<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
- -----
| X | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1996
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Commission File No. 0-3532
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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
- -------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 844-7800
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, $.10 par value
------------------------------------
(Title of class)
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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[Cover page 1 of 2 pages]
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not 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-K or any amendment to this Form 10-K. [ ]
The aggregate market value of Registrant's voting stock
(Common Stock and Class B Common Stock, assuming conversion of Class B
Common Stock into Common Stock on a share for share basis) held by
nonaffiliates of Registrant, as of March 12, 1997, was $1,171,826,920
based on the closing price of the Common Stock on the New York Stock
Exchange on such date.
The number of shares outstanding of Registrant's Common Stock
and Class B Common Stock, as of March 12, 1997, were 67,418,176 shares
and 13,782,301 shares, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Proxy Statement for 1997 Annual Meeting of Shareholders of
Registrant. Certain information to be included therein is
incorporated by reference into PART III hereof.
[Cover page 2 of 2 pages]
<PAGE>
PART I
Item 1. Business.
Introduction
Olsten Corporation (herein, together with its subsidiaries
unless the context otherwise requires, generally referred to as
"Registrant") was incorporated in Delaware in 1967 as the successor to
a business founded in 1950.
Registrant operates through subsidiaries principally under
the trade names "Olsten Staffing Services" and "Olsten Health
Services" and engages in and derives substantially all of its revenues
from two industry segments, Staffing Services and Health Services. In
Staffing Services, Registrant provides qualified assignment employees
to business, industry and government, and Registrant's Information
Technology Services business provides information technology
specialists on either a project management or staff supplementation
basis to assist clients in the design, development and maintenance of
information systems. Further, Registrant provides attorneys and
paralegals to law firms and corporate law departments. In Health
Services, Registrant provides both Network services and health care
personnel (caregivers) for home health care, hospitals and industry
and provides management services to hospital-based home health
agencies. Further, Registrant is a provider of infusion therapy
services and products for both chronic and acute care. Registrant's
owned, licensed and franchised operations conduct business through
more than 1,300 offices in 50 states, the District of Columbia, Puerto
Rico, Canada, Mexico, Argentina, Chile, United Kingdom, Denmark,
Finland, Germany, Norway and Sweden.
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Selected financial information relating to Registrant's
industry segments is contained herein in Note 11 of Notes to
Consolidated Financial Statements.
Systemwide Staffing Services and Health Services sales
accounted for approximately 55% and 45%, respectively, of Registrant's
1996 systemwide sales, approximately 51% and 49%, respectively, of
Registrant's 1995 systemwide sales and approximately 48% and 52%,
respectively, of Registrant's 1994 systemwide sales. Systemwide sales
represent all sales generated by Registrant's entire network,
including Registrant, licensed and franchised offices and hospital-
based home health agencies under management.
Staffing Services
In Staffing Services, Registrant provides assignment
employees in a full spectrum of skills, from entry level workers to
seasoned professionals and managers. Service areas include:
supplemental staffing for office technology; general office and
administrative services; accounting and other financial services;
engineering and technical services; production/distribution/assembly
services; information technology services; legal staffing services;
and marketing support and teleservices. The provision of staffing
services is not generally subject to extensive Federal and state
regulation.
Registrant believes that utilization of assignment employees
has become a valuable and recognized management tool, allowing many
companies to convert fixed costs to variable costs, especially in view
of corporate reengineering and restructuring in a more competitive
global environment. With the availability of such services, a client
can maintain on a cost-effective basis a nucleus of core personnel
that can be supplemented by skilled specialists for long- and short-
term assignments. The expense and inconvenience of hiring additional
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employees for assignments of a limited duration, including
recruiting, interviewing, reference-checking and testing, are
eliminated. Additionally, Registrant believes that its comprehensive
added-value services enable clients to eliminate the record keeping,
payroll taxes, insurance and administrative costs usually associated
with regular, full-time personnel. A client pays only for actual
hours worked by Registrant's assignment employees; upon completion of
the assignment, services can be immediately terminated without the
adverse effects associated with employee lay-offs.
By supplying a supplemental work force to its Staffing
Services clients, Registrant believes it affords them added
efficiencies and economies, as well as greater productivity and
flexibility. Registrant's assignment employees help meet clients'
staffing requirements for peak periods caused by such recurring
factors as seasonal demands, inventories, month-end requirements and
vacations and such unpredictable factors as special projects,
marketing promotions, illnesses and emergencies. Assignments of
personnel may be for hours, days, weeks, months or longer periods as
the clients' needs dictate.
In Staffing Services, Registrant is pursuing with clients
strategic "partnering" relationships that have become increasingly
important to Registrant. Through its Partnership Program (R) services
with major corporate clients, Registrant acts as a master vendor
responsible for the recruitment, training and ongoing management of
large groups of employees for companies at a single site or at
multiple sites, allowing clients to focus better on growing their core
businesses. Other clients have outsourced entire functions whereby
people, processes and technology are all managed by Registrant.
Registrant's services can also include multilocation coordination,
customized orientation and training, billing and electronic
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information exchange programs for its clients. These arrangements can
enable a client to better manage overhead and personnel expenses and
can help save a client time and money by reducing its employee
recruitment and training efforts, particularly if the client is
experiencing a high employee turnover rate.
Health Services
In Health Services, Registrant provides home health care
through Registrant's licensed health care personnel, such as
registered nurses, offering a broad range of services, including
physician-prescribed skilled nursing treatments, patient and family
education, case management, pediatric and perinatal care, physical,
occupational, neurological and speech therapies, administration of
drugs, nutrients and other solutions, and disease management programs,
as well as staffing for hospitals, industry and pharmaceutical
companies. Through its clinical pharmacy network, Registrant has the
ability to deliver nutrients and medications utilized in certain of
its home health care services. Registrant's infusion therapy
operations were significantly expanded through Registrant's
acquisition of Quantum Health Resources, Inc. in June 1996. Home
health care provided by Registrant's unlicensed personnel, such as
home health aides and homemakers, may involve assistance with personal
hygiene, feeding, dressing, preparation of meals and light
housekeeping.
Registrant provides Network services, which involve case
management for the entire home care benefit for managed care
customers with a single source for centralized intake and billing,
claims adjudication, quality assurance and data reporting and
analysis. In furnishing hospital management services, Registrant
provides comprehensive management services to hospital-based home
health agencies, including clinical expertise, policies and
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procedures, quality assurance programs and caregiver training, as well
as dedicated on-site and corporate personnel who provide certain back
office support functions. In carrying out supplemental institutional
staffing, Registrant's health care professionals perform services for
hospitals, nursing homes, clinics and other health care facilities and
furnish business and industry with specialized staffing. Health care
institutions use supplemental staffing for peak periods, illnesses and
vacations, helping these facilities control employee costs.
Factors that Registrant believes have contributed to the
development of home health care in particular include institutional,
governmental, managed care organizational and third-party payor
recognition that home health care is a cost-effective alternative to
lengthy, more expensive institutional care; an aging population;
increasing consumer awareness and interest in home health care; the
psychological benefits of recuperating from an illness or accident in
one's own home; and advanced technology that allows more health care
procedures to be provided at home.
Of Registrant's Health Services revenues, approximately 26%
are attributable to Medicare reimbursement and approximately 22% are
attributable to Medicaid reimbursement and state and local government
contracts. Registrant's home health care business is subject to
extensive Federal and state regulation covering, among other things,
Medicare and Medicaid reimbursement, reporting requirements,
certification and licensure standards for certain home health
agencies, and, in some cases, certificate of need requirements, and
pharmacy licensing requirements. Registrant is also subject to
Federal and state laws regarding fraud and abuse in the delivery of
health care services. These laws generally prohibit direct or
indirect payments, including the offer or solicitation of such
payments, for the referral of patients.
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Registrant is actively pursuing relationships with managed
care organizations as a provider and as a manager of Network services
for home health care delivery. Registrant believes that its
nationwide office network, financial resources and the quality, range
and cost-effectiveness of its services are important factors as it
seeks opportunities in its managed care relationships in a
consolidating home health care industry. Registrant offers the direct
and managed provision of care as a single gatekeeper, thereby
optimizing utilization. Registrant continues to expand its health
care service delivery capabilities through hospital management
contracts to manage hospital-based home health operations in exchange
for management fees.
General
In general, Registrant obtains clients through personal
sales presentations, telephone marketing calls, direct mail
solicitation, referrals from other clients and advertising in a
variety of local and national media, including the Yellow Pages,
newspapers, magazines, trade publications and television.
Registrant's marketing efforts for Health Services also involve
personal contact with case managers for managed health care programs,
such as those involving health maintenance organizations (HMOs) and
preferred provider organizations (PPOs), physicians and their staffs,
hospital management, hospital discharge planners, nursing home
supervisors, insurance company representatives and employers with
self-funded employee health benefit programs.
Registrant believes that its success in furnishing assignment
employees and caregivers is based, among other factors, on its
reputation for quality and local market expertise, combined with the
resources of its extensive office network. Registrant also empowers
its branch managers and branch directors with a high level of
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responsibility, providing strong incentives to manage the business
effectively at the local level--one of the central ingredients in a
business where relationships are vital to success.
There is no one client that accounts for as much as 10% of
Registrant's revenues. In the opinion of Registrant, its business is
not seasonal to any material degree. Except for Registrant's
expansion of legal staffing services through the acquisition of Co-
Counsel, Inc. in August 1996 and Co-Counsel, Inc.'s subsequent
acquisition of five legal staffing companies, there have not been any
significant changes in the kinds of services rendered or methods of
distribution of Registrant since the end of the last fiscal year.
Registrant's capabilities as a provider of infusion therapies
substantially increased as a result of Registrant's acquisition of
Quantum Health Resources, Inc. in June 1996. Registrant expanded its
information technology services business by its acquisition of ARMS,
Inc. in March 1996 and Systems Partners, Inc. in June 1996.
Registrant's assignment employees and caregivers, as well as
the employees of other firms providing similar services, are paid
weekly for their services while payments are generally received from
customers within five to eleven weeks on average of the related
billings for such services. Consequently, as new offices are
established or acquired, or as existing offices expand, there is an
ongoing requirement for cash resources to fund current operations as
well as to provide for the expansion of the business.
Registrant has grown and is pursuing expansion opportunities
by strengthening relationships with many clients, making strategic
acquisitions within and outside the United States, opening additional
offices and developing and extending specialized services,
particularly in health care, information technology, financial and
accounting and legal.
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Franchise Operations
At December 29, 1996, approximately 85 offices were operated
by eight franchisees under franchises granted by Registrant.
Franchisees, who provide services similar to Olsten Staffing Services,
have the exclusive right to market and furnish assignment employees
within a designated geographic area using certain of Registrant's
trade names, service marks, advertising materials, sales programs,
manuals and forms. Franchisees receive training from Registrant,
attend seminars, participate in marketing programs and utilize
Registrant's sales literature. Registrant has established operating
procedures and standards to be followed by its franchisees.
Registrant offers franchisees billing, payroll and other data
processing systems and services, as well as accounts receivable
financing. Registrant also assists its franchisees in obtaining
business from its corporate accounts and through its national and
cooperative local advertising.
Franchisees operate their businesses autonomously within the
framework of Registrant's policies and standards, and recruit, employ
and pay their own regular, full-time employees and assignment
employees. Registrant receives royalty fees from each franchise based
upon its gross franchise sales. Royalty fees generally start at 5% of
gross franchise sales and decrease based upon volume. Sales by
franchisees to their clients are not included in Registrant's revenues
but are included in Registrant's systemwide sales. Franchise
agreements are generally for a term of ten years and typically are
renewable at the option of the franchisee for five additional
five-year terms. Registrant may terminate a franchise if the
franchisee fails to meet Registrant's standards or otherwise breaches
the franchise agreement. Registrant is not granting new franchises
and has not granted any since 1980.
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Licensed Area Representative Operations
At December 29, 1996, approximately 90 offices were operated
by 51 licensed area representatives. Substantially all of these
offices provided only Staffing Services. A licensed area
representative is a person authorized by Registrant to operate
Registrant's Staffing Services business within an exclusive marketing
area. The agreements governing licensed area representative
operations do not have a stated term. The licensed area
representative does not have an ownership interest in the business but
receives approximately 50% of the office's gross profit margin in the
form of commissions, which are reflected in Registrant's selling,
general and administrative expenses. Sales by licensed area
representatives are included in Registrant's revenues. The licensed
area representative is responsible for the office's operating
expenses, such as rent, utilities and in-office staff salaries, and
Registrant is responsible for the assignment employee wages and
related payroll taxes and insurances. Registrant also provides
national advertising, shares in the costs of certain local
advertising, conducts training seminars and furnishes operating
manuals, forms and sales materials to the licensed area
representatives.
Licensed area representatives are required to observe
Registrant's operating procedures and standards and act for Registrant
in recruiting, screening, evaluating and hiring assignment employees.
The licensed area representatives solicit orders for assignment
employees from clients and assign Registrant's assignment employees to
clients in response to such orders. Registrant's experience has shown
that licensing is a more profitable method of operation than
franchising. The opening of licensed area representative offices is
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one of the strategies by which Registrant is pursuing expansion
opportunities.
Source and Availability of Personnel
To maximize the cost effectiveness and productivity benefits
of its assignment employees and caregivers, Registrant utilizes
customized systems and procedures that it has developed and refined
over the years. These processes include the recruitment and selection
of applicants who fit the client's individual parameters for skills,
experience and other criteria. Personalized matching is achieved
through initial applicant profiles, personal interviews, skill
evaluations and background and reference checks. Assignment employees
and caregivers are generally employed by Registrant on an as-needed
basis to meet client demand. Specialized recruitment and retention
programs are offered to assignment employees and caregivers as
incentives for them to remain in the employ of Registrant.
Assignment employees and caregivers are recruited through a
variety of sources, including advertising in local and national media,
job fairs, direct mail solicitations, as well as referrals obtained
directly from clients and other assignment employees and caregivers.
Registrant's employees are generally paid by Registrant for time
actually worked, subject to a four-hour daily minimum on the days
worked. Although conditions may vary in different areas of the
country and with respect to different skill requirements, assignment
employees were generally less available during 1996 than they were in
the preceding year. Caregiver availability was about the same in 1996
compared to the preceding year.
Importance and Effect of Trademarks Held
Various trademarks are registered with the United States
Patent and Trademark Office protecting OLSTEN. Certain other marks
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that are registered or in the process of being registered and are
utilized in Registrant's business include AMERICA IS COMING HOME WITH
US (SM), CO-COUNSEL (R), CUSTOMIZED ADDED-VALUE (R), MAKE THE SURE
CALL (SM), OFISS 2000 (SM), PARTNERSHIP PROGRAM (R), PRECISE (R),
PROFILER (R), PROLAW SYSTEM (SM) and THE FUTURE IS WORKING WITH OLSTEN
(SM). Under current law, federal trademark registrations can be
renewed indefinitely. National advertising and usage have, in the
belief of Registrant, given significance to these marks.
Competitive Position
The Staffing Services and Health Services provided by
Registrant also are provided by a number of companies which operate,
as Registrant does, nationally throughout the United States and by
numerous regional and local firms and are highly competitive. Unlike
Registrant, such companies and firms usually provide either staffing
services or health services, but not both. Registrant believes that,
in terms of systemwide sales, it is North America's third largest
provider of staffing services, as well as one of the world's leading
providers of staffing services, and North America's largest provider
of home health care services and third largest provider of infusion
therapy services.
The principal methods of competing are availability of
personnel, quality of services and the price of such services.
Registrant believes that its favorable competitive position is
attributable to its early industry entry, to its widespread office
network and to the consistently high quality and targeted services it
has provided over the years to its clients, as well as to its
screening and evaluation procedures, its training programs and its
employee retention techniques.
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Number of Persons Employed
At December 29, 1996, Registrant employed approximately
11,000 regular, full-time employees and during 1996 employed
approximately 560,000 assignment employees and caregivers. In
addition, Registrant's franchisees employed approximately 525 regular,
full-time employees as well as approximately 75,000 assignment
employees during 1996. Employees of franchisees are not Registrant's
employees.
As the employer of its assignment employees and caregivers,
Registrant is responsible for and pays the employer's share of Social
Security taxes, federal and state unemployment taxes, workers'
compensation insurance and other similar costs. Wages are generally
paid to assignment employees and caregivers by Registrant on an hourly
basis and may vary in different geographic areas to reflect prevailing
wages paid for particular skills in the community where the services
are performed. Registrant believes that its relationships with its
employees are generally good.
All assignment employees and caregivers of Registrant are
covered by general liability insurance and by a fidelity bond
maintained by Registrant. In addition, caregivers are covered by
professional medical liability insurance. Registrant believes that
its insurance coverages are adequate for the purposes of its business.
International Operations
Registrant, through its Office Angels subsidiary, operates
approximately 55 offices in Great Britain to provide temporary and
permanent placement services. Registrant, through subsidiaries,
operates approximately 25 offices to provide assignment employees and
20 offices to provide caregivers in Canada.
In 1995 Registrant purchased majority interests in Norsk
Personal AS in Norway; Allegro Vikarservice ApS in Denmark (now called
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Olsten Personale AS); and Ready Office S.A. in Argentina (now called
Olsten Ready Office S.A.). In 1996 Registrant acquired, or purchased
majority interests in, OFFiS Unternehmen fur Zeitarbeit GmbH & Co. KG
in Germany; Kontorsjouren AB in Sweden (now called Olsten
Personalkraft AB); Top Notch and Multiforce in Puerto Rico; and
Dataset OY in Finland (now called Olsten Dataset OY). In 1995 and
1996 Registrant expanded its information technology operations through
the acquisitions, respectively, of Ward Associates Limited in Canada
and Harvey Consultants Limited in the United Kingdom.
Item 2. Properties.
The international corporate headquarters of Registrant are
located at 175 Broad Hollow Road, Melville, New York. The building in
which the headquarters are located contains approximately 175,000
square feet of office space and is leased from Suffolk County
Industrial Development Agency under a lease terminating on April 13,
2007, at which time Registrant is obligated to purchase the premises
and building thereon for One Dollar. The industrial development
revenue bond issued in connection with the acquisition, construction,
renovation and equipping of the headquarters building is held by a
wholly-owned subsidiary of Registrant.
The leases for the operating offices utilized by Registrant's
subsidiaries expire at various dates. Registrant believes that such
facilities are adequate for its immediate needs. Registrant does not
anticipate that it will have any problem obtaining additional space if
needed in the future.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which
Registrant or any of its subsidiaries is a party.
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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 Registrant's 1996 fiscal year.
Item 4(a). Executive Officers of Registrant.
The following table sets forth certain information regarding
each of the executive officers of Registrant:
Executive Expiration
Officer of Term Positions and Offices
Name Since Age of Office with Registrant
- ---- --------- --- ---------- ---------------------
Frank N. Liguori 1976 50 April 1997 Chairman of the Board and
Chief Executive Officer
Stuart Olsten 1987 44 April 1997 President and
Vice Chairman
Robert S. Forman 1997 57 April 1997 Executive Vice President
and President,
IMI Systems
B. Garfield French 1996 42 April 1997 Executive Vice President
and Managing Director,
Olsten International
Robert A. Fusco 1992 46 April 1997 Executive Vice President
and President, Olsten
Health Services
Gerald J. Kapalko 1993 50 April 1997 Executive Vice President
and President,
Olsten Latin America
Richard A. Piske, III 1993 48 April 1997 Executive Vice President
and President, Olsten
Staffing Services
William P. Costantini 1992 49 April 1997 Senior Vice President and
General Counsel
Maureen K. McGurl 1997 49 April 1997 Senior Vice President-
Human Resources
Anthony J. Puglisi 1993 47 April 1997 Senior Vice President and
Chief Financial Officer
Frank N. Liguori has been Chairman of the Board of Registrant since
February 1992 and its Chief Executive Officer since April 1990.
Stuart Olsten has been Vice Chairman of Registrant since August 1994
and President of Registrant since April 1990. He was Chief Operating Officer of
Registrant from April 1990 through July 1993.
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Robert S. Forman has been Executive Vice President of Registrant
since February 1997 and President of IMI Systems Inc. since 1979.
B. Garfield French has been Executive Vice President of Registrant
since February 1996 and Managing Director of Olsten International, B.V.
since October 1994. From November 1987 to October 1994, he was Senior Vice
President - Canadian and Mid-America Division of Registrant.
Robert A. Fusco has been Executive Vice President of Registrant since
January 1992 and President, Olsten Health Services, since July 1993. He was
General Manager, Olsten HealthCare, from January 1992 to July 1993.
Gerald J. Kapalko has been Executive Vice President of Registrant since
July 1993, and President, Olsten Latin America since January 1997. From August
1987 to July 1993, he was Senior Vice President - Corporate Development of
Registrant.
Richard A. Piske, III has been Executive Vice President of Registrant
and President, Olsten Staffing Services, since September 1993. From March 1990
to September 1993, he was Senior Vice President - Southeast Division of
Registrant.
William P. Costantini has been Senior Vice President and General
Counsel of Registrant since June 1992. For more than five years prior thereto,
he was Vice President, General Counsel and Secretary of GEO International
Corporation, which had holdings in oil field services, quality assurance and
graphic arts.
Maureen K. McGurl has been Senior Vice President - Human Resources of
Registrant since December 1996. From 1984 to December 1996, she was Corporate
Vice President of Human Resources and Organizational Planning of Supermarkets
General, a supermarket company.
Anthony J. Puglisi has been Senior Vice President and Chief Financial
Officer of Registrant since April 1993. From December 1988 to April 1993, he was
Chief Financial Officer of NMB (USA) Inc., a high technology manufacturer, and
was President of IMC Magnetics Corp. from July 1988 to April 1993.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Market Information
Registrant has outstanding two classes of common equity
securities: Common Stock and Class B Common Stock. Registrant's Common
Stock (symbol OLS) is listed on the New York Stock Exchange. The following
table sets forth the high and low prices of the Common Stock for each
quarter during fiscal 1996 and 1995:
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1996 1995
- ----------------------------------------------------------------------
High Low High Low
---- --- ---- ---
$ $ $ $
1st Quarter 33 24-5/8 23-3/4 20-1/2
2nd Quarter 32-3/8 28-1/2 24-1/4 18-7/8
3rd Quarter 29-5/8 22-7/8 26-3/8 21-1/2
4th Quarter 24-7/8 13-1/2 28-1/4 24-1/2
- ----------------------------------------------------------------------
There is no established public trading market for Registrant's
Class B Common Stock, which is subject to significant restrictions on sale.
Registrant's Class B Common Stock, which has ten votes per share, is
convertible at any time on a share for share basis into Registrant's Common
Stock, which has one vote per share.
Holders
On March 12, 1997 there were approximately 1,920 holders of record
of Registrant's Common Stock (including brokerage firms holding
Registrant's Common Stock in "street name" and other nominees) and 725
holders of record of Registrant's Class B Common Stock.
Dividends per share Fiscal Year
------------------- --------------------------
1996 1995
--------------------------
$ $
Cash dividends*
Common Stock .28 .21
Class B Common Stock .28 .21
- ----------------
* Registrant paid quarterly dividends in its two most recent fiscal years.
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Item 6. Selected Financial Data.
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
-----------------------
In thousands, except share amounts
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other
income 3,377,729 2,813,768 2,588,697 2,402,145 2,131,262
Income before extraordinary
charge 54,642 90,290 92,240 5,043 40,444
Net income (loss) 54,642 90,290 92,240 (9,625) 40,444
Working capital 615,593 493,970 438,432 401,720 303,010
Total assets 1,439,240 1,138,410 979,714 915,086 767,675
Long-term debt 330,329 267,030 211,250 262,307 150,419
Shareholders' equity 769,273 586,389 515,986 404,342 394,492
SHARE INFORMATION:
Primary earnings (loss) per share:
Income before extraordinary
charge .70 1.21 1.25 .07 .62
Net income (loss) .70 1.21 1.25 (.14) .62
Fully diluted earnings (loss) per share:
Income before extraordinary
charge .70 1.18 1.22 .07 .62
Net income (loss) .70 1.18 1.22 (.14) .62
Cash dividends .28 .21 .16 .16 .13
Book value 9.53 7.98 7.06 5.68 5.80
SYSTEMWIDE SALES:
Staffing Services 2,246,803 1,693,407 1,397,393 1,129,632 941,397
Health Services 1,849,396 1,607,595 1,489,522 1,490,599 1,375,267
--------- --------- --------- --------- ---------
4,096,199 3,301,002 2,886,915 2,620,231 2,316,664
========= ========= ========= ========= =========
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Operating results reflect the combined operations of Olsten Corporation (the
"Company"), Quantum Health Resources, Inc. ("Quantum") acquired on June 28,
1996, Co-Counsel, Inc. ("Co-Counsel") acquired on August 9, 1996, and IMI
Systems Inc. ("IMI") acquired on August 2, 1995. Each of these transactions has
been accounted for as a pooling of interests. Comparisons with prior years are
based on restated combined results.
In 1996, the Company recorded merger, integration and other non-recurring
charges totalling $80 million ($48.2 million, net of tax), or $.62 per share.
These non-recurring charges before taxes consist of merger and integration
charges resulting from the Quantum and Co-Counsel acquisitions of $44.5 million
($27 million, net of tax), and include transaction costs of $8.1 million;
compensation and severance costs of $12.4 million; asset writedowns of $8.2
million; and integration costs of $15.8 million. The remaining non-recurring
charges before taxes, which approximate $30 million ($18 million, net of tax),
pertain to certain allowances for a change in the methodology used by Medicare
for computing reimbursements in prior years related to the Company's home health
care business, and Quantum's charge of $5.5 million ($3.2 million, net of tax)
related to settlement of shareholder litigation.
Quantum recorded non-recurring charges in 1995 totalling $12.3 million ($7.4
million, net of tax), or $.09 per share, consisting of a settlement associated
with a State of California billing dispute of $6.3 million ($3.8 million, net of
tax); a writeoff of Quantum's physician practice management business of $2.2
million ($1.3 million, net of tax); and a charge of $3.8 million ($2.3 million,
net of tax) representing costs of relocating Quantum's corporate headquarters.
Excluding the effects of these non-recurring charges, net income increased 5
percent to $102.8 million, or $1.31 per share fully diluted, in 1996 versus
$97.7 million, or $1.27 per share fully diluted, in 1995. Net income in 1995
increased 6 percent from $92.2 million, or $1.22 per share fully diluted, in
1994.
Systemwide sales for the Company's two segments increased 24 percent, to $4.1
billion in 1996; 14 percent, to $3.3 billion in 1995; and 10 percent, to $2.9
billion in 1994. Systemwide sales represent sales generated by Company, licensed
and franchised offices, and hospital-based home health agencies under
management.
Revenues increased 20 percent in 1996 to $3.4 billion compared to $2.8 billion
in 1995. This increase reflected the continued strong demand for the Company's
services along with additional growth through acquisitions. Revenues in 1995
rose 9 percent from $2.6 billion in 1994.
-20-
<PAGE>
Staffing Services' revenues grew 39 percent in 1996 and 24 percent in 1995.
Acquisitions accounted for 22 percent of the growth in 1996 and 5 percent in
1995, with the balance resulting from increases in volume and pricing. We
continue to expand our Information Technology Services business, and our
businesses in Europe and Latin America.
Health Services' revenues were essentially flat in 1996 compared to 1995, and
decreased 4 percent in 1995 versus 1994. Increases in Quantum's revenues, due to
the introduction of new businesses and an increase in the Company's managed care
business, were offset by a decrease in Medicare visits and the sale of certain
operations in 1996. The decrease in 1995 resulted primarily from divestitures
made by the Company in order to strategically position itself.
Cost of services sold increased 24 percent, to $2.4 billion in 1996; 9 percent,
to $2 billion in 1995; and 9 percent, to $1.8 billion in 1994, due primarily to
the growth of revenues. Gross margins as a percentage of revenues were 28.3
percent in 1996 and 30.4 percent in both 1995 and 1994. Gross profit margin on a
consolidated basis was negatively impacted by the change in the Staffing/Health
Services business mix. Staffing Services, which operates at lower margins,
comprised a larger percentage of the total revenues in 1996 as compared to 1995.
In addition, Staffing Services' gross profit margins declined due to the
significant growth of longer-term, higher-volume, lower-margin corporate account
contracts and large regional "partnerships" with major companies. International
margins were reduced due to competitive pricing pressures and increases in
certain statutory costs. The decline in Health Services' gross margins can be
attributed to pricing pressure from large managed care contracts, as well as a
reduction in visits caused by the migration of Medicare patients to health
maintenance organizations and competing home health agencies created by
hospitals.
Selling, general and administrative expenses as a percentage of revenues were
22.7 percent, or $767 million; 24.3 percent, or $684 million; and 24 percent, or
$621 million; in 1996, 1995 and 1994, respectively. The decrease, as a
percentage of revenues in 1996 versus 1995, resulted from both enhanced cost
control and increased revenues. The increase, as a percentage of revenues in
1995 versus 1994, resulted from Quantum's expanded support to its field
operation, development of its information systems, startup of a subsidiary and
expansion of its management team.
Net interest expense of $12.3 million, $4.9 million and $6.4 million, in 1996,
1995 and 1994, respectively, reflected borrowing costs on long-term debt offset
by interest income on investments. The increase in 1996 resulted from interest
expense incurred as the Company continued to fund its acquisition program. The
decrease in 1995 resulted from repayment of debt in 1994 and increased income on
investments in 1995.
The combination of the factors previously described increased pre-tax income
from operations, excluding merger, integration and other non-recurring charges,
to $174.9 million in 1996, compared to $167.7 million in 1995 and $158 million
in 1994.
The 1996 effective income tax rate was 40.7 percent, compared to 42 percent in
1995 and 41.6 percent in 1994. The Company's effective rate has exceeded the
Federal statutory rate primarily because of non-deductible goodwill amortization
and state income taxes, which vary from year to year in relation to the mix of
taxable income by state.
-21-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Working capital at December 29, 1996, including $105.7 million in cash, was $616
million, an increase of 25 percent over the prior year. Receivables, net,
increased $144.4 million, or 28 percent, predominantly due to revenue growth and
acquisitions. Fixed assets, net, increased $20.9 million, or 19 percent,
primarily relating to computer system and equipment purchases. Intangibles,
principally goodwill, net, increased $123.2 million, or 42 percent, resulting
from acquisitions, offset by amortization of intangibles.
The Company has a new revolving credit agreement with a consortium of 11 banks
for up to $400 million in borrowings and letters of credit. As of December 29,
1996, there were $45 million in borrowings and $47 million in standby letters of
credit outstanding. The Company has invested available funds in secure,
short-term, interest-bearing investments. The Company believes that its levels
of working capital, liquidity and available sources of funds are sufficient to
support present operations and to continue to fund future growth and business
opportunities as the Company increases the scope of its services.
The Company's annual dividend on common stock and Class B common stock was $.28
per share.
-22-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The following financial statements of Registrant are included in this
Report:
Page(s) in this Report
----------------------
Consolidated Financial Statements:
Balance Sheets as of December 29, 1996 and F-2
December 31, 1995
Statements of Income for the three years F-3
ended December 29, 1996
Statements of Changes in Shareholders' Equity F-4
for the three years ended December 29, 1996
Statements of Cash Flows for the three years F-5
ended December 29, 1996
Notes to Consolidated Financial Statements F-6 - F-18
Report of Independent Auditors F-19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
There have been no such changes or disagreements.
PART III
Item 10. Directors and Executive Officers of the Registrant.
See the information under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in Registrant's definitive Proxy Statement with
respect to its 1997 Annual Meeting of Shareholders to be filed
with the Securities and Exchange Commission, which information is
incorporated herein by reference. See also the information with
respect to executive officers of Registrant under Item 4(a) of
PART I hereof, which information is incorporated herein by
reference.
-23-
<PAGE>
Item 11. Executive Compensation.
See the information under the captions "Election of
Directors," "Summary Compensation Table," "Option Grants in Last
Fiscal Year," "Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values," "Retirement Plan,"
"Employment Contracts, Termination of Employment and Change-in-
Control Arrangements" and "Compensation Committee Report on
Executive Compensation" in Registrant's definitive Proxy
Statement with respect to its 1997 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
See the information under the caption "Security
Ownership of Certain Beneficial Owners and Management" in
Registrant's definitive Proxy Statement with respect to its 1997
Annual Meeting of Shareholders to be filed with the Securities
and Exchange Commission, which information is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions.
See the information under the caption "Certain Business
Relationships" in Registrant's definitive Proxy Statement with
respect to its 1997 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission, which information is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.
(a)(1) Financial Statements
See Index to Financial Statements attached (Page
F-1).
-24-
<PAGE>
(a)(2) Financial Statement Schedules
Schedules have been omitted since they are either not required
or are not applicable or the required information is shown in
the financial statements or related notes.
(a)(3) Exhibits:
3(a) Restated Certificate of Incorporation of Registrant,
as amended, filed as Exhibit 4.1 to Registrant's
Registration Statement on Form S-8 (File No.
33-61761), is incorporated herein by reference.
3(b) By-Laws of Registrant, filed as Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the year
ended January 2, 1994, are incorporated herein by
reference.
4(a) Restated Certificate of Incorporation
of Registrant, as amended, filed as
Exhibit 3(a).
4(b) By-Laws of Registrant, filed as Exhibit
3(b).
4(c) Indenture dated as of March 15, 1996
between Registrant and First Union
National Bank, as Trustee, relating to
Registrant's 7% Senior Notes due 2006,
filed as Exhibit 4 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, is
incorporated herein by reference.
4(d) Form of Indenture dated as of October
8, 1993 between Quantum Health
Resources, Inc. and First Trust
National Association, as Trustee,
relating to 4-3/4% Convertible
Subordinated Debentures Due 2000 of
Quantum Health Resources, Inc., filed
as Exhibit 4.1 to Registration
Statement on Form S-3 (Reg. No. 33-
69088) of Quantum Health Resources,
Inc., is incorporated herein by
reference.
+4(e) Supplemental Indenture dated as of June
28, 1996 between Quantum Health
Resources, Inc. and First Trust
National Association, as Trustee.
- -----------------
+ Filed herewith
-25-
<PAGE>
*10(a) Registrant's 1984 Incentive Stock Option Plan, as
amended, filed as Exhibit 10(a) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein
by reference.
*10(b) Registrant's Incentive Restricted Stock Plan, as
amended, filed as Exhibit 10(e) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(c) Form of agreement under Registrant's Incentive
Restricted Stock Plan, filed as Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the year
ended December 30, 1990, is incorporated herein by
reference.
10(d) Credit Agreement dated as of August 9,
1996 among Registrant, the Banks
signatory thereto and The Chase
Manhattan Bank, as Agent, covering $400
million credit facility, filed as
Exhibit 10 to Registrant's Quarterly
Report on Form 10-Q for the quarter
ended June 30, 1996, is incorporated
herein by reference.
*10(e) Registrant's 1990 Non-Qualified Stock Option Plan
for Non-Employee Directors and Consultants, as
amended and restated, is incorporated by reference
to Exhibit C to Registrant's definitive Proxy
Statement with respect to its 1995 Annual Meeting of
Shareholders.
*10(f) Registrant's Supplemental Retirement Plan for Key
Executives filed as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the year ended
January 3, 1993, is incorporated herein by
reference.
*10(g) Registrant's Executive Voluntary
Deferred Compensation Plan and Trust
Agreement between Registrant and
Prudential Trust Company, filed as
Exhibit 10(k) to Registrant's Annual
Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein
by reference.
- --------------------
*Management contract or compensatory plan or arrangement.
-26-
<PAGE>
*10(h) Registrant's Retirement Plan for Outside Directors
and Consultants, filed as Exhibit 10(l) to
Registrant's Annual Report on Form 10-K for the year
ended January 2, 1994, is incorporated herein by
reference.
*10(i) Registrant's Deferred Compensation Plan for Outside
Directors, filed as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(j) Employment Agreement dated March 28, 1994 between
Registrant and Frank N. Liguori, filed as Exhibit
10(q) to Registrant's Annual Report on Form 10-K for
the year ended January 2, 1994, is incorporated
herein by reference.
+*10(k) Amendment dated March 27, 1996 to
Employment Agreement between Registrant
and Frank N. Liguori.
*10(l) Agreement dated November 8, 1993
between Registrant and Frank N. Liguori
covering incentive award under
Incentive Restricted Stock Plan and
amendment thereto dated March 27, 1994,
filed as Exhibit 10(r) to Registrant's
Annual Report on Form 10-K for the year
ended January 2, 1994, is incorporated
herein by reference.
*10(m) Form of change in control agreement
between Registrant and each of Robert
A. Fusco, Richard A. Piske, III and
Anthony J. Puglisi, filed as Exhibit
10(o) to Registrant's Annual Report on
Form 10-K for the year ended January 1,
1995, is incorporated herein by
reference.
*10(n) Registrant's 1994 Stock Incentive Plan, as amended
and restated, is incorporated by reference to
Exhibit B to Registrant's definitive Proxy Statement
with respect to its 1995 Annual Meeting of
Shareholders.
- --------------------
*Management contract or compensatory plan or arrangement.
+Filed herewith.
-27-
<PAGE>
*10(o) Registrant's Executive Officer Bonus Plan is
incorporated by reference to Exhibit C to
Registrant's definitive Proxy Statement with respect
to its 1994 Annual Meeting of Shareholders.
10(p) Lease Agreement dated as of April 1,
1995 between Suffolk County Industrial
Development Agency and OLS Holdings,
Inc. covering headquarters facility at
175 Broad Hollow Road, Melville, New
York, filed as Exhibit 10(t) to
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995,
is incorporated herein by reference.
+21 Subsidiaries of Registrant.
+23 Consent of Coopers & Lybrand L.L.P.,
independent auditors.
+27 Financial Data Schedule.
(b) Reports on Form 8-K
During the last quarter of the period covered by this report,
Registrant filed a report on Form 8-K, dated November 21,
1996, reporting in Item 5, Other Events, that Registrant had
released a press release dated November 21, 1996, which was
filed as an Exhibit.
- --------------------
*Management contract or compensatory plan or arrangement.
+Filed herewith.
-28-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 27, 1997 By:/s/ Frank N. Liguori
-----------------------
Frank N. Liguori
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, 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: March 27, 1997 By:/s/ Frank N. Liguori
-----------------------
Frank N. Liguori
Chairman and Chief
Executive Officer and Director
(Principal Executive Officer)
Date: March 27, 1997 By:/s/ Anthony J. Puglisi
-------------------------
Anthony J. Puglisi
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 27, 1997 By:/s/ Andrew N. Heine
----------------------
Andrew N. Heine
Director
Date: March 27, 1997 By:/s/ Stuart R. Levine
-----------------------
Stuart R. Levine
Director
Date: March 27, 1997 By:/s/ John M. May
------------------
John M. May
Director
Date: March 27, 1997 By:/s/ Miriam Olsten
--------------------
Miriam Olsten
Director
Date: March 27, 1997 By:/s/ Stuart Olsten
--------------------
Stuart Olsten
Director
-29-
<PAGE>
Date: March 27, 1997 By:/s/ Richard J. Sharoff
-------------------------
Richard J. Sharoff
Director
Date: March 27, 1997 By:/s/ Raymond S. Troubh
------------------------
Raymond S. Troubh
Director
Date: March 27, 1997 By:/s/ Josh S. Weston
---------------------
Josh S. Weston
Director
-30-
<PAGE>
OLSTEN CORPORATION and SUBSIDIARIES
INDEX to FINANCIAL STATEMENTS
--------
Pages
-----
Consolidated Financial Statements:
Balance Sheets as of December 29, 1996 and F-2
December 31, 1995
Statements of Income for the three years F-3
ended December 29, 1996
Statements of Changes in Shareholders' Equity F-4
for the three years ended December 29, 1996
Statements of Cash Flows for the three F-5
years ended December 29, 1996
Notes to Consolidated Financial Statements F-6 - F-18
Report of Independent Auditors F-19
F-1
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<CAPTION>
In thousands, except share amounts December 29, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 105,725 $ 107,418
Receivables, less allowance for
doubtful accounts of $26,299
and $30,660, respectively 661,806 517,434
Inventories 52,440 46,488
Prepaid expenses and other current assets 23,628 26,197
Refundable and deferred taxes 34,836 20,407
------- -------
Total current assets 878,435 717,944
Fixed assets, net 130,021 109,092
Intangibles, principally goodwill, net of
accumulated amortization of $84,534
and $68,677, respectively 413,549 290,342
Other assets 17,235 21,032
--------- ---------
$ 1,439,240 $ 1,138,410
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accrued expenses $ 111,325 $ 79,168
Accounts payable 58,920 57,323
Payroll and related taxes 57,059 52,124
Insurance costs 35,538 35,359
------- -------
Total current liabilities 262,842 223,974
Long-term debt 330,329 267,030
Other liabilities 76,796 61,017
Commitments -- --
Shareholders' equity
Common stock $.10 par value; authorized 110,000,000 shares; issued 66,652,997
shares and 50,428,046 shares,
respectively 6,665 5,043
Class B common stock $.10 par value;
authorized 50,000,000 shares;
issued 14,086,024 shares and 23,059,502
shares, respectively 1,409 2,306
Additional paid-in capital 438,956 294,758
Retained earnings 320,496 286,037
Cumulative translation adjustment 1,747 (1,755)
--------- ---------
Total shareholders' equity 769,273 586,389
--------- ---------
$ 1,439,240 $ 1,138,410
See notes to consolidated financial statements. ========= =========
</TABLE>
F-2
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
For the Three Years Ended December 29, 1996
<CAPTION>
In thousands, except share amounts December 29, 1996 December 31, 1995 January 1, 1995
----------------- ----------------- ---------------
<S> <C> <C> <C>
Service sales, franchise
fees, management fees and
other income $3,377,729 $2,813,768 $2,588,697
Cost of services sold 2,423,491 1,956,986 1,802,919
--------- --------- ---------
Gross profit 954,238 856,782 785,778
Selling, general and administrative
expenses 767,117 684,170 621,450
Interest expense, net 12,260 4,870 6,376
Merger, integration and other
non-recurring charges 80,000 12,308 --
--------- --------- ---------
Income before income taxes and
minority interests 94,861 155,434 157,952
Income taxes 38,627 65,231 65,722
--------- --------- ---------
Income before minority interests 56,234 90,203 92,230
Minority interests 1,592 (87) (10)
--------- --------- ---------
Net income $ 54,642 $ 90,290 $ 92,240
========= ========= =========
SHARE INFORMATION:
Primary earnings per share:
Net income $ .70 $ 1.21 $ 1.25
========= ========= =========
Average shares outstanding 78,254 74,438 73,894
========= ========= =========
Fully diluted earnings per share:
Net income $ .70 $ 1.18 $ 1.22
========= ========= =========
Average shares outstanding 78,254 81,684 81,259
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
-------------------------------
For the Three Years Ended December 29, 1996
<CAPTION>
Common stock Additional Cumulative
-------------- paid-in Retained translation
In thousands, except share amounts Shares Amount capital earnings adjustment Total
-------- -------- ---------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 2, 1994 50,566,911 $5,057 $273,928 $126,960 $(1,604) $404,341
Net income -- -- -- 92,240 -- 92,240
Cash dividends -- -- -- (9,896) (9,896)
Translation adjustment -- -- -- -- 110 110
Exercise of stock options and
employee stock purchases 659,086 66 12,941 -- -- 13,007
Amortization of restricted stock -- -- 2,299 -- -- 2,299
Conversion of debentures 636,109 64 13,821 -- -- 13,885
---------- ----- ------- ------- ------ -------
Balance at January 1, 1995 51,862,106 5,187 302,989 209,304 (1,494) 515,986
Net income -- -- -- 90,290 -- 90,290
Cash dividends -- -- -- (13,557) -- (13,557)
Translation adjustment -- -- -- -- (261) (261)
Exercise of stock options and
employee stock purchases 568,483 57 5,682 -- -- 5,739
Amortization of restricted stock -- -- 702 -- -- 702
Repurchase
and retirement of
common stock (388,020) (39) (12,471) -- -- (12,510)
Three-for-two stock split 21,444,979 2,144 (2,144) -- -- --
---------- ----- ------- ------- ------ -------
Balance at December 31, 1995 73,487,548 7,349 294,758 286,037 (1,755) 586,389
Net income -- -- -- 54,642 -- 54,642
Cash dividends -- -- -- (20,183) -- (20,183)
Translation adjustment -- -- -- -- 3,502 3,502
Exercise of stock options,
warrants and employee stock
purchases 1,870,185 187 20,916 -- -- 21,103
Amortization of restricted stock -- -- 952 -- -- 952
Conversion of debentures 5,381,288 538 122,330 -- -- 122,868
---------- ----- ------- ------- ------ -------
Balance at December 29, 1996 80,739,021 $8,074 $438,956 $320,496 $ 1,747 $769,273
========== ===== ======= ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Three Years Ended December 29, 1996
<CAPTION>
In thousands December 29, 1996 December 31, 1995 January 1, 1995
----------------- ----------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $54,642 $90,290 $92,240
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Depreciation and amortization 43,897 35,645 27,781
Provision for doubtful accounts 20,342 18,193 12,261
Deferred income taxes (446) 5,009 14,127
Changes in assets and liabilities,
net of effects from acquisitions
and dispositions:
Accounts receivable (127,071) (86,904) (23,537)
Inventories, prepaid expenses
and refundable taxes (15,679) (7,514) (10,558)
Current liabilities 14,426 (5,210) 2,793
Other, net (10,631) (17,713) 8,214
Net cash (used in) provided by -------- -------- --------
operating activities (20,520) 31,796 123,321
-------- -------- --------
INVESTING ACTIVITIES:
Acquisitions of businesses and
reacquisitions of franchises (136,218) (90,249) (10,393)
Purchases of fixed assets (47,375) (52,865) (50,723)
Disposition of fixed assets and
businesses 12,381 16,141 6,698
Net proceeds from sale (purchases)
of investment securities 842 22,292 (16,563)
Net cash used in investing -------- -------- --------
activities (170,370) (104,681) (70,981)
-------- -------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of
senior notes 197,224 -- --
Issuances of common stock under
stock plans 21,103 5,739 13,007
Cash dividends (20,183) (13,557) (9,896)
Net (repayment of) proceeds from
line of credit agreements (8,947) 56,205 (34,060)
Repurchase and retirement of
common stock -- (12,510) --
Net cash provided by (used in) -------- -------- --------
financing activities 189,197 35,877 (30,949)
-------- -------- --------
Net (decrease) increase in cash (1,693) (37,008) 21,391
Cash at beginning of year 107,418 144,426 123,035
-------- -------- --------
Cash at end of year $ 105,725 $ 107,418 $ 144,426
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for income taxes $ 64,073 $ 33,302 $ 33,163
Cash payments for interest $ 15,260 $ 11,695 $ 12,130
NON-CASH TRANSACTIONS:
Conversion of debt to equity $ 124,846 $ -- $ 13,885
</TABLE>
See notes to consolidated financial statements. F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly- owned and majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated. The Company's fiscal year ends
on the Sunday nearest to December 31st. Certain prior period amounts have been
reclassified to conform with the current year presentation.
Revenue Recognition
Service sales and the related labor costs and payroll taxes are recorded in the
period in which the services are performed. Franchise fees, which are based upon
contractual percentages of franchise sales, and management fees generated from
management services provided to hospital-based home health agencies, are
included with Company service sales and recorded in the period in which the
services are provided.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
Cash includes equivalents which are highly liquid investments with original
maturities of three months or less.
Inventories
Inventories consist primarily of biological and pharmaceutical products and
supplies held for sale or distribution to patients through prescription. The
Company records inventories at the lower of cost (weighted average cost) or
market.
Fixed Assets
Fixed assets are stated at cost and depreciated over the estimated useful lives
of the assets using the straight-line method. Leasehold improvements are
amortized over the shorter of the life of the lease or the life of the
improvement.
Intangibles
Intangibles, principally goodwill, associated with acquired businesses and the
unexpired terms of reacquired franchise contracts are being amortized on a
straight-line basis primarily over 40 years.
Foreign Currency Translation
Financial statements of international subsidiaries are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and a weighted average exchange rate for each period for revenues,
expenses, and gains and losses. Where the local currency is the functional
currency, translation adjustments are recorded as a separate component of
shareholders' equity.
F-6
<PAGE>
Income Taxes
The Company provides for taxes based on current taxable income and the future
tax consequences of temporary differences between the financial reporting and
income tax carrying values of its assets and liabilities. Under SFAS No. 109,
assets and liabilities acquired in purchase business combinations are assigned
their fair values, and deferred taxes are provided for lower or higher tax
bases.
Earnings Per Share
Primary earnings per share are based on the weighted average number of shares of
common stock and Class B common stock outstanding during the period, after
giving effect to potentially dilutive options and warrants under the treasury
stock method. In calculating fully diluted earnings per share, both net income
and shares outstanding have been adjusted to assume the Company's convertible
debt had been converted to common stock at the beginning of each period.
Accounting Changes
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This Statement requires that
certain assets be reviewed for impairment and, if impaired, remeasured at fair
value, whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. The adoption of SFAS No. 121 at
January 1, 1996 and its application during 1996, had no material impact on the
Company's financial position or results of operations.
Note 2. Acquisitions
On June 28, 1996, the Company completed the acquisition of Quantum Health
Resources, Inc. ("Quantum"), a provider of alternate site therapies and support
services to individuals affected by certain chronic diseases and other
disorders. As a result, the Company issued approximately 8.8 million shares of
Class B common stock in exchange for all the outstanding Quantum capital 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 Quantum. Certain reclassifications have been made to conform
Quantum's results to the Company's presentation. Operating results previously
reported for the separate companies, including Quantum's non-recurring charges
of $12.3 million ($7.4 million, net of tax) in 1995 and $5.5 million ($3.2
million, net of tax) in the first three months of 1996, for periods prior to the
acquisition, are as follows:
F-7
<PAGE>
<TABLE>
Three Months Ended
Year Ended (unaduited)
-------------------------- ------------------------
<CAPTION>
December 31, January 1, March 31, April 2,
1995 1995 1996 1995
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other income:
Olsten $2,518,875 $2,307,667 $ 683,214 $ 590,350
Quantum 286,154 274,979 80,032 71,313
--------- --------- --------- ---------
$2,805,029 $2,582,646 $ 763,246 $ 661,663
========= ========= ========= =========
Net income (loss):
Olsten $ 90,469 $ 71,242 $ 23,003 $ 19,092
Quantum 1,016 21,641 (1,354) 3,922
--------- --------- --------- ---------
$ 91,485 $ 92,883 $ 21,649 $ 23,014
========= ========= ========= =========
</TABLE>
On August 9, 1996, the Company completed the acquisition of Co-Counsel, Inc.
("Co-Counsel"), a provider of temporary and full-time attorneys and paralegals
to law firms and corporate law departments. As a result, the Company issued
approximately 400 thousand shares of Class B common stock in exchange for all
the Co-Counsel capital 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 Co-Counsel. Operating results
previously reported for the separate companies, for periods prior to the
acquisition, are as follows:
<TABLE>
Six Months Ended
Year Ended (unaduited)
-------------------------- ------------------------
<CAPTION>
December 31, January 1, June 30, July 2,
1995 1995 1996 1995
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other income:
Olsten $2,805,029 $2,582,646 $1,564,574 $1,351,630
Co-Counsel 8,739 6,051 5,812 3,971
--------- --------- --------- ---------
$2,813,768 $2,588,697 $1,570,386 $1,355,601
========= ========= ========= =========
Net income (loss):
Olsten $ 91,485 $ 92,883 $ 51,684 $ 47,498
Co-Counsel (1,195) (643) (494) (215)
--------- --------- --------- ---------
$ 90,290 $ 92,240 $ 51,190 $ 47,283
========= ========= ========= =========
</TABLE>
During 1996, the Company acquired various businesses which were accounted for by
the purchase method of accounting.
In January 1996, the Company completed its purchase of OFFiS Unternehmen fur
Zeitarbeit GmbH & Co. KG (OFFiS) for $47.5 million in cash. Additionally, the
F-8
<PAGE>
Company's 50.1% owned Norwegian subsidiary, Norsk Personal AS, acquired
Kontorsjouren AB for $5.3 million in cash. In February 1996, the Company
acquired Top Notch Temporary Services, Inc. and Multiforce Temporary Services,
Inc. for $5.5 million in cash plus net assets acquired of approximately $4
million. In August 1996, the Company acquired Flatley Employment Services, Inc.,
a temporary and technical services company, for $8 million in cash. During 1996,
the Company acquired several other Staffing Services businesses for an aggregate
purchase price of $20.1 million.
The Company's Information Technology Services subsidiaries completed the
acquisitions of ARMS, Inc. in March 1996 for $14.5 million in cash, Systems
Partners, Inc. and Computer Partners International Corporation in June 1996 for
$10.4 million in cash, and U.K.-based Harvey Consultants Ltd. in August 1996 for
$6.1 million. In January 1997, one of the Company's Information Technology
subsidiaries completed the acquisition of Vistech, Inc. for $17.5 million in
cash.
The Company's Legal Staffing Services subsidiary completed the acquisitions of
five legal services companies in the fourth quarter of 1996 for a total of $11.4
million in cash.
In February 1996, the Company completed its purchase of PartnersFirst
Management, Inc., a manager and provider of services to hospital-owned home
health agencies, for $11.4 million in cash. In October 1996, the Company
acquired Central Health Services, a home health agency, for $7.8 million in
cash. During 1996, the Company purchased several other Health Services
businesses for an aggregate purchase price of $7.4 million.
The results of operations of the acquired companies are included in the
Company's 1996 consolidated Statement of Income from dates of acquisition.
Proforma results of operations are not presented as the proforma impact of the
purchased acquisitions was not significant to the Company's Financial
Statements.
Note 3. Merger, Integration and Other Non-Recurring Charges
In 1996, the Company recorded merger, integration and other non-recurring
charges totalling $80 million ($48.2 million, net of tax), or $.62 per share.
These non-recurring charges before taxes consist of merger and integration
charges resulting from the Quantum and Co-Counsel acquisitions of $44.5 million
($27 million, net of tax), and include transaction costs of $8.1 million;
compensation and severance costs of $12.4 million; asset writedowns of $8.2
million; and integration costs of $15.8 million. The remaining non-recurring
charges before taxes, which approximate $30 million ($18 million, net of tax),
pertain to certain allowances for a change in the methodology used by Medicare
for computing reimbursements in prior years related to the Company's home health
care business, and Quantum's charge of $5.5 million ($3.2 million, net of tax)
related to settlement of shareholder litigation. At December 29, 1996, $26
million of the acquisition charge and $30 million of the allowances remained
unpaid and were included in accrued expenses and accounts receivable,
respectively.
In 1995, Quantum recorded charges totalling $12.3 million ($7.4 million, net of
tax), or $.09 per share relating to a settlement associated with a State of
California billing dispute of $6.3 million ($3.8 million, net of tax); a
writeoff of Quantum's physician practice management business of $2.2 million
($1.3 million, net of tax); and a charge of $3.8 million ($2.3 million, net of
tax) representing costs of relocating Quantum's corporate headquarters.
F-9
<PAGE>
Note 4. Fixed Assets, Net
December 29, 1996 December 31, 1995
----------------- -----------------
Computer equipment and software $ 94,004 $ 62,833
Furniture and fixtures 68,613 62,055
Buildings and improvements 48,792 43,507
Machinery and equipment 17,083 15,850
------- -------
228,492 184,245
Less accumulated depreciation
and amortization 98,471 75,153
------- -------
$ 130,021 $ 109,092
======= =======
Note 5. Long-Term Debt
December 29, 1996 December 31, 1995
----------------- -----------------
7% Senior Notes due 2006, net of
unamortized discount $ 199,051 $ --
4 3/4% Convertible Subordinated
Debentures due 2000 86,250 86,250
4 7/8% Convertible Subordinated
Debentures due 2003 -- 125,000
Revolving credit agreements 45,028 55,780
------- -------
$ 330,329 $ 267,030
======= =======
In March 1996, the Company issued $200 million in 7% Senior Notes due 2006. The
proceeds were used to repay a portion of its revolving credit facility; to
expand the Company's existing office network and the types of services provided
to clients, both internally and through acquisitions; and for general working
capital purposes.
Quantum issued $86.3 million of 4 3/4% Convertible Subordinated Debentures
maturing in 2000. The debentures are convertible into the Company's Class B
common stock at $52.26 per share.
In May 1996, the Company called for redemption all of its $125 million
outstanding 4 7/8% Convertible Subordinated Debentures due 2003. The debentures
were converted into the Company's common stock at $23.20 per share.
The Company has a revolving credit agreement with 11 banks, providing for up to
$400 million in borrowings and letters of credit with interest rates based on
the London Interbank Offered Rate (LIBOR), the United States prime rate, or the
Eurocurrency rate. The agreement expires in 2001. The agreement provides for the
maintenance of various financial ratios and covenants. As of December 29, 1996,
there were $45 million in borrowings and $47 million in standby letters of
credit outstanding.
Interest expense is net of interest income of $9.1 million in 1996, $8.2 million
in 1995, and $6.8 million in 1994.
F-10
<PAGE>
Note 6. Lease Commitments
The Company rents certain properties under noncancellable, long-term operating
leases which expire at various dates. Certain of these leases require additional
payments for taxes, insurance and maintenance and, in many cases, provide for
renewal options. Rent expense under all leases was $44,364 in 1996, $38,338 in
1995 and $39,902 in 1994.
Future minimum rental commitments for all noncancellable leases having a
remaining term in excess of one year at December 29, 1996 are as follows:
$
1997 35,972
1998 29,366
1999 21,085
2000 12,266
2001 6,541
Thereafter 24,707
Note 7. Shareholders' Equity
Common stock consists of shares of common stock and Class B common stock as
follows:
December 29, 1996 December 31,1995 January 1, 1995
----------------- ---------------- ---------------
Common stock 66,652,997 50,428,046 32,257,321
Class B common stock 14,086,024 23,059,502 19,604,785
---------- ---------- ----------
80,739,021 73,487,548 51,862,106
========== ========== ==========
Each share of Class B common stock is convertible into one share of common
stock, has a par value of $.10 and is entitled to 10 votes. The Company is also
authorized to issue 250,000 shares of preferred stock; no shares have been
issued.
Lifetime Corporation ("Lifetime"), which was merged into the Company in 1993,
had previously issued warrants to purchase shares of its common stock in
connection with the sale of convertible debentures which Lifetime subsequently
repaid. As a result of the merger and as modified by the settlement of a class
action lawsuit, the warrant holders were entitled to exchange four warrants plus
$16.11 for 1.27 Olsten Class B common shares. During 1996, 1,326,000 shares were
issued in relation to the exercise of substantially all of the Company's
warrants. The remaining warrants expired on October 31, 1996.
Note 8. Stock Plans
In 1996, the Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been recognized
under the stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant date for
awards in 1996 and 1995 consistent with the provisions of SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the
proforma amounts indicated below:
F-11
<PAGE>
December 29, December 31,
1996 1995
------------ ------------
$ $
Net income - as reported 54,642 90,290
Net income - proforma 52,585 89,381
Primary earnings per share - as reported .70 1.21
Primary earnings per share - proforma .67 1.20
Fully diluted earnings per share - as reported .70 1.18
Fully diluted earnings per share - proforma .67 1.17
The effects of applying SFAS No. 123 in this proforma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995, and additional awards in future years are anticipated.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: dividend yield of 1 percent;
expected volatility of 33 percent; risk-free interest rate of 6.5 percent; and
expected lives of 6 years.
In 1994, shareholders of the Company approved the adoption of the 1994 Stock
Incentive Plan ("1994 Plan") under which an aggregate of 3 million shares of
common stock were reserved for issuance upon exercise of options thereunder.
These options may be awarded in the form of incentive stock options ("ISOs") or
non-qualified stock options ("NQSOs"). The option price of an ISO cannot be less
than 100 percent, and the option price of the NQSO cannot be less than 85
percent of the fair market value at the date of the grant. This plan replaced
the 1984 Incentive Stock Option Plan ("1984 ISO Plan") and the 1984 Non-
Qualified Stock Option Plan ("1984 NQSO Plan"), which terminated in February
1994, except as to options then outstanding. In 1995, shareholders of the
Company approved amendments to the 1994 Plan which increased the maximum term of
stock options granted under the 1994 Plan from five years to ten years and
extended eligibility under the 1994 Plan to the Company's franchisees and
licensees. Options become cumulatively exercisable commencing one year after
grant in four equal annual installments. At December 29, 1996, there were
options outstanding of 1,685,870 and 240,376 for the 1994 Plan and 1984 ISO
Plan, respectively.
In 1991, shareholders of the Company approved the adoption of the Non-Qualified
Stock Option Plan for Non-Employee Directors and Consultants ("Non-Employee
Plan") authorizing the grant of options to outside directors and consultants to
purchase up to an aggregate of 225,000 shares of common stock. In 1995,
shareholders of the Company approved an amendment to the Non-Employee Plan to
increase the maximum term of stock options thereafter granted under the Non-
Employee Plan from five years to ten years. Under the Non-Employee Plan, options
may be granted at prices not less than fair market value at the date of grant
and become exercisable no earlier than six months from the date of grant. At
December 29, 1996, 103,500 options were outstanding under this plan.
Lifetime maintained four stock option plans, including a Non-Employee Director
Stock Option Plan. Options were granted under all plans at not less than the
fair market value at the date of grant. At the merger date, all of the currently
vested options under these plans were exchanged for Olsten Class B common stock
equal to their net economic value. Remaining outstanding options were converted
to options for Olsten Class B shares and are exercisable over various periods
not exceeding five years from the date of grant. At December 29, 1996, 96,849
F-12
<PAGE>
options were outstanding under the plans. IMI Systems Inc. ("IMI"), which was
acquired by the Company in 1995, maintained three stock option plans, which
authorized the grant of options at not less than the fair market value at the
date of grant. At the acquisition date, all outstanding options were converted
to options for Olsten Class B shares and are exercisable over various periods
not exceeding ten years from their date of grant. At December 29, 1996, 18,121
options were outstanding under these plans. Quantum maintained three stock
option plans. Options were granted for all plans at not less than the fair
market value at the date of grant. At the acquisition date, all outstanding
options were converted to options for Olsten Class B shares and became
immediately exercisable. At December 29, 1996, 392,511 options were outstanding
under these plans. Co-Counsel maintained two stock option plans, including a
Stock Option Plan for Non-Employee Directors. Options were granted for both
plans at not less than the fair market value at the date of grant. At the
acquisition date, all outstanding options were converted to options for Olsten
Class B shares and became immediately exercisable. At December 29, 1996, 15,176
options were outstanding under these plans.
A summary of the Company's stock options for 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ -------------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 2,290,100 $21.80 2,342,669 $17.54 2,564,916 $13.20
Granted 878,142 14.67 900,424 24.19 807,776 29.96
Exercised (287,071) 13.04 (698,687) 7.32 (863,186) 9.85
Cancelled (328,768) 29.76 (254,306) 30.66 (166,837) 27.61
Options outstanding, --------- --------- ---------
end of year 2,552,403 $19.31 2,290,100 $21.80 2,342,669 $19.19
========= ========= =========
Options exercisable,
end of year 1,067,768 $20.73 645,113 $19.30 879,676 $11.01
========= ========= =========
Options available for
grant, end of year 1,345,616 2,335,627 3,345,555
========= ========= =========
Weighted-average fair
value of options
granted during the year $5.87 $9.41 n/a
</TABLE>
F-13
<PAGE>
The following table summarizes information about fixed price stock options
outstanding at December 29, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------------ ---------------------------
Weighted
average Weighted Weighted
Number remaining average Number average
Range of outstanding at contractual exercise exercisable at exercise
exercise prices December 29, 1996 life price December 29, 1996 price
- --------------- ----------------- ----------- -------- ----------------- --------
<S> <C> <C> <C> <C> <C>
$ .86 to 1.08 10,991 2.7 $ .95 10,991 $ .95
1.72 to 2.59 7,633 3.2 1.92 7,633 1.92
4.99 to 7.49 12,692 6.0 5.78 9,728 5.81
7.60 to 10.35 83,422 2.7 9.25 78,512 9.20
12.07 to 17.67 1,243,724 7.9 15.10 397,353 16.41
18.53 to 26.25 1,051,382 6.6 23.08 420,992 22.44
27.80 to 41.38 95,902 7.2 31.88 95,902 31.88
42.24 to 60.35 46,657 6.8 49.54 46,657 49.54
--------- ---------
$ .86 to 60.35 2,552,403 7.1 $19.31 1,067,768 $20.73
========= =========
</TABLE>
Under an Incentive Restricted Stock Plan amended in 1993 and in 1996, up to
2,062,500 shares of common stock may be granted or sold at prices less than the
prevailing market price to officers, key employees and others subject to
restrictions as to transfer or sale. Shares under the plan are generally subject
to restrictions as to transfer which lapse ratably in three and five equal
annual installments commencing one year from the date of grant, provided that
recipients are continuously employed by the Company. At December 29, 1996,
1,195,350 shares were available for future grants.
Additional paid-in capital was net of unearned compensation related to
restricted stock of $1 million and $1.7 million for 1995 and 1994, respectively.
Note 9. Income Taxes
Comparative analysis of the provisions for income taxes follows:
December 29, 1996 December 31, 1995 January 1, 1995
----------------- ----------------- ---------------
Current
Federal $28,911 $48,687 $42,975
State and local 2,282 7,119 6,292
Foreign 7,880 4,416 2,328
------- ------- -------
39,073 60,222 51,595
------- ------- -------
Deferred
Federal (375) 4,226 10,621
State and local (71) 783 3,506
------- ------- -------
(446) 5,009 14,127
------- ------- -------
$38,627 $65,231 $65,722
======= ======= =======
F-14
<PAGE>
Reconciliations of the differences between income taxes computed at the Federal
statutory rate and provisions for income taxes are as follows:
December 29, 1996 December 31, 1995 January 1, 1995
----------------- ----------------- ---------------
Income taxes computed at
Federal statutory tax rate $33,201 $54,402 $55,283
State income taxes,
net of Federal benefit 1,437 5,136 6,369
Amortization 2,680 2,365 2,404
Other, net 1,309 3,328 1,666
------- ------- -------
$38,627 $65,231 $65,722
======= ======= =======
Deferred tax assets and liabilities are as follows:
December 29, 1996 December 31, 1995
----------------- -----------------
Deferred tax assets
Reserves $26,244 $22,116
Intangible assets -- 182
Other 249 379
------- -------
26,493 22,677
------- -------
Deferred tax liabilities
Capitalized software (8,236) (5,228)
Intangible assets (904) --
Other (1,438) (1,980)
------- -------
(10,578) (7,208)
------- -------
Net deferred tax asset $15,915 $15,469
======= =======
Note 10. Benefit Plans for Permanent Employees
The Company and its subsidiaries maintain qualified and non-qualified defined
contribution retirement plans for its salaried employees which provide for a
partial match of employee savings under the plans and for discretionary profit
sharing contributions based on employee compensation. The Company also maintains
a non-qualified defined benefit retirement program for key employees and
officers which provides supplemental retirement benefits funded in part by
profit sharing contributions.
Company contributions under the defined contribution plans were approximately
$5.9 million in 1996, $5.1 million in 1995 and $4.8 million in 1994.
Note 11. Business Segment Information
The Company operates in two business segments:
Staffing Services
F-15
<PAGE>
The Company operates Olsten Staffing Services in the United States and Canada,
and nine staffing companies in Europe and Latin America, providing services to
business, industry and government. The Company's services meet the full range of
business needs, including traditional temporary help, project staffing,
professional-level staffing, strategic "partnerships", regular full-time hires
and outsourcing. The Company's Information Technology Services operations
provide services for the design, development and maintenance of information
systems.
Health Services
The Company operates Olsten Health Services in the United States and Canada,
providing home health-related services, including Network services for managed
care organizations; skilled nursing, home health aide and personal services;
infusion therapy; physical/occupational/neurological/speech therapies; pediatric
and perinatal care; disease management; and institutional, occupational and
alternate site staffing, as well as staffing solutions for pharmaceutical,
biotechnology and medical device firms. The Company also operates Olsten Health
Management, providing management services to hospital-based home health
agencies.
Information about the Company's operations, net of merger, integration and other
non-recurring charges of $80 million ($1 million related to Staffing Services,
$67 million related to Health Services, and $12 million related to Corporate and
other) in 1996 and $12.3 million related to the Health Services segment in 1995,
is as follows:
<TABLE>
<CAPTION>
Service sales,
franchise fees,
management fees Income before Depreciation
and other income taxes and Identifiable and Capital
income minority interests assets amortization expenditures
--------------- ------------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December 29, 1996
- ----------------------------
Staffing Services $1,995,904 $ 80,912 $ 470,342 $ 8,549 $ 13,326
Health Services 1,374,353 12,420 749,893 26,612 24,727
Corporate and other 7,472 1,529 219,005 8,736 9,322
--------- ------- --------- ------ ------
$3,377,729 $ 94,861 $1,439,240 $ 43,897 $ 47,375
========= ======= ========= ====== ======
Year ended December 31, 1995
- ----------------------------
Staffing Services $1,434,042 $ 67,932 $ 277,120 $ 5,767 $ 13,725
Health Services 1,369,382 76,368 712,050 24,883 21,523
Corporate and other 10,344 11,134 149,240 4,995 17,617
--------- ------- --------- ------ ------
$2,813,768 $155,434 $1,138,410 $ 35,645 $ 52,865
========= ======= ========= ====== ======
Year ended January 1, 1995
- ----------------------------
Staffing Services $1,152,022 $ 46,564 $ 182,740 $ 3,125 $ 6,047
Health Services 1,422,315 100,597 618,215 20,949 22,546
Corporate and other 14,360 10,791 178,759 3,707 22,130
--------- ------- --------- ------ ------
$2,588,697 $157,952 $ 979,714 $ 27,781 $ 50,723
========= ======= ========= ====== ======
</TABLE>
F-16
<PAGE>
Financial information, summarized by geographic area, net of merger, integration
and other non-recurring charges of $80 million in 1996 and $12.3 million in
1995, both reflected in the United States results, is as follows:
<TABLE>
<CAPTION>
Service sales,
franchise fees,
management fees Income before
and other income taxes and Identifiable
income minority interests assets
--------------- ------------------ ------------
<S> <C> <C> <C>
Year ended December 29, 1996
- ----------------------------
United States $2,845,983 $ 67,473 $1,209,844
Europe 366,501 22,295 181,375
Canada 115,314 4,586 28,942
Latin America 49,931 507 19,079
--------- ------- ---------
$3,377,729 $ 94,861 $1,439,240
========= ======= =========
Year ended December 31, 1995
- ----------------------------
United States $2,556,625 $ 142,682 $1,034,532
Europe 171,360 12,883 80,892
Canada 77,330 355 17,226
Latin America 8,453 (486) 5,760
--------- ------- ---------
$2,813,768 $ 155,434 $1,138,410
========= ======= =========
Year ended January 1, 1995
- --------------------------
United States $2,429,947 $ 147,951 $ 939,429
Europe 93,246 7,596 29,308
Canada 65,504 2,405 10,977
--------- ------- ---------
$2,588,697 $ 157,952 $ 979,714
========= ======= =========
</TABLE>
F-17
<PAGE>
Note 12. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended December 29, 1996
- ----------------------------
$ $ $ $
Service sales, franchise fees,
management fees and other income 766,043 804,343 876,369 930,974
Gross profit 231,021 237,961 246,095 239,161
Net income (loss) 21,425 29,765 (13,098) 16,550
SHARE INFORMATION:
Primary earnings (loss) per share .29 .38 (.16) .21
Fully diluted earnings (loss) per share .28 .37 (.16) .21
Year ended December 31, 1995
- ----------------------------
Service sales, franchise fees,
management fees and other income 663,698 691,903 719,590 738,577
Gross profit 202,219 211,456 219,699 223,408
Net income 22,890 24,393 17,677 25,330
SHARE INFORMATION:
Primary earnings per share .31 .33 .24 .34
Fully diluted earnings per share .30 .32 .24 .33
</TABLE>
F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Board of Directors of Olsten Corporation:
We have audited the accompanying consolidated balance sheets of Olsten
Corporation and Subsidiaries as of December 29, 1996 and December 31, 1995 and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 29,
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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Olsten Corporation
and Subsidiaries as of December 29, 1996 and December 31, 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 29, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 6, 1997
F-19
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description How Filed
- ----------- ----------- ---------
3(a) Restated Certificate of Incorporated by
Incorporation of Registrant, as reference
amended, filed as Exhibit 4.1 to
Registrant's Registration Statement
on Form S-8 (File No. 33-61761), is
incorporated herein by reference.
3(b) By-Laws of Registrant, filed as Incorporated by
Exhibit 3(b) to Registrant's Annual reference
Report on Form 10-K for the year
ended January 2, 1994, are
incorporated herein by reference.
4(a) Restated Certificate of Incorporated by
Incorporation of Registrant, as reference
amended, filed as Exhibit 3(a).
4(b) By-Laws of Registrant, filed as Incorporated by
Exhibit 3(b). reference
4(c) Indenture dated as of March 15, Incorporated by
1996 between Registrant and First reference
Union National Bank, as Trustee,
relating to Registrant's 7% Senior
Notes due 2006, filed as Exhibit 4
to Registrant's Quarterly Report on
Form 10-Q for the quarter ended
March 31, 1996, is incorporated
herein by reference.
4(d) Form of Indenture dated as of Incorporated by
October 8, 1993 between Quantum reference
Health Resources, Inc. and First
Trust National Association, as
Trustee, relating to 4-3/4%
Convertible Subordinated Debentures
Due 2000 of Quantum Health
Resources, Inc., filed as Exhibit
4.1 to Registration Statement on
Form S-3 (Reg. No. 33-69088) of
Quantum Health Resources, Inc.,
is incorporated herein by reference.
- --------------------
*Management contract or compensatory plan or arrangement.
-i-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description How Filed
- ----------- ----------- ---------
4(e) Supplemental Indenture dated as of Filed herewith
June 28, 1996 between Quantum Health
Resources, Inc. and First Trust
National Association, as Trustee.
*10(a) Registrant's 1984 Incentive Stock Incorporated by
Option Plan, as amended, filed as reference
Exhibit 10(a) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(b) Registrant's Incentive Restricted Incorporated by
Stock Plan, as amended, filed as reference
Exhibit 10(e) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(c) Form of agreement under Incorporated by
Registrant's Incentive Restricted reference
Stock Plan, filed as Exhibit 10(g)
to Registrant's Annual Report on
Form 10-K for the year ended
December 30, 1990, is incorporated
herein by reference.
10(d) Credit Agreement dated as of August Incorporated by
9, 1996 among Registrant, the Banks reference
signatory thereto and The Chase
Manhattan Bank, as Agent, covering
$400 million credit facility, filed
as Exhibit 10 to Registrant's
Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, is
incorporated herein by reference.
- --------------------
*Management contract or compensatory plan or arrangement.
-ii-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description How Filed
- ----------- ----------- ---------
*10(e) Registrant's 1990 Non-Qualified Incorporated by
Stock Option Plan for Non-Employee reference
Directors and Consultants, as
amended and restated, is
incorporated by reference to
Exhibit C to Registrant's
definitive Proxy Statement with
respect to its 1995 Annual Meeting
of Shareholders.
*10(f) Registrant's Supplemental Incorporated by
Retirement Plan for Key Executives reference
filed as Exhibit 10(k) to
Registrant's Annual Report on Form
10-K for the year ended January 3,
1993, is incorporated herein by
reference.
*10(g) Registrant's Executive Voluntary Incorporated by
Deferred Compensation Plan and reference
Trust Agreement between Registrant
and Prudential Trust Company, filed
as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(h) Registrant's Retirement Plan for Incorporated by
Outside Directors and Consultants, reference
filed as Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(i) Registrant's Deferred Compensation Incorporated by
Plan for Outside Directors, filed reference
as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(j) Employment Agreement dated March Incorporated by
28, 1994 between Registrant and reference
Frank N. Liguori, filed as Exhibit
10(q) to Registrant's Annual Report
on Form 10-K for the year ended
January 2, 1994, is incorporated
herein by reference.
- --------------------
*Management contract or compensatory plan or arrangement.
-iii-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description How Filed
- ----------- ----------- ---------
*10(k) Amendment dated March 27, 1996 to Filed herewith
Employment Agreement between
Registrant and Frank N. Liguori.
*10(l) Agreement dated November 8, 1993 Incorporated by
between Registrant and Frank N. reference
Liguori covering incentive award
under Incentive Restricted Stock
Plan and amendment thereto dated
March 27, 1994, filed as Exhibit
10(r) to Registrant's Annual Report
on Form 10-K for the year ended
January 2, 1994, is incorporated
herein by reference.
*10(m) Form of change in control agreement Incorporated by
between Registrant and each of reference
Robert A. Fusco, Richard A. Piske,
III and Anthony J. Puglisi, filed
as Exhibit 10(o) to Registrant's
Annual Report on Form 10-K for the
year ended January 1, 1995, is
incorporated herein by reference.
*10(n) Registrant's 1994 Stock Incentive Incorporated by
Plan, as amended and restated, is reference
incorporated by reference to
Exhibit B to Registrant's
definitive Proxy Statement with
respect to its 1995 Annual Meeting
of Shareholders.
*10(o) Registrant's Executive Officer Incorporated by
Bonus Plan is incorporated by reference
reference to Exhibit C to
Registrant's definitive Proxy
Statement with respect to its 1994
Annual Meeting of Shareholders.
- --------------------
*Management contract or compensatory plan or arrangement.
-iv-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description How Filed
- ----------- ----------- ---------
10(p) Lease Agreement dated as of April Incorporated by
1, 1995 between Suffolk County reference
Industrial Development Agency and
OLS Holdings, Inc. covering
headquarters facility at 175 Broad
Hollow Road, Melville, New York,
filed as Exhibit 10(t) to
Registrant's Annual Report on Form
10-K for the year ended December
31, 1995, is incorporated herein by
reference.
21 Subsidiaries of Registrant. Filed herewith
23 Consent of Coopers & Lybrand Filed herewith
L.L.P., independent auditors.
27 Financial Data Schedule. Filed herewith
-v-
<PAGE>
Exhibit 4(e)
-------------------------------------------------------------------
QUANTUM HEALTH RESOURCES, INC.
AND
FIRST TRUST NATIONAL ASSOCIATION,
Trustee
---------------------------------
Supplemental Indenture
Dated as of June 28, 1996
---------------------------------
To
Indenture, Dated as of October 8, 1993,
Between Quantum Health Resources, Inc. and
First Trust National Association, as Trustee,
Relating to $86,250,000 Aggregate Principal Amount
of 4 3/4% Convertible Subordinated Debentures Due October 1, 2000
-------------------------------------------------------------------
<PAGE>
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of June 28, 1996, between Quantum Health Resources,
Inc., a Delaware corporation (the "Company"), having its
principal office at Two Parkwood Crossing, Suite 500, 310 East
96th Street, Suite 500, Indianapolis, Indiana, 46240, and First
Trust National Association, a Minnesota corporation, as Trustee
(the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company and the Trustee heretofore
executed and delivered an Indenture, dated as of October 8, 1993
(the "Indenture") (capitalized terms used but not otherwise
defined in this Supplemental Indenture shall have the meanings
ascribed to such terms in the Indenture); and
WHEREAS, pursuant to the Indenture, the Company issued
and the Trustee authenticated and delivered $86,250,000 aggregate
principal amount of the Company's 4 3/4% Convertible Subordinated
Debentures Due October 1, 2000 (the "Debentures"); and
WHEREAS, pursuant to the Amended and Restated Agreement
and Plan of Merger (the "Merger Agreement"), dated as of May 1,
1996, by and among Olsten Corporation, a Delaware corporation
("Olsten"), QHR Acquisition Corp., a Delaware corporation that is
a wholly-owned subsidiary of Olsten ("Merger Sub"), and the
Company, on June 28, 1996, Merger Sub was merged with and into
the Company (the "Merger"), with the Company as the surviving
corporation, and each issued and outstanding share of the
Company's Common Stock, par value $.01 per share ("Quantum Common
Stock"), other than such Quantum Common Stock held by
stockholders exercising dissenter's rights under the General
Corporation Laws of the State of Delaware, was converted into the
right to receive fifty-eight one hundredths (.58) of one share
(the "Conversion Number") of Olsten's Class B Common Stock, par
value $.10 per share ("Class B Stock"); and
WHEREAS, Section 13.11 of the Indenture provides that,
in the case of any merger of another Person into the Company
which results in the conversion of Quantum Common Stock, the
Person resulting from such merger shall execute and deliver to
the Trustee a supplemental indenture providing that the Holder of
each Debenture then outstanding shall have the right thereafter,
during the period such Debenture shall be convertible as
specified in Section 13.1 of the Indenture, to convert such
Debenture only into the kind and amount of securities, cash or
other assets receivable upon such merger by a holder of the
number of shares of Quantum Common Stock into which such
Debenture might have been converted immediately prior to such
merger; and
2
<PAGE>
WHEREAS, this Supplemental Indenture has been duly
authorized by all necessary corporate action on the part of the
Company; and
WHEREAS, the Company has delivered, or caused to be
delivered, to the Trustee, an Opinion of Counsel and Officers'
Certificate, each stating that this Supplemental Indenture
complies with the requirements of the Indenture.
NOW, THEREFORE, the Company hereby covenants and agrees
with the Trustee for the equal and proportionate benefit of all
Holders of the Debentures, as follows:
SECTION 1. Amendment of Certain Sections of Indenture.
Subject to the other provisions hereof, the Indenture is hereby
amended and supplemented in the following respects:
(a) Section 13.4 of the Indenture is hereby
amended and supplemented by adding the following at the end
thereof:
"(j) From and after the effective time of the
merger of QHR Acquisition Corp., a Delaware
corporation ("Merger Sub"), with and into the
Company pursuant to the Amended and Restated
Agreement and Plan of Merger (the "Merger
Agreement"), dated as of May 1, 1996, by and among
Olsten Corporation, a Delaware corporation
("Olsten"), Merger Sub and the Company, which
merger occurred on June 28, 1996, the Holder of
each Debenture then outstanding shall have the
right thereafter, during the period such Debenture
shall be convertible as specified in Section 13.1,
to convert each such Debenture only into the
number of shares of Olsten Class B Common Stock,
par value $.10 per share, obtained by multiplying
fifty-eight one hundredths (.58) by the number of
shares of Common Stock of the Company into which
such Debenture might have been converted
immediately prior to such merger, assuming such
holder of Common Stock of the Company is not a
Constituent Person or an Affiliate of a
Constituent Person, subject to such further
adjustments as may be required by the provisions
of this Indenture;" and
SECTION 2. Effect of Supplemental Indenture. Upon the
execution and delivery of this Supplemental Indenture by the
Company and the Trustee, the Indenture shall be supplemented in
accordance herewith, and this Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of
Securities heretofore or hereafter authenticated and delivered
under the Indenture shall be bound thereby.
3
<PAGE>
SECTION 3. Indenture Remains in Full Force and Effect.
Except as supplemented hereby, all provisions in the Indenture
shall remain in full force and effect.
SECTION 4. Indenture and Supplemental Indenture
Construed Together. This Supplemental Indenture is an indenture
supplemental to the Indenture, and forms a part of the Indenture
for all purposes.
SECTION 5. Conflict with Trust Indenture Act. If any
provision of this Supplemental Indenture limits, qualifies or
conflicts with any provision of Sections 310 through 317,
inclusive, of the Trust Indenture Act, which provision imposes
duties on any Person, the applicable provisions of Sections 310
through 317, inclusive, of the Trust Indenture Act shall control.
SECTION 6. Separability Clause. In case any provision
in this Supplemental Indenture shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 7. Effect of Headings. The Article and Section
headings herein are for convenience only and shall not affect the
construction hereof.
SECTION 8. Benefits of Supplemental Indenture, Etc.
Nothing in this Supplemental Indenture, express or implied, shall
give to any Person, other than the parties hereto and thereto and
their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Supplemental Indenture.
SECTION 9. Successors and Assigns. All covenants and
agreements in this Supplemental Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 10. Trustee Not Responsible for Recitals. The
recitals contained herein shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Supplemental Indenture.
SECTION 11. Certain Duties and Responsibilities of the
Trustee. In entering into this Supplemental Indenture, the
Trustee shall be entitled to the benefit of every provision of
the Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee, whether or not
elsewhere herein so provided.
SECTION 12. Governing Law. This Supplemental Indenture
shall be governed by and construed in accordance with the laws of
the State of New York.
4
<PAGE>
SECTION 13. Counterparts. This Supplemental Indenture
may be executed in counterparts, each of which, when so executed,
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as
of the date and year first above written.
QUANTUM HEALTH RESOURCES, INC.
By:/s/ John C. McIlwraith
--------------------------------
Title: Senior Vice President
-----------------------------
Attest:
By:/s/ Keith T. Coleman
--------------------------------
Title: Senior Vice President--CFO
-----------------------------
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:/s/ Eve D. Kaplan
--------------------------------
Title: Vice President
-----------------------------
Attest:
By:/s/ K. Barrett
--------------------------------
Title: Assistant Secretary
-----------------------------
5
<PAGE>
Exhibit 10(k)
March 27, 1996
Mr. Frank N. Liguori
2 Talisman Court
Dix Hills, NY 11746
Dear Frank:
This is to confirm that Olsten Corporation and you have agreed to amend
your Employment Agreement with the Company, dated as of March 28, 1994, by
deleting from Section 6.1 (a) (i) (y) of the Employment Agreement the phrase ",
provided, however, that the amount of such bonus shall not exceed for the
purposes of this provision 100% of Employee's annualized base salary in effect
on the date of termination,".
Except as amended hereby, the other terms and conditions of the Employment
Agreement remain the same.
Very truly yours,
OLSTEN CORPORATION
By /s/ William P. Costantini
---------------------------
William P. Costantini
Senior Vice President and
General Counsel
Agreed to:
/s/ Frank N. Liguori
- --------------------
Frank N. Liguori
<PAGE>
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF OLSTEN CORPORATION
----------------------------------
<CAPTION>
JURISDICTION
OF
SUBSIDIARY INCORPORATION BUSINESS NAME
---------- ------------- -------------
<S> <C> <C>
The Accounts Team Limited England/Wales The Accountants Team
Administracion, Servisios y Asesorias S.A. Chile
Administracion y Servisios S.A. Chile
Adyser Consultores S.A. Chile
Adyser S.A. Chile
Aurora Business & Personnel Services Inc. Ontario
Archangel Executive Appointments Limited England/Wales
Broad Pines Development Corp. Delaware
Care One Health Alternatives, Inc. Alabama Olsten Health Services
Care One Health Alternatives, Inc. North Carolina Olsten Health Services
CCI-ASDS, Inc. Delaware Olsten Health Services
Children's Home Care LLC Arizona
Chronic Health Management of California California Olsten Health Services
CLD Personnel Services Limited Nova Scotia Olsten Staffing Services
Co-Counsel, Inc. Texas
Commonwealth Home Care, Inc. Massachusetts Olsten Health Services
Comprehensive Home Services, Inc. Massachusetts Olsten Health Services
Data Vikar AS Norway
Dirka Co. Delaware
GMS, Inc. Ohio Olsten Staffing Services
Harvey Consultants Limited England/Wales
Health Care Services Olsten Limited Delaware
IMI Systems Inc. New York
InfoGen, Inc. Arizona Olsten Health Services
Integrated Computer Technologies Limited England/Wales
Interior Health Care Services Limited British Columbia Olsten Health Services
Kimberly Home Health Care, Inc. Missouri Olsten Health Services
Legal Staffing, Inc. Louisiana
Lifetime Corporation (UK) Limited England/Wales
Network Personnel Inc. Ontario
New York HealthCare Services, Inc. New York Olsten Health Services
Norsk Personal AS Norway
Norsk Personal Benanning AS Norway
Norsk Personal Rekruttering AS Norway
Norsk Personal Undervisning AS Norway
Norsk Prosjekt Konsult AS Norway
Norsk Verdiskring AS Norway
Office Angels Limited England/Wales
Office Angels (Properties) Limited England/Wales
Office Angels (Recruitment) Limited England/Wales
Office Legals Limited England/Wales
OFFiS Unternehemen fur Zeitarbeit GmbH & Co. KG Germany
OLS Holdings, Inc. New York
Olsten Certified HealthCare Corp. Delaware Olsten Health Services
Olsten Chile S.A. Chile
Olsten Dataset Oy Finland
Olsten de Argentina S.A. Argentina
Olsten de Mexico, S.A. de C.V. Mexico
Olsten de Puerto Rico, Inc. Puerto Rico
Olsten Flying Nurses Corp. Delaware
Olsten Integrated Management Services, Inc. Delaware
Olsten International B.V. Netherlands
</TABLE>
<PAGE>
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF OLSTEN CORPORATION
----------------------------------
<CAPTION>
JURISDICTION
OF
SUBSIDIARY INCORPORATION BUSINESS NAME
---------- ------------- -------------
<S> <C> <C>
Olsten Kimberly QualityCare Foundation, Inc. Florida
Olsten Kimberly QualityCare, Inc. Delaware Olsten Health Services
Olsten Latin America, Inc. Delaware
Olsten Norway AS Norway
Olsten of Georgia, Inc. Georgia Olsten Staffing Services
Olsten of Westchester, Inc. New York Covertemp
Olsten Personale AS Denmark
Olsten Personalkraft AB Sweden
Olsten Ready Office S.A. Argentina
Olsten Service Corp. Delaware
Olsten Services Limited Ontario
Olsten Services of New York, Inc. New York Olsten Health Services
Olsten Services S.A. Argentina
Olsten Staffing Services IV, Inc. Delaware
Olsten Staffing Services V, Inc. Delaware
Olsten Staffing Services VI, Inc. Delaware
Olsten Staffing Services VII, Inc. Delaware
Olsten Staff, S.A. de C.V. Mexico
Olsten (UK) Holdings Limited England/Whales
Olsten UK Limited England/Wales
OptimalCare, Inc. Delaware Olsten Health Services
Outside Counsel, Inc. D.C.
Partnersfirst Management, Inc. Florida Olsten Health Services
Personal Eventual de Occidente, S.A. de C.V. Mexico
Projobs, S.A. de C.V. Mexico
Prospective Health Network, Inc. Delaware Olsten Health Services
QC Medi - New York, Inc. New York Olsten Health Services
QHR Southwest Business Trust Pennsylvania Olsten Health Services
QHR Southwest Holdings Corp. California Olsten Health Services
Quality Care - USA., Inc. New York Olsten Health Services
Quality Managed Care, Inc. Delaware Olsten Health Services
Quantum Care Network, Inc. Massachusetts Olsten Health Services
Quantum Disease Management, Inc. Indiana Olsten Health Services
Quantum Health Resources California Olsten Health Services
Quantum Health Resources, Inc. Delaware Olsten Health Services
Quantum Health Resources Inc. (New York) New York Olsten Health Services
Quantum Health Resources of Canada, Inc. Canada
Quantum Health Resources Southwest, L.P. Texas Olsten Health Services
Quantum Information Management Corp. Delaware Olsten Health Services
Quantum Services Corp. Delaware Olsten Health Services
Resource Corporation Louisiana Olsten Health Services
Skilled Nursing Services, Inc. Michigan Olsten Health Services
SPTW, Inc. Nevada Olsten Health Services
Stafco, Inc. Louisiana Olsten Staffing Services
Systems Partners, Inc. California
The IV Clinic, Inc. Texas Olsten Health Services
The IV Clinic II, Inc. Texas Olsten Health Services
The IV Clinic III, Inc. Texas Olsten Health Services
Top Level, S.A. de C.V. Mexico
Vikar Konsulent AS Norway
Vistech, Inc. Virginia
York Health Services, Inc. Ontario Olsten Health Services
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
--------
We consent to the incorporation by reference in the
Registration Statements of Olsten Corporation on Form S-8
(Registration Nos. 33-9804, 33-41603, 33-61763, 33-64539, 33-
66782 and 33-66784) and on Form S-3 (Registration Nos. 33-54463,
33-64267, 333-4743 and 333-7867) of our report dated February 6,
1997, on our audits of the consolidated financial statements of
OLSTEN CORPORATION AND SUBSIDIARIES as of December 29, 1996 and
December 31, 1995, and for each of the three years in the period
ended December 29, 1996, which report is included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
New York, New York
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at December 29,
1996 and Olsten Corporation and Subsidiaries Consolidated Statement of
Income for the year ended December 29, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 105,725
<SECURITIES> 0
<RECEIVABLES> 688,105
<ALLOWANCES> 26,299
<INVENTORY> 52,440
<CURRENT-ASSETS> 878,435
<PP&E> 228,492
<DEPRECIATION> 98,471
<TOTAL-ASSETS> 1,439,240
<CURRENT-LIABILITIES> 262,842
<BONDS> 0
0
0
<COMMON> 8,074
<OTHER-SE> 761,199
<TOTAL-LIABILITY-AND-EQUITY> 1,439,240
<SALES> 3,377,729
<TOTAL-REVENUES> 3,377,729
<CGS> 2,423,491
<TOTAL-COSTS> 2,423,491
<OTHER-EXPENSES> 80,000
<LOSS-PROVISION> 20,342
<INTEREST-EXPENSE> 21,329
<INCOME-PRETAX> 94,861
<INCOME-TAX> 38,627
<INCOME-CONTINUING> 54,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,642
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at September, 29
1996 (unaudited) and Olsten Corporation and Subsidiaries Consolidated
Statement of Income for nine months ended September 29, 1996 (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-29-1996
<PERIOD-END> SEP-29-1996
<CASH> 121,152
<SECURITIES> 0
<RECEIVABLES> 633,626
<ALLOWANCES> 18,017
<INVENTORY> 47,476
<CURRENT-ASSETS> 839,985
<PP&E> 220,511
<DEPRECIATION> 94,286
<TOTAL-ASSETS> 1,382,358
<CURRENT-LIABILITIES> 243,671
<BONDS> 0
0
0
<COMMON> 7,939
<OTHER-SE> 730,171
<TOTAL-LIABILITY-AND-EQUITY> 1,382,358
<SALES> 2,446,755
<TOTAL-REVENUES> 2,446,755
<CGS> 1,731,678
<TOTAL-COSTS> 1,731,678
<OTHER-EXPENSES> 80,000
<LOSS-PROVISION> 14,913
<INTEREST-EXPENSE> 16,192
<INCOME-PRETAX> 66,704
<INCOME-TAX> 27,615
<INCOME-CONTINUING> 38,092
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,092
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at June 30,
1996 (unaudited) and Olsten Corporation and Subsidiaries Consolidated
Statement of Income for six months ended June 30, 1996 (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-29-1996
<PERIOD-END> JUN-30-1996
<CASH> 144,874
<SECURITIES> 0
<RECEIVABLES> 623,790
<ALLOWANCES> 22,196
<INVENTORY> 43,902
<CURRENT-ASSETS> 839,986
<PP&E> 212,047
<DEPRECIATION> 87,108
<TOTAL-ASSETS> 1,367,380
<CURRENT-LIABILITIES> 211,359
<BONDS> 0
0
0
<COMMON> 7,932
<OTHER-SE> 748,608
<TOTAL-LIABILITY-AND-EQUITY> 1,367,380
<SALES> 1,570,386
<TOTAL-REVENUES> 1,570,386
<CGS> 1,101,404
<TOTAL-COSTS> 1,101,404
<OTHER-EXPENSES> 5,500
<LOSS-PROVISION> 9,690
<INTEREST-EXPENSE> 10,866
<INCOME-PRETAX> 87,545
<INCOME-TAX> 35,777
<INCOME-CONTINUING> 51,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,190
<EPS-PRIMARY> .67
<EPS-DILUTED> .65
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at March 31,
1996 (unaudited) and Olsten Corporation and Subsidiaries Consolidated
Statement of Income for three months ended March 31, 1996 (unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-31-1996
<CASH> 257,781
<SECURITIES> 0
<RECEIVABLES> 589,466
<ALLOWANCES> 25,602
<INVENTORY> 40,702
<CURRENT-ASSETS> 912,637
<PP&E> 183,629
<DEPRECIATION> 65,573
<TOTAL-ASSETS> 1,416,391
<CURRENT-LIABILITIES> 208,978
<BONDS> 0
0
0
<COMMON> 7,367
<OTHER-SE> 597,877
<TOTAL-LIABILITY-AND-EQUITY> 1,416,391
<SALES> 766,043
<TOTAL-REVENUES> 766,043
<CGS> 535,022
<TOTAL-COSTS> 535,022
<OTHER-EXPENSES> 5,500
<LOSS-PROVISION> 4,680
<INTEREST-EXPENSE> 4,670
<INCOME-PRETAX> 36,671
<INCOME-TAX> 15,064
<INCOME-CONTINUING> 21,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,425
<EPS-PRIMARY> .29
<EPS-DILUTED> .28
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at December 31,
1995 and Olsten Corporation and Subsidiaries Consolidated Statement of
Income for the year ended December 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 107,418
<SECURITIES> 0
<RECEIVABLES> 548,094
<ALLOWANCES> 30,660
<INVENTORY> 46,488
<CURRENT-ASSETS> 717,944
<PP&E> 184,246
<DEPRECIATION> 75,154
<TOTAL-ASSETS> 1,138,410
<CURRENT-LIABILITIES> 223,974
<BONDS> 0
0
0
<COMMON> 7,349
<OTHER-SE> 579,040
<TOTAL-LIABILITY-AND-EQUITY> 1,138,410
<SALES> 2,813,768
<TOTAL-REVENUES> 2,813,768
<CGS> 1,956,986
<TOTAL-COSTS> 1,956,986
<OTHER-EXPENSES> 12,308
<LOSS-PROVISION> 18,193
<INTEREST-EXPENSE> 13,026
<INCOME-PRETAX> 155,434
<INCOME-TAX> 65,231
<INCOME-CONTINUING> 90,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,290
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at October, 1
1995 (unaudited) and Olsten Corporation and Subsidiaries Consolidated
Statement of Income for 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> 84,224
<SECURITIES> 0
<RECEIVABLES> 539,957
<ALLOWANCES> 21,386
<INVENTORY> 31,039
<CURRENT-ASSETS> 681,778
<PP&E> 170,360
<DEPRECIATION> 63,694
<TOTAL-ASSETS> 1,075,978
<CURRENT-LIABILITIES> 228,665
<BONDS> 0
0
0
<COMMON> 5,194
<OTHER-SE> 560,089
<TOTAL-LIABILITY-AND-EQUITY> 1,075,978
<SALES> 2,075,191
<TOTAL-REVENUES> 2,075,191
<CGS> 1,441,817
<TOTAL-COSTS> 1,441,817
<OTHER-EXPENSES> 8,508
<LOSS-PROVISION> 14,504
<INTEREST-EXPENSE> 9,475
<INCOME-PRETAX> 111,610
<INCOME-TAX> 46,973
<INCOME-CONTINUING> 64,960
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,960
<EPS-PRIMARY> .87
<EPS-DILUTED> .85
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at July, 2
1995 (unaudited) and Olsten Corporation and Subsidiaries Consolidated
Statement of Income for 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> 128,877
<SECURITIES> 0
<RECEIVABLES> 468,230
<ALLOWANCES> 18,560
<INVENTORY> 27,082
<CURRENT-ASSETS> 654,670
<PP&E> 170,028
<DEPRECIATION> 63,414
<TOTAL-ASSETS> 1,026,423
<CURRENT-LIABILITIES> 196,096
<BONDS> 0
0
0
<COMMON> 5,175
<OTHER-SE> 542,764
<TOTAL-LIABILITY-AND-EQUITY> 1,026,423
<SALES> 1,355,601
<TOTAL-REVENUES> 1,355,601
<CGS> 941,926
<TOTAL-COSTS> 941,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,810
<INTEREST-EXPENSE> 6,211
<INCOME-PRETAX> 80,658
<INCOME-TAX> 33,742
<INCOME-CONTINUING> 47,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,283
<EPS-PRIMARY> .64
<EPS-DILUTED> .62
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at April, 2
1995 (unaudited) and Olsten Corporation and Subsidiaries Consolidated
Statement of Income for three months ended April 2, 1995 (unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-02-1995
<CASH> 170,402
<SECURITIES> 0
<RECEIVABLES> 433,582
<ALLOWANCES> 19,009
<INVENTORY> 24,218
<CURRENT-ASSETS> 661,686
<PP&E> 153,069
<DEPRECIATION> 55,643
<TOTAL-ASSETS> 1,005,857
<CURRENT-LIABILITIES> 190,977
<BONDS> 0
0
0
<COMMON> 5,205
<OTHER-SE> 532,865
<TOTAL-LIABILITY-AND-EQUITY> 1,005,857
<SALES> 663,698
<TOTAL-REVENUES> 663,698
<CGS> 461,479
<TOTAL-COSTS> 461,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,919
<INTEREST-EXPENSE> 2,722
<INCOME-PRETAX> 38,787
<INCOME-TAX> 16,256
<INCOME-CONTINUING> 22,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,890
<EPS-PRIMARY> .31
<EPS-DILUTED> .30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheet at January 1,
1995 and Olsten Corporation and Subsidiaries Consolidated Statement of
Income for the year ended January 1, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 144,426
<SECURITIES> 0
<RECEIVABLES> 418,944
<ALLOWANCES> 19,893
<INVENTORY> 22,308
<CURRENT-ASSETS> 630,163
<PP&E> 147,284
<DEPRECIATION> 60,167
<TOTAL-ASSETS> 979,714
<CURRENT-LIABILITIES> 191,731
<BONDS> 0
0
0
<COMMON> 5,187
<OTHER-SE> 510,799
<TOTAL-LIABILITY-AND-EQUITY> 979,714
<SALES> 2,588,697
<TOTAL-REVENUES> 2,588,697
<CGS> 1,802,919
<TOTAL-COSTS> 1,802,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,261
<INTEREST-EXPENSE> 13,181
<INCOME-PRETAX> 157,952
<INCOME-TAX> 65,722
<INCOME-CONTINUING> 92,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,240
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.22
</TABLE>
