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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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PROBUSINESS SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2976066
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
4125 HOPYARD ROAD 94588
PLEASANTON, CA (zip code)
(Address of principal executive offices)
(925) 737-3500
(Registrant's telephone number, including area code)
------------------------
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 7, 1999, there were 20,893,769 shares of the Registrant's Common
Stock outstanding.
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PROBUSINESS SERVICES, INC.
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS (UNAUDITED):
Condensed Balance Sheets
March 31, 1999 and June 30, 1998........................................................... 3
Condensed Statements of Operations
Three and nine months ended March 31, 1999 and 1998........................................ 4
Condensed Statement of Stockholders' Equity
Nine months ended March 31, 1999........................................................... 5
Condensed Statements of Cash Flows
Nine months ended March 31, 1999 and 1998.................................................. 6
Notes to Condensed Financial Statements...................................................... 7
ITEM 2... MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................................ 20
ITEM 2. CHANGES IN SECURITIES........................................................................ 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............................................................. 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................... 20
ITEM 5. OTHER INFORMATION............................................................................ 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................. 20
Signatures................................................................................... 21
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
PROBUSINESS SERVICES, INC.
CONDENSED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
MARCH 31, 1999 JUNE 30, 1998
-------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents........................................................ $ 80,969 $ 13,771
Accounts receivable, net of allowance............................................ 3,328 2,612
Prepaid expenses and other current assets........................................ 3,725 2,122
-------------- -------------
88,022 18,505
Payroll tax funds invested....................................................... 648,902 332,667
-------------- -------------
Total current assets........................................................... 736,924 351,172
Equipment, furniture and fixtures, net............................................. 23,889 13,958
Other assets....................................................................... 14,053 10,879
-------------- -------------
Total assets................................................................... $ 774,866 $ 376,009
-------------- -------------
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued liabilities, current portion of capital lease
obligations and deferred revenue............................................... $ 20,756 $ 15,182
Payroll tax funds collected but unremitted....................................... 648,902 332,667
-------------- -------------
Total current liabilities...................................................... 669,658 347,849
Capital lease obligations, less current portion.................................... 897 1,414
Stockholders' equity............................................................... 104,311 26,746
-------------- -------------
Total liabilities and stockholders' equity..................................... $ 774,866 $ 376,009
-------------- -------------
-------------- -------------
See notes to condensed financial statements.
3
PROBUSINESS SERVICES, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Revenue............................................................... $ 19,869 $ 13,611 $ 50,126 $ 33,163
Operating expenses:
Cost of providing services.......................................... 9,113 6,424 25,057 17,215
General and administrative.......................................... 2,567 1,693 7,464 5,061
Research and development............................................ 1,506 1,213 4,298 3,343
Client acquisition costs............................................ 8,100 5,569 20,625 13,639
--------- --------- --------- ---------
Total operating expenses.............................................. 21,286 14,899 57,444 39,258
Loss from operations.................................................. (1,417) (1,288) (7,318) (6,095)
Interest expense...................................................... (288) (87) (718) (461)
Other income.......................................................... 1,049 242 2,308 502
--------- --------- --------- ---------
Net loss.............................................................. $ (656) $ (1,133) $ (5,728) $ (6,054)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and diluted net loss per share.................................. $ (0.03) $ (0.07) $ (0.29)
--------- --------- ---------
--------- --------- ---------
Shares used in computing basic and diluted
net loss per share.................................................. 20,826 16,800 19,558
--------- --------- ---------
--------- --------- ---------
Pro forma net loss per share.......................................... $ (0.40)
---------
---------
Shares used in computing pro forma net loss per share................. 15,298
---------
---------
See notes to condensed financial statements.
4
PROBUSINESS SERVICES, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK
------------------------------------- NOTES
ADDITIONAL RECEIVABLE TOTAL
PAID-IN ACCUMULATED FROM STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDERS EQUITY
------------ ----------- ---------- ------------ ------------ ------------
Balances at June 30, 1998................... 17,114,855 $ 17 $ 53,286 $ (25,469) $ (1,088) $ 26,746
Issuance of common stock in connection with
public offering, net of offering costs.... 3,191,250 3 80,708 -- -- 80,711
Excercise of warrants....................... 142,796 -- 450 -- -- 450
Excercise of stock options.................. 242,397 -- 676 -- -- 676
Issuance of stock under the employee stock
purchase plan............................. 188,549 -- 1,303 -- -- 1,303
Payment of notes recievable from
stockholders.............................. -- -- -- -- 153 153
Net loss.................................... -- -- -- (5,728) -- (5,728)
------------ --- ---------- ------------ ------------ ------------
Balances at March 31, 1999.................. 20,879,847 $ 20 $ 136,423 $ (31,197) $ (935) $ 104,311
------------ --- ---------- ------------ ------------ ------------
------------ --- ---------- ------------ ------------ ------------
See notes to condensed financial statements.
5
PROBUSINESS SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
NINE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
---------- ----------
OPERATING ACTIVITIES
Net loss.................................................................................. $ (5,728) $ (6,054)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization......................................................... 5,109 3,223
Changes in operating assets and liabilities:
Accounts receivable, net............................................................ (716) 137
Prepaid expenses and other current assets........................................... (1,603) (2,226)
Other assets........................................................................ (1,336) (622)
Accounts payable, accrued liabilities, and deferred revenue......................... 4,474 6,543
---------- ----------
Net cash provided by operating activities................................................. 200 1,001
---------- ----------
INVESTING ACTIVITIES
Purchases of equipment, furniture and fixtures............................................ (12,462) (6,821)
Capitalization of software development costs.............................................. (3,145) (2,640)
---------- ----------
Net cash used in investing activities..................................................... (15,607) (9,461)
---------- ----------
FINANCING ACTIVITIES
Borrowings under line of credit agreements................................................ -- 6,874
Repayments of borrowings under line of credit agreements.................................. -- (11,632)
Repayments under subordinated debt........................................................ -- (3,909)
Repayments under note payable to stockholder.............................................. -- (250)
Repayment of notes receivable from stockholder............................................ 153 --
Principal payments on capital lease obligations........................................... (688) (566)
Proceeds from issuance of common stock.................................................... 83,140 28,140
---------- ----------
Net cash provided by financing activities................................................. 82,605 18,657
---------- ----------
Net increase in cash and cash equivalents................................................. 67,198 10,197
Cash and cash equivalents, beginning of period............................................ 13,771 5,047
---------- ----------
Cash and cash equivalents, end of period.................................................. $ 80,969 $ 15,244
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................................................. $ 221 $ 456
---------- ----------
---------- ----------
Purchases of equipment under capital lease obligations.................................... $ 1,271 $ --
---------- ----------
---------- ----------
See notes to condensed financial statements.
6
PROBUSINESS SERVICES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
OPERATIONS
ProBusiness Services, Inc. (the "Company") provides employee administrative
services for large employers. The Company's primary service offerings are
payroll processing, payroll tax filing, benefits administration, including the
enrollment and processing of flexible benefit plans and COBRA programs, and
human resources software.
BASIS OF PRESENTATION
The Company has prepared its interim condensed financial statements without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). 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.
The information included in this report should be read in conjunction with
the Company's audited financial statements and notes thereto included in the
Company's 1998 Annual Report on Form 10-K.
In the opinion of management, the accompanying unaudited interim condensed
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to summarize fairly the financial position,
results of operations and cash flows for such periods. The results for the
interim period ended March 31, 1999 are not necessarily indicative of the
results that may be expected for any future periods.
BASIC AND DILUTED NET LOSS PER SHARE (HISTORICAL AND PRO FORMA)
Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities by adding other common stock
equivalents, including stock options and warrants, in the weighted average
number of common shares outstanding for a period, if dilutive. Potentially
dilutive securities have been excluded from the computation as their effect is
antidilutive.
Pro forma net loss per share has been computed as described above and also
gives effect, under SEC guidance, to the conversion of preferred stock to common
stock not included above that automatically converted upon completion of the
Company's initial public offering, using the if-converted method.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued FAS
No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements and is
effective for fiscal years beginning after December 15, 1997. Adoption of FAS
130 is required in fiscal 1999. Adoption of FAS 130 did not have a material
effect on the Company's financial position, results of operations or cash flows.
In June 1997, the FASB issued FAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("FAS 131"). FAS 131 establishes standards
for the reporting of information about operating segments and related
disclosures about products and services, geographic areas, and major customers.
Adoption of FAS 131 will be required in fiscal 1999 and require interim
disclosures beginning in
7
PROBUSINESS SERVICES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
fiscal 2000. The Company has not reached a conclusion as to the appropriate
segments, if any, it will be required to report to comply with the provisions of
FAS 131. Adoption of FAS 131 is not expected to have a material effect on the
Company's financial position, results of operations or cash flows.
In June 1998, the FASB issued FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). The Company is required to
adopt FAS 133 in fiscal 2000. FAS 133 established methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. The Company has not yet
determined the effect of FAS 133 on the operations and financial position of the
Company.
2. LINE OF CREDIT AGREEMENT
At March 31, 1999, the Company has a line of credit agreement with a
financial institution. The agreement provides for borrowings that are limited to
the lesser of $20,000,000, or the sum of five times the Company's average
monthly net collections, as defined in the agreement, plus the lesser of five
times the Company's average monthly collections of the interest on tax
investment funds as defined in the agreement or $5,000,000, plus $1,500,000. At
March 31, 1999, no borrowings were outstanding under the agreement and the
amount available for borrowing under the agreement was approximately
$20,000,000. The agreement expires on December 31, 2000, and is subject to
automatic and continuous renewal unless termination notice is given by either
party in accordance with the agreement.
3. INTEREST RATE MANAGEMENT
The Company has entered into various interest rate swap agreements with a
financial institution. These agreements, with fixed interest rates between
4.759% and 5.905%, each have a term of two years, one of which has a
cancellation option after one year, and expire at various dates through December
2000. Interest is paid or received based upon the difference in the fixed
interest rate and the contractual floating rate option times the contractual
notional balance. The actual notional balance varies on a monthly basis due to
fluctuations in projected holdings of collected but unremitted payroll tax
funds. The average monthly notional balance for the remaining term of the
agreements is $284,590,000. The agreements require collateral if interest rates
increase and certain other conditions are met as defined in the agreements. At
March 31, 1999, no collateral was required.
4. STOCKHOLDER'S EQUITY
In September 1998, the Company completed a secondary public offering of
common stock. The offering consisted of 2,775,000 shares of common stock issued
to the public at $27.00 per share. In September 1998, the underwriters exercised
an option to purchase an additional 416,250 shares of common stock at the price
of $27.00 per share to cover over-allotments in connection with the secondary
public offering.
STOCK SPLIT
On July 23, 1998, the Board of Directors approved a three-for-two stock
split of its $.001 par value common stock in the form of a stock dividend to
stockholders of record as of July 31, 1998. All references in the financial
statements to number of shares, per share amounts, stock option data and market
prices of the Company's common stock reflect the effect of the stock split.
8
PROBUSINESS SERVICES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
4. STOCKHOLDER'S EQUITY (CONTINUED)
SUBSEQUENT EVENTS
On April 27, 1999, the Company acquired Conduit Software, a leading provider
of employee relationship management applications. Under the terms of the
agreement, the Company issued approximately 1.8 million shares of common stock
in the acquisition, which will be accounted for under the pooling-of-interests
method of accounting. The Company anticipates it will record one-time charges in
connection with the acquisition of approximately $3.5 million in the fourth
quarter of fiscal 1999.
9
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 contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements. Potential risks and
uncertainties include, among others, those set forth under "Overview" and
"Additional Factors that May Affect Future Results" included in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations. The following discussion also should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this Quarterly
Report.
OVERVIEW
ProBusiness Services, Inc. ("the Company") is a leading provider of employee
administrative services for large employers. The Company's primary service
offerings are payroll processing, payroll tax filing, benefits administration,
including the enrollment and processing of flexible benefit plans and COBRA
programs and human resources software. The Company's proprietary PC-based
payroll system offers the cost-effective benefits of outsourcing and high levels
of client service, while providing the flexibility, control, customization and
integration of an in-house system.
The Company derives its revenue from fees charged to clients for services
and income earned from investing payroll tax funds. Since 1994, the Company has
experienced significant growth of its revenue, client base and average client
size. Revenue increased from $13.9 million in fiscal 1996 to $46.3 million in
fiscal 1998. From March 31, 1997 to March 31, 1999, the client base for payroll
processing services increased from approximately 320 to approximately 550
clients, while the average size of the Company's payroll clients increased from
approximately 900 employees to approximately 1,400 employees. As of March 31,
1999, the Company provided services to approximately 1,750 clients. The
Company's revenue growth is primarily due to continued growth in its client
base, the introduction of its payroll tax service in fiscal 1996, an increase in
the average size of its clients, the introduction of new features and other
services, and a high retention rate of existing payroll clients (approximately
92% for fiscal 1998). The Company does not anticipate it will sustain this rate
of growth in the future.
The establishment of new client relationships involves lengthy and extensive
sales and implementation processes. The sales process generally takes three to
twelve months or longer, and the implementation process generally takes an
additional three to nine months or longer. The Company has experienced
significant operating losses since its inception and expects to incur
significant operating losses in the future due to continued client acquisition
costs, investments in research and development, costs associated with expanding
its sales efforts and operations to new geographic regions. As of March 31,
1999, the Company had an accumulated deficit of approximately $31.2 million.
There can be no assurance that the Company will achieve or sustain profitability
in the future.
The Company's cost of providing services consists primarily of ongoing
account management, tax and benefits administration operations and production
costs. General and administrative expenses consist primarily of personnel costs
associated with finance, corporate services and information technology,
professional fees, and other overhead costs for finance and corporate services.
Research and development expenses consist primarily of personnel costs. Client
acquisition costs consist of sales and implementation expenses and, to a lesser
extent, technical support and marketing expenses.
10
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
revenue for the periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
STATEMENTS OF OPERATIONS DATA:
Revenue.............................................................. 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of providing services......................................... 45.9% 47.2% 50.0% 51.9%
General and administrative......................................... 12.8% 12.5% 14.9% 15.3%
Research and development........................................... 7.6% 8.9% 8.6% 10.1%
Client acquisition costs........................................... 40.8% 40.9% 41.1% 41.1%
----- ----- ----- -----
Total operating expenses............................................. 107.1% 109.5% 114.6% 118.4%
Loss from operations................................................. (7.1)% (9.5)% (14.6)% (18.4)%
Interest expense..................................................... (1.5)% (0.6)% (1.4)% (1.4)%
Other income......................................................... 5.3% 1.8% 4.6% 1.5%
----- ----- ----- -----
Net loss............................................................. (3.3)% (8.3)% (11.4)% (18.3)%
----- ----- ----- -----
----- ----- ----- -----
REVENUE. Revenue increased 46.0% in the third quarter and 51.2% in the
first nine months of fiscal 1999, when compared with the same periods of fiscal
1998, primarily due to increases in the number and average size of the Company's
payroll and tax clients. Interest income earned on payroll tax funds invested
was $6.5 million and $13.4 million for the third quarter and for the first nine
months of fiscal 1999, respectively, and $3.9 million and $7.8 million for the
same periods of fiscal 1998. The increases were primarily due to the addition of
new clients which resulted in an increase in the average daily payroll tax fund
balances.
COST OF PROVIDING SERVICES. Cost of providing services increased 41.9% in
the third quarter and 45.5% for the first nine months of fiscal 1999 when
compared with the same periods of fiscal 1998 and decreased as a percentage of
revenue to 45.9% and 50.0% in the third quarter and for the first nine months of
fiscal 1999, respectively, when compared with the same periods of fiscal 1998.
The increases in absolute dollars were primarily due to increased personnel in
operations such as account management and production resulting from an increase
in client base, production expenses related to an increase in the number of
payroll clients, and to a lesser extent, increases in personnel expenses related
to the Company's payroll tax service.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 51.6% in the third quarter and 47.5% for the first nine months of
fiscal 1999 when compared with the same periods of fiscal 1998 and increased as
a percentage of revenue to 12.8% in the third quarter and decreased as a
percentage of revenue to 14.9% for the first nine months compared with the same
periods of fiscal 1998. The increases in absolute dollars were primarily due to
our increased investment in the Company's information technology infrastructure
and the hiring of additional management and administrative personnel to support
the Company's growth.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased 24.2% in third quarter and 28.6% for the first nine months of fiscal
1999 when compared with the same periods of fiscal 1998 and decreased as a
percentage of revenue to 7.6% and 8.6% in the third quarter and for the first
nine months of fiscal 1999, respectively, when compared with the same periods of
fiscal 1998. The increases in absolute dollars were primarily a result of
increases in personnel to develop enhancements and new features to the Company's
existing services. The decreases as a percentage of revenue are a result of
higher
11
revenue. Capitalized software development costs were $1.1 million and $938,000
for the third quarter of fiscal 1999 and 1998, respectively and $3.1 million and
$2.6 million for the first nine months of fiscal 1999 and 1998, respectively.
CLIENT ACQUISITION COSTS. Client acquisition costs increased 45.4% in third
quarter and 51.2% for the first nine months of fiscal 1999 when compared with
the same periods of fiscal 1998 and decreased as a percentage of revenue to
40.8% in the third quarter and remained unchanged at 41.1% for the first nine
months of fiscal 1999 when compared with the same periods of fiscal 1998. The
increases in absolute dollars were primarily due to the expanded sales and
implementation force for payroll and national tax services and to a lesser
extent expenses related to technical support services.
INTEREST EXPENSE. Interest expense increased 231% in third quarter and
55.7% for the first nine months of fiscal 1999 when compared with the same
periods of fiscal 1998 and increased as a percentage of revenue to 1.5% in the
third quarter and remained unchanged at 1.4% for the first nine of fiscal 1999
compared with the same periods of fiscal 1998. The increases in absolute dollars
were primarily attributable to increased bank fees resulting from increased cash
balances and investments.
OTHER INCOME. Other income increased as a percentage of revenue to 5.3% and
4.6% in third quarter and for the first nine months of fiscal 1999,
respectively, compared to the same periods of fiscal 1998. The increases in
other income were due to higher cash and investment balances resulting from the
Company's initial public offering in September 1997 and follow-on public
offering in September 1998.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company's principal sources of liquidity included $81
million of cash and cash equivalents and a secured $20 million revolving line of
credit which expires in December 2000. There were no outstanding borrowings
under the line of credit as of March 31, 1999.
Net cash provided by operating activities was $200,000, and $1.0 million for
the first nine months of fiscal 1999 and 1998, respectively. The net cash
provided by operating activities for the first nine months of fiscal 1999 was
primarily attributable to an increase in depreciation and amortization and
increases in accounts payable, accrued liabilities and deferred revenue, offset
by the net loss for the first nine months and increases accounts receivable,
prepaid expenses and other assets.
Net cash used in investing activities was $15.6 million and $9.5 million for
the first nine months of fiscal 1999 and 1998, respectively. The increase in net
cash used in investing activities related primarily to $5.8 million used to
purchase a customer care system.
Net cash provided by financing activities was $82.6 million and $18.7
million for the first nine months of fiscal 1999 and 1998, respectively. Net
cash provided by financing activities for first nine months of fiscal 1999
related primarily to $80.7 million of net proceeds from the Company's follow-on
public offering of common stock in September 1998.
The Company believes that existing cash balances, amounts available under
its current credit facility and anticipated cash flows from operations will be
sufficient to meet its working capital and capital expenditure requirements for
at least the next 12 months.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
OPERATING LOSSES; NEED TO COMMIT TO EXPENSE IN ADVANCE OF REVENUES. The
Company has experienced significant operating losses since its inception and
expects to incur significant operating losses in the future due to continued
client acquisition costs, investments in research and development and costs
associated with expanding its sales efforts and operations to new geographic
regions. As of March 31, 1999, the Company had an accumulated deficit of
approximately $31.2 million. The establishment of new client relationships
involves lengthy and extensive sales and implementation processes. The sales
process generally takes three to twelve months or longer, and the implementation
process generally takes an additional three to nine months or longer. In
connection with the acquisition of each new client, the
12
Company incurs substantial client acquisition costs, which consist primarily of
sales and implementation expenses and, to a lesser extent, marketing expenses.
The Company's ability to achieve profitability will depend in part upon its
ability to attract and retain new clients, offer new services and features and
achieve market acceptance of new services. There can be no assurance that the
Company will achieve or sustain profitability in the future. Failure to achieve
or sustain profitability in the future could have a material adverse effect on
the Company's business, financial condition and results of operations.
SEASONALITY; FLUCTUATION IN QUARTERLY RESULTS. The Company's business is
characterized by significant seasonality. As a result, the Company's revenue has
been subject to significant seasonal fluctuations, with the largest percentage
of annual revenue being realized in the third and fourth fiscal quarters,
primarily due to new clients beginning services in the beginning of the tax year
(the Company's third fiscal quarter) and higher interest income earned on
payroll tax funds invested. Further, the Company's operating expenses are
typically higher as a percentage of revenue in the first and third fiscal
quarters as the Company increases personnel to acquire new clients and to
implement and provide services to such new clients, a large percentage of which
begin services in the third quarter.
The Company's quarterly operating results have in the past and will in the
future vary significantly depending on a variety of factors, including the
number and size of new clients starting services, the decision of one or more
clients to delay or cancel implementation or ongoing services, interest rates,
seasonality, the ability of the Company to design, develop and introduce new
services and features for existing services on a timely basis, costs associated
with strategic acquisitions and alliances or investments in technology, the
success of any such strategic acquisition, alliance or investment, costs to
transition to new technologies, expenses incurred for geographic expansion,
risks associated with payroll tax and benefits administration services, price
competition, a reduction in the number of employees of its clients and general
economic factors. Revenue from new clients typically represents a significant
portion of quarterly revenue in the third and fourth fiscal quarters. A
substantial majority of the Company's operating expenses, particularly personnel
and related costs, depreciation and rent, is relatively fixed in advance of any
particular quarter. The Company's agreements with its clients generally do not
have significant penalties for cancellation. As a result, any decision by a
client to delay or cancel implementation of the Company's services or the
Company's underutilization of personnel may cause significant variations in
operating results in a particular quarter and could result in losses for such
quarter. As the Company secures larger clients, the time required for
implementing the Company's services increases, which could contribute to larger
fluctuations in revenue. Interest income earned from investing payroll tax
funds, which is a significant portion of the Company's revenue, is vulnerable to
fluctuations in interest rates. In addition, the Company's business may be
affected by shifts in the general condition of the economy, client staff
reductions, strikes, acquisitions of its clients by other companies and other
downturns. There can be no assurance that the Company's future revenue and
results of operations will not vary substantially. It is possible that in some
future quarter the Company's results of operations will be below the
expectations of public market analysts and investors. In either case, the market
price of the Company's Common Stock could be materially adversely affected.
RISKS ASSOCIATED WITH STRATEGIC ACQUISITIONS AND INVESTMENTS. In April
1999, the Company acquired Conduit Software ("Conduit"), a leading provider of
Employee Relationship Management applications, in a transaction accounted for
using the pooling of interests method of accounting. There can be no assurance
that this acquisition will be completed or that, if completed, will be
effectively assimilated into the Company's business. The integration of Conduit
will place a burden on the Company's management. Such integration is subject to
risks commonly encountered in making such acquisitions, including, among others,
loss of key personnel of the acquired company, the difficulty associated with
assimilating the personnel and operations of the acquired company, the potential
disruption of the Company's ongoing business, the maintenance of uniform
standards, controls, procedures and policies, and the impairment of the
Company's reputation and relationships with employees and clients. There can be
no assurance that the Company will be successful in overcoming these risks or
any other problems encountered in connection with its acquisition of Conduit.
13
The Company has no other current agreements or negotiations underway other
than those described above with respect to any acquisition of, or investment in,
businesses that provide complementary services or technologies to those of the
Company. The Company has in the past and intends in the future to make
additional acquisitions of, and investments in, such businesses. In addition,
future acquisitions could result in the issuance of dilutive equity securities,
the incurrence of debt or contingent liabilities. Furthermore, there can be no
assurance that any strategic acquisition or investment will succeed. Any future
acquisitions or investments could have a material adverse effect on the
Company's business, financial condition and results of operations.
RISKS ASSOCIATED WITH PAYROLL TAX SERVICE AND BENEFITS ADMINISTRATION
SERVICES. The Company's payroll tax filing service is subject to various risks
resulting from errors and omissions in filing client tax returns and paying tax
liabilities owed to tax authorities on behalf of clients. The Company's clients
transfer to the Company contributed employer and employee tax funds. The Company
processes the data received from the client and remits the funds along with a
tax return to the appropriate tax authorities when due. Tracking, processing and
paying such tax liabilities is complex. Errors and omissions have occurred in
the past and may occur in the future in connection with such service. The
Company is subject to large cash penalties imposed by tax authorities for late
filings or underpayment of taxes. To date, such penalties have not been
significant. However, there can be no assurance that any liabilities associated
with such penalties will not have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company's reserves or insurance for such penalties will be
adequate. In addition, failure by the Company to make timely or accurate tax
return filings or pay tax liabilities when due on behalf of clients may damage
the Company's reputation and could adversely affect its relationships with
existing clients and its ability to gain new clients.
The Company's payroll tax filing service is also dependent upon government
regulations, which are subject to continual changes. Failure by the Company to
implement these changes into its services and technology in a timely manner
would have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, since a significant portion of
the Company's revenue is derived from interest earned from investing on
collected but unremitted payroll tax funds, changes in policies relating to
withholding federal or state income taxes or reduction in the time allowed for
taxpayers to remit payment for taxes owed to government authorities would have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company's benefits administration services are subject to various risks
resulting from errors and omissions in processing and filing COBRA or other
benefit plan forms in accordance with governmental regulations and the
respective plans. The Company processes data received from employees and
employers and is subject to penalties for any late or misfiled plan forms. There
can be no assurance the Company's reserves or insurance for such penalties will
be adequate. In addition, failure to properly file plan forms would have a
material adverse effect on the Company's reputation, which could adversely
affect its relationships with existing clients and its ability to gain new
clients. The Company's benefits administration services are also dependent upon
government regulations which are subject to continuous changes that could reduce
or eliminate the need for benefits administration services.
The Company has access to confidential information and to client funds. As a
result, the Company is subject to potential claims by its clients for the
actions of the Company's employees arising from damages to the client's business
or otherwise. There can be no assurance that the Company's fidelity bond and
errors and omissions insurance will be adequate to cover any such claims. Such
claims could have a material adverse effect on the Company's business, financial
condition and results of operations.
INVESTMENT RISKS. The Company invests funds, including payroll tax funds
transferred to it by clients, in short-term, top tier, high quality financial
instruments such as overnight U.S. government direct and agency obligation
repurchase agreements, commercial paper and institutional money market funds.
These investments are exposed to several risks, including credit risks from the
possible inability of the borrowers
14
to meet the terms of their obligations under the financial instruments. The
Company would be liable for any losses on such investments.
Interest income earned from the investment of client tax funds represents a
significant portion of the Company's revenues. As a result, the Company's
business, financial condition and results of operations are significantly
impacted by interest rate fluctuations. The Company enters into interest rate
swap agreements to minimize the impact of interest rate fluctuations. There can
be no assurance, however, that the Company's swap agreements will protect the
Company from all interest rate risks. Under certain circumstances if interest
rates rise, the Company would have payment obligations under its interest rate
swap agreements which may not be offset by interest earned by the Company on
deposited funds. A payment obligation under the Company's swap agreements could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, there can be no assurance that the
Company would have sufficient funds to meet any such swap payment obligations. A
default by the Company under its swap agreements could result in acceleration
and setoff by the bank of all outstanding contracts under the swap agreement,
and could result in cross-defaults of other debt agreements of the Company, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations.
MANAGEMENT OF GROWTH. The Company's business has grown significantly in
size and complexity over the past four years. This growth has placed, and is
expected to continue to place, significant demands on the Company's management,
systems, internal controls, and financial and physical resources. In order to
meet such demands, the Company intends to continue to hire new employees, open
new offices to attract clients in new geographic regions, increase expenditures
on research and development, and invest in new equipment and make other capital
expenditures. In addition, the Company expects that it will need to develop
further its financial and managerial controls and reporting systems and
procedures to accommodate any future growth. Failure to expand any of the
foregoing areas in an efficient manner could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company opened a satellite sales and implementation center in New Jersey
in January 1999 and may open additional sales offices in the future. In May
1999, the Company moved into an additional leased office space built adjacent to
its Pleasanton headquarters and moved its benefits administration center from
its current location in Bellevue, Washington to a new location there. Any
inability to manage growth effectively could have a material adverse effect on
the Company's business, financial condition and results of operations.
SUBSTANTIAL COMPETITION. The market for the Company's services is intensely
competitive, subject to rapid change and significantly affected by new service
introductions and other market activities of industry participants. The Company
primarily competes with several public and private payroll service providers,
such as Automatic Data Processing, Inc., Ceridian Corporation and Paychex, Inc.,
as well as smaller,
regional competitors. Many of these companies have longer operating histories,
greater financial, technical, marketing and other resources, greater name
recognition and a larger number of clients than the Company. In addition,
certain of these companies offer more services or features than the Company and
have processing facilities located throughout the United States. The Company
also competes with in-house employee services departments and, to a lesser
extent, banks and local payroll companies. With respect to benefits
administration services, the Company competes with insurance companies, benefits
consultants and other local benefits outsourcing companies. The Company may also
compete with marketers of related products and services that may offer payroll
or benefits administration services in the future. The Company has experienced,
and expects to continue to experience, competition from new entrants into its
markets. Increased competition, the failure of the Company to compete
successfully, pricing pressures, loss of market share and loss of clients could
have a material adverse effect on the Company's business, financial condition
and results of operations.
RISKS ASSOCIATED WITH THE DEVELOPMENT AND INTRODUCTION OF NEW OR ENHANCED
SERVICES; RISKS OF SOFTWARE DEFECTS. The technologies in which the Company has
invested to date are rapidly evolving and have short
15
life cycles, which requires the Company to anticipate and rapidly adapt to
technological changes. In addition, the Company's industry is characterized by
increasingly sophisticated and varied needs of clients, frequent new service and
feature introductions and emerging industry standards. The introduction of
services embodying new technologies and the emergence of new industry standards
and practices can render existing services obsolete and unmarketable. The
Company's future success will depend, in part, on its ability to develop or
acquire advanced technologies, enhance its existing services with new features,
add new services that address the changing needs of its clients, and respond to
technological advances and emerging industry standards and practices on a timely
and cost-effective basis. Several of the Company's competitors invest
substantially greater amounts in research and development than the Company,
which may allow them to introduce new services or features before the Company.
Even if the Company is able to develop or acquire new technologies in a timely
manner, it may incur substantial costs in developing or acquiring such
technologies and in deploying new services and features to its clients,
including costs associated with acquiring in-process technology, amortization
expenses related to intangible assets and costs of additional personnel. If the
Company is unable to develop or acquire and successfully introduce new services
and new features of existing services in a timely or cost-effective manner, the
Company's business, financial condition and results of operations could be
materially adversely affected.
Application software used by the Company may contain defects or failures
when introduced or when new versions or enhancements are released. The Company
has in the past discovered software defects in certain of its applications, in
some cases only after its systems have been used by clients. There can be no
assurance that future defects will not be discovered in existing or new
applications or releases. Any such occurrence could have a material adverse
effect upon the Company's business, financial condition and results of
operations.
DEPENDENCE ON THIRD-PARTY PROVIDERS. The Company depends on third-party
courier services to deliver paychecks to clients. The Company does not have any
formal written agreements with any of the courier services that it uses. Such
courier services have been in the past and may be in the future unable to timely
pick up or deliver the paychecks from the Company to its clients for a variety
of reasons, including employee strikes, storms or other adverse weather
conditions, earthquakes or other natural disasters, logistical or mechanical
failures or accidents. Failure by the Company to deliver client paychecks on a
timely basis could damage the Company's reputation and have a material adverse
effect on the Company's business, financial condition and results of operations.
DISASTER RECOVERY; RISK OF LOSS OF CLIENT DATA. The Company currently
conducts substantially all of its payroll and payroll tax processing at the
Company's headquarters in Pleasanton, California and divides the payroll
printing and finishing between its Pleasanton and Irvine, California facilities.
The Irvine facility serves both as an alternative processing center and a
back-up payroll center. The Company's benefits administration services are
conducted solely in Bellevue, Washington, and no benefits administration back-up
facility exists. The Company establishes for each payroll client a complete set
of payroll data at the Pleasanton processing center, as well as at the client's
site. In the event of a disaster in Pleasanton, clients would have the ability
to process payroll checks based on the data they have on site if necessary.
There can be no assurance that the Company's disaster recovery procedures are
sufficient or that the payroll data recovered at the client site would be
sufficient to allow the client to calculate and produce payroll in a timely
fashion.
The Company's operations are dependent on its ability to protect its
computer systems against damage from a major catastrophe (such as an earthquake
or other natural disaster), fire, power loss, security breach,
telecommunications failure or similar event. No assurance can be given that the
precautions that the Company has taken to protect itself from or minimize the
impact of such events will be adequate. Any damage to the Company's data
centers, failure of telecommunications links or breach of the security of the
Company's computer systems could result in an interruption of the Company's
operations or other loss which may not be covered by the Company's insurance.
Any such event could have a material adverse effect on the Company's business,
financial condition and results of operations.
16
DEPENDENCE ON KEY PERSONNEL. The Company's success will depend on the
performance of the Company's senior management and other key employees. The loss
of the services of any senior management or other key employee could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company generally does not enter into employment or
noncompetition agreements with its employees. If one or more of the Company's
key employees resigns from the Company to join a competitor or to form a
competitor, the loss of such personnel and any resulting loss of existing or
potential clients to any such competitor could have a material adverse effect on
the Company's business, financial condition and results of operations. In the
event of the loss of any key personnel, there can be no assurance that the
Company would be able to prevent the unauthorized disclosure or use of its
technical knowledge, practices, procedures or client lists by a former employee
or that such disclosure or use would not have a material adverse effect on the
Company's business, financial condition and results of operations.
NEED TO ATTRACT AND RETAIN EXPERIENCED PERSONNEL. The Company's success
depends to a significant degree on its ability to attract and retain experienced
employees. There is substantial competition for experienced personnel, which the
Company expects to continue. Many of the companies with which the Company
competes for experienced personnel have greater financial and other resources
than the Company. The Company has in the past and may in the future experience
difficulty in recruiting sufficient numbers of qualified personnel. In
particular, the Company's ability to find and train implementation employees is
critical to the Company's ability to achieve its growth objectives. The
inability to attract and retain experienced personnel as required could have a
material adverse effect on the Company's business, financial condition and
results of operations.
RISK ASSOCIATED WITH GEOGRAPHIC EXPANSION. A substantial majority of the
Company's revenue historically has been derived from clients located in the
western United States. The Company's ability to achieve significant future
revenue growth will in large part depend on its ability to gain new clients
throughout the United States. Growth and geographic expansion have resulted in
new and increased responsibilities for management personnel and have placed and
continue to place a significant strain on the Company's management and operating
and financial systems. The Company will be required to continue to implement and
improve its systems on a timely basis and in such a manner as is necessary to
accommodate the increased number of transactions and clients and the increased
size of the Company's operations. Any failure to implement and improve the
Company's systems or to hire and retain the appropriate personnel to manage its
operations would have a material adverse effect on the Company's business,
financial condition and results of operations.
YEAR 2000. Many currently installed computer systems and software products
are coded to accept only two-digit entries in the date code field. Beginning in
2000, these date code fields will need to accept four-digit entries in order to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies will need to be upgraded to
comply with Year 2000 ("Y2K") requirements by the end of 1999. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance issues. To address this issue we have a Y2K
project team to try to ensure that the daily operations and functionality of the
Company will not be adversely affected by the Y2K issue.
The Company believes that software applications used for providing payroll,
tax and HR services at the Company are Y2K compliant. Clients representing over
90% of the Company's revenue are currently processing on the Company's Y2K
compliant applications. All clients are expected to be processing on the
Company's Y2K compliant applications by fall of 1999. There can be no assurance
that Y2K errors or defects will not be discovered in the Company's current and
future products.
The Company has engaged a representative sample of its client base to
participate in the application testing process and validate the output; however,
the Company is not assessing the Y2K compliance of its clients' systems or the
possible effects on its operations of the Y2K compliance of its clients'
systems.
17
The Company is in the process of assessing Y2K compliance status with
regards to its internally developed software, third party software, hardware,
facilities, vendors and suppliers. All remediation efforts related to mission
critical software, hardware, vendors, suppliers and facilities are expected to
be completed by fall of 1999. The Company's reliance on third party suppliers
and subcontractors, and therefore, on the proper functioning of their
information systems and software, means that failure by such suppliers and
subcontractors to address Y2K issues could have a material adverse effect on the
Company's business, financial condition and results of operations.
Our Y2K compliance is dependent on key third parties also being Y2K
compliant on a timely basis; we cannot assure that the systems of certain of our
key third parties (for example, phone service providers, banks, etc.), upon
which we rely, will be converted in a timely manner, or that their failure to
convert would not have an adverse effect on our systems. In a worst-case
scenario, if one or more of our significant systems or key third parties were
not Y2K compliant by the end of 1999 this could potentially delay both clients'
payroll processing and transmission of tax payments to the local, state or
federal tax authorities. Failure by the Company to process payroll timely or
make timely or accurate tax return filings or pay tax liabilities when due on
behalf of clients may damage the Company's reputation and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company has a disaster recovery plan in place in case of an event
(including disruption due to Y2K issues) that may affect our mission critical
operations. Like other businesses, many of our business processes are dependent
upon third-party providers. We have contracts in place with alternative vendors
for mission critical suppliers such as telecommunications, delivery services and
production supplies. In addition, the Company maintains a back-up generator in
case of disruption of electrical service and multiple fuel suppliers have been
contracted. There can be no assurance that the disaster recovery plans in place
will be adequate.
The costs for Y2K compliance have not been specifically identified within
the Company. However, the costs associated with Y2K compliance have not been,
and are not expected to be, material to our operations.
LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS. The Company's success is dependent in part upon its proprietary
software technology. The Company has no patents, patent applications or
registered copyrights. The Company relies on a combination of contract,
copyright and trade secret laws to establish and protect its proprietary
technology. The Company distributes its services under software license
agreements that grant clients licenses to use the Company's services and contain
various provisions protecting the Company's ownership and the confidentiality of
the underlying technology. The Company generally enters into confidentiality
and/or license agreements with its employees and existing and potential clients,
and limits access to and distribution of its software, documentation and other
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation or independent
third-party development of the Company's technology. There can be no assurance
that the Company's services and technology do not infringe any existing patents,
copyrights or other proprietary rights of others, or that third parties will not
assert infringement claims in the future. If any such claims are asserted and
upheld, the costs of defense could be substantial and any resulting liability to
the Company could have a material adverse effect on the Company's business,
financial condition and results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's
common stock is likely to be highly volatile and could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new services by the Company or its
competitors, market conditions in the information services industry, changes in
financial estimates by securities analysts or other events or factors, many of
which are beyond the Company's control. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology and services
companies and that often have been unrelated to the
18
operating performance of such companies. These broad market fluctuations may
adversely affect the market price of the Company's common stock.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS. Forward-looking statements
contained in this Quarterly Report are subject to the safe harbor created by the
Private Securities Litigation Reform Act of 1995 and are highly dependent upon a
variety of important factors that could cause actual results to differ
materially from those reflected in such forward-looking statements. When used in
this document and documents referenced herein, the words "intend," "anticipate,"
"believe," "estimate," and "expect" and similar expressions as they relate to
the Company are included to identify such forward-looking statements. These
forward-looking statements include statements regarding the demand for
outsourcing employee administrative services; the Company's expansion of its
client base; the Company's intention to increase its direct sales force; the
development of a comprehensive and fully integrated suite of employee
administrative services; the Company's ability to offer additional services; the
initiation or completion of any strategic acquisition, investment or alliance;
the Company's ability to extend its technology leadership; the Company's ability
to attract and retain new clients; market acceptance of any new services offered
by the Company; the Company's ability to minimize the impact of interest rate
fluctuations; the Company's ability to develop its financial and managerial
controls and systems; the opening of additional facilities; the sufficiency of
the Company's back-up facilities and disaster recovery procedures; the Company's
ability to develop or acquire new technologies; the Company's ability to attract
and retain experienced employees; the ability of the Company to make its
internal system Year 2000 compliant and to transition its clients to a Year 2000
compliant system; the Company's ability to maintain a high payroll client
retention rate and the Company's ability to increase its national presence.
These forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties, including
without limitation, those identified under "Additional Factors That May Affect
Future Results" and elsewhere in this Quarterly Report and other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission. Actual results could differ materially from
these forward-looking statements. In addition, important factors to consider in
evaluating such forward-looking statements include changes in external market
factors, changes in the Company's business or growth strategy or an inability to
execute its strategy due to changes in its industry or the economy generally,
the emergence of new or growing competitors and various other competitive
factors. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this Quarterly Report will in
fact occur.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
(d) On September 19, 1997, the Company commenced an initial public offering,
which consisted of 4,312,500 shares of its Common Stock (the "Offering") at
$7.33 per share pursuant to a registration statement (No. 333-23189)
declared effective by the Securities and Exchange Commission on September
19, 1997. As of January 1, 1999, approximately $200,000 of the net proceeds
from the Offering were invested in short-term financial instruments. From
January 1, 1999 to March 31, 1999, the Company used all of these proceeds
from the short-term financial instruments for working capital.
On September 25, 1998, the Company commenced a secondary public offering
(the "Secondary Offering"), which consisted of 3,191,250 shares of its
Common Stock at $27.00 per share pursuant to a registration statement (No.
333-60745) declared effective by the Securities and Exchange Commission on
September 25, 1998. As of January 1, 1999, approximately $80.7 million, all
of the net proceeds from the Secondary Offering, were invested in short-term
financial instruments. At March 31, 1999, all of the net offering proceeds
from the Secondary Offering were invested in short-term financial
instruments.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Exhibits.
See exhibit list following signature page.
(c) No reports on Form 8-K were filed during the quarter ended March 31, 1999.
20
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.
Dated: May 17, 1999
PROBUSINESS SERVICES, INC.
(REGISTRANT)
/s/ THOMAS H. SINTON
------------------------------------------
Thomas H. Sinton
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ STEVEN E. KLEI
------------------------------------------
Steven E. Klei
SENIOR VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
21