ITEM 1. BUSINESS
GENERAL
Norrell Corporation (the "Company" or "Norrell"), incorporated in 1965 as a Georgia corporation, is a leading national provider of staffing, outsourcing and professional services to businesses, professional and service organizations and government agencies. The Company provides a broad range of services through its national network of 132 Company-owned locations, 115 outsourcing services locations, 133 franchised locations, and 32 professional services offices as of December 22, 1996. More than 19,000 clients (including subsidiaries and affiliated companies) in North America were served by the Company during its latest fiscal year. The Company is benefiting from a continuing trend toward staffing and outsourcing services and the Company's implementation of its business strategy. Based upon revenues, the Company's management believes that it is one of the largest companies in its industry in North America.
As a national provider of temporary personnel and staffing services, the Company supplies its clients with the services of individuals having a wide variety of office, light industrial and other skills, including secretarial, word processing, data entry, telemarketing, assembly, picking, packing and sorting, and shipping and receiving. The Company also provides home health aides and related services to government agencies or home health agencies in the states of New York, New Jersey and Pennsylvania.
In addition to providing temporary personnel and staffing services, the Company provides its clients with outsourcing solutions in a wide range of office and business functions including administrative services, site services, teleservices, accounting services, information systems, document processing, data entry services and integrated service offerings. The Company also provides hospitals with outsourcing solutions in certain office and business functions. During fiscal 1996, the Company formalized its human resources services offering and provides clients with recruitment, interviewing, assessment, and other services associated with the workforce selection process. With its outsourcing offering, the Company assumes responsibility for the function and its results, including management of the people, service delivery process and technology resources.
The Company also provides clients with a range of professional services. During fiscal 1996, the Company acquired the capability to provide services in the information technology field. The Company provides computer professionals for both short-term and long-term assignments, including systems analysts, computer programmers and computer technicians. The Company also provides various computer consulting services such as system planning and development, organizational consulting for business transformation, software systems integration services and project management services. The Company also offers professional services in the financial area, and provides clients with temporary and permanent employees to perform accounting, bookkeeping and other financial services.
The Company offers its staffing, outsourcing and professional services through a number of affiliated companies and divisions, including Norrell Services, Inc. ("Norrell Services"), and Tascor Incorporated ("Tascor"). Norrell Health Care, Inc. provides home health aides, primarily in the states of New York, New Jersey and Pennsylvania and Norrell Financial Staffing, a division of Norrell Services, provides clients with temporary and permanent employees to perform financial services. HealthTask Corporation, a joint venture between the Company, Tascor and Ernst & Young U.S. LLP, provides hospitals with outsourcing solutions in certain office and business functions. Two companies acquired during fiscal year 1996 - Analytical Technologies, Inc. and ANATEC Canada, Inc. (collectively referred to as "ANATEC") and American Technical Resources, Inc., ("ATR") - and a third company acquired effective January 2, 1997 - Comtex Information Systems, Inc., ("Comtex") - provide professional services in the information technology field. Two joint venture companies - Norcross Teleservices, Inc., and CallTask Incorporated - provide outsourcing solutions in the teleservices arena.
STRATEGY
The Company's overall business strategy is focused on: (i) providing a seamless "spectrum of services" to its clients including traditional temporary services, short-term and long-term staffing, value-added outsourcing solutions, and professional services; (ii) establishing the Company as a recognized high quality service provider; and (iii) continuing to grow the Company's existing base of business by developing new product offerings from existing services, expanding into additional skill classes, functional areas and technology, and entering into selected new markets. In 1996, the Company: 1) expanded its capabilities in higher-growth, higher-margin services, such as teleservices and information technology services; 2) continued to re-engineer its service delivery process to enhance customer satisfaction; and 3) continued to focus upon operational factors that increase efficiency and profitability.
For clients committed to high-quality, value-added services, the Company offers strategic workforce management, designed to strengthen a client's organizational effectiveness and flexibility. The Company partners with these clients to diagnose workforce problems and design an integrated service solution, ranging from short-term staff augmentation to comprehensive workforce structures that include dedicated management teams.
SPECTRUM OF SERVICES
The services provided by the Company can be viewed as a spectrum ranging from traditional temporary services to value-added outsourcing solutions.
NORRELL CORPORATION'S SPECTRUM OF SERVICES
[GRAPH]
Traditional Temporary Services. Traditional temporary personnel may be assigned for either a specified or indefinite period of time as necessary to meet the needs of clients. The expense and inconvenience to a client of recruiting employees, including advertising, interviewing and testing, conducting reference and background checks and drug testing are reduced when temporary personnel are engaged. Use of these services also enables the client to eliminate or reduce record keeping, expenses associated with fringe benefits, turnover and related employee costs usually associated with its personnel. A client pays only for actual hours worked by temporary personnel and may terminate the use of temporary services without the adverse effects of layoffs.
Staffing Services. The Company offers both short-term and long-term staffing options tailored to specific client needs. Through short-term staffing, also known as project or peak period staffing, the Company can meet fluctuating staffing requirements quickly and easily, helping clients maintain high levels of productivity without the need to add permanent staff. Short-term staffing is typically an assignment of less than six months and involves one-time, seasonal or recurring use of at least five temporary employees. Through long-term staffing, the Company provides and supervises temporary employees for functions or departments on an extended basis. Long-term staffing typically involves staffing specific positions for six months or more.
Managed Staffing. The Company also emphasizes managed staffing, which is the staffing of positions with personnel on a planned and continuing basis, in most cases with an on-site Norrell manager who is trained to
manage the contingent workforce process. Managed staffing represents a cost-effective solution for employers who spend a significant amount of administrative and personnel department time managing employees whose jobs are generally routine and are characterized by high turnover rates and also for employers in industries with fluctuating personnel needs. Such employers use staffing personnel as a valuable management tool to control overhead costs and enhance profitability. Examples of managed staffing clients of the Company include customer service centers, distribution centers, and various light manufacturing and packaging businesses. The Company's managed staffing business grew 26.9% during fiscal 1996 from $65.3 million in revenues in fiscal 1995 to $82.9 million in revenues in fiscal 1996.
Master Vendor Partnering ("MVP"). The Company offers its MVP program to its clients in conjunction with its other service offerings. Under the MVP program the Company will, in addition to providing traditional temporary services or managed staffing, assume responsibility for coordinating all of the client's temporary help or staffing functions for one or more client locations. This coordination includes taking and filling client orders for services, employee scheduling, new employee orientation, personnel management, quality reviews, and payroll and invoice processing. These functions are handled by a Norrell on-site contract manager at the client location. As the Master Vendor, the Company establishes relationships with other service providers which may be used as specialty subcontractors to provide services in the event the Company does not fill an order with its own personnel. These subcontractors receive orders for services from the Company, usually sign a subcontract agreement with Norrell, render their invoices directly to the Company, and are paid by the Company. The Company provides the client with a single aggregated bill for all of the services provided by Norrell and any subcontractors. The client also looks to the Company as its single point of contact for placing orders for temporary services, responding to quality issues and pricing matters as well as preparing reports concerning usage of temporary services. During fiscal 1996, revenues from the Company's MVP program increased 66.7% from $85.8 million in fiscal 1995 to $143 million in fiscal 1996.
The Company's traditional temporary and staffing services can be divided into four major categories:
Administrative Support Services. Office services are provided by personnel possessing a wide variety of skills required in the workplace, including secretarial, reception, desktop publishing, transcription, typing, data entry, general clerical, switchboard and general office skills. Such services are most often required by clients at times of peak work loads or occasional absences or to fill ongoing staffing requirements. Through the diversity of skills of its personnel, the Company is able to satisfy the needs of its clients in virtually all areas of office services.
Office Automation Services. The Company provides personnel with word processing and personal computer skills, including graphics specialists and trainers, as well as specialists for spreadsheet and data base applications. The Company not only seeks highly qualified and experienced operators to meet the needs of its clients, but also trains its employees using an extensive office automation cross-training curriculum. All Company-owned offices and franchised locations are equipped with personal computers using several of the most widely used word processing, data base and spreadsheet software applications. The Company has developed its own office automation testing, training and support programs, including course curricula designed for self-paced and instructional training.
Technical and Light Industrial Services. Technical and light industrial services personnel are furnished for a variety of assignments, including general assemblers, machine attendants, shipping and receiving clerks, inventory personnel, packers and ticketers. The Company also provides semi-technical personnel, including printed circuit board assemblers, testers and inspectors. Managed staffing has been an effective delivery channel for the Company's technical and light industrial services.
Home Health Aide Services. Home health services are provided by trained, certified home health aides and/or personal care aides in the patient's home. These certified aides meet the requirements of state Medicaid programs and generally provide personal care, cooking, cleaning, shopping and other essential day-to-day services to patients. These services are performed under contracts with the individual governmental entities administering the programs or with certified home health agencies. Norrell's certified aides do not provide any skilled nursing services.
Outsourcing Services. The Company also provides outsourcing services. Through this offering, clients can obtain a broad range of administrative and business support services, with the Company assuming responsibility for managing the productivity and work output of the functions that it performs. Employees provide support tailored to the customer's needs on a long-term, contractual basis. The Company assumes responsibility and accountability for results of the function, including management of the people, the service delivery process and the technology resources, enabling the customer to focus on its core business. The Company's joint venture with Ernst & Young U.S. LLP - HealthTask Corporation - - has targeted outsourcing solutions to hospitals for certain office and administrative functions. In addition, during fiscal 1996, the Company entered into two joint ventures to provide a wide range of teleservices. Norcross Teleservices, Inc., a joint venture between the Company and the Cross Country Group LLC, provides teleservices to organizations that outsource their customer service functions. Norcross focuses on business-to-business and customer-to-business support, including customer service call centers and help desks. The Company owns a 51% interest in the Boston-based joint venture. The Company also owns a 51% interest in CallTask Incorporated, a joint venture between the Company and Harvard Teleservicing, Inc. CallTask primarily provides teleservices to assist clients with customer reservations, product information and order fulfillment.
In fiscal 1996, the Company's outsourcing revenues were $208.1 million, with over 6,000 employees working at client locations. New business development continues to be a priority of the Company's management. International Business Machines Corporation ("IBM"), the Company's largest client, has engaged the Company to provide additional services during the current year. In addition to IBM, the Company has outsourcing agreements with other major clients, and outsourcing revenues from non-IBM customers increased $15.3 million during 1996 to $60.3 million.
The Company's outsourcing services can be divided into several major business categories:
Administrative Services. Administrative services include secretarial and clerical support, text processing, desktop publishing, graphics centers, management support teams and site management functions, such as mail services and reprographic services.
Teleservices. Teleservices include managing information call centers, service/dispatch centers, PC product information and warranty maintenance centers as well as telephone service, network management and related customized programs.
Accounting Services. Accounting services include performing accounting functions such as processing accounts payable, accounts receivable, employee travel reimbursement and asset tracking.
Document Processing and Data Entry Services. These services include records management and a broad range of value-added services performed at Company locations or at customer sites.
Human Resources Services. Human resources services include recruitment, testing, interviewing and selection for a client's workforce.
Professional Services. During 1996, the Company expanded its capabilities in the information technology field and offers a full spectrum of services, from staff augmentation and recruiting to systems consulting. With the acquisition of information technology companies, the Company offers clients a variety of services, including systems planning and development, organizational consulting related to business transformation, project management, software systems integration, software development, and computer professionals for short-term and long-term assignments, including systems analysts, computer programmers and computer technicians. During fiscal 1996, revenues from the Company's information technology services were $50.5 million.
The Company, through its Norrell Financial Staffing division, offers its clients temporary and permanent employees to perform accounting, bookkeeping and related financial services. During fiscal 1996, the Company experienced significant growth in financial staffing due to growth of existing accounts and an increase in office locations. In addition, subsequent to the fiscal year end, the Company acquired Accounting Resources, Inc., a
privately held financial placement firm in Providence, Rhode Island, which provides staffing, permanent placement and executive search services to clients in various industries. Revenues from financial staffing increased from $2.9 million in fiscal 1995 to $14.6 million in fiscal 1996, an increase of $11.7 million.
The Company offers its clients the option of combining any of the above services into a single integrated offering, as well as tailoring services specifically to customer requirements. By applying the principles of continuous quality improvement and business process engineering to each of these areas, the Company has been able to reduce costs and improve productivity for many of its clients.
QUALITY INITIATIVES
The Company is dedicated to providing high quality services and believes it is an industry leader in its quality focus and related measurement systems. This quality focus helps attract and retain national accounts with customers seeking consistent results and a nationwide approach to their needs.
In order to maintain a consistent quality standard for all of its temporary and staffing employees, the Company uses automated systems to screen and evaluate potential personnel, to make appropriate assignments, and to evaluate and review an employee's performance. The Company's quality system, Qualisys, is comprised of three major components: (i) Exact Match(TM), a screening and placement process which matches the employee to the client's needs; (ii) B.O.S.S., its Branch Office Support System, an extensive database of client and personnel information; and (iii) I.R.I.S.(TM), or Integrated Research Information System, by which the Company obtains direct client feedback and measures individual employee performance. These automated services enable the Company to provide staffing services quickly and efficiently, monitor client needs and utilization trends, measure the Company's quality and evaluate and train its employees. This extensive, integrated and automated quality measurement and control system distinguishes the Company from its competitors. With its outsourcing clients, the Company also develops customized performance measurement benchmarks and systems for each client contract as requested. These standards and systems are designed with client input and take into account clients' quality needs and standards.
As a result of such quality initiatives, the Company has received recognition for the quality of its services by groups outside the temporary services industry. The Company has received the national award for Best Practices in Customer Satisfaction from Arthur Andersen's Enterprise Group. The Company has also received the Sears Partners in Progress Award, the Tennessee Quality Award and the Ford Q-1 Award. Ford gives its coveted Q-1 award only to selected vendors in recognition of outstanding quality and service. This award allows the Company to use the Ford Q-1 recognition in advertising and other promotional material. Such recognition for its quality services enhances the Company's ability to compete for larger and more complex contracts and business opportunities.
GROWTH OPPORTUNITIES
The Company increased its revenues from $412.1 million in fiscal 1992 to $1,013.9 million in fiscal 1996. The Company continues to grow its business and increase the volume of services provided by (i) enhancing new service offerings; (ii) increasing the range of services provided to existing clients; (iii) expanding into additional skill classes, functional areas and technology; (iv) expanding its capabilities in higher-growth, higher-margin services; and (v) entering into selected new geographic markets.
The Company has employed an effective geographical expansion strategy with franchise locations providing penetration primarily in markets with lower density populations and Company-owned offices servicing major markets. This combination provides an increased local market presence and a broad network of service locations for national accounts. The Company also selectively considers the acquisition of local temporary service companies with strong market presence in order to efficiently enter new markets. Pursuant to this strategy, during fiscal 1996, the Company acquired Valley Temporary Services, Inc., a staffing firm in Phoenix, Arizona.
ORGANIZATIONAL STRUCTURE
The Company provides its services through a network of Company-owned offices, franchised offices, outsourcing locations, and professional services offices. The table below sets forth certain historical information concerning the number of offices and outsourcing locations:
Company-Owned Operations. The Company owns and operates temporary personnel services offices in major markets, each of which is managed by a Norrell manager who is responsible for most aspects of the Company's business within that market. These responsibilities include sales and client development, recruitment and retention of temporary employees and the implementation of Norrell's marketing strategies. The Company provides extensive training to field managers, sales representatives and operations personnel in all of these areas. A substantial portion of field employees' compensation is based on financial performance, including the attainment of profit objectives. Company-owned offices operating in "middle markets" (generally markets with populations between 500,000 and 1.5 million people) are operated under special incentive arrangements by managers who receive lower salaries and higher incentive compensation relative to managers of other Company-owned offices.
Franchised Operations. The Company currently operates franchised offices throughout the United States and in Canada and Puerto Rico. The Company developed its initial franchise strategy in the mid-1960s as an important element of its overall growth plans. Franchising provides the opportunity to enter targeted markets with substantially less capital than would be required to establish Company-owned offices. The Company's primary franchise target markets are cities with populations between 50,000 and 500,000 people. The Company also establishes franchised offices under its trade name Dynamic People to increase market penetration in major markets in which the Company may also operate Company-owned offices.
The preferred franchisee is a person who is familiar with a particular local market and its business network, has a background in sales and exhibits entrepreneurial qualities characteristic of a small business owner. The franchised operation is designed to allow a franchisee to operate the business autonomously within the framework of the Company's policies and standards. A franchisee has the exclusive right to operate as a temporary personnel services provider for specific services within a designated geographic area using the Company's trade names, advertising materials, sales programs, operating procedures and proprietary and licensed systems as described in the franchise agreement.
Franchise agreements generally have 10 to 15 year terms and are subject to earlier termination as provided in the franchise agreement. Under the franchise agreements, all customers and temporary employees are the customers and employees of the Company rather than of the franchisee. The Company is responsible for all billing and collection procedures and pays the wages of all temporary personnel. The current franchise agreement provides that the franchisee receives between 40% and 60% of franchise gross profits depending upon the volume of gross profits generated by the franchisee. The franchisee is responsible for the overhead of its own operations, such as utilities, office furniture and equipment, rent and staff personnel. The Company receives no initial franchise fee upon the commencement of a franchise relationship. The Company estimates that a franchisee will need working capital of $70,000 to $140,000 to open and operate a franchised office.
- ----------------- 1/ Occasionally, the Company acquires a franchised office and operates it as a Company-owned office until it is refranchised. Such offices are included in franchised locations.
2/ Outsourcing services are generally performed at the clients' facilities.
The franchise division assists and supports its franchisees through regional managers and training development teams. The Company has entered into agreements with the majority of the franchisees pursuant to which the franchisee agrees to provide certain services for a fee in order to assist the Company in certain outsourcing business which is performed in the franchisee's territory. Those services could include recruiting, basic testing and training of personnel, and interviewing persons seeking employment as outsourcing services employees. In the event the Company needs to use temporary services in the course of providing outsourcing services, the franchise owner may provide such services. In addition, the Company selectively allows franchise owners to perform financial staffing services depending upon market size, the amount of financial staffing business involved, and the ability of the franchise owner to meet the needs of the particular client. Franchise owners do not provide outsourcing services in the teleservices area or services in the Company's information technology business.
Outsourcing Locations
The Company currently has operations at sites throughout the United States responsible for the delivery of outsourcing services. The majority of the Company's outsourcing operations are located on site at its customers' facilities, and the remaining outsourcing sites are located in leased offices. Other than regional offices and its corporate offices in the Company's headquarters building, the Company's outsourcing subsidiary does not maintain sales or administrative offices separate from the locations at which client services are performed, allowing the Company to control the growth of overhead costs.
Outsourcing services are delivered by employees who are hired by the Company to perform services during the term of an outsourcing contract. These employees and related field operations are managed by the Company's site managers and area managers who are responsible for service delivery, customer satisfaction, and sales of additional services to current customers through both expansion of existing contracts as well as the addition of new contracts.
Outsourcing field operations are supported by a centralized staff which is responsible for pricing of new or additional business, payroll, performing client process studies, management training and implementation services, which includes the initial recruiting, screening, testing, hiring and training of employees at the start of a new outsourcing services contract.
SALES AND MARKETING
The Company has developed a sales and marketing strategy which is implemented through its Company-owned and franchised staffing services offices and its on-site and off-site outsourcing services locations. The Company focuses these efforts both on a national and local level. The national sales effort is coordinated by a national account team located in the home office and in the local division offices. The local branch offices provide the service and sales efforts needed to support the large national customers. Pursuing national account partnerships is important to the Company's growth due to the consolidation of vendors by large national clients and due to the broad spectrum of services these customers desire. Local accounts are developed by the Company-owned and franchised offices primarily through client referrals, community involvement and direct contacts with prospective clients. Contacts are made through sales representatives, telephone marketing calls and direct mail solicitation.
For all traditional temporary and staffing clients, national and local, the Company has developed a system of formal consultation with its clients' management to determine the clients' specific requirements and to evaluate their potential use of staffing personnel. This approach involves: (i) an in-depth study of the client's corporate attitudes and departmental organization to gain insight into the client's operating philosophy; (ii) an analysis of the client's performance expectations and work experience requirements for staffing personnel; (iii) a job-by-job analysis of the cost effectiveness the client can expect from the use of the Company's staffing employees; and (iv) on-going management reports evaluating the actual results of utilizing the Company's services. This process facilitates an effective match of a client's needs with skills of the staffing employee and enables the client to analyze its use of staffing services. The Company offers all clients the "Norrell Guarantee", under which a client will not be billed if the client is not satisfied with a temporary employee's performance.
The Company's sales efforts for its outsourcing and professional services offerings are accomplished by both the field sales organization and the national accounts teams. Functional experts from Norrell's broad spectrum of services, including ATR, ANATEC, Comtex, Norrell Financial Staffing, Tascor, Norcross and CallTask, assist the sales team in their selling efforts. New sales are generally made to companies at the senior executive level. Sales of outsourcing and professional services to an existing client are made by both the operations management team responsible for the client and the above-mentioned personnel.
The development of awareness and preference for both the Norrell brand and our service offerings is a primary initiative of the sales and corporate marketing organizations. Through a variety of national and local marketing and media vehicles, the Company communicates the attributes of a brand position and service offerings to current customers, prospects and the business community. For recruitment purposes, the Company and its franchisees utilize a multi-media marketing strategy to attract and retain employees to fill the broad spectrum of staffing and outsourcing services.
RECRUITING AND PLACEMENT
The Company's temporary and staffing personnel are primarily individuals between jobs or careers, individuals re-entering the job market or individuals who prefer the flexibility and variety of temporary or shorter-term work assignments. A substantial proportion of new temporary personnel are obtained through referrals by other Norrell personnel. Temporary and staffing personnel are also recruited through local and national advertising media. Due to shortages in the labor market, the Company focuses upon developing and implementing recruiting techniques which will attract and retain qualified personnel.
The Company conducts an interviewing and testing process to screen and evaluate the skills of potential personnel. Company-developed or purchased programs are used to determine skill levels and work attitudes in order to assist in making proper assignments. The Company provides training programs to increase and improve the skills of its personnel. To maintain the quality and effectiveness of its temporary and staffing workforce employees, the Company uses the I.R.I.S. system to review an employee's performance with the client.
To be able to meet demand for qualified home health personnel, who are generally in short supply, the Company recruits employees and conducts a two-week training program to qualify employees as certified home health aids or a one-week training program to qualify them as personal care aides. These training programs effectively increase the Company's supply of qualified aides.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems have been established to allow the Company to maintain state-of-the-art capabilities while at the same time reducing management's time and involvement in systems issues. In December 1992, the Company entered into an agreement with Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of IBM, for information systems operations, development of new systems and maintenance of current software systems and related services. In December 1995, the agreement was reduced in scope. The Company assumed responsibility for development of new systems and maintenance of current software systems. The services currently being provided by ISSC include operating the Company's data center and data network, maintaining the hardware in the data center and data network, generating printed reports previously prepared by the Company and providing storage and disaster recovery for all data media. The agreement with ISSC provides the Company with virtually unlimited computer data storage and operating capacity to meet future information and systems operations needs. This agreement expires on March 31, 2003 unless extended by the Company and ISSC.
In 1995 the Company began replacing certain legacy systems. The primary purpose of this initiative is to install state-of-the-art systems throughout the Company and support the substantial growth of the Company, provide better support for the Company's national account strategy, and to facilitate integration of newly acquired companies. These systems will complete the Company's transition to Client/Server Systems. In 1997 and beyond,
the Company will leverage this new platform to introduce system extensions which will enhance productivity and further our competitive edge.
The Company believes that its B.O.S.S., I.R.I.S.(TM), Exact Match(TM) and proprietary payroll systems give the Company a competitive edge in service delivery over its competitors, in that selected client and temporary employee information, including client satisfaction survey results, are available electronically in each office and at the corporate headquarters.
CLIENTS
During fiscal 1995 and 1996, revenues generated by the Company from contracts with IBM equaled $136.2 million and $158.6 million, respectively, representing 16.2% and 15.6% respectively, of the Company's consolidated revenues for such periods. Approximately 31.0% and 21.4% of these revenues were received during fiscal 1995 and fiscal 1996, respectively, for services performed under a Management Services Agreement. The balance of the Company's IBM-related revenues are consolidated under multiple contracts with different purchasing units within IBM.
During fiscal 1996, revenues generated by the Company from contracts with United Parcel Service, Inc. ("UPS") equaled $122.2 million representing 12.0% of the Company's consolidated revenues for fiscal 1996.
No other client accounted for more than 10% of the Company's consolidated revenues for fiscal 1996 or 1995.
COMPETITION
The temporary services industry is highly competitive with more than 7,000 temporary services companies operating in the United States. The temporary personnel services provided by the Company also are provided by several other companies with nationwide operations that have substantially greater resources than the Company. In addition, the Company competes with numerous local and regional companies, which are frequently the strongest competitors in their particular markets. Accordingly, the Company's competition varies from market to market. Although the Company and other national firms benefit from having nationally recognized names, the Company believes that its customers primarily differentiate among firms by comparing the quality of personnel and services provided by each local office. Companies typically use more than one temporary services firm to satisfy their temporary personnel requirements.
The largest competitors of the Company's temporary and staffing personnel offerings include Kelly Services, Inc., Manpower Inc., Adia Services, Inc., AccuStaff, Inc., The Olsten Corporation, and Interim Services. In addition, there are a number of other firms with annual sales in excess of $100 million, many of which are regional and/or emphasize specialized niches. There are also numerous local and single office firms which are able to compete on price because of their lower overhead structures. These firms are typically located in one city and some are able to compete effectively on that limited basis.
The Company believes that no single competitor has more than a 10% share of the national temporary services market. Nevertheless, it is expected that the industry will continue to consolidate with the large national firms increasing their market share at the expense of firms which are large enough to require sophisticated information-based systems for the placement of temporary personnel and payroll functions for their offices but may lack the capital to compete operationally with larger industry competitors.
The temporary health care market also is highly fragmented and competitive at the local level. While several national health care companies compete with the Company in its markets, many local health care staffing services and home health agencies also compete with the Company. Selections of home health aide services are made primarily on a local basis by agencies and health care administrative personnel.
The principal competitive factors in the temporary services industry are the availability and quality of personnel, the level of service, the effective monitoring of job performance and the price of service. The Company believes that it competes favorably in these areas.
The Company believes that the largest companies that compete with its outsourcing offering are "niche" players which do not compete with the Company's full range of outsourcing services. These outsourcing services providers offer a more limited range of services, assuming responsibility for functions such as food services, facilities maintenance, mailrooms or reprographics.
The Company considers its principal competitors for its outsourcing services to be companies such as Pitney-Bowes, Inc., an equipment manufacturer which provides mailroom services; Manpower; Xerox, an equipment manufacturer that provides reprographics services; Kelly Services, and other large temporary services firms which are attempting to expand their services offerings; and Host Marriott Corporation, which is expanding beyond its traditional hospitality and food services operations in the area of facilities staffing.
In the professional services industry, a large number of national companies provides information technology consulting services related to systems planning and development and business processes and transformation, including Andersen Consulting & Co., IBM Global Services, and Electronic Data Systems. Staff augmentation services in the information technology field are provided primarily by regional and local firms as well as some national firms. Competitive factors in the information technology industry are a proven track record in the marketplace, recruitment and retention of employees with the appropriate skills, development and implementation of effective methodologies, and process and business expertise.
PERSONNEL
As of January 8, 1997, the Company had a staff of approximately 1,300 (excluding temporary employees and employees who perform services on outsourcing contracts). The Company maintains employment contracts with all executive and most field personnel which, among other things, provide agreements not to compete with or solicit customers of the Company after termination of employment for varying periods of time. As of January 8, 1997, the Company employed approximately 6,600 outsourcing services personnel, and approximately 220,000 temporary personnel were employed by the Company during calendar year 1996, including those operating out of franchised offices. As of January 8, 1997, the Company's information technology companies employed 194 individuals (excluding employees who perform services at client locations) and an additional 1,078 employees were assigned to clients to perform systems-related services. This includes employees of Comtex, acquired by the Company on January 2, 1997. As of January 8, 1997, Comtex had a staff of 55 internal employees and employed an additional 222 individuals to perform services at client locations. The Company has no collective bargaining agreements with its employees. The Company believes that it has good relations with its employees.
SERVICE MARKS
The Company is the owner of various service marks, including Norrell, The Norrell Advantage, Dynamic, Dynamic People, Smarter Ways to Get Things Done, Tascor and ANATEC. The Company protects its service marks and believes that the "Norrell" service mark is an important asset to the Company's operations.
GOVERNMENTAL REGULATION
The marketing of the Company's franchises is subject to the disclosure requirements of the Federal Trade Commission and the registration and/or disclosure requirements of certain states. In certain states, the Company's relationship with its franchisees also are governed by the franchise laws of such states.
The Company's home health aide business operates in New York, New Jersey, and Pennsylvania which require licensing of home care providers. In those states, the Company is subject to periodic licensure surveys to ensure continued compliance with licensing requirements. A change in control or the sale of the Company's home health aide business must be approved by the Public Health Council of the New York State Department of Public Health.
In certain states, companies which engage in permanent placement are subject to regulations. The Company analyzes the applicability of these state regulations to the permanent placement activities of Norrell Financial Staffing and complies with these requirements, if applicable. In addition, certain states require licensure and otherwise regulate companies which provide employee leasing services. The Company analyzes these state laws in light of its service offerings and complies when the state law is applicable.
SEASONALITY
Revenues and profits generated in the Company's fourth fiscal quarter (August through October) are typically the highest of its four fiscal quarters. Management believes that this results from a heavier demand during this period and because the fourth quarter includes only one nationally observed holiday. Conversely, revenues for the first fiscal quarter (November through January) are typically the lowest of its four fiscal quarters due to the reduced number of business days for many of the Company's clients because of the number of observed holidays and inclement weather. Revenues and operating profits for the Company's first quarter are typically less than the fourth quarter of the previous year.
ITEM 2.

ITEM 2. PROPERTIES
The Company leases approximately 150,000 square feet of the building which houses its office headquarters pursuant to a lease agreement which will expire June 30, 2007.
On October 27, 1996, the Company was committed under operating leases for office facilities and certain equipment. Aggregate minimum rental requirements under these leases are as follows:
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to ordinary, routine litigation incidental to the Company's business. In the opinion of management, the ultimate resolution of all pending litigation will not have an adverse effect on the Company's business or financial condition.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of fiscal 1996 to a vote of security holders.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers are elected annually and serve at the discretion of the Board of Directors. Information concerning the executive officers, as of January 1, 1997, is provided below.
Guy W. Millner founded the predecessor of the Company in 1961 and has served as Chairman of the Board since that time. He served as President and Chief Executive Officer of the Company from November 1983 until October 15, 1993. Mr. Millner is on an unpaid leave of absence effective November 15, 1995.
C. Douglas Miller was elected Chief Executive Officer and President of the Company effective October 15, 1993. He joined Norrell Services in 1979 and has served since that time as an Area Manager, Regional Manager, Vice President and General Manager of the Franchise Division, and President and General Manager of the Franchise Division for Norrell Services; and as Vice President, President and Chief Operating Officer of the Company. Before joining Norrell Services, Mr. Miller spent 11 years with IBM, most recently serving as Marketing Manager for Major Accounts in the Atlanta Office.
Larry J. Bryan joined the Company in October 1985 and is an Executive Vice President of the Company. Prior to his current position, Mr. Bryan was Chief Financial Officer of the Company. From 1984 until he joined the Company, Mr. Bryan served as Senior Vice President and Chief Financial Officer of American First Corporation. From 1975 to 1984, Mr. Bryan served as Chief Financial Officer and in other capacities of divisions or subsidiaries of Pepsico, Inc., including Pepsico Bottling Group, Taco Bell, Inc., and Leeway Motor Freight, Inc.
Thomas A. Vadnais joined Tascor on September 1, 1992 and served as Vice President -- General Manager until October 31, 1993 when he was elected President and Chief Operating Officer of Tascor. Mr. Vadnais is also Vice President, National Service Management and has served in that capacity since October, 1995. Prior to joining Tascor, Mr. Vadnais was a Vice President of Operations for the national distribution division of IBM where he was employed for 24 years.
Stanley E. Anderson has been employed by Norrell Services since 1981. He is currently Senior Vice President of Business Development, a position he assumed in February, 1996. Prior to that time, he held the positions of Vice President and General Manager, Southeast Division, Vice President and General Manager, East Division, Vice President of Franchise Development, Regional Manager, Branch Manager, and Sales Training Manager.
James L. Donahue is presently Vice President and General Manager for the West Division of Norrell Services. He has been employed by Norrell Services since August, 1994. Prior to that time, he was Vice President of a temporary services firm in San Juan Capistrano, California from April 1991 until August, 1994.
Caress C. Kennedy has been employed by Norrell Services since 1992. She is presently Vice President and General Manager, Northeast Division. She previously held the position of Market Vice President in New York and New Jersey. Prior to joining Norrell Services, Ms. Kennedy was employed by Thompson Financial Services as Senior Vice President of Sales and Marketing and by Xerox as Vice President of Marketing, and Vice President of Strategic Planning and New Business Development.
Ronald T. Self joined Norrell Services on August 31, 1990. He is Senior Vice President and General Manager, Metro Markets Division, Norrell Services. He has held the position of Vice President and General Manager, Central Division, Vice President - Major Accounts and Market Vice-President. From 1986 to 1990, Mr. Self was employed by Coca-Cola U.S.A., Atlanta, Georgia, most recently as Southeast Area Manager.
Eugene F. Obermeyer has been employed by Norrell Services since July 1, 1979. He has been the President and Chief Operating Officer of the Franchise Division of Norrell Services since 1991. He previously held the positions of President and Chief Operating Officer, Southeast Division, Regional Vice President and Regional Manager, District Manager and Branch Manager.
Mark H. Hain has been Vice President, Secretary and General Counsel to the Company since March 1, 1988, when he joined the Company.
Peter F. Rosen is presently Vice President, Human Resources for Norrell Corporation and has served in that capacity since September, 1995. Prior to that time, he was Senior Vice President of Human Resources for GAB Robbins, and Director of Human Resources for SmithKline Beecham.
Thomas E. Fricks serves as Vice President and Chief Information Officer of the Company and has served in that capacity since he joined the Company in August, 1994. From 1983 until 1992, Mr. Fricks was employed by Contel Corp. as Vice President of Information Services. From 1992 until 1994, Mr. Fricks was Vice President of the Telecommunications Group for American Management Systems, Inc.
C. Kent Garner is a Vice President and the Chief Financial Officer of the Company, and has served in that capacity since joining the company in October, 1995. Prior to joining the Company, Mr. Garner was Chief Financial Officer of Dollar General Corporation and Treasurer of Vulcan Materials Company.
Stanley Smith is Vice President and General Manager of the North Central Division of Norrell Services and has held that position since February, 1996. Prior to February, 1996, Mr. Smith held the position of Regional Vice President, North Central Region, Norrell Services from March, 1989 until February, 1996.
Theresa G. Williams has been the Division Vice President, and, General Manager of the Mid Atlantic Division for Norrell Services since February, 1996. Ms. Williams has been employed with the Company since
March, 1984 and has previously held the positions of Region Vice-President, Region Manager and Branch Manager.
Robert W. Grissom, Jr. has served as Vice President, Marketing since February, 1996. Mr. Grissom has also held the positions of Vice President, New Market Development, Region Vice President, Franchise Division and Region Manager, Franchise Division.
Timothy E. Tindle is President and Chief Executive Officer of Analytical Technologies, Inc. ("ANATEC") and has held that position since 1994. Prior to his association with ANATEC, Mr. Tindle was employed with Compaq Computer Corporation for approximately 11 years where he served as Director, National Support Center, Director, Systems Support and National Service Manager.
Charles F. Phillips is President of American Technical Resources, Inc. and has served in that capacity since February, 1986.
Michael C. Mullins is President and Chief Executive Officer of Comtex Information Systems, Inc., a company he founded in 1976.
PART II
ITEM 5.

ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock began trading on the New York Stock Exchange on October 30, 1995 under the symbol NRL. Prior to this date, the Company's Common Stock traded in the over-the-counter market on the National Association of Securities Dealers, Inc.'s Nasdaq National Market. Prior to July 26, 1994, there was no established public trading market for the Common Stock of the Company. The following table sets forth the quarterly closing price ranges for the Company's last two fiscal years.
At January 8, 1997, there were 211 registered record holders of the Company's Common Stock.
The Company declared a dividend on its Common Stock of $.03 per share in December, 1994, March, 1995, April, 1995 and September, 1995. The Company declared a dividend on its Common Stock of $.035 per share in December, 1995, March, 1996, June, 1996 and September, 1996. The Company declared a dividend of $.04 per share on its Common Stock in December, 1996. The Company's loan agreement restricts the amount available
for the payment of dividends to not more than 40% of the Company's cumulative net income since November 1, 1993.
On August 5, 1996, the Company issued an aggregate of 1.0 million shares of its Common Stock, no par value, to five shareholders of ATR in exchange for all of the issued and outstanding stock of ATR, pursuant to a merger and reorganization transaction treated as a pooling of interests. Exemption from registration is claimed pursuant to Section 4(2) of the Securities Act of 1933 due to the limited number of purchasers and isolated nature of this transaction.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following Selected Consolidated Financial Data with respect to the Company's consolidated statements of income for the years ended October 27, 1996, October 29, 1995 and October 30, 1994 and, with respect to the Company's consolidated balance sheets as of October 27, 1996 and October 29, 1995, have been derived from the Company's Consolidated Financial Statements for such years which have been audited by Arthur Andersen LLP, and are included elsewhere herein. The Selected Consolidated Financial Data with respect to the Company's consolidated statements of income for the years ended October 31, 1993 and November 1, 1992, and, with respect to the Company's consolidated balance sheets as of October 30, 1994, October 31, 1993 and November 1, 1992, have been derived from the Company's Consolidated Financial Statements for such years which have been audited by Arthur Andersen LLP. The following data should be read in conjunction with the Company's Financial Statements and the Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected Consolidated Financial Data and the Consolidated Financial Statements of the Company and related notes thereto appearing elsewhere in this Form 10-K.
INTRODUCTION
The Company is organized into three service groups: Staffing Services, which provides temporary administrative, teleservices and light industrial staffing; Professional Services, which provides information technology and accounting staffing; and Outsourcing Services, which provides administrative services and teleservices through contracts in which the Company assumes responsibility for the results of a client process. The Company's customers are businesses, professional and service organizations, and government agencies in the United States and Canada.
Revenue is generally recognized upon the performance of services. Certain services are performed under long-term contracts and revenue from these contracts is recognized by the percentage-of-completion method.
A portion of the Company's revenues is attributable to franchised operations. Employees and customers of the franchised operations are employees and customers of the Company. The Company includes such revenues and related direct costs in its revenues and cost of services, respectively. The net distribution paid to franchisees is based upon a percentage of the gross profit generated and is included in the Company's selling, general and administrative expenses.
In years prior to fiscal 1996, the Company's fiscal year ended on the Sunday closest to October 31. In 1996, the fiscal year end was changed to the last Sunday in October. The fiscal year ended October 27, 1996 is referred to as "1996", the fiscal year ended October 29, 1995 is referred to as "1995" and the fiscal year ended October 30, 1994 is referred to as "1994".
RESULTS OF OPERATIONS
The following table sets forth certain statement of income items as a percentage of revenues for 1996, 1995 and 1994:
YEAR ENDED OCTOBER 27, 1996 COMPARED TO YEAR ENDED OCTOBER 29, 1995
Revenues increased 20.4%, or $171.5 million to $1,013.9 million in 1996. Staffing Services revenues grew 16.7% to $740.7 million, and accounted for 73.1% and 75.3% of total 1996 and 1995 revenues, respectively. Staffing Services volume, as measured by hours that staffing employees worked, increased 12.4% and prices rose 3.9% compared to 13.4 % and 7.0% for 1995. Staffing Services office openings, net of closings, for 1996 included 12 company-owned and 14 franchise offices. During 1996, the Company acquired two information technology companies: Analytical Technologies, Inc., and ANATEC Canada, Inc. (collectively "ANATEC") and American Technical Resources, Inc. ("ATR"). ANATEC, which specializes in information technology consulting, project management, training, and software systems integration, was purchased for cash on July 15, 1996. ATR, which provides short and long-term contract programmers, was acquired in a transaction accounted for as a pooling of interests on August 5, 1996. These two acquisitions plus the Company's existing Financial Staffing division, which provides temporary accounting and financial staffing, have been combined into the Professional Services group. The accompanying financial statements include the results of operations of ANATEC from July 15, the acquisition date. ATR was accounted for as a pooling and, accordingly, the accompanying financial statements include the results of ATR for all periods presented. Professional Services revenues were $65.1 million in 1996 compared to $34.0 million in 1995, a 91.5% increase. Professional Services offices increased by 9 to a total of 30 offices. Outsourcing Services revenues grew 19.7% to $208.1 million. Outsourcing Services revenues from customers other than IBM increased $15.3 million from 1995 to $60.3 million. Included in Outsourcing Services revenues was the recognition of $2.2 million and $4.5 million in 1996 and 1995, respectively, of deferred gain from the return in January 1995 of Company stock held by IBM. Outsourcing Services sites increased by 14 to a total of 105 sites.
Gross profit increased 17.8%, or $33.0 million, to $218.9 million in 1996. Gross margin (gross profit as a percent of revenues) decreased from 22.1% in 1995 to 21.6 % in 1996. Staffing Services gross margin decreased slightly from 22.4% in 1995 to 22.0% in 1996. During the first quarter of 1996, workers' compensation liability for the franchise division of Norrell Services was adjusted to give effect to much better than expected loss experience. The adjustment resulted in a reduction of $800,000 in cost of services which added 0.1% to the Staffing Services gross margin. Without this adjustment, gross margin declined to 21.9% in 1996. Outsourcing Services gross margin declined from 20.4% in 1995 to 18.2% in 1996 due to the renegotiation of a large contract with IBM. The renegotiation extended the contract term through December 1998. Of the 2.2 percentage point decline in Outsourcing Services gross margin, 1.8 percentage points were the result of the renegotiation. Professional Services gross margin increased from 24.6% in 1995 to 27.6% in 1996.
Operating expenses increased 13.0%, or $19.5 million. Depreciation and amortization expense increased 38.6%, or $1.6 million. The increase included $2.6 million of higher franchise commissions associated with increased franchise revenues, $15.7 million of increased personnel and personnel related costs, and $2.1 million of increased costs associated with 1996 additions to offices and sites.
Interest expense increased from $365,000 in 1995, to $1.2 million in 1996 as a result of borrowings to fund the purchase of ANATEC.
Other expense decreased from $1.6 million in 1995 to $1.5 million in 1996. Included in other expense is the Company's share of losses from its 50% ownership in a joint venture formed in October 1994 to provide administrative outsourcing for health care facilities. The losses totaled $830,000 in 1996 and $875,000 in 1995. Other expenses for 1995 also included a loss of $307,000 from the sale in October 1995 of rental real estate. The property had a net book value of $4.3 million and the Company received cash and a $3.4 million three-year, 7% note.
The effective income tax rate declined from 41.9% in 1995 to 38.5% in 1996 primarily as a result of reduced stated income taxes.
Earnings per share from continuing operations rose to $1.00 in 1996 from $.71 in 1995. The 1995 period included a discontinued loss of $.01 per share.
YEAR ENDED OCTOBER 29, 1995 COMPARED TO YEAR ENDED OCTOBER 30, 1994
Revenues increased 20.0%, or $140.4 million, to $842.4 million in 1995. Staffing Services revenues grew 21.3%, or $111.4 million, and accounted for 75.3% and 74.5% of total 1995 and 1994 revenues, respectively. Staffing Services volume increased 13.4% and prices rose 7.0% compared to 21.1% and 1.7%, respectively, for 1994. Office openings, net of closings, for 1995 included 6 company-owned offices and 12 franchise offices. In addition, 16 Outsourcing Services sites were opened, net of closings. Outsourcing Services revenues grew 10.2%, or $16.2 million, to $173.9 million. Outsourcing Services revenues from customers other than IBM increased $22.5 million from 1994 to $45.0 million. Included in 1995 Outsourcing Services was the recognition of $4.5 million of deferred gain from the return in January 1995 of Company stock held by IBM. Professional Services revenues grew 61.0% to $34.0 million. Professional Services offices increased by 19 to a total of 21 offices.
Gross profit increased 17.2%, or $27.3 million, to $185.8 million in 1995. Gross margin declined from 22.6% in 1994 to 22.1% in 1995. Staffing Services gross margin remained constant year-over-year at 22.4%. Outsourcing Services gross margin declined from 22.9% in 1994 to 20.4% in 1995. The decline resulted from the renegotiation of a contract with IBM. Professional Services gross margin increased from 23.9% in 1994 to 24.6% in 1995.
Operating expenses increased 16.2%, or $20.8 million. The increase included $5.6 million of higher franchise commissions associated with increased franchise revenues and $10.7 million of personnel and personnel related costs. Operating expenses, as a percentage of revenues declined from 18.4% in 1994 to 17.8% in 1995 as the Company experienced favorable operating leverage.
Interest expense declined from $2.0 million in 1994 to $365,000 in 1995 as a result of the repayment of debt with the proceeds from the Company's August 1994 initial public offering and the collection of sale proceeds and accounts receivable from the disposition in October 1993 of the Company's home health care operations.
Other expense increased from $408,000 in 1994 to $1.6 million in 1995. Included in the 1995 amount is a loss of $875,000 representing the Company's share of losses from its 50% ownership in a joint venture which provides administrative outsourcing for health care facilities. The joint venture was formed in October 1994 and incurred a loss of $197,000 that year. The increased loss in 1995 was due to a full year of start-up operation. Other expense for 1995 also included a loss of $307,000 from the sale in October 1995 of rental real estate. The 1994 amount included a gain of $760,000 from termination of two interest rate swaps and a loss of $288,000 from the write-off of deferred loan costs upon renegotiation of the Company's credit agreement.
The effective income tax rate declined from 42.8% in 1994 to 41.9% in 1995. As pretax income increases, the impact of nondeductible goodwill expense declines thereby reducing the effective rate. In addition, state income tax expense declined as a percentage of pretax income.
Discontinued operations resulted in a loss of $348,000, net of tax, in 1995. The Company provided for additional legal costs related to the October 1993 sale of its home health care operations.
Earnings per share from continuing operations rose to $0.71 in 1995 from $0.69 in 1994. The loss per share from discontinued operations in 1995 was $0.01 and in 1994 the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) increasing 1994 earnings per share by $0.15.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term liquidity depends primarily upon its level of net income, accounts receivable, accounts payable and accrued expenses. The nature of the Company's business requires payment of wages to its temporary personnel on a weekly basis and to its other employees on a bi-weekly basis while payments from its clients are received on average 30 to 60 days after billing. As a result of this timing difference, the Company's working capital requirements increase proportionately with its revenue increases. The Company has no binding commitments for capital expenditures during the next fiscal year but does expect 1997 capital and information systems development spending , excluding acquisitions, to range from $17 to $21 million as the Company completes the conversion of its headquarters and field information systems. See Note 11 of Notes to Consolidated Financial Statements regarding commitments under the Company's headquarters office building lease and information systems contract. The Company's primary sources of liquidity are operating cash flows and credit facilities totaling $135.0 million. See Note 6 of Notes to Consolidated Financial Statements.
Cash provided from operations in 1996 was $38.0 million compared to $7.3 million in 1995, an increase of $30.7 million. Included in the 1996 amount was $13.0 million provided by the gain from the December 1995 sale of the Company's interest in its Atlanta headquarters building that was sold by its joint venture owner. The Company had a 50% interest in the joint venture. Concurrent with the sale, the Company extended its lease for office space in the building for an additional seven years to now expire in 2007. The gain is being deferred and amortized on a straight-line basis through July 2005 since the landlord may terminate the lease as of this date, and is recorded as a reduction in rent expense. The 1995 amount included an increase of $28.9 million in trade accounts and notes receivable, compared to an increase of $20.2 million in 1996. The larger 1995 increase resulted from higher revenues and a change in payment terms of a large contract.
Investing activities used cash of $56.9 million in 1996 compared to cash used of $11.3 million in 1995. The purchase of ANATEC in July 1996 and Valley Staffing Services, Inc. in January 1996, resulted in uses of cash of $26.2 million and $6.8 million, respectively. The 1996 and 1995 amounts included additions to property and equipment of $7.4 million and $6.0 million in 1996 and 1995, respectively, and MIS development costs of $14.7 million and $4.7 million in 1996 and 1995, respectively. Increased additions to property and equipment were primarily for desk top computers required by new operations and support software. In connection with its acquisition of ANATEC, the Company is obligated to make an additional payment of approximately $10.0 million in February 1997 if ANATEC'S gross profit for the twelve month period ending December 31, 1996 exceeds a specified level. See Note 2 of Notes to Consolidated Financial Statements.
The Company's long-term liquidity is also dependent upon cash flows from operations and borrowing under its credit facilities. The Company has historically been able to obtain debt financing adequate to fund its operations. As described in Note 6 to the Notes to Consolidated Financial Statements, the Company has an unsecured revolving credit facility of $95.0 million which extends until September 30, 1999, and $40.0 million of unsecured bank lines of credit. Management believes the Company's relationships with its lenders are good and that it will be able to obtain any required financing upon maturity of its existing credit facilities. The Company has no long-term commitments other than those described in Note 11 to the Notes to Consolidated Financial Statements.
The Company believes that funds provided from operations and available borrowings under its credit facilities will be sufficient to meet its needs for working capital and capital expenditures at least through the end of the coming fiscal year.
INFLATION
The effects of inflation were not significant to the Company's operations during 1996, 1995, or 1994.
SUBSEQUENT EVENT
On December 8, 1996, the Company executed an agreement to purchase all of the outstanding common and preferred stock and all vested and unvested stock rights of Comtex Information Systems, Inc. ("Comtex") for $67.0 million of cash plus options to acquire approximately 141,000 shares of Norrell Corporation common stock at an average exercise price of $4.43 per share. The transaction, which will be accounted for under the purchase method of accounting, is scheduled to close on or about January 2, 1997. Comtex is a New York City-based provider of information systems services, including systems planning and development, organizational consulting related to business transformation and staff augmentation support. Comtex has locations in New York City, White Plains, New York, and Miami, Florida. At October 31, 1996, Comtex had net assets of $10.9 million.
SPECIAL NOTE REGARDING "FORWARD-LOOKING" INFORMATION
The foregoing section contains "forward-looking" statements which represent the Company's expectations or beliefs concerning future events, including capital spending for 1997 and the sufficiency of funds from operations and available borrowings to meet the Company's working capital and capital expenditure needs for 1997. A number of important factors could, individually or in the aggregate, cause actual results to differ materially from those forming the basis of the forward-looking statements, including changes in the Company's relationship with its largest customers and increased competition in, and changes in laws and regulations relating to, the temporary services and outsourcing industry.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 27, 1996 and October 29, 1995 (In thousands, except share amounts)
The accompanying notes are an integral part of these consolidated financial statements.
NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED OCTOBER 27, 1996, OCTOBER 29, 1995 AND OCTOBER 30, 1994 (In thousands, except per share amounts)
The accompanying notes are an integral part of these consolidated financial statements.
NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended October 27, 1996, October 29, 1995 and October 30, 1994 (In thousands, except share and per share amounts)
The accompanying notes are an integral part of these financial statements.
NORRELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended October 27, 1996, October 29, 1995 and October 30, 1994 (In thousands)
The accompanying notes are an integral part of these consolidated financial statements.
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 27, 1996, OCTOBER 29, 1995 AND OCTOBER 30, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
Basis of Presentation
The consolidated financial statements include the accounts of Norrell Corporation and its subsidiaries (the "Company"). All material intercompany accounts and transactions have been eliminated.
Business and Revenue Recognition
The Company operates in one industry segment, providing staffing and outsourcing services in the United States and parts of Canada.
Revenue is generally recognized upon the performance of services. Certain services are performed under long-term contracts. Revenue from these contracts is recognized using the percentage-of-completion method based on the percentage that incurred costs to date bear to total estimated costs after giving effect to the most recent estimates of total cost. Losses expected to be incurred on jobs in process would be charged to income as soon as such losses are known. Amounts received from customers in excess of revenues recognized to date are classified as deferred revenues and are included in current liabilities.
A portion of the Company's revenue is attributable to franchise operations. Employees and customers of franchise operations are employees and customers of the Company. The Company includes such revenues and related direct costs in its revenue and cost of services, respectively. The net distribution paid to the franchisee is based on a percentage of the gross profit generated and is included in operating expenses.
Significant Customer Information
For fiscal year 1996, two customers accounted for 27.6% of revenues. For fiscal years 1995 and 1994, one customer accounted for revenues of 16.2% and 20.0%, respectively.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.
Intangible Assets
Intangible assets consist primarily of goodwill associated with acquired businesses, which is amortized on a straight-line basis over 40 years. Subsequent to an acquisition, the Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of goodwill may warrant revision or may not be recoverable. When factors indicate that goodwill should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted net cash flows of the related business over the remaining life of the goodwill in measuring whether the goodwill is recoverable. Other intangible assets are amortized over two to seven years. Amortization expense for fiscal years 1996, 1995 and 1994 was $1,015,000, $641,000, and $1,486,000, respectively. Accumulated amortization of intangibles was $7,853,000 and $ 6,944,000 at October 27, 1996 and October 29, 1995, respectively.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Management Information Systems ("MIS") Development Costs
During fiscal 1996 and 1995, the Company incurred costs associated with the purchase and development of management information systems. These costs are capitalized and amortized on a straight-line basis over five years. MIS development cost amortization for 1996 and 1995 was $719,000 and $70,000, respectively.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of no par preferred stock. The Board of Directors is authorized to fix relative rights, preferences, and limitations of any unissued series of preferred stock. No preferred stock was issued or outstanding at October 27, 1996 or October 29, 1995.
Other Income (Expense)
Other income (expense) consists of the following:
Earnings (Loss) Per Share
Earnings (loss) per share is computed by dividing income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding during each period adjusted to reflect the assumed exercise of dilutive stock options under the treasury stock method.
Stock Split
On June 4, 1996, the Board of Directors authorized a two-for-one split of common stock for shareholders of record on June 24, 1996. The stated value remained at $.01 per share. All references in the accompanying financial statements to the number of common shares, except shares authorized, and to per-share amounts have been restated to reflect the stock split. The stated value of the additional shares of common stock issued in connection with the stock split has been credited to common stock with the like amount charged to retained earnings.
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Reclassifications
Certain amounts have been reclassified in the 1995 and 1994 financial statements to conform to the 1996 presentation.
Fiscal Year
Prior to 1996, the Company's fiscal year was a 52 or 53 week period which ended on the Sunday closest to October 31. In 1996, the fiscal year end was changed to the last Sunday in October. Each of the fiscal years ended October 27, 1996, October 29, 1995 and October 30, 1994 included 52 weeks.
2. ACQUISITIONS
Effective July 15, 1996, the Company acquired all of the assets and certain of the liabilities of Analytical Technologies, Inc. and ANATEC Canada, Inc. (collectively, "ANATEC"). ANATEC is a software services and technology organization serving primarily Fortune 500 companies in the Midwestern United States. Services include consulting, project management, software development, training and software systems integration services. The $25,905,000 excess of the acquisition cost over the fair value of ANATEC's tangible assets has been allocated to goodwill and is being amortized over 40 years. In addition to the $27,100,000 paid at closing, ANATEC has the right to receive a contingent payment based on its achieving a specified level of gross profit for the 12-month period ending December 31, 1996. At June 30, 1996, ANATEC had net assets of $1,469,000.
On August 5, 1996, the Company acquired all of the issued and outstanding stock of American Technical Resources Inc. ("ATR") in exchange for 1,000,000 shares of company common stock in a transaction accounted for as a pooling of interests. ATR is an information technology staffing company that specializes in providing computer professionals for short and long term assignments including contract programming, contract recruiting and payrolling services. At July 31, 1996, ATR had net assets of $3,224,000. The Company's financial statements have been restated to include the results of ATR for all periods presented.
3. DISCONTINUED OPERATIONS
On October 29, 1993, the Company sold substantially all assets of its comprehensive home care and nursing resource management operations to Hooper Holmes, Inc., a New York corporation. In the third quarter of 1995, a loss on disposal of $348,000, net of tax, was provided for legal expenses and expenses associated with the wind down of these operations.
4. PROPERTY AND EQUIPMENT, INVESTMENTS AND NON-OPERATING ASSETS
Property and Equipment
The major classes of property and equipment are as follows:
Property and equipment are stated at cost. Depreciation is provided on a straight-line basis over the estimated asset lives of three to twelve years for leasehold improvements and three to ten years for furniture, fixtures and equipment.
Depreciation expense for fiscal years 1996, 1995 and 1994 was $4,273,000, $3,413,000 and $2,893,000, respectively.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Investments and Other Assets
Investments consist principally of securities held for employee benefit plans and are carried at market.
On October 29, 1995, the Company sold for $4,250,000 all land and buildings which had been held as rental property. Proceeds from the sale included a $3,425,000 note receivable. The note bears interest at 7% and is due in October 1998. The sale resulted in a pretax loss of $307,000.
In October 1994, the Company acquired a 50% equity interest in a joint venture formed for the purpose of providing administrative outsourcing services for health care facilities. During fiscal years 1996, 1995 and 1994, the Company contributed $1,059,000, $908,000 and $167,000, respectively, for general operating purposes in accordance with the joint venture agreement.
In 1994, the Company recovered $5,000,000 of principal and $444,000 of dividends from an investment in preferred stock which had been written off in 1991.
5. ACCRUED EXPENSES
Current and long-term accrued expenses are summarized as follows:
The Company self-insures up to specified limits for certain risks related to workers' compensation liability. The estimated costs of existing and future claims under the insurance program are accrued as incidents occur based on historical loss development trends which may be subsequently revised based on developments relating to such claims.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. NOTES PAYABLE AND LONG-TERM DEBT
The Company's debt is summarized as follows:
At October 27, 1996, the Company had a $95,000,000 revolving credit facility expiring September 30, 1999 with a group of commercial banks. Borrowings are unsecured and bear interest at LIBOR, plus an applicable margin. The revolving credit facility contains negative and affirmative covenants which (a) limit additional indebtedness, liens, investments, payment of dividends and disposition of assets and (b) require maintenance of certain financial ratios. In addition, four commercial banks make available unsecured lines of credit that total $40,000,000. Maturities and interest rates on borrowings under these lines are negotiated at the time such borrowings occur. The Company's policy is to classify borrowings under the revolving credit facility as long-term debt since the Company has the ability under the credit agreement, and the intent, to maintain the obligation for longer than one year.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following is a summary of data concerning total debt (Dollars in thousands):
Future maturities of long-term debt as of October 27, 1996 are as follows:
Year Amount ---- ------ (In thousands)
Fiscal 1998 $ 182 Fiscal 1999 23,134 ------- Total $23,316 =======
7. DEFERRED REVENUE AND GAIN
On December 11, 1995, the Company's headquarters building was sold by the joint venture which owned it. The Company had a 50% interest in this joint venture which was formed in 1986 to construct, finance, own and operate a 300,000-square-foot office building in Atlanta, Georgia. The cost of the building was approximately $26,000,000. Each partner contributed $3,000,000 (the other partner also contributed the land for the project), and the balance was financed with a 9.75% nonrecourse 20-year mortgage loan. The investment was accounted for by the equity method. Because of cash distributions, the Company had a negative investment balance of $1,584,000 at October 29, 1995. The Company's share of the pretax gain from the sale was $14,251,000. Concurrent with the sale, the Company extended its lease for office space in the building for an additional seven years. The gain has been deferred and is being amortized on a straight-line basis through July 2005 since the landlord may terminate the lease as of this date, and is recorded as a reduction in rent expense. At October 27, 1996, the deferred gain was $12,967,000 of which $11,471,000 was classified as long-term and $1,496,000 was classified as a current liability in the accompanying balance sheets.
Included in deferred revenue in the accompanying balance sheets was $4,121,000 and $6,298,000 at October 27, 1996 and October 29, 1995, respectively, resulting from redemption of 580,947 shares of the Company's common stock. On December 1, 1994, the stock was returned by a major customer as partial consideration for the Company agreeing to renegotiate that customer's contract for services. The difference between the fair market value of the stock at the redemption date and the unamortized cost of the prior service contract (approximately $11,000,000) was deferred and is being amortized into income through December 1998, the term of the new service contract.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. STOCK OPTION AND PURCHASE PLANS
The Company has a stock incentive plan for the grant of equity-based incentives in the form of nonqualified stock options, incentive stock options, shares of restricted stock, unrestricted bonus stock, performance units, phantom stock, stock appreciation rights and dividend equivalent rights. There are 3,111,113 shares of common stock reserved for issuance under the plan. Incentive stock options are granted at not less than fair value and expire five to ten years after the date of grant. Nonqualified options are granted at prices determined by the Board of Directors and expire five to ten years after the date of grant. The exercise period for all options is fixed by the Board. No shares of restricted stock, unrestricted bonus stock, performance units, phantom stock, stock appreciation rights or dividend equivalent rights have been issued. Nonqualified stock options to purchase common stock have been granted to certain directors.
A summary of stock option activity follows:
At October 27, 1996, options to purchase 1,517,514 shares were exercisable and 93,753 shares were reserved and available for future options.
On January 1, 1996, the Company instituted an employee stock purchase plan for all employees. Employees may contribute up to 15% of their compensation to purchase the Company's common stock at 85% of the lower of the fair market value on the first or last business day of quarterly purchase periods. The Company has reserved 600,000 shares of common stock for the plan. At October 27, 1996, 570,366 shares were available for future issuance.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. BENEFIT PLANS
The Company has a tax qualified 401(k) profit sharing plan which covers substantially all nonhighly compensated employees, as defined under the Internal Revenue Code, other than temporary employees. The plan provides for a matching company contribution of an amount up to 1% of employee compensation. In addition, the Company may make discretionary contributions to the plan. Company contributions are 100% vested after two years of service (three years in the case of employees hired on or after January 1, 1994).
The Company has an unfunded, nonqualified plan for those highly compensated employees not covered by the qualified plan. Under this plan, the Company may match participant contributions up to a percentage of participant compensation determined by the Company. In addition, the Company may make discretionary contributions to the plan. Participants are immediately 100% vested in their contributions and are 100% vested in the Company's contribution after three years of service. Participant contributions may be used to purchase rights to buy company stock or may be invested in funds established by the plan administrator. Company contributions are used to purchase rights to buy company stock. Rights are purchased for the fair value of the underlying stock at the time of grant, less the exercise price of $0.15 per share. Rights may not be exercised until the date the participant terminates employment. At October 27, 1996, 383,529 rights ranging in price from $3.05 to $31.25 per share were outstanding and 91,056 were available for grant.
Effective in June 1994, the Company instituted a management equity program under which members of senior management who are designated as participants in the plan may purchase, at fair market value, shares of common stock, and for those participants who meet certain minimum stock ownership thresholds, stock options will be granted as set forth in the plan. There are 400,000 shares of common stock reserved for issuance under this plan. At October 27, 1996, 106,932 shares had been issued. The remaining reserve totaled 293,068 shares. Any stock options granted under this plan will be issued under the Company's stock incentive plan. At October 27, 1996, the balance of notes receivable from plan participants for stock purchases was $111,000.
Certain highly compensated employees may also qualify for an unfunded, nonqualified salary continuation plan. The plan provides for a benefit upon reaching age 62 and ending at age 76 equal to 20% of average annual compensation as defined in the plan. Vesting occurs over ten years (starts in year six at 20% and reaches 100% in year ten).
Total expense related to the above described benefit plans for the years ended 1996, 1995 and 1994 was $3,164,000, $2,408,000 and $1,646,000, respectively.
10. INCOME TAXES
Effective November 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method as required by Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting SFAS 109 as of November 1, 1993 was to increase net income by $3,414,000.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The provision (benefit) for federal, foreign and state income taxes consists of the following:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Subsequent to the preparation of the financial statements as of October 31, 1993, the Company, based on the advice of tax counsel, determined that the 1993 tax loss on disposal of a subsidiary should be reported as an ordinary loss in the 1993 tax return which was filed in July 1994. This resulted in claims for federal and state refunds of approximately $6,900,000, all of which had been collected and credited to goodwill as of October 29, 1995.
The reconciliation of income tax attributable to continuing operations computed at the U.S. statutory tax rate to income tax expense is:
11. COMMITMENTS AND CONTINGENCIES
At October 27, 1996, the Company was committed under operating leases for office facilities and certain equipment. Aggregate minimum rental requirements under these leases are as follows:
Rent expense was $8,409,000, $8,441,000 and $7,863,000 for fiscal years 1996, 1995 and 1994, respectively.
Effective April 1, 1993, the Company entered into a ten year contract for the purchase of information systems operations services at an annual base cost ranging from $3,000,000 to $5,000,000.
The Company is, from time to time, a party to ordinary, routine litigation incidental to the Company's business. In the opinion of management, the ultimate resolution of all pending legal proceedings will not have an adverse effect on the Company's business or financial condition.
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
12. SELECTED QUARTERLY INFORMATION (UNAUDITED)
Fiscal 1996 Quarter Ended ------------------------- (In thousands, except per share amounts)
Fiscal 1995 Quarter Ended ------------------------- (In thousands, except per share amounts)
NORRELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
13. SUBSEQUENT EVENT
On December 8, 1996, the Company executed an agreement to purchase all of the outstanding common and preferred stock and all vested and unvested stock rights of Comtex Information Systems, Inc. ("Comtex") for $67 million of cash plus options to acquire approximately 141,000 shares of Norrell Corporation common stock at an average exercise price of $4.43 per share. The transaction, which will be accounted for under the purchase method of accounting, is scheduled to close on or about January 2, 1997. Comtex is a New York City-based provider of information systems services, including systems planning and development, organizational consulting related to business transformation and staff augmentation support. Comtex has locations in New York City, White Plains, New York, and Miami, Florida. At October 31, 1996, Comtex had net assets of $10,921,000.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders of Norrell Corporation:
We have audited the accompanying consolidated balance sheets of Norrell Corporation (a Georgia corporation) and subsidiaries as of October 27, 1996 and October 29, 1995 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended October 27, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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, the financial statements referred to above present fairly, in all material respects, the financial position of Norrell Corporation and subsidiaries as of October 27, 1996 and October 29, 1995 and the results of their operations and their cash flows for each three years in the period ended October 27, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia December 10, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
We have audited in accordance with generally accepted auditing standards, the financial statements of Norrell Corporation included in the Form 10-K and have been issued our report thereon dated December 10, 1996. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The schedule listed in the preceding index is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia December 10, 1996
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information regarding Executive Officers of the Company is contained in Item 4A of Part I. Information as to Directors required by this item is incorporated by reference from the Company's definitive Proxy Statement, under the caption "Proposal 1. Election of Directors", which Proxy Statement will be mailed to stockholders in connection with the Company's annual meeting of stockholders, which is scheduled to be held March 4, 1997 and will be filed with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
Information as to Executive Compensation required by this item is incorporated by reference from the Company's definitive Proxy Statement, under the caption "Executive Compensation" which Proxy Statement will be mailed to stockholders in connection with the Company's annual meeting of stockholders, which is scheduled to be held March 4, 1997 and will be filed with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information as to Security Ownership of Certain Beneficial Owners and Management required by this item is incorporated by reference from the Company's definitive Proxy Statement, under the caption "Voting Rights and Principal Shareholders", which Proxy Statement will be mailed to stockholders in connection with the Company's annual meeting of stockholders, which is scheduled to be held March 4, 1997 and will be filed with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information as to Certain Relationships and Related Transactions required by this item is incorporated by reference from the Company's definitive Proxy Statement, under the caption "Certain Transactions and Relationships", which Proxy Statement will be mailed to stockholders in connection with the Company's annual meeting of stockholders, which is scheduled to be held March 4, 1997 and will be filed with the Securities and Exchange Commission pursuant to Regulation 14A.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS.
1. FINANCIAL STATEMENTS.
The following consolidated financial statements of the Company and it subsidiaries are included in Item 8 of this report:
2. FINANCIAL STATEMENT SCHEDULES.
The following financial statement schedule of the Company is included herein:
Schedules not listed above have been omitted because they are not applicable, or the required information is included in the financial statements or notes thereto.
3. EXHIBITS.
The Exhibits filed as a part of this Form 10-K are listed in Item 14(c) of this report, which listing is incorporated herein by reference.
(B) REPORTS ON FORM 8-K.
During the last quarter of the period covered by this report on Form 10-K, the Company filed the following Current Reports on Form 8-K:
(1) Current Report on Form 8-K filed August 6, 1996 providing information under Items 2 and 7 relating to the acquisition of Analytical Technologies, Inc. and ANATEC Canada, Inc.
(2) Amendment Number One on Form 8-K/A filed October 2, 1996 to Current Report on Form 8-K providing information under Items 2 and 7 relating to the acquisition of Analytical Technologies, Inc. and ANATEC Canada, Inc., and including the following financial statements:
(a) Financial statements of Analytical Technologies, Inc. as of December 31, 1995 and 1994, (audited).
(b) Financial statements of ANATEC CANADA, Inc. as of December 31, 1995, (audited).
(c) Balance sheet of Analytical Technologies, Inc. as of June, 30, 1996, (unaudited).
(d) Statements of operations and statements of cash flows of Analytical Technologies, Inc. as of June 30, 1996 and June 30, 1995, (unaudited).
(e) Balance sheet of ANATEC CANADA, Inc. as of June 30, 1996, (unaudited).
(f) Statements of operations and statements of cash flows of ANATEC CANADA, Inc. as of June 30, 1996 and June 30, 1995, (unaudited).
(g) Norrell Corporation pro forma condensed consolidated statement of income for the year ended October 29, 1995, (unaudited).
(h) Norrell Corporation pro forma condensed consolidated statement of income for the nine month period ended July 28, 1996, (unaudited).
(3) Current Report on Form 8-K filed August 20, 1996 providing information under Items 2 and 7 relating to the acquisition of American Technical Resources, Inc.
(4) Amendment Number One on Form 8-K/A filed October 15, 1996 to Current Report on Form 8-K, providing information under Items 2 and 7 relating to the acquisition of American Technical Resources, Inc. and including the following financial statements:
(a) Financial statements of American Technical Resources, Inc. as of July 30, 1996, (unaudited) and October 31, 1995, (audited).
(b) Norrell Corporation pro forma combined balance sheet as of July 28, 1996, (unaudited).
(c) Norrell Corporation pro forma combined statement of income for the nine month period ended July 28, 1996, (unaudited).
(d) Norrell Corporation pro forma combined statements of income for the years ended October 29, 1995, October 30, 1994 and October 31, 1993, (unaudited).
3. EXHIBITS.
* A management contract or compensatory plan, contract or arrangement
* A management contract or compensatory plan, contract or arrangement
* A management contract or compensatory plan, contract or arrangement
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NORRELL CORPORATION The Company
By /s/ C. DOUGLAS MILLER ----------------------------------------------- C. Douglas Miller Chief Executive Officer and President
Date: January 16, 1997
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 Company and in the capacities and on the dates indicated.
By: /s/ C. DOUGLAS MILLER ----------------------------------------------- C. Douglas Miller Director, Chief Executive Officer and President (Principal Executive Officer)
Date: January 16, 1997 -----------------------------------------------
By: /s/ C. KENT GARNER ----------------------------------------------- C. Kent Garner Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date: January 16, 1997 -----------------------------------------------
By: ----------------------------------------------- Guy W. Millner Chairman of the Board
Date: -----------------------------------------------
By: /s/ THOMAS A. VADNAIS ----------------------------------------------- Thomas A. Vadnais Director, President and Chief Operating Officer, Tascor
Date: January 16, 1997 -----------------------------------------------
By: /s/ LARRY J. BRYAN ------------------------------------- Larry J. Bryan Director and Executive Vice President
Date: January 16, 1997 -------------------------------------
By: /s/ CARL E. SANDERS ------------------------------------- Carl E. Sanders Director
Date: January 16, 1997 -------------------------------------
By: /s/ LUCIUS E. BURCH, III ------------------------------------- Lucius E. Burch, III Director
Date: January 16, 1997 -------------------------------------
By: /s/ DONALD A. MC MAHON ------------------------------------- Donald A. McMahon Director
Date: January 16, 1997 -------------------------------------
By: /s/ NANCY CLARK REYNOLDS ------------------------------------- Nancy Clark Reynolds Director
Date: January 16, 1997 -------------------------------------
By: /s/ FRANK A. METZ, JR. ------------------------------------- Frank A. Metz, Jr. Director
Date: January 16, 1997 -------------------------------------
By: /s/ KAAREN JOHNSON-STREET ------------------------------------- Kaaren Johnson-Street Director
Date: January 16, 1997 -------------------------------------
SCHEDULE II
NORRELL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED OCTOBER 30, 1994, OCTOBER 29, 1995 AND OCTOBER 27, 1996