<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996.
REGISTRATION NO. 333-3366
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
THE REGISTRY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 7379 04-2920563
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
189 WELLS AVENUE
NEWTON, MASSACHUSETTS 02159
(617) 527-6886
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
G. DREW CONWAY, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
THE REGISTRY, INC.
189 WELLS AVENUE
NEWTON, MASSACHUSETTS 02159
(617) 527-6886
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
THOMAS C. CHASE, ESQ. KEITH F. HIGGINS, ESQ.
ANDREA M. TEICHMAN, ESQ. ROPES & GRAY
HILL & BARLOW ONE INTERNATIONAL PLACE
ONE INTERNATIONAL PLACE BOSTON, MA 02110-2624
BOSTON, MA 02110-2607 (617) 951-7000
(617) 428-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ___________________
If this form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
_______________________________________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE REGISTRY, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM AND HEADING IN FORM S-1
REGISTRATION STATEMENT LOCATION IN PROSPECTUS
---------------------------- ----------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front Outside Front Cover Page
Cover Page of Prospectus......
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page; Outside Back Cover
Page
3.Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges.............. Prospectus Summary; Risk Factors
4. Use of Proceeds................ Prospectus Summary; Risk Factors; Use of
Proceeds
5. Determination of Offering
Price.......................... Outside Front Cover Page; Underwriting
6. Dilution....................... Dilution
7. Selling Security Holders....... Principal and Selling Stockholder
8. Plan of Distribution........... Outside and Inside Front Cover Pages;
Underwriting; Outside Back Cover Page
9. Description of Securities to be
Registered..................... Prospectus Summary; Dividend Policy;
Capitalization; Description of Capital
Stock
10. Interests of Named Experts and
Counsel........................ Not Applicable
11. Information with Respect to the
Registrant..................... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Use of
Proceeds; Dividend Policy; Capitalization;
Dilution; Selected Consolidated Financial
Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholder; Description of Capital Stock;
Shares Eligible for Future Sale;
Consolidated Financial Statements
12.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 3, 1996
2,200,000 SHARES
[LOGO OF THE REGISTRY, INC.]
COMMON STOCK
-----------
Of the 2,200,000 shares of Common Stock offered hereby, 1,900,000 are being
sold by the Company and 300,000 shares are being sold by the Selling
Stockholder, who will own 77.8% of the Company's outstanding Common Stock upon
completion of this offering. See "Principal and Selling Stockholder." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $15.00 and $17.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for listing, subject to
official notice of issuance, on the Nasdaq National Market under the symbol
"REGI."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- --------------------------------------------------------------------------------
Total (3)....................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 330,000 additional shares of Common Stock solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to the Selling Stockholder will be $ , $ , $ and $ ,
respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to receipt and acceptance by them and to their right to reject any order in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made at the offices of Adams, Harkness & Hill, Inc., Boston,
Massachusetts, on or about , 1996.
ADAMS, HARKNESS & HILL, INC. A.G. EDWARDS & SONS, INC.
The date of this Prospectus is , 1996.
<PAGE>
[ARTWORK]
Artwork - inside front cover
- title: "The Registry, Inc., Delivery Management System"
Graphical representation of the Company's Delivery Management System displaying
the following aspects of that system: National Resource Delivery; Continuous
Support; Consultant Retention; and Technology Sector Recruiting. Technology,
Sector Recruiting is divided into the following areas: Network & Communications;
Legacy Systems; Internet; Workgroup/Desktop; and Database Design & Development.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The logo of the Company is a registered service mark of the Company. All
trademarks and trade names referred to in this Prospectus are the property of
their respective owners.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Investors should carefully consider the
risk factors related to the purchase of Common Stock of the Company. See "Risk
Factors."
THE COMPANY
The Registry, Inc. ("The Registry" or the "Company") provides information
technology (IT) consultants on a contract basis to organizations with complex
IT operations. The Company's revenue is principally derived from supplemental
IT staffing services and, to a lesser extent, from management consulting
services provided through its specialized practices. The Company currently has
more than 1,400 IT consultants placed with its clients to assist them in
implementing solutions for systems and applications development in such areas
as distributed network design, database design and development and
client/server migration. These consultants, billed primarily on an hourly
basis, typically work on engagements lasting from six to twelve months under
the direction of the client. In 1995, the Company provided IT consultants to
approximately 350 clients in a diverse range of industries, including MCI
Telecommunications Corporation, Putnam Investments, Inc., Digital Equipment
Corp., Pepsi Cola International and Pfizer Inc. The Registry has grown from
four offices and $16.9 million in revenue in fiscal 1991 to 23 offices and
$130.5 million in revenue for the twelve months ended March 30, 1996.
In recent years, the IT services industry has grown significantly. According
to a 1996 report prepared by Dataquest, Inc. for the Company, the potential
U.S. market size for supplemental IT staffing services of the type provided by
The Registry's IT consultants was estimated at $9.5 billion in 1994 and is
projected to grow to $16.1 billion in 1999. This growth is a result of numerous
factors including: (i) an increased focus on core business operations by
organizations; (ii) the need to access specialized IT skills to keep pace with
rapidly changing technologies; (iii) the growing trend toward flexible staffing
which provides a variable cost solution to a fixed cost problem; and (iv) the
desire to reduce the cost of recruiting, training and terminating employees as
IT requirements change.
The Company believes that its ability to identify, attract and retain
qualified IT consultants is critical to its success. Each of the Company's
Resource Managers recruits in one of five technology sectors, thereby enabling
the Company to more effectively match the needs of its clients with the skills
of its IT consultants. The Company has also established a National Resource
Delivery Team (NRDT) which provides access to consultants from across the
nation when local resources for a particular skill set are scarce. To enhance
retention, the Company actively remarkets its consultants and offers a
comprehensive benefits package.
Account Managers manage the Company's client relationships. The primary
responsibility of each Account Manager is to develop and implement a specific
account plan identifying the business requirements for IT staffing and services
of each assigned client on an ongoing basis. Account Managers work closely with
Resource Managers to identify new assignments at existing client sites as well
as to locate potential new clients. Resource Managers are responsible for
soliciting, recruiting and assessing technical consultants, developing and
maintaining consultant relationships and maintaining and updating the Company's
database of IT consultant resumes.
The Registry's goal is to be a leading nationwide provider of IT professional
services. The Company's strategy encompasses the following elements: (i) focus
on resource management to effectively identify, qualify, place and retain
quality IT consultants; (ii) focus on application development and software
engineering; (iii) emphasize long-term client relationships; (iv) enhance
growth through internal development, acquisitions and development of new
services; and (v) continue to expand a national presence, leveraging the
Company's resource management capabilities as well as its nationwide resource
pool and customer base. As a result of its involvement in the IT planning
process of many of its clients, the Company is often afforded an opportunity to
anticipate clients' needs for additional IT consultants and services.
Following this offering, G. Drew Conway, President and founder of The
Registry, will own 77.8% of the Company's outstanding Common Stock.
The Company was incorporated in Massachusetts on June 10, 1986. Unless the
context otherwise requires, references herein to "The Registry" and the
"Company" refer to The Registry, Inc., a Massachusetts corporation ("TRI"), and
its wholly owned subsidiaries, America's Registry, Inc., a Massachusetts
corporation ("ARI"), and The Registry, Inc. Network Consulting Practice, a New
Hampshire corporation. The Company's executive offices are located at 189 Wells
Avenue, Newton, Massachusetts 02159. Its telephone number is (617) 527-6886.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company....................... 1,900,000 shares
The Selling Stockholder........... 300,000 shares
Common Stock to be outstanding after
the offering....................... 9,900,000 shares (1)
Use of proceeds..................... For repayment of indebtedness and working
capital. See "Use of Proceeds."
Nasdaq National Market symbol....... REGI
</TABLE>
- --------
(1) Excludes 2,000,000 shares of Common Stock reserved for issuance under the
Company's stock option and stock purchase plans, of which 1,106,500 shares
were subject to outstanding options as of March 30, 1996 at a weighted
average exercise price of $11.00 per share. See "Capitalization" and
"Management -- Stock Awards."
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
---------------------------------------- ----------------------
MAY 31,
------------------------------- JUNE 24, MAR. 25, MAR. 30,
1991 1992 1993 1994 1995 (1) 1995 1996
------- ------- ------- ------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue................. $16,927 $24,021 $39,845 $60,367 $98,687 $70,258 $102,094
Cost of revenue......... 12,774 18,358 30,630 46,262 74,288 53,033 75,210
------- ------- ------- ------- ------- ------- --------
Gross profit............ 4,153 5,663 9,215 14,105 24,399 17,225 26,884
Selling, general and
administrative
expenses............... 3,812 4,760 8,319 12,831 22,925 16,091 22,768
------- ------- ------- ------- ------- ------- --------
Income from operations.. 341 903 896 1,274 1,474 1,134 4,116
Interest and other ex-
pense, net............. 100 163 292 459 1,145 741 1,525
------- ------- ------- ------- ------- ------- --------
Income before taxes..... 241 740 604 815 329 393 2,591
Pro forma provision for
income taxes (2)....... 98 218 281 430 243 221 1,130
------- ------- ------- ------- ------- ------- --------
Pro forma net income
(2).................... $ 143 $ 522 $ 323 $ 385 $ 86 $ 172 $ 1,461
======= ======= ======= ======= ======= ======= ========
Pro forma net income per
share (2).............. $ 0.01 $ 0.02 $ 0.17
======= ======= ========
Weighted average common
and common equivalent
shares (3)............. 8,352 8,352 8,352
SELECTED OPERATING DATA:
Number of branch offices
open at end of period.. 4 6 9 16 21 20 23
<CAPTION>
MARCH 30, 1996
----------------------
AS
ACTUAL ADJUSTED (4)
-------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $ -- $ 5,474
Working capital.................................................. (748) 26,226
Total assets..................................................... 34,884 39,924
Total debt....................................................... 25,053 3,005
Total stockholder's equity....................................... 2,045 29,133
</TABLE>
4
<PAGE>
(1) The Company changed its fiscal year end from May 31 to the last Saturday in
June, effective with the fiscal year ended June 24, 1995. Accordingly, the
June 1994 results are not included in the data presented above. See Note 2
to Consolidated Financial Statements.
(2) On January 1, 1996, the Company effected the Merger described below. The
pro forma data have been computed as if ARI, which was an S corporation for
federal and state income tax purposes, were subject to federal and all
applicable state corporate income taxes since February 1991, based on the
statutory tax rates and the tax laws then in effect. See Notes 2, 8 and 14
to Consolidated Financial Statements.
(3) Weighted average common and common equivalent shares outstanding consist of
8,000,000 shares of Common Stock after giving effect to the Merger and
stock split described below and 352,031 shares related to the dilution
attributable to options granted in the twelve months prior to the offering
using the treasury stock method.
(4) Adjusted to give effect to the sale of 1,900,000 shares of Common Stock by
the Company offered hereby at an assumed initial public offering price of
$16.00 per share and the application of the net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
----------------
Except as otherwise noted, all information in this Prospectus (i) assumes no
exercise of the Underwriters' over-allotment option and (ii) reflects a
177.77778-for-1 stock split of the Company's Common Stock effected on March 22,
1996. See "Capitalization," "Description of Capital Stock" and "Underwriting."
Until January 1, 1996, G. Drew Conway was the sole stockholder of TRI and ARI.
Pursuant to a plan and agreement of merger entered into among TRI, ARI and The
Registry Newco, Inc., a wholly-owned subsidiary of TRI, The Registry Newco,
Inc. merged with and into ARI effective January 1, 1996 (the "Merger"). As a
result, ARI became a wholly-owned subsidiary of TRI.
5
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information in this Prospectus before purchasing the Common Stock
offered by this Prospectus.
Dependence on Availability of Qualified IT Consultants. Substantially all of
the Company's revenue is derived from providing IT consultants on a contract
basis. The Company's success depends upon its ability to continue to attract
and retain IT consultants who possess the technical skills and experience
required to meet the staffing needs of its clients. The Company must
continually update and add to its database of technical personnel in each
market in which it operates. The vast majority of the IT consultants in The
Registry's database are also included in one or more of the databases of the
Company's competitors, and there can be no assurance that experienced
professionals currently working on projects for the Company will not choose to
work on projects for competitors on their next assignment. Competition for IT
consultants is intense and demand for their services has, to date,
substantially exceeded their supply, and the Company expects such competition
will continue to increase. There can be no assurance that qualified technical
personnel will continue to be available to the Company in sufficient numbers,
and any failure to attract or retain qualified IT consultants in sufficient
numbers could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- IT Consultants"
and "-- Competition."
Dependence on Key Personnel. The Company depends to a significant extent on
key management, technical and other personnel. The Company's continued growth
and success will depend in significant part on the continued service of its
founder, President and Chief Executive Officer, Mr. G. Drew Conway. The loss
of Mr. Conway or other key employees could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Management."
History of Marginal Profitability. Through fiscal 1995, the Company grew
rapidly through the opening of new offices. New offices generally have
experienced either losses or marginal profitability for a period of
approximately 12 to 18 months after opening. As these offices have matured and
the Company has implemented certain cost control policies, the Company's
profitability has improved; however, new office openings in the future, among
other factors, could adversely affect the Company's business, operating
results and financial condition. There can be no assurance that the Company
can maintain profitability on a quarterly or annual basis in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Ability to Sustain and Manage Growth. The Company's business has grown
rapidly during the past four years due to the increased number of branch
offices and the increased demand for services from existing clients. The
Company's continued growth is dependent upon a number of factors, including:
(i) the successful performance of new and recently-opened offices; (ii) the
continued identification and training of corporate personnel to staff new and
recently-opened branch offices; (iii) the ability to identify and qualify IT
consultants within both new and existing markets; and (iv) the Company's
ability to develop additional business from existing clients and to obtain new
clients. There can be no assurance that recently-opened offices will reach or
maintain any level of profitability or that the Company's historical revenue
growth will continue. Further, the Company's rapid growth and expansion has
placed and could continue to place a significant strain on the Company's
personnel and resources, and the failure to manage growth effectively could
have a material adverse effect on the Company's business, operating results
and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Growth Strategy"
and "Management."
Dependence on Key Clients; Price Reduction Agreements; Terminability of
Client Arrangements. The Company's top ten clients accounted for approximately
36.5% of revenue in fiscal 1995 and approximately 35.8% of revenue in the
first nine months of fiscal 1996. The loss of a significant client could have
a material adverse effect on the Company's business, operating results and
financial condition.
6
<PAGE>
The Company provides certain large clients with reduced prices for its
services in order to retain the volume of business and/or to obtain a
preferred vendor status with such clients. There can be no assurance that the
Company will be able to maintain desired pricing levels with these or other
clients. All of the Company's arrangements with clients are terminable by the
client at will and without any penalty. There can be no assurance that
existing clients will continue to engage the Company's services at historical
levels, if at all. See "Business -- Client Base."
Concentration of Ownership. Upon completion of the offering, the Company's
Chief Executive Officer and principal stockholder, Mr. G. Drew Conway, will
own 77.8% of the Company's outstanding shares of Common Stock (75.3% if the
over-allotment option is exercised in full). As a result, Mr. Conway will be
able to exercise effective control over almost all matters requiring
stockholder approval. This concentration of ownership could have the effect of
making it difficult for a third party to acquire control of the Company and
may discourage third parties from attempting to do so. Further, future sales
of substantial amounts of Common Stock by Mr. Conway, or the potential for
such sales, could adversely affect the prevailing market price of the Common
Stock. See "Management," "Principal and Selling Stockholder," "Description of
Capital Stock" and "Shares Eligible for Future Sale."
Risks Associated with Acquisitions and Development of Ancillary
Services. The Company has grown, and intends to continue to grow, in part
through the acquisition of other businesses and development of ancillary
services. The Company's ability to expand through acquisition depends on many
factors, including the successful identification and acquisition of businesses
and management's ability to effectively integrate and operate the new
businesses. There is competition for acquisition opportunities in the
industry, which may intensify due to consolidation in the industry, increasing
the costs of capitalizing on such opportunities. The Company competes for
acquisition opportunities with other companies that have significantly greater
financial and management resources. There can be no assurance that the Company
will be able to identify, acquire and integrate suitable acquisition
candidates on reasonable terms. In addition, the Company's ability to develop
successful ancillary practices depends on various factors, including
identification of suitable practice areas in which to invest resources and the
Company's ability to effectively integrate such practices into its overall
operating structure. There can be no assurance that any ancillary practice
developed by the Company will perform according to management's expectations.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources" and "Business -- Growth
Strategy."
Fluctuations in Operating Results; Seasonality. The Company's operating
results have fluctuated in the past based on many factors, including the
opening of new branch offices. In view of the Company's significant growth in
recent years, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. Because the Company only derives
revenue when its consultants are actually working, its operating results are
adversely affected when client facilities close due to holidays or inclement
weather. In particular, the Company generally experiences a certain amount of
seasonality in its second fiscal quarter due to the number of holidays in that
quarter. Further, the Company generally experiences lower operating margins in
its third fiscal quarter due in part to the timing of unemployment tax
accruals. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Fluctuations in the General Economy. Demand for IT professional services is
significantly affected by the general level of economic activity. When
economic activity slows, clients may delay or cancel plans that involve the
hiring of IT consultants. The Company is unable to predict the level of
economic activity at any particular time, and fluctuations in the general
economy could adversely affect the Company's business, operating results and
financial condition.
7
<PAGE>
Employment Liability Risks. Providers of IT professional services employ and
place individuals in the workplace of other businesses. Inherent risks of such
activity include possible claims of errors and omissions, misuse of client
proprietary information, misappropriation of funds, discrimination and
harassment, theft of client property, other criminal activity or torts and
other claims. Although historically the Company has not experienced any
material claims of these types, there can be no assurance that the Company
will not experience such claims in the future.
Potential Effect of Anti-Takeover Provisions. The Company's Board of
Directors has the authority without action by the Company's stockholders to
fix the rights and preferences of and to issue shares of the Company's
Preferred Stock, which may have the effect of delaying, deterring or
preventing a change in control of the Company. The Company has also imposed
various procedural and other requirements, such as supermajority voting
requirements for specified corporate actions, that could make it more
difficult for stockholders to effect certain corporate actions. In addition,
the classification of the Board of Directors of the Company and certain
provisions of Massachusetts law could have the effect of delaying, deterring
or preventing a change in control of the Company. See "Description of Capital
Stock."
No Prior Public Market; Determination of Public Offering Price; Possible
Volatility of Stock Price. Before this offering, there was no public market
for the Common Stock, and there can be no assurance that an active trading
market will develop or be sustained. The initial public offering price will be
determined by negotiation between the Company and the representatives of the
Underwriters based on several factors, including prevailing market conditions
and recent operating results of the Company. The initial public offering price
may not be indicative of the market price of the Common Stock after this
offering. In addition, the stock market historically has experienced
volatility which has affected the market price of securities of many companies
and which has sometimes been unrelated to the operating performance of such
companies. In addition, factors such as announcements of new services or
offices or strategic alliances by the Company or its competitors or third
parties, as well as market conditions in the IT professional services
industry, may have a significant impact on the market price of the Common
Stock. The market price may also be affected by movements in prices of stocks
in general. See "Underwriting."
Shares Eligible for Future Sale. Sales of Common Stock in the public market
after this offering could adversely affect the market price of the Common
Stock. In addition to the 2,200,000 shares offered hereby (assuming no
exercise of the Underwriters' over-allotment option or exercise of outstanding
stock options) and taking into account the contractual restrictions imposed by
lock-up agreements with the Company's sole stockholder, an aggregate of
approximately 7,700,000 shares of Common Stock will become eligible for sale
in the open market pursuant to Rule 144 beginning 180 days following the date
of this Prospectus. See "Description of Capital Stock -- Shares Eligible for
Future Sale." The Company intends to register an aggregate of 2,000,000 shares
of Common Stock reserved for issuance under its stock plans. See
"Management -- Stock Awards."
Absence of Dividends. Except as noted in "Dividend Policy," the Company has
never paid any cash dividends on the Common Stock and does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future. In
addition, the Company is prohibited under the terms of its revolving line of
credit from paying dividends without the consent of the lender. See "Dividend
Policy."
Dilution. Based on an assumed initial public offering price of $16.00 per
share, purchasers of the Common Stock offered hereby will suffer an immediate
dilution of $13.14 per share in the net tangible book value per share of the
Common Stock from the initial public offering price. See "Dilution."
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,900,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $16.00 per share, after deducting the underwriting discount
and estimated offering expenses payable by the Company, are estimated to be
approximately $27.5 million. The principal purposes of this offering are to
increase the Company's working capital and financial flexibility and to
facilitate future access by the Company to the public equity markets. The
Company will not receive any of the proceeds from the sale of shares by the
Company's sole stockholder, G. Drew Conway (the "Selling Stockholder"). See
"Principal and Selling Stockholder."
The Company expects to use approximately $1.4 million of the net proceeds to
repay the outstanding indebtedness under three secured loan agreements with
Phoenixcor, Inc., dated October 27, 1994 (the "1994 Loan"), April 4, 1995 (the
"April 1995 Loan") and August 1, 1995 (the "August 1995 Loan"), respectively.
The 1994 Loan bears interest at a rate of 10.7% per annum and will mature on
September 30, 1997. The April 1995 Loan bears interest at a rate of 11.06% per
annum and will mature on March 13, 1998, while the August 1995 Loan bears
interest at a rate of 10.03% per annum and will mature on July 4, 1998. The
Company expects to use approximately $22.1 million of the net proceeds to
repay the outstanding indebtedness under its revolving line of credit with BNY
Financial Corporation. From February 29, 1996, the date on which the BNY debt
was originally incurred, through April 30, 1996, the weighted average interest
rate was 8.12%. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
revolving line of credit expires on February 28, 1999. The Company intends to
use the remaining net proceeds for general corporate purposes. A portion of
the net proceeds may also be used for acquisitions of businesses that are
complementary to that of the Company. No such acquisitions are being planned
or negotiated as of the date of this Prospectus nor are there any arrangements
or understandings with respect to any acquisitions, and no portion of the net
proceeds has been allocated for any specific acquisition. Pending such uses,
the net proceeds of this offering will be invested in short-term, investment-
grade, interest-bearing securities.
DIVIDEND POLICY
TRI paid a cash dividend in the amount of $50,000 to Mr. Conway in December
1992. ARI paid cash dividends in the approximate aggregate amount of $862,000
to Mr. Conway in December 1995, of which amount $645,000 was immediately used
to repay certain indebtedness of Mr. Conway to TRI. See "Certain
Transactions." The Company currently intends to retain future earnings, if
any, to fund the development and growth of its business and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. In addition, the Company's revolving line of credit with BNY Financial
Corporation prohibits the payment of dividends without consent of the lender.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
9
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company as of March 30, 1996 and as adjusted to reflect the application of the
estimated net proceeds from the sale of 1,900,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$16.00 per share. This table should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 30, 1996
-------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Revolving line of credit................................. $20,613 $ --
======= =======
Current portion of long-term debt (1).................... $ 1,173 $ 286
Long-term debt (2)......................................... 3,110 2,562
Stockholders' equity (3):
Preferred stock, $0.10 par value per share; pro forma:
1,000,000 shares authorized, none issued and
outstanding.............................................
Common stock, no par value per share; pro forma:
29,000,000 shares authorized, 8,000,000 shares issued
and outstanding; as adjusted: 9,900,000 shares issued
and outstanding......................................... 10 10
Additional paid-in capital............................... 344 27,432
Retained earnings........................................ 1,691 1,691
------- -------
Total stockholders' equity.............................. 2,045 29,133
------- -------
Total capitalization.................................... $ 6,328 $31,981
======= =======
</TABLE>
- --------
(1) Includes $36,000 of debt owed by the 189 Wells Avenue Realty Trust (the
"Realty Trust"), of which the Selling Stockholder is the sole beneficiary
and an executive officer of the Company is the sole trustee. See Note 5 to
"Selected Consolidated Financial Data" and Note 13 to Consolidated
Financial Statements.
(2) Includes $2,062,000 of debt owed by the Realty Trust. See Note 5 to
"Selected Consolidated Financial Data" and Note 13 to Consolidated
Financial Statements.
(3) Gives effect to the increase in the Company's authorized capital stock, to
be effective on or before the effective date of the Registration Statement
of which this Prospectus is a part, to 1,000,000 shares of Preferred Stock
and 29,000,000 shares of Common Stock. See "Prospectus Summary" and
"Description of Capital Stock." Excludes 1,106,500 shares of Common Stock
issuable upon exercise of outstanding stock options as of March 30, 1996
at a weighted average exercise price of $11.00 per share. See
"Management -- Stock Awards."
10
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock as of March 30,
1996 was approximately $1.2 million or $0.16 per share. Net tangible book
value per share represents the Company's total tangible assets less total
liabilities, divided by the total number of shares of Common Stock
outstanding.
After giving effect to the sale of the 1,900,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$16.00 per share and the receipt of the net proceeds therefrom, the pro forma
net tangible book value of the Company as of March 30, 1996 would have been
approximately $28.3 million or $2.86 per share. This represents an immediate
increase in net tangible book value of $2.70 per share to the Selling
Stockholder and an immediate dilution in net tangible book value of $13.14 per
share to purchasers of Common Stock in this offering. The following table
illustrates the per share dilution as of March 30, 1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $16.00
Net tangible book value per share as of March 30, 1996........... $0.16
Increase per share attributable to new stockholders.............. 2.70
-----
Pro forma net tangible book value per share after offering......... 2.86
------
Dilution per share to new stockholders............................. $13.14
======
</TABLE>
The following table sets forth on a pro forma basis the number of shares
purchased from the Company, the total consideration paid and the average price
per share paid by the existing stockholder and new stockholders:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Selling Stockholder............ 8,000,000 80.8% $ 465,000 1.5% $ 0.06
New stockholders............... 1,900,000 19.2 30,400,000 98.5 16.00
--------- ----- ----------- -----
Total........................ 9,900,000 100.0% $30,865,000 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of any stock options. At March 30,
1996, there were outstanding options to purchase 1,106,500 shares at a
weighted average exercise price of $11.00 per share. To the extent such
options are exercised, there will be further dilution to new stockholders.
The sale of shares by the Selling Stockholder in this offering will reduce
the number of shares held by the Selling Stockholder to 7,700,000 shares or
approximately 77.8% of the Company's outstanding Common Stock immediately
after the offering (75.3% if the Underwriters' over-allotment is exercised in
full), and will increase the number of shares held by new stockholders to
2,200,000 shares or 22.2% of the Company's outstanding Common Stock
immediately after the offering (2,530,000 shares or 24.7% if the Underwriters'
over-allotment is exercised in full). See "Principal and Selling Stockholder."
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data
and is derived from the more detailed Consolidated Financial Statements and
Notes thereto included elsewhere in this Prospectus. The Consolidated Balance
Sheet Data at May 31, 1994, June 24, 1995 and March 30, 1996 and the
Consolidated Statement of Income Data for each of the two years in the period
ended May 31, 1994, for the year ended June 24, 1995 and for the nine months
ended March 30, 1996 have been derived from the Consolidated Financial
Statements of the Company that have been audited by Price Waterhouse LLP,
independent accountants, and are included elsewhere in this Prospectus. The
Consolidated Balance Sheet Data as of May 31, 1991, 1992 and 1993 and the
Consolidated Statement of Income Data for each of the two years in the period
ended May 31, 1992 have been derived from the Company's audited Consolidated
Financial Statements. The Consolidated Statement of Income Data for the nine
months ended March 25, 1995 has been derived from unaudited financial
statements also appearing herein and which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited interim
period. Operating results for the nine months ended March 30, 1996 are not
necessarily indicative of results for future periods. The selected
consolidated financial data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
---------------------------------------- -----------------
MAY 31,
------------------------------- JUNE 24, MAR. 25, MAR. 30,
1991 1992 1993 1994 1995 (1) 1995 1996
------- ------- ------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DA-
TA:
Revenue................. $16,927 $24,021 $39,845 $60,367 $98,687 $70,258 $102,094
Cost of revenue......... 12,774 18,358 30,630 46,262 74,288 53,033 75,210
------- ------- ------- ------- ------- ------- --------
Gross profit............ 4,153 5,663 9,215 14,105 24,399 17,225 26,884
Selling, general and ad-
ministrative
expenses............... 3,812 4,760 8,319 12,831 22,925 16,091 22,768
------- ------- ------- ------- ------- ------- --------
Income from operations.. 341 903 896 1,274 1,474 1,134 4,116
Interest and other ex-
pense, net............. 100 163 292 459 1,145 741 1,525
------- ------- ------- ------- ------- ------- --------
Income before taxes..... 241 740 604 815 329 393 2,591
Provision for income
taxes.................. 98 218 281 430 4 113 1,208
------- ------- ------- ------- ------- ------- --------
Net income.............. $ 143 $ 522 $ 323 $ 385 $ 325 $ 280 $ 1,383
======= ======= ======= ======= ======= ======= ========
Distributions to stock-
holder (2)............. -- -- $ 50 -- -- -- $ 1,511
------- ------- ------- ------- ------- ------- --------
Income before taxes..... $ 329 $ 393 $ 2,591
Pro forma provision for
income
taxes (3).............. 243 221 1,130
------- ------- --------
Pro forma net in-
come (3)............... $ 86 $ 172 $ 1,461
======= ======= ========
Pro forma net income per
share (3).............. $ 0.01 $ 0.02 $ 0.17
======= ======= ========
Weighted average common
and common equivalent
shares
outstanding (4)........ 8,352 8,352 8,352
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
-------------------------- JUNE 24, MARCH 30,
1991 1992 1993 1994 1995 1996 (5)
----- ----- ----- ------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... -- -- -- -- -- --
Working capital................. $ (2) $ 409 $(138) $ (364) $ (576) $ (748)
Total assets.................... 2,758 5,556 9,477 15,530 28,643 34,884
Total debt...................... 1,426 3,756 6,147 9,361 20,438 25,053
Stockholder's equity............ 531 1,123 1,596 2,136 2,284 2,045
</TABLE>
12
<PAGE>
(1) The Company changed its fiscal year end from May 31 to the last Saturday
in June, effective with the fiscal year ended June 24, 1995. Accordingly,
the June 1994 results are not included in the data presented above. See
Note 2 to Consolidated Financial Statements.
(2) For the nine months ended March 30, 1996, includes $862,000 distributed to
the Selling Stockholder on the common stock of ARI and $649,000
distributed by the Realty Trust to the Selling Stockholder upon
refinancing of the Realty Trust's mortgage. See Note 5 below.
(3) The Company effected the Merger on January 1, 1996. The pro forma data
have been computed as if ARI, which was an S corporation for federal and
state income tax purposes, were subject to federal and all applicable
state corporate income taxes since February 1991, based on the statutory
tax rates and the tax laws then in effect. See Notes 2, 8 and 14 to
Consolidated Financial Statements.
(4) Weighted average common and common equivalent shares outstanding consists
of 8,000,000 shares of Common Stock after giving effect to the Merger and
stock split described under "Prospectus Summary" and 352,031 shares
related to the dilution attributable to options granted in the twelve
months prior to the offering using the treasury stock method.
(5) In conjunction with the renegotiation of the Company's lease with the
Realty Trust, the accounts of the Realty Trust have been consolidated with
those of the Company, commencing September 19, 1995. See Note 13 to
Consolidated Financial Statements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Registry, Inc. provides information technology (IT) consultants on a
contract basis to organizations with complex IT operations. The Company's
revenue is principally derived from supplemental IT staffing services and, to
a lesser extent, from management consulting services provided through its
specialized practices. The Company's IT consultants, billed primarily on an
hourly basis, typically work on engagements lasting from six to twelve months
under the direction of the client. The Registry has grown from four offices
and $16.9 million of revenue in fiscal 1991 to 23 offices and $98.7 million of
revenue in fiscal 1995.
Revenue growth is derived primarily from increases in the number of IT
consultants placed with existing clients and the addition of new clients. In
recent years, the Company has also been able to increase the average billing
rates for its IT consultants as economic conditions have improved and the
demand for skilled and experienced professionals has increased. Revenue is
recognized as services are provided and the majority of clients are billed on
a weekly basis. In fiscal 1995, approximately 36.5% of the Company's revenue
was derived from its top 10 clients, with no client accounting for more than
6.0%.
Because the Company only derives revenue when its consultants are actually
working, its operating results are adversely affected when client facilities
are closed due to holidays or inclement weather. In particular, the Company
experiences a certain amount of seasonality in its second fiscal quarter
because of the number of holidays falling in such quarter. In addition, the
Company generally experiences lower operating margins in its third fiscal
quarter due in part to the timing of unemployment tax accruals.
Since its founding in 1986, the Company has had an aggressive expansion plan
and growth strategy. The Company opened six offices between fiscal 1986 and
1992; three in fiscal 1993; seven in fiscal 1994 and five in fiscal 1995. The
increase in the number of offices has resulted in an increase in revenue for
each year, but has in some cases adversely impacted net income due primarily
to expenses associated with staffing the new offices as well as with the
increase in corporate staff needed to support an increased number of branches.
In most instances, new offices have experienced either losses or marginal
profitability for approximately 12 to 18 months after opening. In certain
cases, branches that have achieved profitability have not remained profitable
on a consistent basis.
Beginning in fiscal 1996, the Company implemented tighter cost controls and
a compensation program based on operating profitability rather than revenue
growth. Further, the Company has sought to improve profitability by increasing
the number of full-time, salaried staff consultants, who generally produce
higher margins than the Company's hourly IT consultants. Apart from its core
IT professional services and in response to market opportunities, the Company
has introduced new service offerings, including the Network Systems Consulting
Practice (NSCP) and the Documentation Services Practice (DSP), both of which
are established practices, as well as a recently introduced Help Desk
Practice.
Through December 31, 1995, ARI was an S corporation for federal and state
income tax purposes and, accordingly, was not subject to corporate income
taxes. As a result, the Company believes that direct comparisons of historical
provisions for income taxes are not meaningful.
In conjunction with the renegotiation of the Company's leases with the
Realty Trust, the accounts of the Realty Trust have been consolidated with
those of the Company, commencing September 19, 1995. The effect of this
consolidation was to increase fixed assets by approximately $1.7 million and
long-term debt by approximately $2.1 million at March 30, 1996. The
consolidation of the Realty Trust did not have a significant effect on the
Company's results of operations, nor is it expected to have a significant
effect in the future. See Note 13 to Consolidated Financial Statements.
14
<PAGE>
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>
YEAR ENDED NINE MONTHS ENDED
------------------------ --------------------
MAY 31, MAY 31, JUNE 24, MAR.25, MAR. 30,
1993 1994 1995 1995 1996
------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 76.9 76.7 75.3 75.5 73.7
----- ----- ----- -------- --------
Gross profit................... 23.1 23.3 24.7 24.5 26.3
Selling, general and adminis-
trative expenses.............. 20.9 21.2 23.2 22.9 22.3
----- ----- ----- -------- --------
Income from operations......... 2.2 2.1 1.5 1.6 4.0
Interest and other expense,
net........................... 0.7 0.8 1.2 1.0 1.5
----- ----- ----- -------- --------
Income before taxes............ 1.5% 1.3% 0.3% 0.6% 2.5%
===== ===== ===== ======== ========
</TABLE>
NINE MONTHS ENDED MARCH 30, 1996 AND MARCH 25, 1995
Revenue. Revenue increased 45.2% to $102.1 million for the first nine months
of fiscal 1996 from $70.3 million in the first nine months of fiscal 1995.
This increase was attributable primarily 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. To a
lesser extent, the increase in revenue resulted from an increase in average
hourly billing rates charged for the Company's IT consultants.
Gross Profit. Gross profit increased 56.4% to $26.9 million for the first
nine months of fiscal 1996 from $17.2 million in the comparable prior period.
As a percentage of revenue, gross profit increased to 26.3% for the period
compared to 24.5% for the comparable prior period. This increase was
attributable primarily to a higher average hourly billing rate charged for the
Company's IT consultants during this period. In addition, the increase in
gross profit as a percentage of revenue was favorably impacted by the growth
in relatively higher margin new service offerings and an increase in staff IT
consultants.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 41.6% to $22.8 million for the first nine
months of fiscal 1996 from $16.1 million in the comparable prior period. As a
percentage of revenue, selling, general and administrative expenses decreased
to 22.3% for the period compared to 22.9% for the comparable prior period.
This decrease was attributable primarily to the growth in revenue during a
period in which there was limited expansion into new markets and a relative
slowing in the hiring of additional Resource Managers, Account Managers and
corporate staff.
Interest and Other Expense, Net. Interest and other expense, net, increased
to $1.5 million for the first nine months of fiscal 1996 from $741,000 in the
comparable prior period. This increase was attributable primarily to the
increased borrowings under the Company's line of credit resulting from the
increase in working capital requirements associated with the Company's sales
growth.
FISCAL YEARS ENDED JUNE 24, 1995 AND MAY 31, 1994
Revenue. Revenue increased 63.4% to $98.7 million for fiscal 1995 from $60.4
million for fiscal 1994. Of this increase, $30.7 million was derived from
existing branch offices with the remaining $7.6 million derived from new
branch offices opened during the year. Approximately half of the increase
attributable to new branch offices was derived from one of the Company's key
clients. Overall, most existing branch offices exhibited significant sales
increases as demand for IT professional services increased. In addition, the
increase in revenue resulted to a lesser extent from an increase in the
average hourly billing rates charged for the Company's IT consultants.
15
<PAGE>
Gross Profit. Gross profit increased 73.0% to $24.4 million for fiscal 1995
from $14.1 million for fiscal 1994. As a percentage of revenue, gross profit
increased to 24.7% for fiscal 1995 from 23.3% for fiscal 1994. This increase
was attributable primarily to a higher average hourly billing rate charged for
the Company's IT consultants during the period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 78.9% to $22.9 million for fiscal 1995 from
$12.8 million for fiscal 1994. As a percentage of revenue, selling, general
and administrative expenses increased to 23.2% for fiscal 1995 from 21.2% for
fiscal 1994. This increase was attributable primarily to the opening of five
branch offices during the year and the staffing of those offices. To a lesser
extent, the increase in selling, general and administrative expenses resulted
from an increase in corporate staff needed to support an increased number of
branches.
Interest and Other Expense, Net. Interest and other expense, net, increased
to $1.1 million for fiscal 1995 from $459,000 for fiscal 1994. This increase
was attributable to the increased borrowings under the Company's line of
credit resulting from the increase in working capital requirements associated
with the Company's sales growth. In addition, the increase in interest expense
resulted in part from a nominal increase in interest rates.
MONTH ENDED JUNE 25, 1994
During the month of June 1994, the Company sustained a loss of $177,000.
This loss was due primarily to the opening of five branch offices during the
previous quarter, all of which sustained operating losses during the month,
and the staffing of those offices. In addition, four previously opened offices
were still operating at a loss during the month. Thus, nine of eighteen branch
offices incurred losses during the month.
FISCAL YEARS ENDED MAY 31, 1994 AND MAY 31, 1993
Revenue. Revenue increased 51.8% to $60.4 million for fiscal 1994 from $39.8
million for fiscal 1993. Of this increase, approximately $19.2 million or
93.2% was derived from existing branch offices, with the remaining $1.4
million derived from new branch offices. The increase was attributable
primarily to an increase in the number of IT consultants placed with the
Company's clients during the period and, to a lesser extent, higher average
hourly billing rates charged for the Company's IT consultants during this
period.
Gross Profit. Gross profit increased 53.3% to $14.1 million for fiscal 1994
from $9.2 million for fiscal 1994. As a percentage of revenue, gross profit
increased to 23.3% for fiscal 1994 from 23.1% for fiscal 1993 as average
hourly billing rates remained relatively stable during the period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 54.2% to $12.8 million for fiscal 1994 from
$8.3 million for fiscal 1993. As a percentage of revenue, selling, general and
administrative expenses increased to 21.2% for fiscal 1994 from 20.9% for
fiscal 1993. This increase resulted primarily from the opening of seven branch
offices during the year and the staffing of those offices.
Interest and Other Expense, Net. Interest and other expense, net, increased
to $459,000 for fiscal 1994 from $292,000 for fiscal 1993. This increase was
attributable to the increased borrowings under the Company's line of credit
resulting from the increase in working capital requirements associated with
the Company's sales growth.
16
<PAGE>
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the seven quarters ending with the quarter ended March
30, 1996, both in dollars and as a percentage of revenue. This data has been
prepared on the same basis as the audited financial statements contained
elsewhere in this Prospectus and includes all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
information for the periods presented, when read in conjunction with the
Company's Consolidated Financial Statements and related Notes thereto. Results
for any previous fiscal quarter are not necessarily indicative of results for
the full year or for any future quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPT. 1994 DEC. 1994 MAR. 1995 JUNE 1995 SEPT. 1995 DEC. 1995 MAR. 1996
---------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue................. $21,171 $24,607 $24,480 $28,429 $31,682 $32,077 $38,335
Cost of revenue......... 15,993 18,632 18,408 21,255 23,360 23,487 28,363
------- ------- ------- ------- ------- ------- -------
Gross profit............ 5,178 5,975 6,072 7,174 8,322 8,590 9,972
Selling, general and
administrative
expenses............... 4,600 5,496 5,995 6,834 7,186 7,397 8,185
------- ------- ------- ------- ------- ------- -------
Income from operations.. 578 479 77 340 1,136 1,193 1,787
Interest and other
expense, net........... 204 256 281 404 470 443 612
------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. $ 374 $ 223 $ (204) $ (64) $ 666 $ 750 $ 1,175
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF
REVENUE:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 75.6 75.7 75.2 74.8 73.7 73.2 74.0
------- ------- ------- ------- ------- ------- -------
Gross profit............ 24.4 24.3 24.8 25.2 26.3 26.8 26.0
Selling, general and
administrative
expenses............... 21.7 22.3 24.5 24.0 22.7 23.1 21.3
------- ------- ------- ------- ------- ------- -------
Income from operations.. 2.7 2.0 0.3 1.2 3.6 3.7 4.7
Interest and other
expense, net........... 0.9 1.1 1.1 1.4 1.5 1.4 1.6
------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. 1.8% 0.9% (0.8)% (0.2)% 2.1% 2.3% 3.1%
======= ======= ======= ======= ======= ======= =======
</TABLE>
The above quarterly data reflects the results of operations for 13 weeks,
except for the September 1995 quarter which includes 14 weeks. The March 1995
and 1996 revenue reflects in some part the seasonality of the business and the
impact of the additional employment taxes on profitability.
During the October to December quarter, the number of holidays and vacation
days marginally reduces revenue. Some clients also close operations completely
during the last week of the year. The Company also experiences a lower
operating profit margin in its third fiscal quarter, the January to March
quarter, in part as a result of higher unemployment tax accruals and, to a
lesser extent, FICA taxes which are expensed as incurred. During this quarter,
the unemployment tax, which is based on the first $7,000-$20,000 of wages for
each employee, depending on the state, is significantly higher than other
quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirement is to fund working capital to
support its growth. The Company utilizes an asset-based loan to fund all of
its working capital requirements. All receipts are collected by the bank and
used to reduce the amount of the loan. All disbursements are posted by the
bank against the loan, increasing the amount of the loan. Thus, the Company
does not maintain a cash balance. As of March 1, 1996, the Company entered
into a $25 million revolving advance facility with BNY
17
<PAGE>
Financial Corporation (the "Line of Credit"). This facility allows the Company
to borrow the lesser of the sum of 85% of eligible receivables (approximately
$20 million as of March 30, 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
agreement requires the maintenance of certain financial ratios, including
minimum tangible net worth and a limit on the ratio of total liabilities to
total tangible net worth. The Company was on March 30, 1996 and is currently
in compliance with these financial covenants.
As of March 30, 1996, the principal amount outstanding under the Line of
Credit, excluding outstanding checks and deposits that have been included in
the line of credit balance in the Company's Consolidated Financial Statements,
was $18.9 million, and approximately $1 million remained available for
borrowing. 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. As of
March 30, 1996, the Company had borrowed $16.1 million under the LIBOR rate
and had $2.8 million outstanding under the alternate base rate. The Company
intends to repay all of the borrowings under the Line of Credit with a portion
of the proceeds from the offering. Following such repayment, the Company will
maintain the Line of Credit for future financing requirements.
The Company had negative cash flow from operations of $1.2 million for the
nine-month period ended March 30, 1996. The Company had negative cash flow
from operations of $2.9 million and $7.1 million for fiscal 1994 and fiscal
1995, respectively. The primary sources of cash from operations during the
nine-month period ended March 30, 1996 were: $1.4 million in net income, net
of $633,000 in non-cash depreciation and amortization expenses; an increase of
$1.1 million in income taxes payable as a result of the conversion of ARI to a
C corporation effective January 1, 1996; and an increase of $1.4 million in
accrued salaries, wages and expenses. The primary use of cash in operations
was an increase of $4.7 million in accounts receivable resulting from the
Company's sales growth. The primary sources of cash from operations in fiscal
1995 were $325,000 in net income, net of $517,000 in non-cash depreciation and
amortization expenses, and an increase of $910,000 in accounts payable. The
primary use of cash from operations was an increase of $9.7 million in
accounts receivable. The primary sources of cash from operations in fiscal
1994 were $385,000 in net income, net of $196,000 in non-cash depreciation
expense, and an increase of $1.7 million in accrued salaries, wages and
expenses. The primary use of cash from operations in fiscal 1994 was an
increase of $5.7 million in accounts receivable.
The Company used $278,000 of cash for investing activities for the nine-
month period ended March 30, 1996. The primary use of cash from investing
activities during this period was the purchase of $973,000 in fixed assets.
The primary source of cash was the net repayment of $695,000 in notes
receivable from officers. The Company used $2.6 million of cash in investing
activities in fiscal 1995. The primary use of cash in investing activities in
such period was the purchase of fixed assets of $1.9 million and an increase
in notes receivable from officers of $406,000. The Company used $465,000 of
cash in investing activities in fiscal 1994. The primary use of cash in
investing activities in such period was the purchase of fixed assets of
$578,000.
For the nine months ended March 30, 1996 the Company generated $1.4 million
in cash from financing activities. The primary source of cash during this
period was provided by net borrowings of $2.7 million on the Line of Credit.
The Company also borrowed $745,000 from a leasing company, and the Realty
Trust received $1.4 million in proceeds from the refinancing of its existing
mortgage loan. The primary uses of cash in this period were the repayment of
$1.9 million of the Company's long-term debt and capital leases and the
distribution of $1.5 million to the Selling Stockholder, including $649,000
distributed to the Selling Stockholder as the sole beneficiary of the Realty
Trust. During fiscal 1995, the Company was provided $9.7 million in cash by
financing activities. The primary source of cash was provided by the Company's
line of credit in the amount of $8.0 million. The Company was also provided
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<PAGE>
$2.1 million in cash through a leasing company. This financing was used to
fund the acquisition of fixed assets. During fiscal 1994, the Company was
provided $3.4 million in cash from financing activities. The primary source of
cash was provided by the Company's line of credit in the amount of $3.3
million.
The Company anticipates that its primary uses of working capital in future
periods will be for funding growth, either through acquisitions, the internal
development of new branches or the development of new service offerings. The
Company also anticipates making approximately $2.5 million in capital
expenditures in the next 12 months principally to upgrade its computer system.
In connection with a 1994 acquisition, the Company may be obligated to make
certain contingent payments during the next several years. See "Certain
Transactions" and Note 3 to Consolidated Financial Statements. The Company
does not believe that such payments would have a material impact on the
Company's liquidity, results of operations or capital requirements. The
Company's principal capital requirement is working capital to support the
accounts receivable associated with its revenue growth. The Company believes
that the proceeds from the offering, together with cash flow from operations
and borrowings under the Line of Credit, will be sufficient to meet the
Company's presently anticipated working capital needs for at least the next 12
months. See "Use of Proceeds."
RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions no later
than fiscal years beginning after December 15, 1995 and adoption of the
recognition and measurement provisions for nonemployee transactions no later
than December 15, 1995. The new standard defines a fair value method of
accounting for stock options and other equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-
based transactions. Companies are also permitted to continue to account for
such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose
in a note to the financial statements pro forma net income and, if presented,
earnings per share as if the Company had applied the new method of accounting.
The accounting requirements of the new method are effective for all employee
awards granted after the beginning of the fiscal year of adoption. The Company
has not yet determined if it will adopt the fair value method of accounting
for employee stock-based compensation, nor has it determined the effect the
new standard will have on net income and earnings per share should it elect to
make such a change. Adoption of the new standard will have no effect on the
Company's cash flows.
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<PAGE>
BUSINESS
The Registry, Inc. ("The Registry" or the "Company") provides information
technology (IT) consultants on a contract basis to organizations with complex
IT operations. The Company's revenue is principally derived from supplemental
IT staffing services and, to a lesser extent, from management consulting
services provided through its specialized practices. The Company currently has
more than 1,400 IT consultants placed with its clients to assist them in
implementing solutions for systems and applications development, in such areas
as distributed network design, database design and development and
client/server migration. These consultants, billed primarily on an hourly
basis, typically work on engagements lasting from six to twelve months under
the direction of the client. In 1995, the Company provided IT consultants to
approximately 350 clients in a diverse range of industries, including MCI
Telecommunications Corporation, Putnam Investments, Inc., Digital Equipment
Corp., Pepsi Cola International and Pfizer Inc. The Registry has grown from
four offices and $16.9 million in revenue in fiscal 1991 to 23 offices and
$130.5 million of revenue for the twelve months ended March 30, 1996.
INDUSTRY OVERVIEW
In recent years, the growth of the information services industry has been
driven by companies' increasing reliance on information technology as a
strategic tool, the shift to distributed computing and the proliferation of
multi-vendor computing environments. As companies struggle to integrate
multiple processing platforms and applications which serve an increasing
number of end-users, systems and applications development has become
increasingly challenging. As organizations continue to focus on their core
competencies and strive to operate more efficiently with fewer people,
managing and planning staffing requirements to meet their IT needs becomes
more difficult.
Confronted with the challenge of designing, implementing and operating more
complex information systems without enlarging corporate staff, businesses are
increasingly turning to IT service providers to augment their in-house IT
operations. Using the services of IT consultants allows companies to: (i)
focus on their core business; (ii) access specialized technical skills; (iii)
implement flexible staffing, providing a variable cost solution to a fixed
cost problem; and (iv) reduce the cost of recruiting, training and terminating
employees as IT requirements change.
There are a number of competitive factors within the highly fragmented IT
services industry. These factors include, among others, IT services providers'
ability to: (i) identify, recruit and retain highly qualified software
engineers; (ii) provide software application and development services across a
broad range of platforms and technologies; and (iii) serve clients across
multiple locations.
In recent years, the IT services industry has grown significantly. According
to a 1996 report prepared by Dataquest, Inc. for the Company, the potential
U.S. market size for supplemental IT staffing services of the type provided by
The Registry's IT consultants was estimated at $9.5 billion in 1994 and is
projected to grow to $16.1 billion in 1999. The Company paid a nominal amount
for this report.
BUSINESS STRATEGY
The Registry's goal is to be a leading nationwide provider of IT
professional services for organizations with complex IT operations. The
Company's business strategy encompasses the following elements:
. Emphasize Resource Management. The Company believes that its ability to
provide the highest quality, most professional IT consultants is
critical to its success. The Company's Delivery Management System is
designed to effectively identify, qualify, place and retain IT
consultants. Each of the Company's 95 Resource Managers recruits in one
of five specific technology sectors, enabling the Company to more
effectively match the skills of its IT consultants with the needs of its
clients. To attract and retain IT consultants, the Company offers them a
comprehensive benefits package and actively remarkets them before their
engagement ends. In addition, the Company's National Resource Delivery
Team (NRDT), a group of Resource Managers based at the Company's
headquarters, helps coordinate recruiting efforts with the local branch
offices to provide access to consultants from across the nation when
local resources for
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<PAGE>
a particular skill set are scarce. The Company believes that its
resource management methodologies have been and will continue to be a
significant factor in its ability to grow.
. Focus on Application Development and Software Engineering. Many of the
Company's clients are leaders in adopting emerging computing
technologies. The Company provides IT consultants for application
development and software engineering in areas such as networking and
communications, migration from legacy systems, workgroup/desktop
applications, database design and development and Internet. In addition
to differentiating the Company's service offerings from those of other
IT service providers, this focus on application development and software
engineering provides the Company an opportunity to enhance margins by
moving away from the commodity pricing more typical for IT consultants
providing routine operations and maintenance services. In addition, this
focus enables the Company to offer its IT consultants the opportunity to
work on challenging projects, which the Company believes is a
significant advantage in attracting and retaining highly skilled
professionals.
. Build Client Relationships. The Registry's goal is to become an
extension of its clients' IT departments. The Company seeks long-term
relationships as a primary IT service provider for companies which have
complex IT operations and for which IT development is a strategic tool
and not merely a support function. The Company believes that this
relationship-oriented approach results in greater client satisfaction
and reduces business development expense. By helping its clients assess
their future staffing needs in their IT planning process, the Company is
better able to anticipate opportunities to provide additional services.
Of the Company's top 10 clients in calendar 1993, seven were among the
Company's top 10 clients in calendar 1995.
. Maintain and Expand National Presence. The Company believes that larger
organizations with multiple locations prefer to deal with IT service
providers that can provide consistent and high quality services on a
nationwide basis. The Company has focused from its inception on
establishing a nationwide presence to take advantage of the enhanced
delivery capabilities resulting from a nationwide resource pool as well
as to focus on and serve national accounts. The Registry has 23 offices
across the country allowing national coverage for larger accounts and
mobility for IT consultants. In the future, the Company's decision to
establish a new office will be influenced, in part, by the extent to
which it can help increase the Company's national presence and assist in
serving national accounts.
GROWTH STRATEGY
The Company's growth has been achieved primarily through branch expansion
and, to a lesser extent, the development of new service offerings, rather than
through acquisitions. The Company believes, however, that a balance of
internal growth and selective acquisitions will best position the Company to
capitalize on opportunities in the IT professional services industry. The
Company's growth strategy consists of five primary components:
. Concentrate on Existing Branch Development. The Company believes that
there are substantial opportunities for increasing revenue in existing
branches, 17 of which have been open for less than four years. The
Company's strategy is to increase sales to existing clients by
increasing the number of IT consultants placed with these clients and by
offering them additional services. As a result of its involvement in the
IT planning process of many of its clients, the Company is often
afforded an opportunity to anticipate clients' needs for additional IT
consultants and services. In addition, the Company seeks to selectively
expand its client base within existing markets.
. Expand National Accounts. The Company is currently focusing on national
account development and has identified certain systems integrators,
computer manufacturers and
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<PAGE>
telecommunications firms as potential national accounts. These accounts
present an array of unique operational challenges, such as coordinating
service delivery across divisional lines and providing centralized
invoicing. The Company believes that its national presence and national
resource management capabilities will enable it to meet these
challenges.
. Implement Satellite Branch Expansion. The Company believes that
opportunities exist for additional satellite expansion. From existing
branch offices, the Company has successfully developed satellite offices
in certain regions. This method of developing opportunities in given
geographic areas allows the Company to expand its client and consultant
base while leveraging existing infrastructure and reducing start-up
costs. For example, the Durham, North Carolina office served as a hub
for the opening of satellite offices in Charlotte and Greensboro, North
Carolina.
. Acquire Complementary Businesses. The Company may seek to acquire
companies in the IT professional services industry to facilitate its
expansion into new geographic areas or to acquire technology businesses
that offer complementary services. The Company believes that the
fragmented nature of the IT professional services industry presents a
number of opportunities for growth through acquisition.
. Develop New Service Offerings. The Company intends to continue its
practice of encouraging individual branches to develop complementary
services, such as the Documentation Services Practice and the recently
introduced Help Desk Practice. These services can then be expanded on a
national level after their viability and profitability is demonstrated
at a local level.
THE REGISTRY'S SERVICES
The Registry provides IT professional services for application development
and software engineering. The vast majority of the Company's IT consultants
work on a supplemental staffing basis to deliver IT implementation,
integration and development services. The Registry's goal is to become an
extension of its clients' IT departments, and the Company believes that this
relationship-oriented approach results in a better understanding of its
clients' business and IT staffing needs. The Company's IT consultants, billed
primarily on an hourly basis, typically work on engagements lasting from six
to twelve months under the direction of the client. In addition, the Company
provides management consulting services primarily through its Network Systems
Consulting Practice. Management consulting engagements generally involve
network strategy, systems architecture and implementation. The Company
generally assumes responsibility for project outcome in such engagements.
Further, the Company has recently introduced service offerings in two
additional practice areas: documentation services and help desk services.
IT Professional Services
The Company organizes its IT professional services in five sectors: networks
and communications; legacy systems; workgroup/desktop; database design and
development; and Internet. Networks and communications engagements generally
involve distributed network design and implementation or optimization and
connectivity services in both local area networks (LANs) and wide area
networks (WANs). General skills required in this sector include UNIX/TCP-
IP/IPX development, SNMP network management development and LAN/WAN
architecture. Legacy system engagements address challenges in the migration of
legacy applications to a client/server environment, large systems development
and general legacy (primarily IBM and Digital VAX/VMS) support. General skills
required in this sector include IBM/COBOL/CICS, VAX/VMS application
development and systems administration and IMS systems programming.
Workgroup/desktop engagements involve front-end graphical user interface (GUI)
development, rapid application prototyping and development, object-oriented
development and workgroup application services. General skills required in
this sector include NT/C++/GUI development, MS Windows/Windows 95/Windows NT
architecture and development and visual basic design/OBDC. Database design and
development assignments involve design, development and implementation of
22
<PAGE>
relational database applications and systems. General skills required in this
sector include Sybase/UNIX/C++/Tuxedo, Oracle DBA and Powerbase/Sybase client
server development. Internet engagements include Web Page design, Internet
security design issues and intranetworking systems development. General skills
required in this sector include HTML/WWW design and development, UNIX/Systems
Engineer/CGI/Firewall development and JAVA development. The Company's IT
consultants typically work on assignments within each of these five sectors as
part of project teams generally comprising client staff and IT consultants
placed by the Company and other IT service providers.
Project Examples
The following are examples of assignments The Registry's IT consultants have
worked on as part of a project team within each of the Company's five
technology sectors. Project teams generally comprise client staff and IT
consultants placed by the Company and other IT service providers.
Networks and Communications
. Integration of Network Protocols for a Systems Integrator. The Company
provided a project manager for one campus of a statewide network
integration project for a four campus state university system. During
this four-month engagement, the Company's IT consultant managed
employees of the client on this portion of the project. To the best of
the Company's knowledge, no other firm provided IT consultants to the
portion of the project on which the Company was engaged.
. Development of Object-Oriented Front-End of a Network Management System
for a Software Manufacturer. One of the Company's IT consultants was the
lead designer and developer on a portion of this project, which lasted
approximately two years. This consultant worked in conjunction with more
than 20 other professionals, consisting of client employees and IT
consultants from other firms. His work was reviewed and supervised by
employees of the client.
Legacy Systems
. Development of an On-Line Portfolio Accounting System for a Mutual
Fund. The Company provided three programmer analysts for a project that
has lasted one and a half years and is still ongoing. These programmer
analysts work at the direction of the client and work with IT
consultants from competitors. The project team consists of 30 persons,
including staff from the client.
. Development of a Billing System for a Long Distance Telecommunications
Company. The Company placed a total of ten programmer analysts working
on three different aspects of this system. These IT consultants have
worked from three months to two years on this project, which is still
ongoing. The consultants work under the client's supervision and
direction. Employees of the client, as well as consultants from other IT
service firms, constituted a majority of the personnel working on each
of the portions of this project.
Workgroup/Desktop
. Migration to New Operating System for a Software Developer. One of The
Registry's IT consultants acted as a project manager and a developer in
the migration of an operating system from Windows to an NT/Windows 95
environment. Another of the Company's IT consultants worked as a
developer on the project, which lasted approximately one and a half
years. This was a large project, involving more than 50 IT
professionals, on which many other IT consultants from the Company's
competitors worked.
. Development of an Investment Management Reporting System for a Financial
Services Company. The Registry provided two IT consultants who acted as
project managers and architects for this project. In addition, the
Company provided six to eight Visual Basic developers on this project,
which lasted approximately nine months. The project managers reported to
an employee of the client. The Company's IT consultants constituted a
majority of the professionals on this project.
Database Design and Development
. Design and Development of a Reporting and Switching System for a
Telecommunications Company. The Company provided five IT consultants on
a project team of eight individuals for this project which lasted eight
months. The Registry's IT consultants primarily acted as software
engineers and, to a lesser extent, test engineers with respect to this
project.
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. Design and Development of a Loan Processing System for a Bank. The
Company provided an IT consultant who acted as project manager on this
project which lasted two and one-half years. He directed approximately
five other client server and database developers, who were also IT
consultants of the Company. Approximately two other IT consultants from
competing firms and approximately four employees of the client worked on
the project under the direction of the project manager.
Internet
. Web Site Development for a Telecommunications Company. On one project
the Company provided approximately eight software developers on a three-
month project. These IT consultants comprised the majority of the
project team which also included approximately two employees of the
client, although the Company did not manage this project.
On another project the Company provided two programmer analysts, one of
whom acted as project leader, who worked on a team of approximately
eight IT consultants. The project has been ongoing for five months and
is scheduled to last at least one year.
. Design and Implementation of an Internet Firewall Security System for a
Mutual Fund. One of the Company's IT consultants with expertise as a
UNIX systems administrator worked on this project in conjunction with
approximately five employees of the client for approximately two and
one-half months.
Practices
Network Systems Consulting Practice (NSCP). In November 1994, the Company
acquired the business that formed the basis for its Network Systems Consulting
Practice. Based in New England and operating from locations in New York City
and Chicago, the NSCP is staffed by 27 salaried employees. The NSCP provides
an extensive suite of management consulting services, addressing issues such
as network strategy, systems architecture and implementation. Most projects
are performed on a time and materials basis, with engagements generally
lasting approximately two to three months. The clients of the NSCP include
systems integrators, hardware manufacturers and pharmaceutical companies.
Documentation Services Practice (DSP). In 1994, the Company initiated its
Documentation Services Practice in its Chicago branch office. The DSP assists
hardware and software vendors and other organizations in developing
documentation, instruction and accompanying related materials associated with
introducing new or upgrading existing products. As product development cycles
continue to shorten, these services, including documentation needs analysis,
design and development, project management, technical writing and graphic
design and illustrations, are designed to help clients produce high-quality,
cost-effective documentation under heightened scheduling constraints. In
addition, the DSP provides systems documentation and process consulting
services to other organizations. The DSP is composed of 31 professionals
including project managers, technical writers, principal consultants, a
quality manager and a practice manager, of whom approximately half are
salaried employees and half are hourly IT consultants. Most projects are
performed on a time and materials basis, with engagements generally lasting
approximately three to four months.
Help Desk Practice. The Company is currently developing a Help Desk Practice
to assist clients in identifying their help desk requirements and implementing
and operating their help desk services. These services may range from
providing consulting services to providing a complete outsourcing solution for
a client's help desk needs.
THE REGISTRY'S DELIVERY MANAGEMENT SYSTEM
IT Consultants
A major challenge facing IT professional services companies is the
identification and retention of highly qualified software engineers and
computer programmers. The Company's typical IT consultant has an average of
six to eight years of experience in application development and software
engineering. The
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<PAGE>
Company believes that it is able to attract and retain the highest quality IT
consultants by offering the following advantages:
. Consultants work with a Resource Manager with a single technology sector
focus who understands the consultants' skills and professional interests.
. The Company provides exposure to a variety of challenging assignments
that help consultants increase their skill sets and business expertise.
. The Company actively remarkets its consultants, allowing them to
concentrate on completing their current assignment.
. The Company offers a comprehensive benefits package comparable in
coverage to those offered in many permanent employment positions.
Resource Management
Resource Managers are responsible for soliciting, recruiting and assessing IT
consultants, developing and maintaining consultant relationships and
maintaining and updating the Company's database. Although Resource Managers
recruit most of the Company's IT consultants through referrals from existing IT
consultants, they utilize several additional recruiting methods, including
local and national print advertising, participation in technical job fairs
across the nation and listing a variety of current openings on the Company's
home page on the World Wide Web. Resource Managers also utilize the Company's
database that contains the resumes of approximately 100,000 IT consultants that
have been submitted to the Company directly or indirectly by such consultants
in response to the Company's recruiting efforts. At any particular time, only
certain of the individuals whose resumes are included in the Company's database
may be available for placement by the Company; certain individuals may have
accepted permanent assignments, may be working for the Company's competitors or
may have left the IT services industry. Nevertheless, the Company believes that
the database facilitates the identification of qualified IT consultants to the
extent of their availability.
As of May 18, 1996, the Company employed 95 Resource Managers located in its
branch offices nationwide. This number exceeds the number of Account Managers
by a ratio of 1.5 to 1 and reflects the Company's commitment to resource
development. Resource Managers are typically college-educated individuals with
experience in customer service, telemarketing and relationship management. They
are compensated through a combination of base salary and bonus incentives based
on consultant placements and gross profit margins.
Account Management
The Company's Account Managers manage its client relationships. Each Account
Manager is responsible for approximately four to seven accounts, some of which
may involve multiple operating units of a particular organization. The Account
Manager's primary responsibility is to develop and implement a specific account
plan for each assigned client. Each plan addresses the following areas:
building and serving the client relationship; identifying and understanding the
client's current and anticipated requirements; and expanding services to
additional areas within the client's organization. The Company's Account
Managers work closely with the Resource Managers to identify new assignments at
existing client sites, staff assignments appropriately and market IT
consultants to existing clients. As of May 18, 1996, the Company employed 62
Account Managers who are compensated through a combination of base salary and
commission.
The Registry's Methodology
The Company has developed a system designed to identify, qualify, place and
retain IT consultants. This system includes the following:
Technology Sector Recruiting. Resource Management teams in each branch
office recruit IT consultants who specialize in one of the five technology
sectors that the Company serves. Each
25
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Resource Manager is assigned to one specific sector and is accountable for
continually developing consultant relationships within, and an
understanding of, that sector. This approach helps a Resource Manager stay
current in a particular sector and reduce a field of potential consultants
to a select list of experts particularly qualified for current openings.
National Resource Delivery Team. The Company has established a National
Resource Delivery Team (NRDT), a group of 12 Resource Managers located at
the Company's corporate headquarters. Communicating daily with the Resource
Managers in the Company's 23 branch offices, the NRDT helps coordinate
recruiting efforts with the local branch offices to provide access to
consultants from across the nation when local resources for a particular
skill set are scarce. The NRDT also supports local branches with on-site
auxiliary recruiters to provide added support and expertise for new office
openings or the rapid growth of existing offices.
Continuous Support and Quality. The Company believes that consultant
quality is of primary importance to its clients and that clients prefer to
work with vendors that have substantial quality programs in place. The
Company has always maintained a proactive approach to quality initiatives,
and its quality programs include a consultant orientation and a review of
client satisfaction 30 days after the beginning of each engagement and at
the end of each engagement. The Company actively solicits feedback from
clients and IT consultants in the areas of productivity, technical
performance and compatibility, as well as overall quality of the service
provided, which then forms the basis for the Company's statistical analysis
for quality improvement programs.
Consultant Retention and Benefits. Clients spend valuable time and effort
in the training and orientation of consultants, and, accordingly, retention
until project completion is extremely important. Before completion of a
project, the Company actively remarkets its consultants, which helps the
Company minimize turnover. This approach allows consultants to focus on
completing their current project -- often when it is in the most critical
phase. The Company has recently developed a benefits package offered to its
hourly IT consultants which includes comprehensive medical insurance, a
prescription drug card, term life insurance, individual long-term
disability insurance and a 401(k) retirement plan. These benefits
underscore the Company's commitment to its consultants and further
consultant loyalty and retention efforts.
OPERATIONS AND SUPPORT SERVICES
Branch Management
The Company's Branch Managers are accountable for branch profitability and
are responsible for day-to-day branch operations, as well as business and staff
development. To date, most Branch Managers have been promoted from within and
thus bring with them an appreciation for the Company's culture. Management
believes that this approach has allowed the Company to maintain consistent
standards during a period of rapid growth. Branch Managers are compensated
through a combination of base salary and bonus incentives based on branch
profitability.
Staffing levels of branch offices vary depending on the maturity of an office
and range from two Resource Managers, one Account Manager, one administrative
staff and a Branch Manager for a recently opened office to nine Resource
Managers, six Account Managers, three administrative staff and a Branch Manager
for a larger, more established office. Satellite offices benefit from sharing
certain staff resources with neighboring branches.
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The following chart lists the Company's 23 branch offices and the fiscal
year in which they opened:
<TABLE>
<CAPTION>
FISCAL
LOCATION YEAR OPENED
- -------- -----------
<S> <C>
Newton, Massachusetts.... 1987
McLean, Virginia......... 1987
Durham, North Carolina... 1990
Atlanta, Georgia......... 1991
Chicago, Illinois........ 1992
Richmond, Virginia....... 1992
Cleveland, Ohio.......... 1993
Rye Brook, New York...... 1993
Boston, Massachusetts.... 1993
Ft. Lauderdale, Florida.. 1994
Rosemont, Illinois....... 1994
Dallas, Texas............ 1994
</TABLE>
<TABLE>
<CAPTION>
FISCAL
LOCATION YEAR OPENED
- -------- -----------
<S> <C>
Denver, Colorado............ 1994
Greensboro, North Carolina.. 1994
New York, New York.......... 1994
Santa Clara, California..... 1994
Seattle, Washington......... 1995
Columbus, Ohio.............. 1995
Stratham, New Hampshire..... 1995
Charlotte, North Carolina... 1995
Rolling Meadows, Illinois
(DSP)...................... 1995
New York, New York (NSCP)... 1996
Walnut Creek, California.... 1996
</TABLE>
Regional Management
The Company has a Regional Vice President for each of the New England, Mid-
Atlantic, Midwest, Southeast, Southwest and Western Regions. The Regional Vice
President is responsible for supervising Branch Managers and for developing a
financial plan for the region, implementing staff development and training and
coordinating marketing strategy. Each Regional Vice President serves on the
Company's Executive Committee. Compensation of Regional Vice Presidents
consists of a base salary plus bonus incentives relating to regional
profitability.
Corporate Services
From its headquarters in Newton, Massachusetts, the Company provides its
branch offices with centralized support services, including marketing,
financial and accounting, legal support and purchasing. In addition, the
Company has committed and expects to continue to commit substantial resources
to the following areas:
Training. The Company provides a number of training programs for its
staff employees to help them stay current with emerging issues in the
information technology industry. These programs include "Registry
University," a four-day training and orientation workshop for new Account
Managers and Resource Managers and the "Branch Manager's Workshop," an
annual series of four three-day workshops that focus on operations,
business development and staff development. Drawing on the experience of
the Company's most successful Resource Managers, the training department
has also developed a "Best Practices" program in resource management.
Information Services. The Company believes that its own information
technology system is an important tool for enhancing productivity,
promoting efficiency and improving communications within the organization.
The Company also believes that its database is one of its most important
assets. The Company is currently committing significant resources to
improving the database search capabilities through centralization and
development of a nationwide communications network.
Human Resources. The Company believes that extending a benefits program
to its IT consultants provides it with a competitive edge by promoting
consultants' loyalty to the Company and enhancing its retention efforts. In
this regard, the Company has recently begun to offer a benefits package to
the Company's IT consultants nationwide. This program includes
comprehensive medical insurance, a prescription drug card, term life
insurance, individual long-term disability insurance and a 401(k)
retirement plan.
27
<PAGE>
CLIENT BASE
The Company focuses its sales efforts primarily on organizations with complex
IT needs and currently provides IT consultants to approximately 350 clients. In
the nine months ended March 30, 1996 approximately 35.8% of the Company's
revenue was derived from its top 10 customers, none of which accounted for more
than 6.5% of revenue. The primary industries served by the Company are:
financial services, manufacturing, communications, systems integration and
pharmaceutical. The following table shows selected clients, categorized by
industry group, for which the Company provided services in the nine months
ended March 30, 1996. The clients listed generated approximately $31 million of
revenue in the aggregate for the Company for the nine months ended March 30,
1996, which represents approximately 30% of the Company's total revenue for
that period.
FINANCIAL SERVICES SYSTEMS INTEGRATION
First Union National Bank Cambridge Technology
Fleet Services Corporation Partners, Inc.
G.E. Capital Corporation Digital Equipment Corp.
John Hancock Mutual Life Insurance Co. International Business
Putnam Investments, Inc. Machines Corp.
Planning Research
Corporation International,
Ltd.
MANUFACTURING
Lockheed Martin Corp. Sun Microsystems Inc.
Silicon Graphics Inc.
PHARMACEUTICAL
COMMUNICATIONS
Bristol-Myers Squibb Company
AT&T HRISO Pfizer Inc.
Hitachi Telecom USA, Inc.
MCI Telecommunications Corporation OTHER
NYNEX Science and Technology, Inc.
Carolina Power & Light Co.
Pepsi Cola International
Philip Morris USA
Prodigy Services Company
Ryder Systems, Inc.
Sara Lee Hosiery, Inc.
Virginia Electric & Power
Co.
COMPETITION
The market for IT professional services is intensely competitive on both
local and national levels. The market is served by numerous IT professional
services companies, many of which have greater financial, technical and other
resources than the Company. Some of these competitors have a nationwide
presence equivalent to, or greater than, that of the Company. Within any given
market, the Company and its competitors frequently compete for the same highly-
skilled IT consultants and clients.
The Company competes for IT consultants with other IT professional services
providers, outsourcing and consulting companies, systems integrators, temporary
personnel agencies and client companies. IT consultants, including those who
work with The Registry, often seek assignments from more than one staffing
company. Primary competitive factors for recruiting and retaining such
professionals include: compensation, including timeliness of payment;
availability of benefits; consistent flow of high quality, varied assignments;
schedule flexibility; and an understanding of consultant skills and work
preferences.
The Company competes for clients with other IT professional services
providers, outsourcing and consulting companies, systems integrators and, to a
lesser extent, temporary personnel agencies. The Company considers large
organizations with complex IT needs to be among its prime clients. Within a
given market, there are a limited number of such potential clients, some of
which have designated only certain IT professional services companies as
approved providers of IT professional services. Primary
28
<PAGE>
competitive factors for obtaining and retaining clients include: careful
matching of consultant skills with the client's requirements; selectivity in
referral of consultant candidates; nationwide presence; consultant technical
expertise; price of services; monitoring of client satisfaction during and
after a placement; and general responsiveness to client needs.
Although the Company believes that it competes favorably both in recruiting
IT consultants and obtaining clients, there is no assurance that it will
continue to be successful in doing so.
EMPLOYEES
As of May 18, 1996, the Company had 415 employees, of which 141 were staff IT
consultants, 95 were Resource Managers, 62 were Account Managers, 62 were
either Branch, Regional or corporate managers and 55 served in various
administrative and accounting capacities. On that date, there were also more
than 1,400 IT consultants (including the 141 staff IT consultants) working on
full-time assignments for the Company's clients. The Company is not a party to
any collective bargaining agreements and considers its relationships with its
employees to be satisfactory.
Approximately 91.4% of the Company's non-staff IT consultants during fiscal
1995 were treated as employees of the Company for federal and state tax
purposes. For such employees, the Company pays social security taxes (FICA),
federal and state unemployment taxes and workers' compensation insurance
premiums. The remainder of the IT consultants worked for the Company on a
subcontract basis, and the Company is not responsible for such taxes under
these arrangements. The Company believes that such arrangements meet the
requirements of applicable law.
PROPERTIES
The Company's executive offices are located in Newton, Massachusetts, in
approximately 18,800 square feet of leased office space, under leases that
expire on September 30, 2010, from the Realty Trust. See Note 5 to "Selected
Consolidated Financial Data," "Certain Transactions" and Note 13 to
Consolidated Financial Statements. The Company also maintains offices and
leases office space occupying between 475 and 5,875 square feet under leases
terminating from December 31, 1996 to July 21, 2001 in the locations in which
it maintains a branch office noted under "-- Branch Management." The Company
believes that its facilities are adequate for its current operations.
LEGAL PROCEEDINGS
On April 21, 1995, Ralph Kirkley Associates, Inc. ("Kirkley"), an IT services
provider, filed suit against the Company in the District Court of Travis
County, Texas, 353rd Judicial District, alleging that the Company breached a
mixed oral and written contract with Kirkley to enter into an agreement to
purchase substantially all of the assets comprising Kirkley's business.
Kirkley's complaint seeks a declaratory judgment that a valid contract existed
between Kirkley and the Company to enter into a purchase and sale agreement for
Kirkley's assets, as well as actual damages of not less than $500,000, recovery
of lost profits, exemplary damages of three times all actual damages awarded
and attorney's fees and costs. The Company has filed a general denial of
Kirkley's complaint and a counterclaim seeking return of the $100,000 deposit
paid to Kirkley's escrow agent and other legal and equitable relief. No further
actions have been taken with respect to this suit. On May 31, 1995, Kirkley
filed a voluntary petition for bankruptcy under Chapter 11 in the United States
Bankruptcy Court for the Western District of Texas. In the event Kirkley or the
trustee in bankruptcy proceeds with the case, the Company intends to defend
vigorously. The Company does not believe that the resolution of this matter
will have a material adverse effect on its business, financial condition or
results of operations.
29
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
G. Drew Conway.......... 38 President, Chief Executive Officer and Director
Robert E. Foley......... 47 Chief Financial Officer and Treasurer
Mark W. Biscoe.......... 35 Vice President, New England Region
Christopher T. Cain..... 32 Vice President, Southwest Region
Anthony F. Carusone..... 48 Vice President, Southeast Region
Christopher B. Egizi.... 40 Vice President, Midwest Region
James F.J. McKee........ 30 Vice President, Western Region
Martin E. Goober........ 31 Vice President, Operations
David E. Jackson........ 44 Vice President, Network Systems Consulting Practice
James H. Anderson....... 41 Denver Branch Manager
Susan E. Hovdesven...... 33 New York Branch Manager
Robert P. Badavas....... 43 Director
Paul C. O'Brien......... 56 Director
</TABLE>
Mr. Conway, the founder of the Company, has served as President, Chief
Executive Officer and Director of the Company since its incorporation in May
1986 and as Treasurer from such date until March 1996. From 1983 until 1986,
Mr. Conway was a founder and principal of The Experts, a technical staffing
company. Mr. Conway previously served as an Account Manager with EDP Temps, a
technical staffing company.
Mr. Foley has served as Chief Financial Officer since joining the Company in
July 1990 and as Treasurer since March 1996. Mr. Foley has more than 22 years
of experience in finance and accounting and is also an Adjunct Professor of
Finance at Northeastern University.
Mr. Biscoe has served as Vice President, New England Region, since November
1995. Mr. Biscoe joined the Company in March 1992 and has served as Branch
Manager of the Newton office and Manager of the NRDT. From 1990 until 1992, Mr.
Biscoe served as Branch Manager of Triple T, Inc., a technical staffing
company.
Mr. Cain has served as Vice President, Southwest Region, since January 1995.
Mr. Cain joined the Company in 1990 as an Account Manager and opened the Dallas
office as Branch Manager.
Mr. Carusone has served as Vice President, Southeast Region, since February
1994. Mr. Carusone joined the Company in February 1992 and has served as Branch
Manager of the Atlanta office. From July 1990 to February 1992, Mr. Carusone
was employed by Status, Inc., a personnel recruiting company.
Mr. Egizi has served as Vice President, Midwest Region, since January 1994.
Mr. Egizi was a founding staff member of the Company in 1986 and has served as
Vice President, Strategic Corporate Services, Branch Manager of the Newton
office and Manager of the NRDT.
Mr. McKee has served as Vice President, Western Region, since January 1996.
Mr. McKee joined the Company in November 1991 as an Account Manager and
subsequently opened the Santa Clara office in June 1994 as Branch Manager and
the Walnut Creek, California office in August 1995. Before joining the Company,
Mr. McKee was employed as an Account Executive with Spectator Publications.
Mr. Goober has served as Vice President, Operations, since September 1995.
Mr. Goober joined the Company in January 1991 as an Account Manager, and before
serving as a Director of Training, served as Branch Manager of the Newton
office, and opened the Boston office. From April 1988 until December 1990, Mr.
Goober served as Senior Account Manager with Sullivan & Cogliano, a technical
staffing company.
30
<PAGE>
Mr. Jackson has served as Vice President, Network Systems Consulting Practice
since November 1994. Mr. Jackson joined the Company when Axiom Consulting
Group, Inc., the network implementation consulting firm he founded in December
1991, was acquired by the Company. From 1989 to 1991, Mr. Jackson served as
Vice President of Sales and Marketing of The DMW Group, Inc., a network
management consulting firm. Mr. Jackson has 22 years of experience in the
networking and communications industry.
Mr. Anderson has served as Branch Manager of the Denver office since August
1994. Mr. Anderson joined the Company in November 1986 and has served as
Director of Training and Development and Manager of the NRDT. From August 1985
through October 1986, Mr. Anderson served as Recruiting Manager with The
Experts, a technical staffing company.
Ms. Hovdesven has served as New York Branch Manager since November 1993. Ms.
Hovdesven joined the Company in March 1988 as an Account Manager and opened the
Durham, Atlanta, Rye Brook and New York City offices.
Mr. Badavas became a director of the Company in May 1996. Mr. Badavas has
been President and Chief Executive Officer of Cerulean Technology, Inc., a
provider of mobile information systems applications, since December 1995. From
October 1986 through October 1995, Mr. Badavas was employed by Chipcom
Corporation, a manufacturer of computer networking intelligent switching
systems, where he served as Senior Vice President, Finance, from July 1994 to
October 1995, Vice President, Finance, from October 1986 to July 1994 and Chief
Financial Officer and Treasurer.
Mr. O'Brien became a director of the Company in April 1996. Mr. O'Brien is
the President of The O'Brien Group, Inc., a consulting firm in the areas of
community relations and external affairs that he founded in January 1995.
Before founding The O'Brien Group, Mr. O'Brien was employed by New England
Telephone and Telegraph Company, most recently as Chairman of the Board from
1993 to December 1994 and as President and Chief Executive Officer from 1988 to
1993. Mr. O'Brien is also a director of Bank of Boston Corporation, Cambridge
NeuroScience, Inc., First Pacific Networks Inc. and Shiva Corporation.
Each officer serves at the discretion of the Board of Directors. There are no
family relationships among any of the directors and executive officers of the
Company.
The Company intends to add two more outside directors to the Board of
Directors following the offering. Following the completion of this offering,
the Board of Directors will have an Audit Committee and a Compensation
Committee. The Audit Committee will review the Company's accounting practices,
internal accounting controls and financial results and oversee the engagement
of the Company's independent auditors. The Compensation Committee will review
and recommend to the Board of Directors the salaries, bonuses and other forms
of compensation for executive officers of the Company and administer various
compensation and benefit plans, including the 1996 Stock Plan and the 1996
Employee Stock Purchase Plan. The initial members of the Audit Committee and
the Compensation Committee will be Messrs. O'Brien and Badavas, neither of whom
is a past or current officer or employee of the Company. The Board of Directors
does not maintain a nominating committee or a committee performing similar
functions.
The Company's Restated Articles of Organization provide that the Board of
Directors is classified into three classes, with the members of the respective
classes serving for staggered three-year terms. The first class consists of Mr.
Badavas, the second class consists of Mr. O'Brien and the third of Mr. Conway,
with the initial terms of the directors comprising the classes expiring upon
the election and qualification of directors at the annual meetings of
stockholders to be held following the fiscal years of the Company ending June
29, 1996, June 28, 1997 and June 27, 1998, respectively. At each annual meeting
of stockholders, nominees for director will be eligible for re-election or
election for full three-year terms. See "Description of Capital Stock --
Massachusetts Law and Certain Provisions of the Company's Articles of
Organization and By-Laws."
31
<PAGE>
DIRECTOR COMPENSATION
In connection with this offering, the Company has determined to pay its
directors who are not officers or employees of the Company $1,000 for each
Board meeting attended and an annual fee of $1,000 for each membership on a
committee of the Board. In addition, each non-employee director is granted
stock options pursuant to the Company's 1996 Eligible Directors Stock Plan
described under "Stock Awards."
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding all compensation
received by the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers during fiscal 1995 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- -------------------
<S> <C> <C>
G. Drew Conway............................................. $ 537,500 $ --
President and Chief Executive Officer
Christopher B. Egizi....................................... 201,400 12,500
Vice President, Midwest Region
Anthony F. Carusone........................................ 75,260 120,231
Vice President, Southeast Region
Susan E. Hovdesven......................................... 53,000 135,003
New York Branch Manager
Martin E. Goober........................................... 109,132 47,500
Vice President, Operations
</TABLE>
In connection with this offering, the Company entered into an employment
agreement (the "Employment Agreement") with Mr. Conway pursuant to which Mr.
Conway will be employed as President and Chief Executive Officer of the
Company. The Employment Agreement provides for a term of four years and an
annual base salary of $400,000, $425,000, $475,000 and $525,000 in the first
through fourth years of the term. Mr. Conway is also eligible for a bonus based
on performance criteria pre-established by the Compensation Committee for each
year and subject to a maximum limitation of $160,000 in the first year. The
Employment Agreement provides that if Mr. Conway's employment is terminated
without "cause" (as defined in the Agreement) or if Mr. Conway terminates his
employment for "good reason" (as defined in the Agreement), the Company will
pay Mr. Conway severance equal to two years of base compensation plus a portion
of the bonus paid or payable with respect to the immediately preceding full
employment year based on days of service in the year of termination. In
addition, if Mr. Conway's employment is terminated at the end of the term of
the Employment Agreement, he will be entitled to severance equal to one year of
base compensation. The agreement also contains non-competition and non-
solicitation covenants during the employment term and for a two-year period
thereafter. Mr. Conway is also provided with certain registration rights with
respect to his Common Stock, described under "Description of Capital Stock."
No stock options or stock appreciation rights ("SARs") were granted to the
Named Executive Officers during fiscal 1995. On March 6, 1996, the Company
granted options to each of Messrs. Egizi, Carusone and Goober, Ms. Hovdesven
and to all executive officers as a group exercisable for 60,000, 50,000,
50,000, 55,000 and 475,000 shares, respectively, at an option exercise price of
$11.00 per share, the fair market value on the date of grant. All such options
vest in five equal installments commencing on the earlier of the six-month
anniversary of the completion of this offering or March 6, 1997 and thereafter
on December 15 in each of 1997 through 2000.
32
<PAGE>
No stock options were exercised by the Named Executive Officers during fiscal
1995. There were no SARs outstanding during fiscal 1995. No unexercised options
were held by any of the Named Executive Officers as of June 24, 1995.
STOCK AWARDS
1996 Stock Plan. The Company's 1996 Stock Plan was approved by the Board of
Directors on March 6, 1996 and by the sole stockholder on March 22, 1996. The
1996 Stock Plan provides for the grant or award of stock options, restricted
stock and stock bonus awards (collectively, the "Awards"). Stock options
granted under the 1996 Stock Plan may be either incentive stock options or non-
qualified stock options. The purpose of the 1996 Stock Plan is to attract and
retain outstanding employees through stock incentives. Regular full-time
employees of the Company, including officers but excluding directors who are
not officers, are eligible to receive Awards.
The 1996 Stock Plan will be administered by the Compensation Committee after
the offering. Subject to the provisions of the 1996 Stock Plan, the Committee
has the authority to designate participants, determine the types of Awards to
be granted, the number of shares to be covered by each Award, the time at which
each Award is exercisable or may be settled, the method of payment and any
other terms and conditions of the Awards. All Awards shall be evidenced by an
Award agreement between the Company and the participant.
Although the Committee determines the prices at which options and other
Awards may be exercised under the 1996 Stock Plan, the exercise price of an
incentive stock option shall be at least 100% of the fair market value (as
determined under the terms of the 1996 Stock Plan) of a share of Common Stock
on the date of grant. The aggregate number of shares of Common Stock available
for awards under the Plan is 1,600,000. No Awards may be made under the 1996
Stock Plan after March 6, 2006.
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock Purchase
Plan (the "1996 Purchase Plan") was adopted by the Board of Directors and
approved by the sole stockholder on March 29, 1996. A total of 300,000 shares
of Common Stock has been reserved for issuance under the 1996 Purchase Plan.
The 1996 Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by one offering during each six-month period and is
administered by the Board of Directors of the Company or by the Compensation
Committee. Employees are eligible to participate if they have been employed by
the Company for at least 18 months. The 1996 Purchase Plan permits eligible
employees to purchase up to 200 shares of Common Stock in any six-month
offering period through payroll deductions, which may not exceed 10% of an
employee's compensation, at a price equal to 85% of the lower of the fair
market value of the Common Stock at the beginning or at the end of each six-
month offering period. Employees may end their participation in the offering at
any time during the offering period, and participation ends automatically on
termination of employment with the Company. The first stock offering period
under the 1996 Purchase Plan will commence upon the effective date of the
registration statement of which this Prospectus is a part. The 1996 Purchase
Plan will terminate on March 29, 2006.
1996 Eligible Directors Stock Plan. The Company's 1996 Eligible Directors
Stock Plan (the "Directors Stock Plan") was approved by the Board of Directors
and by the Company's sole stockholder on March 29, 1996. Under the Directors
Stock Plan, each director who is not an officer, employee or consultant of the
Company or any subsidiary of the Company (an "outside director") will be
granted, upon first being elected to the Board of Directors, an option to
purchase 20,000 shares of Common Stock at an exercise price equal to the fair
market value on the date of the grant. A total of 100,000 shares of Common
Stock are available for awards under the Directors Stock Plan. The options
granted under the Directors Stock Plan will vest in four equal annual
installments commencing one year after the date of grant. No options may be
granted under the Directors Stock Plan after March 29, 2006. In connection with
their initial election to the Board of Directors, each of Messrs. O'Brien and
Badavas has been granted an option to purchase 20,000 shares at an exercise
price of $11.00 per share in the case
33
<PAGE>
of Mr. O'Brien and $13.00 per share in the case of Mr. Badavas, the fair market
value of the Common Stock on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, Mr. Conway, the President, Chief Executive Officer and
sole stockholder of the Company, together with Mr. Foley, the Chief Financial
Officer of the Company, established levels of compensation for the Company's
executive officers. The Company intends to establish a Compensation Committee
after completion of this offering consisting of Messrs. O'Brien and Badavas,
neither of whom is or has ever been an officer, employee or consultant of the
Company.
CERTAIN TRANSACTIONS
On September 19, 1995, the Company entered into four lease agreements, each
with a term ending on September 30, 2010, with the Realty Trust for a total of
approximately 18,800 square feet of office space located at 189 Wells Avenue,
Newton, Massachusetts. The Company's executive offices are located in these
spaces. Mr. Conway is the sole beneficiary of the Realty Trust and Mr. Foley is
the trustee of the Realty Trust. Management believes that the terms of each
lease agreement are no less favorable to the Company than could be obtained in
a transaction with an unrelated third party.
Beginning in May 1990, the Company has made certain loans ("Loans") to Mr.
Conway. The largest amount outstanding under all such Loans was $1,108,982 on
September 25, 1995. The proceeds of such Loans were applied as follows:
$300,000 was used for capital contributions to ARI and the balance was used for
personal purposes. Mr. Conway has repaid most of such indebtedness, in part
from distributions to him from ARI. The amount outstanding under the Loans as
of May 30, 1996, the date of the note evidencing such indebtedness, was
$666,204. The outstanding balances under the Loans accrue interest at the rate
of 10% per annum. Pursuant to the terms of the Loans, Mr. Conway is obligated
to repay the outstanding balances thereunder upon the closing of this offering.
Beginning on August 25, 1992, the Company made certain loans to the Realty
Trust, used to purchase the office building at 189 Wells Avenue, Newton,
Massachusetts, in which the Company's executive offices are located. The
largest amount outstanding under such loans was $420,988 as of May 30, 1996,
the date of the note evidencing such indebtedness. The outstanding balances
under such loans accrue interest at a rate equal to 5.43% per annum, compounded
semi-annually. Pursuant to the terms of such loans, the Realty Trust is
obligated to repay the outstanding balances thereunder upon the closing of this
offering.
In December 1995, ARI paid dividends to Mr. Conway totaling $861,500, of
which amount Mr. Conway used $645,000 to repay principal and accrued interest
on the Loans. See "Dividend Policy." In connection with the refinancing of the
Realty Trust's mortgage in September 1995, the Realty Trust distributed
$649,000 to Mr. Conway. See Note 13 to Consolidated Financial Statements.
In November 1994, the Company acquired Axiom Consulting Group, Inc. ("Axiom")
(currently doing business as "Network Systems Consulting Practice") ("NSCP")
pursuant to a Stock Purchase Agreement dated as of November 30, 1994 by and
among the Company, Axiom and each of the stockholders of Axiom (the "Purchase
Agreement"). Mr. Jackson was President and a principal stockholder of Axiom
and, in exchange for his stock, received $97,500 at the closing of the
acquisition and a subordinated, non-negotiable promissory note in the principal
amount of $292,500, with interest at the prime rate as recalculated on each
anniversary of the note, payable in six equal semi-annual installments
commencing May 30, 1996. In addition, Mr. Jackson is eligible to receive
certain additional payments for his stock equal to 39% (representing his equity
interest in Axiom) of an amount equal to (i) 30% of the net profits, if any, of
NSCP (determined in accordance with the Purchase Agreement) for the 12 months
ended November 30, 1996, plus (ii) 25% of the net profits, if any, of NSCP for
the 12 months ended
34
<PAGE>
November 30, 1997, plus (iii) 20% of the net profits, if any, of NSCP for the
12 months ended November 30, 1998, provided that if the actual total revenue
for NSCP (determined in accordance with the Purchase Agreement) for the 12
months ended November 30, 1998 exceeds the revenue targeted for such period in
NSCP's strategic plan, then the payment shall equal the greater of 20% of the
net profit, if any, of NSCP for the 12 months ended November 30, 1998 or $3
million less the aggregate amount of contingent payments previously paid under
clauses (i) and (ii) above.
Mr. O'Brien, a director of the Company, is a director of Bank of Boston
Corporation. The First National Bank of Boston, a subsidiary of Bank of Boston
Corporation, will serve as the Company's Transfer Agent and Registrar.
The Company has adopted a policy, effective following the consummation of
this offering, that all material transactions between the Company and its
officers, directors and other affiliates must (i) be approved by a majority of
the members of the Company's Board of Directors and by a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
PRINCIPAL AND SELLING STOCKHOLDER
The following table sets forth as of the date of this Prospectus, and as
adjusted to reflect the sale by the Company of 1,900,000 shares of Common Stock
in this offering, certain information with respect to the beneficial ownership
of the Common Stock by: (i) each person known by the Company to beneficially
own more than 5% of the Common Stock; (ii) each director of the Company; (iii)
each of the Named Executive Officers; and (iv) all directors and executive
officers of the Company as a group. Other than Mr. Conway, none of the
Company's directors or Named Executive Officers beneficially owned any shares
of Common Stock as of the date of this Prospectus, although each of the
Company's outside directors and the Named Executive Officers own options to
purchase shares of Common Stock that are not exercisable within six months
following the date of this offering. The Company believes that the beneficial
owners of the Common Stock listed below, based on information furnished by such
owners, have sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING (1) NUMBER OFFERING (1)(2)
NAME OF DIRECTORS, NAMED EXECUTIVE ----------------------OF SHARES -----------------------
OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------- ----------- ------------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
G. Drew Conway.......... 8,000,000 100.0% 300,000 7,700,000 77.8%
c/o The Registry, Inc.
189 Wells Avenue
Newton, MA 02159
All directors and execu-
tive officers as a
group
(13 persons)........... 8,000,000 100.0 300,000 7,700,000 77.8
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to the shares. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days following the date of
this Prospectus, are deemed outstanding for computing the share ownership
and percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 330,000 shares of Common Stock. If the over-allotment
option is exercised in full, Mr. Conway will own 75.3% of the total Common
Stock issued and outstanding.
35
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Before the effectiveness of the Registration Statement of which this
Prospectus is a part, the authorized capital stock of the Company will consist
of 30,000,000 shares, of which 29,000,000 shares will be designated Common
Stock, no par value per share, and 1,000,000 shares will be designated
Preferred Stock, par value $0.10 per share. The following summary description
of the capital stock of the Company is qualified in its entirety by reference
to the Company's restated articles of organization ("Articles of Organization")
and amended and restated by-laws ("By-laws"), copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
As of the date of this Prospectus, there were 8,000,000 shares of Common
Stock outstanding, held of record by one stockholder. Holders of Common Stock
are entitled to one vote per share on all matters submitted to a vote of
stockholders and to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor, subject to
preferences that may be applicable to any outstanding Preferred Stock. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference of any outstanding shares
of Preferred Stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. All of the outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable. The rights, privileges and
preferences of Common Stock are subject to, and could be adversely affected by,
the issuance of Preferred Stock.
PREFERRED STOCK
Pursuant to the Company's Articles of Organization, upon the closing of this
offering, the Board of Directors will have the authority to issue 1,000,000
shares of Preferred Stock. Within the limitations established by law, the Board
of Directors is authorized to fix or alter the dividend rights, dividend rates,
rights and terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preference, conversion rights, voting rights and
other rights of any unissued shares of Preferred Stock, and to fix and amend
the number of shares constituting any issued or unissued series and the
designation thereof, or any of the foregoing. The issuance of Preferred Stock
in certain circumstances may have the effect of delaying, deterring or
preventing a change in control of the Company, may discourage bids for the
Company's Common Stock at a premium over the market price of the Common Stock
and may adversely affect the market price of, and the voting and other rights
of the holders of, the Common Stock. Upon the completion of this offering, the
Company will have no shares of Preferred Stock outstanding. At present the
Company has no plans to issue any shares of Preferred Stock.
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
ORGANIZATION AND BY-LAWS
The Company has elected to be governed by Chapter 110F of the Massachusetts
General Laws, an anti-takeover law. In general, this statute prohibits a
publicly-held Massachusetts corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
board of directors before becoming an interested stockholder, (ii) the
interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation) at
the time it becomes an interested stockholder, or (iii) the business
combination is approved by both the board of directors and the holders of two-
thirds of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder). An "interested stockholder" is a person
who, together with affiliates and associates, owns (or at any time within the
prior three years did own) 5% or more of the outstanding voting stock of the
corporation. A "business combination" includes a merger, a stock or asset sale,
and
36
<PAGE>
certain other transactions resulting in a financial benefit to the interested
stockholder. The Company may at any time elect not to be governed by Chapter
110F by vote of a majority of its stockholders, but such an election would not
be effective for 12 months and would not apply to a business combination with
any person who became an interested stockholder before such election.
Massachusetts General Laws Chapter 156B, Section 50A, generally requires that
publicly-held Massachusetts corporations have a classified board of directors
consisting of three classes as nearly equal in size as possible, with one class
to be elected each year to a three-year term. This statute also provides that
directors of publicly-held Massachusetts corporations may only be removed for
"cause." "Cause" includes (i) a felony conviction, (ii) declaration of an
unsound mind, or (iii) intentional misconduct or a knowing violation of law, if
the director derives an improper and substantial personal benefit from his
actions and his actions materially injure the Company. This statute further
provides that (a) vacancies and newly-created directorships may be filled
solely by a majority of directors remaining in office, (b) directors elected to
fill any vacancy hold office for the remainder of the full term of the class to
which they are elected, (c) no decrease in the number of directors shortens the
term of any incumbent director, and (d) the number of directors is to be fixed
only by vote of the board. The Company has elected not to be governed by
Chapter 156B, Section 50A, but has included provisions substantially similar to
those of Section 50A in its Articles of Organization and By-laws. The
classification of Directors may have the effect of making it more difficult for
stockholders to change the composition of the Board of Directors in a
relatively short period of time. At least two annual meetings of stockholders,
instead of one, will generally be required to effect a change in a majority of
the Board of Directors. This delay will provide the Board of Directors with
additional time to evaluate proposed takeover efforts and other extraordinary
corporate transactions, to consider appropriate alternatives to such proposals
and to act in what it believes to be the best interest of the stockholders. The
classified Board of Directors provision may only be amended, altered, changed
or repealed, and any inconsistent provision may only be adopted, by a vote of
holders of 75% of the shares entitled to vote at an election of directors.
The Company's Articles of Organization include a provision that excludes the
Company from the applicability of Massachusetts General Laws Chapter 110D,
entitled "Regulation of Control Share Acquisitions." In general, this statute
provides that any stockholder of a corporation subject to this statute who
acquires beneficial ownership of 20% or more or the outstanding voting stock of
a corporation may not vote such stock unless the stockholders of the
corporation so authorize. (For purposes of the statute, a person is not deemed
to be a beneficial owner of shares as to which such person may exercise voting
power solely by virtue of a revocable proxy conferring the right to vote.) The
Board of Directors may amend the Company's By-laws at any time to subject the
Company to this statute prospectively.
The Company's By-laws require that nominations for the Board of Directors
made by a stockholder comply with certain notice procedures. In the case of an
annual meeting or a special meeting in lieu of an annual meeting, a notice by a
stockholder of a planned nomination must be given not more than 90 days and not
less than 60 days before the first anniversary of the preceding year's annual
meeting, provided that if the date of the annual meeting or special meeting in
lieu of an annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by a stockholder must be given not more
than 90 days before the meeting and not less than the later of 60 days before
the meeting or 10 days after the date on which public announcement of the date
of the meeting is first made by the Company. In the case of a special meeting
(other than a special meeting in lieu of an annual meeting), notice by a
stockholder must be given not more than 90 days before such meeting and not
less than the later of 60 days before such meeting or 10 days after the date on
which public announcement of the date of the meeting is first made by the
Company. The stockholder's notice of nomination must include particular
information about the stockholder, the nominee and any beneficial owner on
whose behalf the nomination is made. The Company may require any proposed
nominee to provide such additional information as is reasonably required to
determine the eligibility of the proposed nominee.
37
<PAGE>
The By-laws require that a stockholder seeking to have any business conducted
at a meeting of stockholders give notice to the Company in accordance with
certain procedures specified in the By-Laws, including a timetable for
notification identical to the timetable for nominating members of the Board of
Directors described in the preceding paragraph. The notice from the stockholder
must describe the proposed business to be brought before the meeting and
include information about the stockholder making the proposal, any beneficial
owner on whose behalf the proposal is made, and any other stockholder known to
be supporting the proposal.
The By-laws require the Company to call a special meeting of stockholders at
the request of stockholders holding at least 40% of the voting power of the
Company, the minimum threshold for publicly-held Massachusetts corporations
required by Massachusetts General Laws, Chapter 156B, Section 34. Upon
adoption, certain provisions in the Company's By-laws pertaining to
stockholders and directors (including the provisions described above pertaining
to nominations and the presentation of business before a meeting of the
stockholders) may not be amended and no provision inconsistent therewith may be
adopted without the approval of either the Board of Directors or the holders of
at least 75% of the voting power of the Company.
The Company's Articles of Organization include provisions eliminating the
personal liability of the Company's directors for monetary damages resulting
from breaches in their fiduciary duty to the extent permitted by the
Massachusetts Business Corporation Law. Additionally, the Company's Articles of
Organization provide that the Company shall indemnify each person who is or was
a director, officer, employee or other agent of the Company, and each person
who is or was serving at the request of the Company as a director, trustee,
officer, employee or other agent of another organization in which it directly
or indirectly owns shares or of which it is directly or indirectly a creditor,
against all liabilities, costs and expenses reasonably incurred by any such
person in connection with the defense or disposition of or otherwise in
connection with or resulting from any action, suit or other proceeding in which
they may be involved by reason of being or having been such a director,
officer, employee, agent or trustee, or by reason of any action taken or not
taken in such capacity, except with respect to any matter as to which such
person shall have been finally adjudicated by a court of competent jurisdiction
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the Company and provided that indemnification for
matters that are settled requires approval by (i) a majority of disinterested
directors, or if there are not at least two such directors, a majority of the
directors based upon a finding by independent legal counsel that the statutory
standard appears to have been met; (ii) the holders of a majority of the shares
of stock entitled to vote for directors of the Company, exclusive of shares
held by interested directors and officers; or (iii) a court of competent
jurisdiction.
The Articles of Organization provide that certain transactions, such as the
sale, lease or exchange of all or substantially all of the Company's property
and assets and the merger or consolidation of the Company into or with a 10% or
greater stockholder or its affiliates must be authorized by the approval of the
holders of 75% of the shares of each class of stock entitled to vote thereon,
rather than by two-thirds as otherwise provided by statute, provided that such
transactions may be approved by the holders of a majority of the shares of each
class of stock entitled to vote thereon if (i) they have been authorized by a
majority of the members of the Board of Directors who are not affiliates of the
10% stockholder and were directors before the 10% stockholder acquired his
interest or who are successors to such directors, having been recommended to
succeed such directors by a majority of the continuing directors; and (ii) the
requirements of any other applicable provision of the Articles of Organization
have been met.
Subject to the above limitations, the Articles of Organization provide that
certain transactions, including the sale, lease or exchange of all or
substantially all of the property or assets of the Company, or the merger or
consolidation of the Company, which would otherwise require approval by the
affirmative vote of two-thirds of the shares of each class of stock entitled to
vote thereon, may be approved by the vote of a majority of such stockholders,
provided that a majority of the Board of Directors has recommended approval of
the transaction to the stockholders.
38
<PAGE>
Certain of the provisions of the Articles of Organization and By-Laws
discussed above would make more difficult or discourage a proxy contest or the
assumption of control by a holder of a substantial block of the Company's
stock. Such provisions could also have the effect of discouraging a third party
from making a tender offer or otherwise attempting to obtain control of the
Company, even though such an attempt might be beneficial to the Company and its
stockholders. In addition, since the Articles of Organization and By-Laws are
designed to discourage accumulations of large blocks of the Company's stock by
purchasers whose objective is to have such stock repurchased by the Company at
a premium, such provisions could tend to reduce the temporary fluctuations in
the market price of the Company's stock which are caused by such accumulations.
Accordingly, stockholders could be deprived of certain opportunities to sell
their stock at a potentially higher market price.
REGISTRATION RIGHTS
In connection with his Employment Agreement with the Company, Mr. Conway has
been provided with registration rights that entitle him to notice of, and
inclusion of shares of Common Stock in, any registration of shares of Common
Stock by the Company for its account or otherwise (other than certain
registrations relating solely to employee benefit plans or certain business
combinations), provided that in any underwritten offering, the number of shares
of Common Stock that Mr. Conway may include in such offering will be subject to
reduction before any reduction of shares of Common Stock by the Company if the
underwriters determine that marketing factors require a limitation on the
number of shares to be included in the offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is The First
National Bank of Boston.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for the Common Stock.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.
Upon completion of this offering, the Company will have 9,900,000 shares of
Common Stock outstanding (assuming no exercise of the Underwriters' over-
allotment option or exercise of outstanding stock options). Of these shares,
the 2,200,000 shares sold in this offering will be freely transferable without
restriction, except for any shares purchased by an "affiliate" of the Company,
as that term is defined in Rule 144 promulgated under the Securities Act, or by
an individual or entity subject to a contractual restriction on resale. The
remaining 7,700,000 shares (the "Restricted Shares") were issued and sold by
the Company in private placement transactions.
The Selling Stockholder, who holds all of the Restricted Shares, has agreed
(the "Lock-Up Agreement") not to offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of Common Stock during the 180-day
period following the date of this Prospectus, without the prior written consent
of the Representatives of the Underwriters. The Company has also agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or any rights to acquire Common Stock, except issuances under the
Company's outstanding stock option and benefit plans and in connection with
certain possible acquisitions of products, technologies and businesses
(provided that the terms of such issuances in connection with any such possible
acquisitions provide that such shares of Common Stock shall not be resold for a
period of 180 days after the date of this Prospectus), or to accelerate the
vesting schedule of any outstanding stock options, for a period of 180 days
after the date of this Prospectus, without the prior written consent of the
Representatives of the Underwriters. Neither the Company nor Mr. Conway
currently intends to seek early release from the Lock-Up Agreement. The
Representatives of the Underwriters have informed the Company that the
Underwriters have no general policy with respect to granting early release from
lock-up agreements but would make a decision based upon the facts and
circumstances at the time of the request.
39
<PAGE>
All of the Restricted Shares will become eligible for sale under Rule 144
upon the expiration of the Lock-Up Agreement beginning 180 days after the
effective date of this offering.
In general, under Rule 144 as currently in effect, beginning 90 days after
the offering a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities within the meaning of Rule 144 for at
least two years is permitted to sell within any three-month period a number of
shares that does not exceed the greater of: (i) 1% of the then outstanding
shares of the Company's Common Stock (99,000 shares immediately after the
offering); or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks preceding
the date on which notice of the sale is filed with the Commission, or if no
notice is required, the date of receipt of the order to execute the
transaction. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who owns Restricted Shares that
were purchased from the Company (or any affiliate) at least three years
previously, will be entitled to sell such shares under Rule 144(k) immediately
after the offering (subject to the foregoing Lock-Up Agreement, if applicable)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.
Securities issued in reliance on Rule 701 are also restricted securities and,
beginning 90 days after the effective date of the Registration Statement of
which this Prospectus is a part, may be sold by stockholders other than
affiliates of the Company subject only to the manner of sale provisions of Rule
144 and by affiliates under Rule 144 without compliance with its two-year
holding period requirement.
The Company intends to file registration statements on Form S-8 under the
Securities Act covering approximately 2,000,000 shares of Common Stock reserved
for issuance under the 1996 Stock Plan, the 1996 Purchase Plan and the
Directors Stock Plan. See "Management -- Stock Awards." Such registration
statements are expected to be filed 180 days after the date of this Prospectus
and will automatically become effective upon filing. Accordingly, shares
registered under such registration statements will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market,
except to the extent that such shares are subject to vesting restrictions or
the contractual restrictions described above. As of March 30, 1996, options to
purchase 1,106,500 shares were granted and outstanding.
There has been no public market for the Common Stock and no prediction can be
made as to the effect, if any, that market sales of Common Stock or the
availability of such shares for sale will have on the market price of the
Common Stock.
40
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholder have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Adams,
Harkness & Hill, Inc. and A.G. Edwards & Sons, Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Stockholder, the respective numbers of shares of
Common Stock set forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ----------- ------------
<S> <C>
Adams, Harkness & Hill, Inc........................................
A.G. Edwards & Sons, Inc...........................................
---------
Total............................................................ 2,200,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all shares offered hereby, if
any are taken.
The Underwriters propose to offer the shares of Common Stock in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price
less a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the Representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 330,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 2,200,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 2,200,000 shares of Common
Stock offered hereby.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of the Representatives,
except for the shares of Common Stock offered hereby and except that the
Company may issue securities pursuant to the Company's stock plans and in
connection with certain acquisitions, subject to certain restrictions. The
Selling Stockholder, who will hold in aggregate 7,700,000 shares of Common
Stock following the offering, has agreed with the Underwriters not to offer to
sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of Common Stock owned beneficially by
him, other than as a bona fide gift or gifts to or in trust for a person or
entity who or which agrees in writing to be bound by the foregoing restrictions
for a period of 180 days after the date of this Prospectus, without the prior
written consent of the Representatives.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
41
<PAGE>
THE REGISTRY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Price Waterhouse LLP............................................ F-2
Consolidated Balance Sheet as of May 31, 1994, June 24, 1995 and March 30,
1996..................................................................... F-3
Consolidated Statement of Income for the Years Ended May 31, 1993, May 31,
1994 and June 24, 1995, and for the Nine Months Ended March 25, 1995 (un-
audited) and March 30, 1996.............................................. F-4
Consolidated Statement of Changes in Stockholder's Equity for the Years
Ended May 31, 1993, May 31, 1994 and June 24, 1995, and for the Nine
Months Ended March 25, 1995 (unaudited) and March 30, 1996............... F-5
Consolidated Statement of Cash Flows for the Years Ended May 31, 1993, May
31, 1994 and June 24, 1995, and for the Nine Months Ended March 25, 1995
(unaudited) and March 30, 1996........................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of The Registry, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
The Registry, Inc. and its subsidiaries (the "Company") at March 30, 1996,
June 24, 1995 and May 31, 1994, and the results of their operations and their
cash flows for the nine months ended March 30, 1996, for the year ended June
24, 1995, for the one month ended June 25, 1994 (not presented separately
herein) and for each of the two years in the period ended May 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
May 8, 1996
F-2
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
------- -------- ---------
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable, net of allowance for doubtful
accounts of $192, $317 and $351 at May 31, 1994,
June 24, 1995 and
March 30, 1996, respectively..................... $12,356 $ 22,448 $ 27,115
Notes receivable from related parties............. 365 422 57
Deferred income taxes............................. -- -- 174
Other current assets.............................. 259 420 509
------- -------- --------
Total current assets.......................... 12,980 23,290 27,855
Fixed assets, net................................... 1,262 2,758 5,111
Notes receivable from officers...................... 670 1,121 426
Other assets........................................ 225 1,294 1,332
Deferred income taxes............................... 393 180 160
------- -------- --------
$15,530 $ 28,643 $ 34,884
======= ======== ========
Liabilities and Stockholder's Equity
Current liabilities:
Line of credit.................................... $ 9,234 $ 17,938 $ 20,613
Current portion of capital lease obligations...... -- -- 81
Current portion of long-term debt................. 77 946 1,173
Accounts payable.................................. 274 1,252 553
Accrued salaries and wages........................ 897 1,359 1,807
Other accrued expenses............................ 1,208 1,903 2,964
Income taxes payable.............................. -- 99 1,185
Deferred income taxes............................. 1,654 369 227
------- -------- --------
Total current liabilities..................... 13,344 23,866 28,603
------- -------- --------
Deferred income taxes............................... -- 939 1,050
------- -------- --------
Capital lease obligations........................... -- -- 76
------- -------- --------
Long-term debt...................................... 50 1,554 3,110
------- -------- --------
Commitments and contingencies (Notes 3 and 11)
Stockholder's equity:
Preferred stock, $.10 par value (Note 15)
Common stock, no par value:
Authorized--12,000,000 shares; issued and out-
standing--2,666,667 shares at May 31, 1994 and
June 24, 1995, and 8,000,000 shares at March
30, 1996....................................... 10 10 10
Common stock, $.01 par value:
Authorized, issued and outstanding--200,000
shares at May 31, 1995 and June 24, 1995, and
no shares at March 30, 1996.................... 2 2 --
Additional paid-in capital........................ 453 453 344
Retained earnings................................. 1,671 1,819 1,691
------- -------- --------
Total stockholder's equity...................... 2,136 2,284 2,045
------- -------- --------
$15,530 $ 28,643 $ 34,884
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
---------------- YEAR ENDED ---------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
------- ------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................... $39,845 $60,367 $98,687 $70,258 $102,094
Cost of revenue............. 30,630 46,262 74,288 53,033 75,210
------- ------- ------- ------- --------
9,215 14,105 24,399 17,225 26,884
Selling, general and
administrative expenses.... 8,319 12,831 22,925 16,091 22,768
------- ------- ------- ------- --------
Income from operations...... 896 1,274 1,474 1,134 4,116
Interest expense............ (340) (512) (1,201) (783) (1,669)
Interest and other income... 48 53 56 42 144
------- ------- ------- ------- --------
Income before taxes......... 604 815 329 393 2,591
Income tax provision........ 281 430 4 113 1,208
------- ------- ------- ------- --------
Net income.................. $ 323 $ 385 $ 325 $ 280 $ 1,383
======= ======= ======= ======= ========
Unaudited pro forma
information
(Note 14):
Pro forma income before
taxes.................... $ 329 $ 393 $ 2,591
Pro forma income tax
provision................ 243 221 1,130
------- ------- --------
Pro forma net income...... $ 86 $ 172 $ 1,461
======= ======= ========
Pro forma net income per
share.................... $ .01 $ .02 $ .17
======= ======= ========
Weighted average common
and common equivalent
shares................... 8,352 8,352 8,352
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK ADDI- TOTAL
NO PAR $.01 PAR TIONAL STOCK-
--------------- --------------- PAID-IN RETAINED HOLDER'S
SHARES VALUE SHARES VALUE CAPITAL EARNINGS EQUITY
--------- ----- -------- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31,
1992................... 2,666,667 $ 10 100,000 $ 1 $ 99 $1,013 $ 1,123
Distribution............ -- -- -- -- -- (50) (50)
Proceeds from issuance
of common stock........ -- -- 100,000 1 199 -- 200
Net income for the
year................... -- -- -- -- -- 323 323
--------- ---- -------- ----- ---- ------ -------
Balance at May 31,
1993................... 2,666,667 10 200,000 2 298 1,286 1,596
Capital contribution.... -- -- -- -- 155 -- 155
Net income for the
year................... -- -- -- -- -- 385 385
--------- ---- -------- ----- ---- ------ -------
Balance at May 31,
1994................... 2,666,667 10 200,000 2 453 1,671 2,136
Net loss for the month.. -- -- -- -- -- (177) (177)
--------- ---- -------- ----- ---- ------ -------
Balance at June 25,
1994................... 2,666,667 10 200,000 2 453 1,494 1,959
Net income for the
year................... -- -- -- -- -- 325 325
--------- ---- -------- ----- ---- ------ -------
Balance at June 24,
1995................... 2,666,667 10 200,000 2 453 1,819 2,284
Consolidation of real
estate trust
(Note 13).............. -- -- -- -- (111) -- (111)
Distributions........... -- -- -- -- -- (1,511) (1,511)
Acquisition of ARI by
TRI (Note 2)........... 5,333,333 -- (200,000) (2) 2 -- --
Net income for the nine
months................. -- -- -- -- -- 1,383 1,383
--------- ---- -------- ----- ---- ------ -------
Balance at March 30,
1996................... 8,000,000 $ 10 -- $ -- $344 $1,691 $ 2,045
========= ==== ======== ===== ==== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
---------------- YEAR ENDED ---------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
------- ------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................. $ 323 $ 385 $ 325 $ 280 $ 1,383
Adjustments to reconcile
net income to net cash
used for operating
activities:
Depreciation and
amortization............. 96 196 517 396 633
Provision for losses on
accounts receivable...... (38) 147 125 138 34
Deferred income taxes..... 266 430 (88) (66) (185)
Increase in accounts
receivable............... (2,156) (5,660) (9,688) (6,250) (4,701)
(Increase) decrease in
other current assets..... 12 (102) (143) (139) (40)
Increase in other assets.. (32) (174) (190) (134) (107)
Increase (decrease) in
accounts payable......... 71 159 910 507 (699)
Increase in accrued
expenses................. 322 818 690 598 977
Increase in accrued
salaries and wages....... -- 897 396 289 448
Increase in income taxes
payable.................. -- -- 92 179 1,086
------- ------- ------- ------- -------
Net cash used for
operating activities..... (1,136) (2,904) (7,054) (4,202) (1,171)
------- ------- ------- ------- -------
Cash flows from investing
activities:
Cash disbursed for
acquisition............... -- -- (250) (250) --
Increase in notes
receivable from officers.. (152) (82) (406) (284) (365)
Repayment of notes
receivable from officers.. -- -- -- -- 1,060
Decrease (increase) in
notes receivable from
related parties........... (560) 195 (57) (57) --
Purchases of fixed assets.. (693) (578) (1,885) (1,545) (973)
------- ------- ------- ------- -------
Net cash used for
investing activities..... (1,405) (465) (2,598) (2,136) (278)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Net borrowings on line of
credit.................... 2,229 3,294 8,023 5,160 2,675
Principal payments on long-
term debt and capital
lease obligations......... (38) (80) (451) (902) (1,875)
Proceeds from issuance of
long-term debt............ 200 -- 2,080 2,080 2,160
Capital contribution....... -- 155 -- -- --
Proceeds from issuance of
common stock.............. 200 -- -- -- --
Distributions.............. (50) -- -- -- (1,511)
------- ------- ------- ------- -------
Net cash provided by
financing activities..... 2,541 3,369 9,652 6,338 1,449
------- ------- ------- ------- -------
Net change in cash.......... 0 0 0 0 0
Cash, beginning of period... 0 0 0 0 0
------- ------- ------- ------- -------
Cash, end of period......... $ 0 $ 0 $ 0 $ 0 $ 0
======= ======= ======= ======= =======
Supplemental disclosure of
cash flow information:
Cash paid for interest..... $ 340 $ 512 $ 1,201 $ 783 $ 1,669
Cash paid for income
taxes..................... $ -- $ 15 $ -- $ -- $ 307
</TABLE>
See additional disclosure of non-cash investing and financing activity in Notes
3, 4 and 13.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 13 states.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying financial statements include the accounts of TRI and
America's Registry, Inc. ("ARI") which, prior to January 1, 1996, were owned
and controlled by a common sole stockholder who serves as an officer of the
Company. Effective January 1, 1996, TRI, through a wholly-owned subsidiary,
acquired all of the outstanding shares of common stock of ARI and the
stockholder of ARI received an additional 5,333,333 shares of the common stock
of TRI. The accompanying financial statements also include the accounts of
TRI's wholly-owned subsidiary, The Registry, Inc. Network Consulting Practice
(formerly Axiom Consulting Group, Inc.), subsequent to its acquisition on
November 30, 1994 (see Note 3), 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 (see Note 13). All
intercompany balances and transactions have been eliminated.
Stock Split
On March 22, 1996, the Company's sole stockholder approved a 177.77778-for-1
stock split on the common stock of TRI. At that time, the Company's
stockholder also approved an increase to 12,000,000 in the number of
authorized shares of the common stock of TRI, no par value. On April 10, 1996,
the Company's stockholder approved an additional increase to 29,000,000 in the
number of authorized shares of the common stock of TRI. All shares and per
share amounts included in the consolidated financial statements have been
adjusted to give retroactive effect to the stock split for all periods
presented.
Fiscal Year
The Company changed its fiscal year end from May 31 to the last Saturday in
June effective with the fiscal year ended June 24, 1995. The consolidated
statements of income, of changes in stockholder's equity and of cash flows are
presented for each of the two years in the period ended May 31, 1994, the year
ended June 24, 1995 and for the nine months ended March 30, 1996.
The Company's results of operations for the month ended June 25, 1994
reflected revenue of $5,812,000, cost of revenue of $4,468,000, expenses of
$1,588,000, an income tax benefit of $67,000 and net loss of $177,000. During
the month ended June 25, 1994, net cash of $585,000 and $90,000 was used for
operating and investing activities, respectively, and net cash of $675,000 was
provided by financing activities.
Revenue Recognition, Accounts Receivable and Concentration of Credit Risk
Revenue is recognized as services are performed. Ongoing credit evaluations
of customers' financial condition are performed and collateral is not
required. Concentration of credit risk with respect to accounts receivable is
limited due to the number and diversity of customers comprising the Company's
customer base. At March 30, 1996, one customer comprised approximately 13% of
the Company's accounts receivable. No single customer accounted for more than
10% of accounts receivable at May 31, 1994 or June 24, 1995. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
F-7
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Additions, renewals and betterments of
fixed assets are capitalized. Repair and maintenance expenditures for minor
items are generally expensed as incurred. Depreciation of fixed assets is
provided using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Building and improve-
ments.................. 31 1/2 years
Computer equipment...... 5 years
Furniture and equip-
ment................... 5 to 7 years
Motor vehicles.......... 5 years
Leasehold improvements.. lesser of estimated useful life or remaining lease term
</TABLE>
Advertising Costs
Advertising costs are recorded as expense when incurred. There were no
advertising costs recorded as assets at May 31, 1994, June 24, 1995 or March
30, 1996. Total advertising expenses for the years ended May 31, 1993, May 31,
1994 and June 24, 1995 and the nine months ended March 25, 1995 and March 30,
1996 were $158,000, $446,000, $627,000, $461,000 (unaudited) and $231,000,
respectively.
Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial statement and tax
bases of assets and liabilities, utilizing currently enacted tax rates. The
effect of any future change in tax rates is recognized in the period in which
the change occurs. Through May 31, 1994, TRI had used the cash method of
accounting for income tax reporting purposes. Effective June 1, 1994, TRI
converted to the accrual method of accounting for income tax reporting
purposes.
As described in Note 8, ARI had previously elected to be treated as a small
business corporation for income tax purposes with income or loss and credits
passed through to the stockholder. Concurrent with the acquisition of ARI by
TRI described above, ARI's election to be treated as an S corporation
terminated (see Note 8). The companies will continue to file separate tax
returns.
Use of Estimates
The preparation of 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 contingencies at May 31, 1994, June 24, 1995 and March 30, 1996,
and the reported amounts of revenues and expenses during the periods then
ended. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to the current period presentation.
Recently Enacted Accounting Standards
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for
F-8
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Lived Assets to be Disposed Of." In October 1995, the FASB issued SFAS
No. 123, "Accounting for Stock-Based Compensation." Both SFAS No. 121 and No.
123 are effective for fiscal years beginning after December 15, 1995. The
Company will adopt these standards as required and their future adoption is
not expected to have a material effect on the Company's financial position or
results of operations or cash flows.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation of the results of operations and cash flows of the Company for
the nine months ended March 25, 1995, as presented in the accompanying
consolidated financial statements. Results of operations for the interim
period are not necessarily indicative of the results of operations for the
full fiscal year.
3. ACQUISITION OF SUBSIDIARY
On November 30, 1994, TRI acquired all of the common stock of Axiom
Consulting Group, Inc., an information technology consulting firm providing
services similar to those of the Company. The acquired entity retained its
separate corporate form and was subsequently renamed The Registry, Inc.
Network Consulting Practice ("NCP"). The purchase price was $1,000,000, of
which $250,000 was paid in cash at the closing and $750,000 is in the form of
promissory notes which will be paid in installments through November 1998 (see
Note 7).
The acquisition has been accounted for as a purchase and, accordingly, the
purchase price, including an additional $12,000 of related costs which were
incurred by TRI, has been allocated to the assets acquired and the liabilities
assumed based on their estimated fair values at the date of acquisition, as
follows:
<TABLE>
<S> <C>
Accounts receivable............................................... $64,000
Fixed assets...................................................... 81,000
Other assets...................................................... 9,000
Accounts payable.................................................. 3,000
Other liabilities................................................. 57,000
</TABLE>
Goodwill of $918,000, representing the excess of the purchase price over the
fair value of the assets acquired and liabilities assumed, is included in
other assets in the accompanying balance sheet and is being amortized on a
straight-line basis over 10 years. Accumulated amortization at June 24, 1995
and March 30, 1996 was $53,000 and $122,000, respectively.
The pro forma results of operations, assuming that the acquisition of NCP
occurred at the beginning of the years ended May 31, 1994 and June 24, 1995,
would not materially differ from TRI's reported results of operations.
TRI is required to make additional payments up to $3,000,000 to the selling
stockholders of the former Axiom Consulting Group, Inc., contingent upon the
revenue and profits of the subsidiary for the four years subsequent to the
acquisition. Such payments are determined as a stated percentage of net income
of the subsidiary, as defined in the purchase agreement, with a provision that
all $3,000,000 would be payable to the selling stockholders in the event that
the subsidiary's revenue exceeds a stated amount in the 12 month period ending
November 30, 1998. Such amounts, if paid, will be recorded as additional
purchase price. No amounts have been accrued for these contingent payments at
June 24, 1995 or March 30, 1996. In the opinion of management, based upon
NCP's results of operations to date and future projections, the probability of
payment of contingent consideration in excess of $2 million is considered to
be remote as of March 30, 1996.
F-9
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. CONSOLIDATED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Other Current Assets:
Prepaid expenses............................ $ 135,000 $ 263,000 $ 388,000
Advances to officer......................... 74,000 74,000 --
Advances to employees....................... 50,000 83,000 121,000
---------- ---------- ----------
$ 259,000 $ 420,000 $ 509,000
========== ========== ==========
Fixed Assets:
Land........................................ $ -- $ -- $ 360,000
Building.................................... -- -- 1,439,000
Computer equipment.......................... 688,000 2,066,000 2,892,000
Furniture and equipment..................... 593,000 1,263,000 1,451,000
Motor vehicles.............................. 19,000 19,000 19,000
Leasehold and building improvements......... 376,000 395,000 642,000
---------- ---------- ----------
Total fixed assets........................ 1,676,000 3,743,000 6,803,000
Less: accumulated depreciation and amortiza-
tion....................................... 414,000 985,000 1,692,000
---------- ---------- ----------
$1,262,000 $2,758,000 $5,111,000
========== ========== ==========
</TABLE>
Computer equipment recorded under capital leases amounted to approximately
$194,000 at March 30, 1996 ($0 at May 31, 1994 and June 24, 1995). Total
accumulated amortization related to these leases is approximately $30,000 at
March 30, 1996. Amortization expense for the period is included in
depreciation and amortization in the accompanying consolidated statement of
cash flows.
5. RELATED PARTY TRANSACTIONS
Notes receivable from officers in the accompanying consolidated balance
sheet primarily represent promissory notes from the Company's sole
stockholder. The promissory notes bear interest at an annual interest rate of
10%. Related interest income for the years ended May 31, 1993, May 31, 1994
and June 24, 1995 and the nine months ended March 25, 1995 and March 30, 1996
was $48,000, $53,000, $56,000, $42,000 (unaudited) and $50,000, respectively.
On April 15, 1996, the stockholder borrowed an additional $275,000 from the
Company.
Notes receivable from related parties at May 31, 1994 and June 24, 1995
include promissory notes totalling $365,000 from a real estate trust, of which
the sole stockholder of the Company is the sole beneficiary (the "Trust").
These notes are payable on demand and bear interest at a variable rate (5.7%
and 5.6% at May 31, 1994 and June 24, 1995, respectively). Commencing on
September 19, 1995, the accounts of the Trust have been consolidated with
those of the Company (see Note 13), and these promissory notes have been
eliminated in consolidation. At June 24, 1995 and March 30, 1996, notes
receivable from related parties also include promissory notes totaling $57,000
from certain of the former stockholders of NCP. These notes bear interest at
the prime rate published in The Wall Street Journal (9% at June 24, 1995 and
8.25% at March 30, 1996) and are payable in installments at various dates
through November 30, 1996.
F-10
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LINE OF CREDIT
On March 31, 1993, TRI and ARI combined their separate lines of credit into
a single line of credit with the bank; this agreement was amended on June 7,
1995 to allow a maximum borrowing of $17,000,000 and again on October 4, 1995
to allow a maximum borrowing of $18,000,000, payable on demand. The agreement
provided a borrowing base of 80% of eligible accounts receivable, as defined,
less the aggregate amount of issued and undrawn letters of credit. The line of
credit was collateralized by all the assets of the Company and the personal
guarantee of the Company's stockholder. Interest was paid monthly in arrears
at the bank's prime rate plus 0.75% (8% and 9.75% at May 31, 1994 and June 24,
1995, respectively). There were no letters of credit outstanding at May 31,
1994 or June 24, 1995.
In March 1996, the Company terminated its existing line of credit and
replaced it with a line of credit from a different bank. The new line of
credit provides a borrowing base of 85% of eligible accounts receivable, as
defined, up to a maximum borrowing of $25,000,000, payable on demand. Interest
is payable monthly in arrears at the bank's prime rate plus .5% (8.75% at
March 30, 1996) or the LIBOR rate plus 2.5% (7.97% at March 30, 1996) at the
option of the Company. The new line of credit is collateralized by all of the
assets of the Company, contains certain restrictions, including limitations on
the amount of distributions which can be made to the stockholder, purchases of
fixed assets and loans which can be made to officers, and requires the
maintenance of certain financial covenants. The line of credit agreement
expires in February 1999.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
12.5% note payable due on demand................ $ 10,000 $ -- $ --
Note payable due January 1, 1996................ 117,000 59,000 --
Term loan due December 1, 1996.................. -- 563,000 --
10.7% term loan due September 30, 1997.......... -- 502,000 369,000
11% term loan due March 13, 1998................ -- 626,000 474,000
10% term loan due July 4, 1998.................. -- -- 592,000
Notes payable due November 30, 1998............. -- 750,000 750,000
9.375% term loan due August 27, 2010............ -- -- 1,408,000
6.75% term loan due April 1, 2013............... -- -- 690,000
-------- ---------- ----------
127,000 2,500,000 4,283,000
Less: current portion........................... 77,000 946,000 1,173,000
-------- ---------- ----------
$ 50,000 $1,554,000 $3,110,000
======== ========== ==========
</TABLE>
The note payable due January 1, 1996 was payable to a bank in monthly
installments, including interest at the bank's prime rate plus 1.5% (8.75 and
10.5% at May 31, 1994 and June 24, 1995, respectively).
The term loan due December 1, 1996, payable to a bank in monthly
installments of $31,000 plus interest at the bank's prime rate plus 1.25%
(10.25% at June 24, 1995), was repaid in March 1996.
The term loans due September 30, 1997, March 13, 1998 and July 4, 1998 are
payable in monthly installments of $21,000, $22,000 and $24,000, respectively,
including interest.
F-11
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The notes payable due November 30, 1998 resulted from TRI's acquisition of
the former Axiom Consulting Group, Inc. in November 1994 (see Note 3). The
notes are unsecured and are payable to the former stockholders of Axiom
Consulting Group, Inc. in semi-annual installments of $125,000, plus interest
at the prime rate published in The Wall Street Journal, beginning in May 1996.
The term loan due August 27, 2010 is payable to a bank in monthly
installments of $12,000, including interest.
The term loan due April 1, 2013 is payable in semi-annual installments of
$34,000, including interest.
The term loans due September 30, 1997, March 13, 1998 and July 4, 1998 are
collateralized by certain of the Company's assets.
The term loan due August 27, 2010 is collateralized by certain property of
the Trust and the personal guarantee of the Company's sole stockholder. The
term loan due April 1, 2013 is secured by a mortgage on the land and building
of the Trust and the assignment of a life insurance policy on the Company's
sole stockholder.
Aggregate maturities of long-term debt are as follows at March 30, 1996:
<TABLE>
<S> <C>
Remainder of fiscal 1996...................................... $ 323,000
1997.......................................................... 994,000
1998.......................................................... 810,000
1999.......................................................... 192,000
2000.......................................................... 47,000
Thereafter.................................................... 1,917,000
----------
$4,283,000
==========
</TABLE>
8. INCOME TAXES
Prior to January 1, 1996, ARI had elected to be an S corporation for federal
income tax purposes as provided in Section 1362(a) of the Internal Revenue
Code. As such, the corporate income or loss and credits were passed through to
the stockholder and reported on his personal tax return.
In conjunction with the acquisition of all of the common stock of ARI by TRI
(see Note 2), ARI's election to be treated as an S corporation terminated,
effective January 1, 1996. As a result, the income or loss of ARI subsequent
to January 1, 1996 will be subject to corporate income tax. The income tax
provision (benefit) described below for the nine months ended March 30, 1996
includes the income taxes related to ARI since January 1, 1996. The unaudited
pro forma provision for income taxes and pro forma net income on the
accompanying consolidated statement of income (see Note 14) reflects the
estimated results of operations if ARI had been subject to corporate income
taxes during the year ended June 24, 1995 and the nine months ended March 25,
1995 and March 30, 1996.
At the time of conversion of ARI from an S corporation to a C corporation, a
net deferred tax liability of $642,000 was recorded through the income tax
provision on January 1, 1996. This deferred tax liability was comprised
principally of the remaining effects of ARI converting from the cash basis to
the accrual basis for tax reporting purposes on January 1, 1994, offset by
deferred tax assets for certain accrued expenses which are recognized in
different periods for financial and tax reporting.
F-12
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision (benefit) for federal and state income taxes
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
----------------- YEAR ENDED ----------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
-------- -------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal................ $ 15,000 $ -- $ 54,000 $137,000 $1,049,000
State.................. -- -- 38,000 42,000 344,000
-------- -------- -------- -------- ----------
15,000 -- 92,000 179,000 1,393,000
-------- -------- -------- -------- ----------
Deferred:
Federal................ 213,000 344,000 (64,000) (50,000) (632,000)
State.................. 53,000 86,000 (24,000) (16,000) (195,000)
-------- -------- -------- -------- ----------
266,000 430,000 (88,000) (66,000) (827,000)
-------- -------- -------- -------- ----------
Change in tax status of
ARI..................... -- -- -- -- 642,000
-------- -------- -------- -------- ----------
$281,000 $430,000 $ 4,000 $113,000 $1,208,000
======== ======== ======== ======== ==========
</TABLE>
Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. Under SFAS 109, the
benefit associated with future deductible temporary differences and operating
loss or credit carryforwards is recognized if it is more likely than not that
a benefit will be realized. Deferred tax expense (benefit) represents the
change in the net deferred tax asset or liability balance. Deferred tax assets
and liabilities are comprised of the following at May 31, 1994, June 24, 1995,
and March 30, 1996:
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss and credit
carryforwards.............................. $ 413,000 $ 214,000 $ 202,000
Allowance for doubtful accounts............. -- -- 90,000
Accounts payable and accrued expenses....... 351,000 27,000 162,000
Other....................................... 14,000 51,000 --
---------- ---------- ----------
Total gross deferred tax assets......... 778,000 292,000 454,000
---------- ---------- ----------
Deferred tax liabilities:
Conversion from cash to accrual basis....... -- 1,103,000 1,121,000
Accounts receivable......................... 1,887,000 170,000 --
Prepaid expenses............................ 82,000 55,000 --
Fixed assets................................ 20,000 42,000 226,000
Other....................................... 50,000 50,000 50,000
---------- ---------- ----------
Total gross deferred tax liabilities.... 2,039,000 1,420,000 1,397,000
---------- ---------- ----------
Net deferred tax liability.............. $1,261,000 $1,128,000 $ 943,000
========== ========== ==========
</TABLE>
F-13
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes computed using the federal statutory income tax rate differs
from the Company's effective tax rate primarily due to the following:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
------------ YEAR ENDED ---------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
----- ----- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory U.S. federal tax
rate.......................... 34.0% 34.0% 34.0 % 34.0 % 34.0 %
State taxes, net of federal tax
benefit....................... 5.9% 7.0% 2.8 % 4.6 % 3.8 %
(Income) loss from ARI not
(taxable) deductible for
corporate income tax
purposes...................... 4.6% 2.0% (47.1)% (18.4)% (16.2)%
Non-deductible expenses........ 1.0% 3.5% 7.2 % 3.3 % 1.7 %
Amortization of goodwill not
deductible for corporate
income tax purposes........... -- -- 5.5 % 2.6 % 0.9 %
Change in tax status of ARI.... -- -- -- -- 24.8 %
Other.......................... 1.0% 6.3% (1.2)% 2.7 % (2.4)%
----- ----- ----- ----- -----
Effective tax rate............. 46.5% 52.8% 1.2 % 28.8 % 46.6 %
===== ===== ===== ===== =====
</TABLE>
At March 30, 1996, the Company has available for federal income tax purposes
unused operating losses of $399,000 to offset future taxable income, expiring
in various years through 2011. Additionally, the Company has available for
federal income tax purposes unused tax credits of $42,000 at March 30, 1996 to
offset future tax liabilities, which may be carried forward indefinitely.
9. STOCK PLANS
In March 1996, the Company's stockholder approved the formation of the 1996
Stock Plan, the 1996 Employee Stock Purchase Plan and the 1996 Eligible
Directors Stock Plan.
1996 Stock Plan
This plan authorizes the grant of incentive stock options, non-qualified
stock options, stock purchase authorizations or stock bonus awards to key
employees, including officers, employee directors and consultants, to purchase
up to 1,600,000 shares of common stock. Incentive stock options cannot be
granted to consultants. For incentive options, the purchase price is equal to
the fair market value on the date of grant (110% of fair market value for
stockholders who hold greater than 10% of the Company's stock at the time of
grant). For non-qualified options and stock purchase authorizations, the
purchase price is determined by the Board of Directors within limits as set
forth in the plan, but shall not be less than 85% of the fair market value of
the common stock on the date of grant. The periods over which options are
exercisable are determined by the Board of Directors. If permitted by the
Board of Directors, employees may use previously acquired shares of the
Company's common stock (provided that such shares tendered have been held for
at least six months) or may borrow money from the Company on a recourse basis
(for a period of time not to exceed five years) to pay the exercise price of
shares purchased. Options may expire up to 10 years after the date of grant
(five years for incentive options granted to 10% stockholders). The Board of
Directors has the discretion to designate non-qualified options as
transferable. The plan will terminate in March 2006.
Prior to the effective date of the Company's initial public offering, the
Company has the right to repurchase shares obtained through exercise of stock
options, upon the employee's termination of employment or proposed sale of
such shares.
In March 1996, options to purchase 1,106,500 shares of common stock at an
exercise price of $11.00 were granted to employees.
F-14
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 Employee Stock Purchase Plan
This plan, which is intended to qualify under Section 423 of the Internal
Revenue Code, authorizes the grant of options to eligible employees on a semi-
annual basis to purchase shares of the Company's common stock. An aggregate of
300,000 shares of common stock has been reserved for issuance under this plan.
The plan permits eligible employees to purchase up to 200 shares of common
stock in any six month offering period through the accumulation of payroll
deductions, which may not exceed 10% of the employee's compensation. Employees
are eligible to participate if they have been employed by the Company for at
least 18 months. Shares are purchased at 85% of the lower of the fair market
value of the Company's common stock at the beginning or end of each six-month
offering period. Employees may end their participation in the offering at any
time during the offering period, and participation ends automatically on
termination of employment. The first stock offering period under the plan will
commence upon the effective date of the registration statement covering the
Company's initial public offering. The plan will terminate in March 2006.
1996 Eligible Directors Stock Plan
This plan authorizes the grant of an option to purchase 20,000 shares of
common stock to each non-employee director on the date of the director's
initial election to the Board of Directors. The exercise price of options
granted is 100% of the closing price per share of common stock on the date of
grant. Directors may use previously acquired shares of the Company's common
stock to pay the exercise price of shares purchased, provided that such shares
tendered have been held for at least six months. An aggregate of 100,000
shares of common stock may be issued under the plan. Options are exercisable
in four equal annual installments commencing on the first anniversary date of
the grant. Options expire 10 years after the date of grant. The plan will
terminate in March 2006.
In April 1996, options to purchase 20,000 shares of common stock at an
exercise price of $11.00 per share were granted to a newly-elected director.
10. EMPLOYEE SAVINGS PLAN
The Company provides an employee retirement savings plan under Section
401(k) of the Internal Revenue Code (the "Plan") which covers substantially
all employees. Under the terms of the Plan, employees may contribute a
percentage of their salary, up to a maximum of 15%, which is then invested in
one or more of several mutual funds selected by the employee. The Company may
make contributions to the Plan at their discretion; no such contributions have
been made since inception of the Plan.
11. COMMITMENTS
In addition to leasing computer equipment under various capital leases (Note
4), the Company occupies premises under various noncancelable operating leases
which include terms requiring the Company to pay a pro-rata portion of
increased operating expenses and real estate taxes. The leases expire on
various dates through 2001, and certain of the leases contain options for
renewal or purchase of the related equipment.
In January 1993, TRI entered into a three year lease with the Trust which
required annual rental payments of $120,000, payable in equal monthly
installments of $10,000. This lease was amended in January 1994 upon expansion
of the leased area to require annual rental payments of $150,000, payable in
equal monthly installments of $12,500. This lease was further amended in
September 1995 upon expansion of the leased area to require annual payments of
$357,000, payable in equal monthly installments of $29,800. The term of the
lease was also extended through September 2010. In conjunction with the
amendment in September 1995, the Company has begun to consolidate the accounts
of the Trust on a prospective basis (see Note 13). Rent expense for the years
ended May 31, 1993, May 31, 1994, June 24, 1995 and the nine months ended
March 25, 1995 and March 30, 1996 (excluding amounts paid to the Trust after
September 19, 1995) was $366,000, $633,000, $1,188,000, $788,000 (unaudited)
and $1,267,000, respectively.
F-15
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 30, 1996, future minimum rental payments under noncancelable lease
arrangements are as follows, excluding amounts payable to the Trust:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
Remainder of fiscal 1996............................. $ 366,000 $ 25,000
1997................................................. 1,364,000 102,000
1998................................................. 1,232,000 50,000
1999................................................. 975,000 10,000
2000................................................. 607,000 --
Thereafter........................................... 252,000 --
---------- --------
Total minimum lease payments......................... $4,796,000 187,000
==========
Less--amount representing interest................... 30,000
--------
Present value of obligations under capital leases.... $157,000
========
</TABLE>
12. FINANCIAL INSTRUMENTS
The Company enters into various types of financial instruments in the normal
course of business. Fair values are estimated based on assumptions concerning
the amount and timing of estimated future cash flows and assumed discount
rates reflecting varying degrees of perceived risk. Accordingly, the fair
values may not represent actual values of the financial instruments that could
have been realized as of year end or that will be realized in the future.
The carrying amounts of the Company's financial instruments, which include
accounts receivable, notes receivable from related parties, line of credit,
accounts payable, accrued salaries and wages, other accrued expenses, income
taxes payable and long-term debt approximate their fair values at March 30,
1996.
13. CONSOLIDATION OF REAL ESTATE TRUST
As described in Note 11, the Company leases office space from the Trust, of
which the sole stockholder of the Company is the sole beneficiary and an
officer of the Company is the trustee. Effective September 19, 1995, the
Company renegotiated its lease with the Trust in conjunction with a
refinancing of the Trust's mortgage. The modified lease terms expanded the
amount of space which the Company occupies, committed the Company to rent the
facility through the maturity date of the mortgage loan, and granted the
Company a right of first refusal to lease any space in the facility currently
occupied by other tenants when the tenants' leases expire.
Accordingly, as of this date, the Company obtained significant control over
the operations of the Trust and assumed a significant portion of the Trust's
obligations. As a result, the Company has consolidated the accounts of the
Trust as of September 19, 1995 on a prospective basis. As of September 19,
1995, the Trust reported the following assets and liabilities:
<TABLE>
<S> <C>
Fixed assets, net........................................... $ 1,750,000
Other current assets........................................ 49,000
Security deposits and deferred income....................... (84,000)
Note payable to TRI......................................... (365,000)
Mortgage loans payable...................................... (1,461,000)
-----------
$ (111,000)
===========
</TABLE>
F-16
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 1995, one of the mortgage loans payable by the Trust was
refinanced with a new mortgage loan (see Note 7). At this time, a distribution
of $649,000 was made to the beneficiary of the Trust.
Rental income from tenants during the period from September 19, 1995 through
March 30, 1996 was $94,000, which is included in interest and other income in
the accompanying consolidated statement of income. Future minimum rental
commitments from tenants are as follows at March 30, 1996:
<TABLE>
<S> <C>
Remainder of fiscal 1996........................................ $ 43,000
1997............................................................ 109,000
1998............................................................ 12,000
--------
$164,000
========
</TABLE>
14. UNAUDITED PRO FORMA INCOME INFORMATION
The following unaudited pro forma income tax information is presented as if
ARI had been a C corporation subject to federal and state income taxes
throughout the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED --------------------
JUNE 24, MARCH 25, MARCH 30,
1995 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
Income before taxes............................. $329,000 $393,000 $2,591,000
Income tax provision............................ 243,000 221,000 1,130,000
-------- -------- ----------
Pro forma net income............................ $ 86,000 $172,000 $1,461,000
======== ======== ==========
</TABLE>
From inception through the year ended May 31, 1994, ARI generated a taxable
loss for which the Company would not have received a benefit, as ARI would
have filed a separate tax return from TRI.
Net Income Per Share
Pro forma net income per share has been computed by dividing pro forma net
income by the weighted average number of common and common equivalent shares
outstanding, after considering the events described in Notes 2 and 9. Weighted
average common and common equivalent shares include common shares and common
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 date of 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 each period presented.
15. PREFERRED STOCK
On April 10, 1996, the Company's sole stockholder authorized 1,000,000
shares of preferred stock, $0.10 par value. Preferred stock may be issued in
one or more series at the discretion of the Board of Directors of the Company
(without stockholder approval) with such designations, rights and preferences
as the Board of Directors may determine. The preferred stock may have
dividend, liquidation, redemption, conversion, voting or other rights which
may be more expansive than the rights of the holders of the Company's common
stock.
F-17
<PAGE>
(ART)
Artwork - inside back cover
- title: "The Registry, Inc., A National Provider of IT Consultants"
- sub-title: "1,400 Consulting Professionals Nationwide"
Map of the United States showing locations of the Company's offices, divided
into the following regions: Midwest; West; Southwest; New England; Midatlantic;
and Southeast. Offices in each region are listed as follows: Midwest (Cleveland,
Columbus, Chicago, Rosemont and Rolling Meadows); West (Seattle, Santa Clara and
Walnut Creek); Southwest (Dallas and Denver); New England (Stratham, NH, Boston
and Newton); Midatlantic (Rye Brook, Manhattan and McLean); and Southeast
(Richmond, Greensboro, Durham, Charlotte, Atlanta and Ft. Lauderdale).
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 9
Dividend Policy.......................................................... 9
Capitalization........................................................... 10
Dilution................................................................. 11
Selected Consolidated Financial Data..................................... 12
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 14
Business................................................................. 20
Management............................................................... 29
Certain Transactions..................................................... 33
Principal and Selling Stockholder........................................ 34
Description of Capital Stock............................................. 35
Shares Eligible for Future Sale.......................................... 38
Underwriting............................................................. 40
Legal Matters............................................................ 41
Experts.................................................................. 41
Report to Stockholders................................................... 41
Additional Information................................................... 41
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,200,000 SHARES
THE REGISTRY, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
ADAMS, HARKNESS & HILL, INC.
A.G. EDWARDS & SONS, INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the Company
in connection with the sale of the Common Stock being registered hereby. All
the amounts shown are estimated, except the SEC registration fee, the NASD
filing fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 12,214
NASD filing fee.................................................... 4,042
Nasdaq listing fee................................................. 42,250
Blue Sky fee and expenses.......................................... 15,000
Printing and engraving expenses.................................... 100,000
Legal fees and expenses............................................ 275,000
Auditors' accounting fees and expenses............................. 260,000
Transfer Agent and Registrar fees.................................. 10,000
Miscellaneous expenses............................................. 31,494
--------
Total............................................................ $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Massachusetts General Laws, Chapter 156B, Section 67, empowers a
Massachusetts corporation to indemnify any person in connection with any
action, suit or proceeding brought or threatened by reason of the fact that
such person is or was a director, officer, employee or agent of the
corporation or was serving as such with respect to another corporation or
other entity at the request of such corporation, unless such person shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that such action was in the best interests of the Company.
The Company's Articles of Organization, as amended and restated, contains
provisions that require the Company to indemnify its directors and officers to
the fullest extent permitted by Massachusetts law.
Reference is made to the Underwriting Agreement (filed as Exhibit 1.1
hereto) which provides for indemnification arrangements by and among the
Company, its directors or officers, the Underwriters and the Selling
Stockholder in the offering of the Common Stock registered hereby, and each
person, if any, who controls the Company, the Selling Stockholder or the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since July 1, 1992, the Company has issued the following securities that
were not registered under the Securities Act:
In connection with the Merger effective on January 1, 1996, the Company
issued 5,333,333 shares of Common Stock to G. Drew Conway in exchange for
his 200,000 shares of common stock, $0.01 par value, of America's Registry,
Inc.
No underwriters were engaged in connection with the foregoing sale of
securities. Such sales were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement by and among Registrant, the Selling
Stockholder and the Underwriters.
2.1* Stock Purchase Agreement between the Registrant and Axiom Consulting
Group, Inc., dated November 30, 1994.
3.1* Articles of Organization of Registrant, as amended through April 11,
1996.
3.2* Restated Articles of Organization of Registrant, as filed in
Massachusetts on May 13, 1996.
3.3* By-Laws of Registrant, as amended through April 11, 1996.
3.4* By-Laws of Registrant, as amended and restated on May 13, 1996.
4.1* Articles 3, 4, 5, and 6 of the Articles of Organization of Registrant
(included in Exhibit 3.2).
4.2* Specimen Stock Certificate.
5.1* Opinion of Hill & Barlow, a Professional Corporation, as to the
legality of the shares being registered.
10.1* Leases dated September 19, 1995 between the 189 Wells Avenue Realty
Trust and the Company for premises located at the 189 Wells Avenue,
Newton, Massachusetts.
10.2* Registrant's 1996 Stock Plan and related form of stock option
agreement.
10.3* Registrant's 1996 Employee Stock Purchase Plan and related form of
subscription agreement.
10.4* Registrant's 1996 Eligible Directors Stock Plan and related form of
stock option agreement.
10.5* Accounts Receivable Management and Security Agreement dated as of
February 29, 1996 by and among BNY Financial Corporation and each of
The Registry, Inc., America's Registry, Inc. and The Registry, Inc.
Network Consulting Practice.
10.6* Employment Agreement dated May 1996 between Registrant and G. Drew
Conway.
10.7 Amended and Restated Promissory Note dated May 30, 1996, payable to
Registrant by G. Drew Conway.
10.8 Amended and Restated Promissory Note dated May 30, 1996, payable to
Registrant by the 189 Wells Avenue Realty Trust.
21.1* Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, independent accountants.
23.2* Consent of Hill & Barlow, a Professional Corporation (to be included
in Exhibit 5.1).
23.3 Consent of Dataquest Incorporated.
27.1 Financial Data Schedule.
</TABLE>
* Previously filed.
b. Financial Statement Schedules.
Schedule II, "Valuation and Qualifying Accounts."
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14 or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the
II-2
<PAGE>
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Company hereby undertakes to provide at the closing of this
offering to the Underwriters specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
COMPANY HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF BOSTON, COMMONWEALTH OF MASSACHUSETTS ON THE 3RD DAY OF JUNE, 1996.
The Registry, Inc.
/s/ G. Drew Conway
By: _________________________________
G. DREW CONWAY PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED BELOW ON THE 3RD DAY OF JUNE, 1996.
SIGNATURE TITLE
/s/ G. Drew Conway President, Chief Executive Officer and
- ------------------------------------- Director (Principal Executive Officer)
(G. DREW CONWAY)
/s/ Robert E. Foley Chief Financial Officer and Treasurer
- ------------------------------------- (Principal Financial and Accounting
(ROBERT E. FOLEY) Officer)
/s/ Paul C. O'Brien Director
- -------------------------------------
(PAUL C. O'BRIEN)
/s/ Robert P. Badavas Director
- -------------------------------------
(ROBERT P. BADAVAS)
II-4
<PAGE>
SCHEDULE II
THE REGISTRY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
DEDUCTIONS-
BALANCE AT CHARGED CHARGED WRITE-OFF OF BALANCE
BEGINNING TO COSTS AND TO OTHER UNCOLLECTIBLE AT END OF
OF PERIOD EXPENSES ACCOUNTS ACCOUNTS PERIOD
---------- ------------ -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended May 31,
1993................... $ 83 $149 $0 $187 $ 45
Year ended May 31,
1994................... 45 226 0 79 192
Year ended June 24,
1995(1)................ 192 189 0 64 317
Nine months ended March
30, 1996............... 317 224 0 190 351
</TABLE>
- --------
(1) The Company changed its fiscal year end from May 31, 1994 to the last
Saturday in June, effective with the fiscal year ended June 24, 1995.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ----
<C> <S> <C>
1.1* Form of Underwriting Agreement by and among Registrant, the
Selling Stockholder and the Underwriters.
2.1* Stock Purchase Agreement between the Registrant and Axiom
Consulting Group Inc., dated November 30, 1996.
3.1* Articles of Organization of Registrant, as amended through
April 11, 1996.
3.2* Restated Articles of Organization of Registrant, as filed in
Massachusetts on May 13, 1996.
3.3* By-Laws of Registrant, as amended through April 11, 1996.
3.4* By-Laws of Registrant, as amended and restated on May 13, 1996.
4.1* Articles 3, 4, 5, and 6 of the Articles of Organization of
Registrant (included in Exhibit 3.2).
4.2* Specimen Stock Certificate.
5.1* Opinion of Hill & Barlow, a Professional Corporation, as to the
legality of the shares being registered.
10.1* Leases dated September 19, 1995 between the 189 Wells Avenue
Realty Trust and the Company for premises located at the 189
Wells Avenue, Newton, Massachusetts.
10.2* Registrant's 1996 Stock Plan and related form of stock option
agreement.
10.3* Registrant's 1996 Employee Stock Purchase Plan and related form
of subscription agreement.
10.4* Registrant's 1996 Eligible Directors Stock Plan and related
form of stock option agreement.
10.5* Accounts Receivable Management and Security Agreement dated as
of February 29, 1996 by and among BNY Financial Corporation and
each of The Registry, Inc., America's Registry, Inc. and The
Registry, Inc. Network Consulting Practice.
10.6* Employment Agreement dated May 1996 between Registrant and G.
Drew Conway.
10.7 Amended and Restated Promissory Note dated May 30, 1996,
payable to Registrant by G. Drew Conway.
10.8 Amended and Restated Promissory Note dated May 30, 1996,
payable to Registrant by the 189 Wells Avenue Realty Trust.
21.1* Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, independent accountants.
23.2* Consent of Hill & Barlow, a Professional Corporation (to be
included in Exhibit 5.1).
23.3 Consent of Dataquest Incorporated.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
------------------------------------
$666,204 May 30, 1996
FOR VALUE RECEIVED, the undersigned, G. Drew Conway, an individual residing
at 76 Chesterton Road, Wellesley, Massachusetts 02181, hereby promises to pay to
the order of The Registry, Inc., a Massachusetts corporation, upon demand but in
any event no later than the closing of the initial public offering of 2,200,000
shares of common stock of The Registry, Inc. pursuant to a Registration
Statement on Form S-1 No. 333-3366 originally filed on April 11, 1996, the
principal sum of Six Hundred Sixty Six Thousand Two Hundred and Four Dollars
($666,204) together with interest from the date hereof on the principal sum
hereof at a rate of ten percent (10%) per annum. Interest shall be based on a
360-day year and paid for the actual number of days elapsed.
This Note shall become immediately due and payable, without notice or
demand, upon the death or the filing of any proceedings under any bankruptcy or
other law relating to the relief of debtors of, by, or against the undersigned.
This Note replaces a promissory note dated May 23, 1996 for the principal
amount of $664,936.60 payable by the undersigned to The Registry, Inc. (the
"Original Note"), which Original Note was signed to evidence an existing
obligation for the principal amount set forth therein, together with interest at
the rate set forth therein, entered into by the undersigned and The Registry,
Inc. prior to the date thereof, which obligation was not evidenced by a
promissory note.
The undersigned will pay to the holder of this Note upon demand all legal
and other costs and expenses of every kind, including reasonable attorneys' fees
and disbursements, relating to the collection and/or enforcement of this Note or
of any rights hereunder.
The undersigned hereby waives presentment, demand, notice of protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note shall be deemed a contract under seal and shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts.
/s/ G. Drew Conway
---------------------------------
G. Drew Conway
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
------------------------------------
$420,988 May 30, 1996
FOR VALUE RECEIVED, the undersigned, 189 Wells Avenue Realty Trust, a
Massachusetts nominee trust established under a Declaration of Trust dated
August 19, 1992 and recorded with the Middlesex South Registry of Deeds in Book
22332 at page 462, as amended on December 22, 1994 and recorded with said
Registry in Book 25078 at page 395, hereby promises to pay to the order of The
Registry, Inc., a Massachusetts corporation, upon demand but in any event no
later than the closing of the initial public offering of 2,200,000 shares of
common stock of The Registry, Inc. pursuant to a Registration Statement on Form
S-1 No. 333-3366 originally filed on April 11, 1996, in the principal sum of
Four Hundred Twenty Thousand Nine Hundred and Eighty-Eight Dollars ($420,988)
together with interest from the date hereon the principal sum hereof at a rate
of 5.43% per annum, compounded semi-annually, such interest rate to be adjusted
on July 1, 1996 and thereafter semi-annually on July 1 and January 1 to equal
the applicable federal rate for short-term notes compounded semi-annually in
effect on the date of the adjustment. Interest shall be based on a 360-day year
and paid for the actual number of days elapsed.
This Note shall become immediately due and payable, without notice or
demand, upon the dissolution, liquidation, termination of existence, business
failure, insolvency, appointment of a receiver of any property, common law
assignment or trust mortgage for the benefit of creditors, commencement of any
kind of insolvency proceedings, or the filing of any proceedings under any
bankruptcy or other law relating to the relief of debtors of, by, or against the
undersigned.
This Note replaces a promissory note dated May 23, 1996 for the principal
amount of $420,767 payable by the undersigned to The Registry, Inc. (the
"Original Note"), which Original Note was signed to evidence an existing
obligation for the principal amount set forth therein, together with interest at
the rate set forth therein, entered into by the undersigned and The Registry,
Inc. prior to the date thereof, which obligation was not evidenced by a
promissory note.
The undersigned will pay to the holder of this Note upon demand all legal
and other costs and expenses of every kind, including reasonable attorneys' fees
and disbursements, relating to the collection and/or enforcement of this Note or
of any rights hereunder.
The undersigned hereby waives presentment, demand, notice of protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
<PAGE>
This Note shall be deemed a contract under seal and shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts.
189 WELLS AVENUE REALTY TRUST
By: /s/ Robert E. Foley
--------------------------------------
Robert E. Foley
as Trustee and not individually
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 8, 1996, relating
to the consolidated financial statements of The Registry, Inc., which appears
in such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the nine months ended March 30, 1996, the
year ended June 24, 1995 and each of the two years in the period ended May 31,
1994 listed under Item 16(b) of this Registration Statement when such schedule
is read in conjunction with the financial statements referred to in our
report. The audits referred to in such report also included this schedule. We
also consent to the references to us under the headings "Experts" and
"Selected Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Consolidated Financial Data."
Price Waterhouse LLP
Boston, Massachusetts
May 31, 1996
<PAGE>
Exhibit 23.3
CONSENT OF DATAQUEST INCORPORATED
We consent to the quotation in this Registration Statement on Form S-1 of The
Registry, Inc., of that portion of our study entitled "Market Sizing -
Supplemental Staff Services" dated May 23, 1996, as presented in a chart
entitled "Market Size and Forecast - Supplemental Staff Services" relating to
the U.S. market for supplemental services from 1994 until 1999.
DATAQUEST INCORPORATED
By: /s/ Denny Wayson
-----------------------------------
Title: Director, Professional Services
-------------------------------
May 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRY, INC., MARCH 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUN-25-1995
<PERIOD-END> MAR-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 27,466
<ALLOWANCES> 351
<INVENTORY> 0
<CURRENT-ASSETS> 27,855
<PP&E> 6,803
<DEPRECIATION> 1,692
<TOTAL-ASSETS> 34,884
<CURRENT-LIABILITIES> 28,603
<BONDS> 3,186
0
0
<COMMON> 10
<OTHER-SE> 2,035
<TOTAL-LIABILITY-AND-EQUITY> 34,884
<SALES> 0
<TOTAL-REVENUES> 102,094
<CGS> 0
<TOTAL-COSTS> 75,210
<OTHER-EXPENSES> 22,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,669
<INCOME-PRETAX> 2,591
<INCOME-TAX> 1,208
<INCOME-CONTINUING> 1,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,383
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
