U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23144
PERSONNEL MANAGEMENT, INC.
(Exact name of small business issuer as
specified in its charter)
INDIANA 35-1671569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
(Address of principal executive offices) (Zip Code)
(317) 888-4400
(Issuer's telephone number, including area code)
N/A
(Former address at last report)
Check whether the issuer (1) filed all reports required
to be filed by Section 12, 13 or 15(d) of the Exchange
Act during the past 12 months (or for such shorter period
that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days: Yes (X) No ( )
The number of shares outstanding of the issuer's Common
Stock, without par value, at June 2, 1995 was 1,977,766
shares.
Transitional Small Business Disclosure Format: Yes ( )
No (X)
<PAGE>
<PAGE>2
PERSONNEL MANAGEMENT, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION NUMBER
Item 1 - Consolidated Financial Statements
(Unaudited)
Condensed Consolidated Balance
Sheets at April 30, 1995 and
October 31, 1994 3
Condensed Consolidated Statements of
Income for the three months ended
April 30, 1995 and 1994 4
Condensed Consolidated Statements of
Income for the six months ended
April 30, 1995 and 1994 5
Condensed Consolidated Statements
of Cash Flows for the six months
ended April 30, 1995 and 1994 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of
Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURE 13
EXHIBIT INDEX 14
<PAGE>
<PAGE>3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
(restated)
(unaudited) (audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 8,050 $ 238,399
Accounts receivable, net 5,963,081 6,445,653
Prepaid expenses and other
current assets 383,311 327,753
Deferred tax asset 333,452 221,452
Total Current Assets 6,687,894 7,233,257
Property and equipment, net 1,314,189 1,126,721
Notes receivable, shareholder 460,571 447,053
Goodwill, net 5,449,670 5,211,899
Other 164,975 27,050
Total Assets $14,077,299 $14,045,980
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 183,568 $ 105,380
Bank line of credit 270,000 -
Accounts payable 87,133 536,132
Accrued compensation and benefits 1,339,036 1,508,897
Accrued workers' compensation claims 784,264 516,446
Income taxes payable 77,424 136,997
Other current liabilities 31,600 -
Current portion of notes payable 812,298 780,304
Total Current Liabilities 3,585,323 3,584,156
Notes payable 2,667,508 3,071,922
Deferred tax liability 69,541 69,541
SHAREHOLDERS' EQUITY
Common stock 7,683,156 4,564,071
Retained earnings 71,771 2,756,290
Total Shareholders' Equity 7,754,927 7,320,361
Total Liabilities and Shareholders'
Equity $14,077,299 $14,045,980
See accompanying notes.
/TABLE
<PAGE>
<PAGE>4
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
1995 1994
(restated)
<S> <C> <C>
Revenues $15,380,148 $8,452,542
Expenses
Cost of services 12,352,243 6,818,703
General and administrative 2,368,170 1,117,786
Selling 99,612 56,496
Amortization of goodwill 68,927
Total Expenses 14,888,952 7,992,985
Income from operations 491,196 459,557
Other income (expense) (72,375) 8,387
Income before income taxes 418,821 467,944
Income taxes 201,182 256,000
Net income $ 217,639 $ 211,944
Net income per share $ 0.11 $ 0.11
See accompanying notes.
/TABLE
<PAGE>
<PAGE>5
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
1995 1994
(restated)
<S> <C> <C>
Revenues $30,677,355 $15,282,909
Expenses
Cost of services 24,769,190 12,350,842
General and administrative 4,864,535 2,212,603
Selling 204,891 100,475
Amortization of goodwill 137,855 -
Total Expenses 29,976,471 14,663,920
Income from operations 700,884 618,989
Other income (expense) (157,941) 253
Income before income taxes 542,943 619,242
Income taxes 260,805 256,000
Net income $ 282,138 363,242
Pro forma adjustment for income
tax provision 56,700
Pro forma net income $ 306,542
Net income per share $ 0.14 $ 0.22
Pro forma adjustment for
income tax provision 0.03
Pro forma net income per share $ 0.19
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>6
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
1995 1994
(restated)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 282,138 $ 363,242
Adjustments to reconcile net
income to net cash provided by
operating activities
Amortization and depreciation 275,047 37,905
Compensation expense from stock
transactions - 53,656
Interest earned on shareholder loans (13,518) (9,527)
Deferred income taxes (112,000) -
Changes in operating assets and
liabilities:
Accounts receivable 482,572 (648,917)
Prepaid expenses and other assets (193,483) 44,038
Accounts payable (448,999) (88,598)
Accrued liabilities and other
payables 69,984 293,045
NET CASH PROVIDED BY OPERATING
ACTIVITIES 341,741 44,844
INVESTING ACTIVITIES
Purchases of businesses and
additions to goodwill (375,626) -
Purchases of property and equipment (324,661) (171,530)
Purchases of investments - (2,330,124)
NET CASH USED BY INVESTING ACTIVITIES (700,287) (2,501,654)
FINANCING ACTIVITIES
Cash dividends (71) (328,956)
Tax benefit resulting from exercise
of stock options 152,500 -
Net proceeds from sale of common stock - 4,403,917
Retirement of common stock - (294,083)
Net payments on notes payable (372,420) (1,866)
Net borrows (payments) on line of credit 270,000 (240,500)
Payments on notes payable, employees - (195,330)
NET CASH PROVIDED BY FINANCING ACTIVITIES 50,009 3,343,182
Increase (decrease) in cash (308,537) 886,372
Cash (overdraft)at beginning of year 133,019 (486,057)
Cash (OVERDRAFT) AT END OF PERIOD $ (175,518) $ 400,315
See accompanying notes.
/TABLE
<PAGE>
<PAGE>7
PERSONNEL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995
(unaudited)
1. Basis of Presentation
The accompanying financial statements have been
prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange
Commission (SEC). This Report on Form 10-QSB/A
should be read in conjunction with the Company's
financial statements and notes thereto for the year
ended October 31, 1994 included in the Company's
1994 Annual Report to Shareholders. Certain
information and footnote disclosures which are
normally included in financial statements prepared
in accordance with generally accepted accounting
principles have been condensed or omitted pursuant
to SEC rules and regulations. The information
reflects all normal and recurring adjustments
which, in the opinion of management, are necessary
for a fair presentation of the financial position
of the Company and its results of operations for
the interim periods set forth herein. Especially
because of the seasonality of the Company's
business, the results for the three and six months
ended April 30, 1995 are not necessarily indicative
of the results to be expected for the full year.
The financial statements include the combined
financial position, operations and cash flows for
Personnel Management, Inc. and its wholly-owned
subsidiaries, hereafter referred as "the Company".
2. Per Share Disclosures
Per share amounts are based on the weighted average
number of shares of common stock outstanding during
the period (retroactively adjusted to give effect
to subsequent stock dividends), including the
dilutive effect of warrants, stock options and
shares issued to employees at prices below fair
market value. For the aforementioned items, the
effect on the weighted average number of shares
outstanding was computed using the treasury stock
method assuming issuance at the beginning of the
earliest period presented.
<PAGE>
<PAGE>8
3. Income Taxes
From November 1, 1992 to January 31, 1994 the
shareholders of the Company elected, under
Subchapter S of the Internal Revenue Code, to
include the Company's income in their own income
for income tax purposes. Therefore, the Company
made no provision for federal or state income taxes
during that period. The pro forma income tax
provisions included in the condensed consolidated
statements of income give effect to the termination
of the S corporation election as if it occurred on
November 1, 1993 and was calculated using an
estimated effective income tax rate of 37.5%.
Effective February 1, 1994, the Company terminated
its S Corporation status in connection with its
initial public offering.
4. Stock Dividend
On March 16, 1995 the Board of Directors declared a
ten percent stock dividend payable on April 24,
1995 to the holders of record of Common Shares of
the Company. No fractional shares were created,
and the Company paid to each holder of record who
otherwise would have been entitled to receive a
fractional share the value of the fractional
interests. An aggregate of 179,797 whole Common
Shares were issued by the Company pursuant to the
stock dividend. The number of shares outstanding
and all per share disclosures for periods prior to
April 24, 1995 have been retroactively adjusted to
give effect to the stock dividend.
5. Director Stock Option Plan
On April 30, 1995 the Board of Directors approved
the Personnel Management, Inc. 1994 Director Stock
Option Plan effective January 31, 1995. Under the
Plan options shall be granted to non-officer
Directors with respect to an aggregate of 44,000
shares of Common Stock, as adjusted for the 1995
stock dividend and subject to anti-dilution
adjustments for future stock dividends and stock
splits. Eligible Directors shall receive options
to purchase 550 shares (as adjusted) for each Board
of Directors meeting and 275 shares (as adjusted)
for each committee meeting actually attended during
the fiscal quarter ended October 31, 1994 or during
the fiscal year ending October 31, 1995, with each
option priced at the market value of the Common
Shares as of the relevant quarter ending date and
exercisable for five years thereafter. For each
quarter during a fiscal year after the fiscal year
<PAGE>
<PAGE>9
ended October 31, 1995 the number of options to be
granted to an eligible Director shall be fixed by
resolution of the Board and such resolution may not
be amended more than once each fiscal year.
Pursuant to the Plan, the Company has granted
options for an aggregate of 8,250 Common Shares to
its non-officer Directors for their services during
each of the three fiscal quarters ended April 30,
1995, at a weighted average exercise price of
$13.38 per share.
6. The financial statements for the three and six
months ended April 30, 1995 have been restated to
reflect adjustments discovered during the Company's
year-end audit.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following should be read in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the
Company's 1994 Annual Report to Shareholders and the
comparable discussion and analysis included in the
Company's previously restated quarterly report on Form
10-QSB/A for the first quarter of the 1995 fiscal year.
For the three and six months ended April 30, 1995, the
Company reported an increase in revenues over the
comparable periods in 1994. Revenues for the same
central Indiana region served by the Company in 1994
increased by 14% for the six months ended April 30 and by
4% for the three month period ended April 30. The
remainder of the increase in revenues for the three and
six month periods (representing 95% and 86%,
respectively) is attributable to the addition during the
last six months of the Company's fiscal year ended
October 31, 1994, of temporary help businesses serving
areas of northern and southern Indiana, northern Kentucky
and southwestern Florida.
Revenues for the second quarter of 1995 were
approximately the same as revenues for the first quarter
of 1995. The Company attributes this leveling in
revenues to a leveling in manufacturing growth as
indicated by Commerce Department statistics for the first
calendar quarter of 1995. The Company's revenues may be
steady during the remainder of its 1995 fiscal year until
economic conditions improve.
<PAGE>
<PAGE>10
RESULTS OF OPERATIONS
REVENUES. Revenues increased by 82% or $6,928,000 to
$15,380,000 in the second quarter of 1995, compared to
the prior year period primarily as a result of an
increase in the average number of temporary employees
placed with customers. Of this increase, $6,589,000 or
95% is attributable to operations in the regions served
by businesses acquired by the Company during the last six
months of its fiscal year ended October 31, 1994.
For the six months ended April 30, 1995, revenues
increased by 101% or $15,394,000 to $30,677,000 compared
to the 1994 period. Of this increase, $13,204,000 or 86%
is attributable to operations in the acquired regions
identified above.
COSTS OF SERVICES. Costs of services increased 81% or
$5,533,000 to $12,352,000 in the second quarter of 1995,
compared to the 1994 period. Costs of services for the
six months ended April 30, 1995 increased 101% or
$12,418,000 to $24,769,000 compared to the 1994 period.
Increased costs of services in these 1995 periods were
primarily due to the increased volume of services
provided to customers. Costs of services as a percentage
of revenues remained constant at approximately 81% for
the six month periods ended 1995 and 1994.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased 112% or $1,250,000 to
$2,368,000 in the second quarter of 1995, compared to the
prior year period. For the comparative six month
periods, G&A expenses increased 120% or $2,652,000 to
$4,865,000 in 1995. As a percentage of revenues, G&A
expenses for the three months increased from 13.2% in
1994 to 15.4% in 1995, and for the six months increased
from 14.4% to 15.9%. These increases are primarily due
to the increased size of the Company; higher professional
fees and expenses incurred in connection with
investigating potential acquisitions, and the increased
costs of compliance imposed on public companies; and
increased spending for staffing, training and recruiting
in anticipation of the normal season growth in demand for
temporary employees during the third and fourth fiscal
quarters which appears may not materialize.
SELLING. Selling expenses for the three and six month
periods in 1995 increased 79% and 105%, respectively,
compared to 1994, as a result of the Company's growth in
revenues. Selling expenses as a percentage of revenues
remained relatively stable at 0.7%.
<PAGE>
<PAGE>11
AMORTIZATION OF GOODWILL. Goodwill represents the
unamortized cost in excess of fair value of net assets
acquired and is being amortized on a straight-line basis
over 20 years. Goodwill amortization for the three and
six month periods of 1995 was $69,000 and $138,000,
respectively. No amortization was incurred in the
corresponding prior year periods.
OTHER INCOME (EXPENSE). Other expense, primarily
interest expense (net of interest income), increased to
$72,000 and $158,000 for the three and six month periods
of 1995, compared to net interest income of $8,400 and
$253 for the comparable periods of 1994, as a result of
the October 1994 borrowing of $3,852,000 to fund an
acquisition.
INCOME TAXES. The Company became subject to federal
income and state gross income taxation effective February
1, 1994 following termination of its S Corporation
status. Prior to February 1994 pro forma income taxes
were calculated using an effective income tax rate of
37.5% in 1994.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's accounts receivable decreased from
$6,446,000 at October 31, 1994 to $5,963,000 at April 30,
1995. The Company believes its receivables are generally
collectible on a timely basis. Goodwill increased
$238,000 or 4.6% from October 31, 1994 to April 30, 1995
as the result of the payments of additional purchase
price for the first six months of 1995 to the prior
owners of businesses acquired during 1994 under the
earnout provisions of the acquisition agreements.
The Company had available to it through February 28, 1995
a $2,000,000 line of credit with its bank lender that may
be used only for general working capital purposes. The
bank has orally extended this line of credit through
February 28, 1996. Management believes that cash
provided by operations, augmented by borrowings for
working capital purposes under this line of credit, will
be adequate to satisfy the Company's cash requirements
during 1995.
<PAGE>
<PAGE>12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
The Company held its 1995 Annual Meeting of Shareholders
on February 24, 1995. At the Annual Meeting, the
Shareholders elected as Directors the three nominees
proposed by the Board of Directors: (a) for a one-year
term, Joseph C. Cook, Jr., and (b) for three-year terms,
David L. Swider and Richard L. VonDerHaar. Mr. Cook, who
was appointed to the Board in 1994, was elected for a
one-year term rather than for a three-year term in order
to equalize the number of Directors in each of the three
classes of Directors. The results of the election were
as follows:
<TABLE>
<CAPTION>
Votes Votes Broker
Nominee Cast For Withheld Non-Votes
<S> <C> <C> <C>
Joseph C. Cook, Jr. 1,275,470 104 0
David L. Swider 1,275,470 104 0
Richard L. VonDerHaar 1,275,470 104 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index on page 13 (which
Exhibit Index is incorporated herein by reference) are filed
as part of this report.
(b) Reports on Form 8-K
A current report on Form 8-K dated March 1, 1995 was filed to
report under Item 5 the Company's public release of operating
results for the first quarter ended January 31, 1995.
<PAGE>
<PAGE>13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PERSONNEL MANAGEMENT, INC.
Dated: June 24, 1996, By: /s/ Robert R. Millard
as of June 9, 1995 Robert R. Millard, Vice
President of Finance and
Administration (Principal
Financial Officer and Authorized
Signatory)
<PAGE>
<PAGE>14
EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.1 Personnel Management, Inc.
1994 Director Stock Option Plan*
10.2 Schedule of Options Granted Under
1994 Director Stock Option Plan*
10.3 Note Modification Agreement
between the Company, PMI
Administration, Inc., PMI LP I,
PMI LP II and Society National
Bank, Indiana, dated February
28, 1995*
11.1 Statement Re: Computation of
Earnings Per Share for the three months
ended April 30, 1995 and 1994
11.2 Statement Re: Computation of
Earnings Per Share for the six months
ended April 30, 1995 and 1994
27.1 Financial Data Schedule
* Filed with the original quarterly report on Form 10-QSB
for the quarterly period ended April 30, 1995.
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
1995 1994
<S> <C> <C>
Weighted average shares outstanding 1,977,766 1,952,481
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 84,775 26,805
2,062,541 1,979,286
Net income $ 217,639 $ 211,944
Net income per share $ 0.11 $ 0.11
</TABLE>
EXHIBIT 11.2
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
1995 1994
<S> <C> <C>
Weighted average shares outstanding 1,968,321 1,642,219
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 76,278 23,008
2,044,599 1,665,227
Net income $ 282,138 $ 363,242
Net income per share $ 0.14 $ 0.22
Pro forma net income $ 306,542
Pro forma net income per share $ 0.19
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FILER'S FORM 10-QSB/A FOR THE QUARTER
ENDED APRIL 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916606
<NAME> PERSONNEL MANAGEMENT, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<CASH> 8,050
<SECURITIES> 0
<RECEIVABLES> 6,058,147
<ALLOWANCES> 95,066
<INVENTORY> 0
<CURRENT-ASSETS> 6,687,894
<PP&E> 1,786,093
<DEPRECIATION> 471,904
<TOTAL-ASSETS> 14,077,299
<CURRENT-LIABILITIES> 3,585,323
<BONDS> 2,667,508
<COMMON> 7,683,156
0
0
<OTHER-SE> 71,771
<TOTAL-LIABILITY-AND-EQUITY> 14,077,299
<SALES> 15,380,148
<TOTAL-REVENUES> 15,380,148
<CGS> 12,352,243
<TOTAL-COSTS> 12,451,855
<OTHER-EXPENSES> 2,913,683
<LOSS-PROVISION> 23,414
<INTEREST-EXPENSE> 80,490
<INCOME-PRETAX> 418,821
<INCOME-TAX> 201,182
<INCOME-CONTINUING> 217,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 217,639
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
