<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 19, 1996
-------------
ACCUSTAFF INCORPORATED
----------------------
(Exact name of registrant
as specified in its charter)
Florida 0-24484 59-3116655
- -------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
6440 Atlantic Boulevard, Jacksonville, FL 32211
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 725-5574
--------------
N/A
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
<TABLE>
<CAPTION>
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
<S> <C>
Report of Independent Accountants...................................................................... 5
Combined Balance Sheets as of September 30, 1995 and 1994.............................................. 6
Combined Statements of Operations for the Years Ended September 30, 1995 and 1994...................... 7
Combined Statement of Changes in Stockholders' Equity for the Years Ended September 30, 1995 and 1994.. 8
Combined Statements of Cash Flows for the Years Ended September 30, 1995 and 1994...................... 9
Notes to Financial Statements.......................................................................... 10
Combined Balance Sheet as of June 30, 1996 (unaudited)................................................. 15
Combined Statements of Operations for the Six Months Ended June 30, 1995 and 1996 (unaudited).......... 16
Combined Statements of Cash Flows for the Six Months Ended June 30, 1995 and 1996 (unaudited).......... 17
Notes to Interim Financial Statements.................................................................. 18
(B) PRO FORMA FINANCIAL INFORMATION.
Introduction to Pro Forma Unaudited Combined Financial Information..................................... 19
Pro Forma Combined Statement of Operations for the year ended December 31, 1995 (unaudited)............ 22
Pro Forma Combined Statement of Operations for the Six Months ended June 30, 1996 (unaudited).......... 23
Notes to Unaudited Pro Forma Combined Statements of Operations......................................... 24
</TABLE>
-2-
<PAGE>
(C) EXHIBITS.
2.1. Agreement and Plan of Merger by and among AccuStaff Incorporated,
AccuStaff Merger Corp., AccuStaff Merger Subsidiary, Inc., The
McKinley Group, Inc., MGI Services, Inc. and the shareholders of The
McKinley Group, Inc. and MGI Services, Inc. dated as of June 19,
1996 (without schedules)/1/ incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K dated June 19, 1996
filed July 2, 1996.
23.1 Consent of Coopers & Lybrand L.L.P.
99.1 Press Release dated June 18, 1996 incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K dated June
19, 1996 filed July 2, 1996.
99.2 Press Release dated June 20, 1996 incorporated by reference to
Exhibit 99.2 to the Company's Current Report on Form 8-K dated June
19, 1996 filed July 2, 1996.
- ---------------
/1/ AccuStaff shall supplementally furnish a copy of any omitted schedule to
the Securities and Exchange Commission upon request.
-3-
<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 hereunto duly authorized.
ACCUSTAFF INCORPORATED
By: /s/ Derek E. Dewan
-------------------------------------
Derek E. Dewan
President and Chief Executive Officer
Dated: September 3, 1996
-----------------
-4-
<PAGE>
[COOPERS & LYBRAND LETTERHEAD APPEARS HERE]
Report of Independent Accountants
---------------------------------
To the Stockholders
The McKinley Group
We have audited the accompanying combined balance sheets of The McKinley
Group (the Companies) as of September 30, 1995 and 1994, and the related
combined statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of The
McKinley Group as of September 30, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Washington, D.C.
December 7, 1995
-5-
<PAGE>
THE McKINLEY GROUP
COMBINED BALANCE SHEETS
as of September 30, 1995 and 1994
_________
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,692,734 $ 861,971
Accounts receivable 3,277,425 1,415,179
Canadian tax deposit receivable 48,886 -
Other current assets 21,147 15,761
---------- ----------
Total current assets 6,040,192 2,292,911
Property and equipment, net 185,000 122,925
Deposits 77,257 8,654
---------- ----------
Total assets $6,302,449 $2,424,490
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Accounts payable $ 563,685 $ 205,340
Accrued salaries 532,358 244,952
Accrued expenses 69,857 28,511
Current portion of mortgage payable 2,836 2,836
Capital lease obligation 2,443 3,115
---------- ----------
Total current liabilities $1,171,179 $ 484,754
========== ==========
Mortgage payable, net of current portion 16,475 19,996
Capital lease obligation, net of
current portion - 2,337
---------- ----------
Total liabilities $1,187,654 $ 507,087
---------- ----------
Commitments and contingencies (Note 4)
Stockholders' equity:
Common stock, $1.00 par value, 5,000 shares
authorized, 3,000 shares issued and
outstanding 3,000 3,000
Retained earnings 5,111,795 1,914,403
---------- ----------
5,114,795 1,917,403
---------- ----------
Total liabilities and stockholders'
equity $6,302,449 $2,424,490
========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-6-
<PAGE>
THE McKINLEY GROUP
COMBINED STATEMENTS OF OPERATIONS
for the years ended September 30, 1995 and 1994
__________
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Contract consulting revenue $16,512,368 $6,743,633
Operating expenses:
Direct costs of consulting services 10,363,314 4,121,222
Indirect costs of consulting services 627,296 282,688
----------- ----------
Gross profit 5,521,758 2,339,723
Selling, general and administrative 1,225,217 799,665
----------- ----------
Operating income 4,296,541 1,540,058
Interest income 55,055 5,394
Interest expense 13,610 3,604
Rental income, net 3,767 2,361
----------- ----------
Net income $ 4,341,753 $1,544,209
=========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-7-
<PAGE>
THE McKINLEY GROUP
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended September 30, 1995 and 1994
____________
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON RETAINED STOCKHOLDERS'
SHARES STOCK EARNINGS EQUITY
------ ------ ------------ --------------
<S> <C> <C> <C> <C>
Balance, October 1, 1993 3,000 $3,000 $ 426,594 $ 429,594
Net income 1,544,209 1,544,209
Distribution to stockholders (56,400) (56,400)
----- ------ ----------- -----------
Balance, September 30, 1994 3,000 3,000 1,914,403 1,917,403
Net income 4,341,753 4,341,753
Distribution to stockholders (1,144,361) (1,144,361)
----- ------ ----------- -----------
Balance, September 30, 1995 3,000 $3,000 $ 5,111,795 $ 5,114,795
===== ====== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-8-
<PAGE>
THE McKINLEY GROUP
COMBINED STATEMENTS OF CASH FLOWS
for the years ended September 30, 1995 and 1994
----------
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,341,753 $1,544,209
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 60,904 29,810
Increase (decrease in cash resulting from
changes in assets and liabilities):
Accounts receivable (1,862,246) (951,044)
Canadian tax deposit receivable (48,886) -
Other current assets (5,386) (1,444)
Deposits (68,603) (6,073)
Accounts payable 358,345 190,386
Accrued salaries 287,406 250,707
Accrued expenses 41,346 (39,609)
----------- ----------
Net cash provided by operating activities 3,104,633 1,016,942
----------- ----------
Cash flows from investing activities
Purchase of property and equipment (122,979) (84,756)
----------- ----------
(122,979) (84,756)
----------- ----------
Cash flows from financing activities:
Proceeds from notes payable to stockholders - 75,000
Repayments of notes payable - (80,000)
Repayments of capital lease obligations (3,009) (1,265)
Repayments of mortgage payable (3,521) (3,741)
Repayments of stockholders payable - (8,764)
Distributions to stockholders (1,144,361) (90,000)
----------- ----------
Net cash used in financing activities (1,150,891) (108,770)
----------- ----------
Net increase in cash and cash equivalents 1,830,763 823,416
Cash and cash equivalents, beginning of year 861,971 38,555
----------- ----------
Cash and cash equivalents, end of year $ 2,692,734 $ 861,971
=========== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 13,610 $ 3,604
=========== ==========
Supplement disclosure of noncash activity:
Increase to capital lease obligations - $ 6,717
=========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-9-
<PAGE>
THE McKINLEY GROUP
NOTES TO FINANCIAL STATEMENTS
___________
1. Organization
The McKinley Group (the Companies), consists of The McKinley Group,
Inc. and MGI Services, Inc. The McKinley Group, Inc. provides contract labor
to perform computer systems consulting services for a variety of clients in
manufacturing environments.
The McKinley Group, Inc. was incorporated on February 26, 1988 and
has elected to be treated as a Sub-Chapter S corporation under the Internal
Revenue Code. All income of The McKinley Group, Inc. accrues directly to the
stockholders and all income taxes are paid by the stockholders at the
individual level of taxation; therefore, The McKinley Group, Inc. pays no
federal or state income taxes.
Additionally, The McKinley Group, Inc. has elected to use a year end
other than a calendar year end, pursuant to Internal Revenue Code sections 444
and 7519. The McKinley Group, Inc. has paid a deposit to the Internal Revenue
Service pursuant to such election and may have to pay additional deposits
annually. All deposits paid are ultimately refundable.
Included in these combined financial statements is the financial
activity of MGI Services, Inc. (MGI). MGI was incorporated December 27, 1993
(date of inception) with the purpose to provide administrative and accounting
services to The McKinley Group, Inc. which pays a monthly management fee to
MGI in exchange for these services. MGI has elected to be treated as a Sub-
Chapter S corporation under the Internal Revenue Code and is owned by the same
stockholders as The McKinley Group, Inc. MGI uses a calendar year end,
however, these combined financial statements include the financial activity of
MGI as of September 30, 1995 and for the twelve months then ended and as of
September 30, 1994 and for the period of December 27, 1993 (date of inception)
to September 30, 1994. All intercompany accounts and transactions have been
eliminated.
-10-
<PAGE>
THE McKINLEY GROUP
NOTES TO FINANCIAL STATEMENTS
__________
2. Summary of significant accounting policies
Revenue recognition
-------------------
The Companies provide personnel, billed on an hourly basis, to
perform computer consulting services for other companies. Revenue
is recognized and billed as labor hours are worked at agreed upon
rates.
Property and equipment
----------------------
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over estimated useful lives
ranging from 3 to 15 years. Leasehold improvements are amortized on
a straight-line basis over the lesser of the lease term or the
estimated useful life of the improvement.
Maintenance and repairs of property and equipment are charged to
operations and major improvements that extend the useful life are
capitalized. Upon retirement, sale or other disposition of property
and equipment, the cost and accumulated depreciation are eliminated
from the accounts and any gain or loss is included in operations.
Cash and cash equivalents
-------------------------
Cash and cash equivalents consist of all demand deposits and
short-term investments with original maturities of three months or
less.
Concentration of credit risk
----------------------------
The Companies maintain the majority of its cash in an overnight
sweep account which invests primarily in low risk securities. No
losses have been experienced on such investments. Since the
maturities of such investments are overnight they are considered to
be cash equivalents.
-11-
<PAGE>
THE McKINLEY GROUP
NOTES TO FINANCIAL STATEMENTS
___________
Other financial instruments which potentially subject the
Companies to concentrations of credit risk consist principally of
accounts receivable. Concentration of credit risk with respect to
accounts receivable are limited to two customers (see Note 5) with
large balances. The Companies' remaining customer base includes
many smaller balances dispersed across different businesses and
geographic regions.
3. Property and equipment
Property and equipment as of September 30, 1995 and September 30,
1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Computer equipment $221,077 $110,462
Furniture and fixtures 34,088 21,724
Condominium 27,206 29,927
Leasehold improvements 3,776 3,776
Capitalized leases 6,717 6,717
-------- --------
292,864 172,606
Less accumulated depreciation
and amortization 107,864 49,681
-------- --------
Property and equipment, net $185,000 $122,925
======== ========
</TABLE>
Depreciation and amortization expense was $60,904 and $29,810 for
the years ended September 30, 1995 and 1994, respectively.
The Companies own a condominium, which is used for rental purposes.
Depreciation of the rental property is computed using the straight-line method
over an estimated useful life of 15 years. Depreciation expense for the years
ended September 30, 1995 and 1994 is $2,721. The condominium is subject to a
30 year mortgage requiring monthly payments of $386 that bears interest at a
rate of 9.5% per annum.
-12-
<PAGE>
THE McKINLEY GROUP
NOTES TO FINANCIAL STATEMENTS
_________
Future scheduled repayments of the mortgage payable is as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 2,836
1997 3,166
1998 3,481
1999 3,826
2000 4,206
Thereafter 1,796
-------
$19,311
=======
</TABLE>
4. Commitments and contingencies
Operating leases
----------------
The Companies lease certain facilities in Front Royal, Virginia and
Atlanta, Georgia under operating agreements expiring in 1997 and 1998. For
the years ended September 30, 1995 and 1994, rent expense was $40,451 and
$21,900, respectively. The operating lease for the Atlanta office contains
an escalation clause of 4% annually.
Future minimum annual lease payments at September 30, 1995 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 51,742
1997 53,193
1998 18,520
--------
$123,455
========
</TABLE>
Capitalized leases
------------------
The Companies lease certain equipment under noncancelable capital
lease arrangements. Included in the September 30, 1995 and 1994 balance
sheets is $6,717 of equipment, net of accumulated depreciation of $3,359
and $1,120, respectively.
-13-
<PAGE>
THE McKINLEY GROUP
NOTES TO FINANCIAL STATEMENTS
__________
Future minimum lease payments required under the capitalized lease
at September 30, 1995 is $2,443 payable during 1996.
5. Revenue from major customers
During 1995, revenue from two customers accounted for 34% and 16% of
contract revenues. Those customers also accounted for 32% and 16%,
respectively, of the total accounts receivable at September 30, 1995.
During 1994, revenue from two different customers accounted for 24%
and 12% of contract revenues. Those customers also accounted for 7% and 10%,
respectively, of the total accounts receivable at September 30, 1994.
6. Pension plan
The Companies have a voluntary defined-contribution 401(k) plan (the
Plan) which covers employees who are over 21 years of age. The Companies make
contributions to the Plan on a discretionary basis. There were no employer
contributions in 1995 or 1994.
-14-
<PAGE>
THE MCKINLEY GROUP, INC. AND SUBSIDIARY
COMBINED BALANCE SHEET
AS OF
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
June 30,
1996
----------
<S> <C>
Assets
Current assets:
Cash and cash equivalents $2,897,587
Accounts receivable, net 5,025,189
Prepaid expenses 83,704
----------
Total current assets 8,006,480
Furniture and equipment, net 208,899
Other assets 292,359
----------
Total assets $8,507,738
==========
Liabilities & Stockholders' Equity
Current liabilities:
Notes payable, current portion $1,500,000
Accrued payroll and related taxes 719,034
Accounts payable and accrued expenses 242,089
----------
Total current liabilities 2,461,123
Notes payable, long term portion 15,999
----------
Total liabilities 2,477,122
==========
Stockholders' equity:
Common stock 18,572
Retained earnings 6,012,044
----------
Total stockholders' equity 6,030,616
----------
Total liabilities and stockholders'
equity $8,507,738
==========
</TABLE>
-15-
<PAGE>
THE MCKINLEY GROUP, INC. AND SUBSIDIARY
COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, June 30,
1995 1996
---------- ----------
<S> <C> <C>
Revenue $8,249,149 $12,269,458
Cost of revenue 5,418,442 8,249,083
---------- ----------
Gross profit 2,830,707 4,020,375
---------- ----------
Operating expenses:
General and administrative 486,273 1,387,620
Depreciation and amortization 30,452 42,534
---------- ----------
Total operating expenses 516,725 1,430,154
---------- ----------
Income from operations 2,313,982 2,590,221
---------- ----------
Other income (expense):
Interest income 29,997 42,486
Interest expense (7,000) (913)
---------- ----------
Total other income (22,997) 41,573
---------- ----------
Net income $2,336,979 $2,631,794
========== ==========
Pro forma data:
Income before provision for income taxes $2,336,979 $2,631,794
Provision for income taxes 920,551 1,052,718
---------- ----------
Pro forma net income $1,416,428 $1,579,076
========== ==========
</TABLE>
-16-
<PAGE>
THE MCKINLEY GROUP, INC. AND SUBSIDIARY
COMBINED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
June 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income $ 2,336,979 $ 2,631,794
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 30,452 42,534
Changes in assets and liabilities:
Accounts receivable (1,816,140) (1,710,098)
Advances to officers and employees -- --
Prepaid expenses -- 68,219
Other assets 29,669 (166,216)
Accounts payable and accrued expenses 236,845 369,255
Accrued payroll and related taxes 8,920 (382,135)
----------- -----------
Net cash provided by operating 826,725 853,353
activities ----------- -----------
Cash flows used in investing activities:
Purchase of furniture and equipment (99,284) (60,901)
----------- -----------
Net cash used in investing activities (99,284) (60,901)
----------- -----------
Cash flows provided by (used in)
financing activities:
Borrowings on notes payable -- 1,500,211
Payments on notes payable (1,528) --
Distributions to shareholders (714,490) (1,921,109)
----------- -----------
Net cash used in financing activities (716,018) (420,898)
----------- -----------
Net increase in cash and cash
equivalents 11,423 371,554
Cash and cash equivalents, beginning of
period 1,224,880 2,526,213
----------- -----------
Cash and cash equivalents, end of period $ 1,236,303 $ 2,897,767
=========== ===========
</TABLE>
-17-
<PAGE>
THE MCKINLEY GROUP, INC AND SUBSIDIARY
NOTES TO INTERIM FINANCIAL STATEMENTS
1) Basis of Presentation
Interim Financial Information - The unaudited financial statements reflect
all adjustments which, in the opinion of management, are necessary to present
fairly the financial position and results of operations for the periods
presented. The results of operations for the interim periods are not
necessarily indicative of the results for a full year. Certain information and
footnote disclosures as of June 30, 1996 and for the six months ended June 30,
1995 and 1996 normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission, although the
Company believes that the disclosures are adequate to make the information not
misleading.
-18-
<PAGE>
ACCUSTAFF INCORPORATED
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Management believes that the assumptions used in preparing the unaudited
pro forma financial statements contained herein provide a reasonable basis on
which to present the pro forma financial data. The unaudited pro forma
financial statements are provided for informational purposes only and should not
be construed to be indicative of the results of operations or financial position
of AccuStaff Incorporated and its subsidiaries (the "Company") had the
transactions described below been consummated on or as of the dates assumed, and
are not intended to project the Company's results of operations or its financial
position for any future period or as of any future date.
A pro forma combined balance sheet has not been included with the financial
information attached hereto, as The McKinley Group and subsidiary ("McKinley")
has been included in the Company's historical balance sheet which was filed in
the Company's Form 10-Q for the quarter ended June 30, 1996, filed on August 15,
1996.
The pro forma Statements of Operations data for the year ended January 1,
1995, consisting of the Company's audited historical income statement, for the
year ended January 1, 1995 and the McKinley audited historical income statement
for the year ended September 30, 1994, are described herein in lieu of a
columnar presentation. The Company issued 1,857,150 shares of stock in
accordance with the transaction therefore increasing the weighted average number
of shares outstanding to 28,200,510 from 26,343,360. The combined pro forma
operations resulted in revenues of $143.8 million, income from operations of
$6.6 million, and net income of $4.0 million. These combined results resulted
in pro forma earnings per share of $0.14 versus the actual $0.12 reported by the
Company. The acquisition expenses of $2.8 million were not included in the
above pro forma results of operations.
The following unaudited pro forma combined statements of income for the
year ended December 31, 1995 and the six months ended June 30, 1996 have been
prepared to reflect the operations of the Company as if the following had
occurred on January 2, 1995:
(i) the acquisition of McKinley, effective June 19, 1996;
(ii) the acquisitions of Matthews Professional Employment Specialists
Incorporated, effective July 2, 1995; Special Counsel International,
Inc., and its affiliate, effective July 30, 1995; Bogard Temps, Inc.,
effective July 30, 1995; Computer Professionals, Inc., effective
October 29, 1995; Advance/Possis Technical Services, Inc., effective
November 30, 1995; Contemporary Personnel Services, Inc., effective
January 2, 1995, Dupay Enterprises, Inc. d/b/a ASOSA Personnel,
effective January 2, 1995, LawStaf, Inc., effective May 1, 1995 and
Attorneys Per Diem, effective May 1, 1995, HR Management Services,
Inc., effective November 6, 1995 (collectively the "1995 Other
Acquisitions"); and
(iii) the acquisitions of PTA International, d/b/a Perma Temp Agency,
effective January 2, 1996; Goldfarb-Wasson Associates, Inc. d/b/a GW
Consulting and GW Temporaries, Inc., effective January 3, 1996; Excel
Temporary Services, Inc. and affiliated companies, effective January
31, 1996; Additional Technical Support, Inc. and affiliated
companies, effective February 22, 1996; Accounting Pros, Inc. and
Accounting Pros Philadelphia, Inc., effective January 2, 1996, Tekna,
Inc., effective January 1, 1996, Career Enhancement International,
Inc., effective January 5, 1996, Advantage Personnel Services, Inc.
and Advantage Temporaries of Pleasanton, Inc., effective January 28,
1996, and HNS
-19-
<PAGE>
Software, Inc., effective March 11, 1996; Alternative Temps, Inc.,
effective April 27, 1996; TempsAmerica, Inc. and affiliated companies,
effective May 19, 1996; Project Professionals, Inc., effective May 19,
1996; Logue and Rice, Inc. and affiliated companies, effective May 26,
1996; Contact Recruiters, Inc. and Ovation Technologies, Inc.,
effective May 31, 1996; Openware Technologies, Inc., effective June
16, 1996; Alta Technical Services, Inc., effective July 14, 1996; CAD
Design, Inc., effective June 30, 1996; In-House Counsel, Inc.,
effective July 7, 1996; TRAK Services, Inc., effective July 28, 1996;
Perspective Technology, Inc., effective August 11, 1996, Datacorp
Business Systems, Inc., effective August 18, 1996; and Staffware,
Inc., effective August 31, 1996 (collectively "1996 Other
Acquisitions").
On October 26, 1995, the Company's Board of Directors authorized a two-for-
one stock split. The stock split was effected as a 100% stock dividend and was
paid on November 27, 1995 to shareholders of record on November 9, 1995.
Additionally, on March 6, 1996, the Company's Board of Directors authorized a
three-for-one stock split. The stock split was effected as a 200% stock
dividend and paid on March 27, 1996 to shareholders of record on March 20, 1996.
The pro forma financial statements and earnings per share data for the periods
presented herein are computed after giving effect to the both the two-for-one
and three-for-one stock splits.
MCKINLEY BUSINESS COMBINATION
The McKinley acquisition was treated as a pooling of interests for
financial accounting purposes. The Company acquired all of the issued and
outstanding common stock of McKinley in exchange for 1,857,150 shares of the
Company's Common Stock.
1996 OTHER ACQUISITIONS
The 1996 Other Acquisitions were treated as purchases for financial
reporting purposes, except for the acquisitions of Perma Temps and Staffware
which were both accounted for under the pooling of interests method of
accounting. To date the Company has paid in the aggregate $160.9 million in
cash, issued 4.1 million shares of Common Stock, and issued, in the aggregate,
notes payable of $14.8 million (payable from April 1996 to March 1999) as
consideration for the 1996 Other Acquisition. Certain of the 1996 Other
Acquisition agreements provide for additional purchase price consideration upon
attainment of certain earnings targets at the end of periods ranging from one to
three years. Any additional consideration paid will be recorded as additional
purchase price.
1995 OTHER ACQUISITIONS
The 1995 Other Acquisitions were treated as purchases for financial
reporting purposes. The Company paid in the aggregate $53.9 million in cash and
issued, in the aggregate, notes payable of $14.8 million (payable from April
1995 to April 1998) as consideration for the 1995 Other Acquisitions. Certain
of the 1995 Other Acquisition agreements provide for additional purchase price
consideration upon attainment of certain earnings targets at the end of periods
ranging from one to six years. To date an aggregate of $8.3 million of
additional consideration has been paid on the 1995 Other Acquisitions, which has
been recorded as additional purchase price. Any additional consideration paid
will be recorded as additional purchase price.
-20-
<PAGE>
The unaudited pro forma combined financial statements are derived, in part,
from historical financial statements and should be read in conjunction with
those financial statements and the notes thereto. The unaudited pro forma
combined financial statements are not necessarily indicative of the results that
would have occurred if the assumed transactions had occurred on the dates
indicated or the expected financial position or results of operations in the
future. The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements of AccuStaff
Incorporated and in conjunction with the related assumptions and notes to these
unaudited pro forma combined financial statements.
-21-
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
for the year ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
1995 and 1996 Combined
AccuStaff Other Pro Forma AccuStaff
Incorporated McKinley/(1)/ Acquisitions Adjustments Incorporated
------------ -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $267,616,204 $16,512,368 $457,242,848 $ -- $741,371,420
Cost of revenue 218,242,244 10,990,610 357,391,510 -- 586,624,364
------------ ----------- ------------ ----------- ------------
Gross profit 49,373,960 5,521,758 99,851,338 -- 154,747,056
------------ ----------- ------------ ----------- ------------
Operating expenses:
General and administrative 32,981,394 1,164,313 80,690,297 (11,483,269)(a) 103,352,735
Depreciation and amortization 2,210,000 60,904 1,903,585 6,778,591 (b) 10,953,080
------------ ----------- ------------ ----------- ------------
Total operating expenses 35,191,294 1,225,217 82,593,882 (4,704,678) 114,305,815
------------ ----------- ------------ ----------- ------------
Income (loss) from operations 14,182,568 4,296,541 17,257,456 4,704,678 40,441,241
------------ ----------- ------------ ----------- ------------
Other income (expense)
Other -- 3,767 (9,326,431) 10,710,836 (c) 1,388,172
Management fee -- -- (1,387,657) -- (1,387,657)
Interest income 733,248 55,055 501,015 (1,284,684)(d) 4,634
Interest expense (849,700) (13,610) (2,394,739) (12,677,629)(e) (15,935,678)
------------ ----------- ------------ ----------- ------------
Total other income (expenses) (116,452) 45,212 (12,607,812) (3,251,477) (15,930,529)
------------ ----------- ------------ ----------- ------------
Income (loss) before provision for
income taxes 14,066,114 4,341,753 4,649,644 1,453,201 24,510,712
Provision (benefit) for income taxes 5,366,700 1,736,701/(2)/ 1,870,239 581,280 (f) 9,554,920
------------ ------------ ------------ ----------- ------------
Net income (loss) $ 8,699,414 $ 2,605,052 $ 2,779,405 $ 871,821 $ 14,955,792
============ ============ ============ =========== ============
Earnings per share of common and common
stock equivalents $0.22 $0.34
============ ============
Weighted average number of shares
outstanding 39,761,550 43,818,285
============ ============
</TABLE>
- ---------------
/(1)/ Derived from the audited financial statements of McKinley for the year
ended September 30, 1995.
/(2)/ The pro forma provision for income taxes was computed using the Company's
effective tax rate of approximately 40%.
-22-
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
for the six months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
1996
AccuStaff Other Pro Forma
Incorporated Acquisitions Adjustments Pro Forma
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue $334,461,000 $75,599,000 $ -- $410,060,000
Cost of Revenue 284,521,000 56,761,000 -- 321,282,000
------------ ----------- ------------
Gross profit 69,940,000 18,838,000 -- 88,778,000
Operating expenses:
General and administrative 43,519,000 19,940,000 (8,453,000)(a) 55,006,000
Depreciation and amortization 4,178,000 170,000 1,356,000 (b) 5,704,000
------------ ------------ ----------- ------------
Total operating expenses 47,897,000 20,110,000 (7,097,000) 60,710,000
------------ ------------ ----------- ------------
Income (loss) from operations 22,243,000 (1,272,000) 7,097,000 28,068,000
------------ ------------ ----------- ------------
Other income (expense)
Other -- 128,000 -- 128,000
Interest income 1,417,000 -- -- 1,417,000
Interest expense (1,910,000) 10,000 (2,776,000)(e) (4,676,000)
Acquisition expense (2,800,000) (277,000) -- (3,077,000)
------------ ------------ ----------- ------------
Total other income (expense) (3,293,000) (139,000) (2,776,000) 6,208,000
------------ ------------ ----------- ------------
Income (loss) before provision for
income taxes 18,950,000 (1,411,000 ) 4,321,000 21,860,000
Provision (benefit) for income taxes 8,178,000 (564,000) 1,728,000 (f) 9,342,000
------------ ------------ ----------- ------------
Net income (loss) $ 10,772,000 $ (847,000) $ 2,593,000 $ 12,518,000
============ ============ =========== ============
Earnings per share of common and common
stock equivalents $0.17 $0.20
============ ============
Weighted average number of shares
outstanding 62,175,000 62,607,741
============ ============
</TABLE>
-23-
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS
BASIS OF RECORDING THE TRANSACTIONS - The accompanying pro forma combined
income statements for the year ended December 31, 1995 and the six months
ended June 30, 1996 have been prepared to reflect the operations of the
Company as if the following had occurred on January 2, 1995, (the beginning of
the period); (i) the acquisition of McKinley; (ii) the acquisition of the 1996
Other Acquisitions; and (iii) the acquisition of the 1995 Other Acquisitions.
The Acquisition Expenses of $2.8 million, which are not deductible for
income tax purposes, related to the acquisition of McKinley have been
included in the actual results of operations of the Company for the six months
ended June 30, 1996. These expenses have not been included in the statement
of operations for the year ended December 31, 1995.
STATEMENT OF INCOME ADJUSTMENTS - The following pro forma adjustments
were made to the historical statements of the Company:
(a) This adjustment primarily reflects the contractual reduction
in officer compensation relating to the 1996 and 1995 Other Acquisitions
as the result of negotiated employment agreements, which provides for
substantially the same management duties or responsibilities, offset by
increases in officers incentive compensation per employment agreements of
AccuStaff Incorporated.
(b) This adjustment reflects the increase in amortization expense
related to the goodwill recorded under the purchase method of accounting
for the 1996 and 1995 Other Acquisitions in the amount of $6,778,591 for
the year ended December 31, 1995 and $1,356,000 for the six months ended
June 30, 1996.
(c) This adjustment relates to contract termination fees which
were paid to the managers and officers of Computer Professionals, Inc.
required by the purchase of the company by AccuStaff Incorporated.
(d) This adjustment reflects the elimination of interest income
for the cash available to be used and the subsequent interest income
foregone, in connection with the purchase of the 1995 Other Acquisitions.
(e) This adjustment reflects the increase in interest expense for
cash required to be borrowed at an interest rate of 6.5% and for the
additional bank debt and notes payable at interest rates ranging from
6.5% to 8% related to the purchase of the 1995 and 1996 Other
Acquisitions.
(f) This adjustment reflects the decrease to income tax expense
based on the pro forma adjustments to income before provision for income
taxes based on the Company's effective tax rate of approximately 40%.
-24-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Page
----
<S> <C> <C>
2.1 Agreement and Plan of Merger among AccuStaff Incorporated, AccuStaff
Merger Corp., AccuStaff Merger Subsidiary, Inc., The McKinley Group,
Inc., MGI Services, Inc. and the shareholders of The McKinley Group, Inc.
and MGI Services, Inc. dated as of June 19, 1996 (without schedules)
incorporated by reference to Exhibit 2.1 to AccuStaff's Current Report on
Form 8-K dated June 19, 1996 and filed July 2, 1996............................ N/A
23.1 Consent of Coopers & Lybrand L.L.P............................................. 26
99.1 Press Release dated June 18, 1996 incorporated by reference to Exhibit 99.1
to AccuStaff's Current Report on Form 8-K dated June 19, 1996 and
filed July 2, 1996............................................................. N/A
99.2 Press Release dated June 20, 1996 incorporated by reference to Exhibit 99.2
to AccuStaff's Current Report on Form 8-K dated June 19, 1996 and
filed July 2, 1996............................................................. N/A
</TABLE>
-25-
<PAGE>
EXHIBIT 23.1
[LETTERHEAD OF COOPERS AND LYBRAND]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (File No.s 33-88262 and 333-06899) of our
report dated December 7, 1995, on our audits of the combined financial
statements of The McKinley Group as of September 30, 1995 and 1994 and for the
years then ended, which report is included in this Report on Form 8-K.
/s/ Coopers & Lybrand L.L.P.
Washington, D.C.
September 3, 1996
