the financial
statements for any potential additional tax liability or penalties arising from
the audit.
NOTE 8 - PROFIT-SHARING PLAN
The Company adopted a 401(K) plan in 1996. Under this plan, all employees are
eligible to participate in the 401(K) plan following their first anniversary of
employment on specified entry dates and upon attaining age 21.
F-10
<PAGE>
Employees may contribute through salary reductions up to 15% of their
compensation subject to certain Internal Revenue Service limitations. The
Company may make discretionary matching contributions for each participant.
Employee contributions are 100% vested. Employer contributions become vested as
follows:
Percent of
Nonforfeitable
Years of Service Interest
---------------- --------------
Less than 3 ............................................... 0%
3 ..................................................... 20%
4 ..................................................... 40%
5 ..................................................... 60%
6 ..................................................... 80%
7 or more ................................................. 100%
The Company did not make a matching contribution during 1996.
NOTE 9 - RELATED PARTY TRANSACTIONS
Due from Affiliates
- -------------------
The Company has made advances to and paid various expenses on behalf of officers
of the Company totaling $86,228 and $126,362 at December 31, 1995 and 1996,
respectively. Principal and interest, at 5% per annum, are due January 7, 1998.
Owners' Compensation
- --------------------
The Company pays a management fee to a company wholly owned by the Company's
stockholders. During the years ended December 31, 1994, 1995, and 1996,
management fees paid to the related company totaled $378,488, $615,000 and
$513,971, respectively.
Other
- -----
The Company has an employment agreement with a minority shareholder of a
subsidiary for five years, renewable annually, with compensation of $41,600 per
year, plus a bonus of $3,000 per quarter for any quarter with a net profit of
greater than $3,000. In addition, the minority owner was granted first right of
refusal on the sale of the majority owner's stock.
The Company leases office space and equipment from a minority owner of a
subsidiary. Rent expense in 1994, 1995 and 1996 was $5,740, $28,488 and $31,817,
respectively.
The Company also leases furniture from an owner of the Company under a
month-to-month lease. Rent expense was $6,000 in 1994, 1995, and 1996.
NOTE 10 - SUBSEQUENT EVENT
Effective January 7, 1997, the Company entered into a merger agreement with The
Vincam Group, Inc. (Vincam) (a Florida corporation) whereby the Company merged
with a wholly owned subsidiary of Vincam. The merger has been accounted for as a
pooling of interests. Following the merger, the Company became a wholly owned
subsidiary of Vincam. The 200 issued and outstanding shares of common stock of
the Company were exchanged for 500,000 shares of Vincam's common stock, $.001
par value.
In conjunction with this pooling of interests, the 24,500 shares of common stock
owned by the minority shareholder in Staff Administrators of Western Colorado,
Inc. were exchanged for 20,000 shares of Vincam's common stock, $.001 par value.
F-11
<PAGE>
POOLED COMBINED PRO FORMA FINANCIAL INFORMATION (UNADITED):
The following unaudited pro forma statments of income of The Vincam Group, Inc.
(Vincam) and Staff Administrators, Inc. (SAI) for the years ended December 31,
1994, 1995 and 1996, are presented as if the acquisition had ocurred on January
1, 1994.
The pro forma data is presented for informational purposes only and may not be
indicative of the future results of operations of financial position of Vincam,
or what the results of operations or finacial position of Vincam would have been
had the acquisition occurred on the date set forth.
These pooled combined pro forma financial information should be read in
conjuction with the historical financial statements and notes thereto of SAI,
included herein, and Vincam as incorporated herein by referece.
The unaudited pro forma financial information is derived from historical
financial statements of Vincam and SAI. The pooled combined pro forma balance
sheet combines Vincam's and SAI's December 31, 1996 balance sheets. The pooled
combined pro forma statements of income combine Vincam's statement of income for
the years ended December 31, 1994, 1995 and 1996, as included in Vincam's Form
10-K (Commission File No. 0-28148), which is hereby incorporated by reference,
with SAI's historical statements of operations for the years ended December 31,
1994, 1995 and 1996, included elsewhere herein.
F-12
<PAGE>
<TABLE>
<CAPTION>
THE VINCAM GROUP, INC.
POOLED COMBINED PRO FROMA BALANCE SHEET
DECEMBER 31, 1996
------------------------------------------------------------------
POOLED
COMBINED
PRO FORMA PRO FORMA
VINCAM SAI ADJUSTMENTS BALANCE SHEET
------------ ------------ ------------ -------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................ $16,021,548 $ 352,740 $16,374,288
Restricted cash ...................................... 1,314,040 1,017,877 2,331,917
Investments .......................................... -- 149,626 149,626
Accounts receivable .................................. 19,823,352 2,288,404 22,111,756
Due from affiliates .................................. 109,565 126,362 235,927
Deferred taxes ....................................... 553,280 904,000 1,457,280
Reinsurance recoverable .............................. 1,728,000 -- 1,728,000
Prepaid workers' compensation insurance premium ...... 5,483,972 -- 5,483,972
Prepaid expenses and other current assets ............ 740,166 43,993 784,159
------------ ------------ ------------- ------------
Total current assets .......................... 45,773,923 4,883,002 50,656,925
Property and equipment, net .......................... 3,916,411 248,185 4,164,596
Deferred taxes ....................................... 105,391 523,235 $ (5,137)E 623,489
Reinsurance recoverable .............................. 1,472,000 -- 1,472,000
Client contracts and other assets, net of accumulated
amortization of $79,306 ........................... 1,616,881 69,295 301,848 A 1,988,024
Goodwill, net of accumulated amortization of $86,895 . 4,791,836 -- 566,641 A 5,358,477
------------ ------------ ------------- ------------
$57,676,442 $ 5,723,717 $ 863,352 $64,263,511
============ ============ ============= ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ................ $1,856,715 $ 1,549,918 $ 3,406,633
Accrued salaries, wages and payroll taxes ............ 12,939,969 2,424,395 15,364,364
Amounts due under acquisition agreement .............. 2,623,437 -- 2,623,437
Reserve for claims ................................... 3,309,631 1,775,385 5,085,016
Income taxes payable ................................. 953,426 354,150 $ (19,687)E 1,287,889
Current portion of long term borrowings .............. 50,004 39,163 89,167
Deferred compensation, due principally to stockholders 242,013 -- 242,013
Deferred gain ....................................... 323,157 -- 323,157
------------ ------------ ------------- ------------
Total current liabilities ..................... 22,298,352 6,143,011 (19,687) 28,421,676
Long term borrowings, less current portion ............... 791,557 16,326 807,883
Reserve for claims ....................................... 1,472,000 1,374,188 2,846,188
Income taxes payable ..................................... 672,818 -- 672,818
Deferred compensation, due principally to stockholders ... 41,200 -- 41,200
Deferred gain ............................................ 275,275 -- 275,275
Other liabilities ........................................ 45,338 -- 45,338
------------ ------------ ------------- ------------
Total liabilities ............................. 25,596,540 7,533,525 (19,687) 33,110,378
------------ ------------ ------------- ------------
Commitments and contingencies ............................ -- -- --
------------ ------------ ------------- ------------
Stockholders' (deficit) equity:
Common stock, $.001 par value, 60,000,000 shares
authorized, 8,554,148 shares issued and 8,533,332
outstanding ....................................... 8,013 200 320 B 8,533
Additional paid in capital ........................... 33,241,867 -- 868,169 C 34,110,036
Accumulated deficit .................................. (1,169,978) (1,810,008) 14,550 E (2,965,436)
------------- ------------ ------------- ------------
Total stockholders' (deficit) equity........... 32,079,902 (1,809,808) 883,039 31,153,133
------------- ------------ ------------- ------------
$57,676,442 $ 5,723,717 $ 863,352 $64,263,511
============= ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these pooled combined
pro forma financial information.
F-13
<PAGE>
<TABLE>
<CAPTION>
THE VINCAM GROUP, INC.
POOLED COMBINED CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31, 1996
------------------------------------------------------------------
POOLED
COMBINED
PRO FORMA PRO FORMA
VINCAM SAI ADJUSTMENTS INCOME STATEMENT
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenues ................................................. $395,619,538 $ 77,975,919 $473,595,457
------------- ------------- ------------- -------------
Direct costs:
Salaries, wages and employment
taxes of worksite employees ........................... 347,253,311 70,464,960 417,718,271
Health care and workers'
compensation .......................................... 18,909,125 3,952,049 22,861,174
State unemployment taxes and
other ................................................. 3,873,906 346,727 4,220,633
------------- ------------- ------------- -------------
Total direct costs ....................................... 370,036,342 74,763,736 444,800,078
------------- ------------- ------------- -------------
Gross profit ............................................. 25,583,196 3,212,183 28,795,379
------------- ------------- ------------- -------------
Operating expenses:
Administrative personnel ............................ 11,580,072 1,461,023 13,041,095
Other general and administrative .................... 4,748,231 1,919,920 6,668,151
Sales and marketing ................................. 3,370,773 1,163,341 4,534,114
Provision for doubtful accounts ..................... 334,300 100,000 434,300
Depreciation and amortization ....................... 747,389 57,942 $ 42,790 D 848,121
------------- ------------- ------------- -------------
Total operating expenses ........................ 20,780,765 4,702,226 42,790 25,525,781
------------- ------------- ------------- -------------
Operating income ......................................... 4,802,431 (1,490,043) (42,790) 3,269,598
Interest (expense) income, net ........................... 618,045 78,662 696,707
------------- ------------- ------------- -------------
Income before taxes ...................................... 5,420,476 (1,411,381) (42,790) 3,966,305
(Provision for) benefit from income taxes ................ (1,834,500) 518,187 14,550 E (1,301,763)
------------- ------------- ------------- -------------
Net income (loss) ........................................ $ 3,585,976 $ (893,194) $ (28,240) $ 2,664,542
============= ============= ============= =============
Net income per common and common
equivalent share .................................... $ 0.46 $ 0.32
============= =============
Weighted average number of shares
outstanding used in earnings per
share calculation ................................... 7,810,811 8,330,811
============= =============
</TABLE>
The accompanying notes are an integral part of these pooled combined
pro forma financial information.
F-14
<PAGE>
<TABLE>
<CAPTION>
THE VINCAM GROUP, INC.
POOLED COMBINED CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31, 1995
------------------------------------------------------------------
POOLED
COMBINED
PRO FORMA PRO FORMA
VINCAM SAI ADJUSTMENTS INCOME STATEMENT
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenues ................................................. $239,407,710 $ 55,824,216 $295,231,926
------------- ------------- ------------- -------------
Direct costs:
Salaries, wages and employment
taxes of worksite employees ........................... 212,478,971 49,707,987 262,186,958
Health care and workers'
compensation .......................................... 12,339,677 2,991,211 15,330,888
State unemployment taxes and
other ................................................. 1,646,250 410,574 2,056,824
------------- ------------- ------------- -------------
Total direct costs ....................................... 226,464,898 53,109,772 279,574,670
------------- ------------- ------------- -------------
Gross profit ............................................. 12,942,812 2,714,444 15,657,256
------------- ------------- ------------- -------------
Operating expenses:
Administrative personnel ............................ 6,267,921 1,303,912 7,571,833
Other general and administrative .................... 3,207,004 1,523,289 4,730,293
Sales and marketing ................................. 1,724,361 717,229 2,441,590
Provision for doubtful accounts ..................... 165,000 24,090 189,090
Depreciation and amortization ....................... 337,837 37,241 $ 42,790 D 417,868
------------- ------------- ------------- -------------
Total operating expenses ........................ 11,702,123 3,605,761 42,790 15,350,674
------------- ------------- ------------- -------------
Operating income ......................................... 1,240,689 (891,317) (42,790) 306,582
Interest (expense) income, net ........................... 38,371 104,463 142,834
------------- ------------- ------------- -------------
Income before taxes ...................................... 1,279,060 (786,854) (42,790) 449,416
(Provision for) benefit from income taxes ................ (469,223) 229,806 14,550 E (224,867)
------------- ------------- ------------- -------------
Net income (loss) ........................................ $ 809,837 $ (557,048) $ (28,240) $ 224,549
============= ============= ============= =============
Net income per common and common
equivalent share .................................... $ 0.13 $ 0.03
============= =============
Weighted average number of shares
outstanding used in earnings per
share calculation ................................... 6,474,018 6,994,018
============= =============
</TABLE>
The accompanying notes are an integral part of these pooled combined
pro forma financial information.
F-15
<PAGE>
<TABLE>
<CAPTION>
THE VINCAM GROUP, INC.
POOLED COMBINED CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31, 1994
------------------------------------------------------------------
POOLED
COMBINED
PRO FORMA PRO FORMA
VINCAM SAI ADJUSTMENTS INCOME STATEMENT
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenues ................................................. $191,532,568 $ 33,310,475 $224,843,043
------------- ------------- ------------- -------------
Direct costs:
Salaries, wages and employment
taxes of worksite employees ........................... 168,873,997 29,288,492 198,162,489
Health care and workers'
compensation .......................................... 10,348,787 1,864,096 12,212,883
State unemployment taxes and
other ................................................. 1,594,831 316,903 1,911,734
------------- ------------- ------------- -------------
Total direct costs ....................................... 180,817,615 31,469,491 212,287,106
------------- ------------- ------------- -------------
Gross profit ............................................. 10,714,953 1,840,984 12,555,937
------------- ------------- ------------- -------------
Operating expenses:
Administrative personnel ............................ 3,998,504 665,094 4,663,598
Other general and administrative .................... 2,343,131 814,540 3,157,671
Sales and marketing ................................. 1,376,383 274,302 1,650,685
Provision for doubtful accounts ..................... 40,000 -- 40,000
Depreciation and amortization ....................... 204,911 13,066 $ 42,790 D 260,767
------------- ------------- ------------- -------------
Total operating expenses ........................ 7,962,929 1,767,002 42,790 9,772,721
------------- ------------- ------------- -------------
Operating income ......................................... 2,752,024 73,982 (42,790) 2,783,216
Interest (expense) income, net ........................... (19,025) 19,936 911
------------- ------------- ------------- -------------
Income before taxes ...................................... 2,732,999 93,918 (42,790) 2,784,127
(Provision for) benefit from income taxes ................ (933,049) (39,832) 14,550 (958,331)
------------- ------------- ------------- -------------
Net income ............................................... $ 1,799,950 $ 54,086 $ (28,240) $ 1,825,796
============= ============= ============= =============
Net income per common and common
equivalent share .................................... $ 0.27 $ 0.25
============= =============
Weighted average number of shares
outstanding used in earnings per
share calculation ................................... 6,709,657 7,229,657
============= =============
</TABLE>
The accompanying notes are an integral part of these pooled combined
pro forma financial information.
F-16
<PAGE>
NOTES TO UNAUDITED POOLED COMBINED PRO FORMA FINANCIAL INFORMATION
- ------------------------------------------------------------------
A To reflect the purchase of 49% minority interest of a subsidiary of SAI
in exchage for 20,000 shares of the Company's common stock, in a
transaction accounted for as a purchase. The fair value of the assets
acquired and liabilities assumed, and the consideration paid were as
follows:
Fair value of net assets acquired:
Client contracts $ 301,848
Accounts receivable $ 220,643
Property and equipment 36,807
-----------
Fair value of non-cash assets acquired 559,298
-----------
Accounts payable 8,938
Accrued salaries, wages and payroll taxes 240,630
Other libilities 140,624
-----------
Fair value of liabilities assumed 390,192
-----------
Net assets acquired, excluding cash 169,106
Cash acquired 124,253
-----------
Net assets acquired $ 293,359
===========
Purchase price (20,000 shares x $43.00) $ 860,000
===========
The following is a reconciliation of the purchase price to the excess of
costs associated with the acquisition over the estimated fair value of the
net liabilities assumed allocated to goodwill, which is amortized in a
period of 25 years:
Purchase price $ 860,000
Net assets acquried 293,359
-----------
Amount allocated to goodwill $ 566,641
===========
F-17
<PAGE>
B To eliminate the stated value of SAI common stock of $200 and to reflect
the issuance of 520,000 shares of Vincam's common stock in connection with
the acquisition of all of the equity in SAI and its subsidiaries.
C To reflect the excess of the par value in connection with the issuance of
20,000 shares of Vincam's common stock, in a transaction accounted for as a
purchase and described in A above, in connection with the acquisition of
49% minority interest of a subsidiary of SAI.
D To reflect the amortization of the client contracts and goodwill recorded
in connection with the acquisition of 49% minority interest in a SAI
subsidiary. Client contracts is amortized using the straight line basis of
accounting over a period of 15 years. Goodwill is amortized using the
straight line basis of accounting over a period of 25 years.
E To reflect tax effect on the amortization of goodwill and the related
deferred tax effect due to the different amortization periods used for tax
and book purposes.
F-18
<PAGE>
THE VINCAM GROUP, INC.
EXHIBIT INDEX
Exhibit
No.
---------
23 Consent of Ehrhardt Keefe Steiner & Hottman PC
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 333-08003) of The Vincam Group, Inc. of our
report dated January 31, 1997, which appears on page F-1 of The Vincam Group,
Inc.'s Amendment No.1 to the Current Report on Form 8-K dated January 7, 1997,
(Commission File No. 0-28148), relating to the financial statements of Staff
Administrators, Inc. for each of the three years in the period ended December
31, 1996.
/s/ EHRHARDT KEEFE STEINER & HOTTMAN PC
- ---------------------------------------
Ehrhardt Keefe Steiner & Hottman PC
Denver, Colorado
March 14, 1997
<PAGE>
