1
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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 September 30, 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)
34,769,505
(Outstanding as of November 2, 1998)
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COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income................. 3
Condensed Consolidated Balance Sheets....................... 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................................... 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
SIGNATURES............................................................. 12
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
1998 1997 1998 1997
------- ------- -------- --------
Revenues.............................................. $98,688 $72,878 $272,554 $198,543
Cost of revenues:
Salaries, wages and employee benefits............... 50,839 39,806 140,462 109,391
Contractual services................................ 9,804 5,204 26,438 13,962
Project travel and relocation....................... 3,006 3,065 10,585 7,976
Depreciation and amortization....................... 984 848 3,018 2,119
------- ------- -------- --------
Total cost of revenues...................... 64,633 48,923 180,503 133,448
------- ------- -------- --------
Gross profit................................ 34,055 23,955 92,051 65,095
Selling, general and administrative expenses.......... 21,769 18,149 62,922 50,413
Merger costs and other................................ 9,180 360 28,250 716
------- ------- -------- --------
Income from operations...................... 3,106 5,446 879 13,966
Interest expense (income)............................. (821) (163) (2,110) (126)
------- ------- -------- --------
Income before provision for income taxes and
minority interest......................... 3,927 5,609 2,989 14,092
Provision for income taxes............................ 2,657 1,832 5,493 5,121
Minority interest..................................... -- -- -- 82
------- ------- -------- --------
Net income (loss)........................... $ 1,270 $ 3,777 $ (2,504) $ 8,889
======= ======= ======== ========
Basic earnings (loss) per share --
Weighted-average shares outstanding................. 34,539 31,031 34,172 28,831
======= ======= ======== ========
Basic earnings (loss) per share..................... $ 0.04 $ 0.12 $ (0.07) $ 0.31
======= ======= ======== ========
Diluted earnings (loss) per share --
Weighted-average shares outstanding................. 34,539 31,031 34,172 28,831
Diluted effect of stock options..................... 1,758 2,380 -- 1,954
------- ------- -------- --------
Diluted weighted average shares outstanding......... 36,297 33,411 34,172 30,785
======= ======= ======== ========
Diluted earnings (loss) per share................... $ 0.03 $ 0.11 $ (0.07) $ 0.29
======= ======= ======== ========
Pro Forma Information:
Net income (loss) as reported......................... $ 1,270 $ 3,777 $ (2,504) $ 8,889
Pro forma incremental income tax provision
(benefit)........................................... -- 265 (1,417) 57
------- ------- -------- --------
Pro forma net income (loss)........................... $ 1,270 $ 3,512 $ (1,087) $ 8,832
======= ======= ======== ========
Basic earnings (loss) per share --
Weighted-average shares outstanding................. 34,539 31,031 34,172 29,189
======= ======= ======== ========
Basic earnings (loss) per share..................... $ 0.04 $ 0.11 $ (0.03) $ 0.30
======= ======= ======== ========
Diluted earnings (loss) per share --
Weighted-average shares outstanding................. 34,539 31,031 34,172 29,189
Diluted effect of stock options..................... 1,758 2,380 -- 1,954
------- ------- -------- --------
Diluted weighted-average shares outstanding......... 36,297 33,411 34,172 31,143
======= ======= ======== ========
Pro forma diluted earnings (loss) per share......... $ 0.03 $ 0.11 $ (0.03) $ 0.28
======= ======= ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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4
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 65,459 $ 61,861
Accounts receivable, net.................................. 70,732 54,445
Revenues earned in excess of billing, net................. 12,929 11,774
Prepaid expenses and other................................ 3,099 2,545
-------- --------
Total current assets................................... 152,219 130,625
-------- --------
Property and equipment, net................................. 15,485 15,186
Goodwill, net............................................... 4,222 5,870
Other assets, net........................................... 7,060 14,820
-------- --------
Total assets........................................... $178,986 $166,501
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 11,885 $ 6,909
Accrued payroll and related costs......................... 28,903 19,588
Revolving credit facility................................. -- 3,380
Current portion of long term debt......................... -- 893
Distribution payable to shareholders...................... 365 1,325
Deferred revenue.......................................... 2,164 1,451
Other accrued liabilities................................. 9,628 3,893
-------- --------
Total current liabilities.............................. 52,945 37,439
-------- --------
Other liabilities........................................... 337 387
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized, none issued................................ -- --
Common stock, no par value, 200,000,000 shares authorized,
and 34,720,993 and 33,242,105 shares issued and
outstanding as of September 30, 1998 and December 31,
1997, respectively..................................... -- --
Additional paid-in capital................................ 112,734 111,143
Retained earnings......................................... 21,717 20,870
Stock subscriptions receivable............................ (7,234) (2,503)
Cumulative translation adjustment......................... (1,513) (835)
-------- --------
Total shareholders' equity............................. 125,704 128,675
-------- --------
Total liabilities and shareholders' equity............. $178,986 $166,501
======== ========
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
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5
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1998 1997
-------- --------
Net income (loss)........................................... $ (2,504) $ 8,889
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 6,587 5,342
Provision for doubtful accounts........................... 949 234
Stock option expense...................................... -- 356
Minority interest......................................... -- 82
Writedown of other assets and other....................... 15,649 --
Equity in loss of investee................................ -- 216
Change in assets and liabilities --
Accounts receivable.................................... (21,627) (11,605)
Prepaid expenses and other............................. (1,030) (271)
Accounts payable....................................... 3,562 3,089
Accrued payroll and related costs and other
liabilities........................................... 12,497 5,946
Deferred revenue....................................... 860 (269)
-------- --------
Net cash provided by operating activities............ 14,943 12,009
-------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (6,667) (5,505)
Investment in computer software........................... (2,080) (5,022)
Payment for purchase of assets, net of cash acquired...... -- (3,440)
-------- --------
Net cash used in investing activities................ (8,747) (13,967)
-------- --------
Cash flows from financing activities:
Net payments on revolving credit facility and long-term
debt................................................... (4,471) (5,488)
Net proceeds from issuance of common stock................ 2,978 63,155
S corporation distribution................................ (1,058) (10,792)
-------- --------
Net cash provided by (used in) financing
activities.......................................... (2,551) 46,875
-------- --------
Effect of exchange rate changes on cash..................... (47) (7)
-------- --------
Increase in cash and cash equivalents....................... 3,598 44,910
-------- --------
Cash and cash equivalents at beginning of period............ 61,861 19,842
-------- --------
Cash and cash equivalents at end of period.................. $ 65,459 $ 64,752
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 128 $ 896
Income taxes........................................... $ 8,406 $ 3,090
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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6
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 September 30, 1998, the results of its operations for
the three and nine month periods ended September 30, 1998 and 1997, and cash
flows for the nine month periods ended September 30, 1998 and 1997. These
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in CBSI's Joint Proxy
Statement/Prospectus, dated June 9, 1998.
The results of operations for the three and nine month periods ended
September 30, 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 July 24, 1998, a subsidiary of CBSI closed an agreement and plan of
merger with Claremont Technology Group, Inc. (Claremont), a publicly traded
Oregon corporation. The merger agreement provided that all of the outstanding
Claremont common stock be exchanged for approximately 7,235,000 shares of CBSI's
common stock. In addition, outstanding Claremont options as of July 24, 1998
were converted into approximately 1,225,000 options of CBSI. These options
retained their original terms and vesting periods. The merger with Claremont 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. Claremont had a fiscal year end
of June 30. For comparability purposes, the balance sheets as of September 30,
1998 and December 31, 1997, and the results of operations for the three and nine
months ended September 30, 1998 and 1997 of Claremont were combined with the
same periods for CBSI.
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 approximately 3,363,000 of CBSI's
common stock. In addition, outstanding Costello options as of January 27, 1998
were converted into approximately 57,000 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, and
cash flows 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 approximately 1,391,000 shares of CBSI's common
stock. In addition, outstanding Synergy options as of November 20, 1997 were
converted into approximately 418,000 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
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accompanying condensed consolidated balance sheets and statements of income and
cash flows have been retroactively restated.
3. STOCK DIVIDEND
On February 18, 1998, the Board of Directors declared a two-for-one split
of CBSI'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.
4. INCOME TAXES
Prior to CBSI's initial public offering and the dates of the mergers with
Synergy and Costello, the shareholders of the respective companies had elected,
under the provisions of Subchapter S of the United States Internal Revenue Code,
to have income and related tax benefits included in the taxable income of the
shareholders. As a result, no provision for U.S. federal or certain state income
taxes have been included in the condensed consolidated statements of income
prior to CBSI's initial public offering, the date of the merger with Synergy and
the date of the merger with Costello.
Upon termination of the Subchapter S elections, future income of CBSI is
subject 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 $1,400 during the nine month
period ended September 30, 1998 and approximately $920 during the nine month
period ended September 30, 1997.
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 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.
5. MERGER COSTS AND OTHER
During 1998, CBSI incurred approximately $12,600 in costs related to the
mergers of Claremont and Costello. In addition, prior to the merger, Claremont
incurred approximately $15,600 to writedown certain assets of which they
determined did not fit with its future strategic plans and to reorganize its
operations.
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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", "expect", "estimate", "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, general economic conditions, risks
related to mergers and acquisitions and potential liability to clients.
RESULTS OF OPERATIONS
Revenues. The Company's revenues increased approximately 35% to $98.7
million for the three month period ended September 30, 1998 from $72.9 million
for the same period in 1997. Revenue increased approximately 37% to $272.6
million for the nine month period ended September 30, 1998 from $198.5 million
for the same period in 1997. This growth in revenues is primarily attributable
to increases in the Company's IT professional workforce, increases in average
billing rates, further expansion of the Company's international operations and
additional services provided to existing clients. The Company's IT professional
workforce increased approximately 26% for the three month period ended September
30, 1998 from the comparable three month period in 1997, and approximately 31%
for the nine month period ended September 30, 1998 from the comparable nine
month period in 1997. Revenues from international operations, principally
offshore development centers, increased approximately 155% to $31.4 million for
the nine month period ending September 30, 1998 from $12.3 million for the same
nine month period in 1997. Revenues from existing clients increased $17.8
million and $61.0 million for the three month and nine month periods ended
September 30, 1998, respectively, over the same periods in 1997.
Gross Profit. Gross profit increased approximately 42% to $34.1 million for
the three month period ended September 30, 1998 from $24 million for the same
period in 1997, and approximately 41% to $92 million for the nine month period
ended September 30, 1998 from $65.1 million for the same nine month period in
1997. These increases are primarily attributable to increases in the Company's
IT professional workforce and average U.S. billing rates, as well as the
continued expansion of the Company's offshore development centers. Gross profit
as a percentage of revenues increased to approximately 34.5% for the three month
period ended September 30, 1998 from approximately 32.9% for the same period in
1997. For the nine month period ended September 30, 1998, gross profit margin
increased to approximately 33.8% from 32.8% for the same period in 1997. These
increases in gross profit margin as a percentage of revenues are primarily
attributable to the Company's continued strategic shift of its business toward
higher margin service offerings, including Year 2000 services, and the
increasing utilization and expansion of the Company's offshore development
centers which operate at higher gross profit and operating margins. For the
three month period ended September 30, 1998, approximately 11% of revenues were
generated from contract programming services, as compared with approximately 17%
for the three month period ended September 30, 1997. Year 2000 services, a
higher margin service offering, represented 19% of revenues for the three month
period ended September 30, 1998 compared to 11% for the same period in 1997.
Selling, General and Administrative. Exclusive of merger costs and other,
selling, general and administrative expenses increased approximately 20% to
$21.8 million for the three month period ended September 30, 1998 from $18.1
million for the same period in 1997, and approximately 24.8% to $62.9 million
for the nine month period ended September 30, 1998 from $50.4 million for the
same nine month period in 1997. These increases resulted from the continued
expansion of the Company's direct selling and marketing effort, further
enhancement of the infrastructure, and other general overhead cost increases
necessary to support the Company's continued revenue growth. Exclusive of merger
costs and other, as a percentage of revenues,
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selling, general and administrative expenses decreased to 22.1% and 23.1% for
the three and nine month periods ending September 30, 1998, respectively,
compared to 24.9% and 25.4% for the same periods in 1997.
Merger Costs and Other. During 1998, CBSI incurred approximately $12.6
million in costs related to the mergers of Claremont and Costello. In addition,
prior to the merger, Claremont incurred approximately $15.6 million to writedown
certain assets which they determined did not fit with its future strategic plans
and to reorganize its operations.
Interest Expense (Income). Interest expense (income) represents interest
earned on cash equivalents, net of interest expense on borrowings. Interest
income for the nine month period ended September 30, 1998 was $2.1 million, as
compared to $0.1 million for the nine month period ended September 30, 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 and
Claremont'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
The Company's cash provided by operations was $14.9 million for the nine
month period ended September 30, 1998 compared to $12.0 million for the nine
month period ended September 30, 1997. The increase in net cash provided by
operating activities for the nine month period ending September 30, 1998
compared to the same period in 1997, is primarily due to improved operating
margins offset by the payment of costs associated with CBSI's mergers with
Costello in January 1998 and Claremont in July 1998.
The principal use of cash for investing activities during the nine month
periods ended September 30, 1998 and 1997 was for the development of computer
software, and purchase of property and equipment 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. 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. All outstanding borrowings under the revolving credit
facility as of March 5, 1997 were repaid from proceeds of the initial public
offering. As of September 30, 1998, there were no borrowings outstanding under
this facility. In recent years, CBSI has executed several short-term 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. In conjunction with the merger and during the first quarter of 1998,
the outstanding balance on this line of credit was repaid. Under an agreement
with a commercial bank, Claremont has a $5 million line of credit and a $750,000
standby letter of credit, which bears interest at the offshore rate plus 1.75%
or LIBOR plus 1.75%. The borrowings under this facility are secured by the
machinery and equipment and receivables of Claremont. As of September 30, 1998,
there were no borrowings outstanding and approximately $300,000 standby letter
of credit outstanding under this facility. In connection with the terminations
of CBSI's S corporation status, CBSI made partial distributions of its
previously undistributed S corporation earnings. Net cash provided by financing
activities for the nine month period ended September 30, 1997 of $46.9 million
was primarily due to CBSI realizing net proceeds of approximately $61.6 million
from its initial public offering in March 1997 and its secondary offering in
August 1997.
The international operations of CBSI, principally the offshore development
centers, accounted for approximately 11.5% of CBSI's total revenues during the
nine month period ended September 30, 1998. Most of 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 nine month period ended
September 30, 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.
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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 nine month period ended September 30, 1998.
CBSI is currently in the process of evaluating its information technology
infrastructure for Year 2000 compliance. CBSI does not expect that the cost to
modify its information technology infrastructure to be Year 2000 compliant will
be material to its financial condition or results of operations. CBSI does not
anticipate any material disruption in its operations as a result of any failure
to be in compliance. CBSI does not currently have any information concerning
Year 2000 compliance status of its suppliers and customers. In the event that
any of CBSI's significant suppliers or customers do not successfully and timely
achieve Year 2000 compliance, CBSI's business or operations may be adversely
affected.
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 nine month period ended September 30, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 1998 Complete Business Solutions, Inc. held a special meeting
of its shareholders to consider two proposals:
1. to authorize the amendment of Complete Business Solutions, Inc.'s
Articles of Incorporation to increase the number of authorized shares of
Common Stock from 30,000,000 to 200,000,000;
2. to approve the issuance of Common Stock in connection with the
proposed merger with Claremont Technology Group, Inc.
The shareholders approved the increase in the number of authorized shares
of Common Stock from 30,000,000 to 200,000,000. The vote was 18,959,325
approved, 2,338,034 against and 18,149 abstentions.
The shareholders approved the issuance of Common Stock in connection with
the proposed merger with Claremont. The vote was 21,258,648 approved, 21,309
against and 17,972 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NUMBER EXHIBIT
------ -------
(11) Computation of Earnings per share
(27) Financial Data Schedule
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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: November 16, 1998
12
13
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
(11) Computation of Earnings per share
(27) Financial Data Schedule