SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
--------------------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission file number 0-27204
TECHFORCE CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter
GEORGIA 58-2082077
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
5741 RIO VISTA DRIVE, CLEARWATER, FLORIDA 33760
- ----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (727) 533-3600
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicated by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 6, 1999, there were 8,279,298 shares of
the issuer's common stock outstanding.
<PAGE>
TECHFORCE CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
Item 1 Financial Statements............................................ 1
Consolidated Balance Sheets..................................... 1
Consolidated Statements of Operations........................... 2
Consolidated Statements of Cash Flows........................... 3
Notes to Consolidated Financial Statements...................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risks..... 11
PART II. OTHER INFORMATION
Item 1 Legal Proceedings............................................... 12
Item 2 Changes in Securities........................................... 12
Item 3 Defaults Upon Senior Securities................................. 12
Item 4 Submission of Matters to a Vote of Shareholders................. 12
Item 5 Other Information............................................... 12
Item 6 Exhibits and Reports on Form 8-K................................ 12
SIGNATURES
Signatures................................................................ 12
EXHIBIT INDEX
Exhibit Index............................................................. 13
<PAGE>
<TABLE>
<CAPTION>
TECHFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999
(In thousands)
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,559 $ 3,159
Investments 105 104
Accounts receivable, net of allowance for
doubtful accounts of approximately
$1,010,000 and $912,000 at Mar. 31,
1999, and Dec. 31, 1998 18,802 20,415
Inventories 2,281 1,796
Prepaid expenses/other assets 2,679 1,222
Net investment in sales type leases
(current portion) 3,023 2,502
Deferred taxes 2,163 1,807
-------- --------
Total current assets 31,612 31,005
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements 1,337 1,165
Furniture, fixtures and equipment 10,637 9,916
Equipment held for rental 799 703
Replacement parts 17,550 17,107
-------- --------
30,323 28,891
Less accumulated depreciation (16,393) (15,412)
-------- --------
Total property, plant and equipment, net 13,930 13,479
-------- --------
NET INVESTMENT IN SALES TYPE LEASES, 4,328 4,468
Less current portion
OTHER ASSETS 65 133
-------- --------
Total assets $ 49,935 $ 49,085
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,749 $ 5,458
Accrued expenses 2,813 5,150
Accrued contract labor 1,455 1,139
Current maturities of obligations under
capital leases, long-term debt and
non-recourse notes payable 1,134 980
Deferred revenue 3,242 2,750
-------- --------
15,393 15,477
-------- --------
OBLIGATIONS UNDER CAPITAL LEASES,
net of current maturities 344 371
DEFERRED REVENUE, net of current portion 10 17
DEFERRED TAXES 1,483 1,498
NON-RECOURSE NOTES PAYABLE, net of
current maturities 815 659
-------- --------
STOCKHOLDERS' EQUITY
Common stock 83 83
Additional paid in capital 28,596 28,577
Retained earnings 3,211 2,403
-------- --------
31,890 31,063
-------- --------
Total liabilities and
stockholders' equity $ 49,935 $ 49,085
======== ========
</TABLE>
Page 1
<PAGE>
TECHFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the quarter ended March 31, 1999 & 1998
(In thousands, except per share data)
QUARTER ENDED
MARCH 31
----------------------------------
1999 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
Revenues:
Services 14,574 11,700
Hardware 6,729 4,917
---------- ----------
Total revenues 21,303 16,617
Direct Cost:
Services 11,734 9,276
Hardware 4,958 4,102
---------- ----------
Total direct cost 16,692 13,378
Gross Margin:
Services 2,840 2,424
Hardware 1,771 815
---------- ----------
Total gross margin 4,611 3,239
Operating Costs:
Selling and marketing 1,724 1,955
General and administrative 1,579 1,440
---------- ----------
3,303 3,395
Operating Income (loss) 1,308 (156)
Interest (income) expense, net (3) 20
---------- ----------
Income (Loss) before taxes 1,311 (176)
Provision (Benefit) for
income taxes 503 (61)
---------- ----------
Net Income (loss) 808 (115)
========== ==========
Basic earnings (loss) per
common share 0.10 (0.01)
========== ==========
Diluted earnings (loss) per
common share 0.10 (0.01)
========== ==========
Weighted average number of
common shares outstanding - basic 8,263,860 8,123,103
========== ==========
Weighted average number of
common and common
equivalent shares outstanding - diluted 8,422,601 8,123,103
========== ==========
Page 2
<PAGE>
<TABLE>
<CAPTION>
TECHFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
THREE MONTHS ENDED
MARCH 31
---------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 808 ($ 115)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1.049 1,437
Deferred income tax (benefit) provision (371) 132
Changes in assets and liabilities:
Accounts receivable 1,613 (3,294)
Inventories (485) (419)
Prepaid expenses and other current assets (1,457) (197)
Accounts payable 1,291 850
Accrued expenses (2,339) (1,021)
Accrued contract labor 316 231
Deferred revenue 485 1,376
------- -------
Net cash provided by (used in)
operating activities 910 (1,020)
------- -------
Cash Flows from investing activities
Purchase of property and equipment (1,432) (1,656)
(Purchase) sale of investments (1) 3,075
Investment in sales-type leases (381) 607
------- -------
Net cash (used in) provided by investing activities (1,814) 2,026
------- -------
Cash flows from financing activities
Proceeds from stock options exercised 21 41
Repayments of capital lease obligations (27) (10)
Borrowings/(Payments) of non-recourse notes payable,
secured by sales-type leases 310 (710)
------- -------
Net cash provided by (used in) financing activities 304 (679)
------- -------
Net (decrease) increase in cash and cash equivalents (600) 327
Cash and cash equivalents, beginning of period 3,159 735
------- -------
Cash and cash equivalents, end of period $ 2,559 $ 1,062
======= =======
</TABLE>
Page 3
<PAGE>
TECHFORCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
1. NATURE OF BUSINESS
Established in 1991, TechForce (the "Company") operates two primary
business units providing support for corporate enterprise networks and
personal computers. Our Enterprise Network Services business unit provides
multivendor network support services for local and wide area networks
(LAN/WAN) to corporate customers, manufacturers, carriers, and network
integrators. The Enterprise network services, branded under the name
"TechCare(SM)," include offerings for network consulting, management and
monitoring, integration, and maintenance. The Company also sells and leases
networking equipment which serves as a base for additional long-term
support agreements. Our Custom PC Services business unit provides on-site,
depot and logistics services for personal computers and peripheral devices
for PC manufacturers, retailers and other extended-warranty providers.
2. BASIS OF FINANCIAL REPORTING
The condensed consolidated financial statements at March 31, 1999 and for
the three month period then ended are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for fair presentation of the financial position
and operating results for the interim period. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report to Shareholders incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
3. MAJOR CUSTOMERS
During the quarters ended March 31, 1999, and March 31, 1998, the following
customers individually accounted for 10% or more of the Company's revenue:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1999 QUARTER ENDED MARCH 31, 1998
---------------------------- ----------------------------
AMOUNT ($000) PERCENTAGE AMOUNT ($000) PERCENTAGE
------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Best Buy Corporation $ 3,394 16% $ 6 less than 1%
General Electric Corporation $ 2,141 10% $ 3,023 18%
Sears Roebuck and Company $ 2,141 10% $ 1,022 6%
</TABLE>
The loss of revenues from Best Buy Corporation, General Electric
Corporation or Sears Roebuck and Company could have a material impact on
the results of the operations of the Company in the near term.
4. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share" (SFAS 128). Basic earnings per share
is based upon the weighted average number of common shares and the diluted
earnings per share is based upon the weighted average number of common
shares plus the dilutive common equivalent shares outstanding during the
period.
The following is a reconciliation of the denominators of the basic and
diluted earnings per share computations shown on the face of the
accompanying consolidated statements of operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- ----------
<S> <C> <C>
Basic weighted average number of common
shares ............................ 8,263,860 8,123,103
Dilutive effect of options outstanding ............ 158,741 -
Diluted weighted average number of common
and common equivalent shares outstanding....... 8,422,601 8,123,103
</TABLE>
Page 4
<PAGE>
The following options were outstanding at March 31, 1999, but were not
included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the
common shares for March 31, 1999:
Number of options ............................... 755,794
Range of exercise prices ........................ $6.50 - 10.59
Range of expiration dates ....................... 2005 - 2009
The following options were outstanding at March 31, 1998, but were not
included in the computation of diluted earnings per share because the
company incurred a net loss:
Number of options ............................... 1,389,561
Range of exercise prices ........................ $.38 - 9.63
Range of expiration dates ....................... 2004 - 2008
5. LEGAL MATTERS
From time to time, the Company is involved in certain litigation and claims
arising in the ordinary course of business. In the opinion of management,
the ultimate resolution of any such matters will not have a material
adverse effect on the Company's financial position at March 31, 1999 or
results of operations for the three months then ended.
6. RECLASSIFICATIONS
Certain amounts included in the 1998 financial statements have been
reclassified to conform with the 1999 financial statements.
7. BUSINESS SEGMENTS
The Company operates in three primary business segments, one related to the
sale of networking hardware and two related to the sale of services. The
hardware segment provides networking and channel extension hardware
primarily in the United States, Canada and the United Kingdom. The service
operation segment is comprised of two segments, one operating in the
network services industry and the other in the personal computer warranty
repair industry.
Due to the nature of the Company's business, the segments share operating
costs, assets and related liabilities. Where the ability to allocate
specific amounts exists, they have been reflected in their respective
segments.
There were no significant intercompany sales between the three segments
for the three month periods ended March 31, 1999 and 1998.
The following information summarizes the Company's segment information for
the three month periods ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
-------------------------------------------------------
TECHCARE(TM) CUSTOM PC
HARDWARE SERVICES SERVICES CONSOLIDATED
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Revenues $ 6,729,204 $ 6,243,246 $ 8,330,659 $ 21,303,109
Gross margin 1,771,096 1,078,214 1,761,837 4,611,147
Operating costs 3,303,026
Operating income 1,308,121
Interest Income 3,183
Income before provision
for income taxes 1,311,304
Provision for income taxes 502,933
Net Income 808,371
</TABLE>
Page 5
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
-------------------------------------------------------
TECHCARE(TM) CUSTOM PC
HARDWARE SERVICES SERVICES CONSOLIDATED
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Revenues $ 4,916,525 $ 5,533,396 $ 6,166,899 $ 16,616,820
Gross margin 814,598 1,140,447 1,283,338 3,238,383
Operating costs 3,394,593
Operating loss (156,210)
Interest expense 20,008
Loss before benefit
for income taxes (176,218)
Benefit for income taxes (61,081)
Net loss (115,137)
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS AND LIABILITIES
FOR THE PERIOD ENDED MARCH 31, 1999, AND DECEMBER 31, 1998
----------------------------------------------------------
1999 1998
---------- ----------
<S> <C> <C>
HARDWARE SEGMENT
Inventory $2,281,000 $1,796,000
Net Investment in Leases 7,351,000 6,970,000
Notes Payable (1,949,000) (1,539,000)
TECHCARE(TM) SERVICES SEGMENT
Replacement Parts, Net 7,055,000 6,965,000
Deferred Revenue (3,253,000) (2,767,000)
CUSTOM PC SERVICES SEGMENT
Accounts Receivable Net 7,251,000 7,896,000
</TABLE>
GEOGRAPHIC INFORMATION
The Company allocates revenues based on the selling location.
Accordingly revenue from external customers was derived as follows:
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1999 1998
----------- -----------
North America $20,750,970 $15,949,175
United Kingdom 552,139 667,645
---------- ----------
$21,303,109 $16,616,820
The Company's long-lived assets, excluding deferred assets, were as
follows:
FOR THE PERIOD ENDED MARCH 31, 1999,
AND DECEMBER 31, 1998
------------------------------------
1999 1998
---------- -----------
North America $18,187,310 $17,978,080
United Kingdom 127,541 152,212
----------- -----------
$18,314,851 $18,130,292
8. NEW ACCOUNTING PRONOUNCEMENTS
Other issued but not yet required FASB standards are not currently
applicable or material to the Company's operations.
Page 6
<PAGE>
This Report contains certain forward-looking statements with respect to
the Company's operations, industry, financial condition and liquidity. These
statements, which are typically introduced by phrases such as "the Company
believes", "anticipates", "estimates" or "expects" certain conditions to exist,
reflect management's best current assessment of a number of risks and
uncertainties. The Company's actual result could differ materially from the
results anticipated in these forward-looking financial statements as a result of
certain factors described in this report. See "Safe Harbor Statement".
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Established in 1991, TechForce (the "Company") operates two primary
business units providing support for corporate enterprise networks and personal
computers. Our Enterprise Network Services business unit provides multivendor
network support services for local and wide area networks (LAN/WAN) to corporate
customers, manufacturers, carriers, and network integrators. The Enterprise
network services, branded under the name "TechCare(SM)," include offerings for
network consulting, management and monitoring, integration, and maintenance. The
Company also sells and leases networking equipment which serves as a base for
additional long-term support agreements. Our Custom PC Services business unit
provides on-site, depot and logistics services for personal computers and
peripheral devices for PC manufacturers, retailers and other extended-warranty
providers. For on-site repair and parts replacement services, we dispatch our
own customer support representatives, as well as TechForce certified contracted
technicians located in the United States, Canada and the United Kingdom.
Revenues from service and maintenance contracts are either recognized
ratably over the contract period or on a per call basis, as is the case under
the Company's workstation support agreements. Revenues from product sales are
recognized at the time of shipment. When appropriate, revenues from leasing are
accounted for as sales-type leases where the present value of all payments are
recorded currently as revenues and the related costs of the equipment less the
present value of any appropriate unguaranteed residual value are recorded to
cost of sales. The associated interest income is recognized over the term of the
lease.
Management anticipates that revenues from its proprietary channel
extension products and services will continue to decrease at a rate of
approximately 10% to 20% per year primarily as a result of an industry trend
toward open-systems environments. Management does not believe that this gradual
decline in such revenues will have a material adverse effect on the Company's
results of operations and financial condition.
Revenues from General Electric represented 10% of total Company revenues
for the three months ended March 31, 1999 as compared to 18.2% for the three
months ended March 31, 1998. Revenues from Sears and Best Buy represented 10%
and 16% of total Company revenues respectively for the three months ended March
31, 1999, as compared to less than 10% respectively for the three months ended
March 31, 1998.
Other issued but not yet required FASB standards are not currently
applicable or material to the Company's operations.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
TOTAL REVENUES. Total revenues increased 28.2% from the three months ended
March 31, 1998 to the three months ended March 31, 1999 largely due to increased
hardware sales, network services revenue, and custom PC services. Revenues from
channel networking decreased in line with management's expectations.
SERVICE REVENUES. Revenues from services increased 24.6% from $11.7
million for the three months ended March 31, 1998 to $14.6 million for the three
months ended March 31, 1999. This increase was attributable to increased network
services, network integration services and custom PC services revenues partially
offset by the reduced channel networking revenues. Revenues from network
services and network integration services increased
<PAGE>
by 17.8% and 52.2% respectively, while revenues from custom PC services
increased by 35.1% for the three months ended March 31, 1999 as compared to
revenues from these services for the three months ended March 31, 1998.
HARDWARE REVENUES. Revenues from hardware sales increased 36.9% from $4.9
million for the three months ended March 31, 1998 to $6.7 million for the three
months ended March 31, 1999. Hardware revenues included revenues from leasing
activities of $0.4 million and $1.4 million for the three months ended March 31,
1998 and 1999, respectively.
COST OF SERVICE. Cost of service increased 26.5% from $9.3 million for the
three months ended March 31, 1998 to $11.7 million for the three months ended
March 31, 1999. The cost of service increase was attributable to the growth in
business volumes from Custom PC Services, and the increased cost structure to
support the growth of network integration services.
COST OF HARDWARE. Cost of hardware increased 20.9% from $4.1 million for
the three months ended March 31, 1998 to $5.0 million for the three months ended
March 31, 1999.
GROSS MARGIN. Overall gross margin increased 42.4% from $3.2 million
(19.5% of total revenues), for the three months ended March 31, 1998 to $4.6
million (21.6% of total revenues), for the three months ended March 31, 1999.
Gross margin on services increased 17.2% from $2.4 million for the three months
ended March 31, 1998 to $2.8 million for the three months ended March 31, 1999
while decreasing as a percent of service revenues from 20.7% to 19.5%,
respectively. Gross margin on hardware revenues increased 117.3% from $.8
million for the three months ended March 31, 1998 to $1.8 million for the three
months ended March 31, 1999. This increase was caused primarily by increased
hardware revenues with margins in excess of historical levels during the three
months ended March 31, 1999. Hardware margins as a percentage of hardware
revenues increased from 16.6% for the three months ended March 31, 1998 to 26.3%
for the three months ended March 31, 1999.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses decreased
11.8% from $2.0 million for the three months ended March 31, 1998 to $1.7
million for the three months ended March 31, 1999. The decrease resulted
primarily from a reduction of the sales infrastructure.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 9.7% from $1.4 million for the three months ended March 31, 1998 to
$1.6 million for the three months ended March 31, 1999. This increase was
primarily due to increases in business systems development and support expenses,
professional expenses and other general support expenses. General and
administrative expenses as a percentage of revenues decreased from 8.7% for the
three months ended March 31, 1998 to 7.4% for the three months ended March 31,
1999.
OPERATING INCOME. Operating income increased from $(0.2) million (0.9% of
total revenues), for the three months ended March 31, 1998 to $1.3 million (6.1%
of total revenues), for the three months ended March 31, 1999.
INTEREST EXPENSE, NET. Net interest expense totaled $20,000 for the three
months ended March 31, 1998, resulting from interest on the company's line of
credit and notes payable partially offset by investments. Net interest income
totaled $3,000 for the three months ended March 31, 1999, resulting from
interest income on investments offset by interest expense on the company's line
of credit and notes payable.
INCOME TAXES. The Company's effective income tax rate was 38.4% for the
three months ended March 31, 1999, compared to a 34.7% effective income tax rate
for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used cash of $1.0 million and provided
cash of $0.9 million for the three months ended March 31, 1998 and 1999,
respectively. Cash used in operating activities for the 1998 period was
primarily due to a net operating loss, increases in accounts receivable,
inventories and prepaid expenses, and reductions in accrued expenses, offset by
a decrease in other assets and increases in accounts payable, accrued
<PAGE>
contract labor, deferred revenue and net deferred taxes. Cash provided by
operating activities for the 1999 period was primarily due to net income before
depreciation and amortization, decreases in accounts receivable and other
assets, and increases in accounts payable, accrued contract labor and deferred
revenue, offset by increases in inventories and prepaid expenses, and decreases
in accrued expenses and net deferred taxes.
The Company's investing activities provided cash of $2.0 million and used
cash of $1.8 million for the three months ended March 31, 1998 and 1999,
respectively. Cash used by the Company's investing activities for the 1998
period related to the purchase of property and equipment. Cash was provided by
the sale of investments and increases in investment of sales-type leases. Cash
used by the Company's investing activities for the 1999 period resulted from the
purchase of property and equipment. Cash was provided by the reduction of
investment in sales-type leases.
Financing activities used cash of $0.7 million and provided cash of $0.3
million for the three months ended March 31, 1998 and 1999, respectively.
The Company's cash requirements have been financed with cash flow from
operations and borrowings under its revolving credit facility with First Union
National Bank of Florida (the "Bank") since October 1996. The credit facility
with the Bank provides for borrowings of up to $15.0 million based on the value
and aging of the Company's eligible accounts and lease receivables. Borrowings
under the line of credit bear interest at the Bank's quoted variable base rate,
which has ranged from 6.43% to 7.12% during the three months ended March 31,
1999, and was 6.43% as of March 31, 1999. As of March 31, 1999, the Company had
no outstanding balance under the line of credit with approximately $11.3 million
available for borrowing thereunder based upon the Company's qualifying accounts
receivables. The Company intends to use its borrowing capacity under the line of
credit primarily for working capital requirements. The credit facility expires
in September 1999. Although there can be no assurances that the Bank will do so,
the Company believes that the Bank will agree to renew the facility.
As of March 31, 1999 the Company's investment in sales-type leases
included $2.2 million of leases which had been discounted via non-recourse notes
payable to the banks. Additionally investment in capital leases includes $5.2
million of undiscounted leases, a portion of which the Company plans to discount
in 1999. This leasing activity places demands on the Company's working capital
based on the timing and availability of discounting activities with financial
institutions.
Management believes that cash from operations and borrowings available
under its revolving credit facility together with current cash balances will be
sufficient to finance its working capital needs and capital expenditure
requirements for at least the next 12 months. Although no assurance can be
given, management believes that cash from operations together with available
sources of financing, including additional bank debt, will be sufficient to fund
the company's capital requirements for the foreseeable future beyond such 12
month period. The Company does not currently have any other material commitments
for capital expenditures.
YEAR 2000
Many companies use existing computer programs which identify a particular
year using only two digits. These programs were not developed to consider the
impact of the upcoming change in the century. Many computer software
applications could therefore fail or create erroneous results at or beyond the
year 2000 if not corrected or replaced by software applications designed to
properly recognize and process dates during and beyond year 2000 ("Year 2000
compliant software"). In 1998 the Company initiated a project to evaluate its
internal systems and critical external interfaces in order to identify areas
where the Year 2000 issue might materially impact the Company's business and has
hired an outside consultant with Year 2000 compliance experience to assist in
this evaluation. All critical systems and interfaces are being evaluated for
Year 2000 compliance and programs have been initiated to bring about remedial
action where necessary. During 1999, the Company plans to replace certain of its
systems to meet its evolving business requirements. The replacement systems are
being evaluated or developed to ensure Year 2000 compliance. Such replacements
are being made due to reasons other than Year 2000 compliance concerns and no
replacement has been accelerated because of such concerns. The expected costs
for systems work are included within the Company's capital and operating budgets
for 1999.
<PAGE>
Management believes that any other Year 2000 compliance issue related to
its internal systems can be properly managed by its internal staff with minimal
incremental costs, including fees payable to its Year 2000 outside consultant.
Management believes that if the Company's PC service customers experience
Year 2000 compliance problems in their customer help desk systems, the Company
could experience a downturn in customer service requests. Management intends to
seek Year 2000 compliance certification from these customers prior to the end of
1999. Management has identified concerns related to Year 2000 readiness and has
initiated actions to ensure Year 2000 readiness.
The Company utilizes replacement parts inventories with varying levels of
software content in the maintenance of enterprise networks. These replacement
parts are distributed throughout warehouse locations owned and operated by the
Company's logistics vendor. The Company has initiated a program to identify and
upgrade non-compliant Year 2000 replacement parts and expects to complete this
activity prior to 2000. Management believes that less than 10% of its
replacement parts pool represents potential Year 2000 compliance issues.
Software upgrades for these replacement parts are generally available from the
manufacturers at little to no cost to the Company. The unavailability of Year
2000 compliant replacement parts or the failure of such parts once introduced
into the customers' networks due to Year 2000 non-compliance would reduce the
quality of service provided by the Company to its customers and increase the
Company's costs. Although it is not possible to accurately predict the extent of
the upgrade requirement, management estimates that the expenses related to the
audit and upgrade activity will not exceed $250,000.
The Company believes that it will be Year 2000 ready with no material
impact on its business and estimates that its total costs related to all Year
2000 compliance efforts will be approximately $250,000 to $300,000. Any
corrective action will not materially affect the Company's operating results or
financial condition
KEY EMPLOYEE COMPENSATION CONTINUATION PLAN.
In 1998, the Board of Directors adopted the Key Employee Compensation
Continuation Plan (the "Continuation Plan"). Under the Continuation Plan,
employees identified by the Board of Directors as "key" or critical to TechForce
are entitled to a severance payment equal to a percentage of their compensation
(including certain other benefits, bonus amounts and perquisites) for the
twelve-month period ending upon their termination. Each of the Company's
executive officers is entitled to receive a severance payment of 100% of their
compensation. We adopted the Continuation Plan to attract the highest quality
individuals to become key members of our leadership team and to retain the
high-quality individuals who are presently members of our leadership team.
SAFE HARBOR STATEMENT
The Management's Discussion and Analysis and other portions of this
Report, include "forward-looking" statements within the meaning of the federal
securities laws, that are subject to future events, risks and uncertainties that
could cause actual results to differ materially from those expressed or implied.
Important factors that either individually or in the aggregate could cause
actual results to differ materially from those expressed include, without
limitation, (1) that the Company will not retain or grow its customer base, (2)
that the Company will fail to be competitive with existing and new competitors,
(3) that the Company will not be able to sustain its current growth, (4) that
the Company will not adequately respond to technological developments impacting
its industry and markets, (5) that needed financing will not be available to the
Company if and as needed, (6) that a significant change in the growth rate of
the overall U.S. economy will occur such that consumer and corporate spending
are materially impacted, (7) that the Company or its vendors and suppliers may
fail to timely achieve Year 2000 readiness such that there is a material adverse
impact on the business, operations or financial results of the Company, (8) that
a drastic negative change in market conditions occurs, or (9) that some other
unforeseen difficulties occur. This list is intended to identify only certain of
the principal factors that could cause actual results to differ materially from
those described in the forward-looking statements included herein.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Not Applicable.
<PAGE>
PART II OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Shareholders
Not Applicable
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Key Employee Compensation Continuation Plan
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the period.
<PAGE>
SIGNATURES
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.
TECHFORCE CORPORATION
Date: May 13, 1998 /s/ JERREL W. KEE
-------------------------------------
Jerrel W. Kee
Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT NO.
- -----------
10.1 Key Employee Compensation Continuation Plan
27.1 Financial Data Schedule
EXHIBIT 10.1
TECHFORCE CORPORATION
TWELVE MONTH KEY EMPLOYEE COMPENSATION CONTINUATION PLAN AND
SUMMARY PLAN DESCRIPTION
ARTICLE 1
ESTABLISHMENT OF THE PLAN
1.1 TechForce Corporation (the "Company") has established the TechForce
Corporation Key Employee Compensation Continuation Plan (the "Plan") effective
as of___________ 1998. The purpose of the Plan is to provide severance pay and
benefits to key employees in the event that the Company terminates the
employment of such employees under certain limited circumstances as described
herein.
1.2 The Company intends for this Plan to constitute an employee welfare
benefit plan within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and a severance pay plan
within the meaning of Department of Labor (DOL) Regulation Section 2510.3-2(b).
ARTICLE 2
DEFINITIONS
2.1 "BOARD OF DIRECTORS" means the Board of Directors of the Company.
2.2 "CHANGE OF CONTROL" means the first to occur of the following
events: (a) any person(as defined in Section 3(a)(9) of the Exchange Act and as
used in Sections 13(d) and 14(d) thereof), excluding the Company, any Subsidiary
and any employee benefit plan sponsored or maintained by the Company or any
Subsidiary (including any trustee of such plan acting as trustee), but including
a `group' as defined in Section 13(d)(3) of the Exchange Act (a "Person"),
becomes the beneficial owner of shares of the Company having at least thirty
percent (30%) of the total number of votes that may be cast for the election of
directors of the Company (the "Voting Shares"); provided that no Change of
Control will occur as a result of an acquisition of stock by the Company which
increases, proportionately, the stock representing the voting power of the
Company owned by such person or group above thirty percent (30%) of the voting
power of the Company, and provided further that if such person or group acquires
stock representing more than thirty percent (30%) of the voting power of the
Company by reason of share purchases by the Company, and after such share
purchases by the Company acquires any additional shares representing voting
power of the Company, then a Change of Control shall occur; (b) the shareholders
of the Company shall approve any merger or other business combination of the
Company, sale of the Company's assets or combination of the foregoing
transactions (a "Transaction") other than a Transaction involving only the
Company and one or more of its Subsidiaries, or a Transaction immediately
following which the shareholders of the Company immediately prior to the
Transaction continue to have a majority of the voting power in the resulting
entity excluding for this purpose any shareholder owning directly or indirectly
more than ten percent (10%) of the shares of the other company involved in the
merger; or (c) within any twenty-four (24) month period the persons who were
directors of the Company immediately before the beginning of such period (the
"Incumbent Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board of Directors or the board of
directors of any successor to the Company, provided that any director who was
not a director as of the effective date of this Plan shall be deemed to be an
Incumbent Director if such director was elected to the Board of Directors by, or
on the recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually or by prior
operation of this
<PAGE>
clause (c); and provided further that any director elected to the Board of
Directors to avoid or settle a threatened or actual proxy content shall in no
event be deemed to be an Incumbent Director.
2.3 "COMPANY" means TechForce Corporation or any of its subsidiaries or
affiliates that adopt the Plan, except that the Company in the context of the
Plan Administrator, the Board of Directors and a Change of Control shall only
mean TechForce Corporation.
2.4 "DISABILITY" means the permanent and total disability of the
Participant such that he/she is unable to engage in any substantial gainful
activity by reason of any medically-determinable physical or mental impairment
that can be expected to result in death or that has lasted or can be expected to
last for a continuous period of not less than twelve (12) months. The
Participant will not be considered to be permanently and totally disabled unless
he furnishes proof of the existence of such disability in such form and manner
and based on competent medical advice, and at such times, as the Plan
Administrator may reasonably require.
2.5 "EMPLOYEE" means any person whom the Company employs for purposes
of the Federal Insurance Contributions Act.
2.6 "FOR CAUSE" means the involuntary termination of employment of the
Participant because of (i) the willful and continued failure by the Participant
to perform his duties at the Company, (ii) misconduct by the Participant that is
injurious to the Company, financially or otherwise, (iii) commission by the
Participant of an act of fraud or dishonesty relating to and adversely affecting
the Company, (iv) conviction of the Participant of a felony in connection with
his employment with the Company, or (v) the habitual failure of the Participant,
after written notice specifying such failure and a reasonable opportunity to
cure such failure having passed, to perform his employment duties at the Company
in a satisfactory manner.
2.7 "FOR GOOD REASON" means the voluntary termination of employment by
the Participant because and within ninety (90) days of any of the following
actions that occur in anticipation of or upon or after a Change of Control (i) a
substantial diminution in the then-current duties, benefits and responsibilities
of the Participant at the Company, (ii) a substantial diminution in the
then-current base salary or usual bonuses of the Participant, (iii) requiring
the Participant to regularly report to work at a facility that is more than
thirty (30) miles from the facility to which the Participant regularly reports
to work on the Effective Date of the Participant's participation in the Plan,
(iv) the failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan or disability
plan in which Participant is participating, unless such benefit or compensation
plan, life insurance plan, health and accident plan, disability or similar plan
is replaced with a comparable plan in which Participant will participate or
which will provide Participant with comparable benefits, (v) the failure of the
Company to provide the Participant with the number of paid vacation days to
which Participant is normally entitled in accordance with the normal vacation
policy of the Company, or (vi) any action by the Company that adversely effects
in a material way the Participant's participation in or materially reduces
Participant's benefits under any of such benefit or compensation plans.
2.8 "PARTICIPANT" means any Employee selected for participation in the
Plan.
2.9 "PLAN ADMINISTRATOR" means the Compensation Committee of the Board
of Directors.
2.10 "WITHOUT CAUSE" means the involuntary termination of employment of
the Participant due to lack of work at the Company or any other reason that the
Board of Directors determines is in the best interest of the Company other than
For Cause or a Disability.
- 2 -
<PAGE>
ARTICLE 3
ELIGIBILITY FOR PLAN PARTICIPATION
Each Employee of the Company shall become a Participant in the Plan as
of the date the Plan Administrator selects the Employee for participation.
Except as set forth in Article 8 of the Plan, the Plan Administrator in its sole
and unfettered discretion can terminate the participation in the Plan of any
Employee at any time prior to a Change of Control; provided, however, no
Employee's participation in the Plan shall be terminated in anticipation of or
upon or after a Change of Control.
ARTICLE 4
CONDITIONS FOR PAYMENT OF BENEFITS
4.1 A Participant shall be entitled to severance pay and benefits under
the Plan only if there occurs a Change of Control and thereafter the Company
terminates his employment Without Cause or the Participant voluntarily
terminates his employment For Good Reason during the twelve (12) month period
following the Change of Control. A Participant shall not be entitled to
severance pay under the Plan if he (i) resigns other than For Good Reason, (ii)
is terminated For Cause, (iii) dies prior to a Change of Control or prior to a
termination qualifying for severance pay and benefits under the Plan, or (iv)
voluntarily or involuntarily terminates employment as a result of a Disability
prior to a Change of Control or prior to a termination qualifying for severance
pay and benefits under the Plan.
ARTICLE 5
SALARY CONTINUATION BENEFITS
5.1 The amount of severance pay to which a Participant will be entitled
will equal (i) one hundred percent (100%) of the Participant's then-current base
salary at the Company, (ii) one hundred percent (100%) of the amount of any
commissions the Company paid to the Participant in the twelve (12) month period
ending on the termination of Participant's employment, (iii) one hundred percent
(100%) of the amount of any bonuses the Company paid to the Participant in the
twelve (12) month period ending as of the date of the termination of the
Participant's employment, (iv) one hundred percent (100%) of the value of any
perquisites to which the Participant was entitled from the Company in the twelve
(12) month period ending as of the termination of the Participant's employment,
including but not limited to the value of any living allowances, personal travel
allowances, auto lease/rental payments and similar amounts, (v) an amount equal
to the premiums needed for twelve (12) months of COBRA coverage for the
Participant, the Participant's spouse and the dependents of the Participant if
they elect COBRA coverage, and (vi) an amount equal to the premiums needed for
the twelve (12) months following the termination of Participant's employment to
purchase life insurance and disability insurance comparable to the amount of
such insurance that the Participant had at termination of employment.
5.2 Except as set forth in Section 5.3, the aggregate severance
payments described in Section 5.1 above shall be made to the Participant in one
lump sum payment within thirty (30) days of Participant's termination of
employment with the Company.
5.3 Severance payments will be made only after the Participant executes
a release and waiver containing such terms and conditions as the Plan
Administrator may reasonably require.
- 3 -
<PAGE>
ARTICLE 6
CLAIMS FOR BENEFITS
6.1 In the event that a Participant desires to make a claim with
respect to any of the benefits provided hereunder, the Participant shall submit
evidence satisfactory to the officer of the Company that the Plan Administrator
designates to receive claims. Any claim with respect to any of the benefits
provided under the Plan shall be made in writing within thirty (30) days of the
event that the Participant is asserting constitutes a termination of employment.
Failure by the Participant to submit his claim within the thirty (30)-day period
shall bar the Participant from any claim for benefits under the Plan as a result
of the occurrence of that event.
6.2 In the event that a claim of a Participant is wholly or partially
denied, the Participant or his duly authorized representative may appeal the
denial of the claim to the Board of Directors or to any committee that the Board
of Directors designates at any time within ninety (90) days after the
Participant receives written notice from the Company of the denial of the claim.
In connection therewith, the Participant or his duly authorized representative
may request a review of the denied claim, may review pertinent documents, and
may submit issues and comments in writing. Upon receipt of an appeal, the Board
of Directors or such designated committee shall make a decision with respect to
the appeal and, not later than sixty (60) days after receipt of a request for
review, shall furnish the Participant with a decision on review in writing,
including the specific reasons for the decision written in a manner calculated
to be understood by the Participant, as well as specific references to the
pertinent provisions of this Plan upon which the decision is based.
6.3 No benefit that shall be payable under the Plan to any Participant
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to do so shall be
void. No benefit shall in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any Participant, nor shall it be
subject to attachment or legal process.
6.4 The Plan shall not give any Employee or Participant any right or
claim except to the extent that the right is fixed specifically under the Plan.
The establishment of the Plan shall not be construed to give any Employee or
Participant a right to be continued in the employ of the Company or as
interfering with the right of the Company to terminate the employment of any
Employee or Participant at any time.
ARTICLE 7
ADMINISTRATION AND FINANCING OF THE PLAN
7.1 The Plan Administrator shall interpret and administer the Plan. The
Plan Administrator shall establish rules for the administration of the Plan. The
Plan Administrator shall have discretionary authority to construe the terms of
the Plan and shall determine all questions arising in its administration,
interpretation and application, including those concerning eligibility for
benefits. All determinations of the Plan Administrator shall be final and
binding on all Employees and Participants. The Plan Administrator may appoint a
committee or an agent or other representative to act on its behalf, and may
delegate to such committee or agent or representative any of the powers of the
Plan Administrator. Any action that such committee or agent or representative
takes shall be considered to be the action of the Plan Administrator, when the
committee or agent or representative is acting within the scope of the authority
that the Plan Administrator delegates it, and the Plan Administrator shall be
responsible for all such actions.
- 4 -
<PAGE>
7.2 The Company that employs the Participant on his last day of
employment will fund the Plan by payments made from its general assets.
ARTICLE 8
AMENDMENT AND TERMINATION
The Board of Directors in accordance with applicable corporate law
reserves the right at any time to amend or terminate the Plan, except that if
the Plan is terminated in anticipation of or upon or after a Change of Control
has occurred, the Plan Administrator may not terminate the participation in the
Plan of any Participant who is in the Plan when a Change of Control is
anticipated or as of the date of the Change of Control and the Board of
Directors may not amend or terminate the Plan until all Participants in the Plan
as of the date of the Change of Control terminate employment.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 The failure of the Plan Administrator to enforce any of the
provisions of the Plan shall in no way be construed to be a waiver of these
provisions, nor in any way to affect the validity of the Plan or any part
thereof, or the right of the Plan Administrator thereafter to enforce every
provision.
9.2 The benefits provided under this Plan are in addition to and not in
lieu of any other similar benefits that the Company may specify from time to
time in any employee handbook or in any other agreement between the Company and
the Participant. Additionally, the benefits that this Plan provides shall not be
reduced or offset by any other payments or benefits that the Participant may
receive from any other third party or other employer after the termination of
the Participant's employment with the Company.
9.3 Article headings are for convenience only and the language of the
Plan itself will be controlling.
9.4 This Plan shall be unfunded. Any liability of the Company under the
Plan shall be based solely on contractual obligations, if any, that are created
hereunder. No such liability of the Company shall be deemed to be secured by any
property of the Company.
9.5 Whenever any benefits become payable under the Plan, the Company
shall have the right to withhold such amounts as are sufficient to satisfy any
federal, state or local withholding tax requirements.
9.6 The Plan shall be construed and administered under the laws of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed on
__________________, 1998.
TECHFORCE CORPORATION
By:__________________________
Title:_______________________
- 5 -
<PAGE>
TECHFORCE CORPORATION
TWELVE MONTH KEY EMPLOYEE COMPENSATION CONTINUATION PLAN
SUMMARY PLAN DESCRIPTION
NAME OF PARTICIPANT:
________________________________________________________________
NAME OF PLAN:
TechForce Corporation Key Employee Compensation Continuation Plan
NAME, ADDRESS, AND TELEPHONE NUMBER OF SPONSOR AND PLAN
ADMINISTRATOR:
The Plan Sponsor appoints the Plan Administrator to administer the Plan.
EFFECTIVE DATE:
____________________________, 1998
PLAN YEAR:
Calendar year
FISCAL YEAR FOR MAINTAINING PLAN RECORDS:
Calendar Year
TYPE OF WELFARE PLAN:
The Plan is a severance pay plan that provides benefits to certain employees in
the event of termination of their employment due to certain specified reasons.
TYPE OF ADMINISTRATION OF THE PLAN:
The Compensation Committee of the Company's Board of Directors is the Plan
Administrator and administers the Plan as described in Article 7.
PROVISIONS FOR ELIGIBILITY REQUIREMENTS:
The Plan describes eligibility requirements in Article 3.
DESCRIPTION OF PLAN BENEFITS:
The Plan describes conditions for payment of benefits in Article 4 and the
amount of such benefits in Article 5.
<PAGE>
SOURCES OF CONTRIBUTIONS TO THE PLAN AND FUNDING MEDIUM:
The general assets of the Company that employs the Participant shall fund the
severance pay from the Plan.
PROCEDURES FOR PRESENTING CLAIMS AND REDRESS OF DENIED CLAIMS:
Article 6 provides detailed instructions for filing a claim and redress of a
denied claim.
AGENT FOR SERVICE OF PROCESS:
In addition to the agent listed above, service of process may be made upon the
Plan Administrator itself.
TECHFORCE CORPORATION
By:________________________________
Date:______________________________
-2-
<PAGE>
YOUR RIGHTS UNDER ERISA
The following statement is required by law to be included in this Summary Plan
Description:
As a Participant in the TechForce Corporation Twelve Month Severance Pay Plan
(the "Plan") you are entitled to certain rights and protections under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). ERISA
provides that all Plan Participants shall be entitled to:
Examine, without charge, at the Plan Administrator's office and at
other specified location, such as worksites, all Plan documents and
copies of all documents filed by the Plan with the U.S. Department of
Labor, such as detailed annual reports.
Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Administrator. The administrator may make a
reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a
copy of this summary annual report.
In addition to creating rights for Plan Participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan. The people who
operate your Plan, called fiduciaries, have a duty to do so prudently and in the
interest of you and other Plan Participants. No one, including your employer or
any other person, may fire you or otherwise discriminate against you in any way
solely in order to prevent you from obtaining a benefit or exercising your
rights under ERISA. If your claim for a benefit is denied, in whole or in part,
you must receive a written explanation of the reason for the denial. You have
the right to have the Plan review and reconsider your claim. Under ERISA, there
are steps you can take to enforce the above rights. For instance, if you request
materials from the Plan and do not receive them within thirty (30) days, you may
file suit in a federal court. In such a case, the court may require the Plan
Administrator to provide the materials and pay you up to $100 a day until you
receive the materials, unless the materials were not sent because of reasons
beyond the control of the Plan Administrator. If you have a claim for benefits
which is denied or ignored, in whole or in part, you may file suit in a state or
federal court. If it should happen that Plan fiduciaries misuse the Plan's
money, or if you are discriminated against for asserting your rights, you may
file suit in a federal court. The court will decide who should pay court costs
and legal fees. If you are successful, the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees. If you have any questions about your Plan, you should
contact the Plan Administrator. If you have any questions about this statement
or about your rights under ERISA, you should contact the nearest office of the
U.S. Labor-Management Services Administration, Department of Labor.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,559
<SECURITIES> 105
<RECEIVABLES> 19,812
<ALLOWANCES> 1,010
<INVENTORY> 2,281
<CURRENT-ASSETS> 31,612
<PP&E> 30,323
<DEPRECIATION> 16,393
<TOTAL-ASSETS> 49,935
<CURRENT-LIABILITIES> 15,391
<BONDS> 815
0
0
<COMMON> 83
<OTHER-SE> 31,809
<TOTAL-LIABILITY-AND-EQUITY> 49,935
<SALES> 6,729
<TOTAL-REVENUES> 21,303
<CGS> 4,958
<TOTAL-COSTS> 16,692
<OTHER-EXPENSES> 3,303
<LOSS-PROVISION> (84)
<INTEREST-EXPENSE> (3)
<INCOME-PRETAX> 1,311
<INCOME-TAX> 503
<INCOME-CONTINUING> 808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 808
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
