1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- - ----- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
| X | EXCHANGE ACT OF 1934
- - -----
For the quarterly period ended April 3, 1994
---------------
Commission File No. 0-3532
--------
THE OLSTEN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2610512
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Merrick Avenue, Westbury, New York 11590
- - ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 832-8200
-------------------
Not Applicable
- - --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------------- ------------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 6, 1994
- - ------------------------------------ ---------------------------
Common Stock, $ .10 par value 31,710,384 shares
Class B Common Stock, $.10 par value 9,727,553 shares
2
INDEX
-------
Page No.
---------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets -
April 3, 1994 (Unaudited) and January 2, 1994 2
Consolidated Statements of Income (Unaudited) -
Quarters Ended April 3, 1994 and
April 4, 1993, respectively 3
Consolidated Statements of Cash Flows
(Unaudited) - Quarters Ended
April 3, 1994 and April 4, 1993 4
Notes to Consolidated Financial Statements
(Unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 6-7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 8
SIGNATURES 9
1
3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
---------------------
The Olsten Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
ASSETS April 3, 1994 January 2, 1994
------------- ---------------
(Unaudited)
CURRENT ASSETS:
Cash $ 34,449 $ 24,709
Receivables, net 324,944 325,122
Other current assets 55,446 56,807
--------- ---------
Total current assets 414,839 406,638
FIXED ASSETS, NET 60,569 60,185
INTANGIBLES, NET 202,722 204,670
OTHER ASSETS 13,844 18,601
--------- ---------
$691,974 $690,094
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 68,489 $ 74,251
Insurance costs 47,562 45,730
Current portion of long-term debt (Note 3) 24,590 1,886
Payroll and related taxes 20,844 31,143
Accounts payable 8,383 12,597
--------- ---------
Total current liabilities 169,868 165,607
LONG-TERM DEBT (Note 3) 150,388 176,057
OTHER LIABILITIES 52,255 44,110
SHAREHOLDERS' EQUITY:
Common stock $.10 par value; authorized
110,000,000 shares; issued 31,123,317 and
29,976,240 shares, respectively 3,112 2,998
Class B common stock $.10 par value;
authorized 50,000,000 shares; issued
9,666,367 and 10,482,514 shares,
respectively 967 1,048
Additional paid-in capital 215,711 211,331
Retained earnings 102,189 90,280
Cumulative translation adjustment (2,516) (1,337)
--------- ---------
Total shareholders' equity 319,463 304,320
--------- ---------
$691,974 $690,094
========= =========
See notes to consolidated financial statements.
2
4
The Olsten Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands, except share amounts)
(Unaudited)
First Quarter Ended
---------------------
April 3, April 4,
1994 1993
--------- ---------
Service sales, franchise fees
and other income $537,483 $515,349
Cost of services sold 375,533 353,165
--------- ---------
Gross profit 161,950 162,184
Selling, general and
administrative expenses 134,715 139,464
Interest expense, net (Note 3) 2,155 4,186
--------- ---------
Income before income taxes 25,080 18,534
Income taxes 10,734 8,187
--------- ---------
Net income $ 14,346 $ 10,347
========= =========
SHARE INFORMATION:
Net income $ .35 $ .26
========= =========
Weighted average shares 41,463 39,153
========= =========
See notes to consolidated financial statements.
3
5
The Olsten Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
First Quarter Ended
---------------------
April 3, 1994 April 4, 1993
------------- -------------
OPERATING ACTIVITIES:
Net income $ 14,346 $ 10,347
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,000 6,427
Changes in assets and liabilities:
Accounts receivable 178 (12,369)
Current liabilities 4,260 5,074
Other, net (8,667) 1,210
--------- ---------
NET CASH PROVIDED BY OPERATIONS 16,117 10,689
INVESTING ACTIVITIES:
Purchases of fixed assets (4,276) (4,815)
Acquisitions of businesses (679) (1,203)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (4,955) (6,018)
FINANCING ACTIVITIES:
Net proceeds from issuance of convertible
debentures -- 122,488
Net repayments of line of credit
agreements (3,000) (3,000)
Cash dividends (2,435) (1,606)
Issuances of common stock under stock plans 4,013 144
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (1,422) 118,026
--------- ---------
NET INCREASE IN CASH 9,740 122,697
CASH AT BEGINNING OF PERIOD 24,709 33,297
--------- ---------
CASH AT END OF PERIOD $ 34,449 $155,994
========= =========
See notes to consolidated financial statements.
4
6
The Olsten Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
1. Accounting Policies
--------------------
The consolidated financial statements have been prepared by The Olsten
Corporation (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission and, in the opinion of
management, include all adjustments necessary for a fair presentation
of results of operations, financial position and cash flows for each
period presented.
2. Merger with Lifetime Corporation ("Lifetime")
---------------------------------------------
On July 30, 1993, Lifetime merged into the Company. The merger was
accounted for as a pooling of interests and, accordingly, the
consolidated financial statements of the Company were restated for all
periods prior to the merger to combine the accounts and operations of
the Company and Lifetime.
3. Long-Term Debt
---------------
On April 12, 1994, the Company called for redemption all $14 million of
its 11.2% convertible senior subordinated notes, representing the last
of the high coupon debt assumed in the Lifetime merger. At the option
of the note holders, all $14 million has been converted into 636,109
shares of Class B common stock. In April 1994, the Company paid down
$9 million of outstanding debt under its revolving credit agreement.
These items are reflected in current liabilities.
Interest expense, net consists of interest on long-term debt for the
quarter of $2.5 million in 1994 and $4.6 million in 1993 offset by
interest income from investments of $386,000 and $379,000,
respectively.
5
7
Item 2. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------
Results of Operations.
-----------------------
Results of Operations
- - ----------------------
Net income for the first quarter increased 39% to $14.3 million, or $.35
per share, compared to $10.3 million or $.26 per share. The increases over
1993 resulted from increased revenues in Staffing Services as clients look
to Olsten for flexible staffing alternatives along with the integration of
the Olsten Kimberly QualityCare business which resulted in operating
efficiencies.
Revenues for the first quarter were $537 million, as compared to $515
million for last year's first quarter. Staffing Services reported
increased revenues of 20% which resulted from a gain in hourly volume and
increased bill rates. As anticipated, revenues for HealthCare Services
were essentially flat as the Company focused on integration activities,
consolidated and closed certain offices, eliminated non-profitable business
and was impacted by non-recurring revenue adjustments recorded by Lifetime
in 1993. Also, the sale of non-strategic health care businesses in the
fourth quarter of 1993 affected revenue comparisons.
Costs of services increased $22 million, or 6%, to $376 million for the
quarter due primarily to the growth in revenues. As a percentage of
revenues, such expenses increased 1.3% to 70% for the quarter. Gross
margins as a percentage of revenues decreased to 30.1% for the quarter from
31.5% for last year's first quarter as a result of the faster rate of
growth of Staffing Services which operates at lower gross margins than
HealthCare Services and the non-recurring revenue adjustments recorded by
Lifetime in 1993.
Selling, general and administrative expenses for the first quarter
decreased $4.7 million, or 3%, to $134.7 million. As a percentage of
revenues, such expenses decreased 2% to 25% for the quarter as a result of
the Company's ability to effectively manage operating costs and the
operating efficiencies achieved in the integration of Olsten Kimberly
QualityCare.
Net interest expense was $2.2 million and $4.2 million for the first
quarter of 1994 and 1993, respectively, and primarily reflects borrowing
costs on long-term debt offset by interest income on investments. The
decrease resulted from repayment of Lifetime double-digit coupon debt in
the latter half of 1993.
6
8
Liquidity and Capital Resources
- - --------------------------------
Working capital at April 3, 1994, including $34.4 million in cash, was $245
million. The Company has temporarily invested available funds primarily in
short-term, interest-bearing investments.
The Company has revolving credit agreements with six banks for up to $200
million in borrowings and letters of credit. At April 3, 1994, there were
outstanding borrowings of $31 million and $59 million in standby letters of
credit. The Company believes that its levels of working capital and
liquidity and its available sources of funds are sufficient to support
present operations and to continue to increase its scope of services.
7
9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(b) The Company has not filed any report on Form 8-K during the
period for which this report is filed.
8
10
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE OLSTEN CORPORATION
(REGISTRANT)
Date: May 16, 1994 By: /s/ Frank N. Liguori
------------------------------
Frank N. Liguori
Chairman and Chief
Executive Officer
Date: May 16, 1994 By: /s/ Anthony J. Puglisi
-------------------------------
Anthony J. Puglisi
Senior Vice President - Finance
Chief Financial Officer
9