<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1998
REGISTRATION NO. 333-50777
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTERIM SERVICES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3536544
(State of incorporation) (IRS E.I.N.)
</TABLE>
------------------------------
2050 SPECTRUM BOULEVARD
FORT LAUDERDALE, FL 33309, (954) 938-7600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
JOHN B. SMITH, ESQ.
SENIOR VICE PRESIDENT
2050 SPECTRUM BOULEVARD
FORT LAUDERDALE, FL 33309
(954) 938-7600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ANDREW HULSH, ESQ. EDWIN D. WILLIAMSON, ESQ.
BAKER & MCKENZIE SULLIVAN & CROMWELL
701 BRICKELL AVENUE, SUITE 1600 1701 PENNSYLVANIA AVE., N.W.
MIAMI, FL 33131 WASHINGTON, D.C. 20006
(305) 789-8985 (202) 956-7500
</TABLE>
------------------------------
AS SOON AS POSSIBLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
(Approximate date of commencement of proposed sale to the public)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 6, 1998
7,000,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
The last reported sale price of the Common Stock, which is listed under the
symbol "IS", on the New York Stock Exchange on May 4, 1998 was $32 13/16 per
share. See "Price Range of Common Stock".
Concurrently with the Offering, the Company is offering $150,000,000
aggregate principal amount of its Convertible Subordinated Notes by a separate
prospectus. Consummation of this Offering and the Notes Offering are not
conditioned upon each other.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVENT
TO AN INVESTMENT IN THE COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY (2)
-------------- ------------- -------------
<S> <C> <C> <C>
Per Share................................................................. $ $ $
Total (3)................................................................. $ $ $
</TABLE>
- ------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $400,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 1,050,000 shares at the public offering price per share,
less the underwriting discount, solely to cover over-allotments. If such
option is exercised in full, the total public offering price, underwriting
discount and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1998 against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
ROBERT W. BAIRD & CO.
Incorporated
NATIONSBANC MONTGOMERY SECURITIES LLC
BT ALEX. BROWN
------------------
The date of this Prospectus is , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING
TRANSACTIONS IN SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND THE SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE, OR INCORPORATED BY REFERENCE,
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS GIVES EFFECT TO THE SALE OF THE COMPANY'S HEALTHCARE DIVISION (THE
"HEALTHCARE DIVISION") IN SEPTEMBER 1997. REFERENCES TO FISCAL 1997, 1996, 1995,
1994 AND 1993 REFER TO THE COMPANY'S FISCAL YEARS ENDED DECEMBER 26, 1997,
DECEMBER 27, 1996, DECEMBER 29, 1995, DECEMBER 30, 1994 AND DECEMBER 24, 1993,
RESPECTIVELY. 1997 PRO FORMA FINANCIAL INFORMATION GIVES EFFECT TO ACQUISITIONS
AND A DISPOSITION MADE BY THE COMPANY IN FISCAL 1997 AS IF THEY OCCURRED AT THE
BEGINNING OF FISCAL 1997.
THE COMPANY
GENERAL
Interim Services Inc. ("Interim" or the "Company") is a worldwide leader in
recruiting, assessing and deploying talent for a wide variety of businesses.
Through flexible staffing, recruitment, search, consulting and outplacement
services, the Company provides professionals in the fields of information
technology ("IT"), finance, law, manufacturing and human resources, as well as
clerical, administrative and light industrial staffing.
The Company provides services in two primary groups: (i) the Professional
Services Group, which offers a comprehensive range of consulting, staffing,
outplacement and placement services ("Professional Services") in the areas of
information technology, legal, accounting, banking and finance and human
resources, and (ii) the Commercial Staffing Group, which offers workforce
management and clerical, administrative and light industrial staffing services
("Commercial Staffing Services"). The Professional Services Group and Commercial
Staffing Group each represented approximately 50% of the Company's pro forma
revenues in fiscal 1997. The Company believes that it is one of the five largest
worldwide providers of Professional Services, and one of the ten largest
worldwide providers of staffing services, based on revenue.
Since the Company's initial public offering in January 1994 (the "IPO"), the
Company's network of offices in the Professional Services and Commercial
Staffing Groups has nearly doubled, from 373 offices in North America to 733
offices in 12 countries at the end of the first quarter 1998. The Company's
revenues from Professional Services and Commercial Staffing Services increased
from $537 million in fiscal 1994 to $1.4 billion in fiscal 1997 ($1.5 billion on
a pro forma basis). This growth has been accomplished through strategic
acquisitions, internal growth and capitalizing on cross-selling opportunities.
During this period, the Company acquired 18 companies providing staffing,
consulting and employment services through approximately 161 offices,
representing over $550 million of acquired revenues, approximately $496 million
of which were from Professional Services. In April 1997, the Company acquired
Michael Page Group PLC ("Michael Page"), a premier international recruiting and
staffing company specializing primarily in the accounting, banking and finance
industries. The acquisition of Michael Page, the Company's largest acquisition
to date, has provided the Company with a strong international presence,
substantial growth in its higher-margin Professional Services business, enhanced
cross-selling opportunities and access to a worldwide customer base.
BUSINESS STRATEGY
The Company's goal is to drive revenue and earnings growth by delivering
innovative integrated human resources solutions worldwide through its
consultative approach to workforce management. The Company intends to achieve
this goal through a growth strategy that includes strategic acquisitions, with
particular emphasis in its high-margin Professional Services businesses, opening
new offices in existing and new geographic markets and continued development of
its client base by capitalizing on cross-selling opportunities. This growth
strategy is complemented by an operating strategy of offering a
3
<PAGE>
comprehensive range of innovative services under common brands through
decentralized, entrepreneurial offices providing specialized expertise. Through
the implementation of the Company's strategy, earnings before interest and taxes
("EBIT") as a percentage of revenues increased from 2.6% in fiscal 1993 (without
giving effect to the restatement of the Company's financial statements to
account for the acquisition of Brandon Systems Corporation ("Brandon") as a
pooling-of-interests) to 6.5% in fiscal 1997.
The key elements of the Company's strategy are:
CONTINUE TO EXPAND THROUGH ACQUISITIONS. The Company believes that there is
an opportunity to acquire additional companies consistent with its business
strategy because of the highly fragmented nature of the staffing industry and
the pressures of increased competition. The Company has a proven track record of
successfully acquiring companies, integrating them within the Company's existing
operations and producing growth rates of acquired companies in excess of their
historical performance. Since the IPO, the Company has added approximately 161
offices and over $550 million in revenues through acquisition.
MAINTAIN STRONG ORGANIC GROWTH. A significant portion of the Company's
growth has resulted from internal expansion, which includes new office openings
and development of existing offices. The Company intends to continue to add
offices by expanding into new geographic markets, both domestically and
internationally, and to open new offices in existing markets to increase the
range of services offered in such markets. The Company also believes that it has
been able to accelerate the growth of existing offices by capitalizing on
cross-selling opportunities. The Company opened 199 offices from the date of the
IPO through the end of the first quarter of 1998.
PROVIDE A COMPREHENSIVE RANGE OF SERVICES. The Company believes that
significant demand exists from current and prospective clients to procure a
substantial portion of their human resources solutions from a single company,
thereby enabling them to assess and deploy personnel more efficiently and
productively. Accordingly, the Company seeks to be regarded by its clients as
their human resources partner and is committed to developing a broad range of
innovative, value added human resource solutions to meet their evolving needs on
a worldwide basis. Since the IPO, the Company has evolved from solely providing
flexible staffing services to providing a full range of Commercial and
Professional Services.
PROVIDE INNOVATIVE PRODUCTS AND SERVICES. By taking a consultative approach
to client needs, the Company has developed innovative, value-added services that
help clients better manage their human assets. Interim On-Premise utilizes
proprietary software that provides "qualitative" measurement of performance,
quantitative analysis of staffing efficiencies and customized reporting. The
Company's "interim.com" website and "Emerging Workforce" surveys contain
employment information that can be used by both candidates and clients, and the
website was made part of the Smithsonian Institution's Permanent Research
Collection on Information Technology Innovation.
UTILIZE ADVANCED RECRUITMENT METHODS. The Company has added new techniques
to successfully recruit and retain candidates. Through five recruitment centers
in Europe, Asia and South Africa, Interim recruits professionals predominantly
to the U.S. to fill a shortage of skills. In addition, Interim was the first
company in the staffing industry to implement national television advertising
featuring a toll-free number (1-800-A-CAREER) and full-page WALL STREET JOURNAL
advertising for managerial and executive positions. Recruitment efforts are
globally supported by both Internet and Intranet-based technology and a
developing central candidate database that will allow the Company to maintain
contact with candidates throughout the duration of their careers.
LEVERAGE BRAND IDENTITY. Interim is one of a small number of staffing
companies which provide Commercial Staffing Services and Professional Services
under the same brand name. This maximizes
4
<PAGE>
cross-selling opportunities (e.g., Interim Technology, Interim Accounting
Professionals, Interim Legal Services, Interim Attorneys, Interim Personnel,
etc.). Through this common branding, the Company and its franchisees and
licensees are better able to benefit from national media advertising.
DELIVER SERVICES THROUGH SPECIALIZED OFFICES SUPPORTED BY DECENTRALIZED
STRUCTURE. The Company's businesses are operated to be responsive to local
business practices and market conditions. The Company believes that its existing
and potential clients choose service providers largely on the basis of brand
awareness and local specialized expertise. Each of the Company's offices are
organized on this basis, thereby providing clients with perceived value and
enhanced services by enabling them to deal with Interim representatives who
"speak their language" and understand their specific human resources
requirements. Further, all Interim managers are compensated based on profits
generated within their scope of responsibility and cross-selling activities, and
they are responsible for their own hiring, pricing, business mix and local
promotion.
INDUSTRY OVERVIEW
The global staffing services industry has experienced significant growth in
response to the changing work environment worldwide. According to Eurostat, the
European Commission's statistical body, the total staffing services market in
developed economies had revenues of approximately $94 billion in 1995 (the
latest available data). The focus of the staffing industry is changing from
employers' traditional use of staffing services to manage personnel costs and
meet fluctuating staffing requirements to the reduction of administrative
overhead by outsourcing human resources operations that are not part of their
core business competencies. The use of flexible staffing services has allowed
employers to improve productivity, outsource specialized skills and avoid the
negative effects of layoffs. Rapidly changing regulations concerning employee
benefits, insurance and retirement plans, as well as the high cost of hiring,
laying off and terminating permanent employees has also prompted many employers
to take advantage of the flexibility of temporary and contract staffing
arrangements. In addition to the economic conditions driving staffing industry
growth, the Company believes that changing demographics of the workforces of
developed economies and evolving attitudes concerning work patterns, both
domestically and internationally, also contribute to growth in the staffing
industry. These trends have accelerated with the pace of technological change
and greater global competitive pressures.
The U.S. remains the largest and most important staffing service market in
the world. According to STAFFING INDUSTRY REPORT, U.S. staffing industry
revenue, including temporary help, placement, search and outplacement, grew from
approximately $29.3 billion in 1992 to approximately $65.0 billion in 1997,
representing a compound annual growth rate of 17.3%. The U.K. is the second
largest national staffing services market in the world. According to a report
commissioned by the Federation of Recruitment and Employment Services in the
U.K., staffing industry revenue in the U.K. grew from approximately $8.9 billion
in 1992 to approximately $21.8 billion in 1996, representing a compound annual
growth rate of 25.1%.
The staffing services market in most countries in which the Company operates
is highly fragmented and includes a large number of medium-sized and small
businesses, many of which operate in a single geographic market. This
fragmentation, combined with changing client demands and competitive pressures,
has resulted in a trend towards industry consolidation. This consolidation is
being driven by, among other things, client demands for "one-stop shopping" from
staffing providers. Faced with a desire to minimize the number of vendors,
coupled with the need for sophisticated management information systems, the
growth of national or global relationships and the expansion of professional
level specialties, clients demand the services of large staffing companies
capable of offering a full range of staffing services over a broad geographic
area. This ability has been particularly important in fulfilling the needs of
large regional, national and international accounts. Within this more
competitive environment, smaller companies may have difficulties competing due
to limited service offerings, geographic
5
<PAGE>
concentration and lack of sufficient working capital and management resources.
As a result, many smaller companies have been acquired in recent years and the
Company believes that small and medium-sized staffing companies are becoming
increasingly responsive to acquisition proposals by larger firms, such as the
Company. Furthermore, the Company believes that consolidation may also occur
among larger regional and national companies.
------------------------
The Company is a Delaware corporation with its corporate headquarters
located at 2050 Spectrum Boulevard, Fort Lauderdale, Florida 33309. The
Company's telephone number is (954) 938-7600.
THE OFFERING
<TABLE>
<S> <C>
Common Stock to be outstanding after the Offering (1)........... 46,976,969 shares
New York Stock Exchange Symbol.................................. IS
Use of Proceeds................................................. Repayment of debt and
general corporate
purposes, including
acquisitions
</TABLE>
- ------------------------
(1) Does not include 1,050,000 shares of Common Stock that are subject to the
over-allotment option granted by the Company to the Underwriters or shares
of Common Stock issuable upon the exercise of options or upon conversion of
the Convertible Subordinated Notes being offering concurrently herewith. See
"Underwriting" and "Capitalization."
RISK FACTORS
See "Risk Factors for certain considerations relevant to an investment in
the securities offered hereby.
CONCURRENT NOTES OFFERING
Concurrently with the Offering, the Company is offering $150,000,000
aggregate principal amount of Convertible Subordinated Notes due 2005 (the
"Notes", and the offering of such Notes, the "Notes Offering") by a separate
prospectus. The consummation of the Offering and the Notes Offering are not
conditioned upon each other.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------ FISCAL YEAR
MARCH 27, MARCH 28, PRO FORMA ----------------------------------------------------------
1998 1997 1997(1) 1997 1996 1995 1994 (2) 1993
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Commercial Division
Commercial Staffing........ $ 192,482 $ 159,925 $ 744,210 $ 739,662 $ 602,396 $ 515,454 $ 431,348 $ 347,189
Professional Services...... 222,686 95,913 771,798 675,031 308,687 138,140 99,935 79,691
HealthCare Division (3)...... -- 58,583 -- 186,869 228,669 205,719 165,614 143,209
Other Income................. 1,023 2,364 3,974 6,694 7,399 4,934 7,799 4,171
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Total Revenues......... 416,191 316,785 1,519,982 1,608,256 1,147,151 864,247 704,696 574,260
Expenses:
Cost of Services............. 276,673 219,345 1,021,855 1,081,113 795,789 600,169 491,404 402,039
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Gross Profit............... 139,518 97,440 498,127 527,143 351,362 264,078 213,292 172,221
Selling, General & Admin..... 95,977 70,779 334,431 363,152 243,652 177,105 137,859 119,763
Licensee Commissions......... 11,607 9,428 43,958 45,091 39,500 37,295 33,796 20,586
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Results of Operations...... 31,934 17,233 119,738 118,900 68,210 49,678 41,637 31,872
Amort. of Intangibles........ 5,321 2,284 20,628 18,492 8,802 6,884 6,041 5,671
Interest Expense (4)(5)...... 7,700 275 31,472 24,269 5,696 990 112 1,787
Gain on Sale of HealthCare
Business (6)............... -- -- -- (5,300) -- -- -- --
Merger Expense (7)........... -- -- -- -- 8,600 -- -- --
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Earnings Before Taxes...... 18,913 14,674 67,638 81,439 45,112 41,804 35,484 24,414
Income Taxes................. 8,360 6,149 31,255 38,928 22,097 18,071 16,028 11,564
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net Earnings............... $ 10,553 $ 8,525 $ 36,383 $ 42,511 $ 23,015 $ 23,733 $ 19,456 $ 12,850
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net Earnings Per Share (8):
Basic...................... $ 0.26 $ 0.22 $ 0.93 $ 1.08 $ 0.71 $ 0.77 $ 0.64 $ 0.47
Diluted.................... 0.26 0.21 0.90 1.05 0.69 0.76 0.63 0.47
Earnings Per Share:
(excl. merger expenses)
(7)(8):....................
Basic...................... $ 0.94
Diluted.................... 0.91
Weighted Average Shares (8):
Basic...................... 39,886 39,032 39,305 39,305 32,450 30,804 30,386 27,381
Diluted.................... 40,828 39,812 40,407 40,407 33,418 31,324 30,782 27,476
OPERATING INFORMATION:
System-wide Sales(9)......... $ 470,612 $ 484,390 $1,743,824 $2,187,409 $1,834,258 $1,494,260 $1,279,339 $1,085,759
</TABLE>
7
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<TABLE>
<CAPTION>
MARCH 27, 1998
----------------------------------------------
<S> <C> <C> <C>
AS FURTHER
ACTUAL AS ADJUSTED (10) ADJUSTED (11)
----------- ----------------- --------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working Capital...................................... $ 105,244 $ 122,234 $ 242,022
Total Assets......................................... 1,183,051 1,183,051 1,302,839
Long-term Obligations................................ 453,248 240,550 360,337
</TABLE>
- ------------------------
(1) Since the beginning of fiscal 1997, Interim has made certain acquisitions
which were accounted for under the purchase method of accounting, and it
disposed of its HealthCare Division on September 26, 1997. The pro forma
consolidated statement of income and sales data give effect to the
acquisitions and the disposition as though they occurred at the beginning of
fiscal 1997. See Notes to Consolidated Financial Statements.
(2) Fiscal year 1994 contained 53 weeks. All other years contained 52 weeks.
(3) Revenues for the HealthCare Division are included through the date of
disposition of September 26, 1997 and do not include certain allocations of
other income.
(4) Interest expense is net of interest income earned by Brandon prior to the
Company's merger with Brandon on May 23, 1996, which was accounted for as a
pooling-of-interests. See note 7.
(5) Prior to September 25, 1993, the Company's working capital and acquisition
financing were provided by H & R Block Inc. ("Block"), which owned 100% of
the Company's issued and outstanding capital stock prior to the IPO. There
was no interest charged on intercompany debt. In conjunction with the IPO,
effective September 25, 1993, Block formalized this arrangement by (i)
providing a revolving credit facility in the amount of $20,000,000 to fund
the operating requirements of the Company; (ii) converting $30,000,000 of
intercompany indebtedness on such date to a term loan and (iii) contributing
$51,289,000 to the capital of the Company. The earnings data for fiscal 1993
give effect to this arrangement as if it occurred at the beginning of the
period. Interest expense has been computed at 6% and income taxes at the
statutory rate.
(6) On September 26, 1997, the Company sold the HealthCare Division. Amount
represents pre-tax gain on sale. Taxes on the gain were $5,272,000. See
Notes to Consolidated Financial Statements page F-11.
(7) Represents fees and expenses related to the merger with Brandon and the
consolidation and restructuring of the combined companies.
(8) Adjusted to reflect a two-for-one stock split in the form of a 100% stock
dividend paid on September 5, 1997.
(9) System-wide sales is defined as sales of all company-owned, franchised and
licensed offices. Sales data for franchised offices are derived from reports
provided by franchisees, which are not audited. Systemwide sales should not
be considered in isolation or as a substitute for revenues prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability.
(10) Adjusted to reflect the sale by the Company of the 7,000,000 shares of
Common Stock offered hereby at an assumed offering price of $32.813 per
share (before deduction of the underwriting discount and the Company's
estimated offering expenses) and the application of the proceeds therefrom.
See "Use of Proceeds."
(11) Further adjusted to reflect the sale by the Company of $150,000,000
aggregate principal amount of Notes (before deduction of the underwriting
discount and the Company's estimated offering expenses) and the application
of the proceeds therefrom. See "Use of Proceeds."
8
<PAGE>
RISK FACTORS
IN EVALUATING THE COMPANY'S BUSINESS, PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN.
COMPETITIVE MARKETS
The staffing services industry is intensely competitive and highly
fragmented, with few barriers to entry by potential competitors at the local
level. The Company faces significant competition in the markets it serves and
will continue to face significant competition in any geographic markets or
industry sectors that it may enter. In each market in which the Company
operates, it competes for both clients and qualified personnel with other firms
offering such consulting staffing services. The majority of competitors are
significantly smaller than the Company. However, certain of the Company's
competitors have greater marketing and financial resources than the Company.
Many clients use more than one staffing services company and it is common for a
major client to use several staffing services companies at the same time. In
recent years, however, there has been a significant increase in the number of
large potential clients consolidating their staffing services purchases with a
single company or with a small number of companies. The trend to consolidate
staffing services purchases has in some cases made it more difficult for the
Company to obtain business from potential clients who have already contracted to
fill their staffing needs with competitors of the Company. In addition,
consulting and accounting firms have begun to offer services in certain of the
Company's markets. The Company also faces the risk that certain of its current
and prospective clients may decide to provide similar services internally or use
independent contractors. There can be no assurance that the Company will not
encounter increased competition in the future, which could have a material
adverse effect on the Company's results of operations or financial condition.
See "Business--Competition".
ABILITY TO GROW AND MANAGE GROWTH
The Company has experienced significant growth in the past which has
resulted from the acquisition of existing businesses, new office openings, new
service offerings, the further development of existing offices, industry trends
towards the increasing use of temporary and contract personnel and favorable
economic conditions. The ability of the Company to continue to grow and to
successfully manage its growth will depend on a number of factors, including the
continuation of such industry trends, the availability of suitable acquisition
candidates on reasonable terms, the effective integration of newly acquired
companies, the ability of the Company to adapt to new geographic and human
resources services markets and the ability to successfully recruit and train
staff. There can be no assurance that the Company will be able to maintain or
effectively manage growth, establish and expand its market presence or continue
to identify suitable acquisition candidates or complete the acquisitions on
terms favorable to the Company. In addition, there can be no assurance that any
acquired businesses will achieve anticipated financial results. Furthermore,
acquisitions involve a number of special risks, including diversion of
management's attention, the potential failure to retain key personnel at an
acquired company, risks associated with unanticipated events or liabilities and
amortization of goodwill or other acquired intangible assets, some or all of
which could have a material adverse effect on the Company's results of
operations or financial condition. See "Business--Business Strategy" and
"Business--Acquisitions".
FLUCTUATIONS IN LOCAL ECONOMIES
The Company currently operates businesses in 12 countries worldwide. In
fiscal 1997 on a pro forma basis, approximately 78.5% of revenues and
approximately 50.8% of operating profit were generated in North America, 19.2%
of revenues and 44.6% of operating profit were generated in Europe, and 2.3% of
revenues and 4.6% of operating profit were generated in the Asia Pacific region.
Historically, the
9
<PAGE>
general level of economic activity in a country has significantly affected the
demand for staffing services in that country. An economic downturn in a country
or a region in which the Company operates may adversely affect the demand for
the Company's staffing services in that country or region and could have a
material adverse effect on the Company's results of operations or financial
condition. During such downturns, the use of temporary and contract employees
usually is curtailed, the recruitment of permanent employees is reduced and the
Company may face increased competitive pricing pressures. As economic activity
increases, temporary and contract employees often are added to the workforce
before permanent employees are hired. During periods of increased economic
activity and generally higher levels of employment in a particular country or
region, the competition among staffing firms for qualified personnel in that
country or region becomes even greater. There can be no assurance that during
these periods the Company will be able to recruit the personnel necessary to
fill its clients' needs.
BUSINESS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; CURRENCY FLUCTUATIONS
Operations in the Company's markets are subject to risks inherent in
international business activities, including, in particular, varying economic
and political conditions, cultures and business practices in different countries
or regions, overlapping or differing tax structures, compliance with a variety
of accounting and reporting requirements and changing and, in some cases,
complex or ambiguous foreign laws and regulations. Fluctuations in the exchange
rates between the U.S. dollar and the currencies of the other countries in which
the Company operates will affect the results of the Company's international
operations reported in U.S. dollars. See "--Fluctuations in Local Economies".
DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL
The Company depends upon its ability to attract qualified personnel who
possess the skills and experience necessary to meet the staffing requirements of
its clients. The Company must continually evaluate and upgrade its base of
available qualified personnel to keep pace with changing client needs and
emerging technologies. Competition for individuals with proven professional or
technical skills is intense, and demand for such individuals is expected to
remain very strong for the foreseeable future. In particular, the Company's IT
operations are dependent upon the recruitment of qualified personnel, many of
whom are from outside the U.S. Government regulations currently impose a quota
on the number of foreign persons having this expertise who are permitted to work
in the U.S.
RELIANCE ON KEY PERSONNEL
The Company is highly dependent on its management. The continued success of
the Company will depend in large part on the abilities and continued services of
Raymond Marcy, its Chairman, President and Chief Executive Officer, and certain
other officers and key employees. The loss of Mr. Marcy or other officers and
key employees could have a material adverse effect on the Company's operations.
INFORMATION TECHNOLOGY TRENDS
Growth in the use of flexible staffing in the IT area in recent years has
been driven largely by rapid technological advances. As the sophistication and
complexity of business information systems increase, and as the general
corporate trend toward downsizing continues, businesses are increasingly turning
to specialized, outside technical personnel to support their IT operations. The
Company's success in the IT area depends in large part on its ability to keep
pace with existing technology, predict new technological advancements and
recruit and train based on these trends.
YEAR 2000 ISSUE
The Company believes that it has prepared its computer systems and related
software to accommodate data sensitive information relating to the year 2000.
The Company expects that any additional costs
10
<PAGE>
related to ensuring such systems and software to be year 2000-compliant will not
be material to the financial condition or results of operations of the Company.
In addition, the Company is discussing with its vendors and customers the
possibility of any difficulties which may affect the Company as a result of its
vendors and customers ensuring that their computer systems and software are year
2000-compliant. To date, no significant concerns have been identified. However,
there can be no assurance that no year 2000 related computer operating problems
or expenses will arise with the Company's computer systems and software or in
the computer systems and software of the Company's vendors and customers. The
Company's IT Consulting Group performs work for clients to assist them in
modifying their computer systems and software to make them year 2000-compliant.
Generally, this work is performed under the direction and supervision of the
client and without warranties as to results or usability. Accordingly, the
Company does not believe that it will incur any material liabilities to clients
for its work on their year 2000 projects.
EMPLOYER RISKS
Flexible staffing providers employ and place people in the workplace of
other businesses. Attendant risks of such activity which could increase the
Company's cost of doing business include possible claims of discrimination and
harassment, employment of illegal aliens, errors and omissions by the Company's
flexible staff, particularly for the acts of temporary professionals (e.g.,
accountants and attorneys), misuse or misappropriation of client funds or
proprietary information and other similar claims. While the Company maintains
insurance coverage for general liability, errors and omissions and employee
theft, such insurance coverage may not be adequate in scope or amount to cover
any such liability. A failure of any Company personnel to observe the Company's
policies and guidelines intended to reduce exposure to these risks, relevant
client policies and guidelines, or applicable supranational, national, regional
or local laws, rules or regulations, or other circumstances that cannot be
predicted, could result in negative publicity and the payment by the Company of
monetary damages or fines, or have other material adverse effects upon the
Company. In addition, the Company is exposed to potential claims with respect to
the placement process. Because of legal constraints and considerations in
certain jurisdictions, the Company has found it increasingly difficult to verify
candidates' backgrounds. Although the Company historically has not had any
significant problems arising from the matters discussed above, there can be no
assurance that the Company will not experience such problems in the future.
INCREASED COSTS FROM GOVERNMENT REGULATION
In conducting its business, the Company is required to pay a number of
payroll and related costs and expenses, including unemployment taxes, workers'
compensation and insurance and medical insurance for its personnel. Unemployment
insurance premiums paid by employers typically increase during periods of
increased levels of unemployment. Workers' compensation costs have increased
over the past decade and may increase in the future as states have raised
benefit levels and liberalized allowable claims. Future earnings could be
adversely affected if the Company is not able to increase the fees charged to
its clients to absorb the increased costs related to unemployment insurance or
workers' compensation benefits. The Company's costs could also increase as a
result of regulatory reforms, such as universal mandatory health insurance or
the possible imposition of additional requirements and restrictions relating to
the placement of candidates. It is uncertain whether any such proposals will be
adopted and how any such proposals, if adopted, would affect the Company.
Internationally, regulatory requirements at supranational, national, regional
and local levels vary substantially and frequently change. There can be no
assurance that the Company will be able to adapt to future regulatory changes
made by the regulatory authorities of any jurisdiction in which the Company
conducts its business.
11
<PAGE>
USE OF PROCEEDS
Based upon the sale by the Company of the 7,000,000 shares of Common Stock
at an assumed offering price of $32.813 per share (the last reported sales price
of the Common Stock on the New York Stock Exchange on May 4, 1998), before
giving effect to the Company's estimated Offering expenses and the underwriting
discount, the net proceeds from the Offering are expected to be approximately
$230 million (approximately $264 million if the Underwriters' over-allotment
option is exercised in full). Approximately $259.9 million of the net proceeds
of the Offering and the Notes Offering, if consummated, will be used to repay
borrowings under the Company's existing credit facilities, with the remainder to
be used for general corporate purposes, including future acquisitions. The
effective interest rate of all of the borrowings under the credit facilities is
7.2%, including the effects of certain interest rate swaps. Following the
Offering, the Company intends to maintain a certain amount of indebtedness on
its balance sheet which is denominated in British pounds sterling.
CONCURRENT NOTES OFFERING
Concurrently with the Offering, the Company is offering $150 million
aggregate principal amount of Notes by a separate prospectus. The consummation
of the Offering and the Notes Offering are not conditioned upon each other. See
"Use of Proceeds."
12
<PAGE>
PRICE RANGE OF COMMON STOCK
Since August 7, 1996, the Company's Common Stock has been traded on the New
York Stock Exchange under the symbol "IS". Prior thereto, the Common Stock
traded on the Nasdaq National Market under the symbol "INTM". The following
table sets forth for the periods indicated the high and low closing prices of
the Common Stock as reported by the Nasdaq National Market and the New York
Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL 1996
First Quarter............................................................ $ 20.375 $ 17.125
Second Quarter........................................................... 25.125 17.375
Third Quarter............................................................ 22.000 18.250
Fourth Quarter........................................................... 22.813 17.000
FISCAL 1997
First Quarter............................................................ 21.563 17.125
Second Quarter........................................................... 21.438 17.563
Third Quarter............................................................ 25.625 21.750
Fourth Quarter........................................................... 31.000 23.625
FISCAL 1998
First Quarter............................................................ 33.750 23.250
Second Quarter (through May 4, 1998)..................................... 34.188 30.750
</TABLE>
The closing price of the Common Stock on May 4, 1998 was $32.813.
DIVIDEND POLICY
No cash dividend or other cash distribution with respect to the Company's
Common Stock has ever been paid by the Company. The Company currently intends to
retain any earnings for use in its business and does not anticipate paying any
cash dividends in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth the cash and capitalization of the Company as
of March 27, 1998 and (i) as adjusted to reflect the sale of 7,000,000 shares of
Common Stock by the Company at an assumed offering price of $32.813 per share
(the last reported sales price of the Common Stock on the New York Stock
Exchange on May 4, 1998) and (ii) as further adjusted to reflect the sale of
$150,000,000 principal amount of Notes and the application of the gross proceeds
therefrom, in each case before giving effect to the Company's estimated offering
expenses and the underwriting discount. See "Use of Proceeds"; "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financing"; and "Concurrent Notes Offering". The table should be
read in conjunction with the selected consolidated financial and operating data,
the consolidated financial statements and the related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 27, 1998
--------------------------------
AS AS FURTHER
ACTUAL ADJUSTED ADJUSTED
--------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalents.................................... $ 24,579 $ 24,579 $ 144,367
--------- --------- ----------
--------- --------- ----------
Current portion of long-term debt......................... $ 33,895 16,905 16,905
Long-term debt............................................ 453,248 240,551 360,337
--------- --------- ----------
Total debt............................................ $ 487,143 $ 257,456 $ 377,242
Stockholders' equity:
Preferred stock, par value $.01 per share; 2,500,000
shares authorized; none issued or outstanding......... -- -- --
Common stock, par value $.01 per share; 100,000,000
shares authorized; 39,976,969 shares issued and
outstanding (actual); 46,976,969 (as
adjusted)(1)(2)....................................... 400 470 470
Additional paid-in capital.............................. 263,183 492,801 492,801
Retained earnings....................................... 225,116 225,116 225,116
--------- --------- ----------
Total stockholders' equity............................ $ 488,699 $ 718,387 $ 718,387
--------- --------- ----------
Total capitalization, including short-term debt....... $ 975,842 $ 975,842 $1,095,629
--------- --------- ----------
--------- --------- ----------
</TABLE>
- ------------------------
(1) An additional and 3,409,869 shares of Common Stock are reserved for
issuance upon the conversion of the Notes and the exercise of stock options
that have been granted under the Company's stock option plans, respectively.
(2) The number of authorized shares of common stock gives effect to the approval
of the proposal to be voted on by the Company's stockholders on May 7, 1998
to amend the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock to 100,000,000 shares.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated financial statement data for each of the three
years in the period ended fiscal 1997 and as of the end of fiscal 1997 and
fiscal 1996 are derived from, and are qualified by reference to, the Company's
audited consolidated financial statements and related notes thereto which,
together with the related report of Deloitte & Touche LLP, independent auditors,
are included elsewhere in this Prospectus. The selected consolidated financial
statement data for each of fiscal 1994 and fiscal 1993 and as of the end of
fiscal 1995, fiscal 1994 and fiscal 1993 are derived from audited consolidated
financial statements of Interim and Brandon not included herein, and have been
restated consistent with pooling-of-interests treatment. The pro forma data are
derived from the pro forma data contained in the notes to the consolidated
financial statements which give effect to certain acquisitions and a disposition
made by the Company since the beginning of fiscal 1997. The selected
consolidated financial statement data for the three month periods ended March
27, 1998 and March 28, 1997 are derived from the Company's unaudited
consolidated financial statements and, in the opinion of the Company, include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of such information. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------ FISCAL YEAR
MARCH 27, MARCH 28, PRO FORMA ----------------------------------------------------------
1998 1997 1997(1) 1997 1996 1995 1994 (2) 1993
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Revenues:
Commercial Division
Commercial Staffing..... $ 192,482 $ 159,925 $ 744,210 $ 739,662 $ 602,396 $ 515,454 $ 431,348 $ 347,189
Professional Services... 222,686 95,913 771,798 675,031 308,687 138,140 99,935 79,691
HealthCare Division(3).... -- 58,583 -- 186,869 228,669 205,719 165,614 143,209
Other Income.............. 1,023 2,364 3,974 6,694 7,399 4,934 7,799 4,171
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Total Revenues...... 416,191 316,785 1,519,982 1,608,256 1,147,151 864,247 704,696 574,260
Expenses:
Cost of Services.......... 276,673 219,345 1,021,855 1,081,113 795,789 600,169 491,404 402,039
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Gross Profit............ 139,518 97,440 498,127 527,143 351,362 264,078 213,292 172,221
Selling, General &
Admin................... 95,977 70,779 334,431 363,152 243,652 177,105 137,859 119,763
Licensee Commissions...... 11,607 9,428 43,958 45,091 39,500 37,295 33,796 20,586
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Results of Operations... 31,934 17,233 119,738 118,900 68,210 49,678 41,637 31,872
Amort. Of Intangibles..... 5,321 2,284 20,628 18,492 8,802 6,884 6,041 5,671
Interest Expense (4)(5)... 7,700 275 31,472 24,269 5,696 990 112 1,787
Gain on Sale of HealthCare
Business (6)............ -- -- -- (5,300) -- -- -- --
Merger Expense (7)........ -- -- -- -- 8,600 -- -- --
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Earnings Before Taxes... 18,913 14,674 67,638 81,439 45,112 41,804 35,484 24,414
Income Taxes.............. 8,360 6,149 31,255 38,928 22,097 18,071 16,028 11,564
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net Earnings............ $ 10,553 $ 8,525 $ 36,383 $ 42,511 $ 23,015 $ 23,733 $ 19,456 $ 12,850
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net Earnings Per Share
(8):
Basic................... $ 0.26 $ 0.22 $ 0.93 $ 1.08 $ 0.71 $ 0.77 $ 0.64 $ 0.47
Diluted................. 0.26 0.21 0.90 1.05 0.69 0.76 0.63 0.47
Earnings Per Share:
(excl. merger expenses)
(7)(8):
Basic................... $ 0.94
Diluted................. 0.91
Weighted Average Shares
(8):
Basic................... 39,886 39,032 39,305 39,305 32,450 30,804 30,386 27,381
Diluted................. 40,828 39,812 40,407 40,407 33,418 31,324 30,782 27,476
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
Working Capital............................... $ 73,210 $ 169,283 $ 67,526 $ 81,997 $ 78,898
Total Assets(9)............................... 1,091,734 512,490 424,489 275,364 242,925
Long-term Obligations......................... 379,197 -- 60,000 -- 30,000
OPERATING INFORMATION:
System-wide Sales (10)........................ $2,187,409 $1,834,258 $1,494,260 $1,279,339 $1,085,759
</TABLE>
15
<PAGE>
- ------------------------
(1) Since the beginning of fiscal 1997, Interim has made certain acquisitions
which were accounted for under the purchase method of accounting, and it
disposed of its HealthCare Division on September 26, 1997. The pro forma
consolidated statement of income and sales data give effect to the
acquisitions and the disposition as though they occurred at the beginning of
fiscal 1997. See Notes to Consolidated Financial Statements.
(2) Fiscal year 1994 contained 53 weeks. All other years contained 52 weeks.
(3) Revenues for the HealthCare Division are included through the date of
disposition of September 26, 1997 and do not include certain allocations of
other income.
(4) Interest expense is net of interest income earned by Brandon prior to the
Company's merger with Brandon on May 23, 1996, which was accounted for as an
pooling-of-interests. See note 7.
(5) Prior to September 25, 1993, the Company's working capital and acquisition
financing were provided by Block. There was no interest charged on
intercompany debt. In conjunction with the IPO, effective September 25,
1993, Block formalized this arrangement by (i) providing a revolving credit
facility in the amount of $20,000,000 to fund the operating requirements of
the Company; (ii) converting $30,000,000 of intercompany indebtedness on
such date to a term loan and (iii) contributing $51,289,000 to the capital
of the Company. The earnings data for fiscal 1993 give effect to this
arrangement as if it occurred at the beginning of the period. Interest
expense has been computed at 6% and income taxes at the statutory rate.
(6) On September 26, 1997, the Company sold the HealthCare Division. Amount
represents pre-tax gain on sale. Taxes on the gain were $5,272,000. See
Notes to Consolidated Financial Statements page F-11.
(7) Represents fees and expenses related to the merger with Brandon, and the
consolidation and restructuring of the combined companies.
(8) Adjusted to reflect a two-for-one stock split in the form of a 100% stock
dividend paid on September 5, 1997.
(9) Certain reclassifications have been made to prior periods to conform to
current year presentation.
(10) Systemwide sales is defined as sales of all company-owned, franchised and
licensed offices. Sales data for franchised offices are derived from reports
provided by franchisees, which are not audited. Systemwide sales should not
be considered in isolation or as a substitute for revenues prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
"SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA" AND NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS AND THE CONSOLIDATED FINANCIAL STATEMENTS AND
RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS.
INTRODUCTION
The Company is a worldwide leader in recruiting, assessing and deploying
talent for a wide variety of businesses. Through flexible staffing, recruitment,
search, consulting and outplacement services, the Company provides professionals
in the fields of information technology, finance, law, manufacturing and human
resources, as well as clerical, administrative and light industrial staffing.
The Company provides services in two primary groups: (i) the Professional
Services Group, which offers a comprehensive range of consulting, staffing,
outplacement and placement services in the areas of information technology,
legal, accounting, banking and finance and human resources, and (ii) the
Commercial Staffing Group, which offers workforce management and clerical,
administrative and light industrial staffing services. The Professional Services
Group and the Commercial Staffing Group each represented approximately 50% of
the Company's pro forma revenues in fiscal 1997. The Company believes that it is
one of the five largest worldwide providers of Professional Services, and one of
the ten largest worldwide providers of staffing services, based on revenues.
RESULTS OF OPERATIONS
The following table sets forth operational results as a percentage of total
revenues for the periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------
MARCH 27, MARCH 28, PRO FORMA
1998 1997 1997 1997 1996 1995
------------- ------------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Professional Services.......... 53.5% 30.3% 50.8% 42.0% 26.9% 16.0%
Commercial Staffing............ 46.5 50.9 49.2 46.2 52.9 60.0
HealthCare Division............ -- 18.8 -- 11.8 20.2 24.0
----- ----- ----- --------- --------- ---------
Total Revenues............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Services................. 66.5 69.2 67.2 67.2 69.4 69.4
----- ----- ----- --------- --------- ---------
Gross Profit..................... 33.5 30.8 32.8 32.8% 30.6% 30.6%
Selling, General &
Administrative................. 23.1 22.3 22.0 22.6 21.2 20.5
Licensee Commissions............. 2.8 3.0 2.9 2.8 3.4 4.3
----- ----- ----- --------- --------- ---------
Results from Operations.......... 7.6% 5.5% 7.9% 7.4% 6.0% 5.8%
Merger Expense................... -- -- -- -- 0.8 --
Gain on Sale of HealthCare
Division....................... -- -- -- (0.3) -- --
Amortization of Intangibles...... 1.3 0.7 1.4 1.2 0.8 0.8
Interest......................... 1.8 0.1 2.1 1.5 0.5 0.1
Taxes............................ 2.0 2.0 2.0 2.4 1.9 2.1
----- ----- ----- --------- --------- ---------
Net Earnings..................... 2.5% 2.7% 2.4% 2.6% 2.0% 2.8%
----- ----- ----- --------- --------- ---------
----- ----- ----- --------- --------- ---------
Net Earnings (excluding merger
expenses)...................... 2.5% 2.7% 2.4% 2.6% 2.7% 2.8%
----- ----- ----- --------- --------- ---------
----- ----- ----- --------- --------- ---------
</TABLE>
17
<PAGE>
FIRST QUARTER 1998 COMPARED TO 1997
Revenues for the quarter increased 31.4% to $416.2 million from $316.8
million for the first quarter of the prior year. Excluding revenues from the
HealthCare Division, revenues increased 61.9% to $416.2 million from $257.1
million. Professional Services revenues increased 132.2% reflecting the strong
internal growth primarily in IT services as well as the acquisitions of Michael
Page in April 1997 and AIM in March 1997 and several smaller acquisitions in the
first quarter of 1998. Excluding these acquisitions, Professional Services
revenues increased 34.9%. Commercial Staffing revenues increased 20.4%
reflecting the continued expansion of the Interim On-Premise program, increased
demand for traditional commercial staffing services and the acquisition of Crone
Corkill, a UK-based commercial staffing company in March 1998.
Gross profit increased 43.2% to $139.5 million compared with $97.4 million
for the same period in 1997. Gross profit margin increased to 33.5% from 30.8%
in the first quarter of 1997. This increase was principally due to an increase
in the amount of Professional Services revenues as a percentage of total
revenues. Excluding the HealthCare Division, Professional Services revenues
represented 37.3% of first quarter 1997 total revenues compared with 53.5% of
total revenues in 1998. Professional Services generate higher gross profit rates
than Commercial Staffing. In addition, higher pricing in IT helped to increase
the gross profit rate in 1998.
Selling, general and administrative expenses increased 35.6% to $96.0
million from $70.8 million for the same period in 1997. Selling, general and
administrative expenses as a percentage of revenues were 23.1% compared with
22.3% for the same period in 1997. Higher expenses resulted from the growth in
Professional Services, as these businesses tend to have higher selling, general
and administrative costs as a percentage of revenues compared with Commercial
Staffing.
Licensee commissions increased 23.1% to $11.6 million from $9.4 million for
the same period last year. Licensee commissions as a percentage of revenues
decreased to 2.8% from 3.0% due to branch revenues growing at a faster rate than
licensee revenues.
Amortization expenses for the period increased 133% from $2.3 million to
$5.3 million reflecting the increase in intangible assets arising from
acquisitions, primarily Michael Page.
Interest expense increased to $7.7 million from $0.3 million for the same
period last year. This resulted from increased borrowings for acquisitions,
primarily Michael Page. The Company had average borrowings outstanding during
the first quarter of 1998 of $444.4 million at an average rate of interest
(including the effects of interest rate swaps) of 7.2% compared with $18.5
million outstanding during the first quarter of 1997 at an average rate of
interest of 7.5%.
The effective tax rate for the first quarter of 1998 was 44.2% compared with
41.9% for the same period last year. This increase resulted from higher levels
of non-deductible intangible amortization in 1998 due to the Michael Page
acquisition.
Net earnings for the quarter increased 23.8% to $10.6 million (or $0.26 per
diluted share) compared with $8.5 million (or $0.21 per diluted share) for the
same period last year. This represents a 23.8% increase in per share earnings.
The weighted average number of shares used in the per share calculation (as
adjusted for the dilutive impact of common stock equivalents) increased to
40,828,000 from 39,812,000 last year.
FISCAL 1997 COMPARED TO 1996
REVENUES. Revenues in 1997 increased 40.2% to $1,608.3 million from
$1,147.2 million in the prior year. Professional Services revenues increased
118.7% reflecting strong internal growth and the Michael Page and AIM
acquisitions. Excluding these acquisitions, Professional Services revenues
increased 31.0%. Commercial Staffing revenues increased 22.8% reflecting the
expansion of the Interim
18
<PAGE>
On-Premise program, an increase in the number of offices and increased business
in existing offices. HealthCare Division revenues decreased due to the sale of
the HealthCare Division at the end of the third quarter of 1997.
GROSS PROFIT. Gross profit increased 50.0% to $527.1 million from $351.4
million in the prior year. Gross profit margin was 32.8% compared with 30.6% in
fiscal 1996. This increase was principally due to the acquisition of the
higher-margin business of Michael Page, partially offset by the elimination of
higher gross profit generated by the HealthCare Division which was sold at the
end of the third quarter of 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 49.0% to $363.2 million from $243.7 million in
the prior year period. Selling, general and administrative expenses as a
percentage of revenues were 22.6% compared to 21.2% a year ago due to the higher
costs associated with Professional Services. These higher gross margin
businesses have higher operating expenses than the Company's Commercial Staffing
business.
LICENSEE COMMISSIONS. Licensee commissions increased 14.2% to $45.1 million
from $39.5 million in the prior year period and is consistent with the growth in
licensee revenues. Licensee commissions as a percentage of total revenues
decreased from 3.4% to 2.8% due to licensee revenue becoming a smaller portion
of overall revenue.
AMORTIZATION OF INTANGIBLES. Amortization expense increased 110.1% to $18.5
million from $8.8 million in the prior year period reflecting the increase in
intangible assets arising from acquisitions, primarily Michael Page.
INTEREST EXPENSE. Interest expense increased 326.1% to $24.3 million from
$5.7 million in 1996. This resulted from increased borrowings for acquisitions,
primarily Michael Page. The Company had average borrowings outstanding during
1997 of $361.2 million and accrued an average interest rate of 6.9%. See
"--Liquidity and Capital Resources--Financing".
TAXES ON EARNINGS. The effective tax rate for 1997 was 47.8% compared with
49.0% last year. The 1997 effective rate includes an approximate 100% effective
rate on the $5.3 million HealthCare Division sale gain due to a lower tax basis
than book basis in this business. Last year's high rate resulted from a large
portion of the 1996 merger expense being nondeductible. The effective tax rates
excluding these two unusual items were 44.2% and 43.0% for the years ended
December 26, 1997 and December 27, 1996, respectively. The increase in the
effective rate, excluding unusual items, resulted from higher levels of
non-deductible goodwill in 1997.
NET EARNINGS. Net earnings excluding merger expenses increased 39.1% to
$42.5 million ($1.05 per diluted share) from $30.6 million ($0.91 per diluted
share) in the prior year period. This represents a 15.4% increase in per share
earnings. Including merger expenses, net earnings increased 84.7% to $42.5
million ($1.05 per diluted share) from $23.0 million ($0.69 per diluted share)
in the prior year period. The weighted average number of shares used in the per
share calculation (as adjusted for the dilutive impact of common stock
equivalents) increased to 40,407,000 from 33,418,000 in the prior year period,
primarily due to the additional shares issued as a result of the public offering
on October 17, 1996.
FISCAL 1996 COMPARED TO 1995
REVENUES. Revenues in 1996 increased 32.7% to $1,147.2 million from $864.2
million in the prior year. Professional Services revenues increased 123.5%
reflecting significant IT acquisitions and internal growth. Commercial Staffing
revenues increased 16.9% reflecting the expansion of the Interim On-Premise
program and an increase in the number of offices and services provided.
HealthCare Division revenues increased 11.3% due to increases in the number of
offices and expansion of occupational health and physicians services.
19
<PAGE>
GROSS PROFIT. Gross profit increased 33.1% to $351.4 million from $264.1
million in the prior year period. Gross profit margin was 30.6%, the same as
1995. Although the Company added revenues of higher gross profit business
through acquisitions and increases in the Professional Services, this was offset
by a decline in franchise royalties as a percent of total Company revenue and an
increase in the percentage of Commercial Staffing, which generally have lower
gross profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 37.6% to $243.7 million from $177.1 million in
the prior year period. Selling, general and administrative expenses as a
percentage of revenues were 21.2% compared with 20.5% in 1995 due to the higher
relative costs associated with Professional Services.
LICENSEE COMMISSIONS. Licensee commissions increased 5.9% to $39.5 million
from $37.3 million in the prior year period and consistent with the growth in
licensee revenues. Licensee commissions as a percentage of revenues decreased
from 4.3% to 3.4% due to the Company purchasing several license operations, one
licensee converting to a franchise and slower general growth of licensee
revenues compared with branch revenue growth.
AMORTIZATION OF INTANGIBLES. Amortization expense increased 27.9% to $8.8
million from $6.9 million in the prior year period reflecting the increase in
intangible assets arising from acquisitions.
INTEREST EXPENSE. Interest expense increased to $5.7 million from $1.0
million in the prior year; average borrowings during the year were $102.2
million and the Company accrued an average effective interest rate of 6.2%
compared to average borrowings of $22.3 million and an average effective
interest rate of 6.6% in 1995.
TAXES ON EARNINGS. The effective tax rate of 49.0% in 1996 resulted from a
large portion of merger expenses, recorded in the first half of 1996, being
nondeductible. The effective tax rate, excluding the effects of nonrecurring
merger expenses, was 43.0% compared with 43.2% in the prior year. The decline in
the effective tax rate is due primarily to higher earnings in proportion to the
level of nondeductible intangibles.
NET EARNINGS. Net earnings excluding merger expenses increased 28.8% to
$30.6 million ($0.91 per diluted share) from $23.7 million ($0.76 per diluted
share) in the prior year period. This represents a 19.7% increase in per share
earnings. Including merger expenses, net earnings decreased 3.0% to $23.0
million, ($0.69 per diluted share) from $23.7 million ($0.76 per diluted share)
in the prior year period. The weighted average number of shares used in the per
share calculation (as adjusted for the dilutive impact of common stock
equivalents) increased to 33,418,000 from 31,324,000 in the prior year period,
primarily due to the additional shares issued as a result of the secondary
public offering on October 17, 1996.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Historically, the Company has financed its operations through cash generated
by operating activities and bank lines of credit. The Company's principal uses
of cash are funding acquisitions, capital expenditures, working capital needs
and repayment of debt. The nature of the Company's business requires payment of
wages to its flexible staff on a weekly, or bi-weekly basis, while payments from
clients are generally received 30-60 days after billing.
Cash provided by operating activities in 1997 was $57.8 million compared
with cash used by operations in 1996 of $6.1 million and cash provided by
operations in 1995 of $6.6 million. Higher operating cash flow in 1997 resulted
from increased earnings, amortization and depreciation combined with an increase
in accounts payable and accrued liabilities. Reduced cash flow from operating
activities
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in both 1996 and 1995 resulted from lower levels of earnings, depreciation and
amortization. Operating cash flow in 1996 was also impacted by higher receivable
levels due to increases in days sales outstanding and $7.6 million (after-tax)
of merger expenses paid.
Net cash provided by operating activities was $0.8 million and $8.0 million
in the first quarter of 1998 and 1997, respectively. Lower cash flow from
operating activities in 1998 resulted from a reduction in accounts payable and
accrued liabilities during 1998 compared with an increase in 1997. The increase
in 1997 was partially offset by higher other assets due to the increase in a
long-term receivable with a new major customer contract. The decrease in 1998
resulted from the timing of the Company's 1997 fiscal year-end, and tax and
annual incentive payments in the first quarter of 1998.
Investing activities used $474.7 million in 1997 primarily due to the
acquisition of Michael Page partially offset by the proceeds from the sale of
the HealthCare Division. The Company obtained funds from borrowing under a
multi-currency credit facility for the acquisition of Michael Page. See further
discussion in Financing below. Proceeds from the sale of the HealthCare
Division, net of transaction costs, and operating cash flow were used to reduce
these borrowings, leaving $413.0 million of debt outstanding at December 26,
1997. Investing activities in 1996 and 1995 included $12.0 million and $99.0
million, respectively, of other acquisitions, the most significant of which was
the acquisition of the Computer Power Group for $71 million in 1995.
Investing activities in 1997 included $24.9 million of capital expenditures
compared with $33.0 million in 1996 and $11.3 million in 1995. Capital
expenditures in 1997 were for new computer hardware and software, new office
furniture and fixtures and the completion of the Company's corporate
headquarters. Capital expenditures in 1996 were for the expansion of the
Company's headquarters and to upgrade and expand the area of information
technology. The Company anticipates continued expenditures to develop and
upgrade many of its information technology systems. Management expects
expenditures in 1998 to approximate 1997 levels.
Investing activities used $67.0 million and $117.9 million in the first
quarter of 1998 and 1997, respectively, primarily related to acquisitions. In
the first quarter of 1998, the Company acquired several Professional Services
businesses in accounting, banking and finance and completed the Crone Corkill
acquisition. In the first quarter of 1997, the Company acquired AIM and funded
the initial investments in Michael Page.
On October 17, 1996, the Company completed a public offering of 8.5 million
shares (7.9 million shares sold by the Company) of common stock at $21.63 per
share. Net proceeds to the Company were approximately $163.1 million, of which
$131.7 million was used to repay borrowings under the Company's credit
facilities.
The Company intends to continue to make strategic acquisitions to grow its
business. Funding for these acquisitions will come from: (i) internally
generated funds; (ii) borrowings on the Company's credit facility and (iii)
raising additional capital.
FINANCING
The Company has available a $535.9 million multi-currency credit agreement
entered into as of May 1, 1997 and amended as of June 2, 1997. Outstanding
borrowings at December 26, 1997 under this agreement were a $176.7 million term
loan, a $219.5 million revolving loan and $16.8 million in loan notes to prior
shareholders of Michael Page. The term loan is denominated in U.S. dollars while
the revolving loans are denominated in U.S. dollars and British pounds sterling.
Borrowings under this facility are unsecured. The credit facility is available
to fund the Company's acquisitions, to supply working capital and to provide for
general corporate needs. Interest rates on amounts outstanding under the credit
facility are based on LIBOR plus a variable margin. The facility contains
customary covenants, which include the maintenance of certain financial ratios
including minimum net worth, restrictions on
21
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the incurrence of liens and additional indebtedness. In addition, the Company
has established short-term, unsecured, uncommitted lines of credit with certain
banks. These lines of credit are based on LIBOR and are available to fund the
Company's short-term capital requirements. No amounts were outstanding under
these agreements at December 26, 1997.
There was approximately $120.0 million available for future borrowings under
these agreements at December 26, 1997.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer applications being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will be
required to upgrade certain application systems to ensure operability after the
year 1999. However, the Company's most significant internally developed systems
will require modest remediation to be fully ready for year 2000. As such, most
of the systems activity that must take place entails upgrading purchased
application systems. The Company believes that these upgrades will take place in
the ordinary course of business without significant incremental cost. Experts
from the Interim Technology Consulting Group's year 2000 practice will be
utilized to augment internal activities in the assessment and testing phases of
the project.
The Company plans to complete its year 2000 upgrade in a timely manner. The
Company does not foresee substantial incremental costs as most of the
applications that are not currently year 2000 compliant are purchased third
party software packages. The vendors of those products have announced year 2000
upgrade versions scheduled to be available in the first half of 1998. The costs
of these upgrades are included as part of the ongoing maintenance fees. In
addition, the Company is discussing with its vendors and customers the
possibility of any difficulties which may affect the Company as a result of its
vendors and customers ensuring that their computer systems and software are year
2000-compliant. To date, no significant concerns have been identified. However,
there can be no assurance that no year 2000 related computer operating problems
or expenses will arise with the Company's computer systems and software or in
the computer systems and software of the Company's vendors and customers. The
Company's IT Consulting Group performs work for clients to assist them in
modifying their computer systems and software to make them year 2000-compliant.
Generally, this work is performed under the direction and supervision of the
client and without warranties as to results or usability. Accordingly, the
Company does not believe that it will incur any material liabilities to clients
for its work on their year 2000 projects.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements.
FOREIGN OPERATIONS
With the acquisition of Michael Page, the Company has significantly expanded
its business outside of North America. The results of operations of Michael Page
are included within the Professional Services Group. The Company also has
Commercial Staffing operations in The Netherlands. In 1997, revenue and
operating earnings (before interest and taxes, and gain on sale of the
HealthCare Division) from foreign operations were $251.2 million and $39.5
million, respectively. There are currently no legal restrictions regarding the
repatriation of cash flows from these foreign operations.
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SEASONALITY AND CYCLICALITY OF BUSINESS
The Company's businesses are not seasonal in nature, but the staffing
business has historically been considered to be cyclical, often acting as a
coincidental indicator of both economic downswings and upswings. However, the
balance between Professional Services and Commercial Staffing Services should
help reduce the impact of cyclicality. The acquisition in 1997 and growth of AIM
which specializes in outplacement should also mitigate the impact of cyclicality
as outplacement growth rates amplify during a slower economy, offsetting other
services which may be more sensitive to economic declines. As a result of
general shifting of employment patterns and the growth in Interim On-Premise,
the Company believes it may become less cyclical. Finally, the Company's
presence in 12 countries may reduce cyclicality based on management's belief
that the economies of every country will not suffer economic downturns
simultaneously. No single customer accounts for more than 2% of the Company's
sales.
OTHER
In June 1997, Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," was issued. SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. The Company will adopt
this standard in 1998.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", was issued. SFAS No. 131 establishes standards for the way
that public companies report selected information about operating segments in
annual financial statements and requires that those companies report selected
information about segments in interim financial reports issued to shareholders.
SFAS No. 131 also establishes standards for related disclosures about products
and services, geographic areas, and major customers and supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise". SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. The Company has historically reported its information under one segment.
This standard will require the Company to report financial information
consistent with how the business is managed. The Company will adopt this
standard in 1998.
23
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BUSINESS
COMPANY OVERVIEW
The Company is a worldwide leader in recruiting, assessing and deploying
talent for a wide variety of businesses. Through flexible staffing, recruitment,
search, consulting and outplacement services, the Company provides professionals
in the fields of information technology, finance, law, manufacturing and human
resources, as well as clerical, administrative and light industrial staffing.
The Company provides services in two primary groups: (i) the Professional
Services Group, which offers a comprehensive range of consulting, staffing,
outplacement and placement services in the areas of information technology,
legal, accounting, banking and finance and human resources, and (ii) the
Commercial Staffing Group, which offers workforce management and clerical,
administrative and light industrial staffing services. Professional Services and
Commercial Staffing Services each represented approximately 50% of the Company's
pro forma revenues at the end of fiscal 1997. The Company believes that it is
one of the five largest worldwide providers of Professional Services, and one of
the ten largest worldwide providers of staffing services, based on revenues.
Since the IPO, the Company's network of offices in its Professional Services
and Commercial Staffing Groups has nearly doubled, from 373 offices in North
America to 733 offices in 12 countries at the end of the first quarter of 1998.
The Company's revenues from Professional Services and Commercial Staffing
Services increased from $537.0 million in fiscal 1994 to $1.4 billion in fiscal
1997 ($1.5 billion on a pro forma basis). This growth has been accomplished
through strategic acquisitions, internal growth and by capitalizing on
cross-selling opportunities. During this period, the Company acquired 18
companies providing staffing, consulting and employment services through
approximately 161 offices, representing over $550 million of acquired revenues,
$496 million of which were from Professional Services. In April 1997, the
Company acquired Michael Page, a premier international recruiting and staffing
company specializing primarily in accounting, banking and finance, currently
with 51 offices located throughout Europe and the Asia Pacific region. The
acquisition of Michael Page, the Company's largest acquisition to date, has
provided the Company with a strong international presence, substantial growth in
its higher-margin Professional Services business, enhanced cross-selling
opportunities and access to a worldwide customer base.
INDUSTRY OVERVIEW
The global staffing services industry has experienced significant growth in
response to the changing work environment worldwide. According to Eurostat, the
European Commission's statistical body, the total staffing services market in
developed economies had revenues of approximately $94 billion in 1995 (the
latest available data). The focus of the staffing industry is changing from
employers' traditional use of staffing services to manage personnel costs and
meet fluctuating staffing requirements to the reduction of administrative
overhead by outsourcing human resources operations that are not part of their
core business competencies. The use of flexible staffing services has allowed
employers to improve productivity, to outsource specialized skills and to avoid
the negative effects of layoffs. Rapidly changing regulations concerning
employee benefits, insurance and retirement plans, as well as the high cost of
hiring, laying off and terminating permanent employees has also prompted many
employers to take advantage of the flexibility offered through temporary and
contract staffing arrangements. In addition to the economic conditions driving
staffing industry growth, the Company believes that changing demographics of the
workforces of developed economies and evolving attitudes concerning work
patterns also contribute to growth in the staffing industry. These trends have
accelerated with the pace of technological change and greater global competitive
pressures.
The U.S. remains the largest and most important staffing service market in
the world. According to STAFFING INDUSTRY REPORT, U.S. staffing industry
revenue, including temporary help, placement, search and outplacement, grew from
approximately $29.3 billion in 1992 to approximately $65.0 billion in 1997,
representing a compound annual growth rate of 17.3%. The National Association of
Temporary and Staffing Services has estimated that more than 90% of all U.S.
businesses utilize staffing services. Also,
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the U.S. Bureau of Labor Statistics has stated that penetration of the U.S. work
force by temporary and contract workers has increased from approximately 0.4% in
1992 to approximately 1.9% in 1996. One of the fastest growing sectors for the
staffing services industry, as well as for the Company, is information
technology. According to the STAFFING INDUSTRY REPORT, 1996 revenue for this
sector in the U.S. is estimated to have been $11.7 billion, a 27.2% increase
over 1995, and is estimated to have grown to $14.9 billion in 1997, representing
a compound annual growth rate of 23.9% since 1992. In addition, revenues for
other professional level staffing, including accounting, finance and legal, were
estimated to have grown from $1.8 billion in 1992 to $6.1 billion in 1997,
representing a compound annual growth rate of 27.6%. The Company believes that
Professional Services requires longer-term, more highly-skilled personnel
services and, therefore, offers the opportunity for higher profitability than
the Commercial Staffing Services because of the value-added nature of
professional and technical staffing personnel.
The U.K. is the second largest national staffing services market in the
world. According to a report commissioned by the Federation of Recruitment and
Employment Services in the U.K., staffing industry revenue in the U.K. grew from
approximately $8.9 billion in 1992 to approximately $21.8 billion in 1996,
representing a compound annual growth rate of 25.1%. According to Eurostat, the
U.K. had the highest penetration rate of temporary and contract workers in the
world in 1995 (the latest available data), at approximately 3.3%. Demographic
indicators produced by the U.K. Institute for Employment Studies predict a
return to labor shortages in the U.K., particularly in technical and skilled
sectors. This shortage is expected to result from a shrinking labor pool coupled
with continued demand for specialized skills. While a shrinking labor pool may
reduce the number of suitable candidates for the Company to place with its
clients, it may also increase the demand for the Company's specialized
recruiting skills. The Company believes that these factors, as well as the
continued relatively rapid growth in the service sector, should increase the
opportunities to place workers in the U.K.
The total staffing services market in the European Union (excluding the
U.K.) during 1995 (the latest available data) was estimated by Eurostat to be
approximately $24.0 billion, with France, Germany, The Netherlands and Belgium
accounting for over 90% of such market. The continental European staffing
services industry is currently characterized by discrete domestic markets that
have no significant cross-border contact. Between 1992 and 1995 (the latest
available data), the staffing services industry grew at compound annual rates of
11.8% in France, 12.9% in Germany, 13.4% in The Netherlands and 11.4% in
Belgium. In many other European countries, the staffing services industry has
only recently begun to develop. The European Commission has noted trends towards
deregulation and greater labor market flexibility which the Company believes
will increase the use of temporary and contract labor throughout Europe. For
example, Spain, Sweden and Italy have recently enacted legislation that
eliminated or modified laws which had previously significantly restricted or
prohibited the operations of private staffing services companies. In the
emerging markets of Eastern Europe, the Company believes that demand for
staffing services is increasing as a result of deregulation of certain local
labor laws and increasing economic development.
In certain countries in the Asia Pacific region, particularly Australia, the
staffing service industry is well developed, and the Company believes that
opportunities exist for expansion in both Professional Services and Commercial
Staffing Services.
The staffing services market in most countries in which the Company operates
is highly fragmented and includes a large number of small businesses, many of
which operate in a single geographic market. This fragmentation, combined with
changing client demands and competitive pressures, has resulted in a trend
towards industry consolidation. This consolidation is being driven by, among
other things, client demands for "one-stop shopping" from staffing providers.
Faced with a desire to minimize the number of vendors, coupled with the need for
sophisticated management information systems, the growth of national or global
relationships and the expansion of professional level specialties, clients have
begun to demand the services of large staffing companies capable of offering a
full range of staffing services over a broad geographic area. This ability has
been particularly important in fulfilling the needs of large
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regional, national and international accounts. Within this more competitive
environment, smaller companies may have difficulties competing due to limited
service offerings, geographic concentration and lack of sufficient working
capital and management resources. As a result, many smaller companies have been
acquired in recent years and the Company believes that small and mid-sized
staffing companies are becoming increasingly responsive to acquisition proposals
by larger firms, such as the Company. Furthermore, the Company believes that
consolidation may also occur among larger regional and national companies.
BUSINESS STRATEGY
The Company's goal is to drive revenue and earnings growth by delivering
innovative integrated human resources solutions worldwide through its
consultative approach to workforce management. The Company intends to achieve
this goal through a growth strategy that includes strategic acquisitions, with
particular emphasis in its higher-margin Professional Services businesses,
opening new offices in existing and new geographic markets and continued
development of its client base by capitalizing on cross-selling opportunities.
This growth strategy is complemented by an operating strategy of offering a
comprehensive range of innovative services under common brands through
decentralized, entrepreneurial offices providing specialized expertise. Through
the implementation of the Company's strategy, EBIT as a percentage of revenues
increased from 2.6% in fiscal 1993 (without giving effect to the restatement of
the Company's financial statements to account for the acquisition of Brandon as
a pooling-of-interests) to 6.5% in fiscal 1997.
The key elements of the Company's strategy are:
CONTINUE TO EXPAND THROUGH ACQUISITIONS. The Company believes that there
is an opportunity to acquire additional companies consistent with its
business strategy because of the highly fragmented nature of the staffing
industry and the pressures of increased competition. The Company intends to
continue to make complementary acquisitions that can be integrated into
existing operations, as well as strategic acquisitions that provide entry
into new geographic markets or service lines. This acquisition strategy
focuses on strong, well managed staffing and consulting companies
domestically and internationally. The Company has a proven track record of
successfully acquiring companies, integrating them within the Company's
existing operations and producing growth rates of acquired companies in
excess of their historical performance. Since the IPO, the Company has added
approximately 161 offices and over $550 million in revenues through
acquisition.
MAINTAIN STRONG ORGANIC GROWTH. A significant portion of the Company's
growth has resulted from internal expansion, which includes new office
openings and development of existing offices. The Company intends to
continue to add offices by expanding into new geographic markets, both
domestically and internationally, and to open new offices in existing
markets to increase the range of services offered in such markets. New
office openings are jointly planned by corporate and local management based
upon various criteria, including market demand, availability of quality
candidates and whether a new office would complement or broaden the
Company's current geographic network or service offerings. The Company also
believes that it has been able to accelerate the growth of existing offices
by capitalizing on cross-selling opportunities. To this end, the Company's
integration managers focus on facilitating cross-selling opportunities on a
regional basis. The Company opened 199 offices from the date of the IPO
through the end of the first quarter of 1998.
PROVIDE A COMPREHENSIVE RANGE OF SERVICES. The Company believes that a
significant demand exists from current and prospective clients to procure a
substantial portion of their human resources solutions from a single
company, thereby enabling them to assess and deploy personnel more
efficiently and productively. Accordingly, the Company seeks to be regarded
by its clients as their human resources partner and is committed to
developing a broad range of innovative, value-added human resource solutions
to meet their evolving needs on a worldwide basis. Since the IPO, the
Company has significantly increased the range of services offered, moving
from solely providing
26
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flexible staffing services to offering a full range of Commercial and
Professional Services. The higher-margin Professional Services include
workforce management, recruitment, consulting and outplacement services in
the fields of information technology, law, accounting, banking and finance.
The Company believes that Professional Services may be less cyclical and
provide attractive cross-selling opportunities for other Interim offices.
PROVIDE INNOVATIVE PRODUCTS AND SERVICES. By taking a consultative
approach to client needs, the Company has developed innovative, value-added
services that help clients better manage their human assets. Interim
On-Premise utilizes proprietary software that provides "qualitative"
measurement of performance, quantitative analysis of staffing efficiencies
and customized reporting. The Company's "interim.com" website contains
employment information that can be used by both candidates and clients, and
was made part of the Smithsonian Institution's Permanent Research Collection
on Information Technology Innovation. In addition, the Company conducted a
nationwide survey with Louis Harris and Associates to identify emerging
workforce trends to assist clients in human resource planning.
UTILIZE ADVANCED RECRUITMENT METHODS. The Company has added new
techniques to successfully recruit and retain candidates. Through five
recruitment centers in Europe, Asia and South Africa, Interim recruits
professionals, predominantly to the U.S., to fill a shortage of skills. In
addition, Interim was the first company in the staffing industry to
implement national television advertising featuring a toll-free number
(1-800-A-CAREER) and full-page Wall Street Journal advertising for
managerial and executive positions. Recruitment efforts are globally
supported by both Internet and Intranet-based technology and a developing
central candidate database that will allow the Company to maintain contact
with candidates throughout the duration of their careers. Once a candidate
is employed, the Company focuses on training to maintain or enhance skills
and offers certain employees full-time salaries, benefits and participation
in the Company's employee benefit plans as a form of retention.
LEVERAGE BRAND IDENTITY. Interim is one of a small number of staffing
companies which provide Commercial Staffing Services and Professional
Services under the same brand name. This maximizes cross-selling
opportunities (e.g., Interim Technology, Interim Accounting Professionals,
Interim Legal Services, Interim Attorneys, Interim Personnel, etc.). Through
this common branding, the Company and its franchisees and licensees are
better able to benefit from national media advertising. The Company also
benefits from brand name recognition of certain of its subsidiaries
including Michael Page, a premier recruitment organization focusing on the
placement of finance professionals internationally, has established strong
name recognition within the world's largest financial markets and The
Stratford Group, the Company's executive search business specializing in the
recruitment of high-level executives, benefits from name recognition among
senior management.
DELIVER SERVICES THROUGH SPECIALIZED OFFICES SUPPORTED BY DECENTRALIZED
STRUCTURE. The Company's businesses are operated to be responsive to local
business practices and market conditions. The Company believes that its
existing and potential clients choose service providers largely on the basis
of brand awareness and local specialized expertise. Each of the Company's
offices are organized on this basis, thereby providing clients with
perceived value and enhanced services by enabling them to deal with Interim
representatives who "speak their language" and understand their specialized
human resources requirements. Further, all Interim managers are compensated
based on profits generated within their scope of responsibility and
cross-selling activities, and they are responsible for their own hiring,
pricing, business mix and local promotion. The Company believes that this
(i) allows the Company to capitalize on its managers' knowledge of local
business conditions and markets, (ii) makes the Company more attractive to
acquisition candidates, (iii) allows for a smooth transition of acquired
businesses and (iv) enables local operating company managers to develop
long-term relationships with key decision makers at both existing and
potential clients.
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ACQUISITIONS
The Company's corporate management team has extensive experience in
identifying acquisition candidates and integrating acquired operating companies
into the Company's international network. The Company believes its
decentralized, entrepreneurial management structure facilitates its efforts to
acquire branded staffing companies seeking alliances with an
internationally-focused provider of a broad range of staffing services.
During 1997, the Company acquired two companies which have considerably
advanced the Company's objective to grow the Professional Services Group:
Michael Page, a premier international recruiting and staffing company
specializing in accounting, banking and finance, currently with 51 offices
located in the U.K., France, The Netherlands, Italy, Germany, Australia, Hong
Kong, Singapore, Spain, New Zealand and the U.S., and AIM, a leading provider of
outplacement and career consulting services in the U.S. Since the IPO, the
Company has acquired 18 companies providing staffing, consulting and employment
services through approximately 161 offices, representing approximately $551.0
million in acquired revenues. In addition to external acquisitions, Interim
usually purchases franchise and license operations which are for sale. The
Company is generally the purchaser of choice when an Interim franchisee or
licensee decides to sell its business. The Company has a first right of refusal
on any franchise sale at the same terms and conditions as may be agreed with
another purchaser and has a standard purchase option on licenses. Overall,
Company-owned branches yield higher profits than franchised or licensed offices,
and the Company therefore believes that the purchase of these offices is
accretive to overall earnings. The Company regularly evaluates potential
acquisitions of companies that can be integrated into existing operations and
strategic acquisitions that provide entry into new geographic markets or service
lines. Certain information related to external acquisitions is summarized in the
following table.
<TABLE>
<CAPTION>
NUMBER REVENUES
ACQUISITION OF IN
ACQUIRED COMPANY DATE OFFICES(1) MILLIONS(2) PRIMARY SERVICES
- ------------------------------------ ----------- ---------- ------------- ------------------------------------
<S> <C> <C> <C> <C>
PROFESSIONAL SERVICES GROUP
Smyth, Fuchs & Company.............. 3/98 5 $ 2.5 Outplacement
2 5.0 Accounting Staffing & Placement
Network Companies, Inc.............. 2/98
de Recat & Associates, Inc.......... 1/98 3 3.5 Outplacement
3 14.6 Accounting Staffing & Placement
A.J. Burton Group, Inc.............. 1/98
Feldt Personnel Consultants......... 10/97 1 0.5 Accounting Staffing & Placement
Mainstream Access................... 4/97 16 5.7 Outplacement
Michael Page Group PLC.............. 4/97 40 220.0 Accounting & Finance Staffing &
Placement
AIM................................. 3/97 17 35.2 Outplacement, Staffing & Placement
Brandon Systems..................... 5/96 32 89.0 IT Staffing
Of-Counsel.......................... 5/96 1 1.0 Attorney, Paralegal & Legal
Secretary Staffing
Computer Power Group................ 12/95 17 81.0 IT Consulting and Staffing
Hernand & Partners.................. 11/95 3 2.7 Attorney Staffing
Juntunen............................ 10/95 2 13.6 Placement, HR Consulting and
Staffing
OCS Services Group.................. 6/95 5 16.1 IT Consulting and Staffing
Career Associates/Career Temps...... 6/95 5 5.6 Accounting Staffing and Placement
COMMERCIAL STAFFING GROUP
Crone Corkill....................... 3/98 2 38.4 High Level Administrative Staffing
Allround/Interplan.................. 11/96 6 15.0 Traditional Staffing
ICS Temporary Services.............. 12/94 1 1.6 Traditional Staffing
---------- -------------
Total....................... 161 $ 551.0
---------- -------------
---------- -------------
</TABLE>
- ------------------------
(1) Office count at time of acquisition.
(2) Revenues shown for 1995 and 1994 acquisitions reflect annualized results for
the year. 1998, 1997 and 1996 acquisitions reflect revenues for the 12
months prior to acquisition.
28
<PAGE>
DESCRIPTION OF OPERATIONS
The Company provides its decentralized field operations with centralized
national and international support in training, information technology,
recruitment, marketing and sales. This includes national television advertising
aimed at building brand identity and recruiting candidates, centralized
candidate databases and expansive internet and intranet communication abilities.
In addition, back office support includes: centralized payroll, billing,
receivables management, risk management, legal services and cash management.
Corporate staff, as well as integration managers in key markets, are dedicated
to supporting cross-selling activities and national/international account
management and expansion. Business units that pass revenue-generating leads to
other business units are rewarded with a corporate-paid fee. This approach
facilitates an environment of high communication among offices, unifies
strategic initiatives and capitalizes upon multinational resources.
The Company provides skills in two primary groups: the Professional Services
Group and the Commercial Staffing Services Group. Each group offers a
comprehensive range of skills to fulfill client requirements and are described
below.
THE PROFESSIONAL SERVICES GROUP
The Professional Services Group offers a comprehensive range of consulting,
staffing, outplacement and placement services in the areas of IT, legal,
accounting, banking and finance and human resources. The Company's total
revenues in fiscal 1997 from Professional Services were $675.0 million,
representing an increase of approximately $366.3 million or 118.7% from fiscal
1996.
ACCOUNTING AND FINANCE. Through the acquisition of Michael Page and the
growth of Interim Accounting Professionals, the Company provides accounting,
banking and finance staffing and placement services worldwide. Michael Page
specializes in recruiting and staffing in areas such as mergers and
acquisitions, corporate finance and funds management. Michael Page operates in
major financial centers across the globe, including London, Paris, Frankfurt,
Amsterdam, Hong Kong, Singapore and Sydney and in 1997, opened its first office
in New York. As a result of the Michael Page acquisition, Interim is the second
largest provider of recruiting and staffing services in the accounting, banking
and financial areas worldwide. In addition, Michael Page provides Interim with a
global presence to grow its On-Premise and traditional staffing businesses.
Interim Accounting Professionals provides accounting and finance personnel at
all levels including bookkeepers, degreed accountants, certified public
accountants, auditors and controllers. Clients include corporate accounting
departments, small businesses and accounting firms of every size. Interim
Accounting Professionals offers temporary and project staffing, temp-to-hire and
full-time placement capabilities.
INFORMATION TECHNOLOGY. Interim has built a leading information technology
consulting and staffing services group operating through 50 offices, of which 47
are in the U.S., two are in the U.K. and one is in Asia, as well as recruiting
centers in South Africa, Asia and The Netherlands. This business provides a
comprehensive scope of IT services including management consulting, staffing and
outsourcing services. Interim Technology services are subdivided into two
specialty offerings, Technology Consulting and Technology Staffing.
Technology Consulting specializes in the areas of software design,
maintenance, development, quality assurance, implementation and strategic IT
consulting. The Technology Consulting Group has separate practices to supply
specialized expertise in the areas of client/server development, legacy systems
support, network integration, software quality management, systems engineering
and technical communications, and provides IT services to Fortune 100 companies.
In addition, the Technology Consulting Group provides management, staffing, and
testing of year 2000 projects. Technology Consulting engagements are generally
longer term and are provided by highly trained full-time employees.
Technology Staffing provides operations-based staffing and support for IT
operations including help desk and data center operations, operations analysis,
communications, operations and PC support. The Technology Staffing Group also
offers a distinctive partnering service whereby its clients maintain
29
<PAGE>
complete strategic control of their information systems and data, but are
relieved of technology staffing and performance issues and thus benefit from the
traditional savings of outsourcing. This type of outsourcing service is
typically provided to clients under a contractual arrangement. The Technology
Staffing group generally provides large numbers of personnel for shorter
assignments.
LEGAL SERVICES. The Company's legal staffing offices provide attorneys,
paralegals, court reporters, litigation support and legal transcription services
predominantly to law firms and corporations. In addition, the Company operates a
"Depolab" at its corporate headquarters providing summarization, proofing,
editing and transcription services utilizing proprietary software that permits
law firms to have depositions summarized into 13 different formats. The
centralized Depolab concept enhances supervision, confidentiality and quality
control while making better use of human resources which would otherwise be
located in various local offices.
In 1997 the Company introduced Juris Partners, a product designed to be
similar to Interim On-Premise. Juris Partners is a comprehensive management
program designed to increase the effectiveness and cost-efficiency of a
company's legal support. Through Juris Partners, an on-site Interim manager
evaluates and manages a company's entire legal support function, supplying the
necessary staff and services including project staffing, litigation support,
document management and court reporting.
HUMAN RESOURCE SOLUTIONS. Interim HR Solutions offices provide skilled
professionals such as contract recruiters and human resource professionals for
project assignments and human resource consulting and project management at
client locations or on an outsourced basis. In addition, this group's expertise
ranges from organizational development and training to compensation, plan design
and benefits analysis.
RECRUITMENT. Interim provides nationwide searches for all levels of
employees, up to president and CEO. Retained searches are conducted for
executives and high-level managers, and contingency recruitment is available for
management and professional positions. Businesses rely on Interim to recruit
industry experts who will provide strategic direction and top management skills.
The search group has developed a blue chip client list, and has particular
expertise in the technology industry, working with virtually all of the leading
technology companies in the nation. Relationships are established with companies
at the highest levels when recruiting for executives and management. These
relationships serve as an excellent point of entry for a whole host of
additional Interim services including information technology, legal, accounting,
HR, clerical and light industrial.
CAREER CONSULTING. With nationwide capabilities, Interim manages projects
ranging from large-scale national restructurings to individual cases and is
ranked among the top five outplacement firms in the U.S. Interim provides career
management and outplacement services to help companies and their employees
address career transition and termination issues. Career Consulting services
provide career assessment and management, executive coaching, leadership
development and team alignment.
THE COMMERCIAL STAFFING GROUP
The Commercial Staffing Group offers services ranging from workforce
management to clerical, administrative and light industrial staffing.
Approximately 50% of the Company's total revenues at the end of fiscal 1997 were
derived from the Commercial Staffing Group.
INTERIM PERSONNEL. The traditional flexible staffing business consists of
providing a wide variety of clerical, administrative, assembly and light
industrial skills. In addition to supplying personnel to perform general office
tasks such as reception, copying and filing, the Company provides personnel who
are proficient in word processing, graphics, spreadsheets or database
management. In the light industrial area, Interim supplies personnel to perform
light industrial tasks such as electronic and precision assembly, PC board
assembly, packaging, shipping and receiving, warehousing, landscaping,
construction and equipment operation. The Company also offers full-time
placement of these skills.
30
<PAGE>
INTERIM ON-PREMISE. In 1992, the Company introduced a new staffing concept,
Interim On-Premise, whereby a client delegates management of its staffing needs
to the Company, allowing the client to focus on its core business activities.
On-Premise has evolved to include managing a client's entire workforce, a
significant portion of which may be permanent staff. To better serve its
On-Premise clients, the Company has developed proprietary software that is
designed to facilitate managing the productivity of personnel at the client's
work site. On-Premise offices are predominantly Company-owned. Since the concept
was introduced, revenues from On-Premise clients have grown to 30% of the
Commercial Staffing Group's revenues for fiscal 1997.
The Company has found that Interim On-Premise clients, who had typically
utilized Commercial Staffing Services, are very receptive to other Interim
services, particularly in the Professional Services area. On-Premise managers
are well positioned to enhance established relationships with key people at
client organizations and, as a result, introduce Professional Services.
Conversely, Professional Services' employees often can identify instances where
clients need additional staffing services and introduce Interim On-Premise.
These clients have also sought to expand the Interim On-Premise service into
their international operations. Management believes the Company's geographic and
service breadth provide a strong competitive advantage in securing such
broad-reaching assignments. Additionally, once in place, clients are reluctant
to terminate their on-premise arrangements, having become dependent on Interim's
knowledge, productivity and proprietary software.
OFFICE STRUCTURE
Interim offices are Company-owned, franchised and licensed. Most offices
serve multiple clients in their respective geographic area, with the exception
of Interim On-Premise sites, which are established at the client's location to
serve only that client. The Company believes that it can better leverage
profitability through its branch locations. The Company originated as a
franchise organization. Currently 83% of revenues are derived from Company owned
operations and the Company does not intend to add
31
<PAGE>
additional franchises. The following table details the number of offices which
are Company-owned, franchised and licensed as of the end of the periods listed.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
<S> <C> <C> <C>
DECEMBER
NUMBER OF OFFICES 1997 1996 1995
- ------------------------------------------------------------------ ----- --------------- -----
BRANCH OFFICES
Commercial Staffing Group......................................... 218 191 159
Professional Services Group....................................... 181 92 79
HealthCare Division............................................... -- 113 104
--- --- ---
Total Branch Offices.......................................... 399 396 342
--- --- ---
FRANCHISED OFFICES
Commercial Staffing Group......................................... 136 131 123
Professional Group................................................ 3 3 2
HealthCare Division............................................... -- 285 289
--- --- ---
Total Franchised Offices...................................... 139 419 414
--- --- ---
LICENSED OFFICES
Commercial Staffing Group......................................... 150 160 163
Professional Services Group....................................... 18 16 11
HealthCare Division............................................... -- 7 10
--- --- ---
Total Licensed Offices........................................ 168 183 184
--- --- ---
TOTAL OFFICES
Commercial Staffing Group......................................... 504 482 445
Professional Services Group....................................... 202 111 92
HealthCare Division(1)............................................ -- 405 403
--- --- ---
TOTAL OFFICES................................................. 706 998 940
--- --- ---
Less HealthCare Division.......................................... -- 405 403
--- --- ---
TOTAL EXCLUDING HEALTHCARE DIVISION......................... 706 593 537
--- --- ---
--- --- ---
</TABLE>
- ------------------------
(1) The Company sold the HealthCare Division in September 1997.
COMPANY-OWNED OFFICES
As of December 26, 1997, the Company operated 399 branch offices. Branch
office expansion is generally pursued in markets where Interim has an
established presence and is used to increase market penetration. Additional
expansion is achieved by establishing On-Premise operations at client sites. The
Company intends to continue to expand Company-owned branches in those locations
where it can "cluster" multiple offices in close geographic proximity to utilize
centralized regional and area management and other administrative functions,
which leverages growth and increases profitability.
LICENSED OFFICES
The Company grants licenses, which give the licensee the right to establish
a business utilizing the Company's trade names, service marks, advertising
materials, sales programs, operating procedures, manuals and forms within a
designated territory. As of December 26, 1997, the Company's 71 licensees
operated 168 licensed offices.
Licensees are required to observe the Company's operating procedures and
standards and act as a representative of the Company in recruiting, screening,
classifying, employing and placing flexible staff in response to client orders.
The licensee is responsible for establishing the office and paying related
administrative and operating expenses, such as rent, utilities and salaries of
full-time employees. The Company is responsible for paying the wages of the
flexible staff and all related payroll taxes and insurance. As a result, the
Company provides a substantial portion of the working capital needed for the
licensed businesses.
32
<PAGE>
Sales by the licensed offices are included in the Company's revenues, and
the direct costs of services are included in the Company's cost of services. The
licensee receives a commission from the Company, which generally is equivalent
to 75% of the licensed offices' gross profits. The licensee is required to
participate in the Company's national advertising program and use the Company's
billing, payroll and other data processing services for which a separate fee is
paid to the Company.
FRANCHISED OFFICES
The Company has been granting franchises for approximately 40 years. The
average tenure of commercial franchise ownership exceeds 17 years, and a number
of franchisees are second generation owners. Most franchisees operate more than
one franchise. As of December 26, 1997, the Company's 19 franchisees operated
139 offices. The Company does not intend to add any franchisees.
The Company grants franchisees the right to market and furnish commercial
staffing services within a designated geographic area using the Company's trade
names, service marks, advertising materials, sales programs, operating
procedures, manuals and forms. The Company provides franchises with its
national, regional and local advertising. Franchisees operate their businesses
autonomously within the framework of the Company's policies and standards and
recruit, employ and pay their own full-time and flexible staff. The Company
receives royalty fees from each franchise based upon its sales, and in return
supplies a variety of support and marketing services.
COMPETITION
The staffing services industry is intensely competitive and highly
fragmented, with few barriers to entry by potential competitors at the local
level. The Company faces significant competition in the markets it serves and
will continue to face significant competition in any geographic markets or
industry sectors that it may enter. In each market in which the Company
operates, it competes for both clients and qualified personnel with other firms
offering staffing services. The majority of competitors are significantly
smaller than the Company. However, certain of the Company's competitors have
greater marketing and financial resources than the Company. Many clients use
more than one staffing services company and it is common for a major client to
use several staffing services companies at the same time.
The Company's largest competitors are Manpower, Inc., Adecco S.A., Kelly
Services, Inc., The Olsten Corporation, Norrell Corporation, Robert Half
International and AccuStaff, Inc. The Company believes that it is one of the ten
largest worldwide providers of staffing services and one of the five largest
worldwide providers of Professional Services, based upon revenue.
The Company believes that the primary competitive factors in obtaining and
retaining clients are the breadth of services provided as clients seek out
providers that can service all of their staffing needs. Additionally, other
critical competitive factors include the number and location of offices, an
understanding of clients' specific job requirements, the ability to provide
personnel in a timely manner and the ability to monitor the quality of job
performance. The primary competitive factors in obtaining qualified candidates
for employment assignments are quality of available opportunities, wages,
responsiveness to work schedules and number of hours of work available. The
Company believes it has a competitive advantage over its competitors because it
offers a wide range of services and broad availability of skills to its
customers worldwide.
EMPLOYEES
Interim employed more than 400,000 people in 1997, including the HealthCare
Division which was sold in September 1997. The Company estimates that it
assigned approximately 350,000 flexible personnel with its clients in 1997, of
whom approximately 70,000 were assigned, on average, at any given time. The
Company assigned approximately 25,000 people in permanent jobs. In addition, the
Company employs approximately 4,000 staff employees full-time in its national
and international operations.
33
<PAGE>
MANAGEMENT
The following table sets forth the names, ages and position with the Company
of its executive officers and key operating management employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- --------------------------------------------------
<S> <C> <C>
Raymond Marcy..................... 47 Chairman, President and Chief Executive Officer
Robert E. Livonius................ 49 Executive Vice President and Chief Operating
Officer
Roy G. Krause..................... 51 Executive Vice President and Chief Financial
Officer
John B. Smith..................... 58 Senior Vice President, Legal Counsel and Secretary
Robert Evans...................... 54 Vice President and Chief Information Officer
Ken Kilburn....................... 44 Vice President and Chief Administrative Officer
Terry Benson...................... 45 Chief Executive Officer -- Michael Page Group
Stuart N. Emanuel................. 54 President -- Interim Technology Consulting Group
Robert Miano...................... 48 President -- Interim Technology Staffing Group
Gary Peck......................... 45 President -- Commercial Staffing Group
</TABLE>
RAYMOND MARCY has served as the Company's Chairman since August, 1997, as
the Company's Chief Executive Officer since September 1991 and as the President
and a director since November 1989, as well as the Chief Operating Officer from
November 1989 until September 1991. Prior to joining the Company, Mr. Marcy
served as Senior Vice President of Operations for Adia Services, Inc. ("Adia"),
from 1980 through 1988. While retaining his position as Senior Vice President of
Operations for Adia, from May 1988 until November 1989, Mr. Marcy was President
and Chief Executive Officer of Nursefinders, Inc., the temporary nursing
subsidiary of Adia.
ROBERT E. LIVONIUS has served as the Company's Executive Vice President and
Chief Operating Officer since February 1997, as Executive Vice
President--Operations since August 1993, and as Vice President--HealthCare
Division from August 1991 to August 1993. Prior to joining the Company, Mr.
Livonius served as Vice President-Field Operations for a division of NYNEX
Corporation from June 1986 through June 1991.
ROY G. KRAUSE has served as the Company's Executive Vice President and Chief
Financial Officer since October 1995. Prior to joining the Company, Mr. Krause
served as Executive Vice President of HomeBank Federal Savings Bank and HomeBank
Mortgage Corporation from November 1980 to September 1995.
JOHN B. SMITH has served as the Company's Senior Vice President since
January 1980 and as Legal Counsel and Secretary since January 1965. Mr. Smith
also served as a director from January 1969 until May 1995.
ROBERT EVANS has served as the Company's Vice President and Chief
Information Officer since May 1996. Prior to joining the Company, Mr. Evans held
several executive positions with AT&T, including Vice President -- Customer Care
Strategy and Reengineering, Chief Technology Officer, Chief Information Officer
and General Manager of the Consumer Interactive Services business unit.
KEN KILBURN has served as the Company's Vice President of Business
Integration and Chief Administrative Officer since January 1998. Before joining
Interim in January 1989, Mr. Kilburn was Director of PC Options Manufacturing
for Compaq Computer Corp. For nearly 15 years prior thereto, Mr. Kilburn held
various executive management positions in purchasing and manufacturing
operations with Digital Equipment Corp.
TERRY BENSON has served as the Chief Executive Officer of Michael Page since
1989, and held various other positions with Michael Page for nearly ten years
prior thereto.
34
<PAGE>
STUART N. EMANUEL has served as the Company's President--Interim Technology
Consulting Group since May 1997. Prior to joining the Company, Mr. Emanuel held
various executive positions with the Computer Power Group, which was acquired by
the Company in December 1995, including Executive Vice President, Regional Vice
President and Director of Sales.
ROBERT MIANO has served as the Company's President -- Interim Technology
Staffing Group since December 1997. From May 1996 until November 1997, Mr. Miano
served as Executive Vice President -- Interim Technology Staffing Group. From
1992 until May 1996, Mr. Miano served as Vice President -- Operations.
GARY PECK has served as the the Company's President -- Commercial Staffing
Group since August 1997, as Vice President-Commercial Branch Operations from
January 1995 to August 1997 and as Vice President -- Special Services from
August 1991 to December 1994. Prior to joining the Company, Mr. Peck served as
Senior Vice President for Talent Tree Services, Inc., from August 1998 to August
1991.
35
<PAGE>
VALIDITY OF THE SHARES
The validity of the shares offered hereby will be passed upon for the
Company by Baker & McKenzie, Miami, Florida, and for the Underwriters by
Sullivan & Cromwell, Washington, DC.
EXPERTS
The consolidated financial statements included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the Registration Statement and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 7th Floor, New York, New York 10048. Copies of such materials may be
obtained from the web site that the Commission maintains at http://www.sec.gov.
In addition, such material may also be inspected and copied at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005,
and the Pacific Stock Exchange, Incorporated, 301 Pine Street, San Francisco,
California 94104.
This Prospectus constitutes part of a Registration Statement filed by the
Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to the Company and the Common Stock. Statements contained herein
concerning the provisions of any document are not necessarily completed and, in
each instance, where a copy of such document has been filed as an exhibit to the
Registration Statement or otherwise has been filed with the Commission,
reference is made to the copy so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-23198)
pursuant to the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 26,
1997;
2. Proxy Statement for the Annual Meeting of Stockholders held on May
7, 1998, as supplemented;
3. Quarterly Report on Form 10-Q for the quarter ended March 27, 1998;
and
4. All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering made hereby.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests
36
<PAGE>
should be directed to the Company, 2050 Spectrum Boulevard, Fort Lauderdale, FL
33309, Attention: Dierdre A. Skolfield, telephone: (954) 938-7600.
------------------------
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.
37
<PAGE>
INTERIM SERVICES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report......................................................... F-2
Consolidated Statements of Earnings for the Years Ended December 26, 1997, December
27, 1996 and December 29, 1995..................................................... F-3
Consolidated Balance Sheets as of December 26, 1997 and December 27, 1996............ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 26,
1997, December 27, 1996 and December 29, 1995...................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 26, 1997, December
27, 1996 and December 29, 1995..................................................... F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of Interim Services Inc.
Fort Lauderdale, Florida
We have audited the accompanying consolidated balance sheets of Interim
Services Inc. and subsidiaries (the "Company") as of December 26, 1997 and
December 27, 1996, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 26, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Interim Services Inc. and
subsidiaries as of December 26, 1997 and December 27, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 26, 1997, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Fort Lauderdale, Florida
February 5, 1998
F-2
<PAGE>
INTERIM SERVICES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DEC. 26, DEC. 27, DEC. 29,
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Revenues................................................. $1,608,256 $1,147,151 $ 864,247
Cost of services......................................... 1,081,113 795,789 600,169
---------- ---------- ---------
Gross profit........................................... 527,143 351,362 264,078
---------- ---------- ---------
Selling, general and administrative expenses............. 363,152 243,652 177,105
Licensee commissions..................................... 45,091 39,500 37,295
Amortization of intangibles.............................. 18,492 8,802 6,884
Interest expense......................................... 24,269 5,696 990
Gain on sale of HealthCare business...................... (5,300) -- --
Merger expense........................................... -- 8,600 --
---------- ---------- ---------
445,704 306,250 222,274
---------- ---------- ---------
Earnings before taxes.................................. 81,439 45,112 41,804
Income taxes............................................. 38,928 22,097 18,071
---------- ---------- ---------
Net earnings........................................... $ 42,511 $ 23,015 $ 23,733
---------- ---------- ---------
---------- ---------- ---------
Basic earnings per share................................. $ 1.08 $ 0.71 $ 0.77
---------- ---------- ---------
---------- ---------- ---------
Diluted earnings per share............................... $ 1.05 $ 0.69 $ 0.76
---------- ---------- ---------
---------- ---------- ---------
Basic weighted average shares outstanding................ 39,305 32,450 30,804
---------- ---------- ---------
---------- ---------- ---------
Diluted weighted average shares outstanding.............. 40,407 33,418 31,324
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See notes to Consolidated Financial Statements.
F-3
<PAGE>
INTERIM SERVICES INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DEC. 26, DEC. 27,
1997 1996
---------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 15,570 $ 18,938
Marketable securities.............................................. -- 7,499
Receivables, less allowance for doubtful accounts of $5,229 and
$3,023........................................................... 230,947 186,732
Insurance deposits................................................. 23,974 32,794
Other current assets............................................... 37,610 18,301
---------- ---------
Total current assets............................................. 308,101 264,264
Goodwill, net........................................................ 475,656 173,638
Tradenames and other intangibles, net................................ 219,472 1,109
Property and equipment, net.......................................... 65,475 49,795
Other assets......................................................... 23,030 23,684
---------- ---------
$1,091,734 $ 512,490
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt.................................. $ 33,827 $ --
Accounts payable and other accrued expenses........................ 86,489 27,092
Accrued salaries, wages, and payroll taxes......................... 65,256 40,948
Accrued self-insurance losses...................................... 28,466 26,782
Accrued income taxes............................................... 20,853 159
---------- ---------
Total current liabilities........................................ 234,891 94,981
Long-Term Debt....................................................... 379,197 --
Deferred Tax Liability............................................... 4,054 2,798
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $.01 per share; authorized 2,500,000
shares; none issued or outstanding............................... -- --
Common stock, par value $.01 per share; authorized 50,000,000
shares; issued and outstanding 39,745,761 and 38,953,368
shares........................................................... 397 390
Additional paid-in capital......................................... 260,067 251,041
Treasury stock..................................................... -- (460)
Retained earnings.................................................. 206,461 163,950
Cumulative translation adjustment.................................. 6,667 (210)
---------- ---------
Total stockholders' equity....................................... 473,592 414,711
---------- ---------
$1,091,734 $ 512,490
---------- ---------
---------- ---------
</TABLE>
See notes to Consolidated Financial Statements.
F-4
<PAGE>
INTERIM SERVICES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA )
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL GAIN (LOSS) ON CUMULATIVE
COMMON PAID-IN TREASURY MARKETABLE RETAINED TRANSLATION
STOCK CAPITAL STOCK SECURITIES EARNINGS ADJUSTMENT TOTAL
------------- ----------- ----------- ----------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of
December 30, 1994...... $ 308 $ 85,915 $ -- $ (72) $ 118,883 $ (135) $ 204,899
Net earnings............. -- -- -- -- 23,733 -- 23,733
Transactions of pooled
Company................ -- (1,349) -- 98 (1,308) -- (2,559)
Change in foreign
currency translation
adjustment............. -- -- -- -- -- (185) (185)
Proceeds from exercise of
employee stock
options................ -- 401 -- -- -- -- 401
----- ----------- ----------- ----- ----------- ------------- ---------
Balance as of
December 29, 1995...... 308 84,967 -- 26 141,308 (320) 226,289
Net earnings............. -- -- -- -- 23,015 -- 23,015
Transactions of pooled
Company................ -- 271 -- -- (373) -- (102)
Change in foreign
currency translation
adjustment............. -- -- -- -- -- 110 110
Proceeds from exercise of
employee stock option.. 2 3,116 -- -- -- -- 3,118
Sale of 7,900,000 shares
of common stock in a
public offering, net... 80 162,595 -- -- -- -- 162,675
Repurchase of 26,356
shares................. -- -- (460) -- -- -- (460)
Other.................... -- 92 -- (26) -- -- 66
----- ----------- ----------- ----- ----------- ------------- ---------
Balance as of
December 27, 1996...... 390 251,041 (460) -- 163,950 (210) 414,711
Net earnings............. -- -- -- -- 42,511 -- 42,511
Change in foreign
currency translation
adjustment............. -- -- -- -- -- 6,877 6,877
Proceeds from exercise of
employee stock options,
including tax
benefit................ 7 8,744 460 -- -- -- 9,211
Other.................... -- 282 -- -- -- -- 282
----- ----------- ----------- ----- ----------- ------------- ---------
Balance as of
December 26, 1997...... $ 397 $ 260,067 $ -- $ -- $ 206,461 $ 6,667 $ 473,592
----- ----------- ----------- ----- ----------- ------------- ---------
----- ----------- ----------- ----- ----------- ------------- ---------
</TABLE>
See notes to Consolidated Financial Statements.
F-5
<PAGE>
INTERIM SERVICES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 26, DEC. 27, DEC. 29,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Earnings............................................ $ 42,511 $ 23,015 $ 23,733
Adjustments to reconcile net earnings to net cash from
operating activities:
Depreciation and amortization....................... 34,874 18,911 14,556
Deferred income tax (benefit) expense............... (5,654) 687 (74)
Gain on sale of HealthCare business................. (5,300) -- --
Changes in assets and liabilities, net of effects of
acquisitions:
Receivables....................................... (48,288) (40,724) (27,458)
Other assets...................................... (12,615) (18,253) (17,999)
Accounts payable and accrued liabilities.......... 50,772 8,828 14,030
Other............................................. 1,457 1,437 (226)
--------- --------- ---------
Net Cash (Used in) Provided by Operating
Activities...................................... 57,757 (6,099) 6,562
--------- --------- ---------
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired...................... (570,356) (11,964) (98,955)
Proceeds from the sale of HealthCare business, net...... 113,109 -- --
Capital expenditures.................................... (24,913) (32,982) (11,303)
Net proceeds from sale (purchase) of marketable
securities............................................ 7,499 15,631 (5,174)
--------- --------- ---------
Net Cash Used in Investing Activities........... (474,661) (29,315) (115,432)
--------- --------- ---------
Cash Flows from Financing Activities:
Debt proceeds........................................... 509,019 -- 108,218
Debt repayments......................................... (101,911) (114,727) --
Proceeds from stock offering............................ -- 163,114 --
Other................................................... 6,428 1,940 (2,195)
--------- --------- ---------
Net Cash Provided by Financing Activities....... 413,536 50,327 106,023
--------- --------- ---------
Increase (decrease) in cash and cash equivalents.......... (3,368) 14,913 (2,847)
Cash and cash equivalents, beginning of period............ 18,938 4,025 6,872
--------- --------- ---------
Cash and cash equivalents, end of period.................. $ 15,570 $ 18,938 $ 4,025
--------- --------- ---------
--------- --------- ---------
Supplement Cash Flow Information:
Income taxes paid....................................... $ 37,917 $ 21,602 $ 17,570
--------- --------- ---------
--------- --------- ---------
Interest paid........................................... $ 21,316 $ 6,546 $ 1,452
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to Consolidated Financial Statements.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS. Interim Services Inc. (the "Company" or "Interim") is a world
leader in staffing, consulting and career management services, including
flexible staffing, full-time placement, executive search, human resources
consulting, workforce management and outplacement. The Company offers a wide
range of skills including information technology, legal, accounting and finance,
human resources, technical, clerical, administrative and light industrial. The
Company operates through a network of offices throughout the United States,
Australia, Canada, France, Germany, Hong Kong, Italy, New Zealand, Spain,
Singapore, The Netherlands and the United Kingdom.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All material
intercompany transactions and balances have been eliminated.
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 revenues and expenses
during the reporting period. Due to the inherent uncertainty involved in making
estimates, actual results reported in future periods may be based upon amounts
which differ from those estimates.
FISCAL YEAR. The Company's fiscal year is comprised of 52 or 53 weeks,
ending on the last Friday in December. The fiscal years ended December 26, 1997,
December 27, 1996 and December 29, 1995 were all 52 weeks.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with original maturities of 90 days or less at the time of purchase
to be cash equivalents. Cash equivalents are carried at cost which approximates
fair value.
MARKETABLE SECURITIES. Marketable securities are comprised of readily
marketable debt securities with remaining maturities of more than 90 days at the
time of purchase. The Company has classified its investment portfolio as trading
securities and the carrying value of such securities has been adjusted to fair
market value, which was not materially different from cost.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. The Company carries accounts receivable at
the amount it estimates to be collectible. Accordingly, the Company provides
allowances for accounts receivable it estimates to be uncollectible based on
management's best estimates. Recoveries are recognized in the period they are
received. The ultimate amount of accounts receivable that become uncollectible
could differ from those estimated.
INTANGIBLE ASSETS. Intangible assets consist principally of goodwill and
tradenames and are being amortized on a straight-line basis over periods of
approximately 38 years. The Company evaluates the recoverability of intangible
assets, as well as amortization periods, to determine whether an adjustment to
carrying values or a revision to estimated useful lives is appropriate.
Recoverability is determined through evaluation of anticipated cash flows on an
undiscounted basis. If the estimated future cash flows are projected to be less
than the carrying value, an impairment write-down would be recorded.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost and
depreciated using the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
amortized over the shorter of their estimated useful life or the lease term
using the straight-line method. Maintenance and repairs which do not improve or
extend the life of an asset are expensed as incurred.
ACCRUED SELF-INSURANCE LOSSES. The Company retains a portion of the risk
under its workers' compensation, general liability and professional liability
insurance programs. Reserves have been recorded which reflect the discounted
estimated liabilities including claims incurred but not reported. Losses have
been discounted at approximately 5.8% and 6.2% at December 26, 1997 and December
27, 1996, respectively. Such liabilities are necessarily based on estimates and,
while management believes that the amount is adequate, there can be no assurance
that changes to management's estimates may not occur due to limitations inherent
in the estimation process. Changes in the estimates of these accruals are
charged or credited to income in the period determined. The Company funds
portions of its retained risks through deposits with insurance carriers and
others. These deposits are reflected as insurance deposits on the accompanying
Consolidated Balance Sheets and reflect the estimated fair market value of such
amounts.
FOREIGN CURRENCY TRANSLATION. The Company's foreign operations use the
local currency as their functional currency. Assets and liabilities of these
operations are translated at the exchange rates in effect on the balance sheet
date. Income statement items are translated at the average exchange rates for
the year. The impact of currency fluctuation is included in stockholders' equity
as a translation adjustment.
REVENUE RECOGNITION. The Company generates revenues from sales of services
by its own branch and licensed operations and from royalties earned on sales of
services by its franchise operations. Franchise royalties, which are included in
revenues, were $23,091, $27,009 and $24,316 for the years ended December 26,
1997, December 27, 1996 and December 29, 1995, respectively. Revenues and the
related labor costs and payroll taxes are recorded in the period in which
temporary staffing services are performed. Revenues on placements are recognized
when services provided are substantially completed. Allowances are established
to estimate losses due to placed candidates not remaining employed for the
Company's guarantee period.
The Company utilizes two forms of franchising agreements. Under the first
form, the Company records franchise royalties, based upon the contractual
percentage of franchise sales, in the period in which the franchise provides the
service. Under the second form (termed "licensee" by the Company), revenues
generated by the licensee and related direct costs are included as part of the
Company's revenues and cost of services, respectively. The net distribution paid
to the licensee is based upon a percentage of the gross profit generated, and is
captioned "licensee commissions" in the Consolidated Statements of Earnings.
INCOME TAXES. The Company accounts for income taxes under an asset and
liability approach, which requires the recognition of deferred tax assets and
liabilities for expected future tax consequences of temporary differences
between tax bases and financial reporting bases of assets and liabilities. The
Company's policy is to not provide deferred taxes on temporary differences
related to investment in foreign subsidiaries as they are considered permanent
in duration. These differences, primarily undistributed foreign earnings, were
not material at December 26, 1997.
EARNINGS PER SHARE. Basic earnings per share is computed by dividing the
Company's net income by the weighted average number of shares outstanding during
the period.
Diluted earnings per share is computed by dividing the Company's net income
by the weighted average number of shares outstanding and the dilutive impact of
common stock equivalents, primarily
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
stock options. The dilutive impact of common stock equivalents is determined by
applying the treasury stock method.
On August 7, 1997, the Company announced a two-for-one stock split in the
form of a 100% stock dividend, to stockholders of record as of the close of
business on August 18, 1997, payable on September 5, 1997. All shares
outstanding and per share amounts have been restated to reflect the stock split.
DERIVATIVE FINANCIAL INSTRUMENTS. The Company enters into interest rate
swap agreements and foreign exchange forward contracts as part of the management
of its interest rate and foreign currency exchange rate exposures; it has no
derivative financial instruments held for trading purposes and none of the
instruments are leveraged. All financial instruments are put into place to hedge
specific exposures. Amounts to be paid or received under swap agreements are
recognized over the terms of the agreements as adjustments to interest expense.
Amounts receivable or payable under the agreements are included in receivables
or accrued expenses in the accompanying Consolidated Balance Sheets. Gains and
losses on foreign currency forward contracts offset gains and losses resulting
from the underlying transactions. Gains and losses on contracts that hedge
specific foreign currency commitments are deferred and recorded in net income in
the period in which underlying transaction is recorded.
STOCK BASED COMPENSATION. The Company has chosen to account for stock-based
compensation to employees using the intrinsic value method as prescribed by
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations. Accordingly, compensation cost for
stock options issued to employees is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the amount
an employee must pay for the stock. Compensation cost related to restricted
stock granted as part of bonus compensation is recognized in the period the
bonus is earned and measured using the quoted market price on the effective
grant date. Compensation cost related to stock options of non-employees is
recorded at fair value (in accordance with SFAS No. 123).
NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," was
issued. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. SFAS No. 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company will adopt this standard in 1998.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 establishes standards for the way
that public companies report selected information about operating segments in
annual financial statements and require that those companies report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers and supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. The Company has historically reported its information under one segment.
This standard will require the Company to report financial information
consistent with how the business is managed. The
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Company manages its business primarily by skills provided, and thus expects this
will determine its segments to comply with the new standard. The Company will
adopt this standard in 1998.
ACQUISITIONS AND DISPOSITION
ACQUISITIONS
MICHAEL PAGE GROUP, PLC. On April 18, 1997, the Company completed the
purchase of the outstanding shares of Michael Page Group, PLC ("Michael Page"),
a public company in the United Kingdom, for $577,575. Michael Page provides
staffing and placement services primarily in the fields of finance and
accounting with 51 offices in 11 countries. This acquisition was accounted for
under the purchase method of accounting. Accordingly, the operations of Michael
Page are included in the Consolidated Statement of Earnings from the date of
acquisition. The excess of the purchase price over the fair value of the net
tangible assets acquired was $512,469. This amount has been allocated to trade
names and goodwill based upon an independent valuation performed to assist
management in this allocation. Both intangible assets are being amortized over
40 years.
BRANDON SYSTEMS CORPORATION. On May 23, 1996, the Company completed its
merger with Brandon Systems Corporation ("Brandon"), an information technology
staffing company. The Company issued 7,745,380 shares of its common stock in
exchange for 100% of the outstanding shares of Brandon common stock. In
addition, Brandon stock options outstanding at the effective time of the merger
were converted into options to purchase an aggregate of 415,184 additional
Interim common shares. The merger has been accounted for as a
pooling-of-interests for accounting and financial reporting purposes.
Accordingly, the historical financial statements for the periods prior to the
merger are restated as though the companies had been combined. All fees and
expenses related to the merger and the consolidation and restructuring of the
combined companies have been expensed. Such fees and expenses were $8,600.
Revenues of Brandon from periods prior to the merger are included in the
accompanying income statements and were $22,311 for the quarter ended March 29,
1996 and $83,361 for the year ended December 29, 1995. Net earnings and earnings
per share related to Brandon were $1,244 and $0.04, respectively, for the
quarter ended March 29, 1996 and $6,206 and $0.20, respectively, for the year
ended December 29, 1995.
COMPUTER POWER GROUP. Effective December 1, 1995, the Company acquired the
U.S. and U.K. based assets of Computer Power Group ("CPG"), a subsidiary of
Australia-based Computer Power Group, Ltd., for $71,000 in cash. CPG provides
staffing and consulting services in a variety of information technology
disciplines. This acquisition was accounted for under the purchase method of
accounting. Accordingly, the operations of CPG are included in the Consolidated
Statements of Earnings from the date of acquisition. The excess of the purchase
price over the fair value of the net tangible assets acquired (goodwill) was
$56,618 and is being amortized over 40 years.
OTHER ACQUISITIONS. During 1997, 1996 and 1995 the Company made certain
other acquisitions that were accounted for under the purchase method of
accounting. Their operations are included in the Consolidated Statements of
Earnings from the date of acquisition.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The fair value of assets acquired and liabilities assumed (excluding cash
acquired) in connection with the acquisitions follows.
<TABLE>
<CAPTION>
DEC. 26, DEC. 27, DEC. 29,
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
Working capital (deficit)......................................................... $ (8,456) $ 615 $ 9,620
Goodwill and Tradenames........................................................... 563,802 12,016 86,715
Other net assets.................................................................. 15,327 (667) 3,029
Debt assumed...................................................................... (317) -- (409)
--------- ----------- -----------
Net assets acquired............................................................... $ 570,356 $ 11,964 $ 98,955
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
DISPOSITION
HEALTHCARE DIVISION. On September 26, 1997, the Company completed the sale
of its HealthCare business to Cornerstone Equity Investors IV, L.P. ("Buyer").
The Company received $118,590 in cash at closing ($113,109 net of transaction
related cash costs), with the remainder of the $134,000 purchase price to be
paid upon approval of the ownership transfer of Interim HealthCare of New York
Inc. to the Buyer by New York State regulators. Accordingly, recognition of the
remaining portion of the gain on sale has been postponed pending this final
approval. The pre-tax gain on sale recognized in 1997 was $5,300 with taxes on
the gain of $5,272. Revenues, prior to the sale, related to the HealthCare
business were $189,589, $231,268, $207,242 for the years ended December 26,
1997, December 27, 1996, and December 29, 1995, respectively.
Pursuant to the terms of the sales agreement and subject to certain
restrictions, the Company gave the Buyer a royalty-free license to use the
"Interim" trademark and trade names for an initial period of five years. After
that time, a license fee will be charged. Under a transitional service
agreement, the Company will continue to provide various services to the Buyer
including access to and use of information systems. These services will be
provided at rates included in the agreement which approximate the costs the
Company will incur. This service agreement is for two years with an option to
request an additional year. The Company has provided indemnification to the
Buyer on various pending issues with respect to the HealthCare business
including certain medicare reimbursement issues and the collectibility of loans
related to the businesses' physical therapy student loan program. The Company
does not expect that the outcome of these matters will have a material effect on
the Company's financial position or results of operation.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Consolidated Statement of
Earnings of the Company for the year ended December 26, 1997 is based on
historical financial statements of the Company and has been adjusted to reflect
the sale of the Company's HealthCare business, the acquisition of Michael Page
and other acquisitions made since the beginning of the year, as if such
acquisitions and disposition had occurred at the beginning of the year.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 26, 1997
<TABLE>
<CAPTION>
PRO FORMA
PROFORMA ACQUISITIONS AFTER
EFFECT OF ------------------------------------------- DISPOSITION
HISTORICAL HEALTHCARE MICHAEL OTHER PRO FORMA AND
INTERIM DISPOSITION(A) PAGE(E) ACQUISITIONS(E) ADJUSTMENTS ACQUISITIONS
---------- -------------- ----------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $1,608,256 $ (189,589) $ 76,253 $ 25,200 $ (138)(f) $1,519,982
Cost of services................ 1,081,113 (113,050) 38,213 15,717 (138)(f) 1,021,855
---------- -------------- ----------- --------------- ------------- ------------
Gross Profit.................. 527,143 (76,539) 38,040 9,483 -- 498,127
---------- -------------- ----------- --------------- ------------- ------------
Selling, general & admin.
exp........................... 363,152 (61,094) 25,073 6,764 536(g) 334,431
Licensee commissions............ 45,091 (597) -- -- (536)(g) 43,958
Amortization of intangibles..... 18,492 (1,812) -- -- 3,948(h) 20,628
Interest expense................ 24,269 (5,288)(b) (964) -- 13,455(i) 31,472
Gain on sale of HealthCare
Business...................... (5,300) 5,300(c) -- -- -- --
Merger expense.................. -- -- 5,064 -- (5,064)(j) --
---------- -------------- ----------- --------------- ------------- ------------
445,704 (63,491) 29,173 6,764 12,339 430,489
---------- -------------- ----------- --------------- ------------- ------------
Earnings before taxes......... 81,439 (13,048) 8,867 2,719 (12,339) 67,638
Income taxes.................... 38,928 (8,793)(d) 4,593 -- (3,473)(k) 31,255
---------- -------------- ----------- --------------- ------------- ------------
Net earnings.................... $ 42,511 $ (4,255) $ 4,274 $ 2,719 $ (8,866) $ 36,383
---------- -------------- ----------- --------------- ------------- ------------
---------- -------------- ----------- --------------- ------------- ------------
Diluted earnings per share...... $ 1.05 $ 0.90
---------- ------------
---------- ------------
Diluted weighted average shares
outstanding................... 40,407 40,407
---------- ------------
---------- ------------
</TABLE>
- ------------------------
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(a) To eliminate the results of operations of the HealthCare business. A portion
of the eliminated selling, general and administrative costs reflect
corporate expenses that have been allocated to the HealthCare business or
that will be eliminated. These corporate expenses reflect management's best
estimate of the costs no longer expected to be incurred by Interim
subsequent to the disposition of the HealthCare business.
(b) To reduce interest expense due to the reduction of debt from cash flows
generated from the sale of the HealthCare business.
(c) To eliminate gain on the sale of the HealthCare business.
(d) To reflect the aggregate tax benefit of eliminating the HealthCare business,
taxes on the gain and reducing borrowings.
(e) Reflects the historical financial statements of the acquired companies.
Michael Page's financial statements have been adjusted for differences
between U.S. and U.K. Generally Accepted Accounting Principles. Michael
Page's statement of income has been translated into U.S. dollars using
average exchange rates for the period.
(f) To eliminate royalties as a result of the repurchase of Interim franchises.
(g) To eliminate licensee commissions as a result of the repurchase of several
Interim license operations.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(h) To reflect amortization of goodwill and other intangibles generated by the
acquisitions on a straight-line basis over a weighted average life of 40
years.
(i) To reflect the pro forma effect of interest on the additional borrowings
used to fund the acquisitions. Interest on the credit facilities is computed
at LIBOR plus 85 basis points.
(j) To eliminate one-time costs incurred by Michael Page related to it being
acquired by the Company.
(k) To reflect the aggregate tax benefit of pro forma acquisition adjustments.
For the year ended December 27, 1996 revenues, net earnings and diluted
earnings per share would have been $1,201,548, $11,500 and $0.34, respectively,
had these acquisitions and the disposition of the HealthCare business occurred
at the beginning of the period.
INTANGIBLE ASSETS
A summary of intangible assets is as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE LIFE AVERAGE LIFE
(IN YEARS) DEC. 26, 1997 (IN YEARS) DEC. 27, 1996
----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Goodwill........................ 37 $ 516,058 29 $ 214,416
Less accumulated amortization... (40,402) (40,778)
-------------- --------------
Goodwill, net................... $ 475,656 $ 173,638
-------------- --------------
-------------- --------------
Tradenames...................... 40 $ 223,216 5 $ 394
Other intangibles............... 5 3,098 5 4,561
-- --
-------------- --------------
38 226,314 29 4,955
Less accumulated amortization... (6,842) (3,846)
-------------- --------------
Tradenames and other
intangibles, Net.............. $ 219,472 $ 1,109
-------------- --------------
-------------- --------------
</TABLE>
Amortization of intangible assets is as follows:
<TABLE>
<CAPTION>
DEC. 26, DEC. 27, DEC. 29,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Goodwill..................................................... $ 14,193 $ 8,241 $ 6,021
Tradenames................................................... 3,877 1 --
Other intangibles............................................ 422 560 863
----------- ----------- -----------
$ 18,492 $ 8,802 $ 6,884
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
<TABLE>
<CAPTION>
LIFE DEC. 26, DEC. 27,
(IN YEARS) 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
Land....................................................... -- $ 4,167 $ 4,167
Buildings.................................................. 10--40 14,331 11,394
Equipment.................................................. 3--8 82,871 60,453
Software................................................... 3--5 15,060 14,270
Leasehold improvements and other........................... 3--5 7,653 2,419
--------- ---------
124,082 92,703
Less accumulated depreciation and amortization............. (58,607) (42,908)
--------- ---------
$ 65,475 $ 49,795
--------- ---------
</TABLE>
Depreciation and amortization of property and equipment for the years ended
December 26, 1997, December 27, 1996 and December 29, 1995 amounted to $16,382,
$10,109, and $7,672, respectively.
LONG-TERM DEBT
The Company's debt as of December 26, 1997 was comprised of the following:
<TABLE>
<S> <C>
U.S. dollar denominated term loan, due 1998 through 2003......... $ 176,700
Revolving loan facility, due 2003--
British pound sterling denominated borrowings.................. 209,488
U.S. dollar denominated borrowings............................. 10,000
Loan notes denominated in British Pound Sterling................. 16,836
---------
413,024
Less current portion of long term debt........................... (33,827)
---------
---------
$ 379,197
---------
---------
</TABLE>
The Company has available $535,908 under a multi-currency syndicated credit
agreement entered into as of May 1, 1997 and amended as of June 2, 1997 ("Credit
Facility"). This agreement provides both a U.S. dollar denominated term loan and
a multi-currency revolving loan facility. Borrowings under this facility are
unsecured. Interest rates on amounts outstanding under the term loan and
revolving loan are based on LIBOR plus a variable margin. The facility contains
customary covenants, which include the maintenance of certain financial ratios
including minimum net worth, restrictions on the incurrence of lines and
additional indebtedness. The average interest rate for the year ending December
26, 1997 was 6.9%.
The Company also has sterling denominated loan notes outstanding payable to
certain former shareholders of Michael Page. Interest on these notes is based on
six month sterling LIBOR less 1%. The Company expects the majority of these
notes to be paid in 1998.
In addition, the Company has established short-term, unsecured, uncommitted
lines of credit with certain banks. These lines of credit are based on LIBOR and
are available to fund the Company's short-term capital requirements.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Under these agreements, the Company had approximately $120.0 million
available for future borrowings as of December 26, 1997.
The maturities of long term debt outstanding at December 26, 1997, are
summarized as follows: $33,827 in 1998, $23,787 in 1999, $33,981 in 2000,
$50,971 in 2001, $50,971 in 2002.
The Company had various credit facilities in place prior to 1997 with
variable interest rates. No debt was outstanding as of December 27, 1996
pursuant to these agreements.
INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
DEC. 26, 1997 DEC. 27, 1996 DEC. 29, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Current tax expense:
Federal.................................... $ 23,220 $ 17,062 $ 14,509
State and Local............................ 6,055 4,110 3,636
Foreign.................................... 15,307 238 --
-------------- -------------- --------------
44,582 21,410 18,145
-------------- -------------- --------------
Deferred tax (benefit) expense:
Federal.................................... (3,029) 538 (63)
State and Local............................ (721) 149 (11)
Foreign.................................... (1,904) -- --
-------------- -------------- --------------
(5,654) 687 (74)
-------------- -------------- --------------
Total Provision for Income Taxes............. $ 38,928 $ 22,097 $ 18,071
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The following table reconciles the U.S. Federal income tax rate to the
Company's effective tax rate:
<TABLE>
<CAPTION>
DEC. 26, 1997 DEC. 27, 1996 DEC. 29, 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Statutory Rate............................... 35.0% 35.0% 35.0%
Increase (decrease) in rate resulting from:
State and local income taxes, net of
federal benefit.......................... 4.3 6.2 5.6
Nondeductible amortization of
intangibles.............................. 5.9 3.6 3.9
Sale of HealthCare business................ 3.2 -- --
Merger expense............................. -- 4.7 --
Other, net................................. (0.6) (0.5) (1.3)
------ ------ ------
Effective Tax Rate........................... 47.8% 49.0% 43.2%
------ ------ ------
------ ------ ------
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DEC. 26, 1997 DEC. 27, 1996
--------------- ---------------
<S> <C> <C>
Current deferred tax assets:
Employee benefits and self-insurance....... $ 9,529 $ 2,935
Receivables allowances..................... 1,354 1,114
Other...................................... 26 128
------- -------
10,909 4,177
------- -------
Noncurrent deferred tax assets (liabilities):
Fixed assets............................... (1,123) (1,688)
Intangible assets.......................... (2,947) (1,075)
Other...................................... 16 (35)
------- -------
(4,054) (2,798)
------- -------
Net deferred tax assets...................... $ 6,855 $ 1,379
------- -------
------- -------
</TABLE>
EMPLOYEE BENEFIT PLANS
The Company has various savings plans covering substantially all eligible
employees. Company contributions to the plans are based on employee
contributions, the level of the Company match and the attainment of certain
financial objectives. During 1997, plans maintained by three of the Company's
business units were merged into one. Contributions by the Company under these
plans amounted to $2,402, $393 and $666 for the years ended December 26, 1997,
December 27, 1996 and December 29, 1995, respectively.
During 1995, the Company started a deferred compensation plan for certain
employees who are not eligible to participate in the Company's 401(k) savings
plan. This plan was extended to a larger group in 1997. The plan allows eligible
employees to defer receipt of a portion of their compensation. The Company
matches and accrues certain amounts deferred pursuant to this plan based upon
the same criteria as the 401(k) plan. The deferred compensation, along with the
Company matching amounts and accumulated investment earnings, is accrued. Such
accrual amounted to $5,507, $1,821 and $710 at December 26, 1997, December 27,
1996 and December 29, 1995, respectively.
Effective July 1997, the Company adopted a new Employee Stock Purchase Plan
(ESPP) to provide substantially all employees who have been employed for at
least 12 months an opportunity to purchase shares of its common stock at a
discount of 15%. The aggregate amount an employee may purchase is limited to a
maximum of 15% of an employee's compensation up to $25,000 of stock. There were
9,294 shares issued in 1997 under this plan. A total of 590,706 shares are
available as of December 26, 1997 for purchase under the plan which expires on
July 1, 2002.
STOCK-BASED COMPENSATION PLANS
The Company has three primary option stock plans, the 1997 Long-Term
Executive Compensation and Outside Directors Stock Option Plan, the 1997 Stock
Option Plan for employees of Michael Page Group PLC and the 1994 Stock Option
Plan for Franchisees, Licensees and Agents. The 1997 stock option plan for
employees of Michael Page was adopted solely to grant options to employees of
Michael Page to induce them to continue employment after the Michael Page
acquisition. Under the other two plans, options may be granted to outside
directors, selected employees of the Company and
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
its subsidiaries, franchisees, licensees and agents to purchase the Company's
Common Stock for periods not to exceed ten years at a price that is not less
than 100 percent of fair market value on the date of grant. Options granted
under all plans are exercisable cumulatively 20% to 100% each year beginning
one-year after the initial date of grant. At December 26, 1997 and December 27,
1996, the Company had 1,964,723 and 1,085,606 shares, respectively, reserved for
future grants under these plans. In addition, the Company's Outside Directors
Compensation Plan provides for the annual retainer to be paid in the form of the
Company's Common Stock. At December 26, 1997 and December 27, 1996, 5,027 and
7,162 shares, respectively, were reserved for future grant under this Plan.
As part of the Company's bonus plan, the Board of Directors has authorized
50,000 shares of Common Stock to be used for payment of a portion of the bonus
payable to certain employees in the form of restricted shares of the Company's
Common Stock. These shares vest ratably over a three-year period. At December
26, 1997 and December 27, 1996, the Company had 21,858 and 3,306 shares,
respectively, reserved for future grant under this plan.
Changes under these plans for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
DEC. 26, 1997 DEC. 27, 1996 DEC. 29, 1995
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- ---------- ----------- ---------- -----------
Outstanding at beginning of year................. 2,642,554 $ 13.24 2,203,422 $ 10.60 1,614,210 $ 9.28
Granted.......................................... 1,678,910 18.53 840,326 19.01 826,170 12.86
Exercised........................................ (866,241) 11.09 (281,692) 9.49 (94,806) 7.49
Forfeited........................................ (353,619) 16.85 (119,502) 14.25 (142,152) 10.89
---------- ---------- ----------
Outstanding at end of year....................... 3,101,604 $ 16.28 2,642,554 $ 13.24 2,203,422 $ 10.60
---------- ---------- ----------
---------- ---------- ----------
Options exercisable at year-end.................. 908,495 $ 13.01 927,968 $ 9.83 650,046 $ 7.78
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 26, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 12/26/97 LIFE PRICE AT 12/26/97 PRICE
- ------------------------------------------------ ------------ --------------- ----------- ------------ -----------
$ 0-$ 9.99.................................... 32,000 4.02 $ 6.74 32,000 $ 6.74
$10.00-$14.99................................... 952,534 6.64 11.45 639,862 11.21
$15.00-$19.99................................... 2,021,762 8.48 18.44 201,753 18.21
$20.00-$24.00................................... 95,308 8.75 22.00 34,880 21.89
------------ --- ----------- ------------ -----------
3,101,604 7.88 $ 16.28 908,495 $ 13.01
------------ --- ----------- ------------ -----------
------------ --- ----------- ------------ -----------
</TABLE>
The weighted average per share fair values of options granted under the
Company's stock option plans during 1997, 1996 and 1995 were $3.90, $4.03 and
$2.76, respectively. Had the fair value of the grants under these plans been
recognized as compensation expense over the vesting period of the awards,
compensation cost would have been increased by $2,896 ($2,039 after tax, $0.05
per share), $2,136 ($1,524 after tax, $0.05 per share) and $890 ($632 after tax,
$0.02 per share) in 1997, 1996 and 1995, respectively.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The fair value of options at grant date was estimated using the
Black-Scholes multiple option model where each vesting increment is treated as a
separate option with its own expected life and own fair value. The following
weighted average assumptions were used:
<TABLE>
<CAPTION>
DEC. 26, 1997 DEC. 27, 1996 DEC. 29, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Expected life................................ 2 2 2
Interest rate................................ 5.99% 5.94% 5.98%
Volatility................................... 29.79% 30.30% 31.23%
Dividend Yield............................... -- -- --
</TABLE>
SHAREHOLDER RIGHTS PLAN
On February 17, 1994, the Company's Board of Directors adopted a shareholder
rights plan to protect shareholders in the event of an unsolicited attempt to
acquire the Company which is not believed by the Board of Directors to be in the
best interest of shareholders. Under the plan, a dividend of one right (a
"Right") per share was declared and paid on each share of the Company's Common
Stock outstanding on April 1, 1994. As to shares issued after such date, rights
will automatically attach to them after their issuance.
Under the plan, registered holders of each Right may purchase from the
Company one one-hundredth of a share of a new class of the Company's Preferred
Stock, $0.01 par value per share, at a price of $150.00, subject to adjustment,
when the Rights become exercisable. The Rights become exercisable when a person
or group of persons acquires 15% or more of the outstanding shares of the
Company's Common Stock without the prior written approval of the Company's Board
of Directors (an "Unapproved Stock Acquisition"), and after ten business days
following the commencement of a tender offer that would result in an Unapproved
Stock Acquisition. If a person or group of persons makes an Unapproved Stock
Acquisition, the registered holder of each Right has the right to purchase, for
the exercise price of the Right, a number of shares of the Company's Common
Stock having a market value equal to twice the exercise price of the Right.
Following an Unapproved Stock Acquisition, if the Company is involved in a
merger, or 50% or more of the Company's assets or earning power are sold, the
registered holder of each Right has the right to purchase, for the exercise
price of the Right, a number of shares of the common stock of the acquiring
company having a market value equal to twice the exercise price of the Right.
After an Unapproved Stock Acquisition, but before any person or group of
persons acquires 50% or more of the outstanding shares of the Company's Common
Stock, the Board of Directors may exchange all or part of the then outstanding
and exercisable Rights for Common Stock at an exchange ratio of one share of
Common Stock per Right. Upon any such exchange, the right of any holder to
exercise a Right terminates.
The Company may redeem the Rights at a price of $0.01 per Right at any time
prior to an Unapproved Stock Acquisition (and after such time in certain
circumstances). The Rights expire on April 1, 2004, unless extended by the Board
of Directors. Until a Right is exercised, the holder thereof, as such, has no
rights as a stockholder of the Company, including the right to vote or to
receive dividends. The issuance of the Rights alone has no dilutive effect and
does not affect reported earnings per share.
FINANCIAL INSTRUMENTS AND FAIR VALUES
The Company had entered into variable to fixed interest rate swap agreements
in the notional amount of $100,000 as of December 26, 1997. These agreements
have expiration dates between 2000
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
and 2002. Under these agreements, the Company received an average variable rate
of 5.8% and paid an average fixed rate of 6.2% during the twelve months ended
December 26, 1997. The Company also has variable to variable interest rate swap
agreements outstanding at December 26, 1997 with notional amounts of $225,693,
which effectively convert interest from a LIBOR basis to a broader index and cap
the Company's exposure to upward movement in rates at 8.5%. These agreements
expire in 2002. Under these agreements, the Company received an average variable
rate of 6.3% and paid an average variable rate of 5.4% during the twelve months
ended December 26, 1997.
Exposure to market risk on interest rate and foreign currency financial
instruments results from fluctuations in interest and currency rates,
respectively, during the periods in which the contracts are outstanding. The
counterparties to the Company's interest rate swap agreements and currency
exchange contracts consist of a diversified group of major financial
institutions, each of which is rated investment grade A or better. The Company
is exposed to credit risk to the extent of potential nonperformance by
counterparties on financial instruments. Any potential credit exposure does not
exceed the fair value as stated below; the Company believes the risk of
incurring losses due to credit risk is remote.
The cost to terminate the outstanding interest rate swaps as of December 26,
1997 was $5,054. Book value at December 26, 1997 was a $287 receivable. The fair
values of all other financial instruments, including debt, approximate their
book values.
COMMITMENTS AND CONTINGENCIES
Substantially all of the Company's operations are conducted in leased
premises. Total lease expense for the years ended December 26, 1997, December
27, 1996 and December 29, 1995 was $19,085, $11,543 and $7,187, respectively.
Future minimum lease payments under non-cancelable leases as of December 26,
1997 are $15,527, $14,593, $12,140, $9,594, $5,747 in 1998, 1999, 2000, 2001 and
2002, respectively.
Additionally, the Company had outstanding irrevocable letters of credit of
approximately $37.8 million (same as fair value). These letters of credit, which
expire in 1998, collateralize the Company's obligation under certain workers'
compensation insurance programs.
The Company in the ordinary course of its business is threatened with or
named as a defendant in various lawsuits. It is not possible to determine the
ultimate disposition of these matters; however, management is of the opinion
that the final resolution of any threatened or pending litigation is not likely
to have a material adverse effect on the financial position or results of
operations of the Company.
GEOGRAPHIC INFORMATION
The Company operates within one industry segment, providing employment
services in the United States, Puerto Rico, Canada, The Netherlands, United
Kingdom, France, Germany, Italy, Spain, Hong Kong, Singapore, Australia and New
Zealand. Prior to April 18, 1997, when the Company acquired Michael Page, the
Company's global interest was almost entirely in North America. For purposes of
this disclosure the Company has grouped its operations into these regions: North
America, Europe, and Asia Pacific.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The table below provides information pertaining to the Company's operation
by geographic area:
<TABLE>
<CAPTION>
DEC. 26, 1997 DEC. 27, 1996 DEC. 29, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
North America.............................. $ 1,357,093 $ 1,144,558 $ 864,247
Europe..................................... 214,930 2,593 --
Asia Pacific............................... 36,233 -- --
-------------- -------------- --------------
$ 1,608,256 $ 1,147,151 $ 864,247
-------------- -------------- --------------
-------------- -------------- --------------
Operating Profit:
North America.............................. $ 60,912 $ 58,973 $ 42,794
Europe..................................... 34,963 435 --
Asia Pacific............................... 4,533 -- --
-------------- -------------- --------------
100,408 59,408 42,794
Interest Expense............................. 24,269 5,696 990
Gain on sale of HealthCare business/merger
expenses................................... (5,300) 8,600 --
-------------- -------------- --------------
Earnings before income taxes................. $ 81,439 $ 45,112 $ 41,804
-------------- -------------- --------------
-------------- -------------- --------------
Identifiable Assets:
North America.............................. $ 465,367 $ 512,490 $ 424,489
Europe..................................... 548,268 -- --
Asia Pacific............................... 78,099 -- --
-------------- -------------- --------------
$ 1,091,734 $ 512,490 $ 424,489
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
QUARTERLY FINANCIAL DATA (UNAUDITED-AMOUNT IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
The following is a tabulation of the quarterly results of operations for the
years ended December 26, 1997 and December 27, 1996.
<TABLE>
<CAPTION>
1997 QUARTER ENDED
------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEC. 26, 1997 SEPT. 26, 1997(A) JUNE 27, 1997 MARCH 28, 1997
-------------- ----------------- -------------- ---------------
Revenues................. $ 412,868 $ 455,770 $ 422,833 $ 316,785
Gross profit............. 134,331 153,414 141,958 97,440
Earnings before taxes.... 21,546 26,844 18,375 14,674
Income taxes............. 9,529 14,797 8,453 6,149
Net earnings (loss)...... 12,017 12,047 9,922 8,525
Basic earnings (loss) per 0.30 0.31 0.25 0.22
share..................
Diluted earnings (loss) 0.29 0.30 0.25 0.21
per share..............
Share price:
High..................... 31.000 25.625 21.438 21.563
Low...................... 23.625 21.750 17.563 17.125
</TABLE>
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 QUARTER ENDED
------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEC. 27, 1996 SEPT. 27, 1996 JUNE 28, 1996(B) MARCH 29, 1996
-------------- -------------- ----------------- ---------------
Revenues................. $ 306,527 $ 294,711 $ 281,188 $ 264,725
Gross profit............. 94,521 91,160 86,684 78,997
Earnings before taxes.... 17,237 13,970 4,069 9,836
Income taxes............. 7,192 6,143 4,415 4,347
Net earnings (loss)...... 10,045 7,827 (346) 5,489
Basic earnings (loss) per
share.................. 0.27 0.25 (0.01) 0.18
Diluted earnings (loss)
per share.............. 0.26 0.25 (0.01) 0.17
Share price:
High..................... 22.813 22.000 25.125 20.375
Low...................... 17.000 18.250 17.375 17.125
</TABLE>
- ------------------------
(a) Includes pretax gain on sale of HealthCare business of $5,300 and taxes of
$5,272.
(b) Includes $8,600 pretax of Brandon merger expenses.
F-21
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co., Robert W. Baird & Co.
Incorporated, NationsBanc Montgomery Securities LLC and BT Alex. Brown
Incorporated are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------ --------------------
<S> <C>
Goldman, Sachs & Co. ...................................................
Robert W. Baird & Co. Incorporated......................................
NationsBanc Montgomery Securities LLC. .................................
BT Alex. Brown Incorporated.............................................
--------------------
Total................................................................. 7,000,000
--------------------
--------------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The consummation of the Offering and the Notes Offering are not conditioned
upon each other.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 1,050,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 7,000,000 shares of Common
Stock offered.
The Company has agreed that, during the period beginning from the date of
this Prospectus and continuing to and including the date 90 days after the date
of the Prospectus, it will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding on the date of this Prospectus) which are
substantially similar to the shares of the Common Stock or which are convertible
or exchangeable into securities which are substantially similar to the shares of
the Common Stock without the prior written consent of the representatives,
except for (i) the shares of Common Stock offered in connection with the
Offering, (ii) the Notes, (iii) the shares of
U-1
<PAGE>
Common Stock issuable upon conversion of the Notes, (iv) 500,000 shares of
Common Stock, or such securities that are convertible or exchangeable for
500,000 shares of Common Stock, issued in connection with any merger or
acquisition announced after the date of this Prospectus, and (v) such additional
shares of Common Stock, or such securities that are convertible or exchangeable
for shares of Common Stock, in excess of 500,000 shares of Common Stock, in
excess of 500,000 shares of Common Stock issued in connection with a merger or
acquisition, provided that all the recipients of such shares of Common Stock or
convertible or exchangeable securities agree in writing not to offer, sell,
contract to sell or otherwise dispose of such shares of Common Stock or
convertible or exchangeable securities until after the 90th day following the
date of this Prospectus.
In connection with the Offering and the Notes Offering, the Underwriters may
purchase and sell the Common Stock and the Notes in the open market. These
transactions may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
Offering and the Notes Offering. Stabilizing transactions consist of certain
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the Common Stock or the Notes; and syndicate short positions
involve the sale by the Underwriters of a greater number of shares of Common
Stock or Notes than they are required to purchase from the Company in the
Offering or the Notes Offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the Common Stock or Notes sold in the Offering and the Notes
Offering for their account may be reclaimed by the syndicate if such Common
Stock or Notes are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock or the Notes, which may be higher than the
price that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the New York Stock Exchange, in the over-the-counter market or otherwise.
Each Underwriter has also agreed that (a) it has not offered or sold and
prior to the date six months after the date of issue of the shares of Common
Stock will not offer or sell any shares of Common Stock to persons in the U.K.
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose of
their businesses or otherwise in circumstances which have not resulted and will
not resulted in an offer to the public in the U.K. within the meaning of the
Public Offers of Securities Regulations 1995, (b) it has complied, and will
comply with, all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the shares of
Common Stock in, from or otherwise involving the U.K., and (c) it has only
issued or passed on and will only issue or pass on in the U.K. any document
received by it in connection with the issuance of the shares of Common Stock to
a person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 of Great Britain or
is a person to whom the document may otherwise lawfully be issued or passed on.
An affiliate of NationsBanc Montgomery Securities LLC provides certain
commercial banking services to the Company.
The Company intends to use more than 10% of the net proceeds from the sale
of the Common Stock to repay indebtedness owed by it to an affiliate of
NationsBanc Montgomery Securities LLC. See "Use of Proceeds". Accordingly, the
Offering is being made in compliance with the requirements of Rule 2710(c)(8) of
the National Association of Securities Dealers, Inc.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
[INSIDE BACK COVER: WORLD MAP INDICATING OFFICE LOCATIONS FOR COMMERCIAL AND
PROFESSIONAL SERVICES]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 9
Use of Proceeds............................... 12
Concurrent Notes Offering..................... 12
Price Range of Common Stock................... 13
Dividend Policy............................... 13
Capitalization................................ 14
Selected Consolidated Financial and Operating
Data........................................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 17
Business...................................... 24
Management.................................... 34
Validity of the Shares........................ 36
Experts....................................... 36
Available Information......................... 36
Incorporation of Certain Documents by
Reference................................... 36
Index to Consolidated Financial Statements.... F-1
Underwriting.................................. U-1
</TABLE>
7,000,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
PROSPECTUS
---------------------
GOLDMAN, SACHS & CO.
ROBERT W. BAIRD & CO.
Incorporated
NATIONSBANC MONTGOMERY
SECURITIES LLC
BT ALEX. BROWN
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the Common Stock and
Notes being registered.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 76,467
NASD filing fee................................................ 30,000
Accounting fees and expenses................................... 37,500
Legal Fees and expenses........................................ 80,000
Printing and Engraving expenses................................ 75,000
Blue Sky fees and expenses..................................... 1,000
Transfer Agent and Registrar fees and expenses................. 3,000
Miscellaneous.................................................. 97,033
----------
Total.......................................................... $ 400,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Certificate of Incorporation and By-laws
provide that the Company shall indemnify its directors and officers and, upon
certain conditions and in certain circumstances, may advance expenses, to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "GCL"), except that they do not permit indemnification or eliminate
liability for: (i) any breach of the duty of loyalty to the Company or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) an act or omission
expressly described in Section 174 of the GCL; or (iv) any transaction from
which the director derived an improper personal benefit. Generally, Section 145
of the GCL authorizes Delaware corporations, under certain circumstances, to
indemnify their officers and directors against all expenses and liabilities
(including attorneys' fees) incurred by them as a result of any suit brought
against them in their capacity as a director or an officer, if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, if they had no reasonable cause to believe their conduct was
unlawful. A director or officer may also be indemnified against expenses
incurred in connection with a suit by or in the right of the corporation if such
director or officer acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was adjudged
liable to the corporation. The foregoing provisions may reduce the likelihood of
derivative litigation against directors, officers and employees of the Company
and may discourage or deter shareholders or management from bringing a lawsuit
against directors and officers for breaches of their fiduciary duties, even
though such an action, if successful, might otherwise have benefited the Company
and its shareholders.
Additionally, the Underwriting Agreement provides that the Underwriter shall
indemnify each director of the Company, each officer of the Company who signed
this Registration Statement, and each person who controls the Company for
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended.
II-1
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT NAME
- ----------- ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement (2).
2.1 Agreement and Plan of Merger, filed as an Exhibit to the Company's Proxy
Statement/ Prospectus, dated April 24, 1996 and is incorporated herein by
reference.
4.1 Form of Stock Certificate, filed as Exhibit 4.3 to the Company's Form 10-K for the
fiscal year ended December 27, 1996, is incorporated herein by reference.
4.2 Rights Agreement dated as of March 17, 1994 between the Company and Boatmen's
Trust Company, filed as Exhibit 1.1 to the Company's Form 8-A filed April 11,
1994, is incorporated herein by reference.
4.3 Certificate of Designation, Preferences and Rights filed with the Secretary of
State of the State of Delaware, filed as Exhibit 2.1 to the Company's Form 8- A
filed April 11, 1994, is incorporated herein by reference.
4.4 Amendment No. 1 to Rights Agreement dated June 26, 1996 between the Company,
Boatmen's Trust Company and ChaseMellon Shareholder Services L.L.C., filed as
Exhibit 4.1(A) to the Company's Form 10-Q for the quarter ended September 27,
1996, is incorporated herein by reference.
4.5 Amendment No. 2 to Rights Agreement dated February 25, 1997 between the Company
and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(B) to the
Company's Form 10-Q for the quarter ended March 28, 1997, is incorporated herein
by reference.
4.6 Articles Fourth, Fifth, Seventh, Eighth and Tenth of the Restated Certificate of
Incorporation of the Company, as amended September 12, 1996, filed as part of
Exhibit 4.4 to the Company's Form 10-K for the fiscal year ended December 27,
1996, are incorporated herein by reference.
4.7 Sections Four through Twelve and Thirty-five through Forty-one of the Bylaws of
the Company, as amended, filed as part of Exhibit 4.2 to Company's Form S- 3 filed
September 16, 1996, are incorporated herein by reference.
4.8 Certificate of Increase of Shares Designated as Participating Preferred Stock,
filed as Exhibit 2.2 to the Corporation's Form 8-A/A2, dated November 3, 1997, is
incorporated herein by reference.
5.1 Opinion of Baker & McKenzie (2).
23.1 Consent of Baker & McKenzie (included in Exhibit 5.1) (2).
23.2 Consent of Deloitte & Touche LLP (1).
24.1 Power of Attorney (included on Signature Page) (1).
27.1 Financial Data Schedule, filed as Exhibit 27 to the Company's Form 10-Q for the
quarter ended March 27, 1998, is incorporated herein by reference.
</TABLE>
- ------------------------
(1) Previously filed.
(2) Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Company's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offering therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report, to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference in the prospectus to
provide such interim financial information.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(4) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Fort Lauderdale, state of Florida, on
the 5th day of May, 1998.
INTERIM SERVICES INC.
By: /s/ RAYMOND MARCY
-----------------------------------------
Raymond Marcy, CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* Director
- ------------------------------ May 5, 1998
Steven S. Elbaum
* Director
- ------------------------------ May 5, 1998
William F. Evans
* Director
- ------------------------------ May 5, 1998
Jerome B. Grossman
* Director
- ------------------------------ May 5, 1998
Cinda A. Hallman
* Director
- ------------------------------ May 5, 1998
J. Ian Morrison
* Director
- ------------------------------ May 5, 1998
A. Michael Victory
Chairman, President and
/s/ RAYMOND MARCY Chief Executive Officer
- ------------------------------ (principal executive May 5, 1998
Raymond Marcy officer)
Executive Vice President
* and Chief Financial
- ------------------------------ Officer (principal May 5, 1998
Roy G. Krause financial officer)
* President--Finance
- ------------------------------ (principal accounting May 5, 1998
Mark W. Smith officer)
*By: /s/ RAYMOND MARCY
-------------------------
Raymond Marcy
ATTORNEY-IN-FACT
II-4
<PAGE>
Exhibit 1.1
INTERIM SERVICES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
________________________________
UNDERWRITING AGREEMENT
_______ __, 1998
Goldman, Sachs & Co.,
Robert W. Baird & Co. Incorporated,
NationsBanc Montgomery Securities LLC,
BT Alex. Brown Incorporated,
As Representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Interim Services Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
7,000,000 shares (the "Firm Shares") and, at the election of the Underwriters,
up to 1,050,000 additional shares (the "Optional Shares") of Common Stock (par
value $.01 per share) ("Stock") of the Company. The Firm Shares and the Optional
Shares that the Underwriters elect to purchase pursuant to Section 2 hereof are
herein collectively called the "Shares".
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-_____) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto but
including all documents incorporated by reference in the prospectus
contained therein, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement or
<PAGE>
document incorporated by reference therein has heretofore been filed with
the Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules
and regulations of the Commission under the Act is hereinafter called a
"Preliminary Prospectus"); the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including (i) the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Registration Statement at the
time it was declared effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective and (ii) the
documents incorporated by reference in the prospectus contained in the
registration statement at the time such part of the registration statement
became effective, each as amended at the time such part of the registration
statement became effective, are hereinafter collectively called the
"Registration Statement"; such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus"; and any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus
or Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference in
such Preliminary Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Registration Statement that is incorporated by reference in the
Registration Statement;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
-2-
<PAGE>
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein;
(e) (i) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Registration Statement and the Prospectus and (ii) since the respective
dates as of which information is given in the Prospectus there has not been
any change in the capital stock or change in excess of $25 million of
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(f) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case (except for shares of common
stock in its subsidiaries, which the Company has pledged to its lenders
pursuant to a credit agreement dated May 1, 1997 between the Company and
NationsBank) free and clear of all liens, encumbrances and defects except
such as are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease
-3-
<PAGE>
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not interfere in any material respect with the use made and proposed
to be made of such property and buildings by the Company and its
subsidiaries;
(g) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and each
active subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(i) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued and fully paid and non-assessable;
(j) The issue and sale of the Shares to be sold by the Company
hereunder and the compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
material instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act of
the Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or Blue
Sky laws in connection with the purchase and distribution of the Shares by
the Underwriters;
-4-
<PAGE>
(k) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-Laws or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or
by which it or any of its properties may be bound which violation or
default would have a material adverse effect on the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole;
(l) The statements in the Prospectus under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and complete in all
material respects; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(m) Other than as set forth in the Prospectus, (a) there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is subject which, if determined adversely to the Company
or any of its subsidiaries, would, individually or in the aggregate, have a
material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and (b) to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(n) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(o) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(p) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The Company owns or possesses adequate licenses or other rights
to use all trademarks, service marks, trade names, copyrights, and know-how
necessary to conduct the business now or proposed to be conducted by the
Company as described in the Prospectus, and the Company has not received
any notice of infringement of or conflict with (and knows of no such
infringement of or conflict with) asserted rights of others with respect to
trademarks, service marks, trade names, copyrights, and know-how which,
individually or in the aggregate, is reasonably likely to result in any
material adverse effect upon the financial position, stockholders' equity
or result in any material adverse effect upon the financial position,
stockholders' equity or results of operations of the Company, the Company
-5-
<PAGE>
does not in the conduct of its business as now or proposed to be conducted
as described in the Prospectus, infringe or conflict with any right of any
third party, known to the Company, where such infringement or conflict is
reasonably likely to result in any material adverse effect upon the
financial position, stockholders' equity or results of operations of the
Company; and
(r) The Company has obtained any permits, consents and authorizations
required to be obtained by it under laws or regulations relating to its
business, including, without limitation, laws or regulations relating
to the operation and sales of franchises (collectively, "Laws"), and any
such permits, consents and authorizations remain in full force and effect,
except as to any of the foregoing the absence of which (individually or in
the aggregate) will not have a material adverse effect on the financial
position, stockholders' equity or results of operations of the Company.
The Company is in compliance with the Laws in all material respects, and
there is no pending or, to the Company's knowledge, threatened, action or
proceeding against the Company under such Laws, other than any such actions
or proceedings which, individually or in the aggregate, if adversely
determined, is not reasonably likely to have a material adverse effect on
the financial position, stockholders' equity or results of operations of
the Company.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price per
share of $______, the number of Firm Shares as set forth opposite the name of
such Underwriter in Schedule I hereto and (b) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional Shares as
provided below, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in Clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction, the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 1,050,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
-6-
<PAGE>
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., through the facilities of The Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company to Goldman, Sachs & Co.
at least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on ______ __, 1998 or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing, and, with respect to the Optional Shares, 9:30 a.m., New York City
time, on the date specified by Goldman, Sachs & Co. in the written notice given
by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery", such time and date for delivery of
the Firm Optional Shares, if not the First Time of Delivery, is herein called
the "Second Time of Delivery", and each such time and date for delivery is
herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(i) hereof, will be delivered at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, NY 10004-2498 (the "Closing Location"),
and the Shares will be delivered at the Designated Office, all at each Time of
Delivery. A meeting will be held at the Closing Location at 4:00 p.m., New York
City time, on the New York Business Day next preceding each Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be disapproved by
you promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long
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as the delivery of a prospectus is required in connection with the offering
or sale of the Shares; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in such quantities
as you may reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after the time
of issue of the Prospectus in connection with the offering or sale of the
Shares and if at such time any events shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus in
order to comply with the Act or the Exchange Act, to notify you and upon
your request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies
as you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Shares at
any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and
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the rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than (i)
pursuant to employee stock option plans, employee stock purchase plans,
401(k) plans, the director's compensation plan or other employee plans of a
similar nature existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement or the convertible securities registered pursuant to Registration
Statement No. 333-____;(ii) 500,000 Shares, or such securities that are
convertible or exchangeable for 500,000 Shares, issued in connection with
any merger or acquisition announced after the date of the Prospectus; and
(iii) such additional Shares, or such securities that are convertible or
exchangeable for Shares, in excess of 500,000 Shares issued in connection
with a merger or acquisition, PROVIDED that all the recipients of such
Shares or convertible or exchangeable securities agree in writing not to
offer, sell, contract to sell or otherwise dispose of such Shares or
convertible or exchangeable securities until after the 90th day following
the date of the Prospectus)), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(i) To use its best efforts to list, subject to notice of issuance,
the Shares on the New York Stock Exchange (the "Exchange"); and
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(j) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky surveys,
provided that such fees, exclusive of disbursements, shall not exceed $3,000;
(iv) all fees and expenses in connection with listing the Shares on the New York
Stock Exchange; (v) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section 6. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11 hereof,
the Underwriters will pay all of their own costs and expenses, including the
fees and expenses of their counsel, stock transfer taxes on resale of any of the
Shares by them, and any advertising expenses connected with any offers they may
make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction (if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement
shall have become effective by 10:00 p.m., Washington, D.C. time on the
date of this Agreement);
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<PAGE>
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated the date of such Time of Delivery,
with respect to the matters covered in paragraphs (i), (ii), (iv), (vii),
(ix), (x) and (xii) of subsection (c) below as well as such other related
matters as you may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them
to pass upon such matters;
(c) Baker & McKenzie, counsel for the Company, shall have furnished
to you their written opinion, (a draft of each such opinion is attached as
Annex II(b) hereto), dated the date of such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of Delivery) have been
duly and validly authorized and issued and are fully paid and
non-assessable;
(iii) Each of the Company's active subsidiaries incorporated in the
state of Delaware or the state of Florida (the "Active Delaware/Florida
Subsidiaries") has been duly incorporated and is a corporation validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of capital
stock of each of the Active Delaware/Florida Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable. All
of the issued shares of capital stock of each of the Company's active
domestic subsidiaries are owned of record directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims
(such counsel being entitled to rely in respect of the opinion in this
Clause upon opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iv) This Agreement has been duly authorized, executed and delivered
by the Company;
(v) The issuance and sale of the Shares by the Company to the
Underwriters and the fulfillment of and compliance by the Company with all
of the provisions of this Agreement do not violate or result in a breach of
the terms or provisions of, or constitute a default under, any existing
obligation of the Company or any of its subsidiaries under any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument for money borrowed known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or
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<PAGE>
any of its subsidiaries is subject, nor will such action violate any of the
provisions of the Certificate of Incorporation or By-Laws of the Company,
each as amended, any applicable statute, rule or regulation or any order
known to such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties;
(vi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(vii) The statements set forth in the Prospectus under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and complete in all
material respects;
(viii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act;
(ix) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules and
other financial data therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the requirements
of the Act and the rules and regulations thereunder;
(x) On the basis of the information which was reviewed in the course
of the performance of the services referred to in their opinion considered
in the light of their understanding of the applicable law (including the
requirements of the Registration Statement on Form S-3 and the character of
the prospectus contemplated thereby) and the experience they have gained
through their practice under the Act, such counsel are of the opinion that
the Registration Statement, as of its effective date, and the Prospectus,
as of the date of the Prospectus appeared on their face to be appropriately
responsive in all material respects to the requirements of the Act and the
applicable rules and regulations of the Commission thereunder; and that
nothing that came to their attention in the course of their review has
caused them to believe that the Registration Statement, as of its effective
date, contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of its date,
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
also, nothing that has come to such counsel's attention in the course of
certain procedures (as described in such opinion) has caused such counsel
to believe that the Prospectus, as of the date and time of delivery of such
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<PAGE>
opinion, contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that such opinion may state that the
limitations inherent in the independent verification of factual matters and
the character of determinations involved in the registration process are
such that such counsel do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except as otherwise specifically referred to
in paragraph (ix) above, and that such counsel need not express an opinion
or belief as to the financial statements and schedules or other financial
data contained in the Registration Statement or the Prospectus.
(xi) Such counsel does not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration Statement
or required to be incorporated by reference into the Prospectus or required
to be described in the Registration Statement or the Prospectus which are
not filed or incorporated by reference or described as required; and
(xii) Such counsel shall also confirm that the documents incorporated
by reference in the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data
therein, as to which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder;
In giving these opinions, Baker & McKenzie may state that they are admitted
to the bar of the State of New York and Florida and do not express any opinion
as to the laws of any other jurisdiction other than the federal laws of the
United States of America and may rely (1) as to all matters of fact, upon
certificates and written statements of officers and employees of an accountants
for the Company and (2) as to the qualification and good standing of the Company
or any of its subsidiaries, upon opinions of counsel in such other jurisdictions
and certificates of appropriate government officials.
(d) John B. Smith, Senior Vice President, Secretary and Legal Counsel of
Interim Services Inc., shall have furnished you with a written opinion, a draft
of which is attached as Annex II(c) hereto, dated the date of such Time of
Delivery, in form and substance satisfactory to you, the effect that:
(i) Each of the Company's active subsidiaries incorporated in the
State of Florida has been duly incorporated and is a corporation validly
existing in good standing under the laws of the State of Florida.
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<PAGE>
(ii) All of the issued shares of capital stock of each of the Active
Florida Subsidiaries have been duly authorized and validly issued, and are
fully paid and nonassessable.
(iii) The Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of every
state of the United States (other than Delaware) and the District of
Columbia (such counsel being entitled to rely in respect of the opinion in
this Clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they are justified
in relying upon such opinions and certificates);
(iv) To the best of such counsel's knowledge, neither the Company nor
any of its active domestic subsidiaries or any of Michael Page Group PLC,
Crone Corkill Group PLC or Spectrum Insurance Company Ltd. (collectively
with the active domestic sibsidiaries, referred to herein as "Active
Subsidiaries") is in material violation of their respective Certificate of
Incorporation or By-Laws;
(v) All of the issued shares of capital stock of each of the
Company's active foreign subsidiaries are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or claims
(such counsel being entitled to rely in respect of the opinion in this
Clause upon opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both of you and they
are justified in relying upon such opinions and certificates).
(vi) The Company has been registered to offer franchises or has
obtained an exemption from registration or has filed notice of franchise
offering or has filed its offer of franchises (and, to such counsel's
knowledge, such registrations, notices and filings are still effective and
have not been revoked) in each jurisdiction in which the conduct of its
business requires such registrations and filings. The Company's current
franchise offering circular substantially complies as to form with
applicable federal laws and regulations regarding the offer and sale of
franchises. To such counsel's knowledge, the Company has never been denied
franchise registration by any jurisdiction and the Company has never been
and is not now the subject of any cease or desist order issued by the
Federal Trade Commission or other federal agency or state agency having
jurisdiction over franchising activities. To such counsel's knowledge, the
offer and sale of each franchise offered or sold by the Company to date
does not constitute the offer and sale of a security under applicable
federal securities laws. The Company's current form of franchise agreement
is enforceable in accordance with its terms. As used in this
paragraph (iv) and in the applicable assumptions, exceptions,
qualifications and limitations set forth below, the terms "franchise",
"franchises", "franchisee" or "franchisees" also include any license or
licenses offered or sold by the Company in connection with the Company's
licensed office program and licensees thereunder, as described in the
Prospectus.
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<PAGE>
(vii) Except as disclosed in the Prospectus, to the best of such
counsel's knowledge, (i) there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or to
which any property of the Company or any of its subsidiaries is subject
which, if determined adversely to the Company or any of its subsidiaries,
would, individually or in the aggregate, have a material adverse effect on
the consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, which in such counsel's
opinion is not likely to be determined adversely to the Company or any
subsidiary and (ii) no such proceedings are threatened or contemplated by
the governmental authorities or threatened by others.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Deloitte & Touche LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(f)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or change
in excess of $25 million in long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in Clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on New York Stock Exchange;
(iii) a general moratorium on commercial banking activities declared by either
Federal or New York State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United States
of a national emergency or war, if the effect of any such event specified in
this Clause (iv) in the judgment of the Representatives makes it impracticable
or inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
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(h) The Shares to be sold at such Time of Delivery shall have been duly
listed, subject to notice of issuance, on the Exchange;
(i) The Company shall have furnished or caused to be furnished to you at
such Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (f) of this Section, and as to such
other matters as you may reasonably request; and
(j) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
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(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Shares purchased under this Agreement (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and
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the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by PRO RATA allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
of the Shares to be purchased at such Time of Delivery, then the Company
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<PAGE>
shall have the right to require each non-defaulting Underwriter to purchase the
number of Shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason any Shares are
not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex
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<PAGE>
or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company, or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and for each of the Representatives plus one
for each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
Interim Services Inc.
By: .........................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Robert W. Baird & Co. Incorporated
NationsBanc Montgomery Securities LLC
BT Alex. Brown Incorporated
By:
------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
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<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
<S> <C> <C>
Goldman, Sachs & Co. . . . . . . . . . . .
Robert W. Baird & Co. Incorporated . . . .
NationsBanc Montgomery Securities LLC. . .
BT Alex. Brown Incorporated . . . . . . .
Total . . . . . . . . . . . . . . . .
</TABLE>
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ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included or incorporated by reference in the Registration Statement or the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act or the Exchange Act, as applicable, and
the related published rules and regulations thereunder; and, if applicable,
they have made a review in accordance with standards established by the
American Institute of Certified Public Accountants of the consolidated
interim financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been separately furnished to the representatives of the
Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus and/or
included in the Company's Quarterly Report on Form 10-Q incorporated by
reference into the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives; and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing came
to their attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus and
included or incorporated by reference in Item 6 of the Company's Annual
Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the audited
consolidated financial statements for such five fiscal years which were
included or incorporated by reference in the Company's Annual Reports on
Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures
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<PAGE>
that caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302, 402
and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included or incorporated by reference
in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or incorporated
by reference in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements
of the Exchange Act and the related published rules and regulations,
or (ii) any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus, for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
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<PAGE>
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus, except in
each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E) there were any decreases
in consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference) or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representatives
or in documents incorporated by reference in the Prospectus specified by
the Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
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<PAGE>
EXHIBIT 5.1
[BAKER & MCKENZIE LETTERHEAD]
May 5, 1998
Interim Services Inc.
2050 Spectrum Boulevard
Fort Lauderdale, FL 33309
Gentlemen:
Interim Services Inc., a Delaware corporation (the "Company"), has filed
with the Securities and Exchange Commission a Registration Statement on Form S-1
(the "Registration Statement") (Registration No. 333-50777) under the Securities
Act of 1933, as amended (the "Act"). Such Registration Statement relates to the
sale by the Company of up to 7,000,000 shares of common stock, par value $.01
per share (the "Common Stock"), of the Company and up to an additional 1,050,000
shares of Common Stock upon the exercise of the underwriters' over-allotment
option. We have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement.
In connection with the Registration Statement, we have examined, considered
and relied upon copies of the following documents (collectively, the
"Documents"): (i) the Company's Certificate of Incorporation, as amended, and
the bylaws, as amended; (ii) resolutions of the Company's Board of Directors
authorizing the offering and the issuance of the Common Stock to be sold by the
Company and related matters; (iii) the Registration Statement and schedules and
exhibits thereto; and (iv) such other documents and instruments that we have
deemed necessary for the expression of the opinions herein contained. In making
the foregoing examinations, we have assumed without investigation, the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, the conformity to authentic original documents of all documents
submitted to us as copies, and the veracity of the documents. As to various
questions of fact material to the opinion expressed below, we have relied, to
the extent we deemed reasonably appropriate, upon the representations or
certificates of officers and/or directors of the Company and upon documents,
records and instruments furnished to us by the Company, without independently
verifying the accuracy of such certificates, documents, records or instruments.
Based upon the foregoing examination, and subject to the qualifications set
forth below, we are of the opinion that, assuming approval of the proposal to be
voted on by the Company's Stockholders on May 7, 1998 to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock to 100,000,000 shares, the Common Stock to be sold by the Company
has been duly and validly authorized, and when issued, delivered and paid for as
described in the Registration Statement, will be validly issued, fully paid and
non-assessable.
Although we have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement, our engagement has been
limited to certain matters about which we have been consulted. Consequently,
there may exist matters of a legal nature involving the Company in which we have
not been consulted and have not represented the Company. We express no opinion
as to the laws of any jurisdiction other than the General Corporation Law of the
State of Delaware and the laws of the State of Florida. The opinions expressed
herein concern only the effect of the laws (excluding the principles of conflict
of laws) of the General Corporation Law of the State of Delaware and the State
of Florida as currently in effect. This opinion letter is limited to the matters
stated herein and no opinions may be implied or inferred beyond the matters
expressly stated herein. The opinions expressed herein are given as of this
date, and we assume no obligation to update or supplement our opinions to
reflect any facts or circumstances that may come to our attention or any change
in law that may occur or become effective at a later date.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations promulgated thereunder.
Sincerely,
BAKER & MCKENZIE
By: /s/ ANDREW HULSH
-----------------------------------
Andrew Hulsh
