<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, 2000
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 31, 2000, the total number of outstanding shares of the Company's
Common Stock ($0.01 par value) was 23,067,979.
<PAGE> 2
ON ASSIGNMENT, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets at September 30, 2000
and December 31, 1999 3
Consolidated Statements of Income and Comprehensive Income for
the three months ended September 30, 2000 and September 30, 1999 4
Consolidated Statements of Income and Comprehensive Income for
the nine months ended September 30, 2000 and September 30, 1999 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and September 30, 1999 6-7
Notes to Consolidated Financial Statements 8-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 15
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 16
Item 5 - Other information 16
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 44,792,000 $ 24,120,000
Marketable securities 3,559,000 11,151,000
Accounts receivable, net (Note 3) 27,439,000 22,780,000
Advances and deposits 272,000 74,000
Prepaid expenses 1,308,000 1,800,000
Officer loan receivable 300,000 400,000
Income taxes receivable 0 681,000
Deferred income taxes 2,351,000 2,056,000
------------ ------------
Total current assets 80,021,000 63,062,000
------------ ------------
Office Furniture, Equipment and
Leasehold Improvements, net (Note 4) 3,348,000 3,510,000
Marketable securities 11,706,000 2,256,000
Deferred income taxes 349,000 274,000
Workers' compensation restricted deposits 240,000 169,000
Goodwill, net (Note 5) 1,731,000 1,468,000
Other assets 1,544,000 1,001,000
------------ ------------
TOTAL ASSETS $ 98,939,000 $ 71,740,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 712,000 $ 1,067,000
Accrued payroll 5,142,000 4,203,000
Income taxes payable 1,056,000 0
Deferred compensation 1,646,000 807,000
Accrued workers' compensation 1,408,000 1,447,000
Other accrued expenses 741,000 769,000
------------ ------------
Total current liabilities 10,705,000 8,293,000
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock 0 0
Common stock (Note 7) 230,000 223,000
Paid-in capital (Note 7) 28,823,000 17,903,000
Deferred compensation liability 294,000 294,000
Retained earnings 66,675,000 52,850,000
Accumulated other comprehensive income (loss) 24,000 (11,000)
------------ ------------
96,046,000 71,259,000
Less: Treasury shares, at cost (Note 8) 7,812,000 7,812,000
------------ ------------
Total stockholders' equity 88,234,000 63,447,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 98,939,000 $ 71,740,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues (Note 6) $ 51,109,000 $ 42,227,000
Cost of services 34,328,000 28,450,000
------------ ------------
Gross profit 16,781,000 13,777,000
Selling, general and administrative expenses 9,347,000 8,177,000
------------ ------------
Operating income 7,434,000 5,600,000
Interest income 679,000 414,000
------------ ------------
Income before income taxes 8,113,000 6,014,000
Provision for income taxes 3,018,000 2,231,000
------------ ------------
Net income $ 5,095,000 $ 3,783,000
============ ============
Basic earnings per share (Note 9) $ .23 $ 0.17
============ ============
Weighted average number of common
shares outstanding (Note 9) 22,312,000 21,839,000
============ ============
Diluted earnings per share (Note 9) $ .22 $ 0.17
============ ============
Weighted average number of common and common
equivalent shares outstanding (Note 9) 23,233,000 22,274,000
============ ============
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income $ 5,095,000 $ 3,783,000
Other comprehensive income (loss):
Foreign currency translation adjustment 13,000 (9,000)
------------ ------------
Comprehensive income $ 5,108,000 $ 3,774,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues (Note 6) $143,272,000 $116,288,000
Cost of services 96,390,000 78,543,000
------------ ------------
Gross profit 46,882,000 37,745,000
Selling, general and administrative expenses 26,573,000 22,581,000
------------ ------------
Operating income 20,309,000 15,164,000
Interest income 1,696,000 1,220,000
------------ ------------
Income before income taxes 22,005,000 16,384,000
Provision for income taxes 8,180,000 6,088,000
------------ ------------
Net income $ 13,825,000 $ 10,296,000
============ ============
Basic earnings per share (Note 9) $ 0.63 $ 0.47
============ ============
Weighted average number of common
shares outstanding (Note 9) 22,113,000 21,990,000
============ ============
Diluted earnings per share (Note 9) $ 0.60 $ 0.46
============ ============
Weighted average number of common and common
equivalent shares outstanding (Note 9) 23,031,000 22,484,000
============ ============
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Nine Months Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Net income $ 13,825,000 $ 10,296,000
Other comprehensive income:
Foreign currency translation adjustment 35,000 10,000
------------ ------------
Comprehensive income $ 13,860,000 $ 10,306,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE> 6
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,825,000 $ 10,296,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,021,000 841,000
Tax benefit of disqualifying dispositions 3,232,000 815,000
Increase in allowance for doubtful accounts 474,000 493,000
Decrease in income taxes receivable 681,000 20,000
Increase in deferred income taxes (339,000) (343,000)
Loss on disposal of office furniture and equipment 28,000 0
Increase in accounts receivable (5,202,000) (3,216,000)
Increase in accounts payable and accrued expenses 1,393,000 1,033,000
Increase (Decrease) in income taxes payable 1,053,000 (815,000)
(Increase) Decrease in workers' compensation deposits (71,000) 1,000
Decrease (Increase) in prepaid expenses 491,000 (97,000)
------------ ------------
Net cash provided by operating activities 16,586,000 9,028,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (5,036,000) (10,685,000)
Proceeds from the maturity of marketable securities 3,178,000 3,960,000
Acquisition of office furniture, equipment and
leasehold improvements (791,000) (1,337,000)
Increase in advances and deposits (201,000) (53,000)
Repayments of (Disbursements for) officer loan receivable 100,000 (400,000)
Increase in other assets (548,000) (485,000)
Acquisition (Note 11) (360,000) (360,000)
------------ ------------
Net cash used for investing activities (3,658,000) (9,360,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 7,434,000 1,510,000
Proceeds from issuance of common stock -
Employee Stock Purchase Plan 261,000 264,000
Repurchases of common stock 0 (4,804,000)
------------ ------------
Net cash provided by (used for) financing activities 7,695,000 (3,030,000)
------------ ------------
Effect of exchange rate changes on cash and cash equivalents 49,000 1,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,672,000 (3,361,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 24,120,000 27,706,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 44,792,000 $ 24,345,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
6
<PAGE> 7
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
--------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash paid during the period for income taxes, net of refunds $3,592,000 $6,410,000
========== ==========
Cash paid for Goodwill related to an acquisition (Note 11) $ 360,000 $ 360,000
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
7
<PAGE> 8
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
--------------------------------------------------------------------------------
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/A for the year ended December 31, 1999.
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 the Company's 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 nine
months ended September 30, 2000 are not necessarily indicative of the results to
be expected for the full year or any other period.
2. The consolidated financial statements include the accounts of the Company and
its wholly owned domestic and foreign subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
3. Accounts receivable are stated net of an allowance for doubtful accounts of
$1,396,000 and $1,216,000 at September 30, 2000 and December 31, 1999,
respectively.
4. Office furniture, equipment and leasehold improvements are stated net of
accumulated depreciation and amortization of $5,097,000 and $4,268,000 at
September 30, 2000 and December 31, 1999, respectively.
5. Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired (See Note 11). It is being amortized on a straight-line
basis over 15 years. Goodwill is stated net of accumulated amortization of
$448,000 and $352,000 at September 30, 2000 and December 31, 1999, respectively.
6. Revenue from temporary assignments, net of credits and discounts, is
recognized when earned, based on hours worked by the Company's temporary
employees on a weekly basis. Permanent placement fees are recognized when
earned, upon conversion of a temporary employee to a client's regular employee.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101), which
provides additional guidance in applying generally accepted accounting
principles to revenue recognition in the financial statements. The Company has
evaluated the provisions of SAB 101 and believes its impact on their revenue
recognition policy is immaterial.
7. At September 30, 2000 and December 31, 1999, Common Stock, at a par value of
$0.01 per share, consisted of 75,000,000 and 25,000,000 shares authorized and
23,047,194 and 22,325,050 shares issued and outstanding, respectively.
8
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (continued)
--------------------------------------------------------------------------------
8. On April 1, 1999, the Board of Directors authorized the Company to repurchase
up to $15,000,000 of its common stock. The Company plans to make such purchases
primarily in the open market, from time to time, at prevailing prices pursuant
to rules and regulations of the Securities and Exchange Commission. At September
30, 2000 and December 31, 1999, the Company had repurchased 660,000 shares of
its common stock at a total cost of $7,812,000.
9. The following is a reconciliation of the shares used to compute basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding used to compute basic
earnings per share 22,312,000 21,839,000 22,113,000 21,990,000
Dilutive effect of stock options 921,000 435,000 918,000 494,000
---------- ---------- ---------- ----------
Number of shares used to compute
diluted earnings per share 23,233,000 22,274,000 23,031,000 22,484,000
========== ========== ========== ==========
</TABLE>
10. Indicated below is the information required to comply with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information.
Effective in the first quarter of 2000, management decided to change the
composition of its reportable segments by reclassifying the Clinical Lab Staff
division from the Lab Support segment to the Healthcare Financial Staffing
segment as the division is managed and operated in the same manner as the
Healthcare Financial Staffing division. The Healthcare Financial Staffing
segment was renamed the Healthcare Staffing segment. The prior period segment
information has been retroactively restated to reflect the change in reportable
segments. As a result, the Company has two reportable operating segments: Lab
Support and Healthcare Staffing. The Lab Support operating segment includes the
combined results of the Lab Support and EnviroStaff divisions, as they have
similar economic characteristics and they meet the aggregation criteria of SFAS
No. 131. The Lab Support segment provides temporary and permanent placement
services of laboratory and scientific professionals to the biotechnology,
pharmaceutical, food and beverage, chemical and environmental industries. The
Healthcare Staffing segment includes the combined results of the Healthcare
Financial Staffing and Clinical Lab Staff divisions. The Healthcare Staffing
segment provides temporary and permanent placement services of medical billing
and collection and medical staffing professionals to the healthcare industry.
9
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (continued)
--------------------------------------------------------------------------------
The Company's management evaluates performance of each segment primarily based
on revenues and operating income (before acquisition costs, interest and income
taxes). The Company's management does not evaluate, manage or measure
performance of segments using asset information, accordingly, asset information
by segment is not disclosed. The information in the following table is derived
directly from the segments' internal financial reporting used for corporate
management purposes. Certain corporate expenses have not been allocated from the
Lab Support segment to the Healthcare Staffing segment.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Lab Support $ 36,584,000 $ 31,192,000 $103,166,000 $ 87,963,000
Healthcare Staffing 14,525,000 11,035,000 40,106,000 28,325,000
------------ ------------ ------------ ------------
$ 51,109,000 $ 42,227,000 $143,272,000 $116,288,000
============ ============ ============ ============
Gross Profit:
Lab Support $ 12,075,000 $ 10,135,000 $ 33,951,000 $ 28,451,000
Healthcare Staffing 4,706,000 3,642,000 12,931,000 9,294,000
------------ ------------ ------------ ------------
$ 16,781,000 $ 13,777,000 $ 46,882,000 $ 37,745,000
============ ============ ============ ============
Operating Income:
Lab Support $ 5,087,000 $ 3,705,000 $ 13,825,000 $ 10,504,000
Healthcare Staffing 2,347,000 1,895,000 6,484,000 4,660,000
------------ ------------ ------------ ------------
$ 7,434,000 $ 5,600,000 $ 20,309,000 $ 15,164,000
============ ============ ============ ============
</TABLE>
11. On July 20, 1998, the Company acquired substantially all of the assets of
LabStaffers, Inc., a provider of temporary science and medical laboratory
professionals through its branches in Greensboro and Charlotte, N.C. The
LabStaffers, Inc. offices and operations acquired have been added to the
Company's Lab Support division. This acquisition has been accounted for using
the purchase method of accounting. Pro Forma information is not presented as the
impact on revenues, net income and earnings per share are not significant.
Consideration for the purchase consisted of $808,000 in cash paid on the
purchase date. In addition, in July 1999 and July 2000 the Company paid an
additional $360,000 in cash in accordance with the agreement, bringing the total
consideration for the purchase to $1,168,000 at September 30, 1999 and
$1,528,000 at September 30, 2000. This contingent consideration has been added
to goodwill in the accompanying Consolidated Balance Sheets. The payment made in
July 2000 was the last contingent payment due under the purchase agreement.
10
<PAGE> 11
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are based upon
current expectations that involve risks and uncertainties. Any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. For example, the words "believes," "anticipates,"
"plans," "expects," "intends" and similar expressions are intended to identify
forward-looking statements. 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 Company's ability to attract,
train and retain qualified Account Managers and temporary employees in the
laboratory and scientific, environmental health and safety, medical billing and
collections and clinical laboratory and medical staffing fields, management of
growth, particularly in international markets, risks inherent in expansion into
new international markets and new professions, the integration of acquired
operations, and other risks discussed in "Risk Factors That May Affect Future
Results" in Item 1 of the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1999, 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. All forward-looking statements in this document are based
on information available to the Company as of the date hereof and the Company
assumes no obligation to update any such forward-looking statements.
CHANGES IN RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999:
--------------------------------------------------------------------------------
REVENUES - Revenues increased by 21.0% from $42,227,000 for the three months
ended September 30, 1999, to $51,109,000 for the three months ended September
30, 2000, as a result of the increased revenues of the Lab Support and
Healthcare Staffing segments.
Lab Support segment's revenues increased by 17.3% from $31,192,000 for the three
months ended September 30, 1999, to $36,584,000 for the three months ended
September 30, 2000. The increase in revenue was primarily attributable to a
12.1% increase in the number of temporary employees on assignment and to a
lesser extent to a 5.2% increase in average hourly billing rates and a 171.6%
increase in conversion fee revenue from $490,000 for the three months ended
September 30, 1999 to $1,331,000 for the three months ended September 30, 2000.
The increase in the number of temporary employees on assignment was primarily
attributable to the strong performance in most of the markets in which the Lab
Support segment has older, more established branches and to a lesser extent the
contribution of new offices opened in the past year. The increase in the Lab
Support segment's revenues was partially offset by 1.5 fewer working days in the
three month period and a decrease in the EnviroStaff division's revenues by
22.5% from $1,234,000 for the three months ended September 30, 1999 to $956,000
for the three months ended September 30, 2000. The decrease was primarily
attributable to the continuing transition of the division's business away from
serving clients in the remediation business and the resulting planned decline in
remediation assignments and fewer working days in the 2000 period, partially
offset by increases in average hourly billing rates and increased conversion fee
revenue during the 2000 period.
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 THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999: (continued)
--------------------------------------------------------------------------------
Healthcare Staffing segment's revenues increased by 31.6% from $11,035,000 for
the three months ended September 30, 1999, to $14,525,000 for the three months
ended September 30, 2000. The increase in revenue was primarily attributable to
a 31.4% increase in the number of temporary employees on assignment and to a
lesser extent to a 3.5% increase in average hourly billing rates and a 130.0%
increase in conversion fee revenue from $70,000 for the three months ended
September 30, 1999 to $161,000 for the three months ended September 30, 2000.
The increase in the number of temporary employees on assignment was primarily
attributable to the strong performance in most of the markets in which the
Healthcare Staffing segment has older, more established branches and to a lesser
extent the contribution of new offices opened in the past year. The increase in
the Healthcare Staffing segment's revenues was partially offset by 1.5 fewer
working days in the three month period.
COST OF SERVICES - Cost of services consists solely of compensation for
temporary employees and payroll taxes, benefits and employment related expenses
paid by the Company in connection with such compensation. Cost of services
increased 20.7% from $28,450,000 for the three months ended September 30, 1999,
to $34,328,000 for the three months ended September 30, 2000. The Lab Support
segment's cost of services as a percentage of segment revenues decreased by 0.5%
from 67.5% in the 1999 period to 67.0% in the 2000 period. This decrease was
primarily attributable to a 1.5% decrease in temporary employee compensation and
payroll taxes, partially offset by a 0.8% increase in employer paid benefits and
training expenses and a 0.2% increase in workers' compensation expense. The
Healthcare Staffing segment's cost of services as a percentage of segment
revenues increased by 0.6% from 67.0% in the 1999 period to 67.6% in the 2000
period. This increase was primarily attributable to a 0.8% increase in employer
paid benefits and training expenses and a 0.2% increase in workers' compensation
expense, partially offset by a 0.4% decrease in temporary employee compensation
and payroll taxes. The increase in workers' compensation for both segments was
primarily due to higher insurance premiums in the 2000 period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative 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, such as the salaries of corporate operations and
support personnel, management compensation, Account Manager recruiting and
training expenses, corporate advertising and promotion, rent and other general
and administrative expenses. Selling, general and administrative expenses
increased 14.3% from $8,177,000 for the three months ended September 30, 1999,
to $9,347,000 for the three months ended September 30, 2000. Selling, general
and administrative expenses as a percentage of revenues decreased from 19.4% in
the 1999 period to 18.3% in the 2000 period. This result was primarily
attributable to leveraging a more efficient centralized support system over a
larger revenue base, partially offset by the hiring of new Account Managers for
the opening of new offices and the expansion of existing offices.
INTEREST INCOME - Interest income increased 64.0% from $414,000 for the three
months ended September 30, 1999, to $679,000 for the three months ended
September 30, 2000. This increase was primarily the result of interest earned on
higher interest-bearing cash, cash equivalent and marketable security account
balances in the 2000 period.
PROVISION FOR INCOME TAXES - Provision for income taxes increased 35.3% from
$2,231,000 for the three months ended September 30, 1999, to $3,018,000 for the
three months ended September 30, 2000. The Company's effective tax rate
increased slightly from 37.1% in the 1999 period to 37.2% in the 2000 period.
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
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999:
--------------------------------------------------------------------------------
REVENUES - Revenues increased by 23.2% from $116,288,000 for the nine months
ended September 30, 1999, to $143,272,000 for the nine months ended September
30, 2000, as a result of the increased revenues of the Lab Support and
Healthcare Staffing segments.
Lab Support segment's revenues increased by 17.3% from $87,963,000 for the nine
months ended September 30, 1999, to $103,166,000 for the nine months ended
September 30, 2000. The increase in revenue was primarily attributable to a
10.6% increase in the number of temporary employees on assignment and to a
lesser extent to a 5.0% increase in average hourly billing rates and a 132.0%
increase in conversion fee revenue from $1,394,000 for the nine months ended
September 30, 1999 to $3,234,000 for the nine months ended September 30, 2000.
The increase in the number of temporary employees on assignment was primarily
attributable to the strong performance in most of the markets in which the Lab
Support segment has older, more established branches and to a lesser extent the
contribution of new offices opened in the past year. The increase in the Lab
Support segment's revenues was partially offset by a decrease in the EnviroStaff
division's revenues by 18.8% from $3,376,000 for the nine months ended September
30, 1999 to $2,743,000 for the nine months ended September 30, 2000. The
decrease was primarily attributable to the continuing transition of the
division's business away from serving clients in the remediation business and
the resulting planned decline in remediation assignments, partially offset by
increases in average hourly billing rates, additional working days in the nine
month period and increased conversion fee revenue during the 2000 period.
Healthcare Staffing segment's revenues increased by 41.6% from $28,325,000 for
the nine months ended September 30, 1999, to $40,106,000 for the nine months
ended September 30, 2000. The increase in revenue was primarily attributable to
a 38.4% increase in the number of temporary employees on assignment and to a
lesser extent to a 4.7% increase in average hourly billing rates and a 68.5%
increase in conversion fee revenue from $232,000 for the nine months ended
September 30, 1999 to $391,000 for the nine months ended September 30, 2000. The
increase in the number of temporary employees on assignment was primarily
attributable to the strong performance in most of the markets in which the
Healthcare Staffing segment has older, more established branches and to a lesser
extent the contribution of new offices opened in the past year.
COST OF SERVICES - Cost of services consists solely of compensation for
temporary employees and payroll taxes, benefits and employment related expenses
paid by the Company in connection with such compensation. Cost of services
increased 22.7% from $78,543,000 for the nine months ended September 30, 1999,
to $96,390,000 for the nine months ended September 30, 2000. The Lab Support
segment's cost of services as a percentage of segment revenues decreased by 0.6%
from 67.7% in the 1999 period to 67.1% in the 2000 period. This decrease was
primarily attributable to a 1.2% decrease in temporary employee compensation and
payroll taxes, partially offset by a 0.4% increase in employer paid benefits and
training expenses and a 0.2% increase in workers' compensation expense. The
Healthcare Staffing segment's cost of services as a percentage of segment
revenues increased by 0.6% from 67.2% in the 1999 period to 67.8% in the 2000
period. This increase was primarily attributable to a 0.4% increase in employer
paid benefits and training and a 0.3% increase in workers' compensation expense,
partially offset by a 0.1% decrease in employee compensation and payroll taxes.
The increase in workers' compensation for both segments was primarily due to
higher insurance premiums in the 2000 period.
13
<PAGE> 14
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, 2000 AND 1999: (continued)
--------------------------------------------------------------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative 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, such as the salaries of corporate operations and
support personnel, management compensation, Account Manager recruiting and
training expenses, corporate advertising and promotion, rent and other general
and administrative expenses. Selling, general and administrative expenses
increased 17.7% from $22,581,000 for the nine months ended September 30, 1999,
to $26,573,000 for the nine months ended September 30, 2000. Selling, general
and administrative expenses as a percentage of revenues decreased from 19.4% in
the 1999 period to 18.5% in the 2000 period. This result was primarily
attributable to leveraging a more efficient centralized support system over a
larger revenue base, partially offset by the hiring of new Account Managers for
the opening of new offices and the expansion of existing offices.
INTEREST INCOME - Interest income increased 39.0% from $1,220,000 for the nine
months ended September 30, 1999, to $1,696,000 for the nine months ended
September 30, 2000. This increase was primarily the result of interest earned on
higher interest-bearing cash, cash equivalent and marketable security account
balances in the 2000 period.
PROVISION FOR INCOME TAXES - Provision for income taxes increased 34.4% from
$6,088,000 for the nine months ended September 30, 1999, to $8,180,000 for the
nine months ended September 30, 2000. The Company's effective tax rate remained
unchanged at 37.2% in the 1999 and 2000 periods.
14
<PAGE> 15
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,
1999 and 2000 were funds provided by operating activities. For the nine months
ended September 30, 1999, operating activities provided $9,028,000 of cash
compared to $16,586,000 for the nine months ended September 30, 2000. This
increase was primarily attributable to higher net income, an increase in the tax
benefit of disqualifying dispositions, an increase in income taxes payable, a
decrease in income taxes receivable, a decrease in prepaid expenses and a larger
increase in accounts payable and accrued expenses. The increase was partially
offset by a larger increase in accounts receivable in the 2000 period.
Cash used for investing activities totaled $9,360,000 for the nine months ended
September 30, 1999, compared to $3,658,000 for the nine months ended September
30, 2000. This decrease was primarily attributable to lower purchases of
marketable securities in the 2000 period, lower acquisitions of office
furniture, equipment and leasehold improvements and a partial repayment of an
officer loan receivable in the 2000 period compared with a disbursement in the
1999 period. This decrease was partially offset by lower proceeds from the
maturity of marketable securities in the 2000 period.
Cash used for financing activities was $3,030,000 for the nine months ended
September 30, 1999, compared to cash provided by financing activities of
$7,695,000 for the nine months ended September 30, 2000. The increase was
primarily attributable to higher proceeds from the exercise of common stock
options and no repurchases of common stock in the 2000 period.
The Company believes that its cash balances, together with funds from operations
and its borrowing ability, will be sufficient to meet its cash requirements
through at least the next twelve months.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks arising from transactions in the
normal course of business, principally risks associated with interest rate and
foreign currency fluctuations. The Company is exposed to interest rate risk from
its held to maturity investments. The interest rate risk is not significant due
to the short maturity of those investments. The Company is exposed to foreign
currency risk from the translation of foreign operations into U.S. dollars.
Based on the relative size and nature of its foreign operations, the Company
does not believe that a ten percent change in foreign currency exchange rates
would have a material impact on its financial statements.
15
<PAGE> 16
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
None
(b) Reports on Form 8-K
The Company filed a Form 8-K with the Securities and Exchange
Commission on October 5, 2000.
16
<PAGE> 17
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 13, 2000 By:/s/ H. Tom Buelter
--------------------- ------------------
H. Tom Buelter
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 2000 By:/s/ Ronald W. Rudolph
--------------------- ---------------------
Ronald W. Rudolph
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
17
