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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 26, 1996
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AMENDMENT NO. 1
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SOS STAFFING SERVICES, INC.
(Exact name of registrant as specified in its charter)
Utah 0-26094 87-0295503
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(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation) Identification No.)
1415 South Main Street
Salt Lake City, Utah 84115
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(Address of principal executive offices, including zip code)
(801) 484-4400
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(Registrant's telephone number, including area code)
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TABLE OF CONTENTS
This Amendment No. 1 to the Current Report in Form 8-K dated June 26,
1996 is being filed by SOS Staffing Services, Inc. to provide the financial
statements and pro forma financial information.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired: Page
Report of Independent Public Accountants......................... F-1
Combined Balance Sheets as of December 31, 1994 and 1995 and
June 30, 1996.................................................... F-2
Combined Statements of Income and Retained Earnings for the
years ended December 31, 1994 and 1995 and for the six months
ended June 30, 1995 and 1996..................................... F-4
Combined Statements of Cash Flows for the years ended
December 31, 1994 and 1995 and the six months ended June 30, 1995
and 1996......................................................... F-5
Notes to Combined Financial Statements........................... F-6
(b) Pro Forma financial information
Unaudited Pro Forma Condensed Statement of Income for the
year ended December 31, 1995..................................... F-8
Unaudited Pro Forma Condensed Statement of Income for the
twenty-six weeks ended June 30, 1996............................. F-9
Notes to Pro Forma Condensed Financial Data......................F-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Performance Professionals, Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Performance
Professionals, Inc. (a Colorado corporation), Abacus Consulting Group, Inc.
(a Colorado corporation), and Abacus Consultants, Inc. (a Colorado
corporation) as of December 31, 1994 and 1995, and the related combined
statements of income and retained earnings, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Performance
Professionals, Inc., Abacus Consulting Group, Inc. and Abacus Consultants,
Inc. as of December 31, 1994 and 1995, and the results of their operations
and cash flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
July 19, 1996
F-1
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Page 1 of 2
PERFORMANCE PROFESSIONALS, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
ASSETS
December 31,
------------------ June 30,
1994 1995 1996
---------- -------- --------
(Unaudited)
CURRENT ASSETS:
Cash $ 492,673 $435,662 $302,927
Accounts receivable 517,724 238,131 245,176
Prepaids and other 23,352 49,151 32,675
---------- -------- --------
Total current assets 1,033,749 722,944 580,778
---------- -------- --------
PROPERTY AND EQUIPMENT, at cost:
Office equipment 49,927 57,551 63,064
Leasehold improvements and other 3,468 6,057 6,057
---------- -------- --------
53,395 63,608 69,121
Less - accumulated depreciation
and amortization (46,991) (55,662) (61,507)
---------- -------- --------
Net property and equipment 6,404 7,946 7,614
---------- -------- --------
OTHER ASSETS 79,143 108,983 106,118
---------- -------- --------
Total assets $1,119,296 $839,873 $694,510
---------- -------- --------
---------- -------- --------
The accompanying notes to combined financial statements
are an integral part of these combined balance sheets.
F-2
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Page 2 of 2
THE PERFORMANCE PROFESSIONALS, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
------------------ June 30,
1994 1995 1996
---------- -------- --------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 6,397 $ 8,761 $ 13,950
Accrued payroll costs 18,818 22,490 28,514
Income taxes payable 4,618 3,932 44,489
---------- -------- --------
Total current liabilities 29,833 35,183 86,953
---------- -------- --------
DEFERRED INCOME TAX LIABILITY 56,405 19,222 7,716
---------- -------- --------
COMMITMENTS (Note 3)
SHAREHOLDERS' EQUITY:
Common stock of combined entities 210 210 210
Retained earnings 1,032,848 785,258 599,631
---------- -------- --------
Total shareholders' equity 1,033,058 785,468 599,841
---------- -------- --------
Total liabilities and
shareholders' equity $1,119,296 $839,873 $694,510
---------- -------- --------
---------- -------- --------
The accompanying notes to combined financial statements
are an integral part of these combined balance sheets.
F-3
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PERFORMANCE PROFESSIONALS, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ended December 31, Six Months Ended June 30,
----------------------- -------------------------
1994 1995 1995 1996
---------- ---------- ---------- ----------
(Unaudited)
SERVICE REVENUES $3,773,813 $2,735,298 $1,272,421 $1,424,871
DIRECT COSTS OF SERVICES 2,327,788 1,661,212 811,825 899,372
---------- ---------- ---------- ----------
Gross margin 1,446,025 1,074,086 460,596 525,499
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 760,360 986,886 222,305 320,759
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 685,665 87,200 238,291 204,740
---------- ---------- ---------- ----------
OTHER INCOME:
Interest income 16,041 38,520 18,552 11,655
Other, net 3,322 3,660 1,233 520
---------- ---------- ---------- ----------
Total other income, net 19,363 42,180 19,785 12,175
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES 705,028 129,380 258,076 216,915
PROVISION ( BENEFIT) FOR
INCOME TAXES 57,918 (33,030) 26,928 29,051
---------- ---------- ---------- ----------
NET INCOME 647,110 162,410 231,148 187,864
RETAINED EARNINGS, beginning
of period 385,738 1,032,848 1,032,848 785,258
DISTRIBUTIONS TO SHAREHOLDERS - (410,000) - (373,491)
---------- ---------- ---------- ----------
RETAINED EARNINGS, end of period $1,032,848 $ 785,258 $1,263,996 $ 599,631
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-4
<PAGE>
PERFORMANCE PROFESSIONALS, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
Year Ended December 31, Six Months Ended June 30,
----------------------- -------------------------
1994 1995 1995 1996
------------ --------- --------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 647,110 $ 162,410 $ 231,148 $ 187,864
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 4,748 8,670 524 5,845
Changes in operating assets
and liabilities:
Accounts receivable (175,703) 279,593 152,774 (7,045)
Prepaid expenses and other (11,057) (25,799) 16,992 16,476
Other assets (3,320) (29,840) (5,922) 2,865
Accounts payable (15,484) 2,364 30,131 5,189
Accrued liabilities 1,610 2,987 64,846 46,581
Deferred income tax liability 53,301 (37,183) (35,048) (11,506)
--------- -------- -------- --------
Net cash provided by
operating activities 501,205 363,202 455,445 246,269
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (6,658) (10,213) (2,589) (5,513)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders - (410,000) - (373,491)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH 494,547 (57,011) 452,856 (132,735)
CASH AT BEGINNING OF PERIOD (1,874) 492,673 492,673 435,662
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 492,673 $ 435,662 $ 945,529 $ 302,927
--------- --------- --------- ---------
--------- --------- --------- ---------
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-5
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PERFORMANCE PROFESSIONALS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND ORGANIZATION OF BUSINESS
Performance Professionals, Inc. ("Performance"), Abacus Consultants,
Inc., ("AC") and Abacus Consulting Group, Inc. ("ACG") (collectively the
"Company") were incorporated under the laws of the State of Colorado.
Performance and ACG operate a temporary staffing business in Denver, Colorado
which provides professional and technical temporary staffing employees,
primarily information systems related, to various businesses. AC provides
permanent placement services to various businesses.
On June 26, 1996, the Company signed an agreement to sell certain
assets and substantially all of the operations of the Company to SOS Staffing
Services, Inc. who assumed control of the operations of the Company on July
1, 1996. The accompanying financial statements presented are pre-acquisition
financial statements of the combined entities and do not reflect any purchase
accounting adjustments.
PRINCIPLES OF COMBINATION
The combined financial statements include the financial position and
operating results of Performance and its affiliates, AC and ACG. Combined
financial statements are more meaningful than separate statements as the
companies operate under common ownership and management. All significant
intercompany accounts and transactions have been eliminated in combination.
REVENUE RECOGNITION
Temporary services revenues are recognized when the services are rendered
by the Company's temporary employees. Permanent placement revenues are
recognized when employment candidates accept offers of permanent employment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives. Leasehold
improvements are amortized over the terms of the respective leases or the
estimated economic lives of the assets, whichever is shorter. The
depreciation and amortization periods range from four to seven years.
Upon retirement or other disposition of property and equipment, the cost
and related accumulated depreciation or amortization are removed from the
accounts. The resulting gain or loss is reflected in income. Major renewals
and betterments are capitalized while minor expenditures for maintenance and
repairs are charged to expense as incurred.
OTHER ASSET
Other assets consist primarily of the cash surrender value of life
insurance policies and investments in marketable securities.
F-6
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PERFORMANCE PROFESSIONALS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS-continued
INCOME TAXES
Performance and AC have elected, for federal and state income tax
purposes, to include their taxable income with that of its shareholders (an S
Corporation election). Accordingly, these companies make no provision for
income taxes. These companies distribute amounts as needed for the payment of
the shareholders' federal and state income taxes. Distributions are recorded
in the accompanying financial statements when paid.
ACG is a taxable entity for state and federal income tax purposes.
Accordingly, ACG has recorded a provision for income taxes in the
accompanying financial statements. Also, ACG recognizes a liability or asset
for the deferred tax consequences of all temporary differences between the
tax bases of assets or liabilities and their reported amounts in the
financial statements. As of December 31, 1994 and 1995, the Company had a net
deferred income tax liability of $56,405 and $19,222, respectively, which
resulted primarily from using the cash basis of accounting for income tax
reporting purposes.
UNAUDITED INTERIM FINANCIAL DATA
The accompanying unaudited financial statements as of June 30, 1996 and
for the six months ended June 30, 1995 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the six months June
30, 1996 are not necessarily indicative of the results that may be expected
for the full year.
NOTE 2. SIGNIFICANT CUSTOMERS
During the year ended December 31, 1995, one customer accounted for
approximately 44 percent of service revenues. During the year ended December
31, 1994, two customers accounted for approximately 23 and 17 percent,
respectively, of service revenues.
NOTE 3. COMMITMENTS
The Company leases its office facilities under a noncancelable operating
lease. Operating lease payments totalled $20,515 for each of the years ended
December 31, 1994 and 1995. Operating lease payments totalled $10,257 and
$10,724, respectively, for the six months ended June 30, 1995 and 1996.
Future minimum lease payments under noncancelable operating leases total
$10,724, which are payable during fiscal 1996.
F-7
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SOS STAFFING SERVICES, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE 52 WEEKS ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Historical
------------------------ Pro Forma
Company Performance Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SERVICE REVENUES $87,532,903 $2,735,298 $90,268,201
DIRECT COSTS OF SERVICES 69,353,212 1,661,212 71,014,424
---------- ---------- ----------
Gross Margin 18,179,691 1,074,086 19,253,777
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 13,858,600 986,886 $(315,608)(A) 14,529,878
---------- ---------- --------- ----------
INCOME FROM OPERATIONS 4,321,091 87,200 315,608 4,723,899
---------- ---------- --------- ----------
OTHER INCOME (EXPENSE):
Interest expense (145,646) - (251,962)(B) (397,608)
Other, net 230,288 42,180 272,468
---------- ---------- --------- ----------
Total, net 84,642 42,180 (251,962) (125,140)
---------- ---------- --------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,405,733 129,380 63,646 (C) 4,598,759
PROVISION (BENEFIT) FOR INCOME TAXES 1,728,653 (33,030) 106,650 (C) 1,802,273
---------- ---------- --------- ----------
NET INCOME $2,677,080 $ 162,410 $ (43,004) $2,796,486
---------- ---------- --------- ----------
---------- ---------- --------- ----------
NET INCOME PER COMMON SHARE $ 0.43 $ 0.45
---------- ----------
---------- ----------
WEIGHTED AVERAGE COMMON SHARES 6,229,021 6,229,021
---------- ----------
---------- ----------
</TABLE>
F-8
<PAGE>
SOS STAFFING SERVICES, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE 26 WEEKS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Historical
------------------------ Pro Forma
Company Performance Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SERVICE REVENUES $54,987,945 $1,424,871 $56,412,816
DIRECT COSTS OF SERVICES 43,642,684 899,372 44,542,056
----------- ---------- -----------
Gross Margin 11,345,261 525,499 11,870,760
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 8,713,174 320,759 $ 103,196 (A) 9,137,129
----------- ---------- --------- -----------
INCOME FROM OPERATIONS 2,632,087 204,740 (103,196) 2,733,631
----------- ---------- --------- -----------
OTHER INCOME (EXPENSE):
Interest expense (24,764) - (125,981)(B) (150,745)
Other, net 5,515 12,175 17,690
----------- ---------- --------- -----------
Total, net (19,249) 12,175 (125,981) (133,055)
----------- ---------- --------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,612,838 216,915 (229,177)(C) 2,600,576
PROVISION FOR INCOME TAXES 993,243 29,051 (33,711)(C) 988,583
----------- ---------- --------- -----------
NET INCOME $ 1,619,595 $ 187,864 $(195,466) $ 1,611,993
----------- ---------- --------- -----------
----------- ---------- --------- -----------
NET INCOME PER COMMON SHARE $ 0.24 $ 0.24
----------- -----------
----------- -----------
WEIGHTED AVERAGE COMMON SHARES 6,769,473 6,769,473
----------- -----------
----------- -----------
</TABLE>
F-9
<PAGE>
SOS STAFFING SERVICES, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL DATA
(1) Basis of Presentation
The accompanying pro forma condensed statements of income are presented
to give effect to the acquisition of certain assets and substantially all of
the business operations of Performance Professionals, Inc., Abacus
Consultants, Inc. and Abacus Consulting Group, Inc. (collectively
"Performance") which occurred in June, 1996. These condensed statements of
income assume that the acquisition occurred at the beginning of the periods
presented. Such information does not purport to be indicative of the results
which would have actually been obtained if the acquisition had been effected
at the beginning of the periods presented nor is it indicative of actual or
future operating results.
The historical income statement period of SOS Staffing Services, Inc.
(the "Company") for the fifty-two weeks ended December 31, 1995 includes a
pro forma adjustment for income taxes related to the termination of the
Company's S corporation election which was done in connection with the
Company's initial public offering in July 1995.
The historical periods presented for Performance represent their year
ended December 31, 1995 and their six months ended June 30, 1996.
The purchase method of accounting has been used in preparing the pro
forma condensed income statements. The purchase price was approximately
$3,389,500 in cash plus contingent future earnout payments not to exceed
$1,775,000. The initial purchase price, which was paid in June 1996, was
allocated based on the fair value of the net assets acquired and resulted in
allocating approximately $20,000 to equipment and $3,369,500 to goodwill and
other intangibles.
(2) Pro Forma Adjustments
(A) In connection with the acquisition, the Company entered into
employment contracts with two key executives which provided for total annual
compensation of $200,000. These adjustments reflect (i) the elimination of
excess compensation expense in the amount of $442,000 for the year ended
December 31, 1995 and the recording of additional compensation of $40,000 for
the twenty-six weeks ended June 30, 1996, (ii) the amortization of goodwill
totaling $109,724 for the year ended December 31, 1995 and $54,862 for the
twenty-six weeks ended June 30, 1996 based on a thirty year amortization
period and (iii) the amortization of other intangible assets of $16,668 and
$8,334, respectively based on a six year amortization period.
(B) Long-term debt was used to fund the majority of the initial
purchase price. This adjustment reflects the additional interest expense
of $251,962 for the year ended December 31, 1995 and $125,981 for the
twenty-six weeks ended June 30, 1996 calculated using an interest rate of
7.5% on funds borrowed to make the purchase.
(C) Adjustment to record the income tax provision or benefit at the
combined statutory federal and state income tax rate of 38%. Two of these
entities had previously elected S Corporation status and accordingly, did not
record an income tax provision or benefit.
F-10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned thereto duly authorized.
SOS STAFING SERVICES, INC.
\S\ Gary B. Crook
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Gary B. Crook
Vice President, Chief Financial Officer and Treasurer
Date: September 6, 1996
