DSI Reports Record Earnings, Revenue for Fiscal 1998; Expands On TeamStaff Acquisition Goals.SOMERSET Somerset, cities, United States Somerset. 1 City (1990 pop. 10,733), seat of Pulaski co., S Ky., in a farm, coal, and limestone area of the Cumberland foothills; inc. 1810. , N.J.--(BUSINESS WIRE)--Dec. 1, 1998--Digital Solutions, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : DGSI DGSI Direction Générale des Stratégies Industrielles (France) ), one of the nation's leading Professional Employer Organizations A professional employer organization (PEO) provides outsourcing of payroll, workers' compensation, human resources and employee benefits administration. It does this by hiring a client company’s employees, thus becoming their employer of record. (PEO), today reported final earnings for the fourth quarter of $381,000, an increase of 43 percent over the same quarter in fiscal 1997. The company said the improvement is a continued reflection of the growth in the profitability of the company and a further confirmation that it has put its past losses behind it. This represents the fifth consecutive quarter of profitability for the company. On an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. , DSI (Dynamic Systems Initiative) An umbrella term for a suite of Microsoft products that help manage the Windows environment in large enterprises. DSI was introduced in 2003. reported fully diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of one cent. Revenue for the fourth quarter increased to $37,553,000 from $30,400,000 for the same period last year, an increase of 42 percent, reflecting the continued growth in DSI's business. Revenues for fiscal 1998 grew 14 percent to $139,675,000. Income before tax was $1,407,000, or approximately 7 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , versus a loss last year of $2,832,000 which is an improvement of approximately $4.2 million. On a after-tax basis, DSI will report 14 cents per share for 1998, including a third fiscal quarter adjustment associated with deferred taxes, versus a loss of approximately 15 cents per share in fiscal 1997. Without the deferred tax adjustment, earnings per share on an after tax basis for fiscal 1998 would have been 4 cents per share from operations. "On an overall basis", Donald Donald (Domnall, Domhnall, Dumhnuil, Dónall) is an anglicized version of a Scottish or Irish Gaelic personal name, containing the elements dumno "world" and val "rule", viz. "ruler of the world". Compare Dumnorix. W. Kappauf, DSI's President, said, "I am extremely pleased with the performance of the company over the last year. It has been a year of challenge which has laid the foundation for the future growth of DSI. We established four objectives coming into this year: A return to profitability; replacement of the current bank facility with another financing arrangement, with no vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of related warrants; hiring of an investment banker Investment Banker A person representing a financial institution that is in the business of raising capital for corporations and municipalities. Notes: An investment banker may not accept deposits or make commercial loans. to seek acquisition opportunities; and attainment of a national NASDAQ listing. We have achieved our first three objectives, culminating in the pending acquisition of the TeamStaff Companies. The acquisition of TeamStaff will help us towards the achievement of our fourth objective of a National NASDAQ listing." TeamStaff DSI has mailed a proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. to all its shareholders seeking approval of the proposed acquisition of The TeamStaff Companies and the change of its name to TeamStaff. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Mr. Kappauf, "This is an excellent opportunity to catapult catapult (kăt`əpŭlt'), mechanism used to throw missiles in ancient and medieval warfare. At first, catapults were specifically designed to shoot spears or other missiles at a low trajectory (see bow and arrow). the combined entities into the forefront of the PEO industry. The combined company should rank among the top 15 PEOs in the country. Excluding the impact of the proposed acquisition, we estimated DSI would grow after tax earnings from 1998 to 2001 at an average annual compound growth rate of approximately 40 percent, excluding the impact in fiscal 1998 of the third quarter earnings adjustment associated with deferred taxes. With the acquisition of the TeamStaff Companies, we believe we will almost double these growth factors." These increases will occur because the company believes the combined entities will be able to achieve not only significant savings in overhead and insurance programs including workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. costs but, under Kirk Scoggins' leadership, also significantly grow the PEO business. Kappauf said, "It takes about a year to properly train a PEO salesperson. In 1998, our rebuilding year, we have spent a lot of time improving our sales force but more work is needed. TeamStaff brings an excellent sales and marketing engine with a powerful sales force in place to our PEO business. This, coupled with the financial management DSI demonstrated in 1998, should generate synergies in the future." As previously stated, DSI believes it has an in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. growth opportunity in its payroll business customers. "We have an objective", Kappauf continued, "of converting 10 percent of our payroll business customers in Fiscal 1999 to PEO. This would result in approximately $100 million in additional revenue to the company. Although we were successful in some conversions from our Payroll Group in 1998, they did not meet management's expectations for the year. TeamStaff and DSI have set as their number one priority the conversion of these customers to PEO and the process has already started. We are more confident of our success in 1999 due to the proposed addition of the TeamStaff organization." To further discuss the company's fiscal 1998 performance and the TeamStaff acquisition, DSI will hold a conference call, Tuesday Tuesday: see week. , December December: see month. 1, 1998, at 10:00 A.M. To avoid disruptions to the negotiation process that could come from premature pre·ma·ture adj. 1. Occurring or developing before the usual or expected time. 2. Born after a gestation period of less than the normal time, especially, in human infants, after a period of less than 37 weeks. announcements, DSI does not intend to make announcements with respect to the status of negotiations until such time as a definitive agreement is reached, the parties have agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy material changes to announced transaction terms or negotiations have terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: . The statements made herein are only made as of the date of this press release and DSI undertakes no obligations to publicly update such statements to reflect subsequent events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . This press release contains statements of a forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. nature regarding future events. These statements are only predictions and actual events may differ materially. Please refer to documents that DSI files from time to time with the Securities and Exchange Commission for a discussion of certain factors that could cause actual results to differ materially from those contained in the forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . -0-
DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
September 30,
1998 1997
---- ----
Revenues $37,553,000 $30,400,000
Direct expenses 35,159,000 27,983,000
---------- ----------
Gross profit 2,394,000 2,417,000
Selling, general and
administrative expenses 1,712,000 1,904,000
Depreciation and
amortization 159,000 180,000
------- -------
Income from
operations 523,000 333,000
------- -------
Other income (expense):
Interest and
other income 46,000 26,000
Interest expense (188,000) (93,000)
-------- -------
(142,000) (67,000)
-------- -------
Income (loss)
before tax 381,000 266,000
Income tax
benefit (expense) (174,000) --
-------- ------------
Net income (loss) $ 207,000 $ 266,000
=========== ==========
Basic earnings (loss)
per common share $ .01 $ 0.01
============= ============
Weighted average
shares outstanding 19,298,010 19,134,151
========== ==========
Diluted earnings (loss)
per common share $ 0.01 $ 0.01
============= =============
Diluted shares outstanding 19,450,673 19,317,976
========== ==========
DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Year Ended
September 30,
1998 1997
---- ----
Revenues $139,675,000 $122,695,000
Direct expenses 129,747,000 113,894,000
----------- -----------
Gross profit 9,928,000 8,801,000
Selling, general and
administrative expenses 7,389,000 10,306,000
Depreciation and
amortization 661,000 1,010,000
------- ---------
Income from
operations 1,878,000 (2,515,000)
--------- ----------
Other income (expense):
Interest and other
income 83,000 60,000
Interest expense (554,000) (377,000)
-------- --------
(471,000) (317,000)
-------- --------
Income (loss)
before tax 1,407,000 (2,832,000)
Income tax benefit 1,296,000 --
--------- ------------
Net income (loss) $ 2,703,000 $ (2,832,000)
============ ==============
Basic earnings (loss) per
common share $ 0.14 $ (0.15)
============= ==============
Weighted average shares
outstanding 19,271,897 19,070,349
========== ==========
Diluted earnings (loss)
per common share $ 0.14 $ (0.15)
============= ==============
Diluted shares outstanding 19,403,298 19,070,349
========== ==========
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