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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
FORM 10-Q
(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, 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 0-26058
ROMAC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3264661
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
120 West Hyde Park Place
Suite 150
Tampa, Florida 33606
(Address of principal executive offices) (zip-code)
Registrant's telephone number, including area code: (813) 251-1700
______________________________
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) had 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 April 30, 1997.
12,036,904 shares of $.01 par value Common Stock
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<PAGE>
PART I --- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT
ROMAC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
March December
31 31
1997 1996
------ ------
(unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $31,017 $39,555
Short-term investments 914 880
Trade receivables, net of allowance for doubtful
accounts of $597 and $617 respectively 20,954 17,061
Notes receivable from franchisees, current 277 193
Receivables from related parties, current 494 100
Deferred tax asset 243 243
Prepaid expenses and other current assets 1,345 1,214
------ ------
Total current assets 55,244 59,246
Note receivable from franchisees, less current portion 54 75
Receivables from related parties, less current portion 813 862
Deferred tax asset 209 209
Furniture and equipment, net 5,642 5,346
Goodwill, net of accumulated amortization of
$1,436 and $1,108, respectively 19,675 10,915
Other assets, net 2,046 906
------- -------
Total assets $83,683 $77,559
======= =======
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable and other accrued liabilities $ 1,465 $ 1,723
Accrued payroll costs 4,748 2,976
Current portion of payables to related parties 40 23
Income taxes payable 1,239 304
------ ------
Total current liabilities 7,492 5,026
Other long-term liabilities, less current portion 1,618 1,249
------ ------
Total liabilities 9,110 6,275
Commitment and contingencies -- -
Shareholders' Equity:
Preferred stock, par value $.01; 15,000 shares
authorized, none issued and outstanding -- -
Common stock, par value $.01; 15,000 shares authorized,
12,373 and 12,134 issued, respectively 124 121
Additional paid-in-capital 62,721 61,526
Stock subscriptions receivable (1) (13)
Retained earnings 12,654 10,575
Less reacquired stock at cost; 338 shares,
respectively (925) (925)
------ ------
Total shareholders' equity 74,573 71,284
------ ------
Total liabilities and shareholders' equity $83,683 $77,559
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
1
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<PAGE>
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March March
31 31
1997 1996
------ ------
(unaudited) (unaudited)
<S> <C> <C>
Net service revenues $34,952 $16,889
Direct costs of service 21,004 9,719
------ ------
Gross profit 13,948 7,170
Selling, general and administrative expenses 10,532 5,372
Depreciation and amortization 659 237
Other (income) expense (609) (147)
------ ------
Income before income taxes 3,366 1,708
Provision for income taxes 1,287 683
------ ------
Net income $ 2,079 $ 1,025
======= =======
Net income per share $0.17 $0.10
===== =====
Weighted average shares outstanding 12,599 10,338
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
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<PAGE>
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Shares Amounts
<S> <C> <C>
COMMON STOCK:
Balance at December 31, 1996 12,134 $ 121
Exercise of stock options 239 3
------ ------
Balance at March 31, 1997 12,373 $ 124
======
ADDITIONAL PAID-IN CAPITAL:
Balance at December 31, 1996 $61,526
Exercise of stock options 850
Tax benefit related to employee
stock options 345
------
Balance at September 30, 1996 $62,721
=======
STOCK SUBSCRIPTIONS RECEIVABLE:
Balance at December 31, 1996 $ (13)
Payments 12
------
Balance at March 31, 1997 $ 1
=======
RETAINED EARNINGS:
Balance at December 31, 1996 $10,575
Net income 2,079
------
Balance at March 31, 1997 $12,654
=======
REAQUIRED STOCK:
Balance at December 31, 1996 $ (925)
------
Balance at March 31, 1997 $ (925)
=======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
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<PAGE>
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March March
31 31
1997 1996
------ ------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,079 $ 1,025
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 659 237
Provision for losses on accounts and
notes receivable 20 (91)
(Increase) decrease in operating assets:
Trade receivables, net (3,913) (3,033)
Notes receivable from franchisees, current (84) (66)
Prepaid expenses and other current assets (131) (453)
Notes receivable from franchisees,
less current portion 21 --
Other assets, net (1,140) (38)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued
liabilities (258) 69
Accrued payroll costs 1,772 1,045
Income taxes payable 1,280 65
Other long-term liabilities 369 16
------ ------
Cash (used in) provided by
operating activities 674 (1,224)
Cash flows from investing activities:
Capital expenditures (627) (167)
Acquisitions (9,089) (5,963)
Payments for the purchase of short-term
investments (34)
Proceeds from the sale of short-term
investments 7,243
------ ------
Cash (used in) provided by
investing activities (9,750) 1,113
Cash flows from financing activities:
Payments on notes receivable from
stock subscriptions 13 --
Payments on notes payable -- (91)
Issuance of payables to related parties 17 41
Payments on receivables from related parties 49 111
Issuance of receivables from related parties (394) (27)
Proceeds from exercise of stock options 853 46
------ ------
Cash provided by (used in)
financing activities 538 80
------ ------
Decrease in cash and cash equivalents (8,538) (31)
Cash and cash equivalents at beginning of period 39,555 620
------ ------
Cash and cash equivalents at end of period $31,017 $ 589
======= =======
Supplemental Cash Flows Information
Cash paid during the period for:
Interest -- $ 21
Income Taxes $ 183 $ 618
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
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<PAGE>
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
Note A --- Summary of Significant Accounting Policies
Principles of Consolidation. The Consolidated Financial Statements
include the accounts of Romac International, Inc. (the "Company") and its
subsidiaries. All material intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
Interim Financial Information. The Consolidated Financial Statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and, in management's opinion, include all
adjustments necessary for a fair statement of results for such interim
periods. Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and
regulations; however, the Company believes that the disclosures made are
adequate to make the information presented not misleading.
Revenue Recognition. Net service revenues consist of sales from
Company-owned and licensed offices, and royalties received from franchised
operations, less credits and discounts. The Company recognizes revenue for
Professional Temporary and Contract Services based on hours worked by
assigned personnel on a weekly basis. Search revenues are recognized in
contingency search engagements upon the successful completion of the
assignment. In a retained search engagement the initial retainer is
recognized upon execution of the agreement, with the balance recognized on
completion of the search. Reserves are established to estimate losses due
to placed candidates not remaining in employment for the Company's guarantee
period, typically 90 days.
Franchise fees are determined based upon a contractual percentage of the
revenue billed by franchisees. Costs relating to the support of franchised
operations are included in the Company's selling, general and administrative
expenses. The Company includes revenues and related direct costs of licensed
offices in its net service revenues and direct costs of services,
respectively. Commissions paid to licensees is based upon a percentage of
the gross profit generated, and is included in the company's direct cost
of services.
Cash and Cash Equivalents. The Company classifies all highly-liquid
investments with a maturity of three months or less as cash equivalents.
Income Taxes. The Company accounts for income taxes under the principles of
FAS 109 "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires an
asset and liability approach to the recognition of deferred tax assets and
liabilities for the expected future tax consequences of differences between
the carrying amounts and the tax bases of other assets and liabilities. The
tax effects of deductions attributable to employees' disqualifying
dispositions of shares obtained from incentive stock options were reflected
in additional paid-in capital.
Earnings Per Share. In March 1997, Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128") was issued which requires
disclosure of basic earnings per share and modifies existing guidance for
computing fully dilulted earnings per share. Under the new standard, basic
earnings per share is computed as earnings divided by weighted average shares
excluding the dilutive effects of stock options and other potentially
dilutive securities. The effective date of SFAS 128 is December 15, 1997
and early adoption is not permitted. The pro forma impact of adoption of
SFAS 128 had no impact on the period ended March 31, 1997, however the Company
expects that this pronouncement could have a material impact on Earnings Per
Share for the year ended December 31, 1997.
5
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements,
particularly with respect to the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Additional written or oral forward-looking statements may be made
by the Company from time to time, in filings with the Securities and Exchange
Commission or otherwise. Such forward-looking statements are within the
meaning of that term in Section 27A of the Securities Act of 1933 (the
"Securities Act') and Section 21 E of the Securities Exchange Act of 1934
(the "Exchange Act"). Such statements may include, but not be limited to,
projections of revenue, income, losses, cash flows, capital expenditures,
plans for future operations, financing needs or plans, plans relating to
products or services of the Company, estimates concerning the effects of
litigation or other disputes, as well as assumptions to any of the foregoing.
Forward-Looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted. Future events and actual results could
differ materially from those set forth in or underlying the forward-looking
statements.
Results of Operations for each of the Three Months Ended March 31, 1997 and
1996.
Revenues. Net service revenues increased 107.1% to $35.0 million in the
first three months of 1997 from $16.9 million in the first three months of
1996, primarily as a result of a $10.0 million increase in revenues from
existing Company-owned operations and a $8.1 million increase in revenues
from acquired operations.
Professional Temporary revenues increased 72.2% to $12.4 million in the
first three months of 1997 from $7.2 million in the first three months of
1996. This increase resulted from an increase in the number of hours billed
by Company-owned operations during the three months ended March 31, 1997
as compared to the same period in 1996. The average hourly bill rate for
the period ended March 31, 1997 increased 13.6% over the prior year due to
a continued demand for the Company's knowledge workers and the Company's
ability to pass on increased wage costs of its knowledge workers to its
customers.
Contract Services revenues increased 166.7% to $16.8 million in the first
three months of 1997 from $6.3 million in the first three months of 1996,
primarly as a result of a $5.6 million increase in revenues from acquired
operations. The increases attributable to Company-owned operations resulted
from an increase in the number of hours billed during the three months ended
March 31,1997 as compared to the same period in 1996. The average hourly
bill rate for Company-owned operations increased 14.4% for the period ended
March 31, 1997 due to the continued penetration into existing markets where
hourly bill rates are higher such as Boston and Chicago, as well as the
increased expansion of the Company's Emerging Technologies Division which
concentrates on placing knowledge workers in highly skilled technologies
which have the greatest demand.
Search revenues increased 70.6% to $5.8 million during the first three
months of 1997 from $3.4 million in the first three months of 1996,
primarily as a result of a $1.7 million increase in revenues from existing
Company-owned operations and a $.7 million increase in revenues from acquired
operations. The increase attributable to Company-owned operations resulted
primarily from an increase in the number of Search Division sales
consultants, which increased the number of placements made by the Search
Division during the first three months of 1997 as compared to the first
three months of 1996. The average fee for each placement made during the
periods remained relatively constant.
6
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<PAGE>
Franchise and licensee revenues, which are included in the aforementioned
division revenues, decreased 44.9% to approximately $461,000 in the first
three months of 1997 from approximately $836,000 in the first three months
of 1996. The decrease was primarily due to the effects of discontinued
franchisee and licensee operations in Minneapolis, St. Louis, and Portland
during 1996.
Gross Profit. Gross profit increased 93.1% to $13.9 million in the first
three months of 1997 from $7.2 million in the first three months of 1996.
Gross profit as a percentage of net service revenues decreased to 39.7% for
the first three months of 1997 from 42.5% for the first three months of 1996.
This decrease was result of the continuing change in the Company's business
mix whereby revenues from the Professional Temporary and Contract Services
Divisions, traditionally lower gross margins than Search division revenues,
increased to 83.5 of the Company's total revenues during the first three
months ended March 31, 1997 as compared to 79.9% for the same period in 1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 94.4% to $10.5 million in the first three
months of 1996. Selling, general and administrative expenses as a percentage
of net service revenues decreased to 30.0% for the first three months of
1997 from 31.8% for the first three months of 1996. This decrease in
selling, general and administrative expense as a percentage of net service
revenues resulted from greater operating efficiencies and economies of
scale gained from a larger revenue base.
Depreciation and amortization expense. Depreciation and amortization
expense increased 178.1% to approximately $659,000 in the first three months
of 1997 from approximately $237,000 in the first three months of 1996.
Depreciation and amortization expense as a percentage of net service revenues
increased to 1.9% for the first three months of 1997 from 1.4% for the first
three months of 1996. This increase was a result of the Company incurring
additional amortization expense for the three months ended March 31, 1997
related to goodwill recorded as a result of the Company's acquisitions in
1996.
Other (income) expense. Other (income) expense increased to approximately
$609,000 of income in the first three months of 1997 from approximately
$147,000 of income in the first three months of 1996. This increase was
primarily due to interest earned on the investment of the proceeds from the
May 1996 secondary offering.
Income Before Taxes. Income before taxes increased 100.0% to $3.4 million
in the first three months of 1997 from $1.7 million in the first three
months of 1996, primarily as a result of the above factors.
Income Taxes. The effective tax rate was 38.2% for the three months ended
March 31, 1997 compared to 40% for the three months ended March 31, 1996.
Net Income. Net income increased $2.1 million in the first three months
of 1997 from approximately $1.0 million in the first three months of 1996,
primarily as a result of the above described factors.
Liquidity and Capital Resources
As of March 31, 1997 the Company's sources of liquidity included
approximately $31.0 million in cash and cash equivalents, approximately
$914,000 in short-term investments, and approximately $15.8 million in
additional net working capital. In addition, as of March 31, 1997, $5.0
million was available for borrowing under the Company's line of credit.
The Company is currently negotiating with various lending institutions to
expand it's line of credit facilities.
8
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<PAGE>
During the first three months of 1997, cash flow used by operations was
approximately $674,000 resulting primarily from net income, non-cash expenses
(depreciation and amortization) and increases in operating payroll
liabilities, offset by a significant increase in accounts receivable. The
increase in accounts receivable reflects the increased volume of business
during the first three months of 1997 from Company-owned locations and the
initial funding of the accounts receivable base in acquired operations.
During the first three months of 1997, cash flow used in investing
activities was approximately $9.8 million, resulting primarily from the
Company's use of approximately $9.1 million in cash for acquisitions obtained
from the sale of the Company's short-term investments.
The Company believes its cash balance, short-term investments and available
line of credit borrowings will be sufficient to meet it's anticipated cash
requirements for at least the next twelve months unless it uses a substantial
portion of it's cash balances to fund additional acquisitions. In the event
that the Company does complete significant acquisitions, the Company beleives
it has the ability to raise additional funds through its available line of
credit and through other financing vehicles.
9
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<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) Exhibits
None
(b) Reports:
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROMAC INTERNATIONAL, INC.
(Registrant)
/s/ Thomas Calcaterra
_______________________________________
Thomas Calcaterra, Chief Financial Officer
and Secretary
Date: May 15, 1997
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<PAGE>
<TABLE> <S> <C>
<PAGE>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q REPORT FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996
<CASH> 30,170 39,555
<SECURITIES> 914 880
<RECEIVABLES> 20,954 17,678
<ALLOWANCES> 597 617
<INVENTORY> 0 0
<CURRENT-ASSETS> 55,244 59,246
<PP&E> 5,642 8,181
<DEPRECIATION> 331 2,834
<TOTAL-ASSETS> 83,683 77,559
<CURRENT-LIABILITIES> 7,492 5,026
<BONDS> 0 0
0 0
0 0
<COMMON> 124 121
<OTHER-SE> 74,449 71,163
<TOTAL-LIABILITY-AND-EQUITY> 83,683 77,559
<SALES> 0 0
<TOTAL-REVENUES> 34,952 94,210
<CGS> 0 0
<TOTAL-COSTS> 21,004 53,839
<OTHER-EXPENSES> (609) (350)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 78
<INCOME-PRETAX> 3,366 9,946
<INCOME-TAX> 1,287 3,965
<INCOME-CONTINUING> 2,079 5,981
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,079 5,981
<EPS-PRIMARY> .17 .51
<EPS-DILUTED> .17 .51
</TABLE>
