-----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, BaJOf0IwTeD4s5vJsIfV60+IuKIZgoN6g0kG75wjJSvGn/aujDoBE8P575wwHJwa +j6pRU742Db3x4ARx9dgJQ== 0000930420-97-000003.txt : 19970815 0000930420-97-000003.hdr.sgml : 19970815 ACCESSION NUMBER: 0000930420-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROMAC INTERNATIONAL INC CENTRAL INDEX KEY: 0000930420 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 593264661 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26058 FILM NUMBER: 97663741 BUSINESS ADDRESS: STREET 1: 120 W HYDE PARK PL STREET 2: SUITE 200 CITY: TAMPA STATE: FL ZIP: 33606 BUSINESS PHONE: 8132588855 MAIL ADDRESS: STREET 1: 120 W HYDE PARK PLACE STREET 2: SUITE 200 CITY: TAMPA STATE: FL ZIP: 33606 10-Q 1 ============================================================================== 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 For the quarterly period ended June 30, 1997 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ______________________________ Commission file number 0-26058 ROMAC INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) FLORIDA 59-3264661 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 120 West Hyde Park Place Suite 150 Tampa, Florida 33606 (Address of principal executive offices) (zip-code) Registrant's telephone number, including area code: (813) 251-1700 ______________________________ 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) had 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 July 31, 1997. 12,267,421 shares of $.01 par value Common Stock ============================================================================== PART I --- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENT ROMAC INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS)
June December 30 31 1997 1996 ------ ------ (unaudited) Assets: Current Assets: Cash and cash equivalents $30,352 $39,555 Short-term investments 3,903 880 Trade receivables, net of allowance for doubtful accounts of $581 and $617 respectively 23,327 17,061 Notes receivable from franchisees, current 233 193 Receivables from related parties, current 525 100 Deferred tax asset 243 243 Prepaid expenses and other current assets 1,273 1,214 ------ ------ Total current assets 59,856 59,246 Note receivable from franchisees, less current portion 71 75 Receivables from related parties, less current portion 849 862 Deferred tax asset 209 209 Furniture and equipment, net 8,242 5,346 Goodwill, net of accumulated amortization of $1,629 and $1,108, respectively 21,927 10,915 Other assets, net 2,257 906 ------- ------- Total assets $93,411 $77,559 ======= ======= Liabilities and Shareholders' Equity: Current Liabilities: Accounts payable and other accrued liabilities $ 2,268 $ 1,723 Accrued payroll costs 4,871 2,976 Current portion of notes payable and capital lease obligations 891 -- Current portion of payables to related parties 1,360 23 Income taxes payable 940 304 ------ ------ Total current liabilities 10,330 5,026 Notes payable and capital lease obligations, less current portion 1,636 -- Payables to related parties, less current portion 1,575 -- Other long-term liabilities, less current portion 1,829 1,249 ------ ------ Total liabilities 15,370 6,275 Commitment and contingencies -- -- Shareholders' Equity: Preferred stock, par value $.01; 15,000 shares authorized, none issued and outstanding -- -- Common stock, par value $.01; 100,000 shares authorized, 12,445 and 12,134 issued, respectively 124 121 Additional paid-in-capital 63,762 61,526 Stock subscriptions receivable (1) (13) Retained earnings 15,081 10,575 Less reacquired stock at cost; 338 shares, respectively (925) (925) ------ ------ Total shareholders' equity 78,041 71,284 ------ ------ Total liabilities and shareholders' equity $93,411 $77,559 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 1 ============================================================================== ROMAC INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended June June June June 30 30 30 30 1997 1996 1997 1996 ------ ------ ------ ------ (unaudited) (unaudited) (unaudited) (unaudited) Net service revenues $39,640 $21,466 $74,592 $38,355 Direct costs of service 23,577 12,029 44,581 21,748 ------ ------ ------ ------ Gross profit 16,063 9,437 30,011 16,607 Selling, general and administrative expenses 11,855 7,082 22,387 12,455 Depreciation and amortization 627 538 1,286 775 Other (income) expense (454) (315) (1,063) (463) ------ ------ ------ ------ Income before income taxes 4,035 2,132 7,401 3,840 Provision for income taxes 1,608 844 2,895 1,527 ------ ------ ------ ------ Net income $ 2,427 $ 1,288 $ 4,506 $ 2,313 ======= ======= ======= ======= Net income per share-Primary $0.19 $0.12 $0.36 $0.21 ===== ===== ===== ===== Weighted average shares outstanding-Primary 12,743 11,182 12,671 10,760 ======= ======= ======= ======= Net income per share- Fully Diluted $0.19 $0.11 $0.35 $0.21 ===== ===== ===== ===== Weighted average shares outstanding-Fully Diluted 12,982 11,307 12,791 10,822 ======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 2 ============================================================================== ROMAC INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1997 (AMOUNTS IN THOUSANDS) (UNAUDITED)
Shares Amounts COMMON STOCK: Balance at December 31, 1996 12,134 $ 121 Exercise of stock options 311 3 ------ ------ Balance at June 30, 1997 12,445 $ 124 ====== ====== ADDITIONAL PAID-IN CAPITAL: Balance at December 31, 1996 $61,526 Exercise of stock options 1,239 Tax benefit related to employee stock options 997 ------ Balance at June 30, 1997 $63,762 ======= STOCK SUBSCRIPTIONS RECEIVABLE: Balance at December 31, 1996 $ (13) Payments 12 ------ Balance at June 30, 1997 $ (1) ======= RETAINED EARNINGS: Balance at December 31, 1996 $10,575 Net income 4,506 ------ Balance at June 30, 1997 $15,081 ======= REAQUIRED STOCK: Balance at December 31, 1996 $ (925) ------ Balance at June 30, 1997 $ (925) =======
The accompanying notes are an integral part of these consolidated financial statements. 3 ============================================================================= ROMAC INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
Six Months Ended June June 30 30 1997 1996 ------ ------ (unaudited) (unaudited) Cash flows from operating activities: Net income $ 4,506 $ 2,313 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,286 775 Provision for losses on accounts and notes receivable (36) (98) (Increase) decrease in operating assets: Trade receivables, net (6,230) (5,510) Notes receivable from franchisees, current (40) (96) Prepaid expenses and other current assets (59) (736) Notes receivable from franchisees, less current portion 4 (61) Other assets, net (1,351) (109) Increase (decrease) in operating liabilities: Accounts payable and other accrued liabilities 545 (89) Accrued payroll costs 1,895 1,232 Income taxes payable 1,633 935 Other long-term liabilities 580 35 ------ ------ Cash (used in) provided by operating activities 2,733 (1,409) Cash flows from investing activities: Capital expenditures (2,835) (892) Acquisitions (11,507) (11,159) Payments for the purchase of short-term investments (3,023) -- Proceeds from the sale of fixed assets 1,674 -- Proceeds from the sale of short-term investments -- 7,806 ------ ------ Cash (used in) provided by investing activities (15,691) (4,245) Cash flows from financing activities: Payments on notes receivable from stock subscriptions 13 4 Payments on notes payable -- (127) Payments on payable to related parties -- (6) Issuance of payables to related parties 2,912 647 Payments on receivables from related parties 56 103 Net proceeds from secondary offering -- 47,510 Issuance of receivables from related parties (468) (205) Proceeds from exercise of stock options 1,242 203 ------ ------ Cash provided by (used in) financing activities 3,755 48,129 ------ ------ Decrease in cash and cash equivalents (9,203) 42,475 Cash and cash equivalents at beginning of period 39,555 620 ------ ------ Cash and cash equivalents at end of period $30,352 $43,095 ======= ======= Supplemental Cash Flows Information Cash paid during the period for: Interest -- $ 21 Income Taxes $ 1,444 $ 618 Non cash investing and financing activity: Capital lease transaction $ 2,526 --
The accompanying notes are an integral part of these consolidated financial statements. 4 ============================================================================== ROMAC INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) Note A --- Summary of Significant Accounting Policies Principles of Consolidation. The Consolidated Financial Statements include the accounts of Romac International, Inc. (the "Company") and its subsidiaries. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Interim Financial Information. The Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in management's opinion, include all adjustments necessary for a fair statement of results for such interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules or regulations; however, the Company believes that the disclosures made are adequate to make the information presented not misleading. Revenue Recognition. Net service revenues consist of sales from Company-owned and licensed offices, and royalties received from franchised operations, less credits and discounts. The Company recognizes revenue for Flexible Billings (Professional Temporary and Contract Services) based on hours worked by assigned personnel on a weekly basis. Search Fees are recognized in contingency search engagements upon the successful completion of the assignment. In a retained search engagement the initial retainer is recognized upon execution of the agreement, with the balance recognized on completion of the search. Reserves are established to estimate losses due to placed candidates not remaining in employment for the Company's guarantee period, typically 90 days. Franchise fees are determined based upon a contractual percentage of the revenue billed by franchisees. Costs relating to the support of franchised operations are included in the Company's selling, general and administrative expenses. The Company includes revenues and related direct costs of licensed offices in its net service revenues and direct costs of services, respectively. Commissions paid to licensees is based upon a percentage of the gross profit generated, and is included in the company's direct cost of services. As of June 30, 1997, there are no frachisees or licensees with the Company. Cash and Cash Equivalents. The Company classifies all highly-liquid investments with a maturity of three months or less as cash equivalents. Income Taxes. The Company accounts for income taxes under the principles of FAS 109 "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach to the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the carrying amounts and the tax bases of other assets and liabilities. The tax effects of deductions attributable to employees' disqualifying dispositions of shares obtained from incentive stock options were reflected in additional paid-in capital. Earnings Per Share. In March 1997, Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128") was issued which requires disclosure of basic earnings per share and modifies existing guidance for computing fully dilulted earnings per share. Under the new standard, basic earnings per share is computed as earnings divided by weighted average shares excluding the dilutive effects of stock options and other potentially dilutive securities. The effective date of SFAS 128 is December 15, 1997 and early adoption is not permitted. The pro forma impact of adoption of SFAS 128 had no impact on the period ended June 30, 1997, however the Company expects that this pronouncement could have a material impact on Earnings Per Share for the year ended December 31, 1997. 5 ============================================================================== ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements, particularly with respect to the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations. Additional written or oral forward-looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission or otherwise. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 (the "Securities Act') and Section 21 E of the Securities Exchange Act of 1934 (the "Exchange Act"). Such statements may include, but not be limited to, projections of revenue, income, losses, cash flows, capital expenditures, plans for future operations, financing needs or plans, plans relating to products or services of the Company, estimates concerning the effects of litigation or other disputes, as well as assumptions to any of the foregoing. Forward-Looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Results of Operations for each of the Three and Six Months Ended June 30, 1997 and 1996. Revenues. Net service revenues increased 84.2% and 94.3% respectively, to $39.6 million and $74.6 Million for the three and six month periods ending June 30, 1997 as compared to $21.5 million and $38.4 million for the same periods in 1996. These increases were compriseed of a $16.3 million and $32.0 million increase in Flexible Billings (Professional Temporary and Contract Services revenues combined) and a $1.8 million and $4.2 million increase in Search Fees for the three and six month periods ending June 30, 1997, as described below. Professional Temporary revenues increased 42.4% and 55.4% respectively, to $12.1 million and $24.4 million for the three and six month periods ending June 30, 1997 as compared to $8.5 million and $15.7 million for the same periods in 1996. This increase resulted from an increase in the number of hours billed by Company-owned operations compared to the same periods in 1996. The average hourly bill rate for the six month period ended June 30, 1997 increased 14.8% over the prior year due to a continued demand for the Company's knowledge workers and the Company's ability to pass on increased wage costs of its knowledge workers to its customers. Contract Services revenues increased 152.4% and 156.8% respectively, to $21.2 million and $38.0 million for the three and six month periods ending June 30, 1997 as compared to $8.4 million and $14.8 for the same periods in 1996. This increase resulted from an increase in the number of hours billed during the three months and six month periods ended June 30, 1997 as compared to the same periods in 1996. The average hourly bill rate for Company-owned operations increased 13.9% for the six month period ended June 30, 1997 due to the continued penetration into existing markets where hourly bill rates are higher such as Boston and San Francisco, as well as the increased expansion of the Company's Emerging Technologies initiative which concentrates on placing knowledge workers in highly skilled technologies with the greatest demand. Search fees increased 40.1% and 53.1% respectively, to $6.4 million and $12.1 million during the three and six month periods ended June 30, 1997 compared to $4.5 million and $7.9 million for the same periods in 1996. The increase resulted primarily from an increase in the number of search sales consultants, which increased the number of placements made during the three and six month periods ending June 30, 1997 as compared to the same periods in 1996. The average fee for each placement made during the periods remained relatively constant. 6 ============================================================================= Franchise and licensee revenues, which are included in the aforementioned revenues, decreased 66.8% and 58.3% to approximately $332,000 and $793,000 for the three and six month periods ending June 30, 1997 from approximately $1.0 million and $1.9 million for the same periods in 1996. The decrease was primarily due to the effects of discontinued franchisee and licensee operations in Minneapolis, St. Louis, and Portland during 1996, the acquisition of the San Francisco franchisee in June 1996 and the discontinuance of franchisee and licensee operations in Raleigh on March 31, 1997. Gross Profit. Gross profit increased 71.3% and 80.7% respectively, to $16.1 million and $30.0 million for the three and six month periods ending June 30, 1997 as compared to $9.4 and $16.6 million for the same periods in 1996. Gross profit as a percentage of net service revenues decreased to 40.1% and 40.2% respectively, for the three and six month periods ending June 30, 1997 as compared to 43.7% and 43.2% for the same periods in 1996. This decrease was result of the continuing change in the Company's business mix whereby revenues from Flexible Billings, traditionally lower gross margins than Search Fees, increased to 84.1% and 83.6% of the Company's total revenues for the three and six month periods ending June 30, 1997 as compared to 78.6% and 79.4% for the same periods in 1996. Selling, general and administrative expenses. Selling, general and administrative expenses increased 67.6% and 79.2% respectively, to $11.9 and $22.4 million for the three and six month periods ended June 30, 1997 as compared to $7.1 million and $12.5 million for the same periods in 1996. Selling, general and administrative expenses as a percentage of net service revenues decreased to 30.1% and 30.0% respectively, for the three and six month periods ended June 30 1997 compared to 33.0% and 32.6% in 1996. This decrease in selling, general and administrative expense as a percentage of net service revenues resulted from greater operating efficiencies and economies of scale gained from a larger revenue base. Depreciation and amortization expense. Depreciation and amortization expense increased 16.5% and 67.7% respectively, to approximately $627,000 and $1.3 million for the three and six month periods ended June 30, 1997 compared to approximately $538,000 and $775,000 for the same periods in 1996. Depreciation and amortization expense as a percentage of net service revenues decreased to 1.6% and 1.7% for the three and six month periods ended June 30, 1997 as compared to 2.5% and 2.0% for the same periods in 1996. This decrease as a percentage of net service revenues is due to a change in accounting estimate of the amortization period for goodwill related to certain acquisitions from 15 to 30 years of approximately $160,000 which reduced expense during the quarter. This decrease was offset by increased depreciation of approximately $114,000 on computer equipment for new locations and additional employees. Other (income) expense. Other (income) expense increased 44.1% and 138.1% respectively, to approximately $454,000 and $1.1 million for the three and six month periods ended June 30, 1997 compared to approximately $315,000 and $462,000 respectively, for the same periods in 1996. This increase was primarily due to interest earned on the investment of the proceeds from the May 1996 secondary offering. Income Before Taxes. Income before taxes increased 90.5% and 94.7% respectively, to $4.0 million and $7.4 million for the three and six month periods ended June 30, 1997 as compared to $2.1 million and $3.8 million for the same periods in 1996, primarily as a result of the above factors. Income Taxes. The effective tax rate was 39.9% and 39.1% for the three and six month period ended June 30, 1997 compared to 40.0% for all periods in 1996. Net Income. Net income increased to $2.4 million and $4.5 million for the three and six month periods ended June 30, 1997 compared to $1.3 million and $2.3 million for the same periods in 1996, primarily as a result of the above factors. Liquidity and Capital Resources As of June 30, 1997 the Company's sources of liquidity included approximately $30.4 million in cash and cash equivalents, approximately $3.9 million in short-term investments, and approximately $15.3 million in additional net working capital. In addition, as of June 30, 1997, $5.0 million was available for borrowing under the Company's line of credit. The Company is currently negotiating with various lending institutions to expand its line of credit facilities. 8 ============================================================================== During the first six months of 1997, cash flow provided by operations was approximately $2.7 million, resulting primarily from net income, non-cash expenses (depreciation and amortization) and increases in operationg payroll liabilities, offset by a significant increase in accounts receivable. The increase in accounts receivable reflects the increased volume of business during the first six months of 1997 from Company-owned locations and the initial funding of the accounts receivable base in acquired operations. During the first six months of 1997, cash flow used in investing activities was approximately $15.7 million, resulting primarily from the Company's use of approximately $11.5 million in cash for acquisitions. The Company believes its cash balance, short-term investments and available line of credit borrowings will be sufficient to meet it's anticipated cash requirements for at least the next twelve months unless it uses a substantial portion of it's cash balances to fund additional acquisitions. In the event that the Company does complete significant acquisitions, the Company beleives it has the ability to raise additional funds through its available line of credit and through other financing vehicles. 9 =============================================================================== PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) April 25, 1997 Annual Meeting of Stockholders of Romac International, Inc. (c) 1) To approve an amendment to the Company's Articles of Incorporation increasing the Company's authorized common stock from 15 million shares to 100 million shares; Votes Cast For 5,281,147; Votes Cast Against 3,073,467; Votes Abstained 2,500; 2) To amend the Romac International, Inc. Amended and Restated Incentive Stock Option Plan to increase the number of shares available to 4,500,000 from 3,000,000; Votes Cast For 6,180,007; Votes Cast Against 2,093,597; Votes Abstained 83,510; ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports: None ============================================================================= 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 hereunto duly authorized. ROMAC INTERNATIONAL, INC. (Registrant) /s/ Thomas Calcaterra _______________________________________ Thomas Calcaterra, Chief Financial Officer and Secretary Date: August 14, 1997 ============================================================================== EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S 10-Q REPORT FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 6-MOS YEAR DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 JUN-30-1997 DEC-31-1996 30,352 39,555 3,903 880 23,908 17,678 581 617 0 0 59,856 59,246 11,946 8,181 3,704 2,834 93,411 77,559 10,330 5,026 0 0 0 0 0 0 124 121 77,917 71,163 93,411 77,559 0 0 74,592 94,210 0 0 44,581 53,839 (1,063) (350) 0 0 0 78 7,401 9,946 2,895 3,965 4,506 5,981 0 0 0 0 0 0 4,506 5,981 .36 .51 .35 .51
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