COMFORCE Corporation History

Address:

415 Crossways Park Drive
Woodbury, New York 11797
U.S.A.

Telephone: (516) 437-3300
Toll Free: 888-275-4273
Fax: (516) 396-9528

Public Company
Incorporated: 1939 as American Photocopy Equipment Co.
Employees: 650
Sales: $480.33 million (2000)
Stock Exchanges: American
Ticker Symbol: CFS
NAIC: 56131 Employment Placement Agencies; 56132 Temporary Help Agencies

Company Perspectives:

At COMFORCE, our mission is to improve our clients' profits while providing our people with unique and rewarding employment opportunities. Key Dates:

Key Dates:

1939:: American Photocopy Equipment Co. (Apeco), COMFORCE's predecessor, is founded.
1957:: Company goes public.
1976:: Apeco files for Chapter 11 bankruptcy protection.
1985:: Apeco is renamed Lori Corp. after entering the costume jewelry business.
1995:: Lori enters the employment agency business and renames itself COMFORCE.
1997:: COMFORCE acquires Uniforce Services Inc., a larger employment agency firm.
1998:: Uniforce's founder, John Fanning, purchases COMFORCE.

Company History:

COMFORCE Corporation is a leading provider of specialty staffing, consulting, and outsourcing solutions focused on the needs of the largest companies in the growing information technology, telecommunications, professional, technical, and financial market sectors. By maintaining a large global database of permanent, contracting, and consulting employees, COMFORCE brings clients together with qualified people around the world. Its labor force consists mainly of computer programmers, systems consultants, telecommunications engineers, analysts, engineers, technicians, scientists, researchers, and skilled office support personnel. The company's predecessors had eventful histories in a variety of business endeavors.

Apeco: 1939-85

American Photocopy Equipment Co. was founded in Chicago in 1939. The small duplicating concern was on the verge of bankruptcy in 1944, when Samuel G. Rautbord, its part-time legal counsel, scraped up $85,000--mostly from relatives and friends&mdashø buy out one of the partners. He bought out the remaining partner in 1945 for $120,000--also mostly borrowed--and put the company, whose name was commonly contracted to Apeco, back on track by cutting costs. Annual revenue rose to $2 million, even though Apeco's wet photocopying process was awkward to use. In 1953 the company introduced an improved model based on a principle similar to the one used by the Polaroid Land camera. It was immediately successful. Apeco, which made its initial public offering in 1957, became a glamour technology stock of its time. The price of the shares soared tenfold before a 1960 stock split. Revenues reached $35 million and net income amounted to $4.9 million in fiscal 1961. Born into poverty, Rautbord now had a nine-room apartment overlooking Lake Michigan, a chauffeur-driven Rolls Royce convertible, and a Florida-based 80-foot yacht with a crew of four.

Ironically, Apeco's glory days began to fade around the same time, when Xerox Corporation revolutionized the photocopy industry with its dry-process, plain-paper 914 model. Apeco introduced its own dry-process machine, but the complex model suffered from technical problems, and coated-paper copiers were losing ground to plain-paper ones. Apeco fell into the red in fiscal 1966 and began to diversify, first by purchasing a manufacturer of graphic arts supplies, then by acquiring companies in totally different fields. During 1968-69 it acquired a recreational vehicle division that included firms building boats, travel trailers, and truck campers, and a mobile home division that grew to encompass four factories. Net income reached a record $6.1 million in fiscal 1971 and net sales were a record $133.7 million in fiscal 1972. That year the company also purchased Cascade Data, Inc., a manufacturer of data processing systems and computer software.

Apeco lost nearly $6 million in fiscal 1973 and got out of the computer business. The Arab oil embargo and consequent sharp rise in gasoline prices devastated the recreational vehicle industry, while higher interest rates damaged the mobile home industry. As Apeco's losses mounted, the company sold its marine division (1975) and graphic arts division (1977). After losing nearly $22 million in fiscal 1976, the company filed for chapter 11 bankruptcy protection, shed six European subsidiaries, and phased out production of photocopiers. (An Italian subsidiary continued making them until 1981.) Apeco emerged from bankruptcy in 1980 but continued to lose money every year except fiscal 1982. It liquidated its photocopy sales and distribution activities in 1983.

Lori and COMFORCE: 1985-97

In 1982 Peter and John Harvey, Chicago-based brothers, purchased a controlling interest in Apeco through a subsidiary of Artra Group Inc., a Harvey-controlled enterprise that specialized in buying troubled companies for their tax losses and then merging them with profitable ventures. Two years later Apeco purchased R.N. Koch, Inc., a company based in Providence, Rhode Island, that designed, distributed, and sold low-cost costume jewelry, for about $29 million. The following year Apeco sold its mobile home business and renamed itself Lori Corp. The company acquired three more costume jewelry businesses during 1985-86 at a combined cost of $20 million. Sales reached a peak of $128 million in 1987, but the company lost almost $2 million. The following year it lost more than $7 million on only $92 million in sales. Losses continued to mount, while sales volume dropped. R.N. Koch--renamed New Dimensions Accessories Ltd.--fell into chapter 11 bankruptcy in 1992. It emerged from bankruptcy the following year but ceased operations in 1994, when Lori eliminated most of its $22.7 million bank debt by issuing quantities of its own stock and that of Artra to its creditors.

In 1995 Lori exited the costume jewelry field and entered a new line of business by purchasing an employment agency, Spectrum Global Services, Inc., a subsidiary of Spectrum Information Technologies, Inc., for about $6.4 million in cash and stock. Founded in 1987 and acquired by Spectrum Information in 1993 as YIELD TechniGlobal, this firm was providing telecommunications and computer specialists and expertise to Fortune 1000 international companies on a temporary, contractual basis. Annual revenue was about $9 million, and the company was operating slightly in the red. Now controlled by the acquired firm's cofounders, who purchased a 26 percent stake from Artra for about $10 million, and based in Lake Success, Long Island, Lori changed its name to COMFORCE and renamed Spectrum Global COMFORCE Global. COMFORCE Global continued providing technical staffing services to the telecommunications sector as COMFORCE Telecom Inc.

COMFORCE acquired a number of firms in 1996, including Williams Communication Services, Inc.; Project Staffing Support Team, Inc.; RRA, Inc.; Datatech Technical Services, Inc.; Force Five; AZATAR Computer Systems, Inc.; and Continental Field Services Corp., plus its affiliate, Progressive Telecom, Inc. That year it had 33 offices, $55.9 million in sales, and a profit of $1.4 million. In early 1997 COMFORCE purchased RHO Co. Inc. Later in the year it acquired Uniforce Services Inc.--a company more than twice as big as its purchaser--for $106 million, also assuming Uniforce's debt of $35 million.

Uniforce: 1966-97

Reared in Manhattan's tough Hell's Kitchen area, John Fanning opened his first employment agency in 1954 with $6,000 saved, in part from a newspaper delivery route. He sold this company to his employees in 1967 but also had, with two others, formed a temporary agency in 1961 that later became Uniforce Temporary Personnel Services, Inc. Fanning began franchising local Uniforce offices in 1974 or 1975 and had his first dozen franchisees about two years later. Uniforce had net income of only $18,000 on sales of $16.39 million in 1982 (compared with $10.5 million in 1979), but in 1984, the year the company made its initial public offering, it had 30 offices and earned $1.09 million on revenues of $43.45 million. Armed with $4 million collected by selling stock, Fanning promptly acquired ten companies. The next year the number of offices reached 55, mostly in California, Florida, and Texas. By 1990 there were 110 franchised offices nationwide--mostly in towns and small cities of 10,000 to 50,000 people. Revenues reached $110.44 million, on which Uniforce earned $3.88 million. Headquarters were in New Hyde Park, Long Island.

Uniforce collected gross revenues and took a 45 percent royalty--the industry standard--before forwarding the remainder to its franchisees. In return it managed all of the licensee's internal operations, including payroll, personnel training, accounting, and insurance, paid for advertising, and often invested capital as well. By paying the salaries of the temporary personnel directly, Uniforce eliminated the cash-flow problem franchisees faced by having to wait four to six weeks to receive payment from clients.

Uniforce's stock was selling for about five times the initial offering price in 1989, but business slumped during the 1990-91 recession, so much so that the company had to take back some of its own franchises and was waiving its $15,000 initial franchise fee for prospective licensees. Although Uniforce remained modestly profitable, revenues slumped to $82.93 million in 1992. By early 1993 only 64 offices remained, and Fanning adopted a strategy of converting the remaining franchised operations to company-owned ones. By the end of 1994 Uniforce's company-owned units outnumbered the franchised ones. A number of the Uniforce units were specialized ones operated by subsidiaries such as LabForce of America, PrO Unlimited, and Uniforce Information Services. 'Temporary' was dropped from the parent company's name in 1995. The change in strategy was successful and, after several years of increased earnings, Uniforce's net income, in 1996, surpassed the 1989 peak.

COMFORCE Plus Uniforce: 1998-2000

Uniforce Services Inc.'s sales came to $142 million and profit amounted to $3.7 million in 1996. After its purchase by COMFORCE, it became a subsidiary, with Fanning--who said the sale was for him mostly a matter of estate planning--still in charge as chief executive. Acquisitions enabled COMFORCE to raise its revenues to $216.52 million in 1997, but it incurred a net loss of $3.7 million. In September 1998--less than a year after the sale--Fanning bought out COMFORCE's founders and took the titles of chairman and chief executive of the firm. COMFORCE subsequently moved its headquarters to Woodbury, Long Island.

In 1998 COMFORCE acquired Camelot Consulting Group Inc., Camelot Communications Group Inc., Camelot Control Group Inc., and Camelot Group Inc. With these and the Uniforce acquisition, COMFORCE more than doubled its revenues, to $459.02 million, that year. Despite sharply higher interest expenses of $21.49 million, it earned a small net profit of $825,000. Revenues fell to $436.22 million in 1999, and the company incurred a net loss of $2.04 million. In 2000 COMFORCE made one more acquisition, Gerri C. Inc., a New York City-based provider of staffing, permanent placement, and training services. Revenues grew significantly, to $480.33 million. The company lost $397,000 before taking an extraordinary gain of $2.78 million because of early debt extinguishment. The total debt at the end of the year was $197.42 million.

COMFORCE had 62 offices--48 company-owned and 14 licensed branch offices in 19 states--at the end of 2000. The Staff Augmentation segment was providing information technology, telecom, and other staffing services. The Human Capital Management Services segment was providing contingent workforce management services through the PrO Unlimited subsidiary. The Financial Services segment was providing payroll, funding, and back-office support services to approximately 130 independent consulting and staffing companies. In 1999, the first two segments provided 74 percent of revenues and 67 percent of operating profits, while the latter accounted for the remainder.

The Staff Augmentation segment was providing highly skilled programmers, help-desk personnel, systems consultants and analysts, software engineers, and project managers for a wide range of technical assignments in information technology. It also was providing skilled telecom personnel to plan, design, engineer, install, and maintain wireless and wireline telecommunication systems. In addition, it was providing a broad range of other staffing services, including laboratory support (through the Labforce division), medical office support, and professional, scientific, clerical, and call-center staffing. Human Capital Management Services was a market leader in providing end-to-end web-enabled solutions for the effective procurement, tracking, and engagement of contingent or non-employee labor, primarily to Fortune 500 customers.

Fanning family members owned 31 percent of Comforce's stock in 2000; Artra retained a 9 percent stake. The company's clients included Sun Microsystems, Bellsouth Telecommunications, Boeing, and Microsoft. COMFORCE's four largest customers accounted for about 28 percent of company revenues in 2000.

Principal Subsidiaries: COMFORCE Information Technologies, Inc.; COMFORCE Operating, Inc.; COMFORCE Technical Administrative Services, Inc.; COMFORCE Technical Services, Inc.; COMFORCE Telecom, Inc.; Labforce of America, Inc.; PrO Unlimited, Inc.; Uniforce Payrolling Services, Inc.; Uniforce Services, Inc.; Uniforce Staffing Services, Inc.; UTS of Delaware, Inc.

Principal Divisions: Financial Services; Human Capital Management; Staff Augmentation.

Principal Competitors: Butler International; CDI Corporation; Modis Professional Services.

COMFORCE Corporation History

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