<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MAY 31, 1995, OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO .
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Commission file number 0-11380
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STAFF BUILDERS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2650500
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1983 MARCUS AVENUE, LAKE SUCCESS, NEW YORK 11042
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(Address of principal executive offices) (Zip Code)
(516) 358-1000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
The number of shares of Common Stock outstanding on July 10, 1995 was
23,666,677 shares.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
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INDEX
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PAGE NO.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
May 31, 1995 and February 28, 1995 2
Condensed Statements of Consolidated
Income - Three months ended
May 31, 1995 and 1994 3
Condensed Statements of Consolidated Cash
Flows - Three months ended May 31, 1995
and 1994 4
Notes to Condensed Consolidated Financial
Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6-7
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STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MAY 31,
1995 FEBRUARY 28,
(UNAUDITED) 1995
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<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 4,746 $ 4,508
Accounts receivable, net of allowance
for doubtful accounts of $1,800 at May
31, 1995 and $1,750 at February 28, 1995 54,714 53,369
Deferred income tax benefits 1,313 1,303
Prepaid expenses and other current assets 1,682 1,954
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Total current assets 62,455 61,134
Fixed Assets, net of accumulated
depreciation of $3,017 at May 31,
1995 and $4,398 at February 28, 1995 5,969 5,726
Intangible Assets, net of accumulated
amortization of $5,908 at May 31, 1995
and $6,532 at February 28, 1995 30,183 30,149
Other Assets 3,715 3,624
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TOTAL $102,322 $100,633
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-------- --------
LIABILITIES:
Current Liabilities:
Accounts payable and accrued expenses $ 17,563 $ 17,757
Accrued payroll and related expenses 22,203 18,874
Current portion of long-term liabilities 1,370 1,267
Current income taxes payable 1,065 1,320
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Total current liabilities 42,201 39,218
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Amount Due Under Secured Revolving
Line of Credit 3,106 6,461
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Other Long-Term Liabilities 3,046 2,603
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STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 50,000,000
shares authorized; 23,438,925 and 22,937,049
shares issued at May 31, 1995 and February
28, 1995, respectively 234 229
Convertible preferred stock, Class A;
666 2/3 shares outstanding 1 1
Additional paid-in capital 72,047 71,828
Accumulated deficit (18,313) (19,707)
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Total stockholders' equity 53,969 52,351
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TOTAL $102,322 $100,633
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-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
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1995 1994
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<S> <C> <C>
REVENUES:
Service revenues $98,051 $72,166
Sales of franchises and fees, net 375 411
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Total revenues 98,426 72,577
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COSTS AND EXPENSES:
Operating costs 60,498 45,852
General and administrative expenses 34,344 24,273
Provision for doubtful accounts 620 600
Amortization of intangible assets 397 263
Interest expense 276 420
Other (income) expense, net (198) (234)
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Total costs and expenses 95,937 71,174
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INCOME BEFORE INCOME TAXES 2,489 1,403
PROVISION FOR INCOME TAXES 1,095 589
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NET INCOME $ 1,394 $ 814
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INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 1,394 $ 814
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WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Primary 25,222 23,103
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Fully diluted 25,239 23,123
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INCOME PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary $.06 $.04
---- ----
---- ----
Fully diluted $.06 $.04
---- ----
---- ----
</TABLE>
See notes to condensed consolidated financial statements.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
-------------------
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,394 $ 814
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 870 535
Allowance for doubtful accounts 50 100
Deferred income taxes (10) 67
Rent escalation (20) (46)
Change in operating assets and liabilities:
Accounts receivable (1,395) 4,898
Prepaid expenses and other current assets 272 348
Accounts payable and accrued expenses 3,376 241
Income taxes payable (255) (39)
Other assets (99) 52
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Net cash provided by operating activities 4,183 6,970
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses (425) (187)
Additions to fixed assets (260) (316)
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Net cash used in investing activities (685) (503)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of options and warrants 224 101
Decrease in borrowings under
revolving line of credit (3,355) (6,121)
Reduction in other long-term liabilities (129) (478)
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Net cash used in financing activities (3,260) (6,498)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 238 (31)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 4,508 7,330
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,746 $ 7,299
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SUPPLEMENTAL DATA:
Cash paid for:
Interest $ 275 $ 355
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------- -------
Income taxes, net $ 1,384 $ 594
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------- -------
Common stock issued for acquisition $ - $ 50
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------- -------
</TABLE>
See notes to condensed consolidated financial statements.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENTS - In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements contain all
adjustments (consisting of only normal and recurring accruals) necessary to
present fairly the financial position of the Company and its subsidiaries
as of May 31, 1995 and February 28, 1995 and the results of operations and
the cash flows for the three months ended May 31, 1995 and 1994. Certain
prior period amounts have been reclassified to conform with the May 1995
presentation.
The results for the three months ended May 31, 1995 and 1994 are not
necessarily indicative of the results for an entire year. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the Company's audited financial statements as of February
28, 1995 and for the year then ended.
2. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - Earnings per common and
common equivalent share were computed by dividing the earnings applicable
to common stockholders by the weighted average number of shares of common
stock and common stock equivalents, principally dilutive stock options and
warrants outstanding during the period.
The shares used in computing primary earnings per common and common
equivalent share were 25,222,302 shares and 23,102,963 shares for the three
months ended May 31, 1995 and 1994, respectively. The shares used in
computing fully diluted earnings per share were 25,239,164 and 23,123,237
for the three months ended May 31, 1995 and 1994, respectively.
3. PROVISION FOR INCOME TAXES - The provision for income taxes for the three
months ended May 31, 1995 and 1994 is based upon the Company's estimated
tax provision required for the full year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the Condensed Consolidated Financial Statements appearing in
Item 1.
RESULTS OF OPERATIONS
Total revenues increased by $25.8 million or 35.6% for the three months ended
May 31, 1995 ("the 1995 period") to $98.4 million from $72.6 million for the
three months ended May 31, 1994 ("the 1994 period"). This increase includes
$7.1 million of service revenue from an Atlanta, Georgia based provider of
medical staffing services acquired by the Company in July 1994. In addition to
the effect of this acquisition, the increase in revenues includes $7.7 million
from 20 franchise locations added since May 31, 1994 and an increase of $11.0
million or 15.2% from locations operating during the quarter ended May 31, 1994.
The Company receives payment for its services from several sources as indicated
in the following table.
<TABLE>
<CAPTION>
SERVICE REVENUES
THREE MONTHS ENDED
MAY 31,
-----------------
1995 1994
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<S> <C> <C>
Medicare ................................ 58.5% 58.2%
Medicaid and other local government
programs ............................... 18.1 22.3
Insurance and private payors ............ 12.7 15.4
Hospitals, nursing homes and
other health care institutions ......... 10.6 3.4
Other ................................... 0.1 0.7
----- -----
Total ................................... 100.0% 100.0%
----- -----
----- -----
</TABLE>
Operating costs were 61.7% and 63.5% of service revenues for the three months
ended May 31, 1995 and 1994, respectively. The decrease in operating costs as a
percentage of service revenues is primarily due to reduced costs for insurance.
General and administrative expenses increased by $10.1 million, or 41.5%, to
$34.3 million for the three months ended May 31, 1995 from $24.2 million for the
three months ended May 31, 1994. This increase is primarily due to the increase
in required administrative expenses to support the expansion within the
Company's Medicare operations. Included in the increase during the three month
period ended May 31, 1995 is $1.9 million incurred for the medical staffing
services business acquired by the Company in July 1994. These costs, expressed
as a percentage of service revenues, were 35.0% and 33.6% for the three months
ended May 31, 1995 and 1994, respectively.
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<PAGE>
Provision for doubtful accounts was approximately $600 thousand for each of the
three months ended May 31, 1995 and 1994. These costs, expressed as a
percentage of service revenues, declined from 0.8% to 0.6% for the three months
ended May 31, 1995 and 1994, respectively.
Interest expense declined to $276 thousand for the quarter ended May 31, 1995
from $420 thousand in the quarter ended May 31, 1994. The Company has a
revolving line of credit under which the average amount borrowed was $4.9
million and $9.5 million for the three months ended May 31, 1995 and 1994,
respectively. The average interest rate relating to these borrowings was 9.00%
and 7.12% for the three months ended May 31, 1995 and 1994, respectively.
The provision for income taxes increased to $1.1 million for the three months
ended May 31, 1995 as compared to $600 thousand for the three months ended May
31, 1994 primarily due to the increase in income before income taxes as well as
an increase in the effective income tax rate from 42% to 44%. See Note 3 -
Provision for Income Taxes.
Income before income taxes for the three months ended May 31, 1995 increased
approximately $1.1 million to $2.5 million compared to $1.4 million for the
three months ended May 31, 1994. Net income for the three months ended May 31,
1995 was $1.4 million as compared to $814 thousand for the three months ended
May 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a secured revolving credit facility which consists of a
revolving line of credit and an acquisition line of credit, under which it can
borrow up to an aggregate amount of $25 million. The credit facility expires on
July 31, 1997. As of May 31, 1995 and February 28, 1995, the amounts available
for borrowing under the credit facility were approximately $20.1 million and
$13.8 million, respectively. The acquisition line of credit provides for
borrowings up to $7.5 million without collateral to finance acquisitions made by
the Company, provided that the sum of all borrowings do not exceed $25 million.
At May 31, 1995, the Company borrowed $3.1 million under this facility as
compared to $6.5 million at February 28, 1995. The decrease in borrowings is
primarily due to the reduction in the amount of time that the Company's accounts
receivable are outstanding. Trade accounts receivable at May 31, 1995 and
February 28, 1995 were outstanding approximately 53 days and 54 days,
respectively.
At May 31, 1995, the Company's debt obligations due within the next twelve
months were $1.4 million.
The Company expects that its existing cash, cash provided from operations and
its banking facilities will be sufficient to meet its needs for at least the
next twelve months.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
Staff Builders, Inc.
Dated: July 12, 1995 By: /s/ Stephen Savitsky
--------------------------------
Stephen Savitsky
Chairman of the Board, President
and Chief Executive Officer
Dated: July 12, 1995 By: /s/ Gary Tighe
--------------------------------
Gary Tighe
Senior Vice President, Finance
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 4,746
<SECURITIES> 0
<RECEIVABLES> 56,514
<ALLOWANCES> (1,800)
<INVENTORY> 0
<CURRENT-ASSETS> 62,455
<PP&E> 8,986
<DEPRECIATION> (3,017)
<TOTAL-ASSETS> 102,322
<CURRENT-LIABILITIES> 42,201
<BONDS> 0
<COMMON> 234
0
1
<OTHER-SE> 53,734
<TOTAL-LIABILITY-AND-EQUITY> 102,322
<SALES> 0
<TOTAL-REVENUES> 98,426
<CGS> 0
<TOTAL-COSTS> 60,498
<OTHER-EXPENSES> 34,543
<LOSS-PROVISION> 620
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> 2,489
<INCOME-TAX> 1,095
<INCOME-CONTINUING> 1,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,394
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
