-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, iaYVt8lfua5j8ocvoDjp8xjN7P+rmszUKA8nct1znZCu35D6q+A6w4oo40U/5N+K mjqQALqPX5HC5WTG/I33NA== 0000074386-94-000012.txt : 19941122 0000074386-94-000012.hdr.sgml : 19941122 ACCESSION NUMBER: 0000074386-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941002 FILED AS OF DATE: 19941114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLSTEN CORP CENTRAL INDEX KEY: 0000074386 STANDARD INDUSTRIAL CLASSIFICATION: 7363 IRS NUMBER: 132610512 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08279 FILM NUMBER: 94559898 BUSINESS ADDRESS: STREET 1: 175 BROAD HOLLOW ROAD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 516-844-7800 MAIL ADDRESS: STREET 1: 175 BROAD HOLLOW ROAD STREET 2: ONE MERRICK AVE CITY: MELVILLE STATE: NY ZIP: 11747 10-Q 1 OLSTEN CORP. FORM 10-Q FOR QUARTER ENDING 10/02/94 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q - - ----- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | X | EXCHANGE ACT OF 1934 - - ----- For the quarterly period ended October 2, 1994 --------------- Commission File No. 0-3532 -------- THE OLSTEN CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 13-2610512 - - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 175 Broad Hollow Road, Melville, New York 11747 - - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 844-7800 ------------------- One Merrick Avenue, Westbury, New York 11590 - - -------------------------------------------------------------------------- (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. 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 Outstanding at November 9, 1994 - - ------------------------------------ -------------------------------- Common Stock, $ .10 par value 32,216,274 shares Class B Common Stock, $.10 par value 9,268,705 shares 2 INDEX ------- Page No. --------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets - October 2, 1994 (Unaudited) and January 2, 1994 2 Consolidated Statements of Income (Unaudited) - Quarters and Nine Months Ended October 2, 1994 and October 3, 1993, respectively 3 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended October 2, 1994 and October 3, 1993 4 Notes to Consolidated Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 6-7 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. 8 SIGNATURES 9 1 3 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements. --------------------- The Olsten Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share amounts) ASSETS October 2, 1994 January 2, 1994 --------------- --------------- (Unaudited) CURRENT ASSETS: Cash $ 66,847 $ 24,709 Receivables, net 332,762 325,122 Other current assets 39,425 56,807 --------- -------- Total current assets 439,034 406,638 FIXED ASSETS, NET 70,291 60,185 INTANGIBLES, NET 198,994 204,670 OTHER ASSETS 13,331 18,601 --------- -------- $721,650 $690,094 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accrued expenses $ 95,775 $ 74,251 Insurance costs 49,542 45,730 Payroll and related taxes 22,361 31,143 Accounts payable 7,886 12,597 Current portion of long-term debt (Note 3) -- 1,886 --------- -------- Total current liabilities 175,564 165,607 LONG-TERM DEBT (Note 3) 125,000 176,057 OTHER LIABILITIES 54,391 44,110 SHAREHOLDERS' EQUITY: Common stock $.10 par value; authorized 110,000,000 shares; issued 32,257,535 and 29,976,240 shares, respectively 3,226 2,998 Class B common stock $.10 par value; authorized 50,000,000 shares; issued 9,226,297 and 10,482,514 shares, respectively 923 1,048 Additional paid-in capital 231,449 211,331 Retained earnings 131,809 90,280 Cumulative translation adjustment (712) (1,337) --------- -------- Total shareholders' equity 366,695 304,320 --------- -------- $721,650 $690,094 ========= ======== See notes to consolidated financial statements. 2 4 The Olsten Corporation and Subsidiaries Consolidated Statements of Income (In thousands, except share amounts) (Unaudited) Third Quarter Ended Nine Months Ended -------------------- ------------------- October 2, October 3, October 2, October 3, 1994 1993 1994 1993 --------- --------- --------- ---------- Service sales, franchise fees and other income $578,299 $556,675 $1,678,704 $1,610,994 Cost of services sold 407,760 387,878 1,182,608 1,113,082 -------- -------- ---------- ---------- Gross profit 170,539 168,797 496,096 497,912 Selling, general and administrative expenses 138,325 140,562 406,232 423,287 Interest expense, net (Note 3) 1,024 5,037 5,288 14,171 Merger and integration costs -- 80,911 -- 80,911 -------- -------- ---------- ---------- Income (loss) before income taxes and extraordinary charge 31,190 (57,713) 84,576 (20,457) Income taxes (benefit) 13,006 (11,510) 35,641 4,614 -------- -------- ---------- ---------- Income/(loss) before extraordinary charge 18,184 (46,203) 48,935 (25,071) Extraordinary charge, net -- (14,668) -- (14,668) -------- -------- ---------- ---------- Net income (loss) $ 18,184 $(60,871) $ 48,935 $ (39,739) ======== ======== ========== ========== SHARE INFORMATION: - - ------------------ Income (loss) before extraordinary charge $ .43 $ (1.14) $ 1.17 $ (.63) Extraordinary charge $ -- $ (.36) $ -- $ (.36) -------- -------- ---------- ---------- Net income (loss) $ .43 $ (1.50) $ 1.17 $ (.99) ======== ======== ========== ========== Weighted average shares 42,285 40,665 41,990 39,992 ======== ======== ========== ========== See notes to consolidated financial statements. 3 5 The Olsten Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended ---------------------- October 2, 1994 October 3, 1993 --------------- --------------- OPERATING ACTIVITIES: Net income $ 48,935 $(39,739) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,281 19,339 Extraordinary charge, net -- 14,668 Deferred income taxes 3,634 (9,908) Changes in assets and liabilities: Accounts receivable and prepaid expenses 9,742 (41,441) Current liabilities 9,957 53,612 Other, net 12,743 12,407 --------- --------- NET CASH PROVIDED BY OPERATIONS 103,292 8,938 INVESTING ACTIVITIES: Purchases of fixed assets (22,115) (25,409) Acquisitions of businesses (2,199) (2,001) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (24,314) (27,410) FINANCING ACTIVITIES: Net repayments of line of credit agreements (34,000) (3,797) Cash dividends (7,406) (5,586) Issuances of common stock under stock plans 4,566 5,156 Net proceeds from issuance of convertible debentures -- 122,114 Retirement of long-term debt -- (21,821) --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (36,840) 96,066 --------- --------- NET INCREASE IN CASH 42,138 77,594 CASH AT BEGINNING OF PERIOD 24,709 33,297 --------- --------- CASH AT END OF PERIOD $ 66,847 $110,891 ========= ========= See notes to consolidated financial statements. 4 6 The Olsten Corporation and Subsidiaries Notes to Consolidated Financial Statements (In thousands) (Unaudited) 1. Accounting Policies -------------------- The consolidated financial statements have been prepared by The Olsten Corporation (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments necessary for a fair presentation of results of operations, financial position and cash flows for each period presented. 2. Merger with Lifetime Corporation ("Lifetime") --------------------------------------------- On July 30, 1993, Lifetime merged into the Company. The merger was accounted for as a pooling of interests and, accordingly, the consolidated financial statements of the Company were restated for all periods prior to the merger to combine the accounts and operations of the Company and Lifetime. 3. Long-Term Debt --------------- On April 12, 1994, the Company called for redemption all $14 million of its 11.2% convertible senior subordinated notes, representing the last of the high coupon debt assumed in the Lifetime merger. At the option of the note holders, all $14 million has been converted into 636,109 shares of Class B common stock. As of October 2, 1994 the Company paid down the entire outstanding debt of $34 million under its revolving credit agreement. Interest expense, net, consists of interest on long-term debt for the quarter of $1.9 million in 1994 and $5.9 million in 1993 offset by interest income from investments of $830 thousand and $901 thousand, respectively. Interest expense, net, for the nine months was $6.6 million reduced by interest income of $1.4 million in 1994 and $16.5 million reduced by interest income of $2.3 million in 1993. 5 7 Item 2. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------- Results of Operations. ----------------------- Results of Operations - - ---------------------- Third quarter and nine-month results reflect the combined results of Olsten Corporation (the "Company") and Lifetime Corporation ("Lifetime"), pursuant to the merger completed on July 30, 1993, which was accounted for as a pooling of interests. Comparisons with prior year are based on restated combined results. Results for the third quarter and nine months of 1993 reflect merger related charges consisting of transaction costs, compensation and severance costs, asset writedowns, and integration costs, as well as an extraordinary charge for debt prepayment fees, net of taxes. Net income comparisons are exclusive of the merger-related and extraordinary charges incurred in both periods of 1993. Net income before merger-related costs for the third quarter increased 46.1% to $18.2 million, or $.43 per share, compared to $12.4 million or $.31 per share in the third quarter of 1993. For the first nine months of 1994, operating income was $48.9 million, or $1.17 per share, a 45.7% increase over the $33.6 million or $.84 per share, reported in 1993. The increases over 1993 resulted from increased revenues in Staffing Services as clients looked to Olsten for flexible staffing alternatives along with operating efficiencies resulting from the integration of the Olsten Kimberly QualityCare business. Revenues increased $21.6 million or 3.9% to $578.3 million for the third quarter and $67.7 million or 4.2% to $1.7 billion for the first nine months of 1994. Staffing Services revenues for the third quarter and the nine months grew 23% due to an expanding role in providing staffing solutions to companies that are restructuring and reengineering, and due to an improving economy that is marked by rising demand for assignment employees. As anticipated, revenues for HealthCare Services declined as a result of the sale and transfer of certain health care businesses, the consolidation and closing of certain offices, and the elimination of unprofitable business. Costs of services increased $19.9 million, or 5.1%, to $407.8 million for the quarter and $69.5 million or 6.2% to $1.2 billion for the nine months of 1994 due primarily to the growth in revenues. As a percentage of revenues, such expenses increased 0.8% to 70.5% for the quarter and 1.4% to 70.5% for the nine months of 1994. Gross margins as a percentage of revenues decreased to 29.5% for the quarter from 30.3% for last year's third quarter and decreased to 29.6% from 30.9% for last year's nine months. This resulted from the faster rate of growth of Staffing Services which operates at lower gross margins than HealthCare Services, the non-recurring revenue adjustments recorded by Lifetime in 1993, and the sale of selected businesses in the latter part of that year. Selling, general and administrative expenses decreased $2.2 million, or 1.6%, to $138.3 million for the third quarter and $17.1 million or 4% to $406.2 million for the nine months. As a percentage of revenues, such expenses decreased 1.4% to 23.9% for the third quarter and 2.1% to 24.2% for the nine months as a result of the Company's ability to effectively manage operating costs and the operating efficiencies achieved in the integration of Olsten Kimberly QualityCare. 6 8 Net interest expense was $ 1 million and $5 million for the third quarters of 1994 and 1993, respectively, and $5.3 million as compared to $14.2 million for the nine month periods in 1994 and 1993, respectively. This primarily reflects borrowing costs on long-term debt offset by interest income on investments. The decrease resulted from repayment of Lifetime double-digit coupon debt in the latter half of 1993 and in the second quarter of 1994. Liquidity and Capital Resources - - -------------------------------- Working capital at October 2, 1994, including $66.8 million in cash, was $263.5 million. The Company has temporarily invested available funds primarily in short-term, interest-bearing investments. The Company has revolving credit agreements including letters of credit totaling $200 million with a consortium of banks. At October 2, 1994, there were no outstanding borrowings against the revolver and $63 million in standby letters of credit. The Company believes that its levels of working capital and liquidity and its available sources of funds are sufficient to support present operations and to continue to increase its scope of services. 7 9 Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) The following exhibit is filed herewith: Exhibit 27 - Financial Data Schedule (b) The Company has not filed any report on Form 8-K during the period for which this report is filed. 8 10 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. THE OLSTEN CORPORATION (REGISTRANT) Date: November 14, 1994 By: /s/ Frank N. Liguori ------------------------------ Frank N. Liguori Chairman and Chief Executive Officer Date: November 14, 1994 By: /s/ Anthony J. Puglisi ------------------------------- Anthony J. Puglisi Senior Vice President - Finance Chief Financial Officer 9 11 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule EX-27 2 ARTICLE 5 FDS FOR 3RD QUARTER 10-Q
5 This schedule contains summary financial information extracted from The Olsten Corporation and Subsidiaries Consolidated Balance Sheets at October 2, 1994 (unaudited) and The Olsten Corporation and Subsidiaries Consolidated Statements of Income for the nine months ended October 2, 1994 (unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS JAN-01-1995 OCT-02-1994 66,847 0 346,015 13,253 0 439,034 130,584 60,293 721,650 175,564 0 4,149 0 0 362,546 721,650 1,678,704 1,678,704 1,182,608 1,182,608 405,713 519 5,288 84,576 35,641 48,935 0 0 0 48,935 $1.17 0
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