<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 22, 1996
-------------
Commission File No. 0-24300
-------
NORRELL CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-0953709
- ------------------------------- ----------
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
3535 Piedmont Road, NE, Atlanta, GA 30305
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404)240-3000
-------------
Not Applicable
- ------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 22, 1996, Norrell Corporation and its affiliates Norrell Technical
Services, Inc. and Norrell Services, Ltd. (collectively "Norrell"), entered
into an Asset Purchase Agreement that was effective at the close of business on
July 15, 1996, with Analytical Technologies, Inc. and ANATEC Canada, Inc.
(collectively, "ANATEC"). The agreement was for the purchase of all the assets
and assumption of certain liabilities of ANATEC for a cash purchase price of
$27.1 million payable at closing and the right to receive a contingent payment
based upon gross margin for the twelve-month period ending on December 31,
1996. The $25.8 million excess of the acquisition cost over the fair value of
ANATEC's tangible assets has been allocated to goodwill and is being amortized
over 40 years.
The purchase price was financed by borrowings under Norrell's revolving credit
facility. Effective July 1996, the Company increased its credit facility which
consisted of a $25 million overnight loan and $55 million revolving credit
facility to a $40 million overnight loan and $55 million revolving credit
facility, for a total facility of $95 million. The lenders under the revolving
credit facility are Bank of America National Trust and Savings Association as
agent, First Union National Bank of Georgia and Sun Trust Bank, Atlanta.
ANATEC is a software services and technology organization servicing primarily
Fortune 500 companies in the midwestern United States. Services include
consulting, project management, software development, training and software
systems integration services.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
1. Financial statements of Analytical
Technologies, Inc. as of December 31, 1995 and 1994,
(audited).
2. Financial statements of ANATEC CANADA, Inc. as
of December 31, 1995 (audited).
3. Balance sheet of Analytical Technologies, Inc.
as of June 30, 1996, (unaudited).
4. Statements of operations and statements of cash
flows of Analytical Technologies, Inc. as of June 30, 1996
and June 30, 1995, (unaudited).
5. Balance sheet of ANATEC CANADA, Inc. as of June
30, 1996, (unaudited).
6. Statements of operations and statements of cash
flows of ANATEC CANADA, Inc. as of June 30, 1996 and June 30,
1995, (unaudited).
(b) Pro forma financial information.
1. Reference is made to the Norrell Corporation
consolidated balance sheet as of July 28, 1996 previously
filed on Form 10-Q. A pro forma balance sheet is not
required as the transaction is already reflected in the
balance sheet dated July 28, 1996.
2. Norrell Corporation pro forma combined statement of
income for the year ended October 29, 1995, (unaudited).
3. Norrell Corporation pro forma combined statement of income
for the nine month period ended July 28, 1996, (unaudited).
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
NORRELL CORPORATION
(REGISTRANT)
Date: September 30, 1996 By: S./C. Kent Garner
-----------------
C. Kent Garner
Vice President and Chief Financial Officer
(On behalf of the Registrant and as Chief
Accounting Officer)
<PAGE> 4
ANALYTICAL TECHNOLOGIES, INC.
FINANCIAL REPORT
DECEMBER 31, 1995
[LOGO] Plante & Moran, LLP
<PAGE> 5
[Letterhead] Plante & Moran, LLP
Independent Auditor's Report
To the Board of Directors
and Stockholders
Analytical Technologies, Inc.
We have audited the accompanying balance sheet of Analytical Technologies, Inc.
as of December 31, 1995 and 1994 and the related statements of operations,
changes in stockholders' equity and cash flows for the years then ended. 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 audits 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 financial position of Analytical Technologies, Inc.
as of December 31, 1995 and 1994 and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
May 20, 1996
/s/ Plante & Moran, LLP
<PAGE> 6
ANALYTICAL TECHNOLOGIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
December 31
----------------------
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ - $ 11,917
Accounts receivable:
Trade, less allowance for doubtful accounts of
$100,000 in 1995 and $80,000 in 1994 4,674,077 3,251,548
Officers and employees 27,139 37,122
Advances to related company (Note 2) 350,640 -
Marketable securities 150,199 98,156
Excess of earned revenue over amounts billed (Note 3) 74,347 237,393
Prepaid expenses 264,957 117,564
---------- ----------
Total current assets 5,541,359 3,753,700
========== ==========
PROPERTY AND EQUIPMENT (Notes 4 and 7) 1,218,568 857,530
DEPOSITS 42,291 24,333
CASH SURRENDER VALUE OF LIFE INSURANCE 61,660 -
---------- ----------
Total assets $6,863,878 $4,635,563
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 291,079 $ -
Note payable - Bank (Note 5) 3,490,000 1,597,141
Current portion of long-term debt (Note 6) 78,907 1,895
Current portion of lease obligation (Note 7) 8,373 -
Accounts payable 629,393 319,168
Accrued payroll 85,968 51,500
Accrued compensated absences 303,319 288,319
Accrued payroll taxes and other 603,701 369,601
Accrued single business tax 32,545 46,000
---------- -----------
Total current liabilities 5,523,285 2,673,624
LONG-TERM DEBT - Net of current portion (Note 6) 147,077 36,150
OBLIGATION UNDER CAPITAL LEASE - Net of
current portion (Note 7) 17,833 -
---------- -----------
Total liabilities 5,688,195 2,709,774
STOCKHOLDERS' EQUITY
Common stock - $1 par value:
Authorized - 100 shares
Issued and outstanding - 100 shares 100 100
Additional paid-in capital 950 950
Retained earnings 2,229,354 2,578,346
Notes receivable and advances receivable from
stockholders and related companies (Note 14) 1,054,721) (653,607)
---------- -----------
Total stockholders' equity 1,175,683 1,925,789
---------- -----------
Total liabilities and stockholders' equity $6,863,878 $4,635,563
========== ===========
</TABLE>
See Notes to Financial Statements. 2 [LOGO] Plante & Moran, LLP
<PAGE> 7
ANALYTICAL TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
<S> <C> <C>
1995 1994
------------ ------------
SALES $22,397,144 $21,165,625
COST OF OPERATIONS 15,968,022 13,948,592
----------- -----------
GROSS PROFIT 6,429,122 7,217,033
GENERAL AND ADMINISTRATIVE EXPENSES 6,625,405 5,855,535
----------- -----------
OPERATING PROFIT (LOSS) (196,283) 1,361,498
OTHER INCOME (EXPENSE)
Interest income 40,777 23,811
Interest expense (255,872) (118,653)
Gain (loss) on sale of marketable securities 23,646 (5,604)
Other 38,740 330
----------- -----------
Total other expense (152,709) (100,116)
----------- -----------
NET INCOME (LOSS) $ (348,992) $ 1,261,382
=========== ===========
</TABLE>
See Notes to Financial Statements. 3 [LOGO] Plante & Moran, LLP
<PAGE> 8
ANALYTICAL TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Notes
Receivables
And Advances
Receivable
from
Additional Stockholders Total
Common Paid-In Retained And Related Stockholders'
Stock Capital Earnings Companies Equity
------ ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE - January 1, 1994, as
previously stated $ 50 $950 $1,576,090 $ - $1,577,090
Restatement (Note 13) - - - (503,828) (503,828)
---- ---- ---------- ---------- ----------
BALANCE - January 1, 1994, as
restated 50 950 1,576,090 (503,828) 1,073,262
Stock split (Note 11) 50 - (50) - -
Cash dividend - - (259,076) - (259,076)
Issuance of notes receivable and
advances - Net - - - (149,779) (149,779)
Net income for the year - - 1,261,382 - 1,261,382
--- ---- ---------- ----------- ----------
BALANCE - December 31, 1994 100 950 2,578,346 (653,607) 1,925,789
Issuance of notes receivable and
advances - Net - - - (401,114) (401,114)
Net loss for the year - - (348,992) - (348,992)
---- ---- ---------- ----------- ----------
BALANCE - December 31, 1995 $100 $950 $2,229,354 $(1,054,721) $1,175,683
==== ==== ========== =========== ==========
</TABLE>
See Notes to Financial Statements. 4 [LOGO] Plante & Moran, LLP
<PAGE> 9
ANALYTICAL TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (348,992) $1,261,382
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation 192,379 107,979
Provision for losses on accounts receivable 20,000 25,000
Loss on disposition of equipment - 3,123
Loss (gain) on sale of marketable securities (23,646) 5,604
Decrease in cash surrender value of life insurance 1,805 -
Changes in assets and liabilities:
Increase in accounts receivable (1,442,529) (301,598)
(Increase) decrease in excess of earned revenue over amounts billed 163,046 (184,425)
Decrease (increase) in prepaid expenses (147,393) 7,515
Increase in deposits (17,958) (2,318)
Increase in accounts payable 310,225 24,861
Increase in accrued payroll 34,468 3,064
(Decrease) increase in accrued compensated absences 15,000 (30)
Increase in accrued payroll taxes and other 234,100 724
(Decrease) increase in accrued single business tax (13,455) 31,224
---------- ----------
Net cash provided by (used in) operating activities (1,022,950) 982,105
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (182,641) (58,123)
Redemption of marketable securities 154,244 43,972
Purchase of property and equipment (525,517) (575,269)
Proceeds from disposal of equipment - 3,383
Advances to officers and employees - Net of repayments 9,983 1,593
Issuance of advances to related company (532,626) -
Payments received on advances to related company 181,986 -
Premiums paid on life insurance policies (63,465) -
---------- ----------
Net cash used in investing activities (958,036) (584,444)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on lease obligations (1,694) (11,021)
Proceeds from the issuance of long-term debt 238,000 -
Principal payments on long-term debt (50,061) (1,770)
Net proceeds from note payable 1,892,859 115,000
Net increase (decrease) in cash overdraft 291,079 (79,098)
Dividends paid - (259,076)
Issuance of notes receivable and advances receivable from
stockholders and related companies (676,490) (450,884)
Payments received on notes receivable and advances receivable
from stockholders and related companies 275,376 301,105
---------- ----------
Net cash provided by (used in) financing activities 1,969,069 (385,744)
---------- ----------
NET INCREASE (DECREASE) IN CASH (11,917) 11,917
CASH - Beginning of year 11,917 -
---------- ----------
CASH - End of year $ - $ 11,917
========== ==========
</TABLE>
See Notes to Financial Statements. 5 [LOGO] Plante & Moran, LLP
<PAGE> 10
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company is a software services and technology organization
servicing primarily Fortune 500 companies in the midwestern United
States. Services include consulting, project management, fixed price
contracting, software development, training and software systems
integration services. Approximately 53 percent of sales in 1995 and
60 percent of sales in 1994 were made to three major customers.
Accounts Receivable - Approximately 59 percent of trade receivables at
December 31, 1995 and 64 percent at December 31, 1994 were due from
three major customers in the automotive and high-tech industries.
Marketable Securities - Equity securities that are bought and held for
an unspecified period of time (not principally for the purpose of
selling them in the near term) are classified as available-for-sale
securities and reported at fair value, with unrealized gains and
losses reported, net of applicable income tax, in a separate component
of stockholders' equity until realized. At December 31, 1995 and
1994, market approximates cost.
Gains and losses on the sale of securities available for sale are
determined using the average cost method.
Programming Contracts in Progress - Revenue on long-term fixed fee
contracts is recorded on the basis of the Company's estimates of the
percentage of completion of individual contracts. That portion of the
total contract price is accrued as earned revenue, which is determined
on the basis of the Company's estimates of the percentage of
completion to contract expenditures incurred and work performed. At
the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is accrued.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation is computed under the straight-line method over the
assets' estimated useful lives of 5, 7 or 27-1/2 years. Costs of
maintenance and repairs are charged to expense when incurred.
Use of 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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
6 [LOGO] Plante & Moran, LLP
<PAGE> 11
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 - ADVANCES TO RELATED COMPANY
Advances to a related company consist
of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Advances for operations to a
second company controlled by
the Company's stockholders.
These amounts were paid
subsequent to December 31,
1995. Included in the related
company advances are interest
charges at approximately 6
percent on outstanding balances $350,640 $ -
======== ======
</TABLE>
NOTE 3 - PROGRAMMING CONTRACTS IN PROGRESS
Programming contracts in progress are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Costs incurred on uncompleted contracts $695,395 $ 281,239
Estimated earnings (losses) thereon (57,395) 161,414
-------- ---------
Total earnings 638,000 442,653
Less billings thereon 563,653 (205,260)
-------- ---------
Excess of earned revenue over amounts billed $ 74,347 $ 237,393
======== =========
</TABLE>
7 [LOGO] Plante & Moran, LLP
<PAGE> 12
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4 - PROPERTY AND EQUIPMENT
Cost of property and equipment is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Furniture and equipment $ 376,942 $ 294,813
Telephone system 211,681 133,487
Computer equipment and software 1,180,316 805,575
Leasehold improvements 71,914 53,561
Real property 52,000 52,000
---------- ---------
Total cost 1,892,853 1,339,436
Accumulated depreciation 674,285 481,906
---------- ---------
Net carrying amount $1,218,568 $ 857,530
========== =========
</TABLE>
Depreciation expense totaled $192,379 in 1995 and $107,979 in 1994.
NOTE 5 - NOTE PAYABLE - BANK
The note payable to the bank represents the outstanding amount on a
$4,000,000 revolving line of credit that expires June 30, 1996. The
note bears interest at 1/2 percent over the prime rate (the bank's
prime rate was 8.50 percent at December 31, 1995) and is collateralized
by equipment and accounts receivable. The bank has established various
covenants including minimum net worth and current ratio requirements
and the note has been guaranteed by a stockholder and a related
company. The Company also has a $250,000 facility for term loans and
$600,000 for major acquisitions available under this agreement. See
Note 6 for borrowings under these facilities.
At December 31, 1995, the Company was in violation of certain
convenants. The bank subsequently issued a waiver through May 1996
and then reset the covenants bringing the Company into compliances.
8 [LOGO] Plante & Moran, LLP
<PAGE> 13
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Note payable to the bank, due in monthly
installments of $7,650 including interest
at 9.625 percent, with the final payment due
in April 1998. The note is collateralized by $189,923 $ -
property and equipment
Note payable, due in monthly installments of
$367, including interest at 6.875 percent,
with the final payment due in October 2007.
The note is collateralized by real property 36,061 38,045
-------- -------
Total long-term debt 225,984 38,045
Less current portion 78,907 1,895
-------- -------
Long-term debt - Net of current portion $147,077 $36,150
======== =======
</TABLE>
Interest expense on all debt totaled $255,872 in 1995 and $118,653 in
1994.
Minimum principal payments on long-term debt to maturity as of
December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 78,907
1997 86,785
1998 30,763
1999 2,494
2000 2,670
Remaining years 24,365
--------
$225,984
========
</TABLE>
NOTE 7 - LEASES
The Company leases software under a capital lease. Software cost
attributable to the lease amounts to $27,900 and is recorded as
property and equipment in the December 31, 1995 balance sheet, net of
accumulated amortization of $4,650.
9 [LOGO] Plante & Moran, LLP
<PAGE> 14
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 7 - LEASES (Continued)
The Company also leases certain office space, office equipment and
automobiles under operating lease agreements expiring from 1996 to
2003. Total rental expense under operating leases was $464,000 and
$359,000 in 1995 and 1994, respectively.
<TABLE>
<S> <C>
Obligations under capital leases are as follows:
Net minimum lease payments under capital lease $30,430
Amount representing interest (4,224)
-------
Obligation under capital leases representing present value 26,206
of net minimum lease payment
Less current portion 8,373
-------
Noncurrent portion $17,833
=======
</TABLE>
Minimum annual lease rentals for the five years subsequent to 1995 and
in the aggregate are:
<TABLE>
<CAPTION>
Office Office
Years and Equipment Total
Ending Other and Operating Capital
December 31 Space Automobiles Leases Lease
- ----------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C>
1996 $ 359,767 $45,239 $ 405,006 $10,740
1997 306,409 16,231 322,640 10,740
1998 292,578 11,738 304,316 8,950
1999 302,398 7,545 309,943 -
2000 303,390 7,545 310,935 -
---------- ------- ---------- -------
Total $1,564,542 $88,298 $1,652,840 $30,430
========== ======= ========== =======
</TABLE>
NOTE 8 - INCOME TAXES
Beginning in 1987, the Company elected to be treated as a "small
business corporation" for income tax purposes. Under this election,
the stockholders report the taxable income (or loss) and pay any tax
(or receive any benefit) personally. Accordingly, no provision for
federal income taxes has been recorded.
10 [LOGO] Plante & Moran, LLP
<PAGE> 15
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 8 - INCOME TAXES (Continued)
The Company's net operating loss carryforward at December 31, 1986 of
approximately $166,000 and investment tax credit carryovers of $2,200
will be available to offset future taxable income through 2001 if the
Company terminates its "small business corporation" election and
reverts to a regular corporation for income tax purposes.
NOTE 9 - RETIREMENT PLAN
The Company sponsors a retirement savings 401(k) plan. General
information relative to this plan is summarized below:
1. General - The plan is a defined contribution plan covering
substantially all employees at least 21 years of age who are
employed in a position requiring at least 1,800 hours of service
per year. The plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) and qualifies
under Internal Revenue Service Code Sections 401(a) and 401(k).
2. Contributions - Participants may contribute up to 20 percent of
annual wages through payroll withholdings. The Company will
match 25 percent of the participants' contributions up to 3
percent of the participants' gross income. The Company made
contributions to the retirement savings 401(k) plan for the years
ended December 31, 1995 and 1994 of approximately $157,398 and
$138,105, respectively. The Company may also make discretionary
matching contributions to the plan that are allocated to
participants' accounts based on the percentage share of the
participants' contributions to total eligible participant
contributions for the plan year. The Company made no additional
discretionary contribution in 1995 or 1994.
3. Payment of Benefits - Benefits are payable after participants
attain age 59-1/2. However, participants may elect to defer
benefit payments until age 70-1/2. Funds are disbursed to
beneficiaries in one lump-sum distribution. A participant who
resigns or is discharged from employment receives payment for the
value of their account in a lump-sum distribution.
NOTE 10 - CASH FLOWS
Cash paid for interest during the years ended December 31, 1995 and
1994 totaled $232,842 and $118,653, respectively.
During 1995, noncash investing and financing activities included the
purchase of $27,900 of software under a capital lease transaction
(see Note 7).
11 [LOGO] Plante & Moran, LLP
<PAGE> 16
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 11 - STOCK SPLIT
On February 1, 1994, the Company distributed 50 shares of common
stock in connection with a 100 percent stock split. As a result of
the stock split, common stock was increased by $50, and retained
earnings was decreased by $50.
NOTE 12 - COMMITMENTS AND CONTINGENCY
The Company is the guarantor of an obligation of the majority
stockholder. The outstanding balance on this obligation totaled
$352,000 and $360,000 at December 31, 1995 and 1994, respectively,
with payments due in monthly installments of $4,000 beginning in
November 1995.
NOTE 13 - RESTATEMENT
Notes receivable and advances receivable from stockholders and
related companies of $503,828, as originally reported at January 1,
1994, have been restated as reductions of stockholders' equity as the
majority of repayment is contingent upon the distribution of future
earnings of the Company. This restatement resulted in a reduction of
stockholders' equity of $503,828 at January 1, 1994. There was no
effect on 1994 net income resulting from the restatement.
NOTE 14 - NOTES RECEIVABLE AND ADVANCES RECEIVABLE FROM STOCKHOLDERS AND
RELATED COMPANIES
Note receivable and advances receivable from stockholders and related
companies consist of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Unsecured note receivable from a controlling
stockholder bearing interest at 7 percent,
due in monthly installments of $7,388
including interest until the note is paid in full $325,444 $221,379
</TABLE>
12 [LOGO] Plante & Moran, LLP
<PAGE> 17
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 14 - NOTES RECEIVABLE AND ADVANCES RECEIVABLE FROM STOCKHOLDERS AND
RELATED COMPANIES (Continued)
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Unsecured note receivable from a related company
controlled by the Company's stockholders, bearing
interest at 6 percent. Payment is due upon the sale of
the related company's investment in land and building $ 335,339 $253,665
Advances to stockholders due before December 31, 1996,
bearing interest at 6% 303,767 98,068
Advances for operations to a second company controlled by
the Company's stockholders. There are no stated
repayment terms or interest provisions associated with
these advances 90,171 80,495
---------- --------
Total notes receivable and advances
receivable from stockholders
and related companies $1,054,721 $653,607
========== ========
</TABLE>
The majority of repayment of the above notes receivable and advances
is contingent upon the distribution of future earnings of the
Company. Therefore, the amounts have been classified as a reduction
of stockholders' equity.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
A summary of the fair value of financial instruments, as well as the
methods and significant assumptions used to estimate the fair value
of financial instruments at December 31, 1995, is as follows:
Short-term Financial Instruments - The fair value of short-term
financial instruments, including cash, excess of earned revenue over
amounts billed, trade accounts receivable and payable, and accrued
receivables and liabilities, approximates the carrying amounts in the
accompanying financial statements due to the short maturity of such
instruments.
Marketable Securities - The fair value of marketable securities,
which approximates the carrying amount, is estimated based on quoted
market prices.
13 [LOGO] Plante & Moran, LLP
<PAGE> 18
ANALYTICAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Notes Receivable and Advances Received From Stockholders and Related
Companies - The fair value of these instruments is not practicable to
estimate, due to uncertainty of the repayment.
Notes Payable to Bank and Long-term Debt - The fair value of variable
rate and fixed rate notes payable and long-term debt approximates the
carrying amount since the currently effective rates reflect market
rates.
Guarantee - The fair value of the guarantee is not practicable to
estimate, due to the nature of the relationship between the parties
to the instrument.
14 [LOGO] Plante & Moran, LLP
<PAGE> 19
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
FINANCIAL REPORT
DECEMBER 31, 1995
<PAGE> 20
[PLANTE & MORAN, LLP LETTERHEAD]
Independent Auditor's Report
To the Board of Directors
and Stockholders
Anatec Canada, Inc. (a Canadian corporation)
We have audited the accompanying balance sheet of Anatec Canada, Inc. (a
Canadian corporation) as of December 31, 1995 and the related statements of
operations and accumulated deficit and cash flows for the period from March 14,
1995 (inception) to December 31, 1995. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Anatec Canada, Inc. (a
Canadian corporation) as of December 31, 1995 and the results of its operations
and its cash flows for the period from March 14, 1995 (inception) to December
31, 1995, in conformity with generally accepted accounting principles.
Plante & Moran, LLP
September 13, 1996
<PAGE> 21
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Cash $208,541
Trade accounts receivable 155,341
Deposits 1,393
--------
Total assets $365,275
========
LIABILITIES AND DEFICIENCY IN ASSETS
LIABILITIES
Accounts payable $ 21,535
Advances from related company (Note 2) 348,405
Accrued payroll taxes and other 1,566
Accrued goods and services tax 43,172
--------
Total liabilities 414,678
DEFICIENCY IN ASSETS
Common stock - No par value:
Authorized - Unlimited shares
Issued and outstanding - 100 shares 100
Accumulated deficit (49,503)
--------
Total deficiency in assets 49,403
--------
Total liabilities and deficiency in assets $365,275
========
</TABLE>
See Notes to Financial Statements.
2
<PAGE> 22
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
MARCH 14, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<S> <C>
SALES $633,538
COST OF SALES 470,788
--------
GROSS PROFIT 162,750
GENERAL AND ADMINISTRATIVE EXPENSES 201,799
--------
OPERATING LOSS (39,049)
OTHER EXPENSE - Interest 10,454
--------
LOSS - Before income taxes (49,503)
INCOME TAX EXPENSE (Note 5) -
--------
NET LOSS (49,503)
RETAINED EARNINGS - Beginning of period -
--------
ACCUMULATED DEFICIT - End of period $(49,503)
========
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 23
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
MARCH 14, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (49,503)
Adjustments to reconcile net loss to net cash from operating activities -
Changes in assets and liabilities:
Increase in accounts receivable (155,341)
Increase in deposits (1,393)
Increase in accounts payable 21,535
Increase in accrued payroll taxes and other 1,566
Increase in accrued goods and services tax 43,172
---------
Net cash used in operating activities (139,964)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related company - Net of repayments 348,405
Issuance of common stock 100
---------
Net cash flows from financing activities 348,505
---------
NET INCREASE IN CASH 208,541
CASH - Beginning of period -
---------
CASH - End of period $ 208,541
=========
</TABLE>
There was no cash paid for interest during the period ended December 31, 1995.
See Notes to Financial Statements.
4
<PAGE> 24
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company is a Canadian software services and technology
organization servicing primarily companies in Ontario, Canada.
Services include consulting, project management, fixed-price
contracting, software development, training and software systems
integration services. All sales in 1995 were made to one major
customer.
Basis of Presentation - The Company's functional and reporting
currency is the Canadian dollar. The accompanying financial
statements have been prepared for the convenience of readers
accustomed to financial statements presented using the U.S. dollar.
For purposes of the accompanying financial statement presentation, the
Company's monetary assets and liabilities have been remeasured in U.S.
dollars based on exchange rates in effect at December 31, 1995 and the
Company's results of operations have been remeasured using the average
exchange rate for the period then ended.
Accounts Receivable - All trade receivables at December 31, 1995 were
due from one customer in the health insurance industry. Management
considers all accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts has been provided.
Income Taxes - The Company is a Canadian corporation with operations
solely in Canada. Accordingly, the Company is subject only to
Canadian income taxes.
Use of 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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - RELATED PARTY TRANSACTIONS
Advances from related company consist of advances for operations from
a separate company controlled by the Company's stockholders. Amounts
totaling $348,405 were repaid subsequent to December 31, 1995.
Included in related company advances are accrued interest charges at
approximately 6 percent on outstanding balances.
The related company provides employees and administrative services
such as office space, supplies, accounting and management services
necessary for the operation of the Company and charges the Company for
contracted services and management fees.
5
<PAGE> 25
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 2 - RELATED PARTY TRANSACTIONS (Continued)
Contracted services and management fees amounted to $357,817 and
$134,089, respectively, in 1995.
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's short-term financial instruments,
including cash, trade accounts receivable and payable and accrued
liabilities, approximates the carrying amount in the accompanying
financial statements due to the short maturity of such instruments.
NOTE 4 - SUBSEQUENT EVENT
Subsequent to December 31, 1995, the Company entered into an agreement
to sell all the assets of the Company and the rights to its corporate
name.
NOTE 5 - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<S> <C>
Current $ -
Deferred expense -
--------
Total income tax expense (recovery) $ -
========
</TABLE>
A reconciliation of the provision for income taxes on income before
income taxes to income taxes computed by applying the statutory
Canadian income tax rate to income before income taxes is as follows:
<TABLE>
<S> <C>
Tax recovery, computed at 46 percent of loss $(23,000)
Effect of change in valuation allowance 18,000
Effect of nondeductible expense 5,000
--------
Total $ -
========
The details of the net deferred assets are as follows:
Total deferred tax liabilities $ -
Total deferred tax assets 18,000
Valuation allowance recognized for deferred tax assets (18,000)
--------
Net deferred tax assets $ -
========
</TABLE>
6
<PAGE> 26
ANATEC CANADA, INC.
(A CANADIAN CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 5 - INCOME TAXES (Continued)
Deferred tax assets result from expenses recognized for financial
reporting purposes but not yet deductible for tax purposes and loss
carryforwards.
7
<PAGE> 27
ANALYTICAL TECHNOLOGIES, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1996
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ -
Accounts receivable - trade, less allowance for doubtful
accounts of $177,178 4,250,036
Other current assets 949,885
----------
Total current assets 5,199,921
PROPERTY AND EQUIPMENT, less
accumulated depreciation 1,388,263
OTHER NON CURRENT ASSETS 96,769
----------
TOTAL ASSETS $6,684,953
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note Payable - bank $3,582,500
Accounts payable and accrued expenses 1,402,278
Other current liabilities 542,540
----------
Total current liabilities 5,527,318
LONG-TERM DEBT, less current maturities 130,215
OBLIGATION UNDER CAPITAL LEASE - Net of current portion 15,280
Total liabilities 5,672,813
----------
STOCKHOLDER'S EQUITY
Common stock - $1 par value: 100 shares authorized, issued
and outstanding. 100
Additional paid-in-capital 950
Notes receivable and advances from stockholders and related companies (782,213)
Retained earnings 1,793,303
----------
Total stockholders' equity 1,012,140
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,684,953
==========
</TABLE>
See accompanying note to financial statements.
<PAGE> 28
ANALYTICAL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
SALES $11,668,913 $11,432,403
COST OF OPERATIONS 7,831,174 7,506,460
----------- -----------
Gross profit 3,837,739 3,925,943
GENERAL AND ADMINISTRATIVE EXPENSES 3,804,203 3,514,338
----------- -----------
OPERATING PROFIT 33,536 411,605
INTEREST EXPENSE 176,639 109,666
----------- -----------
NET (LOSS) INCOME $ (143,103) $ 301,939
=========== ===========
</TABLE>
See accompanying note to financial statements.
<PAGE> 29
ANALYTICAL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
----------------------------
1996 1995
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(143,103) $ 301,939
Adjustments to reconcile net income(loss) to net cash from operating activities:
Depreciation 118,364 82,607
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 424,041 (757,460)
Increase in other current assets (262,729) (845,866)
Decrease (increase) in accounts payable and accrued expenses (252,648) 68,810
--------- ----------
Increase in other current liabilities 118,092 -
Net cash provided (used in) operating activities 2,017 (1,149,970)
CASH FLOWS FROM INVESTING ACIVITIES
Purchase of marketable securities, net - (19,766)
Additions to property and equipment, net (288,059) (351,499)
Payments received on advances to related company, net 187,338 (1,000)
--------- ----------
Net cash used in investing activities (100,721) (372,265)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from long term debt 16,604 187,462
Net proceeds from note payable 92,500 1,137,859
Payments received on notes receivable and advances receivable
from stockholders and related companies, net 272,508 (3,314)
Dividends paid (292,948) (147,997)
Net increase in cash overdraft 10,040 336,308
--------- ----------
Net cash provided by financing activities 98,704 1,510,318
--------- ----------
NET DECREASE IN CASH - (11,917)
CASH - Beginning of period - 11,917
CASH - End of period $ - $ -
========= ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during period for interest $ 116,421 $ 59,326
</TABLE>
See accompanying note to financial statements.
<PAGE> 30
ANALYTICAL TECHNOLOGIES, INC
NOTE TO INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements reflect all adjustments which, in the
opinion of management, are necessary to present fairly the financial position
and results of operations for the periods presented. The results of operations
for the interim periods are not necessarily indicative of the results for a
full year. Certain information and footnote disclosures as of June 30, 1996 and
for the six months ended June 30, 1996 and 1995 normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules of the Securities and
Exchange Commission, although the Company believes the disclosures are adequate
to make the information not misleading.
<PAGE> 31
ANATEC CANADA, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1996
-------------
ASSETS
<S> <C>
CURRENT ASSETS
Cash $226,055
Accounts receivable 443,186
Deposits and other 27,464
--------
TOTAL ASSETS $696,705
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses 77,837
Advances from related company 161,620
--------
Total liabilities 239,457
--------
STOCKHOLDERS' DEFICIT
Common stock - No stated par value; unlimited shares authorized,
100 issued and outstanding -
Equity adjustment from foreign currency translation 73
Retained earnings 457,175
--------
Total stockholders' equity 457,248
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $696,705
========
</TABLE>
See accompanying note to financial statements.
<PAGE> 32
ANATEC CANADA, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30
------------------------------------
SIX MONTHS FROM MARCH 14,
1996 1996 (INCEPTION)
------------ ----------------
<S> <C> <C>
SALES $1,109,633 $125,151
COST OF OPERATIONS 592,454 93,863
---------- --------
Gross profit 517,179 31,288
GENERAL AND ADMINISTRATIVE EXPENSES 10,487 91,735
---------- --------
OPERATING PROFIT (LOSS) 506,692 (60,447)
INTEREST EXPENSE - 4,750
---------- --------
NET INCOME (LOSS) $ 506,692 $(65,197)
========== ========
</TABLE>
See accompanying note to financial statements.
<PAGE> 33
ANATEC CANADA, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30
-----------------------------------
SIX MONTHS FROM MARCH 14,
1996 1996 (INCEPTION)
---------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 506,692 $ (65,197)
Adjustments to reconcile net income(loss) to net cash from operating activities:
Changes in assets and liabilities:
Increase in accounts receivable (287,845) (101,983)
Increase in deposits and other (26,071) -
--------- ----------
Increase in accounts payable and accrued expenses 11,464 35,786
Net cash provided (used in) operating activities 204,240 (131,394)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related company - net of repayments (186,785) 131,494
EFFECT OF EXCHANGE RATE CHANGES ON CASH 59 -
--------- ----------
NET INCREASE IN CASH 17,514 100
CASH - Beginning of period 208,541 -
--------- ----------
CASH - End of period $ 226,055 $ 100
========= ==========
</TABLE>
There was no cash interest paid during the periods ended June 30, 1996 and June
30, 1995.
<PAGE> 34
ANATEC CANADA, INC.
NOTE TO INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements reflect all adjustments which, in the
opinion of management, are necessary to present fairly the financial position
and results of operations for the periods presented. The results of operations
for the interim periods are not necessarily indicative of the results for a
full year. Certain information and footnote disclosures as of June 30, 1996 and
for the six months ended June 30, 1996 and the period from March 14, 1995
(inception) to June 30, 1995 normally included in the financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to the rules of the Securities and Exchange Commission,
although the Company believes the disclosures are adequate to make the
information not misleading.
<PAGE> 35
NORRELL CORPORATION AND SUBSIDIARIES
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined statements of income for the year
ended October 29, 1995 and for the nine months ended July 28, 1996 present the
combined results of the continuing operations of Norrell Corporation (the
"Company"), Analytical Technologies, Inc. and ANATEC Canada, Inc.
(collectively, "ANATEC") assuming the acquisition had been consummated at the
beginning of the periods indicated. The statements include all material
adjustments necessary to present the combined historical results under these
assumptions.
The pro forma information should be read in conjunction with the Company's
historical Consolidated Financial Statements and Notes thereto contained in the
1995 Annual Report on Form 10-K and Form 10-Q for the third quarter of 1996.
The pro forma financial information is not necessarily indicative of the actual
financial position and results of operations of the Company, nor does it
purport to indicated the future financial position or results of operations of
the Company.
<PAGE> 36
NORRELL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED OCTOBER 29, 1995
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
-----------------------------
Norrell Pro Forma
Corporation ANATEC Adjustments Pro Forma
----------------------------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES $812,635 $23,031 $ - $835,666
COST OF SERVICES 633,761 16,439 - 650,200
-------- ------- ------- --------
Gross profit 178,874 6,592 - 185,466
OPERATING EXPENSES
General and administrative 143,783 6,827 (445)(c) 150,165
Depreciation and amortizati 4,415 - 645 (a) 5,060
-------- ------- ------- --------
Total operating expenses 148,198 6,827 200 155,225
Income from operations 30,676 (235) (200) 30,241
OTHER EXPENSE
Interest 164 266 1,968 (b) 2,398
Other, net 1,554 (104) 0 1,450
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES 28,958 (397) (2,168) 26,393
INCOME TAXES 12,164 - (1,077)(c) 11,087
-------- ------- ------- --------
NET INCOME $ 16,794 $ (397) $(1,091) $ 15,306
======== ======= ======= ========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $0.72 $0.66
======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 23,356 23,356
======== ========
</TABLE>
See accompanying notes to pro forma financial information.
<PAGE> 37
NORRELL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED JULY 28, 1996
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------
Norrell Pro Forma
Corporation ANATEC Adjustments Pro Forma
--------------------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES $707,762 $18,683 $ - $726,445
COST OF SERVICES 557,468 12,805 - 570,273
-------- ------- ------- --------
Gross profit 150,294 5,878 - 156,172
OPERATING EXPENSES
General and administrative 117,234 5,416 (180)(c) 122,470
Depreciation and amortization 3,781 217 484 (a) 4,482
-------- ------- ------- --------
Total operating expenses 121,015 5,633 304 126,952
Income from operations 29,279 245 (304) 29,220
OTHER EXPENSE
Interest 442 258 1,476 (b) 2,176
Other 487 - - 487
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES 28,350 (13) (1,780) 26,557
INCOME TAXES 10,913 - (685)(c) 10,225
-------- ------- ------- --------
NET INCOME $ 17,437 $ (13) $(1,095) $ 16,333
======== ======= ======= ========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.72 $ 0.68
======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 24,125 24,125
======== ========
</TABLE>
See accompanying notes to pro forma financial information.
<PAGE> 38
NORRELL CORPORATION AND SUBSIDIARIES
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) To record the amortization of goodwill resulting from the purchase
adjustment to record the excess of purchase price over the value
of ANATEC's tangible assets on a straight line basis over 40 years.
(b) To record the increase in interest expense as a result of the
higher outstanding debt for the cash purchase price of ANATEC.
(c) To record the estimated income tax effects of the pro forma
adjustments based on the Company's effective tax rate of
approximately 38.5% in 1996 and 42.0% in 1995 and to record the
impact of the change in ANATEC's status from an S Corporation to a
C Corporation.
