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 June 30, 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) 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 July 31, 1995, there were 1,875,523 shares of common stock outstanding. PART I. FINANCIAL INFORMATION GENERAL EMPLOYMENT ENTERPRISES, INC. CONSOLIDATED BALANCE SHEET June 30 September 30 1995 1994 (Dollars in Thousands) (Unaudited) ASSETS Current assets: Cash and cash equivalents $2,398 $1,843 Accounts receivable, less allowances (Jun 1995--$295; Sept 1994--$274) 2,053 1,655 Other current assets 55 63 Total current assets 4,506 3,561 Property and equipment: Furniture and equipment 2,209 2,156 Leasehold improvements 235 235 Total property and equipment 2,444 2,391 Accumulated depreciation and amortization (2,112) (2,044) Net property and equipment 332 347 Other assets: Deferred income taxes 144 14 Other 141 124 Total other assets 285 138 Total assets $5,123 $4,046 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 220 $ 327 Accrued compensation and payroll taxes 2,073 1,779 Deferred rent due within one year 116 135 Other current liabilities 205 102 Total current liabilities 2,614 2,343 Long-term obligations: Deferred rent 126 212 Retirement benefits 341 338 Total long-term obligations 467 550 Shareholders' equity: Common stock, no-par value; authorized -- 5,000,000 shares; issued and outstanding -- 1,875,523 shares in June 1995 and 1,829,823 shares in September 1994 19 18 Capital in excess of stated value of shares 3,360 3,173 Accumulated deficit (1,337) (2,038) Total shareholders' equity 2,042 1,153 Total liabilities and shareholders' equity $5,123 $4,046 See notes to consolidated financial statements. GENERAL EMPLOYMENT ENTERPRISES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Nine Months Ended June 30 Ended June 30 (In Thousands, Except Per Share) 1995 1994 1995 1994 Revenues: Permanent placement services $3,025 $2,674 $ 8,464 $7,103 Contract services 1,437 1,106 3,709 2,819 Interest income 22 4 51 8 Total revenues 4,484 3,784 12,224 9,930 Costs and expenses: Cost of services 3,337 2,933 9,340 7,771 General and administrative 746 641 2,088 1,792 Total costs and expenses 4,083 3,574 11,428 9,563 Income before income taxes 401 210 796 367 Provision for income taxes 75 -- 95 -- Net income $ 326 $ 210 $ 701 $ 367 Net income per share $ .17 $ .11 $ .36 $ .19 See notes to consolidated financial statements. GENERAL EMPLOYMENT ENTERPRISES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine Months Ended June 30 (In Thousands) 1995 1994 Operating activities: Net income $ 701 $ 367 Adjustments to reconcile to net cash provided by operations: Depreciation and amortization 120 129 Deferred rent (86) (75) Credit for deferred income taxes (130) -- Other noncash costs 5 60 Changes in current assets and current liabilities - Accounts receivable (398) (690) Accrued compensation and payroll taxes 294 508 Other, net ( 15) (126) Net cash provided by operating activities 491 173 Investing activities: Acquisition of property and equipment (90) (67) Other, net (34) (22) Net cash used by investing activities (124) (89) Financing activities: Issuance of common stock 188 -- Increase in cash and cash equivalents 555 84 Cash and cash equivalents at beginning of period 1,843 985 Cash and cash equivalents at end of period $2,398 $1,069 Supplementary information: Income tax payments (refunds) $ 30 $ (22) 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 with a bank 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 -- 1,945,382 shares in the June 1995 quarter, 1,900,604 shares in the June 1994 quarter, 1,938,831 shares for the 1995 nine-month period, and 1,900,604 shares for the 1994 nine-month 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 5.6% in June 1995, compared with 6.0% in June 1994. This trend has had a positive impact on the Company's business. One of the Company's corporate strategies since October 1992 has been to market both permanent placement and contract services through all of its 24 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 nine months ended June 30, 1995, consolidated revenues were $12,224,000, up $2,294,000 (23%) from last year's $9,930,000. Permanent placement revenues increased $1,361,000 (19%), primarily due to a 19% higher average placement fee. Contract service revenues increased $890,000 (32%) primarily due to 31% higher average hourly billing rate. The higher fees and billing rates in 1995 are the result of placing more highly- compensated individuals than last year. The consolidated cost of services for the nine months ended June 30, 1995 was $9,340,000, up $1,569,000 (20%) from $7,771,000 in 1994. Agency manager and consultant compensation increased 22%, and salaries of contract service workers increased 34%, as a result of the higher volume of business this year. Payroll taxes and benefits increased 15%; advertising expenses increased 21%; and all other operating costs decreased 3% from last year. As a result, the cost of services as a percent of service revenues decreased 1.6 points, from 78.3% last year to 76.7% this year. General and administrative expenses for the nine months ended June 30, 1995 were $2,088,000, a $296,000 (17%) increase from 1994. There was a $95,000 provision for income taxes in the 1995 nine- month 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 $701,000, or $.36 per share, in the nine months ended June 30, 1995, a $334,000 improvement compared with net income of $367,000, or $ .19 per share, last year. Financial Condition During the nine months ended June 30, 1995, the Company's cash and cash equivalents increased by $555,000 to a balance of $2,398,000. Net income provided $701,000 during the period, and an increase in accrued compensation and payroll taxes provided $294,000, while an increase in accounts receivable required $398,000 and other operating activities required $106,000. As a result, the net cash provided by operating activities was $491,000. During the period, the Company used $124,000 in investing activities, primarily for the acquisition of computer equipment, and the issuance of common stock in connection with stock option exercises provided $188,000. The Company's net working capital was $1,892,000 as of June 30, 1995, compared with $1,218,000 at September 30, 1994, and shareholders' equity was $2,042,000 in June, compared with $1,153,000 last September. 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. As of June 30, 1995, the Company had no debt outstanding. Manage-ment believes that existing financial resources are adequate to meet the Company's current operating needs. As of June 30, 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 6. Exhibits and Reports on Form 8-K The following exhibits are filed as a part of this report: No. Description of Exhibit 3 By-Laws, as amended May 15, 1995 27 Financial Data Schedule for the nine months ended June 30, 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: August 8, 1995 By: /s/ Herbert F. Imhoff Herbert F. Imhoff Chairman of the Board and President Date: August 8, 1995 By: /s/ Kent M. Yauch Kent M. Yauch Treasurer and Controller