SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1999
------------
Commission File No. 1-8279
------
OLSTEN CORPORATION
------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2610512
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Broad Hollow Road, Melville, New York 11747-8905
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 844-7800
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 12, 1999
- ------------------------------------ ------------------------------
Common Stock, $.10 par value 68,236,653 shares
Class B Common Stock, $.10 par value 13,065,764 shares
INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) -
July 4, 1999 and January 3, 1999, respectively 2
Consolidated Statements of Operations (Unaudited) -
Quarters and Six Months Ended July 4, 1999 and
June 28, 1998, respectively 3
Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended July 4, 1999 and
June 28, 1998, respectively 4
Notes to Consolidated Financial Statements (Unaudited) 5-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17-18
Item 5. Other Information 19-20
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Olsten Corporation
Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)
July 4, 1999 January 3, 1999
------------ ---------------
ASSETS
CURRENT ASSETS:
Cash $ 14,991 $ 53,831
Receivables, net 1,146,546 1,005,685
Other current assets 141,399 134,303
--------- ---------
Total current assets 1,302,936 1,193,819
FIXED ASSETS, NET 238,081 233,131
INTANGIBLES, NET 595,802 613,616
OTHER ASSETS 9,633 18,241
--------- ---------
$2,146,452 $2,058,807
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 197,756 $ 195,594
Payroll and related taxes 154,641 144,330
Accounts payable 134,559 142,547
Insurance costs 41,545 36,338
--------- ---------
Total current liabilities 528,501 518,809
LONG-TERM DEBT 745,915 606,107
OTHER LIABILITIES 105,225 111,371
SHAREHOLDERS' EQUITY:
Common stock $.10 par value;
authorized 110,000,000 shares;
issued 68,276,817 and 68,253,080
shares, respectively 6,828 6,825
Class B common stock $.10 par value;
authorized 50,000,000 shares;
issued 13,066,003 and 13,071,560
shares, respectively 1,307 1,307
Additional paid-in capital 447,649 447,488
Retained earnings 322,023 377,268
Accumulated other comprehensive loss (10,541) (9,913)
Less treasury stock, at cost;
45,700 shares (455) (455)
--------- ---------
Total shareholders' equity 766,811 822,520
--------- ---------
$2,146,452 $2,058,807
========= =========
See notes to consolidated financial statements.
2
Olsten Corporation
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Second Quarter Ended Six Months Ended
-------------------- ----------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ --------------
Service sales, franchise fees,
management fees and other income $1,248,633 $1,126,142 $2,446,589 $2,176,084
Cost of services sold 944,833 883,017 1,848,309 1,666,902
--------- --------- --------- ---------
Gross profit 303,800 243,125 598,280 509,182
Selling, general and administrative expenses 266,538 286,591 638,576 523,451
Interest expense, net 10,840 7,476 19,838 13,382
--------- --------- --------- ---------
Income (loss) before income taxes and minority
interests 26,422 (50,942) (60,134) (27,651)
Income tax expense (benefit) 10,241 (19,740) (15,774) (10,714)
--------- --------- --------- ---------
Income (loss) before minority interests 16,181 (31,202) (44,360) (16,937)
Minority interests 2,673 2,262 4,384 3,726
--------- --------- --------- ---------
Net income (loss) $ 13,508 $ (33,464) $ (48,744) $ (20,663)
========= ========= ========= =========
SHARE INFORMATION:
Basic earnings (loss) per share:
Net income (loss) $ .17 $ (.41) $ (.60) $ (.25)
========= ========= ========= =========
Average shares outstanding 81,291 81,346 81,285 81,361
========= ========= ========= =========
Diluted earnings (loss) per share:
Net income (loss) $ .17 $ ( .41) $ (.60) $ (.25)
========= ========= ========= =========
Average shares outstanding 81,352 81,346 81,285 81,361
========= ========= ========= =========
See notes to consolidated financial statements.
3
Olsten Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
----------------
July 4, 1999 June 28, 1998
------------ -------------
OPERATING ACTIVITIES:
Net loss $ (48,744) $ (20,663)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 39,507 32,512
Changes in assets and liabilities,
net of effect from acquisitions:
Accounts receivable and other current assets (181,393) (70,907)
Current liabilities 55,614 41,803
Other, net (435) (8,775)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (135,451) (26,030)
-------- --------
INVESTING ACTIVITIES:
Purchases of fixed assets (39,557) (35,146)
Acquisitions of businesses, net of cash acquired (14,894) (60,408)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (54,451) (95,554)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from (repayments of) line of credit agreements 174,353 (60,862)
Redemption of debentures (7,688) --
Repayment of notes payable (6,517) (6,202)
Cash dividends (6,501) (11,378)
Net proceeds from issuance of notes -- 133,806
Issuances of common stock under stock plans -- 54
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 153,647 55,418
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,585) (278)
-------- --------
NET DECREASE IN CASH (38,840) (66,444)
CASH AT BEGINNING OF PERIOD 53,831 84,810
-------- --------
CASH AT END OF PERIOD $ 14,991 $ 18,366
======== ========
See notes to consolidated financial statements.
4
Olsten Corporation
Notes to Consolidated Financial Statements
(Unaudited)
1. Accounting Policies
-------------------
The unaudited consolidated financial statements have been prepared by
Olsten Corporation (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission and, in the opinion of management,
include all adjustments necessary for a fair presentation of results of
operations, financial position and cash flows for each period presented.
Results for interim periods are not necessarily indicative of results for a
full year. The year-end balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
2. Comprehensive Income (Loss)
---------------------------
Total comprehensive income amounted to $16 million and comprehensive loss
was $37 million during the second quarters of 1999 and 1998, respectively.
During the six months, total comprehensive loss amounted to $49 million and
$25 million for 1999 and 1998, respectively.
3. Acquisitions
------------
Under the terms of the 1997 purchase agreement for Olsten Travail
Temporaire (formerly Sogica S.A.), an additional payment of approximately
$31 million was paid in the second quarter of 1998. An additional purchase
price payment will be required in the year 2000, calculated based upon the
average net income for the three fiscal years ended 1999. Such additional
payments relate to the Company's original purchase of 70 percent of the
Olsten Travail Temporaire shares. The Company is also obligated in the year
2000 to purchase the remaining 30 percent of the shares at a price to be
determined by a multiple ranging from an upper limit of 16 to a lower limit
of 10, applied to the average net income for the fiscal years ended 1998
and 1999.
During the first six months of 1999, the Company purchased additional
Staffing Services operations in France and Health Services operations in
the United States for approximately $15 million in cash. All acquisitions
have been accounted for by the purchase method of accounting.
4. Special Charges and Adjustments
-------------------------------
On March 30, 1999, the Company announced plans to take a special charge
aggregating $102 million. The charge provides for the settlement of two
federal investigations focusing on the Company's Medicare home office cost
reports and certain transactions with Columbia/HCA and a provision of $46
million for the realignment of business units as part of a new
restructuring plan, including compensation and severance costs of $22
million to be paid to operational support staff, branch administrative
personnel and management, asset write-offs of $16 million and integration
costs of $8 million, primarily related to obligations under lease
agreements for offices and other facilities being closed. With respect to
the two federal investigations, the final civil, administrative and
criminal agreements were finalized and signed on July 19, 1999 and the
settlement amount was paid on August 11, 1999. The payment was funded by
5
the Company's revolving credit agreement in the amount of $45 million with
the remainder coming from operating cash flows. Asset write-offs relate
primarily to fixed assets being disposed of in offices being closed and
facilities being consolidated as well as fixed assets and goodwill
attributable to the Company's exit from certain businesses previously
acquired but not within the Company's strategic objectives. The Company
expects that the realignment of the business units will achieve a reduction
of expenses of approximately $14 million for the last three quarters of
1999, due to reduced employee, lease and depreciation expenses.
The Health Services' division represented $73 million of the total
charge, inclusive of a provision for the settlement of the two
government investigations of $56 million, compensation and
severance costs of $5 million, asset write-offs of $7 million and
integration costs of $5 million.
The charge for the Staffing Services' division totaled $16 million
and related to business realignments, including $6 million for
compensation and severance costs, $8 million for asset write-offs
and $2 million for integration costs.
The balance of the charge of $13 million relates to corporate
operations and consists primarily of compensation and severance
costs.
As of the end of the first six months of 1999, 60 percent of
closures and consolidations of facilities have been completed and
approximately 70 percent of the 640 expected terminations have
occurred.
In 1998, as a part of the Balanced Budget Act, the government enacted the
Interim Payment System ("IPS") for reimbursement of home care services
provided under Medicare. Prior to enactment of the IPS, home care services
were reimbursed based on cost subject to a cap determined by the Health
Care Financing Administration. The IPS reimburses home care services based
on costs, subject to both a per-beneficiary limit and a per-visit limit.
Further, the IPS reduced the per-visit limit to 1994 levels. As a result of
these cuts in reimbursement, provider margins have been reduced. In order
to operate at the lowered reimbursement rates, home health care companies
reduced the services provided to patients by providing fewer patient
visits. In addition, the regulatory climate that ensued in home health care
caused a lower level of physician referrals.
In 1998, the Company recorded non-recurring charges and other adjustments
of $66 million related to the restructuring of the Company's Health
Services division. These charges, which were primarily for 60 office
closings and consolidations in the United States, were taken to help
position the Company to operate more efficiently under the new IPS. In
addition, the Company has also made significant technological investments
in order to improve operational efficiencies and employee retention levels.
The benefit of the restructuring began to be realized in the second quarter
of 1998.
Included in this provision was $37 million charged to selling,
general and administrative expenses, which included lease payments
of $3 million, employee severance of $4 million, professional fees
6
and related costs of $13 million, fixed asset and software
write-offs of $5 million to reflect the loss incurred upon the
Company's decision to dispose of the assets in certain closed
offices, and an increase in the allowance for doubtful accounts of
$12 million. The charge for professional fees and related costs
resulted from the settlement with several government agencies
regarding certain past business practices of Quantum, the level of
effort required to respond to the significant inquiries conducted
by the government, and costs incurred to redesign the credit and
collection process of the home health business. All closures and
consolidations, related to this charge, of facilities and employee
terminations have been completed. The allowance for doubtful
accounts was increased because the collection of receivables is
highly dependent on the service provider's ability to provide
certain evidence of service and authorization documentation to a
variety of third-party payors. The office closings, consolidation
of certain business service centers and the termination of
employees are all events that, in the Company's past experience,
impair the ability to provide the aforementioned documentation and
to collect on receivables.
In addition, the Company recorded a reduction in revenues in the
second quarter of 1998 of $14 million in anticipation of lower
Medicare reimbursements resulting from the new per-visit and
per-beneficiary limits that have been imposed by Medicare under
the Interim Payment System.
The Company recorded a charge to cost of sales of $15 million to
reflect the estimated increase in costs that have been incurred,
but not yet reported, based upon a change in the actuarial
estimates utilized to determine the level of service to patients
covered under the Company's capitated contracts.
The major components, and amount of costs charged during the six months
ended July 4, 1999, of the previous years' special charges, as well as the
1999 special charge, were as follows:
Accounts Compensation
Dollars in Receivable and and Severance Integration
Thousands Settlements Other Assets Costs Costs Other Total
--------- ----------- ------------ ------------- ----------- ----- -----
Balance at January 3, 1999 $ -- $ 5,298 $ 1,383 $ 896 $ 476 $ 8,053
Cash expenditures -- -- (1,156) (544) (476) (2,176)
Non-cash write-offs -- (83) -- -- -- (83)
------- ------- ------- ------ ----- -------
Balance at July 4, 1999 $ -- $ 5,215 $ 227 $ 352 $ -- $ 5,794
------- ------- ------- ------ ----- -------
Charge - 1999 $ 56,000 $ 16,060 $ 22,245 $ 7,695 $ -- $102,000
Cash expenditures (330) -- (14,728) (2,844) -- (17,902)
Non-cash write-offs -- (11,488) -- -- -- (11,488)
------- ------- ------- ------ ----- -------
Balance at July 4, 1999 $ 55,670 $ 4,572 $ 7,517 $ 4,851 $ -- $ 72,610
------- ------- ------- ------ ----- -------
Balance of all charges
combined at July 4, 1999 $ 55,670 $ 9,787 $ 7,744 $ 5,203 $ -- $ 78,404
======= ======= ======= ====== ==== =======
7
5. Long-Term Debt
--------------
In February 1999, the Company's revolving credit agreement, which expires
in 2001, was amended, to revise the provision related to the maintenance of
various financial ratios and covenants, including granting the Company
approval to repurchase up to $40 million of the convertible subordinated
debentures. The Company retired $7.7 million of the convertible
subordinated debentures at 88.5 percent of the principal amount, resulting
in a gain of approximately $.9 million in January 1999. In May 1999, the
Company's revolving credit agreement was further amended to revise various
financial ratios and covenants and to restrict further repurchase of the
convertible subordinated debentures, as well as the Company's common
shares.
Interest expense, net, consists primarily of interest on long-term debt for
the quarter of $11 million in 1999 and $8 million in 1998, offset by
interest income from investments of $.6 million for 1999 and $1 million for
1998. Interest expense for the six months was $21 million, net of interest
income of $1 million in 1999 and $15 million, net of interest income of $2
million in 1998.
6. Business Segment Information
----------------------------
The Company operates in three business segments:
Staffing Services
The Company operates Olsten Staffing Services in the United States and
Canada, and staffing companies in 12 countries of Europe and Latin America,
providing supplemental staffing, evaluation and training for office
technology; general office and administrative services; accounting and
other financial services; legal, scientific, engineering and technical
services, including production technical training; call centers;
production/distribution/assembly services; training and pre-employment
services; retail services; marketing support and teleservices;
manufacturing, construction and industrial services; and managed services
for corporations. The Company's services meet the full range of business
needs, including traditional temporary help, project staffing,
professional-level staffing, strategic partnerships, regular full-time
hires and outsourcing. The Company's Financial Staffing Services operations
provide temporary, "temp-to-hire" and full-time placement of accounting and
financial professionals. The Company's Legal Staffing Services operations
provide temporary and full-time attorneys, paralegals and legal support
staff to law firms, corporate law departments and government, as well as
computerized litigation support.
Information Technology Services
The Company operates IMI Systems Inc. in the United States and related
companies in Canada and the United Kingdom providing design, programming
and maintenance of computer systems, on either a project or consulting
basis; focused solutions, comprising both horizontal practices and vertical
industry offerings; applications management, encompassing applications
outsourcing, and the support and development of legacy systems and
enterprise resource planning systems; quality assurance services, including
testing environment assessment and/or creation, test planning and
execution, and use of IMI's proprietary methodology, RadSTAR(TM); and
enterprise support services, including help desk support, technology and
software deployment, infrastructure operability/testing and Web/Internet
support.
8
Health Services
The Company operates Olsten Health Services in the United States and
Canada, delivering home health-related services, including Network
Services, providing care management and coordination for managed care
organizations and self-insured employers; skilled nursing, home health aide
and personal services; acute and chronic infusion therapy;
physical/occupational/neurological/speech therapies; pediatric and
perinatal care; disease management; marketing and distribution services for
pharmaceutical, biotechnology and medical device firms; and institutional,
occupational and alternate site health care staffing.
The Company evaluates performance and allocates resources based on income
or loss from operations before income taxes and minority interests. Segment
data includes charges for allocating corporate costs to each of the
operating segments. Prior period segment data has been restated to conform
with the current period presentation. Information about the Company's
operations, net of a special charge of $102 million, before taxes, in the
first quarter of 1999 ($16 million related to Staffing Services, $73
million related to Health Services, and $13 million related to Corporate
and other), and $66 million, before taxes, in the second quarter of 1998
related to Health Services, is as follows:
Services sales,
franchise fees, Income (loss) before
Dollars in management fees income taxes and
Thousands and other income minority interests
--------- ---------------- --------------------
Second quarter ended July 4, 1999
---------------------------------
Staffing Services $ 767,953 $ 19,627
Information Technology Services 108,107 3,189
Health Services 372,573 3,606
---------- --------
$1,248,633 $ 26,422
========= =======
Second quarter ended June 28, 1998
----------------------------------
Staffing Services $ 702,585 $ 20,769
Information Technology Services 108,356 4,049
Health Services 315,201 (75,760)
--------- -------
$1,126,142 $(50,942)
========= =======
Six months ended July 4, 1999
-----------------------------
Staffing Services $1,490,271 $ 14,854
Information Technology Services 216,469 6,964
Health Services 739,849 (68,852)
Corporate and other -- (13,100)
--------- -------
$2,446,589 $(60,134)
========= =======
9
Six months ended June 28, 1998
------------------------------
Staffing Services $1,328,070 $ 44,074
Information Technology Services 200,847 6,516
Health Services 647,167 (78,241)
--------- -------
$2,176,084 $(27,651)
========= =======
7. Subsequent Event
----------------
On August 18, 1999, the Company announced it intends to merge its staffing
and information technology services businesses with Adecco S.A. On closing,
the Company's health services business will be split off to Olsten
shareholders as an independent, health services company.
When the transactions become effective, each holder of Olsten stock will
receive for each share of Olsten common stock and Olsten Class B stock,
$8.75 in cash, or 0.12472 of an Adecco American Depositary Receipt (ADR)
(one ADR represents one-eighth of one share of Adecco common stock), or a
mixture of cash and Adecco ADRs valued in the aggregate at approximately
$8.75 per Olsten share, subject to proration in order that the aggregate
consideration received by all holders will be half cash and half Adecco ADR
shares. The value of the stock received by shareholders in the health
services company will be determined upon commencement of trading in the new
security.
The transactions required by the merger agreement require the affirmative
vote of holders of a majority of Olsten's common stock and Class B stock,
voting as a single class, as well as customary regulatory and other
conditions. Stuart Olsten, Chairman of the Company, and certain other
holders of the Company's Class B stock, constituting a majority of the
voting power of the Company's combined classes of stock, have committed to
vote in favor of the transactions.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
- ---------------------
Revenues increased 11 percent, or $123 million, during the second quarter and 12
percent, or $271 million, for the first six months of 1999, with 7 percent and
11 percent attributable to acquisitions, respectively. Staffing Services'
revenues increased 9 percent, or $65 million, for the second quarter of 1999 and
12 percent, or $162 million, for the six months of 1999. In Europe, Staffing
Services' second quarter of 1999 revenue grew by 36 percent, principally in
France and Scandinavia, reflecting industry growth and favorable economic
conditions, while North American second quarter of 1999 revenues declined 3
10
percent due, in part, to the historically low level of unemployment in the
United States. Partially offsetting this decrease was a 37 percent increase in
the Canadian staffing business' second quarter of 1999 revenues and a 31 percent
increase in the Company's accounting and financial services specialty division.
Staffing Services' revenues were unfavorably impacted by changes in currency
exchange rates during the second quarter of 1999 due to the strengthening of the
U.S. dollar relative to currencies in Europe, particularly in France, Norway and
the United Kingdom. At constant exchange rates, the increase in Staffing
Services' revenues would be 11 percent, or $77 million. For the six months of
1999, Staffing Services' revenues would have been $1.5 billion, an increase of
13 percent, had exchange rates remained unchanged. Information Technology
Services' revenues were essentially flat in both North America and Europe for
the second quarter of 1999 and grew 8 percent, or $16 million, for the six
months of 1999. Health Services' revenues increased 18 percent, or $57 million,
for the second quarter, and 14 percent, or $93 million, for the six months,
driven by growth in the Infusion, Network and Staffing business, while the
Nursing business was flat due, in part, to the impact of the 1998 change to
Medicare's Interim Payment System discussed below.
Gross profit margins, as a percentage of revenues, increased to 24.3 percent and
24.5 percent for the second quarter and six months from 21.6 percent and 23.4
percent for last year's second quarter and six months, respectively. Excluding
the impact of the non-recurring charge in the second quarter of 1998, gross
profit margins increased from 23.9 percent and remained essentially flat for
last year's second quarter and six months, respectively. Staffing Services'
gross profit margins declined for the quarter and six months as a result of
decreased markups, increased subcontractor utilization, and growth in low margin
Corporate Accounts and Partnership business in North America. Additionally,
increased international competition, a changing business mix and increased
social costs in Europe reduced margins. Information Technology's gross profit
margins remained essentially flat in comparison to the second quarter and six
months of 1998. Health Services' gross profit margins increased slightly,
excluding the effect of the non-recurring charge and other adjustments in the
second quarter of 1998, from 32.3 percent to 34.2 percent in the quarter and
33.3 percent to 34.1 percent in the six months.
On March 30, 1999, the Company announced plans to take a special charge
aggregating $102 million. The charge provides for the settlement of two federal
investigations focusing on the Company's Medicare home office cost reports and
certain transactions with Columbia/HCA and a provision of $46 million for the
realignment of business units as part of a new restructuring plan, including
compensation and severance costs of $22 million to be paid to operational
support staff, branch administrative personnel and management, asset write-offs
of $16 million and integration costs of $8 million, primarily related to
obligations under lease agreements for offices and other facilities being
closed. With respect to the two government investigations, the final civil,
administrative and criminal agreements were finalized and signed on July 19,
1999 and the settlement amount was paid on August 11, 1999. The payment was
funded by the Company's revolving credit agreement in the amount of $45 million
with the remainder coming from operating cash flows. Asset write-offs relate
primarily to fixed assets being disposed of in offices being closed and
facilities being consolidated as well as fixed assets and goodwill attributable
to the Company's exit from certain businesses previously acquired but not within
the Company's strategic objectives. The Company expects that the realignment of
the business units will achieve a reduction of expenses of approximately $13.6
million for the last three quarters of 1999, due to reduced employees, lease and
depreciation expenses.
11
The Health Services' division represented $73 million of the total
charge, inclusive of a provision for the settlement of the two
government investigations of $56 million, compensation and
severance costs of $5 million, asset write-offs of $7 million and
integration costs of $5 million.
The charge for the Staffing Services' division totaled $16 million
and related to business realignments, including $6 million for
compensation and severance costs, $8 million for asset write-offs
and $2 million for integration costs.
The balance of the charge of $13 million relates to corporate
operations and consists primarily of compensation and severance
costs.
As of the end of the second quarter of 1999, 60 percent of the
closures and consolidations of facilities have been completed and
approximately 70 percent of the expected 640 terminations have
occurred.
In 1998, as a part of the Balanced Budget Act, the government enacted the
Interim Payment System ("IPS") for reimbursement of home care services provided
under Medicare. Prior to enactment of the IPS, home care services were
reimbursed based on cost subject to a cap determined by the Health Care
Financing Administration. The IPS reimburses home care services based on costs,
subject to both a per-beneficiary limit and a per-visit limit. Further, the IPS
reduced the per-visit limit to 1994 levels. As a result of these cuts in
reimbursement, provider margins have been reduced. In order to operate at the
lowered reimbursement rates, home health care companies reduced the services
provided to patients by providing fewer patient visits. In addition, the
regulatory climate that ensued in home health care caused a lower level of
physician referrals.
In 1998, the Company recorded non-recurring charges and other
adjustments of $66 million related to the restructuring of the
Company's Health Services division. These charges, which were
primarily for 60 office closings and consolidations in the United
States, were taken to help position the Company to operate more
efficiently under the new IPS. In addition, the Company has also
made significant technological investments in order to improve
operational efficiencies and employee retention levels. The
benefit of the restructuring began to be realized in the second
quarter of 1998.
Included in this provision was $37 million charged to selling,
general and administrative expenses, which included lease payments
of $3 million, employee severance of $4 million, professional fees
and related costs of $13 million, fixed asset and software
write-offs of $5 million to reflect the loss incurred upon the
Company's decision to dispose of the assets in certain closed
offices, and an increase in the allowance for doubtful accounts of
$12 million. The charge for professional fees and related costs
resulted from the settlement with several government agencies
regarding certain past business practices of Quantum, the level of
12
effort required to respond to the significant inquiries conducted
by the government, and costs incurred to redesign the credit and
collection process of the home health business. All closures and
consolidations, related to this charge, of facilities and employee
terminations have been completed. The allowance for doubtful
accounts was increased because the collection of receivables is
highly dependent on the service provider's ability to provide
certain evidence of service and authorization documentation to a
variety of third-party payors. The office closings, consolidation
of certain business service centers and the termination of
employees are all events that, in the Company's past experience,
impair the ability to provide the aforementioned documentation and
to collect receivables.
In addition, the Company recorded a reduction in revenues in the
second quarter of 1998 of $14 million in anticipation of lower
Medicare reimbursements resulting from the new per-visit and
per-beneficiary limits that have been imposed by Medicare under
the Interim Payment System.
The Company recorded a charge to cost of sales of $15 million to
reflect the estimated increase in costs that have been incurred,
but not yet reported, based upon a change in the actuarial
estimates utilized to determine the level of service to patients
covered under the Company's capitated contracts.
Selling, general and administrative expenses decreased to $267 million in the
second quarter of 1999 from $287 million in the second quarter of 1998 due to
the non-recurring charges and other adjustments and recorded in the second
quarter of 1998. Excluding the charge, such expenses, at 21.3% and 21.9% as a
percentage of revenue for the second quarter of 1999 and 1998, respectively,
have remained flat for the quarter. Conversely, selling, general and
administrative expenses increased to $639 million from $524 million in the six
months due to the special charge recorded in the first quarter of 1999.
Excluding both charges, selling, general and administrative expenses for the six
months have been essentially flat as a percentage of revenue at 22.2% in 1998
and 21.9% in 1999.
Net interest expense was $10.8 million and $7.5 million for the second quarters
of 1999 and 1998, respectively, and $20 million and $13 million for the six
months of 1999 and 1998. Net interest primarily reflected borrowing costs on
long-term debt offset by interest income on investments. The increase resulted
from interest expense incurred as the Company continued to fund both its
acquisition program and working capital requirements, particularly accounts
receivable, necessary to support growth in its Staffing Services' business and
Infusion business.
Liquidity and Capital Resources
- -------------------------------
Working capital at July 4, 1999, including $15 million in cash, was $774
million, an increase of 15 percent versus $675 million at January 3, 1999.
Receivables, net, increased $141 million, or 14 percent, predominantly due to
revenue growth and acquisitions in the Staffing Services' business as well as
growth in Health Services' Infusion business, which requires additional working
capital.
13
The Company has a revolving credit agreement for up to $400 million in
borrowings and letters of credit. In February 1999, the Company's revolving
credit agreement, which expires in 2001, was amended, to revise the provision
related to the maintenance of various financial ratios and covenants, including
granting the Company approval to repurchase up to $40 million of the convertible
subordinated debentures. The Company retired $7.7 million of the convertible
subordinated debentures at 88.5 percent of the principal amount, resulting in a
gain of approximately $.9 million in January 1999. In May 1999, the Company's
revolving credit agreement was further amended to revise the provision related
to the maintenance of various financial ratios and covenants and to restrict
further repurchase of the convertible subordinated debentures, as well as the
Company's common shares. As of July 4, 1999, there were $344 million in
borrowings and $15 million in standby letters of credit outstanding under the
revolving credit agreement. The Company has invested available funds in secure,
short-term, interest-bearing investments.
The Company anticipates that, in addition to its projected cash flow from
operations, new borrowings may be required to meet the Company's projected
working capital requirements to fund capital expenditures currently anticipated
by the Company. Although no assurance can be given, the Company currently
believes that cash flows from operations, borrowings available to the Company
under existing financing agreements, and additional borrowings that the Company
believes it will be able to obtain should be adequate to meet its projected
requirements during 1999 and thereafter. If cash flows from operations or
availability under existing and new financing agreements fall below
expectations, the Company may be forced to delay planned capital expenditures,
reduce operating expenses, or consider other alternatives designed to enhance
the Company's liquidity. On August 11, 1999, the Company paid $61 million in
settlement of the U.S. Department of Justice home office cost reports and
Columbia/HCA investigation of which $45 million was funded by the Company's
revolving credit agreement with the remainder coming from operating cash flows.
The Company's 1999 second quarter dividend on common stock and Class B common
stock was $.04 per share.
Year 2000
- ---------
The Year 2000 issue concerns the inability of information systems to properly
recognize and process date-sensitive information beyond January 1, 2000.
The Company's technical infrastructure, encompassing all business applications,
is planned to be Year 2000 ready. Systems not directly related to the financial
operations of the business, primarily voice communications, are also being
upgraded to help ensure readiness.
The North American Staffing Services business is achieving Year 2000 readiness
by replacing all business applications and related infrastructure with compliant
technology. This project, referred to as Project REach, is being implemented to
increase efficiencies and improve the Company's ability to provide services to
customers. The selected systems are Year 2000 compliant and, therefore, no
remediation of current applications is necessary. Project REach is approximately
95 percent completed and is scheduled to be fully implemented by September 1999.
The Company's European and Latin American staffing operations are achieving
readiness primarily through remediation of existing systems and both are
expected to be completed by October 31, 1999.
The Information Technology Services business required minimal remediation to
achieve Year 2000 compliance, and was completed June 30, 1999.
14
In the Health Services segment, systems critical to the business, which have
been identified as non-year 2000 compliant, are being replaced as part of a
project, referred to as Project REO, which is also being implemented to increase
efficiencies and improve the Company's ability to provide services to customers.
The new infrastructure, which is Year 2000 compliant, is currently being
implemented in field offices and is scheduled for completion by October 31,
1999. Other Health Services' systems, which require remediation, are expected to
be completed by October 31, 1999.
The total cost of the Company's remediation plan (exclusive of Project REach and
Project REO costs) is estimated to be approximately $3 million.
As part of its Year 2000 readiness activities, the Company has contacted its
significant vendors and third parties to determine the extent to which the
Company is vulnerable to their potential failure to remediate their own systems
to address the Year 2000 issues. Approximately 93% of those inquired have
responded in writing and indicated their current compliance or that they will be
compliant by the end of 1999.
With respect to the risks associated with its systems, the Company believes that
the most reasonably likely worst case scenario is that the Company may
experience minor system malfunctions and errors in the early days and weeks of
the Year 2000. The Company does not expect these problems to have a material
impact on the Company's ability to place and pay workers or invoice customers.
The Company is not heavily reliant on electronic transmissions from third
parties. With respect to the risks associated with the third parties, the
Company believes that the most reasonably likely worst case scenario is that
some of the Company's vendors and customers will not be compliant. The Company
believes that the number of such third parties will have been minimized by the
Company's program of contacting significant vendors and large customers. Despite
the Company's diligence, there can be no guarantee that significant vendors and
third parties that the Company relies upon to conduct day to day business will
be compliant. Failure by these companies, or any governmental entities, to
remediate their systems on a timely basis could impact cash flow from
operations.
Due to the general uncertainty inherent in the Year 2000 issue resulting, in
part, from the uncertainty of the Year 2000 readiness of third-party suppliers
and customers, and government agencies, the Company is unable to determine at
this time whether the consequences of Year 2000 failures will have a material
impact on the Company's results of operations, liquidity or financial condition.
The continuing Year 2000 effort is expected to help reduce the Company's level
of uncertainty about the Year 2000 issue and, in particular, about the Year 2000
readiness. The Company believes that the implementation of new business systems
and the completion of its Year 2000 plan as scheduled should help reduce the
likelihood of significant interruptions of normal operations.
The Company's plan is to address its significant Year 2000 issues prior to being
affected by them. Should the Company identify significant risks related to its
Year 2000 readiness or its progress deviates from the anticipated timeline, the
Company will develop contingency plans as deemed necessary at that time.
The failure to correct a material Year 2000 problem could result in an
interruption or a failure of certain normal business activities or operations.
Such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition.
15
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's exposure to market risk for changes in interest rates relates
primarily to the fair value of long-term fixed-rate debt. The Company has
historically managed interest rates through the use of a combination of fixed
and variable rate borrowings. Generally, the fair market value of fixed rate
debt will increase as interest rates fall and decrease as interest rates rise.
The Company's long-term debt is primarily composed of fixed rate obligations.
Based on the overall interest rate exposure on the Company's fixed rate
borrowings at July 4, 1999, a 10 percent change in market interest rates would
not have a material effect on the fair value of the Company's long-term debt.
Based on variable rate debt levels, a 10 percent change in market interest rates
(54 basis points on a weighted average) would have less than a 3 percent impact
on the Company's interest expense, net.
Other than intercompany transactions between the United States and the Company's
foreign entities, the Company generally does not have significant transactions
that are denominated in a currency other than the functional currency applicable
to each entity.
Fluctuations in currency exchange rates may also impact the shareholders' equity
of the Company. The assets and liabilities of the Company's non-U.S.
subsidiaries are translated into U.S. dollars at the exchange rates in effect at
the balance sheet date. Revenues and expenses are translated into U.S. dollars
at the weighted average exchange rate for the quarter. The resulting translation
adjustments are recorded in shareholders' equity as accumulated other
comprehensive income (loss).
Although currency fluctuations impact the Company's reported results of
operations, such fluctuations generally do not affect the Company's cash flow or
result in actual economic gains or losses. Each of the Company's subsidiaries
derives revenues and incurs expenses primarily within a single country, and
consequently, does not generally incur currency risks in connection with the
conduct of normal business operations. The Company generally has few cross
border transfers of funds, except for transfers from or to the United States as
working capital loans. To reduce the currency risk related to the loans, the
Company may borrow funds under the existing Revolving Credit Agreement in the
foreign currency to lend to the subsidiary.
Foreign exchange gains and losses are included in the Consolidated Statements of
Operations and historically have not been significant. The Company generally
does not engage in hedging activities, except as discussed above. The Company
did not hold any derivative instruments at July 4, 1999.
OTHER
- -----
INFORMATION CONTAINED HEREIN, OTHER THAN HISTORICAL INFORMATION, SHOULD BE
CONSIDERED FORWARD-LOOKING AND IS SUBJECT TO VARIOUS RISK FACTORS AND
UNCERTAINTIES. FOR INSTANCE, THE COMPANY'S STRATEGIES AND OPERATIONS INVOLVE
RISKS OF COMPETITION, CHANGING MARKET CONDITIONS, CHANGES IN LAWS AND
REGULATIONS AFFECTING THE COMPANY'S INDUSTRIES AND NUMEROUS OTHER FACTORS
DISCUSSED IN THIS DOCUMENT AND IN OTHER COMPANY FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
On September 8, 1998, a Consolidated Amended Class Action Complaint
(the "Amended Complaint") was filed by the plaintiffs in the four
previously disclosed purported class action lawsuits (Weichman,
Goldman, Waldman and Cannold) pending against Olsten and certain of
its officers and directors (collectively, the "Class Action"). The
Amended Complaint asserts claims under Sections 10(b) (including
Rule 10b-5 promulgated thereunder), 14(a) and 20(a) of the
Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of
the Securities Act of 1933. On October 19, 1998, the Company and the
individual defendants served a motion seeking an Order dismissing
the Amended Complaint; that motion was fully briefed on December 23,
1998. The Amended Complaint seeks certification of the proposed
class, a judgment declaring the conduct of the defendants to be in
violation of the law, unspecified compensatory damages and
unspecified costs and expenses, including attorneys' fees and
experts' fees. While the Company is unable at this time to assess
the probable outcome of the Class Action or the materiality of the
risk of loss in connection therewith (given the preliminary stage of
the Class Action and the fact that the Amended Complaint does not
allege damages with any specificity), the Company believes that it
acted responsibly with respect to its shareholders and has
vigorously defended the Class Action.
On or about May 11, 1999, a Complaint was served in a derivative
lawsuit, captioned Robert Rubin, et al. v. John M. May, et al., No.
17135-NC (Delaware Chancery Court), which was filed against the
following current and former directors of the Company: John M. May,
Raymond S. Troubh, Jo[sh] S. Weston, Victor F. Ganzi, Stuart R.
Levine, Frank N. Liguori, Miriam Olsten, Stuart Olsten and Richard
J. Sharoff. The Complaint, which names Olsten as a nominal
defendant, alleges a claim for breach of fiduciary duties arising
out of the Class Action referenced above and the Healthcare
Investigations defined and referenced in Item 5, below. Plaintiffs
seek a judgment (1) requiring the defendants to account to the
Company for unspecified alleged damages resulting from the
defendants' alleged conduct; (2) directing the defendants to
establish and maintain effective compliance programs; and (3)
awarding plaintiffs the costs and expenses of the lawsuit, including
reasonable attorneys' fees.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
(a) The Annual Meeting of Shareholders of the Company was
held on May 4, 1999.
(c)(i) At the Annual Meeting, shareholders elected directors of
the Company by votes as follows:
17
Name of Director Votes For Votes Withheld
---------------- ---------- --------------
Edward A. Blechschmidt 57,081,576 568,092
Victor F. Ganzi 105,127,692 57,170
Stuart R. Levine 105,126,032 58,830
John M. May 57,000,941 648,727
Miriam Olsten 105,124,162 60,700
Stuart Olsten 105,127,692 57,170
Richard J. Sharoff 105,127,670 57,192
Raymond S. Troubh 105,126,122 57,192
Josh S. Weston 57,004,071 645,597
(ii) At the Annual Meeting, shareholders voted upon a
proposal to approve the Company's Executive Officers
Bonus Plan. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
159,496,261 3,144,977 191,892 400
(iii) At the Annual Meeting, shareholders voted upon a
proposal to approve the appointment by the Board of
Directors of PricewaterhouseCoopers LLP as independent
accountants for the Company for its 1999 fiscal year.
The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
162,468,082 277,902 88,546 -0-
(iv) At the Annual Meeting, shareholders voted upon a
proposal to eliminate stock options, bonuses and
restricted shares for top senior management. The votes
were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
2,412,856 142,357,982 361,314 17,702,378
(v) At the Annual Meeting, shareholders voted upon a
proposal to require shareholder approval of change of
control agreements. The votes were:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
9,136,926 135,633,978 361,845 17,701,781
(vi) At the Annual Meeting, shareholders voted upon a
proposal requesting the prompt sale of the Company to
the highest bidder. The votes were as follows:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
3,981,267 140,747,746 373,737 17,731,780
18
Item 5. Other Information.
------------------
Government Investigations. The Company's home health care business
is subject to extensive federal and state regulations which govern,
among other things, Medicare, Medicaid, CHAMPUS and other
government-funded reimbursement programs, reporting requirements,
certification and licensure standards for certain home health
agencies and, in some cases, certificate-of-need and
pharmacy-licensing requirements. The Company is also subject to a
variety of federal and state regulations which prohibit fraud and
abuse in the delivery of health care services, including, but not
limited to, prohibitions against the offering or making of direct or
indirect payments for the referral of patients. As part of the
extensive federal and state regulation of the Company's home health
care business, the Company is subject to periodic audits,
examinations and investigations conducted by or at the direction of
governmental investigatory and oversight agencies. Violation of the
applicable federal and state health care regulations can result in a
health care provider being excluded from participation in the
Medicare, Medicaid and/or CHAMPUS programs, and can subject the
provider to civil and/or criminal penalties.
The Company has cooperated with the previously disclosed health care
industry investigations being conducted by certain governmental
agencies (collectively, the "Healthcare Investigations").
Among the Healthcare Investigations with which the Company continues
to cooperate is that being conducted into the Company's preparation
of Medicare cost reports by the Office of Investigations section of
the Office of Inspector General (an agency within the U.S.
Department of Health and Human Services) and the U.S. Department of
Justice (the "Cost Reports Investigation").
The Company also continues to cooperate with the U.S. Department of
Justice and other federal agencies investigating the relationship
between Columbia/HCA Healthcare Corporation and Olsten in connection
with the purchase, sale and operation of certain home health
agencies which had been owned by Columbia/HCA and managed under
contract by Olsten Health Management, a unit of Olsten Health
Services that provides management services to hospital-based home
health agencies (the "Columbia/HCA Investigation").
The Company continues to cooperate with various state and federal
agencies, including the U.S. Department of Justice and the Office of
the Attorney General of New Mexico, in connection with their
investigations into certain healthcare practices of Quantum Health
Resources ("Quantum"). Among the matters into which the government
has been inquiring are allegations of improper billing and fraud
against various federally-funded medical assistance programs on the
part of Quantum and its post-acquisition successor, the Infusion
Therapy Services division of Olsten Health Services (the "Quantum
New Mexico Investigation"). Most of the time period that the Company
understands to be at issue in the Quantum New Mexico Investigation
predates the Company's June 1996 acquisition of Quantum.
19
On July 19, 1999, the Company entered into written civil and
criminal agreements with the U.S. Department of Justice (and, as to
the civil agreement, the Office of Inspector General of the U.S.
Department of Health and Human Services) finalizing the
understanding that it announced on March 30, 1999 to settle the
civil and criminal aspects of the Cost Reports Investigation and the
Columbia /HCA investigation. Pursuant to the settlement, (a) the
Company paid on August 11, 1999 the sum of $61 million to the U.S.
Department of Justice, including approximately $10.1 million in
criminal fines and penalties; (b) in connection with the
Columbia/HCA Investigation, a subsidiary of the Company, Kimberly
Home Health Care, Inc., a Missouri corporation, pled guilty in the
United States District Courts for the Northern District of Georgia,
the Southern District of Florida and the Middle District of Florida,
respectively, to a criminal violation of the federal mail fraud,
conspiracy and kickback statutes; (c) Kimberly Home Health Care,
Inc. has been permanently excluded from participation in Medicare,
Medicaid and all other federal health care programs as defined in 42
U.S.C. ss.1320a-7b(f); and (d) the Company has executed a Corporate
Integrity Agreement with the Office of Inspector General of the U.S.
Department of Health and Human Services.
By letter dated June 30, 1999, the Medicare Fraud Control Unit of
the New Mexico Attorney General's Office notified the Company that
it has declined to criminally prosecute the so-called "J-Code issue"
relating to Quantum's past practices in seeking government health
care reimbursement.
On January 28, 1999, the Company announced that it had been advised
by the United States Attorney's Office for the District of New
Mexico ("New Mexico U.S. Attorney's Office") that, in connection
with the Quantum New Mexico Investigation, it had dropped its
criminal investigation into certain past practices of Quantum. The
criminal aspect of the Quantum New Mexico Investigation had focused
on allegations of improper billing and fraud against various
federally funded medical assistance programs on the part of Quantum
during the period between January 1992 and April 1997. By letter
dated February 1, 1999, the New Mexico U.S. Attorney's Office
advised the Company that, having ended its criminal inquiry, the
Office has referred the Quantum matter to its Affirmative Civil
Enforcement ("ACE") Section. As it had done with the Criminal
Division of the New Mexico U.S. Attorney's Office, the Company
intends to cooperate fully with that Office's ACE Section in
connection with its civil inquiry into the Quantum matter that has
been referred to it. Although, at this time, the Company is unable
to predict what relief, if any, the ACE Section will seek in
connection with the civil Quantum New Mexico Investigation, such
relief could include money damages and/or civil penalties.
20
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are filed herewith:
Exhibit 2.1 Agreement and Plan of Merger, dated as of
August 17, 1999, by and among Adecco SA,
Staffing Acquisition Corporation and the
Company.
Exhibit 2.2 Separation Agreement, dated as of August 17,
1999, by and among the Company, Aaronco
Corp., and Adecco SA.
Exhibit 10.1 Employment Agreement dated as of February 10,
1999 between the Company and Edward A.
Blechschmidt.
Exhibit 10.2 Supplemental Executive Retirement Plan, as
amended and restated January 4, 1999.
Exhibit 10.3 Separation, Consulting and Non-Competition
Agreement, dated as of August 17, 1999, by
and among Stuart Olsten, Adecco SA, and the
Company.
Exhibit 10.4 Separation, Consulting and Non-Competition
Agreement, dated as of August 17, 1999, by
and among Edward A. Blechschmidt, Adecco SA,
and the Company.
Exhibit 10.5 Separation, Consulting and Non-Competition
Agreement, dated as of August 17, 1999, by
and among Anthony Puglisi, Adecco SA, and the
Company.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K.
(i) The Company has not filed any report on Form 8-K
during the quarter for which this report is filed.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLSTEN CORPORATION
(REGISTRANT)
Date: August 18, 1999 By: /s/Edward A. Blechschmidt
-------------------------------------
Edward A. Blechschmidt
President and Chief Executive Officer
Date: August 18, 1999 By: /s/Anthony J. Puglisi
--------------------------------------
Anthony J. Puglisi
Executive Vice President and
Chief Financial Officer
22
EXHIBIT INDEX
Exhibit 2.1 Agreement and Plan of Merger, dated as of August 17, 1999, by
and among Adecco SA, Staffing Acquisition Corporation and the
Company.
Exhibit 2.2 Separation Agreement, dated as of August 17, 1999, by and among
the Company, Aaronco Corp., and Adecco SA.
Exhibit 10.1 Employment Agreement dated as of February 10, 1999 between the
Company and Edward A. Blechschmidt.
Exhibit 10.2 Supplemental Executive Retirement Plan, as amended and restated
January 4, 1999.
Exhibit 10.3 Separation, Consulting and Non-Competition Agreement, dated as
of August 17, 1999, by and among Stuart Olsten, Adecco SA, and
the Company.
Exhibit 10.4 Separation, Consulting and Non-Competition Agreement, dated as
of August 17, 1999, by and among Edward A. Blechschmidt, Adecco
SA, and the Company.
Exhibit 10.5 Separation, Consulting and Non-Competition Agreement, dated as
of August 17, 1999, by and among Anthony Puglisi, Adecco SA, and
the Company.
Exhibit 27 Financial Data Schedule
23