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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- - ----- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
| X | EXCHANGE ACT OF 1934
- - -----
For the quarterly period ended July 3, 1994
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Commission File No. 0-3532
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THE OLSTEN CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-2610512
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Merrick Avenue, Westbury, New York 11590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 832-8200
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Not Applicable
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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
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 5, 1994
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Common Stock, $ .10 par value 31,954,604 shares
Class B Common Stock, $.10 par value 9,512,355 shares
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INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets -
July 3, 1994 (Unaudited) and January 2, 1994 2
Consolidated Statements of Income (Unaudited) -
Quarters and Six Months Ended July 3, 1994 and
July 4, 1993, respectively 3
Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended
July 3, 1994 and July 4, 1993 4
Notes to Consolidated Financial Statements
(Unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 6-7
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 8
Item 6. Exhibits and Reports on Form 8-K. 9
SIGNATURES 10
1
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
---------------------
The Olsten Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
ASSETS July 3, 1994 January 2, 1994
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(Unaudited)
CURRENT ASSETS:
Cash $ 56,732 $ 24,709
Receivables, net 336,189 325,122
Other current assets 52,189 56,807
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Total current assets 445,110 406,638
FIXED ASSETS, NET 62,805 60,185
INTANGIBLES, NET 201,597 204,670
OTHER ASSETS 13,095 18,601
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$722,607 $690,094
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 97,674 $ 74,251
Insurance costs 48,099 45,730
Payroll and related taxes 23,988 31,143
Accounts payable 10,045 12,597
Current portion of long-term debt (Note 3) 1,734 1,886
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Total current liabilities 181,540 165,607
LONG-TERM DEBT (Note 3) 136,000 176,057
OTHER LIABILITIES 55,813 44,110
SHAREHOLDERS' EQUITY:
Common stock $.10 par value; authorized
110,000,000 shares; issued 31,920,842 and
29,976,240 shares, respectively 3,192 2,998
Class B common stock $.10 par value;
authorized 50,000,000 shares; issued
9,533,722 and 10,482,514 shares,
respectively 953 1,048
Additional paid-in capital 230,494 211,331
Retained earnings 116,110 90,280
Cumulative translation adjustment (1,495) (1,337)
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Total shareholders' equity 349,254 304,320
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$722,607 $690,094
========= ========
See notes to consolidated financial statements.
2
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The Olsten Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands, except share amounts)
(Unaudited)
Second Quarter Ended Six Months Ended
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July 3, July 4, July 3, July 4,
1994 1993 1994 1993
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Service sales, franchise fees
and other income $562,922 $538,970 $1,100,405 $1,054,319
Cost of services sold 399,316 372,039 774,849 725,204
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Gross profit 163,606 166,931 325,556 329,115
Selling, general and
administrative expenses 133,192 143,260 267,907 282,724
Interest expense, net (Note 3) 2,109 4,950 4,264 9,136
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Income before income taxes 28,305 18,721 53,385 37,255
Income taxes 11,901 7,936 22,635 16,123
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Net income $ 16,404 $ 10,785 $ 30,750 $ 21,132
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SHARE INFORMATION:
Net income $ .39 $ .27 $ .74 $ .53
======== ======== ========== ==========
Weighted average shares 41,981 40,157 41,720 39,672
======== ======== ========== ==========
See notes to consolidated financial statements.
3
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The Olsten Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
----------------------
July 3, 1994 July 4, 1993
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OPERATING ACTIVITIES:
Net income $ 30,750 $ 21,132
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,127 13,485
Deferred income taxes 4,365 302
Changes in assets and liabilities:
Accounts receivable and prepaid expenses (1,692) (29,653)
Current liabilities 15,933 10,078
Other, net 6,679 (1,073)
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NET CASH PROVIDED BY OPERATIONS 68,162 14,271
INVESTING ACTIVITIES:
Purchases of fixed assets (10,398) (12,000)
Acquisitions of businesses (2,018) (1,363)
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NET CASH USED IN INVESTING ACTIVITIES (12,416) (13,363)
FINANCING ACTIVITIES:
Net proceeds from issuance of convertible
debentures -- 122,114
Net repayments of line of credit
agreements (23,000) (3,250)
Cash dividends (4,920) (3,204)
Issuances of common stock under stock plans 4,197 1,588
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NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (23,723) 117,248
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NET INCREASE IN CASH 32,023 118,156
CASH AT BEGINNING OF PERIOD 24,709 33,297
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CASH AT END OF PERIOD $ 56,732 $151,453
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See notes to consolidated financial statements.
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The Olsten Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
1. Accounting Policies
--------------------
The consolidated financial statements have been prepared by The Olsten
Corporation (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission and, in the opinion of
management, include all adjustments necessary for a fair presentation
of results of operations, financial position and cash flows for each
period presented.
2. Merger with Lifetime Corporation ("Lifetime")
---------------------------------------------
On July 30, 1993, Lifetime merged into the Company. The merger was
accounted for as a pooling of interests and, accordingly, the
consolidated financial statements of the Company were restated for all
periods prior to the merger to combine the accounts and operations of
the Company and Lifetime.
3. Long-Term Debt
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On April 12, 1994, the Company called for redemption all $14 million of
its 11.2% convertible senior subordinated notes, representing the last
of the high coupon debt assumed in the Lifetime merger. At the option
of the note holders, all $14 million has been converted into 636,109
shares of Class B common stock.
In April 1994 and June 1994, the Company paid down $9 million and
$11 million, respectively, of outstanding debt under its revolving credit
agreement.
Interest expense, net, consists of interest on long-term debt for the
quarter of $2.3 million in 1994 and $6.0 million in 1993 offset by
interest income from investments of $145,000 and $1.1 million,
respectively. Interest expense, net, for the six months was $4.8 million
reduced by interest income of $531,000 in 1994 and $10.6 million reduced by
interest income of $1.5 million in 1993.
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Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations.
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Results of Operations
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Net income for the second quarter increased 52.1% to $16.4 million, or
$.39 per share, compared to $10.8 million or $.27 per share from the second
quarter of the prior year. Net income for the first six months of 1994,
was $30.8 million, or $.74 per share, a 45.5% increase over the $21.1 million
or $.53 per share reported in 1993. The increases over 1993 resulted from
increased revenues in Staffing Services as clients looked to Olsten for
flexible staffing alternatives along with operating efficiencies resulting
from the integration of the Olsten Kimberly QualityCare business.
Revenues increased $24 million or 4.4% to $563 million for the second
quarter and $46.1 million or 4.4% to $1.1 billion for the first six months
of 1994. Staffing Services reported increased revenues for the second
quarter and the six months of 24% and 23%, respectively, due to an expanding
economy and our strategic role in generating creative staffing solutions for
companies which are realigning their operations to become more globally
competitive and efficient. As anticipated, revenues for HealthCare Services
were essentially flat as the Company focused on integration activities,
consolidated and closed certain offices, and eliminated unprofitable business.
In addition, the results were impacted by non-recurring revenue adjustments
recorded by Lifetime in 1993 and the sale of non-strategic healthcare
businesses in the fourth quarter of that year.
Costs of services increased $27.3 million, or 7.3%, to $399 million for the
quarter and $49.6 million or 6.9% to $775 million for the six months of 1994
due primarily to the growth in revenues. As a percentage of revenues, such
expenses increased 1.9% to 71% for the quarter and 1.6% to 70.4% for the six
months of 1994. Gross margins as a percentage of revenues decreased to 29.1%
for the quarter from 31% for last year's second quarter and decreased to 29.6%
from 31.2% for last year's six months. This resulted from the faster rate of
growth of Staffing Services which operates at lower gross margins than
HealthCare Services, the non-recurring revenue adjustments recorded by
Lifetime in 1993, and the sale of selected businesses in the latter
part of that year.
Selling, general and administrative expenses decreased $10.1 million, or 7%,
to $133.2 million for the second quarter and $14.8 million or 5.2% to $267.9
million for the six months. As a percentage of revenues, such expenses
decreased 2.9% to 23.7% for the second quarter and 2.5% to 24.3% for the six
months as a result of the Company's ability to effectively manage operating
costs and the operating efficiencies achieved in the integration of Olsten
Kimberly QualityCare.
Net interest expense was $2.1 million and $5 million for the second quarters
of 1994 and 1993, respectively, and $4.3 million as compared to $9.1 million
for the six month periods in 1994 and 1993, respectively. This primarily
reflects borrowing costs on long-term debt offset by interest income on
investments. The decrease resulted from repayment of Lifetime double-digit
coupon debt in the latter half of 1993 and in the second quarter of 1994.
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Liquidity and Capital Resources
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Working capital at July 3, 1994, including $56.7 million in cash, was $263.6
million. The Company has temporarily invested available funds primarily in
short-term, interest-bearing investments.
The Company has revolving credit agreements with six banks for up to $200
million in borrowings and letters of credit. At July 3, 1994, there were
outstanding borrowings of $11 million and $59 million in standby letters of
credit. The Company believes that its levels of working capital and
liquidity and its available sources of funds are sufficient to support
present operations and to continue to increase its scope of services.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
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(a) The Annual Meeting of Shareholders of the Company was held on
April 29, 1994.
(c) (i) At the Annual Meeting, shareholders elected
directors of the Company by votes as follows:
Name of Director Votes For Votes Withheld
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Allan Tod Gittleson 25,912,143 93,039
Andrew N. Heine 93,400,870 12,450
Frank N. Liguori 93,400,240 13,080
John M. May 25,918,309 86,873
Miriam Olsten 93,399,860 13,460
Stuart Olsten 93,401,070 12,250
Richard J. Sharoff 93,401,070 12,250
Raymond S. Troubh 93,399,960 13,360
(ii) At the Annual Meeting, shareholders voted upon a
proposal to approve the Company's 1994 Stock Incentive Plan. The
votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
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115,503,362 2,926,604 203,703 784,833
(iii) At the Annual Meeting, shareholders voted upon a
proposal to approve an amendment to the Company's 1984 Non-
Qualified Stock Option Plan. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
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116,220,041 2,268,639 219,963 679,859
(iv) At the Annual Meeting, shareholders voted upon a
proposal to approve an incentive award under the Company's
Incentive Restricted Stock Plan. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
114,111,925 4,307,845 213,899 784,833
(v) At the Annual Meeting, shareholders voted upon a
proposal to approve the Company's Executive Officer Bonus Plan.
The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
117,727,810 1,417,660 172,733 100,299
(vi) At the Annual Meeting, shareholders voted upon a
proposal to ratify and approve the appointment by the Board of
Directors of Coopers & Lybrand as independent auditors for the
Company for its 1994 fiscal year. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
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119,157,251 145,287 115,964 -0-
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Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(b) The Company has not filed any report on Form 8-K during the
period for which this report is filed.
9
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SIGNATURES
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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 thereunto duly authorized.
THE OLSTEN CORPORATION
(REGISTRANT)
Date: August 15, 1994 By: /s/ Frank N. Liguori
------------------------------
Frank N. Liguori
Chairman and Chief
Executive Officer
Date: August 15, 1994 By: /s/ Anthony J. Puglisi
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Anthony J. Puglisi
Senior Vice President - Finance
Chief Financial Officer
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