<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 APRIL 30, 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 June 12, 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 April 30, 1997 and October 31, 1996 3
Condensed Consolidated Statements of
Income for the three months ended
April 30, 1997 and 1996 4
Condensed Consolidated Statements of
Income for the six months ended
April 30, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows for the six months ended
April 30, 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 11
Item 6 - Exhibits and Reports on Form 8-K 11
SIGNATURE 12
EXHIBIT INDEX 13
<PAGE>
<PAGE>3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
1997 1996
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 10,796 $ 180,462
Accounts receivable, net 7,494,936 7,548,919
Current portion of notes receivable 68,318 99,039
Income taxes receivable 46,249 25,099
Prepaid expenses 263,175 109,751
Other current assets 99,601 70,252
Deferred tax asset 464,900 433,900
Total current assets 8,447,975 8,467,422
Property and equipment, net 1,267,829 1,209,050
Notes receivable, shareholder 529,890 508,148
Goodwill, net 7,016,496 6,636,191
Other 105,009 113,728
Total assets $ 17,367,199 $16,934,539
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 260,433 $ 106,269
Accounts payable 128,814 284,669
Accrued compensation and benefits 2,533,179 2,822,341
Accrued workers' compensation claims 835,378 752,000
Income taxes payable - 159,500
Other current liabilities 281,456 247,208
Current portion of long-term debt 596,456 500,201
Total current liabilities 4,635,716 4,872,188
Notes payable 2,624,989 2,507,732
Deferred tax liability 159,600 154,600
SHAREHOLDERS' EQUITY
Common stock 7,856,383 7,846,105
Retained earnings 2,090,511 1,553,914
Total shareholders' equity 9,946,894 9,400,019
Total liabilities and shareholders'
equity $17,367,199 $16,934,539
See accompanying notes.
/TABLE
<PAGE>
<PAGE>4
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended
April 30,
1997 1996
Revenues $17,953,878 $16,388,262
Cost of services 14,312,856 12,981,063
Gross margin 3,641,022 3,407,199
Operating expenses:
General and administrative 2,731,401 2,625,215
Selling 60,452 128,427
Amortization of goodwill 91,473 85,242
2,883,326 2,838,884
Income from operations 757,696 568,315
Interest expense, net (48,041) (65,621)
Income before income taxes 709,655 502,694
Income taxes 341,400 221,194
Net income $ 368,255 $ 281,500
Net income per share $ 0.18 $ 0.14
See accompanying notes.
<PAGE>
<PAGE>5
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Six months ended
April 30,
1997 1996
<S> <C> <C>
Revenues $34,580,304 $30,418,378
Cost of services 27,700,281 24,209,657
Gross margin 6,880,023 6,208,721
Operating expenses:
General and administrative 5,426,516 5,031,169
Selling 142,639 226,112
Amortization of goodwill 182,946 167,198
5,752,101 5,424,479
Income from operations 1,127,922 784,242
Interest expense, net (94,625) (135,842)
Income before income taxes 1,033,297 648,400
Income taxes 496,700 285,300
Net income $ 536,597 $ 363,100
Net income per share $ 0.26 $ 0.18
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>6
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended
April 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 536,597 $ 363,100
Adjustments to reconcile net income to net
Cash provided by operating activities:
Amortization and depreciation 381,096 339,873
Deferred income taxes (26,000) -
Shareholder loan activity, net (11,464) (18,874)
Changes in operating assets and
liabilities:
Accounts & notes receivable 84,704 (55,502)
Prepaid expenses and other assets (195,204) 134,883
Accounts payable (155,855) 323,630
Accrued liabilities & other payables (331,036) 110,015
Net cash provided by operations 282,838 1,197,125
INVESTING ACTIVITIES:
Purchases of businesses and additions to
goodwill (563,251) (1,168,972)
Purchases of property and equipment (256,929) (113,652)
Net cash used by investing activities (820,180) (1,282,624)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 224,625
Loan to officer (123,352)
Payments on long-term debt (186,488) (28,297)
Net borrowings (payments) on line of
credit 400,000 (88,000)
Net cash provided (used) by financing
activities 213,512 (15,024)
Increase (decrease) in cash (323,830) (100,523)
Cash (overdraft) at beginning of period 74,193 50,817
Cash (overdraft) at end of period $ (249,637) $ (49,706)
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>7
PERSONNEL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 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 six months
ended April 30, 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.
3. Acquisitions
The company acquired on March 17, 1997 the assets of Garner-
Scott Enterprises, 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.
<PAGE>
<PAGE>8
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.
<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 April 30, 1997, revenues
increased 9.6% or $1,566,000 compared to the 1996 period, to
$17,954,000. The increase was a result of internal revenue growth
of approximately 8.0% and the acquisition of the two staffing
businesses in March 1997.
For the six months ended April 30, 1997, revenues increased 13.7%
or $4,162,000 compared to the prior year period, to $34,580,000.
This increase was due to internal revenue growth of 6.8% 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 April 30, 1997 was $3,641,000 or 20.3% of
revenues, compared to $3,407,000 or 20.8% of revenues for the
corresponding prior year period. The increase in gross margin of
$234,000 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 six months ended April 30, 1997 was $6,880,000
or 19.9% of revenues, compared to $6,209,000 or 20.4% of revenues
for the corresponding prior year period. The increase in gross
margin of $671,000 was primarily due to increased revenues. The
decline in gross margin as a percent of revenues was attributable
primarily to competitive pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended April 30, 1997
were $2,792,000 or 15.6% of revenues compared to $2,754,000 or
16.8% of revenues in the corresponding prior year period. Selling,
general and administrative expenses for the six months ended April
30, 1997 were $5,569,000 or 16.1% of revenues compared to
$5,257,000 or 17.3% of revenues in the corresponding prior year
period. The increase in SG&A expenses for both the three and six
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.<PAGE>
<PAGE>10
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 months ended April 30, 1997
increased 7.3% and 9.4%, 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 $18,000 or 26.8% and
$41,000 or 30.3% in interest expense, net of interest income for
the three months and six months ended April 30, 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 increase in income tax expense for the three and
six month periods ended April 30, 1997 compared to the prior year
periods was a result of an increase in net income before income
taxes and the effective income tax rate. The effective income tax
rate for the current year periods was 48% compared to 44% in the
prior year periods.
NET INCOME. Net income for the three months ended April 30, 1997
increased 30.8% to $368,255 compared to net income of $281,500 for
the prior year period. Earnings per share increased 28.6% to $0.18
from $0.14.
For the six months ended April 30, 1997, net income increased 47.8%
to $536,597 compared to net income of $363,100 in the prior year
period. Earnings per share increased 44.4% to $0.26 from $0.18.
The increases in net income for both the three and six 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 six months ended
April 30, 1997 was $283,000 and net borrowings under the bank
credit facility was $400,000. Primary uses of cash were $187,000
for repayments on long-term borrowings, $257,000 for capital
expenditures and $563,000 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.
<PAGE>
<PAGE>11
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
April 30, 1997, the Company's availability under the line of credit
was approximately $4,456,000.
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, restrictions on capital expenditures, restrictions on
common stock repurchases, and restrictions on future mergers,
consolidations, acquisitions or joint ventures. At April 30, 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
April 30, 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 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
There were no reports on Form 8-K filed by the company during the
three months ended April 30, 1997.<PAGE>
<PAGE>12
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 13, 1997 By: /s/ Robert R. Millard
--------------------------
Robert R. Millard, Vice
President of Finance and
Administration (Principal
Financial Officer and
Authorized Signatory)
<PAGE>
<PAGE>13
EXHIBIT INDEX
Exhibit No. Description of Exhibit Sequential Page
Number
10.1 Amended Schedule of Option
Granted Under 1994 Director
Stock Option Plan 14
11.1 Statement Re: Computation of 15
Earnings Per Share for the Three
Months Ended April 30, 1997
11.2 Statement Re: Computation of 16
Earnings Per Share for the Six
Months Ended April 30, 1997
27 Financial Data Schedule 17
EXHIBIT 10.1
<TABLE>
SCHEDULE OF OPTIONS GRANTED
UNDER 1994 DIRECTOR STOCK OPTION PLAN
(THROUGH APRIL 30, 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
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
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
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
</TABLE>
*All grants prior to April 24, 1995 retroactively adjusted for ten percent stock
dividend paid on that date.
0669\EDGAR\43010q.101
<PAGE>14
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended
April 30,
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 37,781 11,695
2,057,937 2,031,851
Net income $ 368,255 $ 281,500
Net income per share $ 0.18 $ 0.14
</TABLE>
<PAGE>15
EXHIBIT 11.2
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Six months ended
April 30,
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 16,921 7,601
2,037,077 2,027,757
Net income $ 536,597 $ 363,100
Net income per share $ 0.26 $ 0.18
</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
APRIL 30, 1997, AND IS QUALIFIED IN IT ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000916606
<NAME> PERSONNEL MANAGEMENT, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 10,796
<SECURITIES> 0
<RECEIVABLES> 7,685,761
<ALLOWANCES> 190,825
<INVENTORY> 0
<CURRENT-ASSETS> 8,447,975
<PP&E> 2,466,003
<DEPRECIATION> 1,198,174
<TOTAL-ASSETS> 17,367,199
<CURRENT-LIABILITIES> 4,635,716
<BONDS> 2,624,989
0
0
<COMMON> 7,856,383
<OTHER-SE> 2,090,511
<TOTAL-LIABILITY-AND-EQUITY> 17,367,199
<SALES> 17,953,878
<TOTAL-REVENUES> 17,953,878
<CGS> 14,312,856
<TOTAL-COSTS> 14,373,308
<OTHER-EXPENSES> 2,853,744
<LOSS-PROVISION> (30,870)
<INTEREST-EXPENSE> 124,105
<INCOME-PRETAX> 709,655
<INCOME-TAX> 341,400
<INCOME-CONTINUING> 368,255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 368,255
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
