<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 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 March 31, 1999.
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)
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)
(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.
Class of common stock Outstanding as of May 10, 1999
--------------------- ------------------------------
Par value $0.01 per share 21,761,829
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C>
ITEM 1. Financial Statements....................................................3
Unaudited Consolidated Income Statements for the
three months ended March 31, 1998 and 1999.....................................3
Consolidated Balance Sheets as of December 31, 1998
and March 31, 1999.............................................................4
Unaudited Consolidated Statement of Changes in Shareholders'
Equity for the three months ended March 31, 1999...............................5
Unaudited Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1999.....................................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......................................................13
ITEM 6. Exhibits and Reports on Form 8-K.......................................13
SIGNATURES...............................................................................14
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
--------- ---------
(in 000's, except
per share data)
--------------------------
<S> <C> <C>
Revenues $ 539,616 $ 647,341
--------- ---------
Cost of services:
Salaries, wages and payroll taxes 488,295 587,215
Benefits, workers' compensation, state
unemployment taxes and other costs 25,088 29,493
--------- ---------
Total cost of services 513,383 616,708
--------- ---------
Gross profit 26,233 30,633
--------- ---------
Operating expenses:
Salaries, wages and commissions 11,760 14,182
Other general and administrative 5,281 6,180
Depreciation and amortization 1,305 1,779
--------- ---------
Total operating expenses 18,346 22,141
--------- ---------
Operating income 7,887 8,492
Interest income 706 545
Interest expense (31) (11)
--------- ---------
Income before income tax provision 8,562 9,026
Income tax provision 3,211 3,412
--------- ---------
Net income $ 5,351 $ 5,614
========= =========
Net income per share
- Basic $ .23 $ .26
========= =========
- Diluted $ .22 $ .25
========= =========
Weighted average common shares outstanding
- Basic 23,509 21,919
========= =========
- Diluted 24,653 22,412
========= =========
</TABLE>
See notes to consolidated financial statements.
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STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
(UNAUDITED)
----------------- --------------
(in $000's, except share and per share
data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,412 $ 31,456
Certificates of deposit - restricted 8,379 8,269
Marketable securities 32,022 23,977
Accounts receivable, net of allowance for
doubtful accounts of $802 and $843,
respectively 38,637 65,467
Other current assets 6,182 2,905
------------- -------------
Total current assets 100,632 132,074
Property and equipment, net 25,071 24,169
Goodwill, net of accumulated amortization
of $3,779 and $3,963, respectively 10,892 10,708
Deferred income tax asset 2,898 2,743
Other assets, net of accumulated amortization
of $245 and $0, respectively 285 229
------------- -------------
$ 139,778 $ 169,923
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued insurance premiums and health
reserves $ 22,757 $ 23,988
Accrued payroll and payroll taxes 38,748 66,283
Accounts payable and other accrued liabilities 5,515 3,983
Income taxes payable -- 1,165
Deferred income tax liability 5,729 5,464
Customer deposits and prepayments 2,741 2,840
------------- -------------
Total current liabilities 75,490 103,723
Other long-term liabilities 1,499 1,482
Commitments and contingencies (See notes)
Shareholders' equity:
Common stock, $.01 par value 221 218
Shares authorized: 100,000,000
Shares issued and outstanding:
December 31, 1998 - 22,121,267
March 31, 1999 - 21,772,267
Additional paid in capital 46,804 43,099
Retained earnings 16,051 21,665
Other (287) (264)
------------- -------------
Total shareholders' equity 62,789 64,718
------------- -------------
$ 139,778 $ 169,923
============= =============
</TABLE>
See notes to consolidated financial statements.
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STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
UNAUDITED
<TABLE>
<CAPTION>
Accumulated
Common Additional Deferred Share- Other
Stock Common Paid In Compen- holder Comprehensive Retained
(shares) Stock Capital Sation Notes Income Earnings Total
(in $000's except share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 22,121,267 $ 221 $ 46,804 $ (282) $ (61) $ 56 $ 16,051 $ 62,789
Repurchase of common stock (349,000) (3) (4,123) (4,126)
Issuance of common stock -- --
Tax benefit of restricted
stock plan vesting 418 418
Other 60 6 66
Unrealized gain (loss) on
marketable securities (43)
Net income 5,614
Total comprehensive income 5,571
---------- ------ -------- ------ ----- ---- -------- --------
Balance, March 31, 1999 21,772,267 $ 218 $ 43,099 $ (222) $ (55) $ 13 $ 21,665 $ 64,718
========== ====== ======== ====== ===== ==== ======== ========
</TABLE>
See notes to consolidated financial statements.
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STAFF LEASING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1998 1999
-------- --------
(in $000's)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,351 $ 5,614
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,305 1,779
Deferred taxes, net 1,558 308
Provision for bad debts 120 175
Other 33 36
Changes in operating working capital:
(Increase) decrease in certificates of deposit
- restricted (120) 110
Increase in accounts receivable (23,213) (27,005)
(Increase) decrease in other current assets (820) 3,277
Decrease in accounts payable and other accrued
liabilities (381) (1,532)
Increase in accrued payroll and payroll taxes 20,482 27,535
Increase in accrued insurance premiums and health
reserves 3,661 1,231
Increase in income taxes payable 1,651 1,165
Increase in customer deposits and
prepayments 513 99
Decrease in other long-term assets 3 50
Increase (decrease) in other long-term
liabilities 6 (17)
-------- --------
Net cash provided by operating activities 10,149 12,825
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (purchases) maturities of marketable securities (5,190) 8,000
Capital expenditures (1,323) (688)
-------- --------
Net cash (used in) provided by investing activities (6,513) 7,312
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common shares 219 --
Repayment of shareholders' notes receivable 10 7
Repurchase and retirement of common stock (23) (4,100)
-------- --------
Net cash provided by (used in) financing activities 206 (4,093)
-------- --------
Net increase in cash 3,842 16,044
Cash and cash equivalents - beginning of period 21,051 15,412
-------- --------
Cash and cash equivalents - end of period $ 24,893 $ 31,456
======== ========
Supplemental disclosure of cash flow information:
Income taxes paid -- $ 6
======== ========
Interest paid $ 10 $ 10
======== ========
</TABLE>
See notes to consolidated financial statements.
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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, 1998, 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 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. SUBSEQUENT EVENT
In March 1999, the Company received a proposal from Paribas Principal
Partners, its largest institutional shareholder, to acquire all of the
outstanding shares of the Company for $17.50 per share in cash. In April 1999,
based on the unanimous recommendation of a Special Committee of its Board of
Directors, the Company's Board of Directors unanimously decided not to pursue
the proposal made by Paribas Principal Partners at this time.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
-------- --------
<S> <C> <C>
Billed to clients ............................... $ 15,391 $ 7,524
Unbilled revenues ............................... 24,048 58,786
-------- --------
39,439 66,310
Less: Allowance for doubtful accounts..... (802) (843)
-------- --------
$ 38,637 $ 65,467
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment (at cost) was comprised of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
-------- --------
<S> <C> <C>
Leasehold improvements .............................. $ 1,484 $ 1,574
Furniture and fixtures .............................. 2,508 2,562
Vehicles ............................................ 103 103
Equipment ........................................... 1,799 1,826
Computer hardware and software ...................... 29,490 30,007
-------- --------
Total property and equipment ........................ 35,384 36,072
Less accumulated depreciation ................. (10,313) (11,903)
-------- --------
$ 25,071 $ 24,169
======== ========
</TABLE>
For the three months ended March 31, 1999 depreciation expense was $1,590.
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STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(in $000's, except share and per share data)
5. 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.
On April 30, 1999, a shareholder of the Company brought a class action
alleging that the directors and senior officers of the Company breached their
fiduciary duty to shareholders by failing to pursue a proposal from Paribas
Principal Partners to acquire the company in order to entrench themselves in the
management of the Company. Plaintiff seeks injunctive relief and unspecified
damages including attorneys' and experts' fees. The Company believes the lawsuit
is wholly without merit.
The Company's employer and health care 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.
6. EQUITY
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. In 1998, the Company repurchased 1.6 million shares of
its common stock for a total cost of $21.0 million. In January 1999, the
Company's board of Directors increased this share repurchase plan to three
million shares. In the quarter ending March 31, 1999, the Company repurchased
349,000 shares at a cost of $4.1 million.
7. 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 months ended March 31, 1999 was 37.8%.
8. EARNINGS PER SHARE (EPS)
The number of common stock equivalents included in the diluted weighted
average shares outstanding for the three months ended March 31, 1998 and 1999,
related to warrants issued in connection with the Company's reorganization and
initial public offering, was 958,917 and 472,148, respectively. Also included as
common stock equivalents in diluted weighted average shares outstanding were
options granted in connection with the Company's stock option plan, which
totaled 184,936 for the three months ended March 31, 1998 and 20,477 for the
three months ended March 31, 1999.
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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 months ending March 31, 1998 and 1999 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 March 31,
1998:
Basic EPS:
Net income $5,351 23,509 $ .23
Effect of dilutive securities:
Warrants 959
Options 185
------
Diluted EPS:
Net income $5,351 24,653 $ .22
====== ====== =======
For the Three Months Ended March 31,
1999:
Basic EPS:
Net income $5,614 21,919 $ .26
Effect of dilutive securities:
Warrants 472
Options 21
------
Diluted EPS:
Net income $5,614 22,412 $ .25
====== ====== =======
</TABLE>
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the Company's results of operations for
the three months ended March 31, 1998 and 1999, expressed as a percentage of
revenues:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
---- ----
<S> <C> <C>
Revenues ................................. 100.0% 100.0%
Cost of services:
Salaries, wages and payroll taxes ...... 90.5 90.7
Benefits, workers' compensation, state
unemployment taxes and other costs... 4.6 4.6
----- -----
Total cost of services ......... 95.1 95.3
----- -----
Gross profit ............................. 4.9 4.7
----- -----
Operating expenses:
Salaries, wages and commissions ........ 2.2 2.2
Other general and administrative ....... 1.0 .9
Depreciation and amortization .......... .2 .3
----- -----
Total operating costs .......... 3.4 3.4
----- -----
Operating income ......................... 1.5 1.3
Interest income .......................... .1 .1
Interest expense ......................... -- --
----- -----
Income before income taxes ............... 1.6 1.4
Income tax provision ..................... .6 .5
----- -----
Net income ............................... 1.0 .9
===== =====
</TABLE>
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Revenues were $647.3 million for the three months ended March 31, 1999,
compared to $539.6 million for the three months ended March 31, 1998,
representing an increase of $107.7 million, or 20.0%. This increase was due
primarily to an increased number of clients and worksite employees. From March
31, 1998 to March 31, 1999, the number of clients increased 7.2% from 9,659 to
10,357. The number of worksite employees increased 11.1%, from 113,880 to
126,466. Revenue growth exceeded headcount growth by 8.9%, due primarily to wage
inflation and expansion in higher wage markets. During the first quarter of
1999, the Company terminated approximately 3,700 employees that were
unprofitable or running low payroll volumes per employee. The net increase in
the number of worksite employees was due primarily to continuing sales and
marketing efforts in existing markets as well as the development of new markets.
The Company opened one new sales office in the first quarter of 1999. Two new
branches were opened in the first quarter of 1998.
Cost of services was $616.7 million for the three months ended March
31, 1999, compared to $513.4 million for the three months ended March 31, 1998,
representing an increase of $103.3 million, or 20.1%. Cost of services was 95.3%
for the three months ended March 31, 1999, compared to 95.1% of revenues for the
three months ended March 31, 1998.
Salaries, wages and payroll taxes of worksite employees were $587.2
million for the three months ended March 31, 1999, compared to $488.3 million
for the three months ended March 31, 1998, representing an increase of $98.9
million, or 20.3%.
Benefits, workers' compensation, state unemployment taxes and other
costs were $29.5 million for the three months ended March 31, 1999, compared to
$25.1 million for the three months ended March 31, 1998, representing an
increase of $4.4 million, or 17.6%. Benefits, workers' compensation, state
unemployment taxes and other costs were 4.6% of revenues for the three months
ended March 31, 1999 and 1998.
Gross profit was $30.6 million for the three months ended March 31,
1999, compared to $26.2 million for the three months ended March 31, 1998,
representing an increase of $4.4 million, or 16.8%. This increase is less than
the increase in
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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 4.7% of revenues for the three months ended March 31, 1998, compared
to 4.9% for the three months ended March 31, 1998.
Operating expenses were $22.1 million for the three months ended March
31, 1999, compared to $18.3 million for the three months ended March 31, 1998,
representing an increase of $3.8 million, or 20.7%. Operating expenses were 3.4%
of revenues for the three months ended March 31, 1999 and 1998.
Salaries, wages and commissions were $14.2 million for the three months
ended March 31, 1999, compared to $11.8 million for the three months ended March
31, 1998, representing an increase of $2.4 million, or 20.3%. This increase was
due primarily to an increase in corporate personnel that support the Company's
expanded operations and additional sales staff located in its branch offices.
Salaries, wages and commissions were 2.2% of revenues for the three months ended
March 31, 1999 and 1998.
Other general and administrative expenses were $6.2 million for the
three months ended March 31, 1999, compared to $5.3 million for the three months
ended March 31, 1998, representing an increase of $.9 million, or 17.0%. Other
general and administrative expenses were .9% of revenues for the three months
ended March 31, 1999, compared to 1.0% for the three months ended March 31,
1998.
Depreciation and amortization expenses increased by $.5 million for the
three months ended March 31, 1999 compared to the three months ended March 31,
1998, representing an increase of 38.5%. This increase was primarily the result
of the Company's investment in management information systems.
Interest income was $.5 million for the three months ended March 31,
1999, compared to $.7 million in the first quarter of 1998.
Income tax expense of $3.4 million for the three months ended March 31,
1999 represented a provision at an effective tax rate of 37.8% compared to $3.2
million for the three months ended March 31, 1998 at an effective tax rate of
37.5%. The Company's effective tax rate for financial reporting purposes differs
from the statutory federal rate of 35% primarily because of state income taxes
and tax credits.
Net income was $5.6 million for the three months ended March 31, 1999,
compared to net income of $5.4 million for the three months ended March 31,
1998, representing an increase of $.2 million or 3.7%.
Liquidity and Capital Resources
The Company had approximately $63.7 million in cash, cash equivalents,
restricted cash and marketable securities at March 31, 1999.
The Company had no long-term debt as of March 31, 1999. At March 31,
1999, the Company had net working capital of $28.4 million versus $25.1 million
as of December 31, 1998, representing an improvement of $3.3 million, or 13.1%.
In April 1999, the Company received a commitment letter from NationsBank for a
$10 million revolving line of credit to provide for working capital needs.
Borrowings under the credit facility bear interest at variable rates based on
the lenders' base rate or LIBOR.
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 March 31,
1999, 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 $12.8 million for the
three months ended March 31, 1999 compared to net cash provided by operating
activities of $10.1 million for the three months ended March 31, 1998,
representing an increase of $2.7 million, or 26.7%.
In the first quarter of 1999, $4.1 million was used to repurchase
349,000 shares of common stock.
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
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process transactions, send invoices, or engage in similar activities.
Current State of Readiness - 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.
As a result, the Company's Year 2000 compliance initiative is directed towards
testing versus remediation. The Company is in the process of testing custom
modifications to its Oracle software, to ensure that changes made are also Year
2000 compliant. Certification of the Company's mission critical systems and
applications (packaged and custom) began in early 1999 and is expected to be
completed in the third quarter.
The Company has completed a Year 2000 inventory of its computer
hardware, supporting software, and non-IT systems; assessed non-compliance
issues; and has identified upgrades or replacements necessary to ensure Year
2000 compliance. These upgrades and replacements are expected to be
substantially complete by July 1999.
In addition, the Company has initiated formal communications with 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 are compliant. The remaining 50% of significant vendors
have indicated they will be compliant by second quarter 1999. The Company plans
to test the impact of any modifications made by these vendors on the Company's
internal systems by the third quarter of 1999.
Costs - At present, these Year 2000 remediation costs are estimated to
be $.5 million, and will be expensed as incurred in 1999. These costs are not
expected to have a material effect on the Company's financial position or
results of operations.
Risks - It is the Company's belief that the most reasonably likely
worst case scenario 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 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 is in development so
that the Company's critical business processes can be expected to continue to
function on January 1, 2000 and beyond.
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"), 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
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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; and (xi) 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.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Lawrence E. Egle v. Staff Leasing, Inc., et al. On April 30, 1999, the
plaintiff, a shareholder of the Company, brought this class action alleging that
the directors and senior officers of the Company breached their fiduciary duty
to shareholders by failing to pursue a proposal from Paribas Principal Partners
to acquire the company in order to entrench themselves in the management of the
Company. Plaintiff seeks injunctive relief and unspecified damages including
attorneys' and experts' fees. The Company believes the lawsuit is wholly without
merit.
The Company is not a party to any other material pending legal
proceedings other than routine legal matters incidental to its business. The
Company believes that the ultimate resolution of these matters would not have a
material adverse effect on its financial condition or results of operations.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule for the quarter ended March 31, 1999.
</TABLE>
13
<PAGE> 14
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: May 14, 1999 BY /s/ Richard A. Goldman
- --------------------------------------------------------------------------------
Richard A. Goldman
President
Dated: May 14, 1999 BY /s/ John E. Panning
- --------------------------------------------------------------------------------
John E. Panning
Chief Financial Officer
the Principal Financial and
Accounting Officer)
14
<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 MARCH 31, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 31,456
<SECURITIES> 23,977
<RECEIVABLES> 66,310
<ALLOWANCES> 843
<INVENTORY> 0
<CURRENT-ASSETS> 132,074
<PP&E> 36,072
<DEPRECIATION> 11,903
<TOTAL-ASSETS> 169,923
<CURRENT-LIABILITIES> 103,723
<BONDS> 0
0
0
<COMMON> 218
<OTHER-SE> 64,500
<TOTAL-LIABILITY-AND-EQUITY> 169,923
<SALES> 647,341
<TOTAL-REVENUES> 647,341
<CGS> 0
<TOTAL-COSTS> 616,708
<OTHER-EXPENSES> 22,141
<LOSS-PROVISION> 175
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 9,026
<INCOME-TAX> 3,412
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,614
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
</TABLE>
