SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 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 0-26094
SOS STAFFING SERVICES, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0295503
(State or other jurisdiction of incorporation) (I.R.S. Employer ID No.)
1415 South Main Street
Salt Lake City, Utah 84115
(Address of principal executive offices)
(801) 484-4400
(Telephone number)
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 and 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 filings
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 the latest practicable date.
Class of Common Stock Outstanding at November 7, 1997
--------------------- -------------------------------
Common Stock, $0.01 par value 12,652,852
1
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements Page(s)
-------
Condensed Consolidated Balance Sheets
As of September 28, 1997 and December 29, 1996 3-4
Condensed Consolidated Statements of Income
For the Thirteen and Thirty-nine Weeks Ended
September 28, 1997 and September 29, 1996 5
Condensed Consolidated Statements of Cash Flows
For the Thirty-nine Weeks Ended
September 28, 1997 and September 29, 1996 6-7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-12
Item 3. Quantitative and Qualitative Discussion About Market Risk 12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SOS STAFFING SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
September 28, December 29,
1997 1996
----------------- -----------------
CURRENT ASSETS: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,299,749 $ 5,784,651
Accounts receivable, net 27,638,115 19,114,117
Current portion of workers' compensation deposit 710,474 610,473
Prepaid expenses and other 630,359 305,151
Deferred tax asset 914,766 661,645
Amounts due from related parties 454,544 406,376
----------------- -----------------
Total current assets 31,648,007 26,882,413
----------------- -----------------
PROPERTY AND EQUIPMENT, at cost:
Computer equipment 2,003,641 1,399,408
Office equipment 2,329,203 1,461,945
Leasehold improvements and other 1,209,063 969,208
----------------- -----------------
5,541,907 3,830,561
Less accumulated depreciation and amortization (2,275,389) (1,698,080)
----------------- -----------------
Total property and equipment, net 3,266,518 2,132,481
----------------- -----------------
OTHER ASSETS:
Workers' compensation deposit, less current portion 106,369 106,369
Intangible assets, net 34,190,454 17,798,588
Deposits and other assets 421,555 372,973
----------------- -----------------
Total other assets 34,718,378 18,277,930
----------------- -----------------
Total assets $ 69,632,903 $ 47,292,824
================= =================
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
3
<PAGE>
<TABLE>
SOS STAFFING SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
September 28, December 29,
1997 1996
----------------- ----------------
CURRENT LIABILITIES: (Unaudited)
<S> <C> <C>
Accounts payable $ 240,898 $ 600,504
Accrued payroll costs 3,947,391 2,110,554
Current portion of workers' compensation reserve 1,991,408 1,501,669
Accrued liabilities 839,363 408,027
Income taxes payable 629,159 466,726
Accrued acquisition earnouts 3,306,226 4,782,689
----------------- ----------------
Total current liabilities 10,954,445 9,870,169
----------------- ----------------
LONG TERM BANK NOTE 13,000,000 -
----------------- ----------------
WORKERS' COMPENSATION
RESERVE, less current portion 492,097 375,418
----------------- ----------------
DEFERRED INCOME TAX LIABILITY 134,678 213,056
----------------- ----------------
SHAREHOLDERS' EQUITY:
Common stock 90,528 87,060
Additional paid-in capital 34,359,123 31,216,917
Retained earnings 10,602,032 5,530,204
----------------- ----------------
Total shareholders' equity 45,051,683 36,834,181
----------------- ----------------
Total liabilities and shareholders' equity $ 69,632,903 $ 47,292,824
================= ================
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
4
<PAGE>
<TABLE>
SOS STAFFING SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------------------ ------------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
----------------- ----------------- ----------------- -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
SERVICE REVENUES $ 54,388,816 $ 37,846,104 $ 141,752,926 $ 92,834,049
DIRECT COSTS OF SERVICES 42,035,527 30,091,956 110,482,801 73,734,640
----------------- ----------------- ----------------- -----------------
Gross profit 12,353,289 7,754,148 31,270,125 19,099,409
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES;
Selling, general and
administrative 8,424,575 5,446,613 22,010,878 14,076,330
Intangibles amortization 336,103 124,153 901,765 207,610
----------------- ----------------- ----------------- -----------------
Total operating expenses 8,760,678 5,570,766 22,912,643 14,283,940
----------------- ----------------- ----------------- -----------------
INCOME FROM OPERATIONS 3,592,611 2,183,382 8,357,482 4,815,469
----------------- ----------------- ----------------- -----------------
OTHER INCOME (EXPENSE):
Interest expense (146,553) (152,017) (220,623) (176,781)
Interest income 173,107 1,230 411,230 10,729
Other, net (45,265) 108,871 (12,196) 104,887
----------------- ----------------- ----------------- -----------------
Total, net (18,711) (41,916) 178,411 (61,165)
----------------- ----------------- ----------------- -----------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 3,573,900 2,141,466 8,535,893 4,754,304
PROVISION FOR INCOME TAXES (1,458,954) (813,392) (3,464,065) (1,806,635)
----------------- ----------------- ----------------- -----------------
NET INCOME $ 2,114,946 $ 1,328,074 $ 5,071,828 $ 2,947,669
================= ================= ================= =================
NET INCOME PER COMMON SHARE $ 0.23 $ 0.20 $ 0.56 $ 0.44
================= ================= ================= =================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 9,183,184 6,762,230 9,125,360 6,760,392
================= ================= ================= =================
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
5
<PAGE>
<TABLE>
SOS STAFFING SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
39 Weeks Ended
------------------------------------
September 28, September 29,
1997 1996
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Net income $ 5,071,828 $ 2,947,669
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,335,551 533,177
Deferred income taxes (348,373) (392,257)
Loss on disposition of assets 20,012 51,647
Other - (56,409)
Changes in operating assets and liabilities:
Accounts receivable, net (7,171,185) (7,486,427)
Workers' compensation deposit (100,001) (48,470)
Prepaid expenses and other (259,890) (210,895)
Amounts due from related parties (48,168) 52,000
Deposits and other assets (54,582) (80,584)
Accounts payable (359,606) 4,546
Accrued payroll costs 1,836,837 1,181,654
Workers' compensation reserve 606,418 449,682
Accrued liabilities (233,293) 231,791
Income taxes payable 162,433 461,792
----------------- ----------------
Net cash provided by (used in) operating activities 457,981 (2,361,084)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,189,646) (457,897)
Cash paid in acquisitions and earnouts (19,898,911) (5,812,195)
Principal payment on note related to acquisition - (1,450,000)
----------------- ----------------
Net cash used in investing activities $ (21,088,557) $ (7,720,092)
----------------- ----------------
</TABLE>
Theaccompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
6
<PAGE>
<TABLE>
SOS STAFFING SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
39 Weeks Ended
------------------------------------
September 28, September 29,
1997 1996
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Proceeds from issuance of common stock, net $ 3,004,300 $ 30,940
Proceeds from exercise of employee stock options 141,374 -
Net borrowings on line of credit - 1,325,373
Borrowing of debt 13,000,000 6,500,000
----------------- ----------------
Net cash provided by financing activities 16,145,674 7,856,313
----------------- ----------------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (4,484,902) (2,224,863)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,784,651 2,717,389
----------------- ----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,299,749 $ 492,526
====================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 62,819 $ 22,079
Income taxes $ 3,651,457 $ 1,617,750
</TABLE>
Theaccompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
7
<PAGE>
SOS STAFFING SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These condensed consolidated financial statements reflect
all adjustments (consisting only of normal recurring adjustments), which in the
opinion of management, are necessary to present fairly the results of operations
of the Company for the periods presented. It is suggested that these condensed
consolidated financial statements be read in conjunction with the condensed
consolidated financial statements and the notes thereto included in the
Company's Annual Report to Shareholders on Form 10-K.
The results of operations for the thirteen and thirty-nine week periods
ended September 28, 1997 are not necessarily indicative of the results to be
expected for the full year.
Note 2. Acquisitions
All of the Company's acquisitions have been accounted for using the
purchase method. Certain acquisitions have contingent earnout components of the
purchase price. Earnout amounts are accrued when payment becomes probable and
increase the amount of goodwill related to the acquisition.
During the thirty-nine weeks ended September 28, 1997, the Company
acquired certain assets or stock and substantially all of the operations of ten
businesses and a customer list of an eleventh. The aggregate purchase price was
approximately $15.5 million. Four of the acquisitions have contingent future
earnouts up to a combined maximum of $9.4 million. One acquisition has a
contingent future earnout which requires the Company to pay (i); five times the
"Branch Profit" (as defined in the agreement) between $0.7 million and $0.9
million for the 18 months after the acquisition and (ii); two times "Branch
Profit" in excess of $1.2 million for the 24 months following the acquisition.
The excess of the initial purchase price (excluding earnouts) over the estimated
fair market value of the acquired tangible net assets was approximately $14.1
million, of which $13.6 million has been preliminarily allocated to goodwill and
$0.5 million has been allocated to other intangible assets.
Earnouts and Acquisition Costs - During the thirty-nine weeks ended
September 28, 1997 the Company paid earnouts totaling $3.3 million. As of
September 28, 1997 accrued acquisition earnouts totaled $3.3 million. During the
thirty-nine weeks ended September 28, 1997 the Company incurred direct
acquisition costs totaling $285,279.
Pro Forma Acquisition Information--Unaudited
The unaudited pro forma acquisition information for the thirty-nine
weeks ended September 28, 1997 and September 29, 1996 presents the results of
operations of material acquisitions which were completed during the thirty-nine
weeks ended September 29, 1997 as if the acquisitions had occurred at the
beginning of each thirty-nine week period. The results of operations give effect
to certain adjustments, including amortization of intangible assets, interest
expense on debt borrowings utilized to fund certain acquisitions, income taxes
and shares outstanding. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisitions been made at the beginning of the applicable period or of
the results which may occur in the future.
8
<PAGE>
Unaudited pro forma results of operations
-----------------------------------------
(In thousands, except per share data)
39 Weeks Ended
--------------
September 28, September 29,
------------- -------------
1997 1996
---- ----
Service revenues $ 157,232 $ 115,210
Gross profit 34,814 25,303
Income from operations 8,359 5,282
Net income $ 4,942 $ 3,131
=========== ===========
Net income per common share $ 0.54 $ 0.34
=========== ===========
Note 3. Legal Matters
In the ordinary course of its business, the Company is periodically
threatened with or named as a defendant in various lawsuits. The Company
maintains insurance in such amounts and with such coverage and deductibles as
management believes to be reasonable and prudent. The principal risks covered by
insurance include worker's compensation, personal injury, bodily injury,
property damage, errors and omissions, fidelity losses and general liability.
In June 1997, a former customer of the Company commenced litigation
against the Company in the Second District Court, Salt Lake County, State of
Utah, alleging breach of contract, negligence, fraud and misrepresentation. The
allegations are based upon the alleged theft of surplus military goods from the
former customer's warehouse by a former temporary employee of the Company. The
plaintiff is seeking special, general, consequential, punitive and other damages
in an amount in excess of $7.0 million. The Company believes the claim is
without merit and that the Company has valid defenses to all of the allegation
raised by the plaintiff.
There is no other pending litigation that the Company currently
anticipates will have a material adverse effect on the Company's financial
condition or results of operations.
Note 4. Equity Transactions
In connection with the Company's secondary public offering completed in
December 1996, the underwriters exercised their over allotment option to
purchase 330,000 common shares in January 1997. The Company received net
proceeds of approximately $3.0 million.
During the thirty-nine weeks ended September 28, 1997, options to
purchase 16,832 shares of common stock were exercised by employees and the
Company received $141,374.
In October, 1997, the Company completed a secondary offering of
4,600,000 shares (see "Note 5. Subsequent Events")
Note 5. Subsequent Events
On October 1, 1997, the Company entered into an agreement to purchase
certain assets and substantially all of the business operations of Century
Personnel, Inc. and M. A. Jones Enterprises, Inc. (collectively "Century").
Century specializes primarily in commercial staffing, with other divisions
dedicated to information technology staffing and executive search/permanent
placement in high-level professional occupations in Kansas and Missouri.
The purchase price consists of an initial purchase payment of
approximately $14.9 million plus two earnout payments payable within 45 days of
9
<PAGE>
each of the first and second anniversaries of the closing date of the Century
acquisition. The amount of the earnout payments will be based upon the earnings
before interest and taxes generated by Century's business operations during the
two one-year periods following the closing. The aggregate purchase price payable
by the Company shall not exceed $25 million.
On October 6, 1997, the Company purchased certain assets and
substantially all of the business operations of JesCo Technical Services, Inc.
for an aggregate purchase price of approximately $5.0 million plus future
contingent earnouts up to a maximum of $7.0 million. As of September 28, 1997
the Company had paid a $1.0 million down payment which is included in goodwill.
In October, 1997, the Company completed a secondary offering of
4,600,000 shares of common stock at a price of $16.75. Of the shares offered,
3,600,000 were offered by the Company, 600,000 of which were sold to the
underwriters upon exercise of an over-allotment option. The additional 1,000,000
shares were offered by selling shareholders, consisting of the Company's
chairman, a charitable foundation established by the Company's chairman and a
church. The net proceeds to the Company of the offering are estimated at $56.8
million.
The Company intends to use the proceeds of the offering to repay debt,
to pay earnout obligations associated with prior acquisitions, to support
continued growth of operations, including opening additional offices, and for
working capital and general corporate purposes.
10
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements of the Company and notes thereto
appearing elsewhere in this report. The Company's fiscal year consists of a
52-or 53-week period ending on the Sunday closest to December 31.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage relationship to service revenues of selected items in the Company's
unaudited income statement.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
-------------- --------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Service revenues 100.0% 100.0% 100.0% 100.0%
Direct cost of services 77.3% 79.5% 77.9% 79.4%
------- ------- ------- -------
Gross profit 22.7% 20.5% 22.1% 20.6%
------- ------- ------- -------
Operating expenses:
Selling, general and
administrative 15.5% 14.4% 15.5% 15.2%
Intangibles amortization 0.6% 0.3% 0.7% 0.2%
-------- -------- -------- --------
Total operating 16.1% 14.7% 16.2% 15.4%
------- ------- ------- -------
expenses
Operating income 6.6% 5.8% 5.9% 5.2%
======== ======== ======== ========
</TABLE>
Service Revenues. Service revenues increased by $16.5 million or 43.7%
to $54.4 million for the thirteen weeks ended September 28, 1997 compared to
$37.8 million for the thirteen weeks ended September 29, 1996. Of the $16.5
million increase, approximately $9.3 million was attributable to offices
acquired during 1996 and 1997, $5.0 million was attributable to increased
revenues from comparable offices and $2.2 million was attributable to opening
offices. For the thirty-nine weeks ended September 28, 1997 service revenues
increased by $48.9 million, or 52.7%, to $141.8 million compared to $92.8
million for the thirty-nine weeks ended September 29, 1996. Of the $48.9 million
increase, approximately $26.0 million was attributable to offices acquired
during 1996 and 1997, $16.2 million was attributable to increased revenues from
comparable offices and $6.7 million was attributable to opening offices. The
increase in service revenues from comparable offices was also generally
consistent with increases in hours billed, customers served and temporary
staffing employees utilized.
Gross Profit. Gross profit as a percentage of service revenues for the
thirteen weeks ended September 28, 1997 and September 29, 1996 was 22.7% and
20.5% respectively. Gross profit as a percentage of revenues for the thirty-nine
weeks ended September 28, 1997 and September 29, 1996 was 22.1% and 20.6%,
respectively. The increase in gross profit was primarily due to a shift in
business mix towards the information technology business segment, which
typically generates higher gross margins.
Operating Expenses. Operating expenses as a percentage of service
revenues for the thirteen weeks ended September 28, 1997 and September 28, 1996
were 16.1% and 14.7%, respectively. Operating expenses as a percentage of
service revenues for the thirty-nine weeks ended September 28, 1997 and
September 28, 1996 were 16.2% and 15.4%, respectively. The increase in operating
expenses as a percentage of service revenues for the thirteen and thirty-nine
weeks ended September 28, 1997 and September 29, 1996, respectively, was
attributable to an increase in selling, general and administrative expenses and
amortization of intangible assets. The increase in selling, general and
administrative expenses as a percentage of service revenues was attributable to
the information technology and specialty areas where cost structures are higher.
11
<PAGE>
Income Taxes. The effective combined federal and state income tax rate
for the thirteen weeks ended September 28, 1997 and September 29, 1996 was 40.8%
and 38.0%, respectively. The effective combined federal and state income tax
rate for the thirty-nine weeks ended September 28, 1997 and September 29, 1996
was 40.6% and 38.0%, respectively. The increased combined tax rate was due to an
increase in non-deductible amortization of intangible assets relating to certain
acquisitions and increasing profits generated in states which assess higher
state tax rates.
Liquidity and Capital Resources
For the thirty-nine weeks ended September 28, 1997 net cash provided by
operating activities was $0.5 million compared to net cash used in operating
activities of $2.4 million for the thirty-nine weeks ended September 29, 1996.
The increase in operating cash flow was a result of higher net income and
increased depreciation and amortization.
The Company's investing activities used $1.2 million to purchase
property and equipment, $19.9 million to acquire businesses and to pay
acquisition earnouts. See Note 2 to the condensed consolidated financial
statements of the Company for a description of certain terms of these
acquisitions.
In October, 1997, the Company completed a secondary offering of
4,600,000 shares of common stock at a price of $16.75. Of the shares offered,
3,600,000 were offered by the Company, 600,000 of which were sold to the
underwriters upon exercise of an over-allotment option. The additional 1,000,000
shares were offered by selling shareholders, consisting of the Company's
chairman, a charitable foundation established by the Company's chairman and a
church. The net proceeds to the Company of the offering are estimated at $57.0
million.
The Company's primary sources of short-term and long-term liquidity and
capital resources at September 28, 1997 were cash flows from operating
activities and a long-term bank note. The Company's revolving credit facility
increased from $20 million to $35 million effective September 17, 1997. As of
September 28, 1997 the Company had outstanding borrowings of $13 million on the
long-term portion of the revolving credit facility. Short-term borrowings bear
interest at the prime rate charged by the Company's lender which is periodically
adjusted (at September 28, 1997, 8.50%), and long-term borrowings which bear
interest at LIBOR plus 1.75% (currently at approximately 7.72%). The Company
also had letters of credit of $2.8 million outstanding at September 28, 1997,
for purposes of securing its workers' compensation premium obligation. The
aggregate amount of such letters of credit reduces the borrowing availability on
the line of credit. At September 28, 1997, $19.2 million was available for
borrowings or additional letters of credit under the line of credit. Management
believes that the present credit facility, together with cash reserves, cash
flow from operations and completed financing activities, will be sufficient to
fund the Company's operations, capital expenditure requirements and acquisitions
presently anticipated for at least the next 12 months. However, if the Company
were to expand its operations significantly, especially through unanticipated
acquisitions, additional capital may be required. There can be no assurance that
the Company will be able to obtain additional capital at acceptable rates.
Other Matters
During 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This
statement is effective for periods ending after December 15, 1997 and early
application is prohibited. The statement will require that the Company present
basic earnings per share and diluted earnings per share data to replace current
earnings per share information previously presented and all prior period data
must be restated. SFAS No. 128 provides new guidelines expected to simplify the
computation of diluted earnings per share. This statement is not expected to
have a material impact on the Company's financial condition when adopted.
12
<PAGE>
Item 3. Qualitative and Quantitative Disclosures About Market Risk
Not Required
PART II - OTHER INFORMATION
Item 1. Legal proceedings
In the ordinary course of its business, the Company is periodically
threatened with or named as a defendant in various lawsuits. The Company
maintains insurance in such amounts and with such coverage and deductibles as
management believes to be reasonable and prudent. The principal risks covered by
insurance include worker's compensation, personal injury, bodily injury,
property damage, errors and omissions, fidelity losses and general liability.
In June 1997, a former customer of the Company commenced litigation
against the Company in the Second District Court, Salt Lake County, State of
Utah, alleging breach of contract, negligence, fraud and misrepresentation. The
allegations are based upon the alleged theft of surplus military goods from the
former customer's warehouse by a former temporary employee of the Company. The
plaintiff is seeking special, general, consequential, punitive and other damages
in an amount in excess of $7.0 million. The Company believes the claim is
without merit and that the Company has valid defenses to all of the allegation
raised by the plaintiff.
There is no other pending litigation that the Company currently
anticipates will have a material adverse effect on the Company's financial
condition or results of operations.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibit 27 - Financial Data Schedule, filed herewith.
b) Reports on Form 8-K during the quarter for which this report is
filed.
On September 3, 1997 the Company filed a report on Form 8-K with
a report date of August 19, 1997 to report the acquisition of
substantially all the assets and the assumption of certain liabilities
of Execusoft, Inc. No financial statements were filed with this Form
8-K.
On September 18, 1997, the Company filed a report on Form 8-K
with a report date of September 15, 1997 to report the acquisition of
certain assets and substantially all of the business operations of JesCo
Technical Services, Inc. No financial statements were filed with this
Form 8-K.
13
<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 thereunto duly authorized.
SOS STAFFING SERVICES, INC.
Registrant
Dated: November 11, 1997 /s/ Howard W. Scott
-------------------
Howard W. Scott
Chief Executive Officer
Dated: November 11, 1997 /s/ Gary B. Crook
-----------------
Gary B. Crook
Vice President,
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 1299749
<SECURITIES> 0
<RECEIVABLES> 28203348
<ALLOWANCES> (565233)
<INVENTORY> 0
<CURRENT-ASSETS> 31648007
<PP&E> 5541907
<DEPRECIATION> (2275389)
<TOTAL-ASSETS> 69632903
<CURRENT-LIABILITIES> 10954445
<BONDS> 0
0
0
<COMMON> 90528
<OTHER-SE> 44961155
<TOTAL-LIABILITY-AND-EQUITY> 69632903
<SALES> 0
<TOTAL-REVENUES> 141752926
<CGS> 0
<TOTAL-COSTS> 110482801
<OTHER-EXPENSES> 22912643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220623
<INCOME-PRETAX> 8535893
<INCOME-TAX> 3464065
<INCOME-CONTINUING> 5071828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5071828
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0
</TABLE>
