SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-11876
UNIFORCE SERVICES, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-1996648
(State or other jurisdiction (IRS Employer Identification
of incorporation or organi- Number)
zation)
1335 Jericho Turnpike, New Hyde Park, NY 11040
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 437-3300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 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 at March 1, 1996 of shares of the
Registrant's Common Stock, $.01 par value (based upon the closing price per
share of such stock on the NASDAQ National Market), held by non-affiliates of
the Registrant was approximately $14,725,262. Solely for the purposes of this
calculation, shares held by directors and officers of the Registrant have been
excluded. Such exclusion should not be deemed a determination or an admission by
the Registrant that such individuals are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: At March 1, 1996,
there were outstanding 2,981,763 shares of the Registrant's Common Stock, $.01
par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive proxy statement to be
filed not later than April 29, 1996 pursuant to Regulation 14A are incorporated
by reference in Items 10 through 13 of Part III of this Annual Report on Form
10-K.
ITEM 1. BUSINESS
The Company is a specialty niche supplemental staffing company focused
in the areas of information services ("IS"), technology, office automation and
medical office support. It provides services to businesses, educational
institutions, professional and service organizations, federal, state and local
governmental agencies and others in the United States. The Company also supplies
payroll, billing and/or financial support services to independent supplemental
staffing firms (the "Associated Offices"), provides temporary laboratory
staffing support to the scientific community and provides confidential
consulting and payrolling, permitting clients to utilize the services of former
1099 independent contractors and consultants.
Uniforce(R) assists clients in meeting peak workloads, handling
special projects, overcoming personnel shortages and solving staffing
emergencies by supplying them with a supplemental work force. Supplemental
staffing assignments range in duration from days and weeks to many months.
Planned use of supplemental staffing affords economies and flexibility to
clients by permitting the hiring of only such permanent employees as are
required for the basic day-to-day workload. As clients pay only for actual hours
worked by supplemental staff, the cost of such personnel is directly related to
production and work flow. Use of services provided by the Company on a routine
basis also eliminates or reduces clients' recordkeeping, payroll tax, insurance,
benefits, hiring, training and turnover costs.
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A subsidiary of Uniforce, trading as Uniforce Information
Services/Brannon & Tully, places specialized IS professionals on a supplemental
staffing basis. PrO Unlimited, Inc. ("PrO Unlimited(TM)") provides confidential
employee conversion and consulting services enabling client companies to utilize
the services of former 1099 independent contractors and consultants. Employee
conversion results in the employment of former 1099 independent contractors and
consultants by PrO Unlimited and the assignment of these persons to work as
supplemental staffers for clients of PrO Unlimited. LabForce of America, Inc.
("LabForce(R)") provides laboratory professionals, including chemists,
biologists, engineers and other supplemental scientific support personnel to a
broad range of industries.
Temporary Help Industry Servicing Company, Inc. ("THISCO(R)") and its
subsidiary, Brentwood Service Group(R), Inc. ("Brentwood"), provide confidential
financing and perform certain payroll, billing and back office services for
Associated Offices. These functions are performed under contract for a service
charge.
At March 1, 1996, Uniforce Licensees operated 36 licensed offices and
Uniforce operated 14 Company-owned offices, LabForce operated 12 offices, PrO
Unlimited 6 offices and Uniforce Information Services 4 offices. Some of the
LabForce and PrO Unlimited offices occupied space shared with Uniforce offices.
At that date, THISCO and Brentwood serviced 124 Associated Offices. In addition
to its Headquarters (which will be relocated to Woodbury, New York from New Hyde
Park, New York in April 1996), the
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Company maintains a Southeastern Regional office in Boca Raton, Florida and a
Midwestern Regional Office in Overland Park, Missouri. These offices are
responsible for the Company's operations in these areas and, together with the
Headquarters office, the servicing of Uniforce licensed and Company-owned
offices. The Company also maintains an Administrative and Operating Office in
Cleveland, Tennessee, which is responsible for servicing the clients of
Brentwood, and an Operating Office in Atlanta, Georgia, which is responsible for
servicing the IS clients of Uniforce Information Services/Brannon & Tully.
References herein to "Uniforce" are references to Uniforce Staffing Services,
Inc. and its Licensees. References to the "Company" are references to Uniforce
Services, Inc. and its subsidiaries.
UNIFORCE
Uniforce offices furnish a variety of skilled and semi-skilled
supplemental staffing services in the categories described below.
In 1995, general and automated office, technical and professional
services accounted for approximately 81% of the total revenues derived from the
sale of supplemental staffing services, and light industrial services accounted
for approximately 19% of such revenues.
Uniforce obtains clients through the efforts of the Company's and its
Licensees' own sales personnel, direct mail solicitation and referrals from
other clients. The Company also
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administers public relations programs and advertising campaigns using the
slogans, "Workstyles To Fit Your Lifestyle(R)," "Always There When You Need
Us(TM)," "Your Search for Excellence is Over!(R)," "Work When You Want To
Work(R)," "Get Ahead in Style(R)," "The Productivity People(R)" and
"Productivity Through People(R)." Supplemental staffers are recruited primarily
through local media advertising and through referrals from other temporary
staffers.
Although the Company does not consider its business to be seasonal,
the number of days worked by certain supplemental staffing personnel,
principally in light industrial tasks, and resultant revenues varies from
quarter to quarter, as a result of holidays and adverse weather conditions.
INFORMATION SERVICES AND TECHNICAL SERVICES
Uniforce furnishes highly skilled Information Technology professionals
as consultants, programmers, systems analysts, project managers, network
specialists and software engineers as well as in various other specialized
capacities to a variety of industries.
The Company supplies various levels of skilled workers for Computer
Aided Drafting and Design (CAD), Computer Aided Manufacturing (CAM), drafting,
design, electronic component assembly, wiring and soldering to high-tech and
manufacturing.
AUTOMATED OFFICE SERVICES
These Uniforce temporary staffers are skilled individuals who perform
word processing, data processing, data entry and personal computer operations.
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GENERAL OFFICE SERVICES
Uniforce temporary staffers perform as secretaries, typists,
receptionists, clerical assistants and records management clerks, as well as in
other general office categories.
MEDICAL OFFICE SUPPORT
Uniforce provides supplemental staffers for general medical office
support functions that include, but are not limited to, secretarial, payroll,
medical billing, medical transcribing and general clerical functions.
MARKETING
Uniforce supplemental staffers assist in product demonstration,
telemarketing and new product sampling, and provide general staff support at
trade shows and conventions.
LEGAL AND ACCOUNTING
Uniforce legal staffers serve as legal secretaries/ typists,
paralegals, law clerks, librarians and in other law- related areas. Uniforce
provides supplemental staffers for general accounting services and other
finance-related tasks, such as bookkeeping, recordkeeping and credit and
collection.
LIGHT INDUSTRIAL
Uniforce provides both skilled and semi-skilled employees to
supplement its clients' regular work forces in manufacturing plants, warehouses,
distribution centers, retail outlets, hotels and convention centers. Uniforce
staffers assist in shipping and receiving, packing, general assembly, inventory
and hospitality services.
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LICENSED OFFICES
Licensees have the exclusive right to open and maintain one or more
offices within a designated territory, using the Uniforce name and service
marks, and the "Uniforce System," consisting of marketing programs, operating
methods, forms, advertising and promotional materials. Company-owned branch
offices and licensed offices are generally not operated in the same territory.
All new Licensees receive initial training at the Company's training
center, supplemented by written and videotaped training materials used at the
Licensees' offices. Thereafter, ongoing advisory service and support is provided
to each office by the Company's Headquarters and Regional Headquarters staff.
Licensees recruit supplemental staffers and promote their services to
both existing and new clients obtained through the Licensees' marketing efforts.
Performance of the supplemental staffers and overall service quality is the
direct responsibility of Licensees. As they are ultimately responsible for the
collection of accounts receivable, Licensees must conform to strict credit and
collection practices structured by the Company.
The Company and its Licensees share the gross profits from each
Uniforce office. Licensing agreements have a perpetual term. However, Uniforce
may terminate a license for material breach by a Licensee or for other
significant good cause as prescribed in the agreements. In addition, at any time
after 18 months, a Licensee (other than one granted a license under the
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Affiliation Licensing Program) may surrender the license and withdraw from the
supplemental staffing service business in the territory or, upon payment to
Uniforce of an amount based on a predetermined formula, assume and continue the
operation of the business independently of Uniforce, the Uniforce name and the
Uniforce System. Affiliation Licensing Program Licensees generally must wait
five or 10 years from commencement of operations under the Uniforce name before
exercising this option. In either event, if a Licensee exercises this option,
the Company may then license a new office or operate a Company-owned office in
the territory.
The Company grants licenses to operate Uniforce Services offices and
presently offers several different licensing programs. Under the first, licenses
are granted to individuals who, with the assistance of the Company, open new
supplemental staffing offices. The second is the Company's Regional Licensing
Program, under which qualified Licensees agree to open and operate at least two
Uniforce offices in different areas over a predetermined period of time. The
third is the Company's Affiliation Licensing Program, which integrates
established independent supplemental staffing services into the Uniforce system
and includes an inducement payment to qualified candidates. The fourth is the
Uni-Free(TM) Start-Up Program, which is available to experienced supplemental
staffing service executives. Under this last program, Uniforce does not charge
an initial license fee and offers limited financial assistance to qualified
Licensees.
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BRANNON & TULLY/UNIFORCE INFORMATION SERVICES
These highly skilled professionals perform as programmers, systems
analysts, technical writers, database analysts, project managers, application
developers, software engineers, and LAN/WAN (Local Area Network/Wide Area
Network) specialists. In 1995, the Company began using the name Uniforce
Information Services to designate services provided by this subsidiary.
LABFORCE
LabForce provides supplemental scientific staffing support to the
scientific community. Uniforce offices are also given the opportunity to sell
this product line. LabForce provides services nationwide to companies involved
in pharmaceutical, environmental, biotech and processing businesses. LabForce
staffers include highly specialized professional chemists, biologists, lab
instrumentation operators and technicians.
PRO UNLIMITED
PrO Unlimited provides consulting and conversion services to client
companies that require assistance in complying with regulations regarding the
use of 1099 independent contractors and returning retirees. Using its SCORE
1099(TM) software system, it offers client companies consulting services
incorporating a proprietary liability and risk scoring system to assess the
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likelihood of a client's independent contractor being reclassified as an
employee by a governmental authority.
THISCO/BRENTWOOD
THISCO and Brentwood offer unlimited supplemental staff payroll
financing and/or total back office services to Associated Offices. THISCO and
Brentwood's back office services include the providing of various management
reports and analysis, payment of all federal, state and local payroll taxes and
preparation and filing of quarterly and annual payroll tax returns for the
temporary staffers placed by independently owned Associated Offices. Customized
paychecks and invoices are provided to the clients of the Associated Offices in
the name of the Associated Office. Clients of the Associated Offices remit
payment to the Company.
SUPPORT SERVICES
The Company's Headquarters is staffed by a team of personnel
professionals who provide various support services to Licensees, their staffs
and supplemental staffers, and to the various subsidiaries of the Company and
Associated Offices. The Company maintains an accounting and data processing
service center that prepares supplemental staffer payrolls and client billing,
assists in accounts receivable collection and furnishes computerized management
information and analysis to Uniforce offices, Company clients and Associated
Offices. Licensees are
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assigned a Field Service Representative to provide on-site and telephonic
assistance in developing the office to its full potential. Licensees, and in
some instances, their in-house staff members, receive training at the Company's
training center. In addition, periodic seminars are conducted for Licensees and
managers. The Company provides ongoing training, orientation and bi-monthly
topical video update programs that are distributed to all Uniforce offices for
use by in-house and supplemental staffers. The Company's Marketing Department
prepares and distributes programs and promotional literature designed to attract
and educate clients to the benefits of using Uniforce, LabForce, PrO Unlimited,
THISCO and Brentwood services and to recruit personnel for such subsidiaries.
The Company maintains various regional administrative and sales offices
throughout the country that seek new Licensees to expand the Uniforce network
and new clients for the services of Brannon & Tully, THISCO, Brentwood, PrO
Unlimited and LabForce.
EMPLOYEES
The Company currently has approximately 200 employees at its
Headquarters, its Regional Headquarters, Company-owned offices and in the
offices of its various subsidiaries. Licensees' offices generally employ two to
four in-house employees, depending upon the size of the office. Supplemental
staffers may be employed and paid by the Company or by Licensees, depending upon
arrangements with each Licensee. All employees of the Company are covered by
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workers' compensation and general liability insurance and by a fidelity bond.
The Company encourages long term relationships with its supplemental staffers
through their participation in its 401(k) plan. During 1995, the Company,
Uniforce, its Licensees, PrO Unlimited, LabForce and the Associated Offices
provided supplemental staffing services of approximately 74,000 persons.
COMPETITION
The supplemental staffing industry is highly competitive. Competition
is encountered from national, regional and local personnel services in
attracting licensees, employees and clients. Certain national temporary service
companies, such as Kelly Services, Inc., Olsten Corporation, Manpower, Inc. and
Adia Services, Inc., are substantially larger in size than the Company and
possess substantially greater operational, financial and personnel resources.
The Company believes that its initial and ongoing training program,
focused on the Licensee, its in-house staff and staffers located at
Company-owned facilities, has helped it achieve significant results in the past.
No assurance can be given that this will continue to be the case.
The Company believes that niche marketing, quality service, high
caliber professional temporary employees, proper pricing, value added services
and the range of services offered by it are the principal competitive factors
that enable it to compete
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effectively within local markets. The Company views its rate structure as
competitive with those of others in the industry.
PrO Unlimited has principally regional or local competition with no
one company directly competing against it in the national marketplace. LabForce
has as its principal competitor Lab Support, Inc. In financial and back office
support services, the Company's principal competitors are Career Horizons, Inc.,
Damian Services Corporation and TempFunds America, Inc. Brannon & Tully's
competes both with national and regional providers of IS professionals.
While the Company has experienced competitive pressures in its
business, it believes that being a national provider with centralized support
services has enabled it to distribute the costs associated with its businesses
among its Licensees, Company-owned facilities and Associated Offices.
GOVERNMENTAL REGULATION
The primary business of the Company is not subject to governmental
regulation. The sale of franchises or licenses, however, is subject to such
regulation, both by the Federal Trade Commission and a number of states. The
Company believes that it is in compliance with all material requirements of
Federal and state laws applicable to the sale of franchises or licenses in those
states in which it has engaged in marketing licenses.
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TRADEMARKS
The Company holds United States service mark registrations for the
name "Uniforce(R)" (with logo design), "Your Search for Excellence is Over!(R),"
"Work When You Want To Work(R)," "Get Ahead In Style(R)," "The Productivity
People(R)," "Productivity Through People(R)," "Employers Overload(R),"
"THISCO(R)," "Brentwood Service Group(R)," "LabForce(R)," "PrO Unlimited(R),"
"Workstyles To Fit Your Lifestyle(R)" and "Brannon & Tully(R)." The Company also
holds United States trademark registrations for "Skill Wiz(R)" (a program for
the testing of automated office skills of temporary personnel), "Fax A Temp(R)"
(a system for obtaining job requests and other client information via telecopier
equipment), "Factfile(R)" (a system for organizing detailed facts regarding
client requirements), "Unimation(R)" (a specialized program providing a full
range of office automation services), "OA Templine(R)" (a software support,
800-number hotline for supplemental staffers on assignment), "Careertemp
Club(R)" (with logo design) (a program providing a wide range of benefits to
career temporary employees), "Uni-Free(R)," (a licensing program described
above), and "Get Up and Go(R)" (a program that allows supplemental staffers the
mobility to transfer from a Uniforce office in one city to one in another city).
The Company has applied for trademark registration of "Uniskill," "Brentware,"
"Thiskill" (specialized software) and "SCORE 1099." The Company has also
obtained certain New York State service marks, service mark registrations for
"Uniforce" (with logo design), THISCO and Payroll Options Unlimited in Canada,
Tempfunds U.K. in the United
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Kingdom, and has applied for a service mark registration for "Uniforce" in
Brazil.
RECENT DEVELOPMENTS
On December 11, 1995, the Company commenced an offer (the "Offer") to
purchase up to 1,250,000 shares of its Common Stock (the "Shares") at $11.25 per
share, net to the seller in cash. An aggregate of 1,401,080 Shares was tendered
pursuant to the Offer, which provided for proration in the event of
oversubscription. On Wednesday, January 10, 1996, the Company purchased
1,250,000 Shares for aggregate consideration of $14,062,500, which, after giving
effect to certain costs and expenses of the Offer, resulted in a reduction of
stockholders' equity of approximately $14,160,000 subsequent to year-end. At
March 1, 1996, there were 2,981,763 shares of Common Stock outstanding.
ITEM 2. PROPERTIES.
The following table sets forth at March 1, 1996 the principal use and
location, approximate floor space, annual rental and lease expiration date of
the Company's principal facilities. Licensee facilities are not included.
Lease
Principal Use and Approximate Annual Expiration
Location Square Feet Rental Date
- ------------------ --------------- --------------- -----------
Executive Office 15,370 $194,235(1) 4/30/95
New Hyde Park, NY
Executive Office 23,360 443,840(2) 5/31/06
Woodbury, NY
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Regional Service and 2,897 36,355(1)(3) 11/09/99
Operating Office
Boca Raton, FL
Administrative and 6,425 42,020 12/31/97
Operating Office
Cleveland, TN
Operating Office 5,500 82,560 4/18/99
Atlanta, GA
(1) Additional rent is payable in the event of increases in taxes and/or
operating costs.
(2) The lease provides for annual rental increases of approximately
$20,000.
(3) Commencing February 1, 1996, the Company subleased a substantial
portion of these premises and reduced its annual rental by
approximately $60,000.
ITEM 3. LEGAL PROCEEDINGS.
NCCI ET AL. V. UNIFORCE TEMPORARY PERSONNEL, INC., ET AL.
On April 26, 1994, National Council on Compensation Insurance, Inc.,
National Workers Compensation Insurance, Inc., National Workers Compensation
Reinsurance Pool, Insurance Company of North America, The Travelers Insurance
Company and Liberty Mutual Insurance Company (collectively, the "NCCI
Plaintiffs") filed an action in the Circuit Court, Palm Beach County, Florida
(the "Circuit Court") against the Company, certain of its subsidiaries, John
Fanning, Rosemary Maniscalco and Harry Maccarrone, executive officers of the
Company, and other unrelated parties. In June 1994 the NCCI Plaintiffs filed an
amended complaint in the action and in October 1995 a second amended complaint.
In the second amended complaint, the NCCI Plaintiffs added several defendants
including Gordon Robinett, a director of
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the Company and the Company's former Vice-President of Finance, and the
Company's independent public auditors. The NCCI Plaintiffs allege causes of
action for breach of contracts of insurance, negligence, fraud, conspiracy to
defraud, and fraudulent inducement. The NCCI Plaintiffs allege that by virtue of
the manner in which the Company conducted its business, the Company secured
workers' compensation coverage for its temporary employees at premiums below
those that should have been paid. The NCCI Plaintiffs seek an audit, accounting
and damages in an unspecified amount not less than $11,500,000.
At a regularly scheduled case management conference held on February
23, 1996, the Circuit Court ordered that if the NCCI Plaintiffs elect to file a
third amended complaint, they must do so on or before May 17, 1996. Thereafter,
the Circuit Court will consider motions to dismiss the complaint.
Discovery is now ongoing. The Company denies the claims of the NCCI
Plaintiffs and believes that it has substantial defenses, counterclaims and
setoffs thereto.
In June 1994, the Company and Uniforce Services, Inc. (the "Uniforce
Plaintiffs") filed an action in the United States District Court for the
Southern District of Florida, West Palm Beach Division, against the National
Council on Compensation Insurance, the National Workers' Compensation
Reinsurance Pool and others (the "NCCI Defendants"). The action alleged
monopolization, attempts to monopolize, restraint of trade, conspiracy on the
part of the NCCI Defendants, as well as violation of the constitutional
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rights of the Uniforce Plaintiffs. The complaint sought treble damages in an
unspecified amount. The NCCI Defendants filed an answer in the action denying
its allegations and setting forth affirmative defenses, and filed a motion for
summary judgment addressing the antitrust issues pleaded by the Uniforce
Plaintiffs, which motion was subsequently granted by the court. The Company has
appealed the judgment which, upon advice of counsel, it believed to be erroneous
as a matter of law. Oral argument of the appeal was heard by the Eleventh
Circuit Court of Appeals on March 11, 1996 and the matter is currently sub
judice.
In June 1994, various subsidiaries of the Company filed an action in
the New York Supreme Court, Nassau County, against Liberty Mutual Ins. Co.,
Insurance Company of North American a/k/a CIGNA and The Travelers Corp.
insurance companies. The action alleges mismanagement by the carriers of the
plaintiffs' workers' compensation programs and seeks unspecified damages
aggregating approximately $10,000,000. The defendants have filed an answer in
the action denying its allegations and setting forth affirmative defenses. The
parties are currently conducting discovery.
Management believes that the ultimate outcome of these actions will
not have a material adverse effect upon the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of executive
officers of the Company and the offices held by each.
NAME AGE TITLE
John Fanning 64 Chairman of the Board and
President
Rosemary Maniscalco 55 Executive Vice President
Harry V. Maccarrone 48 Vice President - Finance and
Treasurer
Diane J. Geller 42 Secretary
Each executive officer holds office at the pleasure of the Board of
Directors and until his or her successor has been elected and qualifies.
John Fanning, founder of the Company, has served as President and a
director since 1961, the year in which the Company's first office was opened.
Mr. Fanning entered the employment field in 1954, when he founded the Fanning
Personnel Agency, Inc., his interest in which he sold in 1967 to devote his
efforts solely to the Company's operations. He also founded and served as the
first president of the Association of Personnel Agencies of New York.
Rosemary Maniscalco joined the Company as Sales and Marketing
Coordinator in December 1981. In June 1982, her duties were expanded to include
direction of the Company's license marketing efforts, as well as the development
of marketing concepts. In 1983, she was appointed the Company's Director of
Corporate Development, in May 1984, she was elected Executive Vice
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President and in June 1992, she was designated Chief Operating Officer.
Harry V. Maccarrone joined the Company in December 1988 as Assistant
Vice President - Finance. He has served as Vice President - Finance, Treasurer
and the Company's Chief Financial Officer since May 1989. He also served as
Secretary from April 1989 through March 1990.
Diane J. Geller joined the Company in July 1989 as Counsel and was
elected Secretary in March 1990. She served as Vice President and General
Counsel of American Medical and Life Insurance Co., an insurer, from April 1986
through July 1989.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock, $.01 par value, is traded on the NASDAQ
National Market (ticker symbol: UNFR). The following table sets forth, for the
two most recent fiscal years, the high and low closing bid prices for the Common
Stock, as reported by NASDAQ.
BID PRICES
----------
YEAR END DECEMBER 31, 1994 HIGH LOW
- -------------------------- ---- ---
First Quarter 9-1/2 6-1/8
Second Quarter 13-1/2 8
Third Quarter 14 10-1/4
Fourth Quarter 13 10
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BID PRICES
----------
YEAR END DECEMBER 31, 1995 HIGH LOW
- -------------------------- ---- ---
First Quarter 10-1/8 9
Second Quarter 11-1/4 8
Third Quarter 9-5/8 8-3/4
Fourth Quarter 11 8-3/4
DIVIDENDS
During 1994, cash dividends of $.12 per share were paid on the Common
Stock. During 1995, the Company paid quarterly cash dividends on shares of its
Common Stock at the quarterly rate of $.03 per share for the first three
quarters. Subsequent to December 31, 1995, the Board of Directors declared a
quarterly cash dividend of $.03 per share for the quarter ended December 31,
1995, which was paid on February 13, 1996 to holders of record on February 5,
1996. The Company expects to continue to pay comparable cash dividends for the
foreseeable future.
NUMBER OF SHAREHOLDERS
As of March 1, 1996, there were 210 holders of record of the Company's
Common Stock. The Company believes that there are in excess of 2,100 beneficial
owners of the Company's Common Stock additional to such holders of record.
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ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands, except per share amounts)
Consolidated
Summary Earnings Data
System-wide sales (1) $307,069 $249,759 $170,491 $153,295 $136,024
Total revenues 134,471 115,181 86,142 82,925 91,641
Earnings from operations 6,444 4,846 2,331 1,658 1,445
Net earnings 3,563 2,951 1,493 1,144 1,225
Net earnings per share $ 0.83 $ 0.65 $ 0.35 $ 0.26 $ 0.28
Weighted average number of
shares outstanding 4,311 4,553 4,307 4,348 4,404
At December 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands)
Consolidated
Balance Sheet Data(2)
Working capital $ 29,181 $ 19,281 $ 17,508 $ 16,661 $ 15,104
Total assets 50,596 41,496 30,235 28,040 26,809
Long-term debt 11,676 2,800 -- -- --
Total liabilities 26,436 18,384 9,527 8,189 7,211
Stockholders' equity $ 24,160(3) $ 23,112 $ 20,708 $ 19,852 $ 19,598
- ----------------------
(1) System-wide sales are the Company sales of Uniforce Services, Inc. and
its subsidiaries, as well as sales of Associated Offices serviced
through Brentwood Group and THISCO(R).
(2) Certain reclassifications have been made to the previous years'
consolidated balance sheet data to conform to the current years'
presentation.
(3) As a result of the subsequent event described in Note 10 of Notes to
Consolidated Financial Statements, stockholders' equity was reduced by
approximately $14,160,000 subsequent to year-end.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
GENERAL
The following table sets forth, for the years indicated, the
percentages that certain income and expense items bear to the total revenues of
the Company:
Year Ended December 31,
-----------------------------------------------
1995 1994 1993
---- ---- ----
Sales of supplemental staffing services 93.9 94.2 95.0
Service revenues and fees 6.1 5.8 5.0
----- ----- -----
Total revenues 100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Cost of supplemental staffing services 73.0 72.7 73.7
Licensees' share of gross margin 7.0 8.6 10.2
General and administrative 14.5 13.7 12.4
Depreciation and amortization .7 .8 1.0
----- ----- -----
Total costs and expenses 95.2 95.8 97.3
----- ----- -----
Earnings from operations 4.8 4.2 2.7
Other income (expense):
Interest - net (.5) (.1) .1
Other income (expense) - - -
----- ----- -----
Earnings before provision for income 4.3 4.1 2.8
taxes
Provision for income taxes 1.6 1.5 1.1
----- ----- -----
NET EARNINGS 2.7 2.6 1.7
===== ===== =====
-22-
1995 COMPARED TO 1994
Total revenues increased by 16.7% from $115,180,734 in 1994 to
$134,471,332, in 1995. Sales of supplemental staffing services increased by
16.4% or $17,781,850 in 1995 as compared to 1994. These increases resulted
principally from the Company's acquisition in April 1994 of certain assets of
Brannon & Tully, Inc., a provider of IS contract professionals. This company now
operates under the trade name of Brannon & Tully/Uniforce Information Services.
This acquisition contributed $25,528,957 of sales in 1995 as compared to
$12,445,869 for the period from April 18, 1994 to December 31, 1994. This
acquisition has had a favorable impact on the Company's results of operations
and its ability to develop higher margin professional services. Sales by the
Company's subsidiaries, PrO Unlimited, and to a lesser degree LabForce,
continued to increase as the Company emphasized the marketing of these services.
The sales of PrO Unlimited increased by $9,915,331 in 1995 as compared to 1994.
The Company's strategy is to expand through the development of higher
margin professional services such as IS, technical, automated office and other
professional support services as well as through its PrO Unlimited and LabForce
subsidiaries, while continuing to reduce the percentage of its sales derived
from light industrial assignments. In addition, the Company intends to continue
to pursue acquisitions of established independent supplemental staffing service
companies that offer specialty services.
Service revenues and fees increased by 22.5% from $6,694,742 in 1994
to $8,203,490 in 1995. Service revenues and fees generated
-23-
by THISCO and Brentwood increased by $1,015,084 in 1995 compared to 1994. Also
contributing to this increase were certain licensee service revenues and fees
which increased by $493,664 in 1995 as compared to 1994.
In addition, system-wide sales, which include sales of Associated
Offices serviced by THISCO and Brentwood, increased by 22.9%, from $249,758,846
in 1994 to $307,068,836 in 1995. The Company intends to continue to expand this
portion of its business through THISCO and Brentwood.
Cost of supplemental staffing services was 77.7% of sales of
supplemental staffing services during 1995 as compared to 77.2% in 1994. The
higher percentage in 1995 was the result of increased sales by PrO Unlimited,
which have a high percentage of payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a
percentage of the gross margin generated from sales by licensed offices. The
gross margin from sales of supplemental staffing services amounted to
$28,105,271 and $24,719,266 for 1995 and 1994, respectively. Licensees' share of
gross margin was 33.7% for 1995 as compared to 40.0% in 1994. The lower share as
a percentage of gross margin in 1995 is due, in part, to the sales of Brannon &
Tully/Uniforce Information Services for which there are no related Licensee
distributions, and to PrO Unlimited for which there are limited distributions.
General and administrative expenses increased by 23.6% or $3,719,790
in 1995 as compared to 1994. As a percentage of revenues, general and
administrative expenses were 14.5% and 13.7% for 1995 and 1994, respectively.
These increases resulted
-24-
principally from compensation and overhead expenses relating to the Brannon &
Tully/Uniforce Information Services operations. Further contributing to the
increase were higher expenses relating to payroll costs with respect to
permanent staff offset by savings in staff recruiting costs and increased legal
fees relating to the litigation described in Item 3. Legal Proceedings. In
addition, the provision for possible losses on receivables, notes receivable and
other assets increased in 1995 as compared to 1994.
Net interest expense increased by $600,602 during 1995. The increase
in 1995 as compared to 1994 is a direct result of increased borrowings used for
the acquisition of Brannon & Tully, Inc. and to meet working capital
requirements due to the increased system-wide sales.
There was no material difference in the effective income tax rate in
1995 as compared to 1994.
As a result of the factors discussed above, net earnings increased by
20.8% from $2,950,751 in 1994 to $3,563,393 in 1995.
1994 COMPARED TO 1993
Total revenues increased by 33.7% from $86,142,004 in 1993 to
$115,180,734 in 1994. Sales of supplemental staffing services increased by 32.6%
or $26,667,792 in 1994 as compared to 1993. These increases, in part, resulted
from an improvement in general economic conditions favorably affecting the
supplemental staffing industry and the Company. As a result, same office sales
increased during the current periods compared to last year. In addition, sales
by the Company's subsidiaries, PrO Unlimited and LabForce continued to increase
as the Company emphasized the marketing of
-25-
these services. Further contributing to the increase in sales was the Company's
acquisition in April 1994 of certain assets of Brannon & Tully, Inc., a provider
of Information Services contract professionals. This acquisition contributed
$12,445,869 of sales since April 18, 1994 and has had a favorable impact on the
Company's results of operations and its ability to develop higher margin
professional services.
The Company's strategy is to expand through the development of higher
margin professional services such as IS, technical, automated office and other
professional support services as well as through its PrO Unlimited and LabForce
subsidiaries, while continuing to reduce the percentage of its sales derived
from light industrial assignments. In addition, the Company intends to continue
to pursue acquisitions of established independent supplemental staffing service
companies.
Service revenues and fees increased by 54.8% or $2,370,938 as compared
to 1993. This reflects increased service revenues and fees generated by existing
and new clients of THISCO and Brentwood, two of the Company's subsidiaries. In
addition, system-wide sales, which include sales of associated offices serviced
by THISCO and Brentwood increased by 46.5%, from $170,491,415 in 1993 to
$249,758,846 in 1994. The Company intends to continue to expand this portion of
its business through THISCO and Brentwood.
Cost of supplemental staffing services was 77.2% of sales of
supplemental staffing services during 1994 as compared to 77.6% during 1993. The
lower percentage in 1994 was the result of the acquisition of Brannon & Tully in
April 1994, which has a
-26-
relatively high gross margin, offset by PrO Unlimited which has a high
percentage of payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a
percentage of the gross margin generated from sales by licensed offices. The
gross margin from sales of supplemental staffing services amounted to
$24,719,266 and $18,328,712 for 1994 and 1993, respectively. Licensees' share of
gross margin was 40.0% for 1994 as compared to 48.0% in 1993. The lower share as
a percentage of gross margin in 1994 is due, in part, to a higher level of sales
relating to Company-owned offices for which there are no related Licensee
distributions, and to PrO Unlimited for which there are limited distributions.
General and administrative expenses increased by 47.6% or $5,074,519
in 1994 as compared to 1993. As a percentage of revenues, general and
administrative expenses were 13.7% and 12.4% for 1994 and 1993, respectively.
These increases resulted principally from expenses relating to the acquisition
of Brannon & Tully and growth experienced at PrO Unlimited and LabForce. Further
contributing to the increase were higher expenses relating to payroll and
recruiting costs with respect to permanent staff.
Net interest income (expense) decreased by $277,872 during 1994. This
decrease was a result of interest income on notes receivable from Licensees
being more than offset by higher interest expense on the Company's working
capital credit facility and loan agreement. A portion of these loan facilities
were utilized in April 1994 for the acquisition of certain assets of Brannon &
Tully.
-27-
There was no material difference in the effective income tax rate in
1994 as compared to 1993.
As a result of the factors discussed above, net earnings increased by
97.6% from $1,493,121 in 1993 to $2,950,751 in 1994.
FINANCIAL CONDITION
As of December 31, 1995, the Company's working capital increased to
$29,180,891, as compared to $19,281,230 at December 31, 1994. This increase was
due primarily to the continued profitable operations of the Company and the
incurrence of long-term borrowings under the new Credit Facility described
below, which were used to repay short-term borrowings under the Company's prior
credit facilities. These factors were offset by the Company's repurchase of
shares of its Common Stock, the acquisition of fixed assets and the payment of
the cash dividends. Funding and service fees receivables increased by $6,451,758
to $20,918,753 during 1995. This increase is due principally to the increased
service revenues and fees generated by THISCO and Brentwood.
During 1995, the Company paid quarterly cash dividends on shares of
its Common Stock at the quarterly rate of $.03 per share for the first three
quarters. Subsequent to December 31, 1995, the Board of Directors declared a
quarterly cash dividend of $.03 per share for the quarter ended December 31,
1995, which was paid on February 13, 1996 to holders of record on February 5,
1996.
On December 8, 1995, the Company entered in an agreement with a
financial institution creating a three-year $35,000,000 credit facility (the
"Credit Facility"). The Credit Facility comprises a term loan in the amount of
$3,000,000 (the "Term Loan") to be paid
-28-
in monthly installments of $62,500 in 1996, $83,333 in 1997 and $104,167 in
1998, with the balance outstanding due on December 1, 1998, and a $32,000,000
revolving credit facility (the "Revolving Facility"), which expires on December
1, 1998. The Company may borrow against the Revolving Facility up to 85% of
eligible accounts receivable and eligible service and funding fees receivable.
The Term Loan bears interest at the Company's election at either the lender's
floating base rate plus .25%, or LIBOR (London Interbank Offered Rate) plus
2.25%. Borrowings under the Revolving Facility bear interest at the Company's
election at either the lender's floating base rate, or LIBOR plus 2.125%.
Borrowings under the Credit Facility are secured by a first priority security
interest in all owned and after-acquired real and personal property of the
Company.
At December 31, 1995, the Company had outstanding borrowings of
$3,000,000 under the Term Loan bearing interest at an average rate of 8.0% and
$9,000,000 of borrowings under the Revolving Facility bearing interest at an
average rate of 8.1%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility, including those
relating to reporting requirements, maintenance of records, properties and
corporate existence, compliance with laws, incurrence of other indebtedness and
liens, restrictions on certain payments and transactions and extraordinary
corporate events. The Credit Facility also contains financial covenants relating
to maintenance of levels of minimal tangible net worth, EBITDA (earnings before
interest, taxes, depreciation and amortization), net income and fixed charge
coverage and restricting
-29-
the amount of capital expenditures. In addition, the Credit Facility contains
certain events of default of types customary in an asset-based lending facility.
Generally, if the Credit Facility is terminated (i) during the first nine months
of its term, a fee of 1% of the amount thereof is payable, or (ii) during the
succeeding nine months of its term, a fee of .5% of the amount thereof is
payable. The Company was in compliance with all covenants at December 31, 1995.
Prior to December 8, 1995, the Company had maintained with two banks,
a working capital credit facility and a revolving credit and term loan facility.
Amounts outstanding under these facilities were repaid with borrowings available
under the Credit Facility.
In January 1996, the Company successfully completed its offer to
purchase 1,250,000 shares of its common stock at $11.25 net per share. The total
amount required to purchase such shares was $14,062,500, exclusive of related
fees and other expenses. The purchase price and related expenses were funded
with borrowings available under the Credit Facility. As a result of the
transaction, the Company's stockholders equity was reduced by approximately
$14,160,000 subsequent to year-end.
The Company is moving its corporate headquarters in April 1996. The
cost of the move, including purchases of fixed assets, will be approximately
$800,000 and will be financed from cash flow from operations and financing from
the Credit Facility. The Company believes that internally generated cash flow
and funding from the Credit Facility will be adequate to meet current operating
requirements. The Company intends to expand its business through the further
development of higher margin professional services as
-30-
well as through PrO Unlimited and Brannon & Tully/Uniforce Information Services.
Additionally, the Company continues to pursue expansion by acquisition of
established independent supplemental staffing service companies that offer
specialty services. The Company anticipates that internal expansion will also be
financed from its cash flow and available borrowings under the Credit Facility.
The magnitude of future acquisitions will determine whether they can be financed
in the same manner or whether additional external sources of financing will be
required. While the Company believes that such sources would be available on
terms satisfactory to it, there can be no assurance in this regard.
In October 1995, the Financial Accounting Standards Board (FASB)
issued Statement No. 123, "Accounting for Stock-Based Compensation," which must
be adopted by the Company in 1996. The Company has elected not to implement the
fair value based accounting method for employee stock options, but has elected
to disclose commencing in 1996 the pro forma net income and earnings per share
as if such method had been used to account for stock- based compensation cost as
described in Statement No. 123.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
-31-
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See Part I, Item 4. "Executive Officers of the Company." Other
information required by this item is incorporated by reference from the
Company's definitive proxy statement to be filed not later than April 29, 1996
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934 ("Regulation 14A").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than April
29, 1996 pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than April
29, 1996 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than April
29, 1996 pursuant to Regulation 14A.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements: see the Index to Consolidated
Financial Statements.
-32-
(2) Financial Statement Schedules: see the Index to Consolidated Financial
Statements.
(3) Exhibits:
3(a) Certificate of Incorporation of the Company, filed on January 11, 1984,
incorporated by reference to Exhibit 3.1 to Registration Statement on
Form S-18 (SEC File No. 2-89218-NY) of the Company (the "Form S-18").
3(b) Certificate of Merger of Uniforce Temporary Personnel, Inc. and the
Company, filed on January 23, 1984, incorporated by reference to
Exhibit 3.2 to the Form S-18.
3(c) Amendment to Certificate of Incorporation of the Company, filed on
February 15, 1984, incorporated by reference to Exhibit 3.3 to the Form
S-18.
3(d) Amendment to Certificate of Incorporation of the Company, filed on May
20, 1987, incorporated by reference to Exhibit 3(d) to Registration
Statement on Form S-2 (SEC File No. 33-17934) of the Company (the "Form
S-2").
3(e) Amendment to Certificate of Incorporation of the Company, filed on May
17, 1988, incorporated by reference to Exhibit 3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1988.
*3(f) Amendment to Certificate of Incorporation of the Company, filed on
August 21, 1995. The Certificate of Incorporation and all amendments
thereto are restated in their entirety and filed herewith pursuant to
Rule 102(c) of Regulation S-T.
-33-
3(g) By-Laws of the Company as amended through March 10, 1987, incorporated
by reference to Exhibit 3 to the Company's Current Report on Form 8-K
dated March 18, 1987.
10(a) Incentive Stock Option Plan of the Company, as amended through March 9,
1993, incorporated by reference to Exhibit 10(a) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992 (the
"1992 10-K").
10(b) 1985 Stock Option Plan of the Company, as amended through December 7,
1993, incorporated by reference to Exhibit 10(b) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993 (the
"1993 10-K").
10(c) Licensee Stock Option Plan of the Company, incorporated by reference to
Exhibit 10(d) to the Form S-2.
10(d) Amendment dated December 7, 1993 to 1991 Stock Option Plan (the "Plan")
of the Company, incorporated by reference to Exhibit 10(d) to the 1993
10-K. The Plan, as amended through March 9, 1993, is incorporated by
reference to Exhibit 10(d) of the 1992 10-K.
10(e) Directors Stock Option Plan, incorporated by reference to Exhibit 10(x)
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (the "1994 10-K").
10(f) Employment Agreement dated as of January 26, 1984, as amended May 10,
1984, January 5, 1989 and January 10, 1992, between the Company and
John Fanning (the "Fanning Agreement"), incorporated by reference to
Exhibit 10.3 to the Form S-18, Exhibit 28.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1984
-34-
(the "March 1984 10-Q"), Exhibit 10(f) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988 (the "1988 10-K") and
Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 (the "1991 10-K").
10(g) Amendment dated March 15, 1994 to the Fanning Agreement, incorporated
by reference to Exhibit 10(t) to the 1993 10-K.
10(h) Amendment dated April 26, 1994 to the Fanning Agreement, incorporated
by reference to Exhibit 10(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994.
10(i) Amended and Restated Employment Agreement dated as of May 1, 1993
between the Company and Rosemary Maniscalco (the "Maniscalco
Agreement"), incorporated by reference to Exhibit (a) to the Company's
Quarterly Report on Form 10- Q for the quarter ended June 30, 1993.
10(j) Amendment dated September 30, 1994 to the Maniscalco Agreement,
incorporated by reference to Exhibit 10(a) to the September 1994 10-Q.
10(k) Amendment dated December 8, 1995 to the Maniscalco Agreement.
10(l) Agreement of Lease dated October 8, 1976 between Gordon Evergreen Corp.
and Uniforce Services, Inc. as amended by Agreement dated December 2,
1976, Agreement dated as of May 23, 1978, Agreement dated February 22,
1979, Agreement dated March 24, 1980 and Agreement dated April
-35-
21, 1983 (the "Lease Agreement"), incorporated by reference to Exhibit
10.6 to the Form S-18.
10(m) Amendment, Modification and Extension dated as of April 25, 1985 to the
Lease Agreement, incorporated by reference to Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1985.
10(n) Amendment to Lease Agreement dated January 31, 1991, incorporated by
reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990.
10(o) Amendment to Lease Agreement dated as of February 1, 1992, incorporated
by reference to Exhibit 10(l) to the 1991 10-K.
10(p) Amendment to Lease Agreement dated as of March 31, 1994, incorporated
by reference to Exhibit 10(k) to the 1994 10-K.
10(q) Loan and Security Agreement, dated as of December 8, 1995, by and among
the Registrant as Guarantor, the Subsidiaries of the Registrant Named
Therein, as Borrowers and Cross-Guarantors, the Lenders Named Therein,
as Lenders, and Heller, as Agent and as a Lender, incorporated by
reference to Exhibit (b) to the Registrant's Schedule 13E-4, dated
December 11, 1995.
10(r) Employment Agreement dated as of April 18, 1994 by and between the
Company and Vinson A. Brannon, incorporated by reference to Exhibit
10(a) to the Company's Current Report on Form 8-K dated April 18, 1994.
-36-
*10(s) Agreement of Lease, dated January 15, 1996, by and between Industrial
Research & Associates Co. and Uniforce Staffing Services, Inc.
*21 Subsidiaries of the Company.
*23 Consent to the incorporation by reference in the Company's Registration
Statements on Forms S-3 and S-8 of the independent auditors' report
included herein.
*27 Financial Data Schedule.
- ---------------------------------
* Filed herewith.
(b) Reports on Form 8-K: The Registrant filed a Current Report on
Form 8-K dated December 21, 1995 reporting under Item 5
thereof the commencement of a partial self- tender for its
Common Stock and its entry into a new credit facility.
-37-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of North Hempstead, State of New York, on the 28th day of March, 1996.
UNIFORCE SERVICES, INC.
By: /s/ John Fanning
---------------------------------------
John Fanning,
Chairman of the Board,
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John Fanning, Rosemary Maniscalco and
Harry V. Maccarrone his true and lawful attorney-in-fact, each acting alone,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities to sign any and all amendments to
this report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact or their
substitutes, each acting alone, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been duly signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board,
President and Chief
/s/ John Fanning Executive Officer March 28, 1996
- ----------------------------
(John Fanning)
Executive Vice President,
Chief Operating Officer and
/s/ Rosemary Maniscalco Director March 28, 1996
- ----------------------------
(Rosemary Maniscalco)
Vice President-Finance,
Treasurer, Principal
Financial and Chief
Accounting Officer and
/s/ Harry V. Maccarrone Director March 28, 1996
- ----------------------------
(Harry V. Maccarrone)
/s/ John H. Brinckerhoff III Director March 28, 1996
- ----------------------------
(John H. Brinckerhoff III)
/s/ Gordon Robinett Director March 28, 1996
- ----------------------------
(Gordon Robinett)
/s/ Daniel Raynor Director March 28, 1996
- ----------------------------
(Daniel Raynor)
/s/ Joseph A. Driscoll Director March 28, 1996
- ----------------------------
(Joseph A. Driscoll)
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Uniforce Services, Inc.:
We have audited the accompanying consolidated balance sheets of Uniforce
Services, Inc. and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniforce Services,
Inc. and subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in
1993.
KPMG PEAT MARWICK LLP
Jericho, New York
March 8, 1996
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
------ ---- ----
Current assets:
Cash and cash equivalents $ 6,444,859 7,298,823
Accounts receivable (net of allowance for doubtful accounts of
$167,000 and $105,000 in 1995 and 1994, respectively) 14,827,862 11,818,740
Funding and service fees receivable (net of allowance for doubtful
accounts of $402,000 and $179,000 in 1995 and 1994,
respectively) 20,918,753 14,466,995
Current maturities of notes receivable from licensees (net of
allowance for possible loss of $67,000 and $109,000 in 1995
and 1994, respectively) 132,258 399,714
Prepaid expenses and other current assets 1,270,268 501,088
Deferred income taxes 347,149 379,771
----------- -----------
Total current assets 43,941,149 34,865,131
----------- -----------
Notes receivable from licensees (net of current maturities
and allowance for possible loss of $92,000 and $76,000 in 1995 and
1994, respectively) 182,642 277,767
Fixed assets - net 2,125,413 1,294,550
Deferred costs and other assets (net of accumulated amortization of
$1,685,970 and $2,059,914 in 1995 and 1994, respectively) 821,244 1,336,284
Cost in excess of fair value of net assets acquired (net of
accumulated amortization of $335,954 and $139,120 in 1995 and
1994, respectively) 3,525,741 3,722,576
----------- -----------
$50,596,189 41,496,308
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Loan payable $ 750,000 3,500,000
Payroll and related taxes payable 7,540,947 7,007,921
Payable to licensees and clients 2,025,563 1,910,111
Income taxes payable 351,690 --
Accrued expenses and other liabilities 4,092,058 3,165,869
----------- -----------
Total current liabilities 14,760,258 15,583,901
----------- -----------
Loan payable - non-current 11,250,000 2,800,000
Capital lease obligation - non-current 426,109 --
Stockholders' equity:
Common stock $.01 par value, authorized 10,000,000 shares;
issued 4,991,213 and 4,946,813 shares in 1995 and 1994,
respectively 49,912 49,468
Additional paid-in capital 7,789,598 7,411,572
Retained earnings 23,990,043 20,952,594
----------- -----------
31,829,553 28,413,634
Treasury stock, at cost, 829,500 and 578,750 shares in
1995 and 1994, respectively (7,669,731) (5,301,227)
----------- -----------
Total stockholders' equity 24,159,822 23,112,407
----------- -----------
$50,596,189 41,496,308
=========== ===========
See accompanying notes to consolidated financial statements.
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Sales of supplemental staffing services $ 126,267,842 108,485,992 81,818,200
Service revenues and fees 8,203,490 6,694,742 4,323,804
------------- ------------ -----------
Total revenues 134,471,332 115,180,734 86,142,004
Cost of supplemental staffing services 98,162,571 83,766,726 63,489,488
Licensees' share of gross margin 9,473,431 9,895,870 8,792,547
General and administrative 19,450,728 15,730,938 10,656,419
Depreciation and amortization 940,668 941,196 872,621
------------- ------------ -----------
Total costs and expenses 128,027,398 110,334,730 83,811,075
------------- ------------ -----------
Earnings from operations 6,443,934 4,846,004 2,330,929
Other income (expense):
Interest and dividends - net of interest expense
of $889,484, $259,348 and $33,611 in 1995,
1994 and 1993, respectively (727,980) (127,378) 150,494
Other income (expense) 29,439 7,125 (70,302)
------------- ------------ -----------
Earnings before provision for income taxes 5,745,393 4,725,751 2,411,121
Provision for income taxes 2,182,000 1,775,000 918,000
------------- ------------ -----------
Net earnings $ 3,563,393 2,950,751 1,493,121
============= ============ ===========
Weighted average number of shares outstanding 4,311,358 4,553,303 4,307,078
============= ============ ===========
Net earnings per share $ .83 .65 .35
============= ============ ===========
See accompanying notes to consolidated financial statements.
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
Common stock Additional Total
------------ paid-in Retained Treasury stockholders'
Shares Par Value capital earnings stock equity
------ --------- ------- -------- ----- ------
Balance at December 31, 1992 4,717,493 $ 47,175 $ 5,799,935 $ 17,558,414 $ (3,553,829) $ 19,851,695
Common stock issued 3,950 39 24,210 -- -- 24,249
Cash dividend declared ($.12 per share) -- -- -- (516,640) -- (516,640)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Treasury stock acquired -- -- -- -- (162,312) (162,312)
Net earnings -- -- -- 1,493,121 -- 1,493,121
--------- ------------ ------------ ------------ ------------ -------------
Balance at December 31, 1993 4,721,443 47,214 5,842,145 18,534,895 (3,716,141) 20,708,113
Common stock issued 225,370 2,254 1,399,303 -- -- 1,401,557
Cash dividend declared ($.12 per share) -- -- -- (533,052) -- (533,052)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying
dispositions -- -- 152,124 -- -- 152,124
Treasury stock acquired -- -- -- -- (1,585,086) (1,585,086)
Net earnings -- -- -- 2,950,751 -- 2,950,751
--------- ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994 4,946,813 49,468 7,411,572 20,952,594 (5,301,227) 23,112,407
Common stock issued 44,400 444 259,806 -- -- 260,250
Cash dividend declared ($.12 per share) -- -- -- (525,944) -- (525,944)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying
dispositions -- -- 100,220 -- -- 100,220
Treasury stock acquired -- -- -- -- (2,368,504) (2,368,504)
Net earnings -- -- -- 3,563,393 -- 3,563,393
--------- ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 4,991,213 $ 49,912 $ 7,789,598 $ 23,990,043 $ (7,669,731) $ 24,159,822
--------- ------------ ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements.
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net earnings $ 3,563,393 2,950,751 1,493,121
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 940,668 941,196 872,859
Deferred income taxes 32,622 175,000 (30,000)
Provision for possible losses on receivables 583,998 140,651 203,848
Provision for possible losses on notes
receivable and other assets 247,165 (258,599) 153,337
Stock option compensation expense 18,000 18,000 18,000
(Increase) in accounts receivable (3,137,221) (1,203,381) (1,630,068)
(Increase) in funding and service fees receivable (6,907,658) (5,164,472) (795,291)
(Increase) decrease in prepaids and other assets (769,180) (44,131) 294,574
Increase in payroll and related taxes payable 533,026 799,426 1,606,045
Increase in payable to licensees and clients 115,452 414,379 151,865
Increase (decrease) in income taxes payable 451,910 (217,336) (104,846)
Increase in accrued expenses and other 843,043 1,713,010 374,775
liabilities ----------- ---------- ----------
Net cash provided (used) by operating activities (3,484,782) 264,494 2,608,219
----------- ---------- ----------
Cash flows from investing activities:
Acquisition of certain assets of Brannon & Tully -- (3,204,772) --
Purchase of receivables in connection with the
acquisition of Brannon & Tully -- (1,301,595) --
Notes receivable from licensees (163,741) (391,557) (339,251)
Repayments on notes receivable from licensees 548,748 638,749 820,089
Repayment on note receivable from officer -- -- 50,000
(Increase) in deferred costs and other assets (134,358) (121,950) (903,915)
Purchases of fixed assets (669,970) (591,796) (439,765)
----------- ---------- ----------
Net cash (used) by investing activities $ (419,330) (4,972,921) (812,842)
----------- ---------- ----------
(Continued)
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
1995 1994 1993
---- ---- ----
Cash flows from financing activities:
Principal payments on capital lease obligations $ (15,654) -- --
Borrowings under loans payable 15,700,000 6,300,000 --
Principal payments on loans payable (10,000,000) -- (1,000,000)
Proceeds from issuance of common stock 260,250 670,307 24,249
Cash dividends paid (525,944) (533,052) (516,640)
Purchase of treasury stock (2,368,504) (1,585,086) (162,312)
------------ ------------ ------------
Net cash provided (used) by financing
activities 3,050,148 4,852,159 (1,654,703)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (853,964) 143,742 140,674
Cash and cash equivalents at beginning of year 7,298,823 7,155,081 7,014,407
------------ ------------ ------------
Cash and cash equivalents at end of year $ 6,444,859 7,298,823 7,155,081
============ ============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 590,524 131,328 33,611
============ ============ ============
Income taxes, net of refunds $ 1,690,040 1,835,734 1,052,846
============ ============ ============
Non-cash Financing Activities:
During 1994, 127,720 shares of the Company's common stock, with an aggregate
market value of $731,250 were issued in connection with the purchase of certain
assets of Brannon & Tully.
During 1995, the Company entered into a capital lease for new software in the
amount of $524,909.
See accompanying notes to consolidated financial statements.
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) DESCRIPTION OF BUSINESS
Uniforce Services, Inc., together with its subsidiaries, (the Company)
provides supplemental personnel services to businesses, educational
institutions, professional and service organizations, federal, state and
local governmental agencies and others in the United States. The Company
has selected specialized product lines within several of its licensed and
company owned offices to provide skilled Information Services (IS)
professional employees, office automation specialists and medical office
support. The Company also supplies financial, payroll and billing support
services to independent supplemental staffing services. Subsidiaries of
the Company also provide temporary laboratory staffing support to the
scientific community; and provide confidential employee conversion and
consulting services which enable client companies to utilize the services
of former independent contractors and consultants.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Uniforce Services, Inc. and its majority and wholly-owned
subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
(b) LICENSING FEES
The Company recognizes revenue from initial licensing fees when it
has performed substantially all its obligations under its licensing
agreement.
(c) DEPRECIATION AND AMORTIZATION
Depreciation and amortization of fixed assets is computed on a
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of their
estimated useful lives or the respective lease periods.
Intangible assets, which include covenants not to compete and
territorial rights acquired, are being amortized over their estimated
useful life ranging from five to ten years using the straight-line
method. The unamortized balance is included in deferred costs and
other assets in the accompanying consolidated balance sheets.
(Continued)
1
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(d) DEFERRED LICENSE ACQUISITION COSTS
The Company has executed contracts for affiliation with existing
supplemental staffing service companies. Such contracts require the
Company to pay an affiliation fee which is amortized on a
straight-line method over the minimum terms of the affiliation
agreements which are generally five or ten years. In addition, the
Company has paid similar fees for existing supplemental staffing
service companies acquired by the Company's licensees. Under these
arrangements, the Company has agreed to pay, on behalf of its
licensees, one-half of the acquisition cost. Such costs are amortized
on a straight-line basis over five or ten years. Amortization of
deferred licensee acquisition costs amounted to $129,530, $183,649
and $216,601 in 1995, 1994 and 1993, respectively.
(e) INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (Statement 109), in the first
quarter of 1993. Statement 109 was adopted on a prospective basis and
did not have any impact on the Company's financial statements at
adoption. Deferred income taxes are recognized for temporary
differences between the financial reporting basis and tax basis of
assets and liabilities.
(f) EARNINGS PER SHARE
Earnings per share amounts are determined using the weighted average
number of common shares and dilutive common share equivalents
(options) outstanding.
(g) CASH AND CASH EQUIVALENTS
For purposes of presenting the consolidated statements of cash flows,
the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
(h) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(i) FINANCIAL INSTRUMENTS
The fair values of all financial instruments classified as current
assets or liabilities approximate their respective carrying values
because of the short maturity of those instruments. The fair value of
the Company's bank loans approximates book value since the interest
rates are prime-based and accordingly are adjusted for market rate
fluctuations.
(Continued)
2
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(j) RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 and 1994
financial statements to conform to the 1995 presentation.
(3) ACQUISITION
On April 18, 1994, the Company acquired certain assets of Brannon & Tully,
Inc., a provider of IS (Information Systems) contract professionals. The
purchase price totaled $3,881,250 and consisted of $3,150,000 in cash and
the issuance of 127,720 shares of Common Stock of the Company. Pursuant to
a separate agreement, the Company also acquired certain accounts
receivable, with recourse, for $1,301,595. The cash portion of the
purchase price and the accounts receivable acquired were financed through
borrowings available under the Company's credit facility.
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value
as of the date of the acquisition. The excess of the consideration paid
over the estimated fair value of assets acquired in the amount of
$3,781,925 has been recorded as cost in excess of fair value of net assets
acquired (goodwill) and is being amortized over 20 years on the
straight-line method. The Company assesses the recoverability of
unamortized goodwill using the undiscounted projected future earnings from
the related businesses.
The operating results of Brannon & Tully, Inc. have been included in the
consolidated statement of earnings from the purchase date. The following
unaudited pro forma consolidated results of operations assume the
acquisition of Brannon & Tully, Inc. occurred on January 1, 1993:
December 31,
------------
1994 1993
---- ----
Revenues $118,826,683 $ 96,413,355
Net earnings 3,181,632 1,800,551
Earnings per share $ .69 $ .41
============ ============
The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
occurred at the beginning of the period or of results which may occur in
the future.
One of the former principals of Brannon & Tully, Inc. entered into an
employment agreement with the Company. His employment agreement was for a
term of five years, but could be terminated by either party at any time
after one year, upon not less than 90 days notice. Beginning in 1995, the
employment agreement provided for incentive compensation based upon
improvements in gross profits relating to certain offices to which the
officer rendered employment services and provided active assistance. The
amount of incentive compensation earned in 1995 under the agreement was
$370,172. The employment agreement was terminated during 1995.
(Continued)
3
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) FIXED ASSETS
Fixed assets are stated at cost as follows:
Dec. 31, Dec. 31, Estimated
1995 1994 useful life
---- ---- -----------
Computer equipment $ 2,050,173 1,335,976 5-8 years
Computer software 670,605 98,074 3-5 years
Furniture, fixtures, office
equipment and other 1,480,125 1,460,414 5-15 years
Leasehold improvements & signs 488,099 464,654 Life of lease
----------- ---------
4,689,002 3,359,118
Less accumulated depreciation and
amortization 2,563,589 2,064,568
----------- ---------
$ 2,125,413 1,294,550
-========== =========
Depreciation and amortization expense on fixed assets amounted to
$364,025, $291,751 and $257,055 for the years ended December 31, 1995,
1994 and 1993, respectively.
(5) LOAN PAYABLE
On December 8, 1995, the Company entered into an agreement with a
financial institution creating a three-year $35,000,000 credit facility
(the "Credit Facility"). The Credit Facility comprises a term loan in the
amount of $3,000,000 (the "Term Loan") to be paid in monthly installments
of $62,500 in 1996, $83,333 in 1997 and $104,167 in 1998, with the balance
outstanding due on December 1, 1998 and a $32,000,000 revolving credit
facility (the "Revolving Facility") which expires on December 1, 1998 .
The Company may borrow against the Revolving Facility up to 85% of
eligible accounts receivable and eligible service and funding fees
receivable. The Term Loan bears interest at the Company's election at
either the lender's floating base rate plus .25%, or LIBOR (London
Interbank Offered Rate) plus 2.25%. Borrowings under the Revolving
Facility bear interest at the Company's election at either the lender's
floating base rate, or LIBOR plus 2.125%. Borrowings under the Credit
Facility are secured by a first priority security interest in all owned
and after-acquired real and personal property of the Company.
At December 31, 1995, the Company had outstanding borrowings of $3,000,000
under the Term Loan bearing interest at an average rate of 8.0% and
$9,000,000 of borrowings under the Revolving Facility bearing interest at
an average rate of 8.1%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility including,
among other things, minimum net worth and profitability levels, with which
the Company is in compliance as of December 31, 1995.
(Continued)
4
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Credit Facility was used to repay existing indebtedness as described
below and to finance the offer to purchase the Company's common stock in
January 1996 as described in Note 10.
Prior to December 8, 1995, the Company maintained, with two banks, a
working capital credit facility and a revolving credit and term loan
facility. The working capital credit facility represented an open line of
credit of up to $12,000,000 (increased from $10,000,000, effective in
November 1995), borrowings under which were payable on demand. Outstanding
borrowings bore interest, at the Company's option, at the banks' prime
rate or at a rate 120 basis points above the banks' LIBOR Rate. This
working capital credit facility was terminated on December 8, 1995. In
addition, the Company maintained a revolving credit and term loan
agreement which provided for a two-year $6,000,000 facility, outstanding
borrowings under which, at the Company's option, could be converted at the
maturity of the revolving credit facility into a five-year term loan.
Effective November 1995, in connection with the increase in the Company's
working capital facility described above, the revolving credit and term
loan agreement (under which there were no outstanding borrowings) was
terminated.
(6) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109. The Company had previously adopted Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes" which
required the liability approach with respect to deferred tax balances and
the current adjustment for changes in statutory tax rates. The Company
adopted Statement 109, which also requires the liability approach with
respect to deferred tax balances, during the first quarter of 1993.
The components of the provision (benefit) for Federal and state income
taxes are as follows:
1995 1994 1993
---- ---- ----
Federal:
Current $1,868,000 1,384,000 810,000
Deferred 27,000 151,000 (25,000)
State:
Current 282,000 216,000 138,000
Deferred 5,000 24,000 (5,000)
---------- ---------- ----------
$2,182,000 1,775,000 918,000
========== ========== ==========
(Continued)
5
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Income tax expense differed from that which would have resulted by
applying the statutory Federal income tax rates to earnings before
provision for income taxes as a result of the following items:
1995 1994 1993
-------- ---------- ------------
Expected tax on pretax
earnings $ 1,953,000 34.0% $ 1,607,000 34.0% $ 820,000 34.0%
Tax-exempt interest and
qualified dividends (5,000) (.1) (13,000) (.3) (13,000) (.5)
State taxes, net of Federal
income tax benefit 189,000 3.3 158,000 3.4 88,000 3.6
Other, net 45,000 .8 23,000 .5 23,000 1.0
----------- ---- ----------- ---- ----------- ----
Income tax provision $ 2,182,000 38.0% $ 1,775,000 37.6% $ 918,000 38.1%
=========== ==== =========== ==== =========== ====
The tax effect of temporary differences which give rise to significant
portions of deferred tax assets and liabilities are as follows:
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
Notes receivable, due primarily to allowances
for possible loss $142,356 177,272
Receivables, due primarily to allowances
for doubtful accounts 212,148 113,339
Accrued expenses not currently deductible -- 30,816
Accelerated depreciation for tax purposes (61,240) 27,975
Other 53,885 30,369
-------- -------
$347,149 379,771
======= =======
(7) EMPLOYMENT AGREEMENTS AND TRANSACTIONS
The Company has employment agreements with two of its officers providing
for, among other things, their continued employment through December 31,
1996. In addition, the agreements provide for incentive compensation which
is based upon the Company's pre-tax earnings. Incentive compensation
earned in 1995 was $221,298 and in 1994 was $263,677. No incentive
compensation was earned in 1993.
The Company previously held a promissory note from an officer of the
Company. This note resulted from an August 1990 transaction whereby the
Company loaned the officer $200,000 at an interest rate of 8% which was
fully repaid in 1993.
(Continued)
6
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
During 1993, the Company purchased for corporate use a condominium from an
officer of the Company for $152,500. The purchase price was based on an
independent appraisal.
(8) STOCK OPTIONS
During 1991, the Board of Directors of the Company approved the 1991 Stock
Option Plan (the 1991 Plan) which provides for the issuance of up to
500,000 stock options to officers and employees of the Company. Each
option granted pursuant to the 1991 Plan shall be designated at the time
of grant as either an "incentive stock option" or as a "non-qualified
stock option."
In addition, the Company maintains two employee stock option plans, and a
non-qualified stock option plan for its licensees. The plans (except for
options designated as non-qualified stock options) provide for options to
be granted at 100% of the fair market value of the Company's common stock
and provide that the exercise price of options may not be less than 110%
of such fair market value in the case of an employee owning 10% or more of
the voting power of the Company's stock. At the time options are granted,
the Company may impose a waiting period before options can be exercised.
Non-qualified stock options may not be granted at less than 75% of the
fair market value of the Company's common stock at the date of grant.
During 1991, non-qualified stock options with respect to 90,000 shares
were granted under the 1991 Plan at 75% of the fair market value of the
Company's common stock on the date of the grant. The grant resulted in
compensation expense of $180,000 to be allocated to current and future
periods as earned. Additional paid-in capital has been credited to the
extent of aggregate compensation earned since the grant of $85,500.
In 1995 the stockholders of the Company approved the Directors' Stock
Option Plan (the Directors Plan) which permits the granting of a maximum
of 100,000 stock options to its outside Directors. The purpose of the plan
is to secure for the Company and its stockholders the benefits arising
from stock ownership by its outside Directors.
(Continued)
7
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
At December 31, 1995, an aggregate of 533,078 shares of common stock has
been reserved for issuance under the plans. The plans' activities have
been summarized as follows:
Outstanding Option price
options per share
December 31, 1992 368,425 $6.00 - 11.55
Options granted 180,600 5.75 - 6.00
Options exercised (3,950) 5.75 - 6.25
Options lapsed/canceled (10,500) 5.75
-------
December 31, 1993 534,575 5.75 - 11.55
Options granted 41,878 10.25 - 11.75
Options exercised (97,650) 5.75 - 10.50
Options lapsed/canceled (18,800) 5.75 - 10.50
-------
December 31, 1994 460,003 5.75 - 11.75
Options granted 2,500 8.25
Options exercised (44,400) 5.75 - 6.25
Options lapsed/canceled (89,553) 6.25 - 11.55
-------
December 31, 1995 328,550 $5.75 - 11.75
========
See Note 10 for a description of additional options granted in connection
with the subsequent event.
Optionees have made disqualifying dispositions of common stock which had
been acquired through the exercise of incentive and non-qualified stock
options. As a result of the disqualifying dispositions, the Company
receives a tax benefit for the difference between the option price and the
fair market value of its common stock. The benefit in 1993 was not
material. The benefit of $100,220 and $152,124 in 1995 and 1994,
respectively, has been reflected in the accompanying consolidated
statements of stockholders' equity.
In October of 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation," which must
be adopted by the Company in 1996. The Company has elected not to
implement the fair value based accounting method for employee stock
options, but has elected to disclose, commencing in 1996, the pro forma
net income and earnings per share as if such method had been used to
account for stock-based compensation cost as described in Statement No.
123.
(9) COMMITMENTS AND CONTINGENCIES
In April 1994, various prior insurance carriers and their not-for-profit
trade association filed an action against the Company, its officers and
various other parties. The Plaintiffs allege breach of contract and tort
causes of action for underpayment of premiums. The Company's motion to
dismiss the action has not yet
(Continued)
8
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
been decided and the Company continues to deny the validity of the claims
of the Plaintiffs. Further, the Company intends to assert substantial
claims in opposition to the claims of the Plaintiffs. Additionally, the
Company and its subsidiaries have filed suit against the trade association
alleging various anti-trust allegations and against various prior worker
compensation carriers alleging claims mismanagement. Management believes
that the ultimate outcome of these matters will not have a material
adverse effect upon the financial position of the Company.
In January 1996, various vendors of training films filed an action against
the Company. The plaintiffs allege that the Company improperly used and/or
copied plaintiffs' tapes. Motions have been filed to have the plaintiffs'
claims dismissed and/or severed. Management intends to vigorously defend
the claims and believes that the claims will not have a material adverse
effect upon the financial position of the Company.
The Company is obligated under various leases for office space and
equipment through 2000. Net rental expense for the years ended 1995, 1994
and 1993 amounted to approximately $871,000, $734,000 and $606,000,
respectively.
In January 1996, the Company entered into a 10 year lease for 23,360
square feet of space at $19.00 per square foot relating to the relocation
of its corporate headquarters.
Following is a schedule of total minimum lease payments under
noncancelable operating leases as of December 31, 1995, including the
lease entered into in January 1996:
1996 $ 785,577
1997 816,948
1998 813,273
1999 694,559
2000 514,991
Thereafter 3,130,988
---------
Total minimum lease payments $6,756,336
(10) SUBSEQUENT EVENTS
On December 11, 1995, the Company made an offer to purchase for cash up to
1,250,000 shares of its Common Stock at $11.25 net per share (the Offer).
The 1,250,000 shares that the Company offered to purchase represented
approximately 30% of the Shares outstanding as of December 11, 1995. In
January 1996, the Offer was successfully completed.
(Continued)
9
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The total amount required to purchase the 1,250,000 shares was
$14,062,500, exclusive of related fees and other expenses. The purchase
price and related expenses were funded with available borrowings under the
Credit Facility. As a result of the repurchase of shares, the Company's
stockholders equity will be reduced by approximately $14,160,000.
In January 1996, the Company entered into arrangements with two of its
officers. Under such arrangements, the executive officers are entitled to
receive cash bonuses aggregating $1,041,018 payable to the extent of 10%
thereof three years after consummation of the Offer, to the extent of 30%
thereof four years after consummation of the Offer and as to the balance
thereof five years after consummation of the Offer, provided that the
recipient is then employed by the Company. The executive officers were
granted options to purchase an aggregate of 92,535 shares of Common Stock,
such options to vest in installments through January 1999. The exercise
price of such options was $11.25 per share. The cash bonus installments
and option installments are subject to acceleration in the event of death,
merger of the Company, sale of all or substantially all of the Company's
assets or a change of control of the Company.
10