9
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
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 Number: 1-5707
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)
Illinois 36-6097429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Tower Lane, Oakbrook Terrace, Illinois 60181
(Address of principal executive offices)
(630) 954-0400
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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 __
As of July 31, 1996, there were 2,294,872 shares of common
stock outstanding.
PART I. FINANCIAL INFORMATION
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
June 30 September 30
1996 1995
(Dollars in Thousands) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,667 $ 3,225
Accounts receivable, less allowances
(Jun. 1996--$373; Sept. 1995--$290) 2,818 1,803
Other current assets 45 57
Total current assets 7,530 5,085
Property and equipment:
Property and equipment, at cost 2,558 2,473
Accumulated depreciation and amortization (2,198) (2,141)
Net property and equipment 360 332
Other assets 365 408
Total assets $ 8,255 $ 5,825
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued compensation and payroll taxes $ 3,123 $ 2,169
Other current liabilities 586 670
Total current liabilities 3,709 2,839
Long-term obligations 364 443
Shareholders' equity:
Common stock, no-par value; authorized --
20,000,000 shares; issued and outstanding --
2,294,872 shares in June 1996 and
2,195,985 shares in September 1995 23 22
Capital in excess of stated value of shares 4,145 3,494
Retained earnings (accumulated deficit) 14 (973)
Total shareholders' equity 4,182 2,543
Total liabilities and shareholders' equity $ 8,255 $ 5,825
See notes to condensed consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three Months Nine Months
Ended June 30 Ended June 30
(In Thousands, Except Per Share) 1996 1995 1996 1995
Net revenues:
Permanent placement services $ 4,225 $ 3,025 $11,791 $ 8,464
Contract services 1,829 1,437 5,064 3,709
Net revenues 6,054 4,462 16,855 12,173
Costs and expenses:
Cost of services 4,431 3,337 12,182 9,340
General and administrative 996 724 2,866 2,037
Income before income taxes 627 401 1,807 796
Provision for income taxes 245 75 710 95
Net income $ 382 $ 326 $ 1,097 $ 701
Net income per share $ .17 $ .15 $ .49 $ .31
Cash dividends per share -- -- .05 --
Average number of shares 2,275 2,237 2,243 2,229
See notes to condensed consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months
Ended June 30
(In Thousands) 1996 1995
Operating activities:
Net income $1,097 $ 701
Noncash costs and expenses 76 (91)
Changes in current assets and current liabilities -
Accounts receivable (1,015) (398)
Accrued compensation and payroll taxes 954 294
Other, net (72) (15)
Net cash provided by operating activities 1,040 491
Net cash used by investing activities (140) (124)
Financing activities:
Cash dividends declared (110) --
Exercises of stock options 652 188
Net cash provided by financing activities 542 188
Increase in cash and cash equivalents 1,442 555
Cash and cash equivalents at beginning of period 3,225 1,843
Cash and cash equivalents at end of period $4,667 $2,398
Supplementary information:
Income tax payments $ 374 $ 30
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Interim Financial Statements
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. This financial
information should be read in conjunction with the financial
statements included in the Company's annual report on Form 10-KSB
for the year ended September 30, 1995. Operating results for
interim periods are not necessarily indicative of the results
that may be expected for the entire year.
Lease Obligations
Effective February 1, 1996, the Company entered into a new, 10-
year lease agreement covering its corporate headquarters office
space. The previous lease was scheduled to expire in November
1997. As a result, the Company wrote off a deferred rent
liability associated with the previous lease and recorded a
$144,000 credit to rent expense during the second quarter of
fiscal 1996.
Although the new lease results in about the same amount of annual
rent expense as under the previous lease, the new lease results
in improved cash flow of aproximately $120,000 per year.
Income Taxes
The effective income tax rates for the 1995 fiscal periods differ
from the "expected" rates because of reversals of a previously-
recorded deferred income tax valuation allowance.
Net Income Per Share
The number of shares and per-share amounts for the 1995 fiscal
periods have been adjusted to reflect a 15% stock dividend paid
on November 3, 1995.
Common Stock
On February 26, 1996, the Company's shareholders approved an
amendment to the Articles of Incorporation to increase the number
of authorized common shares from 5,000,000 to 20,000,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Corporate Strategies and Economic Factors
The Company provides permanent placement and contract temporary
staffing services for business and industry, specializing in the
placement of information technology, engineering, technical and
accounting personnel. For the nine months ended June 30, 1996,
the Company derived 70% of its revenues from permanent placements
and 30% of its revenues from contract services. As of June 30,
1996, the Company operated 29 offices located in major metropoli
tan and business centers in 12 states.
The demand for the Company's services has been strong in recent
years. For the three fiscal years ended September 30, 1995, the
Company's annual rate of revenue growth was 56% for contract
services and 10% for permanent placement services. Management
believes that this growth is attributable to three factors.
First, it specializes in the fast-growing information technology
field. Second, it fills a growing need in the workplace for
temporary help. And third, the Company offers its clients the
alternative of either temporary or full-time staffing assistance.
The Company's business is also affected by the U.S. economy and
national hiring levels. The last two years were characterized by
relatively low, but stable, economic growth and historically low
levels of unemployment. These economic conditions have
contributed to the growing demand for the Company's services.
Management expects that this growth trend will continue and that
contract services will become the greater portion of the
Company's overall business in the future. To accommodate this
growth, the Company opened six new employment offices during the
first nine months of fiscal 1996. Generally, the Company enters
into short-term leases for new locations, initially using shared
office facilities whenever possible; this approach minimizes
costs during the start-up period.
Results of Operations
For the nine months ended June 30, 1996, consolidated revenues
were $16,855,000, up $4,682,000 (38%) from last year's
$12,173,000. Permanent placement revenues increased $3,327,000
(39%), on 18% more placements and a 16% higher average placement
fee. Contract service revenues increased $1,355,000 (37%), due
to a 24% increase in billable hours and a 6% higher average
hourly billing rate.
The consolidated cost of services for the nine months ended June
30, 1996 was $12,182,000, up $2,842,000 (30%) from 1995. Agency
manager and consultant compensation increased 37%, and wages of
contract service workers increased 29%, as a result of the higher
volume of business this year. Payroll taxes and benefits
increased 29%, and advertising expenses increased 49%. All other
operating costs increased by 4%, which is net of a nonrecurring
gain of $144,000 that resulted from the negotiation of a new
corporate headquarters office lease during fiscal 1996. As a
result, the cost of services as a percent of service revenues
decreased 4.4 points, from 76.7% last year to 72.3% this year.
General and administrative expenses for the nine months ended
June 30, 1996 were $2,866,000, which was an $829,000 (41%)
increase from 1995. Administrative salaries and benefits
increased 49%, travel and personnel costs increased 81%; and all
other general and administrative expenses were up 11% for the
period.
There was a $710,000 provision for income taxes in the 1996
period, compared with a $95,000 provision last year. The
effective income tax rate for the 1995 period differs from the
statutory rate because of the reversal of a previously-recorded
deferred income tax valuation allowance.
Net income was $1,097,000, or $ .49 per share, in the nine months
ended June 30, 1996, a $396,000 improvement compared with net
income of $701,000, or $ .31 per share, for the same period last
year.
Financial Condition
During the nine months ended June 30, 1996, the Company's cash
and cash equivalents increased by $1,442,000 to a balance of
$4,667,000. Net income provided $1,097,000 during the period and
an increase in accrued payroll liabilities provided $954,000.
However, an increase in accounts receivable required $1,015,000.
As a result, the net cash provided by operating activities was
$1,040,000. During the period, the Company used $140,000 in
investing activities, primarily for the acquisition of property
and equipment. The issuance of common stock in connection with
stock option exercises provided $652,000, and $110,000 was used
for the payment of cash dividends. The Company's net working
capital was $3,821,000 as of June 30, 1996, compared with
$2,246,000 at September 30, 1995, and shareholders' equity was
$4,182,000 at June 30, 1996, compared with $2,543,000 last
September.
As of June 30, 1996, the Company had no debt outstanding, and it
had a $1,000,000 line of credit available for working capital
purposes. Management believes that existing resources are
adequate to meet the Company's current operating needs.
As of June 30, 1996, the Company had no commitments for the
acquisition of property and equipment. All of its facilities are
leased, and information about future minimum lease payments is
presented in the notes to consolidated financial statements
contained in the Company's annual report on Form 10-KSB for the
year ended September 30, 1995.
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
The following exhibit is filed as part of this report:
No. Description of Exhibit
27 Financial Data Schedule for the nine months ended June 30, 1996.
There were no reports on Form 8-K filed during the quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Registrant)
Date: August 13, 1996 By: /s/ Herbert F. Imhoff
Herbert F. Imhoff
Chairman of the Board
and President
Date: August 13, 1996 By: /s/ Kent M. Yauch
Kent M. Yauch
Chief Financial Officer
and Treasurer
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