UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] Annual Report Under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the fiscal year ended September 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _______________ to
________________
Commission File Number: 1-5707
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Name of small business issuer in its charter)
Illinois 36-6097429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Tower Lane, Suite 2100, Oakbrook Terrace, IL 60181
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (630) 954-0400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Names of each exchange on which registered
Common Stock, no par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No __
Check if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the most recent fiscal year were $23,241,000.
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of November 1, 1996 was
$20,277,000. At that date, there were 2,651,796 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the General Employment Enterprises, Inc. Proxy
Statement for the 1997 annual meeting of shareholders are
incorporated by reference into Part III of this Form 10-KSB.
Transitional small business disclosure format: Yes ___ No X
PART I
Item 1. Description of Business
General
General Employment Enterprises, Inc. (the "Company") was
incorporated in the State of Illinois in 1962 and is the
successor to employment agencies doing business since 1893. The
Company operated its employment agencies as separate subsidiary
corporations and maintained their separate identities until 1985,
when the subsidiaries were merged into the parent corporation.
In 1987 the Company established Triad Personnel Services, Inc., a
wholly-owned subsidiary, incorporated in the State of Illinois.
The principal executive office of the Company is located at One
Tower Lane, Suite 2100, Oakbrook Terrace, Illinois.
Services Provided
The Company provides permanent placement employment services and
temporary contract staffing services. In recent years, the
Company has focused on professional staffing, particularly in the
areas of information technology, engineering and accounting.
The Company's permanent placement division places applicants into
regular, full-time jobs with client-employers. The Company
charges a fee for successful placements that is based on a
percentage of the applicant's projected annual salary.
The Company's contract services division places its professional
employees on temporary assignments, under contracts with client
companies. Contract workers are employees of the Company,
typically working at the client location and at the direction of
client personnel for periods of three months to one year. Fees
for these services are billed on an hourly basis.
Management believes that the combination of these two services
provides a strong marketing opportunity, because it offers
customers a variety of staffing alternatives that includes
permanent staffing, temporary staffing and a "try before you buy"
approach to hiring. In fiscal 1996, the Company derived 70% of
its revenues from permanent placement services and 30% from
contract services.
Marketing and Recruiting
The Company markets its services using the trade names General
Employment, Omni One, Business Management Personnel and Triad
Personnel Services. As of September 30, 1996, it operated 29
offices located in downtown or suburban areas of major U.S.
cities. Twenty-seven of the offices provided both permanent
placement and contract services, and two of the offices
specialized in contract services only. The offices were
concentrated in California (8) and Illinois (7), with two offices
each in Pennsylvania, Arizona, Indiana and Texas and one office
each in Florida, Georgia, Massachusetts, Michigan, North Carolina
and Ohio.
The Company markets its services to prospective clients primarily
through telephone marketing by its employment consultants and
through mailing of employment bulletins.
Prospective applicants are recruited through telephone contact by
the Company's employment consultants and through newspaper
advertising. The Company uses a proprietary computer program to
assist with tracking applicants and matching them with job
openings. The Company screens and interviews all applicants who
are presented to its clients.
No single client accounts for more than 3% of the Company's
revenues.
Competition
The permanent placement industry is characterized by a large
number of highly competitive sole-proprietorship operations. The
contract services industry is highly competitive and consists of
local, regional and national competitors.
Because the Company operates primarily with professional staffing
positions, it competes by providing service through attention to
quality and service. This is done by providing quality
applicants who are well matched for the open position, by
responding quickly to client requests and by establishing offices
in convenient locations. Pricing is considered to be secondary
to service as a competitive factor.
Geographic diversity helps the Company to balance local or
regional business cycles. Multiple offices in the Chicago, Los
Angeles, San Francisco, Philadelphia, Indianapolis, and Phoenix
markets help to provide better client services in those areas
through convenient office locations and the sharing of
assignments.
Regulation
Employment agency service companies are regulated by four of the
states in which the Company operates. Licenses are issued on a
year-to-year basis. As of September 30, 1996, the Company held
current licenses for all of the offices that were required to
have them.
Employees
As of September 30, 1996, the Company had approximately 240
regular employees and 120 contract service employees.
Item 2. Description of Properties
The Company's policy is to lease commercial office space for all
of its offices. The Company's headquarters are located in a
modern 31-story building in Oakbrook Terrace, Illinois. The
Company leases 12,900 square feet of space at this location,
under a lease that will expire in January 2006.
The Company's staffing offices are located in downtown
metropolitan and suburban business centers conducive to the
Company's business. Generally, the Company enters into six-month
leases for new locations, using shared office facilities whenever
possible. Established offices are operated from leased space
ranging from 1,000 to 2,000 square feet, generally for periods of
one to five years, with cancellation clauses after certain
periods of occupancy. Management believes that existing
facilities are adequate for the Company's current needs.
The Company owns most of the furniture and office equipment which
is used at its headquarters and employment offices, and leases
some office equipment. All of the furniture and office equipment
is considered to be in good condition and is adequately covered
by insurance.
Additional lease information is set forth in "Lease Obligations"
in the notes to consolidated financial statements.
Item 3. Legal Proceedings
As of September 30, 1996, there were no material legal
proceedings pending against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the fourth quarter of the 1996 fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Information regarding this item is contained in the Company's
financial statements presented in this report.
Item 6. 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 professional information technology, engineering,
technical and accounting personnel. For the year ended September
30, 1996, the Company derived 70% of its revenues from permanent
placements and 30% of its revenues from contract services. As of
September 30, 1996, the Company operated 29 offices located in
major metropolitan 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, 1996, the
Company's average annual rate of revenue growth was 43% for
contract services and 24% for permanent placement services.
Management believes that this growth is attributable to three
factors. First, the Company 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 help generate this
growth, the Company opened six new branch offices during fiscal
1996 and has plans to open an additional six offices during
fiscal 1997. 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.
Fiscal 1996 Results of Operations
For the year ended September 30, 1996, consolidated revenues were
$23,241,000, up $6,497,000 (39%) from last year's $16,744,000.
Permanent placement revenues increased $4,721,000 (41%), due to
an 18% increase in the number of placements and a 17% higher
average placement fee. Contract service revenues increased
$1,776,000 (35%) primarily due to a 20% increase in billable
hours and a 7% higher average hourly billing rate. The higher
volume of business in 1996 is due to a combination of greater
productivity in established offices and the opening of six new
offices during the year.
The consolidated cost of services for the year ended September
30, 1996 was $16,717,000, up $4,065,000 (32%) from $12,652,000 in
1995. Branch manager and consultant compensation increased 41%,
and the payroll for contract service workers increased 26%, as a
result of the higher volume of business this year. Payroll taxes
and benefits increased 25%, and recruitment advertising expenses
increased 50%. All other operating costs increased by 10%, 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 3.7 points, from 75.6% last year to
71.9% this year.
General and administrative expenses for the year ended September
30, 1996 were $3,813,000, which was a $939,000 (33%) increase
from 1995. Administrative compensation increased 43%; travel and
personnel costs increased 44%; and all other general and
administrative expenses were up 3% for the period.
Because of the improved profit margins, the Company's pretax
income increased by $1,493,000 (123%) for the year, from
$1,218,000 in 1995 to $2,711,000 in 1996.
There was a $1,070,000 provision for income taxes in fiscal 1996,
compared with a $150,000 provision for income taxes last year.
The effective income tax rate for 1995 differed from the
statutory rate because of the reversal of a previously-recorded
deferred income tax valuation allowance.
Net income was $1,641,000, or $ .63 per share, for the year ended
September 30, 1996, a $573,000 (54%) improvement compared with
net income of $1,068,000, or $ .42 per share, last year.
Fiscal 1995 Results of Operations
For the year ended September 30, 1995, consolidated revenues were
$16,744,000, up $2,548,000 (18%) from $14,196,000 the prior year.
Permanent placement revenues increased $1,453,000 (14%), due to a
19% higher average placement fee and 3% fewer placements.
Contract service revenues increased $1,095,000 (27%) primarily
due to a 27% higher average hourly billing rate. The higher fees
and billing rates in 1995 were the result of placing more highly-
compensated individuals than the prior year.
The consolidated cost of services for the year ended September
30, 1995 was $12,652,000, up $1,596,000 (14%) from $11,056,000 in
1994. Branch manager and consultant compensation increased 14%,
and the payroll for contract service workers increased 30%, as a
result of the higher volume of business. Payroll taxes and
benefits increased 13%; recruitment advertising expenses
increased 20%; and all other operating costs decreased 4% from
the prior year. As a result, the cost of services as a percent
of service revenues decreased 2.3 points, from 77.9% in 1994 to
75.6% in 1995.
General and administrative expenses for the year ended September
30, 1995 were $2,874,000, a $397,000 (16%) increase from 1994.
There was a $150,000 provision for income taxes in fiscal 1995,
and there was no provision for income taxes in fiscal 1994. The
effective tax rates differed from statutory tax rates because of
reversals of a previously-recorded deferred income tax valuation
allowance.
Net income was $1,068,000, or $.42 per share, for the year ended
September 30, 1995, a $405,000 improvement compared with net
income of $663,000, or $ .26 per share in 1994.
Financial Condition
During the year ended September 30, 1996, the Company's cash and
cash equivalents increased by $2,839,000 to a balance of
$6,064,000. Net income provided $1,641,000 during the year, and
an increase in accrued payroll liabilities provided $1,341,000.
However, an increase in accounts receivable required $886,000.
As a result, the net cash provided by operating activities was
$2,473,000. During the year, the Company used $263,000 in
investing activities, primarily for the acquisition of property
and equipment. The issuance of common stock in connection with
stock option exercises provided $739,000, and $110,000 was used
for the payment of a cash dividend. The Company's net working
capital was $4,410,000 as of September 30, 1996, compared with
$2,246,000 at September 30, 1995, and shareholders' equity was
$4,806,000 at September 30, 1996, compared with $2,543,000 last
September.
As of September 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 September 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.
Item 7. Financial Statements
The Company's financial statements are presented in this report.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no changes in or disagreements with the Company's
independent accountants during the two most recent fiscal years.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Information concerning directors of the registrant is set forth
in the registrant's Proxy Statement for the annual meeting of
shareholders under the caption "Election of Directors" and is
incorporated herein by reference.
The executive officers and key employees of the Company, and
their ages as of September 30, 1996, are as follows:
Name Age Position
Herbert F. Imhoff 70 Chairman of the Board and President
Gregory Chrisos 40 Vice President - Triad Personnel Services, Inc.
Nancy C. Frohnmaier 52 Vice President and Corporate Secretary
Herbert F.
Imhoff, Jr. 46 Executive Vice President and General Counsel
Marilyn L. White 46 Vice President, Permanent Placement Operations
Kent M. Yauch 49 Chief Financial Officer and Treasurer
Herbert F. Imhoff has been Chairman of the Board since 1968 and
President of the Company since 1964. Gregory Chrisos was named
Vice President of Triad on October 1, 1996 and prior to that
served as branch manager of the Company's Woburn, Massachusetts
office since 1990. Nancy C. Frohnmaier has been Vice President
since February 1995 and Corporate Secretary since 1985. Herbert
F. Imhoff, Jr. has been Executive Vice President since 1986 and
the Company's General Counsel since 1982. Marilyn L. White was
elected Vice President in August of 1996; prior to that she
served in numerous management capacities, most recently as
General Manager of the Company's Permanent Placement Division.
Kent M. Yauch has been Treasurer of the Company since 1991 and
was named Chief Financial Officer in August of 1996.
Herbert F. Imhoff, Jr. is the son of Herbert F. Imhoff.
Information concerning compliance with Section 16(a) of the
Exchange Act is set forth in the registrant's Proxy Statement for
the annual meeting of shareholders under the caption "Compliance
with Section 16(a) of the Exchange Act," and is incorporated
herein by reference.
Item 10. Executive Compensation
Information concerning executive compensation is set forth in the
registrant's Proxy Statement for the annual meeting of
shareholders under the caption "Compensation of Executive
Officers," and is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Information concerning security ownership of certain beneficial
owners and management is set forth in the registrant's Proxy
Statement for the annual meeting of shareholders under the
caption "Security Ownership of Certain Beneficial Owners and
Management," and is incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
There have been no reportable transactions during the last two
fiscal years.
PART IV
Item 13. Exhibits and Reports on Form 8-K
Reference is made to "Exhibit Index" for a list of exhibits filed
as a part of this report.
There were no reports filed on Form 8-K during the quarter ended
September 30, 1996.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
General Employment Enterprises, Inc.
Oakbrook Terrace, Illinois
We have audited the accompanying consolidated balance sheets of
General Employment Enterprises, Inc. and subsidiary as of
September 30, 1996 and 1995, and the related consolidated
statements of income and cash flows for each of the three years
in the period ended September 30, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of General Employment Enterprises, Inc. and
subsidiary at September 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
November 7, 1996
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
As of September 30
(In Thousands) 1996 1995
ASSETS
Current assets:
Cash and cash equivalents $6,064 $3,225
Accounts receivable, less allowances
(1996--$341; 1995--$290) 2,746 1,860
Total current assets 8,810 5,085
Property and equipment:
Furniture, fixtures and equipment 2,588 2,473
Accumulated depreciation (2,227) (2,141)
Net property and equipment 361 332
Other assets:
Deferred income taxes 179 259
Other assets 231 149
Total assets $9,581 $5,825
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 386 $ 238
Accrued compensation and payroll taxes 3,510 2,169
Accrued income taxes 401 227
Other current liabilities 103 205
Total current liabilities 4,400 2,839
Long-term obligations:
Deferred rent 23 96
Retirement benefits 352 347
Shareholders' equity:
Common stock, no-par value; authorized --
20,000 shares; issued and outstanding --
2,652 shares in 1996 and
2,196 shares in 1995 27 22
Capital in excess of stated value of shares 4,228 3,494
Retained earnings (accumulated deficit) 551 (973)
Total shareholders' equity 4,806 2,543
Total liabilities and shareholders' equity $9,581 $5,825
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF INCOME
Year Ended September 30
(In Thousands, Except Per Share) 1996 1995 1994
Net revenues:
Permanent placement services $16,339 $11,618 $10,165
Contract services 6,902 5,126 4,031
Net revenues 23,241 16,744 14,196
Costs and expenses:
Cost of services 16,717 12,652 11,056
General and administrative 3,813 2,874 2,477
Income before income taxes 2,711 1,218 663
Provision for income taxes 1,070 150 --
Net income $ 1,641 $ 1,068 $ 663
Net income per share $ .63 $ .42 $ .26
Average number of common shares 2,596 2,545 2,543
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30
(In Thousands) 1996 1995 1994
Operating activities:
Net income $1,641 $ 1,068 $ 663
Depreciation expense 141 162 170
Deferred income taxes 80 (245) (14)
Deferred rent and other items (64) (109) (39)
Changes in current assets and
current liabilities -
Accounts receivable (886) (148) (659)
Accrued compensation and payroll taxes 1,341 390 833
Accrued income taxes 174 190 22
Other current liabilities 46 (78) 20
Net cash provided by operating
activities 2,473 1,230 996
Investing activities:
Acquisition of property and equipment (160) (122) (104)
Other, net (103) (51) ( 34)
Net cash used by investing activities (263) (173) (138)
Financing activities:
Exercises of stock options 739 325 --
Cash dividend declared (110) -- --
Net cash provided by financing activities 629 325 --
Increase in cash and cash equivalents 2,839 1,382 858
Cash and cash equivalents at beginning
of year 3,225 1,843 985
Cash and cash equivalents at end
of year $6,064 $3,225 $1,843
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Year Ended September 30
(In Thousands) 1996 1995 1994
Common shares outstanding:
Number at beginning of year 2,196 1,830 1,592
Stock dividend declared 346 286 238
Exercises of stock options 110 80 --
Number at end of year 2,652 2,196 1,830
Common stock:
Balance at beginning of year $ 22 $ 18 $ 16
Stock dividend declared 4 3 2
Exercises of stock options 1 1 --
Balance at end of year $ 27 $ 22 $ 18
Capital in excess of stated value:
Balance at beginning of year $3,494 $3,173 $3,175
Stock dividend declared (4) (3) (2)
Exercises of stock options 738 324 --
Balance at end of year $4,228 $3,494 $3,173
Retained earnings (accumulated deficit):
Balance at beginning of year $ (973)$(2,038)$(2,697)
Net income 1,641 1,068 663
Cash dividend declared (110) -- --
Stock dividend declared (7) (3) (4)
Balance at end of year $ 551 $ (973)$(2,038)
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company
General Employment Enterprises, Inc. (the "Company") and its
wholly-owned subsidiary, Triad Personnel Services, Inc., are
engaged in providing employment services through a network of
branch offices located in major metropolitan areas throughout the
United States. The Company's services include placing
individuals with client-employers on either a permanent or
temporary basis.
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts and
transactions of the Company and its wholly-owned subsidiary. All
significant intercompany accounts and transactions are eliminated
in consolidation.
Estimates and Assumptions
Preparing financial statements in accordance with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported.
Actual results could differ from those estimates.
Revenues from Services
Placement fees are recognized as income at the time applicants
accept employment. Provision is made for estimated losses in
realization, principally due to applicants not remaining in
employment for a guarantee period. Contract service revenues are
recognized when work is performed.
Income Taxes
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of
assets and liabilities, and are measured using the enacted tax
rates and laws that will be in effect when the differences are
expected to reverse.
Net Income Per Share
Net income per share is based on the average number of common
shares and dilutive stock option shares outstanding.
Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents. All cash equivalents are classified as available
for sale and are recorded at fair value. Realized and unrealized
gains and losses are not significant.
The investment portfolio consists of U.S. government agency and
other investment grade securities.
Property and Equipment
Furniture, fixtures and equipment are stated at cost. The
Company provides for depreciation on a straight-line basis over
estimated useful lives of three to ten years.
Deferred Rent
Under the terms of certain office leases, the Company makes no
rent payments or reduced rent payments during the initial portion
of the lease periods. In these cases, the Company recognizes
rent expense ratably over the life of the lease, and the excess
of rent expense over rent payments during these initial periods
is recorded as a liability on the balance sheet.
Stock Options
The Company accounts for stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, there is no compensation
expense to the Company when stock options are granted at prices
equal to the fair market value at the date of grant. Proceeds on
exercises of stock options and the associated income tax benefits
are credited to shareholders' equity when received.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation". Under the provisions of SFAS 123, companies
can elect either to account for stock-based compensation plans
using a fair-value-based method, or to continue measuring
compensation expense for those plans using the method prescribed
in APB 25 and to make pro forma disclosures of net income and
earnings per share as if the fair-value-based method of
accounting had been applied.
The Company anticipates continuing to account for stock-based
compensation using the APB 25 method, and the pro forma
disclosures required by SFAS 123 will be reflected in the
Company's 1997 consolidated financial statements.
Income Taxes
The components of the provision for income taxes are as follows:
(In Thousands) 1996 1995 1994
Current tax provision $ 990 $ 395 $ 14
Deferred taxes related to:
Temporary differences 87 89 90
Loss carryforwards 4 34 190
Valuation allowance (11) (368) (294)
Deferred tax provision (credit) 80 (245) ( 14)
Provision for income taxes $1,070 $ 150 $ --
The differences between income taxes calculated at the 34%
statutory U.S. federal income tax rate and the Company's
provision for income taxes are as follows:
(In Thousands) 1996 1995 1994
Income tax at statutory
federal tax rate $ 922 $ 414 $ 225
State income taxes, less
federal benefit 125 -- --
Reduction of valuation allowance
related to federal tax -- (272) (229)
Other 23 8 4
Provision for income taxes $1,070 $ 150 $ --
The net asset balance of deferred income taxes as of September 30
related to the following temporary differences:
(In Thousands) 1996 1995
Retirement benefits $ 134 $ 134
Accrued vacation 69 52
Deferred rent 11 65
Other (35) 8
Net deferred tax asset $ 179 $ 259
The Company made income tax payments of $431,000 in 1996 and
$32,000 in 1995.
The income tax benefit resulting from exercises of stock options
reduced income taxes payable and increased shareholders' equity
by $385,000 in 1996 and $168,000 in 1995.
Line of Credit
The Company has a loan agreement with a bank, renewable annually,
that makes a $1,000,000 line of credit available to the Company
for working capital purposes. Under the terms of the agreement,
borrowings would be secured by accounts receivable and would bear
interest at the prime rate. There were no borrowings outstanding
under the line of credit as of September 30, 1996 and 1995.
Lease Obligations
The Company leases space for all of its 29 branch offices, which
are located either in downtown or suburban metropolitan business
centers, and space for its corporate headquarters. The
employment offices are generally leased over periods from six
months to five years. Certain lease agreements provide for
increased rental payments contingent upon future increases in
real estate taxes, building maintenance costs and the cost of
living index.
In February 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.
Rent expense was $933,000 in 1996, $1,028,000 in 1995 and
$1,065,000 in 1994.
As of September 30, 1996, future minimum lease payments
(including deferred rent payments) under lease agreements having
initial terms in excess of one year were: 1997 - $896,000, 1998 -
$742,000, 1999 - $634,000, 2000 - $536,000, 2001 - $440,000, and
beyond 2001 - $2,112,000.
Retirement Benefits
The Company has a 401(k) retirement plan in which all full-time
employees may participate after one year of service. Under the
plan, eligible participants may contribute a portion of their
earnings to a trust, and the Company makes matching
contributions, subject to certain limitations. The Company also
has agreements with an officer and a retiree to provide defined
benefits at the individual's retirement, death, or termination.
The Company's accumulated obligation under these defined benefit
arrangements was $419,000 as of September 30, 1996 and $429,000
as of September 30, 1995, all of which was vested. These
benefits are unfunded, and the Company has recorded a liability
for the present value of the obligations at a discount rate of
7.25% in 1996 and 7.5% in 1995. The total cost of both
retirement plans was $84,000 in 1996, $43,000 in 1995 and $60,000
in 1994.
Preferred Stock
As of September 30, 1996 there were 100,000 shares of preferred
stock authorized, including 50,000 shares that were designated as
Series A Junior Participating Preferred Stock. The Series A
shares are reserved for issuance pursuant to the Company's share
purchase rights plan. None of the preferred shares have been
issued.
Common Stock
The Company declared 15% stock dividends in September 1996, 1995
and 1994. All per share amounts have been adjusted to reflect
the dividends.
The Company declared a special cash dividend of $ .04 per share
on its common stock in November 1995.
Stock Options
Under the Company's 1995 Stock Option Plan, the Stock Option
Committee of the Board of Directors has the authority to grant up
to 100,000 shares (subject to adjustment) of incentive or
nonstatutory stock options to officers and employees of the
Company. The option prices, vesting conditions and exercise
periods (up to ten years) are determined by the Committee at the
date of grant.
Under the Company's Stock Option Plan approved in 1992, options
on 140,000 shares (subject to adjustment) were granted to
directors and key employees of the Company.
Pursuant to anti-dilution provisions of the stock option plans,
the number of shares and the option prices per share have been
adjusted for the effect of the Company's stock dividends. A
summary of outstanding stock options is as follows:
(In Thousands, Except Per Share) 1996 1995 1994
Number of shares outstanding:
Beginning of year 117 210 210
Granted 49 13 --
Exercised (127) (106) --
End of year 39 117 210
Weighted average option prices per share:
Granted during the year $5.96 $4.54 $ --
Exercised during the year 2.78 1.48 --
Outstanding at end of year 3.89 1.83 1.48
All outstanding stock options as of September 30,1996 were at
option prices equal to the fair market value at the date of grant
and expire ten years from the date of grant. As of September 30,
1996, 26,000 of the outstanding options were exercisable, and
there were 70,000 additional shares available for grant.
Share Purchase Rights Plan
The Company adopted a share purchase rights plan in 1990 and
declared a dividend of one Preferred Share Purchase Right
("Right") on each outstanding common share. Each Right may be
exercised to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock (the economic equivalent of
one common share) at an exercise price of $12 (which may be
adjusted under certain circumstances). The Rights become
exercisable (and separate from the common shares) when specified
events occur, including the acquisition after December 31, 1989
of 5% or more of the outstanding common shares by a person or
group ("Acquiring Person") that then owns 10% or more of the
outstanding common shares. Upon the occurrence of such an
acquisition (other than pursuant to a tender offer for all of the
outstanding common shares at a price and on other terms deemed
fair and in the best interests of the Company and its
shareholders by a majority of the continuing directors) or if the
Company is acquired in a merger or other business combination
transaction, each Right will entitle the holder (other than an
Acquiring Person) to purchase at the current exercise price,
stock of the Company or the acquiring company having a market
value of twice the exercise price. Each Right is nonvoting,
expires on February 22, 2000 and may be redeemed by the Company
at a price of $ .01 under certain circumstances.
Employment Contracts
The Company has agreements with two of its officers and a
separate plan covering agency managers and key corporate
employees that would become effective if the employment of any of
these officers or employees should terminate under certain
conditions following a change in control of the Company. Under
these circumstances, the Company would be obligated to make lump
sum payments to the two officers equal to two times their annual
salary, to make lump sum payments to covered employees ranging
from $10,000 to $30,000, and to provide continued benefits under
the Company's welfare plans for two years.
Quarterly Data (Unaudited)
Financial and stock market data for each of the quarters of the
Company's last two fiscal years are summarized below:
First Second Third Fourth
(In Thousands, Except Per Share)Quarter Quarter Quarter Quarter
Fiscal 1996:
Net revenues $ 4,997 $ 5,804 $ 6,054 $ 6,386
Cost of services 3,635 4,116 4,431 4,535
General and administrative
expenses 848 1,022 996 947
Income before income taxes 514 666 627 904
Provision for income taxes 200 265 245 360
Net income $ 314 $ 401 $ 382 $ 544
Net income per share $ 0.12 $ 0.15 $ 0.15 $ 0.20
Market prices per share:
High 6.85 7.99 16.20 12.07
Low 4.29 4.46 7.61 7.61
Close 4.57 7.72 9.78 11.30
Fiscal 1995:
Net revenues $ 3,778 $ 3,933 $ 4,462 $ 4,571
Cost of services 2,896 3,107 3,337 3,312
General and administrative
expenses 656 657 724 837
Income before income taxes 226 169 401 422
Provision for income taxes 10 10 75 55
Net income $ 216 $ 159 $ 326 $ 367
Net income per share $ 0.08 $ 0.06 $ 0.13 $ 0.14
Market prices per share:
High 8.79 7.66 6.99 6.52
Low 4.16 4.16 3.88 4.44
Close 6.33 5.48 4.49 5.86
The second quarter of fiscal 1996 includes a $144,000 pretax gain
on lease termination.
The Company's common stock is traded on the American Stock
Exchange under the trading symbol JOB. There were 1,064 holders
of record as of November 1, 1996.
EXHIBIT INDEX
No. Description of Exhibit
3(a) Articles of Incorporation and amendments thereto.
Incorporated by reference from Exhibit 3 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended March
31, 1996, File No. 1-5707.
3(b) By-Laws, as amended November 21, 1995. Incorporated by
reference from Exhibit 3 to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended December 31,
1995, File No. 1-5707.
10(a)Amended and Restated Defined Benefit Deferred Compensation
and Salary Continuation Agreement with Herbert F. Imhoff.
Incorporated by reference from Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990, File No. 1-5707.
10(b)Defined Benefit Deferred Compensation and Salary
Continuation Agreement with John A. Stephenson.
Incorporated by reference from Exhibit 10(g) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30 1980, File No. 1-5707.
10(c)Employment contract with Herbert F. Imhoff.
Incorporated by reference from Exhibit 10(i) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1981, File No. 1-5707.
10(d)Senior Executive Agreement with Herbert F. Imhoff
dated May 22, 1990. Incorporated by reference from Exhibit
10(e) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990, File No. 1-5707.
10(e)Senior Executive Agreement with Herbert F. Imhoff,
Jr. dated May 22, 1990. Incorporated by reference from
Exhibit 10(f) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1990, File No. 1-5707.
10(f)Key Manager Plan, adopted May 22, 1990.
Incorporated by reference from Exhibit 10(h) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1990, File No. 1-5707.
10(g)Rights Agreement with The First National Bank of Chicago as
Rights Agent, dated as of February 12, 1990. Incorporated
by reference from Exhibit (1) of Registration on Form 8-A
dated February 19, 1990.
10(h)Settlement Agreement with Leonard Chavin dated as of
September 27, 1991. Incorporated by reference from Exhibit
10(j) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1991, File No. 1-5707.
10(i)First Amendment to Rights Agreement with The First National
Bank of Chicago as Rights Agent, dated as of September 27,
1991. Incorporated by reference from Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1991, File No. 1-5707.
10(j)Agreement with Sheldon Brottman dated October 3, 1991.
Incorporated by reference from Exhibit 10(l) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1991, File No. 1-5707.
10(k)General Employment Enterprises, Inc. Stock
Option Plan. Incorporated by reference from Exhibit 4.1 to
the Registrant's Form S-8 Registration Statement dated March
3, 1992, Registration No. 33-46124.
10(l)Agreement with Leonard and Marlene Chavin dated as of
October 1, 1993. Incorporated by reference from Exhibit
10(m) to the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended September 30,1993, File No. 1-5707.
10(m)General Employment Enterprises, Inc. 1995
Stock Option Plan. Incorporated by reference from Exhibit
4.1 to the Registrant's Form S-8 Registration Statement
dated April 25, 1995, Registration No. 33-91550.
10(n)Resolution of the Board of Directors, adopted November 21,
1995, establishing a Senior Executive Bonus Pool for fiscal
1996. Incorporated by reference from Exhibit 10 of the
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995, File No. 1-5707.
23 Consent of Independent Auditors.
SIGNATURES
In accordance with Section 13 or 15(d) 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: November 18, 1996 By: /s/ Herbert F. Imhoff
Herbert F. Imhoff
Chairman of the Board and President
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Date: November 18, 1996 By: /s/ Herbert F. Imhoff
Herbert F. Imhoff
Chairman of the Board and President
Principal executive officer
Date: November 18, 1996 By: /s/ Herbert F. Imhoff, Jr.
Herbert F. Imhoff, Jr.
Executive Vice President and Director
Date: November 18, 1996 By: /s/ Kent M. Yauch
Kent M. Yauch
Chief Financial Officer and Treasurer
Principal financial and accounting officer
Date: November 18, 1996 By: /s/ Sheldon Brottman
Sheldon Brottman, Director
Date: November 18, 1996 By: /s/ Leonard Chavin
Leonard Chavin, Director
Date: November 18, 1996 By: /s/ Delain G. Danehey
Delain G. Danehey, Director
Date: November 18, 1996 By: /s/ Walter K. Kerwin, Jr.
Walter T. Kerwin, Jr., Director
Date: November 18, 1996 By: /s/ Howard S. Wilcox
Howard S. Wilcox, Director
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-91550 and No. 33-46124) pertaining to
the General Employment Enterprises, Inc. Stock Option Plans of
our report dated November 7, 1996, with respect to the
consolidated financial statements of General Employment
Enterprises, Inc. and subsidiary included in the Annual Report
(Form 10-KSB) for the year ended September 30, 1996.
/s/ Ernst & Young LLP
November 18, 1996
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