<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 29, 1998
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 001-13956
PERSONNEL GROUP OF AMERICA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 56-1930691
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6302 Fairview Road, Suite 201, Charlotte, North Carolina 28210
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(704) 442-5100
---------------------------------------------------
(Registrant's telephone number including area code)
None
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 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
As of April 27, 1998, there were outstanding 24,944,496 shares of common stock,
par value $.01 per share.
<PAGE> 2
PERSONNEL GROUP OF AMERICA, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (unaudited)
Consolidated Statements of Income..................... 3
Consolidated Balance Sheets........................... 4
Consolidated Statements of Cash Flows................. 5
Notes to Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 15
Signatures............................................................ 16
Exhibit Index ........................................................ 17
2
<PAGE> 3
PERSONNEL GROUP OF AMERICA, INC.
Unaudited Consolidated Statements of Income
For the periods ended March 29, 1998 and March 30, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 29, March 30,
1998 1997
--------- --------
<S> <C> <C>
Revenues:
Information technology services $ 85,428 $42,990
Commercial staffing 69,409 51,171
-------- -------
Total revenues 154,837 94,161
Direct costs of service 113,849 70,152
-------- -------
Gross profit 40,988 24,009
Operating expenses:
Selling, general and administrative 26,302 16,043
Depreciation and amortization 3,079 1,885
-------- -------
Total operating expenses 29,381 17,928
Operating income 11,607 6,081
Interest expense 2,487 1,308
-------- -------
Income from continuing operations before income taxes 9,120 4,773
Provision for income taxes 3,858 2,004
-------- -------
Income from continuing operations 5,262 2,769
Income from discontinued operations, net of taxes -- 692
-------- -------
Net income $ 5,262 $ 3,461
======== =======
Net income per diluted share:
Income from continuing operations $ 0.20 $ 0.11
Income from discontinued operations, net of taxes -- 0.03
-------- -------
Net income per diluted share $ 0.20 $ 0.14
======== =======
Average diluted shares outstanding 31,994 24,134
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
PERSONNEL GROUP OF AMERICA, INC.
Unaudited Consolidated Balance Sheets
March 29, 1998 and December 28, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Mar. 29, Dec. 28,
ASSETS 1998 1997
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,362 $ 642
Accounts receivable, net 95,069 77,869
Prepaid expenses and other current assets 2,237 1,674
Deferred income taxes 4,243 4,165
Receivable from sale of discontinued operations 1,676 36,276
--------- ---------
Total current assets 104,587 120,626
Property and equipment, net 12,019 9,162
Intangible assets, net 379,140 316,413
Other assets 5,487 5,108
--------- ---------
Total assets $ 501,233 $ 451,309
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 10,295 $ 7,490
Accounts payable 2,195 2,200
Accrued wages, benefits and other 39,117 32,321
Income taxes payable 3,116 9,525
--------- ---------
Total current liabilities 54,723 51,536
Long-term debt 208,086 145,050
Other long-term liabilities 18,585 49,647
--------- ---------
Total liabilities 281,394 246,233
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value; shares authorized 5,000;
no shares issued and outstanding -- --
Common stock, $.01 par value; shares authorized 95,000;
24,929 and 24,278 shares issued and outstanding
at March 29, 1998 and December 28, 1997, respectively 249 242
Additional paid-in capital 180,506 171,038
Retained earnings 39,328 34,066
Deferred compensation (244) (270)
--------- ---------
Total shareholders' equity 219,839 205,076
--------- ---------
Total liabilities and shareholders' equity $ 501,233 $ 451,309
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
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PERSONNEL GROUP OF AMERICA, INC.
Unaudited Consolidated Statements Of Cash Flows
For the periods ended March 29, 1998 and March 30, 1997
(In thousands)
<TABLE>
<CAPTION>
Three months ended
Mar. 29, Mar. 30,
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations $ 5,262 $ 2,769
Adjustments to reconcile net income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 3,079 1,885
Deferred income taxes, net 881 (174)
Changes in assets and liabilities:
Accounts receivable (9,598) (4,290)
Accounts payable and accrued liabilities 4,153 2,690
Income taxes payable 880 771
Other, net (99) (494)
--------- --------
Net cash provided by operating activities 4,558 3,157
Cash flows from investing activities:
Cash used in acquisitions, net of cash acquired (90,449) (14,856)
Net cash provided (used) by discontinued operations 27,221 (756)
Purchases of property and equipment, net (1,241) (781)
--------- --------
Net cash used in investing activities (64,469) (16,393)
Cash flows from financing activities:
Repayments under credit facility (46,000) (7,025)
Borrowings under credit facility 107,200 15,800
Repayments of seller notes and acquired indebtedness (1,000) (174)
Proceeds from exercise of stock options 431 593
--------- --------
Net cash provided by financing activities 60,631 9,194
Net increase (decrease) in cash and cash equivalents 720 (4,042)
Cash and cash equivalents at beginning of period 642 5,111
--------- --------
Cash and cash equivalents at end of period $ 1,362 $ 1,069
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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PERSONNEL GROUP OF AMERICA, INC.
Notes To Unaudited Consolidated Financial Statements
(In thousands, except per share data)
(1) GENERAL
The unaudited consolidated financial statements included herein have
been prepared in accordance with the instructions to Form 10-Q and do not
include all the information and footnotes required by generally accepted
accounting principles; however, they do include all adjustments of a normal
recurring nature which, in the opinion of management, are necessary to present
fairly the results of operations of the Company for the interim periods
presented. These interim financial statements should be read in conjunction with
the Company's audited consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
28, 1997. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the entire year.
All share and per share data have been restated to reflect the
two-for-one stock split effected as a stock dividend on March 30, 1998.
(2) INTANGIBLE ASSETS
The Company's businesses were initially acquired from unrelated third
parties in exchange for cash and other consideration. The Company allocates the
excess of cost over the fair value of net tangible assets first to identifiable
intangible assets, if any, and then to goodwill. Although the Company believes
that goodwill has an unlimited life, the Company amortizes such costs on a
straight-line basis over 40 years. Other intangibles consist primarily of
covenants not to compete and other and are generally amortized over three to
five years. Accumulated amortization of intangible assets amounted to $13,622
and $11,346 at March 29, 1998 and December 28, 1997, respectively.
The Company evaluates the recoverability of its investment in
intangible assets in relation to anticipated future cash flows on an
undiscounted basis. Based on this assessment, the Company expects its investment
in excess of cost over fair value of net assets and other intangibles to be
fully recovered.
(3) ACQUISITIONS
During 1998, the Company has acquired the following businesses in eight
separate transactions:
<TABLE>
<CAPTION>
Name of Business Type of Business Date Acquired
---------------- ---------------- -------------
<S> <C> <C>
Ann Wells Personnel Commercial Staffing January 1998
Creative Temporaries Commercial Staffing January 1998
Corporate Staffing Consultants Commercial Staffing January 1998
Advanced Business Consultants Information Technology February 1998
IMA Plus Information Technology March 1998
The Temporary Connection Commercial Staffing March 1998
Trilogy Consulting Information Technology April 1998
Sloan Staffing Services Commercial Staffing May 1998
</TABLE>
6
<PAGE> 7
The acquired businesses are collectively referred to hereinafter as the
"Acquired Companies." The 1997 revenues of the information technology companies
acquired in 1998 were $65,400 in the aggregate, and the 1997 revenues of the
commercial staffing companies acquired in 1998 were $79,100 in the aggregate.
The purchase prices for the Acquired Companies aggregated $132,000,
including direct acquisition costs but excluding certain contingent earnout
payments. Certain of these acquisitions provide for additional payments,
contingent upon attainment of certain earnings targets for various periods
during the next four years. Any such contingent payments will be recorded as
additional purchase price when paid and will increase the amount of excess cost
over fair value of net assets acquired. All acquisitions have been accounted for
using the purchase method of accounting. Accordingly, the assets and liabilities
of the entities acquired, based on preliminary allocations, were recorded at
their estimated fair values at the dates of the acquisitions and the results of
operations of the Acquired Companies have been included in the Company's
consolidated results of operations from the dates of the respective
acquisitions. Final allocation of the purchase price may result in adjustments
to the amounts previously recorded as excess of cost over fair market value of
assets acquired.
The following table presents the Company's pro forma consolidated
results of operations for the three-month periods indicated, as if the Acquired
Companies and the other companies acquired during 1997 had been acquired on
December 30, 1996:
<TABLE>
<CAPTION>
Mar. 29, Mar. 30,
1998 1997
-------- --------
<S> <C> <C>
Revenues .................................. $180,970 $159,148
Income from continuing operations ......... 5,802 3,996
Income from continuing operations per
diluted share ...................... $ 0.21 $ 0.16
======== ========
Weighted average diluted shares outstanding 32,130 24,734
======== ========
</TABLE>
(4) DISCONTINUED OPERATIONS
On December 26, 1997, the Company completed the sale of its healthcare
division for $65,250. Of such amount, $34,600 was paid by delivery of a
promissory note from the purchaser and the balance was paid in cash. The assets,
liabilities, results of operations and cash flows of the healthcare division
have been segregated and reported as discontinued operations for all periods
presented, and previously reported results have been restated. The sale of the
healthcare division resulted in a gain of $89.
In January 1998, the $34,600 note was collected in full. The total
proceeds received in connection with the sale were used to repay outstanding
borrowings under the Credit Facility (as defined below).
During 1997, the Company allocated interest expense to the discontinued
operations based on the ratio of net assets of the discontinued operations to
the total net assets of the consolidated Company. Interest expense allocated in
the quarter ended March 30, 1997 was $409. No other corporate overhead expenses
have been allocated to the discontinued operations.
7
<PAGE> 8
(5) LONG-TERM DEBT
Long-term debt consisted of the following at March 29, 1998 and
December 28, 1997:
<TABLE>
<CAPTION>
Mar. 29, Dec 28,
1998 1997
--------- ---------
<S> <C> <C>
5-3/4% convertible subordinated notes due July 2004 $ 115,000 $ 115,000
$200,000 revolving credit facility due June 2002 85,200 24,000
Notes payable to sellers of acquired companies
and other 18,181 13,540
--------- ---------
218,381 152,540
Less current portion (10,295) (7,490)
--------- ---------
$ 208,086 $ 145,040
========= =========
</TABLE>
On March 17, 1998, the Company amended its Revolving Credit Facility
(the "Credit Facility"), increasing the maximum availability thereunder from
$125,000 to $200,000 and effecting certain other minor changes thereto.
(6) NET INCOME PER SHARE
In accordance with FAS 128, the following tables reconcile net income
and weighted average shares outstanding to the amounts used to calculate basic
and diluted earnings per share for each of the periods ended March 29, 1998 and
March 30, 1997:
<TABLE>
<CAPTION>
Mar. 29, Mar. 30,
1998 1997
------- -------
<S> <C> <C>
EARNINGS PER BASIC SHARE:
Net income $ 5,262 $ 3,461
======= =======
Weighted average shares outstanding 24,762 24,134
Earnings per basic share $ 0.21 $ 0.14
======= =======
EARNINGS PER DILUTED SHARE:
Net income $ 5,262 $ 3,461
Add: Interest expense on Convertible Notes, net of tax 1,064 --
------- -------
Diluted net income 6,326 3,461
Weighted average shares outstanding 24,762 24,134
Add: Dilutive employee stock options 776 --
Add: Assumed conversion of Convertible Notes 6,456 --
------- -------
Weighted average diluted shares outstanding 31,994 24,134
Earnings per diluted share $ 0.20 $ 0.14
======= =======
</TABLE>
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
The following discussion and analysis should be read in conjunction
with the Company's Unaudited Consolidated Financial Statements and related
notes. The Company's fiscal year ends on the Sunday nearest to December 31 and
each fiscal quarter ends on the Sunday nearest to the end of the respective
calendar quarter.
The Company is organized into two divisions: the Information Technology
Services Division, which provides information technology staffing and consulting
services in a range of computer-related disciplines; and the Commercial Staffing
Division, which provides a wide variety of temporary office, clerical, light
technical and light industrial staffing services. Substantially all of the
Company's services are performed on a time and materials basis. At May 7,
1998, the Information Technology Services Division was comprised of 14 companies
and the Commercial Staffing Division was comprised of 25 companies.
The following table sets forth the number of the Company's offices by
division at the end of the years indicated and at May 7, 1998:
<TABLE>
<CAPTION>
Fiscal Year End
------------------------------
May 7,
1998 1997 1996 1995
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Information technology services 37 30 18 --
Commercial staffing 101 82 74 58
--- -- -- --
Total offices 138 112 92 58
</TABLE>
The Company completed its Initial Public Offering ("IPO") in September
1995. Prior to the IPO, the Company was an indirect wholly owned subsidiary of
an international staffing company (the "Former Parent"). The Company was
organized to facilitate the IPO. As a result of the IPO, in which the Former
Parent sold its entire ownership interest in the Company, the Company became an
independent public company. The Company did not receive any of the proceeds of
the sale of shares in the IPO.
On December 26, 1997, the Company completed the sale of its healthcare
division for approximately $65.3 million. Of such amount, $34.6 million was
initially paid by delivery by the purchaser of a promissory note at closing and
the balance was paid in cash. The note was paid in full in January 1998. With
the sale of the healthcare division, the Company completed a transformation that
began in 1996 when the Company made a strategic commitment to enter the high
growth, high margin information technology services business. The gain on the
sale of the healthcare division was not material. As a result of the sale, the
healthcare division had been reflected as a discontinued operation in the
Company's financial statements for all periods presented.
9
<PAGE> 10
During the first quarter of 1998, the Company completed six
acquisitions: Ann Wells Personnel in Silicon Valley, California, Creative
Temporaries in Charlotte, North Carolina; Corporate Staffing Consultants in
Charlotte, North Carolina; Advanced Business Consultants in Kansas City,
Missouri; IMA Plus in Jacksonville, Florida; and The Temporary Connection in
Houston, Texas. Subsequent to March 29, 1998, the Company acquired Trilogy
Consulting Corporation in Chicago, Illinois and Sloan Staffing Services in New
York, New York. Ann Wells Personnel, Creative Temporaries, Corporate Staffing
Consultants, The Temporary Connection and Sloan Staffing Services are leading
providers of commercial staffing services in their respective markets. Advanced
Business Consultants, IMA Plus and Trilogy Consulting are leading providers of
information technology services in their respective markets. These eight
companies had combined revenues of $144.5 million in 1997. Had the Company owned
all of the eight acquired companies discussed above and the other companies
acquired in 1997 at the beginning of 1997, the Company's pro forma 1997 revenues
would have been approximately $690.5 million, and 53% and 47% of such revenues
would have come from the Information Technology and Commercial Staffing
Divisions, respectively.
Each of the Company's acquisitions has been accounted for using the
purchase method of accounting and has been included in the following discussions
as applicable since the respective dates of acquisition. The Company allocates
the excess of cost over the fair value of the net tangible assets first to
identifiable intangible assets, if any, and then to goodwill. The Company
believes that buying market-leading companies and then allowing them to maintain
their separate identities and independence preserves the goodwill for an
unlimited period. Although the Company believes that goodwill has an unlimited
life, the Company amortizes such costs on a straight-line basis over 40 years.
Intangible assets represented 75.6% of total assets and 172.5% of total
shareholders' equity at March 29, 1998. The Company evaluates the recoverability
of its investment in goodwill and other intangibles in relation to anticipated
future cash flows on an undiscounted basis. Based on this assessment, the
Company expects its investments in intangible assets to be fully recovered.
In the future, the Company's revenues and expenses may be significantly
affected by the number and timing of the opening or acquisition of additional
offices or businesses. The timing of such expansion activities also can affect
period-to-period comparisons of the Company's results of operations.
The commercial staffing business is subject to the seasonal impact of
summer and holiday employment trends. Typically, the second six months of each
calendar year is more heavily affected as companies tend to increase their use
of temporary personnel during this period. While the commercial staffing
business is cyclical, the Company believes that the broad geographic coverage of
its operations, its emphasis on high-end clerical staffing and its rapid
expansion into the less cyclical information technology sector, mitigate the
adverse effects of economic cycles in a single industry or geographic region.
10
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RESULTS OF OPERATIONS
Quarter Ended March 29, 1998 Versus Quarter Ended March 30, 1997
Revenues. Total revenues increased 64.4% to $154.8 million in the first
quarter of 1998 from $94.2 million in 1997. Information technology services
revenue grew 98.7% as the Company continued its aggressive acquisition program
and experienced strong internal growth as revenues on a pro forma basis grew
21.2% in the first quarter of 1998 over 1997. Commercial staffing revenue grew
35.6% as the result of the contribution of revenues from the commercial staffing
companies acquired by the Company in 1997 and 1998 and pro forma internal growth
of 8.2% in the first quarter of 1998 over 1997. High internal growth rates were
due to the continued strong demand for information technology services and the
increasing acceptance by businesses and other organizations of the use of a
contingent workforce.
Direct Cost of Services and Gross Profit. Direct costs, consisting of
payroll and related expenses of consultants and temporary workers, increased
62.3% to $113.8 million in the first quarter of 1998. Gross margin as a
percentage of revenue increased 100 basis points to 26.5% from 25.5% during
1997. This increase reflected the Company's continued expansion into the higher
margin information technology staffing and consulting sectors. Information
technology services revenues represented 55.2% of total revenues in the first
quarter of 1998, up from 45.7% in 1997. Gross profit margins in the Information
Technology and Commercial Staffing Divisions remained consistent with 1997
margins as pay rate pressures were generally passed on to the Company's
customers through higher bill rates.
Operating Expenses. Operating expenses, consisting of selling, general
and administrative expenses and depreciation and amortization expense, increased
63.9% to $29.4 million in the first quarter of 1998 from $17.9 million in 1997.
As a percentage of revenues, selling, general and administrative expenses
remained constant at 17.0% in the first quarters of 1998 and 1997. In addition,
depreciation and amortization expense remained constant at 2.0% of revenues in
the first quarter of 1998 and 1997.
Interest Expense. Interest expense increased to $2.5 million in the
first quarter of 1998 from $1.3 million in 1997 as the Company continued to
borrow funds for its aggressive acquisition strategy. See "Liquidity and Capital
Resources."
Income Tax Expense. The effective tax rate increased slightly to 42.3%
in the first quarter of 1998 from 42.0% in 1997. This increase was due to
additional nondeductible amortization expense in 1998 in relation to pretax
income. The Company's effective tax rate has historically been higher than the
U.S. federal statutory rate of 35.0% primarily due to state income taxes and
nondeductible amortization expense.
Income from Continuing Operations. Income from continuing operations
increased 90.0% to $5.3 million in the first quarter of 1998 (or 3.4% of
revenue) from $2.8 million (or 2.9% of revenue) in 1997 due to the factors
discussed above.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Changes in liquidity during the quarter ended March 29, 1998
represented the net effect of cash generated by operations, and from the sale of
the Company's healthcare division, offset by the Company's principal uses of
cash to finance receivables due to the growth in business and fund acquisitions.
For the quarter ended March 29, 1998, cash provided by operating activities
increased to $4.6 million, up from $3.2 million in 1997, primarily as the result
of higher earnings before depreciation and amortization in 1998. Cash used for
investing activities increased to $64.5 million in the first quarter of 1998
from $16.4 million in 1997. This increase reflected additional cash of $90.4
million used for acquisitions, including contingent earnout payments, in 1998
versus $14.9 million in 1997, offset in 1998 by the cash received in connection
with the sale of the healthcare division. Cash flows from financing activities
increased to $60.6 million in the first quarter of 1998 from $9.2 million in
1997. This increase was primarily due to borrowings made under the Company's
Credit Facility to finance six acquisitions in the first quarter 1998.
As of March 29, 1998, receivables for the Information Technology
Division and the Commercial Staffing Division remained outstanding an average of
59 and 42 days, respectively, after billing. In the aggregate, days sales
outstanding were 51 and 48 days at March 29, 1998, and December 28, 1997,
respectively.
The Company's primary capital expenditure requirements relate to
acquisitions. As of May 7, 1998, the Company has made cash payments, including
contingent earnout and post-closing payments, and issued notes aggregating
$466.4 million for acquisitions of existing businesses. As of March 29, 1998,
the Company was obligated under certain acquisition agreements to repay notes
during the next two years of $16.9 million in the aggregate and to make
contingent earnout payments to former owners of acquired businesses. Earnout
payments based on 1998 earnings and beyond are contingent on the future
performance of such acquired businesses, and thus the actual amount cannot be
determined until such date. The Company estimates, based on certain assumptions
as to future performance of such acquired businesses, that aggregate earnout
payments may be in the range of $17.0 million to $26.0 million in 1999, $18.0
million to $28.0 million in 2000, and $7.0 million to $10.0 million in 2001.
There can be no assurance, however, that the future performance of the acquired
businesses will be consistent with the assumptions used in establishing the
foregoing estimates, or that the actual amounts of any earnout payments will not
differ materially from the estimates set forth herein.
12
<PAGE> 13
The Company selectively seeks acquisition opportunities in the ordinary
course of business, and management believes that the Company will continue to
make acquisitions as attractive opportunities become available. The Company
intends to seek additional capital as necessary to fund other potential
acquisitions through one or more funding sources that may include borrowings
under the Credit Facility described below or offerings of debt or equity
securities of the Company. Cash flow from operations, to the extent available,
may also be used to fund a portion of any acquisition expenditures. The Company
also expects to spend approximately one percent of its revenues during 1998 on
field automation systems, management information systems and other capital
expenditures not directly related to acquisitions.
The Company's Credit Facility is a five-year $200.0 million revolving
line of credit due June 2002. As of April 27, 1998, $152.5 million of borrowings
were outstanding under the Credit Facility and approximately $4.0 million had
been used for the issuance of undrawn letters of credit to secure the Company's
workers' compensation programs. Borrowings under the Credit Facility bear
interest at a rate equal to LIBOR plus a percentage corresponding to the
Company's consolidated leverage ratio, as defined, or the agents' base rate, as
defined, at the Company's option.
At April 27, 1998, the amount available for borrowing under the Credit
Facility was approximately $43.6 million. The Credit Facility is secured by
pledges of the stock of the Company's subsidiaries and contains customary
covenants such as the maintenance of certain financial ratios, minimum net worth
and working capital requirements, and a restriction on the payment of cash
dividends on Common Stock. The Credit Facility also limits borrowing
availability for acquisition-related purposes.
The Company has outstanding $115.0 million of 5 3/4% Convertible
Subordinated Notes due July 2004 (the "Notes"). The Notes are subordinated to
all present and future senior indebtedness of the Company, including
indebtedness under the Credit Facility. Interest on the Notes is payable
semi-annually. The Notes are convertible into Common Stock of the Company at any
time before maturity at a conversion price of $17.81 per share. The Notes are
not redeemable prior to July 2000. Thereafter, the Company may redeem the Notes
initially at 103.29% and at decreasing prices thereafter to 100% at maturity, in
each case together with accrued interest.
On April 9, 1998, the Company filed a registration statement for the
sale of 7.0 million shares of Common Stock (plus an additional 1.05 million
shares subject to the underwriters over-allotment options). The Company intends
to use the net proceeds of this offering to repay outstanding indebtedness under
its Credit Facility and to use the remaining net proceeds, if any, for general
corporate purposes. There can be no assurance, however, that the offering will
be completed.
The Company believes that cash flow from operations, borrowing capacity
under the Credit Facility and the proceeds from offerings of debt or equity
securities of the Company (including the planned offering of Common Stock
described above) will be adequate to meet its presently anticipated needs for
working capital, acquisitions, and capital expenditures. There can be no
assurance, however, that the Company will not require capital from additional
sources or that other alternative sources of capital will be available in the
future or, if available, that any such alternative sources will be available on
favorable terms.
13
<PAGE> 14
New Accounting Pronouncements. In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information." ("FAS 131") which changes the way that
public companies report information about operating segments in annual and
interim financial statements. FAS 131 will be effective in years beginning after
December 15, 1997. The Company will be required to adopt FAS 131 beginning with
its 1998 annual financial statements. Management has not yet completed its
analysis of the impact that this standard will have on the financial statements
of the Company.
Year 2000 Compliance. Management believes that the Company's
operational and financial reporting systems are substantially Year 2000
compliant. Future Year 2000 compliance costs are not expected to have a material
impact on the financial position, results of operations or cash flows of the
Company. Management does not know at this time what, if any, impact Year 2000
compliance may have on its customers and vendor sources and the impact, if any,
on the Company if such customers or vendors are not fully compliant. Management
is attempting to determine when its significant customers and vendors will be
Year 2000 compliant.
Inflation. The effects of inflation on the Company's operation were not
material in the first quarter of 1998. Inflationary increases in payroll costs
were generally passed on to the Company's customers through higher bill rates.
FORWARD-LOOKING INFORMATION
This report, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," may contain various
"forward-looking statements," within the meaning of Section 21E of the
Securities Exchange Act of 1934, that are based on management's belief and
assumptions, as well as information currently available to management. When used
in this document, the words "anticipate," "estimate," "expect," and similar
expressions may identify forward-looking statements. Although the Company
believes that the expectations reflected in any such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to be
correct. Any such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, the Company's actual results,
performance or financial condition may vary materially from those anticipated,
estimated or expected. Among the key factors that may have a direct bearing on
the Company's actual results, performance or financial condition are
fluctuations in the economy, the degree and nature of competition, demand for
the Company's services, changes in laws and regulations affecting the Company's
business, the Company's ability to complete acquisitions and integrate the
operations of acquired businesses, to recruit and place temporary professionals,
to expand into new markets, and to maintain profit margins in the face of
pricing pressures and inflation and other matters discussed in this report and
the Company's other filings with the Securities and Exchange Commission.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The exhibits filed with or incorporated by
reference into this Form 10-Q are set forth in the Exhibit
Index, which immediately precedes the exhibits to this report.
(b) Reports on Form 8-K -The Company filed the following current
reports on Form 8-K during the quarter ended March 29, 1998:
(i) Current Report on Form 8-K dated December 29, 1997,
reporting that the Company had completed the sale of
its healthcare division.
(ii) Current Report of Form 8-K/A dated January 12, 1998,
amending the above-referenced Current Report on Form
8-K dated December 29, 1998 to attach pro forma
condensed consolidated information (unaudited) of the
Company as of September 28, 1997 and for the year
ended December 29, 1996 and the nine months ended
September 29, 1997.
(iii) Current Report of Form 8-K dated March 6, 1998,
reporting the declaration of a two-for-one split of
the Company's Common Stock, which was effected as a
100% stock dividend paid on March 30, 1998 to holders
of record at the close of business on March 16, 1998.
15
<PAGE> 16
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.
PERSONNEL GROUP OF AMERICA, INC.
(Registrant)
Date: May 13, 1998 By: /s/ Edward P. Drudge Jr.
---------------------------
Edward P. Drudge Jr.
Chief Executive Officer
Date: May 13, 1998 By: /s/ James C. Hunt
-------------------
James C. Hunt
Senior Vice President
Chief Financial Officer and
Treasurer
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED
HEREWITH(*), OR
INCORPORATED BY
REFERENCE FROM
PREVIOUS EXHIBIT COMPANY REG. NO.
EXHIBIT NUMBER DESCRIPTION NUMBER OR REPORT
- -------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
3.1 Restated Certificate of Incorporation of the 3.1 333-31863
Company, as amended
3.2 Amended and Restated Bylaws of the Company 3.2 33-95228
4.0 Specimen Stock Certificate 4.0 33-95228
4.1 Rights Agreement between the Company and 1 0-27792
First Union National Bank (as successor
trustee)
4.2 Indenture between the Company and First Union 4.2 333-31863
National Bank, as Trustee
4.3 Form of Note Certificate for 5-3/4% 4.3 333-31863
Convertible Subordinated Notes
10.1 1995 Equity Participation Plan, as amended 10.1 333-31863
10.2 Management Incentive Compensation Plan 10.2 10-Q for quarter
ended 9/30/95
10.3 Employee Stock Purchase Plan 10.3 333-31863
10.4# Director and Officer Indemnification 10.3 10-K for year
Agreement of James V. Napier ended 12/31/95
10.5 Employment Agreement between the Company and 10.9 10-Q for quarter
Edward P. Drudge, Jr. ended 9/30/95
10.6 Amendment No. 1 to Employment Agreement 10.6 10-K for year ended
between the Company and Edward P. Drudge, Jr. 12/28/97
10.7 Employment Agreement between the Company and 10.10 10-K for year
James C. Hunt ended 12/29/96
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
FILED
HEREWITH(*), OR
INCORPORATED BY
REFERENCE FROM
PREVIOUS EXHIBIT COMPANY REG. NO.
EXHIBIT NUMBER DESCRIPTION NUMBER OR REPORT
- -------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
10.8 Employment Agreement between the Company and 10.13 10-K for year
Ken R. Bramlett, Jr. ended 12/29/96
10.9 Indemnification Agreement between the Company 10.14 10-Q for quarter
and Adia Delaware ended 9/30/95
10.10 Tax-Sharing Agreement between the Company, 10.15 10-Q for quarter
Adia Delaware and Adia California ended 9/30/95
10.11 Amended and Restated Non-Qualified 10.16 10-K for year
Profit-Sharing Plan ended 12/29/96
10.12 Director's Non-Qualified Compensation Plan 10.12 10-K for year ended
12/28/97
10.13 Amended and Restated Credit Agreement between 10.15 333-31863
the Company and its subsidiaries, the Lenders
party thereto and NationsBank N.A., as Agent
10.14 Amendment No. 1 to Amended and Restated *
Credit Agreement among the Company and its
Subsidiaries, The Lenders party thereto and
NationsBank, N.A., as agent
10.15 Asset Purchase Agreement between the Company 2 8-K dated 9/30/96
and Business Enterprise Systems and
Technology, Inc. (BEST Consulting)
10.16 Stock Purchase Agreement for the sale of 1 8-K dated 12/26/97
Nursefinders between PFI Corp., Nursefinders,
Inc., and Nursefinder Acquisition Corp.
10.17 Registration Rights Agreement between the 10.17 333-31863
Company and the Initial Purchasers
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
FILED
HEREWITH(*), OR
INCORPORATED BY
REFERENCE FROM
PREVIOUS EXHIBIT COMPANY REG. NO.
EXHIBIT NUMBER DESCRIPTION NUMBER OR REPORT
- -------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
27.1 Financial Data Schedule *
(For SEC Purposes Only)
</TABLE>
# This Exhibit is substantially identical to Director and Officer
Indemnification Agreements (i) of the same date between the Company and
the following individuals: Edward P. Drudge, Jr., Kevin P. Egan, J.
Roger King, William Simione, Jr.; and (ii) dated April 17, 1998 between
the Company and each of James C. Hunt and Ken R. Bramlett, Jr.
19
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated as of March 17, 1998, is entered into by and among PERSONNEL
GROUP OF AMERICA, INC. (the "Borrower"), CERTAIN SUBSIDIARIES OF THE BORROWER
IDENTIFIED ON THE SIGNATURES PAGES HERETO (the "Guarantors"), EACH PERSON
IDENTIFIED AS AN "EXISTING LENDER" ON THE SIGNATURE PAGES HERETO (the "Existing
Lenders"), EACH PERSON IDENTIFIED AS A "NEW LENDER" ON THE SIGNATURE PAGES
HERETO (the "New Lenders" and, together with the Existing Lenders, the
"Lenders") and NATIONSBANK, N.A., as agent for the Lenders (in such capacity,
the "Agent").
W I T N E S S E T H:
WHEREAS, pursuant to an Amended and Restated Credit Agreement dated as
of June 23, 1997 (the "Existing Credit Agreement") among the Borrower, the
Guarantors, the Existing Lenders and the Agent, the Existing Lenders have
extended commitments to make certain credit facilities available to the
Borrower; and
WHEREAS, the parties hereto have agreed to amend the Existing Credit
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined
herein or the context otherwise requires, the following terms used in
this Amendment, including its preamble and recitals, have the following
meanings:
"Amended Credit Agreement" means the Existing Credit
Agreement as amended hereby.
"Amendment No. 1 Effective Date" is defined in
Subpart 4.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Amendment,
1
<PAGE> 2
including its preamble and recitals, have the meanings provided in the
Amended Credit Agreement.
PART II
ASSIGNMENTS AND ASSUMPTIONS
The Existing Lenders hereby sell and assign, without recourse, to the
Lenders, and the Lenders hereby purchase and assume, without recourse, from the
Existing Lenders, effective as of the Amendment No. 1 Effective Date, such
interests in the Existing Lenders' rights and obligations under the Existing
Credit Agreement (including, without limitation, the Commitments of the Existing
Lenders on the Amendment No. 1 Effective Date and the Loans owing to the
Existing Lenders which are outstanding on the Amendment No. 1 Effective Date) as
shall be necessary in order to give effect to the reallocations of the Committed
Amounts and Commitment Percentages effected by the amendment to Schedule 2.1(a)
to the Existing Credit Agreement pursuant to Subpart 3.6. Each of the Lenders
hereby makes and agrees to be bound by all the representations, warranties and
agreements set forth in Section 11.3(b) of the Existing Credit Agreement, except
that this Amendment shall serve in lieu of the assignment agreement referenced
in Section 11.3(b). From and after the Amendment No. 1 Effective Date (i) each
of the Lenders shall be a party to and be bound by the provisions of the Amended
Credit Agreement and, to the extent of the interests assigned hereby, have the
rights and obligations of a Lender thereunder and under the other Credit
Documents and (ii) each of the Existing Lenders shall, to the extent of the
interests assigned hereby, relinquish its rights and be released from its
obligations under the Existing Credit Agreement. The Agent shall record in the
register referred to in Section 11.3(c) of the Existing Credit Agreement on the
Amendment No. 1 Effective Date the information relating to the assignments and
assumptions effected pursuant to this Part II. The Agent hereby agrees (i) that
no transfer fee shall be payable under Section 11.3(b) of the Existing Credit
Agreement or otherwise in connection with the assignments effected pursuant to
this Part II and (ii) to pay to each Lender an amendment fee as separately
agreed to by the Agent and such Lender.
PART III
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 1
Effective Date, the Lenders agree with the Credit Parties that the Existing
Credit Agreement shall be amended in accordance with this Part III. Except as so
amended, the Existing Credit Agreement shall continue in full force and effect.
SUBPART 3.1. Amendment to Section 1.1. The pricing grid
contained in the definition of "Applicable Percentage" set forth in
Section
2
<PAGE> 3
1.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
<TABLE>
<CAPTION>
============================================================================================================================
Applicable
Applicable Percentage for Applicable
Pricing Percentage for Standby Letter of Percentage for
Level Consolidated Leverage Ratio Eurodollar Loans Credit Fee Unused Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I Less than 1.25:1.00 0.500% 0.500% 0.125%
- ----------------------------------------------------------------------------------------------------------------------------
II Greater than or equal to 1.25:1.00, but 0.750% 0.750% 0.150%
less than 2.25:1.00
- ----------------------------------------------------------------------------------------------------------------------------
III Greater than or equal to 2.25:1.00, but 1.000% 1.000% 0.225%
less than 3.00:1.00
- ----------------------------------------------------------------------------------------------------------------------------
IV Greater than or equal to 3.00:1.00, but 1.250% 1.250% 0.250%
less than 3.50:1.00
- ----------------------------------------------------------------------------------------------------------------------------
V Greater than or equal to 3.50:1.00 1.375% 1.375% 0.350%
============================================================================================================================
</TABLE>
SUBPART 3.2. Further Amendment to Section 1.1. The definition
of "Permitted Acquisition" set forth in Section 1.1 of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
"Permitted Acquisition" means:
(i) acquisitions by the Borrower or its Subsidiaries
of all or any portion of the capital stock or securities or
all, substantially all or any portion of the assets of any
Person engaged in a business or businesses substantially
similar to any business currently conducted by the Borrower or
any of its Subsidiaries, provided that (A) the purchase price
(including the fair market value of any capital stock of the
Borrower provided as a portion thereof) of any such
acquisition individually does not exceed 25% of Consolidated
Net Worth, (B) the purchase price (excluding the fair market
value of any capital stock of the Borrower provided as a
portion thereof) of any such acquisition individually does not
exceed 12.5% of Consolidated Net Worth, (C) no portion of the
purchase price of any such acquisition shall consist of any
stock other than common stock of the Borrower, (D) such
acquisition is approved by the board of directors of such
Person (if applicable or required), and (E) after giving
effect on a Pro Forma Basis to any such acquisition (including
but not limited to any Indebtedness to be incurred by the
Borrower or any of its Subsidiaries in connection therewith),
(1) no Default or Event of Default would exist hereunder and
(2) one of the following subclauses (x) or (y) is true: (x)
3
<PAGE> 4
either the Consolidated Leverage Ratio is less than or equal
to 3.25:1.00 and the Consolidated Senior Leverage Ratio is
less than or equal to 1.75:1.00 or (y) such acquisition occurs
prior to any follow-on equity issuance by the Borrower in an
amount of not less than $75,000,000, but in any event not
later than September 30, 1998, and either (I) such Person
being acquired is listed on Schedule 1.1D and neither the cash
payment at closing nor the scheduled contingent payment in
connection with such acquisition exceeds the applicable
maximum amount set forth on Schedule 1.1D or (II) the purchase
price of such acquisition, together with all other
acquisitions permitted pursuant to this subclause
(i)(E)(2)(y)(II) of the definition of Permitted Acquisition,
is not more than $25,000,000; and
(ii) any merger or consolidation permitted by Section
8.4(b).
As used herein, the "purchase price" of any acquisition shall
include, without duplication, the non-contingent purchase
price, all acquired liabilities, all non-compete payments and
the principal amount of any seller financing, but shall
exclude the contingent purchase price and all fees and
expenses.
SUBPART 3.3. Amendment to Section 2.1(a). The reference to
"ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000)" in Section
2.1(a) of the Existing Credit Agreement is hereby replaced with a
reference to "TWO HUNDRED MILLION DOLLARS ($200,000,000)".
SUBPART 3.4. Amendment to Section 7.11(b). Section 7.11(b) of
the Existing Credit Agreement is hereby amended in its entirety to read
as follows:
7.11 FINANCIAL COVENANTS.
* * *
(b) Consolidated Leverage Ratio. The Consolidated
Leverage Ratio as of the last day of each fiscal quarter shall
be no greater than:
<TABLE>
<S> <C>
From the Closing Date to, and including, the
last day of the third fiscal quarter of 1998 4.25 : 1.00
At all times after the last day of the third fiscal
quarter of 1998 4.00 : 1.00
</TABLE>
4
<PAGE> 5
SUBPART 3.5. Addition of Schedule 1.1D. A new Schedule 1.1D in
the form of Schedule 1.1D attached hereto is hereby added to the
Existing Credit Agreement.
SUBPART 3.6. Amendments to Schedule 2.1(a). Schedule 2.1(a) of
the Existing Credit Agreement is hereby deleted in its entirety and a
new schedule in the form of Schedule 2.1(a) attached hereto is
substituted therefor.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1. Amendment No. 1 Effective Date. This Amendment
shall be and become effective as of the date hereof (the "Amendment No.
1 Effective Date") when all of the conditions set forth in this Subpart
4.1 shall have been satisfied, and thereafter this Amendment shall be
known, and may be referred to, as "Amendment No. 1."
SUBPART 4.1.1. Execution of Counterparts of Amendment. The
Agent shall have received counterparts (or other evidence of execution,
including telephonic message, satisfactory to the Agent) of this
Amendment, which collectively shall have been duly executed on behalf
of each of the Borrower, the Guarantors, the Agent and the Lenders.
SUBPART 4.1.2. Delivery of New Promissory Notes. The Agent
shall have received from the Borrower new promissory notes for the
Lenders in the amounts of their respective Commitments under the
Amended Credit Agreement and substantially in the form of the original
Notes under the Existing Credit Agreement (but with notation thereon
that such Notes are given in substitution for and replacement of the
original Notes).
SUBPART 4.1.3. Joinder of New Subsidiaries. The Agent shall
have received from the Borrower, in form and substance satisfactory to
the Agent, (a) a joinder agreement to the Amended Credit Agreement
executed by all direct and indirect subsidiaries of the Borrower that
are not parties to the Existing Credit Agreement (the "New
Subsidiaries"), (b) an amendment to the pledge agreement whereby all of
the capital stock of the New Subsidiaries is pledged to the Agent for
the benefit of the Lenders and (c) such corporate authority documents,
UCC financing statements and other documents as are reasonably
requested by the Agent in connection with the foregoing.
5
<PAGE> 6
PART V
MISCELLANEOUS
SUBPART 5.1. Cross-References. References in this Amendment to
any Part or Subpart are, unless otherwise specified, to such Part or
Subpart of this Amendment.
SUBPART 5.2. Instrument Pursuant to Existing Credit Agreement.
This Amendment is a Credit Document executed pursuant to the Existing
Credit Agreement and shall (unless otherwise expressly indicated
therein) be construed, administered and applied in accordance with the
terms and provisions of the Existing Credit Agreement.
SUBPART 5.3. References in Other Credit Documents. At such
time as this Amendment shall become effective pursuant to the terms of
Subpart 4.1, all references in the Credit Documents to the "Credit
Agreement" shall be deemed to refer to the Credit Agreement as amended
by this Amendment.
SUBPART 5.4. Representations and Warranties. The Borrower
hereby represents and warrants that (i) the conditions precedent to the
initial Loans were satisfied as of the Closing Date (assuming
satisfaction of all requirements in such conditions that an item be in
form and/or substance reasonably satisfactory to the Agent or any
Lenders or that any event or action have been completed or performed to
the reasonable satisfaction of the Agent or any Lenders), (ii) the
representations and warranties contained in Section 6 of the Existing
Credit Agreement (as amended by this Amendment) are correct on and as
of the date hereof as though made on and as of such date and after
giving effect to the amendments contained herein and (iii) no Default
or Event of Default exists under the Existing Credit Agreement on and
as of the date hereof and after giving effect to the amendments
contained herein.
SUBPART 5.5. Liens. The Borrower and the Guarantors, as
applicable, affirm the liens and security interests created and granted
in the Credit Documents (including, without limitation, the Pledge
Agreement) and agree that this Amendment shall in no manner adversely
effect or impair such liens and security interests.
SUBPART 5.6. Acknowledgment of Guarantors. The Guarantors
acknowledge and consent to all of the terms and conditions of this
Amendment and agree that this Amendment and all documents executed in
connection herewith do not operate to reduce or discharge the
Guarantors' obligations under the Amended Credit Agreement or the other
Credit Documents. The Guarantors further acknowledge and agree that the
Guarantors have no claims, counterclaims, offsets,
6
<PAGE> 7
or defenses to the Credit Documents and the performance of the
Guarantors' obligations thereunder or if the Guarantors did have any
such claims, counterclaims, offsets or defenses to the Credit Documents
or any transaction related to the Credit Documents, the same are hereby
waived, relinquished and released in consideration of the Lenders'
execution and delivery of this Amendment.
SUBPART 5.7. No Other Changes. Except as expressly modified
and amended in this Amendment, all the terms, provisions and conditions
of the Credit Documents shall remain unchanged and shall continue in
full force and effect.
SUBPART 5.8. Counterparts. This Amendment may be executed by
the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but
one and the same agreement.
SUBPART 5.9. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NORTH CAROLINA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
SUBPART 5.10. Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
[The remainder of this page has been left blank intentionally]
7
<PAGE> 8
This Amendment No. 1 to Amended and Restated Credit Agreement is
executed as of the day and year first written above.
BORROWER: PERSONNEL GROUP OF AMERICA, INC.,
a Delaware corporation
By: /s/ Ken R. Bramlett, Jr.
---------------------------------------
Name: Ken R. Bramlett, Jr.
-------------------------------------
Title: Senior Vice President
GUARANTORS: STAFFPLUS, INC.,
a Delaware corporation
PFI CORP.,
a Delaware corporation
INFOTECH SERVICES, INC.,
a North Carolina corporation
BROUGHTON SYSTEMS, INC.,
a Virginia corporation
WORD PROCESSING PROFESSIONALS, INC.,
a New York corporation
LLOYD RITTER CONSULTING, INC.,
a California corporation
FRANKLIN-PIERCE ASSOCIATES, INC.,
a Massachusetts corporation
SCOTT-WAYNE ASSOCIATES, INC.,
a Massachusetts corporation
BAL ASSOCIATES, INC.,
a California corporation
CREATIVE CORPORATE STAFFING, INC.,
a North Carolina corporation
ADVANCED BUSINESS CONSULTANTS, INC.,
a North Carolina corporation
By: /s/ Ken R. Bramlett, Jr.
---------------------------------------
Name: Ken R. Bramlett, Jr.
-------------------------------------
Title: Vice President of each of the
above-named Guarantors
<PAGE> 9
EXISTING
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a Lender
and in its capacity as Agent
By: /s/ Mark D. Halmrast
---------------------------------------
Name: Mark D. Halmrast
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS SUCCESSOR
BY MERGER TO BANK OF AMERICA ILLINOIS
By: /s/ Michael J. McKenney
---------------------------------------
Name: Michael J. McKenney
-------------------------------------
Title: Vice President
------------------------------------
BANQUE PARIBAS
By: /s/ Diane P. Helkowski
---------------------------------------
Name: Diane P. Helkowski
-------------------------------------
Title: Vice President
------------------------------------
By: /s/ Robert G. Carino
---------------------------------------
Name: Robert G. Carino
-------------------------------------
Title: Vice President
------------------------------------
COMERICA BANK
By: /s/ Tamara J. Gurne
---------------------------------------
Name: Tamara J. Gurne
-------------------------------------
Title: Vice President
------------------------------------
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
---------------------------------------
Name: David M. Cawrse
-------------------------------------
Title: First Vice President and Manager
------------------------------------
[Lender Signatures Continue]
<PAGE> 10
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ David T. McNeek
---------------------------------------
Name: David T. McNeek
-------------------------------------
Title: Authorized Agent
------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert J. Mitchell, Jr.
---------------------------------------
Name: Robert J. Mitchell, Jr.
-------------------------------------
Title: Vice President
------------------------------------
FIRST UNION NATIONAL BANK
By: /s/ David Tratter
---------------------------------------
Name: David Tratter
-------------------------------------
Title: Vice President
------------------------------------
NEW
LENDERS: WACHOVIA BANK, N.A.
By: /s/ Sarah T. Warren
---------------------------------------
Name: Sarah T. Warren
-------------------------------------
Title: Vice President
------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> MAR-29-1998
<CASH> 1,362
<SECURITIES> 0
<RECEIVABLES> 96,472
<ALLOWANCES> (1,403)
<INVENTORY> 0
<CURRENT-ASSETS> 104,587
<PP&E> 16,847
<DEPRECIATION> (4,828)
<TOTAL-ASSETS> 501,233
<CURRENT-LIABILITIES> 54,723
<BONDS> 208,086
0
0
<COMMON> 249
<OTHER-SE> 219,590
<TOTAL-LIABILITY-AND-EQUITY> 501,233
<SALES> 154,837
<TOTAL-REVENUES> 154,837
<CGS> 113,849
<TOTAL-COSTS> 140,151
<OTHER-EXPENSES> 3,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,487
<INCOME-PRETAX> 9,120
<INCOME-TAX> 3,858
<INCOME-CONTINUING> 5,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,262
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
