<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 1996
-------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ___________________to____________________
Commission File Number 0-28192
THE REGISTRY, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2920563
- - ------------------------ -------------------------------
(State of Incorporation) (IRS Employer Identification No.)
189 WELLS AVENUE
NEWTON, MA 02159
(617)527-6886
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
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 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 October 31, 1996, there were 10,230,000 shares of Common Stock, no par
value, outstanding.
1
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THE REGISTRY, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at
September 28, 1996 and June 29, 1996 3
Condensed Consolidated Statement of
Operations for the three months ended
September 28, 1996 and September 30, 1995 4
Condensed Consolidated Statement of Cash
Flows for the three months ended
September 28, 1996 and September 30, 1995 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 10
SIGNATURES 10
EXHIBIT INDEX 11
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. The important factors discussed below under the caption "Certain
Factors That May Affect Future Operating Results," among others, could cause
actual results to differ materially from those indicated by forward-looking
statements made herein and presented elsewhere by management from time to time.
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THE REGISTRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER JUNE 29,
28, 1996 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,337 $12,044
Accounts receivable, net 35,574 29,930
Notes receivable from related parties 133 680
Deferred income taxes 47 47
Other current assets 894 656
--------- --------
Total current assets 41,985 42,759
Fixed assets, net 6,408 5,344
Notes receivable from officers 91 60
Other assets 3,346 903
Deferred income taxes 35 35
--------- --------
Total assets $51,865 $49,101
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 10 $ 10
Current portion of long-term debt 326 365
Accounts payable 333 680
Accrued salaries and wages 2,984 2,641
Other accrued liabilities 4,587 3,122
Accrued income taxes 1,004 1,209
Deferred income taxes 81 89
--------- --------
Total current liabilities 9,325 8,116
Deferred income taxes 601 670
Long-term debt 2,485 2,485
Commitments and contingencies
Stockholders' equity
Preferred stock, $.10 par value - -
Common stock, no par value 10 10
Additional paid-in capital 34,969 34,969
Retained earnings 4,475 2,851
--------- --------
Total stockholders' equity 39,454 37,830
--------- --------
$51,865 $49,101
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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THE REGISTRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
<S> <C> <C>
Revenue $47,303 $31,682
Cost of revenue 34,696 23,360
--------- ---------
12,607 8,322
Selling, general and administrative
expenses 9,704 7,186
--------- ---------
Income from operations 2,903 1,136
Interest expense (80) (489)
Interest and other income 129 19
--------- ---------
Income before taxes 2,952 666
Income tax provision 1,328 121
--------- ---------
Net income $ 1,624 $ 545
========= =========
Net income per share $0.15
=========
Weighted average common and common
equivalent shares 11,006
=========
Pro forma information
Income before taxes $ 666
Pro forma income tax provision 322
---------
Pro forma net income $ 344
=========
Pro forma net income per share $0.04
=========
Weighted average common and common
equivalent shares 8,398
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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THE REGISTRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT. 28, SEPT. 30,
1996 1995
<S> <C> <C>
Cash flows provided by (used for)
operating activities:
Net income $ 1,624 $ 545
Adjustments to reconcile net
income to net cash used for
operating activities
Depreciation and amortization 218 199
Provision for losses on
accounts receivable 130 90
Deferred income taxes (265) 0
Increase in accounts receivable (5,102) (1,947)
Increase in other current assets (231) (98)
Increase in other assets 0 (16)
Decrease in accounts payable (381) (897)
Increase in accrued expenses 1,299 438
Increase in accrued salaries and wages 148 165
Increase (decrease) in income taxes payable (205) 22
--------- ---------
Net cash used for
operating activities (2,765) (1,499)
--------- ---------
Cash flows from investing activities:
Cash disbursed for acquisition (2,476) 0
Increase in notes receivable from officers (31) 0
Repayment of notes receivable from officers 0 379
Increase in notes receivable from related parties (34) (4)
Purchases of fixed assets (1,242) (215)
--------- ---------
Net cash provided by (used for)
investing activities (3,783) 160
--------- ---------
Cash flows from financing activities:
Net borrowings on line of credit 0 911
Principal payments on long-term debt (159) (1,083)
Proceeds from issuance of long-term debt 0 2,160
Distributions 0 (649)
--------- ---------
Net cash provided by (used for)
financing activities (159) 1,339
--------- ---------
Net decrease in cash and cash equivalents (6,707) 0
Cash and cash equivalents, beginning of period 12,044 0
--------- ---------
Cash and cash equivalents, end of period $ 5,337 $ 0
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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THE REGISTRY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Registry, Inc. ("TRI" or "the Company") is an information technology
("IT") professional services firm providing IT consultants on a contract
basis to organizations nationwide with complex IT operations. Offices are
maintained in 14 states.
Basis of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of The Registry, Inc. and its wholly-owned subsidiaries as well as
the accounts of a real estate trust which is substantially controlled by
the Company, subsequent to the renegotiation of certain lease terms on
September 19, 1995. All intercompany balances and transactions have been
eliminated.
Interim Financial Statements
The condensed consolidated balance sheet at September 28, 1996 and
condensed consolidated statements of operations and of cash flows for the
three month periods ended September 28, 1996 and September 30, 1995 are
unaudited and, in the opinion of management, include all adjustments
(consisting of normal and recurring adjustments) necessary for a fair
presentation of results for these interim periods. Certain information and
footnote disclosures normally included in the Company's annual consolidated
financial statements have been condensed or omitted. The results of
operations for the interim period ended September 28, 1996 are not
necessarily indicative of the results to be expected for the entire year.
The balance sheet at June 29, 1996 contained herein has been derived from
the audited consolidated financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These interim
condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements for the year ended June
29, 1996 which are contained in the Company's 1996 Annual Report on Form
10-K.
Results of operations for the quarter ended September 28, 1996 and
September 30, 1995 are for 13 weeks and 14 weeks, respectively.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to the current period presentation.
Pro forma income information
The pro forma information included for the period ended September 30, 1995
is presented as if the Company's ARI subsidiary had been a C corporation
subject to federal and state income taxes throughout the period.
Net income per share
Net income per share and pro forma net income per share have been computed
by dividing net income or pro forma net income by the weighted average
number of common shares outstanding and common equivalent shares which may
be issuable upon exercise of outstanding stock options, computed using the
treasury stock method. Pursuant to Securities and Exchange Commission's
Staff Accounting Bulletin No. 83, stock options granted during the twelve
months prior to the initial filing of the Company's Registration Statement
on Form S-1 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 the period presented.
Acquisition of subsidiary
On August 16, 1996 the Company, through its wholly owned subsidiary, ARI,
acquired all of the outstanding stock of Morris Information Systems, Inc.,
a Texas corporation ("MIS"), for $2,500,000 in cash plus amounts up
6
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THE REGISTRY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
to an aggregate of $700,000 contingent upon the operating results of MIS
during the two years following the acquisition. In addition, the Company
will pay a total of $300,000 over the next two years to the former
stockholder of MIS in consideration for a consulting and noncompetition
agreement. MIS is an information technology consulting firm performing
services similar to those of the Company. The acquisition has been
accounted for as a purchase and, accordingly, the purchase price has been
allocated to the assets acquired and liabilities assumed based upon their
estimated fair values as of the date of acquisition. The excess of the
consideration paid over the estimated fair value of net assets acquired,
approximately $2,303,000, has been recorded as goodwill, which will be
amortized over its estimated useful life of thirty years. The pro forma
results of operations, assuming that the acquisition of MIS occurred at the
beginning of the periods ended September 28, 1996 and September 30, 1995,
would not materially differ from TRI's reported results of operations.
2. SUBSEQUENT EVENT
On November 1, 1996, the Company, through its wholly owned subsidiary, ARI,
acquired all of the outstanding stock of Sun-Tek Consultants, Inc., a
Florida corporation ("Sun-Tek"), for $1,900,000 in cash. Sun-Tek is an
information technology consulting firm based in Orlando, Florida performing
services similar to those of the Company. The acquisition will be accounted
for as a purchase and, accordingly, the purchase price will be allocated to
the assets acquired and liabilities assumed based upon their estimated fair
values as of the date of acquisition. The excess of the consideration over
the estimated fair value of net assets acquired will be recorded as
goodwill.
7
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PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The following table summarizes the Company's significant
operating results as a percentage of revenue for each of the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT. 28, 1996 SEPT. 30, 1995
<S> <C> <C>
Revenue 100.0% 100.0%
Cost of revenue 73.4 73.7
-------- --------
Gross profit 26.6 26.3
Selling, general and administrative
expenses 20.5 22.7
-------- --------
Income from operations 6.1 3.6
Interest expense (0.2) (1.5)
Interest and other income 0.3 0.0
-------- --------
Income before taxes 6.2 2.1
Income tax provision 2.8 0.4
-------- --------
Net income 3.4% 1.7%
======== ========
Pro forma information
Income before taxes 2.1%
Pro forma income tax provision 1.0
--------
Pro forma net income 1.1%
========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
Revenue. Revenue increased 49.3% to $47.3 million for the first quarter
of 1997 from $31.7 million in the first quarter of 1996. This increase was
attributable to an increase in revenue from professional services and to a
lesser extent from additional service offerings provided by the Company's
practices. The increase in revenue from professional services was
primarily due to the growth in sales within existing offices and the
continued maturation of newer branch offices resulting in a greater number
of IT consultants placed with the Company's clients during the period.
Gross Profit. Gross profit increased 51.2% to $12.6 million for the first
quarter of 1997 from $8.3 million in the comparable prior period. As a
percentage of revenue, gross profit increased to 26.6% for the period
compared to 26.3% for the comparable prior period. This increase was
attributable primarily to increases in the number of relatively higher
margin projects and specialized practice engagements.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 35.0% to $9.7 million for the first
quarter of 1997 from $7.2 million in the comparable prior period. As a
percentage of revenue, selling, general and administrative expenses
decreased to 20.5% from 22.7% for the comparable prior period. This
decrease was attributable primarily to the growth in revenue during the
period in which there was limited expansion into new markets.
Interest and Other Expense, Net. Interest and other expense, net, decreased
significantly from the first quarter of 1996 resulting in income of $49,000
for the current period as compared to expense of $470,000 in the comparable
prior period. This decrease was a result of the repayment of amounts
outstanding under the Company's line of credit and certain other
obligations in June of 1996 upon receipt of the proceeds from the Company's
initial public offering. The
8
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Company completed the first quarter of 1997 with cash and cash equivalents
of $5.3 million invested in short term U.S. treasury instruments.
LIQUIDITY AND CAPITAL RESOURCES
On June 10, 1996 the Company completed its initial public offering of the
sale of 2,230,000 shares of common stock. The Company received $34,498,000
from the sale of shares, net of underwriting discounts and expenses
associated with the offering. The Company has used the proceeds to pay off
outstanding balances under the line of credit and other debt instruments,
to finance capital expenditures and for general corporate purposes,
including working capital.
The Company's cash and cash equivalents decreased $6,707,000 during the
first quarter as receivables increased by $5,102,000, $2,476,000 was
expended for the acquisition of Morris Information Systems, Inc. and
$1,242,000 in capital expenditures were made. These cash expenditures were
offset by increases in accrued expenses of $1,447,000 during the quarter.
The working capital balance decreased slightly in the quarter to
$32,660,000 while the Company maintained a 4.5:1 current ratio.
The Company continues to maintain a $25 million revolving advance facility
with BNY Financial Corporation (the "Line of Credit"). The Line of Credit
allows the Company to borrow the lesser of the sum of 85% of eligible
receivables (approximately $26.4 million as of September 28, 1996) or $25
million. The Line of Credit is secured by all of the Company's assets and
contains certain restrictive covenants, including limitations on amounts of
loans the Company may extend to officers and employees, the incurrence of
additional debt and the payment of dividends on the Company's common or
preferred stock. Additionally the Line of Credit requires the maintenance
of certain financial ratios, including minimum tangible net worth and a
limit of total liabilities to total tangible net worth. The Company was on
September 28, 1996 and is currently in compliance with these financial
covenants.
As of September 28, 1996, the principal amount outstanding under the Line
of Credit was $10,000 with availability of $25 million. The Line of Credit
bears an interest rate of LIBOR plus 2.5% or the Bank of New York alternate
base rate plus 0.5% at the Company's option.
In connection with previous acquisitions, the Company may be obligated to
make certain contingent payments during the next several years. The
Company does not believe that such payments would have a material impact on
the Company's liquidity, results of operations or capital requirements.
On November 1, 1996, the Company, through its wholly owned subsidiary, ARI,
acquired all of the outstanding stock of Sun-Tek Consultants, Inc. ("Sun-
Tek") for $1,900,000 in cash. Sun-Tek is an information technology
consulting firm based in Orlando, Florida performing services similar to
those of the Company. The acquisition will be accounted for as a purchase
and, accordingly, the purchase price will be allocated to the assets
acquired and liabilities assumed based upon their estimated fair values as
of the date of acquisition. The excess of the consideration over the
estimated fair value of net assets acquired will be recorded as goodwill.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The foregoing forward-looking statements involve risks and uncertainties.
The Company's actual performance and results may differ materially due to
many important factors, including, but not limited to, the Company's
dependence on the availability of qualified IT consultants, its dependence
on key personnel, the relatively short history of profitability, ability to
sustain and manage growth, dependence on key clients, fluctuations in
operating results due in part to the opening of new branch offices,
competition, general economic conditions, and the like. For
9
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additional and more comprehensive discussion of the risks associated with
ownership of Common Stock of the Company, please see the Risk Factors
section of the Company's Annual Report on Form 10-K. As a result of these
and other factors, there can be no assurance that the Company will not
experience material fluctuations in future operating results on a quarterly
or annual basis.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
Not applicable.
Item 2 - Change in Securities
None.
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 6 - Exhibits and Reports on Form 8-K
a. See Exhibit Index, Page 11
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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 REGISTRY, INC.
(Registrant)
Date: November 12, 1996 By: /s/ G. Drew Conway
--------------------------
G. Drew Conway, President and
Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1996 By: /s/ Robert E. Foley
---------------------------
Robert E. Foley, Chief Financial
Officer
(Principal Financial and Accounting
Officer)
10
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THE REGISTRY, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
<S> <C>
27 Financial Data Schedule
</TABLE>
11
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRY'S SEPTEMBER 28, 1996 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-28-1996
<CASH> 5,337
<SECURITIES> 0
<RECEIVABLES> 36,216
<ALLOWANCES> (642)
<INVENTORY> 0
<CURRENT-ASSETS> 41,985
<PP&E> 8,493
<DEPRECIATION> (2,085)
<TOTAL-ASSETS> 51,865
<CURRENT-LIABILITIES> 9,325
<BONDS> 2,811
0
0
<COMMON> 10
<OTHER-SE> 39,444
<TOTAL-LIABILITY-AND-EQUITY> 51,865
<SALES> 0
<TOTAL-REVENUES> 47,303
<CGS> 0
<TOTAL-COSTS> 34,696
<OTHER-EXPENSES> 9,704
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 2,952
<INCOME-TAX> 1,328
<INCOME-CONTINUING> 1,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,624
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0
</TABLE>
