UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 1-5707
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)
Illinois 36-6097429
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number)
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One Tower Lane, Oakbrook Terrace, Illinois 60181
(Address of principal executive offices)
(708) 954-0400
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No __
As of March 31, 1995, there were 1,858,273 shares of common stock outstanding.
PART I. FINANCIAL INFORMATION
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
March 31 September 30
1995 1994
(Dollars in Thousands) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,810 $ 1,843
Accounts receivable, less allowances
(Mar 1995--$284; Sept 1994--$274) 1,879 1,655
Prepaid expenses and other current assets 65 63
Total current assets 3,754 3,561
Property and equipment:
Furniture and equipment 2,219 2,156
Leasehold improvements 235 235
Total property and equipment 2,454 2,391
Accumulated depreciation and amortization (2,091) (2,044)
Net property and equipment 363 347
Other assets:
Deferred income taxes 104 14
Other 138 124
Total other assets 242 138
Total assets $ 4,359 $ 4,046
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 191 $ 327
Accrued compensation and payroll taxes 1,781 1,779
Deferred rent due within one year 123 135
Other current liabilities 116 102
Total current liabilities 2,211 2,343
Long-term obligations:
Deferred rent 154 212
Retirement benefits 340 338
Total long-term obligations 494 550
Shareholders' equity:
Common stock, no-par value; authorized --
5,000,000 shares; issued and outstanding --
1,858,273 shares in March and
1,829,823 shares in September 19 18
Capital in excess of stated value of shares 3,298 3,173
Accumulated deficit (1,663) (2,038)
Total shareholders' equity 1,654 1,153
Total liabilities and
shareholders' equity $ 4,359 $ 4,046
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See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Three Months Six Months
Ended March 31 Ended March 31
(In Thousands, Except Per Share) 1995 1994 1995 1994
Revenues:
Permanent placement services $ 2,704 $ 2,411 $ 5,439 $ 4,429
Contract services 1,229 814 2,272 1,713
Interest income 14 1 29 4
Total revenues 3,947 3,226 7,740 6,146
Costs and expenses:
Cost of services 3,107 2,509 6,003 4,838
General and administrative 671 582 1,342 1,151
Total costs and expenses 3,778 3,091 7,345 5,989
Income before income taxes 169 135 395 157
Provision for income taxes 10 -- 20 --
Net income $ 159 $ 135 $ 375 $ 157
Net income per share $ .08 $ .07 $ .19 $ .09
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See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended March 31
(In Thousands) 1995 1994
Operating activities:
Net income $ 375 $ 157
Adjustments to reconcile to net cash used
by operations:
Depreciation and amortization 80 87
Deferred rent (58) (63)
Credit for deferred income taxes (90) --
Other noncash costs 3 32
Changes in current assets and current
liabilities -
Accounts receivable (224) (505)
Accrued compensation and payroll taxes 2 228
Other, net (136) (103)
Net cash used by operating activities (48) (167)
Investing activities:
Acquisition of property and equipment (86) (7)
Other, net (25) (9)
Net cash used by investing activities (111) (16)
Financing activities:
Issuance of common stock 126 --
Decrease in cash and cash equivalents (33) (183)
Cash and cash equivalents at beginning
of period 1,843 985
Cash and cash equivalents at end of period $1,810 $ 802
Supplementary information:
Income tax payments (refunds) $ 22 $ (22)
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See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interim Financial Statements
The accompanying financial information for interim periods is unaudited but includes all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the results for the periods. This financial information should be read in conjunction with the financial statements included in the Company's annual report on Form 10-KSB for the year ended September 30, 1994. Operating results for interim periods are not necessarily indicative of the results that may be expected for the entire year.
Line of Credit
In April 1995, the Company entered into a loan agreement that makes a $1,000,000 line of credit available to the Company for working capital purposes.
Income Taxes
The effective income tax rates differ from expected rates because of reversals of a deferred income tax valuation allowance recorded in prior years.
Net Income Per Share
Net income per share is based on the average number of common shares outstanding and dilutive stock option shares -- 1,942,782 shares in the March 1995 period and 1,829,823 shares in the March 1994 period.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Economic Factors and Corporate Strategies
The Company is engaged in providing employment services in major metropolitan business centers throughout the United States. As such, the Company's business is strongly affected by the U.S. economy and national hiring levels.
During the last two years, the national economy has continued to grow, with the Gross Domestic Product increasing at an average rate of 4.1% for the 1994 calendar year, the strongest annual growth since 1984. This had a positive impact on employment levels, as the national unemployment rate dropped to 5.5% in March 1995, compared with 6.5% in March 1994. This trend has had a positive impact on the Company's volume of business.
One of the Company's corporate strategies since October 1992 has been to market both permanent placement and contract services through all 23 of its offices, thereby providing the Company's customers with a choice of staffing alternatives. This strategy has been a major factor in the Company's revenue growth over the last two years.
Results of Operations
For the six months ended March 31, 1995, consolidated revenues were $7,740,000, up $1,594,000 (26%) from last year's $6,146,000. Permanent placement revenues increased $1,010,000 (23%), primarily due to a 20% higher average placement fee. Contract service revenues increased $559,000 (33%) primarily due to 36% higher average hourly billing rate. The higher fees associated with both permanent placements and contract services are the result of placing more highly-compensated individuals than last year.
The consolidated cost of services for the six months ended March 31, 1995 was $6,003,000, up $1,165,000 (24%) from $4,838,000 in 1994. Agency manager and consultant compensation increased 28% and salaries of contract service workers increased 34% as a result of the higher volume of business this year. Payroll taxes and benefits increased 20%; advertising expenses increased 31%; and all other operating costs remained about the same as last year. As a result, the cost of services as a percent of service revenues decreased 1.0 point, from 78.8% last year to 77.8% this year.
General and administrative expenses for the six months ended March 31, 1995 were $1,342,000, a $191,000 (17%) increase from 1994. Administrative salaries and benefits increased 14%, while all other general and administrative expenses were up 21% for the period.
There was a $20,000 provision for income taxes in the 1995 period, and there was no provision for income taxes in the 1994 period. The effective tax rates differed from statutory tax rates because of reversals of a previously-recorded deferred income tax valuation allowance.
Net income was $375,000, or $.19 per share, in the six months ended March 31, 1995, a $218,000 improvement compared with net income of $157,000, or $.09 per share, last year.
Financial Condition
During the six months ended March 31, 1995, the Company's cash and cash equivalents decreased by $33,000 to a balance of $1,810,000. Net income provided $375,000 during the period, while an increase in accounts receivable required $224,000 and other operating activities required $199,000. As a result, the net cash used by operating activities was $48,000. During the period, the Company used $111,000 in investing activities, primarily for the acquisition of computer equipment, and the issuance of common stock in connection with stock option exercises provided $126,000. The Company's net working capital was $1,543,000 as of March 31, 1995, compared with $1,218,000 at September 30, 1994, and shareholders' equity was $1,654,000.
As of March 31, 1995, the Company had no credit agreements and no debt. In April 1995, the Company entered into a loan agreement that makes a $1,000,000 line of credit available to the Company for working capital purposes. Management believes that existing resources are adequate to meet the Company's current operating needs.
As of March 31, 1995, the Company had no commitments for the acquisition of property and equipment. All of its facilities are leased, and information about future minimum lease payments is presented in the notes to consolidated financial statements contained in the Company's annual report on Form 10-KSB for the year ended September 30, 1994.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on February 27, 1995, the shareholders approved the adoption of the General Employment Enterprises, Inc. 1995 Stock Option Plan. There were 1,107,461 shares voted for adoption, and there were 750,812 shares withheld. In addition, the shareholders elected all of the nominees for election as directors. The name of each director elected, together with the number of votes cast for election and the number of votes withheld are presented below:
Nominee Votes For Votes Withheld Sheldon Brottman 1,713,268 6,153 Leonard Chavin 1,710,810 8,611 Herbert Imhoff 1,716,398 3,023 Herbert F. Imhoff, Jr. 1,716,632 2,789 Walter T. Kerwin, Jr. 1,716,340 3,081 Howard S. Wilcox 1,716,222 3,199 |
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed as a part of this report:
No. Description of Exhibit
10 Second Amendment to Settlement Agreement with Leonard and Marlene Chavin dated March 24, 1995.
27 Financial Data Schedule for the six months ended March 31, 1995.
There were no reports on Form 8-K filed during the quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Registrant)
Date: May 1, 1995 By: /s/ Herbert F. Imhoff
Herbert F. Imhoff
Chairman of the Board
and President
Date: May 1, 1995 By: /s/ Kent M. Yauch
Kent M. Yauch
Treasurer and Controller
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| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL EMPLOYMENT ENTERPRISES, INC.'S CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1995 AND ITS CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | SEP 30 1995 |
| PERIOD END | MAR 31 1995 |
| CASH | 1,810 |
| SECURITIES | 0 |
| RECEIVABLES | 2,163 |
| ALLOWANCES | 284 |
| INVENTORY | 0 |
| CURRENT ASSETS | 3,754 |
| PP&E | 2,454 |
| DEPRECIATION | 2,091 |
| TOTAL ASSETS | 4,359 |
| CURRENT LIABILITIES | 2,211 |
| BONDS | 0 |
| COMMON | 19 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| OTHER SE | 1,635 |
| TOTAL LIABILITY AND EQUITY | 4,359 |
| SALES | 0 |
| TOTAL REVENUES | 7,740 |
| CGS | 0 |
| TOTAL COSTS | 6,003 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 0 |
| INCOME PRETAX | 395 |
| INCOME TAX | 20 |
| INCOME CONTINUING | 375 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 375 |
| EPS PRIMARY | .19 |
| EPS DILUTED | .19 |
EXHIBIT 10
SECOND AMENDMENT TO SETTLEMENT AGREEMENT
This Agreement is entered into between General Employment
Enterprises, Inc. (The "Company") and Leonard and Marlene Chavin
(the "Chavins").
WHEREAS, the Company and Leonard Chavin are parties to a
Settlement Agreement dated as of September 27, 1991 (the
"Settlement Agreement") and to an Agreement dated as of October
1, 1993 (the "First Amendment to Settlement Agreement"); and
WHEREAS, pursuant to the terms of the Settlement Agreement
Leonard Chavin made certain Agreements not to solicit proxies and
to refrain from other certain acts so long as he and one other
person designated by "Chavin" were included in the slate of
nominees recommended by the Board to shareholders for election as
directors at the annual meeting of shareholders. At the time of
the "Agreement", the "Company's" Board of Directors consisted of
six members; and
WHEREAS, the parties believe it to be in the best interest
of the Company to increase the number of Directors from six to
seven.
In consideration of the mutual provisions contained herein,
the parties agree as follows:
1. The Company agrees to increase the number of its
Directors from six to seven.
2. The Chavins agree that regardless of the increase in
number of Directors in this Second Amendment to Settlement
Agreement, they shall still be bound by paragraph 4 of the
"Settlement Agreement" providing for Leonard Chavin and one other
person to be included in the slate of nominees recommended by the
Board to shareholders for election as directors at its annual
meeting of shareholders.
3. This Second Amendment to Settlement Agreement, the First
Amendment to Settlement Agreement, and the Settlement Agreement
will continue in full force and effect so long as Leonard Chavin
remains a member of the Company's Board of Directors or until
December 31, 1995, whichever is longer.
IN WITNESS WHEREOF, the Chavins and the Company have caused
this Second Amendment to Settlement Agreement to be duly executed as
of 3/24/1995.
Attest:
/s/ Herbert F. Imhoff /s/ Leonard Chavin
Leonard Chavin
Attest:
/s/ B. Urretgui /s/ Marlene Chavin
Marlene Chavin
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General Employment Enterprises, Inc.
By:
/s/ Herbert F. Imhoff Herbert F. Imhoff Chairman of the Board |