<PAGE> 1
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 October 1, 1995
-----------------
Commission File No. 0-3532
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OLSTEN CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-2610512
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Broad Hollow Road, Melville, New York 11747-8905
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 844-7800
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Not Applicable
- --------------------------------------------------------------------------
(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
------------- ------------
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 October 31, 1995
- ------------------------------------ --------------------------------
Common Stock, $ .10 par value 33,516,832 shares
Class B Common Stock, $.10 par value 9,308,541 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 -
October 1, 1995 (Unaudited) and January 1, 1995 2
Consolidated Statements of Income (Unaudited) -
Quarters and Nine Months Ended October 1, 1995 and
October 2, 1994, respectively 3
Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended
October 1, 1995 and October 2, 1994 4
Notes to Consolidated Financial Statements
(Unaudited) 5 - 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7 - 8
PART II - OTHER INFORMATION
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.
---------------------
Olsten Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
October 1, 1995 January 1, 1995
ASSETS --------------- ---------------
(Unaudited)
CURRENT ASSETS:
Cash $ 19,480 $ 68,628
Receivables, net 432,659 329,902
Other current assets 38,564 52,285
--------- ---------
Total current assets 490,703 450,815
FIXED ASSETS, NET 89,514 72,739
INTANGIBLES, NET (Note 5) 253,689 203,377
OTHER ASSETS 7,824 13,047
--------- ---------
$841,730 $739,978
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $125,229 $ 73,001
Payroll and related taxes 17,878 32,765
Insurance costs 39,439 47,529
Accounts payable 16,237 15,932
--------- ---------
Total current liabilities 198,783 169,227
LONG-TERM DEBT (Note 2) 125,000 125,000
OTHER LIABILITIES 67,711 56,023
SHAREHOLDERS' EQUITY (Note 3):
Common stock $.10 par value; authorized
110,000,000 shares; issued 33,477,097 and
32,257,321 shares, respectively 3,348 3,226
Class B common stock $.10 par value;
authorized 50,000,000 shares; issued
9,329,318 and 10,113,511 shares,
respectively 933 1,011
Additional paid-in capital 242,642 235,228
Retained earnings 205,950 151,757
Cumulative translation adjustment (2,637) (1,494)
--------- ---------
Total shareholders' equity 450,236 389,728
--------- ---------
$841,730 $739,978
========= =========
See notes to consolidated financial statements.
2
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Olsten Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands, except share amounts)
(Unaudited)
Third Quarter Ended Nine Months Ended
-------------------- --------------------
October 1, October 2, October 1, October 2,
1995 1994 1995 1994
--------- --------- --------- ----------
Service sales, franchise fees,
management fees and
other income $647,317 $591,004 $1,855,466 $1,712,679
Cost of services sold 450,026 416,905 1,294,420 1,207,050
------- -------- ---------- ----------
Gross profit 197,291 174,099 561,046 505,629
Selling, general and
administrative expenses 154,829 141,108 446,869 414,074
Interest expense, net (Note 2) 1,192 1,190 3,003 5,721
-------- -------- ---------- ----------
Income before income taxes 41,270 31,801 111,174 85,834
Income taxes 17,045 13,277 46,161 36,197
-------- -------- ---------- ----------
Net income from operations
before minority interest 24,225 18,524 65,013 49,637
Minority interest 370 -- 745 --
-------- -------- ---------- ----------
Net income $ 23,855 $ 18,524 $ 64,268 $ 49,637
======== ======== ========== ==========
SHARE INFORMATION:
-----------------
Primary:
Net income $ .55 $ .43 $ 1.48 $ 1.16
======== ======== ========== ==========
Average shares 43,427 43,222 43,336 42,913
======== ======== ========== ==========
Fully diluted:
Net income $ .53 $ .41 $ 1.42 $ 1.12
======== ======== ========== ==========
Average shares 47,112 46,900 47,076 46,863
======== ======== ========== ==========
See notes to consolidated financial statements.
3
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Olsten Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
---------------------
October 1, 1995 October 2, 1994
--------------- ---------------
OPERATING ACTIVITIES:
Net income $ 64,268 $ 49,637
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 20,664 18,488
Deferred income taxes 4,100 3,634
Changes in assets and liabilities,
net of effects from acquistions:
Accounts receivable, and other
current assets (41,942) 7,490
Current liabilities (1,579) 11,096
Other, net 10,370 13,161
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 55,881 103,506
INVESTING ACTIVITIES:
Acquisitions/Dispositions of businesses and
reacquisitions of franchises(Notes 4 and 5) (65,319) (2,261)
Purchases of fixed assets (35,039) (22,221)
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NET CASH USED IN INVESTING ACTIVITIES (100,358) (24,482)
FINANCING ACTIVITIES:
Net repayments of line of credit
agreements -- (34,000)
Cash dividends (10,076) (7,406)
Issuances of common stock under stock plans 5,405 4,566
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NET CASH USED IN FINANCING ACTIVITIES (4,671) (36,840)
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NET (DECREASE) INCREASE IN CASH (49,148) 42,184
CASH AT BEGINNING OF PERIOD 68,628 24,793
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CASH AT END OF PERIOD $ 19,480 $ 66,977
========= =========
See notes to consolidated financial statements.
4
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Olsten Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
1. Accounting Policies
--------------------
The consolidated financial statements have been prepared by 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. Long-Term Debt
---------------
Interest expense, net, consists primarily of interest on long-term debt for
the quarter of $2.2 million in 1995 and $2 million in 1994 offset by
interest income from investments of $1 million and $829 thousand,
respectively. Interest expense, net, for the nine months was $6.1 million
reduced by interest income of $3.1 million in 1995 and $7.1 million reduced
by interest income of $1.4 million in 1994.
3. Acquisition of IMI Systems, Inc.
--------------------------------
In August, the Company completed the acquisition of IMI Systems, Inc.
("IMI"), a leading information technology services company. As a result,
the Company issued 847 thousand shares of Class B common stock in exchange
for all the outstanding IMI capital stock. Subsequently, substantially all
of the Class B common stock issued was converted into common stock. The
acquisition was accounted for as a pooling of interests and, accordingly,
the consolidated financial statements of the Company have been restated for
all periods prior to the acquisition to combine the accounts and operations
of the Company and IMI. Operating results previously reported for the
separate companies for periods prior to the acquisition are as follows:
Second Quarter Ended Six Months Ended
-------------------- ----------------------
07/02/95 07/03/94 07/02/95 07/03/94
-------- -------- -------- --------
Service sales, franchise fees,
management fees and other income:
Olsten $601,693 $562,922 $1,177,196 $1,100,405
IMI 16,106 10,978 30,953 21,270
-------- -------- ---------- ----------
$617,799 $573,900 $1,208,149 $1,121,675
======== ======== ========== ==========
Net income:
Olsten $ 20,955 $ 16,404 $ 39,657 $ 30,751
IMI 366 163 756 362
-------- -------- ---------- ----------
$ 21,321 $ 16,567 $ 40,413 $ 31,113
======== ======== ========== ==========
5
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4. Acquisition/Sale of Business
------------------------------
On September 30, 1995, the Company completed a single transaction involving
the purchase of Nurse's House Call, the home health care business of Hooper
Holmes, Inc. for $72.6 million and the sale of the stock of its wholly
owned subsidiary, ASB Meditest, which provides mobile diagnostic,
paramedical and occupational health services for $40.6 million. The
difference in value was settled for $32 million in cash. The transaction
was accounted for under the purchase method and accordingly, the operating
results of Nurse's House Call will be included in the consolidated
operating results of the Company from the date of the acquisition. The
Company recognized a gain of $1.6 million in conjunction with the sale of
ASB Meditest.
5. Acquisition of Ready Office S.A.
--------------------------------
In September, the Company acquired a 65 percent interest in Ready
Office S.A., Argentina's oldest and largest independent staffing services
company for $2.7 million in cash. The transaction was accounted for under
the purchase method and accordingly, the Company's share of the operating
results of Ready Office S.A. has been included in the consolidated
operating results from the date of the acquisition.
6
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------
Results of Operations.
-----------------------
Results of Operations
- ----------------------
The Company, for the first time, reported the combined financial results of
Olsten and IMI, pursuant to the acquisition on August 2, 1995, which was
accounted for as a pooling of interests. Accordingly, all comparisons with
prior year are based on restated combined results.
Net income for the third quarter increased 28.8% to $23.9 million, or $.55
per share, compared to $18.5 million or $.43 per share. Net income for the
first nine months of 1995 was $64.3 million, or $1.48 per share, a 29.5%
increase over the $49.6 million or $1.16 per share reported in 1994. The
increases over 1994 resulted from increased profit growth in each segment of
our business, as the Company capitalized on sustained demand for flexible
staffing and the strategic positioning of HealthCare Services.
Revenues increased $56.3 million or 9.5% to $647.3 million for the third
quarter, as compared to $591 million for last year's third quarter and
$142.8 million or 8.3% to $1.9 billion for the first nine months of 1995.
Staffing Services reported increased revenues of 22.7% for the third quarter
and 23.6% for the nine months of 1995, reflecting growth in volume contracts,
increased bill rates, and acquisitions of businesses. As anticipated,
revenues for HealthCare Services declined 5.4% for the third quarter and 6.4%
for the first nine months of 1995 compared to last year. This decline results
primarily from the divestitures made in October 1994 to enter the Hospital
Contract Management business.
Costs of services increased $ 33.1 million, or 7.9%, to $450 million for the
third quarter and $87.4 million or 7.2% to $1.3 billion for the nine months
of 1995 due primarily to the growth in revenues. As a percentage of revenues,
such expenses decreased 1% to 69.5% for the quarter and .7% to 69.8% for the
nine months of 1995. Gross margins as a percentage of revenues increased to
30.5% for the quarter from 29.5% for last year's third quarter and increased
to 30.2% from 29.5% for last year's nine months. This was primarily a result
of growth in revenues, reduced workers' compensation and payroll tax costs
together with the additional management fees generated under the Hospital
Contract Management business.
Selling, general and administrative expenses increased $13.7 million or 9.7%
to $154.8 million for the third quarter and $32.8 million, or 7.9%, to $446.9
million for the nine months. For the quarter and for the nine months,
selling, general and administrative expenses as a percentage of revenues
remained unchanged.
Net interest expense was $1.2 million for each of the third quarters of 1995
and 1994, and $3 million as compared to $5.7 million the for nine month
periods in 1995 and 1994, respectively. Net interest primarily reflects
borrowing costs on long-term debt offset by interest income on investments.
The decrease for the nine month period resulted from repayment of debt in the
third quarter of 1994 and increased income on investments from improved
concentration and investment of operating cash.
7
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Liquidity and Capital Resources
- --------------------------------
Working capital at October 1, 1995, including $19.5 million in cash, was
$210.9 million. The Company has invested available funds primarily in
short-term, interest-bearing investments. The Company has a revolving credit
agreement with six banks for up to $200 million in borrowings and letters of
credit. At October 1, 1995, there were no borrowings and $59.5 million in
standby letters of credit outstanding. 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 fund future growth
and business opportunities as the Company increases its scope of services.
8
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
----------------------------------
(a) The following exhibits are filed herewith:
Exhibit 27 - Financial Data Schedule
(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
------------
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.
OLSTEN CORPORATION
(REGISTRANT)
Date: November 8, 1995 By: /s/ Frank N. Liguori
------------------------------
Frank N. Liguori
Chairman and Chief
Executive Officer
Date: November 8, 1995 By: /s/ Anthony J. Puglisi
-------------------------------
Anthony J. Puglisi
Senior Vice President - Finance
Chief Financial Officer
10
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EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheets at October 1, 1995
(unaudited) and Olsten Corporation and Subsidiaries Consolidated Statements
of Income for the nine months ended October 1, 1995 (unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> OCT-01-1995
<CASH> 19,480
<SECURITIES> 0
<RECEIVABLES> 446,417
<ALLOWANCES> 13,758
<INVENTORY> 0
<CURRENT-ASSETS> 490,703
<PP&E> 153,009
<DEPRECIATION> 63,495
<TOTAL-ASSETS> 841,730
<CURRENT-LIABILITIES> 198,783
<BONDS> 0
<COMMON> 4,281
0
0
<OTHER-SE> 445,955
<TOTAL-LIABILITY-AND-EQUITY> 841,730
<SALES> 1,855,466
<TOTAL-REVENUES> 1,855,466
<CGS> 1,294,420
<TOTAL-COSTS> 1,294,420
<OTHER-EXPENSES> 444,937
<LOSS-PROVISION> 1,932
<INTEREST-EXPENSE> 6,115
<INCOME-PRETAX> 111,174
<INCOME-TAX> 46,161
<INCOME-CONTINUING> 65,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,268
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.42
</TABLE>
