<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JULY 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___ TO ___.
Commission file number 0-23144
PERSONNEL MANAGEMENT, INC.
(Exact name of registrant 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
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1994 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes (X) No ( )
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
Class Outstanding at September 11, 1997
Common Stock, without par value 2,020,156 shares
<PAGE>
<PAGE>2
PERSONNEL MANAGEMENT, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
at July 31, 1997 and October 31, 1996 3
Condensed Consolidated Statements of
Income for the three months ended
July 31, 1997 and 1996 4
Condensed Consolidated Statements of
Income for the nine months ended
July 31, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows for the nine months ended
July 31, 1997 and 1996 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 1 - Legal Proceedings 12
Item 5 - Other Information 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
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 35,629 $ 180,462
Accounts receivable, net 7,652,287 7,548,919
Current portion of notes receivable 53,318 99,039
Income taxes receivable 25,911 25,099
Prepaid expenses 204,517 109,751
Other current assets 56,869 70,252
Deferred tax asset 474,900 433,900
Total current assets 8,503,431 8,467,422
Property and equipment, net 1,294,650 1,209,050
Notes receivable, shareholder 540,195 508,148
Goodwill, net 7,123,545 6,636,191
Other 126,316 113,728
Total assets $ 17,588,137 $16,934,539
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 143,500 $ 106,269
Accounts payable 222,309 284,669
Accrued compensation and benefits 2,669,750 2,822,341
Accrued workers' compensation claims 920,471 752,000
Income taxes payable - 159,500
Other current liabilities 247,693 247,208
Current portion of long-term debt 564,874 500,201
Total current liabilities 4,768,597 4,872,188
Notes payable 2,324,988 2,507,732
Deferred tax liability 166,300 154,600
SHAREHOLDERS' EQUITY
Common stock 7,856,384 7,846,105
Retained earnings 2,471,868 1,553,914
Total shareholders' equity 10,328,252 9,400,019
Total liabilities and
shareholders' equity $17,588,137 $16,934,539
See accompanying notes.
/TABLE
<PAGE>
<PAGE>4
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31,
1997 1996
<S> <C> <C>
Revenues $19,075,410 $17,144,732
Cost of services 15,256,736 13,669,668
Gross margin 3,818,674 3,475,064
Operating expenses:
General and administrative 2,920,412 2,690,193
Selling 105,728 95,123
Amortization of goodwill 91,475 89,425
3,117,615 2,874,741
Income from operations 701,059 600,323
Interest expense, net (50,102) (60,799)
Income before income taxes 650,957 539,524
Income taxes 269,600 287,100
Net income $ 381,357 $ 252,424
Net income per share $ 0.19 $ 0.12
</TABLE>
See accompanying notes.<PAGE>
<PAGE>5
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
July 31,
1997 1996
<S> <C> <C>
Revenues $53,655,714 $47,563,110
Cost of services 42,957,017 37,879,325
Gross margin 10,698,697 9,683,785
Operating expenses:
General and administrative 8,346,928 7,721,362
Selling 248,367 321,235
Amortization of goodwill 274,421 256,623
8,869,716 8,299,220
Income from operations 1,828,981 1,384,565
Interest expense, net (144,727) (196,641)
Income before income taxes 1,684,254 1,187,924
Income taxes 766,300 572,400
Net income $ 917,954 $ 615,524
Net income per share $ 0.45 $ 0.30
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>6
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
July 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 917,954 $ 615,524
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization and depreciation 567,802 517,095
Deferred income taxes (29,300) -
Shareholder loan activity, net (21,768) (29,179)
Changes in operating assets and
liabilities:
Accounts & notes receivable (57,647) (148,892)
Prepaid expenses and other assets (94,783) 275,782
Accounts payable (62,360) 141,522
Accrued liabilities & other payables (143,135) 475,987
Net cash provided by operating activities 1,076,763 1,847,839
INVESTING ACTIVITIES:
Purchases of businesses and additions to
goodwill (761,775) (1,348,082)
Purchases of property and equipment (378,981) (143,124)
Net cash used by investing activities (1,140,756) (1,491,206)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options - 224,625
Loan to officer, net of repayment - (61,676)
Payments on long-term debt (343,071) (28,297)
Net borrowings (payments) on line of
credit 225,000 (495,254)
Net cash used by financing activities (118,071) (360,602)
Decrease in cash (182,064) (3,969)
Cash (overdraft) at beginning of period 74,193 50,817
Cash (overdraft) at end of period $ (107,871) $ 46,848
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>7
PERSONNEL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
(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-Q should be read in conjunction with the
company's financial statements and notes thereto for the
year ended October 31, 1996 included in the company's 1996
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. Because of the seasonality of the company's
business, the results for the three and nine months ended
July 31, 1997 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,
including the dilutive effect of warrants and stock
options. For the aforementioned items, the effect on the
weighted average number of shares outstanding was computed
using the treasury stock method using the actual date of
grant or exercise for shares and options issued.<PAGE>
<PAGE>8
3. Acquisitions
The company acquired on March 17, 1997 the assets of
Garner-Scott Enterprise, Inc., a staffing business based
in Madison, Indiana and Carrollton, Kentucky with annual
revenues of approximately $2,100,000. The business was
acquired for $250,000 plus 33.3% of future income before
income taxes and other adjustments derived from the areas
served by the business through February 28, 2002. The
acquired business operations provide predominately light
industrial staffing services.
The company acquired on March 24, 1997 the assets of First
In Temporaries, Inc.'s Louisville, Kentucky staffing
operations with annualized revenues of approximately
$1,700,000. The business was acquired for $311,000. The
acquired business operations provide clerical and light
industrial staffing services.
The company acquired on April 25, 1997 a minority equity
investment in Adminiserve, Inc., a professional employer
organization based in Greenwood, Indiana.
4. New Accounting Principles
Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" becomes effective for the fiscal year
ended October 31, 1998. The company does not expect the
statement to have a material impact on the financial
statements.<PAGE>
<PAGE>9
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 1996 Annual Report to
Shareholders.
SELECTED INCOME STATEMENT COMPARISONS
REVENUES. For the three months ended July 31, 1997, revenues
increased 11.3% or $1,931,000 compared to the 1996 period, to
$19,075,000. The increase was a result of internal revenue growth
of approximately 7.0% and the acquisition of the two staffing
businesses in March 1997.
For the nine months ended July 31, 1997, revenues increased 12.8% or
$6,093,000 compared to the prior year period, to $53,656,000. This
increase was due to internal revenue growth of approximately 7.0%
and the acquisitions of staffing businesses in February 1996 and
March 1997.
GROSS MARGINS. Gross margin is defined by the company as revenues
less the cost of providing services, which includes hourly wages of
temporary employees, employer payroll taxes, benefits for temporary
employees and workers' compensation costs. Gross margin for the
three months ended July 31, 1997 was $3,819,000 or 20.0% of
revenues, compared to $3,475,000 or 20.3% of revenues for the
corresponding prior year period. The increase in gross margin of
$344,000 was primarily due to increased revenues. The decline in
gross margin as a percentage of revenues was attributable primarily
to competitive pricing.
Gross margin for the nine months ended July 31, 1997 was $10,699,000
or 19.9% of revenues, compared to $9,684,000 or 20.4% of revenues
for the corresponding prior year period. The increase in gross
margin of $1,015,000 was primarily due to increased revenues. The
decline in gross margin as a percent of revenues was attributable
primarily to competitive pricing.<PAGE>
<PAGE>10
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended July 31, 1997
were $3,026,000 or 15.9% of revenues compared to $2,785,000 or 16.2%
of revenues in the corresponding prior year period. Selling,
general and administrative expenses for the nine months ended July
31, 1997 were $8,595,000 or 16.0% of revenues compared to $8,043,000
or 16.9% of revenues in the corresponding prior year period. The
increase in SG&A expenses for both the three and nine month periods
was entirely associated with the staffing businesses purchased by
the company in February 1996 and March 1997. SG&A expenses as a
percentage of revenues declined as a result of lower professional
fees and provision for bad debts.
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 nine months ended July 31, 1997
increased 2.3% and 6.9%, respectively, compared to the previous year
period. This increase was a result of the amortization of goodwill
related to the businesses acquired in February 1996 and March 1997,
and the amortization of payments of additional purchase price to the
prior owners of acquired businesses under the earnout provisions of
the acquisition agreements.
INTEREST EXPENSE, NET. The decrease of $11,000 or 17.6% and $52,000
or 26.4% in interest expense, net of interest income for the three
months and nine months ended July 31, 1997, respectively, compared
to the prior year period was due primarily to lower average
borrowings compared to the corresponding prior year period.
INCOME TAXES. The decrease in income tax expense for the three
months ended July 31, 1997 compared to the prior year period was due
to a reduction in the company's effective tax rate. Income tax
expense in the current quarterly period included the adjustment to
reflect income tax expense on a year-to-date basis at this new lower
effective tax rate.
The increase in income tax expense for the nine months ended July
31, 1997 compared to the prior year period was a result of an
increase in net income before income taxes. The effective income
tax rate for the current year nine month period was 45.5% compared
to 48.2% in the prior year period.
NET INCOME. Net income for the three months ended July 31, 1997
increased 51.1% to $381,000 compared to net income of $252,000 for
the prior year period. Earnings per share increased 58.3% to $0.19
from $0.12.<PAGE>
<PAGE>11
For the nine months ended July 31, 1997, net income increased 49.1%
to $918,000 compared to net income of $615,500 in the prior year
period. Earnings per share increased 50.0% to $0.45 from $0.30.
The increases in net income for both the three and nine month
periods in fiscal 1997 were attributable to increases in revenues
and decreases in selling, general and administrative expenses as a
percentage of revenues.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities during the nine months ended
July 31, 1997 was $1,077,000 and net borrowings under the bank
credit facility were $225,000. Primary uses of cash were $343,000
for repayments on long-term borrowings, $379,000 for capital
expenditures and $762,000 for purchases of businesses and payments
under the earnout provisions of acquisition agreements.
Management believes that cash provided by operations, augmented by
borrowings for working capital purposes under the bank credit
facility, will be adequate to satisfy the company's operating cash
requirements during fiscal 1997.
On January 21, 1997, the company accepted a commitment from KeyBank,
NA to refinance its bank credit facility which provides the company
with the ability to borrow up to $11,000,000 for general working
capital purposes, acquisition financing, letters of credit and the
refinancing of outstanding borrowings. The facility consists of a
two year $8,500,000 revolving line of credit and a five year
$2,500,000 term loan. Borrowings under the line of credit are
subject to meeting certain borrowing base requirements. Upon
maturity, up to $4,000,000 of borrowings for acquisition financing
under this line convert to a five year term loan. At July 31, 1997,
the company's availability under the line of credit was
approximately $4,920,000.
The $2,500,000 term loan is payable in equal monthly principal
installments of $42,000 beginning February 1997. The company's
existing and committed credit facilities are secured and
collateralized by accounts receivable, equipment, cash, general
intangibles, contract rights, and proceeds thereof. In addition,
the company has agreed with the bank under the credit facilities to
certain financial and non-financial restrictive covenants, which
include, among other things, minimum levels of tangible net worth,
minimum cash flow coverage ratios, maximum ratio of indebtedness to
earnings,
<PAGE>
<PAGE>12
restrictions on capital expenditures, restrictions on common stock
repurchases, and restrictions on future mergers, consolidations,
acquisitions or joint ventures. At July 31, 1997, the company was
in compliance with its covenants.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There were no material developments during the three months ended
July 31, 1997, in certain Florida litigation to which the company is
a party that was first described in Item 1 of the company's
quarterly report on Form 10-Q for the three months ended January 31,
1997.
Item 5. Other Information
Effective July 1, 1997, Gary F. Hentschel was promoted to President
and Chief Operating Officer of the company. Hentschel served as
Chief Operating Officer since joining the company in July 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index on page 14 (which Exhibit
Index is incorporated herein by reference) are filed as part of this
report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the company during the
three months ended July 31, 1997.
<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: September 11, 1997 By: /s/ Robert R. Millard
--------------------------
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 Amended Schedule of Options
Granted Under 1994 Director
Stock Option Plan
10.2 1994 Director Stock Option Plan
(As amended May 19, 1997, subject to
shareholder approval)
11.1 Statement Re: Computation of
Earnings Per Share for the Three
Months Ended July 31, 1997
11.2 Statement Re: Computation of
Earnings Per Share for the Nine
Months Ended July 31, 1997
27 Financial Data Schedule
EXHIBIT 10.1
<TABLE>
SCHEDULE OF OPTIONS GRANTED
UNDER 1994 DIRECTOR STOCK OPTION PLAN
(THROUGH JULY 31, 1997)
<CAPTION>
Number of Date of Option Option
Grantee Options Granted* Grant Price* Period
<S> <C> <C> <C> <C>
Joseph C. Cook, Jr. 550 1/31/95 $12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
825 01/31/96 5.90 1/30/2001
550 04/30/96 8.75 04/29/2001
550 07/31/96 6.98 07/30/2001
550 10/31/96 7.63 10/30/2001
550 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
550 7/31/97 9.63 7/30/2002
David L. Swider 825 1/31/95 $9.95 1/30/2000
(for the quarter ended 10/31/94)
1,100 1/31/95 12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
1,100 01/31/96 5.90 01/30/2001
1,100 04/30/96 8.75 04/29/2001
825 07/31/96 6.98 07/30/2001
825 10/31/96 7.63 10/30/2001
825 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
825 7/31/97 9.63 7/30/2002
Richard L. VonDerHaar 825 1/31/95 $9.95 1/30/2000
(for the quarter ended 10/31/94)
1,100 1/31/95 12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
1,100 01/31/96 5.90 01/30/2001
550 04/30/96 8.75 04/29/2001
825 07/31/96 6.98 07/30/2001
825 10/31/96 7.63 10/30/2001
825 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
825 7/31/97 9.63 7/30/2002
Max K. DeJonge 550 10/31/95 $9.08 10/30/2000
550 01/31/96 5.90 01/30/2001
550 04/30/96 8.75 04/29/2001
550 07/31/96 6.98 07/30/2001
550 10/31/96 7.63 10/30/2001
550 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
550 7/31/97 9.63 7/30/2002
</TABLE>
*All grants prior to April 24, 1995 retroactively adjusted for ten percent stock
dividend paid on that date.
0669\EDGAR\73110q.101
PERSONNEL MANAGEMENT, INC.
1994 DIRECTOR STOCK OPTION PLAN
(As amended May 19, 1997,
subject to shareholder approval)
I. PURPOSE
The purpose of this 1994 Director Stock Option Plan (the "Plan") of
Personnel Management, Inc. (the "Corporation") is to encourage
ownership in the Corporation by outside directors of the
Corporation whose continued services are considered essential to
the Corporation's continued progress, and to provide them with a
further incentive to continue as directors of the Corporation, and
to increase the value of the Corporation.
II. ELIGIBILITY
Each director of the Corporation is eligible to participate in the
Plan and shall receive the options provided for by formula herein,
unless he or she is an officer or employee of the Corporation or
any subsidiary of the Corporation ("Eligible Director").
III. STOCK SUBJECT TO THE PLAN
A. Common Stock. The stock which is the subject of
options granted under the Plan shall be the Corporation's
authorized but unissued Common Stock, no par value per share
("Stock"). In connection with the issuance of shares of Stock
under the Plan, the Corporation may utilize shares repurchased
in the open market or otherwise.
B. Aggregate Amount. The total number of shares subject
to options granted under the Plan shall not exceed forty
thousand (40,000) shares (subject to adjustment under Article
VIII).
IV. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under this Plan shall be evidenced by a written
agreement in substantially the form attached hereto as Exhibit A,
which agreement shall comply with and be subject to the following
terms and conditions:
A. Non-Statutory Stock Options. All options granted
under the Plan shall be non-statutory options not entitled to
special tax treatment under Section 422A of the Internal
Revenue Code of 1986, as amended to date and as may be further
amended from time to time (the "Code").
<PAGE>
<PAGE> 2
B. Option Grant Dates. Options shall be granted on
January 31, 1995 for each Eligible Director's service to the
Corporation during the two fiscal quarters ended October 31,
1994 and January 31, 1995, and on the last day of each fiscal
quarter thereafter for each Eligible Director's service to the
Corporation during such quarter.
C. Number of Option Shares. An option granted to an
Eligible Director relating to such Eligible Director's service
to the Corporation during the fiscal quarter ended October 31,
1994 or during any quarter within the fiscal year ended
October 31, 1995, shall be an option to acquire a number of
shares equal to (i) 500 shares of Stock for each meeting of
the Corporation's Board of Directors actually attended by such
Eligible Director during such quarter, plus (ii) 250 shares of
Stock for each meeting of a committee of the Board of
Directors actually attended by such Eligible Director during
such quarter. For each quarter during a fiscal year after the
fiscal year ended October 31, 1995, the number of shares which
an Eligible Director shall be entitled to receive for each
board meeting attended and each board committee meeting
attended shall be set by a standing resolution of the
Corporation's Board of Directors, which resolution may not be
amended more than once each fiscal year.
D. Transferability. Each option granted under the Plan
by its terms shall not be transferable by the Eligible
Director otherwise than by will or by the laws of descent and
distribution, and shall be exercised during the lifetime of
the Eligible Director only by such Eligible Director.
E. Term of Option. Options become exercisable with
respect to fifty percent (50%) of the shares covered thereby
on the date upon which they were granted and become
exercisable with respect to the remaining shares covered
thereby on the first anniversary of the date upon which they
were granted. Unless terminated earlier in accordance with
the terms of the Plan or the applicable option agreement, each
option shall terminate upon the expiration of five (5) years
after such option was granted.
F. Manner of Exercise. Options may be exercised only by
written notice to the Corporation, which notice must specify
the date of the stock option and the number of shares of Stock
covered by the exercise, accompanied by payment of the full
consideration for the shares as to which they are exercised in
one or a combination of the following alternative forms:
<PAGE>
<PAGE> 3
(i) cash (including check, bank draft or money
order); or
(ii) shares of Stock previously acquired and held
for at least six (6) months and standing in the name of
the Eligible Director having a fair market value (as
defined in Article VI) on the date of exercise equal to
the Option Price (as defined in Article V) of the shares
being exercised hereunder. If the value of a certificate
for shares tendered is in excess of the Option Price, the
excess representing any fraction of a share value will be
refunded to the Eligible Director in cash by the
Corporation, and any excess representing whole share
values will be refunded to the Eligible Director by the
issuance of a new Stock Certificate representing such
whole shares. If the Eligible Director desires that the
shares of Stock be registered in his or her name and that
of another as joint tenants with rights of survivorship,
he or she should so state in the notice. In no case may
fewer than one hundred (100) of such shares be purchased
at any one time, except to purchase a residue of fewer
than one hundred (100) shares. An option may not be
exercised for a fractional share.
G. Replacement Options. In the event that an Eligible
Director tenders Stock owned by such Eligible Director in
payment (in whole or in part) of the purchase price of the
shares that such Eligible Director has elected to purchase
under an option, the Corporation shall issue to such Eligible
Director a replacement option (a "Replacement Option") with
the same expiration date as the option exercised (the
"Exercised Option"). Such Replacement Option shall entitle
such Eligible Director to purchase a number of shares equal to
the number of shares tendered to the Corporation to purchase
shares under the Exercised Option, and shall specify an
exercise price equal to the fair market value (as determined
in Article VI) of the Stock on the date of exercise of the
Exercised Option. Such Replacement Option shall not be
exercisable during the twelve (12) months following the date
of exercise of the Exercised Option and shall be cancelled if,
during such twelve (12) month period, the Eligible Director
sells any Stock other than in payment of the exercise price of
another option under the Plan, or following the death of the
Eligible Director.
<PAGE>
<PAGE> 4
H. Termination of Directorship. All rights of an
Eligible Director in an option (including without limitation
a Replacement Option), to the extent that such rights have not
been exercised and have not otherwise expired, shall terminate
fifteen (15) months subsequent to the termination for any
reason of such Director's services as an Eligible Director of
the Corporation. If the reason for termination is the death
of an Eligible Director or an Eligible Director dies
subsequent to the termination of his or her services as an
Eligible Director, any option (including without limitation a
Replacement Option) may be exercised during the period
specified in the preceding sentence by the personal
representative of the Eligible Director's estate or by the
person or persons to whom the option is transferred pursuant
to the Eligible Director's will or in accordance with the laws
of descent and distribution.
V. OPTION PRICE
The option price per share (the "Option Price") for the shares
covered by an option (other than a Replacement Option) relating to
the fiscal quarter ended October 31, 1994 shall be the fair market
value (as determined in Article VI) of one share of Stock on
October 31, 1994 and the Option Price for the shares covered by any
option relating to any fiscal quarter thereafter (other than a
Replacement Option) shall be the fair market value (as determined
in Article VI) of one share of stock on the date of grant of the
option.
VI. VALUATION OF COMMON STOCK
For all valuation purposes under the Plan, the fair market value of
a share of Stock shall be the average of the closing bid and ask
prices recorded by the National Association of Securities Dealers
(NASD) for the five (5) trading days immediately receding the date
of grant.
VII. NO RIGHT TO CONTINUE AS A DIRECTOR
Neither the Plan nor the granting of an option nor any other action
taken pursuant to the Plan shall constitute or be evidence of any
agreement or understanding, express or implied, that the
Corporation will retain an Eligible Director for any period of time
or at any particular rate of compensation.
<PAGE>
<PAGE> 5
VIII. ADJUSTMENT TO STOCK
In the event any change is made to the Stock subject to the Plan or
subject to any outstanding option granted under the Plan (whether
by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or
otherwise), then appropriate adjustments shall be made to the
maximum number of shares that may be the subject of options granted
under the plan and the number of shares and price per share of
stock subject to outstanding options. The grant of options under
the Plan shall not affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IX. EFFECTIVE DATE
The Plan shall take effect on January 31, 1995, but options may be
granted hereunder relating to an Eligible Director's service to the
Corporation for any fiscal quarter ended on or after October 31,
1994; provided, however, no shares of Stock shall be issued under
the Plan and no options granted under the Plan shall be exercisable
prior to six (6) months after the Plan is approved by the holders
of at least a majority of the Corporation's voting stock present or
represented and voting at a duly held meeting at which a quorum is
present or represented. If such shareholder approval is not
obtained, then any options previously granted under the Plan shall
terminate and no further options shall be granted.
X. AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Corporation may suspend, discontinue
or terminate the Plan or revise or amend it in any respect
whatsoever; provided that the Board shall not, without the approval
of the Corporation's shareholders (i) materially increase the
number of shares of Stock which may be issued under the Plan
(unless necessary to effect the adjustments required under Article
VIII) or other benefits accruing to participants under the plan,
(ii) materially modify the eligibility requirements for awards
under the Plan, or (iii) make any other change with respect to
which the Board of Directors determines that shareholder approval
is required by applicable law or regulatory standards; nor shall
any amendment adversely affect an Eligible Director's rights under
any option previously granted without the Eligible Director's
consent. The provisions of this Plan that state or set forth a
formula for determining the amount, price and timing of awards of<PAGE>
<PAGE> 6
options and/or Stock shall not be amended more than once every six
(6) months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act, or the rules thereunder.
XI. USE OF PROCEEDS
The cash proceeds received by the Corporation from the issuance of
shares pursuant to options under the Plan shall be used for general
corporate purposes.
XII. ADMINISTRATION
The Plan shall be self-administered. However, ministerial actions
and duties shall be performed by the President of the Corporation,
who has authority to execute and deliver options to Eligible
Directors and to execute and deliver all such other instruments,
and to take all other actions and to make all other determinations,
not inconsistent with this Plan, that he may deem, in his sole
discretion, necessary or desirable.
XIII. SECTION 16
Transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3, generally, and Rule 16b-
3(c)(2)(ii), specifically, or their successors under the Exchange
Act. To the extent any provision of the Plan or action by the
President fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the President.
XIV. DELIVERY AND REGISTRATION OF STOCK
The Corporation's obligation to deliver shares with respect to an
option shall, if the President so requests, be conditioned upon the
receipt of a representation as to the investment intention of the
participant to whom such shares are to be delivered, in such form
as the President shall determine to be necessary or advisable to
comply with the provisions of the Securities Act of 1933, as
amended, or any other federal, state or local securities
legislation. It may be provided that any representation
requirement shall become inoperative upon a registration of the
shares or other action eliminating the necessity of such
representation under such Securities Act or other securities
legislation. The Corporation shall not be required to deliver any
shares under the Plan prior to (i) the admission of such shares to
listing on any stock exchange or system on which shares may then be
listed, and (ii) the completion of such registration or other
qualification of such shares under any state or federal law, rule
or regulation, as the President shall determine to be necessary or
advisable.
<PAGE>
<PAGE>7
XV. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Indiana and
construed accordingly.
0669\stockopt.amd
<PAGE>16
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended
July 31,
1997 1996
<S> <C> <C>
Weighted average shares outstanding 2,020,156 2,020,156
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 34,513 18,109
2,054,669 2,038,265
Net income $ 381,357 $ 252,424
Net income per share $ 0.19 $ 0.12
</TABLE>
<PAGE>17
EXHIBIT 11.2
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine months ended
July 31,
1997 1996
<S> <C> <C>
Weighted average shares outstanding 2,020,156 2,020,156
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 28,284 11,143
2,048,440 2,031,299
Net income $ 917,954 $ 615,524
Net income per share $ 0.45 $ 0.30
</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-Q FOR THE QUARTER ENDED
JULY 31, 1997, 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> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 35,629
<SECURITIES> 0
<RECEIVABLES> 7,705,605
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,503,431
<PP&E> 2,588,056
<DEPRECIATION> 1,293,406
<TOTAL-ASSETS> 17,588,137
<CURRENT-LIABILITIES> 4,768,597
<BONDS> 2,324,988
0
0
<COMMON> 7,856,384
<OTHER-SE> 2,471,868
<TOTAL-LIABILITY-AND-EQUITY> 17,588,137
<SALES> 53,655,714
<TOTAL-REVENUES> 53,655,714
<CGS> 42,957,017
<TOTAL-COSTS> 43,205,384
<OTHER-EXPENSES> 8,621,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,727
<INCOME-PRETAX> 1,684,254
<INCOME-TAX> 766,300
<INCOME-CONTINUING> 917,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 917,954
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
