<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to__________________
Commission File No. 0-28148
STAFF LEASING, INC.
(exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 65-0735612
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 301 Blvd West, Suite 202
Bradenton, FL 34205
(Address of principal executive offices) (Zip Code)
</TABLE>
(Registrant's Telephone Number, Including Area Code): (941) 748-4540
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
<TABLE>
<S> <C>
Class of common stock Outstanding as of October 31, 1998
- --------------------- ----------------------------------
Par value $0.01 per share 22,471,067
</TABLE>
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements ......................................... 3
Unaudited Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1997 and 1998 ..................... 3
Unaudited Consolidated Balance Sheets as of December 31, 1997
and September 30, 1998 ............................................ 4
Unaudited Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months Ended September 30, 1998 ............... 5
Unaudited Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1998 ..................... 6
Notes to Consolidated Financial Statements .......................... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ............................................ 16
ITEM 6. Exhibits and Reports on Form 8-K ............................. 16
SIGNATURES ................................................................... 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1998 1997 1998
--------- --------- ----------- -----------
(in $000's, except share and per share data)
<S> <C> <C> <C> <C>
Revenues $ 480,902 $ 607,342 $ 1,331,432 $ 1,729,169
--------- --------- ----------- -----------
Cost of services:
Salaries, wages and payroll taxes 435,101 551,888 1,203,247 1,568,621
Benefits, workers' compensation, state unemployment
taxes and other costs 20,096 26,678 59,969 77,343
--------- --------- ----------- -----------
Total cost of services 455,197 578,566 1,263,216 1,645,964
--------- --------- ----------- -----------
Gross profit 25,705 28,776 68,216 83,205
--------- --------- ----------- -----------
Operating expenses:
Salaries, wages and commissions 10,313 12,907 30,965 37,115
Other general and administrative 5,203 5,358 16,099 15,973
Depreciation and amortization 1,366 1,525 3,248 4,207
--------- --------- ----------- -----------
Total operating expenses 16,882 19,790 50,312 57,295
--------- --------- ----------- -----------
Operating income 8,823 8,986 17,904 25,910
Interest income 525 909 579 2,441
Interest expense (762) (20) (2,138) (68)
Other income (expense) 1 -- (91) --
--------- --------- ----------- -----------
Income before income tax provision
8,587 9,875 16,254 28,283
Income tax provision -- 3,701 -- 10,604
--------- --------- ----------- -----------
Net income $ 8,587 $ 6,174 $ 16,254 $ 17,679
========= ========= =========== ===========
Return on preferred interests $ 962 $ -- $ 2,391 $ --
========= ========= =========== ===========
Net income attributable to common shareholders
$ 7,625 $ 6,174 $ 13,863 $ 17,679
========= ========= =========== ===========
Net income per share attributable to common shareholders
- Basic
- Diluted $ .32 $ .26 $ .66 $ .75
$ .31 $ .26 $ .63 $ .72
========= ========= =========== ===========
Weighted average shares outstanding
- Basic 23,514 23,321 20,941 23,488
- Diluted 24,484 24,133 21,861 24,478
========= ========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1997 September 30, 1998
UNAUDITED
------------------ ------------------
(in $000's, except share and per share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,051 $ 17
Marketable securities 19,910 41,810
Certificates of deposit - restricted 8,406 8,321
Accounts receivable, net of allowance for
doubtful accounts of $835 and $844, respectively 34,814 63,186
Deferred income tax asset 4,494 3,699
Other current assets 1,154 4,045
--------- --------
Total current assets 89,829 121,078
Property and equipment, net 19,487 23,685
Goodwill, net of accumulated amortization
of $3,046 and $3,596, respectively 11,625 11,075
Deferred income tax asset 6,635 5,747
Other assets, net of accumulated amortization
of $173 and $233, respectively 242 340
--------- --------
$ 127,818 $161,925
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued insurance premiums and health
reserves $ 19,960 $ 23,048
Accrued payroll and payroll taxes 36,837 59,286
Accounts payable and other accrued liabilities 6,535 5,146
Customer deposits and prepayments 2,121 2,772
Deferred income tax liability -- 7,325
--------- --------
Total current liabilities 65,453 97,577
Other long-term liabilities 1,518 1,526
Deferred income tax liability 2,699 2,168
Commitments and contingencies (See notes)
Shareholders' equity :
Common stock, $.01 par value 235 225
Shares authorized: 100,000,000
Shares issued and outstanding:
December 31, 1997 - 23,505,358
September 30, 1998 - 22,486,067
Additional paid in capital 65,877 50,473
Retained earnings/(Accumulated deficit) (7,344) 10,335
Other (620) (379)
--------- --------
Total shareholders' equity 58,148 60,654
--------- --------
$ 127,818 $161,925
========= ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
UNAUDITED
<TABLE>
<CAPTION>
Retained
Common Additional Earnings/
Stock Common Paid In Deferred Shareholder (Accumulated
(shares) Stock Capital Compensation Notes Deficit) Total
--------------- -------- -------------- --------------- ------------ ------------- -------------
(in $000's except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 23,505,358 $235 $65,877 $(431) $(189) $(7,344) $58,148
Repurchase of common stock (1,207,000) (12) (17,306) (17,318)
Issuance of common stock 10,000 - 257 257
Issuance of common
stock through exercise of
warrants, net of offering
costs of $450 177,709 2 835 837
Tax benefit of restricted
stock plan vesting 814 814
Other (4) 112 129 237
Net income 17,679 17,679
---------- ---- ------- ----- ----- ------- -------
Balance,
September 30, 1998 22,486,067 $ 225 $50,473 $(319) $(60) $10,335 $60,654
========== ===== ======= ===== ==== ======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the nine months ended
September 30,
-----------------------------------------
1997 1998
-------------------- ------------------
(in $000's)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,254 $ 17,679
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,248 4,207
Decrease in deferred taxes, net - 9,292
Provision for bad debts 640 500
Amortization of debt issuance costs 957 -
Fixed asset obsolescence 783 -
Other 152 117
Changes in operating working capital:
(Increase) decrease in certificates of deposit -
restricted (8,250) 85
Increase in accounts receivable (15,492) (28,872)
Increase in other current assets (350) (2,891)
Decrease in accounts payable and other accrued
liabilities (2,648) (1,389)
Increase in accrued payroll and payroll taxes 13,943 22,449
Increase in accrued insurance premiums and health
reserves 5,812 3,088
Increase in customer deposits and prepayments 628 651
Increase in other long-term assets (168) (159)
(Decrease) increase in other long-term
liabilities (201) 8
-------------------- ------------------
Net cash provided by operating activities 15,308 24,765
-------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities, net (4,949) (21,900)
Capital expenditures (4,702) (7,809)
-------------------- ------------------
Net cash used in investing activities (9,651) (29,709)
-------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions, net of shareholder notes receivable and
issuance costs 370 -
Proceeds from sale of common shares, net 61,038 1,094
Repayment of shareholders' notes receivable 544 134
Repurchase and retirement of common stock (69) (17,318)
Repurchase of shareholders' interests, including fixed return (19,788) -
Repayments of capital leases (3,746) -
Repayments of long-term debt (17,700) -
-------------------- ------------------
Net cash provided by (used in) financing activities 20,649 (16,090)
-------------------- ------------------
Net increase (decrease) in cash 26,306 (21,034)
Cash and cash equivalents - beginning of period 12 21,051
==================== ==================
Cash and cash equivalents - end of period $ 26,318 $ 17
==================== ==================
Supplemental disclosure of cash flow information:
Income taxes paid $ - $ 2,894
==================== ==================
Interest paid $ 1,020 $ 56
==================== ==================
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $000's, except share and per share data)
1. GENERAL
The accompanying unaudited consolidated financial statements of Staff
Leasing, Inc. ("the Company) have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended December 31, 1997, included in the Company's Form 10-K. The
financial information furnished reflects all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations and
cash flows for the interim periods presented.
The Company's operations are currently conducted through Staff Capital,
L.P. (the "Partnership") and a number of subsidiary limited partnerships (the
"OLPs"). The consolidated operations of the Company exclude intercompany
accounts and transactions. Certain reclassifications have been made to the
consolidated financial statements of prior periods to conform to the current
period presentation.
2. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
<S> <C> <C>
Billed to clients ......................... $ 19,888 $ 11,590
Unbilled revenues ......................... 15,761 52,440
-------- --------
35,649 64,030
Less: Allowance for doubtful accounts (835) (844)
-------- --------
$ 34,814 $ 63,186
======== ========
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment (at cost) was comprised of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
<S> <C> <C>
Leasehold improvements ............ $ 1,318 $ 1,527
Furniture and fixtures ............ 1,456 2,283
Vehicles .......................... 120 120
Equipment ......................... 1,367 1,667
Computer hardware and software .... 20,510 26,893
-------- --------
Total property and equipment ...... 24,771 32,490
Less accumulated depreciation (5,284) (8,805)
-------- --------
$ 19,487 $ 23,685
======== ========
</TABLE>
For the three and nine months ended September 30, 1998 depreciation expense
was $1,322 and $3,597 respectively.
7
<PAGE> 8
STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(in $000's, except share and per share data)
4. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain pending claims which have arisen in the
normal course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the consolidated financial
position or results of operations if adversely resolved.
The Company's professional employer operations are subject to numerous
Federal, state and local laws related to employment, taxes and benefit plan
matters. Generally, these regulations affect all companies in the U.S. However,
the regulatory environment for professional employer organizations ("PEOs") is
an evolving area due to uncertainties resulting from the non-traditional
employment relationships. Many Federal and state laws relating to tax and
employment matters were enacted prior to the development of PEOs and do not
specifically address the obligations and responsibilities of these PEO
relationships. If the IRS concludes that PEOs are not "employers" of certain
worksite employees for purposes of the Internal Revenue Code of 1986, as amended
(the "Code"), the tax qualified status of the Company's 401(k) retirement plan
as in effect prior to April 1, 1997 could be revoked, its cafeteria plan may
lose its favorable tax status and the Company may no longer be able to assume
the client's Federal employment tax withholding obligations. Any adverse
developments in the above noted areas could have a material effect on the
Company's financial condition and future results of operations.
5. RELATED PARTIES
Staff Leasing has a five-year employment contract with a shareholder,
which requires annual payments of $362. This agreement will terminate in
November 1998. For the three and nine months ended September 30, 1998, $84 and
$240 respectively, of expense was recorded under this agreement. In addition,
lease expense related to certain automobile leases was paid to an entity owned
by this same shareholder totaling $0 and $21 respectively, for the three and
nine months ended September 30, 1998.
6. INCOME TAXES
The Company records income tax expense using the asset and liability
method of accounting for deferred income taxes. Under such method, deferred tax
assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial statements and the income tax
bases of the Company's assets and liabilities.
The Company's effective tax rate provides for Federal and state income
taxes. The effective tax rate for the three and nine months ended September 30,
1998 was 37.5%. Prior to July 1997, the Company operated through limited
partnerships for Federal and state income tax purposes, and therefore, no
income tax provision was required. Beginning in July 1997 and ending September
30, 1997, taxable income generated by the partnerships was allocated to the
former general partner and not to the Company in accordance with the
Partnership agreement and applicable tax rules and regulations. Accordingly, no
provision or benefit for Federal and state income taxes was recorded.
7. EQUITY
In April 1998, certain shareholders of the Company completed an
underwritten secondary offering of 3.1 million shares of common stock of the
Company. In connection with this offering, 177,709 shares of common stock were
issued by the Company upon the exercise of warrants that were sold to the
underwriters by certain selling shareholders. The Company received approximately
$1,285 from the exercise of the warrants and paid approximately $450 of expenses
associated with this secondary offering.
In August 1998, the Company's Board of Directors approved a program to
repurchase up to two million shares of the Company's common stock. Purchases may
be made from time to time depending upon the Company's stock price, and will be
made primarily in the open market, but may also be made through privately
negotiated transactions. During August and September, approximately 1.2 million
shares were repurchased at a total cost of $17,293.
8. EARNINGS PER SHARE ("EPS")
The common stock equivalents included in the diluted weighted average
shares outstanding for the three and nine months ended September 30, 1997 and
1998, related to warrants issued in connection with the Company's reorganization
and initial public offering. The warrants calculated as common stock equivalents
totaled 881,118 and 832,978 respectively, for the three and nine months ended
September 30, 1997 and totaled 741,792 and 825,188 respectively, for the three
and nine months ended September 30, 1998. Also included as potential common
stock equivalents for diluted weighted average shares outstanding were options
granted in connection with the Company's stock option plan. The options
calculated as common stock equivalents totaled 89,156 and 86,274 respectively,
for the three and nine months ended September 30, 1997 and totaled 70,099 and
164,922, respectively, for the three and nine months ended September 30, 1998.
8
<PAGE> 9
STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of net income attributable to common stock and shares
outstanding for the purposes of calculating basic and diluted earnings per share
for the three and nine months ended September 30, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
(in $000's) (in 000's)
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997:
Net income $ 8,587
Less: Return on preferred interests (962)
----------
Basic EPS :
Net income attributable to common
shareholders $ 7,625 23,514 $ .32
========== ======
Effect of dilutive securities:
Warrants 881
Options 89
------
Diluted EPS :
Net income attributable to common
shareholders $ 7,625 24,484 $ .31
========== ======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997:
Net income $ 16,254
Less: Return on preferred interests (2,391)
----------
Basic EPS :
Net income attributable to common
shareholders $ 13,863 20,941 $ .66
========== ======
Effect of dilutive securities:
Warrants 833
Options 87
------
Diluted EPS :
Net income attributable to common
shareholders $ 13,863 21,861 $ .63
========== ====== ======
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998:
Basic EPS :
Net income attributable to common
shareholders $ 6,174 23,321 $ .26
========== ======
Effect of dilutive securities:
Warrants 742
Options 70
------
Diluted EPS :
Net income attributable to common
shareholders $ 6,174 24,133 $ .26
========== ====== ======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998:
Basic EPS :
Net income attributable to common
shareholders $ 17,679 23,488 $ .75
========== ======
Effect of dilutive securities:
Warrants 825
Options 165
------
Diluted EPS :
Net income attributable to common
shareholders $ 17,679 24,478 $ .72
========== ====== ======
</TABLE>
9
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the largest professional employer organization ("PEO") in the
United States. At September 30, 1998, the Company served over 10,400 clients
with approximately 123,000 worksite employees. With 43 branches located in
Florida, Texas, Georgia, Arizona, Minnesota, North Carolina and Tennessee, the
Company provides a broad range of services, including payroll administration,
risk management, benefits administration, unemployment and human resource
consulting.
REVENUES. Revenues consist of charges by the Company for the salaries and
wages of the worksite employees (including the employee-paid portion of health
and other benefits), its service fee and the clients' portion of health and
retirement benefits provided to the worksite employees. These charges are
invoiced to the client at the time of each periodic payroll. The service fee
covers the cost of certain employment-related taxes, workers' compensation
insurance coverage and administrative and field services provided by the Company
to the client, including payroll administration and safety, human resource and
regulatory compliance consultation. Salaries and wages of worksite employees are
affected by the inflationary effects on wage levels, including the effect of
increases in the Federal minimum wage, and by competition in the labor markets
in which the Company operates. Fluctuations in salaries and wages resulting from
these factors have a proportionate impact on the Company's service fee, which is
invoiced as a percentage of salaries and wages.
COST OF SERVICES. Cost of services includes salaries and wages of worksite
employees, payroll taxes, employee benefit costs, workers' compensation
insurance and state unemployment taxes.
OPERATING EXPENSES. Operating expenses consist primarily of salaries,
wages and commissions associated with the Company's internal employees, and
general and administrative expenses. Over the past several years, the Company
has experienced an increase in its operating expenses as the Company has
expanded its senior management, sales and marketing staff, payroll processing
operations and client and worksite employee service functions.
INCOME TAXES. The Company's effective tax rate for the three and nine
months ended September 30, 1998 was 37.5%. The Company's 1998 estimated
effective tax rate for financial reporting purposes differs from the statutory
Federal rate of 35% primarily because of state income taxes and tax credits.
Prior to July 1997, the Company operated through limited partnerships for
Federal and state income tax purposes, and therefore, no income tax provision
was required. Beginning in July 1997 and ending September 30, 1997, taxable
income generated by the partnerships was allocated to the former general partner
and not to the Company in accordance with the Partnership agreement and
applicable tax rules and regulations. Accordingly, no provision or benefit for
Federal and state income taxes was recorded.
PROFITABILITY. Profitability is largely dependent upon the Company's
success in managing revenues and costs that are within its control. These
controllable revenues and costs primarily relate to workers' compensation,
health benefits and state unemployment taxes. The Company manages these
controllable costs through its use of: (i) its guaranteed workers' compensation
cost arrangement with Liberty Mutual Insurance Company; (ii) appropriately
designed health benefit plans that encourage worksite employee participation,
high managed care utilization and efficient risk pooling; and (iii) aggressive
management of its state unemployment tax exposure.
10
<PAGE> 11
RESULTS OF OPERATIONS
The following table presents the Company's results of operations for the
three and nine months ended September 30, 1997 and 1998, expressed as a
percentage of revenues:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0%
Cost of services:
Salaries, wages and payroll taxes........ 90.5 90.9 90.4 90.7
Benefits, workers' compensation, state
unemployment taxes and other costs.... 4.2 4.4 4.5 4.5
------ ------ ----- -----
Total cost of services........... 94.7 95.3 94.9 95.2
------ ------ ----- -----
Gross profit............................... 5.3 4.7 5.1 4.8
------ ------ ----- -----
Operating expenses:
Salaries, wages and commissions.......... 2.1 2.1 2.3 2.2
Other general and administrative......... 1.1 .9 1.2 .9
Depreciation and amortization............ .3 .2 .3 .2
------ ------ ----- -----
Total operating costs...................... 3.5 3.2 3.8 3.3
------ ------ ----- -----
Operating income........................... 1.8 1.5 1.3 1.5
Interest income ........................... .1 .1 - .1
Interest expense........................... (.1) - (.1) -
------ ------ ----- -----
Income before income taxes................. 1.8 1.6 1.2 1.6
Income tax provision....................... - .6 - .6
------ ------ ----- -----
Net income................................. 1.8% 1.0% 1.2% 1.0%
====== ====== ===== =====
</TABLE>
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
Revenues were $607.3 million for the three months ended September 30,
1998, compared to $480.9 million for the three months ended September 30, 1997,
representing an increase of $126.4 million, or 26.3%. This increase was due
primarily to an increased number of clients and worksite employees. From
September 30, 1997 to September 30, 1998, the number of clients increased 16.5%
from 8,933 to 10,406. The number of worksite employees increased 20.1%, from
102,233 to 122,809. Revenue growth exceeded headcount growth by 6.2%, due in
part, to the effects of wage inflation caused by tightened labor markets, which
encourage clients to utilize more fully their existing employee base, and higher
average wages in the Company's expansion states. The increase in the number of
clients and worksite employees was the result of continuing sales and marketing
efforts in existing markets, as well as the development of new markets. The
Company opened two new sales offices in the third quarter of 1998. One new sales
office was opened in the third quarter of 1997.
Cost of services was $578.6 million for the three months ended September
30, 1998, compared to $455.2 million for the three months ended September 30,
1997, representing an increase of $123.4 million, or 27.1%. Cost of services was
95.3% and 94.7% of revenues for the three months ended September 30, 1998 and
1997, respectively.
Salaries, wages and payroll taxes of worksite employees were $551.9
million for the three months ended September 30, 1998, compared to $435.1
million for the three months ended September 30, 1997, representing an increase
of $116.8 million, or 26.8%.
Benefits, workers' compensation, state unemployment taxes and other costs
were $26.7 million for the three months ended September 30, 1998, compared to
$20.1 million for the three months ended September 30, 1997, representing an
increase of $6.6 million, or 32.8%. The rate of increase was higher than the
growth in revenues due in part to a continuing soft workers' compensation market
and the Company's expansion into lower workers' compensation margin states,
which also has the effect of decreasing revenues. Additionally, the Company
recorded $2.4 million and $.7 million in September 1997 and 1998, respectively,
for a reduction in its health benefit plan subsidy. This reduction was primarily
attributable to favorable experience on the maturation or run-out of prior
years' health claims. Benefits, workers' compensation, state unemployment taxes
and other costs were 4.4% of revenues for the three months ended September 30,
1998, compared to 4.2% for the three months ended September 30, 1997.
11
<PAGE> 12
Gross profit was $28.8 million for the three months ended September 30,
1998, compared to $25.7 million for the three months ended September 30, 1997,
representing an increase of $3.1 million, or 12.1%. This increase is less than
the increase in revenues due to the Company's continued expansion into states
with lower gross profit margins than Florida, and due to competitive workers'
compensation pricing in Texas and Georgia. Gross profit was 4.7% and 5.3% of
revenues for the three months ended September 30, 1998 and 1997, respectively.
Operating expenses were $19.8 million for the three months ended September
30, 1998, compared to $16.9 million for the three months ended September 30,
1997, representing an increase of $2.9 million, or 17.2%. Operating expenses
were 3.2% of revenues for the three months ended September 30, 1998, compared to
3.5% for the three months ended September 30, 1997.
Salaries, wages and commissions were $12.9 million for the three months
ended September 30, 1998, compared to $10.3 million for the three months ended
September 30, 1997, representing an increase of $2.6 million, or 25.2%. This
increase was due primarily to an increase in corporate personnel that support
the Company's expanded operations, implementation of new payroll processing
systems, and additional sales staff located in its branch offices. Salaries,
wages and commissions were 2.1% of revenues for the three months ended September
30, 1998 and 1997.
Other general and administrative expenses were $5.4 million for the three
months ended September 30, 1998, compared to $5.2 million for the three months
ended September 30, 1997, representing an increase of $.2 million, or 3.9%. This
increase was due primarily to an increase in administrative costs to support the
addition of branch offices. Other general and administrative expenses were .9%
of revenues for the three months ended September 30, 1998, compared to 1.1% for
the three months ended September 30, 1997.
Depreciation and amortization expenses increased by $.1 million for the
three months ended September 30, 1998 compared to the three months ended
September 30, 1997, representing an increase of 7.1%. This increase was
primarily the result of the Company's investment in management information
systems. Amortization of capitalized software costs associated with the
Company's implementation of new payroll processing and management information
systems began July 1997, when the systems became operational. These costs are
being amortized over a seven-year period.
Interest income was $.9 million for the three months ended September 30,
1998, compared to $.5 million for the three months ended September 30, 1997.
Interest income resulted from the continued investment of net proceeds from the
Company's initial public offering in July 1997 and net cash provided by
operating activities.
Income tax expense of $3.7 million for the three months ended September
30, 1998 represented a provision at an effective tax rate of 37.5%. No
provision for income taxes was required for the three months ended September
30, 1997.
Net income was $6.2 million for the three months ended September 30, 1998,
compared to net income of $8.6 million for the three months ended September 30,
1997, representing a decrease of $2.4 million or (27.9%).
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997
Revenues were $1,729.2 million for the nine months ended September 30,
1998, compared to $1,331.4 million for the nine months ended September 30, 1997,
representing an increase of $397.8 million, or 29.9%. This increase was due
primarily to an increased number of clients and worksite employees. From
September 30, 1997 to September 30, 1998, the number of clients increased 16.5%
from 8,933 to 10,406. The number of worksite employees increased 20.1%, from
102,233 to 122,809. Revenue growth exceeded headcount growth by 9.8%, due in
part, to the effects of wage inflation caused by tightened labor markets, which
encourage clients to utilize more fully their existing employee base, and higher
average wages in the Company's expansion states.
In January 1997 and to a much lesser extent, in January 1998, the Company
reduced the service fees charged on average to its Florida clients in response
to a reduction in workers' compensation rates in Florida. While the Company
believes these reductions in service fees have not adversely affected the
Company's profitability to date because the Company has been able to offset the
effect of these actions by controlling expenses, it is possible that future
service fee reductions could adversely affect the Company's operations.
Cost of services was $1,646.0 million for the nine months ended September
30, 1998, compared to $1,263.2 million for the nine months ended September 30,
1997, representing an increase of $382.8 million, or 30.3%. Cost of services was
95.2% and 94.9% of revenues for the nine months ended September 30, 1998 and
1997, respectively.
Salaries, wages and payroll taxes of worksite employees were $1,568.6
million for the nine months ended September 30, 1998, compared to $1,203.2
million for the nine months ended September 30, 1997, representing an increase
of $365.4 million, or 30.4%.
12
<PAGE> 13
Benefits, workers' compensation, state unemployment taxes and other costs
were $77.3 million for the nine months ended September 30, 1998, compared to
$60.0 million for the nine months ended September 30, 1997, representing an
increase of $17.3 million, or 28.8%. Benefits, workers' compensation, state
unemployment taxes and other costs were 4.5% of revenues for the nine months
ended September 30, 1998 and 1997. The rate of increase was slightly lower than
the growth in revenues due to: (i) a 2.7% reduction in the workers' compensation
premium rate and (ii) state unemployment tax rate reductions effective in 1998
for various states.
Gross profit was $83.2 million for the nine months ended September 30,
1998, compared to $68.2 million for the nine months ended September 30, 1997,
representing an increase of $15.0 million, or 22.0%. This increase is less than
the increase in revenues due to the Company's continued expansion into states
with lower margins than Florida, as well as competitive pricing in its current
markets. Gross profit was 4.8% of revenues for the nine months ended September
30, 1998 and 5.1% of revenues for the nine months ended September 30, 1997.
Operating expenses were $57.3 million for the nine months ended September
30, 1998, compared to $50.3 million for the nine months ended September 30,
1997, representing an increase of $7.0 million, or 13.9%. This increase is less
than the growth in gross profit due to the Company's continued leverage of its
corporate management and operating infrastructure. Operating expenses were 3.3%
of revenues for the nine months ended September 30, 1998, compared to 3.8% for
the nine months ended September 30, 1997.
Salaries, wages and commissions were $37.1 million for the nine months
ended September 30, 1998, compared to $31.0 million for the nine months ended
September 30, 1997, representing an increase of $6.1 million, or 19.7%. This
increase was due primarily to an increase in corporate personnel that support
the Company's expanded operations, implementation of new payroll processing
systems, and additional sales staff located in its branch offices. Salaries,
wages and commissions were 2.2% of revenues for the nine months ended September
30, 1998, compared to 2.3% for the nine months ended September 30, 1997.
Other general and administrative expenses were $16.0 million for the nine
months ended September 30, 1998, compared to $16.1 million for the nine months
ended September 30, 1997, representing a decrease of $.1 million, or (.6%).
Other general and administrative expenses were .9% of revenues for the nine
months ended September 30, 1998, compared to 1.2% for the nine months ended
September 30, 1997.
Depreciation and amortization expenses increased by $1.0 million for the
nine months ended September 30, 1998 compared to the nine months ended September
30, 1997, representing an increase of 31.3%. This increase was primarily the
result of the Company's investment in management information systems.
Amortization of capitalized software costs associated with the Company's
implementation of new payroll processing and management information systems
began July 1997, when the systems became operational. These costs are being
amortized over a seven-year period.
Interest income was $2.4 million for the nine months ended September 30,
1998, compared to $.6 million of interest income for the first nine months of
1997, an increase of $1.8 million. Interest income resulted from the continued
investment of net proceeds from the Company's initial public offering in July
1997 and net cash from operations.
Interest expense was minimal for the nine months ended September 30, 1998,
compared to $2.1 million for the nine months ended September 30, 1997, a
decrease of $2.2 million, or (104.8%). The decrease was due to the repayment of
the Company's long-term borrowings at the beginning of July 1997.
Income tax expense of $10.6 million for the nine months ended September
30, 1998 represented a provision at an effective tax rate of 37.5%. No
provision for income taxes was required for the nine months ended September 30,
1997.
Net income was $17.7 million for the nine months ended September 30, 1998,
compared to net income of $16.3 million for the nine months ended September 30,
1997, representing an increase of $1.4 million or 8.6%.
Liquidity and Capital Resources
The Company had approximately $50.1 million in cash, cash equivalents,
restricted cash and marketable securities at September 30, 1998. In August
1998, the Company's Board of Directors approved a program to repurchase up to
two million shares of the Company's common stock. Purchases may be made from
time to time depending upon the Company's stock price, and will be made
primarily in the open market, but may also be made through privately negotiated
transactions.
The Company periodically evaluates its liquidity requirements, capital
needs and availability of capital resources in view of its plans for expansion,
including potential acquisitions, anticipated levels of health benefit plan
subsidies and other operating cash needs. The Company has in the past sought,
and may in the future seek, to raise additional capital or take other measures
to increase its liquidity and capital resources. The Company currently believes
that the proceeds from the initial public offering in July 1997 and the current
cash flow from operations will be sufficient to meet its requirements through
1998. The Company may rely on these same sources, as well as public or private
debt and/or equity financing to meet its long-term capital needs.
The Company had no long-term debt as of September 30, 1998. At September 30,
1998, the Company had net working capital of $23.5 million, versus $24.4 million
as of December 31, 1997, representing a slight decline of $.9 million, or 3.7%.
13
<PAGE> 14
The Company's primary short-term capital requirements relate to the
payment of accrued payroll and payroll taxes of its internal and worksite
employees, accounts payable for capital expenditures and the payment of accrued
workers' compensation expense and health benefit plan premiums. As of September
30, 1998, the Company had $8.3 million of restricted certificates of deposit,
with original maturities of less than one year, as collateral for certain
standby letters of credit issued in connection with the Company's health benefit
plans.
Net cash provided by operating activities was $24.8 million for the nine
months ended September 30, 1998 compared to net cash provided by operating
activities of $15.3 million for the nine months ended September 30, 1997,
representing an increase of $9.5 million, or 62.1%. The increase was primarily
due to the increase in income before income taxes for the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997.
Net cash used in investing activities was $29.7 million for the nine
months ended September 30, 1998. Of this amount, $21.9 million was for the
purchase of interest-bearing marketable securities. During 1998, the Company
anticipates total capital expenditures of approximately $11 million, of which
$7.8 million has been spent year-to-date September 30, 1998.
Net cash used in financing activities for the nine months ended September
30, 1998 was $16.1 million, due primarily to the repurchase of 1.2 million
shares of stock by the Company in the third quarter for a total cost of $17.3
million. Other financing activities included the exercise of warrants in
connection with the Company's secondary offering, which generated net proceeds
of $835 in the second quarter.
In October 1998 the Company cancelled its $20 million revolving credit
facility. The Company had not borrowed under this credit facility since its
inception in December 1997.
The Company has an arrangement to enable it to defer up to $10 million of
payments to a vendor, which must be repaid by September 30, 1999. To date, the
Company has not deferred any payments under this arrangement.
Year 2000 Compliance
The Year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date is
stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock or
date recording mechanism, including date sensitive software which uses only two
digits to represent the year, may recognize a date using 00 as the year 1900
rather than the year 2000. In addition, the Year 2000 is a leap year, which also
may not be addressed by such systems. Either issue could result in a system
failure or miscalculations causing disruption of operations, including among
other things, a temporary inability to process transactions, send invoices, or
engage in similar activities.
Current State of Readiness - The Company believes its proprietary software
is Year 2000 compliant. The Company's primary internal computer applications
were purchased from Microsoft and Oracle. These companies have issued public
documents affirming Year 2000 compliance for their applications. The Company is
in the process of testing custom modifications to its Oracle software, to ensure
that changes made are also Year 2000 compliant. Testing of internal systems is
approximately one third complete and remediation work, if any, is expected to
begin in early 1999 and be completed by the middle of 1999.
The Company has completed a full Year 2000 inventory of all computer
hardware, non-primary software, and non-IT systems; assessed non-compliance
issues; assigned priorities for correction of such items; and is in the process
of identifying upgrades or replacements necessary to ensure Year 2000
compliance. Remediation measures are begun as soon as the necessary corrective
products and services are identified.
In addition, the Company has initiated formal communications with all of
its significant vendors to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. This includes service vendors with IT interfaces to the Company's
applications and non-IT systems suppliers. Approximately 50% of the Company's
significant vendors have responded that they will be compliant by the end of
calendar 1998, and the Company plans to test the impact of any modifications
made by these vendors on the Company's internal systems during 1999.
Costs - From 1995 to September 30, 1998, the Company has invested $26.9
million in its technology infrastructure, which has also addressed the majority
of its internal Year 2000 issues. Additional costs will be incurred for certain
testing software, hardware, non-IT upgrades, testing efforts with significant
vendors and implementation of necessary changes. At present, these Year 2000
remediation costs are estimated to be $.5 million, and will be expensed as
incurred in 1998 and 1999. These costs are not expected to have a material
effect on the Company's financial position or results of operations, and should
not require a significant re-deployment of current technology resources from
existing projects.
14
<PAGE> 15
Risks - It is the Company's belief that the greatest potential risk
from the Year 2000 issue is that a third party vendor will not remediate its own
Year 2000 issues in time, resulting in a disruption of additional client
services, such as the processing of insurance claims or the direct deposit of
payroll to a financial institution. The Company is focusing the majority of its
Year 2000 efforts to address these issues.
The Company can give no guarantee that current Year 2000 remediation
cost estimates will be achieved and actual results could differ materially from
existing plans. Factors that might cause material differences include, but are
not limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct errors or defects in the technology used in
internal IT and non-IT systems, and the ability of the Company's significant
suppliers, customers and others with which it conducts business, including
Federal and state government agencies, to identify and resolve their own Year
2000 issues and similar uncertainties. Further, the impact of a Year 2000
failure on the Company's future results of operations, liquidity or financial
condition cannot be determined at this time, but is a risk which should be
considered in evaluating future growth of the Company.
Contingency Plans - A contingency plan for a possible Year 2000 failure
of any key internal hardware, software or non-IT systems has been developed so
that the Company's critical business processes can be expected to continue to
function on January 1, 2000 and beyond. The plan includes preparing "backup"
software systems, repairing or replacing systems, changing suppliers, performing
certain processes manually, or suspending non-critical operations. This plan
will be fully tested by the end of the second quarter of 1999. Contingency plans
for any significant third party's failure to remediate its own Year 2000 issues,
which might have an impact on the Company's systems or operations, have not yet
been developed, but will be developed in the first quarter of 1999.
Cautionary Note Regarding Forward-looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), Staff Leasing, Inc. (the
"Company") is hereby providing cautionary statements identifying important
factors that could cause the Company's actual results to differ materially from
those projected in forward-looking statements (as such term is defined in the
Reform Act) made by or on behalf of the Company herein or orally, whether in
presentations, in response to questions or otherwise. Any statements that
express, or involve discussions as to, expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, through the
use of words or phrases such as "will result," "are expected to," "will
continue," "estimated," and "projection") are not historical facts and may be
forward-looking and, accordingly, such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results or performance of the Company to be materially different from any future
results or performance expressed or implied by such forward-looking statements.
Such known and unknown risks, uncertainties and other factors include, but are
not limited to, the following: (i) the potential for additional subsidies for
health benefit plans; (ii) volatility in workers' compensation rates and
unemployment taxes; (iii) possible adverse application of certain Federal and
state laws and the possible enactment of unfavorable laws or regulation; (iv)
impact of competition from existing and new professional employer organizations;
(v) risks associated with expansion into additional states where the Company
does not have a presence or significant market penetration; (vi) risks
associated with the Company's dependence on key vendors; (vii) the possibility
for client attrition; (viii) risks associated with geographic market
concentration and concentration of clients in the construction industry; (ix)
the financial condition of clients; (x) the failure to properly manage growth
and successfully integrate acquired companies and operations; (xi) risks that
the Company has not adequately addressed the Year 2000 computer system issue;
and (xii) other factors which are described in further detail in the Company's
filings with the Securities and Exchange Commission.
The Company cautions that the factors described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
While the Company is involved from time to time in routine legal matters
incidental to its business, there are presently no material litigation
proceedings pending against the Company.
ITEM 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27.2 (a) Financial Data Schedule for the quarter ended September 30, 1997
27.2 (b) Financial Data Schedule for the nine months ended September 30, 1997
27.3 (a) Financial Data Schedule for the quarter ended September 30, 1998
27.3 (b) Financial Data Schedule for the nine months ended September 30, 1998
</TABLE>
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
STAFF LEASING, INC.
Dated: November 12, 1998 BY /s/ Richard A. Goldman
- ------------------------------------------------------------------------
Richard A. Goldman
President
Dated: November 12, 1998 BY /s/ John E. Panning
- ------------------------------------------------------------------------
John E. Panning
Chief Financial Officer
(the Principal Financial and Accounting Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF STAFF LEASING, INC. FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 INCLUDED IN FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 26,318
<SECURITIES> 4,949
<RECEIVABLES> 49,711
<ALLOWANCES> 893
<INVENTORY> 0
<CURRENT-ASSETS> 90,105
<PP&E> 22,868
<DEPRECIATION> 4,556
<TOTAL-ASSETS> 120,565
<CURRENT-LIABILITIES> 78,221
<BONDS> 0
0
0
<COMMON> 235
<OTHER-SE> 40,301
<TOTAL-LIABILITY-AND-EQUITY> 120,565
<SALES> 480,902
<TOTAL-REVENUES> 480,902
<CGS> 0
<TOTAL-COSTS> 455,197
<OTHER-EXPENSES> 16,882
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 762
<INCOME-PRETAX> 8,587
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,587
<EPS-PRIMARY> .32
<EPS-DILUTED> .31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF STAFF LEASING, INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 INCLUDED IN FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 26,318
<SECURITIES> 4,949
<RECEIVABLES> 49,701
<ALLOWANCES> 893
<INVENTORY> 0
<CURRENT-ASSETS> 90,105
<PP&E> 22,868
<DEPRECIATION> 4,556
<TOTAL-ASSETS> 120,565
<CURRENT-LIABILITIES> 78,221
<BONDS> 0
0
0
<COMMON> 235
<OTHER-SE> 40,301
<TOTAL-LIABILITY-AND-EQUITY> 120,565
<SALES> 1,331,432
<TOTAL-REVENUES> 1,331,432
<CGS> 0
<TOTAL-COSTS> 1,263,216
<OTHER-EXPENSES> 50,312
<LOSS-PROVISION> 640
<INTEREST-EXPENSE> 2,138
<INCOME-PRETAX> 16,254
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,254
<EPS-PRIMARY> .66
<EPS-DILUTED> .63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF STAFF LEASING, INC. FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1998 INCLUDED IN FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 17
<SECURITIES> 41,810
<RECEIVABLES> 63,186
<ALLOWANCES> 844
<INVENTORY> 0
<CURRENT-ASSETS> 121,078
<PP&E> 32,490
<DEPRECIATION> 8,805
<TOTAL-ASSETS> 161,925
<CURRENT-LIABILITIES> 97,577
<BONDS> 0
0
0
<COMMON> 225
<OTHER-SE> 60,429
<TOTAL-LIABILITY-AND-EQUITY> 161,925
<SALES> 607,342
<TOTAL-REVENUES> 607,342
<CGS> 0
<TOTAL-COSTS> 578,566
<OTHER-EXPENSES> 19,790
<LOSS-PROVISION> 160
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 9,875
<INCOME-TAX> 3,701
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,174
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF STAFF LEASING, INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 INCLUDED IN FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 17
<SECURITIES> 41,810
<RECEIVABLES> 63,186
<ALLOWANCES> 844
<INVENTORY> 0
<CURRENT-ASSETS> 121,078
<PP&E> 32,490
<DEPRECIATION> 8,805
<TOTAL-ASSETS> 161,925
<CURRENT-LIABILITIES> 97,577
<BONDS> 0
0
0
<COMMON> 225
<OTHER-SE> 60,429
<TOTAL-LIABILITY-AND-EQUITY> 161,925
<SALES> 1,729,169
<TOTAL-REVENUES> 1,729,169
<CGS> 0
<TOTAL-COSTS> 1,645,964
<OTHER-EXPENSES> 57,295
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> 28,283
<INCOME-TAX> 10,604
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,679
<EPS-PRIMARY> .75
<EPS-DILUTED> .72
</TABLE>
