<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 1997.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
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 INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
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)
RICHARD L. BUGLEY, ESQ.
GENERAL COUNSEL
THE REGISTRY, INC.
189 WELLS AVENUE
NEWTON, MASSACHUSETTS 02159
(617) 527-6886
(617) 527-6999 (FAX)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
KEITH F. HIGGINS, ESQ. PETER B. TARR, ESQ.
ROPES & GRAY HALE AND DORR LLP
ONE INTERNATIONAL PLACE 60 STATE STREET
BOSTON, MA 02110-2607 BOSTON, MA 02109
(617) 951-7000 (617) 526-6000
(617) 951-7050 (FAX) (617) 526-5000 (FAX)
---------------
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: [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, no par value................ 3,450,000 shares $45.6875 $157,621,875 $47,765
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes shares which the Underwriters have the option to purchase from
the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act on the basis of the
average of the high and low prices of The Registry, Inc. Common Stock, no
par value, reported on the Nasdaq National Market on January 16, 1997.
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>
SUBJECT TO COMPLETION, DATED JANUARY 17, 1997
3,000,000 SHARES
LOGO
COMMON STOCK
-----------
Of the 3,000,000 shares of Common Stock offered hereby, 1,234,166 shares are
being sold by the Company and 1,765,834 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Stockholders. The Company's Common Stock is quoted on the Nasdaq National
Market under the symbol "REGI." On January 16, 1997, the last reported sale
price of the Common Stock was $44 13/16 per share. See "Price Range of Common
Stock."
SEE "RISK FACTORS" COMMENCING ON PAGE 7 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) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
- --------------------------------------------------------------------------------
Total (3)..................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders 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 $550,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 450,000 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 Selling Stockholders 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 , 1997.
ADAMS, HARKNESS & HILL, INC.
MONTGOMERY SECURITIES
J.C. BRADFORD & CO.
The date of this Prospectus is , 1997.
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.
<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.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS AND THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS
IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
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. As of September 28, 1996,
the Company had approximately 1,640 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 fiscal 1996, the Company provided IT
consultants to approximately 380 clients in a diverse range of industries,
including MCI Telecommunications Corporation, Digital Equipment Corp., Sun
Microsystems Inc. and Pfizer Inc. The Registry has grown from four offices and
$16.9 million in revenue in fiscal 1991 to 25 offices and $161.2 million in
revenue for the twelve months ended September 28, 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, Chief Executive Officer
and principal stockholder of The Registry, will own 50.4% 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. The Company's executive offices are located at
189 Wells Avenue, Newton, Massachusetts 02159. Its telephone number is (617)
527-6886.
3
<PAGE>
RECENT ACQUISITIONS
In keeping with an important component of its growth strategy, the Company
has acquired five IT consulting companies and an application development
business since its initial public offering in June 1996. The Company believes
that these acquisitions have expanded its national presence thereby broadening
its nationwide resource pool and client base. Certain information relating to
these acquisitions is summarized in the following table.
<TABLE>
<CAPTION>
MOST RECENT
ACQUISITION FISCAL YEAR
ACQUIRED COMPANY DATE REVENUE (1) BRANCHES HEADQUARTERS
- ------------------------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Morris Information 8/16/96 $ 3,700,000 2 Houston, TX
Systems, Inc.
Sun-Tek Consultants, Inc. 11/1/96 2,400,000 1 Orlando, FL
Application Resources, 11/26/96 37,600,000 3 San Francisco, CA
Inc.
Shamrock Computer 11/27/96 33,700,000 5 Bloomington, MN
Resources, Ltd.
Sterling Information 11/27/96 6,100,000 1 Austin, TX
Group, Inc.
James Duncan & Associates 12/24/96 6,400,000 2 Royal Tonbridge
Wells, England
</TABLE>
- --------
(1) Represents revenues for fiscal years ending December 31, 1995 for each of
Morris Information Systems, Inc., Sun-Tek Consultants, Inc., Sterling
Information Group, Inc. and James Duncan & Associates and June 29, 1996 for
each of Application Resources, Inc. ("ARI") and Shamrock Computer Resources
Ltd. ("SCR"). The acquisitions of ARI and SCR will be accounted for as
poolings - of - interests and, accordingly, the Company's financial
statements will be restated to include the results of operations of these
entities. The other acquisitions will be accounted for as purchases. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Acquisitions" and the Pro Forma Unaudited Combined
Condensed Financial Information.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company.............................. 1,234,166 shares
The Selling Stockholders................. 1,765,834 shares
Common Stock to be outstanding after the
offering.................................. 13,875,790 shares (1)
Use of proceeds............................ For repayment of indebtedness, working
capital, other general corporate purposes
and acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol.............. REGI
</TABLE>
- --------
(1) Excludes 4,187,870 shares of Common Stock reserved for issuance under stock
option and stock purchase plans, of which 1,403,405 shares were subject to
outstanding options as of December 28, 1996 at a weighted average exercise
price of $9.91 per share. See "Capitalization" and "Management -- Stock
Awards."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
--------------------------------------------- -------------------
MAY 31,
------------------------- JUNE 24, JUNE 29, SEPT. 30, SEPT. 28,
1992 1993 1994 1995 (1) 1996 (1) 1995 (1) 1996 (1)
------- ------- ------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue................. $24,021 $39,845 $60,367 $98,687 $145,588 $31,682 $47,303
Cost of revenue......... 18,358 30,630 46,262 74,288 106,945 23,360 34,696
------- ------- ------- ------- -------- ------- -------
Gross profit............ 5,663 9,215 14,105 24,399 38,643 8,322 12,607
Selling, general and
administrative
expenses............... 4,760 8,319 12,831 22,925 32,152 7,186 9,704
------- ------- ------- ------- -------- ------- -------
Income from operations.. 903 896 1,274 1,474 6,491 1,136 2,903
Interest and other in-
come (expense), net.... (163) (292) (459) (1,145) (1,867) (470) 49
------- ------- ------- ------- -------- ------- -------
Income before taxes..... 740 604 815 329 4,624 666 2,952
Pro forma provision for
income taxes (2)....... 218 281 430 243 2,003 322 1,328
------- ------- ------- ------- -------- ------- -------
Pro forma net income
(2).................... $ 522 $ 323 $ 385 $ 86 $ 2,621 $ 344 $ 1,624
======= ======= ======= ======= ======== ======= =======
Pro forma net income per
share (2).............. $ 0.01 $ 0.30 $ 0.04 $ 0.15
======= ======== ======= =======
Weighted average common
and common equivalent
shares (3)............. 8,398 8,594 8,398 11,006
SELECTED OPERATING DATA:
Number of branch offices
open at end of period.. 6 9 16 21 23 21 25
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
---------------------------------
PRO PRO FORMA
ACTUAL FORMA (4) AS ADJUSTED (5)
------- --------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...... $ 5,337 $ 9,236 $ 60,017
Working capital................ 32,660 35,998 87,989
Total assets................... 51,865 69,297 120,078
Total debt..................... 2,811 4,617 3,407
Total stockholders' equity..... 39,454 44,077 96,068
</TABLE>
(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. Statement
of Income Data for the years ended June 24, 1995 and June 29, 1996 are for
52 and 53 weeks, respectively. Statement of Income Data for the three
months ended September 30, 1995 and September 28, 1996 are for 14 and 13
weeks, respectively. See Note 2 to Consolidated Financial Statements.
(2) On January 1, 1996, the Company effected the Reorganization described
below. The pro forma data have been computed as if America's Registry, Inc.
("America's Registry"), a wholly-owned subsidiary of the Company 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 15 to Consolidated Financial Statements.
(3) Weighted average common and common equivalent shares outstanding consist of
the weighted average number of shares of Common Stock outstanding, after
giving effect to the Reorganization
5
<PAGE>
described below, and Common Stock which may be issuable upon exercise of
outstanding stock options computed using the treasury stock method. For the
year ended June 24, 1995 and the three months ended September 30, 1995
weighted average common and common equivalent shares also include 397,588
shares related to the dilution attributable to options granted in the
twelve months prior to the closing of the Company's initial public offering
in June 1996 using the treasury stock method.
(4) In November 1996, the Company acquired Application Resources, Inc. and
Shamrock Computer Resources, Ltd. in transactions to be accounted for as
poolings-of-interests. The pro forma data reflect the combined balances of
the three companies as if the mergers had occurred as of September 28,
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Recent Acquisitions," "Business -- Recent
Acquisitions," Note 16 to Consolidated Financial Statements and the Pro
Forma Unaudited Combined Condensed Financial Information.
(5) Adjusted to give effect to the sale of 1,234,166 shares of Common Stock by
the Company offered hereby at an assumed offering price of $44.8125 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 assumes no
exercise of the Underwriters' over-allotment option. See "Capitalization,"
"Description of Capital Stock" and "Underwriting." Until January 1, 1996, G.
Drew Conway was the sole stockholder of TRI and America's Registry. Pursuant
to a plan and agreement of merger entered into among TRI, America's Registry
and The Registry Newco, Inc., a wholly-owned subsidiary of TRI, The Registry
Newco, Inc. merged with and into America's Registry effective January 1, 1996
(the "Reorganization"). As a result, America's Registry became a wholly-owned
subsidiary of TRI.
6
<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. Except for the historical information contained
herein, the discussion in this Prospectus contains certain forward-looking
statements that involve risks and uncertainties. The cautionary statements
made in this Prospectus should be read as being applicable to all related
forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed here.
Important factors that could cause or contribute to such differences include
those discussed below, as well as those discussed elsewhere herein.
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."
Ability to Sustain and Manage Growth; Development of Ancillary Services. 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 existing
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. 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 -- Recent Acquisitions,"
"Business -- Growth Strategy" and "Management."
Risks Associated with Acquisitions. The Company has grown, and intends to
continue to grow, in part through the acquisition of other businesses. 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 intense 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
7
<PAGE>
than the Company. Further, the anticipated benefits from any acquisitions may
not be achieved unless the operations of the acquired business are
successfully combined with those of the Company in a timely manner. The
integration of the Company's acquisitions requires substantial attention from
management. The diversion of the attention of management, and any difficulties
encountered in the transition process, could have a material adverse effect on
the Company's business, operating results and financial condition. In
addition, the process of integrating the various businesses could cause the
interruption of or the loss of momentum in the activities of some or all of
these businesses, which could have a material adverse effect on the Company's
business, operating results and financial condition. Further, acquired
businesses may experience employee turnover rates higher than have been
experienced historically. Higher employee turnover rates could adversely
impact the Company's efforts to integrate these businesses. There can be no
assurance that the Company will be able to identify suitable acquisition
candidates, acquire any such candidates on reasonable terms or integrate
acquired businesses successfully. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Growth Strategy."
Dependence on Key Clients; Price Reduction Agreements; Terminability of
Client Arrangements. The Company's top ten clients accounted for approximately
34.8% of revenue in fiscal 1996 and approximately 34.3% of revenue in the
first three months of fiscal 1997. The loss of a significant client could have
a material adverse effect on the Company's business, operating results and
financial condition. 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."
Risks of International Operations. The Company commenced international
operations with the acquisition in December 1996 of James Duncan & Associates,
an IT consulting company based near London, England. The success of the
Company's international operations will depend greatly upon the continued
development of the technology infrastructure in Europe and the Company's
ability to manage generally lower gross profit margins associated with
European IT consulting operations. There can be no assurance that the
Company's international operations will be profitable or support the Company's
growth strategy. The risks inherent in the Company's international business
activities include unexpected changes in regulatory environments, foreign
currency fluctuations, tariffs and other trade barriers, difficulties in
managing international operations and potential foreign tax consequences,
including repatriation of earnings and the burden of complying with a wide
variety of foreign laws and regulations. The failure of the Company to manage
growth, attract and retain personnel, manage major development efforts or
profitably deliver services could have a material adverse impact on the
Company's ability to successfully develop its international operations and
could have a material adverse effect on the Company's business, operating
results and financial condition.
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
President, Chief Executive Officer and principal stockholder, 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. The Company maintains a $23 million key man life insurance policy
on Mr. Conway. See "Management."
Concentration of Ownership. Upon completion of the offering, the Company's
President, Chief Executive Officer and principal stockholder, Mr. G. Drew
Conway, will own 50.4% of the Company's outstanding shares of Common Stock
(48.8% 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
8
<PAGE>
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 Stockholders" and "Description of Capital Stock."
History of Marginal Profitability. Through fiscal 1995, the Company grew
rapidly through the opening of new offices. Newly opened offices have
generally 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."
Government Regulation of Immigration. Certain of the Company's IT
consultants are foreign nationals working in the United States under H1-B
permits. Accordingly, both the Company and these foreign nationals must comply
with United States immigration laws. The inability of the Company to obtain
H1-B permits for certain of its employees in sufficient quantities or at a
sufficient rate could have a material adverse effect on the Company's
business, operating results and financial condition. Furthermore, Congress and
administrative agencies with jurisdiction over immigration matters have
periodically expressed concerns over the levels of legal and illegal
immigration into the U.S. These concerns have often resulted in proposed
legislation, rules and regulations aimed at reducing the number of work
permits that may be issued. Any changes in such laws making it more difficult
to hire foreign nationals or limiting the ability of the Company to retain
foreign employees could require the Company to incur additional unexpected
labor costs and expenses. Any such restrictions or limitations on the
Company's hiring practices could have a material adverse effect on the
Company's business, operating results and financial condition. See
"Business -- Employees."
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.
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.
9
<PAGE>
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."
Possible Volatility of Stock Price. 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."
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."
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,234,166 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $44.8125 per share, after deducting the underwriting discount and estimated
offering expenses payable by the Company, are estimated to be approximately
$52.0 million. The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
The Company expects to use approximately $16.0 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 September 28, 1996, the weighted average
interest rate was 8.19%. 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 also intends to use approximately $2.5 million of the net proceeds to
finance the continuing upgrade of the Company's IT infrastructure. See
"Business--Operations and Support Services." The Company intends to use the
remaining net proceeds for working capital and 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. As of the date of this
Prospectus, there are no agreements or commitments with respect to any
significant 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.
PRICE RANGE OF COMMON STOCK
The following table sets forth the reported high and low sale prices for the
Common Stock on the Nasdaq National Market, under the symbol "REGI," for the
periods indicated:
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
- ----------- ------- ---------
<S> <C> <C>
Fourth Quarter (from June 5).................................. $36 3/4 $17*
<CAPTION>
FISCAL 1997
- -----------
<S> <C> <C>
First Quarter................................................. $34 1/4 $24 1/2
Second Quarter................................................ $53 1/4 $34 1/2
Third Quarter (through January 16, 1997)...................... $49 3/4 $44 13/16
</TABLE>
- -------
* Initial public offering price per share.
On January 16, 1997, the last reported sale price for the Common Stock on
the Nasdaq National Market was $44.8125 per share. As of January 6, 1997,
there were approximately 66 holders of record of Common Stock.
DIVIDEND POLICY
America's Registry 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."
11
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company as of September 28, 1996, on a pro forma basis to reflect the
acquisitions of Application Resources, Inc. ("ARI") and Shamrock Computer
Resources, Ltd. ("SCR") in November 1996 in transactions which will be
accounted for as poolings-of-interests and as adjusted to reflect the
application of the estimated net proceeds from the sale of 1,234,166 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $44.8125 per share. This table should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Pro Forma Unaudited Combined Condensed Financial
Information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-----------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Revolving line of credit....................... $ 10 $ 1,210 $ --
======= ======= =======
Current portion of long-term debt (1).......... $ 326 $ 510 $ 510
Long-term debt (2)............................... 2,485 2,897 2,897
Stockholders' equity (3)(4):
Preferred stock, $0.10 par value per share;
1,000,000 shares authorized, none issued and
outstanding................................... -- -- --
Common stock, no par value per share;
49,000,000 shares authorized, 10,230,000
shares issued and outstanding; pro forma:
12,580,774 shares issued and outstanding; pro
forma as adjusted: 13,814,940 shares issued
and outstanding............................... 10 2,212 2,212
Additional paid-in capital..................... 34,969 38,041 90,032
Treasury stock................................. -- (2,000) (2,000)
Notes receivable from employees................ -- (226) (226)
Retained earnings.............................. 4,475 6,050 6,050
------- ------- -------
Total stockholders' equity.................... 39,454 44,077 96,068
------- ------- -------
Total capitalization.......................... $42,265 $47,484 $99,475
======= ======= =======
</TABLE>
- --------
(1) Includes $39,000 of debt owed by the 189 Wells Avenue Realty Trust (the
"Realty Trust"), of which G. Drew Conway is the sole beneficiary and an
executive officer of the Company is the sole trustee. See Note 6 to
"Selected Consolidated Financial Data" and Note 14 to Consolidated
Financial Statements.
(2) Includes $2,040,000 of debt owed by the Realty Trust. See Note 6 to
"Selected Consolidated Financial Data" and Note 14 to Consolidated
Financial Statements.
(3) Excludes 1,222,250 shares of Common Stock issuable upon exercise of
outstanding stock options as of September 28, 1996 at a weighted average
exercise price of $11.36 per share. See "Management -- Stock Awards."
(4) ARI had 2,448,000 shares of Series A Preferred Stock, no par value,
outstanding as of September 28, 1996. Immediately prior to the merger of
ARI with and into a wholly-owned subsidiary of the Company, these shares
were converted into the equivalent of 671,800 shares of the Company's
Common Stock.
12
<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 June 24, 1995 and June 29, 1996 and the Consolidated Statement
of Income Data for the years ended May 31, 1994, June 24, 1995 and June 29,
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, 1992, 1993 and 1994 and the Consolidated
Statement of Income Data for the years ended May 31, 1992 and 1993 have been
derived from the Company's audited Consolidated Financial Statements. The
Consolidated Balance Sheet Data at September 28, 1996 and the Consolidated
Statement of Income Data for the three months ended September 30, 1995 and
September 28, 1996 have 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 periods. Operating
results for the three months ended September 28, 1996 are not necessarily
indicative of results for future periods. The selected consolidated financial
data does not include the combined results of Application Resources, Inc. and
Shamrock Computer Resources, Ltd. and should be read in conjunction with the
Consolidated Financial Statements and Notes thereto, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Pro
Forma Unaudited Combined Condensed Financial Information included elsewhere
herein.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- -----------------------
MAY 31,
------------------------- JUNE 24, JUNE 29, SEPT. 30, SEPT. 28,
1992 1993 1994 1995 (1)(2) 1996 (2) 1995 (2) 1996 (2)
------- ------- ------- ----------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue................. $24,021 $39,845 $60,367 $98,687 $145,588 $31,682 $47,303
Cost of revenue......... 18,358 30,630 46,262 74,288 106,945 23,360 34,696
------- ------- ------- ------- -------- ------- -------
Gross profit............ 5,663 9,215 14,105 24,399 38,643 8,322 12,607
Selling, general and ad-
ministrative
expenses............... 4,760 8,319 12,831 22,925 32,152 7,186 9,704
------- ------- ------- ------- -------- ------- -------
Income from operations.. 903 896 1,274 1,474 6,491 1,136 2,903
Interest and other
income (expense), net.. (163) (292) (459) (1,145) (1,867) (470) 49
------- ------- ------- ------- -------- ------- -------
Income before taxes..... 740 604 815 329 4,624 666 2,952
Provision for income
taxes.................. 218 281 430 4 2,081 121 1,328
------- ------- ------- ------- -------- ------- -------
Net income.............. $ 522 $ 323 $ 385 $ 325 $ 2,543 $ 545 $ 1,624
======= ======= ======= ======= ======== ======= =======
Distributions to stock-
holder (3)............. -- $ 50 -- -- $ 1,511 $ 649 --
------- ------- ------- ------- -------- ------- -------
Income before taxes..... $ 329 $ 4,624 $ 666 $ 2,952
Pro forma provision for
income taxes (4)....... 243 2,003 322 1,328
------- -------- ------- -------
Pro forma net in-
come (4)............... $ 86 $ 2,621 $ 344 $ 1,624
======= ======== ======= =======
Pro forma net income per
share (4).............. $ 0.01 $ 0.30 $ 0.04 $ 0.15
======= ======== ======= =======
Weighted average common
and common equivalent
shares
outstanding (5)........ 8,398 8,594 8,398 11,006
======= ======== ======= =======
<CAPTION>
MAY 31,
----------------------------- JUNE 24, JUNE 29, SEPT. 28,
1992 1993 1994 1995 (1) 1996 (6)(7) 1996 (6)(7)
------- ------- ----------- -------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents.................. -- -- -- -- $12,044 $ 5,337
Working capital......... $ 409 $ (138) $ (364) $ (576) 34,643 32,660
Total assets............ 5,556 9,477 15,530 28,643 49,101 51,865
Total debt.............. 3,756 6,147 9,361 20,438 2,860 2,811
Stockholders' equity.... 1,123 1,596 2,136 2,284 37,830 39,454
</TABLE>
13
<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) Statement of Income Data for the years ended June 24, 1995 and June 29,
1996 are for 52 and 53 weeks, respectively. Statement of Income Data for
the three months ended September 30, 1995 and September 28, 1996 are for
14 and 13 weeks, respectively.
(3) For the year ended June 29, 1996 and the three months ended September 30,
1995, includes $649,000 distributed by the Realty Trust to G. Drew Conway
upon refinancing of the Realty Trust's mortgage. See Note 6 below. For the
year ended June 29, 1996, also includes $861,500 distributed to G. Drew
Conway in respect of the common stock of America's Registry.
(4) The Company effected the Reorganization on January 1, 1996. The pro forma
data have been computed as if America's Registry, 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 15 to Consolidated Financial Statements.
(5) Weighted average common and common equivalent shares outstanding consist
of the weighted average number of shares of Common Stock outstanding,
after giving effect to the Reorganization, and Common Stock which may be
issuable upon exercise of outstanding stock options computed using the
treasury stock method. For the year ended June 24, 1995 and the three
months ended September 30, 1995, weighted average common and common
equivalent shares also include 397,588 shares related to the dilution
attributable to options granted in the twelve months prior to the closing
of the Company's initial public offering in June 1996 using the treasury
stock method.
(6) 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 14 to
Consolidated Financial Statements.
(7) The Company completed its initial public offering on June 10, 1996,
selling 2,230,000 shares of Common Stock and receiving net proceeds of
$34,498,000. The Company used a portion of the proceeds to repay all
outstanding indebtedness under the Company's credit facility and certain
term loans. See Note 9 to Consolidated Financial Statements.
14
<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 25 offices and $161.2 million
of revenue in the twelve months ended September 28, 1996.
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 1996, approximately 34.8% of the Company's revenue
was derived from its top 10 clients, with no client accounting for more than
6.6%.
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; five in fiscal 1995 and two
in fiscal 1996 and acquired two offices in the first quarter of fiscal 1997.
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 newly opened offices as
well as with the increase in corporate staff needed to support an increased
number of branches. In most instances, newly opened 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. In November 1996, the Company acquired Sterling Information Group,
Inc. which will form the basis for the Company's application development
practice.
The Company has completed six acquisitions since its initial public offering
in June 1996, acquiring five IT consulting companies, headquartered in
Houston, Texas, Orlando, Florida, San Francisco, California, Bloomington,
Minnesota and Royal Tonbridge Wells, England, and an applications development
company headquartered in Austin, Texas. In the aggregate, the Company paid
cash consideration of $17.8 million and issued 2,353,510 shares of Common
Stock in connection with these acquisitions. Four of these acquisitions have
been accounted for as purchases while the acquisitions of Application
Resources, Inc. ("ARI") and Shamrock Computer Resources, Ltd. ("SCR") will be
accounted for as poolings-of-interests.
Through December 31, 1995, America's Registry 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.
15
<PAGE>
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 September 28, 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 14 to Consolidated Financial Statements.
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 THREE MONTHS ENDED
------------------------- -------------------
MAY 31, JUNE 24, JUNE 29, SEPT. 30, SEPT. 28,
1994 1995 1996 1995 1996
------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................. 76.7 75.3 73.5 73.7 73.3
----- ----- ----- ----- -----
Gross profit.................... 23.3 24.7 26.5 26.3 26.7
Selling, general and administra-
tive expenses.................. 21.2 23.2 22.1 22.7 20.6
----- ----- ----- ----- -----
Income from operations.......... 2.1 1.5 4.4 3.6 6.1
Interest and other income (ex-
pense), net.................... (0.8) (1.2) (1.2) (1.5) 0.1
----- ----- ----- ----- -----
Income before taxes............. 1.3% 0.3% 3.2% 2.1% 6.2%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
Revenue. Revenue increased 49.3% to $47.3 million for the first quarter of
fiscal 1997 from $31.7 million in the first quarter of fiscal 1996. 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.
Gross Profit. Gross profit increased 51.5% to $12.6 million for the first
quarter of fiscal 1997 from $8.3 million in the first quarter of fiscal 1996.
As a percentage of revenue, gross profit increased to 26.7% in the first
quarter of fiscal 1997 compared to 26.3% in the first quarter of fiscal 1996.
The increase was attributable primarily to increases in the number of
relatively higher margin projects and specialized practice engagements.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 35.0% to $9.7 million for the first
quarter of fiscal 1997 from $7.2 million in the first quarter of fiscal 1996.
As a percentage of revenue, selling, general and administrative expenses
decreased to 20.6% in the first quarter of fiscal 1997 from 22.7% in the first
quarter of fiscal 1996. This decrease was attributable primarily to the growth
in revenue during the period in which there was limited expansion into new
markets.
Interest and Other Income (Expense), Net. Interest and other income
(expense), net, changed significantly from the first quarter of 1996 resulting
in income of $49,000 in the first quarter of fiscal 1997 as compared to
expense of $470,000 in the first quarter fiscal 1996. This increase resulted
from the repayment of amounts outstanding under the Company's line of credit
and certain other obligations in June 1996 upon receipt of the proceeds from
the Company's initial public offering. The Company completed the first quarter
of fiscal 1997 with cash and cash equivalents of $5.3 million invested in
short term U.S. treasury instruments.
16
<PAGE>
FISCAL YEARS ENDED JUNE 29, 1996 AND JUNE 24, 1995
Revenue. Revenue increased 47.5% to $145.6 million for fiscal 1996 from
$98.7 million in 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 58.4% to $38.6 million for fiscal 1996
from $24.4 million in the comparable prior period. As a percentage of revenue,
gross profit increased to 26.5% for the period compared to 24.7% 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 40.2% to $32.2 million for fiscal 1996
from $22.9 million in the comparable prior period. As a percentage of revenue,
selling, general and administrative expenses decreased to 22.1% for the period
compared to 23.2% 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 Income (Expense), Net. Interest and other income
(expense), net, was $(1.9) million during fiscal 1996 as compared to $(1.1)
million in the comparable prior period. This change 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.
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 Income (Expense), Net. Interest and other income
(expense), net, was $(1.1) million for fiscal 1995 as compared to $(459,000)
for fiscal 1994. This change 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.
17
<PAGE>
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.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the nine quarters ending with the quarter ended
September 28, 1996, in thousands of 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 in the opinion of
management, 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 JUNE 1996 SEPT. 1996
---------- --------- --------- --------- ---------- --------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <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 $43,494 $47,303
Gross profit....... 5,178 5,975 6,072 7,174 8,322 8,590 9,972 11,759 12,607
Income from
operations........ 578 479 77 340 1,136 1,193 1,787 2,375 2,903
Net income (loss).. 207 158 (85) 45 545 738 100 (1) 1,160 1,624
Pro forma net
income (loss)..... 178 107 (113) (86) 344 412 705 1,160 1,624
Pro forma net
income (loss) per
share............. $ 0.02 $ 0.01 $ (0.01) $ (0.01) $ 0.04 $ 0.05 $ 0.08 $ 0.13 $ 0.15
AS A PERCENTAGE OF REVENUE:
Revenue............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....... 24.5 24.3 24.8 25.2 26.3 26.8 26.0 27.0 26.7
Income from
operations........ 2.7 1.9 0.3 1.2 3.6 3.7 4.7 5.5 6.1
Net income (loss).. 1.0 0.6 (0.3) 0.2 1.7 2.3 0.3 2.7 3.4
Pro forma net
income (loss)..... 0.8% 0.4% (0.5)% (0.3)% 1.1% 1.3% 1.8% 2.7% 3.4%
</TABLE>
(1) Includes a $642,000 charge associated with the conversion of America's
Registry from an S corporation to a C corporation. See Note 8 to
Consolidated Financial Statements.
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.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On June 10, 1996, the Company completed its initial public offering for the
sale of 2,230,000 shares of Common Stock, which included 330,000 shares issued
upon exercise of the underwriters' over-allotment option. The Company received
$34.5 million from the sale of the shares, net of the underwriting discounts
and expenses associated with the offering. Additionally, the Company had
previously incurred $294,000 of costs related to the initial public offering
that were deferred in previous years. Net proceeds were used to repay all
outstanding indebtedness under the Company's credit facility, which was
approximately $19.3 million, and certain term loans (see Note 7 to the
Consolidated Financial Statements). As of February 29, 1996, the Company
entered into a $25 million revolving advance facility with BNY Financial
Corporation (the "Line of Credit"). This facility allows the Company to borrow
the lesser of $25 million or 85% of eligible receivables (which equaled
approximately $25.9 million as of September 28, 1996). 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 September 28, 1996 and is
currently in compliance with these financial covenants.
As of September 28, 1996, the principal amount outstanding under the Line of
Credit was $10,000, with availability of $25.0 million. The Line of Credit
bears an interest rate of LIBOR plus 2.5% or the Bank of New York alternate
base rate plus 0.5% at the Company's option. In addition, at September 28,
1996, the Company had invested $5.3 million in short term treasury bills at
various financial institutions which earn interest at the Short Term Federal
Funds rate (4.76% at September 28, 1996).
The Company had negative cash flow from operations of $1.8 million, $7.1
million and $2.9 million for fiscal years 1996, 1995 and 1994, respectively.
The primary sources of cash from operations during fiscal 1996 were: $2.5
million in net income, net of $799,000 in non-cash depreciation and
amortization expenses; an increase of $1.1 million in income taxes payable as
a result of the conversion of America's Registry to a C corporation effective
January 1, 1996; and an increase of $2.4 million in accrued salaries, wages
and expenses. The primary use of cash in operations was an increase of $7.6
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 $269,000 of cash for investing activities in fiscal 1996.
The primary use of cash from investing activities during this period was the
purchase of $1.3 million in fixed assets. The primary source of cash was the
net repayment of $1.1 million 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 fiscal 1996 the Company generated $14.1 million in cash from financing
activities. The primary source of cash during this period was $34.5 million in
net proceeds from the Company's initial public offering of Common Stock in
June 1996. 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 $17.9 million on the Company's line of credit and $3.5 million of
the Company's long-term debt and capital leases and the distribution of $1.5
19
<PAGE>
million to the majority stockholder, including $649,000 distributed to the
majority 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 $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's cash and cash equivalents decreased $6.7 million during the
first three months of fiscal 1997 as receivables increased by $5.1 million,
$2.5 million was expended for the acquisition of Morris Information Systems,
Inc. and $1.2 million in capital expenditures were made. These cash
expenditures were offset by increases in accrued expenses of $1.4 million
during the quarter. The Company's working capital decreased slightly in the
quarter to $32.7 million while the Company maintained a 4.5:1 current ratio.
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 existing branch offices or the development of new branch
offices and 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 certain of its
acquisitions, the Company may be obligated to make certain contingent payments
during the next several years. See "Certain Transactions" and Notes 3 and 16
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.
RECENT ACQUISITIONS
In the second quarter of fiscal 1997, the Company completed five
acquisitions. Four of the acquired companies--Sun-Tek Consultants, Inc. ("Sun-
Tek"), based in Orlando, Florida; Application Resources, Inc. ("ARI"), based
in San Francisco, California; Shamrock Computer Resources, Ltd. ("SCR"), based
in Bloomington, Minnesota; and James Duncan & Associates ("JDA"), based in
Royal Tonbridge Wells, England--provide information technology consulting
services similar to those that the Company currently provides. One of the
acquisitions--Sterling Information Group, Inc. ("Sterling"), based in Austin,
Texas--is an independent provider of outsourced software application
development.
In connection with the Sun-Tek, Sterling and JDA acquisitions, the Company
paid an aggregate of $13.3 million in cash, issued 2,736 shares of Common
Stock and agreed to pay $125,000 in deferred consideration. In addition, the
Company may become obligated to pay up to $500,000 in contingent cash
consideration. These acquisitions have been accounted for as purchases and,
accordingly, the purchase price will be allocated to the assets acquired and
liabilities assumed based upon their estimated fair values as of the
respective dates of acquisition. The excess of the consideration paid over the
estimated fair value of net assets acquired will be recorded as goodwill. The
results of operations for these acquisitions will be included in the Company's
results from the respective dates of acquisition.
The ARI and SCR combinations, in which an aggregate of 2,350,774 shares of
Common Stock were issued, and $2 million in cash was used to repurchase shares
of capital stock from a stockholder of SCR who exercised dissenter's rights,
will be accounted for as poolings-of-interests. Accordingly, commencing with
the Company's December 28, 1996 financial results, the Company's financial
statements will be restated to reflect those acquisitions on a historical
basis. The Pro Forma Unaudited Combined Condensed Financial Information
included elsewhere in this Prospectus reflects the estimated financial
position and results of operations of the Company as if the Company, ARI and
SCR had historically been combined.
20
<PAGE>
Including ARI and SCR, on a combined basis, the Company's working capital
will increase by approximately $3.3 million at September 28, 1996 as compared
to its historical balance, with no significant change in long-term debt.
ARI and SCR have also experienced significant growth over the past several
years, for similar reasons as the Company. SCR has historically reported a
higher gross profit percentage than the Company because SCR employs nearly all
of its consultants on a full-time basis and therefore has a lower cost
structure than the Company and ARI, which employ consultants primarily on a
contract basis. However, this has also resulted in greater variability in
SCR's gross profit percentage from period to period, as SCR must continue to
pay its employees during periods in which they are not working for clients and
generating revenue.
ARI and SCR have historically reported a higher level of income from
operations as a percentage of revenues than The Registry, due to their smaller
geographic base of operations and corporate infrastructure as compared to the
Company.
The Company believes that, on a combined basis, it may be able to achieve a
nominally higher gross profit and operating income percentage than it
historically has reported, due to the above factors and the planned
integration of ARI and SCR into the Company's existing branch offices and
practices. However, the Company will incur a significant amount of expenses
over the remainder of fiscal 1997 to complete this integration.
Additionally, because these acquisitions are to be treated as poolings-of-
interests, all transaction costs associated with the ARI and SCR acquisitions
will be expensed as incurred, primarily in the Company's second quarter of
fiscal 1997. While these amounts are subject to change, the Company
anticipates that, on a combined basis, the total amount of these transaction
costs will be approximately $4.5 million. Many of the acquisition related
transaction costs will not be deductible for corporate income tax purposes,
which will cause the Company's effective tax rate for the remainder of fiscal
1997 to increase over that reported historically.
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 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 of the
standard. The Company has decided not to adopt the fair value method of
accounting for employee stock-based compensation for financial reporting
purposes.
21
<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. As of September 28, 1996,
the Company had approximately 1,640 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 fiscal 1996, the Company provided
IT consultants to approximately 380 clients in a diverse range of industries,
including MCI Telecommunications Corporation, Sun Microsystems Inc., Digital
Equipment Corp. and Pfizer Inc. The Registry has grown from four offices and
$16.9 million in revenue in fiscal 1991 to 25 offices and $161.2 million in
revenue for the twelve months ended September 28, 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 and industries.
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 102 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
22
<PAGE>
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 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.
. 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 25 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 or make an acquisition will be influenced, in
part, by the extent to which establishing a new office or making an
acquisition can help increase the Company's national presence and assist
in serving national accounts.
GROWTH STRATEGY
Through fiscal 1996, the Company's growth was achieved primarily through
branch expansion and, to a lesser extent, the development of new service
offerings, rather than through acquisitions. Since the Company's initial
public offering, it has completed six acquisitions. The Company believes 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:
. Acquire Complementary Businesses. The Company expects to continue to
seek to acquire companies, both nationally and internationally, 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.
. Concentrate on Existing Branch Development. The Company believes that
there are substantial opportunities for increasing revenue in existing
branches, 15 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
23
<PAGE>
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 of its clients, including
systems integrators, computer manufacturers and 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.
. Develop and Provide New Service Offerings. The Company intends to
continue its practice of developing and acquiring complementary
services, such as the Documentation Services Practice, the recently
introduced Help Desk Practice and the Applications Development Practice.
These services can then be expanded on a national level after their
viability and profitability is demonstrated at a local level.
RECENT ACQUISITIONS
A key component of the Company's growth strategy is to acquire complementary
IT consulting organizations. The Company seeks acquisitions that will increase
its national and international presence, strengthen its professional services
offerings, add clients, provide access to expanded resource pools, introduce
new service offerings and establish the Company in new geographic markets. The
Company believes that its team-oriented management style facilitates its
efforts to acquire independent IT consulting businesses seeking an alliance
with a national organization. In determining to proceed with an acquisition,
the Company evaluates a number of factors, including: historical and projected
financial results, compatibility of corporate cultures, reputation and
personality of management, the expansion of the Company's geographic market
share, enhancement of service offerings to clients, synergy with the Company's
existing operations and the purchase price and expected impact on the
Company's earnings per share.
Management believes that acquired businesses can be integrated with the
Company at acceptable incremental costs. When integrating a particular
acquisition, the Company addresses the particular sales and recruiting as well
as operational structure in a manner that management believes will best
preserve those attributes of value and at the same time leverage the existing
infrastructure that the Company has established. The Company has, on occasion,
utilized independent consultants to assist in its evaluation and integration
processes. Depending on the particular acquisition, the Company may choose to
operate the entity as an independent subsidiary maintaining its own corporate
identity, or choose to integrate the acquired business into the Company.
Since its initial public offering in June 1996, the Company has completed
six acquisitions. The acquired companies are described briefly below.
. Morris Information Systems, Inc. Headquartered in Houston, Texas with a
branch office in Columbia, South Carolina, Morris Information Systems,
Inc. ("MIS") provides IT consulting services to a wide variety of
clients. In its most recently completed fiscal year, MIS had revenue of
approximately $3.7 million.
. Sun-Tek Consultants, Inc. Located in Orlando, Florida, Sun-Tek
Consultants Inc. ("Sun-Tek") provides IT consulting services to a
variety of clients in Central Florida. In its most recently completed
fiscal year, Sun-Tek had revenue of approximately $2.4 million.
24
<PAGE>
. Application Resources, Inc. Headquartered in San Francisco, California
with two branch offices in Walnut Creek and Los Altos, California,
Application Resources, Inc. ("ARI") provides IT consulting services to a
wide variety of clients in the Northern California area. The Company
intends to merge the ARI Walnut Creek office with its own Walnut Creek
office in the near future. In its most recently completed fiscal year,
ARI had revenue of approximately $37.6 million.
. Shamrock Computer Resources, Ltd. Headquartered in Bloomington,
Minnesota with branch offices in Moline, Illinois, Omaha, Nebraska, St.
Louis, Missouri and Schaumberg, Illinois, Shamrock Computer Resources,
Ltd. ("SCR") provides IT consulting services to a wide variety of
clients in the Midwest region. SCR employs primarily staff IT
consultants and its acquisition has increased the number of the
Company's staff IT consultants significantly. The Company expects to
combine SCR's Schaumberg, Illinois office with its Rolling Meadows,
Illinois office in the near future. In its most recently completed
fiscal year, SCR had revenue of approximately $33.7 million.
. Sterling Information Group, Inc. Headquartered in Austin, Texas,
Sterling Information Group, Inc. ("Sterling") provides application
development services to a variety of clients in the Southwest region.
The Company intends to use Sterling as the basis of its Application
Development Practice and will operate Sterling under its current name.
In its most recently completed fiscal year, Sterling had revenue of
approximately $6.1 million.
. James Duncan & Associates. Based in England, James Duncan & Associates
("JDA") was the Company's first overseas acquisition. From its
headquarters in Royal Tonbridge Wells, and its branch office in
Luxembourg, JDA provides IT consulting services to clients in England
and in continental Europe. In its most recently completed fiscal year,
JDA had revenue of approximately $6.4 million.
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 three
additional practice areas: documentation services, application development and
help desk services.
IT Professional Services
The Company organizes its IT professional services in five sectors:
workgroup/desktop; legacy systems; networks and communications; database
design and development; and Internet.
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
. Visual Basic design/OBDC
25
<PAGE>
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
. IMS systems programming
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
. LAN/WAN architecture
Database design and development assignments involve design, development and
implementation of relational database applications and systems. General skills
required in this sector include:
. Sybase/UNIX/C++/Tuxedo
. Oracle DBA
. 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
. JAVA development
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.
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.
26
<PAGE>
Legacy Systems
. Development of an On-Line Portfolio Accounting System for a Mutual
Fund. The Company provided three programmer analysts for a project that
lasted one and a half years. These programmer analysts worked at the
direction of the client and with IT consultants provided by certain of
the Company's competitors. The project team consisted 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 and one-half 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.
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.
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.
. 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 lasted approximately seven months.
. 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.
27
<PAGE>
Practices
Network Systems Consulting Practice. In November 1994, the Company acquired
the business that formed the basis for its Network Systems Consulting Practice
("NSCP"). Based in New England and operating from locations in New York City
and Chicago, the NSCP is staffed by 35 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. In 1994, the Company initiated its
Documentation Services Practice ("DSP") 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 32 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.
Application Development Practice. In November 1996, the Company acquired
Sterling Information Group, Inc., the business which will form the basis for
the Company's Application Development Practice. Based in Austin, Texas, the
practice specializes in developing end-user applications that utilize
client/server, Internet, relational database and object-oriented technologies.
The core competencies utilized in the Application Development Practice include
project-based software analysis, development, implementation, support
services, training and outsourced software product development.
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
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 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 utilizes a National Resource
Delivery Team ("NRDT"), a group of 10 Resource Managers located at the
Company's corporate headquarters. Communicating daily with the Resource
Managers in the Company's 25 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.
28
<PAGE>
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 offers a benefits package to its hourly IT consultants
which includes comprehensive medical insurance, a prescription drug card,
term life insurance, individual long-term disability insurance, a 401(k)
retirement plan and, subject to certain restrictions, the right to
participate in the Company's stock purchase plan. These benefits underscore
the Company's commitment to its consultants and further consultant loyalty
and retention efforts.
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 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,
including participation in the Company's stock purchase plan.
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.
29
<PAGE>
As of September 28, 1996, the Company employed 102 Resource Managers located
in its branch offices nationwide. This number exceeds the number of Account
Managers by a ratio of 1.3 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 September 28, 1996, the
Company employed 79 Account Managers who are compensated through a combination
of base salary and commission.
OPERATIONS AND SUPPORT SERVICES
Regional Management
The Company has a Regional Vice President for each of the Northeast,
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.
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, a majority of the Company's Branch Managers have
been promoted from within and thus bring with them an appreciation for the
Company's culture. Management believes that this approach allows 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 one Resource Manager, one Account/Branch Manager and one
administrative staff person to 11 Resource Managers, six Account Managers,
five administrative staff persons and a Branch Manager for a larger, more
established office.
30
<PAGE>
The following chart lists the Company's 25 branch offices and the fiscal
year in which they were opened or acquired:
<TABLE>
<CAPTION>
FISCAL YEAR
LOCATION OPENED/ACQUIRED
- -------- ---------------
<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
Denver, Colorado........ 1994
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR
LOCATION OPENED/ACQUIRED
- -------- ---------------
<S> <C>
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
Houston, Texas........... 1997
Columbia, South
Carolina................ 1997
</TABLE>
Corporate Services
From its headquarters in Newton, Massachusetts and certain regional offices
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 offers 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, a 401(k) retirement plan and, subject to certain
restrictions, the right to participate in the Company's stock purchase
plan.
CLIENT BASE
The Company focuses its sales efforts primarily on organizations with
complex IT needs and currently provides IT consultants to approximately 400
clients. In the three months ended September 28, 1996, approximately 34.3% of
the Company's revenue was derived from its top 10 customers, none of which
accounted for more than 6.1% of revenue. The primary industries served by the
Company are: financial services, manufacturing, communications, systems
integration and pharmaceutical. The following table
31
<PAGE>
shows selected clients, categorized by industry group, for which the Company
provided services in the three months ended September 28, 1996. The clients
listed generated approximately $12.7 million of revenue in the aggregate for
the Company for the three months ended September 28, 1996, which represents
approximately 26.9% 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
Machines Corp.
MANUFACTURING Planning Research
Corporation International,
Ltd.
Lockheed Martin Corp.
Silicon Graphics Inc. Sun Microsystems Inc.
COMMUNICATIONS PHARMACEUTICAL
AT&T Bristol-Myers Squibb Company
Hitachi Pfizer Inc.
MCI Telecommunications Corporation
NYNEX OTHER
Carolina Power & Light Co.
Philip Morris USA
Prodigy Services Company
Ryder Systems, 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 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.
32
<PAGE>
EMPLOYEES
As of September 28, 1996, the Company had 508 employees, of whom 196 were
staff IT consultants, 102 were Resource Managers, 79 were Account Managers, 41
were either Branch, Regional or corporate managers and 90 served in various
administrative and accounting capacities. On that date, there were also more
than 1,640 IT consultants (including the 196 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 89.9% of the Company's non-staff IT consultants during fiscal
1996 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 6 to "Selected
Consolidated Financial Data," "Certain Transactions" and Note 14 to
Consolidated Financial Statements. The Company also maintains offices and
leases office space occupying between 208 and 7,835 square feet under leases
terminating from May 31, 1997 to July 31, 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.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company
believes that it is not currently involved in any legal proceedings the
resolution of which, individually or in the aggregate, would have a material
adverse effect on the Company's business, financial condition or results of
operation.
33
<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.......... 39 President, Chief Executive Officer and Director
Robert E. Foley......... 48 Chief Financial Officer and Treasurer
Mark W. Biscoe.......... 36 Vice President, Northeast Region
Christopher T. Cain..... 33 Vice President, Southwest Region
Anthony F. Carusone..... 48 Vice President, Southeast Region
Christopher B. Egizi.... 40 Vice President, Midwest Region
James F.J. McKee........ 31 Vice President, Western Region
Martin E. Goober........ 31 Vice President, Operations
David E. Jackson........ 45 Vice President, Network Systems Consulting Practice
Robert P. Badavas....... 43 Director
Paul C. O'Brien......... 57 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, Northeast Region, since July 1996,
and Vice President, New England, from November 1995 to July 1996. 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
34
<PAGE>
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.
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. 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, from October 1986 to October 1995.
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
June 1993 to December 1994 and as President and Chief Executive Officer from
October 1988 to June 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 Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, presently composed of Messrs. Badavas and O'Brien,
reviews the Company's accounting practices, internal accounting controls and
financial results and oversees the engagement of the Company's independent
auditors. The Compensation Committee, also composed of Messrs. Badavas and
O'Brien, reviews and recommends 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 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. At each annual meeting of stockholders, nominees for director will be
eligible for re-election or election for three-year terms. See "Description of
Capital Stock -- Massachusetts Law and Certain Provisions of the Company's
Articles of Organization and By-Laws."
DIRECTOR COMPENSATION
Directors of the Company who are not officers or employees of the Company
are paid $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."
35
<PAGE>
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 and
1996 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- --------------------------- ---- -------- -------- ------------------
<S> <C> <C> <C> <C>
G. Drew Conway................... 1996 $520,000 $ -- --
President and Chief Executive 1995 537,500 -- --
Officer
Anthony F. Carusone.............. 1996 97,940 199,052 50,000
Vice President, Southeast Region 1995 75,260 120,231 --
Christopher B. Egizi............. 1996 201,800 80,000 60,000
Vice President, Midwest Region 1995 201,400 12,500 --
Mark W. Biscoe................... 1996 97,745 167,867 50,000
Vice President, Northeast Region 1995 86,269 71,308 --
Martin E. Goober................. 1996 118,600 139,000 50,000
Vice President, Operations 1995 109,132 47,500 --
</TABLE>
- --------
(1) Annual compensation amounts do not include the dollar value of perquisites
and other personal benefits which did not exceed the lesser of $50,000 or
10 percent of salary and bonus for any Named Executive Officer.
EMPLOYMENT AGREEMENTS
Effective June 30, 1996, the Company entered into an employment agreement
(the "Employment Agreement") with Mr. Conway pursuant to which Mr. Conway is
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 $160,000 in the first year. The
Employment Agreement provides that if Mr. Conway's employment is terminated
without "cause" (as defined in the Employment Agreement) or if Mr. Conway
terminates his employment for "good reason" (as defined in the Employment
Agreement), the Company will pay Mr. Conway severance equal to two years of
base compensation plus a portion of the bonus paid or payable with respect to
the immediately preceding full employment year based on days of service in the
year of termination. In addition, if Mr. Conway's employment is terminated at
the end of the Employment Agreement, he will be entitled to severance equal to
one year of base compensation. The Employment Agreement also contains non-
competition and non-solicitation covenants during the employment term and for
a two-year period thereafter. Mr. Conway is also provided with certain
registration rights with respect to his shares of Common Stock, described
under "Description of Common Stock."
36
<PAGE>
No stock options were granted during fiscal 1995 to any Named Executive
Officer. The following table sets forth certain information concerning grants
of stock options made during fiscal 1996 to each of the Named Executive
Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OR PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERMS (2)
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- ------------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
G. Drew
Conway..... -- -- -- -- -- --
Mark W.
Biscoe..... 50,000 4.1% $11.00 3/06/06 $ 345,892 $ 876,558
Anthony F.
Carusone... 50,000 4.1% $11.00 3/06/06 $ 345,892 $ 876,558
Christopher
B. Egizi... 60,000 5.0% $11.00 3/06/06 $ 415,070 $ 1,051,870
Martin E.
Goober..... 50,000 4.1% $11.00 3/06/06 $ 345,892 $ 876,558
</TABLE>
- --------
(1) The expiration date of each option is the tenth anniversary of the date on
which it was originally granted. These options are exercisable in five
equal installments commencing on December 10, 1996 and annually thereafter
commencing on December 15, 1997.
(2) In accordance with the rules of the Securities and Exchange Commission,
the amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
option holders' continued employment through the option period, and the
date on which the options are exercised.
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers on
June 29, 1996. No options were exercised by any of the Named Executive
Officers during fiscal 1995 or 1996 and at fiscal year-end no options were
exercisable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
NAME YEAR END YEAR END (1)
- ---- ---------------------- --------------------
<S> <C> <C>
G. Drew Conway...................... -- --
Mark W. Biscoe...................... 50,000 $ 912,500
Anthony F. Carusone................. 50,000 $ 912,500
Christopher B. Egizi................ 60,000 $1,095,000
Martin E. Goober.................... 50,000 $ 912,500
</TABLE>
- --------
(1) Value is based upon the difference between the fair market value of $29.25
per share, which was the closing sale price per share of Common Stock on
the Nasdaq National Market on the last trading day of the 1996 fiscal
year, less the option exercise price payable per share multiplied by the
number of shares underlying the option.
No stock appreciation rights were granted to any Named Executive Officer
during fiscal 1995 or 1996, nor were any outstanding at June 29, 1996.
37
<PAGE>
STOCK PLANS
1996 Stock Plan. The Company's 1996 Stock Plan was approved by the Board of
Directors on March 6, 1996 and by the then sole stockholder on March 22, 1996.
On January 9, 1997, the Board of Directors, subject to stockholder approval,
voted to amend the 1996 Stock Plan by increasing the number of shares of
Common Stock available for issuance thereunder by 2,000,000, to an aggregate
of 3,600,000 shares of Common Stock. Mr. Conway, who will own approximately
50.4% of the outstanding shares of the Company's Common Stock after the
offering, has indicated that he will vote as a stockholder in favor of such
amendment. 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 is administered by the Compensation Committee. Subject
to the provisions of the 1996 Stock Plan, the Committee has the authority to
designate participants and 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. Upon stockholder approval of the amendment referred to
above, the aggregate number of shares of Common Stock available for Awards
under the Plan will be 3,600,000. No Awards may be made under the 1996 Stock
Plan after March 6, 2006. As of September 28, 1996, options to purchase an
aggregate of 1,222,250 shares of Common Stock were outstanding under the 1996
Stock Plan.
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 then 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 Internal Revenue Code of 1986, as amended (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 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 then 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 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 was granted an option to purchase 20,000 shares at
an exercise price of $11.00 per share in the case 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.
38
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Company's initial public offering in June 1996, the Company had
no Compensation Committee or other committee performing similar functions and
decisions concerning executive compensation were made by Mr. Conway, the
President, Chief Executive Officer and then sole stockholder of the Company,
together with Mr. Foley, the Chief Financial Officer of the Company. Since
June 1996, decisions concerning executive compensation have been made by the
Compensation Committee, 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 at an annual rent of approximately $357,000. 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.
The Realty Trust acquired the building in August 1992 with approximately
$170,000 borrowed from the Company pursuant to the Realty Trust Loan described
below and approximately $1,650,000 in bank financing. The Realty Trust, and
not the Company, acquired the building based on the advice of the Company's
advisors and lending banks that (i) the Company should not be in the business
of owning and operating real estate and (ii) the Company should not be
burdened by additional debt on its books, given its debt to equity ratio. In
connection with the refinancing of the Realty Trust's mortgage on the building
in September 1995, approximately $649,000 of the proceeds from the refinancing
were distributed to Mr. Conway. See Note 14 to Consolidated Financial
Statements. Pursuant to the terms of the loan between the Realty Trust and the
Company, the Realty Trust repaid the outstanding loan balances upon the
closing of the Company's initial public offering and the Realty Trust now has
an equity interest in the building.
Beginning in May, 1990 the Company made certain loans ("Loans") to Mr.
Conway. The largest amount outstanding under all such Loans was $1,108,982 on
September 25, 1995. The outstanding balance under the Loans accrued interest
at the rate of 10% per annum. Of these proceeds, $300,000 was used for capital
contributions to America's Registry and the balance was used for personal
purposes. Mr. Conway repaid all of such indebtedness, including accrued
interest, following the Company's initial public offering in June 1996.
Beginning on August 25, 1992, the Company made certain loans to the Realty
Trust, used to purchase and operate the office building at 189 Wells Avenue,
Newton, Massachusetts, in which the Company's executive offices are located
(the "Realty Trust Loan"). The largest amount outstanding under such loans was
$420,988 as of May 30, 1996, the date of the note evidencing such
indebtedness. Pursuant to the terms of the Realty Trust Loan, the Realty Trust
repaid the outstanding balances thereunder following the Company's initial
public offering in June 1996.
In December 1995, America's Registry 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 November 1994, the Company acquired Axiom Consulting Group, Inc.
("Axiom") (currently doing business as "Network Systems Consulting Practice"
or "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
39
<PAGE>
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 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, serves as the Company's Transfer Agent and Registrar.
The Company has adopted a policy 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.
40
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth as of the date of this Prospectus, and as
adjusted to reflect the sale of the shares offered hereby, 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; (iv) each Selling Stockholder; and (v) all directors and executive
officers of the Company as a group. 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)
DIRECTORS, NAMED EXECUTIVE OFFICERS AND ----------------------- OF SHARES -----------------------
5% AND SELLING STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------- ------------ ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
G. Drew Conway (3)+.............. 7,697,560 60.9% 700,000 6,997,560 50.4%
Director, President and
Chief Executive Officer
Robert P. Badavas................ 5,000 * -- 5,000 *
Director
Paul C. O'Brien.................. 5,000 * -- 5,000 *
Director
Mark W. Biscoe (4)............... 12,400 * -- 12,400 *
Vice President, Northeast Region
Anthony F. Carusone (4).......... 12,200 * -- 12,200 *
Vice President, Southeast Region
Christopher B. Egizi (5)......... 19,200 * -- 19,200 *
Vice President, Midwest Region
Martin E. Goober (4)............. 11,950 * -- 11,950 *
Vice President, Operations
James D. Campbell................ 122,943 1.0 61,471 61,472 *
William J. Campbell (6)(7)....... 715,158 5.7 353,463 361,695 2.6
Charles E. Entrekin, Jr.......... 263,450 2.1 131,725 131,725 *
Essex Performance Fund L.P. ..... 37,047 * 18,523 18,524 *
Essex Special Growth *
Opportunities Fund L.P. ........ 4,802 * 2,401 2,401
Essex High Tech. Foreign Fund 11,663 * 5,831 5,832 *
L.P. ...........................
Essex New Discovery Fund L.P. ... 21,954 * 10,977 10,977 *
Thomas W. Fife (6)............... 20,855 * 6,311 14,544 *
James J. Flaherty................ 153,182 1.2 58,333 94,849 *
Patrick J. Flaherty.............. 153,182 1.2 58,333 94,849 *
Timothy J. Guilfoil.............. 153,182 1.2 58,333 94,849 *
Judith Hamilton (6).............. 20,855 * 6,311 14,544 *
Santosh S. Krishnan.............. 153,182 1.2 58,333 94,849 *
Luke Family Trust (8)............ 31,833 * 12,623 19,210 *
William Magidson (9)............. 1,920 * 823 1,097 *
Donald C. Peterson............... 153,182 1.2 58,333 94,849 *
Raj Ponnuswamy................... 153,182 1.2 58,333 94,849 *
Marc L. Steuer (6)............... 20,855 * 6,311 14,544 *
Guy J. Vaillancourt (10)......... 27,991 * 3,018 24,973 *
Robert Warshawer................. 179,475 1.4 89,737 89,738 *
Charles Yazel.................... 12,623 * 6,311 6,312 *
All directors and executive offi-
cers as a group (11 persons).... 7,808,210 61.4% 700,000 7,108,210 51.0%
</TABLE>
41
<PAGE>
- --------
+ c/o The Registry, Inc.
189 Wells Avenue
Newton, MA 02159
* Less than one percent.
(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 450,000 shares of Common Stock from the Company. If
the over-allotment option is exercised in full, Mr. Conway will own 48.8%
of the total Common Stock outstanding after completion of the offering.
(3) Includes 2,200 shares of Common Stock held by trusts for which Mr. Conway
serves as trustee.
(4) Includes 10,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable or exercisable within 60 days.
(5) Includes 12,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable or exercisable within 60 days.
(6) Includes 8,232 shares of Common Stock issuable upon exercise of options
which are currently exercisable or exercisable within 60 days.
(7) The address for Mr. William Campbell is 372 King Rd., Atlanta, Ga. 30342.
(8) Includes 6,586 shares of Common Stock issuable upon exercise of options
which are held by a trustee of the Luke Family Trust and are currently
exercisable or exercisable within 60 days.
(9) Includes 274 shares of Common Stock issuable upon exercise of options
which are currently exercisable or exercisable within 60 days.
(10) Includes 21,954 shares of Common Stock issuable upon exercise of options
which are currently exercisable or exercisable within 60 days.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares,
of which 49,000,000 shares are designated Common Stock, no par value per
share, and 1,000,000 shares are 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 January 6, 1997, there were 12,636,128 shares of Common Stock
outstanding, held of record by 66 stockholders. 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 the shares of Common Stock offered by the Company in
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, the Board of Directors
has 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
43
<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.
44
<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 under the Massachusetts Business
Corporation Law 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.
45
<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.
In connection with the acquisition of ARI, the Company granted registration
rights to the former stockholders of ARI. As a result, the holders of
1,431,682 shares of Common Stock (the "ARI Registrable Securities") are
entitled to certain rights with respect to the registration of such shares
under the Securities Act of 1933, as amended (the "Securities Act"). On no
more than three occasions, these holders have the right to require the Company
to effect the registration of all or a portion of the ARI Registrable
Securities under the Securities Act, subject to certain conditions and
limitations.
In connection with the acquisition of SCR, the Company granted registration
rights to the former stockholders of SCR. As a result, the holders of 919,092
shares of Common Stock (the "SCR Registrable Securities," and together with
the ARI Registrable Securities, the "Registrable Securities") are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. On no more than one occasion, these holders have the right to
require the Company to effect the registration of all or a portion of SCR
Registrable Securities under the Securities Act, subject to certain conditions
and limitations.
In addition, in the event the Company proposes to register any of its
securities under the Securities Act either for its own account or the account
of other security holders, the holders of Registrable Securities are entitled
to notice of such registration and may request the Company to include all or a
portion of their Registrable Securities in such registration, subject to
certain marketing and other limitations. The Company may in certain
circumstances defer such registrations and the underwriters have the right,
subject to certain limitations, to limit the number of Registrable Securities
included in such registrations. All of the shares of Common Stock being sold
by the Selling Stockholders in this offering are being sold pursuant to
registration rights.
The Company has agreed to bear all expenses incurred in connection with any
such registrations, other than the fees and disbursements of counsel selected
by the holders of the Registrable Securities and underwriting commissions and
discounts applicable to such Registrable Securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is The First
National Bank of Boston.
46
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Adams,
Harkness & Hill, Inc., Montgomery Securities and J.C. Bradford & Co. 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........................................
Montgomery Securities..............................................
J.C. Bradford & Co.................................................
---------
Total............................................................ 3,000,000
=========
</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 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 450,000
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 3,000,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 3,000,000 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 Adams, Harkness &
Hill, Inc., 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.
In addition, G. Drew Conway, the President, Chief Executive Officer and
principal stockholder of the Company, who will hold an aggregate of 6,997,560
shares of Common Stock following the offering, for a period of 180 days after
the date of this Prospectus, and the Company's executive officers, directors
and certain Selling Stockholders, who will hold an aggregate of 1,395,590
shares after the offering, for a period of 90 days after the date of this
Prospectus, have 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 them, 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, without the
prior written consent of Adams, Harkness & Hill, Inc.
47
<PAGE>
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.
In general, the rules of the Securities and Exchange Commission (the
"Commission") will prohibit the Underwriters from making a market in the
Company's Common Stock during the "cooling off" period immediately preceding
the commencement of sales in the offering. The Commission has, however,
adopted exemptions from these rules that permit passive market making under
certain conditions. These rules permit an Underwriter to continue to make a
market subject to the conditions, among others, that its bid not exceed the
highest bid by a market maker not connected with the offering and that its net
purchases on any one trading day not exceed prescribed limits. Pursuant to
these exemptions, certain Underwriters, selling group members (if any) or
their respective affiliates may engage in passive market making in the
Company's Common Stock during the cooling off period.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF COMMON STOCK
The validity of the Common Stock being offered hereby will be passed upon
for the Company by Ropes & Gray, Boston, Massachusetts. Certain legal matters
in connection with this offering will be passed upon for the Underwriters by
Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of The Registry, Inc. as of June 29,
1996 and June 24, 1995, and for the years ended June 29, 1996, June 24, 1995
and May 31, 1994 included in this Prospectus have been so included in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and the Commission's regional offices
at 7 World Trade Center, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the public reference section of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at
prescribed rates. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically, such as the Company. The
address of the Commission's Web site is http://www.sec.gov.
48
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
omits certain of the information contained in the Registration Statement and
the exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
DC 20549, and at the Commission's regional offices at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies may be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
49
<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 June 24, 1995, June 29, 1996 and Septem-
ber 28, 1996
(unaudited).............................................................. F-3
Consolidated Statement of Income for the Years Ended May 31, 1994, June
24, 1995 and June 29, 1996 and for the Three Months Ended September 30,
1995 (unaudited) and September 28, 1996 (unaudited)...................... F-4
Consolidated Statement of Changes in Stockholders' Equity for the Years
Ended May 31, 1994, June 24, 1995 and June 29, 1996 and for the Three
Months Ended September 28, 1996 (unaudited).............................. F-5
Consolidated Statement of Cash Flows for the Years Ended May 31, 1994,
June 24, 1995 and June 29, 1996 and for the Three Months Ended September
30, 1995 (unaudited) and September 28, 1996 (unaudited).................. F-6
Notes to Consolidated Financial Statements................................ F-7
Introduction to Pro Forma Unaudited Combined Condensed Financial Informa-
tion..................................................................... F-21
Pro Forma Unaudited Combined Condensed Balance Sheet as of September 28,
1996..................................................................... F-22
Pro Forma Unaudited Combined Condensed Statement of Income for the Years
Ended May 31, 1994, June 24, 1995 and June 29, 1996 and for the Three
Months Ended September 30, 1995 and September 28, 1996................... F-23
Notes to Pro Forma Unaudited Combined Condensed Financial Statements...... F-24
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of The Registry, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
The Registry, Inc. and its subsidiaries (the "Company") at June 29, 1996 and
June 24, 1995, and the results of their operations and their cash flows for
each of the two years in the period ended June 29, 1996, for the one month
ended June 25, 1994 (not presented separately herein), and for the year 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
July 26, 1996, except as to
the "Morris Information Systems"
section of Note 3 which is
as of August 16, 1996.
F-2
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 24, JUNE 29, SEPTEMBER 28,
1995 1996 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ -- $12,044 $ 5,337
Accounts receivable, net of allowance for
doubtful accounts of $317, $464 and $594 at
June 24, 1995, June 29, 1996 and September
28, 1996, respectively...................... 22,448 29,930 35,574
Notes receivable from related parties........ 422 82 133
Deferred income taxes........................ -- 47 47
Other current assets......................... 420 656 894
------- ------- -------
Total current assets..................... 23,290 42,759 41,985
Fixed assets, net.............................. 2,758 5,344 6,408
Notes receivable from officers................. 1,121 60 91
Other assets................................... 1,294 903 3,346
Deferred income taxes.......................... 180 35 35
------- ------- -------
$28,643 $49,101 $51,865
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............................... $17,938 $ 10 $ 10
Current portion of capital lease
obligations................................. -- 77 37
Current portion of long-term debt............ 946 288 289
Accounts payable............................. 1,252 680 333
Accrued salaries and wages................... 1,976 2,641 2,984
Other accrued expenses....................... 1,286 3,122 4,587
Income taxes payable......................... 99 1,209 1,004
Deferred income taxes........................ 369 89 81
------- ------- -------
Total current liabilities................ 23,866 8,116 9,325
------- ------- -------
Deferred income taxes.......................... 939 670 601
------- ------- -------
Capital lease obligations...................... -- 52 52
------- ------- -------
Long-term debt................................. 1,554 2,433 2,433
------- ------- -------
Commitments and contingencies (Notes 3 and 12)
Stockholders' equity:
Preferred stock, $.10 par value (Note 9)
Common stock, no par value:
Authorized--29,000,000 shares; issued and
outstanding--2,666,667 shares at June 24,
1995 and 10,230,000 shares at June 29, 1996
and September 28, 1996...................... 10 10 10
Common stock, $.01 par value:
Authorized, issued and outstanding--200,000
shares at June 24, 1995 and no shares at
June 29, 1996 and September 28, 1996........ 2 -- --
Additional paid-in capital................... 453 34,969 34,969
Retained earnings............................ 1,819 2,851 4,475
------- ------- -------
Total stockholders' equity............... 2,284 37,830 39,454
------- ------- -------
$28,643 $49,101 $51,865
======= ======= =======
</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 THREE MONTHS ENDED
--------------------------- ---------------------------
MAY 31, JUNE 24, JUNE 29, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996 1995 1996
------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue................. $60,367 $98,687 $145,588 $31,682 $47,303
Cost of revenue......... 46,262 74,288 106,945 23,360 34,696
------- ------- -------- ------- -------
14,105 24,399 38,643 8,322 12,607
Selling, general and
administrative
expenses............... 12,831 22,925 32,152 7,186 9,704
------- ------- -------- ------- -------
Income from operations.. 1,274 1,474 6,491 1,136 2,903
Interest expense........ (512) (1,201) (2,084) (489) (80)
Interest and other
income................. 53 56 217 19 129
------- ------- -------- ------- -------
Income before taxes..... 815 329 4,624 666 2,952
Income tax provision.... 430 4 2,081 121 1,328
------- ------- -------- ------- -------
Net income.............. $ 385 $ 325 $ 2,543 $ 545 $ 1,624
======= ======= ======== ======= =======
Net income per share.... $ 0.15
=======
Weighted average common
and common equivalent
shares................. 11,006
=======
Unaudited pro forma information
(Note 15):
Income before taxes... $ 329 $ 4,624 $ 666
Pro forma income tax
provision............ 243 2,003 322
------- -------- -------
Pro forma net income.. $ 86 $ 2,621 $ 344
======= ======== =======
Pro forma net income
per share............ $ 0.01 $ 0.30 $ 0.04
======= ======== =======
Weighted average
common and common
equivalent shares.... 8,398 8,594 8,398
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
NO PAR $.01 PAR ADDITIONAL TOTAL
---------------- --------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL EARNINGS EQUITY
---------- ----- -------- ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
14).................... -- -- -- -- (111) -- (111)
Distributions........... -- -- -- -- -- (1,511) (1,511)
Acquisition of America's
Registry by TRI (Note
2)..................... 5,333,333 -- (200,000) (2) 2 -- --
Proceeds from issuance
of Common Stock, net of
issuance costs......... 2,230,000 -- -- -- 34,204 -- 34,204
Capital contribution.... -- -- -- -- 421 -- 421
Net income for the
year................... -- -- -- -- -- 2,543 2,543
---------- ---- -------- ---- ------- ------- -------
Balance at June 29,
1996................... 10,230,000 10 -- -- 34,969 2,851 37,830
Net income for the
quarter (unaudited).... -- -- -- -- -- 1,624 1,624
---------- ---- -------- ---- ------- ------- -------
Balance at September 28,
1996................... 10,230,000 $ 10 -- $-- $34,969 $ 4,475 $39,454
========== ==== ======== ==== ======= ======= =======
</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 AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
--------------------------- -------------------
MAY 31, JUNE 24, JUNE 29, SEPT. 30, SEPT. 28,
1994 1995 1996 1995 1996
------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.................... $ 385 $ 325 $ 2,543 $ 545 $ 1,624
Adjustments to reconcile net
income to net cash used for
operating activities:
Depreciation and
amortization................. 196 517 799 199 218
Provision for losses on
accounts receivable.......... 147 125 147 90 130
Deferred income taxes......... 430 (88) (451) -- (265)
Increase in accounts
receivable................... (5,660) (9,688) (7,629) (1,947) (5,102)
Increase in other current
assets....................... (102) (143) (187) (98) (231)
(Increase) decrease in other
assets....................... (174) (190) 5 (16) --
Increase (decrease) in
accounts payable............. 159 910 (572) (897) (381)
Increase in accrued expenses.. 818 690 1,887 438 1,299
Increase in accrued salaries
and wages.................... 897 396 530 165 148
Increase (decrease) in income
taxes payable................ -- 92 1,110 22 (205)
------- ------- -------- ------- -------
Net cash used for operating
activities.................. (2,904) (7,054) (1,818) (1,499) (2,765)
------- ------- -------- ------- -------
Cash flows from investing
activities:
Cash disbursed for
acquisition.................. -- (250) -- -- (2,476)
Increase in notes receivable
from officers................ (82) (406) (709) -- (31)
Repayment of notes receivable
from officers................ -- -- 1,770 379 --
Decrease (increase) in notes
receivable from related
parties...................... 195 (57) (25) (4) (34)
Purchases of fixed assets..... (578) (1,885) (1,305) (215) (1,242)
------- ------- -------- ------- -------
Net cash provided by (used
for) investing activities... (465) (2,598) (269) 160 (3,783)
------- ------- -------- ------- -------
Cash flows from financing
activities:
Cash proceeds from issuance of
common stock (Note 9)........ -- -- 34,498 -- --
Net borrowings (payments) on
line of credit............... 3,294 8,023 (17,928) 911 --
Principal payments on long-
term debt and capital lease
obligations.................. (80) (451) (3,509) (1,083) (159)
Proceeds from issuance of
long-term debt............... -- 2,080 2,160 2,160 --
Capital contribution.......... 155 -- 421 -- --
Distributions................. -- -- (1,511) (649) --
------- ------- -------- ------- -------
Net cash provided by (used
for) financing activities... 3,369 9,652 14,131 1,339 (159)
------- ------- -------- ------- -------
Net increase (decrease) in cash
and cash equivalents.......... -- -- 12,044 -- (6,707)
Cash and cash equivalents,
beginning of period........... -- -- -- -- 12,044
------- ------- -------- ------- -------
Cash and cash equivalents, end
of period..................... $ -- $ -- $ 12,044 $ -- $ 5,337
======= ======= ======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest........ $ 512 $ 1,201 $ 2,018 $ 472 $ 61
Cash paid for income taxes.... $ 15 $ -- $ 1,422 $ 169 $ 1,788
</TABLE>
See additional disclosure of non-cash investing and financing activity in
Notes 3, 4, 9 and 14.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALL INFORMATION INCLUDED IN THESE FOOTNOTES FOR ANY PERIOD SUBSEQUENT TO JUNE
29, 1996 IS UNAUDITED.
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 14 states.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying financial statements include the accounts of TRI and
America's Registry, Inc. ("America's Registry") 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
America's Registry and the stockholder of America's Registry 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
subsidiaries, The Registry, Inc. Network Systems Consulting Practice (formerly
Axiom Consulting Group, Inc.), and Morris Information Systems, Inc. subsequent
to their acquisition on November 30, 1994 and August 16, 1996, respectively
(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 14). All intercompany
balances and transactions have been eliminated.
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 stockholders' equity and of cash flows are
presented for the years ended May 31, 1994, June 24, 1995 and June 29, 1996.
Results of operations and of cash flows for the years ended June 24, 1995 and
June 29, 1996 are for 52 weeks and 53 weeks, respectively. The results of
operations and of cash flows for the quarters ended September 30, 1995 and
September 28, 1996 are for 14 weeks and 13 weeks, respectively.
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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
Company's investments consist of short term U.S. treasury bill investments
earning interest at the Short Term Federal Funds rate (5.167% at June 29,
1996). Accordingly, the investments are subject to minimal credit and market
risks. These investments are carried at cost plus accrued interest which
approximates market. The Company considers such securities to be classified as
"held-to-maturity".
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 June 29, 1996, one customer comprised approximately 13% of
the Company's accounts receivable. No single customer accounted for more than
10% of accounts receivable at June 24, 1995. The
F-7
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
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 improvements................. 31 1/2 years
Computer equipment........................ 5 years
Furniture and equipment................... 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 June 24, 1995 or June 29, 1996. Total
advertising expenses for the years ended May 31, 1994, June 24, 1995 and June
29, 1996 were $446,000, $627,000 and $340,000, 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, America's Registry 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 America's Registry by TRI described above, America's Registry'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 June 24, 1995, June 29, 1996 and September 28,
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.
F-8
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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 has decided to adopt SFAS No.
123 for disclosure purposes only. The adoption of SFAS No. 121 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 financial position of the Company at September 28, 1996 and the results
of operations and cash flows of the Company for the three months ended
September 30, 1995 and September 28, 1996 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 SUBSIDIARIES
The Registry, Inc. Network Systems Consulting Practice
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
Systems Consulting Practice ("NSCP"). 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 June
29, 1996 was $53,000 and $145,000, respectively.
The pro forma results of operations, assuming that the acquisition of NSCP
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.
F-9
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 twelve 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 June 29, 1996, and $168,000 has been accrued for
these contingent payments during the quarter ended September 28, 1996.
Morris Information Systems
On August 16, 1996, the Company, through a wholly-owned subsidiary, acquired
all of the outstanding stock of Morris Information Systems ("MIS"), an
information technology consulting firm performing services similar to those of
the Company. The purchase price was $2,500,000 in cash plus amounts up to an
aggregate of $700,000 contingent upon the operating results of MIS during the
two years following the acquisition. Such amounts, if paid, will be recorded
as additional purchase price. No amounts have been accrued for the contingent
payments at September 28, 1996. In addition, the Company will pay a total of
$300,000 in monthly payments through August 1998 to the former stockholder of
MIS in consideration for a consulting and noncompetition agreement.
Goodwill of $2,303,000, 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 30 years. Accumulated amortization at September 28,
1996 is $10,000.
The pro forma results of operations, assuming that the acquisition of MIS
occurred at the beginning of the year ended June 29, 1996 or the quarter ended
September 28, 1996, would not materially differ from TRI's reported results of
operations.
F-10
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. COMBINED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
JUNE 24, JUNE 29,
1995 1996
---------- ----------
<S> <C> <C>
Other Current Assets:
Prepaid expenses.................................... $ 263,000 $ 558,000
Advances to officers................................ 74,000 --
Advances to employees............................... 83,000 98,000
---------- ----------
$ 420,000 $ 656,000
---------- ----------
Fixed Assets:
Land................................................ $ -- $ 360,000
Building............................................ -- 1,439,000
Computer Equipment.................................. 2,066,000 3,102,000
Furniture and equipment............................. 1,263,000 1,615,000
Motor vehicles...................................... 19,000 19,000
Leasehold and building improvements................. 395,000 688,000
---------- ----------
Total fixed assets................................ 3,743,000 7,223,000
Less: accumulated depreciation and amortization..... 985,000 1,879,000
---------- ----------
$2,758,000 $5,344,000
---------- ----------
Other Accrued Expenses:
Accrued employee benefits........................... $ 362,000 $1,229,000
Accrued commissions and bonuses..................... 193,000 750,000
Other accrued expenses.............................. 731,000 1,143,000
---------- ----------
$1,286,000 $3,122,000
========== ==========
</TABLE>
Computer equipment recorded under capital leases amounted to approximately
$238,000 at June 29, 1996 ($0 at June 24, 1995). Total accumulated
amortization related to these assets is approximately $78,000 at June 29,
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 at June 24, 1995 primarily represent
promissory notes from the Company's president and majority stockholder which
were repaid during fiscal year 1996. The promissory notes bore interest at an
annual interest rate of 10%. Related interest income for the years ended May
31, 1994, June 24, 1995 and June 29, 1996 was $53,000, $56,000 and $55,000,
respectively. Notes receivable from officers at June 29, 1996 represents notes
due from various senior officers of the Company and bear interest at the prime
rate (8.25% at June 29, 1996).
Notes receivable from related parties at June 24, 1995 include promissory
notes totaling $365,000 from a real estate trust, of which the president and
majority stockholder of the Company is the sole beneficiary (the "Trust"). In
June 1996, the president and majority stockholder contributed $421,000 to the
Trust, which was used to repay the notes and accrued interest. These notes
were payable on demand and bore interest at a variable rate (5.6% at June 24,
1995). At June 24, 1995 and June 29, 1996 notes receivable from related
parties also include promissory notes totaling $57,000 and $82,000,
respectively, from certain of the former stockholders of TRI's wholly-owned
subsidiary (NSCP). These notes bear interest at the prime rate published in
The Wall Street Journal (9% at June 24, 1995 and 8.25% at June 29, 1996), and
are payable in installments at various dates through November 30, 1998.
F-11
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LINE OF CREDIT
On March 31, 1993, TRI and America's Registry 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 president and majority
stockholder. Interest was paid monthly in arrears at the bank's prime rate
plus 0.75% (9.75% at June 24, 1995). There were no letters of credit
outstanding at 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 0.5% (8.75% at
June 29, 1996) or the LIBOR rate plus 2.5% (8.00% at June 29, 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 stockholders, 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>
JUNE 24, JUNE 29,
1995 1996
---------- ----------
<S> <C> <C>
Note payable due January 1, 1996...................... $ 59,000 $ --
Term loan due December 1, 1996........................ 563,000 --
10.7% term loan due September 30, 1997................ 502,000 --
11% term loan due March 13, 1998...................... 626,000 --
Notes payable due November 30, 1998................... 750,000 625,000
9.375% term loan due August 27, 2010.................. -- 1,406,000
6.75% term loan due April 1, 2013..................... -- 690,000
---------- ----------
2,500,000 2,721,000
Less: current portion................................. 946,000 288,000
---------- ----------
$1,554,000 $2,433,000
========== ==========
</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% (10.5% at
June 24, 1995).
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 and March 13, 1998, payable in monthly
installments of $21,000 and $22,000, respectively, including interest, were
repaid in June 1996.
F-12
<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, and is collateralized by certain
property of the Trust and the personal guarantee of the Company's president
and majority stockholder.
The term loan due April 1, 2013 is payable in semi-annual installments of
$34,000, including interest, and 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 president and majority stockholder.
Aggregate maturities of long-term debt are as follows at June 29, 1996:
<TABLE>
<S> <C>
1997.............................................................. $ 288,000
1998.............................................................. 299,000
1999.............................................................. 170,000
2000.............................................................. 47,000
2001.............................................................. 53,000
Thereafter........................................................ 1,864,000
----------
$2,721,000
==========
</TABLE>
8. INCOME TAXES
Prior to January 1, 1996, America's Registry 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 America's
Registry by TRI (see Note 2), America's Registry's election to be treated as
an S Corporation terminated, effective January 1, 1996. As a result, the
income or loss of America's Registry subsequent to January 1, 1996 will be
subject to corporate income tax. The income tax provision (benefit) described
below for the year ended June 29, 1996 includes the income taxes related to
America's Registry 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 15) reflects the estimated results of operations
if America's Registry had been subject to corporate income taxes during the
years ended June 24, 1995 and June 29, 1996.
At the time of conversion of America's Registry 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 America's Registry
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-13
<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, JUNE 24, JUNE 29,
1994 1995 1996
-------- -------- -----------
<S> <C> <C> <C>
Current:
Federal................. $ -- $ 54,000 $ 2,019,000
State................... -- 38,000 513,000
-------- -------- -----------
-- 92,000 2,532,000
Deferred:
Federal................. 344,000 (64,000) (841,000)
State................... 86,000 (24,000) (252,000)
-------- -------- -----------
430,000 (88,000) (1,093,000)
Change in tax status of
America's Registry....... -- -- 642,000
-------- -------- -----------
$430,000 $ 4,000 $ 2,081,000
======== ======== ===========
</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 June 24, 1995 and June 29,
1996:
<TABLE>
<CAPTION>
JUNE 24, JUNE 29,
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss and credit carry forwards........ $ 214,000 $ 53,000
Allowance for doubtful accounts..................... -- 126,000
Accounts payable and accrued expenses............... 27,000 257,000
Other............................................... 51,000 --
---------- ----------
Total gross deferred tax assets................... 292,000 436,000
---------- ----------
Deferred tax liabilities:
Conversion from cash to accrual basis............... 1,103,000 824,000
Accounts receivable................................. 170,000 --
Prepaid expenses.................................... 55,000 82,000
Fixed assets........................................ 42,000 150,000
Other............................................... 50,000 57,000
---------- ----------
Total gross deferred tax liabilities.............. 1,420,000 1,113,000
---------- ----------
Net deferred tax liability........................ $1,128,000 $ 677,000
========== ==========
</TABLE>
F-14
<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, JUNE 24, JUNE 29,
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Statutory U.S. federal tax rate................... 34.0 % 34.0 % 34.0 %
State taxes, net of federal tax benefit........... 7.0 % 2.8 % 3.8 %
(Income) loss from America's Registry not
(taxable) deductible for corporate income tax
purposes......................................... 2.0 % (47.1)% (9.1)%
Non-deductible expenses........................... 3.5 % 7.2 % 1.8 %
Amortization of goodwill not deductible for
corporate income tax purposes.................... -- 5.5 % .7 %
Change in tax status of America's Registry........ -- -- 13.9 %
Other............................................. 6.3 % (1.2)% (.1)%
------ ------- ------
Effective tax rate................................ 52.8 % 1.2 % 45.0 %
====== ======= ======
</TABLE>
At June 29, 1996, the Company has available for federal income tax purposes
unused operating losses of $90,000 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 $18,000 at June 29, 1996 to
offset future tax liabilities, which may be carried forward indefinitely.
9. STOCKHOLDERS' EQUITY
Preferred Stock
On April 10, 1996, the Company's then sole stockholder authorized 1,000,000
shares of preferred stock, $.10 par value ("Preferred Stock"). 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.
Stock Split
On March 22, 1996, the Company's then 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. On November 21, 1996,
the Company's stockholders approved an additional increase to 49,000,000 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.
Public Offering of Common Stock
On June 10, 1996, the Company completed its initial public offering for the
sale of 2,230,000 shares of Common Stock, which included 330,000 shares in
respect of the underwriters' over-allotment option. The Company received
$34,498,000 from the sale of the shares, net of the underwriting discounts and
F-15
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expenses associated with the offering. Additionally, the Company had
previously incurred $294,000 of costs related to the initial public offering
that were deferred in previous years which were also charged against the
proceeds of the offering. Net proceeds were used to repay all outstanding
indebtedness under the Company's credit facility and certain term loans (see
Note 7).
10. STOCK PLANS
In March 1996, the Company's then sole 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. In January 1997, the Company's Board
of Directors, subject to stockholder approval, voted to increase the number of
shares of Common Stock authorized under this plan to 3,600,000. 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 ten 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.
A summary of option activity under the plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- -------------
<S> <C> <C>
Outstanding at June 24, 1995....................... -- --
Granted............................................ 1,210,750 $11.00-$16.00
Canceled........................................... (15,750) $11.00-$13.00
--------- -------------
Outstanding at June 29, 1996....................... 1,195,000 $11.00-$16.00
========= =============
</TABLE>
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 eighteen 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
commenced on June 5, 1996, the effective date of the registration statement
covering the Company's initial public offering. The plan will terminate in
March 2006.
F-16
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 ten years after the date of grant. The plan will
terminate in March 2006.
In April and May 1996, options to purchase 20,000 shares each of Common
Stock at an exercise price of $11.00 and $13.00 per share, respectively, were
granted to newly-elected directors.
11. 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.
12. 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 of 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 14). Rent expense for
the years ended May 31, 1994, June 24, 1995 and June 29, 1996 (excluding
amounts paid to the Trust after September 19, 1995) was $633,000, $1,188,000
and $1,499,000, respectively.
F-17
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At June 29, 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>
1997.................................................... $1,364,000 $ 92,000
1998.................................................... 1,232,000 50,000
1999.................................................... 975,000 10,000
2000.................................................... 607,000 --
2001.................................................... 240,000 --
Thereafter.............................................. 12,000 --
---------- --------
Total minimum lease payments............................ $4,430,000 $152,000
==========
Less--amount representing interest...................... 23,000
--------
Present value of obligations under capital leases....... $129,000
========
</TABLE>
13. 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 June 29,
1996.
14. CONSOLIDATION OF REAL ESTATE TRUST
As described in Note 12, the Company leases office space from a real estate
trust, of which the president and majority 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-18
<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
June 29, 1996 was $137,000, 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 June 29, 1996:
<TABLE>
<S> <C>
1997................................................................ $109,000
1998................................................................ 12,000
--------
$121,000
========
</TABLE>
15. UNAUDITED PRO FORMA INCOME INFORMATION
The following unaudited pro forma income tax information is presented as if
America's Registry had been a C corporation subject to federal and state
income taxes throughout the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED QUARTER ENDED
JUNE 24, JUNE 29, SEPT. 30,
1995 1996 1995
---------- ---------- -------------
<S> <C> <C> <C>
Income before taxes...................... $329,000 $4,624,000 $666,000
Pro forma income tax provision........... 243,000 2,003,000 322,000
-------- ---------- --------
Pro forma net income..................... $ 86,000 $2,621,000 $344,000
======== ========== ========
</TABLE>
From inception through the year ended May 31, 1994, America's Registry
generated a taxable loss for which the Company would not have received a
benefit, as America's Registry 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, 9 and 10.
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 Commissions 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.
16. UNAUDITED SUBSEQUENT EVENTS
Sun-Tek Consultants, Inc.
On November 1, 1996, the Company, through a wholly owned subsidiary,
acquired all of the outstanding stock of Sun-Tek Consultants, Inc., a Florida
corporation ("Sun-Tek"), for $1,900,000 in cash. Sun-Tek Consultants, Inc. is
an information technology consulting firm based in Orlando, Florida performing
services similar to those of the Company. The acquisition will be accounted
for as a purchase and, accordingly, the purchase price will be allocated to
the assets acquired and liabilities assumed based upon their estimated fair
values as of the date of acquisition. The excess of the consideration over the
estimated fair value of net assets acquired will be recorded as goodwill.
F-19
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Application Resources, Inc.
On November 26, 1996, pursuant to an Agreement and Plan of Merger dated
October 30, 1996, the Company, through a wholly-owned subsidiary, acquired
Application Resources, Inc., a California corporation ("ARI"). ARI is an
information technology consulting firm performing services similar to those of
the Company. Pursuant to the agreement, each outstanding share of ARI capital
stock was converted into the right to receive 0.274428 shares of the Company's
Common Stock. The Company also assumed outstanding options for the purchase of
ARI common stock at the same conversion ratio. Immediately prior to the
merger, there were 5,217,000 shares of ARI common stock and options to
purchase 794,000 shares of ARI common stock outstanding. The acquisition will
be accounted for as a pooling-of-interests.
Shamrock Computer Resources, Ltd.
On November 27, 1996, pursuant to an Agreement and Plan of Merger dated
November 26, 1996, the Company, through a wholly-owned subsidiary, acquired
Shamrock Computer Resources, Ltd. ("SCR"), an Iowa corporation. SCR is an
information technology consulting firm performing services similar to those of
the Company. Pursuant to the agreement, each outstanding share of SCR capital
stock was converted into the right to receive 136.7695 shares of the Company's
Common Stock. Immediately prior to the merger, there were 7,072 shares of SCR
common stock outstanding. Pursuant to the provisions of the Iowa Business
Corporation Act (the "IBCA"), a stockholder of SCR holding 352 shares of SCR
capital stock perfected dissenters' rights under the IBCA and was paid
$2,000,000 in redemption of such shares. The acquisition will be accounted for
as a pooling-of-interests.
Sterling Information Group, Inc.
On November 27, 1996, the Company, through a wholly-owned subsidiary,
acquired certain assets and liabilities of Sterling Information Group, Inc.
("Sterling"), a Texas corporation, for cash consideration of $7,500,000, plus
amounts up to an aggregate of $500,000 contingent upon the operating results
and expansion success of Sterling over the next 7 months. Sterling is an
independent provider of outsourced software application development based in
Austin, TX. The acquisition will be accounted for as a purchase and,
accordingly, the purchase price will be allocated to the assets acquired and
liabilities assumed based upon their estimated fair values as of the date of
acquisition. The excess of the consideration paid over the estimated fair
value of net assets acquired will be recorded as goodwill.
James Duncan & Associates
On December 24, 1996, the Company, through a wholly-owned subsidiary,
acquired all of the outstanding share capital of AFC Holdings (Guernsey)
Limited, a Guernsey trust which holds all of the outstanding share capital of
James Duncan & Associates ("JDA"), a United Kingdom corporation, for
$4,172,000, payable in $3,921,000 in cash, 2,736 shares of the Company's
Common Stock and $125,000 payable on or before December 24, 1997 in cash or
shares of the Company's Common Stock at the option of the selling
stockholders. JDA is an information technology consulting firm performing
services similar to those of the Company. The acquisition will be accounted
for as a purchase and, accordingly, the purchase price will be allocated to
the assets acquired and liabilities assumed based upon their estimated fair
values as of the date of acquisition. The excess of the consideration paid
over the estimated fair value of net assets acquired will be recorded as
goodwill.
F-20
<PAGE>
INTRODUCTION TO
PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL INFORMATION
The following pro forma unaudited combined condensed financial statements
give effect to the mergers of the Company with Application Resources, Inc.
("ARI") and Shamrock Computer Resources, Ltd. ("SCR") on November 26 and 27,
1996, respectively, each to be accounted for as a pooling of interests. The
pro forma unaudited combined condensed balance sheet presents the combined
financial position of the Company, ARI and SCR as of September 28, 1996
assuming that the mergers had occurred as of September 28, 1996 based upon the
historical balance sheet data of the Company, ARI and SCR at that date. Upon
the consummation of the mergers, ARI's and SCR's December 31 year ends were
conformed to the Company's last Saturday in June year end for fiscal 1996. The
pro forma unaudited combined condensed statement of income gives effect to the
mergers by combining the results of operations of The Registry for the year
ended June 29, 1996 and the quarters ended September 28, 1996 and September
30, 1995 with the results of operations of ARI and SCR for the same periods.
The pro forma unaudited combined condensed statement of income gives effect to
the mergers by combining the results of operations of The Registry for the
year ended June 24, 1995 and May 31, 1994 with the results of operations of
ARI and SCR for the years ended December 31, 1995 and December 31, 1994,
respectively, on a pooling-of-interests basis. The results of operations of
ARI and SCR for the six months ended December 31, 1995 (reflecting revenue of
$15,972,000 and $14,801,000 and net income of $680,000 and $1,612,000,
respectively) have therefore been included in two periods, and have been
deducted in determining combined retained earnings at September 28, 1996.
These unaudited pro forma combined condensed financial statements should be
read in conjunction with the historical consolidated financial statements and
notes thereto of the Company.
The Company has also completed four acquisitions which have been accounted
for as purchases. The Company paid total consideration of $16.1 million in
cash and stock for these entities and the primary assets recorded as a result
of these acquisitions were accounts receivable and goodwill. The Company does
not consider these four acquisitions to be significant to its consolidated
financial position or results of operations for the periods presented as
described above, and, accordingly, has not included the financial results of
such acquired entities in the accompanying pro forma unaudited combined
condensed financial statements.
F-21
<PAGE>
THE REGISTRY, INC.
APPLICATION RESOURCES, INC.
SHAMROCK COMPUTER RESOURCES, LTD.
PRO FORMA UNAUDITED COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRI
SEPT. ARI SCR PRO
28, SEPT. 28, SEPT. 28, FORMA
1996 1996 1996 ADJUSTMENT COMBINED
------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short term
investments.............. $ 5,337 $2,631 $ 661 (2,000)(4a) $ 9,236
2,607 (4b)
Accounts receivable, net.. 35,574 5,939 5,596 47,109
Notes receivable from
related parties.......... 133 -- -- 133
Deferred income taxes..... 47 65 -- 112
Other current assets...... 894 146 90 1,130
------- ------ ------ ------ -------
41,985 8,781 6,347 607 57,720
Fixed assets, net........... 6,408 731 952 8,091
Loans to officers........... 91 -- -- 91
Other assets................ 3,346 -- 14 3,360
Deferred income taxes....... 35 -- -- 35
------- ------ ------ ------ -------
Total assets.......... $51,865 $9,512 $7,313 $ 607 $69,297
======= ====== ====== ====== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............ $ 10 $ -- $1,200 $ 1,210
Current portion of long-
term debt................ 326 50 134 510
Accounts payable.......... 333 489 700 1,523
Accrued salaries and
wages.................... 2,984 1,309 642 4,935
Other accrued expenses.... 4,587 1,445 956 4,500 (3) 11,488
Accrued income taxes...... 1,004 971 -- 1,975
Deferred income taxes..... 81 -- -- 81
------- ------ ------ ------ -------
Total current
liabilities.......... 9,325 4,264 3,633 4,500 21,722
------- ------ ------ ------ -------
Deferred income taxes....... 601 -- -- 601
------- ------ ------ ------ -------
Long-term debt.............. 2,485 168 244 2,897
------- ------ ------ ------ -------
Commitments and
contingencies
Stockholders' equity
Preferred stock........... -- 1,916 -- (1,916)(4c) --
Common stock.............. 10 284 2 1,916 (4c) 2,212
Additional paid-in
capital.................. 34,969 -- 465 2,607 (4b) 38,041
Treasury stock............ -- -- -- (2,000)(4a) (2,000)
Notes receivable from
employees................ -- (226) -- (226)
Deferred stock
compensation............. -- -- (172) 172 (4a) --
Retained earnings......... 4,475 3,106 3,141 (4,500)(3) 6,050
(172)(4a)
------- ------ ------ ------ -------
Total stockholders'
equity............... 39,454 5,080 3,436 (3,893) 44,077
------- ------ ------ ------ -------
$51,865 $9,512 $7,313 $ 607 $69,297
======= ====== ====== ====== =======
</TABLE>
F-22
<PAGE>
THE REGISTRY, INC.
APPLICATION RESOURCES, INC.
SHAMROCK COMPUTER RESOURCES, LTD.
PRO FORMA UNAUDITED COMBINED CONDENSED STATEMENT OF INCOME (IN THOUSANDS EXCEPT
PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
--------------------------- -------------------
MAY 31, JUNE 24, JUNE 29, SEPT. 30, SEPT. 28,
1994 1995 1996 1995 1996
------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue...................... $82,375 $153,985 $216,878 $46,341 $69,429
Cost of revenue.............. 63,071 114,670 158,742 33,903 50,346
------- -------- -------- ------- -------
19,304 39,315 58,136 12,438 19,083
Selling, general and
administrative expenses..... 16,791 33,801 46,144 9,878 14,344
------- -------- -------- ------- -------
Income from operations....... 2,513 5,514 11,992 2,560 4,739
Interest expense............. (507) (1,224) (2,125) (496) (106)
Interest and other income
(expenses).................. 55 90 (108) 24 1,723
------- -------- -------- ------- -------
Income before taxes.......... 2,061 4,380 9,759 2,088 6,356
Income tax provision......... 526 822 $ 3,127 372 2,474
------- -------- -------- ------- -------
Net income................... $ 1,535 $ 3,558 $ 6,632 $ 1,716 $ 3,882
======= ======== ======== ======= =======
Pro forma information
Income before taxes........ $ 2,061 $ 4,380 $ 9,759 $ 2,088 $ 6,356
Pro forma income tax
provision................. 942 1,961 4,222 922 2,835
------- -------- -------- ------- -------
Pro forma net income....... $ 1,119 $ 2,419 $ 5,537 $ 1,166 $ 3,521
======= ======== ======== ======= =======
Pro forma net income per
share..................... $ 0.22 $ 0.50 $ 0.11 $ 0.26
======== ======== ======= =======
Weighted average common and
common
equivalent shares......... 10,968 11,083 10,864 13,520
</TABLE>
Results of operations for the years ended June 24, 1995 and June 29, 1996 are
for 52 and 53 weeks, respectively.
Results of operations for the quarter ended September 30, 1995 and September
28, 1996 are for 14 weeks and 13 weeks, respectively.
F-23
<PAGE>
NOTES TO PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS
1. The pro forma unaudited combined condensed financial statements reflect
the issuance of 2,350,774 shares of The Registry's Common Stock for 5,217,000
shares of ARI common stock and 6,720 shares of SCR common stock (based on
shares of Common Stock outstanding after considering the events described in
Note 4 below) in connection with the mergers based upon exchange ratios of
0.274428 and 136.7695 shares of The Registry's Common Stock for each share of
ARI and SCR common stock, respectively.
The pro forma unaudited combined condensed balance sheet presents the
combined financial position of TRI, ARI and SCR as of September 28, 1996
assuming that the mergers had occurred as of September 28, 1996. Such pro
forma information is based upon the historical consolidated balance sheet data
of TRI, ARI and SCR as of that date. The pro forma unaudited combined
condensed statement of income gives effect to the mergers of TRI, ARI and SCR
by combining the results of operations of TRI for the years ended June 29,
1996, June 24, 1995 and May 31, 1994 and the three months ended September 28,
1996 and September 30, 1995 with the results of operations of SCR for the year
ended June 30, 1996, the two years ended December 31, 1995 and the three
months ended September 30, 1996 and 1995, respectively, and the results of
operations of ARI for the year ended June 30, 1996, the year ended December
31, 1995, the three months from October 1, 1994 (date of inception as a
separate entity) through December 31, 1994 and the three months ended
September 30, 1996 and 1995, respectively, on a pooling-of-interests basis.
2. There were no material transactions between the Company, ARI or SCR
during any of the periods presented.
3. The Registry, Inc., ARI and SCR will incur aggregate transaction costs of
approximately $4.5 million associated with the mergers primarily in the
quarter in which the mergers were consummated. The pro forma combined
condensed balance sheet as of September 28, 1996 has been adjusted to reflect
these costs. These estimated costs are not reflected in the pro forma
unaudited combined condensed statement of income data. The amount of these
costs are a preliminary estimate and therefore are subject to change.
4. (a) Immediately prior to the merger between TRI and SCR, an employee of
SCR exercised an option to purchase 352 shares of SCR's common stock. All
remaining deferred compensation related to this option was recognized at this
time. These shares were not exchanged for TRI shares as part of the merger,
and were repurchased by the combined company for $2,000,000.
(b) On November 19, 1996, ARI sold a total of 110,000 shares of its common
stock and 165,000 shares of its preferred stock to an outside investor for
proceeds of $2,607,000.
(c) Immediately prior to the merger between TRI and ARI, all of ARI's
preferred stock was converted into an equivalent number of shares of common
stock on a one-for-one basis.
The pro forma unaudited combined condensed balance sheet has been adjusted to
reflect these transactions.
5. Prior to its acquisition by The Registry, SCR was treated as an
S Corporation for federal income tax purposes, with all taxable income passed
through to the stockholders and reported on their personal tax returns.
Accordingly, the historical results of operations of SCR have not included any
corporate income tax provisions. The pro forma information on the accompanying
combined condensed statement of income reflects the estimated results of
operations as if SCR had been a C corporation subject to corporate income
taxes during the periods presented. A similar pro forma calculation has been
included for The Registry's America's Registry, Inc. subsidiary, as more fully
described in Notes 2, 8, and 15 of the Company's Consolidated Financial
Statements. The table below sets forth the composition of the unaudited pro
forma combined net revenues, net income and pro forma net income for each of
the periods shown had the mergers taken place at the beginning of the period
shown:
F-24
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
---------------------------- -------------------
MAY 31, JUNE 24, JUNE 29, SEPT. 30, SEPT. 28,
1994 1995 1996 1995 1996
------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Revenues
The Registry, Inc. .......... $60,367 $ 98,687 $145,588 $31,682 $47,303
Application Resources,
Inc. ....................... 6,420(a) 29,870 37,615 7,701 12,073
Shamrock Computer Resources,
Ltd. ....................... 15,588 25,428 33,675 6,958 10,053
------- -------- -------- ------- -------
Combined..................... $82,375 $153,985 $216,878 $46,341 $69,429
======= ======== ======== ======= =======
Net Revenues
The Registry, Inc. .......... $ 385 $ 325 $ 2,543 $ 545 $ 1,624
Application Resources,
Inc. ....................... 143(a) 1,039 1,228 319 1,376
Shamrock Computer Resources,
Ltd. ....................... 1,007 $ 2,194 2,861 852 882
------- -------- -------- ------- -------
Combined..................... $ 1,535 $ 3,558 $ 6,632 $ 1,716 $ 3,882
======= ======== ======== ======= =======
Pro Forma Net Income
The Registry, Inc. .......... $ 385 $ 86 $ 2,621 $ 344 $ 1,624
Application Resources,
Inc. ....................... 143(a) 1,039 1,228 319 1,376
Shamrock Computer Resources,
Ltd. ....................... 591 1,294 1,688 503 521
------- -------- -------- ------- -------
Combined..................... $ 1,119 $ 2,419 $ 5,537 $ 1,166 $ 3,521
======= ======== ======== ======= =======
</TABLE>
(a) Includes the results of operations of ARI from October 1, 1994 (date of
inception as a separate entity) through December 31, 1994 only.
Certain reclassifications have been made to the financial statements of ARI
and SCR to conform to The Registry, Inc.'s classifications.
6. The pro forma unaudited combined net income per share is based on the
weighted average number of shares of Common Stock and common equivalent shares
outstanding of The Registry, Inc., ARI and SCR for each period, using an
exchange ratio of 0.274428 shares of The Registry stock for each share of ARI
stock or each ARI stock option and 136.7695 shares of The Registry stock for
each share of SCR stock or each SCR stock option. The weighted average number
of shares of Common Stock and common equivalent shares outstanding also
includes common shares issuable upon conversion of ARI's preferred stock,
using the same exchange ratio.
F-25
<PAGE>
(ART)
Artwork - inside back cover
- title: "The Registry, Inc., A National Provider of IT Consultants"
- sub-title: "1,600 Consulting Professionals Nationwide"
Map of the United States showing locations of the Company's offices, divided
into the following regions: Midwest; West; Southwest; Northeast; 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, Denver and Houston); Northeast; (Stratham, NH,
Boston, Newton, Rye Brook, Manhattan and McLean); and Southeast (Richmond,
Greensboro, Durham, Charlotte, Atlanta, Ft. Lauderdale and Columbia ).
<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, ANY SELLING STOCKHOLDER
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. NEITHER 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............................................................. 7
Use of Proceeds.......................................................... 11
Price Range of Common Stock.............................................. 11
Dividend Policy.......................................................... 11
Capitalization........................................................... 12
Selected Consolidated Financial Data..................................... 13
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 22
Management............................................................... 34
Certain Transactions..................................................... 39
Principal and Selling Stockholders....................................... 41
Description of Capital Stock............................................. 43
Underwriting............................................................. 47
Validity of Common Stock................................................. 48
Experts.................................................................. 48
Available Information.................................................... 48
Additional Information................................................... 49
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,000,000 SHARES
THE REGISTRY, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
ADAMS, HARKNESS & HILL, INC.
MONTGOMERY SECURITIES
J.C. BRADFORD & CO.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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................................................ $47,765
NASD filing fee..................................................... 16,263
Nasdaq listing fee.................................................. 17,500
Blue Sky fee and expenses........................................... 10,000
Printing and engraving expenses..................................... 100,000
Legal fees and expenses............................................. 125,000
Accounting fees and expenses........................................ 175,000
Transfer Agent and Registrar fees................................... 7,100
Miscellaneous expenses.............................................. 51,372
-------
Total............................................................. 550,000
=======
</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
Stockholders in the offering of the Common Stock registered hereby, and each
person, if any, who controls the Company, the Selling Stockholders 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, 1993, the Company has issued the following securities that
were not registered under the Securities Act:
In connection with the Reorganization 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.
In connection with the acquisition of all of the capital stock of
Application Resources, Inc. on November 26, 1996, the Company issued
1,431,682 shares of Common Stock, no par value, to the former stockholders
of Application Resources, Inc.
In connection with the acquisition of all of the capital stock of
Shamrock Computer Resources, Ltd. on November 27, 1996, the Company issued
919,092 shares of Common stock, no par value, to the former stockholders of
Shamrock Computer Resources, Ltd.
II-1
<PAGE>
In connection with the acquisition of all of the capital stock of AFC
Holdings (Guernsey) Limited on December 24, 1996, the Company issued 2,736
shares of Common Stock, no par value, to certain employees of James Duncan
& Associates Limited, a United Kingdom Corporation.
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, except in the
case of the sale of securities to certain employees of James Duncan &
Associates in connection with the acquisition of AFC Holdings (Guernsey)
Limited, which sale was made in reliance upon the exemption from
registration contained in Regulation S under the Securities Act.
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
Stockholders and the Underwriters.
2.1/1/ Stock Purchase Agreement between the Registrant and Axiom Consulting
Group, Inc., dated November 30, 1994.
3.1 Restated Articles of Organization of Registrant, as filed in
Massachusetts on January 13, 1997.
3.2/1/ By-Laws of Registrant, as amended and restated on May 13, 1996.
4.1/1/ Articles 3, 4, 5, and 6 of the Articles of Organization of Registrant
(included in Exhibit 3.2).
4.2/1/ Specimen Stock Certificate.
5.1* Opinion of Ropes & Gray, as to the validity of the shares being
registered.
10.1/1/ 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.
10.2/1/ Registrant's 1996 Stock Plan and related form of stock option
agreement.
10.3/1/ Registrant's 1996 Employee Stock Purchase Plan and related form of
subscription agreement.
10.4/1/ Registrant's 1996 Eligible Directors Stock Plan and related form of
stock option agreement.
10.5/1/ 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.
10.6/1/ Employment Agreement dated May 13, 1996 between Registrant and G.
Drew Conway.
10.7/1/ Amended and Restated Promissory Note dated May 30, 1996, payable to
Registrant by G. Drew Conway.
10.8/1/ Amended and Restated Promissory Note dated May 30, 1996, payable to
Registrant by the 189 Wells Avenue Realty Trust.
10.9/2/ Agreement and Plan of Merger among the Registrant, Application
Resources, Inc. and ARI Acquisition Corp. dated as of October 30,
1996.
10.10/2/ Agreement and Plan of Merger among the Registrant, Shamrock Computer
Resources, Ltd. and SCR Acquisition Corp. dated as of November 26,
1996.
21.1 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, independent accountants.
23.2 Consent of Ropes & Gray (to be included in Exhibit 5.1).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
23.3 Consent of Dataquest Incorporated.
24.1 Powers of Attorney (included on page II-4).
</TABLE>
- --------
* To be filed by amendment.
/1/ Filed as an exhibit to the Registrant's registration statement on Form S-1
filed with the Securities and Exchange Commission (the "Commission") (File
No. 333-3366) and incorporated by reference herein.
/2/ Filed as an exhibit to the Registrant's Current Report on Form 8-K filed
with the Commission on December 11, 1996 and incorporated herein by
reference.
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
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.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
COMPANY HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON,
COMMONWEALTH OF MASSACHUSETTS ON THE 17TH DAY OF JANUARY, 1997.
The Registry, Inc.
By: /s/ G. Drew Conway
----------------------------------
G. DREW CONWAY PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
We, the undersigned officers and directors of The Registry, Inc., hereby
severally constitute and appoint G. Drew Conway, Robert E. Foley and Richard
L. Bugley, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement and any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b), and generally to do all such
things in our names and on our behalf in our capacities as officers and
directors to enable The Registry, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Registration
Statement and any and all amendments thereto or to any subsequent Registration
Statement for the same offering which may be filed under Rule 462(b).
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED BELOW ON THE 17TH DAY OF JANUARY, 1997.
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,
1994................... $ 45 $226 $ 0 $79 $192
Year ended June 24,
1995(1)................ 192 189 0 64 317
Year ended June 29,
1996................... 317 340 0 193 464
Quarter ended September
28, 1996 (Unaudited)... 464 143 0 13 594
</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 Stockholders and the Underwriters.
2.1/1/ Stock Purchase Agreement between the Registrant and Axiom
Consulting Group, Inc., dated November 30, 1994.
3.1 Restated Articles of Organization of Registrant, as filed in
Massachusetts on January 13, 1997.
3.2/1/ By-Laws of Registrant, as amended and restated on May 13,
1996.
4.1/1/ Articles 3, 4, 5, and 6 of the Articles of Organization of
Registrant (included in Exhibit 3.2).
4.2/1/ Specimen Stock Certificate.
5.1* Opinion of Ropes & Gray, as to the validity of the shares
being registered.
10.1/1/ 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.
10.2/1/ Registrant's 1996 Stock Plan and related form of stock option
agreement.
10.3/1/ Registrant's 1996 Employee Stock Purchase Plan and related
form of subscription agreement.
10.4/1/ Registrant's 1996 Eligible Directors Stock Plan and related
form of stock option agreement.
10.5/1/ 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.
10.6/1/ Employment Agreement dated May 13, 1996 between Registrant and
G. Drew Conway.
10.7/1/ Amended and Restated Promissory Note dated May 30, 1996,
payable to Registrant by G. Drew Conway.
10.8/1/ Amended and Restated Promissory Note dated May 30, 1996,
payable to Registrant by the 189 Wells Avenue Realty Trust.
10.9/2/ Agreement and Plan of Merger among the Registrant, Application
Resources, Inc. and ARI Acquisition Corp. dated as of October
30, 1996.
10.10/2/ Agreement and Plan of Merger among the Registrant, Shamrock
Computer Resources, Ltd. and SCR Acquisition Corp. dated as of
November 26, 1996.
21.1 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, independent accountants.
23.2 Consent of Ropes & Gray (to be included in Exhibit 5.1).
23.3 Consent of Dataquest Incorporated.
</TABLE>
- --------
* To be filed by amendment.
/1/ Filed as an exhibit to the Company's registration statement on Form S-1
filed with the Commission on April 11, 1996 (File No. 333-3366) and
incorporated by reference herein.
/2/ Filed as an exhibit to the Registrant's Current Report on Form 8-K filed
with the Commission on December 11, 1996 and incorporated herein by
reference.
<PAGE>
EXHIBIT 3.1
FEDERAL IDENTIFICATION
NO. 04-2920563
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, G. Drew Conway, *President/xxxxxxxxxxxx.
-------------------------------------------------,
and Robert E. Foley , *Clerk xxxxxxxxxxxx.
----------------------------------------------------
of The Registry, Inc.
--------------------------------------------------------------------------.
(Exact name of corporation)
located at 189 Wells Ave., Newton, MA 02159
------------------------------------------------------------------.
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article III
- ----------------------------------------------------------------------------
(Number those articles 1,2,3,4,5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on
November 21, 1996, by vote of:
9,635,935 shares of Common Stock of 10,230,000 shares outstanding,
- ----------- ----------------- -------------
(type, class & series, if any)
shares of of shares outstanding, and
- ----------- ----------------- ----------
(type, class & series, if any)
shares of of shares outstanding,
- ----------- ----------------- -------------
(type, class & series, if any)
**being at least a majority of each type, class or series outstanding and
entitled to vote thereon:/**
*Delete the inapplicable words **Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B, Section 70.
/2/ For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 by
11 sheets of paper with a left margin of at least 1 inch. Additions to more than
one article may be made on a single sheet so long as each article requiring each
addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: 29,000,000 Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $0.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: 49,000,000 Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $0.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: .
------------------------------
SIGNED UNDER THE PENALTIES OF PERJURY, this 8th day of January, 1997.
--- ------- --
/s/ G. Drew Conway , *President
- ----------------------------------------------------
G. Drew Conway
/s/ Robert E. Foley . *Clerk
- -----------------------------------------------------
Robert E. Foley
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
===============================================
I hereby approve the within Articles of Amendment
and, the filing fee in the amount of $_______
having been paid, said articles are deemed to
have been filed with me this _______ day of
___________ 19____.
Effective date:
--------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Cynthia A. Bacon, Senior Paralegal
Ropes & Gray
---------------------------------------------
One International Place
---------------------------------------------
Boston, MA 0211-2624
---------------------------------------------
<PAGE>
Exhibit 21.1
THE REGISTRY, INC.
LIST OF SUBSIDIARIES:
AMERICA'S REGISTRY, INC.
THE REGISTRY INTERNATIONAL, INC.
THE REGISTRY, INC. NETWORK CONSULTING PRACTICE
SHAMROCK COMPUTER RESOURCES, LTD.
APPLICATION RESOURCES, INC.
STERLING INFORMATION GROUP, INC.
AFC HOLDINGS (GUERNSEY) LIMITED
THE REGISTRY LTD.
JAMES DUNCAN & ASSOCIATES
<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 July 26, 1996, except
as to the "Morris Information Systems" section of Note 3 which is as of August
16, 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 each of the two years in
the period ended June 29, 1996 and the year 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
January 17, 1997
<PAGE>
CONSENT OF DATAQUEST INC.
CONSENT OF DATAQUEST INC.
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
/s/ Dennis Wayson
Title Director, Professional
Services
