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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996
COMMISSION FILE NUMBER: 0-24484
ACCUSTAFF INCORPORATED
(Exact name of registrant as specified in its charter)
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Florida 59-3116655
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6440 Atlantic Blvd., Jacksonville, FL 32211
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(Address of principal executive offices) (Zip Code)
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(Registrant's telephone number including area code): (904) 725-5574
Securities registered pursuant to Section 12(b) of the Act:
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Common Stock, Par Value $0.01
Per Share New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
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Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark 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
The aggregate market value of the voting stock held by non-affiliates of the
Registrant (assuming for these purposes, but not conceding, that all executive
officers and directors are "affiliates" of the Registrant), based upon the
closing sale price of common stock on March 24, 1997, as reported by the New
York Stock Exchange, was approximately $1,583,531,060.
As of March 24, 1997, the number of shares outstanding of the Registrant's
common stock was 98,080,264.
DOCUMENTS INCORPORATED BY REFERENCE. List hereunder the following documents
if incorporated by reference and the part of the Form 10-K (e.g., Part I, Part
II, etc.) into which the document is incorporated: Portions of the
Registrant's Proxy Statement for its 1997 Annual Meeting of stockholders are
incorporated by reference in Part III.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [_]
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INDEX OF FORM 10-K
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PAGE
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PART I
Item 1. Business.......................................................... 1
Item 2. Properties........................................................ 13
Item 3. Legal Proceedings................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............... 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................. 14
Item 6. Selected Financial Data........................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 16
Item 8. Financial Statements and Supplementary Data....................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 44
PART III
Item 10. Directors and Executive Officers of the Registrant............... 44
Item 11. Executive Compensation........................................... 44
Item 12. Security Ownership of Certain Beneficial Owners and Management... 44
Item 13. Certain Relationships and Related Transactions................... 44
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 44
Signatures................................................................ 49
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PART I
ITEM 1. BUSINESS
GENERAL
AccuStaff Incorporated (including, unless the context otherwise requires,
all subsidiaries) ("AccuStaff", or the "Company") is a national provider of
strategic staffing, consulting and outsourcing services to businesses,
professional and service organizations and governmental agencies through a
branch office network that includes Company-owned, franchised and associated
offices. The Company operates 464 Company-owned, 84 franchised and 352
associated branch offices in 45 states and the District of Columbia. The
Company's business is organized into six divisions: the Information Technology
division, the Professional Services division, the Commercial division, the
Teleservices division (previously the Telecommunications division), the Health
Care division and the Private Label division, which generated 27.6%, 12.4%,
43.5%, 7.8%, 7.7% and 1.0% of the Company's fiscal 1996 revenue, respectively.
The Company's Information Technology, Professional Services, Commercial,
Health Care and Private Label divisions provide a wide range of services to a
diversified mix of clients, while its Teleservices division furnishes trained
telemarketing personnel to ATI, a subsidiary of AT&T.
The Company strengthened its position as a leader in the staffing,
consulting and outsourcing industry with the acquisition of Career Horizons,
Inc. ("Career") in November 1996. This acquisition broadened the Company's
service offerings through the addition of Career's Health Care and Private
Label divisions and expanded significantly the Company's Information
Technology and Commercial divisions.
STAFFING INDUSTRY
The temporary staffing industry has grown rapidly in recent years as
companies have utilized temporary employees to control personnel costs and to
meet specialized or fluctuating personnel needs. According to Staffing
Industry Report, the U.S. market for temporary staffing services grew at a
compound annual growth rate of approximately 16% from approximately $28.9
billion in revenue in 1993 to approximately $45.1 billion in revenue in 1996.
Two of the fastest growing sectors of the staffing services industry, are
information technology services and professional services. According to
Staffing Industry Report, revenue from the information technology sector in
1996 are estimated to have been $11.4 billion, representing a 26% compounded
annual growth rate since 1993, while revenue in the professional/specialty
sector in 1996 are estimated to have been $4.8 billion, representing a 26%
compounded annual growth rate since 1993. The Company believes the temporary
staffing industry is highly fragmented, but is experiencing increasing
consolidation largely in response to opportunities to provide comprehensive
supplemental staffing solutions to regional and national accounts.
Historically, the demand for temporary staffing services has been driven
primarily by a need to temporarily replace full-time employees due to illness,
vacation or abrupt termination. More recently, competitive pressures have
forced businesses to focus on reducing costs, including converting fixed,
permanent labor costs to variable or flexible costs. The use of temporary
staffing typically shifts employment costs and risks, such as workers'
compensation and unemployment insurance and possible adverse effects of
changing employment regulations, to temporary staffing companies, which can
spread the costs and risks over a larger pool of employees and clients. In
addition, this use of temporary employees avoids the inconvenience, expense
and other adverse effects of hiring and firing additional full-time employees.
Organizations have also begun using flexible staffing to reduce
administrative overhead by outsourcing operations that are not part of their
core business functions. In its most basic form, outsourcing involves staffing
and managing a specific facility or function, such as a mail room. In a
partnering relationship, the temporary staffing company, in addition to
providing on-site management of its temporary employees, often provides other
value-added services such as assuming the primary role in training the
temporary employees to perform specific tasks required by the client, and may
be compensated, in part, based on the increase in productivity of the staffed
function or facility.
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THE COMPANY'S STAFFING SERVICES
Information Technology Division. The information technology division, which
accounted for 27.6% of the Company's fiscal 1996 revenue, provides a full
range of information technology staffing services through both the Solutions
Group, which provides mainframe to client server transition specialists,
client-server program analysts and internet and intranet applications
developers; and the Supplemental Staffing Group, which provides systems
administrators, PC specialists, program analysts systems analysts, database
analysts, LAN/WAN specialists, software specialists, documentation
specialists, project managers, computer trainees, software engineers and
electronic data processing (EDP) auditors through 80 dedicated branch offices.
The Company provides these highly-skilled information technology specialists
for short-term, long-term and permanent placement to primarily large
corporations and financial institutions. The Company has business partnerships
or nationally recognized certifications from companies such as SAP, Microsoft,
IBM, Lotus and PowerSoft. The acquisition of Career, combined with the
Company's acquisition of additional information technology businesses,
significantly contributed to the expansion of the Information Technology
division during 1996.
Professional Services Division. The Professional Services division, which
accounted for 12.4% of the Company's fiscal 1996 revenue, provides personnel
for legal, technical, accounting, scientific and outplacement functions. The
legal unit provides attorneys, paralegals and legal secretaries to corporate
legal departments and private law firms. The Company believes it is one of the
leading providers of staffing services to the legal services industry. The
Company's technical unit provides drafters, designers and engineers in the
mechanical and electrical engineering fields as well as personnel to the
chemical, plastics and other industries requiring chemists, laboratory
technicians and other professionals. The technical unit also provides high
level engineering and drafting services, including the outsourcing of
specialized design services such as architectural design and drafting, tool
designs and computer-aided design (CAD) services. The accounting unit provides
professionals in finance, data processing and accounting, including auditors,
controllers, CPAs, financial analysts, loan processors and tax accountants.
The scientific unit provides trained scientists, laboratory technicians and
chemists to Fortune 1000 companies in the pharmaceutical and consumer products
industries. The outplacement unit provides outplacement, career development,
leadership development and change management services.
Commercial Division. AccuStaff's Commercial division, which accounted for
43.5% of the Company's fiscal 1996 revenue, provides personnel to clients to
serve both traditional temporary clerical and light industrial needs. The
Commercial division has two business units: office services and light
industrial services. Office services supplies a wide variety of secretarial,
clerical, word processing and office automation personnel to perform skilled
tasks, as well as reception, copying, filing and other miscellaneous office
services. The light industrial unit supplies personnel to perform functions
such as unskilled assembly and packaging, light-duty warehouse work, inventory
and other light-duty, labor-intensive tasks and provides personnel for the
assembly of electronic and other components. This unit also supplies personnel
to assist with banquets and catering functions, hospitality and other labor-
intensive special engagements such as sporting or political events and
meetings and conventions.
Teleservices Division. The Teleservices division, which accounted for 7.8%
of the Company's fiscal 1996 revenue, provides temporary staffing to ATI, a
subsidiary of AT&T, which requires trained personnel for customer care
services and inbound and outbound telemarketing services. These services
involve responding to incoming calls for employee benefits administration,
customer service and other needs as well as initiating outgoing telemarketing
programs for AT&T related businesses and others. The Company has significantly
expanded the teleservices it supplies to ATI since initiating its relationship
in 1985. Effective January 1, 1995, the Company, through its subsidiary People
Systems, Inc., entered into a five-year agreement with ATI. The Company
believes it is the primary provider of staffing services to ATI. This
partnering relationship includes incentive pricing based on productivity and
the electronic exchange of management information. This agreement prohibits
the Company from providing similar services to any direct competitor of ATI.
Health Care Division. The Health Care division, which accounted for 7.7% of
the Company's fiscal 1996 revenue, provides personnel primarily to individuals
requiring home health care and, to a lesser extent, to health care facilities.
The division provides certified home health and personal care aides,
companions, health care technicians, licensed nurses and therapists. The
Health Care division was acquired in the Career transaction.
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Private Label Division. The Private Label division, which accounted for 1.0%
of the Company's fiscal 1996 revenue, provides financial and back office
support service to independently owned temporary personnel firms ("Associated
Offices"). These services including billing and payroll services and
preparation of payroll tax filings and management reports. In addition, the
Private Label division advances the Associated Offices an amount equal to
their gross profit after deduction of Career's fees and expenses. The Private
Label division was acquired in the Career transaction.
STRATEGY OVERVIEW
AccuStaff's strategy is to increase its revenue and improve its
profitability by offering an extensive range of specialized services through a
national network of branch offices while expanding its Professional Services
and Information Technology divisions and creating value-added partnering and
outsourcing relationships with Commercial division customers. The Company
markets and delivers its services with an emphasis on local entrepreneurial
spirit and decision making at the branch level combined with strong corporate
technological, marketing and managerial support. Where appropriate, the
Company clusters branches within markets to provide specialized service
delivery, to take advantage of cross-selling opportunities and, in certain
circumstances, to reduce overhead costs. The Company seeks to provide
innovative and customized solutions to staffing problems and to expand the
Company's relationships with Fortune 1000 clients. Management believes that
this approach, coupled with its compensation structure which is tied to branch
office profitability and cross-referrals among service lines, results in a
creative and committed management team, enhanced client service and increased
revenue growth.
The Company has supported its strategy of service diversification and
geographic expansion with an aggressive acquisition program and, to a lesser
extent, with newly-opened branch offices. A key element of the Company's
expansion strategy is to acquire existing businesses with strong management,
profitable operating results and recognized local and regional presence.
Acquisition criteria also include a desirable market location, significant
market share, new or expanded specialties that can be added to the Company's
existing lines of business, efficient operating systems and existing
management that will fit well within the Company's decentralized,
entrepreneurial environment.
OPERATING STRATEGY
The following are key elements of the Company's operating strategy:
Extensive Range of Services. AccuStaff offers a broad selection of strategic
staffing services, ranging from information technology professionals to
virtually all traditional temporary staffing services such as secretarial,
clerical, word processing and light industrial. In addition, the Company has
significantly expanded its professional services by providing personnel, such
as attorneys, paralegals, CAD specialists, engineers, accountants and
financial services industry specialists. These professional service lines,
which management believes have substantial growth opportunity, tend to
generate higher gross margins than more traditional temporary services. The
Company also furnishes temporary employees for high volume, specialized
services such as teleservices. While teleservices tend to have lower gross
margins, the longer-term nature of these relationships coupled with the
relatively lower operating expenses associated with these relationships make
these high volume operations attractive. The Company also offers permanent
placement services in several of its branches and believes that the relatively
higher margins and cross-selling opportunities associated with permanent
placement make it a profitable complement to its other staffing services.
Decentralized, Entrepreneurial Branches with Centralized Support. Management
of AccuStaff's various client services is decentralized, with branch managers
and principals of acquired companies enjoying considerable autonomy in hiring,
pricing, business mix and advertising. The Company seeks talented managers who
are capable of operating independently and succeeding within the Company's
decentralized operating structure. Substantially all full-time branch office
personnel are eligible to receive incentive compensation based on office
profitability, resulting in a team-oriented approach. AccuStaff also provides
incentives to promote cross-referrals among different service lines and
different geographic areas. The Company provides its decentralized
3
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branch offices with strong support from either its corporate offices,
Northeast Operations Center or smaller remote sites including billing,
payroll, risk management, receivables aging analysis and collections services,
marketing, quality standards enforcement, guidance in hiring and training of
personnel, operating procedures, customer service and regulatory guidance. The
Company also supports marketing efforts to large and multi-office accounts
with a team of individuals responsible for national account marketing and
service. The Company's planned expansion of its corporate support systems will
allow the Company to achieve administrative economies of scale while
capitalizing on the responsiveness to client needs of its decentralized branch
office network.
Customized, Value-Added Services. The Company strives to provide added value
by customizing its services to meet its clients' needs. These services include
customized management information reporting, on-site management of temporary
personnel, specialized training and behavioral testing of temporary employees
for selected lines of business. The Company believes that offering these
services will help to enhance its long-term partnering relationships with its
clients.
Company of Specialists. AccuStaff's offices and systems are designed to
focus on client needs. Lines of authority, customer sales and service
responsibilities, staff recruiting and brand identification are grouped by
service type to enhance responsiveness to the client's needs. As a result the
Company may operate several offices in the same market that provide different
personnel services. For example, within a particular market, the Company may
have a commercial and a professional services branch, which may share office
facilities to reduce overhead, but each of the service lines within that
branch will have its own management team and account executives. In addition,
the Company may open additional offices to service the specific functional
needs of its clients as well as to follow existing clients into new geographic
areas. Management believes that the segregation of service lines enhances
employee professionalism and communicates functional expertise to clients.
Innovative Use of Technology. The Company believes that a significant
competitive advantage can be obtained through the innovative use of
technology. AccuStaff has made substantial investments in and has a continuing
program to improve its management information, marketing, accounting and
payroll processing systems, evidenced by the continuing development of both
the Company's proprietary ACCUDRIVE(TM) system and OASIS system. This systems
link front office (customer relations and staffing) and back office (data
processing, payroll and other internal support) systems, enabling the Company
to provide clients with management reports that measure productivity and
efficiency. These systems will continue to be enhanced, integrated and rolled
out to a majority of the branch offices for the next 24 to 36 months. Because
certain payroll and utilization data and functions of the Company's management
information systems can be integrated with the management information systems
of its customers, the Company's management information systems enhance
AccuStaff's ability to build partnering relationships. The Company continually
seeks to achieve additional economies of scale through increased automation.
Control of Operating Expenses. The Company seeks to improve its
profitability by controlling its operating expenses, both in aggregate amount
and as a percentage of revenue. To control operating expenses, the Company
employs a decentralized organizational structure with a lean corporate staff,
focuses on intelligent uses of technology and empowers local managers to make
and implement business decisions and solutions. The Company believes that
longer-term partnering relationships with key customers will also help the
Company reduce operating expenses as a percentage of revenue.
GROWTH STRATEGY
The following are the key elements of the Company's growth strategy:
Strategic Acquisitions. Since its formation in 1992, AccuStaff has pursued
an aggressive acquisition program, having acquired numerous staffing
companies, highlighted by the merger with Career in November 1996.
Collectively, AccuStaff and Career have acquired 65 staffing companies since
1993, including 39 in fiscal 1996, and 9 during the first quarter of 1997. A
key element of the Company's expansion strategy is to continue to acquire
existing businesses with profitable operations and recognized local and
regional presence, with a view
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toward expanding the Company's geographic service base and diversifying and
strengthening its service mix. Acquisition criteria also include a desirable
market location, significant market share, new or expanded specialties that
can be added to the Company's existing lines of business, efficient operating
systems and existing management that will fit well with the Company's
decentralized, entrepreneurial environment. The Company's general policy is to
finance a portion of each acquisition with seller financing and/or an earn-out
arrangement that provides the seller with additional consideration if the
acquired company reaches specified earnings targets after the acquisition.
Expansion of Information Technology and Professional Services. The
Information Technology and Professional Services divisions generally enjoy
higher profit margins than the Company's other divisions due to the
specialized expertise of the temporary personnel provided through these
divisions. Management's strategy is to strengthen its position as one of the
few full-service temporary staffing companies to offer information technology
and professional services on a broad scale. AccuStaff's principal competitors
in the information technology and professional services areas generally
consist of specialty firms that do not offer a broad range of temporary
staffing services. The Company's strategy is to continue to increase the
percentage of its revenue and gross profits from the Professional Services
division by expanding current specialties into new geographic markets and by
identifying and adding new lines of business, leveraging wherever possible on
existing specialty strengths. The Company significantly expanded its
information technology operations by acquiring 30 firms with information
technology operations since 1993, including Career. These acquisitions extend
the geographic coverage of the information technology operations with the
capacity to provide clients with services in the 48 contiguous states.
Entry into New Markets. The Company's strategies for entering new markets
are to follow existing clients into new geographic areas and to make strategic
acquisitions, particularly if such acquisitions will either broaden the
geographic base of its Commercial division in major markets and thereby
enhance its ability to compete for national accounts or increase the size and
breadth of the Company's Professional Services division. In evaluating new
markets, the Company considers a number of factors, including local
demographics and economic conditions as well as the available local workforce.
Expansion of Partnering and Outsourcing Relationships. The Company considers
itself to have partnering relationships with more than 75 clients. These
relationships involve providing a large number of temporary employees in
specialized areas including telecommunications, banking, data entry and other
financial services. These relationships tend to be characterized by the
provision of additional services, such as on-site temporary staffing
coordination or management, skills testing and behavioral screening of
employees. While these partnering relationships generally have lower gross
margins than traditional temporary staffing services, the higher volumes and
comparatively lower operating expenses associated with these relationships
result in attractive operating profits for the Company. The Company seeks to
expand its partnering relationships to comprehensive outsourcing arrangements,
in which the Company staffs and manages an entire department or function on a
turn-key basis. The Company engaged in outsourcing relationships with
approximately 25 clients during 1996. The Company believes that partnering and
outsourcing arrangements, which involve higher levels of involvement in a
customer's operations, will promote the longevity and stability of the
Company's client relationships.
Increased Penetration of Existing Markets. A key element of AccuStaff's
growth strategy is to cluster new offices in existing and contiguous markets.
The Company believes that growth in the staffing industry comes mainly from
the establishment or acquisition of new offices, since the market for any
specific office is generally restricted by its proximity to clients and by the
geographic radius in which associates are willing to travel. Office clustering
and increasing revenue at existing offices create economies of scale through
common regional management and the spreading of advertising, recruiting and
training costs over a larger revenue base. In certain markets, the Company
intends to cross-sell professional services including information technology,
legal, accounting and technical services through its existing Commercial
division offices with a view to establishing stand-alone professional services
branch offices as growth and customer needs warrant.
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ACQUISITIONS
A key component of the Company's growth strategy is to acquire existing
staffing operations. The Company seeks acquisitions that will expand the
geographic scope of its Commercial, Information Technology and Professional
Service divisions, strengthen its professional services and introduce new
specialty services to its business mix. Management believes that AccuStaff's
strong reputation and decentralized, team-oriented management style facilitate
its efforts to acquire independent staffing businesses seeking an alliance
with a national company. In determining whether to proceed with an
acquisition, the Company evaluates a number of factors, including: the
historical and projected financial results; the purchase price and expected
impact on the Company's earnings per share; the expansion of the Company's
geographic market share; the enhancement to the Company's breath of services;
the experience, reputation and personality of management; and any expected
synergies with the Company's existing operations.
The Company has established a team responsible for coordinating the
integration of acquired businesses into the Company's operation. Management
believes that acquired businesses can be integrated into the Company at low
incremental cost and will enable the Company to continue to spread fixed costs
over a larger revenue base. The Company currently plans to operate the
acquired companies which offer Commercial division services under the
AccuStaff name. The Company is in the process of creating a singular brand
identity for the Information Technology division as well as the different
business units in the Professional Services division. The Company currently
plans to retain the former names and marketing identities of acquired
companies operating in the Information Technology and the Professional
Services division for a transition period.
On November 14, 1996, the Company merged with Career Horizons, Inc.
("Career"), which strengthen its position as a leader in the staffing
industry. The Company acquired all of the outstanding stock of Career in
exchange for 27.6 million shares of the Company's common stock. The merger was
accounted for under the pooling-of-interests method of accounting. Career's
revenue for the twelve months ended December 31, 1995, was $385.3 million,
comprised of four divisions as follows: Commercial $259.7 million, Health Care
$104.2 million, Information Technology, $9.0 million and Private Label, $12.4
million. Career, like the Company, also employed an aggressive acquisition
strategy focusing primarily on the Information Technology division and, to a
lesser extent, the Commercial division.
During fiscal 1996, the Company and its subsidiary Career completed several
acquisitions which enhanced the Company's goal of penetration into the higher
margin Information Technology and Professional Services divisions. In
addition, the Company enhanced its Commercial division through acquisitions
which increased the geographical penetration and diversified the product mix.
The following table details the acquisitions of the Company and Career
organized by division:
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ACQUISITION FISCAL 1995
DATE REVENUES
Information Technology ----------- -------------
(IN MILLIONS)
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GW Consulting..................................... 1/96 $46.3
Mini-Systems Associates........................... 1/96 45.3
Zeitech, Inc...................................... 1/96 34.2
Tekna, Inc........................................ 1/96 0.7
Career Enhancement International, Inc............. 1/96 5.4
The Experts....................................... 2/96 35.7
HNS Software, Inc................................. 3/96 10.7
American Computer Professionals, Inc.............. 4/96 8.8
WHY Systems, Inc.................................. 5/96 3.4
Contact Recruiters, Inc. and Ovation Technologies,
Inc............................................... 5/96 11.3
The McKinley Group, Inc........................... 6/96 28.0
Openware Technologies, Inc........................ 6/96 6.4
ALTA Technical Services, Inc...................... 7/96 3.0
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ACQUISITION FISCAL 1995
DATE REVENUES
Information Technology ----------- -------------
(IN MILLIONS)
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Perspective Technology Corporation................. 8/96 $ 5.6
DataCorp Business Systems.......................... 8/96 7.0
Berger & Co........................................ 8/96 27.0
Staffware, Inc..................................... 8/96 11.9
North American Consulting Services, Inc............ 9/96 5.3
TSG Professional Services, Inc..................... 9/96 49.4
The Blackstone Group............................... 10/96 19.4
HJM Consulting, Inc................................ 12/96 15.1
Resource Solutions Group, Inc...................... 12/96 3.5
Professional Services
Accounting Pros, Inc............................... 1/96 $ 3.7
Additional Technical Support, Inc.................. 2/96 79.2
Project Professionals, Inc......................... 5/96 7.3
Logue & Rice, Inc.................................. 5/96 3.7
CAD Design, Inc.................................... 7/96 1.7
In-House Counsel, Inc.............................. 7/96 0.8
TRAK Services, Inc................................. 7/96 3.7
Scientific Staffing, Inc........................... 10/96 20.2
Legal Support Personnel, Inc....................... 10/96 5.4
Commercial
PTA International.................................. 1/96 $30.0
Excel Temporary Services, Inc...................... 2/96 31.6
Advantage Personnel Services, Inc.................. 2/96 10.8
Management Search, Inc............................. 3/96 42.2
Alternative Temps, Inc............................. 4/96 3.8
CenCor Temporary Services.......................... 4/96 27.4
Richard Michael Group, Inc......................... 4/96 6.6
Temps America East, Inc............................ 5/96 40.8
Dial A Temporary, Inc.............................. 6/96 10.2
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The companies mentioned above, excluding Career, were acquired for
consideration in the aggregate of $373.8 million, comprised of $345.5 million
in cash and $28.3 million in notes payable to former shareholders, and 6.9
million shares of the Company's common stock.
The following table details the acquisitions of the Company in fiscal 1997:
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ACQUISITION FISCAL 1996
DATE REVENUES
Information Technology ----------- -------------
(IN MILLIONS)
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Executive Monitors, Inc............................ 1/97 $12.7
Consultants in Computer Software, Inc.............. 1/97 13.2
Preferred Consulting, Inc.......................... 1/97 9.0
Lenco Computer Consulting.......................... 1/97 16.1
Computer Action, Inc............................... 3/97 10.1
Professional Services
Manchester, Inc.................................... 1/97 $30.2
Legal Information Technology, Inc.................. 1/97 10.4
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ACQUISITION FISCAL 1996
DATE REVENUES
Commercial ----------- -------------
(IN MILLIONS)
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CGS Services, Inc.................................. 1/97 $10.1
The Placers, Inc., et al........................... 1/97 35.1
Espirit Staffing Services.......................... 2/97 5.0
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OPERATIONS
Branch Offices. The Company delivers its services through a branch office
network of 900 offices in 45 states, including 464 Company-owned, 84
franchised, and 352 associated offices. Wherever possible, the Company
clusters offices to permit advertising and administrative expenses to be
spread over a large number of offices in close proximity to each other.
The following table shows the Company's owned, franchised and associated
offices as of the dates indicated (including offices of an acquired subsidiary
only after such acquisition):
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JAN. 1, DEC. 31, DEC. 31, MARCH 31
1995 1995 1996 1996
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Information Technology.................... 1 8 72 80
Professional Services..................... 10 21 73 94
Commercial (1)............................ 41 60 275 299
Teleservices.............................. 4 5 6 6
Health Care (2)........................... -- -- 69 69
Private Label (3)......................... -- -- 327 352
--- --- --- ---
Total offices......................... 56 94 822 900
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(1) Includes 39 and 42 franchised offices as of December 31, 1996 and March
31, 1997, respectively.
(2) Includes 45 and 42 franchised offices as of December 31, 1996 and March
31, 1997, respectively.
(3) Comprised of Associated Offices.
Account coordinators in each office are responsible for sales, interviewing
temporary employees and monitoring customer relationships. Account
coordinators and other office personnel report to a branch manager who is
responsible for the profitability of the office. Branch managers are given a
high level of authority in making decisions about the operation of their
offices and receive bonuses based on the profitability of their branch. Other
branch personnel, including account coordinators, also receive bonuses
directly related to the profitability of their branch. This system encourages
account coordinators to develop ongoing relationships with their customers
after a sale has been made. Branch managers in the Commercial division report
to regional vice presidents or subsidiary presidents, who report to the
Company's Commercial division president. Branch managers in the Information
Technology, Professional Services and Teleservices divisions report to their
division heads, who report in turn to the Chief Operating Officer, except for
the presidents of certain Professional Services and Information Technology
subsidiaries who report directly to the Company's Chief Executive Officer.
Franchised Commercial Services Offices. Franchised Commercial Services
Offices provide only clerical and light industrial personnel. At December 31,
1996, the Company's Commercial Services franchisees operated 39 offices.
Commencing in 1996, the Company resumed sales of additional franchises for the
first time since 1991.
Under the current franchises, the Company granted each Commercial Services
franchisee the exclusive right to operate under the TempForce trademark within
a designated geographic area. Future franchisees will be sold under the
AccuStaff trademark and the Company intends to convert a majority of the
existing franchises to the AccuStaff trademark during the next 18 months. The
Company provides each franchised office with the same software used by some of
the Company-owned offices to assist in recruiting temporary employees, testing
applicants and matching employee skills to specific client requirements.
Franchisees receive training from the Company, attend Company-sponsored
seminars, participate in marketing programs and utilize the Company sales
literature. The franchisee is responsible for screening and recruiting
qualified temporary personnel, as well as locating clients.
8
<PAGE>
Generally, the temporary worker is the Company's employee and all costs of
employing the temporary worker are the responsibility of the Company. The
Company provides, under master policies, workers' compensation and liability
insurance and fidelity bonds for temporary employees. The Company bills
franchisees for insurance premiums. Under most of these agreements, the
Company receives between 45% and 40% of the gross profits of the franchised
offices. Franchisees must maintain their own insurance coverage for the
franchised office and its permanent employees including workers' compensation,
disability, general liability, automobile liability and fidelity bond
coverage.
Current Commercial Services franchise agreements generally are terminable by
the franchisee upon 30 days' prior written notice to the Company. Future
franchise agreements will have terms (including renewal options) of up to 25
years. The Company requires all franchisees to follow the basic procedures and
standards established for Company-owned offices and may terminate a franchise
agreement if the franchisee fails to meet the Company's standard or otherwise
breaches the franchise agreement. Franchisees are generally required to
advertise in the Yellow Pages. In addition, franchisees, and in certain cases,
the Company, are required to contribute at least one percent of annual
billings in excess of $500,000, or in certain cases one percent of a
franchisee's gross profit where annual billings exceed $500,000, to the
Company's advertising fund. The Company assists its franchisees by providing
national, regional and cooperative advertising.
Franchised Health Care Offices. Franchised Health Care Offices provide only
health care personnel. At December 31, 1996, the Company's Health Care
franchisees operated 45 offices.
The Company grants the Health Care franchisee the exclusive right to operate
under the HealthForce and Medi-Force trademarks within a designated geographic
area. The Company provides each franchised office with the same software used
by some of the Company-owned offices to assist in recruiting temporary
employees, testing applicants and matching employee skills to specific client
requirements. Franchisees receive training from the Company, attend seminars,
participate in marketing programs and utilize the Company's sales literature.
Franchisees operate their businesses autonomously within the framework of
the Company's policies and standards, and recruit, employ and pay their own-
full-time employees. The franchisee is responsible for screening and
recruiting qualified temporary personnel, as well as obtaining clients. All
temporary personnel assigned positions by franchised offices are employed by
the Company while performing their duties. The Company provides, under master
policies, workers' compensation and liability insurance and fidelity bonds for
temporary employees recruited by franchised offices. The Company bills
franchisees for insurance premiums. Franchisees must maintain their own
insurance coverage for the franchised office and its permanent employees
including workers' compensation, disability, general liability, automobile
liability and fidelity bond coverage.
The Company receives royalty fees from each franchisee based upon the
franchisee's sales and encourages each franchisee to expand its operations by
reducing royalty fee percentages for increases in sales volume. Royalty fees
generally range from 12% to 6.5% of sales. New franchises get 6 months free of
royalty fees. In addition, franchisees are required to reimburse the Company
for certain expenses. New franchisees pay the Company an initial non-recurring
franchise fee of $10,000 to cover partially screening, training and other
start-up costs incurred by the Company in establishing a franchised office.
The franchise agreements, as amended, are terminable by the franchisees on
30 to 90 days' prior written notice, depending upon the terms of the
individual franchise agreements. Franchisees and, in certain cases, the
Company, are required to contribute one half of one percent of billings in
excess of between $150,000 and $350,000, depending upon the terms of the
individual franchise agreements, to the Company's advertising fund. The
Company assists its franchisees by providing national, regional and
cooperative local advertising.
Sales and Marketing. During a typical week, the Company provides temporary
services for over 10,000 clients. The Company obtains clients through personal
sales presentations, telephone marketing calls, direct mail solicitations,
referrals from other clients and advertising in a variety of local and
national media, including newspapers, magazines and trade publications. In
addition, the Company utilizes local television advertising in
9
<PAGE>
certain markets to increase name recognition. Many of the branches supplement
the Company's advertising efforts with their own local advertising. The
Company has in-house graphics design and marketing personnel to produce
marketing materials and client proposals. The Company also actively sponsors
various community activities, such as co-sponsoring seminars on human
resource-related issues, as a way of increasing name recognition. The
Company's directors and officers participate in national trade associations,
local chambers of commerce and other civic organizations.
As larger clients consolidate their purchasing of temporary services.
management believes that AccuStaff's ability to provide a full range of
services to national accounts will be a competitive advantage. Through
relationships with other staffing companies, the Company has been successful
in providing temporary staffing services in markets where it does not have
branch offices. All of the Company's offices submit requests for proposals
from large or multi-office accounts to the Company's national accounts
coordinator to enable the Company to develop bids for national accounts. When
business is obtained, the national accounts coordinator notifies all offices
and coordinates the branch manager's contact with the client's local
representative. The national accounts coordinator continues to monitor the
performance of local offices and meets regularly with the client's central
purchasing representative to discuss service.
Temporary Employees. The Company finds that referrals from its existing
labor force provide the highest quality and largest number of new temporary
employees and pays a referral fee to any employee responsible for recruiting a
temporary employee. In addition, temporary personnel are recruited through
advertising in local and, to a lesser extent, national media. Temporary
employees are employed by the Company on an as-needed basis dependent upon
client demand and are paid only for the time they actually work. The Company
employs in excess of 60,000 temporary employees during a typical week.
The Company is responsible for and pays the employer's share of Social
Security taxes (FICA), federal and state unemployment taxes, workers'
compensation insurance and other similar costs relating to its temporary
employees. The Company does not, in general, provide health insurance benefits
to its temporary employees. Temporary employees with more than 1,000 hours of
service per year are eligible to participate in the Company's 401(k) savings
plan.
Assessment, Training and Quality Control. The Company uses a comprehensive
system to assess, select and train its full-time employees in order to provide
quality assurance for its temporary personnel operations. Assessment,
selection, training and support materials are acquired from third parties or
designed and produced by the Company for its branch offices. AccuStaff
provides workplace orientation courses for temporary employees tailored to the
practices and policies of specific clients and also furnishes specialized
training for temporary employees. Computerized tutorials are available in most
branch offices for temporary employees wishing to upgrade their typing, data
entry, office automation or word processing skills, and classes on topics such
as spreadsheets and word processing are conducted periodically in those branch
offices. In addition, the Company provides a "help desk" which is an
information link staffed by computer experts to provide on-line support for
software applications to both temporary workers and clients' full-time staff.
AccuStaff stresses specialization and the mining and empowerment of employees
to ensure that customers receive the highest quality service for the most
cost-effective price.
Management Information Systems. The Company currently maintains multiple
processing centers throughout its branch structure with a majority of the back
office processing done at either the Northeast Operations Center in Woodbury,
New York (previously the Career headquarters) or at the Company's headquarters
in Jacksonville, Florida.
The centralized computer systems at the Northeast Operations Center support
the majority of the Commercial division operations, as well as all of the
Health Care and Private Label division with customized billing, payroll, and a
wide range of management reports, including weekly, monthly and quarterly
reports that provide information ranging from client activity to customer
service representatives' productivity. The billing system provides for
multiple reporting capabilities including tape-to-tape billing, modem
transmission and custom printed invoices. The systems support field operations
in marketing, employee search and selection, quality assurance and regulatory
compliance.
10
<PAGE>
Branch offices that use the Northeast Operations Center are linked to the
centralized systems by remote-site personal computers. Offices that are not
linked by personal computer to the centralized systems submit billing and
payroll information by overnight delivery services to the Northeast Operations
Center for processing. The remote-site system is supported by in-house
technical support department, which is responsible for computer installations,
training and technical support. Using modem communications, the technical
support personnel can log onto a remote-site computer to resolve problems.
The management information systems in Jacksonville, Florida have been
focused upon creating a customized network and software design based on
client-server architecture. The Jacksonville systems support all the branches
of the legal, accounting, and scientific units of the Professional Services
division, the Teleservices division, as well as numerous Commercial division
branches. The company continues to enhance its proprietary management
information system known as ACCUDRIVE with a combination of fully integrated
financial applications and resume search and retrieval applications obtained
from third parties. ACCUDRIVE assists in the efficient matching of employee
skills with employer needs in addition to providing branch offices support on
pricing, marketing, quality assurance, and regulatory compliance. For those
branch offices serviced by Jacksonville who do not have access to ACCUDRIVE,
payroll and billing information are submitted via overnight delivery.
The Company believes that its management information systems are
instrumental to its operations and that the core components of its system are
adequate to service its growth in the foreseeable future. The Company expects
to be integrating the management information systems of acquired companies
into one of either the Northeast Operations Center or the Jacksonville,
Florida headquarters over the next 36 months. The Company believes by
consolidating back office functions of acquired offices in an orderly manner
the process should not have a detrimental effective on operations in the short
run and should provide more efficient and profitable operations in the long
run.
The Company has implemented procedures designed to reduce its exposure to
loss due to interruption or loss of the Company's information processing
capabilities at either its Northeast Operations Center or its Jacksonville,
Florida headquarters, including the remote storage of backup materials and the
development of a disaster recovery plan.
Workers' Compensation Program. The Company maintains multiple workers'
compensation insurance programs for claims in excess of deductibles ranging
from $250,000 to $350,000 per occurrence. The Company's insurance carriers
require the Company to maintain irrevocable letters of credit to cover
potential claim losses under the self-insurance portion of the plans in
amounts totaling to $15.2 million as of December 31, 1996. These insurance
plans cover most of the Company's operations. Any recent acquisitions in which
the acquired companies are self-insured are integrated into the Company's plan
immediately. However, if an acquired company is fully insured or has limited
self-insurance, the Company will integrate the subsidiary at the most cost
effective date in accordance with management's analysis.
Regional field personnel process and investigate workers' compensation
claims and report to the Company's full-time in-house risk manager on a
regular basis. These field personnel work in conjunction with the risk manager
and a third-party administrator to manage claims and set up appropriate
accruals for the uninsured portion of claims (up to certain deductible
amounts). An independent actuary provides advice on overall workers'
compensation costs as well as an actuarial valuation regarding the adequacy of
the accruals. The accrual balances determined by the third-party administrator
and Company management are consistent with the amounts recommended by the
actuary.
In addition, the Company has a safety program in all branch offices to
provide appropriate safety training to employees prior to job assignment. The
risk manager and field personnel also perform safety inspections at customer
locations to help determine potential risks for employee injury and to assist
customers in making the workplace safer. Company policies prohibit staffing of
high risk work such as roofing, the handling of hazardous materials or
operating motor vehicles or heavy equipment. Third-party behavioral testing is
used to help reduce unnecessary claims.
11
<PAGE>
Full-Time Employees. At March 27, 1997, the Company employed approximately
2,200 employees on a full-time equivalent basis, of whom 87 work at the
corporate headquarters and 179 at the Northeast Operations Center. Full-time
employees are covered by life and disability insurance and receive health and
other benefits.
COMPETITION
The staffing services industry is fragmented and highly competitive, with
limited barriers to entry. A large percentage of temporary staffing companies
are local operations with fewer than five offices. Within local markets, these
firms actively compete with the Company for business, and in most of these
markets no single company has a dominant share of the market. The Company also
competes with larger full-service and specialized competitors in national,
regional and local markets. The principal national competitors of the
Company's Commercial, Professional Services and Health Care divisions include
Manpower, Inc., Kelly Services, Inc., The Olsten Corporation, Interim
Services, Inc., Robert Half International, and CDI Corp. The principal
national competitors of the Company's Information Technology division include
Keane Inc., the Registry, COREStaff Inc. and, to an extent, the consulting
divisions of IBM and the "Big Six" accounting firms. Some of these national
competitors have greater marketing, financial and other resources than the
Company. The Company believes that the primary competitive factors in
obtaining and retaining clients are the number and location of offices, an
understanding of clients' specific job requirements, the ability to provide
personnel in a timely manner, the monitoring of quality of job performance and
the price of services. The primary competitive factors in obtaining qualified
candidates for employment assignments are wages, responsiveness to work
schedules and number of hours of work available. Management believes that
AccuStaff is highly competitive in these areas.
GOVERNMENT REGULATIONS
The Company's Health Care division is subject to extensive federal, state
and local laws and government regulations, including licensing requirements,
periodic examinations by government agencies and federal and state anti-fraud,
anti-abuse and anti-kickback statutes and regulations. Healthcare providers
are also subject to extensive documentation requirements of government
agencies and industry participants, such as insurance companies and managed
care companies. These regulations can affect the ability of the Company to
collect its fees for services provided. Of the Health Care division's sales in
fiscal 1996, approximately 36% were attributable to Medicaid services and
12.5% were attributable to Medicare services. The extent and type of
government support for healthcare services, as well as the extent and type of
health insurance benefits that employers are required to provide employees,
have been the subject of intense scrutiny and debate in recent years at both
the national and state levels. Changes in government support of healthcare
services or the regulations governing such services, including regulations
governing the methods by which services are delivered, the prices for services
or reimbursements of fees, could all have a significant, and potentially
adverse, effect on the Company. In addition, as part of healthcare reform,
recent federal and certain state legislative proposals have included
provisions extending health insurance benefits to temporary employees who
currently are not provided with such benefits. The Company cannot currently
predict what, if any, governmental action will be taken.
In many states in which the Health Care division operates, Career is
required to be licensed in order to establish and operate a home care service
agency. In approximately 21 states and the District of Columbia, home
healthcare providers must initially receive certificate of need ("CON")
approval from the state, in addition to complying with licensure requirements.
In some states, the process of obtaining a CON may be costly and time
consuming, and several states currently are not granting CONs. CON and
licensure laws can restrict the types of services that a company may provide.
Additionally, such laws may limit a company's ability to establish or expand
its operations within a state. Failure to obtain any such approvals may have
an adverse effect on such operations.
New York State requires an approval by the Public Health Counsel of the New
York State Department of Health ("NYPHC") for any change in the "controlling
person" of an operator of a licensed home care services agency ("LHCSA").
"Controlling person" means a person or entity which directly or indirectly has
the ability to direct the actions, management or policies of an entity whether
through the ownership of voting securities or voting rights, by contract or
otherwise. Control of an entity is presumed to exist if any person directly or
12
<PAGE>
indirectly owns, controls or holds the power to vote 10% or more of the voting
securities or voting rights of such entity. A person or entity which becomes a
controlling person of an operator of a LHCSA must file an application for
NYPHC approval within 30 days of becoming a controlling person, and pending a
decision by the NYPHC, such person or entity may not exercise control over the
LHCSA. Such person or entity must divest itself of the controlling interest of
the operator within 30 days if the NYPHC denies such approval. The Company has
13 offices in New York State which are LHCSA's.
The Company is required by the Federal Trade Commission and by the laws in a
number of states to prepare, update and deliver an offering circular to
potential franchisees. In addition, certain states require that such offering
circulars be registered with the state. The Company's franchise programs are,
or will be, registered in those jurisdictions in which the Company's
activities require registration.
TRADEMARKS
The Company has applications pending before the Patent and Trademark Office
for federal registration of the service marks ACCUSTAFF and the ACCUSTAFF logo
for its services generally, ACCUDRIVE for its proprietary software and
management information systems and ACCUTECH for its technical services. See
"Legal and Administrative Proceedings" below for information regarding a legal
challenge to the use and registration of these marks. Subsidiaries of
AccuStaff hold federally registered service marks for TEMPFORCE, FLEXI-FORCE,
LAWSTAF, the LAWSTAF INC. logo, the ATTORNEYS PER DIEM INC. logo, ASOSA
PERSONNEL AP, CONTEMPORARY, SPECIAL ASSISTANTS, SPECIAL COUNSEL, THE EXPERTS,
the Experts hourglass logo, the Tempo logo, and the Temporaries Inc. logo, and
registered service marks in California for PERMA TEMP AGENCY and the Perma
Temp logo. A subsidiary of the Company has a right until September of 1998 to
use the A+ logo.
Subsidiaries also have common law claims to the trade names ACCOUNTING PROS,
ACCOUNTING PROS PHILADELPHIA, MINI-SYSTEMS, ZEITECH, SCA CONSULTING GROUP,
TEKNA, TEKNA SYSTEMS GROUP, EXCEL TEMPORARY SERVICES, INC., EXCEL TRAINING
SERVICES, INC. and EXCEL TECHNICAL SERVICES, INC.
ITEM 2. PROPERTIES
The Company owns no material real estate. It leases its corporate
headquarters and Northeast Operations Center as well as its branch offices.
The leases generally run for three to five-year terms. The Company believes
that its facilities are generally adequate for its needs and does not
anticipate difficulty replacing such facilities or locating additional
facilities, if needed. The Company anticipates the need to move or expand its
corporate headquarters, but expects no difficulty finding such other or
additional space.
ITEM 3. LEGAL AND ADMINISTRATIVE PROCEEDINGS
The Company, in the ordinary course of its business, is from time to time
threatened with or named as a defendant in various lawsuits, including
discrimination and harassment and other similar claims. The Company maintains
insurance in such amounts and with such coverages and deductibles as
management believes are reasonable and prudent. The principal risks that the
Company insures against are workers' compensation, personal injury, bodily
injury, property damage, professional malpractice, errors and omissions and
fidelity losses.
Accu Personnel, Inc., an unrelated company based in New Jersey ("Accu
Personnel"), has opposed AccuStaff's applications to register the marks
ACCUSTAFF, ACCUDRIVE and ACCUTECH pending before the United States Patent and
Trademark Office (the "Patent Office"). In addition, Accu Personnel sought
money damages and an injunction in an action brought in the United States
District Court for Delaware based on alleged common law trademark infringement
and unfair competition. The District Court has dismissed with prejudice Accu
Personnel's claim for damages and denied Accu Personnel's request for
permanent injunctive relief. Accu Personnel has dismissed, without prejudice,
its remaining claims in the District Court proceeding, leaving only
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<PAGE>
the plaintiffs' oppositions to the Company's pending Patent Office
applications. In connection with such dismissal, AccuStaff agreed not to use
the ACCUSTAFF mark or any other mark with the ACCU prefix in certain areas of
southern New Jersey pending a negotiated settlement or a final judgment of the
Trademark Trial and Appeal board or other court or tribunal. Based on advice
the Company has received from various sources, AccuStaff expects, but cannot
be absolutely assured that it will, obtain registration of the marks with the
Patent Office, subject only to a possible restriction on using the marks in
the limited geographic areas of southern New Jersey and southeastern
Pennsylvania where Accu Personnel claims to possess trademark rights.
AccuStaff currently has no offices in those geographic areas.
There is no pending litigation which the Company believes is likely to have
a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting of Stockholders on November 14, 1996 to
consider and vote upon the approval of the issuance of shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), pursuant to an
Agreement and Plan of Merger, dated as of August 25, 1996, by and among the
Company, Sunrise Merger Corporation, a wholly owned subsidiary of the Company,
and Career, which provided for the merger of Sunrise Merger Corporation with
and into Career. The following represents the votes cast to approve the
issuance of the Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
Voting for............................................... 45,698,136
Voting against........................................... 120,702
Abstain from voting...................................... 39, 850
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The following table sets forth the reported high and low sales prices of the
Common Stock for the quarters indicated as reported on the New York Stock
Exchange and the Nasdaq National Market, as adjusted to reflect both the
Company's three-for-one stock split, effective March 27, 1996, and two-for-one
stock split effective, November 27, 1995. The Company completed its initial
public offering on August 16, 1994, at a split adjusted price per share of
$1.75. The Common Stock was traded on the Nasdaq National Market until
November 15, 1996, at which time it commenced trading on the New York Stock
Exchange under the symbol "ASI".
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR 1994
Third Quarter (from August 16, 1994)......................... $ 2.44 $ 1.83
Fourth Quarter............................................... 2.33 1.77
FISCAL YEAR 1995
First Quarter................................................ $ 3.29 $ 2.23
Second Quarter............................................... 4.13 3.04
Third Quarter................................................ 6.21 3.58
Fourth Quarter............................................... 14.75 5.10
FISCAL YEAR 1996
First Quarter................................................ $26.50 $11.58
Second Quarter............................................... 38.00 22.75
Third Quarter................................................ 31.75 21.00
Fourth Quarter............................................... 28.13 17.88
</TABLE>
14
<PAGE>
As of March 24, 1997, there were approximately 834 holders of record of the
Company's Common Stock.
No cash dividend or other cash distribution with respect to the Company's
Common Stock has ever been paid by the Company. The Company currently intends
to retain any earnings to provide for the operation and expansion of its
business and does not anticipate paying any cash dividends in the foreseeable
future. The Company's revolving credit facility prohibits the payment of cash
dividends without the lender's consent.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------
JAN.3, JAN. 2, JAN. 1, DEC. 31, DEC. 31,
1993(1) 1994(1) 1995(1) 1995(1) 1996(1)
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue.................... $311,884 $401,932 $511,570 $725,982 $1,448,624
Cost of revenue............ 244,159 317,754 400,916 567,662 1,111,358
-------- -------- -------- -------- ----------
Gross profit............... 67,725 84,178 110,654 158,320 337,266
Operating expenses......... 60,771 74,498 88,017 118,918 241,507
-------- -------- -------- -------- ----------
Income from operations..... 6,954 9,680 22,637 39,402 95,759
Other income (expense)..... 119 135 46 146 (28,502)
Interest expense........... (5,942) (6,272) (2,845) (2,234) (2,852)
-------- -------- -------- -------- ----------
Income before taxes........ 1,131 3,543 19,838 37,314 64,405
Provision for income taxes. 700 1,160 6,357 11,245 36,463
-------- -------- -------- -------- ----------
Income before extraordinary
item...................... 431 2,383 13,481 26,069 27,942
Extraordinary item......... -- -- (1,403) - --
-------- -------- -------- -------- ----------
Net income................. 431 2,383 12,078 26,069 27,942
======== ======== ======== ======== ==========
Net income per share....... $ 0.01 $ 0.05 $ 0.24 $ 0.41 $ 0.31
======== ======== ======== ======== ==========
Pro forma net income(2).... 431 2,383 10,486 22,925 31,584
======== ======== ======== ======== ==========
Pro forma net income per
share..................... $ 0.01 $ 0.05 $ 0.21 $ 0.36 $ 0.35
======== ======== ======== ======== ==========
Weighted average shares
outstanding (3)........... 29,625 35,821 49,071 66,379 100,410
Division Revenue Data:
Commercial................. $214,703 $280,207 $331,564 $419,388 $ 629,877
Information Technology..... -- 2,102 17,600 61,424 400,408
Professional Services...... 6,633 9,156 18,712 29,065 179,608
Teleservices............... 14,118 19,900 39,598 99,470 112,375
Health Care................ 69,101 81,345 92,392 104,160 112,044
Private Label.............. 7,329 9,222 11,704 12,475 14,312
-------- -------- -------- -------- ----------
Total revenue.............. $311,884 $401,932 $511,570 $725,982 $1,448,624
======== ======== ======== ======== ==========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
AS OF
-----------------------------------------
JAN. 3, JAN. 2, JAN 1, DEC. 31, DEC. 31,
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital....................... $15,350 $21,236 $83,115 $165,940 $270,925
Total assets.......................... 95,812 117,079 150,195 348,588 897,115
Long term debt........................ 53,363 65,579 26,075 93,060 104,533
Stockholders' equity.................. 4,035 7,911 83,058 183,495 654,921
</TABLE>
- --------
(1) Includes the financial information of the Company for the respective years
noted above restated to account for any mergers, accounted for under the
pooling-of-interest method of accounting, beginning in the period in which
the respective merger provided a material impact on the Company's
financial information.
(2) Pro forma net income is the Company's historical net income less the
approximate federal and state income taxes that would have been incurred,
if the companies with which the Company merged had been subject to tax as
a C Corporation.
(3) Weighted average number of shares has been computed using the treasury
stock method and the as-if converted method for convertible securities
which includes dilutive common stock equivalents as if outstanding during
the respective periods.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in connection with the Company's
Consolidated Financial Statements and the related notes thereto included
elsewhere herein. The Company's fiscal year ended on the Sunday closest to
December 31 for the years which preceded fiscal year 1996 when the Company
changed its fiscal year to comply with the calendar year.
INTRODUCTION
The Company has acquired numerous staffing companies since its formation in
1992. Each of these acquisitions, other than the acquisitions of PTA
International, The McKinley Group, Inc., Career Horizons, Inc., HJM
Consulting, Inc, Staffware, Inc. and Legal Support Personnel, Inc. which were
accounted for under the pooling-of-interests method of accounting, has been
accounted for using the purchase method of accounting. The results of the
operations of each of the companies acquired through December 31, 1996, which
were accounted for under the purchase method of accounting, have been included
in the following discussion since the date of acquisition. The Company's
historical financial statements have been restated to reflect the results of
operations and financial position of the companies accounted for under the
pooling-of-interest method of accounting, except for Staffware, Inc. and Legal
Support Personnel, Inc. due to the immaterial effect on prior periods. In the
future, the Company's revenues and expenses may be significantly affected by
the number and timing of the opening or acquisition of additional offices. The
timing of such expansion activities also can affect period-to-period
comparisons.
The Company offers a broad range of staffing and outsourcing services
through six divisions; the Commercial division, which provides clerical and
light industrial staffing services; the Information Technology division, which
provides computer consulting services; the Professional Services division,
which provides personnel who perform specialized services such as accounting,
legal, technical, and scientific; the Teleservices division, which provides
personnel for customer care and inbound and outbound telemarketing services to
ATI; the Health Care division, which provides a wide range of personnel,
primarily to individuals requiring home health care and, to a lesser extent,
to health care facilities; and the Private Label division, which provides
Associated Offices with a wide range of back office and financial support
services. The Information Technology, Professional Services and Health Care
divisions generally enjoy higher gross and operating margins than the
Company's Commercial and Teleservices divisions. The Teleservices division is
characterized by higher volumes, lower gross margins and lower operating
expenses than the Company's other divisions. See --"Results of Operations."
16
<PAGE>
Temporary personnel placed by AccuStaff are generally Company employees.
AccuStaff is responsible for employee related expenses for its temporary
employees, including workers' compensation, unemployment compensation
insurance, Medicare and Social Security taxes and general payroll expenses.
The Company does not provide health, dental, disability or life insurance to
its temporary employees except in certain circumstances. Generally, the
Company bills its clients for the hourly wages paid to the temporary employees
placed with the client, plus a negotiated markup. Depending on the
arrangements negotiated with the client, the markup may be fixed or may allow
direct pass-throughs of increases in expenses such as unemployment
compensation insurance and workers' compensation insurance. Because the
Company pays the majority of its temporary employees only for the hours they
actually work, wages for the Company's temporary personnel are a variable cost
that increase or decrease in proportion to revenue. See "Business-Operations-
Temporary Employees."
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain items in the Company's consolidated statement of income for the
indicated periods.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------
JAN. 1, DEC. 31, DEC. 31,
1995 1995 1996
------- -------- --------
<S> <C> <C> <C>
Revenue:
Commercial division.................................. 64.8% 57.8% 43.5%
Information Technology division...................... 3.4 8.5 27.6
Professional Services division....................... 3.7 4.0 12.4
Teleservices division................................ 7.7 13.7 7.8
Healthcare division.................................. 18.1 14.3 7.7
Private Label division............................... 2.3 1.7 1.0
----- ----- -----
Total............................................... 100.0 100.0 100.0
Cost of revenue....................................... 78.4 78.2 76.7
----- ----- -----
Gross profit.......................................... 21.6 21.8 23.3
Operating expenses.................................... 17.2 16.4 16.7
----- ----- -----
Income from operations................................ 4.4 5.4 6.6
Other income (expense)................................ (0.5) (0.3) (2.2)
----- ----- -----
Income before provision for income taxes.............. 3.9 5.1 4.4
Provision for income taxes............................ (1.2) (1.5) (2.5)
Extraordinary loss.................................... (0.2) -- --
----- ----- -----
Net income............................................ 2.5% 3.6% 1.9%
===== ===== =====
</TABLE>
The following table sets forth the gross profit as a percentage of revenue
("gross margin" or "margin") for each of the Company's six divisions for the
indicated periods.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------
JAN. 1, DEC. 31, DEC. 31,
1995 1995 1996
------- -------- --------
<S> <C> <C> <C>
Commercial............................................ 16.7% 17.9% 19.7%
Information Technology................................ 34.0 31.9 26.9
Professional Services................................. 26.4 28.7 25.2
Teleservices.......................................... 8.1 10.0 10.0
Healthcare............................................ 31.7 31.6 30.6
Private Label......................................... 100.0 100.0 100.0
</TABLE>
17
<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995
Revenue. Revenue increased $722.6 million, or 99.5%, to $1,448.6 million in
fiscal 1996 from $726.0 million in fiscal 1995. The increase was attributable
by division to: Commercial, $210.5 million, or an increase of 50.2%;
Information Technology, $339.0 million or an increase of 551.9%; Professional
Services, $150.5 million, or an increase of 518.0%; Teleservices, $12.9
million, or an increase of 13.0%; Health Care, $7.9 million, or an increase of
7.6%; and Private Label, $1.8 million or an increase of 14.7%. The increases
in the Commercial, Information Technology, and Professional Division were
primarily due to the revenue contribution of acquired companies while the
increase in the Teleservices, Private Label and Health Care divisions were
primarily due to internal growth.
Gross Profit. Gross profit increased $179.0 million, or 113.0%, to $337.3
million in fiscal 1996 from $158.3 million in fiscal 1995. Gross margin
increased to 23.3% in fiscal 1996 from 21.8% in fiscal 1995.The overall
increase in gross margin was due to the migration of the Company to the
Information Technology and Professional Services divisions which produce
higher gross margins than the Company's Commercial and Teleservices divisions.
In addition, the Commercial division experienced increasing margins. This
increased margin coupled with the volume of Commercial division revenue
produced a significant increase in overall gross margin. The gross margins in
the Teleservices, Health Care, and Private Label divisions remained relatively
stable.
Operating Expenses. Operating expenses increased $122.6 million, or 103.1%,
to $241.5 million in fiscal 1996 from $118.9 million in fiscal 1995. Operating
expenses as a percentage of revenue increased to 16.7% in fiscal 1996, from
16.4% in fiscal 1995. The increase was due to the increase in depreciation and
amortization to $18.1 million in 1996 from $5.9 million in 1995. Operating
expenses before depreciation and amortization expense as a percentage of
revenue decreased to 15.4% in fiscal 1996 from 15.6% in fiscal 1995. The
decline in operating expenses before depreciation and amortization expense as
a percentage of revenue was attributable to the Company's ability to spread
expenses over a larger revenue base.
Income from Operations. As a result of the foregoing, income from operations
increased $56.4 million, or 143.0%. to $95.8 million in fiscal 1996 from $39.4
million in fiscal 1995. Income from operations as a percentage of revenue
increased to 6.6% in fiscal 1996 from 5.4% in fiscal 1995.
Interest Expense. Interest expense increased $618,000, or 27.7%, to $2.9
million in fiscal 1996 from $2.2 million in fiscal 1995. The increase in
interest expense resulted from a combination of the utilization of the
Company's credit facility, the issuance of the 7% Convertible Subordinated
Debentures in October of 1995, and the timing of common stock offerings in
1995 and 1996.
Other Expense. Other expense consists primarily of non-recurring merger
expenses of $28.5 million which were incurred during 1996 as a result of the
mergers with The McKinley Group, Inc., HJM Consulting, Inc. and Career
Horizons, Inc.
Income Taxes. The Company's effective tax rate, including the effect of the
pro forma tax provision, was 50.9% in fiscal 1996 compared to 38.6% in fiscal
1995. The increase in the effective tax rate was due to the increase in
taxable income as a result of the non-deductible, non-recurring merger
expenses with The McKinley Group, Inc., HJM Consulting, Inc., and Career
Horizons, Inc.
Pro Forma Net Income. As a result of the foregoing, pro forma net income
increased $8.7 million. or 37.8%, to $31.6 million in 1996 from $22.9 million
in fiscal 1995. Pro forma net income as a percentage of revenue decreased to
2.2% in fiscal 1996 from 3.2% in fiscal 1995, due to the non-deductible, non-
recurring merger expenses. Exclusive of the merger expenses, pro forma net
income would have increased $35.2 million to $58.1 million, resulting in an
increase to pro forma net income as a percentage of revenue to 4.0%.
18
<PAGE>
FISCAL 1995 COMPARED TO FISCAL 1994
Revenue. Revenue increased $214.4 million, or 41.9%, to $726.0 million in
fiscal 1995 from $511.6 million in fiscal 1994. The increase was attributable
by division to: Commercial, $87.8 million, or an increase of 26.5%,
Information Technology $43.8 million, or an increase of 249.0%, Professional
Services, $10.4 million or an increase of 55.3%, Teleservices, $59.9 million
or an increase of 151.2%; Health Care, $11.8 million, or an increase of 12.7%,
and Private Label, $771,000, or an increase of 6.6%. The increases in the
Commercial and Professional Services division was comprised of acquisitions
and internal growth. The increase in the Information Technology division was
primarily due to the revenue contribution of acquired companies. The increases
in the Teleservices , Health Care and Private Label Divisions were the result
of internal growth.
Gross Profit. Gross profit increased $47.7 million, or 43.1%, to $158.3
million in fiscal 1995 from $110.6 million in fiscal 1994. Gross margin
increased to 21.8% in fiscal 1995 from 21.6% in fiscal 1994. The overall
increase in gross margin was due to the impact of the Company's shift to the
Professional Services and Information Technology divisions which produce a
higher gross margin than the Company's Commercial and Teleservices divisions.
Operating Expenses. Operating expenses increased $30.9 million, or 35.1%, to
$118.9 million in fiscal 1995 from $88.0 million in fiscal 1994. Operating
expenses as a percentage of revenue decreased to 16.4% in fiscal 1995 from
17.2% in fiscal 1994. The decline was attributable to the Company's ability to
spread expenses over a larger revenue base in fiscal 1995.
Income From Operations. As a result of the foregoing, income from operations
increased $16.8 million, or 74.1%, to $39.4 million in fiscal 1995 from $22.6
million in fiscal 1994. Income from operations as a percentage of revenue
increased to 5.4% in fiscal 1995 from 4.4% in fiscal 1994.
Interest Expense. Interest expense decreased $611,000, or 21.5%, to $2.2
million in fiscal 1995 from $2.8 million in fiscal 1994.
Income Taxes. The Company's effective income tax rate, including the effect
of the pro forma tax provision, was 38.6% in fiscal 1995 compared to 40.0% in
fiscal 1994. The decrease was due the implementation of state tax planning
initiatives in fiscal 1995.
Pro forma net Income. As a result of the foregoing, pro forma net income
increased $12.4 million, or 118.6%, to $22.9 million in fiscal 1995 from $10.5
million in fiscal 1994. Net income as a percentage of revenue increased to
3.2% in fiscal 1995 from 2.0% in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are from operations, proceeds of
Common Stock offerings and borrowings under its $150 million revolving credit
facility. The Company's principal uses of cash are to fund acquisitions,
working capital and capital expenditures. The Company generally pays its
temporary employees weekly for their services while receiving payments from
customers 35 to 60 days from the date of invoice. As new offices are
established or acquired, or as existing offices expand, there will be
increasing requirements for cash resources to fund current operations.
During April 1996, the Company completed a secondary offering of 11.8
million shares of common stock from which the Company received net proceeds of
approximately $304.9 million. In addition, the Company's subsidiary, Career,
prior to the date of the merger with the Company, completed an offering in
which Career issued 8.2 million shares of common stock, adjusted for the
conversion to the Company's shares of common stock from which the Company
received net proceeds of $119.8 million. The net proceeds have been used, in
part, to repay the outstanding indebtedness under the Company's revolving
credit facility, while the remaining proceeds were used to fund acquisitions
and for other general corporate purposes through December 31, 1996.
19
<PAGE>
The Company is also obligated under various acquisition agreements to make
earn-out payments to former stockholders of acquired companies over the next
five years. The Company cannot currently estimate the total amount of these
payments; however, the Company anticipates that the cash generated by the
operations of the acquired companies will provide a substantial part of the
capital required to fund the earn-out payments.
The Company anticipates that capital expenditures for improvements to its
management information and operating systems will require capital expenditures
during the next twelve months of approximately $6.0 million. The Company
anticipates recurring capital expenditures in future years to be approximately
$2.5 million per year.
The Company believes that funds provided by operations, available borrowings
under the credit facility, current amounts of cash and the net proceeds from
the sale of Common Stock offered hereby will be sufficient to meet its
presently anticipated needs for working capital, capital expenditures and
acquisitions for at least the next 12 months.
INDEBTEDNESS OF THE COMPANY
The Company has a revolving credit facility with a syndicate of commercial
banks which is collateralized by substantially all of the Company's assets.
The facility has a limit of $150 million. The facility was syndicated to a
group of 13 banks, with NationsBank (South), N.A. as agent.
The credit facility has a term of five years expiring February 1, 2001.
Outstanding amounts under the credit facility bear interest at certain
floating rates as specified by the credit facility. The credit facility
contains certain affirmative and negative covenants relating to the Company's
operations, including a prohibition on making any business acquisition without
the consent of the lenders holding not less than two-thirds of the credit
exposure, under the credit facility for acquisitions of a size requiring
lender consent, if the cost of the acquisition (including cash or non-cash
consideration paid and the amount of indebtedness assumed) exceeds the lesser
of $20 million or 10% of the Company's consolidated stockholders' equity.
As of March 26, 1997, the Company has a balance of $63.0 million outstanding
under the credit facility. The Company also has outstanding letters of credit
in the amount of $15.2 million, which reduce the amount of funds available
under the facility. Therefore, the remaining balance of funds available to the
Company as of March 31, 1997 is $71.8 million. The Company is currently in
negotiations to increase its existing line of credit.
On October 16, 1995, the Company's subsidiary, Career, issued $86,250 of 7%
Convertible Senior Notes Due 2002 which were assumed by the Company pursuant
to the merger. Interest on the notes is paid semiannually on May 1 and
November 1 of each year. The notes are convertible at the option of the holder
thereof, at any time after 90 days following the date of original issuance
thereof and prior to maturity, unless previously redeemed, into shares of
common stock of the Company at a conversion price of $11.35 per share, subject
to adjustment in certain events. The notes are redeemable, in whole or in
part, at the option of the Company, at any time on or after November 1, 1998,
at stated redemption prices, together with accrued interest. The notes do not
provide for any sinking fund. Upon a Designated Event (as defined and
including a change of control) holders of the notes will have the right,
subject to certain restrictions and conditions, to require the Company to
purchase all or any part of the Notes at a purchase price equal to 101% of the
principal amount thereof together with accrued and unpaid interest to the date
of purchase. The notes have been unconditionally guaranteed by the Company and
joint and severally guaranteed by each of Career's present and any future
subsidiaries. The guarantee of the Company and each subsidiary of Career is an
unsecured general obligation of the Company and such subsidiary, ranking
equally with other unsecured obligations of the Company and such subsidiary.
The obligation of the Company and each of Career's present and any future
subsidiaries under its guarantee is full and unconditional.
The Company has certain notes payable to shareholders of acquired companies.
The notes payable bear interest at rates ranging from 5.0% to 8.0% and have
repayment terms from January 1997 to March 1999. As of March 31, 1997, the
Company owed approximately $24.2 million in such acquisition indebtedness.
20
<PAGE>
The Company has $1.0 million of 6% Convertible Subordinated Debentures
outstanding as of December 31, 1996, which are convertible into Common Stock
at a price of $1.375 per share. The debentures were converted into 727,272
shares of the Company's common stock on January 31, 1997.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements. Generally,
throughout the periods discussed above, the increases in revenue have resulted
primarily from higher volumes, rather than price increases.
OTHER MATTERS
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." This standard requires
that long-lived assets and certain identifiable intangibles held and used by
an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this standard did not have a material effect on
reported earnings, financial condition or cash flows.
In fiscal 1996 the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard establishes a fair value method for accounting
for stock-based compensation plans, either through recognition or disclosure.
The Company adopted this standard by disclosing the pro forma net income and
earnings per share amounts assuming the fair value method was adopted on
January 1, 1995. The adoption of this standard will not impact results of
operations, financial position or cash flows.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. SFAS No.
128 establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing earnings
per share previously found in APB Opinion 15, Earnings per Share, and makes
them comparable to international EPS standards. It replaces the presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator
of the diluted EPS computation. Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS pursuant to Opinion 15.
This statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. This statement requires restatement of all prior-period EPS data
presented.
FORWARD LOOKING STATEMENTS
Statements made in this Report regarding the Company's expectations or
beliefs concerning future events, including capital spending, expected results
and the Company's liquidity situation during 1997, should be considered
forward-looking and subject to various risks and uncertainties. The Company's
actual results may differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth under Risk
Factors and elsewhere in the Company's Joint Proxy Statement/Prospectus dated
October 8, 1996, the Company's Prospectus dated January 16, 1997, and as
discussed in the Company's reports on Forms 10-Q and 8-K made under the
Securities Exchange Act of 1934. For instance, the Company's results of
operations may differ materially from those anticipated in the forward-looking
statements due to, among other things: management's ability to effectively
integrate the combined operations of Career and the Company; the Company's
ability to successfully identify suitable acquisition candidates, complete
acquisitions or integrate the
21
<PAGE>
acquired business into its operations; the general level of economic activity
in the Company's markets; increased price competition; changes in government
regulations or interpretations thereof; and the continued availability of
qualified temporary personnel--particularly in the information technology and
other professional segments of the Company's businesses. In addition, the
market price of the Company's stock may from time to time be significantly
volatile as a result of, among other things: the Company's operating results;
the operating results of other temporary staffing companies; and changes in
the performance of the stock market in general.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
AccuStaff Incorporated
We have audited the consolidated balance sheets of AccuStaff Incorporated
and Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's 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 audit 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AccuStaff Incorporated and Subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Jacksonville, Florida
March 26, 1997
22
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $108,664 $ 35,695
Reverse repurchase agreements....................... -- 48,449
Accounts receivable, net of allowance of $7,048 and
$2,448............................................. 249,161 110,056
Due from associated offices, net.................... 38,897 35,832
Prepaid expenses.................................... 7,216 3,261
Deferred income taxes............................... 3,605 4,124
-------- --------
Total current assets............................. 407,543 237,417
Furniture, equipment, and leasehold improvements,
net.................................................. 25,803 11,336
Goodwill, net........................................ 447,595 95,208
Other assets......................................... 16,174 4,627
-------- --------
Total assets..................................... $897,115 $348,588
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and convertible debt.................. $ 13,723 $ 17,779
Accounts payable and accrued expenses............... 58,694 18,458
Accrued payroll and related taxes................... 64,201 35,240
-------- --------
Total current liabilities........................ 136,618 71,477
Convertible debt..................................... 86,250 88,550
Notes payable, long-term portion..................... 17,283 4,510
Deferred income taxes................................ 2,043 556
-------- --------
Total liabilities................................ 242,194 165,093
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding....... -- --
Common stock, $.01 par value; 150,000,000 shares
authorized; 96,551,702 and 71,428,194 shares issued
and outstanding.................................... 966 715
Additional contributed capital...................... 592,948 143,193
Retained earnings................................... 65,441 39,666
-------- --------
659,355 183,574
Less: deferred stock compensation.................. (4,434) (79)
-------- --------
Total stockholders' equity......................... 654,921 183,495
-------- --------
Total liabilities and stockholders' equity......... $897,115 $348,588
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
<S> <C> <C> <C>
Revenue................................... $1,448,624 $725,982 $511,570
Cost of revenue........................... 1,111,358 567,662 400,916
---------- -------- --------
Gross profit............................. 337,266 158,320 110,654
---------- -------- --------
Operating expenses:
General and administrative............... 202,221 94,509 66,596
Remittance to franchisees................ 21,211 18,489 16,975
Depreciation and amortization............ 18,075 5,920 4,446
---------- -------- --------
Total operating expenses.............. 241,507 118,918 88,017
---------- -------- --------
Income from operations................ 95,759 39,402 22,637
---------- -------- --------
Other income (expense):
Interest expense, net.................... (2,852) (2,234) (2,845)
Other.................................... (28,502) 146 46
---------- -------- --------
Total other expense, net.............. (31,354) (2,088) (2,799)
---------- -------- --------
Income before provision for income taxes
and extraordinary item.................... 64,405 37,314 19,838
Provision for income taxes................ 36,463 11,245 6,357
---------- -------- --------
Income before extraordinary item.......... 27,942 26,069 13,481
Extraordinary loss on retirement of debt,
net of $933 income tax benefit........... -- -- (1,403)
---------- -------- --------
Net income................................ 27,942 26,069 12,078
Preferred stock dividend requirement...... -- -- (175)
---------- -------- --------
Net income applicable to common
stockholders.............................. $ 27,942 $ 26,069 $ 11,903
========== ======== ========
Income per share of common and common
share equivalents:
Income before extraordinary item.......... $ 0.31 $ 0.41 $ 0.27
Extraordinary item........................ -- -- $ (0.03)
---------- -------- --------
Earnings per share........................ $ 0.31 $ 0.41 $ 0.24
========== ======== ========
Weighted average number of common share
and common share equivalents outstanding. 100,410 66,379 49,071
========== ======== ========
Unaudited pro forma data (Note 2):
Net income applicable to common
stockholders before provision for pro
forma income taxes...................... $ 27,942 $ 26,069 $ 11,903
Provision for pro forma income taxes..... (3,642) 3,144 1,592
---------- -------- --------
Pro forma net income applicable to
common stockholders................... $ 31,584 $ 22,925 $ 10,311
========== ======== ========
Pro forma earnings per share.............. $ 0.35 $ 0.36 $ 0.21
========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 27,942 $ 26,069 $12,078
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........... 18,075 5,920 4,446
Provision for doubtful accounts......... 3,862 1,935 1,649
Extraordinary loss on retirement of
debt.................................... -- -- 2,336
Deferred income taxes................... 4,713 (77) (2,172)
Other, net.............................. 537 384 27
Changes in certain assets and
liabilities:
Accounts receivable.................... (72,181) (16,100) (14,276)
Due from associated offices............ (3,250) (501) (9,332)
Prepaid expenses....................... 4,905 (216) 1,007
Other assets........................... (379) (327) (190)
Accounts payable and accrued expenses.. 23,873 1,180 4,322
Accrued payroll and related taxes...... (156) 3,710 8,350
-------- -------- -------
Net cash provided by operating
activities............................ 7,941 21,977 8,245
-------- -------- -------
Cash flows from investing activities:
Investment in reverse repurchase
agreement, net.......................... 48,449 (48,449) --
Purchases of investments................. (10,438) (2,028) (8,150)
Sales and maturities of investments...... -- 8,842 1,336
Purchase of furniture, equipment and
leasehold improvements.................. (11,343) (6,255) (1,813)
Restricted cash.......................... -- -- 1,761
Purchase of businesses including
additional earn-outs on acquisitions,
net of cash acquired.................... (354,591) (63,428) (1,317)
-------- -------- -------
Net cash used in investing activities. (327,923) (111,318) (8,183)
-------- -------- -------
Cash flows from financing activities:
Credit facilities, including bank
overdraft, net.......................... -- (24,007) (19,415)
Proceeds from issuance of common stock... 431,654 74,420 60,227
Proceeds from issuance of convertible
debt.................................... -- 85,663 2,300
Repayment of convertible debt............ -- -- (23,000)
Borrowings on notes payable.............. -- 8,873 79,049
Repayments on notes payable.............. (35,322) (17,655) (87,803)
Distributions to former shareholders of
acquired S-corp......................... (3,381) (2,350) (90)
Dividends paid on preferred stock........ -- -- (1,282)
Redemption of preferred stock............ -- -- (8,745)
Financing costs paid..................... -- (633) (608)
-------- -------- -------
Net cash provided by financing
activities............................ 392,951 124,311 633
-------- -------- -------
Net increase in cash and cash equivalents. 72,969 34,970 695
Cash and cash equivalents, beginning of
year...................................... 35,695 725 30
-------- -------- -------
Cash and cash equivalents, end of year.... $108,664 $ 35,695 $ 725
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
<S> <C> <C> <C>
CASH FLOW INFORMATION
Interest paid............................. $ 7,819 $ 2,708 $3,396
Income taxes paid......................... 19,765 $12,244 $5,498
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1994, the Company acquired all of the outstanding stock of
Debbie Temps, Inc. and reacquired several franchises from franchise owners. In
connection with the acquisitions, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired.................................... $ 5,228
Cash paid for the capital stock.................................. (1,266)
-------
Liabilities assumed.............................................. $ 3,962
=======
</TABLE>
In fiscal 1994 a member of the Board of Directors of the Company converted a
$500 subordinated debenture for 399,996 shares of common stock. Also in 1994,
90,000 shares of stock were issued to the President and Chief Executive Officer
pursuant to the terms of a restricted stock grant.
During fiscal 1995, the Company completed numerous acquisitions (see note 3).
In connection with the acquisitions, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired................................... $100,198
Cash paid....................................................... (60,328)
--------
Liabilities assumed............................................. $ 39,870
========
</TABLE>
In fiscal 1995, convertible subordinated debentures of $1,500 were converted
by the Company into 1,127,262 shares of common stock.
During fiscal 1996, the Company completed numerous acquisitions (see Note 3).
In connection with the acquisitions, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired.................................. $ 437,724
Cash paid...................................................... (341,154)
---------
Liabilities assumed............................................ $ 96,570
=========
</TABLE>
In fiscal 1996, Convertible Subordinated Debentures of $1,300 were converted
by the Company into 1,040,000 shares of common stock. Also, 345,000 shares of
stock were issued to the President and Chief Executive Officer pursuant to the
terms of a restricted stock grant.
26
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED
STOCK COMMON STOCK ADDITIONAL DEFERRED
------------- ----------------- CONTRIBUTED RETAINED STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS COMPENSATION TOTAL
------ ------ ---------- ------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 2,
1994................... -- $ -- 5,149,817 $ 51 $ 7,381 $ 3,224 $ (278) $ 10,378
Common stock issued
under employee stock
purchase plan......... -- -- 12,760 -- 96 -- -- 96
Sale of common stock... -- -- 3,358,436 34 59,817 -- -- 59,851
Conversion of
subordinated
debentures............ -- -- 66,666 1 499 -- -- 500
Issuance of restricted
stock................. -- -- 15,000 -- -- -- --
Preferred stock
dividend accrual...... -- -- -- -- (175) -- -- (175)
Exercise of stock
options and related
tax benefits.......... -- -- 21,105 -- 255 -- -- 255
Exercise of warrants... -- -- 449,869 5 21 -- -- 26
Amortization of
unearned compensation. -- -- -- -- -- -- 103 103
Net income............. -- -- -- -- -- 12,078 -- 12,078
Distribution to former
shareholders of
acquired
S-corporation......... -- -- -- -- -- (57) -- (57)
---- ----- ---------- ---- -------- ------- ------- --------
Balance, January 1,
1995................... -- -- 9,073,653 91 67,894 15,245 (175) 83,055
Sale of common stock... -- -- 2,500,000 25 72,378 -- -- 72,403
Conversion of
subordinated
debentures............ -- -- 187,877 2 1,498 -- -- 1,500
Exercise of stock
options and related
tax benefit........... -- -- 143,169 2 2,018 -- -- 2,020
Amortization of
unearned compensation. -- -- -- -- -- -- 96 96
Net income............. -- -- -- -- -- 26,069 -- 26,069
McKinley income for the
three months ended
December 31, 1994..... -- -- -- -- -- 702 -- 702
Distribution to former
shareholders of
Acquired S-
corporation........... -- -- -- -- -- (2,350) -- (2,350)
2 for 1 stock split.... -- -- 11,904,699 119 (119) -- -- --
---- ----- ---------- ---- -------- ------- ------- --------
Balance December 31,
1995................... -- -- 23,809,398 239 143,669 39,666 (79) 183,495
3 for 1 stock split.... -- -- 47,618,796 476 (476) -- -- --
Sale of common stock... -- -- 20,017,575 200 424,477 -- -- 424,677
Conversion of
subordinated
debentures............ -- -- 1,040,000 10 1,290 -- -- 1,300
Issuance of restricted
stock................. -- -- 345,000 3 4,889 -- (4,892) --
Exercise of stock
options and related
tax benefit........... -- -- 2,726,412 27 17,013 -- -- 17,040
Vesting of restriced
stock................. -- -- -- -- -- -- 537 537
Net income............. -- -- -- -- -- 27,942 -- 27,942
Issuance of stock
related to business
combinations.......... -- -- 994,521 11 2,086 1,214 -- 3,311
Distribution to former
shareholders of
acquired
S-corporation......... -- -- -- -- -- (3,381) -- (3,381)
---- ----- ---------- ---- -------- ------- ------- --------
Balance, December 31,
1996................... -- $ -- 96,551,702 $966 $592,948 $65,441 $(4,434) $654,921
==== ===== ========== ==== ======== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands except for per share amounts)
1. DESCRIPTION OF BUSINESS:
AccuStaff Incorporated and Subsidiaries (the Company) is a national provider
of strategic staffing and outsourcing services to businesses, professional and
service organizations and governmental agencies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
On January 2, 1996 the Company acquired all of the stock of PTA
International, d/b/a Perma Temp Agency (PTA) in exchange for 1,766,844 shares
of the Company's common stock. On June 19, 1996 the Company acquired all of the
stock of The McKinley Group, Inc. (McKinley) in exchange for 1,857,150 shares
of the Company's common stock. Through March 31, 1996, McKinley had revenue and
net income of $6,200 and $1,200, respectively. On November 14, 1996 the Company
acquired all of the stock of Career Horizons, Inc. (Career) in exchange for
27,636,523 shares of the Company's common stock. Through September 30, 1996,
Career had revenue and net income of $444,300 and $12,800, respectively. On
December 12, 1996, the Company acquired all of the stock of HJM Consulting,
Inc, (HJM) in exchange for 2,250,000 shares of the Company's common stock.
Through September 30, 1996, HJM had revenue and a net loss of $20,000 and $100,
respectively. These acquisitions have been accounted for under the pooling of
interests method of accounting. Accordingly, the consolidated financial
statements of the Company have been restated to give retroactive effect to the
mergers and all share and per share data presented herein has been converted
into the Company's shares and earnings per share, respectively, in accordance
with the exchange ratios documented in the merger agreements. McKinley's former
fiscal years ended on September 30, 1995, 1994 and 1993. The fiscal years ended
September 30, 1994 and 1993 of McKinley were combined with the years ended
January 1, 1995 and January 2, 1994, respectively. The calendar year ended
December 31, 1995 of McKinley was combined with the fiscal year ended
December 31, 1995 for AccuStaff. An adjustment to AccuStaff's retained earnings
for the income of McKinley for the three months ended December 31, 1994 has
been made to properly state the equity balance of the Company at December 31,
1995. Career's former fiscal years ended on June 30, 1995, 1994 and 1993. The
calendar year 1996, 1995 and 1994 results of Career were combined with the
fiscal years ended December 31, 1996, December 31, 1995 and January 1, 1995 for
the Company. The reconciliation below details the effects of the poolings
detailed above on the previously reported revenues, net income, stockholders'
equity and earnings per share of the Company.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 JANUARY 1, 1995
----------------- ---------------
<S> <C> <C>
Revenue as previously reported............ $267,616 $137,051
Revenues, Career.......................... 385,289 334,088
Revenues, other........................... 73,077 40,431
-------- --------
Revenues, as restated..................... $725,982 $511,570
======== ========
Net income, as previously reported........ $ 8,699 $ 3,005
Net income, Career........................ 9,328 4,851
Net income other.......................... 8,042 4,222
-------- --------
Net income, as restated................... $ 26,069 $ 12,078
======== ========
Earnings per share, as previously
reported.................................. $ 0.22 $ 0.12
Increase attributable to Career........... 0.10 0.06
Increase attributable to other............ 0.09 0.06
-------- --------
Earnings per share, as restated........... $ 0.41 $ 0.24
======== ========
</TABLE>
28
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 JANUARY 1, 1995 JANUARY 2, 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Stockholders' equity, as
previously reported.......... $109,563 $26,311 $ 3,568
Stockholders' equity, Career. 60,903 50,111 4,343
Stockholders' equity, other.. 13,029 6,633 2,467
-------- ------- -------
Stockholders' equity, as
restated..................... $183,495 $83,055 $10,378
======== ======= =======
</TABLE>
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Additionally, the Company's 49 percent owned
affiliate, PeopleSystems, Inc., has been accounted for as a consolidated
subsidiary, due to the Company's control by an agreement. All intercompany
transactions have been eliminated in the accompanying consolidated financial
statements.
Fiscal Year
During 1996, the Company changed its fiscal year to a calendar year. In the
prior years, the fiscal year ended on the Sunday closest to December 31 of each
year. All fiscal years presented herein consist of 52 weeks.
Cash and Cash Equivalents
Cash and cash equivalents include deposits in banks, government money market
funds, and short-term investments with original maturities of 90 days or less.
Reverse Repurchase Agreements
Reverse repurchase agreements as of December 31, 1995 had a maturity date of
less than 90 days and were collateralized by U.S. Treasury Securities in an
amount equal to 102% of the agreements' value.
Investments
The Company follows Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities ("SFAS No.
115"). SFAS No. 115 requires that investments in debt and equity securities be
designated as trading, held-to-maturity, or available-for-sale. These reporting
categories determine the recognition and measurement of investments in the
Company's financial statements.
On August 8, 1996, the Company purchased a 9.9% interest in Payroll
Transfers, Inc. through an 8% convertible subordinated debt instrument which
matures August 8, 2004. In addition, the Company has an option to purchase an
additional 10% of Payroll Transfers, Inc. for $18,729, which expires on July
29, 1997. The shares are not publicly traded and therefore do not have a
readily determinable value as to be accounted for under SFAS No. 115.
Consequently, the Company has stated the investment at the lower of cost or
market method. The investment has been included in other assets.
Furniture, Equipment, and Leasehold Improvements
Furniture, equipment, and leasehold improvements are recorded at cost less
accumulated depreciation and amortization. Depreciation of furniture and
equipment is computed using the straight-line method over the estimated useful
lives of the assets, ranging from 5 to 15 years. Amortization of leasehold
improvements is computed using the straight-line method over the useful life of
the asset or the term of the lease, whichever is shorter. Costs associated with
the development of the Company's proprietary software package have been
29
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
deferred and are being amortized over a five-year period. Total depreciation
and amortization expense was $5,955, $2,389 and $2,413 for 1996, 1995 and 1994
respectively. Accumulated depreciation and amortization of furniture, equipment
and leasehold improvements as of December 31, 1996 and 1995 was $22,728 and
$12,404, respectively.
Goodwill
Goodwill represents the excess of cost over fair value of net tangible assets
acquired through acquisitions. Such excess of cost over fair value of net
tangible assets acquired is being amortized on a straight-line basis over
periods ranging from 15 to 40 years. Management periodically reviews the
potential impairment of goodwill on a non-discounted cash flow basis to assess
recoverability. If the estimated future cash flows are projected to be less
than the carrying amount, an impairment write-down (representing the carrying
amount of the goodwill which exceeds the present value of estimated expected
future cash flows) would be recorded as a period expense. Accumulated
amortization was $23,057 and $10,708 as of December 31, 1996 and 1995,
respectively.
Revenue Recognition
The Company recognizes as revenue, at the time the staffing services are
provided, the amounts billed to clients of Company-owned offices and
substantially all franchisees. In all such cases, the temporary worker is the
Company's employee and all costs of employing the temporary worker are the
responsibility of the Company and are included in cost of services. The
accounts receivable of such franchisees belong to the Company and are included
with those of the Company-owned operations, as accounts receivable, in the
consolidated balance sheets.
With respect to services performed for independent temporary personnel firms
("Associated Offices") and certain other franchisees, the Company records the
service fee it receives as revenue. In such cases, the temporary worker is not
employed by the Company. All costs are the responsibility of the Associated
Office or the franchisee and are not included in cost of services. The Company
advances to such Associated Offices and franchisees the amounts billed to their
clients and includes the amount of the advances on the Company's consolidated
balance sheets as Due from Associated Offices.
The Company recognizes revenue from franchise fees when it has performed
substantially all its obligations under its agreement.
Advertising Costs
Advertising costs are expensed as incurred except for advertising costs which
have a contractual life. Advertising costs with a contractual life are
amortized over the life of the contract, not to exceed one year.
Income Taxes
Deferred tax liabilities and assets are recognized for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
30
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
Earnings Per Share
Net income per share has been computed using the weighted average number of
common shares and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents consist of restricted stock,
convertible debentures, and stock options (calculated using the treasury stock
method). Pursuant to the requirements of the Securities and Exchange
Commission, common and common share equivalents issued at prices below the
initial public offering price of $1.75 per share during the twelve months
immediately preceding the effective date of the Company's initial public
offering have been included in the calculation of common and common share
equivalents, using the treasury stock method, as if they were outstanding for
all periods presented.
Remittance to Franchisees
The remittance to franchisees is that portion of gross profit owed to
substantially all franchisees after deduction of fees and expenses.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Although management believes these estimates and assumptions are adequate,
actual results may differ from the estimates and assumptions used.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS No. 123, "Accounting
for Stock-Based Compensation". This Statement became effective beginning with
the Company's first quarter of fiscal year 1996 and did not have a material
effect on the Company's financial position or results of operations. Upon
adoption of SFAS No. 123, the Company continues to measure compensation expense
for its stock-based employee compensation plans using the intrinsic value
method prescribed by APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and will provide pro forma disclosures of net income and earnings
per share as if the fair value-based method prescribed by SFAS No. 123 had been
applied in measuring compensation expense (see Note 9).
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. SFAS No.
128 establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per share
previously found in APB Opinion 15, Earnings per Share, and makes them
comparable to international EPS standards. It replaces the presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. This statement is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This statement requires
restatement of all prior-period EPS data presented.
Reclassifications
Certain amounts have been reclassified in 1994 and 1995 to conform to the
1996 presentation.
Unaudited Pro Forma Data
PTA International (PTA), The McKinley Group, Inc. (McKinley) and HJM
Consulting, Inc. (HJM), prior to their acquisition by the Company, had elected
to be treated as S Corporations for federal and state income tax purposes. As
such, the taxable income of each company was reported to and subject to tax to
its respective shareholders. The unaudited pro forma provision for income taxes
reported on the consolidated statements of income provides approximate federal
and state income taxes (by applying statutory income tax rates) that would have
been incurred if PTA, McKinley and HJM had been subject to tax as a C
Corporation.
31
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
3. ACQUISITIONS:
For the year ended December 31, 1996
The Company has completed numerous acquisitions during 1996 including PTA,
McKinley, Career and HJM for which the financial statements have been restated
(See Note 2). In addition, the Company has acquired the following companies
which have been accounted for under the purchase method of accounting: the
stock of Tekna, Inc.; the stock of Goldfarb-Wasson Associates, Inc. d/b/a/ GW
Consulting, and an affiliated company; the stock of Programming Enterprises,
Inc. d/b/a Mini-Systems Associates; the assets of Zeitech, Inc; the stock of
Excel Temporary Services, Inc. and affiliated companies; the assets of Career
Enhancement International, Inc.; the assets of Advantage Personnel Services,
Inc. and an affiliated company; the stock of Additional Technical Support, Inc.
and affiliated companies; the stock of Management Search, Inc.; the assets of
HNS Software, Inc.; the assets of American Computer Professionals, Inc.; the
assets of Alternative Temps, Inc.; the stock of Century Temporary Services,
Inc. d/b/a CenCor Temporary Services and its affiliate; the assets of Richard
Michael Temps, Inc. and its affiliate; the assets of Why Systems, Inc.; the
assets of TempsAmerica East, Inc. and affiliated companies; the stock of
Project Professionals, Inc.; the assets of Logue & Rice, Inc. and the stock of
its affiliated companies; the stock of Contact Recruiters, Inc. and an
affiliated company; the stock of Openware Technologies, Inc.; the assets of
Dial A Temporary, Inc.; the assets of CAD Design, Inc.; the assets of Alta
Technical Services, Inc.; the assets of In-House Counsel, Inc.; the assets of
TRAK Services, Inc.; the stock of Perspective Technology, Inc.; the stock of
Datacorp Business Systems, Inc.; the stock of the Daedalian Group, Inc. d/b/a
Berger & Co.; the assets of North American Consulting Services, Inc.; the stock
of TSG Professional Services, Inc.; the stock of Contracted Services Group,
Inc. d/b/a The Blackstone Group; the stock of Scientific Staffing, Inc. and
affiliated companies; and the assets of Resource Solutions Group, Inc. The
aggregate purchase price of the acquisitions during 1996, being accounted for
under the purchase method of accounting was $375,800, comprised of $345,500 in
cash, $28,300 in notes payable to former shareholders and $2,000 in the
Company's common stock.
In addition, certain former shareholders of the acquired companies are
eligible to receive contingent consideration upon attainment of certain
earnings targets. The excess of the purchase price over the fair value of the
tangible assets (goodwill) was $357,985 and is being amortized on a straight
line basis over periods ranging from 15 to 32.5 years, including any contingent
consideration paid for the purchase method acquisitions.
The Company merged with Staffware, Inc. and Legal Support Personnel, Inc.
which were accounted for under the pooling-of-interests method of accounting.
The Company acquired all of the stock of the companies in exchange for 926,486
shares of the Company's common stock. Due to the immaterial effect on prior
periods, the Company's historical financial statements have not been restated.
For the year ended December 31, 1995
In the year ended December 31, 1995, the Company completed the following
acquisitions which have been accounted for under the purchase method of
accounting: the assets of Contemporary Personnel, Inc.; the assets of Staffing
Resources, Inc. and its affiliated companies; the stock of DuPay enterprises,
Inc. d/b/a ASOSA Personnel; the stock of Staff Additions, Inc.; the stock of
LawStaf, Inc.; the stock of Attorneys Per Diem, Inc.; the stock of Matthews
Professional Employment Specialists, Inc.; the assets of Special Counsel
International, Inc. and its affiliated companies; the stock of Bogard Temps,
Inc.; the stock of Contract Staffing Group, Inc. d/b/a Computer Consulting
Group; the stock of Professionals For Computing, Inc.; the stock of Computer
Professionals, Inc.; the stock of HR Management Services, Inc.; and the stock
of Advance/Possis Technical Services, Inc. The aggregate purchase price of the
acquisitions in the year ended December 31, 1995 was $82,100, comprised of
$60,100 in cash and $22,000 in notes payable to the former shareholders. The
aggregate excess of the purchase price over the fair value of net tangible
assets acquired (goodwill) was $74,700 and is
32
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
being amortized on a straight line basis over periods ranging from 15 to 40
years. During 1996, the Company paid $6,500 of contingent consideration related
to the acquisitions completed in the year ended December 31, 1995. This amount
has been capitalized and is being amortized over the remaining goodwill lives
for each respective acquisition.
For the year ended January 1, 1995
On March 2, 1994, the Company acquired all of the outstanding stock of Debbie
Temps, Inc. (Debbie Temps), a provider of personnel on a temporary, permanent
or temporary to permanent basis in Illinois for $4,100. The excess of the
purchase price over the fair value of the net assets acquired (goodwill) was
$3,085 and is being amortized on a straight-line basis over 15 years.
Pro Forma results of operations
The unaudited pro forma results of operations listed below include the
effects of the purchases discussed above and reflect purchase accounting
adjustments and other pro-forma adjustments, including reduction of officers'
compensation as the result of negotiated employment agreements, assuming the
acquisitions had occurred at the beginning of the year in which each company
was acquired and also at the beginning of the preceding year. The results
detailed below for fiscal 1996, include $28,502 in non-recurring acquisition
costs related to the mergers with McKinley, Career, and HJM. Exclusive of the
non-recurring costs, net income and earnings per share would have been $63,900
and $0.66, respectively. These pro forma amounts are not necessarily indicative
of what actually would have occurred if the acquisitions had been in effect for
the entire periods presented. In addition, they are not intended to be
projections of future results and do not reflect any synergies that might be
achieved from combined operations.
<TABLE>
<CAPTION>
FISCAL
----------------------------------
1996 1995 1994
----------- ---------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue.................................. $1,671,968 $1,459,075 $629,288
Net income............................... 37,348 32,645 10,605
Earnings per share....................... $ 0.40 $ 0.46 $ 0.22
</TABLE>
4. NOTES PAYABLE:
Notes payable at December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
FISCAL
-----------------
1996 1995
-------- --------
<S> <C> <C>
Credit facilities........................................... $ -- $ --
Note payable to former shareholder of Special Counsel
International, including interest at 5.5% compounded
annually, paid January 2, 1996............................. -- 9,190
Note payable to former shareholders of Computer
Professionals, including interest at 5.73% compounded
annually due October 31, 1998.............................. 2,161 3,000
Note payable to Contemporary including interest at 6.19%
payable in twelve quarterly installments, beginning on
April 1, 1995 and $174 including interest at 6.34%, payable
in thirty equal monthly installments beginning on August 1,
1995....................................................... 907 1,603
Note payable to Contract Staffing Group, Inc., interest at
prime, compounded annually paid January 2, 1996............ -- 3,856
</TABLE>
33
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
FISCAL
---------------
1996 1995
------- -------
<S> <C> <C>
Note payable to Professionals for Computing, Inc. , interest at
prime less .5%, compounded annually due December 2, 1996...... $ -- $ 3,110
Note payable to former shareholders of GW Consulting, including
interest at 8.0% compounded annually, due January 2, 1999..... 2,500 --
Note payable to former shareholders of Additional Technical
Support, Inc. including interest at 6.375% compounded
annually, payable quarterly through. February , 1999.......... 2,867 --
Note payable to former shareholders of Logue & Rice, Inc.
including interest at 5.05% compounded annually, due in 1997.. 2,000 --
Note payable to former shareholders of Resource Solutions
Group, Inc. including interest at 5.96% compounded annually,
due January 2, 1997 and $800 due November 30, 1999............ 3,380 --
Note payable to former shareholder of ScientificStaffing, Inc.
including interest at 6.02% compounded annually, due March 1,
1999.......................................................... 1,500 --
Note payable to former shareholder of Perspective Technology
Corp., including interest at 5.76% compounded annually, due
August 15, 1998............................................... 1,375 --
Note payable to former shareholder of The Blackstone Group,
including interest at 6.02% compounded annually, due December
31, 1998...................................................... 2,500 --
Note payable to former shareholder of North American Consulting
Services, Inc. including interest at 5.98% compounded
annually, due September 17, 1998.............................. 1,300 --
Note payable to former shareholder of HNS Software, Inc.,
including interest at 4.99% compounded annually, due March 31,
1999.......................................................... 1,200 --
Notes payable to Management Search, Inc., including interest at
Libor plus 1.25% compounded annually due September 4, 1997.... 1,469 --
Notes payable to former shareholders of TSG, including interest
at prime, compounded annually due September 16, 1998.......... 2,000 --
Other notes payable, including interest at 5.33% to 6.50%, due
in 1997 through 1998.......................................... 4,847 1,530
------- -------
30,006 22,289
------- -------
Current portion of notes payable............................... 12,723 17,779
------- -------
Long-term portion of notes payable............................. 17, 283 $ 4,510
======= =======
</TABLE>
The revolving credit facility contains certain covenants, such as requiring
the Company to maintain specified current and tangible net worth ratios and
does not permit the payment of dividends. The facility is collateralized by
substantially all of the Company's assets. The Company was in compliance with
all covenants as of December 31, 1996 and 1995.
On February 1, 1996, the revolving credit facility was amended and restated,
increasing the available line from $25,000 to $100,000. On May 2, 1996, the
facility was again amended increasing the available line to $150,000. The
facility has a five year maturity and bears interest using an incentive pricing
model based on the LIBOR, federal funds, or the prime rate.
34
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
Maturities of loans and convertible debt (see Note 13), are as follows for
the fiscal years subsequent to December 31, 1996:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997............................................................... $ 13,723
1998............................................................... 11,206
1999............................................................... 6,077
2000............................................................... --
2001............................................................... --
Thereafter......................................................... 86,250
--------
$117,256
========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases office space under various noncancellable operating
leases. The following is a schedule of future minimum lease payments with terms
in excess of one year:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997................................................................ $11,720
1998................................................................ 8,479
1999................................................................ 6,406
2000................................................................ 3,955
2001................................................................ 1,385
Thereafter.......................................................... 3,327
-------
$35,272
=======
</TABLE>
Total rent expense for fiscal 1996, 1995, and 1994 was $11,325, $5,234 and
$4,022 respectively.
The Company is a party to a number of lawsuits and claims arising out of the
conduct of its business. In the opinion of management, based on the advice of
in-house and external legal counsel, the lawsuits and claims pending will not
have a material adverse effect on the Company's financial position.
6. INCOME TAXES:
A comparative analysis of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
FISCAL
------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
Federal........................................... $29,262 $ 9,492 $ 6,795
State and local................................... 5,194 2,133 1,768
------- ------- -------
34,456 11,625 8,563
------- ------- -------
Deferred:
Federal........................................... 1,565 (286) (2,141)
State and local................................... 442 (94) (65)
------- ------- -------
2,007 (380) (2,206)
------- ------- -------
$36,463 $11,245 $ 6,357
======= ======= =======
</TABLE>
35
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
The difference between the actual income tax provision and the tax provision
computed by applying the statutory federal income tax rate to income before
provision for income taxes is attributable to the following:
<TABLE>
<CAPTION>
FISCAL
----------------------------------------------------------
1996 1995 1994
------------------- ------------------- ------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------- ---------- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Tax computed using the
federal statutory rate. $22,542 35.0% $13,060 35.0% $6,745 34.0%
State income taxes, net
federal income tax
effect................. 2,825 4.4 1,567 4.2 1,408 7.1
Alternative minimum tax. -- -- -- -- (132) (.7)
Pre-acquisition earnings
of acquired S
corporations........... (1,081) (1.7) (3,144) (8.4) (1,592) (8.0)
Acquired subsidiaries
change from cash to
accrual basis.......... 4,723 7.3 -- -- -- --
Non-deductible merger
expenses............... 7,250 11.3 -- --
Permanent differences
and other.............. 204 .3 (238) (.6) (72) (.4)
------- ---- ------- ---- ------ ----
$36,463 56.6% $11,245 30.2% $6,357 32.0%
======= ==== ======= ==== ====== ====
</TABLE>
The components of the deferred tax assets and liabilities recorded in the
accompanying consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
FISCAL
----------------
1996 1995
------- -------
<S> <C> <C>
Gross deferred tax assets:
Self-insurance reserves..................................... $ 5,124 $ 3,339
Deferred income............................................. 71 312
Allowance for doubtful accounts receivable.................. 1,124 678
Purchase accounting adjustments............................. 2,242 --
Other....................................................... 1,171 386
------- -------
Total gross deferred tax assets.......................... 9,732 4,715
------- -------
Gross deferred tax liabilities:
Amortization of computer software costs..................... (128) (113)
Depreciation and amortization of furniture, equipment and
leasehold improvements...................................... (1,970) (538)
Amortization of goodwill.................................... (2,034) (53)
Acquired subsidiaries change from cash to accrual basis..... (3,746) (443)
Other....................................................... (292) --
------- -------
Total gross deferred tax liabilities........................ (8,170) (1,147)
------- -------
Net deferred income tax asset............................ $ 1,562 $ 3,568
======= =======
</TABLE>
36
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
The net deferred income tax assets (liabilities) are reflected in the
accompanying consolidated balance sheets as follows:
<TABLE>
<CAPTION>
FISCAL
---------------
1996 1995
------- ------
<S> <C> <C>
Net deferred income tax assets--current portion............. $ 3,605 $4,124
Net deferred income tax liabilities-non-current portion..... (2,043) (556)
------- ------
$ 1,562 $3,568
======= ======
</TABLE>
Management has determined, based on the history of prior taxable earnings and
its expectations for the future, taxable income will more likely than not be
sufficient to fully realize deferred tax assets and, accordingly, has not
reduced deferred tax assets by a valuation allowance.
8. EMPLOYEE BENEFIT PLANS:
Profit Sharing Plan
The Company has a noncontributory profit sharing plan that includes a 401(k)
plan, which covers all non-highly compensated (as defined by IRS regulations)
full time employees over age twenty-one with at least one year of employment
and 1,000 hours of service. The Company also has a non-qualified deferred
compensation plan for its highly compensated employees. The Company may make
annual contributions at the discretion of the Board of Directors, but
contributions are limited to the maximum amount allowed under the provisions of
the Internal Revenue Code. The Company did not contribute to the profit sharing
plan during fiscal 1996, 1995, or 1994.
The Company's subsididary, Career, has a 401(k) plan for all of their non-
highly compensated employees (as defined by IRS regulations) and temporary
employees, and a non-qualified deferred compensation plan for its highly
compensated employees. The plans allow eligible employees to contribute up to
10% of compensation, as defined. Career matches employee contributions at 50%
up to the first 5% of total compensation.
The Company has assumed many 401(k) plans of acquired subsidiaries. The
Company intends to merge these plans into the Company's plan in the future.
Amounts charged to earnings with respect to the plans were $503, $383 and $306
for the years ended December 31, 1996, 1995 and 1994, respectively.
9. STOCKHOLDERS' EQUITY:
Public Offerings of Common Stock
On August 23, 1994, the Company completed its Initial Public Offering for the
sale of 10,200,000 shares of common stock. Coincident with the offering, the
underwriters of the offering exercised their 15% over-allotment option and
accordingly an additional 1,800,000 shares of the Company's common stock were
sold by the Company. The Company received $18,684 from the sale of the shares,
net of underwriting discount and expenses associated with the offering. The net
proceeds were used to repay all outstanding indebtedness under the Company's
credit facility, which was approximately $4,900 and approximately $1,500 in
acquisition indebtedness. The remaining proceeds were used primarily to fund
additional acquisitions.
37
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
On October 3, 1995, the Company completed another offering for the sale of
15,000,000 shares of common stock. The Company received $72,400 from the sale
of the shares, net of underwriting discount and expenses associated with the
offering. A portion of the net proceeds were used to repay all outstanding
indebtedness under the Company's credit facility, which was approximately
$8,500. The remaining proceeds, expended through December 31, 1995, were used
primarily to fund additional acquisitions.
In April 1996, the Company completed an offering for the sale of 11,790,000
shares of common stock. The Company received $304,900 million from the sale of
the shares, net of underwriting discount and expenses associated with the
offering. The net proceeds were used to repay all outstanding indebtedness
under the Company's credit facility, which was approximately $92,800. The
remaining proceeds have been used primarily to fund acquisitions.
The Company's subsidiary, Career, prior to the date of the merger with the
Company, completed offerings in which Career issued 16,085,365 shares of common
stock, adjusted for the conversion to the Company's shares of common stock, in
which Career received $161,200, net of underwriting discounts and expenses
associated with the offerings. Career used a portion of the proceeds from its
initial offering to repay subordinated notes. The repayment of the subordinated
notes, the associated prepayment penalty and the write-off of unamortized bank
financing costs in connection with the offering resulted in an extraordinary
charge to earnings of $1,403, net of $933 income tax benefit in the year ended
January 1, 1995.
Incentive Employee Stock Plans
Effective December 29, 1993, the Board of Directors approved the 1993 Stock
Option Plan (the 1993 Plan) which provides for the granting of options for the
purchase of up to an aggregate of 2,400,000 shares of common stock to key
employees. Under the 1993 Plan, the Stock Option Committee (the Committee) of
the Board of Directors has the disc retion to award stock options, stock
appreciation rights (SARS) or restricted stock to employees. Options may be
either incentive stock options or non-qualified options and the option price
shall be established by the Committee. Incentive stock options may be granted
at an exercise price not less than 100% of the fair market value of a share on
the effective date of the grant and non-qualified options may be granted at an
exercise price not less than 50% of the fair market value of a share on the
effective date of the grant.
On August 24, 1995, the Board of Directors approved the 1995 Stock Option
Plan (the 1995 Plan), which provided for the granting of options up to an
aggregate of 3,000,000 shares of common stock to key employees under terms and
provisions similar to the 1993 Plan. During fiscal 1996, the 1995 Plan was
amended to provide for the granting of an additional 6,000,000 shares.
The Company has assumed the stock option plans of its acquired subsidiary,
Career, in accordance with the terms of the merger agreement dated November 14,
1996. At the date of acquisition Career had 2,254,831 options outstanding under
the plans which were assumed.
Non-Employee Director Stock Plan
Effective December 29, 1993, the Board of Directors of the Company approved a
stock option plan (Director Plan) for nonemployee directors, whereby 600,000
shares of common stock have been reserved for issuance to non-employee
directors. The Director Plan allows each non-employee director to purchase
60,000 shares at an exercise price equal to the fair market value at the date
of the grant upon election to the Board. In addition, each non-employee
direction is granted 20,000 options upon the anniversary date of the director's
initial election date. The options become exercisable ratably over a five-year
period and expire ten years from the date
38
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
of the grant. However, the options are exercisable for a maximum of three years
after the individual ceases to be a director and if the director ceases to be a
director within one year of appointment the options are canceled. The Company
granted 120,000 options under the Director's Plan with an exercise price of
$1.25 during fiscal 1994. In fiscal 1996, the Company granted 80,000 options
under the Director's Plan at an average exercise price of $25.31.
The following table summarizes the Company's Stock Option Plans:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED
EXERCISE AVERAGE
SHARES PRICES EXERCISE PRICE
---------- ------------- --------------
<S> <C> <C> <C>
Balance, January 3, 1994............... 2,966,470 $ 0.18--1.39 $ 1.08
Granted............................... 134,502 $ 0.98--5.81 4.74
Exercised............................. (126,632) $ 0.18--1.39 0.37
Cancelled............................. (75,000) $ 1.25--1.25 1.25
---------- ------------- ------
Balance, January 1, 1995............... 2,899,340 $ 0.18--5.81 1.16
Granted............................... 3,879,846 $ 2.31--11.00 5.28
Exercised............................. (867,113) $ 0.18--5.80 0.86
Cancelled............................. (6,640) $ 1.39--5.81 2.20
---------- ------------- ------
Balance, December 31, 1995............. 5,905,433 $ 0.18--11.00 3.88
Granted............................... 6,478,591 $11.27--33.75 19.50
Exercised............................. (2,029,163) $ 0.18--12.09 2.76
Cancelled............................. (61,467) $ 5.81--22.22 11.69
---------- ------------- ------
Balance, December 31, 1996............. 10,293,394 $ 0.69--33.75 $13.67
========== ============= ======
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------- ------------------
AVERAGE AVERAGE
AVERAGE EXERCISE EXERCISE
EXERCISE PRICE RANGE SHARES LIFE (A) PRICE SHARES PRICE
- -------------------- ---------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.69--5.17..................... 3,618,969 6.52 $ 4.19 3,089,769 $ 4.44
$6.25--13.83.................... 1,671,090 7.04 11.53 720,045 11.38
$14.50--14.50................... 1,920,000 9.07 14.50 1,104,000 14.50
$16.00--25.74................... 764,235 7.78 21.93 104,958 19.48
$26.125--33.75.................. 2,319,100 9.76 26.61 30,600 26.31
---------- ---- ------ --------- ------
Total .......................... 10,293,394 7.90 $13.67 5,049,372 $ 8.07
========== ==== ====== ========= ======
</TABLE>
- --------
(a) Average contractual life remaining in years.
At year-end 1995, options with an average exercise price of $3.28 were
exercisable on 3.5 million shares; at year-end 1994, options with an average
exercise price of $1.01 were exercisable on 1.5 million shares.
The Company has adopted Statement of Financial Accounting Standards (SFAS)
NO. 123, "Accounting for Stock-Based Compensation," issued in October 1995. As
permitted by the provisions of SFAS No. 123, the Company applies APB Opinion 25
and related interpretations in accounting for its employee stock option plans
and, accordingly, does not recognize compensation cost. If the Company had
elected to recognize compensation
39
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
cost for options granted in 1995 and 1996, based on the fair value of the
options granted at the grant date as prescribed by SFAS No. 123, net income and
earnings per share would have been reduced to the pro forma amounts indicated
below.
<TABLE>
<CAPTION>
1996 1995
------- -------
<C> <S> <C> <C>
Net income As reported $27,942 $26,069
Pro forma $17,154 $23,374
Fully diluted earnings per share As reported $ 0.31 $ 0.40
Pro forma $ 0.21 $ 0.37
</TABLE>
The weighted average fair values of options granted during 1996 and 1995 were
$4.57 and $1.23 per share, respectively. The fair value of each option grant is
estimated on the date of grant using the Black Scholes option-pricing model
with the following assumptions:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Expected dividend yield............................................ -- --
Expected stock price volatility.................................... .30 .30
Risk-free interest rate............................................ 5.90 6.89
Expected life of options........................................... 3.5 3.5
</TABLE>
During Fiscal 1996, the Company's Board of Directors issued a restricted
stock grant of 345,000 shares, under the 1995 Plan, to the Company's President
and Chief Executive Officer, which vests over five years. The Company recorded
$4,892 in deferred compensation expense which is being amortized on a straight
line basis over vesting period of the grant.
Other Common Stock Sales
In 1994, the Company sold 320,004 shares of common stock, including 180,000
shares to a member of the Board of Directors, at $1.25 per share, representing
the fair value at date of sale.
Stock Splits
Effective November 27, 1995, the Company's Board of Directors approved a two-
for-one stock split of common stock for stockholders of record as of November
9, 1995. A total of $119 was transferred from additional contributed capital to
the stated value of common stock in connection with the stock split. The par
value of the common stock remains unchanged. All share and per share amounts
have been restated to retroactively reflect the stock split.
Effective March 6, 1996, the Company's Board of Directors approved a three-
for-one stock split of common stock for stockholders of record as of March 20,
1996. A total of $476 was transferred from additional contributed capital to
the stated value of common stock in connection with the stock split. The par
value of the common stock remains unchanged. All share and per share amounts
have been restated to retroactively reflect the stock split.
10. CONCENTRATION OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The
Company places its cash with what it believes to be high credit quality
institutions. At times such investments may be in excess of the FDIC insurance
limit. The Company routinely assesses the financial strength of its customers
and, as a consequence, believes that its trade accounts receivable credit risk
exposure is limited.
40
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
11. SIGNIFICANT CUSTOMER INFORMATION:
In January 1995, the Company was selected by American Transtech, Inc. ("ATI")
to become the primary provider of temporary staffing services for ATI's
Telecommunications Operations. Those services are being provided through
PeopleSystems, Inc., an affiliate of the Company, utilizing the Company's
temporary employees. The Company has provided staffing services to ATI, a
subsidiary of AT&T, which has comprised 8%, 14%, and 8% of revenue for fiscal
1996, 1995, and 1994, respectively.
12. ACCRUED WORKERS' COMPENSATION CLAIMS:
The Company is primarily self-insured with respect to workers' compensation
claims for all employees, supplemented by insurance coverage which limits the
Company's liability per occurrence. The limit of the Company's liability per
occurrence ranges from $250 to $350 under the Company's self-insured plans. The
excess insurance coverage provides coverage in excess of the limit of the
Company's liability per occurrence. In addition, several of the Company's
subsidiaries are fully insured under various plans and, therefore, are not
included in the self insured plans.
The Company has provided an accrual for the estimated amount of unsettled
workers' compensation claims. This estimate was based, in part, on an
evaluation of information provided by the Company's third-party administrator
and its independent actuary, and represents management's best estimate of the
Company's future liability. The Company's management believes that the
difference, if any, between the amounts recorded at December 31, 1996, for its
estimated liability and the costs of settling the actual claims, will not be
material to the results of operations.
<TABLE>
<CAPTION>
FISCAL
-----------------
1996 1995
-------- -------
<S> <C> <C>
Balance, beginning of period.............................. $ 9,900 $ 5,100
Estimated cost of claims incurred......................... 20,827 13,653
Payments.................................................. (12,627) (8,853)
-------- -------
Balance, end of period.................................... $ 18,100 $ 9,900
======== =======
</TABLE>
The Company's irrevocable letters of credit are primarily to guarantee the
payment of the Company's workers' compensation claims. At December 31, 1996 and
1995, the letters of credit amounted to $15,225 and $16,482, respectively.
13. CONVERTIBLE DEBT:
During the first quarter of 1994, the Company sold $2,300 principal amount of
6% Convertible Subordinated Debentures, due January 31, 1997. The debentures
were convertible at the option of the debenture holders into shares of the
Company's common stock at a price of $1.25 per share. In addition to the
convertible subordinated debentures, the Company also granted options to
certain debenture holders, to purchase an additional $2,000 of 6% Convertible
Subordinated Debentures, due January 31, 1997, which were convertible into
shares of common stock at a conversion price of $1.38 per share. Included in
the debentures was a $500 debenture to a Board member which was redeemable at
the Company's option at 100% of principal. During fiscal 1994, this debenture
was called by the Company. The holder exercised his option to convert the
debenture for 399,996 shares of common stock.
41
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
During fiscal 1995, the debenture holders converted their options to purchase
$2,000 of 6% Convertible Subordinated Debentures, due January 31, 1997, which
are convertible into shares of common stock at a conversion price of $1.38 per
share. In addition, the holders of $1,500 in principal amount of the Company's
6% Convertible Subordinated Debentures presented their debentures to the
Company for conversion. The debentures were converted into 1,127,262 shares of
the Company's common stock.
During fiscal 1996, the holders of $1,300 in principal amount of the
Company's 6% Convertible Subordinated Debentures presented their debentures to
the Company for conversion. The debentures were converted into 1,040,000 shares
of the Company's common stock.
On October 16, 1995, the Company's subsidiary, Career, issued $86,250 of 7%
Convertible Senior Notes Due 2002. Interest on the notes is paid semiannually
on May 1 and November 1 of each year. The notes are convertible at the option
of the holder thereof, at any time after 90 days following the date of original
issuance thereof and prior to maturity, unless previously redeemed, into shares
of common stock of the Company at a conversion price of $11.35 per share,
subject to adjustment in certain events.
The notes are redeemable, in whole or in part, at the option of the Company,
at any time on or after November 1, 1998, at stated redemption prices, together
with accrued interest. The notes do not provide for any sinking fund. Upon a
Designated Event (as defined and including a change of control) holders of the
notes will have the right, subject to certain restrictions and conditions, to
require the Company to purchase all or any part of the Notes at a purchase
price equal to 101% of the principal amount thereof together with accrued and
unpaid interest to the date of purchase.
The notes have been unconditionally guaranteed by the Company and joint and
severally guaranteed by each of Career's present and any future subsidiaries.
The guarantee of the Company and each subsidiary of Career is an unsecured
general obligation of the Company and such subsidiary, ranking equally with
other unsecured obligations of the Company and such subsidiary. The obligation
of the Company and each of Career's present and any future subsidiaries under
its guarantee is full and unconditional.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following summary disclosures are made in accordance with the provisions
of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," which
requires the disclosure of fair value information about both on-and off-balance
sheet financial instruments where it is practicable to estimate the value. Fair
value is defined in SFAS No. 107 as the amount at which an instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. It is not the Company's intent to enter into such
exchanges.
The following methods and assumptions were used in estimating the fair value
of financial instruments:
Investments. The carrying amount approximates fair value based on quoted
market prices.
Debt. The fair value of debt instruments is based on rates available to the
Company for debt with similar terms and maturities and approximates its
carrying amount.
Convertible Subordinated Debenture. Convertible Subordinated debentures are
convertible into shares of common stock at $1.25. The fair value of the
subordinated debt instrument is based on estimated rates for debt instruments
with similar terms and maturities and approximates its carrying value.
Convertible Senior Notes. The carrying value of the convertible senior notes
approximates fair value based on the market prices of similar securities.
42
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(dollar amounts in thousands except for per share amounts)
15. SUMMARY DATA OF SUBSIDIARY
The following table details the summarized financial information of the
Company's wholly owned subsidiary, Career Horizons, Inc., and Career Horizons'
subsidiaries as of and for the fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Current assets......................................... $184,987
Non-current assets..................................... 187,482
Current liabilities.................................... 77,893
Non-current liabilities................................ 88,250
Revenue................................................ 636,798
Gross profit........................................... 155,665
Income from operations................................. 38,588
</TABLE>
16. QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS):
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED FOR THE YEAR
----------------------------------- ENDED
MARCH JUNE 30, SEPT. DEC. 31, DECEMBER 31,
31, 1996 1996 30, 1996 1996 1996
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Revenue...................... $279,032 $343,770 $393,405 $432,417 $1,448,624
Gross profit................. 62,162 77,582 91,908 105,614 337,266
Income from operations....... 14,495 21,366 27,634 32,264 95,759
Income before provision for
income taxes................. 12,312 18,462 27,778 5,853 64,405
Net income................... 8,025 9,429 16,953 (6,465) 27,942
Pro forma net income......... 7,570 10,447 16,953 (3,386) 31,584
Pro forma earnings per share. $ 0.09 $ 0.11 $ 0.17 $ (0.02) $ 0.35
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED FOR THE YEAR
----------------------------------- ENDED
APRIL 2, JULY 2, OCTOBER DEC. 31, DECEMBER 31,
1995 1995 1, 1995 1995 1995
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Revenue....................... $158,524 $173,786 $187,631 $206,041 $ 725,982
Gross profit.................. 33,149 36,807 41,898 46,466 158,320
Income from operations........ 5,784 9,404 10,787 13,427 39,402
Income before provision for
income taxes.................. 5,368 9,050 10,195 12,701 37,314
Net income.................... 3,942 6,438 7,027 8,662 26,069
Pro forma net income.......... 3,225 5,677 6,177 7,846 22,925
Pro forma earnings per share.. $ 0.06 $ 0.09 $ 0.10 $ 0.10 $ 0.36
</TABLE>
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There have been no disagreements with or change in the registrant's
independent accountant since the Company's inception.
PART III
Certain information required by Part III is omitted from this report in that
the Registrant will file a Definitive Proxy Statements pursuant to Regulation
14A ("the Proxy Statement") not later than 120 days after the end of the
financial year covered by this report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
sections entitled "Election of Directors" and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" contained in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
section entitled "Executive Compensation" contained in the Proxy Statement
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
section entitled "Voting Securities" contained in the Proxy Statement
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
section entitled "Certain Transactions; Compensation Committee Interlocks and
Insider Participation contained in the Proxy Statement
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following consolidated financial statements of the Company and its
subsidiaries are included in Item 8 of this report.
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income for the years ended December 31,
1996 and 1995 and for the year ended January 1, 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1996 and 1995 and for the year ended January 1, 1995
Consolidated Statements of Stockholders' equity for the years ended
December 31, 1996 and 1995 and for the year ended January 1, 1995
Notes to Consolidated Financial Statements.
44
<PAGE>
2. Financial Statement Schedules
Financial statement schedules required to be included in this report
are either shown in the financial statements and notes thereto included
in Item 8 of this report or have been omitted because they are not
applicable.
3. Exhibits
2.1 Agreement and Plan of Reorganization related to the acquisition of
PTA International, d/b/a Perma Temp Agency (1)
2.2 Stock Purchase Agreement related to the acquisition of Goldfarb-
Wasson Associates, Inc., d/b/a GW Consulting and GW Temporaries,
Inc. (2)
2.3 Asset Purchase Agreement related to the purchase of Career
Enhancement International, Inc. (3)
2.4 Asset Purchase Agreement related to the acquisition of Accounting
Pros, Inc. and Accounting Pro Philadelphia, Inc. (3)
2.5 Stock Purchase Agreement related to the acquisition of TEKNA, Inc.
(3)
2.6 Asset Purchase Agreement related to the acquisition of Advantage
Personnel Services, Inc. (3)
2.7 Stock Purchase Agreement related to the acquisition of Excel
Temporary Services, Inc.; Excel Services of Atlanta, Inc.; Excel
Services of Cobb County, Inc.; and Excel Services of D.C., Inc.(4)
2.8 Stock Purchase Agreement related to the acquisition of Additional
Technical Support, Inc.; CADSTAR International, Inc.; Systems Pros,
Inc.; and National Software Associates, Inc. (5)
2.9 Asset Purchase Agreement related to the acquisition of HNS
Software, Inc. (3)
2.10 Agreement and Plan of Merger related to the acquisition of The
McKinley Group, Inc. and MGI Services, Inc. (6)
2.11 Agreement and Plan of Merger related to the acquisition of Career
Horizons, Inc. (7)
3.1 Articles of Incorporation, as amended.(3)
3.2 Bylaws, as amended.
4.1 Form of 6% Convertible Subordinated Debenture dated February 4,
1994.(8)
4.2 Form of 6% Convertible Subordinated Debenture dated February 28,
1994.(8)
4.3 Form of 6% Convertible Subordinated Debenture dated March 1,
1994.(8)
4.4 Form of 6% Convertible Subordinated Debenture dated March 24,
1994.(8)
4.5 Form of 6% Convertible Subordinated Debenture dated March 1,
1995.(9)
4.6 Form of 6% Convertible Subordinated Debenture dated Mach 23,
1995.(9)
4.7 Indenture, dated as of October 19, 1995 between Career Horizons,
Inc. and Chemical Bank, as Trustee.(10)
4.8 First Supplemental Indenture, dated October 19, 1996, among Career
Horizons, Inc., each of the subsidiaries of Career Horizons, Inc.
and the Trustee.(10)
4.9 Second Supplemental Indenture, dated November 13, 1996, by and
among Career Horizons, Inc., each of the subsidiaries of Career
Horizons, Inc. and the Trustee.(11)
4.10 Third Supplemental Indenture, dated November 14, 1996, by and
among Career Horizons, Inc., each of the subsidiaries of Career
Horizons, Inc. and the Trustee.(11)
45
<PAGE>
4.11 Form of Convertible Note.(10)
4.12 Registration Agreement, dated October 16, 1995, between Career
Horizons, Inc. and Salomon Brothers, Inc., as Respective of the
Initial Purchasers named in Schedule I thereto.(10)
10.1 AccuStaff Incorporated Employee Stock Plan.(8)*
10.2 AccuStaff Incorporated Non-Employee Director Stock Plan.(8)*
10.3 Form of Employee Stock Option Award Agreement.(8)*
10.4 Form of Non-Employee Director Stock Option Award Agreement.(8)*
10.5 Profit Sharing Plan.(8)*
10.6 Amended and Restated Revolving Credit and Reimbursement Agreement
by and between the Company and NationsBank of Florida, National
Association dated June 6, 1995.(8)
10.7 Employment Agreement with Derek E. Dewan, as amended.(12)*
10.8 Employment Agreement with Delores P. Kesler, as amended.(8)*
10.9 Employment Agreement with Stephen A. Hoffmann, as amended.(8)*
10.10 Employment Agreement with David G. Richardson, as amended.(8)*
10.11 Employment Agreement with William H. Thumel, Jr., as amended.(8)*
10.12 Kesler Leases
i. Lease Agreement between the Registrant, as Tenant, and ATS
Services, Inc., as Landlord (Atlantic Blvd., Jacksonville,
FL).(8)
ii. Lease Agreement between the Registrant, as Tenant, and Delores
P. Kesler as Landlord (Beach Blvd., Jacksonville, FL).(8)
10.13 Hoffmann Leases
i. Lease Agreement between Metrotech Incorporated, as Lessee, and
Stephen A. Hoffman and Peggy R. Hoffmann, as Lessors
(Louisville, KY).(8)
ii. Lease Agreement between Arkansas Metro, Inc., as Lessee, and
Stephen A. Hoffman, as Lessor (Fort Smith, AR).(8)
10.14 Thumel Leases
i. Lease Agreement between the Registrant, as Tenant, and Abacus
of Hampton Roads, as Landlord (Newport News, VA).(8)
ii. Lease Agreement between the Registrant, as Tenant, and W.H.
Thumel, as Landlord (Virginia Breach, VA).(8)
iii. Lease Agreement between the Registrant, as Tenant, and Abacus
of Hampton Roads, as Landlord (Virginia Breach, VA).(8)
iv. Lease Agreement between the Registrant, as Tenant, and W.H.
Thumel, as Landlord (Norfolk, VA).(8)
v. Lease Agreement between the Registrant, as Tenant, and W.H.
Thumel, as Landlord (Virginia Breach, VA).(8)
10.15 Staffing Services Contract between American Transtech, Inc. and
People Systems, Inc.(8)
10.16 AccuStaff Incorporated 1995 Stock Option Plan.(8)*
46
<PAGE>
10.17 Form of Stock Option Agreement under AccuStaff Incorporated 1995
Stock Option Plan.(8)*
10.18 Executive Employment Agreement with Michael D. Abney.(3)*
10.19 Executive Employment Agreement with James R. O'Reilly.(3)*
10.20 Form of Director's and Officer's Indemnification Agreement.(8)*
10.21 Franchise Agreement between the Company and People Systems,
Inc.(8)
10.22 Second Amended and Restated Revolving Credit Facility with
NationsBank, National Association (South) dated February 12,
1996.(3)
10.23 Warrant Agreement between the Registrant and NationsBank,
National Association (South) dated January 9, 1996.(3)
10.24 Note made by Registrant in favor of NationsBank, National
Association (South) dated March 18, 1996.(3)
10.25 Termination Agreement and General Release among the Registrant,
Lesley M. Friedman and LMF Transition Corp. dated March 6, 1996.(3)
10.26 Third Amended and Restated Revolving Credit and Reimbursement
Agreement by and among Company and NationsBank, N.A. (South), dated
May 2, 1996.(13)
10.27 Purchase Agreement between Company and Payroll Transfers, Inc.,
dated August 8, 1996.(14)
10.28 Option Agreement between Company and Payroll Transfers, Inc.,
dated August 8, 1996.(14)
10.29 8% Subordinated Convertible Note due August 8, 1996, made by
Payroll Transfers, Inc. in favor of Company.(14)
10.30 Strategic Relationship Agreement between Company and Payroll
Transfers, Inc., dated August 8, 1996.(14)
10.31 Registration Rights Agreement between Company and Payroll
Transfers, Inc., dated August 8, 1996.(14)
10.32 Employment Agreement with Walter W. Macauley.(15)*
11.1 Statement re: computation of per share earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand, L.L.P.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. The Registrant filed the following reports on Form 8-K
during the fourth quarter of 1996:
Form 8-K dated November 14, 1996, reporting the closing of the
acquisition of Career Horizons, Inc. filed pursuant to Item 2 of Form
8-K.
Form 8-K dated December 10, 1996, restating the financials for Career
Horizons, Inc. and The McKinley Group, Inc. filed pursuant to Item 5 of
Form 8-K.
(c) The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) Financial Statement Schedule-not applicable.
- --------
(1) Incorporated by reference to the Company's Current Report on Form 8-K
dated January 2, 1996.
(2) Incorporated by reference to the Company's Current Report on Form 8-K
dated January 3, 1996.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
47
<PAGE>
(4) Incorporated by reference to the Company's Current Report on Form 8-K
dated February 19, 1996.
(5) Incorporated by reference to the Company's Current Report on Form 8-K
dated February 20, 1996.
(6) Incorporated by reference to the Company's Current Report on Form 8-K
dated June 19, 1996.
(7) Incorporated by reference to the Company's Current Report on Form 8-K
dated August 25, 1996.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-79806).
(9) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended July 2, 1995.
(10) Previously filed as an exhibit to Career Horizons, Inc.'s Registration
Statement on Form S-3 (Reg. No. 33-99840) and incorporated by reference
herein.
(11) Previously filed as an exhibit to Company's Registration Statement on Form
S-3 (Reg. No. 333-18695) and incorporated by reference herein.
(12) Employment Agreement, First, Second and Third Amendments incorporated by
reference to the Company's Registration Statement on Form S-1, filed
August 29, 1996 (Reg. No. 33-96372). Fourth Amendment incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996).
(13) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1996.
(14) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1996.
(15) Incorporated by reference to the Company's Registration Statement on Form
S-4 (Reg. No. 333-12207) and incorporated by reference herein.
* A management contract or compensatory plan, contract or arrangement.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ACCUSTAFF INCORPORATED
By: /s/ Derek E. Dewan
-----------------------------------
DEREK E DEWAN,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934. this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Derek E. Dewan Chairman, President, Chief March 28, 1997
_________________________________ Executive Officer and
DEREK E. DEWAN Director
/s/ Michael D. Abney Senior Vice President, Chief March 28, 1997
_________________________________ Financial Officer,
MICHAEL D. ABNEY Treasurer, Secretary and
Director
/s/ Sean D. Mann Vice President and March 28, 1997
_________________________________ Controller/ Chief
SEAN D. MANN Accounting Officer
/s/ John A. Anderson, Jr. Director March 28, 1997
_________________________________
JOHN A. ANDERSON, JR.
Vice Chairman and Director March , 1997
_________________________________
WALTER W. MACAULEY
/s/ William H. Thumel, Jr. Director March 28, 1997
_________________________________
WILLIAM H. THUMEL, JR.
/s/ T. Wayne Davis Director March 28, 1997
_________________________________
T. WAYNE DAVIS
/s/ Delores Pass Kesler Director March 28, 1997
_________________________________
DELORES PASS KESLER
</TABLE>
49
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ACCUSTAFF INCORPORATED
(A FLORIDA CORPORATION)
AS AMENDED
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Definitions........................................ 1
ARTICLE 2
OFFICES
Section 2.1 Principal and Business Offices..................... 1
Section 2.2 Registered Office.................................. 1
ARTICLE 3
SHAREHOLDERS
------------
Section 3.1 Annual Meeting...................................... 2
Section 3.2 Special Meetings.................................... 2
Section 3.3 Place of Meeting.................................... 2
Section 3.4 Notice of Meeting................................... 2
Section 3.5 Waiver of Notice.................................... 3
Section 3.6 Fixing of Record Date............................... 3
Section 3.7 Shareholders' List for Meetings..................... 4
Section 3.8 Quorum.............................................. 5
Section 3.9 Voting of Shares.................................... 5
Section 3.10 Vote Required....................................... 5
Section 3.11 Conduct of Meeting.................................. 6
Section 3.12 Inspectors of Election.............................. 6
Section 3.13 Proxies............................................. 6
Section 3.14 Shareholder Nominations and Proposals............... 7
Section 3.15 Action by Shareholders Without Meeting.............. 7
Section 3.16 Acceptance of Instruments Showing Shareholder Action 8
ARTICLE 4
BOARD OF DIRECTORS
------------------
Section 4.1 General Powers and Number.......................... 9
Section 4.2 Qualifications..................................... 9
Section 4.3 Term of Office..................................... 9
Section 4.4 Removal............................................ 9
<PAGE>
Page
----
Section 4.5 Resignation........................................ 9
Section 4.6 Vacancies.......................................... 9
Section 4.7 Compensation....................................... 10
Section 4.8 Regular Meetings................................... 10
Section 4.9 Special Meetings................................... 10
Section 4.10 Notice............................................. 11
Section 4.11 Waiver of Notice................................... 11
Section 4.12 Quorum and Voting.................................. 11
Section 4.13 Conduct of Meetings................................ 11
Section 4.14 Committees......................................... 12
Section 4.15 Action Without Meeting............................. 12
ARTICLE 5
OFFICERS
--------
Section 5.1 Number............................................. 13
Section 5.2 Election and Term of Office........................ 13
Section 5.3 Removal............................................ 13
Section 5.4 Resignation........................................ 13
Section 5.5 Vacancies.......................................... 13
Section 5.6 President.......................................... 14
Section 5.7 Chief Operating Officer............................ 14
Section 5.8 Vice Presidents.................................... 14
Section 5.9 Secretary.......................................... 14
Section 5.10 Treasurer.......................................... 15
Section 5.11 Assistant Secretaries and Assistant Treasurers..... 15
Section 5.12 Other Assistants and Acting Officers............... 15
Section 5.13 Salaries........................................... 15
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
------------------------------------------------------
Section 6.1 Contracts.......................................... 16
Section 6.2 Checks, Drafts. etc................................ 16
Section 6.3 Deposits........................................... 16
Section 6.4 Voting of Securities Owned by Corporation.......... 16
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
-------------------------------------------
Section 7.1 Consideration for Shares........................... 17
Section 7.2 Certificates for Shares............................ 17
-ii-
<PAGE>
Page
----
Section 7.3 Transfer of Shares................................. 18
Section 7.4 Restrictions on Transfer........................... 18
Section 7.5 Lost, Destroyed, or Stolen Certificates............ 18
Section 7.6 Stock Regulations.................................. 18
ARTICLE 8
SEAL
----
Section 8.1 Seal............................................... 18
ARTICLE 9
BOOKS AND RECORDS
-----------------
Section 9.1 Books and Records.................................. 18
Section 9.2 Shareholders' Inspection Rights.................... 19
Section 9.3 Distribution of Financial Information.............. 19
Section 9.4 Other Reports...................................... 19
ARTICLE 10
INDEMNIFICATION
---------------
Section 10.1 Provision of Indemnification....................... 19
ARTICLE 11
AMENDMENTS
----------
Section 11.1 Power to Amend..................................... 20
-iii-
<PAGE>
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Definitions. The following terms shall have the following
-----------
meanings for purposes of these bylaws:
"Act" means the Florida Business Corporation Act, as it may be amended from
---
time to time, or any successor legislation thereto.
"Deliver" or "delivery" includes delivery by hand; United States mail;
------- --------
facsimile, telegraph, teletype or other form of electronic transmission; and
private mail carriers handling nationwide mail services.
"Distribution" means a direct or indirect transfer of money or other
------------
property (except shares in the corporation) or an incurrence of indebtedness by
the corporation to or for the benefit of shareholders in respect of any of the
corporation's shares. A distribution may be in the form of a declaration or
payment of a dividend; a purchase, redemption, or other acquisition of shares; a
distribution of indebtedness; or otherwise.
"Principal office" means the office (within or without the State of
----------------
Florida) where the corporation's principal executive offices are located, as
designated in the Articles of Incorporation until an annual report has been
filed with the Florida Department of State, and thereafter as designated in the
annual report.
ARTICLE 2
OFFICES
-------
Section 2.1 Principal and Business Offices. The corporation may have such
------------------------------
principal and other business offices, either within or without the State of
Florida, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
Section 2.2 Registered Office. The registered office of the corporation
-----------------
required by the Act to be maintained in the State of Florida may but need not be
identical with the principal office if located in the State of Florida, and the
address of the registered office may be changed from time to time by the Board
of Directors or by the registered agent. The business office of the registered
agent of the corporation be identical to such registered office.
<PAGE>
ARTICLE 3
SHAREHOLDERS
------------
Section 3.1 Annual Meeting. The annual meeting of shareholders shall be
--------------
held within four months after the close of each fiscal year of the corporation
on a date and at a time and place designated by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held on
the day fixed as herein provided for any annual meeting of shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of shareholders as soon thereafter as is practicable.
Section 3.2 Special Meetings.
----------------
(a) Call by Directors or President. Special meetings of shareholders,
------------------------------
for any purpose or purposes, may be called by the Board of Directors, the
Chairman of the Board (if any) or the President.
(b) Call by Shareholders. The corporation shall call a special
--------------------
meeting of shareholders in the event that the holders of at least ten percent of
all of the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date, and deliver to the Secretary one or
more written demands for the meeting describing one or more purposes for which
it is to be held. The corporation shall give notice of such a special meeting
within sixty days after the date that the demand is delivered to the
corporation.
Section 3.3 Place of Meeting. The Board of Directors may designate any
----------------
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of shareholders. If no designation is made,
the place of meeting shall be the principal office of the corporation.
Section 3.4 Notice of Meeting.
-----------------
(a) Content and Delivery. Written notice stating the date, time, and
--------------------
place of any meeting of shareholders and, in the case of a special meeting, the
purpose or purposes for, which the meeting is called, shall be delivered not
less than ten days nor more than sixty days before the date of the meeting by or
at the direction of the President or the Secretary, or the officer or persons
duly calling the meeting, to each shareholder of record entitled to vote at such
meeting and to such other persons as required by the Act. Unless the Act
requires otherwise, notice of an annual meeting need not include a description
of the purpose or purposes for which the meeting is called. If mailed, notice
of a meeting of shareholders shall be deemed to be delivered when deposited in
the United States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the corporation, with postage thereon
prepaid.
-2-
<PAGE>
(b) Notice of Adjourned Meetings. If an annual or special meeting of
----------------------------
shareholders is adjourned to a different date, time, or place, the corporation
shall not be required to give notice of the new date, time, or place if the new
date, time, or place is announced at the meeting before adjournment; provided,
--------
however, that if a new record date for an adjourned meeting is or must be fixed,
- -------
the corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new record date who are entitled to notice of the
meeting.
(c) No Notice Under Certain Circumstances. Notwithstanding the other
-------------------------------------
provisions of this Section, no notice of a meeting of shareholders need be given
to a shareholder if: (1) an annual report and proxy statement for two
consecutive annual meetings of shareholders, or (2) all, and at least two,
checks in payment of dividends or interest on securities during a twelve-month
period have been sent by first-class, United States mail, addressed to the
shareholder at his or her address as it appears on the share transfer books of
the corporation, and returned undeliverable. The obligation of the corporation
to give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the corporation has received a new address for such shareholder
for entry on its share transfer books.
Section 3.5 Waiver of Notice.
----------------
(a) Written Waiver. A shareholder may waive any notice required by
--------------
the Act or these bylaws before or after the date and time stated for the meeting
in the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, and be delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Neither the business to be
transacted at nor the purpose of any regular or special meeting of shareholders
need be specified in any written waiver of notice.
(b) Waiver by Attendance. A shareholder's attendance at a meeting, in
--------------------
person or by proxy, waives objection to all of the following: (1) lack of notice
or defective notice of the meeting, unless the shareholder at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting; and (2) consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
Section 3.6 Fixing of Record Date.
---------------------
(a) General. The Board of Directors may fix in advance a date as the
-------
record date for the purpose of determining shareholders entitled to notice of a
shareholders' meeting, entitled to vote, or take any other action. In no event
may a record date fixed by the Board of Directors be a date preceding the date
upon which the resolution fixing the record date is adopted or a date more than
seventy days before the date of meeting or action requiring a determination of
shareholders.
-3-
<PAGE>
(b) Special Meeting. The record date for determining shareholders
---------------
entitled to demand a special meeting shall be the close of business on the date
the first shareholder delivers his or her demand to the corporation.
(c) Shareholder Action by Written Consent. If no prior action is
-------------------------------------
required by the Board of Directors pursuant to the Act, the record date for
determining shareholders entitled to take action without a meeting shall be the
close of business on the date the first signed written consent with respect to
the action in question is delivered to the corporation, but if prior action is
required by the Board of Directors pursuant to the Act, such record date shall
be the close of business on the date on which the Board of Directors adopts the
resolution taking such prior action unless the Board of Directors otherwise
fixes a record date.
(d) Absence of Board Determination for Shareholders' Meeting. If the
--------------------------------------------------------
Board of Directors does not determine the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, such record date shall be the close of business on the
day before the first notice with respect thereto is delivered to shareholders.
(e) Adjourned Meeting. A record date for determining shareholders
-----------------
entitled to notice of or to vote at a shareholders' meeting is effective for any
adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting.
(f) Certain Distributions. If the Board of Directors does not
---------------------
determine the record date for determining shareholders entitled to a
distribution (other than one involving a purchase, redemption, or other
acquisition of the corporation's shares or a share dividend), such record date
shall be the close of business on the date on which the Board of Directors
authorizes the distribution.
Section 3.7 Shareholders' List for Meetings.
-------------------------------
(a) Preparation and Availability. After a record date for a meeting
----------------------------
of shareholders has been fixed, the corporation shall prepare an alphabetical
list of the names of all of the shareholders entitled to notice of the meeting.
The list shall be arranged by class or series of shares, if any, and show the
address of and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder for a period of ten days prior to
the meeting or such shorter time as exists between the record date and the
meeting date, and continuing through the meeting, at the corporation's principal
office, at a place identified in the meeting notice in the city where the
meeting will be held, or at the office of the corporation's transfer agent or
registrar, if any. A shareholder or his or her agent may, on written demand,
inspect the list, subject to the requirements of the Act, during regular
business hours and at his or her expense, during the period that it is available
-4-
<PAGE>
for inspection pursuant to this Section. The corporation shall make the
shareholders' list available at the meeting and any shareholder or his or her
agent or attorney may inspect the list at any time during the meeting or any
adjournment thereof.
(b) Prima Facie Evidence. The shareholders' list is prima facie
--------------------
evidence of the identity of shareholders entitled to examine the shareholders'
list or to vote at a meeting of shareholders.
(c) Failure to Comply. If the requirements of this Section have not
-----------------
been substantially complied with, or if the corporation refuses to allow a
shareholder or his or her agent or attorney to inspect the shareholders' list
before or at the meeting, on the demand of any shareholder, in person or by
proxy, who failed to get such access, the meeting shall be adjourned until such
requirements are complied with.
(d) Validity of Action Not Affected. Refusal or failure to prepare or
-------------------------------
make available the shareholders' list shall not affect the validity of any
action taken at a meeting of shareholders.
Section 3.8 Quorum.
------
(a) What Constitutes a Quorum. Shares entitled to vote as a separate
-------------------------
voting group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. If the corporation has only one
class of stock outstanding, such class shall constitute a separate voting group
for purposes of this Section. Except as otherwise provided in the Act, a
majority of the votes entitled to be cast on the matter shall constitute a
quorum of the voting group for action on that matter.
(b) Presence of Shares. Once a share is represented for any purpose
------------------
at a meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes of
determining whether a quorum exists for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting.
(c) Adjournment in Absence of Quorum. Where a quorum is not present,
--------------------------------
the holders of a majority of the shares represented and who would be entitled to
vote at the meeting if a quorum were present may adjourn such meeting from time
to time.
Section 3.9 Voting of Shares. Except as provided in the Articles of
----------------
Incorporation or the Act, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a meeting of shareholders.
Section 3.10 Vote Required.
-------------
(a) Matters Other Than Election of Directors. If a quorum exists,
----------------------------------------
except in the case of the election of directors, action on a matter shall be
-5-
<PAGE>
approved if the votes cast within the voting group favoring the action exceed
the votes cast opposing the action, unless the Act requires a greater number of
affirmative votes.
(b) Election of Directors. Each director shall be elected by a
---------------------
plurality of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Each shareholder who is
entitled to vote at an election of directors has the right to vote the number of
shares owned by him or her for as many persons as there are directors to be
elected. Shareholders do not have a right to cumulate their votes for
directors.
Section 3.11 Conduct of Meeting. The Chairman of the Board of Directors,
------------------
and if there be none, or in his or her absence, the President, and in his or her
absence, a Vice President in the order provided under the Section of these
bylaws titled "Vice Presidents," and in their absence, any person chosen by the
shareholders present shall call a shareholders' meeting to order and shall act
as presiding officer of the meeting, and the Secretary of the corporation shall
act as secretary of all meetings of the shareholders, but, in the absence of the
Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting. The presiding officer of the meeting shall have broad
discretion in determining the order of business at a shareholders' meeting. The
presiding officer's authority to conduct the meeting shall include, but in no
way be limited to, recognizing shareholders entitled to speak, calling for the
necessary reports, stating questions and putting them to a vote, calling for
nominations, and announcing the results of voting. The presiding officer also
shall take such actions as are necessary and appropriate to preserve order at
the meeting. The rules of parliamentary procedure need not be observed in the
conduct of shareholders' meetings; however, meetings shall be conducted in
accordance with accepted usage and common practice with fair treatment to all
who are entitled to take part.
Section 3.12 Inspectors of Election. Inspectors of election may be
----------------------
appointed by the Board of Directors to act at any meeting of shareholders at
which any vote is taken. If inspectors of election are not so appointed, the
presiding officer of the meeting may, and on the request of any shareholder
shall, make such appointment. The inspectors of election shall determine the
number of shares outstanding, the voting rights with respect to each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies; receive votes, ballots, consents, and waivers;
hear and determine all challenges and questions arising in connection with the
vote; count and tabulate all votes, consents, and waivers; determine and
announce the result; and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. No inspector, whether appointed by the
Board of Directors or by the person acting as presiding officer of the meeting,
need be a shareholder.
Section 3.13 Proxies.
-------
(a) Appointment. At all meetings of shareholders, a shareholder may
-----------
vote his or her shares in person or by proxy. A shareholder may appoint a proxy
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to vote or otherwise act for the shareholder by signing an appointment form,
either personally or by his or her attorney-in-fact. If an appointment form
expressly provides, any proxy holder may appoint, in writing, a substitute to
act in his or her place. A telegraph, telex, or a cablegram, a facsimile
transmission of a signed appointment form, or a photographic, photostatic, or
equivalent reproduction of a signed appointment form is a sufficient appointment
form.
(b) When Effective. An appointment of a proxy is effective when
--------------
received by the Secretary or other officer or agent of the corporation
authorized to tabulate votes. An appointment is valid for up to eleven months
unless a longer period is expressly provided in the appointment form. An
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
Section 3.14 Shareholder Nominations and Proposals. Any shareholder
-------------------------------------
nomination for director or proposal for action at a forthcoming shareholder
meeting must be delivered to the corporation no later than the deadline for
submitting shareholder proposals pursuant to Securities Exchange Commission
Regulations Section 240.14a-8. The presiding officer at any shareholder meeting
shall not be required to recognize any nomination or proposal which did not
comply with such deadline.
Section 3.15 Action by Shareholders Without Meeting.
--------------------------------------
(a) Requirements for Written Consents. Any action required or
---------------------------------
permitted by the Act to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote if one or more written consents describing the action taken shall be signed
and dated by the holders of outstanding stock entitled to vote thereon having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Such consents must be delivered to the principal office
of the corporation in Florida, the corporation's principal place of business,
the Secretary, or another officer or agent of the corporation having custody of
the books in which proceedings of meetings of shareholders are recorded. No
written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the date of the earliest dated consent
delivered in the manner required herein, written consents signed by the number
of holders required to take action are delivered to the corporation by delivery
as set forth in this Section.
(b) Revocation of Written Consents. Any written consent may be
------------------------------
revoked prior to the date that the corporation receives the required number of
consents to authorize the proposed action. No revocation is effective unless in
writing and until received by the corporation at its principal office in Florida
or its principal place of business, or received by the Secretary or other
officer or agent having custody of the books in which proceedings of meetings of
shareholders are recorded.
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(c) Notice to Nonconsenting Shareholders. Within ten days after
------------------------------------
obtaining such authorization by written consent, notice must be given in writing
to those shareholders who have not consented in writing or who are not entitled
to vote on the action. The notice shall fairly summarize the material features
of the authorized action and, if the action be such for which dissenters' rights
are provided under the Act, the notice shall contain a clear statement of the
right of shareholders dissenting therefrom to be paid the fair value of their
shares upon compliance with the provisions of the Act regarding the rights of
dissenting shareholders.
(d) Same Effect as Vote at Meeting. A consent signed under this
------------------------------
Section has the effect of a meeting vote and may be described as such in any
document. Whenever action is taken by written consent pursuant to this Section,
the written consent of the shareholders consenting thereto or the written
reports of inspectors appointed to tabulate such consents shall be filed with
the minutes of proceedings of shareholders.
Section 3.16 Acceptance of Instruments Showing Shareholder Action. If the
----------------------------------------------------
name signed on a vote, consent, waiver, or proxy appointment corresponds to the
name of a shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver, or proxy appointment and give it effect as the act of a
shareholder. If the name signed on a vote, consent, waiver, or proxy
appointment does not correspond to the name of a shareholder, the corporation,
if acting in good faith, may accept the vote, consent, waiver, or proxy
appointment and give it effect as the act of the shareholder if any of the
following apply:
(a) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(b) The name signed purports to be that of a administrator, executor,
guardian, personal representative, or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation is presented with respect to the vote, consent, waiver, or proxy
appointment;
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy, or assignee for the benefit of creditors of the shareholder and, if
the corporation requests, evidence of this status acceptable to the corporation
is presented with respect to the vote, consent, waiver, or proxy appointment;
(d) The name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign for
the shareholder is presented with respect to the vote, consent, waiver, or proxy
appointment; or
(e) Two or more persons are the shareholder as cotenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all co-
owners.
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<PAGE>
The corporation may reject a vote, consent, waiver, or proxy appointment if the
Secretary or other officer or agent of the corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE 4
BOARD OF DIRECTORS
------------------
Section 4.1 General Powers and Number. All corporate powers shall be
-------------------------
exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, the Board of Directors. The
corporation shall have seven (7) directors initially. The number of directors
may be increased or decreased from time to time by vote of a majority of the
entire Board of Directors, but shall never be less than four nor more than
eleven.
Section 4.2 Qualifications. Directors must be natural persons who are
--------------
eighteen years of age or older but need not be residents of this state or
shareholders of the corporation.
Section 4.3 Term of Office. Each director shall hold office until the
--------------
next annual meeting of shareholders and until his or her successor shall have
been elected and, if necessary, qualified, or until there is a decrease in the
number of directors which takes effect after the expiration of his or her term,
or until his or her prior death, resignation or removal.
Section 4.4 Removal. The shareholders may remove one or more directors
-------
with or without cause. A director may be removed by the shareholders at a
meeting of shareholders, provided that the notice of the meeting states that the
purpose, or one of the purposes, of the meeting is such removal.
Section 4.5 Resignation. A director may resign at any time by delivering
-----------
written notice to the Board of Directors or its Chairman (if any) or to the
corporation. A director's resignation is effective when the notice is delivered
unless the notice specifies a later effective date.
Section 4.6 Vacancies.
---------
(a) Who May Fill Vacancies. Except as provided below, whenever any
----------------------
vacancy occurs on the Board of Directors, including a vacancy resulting from an
increase in the number of directors, it may be filled by the affirmative vote of
a majority of the remaining directors though less than a quorum of the Board of
Directors, or by the shareholders. If the directors first fill a vacancy, the
shareholders shall have no further right with respect to that vacancy, and if
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the shareholders first fill the vacancy, the directors shall have no further
rights with respect to that vacancy.
(b) Directors Electing by Voting Groups. Whenever the holders of
-----------------------------------
shares of any voting group are entitled to elect a class of one or more
directors by the provisions of the Articles of Incorporation, vacancies in such
class may be filled by holders of shares of that voting group or by a majority
of the directors then in office elected by such voting group or by a sole
remaining director so elected. If no director elected by such voting group
remains in office, unless the Articles of Incorporation provide otherwise,
directors not elected by such voting group may fill vacancies.
(c) Prospective Vacancies. A vacancy that win occur at a specific
---------------------
later date, because of a resignation effective at a later date or otherwise, may
be filled before the vacancy occurs, but the new director may not take office
until the vacancy occurs.
Section 4.7 Compensation. The Board of Directors, irrespective of any
------------
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the corporation as directors, officers, or
otherwise, or may delegate such authority to an appropriate committee. The
Board of Directors also shall have authority to provide for or delegate
authority to an appropriate committee to provide for reasonable pensions,
disability or death benefits, and other benefits or payments, to directors,
officers, and employees and to their families, dependents, estates, or
beneficiaries on account of prior services rendered to the corporation by such
directors, officers, and employees.
Section 4.8 Regular Meetings. A regular meeting of the Board of Directors
----------------
shall be held without other notice than this bylaw immediately after the annual
meeting of shareholders and each adjourned session thereof. The place of such
regular meeting shall be the same as the place of the meeting of shareholders
which precedes it, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors may provide, by resolution, the
date, time, and place, either within or without the State of Florida, for the
holding of additional regular meetings of the Board of Directors without notice
other than such resolution.
Section 4.9 Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board (if any), the President or one-third
of the members of the Board of Directors. The person or persons calling the
meeting may fix any place, either within or without the State of Florida, as the
place for holding any special meeting of the Board of Directors, and if no other
place is fixed, the place of the meeting shall be the principal office of the
corporation in the State of Florida.
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Section 4.10 Notice. Special meetings of the Board of Directors must be
------
preceded by at least 12 hours'/1/ notice of the date, time, and place of the
meeting. The notice need not describe the purpose of the special meeting.
Section 4.11 Waiver of Notice. Notice of a meeting of the Board of
----------------
Directors need not be given to any director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
Section 4.12 Quorum and Voting. A quorum of the Board of Directors
-----------------
consists of a majority of the number of directors prescribed by these bylaws.
If a quorum is present when a vote is taken, the affirmative vote of a majority
of directors present is the act of the Board of Directors. A director who is
present at a meeting of the Board of Directors or a committee of the Board of
Directors when corporate action is taken is deemed to have assented to the
action taken unless: (a) he or she objects at the beginning of the meeting (or
promptly upon his or her arrival) to holding it or transacting specified
business at the meeting; or (b) he or she votes against or abstains from the
action taken.
Section 4.13 Conduct of Meetings.
-------------------
(a) Presiding Officer. The Board of Directors may elect from among
-----------------
its members a Chairman of the Board of Directors, who shall preside at meetings
of the Board of Directors. The Chairman, and if there be none, or in his or her
absence, the President, and in his or her absence, a Vice President in the order
provided under the Section of these bylaws titled "Vice Presidents," and in
their absence, any director chosen by the directors present, shall call meetings
of the Board of Directors to order and shall act as presiding officer of the
meeting.
(b) Minutes. The Secretary of the corporation shall act as secretary
-------
of all meetings of the Board of Directors but in the absence of the Secretary,
the presiding officer may appoint any other person present to act as secretary
of the meeting. Minutes of any regular or special meeting of the Board of
Directors shall be prepared and distributed to each director.
(c) Adjournments. A majority of the directors present, whether or not
------------
a quorum exists, may adjourn any meeting of the Board of Directors to another
time and place. Notice of any such adjourned meeting shall be given to the
directors who are not present at the time of the adjournment and, unless the
- ----------
/1/ By amendment adopted by the Board of Directors on January 6, 1997.
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<PAGE>
time and place of the adjourned meeting are announced at the time of the
adjournment, to the other directors.
(d) Participation by Conference Call or Similar Means. The Board of
-------------------------------------------------
Directors may permit any or all directors to participate in a regular or a
special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means
is deemed to be present in person at the meeting.
Section 4.14 Committees. The Board of Directors, by resolution adopted by
----------
a majority of the full Board of Directors, may designate from among its members
an Executive Committee and one or more other committees (which may include, by
way of example and not as a limitation, a Compensation Committee, an Audit
Committee and a Nominating Committee) each of which, to the extent provided in
such resolution, shall have and may exercise all the authority of the Board of
Directors, except that no such committee shall have the authority to:
(a) approve or recommend to shareholders actions or proposals
required by the Act to be approved by shareholders;
(b) fill vacancies on the Board of Directors or any committee
thereof;
(c) adopt, amend, or repeal these bylaws;
(d) authorize or approve the reacquisition of shares unless pursuant
to a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale or contract for the sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the Board of Directors may authorize a
committee (or a senior executive officer of the corporation) to do so within
limits specifically prescribed by the Board of Directors.
Each committee must have two or more members, who shall serve at the pleasure of
the Board of Directors. The Board of Directors, by resolution adopted in
accordance with this Section, may designate one or more directors as alternate
members of any such committee, who may act in the place and stead of any absent
member or members at any meeting of such committee. The provisions of these
bylaws which govern meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members as
well.
Section 4.15 Action Without Meeting. Any action required or permitted by
----------------------
the Act to be taken at a meeting of the Board of Directors or a committee
thereof may be taken without a meeting if the action is taken by all members of
the Board or of the committee. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director or
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<PAGE>
committee member and retained by the corporation. Such action shall be
effective when the last director or committee member signs the consent, unless
the consent specifies a different effective date. A consent signed under this
Section has the effect of a vote at a meeting and may be described as such in
any document.
ARTICLE 5
OFFICERS
--------
Section 5.1 Number. The principal officers of the corporation shall be a
------
President, a Chief Operating Officer, the number of Vice Presidents, if any, as
authorized from time to time by the Board of Directors, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. The Board of Directors may also authorize
any duly appointed officer to appoint one or more officers or assistant
officers. The same individual may simultaneously hold more than one office.
Section 5.2 Election and Term of Office. The officers of the corporation
---------------------------
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as is
practicable. Each officer shall hold office until his or her successor shall
have been duly elected or until his or her prior death, resignation, or removal.
Section 5.3 Removal. The Board of Directors may remove any officer and,
-------
unless restricted by the Board of Directors, an officer may remove any officer
or assistant officer appointed by that officer, at any time, with or without
cause and notwithstanding the contract rights, if any, of the officer removed.
The appointment of an officer does not of itself create contract rights.
Section 5.4 Resignation. An officer may resign at any time by delivering
-----------
notice to the corporation. The resignation shall be effective when the notice
is delivered, unless the notice specifies a later effective date and the
corporation accepts the later effective date. If a resignation is made
effective at a later date and the corporation accepts the future effective date,
the pending vacancy may be filled before the effective date but the successor
may not take office until the effective date.
Section 5.5 Vacancies. A vacancy in any principal office because of
---------
death, resignation, removal, disqualification, or otherwise, shall be filled as
soon thereafter as practicable by the Board of Directors for the unexpired
portion of the term.
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<PAGE>
Section 5.6 President. The President shall be the principal executive
---------
officer of the corporation and, subject to the direction of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. The President shall, when present, preside at all
meetings of the shareholders and, if no Chairman of the Board has been elected,
shall preside at all meetings of the Board of Directors. The President shall
have authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint such agents and employees of the corporation as he or she
shall deem necessary, to prescribe their powers, duties and compensation, and to
delegate authority to them. Such agents and employees shall hold office at the
discretion of the President. The President shall have authority to sign
certificates for shares of the corporation the issuance of which shall have been
authorized by resolution of the Board of Directors, and to execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds,
contracts, leases, reports, and all other documents or instruments necessary or
proper to be executed in the course of the corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, the President may
authorize any Vice President or other officer or agent of the corporation to
execute and acknowledge such documents or instruments in his or her place and
stead. In general he or she shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
Section 5.7 Chief Operating Officer. The Chief Operating Officer shall:
-----------------------
(a) be responsible for supervising and controlling the daily operations of the
corporation; and (b) in general perform all duties incident to the office of
Chief Operating Officer and have such other duties and exercise such authority
as from time to time may be delegated or assigned by the President or by the
Board of Directors.
Section 5.8 Vice Presidents. In the absence of the President or in the
---------------
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, the
Vice President, if any (or in the event there be more than one Vice President,
the Vice Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election), shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice President
may sign certificates for shares of the corporation the issuance of which shall
have been authorized by resolution of the Board of Directors; and shall perform
such other duties and have such authority as from time to time may be delegated
or assigned to him or her by the President or by the Board of Directors. The
execution of any instrument of the corporation by any Vice President shall be
conclusive evidence, as to third parties, of his or her authority to act in the
stead of the President.
Section 5.9 Secretary. The Secretary shall: (a) keep, or cause to be
---------
kept, minutes of the meetings of the shareholders and of the Board of Directors
(and of committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
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Directors (or committees thereof) without a meeting); (b) be custodian of the
corporate records and of the seal of the corporation, if any, and if the
corporation has a seal, see that it is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (c)
authenticate the records of the corporation; (d) maintain a record of the
shareholders of the corporation, in a form that permits preparation of a list of
the names and addresses of all shareholders, by class or series of shares and
showing the number and class or series of shares held by each shareholder; (e)
have general charge of the stock transfer books of the corporation; and (f) in
general perform all duties incident to the office of Secretary and have such
other duties and exercise such authority as from time to time may be delegated
or assigned by the President or by the Board of Directors.
Section 5.10 Treasurer. The Treasurer shall: (a) have charge and custody
---------
of and be responsible for all funds and securities of the corporation; (b)
maintain appropriate accounting records; (c) receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositories as shall be selected in accordance with the
provisions of these bylaws; and (d) in general perform all of the duties
incident to the office of Treasurer and have such other duties and exercise such
other authority as from time to time may be delegated or assigned by the
President or by the Board of Directors. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of his or her duties
in such sum and with such surety or sureties as the Board of Directors shall
determine.
Section 5.11 Assistant Secretaries and Assistant Treasurers. There shall
----------------------------------------------
be such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and Assistant Treasurers,
in general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 5.12 Other Assistants and Acting Officers. The Board of Directors
------------------------------------
shall have the power to appoint, or to authorize any duly appointed officer of
the corporation to appoint, any person to act as assistant to any officer, or as
agent for the corporation in his or her stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors or an authorized officer shall have the power to perform
all the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
appointing officer.
Section 5.13 Salaries. The salaries of the principal officers shall be
--------
fixed from time to time by the Board of Directors or by a duly authorized
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committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he or she is also a director of the corporation.
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
------------------------------------------------------
Section 6.1 Contracts. The Board of Directors may authorize any officer
---------
or officers, or any agent or agents to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge made by the corporation shall be executed in the name of the corporation
by the President or one of the Vice Presidents; the Secretary or an Assistant
Secretary, when necessary or required, shall attest and affix the corporate
seal, if any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority of the
signing officer or officers.
Section 6.2 Checks, Drafts, etc. All checks, drafts or other orders for
-------------------
the payment of money, notes, or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Board of Directors.
Section 6.3 Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
Section 6.4 Voting of Securities Owned by Corporation. Subject always to
-----------------------------------------
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corporation by the President of this corporation if he or she be present, or in
his or her absence by any Vice President of this corporation who may be present,
and (b) whenever, in the judgment of the President, or in his or her absence, of
any Vice President, it is desirable for this corporation to execute a proxy or
written consent in respect of any such shares or other securities, such proxy or
consent shall be executed in the name of this corporation by the President or
one of the Vice Presidents of this corporation, without necessity of any
authorization by the Board of Directors, affixation of corporate seal, if any,
or countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power, and authority to vote the shares or
other securities issued by such other corporation and owned or controlled by
this corporation the same as such shares or other securities might be voted by
this corporation.
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ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
-------------------------------------------
Section 7.1 Consideration for Shares. The Board of Directors may
------------------------
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the corporation, including cash, promissory
notes, services performed, promises to perform services evidenced by a written
contract, or other securities of the corporation. Before the corporation issues
shares, the Board of Directors shall determine that the consideration received
or to be received for the shares to be issued is adequate. The determination of
the Board of Directors is conclusive insofar as the adequacy of consideration
for the issuance of shares relates to whether the shares are validly issued,
fully paid, and nonassessable. The corporation may place in escrow shares
issued for future services or benefits or a promissory note, or make other
arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until the
services are performed, the note is paid, or the benefits are received. If the
services are not performed, the note is not paid, or the benefits are not
received, the corporation may cancel, in whole or in part, the shares escrowed
or restricted and the distributions credited.
Section 7.2 Certificates for Shares. Every holder of shares in the
-----------------------
corporation shall be entitled to have a certificate representing all shares to
which he or she is entitled unless the Board of Directors authorizes the
issuance of some or all shares without certificates. Any such authorization
shall not affect shares already represented by certificates until the
certificates are surrendered to the corporation. If the Board of Directors
authorizes the issuance of any shares without certificates, within a reasonable
time after the issue or transfer of any such shares, the corporation shall send
the shareholder a written statement of the information required by the Act or
these bylaws to be set forth on certificates, including any restrictions on
transfer. Certificates representing shares of the corporation shall be in such
form, consistent with the Act, as shall be determined by the Board of Directors.
Such certificates shall be signed (either manually or in facsimile) by the
President or any Vice President or any other persons designated by the Board of
Directors and may be sealed with the seal of the corporation or a facsimile
thereof. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. Unless the
Board of Directors authorizes shares without certificates, all certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except as provided in these
bylaws with respect to lost, destroyed, or stolen certificates. The validity of
a share certificate is not affected if a person who signed the certificate
(either manually or in facsimile) no longer holds office when the certificate is
issued.
-17-
<PAGE>
Section 7.3 Transfer of Shares. Prior to due presentment of a certificate
------------------
for shares for registration of transfer, the corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications, and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
corporation with a request to register a transfer, the corporation shall not be
liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the corporation had no duty to inquire into
adverse claims or has discharged any such duty. The corporation may require
reasonable assurance that such endorsements are genuine and effective and
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
Section 7.4 Restrictions on Transfer. The face or reverse side of each
------------------------
certificate representing shares shall bear a conspicuous notation as required by
the Act of any restriction imposed by the corporation upon the transfer of such
shares.
Section 7.5 Lost, Destroyed, or Stolen Certificates. Unless the Board of
---------------------------------------
Directors authorizes shares without certificates, where the owner claims that
certificates for shares have been lost, destroyed, or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (a) so requests before
the corporation has notice that such shares have been acquired by a bona fide
purchaser, (b) files with the corporation a sufficient indemnity bond if
required by the Board of Directors or any principal officer, and (c) satisfies
such other reasonable requirements as may be prescribed by or under the
authority of the Board of Directors.
Section 7.6 Stock Regulations. The Board of Directors shall have the
-----------------
power and authority to make all such further rules and regulations not
inconsistent with law as they may deem expedient concerning the issue, transfer,
and registration of shares of the corporation.
ARTICLE 8
SEAL
----
Section 8.1 Seal. The Board of Directors may provide for a corporate seal
----
for the corporation.
ARTICLE 9
BOOKS AND RECORDS
------------------
Section 9.1 Books and Records.
-----------------
(a) The corporation shall keep as permanent records minutes of all
meetings of the shareholders and Board of Directors, a record of all actions
-18-
<PAGE>
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors in place of the
Board of Directors on behalf of the corporation.
(b) The corporation shall maintain accurate accounting records.
(c) The corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(d) The corporation shall keep a copy of all written communications
within the preceding three years to all shareholders generally or to all
shareholders of a class or series, including the financial statements required
to be furnished by the Act, and a copy of its most recent annual report
delivered to the Department of State.
Section 9.2 Shareholders' Inspection Rights. Shareholders are entitled to
-------------------------------
inspect and copy records of the corporation as permitted by the Act.
Section 9.3 Distribution of Financial Information. The corporation shall
-------------------------------------
prepare and disseminate financial statements to shareholders as required by the
Act.
Section 9.4 Other Reports. The corporation shall disseminate such other
-------------
reports to shareholders as are required by the Act, including reports regarding
indemnification in certain circumstances and reports regarding the issuance or
authorization for issuance of shares in exchange for promises to render services
in the future.
ARTICLE 10
INDEMNIFICATION
---------------
Section 10.1 Provision of Indemnification. The corporation shall, to the
----------------------------
fullest extent permitted or required by the Act, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the corporation to provide broader indemnification
rights than prior to such amendment), indemnify its Directors against any and
all Liabilities, and advance any and all reasonable Expenses, incurred thereby
in any Proceeding to which any such Director is a Party or in which such
Director is deposed or called to testify as a witness because he or she is or
was a Director of the corporation. The rights to indemnification granted
hereunder shall not be deemed exclusive of any other rights to indemnification
against Liabilities or the advancement of Expenses which a Director may be
entitled under any written agreement, Board resolution, vote of shareholders,
the Act, or otherwise. The corporation may, but shall not be required to,
supplement the foregoing rights to indemnification against Liabilities and
-19-
<PAGE>
advancement of Expenses by the purchase of insurance on behalf of any one or
more of its Directors whether or not the corporation would be obligated to
indemnify or advance Expenses to such Director under this Article. For purposes
of this Article, the term "Directors" includes former directors and any
directors who are or were serving at the request of the corporation as
directors, officers, employees, or agents of another corporation, partnership,
joint venture, trust, or other enterprise, including, without limitation, any
employee benefit plan (other than in the capacity as agents separately retained
and compensated for the provision of goods or services to the enterprise,
including, without limitation, attorneys-at-law, accountants, and financial
consultants). All other capitalized terms used in this Article and not
otherwise defined herein shall have the meaning set forth in Section 607.0850,
Florida Statutes (1991). The provisions of this Article are intended solely for
the benefit of the indemnified parties described herein, their heirs and
personal representatives and shall not create any rights in favor of third
parties. No amendment to or repeal of this Article shall diminish the rights of
indemnification provided for herein prior to such amendment or repeal.
ARTICLE 11
AMENDMENTS
----------
Section 11.1 Power to Amend. These bylaws may be amended or repealed by
--------------
either the Board of Directors or the shareholders, unless the Act reserves the
power to amend these bylaws generally or any particular bylaw provision, as the
case may be, exclusively to the shareholders or unless the shareholders, in
amending or repealing these bylaws generally or any particular bylaw provision,
provide expressly that the Board of Directors may not amend or repeal these
bylaws or such bylaw provision, as the case may be.
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
EXHIBIT 11--COMPUTATION OF PER SHARE EARNINGS
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL
---------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Weighted average number of common shares and common
share equivalents outstanding.......................... 87,610 59,580 45,629
Additional shares deemed outstanding for:
Stock options.......................................... 4,437 2,513 1,412
Convertible debt....................................... 8,363 4,286 2,030
------- ------ ------
Primary and fully diluted weighted average number of
common shar and common share equivalents............... 100,410 66,379 49,071
======= ====== ======
Net Income.............................................. 27,942 26,069 12,078
Preferred stock dividend requirement.................... -- -- (175)
Add back of interest expense attributable to convertible
debentures deemed converted............................ 3,680 885 62
------- ------ ------
Net Income attributable to common shares................ 31,622 26,954 11,965
------- ------ ------
Earnings per share of common shares and common share
equivalents............................................. $ 0.31 $ 0.41 $ 0.24
====== ======
</TABLE>
<PAGE>
EXHIBIT 21.1
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE COMPANY STATE OF INCORPORATION
--------------------------- ----------------------
<S> <C>
Mid-States Technical Staffing Services, Inc. Iowa
Debbie Temps, Inc. Illinois
DuPay Enterprises, Inc. d/b/a ASOSA Personnel Arizona
LawStaf, Inc. Georgia
Attorneys Per Diem, Inc. Maryland
Matthews Professional Employment Specialists, Inc. Illinois
Special Counsel International, Inc. New York
Computer Professionals, Inc. Florida
Bogard Temps, Inc. California
Advance/Possis Technical Services, Inc. Minnesota
HR Management Services, Inc. Michigan
Openware Technologies, Inc. Florida
Tekna, Inc. Virginia
Goldfarb-Wasson Associates, Inc. d/b/a GW Consulting California
GW Temporaries, Inc. California
PTA International California
Accounting Pros, Inc. f/k/a AS Acquisition Corp. Pennsylvania
Excel Temporary Services, Inc. Georgia
The McKinley Group, Inc. Virginia
Contact Recruiters, Inc. New Hampshire
Ovation Technologies, Inc. New Hampshire
MGI Services, Inc. Virginia
Advantage Personnel Services, Inc. f/k/a/ AC Acquisition Corp. California
Project Professionals, Inc. California
TempsAmerica, Inc. Delaware
Additional Technical Support, Inc. Massachusetts
CADSTAR International, Ltd. Massachusetts
The Experts, Inc. Massachusetts
System Pros, Inc. Massachusetts
National Software Associates, Inc. Massachusetts
Perspective Technology Corporation Virginia
Datacorp Business Systems, Inc. Ohio
Staffware, Inc. Texas
L & R Temporaries, Inc. Virginia
L & R Temporaries Atlanta, Inc. Georgia
Berrett Techalliance Corp. Virginia
Scientific Staffing, Inc. Pennsylvania
Scientific Staffing of Ft. Lauderdale, Inc. Florida
Scientific Staffing of Tampa Bay, Inc. Florida
Career Horizons Delaware
Health Force, Inc. New York
Health Force Operating Corp. New York
HealthForce Company New York
TempForce Company New York
Medi-Force, Inc. d/b/a/ Health Force Home Health Care Services New York
Programming Enterprises, Inc. d/b/a Mini-Systems Assoc. California
Zeitech, Inc. Delaware
Professionals for Computing, Inc. d/b/a PFC Incorporated California
American Computer Professionals, Inc. Delaware
TSG Professional Services, Inc. New Hampshire
Contract Staffing Group Inc. d/b/a Computer Consulting Group South Carolina
CHI Financial Services, Inc. Delaware
Contemporary Graphics Group, Inc. New York
EIM Associates, Inc. Florida
PL Services, Inc. Delaware
Temp Force, Inc. New York
CHI Payroll Services, Inc. Delaware
Career Horizons Government Services, Inc. New York
Staff-Additions, Inc. New York
Staffing Resources (SC), Inc. Delaware
Temporaries Incorporated D.C.
Temps & Co Services, Inc. Delaware
Temps & Co. Franchising, Inc. Delaware
CHI Services, Inc. Delaware
Potomac Personnel Services, Inc. Delaware
The Original Tempo Health Power, Inc. New York
The Richard Michael Temps, Inc. Delaware
Century Temporary Services, Inc. Ohio
Dial A Temporary, Inc. Delaware
Berger & Co. Delaware
Executive Monitors, Inc. Pennsylvania
Consultants in Computer Software, Inc. Minnesota
Preferred Consulting, Inc. Minnesota
Lenco Computer Consulting Massachusetts
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF COOPERS & LYBRAND, L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8, Registration Numbers 33-88262, 333-06899,
333-15701 and 333-16043 and the registration statements of AccuStaff
Incorporated on Form S-3, Registration Numbers 333-17715 and 333-18695 of our
report dated March 26, 1997, on our audits of the consolidated financial
statements of AccuStaff Incorporated and Subsidiaries as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
which report is included in the Annual Report on Form 10-K.
COOPERS & LYBRAND, L.L.P.
Jacksonville, Florida
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 108,664
<SECURITIES> 0
<RECEIVABLES> 256,209
<ALLOWANCES> 7,048
<INVENTORY> 0
<CURRENT-ASSETS> 407,543
<PP&E> 48,531
<DEPRECIATION> 22,728
<TOTAL-ASSETS> 897,115
<CURRENT-LIABILITIES> 136,618
<BONDS> 86,250
0
0
<COMMON> 966
<OTHER-SE> 653,955
<TOTAL-LIABILITY-AND-EQUITY> 897,115
<SALES> 1,448,629
<TOTAL-REVENUES> 1,448,629
<CGS> 1,111,358
<TOTAL-COSTS> 1,111,358
<OTHER-EXPENSES> 266,147
<LOSS-PROVISION> 3,862
<INTEREST-EXPENSE> 2,852
<INCOME-PRETAX> 64,405
<INCOME-TAX> 36,463
<INCOME-CONTINUING> 27,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,942
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
