================================================================================
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 EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 0-28148
THE VINCAM GROUP, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2452823
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2850 DOUGLAS ROAD CORAL GABLES, FLORIDA 33134
(Address of principal executive offices) (Zip Code)
(305) 460-2350
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year,
if changed since last report)
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 ____
As of May 8, 1998, The Vincam Group, Inc. had 15,611,807 shares of
common stock, $.001 par value, outstanding.
================================================================================
THE VINCAM GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements............................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................ 22
Item 2. Changes in Securities and Use of Proceeds........................ 22
Item 6. Exhibits and Reports on Form 8-K................................. 22
SIGNATURES................................................................. 23
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
----
THE VINCAM GROUP, INC.
Consolidated Balance Sheets as of March 31, 1998 (Unaudited) and
December 31, 1997........................................................ 4
Unaudited Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1997............................................ 5
Unaudited Consolidated Statement of Changes in Stockholders' Equity
for the Three Months Ended March 31, 1998................................ 6
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1998 and 1997.................................................. 7
Notes to Consolidated Financial Statements (Unaudited)..................... 8
3
THE VINCAM GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
-------------- ------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 7,640,965 $ 4,934,755
Investments................................................... -- 1,766,737
Accounts receivable, net...................................... 50,759,319 48,924,247
Due from affiliates........................................... 466,371 561,673
Income tax receivable......................................... 451,894 1,536,371
Deferred taxes................................................ 735,488 735,488
Reinsurance recoverable....................................... 1,495,587 1,692,513
Prepaid workers' compensation insurance premium............... 12,769,045 14,467,403
Prepaid expenses and other current assets..................... 3,938,129 3,020,745
-------------- --------------
Total current assets................................... 78,256,798 77,639,932
Property and equipment, net................................... 8,076,164 7,852,498
Deferred taxes................................................ 640,735 640,735
Goodwill and client contracts, net............................ 7,274,753 7,384,323
Other assets.................................................. 1,437,431 1,498,438
-------------- --------------
$ 95,685,881 $ 95,015,926
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses......................... $ 5,494,637 $ 4,712,931
Accrued salaries, wages and payroll taxes..................... 41,970,127 39,887,369
Reserve for claims............................................ 3,945,079 4,106,734
Income tax payable............................................ 612,188 --
Current portion of borrowings................................. 7,728,245 11,061,009
Deferred gain................................................. 251,678 460,294
-------------- --------------
Total current liabilities.............................. 60,001,954 60,228,337
Long term borrowings, less current portion........................ 34,945 36,818
Reserve for claims................................................ 301,000 402,000
Other liabilities................................................. 1,138,889 1,038,037
-------------- --------------
Total liabilities...................................... 61,476,788 61,705,192
-------------- --------------
Commitments and contingencies (Note 6)............................ -- --
-------------- --------------
Stockholders' equity:
Common stock, $.001 par value, 60,000,000 shares
authorized, 15,583,631 shares issued and outstanding....... 15,583 15,391
Additional paid in capital.................................... 34,237,625 35,142,798
Accumulated deficit........................................... (44,115) (1,847,455)
-------------- --------------
Total stockholders' equity............................. 34,209,093 33,310,734
-------------- --------------
$ 95,685,881 $ 95,015,926
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
4
THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1998 1997
------------------ -----------------
Revenues.................................................. $ 284,222,770 $ 220,024,174
------------------ -----------------
Direct costs:
Salaries, wages and employment
taxes of worksite employees......................... 254,597,519 194,324,100
Health care and workers' compensation................. 10,432,458 9,657,609
State unemployment taxes and other.................... 3,619,936 2,862,757
------------------ -----------------
Total direct costs.............................. 268,649,913 206,844,466
------------------ -----------------
Gross profit.............................................. 15,572,857 13,179,708
------------------ -----------------
Operating expenses:
Administrative personnel.............................. 6,426,380 5,717,606
Other general and administrative...................... 3,365,934 2,983,019
Sales and marketing................................... 1,715,363 1,549,739
Provision for doubtful accounts....................... 258,412 315,850
Depreciation and amortization......................... 724,338 766,106
------------------ -----------------
Total operating expenses........................ 12,490,427 11,332,320
------------------ -----------------
Operating income.......................................... 3,082,430 1,847,388
Interest (expense) income, net............................ (40,090) 175,777
------------------ -----------------
Income before taxes....................................... 3,042,340 2,023,165
Provision for income taxes................................ (1,239,000) (804,407)
------------------ ------------------
Net income................................................ $ 1,803,340 $ 1,218,758
================== =================
Basic net income per common share......................... $ 0.12 $ 0.08
================== =================
Weighted average number of shares
outstanding used in basic
earnings per share calculation........................ 15,563,038 15,212,450
================== =================
Diluted net income per common share....................... $ 0.11 $ 0.08
================== =================
Weighted average number of shares
outstanding used in diluted
earnings per share calculation........................ 16,267,673 15,980,478
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
5
THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
COMMON STOCK
-------------------------- RETAINED
ADDITIONAL EARNINGS
PAID IN (ACCUMULATED
SHARES PAR VALUE CAPITAL DEFICIT) TOTAL
---------- ----------- ------------ --------------- -----------
Balance at December 31, 1997..................... 15,390,880 $ 15,391 $ 35,142,798 $ (1,847,455) $33,310,734
Issuance of common stock under
acquisition agreements.......................... 150,000 150 (1,001,732) -- (1,001,582)
Issuance of common stock to
employees under stock option plans.............. 42,751 42 96,559 -- 96,601
Net income....................................... -- -- -- 1,803,340 1,803,340
------------- ----------- -------------- --------------- ------------
Balance at March 31, 1998........................ 15,583,631 $ 15,583 $ 34,237,625 $ (44,115) $34,209,093
============= =========== ============== =============== ============
The accompanying notes are an integral part of these consolidated
financial statements.
6
THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
--------------------------------
1998 1997
-------------- ------------
Cash flows from operating activities:
Net income................................................. $ 1,803,340 $ 1,218,758
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................ 724,338 766,106
Provision for doubtful accounts.......................... 258,412 315,850
Deferred gain............................................ (208,616) 460,552
Deferred income tax expense.............................. -- 1,117,306
Changes in assets and liabilities:
Increase in accounts receivable........................ (2,093,484) (4,968,241)
Decrease in due from affiliates........................ 95,302 27,875
Decrease in income tax receivable...................... 1,084,477 --
Decrease (increase) in reinsurance recoverable......... 196,926 (1,273,800)
Decrease in prepaid workers' compensation
insurance premium.................................... 1,698,358 691,728
Increase in prepaid expenses and other current assets.. (917,384) (399,665)
Decrease (increase) in other assets.................... 28,022 (106,442)
Increase (decrease) in accounts payable and
accrued expenses..................................... 105,124 (804,349)
Increase in accrued salaries, wages and payroll taxes.. 2,082,755 4,163,531
Decrease in reserve for claims......................... (587,655) (461,749)
Increase (decrease) in income taxes payable............ 612,188 (236,194)
Decrease in deferred compensation...................... -- (276,596)
Increase (decrease) in other liabilities............... 100,852 (102,445)
-------------- -------------
Net cash provided by operating activities..................... 4,982,955 132,225
-------------- -------------
Cash flows from investing activities:
Purchases of property and equipment........................ (805,449) (1,336,777)
Redemption (purchases) of short term investments........... 1,766,737 (169,138)
-------------- -------------
Net cash provided by (used in) investing activities........... 961,288 (1,505,915)
-------------- -------------
Cash flows from financing activities:
Principal payments on borrowings........................... (3,334,634) (21,388)
Notes payable to affiliate................................. -- (1,018,000)
Payment of amounts due under acquisition agreements........ -- (478,364)
Issuance of common stock to employees under stock plans.... 96,601 123,330
-------------- -------------
Net cash used in financing activities......................... (3,238,033) (1,394,422)
-------------- -------------
Net increase (decrease) in cash and cash equivalents.......... 2,706,210 (2,768,112)
Cash and cash equivalents, beginning of period................ 4,934,755 18,884,531
-------------- -------------
Cash and cash equivalents, end of period...................... $ 7,640,965 $ 16,116,419
============== =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
On January 7, 1997, the Company acquired the 49% minority interest
in Staff Administrators of Western Colorado, Inc., a subsidiary of Staff
Administrators, Inc. ("SAI"), in a transaction accounted for as a purchase. The
fair value of the net assets acquired amounted to $293,359. The excess of
$566,641 of the purchase price over the net assets acquired was allocated to
goodwill.
The accompanying notes are an integral part of these consolidated
financial statements.
7
THE VINCAM GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of The
Vincam Group, Inc. and its subsidiaries have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. They do
not include all information and notes required by generally accepted accounting
principles for complete financial statements and should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
year ended December 31, 1997 included in The Vincam Group, Inc.'s Annual Report
on Form 10-K, as amended by Form 10-K/A No.1. The financial information
furnished reflects all adjustments, consisting only of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and of cash flows
for the interim periods presented. The results of operations for the periods
presented are not necessarily indicative of the results for the entire year.
The accompanying unaudited financial statements include the accounts of
The Vincam Group, Inc. and its subsidiaries ("Vincam" or the "Company"). All
material intercompany balances and transactions have been eliminated.
NOTE 2 - ACQUISITIONS
On January 30, 1998, the Company acquired Corporate Staff Services,
Inc. ("CSS"), a privately held PEO headquartered in Orange County, Connecticut
(the "CSS Acquisition"). The Company issued 150,000 shares of its common stock
in exchange for all of the outstanding shares of common stock of CSS. The
acquisition has been accounted for as a pooling of interest, however, since the
CSS Acquisition was not significant to the Company's financial condition and
results of operations, the 1997 financial information has not been restated to
include the financial position and results of operations of CSS.
NOTE 3 - ACCOUNTS RECEIVABLE
At March 31, 1998 and December 31, 1997, accounts receivable consisted
of the following:
1998 1997
---------------- ----------------
Billed to clients........................... $ 16,330,134 $ 16,149,364
Unbilled revenues........................... 36,768,909 34,801,470
---------------- ----------------
53,099,043 50,950,834
Less: allowance for doubtful accounts....... (2,339,724) (2,026,587)
---------------- ----------------
$ 50,759,319 $ 48,924,247
================ ================
NOTE 4 - RESERVE FOR CLAIMS
In December 1996, the Company entered into an arrangement with a
national insurance company to provide workers' compensation insurance coverage
at a cost which is equal to a fixed percentage of the average standard premium
for 1997 through 1999, subject to a deductible of only $2,000 per medical claim.
The workers' compensation arrangement, originally covering the years 1997
through 1999, now includes coverage through the year 2000 under certain revised
terms and conditions. The arrangement remains a guaranteed cost program.
Accordingly, effective January 1, 1997, the Company recorded
8
THE VINCAM GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
workers' compensation costs based primarily on the fixed percentage of the
average standard premium under such policy, rather than through the previous
practice of applying actuarial estimates to claims.
In addition, in December 1996, March 1997, September 1997 and December
1997, the Company entered into agreements to reinsure substantially all of the
remaining claims under the Company's large deductible worker's compensation
insurance policies for the years 1994, 1995 and 1996 (including those of
acquired companies), for an aggregate premium of $6,010,000. Since reserves for
claims for these years have been previously provided, the Company has recorded
the premium as a reinsurance receivable and a deferred gain which will be
recognized to income in future periods based on the proportion of cumulative
claims paid to the total estimated liability for claims.
As a consequence of the reinsurance agreement described above, at March
31, 1998 and December 31, 1997, the Company has classified as current the
estimated amounts of reserves established for claims and reinsurance recoverable
expected to be paid and to be collected, respectively, within one year, as well
as the related deferred gain expected to be recognized within one year.
At March 31, 1998 and December 31, 1997, the Company's reserves for
claims costs are as follows:
1998 1997
--------------- ----------
Reserve for workers' compensation claims.............. $ 2,148,705 $ 2,035,477
Reserve for behavioral and health care claims......... 2,097,374 2,473,257
-------------- -------------
4,246,079 4,508,734
Less: workers' compensation claims expected
to be settled in more than one year................... (301,000) (402,000)
---------------- -------------
Reserve for claims--current $ 3,945,079 $ 4,106,734
=============== =============
9
THE VINCAM GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
NOTE 5 - BORROWINGS
Borrowings at March 31, 1998 and December 31, 1997, are as follows:
1998 1997
--------------- --------------
Note payable for workers' compensation premiums, maturing in
November 1998, with monthly payments of principal and
interest of $1,144,534, at a rate of 6.30%................................. $ 6,660,562 $ 10,035,123
Notes payable for general liability insurance premiums, maturing
in 1998, with monthly payments of principal and interest ranging from
$16,333 to $19,280, at a rates ranging from 6.50% to 6.70%................. 242,683 173,526
Note payable to bank, original amount of $1 million, repayable
in monthly instalments of $4,167, plus interest at 8.50% per
annum, through November 1998 when a balloon payment of
$750,000 is due, secured by land and building.............................. 783,223 791,557
Note payable for state unemployment taxes, maturing in 1998
with monthly payments of $3,264............................................ 6,174 16,326
Capital lease obligations for computer hardware and software,
payable in monthly instalments of principal and interest ranging
from $3,214 to $7,479 through May 2000, with interests
ranging from 9.80% to 12.30% per annum, collateralized
by computer hardware and software.......................................... 37,672 46,276
Other notes payable, bearing interest at rates ranging from
7.50% to 10.75%, repayable in various monthly instalments.................. 32,876 35,019
--------------- --------------
7,763,190 11,097,827
Less: current portion...................................................... (7,728,245) (11,061,009)
--------------- --------------
$ 34,945 $ 36,818
=============== ==============
In April 1997, the Company entered into a revolving line of credit
agreement for an aggregate amount of $50,000,000 with a group of banks (the
"Credit Agreement"). The Credit Agreement provides for a revolving credit
facility with a sublimit of $15,000,000 to fund working capital advances and
standby letters of credit. The Credit Agreement also provides for advances to
finance acquisitions. Amounts outstanding under the revolving credit facility
mature on April 24, 2000. If, on April 24, 2000, certain conditions are
satisfied, any amounts outstanding under the revolving line of credit may be
converted into a term loan payable in eight quarterly instalments commencing on
August 1, 2000. The Company is required to pay an unused facility fee ranging
from .20% to .35% per annum on the facility, depending upon certain financial
covenants.
The Credit Agreement is secured by a pledge of shares of all of the
Company's subsidiaries. The Credit Agreement contains customary events of
default and covenants which prohibit, among other things, incurring additional
indebtedness in excess of a specified amount, paying dividends, creating liens
and engaging in certain mergers or combinations without the prior written
consent of the lender. The Credit
10
THE VINCAM GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
Agreement also contains certain financial covenants relating to current ratio,
debt to capital ratio, debt and fixed charges coverage and minimum tangible net
worth, as defined in the Credit Agreement.
Interest under the Credit Agreement accrues at rates based, at the
Company's option, on the Bank's Prime Rate plus a margin of as much as .25%, or
its Eurodollar Rate (as defined in the Credit Agreement) plus a margin of 1.00%
to 1.75%, depending on certain financial covenants.
Under the Company's revolving credit facility, the Company had
outstanding $7,551,200 in standby letters of credit at December 31, 1997, which
guarantee the payment of claims to the Company's workers' compensation insurance
carrier. As of that date there were no amounts outstanding for working capital
or advances to finance acquisitions under the revolving credit facility.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On December 9, 1997, the Company entered into a leasing arrangement
with respect to a new headquarters facility in Miami-Dade County that the
Company expects will be completed in the fall of 1998. The leasing arrangement
has an initial expiration date of four years after completion of the facility
and allows the Company to extend the term of the lease for up to three more
years subject to compliance with the terms and conditions of the credit
agreement and related documents. The lessor of the facility has financed 97% of
the costs of acquiring the land and constructing the facility. The financing
agreement relating to the facility (the "Facility Financing Agreement") contains
certain covenants, including financial covenants, of the Company and events of
default with respect thereto, which covenants are the same in all material
respects as those contained in the Company's Credit Agreement. Under the leasing
arrangement, the Company's commitment in future years will be based on (i)
interest at a competitive rate on all outstanding loan amounts with respect to
the facility plus (ii) the yield, at a competitive rate, in respect of the
lessor's 3% equity investment. Default under the Company's covenants contained
in the Facility Financing Agreement constitutes default under the Company's
lease of the headquarters facility. In the event of such default, the Company is
obligated to either purchase the facility for the Purchase Price (defined below)
or pay a termination fee in an amount approximately equal to the Purchase Price.
The maximum amount on which the lease payments will be based is limited to $12
million. As of December 31, 1997, an aggregate of $3.9 million in loans were
outstanding to the lessor which financed the $2.6 million purchase price of the
land and certain development and closing costs.
The Company has an option to purchase the headquarters facility at any
time for an amount equal to the total of (i) the amount of loans outstanding
with respect to the property, (ii) the lessor's investment in the facility,
(iii) any accrued and unpaid interest on such outstanding loans, and (iv) all
accrued and unpaid yield on the lessor's equity investment (the "Purchase
Price"). If the Company determines not to purchase the facility, it will be
required to make a termination payment at the end of the lease term equal to
approximately 85% of the Purchase Price. The Company's lease payment obligations
are secured by a pledge of the stock of all of its subsidiaries.
In October 1996, the Company received a notice of assessment in the
discounted amount of approximately $53,500 from The Treasurer of the State of
Florida Department of Insurance as Receiver of United States Employer Consumer
Self Insurance Fund of Florida, a workers' compensation insurance fund which was
declared insolvent (the "Fund"). The Company paid the discounted assessment in
January 1997. The Company had certain worksite employees covered by the Fund
during the fiscal years ended December 31, 1992, 1993 and 1994. The court order
authorizing the assessment provides that the Company, by paying the discounted
assessment, is deemed to have paid its assessment in full and is not subject to
any further assessment for policyholder loss claims. The Company may be subject
to additional liability for the
11
THE VINCAM GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
assessments of other Fund members. The Company believes that there are
approximately 700 members of the Fund which have been assessed $37,000,000 in
the aggregate. Although the amount of the potential exposure, if any, for such
additional liability is not yet determinable, management believes that the
Company would have meritorious defenses to such additional liability and that
its ultimate liability in this matter will not have a material adverse effect on
the Company's financial condition or results of operations. There cannot,
however, be any assurance that any such liability will not have such a material
adverse effect.
The Company is a defendant in a lawsuit pending in the 11th Judicial
Circuit in Miami-Dade County, Florida related to a wrongful death and premises
liability claim involving a worksite employee. The plaintiff's complaint, which
was sustained by the court, alleges premises liability and negligence against
both the Company and its client as a result of a worksite accident on the
client's premises and seeks damages in excess of $15,000. The Company is
asserting that its liability under this claim, if any, should be limited to
$100,000 due to the immunity provisions of the Florida workers' compensation
statute involving worksite accidents. The Company's motions for summary judgment
on that basis were denied, and discovery in the proceeding continues. Based on
consultations with the Company's counsel, management of the Company believes
that it has meritorious defenses. The case is set for trial in October 1998. The
Company believes that if the lawsuit is adversely determined, the Company may be
entitled to indemnification from its client and/or the Company's liability
insurance carrier. Although management believes, based on consultations with the
Company's counsel, that the Company's ultimate liability in this matter should
not be material, there can be no assurance that the Company will prevail in the
litigation, or in a related claim for indemnification, or that the liability of
the Company, if any, would not have a material adverse effect on the Company's
financial condition and results of operations.
In April 1998, the Company settled the lawsuit brought in the 11th
Judicial Circuit in Miami-Dade County, Florida in November 1995 by an individual
who alleged that he was injured by a worksite employee of a client of the
Company which owns and operates a hotel and was a co-defendant in the
litigation. The full amount of the settlement was paid by the Company's general
liability insurer.
In June 1995, the National Labor Relations Board ("Board") filed a
complaint charging Amstaff, Inc., with refusal to bargain with respect to a
collective bargaining agreement, under which a now former client's employees
were employed, in violation of the National Labor Relations Act. Vincam acquired
Amstaff, Inc. in June 1997. The charge was initially dismissed by a Detroit
office of the Board, but has since been reinstated following a union appeal to
the general counsel for the Board. If the Board rules against the Company, the
Company could be held liable for lost wages and benefits of such employees for a
period of almost four years. Any award would be reduced by any earnings of such
employees which are received or reasonably could have been received from other
employment during the relevant time period. The Company cannot currently
estimate its potential liability if the Board were to rule against it. The
Company is vigorously defending this case, but there can be no assurance that
the Company will prevail in the proceedings or that the liability of the
Company, if any, would not have a material adverse effect on the Company's
financial condition and results of operations.
The Company is also involved in other legal and administrative
proceedings arising in the ordinary course of business. The outcomes of these
actions are not expected to have a material effect on the Company's financial
position or results of operations on an individual basis, although adverse
outcomes in a significant number of such ordinary course legal proceedings
could, in the aggregate, have a material adverse effect on the Company's
financial condition and results of operations.
* * * * * * * * * *
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with (i) the Consolidated Financial Statements and Notes thereto contained
herein, (ii) the Consolidated Financial Statements and the Notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing in the 1997 Annual Report on Form 10-K, as amended by Form
10-K/A No.1, filed by The Vincam Group, Inc. ("Vincam" or the "Company") with
the Securities and Exchange Commission.
The following discussion contains forward-looking statements. The
Company's actual results could differ materially from those discussed in such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this Form 10-Q. In
connection with the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 (the "Reform Act"), the Company is hereby providing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company herein or orally, whether in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "will result," "are expected to," "will continue," "is
anticipated," "estimated," "believes," "projection" and "outlook") are not
historical facts and may be forward-looking and, accordingly, such statements
involve estimates, assumptions and uncertainties which could cause actual
results to differ materially from those expressed in the forward-looking
statements. Such uncertainties include, among others, the following: (i)
potential for unfavorable interpretation of government regulations relating to
labor, taxes, insurance, employment matters and the provision of managed care
services; (ii) the Company's ability to obtain or maintain all required licenses
or certifications required to maintain or to further expand the range of
services offered by the Company; (iii) potential increases in the Company's
costs, such as health care costs, that the Company may not be able to reflect
immediately in its service fees; (iv) the Company's ability to offer its
services to prospective clients in additional states where it has less or no
market penetration; (v) the level of acquisition opportunities available to the
Company and the Company's ability to efficiently price and negotiate such
acquisitions on a favorable basis; (vi) the financial condition of the Company's
clients; (vii) additional regulatory requirements affecting the Company; (viii)
the impact of competition from existing and new professional employer
organizations; (ix) the failure to properly manage growth and successfully
integrate acquired companies and operations, and to achieve synergies and other
cost savings in the operation of acquired companies; and (x) other factors which
are described in further detail in the Company's filings with the Securities and
Exchange Commission including this Form 10-Q.
The Company cautions that the factors described above could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
13
OVERVIEW
Vincam, one of the ten largest professional employer organization
("PEOs") in the industry based on 1996 revenues (according to Staffing Industry
Analysts, Inc.), provides small and medium-sized businesses with an outsourcing
solution to the complexities and costs related to employment and human
resources. The Company's continuum of integrated employment-related services
consists of human resource administration, employment regulatory compliance
management, workers' compensation coverage, health care and other employee
benefits. The Company establishes a co-employer relationship with its clients
and contractually assumes substantial employer responsibilities with respect to
worksite employees. In addition, the Company offers certain specialty managed
care services on a stand-alone basis to health and workers' compensation
insurance companies, HMOs and large employers.
The Company's standard PEO services agreement provides for an initial
one year term, subject to termination by the Company or the client at any time
during the first year upon 30 days' prior written notice. Thereafter, the
contract may be terminated upon 30 days' notice given prior to the expiration of
the renewal term or immediately for cause. Client contracts acquired in
acquisitions may be terminable upon shorter notice, or under different terms,
than under the Company's standard PEO services agreements. A significant number
of contract terminations could have a material adverse effect on the Company's
financial condition, results of operations and liquidity.
Revenues from professional employer services are based on a pricing
model that takes into account the gross pay of each employee and a mark-up which
includes the estimated costs of federal and state employment taxes, workers'
compensation, employee benefits and the human resource administrative services,
as well as a provision for profit. The specific mark-up varies by client based
on the workers' compensation classification of the worksite employees and their
eligibility for health care benefits. Accordingly, the Company's average mark-up
percentage will fluctuate based on client mix, which cannot be predicted with
any degree of certainty. Specialty managed care revenues are generated from a
variety of risk-bearing, capitated, and fee-based arrangements.
The Company's revenues include all amounts billed to clients for gross
salaries and wages, related employment taxes, and health care and workers'
compensation coverage of worksite employees. The Company is obligated to pay the
gross salaries and wages, related employment taxes and health care and workers'
compensation costs of its worksite employees whether or not the Company's
clients pay the Company on a timely basis or at all. The Company believes that
including such amounts as revenues appropriately reflects the responsibility
which the Company bears for such amounts and is consistent with industry
practice. In addition, the Company's revenues are subject to fluctuations as the
result of (i) changes in the volume of worksite employees serviced by the
Company; (ii) changes in the wage base and employment tax rates of worksite
employees; and (iii) changes in the mark-up charged by the Company for its
services.
The Company's primary direct costs are (i) salaries, wages, the
employer's portion of social security, Medicare premiums, federal unemployment
taxes, and other state payroll-based and sales taxes, (ii) health care and
workers' compensation costs, and (iii) state unemployment taxes and other direct
costs. The Company can significantly impact its gross profit margin by actively
managing the direct costs described in clauses (ii) and (iii).
The Company's health care costs consist of medical insurance premiums,
payments of and reserves for claims subject to deductibles and the costs of
dental care, vision care, disability, employee assistance and other similar
benefit plans. The Company's health care benefit plans consist of a mixture of
fully insured, minimum premium arrangements, partially self-insured plans and
guaranteed cost programs, with third party
14
insurers providing insurance with respect to minimum premium and partially
self-insured plans to the extent claims exceed certain levels ("stop loss
coverage"). Under minimum premium arrangements and partially self-insured plans,
liabilities for health care claims are recorded based on the Company's health
care loss history. The Company maintains reserves for medical and behavioral
health claims, which reserves are estimates based on periodic reviews of open
claims, past claims experience and other factors deemed relevant by management.
While the Company believes that such reserves are adequate, the Company cannot
predict with certainty the ultimate liability associated with open claims and
past claims experience may not be indicative of future results. Accordingly, if
estimated reserve amounts prove to be less than the ultimate liability with
respect to such claims, the Company's financial condition, results of operations
and liquidity could be materially adversely affected. In addition, to the extent
an insurer delays or denies the payment of a claim for stop loss coverage, the
Company's financial condition, results of operations and liquidity could be
materially adversely affected.
Workers' compensation costs include medical costs and indemnity
payments for lost wages, administrative costs and insurance premiums related to
the Company's workers' compensation coverage. Prior to 1997, the Company was
insured under a large deductible insurance plan. Under this plan the Company was
obligated to reimburse its insurance carrier for a portion of the insurance risk
related to workers' compensation claims up to a predetermined deductible per
occurrence ranging from $150,000 to $1,000,000. Workers' compensation costs for
1995 and 1996 also include reserves for claims which have been incurred but not
reported and for anticipated loss development. In December 1996, the Company
entered into an arrangement with an insurance company under which the percentage
of the average standard premium to be paid by the Company for workers'
compensation coverage for the years 1997 to 1999 was fixed. The arrangement,
originally covering the years 1997 through 1999, now includes coverage through
the year 2000 under certain revised terms and conditions. The arrangement
remains a guaranteed cost program. Additionally, the Company entered into
agreements as of December 1996 whereby the Company reinsured substantially all
of the remaining claims under the Company's large deductible workers'
compensation insurance policies for the years 1994 through 1996, and in 1997
entered into similar agreements to reinsure the remaining claims under the prior
large deductible workers' compensation insurance policies of Staff
Administrators, Inc. ("SAI"), Amstaff, Inc. ("AMI") and Staffing Network, Inc.
("SNI"), companies acquired by Vincam.
The cost of workers' compensation insurance coverage is significant to
the Company's operating results. Accordingly, the Company uses extensive managed
care procedures in an attempt to control workers' compensation costs and related
insurance premiums. Changes to existing workers' compensation rating systems,
which could result in increased insurance premiums, and other increases in
workers' compensation costs and related insurance premiums could have a material
adverse effect on the Company's financial condition, results of operations and
liquidity.
State unemployment taxes are based on rates which vary from state to
state. Generally they are subject to certain minimum rates, but the aggregate
rates payable by an employer are affected by the employer's claims history. The
Company controls unemployment claims by aggressively contesting unfounded claims
and, when possible, quickly returning employees to work by reassigning them to
other worksites.
The Company's primary operating expenses are administrative personnel
expenses, other general and administrative expenses, and sales and marketing
expenses. Administrative personnel expenses include compensation, fringe
benefits and other personnel expenses related to internal administrative
employees. Other general and administrative expenses include rent, office
supplies and expenses, legal and accounting fees, insurance and other operating
expenses. Sales and marketing expenses include compensation of sales
representatives and the marketing staff, as well as marketing and advertising
expenses.
15
The Company's long-term profitability is largely dependent upon its
success in managing its controllable direct costs, although the Company's
current guaranteed cost workers' compensation policy largely eliminates
fluctuations in direct costs associated with workers' compensation for the years
covered thereby. The Company manages its controllable direct costs through its
use of (i) its proprietary managed care system, which includes provider
networks, utilization review and case management, (ii) educational programs
designed to reduce the severity and frequency of workplace accidents, and (iii)
a variety of other techniques, including return to work programs, drug-free
workplace programs, involvement in hiring, disciplinary and termination
decisions, adjudication of unemployment claims, and reassignment of laid off
workers.
The Company's financial condition and results of operations are subject
to several contingencies including the conclusions that may be reached by the
IRS Market Segment Group and the resolutions of certain pending legal
proceedings.
In addition, the year 2000 issue may materially affect the Company's
services or competitive conditions. This issue affects computer systems that
have time-sensitive programs (such as the Company's payroll processing programs)
that may not properly recognize the year 2000. This could result in major
systems failures or miscalculations. The Company has begun the process of
identifying, evaluating, and implementing changes to computer programs necessary
to address the year 2000 issue in order to provide uninterrupted normal
operations of critical business systems before, during and after the year 2000.
If necessary modifications and conversions are not completed in a timely manner,
the year 2000 issue may have a material adverse effect on the results of
operations and financial condition of the Company. The total cost associated
with the required modifications and conversions is not known at this time,
however, it is not expected to be material to the Company's financial position
and is being expensed as incurred.
16
RESULTS OF OPERATIONS
The following table sets forth, for March 31, 1998 and 1997, certain
selected income statement data expressed as a percentage of revenues:
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
-------- --------
Revenues.......................................................... 100.0% 100.0%
----------- -----------
Direct costs:
Salaries, wages and employment taxes of worksite
employees.................................................... 89.6% 88.3%
Health care and workers' compensation.......................... 3.7% 4.4%
State unemployment taxes and other............................. 1.2% 1.3%
----------- -----------
Total direct costs........................................... 94.5% 94.0%
----------- -----------
Gross profit...................................................... 5.5% 6.0%
----------- -----------
Operating expenses:
Administrative personnel....................................... 2.3% 2.6%
Other general and administrative, including provision
for doubtful accounts........................................ 1.2% 1.5%
Sales and marketing............................................ 0.6% 0.7%
Depreciation and amortization.................................. 0.3% 0.3%
----------- -----------
Total operating expenses..................................... 4.4% 5.1%
----------- -----------
Operating income.................................................. 1.1% 0.9%
Interest income (expense), net.................................... 0.0% 0.1%
----------- -----------
Income before taxes............................................... 1.1% 1.0%
Provision for income taxes........................................ 0.4% 0.4%
----------- -----------
Net income........................................................ 0.7% 0.6%
=========== ===========
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
The Company's revenues for the three months ended March 31, 1998 were
$284.2 million compared to $220.0 million for the same period in 1997,
representing an increase of $64.2 million, or 29.2%. This increase was due
primarily to an increased number of PEO worksite employees. The number of
worksite employees increased 20.4% over the same period, from 35,300 worksite
employees to 42,500.
Salaries, wages and employment taxes of worksite employees were $254.6
million for the three months ended March 31, 1998, compared to $194.3 million
for the same period in 1997, representing an increase of $60.3 million, or
31.0%. The increase in salaries, wages and employment taxes of worksite
employees was due primarily to an increased number of PEO worksite employees.
Salaries, wages and employment taxes of worksite employees were 89.6% of
revenues for the three months ended March 31, 1998, compared to 88.3% for the
same period in 1997. The increase of salaries, wages and employment taxes of
worksite employees as a percentage of revenues resulted from a change in the
Company's worksite
17
employee mix towards worksite employees having a lower cost workers'
compensation classification and lower workers' compensation rates in several of
the states where the Company operates, which resulted in lower markups being
charged by the Company.
Health care and workers' compensation costs were $10.4 million for the
three months ended March 31, 1998, compared to $9.7 million for the same period
in 1997, representing an increase of $0.8 million, or 8.0%. This increase was
due mainly to the higher volume of PEO worksite employees. Health care and
workers' compensation costs were 3.7% of revenues for the three months ended
March 31, 1998, compared to 4.4% for the same period in 1997. The decrease of
health care and workers' compensation costs as a percentage of revenues was due
mainly to the change in the Company's worksite employee mix towards worksite
employees having a lower cost workers' compensation classification, which
resulted in lower markups being charged by the Company.
State unemployment taxes and other direct costs were $3.6 million for
the three months ended March 31, 1998, compared to $2.9 million for the same
period in 1997, representing an increase of $0.8 million or 26.3%. This increase
was due mainly to the higher volume of salaries and wages paid during the three
months ended March 31, 1998, which was a direct function of the increase of PEO
worksite employees and an increase in other direct costs related to the
Company's services. State unemployment taxes and other direct costs were 1.2% of
revenues for the three months ended March 31, 1998, compared to 1.3% for the
same period in 1997.
Gross profit was $15.6 million for the three months ended March 31,
1998 compared to $13.2 million for the same period in 1997, representing an
increase of $2.4 million, or 18.2%, due mainly to both, the increase in revenues
and the increase in salaries and wages paid during the three months ended March
31, 1998, which was a direct function of the increase of PEO worksite employees.
Gross profit was 5.5% of revenues for the three months ended March 31, 1998,
compared to 6.0% for the same period in 1997. The decrease in gross profit as a
percentage of revenues was due mainly to the shift in the Company's employee
mix, which resulted in lower markup being charged by the Company, partially
offset by lower workers' compensation cost.
Administrative personnel expenses were $6.4 million for the three
months ended March 31, 1998, compared to $5.7 million for the same period in
1997, representing an increase of $0.7 million, or 12.4%. This increase was
primarily attributable to increased staffing to support the Company's growth,
including management and senior executive personnel. Administrative personnel
expenses were 2.3% of revenues for the three months ended March 31, 1998,
compared to 2.6% for the same period in 1997. This decrease in administrative
personnel expenses as a percentage of revenues resulted from the payment of
executive salaries at AMI and SNI during 1997, which were reduced after their
respective acquisitions by the Company.
Other general and administrative expenses, including provision for
doubtful accounts, were $3.6 million for the three months ended March 31, 1998,
compared to $3.3 million for the same period in 1997, representing an increase
of $0.3 million, or 9.9%. This increase in other general and administrative
expenses was primarily attributable to the growth of the Company's business and
to the increased amount of acquisition costs. Other general and administrative
expenses were 1.2% of revenues for the three months ended March 31, 1998,
compared to 1.5% for the same period in 1997.
Sales and marketing costs were $1.7 million for the three months ended
March 31, 1998, compared to $1.6 million for the same period in 1997,
representing an increase of $0.16 million, or 10.7%. The
18
increase reflects the addition of sales representatives and marketing personnel,
consistent with the Company's strategy to increase its client base in its
existing and acquired markets. Sales and marketing costs were 0.6% of revenues
for the three months ended March 31, 1998, compared to 0.7% for the same period
in 1997.
Operating income was $3.1 million for the three months ended March 31,
1998, compared to $1.9 million for the same period in 1997, representing an
increase of $1.2 million, or 67.0%. The increase in operating income was due
mainly to increase in revenues resulting from an increase in worksite employees.
Net income was $1.8 million for the three months ended March 31, 1998,
compared to $1.2 million for the same period in 1997, representing an increase
of $0.6 million, or 48.2%. Diluted earnings per share were $0.11 for the three
months ended March 31, 1998, compared to $0.08 for the same period in 1997,
representing an increase of $0.03, or 45.6%.
The Company anticipates that administrative personnel expenses, other
general and administrative expenses, sales and marketing expenses and interest
expense will continue to increase in future periods to the extent that the
Company continues to experience growth and to expand its service offerings.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had working capital of $18.3 million,
compared to $17.4 million at December 31, 1997. The Company anticipates
reduction in working capital in future periods as a result of the Company's
current plans to continue growth through acquisitions and expenditures to
support current growth.
The Company's Credit Agreement with a group of banks for which Fleet
National Bank ("Fleet Bank") acted as agent provides for a $50.0 million
revolving line of credit with a sublimit of $15.0 million for standby letters of
credit and revolving credit loans for working capital purposes. The Credit
Agreement also provides for advances to finance acquisitions. The Company uses
letters of credit primarily to secure its obligations to reimburse its former
workers' compensation insurance carrier for workers' compensation payments
subject to the policy deductible. Borrowings bear interest at rates based, at
the Company's option, on Fleet Bank's Prime Rate plus a margin of as much as
0.25% or its Eurodollar Rate (as defined in the Credit Agreement) plus a margin
of 1.00% to 1.75%, depending on certain financial covenants. The facility is
secured by a pledge of the shares of all of the Company's subsidiaries. The
revolving line of credit matures on April 24, 2000. If, on April 24, 2000,
certain conditions are satisfied, any amounts outstanding under the revolving
line of credit may be converted into a term loan payable in eight quarterly
instalments commencing on August 1, 2000. The Credit Agreement contains
customary events of default and covenants which prohibit, among other things,
incurring additional indebtedness in excess of a specified amount, paying
dividends, creating liens and engaging in certain mergers or combinations
without the prior written consent of the lender. The Credit Agreement also
contains certain financial covenants relating to current ratio, debt to capital
ratio, debt and fixed charges coverage and minimum tangible net worth, as
defined in the Credit Agreement. The Company is required to pay an unused
facility fee ranging from .20% to .35% per annum on the facilities, depending
upon certain financial covenants. Under the Company's credit facility, the
Company had outstanding $7.6 million in stand by letters of credit at December
31, 1997 which guarantee the payment of claims to the Company's previous
workers' compensation carrier under the Company's large deductible workers'
compensation insurance policies for 1994, 1995 and 1996. As of that date, there
were no other amounts outstanding under the Company's credit facility.
On December 9, 1997, the Company entered into a leasing arrangement
with respect to a new headquarters facility in Miami-Dade County that the
Company expects will be completed in the fall of 1998. The leasing arrangement
has an initial expiration date of four years after completion of the facility
and allows the Company to extend the term of the lease for up to three more
years subject to compliance with the terms and conditions of the credit
agreement and related documents. The lessor of the facility has
19
financed 97% of the costs of acquiring the land and constructing the facility.
The financing agreement relating to the facility (the "Facility Financing
Agreement") contains certain covenants, including financial covenants, of the
Company and events of default with respect thereto, which covenants are the same
in all material respects as those contained in the Company's Credit Agreement.
Under the leasing arrangement, the Company's commitment in future years will be
based on (i) interest at a competitive rate on all outstanding loan amounts with
respect to the facility plus (ii) the yield, at a competitive rate, in respect
of the lessor's 3% equity investment. Default under the Company's covenants
contained in the Facility Financing Agreement constitutes default under the
Company's lease of the headquarters facility. In the event of such default, the
Company is obligated to either purchase the facility for the Purchase Price
(defined below) or pay a termination fee in an amount approximately equal to the
Purchase Price. The maximum amount on which the lease payments will be based is
limited to $12 million. As of December 31, 1997, an aggregate of $3.9 million in
loans were outstanding to the lessor which financed the $2.6 million purchase
price of the land and certain development and closing costs.
The Company has an option to purchase the headquarters facility at any
time for an amount equal to the total of (i) the amount of loans outstanding
with respect to the property, (ii) the lessor's investment in the facility,
(iii) any accrued and unpaid interest on such outstanding loans, and (iv) all
accrued and unpaid yield on the lessor's equity investment (the "Purchase
Price"). If the Company determines not to purchase the facility, it will be
required to make a termination payment at the end of the lease term equal to
approximately 85% of the Purchase Price. The Company's lease payment obligations
are secured by a pledge of the stock of all of its subsidiaries.
The Company anticipates that available cash, cash flows from operations
and borrowing availability under the Credit Agreement will be sufficient to
satisfy the Company's liquidity and working capital requirements for the
foreseeable future; however, to the extent that the Company should desire to
increase its financial flexibility and capital resources or require or choose to
fund future capital commitments from sources other than operating cash or from
borrowings under its revolving line of credit or its acquisition loan facility,
the Company may consider raising capital through the offering of equity and/or
debt securities in the public or private markets, as well as from banks.
The Company's primary short-term liquidity requirements in 1998 include
the repayment of $7.7 million borrowed by the Company to finance the prepayment
of a portion of the Company's workers' compensation and general liability
insurance premiums for 1998, payment of $750,000 due on the mortgage of the
Company's current headquarters facility, investment in software development,
expenditures for office and computer equipment to support the Company's growth,
and the payment of other expenses related to the Company's growth. The Company
anticipates capital expenditures for 1998 of approximately $5.0 million,
primarily for software development, including the evaluation and implementation
of changes to computer programs addressing the year 2000 issue.
Net cash provided by operating activities was $5.0 million for the
three months ended March 31, 1998, compared to approximately $0.1 million for
the same period in 1997. The difference between the Company's net income of $1.8
million for the three months ended March 31, 1998, and its operating cash flow
was due primarily to a $2.1 million increase in accrued salaries, wages, and
payroll taxes, an increase of $0.6 million in income tax payable, a decrease in
prepaid workers' compensation insurance premium of $1.7 million, a decrease in
income tax receivable of $1.1 million, an increase in accounts payable and
accrued expenses of $0.1 million, and increases in noncash items such as
depreciation and amortization of $0.7 million, provision for doubtful accounts
of $0.3 million, partially reduced by an increase of $2.1 million in accounts
receivable, an increase of $0.9 million in prepaid expenses and other current
assets, and a decrease in reserves for claims of $0.6 million. The increase in
accounts receivable and accrued salaries, wages and payroll taxes resulted from
both a higher number of PEO clients and worksite employees served during the
20
three months ended March 31, 1998 and the timing of the payroll cycle. The
Company's accounts receivable and accrued salaries, wages, and payroll taxes are
subject to fluctuations depending on the proximity of the closing date of the
reporting period to that of the payroll cycle.
Net cash provided by investing activities was $1.0 million for the
three months ended March 31, 1998, compared to $1.5 million used in investing
activities in the same period in 1997. This reflects the purchase of $0.8
million in property and equipment to support the Company's growth and the
redemption of short term investments of $1.8 million.
Net cash used in financing activities was $3.2 million for the three
months ended March 31, 1998, compared to $1.4 million used in financing
activities in the same period in 1997. During 1998, the Company made principal
payments on borrowings of $3.3 million.
21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Part I, Item 3. Legal Proceedings of The Vincam
Group, Inc.'s Annual Report on Form 10-K for year ended December 31, 1997, as
amended. In April 1998, the 11th Judicial Circuit Court in Miami-Dade County
Florida entered an order dismissing with prejudice the lawsuit filed by James
Byrnes against The Vincam Group, Inc. (the "Company"), among others. The court's
order followed the settlement of the lawsuit between Mr. Byrnes and the Company.
The full amount of the settlement was paid by the Company's general liability
insurer.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 30, 1998, the Company completed the acquisition of Corporate
Staff Services, Inc. ("CSS") and issued an aggregate of 150,000 shares of its
common stock, par value $.001 ("Common Stock"), to John J. Piscioniere and
Willard Finkle as consideration for all of the outstanding common stock of CSS.
The issuance of such shares of Common Stock was exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to the
provisions of Section 4(2) thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
--- -----------
11 Statement re Computation of Per Share Earnings
27.1 Financial Data Schedule as of and for the three months
period ended March 31, 1998.
27.2 Restated Financial Data Schedule as of and for the three
months period ended March 31, 1997.
(b) Reports of Form 8-K
On January 20, 1998, the Company filed Amendment No.1 to its Current
Report of Form 8-K dated December 1, 1997 with the Securities and Exchange
Commission reporting information under Item 5, Other Events and Item 7,
Financial Statements, Pro Forma Financial Information and Exhibits.
22
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 VINCAM GROUP, INC.
MAY 15, 1998 By: /S/ CARLOS A. RODRIGUEZ .
- ------------------- ------------------------------------------------
Date Carlos A. Rodriguez, Chief Financial Officer,
Senior Vice President Finance and Administration
(Principal Financial Officer)
MAY 15, 1998 By: /S/ MARTINIANO J. PEREZ .
- ------------------- ------------------------------------------------
Date Martiniano J. Perez, Vice President and Controller
(Principal Accounting Officer)
23
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
11 Statement re Computation of Per Share Earnings
27.1 Financial Data Schedule as of and for the three months
period ended March 31, 1998.
27.2 Restated Financial Data Schedule as of and for the three
months period ended March 31, 1997.