FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ________ to ___________
Commission file number: 0-24484
Modis Professional Services, Inc.
(Exact name of Registrant as specified in its charter)
Florida 59-3116655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Independent Drive
Jacksonville, Florida
32202
(Address of principal executive offices) (Zip code)
(904) 360-2000
(Registrant's telephone
number including area code)
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 registrant's classes of
common stock, as of the latest practicable date. April 30, 1999.
Common Stock, $0.01 par value Outstanding: 95,881,907 (No. of shares)
<PAGE>
FORWARD LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements, including but not
limited to all of the information under Part I, Item 3, under 'Quantitative and
Qualitative Disclosures About Market Risk' (except for historical data). These
forward-looking statements are subject to risks, uncertainties or assumptions
and may be affected by other factors, including but not limited to: the matters
discussed in Part I, Item 2, under 'Three months ended March 31, 1999 compared
to three months ended March 31, 1998 - Revenue,' under Part 1, Item 2 'Other
Matters - Year 2000 Compliance,' under Part 1, Item 2 'Factors Which May Impact
Future Results and Financial Information,' fluctuations in the economy and
financial markets in general and in the Company's industry in particular,
industry trends towards consolidating vendor lists, the demand for the Company's
services, including the impact of changes in utilization rates and effects of
the Year 2000 on spending for non-Year 2000 related items, consolidation of
major customers, the effect of competition, including the Company's ability to
expand into new markets and to maintain profit margins in the face of pricing
pressures and wage inflation, the Company's ability to retain significant
existing customers or obtain new customers, the Company's ability to recruit,
place and retain consultants and professional employees, the Company's ability
to identify and complete acquisition targets and to successfully integrate
acquired operations into the Company, possible changes in governmental
regulations affecting the Company's operations, including possible changes to
regulations relating to benefits for consultants and temporary personnel,
unexpected fluctuations in interest rates or foreign currency exchange rates,
exposure to Year 2000 liability from the Company's Year 2000 remediation and
other IT services, loss of key employees, the ability of the Company to
successfully complete its previously announced Integration and Strategic
Repositioning Plan, and other factors discussed in the Company's previous
filings with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. Should one or more of these risks, uncertainties or other
factors materialize, or should underlying assumptions prove incorrect, actual
results, performance or achievements of the Company may vary materially from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Forward-looking statements are based on beliefs and
assumptions of the Company's management and on information then currently
available to management. Forward-looking statements speak only as of the date
they are made, and the Company undertakes no obligation to update publicly any
of them in light of new information or future events. Undue reliance should not
be placed on such forward-looking statements. Forward-looking statements are not
guarantees of performance.
<PAGE>
<TABLE>
<CAPTION>
Modis Professional Services, Inc. and Subsidiaries
Index
<S> <C> <C>
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998....................... 3
Condensed Consolidated Statements of Income for the Three Months ended March 31, 1999 and 1998......... 4
Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 1999 and 1998..... 5
Notes to Condensed Consolidated Financial Statements................................................... 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 9
Item 3 Quantitative and Qualitive Disclosure About Market Risks............................................... 14
Part II Other Information
Item 1 Legal Proceedings...................................................................................... 16
Item 2 Changes in Securities and Use of Proceeds.............................................................. 16
Item 3 Defaults Upon Senior Securities........................................................................ 16
Item 4 Submission of Matters to a Vote of Security Holders.................................................... 16
Item 5 Other Information...................................................................................... 16
Item 6 Exhibits and Reports on Form 8-K....................................................................... 16
Signatures............................................................................................. 17
Exhibits
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Modis Professional Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollar amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------- -------------------
(unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 39,620 $ 105,816
Accounts receivable, net 351,683 327,185
Prepaid expenses 7,841 11,219
Deferred income taxes 14,856 16,858
Other 29,231 28,460
------------------- -------------------
Total current assets 443,231 489,538
Furniture, equipment and leasehold improvements, net 38,651 37,577
Goodwill, net 1,029,416 1,025,240
Other assets 17,699 19,526
------------------- -------------------
Total assets $ 1,528,997 $ 1,571,881
=================== ===================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 948 $ 15,988
Accounts payable and accrued expenses 127,948 206,681
Accrued payroll and related taxes 70,072 60,844
Income taxes payable 47,529 189,887
------------------- -------------------
Total current liabilities 246,497 473,400
Notes payable, long-term portion 162,866 15,525
Deferred income taxes 12,493 12,846
------------------- -------------------
Total liabilities 421,856 501,771
------------------- -------------------
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; 400,000,000 shares authorized
95,798,567 and 96,306,323 shares issued and outstanding on
March 31, 1999 and December 31, 1998, respectively 958 963
Additional contributed capital 578,648 563,728
Retained earnings 529,127 504,899
Accumulated other comprehensive income (1,592) 520
------------------- -------------------
Total stockholders' equity 1,107,141 1,070,110
------------------- -------------------
Total liabilities and stockholders' equity $ 1,528,997 $ 1,571,881
=================== ===================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Modis Professional Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
(dollar amounts in thousands except per share amounts)
Three Months Ended
--------------------------------------
March 31, March 31,
1999 1998
(unaudited) (unaudited)
----------------- ----------------
<S> <C> <C>
Revenue $ 482,866 $ 374,492
Cost of revenue 352,941 270,049
----------------- ----------------
Gross profit 129,925 104,443
----------------- ----------------
Operating expenses:
General and administrative 79,352 55,591
Depreciation and amortization 10,883 7,563
----------------- ----------------
Total operating expenses 90,235 63,154
----------------- ----------------
Income from operations 39,690 41,289
----------------- ----------------
Other income (expense):
Interest expense (1,271) (6,697)
Interest income and other, net 1,592 763
----------------- ----------------
Total other income (expense) 321 (5,934)
Income from continuing operations before
provision for income taxes 40,011 35,355
Provision for income taxes 15,783 13,258
----------------- ----------------
Income from continuing operations 24,228 22,097
Income from discontinued operations, net of income
taxes of $6,288 for 1998 - 10,479
----------------- ----------------
Net income $ 24,228 $ 32,576
================= ================
Basic income per common share:
from continuing operations $ 0.25 $ 0.21
================= ================
from discontinued operations $ - $ 0.10
================= ================
Basic net income per common share $ 0.25 $ 0.31
================= ================
Diluted income per common share:
from continuing operations $ 0.25 $ 0.20
================= ================
from discontinued operations $ - $ 0.09
================= ================
Diluted net income per common share $ 0.25 $ 0.29
================= ================
Average common shares outstanding, basic 96,290 105,268
================= ================
Average common shares outstanding, diluted 96,924 117,003
================= ================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Modis Professional Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(dollar amounts in thousands except for per share amounts)
Three Months Ended
-------------------------------
March 31, March 31,
1999 1998
(unaudited) (unaudited)
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 24,228 $ 22,097
Adjustments to net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 10,883 7,563
Deferred income taxes 1,616 1,028
Changes in certain assets and liabilities:
Accounts receivable (24,905) (43,349)
Prepaid expenses and other assets 5,333 (10,294)
Accounts payable and accrued expenses (3,737) 10,028
Accrued payroll and related taxes 15,040 8,931
Other, net 804 3,933
--------------- ---------------
Net cash provided by (used in) operating
activities 29,262 (63)
--------------- ---------------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold
improvements, net of disposals (4,003) (4,497)
Purchase of businesses, including additional earn-outs on
acquisitions, net of cash acquired (47,501) (45,655)
Income taxes and other cash expenses related to sale of
net assets of discontinued commercial operations (185,409) -
Advances associated with sale of assets of discontinued
health care operations, net of repayments (2,000) -
--------------- ---------------
Net cash used in investing activities (238,913) (50,152)
--------------- ---------------
Cash flows from financing activities:
Repurchases of common stock, net of refunds 11,876 -
Proceeds from stock options exercised 1,539 25,839
Borrowings on indebtedness 150,000 71,509
Repayments on indebtedness (19,324) (30,063)
--------------- ---------------
Net cash provided by financing activities 144,091 67,285
--------------- ---------------
Effect of exchange rate changes on cash and cash equivalents (636) 895
Net (decrease) increase in cash and cash equivalents (66,196) 17,965
Cash provided by discontinued operations - 5,541
Cash and cash equivalents, beginning of period 105,816 23,938
--------------- ---------------
Cash and cash equivalents, end of period 39,620 47,444
=============== ===============
Supplemental noncash investing information:
During the first quarter of 1998, the Company issued 4,598,698 shares of its
common stock, with a fair value of $130,000 in exchange for all the outstanding
common stock of Actium, Incorporated.
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
Modis Professional Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(dollar amounts in thousands except for per share amounts)
1. Basis of Presentation.
The accompanying condensed 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 filed with the Securities and Exchange Commission (SEC) on March
31, 1999.
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.
2. Restructuring of Operations
In December 1998, the Company's Board of Directors approved an Integration and
Strategic Repositioning Plan to strengthen the overall profitability of the
Company by implementing a back office integration program and branch
repositioning plan in an effort to consolidate or close branches whose financial
performance did not meet the Company's expectations. Pursuant to the Plan,
during the fourth quarter of 1998 the Company recorded a restructuring and
impairment charge of $34,759. The restructuring component of the Plan is based,
in part, on the evaluation of objective evidence of probable obligations to be
incurred by the Company or impairment of specifically identified assets.
The Plan calls for the consolidation or closing of 23 Professional Services
division branches, certain organizational improvements and the consolidation of
15 back office operations. This restructuring, which will result in the
elimination of approximately 290 positions, will be completed over a 12- to
18-month period, which began during the first quarter of 1999.
The major components of the restructuring and impairment charge include:(1)
costs of $7,494 to recognize severance and related benefits for the
approximately 290 employees to be terminated. The severance and related benefit
accruals are based on the Company's severance plan and other contractual
termination provisions. These accruals include amounts to be paid to employees
upon termination of employment. Prior to December 31, 1998, management had
approved and committed the Company to a plan that involved the involuntary
termination of certain employees. The benefit arrangements associated with this
plan were communicated to all employees in December 1998. The plan specifically
identified the number of employees to be terminated and their job
classifications; (2) costs of $2,476 to write down certain furniture, fixtures
and computer equipment to net realizable value at branches not performing up to
the Company's expectations; (3) costs of $9,936 to write down goodwill
associated with the acquisition of Legal Information Technology, Inc. which was
acquired in January 1997, calculated in accordance with Statement of Financial
Accounting Standards (SFAS) No. 121 in the fourth quarter of 1998; (4) costs of
$8,035 to terminate leases and other exit and shutdown costs associated with the
consolidated or closed branches including closing the facilities; and (5) costs
of $6,818 to adjust accounts receivable due to the expected increase in bad
debts which results directly from the termination or change in client
relationships which results when branch and administrative employees, who have
the knowledge to effectively pursue collections are terminated. These costs are
based upon management's best estimates based upon available information.
6
<PAGE>
The following table summarizes the restructuring activity through March 31, 1999
(in millions):
<TABLE>
<CAPTION>
Payments To Write-Down Of Payments On
Employees Certain Property, Cancelled Write-Down Of
Involuntarily Plant and Facility Certain
Terminated (a) Equipment (b) Leases (a) Receivables (b) Total
----------------- ------------------ ---------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Balances as of
December 31, 1998 $ 7,494 $ 2,476 $ 8,035 $ 6,818 $ 24,823
Charges during the
three months ended
March 31, 1999 (1,959) (125) (308) - (2,392)
------- ------- ------- ------- -------
Balances as of
March 31, 1999 $ 5,535 $ 2,351 $ 7,727 $ 6,818 $ 22,431
======= ======= ======= ======= =======
(a): Cash; (b): Noncash
</TABLE>
As of March 31, 1999, the $22,431 balance in the restructuring accrual was
included in the balance sheet caption 'Accounts payable and accrued expenses'.
3. Segment Reporting
The Company discloses segment information in accordance with SFAS No. 131,
'Disclosure About Segments of an Enterprise and Related Information,' which
requires companies to report selected segment information on a quarterly basis
and to report certain entity-wide disclosures about products and services, major
customers, and the material countries in which the entity holds assets and
reports revenues.
The Company has two reportable segments: information technology (IT) and
professional services. The Company's reportable segments are strategic business
units that offer different services and are managed separately as each business
unit requires different resources and marketing strategies. The IT segment
provides computer related consulting services. The professional services segment
provides personnel who perform specialized services such as accounting, legal,
technical, outplacement and scientific. Discontinued operations of the Company
are not contained within the scope of this footnote.
The accounting policies of the segments are consistent with those described in
the summary of significant accounting policies in Note 2 to the Consolidated
Financial Statements on Form 10-K filed with the SEC on March 31, 1999, and all
intersegment sales and transfers are eliminated.
No one customer represents more than 5% of the Company's overall revenue.
Therefore, the Company does not believe it has a material reliance on any one
customer as the Company is able to provide services to numerous Fortune 1000 and
other leading businesses.
The Company evaluates segment performance based on revenues, gross margin and
pre-tax income from continuing operations. The Company does not allocate income
taxes or unusual items to the segments. The following table summarizes segment
and geographic information:
7
<PAGE>
<TABLE>
<CAPTION>
March 31,
-------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue
IT $ 343,913 $ 253,013
Professional 138,953 121,479
------------ ------------
Total Revenue $ 482,866 $ 374,492
============ ============
Gross Profit
IT $ 84,584 $ 66,125
Professional 45,341 38,318
------------ ------------
Total Gross Profit $ 129,925 $ 104,443
============ ============
Pre-tax Income from Continuing Operations
IT $ 28,385 $ 24,236
Professional 11,626 11,119
------------ ------------
Total Pre-tax Income from Continuing Operations $ 40,011 $ 35,355
============ ============
Geographic Areas
Revenues
United States $ 392,479 $ 326,633
U.K. 84,831 41,792
Other 5,556 6,067
------------ ------------
Total $ 482,866 $ 374,492
============ ============
March 31, December 31,
-------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------
Assets
IT $ 1,066,393 $ 1,037,722
Professional 396,935 400,563
------------ ------------
1,463,328 1,438,285
Corporate 65,669 133,596
------------ ------------
Total Assets $ 1,528,997 $ 1,571,881
============ ============
Geographic Areas
Identifiable Assets
United States $ 1,148,446 $ 1,222,821
U.K. 367,852 345,182
Other 12,699 3,878
------------ ------------
Total $ 1,528,997 $ 1,571,881
============ ============
</TABLE>
4. Comprehensive Income
The Company discloses other comprehensive income in accordance with SFAS No.
130, 'Reporting Comprehensive Income'. As of March 31, 1999 and December 31,
1998, the balances shown in the balance sheet caption 'Accumulated other
comprehensive income' consist of foreign currency translation items. A summary
of the foreign currency translations for the three months ended March 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
Before-Tax
Amount Income After-Tax
Three Months Ended, gain (loss) Tax Amount
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31, 1998 $ 895 $ - $ 895
March 31, 1999 $ (2,112) - (2,112)
</TABLE>
The currency translation adjustments are not adjusted for income taxes as they
relate to indefinite investments in non-U.S. subsidiaries.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
During fiscal 1998, the Company sold its assets that were unrelated to its
Information Technology and Professional Services divisions. Effective March 30,
1998, the Company sold the Health Care division for consideration of $8.0
million, consisting of $3.0 million in cash and $5.0 million in a note
receivable due March 30, 2000 bearing interest at 2% in excess of the prime
rate. In addition, the Company retained the accounts receivable of the Health
Care division of approximately $28.2 million. On September 27, 1998, the Company
sold its Commercial operations and its Teleservices division for $850 million,
prior to any purchase price adjustments, for cash.
As a result of these transactions, the Company's Consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations have been reclassified to report the results of operations
of its Commercial, Teleservices and Health Care divisions as discontinued
operations for all periods presented.
The following detailed analysis of operations should be read in conjunction with
the 1998 Financial Statements and related notes included in the Company's Form
10-K filed on March 31, 1999.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Results from Continuing Operations
Revenue. Revenue increased $108.4 million, or 28.9%, to $482.9 million in the
three months ended March 31, 1999, from $374.5 million in the year earlier
period. The increase was attributable by division to: Information Technology,
$90.9 million or an increase of 35.9%, and Professional Services, $17.5 million
or an increase of 14.4%. The increases in the Information Technology and
Professional Services divisions were due to both internal growth and to the
revenues of acquired companies. The revenue for the Company's Information
Technology division is obtained through the modis Solutions and modis Consulting
business units. modis Solutions provided approximately 31.1% and 23.0% of the
division's revenue for the three months ended March 31, 1999 and 1998, as
compared to 68.9% and 77.0% which was provided by the division's modis
Consulting unit during the same respective periods. The Company plans to
continue to expand the percentage of revenue contributed through its modis
Solutions unit as it expands that unit's offerings throughout the offices of the
modis Consulting unit through various cross-selling efforts.
Management has observed a current trend in the industry which may possibly
enhance the effectiveness of its strategy. This trend involves the movement of
large users of IT services to larger national and international providers of IT
services. The Company has seen a trend among large national and international
customers towards scaled back, preferred vendor lists for supplying IT services.
The Company believes it is well positioned as one of the companies which can
successfully offer services to these customers and achieve selection as a
preferred provider. Approximately 2.7% of the IT division's total revenue is
derived from two United Kingdom customers. If these or other customers reduce
spending on IT services or exclude the Company from their vendor lists, then the
fiscal 1999 IT division revenues may experience a decrease if the revenue
associated with such customers cannot be replaced.
Another trend in the industry that may limit the Company's operating strategy
has been articulated by some industry analysts. These industry analysts have
speculated that non Year 2000 related IT spending may be negatively affected in
the third and fourth quarter of fiscal 1999. This theory speculates, among other
things, that customers will focus their efforts in the third and fourth quarters
of fiscal 1999 on testing and implementing legacy systems which have undergone
Year 2000 remediation. The theory further speculates that this focus will result
in a curtailment of spending on such IT services as ERP implementation and
custom software development during 1999. As the Company's modis Solutions unit
provides ERP implementation and custom software development services, if
spending is curtailed, the Company may possibly experience some weakness in its
ERP practice.
The Company's Professional Services division consists of the accounting and
finance, legal, technical and engineering, career management and consulting and
scientific units which contributed 36.9%, 14.7%, 31.7%, 11.3% and 5.4%,
respectively, of the Professional Services division's revenues by group during
the three months ended March 31, 1999 as compared to 32.6%, 16.3%, 35.4%, 9.4%
and 6.3%, respectively, during the year earlier period.
During the first quarter of 1999, the Company created and filled the position of
President and COO of the Professional Services division. This position will be
responsible for the operations of all business units of the Professional
Services division. The Company believes this position will create inertia to
improve the platform for better operational results throughout the entire
Professional Services division. Additionally, the Special Counsel unit of the
Professional Services division formed strategic alliances with International
Paper and The Document Company Xerox in the three months ended March 31, 1999.
9
<PAGE>
Gross Profit. Gross profit increased $25.5 million, or 24.4%, to $129.9 million
in the three months ended March 31, 1999, from $104.4 million in the year
earlier period. Gross margin decreased to 26.9% from 27.9% for the same
respective periods. The gross margin in the IT division decreased from 26.1% to
24.6% for the three months ended March 31, 1998 and 1999, respectively. The
overall decrease in the IT division's gross margin was mainly due to the
increased percentage of the Information Technology division's revenues generated
by the U.K. operations, which generally contribute a lower gross margin
percentage. The gross margin in the Professional Services division increased to
32.6% in the three months ended March 31, 1999 from 31.5% in the year earlier
period.
Operating Expenses. Operating expenses increased $27.0 million, or 42.7%, to
$90.2 million in the three months ended March 31, 1999, from $63.2 million in
the year earlier period. Operating expenses as a percentage of revenue increased
to 18.7% in the three months ended March 31, 1999, from 16.9% in the year
earlier period. The Company's general and administrative ("G&A") expenses
increased $23.8 million or 42.8% to $79.4 million in the three months ended
March 31, 1999, from $55.6 million in the year earlier period. The increase in
G&A expenses was primarily related to the effects of acquisitions made by the
Company, internal growth of the operating companies post-acquisition,
investments made to improve infrastructure and to develop technical practices
and increased expenses at the corporate level to support the growth of the
Company, including sales, marketing and brand recognition. Included in G&A
expenses during both the three months ended March 31, 1999 and 1998 are the
costs associated with projects underway to ensure accurate date recognition and
data processing with respect to the Year 2000 as it relates to the Company's
business, operations, customers and vendors. These costs have been immaterial to
date and are not expected to have a material impact on the Company's results of
operations, financial condition or liquidity in the future. See 'OTHER MATTERS -
Year 2000 Compliance' below.
Income from Operations. Income from operations decreased $1.6 million, or 3.9%,
to $39.7 million in the three months ended March 31, 1999, from $41.3 million in
the year earlier period. Income from operations as a percentage of revenue
decreased to 8.2% in the three months ended March 31, 1999, from 11.0% in the
year earlier period.
Other Income (Expense). Interest expense decreased $5.4 million, or 80.6%, to
$1.3 million in the three months ended March 31, 1999, from $6.7 million in the
year earlier period. Immediately subsequent to the sale of the Company's
Commercial operations and Teleservices divisions in September 1998, the Company
paid off and terminated the Company's then existing credit facility. The new and
currently existing facility did not have a balance at December 31, 1998 and the
Company did not begin borrowing on the facility until late in the three month
period ended March 31, 1999. Interest expense was more than offset in the three
months ended March 31, 1999 by interest and other income of $1.6 million from
(1) investment income from certain investments owned by the Company and (2)
interest income earned from cash on hand at certain subsidiaries of the Company.
Income Taxes. The Company's effective tax rate was 39.4% in the three months
ended March 31, 1999, compared to 37.5% in the year earlier period. The increase
in the effective tax rate was due to the increase in certain non-deductible
expense items, the majority of which is non-deductible goodwill amortization
resulting from tax-free mergers accounted for under the purchase method of
accounting.
Income from Continuing Operations. As a result of the foregoing, income from
continuing operations increased $2.1 million, or 9.5%, to $24.2 million in the
three months ended March 31, 1999, from $22.1 million in the year earlier
period. Income from continuing operations as a percentage of revenue decreased
to 5.0% in the three months ended March 31, 1999, from 5.9% in the year earlier
period.
Results from Discontinued Operations
Income from Discontinued Operations. Income from the discontinued commercial
operations, after tax, were $10.5 million for the three months ended March 31,
1998. Additionally, for the three months ended March 31, 1998, reported revenues
from discontinued operations were $319.0 million and operating income for the
discontinued operations were $18.1 million. Results of discontinued operations
include allocations of consolidated interest expense totaling $1.4 million for
the three months ended March 31, 1998. The allocations were based on the
historic funding needs of the discontinued operations, including: the purchases
of property, plant and equipment, acquisitions, current income tax liabilities
and fluctuating working capital needs. Due to the sale of the Commercial
operations and Teleservices division on September 27, 1998, and the sale of the
Health Care division on March 30, 1998, the three months ended March 31, 1999
results did not include any operations of the Commercial, Teleservices or
Health Care divisions.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have principally related to the acquisition
of businesses, working capital needs and capital expenditures. These
requirements have been met through a combination of bank debt, issuances of
Common Stock and internally generated funds. The Company's operating cash flows
and working capital requirements are affected significantly by the timing of
payroll and by the receipt of payment from the customer. Generally, the Company
pays its Information Technology and Professional Services consultants
semi-monthly, and receives payments from customers within 30 to 80 days from the
date of invoice.
The Company had working capital of $196.7 million and $16.1 million as of March
31, 1999 and December 31, 1998, respectively. The Company had cash and cash
equivalents of $39.6 million and $105.8 million as of March 31, 1999 and
December 31, 1998, respectively. The principal reasons for the increase in the
Company's working capital is that included in current liabilities at December
31, 1998 were (1) amounts related to earn-out payments due to the former owners
of acquired companies and (2) a $175 million current tax liability relating to
the sale of its Commercial operations and Teleservices division. The majority of
these amounts were paid in the first quarter of fiscal 1999. For the three
months ended March 31, 1999 and 1998, the Company generated $29.3 million of
cash flows from operations during the three months ended March 31, 1999 versus
using $0.06 million during the same period in fiscal 1998. The increase in cash
flow from operations in the three months ended March 31, 1999 is due to the
reduction in cash needed to fund accounts receivable and cash flows provided
from acquired companies.
The Company used $238.9 million for investing activities in the three months
ended March 31, 1999 mainly as a result of the payment of the current tax
liability, net worth adjustment and certain transaction expenses relating to the
sale of the Company's Commercial operations and Teleservices division.
Additionally, the Company used $47.5 million for acquisitions and earn-out
payments and $4.0 million for capital expenditures. In the three months ended
March 31, 1998, the Company used $50.2 million for investing activities, of
which $45.7 million was used for acquisitions and earn-out payments and $4.5
million was used for capital expenditures. For the three months ended March 31,
1999, the Company did not pay any indemnification claims resulting from the sale
of the Company's Commercial, Teleservices and Health Care divisions in 1998.
Although the Company has received certain claims for indemnification or notices
of possible claims pursuant to such obligations, the Company believes that it
has meritorious defenses against such claims and does not believe that such
claims, if successful, would have a material adverse effect on the Company's
financial condition or results of operations.
For the three months ended March 31, 1999 and 1998, the Company generated $144.1
million and $67.3 million of cash flows from financing activities, respectively.
For both the three months ended March 31, 1999 and 1998, these amounts primarily
represent net borrowings from the Company's credit facility. For the three
months ended March 31, 1999, these net borrowings were used primarily to satisfy
the current tax liability, net worth adjustment, and certain transaction
expenses relating to the sale of the Company's Commercial operations and
Teleservices division while for the three months ended March 31, 1998 these net
borrowings were used primarily to fund acquisitions and earn-out payments.
On October 31, 1998, the Company's Board of Directors authorized the repurchase
of up to $200.0 million of the Company's Common Stock pursuant to a share
buyback program. On December 4, 1998, the Company's Board of Directors increased
the authorized share buyback program by an additional $110.0 million, bringing
the total authorized repurchase amount to $310.0 million. As of December 31,
1998, the Company had repurchased approximately 21,751,000 shares under the
share buyback program. Included in the shares repurchased as of December 31,
1998 were approximately 6,150,000 shares repurchased under an accelerated stock
acquisition plan ("ASAP"). The Company entered into the ASAP with a certain
brokerage firm which agreed to sell to the Company shares of its Common Stock at
a certain cost. The brokerage firm borrowed these shares from its customers and
was required to enter into market transactions, subject to Company approval, and
purchase shares of Company Common Stock to return to its customers. The Company,
pursuant to the ASAP, agreed to compensate the brokerage firm for any increases
in the Company's stock price that would cause the brokerage firm to pay an
amount to purchase the stock over the ASAP price. Conversely, the Company would
receive a refund in the purchase price if the Company's stock price fell below
the ASAP price. Subsequent to December 31, 1998, the Company used refunded
proceeds from the ASAP to complete the program during January and February 1999,
with the repurchase of approximately 597,000 shares, bringing the total shares
repurchased under the program to approximately 22,348,000 shares. All of these
shares were retired upon purchase.
The Company is also obligated under various acquisition agreements to make
earn-out payments to former stockholders of acquired companies over the next
four years. The Company estimates that the amount of these payments will total
$50.3 million for the remainder of 1999, and $26.2 million, $10.1 million and
$2.9 million annually, for the next three years. 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 these payments.
11
<PAGE>
The Company anticipates that capital expenditures for furniture and equipment,
including improvements to its management information and operating systems
during the remainder of 1999 will be approximately $11.0 million. The Company
anticipates recurring expenditures in future years to be approximately $15.0
million per year.
The Company believes that funds provided by operations, available borrowings
under the credit facility, and current amounts of cash 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
On October 30, 1998, the Company entered into a $500 million revolving credit
facility which is syndicated to a group of 13 banks with NationsBank, N.A., as
principal agent. The facility expires on October 21, 2003. Outstanding amounts
under the credit facility bear interest at certain floating rates as specified
by the credit facility. The credit facility contains certain financial and
non-financial covenants relating to the Company's operations, including
maintaining certain financial ratios. Repayment of the credit facility is
guaranteed by the material subsidiaries of the Company. In addition, approval is
required by the majority of the lenders when the cash consideration of an
individual acquisition exceeds 10% of consolidated stockholders' equity of the
Company.
As of April 30, 1999, the Company had a balance of $162.0 million outstanding
under the credit facility. The Company also had outstanding letters of credit in
the amount of $7.8 million, reducing the amount of funds available under the
credit facility to $330.2 million, as of April 30, 1999.
The Company also has certain notes payable to shareholders of acquired
companies. The notes payable bear interest at rates ranging from 4.3% to 8.0%
and have repayment terms from January 1999 to November 2004. As of April 30, the
Company owed approximately $13.8 million in such acquisition indebtedness.
SEASONALITY
The company's quarterly operating results are affected primarily by the number
of billing days in the quarter and the seasonality of its customers' businesses.
Demand for services in the information technology and professional services
businesses is typically lower during the first quarter until customers'
operating budgets are finalized and the profitability of the Company's
consultants is generally lower in the fourth quarter due to fewer billing days
because of the higher number of holidays and vacation days.
12
<PAGE>
OTHER MATTERS
Year 2000 Compliance
During 1997 the Company began projects to address potential problems within the
Company's operations which could result from the century change in the Year
2000. In 1998, the Company created a Year 2000 Project Office to oversee Year
2000 related projects and to address potential problems within the Company's
operations, which could result from the century change in the Year 2000. The
Project Office reports to the Company's Board of Directors, is staffed primarily
with representatives of the Company's Information Systems Department and has
access to key associates in all areas of the Company's operations. The Project
Office also uses outside consultants on an as-needed basis.
A four-phase approach has been utilized to address the Year 2000 issues: (1) an
inventory phase to identify all computer-based systems and applications
(including embedded systems) which might not be Year 2000 compliant; (2) an
assessment phase to determine what revisions or replacements would be necessary
to achieve Year 2000 compliance and identification of remediation priorities
which would best serve the Company's business interests; (3) a conversion phase
to implement the actions necessary to achieve compliance and to conduct the
tests necessary to verify that the systems are operational; and (4) an
implementation phase to transition the compliant systems into the everyday
operations of the Company. Management believes that the four phases are
approximately 100%, 100%, 80%, and 71% complete, respectively.
The Company's corporate accounting, payroll and human resources systems are
recent implementations (installed since June 1997) of mainstream computer
products from vendors such as PeopleSoft, Informix, Microsoft, Digital Equipment
Corporation and Compaq. The Company is near completion of Year 2000 required
upgrades for corporate hardware systems, operating systems, network systems,
database systems and applications systems. This project is in process and on
schedule, with an anticipated completion date of July 1999.
The Company operates approximately 263 branches, primarily in the U.S., Canada
and the United Kingdom. The branch network relies on a variety of front office
automation systems to provide sales support for resume tracking and client
contact management. Because of the diverse architectural nature of these systems
together with the relative ease with which backup/contingency procedures can be
implemented in the event of an individual branch system outage, the Company does
not believe that these systems pose a material Year 2000 risk. Nevertheless, the
Company has completed inventory and assessment phases for all branch locations.
In conjunction with other business related integration projects, the Company is
actively replacing noncompliant Year 2000 branch hardware and software with Year
2000 compliant products. The Company expects that this replacement process will
be complete in July 1999. To date, the Company has found that less than 10% of
branch workstations require hardware or software upgrades for Year 2000
purposes.
Milestones and implementation dates and the cost of the Company's Year 2000
readiness program are subject to change based on new circumstances that may
arise or new information becoming available, that may change underlying
assumptions or requirements. Further, there are no assurances that the Company
will identify all data handling problems in its business systems or that the
Company will be able to successfully remedy Year 2000 items that are discovered.
Non-IT systems have also been assessed and inventoried. Potential Year 2000
risks in these systems include landlord-controlled systems, such as heating and
cooling systems, automated security systems, elevators, and office equipment,
phone systems, facsimile machines and copiers. The Company has requested
assessments of non-IT systems for Year 2000 compliance from landlords and office
equipment vendors. Based on these responses that the Company has received, the
Company believes that the Year 2000 risk of non-IT systems failure is not
material.
The Company has budgeted approximately $2.0 million to address the Year 2000
issues, which includes the estimated cost of the salaries of associates and the
fees of consultants addressing the issue. This cost represents approximately 10%
of the Company's total MIS budget. Approximately $1.5 has been incurred to date
for outside consultants, software and hardware applications, and dedicated
personnel. The Company does not separately track the internal costs incurred for
portions of the Year 2000 compliance project that are completed as a part of
other business related projects. Such costs are principally the related payroll
costs for the Company's information systems group. The Company believes that
cash flows from operations and funds available under the Company's credit
facility as well as cash on hand are sufficient to fund these costs.
13
<PAGE>
As a part of the Year 2000 review, the Company is examining its relationships
with certain key outside vendors and others with whom it has significant
business relationships to determine to the extent practical the degree of such
parties' Year 2000 compliance and to develop strategies and alternatives for
working with them through the century change. Other than its banking
relationships, which include only large, federally insured institutions, and
utilities (electrical power, telecommunications, water and related items), the
Company does not have a relationship with any third-party which is material to
the operations of the Company and, therefore, believes that the failure of any
such party to be Year 2000 compliant would not have a material adverse effect on
the Company. However, banking or utility failures at the Company's branches or
with its customers could have a material effect on the Company's revenue sources
and could disrupt the payment cycle of certain of the Company's customers.
Should the Company or a third party with whom the Company deals have a systems
failure due to the century change, the Company does not expect any such effect
to be material. The Company is developing contingency plans for alternative
methods of transaction processing and estimates that such plans will be
finalized by August 1999.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The following assessment of the Company's market risks does not include
uncertainties that are either nonfinancial or nonquantifiable, such as
political, economic, tax and other credit risks.
Interest Rates. The Company's exposure to market risk for changes in interest
rates relates primarily to the Company's short-term and long-term debt
obligations and to the Company's investments.
The Company's investment portfolio consists of cash and cash equivalents
including deposits in banks, government securities, money market funds, and
short-term investments with maturities, when acquired, of 90 days or less. The
Company is adverse to principal loss and ensures the safety and preservation of
its invested funds by placing these funds with high credit quality issuers. The
Company constantly evaluates its invested funds to respond appropriately to a
reduction in the credit rating of any investment issuer or guarantor.
The Company's short-term and long-term debt obligations totaled approximately
$163.8 million as of March 31, 1999 and the Company had $342.2 million available
under its current credit facility. The debt obligations consist of (1) notes
payable to former shareholders of acquired corporations, are at a fixed rate of
interest, and extend through 2004 and (2) amounts outstanding under the credit
facility which expires in 2003. The interest rate risk on the note obligations
is immaterial due to the dollar amount and fixed nature of these obligations.
The interest rate on the credit facility is variable, with the rate on
borrowings outstanding at March 31, 1999 at 5.6%. As of March 31, 1999, the
Company has not entered into any interest rate instruments to reduce its
exposure to interest rate risk.
Foreign Currency Exchange Rates. Foreign currency exchange rate changes impact
translations of foreign denominated assets and liabilities into U.S. dollars and
future earnings and cash flows from transactions denominated in different
currencies. The Company generated approximately 18.7% of its consolidated
revenues for the three months ended March 31, 1999 consolidated revenues from
international operations, 93.9% of which were from the United Kingdom and 6.1%
of which were from other countries. Thus, 93.9% of international revenues were
derived from the United Kingdom, whose currency, has not fluctuated materially
against the United States dollar since the Company began operating in the United
Kingdom. The Company recorded unrealized cumulative foreign exchange translation
losses of $1,592 as of March 31, 1999, and unrealized cumulative foreign
exchange translation gains of $520 as of December 31, 1998. The cumulative
amounts are recorded as a separate component of stockholders' equity under the
caption 'Accumulated other comprehensive income'. The Company did not hold and
has not entered into any foreign currency derivative instruments as of March 31,
1999.
14
<PAGE>
FACTORS WHICH MAY IMPACT FUTURE RESULTS AND FINANCIAL CONDITION
Effect of Fluctuations in the General Economy
Demand for the Company's information technology and professional business
services is significantly affected by the general level of economic activity in
the markets served by the Company. During periods of slowing economic activity,
companies may reduce the use of outside consultants and staff augmentation
services prior to undertaking layoffs of full-time employees. Also during such
periods, companies may elect to defer installation of new information technology
systems and platforms (such as Enterprise Resource Planning systems) or upgrades
to existing systems and platforms. Year 2000 remediation and testing for
existing information technology systems may have a similar effect. As a result,
any significant economic downturn or Year 2000 impact could have a material
adverse effect on the Company's results of operations or financial condition.
The Company may also be adversely effected by consolidations through mergers and
otherwise of main customers or between major customers with non-customers. These
consolidations as well as corporate downsizings may result in redundant
functions or services and a resulting reduction in demand by such customers for
the Company's services. Also, spending for outsourced business services may be
put on hold until the consolidations are completed.
Competition
The Company's industry segments are intensely competitive and highly fragmented,
with few barriers to entry by potential competitors. The Company faces
significant competition in the markets that it serves and will face significant
competition in any geographic market that it may enter. In each market and
industry segment in which the Company operates, it competes for both clients and
qualified professionals with other firms offering similar services. Competition
creates an aggressive pricing environment and higher wage costs, which puts
pressure on gross margins.
Ability to Recruit and Retain Professional Employees
The Company depends on its ability to recruit and retain employees who possess
the skills, experience and/or professional certifications necessary to meet the
requirements of the Company's clients. Competition for individuals possessing
the requisite criteria is intense, particularly in certain specialized IT and
professional skill areas. The Company often competes with its own clients in
attracting and retaining qualified personnel. There can be no assurance that
qualified personnel will be available and recruited in sufficient numbers on
economic terms acceptable to the Company.
The continuing shortage of qualified IT consultants may adversely affect the
Company's ability to increase revenue. This shortage may be exacerbated by the
difficulties of utilizing the services of qualified foreign nationals working in
the United States under H-1B visas. The use of these consultants requires both
the Company and these foreign nationals to comply with United States immigration
laws.
Ability to Continue Acquisition Strategy; Ability to Integrate Acquired
Operations
The Company has experienced significant growth in the past through acquisitions.
Although the Company continues to seek acquisition opportunities, there can be
no assurance that the Company will be able to negotiate acquisitions on economic
terms acceptable to the Company or that the Company will be able to successfully
identify acquisition candidates and integrate all acquired operations into the
Company.
Possible Changes in Governmental Regulations
From time to time, legislation is proposed in the United States Congress, state
legislative bodies and by foreign governments that would have the effect of
requiring employers to provide the same or similar employee benefits to
consultants and other temporary personnel as those provided to full-time
employees. The enactment of such legislation would eliminate one of the key
economic reasons for outsourcing certain human resources and could significantly
adversely impact the Company's staff augmentation business. In addition, the
Company's costs could increase as a result of future laws or regulations that
address insurance, benefits or other employment-related matters. There can be no
assurance that the Company could successfully pass any such increased costs to
its clients.
Possible Year 2000 Exposure
The IT division performs both Year 2000 remediation services as well as system
upgrades and enhancements for clients. There is some possibility that customers
who experience system failures related to Year 2000 may institute actions
against their IT vendors, including the Company. There is no ability to quantify
the likelihood or merit of any such claims; but if a significant number of such
claims are asserted against the Company or if one or more customers assert
meritorious claims, such claims may result in material adverse effects on the
Company's results of operations and financial condition.
15
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
No disclosure required.
Item 2. Changes in Securities
No disclosure required.
Item 3. Defaults Upon Senior Securities
No disclosure required.
Item 4. Submission of Matters to a Vote of Security Holders
No disclosure required.
Item 5. Other Information
No disclosure required.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
10.7 Employment Agreement with Derek E. Dewan, as amended (1)
11 Calculation of Per Share Earnings
27 Financial Date Schedule
(1) 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.
B. Reports on Form 8-K
No disclosure required
16
<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
Signatures Title Date
/s/ DEREK E. DEWAN President, Chairman May 17, 1999
- ---------------------- of the Board and Chief
Derek E. Dewan Executive Officer
/s/ MICHAEL D. ABNEY Senior Vice President, May 17, 1999
- ---------------------- Chief Financial Officer,
Michael D. Abney Treasurer, and Director
/s/ ROBERT P. CROUCH Vice President and May 17, 1999
- ---------------------- Chief Accounting Officer
Robert P. Crouch
17
2
FIFTH AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
THIS FIFTH AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT is made and entered
into as of March 31, 1999, and effective as of January 1, 1999 (the 'Fifth
Amendment'), by and between MODIS PROFESSIONAL SERVICES, INC., (formerly
AccuStaff Incorporated) a Florida corporation (the 'Employer') and DEREK E.
DEWAN, a resident of the State of Florida (the 'Executive').
WHEREAS, the Employer and the Executive entered into an Employment
Agreement dated December 31, 1993, as amended by the First Amendment dated as of
December 31, 1993 (the'First Amendment'), the Second Amendment dated as of
August 24, 1995, and effective as of January 26, 1995 (the 'Second Amendment')
the Third Amendment dated as of August 24, 1995 (the 'Third Amendment'), and the
Fourth Amendment dated as of March, 1996 (the 'Fourth Amendment), (such
Employment Agreement, as amended by the First, Second, Third and Fourth
Amendments, is herein collectively referred to as the'Agreement');
WHEREAS, in recognition of the Executive's outstanding performance and
record of achievement to date as President and Chief Executive Officer, the
Employer wishes to increase Executive's salary.
WHEREAS, Employer wishes to clarify that Executive's incentive bonus shall
be calculated based upon a year to year increase in net income from 'operating
earnings'.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants, and subject to the terms and conditions contained in this Fifth
Amendment, the Employer and the Executive, intending to be legally bound, hereby
agree as follows (unless otherwise indicated, all capitalized terms herein shall
have the same meaning ascribed to them in the Agreement).
1. RECITALS CORRECT. The above recitals are true and correct and are by
this reference incorporated in and made a part of this Fifth Amendment.
2. BASE SALARY. Paragraph 4.A. of the Agreement is hereby amended by
deleting the amount '$350,000' from the first line thereof and substituting the
amount '$500,000.'
3. The first sentence of Paragraph 4.B. of the Agreement is hereby amended
to read as follows: Additional Compensation (the'Incentive Compensation') equal
to four percent (4%) of growth (increase) in net income exclusive of one-time
gains (before state and federal income and franchise taxes) of Employer (on a
consolidated basis) for each fiscal year ( or part thereof) of Employer during
the Employment Period.
4. AGREEMENT VALID. Except as modified hereby, the Agreement shall remain
valid and binding upon the Employer and the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement as of March
31, 1999, effective as of January 1, 1999.
MODIS PROFESSIONAL SERVICES, INC.
By:__________________________________
T. Wayne Davis
Chairman, Compensation Committee
3
<TABLE>
<CAPTION>
(dollar amounts in thousands except per share amounts) Three Months Ended
------------------------------------
March 31, 1999 March 31, 1998
----------------- ------------------
<S> <C> <C>
Basic income per common share computation:
Income available to common shareholders
from continuing operations $ 24,228 $ 22,097
----------------- ------------------
Income available to common shareholders
from discontinued operations $ - $ 10,479
----------------- ------------------
Average common shares outstanding 96,290 105,268
================= ==================
Basic income per common share from continuing
operations $ 0.25 $ 0.21
================= ==================
Basic income per common share from discontinued
operations $ - $ 0.10
================= ==================
Basic net income per common share $ 0.25 $ 0.31
================= ==================
Diluted income per common share computation:
Income available to common shareholders from continuing
operations $ 24,228 $ 22,097
Interest paid on convertible debt, net of tax benefit - 928
Income available to common shareholders and
assumed conversions from continuing operations $ 24,228 $ 23,025
----------------- ------------------
Average common shares outstanding 96,290 105,268
Incremental shares from assumed conversions:
Convertible debt - 7,599
Stock options 634 4,136
----------------- ------------------
Diluted average common shares outstanding 96,924 117,003
================= ==================
Diluted income per common share from continuing
operations $ 0.25 $ 0.20
================= ==================
Diluted income per common share from discontinued
operations $ - $ 0.09
================= ==================
Diluted net income per common share $ 0.25 $ 0.29
================= ==================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<PERIOD-TYPE> 3-MOS
<CASH> 39,620
<SECURITIES> 0
<RECEIVABLES> 366,463
<ALLOWANCES> 14,780
<INVENTORY> 0
<CURRENT-ASSETS> 443,231
<PP&E> 81,808
<DEPRECIATION> 43,157
<TOTAL-ASSETS> 1,528,997
<CURRENT-LIABILITIES> 246,497
<BONDS> 0
0
0
<COMMON> 958
<OTHER-SE> 1,106,183
<TOTAL-LIABILITY-AND-EQUITY> 1,528,997
<SALES> 482,866
<TOTAL-REVENUES> 482,866
<CGS> 352,941
<TOTAL-COSTS> 352,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,337
<INTEREST-EXPENSE> 1,271
<INCOME-PRETAX> 40,011
<INCOME-TAX> 15,783
<INCOME-CONTINUING> 24,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,228
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
