<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 0-21533
TEAM AMERICA CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 31-1209872
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 EAST WILSON BRIDGE ROAD 43085
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (614) 848-3995
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- ---------
THE NUMBER OF SHARES OF REGISTRANT'S ONLY CLASS OF COMMON STOCK OUTSTANDING ON
NOVEMBER 11, 1997 WAS 3,879,636
<PAGE> 2
TEAM AMERICA CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1997
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
Item 1. Financial Statements:
Consolidated Statements of Income -- Three-month periods
ended September 30, 1997 and 1996 (unaudited) - 3 -
Consolidated Statements of Income -- Nine-month periods
ended September 30, 1997 and 1996 (unaudited) - 4 -
Consolidated Balance Sheets -- September 30, 1997 (unaudited)
and December 31, 1996 - 5 -
Consolidated Statements of Cash Flows -- Nine-month periods
ended September 30, 1997 and 1996 (unaudited) - 7 -
Consolidated Statement of Changes in Shareholders' Equity-
Nine-month period ended September 30, 1997 (unaudited) - 8 -
Notes to Consolidated Financial Statements - 9 -
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - 10 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K - 16 -
Signature - 17 -
Exhibit Index - 18 -
Exhibits - 19 -
</TABLE>
- ----------
Note: Item 3 of Part I and Items 1 through 5 of Part II are omitted because they
are not applicable.
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TEAM AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1997 1996
(unaudited)
<S> <C> <C>
REVENUES $36,697,118 $24,803,028
DIRECT COSTS:
Salaries and wages 31,764,551 21,130,580
Payroll taxes, workers' compensation premiums,
employee benefits and other 3,235,718 2,226,161
----------- -----------
Total direct costs 35,000,269 23,356,741
----------- -----------
Gross profit 1,696,849 1,446,287
EXPENSES:
Administrative salaries, wages and employment taxes 862,856 640,407
Other general and administrative expenses 526,883 445,283
Advertising 95,131 52,703
Depreciation and amortization 59,812 23,841
----------- -----------
Total operating expenses 1,544,682 1,162,234
----------- -----------
Income from operations 152,167 284,053
OTHER INCOME 148,286 6,855
----------- -----------
Income before income taxes 300,453 290,908
INCOME TAX EXPENSE 127,661 105,780
----------- -----------
Net income $ 172,792 $ 185,128
=========== ===========
Earnings per share $ 0.05 $ 0.09
=========== ===========
Weighted average shares outstanding 3,501,686 2,087,848
=========== ===========
</TABLE>
3
<PAGE> 4
TEAM AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1997 1996
(unaudited)
<S> <C> <C>
REVENUES $94,051,834 $69,705,688
DIRECT COSTS:
Salaries and wages 80,605,444 59,017,947
Payroll taxes, workers' compensation premiums,
employee benefits and other 8,537,646 6,788,563
----------- -----------
Total direct costs 89,143,090 65,806,510
----------- -----------
Gross profit 4,908,744 3,899,178
EXPENSES:
Administrative salaries, wages and employment taxes 2,423,471 1,894,994
Other general and administrative expenses 1,276,195 997,668
Advertising 254,750 174,384
Depreciation and amortization 146,515 58,314
----------- -----------
Total operating expenses 4,100,931 3,125,360
----------- -----------
Income from operations 807,813 773,818
OTHER INCOME 440,650 12,613
----------- -----------
Income before income taxes 1,248,463 786,431
INCOME TAX EXPENSE 512,313 330,300
----------- -----------
Net income $ 736,150 $ 456,131
=========== ===========
Earnings per share $ 0.22 $ 0.22
=========== ===========
Weighted average shares outstanding 3,404,750 2,088,768
=========== ===========
</TABLE>
4
<PAGE> 5
TEAM AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents:
Cash $ 1,730,984 $ 1,383,023
Temporary cash investments 5,222,715 6,717,497
----------- -----------
Total cash and cash equivalents 6,953,699 8,100,520
Short-term investments 5,700,695 7,499,375
Receivables:
Trade, net 765,376 263,351
Employee advances 184,210 48,487
Unbilled revenues 5,187,127 2,550,854
----------- -----------
Total receivables 6,136,713 2,862,692
Prepaid income taxes -- --
Prepaid expenses 484,787 267,784
Deferred income tax asset 120,000 120,000
----------- -----------
Total current assets 19,395,894 18,850,371
PROPERTY AND EQUIPMENT, NET 900,243 492,335
OTHER ASSETS:
Goodwill and non-compete agreements, net 9,761,176 --
Cash surrender value of life insurance policies 390,398 259,895
Mandated benefit/security deposits 155,316 129,500
Deferred income tax asset 102,000 102,000
Other assets 64,787 65,155
----------- -----------
Total other assets 10,473,677 556,550
----------- -----------
Total assets $30,769,814 $19,899,256
=========== ===========
</TABLE>
5
<PAGE> 6
TEAM AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 480,841 $ 254,181
Related parties -- 24,768
------------ ------------
Total accounts payable 480,841 278,949
Acquisition payments due 1,954,015 --
Accrued compensation 4,741,833 2,440,708
Withheld and accrued payroll taxes payable 1,419,507 670,952
Accrued workers' compensation premiums 998,296 839,117
Federal and state income taxes payable (43,041) 389,275
Other accrued expenses 383,288 265,433
Client deposits 504,316 470,135
Capital lease obligation, current portion 10,000 11,461
------------ ------------
Total current liabilities 10,449 055 5,366,030
CAPITAL LEASE OBLIGATION, net of current portion 23,855 --
DEFERRED RENT 105,655 126,125
DEFERRED COMPENSATION LIABILITY 387,088 259,895
------------ ------------
Total liabilities 10,965,653 5,752,050
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock:
Class A, no par value; 500,000 shares authorized; -- --
none issued; (aggregate liquidation preference $0)
Class B, no par value; 500,000 shares authorized;
none issued -- --
Common Stock, no par value:
Common Stock, 10,000,000 shares authorized
3,982,909 and 3,478,976 shares issued; 3,879,636
and 3,335,088 shares outstanding, respectively 18,542,146 13,629,005
Excess purchase price (83,935) (83,935)
Retained earnings 1,365,411 629,251
------------ ------------
19,823,622 14,174,321
Less - Treasury stock, 103,273 and 143,888 shares
respectively, at cost (19,461) (27,115)
------------ ------------
Total shareholders' equity 19,804,161 14,147,206
------------ ------------
Total liabilities and shareholders' equity $ 30,769,814 $ 19,899,256
============ ============
</TABLE>
6
<PAGE> 7
TEAM AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1997 1996
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 736,150 $ 456,131
Adjustments to reconcile net income to
net cash provided by (used in) operating activities
Depreciation and amortization 146,515 58,314
Deferred tax expense (benefit) -- --
(Increase) decrease in operating assets:
Receivables (2,409,602) (727,965)
Prepaid expenses (20,133) 34,997
Mandated benefit/security deposits (17,850) (26,070)
Other -- (16,151)
Increase (decrease) in operating liabilities:
Accounts payable 108,695 61,643
Accrued expenses and other payables 1,120,559 86,538
Client deposits 32,794 36,354
Deferred liabilities 106,723 58,727
----------- -----------
Net cash provided by (used in) operating activities (196,149) 22,518
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (413,782) (261,474)
Increases in cash surrender value of life insurance policies (130,503) (77,843)
Decrease in short-term investments 1,798,680 --
AEM Acquisition, net of cash obtained (42,613) --
WSI Acquisition, net of cash obtained (2,133,479) --
----------- -----------
Net cash provided by (used in) investing activities (921,697) (339,317)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable -- (14,000)
Payments on capital lease obligation (8,395) (6,746)
Purchase of treasury stock -- (2,600)
Offering costs incurred (20,580) --
----------- -----------
Net cash used in financing activities (28,975) (23,346)
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,146,821) (340,145)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,100,520 1,938,253
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,953,699 $ 1,598,108
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 2,389 $ 2,279
=========== ===========
Income Taxes $ 843,000 $ 333,847
=========== ===========
</TABLE>
7
<PAGE> 8
TEAM AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Excess
Common Stock Treasury Stock Purchase Retained
Number Value Number Value Price Earnings Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance 3,478,976 $ 13,629,005 143,888 $ (27,115) $(83,935) $ 629,251 $14,147,206
December 31, 1996
AEM Acquisition 386,236 (40,615) 7,654 393,890
Offering Costs (20,580) (20,580)
WSI Acquisition 503,933 4,547,485 4,547,485
Net Income 736,160 736,160
----------------------------------------------------------------------------------------------
Balance 3,982,909 $ 18,542,146 103,273 $ (19,461) $(83,935) $1,365,411 $19,804,161
==============================================================================================
September 30, 1997
</TABLE>
8
<PAGE> 9
TEAM AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- Unaudited Interim Consolidated Financial Statements
The accompanying interim consolidated financial statements as of
September 30, 1997 and for the three-month and nine-month periods then ended are
unaudited. However, in the opinion of management these interim statements
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position, results of
operations and cash flows of TEAM America Corporation.
NOTE 2 -- Accounting Policies
The financial statements should be read in conjunction with the audited
financial statements contained in TEAM America Corporation's Form 10-K Annual
Report for the year ended December 31, 1996. Since December 31, 1996, the
Company acquired PEO businesses in transactions accounted for as purchases.
Intangible assets recorded as a result of the purchase were covenants not to
compete, which are amortized over their stated life of seven years, and
goodwill. Goodwill was recorded as the amount by which the consideration paid,
including the value of stock issued and liabilities assumed, exceeded the fair
market value of assets acquired. Goodwill is being amortized over a twenty-five
year period.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth results of operations for the
three-month and nine-month periods ended September 30, 1997 and 1996 expressed
as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
--- --- --- ---
Revenues
Direct Costs:
Salaries and wages 86.6 85.2 85.7 84.7
Payroll taxes, workers' 8.8 9.0 9.1 9.7
compensation premiums,
employee benefits and other
costs
--- --- --- ---
Gross Profit 4.6 5.8 5.2 5.6
--- --- --- ---
Operating Expenses:
Administrative salaries, 2.3 2.6 2.6 2.7
wages and employment taxes
Other general and 1.4 1.8 1.3 1.4
administrative
Advertising 0.3 0.2 0.3 0.3
Depreciation and amortization 0.2 0.1 0.2 0.1
--- --- --- ---
Total Operating Expenses 4.2 4.7 4.4 4.5
--- --- --- ---
Other income (expense), net 0.4 -- 0.5 --
--- ---
Income before income taxes 0.8 1.1 1.3 1.1
Income taxes 0.3 0.4 0.5 0.5
--- --- --- ---
Net income 0.5 0.7 0.8 0.6
=== === === ===
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
REVENUES
Revenues increased $11,894,000 or 48% in the three months ended
September 30, 1997 compared to the three months ended September 30, 1996.
Worksite employees, excluding certain seasonal employees and the employees at
Workforce Strategies which was acquired September 8, 1997, increased 37% from
3,254 at September 30, 1996 to 4,465 at September 30, 1997. Total worksite
employees including the Workforce acquisition increased to nearly 6,300 at
September 30, 1997 from 3,600 at December 31, 1996.
10
<PAGE> 11
Average annualized wages per worksite employee increased 3.6% to
$26,912 for the three months ended September 30, 1997 from $25,975 for the three
months ended September 30, 1996. The average annualized wage per employee is
down slightly from the 1996 average of over $27,000 due to a higher mix of
manufacturing based clients added as a result of the AEM acquisition on April 1,
1997.
DIRECT COSTS
Salaries and wages rose 50% to $31,765,000 in the three months ended
September 30, 1997 from $21,130,000 in the three months ended September 30,
1996. Payroll taxes, etc., rose 45% to $3,236,000 in the third quarter of 1997
from $2,226,000 in the third quarter of 1996. The increase in salaries and wages
in 1997's third quarter was in line with the increased headcount. The increase
in the cost of payroll taxes and benefits primarily reflects higher costs for
the Company's Ohio workers' compensation program in the third quarter of 1997.
EXPENSES
Administrative salaries expense rose 35% to $863,000 for the three
months ended September 30, 1997 from $640,000 for the three months ended
September 30, 1996 as the Company continued to add headcount to support the
growth of the Company. Other general and administrative expenses rose 18% from
the third quarter of 1996 to the third quarter of 1997 as the result of higher
external expenses to support a larger public entity.
INCOME FROM OPERATIONS
As a result of the decrease in gross profit and higher operating
expenses, income from operations decreased 46% to $152,000 in the three months
ended September 30, 1997 from $284,000 in the three months ended September 30,
1996.
OTHER INCOME
Other income of $148,000 consists principally of interest income and
earnings on short-term investments and temporary cash investments. The
investments represent the cash proceeds from the initial public offering of TEAM
America stock in December 1996. There were no excess cash investments in the
corresponding third quarter of 1996.
INCOME TAX EXPENSE
Income tax expense rose 21% from the third quarter of 1996 to the third
quarter of 1997. The effective tax rate was 42% for the three months ended
September 30, 1997 compared to 36% for the three months ended September 30,
1996. The effective tax rate for all of calendar 1996 was 42.3%. The lower tax
rate in 1997 reflects the tax-exempt investment income in 1997 and the lessened
impact of non-deductible life insurance premiums due to increased pre-tax income
in 1997.
11
<PAGE> 12
NET INCOME AND EARNINGS PER SHARE
Net income decreased $13,000 or 7% from the three months ended
September 30, 1996 to the three months ended September 30, 1997 due to the lower
gross profit and higher operating expenses offset by higher investment income.
Earnings per share in the third quarter of 1997 decreased 44% from the third
quarter of 1996 because average shares outstanding increased from 2,089,000 in
the third quarter of 1996 to 3,502,000 in the third quarter of 1997, or 68%,
following the initial public offering of 1,250,000 shares of TEAM America stock
in December 1996 and shares issued in the acquisitions in March and September
1997. Basic earnings per share, as calculated in accordance with FASB Statement
No. 128, is the same as earnings per share presented in the accompanying
financial statements.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
REVENUES
Revenues increased $24,345,000 or 35% in the nine months ended
September 30, 1997 compared to the nine months ended September 30, 1996. The
year-to-date average number of worksite employees, excluding certain seasonal
employees and the Workforce employees, increased 22% from 3,226 at September 30,
1996 to 3,934 at September 30, 1997. The average annualized wages per worksite
employee increased 9.6% to $26,735 in 1997 from $24,400 in 1996 reflecting a
continued emphasis on attracting new clients in higher paying industries.
DIRECT COSTS
Salaries and wages rose 37% to $80,605,000 in the nine months ended
September 30, 1997 from $59,017,000 in the nine months ended September 30, 1996.
Payroll taxes, etc., rose only 26% to $8,538,000 in from $6,789,000 in 1996. The
increase in salaries and wages was in line with the increased revenues. Payroll
taxes and benefits costs rose only 26% as a result of the Company's risk
management efforts and a 20% premium credit dividend from the State of Ohio
worker's compensation fund during the first six months of 1997.
EXPENSES
Administrative salaries expense rose 28% to $2,423,000 for the nine
months ended September 30, 1997 from $1,895,000 for the nine months ended
September 30, 1996 as the Company continued to add headcount to support the
growth of the Company. Other general and administrative expenses also rose 28%
for the nine months ended September 30, 1997 from the nine months ended
September 30, 1996 as the result of higher external expenses related to being a
public company, higher facilities costs and expenses to support a larger
organization and staff.
INCOME FROM OPERATIONS
As a result of the 26% increase in gross profit, offset by higher
operating expenses, income from operations increased only 4% to $808,000 in the
nine months ended September 30, 1997 from $774,000 in the nine months ended
September 30, 1996.
12
<PAGE> 13
OTHER INCOME
Other income of $441,000 consists principally of interest income and
earnings on short-term investments and temporary cash investments. The
investments represent the cash proceeds from the initial public offering of TEAM
America stock in December 1996. There were no excess cash investments in the
corresponding period of 1996.
INCOME TAX EXPENSE
Income tax expense rose 55% from 1996 to 1997. The effective tax rate
was 41% for the nine months ended September 30, 1997 compared to 42% for the
nine months ended September 30, 1996. The effective tax rate for all of calendar
1996 was 42.3%. The lower tax rate in 1997 reflects the tax-exempt investment
income in 1997 and the lessened impact of non-deductible life insurance premiums
due to increased pre-tax income in 1997.
NET INCOME AND EARNINGS PER SHARE
Net income increased $280,000 or 62% from the nine months ended
September 30, 1996 to the nine months ended September 30, 1997 due to the higher
revenues and investment income. Earnings per share were flat between the periods
because average shares outstanding increased from 2,089,000 in 1996 to 3,355,000
in 1997, following the initial public offering of 1,250,000 shares of TEAM
America stock in December 1996 and shares issued in acquisitions in March, 1997
and September, 1997. Basic earnings per share, as calculated in accordance with
FASB Statement No. 128, is the same as earnings per share presented in the
accompanying financial statements.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had a working capital surplus of
$8,947,000. At December 31, 1996, the working capital surplus was $13,484,000.
The Company's primary source of liquidity and capital resources has
historically been its internal cash flow from operations. In addition, in
December 1996, net cash of $13,314,000 was provided from an initial public
offering of Company stock. Net cash provided by (used in) operating activities
was $(196,000) and $23,000 for the nine month periods ended September 30, 1997
and 1996, respectively.
The Company recognizes as revenue and as unbilled receivables, on an
accrual basis, any such amounts which relate to services performed by worksite
employees as of the end of each accounting period which have not yet been billed
to the client because of timing differences between the day the Company's
accounting period ends and the billing dates for client payroll periods that
include the day the Company's accounting period ends. The amount of unbilled
receivables, as well as accrued liabilities and client deposits, have increased
with the general growth of the Company.
13
<PAGE> 14
For work performed prior to the termination of a client agreement, the
Company may be obligated, as an employer, to pay the gross salaries and wages of
the client's worksite employees and the related employment taxes and workers'
compensation costs, whether or not the Company's client pays the Company on a
timely basis or at all. The Company, however, historically has not incurred
significant bad debt expenses because the Company generally collects from its
clients all revenues with respect to each payroll period in advance of the
Company's payment of the direct costs associated therewith. The Company attempts
to minimize its credit risk by investigating and monitoring the credit history
and financial strength of its clients and by generally requiring payments to be
made by wire transfer, immediately available funds or ACH transfer. With respect
to ACH transfers, the Company is obligated to pay the client's worksite
employees if there are insufficient funds in the client's bank account on the
payroll date. The Company's policy, however, is only to permit clients with a
proven credit history with the Company to pay by ACH transfer. In addition, in
the rare event of nonpayment by a client, the Company has the ability to
terminate immediately its contract with the client. The Company also protects
itself by obtaining unconditional personal guaranties from the owners of a
client and/or a cash security deposit, bank letter of credit or pledge of
certificates of deposit. As of September 30, 1997 and 1996, the Company held
cash security deposits in the amounts of $504,000 and $470,000, respectively.
Additional sources of funds to the Company are advance payments of
employment taxes and insurance premiums which the Company holds until they are
due and payable to the respective taxing authorities and insurance providers.
Net cash used in investing activities was $922,000 and $339,000 for the
nine month periods ended September 30, 1997 and 1996, respectively. The
principal use of cash from investing activities was the purchase of additional
computer equipment and software to support the growth of the business. In March
and April, 1997 $289,485 was paid for the acquisition of AEM, a PEO located in
Dover, Ohio. The 40,615 shares of TEAM America stock with a value of $394,000
were also issued from treasury stock to the shareholders of AEM as part of the
purchase price. Fifty percent of the shares of TEAM America stock has been
deposited in an escrow account at a bank. The shares will be released from
escrow in 1998, 1999 and 2000 subject to the satisfaction of covenants
pertaining to retention of worksite employees and fees. In September, 1997
approximately 495,000 shares of TEAM America stock and 176,000 options to
acquire shares of TEAM America stock at $8.50 per share were issued to the
shareholders of Workforce to acquire that PEO. In addition $2,133,000 was paid
in September and $1,954,000 is payable at September 30, 1997 to the shareholders
of Workforce and to others for the acquisition of Workforce and certain costs
related thereto.
Two acquisitions of PEO's were completed subsequent to September 30,
1997. Total cash paid in these acquisitions was $4,105,000. Also 796,000 shares
of TEAM America stock was issued in these transactions along with 333,333
options to acquire additional TEAM America stock at $11.00 per share.
The principal source of cash provided by investing activities was the
maturation of short-term investment instruments which were reinvested in
temporary cash investments at September 30, 1997 or used towards the
acquisitions of AEM and Workforce.
14
<PAGE> 15
Financing activities are not material as the Company has no debt or
significant capital leases.
Presently, the Company has no material commitments for capital
expenditures. Primary new uses of cash may include acquisitions, the size and
timing of which cannot be predicted.
The Company had executed a $500,000 promissory note to a bank which, at
the bank's sole discretion, would allow the Company to obtain loans up to such
amount without negotiating or executing any further agreements. Borrowings under
this credit facility are payable upon demand and bear interest at the bank's
prime rate (8.25% at September 30, 1997). As of September 30, 1997 and 1996, no
borrowings were outstanding under this credit facility. In July 1997 this credit
facility was replaced by a $5,000,000 revolving credit agreement with a bank.
The credit agreement provides for borrowings at the prime rate or LIBOR plus 2%.
The credit agreement requires the Company to maintain certain financial
standards as to net worth, current ratio and cash position and also requires the
bank's consent to acquisitions. There were no borrowings under the revolving
credit agreement in the third quarter.
The Company believes that the net proceeds from the sale of the common
shares in December 1996 which were invested in marketable securities and
certificates of deposit, together with existing cash, cash equivalents and
internally generated funds will be sufficient to meet the Company's presently
anticipated working capital and capital expenditure requirements both for the
next twelve months and for the foreseeable future thereafter. To the extent that
the Company needs additional capital resources, the Company believes that it
will have access to both bank financing and capital leasing for additional
facilities and equipment. However, there can be no assurance that additional
financing will be available on terms favorable to the Company or at all.
The Company did not pay dividends in 1996, or thus far in 1997, and
does not expect to pay a dividend in the foreseeable future.
The Company believes the effects of inflation have not had a
significant impact on its results of operations or financial condition.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q including, without
limitation, statements containing the words "believes", "anticipates",
"intends", "expects", and words of similar import, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company or the PEO industry to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
(i) potential for unfavorable interpretation of government regulations relating
to labor, tax, insurance and employment matters; (ii) changes in the laws
regulating collection and payment of payroll taxes and employee benefits,
including 401(k) plans; (iii) potential loss of qualified status for the
Company's 401(k) plan as a result of request by Internal Revenue Service ("IRS")
for Tax Advice Memorandum ("TAM"); (iv) general market conditions, including
demand for the Company's products and services, competition and price
15
<PAGE> 16
levels or adverse economic developments in Ohio where a substantial portion of
the Company's business is concentrated; (v) the Company's ability to offer its
services in states other than Ohio where it has little or no market penetration;
(vi) higher than expected workers' compensation claims, increases in rates, or
changes in applicable laws or regulations; (vii) the level and quality of
acquisition opportunities available to the Company and the ability to properly
manage growth when acquisitions are made; (viii) short-term nature of client
agreements and the financial condition of the Company's clients; (ix) liability
for employment practices of clients; and (x) additional regulatory requirements
affecting the Company.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
On September 8, 1997 the Company reported on Form 8-K the
acquisition of Workforce Strategies, Inc. (Items 2 and 7).
(b) Exhibits
11 Computation of Earnings per Common and common Equivalent Share
27 Financial Data Schedule
17
<PAGE> 18
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 hereunto duly authorized.
TEAM AMERICA CORPORATION
/s/MICHAEL R. GOODRICH
----------------------
Chief Financial Officer and Authorized
Signing Officer
November 11 , 1997
18
<PAGE> 19
EXHIBIT INDEX
Exhibit Number Description Page #
- -------------- ----------- ------
11 Computation of Earnings per Common and
Common Equivalent Share - 20 -
27 Financial Data Schedule - - *
* In SEC EDGAR-filed document only
19
<PAGE> 1
EXHIBIT 11
TEAM AMERICA CORPORATION
COMPUTATION OF EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INCOME $ 172,792 $ 185,128 $ 736,150 $ 456,131
============= ============= ============= =============
SHARES:
Weighted average number of shares
outstanding during the period 3,501,686 2,087,848 3,404,750 2,088,768
Shares issuable upon the exercise
of stock options less shares
repurchased from the proceeds -- -- -- --
------------- ------------- ------------- -------------
Common and Common
equivalent shares outstanding 3,501,686 2,087,848 3,404,750 2,088,768
============= ============= ============= =============
EARNINGS PER COMMON SHARE $ 0.05 $ 0.09 $ 0.22 $ 0.22
============= ============= ============= =============
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000860235
<NAME> TEAM AMERICA CORP.
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,953,699
<SECURITIES> 5,700,695
<RECEIVABLES> 6,136,713
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,395,894
<PP&E> 1,360,770
<DEPRECIATION> 370,527
<TOTAL-ASSETS> 30,769,814
<CURRENT-LIABILITIES> 10,449,055
<BONDS> 0
0
0
<COMMON> 18,542,146
<OTHER-SE> 1,262,015
<TOTAL-LIABILITY-AND-EQUITY> 30,769,814
<SALES> 94,051,834
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 89,143,090
<OTHER-EXPENSES> 4,100,931
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,246,463
<INCOME-TAX> 512,313
<INCOME-CONTINUING> 736,150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 736,150
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
