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UNITED STATES
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 July 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: 0-26208
-------------------------------
BUSINESS RESOURCE GROUP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0150337
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2150 NORTH FIRST STREET, SUITE 101
SAN JOSE, CA 95131
(Address of Principal Executive Offices)
(408) 325-3200
(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.
[X] Yes [ ] No
At July 31, 1999 there were 5,152,631 shares of the Registrant's Common Stock
outstanding.
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<PAGE>
PART I. FINANCIAL INFORMATION PAGE
Item 1: Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 1999 and October 31, 1998 .....................
Condensed Consolidated Statements of Income for the
Three and Nine Months ended July 31, 1999 and 1998 ......
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended July 31, 1999 and 1998 ......
Notes to Condensed Consolidated Financial
Statements...............................................
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
Introduction ............................................
Results of Operations ...................................
Liquidity and Capital Resources..........................
Item 3: Quantitative and Qualitative Disclosures
about Market Risks ......................................
PART II. OTHER INFORMATION
Item 1: Legal Proceedings .......................................
Item 2: Changes in Securities and Use of Proceeds................
Item 3: Defaults Upon Senior Securities .........................
Item 4: Submission of Matters to a Vote of Security Holders .....
Item 5: Other Information .......................................
Item 6: Exhibits and Reports on Form 8-K ........................
SIGNATURES........................................................
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements
BUSINESS RESOURCE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............... $765 $412
Accounts receivable, net........... 11,009 10,662
Inventory.......................... 11,207 8,279
Prepaids and other current assets.. 3,264 2,411
------------ ------------
Total current assets........... 26,245 21,764
Property and equipment, net.............. 3,217 3,107
Other assets............................. 5,111 3,107
------------ ------------
$34,573 $27,978
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit..................... $3,334 $3,858
Accounts payable................... 7,067 3,369
Accrued liabilities................ 3,312 4,789
Income taxes payable............... 1,393 337
Current portion of long-term debt.. 883 336
------------ ------------
Total current liabilities...... 15,989 12,689
Long-term debt........................... 1,894 733
Deferred income tax liability............ 160 160
Shareholders' equity:
Common stock....................... 51 50
Additional paid in capital......... 11,677 11,337
Retained earnings.................. 4,802 3,009
------------ ------------
Total shareholders' equity..... 16,530 14,396
------------ ------------
$34,573 $27,978
============ ============
</TABLE>
The balance sheet at October 31, 1998 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
<PAGE>
BUSINESS RESOURCE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
--------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues:
Workspace products............... $27,888 $21,296 $73,049 $53,826
Workspace services............... 5,516 4,985 15,742 12,548
---------- ---------- ---------- ----------
Total net revenues 33,404 26,281 88,791 66,374
---------- ---------- ---------- ----------
Cost of net revenues:
Workspace products............... 21,949 16,793 57,423 42,732
Workspace services............... 4,007 3,638 11,696 9,264
---------- ---------- ---------- ----------
Total cost of net revenue... 25,956 20,431 69,119 51,996
---------- ---------- ---------- ----------
Gross profit....................... 7,448 5,850 19,672 14,378
Selling, general and
administrative expenses.......... 5,811 4,858 16,108 12,618
---------- ---------- ---------- ----------
Income from operations 1,637 992 3,564 1,760
Other income/expense:
Net interest income/expense...... (165) (110) (517) (162)
Gain on sale of assets........... 10 0 12 50
---------- ---------- ---------- ----------
Total other income/expense..... (155) (110) (505) (112)
---------- ---------- ---------- ----------
Income before income tax........... 1,482 882 3,059 1,648
Provision for income taxes......... 613 365 1,266 681
---------- ---------- ---------- ----------
Net income......................... $869 $517 $1,793 $967
========== ========== ========== ==========
Net earnings per share:
Basic........................ $0.17 $0.10 $0.35 $0.20
========== ========== ========== ==========
Diluted...................... $0.17 $0.10 $0.35 $0.19
========== ========== ========== ==========
Shares used in computation:
Basic........................ 5,153 4,996 5,107 4,942
========== ========== ========== ==========
Diluted...................... 5,207 4,996 5,155 4,968
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
BUSINESS RESOURCE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings....................................... $1,793 $967
Adjustments to reconcile to net cash used
by operating activities:
Depreciation and amortization................... 895 635
Gain on sale of property and equipment.......... (12) (50)
Warrants issued for services.................... -- 147
Changes in operating assets and liabilities:
Accounts receivable......................... 408 4,735
Inventory................................... (1,595) (5,978)
Prepaids and other current assets........... (850) (610)
Accounts payable............................ 3,026 (136)
Accrued liabilities......................... (1,985) (494)
Income taxes payable........................ 1,056 678
---------- ----------
Net cash provided (used) by
operating activities.................. 2,736 (106)
---------- ----------
INVESTING ACTIVITIES:
Purchase of property and equipment................. (670) (1,071)
Proceeds from sale of property and equipment....... 12 50
Acquisition of business, net of cash received...... (2,014) (1,926)
Change in other assets............................. 25 29
---------- ----------
Net cash used by investing activities.... (2,647) (2,918)
---------- ----------
FINANCING ACTIVITIES:
Increase in debt................................... 2,000 --
Repayment of debt.................................. (353) --
Issuance of common stock, net of compensation 91 24
Borrowings (repayments) against line of credit..... (1,474) 3,230
---------- ----------
Net cash provided by financing activities.. 264 3,254
---------- ----------
Net increase (decrease) in cash and equivalents......... 353 230
CASH AND EQUIVALENTS BALANCES:
Beginning of period................................ 412 274
---------- ----------
End of period...................................... $765 $504
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................ $496 $162
========== ==========
Income taxes.................................... $2,450 $ --
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
BUSINESS RESOURCE GROUP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation and Significant Accounting Policies
The financial information as of July 31, 1999, and for the three and nine
month periods ended July 31, 1999 and 1998, respectively, is unaudited.
In the opinion of management, such information reflects all adjustments,
consisting only of normal recurring adjustments, considered necessary for
a fair presentation of the results of such periods. The accompanying
condensed financial statements should be read together with the audited
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended October 31, 1998. The financial
statements have been prepared in accordance with the regulations of the
Securities and Exchange Commission, but omit certain information and
footnote disclosure necessary to present the statements in accordance
with generally accepted accounting principles.
Note 2. Basic and Diluted Share Information
Basic Earnings Per Share("EPS") excludes dilution and is computed by
dividing net income by the weighted average of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Net income ........................ $869 $517 $1,793 $967
========= ========= ========= =========
Weighted average common shares
outstanding .................... 5,153 4,996 5,107 4,942
Common equivalent shares:
Stock options .............. 54 48 26
--------- --------- --------- ---------
Total common stock and common
stock equivalents .............. 5,207 4,996 5,155 4,968
</TABLE> ========= ========= ========= =========
Options to purchase 270,450 and 190,607 shares of common stock were
outstanding during the third quarters of the Company's fiscal years 1999
and 1998, respectively, but were not included in the computation of
diluted EPS for such quarters because the exercise price of such
outstanding options was greater than the average fair market value of
common shares for such periods.
Note 3. Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") adopted
Statements of Financial Accounting Standards ("SFAS") 130, (Reporting
Comprehensive Income), which requires that an enterprise report, by major
components and as a single total, the change in its net assets during the
period from non-owner sources; and SFAS 131, (Disclosures about Segments
of an Enterprise and Related Information), which establishes annual and
interim reporting standards for an enterprise's operating segments and
related disclosures about its products, services, geographic areas and
major customers. Adoption of these statements will not impact the
Company's financial position, results of operations or cash flows, and
any effect will be limited to the form and content of its disclosures.
Both statements are effective for the fiscal year beginning November 1,
1998. The Company is currently conducting evaluations to determine if it
has reportable segments under SFAS 131. With respect to SFAS 130, the
Company had no items of comprehensive income other than net income during
either quarter ended July 31, 1999 or 1998.
In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," was
issued which defines derivatives, requires all derivatives be carried at
fair value, and provides for hedging accounting when certain conditions
are met. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. Although the Company has not fully
assessed the implications of this new statement, the Company does not
believe adoption of this statement will have a material impact on the
Company's financial statements.
Note 4. Subsequent Event
On August 3, 1999, the Company, pursuant to an Asset Purchase Agreement
dated August 3, 1999 by and among the Company, MOI Acquisition Corp., a
California corporation, (the "Subsidiary"), and Modern Office Interiors,
a North Carolina corporation ("MOI" and the "Seller"), and Richard
Nellis, Craig Parr, and Mark Baldwin (the "Shareholders"), purchased
substantially all of the assets of MOI (the "Acquisition"). The
Subsidiary is a wholly owned subsidiary of the Company and the
Shareholders are the sole shareholders of MOI. Assets of MOI include all
right, title, and interest to the marks "Modern Office Interiors" and
"MOI", inventory consisting of office furniture, cash, accounts
receivable, office and warehouse equipment, vehicles, and goodwill (the
"Assets"). The purchase price paid by the Company consisted of (i) an
initial $70,308 in cash; (ii) an additional cash payment to be based upon
the July 31, 1999 valuation of purchased assets and assumed liabilities;
and (iii) an earn out to be paid over three years based upon annual
operating income objectives of MOI Acquisition Corporation (collecively,
the "Purchase Price"). The Purchase Price was determined by arms-length
negotiations among the parties. The cash paid to the Seller was obtained
from a draw down on the Company's $18,000,000 line of credit with
Comerica Bank under the Company's Agreement with Comerica Bank dated
February 15, 1999.
Modern Office Interiors is primarily engaged in the business of
refurbished office furniture sales.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction:
The matters discussed herein include forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and are subject to certain risks and uncertainties that could
cause the actual results to differ materially from those projected. Such
forward-looking statements include, without limitation, statements
relating to the Company's future revenue, gross margins, operating
expenses, management's plans and objectives for the Company's future
operations and the sufficiency of financial resources to support future
operations and expenditures. Factors that could cause actual results to
differ materially include, but are not limited to, the timely
availability, delivery and acceptance of new products and services, the
continued strength of sales to Cisco Systems, Inc. (one of the Company's
principal customers), the impact of competitive products and pricing, the
management of growth and acquisitions, and other risks detailed below and
included from time to time in the Company's other reports filed with the
Securities and Exchange Commission and press releases, copies of which
are available from the Company upon request. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to
release publicly the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
References made in this Quarterly Report on Form 10-Q to the "Company" or
the "Registrant" refer to Business Resource Group.
Results of Operations (three months ended July 31, 1999):
Net revenues were $33.4 million for the three months ended July 31, 1999
as compared to $26.3 million reported for the three months ended July 31,
1998, an increase of 27%. Product revenues for the three months ended
July 31, 1999 were $27.9 million, an increase of $6.6 million, or 31%,
from product revenues of $21.3 million reported for the three months
ended July 31, 1998. The higher product revenues in the third quarter of
fiscal 1999 were primarily due to increased revenues from Cisco Systems,
Inc. of $3.5 million, in addition to increased revenues from other new
and existing customers of $3.1 million. Service revenues for the third
quarter of fiscal 1999 were $5.5 million, an increase of $0.5 million, or
10%, from service revenues of $5.0 million reported in the same quarter
of fiscal 1998. The higher service revenues reflect increased product-
related services on higher product revenues.
Gross profit for the third quarter of fiscal 1999 was $7.4 million, or
22.3% of revenues, as compared to $5.9 million, or 22.3% of revenues, for
the comparable quarter of fiscal 1998. As a percentage of net revenues,
gross profits from product revenues were 21.3% for the quarter ended July
31, 1999 as compared to 21.1% for the third quarter ended July 31, 1998.
The higher gross profit percentage was due primarily to a shift in the
sales mix toward higher margin refurbished products during the third
quarter of fiscal 1999 relative to the same period of fiscal 1998. Gross
profits for the third quarter of fiscal 1999 from service revenues were
27.4% as compared to 27.0% for the third quarter ended July 31, 1998.
Selling, general and administrative expenses were $5.8 million, or 17.4%
of revenues, for the third quarter of fiscal 1999 as compared to $4.9
million, or 18.6% of revenues, for the third quarter of fiscal 1998.
Selling, general and administrative expenses increased over the third
quarter of fiscal 1998 primarily due to recent incremental costs related
to the refurbishment operations of Re'nu, a wholly owned subsidiary of
the Company.
Interest and other expense, net was $155,000 for the three months ended
July 31, 1999 as compared to $110,000 for the same period of fiscal 1998.
The increased expense was primarily due to interest expense as a result
of a higher average outstanding balance on the Company's line of credit
during the Fiscal 1999 third quarter as compared to the Fiscal 1998 third
quarter. The higher average outstanding line of credit balance was
primarily due to working capital needs as a result of business growth.
Results of Operations (nine months ended July 31, 1999):
Net revenues were $88.8 million for the nine months ended July 31, 1999
as compared to $66.4 million reported for the nine months ended July 31,
1998, an increase of 34%. Product revenues on a year to date basis for
fiscal 1999 were $73.0 million as compared to $53.8 million for the same
period of fiscal 1998, an increase of 36%. The higher product revenues
for the first nine months of fiscal 1999 were due to increased revenues
of $13.5 million related to Cisco Systems, Inc., in addition to
incremental revenues of $5.7 million related to new and existing
customers. Service revenues were $15.7 million for the nine months ended
July 31, 1999, an increase of $3.2 million, or 25%, over service revenues
of $12.5 million reported for the same period of fiscal 1998. The higher
service revenues reflect increased product-related services on higher
product revenues and increased facilities services revenues.
Gross profit for the first nine months of fiscal 1999 was $19.7 million,
or 22.2% of revenues, as compared to $14.4 million, or 21.7% of revenues,
for the comparable period of fiscal 1998. As a percentage of net
revenues, gross profits from product revenues were 21.4% for the nine
months ended July 31, 1999, as compared to 20.6% for the first nine
months of fiscal 1998. This increase reflects a shift in the sales mix
toward higher margin refurbished products during the first nine months of
fiscal 1999 relative to the comparable period in fiscal 1998. As a
percentage of net revenues, gross profits from service revenues were
25.7% for the first nine months of fiscal 1999 as compared to 26.2% for
the first nine months of fiscal 1998. The decrease in fiscal 1999
services gross profits was the result of several large projects for new
customers with lower initial services gross profits.
Selling, general and administrative expenses were $16.1 million, or 18.1%
of revenues, for the first nine months of fiscal 1999 as compared to
$12.6 million, or 19.0% of revenues, for the first nine months of fiscal
1998. Selling, general and administrative expenses increased over the
first nine months of fiscal 1998 primarily due to incremental costs
related to the refurbishment operations of OFN and Re'nu, wholly owned
subsidiaries of the Company.
Interest and other expense, net was $505,000 for the nine months ended
July 31, 1999 as compared to $112,000 for the same period of fiscal 1998.
The increased expense was primarily due to interest expense as a result
of a higher average outstanding balance on the Company's line of credit
during the first nine months of fiscal 1999 as compared to the first nine
months of fiscal 1998. The higher average outstanding line of credit
balance was primarily due to working capital needs as a result of
business growth.
Liquidity and Capital Resources:
Working capital at July 31, 1999 was $10.3 million, a $1.2 million
increase over the working capital of $9.1 million at October 31, 1998.
At July 31, 1999, the Company had net borrowings of $6.1 million as
compared to $4.9 million reported October 31, 1998, primarily due to
borrowings against the Company's credit facilities in connection with the
Re'nu acquisition in early February and higher inventory balances.
Inventories at July 31, 1999 were $11.2 million, an increase of $2.9
million over the $8.3 million reported at October 31, 1998. The increase
in inventories resulted primarily from the addition of $1.3 million of
inventory from the Re'Nu acquisition, in addition to an increase of $1.2
million in in-transit inventories at July 31, 1999, representing payments
made to vendors on product that is either in-transit to customers or
awaiting installation at the customer's facility. Prepaids and other
current assets at July 31, 1999 were $3.3 million, an increase of $0.9
million over the $2.4 million reported at October 31, 1998. The increase
in prepaids and other current assets was primarily due to increases in
prepaid income taxes and vendor deposits. Other assets at July 31, 1999
were $5.1 million, an increase of $2.0 million over the $3.1 million
reported at October 31, 1998. The increase in other assets was due
primarily to goodwill related to the Re'Nu acquisition. Accounts payable
at July 31, 1999 were $7.1 million, an increase of $3.7 million over the
$3.4 million reported at October 31, 1998. This increase reflects higher
vendor balances at the end of the quarter due to timing differences
between product receipt and vendor payment as compared to the period
ended October 31, 1998.
Net cash used in investing activities during the nine months ended July
31, 1999 was $2.6 million and resulted from the Company's acquisition of
Re'Nu, investments in property and equipment which primarily related to
the purchases of showroom furniture for our new San Francisco and Phoenix
locations, and investments related to the implementation of the Company's
new enterprise resource planning system.
In February 1999, the Company replaced its existing $15.0 million credit
facility with a new $18.0 million credit facility with a bank which
expires on February 15, 2001. The new credit facility is comprised of a
$15.0 million line of credit and a $3.0 million acquisition loan
facility. The Company maintains an irrevocable stand-by letter of credit
in the amount of $3.0 million against the line of credit. As of July 31,
1999, the Company had bank borrowings of $5.3 million under the existing
credit facility.
The Company believes existing cash, together with cash generated from
operations and the Company's available borrowing capacity will provide
sufficient funds to meet the Company's anticipated working capital
requirements for the forseeable future.
Year 2000
The Company continues to monitor and assess the impact of the Year 2000
issue on its critical systems, devices, applications or business
relationships. The Company's overall goal is to be prepared for the year
2000, meaning that critical systems, devices, applications or business
relationships have been evaluated and are expected to be suitable for
continued use into and beyond the year 2000, or when contingency plans
are put into place. In May 1998, after an extensive review of systems,
the Company selected an enterprise resource planning system from SAP
America, Inc. ("SAP"), a system capable of accommodating the year 2000.
This new enterprise resource planning system was implemented in June,
1999. The Company is reviewing the readiness of third parties which
provide goods or services to the Company to determine whether a year
2000-related event will impede the ability of such suppliers to continue
to provide such goods and services as the year 2000 is reached.
Costs: The Company does not expect the costs associated with its year
2000 efforts to be material. The Company estimates that the total cost of
replacing its information systems and achieving year 2000 readiness for
its internal systems and equipment will range from $1.5 to $2.0 million,
of which $1.3 million has been incurred by July 31, 1999. Based on its
current estimates and information currently available, the Company does
not anticipate that the costs associated with this project will have a
material adverse affect on the Company's consolidated financial position,
results of operations or cash flows in future periods. The Company's
aggregate cost estimate does not include time and costs that may be
incurred by the Company as a result of the failure of any third parties,
including suppliers, to be prepared for the year 2000 or costs to
implement any contingency plans.
Risks/Contingency Plans: Based on assessment efforts to date, the Company
does not believe that the year 2000 issue will have a material adverse
effect on its financial condition or results of operations. The Company
believes that the distribution and service nature of the Company's
operations and its large supplier base should mitigate any adverse
impact. The Company's beliefs and expectations, however, are based on
certain assumptions and expectations that ultimately may prove to be
inaccurate. The Company has completed its SAP implementation, but
continues to assess the risks from potential year 2000 failures, and
therefore has not yet developed year 2000 contingency plans, if
necessary. If, as a result of ongoing assessment, a business function is
determined to be at risk, contingency plans will be developed no later
than October 31, 1999.
As a normal course of business, potential sources of risk include the
inability of principal suppliers to be year 2000 ready, which could
result in delays in product deliveries, or the ability to provide
services from such suppliers. The Company's contingency plans will
include, among other things, (1) manual workarounds, (2) use of temporary
replacement or alternative products,(3) reliance on temporary or
alternative sources of supply, and (4) engagement of temporary, extra
staffing to complete deliveries. In the event of year 2000 failures by
common-carrier infrastructure suppliers such as utilities,
telecommunications, transportation and the like, the Company has
significantly less ability to pre-emptively assess and prepare for such
failures. In such scenarios the Company's response is uncertain.
The Company is not in a position to identify or to avoid all possible
year 2000 scenarios. Based upon assessments to date the Company believes
the most reasonably likely worst case scenario would be the inability of
suppliers to deliver products and/or services in time frames required by
the Company's customers. In the event of such delays the Company would
attempt to provide temporary replacement products, alternative products
or extra staffing to complete deliveries in order to mitigate the impact
upon our customers.
The preceding year 2000 discussion contains various forward-looking
statements which represent the Company's beliefs or expectations
regarding future events. When used in the year 2000 discussion, the
words "believes," "expects," "estimates" and similar expressions are
intended to identify forward-looking statements. Forward-looking
statements include, but are not limited to, the Company's expectations as
to when it will complete its year 2000 contingency plans; its estimated
cost of achieving year 2000 readiness; the Company's belief that its
internal systems and equipment will be year 2000 compliant in a timely
manner; and the availability of replacement or alternative products in
sufficient quantities should the need arise. All forward-looking
statements involve a number of risks and uncertainties that could cause
the actual results to differ materially from the projected results.
Factors that may cause these differences include, but are not limited to,
the availability of qualified personnel; the ability to identify and
replace embedded computer chips in affected systems or equipment; and the
actions of governmental agencies or other third parties with respect to
year 2000 problems.
Item 3: Quantitative and Qualitative Disclosures about Market Risks
The Company is exposed to interest rate risk primarily through its
borrowing activities. The Company has not used derivative financial
instruments to hedge such risks. There is inherent roll-over risk for
borrowings as they mature and are renewed at current market rates. The
extent of this risk in not quantifiable or predictable because of the
variability of future interest rates and business financing requirements.
If market rates were to increase immediately by 10 percent from levels at
October 31, 1998, the end of the Company's most recent fiscal year, the
fair value of the Company's borrowings would not be materially affected
as borrowings are primarily subject to variable interest rates.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
The Company is not a party to any lawsuit or proceeding which, in
the opinion of management, is likely to have a material adverse effect on
the Company. The Company may from time to time be a party to various
legal proceedings arising in the normal course of its business.
Item 2: Changes in Securities and Use of Proceeds
Not applicable
Item 3: Defaults upon Senior Securities
Not applicable
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable
Item 5: Other information
Not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibit 27: Financial data schedule
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K for the three
months ended July 31, 1999.
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 thereunto duly authorized.
BUSINESS RESOURCE GROUP
Registrant
Date: September 10, 1999 /s/ John M. Palmer
John M. Palmer
Vice President, Chief
Operating Officer and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 765
<SECURITIES> 0
<RECEIVABLES> 11,009
<ALLOWANCES> 0
<INVENTORY> 11,207
<CURRENT-ASSETS> 26,245
<PP&E> 3,217
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,573
<CURRENT-LIABILITIES> 15,989
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 16,479
<TOTAL-LIABILITY-AND-EQUITY> 34,573
<SALES> 27,888
<TOTAL-REVENUES> 33,404
<CGS> 21,949
<TOTAL-COSTS> 25,956
<OTHER-EXPENSES> 5,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,482
<INCOME-TAX> 613
<INCOME-CONTINUING> 869
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 869
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
</TABLE>
