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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE) FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 19972000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NO.NUMBER 0-26058
ROMAC INTERNATIONAL,KFORCE.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-3264661
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
20 WEST HYDE PARK PLACE, SUITE 150, TAMPA, FLORIDA 33606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(Exact name of Registrant as specified in its charter)
FLORIDA 59-3264661
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
120 WEST HYDE PARK PLACE, SUITE 150, TAMPA, FLORIDA 33606
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(address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 251-1700
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B)12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
NONE NONE
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G)12(g) OF THE ACT:
COMMON STOCK,Common Stock, $0.01 PAR VALUE
(TITLE OF CLASS)par value
-----------------------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Registrant's voting and non-voting stock
held by nonaffiliates of Registrant, as of March 13, 1998,23, 2001, was $530,379,086.$130,118,560.
The number of shares outstanding of Registrant's Common Stock as of
March 13, 1998,23, 2001, was 29,527,818.32,529,640.
DOCUMENTS INCORPORATED BY REFERENCE:
Parts of the Company's definitive proxy statement for the Annual
Meeting of the Company's Shareholders to be held on April 20, 1998June 18, 2001, are
incorporated by reference into Part III of this Form.
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TABLE OF CONTENTS
ITEM NO. PAGE
- --------ITEM PAGE
---- ----
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 10
Item 6. Selected Financial Data..................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 12
Item 7a. Quantitative and Qualitative Disclosures about Market Risk.. 16
Item 8. Financial Statements and Supplementary Data................. 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 17
Item 10. Directors and Executive Officers of the Registrant.......... 17
Item 11. Executive Compensation...................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 17
Item 13. Certain Relationships and Related Transactions.............. 17
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
10-K........................................................ 17
Index to Consolidated Financial Statements (Pages 22-40).............. 19
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Item 2. Properties.................................................. 11
Item 3. Legal Proceedings........................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......... 12
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 12
Item 6. Selected Financial Data..................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 8. Financial Statements and Supplementary Data................. 17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 17
Item 10. Directors and Executive Officers of the Registrant.......... 18
Item 11. Executive Compensation...................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 18
Item 13. Certain Relationships and Related Transactions.............. 18
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 19
Index to Consolidated Financial Statements and Schedule............... 20
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PART I
ITEM 1. BUSINESS
This document contains certain forward-looking statements regarding future
financial condition and results of operations and the Company's business
operations. The words "expect," "estimate," "anticipate," "predict," "believe,"
"plans" and similar expressions are intended to identify forward lookingforward-looking
statements. Such statements involve risks, uncertainties and assumptions,
including industry and economic conditions, customer actions and other factors
discussed in this and Romac International,kforce.com, Inc.'s ("Romac"kforce" or the "Company") other
filings with the Securities and Exchange Commission (the "Commission"). Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated.
GENERAL
Headquartered in Tampa, Florida, the Company was formed in August 1994 as a
result of the combination of Romac is a provider of professional specialty staffing services in 19
markets in the United States. Romac strives to shape valuable business
relationships between organizations& Associates, Inc. and the knowledgeable people who make them
successful. To better serve the needsthree of its customers, Romac provides its
value-added serviceslargest
franchises. Following an Initial Public Offering in 1995, the following specialties: Information Technology,
FinanceCompany grew to
31 offices in 18 major markets. On April 20, 1998, the Company consummated a
merger whereby Source Services Corporation ("Source"), was merged into the
Company pursuant to an Agreement and Accounting, Human ResourcesPlan of Merger ("the Merger Agreement")
dated February 1, 1998, as amended on February 11, 1998 and Operating Specialties. Romac
believes its broad rangeApril 17, 1998. The
acquisition was accounted for using the pooling of highly specialized services providesinterests method of
accounting; accordingly, all historical results have been restated to reflect
the merger. This merger combined the strength of two organizations that shared
common visions, strategies and business practices. The Company now operates
through more than 97 locations in 45 markets and serves primarily clients with
integrated solutions to their staffing needs, allowing Romac to develop
long-term, consultative relationships. Romac principally servesfrom
Fortune 1000 clients,companies with the top ten clients representing 10.0%approximately 8%
of revenue in 1997. Romac's
functional focus2000.
On May 5, 2000, the stockholders approved a name change from Romac
International, Inc. ("Romac") to kforce.com, Inc. The Company intends to
request shareholder approval to remove the ".com" from its name in 2001 and
range of service offerings generate increased placement
opportunities and enhance Romac's ability to identify, attract, retain, develop,
and motivate personnel and operating employees (the "KnowledgeForce").
RECENT ACQUISITIONS
Since the completion of the Company's initial public offering in August
1995, the Company has completed 14 acquisitions which have expanded the
Company's geographic coverage and its service offerings. Certain information
relating to these acquisitions is summarized in the following table.
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MOST RECENT
FISCAL YEAR
DATE OF REVENUE
NAME OF COMPANY ACQUISITION IN MILLIONS(1) FUNCTIONAL SERVICE AREA PRIMARY LOCATION
--------------- ----------- -------------- ----------------------- ----------------
Temporary Accounting Professionals,operate as Kforce Inc. ............................... 5/1/96 $ 0.6 Finance & Accounting Pittsburgh, PA
Bayshare, Inc. ....................... 6/1/96 6.3 Finance & Accounting San Francisco, CA
Career Enhancement International of
Massachusetts, Inc. ................ 1/1/97 4.7 Information Technology Boston, MA
Career Concepts, Inc. ................ 1/1/97 0.6 Information Technology Boston, MA
Romac & Associates of Chestnut Hill... 1/1/96 0.2 Information Technology Boston, MA
Venture Networks Corporation, Inc. ... 1/1/96 2.1 Information Technology Boston, MA
PCS Group, Inc. ...................... 2/1/96 3.6 Information Technology Louisville, KY
Strategic Outsourcing, Inc. .......... 3/1/96 5.7 Human Resources Boston, MA
Professional Application Resources,
Inc. ............................... 3/1/97 8.3 Information Technology Houston, TX
The McMahon Company................... 6/1/97 0.3 Human Resources Philadelphia, PA
Uni*Quality Systems Solutions,
Inc. ............................... 9/1/97 12.4 Information Technology Naperville, IL
Sequent Associates, Inc. ............. 9/1/97 15.9 Information Technology San Jose, CA
DP Specialists of Colorado, Inc. ..... 11/1/97 3.9 Information Technology Denver, CO
The Center For Recruiting
Effectiveness, Inc. ................ 12/1/97 2.4 Human Resources Washington, DC
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(1) Represents fiscal year revenue for the year prior to acquisition by Romac.
On February 1, 1998 (amended on February 11, 1998), the Company and Source
Services Corporation ("Source") entered into a definitive merger agreement (the
"Merger Agreement") providing for the merger of Source into the Company (the
"Source Merger"). The parties intend that the transaction will be treated as a
"pooling of interests" for accounting purposes and will qualify as a tax-free
reorganization. Under the terms of the Merger Agreement, stockholders of Source
will receive 1.1932 shares of Romac common stock, par value $.01 per share, for
each of the approximately 14.1 million outstanding shares of Source common
stock, subject to adjustment based upon the Company's market price prior to
closing and certain other conditions. Following completion of the Source Merger,
David L. Dunkel will continue as chairman and chief executive officer of the
Company and James D. Swartz will be president and chief operating officer. Les
Ward, currently Chief Executive Officer of Source, will join the board of
directors of the Company and will assist in the integration program and with
special projects. Consummation of the Source Merger is subject to certain
conditions, including effectiveness of a registration statement to be filed by
the Company with the Commission, approval by the shareholders of each company,
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, receipt of opinions from the parties'
independent accountants regarding the treatment of the Source Merger as a
"pooling of interests," and other conditions. The Source Merger is expected to
be completed during the second calendar quarter of 1998.
INDUSTRY OVERVIEW
The flexible employment service industry has experienced significant growth
over the last ten years in response to the changing work environment in the
United States. Fundamental changes in the employer-employee relationship
continue to occur, with employers developing increasingly stringent criteria
for permanent employees, while moving toward project-oriented flexible hiring.
This trend has been advanced by increasing automation that has resulted in
shorter technological cycles and by global competitive pressures. Many
employers have responded to these challenges by turning to flexible personnel
to keep labor costs variable, to achieve maximum flexibility, to outsourceobtain highly
specialized skills, and to avoid the negative effects of layoffs.
Rapidly changing regulations concerning employee benefits, health insurance,
retirement plans, and the highly competitive business climate have also
prompted many employers to take advantage of the flexibility offered through
flexible staffing. Additionally, Internal Revenue Service and Department of
Labor regulations concerning the classification of employees and independent
contractors have significantly increased demand by prompting many independent contractors to
affiliate with employers like Romac.
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5the Company.
The temporary staffing industry has grown rapidly in recent years as companies
have utilized temporary employees to manage personnel costs, while meeting
specialized or fluctuating staffing requirements. According to theThe National Association of
Temporary and Staffing Industry Report,Services has estimated that more than 80% of all U.S.
businesses utilize temporary staffing services. Selected industry reports
indicate the United States temporary staffing industry grew from approximately $20.4an estimated
$76.8 billion in revenue in 19911999 to approximately $47.1$85.9 billion in revenue in 1996, a compound annual growth rate of 18.2%. One of the
fastest growing sectors for Romac, as well as the industry, is information
technology services. Revenue for this sector in 1996 is estimated to have been
$11.7 billion, a 27.2% increase over 1995. Romac2000. The Company believes
that professional and technical staffing within the temporary staffing industry
requires longer-term, more highly-skilled personnel services and offers the
opportunity for higher profitability than the clerical and light industrial
staffing segments, because of the value-added nature of professional and
technical personnel.
The National
Association of Temporary and Staffing Services has estimated that more than 90%
of all U.S. businesses utilize temporary staffing services.3
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BUSINESS STRATEGY
Romac's objectiveThe Company is to be aone of the nationally recognized leaderleaders in providing its
professional specialty staffing services. The key elements of Romac'sthe Company's
business strategy in seeking to achieve this objective include:include the following:
- Implement the KnowledgeForce Strategy. As the staffing industry
continues to evolve in today's economy, its impact on organizations and
their ability to attract and secure intellectual capital has been
enormous. Romac believes, and government statistics support, that the
demand for and the supply of intellectual capital is moving away from a
permanent employment status towards an increasingly fluid and flexible
employment relationship through flexible staffing. Romac believes that
the intellectual capital of today, and even more so in the future, will
be concentrated in highly skilled individuals who Romac collectively
refers to as the "KnowledgeForce." In response to its beliefs, Romac has
implemented a strategy to become known as the "KnowledgeForce Resource"
in each market it serves.
- Focus on Value-Added Services. RomacFOCUS ON VALUE-ADDED SERVICES. The Company focuses exclusively on
providing specialty staffing services to its clients. Romac believes that providing
these specialty services to its clients, offer greater profitability thanspecifically in
the clericalareas of information technology, human resources, finance and
light industrial sectors of the temporary staffing
industry.accounting and operating specialties. In addition, Romacthe Company
believes, based upon data published by the U.S. Bureau of Labor
Statistics and other sources, that employment growth will be
greater in Romac's sectors thansignificant in the traditional clerical and
light industrialCompany's sectors. The placement of highly skilled
personnel requires a distinct operational and technical knowledge to
effectively recruit and screen personnel, match them to client needs,
and develop and manage the resulting relationships. RomacThe Company
believes its historical focus in this market, and name recognition, combined with management'sits
staff's operating expertise, provideprovides it with a competitive benefit.advantage.
- Build Long-Term, Consultative Relationships. RomacBUILD LONG-TERM, CONSULTATIVE RELATIONSHIPS. The Company believes it
has developed long-term relationships with its clients by providing
integrated solutions to their specialty staffing requirements. RomacThe
Company strives to differentiate itself by working closely with its
clients to maximize their return on human assets. In addition, Romac'sthe
Company's ability to offer a broad range of flexible personnel
services, coupled with its permanent placement capability, offers the
client a single-source provider of specialty staffing services. This
ability enables Romacthe Company to emphasize consultative rather than
transactional client relationships.
- Implement Carve-Out Strategy. Romac has begun implementation of its
"carve-out" marketing strategy, which encourages large contractors of
staffing services to "carve-out" the professional and technical sectors
of staffing contracts and award such business to specialty staffing
services providers instead of large generalist staffing firms. As a
result of this strategy, Romac has signed several contracts with major
national corporations for certain of Romac's services. Management
believes there is substantial opportunity for growth through the
continued implementation of this strategy.
- Achieve Extensive Client Penetration. Romac'sACHIEVE EXTENSIVE CLIENT PENETRATION. The Company's client development
process focuses on repeated contacts with client employees responsible
for staffing decisions. Contacts are made within numerous functional
departments and at many different organizational levels within the
client. Romac'sThe Company's operating employees are trained to develop a
thorough understanding of each client's total staffing requirements.
In addition, although Romacthe Company is organized functionally, its
operating employees are trained and incentivizedprovided incentives to recognize
cross-selling opportunities for all of Romac'sthe Company's other services.
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- Apply Innovative Technology. Romac utilizes proprietary technologies and
processes in the staffing, marketing, and management of its operations.
Romac's Professional Recruiters Operating System ("PROS") provides
operating employees with a systematic approach to identifying,
monitoring, and serving the needs of Romac's customers (clients and
personnel). Once operating employees obtain information regarding a
customer, the data is entered into Romac's integrated operating system
and is coded for future action. Operating employees are then prompted by
means of an automated planner to contact the customer periodically to
monitor and serve the needs that have been identified. Romac believes
that its emphasis on the use of technology has resulted in the delivery
of higher quality service, greater operating efficiency, and increased
operating employee productivity.
- Recruit High-Quality Professionals. RomacRECRUIT HIGH-QUALITY PROFESSIONALS. The Company places great emphasis
on recruiting qualified personnel. RomacThe Company believes it has a
recruiting advantage over those of its competitors that lack the
ability to offer personnel flexible and permanent opportunities.
Personnel seeking permanent employment frequently accept flexible
assignments through Romacthe Company until a permanent position becomes
available.
Personnel are screened by
an operating employee with a compatible technical background to determine
qualifications and match them with client needs.
- Encourage Operating Employee Achievement. Romac's managementENCOURAGE OPERATING EMPLOYEE ACHIEVEMENT. The Company promotes a
quality-focused, results-oriented culture. Operating employees are
selected based on their willingness to assume responsibility and promote
Romac's philosophy. All operating employees are
given numerous incentives to encourage the achievement of corporate goals. RomacThe
Company fosters a team-oriented and high energyhigh-energy environment,
celebrates the successes of its operating employees, and attempts to
create a "spirited" work environment.
GROWTH STRATEGY
Romac'sThe Company has a growth strategy is to expand its services in existing markets,
where
it does not offerincreasing the reach of its full range of functional services, and to enter new markets.while providing
its four functional business units with integrated staffing solutions. The key
elements of Romac'sthe Company's growth strategy are as follows:
- Introduce Functional Service Offerings to Existing Markets. Romac
currently offers four areas of functional services and only one of
Romac's 19 markets offers the full range of services. As a result, RomacINTRODUCE FUNCTIONAL SERVICE OFFERINGS TO EXISTING MARKETS. The
Company believes that a substantial opportunity exists to increase the
number of service offerings within its existing markets.
Romac intends to offer its
recently expanded full range of functional services into each of its
existing locations.4
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- Open New Locations. Romac continually evaluates potential geographic
expansion into new metropolitan areas. To facilitate new market entry,
Romac plans to transfer or recruit experienced operating employees for
positions in new locations as they are opened. Romac also seeks to
leverage its national accounts to facilitate its entry into new markets.
Since February 1995, Romac has opened offices in Dallas, Houston,
Minneapolis, Philadelphia, Pittsburgh, Washington, D.C., Stamford and St.
Louis.
- Leverage Existing Client Relationships and Develop New Clients. RomacLEVERAGE EXISTING CLIENT RELATIONSHIPS AND DEVELOP NEW CLIENTS. The
Company continually identifies additional growth opportunities within
existing and new clients as a result of the interrelationshipsinter-relationships among
its service offerings. RomacThe Company has established goals for
cross-selling and has trained and incentivizedprovided incentives for its
operating employees to actively sell Romac'sits full range of services, in an
effort to maximize its reach into the marketplace.
- Acquire Strategic Businesses. Romac intends to continue to pursue the
acquisition of complementary specialty staffing businesses. Romac's
preference is to acquire businesses in markets in which Romac currently
has a location or formerly maintained a franchised or licensed location,
although other markets will also be explored, including markets outside
the United States. Romac's primary acquisition candidates are local or
regional specialty staffing firms with established client relationships
in markets targeted by Romac. Romac currently has no understanding or
agreement with any potential acquisition candidate, except the Merger
Agreement with Source.
- Expand Major and National Accounts Program. RomacEXPAND MAJOR AND NATIONAL ACCOUNTS PROGRAM. The Company will continue
to market its full range of services to existing and new clients in
order to position Romacitself as the preferred vendor for specialty
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7web-enabled
staffing services. RomacThe Company believes the major accounts program
enables it to further penetrate its clients by giving Romacit greater
access to key staffing decision makers, including the support of the
client's purchasing and procurement team. This increased access allows
Romacthe Company to achieve greater operating leverage through improved
efficiencies in the marketing process. RomacThe Company has successfully
obtainedsecured several national agreements for professional and technical
specialty staffing services. RomacThe Company intends to aggressively
pursue such agreements to facilitate geographic expansion and existing
market penetration.
- Introduce New Services. Romac continually evaluatesFUNCTIONAL ORGANIZATION
Organized by function, the introduction of
newCompany provides services in an effort to meet customer demands. Romac has introduced
flexible staffing of pharmaceutical, health care, and manufacturing
services personnel to complement its existing search capabilities in
these areas. Additionally, Romac acquired an entity that provides
outplacement services and human resource contract and outsourcing
services. To enhance the technical capabilities and perceived quality of
Romac's Information Technology Services, Romac has formed Emerging
Technologies Division ("ETD") through which selected personnel receive
extensive training in emerging information technologies and are assigned
to client environments for periods generally ranging from six months to
two years.
FUNCTIONAL ORGANIZATION
In March 1997, Romac changed the manner in which it classifies its service
offerings in order to better serve the specialty needsareas of
its customers.
Currently, in orderinformation technology, finance and accounting, human resources and operating
specialties. (See Note 13 to align itself more closely with the organizational
structure of its clients andNotes to the skills of its personnel on assignment, and
available for assignment, Romac organizes its service offerings by function.Company's Consolidated Financial
Statements.)
The functional areas are defined as:
- Information Technology.INFORMATION TECHNOLOGY. Computer and Data Processing Services heads
the Bureau of Labor Statistics' list of the fastest growing
industries. The shortage of technical expertise to operate the
advanced systems that businesses have acquired over the last decade is
a major catalyst contributing to the growth of this segment. Romac'sThe
Company's Information Technology services focuses on more
sophisticated areas of the
information technologies (i.e.,
systems/applications programmers, systems analysts, e-business and
networking technicians), where the shortage of personnel is
the most acute..
- FINANCE & ACCOUNTING. The combination of a growing number of available software applications, the
increased complexity of such software applications, and the short supply of
qualified software expertise contributed to Romac's decision to create ETD in
mid-1995. ETD retrains skilled information technology professionals in cutting
edge technology solutions and then offers the services of those highly trained
individuals to Romac's clients. Romac believes the sophistication of these
technologies, coupled with the significant unmet demand, provide an attractive
opportunity for Romac to generate a new, higher margin business, and to add
value to its clients.
- Finance & Accounting. In its markets, RomacCompany believes it has built a strong
reputation for providing qualified finance and accounting
professionals to businesses. RomacThe Company believes this reputation
facilitates Romac'sits recruiting and placement efforts. Romac'sThe Company's
Finance & Accounting personnel are experienced in areas such as
corporate taxation, budget preparation and analysis, financial
reporting, cost analysis, and audit services. Romac recently introducedFinance & Accounting
also offers its Executive Solutions service line which provides chief
financial officers, controllers and other higher-level financial
professionals on a contract basis for assignment lengths generally
ranging from three to six months. Our accounting support group
provides placement of entry level accounting positions such as
bookkeepers.
- Human Resources.HUMAN RESOURCES. The non-core functions of a business, such as human
resources, are the most likely to be outsourced. With increasing
employment regulations, the administrative burden on employers is
becoming more complex and more time-consuming than ever before. RomacThe
Company offers flexible and permanent staffing of human resource
professionals in the areas of recruiting, benefits administration,
training and generalists. In addition, Romacthe Company provides
outplacement, outsourcing and consulting services in this field.
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- Operating Specialties.OPERATING SPECIALTIES. This segment consists of revenues generated by
the placement of professionals skilled
in the pharmaceutical, manufacturing,engineering, health care, life insurance,scientific and investmentlegal
industries. Examples of the types of positions that would be
classified in these categories are: research and regulatory personnelclinical trial professionals
(CRAs) for pharmaceutical clients, quality engineers and assurance
personnel for manufacturing companies, hospital administrationhealth care information
management professionals and management personnelnurses for health care companies, and
paralegals and attorneys for law firms and corporate clients. The
Scientific Group works with lab professionals, research and
development, quality assurance and quality control professionals.
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Supporting these four functional groups in 2000 was a new business unit, formed
in 1999, kforce.com Interactive, which provided the technical management personneland
operational expertise for life insurance companies.the Company's web-enabled staffing solutions. The unit
worked closely with the functional units to integrate unbundled web-enabled
services into existing accounts, to grow and manage the database of the
Company's job candidates and to serve, through the national business center, as
the primary point of sales into secondary or tertiary markets and geographic
regions where the Company does not have a physical presence. In the latter part
of 2000, the Company rolled out its "localized" web sites to each of its major
markets. Subsequently, the Company believes that the "high tech - high touch"
strategy behind its web initiative has evolved to the point where the
operations of the Company, through the localization strategy, have internalized
the operational aspects of the web. The "localization" strategy, deployed in
the second half of 2000, enabled each kforce market to significantly tailor the
content of the website to its particular needs. Each market can post job
openings specific to the region as well as content specific to that market's
clients and candidates. Subsequently, in late 2000, the Interactive group
ceased to operate as a business unit.
In February 2001, the Company modified its operating structure by consolidating
kforce Consulting, the Company's e-services project driven solutions practice,
into its existing Information Technology division. In 2000, kforce Consulting
lost $7.9 million on $17.6 million in revenue. The Company has no certainty
that any of the kforce Consulting revenue stream will continue in the future.
In realigning both the Interactive and kforce Consulting groups, the Company
believes it has strengthened its focus on its core staffing business.
STAFFING SERVICES
Once the functional challenges of the client have been identified, Romacthe Company
can then consult with the client to determine its staffing and time duration
requirements. RomacThe Company offers its staffing services in one of two categories:
Flexible Staffing Services or Search Services.
Flexible Staffing ServicesFLEXIBLE STAFFING
Flexible Staffing Services are offered by Romacthe Company to provide personnel in
the fields of information technology, finance and accounting, human resources
and operating specialties. RomacFlexible Staffing Services entail placing skilled
workers in the client environment on a contractual basis. Assignments typically
run from three months to one year in duration. The Company currently offers
flexible staffing services in
nineteen metropolitan markets. The two primary service offerings within Flexible Staffing are distinguished below:
Professional Temporary Services. Professional Temporary Services are
offered by Romac to provide professional temporary personnel in the fieldsmost large metropolitan market areas of
information technology, finance and accounting.
Professional Temporary Servicesaccounting, human resources and operating
specialties.
FINANCE AND ACCOUNTING. Flexible staffing offers its clients a
reliable and cost-effective means of handling uneven or peak workloads
caused by events such as periodic financial reporting deadlines, tax
deadlines, special projects, systems conversions, and unplanned
staffing fluctuations. Professional Temporary ServicesFlexible staffing for finance and accounting
meets such clients' needs with personnel who have an extensive range
of accounting and financial experience, including corporate taxation,
budget preparation and analysis, financial reporting, regulatory
filings, payroll preparation, cost analysis, and audit services.
Through the use of Romac'sthe Company's services, clients are able to avoid
the cost and inconvenience of hiring and terminating permanent
employees. Typically, the duration of assignments in the Professional
Temporary Services is six to twelve weeks.
Personnel for Professional TemporaryINFORMATION TECHNOLOGY. Flexible Staffing Services are obtained from Search
Services, referrals, and advertising in local newspapers and on Romac's
home page on the Internet. Romac believes it has a competitive advantage in
attracting personnel because of its ability to provide assignments ranging
from short term to permanent. Access by the Professional Temporary Services
to the Search Services' personnel pool provides personnel the opportunity
to obtain permanent employment as a result of a flexible assignment,
earnings that may allow personnel to be more selective when evaluating
permanent opportunities, and additional experience that can enhance
personnel skills and overall marketability. Personnel are screened by an
operating employee with a compatible background to determine their
qualifications and to match these qualifications with individual client
needs. This screening includes an in-depth interview, skill testing,
reference checks, and, in some cases, credit checks and additional
background checks.
Professional Temporary Services targets Fortune 1000 companies and
other large organizations, with a primary focus on organizations determined
to have the potential need for Romac's full range of services. In order to
maximize its marketing effectiveness, Romac provides extensive training to
its operating employees, which emphasizes the consulting nature of its
business. Romac's operating employees develop marketing plans composed of
multiple visits, frequent telemarketing activity, monthly mailings, and
other actions supported through the use of the PROS and daily staff
meetings. Romac believes that these techniques and processes provide the
opportunity to expand its business within its clients' organizations,
solidify client relationships, and develop new clients. Romac recognizes
that in some cases Professional Temporary Services personnel will be
offered permanent positions. If a client requests that personnel become
permanent employees, Romac typically charges a "conversion" fee that is
calculated as a percentage of the initial annual compensation.
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Contract Services. Contract Servicesinformation
technology provides personnel on a contractual basis, which typically
averages six to nine months in duration. ContractFlexible Information
Technology Services has traditionally focused on providing information
systems personnel to assist clients whose needs range from mainframe
environments to single work stations. Contract Servicesworkstations. Flexible information technology
personnel perform a wide range of services, including software
development, database design and management, system administration,
end-user training and acceptance, network design and integration,
information strategy development,
6
7
business and systems plans, and standardization of technology and
business procedures. The size and growth of the information services industry in
recent years have been driven largely by rapid technological advances.
These advances have included the availability of increased computing power
at lower costs and the emergence of new information systems capabilities.
As a result, the ability of businesses to benefit from the application of
computer technology has been greatly enhanced and has been accompanied by a
dramatic increase in the number of end users. At the same time, the
sophistication and complexity of the systems needed to serve these
businesses and to deliver the desired benefits have greatly increased. Additionally, the need to contain costs has
caused many businesses to reduce the number of personnel resulting in
increased dependence upon information systems to support important
functions and to improve productivity.
Romac's baseThe Company's database of skilled technical personnel is integral to
its success. Because technical needs are diverse and technology
advances occur frequently, technical talent is in high demand. As a
result, Contract
Servicesflexible information technology focuses heavily on its
recruiting efforts. In addition, Romac
focuses on training its Information Systems personnel in sophisticated
technology applications. For example, Romac has formed ETD, which selects
personnel to receive extensive training in emerging information
technologies and who are assigned to client environments for periods
generally ranging from six months to two years. RomacThe Company believes that building a base of
skilled technical personnel who are available for assignment is as
integral to its success as are its client relationships.
OPERATING SPECIALTIES. The March 1996 acquisition of Strategic Outsourcing, Inc., which was
renamed Romac-HR ("Romac-HR"),Company has expanded Romac's Contractits Flexible Staffing
Services functions to include human resource personnel. Romac-HR, which was founded in 1989 in
Boston, provides its clients with human resource personnel on a contractual
basis to assist in the development, implementation, and maintenance of a
wide variety of human resource processes. Romac currently provides the
human resource contract services function in the Boston, Chicago,
Philadelphia, Tampa and Washington DC markets. Romac plans to continue to
introduce the human resource contract services function into its existing
markets.
Romac has expanded its Contract Services functions to include
manufacturing services,pharmaceutical, engineering, health
care, scientific and legal industries. Examples of the types of
positions classified in these categories are: clinical trial
professionals (CRAs) for pharmaceutical personnel. Within
manufacturing services, Romac provides a wide range ofclients, quality engineers and
assurance personnel for manufacturing companies, health care
information management professionals and nurses for health care
companies, and paralegals and attorneys for law firms and corporate
clients. The Scientific Group works with lab professionals, research
and development, quality assurance personnel. Health care contract services provides
hospital administration and management personnel. Pharmaceutical contract
services provides pharmaceutical industry clients with research and
regulatory personnel.
Currently, Romac services these other functional areas on a national
basis solely out of its Tampa office.
Romac'squality control professionals.
The Company's operating employees develop and maintain an active personnelcandidate
inventory designed to meet the needs of Romac'sits clients. To recruit qualified
personnel, Romaccandidates, the Company uses targeted telephone and internetInternet recruiting,
obtains referrals from its existing personnel and clients, and places newspaper
advertisements. The Search Services' recruiting efforts complement those of
ContractFlexible Staffing Services, and Romacthe Company believes that this combination
distinguishes it from many of its competitors. To foster loyalty and commitment
from its existing personnel, Romacthe Company maintains frequent contact and offerswith them
as well as providing competitive wages, benefits, flexible schedules, and
exposure to a variety of working environments. ContractThe Company currently maintains
a database of approximately 1.5 million candidates.
Flexible Staffing Services concentrates on marketing its services totargets Fortune 1000 companies and other businesseslarge
organizations, with information systems, manufacturing
services, human resources, health care, and pharmaceutical personnel
requirements. Operating employees emphasize Romac's abilitya primary focus on organizations determined to provide
contract personnel who can perform a widehave the
potential need for the Company's full range of services within eachservices. In order to maximize
its marketing effectiveness, the Company provides training to its operating
employees, which emphasizes the consulting nature of these areas through consultative contacts with client end-users, personalits business. The Company's
operating employees develop marketing plans composed of multiple visits, monthly
mailings, and telemarketing efforts.
8
10other actions supported through the use of the front-end systems
and staff meetings. The Company believes that these techniques and processes
provide the opportunity to expand its business within its clients'
organizations, solidify client relationships, and develop new clients. The
Company recognizes that in some cases Flexible Staffing Services personnel will
be offered permanent positions. If a client requests that personnel become
permanent employees, the Company typically charges a "conversion" fee that is
calculated as a percentage of the initial annual compensation.
SEARCH SERVICES
The Company provides extensive Search Services Romac provides extensive search services(permanent placement) for
professional and technical personnel. The professional skills offered by the Search Servicesplacement opportunities are in the
areas of information technology, finance and accounting, financial services,
pharmaceutical research, health care, human resources, insurance, legal and
manufacturing.
RomacThe Company performs both contingency and retained searches. A contingency
search results in payment to Romacthe Company only when personnel are actually hired
by a client. Romac'sThe Company's strategy is to perform contingency searches only for
skills Romacit targets as its "core-businesses."core-businesses. Client searches that are outside a
core-business area typically are at a management or executive level and require
a targeted research and recruiting effort. RomacThe Company typically performs these
searches as retained searches where the client pays a part of the search fee in
advance and the remainder upon completion of the search. Romac'sThe Company's fee is
typically structured as a percentage of the placed individual's first-year
annual compensation.
7
8
An active database of personnelcandidates is maintained as the result of itsthe Company's
continuous recruiting efforts and reputation in the industry. In addition,
operating employees locate many potential personnel as the result of referrals
from the Flexible Staffing Services activities.
RomacThe Company believes that it has developed a reputation for quality search work
and that it is recognized as a leader in its search specialties. To minimize
the risk of changes in skill demand, Romac'sthe Company's marketing plan incorporates
a continual review of client recruitment plans for future periods to allow for
rapid changes to "in-demand" skills. The quality of the relationship with
client personnel is a key component of the strategy, and Romacthe Company seeks to
use consultative relationships to obtain insight into emerging growth areas.
The clients targeted by the Search Services are typically the same as those
targeted by the Flexible Staffing Services. This common focus is intended to
contribute to Romac'sthe Company's objective of providing integrated solutions to its
clients' personnel needs.
Romac'sThe Company's search business is highly specialized. Certain skills, such as
finance and accounting, information technology and human resources, may be
served by local offices, while other, more highly specialized operating
specialtiesniches require a
regional or national focus.
Romac believes that a trend
toward greater selectivityTECHNOLOGY
kforce.com continues to invest in its clients' hiring processes has contributed to
an increased demand fortechnology infrastructure. During 2000,
the Company outsourced the corporate headquarters data center and had its
Search Services. This emphasis on quality fits well
with Romac's inventory of personnel. Romac expects thatservers placed in a bunkered facility. We believe this facility will greatly
reduce the Search Services will
continue to add operating specialties in the majority of markets served.
MARKETS
Romac serves 19 metropolitan markets with management of the operations
coordinated from its headquarters in Tampa. Romac's headquarters provides its
offices with administrative, marketing, accounting, training, legal, and
information systems support, particularly as it relatesthreat to the standardization
of the operating processes of its offices.
9
11
The following table lists the services offered by Romac onCompany from a market by
market basis.
SERVICES OFFERED
--------------------------------------------------
INFORMATION FINANCE & HUMAN OPERATING YEAR
TECHNOLOGY ACCOUNTING RESOURCES SPECIALTIES OPENED/ACQUIRED
----------- ---------- --------- ----------- ---------------
Atlanta, GA......................... X X 1986
Boston, MA.......................... X X X X 1966
Chicago, IL......................... X X X 1985
Dallas, TX.......................... X X 1995
Denver, CO.......................... X 1997
Houston, TX......................... X X 1995
Louisville, KY...................... X 1992
Miami/Ft. Lauderdale, FL............ X X 1982
Minneapolis, MN..................... X 1996
Orange County, CA................... X 1997
Orlando, FL......................... X X 1984
Philadelphia, PA.................... X X X 1995
Pittsburgh, PA...................... X 1996
San Francisco, CA................... X X 1989
San Jose, CA........................ X X 1997
St. Louis, MO....................... X 1998
Stamford, CT........................ X X 1997
Tampa, FL........................... X X X X 1980
Washington, DC...................... X X 1997
PROFESSIONAL RECRUITERS OPERATING SYSTEM
Romac has developed a proprietary integrated system designed to maximize
productivity and to aid in the management of its business. PROS is designed to
be a comprehensive approachpotential major outage due to the
operationforces of nature.
The Company's Enterprise Resource Planning ("ERP") application was also
upgraded in 2000. This project improved many internal and managementexternal customer
related business processes. The continued integration between the ERP and
Customer Service related proprietary systems ("PROS" and "WIZARD") improve the
transfer of a specialty
staffing firm. It comprises sophisticateddata and proprietary operating and computer
systems initially developedsimplification of business processes.
Also in 1982 and has been continually enhanced.2000, the kforce.com Internet web site had two major releases. One
supported the Company's branding initiative, which included the Super Bowl
advertising campaign. The system links each office location throughsecond major release supported the use of a private network to
Romac's corporate headquarters.
PROS offers several advantages in providing information to support the
goals of Romac. Through the use of PROS,localization
market information concerning target
customers is tracked and prioritized to focus marketing and development efforts.
Readily available management reports indicate the frequency and nature of
contact with the targeted customers to support marketing plans. By using these
reports, managers provide direction and support to operating employees to ensure
that customers are properly served. A manager, concerned with the status of a
particular assignment at any point, can examine the detailed status and degree
of coverage on each assignment. PROS offers both detailed and summary reports to
provide a continuous view of key factors related to customer development and
service and operating employee and personnel productivity.
In addition to customer service considerations, PROS enhances the
productivity and efficiency of the operating employees. One of the primary
problems facing operating employees is the effective and productive use of
information. PROS simplifies the information recording and retrieval problem and
enables operating employees in different functional and geographical areas to
share information and communicate more effectively.
Finally, PROS helps Romac manage information by passing data from the
operating divisions software to the accounting software. This approach increases
productivity, as data have a single point of entry and can be readily accessed
by all functional areas within Romac. Romac intends to continue to enhance its
systems capabilities to streamline processes in orderstrategy. The Company continues to improve customer
servicing.
10
12system interfaces that
support internal and external business processes.
COMPETITION
The specialty staffing services industry is very competitive and fragmented.
There are relatively limitedfew barriers to entry and new competitors frequently enter
the market. A number of Romac'sthe Company's competitors possess substantially greater
resources than Romac. Romacthe Company. The Company faces substantial competition from
large national firms and local specialty staffing firms. Larger national
firms that offer specialty staffing services include Robert Half International,
Computer Horizon, Inc., and Alternative Resources Corporation. The local firms are
typically operator-owned, and each market generally has one or more significant
competitors. RomacThe Company also faces competition from national clerical and
light industrial staffing firms and national and regional accounting firms that
also offer certain specialty staffing services. TheseAdditionally, there are a
number of "born on the web" job boards that are offering traditional staffing
services as well as traditional staffing companies include Interior
Services, Inc., Norrell Corporation, AccuStaff Incorporated, and Olsten Corp.
Romacdeveloping a significant web
component.
The Company believes that the availability and quality of its personnel, the
level of service, the effective monitoring of job performance, scope of
geographic service and the price of service are the principal elements of
competition. RomacThe Company believes that availability of quality personnel is an
especially important facet of competition. In order to attract personnel, Romaccandidates, the
Company places emphasis upon its ability to provide permanent placement
opportunities, competitive compensation and benefits, quality and varied
assignments, and scheduling flexibility. Because personnel pursue other
employment opportunities on a regular basis, it is important that Romacthe Company
respond to market conditions affecting these individuals. Additionally, in
certain markets Romacand in response to economic softening, the Company has
experienced significant pricing pressure from some of its competitors. Although
Romacthe Company believes it
8
9
competes favorably with respect to these factors, it expects competition and
pricing pressure to increase, and there iscan be no assurance that Romacit will remain
competitive.
INSURANCE
RomacThe Company maintains a fidelity bond and a number of insurance policies
including general liability and automobile liability, (each with excess
liability coverage), professional liability, worker'serrors and omissions, employment
practices liability, workers' compensation and employers' liability. Romac also maintains professional liability and crimeEach of
these policies, each with aggregate coverage of $1.0up to $5.0 million, coveringcovers certain
liabilities that may arise from the actions or omissions of its operating
employees and personnel. Romac currently maintains key man life insurance on
certainThere can be no assurance that any of its executive officers in an aggregate amount of $7.5 million. Romac
believes that its insurancethe above
coverages will be adequate for its needs, although
there is no assurance that these coverages will be sufficient.the Company's needs.
OPERATING EMPLOYEES AND PERSONNEL
As of December 31, 1997, Romac2000, the Company and its subsidiaries employed
approximately 6002,400 operating employees. Additionally, as of that date, Romacthe
Company had approximately 2,6007,100 personnel on assignment providing flexible
staffing services to its clients. As the employer, Romacthe Company is responsible
for the operating employees and personnel payrolls and employer's share of
social security taxes (FICA), federal and state unemployment taxes, workers'
compensation insurance, and other direct labor costs relating to its operating
employees and personnel. RomacThe Company offers access to various insurance
programs and other benefits for its operating employees and personnel. RomacThe
Company has no collective bargaining agreements covering any of its operating
employees or personnel, has never experienced any material labor disruption,
and is unaware of any current efforts or plans to organize its operating
employees or personnel.
Romac considers relations with its operating
employees and personnel to be good.
ITEM 2. PROPERTIES
Romac owns no real estate. ItThe Company leases its corporate headquarters in Tampa, Florida, as well as
space for its other locations. The aggregate area of office space under leases
for locations is approximately 154,000534,700 square feet. The leases generally run
from month-to-month to five years and the aggregate annual rent paid by Romacthe
Company in 19972000 was approximately $2.1$11.4 million. RomacThe Company believes after
relocation to its new corporate headquarters in 2001, that its facilities arewill
be adequate for its needs and does not expect difficulty
replacing such facilities or locating additional facilities, if needed.
11
13needs. The Company owns a parcel of vacant land adjacent to
the site of its new corporate headquarters for which it has no current plans to
develop.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, Romacthe Company is, from time to time,
threatened with or named as a defendant in various lawsuits, including
discrimination and harassment and other similar claims. RomacThe Company maintains
insurance in such amounts and with such coverages and deductibles as management
believes are reasonable. The principal risks that Romacthe Company insures against
are workers' compensation, personal injury, bodily injury, property damage,
professional malpractice, errors and omissions, employment practices liability
and fidelity losses. RomacThe Company does not believe that it is
not currently involved in any
litigation which would reasonably be expected to have a material litigation.adverse effect
on its results of operation or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1997 covered by this Annual Report
on Form 10-K.2000.
9
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market(SM), formerly under the symbol "ROMC" and now under the
symbol "KFRC". The following table sets forth, for the periods indicated, the
range of high and low closing sale prices for the Common Stock, as reported on
the Nasdaq National Market.
The table has been
adjusted to reflect two-for-one stock splits, each in the form of a 100% stock
dividend reflected on the Nasdaq National Market on May 23, 1996 and October 17,
1997.
FISCAL YEAR HIGH LOW
----------- ------- -------
1996:
First Quarter............................................ $ 8.063 $ 5.750
Second Quarter........................................... $14.875 $ 7.688
Third Quarter............................................ $15.750 $10.125
Fourth Quarter........................................... $15.125 $10.625
1997:
First Quarter............................................ $13.500 $ 8.438
Second Quarter........................................... 17.375 8.313
Third Quarter............................................ 22.500 16.875
Fourth Quarter........................................... 25.125 14.500
1998:
First Quarter (through March 13, 1998)................... $24.125 $23.750
CALENDAR YEAR HIGH LOW
------- -------
1998:
First Quarter..................................... $29.750 $19.375
Second Quarter................................. $32.250 $23.125
Third Quarter.................................... $31.125 $16.125
Fourth Quarter.................................. $22.750 $11.750
1999:
First Quarter..................................... $24.250 $ 6.875
Second Quarter.................................... $15.438 $ 6.906
Third Quarter..................................... $ 9.750 $ 7.000
Fourth Quarter.................................... $15.625 $ 5.875
2000:
First Quarter..................................... $18.250 $ 8.875
Second quarter.................................... $13.250 $ 4.438
Third Quarter..................................... $ 7.563 $ 3.500
Fourth Quarter.................................... $ 5.063 $ 2.063
2001:
First Quarter (through March 23) $ 4.125 $ 2.281
On March 13, 1998,23, 2001, the last reported sale for the Company's Common Stock was at
$23.750.$4.00. On March 13, 199823, 2001 there were approximately 73164 holders of
record.
Since the Company's initial public offering, the Company has not paid any cash
dividends on its common stock. 12The Company is currently prohibited from making
such dividend distributions under the terms of its Credit Facility.
10
1411
ITEM 6. SELECTED FINANCIAL DATA
The information set forth below is not necessarily indicative of the results of
future operations and should be read in conjunction with Consolidated Financial
Statements and the related Notes thereto incorporated into Item 8 of this
report.
YEARS ENDED DECEMBER 31,
------------------------------------------------
1993 1994 1995----------------------------------------------------
1996 1997 ------- ------- ------- -------1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net service revenues...................... $40,346 $40,789 $45,655 $94,210 $181,434revenues......... $301,588 $479,743 $680,086 $746,632 $794,997
Direct costs of services.................. 26,126 24,851 25,460 53,839 110,550
------- ------- ------- -------services..... 145,881 254,132 388,505 424,001 433,441
-------- -------- -------- -------- --------
Gross profit.............................. 14,220 15,938 20,195 40,371 70,884profit................. 155,707 225,611 291,581 322,631 361,556
Selling, general and
administrative expenses............................... 12,775 15,009 15,232 30,348 50,531expenses... 133,084 184,876 224,790 346,452 341,812
Depreciation and
amortization............. 298 248 512 1,762 3,242
Combination expenses...................... -- 2,251 -- -- --amortization.............. 3,238 5,794 9,507 14,514 18,440
Merger, restructuring, and
integration expense....... - - 26,122 - -
Other (income) expense,
net(1)............ 34 (1,157) (570) (1,685) (1,932)
------- ------- ------- -------net....................... (1,773) (2,675) (4,985) (942) 113
-------- -------- -------- -------- --------
Income (loss) before taxes and minority
interest............................... 1,113 (413) 5,021 9,946 19,043
Provisionincome
taxes..................... 21,158 37,616 36,147 (37,393) 1,191
(Provision) benefit for
taxes....................... 448 186 2,008 3,965 7,500
------- ------- ------- -------income taxes.............. (8,706) (15,545) (20,708) 13,877 (1,474)
-------- Income (loss) before minority interest.... 665 (599) 3,013 5,981 11,543
Minority interest in subsidiary income.... 15 -- -- -- --
------- ------- ------- --------------- -------- -------- --------
Net income (loss)(1).................................. $ 650 (599) 3,013 5,981 11,543
======= ======= ======= =======12,452 $ 22,071 $ 15,439 $(23,516) $ (283)
======== ======== ======== ======== ========
Net income (loss)
per share(2) -- basic...share-basic............ $ 0.05 (.04) .19 0.28 .46
======= ======= ======= =======.35 $ .55 $ .34 $ (.53) $ (.01)
======== ======== ======== ======== ========
Weighted average shares
outstanding -- basic................... 13,237 14,078 16,087 21,716 24,896outstanding-basic............ 35,312 40,471 45,410 44,781 42,886
Net income (loss) per
share -- diluted.... 0.05 (.04) .18 .26 .44
======= ======= ======= =======share-diluted............. $ .34 $ .52 $ .33 $ (.53) $ (.01)
======== ======== ======== ======== ========
Weighted average shares
outstanding -- diluted................. 13,237 14,078 16,965 23,319 26,398
outstanding-diluted....... 36,996 42,264 47,318 44,781 42,886
DECEMBER 31,
------------------------------------------------
1993 1994 1995----------------------------------------------------
1996 1997 ------- ------- ------- -------1998 1999 2000
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Working capital...........................capital.............. $ 2,57995,557 $149,459 $135,348 $ 2,093 $13,895 $54,22086,310 $ 97,50070,885
Total assets.............................. 6.135 6,984 20,952 77,559 197,139assets................. $142,112 $283,098 $333,812 $296,187 $278,018
Total long-term debt...................... 92 24 500 --debt......... $ - $ 1,260 Shareholders' equity...................... 3,074 2,435 16,924 71,284 173,680$ 461 $ - $ 45,000
Stockholders' equity......... $119,221 $232,704 $255,022 $218,205 $155,037
- ---------------
(1) Net income (loss) for the years ended December 31, 1994, 1995, 1996, and
1997, includes franchise termination income (net of tax) of $336, $261,
$208, and $100, respectively.
(2) Net income (loss) per share for the years ended December 31, 1994, 1995,
1996, and 1997, includes franchise termination income per share of $0.02,
$0.01, $0.01, $0.00, respectively.11
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in connection with Romac'sthe Company's
Consolidated Financial Statements and the related Notes thereto incorporated
into Item 8 of this report.
OVERVIEW
RomacThe Company is a provider of professional and technical specialty staffing
services in 1945 markets in the United States. Romac strives to shape valuable
business relationships between organizationsStates and the knowledgeable people who
make them successful. To better serve the needs of its customers, Romacone international market
(Toronto, Canada). The Company provides its customers 13
15
value-addedstaffing services in the
following specialties: Information Technology,
Financeinformation technology, finance and Accounting, Human Resourcesaccounting, human
resources and Operating Specialties. Romacoperating specialties. The Company believes its broad range of
highly specialized services provides clients with integrated solutions to their
staffing needs, allowing Romacit to develop long-term, consultative relationships.
Romac principally serves Fortune 1000
clients with its top ten clients representing 10.0%This range of its revenueservices includes search services and flexible staffing services,
both professional temporary and contract. Contract services for 1997.
Romacinformation
technology services are provided through the Company's kforce Consulting group.
The Company believes its functional focus and range of service offerings
generate increased placement opportunities and enhance Romac'sits ability to identify,
attract, retain, develop and motivate personnel and operating employees. Revenue RecognitionThe
Company principally serves Fortune 1000 clients, with its top ten clients
representing approximately 8% of its revenue for 2000.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net service revenues,
certain items in the Company's consolidated statements of operations for the
indicated periods:
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999 2000
----- ----- -----
Flexible Billings............................ 80.1% 80.6% 77.5%
Search Fees.................................. 19.9 19.4 22.5
----- ----- -----
Net service revenues......................... 100.0 100.0 100.0
Gross profit................................. 42.9 43.2 45.5
Selling, general, and administrative
expenses................................... 33.1 46.4 43.0
Income (loss) before income taxes............ 5.3 (5.0) 0.1
Net income (loss) ........................... 2.3% (3.1)% 0.0%
2000 COMPARED TO 1999
NET SERVICE REVENUES. Net service revenues consistincreased 6.5% to $795.0 million in
2000 compared to $746.6 million for the same period in 1999. This increase was
composed of sales, net of credits and discounts. Romac
recognizesa $14.6 million increase in Flexible Billings based on hours worked by assigned personnel onand a weekly basis.$33.8 million
increase in Search Fees for the year ended December 31, 2000. The reasons for
such increases are recognizedset forth below.
FLEXIBLE BILLINGS. Flexible billings increased 2.4% to $616.0 million in contingency search engagements upon2000
compared to $601.5 million for the successful completionsame period in 1999. Hours billed for the
year remained relatively consistent year-to-year between 2000 and 1999. The
increase in flexible billings was primarily attributable to an increase in the
average billing rate in 2000.
SEARCH FEES. Search fees increased 23.3% to $178.9 million in 2000 compared to
$145.1 million for the same period in 1999. Approximately $16.0 million of the assignment. Franchise fees were determined
based upon a contractual percentage of the revenue billed by franchisees. Costs
relating to the support of franchised operations were included in Romac's
selling, general and administrative expenses. The last remaining franchisee and
licensee agreement was terminated at the end of the second quarter of 1997.
Romacthis
increase was the legal employerresult of flexible personnel under its licensing
arrangements, and accordingly included revenues and related direct costsan increased number of licensed officessearch placements made during
2000 as compared to 1999. The remaining increase, approximately $17.8 million,
was primarily the result of an increase in its net service revenues and direct cost of services,
respectively. Commissions paid to licensees were based upon a percentage of the gross profit generated, and were included in Romac's direct cost of services.
Gross Profitaverage fee for each search
placement.
12
13
GROSS PROFIT. Gross profit for theon Flexible Billings is determined by deducting the
direct cost of services (flexible(primarily flexible personnel payroll wages, payroll
taxes, payroll-related insurance, and licensee commissions)subcontract costs) from net service
revenues. Consistent with industry practices, all costs related to Search Fees
are classified as selling, general, and administrative expense. RESULTS OF OPERATIONS
The following table sets forth revenue mix and certain items in Romac's
consolidated statement of operations as a percentage of net service revenues for
the indicated periods:
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
Flexible Billings................................... 78.5% 80.2% 86.0%
Search Fees......................................... 21.5 19.8 14.0
----- ----- -----
Net service revenues................................ 100.0 100.0 100.0
===== ===== =====
Gross profit........................................ 44.2 42.9 39.1
Selling, general, and administrative expenses....... 33.4 32.2 27.9
Income before taxes................................. 11.0 10.6 10.5
Net income.......................................... 6.6% 6.3% 6.4%
1997 COMPARED TO 1996
Net service revenues. Net service revenuesGross profit
increased 92.6%12.1% to $181.4$361.6 million in 19972000 as compared to $94.2 million for the same period in 1996. This
increase was composed of a $80.6 million increase in Flexible Billings and a
$6.7 million increase in Search Fees for the year ended December 31, 1997 as
described below.
Flexible Billings increased 106.8% to $156.0$322.6 million in
1997 as compared to
$75.5 million for the same period in 1996. This increase is a result of an
increase in the number of hours billed by Romac-owned operations as compared to
the same periods in 1996. The average hourly bill rate for the year increased to
$36.0 in 1997 from $28.0 for 1996 due to the growing mix of contract business as
a percentage of total Flexible Billings. In addition, Romac's ETD division
increased its bill rates 26% in 1997 compared to the same periods in 1996 as the
demand for these highly skilled workers continues to build.
14
16
Search Fees increased 35.3% to $25.3 million in 1997 as compared to $18.7
million for the same period in 1996. This increase resulted primarily from an
increase in the number of search sales consultants, which increased the number
of search placements made in 1997 as compared to the same period in 1996. The
average fee for each search placement made during the periods remained
relatively constant.
Gross profit. Gross profit increased 75.5% to $70.9 million in 1997 as
compared to $40.4 million in 1996.1999. Gross profit as a percentage of net service revenues decreasedincreased to 39.1%45.5%
in 1997 as2000 compared to 42.9%43.2% for the same period in 1996. This decrease1999. The increase in gross
profit percentage was a result of both the continuing changeimprovement in Romac'smargins on Flexible
Billings, attributable to higher average billing rates, and a shift in business
mix whereby revenues from Flexible Billings,to more Search Fees, which have traditionally lower grosshigher margins than Flex
Billings, in 2000 compared to 1999. Search Fees increased to 86.0%accounted for 22.5% of Romac's2000 net
service revenues in 1997 as compared to 80.1% for the same period19.4% in 1996.
Selling, general and administrative expenses.1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 66.7%decreased 1.3% to $50.5$341.8 million in 19972000 as compared to
$30.3$346.5 million for the same period in 1996.1999. Selling, general and administrative
expenses as a percentage of net service revenues decreased to 27.9%43.0% in 19972000
compared to 32.2%46.4% for the same period in 1996. This1999. The decrease in selling,
general, and administrative expense as a percentage of
net service revenues resulted primarily from greater operating efficienciesthe continuation of strategic
initiatives undertaken by management in 1999 to re-engineer and economiesstreamline back
office operations, and a reduction in advertising after the launch of scale gained from
a larger revenue base.
Depreciation and amortization expense.the
Company's new name.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
77.8%,27.0% to $3.2$18.4 million for 1997 as2000 compared to $1.8$14.5 million for the same period
in 1996.1999. Depreciation and amortization expense as a percentage of net service
revenue decreasedincreased to 1.8%2.3% for 1997 as2000 compared 1.9% for the same period in 1996.1999.
The decreaseincrease as a percentage of net service revenues for 19972000 as compared to
the same period in 1996 is1999 was primarily due to a
change in accounting estimate which increased the amortization period for
goodwill from 15of computer
software utilized to 30 years related to certain acquisitions.
Other (income) expense.increase back office efficiency.
OTHER (INCOME) EXPENSE. Other (income) expense increased 11.8%decreased 112.0% in 19972000 to $1.9$0.1
million as compared to approximately $1.7$(0.9) million for the same period in 1996.1999. The increase during 1997decrease
in 2000 compared to the same period in 1996 is1999 was primarily due to a reduction of interest earned onincome in
2000 compared to 1999 related to the investmentuse of the proceeds from the May 1996 and November
1997available cash to make stock
offerings.
Incomerepurchases throughout 2000.
INCOME (LOSS) BEFORE INCOME TAXES. The income before taxes. Income beforeincome taxes increased 91.9% to $19.0was $1.2
million for 19972000 as compared to $9.9loss before taxes of $(37.4) million for the
same period in 1996,1999, primarily as a result of the above factors.
Provisionincreased net service revenues
and gross margin and reduced selling, general, and administrative expenses
discussed above.
PROVISION (BENEFIT) FOR INCOME TAXES. The income tax provision for income taxes. Provision for income taxes increased 87.5% to
$7.52000 was
$1.5 million for 1997 compared to $4.0a benefit of $(13.9) million for the same period in
1996.1999. The effective tax rate was 39.4%124% in 19972000 as compared to approximately 40.0%an effective tax
benefit rate of 37.1% in 1996.
Net income. Net income increased 91.7%1999. The increase in the effective tax rate in 2000
as compared to $11.51999 was primarily due to the benefit resulting from Company's
net loss position in 1999. The effective tax rate in 2000 was abnormally high
due to non-deductibility of amortization of goodwill and 50% of meals and
entertainment expenses.
NET INCOME (LOSS). The net loss was $(0.3) million for 19972000 and $(23.5) million
for 1999. This reduction in loss in 2000 compared to $6.01999 was the result of
increased net service revenue and gross margin and reduced selling, general,
and administrative expenses discussed above.
13
14
1999 COMPARED TO 1998
NET SERVICE REVENUES. Net service revenues increased 9.8% to $746.6 million in
1999 compared to $680.1 million for the same period in 1996. This increase was due to the
revenue increases discussed above offset by a decrease in the gross profit as a
percentage of net service revenues due to the continuing change in the business
mix towards Flexible Billings, which has traditionally lower gross margins, and
a decrease in selling, general and administrative expenses as a percentage of
net service revenues (although selling, general, and administrative expenses
increased in absolute dollars) due to economies of scale gained from a larger
revenue base.
1996 COMPARED TO 1995
Net service revenues. Net service revenues increased 106.1% to $94.2
million in 1996 as compared to $45.7 million for the same period in 1995.1998. This increase was
composed of a $39.6$56.9 million increase in Flexible Billings and a $8.9$9.6 million
increase in Search Fees for 1996. This increasethe year ended December 31, 1999. The reasons for
such increases are set forth below.
FLEXIBLE BILLINGS increased 10.4% to $601.5 million in Flexible
Billings was partially offset by an approximate $1.5 million decrease in
Flexible Billings from franchisee and licensee operations for 19961999 as compared to
1995, as several franchisee and licensee operations were discontinued during
1996.
Flexible Billings increased 110.3% to $75.5$544.6 million for 1996 as compared to
$35.9the same period in 1998. Approximately $41 million in 1995. Thisof this
increase in Flexible Billings includeswas a $25.3
million increase from existing Company-owned operations and $14.3 million
increase from acquired operations. The increase attributable to Company-owned
operations resulted primarily fromresult of an increase in the number of hours billed by
Company-owned operations during 1996
15
17 as compared to 1995, as well as fromthe same periods in 1998 due to the Company's
continued emphasis on expanding the number of service offerings in all markets.
The remaining increase, approximately $16 million, was primarily attributable
to an increase in the average hourly billbilling rate for 19961999.
SEARCH FEES increased 7.1% to approximately $27.0 per hour as$145.1 million in 1999 compared to approximately $21.3 per
hour$135.5 million
for the same period in 1995.
Search Fees increased 90.8% to $18.7 million in 1996 as compared to $9.8
million in 1995.1998. This increase in revenues was a result of a $4.3 million
increase in revenues from existing Company-owned operations and a $4.6 million
increase in revenues attributable to acquired operations. The increase in
Company-owned operations resulted primarily from an increase
in the number ofaverage fee for each search sales consultants, which increasedplacement made during 1999 compared to the
same period in 1998. The number of search placements made during 1996 as compared to 1995. The average fee for each Search placement madein 1999 remained
relatively constant during the periods involved. Franchise and license
revenues, which are included in the aforementioned Flexible Billings decreased
approximately 31.9%compared to $3.2 million in 1996 from $4.7 million in 1995. The
decrease was primarily due to the effects of discontinued franchisee and
licensee operations during 1996.
After taking into account the decreases in net service revenues
attributable to discontinued franchisee and licensee operations, the net service
revenue comparisons reflect a continued improvement in the demand for Romac's
specialized staffing services. Romac opened two new Company-owned locations
during 1996: Pittsburgh in February and Minneapolis in April.
Gross profit.1998.
GROSS PROFIT. Gross profit increased 100.0%10.6% to $40.4$322.6 million in 1996 as1999 compared
to $20.2$291.6 million in 1995.1998. Gross profit as a percentage of net service revenues
decreasedincreased to 43.2% in 1999 compared to 42.9% for the same period in 1996 as compared to 44.2% in 1995. This decrease1998. The
increase in gross profit margin as a percentage of net service revenues was primarily a result of the improvement
in margins on Flexible Billings attributable to higher average billing rates.
This increase was partially offset by the continuing changeschange in Romac'sthe Company's
business mix whereby revenuesbetween Flexible Billings and Search Fees. Revenues from Flexible
Billings, which hashave traditionally lower gross margins than Search Fees,
increased to 80.1%80.6% of Romac'sthe Company's net service revenues for 1996 asin 1999 compared to
78.6%80.1% for 1995.
Selling, general and administrative expenses.the same period in 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 99.3%54.1% to $30.3$346.5 million in 1996 as1999 compared to
$15.2$224.8 million for the same period in 1995.1998. Selling, general and administrative
expenses as a percentage of net service revenues decreasedincreased to 32.2%46.4% in 1996 as1999
compared to 33.4%33.1% for the same period in 1995. This decrease in selling, general, and administrative expenses1998. The increase as a percentage of
net service revenues resulted primarily from greaterseveral strategic initiatives
adopted by management during the first half of 1999. These included: i) the
development, deployment, advertising and other related expenses for the
Company's online interactive career management and recruitment resource,
kforce.com Interactive, ii) activities to re-engineer and streamline back
office operations, and iii) investments in future growth, including leadership
development, increasing the number of sales consultants, buildout of a national
service center, and further development of educational services, kforce
Consulting and operating efficienciesspecialties.
MERGER, RESTRUCTURING AND INTEGRATION EXPENSE. There was no merger,
restructuring and economiesintegration expense in 1999, compared to $26.1 million in
1998. The 1998 expenses were related to the merger with Source in April 1998
and the restructuring charges incurred in connection with the merger. Merger,
restructuring and integration expenses consisted of scale gained from a larger revenue base.$8.2 million of direct
costs related to the merger and $17.9 million related to restructuring and
integration.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses.expense increased
52.7%, to $14.5 million for 1999 compared to $9.5 million for the same period
in 1998. Depreciation and amortization expensesexpense as a percentage of net service
revenue increased approximately 260.0% to $1.8 million in 1996 as1.9% for 1999 compared to $500,0001.4% for the same period in 1995, primarily because Romac incurred a full year of depreciation
expense on approximately $1.2 million of new computer and telephone equipment
that was purchased during 1995, began depreciating approximately $1.3 million of
computer and telephone equipment and approximately $700,000 of furniture and
fixtures acquired in 1996, and incurred additional amortization expense in 1996
related to goodwill recorded1998.
The increase as a resultpercentage of asset acquisitions made by Romac
during 1996.
Other (income) expense. Other (income) expense increased 198.2% to $1.7
million of income in 1996 asnet service revenues for 1999 compared to $570,000 of incomethe
same period in 1995. This
increase1998 was primarily due to interest earned by Romacadditional depreciation on the investmentnew
technology platform implemented at certain Source locations in the second half
of the
proceeds from its May 1996 Common Stock offering1998 and expenses relating to capital lease obligations entered intoadditional goodwill amortization due to earnout buyouts
negotiated in 1995 declined1999.
OTHER (INCOME) EXPENSE. Other (income) expense decreased 81.1% in 1996. This increase
was partially offset by a decrease in franchisee termination income received by
Romac during the periods involved, as $346,189 was received in 1996 as compared1999 to $435,000 in 1995.
Income before taxes. Income before taxes increased 98.0% to $9.9$0.9
million
in 1996 as compared to $5.0 million for the same period in
1995,14
15
1998. The decrease during 1999 compared to the same period in 1998 was due to a
decrease in investment income resulting from increased cash requirements for
funding operations and for the Company's repurchase of common stock.
INCOME (LOSS) BEFORE INCOME TAXES. The loss before income taxes was $37.4
million for 1999 compared to income before taxes of $36.1 million for the same
period in 1998, primarily as a result of the above
factors.
Provisionincrease in selling, general and
administrative expenses discussed above.
PROVISION (BENEFIT) FOR INCOME TAXES. The income tax benefit for income taxes. Provision for income taxes increased 100% to
$4.01999 was $13.9
million in 1996 as compared to $2.0a provision of $20.7 million for the same period in 1995.1998.
The effective incometax benefit rate was 37.1% in 1999 compared to an effective
provision rate of 57.3% in 1998. The decrease in the effective tax rate was constant at approximately 40.0% for both periods.
Net income. Net income increased approximately 100% to $6.0 million in 1996 as1999
compared to $3.01998 was primarily due to the Company's net loss position in 1999
and to certain non-deductible merger related expenses in 1998 which were not
present in 1999.
NET INCOME (LOSS). The net loss was $23.5 million for 1999 compared to net
income of $15.4 million for the same period in 1995,1998. This decrease was
primarily due to the increase in selling, general and administrative expenses
discussed above, which were partially offset by the 1998 merger, restructuring,
and integration expenses and the decrease in the effective tax rate as a result
of the above
factors.
16
18non-deductible merger related expenses in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, theThe Company's sources of liquidity includedinclude approximately $77.9$1.9 million in cash
and cash equivalents and approximately $19.6$69.0 million in additional net working
capital. In addition, asthe Company has approximately $45 million outstanding
under its $90 million Amended and Restated Credit Facility with Bank of December 31, 1997,
there were no amounts outstanding on Romac's line of credit and $30.0 millionAmerica
(the "Credit Facility"). This Credit Facility, which was available for borrowing under Romac's line of credit. Romac entered into on
November 3, 2000, has an initial term of three years. The Credit Facility
provides for a new Revolving Linemaximum revolving credit facility of $90 million (not to exceed
85% of the Company's "Eligible Receivables" as such term is defined in the
Credit Loan Agreement with Nationsbank, N.A. (the "LineFacility).
The Credit Facility contains a provision that limits the dollar amount of
Credit") during September 1997. The Linecommon stock the Company may repurchase subsequent November 3, 2000 to $55
million. On February 12, 2001, the Credit Facility was amended to increase the
maximum amount of Credit expires on March 31, 2000 and
amounts outstanding undercommon stock the line of credit accrue interest at an annual rate
equalCompany may repurchase to 65 basis points above the 90-day London Interbank Offering interest
rate ("LIBOR"). As of December 31, 1997, the interest rate on the Line of Credit
was 6.46%.$72 million.
During the year ended December 31, 1997,2000, cash flow provided by operations was
approximately $4.5$28.3 million, resulting primarily from neta non-cash adjustment for
depreciation and amortization, refunds of prior income non-cash
expenses (depreciationtax payments and amortization) and increasesan
increase in operatingaccrued payroll liabilities,costs, partially offset by an increase in accounts
receivable.receivable and a decrease in accounts payable and other accrued liabilities.
The increase in accounts receivable reflects the increased volume of business
during 1997 from
existing locationsin 2000 as compared to 1999. The increase in accrued payroll costs, and the
initial fundingdecreases in accounts payable and other accrued liabilities are primarily due
to the timing of the accounts receivable base in
acquired operations.payment of these liabilities.
During 1997,2000, cash flow used in investing activities was approximately $54.3$10.8
million, resulting primarily from Romac'san increase of $3.2 million in the value of
deferred compensation related assets, the use of approximately $52.1$1.2 million for
contingent earn out payments on prior acquisitions and $6.4 million in capital
expenditures.
For the year 2000, cash flow used in financing activities was approximately
$23.4 million, resulting primarily from the use of $12.7 million for acquisitions.
In Novemberthe
repurchase of outstanding stock through open market purchases and $55.8 million
to execute a modified Dutch Auction tender offer for the repurchase of common
stock completed in December 1997, Romac received approximately $86.52000. The use of funds for stock purchases was
partially offset by proceeds from the Company's bank line of credit. As of
December 31, 2000, the Company had repaid $10.0 million as netof the $55.0 million of
bank line of credit proceeds used during the year. Through March 23, 2001, an
additional 285,000 shares were repurchased in 2001 for a total purchase price of
$1.1 million.
15
16
On March 11, 1999, the Company announced that its Board of Directors had
authorized the repurchase of up to $50 million of its common stock offering, parton the open
market, from time to time, depending on market conditions. On October 24, 2000,
the Board of which was usedDirectors authorized an increase to repayup to $100 million for stock
repurchases. As of December 31, 2000, the indebtedness outstandingCompany had repurchased approximately
14.4 million shares for $82.7 million under this plan. Additional stock
repurchases may have a material impact on the Line of Credit. Romac intends to useCompany's cash flow requirements
for the remaining net proceeds for general corporate purposes, including possible
acquisitions, expansion of Romac's operations and certain capital expenditures
related to Romac's expansion. Pending such uses, the net proceeds will be
invested in short term, investment grade securities, certificates of deposit, or
direct or guaranteed obligations of the United States government.
Romacnext twelve months.
The Company believes that cash flow from operations and borrowings under Romac's
Line of Credit,its
credit facility, or other credit facilities that may become available to Romacthe
Company in the foreseeable future, will be adequate to meet the working capital
requirements of Romac's
current operations for at least the next 12twelve months.
Romac believesHowever, there is no assurance (i) that the consummation ofCompany will be able to obtain
financing in amounts sufficient to meet its operating requirements or at terms
which are satisfactory and which allow the Source MergerCompany to remain competitive, or
(ii) that the Company will not adversely affect Romac's liquidity
and capital resources. Romac'sbe able to meet the financial covenants contained in
its credit facility. The Company's estimate of the period that existing
resources will fund its and the combined company's working capital requirements is a forward-looking
statement that is subject to risks and uncertainties. Actual results could
differ from those indicated as a result of a number of factors, including the
use of such resources for possible acquisitions.
YEARacquisitions and the announced stock
repurchase plan.
NEW ACCOUNTING PRONOUNCEMENTS
In March 2000, COMPUTER ISSUES
Many computer systemsFASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation", which further clarifies APB Opinion
No. 25, "Accounting for Stock Issued to Employees". This interpretation did not
have a material impact on the Company's financial position or its results of
operations.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", was issued. SFAS No. 133, as amended by SFAS Nos. 137 and 138,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It also
requires that all derivatives and hedging activities be recognized as either
assets or liabilities in the Consolidated Balance Sheets and be measured at
fair value. The accounting for changes in the fair value of the derivative
(that is, gains and losses) depends upon the intended use today were designedof the derivative and
developed using two
digits, rather than four,resulting designation if used as a hedge. SFAS No. 133, as amended, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000
and therefore will be effective during the quarter ended March 31, 2001. The
Company has determined that this standard has no impact on its financial
position or results of operations and is not currently expected to specify years. Ashave a
result, such systems will
recognizematerial impact in the year 2000 as "00." This could cause many computer applicationsfuture.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to fail completelya variety of risks, including foreign currency
fluctuations and changes in interest rates on its borrowings. The effect of a
1% change in interest rates would currently have an impact of $.45 million. The
Company does not engage in trading market risk sensitive instruments for
speculative or to create erroneous results unless corrective measureshedging purposes. The Company does not believe that changes in
interest rates or foreign currency are taken. Romac utilizes software or related computer technologies which are
essentialmaterial to its operations. The Company believes all such software is currently
Year 2000 compliant, and therein does not anticipate any material impact as a
result of the Year 2000 issue.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is includedCompany's consolidated financial statements and notes thereto and the
reports of Deloitte & Touche LLP and PricewaterhouseCoopers LLP, the Company's
independent auditors, are set forth on the pages 22 to 47indicated in Item 14 of Part IV of this Report and is incorporated into this item by reference.14.
16
17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
19On August 3, 2000, the Company replaced PricewaterhouseCoopers LLP ("PWC")
with Deloitte & Touche LLP ("DT") as the Company's independent auditors. The
change was the result of a formal proposal process conducted by the Company's
Audit Committee and management with several accounting firms. The change was
approved by both the Audit Committee and the Board of Directors.
The reports of PWC on the Company's consolidated balance sheets as of December
31, 1999 and 1998 and the related consolidated statements of operations and
comprehensive income, stockholders equity and cash flows for each of the years
in the three-year period ended December 31, 1999, did not contain an adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
There were no disagreements between the Company and PWC as to any matter of
accounting principles or practices, financial statement disclosure, or audit
scope or procedure, which disagreements, if not resolved to the satisfaction of
PWC, would have caused it to make a reference to the subsequent matter of the
disagreement in connection with its reports on the financial statements for
such periods within the meaning of Item 304 (a)(1)(iv) of Regulation S-K.
During the Company's two most recent fiscal years or any subsequent interim
periods prior to the engagement of DT, neither the Company nor anyone on its
behalf consulted with DT concerning: (i) the application of accounting
principles to any transaction or the type of audit opinion that might be
rendered on the Company's financial statements; or (ii) any matter that was
either the subject of a disagreement or an event required to be reported
pursuant to Item 304(a)(1)(iv) of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 relating to executive officers and
directors of the registrant is incorporated herein by reference to the
registrant's definitive proxy statement for the Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 relating to executive compensation is
incorporated herein by reference to the registrant's definitive proxy statement
for the Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 relating to security ownership of certain
beneficial owners and management is incorporated herein by reference to the
registrant's definitive proxy statement for the Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 relating to certain relationships and
related transactions is incorporated herein by reference to the registrant's
definitive proxy statement for the Annual Meeting of Shareholders.
18
20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
17
18
1. Financial Statements.FINANCIAL STATEMENTS. The consolidated financial statements,
and related notes thereto, of the Company with the independent
auditors' reportreports thereon are included in Part IV of this Reportreport on
the pages indicated by the Index to Consolidated Financial Statements
and Schedule as presented on page 2219 of this report.
2. Financial Statement Schedule.FINANCIAL STATEMENT SCHEDULE. The financial statement
schedule of the Company is included in Part IV of this Reportreport on the
page indicated by the Index to Consolidated Financial Statements and
Schedule as presented on page 2019 of this report. The independent
auditors' reportreports as presented on pagepages 20, 21 and 41 of this report
appliesapply to the financial statement schedule. This financial statement
schedule should be read in conjunction with the consolidated financial
statements, and related notes thereto of the Company.
Schedules not listed in the Index to Consolidated Financial Statements
and ScheduleSchedules have been omitted because they are not applicable, not
required, or the information required to be set forth therein is
included in the consolidated financial statements or notes thereto.
3. Exhibits.EXHIBITS. See Item 14(c) below.
(b) Reports on FormREPORTS ON FORM 8-K.
(i) Report on Form 8-K, filed October 9, 1997, relating to the
purchase of substantially all the assets of Sequent Associates, Inc.
(ii) Report on Form 8-K, filed October 16, 1997, announcing third
quarter operating results.
(iii) Report on Form 8-K/A, filed October 16, 1997, filing the
financial statements for Uni*Quality System Solutions, Inc., previously
omitted from the Company's Report on Form 8-K, filed September 22, 1997
(iv) Report on Form 8-K, filed December 3, 1997, relating to the
resignation of Maureen A. Rorech from the Board of Directors.None.
(c) Exhibits.EXHIBITS. The exhibits listed on the Exhibits Index are filed as part
of, or incorporated by reference into, this Report.report.
(d) Financial Statement Schedules.FINANCIAL STATEMENT SCHEDULES. See Item 14(a) above.
18
19
21
ROMAC INTERNATIONAL,KFORCE.COM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
PAGE
----
Independent Auditors' Report................................ 21
Consolidated Financial Statements:
Consolidated Balance Sheets -- December 31, 1997 and
1996................................................... 22
Consolidated Statements of Operations -- Years ended
December 31, 1997, 1996, and 1995...................... 23
Consolidated Statements of Changes in Shareholders'
Equity -- Years ended
December 31, 1997, 1996, and 1995...................... 25
Consolidated Statements of Cash Flows -- Years ended
December 31, 1997, 1996, and 1995...................... 24
Notes to Consolidated Financial Statements................ 27
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts..........Page
Independent Auditors' Reports............................................ 20
Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 2000 and 1999............... 22
Consolidated Statements of Operations and Other Comprehensive Income
(Loss)-Years ended December 31, 2000, 1999 and 1998.................. 23
Consolidated Statements of Cash Flows - Years ended
December 31, 2000, 1999 and 1998..................................... 24
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 2000, 1999 and 1998..................................... 25
Notes to Consolidated Financial Statements............................. 27
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts.... ................... 42
19
20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of kforce.com, Inc.:
We have audited the accompanying consolidated balance sheet of kforce.com, Inc.
and subsidiaries (the "Company"), formerly known as Romac International, Inc.,
as of December 31, 2000, and the related consolidated statements of operations
and comprehensive income (loss), stockholders' equity, and cash flows for the
year then ended. Our audit also included the accompanying financial statement
schedule.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2000, and the results of their operations and their cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Deloitte & Touche LLP
Certified Public Accountants
Tampa, Florida
January 30, 2001
20
2221
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and ShareholdersStockholders of Romac International, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and changes in shareholders'comprehensive income, of
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Romac International, Inc., and its
subsidiaries ("the Company") at December 31, 1997 and 1996,1999, and the results of their
operations and their cash flows for each of the threetwo years in the period ended
December 31, 1997,1999, in conformity with accounting principles generally accepted
accounting principles.in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted auditing standardsin the United States of America, which require that we plan and
perform the auditsaudit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price WaterhousePricewaterhouseCoopers LLP
PRICE WATERHOUSE- ------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
February 25, 19988, 2000
21
23
ROMAC INTERNATIONAL,22
KFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------
1997 1996
-------- ------------------------------
2000 1999
--------- ---------
(IN 000'S)
ASSETS
Current Assets:
Cash and cash equivalents.................................equivalents ................................ $ 77,946 $39,555
Short-term investments.................................... 47 8801,865 $ 7,919
Trade receivables, net of allowance for doubtful accounts
of $880$6,649 and $617, respectively......................... 35,475 17,061
Notes receivable from franchisees, current................ 109 193
Receivables from related parties, current................. 233 100$4,417, respectively .................... 125,931 112,545
Income tax refund receivables ............................ -- 23,038
Deferred tax asset current............................... 352 243....................................... 4,872 3,546
Prepaid expenses and other current assets................. 1,637 1,214
-------- -------assets ................ 3,682 3,669
--------- ---------
Total current assets.............................. 115,799 59,246
Notes receivable from franchisees, less current portion..... 4 75assets ............................. 136,350 150,717
Receivables from officers and related parties less current portion...... 1,290 862.............. 1,058 960
Furniture and equipment, net ............................... 23,115 27,758
Deferred tax asset, lessnon current portion.................... 310 209
Furniture and equipment, net................................ 8,206 5,346............................ 1,250 1,711
Other assets, net........................................... 4,878 906net .......................................... 23,481 19,349
Goodwill, net of accumulated amortization of $2,578$13,135 and
$1,108, respectively...................................... 66,652 10,915
-------- -------$9,452, respectively .................................. 92,764 95,692
--------- ---------
Total assets...................................... $197,139 $77,559
======== =======assets ..................................... $ 278,018 $ 296,187
========= =========
LIABILITIES AND SHAREHOLDERS'STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued liabilities............liabilities ........... $ 2,68017,464 $ 1,72324,180
Accrued payroll costs..................................... 7,227 2,976
Current portion of capital lease obligations.............. 731 --
Current portion of payables to related parties............ 4,265 23
Income taxes payable...................................... 3,396 304
-------- -------
Total current liabilities......................... 18,299 5,026costs .................................... 37,778 31,922
Bank overdrafts .......................................... 8,083 5,824
Capital lease obligations less current portion............. 1,260................................ -- Payables481
Notes payable to related parties less......................... -- 2,000
Income taxes payable ..................................... 2,140 --
--------- ---------
Total current portion........... 1,375liabilities ........................ 65,465 64,407
Long term debt ............................................. 45,000 --
Other long-term liabilities................................. 2,525 1,249
-------- -------liabilities ................................ 12,516 13,575
--------- ---------
Total liabilities................................. 23,459 6,275liabilities ................................ 122,981 77,982
Commitments and contingencies Shareholders'(Note 11)
Stockholders' Equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none
issued and outstanding.................................outstanding ................................ -- --
Common stock, $0.01 par; 100,000250,000 shares authorized, 29,86346,959
and 24,26746,687 issued, and outstanding, respectively........ 299 243respectively ....................... 470 467
Additional paid-in capital................................ 152,188 61,404
Stock subscriptions receivable............................ -- (13)capital ............................... 191,007 187,262
Accumulated other comprehensive (loss) income ............ (267) (170)
Retained earnings......................................... 22,118 10,575earnings ........................................ 46,363 46,646
Less reacquired shares at cost; 677 shares................ (925) (925)
-------- -------14,802 and 2,613 shares,
respectively ....................................... (82,536) (16,000)
--------- ---------
Total shareholders' equity........................ 173,680 71,284
-------- -------stockholders' equity ....................... 155,037 218,205
--------- ---------
Total liabilities and shareholders' equity........ $197,139 $77,559
======== =======stockholders' equity ....... $ 278,018 $ 296,187
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
22
24
ROMAC INTERNATIONAL,23
KFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31,
-------------------------------------
2000 1999 1998
--------- --------- ---------
(IN 000'S, EXCEPT PER SHARE DATA)
1997 1996 1995
-------- ------- -------
Net service revenues........................................ $181,434 $94,210 $45,655revenues ........................ $ 794,997 $ 746,632 $ 680,086
Direct costs of services.................................... 110,550 53,839 25,460
-------- ------- -------services .................... 433,441 424,001 388,505
--------- --------- ---------
Gross profit................................................ 70,884 40,371 20,195profit ................................ 361,556 322,631 291,581
Selling, general and administrative expenses................ 50,531 30,348 15,232expenses 341,812 346,452 224,790
Merger, restructuring and integration expense -- -- 26,122
Depreciation and amortization............................... 3,242 1,762 512amortization ............... 18,440 14,514 9,507
Other (income) expense:
Dividend and interest income.............................. (1,902) (1,413) (214)income .............. (288) (1,639) (5,224)
Interest expense.......................................... 127 78 133expense .......................... 734 423 216
Other (income) expense, net............................... (157) (350) (489)
-------- ------- -------net ............... (333) 274 23
--------- --------- ---------
Income (loss) before income taxes.................................. 19,043 9,946 5,021
Provisiontaxes ........... 1,191 (37,393) 36,147
(Provision) benefit for income taxes.................................. 7,500 3,965 2,008
-------- ------- -------taxes ........ (1,474) 13,877 (20,708)
--------- --------- ---------
Net income..................................................(loss) income ........................... $ 11,543(283) $ 5,981(23,516) $ 3,013
======== ======= =======15,439
Other comprehensive (loss) income:
Foreign currency translation .............. (97) (191) 63
--------- --------- ---------
Comprehensive (loss) income ................. $ (380) $ (23,707) $ 15,502
========= ========= =========
Net (loss) income per share:
Basic.....................................................Basic .................................. $ .46(.01) $ .28(.53) $ .19
======== ======= =======
Diluted....................................................34
========= ========= =========
Diluted ................................ $ .44(.01) $ .26(.53) $ .18
======== ======= =======.33
========= ========= =========
Weighted average shares:
Basic..................................................... 24,896 21,716 16,087
======== ======= =======
Diluted................................................... 26,398 23,319 16,965
======== ======= =======Basic .................................. 42,886 44,781 45,410
========= ========= =========
Diluted ................................ 42,886 44,781 47,318
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
23
25
ROMAC INTERNATIONAL,24
KFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'CASH FLOWS
YEARS ENDED DECEMBER 31,
-----------------------------------
2000 1999 1998
-------- -------- ---------
(IN 000'S)
Cash flows from operating activities:
Net (loss) income ................................. $ (283) $(23,516) $ 15,439
Adjustments to reconcile net (loss) income to
cash provided by (used in) operating activities:
Depreciation and amortization .................. 18,440 14,514 9,507
Provision for fallouts and bad debts on accounts
and notes receivable ......................... 7,106 9,768 4,049
Deferred income taxes .......................... (865) 347 (2,742)
Loss on asset sales/disposals .................. 830 419 1,604
(Increase) decrease in operating assets:
Trade receivables, net ......................... (20,491) (8,169) (33,464)
Prepaid expenses and other current assets ...... (13) (43) (1,108)
Other assets, net .............................. (5,088) (7,281) (5,751)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued
liabilities .................................. (6,716) 14,920 1,229
Accrued payroll costs .......................... 8,016 (9,148) 12,932
Bank overdrafts ................................ 2,260 5,824 --
Accrued merger, restructuring, and integration
expense ...................................... -- (4,931) 4,931
Income tax refund (payable) .................... 26,174 (26,129) 29
Other long-term liabilities .................... (1,059) 6,703 4,284
-------- -------- ---------
Cash provided by (used in) operating
activities .............................. 28,311 (26,722) 10,939
-------- -------- ---------
Cash flows from investing activities:
Capital expenditures, net ...................... (6,408) (16,603) (11,820)
Acquisitions, net of cash acquired and including
payment on earnout provisions ................ (1,221) (6,039) (23,593)
Proceeds from the sale of short-term
investments .................................. -- 12,000 --
Premiums paid for cash surrender value of life
Insurance policies ........................... (3,213) (391) (3,292)
Purchase of short-term investments ............. -- -- (10,047)
-------- -------- ---------
Cash used in investing activities ......... (10,842) (11,033) (48,752)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from bank line of credit .............. 55,000 -- --
Repayments on bank line of credit .............. (10,000) -- --
Payments on capital lease obligations .......... (481) (723) (787)
Payments on notes payable to related parties ... (2,000) (10,144) --
Payments on (issuance of) notes receivable from
related parties .............................. -- 1,143 (582)
Proceeds from exercise of stock options ........ 2,513 1,843 6,271
Repurchases of treasury stock .................. (12,699) (15,075) --
Repurchase of treasury stock in tender offer
transaction ................................ (55,759) -- --
-------- -------- ---------
Cash (used in) provided by
financing activities .................. (23,426) (22,956) 4,902
-------- -------- ---------
Increase(decrease) in cash and cash equivalents ..... (5,957) (60,711) (32,911)
Cumulative translation adjustment ................... (97) (191) 63
Cash and cash equivalents at beginning of year ...... 7,919 68,821 101,669
-------- -------- ---------
Cash and cash equivalents at end of year ............ $ 1,865 $ 7,919 $ 68,821
======== ======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
24
25
KFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 19962000, 1999 AND 19951998
(IN 000'S)
SHARES AMOUNTACCUMULATED
COMMON STOCK ADDITIONAL OTHER
---------------- PAID-IN COMPREHENSIVE
Shares Amounts CAPITAL INCOME
------ --------------- --------- -------------
COMMON STOCK:
Balance at December 31, 1994................................ 15,751 $ 158
Issuance of common stock.................................... 4,160 42
Exercise of stock options................................... 21 --
------ --------
Balance at December 31, 1995................................ 19,932 200
Issuance of common stock.................................... 4,024 40
Exercise of stock options................................... 311 3
------ --------
Balance at December 31, 1996................................ 24,267 243
Issuance of common stock.................................... 4,577 46
Exercise of stock options................................... 1,019 10
------ --------
Balance at December 31, 1997................................ 29,863 $ 299
====== ========
ADDITIONAL PAID-IN CAPITAL:
Balance at December 31, 1994................................ $ 1,655
Issuance of common stock.................................... 11,360
Exercise of stock options................................... 32
Tax benefit related to employee stock options............... 25
--------
Balance at December 31, 1995................................ 13,072
Issuance of common stock.................................... 47,191
Exercise of stock options................................... 512
Tax benefit related to employee stock options............... 629
--------
Balance at December 31, 1996................................ 61,404
Issuance of common stock.................................... 86,469
Exercise of stock options................................... 2,834
Tax Benefit related to employee stock options............... 1,481
--------
Balance at December 31, 1997................................ $152,188
========
STOCK REPURCHASE OBLIGATION:
Balance at December 31, 1994................................ $ (924)
Reacquired stock............................................ 924
--------
Balance at December 31, 1995, 1996 and 1997................. $ --
========
STOCK SUBSCRIPTIONS RECEIVABLE:
Balance at December 31, 1994................................ $ (36)
Payments on stock subscriptions receivable.................. 19
--------
Balance at December 31, 1995................................ (17)
Payments on stock subscriptions receivable.................. 4
--------
Balance at December 31, 1996................................ (13)
Payments on stock subscriptions receivable.................. 13
--------
Balance at December 31, 1997................................ $ --
========
24
26
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY -- (CONTINUED)
SHARES AMOUNT
------ --------
RETAINED EARNINGS:
Balance at December 31, 1994................................ $ 1,582
Net income.................................................. 3,013
--------
Balance at December 31, 1995................................ 4,595
Net income.................................................. 5,980
--------
Balance at December 31, 1996................................ 10,575
Net income.................................................. 11,543
--------
Balance at December 31, 1997................................ $ 22,118
========
REACQUIRED SHARES:
Balance at December 31, 1994................................ (676) $ (924)
Reacquired escrow shares.................................... -- (1)
------ --------
Balance at December 31, 1995, 1996 and 1997................. (676) $ (925)
====== ========
TOTAL SHAREHOLDERS'STOCKHOLDERS' EQUITY:
Balance at December 31, 1994................................1997 ............ 45,475 $455 $ 2,435
Issuance of common stock.................................... 11,402
Net income.................................................. 3,013178,493 $ (42)
Exercise of stock options................................... 32
Payments on stock subscriptions receivable.................. 19
Reacquired escrow shares.................................... (1)options ............... 933 9 6,262 --
Tax benefit related toof employee stock options............... 25
--------options ... -- -- 545 --
Foreign currency translation adjustment . -- -- -- 63
Net income .............................. -- -- -- --
------ ---- --------- -----
Balance at December 31, 1995................................ 16,925
Issuance of common stock.................................... 47,2311998 ............ 46,408 464 185,300 21
Exercise of stock options................................... 515options ............... 279 3 1,840 --
Tax benefit related toof employee stock options............... 629
Payments onoptions ... -- -- 122 --
Foreign currency translation adjustment . -- -- -- (191)
Net loss ................................ -- -- -- --
Repurchase of common stock subscriptions receivable.................. 4
Net income.................................................. 5,980
--------.............. -- -- -- --
------ ---- --------- -----
Balance at December 31, 1996................................ 71,284
Issuance of common stock.................................... 86,5151999 ............ 46,687 467 187,262 (170)
Exercise of stock options................................... 2,844options ............... 272 3 2,510 --
Tax benefit related toof employee stock options............... 1,481
Payment onoptions ... -- -- 995 --
401(k) matching contribution ............ -- -- 406 --
Employee stock subscriptions receivable................... 13purchase plan contribution -- -- (166) --
Foreign currency translation adjustment . -- -- -- (97)
Net income.................................................. 11,543
--------loss ................................ -- -- -- --
Repurchase of common stock .............. -- -- -- --
------ ---- --------- -----
Balance at December 31, 1997................................ $173,680
========2000 ............ 46,959 $470 $ 191,007 $(267)
====== ==== ========= =====
The accompanying notes are an integral part of these consolidated financial
statements.
25
27
ROMAC INTERNATIONAL,26
KFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
CONTINUED (IN 000'S)
1997 1996 1995REACQUIRED STOCK
RETAINED --------------------
EARNINGS Shares Amounts TOTAL
-------- ------- -------- ----------------
Cash flows from operating activities:
STOCKHOLDERS' EQUITY:
Balance at December 31, 1997 ............. $ 54,723 677 $ (925) $ 232,704
Exercise of stock options ................ -- -- -- 6,271
Tax benefit of employee stock options .... -- -- -- 545
Foreign currency translation adjustment .. -- -- -- 63
Net income................................................ $ 11,543 $ 5,981 $ 3,013
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 3,242 1,762 512
Provision for losses on accounts and notes
receivable........................................... 638 193 290
Deferred taxes......................................... (210) 26 (64)
(Increase) decrease in operating assets:
Trade receivables, net................................. (19,052) (9,900) (4,424)
Notes receivable from franchisees...................... 155 (111) (17)
Prepaid expenses and other current assets.............. (423) (895) 398
Other assets, net...................................... (2,487) (7) (14)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities......... 957 1,050 (922)
Accrued payroll costs.................................. 4,251 1,518 (65)
Income taxes payable................................... 4,572 361 554
Other long-term liabilities............................ 1,276 657 (682)
--------............................... 15,439 -- -- 15,439
-------- ------- Cash provided by (used for) operating
activities...................................... 4,462 635 (1,421)
-------- ---------
Balance at December 31, 1998 ............. 70,162 677 (925) 255,022
Exercise of stock options ................ -- -- -- 1,843
Tax benefit of employee stock options .... -- -- -- 122
Foreign currency translation adjustment .. -- -- -- (191)
Net loss ................................. (23,516) -- -- (23,516)
Repurchase of common stock ............... -- 1,936 (15,075) (15,075)
-------- ------- Cash flows from investing activities:
Capital expenditures...................................... (3,226) (3,830) (1,302)
Acquisitions, net-------- ---------
Balance at December 31, 1999 ............. 46,646 2,613 (16,000) 218,205
Exercise of cash acquired........................ (52,127) (11,254) --
Proceeds from sale of furniture and equipment, net........ 1,681 -- 12
Proceeds from the sale of short-term investments, net..... 833 7,024 --
Increase in cash surrender value of life insurance
policies............................................... (1,485) (382) (241)
Payments for purchase of short-term investments, net......stock options ................ -- -- (7,656)
---------- 2,513
Tax benefit of employee stock options .... -- -- -- 995
401(k) matching contribution ............. -- (72) 479 885
Employee stock purchase plan contribution -- (217) 1,443 1,277
Foreign currency translation adjustment .. -- -- -- (97)
Net loss ................................. (283) -- -- (283)
Repurchase of common stock ............... -- 12,478 (68,458) (68,458)
-------- ------- Cash used in investing activities................. (54,324) (8,442) (9,187)
-------- -------- -------
Cash flows from financing activities:
Payments on notes receivable from stock subscriptions..... 13 4 19
Payments on capital lease obligations..................... (535) (703) (570)
Payments on notes payable to related parties.............. (23) (6) (18)
Payments on notes receivable from related parties......... 39 220 96
Issuance of notes receivable from related parties......... (600) (520) (439)
Proceeds from issuance of common stock.................... 86,515 47,232 11,402
Proceeds from exercise of stock options................... 2,844 515 32
Repurchase of stock....................................... -- -- 1
-------- -------- -------
Cash provided by financing activities............. 88,253 46,742 10,523
-------- -------- -------
Increase (decrease) in cash and cash equivalents............---------
Balance at December 31, 2000 ............. $ 38,39146,363 14,802 $(82,536) $ 38,935 $ (85)
Cash and cash equivalents at beginning of year.............. 39,555 620 705
-------- -------- -------
Cash and cash equivalents at end of year.................... $ 77,946 $ 39,555 $ 620
========155,037
======== ======= ======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
26
28
ROMAC INTERNATIONAL,27
KFORCE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN 000S,000'S EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
ROMAC International,ORGANIZATION
kforce.com, Inc. and subsidiaries (the "Company") is a provider of professional
and technical specialty staffing services in 18more than 97 locations in 45
markets in the United States as of
December 31, 1997.and Canada. The Company provides its customers value-added
staffing services in the following specialties: Information Technology, Finance
and Accounting, Human Resources and Operating Specialties. The Company provides
flexible staffing services on both a professional temporary and contract basis
and provides search services on both a contingency and retained basis. The
Company principally serves Fortune 1000 clients.
Stock Split/Dividend
On April 21, 1995,May 5, 2000 the Company declaredStockholders approved a 1.023-for-1 stock split on its
common stock. The Company declared two-for-one stock splits effected as a 100%
stock dividends on its common stock on May 15, 1996 and October 3, 1997. All
share-related data in these consolidated financial statements have been adjusted
retroactivelyname change from Romac
International, Inc. ("Romac") to give effect to these events as if they had occurred at the
beginning of the earliest period presented.
Public Offerings
The Company completed its initial public offering of 4,160 shares of common
stock on August 12, 1995. The proceeds of $11,402, net of underwriters'
discounts and other offering costs, were used to pay down debt, to reacquire
stock, for general working capital purposes and to finance business
acquisitions. The Company completed secondary offerings of 4,024 and 4,577
shares of common stock on June 4, 1996 and October 17, 1997, respectively. The
proceeds of $47,232 and $86,515, respectively, net of underwriters' discounts
and other offering costs, are being used to finance business acquisitions and to
fund general working capital purposes.
Principles of Consolidationkforce.com, Inc.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Companykforce.com, Inc.
and its subsidiaries. All material intercompany accounts and transactions have
been eliminated in the consolidated financial statements.
Use of Estimatesconsolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash EquivalentsCASH AND CASH EQUIVALENTS
The Company classifies all highly-liquidhighly liquid investments with an initialoriginal maturity
of three months or less as cash equivalents.
Investments
Investments in mutual funds and common stock have been classified as
available for sale and, as a result, are stated at fair market value. Mutual
funds available for current operations are classified in the balance sheet as
short-term investments while investments in common stock are included in other
assets. Unrealized holding
27
29
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
gains and losses are included as a component of shareholders' equity until
realized. At December 31, 1997 and 1996, there were no unrealized gains or
losses.
Furniture and EquipmentFURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. The cost of leasehold improvements is amortized
using the straight-line method over the terms of the related leases which range
from 3three to 7seven years.
Revenue RecognitionREVENUE RECOGNITION
Net service revenues consist of sales, net of credits and discounts. The
Company recognizes Flexible Billings 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. Franchise fees were determined
based uponThe Company's
policy is to replace individuals who fail to continue employment for the period
of time specified in the agreements for search assignments, generally thirty to
ninety days. Revenue from Search Fees is shown on the Consolidated Statement of
Operations net of a contractual percentagereserve for candidates not remaining in employment for the
guarantee period.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements". This
pronouncement summarizes certain of the SEC staff's views on applying generally
accepted accounting principles to revenue billed by franchisees. Costs
relating to the support of franchised operations were included in the Company's
selling, general and administrative expenses. The last remaining franchisee and
licensee agreement was terminated at the end of the second quarter of 1997.recognition. The Company was the legal employeris
27
28
required to be in compliance with SAB 101 for our fiscal year ending December
31, 2000. The adherence to SAB 101 requirements did not have a material impact
on our results of flexible personnel under its licensing
arrangements, and accordingly, included revenues and related direct costs of
licensed offices in its net service revenues and direct cost of services,
respectively. Commissions paid to licensees were based upon a percentage of the
gross profit generated, and were included in the Company's direct cost of
services.
Income Taxesoperations, financial position or cash flows.
INCOME TAXES
The Company accounts for income taxes under the principles of Statement of
Financial Accounting Standards No. 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 effectsbenefits of deductions attributable to employees'
disqualifying dispositions of shares obtained from incentive stock options are
reflected in additional paid-in capital.
Stock Based Compensation
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123") during 1996.STOCK BASED COMPENSATION
The Company has elected to continue accounting for stock based compensation
under the intrinsic value method of accounting for stock based compensation as
provided under APB No. 25 and has disclosed pro forma net income and earnings
(loss) per share amounts using the fair value based method prescribed by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" ("SFAS 123.
Earnings Per Share123").
SELF-INSURANCE
The Company adopted Statementoffered an employee benefit program for certain employees through
September 30, 1998, and offers a program for all eligible employees effective
October 1, 1998, for which it is self-insured for a portion of the cost. The
Company is liable for claims up to $150 per employee and aggregate claims up to
a defined yearly payment limit. All full-time employees and salaried
consultants are eligible to participate in the program. Self-insurance costs
are accrued using estimates to approximate the liability for reported claims
and claims incurred but not reported.
OTHER COMPREHENSIVE INCOME
Other comprehensive income includes foreign currency translation adjustments
which arise primarily from activities of the Company's Canadian operations.
Results of operations are translated using the average exchange rates during
the period, while assets and liabilities are translated into U.S. dollars using
current or historical rates depending upon the related assets. Resulting
foreign currency translation adjustments are recorded in stockholders' equity.
EARNINGS PER SHARE
Under Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") during 1997, which requires disclosure of, basic
and diluted earnings per share. Under the new standard, basic earnings(loss) per share is computed as earnings divided by weighted average
shares outstanding. Diluted earnings (loss) per share includes the dilutive
effects of stock options and other potentially dilutive securities.
All prior period disclosures have been
restated to conform with current year presentation.
The adoptionOptions that were outstanding, but were antidilutive, and therefore were
excluded from the computation of this new standard had a $.04 per share impact on basic
earnings per sharediluted shares, totaled 5,751, 5,289, and
an immaterial impact on diluted earnings per share for
the year ending December 31, 1997. Options to purchase 1581,207 shares of common stock, for 2000, 1999, and 1998, respectively, at option
prices per share ranging from $16.13$0.980 to $20.63 per share were outstanding during
1997 but were not included$28.125, $ 0.980 to $30.063, and
$24.125 to $30.063 in the computation of diluted earnings per share
because the options were anti-dilutive.
28
30
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)2000, 1999 and 1998, respectively. The options, which
expire on various dates ranging from July 2, 2007January 2005 to December
11, 2007,October 2009 were still
outstanding at December 31, 1997.
Recently Issued Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which will require Romac to disclose, in financial statement format,
all non-owner changes in equity. Such changes include cumulative foreign
currency translation adjustments and certain minimum pension liabilities. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997 and
requires presentation of prior period financial statements for comparability
purposes. Romac expects to adopt this standard during the year ended December
31, 1998. The adoption of this standard is not expected to have a material
impact on disclosure in Romac's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for
reporting information about operating segments in annual financial statements
and interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and
requires presentation of prior period financial statements for comparability
purposes. Romac is currently evaluating its required disclosures under SFAS No.
131 and expects to adopt this standard during the year ended December 31, 1998.
2.2000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required
28
29
in interpreting data to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of December 31,
1997 and 1996. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date and current estimates of fair value may differ significantly from the
amounts presented herein. The fair values of
the Company's financial instruments are estimated based on current market rates
and instruments with the same risk and maturities. The fair values of cash and
cash equivalents, accounts receivable, short-term investments, accounts
payable, notes payablelong term debt, other non-current liabilities and payables to related
parties approximate the carrying values of these financial instruments.
3.GOODWILL
Goodwill, net of accumulated depreciation, totaled $92,764 and $95,692 at
December 31, 2000 and 1999, respectively. Goodwill is amortized on a
straight-line basis over a fifteen to thirty year period. Goodwill amortization
expense was $4,231, $3,857 and $3,212 for the years ended December 31, 2000,
1999 and 1998, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
Management periodically reviews the carrying value of goodwill and other
long-lived assets to determine if an impairment has occurred. Any impairment
loss would have been recorded in the period identified. No such losses were
recorded in the accompanying Consolidated Statements of Operations and Other
Comprehensive Income (Loss).
CAPITALIZED SOFTWARE
During 1997, the Company began the development and implementation of new
computer software to enhance performance of the accounting and operating
systems. The Company accounts for direct internal and external costs subsequent
to the preliminary stage of this project under the principles of SOP 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". Software development costs are being capitalized and classified
as other assets and amortized over the estimated useful life of the software
(typically three years) using the straight-line method. The Company continues
development and enhancements to its accounting and operating computer software.
Direct internal and external costs subsequent to the preliminary stage of each
of these projects are being capitalized and classified as capitalized software,
a component of other assets.
DEFERRED LOAN COSTS
Costs incurred to secure the Company's Credit Facilities have been capitalized
and are being amortized over the terms of the related agreements.
NON-COMPETE AGREEMENTS
Payments made to enter into non-compete agreements have been capitalized and
are being amortized on a straight-line basis over the terms of the related
agreements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2000, FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation", which further clarifies APB Opinion
No. 25, "Accounting for Stock Issued to Employees". This interpretation did not
have a material impact on the Company's financial position or its results of
operations.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", was issued. SFAS No. 133, as amended by SFAS Nos. 137 and 138,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It also
requires that all derivatives and hedging activities be recognized as either
assets or liabilities in the Consolidated Balance Sheets and be measured at
fair value. The accounting for changes in the fair value of the derivative
(that is, gains and
29
30
losses) depends upon the intended use of the derivative and resulting
designation if used as a hedge. SFAS No. 133, as amended, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000 and therefore
will be effective during the quarter ended March 31, 2001. The Company has
determined that this standard has no impact on its financial position or
results of operations and is not currently expected to have a material impact
in the future.
2. FURNITURE AND EQUIPMENT
Major classifications of furniture and equipment and related asset lives are
summarized as follows:
DECEMBER 31,
-----------------
USEFUL LIFE 1997 1996
----------- ------- ------
Furniture and equipment.............................. 5 years $ 3,271 $1,864
Computer equipment................................... 5 years 9,546 6,124
Leasehold improvements............................... lease term 575 192
------- ------
13,392 8,180
Less accumulated depreciation and amortization.................... 5,186 2,834
------- ------
$ 8,206 $5,346
======= ======
IncludedDECEMBER 31,
-----------------
USEFUL LIFE 2000 1999
----------- ------- -------
Furniture and equipment.................... 5-7 years $17,679 $20,436
Computer equipment......................... 3-5 years 20,834 24,342
Airplane................................... 5 years 1,889 1,889
Leasehold improvements..................... lease term 4,997 2,746
Land....................................... 1,310 -
------- -------
46,709 49,413
Less accumulated depreciation ............. 23,594 21,655
------- -------
$23,115 $27,758
======= =======
In 2000, the Company purchased land in computer equipment is approximately $2,600 subjectTampa, FL. The Company subsequently sold
the portion of this land on which its new headquarters facility will be built
to a noncancellable capitalreal estate developer. The Company will lease commitment with a three year term commencing on
July 1, 1997.
29
31
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS
Goodwill and intangible assets of $66,652 and $10,915 at December 31, 1997
and 1996, respectively, relate primarilythe facility for 15 years
from the developer once construction is complete in late 2001. Leasehold
improvements includes approximately $1,865 in improvements related to acquisitions made during 1997 and
1996.
Goodwill is amortized on a straight-line basis over a fifteen or thirty
year period and intangible assets are amortized over the
lifeheadquarters facility. Depreciation of the employment
agreement (five to eight years). Management periodically reviewsimprovements will begin upon the
potential
impairmentcommencement of goodwill in order to determine the proper carrying valuelease. Land consists of goodwill as of each balance sheet date presented. Goodwill amortization expense
of $1,469, $653 and $108 was recorded$1,310 for the years ended Decemberremaining parcel of
property not sold to the developer.
3. ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1997,
1996 and 1995, respectively.2000
During the second quarter of 1997,2000, the Company revised its estimate ofhad no acquisitions. During 2000, the amortization periodCompany settled
earnout provisions on certain prior acquisitions for goodwill from 15 to 30 years for certain acquisitions.
The change increased 1997 net income by $404, or $.02 per share.
For The Year Ended Decemberapproximately $1,221.
These amounts have been recorded as purchase price consideration and are
included in goodwill.
FOR THE YEAR ENDED DECEMBER 31, 19971999
In January 1997,1999, the Company acquired substantially all of the assets of
Career Enhancement International of Massachusetts ("CEIM"), a provider of
permanent placementNetwork Training Solutions, Science Solutions, Inc. and contract servicesTechnology Consulting
Group for information technology personnel.
Thean aggregate purchase price wasof approximately $4,400, subject to adjustment upon
attainment of certain operating results.
In March 1997,$5,100. During 1999, the
Company acquiredalso settled earnout provisions on certain prior acquisitions for
approximately $1,300. These amounts have been recorded as purchase price
consideration and are included in goodwill.
FOR THE YEAR ENDED DECEMBER 31, 1998
The Company completed its merger with Source Services Corporation ("Source") on
April 20, 1998, in a transaction accounted for as a pooling of interests.
Accordingly, all historical results have been restated to reflect the combined
results for the Company and Source for all periods presented. The common stock
of Source was converted to shares of the outstanding capital stock of
Professional Application Resources Incorporated ("PAR"),Company using a provider of
information technology contract personnel. The1.1351 ratio.
30
31
There were no purchase price was approximately
$4,700.
In September 1997,acquisitions by the Company acquired all ofduring the outstanding capital
stock of Uni*Quality Systems Solutions, Inc. ("UQ"), a provider of contract
services for information technology personnel. The purchase price was
approximately $19,600, subject to adjustment upon attainment of certain
operating results. Also in September 1997, the Company acquired substantially
all of the assets of Sequent Associates, Inc. ("Sequent"), a provider of
supplemental contract personnel staffing specializing in information technology
and engineering professionals. The purchase price was approximately $20,300,
subject to adjustment upon attainment of certain operating results.
In November 1997, the Company acquired the fixed assets of DP Specialists
of Colorado, Inc. ("DPSE"), a provider of permanent placement and staff
augmentation contract services for information technology personnel. The
purchase price, including a non-compete agreement, was approximately $3,300.
In December 1997, the Company acquired substantially all of the assets of
The Center For Recruiting Effectiveness, Inc. ("CRE"), a provider of human
resources personnel on a permanent and contract basis. The purchase price was
approximately $2,100 subject to adjustment upon attainment of certain operating
results.
For The Year Endedyear ended
December 31, 1996
In January 1996, the Company completed the acquisition1998. However, during 1998, approximately $23,593 of all of the
assets, except for cash and accounts receivable of Venture Network Corporation,
Inc. ("Venture"), a Company engaged in the business of providing permanent and
contract services for information systems personnel. The purchase price,
including a non-compete agreement, was approximately $1,100. In February 1996,
the Company acquired the intangible assets of PCS Group, Inc. ("PCS"), a
provider of contract service information systems personnel. The purchase price,
including a non-compete agreement, was approximately $2,300. In March 1996, the
Company acquired certain of the assets except for cash and accounts receivable
of Strategic Outsourcing, Inc. ("SOI") for approximately $2,500 in cash. In June
1996, the Company acquired the fixed assets and intangible assets of
30
32
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Bayshare, Inc. ("Bayshare"), the former legal entity for the Romac franchise for
the San Francisco area. The purchase price was approximately $5,000 and is
subject to adjustment upon attainment of certain operating results.
During fiscal 1997, approximately $1,900 was paid as additional purchase
priceearnout
provisions related to the 1996 acquisitions. The Company fixed the earnouts on
certainprior acquisitions during 1997 for approximately $5,600 (see Note 8).were paid. These amounts have been
recorded as additional purchase price consideration and are included in
goodwill.
The Company has accounted for all acquisitions, except for the Source
transaction, using the purchase method of accounting. The results of the acquiredthese
purchased companies' operations have been included with those of the Company
from the dates of the respective acquisitions.
The pro
forma results of operations listed below reflect purchase accounting and pro
forma adjustments as if the transactions occurred as of the beginning of 1996.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of the results that would have occurred if the assumed transaction
had occurred on the dates indicated or the expected financial position or
results of operations in the future.
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
Net service revenue.................................... $216,541 $147,903
Gross profit........................................... 80,340 55,780
Income before income taxes............................. 19,220 9,372
Net income............................................. 11,543 5,623
Earnings per share -- basic............................ $ .46 $ .26
Earnings per share -- diluted.......................... $ .44 $ .24
5.4. OTHER ASSETS
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
DECEMBER 31,
----------------
2000 1999
------- ------
Cash surrender value of life insurance policies............. $13,648 $10,435
Capitalized software, net of amortization................... 7,914 8,294
Deferred loan cost, net of amortization..................... 1,431 -
Other....................................................... 488 620
------- ------
$23,481 $19,349
======= ======
Cash surrender value of life insurance policies........ $2,280 $795
Capitalized software................................... 1,900 --
Investment in common stock............................. 54 53
Other.................................................. 644 58
-------- --------
$4,878 $906
======== ========
The cash surrender value of life insurance policies relates to policies maintained
on key employeesby the Company that will be used to fund deferred compensation agreementsobligations in the Deferred
Compensation Plan (Note 9) with a cash surrender valuevalues of $1,872$13,648 and $522$10,435 at
December 31, 19972000 and 1996,
respectively,1999, respectively.
Amortization expense of capitalized software was $3,331 and key man life insurance on officers with a cash surrender$2,915, in December
31, 2000 and 1999 respectively.
Amortization expense of deferred loan costs was $659 in December 31, 2000.
The Company has included the value of $408non-compete agreements totaling $187 and
$273$270 at December 31, 19972000 and 1996, respectively.
During 1997,1999, respectively, in Other. The non-compete
agreements are being amortized on a straight-line basis over the Company began the development and implementation of new
computer software to enhance performancelives of the
accounting and operation
systems. Direct internal and external costs subsequent torelated employment agreements. Amortization expense of non-compete agreements
was $83 for each of the preliminary stage
of this project are being capitalized and classified as other assets.
Capitalized software development costs were $1,900 and $0 atyears ended December 31, 19972000, 1999, and 1996, respectively. Capitalized1998. In
addition, Other includes $223 of prepaid software development costs are amortized
over the estimated useful life of the software using the straight-line method
over the estimated economic life.
31
33
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6.license costs.
5. LINE OF CREDIT AND CAPITAL LEASE OBLIGATION
DECEMBER 31,
--------------
1997 1996
------ ----
DECEMBER 31,
----------------
2000 1999
------- ----
Bank line of credit ..................................... $45,000 $ --
Obligation under capital lease with quarterly payments of
principal and interest at 8.3% through June 2000.......... $1,991 $--
Less current maturities..................................... 731 --
------ ---
$1,260 $--
====== ===
Future minimum lease payments under capital lease obligations are $731,
$782with quarterly payments of
principal and $478 for 1998,interest at 8.3% through June 2000 ...... -- 481
------- ----
45,000 481
Less current maturities ................................. -- 481
------- ----
$45,000 $ --
======= ====
During 1999, and 2000, respectively.
In March 1996, the Company entered intohad an unsecured line of credit agreement. This agreement provided for up to $5,000in the
amount of working capital to the
Company for general corporate purposes. This agreement was renegotiated on
September 11, 1997 and the line was increased to $30,000. This agreement matures$30,000 ("Old Credit Facility") which matured on March 31, 2000 and bears2000. The
interest atrate on the Old Credit Facility was up to
150 basis points31
32
1.5% above the average rate at which deposits in U.S. dollars were offered in
the London interbank
market ("LIBOR"). This agreement contains restrictive covenants which require
the maintenance of certain financial ratios. The Company is in compliance with
all covenants as of December 31, 1997 and 1996.Interbank Market. No amounts were outstanding on
any of these lines of creditunder the Old Credit
Facility at December 31, 19971999.
On May 4, 2000, the Company entered into a $35 million Revolving Line of
Credit Agreement with Bank of America, N.A. (the "Line of Credit"). The Line of
Credit provided for a maximum revolving credit facility of $35 million (based
on the Company's eligible receivables). Under its terms, prepayments on the
Line of Credit were allowed at any time, with any remaining unpaid balance due
two years from closing. Borrowings under the Line of Credit are secured by all
of the assets of the Company and its subsidiaries. Interest rates on the
outstanding balance are to be calculated based on: (i) the London Interbank
Offered Rate ("LIBOR") plus (ii) from 1.75% to 3.00% based on certain financial
ratios of the Company. Fees payable by the Company in connection with the Line
of Credit also varied with these financial ratios. The terms of the Line of
Credit also included certain financial covenants related to quarterly minimum
requirements for EBITDA, fixed charge coverage ratio and tangible net worth and
maximum requirements for leverage ratio. There were also certain limitations on
investments and acquisitions, dividends and repurchases of the Company's stock.
The Company entered into an Amended and Restated Credit Agreement (the "Credit
Facility") on November 3, 2000, with Bank of America, N.A. ("BA"). As of
December 31, 2000, there was $45,000 outstanding on the Credit Facility. The
Credit Facility provides for a maximum revolving credit facility of $90 million
(not to exceed 85% of the Company's Eligible Receivables, as defined in the New
Credit Facility). Under its terms, prepayments on the Credit Facility are
allowed at any time, with any remaining unpaid balance due November 3, 2003.
Borrowings under the Credit Facility are secured by all of the assets of the
Company and its subsidiaries. Amounts borrowed under the Credit Facility will
bear interest during the period beginning on November 3, 2000 until the bank's
receipt of the Company's financial statements for the fiscal quarter ended
March 31, 2001 at a rate per annum equal either to 0.50% plus BA's Prime Rate
("Prime") or 1996.to reserve adjusted LIBOR (as defined in the Credit Facility) plus
2.70% adjusted monthly. Following delivery of the Company's financial
statements for the fiscal quarter ended March 31, 2001, performance pricing
will be available, ranging from Prime to Prime plus 0.75% and LIBOR plus 1.75%
to LIBOR plus 3.25%, pursuant to certain financial performance targets as set
forth in the Credit Facility. Pricing will thereafter be changed quarterly
based on the previous four quarters' performance. The terms of the Credit
Facility also include certain financial covenants only if the total amount
borrowed under the Credit Facility exceeds specified amounts. These financial
covenants relate to quarterly EBITDA as compared to the Company's EBITDA
projections. There are also certain limitations on investments and
acquisitions, and repurchases of the Company's stock. Under the terms of this
Agreement, the Company is prohibited from making any dividend distributions.
The Credit Facility contains a provision that limits the dollar amount of
common stock the Company may repurchase subsequent to November 3, 2000 to $55
million. In February 2001, the Credit Facility was amended to increase the
maximum amount of common stock the Company may repurchase to $72 million.
6. MERGER, RESTRUCTURING AND INTEGRATION EXPENSES
In connection with the 1998 Source merger, $26,122 of one-time merger,
restructuring, and integration related expenses were identified and recorded in
1998. These charges included direct merger costs of approximately $8,265, which
consisted of professional fees and other transaction costs associated with the
merger, approximately $4,606 of severance and other termination-related costs
to be incurred in connection with anticipated staff reductions, $5,885 costs in
connection with consolidation of certain office facilities and related
equipment, and approximately $7,366 in other merger and integration related
expenses.
At December 31, 1998, the remaining accrued expenses balance associated with
the above charge was $4,931, of which approximately $2,744 related to severance
and other termination-related costs, approximately $1,631 related to the
consolidation of certain office facilities and related equipment and
approximately $556 related to other merger and integration related expenses.
32
33
7. INCOME TAXES
The provisionbenefit (provision) for income taxes consists of the following:
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
Current:
Federal........................................ $6,287 $3,239 $1,658
State.......................................... 1,423 752 414
Deferred......................................... (210) (26) (64)
------ ------ ------
$7,500 $3,965 $2,008
====== ====== ======
YEARS ENDED DECEMBER 31,
--------------------------------------------
2000 1999 1998
-------- -------- --------
Current:
Federal ............... $ (2,025) $ 13,252 $(19,156)
State ................. (314) 972 (4,294)
Deferred .............. 865 (347) 2,742
-------- -------- --------
$ (1,474) $ 13,877 $(20,708)
======== ======== ========
The provisionbenefit (provision) for income taxes shown above varied from the statutory
federal income tax rates for those periods as follows:
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996 1995
----- ------ ------
% % %
Federal income tax rate.............................. 35.0 34.0 34.0
State income taxes, net of federal tax benefit..... 4.9 5.0 5.3
Non-deductible items............................... .5 1.4 1.1
Goodwill amortization.............................. .6 (.1) .4
Life insurance items............................... -- .2 .2
Other.............................................. (1.6) (.5) (1.0)
---- ----- -----
Effective tax rate................................... 39.4 40.0 40.0YEARS ENDED
DECEMBER 31,
-----------------------
2000 1999 1998
----- ---- -----
% % %
Federal income tax rate ............................ (34.0) 35.0 (35.0)
State income taxes, net of federal tax benefit ..... (3.3) 5.0 (5.0)
Non-deductible items ............................... (56.6) (1.8) (16.1)
Goodwill amortization .............................. (30.4) (1.0) (1.2)
Other .............................................. .6 (.1) --
----- ---- -----
Effective tax rate ................................. (123.7) 37.1 (57.3)
====== ==== ===== =====
Nondeductible items consist primarily of the direct costs of the Source merger
and the portion of meals and entertainment expenses which are not deductible
for tax purposes.
3233
34
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income tax assets and liabilities shown on the balance sheet are
comprised of the following:
DECEMBER 31,
--------------
1997 1996
----- -----
Deferred taxes, current:
Assets
Allowance for bad debts................................ $ 352 $ 222
Accrued liabilities.................................... -- 21
----- -----
Net deferred tax asset, current........................ $ 352 $ 243
===== =====
Deferred taxes, non-current:
Assets
Deferred compensation.................................. $ 979 $ 448
Deferred rent.......................................... 78 34
----- -----
1,057 482
Liabilities
Depreciation........................................... (747) (273)
----- -----
Net deferred tax asset, non-current.................... $ 310 $ 209
===== =====
DECEMBER 31,
--------------------
2000 1999
------- -------
Deferred taxes, current:
Assets
Allowance for bad debts ...................... $ 2,261 $ 1,426
Accrued liabilities .......................... 2,612 2,154
Charitable contribution deduction carryforward 32 --
------- -------
4,905 3,580
Liabilities
Accrued liabilities .......................... (33) (33)
------- -------
Net deferred tax asset ....................... $ 4,872 $ 3,546
======= =======
Deferred taxes, non-current:
Assets
Deferred compensation ........................ $ 5,057 $ 5,600
State net operating loss carryforward ........ 718 968
------- -------
5,775 6,568
Liabilities
Depreciation and amortization ................ (4,525) (4,857)
------- -------
Net deferred tax asset ....................... $ 1,250 $ 1,711
======= =======
A valuation allowance on the net deferred tax assets has not been recorded due
to the presence of taxable income in years available for carryback.carryback and
management's expectation that it is more likely than not that deferred tax
assets will be realized in future periods.
At December 31, 2000, the Company had approximately a $6,700 state tax net
operating loss which will be carried forward to be offset against future state
taxable income. The amount of the state tax net operating loss carryforward
expires in varying amounts through 2014.
8. RELATED PARTIES
RECEIVABLES FROM RELATED PARTIES
Receivables from Related Parties
Receivables from related parties are summarized as follows:
DECEMBER 31,
--------------
1997 1996
------ ----
Receivables from officers and shareholders.................. $1,136 $800
Other related party receivables............................. 387 162
------ ----
1,523 962
Less current maturities..................................... 233 100
------ ----
$1,290 $862
====== ====
Receivables from officers and shareholdersstockholders include non interestnon-interest bearing
receivables for premiums paid on split dollar life insurance policies.policies and other
notes receivable. Repayment terms on the remaining unsecuredother notes receivables range from one
to two years at rates of 8%6% to 9%8%.
33NOTES PAYABLE TO RELATED PARTIES
As of December 31, 1999, the Company had $2,000 of notes payable outstanding to
a related party relating to contingent purchase price adjustments on previous
acquisitions (see Note 3). This obligation was retired in 2000.
RELATED PARTY TRANSACTIONS
Consulting services totaling $371 and $595 for 2000 and 1999, respectively, were
provided to the Company by a company owned by the spouse of the Chairman of the
Board. On July 1, 2000, the consulting contract was cancelled. In addition, an
aircraft charter company owned 100% by the Chairman of the Board provided
charter services to the Company in the amount of $125 in both 2000 and 1999. The
Company billed the aircraft charter company $22 and $35 for the use of the
Company's airplane in 2000 and 1999, respectively. Similar agreements for
aircraft
34
35
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Payables to Related Parties
Notes payable to related parties include the following:
DECEMBER 31,
--------------
1997 1996
------ ----
Notes payable due in annual installments through February
1999 relating to contingent purchase price adjustments on
previous acquisitions (see Note 4)........................ $5,640 $ --
Note payable to a related party, principal and 9% interest
payable in bi-monthly installments through May, 1997...... -- 23
Less current maturities..................................... 4,265 23
------ ----
$1,375 $ --
====== ====
Related Party Leasesusage have been entered into for 2001. The Company has operating leases with
related parties as discussed in Note 12.
Stock Subscription Notes Receivable
From 1989 to August 31, 1994, certain subsidiaries of Romac-FMA issued
stock to key employees of its respective majority owned subsidiaries of
Romac-FMA in exchange for stock subscription notes receivable. At December 31,
1997 and 1996, $0 and $14, respectively, of non interest bearing subscription
notes receivable were outstanding and collateralized by the respective shares of
the subsidiaries' stock. The outstanding balances of these notes receivable were
reflected as a reduction of the minority interest through August 31, 1994, at
which time the minority interests of certain subsidiaries of Romac-FMA were
exchanged for shares in the Company and the remaining outstanding subscription
receivables are now shown as a reduction of shareholders' equity.11.
9. FRANCHISE REORGANIZATION
In 1995, the Company reached agreements with the Arlington and Dallas
franchisees to terminate their franchise agreements. The terms of the Arlington
agreement included a $260 note receivable at 9% interest, payable in 18 equal
monthly installments. The agreement also includes a covenant not to compete in
the Arlington market for a four month period beginning January 1, 1995. The
Dallas arrangement included a $175 cash settlement and the Company retained the
rights to the phone listing and other business records at the Dallas location.
In 1996, the Company reached agreements with its Minneapolis, Portland and
St. Louis franchises to terminate their franchise agreements. The terms of the
Minneapolis agreement included notes receivable totaling $207 at 8% interest
payable in 18 equal monthly installments. The agreement also allowed the Company
to immediately enter the Minneapolis market. The terms of the Portland agreement
included a $106 note receivable at 9% interest payable in 149 equal weekly
installments. The agreement also includes a covenant not to compete in the
Portland market for a six month period beginning July 31, 1996. The St. Louis
agreement included a $59 note receivable at 8% interest payable in 18 equal
monthly installments. The agreement also allowed the Company to immediately
enter the St. Louis market.
In 1997, the Company reached termination agreements with the last of its
two franchises. The terms of the Raleigh agreement included notes receivable
totaling $117 at 9% interest payable in 18 equal monthly installments. This
agreement allowed the Company to immediately enter the Raleigh market. The terms
of the New Orleans agreement included notes receivable totaling $50 at 9%
interest payable in 18 equal monthly installments. This agreement allowed the
Company to immediately enter the New Orleans market.
34
36
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The revenue from these transactions has been reflected as other income in
each respective year. Receivables related to these agreements of $109 and $247
at December 31, 1997 and 1996, respectively, are included in notes receivable
from franchisees. Franchise royalties amounted to $10, $450 and $487 for the
years ended December 31, 1997, 1996 and 1995, respectively. As of December 31,
1997, there were no Romac franchises remaining.
10. EMPLOYEE BENEFIT PLANS
401(k) Savings PlanSAVINGS PLAN
The Company has a qualified defined contribution 401(k) plan covering
substantially all full-time employees, except officers and certain highly
compensated employees. The plan offers a savings feature and
Company matching contributions. Employer matching contributions are
discretionary and are funded annually as approved by the Board of Directors.
The match has been made in the Company's stock for 1999 and 2000. Assets of
this plan are held in trust for the sole benefit of employees.
Prior to the merger, Source merged its profit sharing plan and 401(k) plan
("Source Plan") effective October 1, 1997. The Source Plan covered all active
participants who were participating in either the previous 401(k) plan or
profit sharing plan or those employees who met the Source Plan's requirements
for eligibility. The Source Plan was merged with the Company's 401(k) plan
("the Plan") effective July 1, 1998. At December 31, 2000, 1999 and 1998, the
Plan held 1,615, 1,772 and 2,303 shares, respectively, of the Company's stock,
representing approximately 5.0%, 4.0% and 5.0%, respectively of the Company's
outstanding shares. Employer contributions to thisthe 401(k) plans totaled $1,165,
$892 and $1,609 in 2000, 1999 and 1998, respectively.
EMPLOYEE STOCK PURCHASE PLAN
During 1996, Source enacted an Employee Stock Purchase Plan. This plan totaled $47, $40 and $22allowed
employees to purchase stock at the current market price through payroll
deductions, without paying commissions on purchases. Only Source employees
hired prior to April 20, 1998 were eligible to participate in 1997, 1996 and 1995, respectively.
Priorthe Employee
Stock Purchase Plan. There was no waiting period for enrollment prior to their mergers intoApril
20, 1998.
Effective January 1, 2000, the Company certain subsidiariesplaced into effect a new Employee Stock
Purchase Plan which had separate
qualified defined contribution 401(k) plans covering substantiallybeen approved during 1999 and which allows all
full-time
employees to purchase stock at a 15% discount from market prices and without
commissions on the purchases. Employees are eligible to participate in the plan
as of the subsidiaries. No employer matching contributions were made for
these plans fornext plan enrollment date following their date of hire. This plan
replaces the yearsprior Source Employee Stock Purchase Plan. For the year ended
December 31, 1997, 1996 and 1995. Employees2000, the Company issued 632 shares of these subsidiaries are now covered undercommon stock, at an average
purchase price of $3.73 per share, pursuant to the Employee Stock Purchase
Plan. These shares were transferred to the plan from the Company's plan described above.
Deferred Compensation Plantreasury
stock. Of the 632 shares issued, the Company issued 217 of the shares at an
average price of $5.90 during the year and 415 shares at an average price of
$2.60 subsequent to year-end. The shares issued subsequent to year-end related
to employee contributions made during the year.
DEFERRED COMPENSATION PLAN
The Company has a non-qualified deferred compensation plan pursuant to which
eligible officers and highly compensated key employees may elect to defer part
of their compensation to later years. The Company accrues interest and
discretionary Company
matching contributions. These amounts, which are classified as other long-term
liabilities, are payable upon retirement or termination of employment, and at
December 31, 19972000 and 1996,1999, aggregated $2,278$12,966 and $1,119,$14,001, respectively. The
Company has insured the lives of the participants in the deferred compensation
programplan to assist in the funding of the deferred compensation liability. The cash
surrender value of these Company-owned life insurance policies, of $1,872$13,648 and
$523,$10,435 at December 31, 19972000 and 1996,1999, respectively, is included in other
assets. Compensation expense of $234, $28$439, $1,938, and $45$825 was recognized for the
plan for the years ended December 31, 1997, 19962000, 1999, and 1995,1998, respectively.
Split Dollar Life Insurance35
36
SPLIT DOLLAR LIFE INSURANCE
In 1995, the Company entered into split dollar and cross-purchase split dollar
life insurance agreements with several officers and their estates whereby the
Company pays a portion of the life insurance premiums on behalf of the officers
and their estates. The Company has been granted a security interest in the cash
value and death benefit of each policy equal to the amount of the cumulative
premium payments made by the Company. The intent of these agreements iswas to, in
the event of an officer's death, provide liquidity to pay estate taxes and to
provide surviving officers with the ability to purchase shares from a deceased
officer's estate, minimizing the possibility of a large block of the Company's
common shares being put on the open market to the potential detriment of the
Company's market price and to allow the Company to maintain a concentration of
voting power among its officers.
Total premiumsPremiums paid to date of $916that have not been recovered from policy cancellations
and $742which are included in related party receivables for the years endedwere $758 and $760 at
December 31, 19972000 and 1996,1999, respectively.
11.10. STOCK OPTION PLANS
During 1994, the Company established an employee incentive stock option plan
which authorized the issuance to employees of options to purchase common stock to
employees. The maximum number of shares of common stock that could be issued
under the plan could not exceed 1,636. In 1995, the employee stock option
incentive
35
37
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
plan was amended to increase the number of shares of common stock that may be
issued to 3,070.stock.
During 1996, this plan was amended to increase the number of shares of common
stock that may be issued under the plan to 6,000 to allow persons other than
employees to participate in the plan, to allow incentives in the form of
Nonqualified Stock Options, Stock Appreciation Rights and Restricted Stock to
be awarded under the plan and to effect a change in the plan name to the Romac
International, Inc. Stock Incentive Plan (the "Plan").Plan. During 1997, the Plan was amended to
increase the number of shares of common stock that may be issued under the Plan
to 9,000. The Plan was again amended in 1999 to increase the number of shares
authorized for issuance to 12,000.
During 1995, the Company established a non-employee director stock option plan
which authorized the issueissuance to non-employee directors of options to purchase
common stock to
non-employee directors.stock. The maximum number of shares of common stock that can be issued
under this plan is 400.
Prior to the merger, Source had an incentive stock option plan for eligible
employees of Source and a non-employee director option plan. Effective with the
merger, all stock options previously granted and outstanding under these plans
were exchanged for approximately 638 of the Company's stock options.
A summary of the Company's stock option activity is as follows:
NON- WEIGHTED WEIGHTED
EMPLOYEE EMPLOYEE AVERAGE AVERAGE
INCENTIVE DIRECTOR EXERCISE FAIR VALUE
STOCK OPTION STOCK OPTION PRICE PER OF OPTIONS
PLAN PLAN TOTAL SHARE GRANTED
------------ ------------ ----------- --------- ----------
Outstanding as of
December 31, 1994..................... 5521997 .. 4,196 191 4,387 $ 9.36
Granted ............ 1,899 101 2,000 $25.71 $10.86
Exercised .......... (933) -- 552(933) $ 1.37
Granted............................... 1,663 80 1,743 $ 2.69 $ .95
Exercised............................. (22)6.75
Forfeited .......... (587) -- (22) $ 1.49
------(587) $15.54
----- --- -----------
Outstanding as of
December 31, 1995..................... 2,193 80 2,2731998 .. 4,575 292 4,867 $15.84
Granted ............ 2,353 60 2,413 $ 2.38
Granted............................... 1,844 40 1,884 $10.96 $4.09
Exercised............................. (311)7.68 $ 7.73
Exercised .......... (342) -- (311)(342) $ 1.66
Forfeited............................. (122) -- (122) $ 8.25
------5.26
Forfeited .......... (1,522) (127) (1,649) $19.19
----- --- -----------
Outstanding as of
December 31, 1996..................... 3,604 120 3,7241999 .. 5,064 225 5,289 $11.76
Granted ............ 2,204 94 2,298 $10.77 $ 6.59
Granted............................... 1,139 20 1,159 $12.92 $5.59
Exercised............................. (1,019)4.89
Exercised .......... (283) -- (1,019)(283) $ 2.79
Forfeited............................. (304) -- (304) $10.91
------8.93
Forfeited .......... (1,528) (25) (1,553) $12.75
----- --- -----------
Outstanding as of
December 31, 1997..................... 3,420 140 3,560 $ 9.43
======2000 .. 5,457 294 5,751 $11.04
===== === ====== ======
Exercisable at December 31:
1997............................... 1,060 88 1,148
1998............................... 998 12 1,010
1999............................... 725 12 737
2000............................... 296 12 308
2001............................... 123 12 135=====
36
37
Employee Non-Employee
Incentive Director
Exercisable at Stock Option Stock Option
December 31: Plan Plan Total
------------------- ------------ ------------ -----
2000............ 1,797 213 2,010
2001............ 1,356 62 1,418
2002............ 1,422 19 1,441
2003............ 876 -- 876
2004............ 6 -- 6
Options granted during each of the three years ended December 31, 19972000 have
vesting requirements ranging from onethree to sevenfour years. Options expire at the
end of ten years from the date of grant.
36
38
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about employee and director stock
options:
OPTIONS OUTSTANDING
------------------------------------------
NUMBER WEIGHTED
OUTSTANDING AVERAGE WEIGHTED
AT REMAINING AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE
RANGE OF EXERCISE PRICES 1997 (SHARES) LIFE (YEARS) PRICE ($)
------------------------ ------------- ------------ ---------
$1.365 - $1.49........................... 414 6.9 $ 1.45
$4.188 - $4.688.......................... 565 7.7 $ 4.19
$6.250 - $7.688.......................... 203 8.2 $ 6.30
$8.845 - $9.565.......................... 11 9.3 $ 9.24
$10.125 - $15.250........................ 2,209 9.0 $11.92
$16.125 - $20.625........................ 158 9.5 $17.18
-----
3,560OPTIONS OUTSTANDING
-----------------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED
OUTSTANDING AT REMAINING AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE
RANGE OF EXERCISE PRICES 2000 (SHARES) LIFE (YEARS) PRICE ($)
------------------------ -------------- ------------ ---------
$ 0.980 - $ 1.490 ................. 58 4.2 $ 1.32
$ 1.500 - $ 8.6875 ................ 3,010 8.0 $ 6.40
$ 9.565 - $12.180 ................. 526 5.9 $ 11.34
$12.181 - $18.060 ................. 1,469 8.3 $ 14.39
$18.061 - $24.375 ................. 374 6.9 $ 22.31
$24.376 - $28.1250 ................ 314 7.0 $ 27.75
-----
5,751 7.7 $ 11.04
=====
OPTIONS EXERCISABLE
--------------------------
NUMBER
EXERCISABLE WEIGHTED
AT AVERAGE
DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 1997 (SHARES) PRICE ($)
------------------------ ------------- ---------
$1.365 - 1.490....................................... 295 $ 1.48
$4.188 - $4.688...................................... 330 $ 4.19
$6.250 - $7.688...................................... 47 $ 6.39
$10.125 - $15.250.................................... 425 $11.39
$16.125 - $20.625.................................... 51 $16.94
-----
1,148OPTIONS EXERCISABLE
--------------------------
NUMBER WEIGHTED
EXERCISABLE AT AVERAGE
DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 2000 (SHARES) PRICE ($)
------------------------ -------------- ---------
$ 0.980 - $ 1.490 ................. 58 $ 1.32
$ 1.500 - $ 8.6875 ................ 840 $ 6.74
$ 9.565 - $12.180 ................. 426 $ 11.44
$12.181 - $18.060 ................. 332 $ 14.16
$18.061 - $24.375 ................. 192 $ 22.24
$24.376 - $28.1250 ................ 162 $ 27.76
-----
2,010 $ 11.98
=====
37
38
Had compensation cost for the Company's option plans been determined based on
the fair value at the grant dates, as prescribed by SFAS 123, the Company's net
incomeincome(loss) and net income (loss) per share would have been as follows:
YEARS ENDED
DECEMBER 31,
-----------------
1997 1996
------- ------
Net income:
As Reported............................................. $11,543 $5,981
Compensation expense per SFAS 123.................... (2,954) (786)
Tax benefit pro forma................................ 456 314
------- ------
$ 9,045 $5,509
======= ======
Net income per share:
Basic:
As Reported.......................................... $ .46 $ .28
Pro forma............................................ .36 .25
Diluted:
As reported.......................................... $ .44 $ .26
Pro forma............................................ .34 .24
YEARS ENDED
DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------
Net income (loss):
As Reported........................... $ (283) $(23,516) $15,439
Compensation expense per SFAS
123.............................. (19,715) (11,113) (6,100)
Tax benefit, pro forma............. 363 890 532
-------- ------- -------
$(19,635) $(33,739) $ 9,871
======== ======= =======
Net income (loss) per share:
Basic:
As Reported........................ $ (.01) $ (.53) $ .34
Pro forma.......................... $ (.46) $ (.75) $ .22
Diluted:
As reported........................ $ (.01) $ (.53) $ .33
Pro forma $ (.46) $ (.75) $ .21
The fair value of each option is estimated on the date of grant using the
minimum value methodBlack-Scholes option pricing model with the following assumptions used for
grants during the applicable period: dividend yield of 0.0% for bothall three
periods; risk-free interest rates of 5.85% - 7.03%5.66%-6.75% for options granted during the
year ended December 31, 1997 and 5.95% - 7.99%2000, 4.95%-5.74% for options granted during the year
ended December 31, 1996;1999 and 4.77%-5.71% for options granted during the year
ended December 31, 1998; a weighted average expected 37
39
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
option term of 4 - 74-7 years
for 1997 and 3 - 52000, 5-6 years for 1996;1999 and 4-7 years for 1998; and a volatility factor of
37.02%50.00% for 19972000, 45.59% for 1999 and 35.35%40.69% for 1996.1998.
Tax benefits resulting from the disqualifying dispositions of shares acquired
under the Company's employee incentive stock option plan reduced taxes
currently payable by $1,481$828 and $629$122 in 19972000 and 1996,1999, respectively. These tax
benefits are credited to additional paid-in-capital.
12.11. COMMITMENTS AND CONTINGENCIES
Operating Leases
TheOPERATING LEASES
During 2000, the office space the Company leases office space for use as its headquarters
under an
operating lease with monthly payments of $27 expiring in 2001 from a related
party. The Company also leases office space for Romac Portland fromthat was previously owned by a related party, at an annual rentalwas sold to independent
investors. Rent in the amount of $74 subject$121, $312 and $286 was paid to adjustment as defined through
December 31, 2000.the related
party in 2000, 1999 and 1998, respectively. The Company leases other space and
various equipment under operating leases expiring at various dates with some
leases cancelable upon 30 to 90 days notice. The leases require payment of
taxes, insurance and maintenance costs in addition to rental payments.
Future minimum lease payments under noncancellable operating leases are
summarized as follows: 1998, $3,107; 1999, $2,870; 2000, $1,660; 2001, $629; and $233$9,651; 2002, $6,946; 2003, $5,903; 2004, $3,285;
2005, 821; $1,066 thereafter. Minimum obligations have not been reduced by minimum sublease
rentals of $149 due under a noncancellable sublease.
Rental expense under all operating leases was $2,329, $1,379$11,415, $12,187 and $759$10,226 for
1997, 19962000, 1999, and 1995,1998, respectively.
Noncancellable Processing Commitment
The Company has an agreement with a third party processor (the "Processor")
who provides certain services for some of the Company's franchised and licensed
temporary placement operations; the cost of such services is a percentage of
gross billings as defined within the agreement. Pursuant to certain contract
termination provisions, the Company would be required to pay $500 in the event
of termination of such agreement. The agreement continues in effect until the
aggregate of all amounts actually collected and paid to the Processor from
September 1, 1985 exceeds $5,000. The cumulative amounts processed were $4,373,
$4,279 and $4,094 as of December 31, 1997, 1996 and 1995, respectively.
Stock Repurchase Agreements
Stock repurchase agreements between certain subsidiaries of the Company
(former Romac-FMA subsidiaries) and certain shareholders provided for the
purchase of their shares of the subsidiaries' stock in the event of disability
or death of the shareholder, at market value as determined by an independent
third party. The commitment under such agreements was partially funded by term
life insurance and disability policies on these shareholders owned by the
Company. In connection with these redemption agreements, the Company had
employment agreements with such key employees until consummation of the share
exchange, wherein all such employment agreements were terminated, with the
exception of those discussed below and the repurchase agreements were amended to
reflect the receipt of shares of the Company in exchange for shares owned in the
former FMA subsidiaries. On April 26, 1995, all such agreements were amended to
convert the Company's repurchase obligation to an option to purchase, at the
discretion of the Company.
In October 1994, the Company became liable to repurchase approximately 676
shares under one of the stock repurchase agreements due to the death of a
shareholder. Under the terms of the repurchase agreement, the liability was to
be paid in five equal annual installments beginning March 1, 1995, with interest
payable at 9%. The note was paid in full as of December 31, 1995. The related
life insurance proceeds of approximately $500 is included in other income for
the year ended December 31, 1994. The amendment of the stock
38
40
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase agreements on April 26, 1995 by the Company and its certain
shareholders eliminated all contingent stock repurchase obligations.
Accordingly, the related life insurance policies were terminated.
Litigation
The Company is involved in litigation in39
LITIGATION
In the ordinary course of its business, the Company is, from time to time,
threatened with or named as a defendant in various lawsuits, including
discrimination and harassment and other similar claims. The Company maintains
insurance in such amounts and with such coverages and deductibles as management
believes are reasonable. The principal risks that the Company insures against
are workers' compensation, personal injury, bodily injury, property damage,
professional malpractice, errors and omissions, employment practices liability
and fidelity losses. The Company does not believe that it is involved in any
litigation which is not, in the opinion of management,would reasonably be expected to have a material adverse effect
on theits results of operationsoperation or financial condition of the Company.
Employment Agreements
During 1996 and 1997, thecondition.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain executive
officers which provide for minimum compensation, and salary and continuation of
certain benefit continuationbenefits for a twoone to three year period under certain circumstances.
The agreements also provide for a payment of amounts twoone to three times their annual
salary and average annual bonus if a change in control (as defined) of the
Company occurs and include a covenant against competition with the Company that
extends for one year after termination for any reason. In addition, the Company
has entered into employment agreements with certain key employees which provide
for a payment of one to two times their annual salary and average annual bonus
if a change in control (as defined) of the Company occurs and include a
covenant against competition with the Company that extends for one year after
termination for any reason. The Company's liability at December 31, 19972000, would
behave been approximately $1,100$8,230 in the event of a change in control or $2,795 if
all of the employees under contract were to be terminated by the Company
without good cause (as defined) under these contracts.
13.NOTE PAYABLE GUARANTEE
In March 1999, the Company guaranteed a note payable by one of its former
officers. At December 31, 2000 and 1999, the balance of this note was
approximately $1,849 and $1,779, respectively. The note matured on December 31,
2000 and is currently unpaid.
12. SUPPLEMENTAL CASH FLOWSFLOW INFORMATION
The Company's non-cash investing and financing activities and cash payments for
interest and income taxes were as follows:
YEARS ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- ------
Notes payable issued in settlement of
contingent purchase price of previous
Acquisitions.............................. $ -- $ -- $11,100
Employer matching :
Contribution of treasury stock to
401(k) Plan............................. $ 406 $ -- $ --
Contribution of treasury stock to Employee
Stock Purchase Plan..................... $ 631 $ -- $ --
Cash paid during the year for:
Interest.................................. $ 508 $ 423 $ 216
Income taxes.............................. $(23,083) $12,027 $19,905
13. SEGMENT ANALYSIS
The Company discloses its business segments in accordance with Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of
Enterprise and Related Information" ("SFAS 131"). The Company's internal
information that is used by management for making operational decisions and
addressing performance is the source of determining the Company's reportable
segments. The Company has four functional service offerings, including:
Information Technology, Finance and Accounting, Human Resources and Operating
Specialties.
39
40
The Company only generates information on sales and gross profit on a
functional basis; as such, asset information by segment is not disclosed.
Substantially all operations and long-lived assets are located in the US.
Information concerning operations in these segments of business is as follows:
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------INFORMATION FINANCE & HUMAN OPERATING
TECHNOLOGY ACCOUNTING RESOURCES SPECIALTIES TOTAL
----------- ---------- --------- ----------- --------
Notes payable issued in settlement of contingent purchase
price of previous acquisitions......................... $5,640 $ -- $ --
Capital lease transaction................................ $2,526 $ -- $1,207
Cash paid during the year for:
Interest............................................... $ 127 $ 79 $ 133
Income taxes........................................... $4,187 $3,675 $1,515
2000
Sales....................... $442,833 $226,737 $22,712 $102,715 $794,997
Gross Profit................ 182,993 132,023 7,700 38,840 361,556
1999
Sales....................... $448,640 $205,646 $18,317 $74,029 $746,632
Gross Profit................ 175,117 114,321 6,191 27,002 322,631
1998
Sales....................... $431,921 $191,086 $17,575 $39,504 $680,086
Gross Profit................ 169,429 104,765 5,672 11,715 291,581
14. SUBSEQUENT EVENTS
On February 1, 1998 and as amended on February 11, 1998, the Company
announced a definitive merger agreement (the "Merger") with Source Services
Corporation ("Source"), a flexible and permanent specialty staffing company. The
agreement provides for a stock-for-stock merger transaction whereby the
stockholders of Source will receive 1.1932 shares of Romac common stock for each
of the outstanding shares of Source common stock, subject to adjustment based on
Romac's market price prior to closing and certain other conditions. Based on
Romac's closing price of $22.375 per share on Friday, January 30, 1998, the
transaction would be valued at approximately $375,000. The consummation of the
Merger is subject to certain conditions including effectiveness of a
registration statement to be filed by the Company with the SEC, approval by the
stockholders of each company and the receipt of the opinions that the Merger may
be accounted for as a "pooling of interests" for accounting purposes and qualify
as a tax-free reorganization.
39
41
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED
-----------------------------------------
MAR.-----------------------------------------------
MAR 31 JUN.JUN 30 SEPT.SEPT 30 DEC.DEC 31
------- ---------------- -------- --------------- ---------
Fiscal 19972000
Net service revenues...................... $34,952 $39,640 $45,915 $60,927revenues .............. $ 195,063 $197,661 $202,193 $ 200,080
Gross profit.............................. 13,948 16,063 18,591 22,282
Net income................................ 2,078 2,427 3,041 3,996profit ...................... 88,201 91,618 93,627 88,110
Net income per share -- basic............. $ .09 $ .10 $ .12 $ .15(loss) ................. (2,395) 1,807 295 10
Net income (loss) per share -- diluted...........share-basic.. $ .08(.05) $ .10.04 $ .12.01 $ .14.00
Net income (loss) per
share-diluted .................. $ (.05) $ .04 $ .01 $ .00
Fiscal 19961999
Net service revenues...................... $16,889 $21,466 $26,433 $29,422revenues .............. $ 184,095 $189,390 $191,707 $ 181,440
Gross profit.............................. 7,170 9,437 11,369 12,395
Net income................................ 1,025 1,288 1,805 1,863profit ...................... 78,832 81,208 82,215 80,376
Net income per share -- basic............. $ .06 $ .06 $ .08 $ .08(loss) ................. 9,128 332 904 (33,880)
Net income (loss) per share -- diluted...........share-basic.. $ .05.20 $ .06.01 $ .08.02 $ .07(.77)
Net income (loss) per
share-diluted .................. $ .20 $ .01 $ .02 $ (.77)
15. TENDER OFFER - STOCK REPURCHASE
On November 6, 2000, the Company announced a modified Dutch Auction tender
offer, consisting of an offer to purchase up to 10,000 shares of its common
stock at a purchase price between $5.50 and $4.75 per share net to the seller
in cash, without interest. The tender offer concluded on December 5, 2000,
whereby the Company purchased approximately 10,000 shares at $5.50 per share.
This repurchase was funded by cash and approximately $55,000 of debt from
existing bank lines of which $10,000 was repaid as of December 31, 2000. Costs
incurred to effect the transaction were $759.
16. SUBSEQUENT EVENTS
The Company has announced that the management structure of kforce Consulting,
its e-business consulting group, is being consolidated into the management
structure of its existing Information Technology business unit. The financial
results of kforce Consulting have previously been reported as a part of the
Information Technology business segment. In 2000, kforce Consulting lost $7.9
million on $17.6 million in revenue.
40
4241
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of
Romac International, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 25, 19988, 2000 appearing in this Form 10-K of Romac International, Inc.
also included an audit of the Financial Statement Schedule listed in Item 14 of
this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ Price WaterhousePricewaterhouseCoopers LLP
Price Waterhouse- ------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
February 25, 19988, 2000
41
4342
SCHEDULE II
ROMAC INTERNATIONAL,KFORCE.COM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
SUPPLEMENTAL SCHEDULE
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------- ----------------------- ---------- -------------
CHARGED TO CHARGED TO
BALANCE AT COSTS AND OTHER BALANCE AT
DESCRIPTION BEGINNING OF EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ------------- ---------- ---------- ---------- -------------
Allowance Reserve........................ 1995 $333 $376Reserve...... 1998 $ --5,423 $ 86 $623
--
1996 623 193 199 617
--
1997 617 638 375 8804,049 $ 3,710 $ 5,762
1999 5,762 9,768 11,113 4,417
2000 4,417 7,106 4,874 6,649
42
4443
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ROMAC INTERNATIONAL,KFORCE.COM, INC.
Date: March 17, 199828, 2001 By: /s/ DAVID L. DUNKEL
--------------------------------------------------------------------
David L. Dunkel
Chairman of the Board,
Chief Executive Officer and
Director
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David L. Dunkel and James Swartz and each
of them, jointly and severally, his attorneys-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorneys-in-fact
or his substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 17, 1998 By: /s/ JAMES D. SWARTZ
----------------------------------------------------
James D. Swartz
President and Director
Date: March 17, 1998 By: /s/ HOWARD W. SUTTER
----------------------------------------------------
Howard W. Sutter
Vice President and Director
Date: March 17, 1998 By: /s/ THOMAS M. CALCATERRA
----------------------------------------------------
Thomas M. Calcaterra
Chief Financial Officer, Secretary,
and Principal Accounting Officer
Date: March 17, 1998 By: /s/ PETER DOMINICI
----------------------------------------------------
Peter Dominici
Vice President, Treasurer, and Director
Date: March 17, 1998 By: /s/ RICHARD M. COCCHIARO
----------------------------------------------------
Richard M. Cocchiaro
Vice President and Director
Date: March 17, 1998 By: /s/ W. R. CAREY, JR.
----------------------------------------------------
W. R. Carey, Jr.
Director
43
45
Date: March 17, 1998 By: /s/ GORDON TUNSTALL
----------------------------------------------------
Gordon Tunstall
Director
Date: March 17, 1998 By: /s/ TODD MANSFIELD
----------------------------------------------------
Todd Mansfield
Director
Date: March 17, 1998 By: /s/ DAVID L. DUNKEL
----------------------------------------------------Date: March 28, 2001 By: /s/ DAVID L. DUNKEL
---------------------------------------
David L. Dunkel
Director
and Chief Executive Officer
Date: March 28, 2001 By: /s/ WILLIAM L. SANDERS
---------------------------------------
William L. Sanders
Sr. Vice President, Chief Financial
Officer
Date: March 28, 2001 By: /s/ JOHN N. ALLRED
---------------------------------------
John N. Allred
Director
Date: March 28, 2001 By: /s/ W.R. CAREY, JR.
---------------------------------------
W.R. Carey, Jr.
Director
Date: March 28, 2001 By: /s/ RICHARD M. COCCHIARO
---------------------------------------
Richard M. Cocchiaro
Vice President and Director
Date: March 28, 2001 By: /s/ TODD MANSFIELD
---------------------------------------
Todd Mansfield
Director
Date: March 28, 2001 By: /s/ RALPH STRUZZIERO
---------------------------------------
Ralph Struzziero
Director
Date: March 28, 200 By: /s/ HOWARD W. SUTTER
---------------------------------------
Howard W. Sutter
Vice President and Director
Date: March 28, 2001 By: /s/ GORDON TUNSTALL
---------------------------------------
Gordon Tunstall
Director
Date: March 28, 2001 By: /s/ KARL VOGELER
---------------------------------------
Karl Vogeler
Director
43
44 46
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT NO. DESCRIPTION
PAGE
- ----------- -----------
----------
2.13.1 Amended and Restated Articles of Incorporation(1)
3.2 Amended and Restated Bylaws(1)
4.1 Amended and Restated Credit Agreement among Certain
Financial Institutions, Bank of America NA (as the
Administrative Agent) and Plankforce.com, Inc. dated
November 3, 2000
4.2 Second Amendment to Amended and Restated Credit
Agreement dated as of Merger,February 12, 2001
4.3 Rights Agreement, dated February 1,October 28, 1998, between Romac
International, Inc. and Source Services
Corporation****
2.2State Street Bank and Trust Company
as Rights Agent(2)
4.4 Amendment Number 1 to Agreement and Plan of Merger, dated
February 11, 1998, between Romac International, Inc. and
Source Services Corporation*****
3.1 Amended and Restated Articles of Incorporation*
3.2 Bylaws*
4.1 Amended and Restated Articles of Incorporation (incorporated
by reference to Exhibit 3.1)**
4.2 Bylaws (incorporated by reference to Exhibit 3.1)
10.5 Asset Purchase Agreement, effective September 1, 1997
between Romac International Inc. and the Sellers of Sequent
Associates, Inc.**
10.6 Stock PurchaseRights Agreement dated September 5, 1997, between
Romac International Inc. and the Sellersas of Uni*Quality
Systems Solutions, Inc.***
10.7 $30,000,000 Revolving Line of Credit Agreement between
NationsBank, National Association and Romac International,
Inc. dated September 11, 1997
10.18October 24, 2000(3)
10.1 Employment Agreement, dated as of March 1, 1997,2000, between the
Company and David L. Dunkel******
10.19Dunkel(4)
10.2 Employment Agreement, dated as of March 1, 1997,2000, between the
Company and Howard W. Sutter******
10.20William L. Sanders(4)
10.3 Employment Agreement, dated as of March 1, 1997,2000, between
the Company and Peter Dominici******
21. ListJoseph J. Liberatore
10.4 Employment Agreement, dated as of subsidiariesMarch 1, 2000, between
the Company and Ken W. Pierce
10.5 Employment Agreement, dated as of March 1, 2000, between
the Company 23.and Lawrence J. Stanczak
10.6 1999 Romac International, Inc. Employee Stock Purchase Plan(4)
23.1 Consent of Price WaterhousePricewaterhouseCoopers LLP
27. Financial Data Schedule (for SEC use only)23.2 Consent of Deloitte & Touche LLP
- ---------------
*(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-91738).
** Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-26058), filed September 22, 1997
***May 9, 1996.
(2) Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-26058), filed October 9, 1997.
****29, 1998.
(3) Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-26058), filed February 2, 1998.
***** Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-26058), filed February 19, 1998.
******November 3, 2000.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K
(File No. 0-26058), filed March 28, 1997.
4529, 2000.
44