FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
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 0-24928
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THE SOLOMON-PAGE GROUP LTD.
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(Exact name of registrant as specified in its charter)
Delaware 51-0353012
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1140 AVENUE OF THE AMERICAS, NEW YORK, NY 10036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 764-9200
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N/A
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(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 of 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 / /
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At February 6, 1998, there were
outstanding 5,129,285 shares of the Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format:
Yes / / No /X/
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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OVERVIEW
The Company is a specialty niche provider of staffing services
organized into two primary operating divisions: executive search / full time
contingency recruitment and temporary staffing and consulting. The executive
search and full time contingency recruitment division comprises eight lines of
business, including four industry (capital markets, publishing and new media,
healthcare and fashion services), and four functional (information technology,
accounting, human resources and legal). The executive search and full time
contingency recruitment division generated approximately 42% of the Company's
revenue for the three months ended December 31, 1997. The temporary staffing and
consulting division provides services to companies seeking personnel in the
information technology, accounting and human resources areas and generated
approximately 58% of the Company's revenue for the three months ended December
31, 1997.
The following is a summary of the Company's consolidated financial
and operating data.
THREE MONTHS ENDED
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DECEMBER 31,
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STATEMENT OF OPERATIONS DATA: 1997 1996
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Revenue $10,213,428 $5,478,063
Income from Operations 728,992 393,698
Income Before Income Tax Expense 741,247 426,883
Income Tax Expense 334,340 85,253
Net Income 406,907 341,630
Basic Earnings Per Common Share $0.08 $0.07
Diluted Earnings Per Common Share $0.07 $0.06
BALANCE SHEET DATA: DECEMBER 31, 1997
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Working Capital $4,418,004
Total Assets 13,663,750
Line of Credit 1,400,000
Long-term Debt, Net of Current Maturities 24,653
Stockholders' Equity 7,720,069
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this document.
Revenue increased to approximately $10,213,000 for the three months
ended December 31, 1997 from approximately $5,478,000 for the three months ended
December 31, 1996, an increase of approximately $4,735,000 or 86%. Revenues from
the Company's executive search and full time contingency recruitment division
experienced an increase of 54% to approximately $4,289,000 for the three months
ended December 31, 1997 compared to approximately $2,782,000 for the same period
in 1996. Revenues from the Company's temporary staffing and consulting division
were approximately $5,924,000 for the three months ended December 31, 1997
compared to approximately $2,696,000 for the same period in 1996, an increase of
approximately $3,228,000 or 120%.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION [CONTINUED]
The increase in revenues for the three months ended December 31, 1997
compared to the three months ended December 31, 1996 for the Company's executive
search and full time contingency recruitment division is primarily attributable
to the expansion of its client base and strong demand for personnel from
existing clients. Also, the addition of experienced counselors contributed to
the increase in revenues. The Company's temporary staffing and consulting
business experienced a significant increase in revenues for three months ended
December 31, 1997 compared to the same periods in 1996. The increases were
attributable to the expansion into the accounting and human resource temporary
staffing marketplace as well as the hiring of experienced sales and recruiting
personnel. In addition, revenues from the Company's information technology
temporary staffing and consulting business increased to approximately $5,165,000
for the three months ended December 31, 1997 compared to approximately
$2,696,000 for the same period in 1996, an increase of 92%.
Selling expenses for the three months ended December 31, 1997 totaled
approximately $7,768,000 (76% of revenues) compared with approximately
$4,024,000 (73% of revenues) for the three months ended December 31, 1996. The
increase in selling expenses as a percentage of revenue is primarily related to
costs associated with payroll requirements within the temporary staffing and
consulting division. In addition, the Company has incurred costs due to the
hiring of senior level counselors within various lines of business. Selling
expenses consist primarily of temporary staffing payroll, salaries and
commissions of sales and recruiting personnel, employee benefits, telephone and
advertising.
General and Administrative expenses increased to approximately
$1,601,000 (16% of revenues) for the three months ended December 31, 1997
compared to approximately $986,000 (18% of revenues) for the three months ended
December 31, 1996. The improvements as a percentage of revenues relates to
operating efficiencies and economies of scale associated with increased
revenues. The increase was primarily a result of hiring additional operating
employees and increased expenses associated with the expansion of the Company's
business.
Depreciation and Amortization expense for the three months ended
December 31, 1997 totaled approximately $115,000 compared to approximately
$75,000 for the same period in 1996. The increase is due to increased capital
expenditures during fiscal 1997 and the amortization of intangible assets
related to the acquisition of trade names.
Income before taxes increased 74% to approximately $741,000 for the
three months ended December 31, 1997 as compared to approximately $427,000 for
the three months ended December 31, 1996, primarily as a result of the above
mentioned factors.
The effective tax rate increased 125% to 45% for the three months ended
December 31, 1997 compared to 20% for the three months ended December 31, 1996,
as a result of net operating loss carryforwards utilized in 1996.
Net income was approximately $407,000 for the three months ended
December 31, 1997 compared to approximately $342,000 for the three months ended
December 31, 1996. The increase was primarily a result of the factors described
above.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company's sources of liquidity included
approximately $1,654,000 in cash and cash equivalents and short-term
investments. The Company's working capital at December 31, 1997 was
approximately $4,418,000 a decrease of approximately $1,471,000 compared to
December 31, 1996. The decrease in working capital is primarily attributable to
the repurchase of 1,000,000 warrants at a cost of $1,053,997, which was financed
through borrowings on the Company's line of credit. In addition, the Company has
available approximately $1,052,000 of long term investments as a source of
liquidity if required.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION [CONTINUED]
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On October 31, 1997, the Company's Board of Directors authorized the
repurchase of up to 1,000,000 of the Company's Class A redeemable common stock
purchase warrants in open market or privately negotiated transactions. The
Company has completed the repurchased of 1,000,000 warrants at a cost of
$1,053,997, which was financed through borrowings on the Company's line of
credit.
In February 1997, the Company entered into a one year $4,000,000 demand
line of credit facility agreement with The Dime Savings Bank which is
collateralized by all the Company's assets. The agreement provides for
borrowings at 1% above the Dime Reference Rate (Dime Reference Rate at December
31, 1997 was 8.5%), in amounts not exceeding 80% of eligible accounts receivable
(as defined therein) and expires on February 28, 1998, on which date the
outstanding principal amount is required to be repaid. As of December 31, 1997,
the Company has borrowed approximately $1,400,000 under this credit facility,
most of which was used for the repurchase of the Company's Class A redeemable
common stock purchase warrants. The Company is currently in negotiations with
the Dime Savings Bank to extend the facility on substantially the same terms as
are currently in effect for an additional one year period. If the Company is
unable to extend such facility, the Company believes that an alternative
facility can be obtained on substantially similar terms, although there can be
no assurance in such regard.
During the three months ended December 31, 1997, cash flows provided by
operating activities were approximately $21,000, resulting primarily from higher
earnings. Cash provided by investing activities for the three months ended
December 31, 1997 were approximately $161,000, which was primarily due to the
sale of investments.
Capital expenditures for the remainder of fiscal 1998 are expected to
be approximately $400,000, which will primarily relate to the upgrading of
computers, telephone system and various leasehold improvements.
The Company believes that its current cash position and investment
balances, together with financing available under its working capital facility
will be sufficient to support current working capital requirements for the next
twelve months.
NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ["FASB"] has issued Statement
of Financial Accounting Standards, [SFAS] No. 129, "Disclosure of Information
about Capital Structure," in February 1997. SFAS No. 129 does not change any
previous disclosure requirements, but rather consolidates existing disclosure
requirements for ease of retrieval.
The Financial Accounting Standards Board ["FASB"] issued Statement of
Financial Accounting Standards ["SFAS"] No. 130, "Reporting Comprehensive
Income." SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Earlier application is permitted. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. The Company
is in the process of determining its preferred format. The adoption of SFAS No.
130 will have no impact on the Company's consolidated results of operations,
financial position or cash flows.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 changes how operating segments
are reported in annual financial statements and requires the reporting of
selected information about operating segments in interim financial reports
issued to shareholders. SFAS No. 131 is effective for periods beginning after
December 15, 1997, and comparative information for earlier years is to be
restated. SFAS No. 131 need not be applied to interim financial statements in
the initial year of its application. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have not impact
on the Company's consolidated results of operations, financial position or cash
flows.
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THE SOLOMON-PAGE GROUP LTD.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
THE SOLOMON-PAGE GROUP LTD.
(Registrant)
Date: February 6, 1998 /S/ LLOYD B. SOLOMON
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Lloyd B. Solomon, Chief Executive Officer
Date: February 6, 1998 /S/ ERIC M. DAVIS
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Eric M. Davis, Chief Financial Officer
Vice President - Finance
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