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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 27, 1997
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period to
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Commission File Number 028192
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THE REGISTRY, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 042920563
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(State of Incorporation) (IRS Employer Identification No.)
189 WELLS AVENUE
NEWTON, MA 02159
(617) 527-6886
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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As of November 12, 1997, there were 21,874,133 shares of Common Stock, no par
value, outstanding.
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THE REGISTRY, INC.
INDEX TO FORM 10-Q
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at September 27, 1997 and June 28, 1997 3
Condensed Consolidated Statement of Operations for the three months ended
September 27, 1997 and September 28, 1996 4
Condensed Consolidated Statement of Cash Flows for the three months ended
September 27, 1997 and September 28, 1996 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
PART II. OTHER INFORMATION 14
SIGNATURES 15
EXHIBIT INDEX 16
This Quarterly Report on Form 10-Q contains forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. The important factors discussed below under the caption "Certain
Factors That May Affect Future Operating Results," among others, could cause
actual results to differ materially from those indicated by forward-looking
statements made herein and presented elsewhere by management from time to time.
2
THE REGISTRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(Unaudited)
SEPTEMBER 27, 1997 JUNE 28, 1997
Assets
Current assets
Cash and cash equivalents $ 6,852 $ 27,561
Marketable securities 12,434 28,675
Accounts receivable, net 113,669 99,263
Notes receivable 1,677 2,045
Deferred income taxes 2,743 2,299
Other current assets 4,683 3,793
---------------------- ----------------------
Total current assets 142,058 163,636
Fixed assets, net 18,393 16,135
Notes receivable from officers 123 147
Other assets 86,674 47,140
Deferred income taxes 136 -
---------------------- ----------------------
Total assets $ 247,384 $ 227,058
---------------------- ----------------------
Liabilities and Stockholders' Equity
Current liabilities
Line of credit $ 10,987 $ 1,485
Current portion of long-term debt 853 515
Accounts payable 4,710 6,197
Accrued salaries and wages 12,768 9,913
Other accrued expenses 27,446 14,254
Income taxes payable 607 1,433
Deferred income taxes 947 476
---------------------- ----------------------
Total current liabilities 58,318 34,273
Deferred income taxes 1,323 1,115
Long-term debt 2,281 2,254
Other liabilities 535 496
Commitments and contingencies
Stockholders' equity
Preferred stock - -
Common stock 4,703 4,703
Additional paid-in capital 159,885 156,957
Notes receivable from stockholders (226) (226)
Retained earnings 20,632 27,428
Unrealized gain (loss) on investments 24 (21)
Cumulative translation adjustment (91) 79
---------------------- ----------------------
Total stockholders' equity 184,927 188,920
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$ 247,384 $ 227,058
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The accompanying notes are an integral part of these financial statements.
3
THE REGISTRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE QUARTER ENDED
SEPTEMBER 27, 1997 SEPTEMBER 28, 1996
Revenue $ 121,478 $ 83,429
Cost of revenue 83,101 59,965
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38,377 23,464
Selling, general and administrative expenses 26,687 16,755
Acquisition-related expenses 14,406 241
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Income (loss) from operations (2,716) 6,468
Interest and other income, net 262 2,069
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Income (loss) before taxes (2,454) 8,537
Income tax provision 4,342 3,413
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Net income (loss) $ (6,796) $ 5,124
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Net loss per share $ (0.31)
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Weighted average common and
common equivalent shares 21,843
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Pro forma information
Income before taxes $ 8,537
Proforma adjustment to officers' salary 1,042
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9,579
Pro forma income tax provision 3,762
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Pro forma net income $ 5,817
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Pro forma net income per share $ 0.28
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Weighted average common and
common equivalent shares 20,857
------------------------
The accompanying notes are an integral part of these financial statements.
4
THE REGISTRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 27, 1997 SEPTEMBER 28, 1996
Cash flows from operating activities:
Net income (loss) $ (6,796) $ 5,124
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities
Depreciation and amortization 1,800 511
Amortization of deferred stock compensation - 8
Provision for losses on accounts receivable 610 322
Deferred income taxes (393) (332)
Increase in accounts receivable (13,114) (4,856)
Increase in other current assets (787) (140)
Increase in other assets (688) -
Decrease in accounts payable (1,101) (549)
Increase in accrued expenses 6,842 1,458
Increase in accrued salaries and wages 2,664 1,084
Decrease in accrued income taxes (724) (289)
Increase in other liabilities 39 23
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Net cash provided by (used for) operating activities (11,648) 2,364
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Cash flows from investing activities
Cash disbursed for acquisitions (34,211) (2,476)
Increase in notes receivable from officers (43) (526)
Repayment of notes receivable from officers 176 -
Decrease in notes receivable from related parties (14) (34)
Purchase of marketable securities (1,560) (6,288)
Sale of marketable securities 17,846 -
Purchases of fixed assets (3,544) (1,621)
Proceeds from sale of fixed assets - 830
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Net cash used for investing activities (21,350) (10,115)
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Cash flows from financing activities
Cash proceeds from exercise of stock options 1,350 1,472
Cash proceeds from stock purchase plan 1,476 371
Net borrowings (repayments) on line of credit 9,502 (675)
Principal payments on long-term debt (72) (941)
Proceeds from issuance of long-term debt 206 1,793
Distributions - (959)
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Net cash provided by financing activities 12,462 1,061
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Effect of exchange rate changes on cash and cash equivalents (171) 10
--------------------- ---------------------
Net decrease in cash and cash equivalents (20,709) (6,680)
Cash and cash equivalents, beginning of period 27,561 38,062
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Cash and cash equivalents, end of period $ 6,852 $ 31,382
--------------------- ---------------------
The accompanying notes are an integral part of these financial statements.
5
THE REGISTRY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Registry, Inc. ("TRI" or the "Company") is a worldwide provider
of integrated business and information technology ("IT") consulting
services to organizations with complex IT operations in a broad
range of industries. As of September 27, 1997, the Company
maintained offices in sixty-seven locations worldwide.
Basis of Consolidation
The accompanying condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. On
July 31, 1997 the Company completed an acquisition of Renaissance
Solutions, Inc. ("Renaissance")(see Note 2). This acquisition has
been accounted for using the pooling-of-interests method and,
accordingly, the accompanying financial statements have been
retroactively restated to reflect the financial position and results
of operations and cash flows of the Company and Renaissance for all
periods presented. All intercompany balances and transactions have
been eliminated.
Interim Financial Statements
The condensed consolidated balance sheet at September 27, 1997 and
condensed consolidated statements of operations and of cash flows
for the three month periods ended September 27, 1997 and September
28, 1996 are unaudited and, in the opinion of management, include
all adjustments (consisting of normal and recurring adjustments)
necessary for a fair presentation of results for these interim
periods. Certain information and footnote disclosures normally
included in the Company's annual consolidated financial statements
have been condensed or omitted. The results of operations for the
interim period ended September 27, 1997 are not necessarily
indicative of the results to be expected for the entire fiscal year.
The balance sheet at June 28, 1997 contained herein has been derived
from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. These interim condensed consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements for the year ended June 28, 1997
which are contained in the Company's 1997 Annual Report on Form 10-
K.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to the current period presentation.
Pro forma income information
The pro forma information is presented to show (i) the effects on
1996 of the contractual reduction of International Systems Services
Corporation's ("ISS") officer's compensation following the
acquisition of ISS by Renaissance in December of 1996 and (ii) the
federal and state income taxes that would have been provided for in
the three months ended September 28, 1996 on the proforma income
before taxes if certain of the Company's subsidiaries had been C
Corporations in the period.
Pro forma net income(loss) per share
Pro forma net income (loss) per share has been computed by dividing
pro forma net income (loss) by the weighted average number of common
shares outstanding and common equivalent shares which may be
issuable upon exercise of outstanding stock options, computed using
the treasury stock method. The weighted average number of common and
common equivalent shares outstanding for the three months ended
September 28, 1996 also includes common shares issuable upon
conversion of Application Resources, Inc.'s ("ARI") preferred stock,
using the exchange ratio of 0.274428 shares of TRI Common Stock for
each share of ARI stock. Pro forma weighted
6
THE REGISTRY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
average number of common shares also assumes the shares issued in
connection with the Renaissance acquisition were outstanding for all
periods presented.
Translation of foreign currencies
The functional currency for the Company's foreign
subsidiaries is the local currency. Assets and liabilities are
translated into U.S. dollars at exchange rates in effect at the
balance sheet date. Income and expense items and cash flows are
translated at average exchange rates for the period. Cumulative net
translation adjustments are included in stockholders' equity. Gains
and losses resulting from foreign currency transactions, not
significant in amount, are included in the results of operations as
other income (expense).
Recently enacted accounting standards
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 specifies modifications to the
calculation of earnings per share from that currently used by the
Company. Under SFAS 128, "basic earnings per share" is calculated
based upon the weighted average number of common shares actually
outstanding, and "diluted earnings per share" is calculated based
upon the weighted average number of common shares, common share
equivalents, and other convertible securities outstanding. SFAS 128
is effective in the Company's second quarter of fiscal 1998 and will
be adopted at that time with retroactive restatement of all
previously reported amounts. Had the Company been following the
provisions of SFAS 128 historically, the following pro forma amounts
would have been reported for basic earnings (loss) per share:
Three months ended
September 27, 1997 September 28, 1996
$(0.31) $0.30
Diluted earnings per share, computed under the provisions of SFAS
128 would not have differed materially from the pro forma net income
(loss) per share amounts previously reported by the Company. The
adoption of SFAS 128 will have no effect on the Company's financial
position or cash flows.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
This statement establishes standards for the reporting of
comprehensive income in a company's full set of financial statements
and is effective for fiscal years beginning after December 15, 1997
Comprehensive income is defined in SFAS 130 as the change in equity
(net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources. Comprehensive income reported by an entity will disclose
both net income and other currency items, minimum pension liability
adjustments and unrealized gains and losses on certain investments
in debt and equity securities. SFAS 130 will affect the Company's
reporting of unrealized gains and losses on marketable securities,
as well as the reporting of translation adjustments resulting from
certain investments in foreign subsidiaries. Such disclosures of
comprehensive income will be in addition to existing reporting of
net income. The Company will adopt this statement as required.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information", ("SFAS 131"). SFAS 131 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of
disclosures for all periods presented.
SFAS 131 requires that companies disclose information about
operating segments in annual and interim financial statements. SFAS
131 utilizes the "management approach" in determining what
constitutes an operating segment. An operating segment is defined in
SFAS 131 as a business
7
THE REGISTRY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
component:
. which engages in business activities from which it may earn
revenues and incur expenses
. whose operating results are regularly reviewed by
a chief operating decision maker to make decisions about resources
to be allocated to the segment and assess its performance; and
. for which discrete financial information is available.
SFAS 131 requires that a company disclose information about
operating segments that meet any of the following thresholds:
. its reported revenue, including both customer and intersegment
sales, is greater than or equal to 10% of combined revenue
. the absolute amount of its reported profit or loss is greater than
10% or more of the absolute amount of (1) the combined reported
profit of all segments that did not report a loss or (2) the
combined reported losses of all segments that did report a loss,
. its assets are greater than or equals to 10% or more of combined
assets of all operating segments.
The adoption of SFAS 131 will not impact the Company's financial
position, results of operations or cash flows. Management is
currently assessing which operating segments of the Company will
require disclosure and the Company will adopt the statement as
required.
2. MERGER WITH RENAISSANCE SOLUTIONS, INC.
On July 31, 1997 pursuant to an Agreement and Plan of Merger dated
May 19, 1997 (the "Agreement"), The Registry, through a wholly-owned
subsidiary, acquired Renaissance Solutions, Inc., a Delaware
corporation ("Renaissance"). Renaissance provides management
consulting and client/server systems integration services, primarily
for large corporations. Pursuant to the Agreement, each outstanding
share of Renaissance capital stock was converted into the right to
receive 0.80 shares of The Registry's common stock. The Company also
assumed outstanding options for the purchase of Renaissance common
stock at the same conversion ratio. Immediately prior to the
acquisition, there were 9,573,204 shares of Renaissance common stock
and options to purchase 1,354,895 shares of Renaissance common stock
outstanding.
This transaction has been accounted for as a pooling-of-interests
and accordingly, all amounts have been restated to reflect this
acquisition on a historical basis. Costs associated with this
transaction have been expensed as incurred.
3. ACQUISITION OF SUBSIDIARIES - PURCHASES
McClain Group, Inc. On July 16, 1997, The Registry, through a wholly
owned subsidiary, acquired all of the outstanding stock of the
McClain Group, Inc., a Virginia corporation ("McClain") for $15.4
million in cash. McClain is an information technology management
consulting firm based in Richmond, Virginia. McClain provides IT
consulting and project management services and operates under its
strategies consulting subsidiary, Renaissance Solutions, Inc.
Technomics Consultants International, Inc. On July 25, 1997,
Renaissance, through a wholly owned subsidiary, acquired all of the
outstanding stock of Technomics Consultants International, Inc., an
Illinois corporation ("Technomics") for $2.0 million in cash and up
to $5.2 million in contingent consideration. Technomics is a
management consulting firm based in Chicago, Illinois with offices
in London, England; Hong Kong; Bombay, India; Tokyo, Japan; Ho Chi
Minh City, Vietnam; Shanghai, PRC and Singapore.
Eligibility Management Systems, Inc. On August 27, 1997, the Company
acquired all of the outstanding stock of Eligibility Management
Systems,
8
THE REGISTRY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Inc., a Florida corporation ("EMS") for $17.0 million in cash, of
which $15.0 million was payable at the time of closing and $2.0
million is payable over the next two years. An additional $4.0
million in consideration may be payable subject to certain earnout
arrangements.
These acquisitions have been accounted for as a purchases and
accordingly, the purchase prices have been allocated to the assets
acquired and liabilities assumed based upon their estimated fair
values as of the date of their respective acquisitions. The excess
of the consideration paid over the estimated fair value of net
assets acquired has been recorded as goodwill and is being amortized
on a straight-line basis over 30 years.
The pro forma results of operations, assuming that the acquisitions
occurred at the beginning of the periods ended September 27, 1997
and September 28, 1996 would not materially differ from TRI's
reported results of operations.
4. LEGAL SETTLEMENT
In August 1996, ARI received a settlement of $1,625,000 from its
insurance company for payment of defense costs and certain expenses
associated with a previous intellectual property rights matter. This
amount, net of related expenses, has been included in interest and
other income in the accompanying consolidated statement of
operations.
9
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
The following table summarizes the Company's significant
operating results as a percentage of revenue for each of the periods
indicated.
THREE MONTHS ENDED
SEPT 27, 1997 SEPT 28, 1996
Revenue 100.0 % 100.0%
Cost of revenue 68.4 71.9
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Gross profit 31.6 28.1
Selling, general and administrative expenses 22.0 20.1
Acquisition-related expenses 11.8 0.3
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Income (loss) from operations (2.2) 7.7
Interest and other income, net 0.2 2.5
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Income (loss) before taxes (2.0) 10.2
Income tax provision 3.6 4.1
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Net income (loss) (5.6)% 6.1%
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Pro forma information
Income before taxes 10.2%
Pro forma adjustment to officers' salary 1.2
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11.4
Pro forma income tax provision 4.4
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Pro forma net income 7.0%
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THREE MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
Revenue. Revenue increased 45.6% to $121.5 million for the first
quarter of fiscal 1998 from $83.4 million in the first quarter of
fiscal 1997. This increase was attributable primarily to increases
in the revenue of The Registry's professional services operations in
the quarter resulting in a greater number of IT consultants being
placed with the Company's clients during the period. In addition,
revenue attributable to the Company's strategic and management
consulting services of Renaissance also increased due to both
organic growth at Renaissance and the addition of the C.M.
Management Systems, Ltd., Inc. and COBA Consulting Limited
acquisitions in fiscal 1997.
Gross Profit. Gross profit increased 63.6% to $38.4 million for the
first quarter of fiscal 1998 from $23.5 million in the comparable
prior period. As a percentage of revenue, gross profit increased to
31.6% for the period compared to 28.1% for the comparable prior
period. The increase in gross margin percentage was attributable to
increases in the number of higher margin strategic and management
consulting engagements resulting from acquisitions in the strategic
consulting services area and the increased utilization of staff IT
consultants compared with the prior period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 59.3% to $26.7 million for the
first quarter of fiscal 1998 from $16.8 million in the comparable
prior period. As a percentage of revenue, selling, general and
administrative expenses increased to 22.0% from 20.1% for the
comparable prior period. This increase was attributable primarily to
the costs of the integration of and redundant processes in the
recently added acquisitions, as well as the investments in the
Company's infrastructure to support the growth of the past year.
Acquisition-related expenses associated with the merger with
Renaissance consisting primarily of investment banking, legal, and
accounting costs and certain payments made under change of control
provisions have been recorded as a separate line item in the
Company's Statement of Operations.
10
Interest and Other Income, Net. Interest and other income, net,
decreased 87.3% to $262,000 in income for the first quarter of
fiscal 1998 from $2.1 million in income for the first quarter of
fiscal 1997. The decrease in the income was a result of $1.6 million
insurance settlement which was received in the first quarter of
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
On July 31, 1997 pursuant to an Agreement and Plan of
Merger dated May 19, 1997, The Registry, through a wholly-owned
subsidiary, acquired Renaissance Solutions, Inc., a Delaware
corporation. Renaissance provides management consulting and
client/server systems integration services, primarily for large
corporations. Pursuant to the agreement, each outstanding share of
Renaissance capital stock was converted into the right to receive
0.80 shares of The Registry's common stock. The Registry also
assumed outstanding options for the purchase of Renaissance common
stock at the same conversion ratio. The Company issued 7,658,563
shares of TRI common stock and assumed options to purchase 1,083,916
shares of TRI common stock as a result of the merger.
The Company entered into a $25 million revolving advance
facility with BNY Financial Corporation (the "BNY Line of Credit").
This facility allows the Company to borrow the lesser of $25 million
or 85% of eligible receivables. The Line of Credit is secured by all
of the Company's assets and contains certain restrictive covenants,
including limitations on amounts of loans the Company may extend to
officers and employees, the incurrence of additional debt and the
payment of dividends on the Company's common or preferred stock.
Additionally, the BNY Line of Credit requires the maintenance of
certain financial ratios, including minimum tangible net worth and a
limit on the ratio of total liabilities to total tangible net worth.
The Company was on September 27, 1997 and is currently in compliance
with these financial covenants.
As of September 27, 1997, there was approximately $9.8
million outstanding under the BNY Line of Credit. The BNY Line of
Credit bears an interest rate of LIBOR plus 2.5% or the Bank of New
York alternate base rate plus 0.5% at the Company's option. In
addition, at September 27, 1997, the Company had invested $12.4
million in municipal and federal bonds held at various interest
rates.
In June 1997, The Company entered into a line of credit
agreement with a foreign bank to provide an overdraft facility of
1,400,000 British Sterling to a subsidiary located in Great Britain.
This facility matures on January 31, 1998 and is secured by a $2.0
million standby letter of credit from a U.S. bank. There was
$1,195,000 drawn on this facility as of September 27, 1997.
The Company had negative cash flows from operations of
$11.6 million for the three months ended September 27, 1997. The
negative operating cash flows during this period reflected a $13.1
million increase in net accounts receivable during the period due
primarily to the increase in revenues as well as the timing of
invoicing on certain deliverable based projects. The Company's
operating cash flows and working capital requirements are
significantly affected by the timing of the payment of payroll and
the receipt of payment from the customer. The Company pays its
employees on a weekly or bi-weekly basis. Clients are generally
invoiced for services either at the end of the applicable pay
period, on a monthly basis, or on a deliverable basis for some
management and strategic consulting engagements. Additionally cash
flows from operations were impacted by fluctuations in accrual and
payable balances between the periods and an increase in accrued
expenses related to the acquisition costs incurred during the
period.
The Company had negative cash flows from investing
activities of $21.4 million for the
11
three months ended September 27, 1997. The primary use of cash for
investing activities in the three months ended September 27, 1997
was $34.2 million for acquisitions completed in this period. This
was offset in part by $16.3 million in net cash received for
marketable securities sold and matured during the period. Capital
expenditures totaled $3.5 million for the three months ended
September 27, 1997 and were related primarily to the upgrade of the
computer systems at the Company's recent acquisitions as well as the
upgrade of the Company's IT infrastructure.
The Company had cash provided by financing activities of
$12.5 million for the three months ended September 27, 1997
principally from borrowings against its BNY Line of Credit. In
addition $1.5 million was received from employees for purchases of
common stock under the Employee Stock Purchase Program.
The Company anticipates that its primary uses of working
capital in future periods will be for funding growth, either through
acquisitions, the internal development of existing branch offices or
the development of new branch offices and new service offerings. The
Company also anticipates making approximately $7.5 million in
capital expenditures in the next twelve months principally to
upgrade its computer system. In connection with certain of its
acquisitions, the Company may be obligated to make certain
contingent payments during the next several years. The Company does
not believe that such payments would have a material impact on the
Company's liquidity, results of operations or capital requirements.
The Company's principal capital requirement is working capital to
support the accounts receivable associated with its revenue growth.
The Company believes that the cash flow from operations and
borrowings under the Line of Credit, which is presently under
negotiations to be increased to $50 million, will be sufficient to
meet the Company's anticipated working capital needs for the next 12
months.
RECENT ACQUISITIONS
McClain Group, Inc. On July 16, 1997, The Registry, through a
wholly-owned subsidiary, acquired all of the outstanding stock of
the McClain Group, Inc., a Virginia corporation ("McClain") for
$15.4 million in cash. McClain is an information technology
management consulting firm based in Richmond, Virginia. McClain
provides IT consulting and project management services and
operates under its strategies consulting subsidiary, Renaissance
Solutions, Inc.
Technomics Consultants International, Inc. On July 25, 1997,
Renaissance, through a wholly owned subsidiary, acquired all of the
outstanding stock of Technomics Consultants International, Inc., an
Illinois corporation ("Technomics") for $2.0 million in cash and up
to $5.2 million in contingent consideration. Technomics is a
management consulting firm based in Chicago, Illinois with offices
in London, England; Hong Kong; Bombay, India; Tokyo, Japan; Ho Chi
Minh City, Vietnam; Shanghai, PRC and Singapore.
Eligibility Management Systems, Inc. On August 27, 1997, The
Registry, through a wholly owned subsidiary, acquired all of the
outstanding stock of the Eligibility Management Systems, Inc., a
Florida corporation ("EMS") for $17 million in cash, of which $15
million was payable at the time of closing and $2 million is payable
over the next two years. An additional $4.0 million in consideration
may be payable subject to certain earnout arrangements.
These acquisitions have been accounted for as a purchases and
accordingly, the purchase prices have been allocated to the assets
acquired and liabilities assumed based upon their estimated fair
values as of the date of their respective acquisitions. The excess
of the consideration paid over the estimated fair value of net
assets acquired has been recorded as goodwill and is being amortized
on a straight-line basis over 30 years.
12
The pro forma results of operations, assuming that the acquisitions
occurred at the beginning of the periods ended September 27, 1997
and September 28, 1996 would not materially differ from TRI's
reported results of operations.
RECENTLY ENACTED ACCOUNTING STANDARD
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 specifies modifications to the
calculation of earnings per share from that currently used by the
Company. Under SFAS 128, "basic earnings per share" is calculated
based upon the weighted average number of common shares actually
outstanding, and "diluted earnings per share" is calculated based
upon the weighted average number of common shares, common share
equivalents, and other convertible securities outstanding. SFAS 128
is effective in the Company's second quarter of fiscal 1998 and will
be adopted at that time with retroactive restatement of all
previously reported amounts. Had the Company been following the
provisions of SFAS 128 historically, the following pro forma amounts
would have been reported for basic earnings (loss) per share:
Three months ended
September 27 1997 September 28, 1996
$(0.31) $0.30
Diluted earnings per share, computed under the provisions of SFAS
128 would not have differed materially from the pro forma net income
(loss) per share amounts previously reported by the Company. The
adoption of SFAS 128 will have no effect on the Company's financial
position or cash flows. In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). This statement establishes standards for the
reporting of comprehensive income in a company's full set of
financial statements and is effective for fiscal years beginning
after December 15, 1997
Comprehensive income is defined in SFAS 130 as the change in equity
(net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources. Comprehensive income reported by an entity will disclose
both net income and other currency items, minimum pension liability
adjustments and unrealized gains and losses on certain investments
in debt and equity securities. SFAS 130 will affect The Registry's
reporting of unrealized gains and losses on marketable securities,
as well as the reporting of translation adjustments resulting from
certain investments in foreign subsidiaries. Such disclosures of
comprehensive income will be in addition to existing reporting of
net income. The Registry will adopt this statement as required.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information", ("SFAS 131"). SFAS 131 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of
disclosures for all periods presented.
SFAS 131 requires that companies disclose information about
operating segments in annual and interim financial statements. SFAS
131 utilizes the "management approach" in determining what
constitutes an operating segment. An operating segment is defined in
SFAS 131 as a business component:
. which engages in business activities from which it may earn
revenues and incur expenses
. whose operating results are regularly reviewed by
a chief operating decision maker to make decisions about resources
to be allocated to the segment and assess its performance; and
. for which discrete financial information is available.
13
SFAS 131 requires that a company disclose information about
operating segments that meet any of the following thresholds:
. its reported revenue, including both
customer and intersegment sales, is greater than or
equal to 10% of combined revenue
. the absolute amount of its reported profit or loss is greater than
10% or more of the absolute amount of (1) the combined reported
profit of all segments that did not report a loss or (2) the
combined reported losses of all segments that did report a loss,
. its assets are greater than or equals to 10% or more of combined
assets of all operating segments.
The adoption of SFAS 131 will not impact The Registry's financial
position, results of operations or cash flows. Management is
currently assessing which operating segments of the Company will
require disclosure and the Company will adopt the statement as
required.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The foregoing forward-looking statements which may involve certain
risks and uncertainties. The Company's actual performance and
results may differ materially due to many important factors,
including, but not limited to, the Company's dependence on the
availability of qualified IT consultants, its ability to sustain and
manage growth, the risks associated with acquisitions, its
dependence on key clients, risks associated with international
operations, its dependence on key personnel, the Company's
relatively short history of profitability, the impact of the
government regulation of immigration, fluctuations in operating
results due in part to the opening of new branch offices, general
economic conditions, employment liability risks, and the like. For a
more comprehensive discussion of the risks associated with ownership
of Common Stock of the Company, please see the Risk Factors section
of the Company's Annual Report on Form 10-K. As a result of these
and other factors, there can be no assurance that the Company will
not experience material fluctuations in future operating results on
a quarterly or annual basis.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
Not applicable
Item 2 - Change in Securities
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
1. A special meeting of stockholders was held on July 30, 1997
(the "Special Meeting") to approve the issuance of shares of
the Company's common stock, no par value, pursuant to the
Agreement and Plan of Merger, dated as of May 19, 1997 among
the Company, Rain Acquisition Corp., a wholly owned subsidiary
of the Company, and Renaissance. 12,505,744 votes were cast
for the issuance, 98,478 votes were cast against 69 votes
abstained, and 265,066 broker nonvotes.
2. At the Special Meeting the approval was also sought for the
amendment of the Company's 1996 Stock Plan. The amendment
increased the shares of Common Stock available for issuance
under the 1996 Stock Plan by 2,000,000 shares. The vote was
10,753,981 for and 1,850,235 against, with 75 abstentions and
265,066 broker nonvotes.
3. At the Special Meeting the approval was also sought for an
amendment to the Company's Restated Articles of Organization
(the "Charter Amendment"). The Charter Amendment increased the
authorized shares of Common Stock from 49,000,000 to
99,000,000 shares. The vote was 12,755,739 for and 109,143
against, with 4,475 abstentions.
Item 6 - Exhibits and Reports on Form 8-K
a. See Exhibit Index, Page 15
b. Reports on Form 8-K
Reports on Form 8-K related to the Company's
acquisitions were filed on July 21, 1997; August 12, 1997, and
September 10, 1997 and are incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE REGISTRY, INC.
(Registrant)
Date: November 12, 1997 By: /s/ G. Drew Conway
--------------------------
G. Drew Conway, President
and Chief Executive Officer
(Principal Executive
Officer)
Date: November 12, 1997 By: /s/ Robert E. Foley
---------------------------
Robert E. Foley, Chief
Financial Officer
(Principal Financial and
Accounting Officer)
15
THE REGISTRY, INC.
EXHIBIT INDEX
Exhibit Page
27 Financial Data Schedule
16