0000074386-95-000008.txt : 19950816 0000074386-95-000008.hdr.sgml : 19950816 ACCESSION NUMBER: 0000074386-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950702 FILED AS OF DATE: 19950815 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLSTEN CORP CENTRAL INDEX KEY: 0000074386 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [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: 95564043 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 07/02/95 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 July 2, 1995 --------------- Commission File No. 0-3532 -------- 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 11747-8905 ----------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 844-7800 ------------------- Not Applicable -------------------------------------------------------------------------- (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 August 11, 1995 ------------------------------------ ------------------------------- Common Stock, $ .10 par value 32,529,878 shares Class B Common Stock, $.10 par value 9,248,876 shares 2 INDEX ------- Page No. --------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets - July 2, 1995 (Unaudited) and January 1, 1995 2 Consolidated Statements of Income (Unaudited) - Quarters and Six Months Ended July 2, 1995 and July 3, 1994, respectively 3 Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended July 2, 1995 and July 3, 1994 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 4. Submission of Matters to a Vote of Security Holders. 8 Item 6. Exhibits and Reports on Form 8-K. 9 SIGNATURES 10 1 3 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements. --------------------- Olsten Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share amounts) July 2, 1995 January 1, 1995 ASSETS ------------ --------------- (Unaudited) CURRENT ASSETS: Cash $ 60,608 $ 68,338 Receivables, net 352,124 319,613 Other current assets 34,556 51,575 --------- --------- Total current assets 447,288 439,526 FIXED ASSETS, NET 90,209 72,543 INTANGIBLES, NET (Note 5) 224,945 200,972 OTHER ASSETS 6,622 12,917 --------- --------- $769,064 $725,958 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accrued expenses $ 67,498 $ 71,889 Payroll and related taxes 45,753 30,241 Insurance costs 36,942 47,301 Accounts payable 12,972 15,625 --------- --------- Total current liabilities 163,165 165,056 LONG-TERM DEBT (Note 2) 125,000 125,000 OTHER LIABILITIES 58,607 49,899 SHAREHOLDERS' EQUITY: Common stock $.10 par value; authorized 110,000,000 shares; issued 32,515,284 and 32,257,321 shares, respectively 3,252 3,226 Class B common stock $.10 par value; authorized 50,000,000 shares; issued 9,249,327 and 9,266,496 shares, respectively 925 927 Additional paid-in capital 235,499 232,594 Retained earnings 183,492 150,506 Cumulative translation adjustment (876) (1,250) --------- --------- Total shareholders' equity 422,292 386,003 --------- --------- $769,064 $725,958 ========= ========= See notes to consolidated financial statements. 2 4 Olsten Corporation and Subsidiaries Consolidated Statements of Income (In thousands, except share amounts) (Unaudited) Second Quarter Ended Six Months Ended -------------------- ------------------- July 2, July 3, July 2, July 3, 1995 1994 1995 1994 --------- --------- --------- ---------- Service sales, franchise fees, management fees and other income $601,693 $562,922 $1,177,196 $1,100,405 Cost of services sold 419,462 399,316 822,064 774,849 -------- -------- ---------- ---------- Gross profit 182,231 163,606 355,132 325,556 Selling, general and administrative expenses 145,041 133,192 285,198 267,907 Interest expense, net (Note 2) 740 2,109 1,386 4,264 -------- -------- ---------- ---------- Income before income taxes 36,450 28,305 68,548 53,385 Income taxes 15,131 11,901 28,516 22,635 -------- -------- ---------- ---------- Net income from operations before minority interest 21,319 16,404 40,032 30,750 Minority interest 364 -- 375 -- -------- -------- ---------- ---------- Net income $ 20,955 $ 16,404 $ 39,657 $ 30,750 ======== ======== ========== ========== SHARE INFORMATION: ----------------- Primary: Net income $ .50 $ .39 $ .94 $ .74 ======== ======== ========== ========== Average shares outstanding 42,293 41,981 42,310 41,720 ======== ======== ========== ========== Fully diluted: Net income $ .48 $ .38 $ .90 $ .72 ======== ======== ========== ========== Average shares outstanding 45,908 45,792 45,902 45,747 ======== ======== ========== ========== See notes to consolidated financial statements. 3 5 Olsten Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended --------------------- July 2, 1995 July 3, 1994 ------------ ------------ OPERATING ACTIVITIES: Net income $ 39,657 $ 30,750 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,282 12,127 Deferred income taxes 4,100 4,365 Changes in assets and liabilities: Accounts receivable, and other current assets (19,592) (1,692) Current liabilities (1,891) 15,933 Other, net 16,928 6,679 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 52,484 68,162 INVESTING ACTIVITIES: Purchases of fixed assets (24,882) (10,398) Acquisitions of businesses and reacquisitions of franchises (Note 5) (31,238) (2,018) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (56,120) (12,416) FINANCING ACTIVITIES: Net repayments of line of credit agreements -- (23,000) Cash dividends (6,671) (4,920) Issuances of common stock under stock plans 2,577 4,197 --------- --------- NET CASH USED IN FINANCING ACTIVITIES (4,094) (23,723) --------- --------- NET (DECREASE) INCREASE IN CASH (7,730) 32,023 CASH AT BEGINNING OF PERIOD 68,338 24,709 --------- --------- CASH AT END OF PERIOD $ 60,608 $ 56,732 ========= ========= See notes to consolidated financial statements. 4 6 Olsten Corporation and Subsidiaries Notes to Consolidated Financial Statements (In thousands) (Unaudited) 1. Accounting Policies -------------------- The consolidated financial statements have been prepared by 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. Long-Term Debt --------------- Interest expense, net, consists primarily of interest on long-term debt for the quarter of $2.1 million in 1995 and $2.3 million in 1994 offset by interest income from investments of $1.4 million and $145 thousand, respectively. Interest expense, net, for the six months was $3.5 million reduced by interest income of $2.2 million in 1995 and $4.8 million reduced by interest income of $531 thousand in 1994. 3. Subsequent Events ----------------- In August, the Company completed the acquisition of IMI Systems, Inc., a leading international information technology services company and has purchased P.J. Ward Associates, Ltd., a Toronto-based leader in Canadian information technology services. 4. Pending Acquisition/Sale of Businesses -------------------------------------- In May, the Company announced the pending acquisition of Nurse's House Call, the home health care business of Hooper Holmes, Inc., as well as the sale to Hooper Holmes, Inc. of ASB Meditest, Olsten's mobile diagnostic, paramedical and occupational health services company. The transaction is subject to approval of the Hooper Holmes shareholders and is anticipated to close in the third quarter. 5. Acquisition of Norsk Personal A.S. ----------------------------------- In the second quarter, the Company acquired a 50.1 percent interest in Norsk Personal A.S. for $24.8 million. The transaction was accounted for under the purchase method and accordingly, our share of the operating results of Norsk Personal A.S. has been included in the consolidated operating results since the date of the acquisition. 5 7 Item 2. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------- Results of Operations. ----------------------- Results of Operations ---------------------- Net income for the second quarter increased 27.7% to $21 million, or $.50 per share, compared to $16.4 million or $.39 per share. Net income for the first six months of 1995 was $39.7 million, or $.94 per share, a 29% increase over the $30.8 million or $.74 per share reported in 1994. The increases over 1994 resulted from increased profit growth in each of our businesses, as we capitalized on continuing strong demand for Staffing Services and our strategic positioning of HealthCare Services. Revenues increased $38.8 million or 6.9% to $601.7 million for the second quarter, as compared to $562.9 million for last year's second quarter and $76.8 million or 7% to $1.2 billion for the first six months of 1995. Staffing Services reported increased revenues of 20% for the second quarter and 23% for the six months of 1995, reflecting gains in volume and bill rates, as major corporate clients utilized our services on an increasing basis. As anticipated, revenues for HealthCare Services declined 6% for the second quarter and 7% for the first half of 1995 compared to last year. This decline primarily results from the transfer of Medicare business from company owned to a managed operation under the Hospital Contract Program and the sale of HealthCare Staff Resources in March 1995. Cost of services increased $20.1 million, or 5%, to $419.5 million for the second quarter and $47.2 million or 6.1% to $822.1 million for the six months of 1995 due primarily to the growth in revenues. As a percentage of revenues, such expenses decreased 1.2% to 69.7% for the quarter and .6% to 69.8% for the six months of 1995. Gross profits as a percentage of revenues increased to 30.3% for the quarter from 29.1% for last year's second quarter and increased to 30.2% from 29.6% for last year's six months primarily as a result of the growth in revenues, reduced workers' compensation and payroll tax costs and the additional management fees generated under the Hospital Contract Program. Selling, general and administrative expenses increased $11.8 million or 8.9% to $145 million for the second quarter and $17.3 million, or 6.5%, to $285.2 million for the six months. As a percentage of revenues, such expenses increased .4% to 24.1% for the second quarter resulting from market expansion costs and higher depreciation expense related to equipment and computer systems installed. For the six months, selling, general and administrative expenses as a percentage of revenues were essentially flat. Net interest expense was $740 thousand and $2.1 million for the second quarters of 1995 and 1994, respectively, and $1.4 million as compared to $4.3 million the for six month periods in 1995 and 1994, respectively. Net interest primarily reflects borrowing costs on long-term debt offset by interest income on investments. The decrease resulted from repayment of debt in the second quarter of 1994 and increased income on investments from improved concentration and investment of operating cash. 6 8 Liquidity and Capital Resources -------------------------------- Working capital at July 2, 1995, including $60.6 million in cash, was $284.1 million. The Company has temporarily invested available funds primarily in short-term, interest-bearing investments. The Company has a revolving credit agreement with six banks for up to $200 million in borrowings and letters of credit. At July 2, 1995, there were no borrowings and $61 million in standby letters of credit outstanding. 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 fund future growth and business opportunities as the Company increases its scope of services. 7 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- (a) The Annual Meeting of Shareholders of the Company was held on April 28, 1995. (c) (i) At the Annual Meeting, shareholders elected directors of the Company by votes as follows: Name of Director Votes For Votes Withheld ---------------- --------- -------------- Andrew N. Heine 91,430,060 6,480 Stuart R. Levine 91,432,160 4,380 Frank N. Liguori 91,430,190 6,350 John M. May 25,052,960 87,671 Miriam Olsten 91,423,910 12,630 Stuart Olsten 91,432,360 4,180 Richard J. Sharoff 91,432,360 4,180 Raymond S. Troubh 25,086,873 53,758 Josh S. Weston 25,076,487 64,144 (ii) At the Annual Meeting, shareholders voted upon a proposal to approve amendments to the Company's Restated Certificate of Incorporation. The votes were as follows: Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 112,457,091 994,515 56,672 3,068,893 (iii) At the Annual Meeting, shareholders voted upon a proposal to approve amendments to the Company's 1994 Stock Incentive Plan. The votes were as follows: Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 114,270,194 2,041,281 121,697 143,999 (iv) At the Annual Meeting, shareholders voted upon a proposal to approve an amendment to the Company's 1990 Non-Qualified Stock Option Plan for Non-Employee Directors and Consultants. The votes were as follows: Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 114,229,657 2,083,230 120,285 143,999 (v) At the Annual Meeting, shareholders voted upon a proposal to ratify and approve the appointment by the Board of Directors of Coopers & Lybrand as independent auditors for the Company for its 1995 fiscal year. The votes were as follows: Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 116,493,279 31,714 52,178 -0- 8 10 Item 6. Exhibits and Reports on Form 8-K. ---------------------------------- (a) The following exhibits are filed herewith: Exhibit 3 - Restated Certificate of Incorporation, as amended, of Company, filed on August 11, 1995, as Exhibit 4.1 to Company's Registration Statement on Form S-8 (No. 33-61763), is incorporated herein by reference. Exhibit 4 - Restated Certificate of Incorporation, as amended, of Company, filed on August 11, 1995, as Exhibit 4.1 to Company's Registration Statement on Form S-8 (No. 33-61763), is incorporated herein by reference. 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. 9 11 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. OLSTEN CORPORATION (REGISTRANT) Date: August 15, 1995 By: /s/ Frank N. Liguori ------------------------------ Frank N. Liguori Chairman and Chief Executive Officer Date: August 15, 1995 By: /s/ Anthony J. Puglisi ------------------------------- Anthony J. Puglisi Senior Vice President - Finance Chief Financial Officer 10 12 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q
5 This schedule contains summary financial information extracted from Olsten Corporation and Subsidiaries Consolidated Balance Sheets at July 2, 1995 (unaudited) and Olsten Corporation and Subsidiaries Consolidated Statements of Income for the six months ended July 2, 1995 (unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JUL-02-1995 60,608 0 364,470 12,346 0 447,288 153,345 63,136 769,064 163,165 0 4,177 0 0 418,115 769,064 1,177,196 1,177,196 822,064 822,064 283,775 1,423 3,549 68,548 28,516 39,657 0 0 0 39,657 .94 .90