<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
or
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________.
Commission file number: 0-24484
AccuStaff Incorporated
(Exact name of registrant as specified in its charter)
Florida 59-3116655
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6440 Atlantic Boulevard, Jacksonville, Florida 32211
(Address of principal executive offices) (Zip Code)
(904) 725-5574
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
November 14, 1997
Common Stock, $0.01 par value: 100,714,848
(No. of Shares)
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I Financial Information
ITEM 1 Financial Statements
Consolidated Balance Sheets as of September 30, 1997 and December 31,1996................................. 2
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 1997 and 1996................................................................................. 3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1997 and
1996....................................................................................................... 4
Notes to Consolidated Financial Statements................................................................. 5-6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................................................................6-10
PART II Other Information
ITEM 2 Changes in Securities and Use of Proceeds......................................................................10
ITEM 5 Other Information..............................................................................................10
ITEM 6 Exhibits and Reports on Form 8-K...............................................................................10
Signatures.....................................................................................................11
</TABLE>
1
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---------------------- ---------------------
(unaudited) (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 31,161 $108,664
Accounts receivable, net.......................................... 362,392 249,161
Due from associated offices, net.................................. 44,332 38,897
Prepaid expenses.................................................. 9,204 7,216
Deferred income taxes............................................. 7,799 3,605
Total current assets............................................. 454,888 407,543
Furniture, equipment, and leasehold improvements, net.............. 38,157 25,803
Goodwill, net...................................................... 756,521 447,595
Other assets....................................................... 18,280 16,174
---------------------- ---------------------
Total assets..................................................... $1,267,846 $897,115
====================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable and convertible debt................................... $ 10,016 $ 13,723
Accounts payable and accrued expenses................................ 53,528 58,694
Accrued payroll and related taxes.................................... 88,870 64,201
------------------- ---------------------
Total current liabilities........................................... 152,414 136,618
Convertible debt...................................................... 86,250 86,250
Notes payable, long-term portion...................................... 263,230 17,283
Deferred income taxes................................................. 3,835 2,043
------------------- ---------------------
Total liabilities................................................... 505,729 242,194
------------------- ---------------------
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;
99,808,784 and 96,551,702 shares issued and outstanding on
September 30, 1997 and December 31, 1996, respectively.............. 998 966
Additional contributed capital....................................... 625,821 592,948
Retained earnings.................................................... 138,983 65,441
------------------- ---------------------
765,802 659,355
Less: deferred stock compensation................................ (3,685) (4,434)
------------------- ---------------------
Total stockholders' equity.......................................... 762,117 654,921
------------------- ---------------------
Total liabilities and stockholders' equity.......................... $1,267,846 $897,115
=================== =====================
</TABLE>
See Notes to Consolidated Financial Statements
2
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ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- -----------------------------------
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue..................................... $591,961 $393,405 $1,612,649 $1,016,207
Cost of revenue............................. 439,823 301,497 1,209,623 784,555
-------- -------- ---------- ----------
Gross profit.............................. 152,138 91,908 403,026 231,652
-------- -------- ---------- ----------
Operating expenses:
General and administrative................ 84,447 53,559 230,438 140,416
Remittance to franchisees................. 6,495 5,706 17,826 15,604
Depreciation and amortization............. 9,761 5,010 24,057 12,136
-------- -------- -------- --------
Total operating expenses............... 100,703 64,275 272,321 168,156
-------- -------- -------- --------
Income from operations...................... 51,435 27,633 130,705 63,496
Other expense:
Interest expense, net..................... (5,915) 145 (11,896) (2,143)
Other..................................... 0 - - (2,800)
-------- -------- -------- --------
Income before provision for income taxes.... 45,520 27,778 118,809 58,553
Provision for income taxes.................. 17,070 10,825 45,267 25,086
-------- -------- -------- --------
Net income................................ 28,450 16,953 73,542 33,467
Pro forma data:
Net income before provision for
pro forma income taxes................. 28,450 16,953 73,542 33,467
Provision for pro forma income taxes...... - - - (1,504)
-------- -------- -------- --------
Pro forma net income...................... 28,450 16,953 73,542 34,971
Pro forma earnings per share................ $ 0.27 $ 0.17 $ 0.70 $ 0.37
======== ======== ======== ========
Weighted average number of common shares
and common share equivalents outstanding... 110,750 107,400 109,385 100,900
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------------------
SEPT. 30,1997 SEPT. 30, 1996
--------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 73,542 $ 33,467
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................................ 24,057 12,136
Provision for doubtful accounts...................................... 1,916 2,020
Deferred income taxes................................................ (1,353) 3,743
Changes in certain assets and liabilities:
Accounts receivable............................................... (69,340) (71,253)
Due from associated offices....................................... (5,573) (946)
Prepaid expenses.................................................. 1,584 415
Other assets...................................................... (769) (1,622)
Accounts payable and accrued liabilities.......................... (19,109) 5,157
Accrued compensation and related taxes............................ 17,509 21,628
-------------- --------------
Net cash provided by operating activities...................... 22,464 4,745
-------------- --------------
Cash flows used in investing activities:
Investment in reverse repurchase agreements, net....................... - 38,011
Purchase of furniture, equipment and leasehold improvements............ (10,432) (8,779)
Purchase of businesses, including additional earn-outs on
acquisitions, net of cash acquired.................................. (311,219) (313,225)
-------------- --------------
Net cash used in investing activities.......................... (321,651) (283,993)
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering expenses paid.. - 424,777
Proceeds from stock options exercised.................................. 15,883 4,340
Borrowings on indebtedness............................................. 264,412 96,822
Repayments on indebtedness............................................. (58,611) (125,905)
Other, net............................................................. - (5,065)
-------------- --------------
Net cash provided by financing activities...................... 221,684 394,969
-------------- --------------
Net (decrease) increase in cash and cash equivalents......................... (77,503) 115,721
Cash and cash equivalents, beginning of period............................... 108,664 46,206
--------------- --------------
Cash and cash equivalents, end of period..................................... $ 31,161 $ 161,927
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION.
The accompanying consolidated financial statements are unaudited and have
been prepared by the Company in accordance with the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain information
and footnote disclosures usually found in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. The financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Form 10-K, as amended, for the year ended
December 31, 1996.
The accompanying consolidated financial statements reflect all adjustments
(including normal recurring adjustments) which, in the opinion of
management, are necessary to present fairly the financial position and
results of operations for the interim periods presented. The results of
operations for an interim period are not necessarily indicative of the
results of operations for a full fiscal year.
All share and per share data have been restated to reflect the Company's
stock split in the form of a 200% stock dividend which was effective March
27, 1996. In addition, the Company completed the acquisitions of The
McKinley Group, Inc. and an affiliated company ("McKinley") on June 19,
1996, Career Horizons, Inc. ("Career") on November 14, 1996, and HJM
Consulting, Inc. ("HJM") on December 12, 1996 each of which was accounted
for as a pooling of interests. McKinley and HJM were treated as S-
corporations for federal income tax purposes prior to their acquisition and
accordingly were not subject to income tax at the corporate level.
Therefore, all prior period financial statements presented have been
restated as if the acquisitions had taken place at the beginning of such
periods and each was treated as a C-corporation for federal income tax
purposes.
2. Summary Data of Subsidiary
The following table details the summarized financial information (in
thousands) of the Company's wholly owned subsidiary, Career Horizons, Inc.,
and Career Horizons' subsidiaries as of and for the dates and periods
indicated.
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
--------------------- -----------------------
<S> <C> <C>
Current assets......................................... $286,673 $184,987
Non-current assets..................................... 103,645 187,842
Current liabilities.................................... 63,738 77,893
Non-current liabilities................................ 88,560 88,250
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
------------------------------------------- ----------------------------------------
Sept. 30, 1997 Sept. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Revenue................................ $596,530 $444,342 $64,l78 $168,491
Gross profit........................... 151,022 106,546 41,114 40,928
Income from operations................. 35,842 23,419 9,583 8,871
</TABLE>
3. NEWLY ISSUED ACCOUNTING STANDARDS
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 Accounting Principals
Board ("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 stoack that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB 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. The
Company does not expect SFAS No. 128 to have a material effect to EPS as
the Company already reports its EPS on the fully diluted basis pursuant to
APB Opinion 15.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996.
Revenue. Revenue increased $198.6 million, or 50.5%, to $592.0 million in
the three months ended September 30, 1997 from $393.4 million in the year
earlier period. The increase was attributable by division to: Commercial, $25.7
million, or an increase of 14.6%; Information Technology, $92.4 million, or an
increase of 87.4%; Professional Services, $54.5 million, or an increase of
109.8%; Teleservices, $19.9 million, or an increase of 67.5%; Health Care, $5.6
million, or an increase of 19.8%; and Private Label $0.5 million or an increase
of 11.9%. The increases in the Private Label and Health Care divisions were due
to internal growth. The increases in the Information Technology, Professional
Services, Commercial and Teleservices divisions were due to both internal growth
and, more significantly, the revenue contribution of acquired companies.
Gross Profit. Gross profit increased $60.2 million, or 65.5%, to $152.1
million in the three months ended September 30, 1997 from $91.9 million in the
year earlier period. Gross margin increased to 25.7% in the three months ended
September 30, 1997 from 23.4% in the year earlier period. The overall increase
in gross margin is primarily due to the increase in revenue of the Company's
Information Technology and Professional Services divisions which produce higher
gross margins than the Company's Commercial and Teleservices divisions. In
addition, the Professional Services division experienced a significant increase
in gross margin percentage which when coupled with its increase in revenue,
attributed to the Company's overall gain. The gross margins in the Health Care
and Private Label divisions remained relatively unchanged, while the
Teleservices division experienced a slight gain.
Operating Expenses. Operating expenses increased $36.4 million, or 56.6%,
to $100.7 million in the three months ended September 30, 1997 from $64.3
million in the year earlier period. Operating expenses as a percentage of
revenue increased to 17.0% in the three months ended September 30, 1997, from
16.3% in the year earlier period. Operating expenses before depreciation and
amortization expense as a percentage of revenue increased to 15.4% in the three
months ended September 30, 1997 from 15.1% in the year earlier period. The rise
in operating expenses before depreciation and amortization expense as a
6
<PAGE>
percentage of revenue is attributable to new branch openings and integration and
conversion cost and in particular system conversion costs and the costs
associated with the single-name branding of certain lines of business.
Income from Operations. As a result of the foregoing, income from
operations increased $23.8 million, or 86.2%. to $51.4 million in the three
months ended September 30, 1997 from $27.6 million in the year earlier period.
Income from operations as a percentage of revenue increased to 8.7% in the three
months ended September 30, 1997 from 7.0% in the year earlier period.
Interest Expense. Interest expense increased $6.0 million, to $5.9 million
in the three months ended September 30, 1997 versus interest income of $0.1
million in the year earlier period. The interest expense resulted from a
combination of the utilization of the Company's credit facility, the notes
payable to shareholders of acquired companies, and the 7.0% Convertible Senior
Notes.
Net Income. As a result of the foregoing, net income increased $11.5
million or 67.6%, to $28.5 million in the three months ended September 30, 1997
from $17.0 million in the year earlier period. Net income as a percentage of
revenue increased to 4.8% in the three months ended September 30, 1997 from 4.3%
in the year earlier period.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996.
Revenue. Revenue increased $596.4 million, or 58.7% to $1,612.6 million in the
six months ended September 30, 1997 from $1,016.2 million in the year earlier
period. The increase was attributable by division to: Commercial, $107.6
million, or an increase of 23.6%; Information Technology, $292.8 million, or an
increase of 111.6%; Professional Services, $139.1 million, or 112.3%;
Teleservices, $39.0 million, or an increase of 47.2%; Health Care, $16.8
million, or an increase of 20.6% and Private Label, $1.1 million or an increase
of 10.5%. The increases in the Private Label and Health Care divisions were due
to internal growth. The increases in the Information Technology, Professional
Services, Commercial and Teleservices divisions were due to both internal growth
and, more significantly, the revenue contribution of acquired companies.
Gross Profit. Gross profit increased $171.3 million, or 73.9%, to $403.0
million in the nine months ended September 30, 1997 from $231.7 million in the
year earlier period. Gross margin increased to 25.0% in the nine months ended
September 30, 1997 from 22.8% in the year earlier period. The overall increase
in gross margin is primarily due to the increase in revenue of the Company's
Information Technology and Professional Services divisions which produce a
higher gross margin percentage than the Company's Commercial and Teleservices
divisions. In addition, the Professional Services division experienced a
significant increase in gross margins which when coupled with its increase in
revenues, attributed to the Company's overall gain. The gross margins in the
Health Care, Private Label and Teleservices divisions remained relatively
unchanged.
Operating expenses. Operating expenses increased $104.2 million, or 61.9% to
$272.3 million in the nine months ended September 30, 1997 from $168.1 million
in the year earlier period. Operating expenses as a percentage of revenue
increased to 16.9% in the nine months ended September 30, 1997, from 16.5% in
the year earlier period. Operating expenses before depreciation and
amortization expense as a percentage of revenue remained unchanged at 15.4% for
the nine months ended September 30, 1997 as compared to the year earlier period.
Income from Operations. As a result of the foregoing, income from operations
increased $67.2 million, or 105.8%, to $130.7 million in the nine months ended
September 30, 1997 from $63.5 million in the year earlier period. Income from
operations as a percentage of revenue increased to 8.1% in the nine months ended
September 30, 1997 from 6.2% in the year earlier period.
Interest Expense. Interest expense increased $9.8 million to $11.9 million in
the nine months ended September 30, 1997 from $2.1 million in the year earlier
period. The interest expense resulted from a combination of the utilization of
7
<PAGE>
the Company's credit facility, the notes payable to shareholders of acquired
companies, and the 7.0% Convertible Senior Notes.
Net Income. As a result of the foregoing, net income increased $38.5 million
or 110.0% to $73.5 million in the nine months ended September 30, 1997 from
$35.0 million in the year earlier period. Net income as a percentage of revenue
increased to 4.6% in the nine months ended September 30, 1997 from 3.4% in the
year earlier period.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, the Company's working
capital requirements were funded by operations despite experiencing a
significant increase in accounts receivable. The increase in the accounts
receivable was the result of the growth of the Company's revenue combined with
several acquisitions in which the Company purchased the business operations and
certain assets of the acquired companies, excluding accounts receivable.
Therefore, the Company was required to fund the acquired companies' initial
accounts receivable balances causing an increase in accounts receivable. The
Company may continue to experience these temporary fluctuations if any similarly
structured acquisitions are completed in the future. The Company will use cash
generated by operations or its revolving credit facility to fund any temporary
operational cash flow needs.
The Company's primary sources of funds are from operations, proceeds of
Common Stock offerings and borrowings under its $500 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 $120.4 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.
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 furniture and
equipment and improvements to its management information and operating systems
will require capital expenditures during the next twelve months of approximately
$10.0 million. The Company anticipates recurring capital expenditures in future
years to be approximately $7.0 - $10.0 million per year.
The Company believes that funds provided by operations, available
borrowings under the credit facility, current amounts of cash and various
capital raising alternatives will be sufficient to meet its presently
anticipated needs for working capital, capital expenditures and acquisitions for
at least the next 12 months.
8
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INDEBTEDNESS OF THE COMPANY
The Company entered into an agreement on May 23, 1997 expanding its credit
facility to $500 million. The facility is unsecured but is guaranteed by each
of the Company's subsidiaries. The facility is syndicated to a group of 20
banks, with NationsBank (South), N.A. as agent.
The credit facility has a term of five years expiring May 23, 2002.
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 acquisitions which would result
in pro forma noncompliance with the related covenants if the acquired company
would meet or exceed 10% of total assets or income on a consolidated basis. In
addition, approval is required by the majority lenders at such time that the
cash consideration of an individual acquisition exceeds 10% of consolidated
shareholder's equity.
As of November 14, 1997, the Company has a balance of $340.0 million
outstanding under the credit facility. The Company also has outstanding letters
of credit in the amount of $22.7 million, which reduce the amount of funds
available under the facility. Therefore, the remaining balance of funds
available to the Company as of November 14, 1997 is $137.3 million.
The Company has outstanding $86.25 million 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 ability of
(i) Career's subsidiaries to make distributions to Career, and (ii) Career to
make distibutions to the Company, are and will continue to be restricted by
applicable provisions of law. The Indenture for the Notes does not limit the
ability of Career or its subsidiaries to make distributions, incur indebtedness,
grant security interests or liens in respect of their assets or the ability of
Career's subsidiaries to incur contractual restrictions on their ability to make
distributions to Career. 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 July 1997 to March 1999. As of November 14,
1997, the Company owed approximately $47.7 million in such acquisition
indebtedness.
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.
FORWARD LOOKING STATEMENTS
Statements made in this Report regarding the Company's expectation or
beliefs concerning future events, including capital spending, expected results
9
<PAGE>
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
acquired business into its operations; the general level of ecomonic 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.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) In January 1997, the Company issued 405,320 shares of common stock to
the former shareholders of Legal Information Technology, Inc. common stock.
This issuance of securities was made in reliance on the exemption from
registration provided under Section 4(2) of the Securities Act of 1933 as a
transaction by an issuer not involving a public offering. All of the securities
were acquired by the recipients for investment and with no view toward the
resale or distribution thereof. In each instance, the recipient was either an
accredited or a sophisticated investor, the offers and sales were made without
any public solicitation and the stock certificates bear restrictive legends.
(d) Not applicable.
ITEM 5. OTHER INFORMATION
On November 12, 1997, the Company announced that it had entered into a
definitive merger agreement providing for the acquisition of Office Specialists,
Inc. by the Company. A copy of the press release announcing the execution of the
merger agreement is attached hereto and is incorporated by reference herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
11 Computation of Earnings Per Share.
27 Financial Data Schedule.
99.1 Press Release dated November 12, 1997.
(B) Reports on Form 8-K
The Company has not filed any reports on Form 8-K during the quarter
ended September 30, 1997.
10
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ACCUSTAFF INCORPORATED AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of 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
Date: November 14, 1997 /s/ Derek E. Dewan
--------------------- ----------------------
Derek E. Dewan
Chairman, President and Chief Executive
Officer
Date: November 14, 1997 /s/ Michael D. Abney
--------------------- ------------------------
MICHAEL D. ABNEY
Senior Vice President and Chief Financial
Officer
Date: November 14, 1997 /s/ Robert P. Crouch
--------------------- --------------------------
ROBERT P. CROUCH
Vice President and Controller
11
<PAGE>
EXHIBIT INDEX
11 Computation of Earnings Per Share.
27 Financial Data Schedule.
99.1 Press Release dated November 12, 1997.
<PAGE>
EXHIBIT 11
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED Nine Months Ended
------------------------------------- ------------------------------------
SEPT 30, 1997 SEPT 30, 1996 SEPT 30, 1997 SEPT 30, 1996
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income.................................... 28,450 16,953 73,542 34,971
Add: Interest Expense on 6% Convertible
Subordinated Debentures.................... - 40 - 120
Net income available - primary................ 28,450 16,993 73,542 35,091
-------------- ------------- -------------- ---------------
Add: Interest Expense on 7% Convertible Senior
Notes Due 2002, net of taxes (1)........... 928 928 2,797 1,869
Net income available - fully diluted.......... 29,378 17,921 76,339 36,960
-------------- ------------- -------------- --------------
Shares outstanding:
Weighted average number of common shares
outstanding................................ 99,658 95,250 98,311 87,889
Additional shares assuming exercise of employee
stock options............................... 2,973 3,727 2,574 3,911
Deemed conversion of 6% Convertible Debentures. - 727 - 1,293
Weighted average number of common shares
outstanding - primary earnings per share.... 102,631 99,704 100,885 93,093
-------------- -------------- -------------- --------------
Incremental shares outstanding based upon period
ending fair market value: employee stock
options.................................... 520 97 901 208
Add: Deemed conversion of 7% Convertible
Senior Notes Due 2002....................... 7,599 7,599 7,599 7,599
Weighted average number of common shares
outstanding - fully diluted earnings per share 110,750 107,400 109,385 100,900
-------------- -------------- -------------- --------------
Income per common share:
Primary .................................. .28 .17 .72 .38
Fully Diluted............................. .27 .17 .70 .37
</TABLE>
(1) The 7% Convertible Senior Notes due 2002 did not have a dilutive effect on
earnings per share for the three months ended March 31, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 31,161
<SECURITIES> 0
<RECEIVABLES> 368,325
<ALLOWANCES> 5,933
<INVENTORY> 0
<CURRENT-ASSETS> 454,888
<PP&E> 63,698
<DEPRECIATION> 25,541
<TOTAL-ASSETS> 1,267,846
<CURRENT-LIABILITIES> 152,414
<BONDS> 0
0
0
<COMMON> 998
<OTHER-SE> 732
<TOTAL-LIABILITY-AND-EQUITY> 1,267,846
<SALES> 591,961
<TOTAL-REVENUES> 591,961
<CGS> 439,823
<TOTAL-COSTS> 439,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 381
<INTEREST-EXPENSE> 5,915
<INCOME-PRETAX> 45,520
<INCOME-TAX> 17,070
<INCOME-CONTINUING> 28,450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,450
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
<PAGE>
EXHIBIT 99.1
WEDNESDAY NOVEMBER 12, 1997
ACCUSTAFF TO ACQUIRE BOSTON-BASED OFFICE SPECIALISTS, INC.
HIGHER-END BUSINESS SERVICES AND OUTSOURCING FIRM TO ADD REVENUES OF OVER $200
MILLION IN 1998
JACKSONVILLE, Fla.--(BUSINESS WIRE)--Nov. 12, 1997--AccuStaff Incorporated
(NYSE:ASI-news), an international provider of business services, including
--------
consulting, outsourcing and strategic staffing, today announced that it has
reached an agreement to acquire Boston-based Office Specialists, Inc. ("OSI"), a
higher-end business services company which provides human resource outsourcing
and strategic staffing. Total revenues for 1997 are estimated to be
approximately $175 million, based upon unaudited financial information. OSI's
revenues for 1998 are projected to be more than $200 million. AccuStaff will
issue shares of its stock in exchange for 100% of OSI stock. It is anticipated
that the transaction will close in December of this year. It will be accounted
for as a pooling of interests, and is expected to be accretive to earnings.
Other terms of the acquisition transaction were not disclosed.
Derek E. Dewan, Chairman, President and Chief Executive Officer of AccuStaff,
said "OSI has offices in many of the larger, faster-growing markets in the U.S.
Its market coverage fills in many of our geographic voids, particularly in New
England. OSI is highly focused on providing high-quality business services to
over 6,000 clients, many on an outsourced basis. This will be a tremendous boost
to our service capability and delivery network."
OSI was founded in 1963 and has 53 offices in nine states and the District of
Columbia. Larry Derito, president of OSI, will continue running that division
after the acquisition is finalized. OSI provides highly skilled human resource
services in the office automation, transaction processing and higher-end office
support areas. These include desktop publishers, presentation specialists,
desktop illustrators, word processing specialists, software spreadsheet
specialists and database analysts. In addition, the company provides human
resource outsourcing services through its fast growing "Strategix" division and
technical services through its "Tech Specialists" group.
OSI helps set industry standards for quality with its "Service 1st" program
which helps fit a specific customer need via a tailored search process using
"A.I.M." (automated information management system) and "Qualifier" (computerized
testing system). Branch offices maintain a computer learning lab consisting
<PAGE>
of advanced skill testing and training technology. Its technology-based
reactivation program and its real-time "Friday payroll system" are unique,
giving OSI a competitive advantage in recruiting -- particularly in today's
tight labor market.
Derito said, "The combination of our companies offers us a tremendous
opportunity for cross-selling in several additional markets, most notably, New
England. We believe our combination with AccuStaff, with its multiple specialty
services, will be well received by our clients and staff."
Dewan added, "We will continue our build-out of the U.S. markets in all of our
specialties, and expect to expand our services capabilities in select markets
abroad. We have the financial capacity to continue our active acquisition
program as we seamlessly integrate acquired businesses. The pipeline remains
full."
AccuStaff Incorporated is an international provider of business services,
including consulting, outsourcing, and strategic staffing services, to leading
businesses. Headquartered in Jacksonville, Florida, the Company has over 1,000
branch, franchise, and associated offices in 46 states, the District of
Columbia, the United Kingdom, Continental Europe, and Latin America.
Statements made in this press release, other than those concerning historical
information, 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 reports on
Forms 10-K, 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
Horizons, Inc. and the Company; the Company's ability to successfully identify
suitable acquisition candidates, complete acquisitions or integrate the acquired
business into its operations; the general level of economic activity in the
Company's markets; increased price competition; 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 of 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.
For additional information about the Company visit AccuStaff's web site:
http://www.accustaff.com.
- ------------------------
