<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported):................April 4, 1997
STAFFMARK, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20971 71-0788538
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
302 East Millsap Road
Fayetteville, Arkansas 72703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:..............(501) 973-6000
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On April 4, 1997, StaffMark, Inc. (the "Company") completed the
acquisition of Global Dynamics, Inc., a Delaware corporation ("Global"). Global
was merged into the Company's wholly-owned subsidiary, StaffMark Acquisition
Corporation Four, a Delaware corporation ("SAC"), with SAC being the surviving
corporation (the "Merger"). Global, which is located in Walnut Creek,
California, provides information technology staffing services. The
consideration paid in the transaction consisted of approximately $13.2 million
in cash and 690,855 restricted shares of the Company's Common Stock. The
purchase price was determined as a result of direct negotiations with the
stockholders of Global.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
(b) Pro Forma Financial Information
(c) Exhibits. The following exhibits are filed with this Form 8-K:
2.1 Agreement and Plan of Reorganization, dated April 4, 1997,
among StaffMark, Inc., StaffMark Acquisition Corporation
Four, Perry Butler, Carolyn Butler, Paul Sharps, and
Global Dynamics, Inc.(1) Incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated April 4, 1997, filed April 18, 1997.
99.1 Press Release dated April 4, 1997, incorporated by reference
to Exhibit 99.1 to the Company's Current Report on Form 8-K
dated April 4, 1997, filed April 18, 1997.
(1) The Company will furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon request.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAFFMARK, INC.
(Registrant)
Date: June 6, 1997 By: /s/ TERRY C. BELLORA
------------------------
Terry C. Bellora
Chief Financial Officer
3
<PAGE> 4
[ARTHUR ANDERSEN LLP LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Global Dynamics, Inc.:
We have audited the accompanying balance sheet of Global Dynamics, Inc. (a
Delaware corporation) as of December 31, 1996, and the related statements of
operations, changes in shareholders' equity and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Dynamics, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California,
March 27, 1997
<PAGE> 5
GLOBAL DYNAMICS, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 281,905
Accounts receivable, trade, net allowance for
uncollectible accounts of $41,217 135,953
Unbilled receivables, trade 2,968,224
Note receivable 20,145
Employee advances 67,400
Other assets 20,614
----------
Total current assets 3,494,241
FURNITURE, FIXTURES AND EQUIPMENT, at cost, less
accumulated depreciation of $193,926 156,340
----------
Total assets $3,650,581
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued employee compensation and benefits and
other related costs $ 957,528
Accounts payable, trade 98,571
Deferred rent 22,442
Income taxes payable 38,916
Current portion of notes payable 22,387
Current portion of capital lease obligation 10,431
----------
Total current liabilities 1,150,275
NOTES PAYABLE 403,303
CAPITAL LEASE OBLIGATIONS 3,778
----------
Total liabilities 1,557,356
----------
SHAREHOLDERS' EQUITY:
Common stock, 10,000 shares authorized;
633 shares issued and outstanding; $.01 par value 6
Additional paid-in capital 1,377
Retained earnings 2,091,842
----------
Total shareholders' equity 2,093,225
----------
Total liabilities and shareholders' equity $3,650,581
==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
GLOBAL DYNAMICS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
REVENUES:
<S> <C>
Client service fees $16,237,711
Permanent placement fees 891,942
Miscellaneous income 30,423
-----------
17,160,076
-----------
OPERATING EXPENSES:
Consulting and contracting 12,109,316
General and administrative 1,897,319
Marketing and sales 1,070,122
Recruiting 758,822
Depreciation 43,873
-----------
15,879,452
-----------
Income from operations 1,280,624
INTEREST EXPENSE 52,380
-----------
Income before state income tax 1,228,244
STATE INCOME TAX 22,000
-----------
Net income $ 1,206,244
===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
GLOBAL DYNAMICS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ 6 $1,377 $ 989,220 $ 990,603
Distributions 0 0 (103,622) (103,622)
Net income 0 0 1,206,244 1,206,244
------- ------ ----------- -----------
BALANCE AT DECEMBER 31, 1996 $ 6 $1,377 $ 2,091,842 $ 2,093,225
======= ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
GLOBAL DYNAMICS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,206,244
-----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 43,873
Decrease in accounts receivable 645,767
Increase in unbilled receivables (1,301,550)
Decrease in employee advances 35,728
Increase in other assets (3,999)
Increase in accrued employee compensation and benefits
and other related costs 27,366
Decrease in accounts payable, trade (191,395)
Decrease in deferred rent (2,041)
Increase in income taxes payable 17,700
-----------
Total adjustments (728,551)
-----------
Net cash provided by operating activities 477,693
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furnishings (58,345)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes receivable (20,145)
Distribution to shareholder (103,622)
Principal payment on notes payable (12,379)
Principal payment under capital lease (13,674)
-----------
Cash used in financing activities (149,820)
-----------
NET INCREASE IN CASH 269,528
CASH AT BEGINNING OF THE YEAR 12,377
-----------
CASH AT END OF THE YEAR $ 281,905
===========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: The Company made state
income tax payments of $2,588 and interest payments of $5,500 during 1996.
The accompanying notes are an integral part of these statements.
<PAGE> 9
GLOBAL DYNAMICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
Global Dynamics, Inc. (the Company), a Delaware corporation, is a information
technology consulting firm established for the purpose of providing skilled
computer professionals to clients requiring permanent and temporary technical
resources. The Company provides contract personnel, contract-to-hire, direct
placement, payrolling and foreign recruiting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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
contingent assets and liabilities as of the date of the financial statements.
Actual results could differ from those estimates.
EQUIPMENT AND FURNISHINGS
Equipment and furnishings are stated at cost less accumulated depreciation.
Depreciation of equipment and furnishings is provided using the straight-line
method over estimated useful lives of five to seven years.
REVENUE RECOGNITION
Temporary services revenues are recognized when the services are rendered by
the Company's temporary employees. Permanent placement revenues are recognized
when employment candidates accept offers of permanent employment. Services
performed during the year but not invoiced are recorded as "Unbilled
receivables, trade" on the balance sheet.
INCOME TAX
As an S Corporation, the Company is generally not subject to federal income
taxes, but rather its net income and losses are passed through directly to its
shareholders for inclusion in their taxable income or loss. Effective March 1,
1997, the Company became a C Corporation.
State taxes are recorded by the Company using the liability method.
<PAGE> 10
-2-
3. COMMITMENTS AND CONTINGENCIES:
The Company leases office space under a noncancelable lease. Rent expense for
office space for the year ended December 31, 1996, was $144,862. At December
31, 1996, minimum future lease payments under noncancelable office space lease
agreements are as follows:
<TABLE>
<CAPTION>
Year Ending Lease
December 31 Commitments
----------- -----------
<S> <C>
1997 $ 146,902
1998 148,942
1999 150,982
2000 75,491
2001 and thereafter 0
----------
Total $ 522,317
==========
</TABLE>
The Company has a capital lease obligation for equipment that expires in June
1998. Payments on the obligation were $11,820 for the year ended December 31,
1996. Future minimum lease payments for the obligation are as follows:
<TABLE>
<S> <C>
1997 $ 10,431
1998 3,778
----------
Total $ 14,209
==========
</TABLE>
4. FURNITURE, FIXTURES AND EQUIPMENT:
A summary of furniture, fixtures and equipment at December 31, 1996, is as
follows:
<TABLE>
<S> <C>
Furniture and fixtures $ 41,560
Equipment 70,887
Computer equipment 237,819
-----------
Total furniture, fixtures and
equipment, at cost 350,266
Less: Accumulated depreciation (193,926)
--------
Total net furniture, fixtures and
equipment $ 156,340
===========
</TABLE>
5. RELATED-PARTY TRANSACTIONS:
At December 31, 1996, the Company held a note receivable of $20,145 from a
permanent employee. The note, which is secured by the assets of the employee,
bears an annual rate of 10.5 percent and is to be repaid in 1997.
<PAGE> 11
-3-
During 1996, the Company advanced salaries to certain permanent employees and
shareholders. The balance to be repaid from 1997 salaries was $67,400 at
December 31, 1996.
6. LINE OF CREDIT:
The Company has access to a line of credit with a credit facility that provides
up to $1,000,000, which is available to fund the Company's general business and
working capital needs, and a second line of credit that provides up to
$100,000, which is available to fund purchases of equipment for the Company.
The lines of credit are secured by the assets of the Company and guaranteed by
the shareholders. At December 31, 1996, the Company had no outstanding
borrowing against either of these lines of credit. Interest expense related to
these lines of credit during the year ended December 31, 1996, was $3,927.
7. NOTES PAYABLE:
At December 31, 1996, the Company had a promissory note payable with an
original balance of $40,000. This note, which bears an annual rate of 11.35
percent, is due on July 28, 2000. At December 31, 1996, the unpaid balance on
this note was $31,607. During the year ended December 31, 1996, interest of
$4,059 was expensed.
During 1995, the Company entered into an agreement to purchase shares of the
Company from previous employees. In exchange for the shares, the Company issued
promissory notes payable to the previous employees for an aggregate amount of
$400,000, bearing an annual interest rate of 8.5 percent. The remaining balance
is payable on December 15, 2005, or upon the sale and transfer of 100 percent
of the stock in the Company, whichever occurs first. Interest expense related
to the notes for the year ended December 31, 1996, was $14,083.
Future principal payments for all notes payable are as follows:
<TABLE>
<S> <C>
1997 $ 23,082
1998 24,417
1999 25,865
2000 27,052
2001 and thereafter 325,274
----------
Total $ 425,690
==========
</TABLE>
8. EMPLOYEE BENEFIT PLANS:
The Company offers a 401(k) plan to eligible employees, as defined in the Plan
Document.
The Company matches employee contributions up to a specified amount. Company
contributions for the year ended December 31, 1996, was $11,980.
9. SUBSEQUENT EVENTS:
On March 7, 1997, the Company signed a letter of intent to sell 100 percent of
the outstanding shares of the Company to an unaffiliated company. If the sale
is consummated, the effective date will be April 1, 1997.
<PAGE> 12
STAFFMARK, INC. - FORM 8-K/A
1996 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
INTRODUCTION
StaffMark, Inc. (the "Company" or "StaffMark") was founded in March
1996 to create a leading provider of diversified staffing services to
businesses, healthcare providers, professional and service organizations and
governmental agencies, primarily in growth markets in the southeastern and
southwestern United States. On October 2, 1996, StaffMark and six staffing
service businesses, Brewer Personnel Services, Inc. ("Brewer"), Prostaff
Personnel, Inc. and its related entities ("Prostaff"), Maxwell Staffing, Inc.
and its related entities ("Maxwell"), HRA, Inc. ("HRA"), First Choice Staffing,
Inc. ("First Choice") and Blethen Temporaries, Inc. and its related entities
("Blethen"), (each a "Founding Company" and collectively, the "Founding
Companies"), merged through a series of separate transactions (the "Merger")
simultaneously with the closing of the Company's initial public offering (the
"Offering").
Between March 1996 and the consummation of the Offering, the Company
did not conduct any operations and all activities prior to the Offering related
to the Merger and the Offering. Pursuant to the requirements of the Securities
and Exchange Commission's ("SEC") Staff Accounting Bulletin No. 97 ("SAB 97"),
which was issued and became effective July 31, 1996, Brewer was designated as
the acquirer, for financial reporting purposes, of Prostaff, Maxwell, HRA,
First Choice, and Blethen (collectively, the "Other Founding Companies"). Based
upon the applicable provisions of SAB 97, these acquisitions were accounted for
as combinations at historical cost.
Effective March 1, 1997, StaffMark acquired Flexible Personnel, Inc.,
Great Lakes Search Associates, Inc., and HR America, Inc. (collectively,
"Flexible"). Located in Fort Wayne, Indiana, Flexible operates a total of 40
offices in Indiana, Michigan and Ohio and provides clerical, light industrial,
professional/information technology, accounting services, and staff leasing.
Flexible had 1996 revenues of approximately $49.3 million and operates in the
Commercial and Professional/Information Technology divisions. The total
consideration paid for Flexible's assets was approximately $10.0 million,
including $7.5 million in cash and 183,823 restricted shares of StaffMark
Common Stock.
Effective April 1, 1997, StaffMark acquired Global Dynamics, Inc.
("Global"). Global, located in Walnut Creek, California, provides information
technology staffing services to several Fortune 500 companies. Global had 1996
revenues of approximately $17.2 million and operates in the Professional/
Information Technology division. The total consideration paid for Global's
stock was approximately $23.3 million, including $14.0 million in cash and
690,855 restricted shares of StaffMark Common Stock.
The following unaudited pro forma combined financial statements present
Brewer and StaffMark and give effect to the following pro forma adjustments:
(i) the acquisition of the Other Founding Companies at historical cost in
accordance with the applicable provisions of SAB 97; (ii) the effect of
Brewer's February 1996 acquisition of On Call Employment Services, Inc. ("On
Call"); (iii) the effect of StaffMark's March 1997 acquisition of Flexible;
(iv) the effect of StaffMark's April 1997 acquisition of Global; (v) the
adjustment to compensation expense for the difference between the historical
compensation paid to certain previous owners of the Founding Companies,
Flexible and Global and the employment contract compensation ("Compensation
Differential"); and (vi) the incremental provision for income taxes
attributable to the income of subchapter S Corporations, net of the income tax
benefits related to the Compensation Differential.
The pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions in fact had occurred at the beginning of 1996 or to
project the Company's financial position or results of operations for any
future period.
<PAGE> 13
STAFFMARK, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Acquisition Related Adjustments
-----------------------------------
Other
Significant
StaffMark Acquisitions (a) Global (b)
------------- ---------------- ---------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $13,856 $ (8,082) $ 282
Accounts receivable, net of allowance
for doubtful accounts 21,065 3,869 136
Unbilled trade receivables -- -- 2,968
Notes receivable -- -- 20
Prepaid expenses and other 1,578 355 88
------- -------- -------
Total current assets 36,499 (3,858) 3,494
PROPERTY AND EQUIPMENT, net 4,004 699 156
INTANGIBLE ASSETS, net 30,512 6,051 --
OTHER ASSETS 483 36 --
------- -------- -------
$71,498 $ 2,928 $ 3,650
======= ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities $ 1,907 $ 1,446 $ 121
Outstanding checks 176 -- --
Payroll and related liabilities 3,516 -- 958
Reserve for workers' compensation claims 3,771 520 --
Current maturities of debt -- -- 32
Income taxes payable 2,415 -- 39
Deferred income taxes 663 (663) --
------- ------- -------
Total current liabilities 12,448 1,303 1,150
LONG-TERM DEBT, less current maturities -- -- 407
OTHER LONG TERM LIABILITIES 519 -- --
DEFERRED INCOME TAXES 421 -- --
------- ------- -------
Total liabilities 13,388 1,303 1,557
SHAREHOLDERS' EQUITY:
Common stock 134 2 --
Paid-in capital 55,379 1,623 1
Retained earnings 2,597 -- 2,092
------- ------- -------
Total shareholders' equity 58,110 1,625 2,093
------- ------- -------
$71,498 $ 2,928 $ 3,650
======= ======= =======
<CAPTION>
Acquisition Related Adjustments
--------------------------------
Pro Forma
Merger Total
Adjustments Adjustments Pro Forma
------------- ----------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,973 (c) $ (8,239) $ 5,617
(13,973)(d)
(439)(e)
Accounts receivable, net of allowance
for doubtful accounts -- 4,005 25,070
Unbilled trade receivables -- 2,968 2,968
Notes receivable -- 20 20
Prepaid expenses and other -- 443 2,021
-------- -------- --------
Total current assets (439) (803) 35,696
PROPERTY AND EQUIPMENT, net -- 855 4,859
INTANGIBLE ASSETS, net 19,093 (f) 25,144 55,656
OTHER ASSETS -- 36 519
-------- -------- --------
$ 18,654 $ 25,232 $ 96,730
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities $ -- $ 1,567 $ 3,474
Outstanding checks -- -- 176
Payroll and related liabilities -- 958 4,474
Reserve for workers' compensation claims -- 520 4,291
Current maturities of debt (32)(e) -- --
Income taxes payable -- 39 2,454
Deferred income taxes 1,155 (g) 492 1,155
-------- -------- --------
Total current liabilities 1,123 3,576 16,024
LONG-TERM DEBT, less current maturities (407)(e) 13,973 13,973
13,973 (c)
OTHER LONG TERM LIABILITIES -- -- 519
DEFERRED INCOME TAXES -- -- 421
-------- -------- --------
Total liabilities 14,689 17,549 30,937
STOCKHOLDERS' EQUITY:
Common stock 7 (h) 9 143
Paid-in capital (1)(i) 7,674 63,053
6,051 (h)
Retained earnings (2,092)(i) -- 2,597
-------- -------- --------
Total stockholders' equity 3,965 7,683 65,793
-------- -------- --------
$ 18,654 $ 25,232 $ 96,730
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE> 14
STAFFMARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(a) Represents the pro forma effects, as of December 31, 1996, related to
the acquisition of Flexible as reported in Form 8-K/A filed on May 30,
1997 in connection with its acquisition by StaffMark.
(b) Represents the audited December 31, 1996 balance sheet of Global,
which was purchased by StaffMark in April 1997.
(c) Records the cash borrowed from Mercantile Bank of St. Louis to fund
the cash portion of the consideration due to the stockholders of
Global in connection with the acquisition.
(d) Records the distribution of the cash portion of the consideration due
to the stockholders of Global in connection with the acquisition.
(e) Records the repayment of Global's debt obligations assumed by
StaffMark in conjunction with the acquisition.
(f) Records the net intangible assets recorded by StaffMark in conjunction
with its acquisition of Global.
(g) Records the adjustment to record the deferred income tax balances
attributable to the temporary differences between financial reporting
and income tax basis of assets and liabilities held by Global.
(h) Records the issuance 690,855 shares of restricted StaffMark Common
Stock issued to the stockholders of Global in connection with the
acquisition.
(i) Records the adjustment to remove the equity of Global in conjunction
with the acquisition by StaffMark.
<PAGE> 15
STAFFMARK, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Acquisition Related Adjustments
-----------------------------------
Other
Significant
StaffMark Acquisitions (a) Global (b)
--------- ------------------ ----------
<S> <C> <C> <C>
SERVICE REVENUES $ 104,476 $144,437 $ 17,160
COST OF SERVICES 81,607 114,738 --
--------- -------- --------
Gross profit 22,869 29,699 17,160
OPERATING EXPENSES:
Selling, general and administrative 14,624 22,739 15,836
Depreciation and amortization 1,373 1,075 44
--------- -------- --------
Operating income 6,872 5,885 1,280
--------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (1,376) (501) (52)
Other, net 301 427 --
--------- -------- --------
INCOME BEFORE INCOME TAXES 5,797 5,811 1,228
INCOME TAX PROVISION 1,774 2,992 22
--------- -------- --------
Net income (loss) $ 4,023 $ 2,819 $ 1,206
========= ======== ========
<CAPTION>
Acquisition Related Adjustments
-------------------------------
Pro Forma Total
Adjustments Adjustments Pro Forma
----------- ----------- ----------
<S> <C> <C> <C>
SERVICE REVENUES $ -- $ 161,597 $ 266,073
COST OF SERVICES -- 114,738 196,345
------- --------- ---------
Gross profit -- 46,859 69,728
OPERATING EXPENSES:
Selling, general and administrative (105)(c) 38,470 53,094
Depreciation and amortization 636 (d) 1,755 3,128
------- --------- ---------
Operating income (531) 6,634 13,506
------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (978) (e) (1,531) (2,907)
Other, net -- 427 728
------- --------- ---------
INCOME BEFORE INCOME TAXES (1,509) 5,530 11,327
INCOME TAX PROVISION 116 (f) 3,130 4,904
------- --------- ---------
Net income (loss) $(1,625) $ 2,400 $ 6,423
======= ========= =========
PRO FORMA NET INCOME PER
COMMON SHARE $ 0.61
=========
WEIGHTED AVERAGE SHARES
OUTSTANDING 10,444 (g)
=========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 16
STAFFMARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(a) Represents the audited financial results and pro forma effects of:
(i) the Other Founding Companies, which were acquired by Brewer on
October 2, 1996, for the period from January 1, 1996, through the date
of acquisition; (ii) On Call, which was purchased by Brewer on
February 2, 1996, for the period from January 1, 1996 through the date
of acquisition; and (iii) Flexible, which was purchased by StaffMark
effective March 1, 1997.
(b) Records the audited financial results of Global, which was purchased
by StaffMark effective April 1, 1997.
(c) Adjusts compensation to the level the owners have agreed to receive
from Global subsequent to the acquisition.
(d) Adjustment to reflect the amortization expense relating to the
intangible assets recorded in conjunction with the acquisition of
Global for fiscal year 1996. Intangible assets recorded in conjunction
with this acquisition include goodwill of approximately $19.1 million
which is being amortized over thirty years.
(e) Adjustment to reflect the increase in interest expense relating to
debt incurred in conjunction with the acquisition of Global for fiscal
year 1996. This pro forma expense calculation is based on
approximately $14.0 million borrowed by StaffMark under its credit
facility with Mercantile Bank of St. Louis. Pro forma interest expense
is computed based upon the applicable rate in effect on the credit
facility which, based upon the terms of the agreement, would have
approximated 7.0% during the pro forma period.
(f) Records the incremental provision to reflect federal and state income
taxes as if Global had been a subchapter C Corporation. This adjustment
records income tax expense at an effective combined tax rate of 39%,
adjusted for nondeductible goodwill amortization.
(g) Includes: (i) 1,355,000 shares issued by StaffMark prior to the
Offering; (ii) 5,618,249 shares issued to the stockholders of the
Founding Companies in connection with the Merger; (iii) 1,326,459
shares issued in connection with the Offering to pay the cash portion
of the consideration for the Founding Companies for the period from
January 1, 1996 through the date of the Offering; (iv) 6,325,000
shares issued in connection with the Offering; (v) 118,763 shares
issued in conjunction with the November 1996 acquisition of The
Technology Source L.L.C.; (vi) 183,823 shares issued in conjunction
with the March 1997 acquisition of Flexible; and (vii) 690,855 shares
issued in conjunction with the April 1997 acquisition of Global.
