<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-20540
ON ASSIGNMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4023433
(State of Incorporation) (IRS Employer Identification No.)
26651 WEST AGOURA ROAD
CALABASAS, CA 91302
(Address of principal executive offices)
(Zip Code)
(818) 878-7900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At October 20, 1997, the total number of outstanding shares of the Company's
Common Stock ($0.01 par value) was 10,674,236.
Page 1 of 18 pages
Exhibit index on page 17
<PAGE> 2
ON ASSIGNMENT, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Consolidated Financial Statements
<S> <C> <C> <C>
Consolidated Balance Sheets at September 30, 1997
and December 31, 1996 (Unaudited) 3
Consolidated Statements of Income for the three months
ended September 30, 1997 and September 30, 1996 (Unaudited) 4
Consolidated Statements of Income for the nine months
ended September 30, 1997 and September 30, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and September 30, 1996
(Unaudited) 6, 7
Notes to Consolidated Financial Statements (Unaudited) 8, 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10, 11, 12, 13, 14
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security-Holders 15
Item 5 - Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
Index to Exhibits 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $16,440,000 $11,102,000
Marketable securities, current 5,900,000 3,000,000
Account receivable, net (Note 5) 15,246,000 12,264,000
Advances and deposits 71,000 72,000
Prepaid expenses 586,000 681,000
Deferred income taxes 1,082,000 968,000
------------ ------------
Total current assets 39,325,000 28,087,000
------------ ------------
Office Furniture, Equipment and
Leasehold Improvements, net (Note 6) 2,764,000 2,294,000
Workers' compensation deposits 527,000 743,000
Goodwill, net (Note 7) 546,000 581,000
Other assets 168,000 169,000
------------ ------------
TOTAL ASSETS $43,330,000 $31,874,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued payroll $4,630,000 $2,397,000
Accounts payable 810,000 488,000
Accrued expenses 1,730,000 1,348,000
Income taxes payable 230,000 6,000
------------ ------------
Total current liabilities 7,400,000 4,239,000
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock (Note 8) 0 0
Common stock (Note 9) 107,000 103,000
Paid-in capital (Note 9) 11,302,000 8,726,000
Retained earnings 24,522,000 18,806,000
Cumulative foreign currency translation adjustment (Note 10) (1,000) 0
------------ ------------
Total stockholders' equity 35,930,000 27,635,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $43,330,000 $31,874,000
============ ============
</TABLE>
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUES $28,854,000 $23,303,000
COST OF SERVICES 20,176,000 16,244,000
----------- -----------
GROSS PROFIT 8,678,000 7,059,000
OPERATING EXPENSES 5,449,000 4,554,000
----------- -----------
OPERATING INCOME 3,229,000 2,505,000
INTEREST INCOME, NET 227,000 130,000
----------- -----------
INCOME BEFORE INCOME TAXES 3,456,000 2,635,000
PROVISION FOR INCOME TAXES 1,293,000 1,062,000
----------- -----------
NET INCOME $2,163,000 $1,573,000
=========== ===========
PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE (Notes 9 and 11) $0.20 $0.14
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING (Note 9) 11,092,000 10,898,000
=========== ===========
</TABLE>
4
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUES $78,834,000 $63,643,000
COST OF SERVICES 55,058,000 44,292,000
----------- -----------
GROSS PROFIT 23,776,000 19,351,000
OPERATING EXPENSES 15,200,000 12,956,000
----------- -----------
OPERATING INCOME 8,576,000 6,395,000
ACQUISITION COSTS (Note 3) 0 401,000
----------- -----------
INCOME BEFORE INTEREST AND INCOME TAXES 8,576,000 5,994,000
INTEREST INCOME, NET 585,000 370,000
----------- -----------
INCOME BEFORE INCOME TAXES 9,161,000 6,364,000
PROVISION FOR INCOME TAXES 3,445,000 2,563,000
----------- -----------
NET INCOME $5,716,000 $3,801,000
=========== ===========
PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE (Notes 9 and 11) $0.52 $0.35
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING (Note 9) 10,975,000 10,890,000
=========== ===========
</TABLE>
5
<PAGE> 6
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,716,000 $3,801,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 598,000 499,000
Increase in allowance for doubtful accounts 285,000 63,000
Increase in deferred income taxes (114,000) (273,000)
Loss on disposal of furniture and equipment 42,000 0
Increase in accounts receivable (3,267,000) (1,788,000)
Increase in accounts payable and accrued expenses 2,937,000 1,492,000
Increase in income taxes payable 724,000 392,000
Decrease in workers' compensation deposits 216,000 100,000
Decrease in prepaid expenses 95,000 177,000
Increase in other assets (11,000) (5,000)
------------ ------------
Net cash provided by operating activities 7,221,000 4,458,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (6,450,000) (1,000,000)
Proceeds from the maturity of marketable securities 3,550,000 1,575,000
Acquisition of office furniture, equipment and
leasehold improvements (1,070,000) (987,000)
Proceeds from sale of furniture and equipment 7,000 0
Decrease (increase) in advances and deposits 1,000 (46,000)
------------ ------------
Net cash used for investing activities (3,962,000) (458,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 1,908,000 939,000
Proceeds from issuance of common stock -
Employee Stock Purchase Plan 172,000 149,000
Borrowings on line of credit 0 450,000
Repayments of line of credit borrowings 0 (925,000)
------------ ------------
Net cash provided by financing activities 2,080,000 613,000
------------ ------------
Effect of exchange rate changes on cash and cash equivalents (Note 10) (1,000) 0
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,338,000 4,613,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,102,000 3,327,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $16,440,000 $7,940,000
============ ============
</TABLE>
6
<PAGE> 7
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash paid during the period for income taxes, net of refunds $2,836,000 $2,429,000
========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
-------- ---------
<S> <C> <C>
Tax benefit of disqualifying dispositions $500,000 $150,000
======== ========
</TABLE>
7
<PAGE> 8
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
- -------------------------------------------------------------------------------
1. The accompanying consolidated financial statements have been prepared by the
Company, pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). This Report on Form 10-Q should be read in conjunction with
the Company's annual report on Form 10-K for the year ended December 31, 1996.
Certain information and footnote disclosures which are normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and regulations.
The information reflects all normal and recurring adjustments which, in the
opinion of Management, are necessary for a fair presentation of the financial
position of the Company and its results of operations for the interim periods
set forth herein. The results for the three months or the nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the full year or any other period.
2. On January 1, 1997, the Company effected a corporate reorganization resulting
in a consolidation of the Company's divisional field operations into Assignment
Ready, Inc., a Delaware corporation and wholly-owned subsidiary of the Company,
in order to centralize management functions into one entity, to optimize
regional activities and achieve economies of scale.
3. On March 27, 1996, the Company issued 171,579 shares of its common stock for
all of the outstanding common stock of EnviroStaff, Inc. ("EnviroStaff"), a
Minnesota corporation, which specialized in providing employees on temporary
assignments to the environmental services industry. The acquisition has been
accounted for as a pooling-of-interests and, accordingly, the Company's
consolidated financial statements have been restated for all periods prior to
the acquisition to include the results of operations, financial positions, and
cash flows of EnviroStaff.
Acquisition costs of approximately $401,000 related to the acquisition of
EnviroStaff were charged to expense during the three-month period ended March
31, 1996. The after-tax impact of these expenses on primary and fully diluted
earnings per share was $0.02 for the three-month period ended March 31, 1996.
Acquisition costs included legal, accounting, financial advisory services, and
other costs of the acquisition.
4. The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
5. Accounts receivable are stated net of an allowance for doubtful accounts of
$788,000 and $553,000 at September 30, 1997 and December 31, 1996, respectively.
8
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (continued)
- ------------------------------------------------------------------------------
6. Office furniture, equipment and leasehold improvements are stated net of
accumulated depreciation and amortization of $2,533,000 and $2,032,000 at
September 30, 1997 and December 31, 1996, respectively.
7. Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired. It is being amortized on a straight-line basis over 15
years. Goodwill is stated net of accumulated amortization of $163,000 and
$128,000 at September 30, 1997 and December 31, 1996, respectively.
8. At September 30, 1997 and December 31, 1996, Preferred Stock at a par value
of $0.01 per share consisted of 1,000,000 shares authorized and 0 shares issued
and outstanding.
9. At September 30, 1997 and December 31, 1996, Common Stock at a par value of
$0.01 per share consisted of 25,000,000 shares authorized and 10,671,562 and
10,311,120 shares issued and outstanding, respectively.
On September 24, 1997, the Board of Directors authorized a two-for-one stock
split, effected as a 100 percent common stock dividend, distributed on October
20, 1997 to shareholders of record on October 13, 1997. All references in the
accompanying consolidated financial statements to number of shares and per share
amounts of the Company's common stock have been retroactively restated to
reflect the increased number of common shares outstanding. In addition,
stockholders' equity has been restated to give retroactive recognition to the
stock split by reclassifying from paid-in capital to common stock the par value
of the additional shares arising from the split.
10. On May 12, 1997, the Company formed Assignment Ready Inc., a Canadian
corporation and wholly-owned subsidiary of the Company, and commenced operations
in Canada during the third quarter of 1997.
Assets and liabilities of foreign operations, where the functional currency is
the local currency, are translated into U.S. dollars at the rate of exchange in
effect on the balance sheet date. Income and expenses are translated at the
average rates of exchange prevailing during the period. The related translation
adjustments are recorded as cumulative foreign currency translation adjustments,
a separate component of stockholders' equity.
11. In December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." The provisions of
this statement will require a change in the method of calculating earnings per
share. The Company has not yet determined the effect, if any, that this
statement will have on currently reported earnings per share.
12. Certain reclassifications have been made to the 1996 consolidated financial
statements to conform with the 1997 consolidated financial statement
presentation.
9
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion in this Report contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, the management of growth, risks
inherent in expansion into new professions and new markets, the Company's
ability to attract and retain qualified science and financial personnel, and
other risks discussed in "Risk Factors That May Affect Future Results" in the
Business Section of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as well as those discussed elsewhere in this Report and from
time to time in the Company's other reports filed with the Securities and
Exchange Commission.
CHANGES IN RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
- -------------------------------------------------------------------------------
REVENUES - Revenues increased by 23.8% from $23,303,000 for the three months
ended September 30, 1996, to $28,854,000 for the three months ended September
30, 1997, primarily as a result of the increase in the number of temporary
employees on assignment in the Lab Support and Healthcare Financial Staffing
divisions, partially offset by a decrease in the number of temporary employees
on assignment in the EnviroStaff division. In addition, the revenue growth
resulted from an increase in average hourly billing rates in all three divisions
during the 1997 period.
The growth of the Lab Support division's revenues were primarily attributable to
strong performance in most of the markets in which the Lab Support division has
older, better established branches and to a lesser extent the contribution of
new offices opened in the past year and an increase in average hourly billing
rates during the 1997 period.
The decrease in the EnviroStaff division's revenues were primarily attributable
to the continuing transition of the division's business away from remediation
and the resulting planned decline in remediation assignments, partially offset
by increases in revenues from the division's higher margin core business and an
increase in average hourly billing rates during the 1997 period.
The growth of the Healthcare Financial Staffing division's revenues were
primarily attributable to strong performance in most of the markets in which the
Healthcare Financial division has older, better established branches and to a
lesser extent the contribution of new offices opened in the past year, and an
increase in average hourly billing rates during the 1997 period.
10
<PAGE> 11
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN RESULTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
- -------------------------------------------------------------------------------
COST OF SERVICES - Cost of services consists solely of compensation for
temporary employees and payroll taxes and benefits paid by the Company in
connection with such compensation. Cost of services increased 24.2% from
$16,244,000 for the three months ended September 30, 1996, to $20,176,000 for
the three months ended September 30, 1997. Cost of services as a percentage of
revenues increased from 69.7% in the 1996 period to 69.9% in the 1997 period.
This increase was primarily attributable to an increase in employer paid
benefits and workers' compensation expense reserves, and a decrease in
conversion fee revenue (which has no associated costs of service) of the Lab
Support division in the 1997 period.
OPERATING EXPENSES - Operating expenses include the costs associated with the
Company's network of Account Managers and branch offices, including Account
Manager compensation, rent, other office expenses and advertising for temporary
employees, and corporate office expenses, including corporate operations and
support personnel, management compensation, Account Manager recruiting and
training expenses, corporate advertising and promotion, rent and other general
and administrative expenses. Operating expenses increased 19.7% from $4,554,000
for the three months ended September 30, 1996, to $5,449,000 for the three
months ended September 30, 1997. Operating expenses as a percentage of revenues
decreased from 19.5% in the 1996 period to 18.9% in the 1997 period. This result
was primarily attributable to improved Account Manager productivity in all three
divisions.
INTEREST - Interest income, net increased 74.6% from $130,000 for the three
months ended September 30, 1996 to $227,000 for the three months ended September
30, 1997, primarily as a result of interest earned on higher interest-bearing
cash, cash equivalent and marketable security account balances in the 1997
period.
PROVISION FOR INCOME TAXES - Income taxes increased 21.8 % from $1,062,000 for
the three months ended September 30, 1996 to $1,293,000 for the three months
ended September 30, 1997. The effective tax rate decreased from 40.3% in the
1996 period to 37.4% in the 1997 period. This decrease was primarily
attributable to the consolidation of divisional field operations into Assignment
Ready, Inc., a wholly-owned subsidiary of the Company, which resulted in a lower
overall effective state tax rate.
11
<PAGE> 12
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
- -------------------------------------------------------------------------------
REVENUES - Revenues increased by 23.9% from $63,643,000 for the nine months
ended September 30, 1996, to $78,834,000 for the nine months ended September 30,
1997, primarily as a result of the increase in the number of temporary employees
on assignment in the Lab Support and Healthcare Financial Staffing divisions,
partially offset by a decrease in the number of temporary employees in the
EnviroStaff division. In addition, the revenue growth resulted from an increase
in average hourly billing rates in all three divisions during the 1997 period.
The growth of the Lab Support division's revenues were primarily attributable to
strong performance in most of the markets in which the Lab Support division has
older, better established branches and to a lesser extent the contribution of
new offices opened in the past year and an increase in average hourly billing
rates during the 1997 period.
The decrease in the EnviroStaff division's revenues were primarily attributable
to the continuing transition of the division's business away from remediation
and the resulting planned decline in remediation assignments, partially offset
by increases in revenues from the division's higher margin core business and an
increase in average hourly billing rates. In addition, severe winter weather in
several key markets contributed to the decrease in revenues in the 1997 period.
The growth of the Healthcare Financial Staffing division's revenues were
primarily attributable to strong performance in most of the markets in which the
Healthcare Financial Staffing division has older, better established branches
and to a lesser extent the contribution of new offices opened in the past year,
and an increase in average hourly billing rates during the 1997 period, which
were principally attributable to a concentration on new business with a higher
price structure.
COST OF SERVICES - Cost of services increased 24.3% from $44,292,000 for the
nine months ended September 30, 1996, to $55,058,000 for the nine months ended
September 30, 1997. Cost of services as a percentage of revenues increased from
69.6% in the 1996 period to 69.8% in the 1997 period. This increase was
primarily attributable to an increase in employer paid benefits and workers'
compensation expense reserves, and a decrease in conversion fee revenue (which
has no associated costs of service) of the Lab Support division in the 1997
period.
OPERATING EXPENSES - Operating expenses increased 17.3% from $12,956,000 for the
nine months ended September 30, 1996, to $15,200,000 for the nine months ended
September 30, 1997. Operating expenses as a percentage of revenues decreased
from 20.4% in the 1996 period to 19.3% in the 1997 period. This result was
primarily attributable to improved Account Manager productivity in all three
divisions.
12
<PAGE> 13
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN RESULTS OF OPERATIONS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
- -------------------------------------------------------------------------------
ACQUISITION COSTS - Acquisition costs consisted principally of legal,
accounting, financial advisory services and other expenses related to the
initial combination of EnviroStaff and the Company. The combined companies
incurred approximately $401,000 in acquisition costs during the quarter ended
March 31, 1996.
INTEREST - Interest income, net increased 58.1% from $370,000 for the nine
months ended September 30, 1996 to $585,000 for the nine months ended September
30, 1997, primarily as a result of interest earned on higher interest-bearing
cash, cash equivalent and marketable security account balances in the 1997
period, and interest expense charged on EnviroStaff's line of credit borrowings
in the 1996 period.
PROVISION FOR INCOME TAXES - Income taxes increased 34.4% from $2,563,000 for
the nine months ended September 30, 1996 to $3,445,000 for the nine months ended
September 30, 1997. The effective tax rate decreased from 40.3% in the 1996
period to 37.6% in the 1997 period. This decrease was primarily attributable to
the consolidation of divisional field operations into Assignment Ready, Inc., a
wholly-owned subsidiary of the Company, which resulted in a lower overall
effective state tax rate.
13
<PAGE> 14
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------------------------------------------------------
The Company's primary sources of cash for the nine months ended September 30,
1997 were funds provided by operating activities. For the nine months ended
September 30, 1996, operating activities provided $4,458,000 of cash compared to
$7,221,000 for the nine months ended September 30, 1997. This increase was
primarily attributable to higher net income and an increase in accounts payable
and accrued expenses, income taxes payable and the allowance for doubtful
accounts. The increase was partially offset by an increase in accounts
receivable.
Cash used for investing activities totaled $458,000 for the nine months ended
September 30, 1996, compared to $3,962,000 for the nine months ended September
30, 1997. This was primarily attributable to cash used to purchase marketable
securities exceeding cash proceeds from the maturity of marketable securities in
the 1997 period.
Cash provided by financing activities was $613,000 for the nine months ended
September 30, 1996, compared to $2,080,000 for the nine months ended September
30, 1997. The increase was primarily attributable to higher proceeds from the
sale of common stock in connection with the exercise of stock options and the
Employee Stock Purchase Plan during the 1997 period, and repayments of
EnviroStaff's line of credit borrowings exceeding the related borrowings during
the 1996 period.
Effective September 30, 1996, the Company renewed its unsecured bank line of
credit. The maximum borrowings allowable under this agreement are $7,000,000 and
bear interest at the bank's reference rate (8.5% at September 30, 1997). The
agreement expires on July 1, 1998. No borrowings were outstanding under this
credit line at September 30, 1997.
In addition, the Company's EnviroStaff subsidiary had a $1,000,000 line of
credit with a bank. Borrowings accrued interest at prime plus 1.25%. Advances
were secured by all of the assets of EnviroStaff and the agreement included
requirements for minimum operating ratios and tangible net worth and restricted
the payment of dividends. On April 19, 1996, the Company paid the outstanding
balance in full and the line of credit agreement was terminated.
The Company believes that its cash balances, together with funds from operations
and its borrowing capacity, will be sufficient to meet its cash requirements
through at least the next twelve months.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - 11.1
Statement regarding computation of earnings per share
(b) Reports on Form 8-K
None
15
<PAGE> 16
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ON ASSIGNMENT, INC.
Date: November 12, 1997 By: /s/ H. Tom Buelter
----------------- -----------------------
H. Tom Buelter
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1997 By: /s/ Ronald W. Rudolph
----------------- -----------------------
Ronald W. Rudolph
Sr. Vice President, Finance & Operations
Support, and Chief Financial Officer
(Principal Financial and Accounting Officer)
16
<PAGE> 17
PART II - OTHER INFORMATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ----------------------------------------------------------------------------------
<S> <C> <C>
11.1 Statement regarding computation 18
of earnings per share
</TABLE>
17
<PAGE> 1
EXHIBIT 11.1
ON ASSIGNMENT, INC.
STATEMENTS OF COMPUTATION OF NET EARNINGS PER
COMMON AND COMMON EQUIVALENT SHARES (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income used to compute primary and
fully diluted earnings per share $2,163,000 $1,573,000 $5,716,000 $3,801,000
=========== =========== =========== ===========
Weighted average number of shares
Outstanding 10,626,000 10,254,000 10,516,000 10,176,000
Dilutive effect of stock options and
Warrants 466,000 644,000 459,000 714,000
----------- ----------- ----------- -----------
Number of shares used to compute
primary and fully diluted earnings
per share 11,092,000 10,898,000 10,975,000 10,890,000
=========== =========== =========== ===========
Net earnings per share $0.20 $0.14 $0.52 $0.35
=========== =========== =========== ===========
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS (UNAUDITED) AND CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,967,000
<SECURITIES> 5,900,000
<RECEIVABLES> 16,034,000
<ALLOWANCES> 788,000
<INVENTORY> 0
<CURRENT-ASSETS> 39,325,000
<PP&E> 5,297,000
<DEPRECIATION> 2,533,000
<TOTAL-ASSETS> 43,330,000
<CURRENT-LIABILITIES> 7,400,000
<BONDS> 0
0
0
<COMMON> 107,000
<OTHER-SE> 35,823,000
<TOTAL-LIABILITY-AND-EQUITY> 43,330,000
<SALES> 0
<TOTAL-REVENUES> 78,834,000
<CGS> 0
<TOTAL-COSTS> 55,058,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 285,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,161,000
<INCOME-TAX> 3,445,000
<INCOME-CONTINUING> 5,716,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,716,000
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
