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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-22141
COMPLETE BUSINESS SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or Other Jurisdiction of
Incorporation or Organization)
38-2606945
(IRS Employer
Identification No.)
32605 WEST TWELVE MILE ROAD
SUITE 250
FARMINGTON HILLS, MICHIGAN 48334
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code: (248) 488-2088
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
NO PAR VALUE
(Class of Common Stock)
27,222,900
(Outstanding as of May 4, 1998)
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COMPLETE BUSINESS SOLUTIONS, INC.
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Condensed Consolidated Balance Sheets....................... 3
Condensed Consolidated Statements of Income................. 4
Condensed Consolidated Statements of Cash Flows............. 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 12
SIGNATURES............................................................. 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 49,674 $ 57,458
Accounts receivable, net.................................. 45,858 38,574
Prepaid expenses and other................................ 2,139 2,042
-------- --------
Total current assets................................... 97,671 98,074
-------- --------
Property and equipment, net................................. 9,393 8,371
Goodwill, net............................................... 2,772 2,809
Other assets................................................ 1,170 999
-------- --------
Total assets........................................... $111,006 $110,253
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6,863 $ 4,370
Accrued payroll and related costs......................... 14,629 15,630
Revolving credit facility................................. -- 3,380
Distribution and loan payable to shareholders............. 1,458 1,325
Current portion of deferred revenue....................... 1,810 1,075
Other accrued liabilities................................. 5,727 4,362
-------- --------
Total current liabilities.............................. 30,487 30,142
-------- --------
Other liabilities........................................... 165 190
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized, none issued................................ -- --
Common stock, no par value, 30,000,000 shares authorized,
27,014,720 and 26,653,406 shares issued and outstanding
as of March 31, 1998 and December 31, 1997,
respectively........................................... -- --
Additional paid-in capital................................ 74,180 75,328
Retained earnings......................................... 10,131 7,779
Stock subscriptions receivable............................ (3,249) (2,503)
Cumulative translation adjustment......................... (708) (683)
-------- --------
Total shareholders' equity............................. 80,354 79,921
-------- --------
Total liabilities and shareholders' equity............. $111,006 $110,253
======== ========
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
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COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
Revenues.................................................... $60,537 $41,469
Cost of revenues:
Salaries, wages and employee benefits..................... 33,560 25,642
Contractual services...................................... 5,763 2,944
Project travel and relocation............................. 2,704 1,421
Depreciation and amortization............................. 318 364
------- -------
Total cost of revenues............................ 42,345 30,371
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Gross profit...................................... 18,192 11,098
Selling, general and administrative expenses................ 11,990 8,551
Merger costs................................................ 3,421 --
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Income from operations............................ 2,781 2,547
Other expense (income)...................................... (538) 92
------- -------
Income before provision for income taxes and
minority interest................................ 3,319 2,455
Provision for income taxes.................................. 3,048 1,135
Minority interest........................................... -- 82
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Net income........................................ $ 271 $ 1,238
======= =======
Basic earnings per share --
Weighted-average shares outstanding....................... 26,902 19,810
======= =======
Basic earnings per share.................................. $ 0.01 $ 0.06
======= =======
Diluted earnings per share --
Weighted-average shares outstanding....................... 26,902 19,810
Diluted effect of stock options........................... 1,536 569
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Diluted weighted average shares outstanding............... 28,438 20,379
======= =======
Diluted earnings per share................................ $ 0.01 $ 0.06
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PRO FORMA INFORMATION
(UNAUDITED)
Net income as reported...................................... $ 271 $ 1,238
Pro forma incremental income tax benefit.................... (1,417) (315)
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Pro forma net income........................................ $ 1,688 $ 1,553
======= =======
Basic earnings per share --
Weighted-average shares outstanding....................... 26,902 20,884
======= =======
Basic earnings per share.................................. $ 0.06 $ 0.07
======= =======
Diluted earnings per share --
Weighted-average shares outstanding....................... 26,902 20,884
Diluted effect of stock options........................... 1,536 569
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Diluted weighted-average shares outstanding............... 28,438 21,453
======= =======
Pro forma diluted earnings per share...................... $ 0.06 $ 0.07
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Cash flows from operating activities:
Net income................................................ $ 271 $ 1,238
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 750 677
Provision for doubtful accounts........................... 297 72
Equity in loss of investee................................ -- 72
Minority interest......................................... -- 82
Change in assets and liabilities --
Accounts receivable.................................... (7,645) 1,322
Prepaid expenses and other............................. (392) 320
Accounts payable....................................... 2,483 713
Accrued payroll and related costs and other
liabilities........................................... 497 173
Deferred revenue....................................... 710 (94)
------- -------
Net cash provided by (used in) operating
activities.......................................... (3,029) 4,575
------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (1,658) (701)
------- -------
Net cash used in investing activities................ (1,658) (701)
------- -------
Cash flows from financing activities:
Net payments on revolving credit facility................. (3,380) (2,635)
Payments on long-term debt................................ -- (791)
Net proceeds from issuance of common stock................ 269 24,392
S corporation distribution................................ -- (8,592)
------- -------
Net cash provided by (used in) financing
activities.......................................... (3,111) 12,374
------- -------
Effect of exchange rate changes on cash..................... 14 --
------- -------
Increase (decrease) in cash and cash equivalents............ (7,784) 16,248
------- -------
Cash and cash equivalents at beginning of period............ 57,458 3,937
------- -------
Cash and cash equivalents at end of period.................. $49,674 $20,185
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 76 $ 141
Income taxes........................................... $ 1,777 $ 483
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared by management, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the financial position of Complete Business Solutions, Inc. and
subsidiaries (CBSI) as of March 31, 1998, the results of its operations for the
three-month periods ended March 31, 1998 and 1997, and cash flows for the three
month periods ended March 31, 1998 and 1997. These financial statements should
be read in conjunction with the consolidated financial statements and footnotes
thereto included in CBSI's 1997 Form 10-K.
The results of operations for the three month period ended March 31, 1998
are not necessarily indicative of the results to be expected in future quarters
or for the full fiscal year ending December 31, 1998.
2. PRINCIPLES OF CONSOLIDATION AND ORGANIZATION
The consolidated financial statements include the accounts of CBSI. All
significant intercompany accounts and transactions have been eliminated in the
accompanying consolidated financial statements.
On January 27, 1998, a subsidiary of CBSI closed an agreement and plan of
merger with c.w. Costello & Associates, inc. (Costello), a privately held
Delaware corporation. The merger agreement provided for all of the outstanding
Costello Common Stock to be exchanged for 3,363,090 of CBSI's Common Stock. In
addition, outstanding Costello options totaling 16,000 as of January 27, 1998
were converted into 56,909 options of CBSI. These options retained their
original terms and vesting periods. The merger with Costello was accounted for
by the pooling of interests method of accounting, and accordingly, the
accompanying condensed consolidated balance sheets and statements of income,
cash flows, and shareholders' equity have been retroactively restated.
On November 20, 1997 a subsidiary of CBSI closed an agreement and plan of
merger with Synergy Software, Inc., (Synergy) a privately held Illinois
corporation. The merger agreement provided for all of the outstanding Synergy
Common Stock to be exchanged for 1,390,894 shares of CBSI's Common Stock. In
addition, outstanding Synergy options totaling 646,462 as of November 20, 1997
were converted into 418,210 options of CBSI. These options retained their
original terms and vesting periods. The merger with Synergy was accounted for by
the pooling of interests method of accounting, and accordingly, the accompanying
condensed consolidated balance sheets and statements of income and cash flows
have been retroactively restated.
Through July 1996, CBSI held a 76% interest in Complete Business Solutions
(India) Private Limited (CBS India) with the remaining 24% interest held by an
entity affiliated with CBSI's shareholder (affiliated entity). In July 1996,
CBSI formed CBS Complete Business Solutions (Mauritius) Limited (CBS Mauritius)
and CBSI and the affiliated entity each contributed its ownership interest in
CBS India for a similar interest in CBS Mauritius.
In July 1996, CBS Mauritius sold an ownership interest to an unrelated
entity for approximately $3,500, net of transaction costs. Simultaneously, CBS
Mauritius repurchased its stock held by the affiliated entity for approximately
$2,708 and CBSI made a capital contribution of $1,708 to CBS Mauritius. The net
loss on this transaction was not material. As of December 31, 1996, CBSI owned
72% and the unrelated entity owned 28% of CBS Mauritius, which owned 100% of CBS
India.
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As authorized in the CBS Mauritius Shareholders agreement and in connection
with the initial public offering of CBSI's Common Stock, the 28% shareholder of
CBS Mauritius converted its ownership interest in CBS Mauritius into 1,105,264
shares of CBSI's Common Stock. The acquisition of the minority shares was
accounted for under the purchase method of accounting. The excess of the
aggregate purchase price over the fair value of the net assets acquired has been
recognized as goodwill of approximately $2,931 in the condensed consolidated
balance sheets and is being amortized over 20 years.
3. COMMON STOCK OFFERINGS
In March 1997, CBSI completed an initial public offering of 5,000,000
shares of its Common Stock at a price of $6.00 per share. That offering
consisted of 4,600,000 shares of newly issued Common Stock and 400,000 shares
sold by a selling shareholder. After underwriting discounts, commissions and
other issuance costs, net proceeds to CBSI from that offering were approximately
$23,792. The net proceeds from that offering have been invested in cash
equivalents with an initial maturity of three months or less.
In August 1997, CBSI completed a secondary offering of 5,200,000 shares of
its Common Stock at a price of $14 1/8 per share. This offering consisted of
2,900,000 shares of newly issued Common Stock and 2,300,000 shares sold by
selling shareholders. After underwriting discounts, commissions and other
issuance costs, net proceeds to CBSI from this offering were approximately
$38,000. The net proceeds from this secondary offering have been invested and
will be used for further expansion of CBSI operations; development of new
service lines and possible acquisition of related businesses; and general
corporate purposes, including working capital needs.
4. STOCK DIVIDEND
On February 18, 1998, the Board of Directors declared a two-for-one split
of the Company's common stock, effected in the form of a stock dividend payable
on March 19, 1998 to shareholders of record on March 5, 1998. All agreements
concerning stock options provide for the issuance of additional shares due to
the declaration of the stock split. All references to number of shares, except
shares authorized, the number of options and to per share information in the
condensed consolidated financial statements and related notes have been adjusted
to reflect the stock split on a retroactive basis.
5. INCOME TAXES
Prior to March 4, 1997, the shareholders of CBSI had elected, under the
provisions of Subchapter S of the United States Internal Revenue Code, to have
income and related tax benefits of CBSI included in the taxable income of the
shareholders. As a result, no provision for U.S. federal or state income taxes
has been included in the condensed consolidated statements of income prior to
March 4, 1997.
On March 4, 1997, in connection with the initial public offering discussed
in Note 3, the shareholders and CBSI revoked the Subchapter S election, thereby
subjecting future income of CBSI to federal and state income taxes at the
corporate level. Accordingly, the application of the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS No.
109) resulted in the recognition of deferred tax assets and liabilities, and a
corresponding charge to the provision for income taxes of approximately $920
during the three month period ended March 31, 1997.
As discussed in Note 2, on January 27, 1998, the Company merged with
Costello, an S corporation. As a result of the merger, the S corporation status
was terminated thereby subjecting future income of Costello to federal and state
income taxes at the corporate level. Accordingly, the application of SFAS No.
109 resulted in the recognition of deferred tax assets and liabilities, and a
corresponding charge to the provision for income taxes of approximately $1,400
during the three month period ended March 31, 1998.
CBSI has provided federal and state income taxes in the condensed
consolidated statements of income based on the anticipated effective tax rate
for fiscal years 1998 and 1997. The unaudited pro forma net income in the
condensed consolidated statements of income reflect applicable pro forma
adjustments to the provision
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for income taxes to reflect net income as if the Subchapter S elections had been
revoked prior to January 1, 1997.
CBS Mauritius is incorporated in Mauritius and is not subject to income
taxes. CBS India is an Indian corporation subject to income taxes and receives
exemptions from Indian income taxes under free trade zone and software exporters
provisions of Indian tax law. CBSI considers all undistributed earnings of its
foreign subsidiaries to be permanently invested. Therefore, no United States
income taxes have been provided on these earnings.
6. SUBSEQUENT EVENT -- MERGER WITH CLAREMONT TECHNOLOGY GROUP, INC.
On April 8, 1998, CBSI signed an agreement and Plan of Merger with
Claremont Technology Group, Inc. (Claremont), a publicly traded Oregon
corporation and with the holders of the issued and outstanding capital stock of
Claremont.
This merger agreement provides for all of the outstanding Claremont common
stock to be exchanged for approximately 7.2 million shares of CBSI's common
stock. In negotiating the purchase price, CBSI considered the current market
value of its common stock, Claremont's reputation as a premier provider of IT
services to large and mid-sized corporations, the minimal overlap of Claremont
and CBSI's clients, the broad range of IT services provided by Claremont,
Claremont's 700 IT professionals and Claremont's experience in ERP and
client/server technology.
The merger with Claremont is expected to be accounted for by the pooling of
interests method of accounting.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following management's discussion and analysis of financial condition
and results of operations should be read in conjunction with CBSI's condensed
consolidated financial statements and notes thereto included in this Quarterly
Report. With the exception of statements regarding historical matters and
statements regarding CBSI's current status, certain matters discussed below and
throughout this management discussion and analysis are forward-looking
statements that involve substantial risks and uncertainties that could cause
actual results to differ materially from targets or projected results. Such
forward-looking statements regarding targets or projections may be identified by
the use of the words "anticipate", "believe", "estimate", "expect", "plan" and
similar expressions. Factors that could cause such differences include the
recruitment and retention of IT professionals, government regulation of
immigration, increasing significance and risks of non-U.S. operations,
variability of operating results, decrease in demand for Year 2000 services,
exposure to conditions in India, fixed-price projects, competition, management
of growth, rapid technological change, risks related to mergers and acquisitions
and potential liability to clients.
RESULTS OF OPERATIONS
Revenues. CBSI's revenues increased approximately 46% to $60.5 million for
the three month period ended March 31, 1998 from $41.5 million for the same
period in 1997. This growth in revenues is primarily attributable to increases
in CBSI's IT professional workforce, increases in average billing rates, further
expansion of CBSI's international operations and additional services provided to
existing clients. CBSI's IT professional workforce increased approximately 38%
for the three month period ended March 31, 1998 from the comparable three month
period in 1997. Revenues from international operations, principally offshore
development centers, increased approximately 341% to $7.7 million for the three
month period ending March 31, 1998 from $1.7 million for the same three month
period in 1997. Revenues from existing clients increased $15.2 million for the
three month period ended March 31, 1998 over the same period in 1997.
Gross Profit. Gross profit consists of revenues less cost of revenues. Cost
of revenues consists primarily of salaries (including nonbillable and training
time), benefits, travel and relocation for IT professionals. In addition, cost
of revenues includes depreciation and amortization, direct facility costs and
contractual services. Gross profit increased approximately 64% to $18.2 million
for the three month period ended March 31, 1998 from $11.1 million for the same
period in 1997. This increase is primarily attributable to increases in CBSI's
IT professional workforce and average U.S. billing rates, as well as the
continued expansion of CBSI's offshore development centers. Gross profit as a
percentage of revenues increased to approximately 30% for the three month period
ended March 31, 1998 from approximately 27% for the same period in 1997. This
increase in gross profit margin as a percentage is primarily attributable to
CBSI's continued strategic shift of its business toward higher margin service
offerings, including Year 2000 services, and the increasing utilization and
expansion of CBSI's offshore development centers which operate at higher gross
profit and operating margins. For the three month period ended March 31, 1998,
approximately 18% of revenues were generated from contract programming services,
as compared with approximately 27% for the three month period ended March 31,
1997. While Year 2000 services, a higher margin service offering, represented
20% of revenues for the three month period ended March 31, 1998 compared to 9%
for the same period in 1997.
Selling, General and Administrative. Selling, general and administrative
expenses consists primarily of costs associated with CBSI's direct selling and
marketing efforts, human resources and recruiting departments, administration
and indirect facility costs. Selling, general and administrative excluding
approximately $3.4 million of merger costs included in conjunction with the
merger with Costello expenses increased approximately 40% to $12.0 million for
the three month period ended March 31, 1998 from $8.6 million for the same
period in 1997. This increase resulted from the continued expansion of CBSI's
direct selling and marketing effort, further enhancement of the infrastructure,
and other general overhead cost increases necessary to support CBSI's continued
revenue growth. Exclusive of merger costs, as a percentage of revenues, selling,
general and administrative expenses represented approximately 20% for the three
month period ended March 31, 1998 compared to 21% for the same period in 1997.
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Other Expense (Income). Other expense (income) represents interest earned
on cash equivalents, net of interest expense on borrowings. Other income for the
three month period ended March 31, 1998 was $.5 million, as compared to other
expense of $.1 million for the three month period ended March 31, 1997. This
change is primarily due to reduced interest expense, resulting from the
repayment of CBSI outstanding debt in 1997 and the repayment of Costello's debt
in 1998 and interest earned from the investment of net proceeds from CBSI's
public offerings of Common Stock in 1997.
LIQUIDITY AND CAPITAL RESOURCES
From the Company's inception in 1985 through January 27, 1998, the Company
generally funded its operations and working capital needs through internally
generated funds, periodically supplemented by borrowings under the Company's
revolving credit facilities with commercial banks. The Company's cash used in
operations was $3.0 million for the three month periods ended March 31, 1998
compared to cash provided by operations of $4.6 million for the three month
period ended March 31, 1997. During the three month period ended March 31, 1998,
cash flows used in operating activities were approximately $3 million, primarily
the result of payment of deferred compensation arrangements, bonuses and taxes
related to the merger with Costello.
The principal use of cash for investing activities during the three month
periods ended March 31, 1998 and 1997 was for the purchase of property and
equipment and computer software primarily as part of the development and
enhancement of the Company's software development centers.
Historically, borrowings and repayments under CBSI's revolving credit
facilities represented the most significant components of cash provided or used
by financing activities. However, net cash provided by financing activities was
approximately $12.4 million primarily due to CBSI realizing net proceeds of
approximately $24.4 million from its initial public offering on March 5, 1997.
All outstanding borrowings under the revolving credit facility as of March 5,
1997 were repaid from the proceeds of the initial public offering. In connection
with the termination of CBSI's S corporation status, CBSI made partial
distributions of its previously undistributed S corporation earnings.
Under an arrangement with a commercial bank, CBSI may borrow an amount not
to exceed $21 million with interest at the bank's prime interest rate, or the
Libor rate plus 1 1/2%. The borrowings under this facility are short-term,
payable on demand and are secured by trade accounts receivable and equipment of
CBSI. As of March 31, 1998, there were no borrowings outstanding under this
facility. In recent years, CBSI has executed several short-terms notes with the
bank to finance the purchase of equipment and software. During fiscal year 1997,
the balances outstanding on these notes were repaid. In 1997 and through
February 1998, Costello had a line of credit with a commercial bank which
included a base borrowing line of $11 million and a special advance of $1.5
million. As of December 31, 1997, approximately $3.4 million was outstanding
under this line of credit. In conjunction with the merger and during the first
quarter of 1998, the outstanding balance on this line of credit was repaid.
The international operations of CBSI, principally the offshore development
centers, accounted for approximately 12% of CBSI's total revenues during the
three month period ended March 31, 1998. Most of the CBSI's revenues are billed
in U.S. dollars. CBSI recognizes transaction gains and losses in the period of
occurrence. Foreign currency fluctuations during the three month period ended
March 31, 1998 did not have a material impact on income from operations as
currency fluctuations on revenue denominated in a foreign currency were offset
by currency fluctuations on expenses denominated in a foreign currency. There
were no material operating trends or effects on liquidity as a result of
fluctuations in the functional currency. CBSI does not generally use any types
of derivatives to hedge against foreign currency fluctuations, nor does it
speculate in foreign currency.
Inflation did not have a material impact on CBSI's revenues or income from
operations during the three month period ended March 31, 1998.
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CBSI continues to address the impact of the year 2000 issue on its internal
systems. CBSI believes the cost associated with its plan to convert its internal
systems will not be material. In addition, CBSI anticipates that Year 2000
conversion services will represent a significant percentage of its revenues for
the next few years.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," was issued in February 1997. CBSI will be
required to adopt the new standard for the year ended December 31, 1998. This
statement requires specific disclosure regarding CBSI's capital structure,
including descriptions of the securities comprising the capital structure and
the contractual rights of the holders of such securities. CBSI's adoption of
this statement during the first quarter of 1998 resulted in no significant
changes to the financial statements.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," was issued in June 1997. CBSI will be required to adopt
the new standard for the year ended December 31, 1998, although early adoption
is permitted. The primary objective of this statement is to report and disclose
a measure ("comprehensive income") of all changes in equity of a company that
result from transactions and other economic events of the period other than
transactions with owners. CBSI's adoption of this statement during the first
quarter of 1998 resulted in no significant changes to the financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was issued in June 1997.
CBSI will be required to adopt the new standard for the year ended December 31,
1998, although early adoption is permitted. This statement requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way CBSI's management organizes segments within CBSI for making
operating decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management structure, or any
other manner in which management disaggregates a company. CBSI will adopt this
statement in fiscal year 1998.
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," was issued in
February 1998. CBSI will be required to adopt the new standard for the year
ended December 31, 1998. This statement standardizes the disclosure requirements
for pensions and other postretirement benefits to the extent practicable,
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis, and eliminates
certain disclosures that are no longer as useful as they were when Statement of
Financial Accounting Standards No. 87, 88 and 106 were issued. CBSI will adopt
this statement in fiscal year 1998.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NUMBER EXHIBIT
------ -------
(11) Computation of Earnings per share
(27) Financial Data Schedule
(b) Reports on Form 8-K
One report on Form 8-K was filed during the three month period ended March
31, 1998 --
On March 30, 1998, an 8-K was filed reporting a two-for-one split of the
Company's common stock effected in the form of a stock dividend payable on March
19, 1998 to shareholders of record on March 5, 1998. All agreements concerning
stock options provide for the issuance of additional shares due to the
declaration of the stock split. All references to number of shares, except
shares authorized, the number of options and to per share information in the
condensed consolidated financial statements and related notes have been adjusted
to reflect the stock split on a retroactive basis.
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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.
COMPLETE BUSINESS SOLUTIONS, INC.
By: /s/ RAJENDRA B. VATTIKUTI
------------------------------------
Rajendra B. Vattikuti
President and Chief Executive
Officer
/s/ TIMOTHY S. MANNEY
------------------------------------
Timothy S. Manney
Executive Vice President of Finance
and
Administration, Treasurer and
Director
Dated: May 13, 1998
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
11 Computation of Per Share Earnings
27 FDS Schedule