SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-13984
DIVERSIFIED CORPORATE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1565578
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12801 North Central Expressway
Suite 260
Dallas, Texas 75243
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 458-
8500
Former name, former address and former fiscal year if changed
since last report:
Indicate by check mark whether registrant (1) has filed all
reports required 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 No X
Number of shares of common stock of the registrant
outstanding on March 31, 1995, was 1,758,211.
Total Number of pages for
this 10-Q filing: 9
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1995 1994
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents $47,563 $ 45,780
Accounts receivable, less allowance
for doubtful accounts of approximately
$217,000 and $205,000, respectively 2,034,374 1,874,754
Refundable federal taxes - 225
Notes receivable 25,871 25,363
Prepaid expenses and other current assets 169,806 157,153
TOTAL CURRENT ASSETS 2,277,614 2,103,275
EQUIPMENT, FURNITURE AND LEASEHOLD
IMPROVEMENTS, NET 322,161 286,829
OTHER ASSETS:
Notes receivable 5,610 11,533
Other 161,901 161,243
$ 2,767,286 $ 2,562,880
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 3,208,793 $ 3,143,107
Current maturities of long-term debt 86,091 101,822
TOTAL CURRENT LIABILITIES 3,294,884 3,244,929
DEFERRED LEASE RENTS 99,807 117,597
LONG-TERM DEBT 107,923 113,240
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY):
Preferred stock, $1.00 par value;
1,000,000 shares
authorized, none issued - -
Common stock, $.10 par value;
10,000,000 shares
authorized, 1,881,161 shares issued 188,116 188,116
Additional paid-in capital 3,615,151 3,615,151
Accumulated deficit (4,369,170) (4,546,728
Common stock held in treasury
(122,950 shares), at cost (169,425) (169,425)
TOTAL STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY) (735,328) (912,886)
$2,767,286 $2,562,880
See Notes to Consolidated Financial Statements.
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
March 31,
1995 1994
NET SERVICE REVENUES:
Regular Placements $2,220,999 $1,748,895
Temporary 934,650 710,642
Contract Labor 1,387,208 1,032,819
4,542,85 73,492,356
COST AND EXPENSES 3,934,683 3,101,678
INCOME FROM OPERATING ENTITIES 608,174 390,678
GENERAL AND ADMINISTRATIVE EXPENSES (390,904) (365,879)
OTHER INCOME (EXPENSES):
Gain on foreclosure of divisional assets - 16,276
Interest expense,net (59,783) (37,806)
Other, net 20,071 23,193
(39,712) 1,663
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 177,558 26,462
INCOME TAXES, net of tax benefit from utilization
of net operating loss carryforward - -
INCOME BEFORE EXTRAORDINARY ITEM 177,558 26,462
EXTRAORDINARY ITEM - gain on troubled debt
restructuring, net of income tax - 21,738
NET INCOME $177,558 $48,200
INCOME PER SHARE
Income before extraordinary item $ .10 $.02
Extraordinary Item - .01
INCOME PER SHARE $ .10 $.03
WEIGHTED AVERAGE COMMON AND
COMMON SHARES OUTSTANDING 1,758,211 1,758,211
The Notes to Consolidated Financial Statements are an Integral Part of the
Financial Statements.
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended
March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 177,558 $ 48,200
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 25,258 25,588
(Benefit) provision for losses on
accounts receivable 11,644 (24,662)
Increase in accounts receivable (171,264) (650,841)
Decrease in receivables from net
assets repossessed - 236,973
Increase in prepaid expenses and
other current assets (12,936) (57,065)
(Increase) decrease in other assets 5,265 (109,236)
Increase in fixed assets from foreclosure - (223,849)
Increase in accounts payable
and accrued expenses 178,288 675,613
Decrease in obligations resulting
from settlement agreements - (31,478)
Decrease in deferred lease rents (17,790) (20,955)
Net cash provided by (used in)
operating activities 196,023 (131,712)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (60,590) (10,212)
Net cash used in investing activities (60,590) (10,212)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loan - 10,000
Repayment of short-term debt (14,500) (10,000)
Increase (decrease) in proceeds
from factored receivables (112,602) 176,430
Principal payments under long-term
debt obligations to others (6,548) (14,258)
Net cash used in financing activities (133,650) 162,172
Net increase (decrease) in
cash and cash equivalents 1,783 20,248
Cash and cash equivalents
at beginning of year 45,780 102,775
Cash and cash equivalents at
end of period $47,563 $123,023
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 76,318 $ 36,547
The Notes to Consolidated Financial Statements are an Integral Part of the
Financial Statements.
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Basis of Presentation
The consolidated financial statements include the operations
of Diversified Corporate Resources, Inc. and its subsidiaries
(the "Company"). The financial information for the three months
ended March 31, 1995, is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which the Company
considers necessary for a fair presentation of the results for
the period. The financial information should be read in
conjunction with the consolidated financial statements for the
year ended December 31, 1994, included in the Company's annual
report on Form 10-K. Operating results for the three months
ended March 31, 1995, are not necessarily indicative of the
results that may be expected for the entire year ended December
31, 1995.
The Company's Consolidated Statement of Operations for the
quarters ended March 31, 1995 and 1994, include income from the
operations of the employment placement business (the "Employment
Placement Business"). The Employment Placement Business includes
the operation of the assets foreclosed upon in January, 1994.
Revenue Recognition
Fees for full-time (regular) placement of personnel were
recognized as income at the time the applicants accepted
employment. Provision was made for estimated losses in
realization (principally due to applicants not commencing
employment or not remaining in employment for the guaranteed
period). Revenue from temporary and contract personnel
placements was recognized upon performance of services. Cost of
services consists of expenses for the operation of agencies
(principally commissions, direct wages paid to temporary
personnel, payroll taxes and rent) and a provision for
uncollectible accounts (approximately $28,000 in 1995).
Cash and Cash Equivalents
Cash and cash equivalents includes certificates of deposit of
approximately $32,000 at March 31, 1995, and $31,000 at December
31, 1994. The Company considers all highly liquid investment
instruments purchased with remaining maturities of three months
or less to be cash equivalents for purposes of the consolidated
statements of cash flow.
Income Taxes
During 1993, the Company changed its method of accounting for
income taxes to conform to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Accordingly, income taxes are provided for
the tax effects of transactions reported in the financial
statements and consist of taxes currently payable plus deferred
taxes related primarily to differences between the basis of
installment sales, property and equipment and accounts receivable
for financial and income tax reporting. The deferred taxes
represent the future tax return consequences of those
differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
The Company has a net operating loss carryforward of
approximately $4.9 million as of December 31, 1994, which, if
unused, expires in 2002 through 2008. However, due to a more
than 50% change in ownership beginning with an April 1991
transaction, the Company's net operating loss carryforward is
subject to certain limitations pursuant to provisions of the
Internal Revenue Code. The amount of the Company's net operating
loss available for use at December 31, 1994, was approximately
$1.7 million. An additional amount of approximately $500,000
will become available annually through 2001.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months Ended March 31, 1995, Compared to Three Months
Ended March 31, 1994
Total revenues were $4.5 million for the first quarter ended
March 31, 1995, compared to $3.5 million in 1994. This increase
of 30.1% resulted from an increase in regular placements,
temporary and contract labor revenues. Cost and expenses were
$3.9 million in the first quarter of 1995 as compared to $3.1
million in the first quarter of 1994. This represents a 26.9%
increase. The increases in revenues and the related cost and
expenses in the first quarter of 1995 as compared to the first
quarter of 1994 resulted from an increase in all areas of service
revenues and operations of the Employment Placement Business
during the first quarter of 1995.
General and administrative expenses increased approximately
$25,000, or 6.8%, in 1995 as compared to the first quarter of
1994. The increase is primarily a result of an increase in
payroll expenses in the Company's Employment Placement Business.
Interest expense increased approximately $22,000, which is the
result of an increase in liability relating to factored accounts
receivable of the Employment Placement Business.
In the first quarter of 1994, the Company recorded
approximately $22,000 as an extraordinary item from gain on debt
restructuring, net of income taxes, which is the result of
management's successful efforts in settling certain prior year
liabilities on a discounted basis. There was no gain recorded in
the quarter ended March 31, 1995.
As a result of these factors, the Company recorded
approximately $178,000 of net income for the first quarter of
1995, compared to approximately $48,000 for the first quarter of
1994.
Liquidity and Capital Resources
Working capital was a $1.0 million deficit at March 31, 1995,
compared with a $1.1 million deficit at December 31, 1994. This
deficit decrease of approximately $124,000 during the first
quarter of 1995 can be primarily attributed to an increase in the
accounts receivable of the Employment Placement Business.
Cash flow provided by operating activities of $196,000
resulted primarily from net income for the first quarter of 1995.
Net cash used in investing activities was $61,000 as a result
of capital expenditures made by the Company during the first
quarter of 1995. The Company also retired $21,000 in notes
payable during the first quarter of 1995, and decreased its
factoring liability by approximately $113,000 during the same
period.
Other
Subsequent to March 31, 1995, the Company has opened a new
district office in Chicago, Illinois. This office will provide
employment placement services to prospective clients in the
region. Management believes that this operation will contribute
significantly to future growth and profits.
In addition, subsequent to March 31, 1995, the Company entered
into a long-term lease commitment for approximately 41,000
square feet of office space, at a favorable market rate, in
Dallas, Texas. This office space is currently the corporate
headquarters for the Company, and includes several of the
Company's agency operations.
Subsequent to March 31, 1995, the Company has entered into
negotiations with major financial sources to provide funding to
the Company under a factoring or an asset based lending
arrangement. If such funding arrangement is finalized,
management plans to use these funds to finance the Employment
Placement Business and to replace its current factoring sources
at a significantly lower cost.
PART II OTHER INFORMATION
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
Item 1. LEGAL PROCEEDINGS
Not Applicable.
Item 2. CHANGES IN SECURITIES
Not Applicable.
Item 3. DEFAULTS ON SENIOR SECURITIES
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Item 5. OTHER INFORMATION
The Company has been delayed in filing this Form 10-Q due
primarily to the lack of reliable financial information with
respect to the business operations related to the assets
foreclosed upon by the Company in January, 1994.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable.
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.
DIVERSIFIED CORPORATE RESOURCES,
INC.
Registrant
DATE: November 13, 1995 By: /s/ J. Michael Moore
J. Michael Moore,
Chief Executive Officer
DATE: November 13, 1995 By: /s/ M. Ted Dillard
M. Ted Dillard
Chief Financial Officer