SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-13984
DIVERSIFIED CORPORATE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1565578
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
12801 North Central Expressway
Suite 260
Dallas, Texas 75243
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 458-
8500
Former name, former address and former fiscal year if changed
since last report:
Indicate by check mark whether registrant (1) has filed all
reports required 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 No X
Number of shares of common stock of the registrant
outstanding on June 30, 1995, was 1,758,211.
<PAGE>
Total Number of
pages for
this 10-Q filing: 10
<TABLE>
<CAPTION>
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $136,339 $45,780
Accounts receivable less allowance
for doubtful
accounts of approximately $221,000
and $205,000, respectively 2,035,016 1,874,754
Refundable federal taxes - 225
Notes receivable 23,227 25,363
Prepaid expenses and other
current assets 174,773 157,153
TOTAL CURRENT ASSETS 2,369,355 2,103,275
EQUIPMENT, FURNITURE AND LEASEHOLD
IMPROVEMENTS, NET 378,911 286,829
OTHER ASSETS:
Notes receivable 2,723 11,533
Other 164,137 161,243
$2,915,126 $2,562,880
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $3,299,216 $3,143,107
Current maturities of long-term debt 73,844 101,822
TOTAL CURRENT LIABILITIES 3,373,060 3,244,929
DEFERRED LEASE RENTS 84,048 117,597
LONG-TERM DEBT 102,611 113,240
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY):
Preferred stock, $1.00 par value;
1,000,000 shares
authorized, none issued - -
Common stock, $.10 par value;
10,000,000 shares
authorized, 1,881,161 shares issued 188,116 188,116
Additional paid-in capital 3,615,151 3,615,151
Accumulated deficit (4,278,435) (4,546,728)
Common stock held in treasury
(122,950 shares), at cost (169,425) (169,425)
TOTAL STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (644,593) (912,886)
$2,915,126 $2,562,880
See Notes to Consolidated Financial Statements.
<PAGE>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended For the six months ended
June 30, June 30,
1995 1994 1995 1994
NET SERVICE REVENUES
<S> <C> <C> <C> <C>
Regular Placements $2,509,768 $1,861,240 $4,730,767 $3,610,135
Temporary 1,001,194 691,434 1,935,844 1,402,076
Contract Labor 1,364,847 952,540 2,752,055 1,985,359
4,875,809 3,505,214 9,418,666 6,997,570
COST AND EXPENSES 4,299,010 3,108,385 8,233,693 6,210,063
INCOME FROM
OPERATING ENTITIES 576,799 396,829 1,184,973 787,507
GENERAL AND
ADMINISTRATIVE
EXPENSES (461,916) (357,033) (852,820) (722,912)
OTHER INCOME (EXPENSES):
Gain on foreclosure
of divisional
assets - 108,666 - 124,942
Interest expense,
net (47,663) (39,482) (107,446) (77,288)
Other, net 17,894 18,598 37,965 41,791
(29,769) 87,782 (69,481) 89,445
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 85,114 127,578 262,672 154,040
INCOME TAXES, net of
tax benefit from
utilization of net
operating loss
carryforward - - - -
INCOME BEFORE
EXTRAORDINARY ITEM 85,114 127,578 262,672 154,040
EXTRAORDINARY ITEM -
gain on troubled debt
restructuring,
net of income tax 5,621 32,364 5,621 54,102
NET INCOME $90,735 $159,942 $268,293 $208,142
INCOME (LOSS) PER SHARE
Income (loss)
before extraordinary
item $.04 $.07 $.14 $.09
Extraordinary Item .01 .02 .01 .03
INCOME PER SHARE $.05 $.09 $.15 $ .12
WEIGHTED AVERAGE COMM
ON AND COMMON
SHARES OUTSTANDING 1,758,211 1,758,211 1,758,211 1,758,211
The Notes to Consolidated Financial Statements are an Integral Part of the
Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $268,293 $208,142
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation 56,935 51,141
(Benefit) provision for losses on
accounts receivable 15,745 (12,818)
Increase in accounts receivable (176,007) (554,838)
Decrease in receivables from net assets foreclosed - 236,973
Increase in prepaid expenses and other current assets (15,259)(88,603)
(Increase) decrease in other assets 5,916 (108,979)
Increase in fixed assets from foreclosure - (223,849)
Increase in accounts payable and accrued expenses 228,069 665,506
Decrease in deferred lease rents (33,549) (40,849)
Decrease in obligations resulting
from settlement agreements - (159,556)
Net cash provided by (used in)
operating activities 350,143 (27,730)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (149,017) (63,306)
Net cash used in investing activities (149,017) (63,306)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loan - 10,000
Repayment of short-term debt (25,323) (10,000)
Increase (decrease) in proceeds
from factored receivables (71,960) 60,687
Principal payments under
long-term debt obligations to others (13,284) (14,558)
Net cash (used in) provided
by financing activities (110,567) 46,129
Net increase (decrease) in cash
and cash equivalents 90,559 (44,907)
Cash and cash equivalents
at beginning of year 45,780 102,775
Cash and cash equivalents at end of period $ 136,339 $57,868
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 143,959 $ 75,681
The Notes to Consolidated Financial Statements are an Integral Part of the
Financial Statements.
<PAGE>
</TABLE>
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Basis of Presentation
The consolidated financial statements include the operations
of Diversified Corporate Resources, Inc. and its subsidiaries
(the "Company"). The financial information for the three and six
month periods ended June 30, 1995, is unaudited but includes all
adjustments (consisting only of normal recurring accruals) which
the Company considers necessary for a fair presentation of the
results for the period. The financial information should be read
in conjunction with the consolidated financial statements for the
year ended December 31, 1994, included in the Company's annual
report on Form 10-K. Operating results for the three and six
month periods ended June 30, 1995, are not necessarily indicative
of the results that may be expected for the entire year ended
December 31, 1995.
The Company's Consolidated Statement of Operations for the
three and six month periods ended June 30, 1995 and 1994, include
income from the operations of the employment placement business
(the "Employment Placement Business"). The Employment Placement
Business includes the operation of the assets foreclosed upon in
January, 1994.
Revenue Recognition
Fees for full-time (regular) placement of personnel were
recognized as income at the time the applicants accepted
employment. Provision was made for estimated losses in
realization (principally due to applicants not commencing
employment or not remaining in employment for the guaranteed
period). Revenue from temporary and contract personnel
placements was recognized upon performance of services. Cost of
services consists of expenses for the operation of agencies
(principally commissions, direct wages paid to temporary
personnel, payroll taxes and rent) and a provision for
uncollectible accounts (approximately $29,000 and $57,000,
respectively, for the three and six month periods ended June 30,
1995).
Cash and Cash Equivalents
Cash and cash equivalents includes certificates of deposit of
approximately $32,000 at June 30, 1995, and $31,000 at December
31, 1994. The Company considers all highly liquid investment
instruments purchased with remaining maturities of three months
or less to be cash equivalents for purposes of the consolidated
statements of cash flow.
Income Taxes
<PAGE>
During 1993, the Company changed its method of accounting for
income taxes to conform to the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Accordingly, income taxes are provided for the tax
effects of transactions reported in the financial statements and
consist of taxes currently payable plus deferred taxes related
primarily to differences between the basis of installment sales,
property and equipment and accounts receivable for financial and
income tax reporting. The deferred taxes represent the future
tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are
recovered or settled.
The Company has a net operating loss carryforward of
approximately $4.9 million as of December 31, 1994, which, if
unused, expires in 2002 through 2008. However, due to a more
than 50% change in ownership beginning with an April 1991
transaction, the Company's net operating loss carryforward is
subject to certain limitations pursuant to provisions of the
Internal Revenue Code. The amount of the Company's net operating
loss available for use at December 31, 1994, was approximately
$1.7 million. An additional amount of approximately $500,000
will become available annually through 2001.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months Ended June 30, 1995 Compared to Three Months
Ended June 30, 1994
Total revenues were $4.9 million for the second quarter ended
June 30, 1995, compared to $3.5 million in the second quarter of
1994. This increase of 39.1% resulted from increases in regular
placements, temporary and contract labor revenues. Cost and
expenses were $4.3 million in the second quarter of 1995 as
compared to $3.1 million in the second quarter of 1994. This
represents a 38.3% increase. The increases in revenues and the
related cost and expenses in the second quarter of 1995 as
compared to the second quarter of 1994 resulted from an increase
in all areas of service revenues and operations of the Employment
Placement Business during the second quarter of 1995.
General and administrative expenses increased approximately
$105,000, or 29.4%, for the second quarter of 1995. This
increase is primarily a result of an increase in payroll expenses
in the Company's Employment Placement Business.
Other income and expenses for the second quarter of 1995
decreased approximately $118,000 as compared to the second
quarter of 1994. Due to a January 1994 foreclosure transaction,
the Company recognized a $109,000 gain on foreclosure of
divisional assets during the second quarter of 1994.
In the second quarter of 1994, the Company recorded
approximately $32,000 as an extraordinary item from gain on debt
restructuring, net of income taxes, which is the result of
management's successful efforts in settling certain prior year
liabilities on a discounted basis. There was a gain of
approximately $6,000 on debt restructuring recorded in the second
quarter ended June 30, 1995.
As a result of these factors, the Company recorded
approximately $91,000 of net income for the second quarter of
1995, compared to approximately $160,000 for the second quarter
of 1994.
Six Months Ended June 30, 1995 Compared to Six Months Ended
June 30, 1994
Total revenues were $9.4 million for the first six months
ended June 30, 1995, compared to $7.0 million for the first six
months of 1994. This increase of 34.6% resulted from increases
in regular placements, temporary and contract revenues. Cost and
expenses were $8.2 million for the first six months of 1995
compared to $6.2 million in the first six months of 1994. This
represents a 32.6% increase. The increases in revenues and the
related cost and expenses in the first six months of 1995 as
compared to the first six months of 1994 resulted from an
increase in all areas of service revenues and operations of the
Employment Placement Business during the first six months of
1995. The demand for the Company's services remained strong
through the first six months of 1995.
<PAGE>
General and administrative expenses increased approximately
$130,000, or 18.0%, in 1995 as compared to the first six months
of 1994. This increase is primarily the result of an increase in
payroll expenses in the Company's Employment Placement Business.
Due to a January, 1994 foreclosure transaction, the Company
recognized a $125,000 gain on foreclosure of divisional assets
during the first six months of 1994, as compared to no gain being
recognized in the comparable period in 1995.
Interest expense increased approximately $30,000, which is
the result of an increase in liabilities relating to factored
accounts receivable of the Employment Placement Business.
In the first six months of 1994, the Company recognized
approximately $54,000 as an extraordinary item from gain on debt
restructuring, net of income taxes, which is the result of
management's successful efforts in settling certain prior year
liabilities on a discounted basis. There was a gain of
approximately $6,000 on debt restructuring recorded in the first
six months of 1995.
As a result of these factors, the Company recorded
approximately $268,000 in net income for the first six months
ended June 30, 1995, compared to approximately $208,000 for the
first six months ended June 30, 1994.
Liquidity and Capital Resources
Working capital was a $1.0 million deficit at June 30, 1995,
compared with a $1.1 million deficit at December 31, 1994. This
deficit decrease of approximately $138,000 during the first six
months of 1995 can be primarily attributed to an increase in the
accounts receivable of the Employment Placement Business.
Cash flow provided by operating activities of approximately
$350,000 resulted primarily from net income for the first six
months of 1995 and from an increase in accounts payable and
accrued expenses, partially offset by an increase in accounts
receivable.
Net cash used in investing activities was $149,000 as a
result of capital expenditures made by the Company during the
first six months of 1995. In addition, the Company retired
approximately $39,000 in notes payable and other obligations
during the first six months of 1995. The Company also decreased
its factoring liability by approximately $72,000 during the first
six months of 1995.
Other
Subsequent to March 31, 1995, the Company has opened a new
district office in Chicago, Illinois. This office will provide
employment placement services to prospective clients in the
<PAGE>
region. Management believes that this operation will contribute
significantly to future growth and profits.
In addition, subsequent to March 31, 1995, the Company
entered into a long-term lease commitment for approximately
41,000 square feet of office space, at a favorable market rate,
in Dallas, Texas. This office space is currently the corporate
headquarters for the Company, and includes several of the
Company's agency operations.
Subsequent to March 31, 1995, the Company has entered into
negotiations with major financial sources to provide funding to
the Company under a factoring or an asset based lending
arrangement. If such funding arrangement is finalized,
management plans to use these funds to finance the Employment
Placement Business and to replace its current factoring sources
at a significantly lower cost.
<PAGE>
PART II OTHER INFORMATION
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
Item 1. LEGAL PROCEEDINGS
Not Applicable.
Item 2. CHANGES IN SECURITIES
Not Applicable.
Item 3. DEFAULTS ON SENIOR SECURITIES
Not Applicable.
Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N o t
Applicable.
Item 5. OTHER INFORMATION
The Company
has been
delayed in
filing this
Form 10-Q due
primarily to
the lack of
reliable
financial
information
with respect
t o t h e
business
operations
related to
the assets
foreclosed
upon by the
Company in
January,
1994.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
N o t
Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DIVERSIFIED CORPORATE RESOURCES, INC.
Registrant
DATE: November 13, 1995
By: /s/ J. Michael Moore
J. Michael Moore,
Chief Executive Officer
DATE: November 13, 1995
By: /s/ M. Ted Dillard
M. Ted Dillard
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000779226
<NAME> DIVERSIFIED CORPORATE RESOURCES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 136,339
<SECURITIES> 0
<RECEIVABLES> 2,035,016
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,369,355
<PP&E> 378,911
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,915,126
<CURRENT-LIABILITIES> 3,373,060
<BONDS> 0
<COMMON> 188,116
0
0
<OTHER-SE> (832,709)
<TOTAL-LIABILITY-AND-EQUITY> 2,915,126
<SALES> 0
<TOTAL-REVENUES> 9,418,666
<CGS> 8,233,693
<TOTAL-COSTS> 852,820
<OTHER-EXPENSES> 69,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,446
<INCOME-PRETAX> 262,672
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 5,621
<CHANGES> 0
<NET-INCOME> 268,293
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
