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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 29, 1996
OR
[ ] TRANSITION REPORT SUBJECT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
Commission File Number: 0-11380
STAFF BUILDERS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2650500
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1983 Marcus Avenue, Lake Success, NY 11042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 358-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
Class B Common Stock, $.01 par value
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 and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
The aggregate market value of the voting stock (Class A and Class B
Common Stock, assuming conversions of Class B Common Stock into Class A
Common Stock on a share for share basis) held by non-affiliates of the
registrant based on the closing price of such stock on April 26, 1996,
was $79,354,080.
The number of shares of Class A Common Stock and Class B Common Stock
outstanding on April 26, 1996 was 22,016,025 and 1,496,295 shares,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Items 10,11,12 and 13 will be included in
the Company's definitive Proxy Statement for the Annual Meeting of
Stockholders, which will be filed pursuant to Regulation 14A within 120
days after the close of the fiscal year for which this report is filed,
and which information is incorporated herein by reference.
PART I
ITEM 1. BUSINESS
Staff Builders, Inc. is a Delaware corporation which was
incorporated in New York in 1978 and reincorporated in Delaware in
May 1983. Unless the context otherwise requires, all references to
the "Company" include the Company's predecessor and its
subsidiaries.
General
The Company is a leading national provider of home
health care. In addition, it provides supplemental staffing to
health care institutions. These services are provided through a
pool of approximately 40,000 caregivers operating within a network
of 214 offices located in 37 states and the District of Columbia.
Of these offices, 30 are directly owned by the Company and 184 are
operated by 85 franchisees.
The Company's 214 field office locations include 46
locations which were added from six acquisitions made during the
three years ended February 29, 1996. On September 29, 1995, the
Company acquired a home health care provider consisting of nine
locations in Ohio, Virginia and Indiana, which have been
consolidated to seven locations as of February 29, 1996. These
locations contributed revenues of approximately $2.6 million for
the fiscal year ended February 29, 1996 ("Fiscal 1996"). On
September 1, 1995, four locations in Central New Jersey were
acquired from a home health care business which generated revenues
of approximately $1.9 million in fiscal 1996. On August 30, 1995,
the Company acquired seven locations in the Raleigh-Durham, North
Carolina area, which contributed revenues of approximately $5.6
million in fiscal 1996. In July 1994, the Company acquired
thirteen locations of a supplemental staffing business operating in
seven states, and in a separate acquisition in November 1994, seven
additional supplemental staffing offices operating in five states
were added. These supplemental staffing locations contributed
revenues of approximately $24.0 million and $15.4 million in fiscal
1996 and for the year ended February 28, 1995 ("Fiscal 1995"),
respectively. See "Business -- Supplemental Staffing."
In July 1993, the Company acquired eight locations of a regional
home health care business which contributed revenues of
approximately $ 36.2 million, $29.7 million and $16.8 million in
fiscal 1996, fiscal 1995 and for the year ended February 28, 1994
("Fiscal 1994"), respectively. Additionally, the Company acquired
certain assets, consisting primarily of employee and customer
lists, of 23 other home health care providers in 30 locations
during the three years ended February 29, 1996.
Home Health Care
The Company provides a broad range of health care
services to individuals in their homes, affording an alternative to
institutionalized care. Services are rendered by licensed and
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registered nurses, therapists and medical social workers, who
provide skilled care such as intravenous therapy, pain management,
ventilator care, changing of dressings, injections, administration
of medication and other nursing procedures. In addition, unskilled
care is provided by home health aides and other unlicensed
personnel who assist patients with their daily activities.
Services are available 24 hours per day, seven days per
week, and personnel at each of the Company's offices are available
after normal business hours to respond to emergencies and meet
other service requests. Each office generally is staffed by a
manager who has responsibility for general management of the
office; one or more field staff supervisors who are responsible for
ensuring that requested services are provided; and a director of
home care services who is responsible for overseeing the
implementation of the patient's plan of care as prescribed by the
physician.
Clients' requests for home health care are typically
received at a local office and all skilled home health care
services are provided pursuant to the orders of the patient's
physician. Generally, after a referral is received, the director
of home care services will make arrangements for an assessment in
which the patient's condition is analyzed in order to identify the
patient's needs. Home care services are rendered in accordance
with the plan of care. During the intake process, the Company
contacts third-party payors to confirm the extent of insurance
coverage.
Home health care services accounted for approximately
90%, 91% and 95% of revenues for fiscal 1996, 1995 and 1994,
respectively. The primary payment sources for home health care
revenues are Medicare, Medicaid, commercial insurance carriers and
individuals, and state and local government health programs. See
"Business -- Reimbursement" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Supplemental Staffing
The Company has expanded its supplemental staffing
business through the acquisition in July 1994 of ATC Services
Incorporated ("ATC"), a provider of temporary and contractual
staffing services to health care institutions and other
organizations, through thirteen offices located in seven states,
and the acquisition by ATC in November 1994 of seven additional
offices in five states. During fiscal 1996, additional
supplemental staffing franchise locations were added contributing
to the total supplemental staffing revenues of approximately $38.1
million in fiscal 1996, as compared to $28.8 million and $10.5
million in fiscal 1995 and fiscal 1994, respectively. The
Company's supplemental staffing operations provide clients with
temporary technicians, registered nurses, licensed practical
nurses, insurance billers and other personnel. Health care
institutions use supplemental staffing to cover permanent positions
for which they have openings, for peak periods, vacations and
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emergencies and to accommodate periodic increases in the number of
patients.
Local offices are generally familiar with the
operations, procedures and policies of the institutions in the
areas served by such offices and use this knowledge in providing
the training and orientation to their supplemental staffing
personnel. Accordingly, the personnel provided are able to assume
responsibility quickly and work effectively with permanent staff
members.
Supplemental staffing operations accounted for
approximately 9%, 9% and 4% of the revenues for fiscal 1996, 1995
and 1994, respectively.
Franchisees
Of the Company's 214 field office locations, 184 are
operated by 85 franchisees pursuant to the terms of a franchise
agreement with the Company. The Company utilizes a form of
franchising whereby it licenses independent companies or
contractors to represent the Company within a designated territory
using the Company's trade names and service marks. These
franchisees recruit direct service personnel and solicit orders and
assign Company personnel including registered nurses, therapists
and home health aides to service the Company's clients. The
Company pays and distributes the payroll for the direct service
personnel, administers all payroll withholdings and payments, bills
the customers and receives and processes the accounts receivable.
The franchisees are responsible for providing an office and paying
related expenses for administration including rent, utilities and
costs for administrative personnel. The Company owns all necessary
health care-related permits and licenses and, where required,
certificates of need for operation of franchise offices. The
revenues and related direct costs are included in the Company's
consolidated service revenues and operating costs.
The locations operated by franchisees contributed
approximately $334 million, $251 million and $184 million, or
approximately 82%, 77% and 75% of the Company's service revenues
for fiscal 1996, 1995 and 1994, respectively.
The initial franchise term granted by the Company is
generally ten years. A franchisee has the option to extend for an
additional five-year term, subject to the franchisee adhering to
the operating procedures and quality control standards established
by the Company. The initial franchise fee is currently $29,500 for
home health care and $19,500 for the ATC supplemental staffing
operations. In addition, franchisees who have converted branch
offices into franchises may be required to lease certain assets of
the branch office from the Company. When converting independently
owned agencies into franchises, the Company negotiates the terms of
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the conversion on a transaction-by-transaction basis depending on
the size of the agency, the nature of the agency's business and the
location of the agency.
The Company pays a distribution or commission to the
franchisees based upon a defined formula of gross profit generated.
Generally, the Company pays the home health care franchisee 60% of
the gross profit attributable to the non-Medicare operations of the
franchise. The payment to the Company's franchises related to
Medicare operations is adjusted for cost limitations and
reimbursement of allowable Medicare costs. The Company generally
pays the supplemental staffing franchises 60% of the gross profit
based on volume. For fiscal 1996, 1995 and 1994, total franchisee
distributions of approximately $75.4 million, $56.9 million and
$40.5 million, respectively, were included in the Company's general
and administrative expenses.
The Company has implemented its franchise program to
permit it to quickly penetrate new markets and realize economies of
scale. The program also enables the Company to maintain stable
local management by reducing personnel turnover.
Data Processing
The Company maintains central computerized management
information systems (including payroll, billing and other
administrative functions) for its home health care operations at
its corporate headquarters in Lake Success, New York. The ATC
operations have their corporate headquarters in Atlanta, Georgia.
Generally, bills are rendered, payroll is processed and collections
are received at the corporate headquarters or at lock-boxes which
have been established in connection with the Company's revolving
line of credit.
Recruiting and Training
The Company and its franchisees recruit health care and
medical staffing personnel principally through referrals from other
personnel, newspaper advertisements and direct mail solicitations
to nursing, paramedical and other recruiting sources. A large
percentage of these personnel are employed only when needed, and
are paid for the actual number of hours worked or visits made.
The Company has standardized procedures for recruiting,
interviewing, testing and reference checking prospective personnel.
All nurses and therapists must be licensed by the appropriate
licensing authorities. Substantially all unlicensed health care
personnel must be certified either through a state-approved
certification program or must have had previous experience in
providing direct patient care in a hospital, nursing home or in the
home. After selection, applicants receive instruction in the
Company's procedures and policies. Subsequently, they are included
on a list of personnel eligible for placement on home care cases.
The Company has an in-service training program for its home health
personnel which satisfies the statutory prerequisites for
certification required by certain states.
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In addition to health care personnel recruited and
trained by the Company, the Company contracts with third parties to
meet its personnel requirements. These contracted personnel must
have the same qualifications required of Company personnel.
Quality Control
As a service business, the quality and reputation of the
Company's personnel and operations is critical to the Company's
success. The Company has implemented uniform quality assurance
programs for its home health care operations, including its
consumer hotline and service evaluation system in which patients
are asked by the Company to rate the quality of care provided.
These programs are administered at the national and local levels.
The Company's Directors of Professional Services conduct periodic
on-site reviews to determine compliance with all regulations.
Marketing
The Company markets its services on a national and local
basis. Each office seeks to retain strong local identification in
order to best respond to prevailing market conditions and cultivate
local referrals. Office managers and franchisees are able to offer
the most appropriate services based on market need and implement
customized marketing programs for the areas they serve. The
Company provides marketing support including sales brochures,
selling seminars, advertising and marketing materials in addition
to assistance in developing marketing plans.
Local marketing efforts principally involve periodic
visits or calls to hospital discharge planners, nursing management,
physicians and other individuals at hospitals, nursing homes and
other health care facilities who are responsible for discharge
planning.
Due to changes in health care reimbursement, insurance
companies and health maintenance organizations have become more
involved in directing services for those to whom they provide
coverage. The Company has sought to adapt to the increased role of
these organizations in patient referrals through the implementation
of its Managed Care Program. Under this program, the Company
provides services to members of health maintenance organizations or
policy holders of insurance companies at a negotiated rate. The
Company believes that some of these organizations, as a result of
their strict guidelines, centralized administration and geographic
diversity, retain the Company because of its ability to
consistently offer quality services on a national basis. Moreover,
the Company believes that its ability to offer patients a wide
variety of home health care services will provide it with a
competitive edge in obtaining additional business from these
organizations.
The Company's representatives attend and participate in
health care functions, trade shows and conventions and have ongoing
public education programs to further enhance the Company's role as
a national home health care provider.
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Reimbursement
Revenues generated from the Company's home health care
services are paid by private insurance carriers, health maintenance
organizations and individuals, Medicare, Medicaid and other state
and local government health insurance programs. During fiscal 1996
approximately 13% of the Company's total revenues represented
reimbursement from commercial insurance carriers, health
maintenance organizations and individuals; 58% came from Medicare;
and 19% came from Medicaid and other local government health
programs. Medicare is a Federally funded program available to
persons with certain disabilities and persons of age 65 or older.
Medicaid, a program jointly funded by Federal and state
governments, and other local government health care programs are
designed to pay for certain health care and medical services
provided to low income individuals without regard to age.
The Company has 132 locations which are certified to
provide home health care services to Medicare patients. Medicare
reimburses the Company for covered items and services at the lower
of the Company's cost, as determined by Medicare, cost limits
established by the Federal government, or the amount charged by the
Company. The Company submits all Medicare claims to a single
insurance company acting as a fiscal intermediary which processes
claims on behalf of the Federal government. As of February 29,
1996, the Company has 76 offices which qualify to participate in
Medicare's periodic interim payments ("PIP") program. Under PIP,
the Company receives regular bi-weekly Medicare payments based on
past Medicare activity of qualifying offices, which are adjusted at
the end of each calendar quarter for actual levels of activity.
Offices which are not participating in the PIP program receive
payment for services upon submission of individual claims.
The Company is also reimbursed for covered items by
Medicaid. Approximately 75% of the Company's local offices are
approved to provide home health care services to Medicaid
recipients. Medicaid reimbursement procedures vary from state to
state.
Competition
Although there are national home health care and
supplemental staffing companies, the home health care industry is
highly fragmented and competitors are often localized in particular
geographical markets. In general, there has been a recent trend
toward consolidation in the health care industry, and particularly
within the home health care industry. As the nation's health care
system is overhauled to encourage "managed competition", it is
likely that this trend toward increased consolidation in the home
health care industry will accelerate. In any event, the Company
expects that it will continue to compete with the national
organizations as well as local providers including home health care
providers owned or otherwise controlled by hospitals. Some of the
entities with which the Company competes have substantially greater
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financial and other resources. In addition, the Company's
operations depend, to a significant degree, on its ability to
recruit qualified health care personnel and the Company faces
competition from other companies in recruiting. Generally, there
is a shortage of qualified health care personnel and, as a result,
the Company, from time to time, has experienced difficulties in
obtaining personnel to meet demands for services.
The Company believes that prompt service, price, quality
and range of services offered are the principal competitive factors
which enable it to compete effectively. The Company believes that
its rate structure is competitive with others in the industry.
During fiscal 1996, no single client or group contract accounted
for ten percent or more of the consolidated revenues of the
Company. The Company expects additional competition will develop
given the increasing level of demand for the type of services
offered. See "Business -- Recruiting and Training."
Service Marks
The Company believes that its service marks, Staff
Builders and EthiCare, have significant value and are important
to the marketing of its services. These names are registered as
service marks with the United States Patent and Trademark Office.
The registration of the Staff Builders service mark will remain
in effect through February 14, 1999, with respect to home care and
hospital staff relief, and through June 28, 2006 with respect to
temporary personnel for business and industry. The registration of
the EthiCare service mark will remain in effect through December
28, 2002. Each of these marks is renewable for additional ten-year
periods, provided the Company continues to use them in the ordinary
course of business. The Company also owns other federally
registered marks for names used in connection with its business.
Government Regulation
The Company's health care business is subject to
extensive and frequently changing regulation by Federal, state and
local authorities. Such regulation imposes a significant
compliance burden on the Company, including state licensing and
certificate of need requirements and Federal and state eligibility
standards for certification as a Medicare and Medicaid provider.
The imposition of more stringent regulatory requirements or the
denial or revocation of any license or permit necessary for the
Company to operate in a particular market could have a material
adverse effect on the Company's operations. In addition, the
Company will be required to comply with the licensing and/or
Certificate of Need ("CON") requirements and applicable regulations
in the jurisdictions in which it plans to provide services, except
for the states of Colorado, Massachusetts, Michigan and Ohio which
have neither CON nor licensure requirements.
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The Federal government and all states in which the
Company currently operates regulate various aspects of the
Company's business. Home health agency certification by the Health
Care Financing Administration ("HCFA") is required to receive
reimbursement for services from Medicare. The Company has 132
offices in 33 states and the District of Columbia which provide
services covered by Medicare. HCFA requires, as conditions of
participation as a home health agency in the Medicare program,
among other things, the satisfaction of certain standards with
respect to personnel, services and supervision; the preparation of
annual budgets and capital expenditure plans; and the establishment
of a professional advisory group that includes at least one
physician, one registered nurse and other representatives from
related disciplines or consumer groups.
Certain states require a provider of home health care
services to obtain a license before rendering services. Some
states, including many of the states in which the Company presently
operates, maintain Certificate of Need ("CON") legislation
requiring an office to file an application that must be approved by
the appropriate state authority before certain health care services
can be provided in an area. Approval is dependent upon, among
other things, good character and competence, financial capability
and a demonstration that the need exists for such services. In
states having a CON requirement, HCFA will grant Medicare
certification to an office, thereby permitting the office to
provide services covered by Medicare, only if the office has
obtained a CON.
New York State requires the approval by the Public
Health Council of the New York State Department of Health ("NYPHC")
of any change in the "controlling person" of an operator of a
licensed health care services agency (an "LHCSA"). Control of an
entity is presumed to exist if any person owns, controls or holds
the power to vote 10% or more of the voting securities of such
entity. A person seeking approval as a controlling person of an
operator of a LHCSA must file an application for NYPHC approval
within 30 days of becoming a controlling person, and pending a
decision by the NYPHC, such person may not exercise control over
the LHCSA. The Company has 16 offices in New York State which are
LHCSAs. Such offices accounted for approximately 14% of the
Company's revenues in fiscal 1996. If any person should become the
owner or holder, or acquire control, of the right to vote 10% or
more of the Common Stock of the Company, such person could not
exercise control of the Company's LHCSAs until such ownership,
control or holding has been approved by the NYPHC.
The Company is subject to Federal laws and laws in
certain states that govern the offer and sale of franchises. The
Company is also subject to a number of state laws that regulate
certain substantive aspects of the franchisor-franchisee
relationship. If the Company fails to comply with the franchise
laws, rules and regulations of a particular state relating to
offers and sales of franchises, the Company will be unable to
engage in offering or selling franchises in or from such state. To
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offer and sell franchises, the Company is required by the Federal
Trade Commission to furnish to prospective franchisees a current
franchise offering disclosure document. The Company has used a
Uniform Franchise Offering Circular to satisfy this disclosure
obligation. In addition, in certain states the Company is required
to register or file with such states and to provide prescribed
disclosures. The Company is currently permitted to offer
franchises in 45 states.
The Company is required to update its offering
disclosure document to reflect intended changes or the occurrence
of certain material events. The occurrence of any such changes or
events may from time to time require the Company to stop offering
and selling franchises until the document is so updated.
Insurance
The Company's field employees make decisions which can
have significant medical consequences to the patients in their
care. As a result, the Company is exposed to substantial liability
in the event of negligence or wrongful acts of its personnel. The
Company maintains medical professional and general liability
insurance providing for coverage in a maximum amount of $26 million
per claim, subject to a limitation of $26 million for all claims in
any single year and to a deductible for each claim. In addition,
franchisees are required to maintain general liability insurance
providing for coverage of at least $1 million.
Personnel and Employees
At February 29, 1996, the Company employed approximately
2,800 full-time administrative and management personnel.
Approximately 2,480 of these employees were located at the
Company's branch offices, 300 were located at its corporate
headquarters in Lake Success, New York, and 20 were located at its
medical staffing division headquarters in Atlanta, Georgia.
In addition, the Company draws upon a pool of
approximately 40,000 caregivers who are eligible for placement and
utilizes the services of approximately 17,000 of them at any one
time. Approximately 42% of these individuals are registered nurses
and other licensed personnel and 58% are home health aides and
other unlicensed personnel. The Company screens all applicants to
ensure that they meet all licensing requirements and the Company's
eligibility standards. This screening process includes skills
testing, reference checking, professional license verification,
personal interviews and a physical examination. In addition, new
employees receive an orientation on the Company's policies and
procedures prior to their initial assignment. Further, the
registered professional nurse who has responsibility for
coordinating the patient's care visits the patient within 72 hours
after commencement of services, as required, to assess the
caregiver's performance. The Company is not a party to any
collective bargaining agreement and considers its relationship with
its employees to be satisfactory.
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ITEM 2. PROPERTIES
The Company's corporate headquarters consists of
approximately 50,000 square feet of leased office space and 5,000
square feet of storage space in Lake Success, New York. The lease
for the corporate headquarters expires on September 30, 2003 and
provides for a base rent of approximately $87,600 per month, which
increases by three percent on December 1, 1996 and each year
thereafter.
In connection with the Company's acquisition of ATC
Services Incorporated in July 1994, the Company maintains its
medical staffing division in Atlanta, Georgia. The lease for
approximately 9,500 square feet of office space expires on May 31,
2000 and provides for a monthly base rent of approximately $10,500.
Approximately 6,000 square feet of the office is sublet to a
subtenant unaffiliated with the Company at a monthly rental of
approximately $5,600 with yearly increases of 4.5 percent.
The Company believes that its corporate and divisional
headquarters office space is sufficient for its immediate needs and
that it will be able to obtain additional space if needed in the
future.
The Company leases substantially all of its branch
office locations from landlords unaffiliated with the Company or
any of its executive officers or directors. Most of these leases
are for a specified term, although several of them are month-to-
month leases. As of February 29, 1996, there were 214 offices
including 30 managed directly by the Company and 184 managed by
franchisees; 18 of these franchise offices sublease the office
space from the Company and the remaining franchise offices are
leased by the franchisee from third-party landlords. The Company
believes that it will be able to renew or find adequate replacement
offices for all leases which are scheduled to expire in the next
twelve months at comparable costs.
ITEM 3. LEGAL PROCEEDINGS
On September 20, 1995, the United States Attorney for
the Eastern District of Pennsylvania alleged that (i) between 1987
and 1989, a corporation, substantially all assets and liabilities
of which were acquired by a subsidiary of the Company in 1993,
submitted false claims to Medicare totaling approximately $1.5
million and (ii) officers and employees of that corporation
submitted false statements in support of such claims,and made a
pre-complaint civil settlement demand of approximately $4.5
million. The alleged false claims and false statements were made
before the Company acquired that corporation in 1993. Based on its
preliminary investigation, the Company believes that the amount of
improper claims, if any, submitted by that corporation to Medicare
between 1987 and 1989, were significantly below $1.5 million. The
Company is in negotiations with the office of the United States
Attorney to resolve this matter, but is unable to predict the
ultimate costs, if any, that may be incurred by the company. As
such, no provision has been made in the accompanying financial
statements.
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The Company is a defendant in several civil actions
which are routine and incidental to its business. The Company
purchases insurance in such amounts which management believes to be
reasonable and prudent. In the opinion of management, the outcome
of pending litigation will not have a material adverse effect on
the Company's consolidated financial condition, liquidity or
results of operations. Accrued expenses include $386,000 at
February 29, 1996 which represents the estimated amount of
liability claims payable. Such amount represents the deductible
amount for which the Company is liable, net of payments by the
Company's insurers which are probable of realization, estimated at
approximately $1.4 million.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of fiscal 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
(A) Market Information
The Company has outstanding two classes of common equity
securities: Class A Common Stock and Class B Common Stock. These
two classes were created by a recapitalization of the Company's
Common Stock that was completed in October 1995. The Company's
Class A Common Stock is traded in the over-the-counter market and
listed on the Nasdaq National Market under the symbol "SBLI" as was
its common stock prior to the recapitalization.
High Low
Fiscal Year Ended February 28, 1995
1st Quarter $ 5.00 $ 3.25
2nd Quarter 3.69 2.63
3rd Quarter 3.50 2.88
4th Quarter 4.00 2.88
Fiscal Year Ended February 29, 1996
1st Quarter $ 4.63 $ 3.25
2nd Quarter 4.50 3.31
3rd Quarter 5.63 2.56
4th Quarter 4.00 2.38
There is no established public trading market for the
Company's Class B Common Stock, which has ten votes per share and
upon transfer is convertible automatically into one share of Class
A Common Stock, which has one vote per share.
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(B) Holders
As of April 26, 1996 there were approximately 370 holders
of record of Class A Common Stock (including brokerage firms
holding stock in "street name" and other nominees) and 567 holders
of record of Class B Common Stock.
(C) Dividends
Since its organization, the Company has not paid any
dividends on its shares of Common Stock. Management anticipates
that for the foreseeable future all earnings will be retained for
use in its business and, accordingly, it does not intend to pay
cash dividends. The Company's current revolving credit facility
prohibits the payment of cash dividends on the common stock.
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ITEM 6.
SELECTED FINANCIAL DATA (in thousands, except share and per share data)
Years Ended
February February February February February
29, 1996 28, 1995 28, 1994 28, 1993 29, 1992
CONSOLIDATED OPERATIONS DATA:
Revenues $410,160 $325,111 $246,082 $198,627 $168,508
Costs and expenses:
Operating costs 256,719 201,365 152,824 128,331 113,423
General and administrative expenses 143,704 111,462 83,682 62,075 48,817
Provision for doubtful accounts 2,678 2,431 2,400 2,352 2,588
Amortization of intangible assets 1,823 1,237 884 775 826
Interest expense 948 1,237 2,189 2,244 3,481
Other (income) expense, net 815 (818) (569) (935) (453)
Total costs and expenses 406,687 316,914 241,410 194,842 168,682
Income (loss) from operations
before income taxes 3,473 8,197 4,672 3,785 (174)
Provision for income taxes 1,459 3,462 1,308 1,211 34
Income (loss) from operations 2,014 4,735 3,364 2,574 (208)
Extraordinary Item: Gain on refinancing, net - - - - 960
Net income $ 2,014 $ 4,735 $ 3,364 $ 2,574 $ 752
Income (loss) applicable to common
stockholders:
Income (loss) from operations $ 2,014 $ 4,735 $ 3,954 $ 2,174 $ (608)
Extraordinary item - - - - 960
Income applicable to common
stockholders $ 2,014 $ 4,735 $ 3,954 $ 2,174 $ 352
Income (loss) per common and common
equivalent share -
Primary:
Income (loss) from operations $ .08 $ .20 $ .20 $ .14 $ (.09)
Extraordinary item - - - - .14
Income $ .08 $ .20 $ .20 $ .14 $ .05
Fully diluted:
Income $ .08 $ .20 $ .20 $ .13 $ .05
Cash dividends per common share $ - $ - $ - $ - $ -
Weighted average number of common
and common equivalent shares
outstanding:
Primary 25,340 24,073 22,175 16,073 7,094
Fully diluted 25,532 24,376 22,175 16,488 7,712
CONSOLIDATED BALANCE SHEET DATA:
Total assets $120,527 $103,486 $ 87,310 $ 66,983 $ 62,174
Working capital 12,007 22,038 26,855 17,214 14,012
Current portion of long-term liabilities 2,356 1,267 827 1,797 1,610
Long-term liabilities 9,611 9,186 14,021 13,768 13,097
Total liabilities 65,217 51,135 48,035 37,708 35,631
Redeemable Class B Preferred Stock
and accrued dividends - - - 6,034 5,634
Stockholders' equity 55,310 52,351 40,976 23,241 20,909
Certain prior period amounts have been reclassified to conform with the fiscal 1996 presentation.
-14-
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information
which the Company's management believes is relevant to an
assessment and understanding of the Company's results of operations
and financial condition. This discussion should be read in
conjunction with the consolidated financial statements and notes
thereto appearing elsewhere herein. (Dollars in thousands, except
per share amounts or where otherwise indicated).
Results of Operations
Years Ended February 29, 1996 ("Fiscal 1996"), February 28, 1995
("Fiscal 1995") and February 28, 1994 ("Fiscal 1994")
Revenues. Total revenues increased by $85.0 million or
26.2% to $410.1 million in fiscal 1996 from $325.1 million in
fiscal 1995. This increase included $11.2 million of revenue from
acquisitions made in fiscal 1996, including $5.6 million of
revenues from a regional home health care provider based in
Raleigh-Durham, North Carolina which was acquired in August 1995,
and $5.6 million of revenues from three other companies acquired
since August 1995. Further, revenues generated by an Atlanta,
Georgia based provider of medical staffing services (ATC) acquired
in July 1994, which are included for the full fiscal 1996 period,
contributed $8.6 million of increased revenue in fiscal 1996 as
compared to fiscal 1995. The introduction and expansion of medical
staffing services in some of the Company's existing locations added
$2.2 million of revenues in fiscal 1996. Expansion of the
Company's franchise program resulted in increased health care
revenues of $27.0 million in fiscal 1996 over fiscal 1995 from the
addition of new locations in fiscal 1996 and the addition of
locations during fiscal 1995 which are included in the full fiscal
1996 period. Additionally, the Company generated increased revenue
of $39.0 million, or 13%, in fiscal 1996 over fiscal 1995, from
existing locations which were included for the entire two fiscal
periods. Offsetting the foregoing increases, the Company reduced
its Medicare revenues by $3.0 million due to a revision in the
methodology used to allocate corporate overhead, as required by the
Medicare fiscal intermediary.
Revenues increased by $79.0 million or 32.1% to $325.1 million
in fiscal 1995 from $246.1 million in fiscal 1994. This increase
includes $15.4 million of revenue from ATC acquired by the Company
in July 1994. Further, revenues generated by a regional home
health care business acquired in July 1993, which are included for
the full 1995 period, contributed $12.9 million of increased
revenue in the 1995 period as compared to the 1994 period. In
addition to the effect of these acquisitions, the increase in
-15-
revenues is primarily due to an increase of $39.1 million, or
33.6%, in the Company's Medicare revenues to $155.5 million in
fiscal 1995 period from $116.4 million in fiscal 1994 period.
Additionally, there was an increase of $6.2 million, or 10.6%,
in the Company's Medicaid and other local government program
revenues to $64.7 million from $58.5 million in fiscal 1994. The
remainder of the increase of $5.4 million in revenues in fiscal
1995 is primarily due to an increase of $3.4 million, or 8.2%, in
revenues from insurance and private payors to $45.1 million from
$41.7 million in the 1994 period. The foregoing increases in
revenues include $13.6 million derived from new franchise
operations added in fiscal 1995 in connection with the Company's
continued expansion of its franchise program.
The increase in Medicare and Medicaid revenues during the
three years ended February 29, 1996 was due to an increase in the
number of locations participating in these programs. In order to
be certified by the Health Care Finance Administration as a home
health agency which may participate in the Medicare program, among
other things, a location must satisfy certain operational standards
with respect to the number and qualifications of personnel, service
levels and related supervision as well as meet certain financial
standards with respect to the preparation of annual budgets and
capital expenditure plans. The number of locations which are
eligible to provide Medicare services has increased from 81 as of
February 28, 1994, to 132 as of February 29, 1996. Additionally,
the Company has continued to respond to the related, increasing
market demand for health care services.
The Company receives payment for its health care services
from several sources. The following are the Company's service
revenues by payment source:
Years Ended
February February February
29, 1996 28, 1995 28, 1994
Medicare .......................... 57.7% 56.5% 53.5%
Medicaid and other local
government programs ............. 19.4 20.1 24.2
Insurance and private payors ...... 13.4 14.5 17.4
Hospitals, nursing homes and
other health care institutions ... 9.3 8.9 4.3
Other ............................. 0.2 - 0.6
Total ............................. 100.0% 100.0% 100.0%
-16-
The change in revenue mix and the reimbursement sources
reflect the Company's growth of its home health care operations and
the expansion of its supplemental staffing services. Supplemental
staffing revenues increased by $9.3 million, or 32.4%, to $38.1
million in fiscal 1996 from $28.8 million in fiscal 1995, as
compared to $10.5 million in fiscal 1994. The increase in fiscal
1996 included $8.6 million from the ATC locations acquired in July
1994.
The portion of the Company's service revenues
attributable to franchise operations has been increasing. The
service revenues attributable to franchise offices increased to 82%
in fiscal 1996 from 77% in fiscal 1995 and from 75% in fiscal 1994.
The increase in revenues attributable to franchise offices was due
to the increase in the number of locations operated by franchisees
from 94 locations operated by 57 franchisees as of February 28,
1994 to 184 locations operated by 85 franchisees as of February 29,
1996. These increases result from the Company's continuing efforts
to expand its operations in additional markets primarily through
the recruitment of new franchisees.
Operating Costs. Operating costs were 62.8%, 62.1% and
62.3% of service revenues in fiscal 1996, 1995 and 1994,
respectively. Operating costs represent the direct costs of
providing services to patients, including direct service wages,
payroll taxes, travel costs, insurance costs directly related to
services, medical supplies and the cost of contracted services.
The increase in the percentage of operating costs in fiscal 1996 is
primarily due to the reduction in Medicare revenues due to a
revision in the methodology used to allocate corporate overhead.
The payroll fringe costs, consisting primarily of payroll
taxes and workers compensation insurance, represents 14.6%, 17.3%
and 21.1% of direct service wages in fiscal 1996, 1995 and 1994,
respectively. The decrease in payroll fringe costs as a percentage
of direct service wages in fiscal 1996 was primarily due to reduced
premiums for workers compensation insurance.
The cost of contracted services represents 8.1%, 9.8% and
7.4% of service revenues in fiscal 1996, 1995 and 1994,
respectively. The decrease in these costs in fiscal 1996 as a
percentage of service revenues is primarily due to the Company's
expansion and use of its own qualified work force to provide
medical staffing services which were previously rendered by
contractors. The increase in these costs in fiscal 1995 was
primarily due to the increase in Medicare services provided by the
Company.
-17-
The revenues, operating costs and resultant gross margins
generated by the Company's franchise and Company-owned locations
are as follows:
($ in millions)
Years Ended
February February February
29, 1996 28, 1995 28, 1994
Total revenues - Franchise $334 $251 $184
Total revenues - Company-Owned 76 74 62
Total revenues $410 $325 $246
Operating costs - Franchise $207 $154 $112
Operating costs - Company-Owned 50 47 41
Operating costs $257 $201 $153
Gross margin - Franchise $127 $ 97 $ 72
Gross margin - Company-Owned 26 27 21
Gross margin $153 $124 $ 93
The gross margin percentages generated by Company-owned
locations are lower than those for franchise locations as a result
of a proportionately higher volume of services which have lower
gross margin percentages, such as supplemental staffing and
Medicaid.
General and Administrative Expenses. General and
administrative expenses increased by $32.2 million or 28.9% in
fiscal 1996 as compared to fiscal 1995 and increased by $27.8
million or 33.2% in fiscal 1995 as compared to fiscal 1994. These
costs expressed as a percentage of service revenues were 35.1%,
34.4% and 34.1% in fiscal 1996, 1995 and 1994, respectively. The
increase in general and administrative expenses as a percentage of
service revenues is primarily due to the increases in the Company's
Medicare services, which require higher administrative costs than
non-Medicare services. Included in the increase in fiscal 1996 is
$3.2 million incurred by the Company's medical staffing division,
due primarily to the locations acquired in July 1994, which are
included in the full 1996 fiscal year. Further, $2.1 million was
incurred by seven locations acquired in August 1995, from a
regional home health care provider. Additionally, expansion of the
Company's franchise program resulted in increased general and
administrative expense of $18.5 million in fiscal 1996 over fiscal
1995, for the amounts distributed to new franchisees which were
added in fiscal 1996 and the addition of new franchise locations
during fiscal 1995 which are included in the full fiscal 1996
period. Also included in fiscal 1996, are non-recurring total
general and administrative expenses incurred from two unprofitable
divisions of approximately $1.4 million. Included in general and
administrative expenses are reserves and write-offs of notes
receivable from franchisees of $169 and $400 in fiscal 1996 and
fiscal 1994,
-18-
respectively. There was no expense incurred in fiscal 1995 related
to reserves and write-offs of notes receivable.
Provisions for Doubtful Accounts Receivable. The
provisions represented 0.7%, 0.8% and 1.0% of service revenues in
fiscal 1996, 1995 and 1994, respectively. The decreases in the
provisions results from improvements made in billing and collection
procedures.
Amortization of Intangible Assets. Amortization of
intangible assets was approximately $1.8 million in fiscal 1996 as
compared to $1.2 million in fiscal 1995 and $900 in fiscal 1994.
The increases are due to business acquisitions made in the 1996 and
1995 fiscal years.
Interest Expense. Interest expense was approximately
$900 in fiscal 1996 as compared to $1.2 million in fiscal 1995 and
$2.2 million in fiscal 1994. The reductions in interest expense
were due to a combination of lower interest rates and reduced
levels of borrowings required due primarily to the reduction in the
amount of time that the Company's accounts receivable were
outstanding.
Other (Income) Expense, Net. Other (income) expense, net
in fiscal 1996 includes expense of $1,580 to provide for the costs
to close two unprofitable divisions, $358 in costs associated with
the Company's recapitalization and $165 for settlement of
litigation. Other income primarily consists of interest received
on franchise notes receivable in fiscal 1996, 1995 and 1994.
Interest earned on franchise notes receivable is generally at the
prime rate plus three percent.
Provision for Income Taxes. The provision for income
taxes reflects an effective rate of 42%, 42% and 28% in fiscal
1996, 1995 and 1994, respectively. The effective tax rate of 28%
in fiscal 1994 includes a reduction of the Company's valuation
allowance of $858.
Income Applicable to Common Stockholders. Income
applicable to common stockholders for fiscal 1996 was $2.01
million, or $.08 per share, compared to $4.74 million, or $.20 per
share in fiscal 1995 and $3.95 million, or $.20 per share in fiscal
1994. Included in fiscal 1994 was a non-recurring gain of $590, or
$.03 per share, resulting from a discount from the redemption of
the Company's Class B Preferred Stock.
Liquidity and Capital Resources
The Company has a secured revolving credit facility which
-19-
consists of a revolving line of credit and an acquisition line of
credit, under which it can borrow up to an aggregate amount of $25
million. The Company is permitted to borrow up to 75% of eligible
receivables up to the maximum amount of the credit facility less
amounts outstanding under the acquisition line of credit. The
acquisition line of credit provides for borrowings up to $7.5
million without collateral to finance acquisitions made by the
Company, provided that the sum of all borrowings do not exceed $25
million. Eligible receivables are defined principally as trade
accounts receivable which have been outstanding for less than 120
days. Long-term and short-term liquidity will be enhanced to the
extent that the accounts receivable on which the Company is not
permitted to borrow are reduced and by shortening the amount of
time that its accounts are outstanding. The average daily balance
outstanding under the credit facility was approximately $1.4
million, $3.3 million, and $11.2 million in fiscal 1996, 1995 and
1994, respectively.
Trade accounts receivable at the end of fiscal 1996,
1995, and 1994 were outstanding for an average of approximately 48,
54 and 68 days, respectively. Included in these receivables are
amounts derived from Medicare services. The reduction in the days
of outstanding trade accounts receivable was due to an increase in
the number of the Company's offices which participate in Medicare's
periodic interim payment ("PIP") program. Under PIP, the Company
receives regular bi-weekly payments based on past Medicare volume.
During fiscal 1996, 76 offices participated in the PIP program.
The Company funds the operating costs for all Company
owned and franchise locations as well as all regional and corporate
general and administrative expenses. Operating costs primarily
consist of direct service salaries paid on a weekly cycle. Each
franchisee funds its own general and administrative expenses. The
Company pays a distribution to its franchisees, based upon a
percentage of gross profit generated by the franchise, within 25 to
45 days after each month-end. Some of the administrative personnel
for franchise locations are leased from the Company for which the
related cost is deducted from monthly distributions paid.
During fiscal 1994, the Company called for redemption of
outstanding public warrants issued in a 1992 public offering, which
resulted in the issuance of 5.06 million shares of its common
stock. As a result, the Company obtained net proceeds of $13.7
million, a portion of which was used to redeem the Class B
Preferred Stock and pay certain long-term debt obligations.
During fiscal 1996 and 1995, the Company purchased and
retired a total of 1,363,744 shares of its common stock at a cost
of $3.9 million. In December 1995, the Company's Board of
Directors authorized the repurchase of up to 2.4 million shares of
common stock, subject to the consent of the Company's bank. The
bank gave approval for an initial $3.0 million in purchases of
which $1.0 million was utilized through February 29, 1996.
-20-
The Company has several agreements under which it leases
computer and other capital equipment through September 2002. The
net carrying value of the assets under these leases was
approximately $3.8 million and $2.4 million at February 29, 1996
and February 28, 1995, respectively.
At February 29, 1996, the Company's debt obligations due
within the next twelve months were approximately $2.4 million.
The Company expects that its existing working capital,
cash from operations and its banking facilities will be sufficient
to meet its needs for at least the next twelve months. The Company
expects that it will be able to extend or replace its revolving
credit agreement on favorable terms prior to its expiration on July
31, 1997.
Effect of Inflation
The rate of inflation was immaterial during the 1996
fiscal year. In the past, the effects of inflation on salaries and
operating expenses have been offset by the Company's ability to
increase its charges for services rendered. The Company
anticipates that it will be able to continue to do so in the
future, subject to applicable restrictions with respect to services
provided to clients eligible for Medicare and Medicaid
reimbursement. The Company continually reviews its costs in
relation to the pricing of its services.
Recent Pronouncements of the Financial Accounting Standards Board
Recent pronouncements of the Financial Accounting
Standards Board ("FASB"), which are not required to be adopted at
this date, include Statements of Financial Accounting Standards
("SFAS") No. 123,"Accounting for Stock-Based Compensation" ("SFAS
123") and SFAS No. 121, "Accounting for Impairment of Long-Lived
Assets to be Disposed Of ("SFAS 121"), which are effective for
fiscal years beginning after December 15, 1995. The adoption of
SFAS 123 and SFAS 121 is not expected to have a material impact on
the Company's consolidated financial position or results of
operations.
-21-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STAFF BUILDERS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of
February 29, 1996 and February 28, 1995 F-2
Consolidated Statements of Income
for the Years ended February 29, 1996,
February 28, 1995 and February 28, 1994 F-3
Consolidated Statements of Stockholders'
Equity for the Years ended February 29,
1996, February 28, 1995 and February 28, 1994 F-4
Consolidated Statements of Cash Flows
for the Years ended February 29, 1996,
February 28, 1995 and February 28, 1994 F-5
Notes to Consolidated Financial Statements F-6
FINANCIAL STATEMENT SCHEDULE FOR THE YEARS ENDED
FEBRUARY 29, 1996, FEBRUARY 28, 1995
AND FEBRUARY 28, 1994
II - Valuation and Qualifying Accounts F-21
All other schedules were omitted because they are not required, not
applicable or the information is otherwise shown in the financial
statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Staff Builders, Inc.:
We have audited the accompanying consolidated balance sheets of Staff
Builders, Inc. and subsidiaries (the "Company") as of February 29, 1996 and
February 28, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended February 29, 1996. Our audits also included the financial
statement schedule listed in the table of contents. These financial
statements and the financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Staff Builders, Inc. and
subsidiaries at February 29, 1996 and February 28, 1995 and the results of
their operations and their cash flows for each of the three years in the
period ended February 29, 1996 in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Deloitte & Touche, LLP
Jericho, New York
April 15, 1996
F-1
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
February February
ASSETS Notes 29, 1996 28, 1995
CURRENT ASSETS:
Cash and cash equivalents $ 8,710 $ 4,508
Accounts receivable, net of allowance
for doubtful accounts of $2,200
and $1,750, respectively 52,957 56,222
Deferred income tax benefits 8 2,403 1,303
Prepaid expenses and other current assets 2 3,543 1,954
Total current assets 67,613 63,987
FIXED ASSETS, net 4 7,436 5,726
INTANGIBLE ASSETS, net 3 41,877 30,149
OTHER ASSETS 2,8 3,601 3,624
TOTAL 7 $120,527 $103,486
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,003 $ 9,654
Accrued expenses 5 16,478 10,834
Accrued payroll and payroll related expenses 6 27,769 18,874
Current portion of long-term liabilities 7 2,356 1,267
Current income taxes payable 8 - 1,320
Total current liabilities 55,606 41,949
LONG-TERM LIABILITIES 7 9,611 9,186
COMMITMENTS AND CONTINGENCIES 9
STOCKHOLDERS' EQUITY: 7,11
Common stock - $.01 par value; 50,000,000
shares authorized; 22,937,049 shares
outstanding at February 28, 1995 - 229
Class A Common Stock - $.01 par value;
50,000,000 shares authorized;
22,036,313 outstanding at February 29, 1996 220 -
Class B Common Stock - $.01 par value;
1,554,936 shares authorized; 1,501,007
outstanding at February 29, 1996 15 -
Convertible preferred stock, 10,000 shares
authorized; Class A - $1.00 par value;
666 2/3 shares outstanding at February 29,
1996 and February 28, 1995 1 1
Additional paid-in capital 72,767 71,828
Accumulated deficit (17,693) (19,707)
Total stockholders' equity 55,310 52,351
TOTAL $120,527 $103,486
See notes to consolidated financial statements
F-2
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Years Ended
February February February
Notes 29, 1996 28, 1995 28, 1994
REVENUES:
Service revenues $408,873 $324,013 $245,357
Sales of franchises and fees, net 2 1,287 1,098 725
Total revenues 410,160 325,111 246,082
COSTS AND EXPENSES:
Operating costs 256,719 201,365 152,824
General and administrative expenses 143,704 111,462 83,682
Provision for doubtful accounts 2,678 2,431 2,400
Amortization of intangible assets 1,823 1,237 884
Interest expense 948 1,237 2,189
Other (income) expense, net 2,13 815 (818) (569)
Total costs and expenses 406,687 316,914 241,410
INCOME BEFORE INCOME TAXES 3,473 8,197 4,672
PROVISION FOR INCOME TAXES 8 1,459 3,462 1,308
NET INCOME $ 2,014 $ 4,735 $ 3,364
INCOME APPLICABLE TO COMMON STOCKHOLDERS:
NET INCOME $ 2,014 $ 4,735 $ 3,364
Add net discount
on Class B Preferred Stock 10 - 590
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 2,014 $ 4,735 $ 3,954
EARNINGS PER COMMON SHARE:
Primary earnings per share 12 $ .08 $ .20 $ .20
Fully diluted earnings per share 12 $ .08 $ .20 $ .20
See notes to consolidated financial statements
F - 3
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
Convertible
Preferred Additional
Common Stock, Paid-In Accumulated Treasury
Notes Total Stock Class A Capital Deficit Stock
Balances, March 1, 1993
(15,808,736 common shares issued) $23,241 $158 $1 $51,560 $(28,396) $(82)
Issuance of 1,076 additional common
shares in connection with a 1987 acquisition - -
Issuance of 60,500 common shares in
connection with exercise of stock options 11 129 1 128
Discount, net of accrued dividends, on
Redeemable Class B Preferred Stock 10 590 590
Issuance of 5,060,000 common shares in
connection with the call for redemption
of stock warrants 11 13,652 51 13,601
Retirement of 11,093 shares of treasury stock - (82) 82
Net Income 3,364 3,364
Balances, February 28, 1994
(20,919,219 common shares issued) 40,976 210 1 65,207 (24,442) -
Issuance of 600 additional common
shares in connection with a 1987 acquisition - -
Issuance of 35,450 common shares in
connection with exercise of stock options 11 95 - 95
Issuance of 250,000 common shares in
connection with exercise of stock warrants 11 502 2 500
Issuance of 2,570,388 common shares in
connection with acquisitions 3 8,482 26 8,456
Issuance of 139,166 common shares in
connection with the employee stock
purchase plan 11 397 1 396
Purchase and retirement of 977,774 common shares (2,836) (10) (2,826)
Net Income 4,735 4,735
Balances, February 28, 1995
(22,937,049 common shares issued) 52,351 229 1 71,828 (19,707) -
Issuance of 1,360 additional common
shares in connection with a 1987 acquisition - -
Issuance of 437,681 common shares in connection
with exercise of stock options, net of 683,054
shares used to pay for shares and withholding
taxes, net of related tax benefits of $772 11 409 4 405
Issuance of 398,016 common shares in connection
with exercise of stock warrants 11 1,130 4 1,126
Issuance of 149,214 common shares in connection
with employee stock purchase plan 11 431 2 429
Purchase and retirement of 386,000 common shares (1,025) (4) (1,021)
Net Income 2,014 2,014
Balances, February 29, 1996
(23,537,320 common shares issued) $55,310 $235 $1 $72,767 $(17,693) $ -
See notes to consolidated financial statements
F-4
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended
February February February
Notes 29, 1996 28, 1995 28, 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,014 $ 4,735 $ 3,364
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization of fixed assets 2,120 1,378 1,392
Amortization of intangibles and other assets 1,823 1,237 884
Amortization of rent escalation liability 7 60 106 (167)
Allowance for doubtful accounts 450 350 200
Deferred income taxes 8 (1,013) 513 (1,611)
Change in operating assets and liabilities:
Accounts receivable 3,993 (2,452) (9,712)
Prepaid expenses and other current assets (1,447) (212) 912
Accounts payable and accrued expenses 13,046 6,243 6,656
Income taxes payable (1,098) (398) 489
Other assets (10) (595) 556
Net cash provided by
operating activities 19,938 10,905 2,963
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses 3 (7,981) (3,956) (1,025)
Additions to fixed assets, net (1,127) (2,101) (1,018)
Proceeds from disposal of fixed assets 14 3 17
Net cash used in investing activities (9,094) (6,054) (2,026)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Employee Stock Purchase Plan 11 431 397 -
Exercise of stock options 409 95 129
Exercise of warrants 11 1,130 502 13,652
Payment of Redeemable Class B Preferred Stock 10 - - (5,444)
Purchase and retirement of common stock (1,026) (2,836)
Borrowings under revolving line of credit 7 (6,642) (5,094) 1,870
Reduction of notes payable and other
long-term liabilities 7 (1,127) (737) (3,993)
Net cash provided by (used in) financing
activities (6,642) (7,673) 6,214
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,202 (2,822) 7,151
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,508 7,330 179
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,710 $ 4,508 $ 7,330
SUPPLEMENTAL DATA:
Cash paid for:
Interest $ 806 $ 962 $ 1,974
Income taxes, net $ 3,485 $ 2,846 $ 2,485
Fixed assets purchased through
capital lease agreements $ 2,425 $ 1,330 $ 493
Common stock issued for business acquisitions $ - $ 8,482 $ -
See notes to consolidated financial statements
F-5
STAFF BUILDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 1996 ("Fiscal 1996"), FEBRUARY 28, 1995
("Fiscal 1995") AND FEBRUARY 28, 1994 ("Fiscal 1994")
(Dollars in Thousands, Except Where Indicated Otherwise and, for Per
Share Amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Staff Builders, Inc. ("Staff Builders" or the "Company") is
a national provider of home health care personnel and supplemental
staffing to health care institutions.
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Staff Builders and its wholly-owned subsidiaries. The
Company maintains its records on a fiscal year ending the last day in
February. All material intercompany accounts and transactions have
been eliminated. Certain prior period amounts have been reclassified
to conform with the fiscal 1996 presentation.
A majority of the Company's service revenues are derived
under a form of franchising where the Company licenses independent
companies or contractors to represent the Company within a designated
territory using the Company's trade names and service marks. These
franchisees recruit direct service personnel and solicit orders and
assign Company personnel including registered nurses, therapists and
home health aides to service the Company's clients. The Company pays
and distributes the payroll for the direct service personnel,
administers all payroll withholdings and payments, bills the customers
and receives and processes the accounts receivable. The franchisees
are responsible for providing an office and paying related expenses
for administration including rent, utilities and costs for
administrative personnel.
The Company owns all necessary health care related permits
and licenses and, where required, certificates of need for operation
of franchise offices. The revenues generated by the franchise
operations along with the related accounts receivable belong to the
Company. The revenues and related direct costs are included in the
Company's consolidated service revenues and operating costs.
The Company pays a distribution or commission to the
franchisees based on a defined formula of gross profit generated.
Generally, the Company pays the home health care franchisee 60% of the
gross profit attributable to the non-Medicare operations of the
franchise. The payment to the Company's franchsises related to
Medicare operations is adjusted for cost limitations and reimbursement
of allowable Medicare costs. The Company generally pays the
supplemental staffing franchisee 60% of the gross profit based on
volume.
F-6
For fiscal 1996, 1995 and 1994, total franchisee
distributions of approximately $75.4 million, $56.9 million and $40.5
million, respectively, were included in the Company's general and
administrative expenses.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, revenues and expenses as well as the disclosure of
contingent assets and liabilities in the financial statements. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include certificates of deposit
and commercial paper purchased with a maturity of less than three
months.
Fixed Assets
Fixed assets, primarily consisting of office equipment,
furniture and fixtures, leased equipment and leasehold improvements,
are depreciated on a straight-line basis over the estimated useful
lives of the assets or terms of the related lease, whichever is
shorter. The estimated useful life of office equipment and furniture
and fixtures is seven years and leasehold improvements and other
equipment is five years.
Intangible Assets
The excess of the purchase price and related acquisition
costs over the fair market value of the net assets of the businesses
acquired is amortized on a straight-line basis over periods ranging
from fifteen to forty years. Intangible assets also include customer
lists, trademarks and noncompete agreements, which are amortized over
a four to fifteen-year period on a straight-line basis. The
accumulated amortization as of February 29, 1996 and February 28,
1995, was $7,282 and $6,532, respectively. During fiscal 1996, the
Company wrote off $1,014 of fully amortized intangible assets.
Management evaluates the recoverability of intangible assets based on
projections of future earnings, on an undiscounted basis, attributable
to the assets acquired.
Revenue Recognition
Revenues generated from the sales and licensing of
franchises and initial franchise fees are recognized when the Company
has performed substantially all of its obligations under its franchise
agreements and when collectibility of such amounts is reasonably
assured. In circumstances where a reasonable basis does not exist for
estimating collectibility of the proceeds of the sales of franchises
and initial franchise fees, such proceeds are deferred and recognized
as collections are made, utilizing the cost recovery method (see Note
2).
F-7
Revenues generated from Medicare services are recorded when
services are provided at an estimated reimbursement rate. Certain
factors used to develop these rates are subject to review and
adjustment by the appropriate governmental authorities and may result
in additional amounts due to or due from the Company. Management
reduces revenues by its estimate of the amount of net adjustments
which should ultimately occur. Adjustments, if any, are recorded to
these estimates in the period during which they arise. The Company
reduced its Medicare revenues by $3.0 million in the quarter ended
November 30, 1995, for which the related amount of the third party
payor settlement liability is included in accrued expenses, due to a
revision in the methodology used to allocate corporate overhead.
Income Taxes
Deferred income taxes result from timing differences
between financial and income tax reporting which primarily include the
deductibility of certain expenses in different periods for financial
reporting and income tax purposes.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, franchise
notes receivable, obligations under capital leases and notes payable
and other liabilities related to acquisitions approximate fair value.
2. FRANCHISE OPERATIONS
Franchise notes receivable generally bear interest at the
prevailing prime lending rate plus three percent and are generally
payable over a term of ten years. The balance of these notes
receivable at February 29, 1996 and February 28, 1995 amounted to
$1,533 and $1,816, net of deferred income reflected as a valuation
reserve for financial reporting purposes of $5,456 and $4,971,
respectively. The net balances of these notes at February 29, 1996
and February 28, 1995 include $191 and $188 in Prepaid Expenses and
Other Current Assets and $1,342 and $1,628 in Other Assets,
respectively. During fiscal 1996, 1995 and 1994, $526, $381 and $178,
respectively, of notes receivable previously not recognized into
income were collected and included in revenues.
Sales of franchises and fees, net include $761, $480 and
$498 of initial franchise fees for fiscal 1996, 1995 and 1994,
respectively. The initial franchise fees received in fiscal 1996 and
1995 include $507 and $452 for health care franchises and $254 and $28
for supplemental staffing franchises, respectively. The remaining
amounts represent charges to franchisees for the use of Company assets
including customer and employee lists. The Company has performed
substantially all of its obligations as required under the terms of
its franchise agreements.
General and administrative expenses include reserves and
write-offs of notes receivable from franchisees of $169 and $400 in
F-8
fiscal 1996 and 1994, respectively. There was no expense incurred in
fiscal 1995 related to reserves and write-offs of notes receivable.
Other income primarily consists of interest received on
franchise notes receivable.
During fiscal 1993, one of the franchisees was acquired by
a corporation owned by a family member of one of the Company's
officers. The purchase price for the franchise included the
assumption of a note payable to the Company of $845 of which $771
remains outstanding at February 29, 1996. The note bears interest at
three percent above the prevailing prime lending rate and matures in
2009.
Five of the Company's officers, including two executive
officers, own all or a portion of four franchises. Two of these
officers own a portion of a franchise for which a note payable was
issued to the company of $300 of which $281 remains outstanding at
February 29, 1996. Additionally, two other Company officers own two
franchises for which a liability to the Company of $51 remains
outstanding at February 29, 1996. Further, a Company officer acquired
a portion of a franchise for which a note payable of $105 remains
outstanding at February 29, 1996.
3. ACQUISITIONS
On August 30, 1995, the Company acquired the stock of
MedVisit, Inc., a regional health care provider consisting of seven
locations in the Raleigh-Durham, North Carolina area. The transaction
was accounted for as a purchase for which aggregate consideration of
approximately $5.0 million included cash paid of $1.2 million, the
present value of notes payable of $2.7 million and net obligations
assumed of $1.1 million.
On September 1, 1995, the Company acquired assets of Accredicare,
Inc., a health care provider consisting of four locations, in central
New Jersey, which was accounted for as a purchase for which cash
consideration of approximately $1.2 million was paid. This health
care provider currently operates these locations as a franchise of the
Company. Commencing in September 2000, the franchise has the option
to require the Company to purchase the right to operate in these
locations for an amount equal to the gross margin generated for the
prior twelve month period.
On September 29, 1995, the Company acquired assets of Care Star, Inc.,
a health care provider consisting of nine locations in Virginia,
Indiana and Central Ohio, which was accounted for as a purchase for
aggregate cash consideration of approximately $2.4 million.
On July 22, 1994, the Company acquired the stock of ATC Services
Incorporated ("ATC"), an Atlanta, Georgia based provider of medical
staffing services, for aggregate consideration of approximately $8.7
million which resulted in goodwill and intangibles of approximately
$5.7 million. The consideration consisted of approximately 2.5
F-9
million shares of the Company's common stock and approximately $300
in related acquisition costs. In November 1994, ATC acquired certain
assets and the operations of seven additional medical staffing
locations for aggregate cash consideration of $800, which resulted in
goodwill of approximately $700. These acquisitions were accounted for
as purchase transactions.
On July 2, 1993, the Company acquired the assets of the
Albert Gallatin Visiting Nurse Association, Inc. and the stock of
Albert Gallatin Services Corporation for aggregate consideration of
approximately $1.9 million including cash paid of $493. This
acquisition was accounted for as a purchase and resulted in goodwill
of approximately $1.9 million.
The results of operations of the acquired companies are
included in the accompanying consolidated financial statements
subsequent to their respective dates of acquisition. Revenues, net
income and earnings per share, on an unaudited pro-forma basis for the
year ended February 29, 1996, if the fiscal 1996 acquisitions had
occurred on March 1, 1995, would have approximated $425 million, $2.3
million and $.09, respectively. Revenues, net income and earnings per
share on an unaudited pro-forma basis for the year ended February 28,
1995, if the fiscal 1996 and 1995 acquisitions had occurred on March
1, 1994, would have approximated $368 million, $5.4 million and $.21,
respectively. Revenues, net income and earnings per share on an
unaudited pro-forma basis for the year ended February 28, 1994, if the
fiscal 1995 and 1994 acquisitions had occurred on March 1, 1993,
would have approximated $295 million, $3.7 million and $.17,
respectively.
Additionally, the Company acquired certain assets,
consisting primarily of employee and customer lists, of other home
health care providers in fiscal 1996, 1995 and 1994 for aggregate
consideration of approximately $4,693, $3,147 and $712, respectively.
The fiscal 1996 and fiscal 1994 consideration included $2,933 and $532
in cash and $1,760 and $180 in notes payable (see Note 7),
respectively. The fiscal 1995 consideration was paid in cash. These
acquisitions consisted of eleven, seven, and five separate health care
entities in fiscal 1996, 1995 and 1994, respectively, and were
accounted for as purchase transactions.
In connection with the fiscal 1996 and 1995 acquisitions,
consideration paid was as follows:
1996 1995
Fair value of assets acquired...... $15,440 $5,559
Liabilities assumed................ 7,459 1,603
Total consideration for
assets and stock.................. $ 7,981 $3,956
F-10
4. FIXED ASSETS
Fixed assets consist of the following:
February February
29, 1996 28, 1995
Equipment under capital leases
(see Note 7)..................... $ 5,341 $ 3,147
Office equipment, furniture
and fixtures..................... 5,988 6,293
Leasehold improvements............. 752 578
Land and building.................. 106 106
Total, at cost..................... 12,187 10,124
Less accumulated depreciation
and amortization................. 4,751 4,398
Fixed assets, net.................. $ 7,436 $ 5,726
During fiscal 1996 and fiscal 1995, the Company wrote off fully
depreciated fixed assets of approximately $1.7 million and $2.1
million, respectively.
5. ACCRUED EXPENSES
Accrued expenses include $7,185 and $5,460 at February 29, 1996
and February 28, 1995, respectively, of accrued franchise
distributions. Also included in accrued expenses at February 29, 1996
and February 28, 1995 was $7,036 and $2,853, respectively, reflecting
the Company's third-party payor settlement liability.
6. ACCRUED PAYROLL AND PAYROLL RELATED EXPENSES
Accrued payroll and payroll related expenses consist of the
following:
February February
29, 1996 28, 1995
Accrued payroll..................... $11,781 $ 8,605
Accrued insurance ................. 10,563 5,531
Accrued payroll taxes .............. 2,567 3,048
Other .............................. 2,858 1,690
Total .............................. $27,769 $18,874
F-11
7. LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
February February
29, 1996 28, 1995
Borrowings under a secured revolving
line of credit(a)................. $ - $ 6,461
Obligations under capital leases(b). 3,755 2,290
Rent escalation liability(c)........ 1,086 769
Notes payable and other liabilities
related to acquisitions(d)........ 5,428 301
Other............................... 1,698 632
Total............................... 11,967 10,453
Less current portion................ 2,356 1,267
Long-term liabilities(e)............ $ 9,611 $ 9,186
(a) The Company has a secured credit facility which expires on July
31, 1997. The credit facility consists of a revolving line of credit
and an acquisition line of credit, under which the Company can borrow
up to an aggregate amount of $25 million.
Amounts borrowed under the credit facility are collateralized by
a pledge of all the stock of the Company's subsidiaries, by all
accounts receivable and by liens on substantially all other assets of
the Company and its subsidiaries. The agreement contains certain
financial covenants which, among other things, (i) require the
maintenance of a specified minimum defined level of effective net
worth, net income, and the ratio of senior debt to effective net
worth, (ii) limit the amount of capital expenditures, and (iii)
prohibit the declaration or payment of cash dividends.
The amount available for borrowing under the credit facility was
$24.8 million at February 29, 1996 and $13.8 million at February 28,
1995. The maximum amounts borrowed under the credit facility for
fiscal 1996 and 1995, were $10.0 million and $16.9 million and the
average interest rates were 8.98% and 7.53%, respectively.
The Company is permitted to borrow up to 75% of eligible accounts
receivable, up to the maximum amount of the credit facility less
amounts outstanding under the acquisition line of credit. The
acquisition line of credit provides for borrowings up to $7.5 million
without collateral to finance acquisitions, provided that the sum of
all borrowings do not exceed $25 million. Each amount borrowed under
the acquisition line of credit is subject to the Bank's approval and
must be repaid over twelve to forty-eight months as determined by the
Bank, at one percent over prime. There have been no borrowings under
the acquisition line of credit.
During fiscal 1996, funds were borrowed at the prevailing prime
lending rate, such prime rate being 8.25% at February 29, 1996. A
commitment fee on the unused portion of the credit facility is payable
at the rate of .375% per annum, together with an annual collateral
management fee of $75.
F-12
(b) At February 29, 1996, the Company had capital lease agreements
for computers and other equipment through September 2002. The net
carrying value of the assets under capital leases was approximately
$3.8 million and $2.5 million at February 29, 1996 and February 28,
1995, respectively, and such amounts are included in Fixed Assets.
(c) The lease on the Company's corporate headquarters requires
scheduled rent increases through September 30, 2003. A rent
escalation liability is recorded for the amounts required to record
the expense of this lease on a straight-line basis over the life of
the lease, in excess of payments made.
(d) At February 29, 1996, the Company had a balance of notes payable
and other liabilities related to acquisitions made during fiscal 1996
of $4,511 and $697, respectively. The notes payable bear interest at
7.5% to 8.0% and are payable through September 2010. Additionally,
in connection with acquisitions made in prior fiscal years, an
aggregate remaining balance of $220 at February 29, 1996, bears
interest at 7.0% to 8.0% and matures at dates through October 2003.
(e) Long-term liabilities maturing subsequent to February 29, 1996
are as follows:
Obligations
Under
Capital Other
Years Ending February Leases Debt Total
1997.................... $1,579 $1,051 $ 2,630
1998.................... 1,309 565 1,874
1999.................... 989 451 1,440
2000.................... 403 610 1,013
2001.................... 4 636 640
Thereafter.............. 6 4,899 4,905
4,290 8,212 12,502
Less amount representing
interest ($274 payable
in fiscal 1997)....... 535 - 535
Total................... $3,755 $8,212 $11,967
8. INCOME TAXES
The provision for income taxes consists of the following:
Years Ended
February February February
29, 1996 28, 1995 28, 1994
Current:
Federal.............. $ 1,829 $2,208 $2,221
State................ 643 741 698
Deferred................ (1,013) 513 (753)
Reduction of valuation
allowance.............. - - (858)
Total................... $ 1,459 $3,462 $1,308
F-13
The deferred tax assets (liabilities) at February 29, 1996
and February 28, 1995 are comprised of the following:
February February
29, 1996 28, 1995
Current:
Allowance for doubtful
accounts receivable...... $ 647 $ 453
Nondeductible accruals.... 1,756 850
Current................. 2,403 1,303
Non-Current:
Revenue recognition....... 407 261
Accelerated depreciation.. (370) (84)
Other assets.............. 65 21
Non-current............. 102 156
Total................. $2,505 $1,459
The non-current deferred tax assets are included in Other Assets on
the accompanying balance sheets.
The following is a reconciliation of the effective income tax rate
to the Federal statutory rate:
Years Ended
February February February
29, 1996 28, 1995 28, 1994
Federal statutory rate....... 34.0% 34.0% 34.0%
State and local income taxes,
net of Federal income
tax benefit................. 8.7 6.9 7.5
Tax credits.................. (3.9) (0.1) (0.2)
Goodwill amortization........ 8.9 2.9 3.9
Reduction in valuation
allowance on deferred
tax assets ................. - - (18.4)
Reversal of prior year
accrual..................... (7.4) - -
Other........................ 1.7 1.5 (1.2)
Effective rate............... 42.0% 42.2% 28.0%
9. COMMITMENTS AND CONTINGENCIES
Approximate minimum annual rental commitments for the
remaining terms of the Company's noncancellable operating leases
relating to office space and equipment rentals are as follows:
Years Ending February
1997 ............................ $ 4,007
1998 ............................ 3,289
1999 ............................ 2,672
2000 ............................ 2,103
2001 ............................ 1,715
Thereafter ...................... 3,224
Total ........................... $17,010
F-14
Certain leases require additional payments based upon property
tax and maintenance expense escalations.
Aggregate rental expense for fiscal 1996, 1995 and 1994
approximated $3,409, $2,850 and $2,605, respectively.
The Company has entered into employment agreements with
several key officers and personnel which require minimum aggregate
payments of approximately $2,850, $1,855, $1,267, $1,076 and
$1,180, over the next five fiscal years. Agreements with two
executives provide, in the event of their death, for the continued
payment of their compensation to their beneficiaries for the
duration of their agreements. Additionally, certain officers have
entered into agreements which provide that in the event of change
in control of, and the discontinuance of such employee's
employment, the Company will pay a lump sum amount of 2.99 times
the average annual compensation paid to the employee during the
five-year period immediately preceding the date of the
discontinuance of employment.
The Company is a guarantor of a mortgage in the amount of $561
as of February 29, 1996 through February 2005 arising from the sale
of land and a building in June 1988.
On September 20, 1995, the United States Attorney for the
Eastern District of Pennsylvania alleged that (i) between 1987 and
1989, a corporation, substantially all assets and liabilities of
which were acquired by a subsidiary of the Company in 1993,
submitted false claims to Medicare totaling approximately $1.5
million and (ii) officers and employees of that corporation
submitted false statements in support of such claims, and made a
pre-complaint civil settlement demand of approximately $4.5
million. The alleged false claims and false statements were made
before the Company acquired that corporation in 1993. Based on its
preliminary investigation, the Company believes that the amount of
improper claims, if any, submitted by that corporation to Medicare
between 1987 and 1989, were significantly below $1.5 million. The
Company is in negotiations with the office of the United States
Attorney to resolve this matter, but is unable to predict the
ultimate costs, if any, that may be incurred by the Company. As
such no provision has been made in the accompanying financial
statements.
The Company is a defendant in several civil actions which are
routine and incidental to its business. The Company purchases
insurance in such amounts which management believes to be
reasonable and prudent. In management's opinion, after
consultation with legal counsel, settlement of these actions will
not have a material adverse effect on the Company's consolidated
financial position, liquidity or results of operations. Accrued
expenses include $386 at February 29, 1996 which represents the
estimated amount of liability claims payable. Such amount
represents the deductible amount for which the Company is liable,
net of payments by the Company's insurers which are probable of
realization, estimated at approximately $1.4 million.
F-15
10. REDEEMABLE CLASS B PREFERRED STOCK
The Company redeemed all of the Class B Preferred Stock upon
the payment of $5,444 during fiscal 1994. Such amount was net of
a discount of $900. Income applicable to common stockholders for
fiscal 1994 included the discount, less dividends accrued of $310.
11. STOCKHOLDERS' EQUITY
Common Stock - Recapitalization and Voting Rights
During fiscal 1996 the shareholders approved a plan of
recapitalization by which the existing Common Stock, $.01 par
value, was reclassified and converted into either Class A Common
Stock, $.01 par value per share, or Class B Common Stock, $.01 par
value per share. Prior to the recapitalization, shares of common
stock that were held by the beneficial owner for at least 48
consecutive months were considered long-term shares, and, were
entitled to ten votes for each share of stock. Pursuant to the
recapitalization, long-term shares were converted into Class B
Common Stock and short-term shares (beneficially owned for less
than 48 months) were converted into Class A Common Stock. As a
result of the recapitalization, 1,554,936 shares of Class B common
stock were issued.
A holder of Class B Common Stock is entitled to ten votes for
each share and each share is convertible into one share of Class A
Common Stock (and will automatically convert into one share of
Class A Common Stock upon any transfer subject to certain limited
exceptions). Except as otherwise required by the Delaware General
Corporation Law, all shares of common stock vote as a single class
on all matters submitted to a vote by the stockholders.
The recapitalization included all outstanding options and
warrants to purchase shares of common stock which were converted
automatically into options and warrants, to purchase an equal
number of shares of Class A Common Stock.
Stock Options
During fiscal 1994, the Company adopted a stock option plan
(the "1993 Stock Option Plan") under which an aggregate of one
million shares of common stock are reserved for issuance upon
exercise of options thereunder. Options granted under this plan
may be incentive stock options ("ISO's") or non-qualified options
("NQSO's"). This plan replaces the 1986 Non-Qualified Plan ("1986
NQSO Plan") and the 1983 Incentive Stock Option Plan ("1983 ISO
Plan") which terminated in 1993 except as to options then
outstanding. Employees, officers, directors and consultants are
eligible to participate in the plan. Options are granted at not
less than the fair market value of the common stock at the date of
grant.
A total of 671,500 stock options were granted under the 1993
Stock Option Plan, at option prices ranging from $2.63 to $3.87, of
which 597,500 remain outstanding at February 29, 1996.
F-16
A summary of activity under the 1993 Stock Option Plan, the 1986
NQSO Plan and the 1983 ISO Plan is as follows:
Options
for Shares Price per Share
Options outstanding at
February 28, 1993 2,690,125 $1.31 to $6.38
Granted 1,029,540 $2.19 to $3.87
Exercised (60,500) $1.93 to $3.00
Terminated (45,550) $2.19 to $3.00
Options outstanding at
February 28, 1994 3,613,615 $1.31 to $6.38
Granted 110,500 $2.94 to $3.75
Exercised (35,450) $1.31 to $3.00
Terminated (23,800) $2.19 to $3.69
Options outstanding at
February 28, 1995 3,664,865 $1.63 to $6.38
Granted 31,000 $2.63 to $2.94
Exercised (1,120,735) $1.75 to $3.00
Terminated (72,100) $2.19 to $4.00
Options outstanding at
February 29, 1996 2,503,030 $1.63 to $6.38
Included in the outstanding options are 739,622 ISO's and
1,397,523 NQSO's which were exercisable at February 29, 1996. The
remaining options to purchase 365,885 shares become exercisable at
various dates through April 1998.
During fiscal 1995, the Company adopted a stock option plan
(the "1994 Performance-Based Stock Option Plan") which provides for
the issuance of up to 3,400,000 shares of its common stock.
Executive officers of the Company and its wholly owned subsidiaries
are eligible for grants. Performance-based stock options are
granted for periods of up to ten years and the exercise price is
equal to the average of the closing price of the common stock for
the twenty consecutive trading days prior to the date on which the
option is granted. Vesting of performance based options is during
the first four years after the date of grant, and is dependent upon
increases in the market price of the common stock.
A total of 2,230,000 stock options were granted under the 1994
Performance-Based Stock Option Plan at an option price of $3.14.
Options for 1,115,000 are currently exercisable through 2004 and
the remaining 1,115,000 options may become exercisable prior to
October 1998 based upon the market price of the Company's common
stock.
During fiscal 1994, the Company adopted an Employee Stock
Purchase Plan which provides for the issuance of up to one million
shares of its common stock. The purchase price of the shares is
the lesser of 90 percent of the fair market value at the enrollment
date, as defined, or the exercise date. During fiscal 1996 and
1995 a total of 288,380 shares were issued under this plan.
F-17
Stock Warrants
In connection with a public sale of securities completed in
February 1992, the Company sold warrants to purchase its common
stock at $3.00 per share. During fiscal 1994, the Company called
for redemption of the outstanding public warrants, which resulted
in the issuance of 5.06 million shares of common stock and net
proceeds of $13.7 million. In connection with the redemption of
the warrants, the Company issued to a financial advisor, for an
aggregate of $200, warrants to purchase 200,000 shares of the
Company's common stock at $3.20 per share. These warrants were
exercised during fiscal 1996.
In connection with the February 1992 public sale of
securities, the Company sold to the underwriter and its designees,
for an aggregate consideration of $200, warrants to purchase
200,000 units at an exercise price of $9.90 per unit. Each unit
consists of four shares of common stock. During fiscal 1996,
warrants to purchase 49,504 units were exercised and the company
issued 198,016 shares and received proceeds of $490. The remaining
underwriter warrants are exercisable through January 31, 1997.
During Fiscal 1992, the Company granted warrants for the
purchase of 150,000 shares of its common stock at $1.12 per share
and 250,000 shares at $2.08 per share to a financial public
relations firm which expire in October 1996 and February 1997,
respectively.
In connection with the establishment of the Company's
revolving line of credit, the Company issued warrants for the
purchase of 250,000 shares of its common stock at $2.00 per share
to a consulting firm. These warrants were exercised during fiscal
1995.
Convertible Preferred Stock, Class A
Each issued and outstanding share of Convertible Preferred Stock,
Class A, is entitled to a noncumulative dividend of $1.00, and has a
preference on liquidation of $1.00. The holders of the Convertible
Class A Preferred Stock do not have any voting rights except on
matters concerning the substantive rights, privileges and preferences
of the Class A Preferred Stock and on issues related to certain
business combinations.
Common Shares Reserved
The following represents common shares reserved and available for
issuance, at February 29, 1996, for options granted and outstanding
warrants and employee stock purchases:
Available
Reserved for Issuance
1994 Performance-Based Stock
Option Plan..................... 2,230,000 1,170,000
1993, 1986 and 1983 Stock
Option Plans.................... 2,503,030 358,500
1993 Employee Stock Purchase Plan .. - 711,620
Underwriter Unit Warrants .......... 601,984 -
Other Warrants ..................... 400,000 -
Other............................... 50,221 -
Total ............................. 5,785,235 2,240,120
F-18
12. EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common and common
equivalent share were computed by dividing the earnings applicable to
common stockholders, as adjusted in fiscal 1994 for the dividends and
discount on the Class B Preferred Stock (see Note 10), by the weighted
average number of shares of common stock and common stock equivalents
which consist principally of dilutive stock options and warrants.
The fiscal 1995 and 1994 computations include the additional
shares and the assumed savings of interest expense, net of income
taxes, that would have occurred if all outstanding options and
warrants were exercised.
The following table presents information necessary to calculate
earnings per share for fiscal 1996, 1995 and 1994 (in thousands):
Years Ended
February February February
29, 1996 28, 1995 28, 1994
Primary
Shares outstanding:
Weighted average outstanding 23,598 22,389 16,412
Share equivalents 1,742 1,684 5,763
Adjusted outstanding 25,340 24,073 22,175
Adjusted net income applicable
to common stockholders:
Net income $ 2,014 $ 4,735 $ 3,364
Add net discount (deduct
dividends) on Class B
Preferred Stock (see Note 10) - - 590
Net income applicable to
common stockholders 2,014 4,735 3,954
Add interest savings, net
of tax provision - - 438
Adjusted net income applicable
to common stockholders $ 2,014 $ 4,735 $ 4,392
Fully Diluted
Shares outstanding:
Weighted average outstanding 23,598 22,389 16,412
Share equivalents 1,934 1,987 5,763
Adjusted outstanding 25,532 24,376 22,175
Adjusted net income applicable
to common stockholders:
Net income $ 2,014 $ 4,735 $ 3,364
Add net discount (deduct
dividends) on Class B
Preferred Stock (see Note 10) - - 590
Net income applicable to
common stockholders 2,014 4,735 3,954
Add interest savings, net
of tax provision - 25 373
Adjusted net income applicable
to common stockholders $ 2,014 $ 4,760 $ 4,327
F-19
13. UNAUDITED QUARTERLY FINANCIAL DATA
Summarized unaudited quarterly financial data for fiscal 1996 and
1995 are as follows (in thousands, except per share data):
Quarters Ended
May August November February
31, 1995 31, 1995 30, 1995 29, 1996
Revenues ......................... $ 98,426 $100,369 $105,971 $105,394
Gross profit ..................... $ 37,928 $ 38,099 $ 37,272 $ 40,142
Net Income (Loss)................. $ 1,394 $ 1,542 $ (1,860) $ 938
Income (Loss) per common share:
Primary ....................... $ .06 $ .06 $ (.08) $ .04
Fully diluted ................. $ .06 $ .06 $ (.08) $ .04
Weighted average number
of common shares:
Primary........................ 25,222 25,616 23,847 24,358
Fully diluted ................. 25,239 25,681 23,847 24,451
Quarters Ended
May August November February
31, 1994 31, 1994 30, 1994 28, 1995
Revenues ......................... $ 72,577 $ 76,038 $ 85,085 $ 91,411
Gross profit ..................... $ 26,725 $ 30,134 $ 32,325 $ 34,562
Net Income........................ $ 814 $ 1,178 $ 1,263 $ 1,480
Income per common share:
Primary ....................... $ .04 $ .05 $ .05 $ .06
Fully diluted ................. $ .04 $ .05 $ .05 $ .06
Weighted average number
of common shares:
Primary........................ 23,103 23,708 25,042 24,463
Fully diluted ................. 23,123 23,804 26,244 25,936
The quarterly earnings per share amounts were calculated on
a discrete basis and therefore may not aggregate to the year to
date earnings per share amounts.
The Company reduced its revenues by $3.0 million in the
quarter ended November 30, 1995 due to a change in the method of
allocating overhead to the Company's Medicare operations. The
Company also recorded charges in other (income) expense, net
including $1.6 million during the quarter ended November 30, 1995
for the closure of two unprofitable divisions, $165 for settlement
of litigation and $358 of costs associated with the Company's
recapitalization (see Note 11).
F-20
SCHEDULE II
STAFF BUILDERS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Years Ended
February February February
29, 1996 28, 1995 28, 1994
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance, beginning of period $ 1,750 $ 1,400 $ 1,200
Charged to costs and expenses 2,678 2,431 2,400
Deductions (2,228) (2,081) (2,200)
Balance, end of period $ 2,200 $ 1,750 $ 1,400
ACCUMULATED AMORTIZATION OF
INTANGIBLE ASSETS:
Balance, beginning of period $ 6,532 $ 5,342 $ 4,485
Charged to costs and expenses 1,764 1,190 857
Deductions (1,014) - -
Balance, end of period $ 7,282 $ 6,532 $ 5,342
DEFERRED INCOME (NETTED AGAINST
FRANCHISE NOTES RECEIVABLE):
Balance, beginning of period $ 4,971 $ 5,761 $ 5,693
Charged to notes receivable 1,115 402 390
Deductions ( 630) (1,192) (322)
Balance, end of period $ 5,456 $ 4,971 $ 5,761
F-21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no such changes or disagreements.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Items 10, 11, 12 and 13 is
included in the Company's definitive Proxy Statement for the
Annual Meeting of Stockholders, which will be filed pursuant to
Regulation 14A within 120 days after the close of the fiscal year
for which this Report is filed, and which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(A) Financial Statements and Financial Statement Schedules
The financial statements, including the supporting schedules,
filed as part of the report, are listed in the Table of Contents
to the Consolidated Financial Statements.
(B) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant for the
quarter ended February 29, 1996.
(C) Exhibits
-22-
EXHIBIT INDEX
Exhibit No. Description
3.1 Restated Certificate of Incorporation of the
Company, filed July 11, 1988. (A)
3.2 Certificate of Amendment to the Restated
Certificate of Incorporation of the Company, filed
August 22, 1991. (B)
3.3 Certificate of Amendment to the Restated
Certificate of Incorporation of the Company, filed
September 3, 1992. (A)
3.4 Certificate of Retirement of Stock of the Company,
filed February 28, 1994. (C)
3.5 Certificate of Retirement of Stock of the Company,
filed June 3, 1994. (A)
3.6 Certificate of Designation, Rights and Preferences
of the Class A Preferred Stock of the Company,
filed June 6, 1994. (A)
3.7 Certificate of Amendment of Restated Certificate
of Incorporation of the Company, filed August 23,
1994. (A)
3.8 Certificate of Amendment of Restated Certificate
of Incorporation of the Company, filed October 26,
1995. (D)
3.9 Certificate of Amendment of Restated Certificate
of Incorporation of the Company, filed December
19, 1995.
3.10 Plan Of Recapitalization dated as of May 12, 1995.
3.11 Amended and Restated By-Laws of the Company. (A)
4.1 Specimen Class A Common Stock Certificate. (E)
4.2 Specimen Class B Common Stock Certificate. (F)
4.3 Warrant Certificate issued by the Company to Whale
Securities Co., L.P. issued on September 25, 1995.
- - ---------------------
See Notes to Exhibits
Exhibit No. Description
4.4 Common Stock Purchase Warrant issued by the
Company to Strategic Growth International, Inc. on
October 22, 1991. (K)
4.5 Common Stock Purchase Warrant issued by the
Company to Strategic Growth International, Inc. on
February 13, 1992. (K)
10.1 1983 Incentive Stock Option Plan (incorporated by
reference to Exhibit 18.1 to the Company's
Registration Statement on Form S-18, (File No.
1-83939NY), filed with the Commission on September
15, 1983).
10.2 Amendment to the 1983 Incentive Stock Option Plan
(adopted on May 15, 1986). (A)
10.3 Amendment to the 1983 Incentive Stock Option Plan,
dated January 1, 1987. (A)
10.4 Amendment to the 1983 Incentive Stock Option Plan,
dated as of December 1, 1987. (A)
10.5 Amendment to the 1983 Incentive Stock Option Plan,
dated as of August 3, 1988. (A)
10.6 Amendment to the 1983 Incentive Stock Option Plan,
dated as of August 8, 1990. (A)
10.7 Amendment to the 1983 Incentive Stock Option Plan,
dated as of October 27, 1995. (G)
10.8 1986 Non-Qualified Stock Option Plan of the
Company. (H)
10.9 First Amendment to 1986 Non-Qualified Stock Option
Plan, effective as of May 11, 1990. (A)
10.10 Amendment to the 1986 Non-Qualified Stock Option
Plan, dated as of October 27, 1995. (I)
- - ---------------------
See Notes to Exhibits
10.11 Resolutions of the Company's Board of Directors
amending the 1983 Incentive Stock Option Plan and
the 1986 Non-Qualified Stock Option Plan, dated as
of June 3, 1991. (A)
10.12 1993 Stock Option Plan of the Company. (A)
10.13 Amended and Restated 1993 Employee Stock Purchase
Plan of the Company. (J)
10.14 Executive Deferred Compensation Plan, effective as
of March 1, 1994. (C)
10.15 Form of Split-Dollar Life Insurance Agreement. (C)
10.16 1994 Performance-Based Stock Option Plan of the
Company (incorporated by reference to Exhibit B to
the Company's Proxy Statement, dated July 18,
1994, filed with the Commission on July 27, 1994.)
10.17 Stock Option Agreement, dated June 17, 1991, under
the Company's 1983 Incentive Stock Option Plan
between the Company and Stephen Savitsky. (A)
10.18 Stock Option Agreement, dated May 26, 1992, under
the Company's 1983 Incentive Stock Option Plan
between the Company and Stephen Savitsky. (A)
10.19 Stock Option Agreement, dated April 22, 1993,
under the Company's 1983 Incentive Stock Option
Plan between the Company and Stephen Savitsky. (A)
10.21 Stock Option Agreement, dated as of March 28,
1990, under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and Stephen
Savitsky. (A)
10.22 Stock Option Agreement, dated as of June 17, 1991,
under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and Stephen
Savitsky. (A)
- - ---------------------
See Notes to Exhibits
10.23 Stock Option Agreement, dated February 3, 1994,
under the Company's 1993 Stock Option Plan between
the Company and Stephen Savitsky. (A)
10.24 Stock Option Agreement, dated October 1, 1994,
under the Company's 1994 Performance-Based Stock
Option Plan between the Company and Stephen
Savitsky. (A)
10.27 Stock Option Agreement, dated June 17, 1991, under
the Company's 1983 Incentive Stock Option Plan
between the Company and David Savitsky. (A)
10.28 Stock Option Agreement, dated May 26, 1992, under
the Company's 1983 Incentive Stock Option Plan
between the Company and David Savitsky. (A)
10.29 Stock Option Agreement, dated April 22, 1993,
under the Company's 1983 Incentive Stock Option
Plan between the Company and David Savitsky. (A)
10.31 Stock Option Agreement, dated as of March 28,
1990, under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and David
Savitsky. (A)
10.32 Stock Option Agreement, dated as of June 17, 1991,
under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and David
Savitsky. (A)
10.33 Stock Option Agreement, dated February 3, 1994,
under the Company's 1993 Stock Option Plan between
the Company and David Savitsky. (A)
10.34 Stock Option Agreement, dated October 1, 1994,
under the Company's 1994 Performance-Based Stock
Option Plan between the Company and David
Savitsky. (A)
- - ---------------------
See Notes to Exhibits
10.35 Stock Option Agreement, dated May 26, 1992, under
the Company's 1983 Incentive Stock Option Plan
between the Company and Gary Tighe. (A)
10.36 Stock Option Agreement, dated April 22, 1993,
under the Company's 1983 Incentive Stock Option
Plan between the Company and Gary Tighe. (A)
10.37 Stock Option Agreement, dated as of April 15,
1991, under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and Gary Tighe.(A)
10.38 Stock Option Agreement, dated October 1, 1994,
under the Company's 1994 Performance-Based Stock
Option Plan between the Company and Gary Tighe.(A)
10.39 Stock Option Agreement, dated June 17, 1991, under
the Company's 1983 Incentive Stock Option Plan
between the Company and Edward Teixeira. (A)
10.40 Stock Option Agreement, dated May 26, 1992, under
the Company's 1983 Incentive Stock Option Plan
between the Company and Edward Teixeira. (A)
10.41 Stock Option Agreement, dated as March 28, 1990,
under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and Edward
Teixeira. (A)
10.42 Stock Option Agreement, dated as of October 1,
1994, under the Company's 1994 Performance-Based
Stock Plan between the Company and Edward
Teixiera. (A)
10.43 Stock Option Agreement, dated May 26, 1992, under
the Company's 1983 Incentive Stock Option Plan
between the Company and Sharon Hamilton. (A)
- - ---------------------
See Notes to Exhibits
10.44 Stock Option Agreement, dated April 22, 1993,
under the Company's 1983 Incentive Stock Option
Plan between the Company and Sharon Hamilton. (A)
10.45 Stock Option Agreement, dated as of November 6,
1990, under the Company's 1986 Non-Qualified Stock
Option Plan between the Company and Sharon
Hamilton. (A)
10.46 Stock Option Agreement, dated as of October 1,
1994, under the Company's 1994 Performance-Based
Stock Option Plan between the Company and Sharon
Hamilton. (A)
10.47 Employment Agreement, dated as of June 1, 1987,
between the Company and Stephen Savitsky. (A)
10.48 Amendment, dated as of October 31, 1991, to the
Employment Agreement between the Company and
Stephen Savitsky. (A)
10.49 Amendment, dated as of December 7 1992, to the
Employment Agreement between the Company and
Stephen Savitsky. (A)
10.50 Employment Agreement, dated as of June 1, 1987,
between the Company and Ephraim Koschitzki. (A)
10.51 Amendment, dated as of November 1, 1991, to the
Employment Agreement between the Company and
Ephraim Koschitzki. (B)
10.52 Second Amendment dated October 20, 1995, to the
Employment Agreement between the Company and
Ephraim Koschitzki.
10.53 Employment Agreement, dated as of June 1, 1987,
between the Company and David Savitsky. (A)
- - ---------------------
See Notes to Exhibits
10.54 Amendment, dated as of October 31, 1991, to the
Employment Agreement between the Company and David
Savitsky. (A)
10.55 Amendment, dated as of January 3, 1992, to the
Employment Agreement between the Company and David
Savitsky. (A)
10.56 Amendment, dated as of December 7, 1992, to the
Employment Agreement between the Company and David
Savitsky. (A)
10.57 Employment Agreement, dated as of May 15, 1993,
between the Company and Gary Tighe. (K)
10.58 Employment Agreement, dated as of July 26, 1993,
between Staff Builders, Inc. (NY) and Edward
Teixeira. (K)
10.59 Employment Agreement, dated as of May 1, 1993,
between Staff Builders, Inc. (NY) and Sharon
Hamilton. (K)
10.60 Loan and Security Agreement, dated as of February
10, 1992, between the Company, its subsidiaries
and Mellon Bank, N.A. (A)
10.61 Amendment to Loan and Security Agreement, dated as
of August 31, 1993, between the Company, its
subsidiaries and Mellon Bank, N.A. (K)
10.62 Second Amendment to Loan and Security Agreement,
dated as of March 30, 1994, between the Company,
its subsidiaries and Mellon Bank, N.A. (C)
10.63 Third Amendment to Loan and Security Agreement,
dated as of April 29, 1994, between the Company,
its subsidiaries and Mellon Bank, N.A.
(Incorporated by reference to the Company's
exhibit booklet to its Form 10-Q for the quarterly
period ended May 31, 1994, (File No. 0-11380),
filed with the Commission on July 13, 1994.)
- - ---------------------
See Notes to Exhibits
10.64 Fourth Amendment to Loan and Security Agreement,
dated as of August 1, 1994, between the Company,
its subsidiaries and Mellon Bank, N.A.
(Incorporated by reference to the Company's
exhibit booklet to its Form 10-Q for the quarterly
period ended August 31, 1994, (File No. 0-11380),
filed with the Commission on October 13, 1994.)
10.65 Fifth Amendment to Loan and Security Agreement,
dated as of April 10, 1995, between the Company,
its subsidiaries and Mellon Bank, N.A. (A)
10.66 Sixth Amendment to Loan and Security Agreement,
dated as of August 23, 1995, between the Company,
its subsidiaries and Mellon Bank, N.A.
10.67 Seventh Amendment to Loan and Security Agreement,
dated as of January 3, 1996, between the Company,
its subsidiaries and Mellon Bank, N.A.
10.68 Promissory Note and Mortgage, dated August 23,
1984, of U.S. Ethicare Corporation to Niasher
Realty, Inc. (H)
10.69 Agreement of Lease, dated as of October 1, 1994,
between Triad III Associates and Staff Builders,
Inc. (NY). (A)
10.70 Supplemental Agreement, dated as of January 21,
1994, between General Electric Capital
Corporation, Triad III Associates and Staff
Builders, Inc. (NY) (A)
10.71 Agreement of Lease, dated as of June 19, 1995,
between Triad III Associates and Staff Builders,
Inc. (NY).
10.72 Agreement of Lease, dated as of February 12, 1996,
between Triad III Associates and Staff Builders,
Inc. (NY).
- - ---------------------
See Notes to Exhibits
10.73 Asset Purchase Agreement dated as of June 22,
1993, between Albert Gallatin Home Care, Inc and
Albert Gallatin Visiting Nurse Association, Inc.
(C)
10.74 Stock Purchase Agreement, dated as of June 22,
1993, between Staff Builders, Inc. (NY) and Albert
Gallatin Planning and Development Corporation. (C)
10.75 Agreement of Merger among Staff Builders, Inc.,
ATC Acquisition Corp., ATC Services Incorporated,
and Terrence L. Bauer and the Shareholders of ATC
Services Incorporated, dated July 22, 1994
(Incorporated by reference to the Company's Form
8-K (File No. 0-11380) dated July 22, 1994, filed
with the Commission on August 22, 1994.)
10.76 Stock Purchase Agreement, dated as of August 30,
1995, between Staff Builders Services, Inc.,
MedVisit, Inc. and Roger Jack Pleasant.
10.77 Asset Purchase and Sale Agreement, dated as of
September 1, 1995, between Staff Builders
Services, Inc. and Accredicare, Inc.
10.78 Asset Purchase and Sale Agreement, dated as of
September 29, 1995, between Staff Builders
Services, Inc. and Carestar, Inc.
10.79 Indemnification Agreement, dated as of September
1, 1987, between the Company and Ephraim
Koschitzki. (A)
10.80 Indemnification Agreement, dated as of September
1, 1987, between the Company and Stephen
Savitsky. (A)
- - ---------------------
See Notes To Exhibits
10.81 Indemnification Agreement, dated as of September
1, 1987, between the Company and David
Savitsky. (A)
10.82 Indemnification Agreement, dated as of September
1, 1987, between the Company and Bernard J.
Firestone. (A)
10.83 Indemnification Agreement, dated as of September
1, 1987, between the Company and Jonathan
Halpert. (A)
10.84 Indemnification Agreement, dated as of February
10, 1992, between the Company and Gary Tighe. (A)
10.85 Indemnification Agreement, dated as of February
10, 1992, between the Company and Sharon
Hamilton. (A)
10.86 Indemnification Agreement, dated as of May 2,
1995, between the Company and Edward Teixeira. (A)
10.87 Form of Home Health Care Services Franchise
Agreement. (B)
10.88 Form of Medical Staffing Services Franchise
Agreement
10.89 Common Stock Purchase Warrant issued by the
Company to Strategic Growth International, Inc. on
February 13, 1992. (K)
10.90 Letter Agreement, dated November 17, 1993, between
the Company and Bear, Stearns & Co. Inc. (J)
10.91 Letter Agreement, dated December 20, 1993, between
the Company and Bear, Stearns & Co. Inc. (L)
21 Subsidiaries of the Company.
24 Powers of Attorney.
- - ---------------------
See Notes to Exhibits
NOTES TO EXHIBITS
(A) Incorporated by reference to the Company's exhibit
booklet to its Form 10-K for the fiscal year ended
February 28, 1995 (File No. 0-11380), filed with the
Commission on May 5, 1995.
(B) Incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 33-43728), dated
January 29, 1992.
(C) Incorporated by reference to the Company's exhibit
booklet to its Form 10-K for the fiscal year ended
February 28, 1994, (File No. 0-11380), filed with the
Commission on May 13, 1994.
(D) Incorporated by reference to the Company's Form 8-K
filed with the Commission on October 31, 1995.
(E) Incorporated by reference to the Company's Form 8-A
filed with the Commission on October 24, 1995.
(F) Incorporated by reference to the Company's Form 8-A
filed with the Commission on October 24, 1995.
(G) Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-63941), filed with
the Commission on November 2, 1995.
(H) Incorporated by reference to the Company's Registration
Statement of Form S-4, as amended (File No. 33-9261),
dated April 9, 1987.
(I) Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-63939), filed with
the Commission on November 2, 1995.
(J) Incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 33-71974), filed with
the Commission on November 19, 1993.
(K) Incorporated by reference to the Company's Post-
Effective Amendment No. 1 to Registration Statement on
Form S-1 (File No. 33-43728), filed with the Commission
on October 15, 1993.
(L) Incorporated by reference to the Amendment No. 1 to the
Company's Registration Statement on Form S-1 (File No.
33-71974), filed with the Commission on December 21,
1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
STAFF BUILDERS, INC.
By: /S/ STEPHEN SAVITSKY
Stephen Savitsky
Chairman of the Board,
President, and Chief
Executive Officer
Dated: May 10, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
/S/ STEPHEN SAVITSKY Chairman of the Board, May 10, 1996
Stephen Savitsky President and Chief
Executive Officer
(Principal Executive
Officer) and Director
/S/ DAVID SAVITSKY Executive Vice President, May 10, 1996
David Savitsky Chief Operating Officer,
Secretary, Treasurer
and Director
/S/ GARY TIGHE Senior Vice President, May 10, 1996
Gary Tighe Finance and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
* Director May 10, 1996
Bernard J. Firestone,
Ph.D.
* Director May 10, 1996
Jonathan Halpert,
Ph.D.
* Director May 10, 1996
Donald Meyers
* By: /S/ STEPHEN SAVITSKY
(Stephen Savitsky,
Attorney-in-Fact)
-23-