-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HBRN26Wu/5Dt1BiS4iyRiZ3138Z3PZJ+qKPdP6AiyQQNjQJIFWDa7MvWhRs92YYM h3XNnzl4iCBMQE5BMMklMA== 0000950144-97-006714.txt : 19970610 0000950144-97-006714.hdr.sgml : 19970610 ACCESSION NUMBER: 0000950144-97-006714 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970427 FILED AS OF DATE: 19970609 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORRELL CORP CENTRAL INDEX KEY: 0000778397 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 580953079 STATE OF INCORPORATION: GA FISCAL YEAR END: 1030 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14018 FILM NUMBER: 97621219 BUSINESS ADDRESS: STREET 1: 3535 PIEDMONT RD N.E. CITY: ATLANTA STATE: GA ZIP: 30305 BUSINESS PHONE: 4042403000 MAIL ADDRESS: STREET 1: 3535 PIEDMONT RD N.E. CITY: ATLANTA STATE: GA ZIP: 30305 10-Q 1 NORRELL CORPORATION: 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [MARK ONE] [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE OF 1934 For the quarterly period ended April 27, 1997 Commission File No. 0-24300 NORRELL CORPORATION ------------------- (Exact name of registrant as specified in its charter) GEORGIA 58-0953709 - ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 3535 Piedmont Road, NE, Atlanta, GA 30305 - ---------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (404)240-3000 -------------
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: 24,079,702 shares on May 25, 1997. 2 Norrell Corporation and Subsidiaries FORM 10-Q INDEX
Page No. -------- PART I FINANCIAL INFORMATION - ------ ITEM 1. Financial Statements Consolidated Balance Sheets - April 27, 1997 (Unaudited) and October 27, 1996 2 Consolidated Statements of Income (Unaudited) - Three months and Six Months ended April 27, 1997 and April 28, 1996 3 Consolidated Statements of Cash Flows (Unaudited) - Six months ended April 27, 1997 and April 28, 1996 4 Notes to Consolidated Financial Statements (Unaudited) 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II OTHER INFORMATION - ------- ITEM 6. Exhibits and Reports on Form 8-K 10 SIGNATURE 13
3 NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS APRIL 27, 1997 OCTOBER 27, 1996 - ------ -------------- ---------------- CURRENT ASSETS CASH AND SHORT-TERM INVESTMENTS $ 7,894 $ 8,876 ACCOUNTS RECEIVABLE TRADE, LESS ALLOWANCES OF $8,712 IN 1997 200,791 145,843 AND $7,411 IN 1996 PREPAID EXPENSES 3,205 2,674 OTHER 11,534 9,995 --------- --------- TOTAL CURRENT ASSETS 223,424 167,388 --------- --------- PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION 15,589 13,513 NONCURRENT DEFERRED INCOME TAXES 10,791 6,034 OTHER ASSETS GOODWILL AND OTHER INTANGIBLES, NET OF AMORTIZATION 123,414 45,069 MIS DEVELOPMENT COSTS, NET OF AMORTIZATION 26,433 18,634 INVESTMENTS AND OTHER ASSETS 12,102 12,593 --------- --------- TOTAL OTHER ASSETS 161,949 76,296 --------- --------- TOTAL ASSETS $ 411,753 $ 263,231 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES CURRENT MATURITIES OF LONG-TERM DEBT $ 12,019 $ 9,789 ACCOUNTS PAYABLE 13,570 14,651 ACCRUED EXPENSES 86,596 67,536 DEFERRED REVENUE AND GAIN 10,433 10,822 --------- --------- TOTAL CURRENT LIABILITIES 122,618 102,798 LONG-TERM DEBT, LESS CURRENT MATURITIES 120,240 23,316 LONG-TERM DEFERRED GAIN 10,727 11,471 LONG-TERM ACCRUED EXPENSES 40,435 27,614 --------- --------- TOTAL LIABILITIES 294,020 165,199 --------- --------- SHAREHOLDERS' EQUITY COMMON STOCK, STATED VALUE $.01 PER SHARE; 50,000,000 SHARES AUTHORIZED, WITH SHARES ISSUED OF 23,999,360 IN 1997 AND 23,566,204 IN 1996 240 236 TREASURY STOCK, AT COST; 32,565 SHARES IN 1997 AND 29,091 SHARES IN 1996 (790) (575) ADDITIONAL PAID-IN CAPITAL 50,250 44,096 RECEIVABLES FROM OFFICERS AND EMPLOYEES (125) (111) RETAINED EARNINGS 68,158 54,386 --------- --------- TOTAL SHAREHOLDERS' EQUITY 117,733 98,032 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 411,753 $ 263,231 ========= =========
2 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------- ------------------------------ APRIL 27, 1997 APRIL 28, 1996 APRIL 27, 1997 APRIL 28, 1996 -------------- -------------- -------------- -------------- REVENUES $317,943 $250,334 $599,177 $479,585 COST OF SERVICES 248,032 197,011 468,377 376,828 -------- -------- -------- -------- GROSS PROFIT 69,911 53,323 130,800 102,757 OPERATING EXPENSES 50,686 41,271 96,642 80,803 DEPRECIATION AND AMORTIZATION 2,598 1,450 4,519 2,644 -------- -------- -------- -------- INCOME FROM OPERATIONS 16,627 10,602 29,639 19,310 OTHER EXPENSE INTEREST 2,548 208 3,486 364 OTHER 401 235 860 470 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 13,678 10,159 25,293 18,476 INCOME TAXES 5,199 3,910 9,613 7,113 -------- -------- -------- -------- NET INCOME $ 8,479 $ 6,249 $ 15,680 $ 11,363 EARNINGS PER COMMON SHARE $ 0.33 $ 0.25 $ 0.61 $ 0.46 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 25,944 24,929 25,837 24,852 ======== ======== ======== ========
3 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5 NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED ---------------------------------- APRIL 27, 1997 APRIL 28, 1996 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 15,680 $ 11,363 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES DEPRECIATION AND AMORTIZATION - OPERATING EXPENSES 4,519 2,644 DEPRECIATION AND AMORTIZATION - COST OF SERVICES/OTHER EXPENSES 275 148 GAIN ON RETIREMENT OF COMMON STOCK (942) (1,235) PROVISION FOR DOUBTFUL ACCOUNTS 942 1,115 DEFERRED INCOME TAXES (6,106) (4,926) DEFERRED GAIN ON SALE OF BUILDING (744) 13,711 LONG-TERM ACCRUED EXPENSES 4,526 1,549 OTHER 3,671 92 CHANGE IN CURRENT ASSETS AND CURRENT LIABILITIES ACCOUNTS RECEIVABLE, TRADE (46,803) (8,588) PREPAID EXPENSES (355) 136 DEFERRED REVENUE 285 (709) ACCOUNTS PAYABLE (6,096) (4,728) ACCRUED EXPENSES 19,793 3,509 OTHER 619 2,513 --------- --------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (10,736) 16,594 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES COST OF ACQUISITIONS, NET OF CASH ACQUIRED (76,806) (6,780) INCREASE IN MIS DEVELOPMENT COSTS, NET (8,830) (5,888) ADDITIONS TO PROPERTY AND EQUIPMENT (3,853) (2,974) CASH INVESTMENTS IN AND ADVANCES TO JOINT VENTURES (1,532) (1,569) INCREASE IN INVESTMENTS AND OTHER ASSETS (580) (1,599) CASH DISTRIBUTIONS FROM JOINT VENTURE -- 325 INCREASE IN GOODWILL AND OTHER INTANGIBLES, NET (565) (268) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (92,166) (18,753) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS FROM THE ISSUANCE OF LONG-TERM DEBT 233,091 4,030 REPAYMENTS OF LONG-TERM DEBT (133,939) -- PROCEEDS FROM THE ISSUANCE OF COMMON STOCK 2,474 170 PROCEEDS FROM STOCK OPTION EXERCISES INCLUDING RELATED TAX BENEFITS 2,439 722 DIVIDENDS PAID ON COMMON STOCK (1,908) (1,457) ACQUISITION OF TREASURY STOCK (263) (85) REDUCTION IN RECEIVABLES FROM OFFICERS AND EMPLOYEES 26 207 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 101,920 3,587 --------- --------- NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS (982) 1,428 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 8,876 5,115 --------- --------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 7,894 $ 6,543 ========= ========= SUPPLEMENTARY CASH FLOW DISCLOSURES CASH PAYMENTS DURING THE PERIOD FOR INTEREST $ 2,528 $ 359 INCOME TAXES, NET OF REFUNDS 13,858 9,284 NONCASH INVESTING AND FINANCING ACTIVITY ISSUANCE OF OPTIONS TO BENEFIT PLan 842 726 EXERCISE OF BENEFIT PLAN STOCK OPTIONS 780 209
4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 6 NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K. The information furnished reflects all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods presented. Such adjustments are of a normal recurring nature. 2. Acquisition of Assets Effective January 2, 1997, the Company acquired all of the outstanding common and preferred stock and all vested and unvested stock rights of Comtex Information Systems, Inc. ("Comtex") for $67,000,000 of cash plus stock options to acquire approximately 141,000 shares of Norrell Corporation Common Stock at a weighted average exercise price of $4.56 per share. Comtex is a New York City-based provider of information technology services, including systems planning and development, organizational consulting related to business transformation and staff augmentation support. Comtex has locations in New York City; White Plains, New York and Miami, Florida. The acquisition, which was accounted for under the purchase method, was financed with borrowings under the Company's revolving credit facility. The results of operations of Comtex are included in the statements of income beginning January 2, 1997. At December 31, 1996, Comtex had net assets of $10,066,000. 3. Long Term Debt and Financial Instruments Effective December 26, 1996, the Company amended its $95,000,000 revolving credit facility to increase available borrowings to $150,000,000. In addition, the Company increased its available borrowings under its unsecured lines of credit from $40,000,000 to $50,000,000. The Company also entered into four interest rate swap agreements in order to manage exposure to fluctuations in interest rates. The difference between fixed and variable interest amounts calculated by reference to agreed-upon principal notional amounts is recognized as an adjustment to interest expense over the life of the swaps. Two of the four swap agreements are each for notional principal amounts of $20,000,000, the remaining two agreements are for notional principal amounts of $12,000,000 and $8,000,000. The Company exchanges floating interest rates based on LIBOR for an average fixed rate of 6.43% at quarterly settlement dates. The swap agreements terminate between November 2001 and January 2002. At April 27, 1997, the total fair market value of the swaps was $1,018,000. 5 7 4. New Accounting Pronouncement In March, 1997, the Financial Accounting Standards Board released Statement of Financial Accounting Standard No. 128 ("SFAS 128"), Earnings Per Share, which is effective for fiscal years ending after December 15, 1997. Early adoption is not permitted. SFAS 128 may significantly change reported earnings per share ("EPS") for companies, such as Norrell Corporation, with complex capital structures as compared to EPS calculated using the modified treasury stock method. The pro forma effect of applying the provision of SFAS 128 is as follows:
Three Months Ended Six Months Ended -------------------------------------------- ---------------------------------------------- April 27, 1997 April 28, 1996 April 27, 1997 April 28, 1996 -------------- -------------- -------------- -------------- Historical Pro Forma Historical Pro Forma Historical Pro Forma Historical Pro Forma ---------- --------- ---------- --------- ---------- --------- ---------- --------- Primary/Basic EPS $0.33 $0.35 $0.25 $0.27 $0.61 $0.66 $0.46 $0.49 Fully Diluted/Diluted EPS $0.33 $0.33 $0.25 $0.25 $0.61 $0.61 $0.45 $0.46
6 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company operates on a 52-53 week fiscal calendar. The 1997 fiscal year will end on November 2 and will include a 53rd week. The Company anticipates the additional week of operations will add approximately $3 to $6 million to fourth quarter operating income. A 53rd week occurs in one of every 5 or 6 fiscal years depending on the timing of leap years. OPERATING RESULTS SECOND QUARTER ENDED APRIL 27, 1997 COMPARED TO SECOND QUARTER ENDED APRIL 28, 1996 Revenues increased 27.0%, or $67.6 million, to $317.9 million in 1997. Staffing Services revenues grew 16.5% to $214.0 million, and accounted for 67.3% and 73.4% of total 1997 and 1996 period revenues, respectively. Staffing Services volume, as measured by hours that staffing employees worked, increased 12.1% and prices rose 3.9% compared to 15.0% and 3.5%, respectively, for the 1996 period. Outsourcing Services revenues grew 14.2% to $60.2 million. Outsourcing Services revenues from customers other than IBM increased $6.2 million in 1997 to $20.8 million. The Company added to its Professional Services Group through the acquisitions of Analytical Technologies, Inc. and ANATEC Canada, Inc. (collectively "ANATEC") in July, 1996, Accounting Resources, Inc. ("ARI") in November, 1996 and Comtex in January, 1997. Professional Services revenues were $43.7 million in the 1997 period compared to $13.9 million in the 1996 period, a 214.0% increase. The 1996 period included the results of American Technical Resources, Inc. ("ATR"), which was accounted for as a pooling of interests, and Financial Staffing. Gross profit increased 31.1%, or $16.6 million, to $69.9 million in 1997. Gross margin (gross profit as a percent of revenues) increased from 21.3% in the 1996 period to 22.0% in the 1997 period. Staffing Services gross margin decreased from 21.5% in 1996 to 21.1% in 1997. This decline of 0.4% was primarily the result of higher wage rates. Outsourcing Services gross margin decreased from 19.2% in 1996 to 18.3% in the 1997 period. Over half of the decline was due to increased use of Staffing Services employees to staff outsourcing contracts. Under this arrangement, Staffing Services recognizes the gross profit, whereas Outsourcing Services recognizes revenue from these transactions equal to the charge from Staffing Services. The remaining decline was due to a customer billing adjustment which added 0.3% to the 1996 period gross margin and to a somewhat smaller price increase in the 1997 period on a contract with IBM. Contract costs rose slightly more than the price increase which contributed to the margin decline. Professional Services gross margin increased from 26.3% in the 1996 period to 31.4% in the 1997 period. Margins increased as a result of adding higher margin information technology consulting services in the 1997 period through the acquisitions of ANATEC, ARI and Comtex. Operating expenses increased 22.8%, or $9.4 million, primarily as a result of acquisitions and the added costs of supporting internal growth. Depreciation and amortization expense increased $1.1 million, or 79.2%, as a result of increased investment in management information systems ("MIS") and amortization of goodwill from acquisitions. Operating expenses and depreciation and amortization, as a percentage of revenues, declined from 17.1% in the 1996 period to 16.8% in the 1997 period as the Company experienced favorable operating leverage. Interest expense increased from $208,000 in the 1996 period to $2.5 million in the 1997 period as a result of borrowings to fund the purchase of ANATEC, ARI and Comtex and the increased cost associated with carrying a higher trade accounts receivable balance. See Liquidity and Capital Resources. Other expense increased from $235,000 in the 1996 period to $401,000 in the 1997 period as a result of increased losses from the Company's 50% ownership in a joint venture to provide administrative outsourcing for health care facilities. 7 9 OPERATING RESULTS SIX MONTHS ENDED APRIL 27, 1997 COMPARED TO SIX MONTHS ENDED APRIL 28, 1996 Revenues increased 24.9%, or $119.6 million, to $599.2 million in 1997. Staffing Services revenues grew 15.2% to $408.5 million, and accounted for 68.2% and 73.9% of total 1997 and 1996 period revenues, respectively. Staffing Services volume, as measured by hours that staffing employees worked, increased 10.7% and prices rose 4.1% compared to 13.7% and 4.2%, respectively, for the 1996 period. Outsourcing Services revenues grew 15.3% to $115.8 million. Outsourcing Services revenues from customers other than IBM increased $11.4 million from 1996 to $38.4 million. The Company added to its Professional Services Group through the acquisitions of ANATEC, ARI and Comtex. Professional Services revenues were $74.9 million in the 1997 period compared to $24.8 million in the 1996 period, a 202.4% increase. Gross profit increased 27.3%, or $28.0 million, to $130.8 million in 1997. Gross margin increased from 21.4% in the 1996 period to 21.8% in the 1997 period. Staffing Services gross margin declined from 21.9% in 1996 to 21.3% in 1997. During the first quarter of 1996, workers' compensation liability for the franchise division of Norrell Services was adjusted to give effect to much better than expected loss experience. The adjustment resulted in a reduction of $800,000 in cost of services which added 0.2% to Staffing Services gross margin in the 1996 period. Without this adjustment, gross margin would have been 21.7% in the 1996 period. The remaining decline of 0.4% was primarily the result of higher wage rates. Outsourcing Services gross margin declined from 18.6% in 1996 to 18.2% in the 1997 period. Over half of the decline was due to a an increased use of Staffing Services' employees to staff outsourcing contracts. Under this arrangement, Staffing Services recognizes the gross profit whereas Outsourcing Services recognizes revenue from these transactions equal to the charge from Staffing Services. Professional Services gross margin increased from 25.9% in the 1996 period to 30.5% in the 1997 period. Margins increased as a result of adding higher margin information technology consulting services in the 1997 period through the acquisitions of ANATEC, ARI and Comtex. The 1996 period included the results of ATR, which was accounted for as a pooling of interests, and Financial Staffing. Operating expenses increased 19.6%, or $15.8 million, primarily as a result of acquisitions and the added costs of supporting internal growth. Depreciation and amortization expense increased $1.9 million, or 70.9%, from the 1996 period due to increased investment in MIS and goodwill from acquisitions. Operating expenses and depreciation and amortization, as a percentage of revenues, declined from 17.4% in the 1996 period to 16.9% in the 1997 period as the Company experienced favorable operating leverage. Interest expense increased from $364,000 in the 1996 period to $3.5 million in the 1997 period as a result of borrowings to fund the purchase of ANATEC, ARI and Comtex and the increased cost associated with carrying a higher trade accounts receivable balance. See Liquidity and Capital Resources. Other expense increased from $470,000 in the 1996 period to $860,000 in the 1997 period as a result of increased losses from the Company's 50% ownership in a joint venture to provide administrative outsourcing for health care facilities. LIQUIDITY AND CAPITAL RESOURCES Cash used by operations in the 1997 period was $10.7 million compared to cash provided of $16.6 million in the 1996 period. The 1997 period included an increase of $46.8 million in trade accounts and notes receivable compared to an increase of $8.6 million in the 1996 period. The 1997 increase was due principally to the higher level of revenues in the 1997 period and to billing delays caused by the conversion in December 1996 to a new billing and accounts receivable system. The Company does not believe that system issues have impacted the collectibility of its accounts receivable. The Company is currently improving the new billing system and expects to incur additional costs to improve its operation. Higher revenues in the 1997 period were due, in part, to the acquisitions of Comtex, ANATEC and ARI. The 1997 period cash used in operating activities was partially offset by an increase in accrued expenses (an increase in cash) of $19.8 million compared to an increase of $3.5 million in the 1996 period. Included in the 1997 amount was an accrual of $9.2 million for the contingent payment associated with the acquisition of ANATEC. The remaining increase in accrued liabilities was related to internal growth in operations and the 8 10 acquisitions of Comtex, ANATEC and ARI. The 1996 cash provided by operating activities included a $13.7 million gain from the sale of the Company's interest in its Atlanta headquarters building which was sold by its joint venture owner. The Company had a 50% interest in the joint venture. Concurrent with the sale, the Company extended its lease for office space in the building for an additional seven years to now expire in 2007. The gain is being deferred and amortized on a straight-line basis through July 2005, the date on which the landlord may terminate the lease, and is recorded as a reduction in rent expense. Investing activities used cash of $92.2 million in the 1997 period compared to cash used of $18.8 million in the 1996 period. The January, 1997 purchase of Comtex and the November, 1996 purchase of ARI resulted in cash uses of $60.0 million and $7.6 million, respectively, in the 1997 period. The purchase of Valley Staffing Services, Inc. in January, 1996 used cash of $6.8 million in the 1996 period. In connection with its acquisition of ANATEC, the Company reached an agreement as to the final payment due the former owners of ANATEC. This payment of $9.2 million was based on ANATEC's gross profit for the twelve months ending December 31, 1996 and is included in the cost of acquisitions in the accompanying statements. The resulting cash flow impact was a use of $9.2 million. The investing activities for 1997 and 1996 included MIS development costs of $8.8 million and $5.9 million, respectively. At April 27, 1997, the Company had $132.3 million of total debt outstanding. The Company continues to estimate that it will capitalize approximately $17 to $21 million of costs in fiscal 1997 for MIS development and implementation and for property and equipment, primarily desktop computers required for the operation of new systems. The Company expects to incur additional costs in fiscal 1997 as a result of the decision to delay the implementation of a new payroll system. Costs of delaying implementation of the payroll system will be expensed as incurred during the remainder of fiscal 1997 and are expected to total approximately $4 to $5 million. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain forward-looking statements and information that involve risks and uncertainties. Where used in this report, the words "believe", "anticipate", "expect", "estimate" and similar expressions are intended to identify forward-looking statements. The Company's actual results could differ materially from the results anticipated. Among factors that may have a direct bearing on the Company's results are fluctuations in economic conditions in the Company's markets, the degree and nature of competition, pricing competition and the Company's ability to recruit and replace employees. 9 11 (a) Exhibit 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K The following reports on Form 8-K filed for the period covered under this quarterly filing are incorporated by reference. Form 8-K report dated December 8, 1996, filed on December 20, 1996 Form 8-K/A report dated December 8, 1996, filed on February 19, 1997 10 12 SIGNATURE 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. NORRELL CORPORATION (REGISTRANT) Date: June 5, 1997 By: S/C. Kent Garner ---------------- C. Kent Garner Vice President and Chief Financial Officer (On behalf of the Registrant and as Chief Accounting Officer) 11 EX-11 2 COMPUTATION OF EARNINGS 1 EXHIBIT 11 NORRELL CORPORATION AND SUBSIDIARIES COMPUTATION OF PRIMARY EARNINGS PER SHARE (Dollars and shares in thousands, except per share amounts)
Three Months Ended Six Months Ended ---------------------- ---------------------- April 27, April 28, April 27, April 28, 1997 1996 1997 1996 ---- ---- ---- ---- INCOME AVAILABLE TO COMMON SHARES PRIMARY: Net income applicable to common stock $ 8,479 $ 6,249 $15,680 $11,363 ======= ======= ======= ======= WEIGHTED AVERAGE SHARES PRIMARY: Common shares 23,959 23,369 23,839 23,318 Common share equivalents applicable to stock options 1,985 1,560 1,998 1,534 ------- ------- ------- ------- Total 25,944 24,929 25,837 24,852 ======= ======= ======= ======= EARNINGS PER SHARE PRIMARY: Net income applicable to common stock $ 0.33 $ 0.25 $ 0.61 $ 0.45 ======= ======= ======= =======
2 NORRELL CORPORATION AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (Dollars and shares in thousands, except per share amounts)
Three Months Ended Six Months Ended ---------------------- ----------------------- April 27, April 28, April 27, April 28, 1997 1996 1997 1996 ---- ---- ---- ---- INCOME AVAILABLE TO COMMON SHARES FULLY DILUTED: Net income applicable to common stock $ 8,479 $ 6,249 $15,680 $11,363 ======= ======= ======= ======= WEIGHTED AVERAGE SHARES FULLY DILUTED: Common shares 23,959 23,369 23,839 23,318 Common share equivalents applicable to stock options 1,985 1,864 1,998 1,888 ------- ------- ------- ------- Total 25,944 25,233 25,837 25,206 ======= ======= ======= ======= EARNINGS PER SHARE (A) FULLY DILUTED: Net income applicable to common stock $ 0.33 $ 0.25 $ 0.61 $ 0.45 ======= ======= ======= =======
(a) This calculation is submitted in accordance with Regulation S-K 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS NOV-02-1997 OCT-28-1996 APR-27-1997 1 7,894 0 200,791 8,712 0 223,424 33,994 18,405 411,753 122,618 0 0 0 240 117,493 411,753 599,177 599,177 468,377 468,377 101,161 942 3,486 25,293 9,613 15,680 0 0 0 15,680 .61 .61
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