<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 July 2, 1995
---------------
Commission File No. 0-3532
--------
OLSTEN CORPORATION
------------------------------------------------------
(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
-------------------
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 August 11, 1995
------------------------------------ -------------------------------
Common Stock, $ .10 par value 32,529,878 shares
Class B Common Stock, $.10 par value 9,248,876 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 2, 1995 (Unaudited) and January 1, 1995 2
Consolidated Statements of Income (Unaudited) -
Quarters and Six Months Ended July 2, 1995 and
July 3, 1994, respectively 3
Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended
July 2, 1995 and July 3, 1994 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.
---------------------
Olsten Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
July 2, 1995 January 1, 1995
ASSETS ------------ ---------------
(Unaudited)
CURRENT ASSETS:
Cash $ 60,608 $ 68,338
Receivables, net 352,124 319,613
Other current assets 34,556 51,575
--------- ---------
Total current assets 447,288 439,526
FIXED ASSETS, NET 90,209 72,543
INTANGIBLES, NET (Note 5) 224,945 200,972
OTHER ASSETS 6,622 12,917
--------- ---------
$769,064 $725,958
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 67,498 $ 71,889
Payroll and related taxes 45,753 30,241
Insurance costs 36,942 47,301
Accounts payable 12,972 15,625
--------- ---------
Total current liabilities 163,165 165,056
LONG-TERM DEBT (Note 2) 125,000 125,000
OTHER LIABILITIES 58,607 49,899
SHAREHOLDERS' EQUITY:
Common stock $.10 par value; authorized
110,000,000 shares; issued 32,515,284 and
32,257,321 shares, respectively 3,252 3,226
Class B common stock $.10 par value;
authorized 50,000,000 shares; issued
9,249,327 and 9,266,496 shares,
respectively 925 927
Additional paid-in capital 235,499 232,594
Retained earnings 183,492 150,506
Cumulative translation adjustment (876) (1,250)
--------- ---------
Total shareholders' equity 422,292 386,003
--------- ---------
$769,064 $725,958
========= =========
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)
Second Quarter Ended Six Months Ended
-------------------- -------------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
--------- --------- --------- ----------
Service sales, franchise fees,
management fees and
other income $601,693 $562,922 $1,177,196 $1,100,405
Cost of services sold 419,462 399,316 822,064 774,849
-------- -------- ---------- ----------
Gross profit 182,231 163,606 355,132 325,556
Selling, general and
administrative expenses 145,041 133,192 285,198 267,907
Interest expense, net (Note 2) 740 2,109 1,386 4,264
-------- -------- ---------- ----------
Income before income taxes 36,450 28,305 68,548 53,385
Income taxes 15,131 11,901 28,516 22,635
-------- -------- ---------- ----------
Net income from operations
before minority interest 21,319 16,404 40,032 30,750
Minority interest 364 -- 375 --
-------- -------- ---------- ----------
Net income $ 20,955 $ 16,404 $ 39,657 $ 30,750
======== ======== ========== ==========
SHARE INFORMATION:
-----------------
Primary:
Net income $ .50 $ .39 $ .94 $ .74
======== ======== ========== ==========
Average shares outstanding 42,293 41,981 42,310 41,720
======== ======== ========== ==========
Fully diluted:
Net income $ .48 $ .38 $ .90 $ .72
======== ======== ========== ==========
Average shares outstanding 45,908 45,792 45,902 45,747
======== ======== ========== ==========
See notes to consolidated financial statements.
3
<PAGE> 5
Olsten Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
---------------------
July 2, 1995 July 3, 1994
------------ ------------
OPERATING ACTIVITIES:
Net income $ 39,657 $ 30,750
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,282 12,127
Deferred income taxes 4,100 4,365
Changes in assets and liabilities:
Accounts receivable, and other
current assets (19,592) (1,692)
Current liabilities (1,891) 15,933
Other, net 16,928 6,679
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 52,484 68,162
INVESTING ACTIVITIES:
Purchases of fixed assets (24,882) (10,398)
Acquisitions of businesses and
reacquisitions of franchises (Note 5) (31,238) (2,018)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (56,120) (12,416)
FINANCING ACTIVITIES:
Net repayments of line of credit
agreements -- (23,000)
Cash dividends (6,671) (4,920)
Issuances of common stock under stock plans 2,577 4,197
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (4,094) (23,723)
--------- ---------
NET (DECREASE) INCREASE IN CASH (7,730) 32,023
CASH AT BEGINNING OF PERIOD 68,338 24,709
--------- ---------
CASH AT END OF PERIOD $ 60,608 $ 56,732
========= =========
See notes to consolidated financial statements.
4
<PAGE> 6
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 $2.1 million in 1995 and $2.3 million in 1994 offset by
interest income from investments of $1.4 million and $145 thousand,
respectively. Interest expense, net, for the six months was $3.5 million
reduced by interest income of $2.2 million in 1995 and $4.8 million reduced
by interest income of $531 thousand in 1994.
3. Subsequent Events
-----------------
In August, the Company completed the acquisition of IMI Systems, Inc., a
leading international information technology services company and has
purchased P.J. Ward Associates, Ltd., a Toronto-based leader in Canadian
information technology services.
4. Pending Acquisition/Sale of Businesses
--------------------------------------
In May, the Company announced the pending acquisition of Nurse's House Call,
the home health care business of Hooper Holmes, Inc., as well as the sale to
Hooper Holmes, Inc. of ASB Meditest, Olsten's mobile diagnostic, paramedical
and occupational health services company. The transaction is subject to
approval of the Hooper Holmes shareholders and is anticipated to close in
the third quarter.
5. Acquisition of Norsk Personal A.S.
-----------------------------------
In the second quarter, the Company acquired a 50.1 percent interest in Norsk
Personal A.S. for $24.8 million. The transaction was accounted for under
the purchase method and accordingly, our share of the operating results of
Norsk Personal A.S. has been included in the consolidated operating results
since the date of the acquisition.
5
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------
Results of Operations.
-----------------------
Results of Operations
----------------------
Net income for the second quarter increased 27.7% to $21 million, or $.50
per share, compared to $16.4 million or $.39 per share. Net income for the
first six months of 1995 was $39.7 million, or $.94 per share, a 29%
increase over the $30.8 million or $.74 per share reported in 1994. The
increases over 1994 resulted from increased profit growth in each of our
businesses, as we capitalized on continuing strong demand for Staffing
Services and our strategic positioning of HealthCare Services.
Revenues increased $38.8 million or 6.9% to $601.7 million for the second
quarter, as compared to $562.9 million for last year's second quarter and
$76.8 million or 7% to $1.2 billion for the first six months of 1995.
Staffing Services reported increased revenues of 20% for the second quarter
and 23% for the six months of 1995, reflecting gains in volume and bill rates,
as major corporate clients utilized our services on an increasing basis. As
anticipated, revenues for HealthCare Services declined 6% for the second
quarter and 7% for the first half of 1995 compared to last year. This decline
primarily results from the transfer of Medicare business from company owned to
a managed operation under the Hospital Contract Program and the sale of
HealthCare Staff Resources in March 1995.
Cost of services increased $20.1 million, or 5%, to $419.5 million for the
second quarter and $47.2 million or 6.1% to $822.1 million for the six months
of 1995 due primarily to the growth in revenues. As a percentage of revenues,
such expenses decreased 1.2% to 69.7% for the quarter and .6% to 69.8% for the
six months of 1995. Gross profits as a percentage of revenues increased to
30.3% for the quarter from 29.1% for last year's second quarter and increased
to 30.2% from 29.6% for last year's six months primarily as a result of the
growth in revenues, reduced workers' compensation and payroll tax costs and the
additional management fees generated under the Hospital Contract Program.
Selling, general and administrative expenses increased $11.8 million or 8.9% to
$145 million for the second quarter and $17.3 million, or 6.5%, to $285.2
million for the six months. As a percentage of revenues, such expenses
increased .4% to 24.1% for the second quarter resulting from market expansion
costs and higher depreciation expense related to equipment and computer systems
installed. For the six months, selling, general and administrative expenses as
a percentage of revenues were essentially flat.
Net interest expense was $740 thousand and $2.1 million for the second
quarters of 1995 and 1994, respectively, and $1.4 million as compared to
$4.3 million the for six 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 resulted from repayment of debt
in the second quarter of 1994 and increased income on investments from improved
concentration and investment of operating cash.
6
<PAGE> 8
Liquidity and Capital Resources
--------------------------------
Working capital at July 2, 1995, including $60.6 million in cash, was $284.1
million. The Company has temporarily 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 July 2, 1995, there were no borrowings and $61 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.
7
<PAGE> 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The Annual Meeting of Shareholders of the Company was held on
April 28, 1995.
(c) (i) At the Annual Meeting, shareholders elected directors of the
Company by votes as follows:
Name of Director Votes For Votes Withheld
---------------- --------- --------------
Andrew N. Heine 91,430,060 6,480
Stuart R. Levine 91,432,160 4,380
Frank N. Liguori 91,430,190 6,350
John M. May 25,052,960 87,671
Miriam Olsten 91,423,910 12,630
Stuart Olsten 91,432,360 4,180
Richard J. Sharoff 91,432,360 4,180
Raymond S. Troubh 25,086,873 53,758
Josh S. Weston 25,076,487 64,144
(ii) At the Annual Meeting, shareholders voted upon a proposal to
approve amendments to the Company's Restated Certificate of
Incorporation. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
112,457,091 994,515 56,672 3,068,893
(iii) At the Annual Meeting, shareholders voted upon a proposal to
approve amendments to the Company's 1994 Stock Incentive Plan. The
votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
114,270,194 2,041,281 121,697 143,999
(iv) At the Annual Meeting, shareholders voted upon a proposal to
approve an amendment to the Company's 1990 Non-Qualified Stock Option
Plan for Non-Employee Directors and Consultants. The votes were as
follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
114,229,657 2,083,230 120,285 143,999
(v) 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
1995 fiscal year. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
116,493,279 31,714 52,178 -0-
8
<PAGE> 10
Item 6. Exhibits and Reports on Form 8-K.
----------------------------------
(a) The following exhibits are filed herewith:
Exhibit 3 - Restated Certificate of Incorporation, as amended,
of Company, filed on August 11, 1995, as
Exhibit 4.1 to Company's Registration Statement on
Form S-8 (No. 33-61763), is incorporated
herein by reference.
Exhibit 4 - Restated Certificate of Incorporation, as amended,
of Company, filed on August 11, 1995, as
Exhibit 4.1 to Company's Registration Statement on
Form S-8 (No. 33-61763), is incorporated
herein by reference.
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
<PAGE> 11
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: August 15, 1995 By: /s/ Frank N. Liguori
------------------------------
Frank N. Liguori
Chairman and Chief
Executive Officer
Date: August 15, 1995 By: /s/ Anthony J. Puglisi
-------------------------------
Anthony J. Puglisi
Senior Vice President - Finance
Chief Financial Officer
10
<PAGE> 12
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 July 2, 1995
(unaudited) and Olsten Corporation and Subsidiaries Consolidated Statements of
Income for the six months ended July 2, 1995 (unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-02-1995
<CASH> 60,608
<SECURITIES> 0
<RECEIVABLES> 364,470
<ALLOWANCES> 12,346
<INVENTORY> 0
<CURRENT-ASSETS> 447,288
<PP&E> 153,345
<DEPRECIATION> 63,136
<TOTAL-ASSETS> 769,064
<CURRENT-LIABILITIES> 163,165
<BONDS> 0
<COMMON> 4,177
0
0
<OTHER-SE> 418,115
<TOTAL-LIABILITY-AND-EQUITY> 769,064
<SALES> 1,177,196
<TOTAL-REVENUES> 1,177,196
<CGS> 822,064
<TOTAL-COSTS> 822,064
<OTHER-EXPENSES> 283,775
<LOSS-PROVISION> 1,423
<INTEREST-EXPENSE> 3,549
<INCOME-PRETAX> 68,548
<INCOME-TAX> 28,516
<INCOME-CONTINUING> 39,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,657
<EPS-PRIMARY> .94
<EPS-DILUTED> .90
</TABLE>
