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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
Commission File Number 0-20540
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ON ASSIGNMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4023433
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26651 West Agoura Road
Calabasas, California 91302
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (818) 878-7900
------------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -------------------
<S> <C>
None None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
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 of the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the 9,424,063 shares of voting stock
(based on the closing price reported by the Nasdaq Stock Market on January 31,
2000) held by non-affiliates of the registrant as of January 31, 2000 was
approximately $294,502,000. For purposes of this disclosure, shares of common
stock held by persons who own 5% or more of the shares of outstanding common
stock and shares of common stock held by each officer and director have been
excluded in that such persons may be deemed to be "affiliates" as that term is
defined under the Rules and Regulations of the Act. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
As of January 31, 2000, the registrant had outstanding 10,839,311 shares
of Common Stock, $0.01 par value.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the On Assignment, Inc. Proxy Statement for the registrant's
Annual Meeting of Stockholders scheduled to be held on June 13, 2000 are
incorporated by reference into Part III of this Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
This Annual Report on Form 10-K contains forward-looking statements
regarding the future financial condition and results of operations and the
Company's business operations. The words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. Such statements 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,
those discussed in "Risk Factors that May Affect Future Results" in item 1 of
this report, as well as those discussed elsewhere in this report and the
registrant's other filings with the Securities and Exchange Commission.
GENERAL
On Assignment, Inc. (the "Company"), through its first operating
division, Lab Support, is a leading nationwide provider of temporary scientific
professionals to laboratories in the biotechnology, pharmaceutical, food and
beverage, chemical, and environmental industries. In July 1998, the Company
acquired substantially all of the assets, offices and operations of LabStaffers,
Inc., which were added to the Lab Support division. In January 1994, the Company
established its second operating division, Finance Support, with the acquisition
of 1st Choice Personnel, Inc. The Finance Support division was expanded in
December 1994, with the acquisition of substantially all of the assets, offices
and operations of Sklar Resource Group, Inc. With a shift in Finance Support's
business development focus to medical billing and collections, in January 1997
the name of the Finance Support division was changed to Healthcare Financial
Staffing. In March 1996, the Company established its third operating division,
EnviroStaff, with the acquisition of EnviroStaff, Inc., which specializes in
providing temporary environmental professionals to the environmental services
industry. On May 12, 1997, the Company formed Assignment Ready Inc., a Canadian
corporation and wholly owned subsidiary of the Company, and commenced operations
in Toronto as Lab Support Canada, during the third quarter of 1997. On February
2, 1999, the Company formed On Assignment UK Limited, a United Kingdom
corporation and wholly owned subsidiary of the Company. On February 16, 1999, On
Assignment UK Limited formed Lab Support (UK) Limited, a United Kingdom
corporation and wholly owned subsidiary of On Assignment UK Limited, and
commenced operations as Lab Support UK during the first quarter of 1999. In the
third quarter 1999, the Company established its fourth division, Clinical Lab
Staff, which provides scientific and medical professionals to hospitals,
physicians' offices, clinics, reference laboratories and HMOs. The Company has
two operating segments: Lab Support and Healthcare Financial Staffing. The Lab
Support operating segment includes the combined results of the Lab Support,
Clinical Lab Staff and EnviroStaff divisions, as they have similar economic
characteristics and they meet the aggregation criteria of SFAS No. 131. As of
December 31, 1999, the Company served 68 operational markets through a network
of 144 branch offices.
The Company's principal executive offices are located at 26651 West
Agoura Road, Calabasas, California 91302 and its telephone number is (818)
878-7900.
ON ASSIGNMENT'S APPROACH
The Company's strategy is to serve the needs of targeted industries for
quality assignments of temporary professionals. In contrast to the mass market
approach used for temporary office/clerical and light industrial personnel, the
Company believes effective assignments of temporary professionals require the
person making assignments to have significant knowledge of the client's industry
and be able to assess the specific needs of the client as well as the temporary
professionals' qualifications. As a result, the Company has developed a tailored
approach to the assignment process -- the Account Manager System. Unlike
traditional approaches, the Account Manager System is based on the use of
experienced professionals, Account Managers, to manage the assignment process.
Account Managers meet with clients' managers to understand position descriptions
and workplace environments, and with temporary employee candidates to assess
their qualifications and interests. With this information, Account Managers can
make quality assignments of temporary professionals to clients, typically within
24 to 48 hours of client requests. The Company's corporate office performs many
functions that allow Account Managers to focus more effectively on the
assignment of temporary professionals. These functions include recruiting,
ongoing training and coaching, appointment making, business development and
administrative support. The corporate office also selects, opens and maintains
branch offices according to a standardized model.
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Temporary personnel assigned to clients are employees of the Company,
though clients provide on-the-job supervisors for temporary personnel.
Therefore, clients control and direct the work of temporary personnel and
approve hours worked, while the Company is responsible for many of the
activities typically handled by the client's personnel department.
BRANCH OFFICE NETWORK
At December 31, 1999, the Company had 70 Lab Support branch offices, 44
Healthcare Financial Staffing branch offices, 21 EnviroStaff branch offices, and
9 Clinical Lab Staff branch offices. Of this total of 144 branch offices, 106
branch offices involve shared office space among divisions. Through this network
of branch offices, the Company served the following operational markets:
<TABLE>
<S> <C> <C> <C> <C>
Allentown, PA Dallas, TX London, United Kingdom Philadelphia, PA San Francisco, CA
Ann Arbor, MI Denver, CO Los Angeles, CA Phoenix, AZ San Jose, CA
Atlanta, GA Des Moines, IA Louisville, KY Piscataway, NJ Seattle, WA
Austin, TX Detroit, MI Madison, WI Pittsburgh, PA St. Louis, MO
Baltimore, MD Ft. Lauderdale, FL Manchester, United Kingdom Pleasanton, CA Tampa, FL
Birmingham, United Kingdom Ft. Worth, TX Memphis, TN Portland, OR Tulsa, OK
Boston, MA Greensboro, NC Miami, FL Princeton, NJ Toronto, ON, Canada
Buffalo, NY Greenville, SC Milwaukee, WI Providence, RI Vancouver, BC, Canada
Charlotte, NC Harrisburg, PA Minneapolis, MN Raleigh-Durham, NC Ventura, CA
Chicago, IL Houston, TX Montreal, QC, Canada Richmond, VA Washington, DC
Cincinnati, OH Indianapolis, IN Nashville, TN Sacramento, CA Westport, CT
Cleveland, OH Jacksonville, FL New Orleans, LA Salt Lake City, UT White Plains, NY
Columbus, OH Kansas City, MO Oklahoma City, OK San Antonio, TX
Costa Mesa, CA Las Vegas, NV Orlando, FL San Diego, CA
</TABLE>
CLIENTS
The Lab Support operating segment includes the combined results of the
Lab Support, Clinical Lab Staff, and EnviroStaff divisions. Lab Support's
clients primarily include biotechnology, pharmaceutical, food and beverage,
chemical and environmental companies. Clinical Lab Staff's clients primarily
include companies engaged in the healthcare services industry and companies
providing medical laboratory and medical technologist services. EnviroStaff's
clients primarily include companies in the environmental services industry.
Healthcare Financial Staffing's clients include companies engaged in the
healthcare services industry. During the year ended December 31, 1999, the
Company provided assignment professionals to approximately 5,000 clients. All
temporary assignments, regardless of their planned length, may be terminated
without prior notice by the client or the temporary employee.
THE TEMPORARY PROFESSIONAL
The skill and experience levels of Lab Support's temporary professional
employees range from scientists with bachelor and/or masters degrees and
considerable laboratory experience to technicians with limited chemistry or
biology background and lab experience. The skill and experience levels of
Clinical Lab Staff's temporary professional employees range from medical and
laboratory clinical technologists to phlebotomists and medical assistants. The
skill and experience levels of EnviroStaff's temporary professional employees
range from engineers, geologists, industrial hygienists and safety professionals
with bachelor and/or masters degrees and several years of experience to field
technicians with some applicable experience. The skill and experience levels of
Healthcare Financial Staffing's temporary professional employees typically
include two or more years of medical billing and collection experience.
Hourly wage rates are established according to local market conditions.
The Company pays the related costs of employment including social security
taxes, federal and state unemployment taxes, workers' compensation insurance and
other similar costs. After minimum service periods and hours worked, the Company
also provides paid holidays, allows participation in the Company's 401(k)
Retirement Savings Plan and Employee Stock Purchase Plan, creates eligibility
for an annual bonus, and facilitates access to health insurance for its
temporary employees.
EXPANSION IN EXISTING PROFESSIONS AND INTO OTHER PROFESSIONS
The Company intends to expand its services domestically and
internationally in the laboratory and scientific, clinical laboratory and
medical staffing, environmental health and safety and medical billing and
collections fields it currently serves and to apply its approach to the
assignment of temporary professionals in other fields. The Company believes that
its experience with the Account Manager System and centralized
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operational support will enable it to enter new markets effectively. The Company
continually reviews opportunities in various industries, evaluating the current
volume and profitability of temporary assignments, the length of assignments,
the degree of specialization necessary to be successful, the competitive
environment and the applicability of its Account Manager approach. If attractive
markets are identified, the Company may enter these markets through acquisition
or internal growth. The Company's January 1994 acquisition of 1st Choice
Personnel, Inc., December 1994 acquisition of substantially all of the assets of
Sklar Resource Group, Inc., March 1996 acquisition of EnviroStaff, Inc., and
July 1998 acquisition of substantially all of the assets of LabStaffers, Inc.
were consistent with this ongoing activity, and the Company periodically engages
in discussions with possible acquisition candidates.
COMPETITION
The temporary services industry is highly competitive and fragmented and
has low barriers to entry. The Company believes its Lab Support division is one
of the few nationwide temporary service providers that specialize exclusively in
scientific laboratory personnel. Although other nationwide temporary personnel
companies compete with the Company with respect to scientific, clinical
laboratory and medical technologist, environmental services and medical billing
and collecting personnel, many of these companies focus on office/clerical and
light and heavy industrial personnel, which account for approximately 80% of the
overall temporary personnel services market. These companies include Manpower,
Inc., Kelly Services, Inc., The Olsten Corporation, Adecco, and Aerotech, Inc.,
each of which is larger and has substantially greater financial and marketing
resources than the Company.
The Company also competes with temporary personnel agencies on a
regional and local basis. Frequently, the strongest competition in a particular
market is a local company with established relationships. The Company also
competes with its clients that directly advertise or seek referrals of qualified
candidates on their own behalf.
The principal competitive factors in attracting qualified candidates for
temporary employment are salaries and benefits, speed, quality and duration of
assignments and responsiveness to the needs of employees. The Company believes
that many persons seeking temporary employment through the Company are also
pursuing employment through other means, including other temporary employment
service firms. Therefore, the speed and availability of appropriate assignments
is an important factor in the Company's ability to complete assignments of
qualified candidates. In addition to having high quality temporary personnel to
assign in a timely manner, the principal competitive factors in obtaining and
retaining clients in the temporary services industry are correctly understanding
the client's specific job requirements, the appropriateness of the temporary
personnel assigned to the client, the price of services and the monitoring of
client satisfaction. Although the Company believes it competes favorably with
respect to these factors, it expects competition to increase.
EMPLOYEES
At December 31, 1999, the Company employed approximately 250 regular
employees, including Account Managers and corporate office employees. During the
year ended December 31, 1999, the Company employed approximately 15,000
temporary employees. None of the Company's employees, including its temporary
employees, are represented by a collective bargaining agreement. The Company
believes its employee relations are good.
REGULATION
The Company's operations are subject to applicable state and local
regulations governing the provision of personnel placement services which
require personnel companies to be licensed or separately registered. To date,
the Company has not experienced any material difficulties in complying with such
regulations. State mandated workers' compensation and unemployment insurance
premiums, which the Company pays for its temporary and regular employees, can
have a direct effect on the Company's cost of services and thereby,
profitability.
PROPRIETARY RIGHTS
The Company has registered its Lab Support and EnviroStaff service marks
with the United States Patent and Trademark Office and applied for registration
of its Healthcare Financial Staffing and Clinical Lab Staff service marks. The
Company has also registered "The Quality Assignment" mark with the United States
Patent and Trademark Office. The Company has also registered its Lab Support
service mark in Canada and has applied for the use of the Lab Support service
mark in the United Kingdom and the Netherlands. The Company has rights in other
trademarks used in connection with its business and has other applications
pending for the international use of its service marks.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company operates in a highly competitive environment that involves a
number of risks, many of which are beyond the Company's control. The following
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discussion highlights some of the risks that may affect the Company's future
results.
Uncertainty of Future Operating Results, Quarterly Fluctuations and
Seasonality. Future operating results will depend on many factors, including
demand for the Company's services, the market's acceptance of price changes, the
productivity, recruitment and retention of Account Managers, the results of the
Company's expansion into new geographic markets, the degree and nature of
competition, the effectiveness of the Company's expansion into other
professions, and the Company's ability to control costs and manage its accounts
receivable. The Company and the temporary services industry as a whole typically
experience seasonal declines in demand from the year-end holiday season through
early February and during June, July and August. The Company has experienced
variability in the duration and depth of these seasonal declines, which in turn
have materially affected period-to-period and current period-to-prior period
comparisons of its financial and operating performance. As a result of these and
other factors, there can be no assurance that the Company will be able to grow
in future periods, sustain its past rate of revenue growth or maintain
profitability on a quarterly or annual basis. If in some future quarter or
quarters the Company's operating results are below the expectations of public
market analysts or investors, the market price of its common stock may decline
significantly.
Reliance on and Ability to Attract, Develop and Retain Account Managers.
The Company relies significantly on the performance of its Account Managers, who
have primary responsibility for all aspects of the process of assigning the
Company's temporary employees to clients. The Company is highly dependent on its
ability to hire, develop and retain qualified Account Managers, as well as on
the productivity of its Account Managers. The available pool of qualified
Account Manager candidates is limited. In addition, prior to joining the
Company, the typical Account Manager has no prior experience in the temporary
employment industry. The Company commits substantial resources to the
recruitment, training, development and operational support of its Account
Managers. There can be no assurance that the Company will be able to continue to
recruit, train and retain sufficient numbers of qualified Account Managers or
that Account Managers will achieve desired productivity levels. Failure to
achieve planned numbers of Account Managers or productivity of Account Managers
could result in a material adverse effect on the Company's financial condition,
results of operations and business.
Expansion in Existing Professions and into Other Professions. The
Company plans to expand its services domestically and internationally within the
laboratory and scientific, clinical laboratory and medical staffing,
environmental health and safety and medical billing and collections fields it
currently serves and to other professional fields. The success of the Company's
expansion efforts will depend on a number of factors, including the Company's
ability to adapt the Account Manager system used in its divisions to other
industries and professions, recruit and train new Account Managers with the
particular industry or professional experience, establish client relationships
in new industries and successfully recruit, qualify and orient new temporary
professionals. The ability to manage these factors may be more difficult or take
more resources than the Company anticipates, particularly since they may involve
industries, clients and professionals that the Company has no experience with.
The Company may decide to pursue future expansion by internal growth or
acquisition. The rate at which the Company establishes new services may
significantly affect the Company's operating and financial results, especially
in the quarters of and immediately following expansion into new domestic and
international professional markets or the integration of acquired operations.
There can be no assurance that the Company will be able to successfully expand
its services in the fields it currently serves, identify new professional fields
suitable for expansion or continue to grow. Furthermore, in the event the
Company pursues an acquisition, there can be no assurance that the Company will
identify suitable acquisition candidates on reasonable terms, that the Company
will be able to successfully integrate acquisitions, that anticipated benefits
of the acquisition will be achieved, or that diversion of management attention
to the acquisition and integration process will not have an adverse effect on
the Company's existing businesses.
Planned International Operations Face Special Risks. In the first
quarter of 1999, the Company expanded its operations to the United Kingdom and
intends to expand its operations to other countries in Europe in the future. The
Company has limited experience in marketing, selling and supporting its services
outside of North America. Development of such skills may be more difficult or
take longer than the Company anticipates, especially due to the fact that its
centralized support functions in Calabasas, California will not be able to
provide the same level of support to operations outside of North America as it
does to its current North American operations. In addition to establishing
operations support functions outside North America, the Company will have to
address language barriers and different regulations of temporary employment.
Moreover, international operations are subject to a variety of additional risks
associated with conducting business internationally that could seriously harm
the Company's financial condition and results of operations. These risks may
include the following:
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problems in collecting accounts receivable; the impact of recessions in
economies outside the United States; unexpected changes in regulatory
requirements; fluctuations in currency exchange rates; seasonal reductions in
business activity during the summer months in Europe; and potentially adverse
tax consequences.
Dependence on Availability of Qualified Temporary Professional
Employees. The Company is dependent upon continuing to attract qualified
laboratory and scientific, clinical laboratory and medical technologist,
environmental services and medical billing and collecting personnel with a broad
range of skills and experience in order to meet client needs. The Company
competes for such personnel with other temporary personnel companies, as well as
actual and potential clients, some of which seek to fill positions with either
regular or temporary employees. In addition, the Company's temporary employees
sometimes become regular employees of the Company's clients. There can be no
assurance that qualified laboratory and scientific, clinical laboratory and
medical technologist, environmental services, and medical billing and
collections personnel will be available to the Company in adequate numbers.
Highly Competitive Market. The temporary services industry is highly
competitive and fragmented, with limited barriers to entry. The Company competes
in national, regional and local markets with full-service agencies and in
regional and local markets with specialized temporary services agencies. Several
of these companies have significantly greater marketing and financial resources
than those of the Company. As the Company expands into new geographic markets,
its success will depend in part on its ability to gain market share from
competitors. The Company expects that competition will increase in the future
and there can be no assurance that the Company will remain competitive.
Effect of Fluctuations in the General Economy. Demand for temporary
services is significantly affected by the general level of economic activity. As
economic activity slows, many companies reduce their usage of temporary
employees before undertaking layoffs of their regular employees. As economic
activity increases, many clients convert their temporary employees to regular
employees which, depending on the Company's agreement with the client and when
such conversion occurs, may not result in any conversion fee revenue for the
Company. The Company is unable to predict the level of economic activity at any
particular time and its effect on the Company's operating and financial results.
Terminability of Client Arrangements. The Company's arrangements with
clients are terminable at will and do not require clients to use the Company's
services. All temporary assignments, regardless of their planned length, may be
terminated without advance notice. There can be no assurance that existing
clients will continue to use the Company's services at historical levels, if at
all.
Employment Liability Risks. The Company employs and assigns temporary
employees to the workplaces of other businesses. Inherent risks of such activity
include possible claims of errors and omissions, misuse of customers'
proprietary information, discrimination and harassment, theft of client
property, and other criminal activity or torts by temporary employees. The
Company seeks to reduce its liability for the acts of its temporary employees by
providing in its arrangements with most clients that temporary personnel work
under the client's supervision, control and direction. There can be no assurance
that such arrangements will be enforceable or that, if enforceable, would be
sufficient to preclude liability as a result of the actions of the Company's
temporary personnel. In addition, there can be no assurance that current
liability insurance coverage will be adequate or will continue to be available
in sufficient amounts.
Workers' Compensation Expense. The Company maintains a partially
self-insured workers' compensation program. In connection with this program, the
Company pays a base premium plus actual losses incurred up to certain levels,
and is insured for losses greater than certain levels per occurrence and in the
aggregate. The Company seeks to minimize the impact of workers' compensation
losses through a proactive claims management and accident reduction program.
While the Company believes that current loss reserves are reasonable based on
claims filed and an estimate of claims incurred but not yet reported, there can
be no assurance that loss reserves and insurance coverage will be adequate in
amount to cover all workers' compensation claims.
Dependence on Key Officers. The Company's future success depends in
significant part upon the continued service of its key officers. Competition for
such personnel is intense and there can be no assurance that the Company will
retain its key officers or that it can attract or retain other highly qualified
managerial personnel in the future. The loss of any of its key officers could
have a material adverse effect upon the Company's business, operating results
and financial condition.
Government Regulations. In many states, the temporary services industry
is regulated, and firms such as the Company must be registered or qualify for an
exemption from registration. While these regulations have not materially
effected the conduct of the Company's business to date, there can be no
assurance that future regulations will not have such effect. State mandated
workers' compensation and unemployment insurance premiums, which the Company
pays for its
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temporary as well as its regular employees, can have a direct effect on cost of
services and thereby, profitability. In the past, federal legislative proposals
for national health insurance have included provisions extending health
insurance benefits to temporary employees and some states could impose sales
taxes or raise sales tax rates on temporary services. Further increases in such
premiums or rates or the introduction of new regulatory provisions could
substantially raise the costs associated with hiring temporary employees and
there is no assurance that these increased costs could be passed on to clients
without a significant decrease in the demand for temporary employees.
Year 2000. The Company developed and implemented a Year 2000 Readiness
Plan to address the Year 2000 issues, particularly with respect to its critical
systems. The Company believes that all critical internal business systems have
been upgraded to meet "Year 2000" requirements. The Company has not experienced
significant Year 2000 issues subsequent to 1999's fiscal year end and is not
aware of any significant Year 2000 issues for which it is not adequately
prepared. However, there can be no assurance that the Company's business,
operating results, or financial condition will not be adversely affected by
issues surrounding the Year 2000 conversion. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Readiness Disclosure."
ITEM 2. PROPERTIES
The Company has leased approximately 30,500 square feet of office space
through March 2004, for its corporate headquarters in Calabasas, California. In
addition, the Company leases office space in 81 branch office locations in the
metropolitan areas listed under the caption "Branch Office Network" in Item 1
hereof. A branch office typically occupies space ranging from approximately
1,200 to 1,500 square feet with lease terms that typically range from six months
to five years.
ITEM 3. LEGAL PROCEEDINGS
(a) There is no material legal proceeding to which the Company is a
party or to which its properties are subject.
(b) No material legal proceedings were terminated in the fourth quarter
of 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages as of December 31,
1999 were:
<TABLE>
<CAPTION>
Name Age Position
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<S> <C> <C>
H. Tom Buelter 58 Chairman of the Board and Chief Executive Officer
Kathy J. West 48 President and Chief Operating Officer
Ronald W. Rudolph 56 Senior Vice President, Finance and Chief Financial Officer (1)
Carrie S. Nebens 42 Executive Vice President, U.S. Operations
</TABLE>
(1) Executive Vice President, Finance and Chief Financial Officer, effective
March 13, 2000.
H. TOM BUELTER has served as Chief Executive Officer and a director of
the Company since he joined the Company in March 1989. Mr. Buelter was elected
Chairman of the Company's Board of Directors in December 1992. Mr. Buelter also
held the title of President from March 1989 to September 1997. From 1983 to
1989, he was Senior Vice President of Kelly Services, Inc. ("Kelly Services"), a
temporary personnel firm, and Chief Operating Officer of Kelly Assisted Living,
a division of Kelly Services which provides temporary home-care personnel.
KATHY J. WEST has served as President and Chief Operating Officer since
September 1997. From March 1995 to September 1997, Ms. West served as the
Company's Senior Vice President, Chief Operating Officer. From October 1993 to
March 1995, Ms. West served as the Company's Senior Vice President, Operations.
From April 1993 to October 1993, Ms. West served as the Company's Senior Vice
President, Employee and Business Services and, from January 1992 to April 1993,
as the Company's Vice President, Employee and Business Services. Ms. West joined
the Company in 1990, as Director of Branch Operations. From 1987 to 1990, she
served as the founding principal of Performance Training Systems, a training
services firm. From 1973 to 1987, she was employed by Kelly Services, where she
held a variety of field operating and corporate positions. Her responsibilities
included field sales, corporate branch operations, training and developing
international sales and service schools.
RONALD W. RUDOLPH has served as Executive Vice President, Finance and
Chief Financial Officer since March 13, 2000. From January 1, 1999 through March
12, 2000, Mr. Rudolph served as Senior Vice President, Finance and Chief
Financial Officer. From October 1996 through December 1998, Mr. Rudolph served
as Senior Vice President, Finance and Operations Support, and Chief Financial
Officer. From January 1996 through October 1996, Mr. Rudolph served as Senior
Vice President, Finance and Administration, and Chief Financial Officer. Mr.
Rudolph joined the Company in April 1995, as Vice President, Finance and
Administration, and Chief Financial Officer. From April 1987 to September 1994,
Mr. Rudolph was Vice President, Finance and Administration, and Chief Financial
Officer of Retix, a manufacturer of enterprise networking devices, and from June
1993 to September 1994, Mr. Rudolph was a director of Retix.
CARRIE S. NEBENS has served as Executive Vice President, U.S. Operations
since January 1, 1999. From July 1, 1998 through December 1998, Ms. Nebens
served as Senior Vice President, Strategic Operations. From September 1997
through June 1998, she served as Senior Vice President and General Manager, Lab
Support division. From October 1996 through September 1997, Ms. Nebens served as
Vice President and General Manager, Lab Support division. From January 1996
through October 1996, Ms. Nebens served as Vice President, Support Services.
From April 1995 through December 1996, she served as Vice President, Assignment
Services and Training, and was designated an executive officer of the company in
September 1995. From June 1993 to March 1995, she was Vice President, Field
Operations for the Company's Lab Support division. From January 1992 to May
1993, Ms. Nebens served as Vice President, Operations of the Company. From 1991
to 1992, Ms. Nebens served as Director, Branch Operations for the Company. Ms.
Nebens joined the Company in 1988, as an Account Manager, served from 1988 to
1990, as the regional Manager for the Chicago office, and in 1991, was promoted
to Regional Director and Director of Field Services.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq Stock Market under the
symbol ASGN. The following table sets forth the range of high and low sales
prices, as reported on the Nasdaq Stock Market for the period from January 1,
1998 to December 31, 1999. At January 31, 2000, the Company had approximately 85
holders of record of its Common Stock (although the Company has been informed
there are in excess of approximately 2,800 beneficial owners) and 10,839,311
shares outstanding.
<TABLE>
<CAPTION>
Price Range of Common Stock
---------------------------
High Low
------------ ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998
First Quarter 32-1/8 21-3/8
Second Quarter 34-15/16 28-1/4
Third Quarter 37-3/4 32-1/16
Fourth Quarter 37-1/2 22-5/8
Fiscal Year Ended December 31, 1999
First Quarter 38-1/2 23-15/16
Second Quarter 31-7/8 21-9/16
Third Quarter 33-1/2 24
Fourth Quarter 29-7/8 23
</TABLE>
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
to number of shares, sales prices and per share amounts of the Company's common
stock have been retroactively restated to reflect the increased number of common
shares outstanding.
On March 7, 2000, the Board of Directors authorized a two-for-one stock
split, effected as a 100 percent common stock dividend, to be distributed on
April 3, 2000 to shareholders of record as of March 27, 2000. Based on a
distribution date which occurs subsequent to the issuance of the financial
statements, references to number of shares, sales prices and per share amounts
of the Company's common stock have not been retroactively restated to reflect
the increased number of common shares outstanding.
Since inception, the Company has not declared or paid any cash dividends
on its Common Stock and currently plans to retain all earnings to support the
development and expansion of its business. The Company has no present intention
of paying any dividends on its Common Stock in the foreseeable future. However,
the Board of Directors of the Company periodically reviews the Company's
dividend policy to determine whether the declaration of dividends is
appropriate.
9
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Company.
This historical data should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
(in thousands, except per share data) 1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues $ 72,617 $ 88,188 $107,849 $132,741 $159,473
Cost of services 50,812 61,231 74,748 90,705 107,652
-------- -------- -------- -------- --------
Gross profit 21,805 26,957 33,101 42,036 51,821
Operating expenses 14,950 17,699 20,714 25,308 30,428
-------- -------- -------- -------- --------
Operating income 6,855 9,258 12,387 16,728 21,393
Acquisition costs -- 401 -- -- --
-------- -------- -------- -------- --------
Income before interest and income taxes 6,855 8,857 12,387 16,728 21,393
Interest income, net 410 549 833 1,336 1,635
-------- -------- -------- -------- --------
Income before income taxes 7,265 9,406 13,220 18,064 23,028
Provision for income taxes 2,924 3,800 4,954 6,748 8,566
-------- -------- -------- -------- --------
Net income $ 4,341 $ 5,606 $ 8,266 $ 11,316 $ 14,462
-------- -------- -------- -------- --------
Basic earnings per share $ 0.44 $ 0.55 $ 0.78 $ 1.04 $ 1.32
-------- -------- -------- -------- --------
Weighted average number of
common shares outstanding 9,974 10,207 10,561 10,860 10,953
-------- -------- -------- -------- --------
Diluted earnings per share $ 0.41 $ 0.51 $ 0.75 $ 1.00 $ 1.29
-------- -------- -------- -------- --------
Weighted average number of common
and common equivalent shares
outstanding 10,530 10,898 11,031 11,302 11,186
-------- -------- -------- -------- --------
BALANCE SHEET DATA
Cash, cash equivalents and current
portion of marketable securities $ 6,892 $ 14,102 $ 23,709 $ 30,466 $ 35,271
Working capital 14,702 23,709 35,225 43,987 54,769
Total assets 23,922 31,874 44,864 62,028 71,740
Long-term liabilities -- -- -- -- --
Stockholders' equity 20,148 27,635 39,272 54,226 63,447
</TABLE>
10
<PAGE> 11
ITEM 7. 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, management of growth,
particularly in international markets, risks inherent in expansion into new
international markets and new professions, the integration of acquired
operations, the Company's ability to attract, train and retain qualified Account
Managers and temporary employees in the laboratory, science, financial and
environmental fields, and other risks discussed in "Risk Factors That May Affect
Future Results" in Item 1 of this Annual Report, beginning on page 4, 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.
SEASONALITY
The Company's results have historically been subject to seasonal
fluctuations. Demand for the Company's temporary employees typically declines
from the year-end holiday season through February, resulting in a corresponding
decrease in revenues, operating income and net income. Demand for the Company's
temporary employees also often declines in June, July and August due to
decreases in clients' activity during vacation periods and the availability of
students to perform temporary work. As a result, the Company has experienced
slower growth or declines in revenues, operating income and net income during
the first quarter and from the second quarter to third quarter of prior years.
YEARS ENDED DECEMBER 31, 1998 AND 1999
REVENUES. Revenues increased by 20.1% from $132,741,000 in the year
ended December 31, 1998, to $159,473,000 in the year ended December 31, 1999, as
a result of the increased revenues of the Lab Support and the Healthcare
Financial Staffing segments.
The growth of the Lab Support segment's revenues was primarily
attributable to an increase in the number of temporary employees on assignment
and to a lesser extent to an increase in average hourly billing rates during
1999. 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, better 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, which 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 and
average weekly hours worked during 1999.
The growth of the Healthcare Financial Staffing segment's revenues was
primarily attributable to an increase in the number of temporary employees on
assignment and to a lesser extent to an increase in average hourly billing rates
during 1999. 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 Financial Staffing segment has older, better 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 and benefits paid by the Company in
connection with such compensation. Cost of services increased 18.7% from
$90,705,000 in 1998 to $107,652,000 in 1999. Cost of services as a percentage of
revenues decreased from 68.3% in 1998 to 67.5% in 1999. This decrease was
primarily attributable to a decrease in workers' compensation and state
unemployment insurance expense in both segments in 1999, partially offset by an
increase in employer paid benefits in both segments.
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, 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. Operating expenses increased 20.2%
from $25,308,000 in 1998 to $30,428,000 in 1999. Operating expenses as a
percentage of revenues remained consistent at 19.1% in the 1998 and 1999
periods. This result was primarily attributable to leveraging a centralized
support system over a larger revenue base, offset by investments in Account
Manager training and recruiting, expenses for international expansion into
Canada and the UK, and an increase in the hiring of new Account Managers for the
opening of new offices and the expansion of existing offices.
11
<PAGE> 12
INTEREST INCOME. Interest income increased 22.4% from $1,336,000 in 1998
to $1,635,000 in 1999, primarily as a result of interest earned on higher
interest-bearing cash, cash equivalent and marketable security account balances
in 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes increased 26.9%
from $6,748,000 in 1998 to $8,566,000 in 1999. The Company's effective tax rate
remained relatively unchanged from 37.4% in 1998 compared to 37.2% in 1999.
YEARS ENDED DECEMBER 31, 1997 AND 1998
REVENUES. Revenues increased by 23.1% from $107,849,000 in the year
ended December 31, 1997, to $132,741,000 in the year ended December 31, 1998, as
a result of the increased revenues of the Lab Support and the Healthcare
Financial Staffing segments.
The growth of the Lab Support segment's revenues was primarily
attributable to an increase in the number of temporary employees on assignment
and to a lesser extent to an increase in average hourly billing rates during
1998. 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, better 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, which 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 revenue from the division's higher
margin regulatory compliance business and an increase in average hourly billing
rates during 1998.
The growth of the Healthcare Financial Staffing segment's revenues was
primarily attributable to an increase in the number of temporary employees on
assignment and to a lesser extent to an increase in average hourly billing rates
during 1998. 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 Financial Staffing segment has older, better 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 and benefits paid by the Company in
connection with such compensation. Cost of services increased 21.3% from
$74,748,000 in 1997 to $90,705,000 in 1998. Cost of services as a percentage of
revenues decreased from 69.3% in 1997 to 68.3% in 1998. This decrease was
primarily attributable to a decrease in workers' compensation expense and
employer payroll taxes in both segments, and an increase in conversion fee
revenue (which has no associated cost of services) of both segments in 1998,
partially offset by an increase in employer paid benefits. In addition, lower
training and medical monitoring expenses in the Lab Support segment's
EnviroStaff division, primarily as a result of the transition of the division's
business away from remediation assignments, contributed to the decrease in 1998.
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, 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. Operating expenses increased 22.2%
from $20,714,000 in 1997 to $25,308,000 in 1998. Operating expenses as a
percentage of revenues decreased from 19.2% in 1997 to 19.1% in 1998. This
result was primarily attributable to leveraging a centralized support system
over a larger revenue base, partially offset by an increase in the hiring of new
Account Managers for the opening of new offices and the expansion of existing
offices.
INTEREST INCOME. Interest income increased 60.4% from $833,000 in 1997
to $1,336,000 in 1998, primarily as a result of interest earned on higher
interest-bearing cash, cash equivalent and marketable security account balances
in 1998.
PROVISION FOR INCOME TAXES. Provision for income taxes increased 36.2%
from $4,954,000 in 1997 to $6,748,000 in 1998. The Company's effective tax rate
remained relatively unchanged from 37.5% in 1997 compared to 37.4% in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash in 1998 and 1999 were funds
provided by operating activities. In 1998, operating activities provided
$11,622,000 of cash compared to $10,110,000 in 1999. This decrease was primarily
attributable to a smaller increase in accounts payable and accrued expenses, a
larger increase in accounts receivable, a decrease in income taxes receivable, a
larger increase in deferred income taxes, and a decrease in workers'
compensation deposits. This
12
<PAGE> 13
decrease was partially offset by a higher net income and larger increases in
depreciation and amortization in 1999 compared to 1998.
Cash used for investing activities totaled $4,716,000 in 1998 compared
to $7,934,000 in 1999. This increase was primarily attributable to lower
proceeds from the maturity of marketable securities, higher purchases of
marketable securities, higher purchases of furniture, equipment, and leasehold
improvements and a disbursement for officer loan receivable in 1999. This
increase was partially offset by cash payments of $808,000 for the acquisition
of substantially all of the assets of LabStaffers, Inc. in 1998 compared to an
installment payment of $360,000 in 1999.
Cash provided by financing activities was $2,472,000 in 1998 compared to
cash used for financing activities of $5,770,000 in 1999. The decrease was
primarily attributable to repurchases of common stock.
On August 28, 1998, the Company renewed its unsecured bank line of
credit. The maximum borrowings allowable under this agreement were $7,000,000
and accrued interest at the bank's reference rate. The Company terminated the
line of credit on July 1, 1999. No amounts were outstanding as of December 31,
1998.
The Company believes that its cash balances, together with the funds
from operations will be sufficient to meet its cash requirements through at
least the next twelve months.
YEAR 2000 READINESS DISCLOSURE
The Company developed and implemented a Year 2000 Readiness Plan to
address the Year 2000 issues, particularly with respect to its critical systems.
Critical systems are those whose failure poses a risk of disruption to the
Company's ability to provide employment for its temporary employees and
temporary staffing services to its clients. The Company believes that all
critical internal business systems have been upgraded to meet "Year 2000"
requirements. The Company has not experienced significant Year 2000 issues
subsequent to 1999's fiscal year end and is not aware of any significant Year
2000 issues for which it is not adequately prepared. However, there can be no
assurance that the Company's business, operating results or financial condition
will not be adversely affected by issues surrounding the Year 2000 conversion.
To date, the costs incurred by the Company with respect to Year 2000 compliance
have not been material.
ITEM 7A. 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 immaterial 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 currencies would have a
material impact on its financial statements.
13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
On Assignment, Inc.
Calabasas, California
We have audited the accompanying consolidated balance sheets of On
Assignment, Inc. and subsidiaries (the "Company") as of December 31, 1998 and
1999, and the related consolidated statements of income, comprehensive income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedule listed at Item 14. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, such consolidated financial statements present fairly,
in all material respects, the financial position of On Assignment, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Deloitte & Touche LLP
- -------------------------------
Deloitte & Touche LLP
Los Angeles, California
January 25, 2000
14
<PAGE> 15
ON ASSIGNMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 27,706,000 $ 24,120,000
Marketable securities 2,760,000 11,151,000
Accounts receivable, net of allowance for doubtful
accounts of $1,009,000 (1998) and $1,216,000 (1999) 18,578,000 22,780,000
Advances and deposits 70,000 74,000
Prepaid expenses 1,149,000 1,800,000
Officer loan receivable (Note 3) -- 400,000
Income taxes receivable 254,000 681,000
Deferred income taxes (Note 8) 1,272,000 2,056,000
------------ ------------
Total current assets 51,789,000 63,062,000
------------ ------------
Office Furniture, Equipment and
Leasehold Improvements, net (Note 2) 2,703,000 3,510,000
Marketable securities 5,325,000 2,256,000
Deferred income taxes (Note 8) 273,000 274,000
Workers' compensation restricted deposits (Note 6) 168,000 169,000
Goodwill, net (Note 4) 1,215,000 1,468,000
Other assets (Note 5) 555,000 1,001,000
------------ ------------
Total Assets $ 62,028,000 $ 71,740,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 309,000 $ 1,067,000
Accrued payroll 4,552,000 4,203,000
Deferred compensation (Note 5) 319,000 807,000
Accrued workers' compensation (Note 6) 1,437,000 1,447,000
Other accrued expenses 1,185,000 769,000
------------ ------------
Total current liabilities 7,802,000 8,293,000
------------ ------------
Commitments and Contingencies (Notes 5 and 6) -- --
Stockholders' Equity (Note 9):
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized, no shares issued or
outstanding in 1998 and 1999 -- --
Common Stock, $0.01 par value, 25,000,000 shares
authorized, 10,944,040 issued and outstanding in
1998 and 10,832,525 issued and outstanding in 1999 109,000 108,000
Paid-in capital 15,752,000 10,206,000
Deferred compensation liability (Note 5) -- 294,000
Retained earnings 38,388,000 52,850,000
Accumulated other comprehensive income (23,000) (11,000)
------------ ------------
Total stockholders' equity 54,226,000 63,447,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 62,028,000 $ 71,740,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
15
<PAGE> 16
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $107,849,000 $132,741,000 $159,473,000
Cost of services 74,748,000 90,705,000 107,652,000
------------ ------------ ------------
Gross profit 33,101,000 42,036,000 51,821,000
Operating expenses 20,714,000 25,308,000 30,428,000
------------ ------------ ------------
Operating income 12,387,000 16,728,000 21,393,000
Interest income, net 833,000 1,336,000 1,635,000
------------ ------------ ------------
Income before income taxes 13,220,000 18,064,000 23,028,000
Provision for income taxes (Note 8) 4,954,000 6,748,000 8,566,000
------------ ------------ ------------
Net income $ 8,266,000 $ 11,316,000 $ 14,462,000
------------ ------------ ------------
Basic earnings per share $ 0.78 $ 1.04 $ 1.32
------------ ------------ ------------
Weighted average number of Common
Shares Outstanding 10,561,000 10,860,000 10,953,000
------------ ------------ ------------
Diluted earnings per share $ 0.75 $ 1.00 $ 1.29
------------ ------------ ------------
Weighted average number of Common and
Common Equivalent Shares Outstanding 11,031,000 11,302,000 11,186,000
------------ ------------ ------------
</TABLE>
PROFORMA EARNINGS PER SHARE CALCULATION (NOTE 1)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Basic earnings per share $ 0.39 $ 0.52 $ 0.66
-------------- -------------- --------------
Weighted average number of Common
Shares Outstanding 21,123,000 21,721,000 21,907,000
-------------- -------------- --------------
Diluted earnings per share $ 0.37 $ 0.50 $ 0.65
-------------- -------------- --------------
Weighted average number of Common and
Common Equivalent Shares Outstanding 22,063,000 22,604,000 22,372,000
-------------- -------------- --------------
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net income $ 8,266,000 $ 11,316,000 $ 14,462,000
Other comprehensive income:
Foreign currency translation adjustment (6,000) (17,000) 12,000
------------ ------------ ------------
Comprehensive income $ 8,260,000 $ 11,299,000 $ 14,474,000
------------ ------------ ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
16
<PAGE> 17
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------------------ ------------------------------- Paid-In
Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 0 $ 0 10,311,120 $ 103,000 $ 8,726,000
Exercise of common stock
options -- -- 402,563 4,000 2,321,000
Common stock issued --
Employee Stock Purchase Plan -- -- 13,552 -- 172,000
Disqualifying dispositions -- -- -- -- 880,000
Other comprehensive income --
Translation adjustments -- -- -- -- --
Net income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 0 0 10,727,235 107,000 12,099,000
Exercise of common stock
options -- -- 207,291 2,000 2,265,000
Common stock issued --
Employee Stock Purchase Plan -- -- 9,514 -- 205,000
Disqualifying dispositions -- -- -- -- 1,183,000
Other comprehensive income --
Translation adjustments -- -- -- -- --
Net income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 0 0 10,944,040 109,000 15,752,000
Exercise of common stock -- -- 218,443 2,000 1,776,000
options
Repurchases of Common Stock -- -- (330,000) (3,000) (7,809,000)
Deferred Compensation -- -- (9,882) -- (294,000)
Liability
Common stock issued --
Employee Stock Purchase Plan -- -- 9,924 -- 264,000
Disqualifying dispositions -- -- -- -- 517,000
Other comprehensive income --
Translation adjustments -- -- -- -- --
Net income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 0 $ 0 10,832,525 $ 108,000 $ 10,206,000
------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Deferred Other
Compensation Retained Comprehensive
Liability Earnings Income Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 -- $ 18,806,000 $ 0 $ 27,635,000
Exercise of common stock
options -- -- -- 2,325,000
Common stock issued --
Employee Stock Purchase Plan -- -- -- 172,000
Disqualifying dispositions -- -- -- 880,000
Other comprehensive income --
Translation adjustments -- -- (6,000) (6,000)
Net income -- 8,266,000 -- 8,266,000
------------ ------------ ------------ ------------
Balance, December 31, 1997 -- 27,072,000 (6,000) 39,272,000
Exercise of common stock
options -- -- -- 2,267,000
Common stock issued --
Employee Stock Purchase Plan -- -- -- 205,000
Disqualifying dispositions -- -- -- 1,183,000
Other comprehensive income --
Translation adjustments -- -- (17,000) (17,000)
Net income -- 11,316,000 -- 11,316,000
------------ ------------ ------------ ------------
Balance, December 31, 1998 -- 38,388,000 (23,000) 54,226,000
Exercise of common stock -- -- -- 1,778,000
options
Repurchases of Common Stock -- -- -- (7,812,000)
Deferred Compensation 294,000 -- -- --
Liability
Common stock issued --
Employee Stock Purchase Plan -- -- -- 264,000
Disqualifying dispositions -- -- -- 517,000
Other comprehensive income --
Translation adjustments -- -- 12,000 12,000
Net income -- 14,462,000 -- 14,462,000
------------ ------------ ------------ ------------
Balance, December 31, 1999 $ 294,000 $ 52,850,000 $ (11,000) $ 63,447,000
------------ ------------ ------------ ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
17
<PAGE> 18
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,266,000 $ 11,316,000 $ 14,462,000
Adjustments to reconcile net income to net cash
provided by operating activities, net of acquisitions:
Depreciation and amortization 815,000 948,000 1,158,000
Increase in allowance for doubtful accounts 451,000 593,000 738,000
Increase in deferred income taxes (250,000) (327,000) (785,000)
Loss on disposal of furniture and equipment 141,000 215,000 7,000
Increase in accounts receivable (3,403,000) (3,934,000) (4,927,000)
(Increase) Decrease in income taxes receivable (111,000) 1,040,000 86,000
Increase in accounts payable and accrued expenses 1,360,000 2,215,000 484,000
Increase in income taxes payable 873,000 -- --
Decrease (Increase) in workers' compensation
restricted deposits 147,000 428,000 (1,000)
Decrease (Increase) in prepaid expenses 2,000 (470,000) (651,000)
Increase in other assets (10,000) (402,000) (461,000)
------------ ------------ ------------
Net cash provided by operating activities 8,281,000 11,622,000 10,110,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (7,250,000) (10,345,000) (10,777,000)
Proceeds from the maturity of marketable securities 4,880,000 7,630,000 5,455,000
Acquisition of furniture, equipment and leasehold
improvements (1,180,000) (1,193,000) (1,849,000)
Proceeds from sale of furniture and equipment 8,000 2,000 1,000
Decrease (Increase) in advances and deposits 5,000 (2,000) (4,000)
Acquisition (Note 12) -- (808,000) (360,000)
Disbursements for officer loan receivable (Note 3) -- -- (400,000)
------------ ------------ ------------
Net cash used for investing activities (3,537,000) (4,716,000) (7,934,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 2,325,000 2,267,000 1,778,000
Proceeds from issuance of common stock --
Employee Stock Purchase Plan 172,000 205,000 264,000
Repurchases of common stock -- -- (7,812,000)
------------ ------------ ------------
Net cash provided by (used for) financing
activities 2,497,000 2,472,000 (5,770,000)
------------ ------------ ------------
Effect of exchange rate changes on cash and cash
equivalents (Note 1) (4,000) (11,000) 8,000
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 7,237,000 9,367,000 (3,586,000)
Cash and Cash Equivalents at Beginning of Period 11,102,000 18,339,000 27,706,000
------------ ------------ ------------
Cash and Cash Equivalents at End of Period $ 18,339,000 $ 27,706,000 $ 24,120,000
------------ ------------ ------------
Acquisition (Note 12):
Fair value of assets acquired $ -- $ 58,000 $ --
Goodwill -- 750,000 360,000
------------ ------------ ------------
Cash paid $ -- $ 808,000 $ 360,000
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Tax benefit of disqualifying dispositions (Note 8) $ 880,000 $ 1,183,000 $ 517,000
------------ ------------ ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
18
<PAGE> 19
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
On Assignment, Inc. (the "Company"), has two operating segments: Lab
Support and Healthcare Financial Staffing. The Lab Support operating segment
includes the combined results of the Lab Support, Clinical Lab Staff and
EnviroStaff divisions. The Lab Support segment provides temporary and permanent
placement of scientific personnel with laboratories and other institutions,
laboratory and medical staffing personnel to the healthcare industry, and
environmental professionals to the environmental health and safety fields. The
Company's Healthcare Financial Staffing segment provides temporary and permanent
placement of medical billing and collection professionals to the healthcare
industry. Significant accounting policies are as follows:
Principles of Consolidation. The Consolidated Financial Statements
include the accounts of the Company and its wholly owned domestic and foreign
subsidiaries (see Note 12). All significant intercompany accounts and
transactions have been eliminated.
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. ("ARI"), 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.
On May 12, 1997, the Company formed Assignment Ready Inc., a Canadian
corporation and wholly owned subsidiary of the Company, and commenced operations
in Toronto as Lab Support Canada during the third quarter of 1997.
On February 2, 1999, the Company formed On Assignment UK Limited, a
United Kingdom corporation and wholly owned subsidiary of the Company. On
February 16, 1999, On Assignment UK Limited formed Lab Support (UK) Limited, a
United Kingdom corporation and wholly owned subsidiary of On Assignment UK
Limited, and commenced operations as Lab Support UK during the first quarter of
1999.
Cash Flows and Marketable Securities. For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Investments having a maturity of more than three months and less than twelve
months are classified under current assets as marketable securities. Investments
having a maturity of more than twelve months are classified under non-current
assets as marketable securities. Marketable securities, which have been
classified as held to maturity, are recorded at amortized cost which
approximated market at December 31, 1998 and 1999.
The amortized cost and estimated fair value of marketable securities at
December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998:
Current marketable securities $ 2,760,000 $ 44,000 $ -- $ 2,804,000
Non-current marketable securities 5,325,000 61,000 (7,000) 5,379,000
----------- ----------- ----------- -----------
Total $ 8,085,000 $ 105,000 $ (7,000) $ 8,183,000
----------- ----------- ----------- -----------
1999:
Current marketable securities $11,151,000 $ 9,000 $ (159,000) $11,001,000
Non-current marketable securities 2,256,000 8,000 (19,000) 2,245,000
----------- ----------- ----------- -----------
Total $13,407,000 $ 17,000 $ (178,000) $13,246,000
----------- ----------- ----------- -----------
</TABLE>
Cash paid for income taxes (net of refunds) for the years ended December
31, 1997, 1998, and 1999 was $4,443,000, $6,035,000 and $9,262,000,
respectively.
19
<PAGE> 20
Office Furniture, Equipment and Leasehold Improvements and Depreciation.
Office furniture, equipment and leasehold improvements are stated at cost.
Depreciation and amortization are provided using the straight-line method over
the estimated useful lives of the related assets, generally three to five years.
The Company reviews long-lived assets and certain identifiable
intangibles for impairment at least quarterly. An impairment loss is recognized
when the sum of the undiscounted future cash flows is less than the carrying
amount of the asset. No such impairment losses have been recognized as of
December 31, 1997, 1998 and 1999.
Income Taxes. Deferred taxes result from temporary differences between
the bases of assets and liabilities for financial and tax reporting purposes.
Deferred tax assets and liabilities represent future tax consequences of these
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Revenue Recognition. Revenue from temporary assignments is recognized
when earned, based on hours worked by the Company's temporary employees.
Permanent placement fees are recognized when earned, upon conversion of a
temporary employee to a client's regular employee.
Foreign Currency Translation. 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 in accumulated other
comprehensive income as a separate component of stockholders' equity.
Earnings per Share. Basic earnings per share are computed based upon the
weighted average number of common shares outstanding and diluted earnings per
share are computed based upon the weighted average number of common shares
outstanding and dilutive common share equivalents (consisting of incentive stock
options and non-qualified stock options) outstanding during the periods using
the treasury stock method. Following is a reconciliation of the shares used to
compute basic and diluted earnings per share:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of shares outstanding
used to compute basic earnings per share 10,561,000 10,860,000 10,953,000
Dilutive effect of stock options 470,000 442,000 233,000
---------- ---------- ----------
Number of shares used to compute diluted earnings
per share 11,031,000 11,302,000 11,186,000
---------- ---------- ----------
</TABLE>
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, sales
prices 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.
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
December 31, 1999, the Company had repurchased 330,000 shares of its common
stock at a total cost of $7,812,000.
On March 7, 2000, the Board of Directors authorized a two-for-one stock
split, effected as a 100 percent common stock dividend, to be distributed on
April 3, 2000 to shareholders of record as of March 27, 2000. Based on a
distribution date which occurs subsequent to the issuance of the financial
statements, references to number of shares, sales prices and per share amounts
of the Company's common stock have not been retroactively restated to reflect
the increased number of common shares outstanding. Proforma earnings per share
calculations are included in the Consolidated Statements of Income.
Stock-Based Compensation. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." The Company has adopted only the
disclosure portion of the statement (see Note 9).
20
<PAGE> 21
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.
Concentration of Credit Risk. Financial instruments that potentially
subject the Company to credit risks consist primarily of cash and cash
equivalents, marketable securities, and trade receivables. The Company places
its cash and cash equivalents and marketable securities with quality credit
institutions, and limits the amount of credit exposure with any one institution.
Concentration of credit risk with respect to accounts receivable are limited
because of the large number of geographically dispersed customers, thus
spreading the trade credit risk. The Company performs ongoing credit evaluations
to identify risks and maintains an allowance to address these risks.
Fair Value of Financial Instruments. The recorded values of cash and
cash equivalents, accounts receivable, accounts payable and accrued expenses
approximate their fair value based on their short-term nature. The fair values
of marketable securities were estimated using quoted market prices.
Derivative Instruments and Hedging Activities. In June 1999, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 137, which delays the effective date of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133, which requires that all derivatives be
recognized as assets or liabilities in the consolidated balance sheet measured
at fair value, is effective for the Company starting in its fiscal year 2001,
but is currently not expected to have a significant impact.
Reclassifications. Certain reclassifications have been made to the prior
year consolidated financial statements to conform with the current year
consolidated financial statement presentation.
2. OFFICE FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS.
Office furniture, equipment and leasehold improvements at December 31,
1998 and 1999, consisted of the following:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Furniture and fixtures $ 1,202,000 $ 1,674,000
Computers and related equipment 2,592,000 3,276,000
Machinery and equipment 1,064,000 1,368,000
Leasehold improvements 726,000 1,041,000
Construction in progress 570,000 419,000
----------- -----------
6,154,000 7,778,000
Less accumulated depreciation and amortization (3,451,000) (4,268,000)
----------- -----------
Total $ 2,703,000 $ 3,510,000
----------- -----------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1997,
1998 and 1999 was $753,000, $860,000 and $1,035,000, respectively.
3. OFFICER LOANS RECEIVABLE.
In June 1999, the Company loaned an officer of the Company $400,000,
bearing interest at 4.92%, compounded semi-annually. Principal and interest are
payable on June 10, 2000.
4. GOODWILL.
Goodwill represents the excess of the purchase price over the fair value
of the net assets acquired (see Note 12). Goodwill is stated net of accumulated
amortization of $243,000 at December 31, 1998 and $352,000 at December 31, 1999.
Goodwill is being amortized on a straight-line basis over fifteen years. The
Company periodically reviews goodwill to assess recoverability; impairments
would be recognized in operating results if a permanent diminution in value were
to occur.
21
<PAGE> 22
5. 401(k) RETIREMENT SAVINGS PLAN, DEFERRED COMPENSATION PLAN AND CHANGE
IN CONTROL SEVERANCE PLAN.
Effective January 1, 1995, the Company adopted the On Assignment, Inc.
401(k) Retirement Savings Plan under Section 401(k) of the Internal Revenue
Code, under which eligible employees may elect to have a portion of their salary
deferred and contributed to the plan. The amount of salary deferred is not
subject to Federal and State income tax at the time of deferral. The Plan covers
all eligible employees and provides for matching or discretionary contributions
at the discretion of the Board of Directors. The Company made no matching or
discretionary contributions to the plan during the years ended December 31,
1997, 1998 and 1999.
Effective January 1, 1998, the Company implemented the On Assignment,
Inc. Deferred Compensation Plan. The plan permits a select group of management
or highly compensated employees or directors to annually elect to defer up to
100 percent of their base salary, annual bonus, stock option gain or fees on a
pre-tax basis, and earn tax-deferred interest on these amounts. Distributions
from the plan are made at retirement, death or termination of employment, in a
lump sum, or over five, ten or fifteen years. At December 31, 1999, the
liability under the plan was approximately $807,000. A life insurance policy is
maintained on the participants relating to the plan, whereby the Company is the
sole owner and beneficiary of such insurance. The cash surrender value of this
life insurance policy, which is reflected in other assets, was approximately
$754,000 at December 31, 1999.
During 1999, a participant in the Deferred Compensation Plan performed a
stock-for-stock exercise resulting in a gain of approximately $294,000. A stock
certificate for 9,882 shares was issued into a rabbi trust in the Company's
name. The employer stock held by the rabbi trust has been classified in equity
in the same manner as treasury stock, with a reduction in shares outstanding and
a corresponding reduction to Additional Paid-in Capital. The deferred
compensation liability is also shown as a separate component in equity.
On February 12, 1998, the Company adopted the On Assignment, Inc. Change
in Control Severance Plan ("the Plan") to provide severance benefits for
officers and other eligible employees who are terminated following an
acquisition of the Company. Under the Plan, if an eligible employee is
involuntarily terminated within 18 months of a change in control, as defined in
the Plan, then the employee will be entitled to salary plus target bonus payable
in a lump sum. The amounts payable would range from one month to 18 months of
salary and target bonus depending on the employee's length of service and
position with the Company.
6. COMMITMENTS AND CONTINGENCIES.
The Company leases its facilities and certain office equipment under
operating leases which expire at various dates through 2004. Certain leases
contain rent escalations and/or renewal options.
The following is a summary of future minimum lease payments by year:
<TABLE>
<CAPTION>
Operating
Leases
----------
<S> <C>
2000 $2,013,000
2001 1,641,000
2002 1,427,000
2003 1,229,000
2004 257,000
----------
Total Minimum Lease Payments $6,567,000
----------
</TABLE>
Rent expense for the years ended December 31, 1997, 1998 and 1999 was
$1,433,000, $1,593,000 and $2,342,000, respectively.
The Company and its subsidiaries are involved in various legal
proceedings, claims and litigation arising in the ordinary course of business.
However, based on the facts currently available, management believes that the
disposition of matters that are pending or asserted will not have a materially
adverse effect on the financial position of the Company.
The Company is partially self-insured for workers' compensation expense.
In connection with this program, cash deposits are required to be held by the
reinsurer for the payment of losses and as collateral amounting to $168,000 and
$169,000 at December 31, 1998 and 1999, respectively. These workers'
compensation deposits are restricted as to withdrawal and have therefore been
classified as non-current assets in the accompanying Consolidated Balance
Sheets.
22
<PAGE> 23
These funds are invested primarily in three-month treasury bills and are
recorded at amortized cost which approximated market at December 31, 1998 and
1999. In addition, the Company has provided a stand-by letter of credit
amounting to approximately $878,000 at December 31, 1998 and 1999, in connection
with this program. The self-insurance claim liability is determined based on
claims filed and an estimate of claims incurred but not yet reported and
amounted to approximately $1,437,000 and $1,447,000 at December 31, 1998 and
1999, respectively.
The Company's EnviroStaff subsidiary was operating under a loss-retro
workers' compensation policy from July 1, 1995 through September 30, 1996. In
connection with this program, EnviroStaff paid a base premium with an excess
loss cap of $50,000 per occurrence. Medical and indemnity expenses are paid at
cost plus administration fees and taxes. The insurance claim liability is
determined based on claims filed and an estimate of claims incurred but not yet
reported. In addition, EnviroStaff provided a standby letter of credit amounting
to approximately $120,000 that expired on July 1, 1998. Effective October 1,
1996, EnviroStaff was added to the Company's workers' compensation program.
7. BORROWING ARRANGEMENTS.
On August 28, 1998, the Company renewed its unsecured bank line of
credit. The maximum borrowings allowable under this agreement were $7,000,000
and accrued interest at the bank's reference rate. The Company terminated the
line of credit on July 1, 1999. No amounts were outstanding as of December 31,
1998.
8. INCOME TAXES.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Federal:
Current $ 4,166,000 $ 6,164,000 $ 8,196,000
Deferred (271,000) (290,000) (707,000)
----------- ----------- -----------
3,895,000 5,874,000 7,489,000
----------- ----------- -----------
State:
Current 1,038,000 911,000 1,155,000
Deferred 21,000 (37,000) (78,000)
----------- ----------- -----------
1,059,000 874,000 1,077,000
----------- ----------- -----------
Total $ 4,954,000 $ 6,748,000 $ 8,566,000
=========== =========== ===========
</TABLE>
Deferred income taxes arise from the recognition of certain assets and
liabilities for tax purposes in periods different from those in which they are
recognized in the financial statements. These differences relate primarily to
workers' compensation, state taxes, bad debt, deferred compensation, and
depreciation and amortization expenses.
Deferred assets and liabilities are classified as current and
non-current according to the nature of the assets or liabilities from which they
arose.
The components of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1999
-------------------------- -------------------------
Federal State Federal State
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Deferred tax assets:
Current:
Allowance for doubtful accounts $343,000 $49,000 $416,000 $62,000
Employee related accruals 59,000 8,000 515,000 76,000
State taxes 297,000 -- 385,000 --
Workers' compensation loss reserve 499,000 71,000 524,000 78,000
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C>
---------- -------- ---------- --------
Total current deferred tax assets 1,198,000 128,000 1,840,000 216,000
---------- -------- ---------- --------
Non-current:
Depreciation and amortization expense 205,000 30,000 139,000 21,000
Other 37,000 1,000 114,000 --
---------- -------- ---------- --------
Total deferred tax assets 1,440,000 159,000 2,093,000 237,000
Deferred tax liabilities:
Current:
Other (54,000) -- -- --
---------- -------- ---------- --------
Net deferred tax asset $1,386,000 $159,000 $2,093,000 $237,000
---------- -------- ---------- --------
</TABLE>
The net operating loss carryforwards included in other non-current deferred tax
assets at December 31, 1998 and 1999, were acquired through the 1994 acquisition
of 1st Choice Personnel, Inc. These carryforwards are available to offset future
taxable income, subject to annual limitations, through the year 2007.
The reconciliation between the amount computed by applying the U.S.
federal statutory tax rate of 35% in 1997, 1998 and 1999 to income before income
taxes and the actual income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Income tax expenses at the statutory rate $ 4,627,000 $ 6,322,000 $ 8,060,000
State income taxes, net of federal income tax benefit 401,000 575,000 1,119,000
Tax-free interest and other (74,000) (149,000) (613,000)
----------- ----------- -----------
Total $ 4,954,000 $ 6,748,000 $ 8,566,000
----------- ----------- -----------
</TABLE>
At December 31, 1998 and 1999, net income taxes payable and additional
paid-in capital include tax benefits amounting to $1,183,000 and $517,000,
respectively, resulting from disqualifying dispositions by officers and
employees of common stock of the Company acquired through the exercise of stock
options.
9. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN.
Under its Stock Option Plan, the Company may grant employees,
contractors, and non-employee members of the Board of Directors incentive or
non-qualified stock options to purchase an aggregate of up to 4,000,000 shares
of its common stock. Optionees, option prices, option amounts, grant dates and
vesting are established by the Compensation Committee of the Board of Directors.
The option prices may not be less than 85% of the fair market value of the stock
at the time the option is granted. Stock options granted to date generally
become exercisable over a pro rata period of four years and have a maximum term
of ten years measured from the grant date.
24
<PAGE> 25
The following summarizes stock option activity for the years ended
December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Weighted
Non- Average
Incentive Qualified Exercise
Stock Stock Price
Options Options Per Share
---------- ---------- ---------
<S> <C> <C> <C>
Outstanding at January 1, 1997 1,126,770 321,710 $10.05
Granted 409,968 161,032 $20.46
Exercised (335,358) (67,201) $ 5.77
Canceled (405,573) (29,392) $14.14
---------- ----------
Outstanding at December 31, 1997 795,807 386,149 $15.04
Granted 340,192 142,958 $32.37
Exercised (136,843) (70,448) $10.94
Canceled (199,784) (1,500) $21.53
---------- ----------
Outstanding at December 31, 1998 799,372 457,159 $21.34
Granted 418,911 168,539 $26.85
Exercised (210,442) (14,763) $ 8.99
Canceled (198,030) (10,447) $27.98
---------- ----------
Outstanding at December 31, 1999 809,811 600,488 $24.63
---------- ----------
</TABLE>
The following summarizes pricing and term information for options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ ------------------------------
Weighted Weighted Weighted
Number Average Average Average
Range of Outstanding at Remaining Exercise Exercisable at Exercise
Exercise Prices December 31, 1999 Contractual Life Price December 31, 1999 Price
- ------------------ ----------------- ---------------- -------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
$ 4.875 to $ 19.50 319,128 6.0 years $ 14.45 300,366 $ 14.44
19.625 to 23.00 297,387 8.3 years 22.74 123,206 22.71
23.375 to 27.375 319,262 9.8 years 26.44 51,519 25.16
27.625 to 32.438 423,522 9.1 years 31.01 105,848 31.64
32.625 to 36.75 51,000 8.7 years 34.95 18,785 34.88
--------- --------- --------- --------- ---------
$ 4.875 to $ 36.75 1,410,299 8.4 years $ 24.63 599,724 $ 20.74
--------- --------- --------- --------- ---------
</TABLE>
The Employee Stock Purchase Plan allows eligible employees to purchase
Common Stock of the Company, through payroll deductions, at 85% of the lower of
the market price on the first day or the last day of the semi-annual purchase
period. Eligible employees may contribute up to 10% of their base earnings
toward the purchase of the stock. During 1997, 1998 and 1999, shares issued
under the plan were 13,552, 9,514 and 9,924, respectively.
The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its Stock Option Plan and Employee
Stock Purchase Plan and accordingly, no compensation cost has been recognized
for its stock option and purchase plans. The Company has adopted the disclosure
only provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123). The estimated fair
value of options granted during 1997, 1998 and 1999 pursuant to SFAS No. 123 was
approximately $5,530,000, $7,342,000 and $7,693,000, respectively, and the
estimated fair value of stock purchased under the Company's Employee Stock
Purchase
25
<PAGE> 26
Plan was approximately $60,000, $72,000 and $93,000, respectively. Had
compensation cost for the Company's Stock Option Plan and its Employee Stock
Purchase Plan been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, the
Company's pro forma net income would have been $7,368,000, $9,771,000 and
$11,993,000 and pro forma earnings per share would have been $0.68, $0.87 and
$1.08 for 1997, 1998 and 1999, respectively. Because the SFAS No. 123 method of
accounting has not been applied to options granted prior to January 1, 1995, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.
The fair value of options granted under the Company's Stock Option Plan
during 1997, 1998 and 1999 was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used: (i) no dividend yield in 1997, 1998 or 1999, (ii) expected
volatility of approximately 48% in 1997, 49% in 1998 and 50% in 1999, (iii)
risk-free interest rate of approximately 6.2% in 1997, 5.0% in 1998 and 5.8% in
1999, and (iv) expected lives of the options of approximately 5 years in 1997,
1998 and 1999. Pro forma compensation cost of shares purchased under the
Employee Stock Purchase Plan is measured based on the discount from market
value.
10. BUSINESS SEGMENTS.
Indicated below is the information required to comply with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information.
The Company has two reportable operating segments: Lab Support and
Healthcare Financial Staffing. The Lab Support operating segment includes the
combined results of the Lab Support, Clinical Lab Staff 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, laboratory and medical staffing professionals to the healthcare
industry and environmental professionals to the environmental health and safety
fields. The Healthcare Financial Staffing segment provides temporary and
permanent placement services of medical billing and collection professionals to
the healthcare industry.
The Company's management evaluates performance of each segment primarily
based on revenues and operating income (before acquisition costs, interest and
income taxes). The accounting policies of the segments are the same as those
described in the Summary of Significant Accounting Policies (see Note 1). The
information in the following table is derived directly from the segments'
internal financial reporting used for corporate management purposes. Certain
corporate expenses are not allocated to and/or among the operating segments.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Lab Support $ 96,610,000 $110,644,000 $120,380,000
Healthcare Financial Staffing 11,239,000 22,097,000 39,093,000
------------ ------------ ------------
$107,849,000 $132,741,000 $159,473,000
------------ ------------ ------------
Gross Profit:
Lab Support $ 29,528,000 $ 34,750,000 $ 39,089,000
Healthcare Financial Staffing 3,573,000 7,286,000 12,732,000
------------ ------------ ------------
$ 33,101,000 $ 42,036,000 $ 51,821,000
------------ ------------ ------------
Operating Income:
Lab Support $ 11,367,000 $ 13,532,000 $ 14,731,000
Healthcare Financial Staffing 1,020,000 3,196,000 6,662,000
------------ ------------ ------------
$ 12,387,000 $ 16,728,000 $ 21,393,000
------------ ------------ ------------
</TABLE>
11. UNAUDITED QUARTERLY RESULTS.
The following table presents unaudited quarterly financial information
for each of the eight quarters ended December 31, 1999. In the opinion of
management, the quarterly information contains all adjustments, consisting only
of
26
<PAGE> 27
normal recurring accruals, necessary for a fair presentation thereof. The
operating results for any quarter are not necessarily indicative of the results
for any future period.
<TABLE>
<CAPTION>
(Unaudited)
(in thousands, except per share data)
Quarter Ended
--------------------------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $28,567 $32,508 $35,535 $36,131 $34,789 $39,272 $42,227 $43,185
Cost of services 19,754 22,261 24,192 24,498 23,569 26,524 28,450 29,109
------- ------- ------- ------- ------- ------- ------- -------
Gross profit 8,813 10,247 11,343 11,633 11,220 12,748 13,777 14,076
Operating expenses 5,397 6,230 6,966 6,715 6,791 7,613 8,177 7,847
------- ------- ------- ------- ------- ------- ------- -------
Operating income 3,416 4,017 4,377 4,918 4,429 5,135 5,600 6,229
Interest income 302 322 357 355 395 411 414 415
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes 3,718 4,339 4,734 5,273 4,824 5,546 6,014 6,644
Provision for income taxes 1,400 1,614 1,772 1,962 1,794 2,063 2,231 2,478
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 2,318 $ 2,725 $ 2,962 $ 3,311 $ 3,030 $ 3,483 $ 3,783 $ 4,166
------- ------- ------- ------- ------- ------- ------- -------
Basic earnings per share $ 0.22 $ 0.25 $ 0.27 $ 0.30 $ 0.28 $ 0.32 $ 0.35 $ 0.38
------- ------- ------- ------- ------- ------- ------- -------
Weighted average number of
common shares outstanding 10,767 10,842 10,898 10,934 11,013 11,054 10,919 10,839
------- ------- ------- ------- ------- ------- ------- -------
Diluted earnings per share $ 0.21 $ 0.24 $ 0.26 $ 0.29 $ 0.27 $ 0.31 $ 0.34 $ 0.38
------- ------- ------- ------- ------- ------- ------- -------
Weighted average number
of common and common
equivalent shares
outstanding 11,202 11,296 11,361 11,332 11,340 11,245 11,137 11,025
------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
12. ACQUISITIONS.
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 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 December 31, 1999. This contingent consideration
has been added to goodwill in the accompanying Consolidated Balance Sheets.
Additional consideration not to exceed $480,000 may be paid 25 months after the
closing date, contingent on certain revenue targets, and any contingent
consideration will also be added to goodwill.
27
<PAGE> 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
Information regarding the Company's directors will be set forth under
the caption "Proposal One -- Election of Directors" in the Company's proxy
statement for use in connection with its Annual Meeting of Stockholders
scheduled to be held on June 13, 2000 (the "2000 Proxy Statement") and is
incorporated herein by reference. The 2000 Proxy Statement will be filed with
the Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year.
Information regarding the Company's executive officers is set forth in
Part I of this Annual Report on Form 10-K and is incorporated herein by
reference.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Information regarding compliance with Section 16(a) of the Exchange Act
will be set forth under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Company's 2000 Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding remuneration of the Company's directors and
officers will be set forth under the captions "Proposal One -- Election of
Directors," and "Executive Compensation and Related Information" in the
Company's 2000 Proxy Statement to be filed within 120 days after the end of the
Company's fiscal year and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management will be set forth under the captions "General Information for
Stockholders -- Record Date, Voting and Share Ownership" in the Company's 2000
Proxy Statement to be filed within 120 days after the end of the Company's
fiscal year and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
will be set forth under the caption "Executive Compensation and Related
Information -- Certain Relationships and Related Transactions" in the Company's
2000 Proxy Statement to be filed within 120 days after the end of the Company's
fiscal year and is incorporated herein by reference.
28
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT PAGE
<S> <C> <C>
1. Financial Statements:
Report of Independent Auditors 14
Consolidated Balance Sheets at December 31, 1998 and 1999 15
Consolidated Statements of Income and Comprehensive Income
for the Years Ended December 31, 1997, 1998 and 1999 16
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1998 and 1999 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999 18
Notes to Consolidated Financial Statements 19
2. Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts 33
Schedules other than those referred to above have been
omitted because they are not applicable or not required
under the instructions contained in Regulation S-X or
because the information is included elsewhere in the
financial statements or notes thereto.
</TABLE>
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1999.
29
<PAGE> 30
(c) EXHIBITS
<TABLE>
<CAPTION>
NUMBER FOOTNOTE DESCRIPTION
- ------ -------- -----------
<S> <C> <C>
3.1 (1) Amended and Restated Certificate of Incorporation of the Company.
3.2 (2) Amended and Restated Bylaws of the Company.
4.2 (3) Specimen Common Stock Certificate.
10.1 (3) Form of Indemnification Agreement.
10.2 (4) Restated 1987 Stock Option Plan, as amended.
10.3 (5) 1992 Employee Stock Purchase Plan.
10.9 (6) Office lease dated December 7, 1993, by and between the Company and Malibu
Canyon Office Partners, LP.
21.1 Subsidiaries of the Registrant.
24.1 Consent of Deloitte & Touche LLP.
25.1 Power of Attorney (see page 32).
</TABLE>
(1) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 0-20540) filed with the Securities
and Exchange Commission on March 30, 1993.
(2) Incorporated by reference from an exhibit filed with the Company's
Current Report on Form 8-K (File No. 0-20540) filed with the Securities
and Exchange Commission on February 4, 1998.
(3) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-1 (File No. 33-50646) declared
effective by the Securities and Exchange Commission on September 21,
1992.
(4) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 0-20540) filed with the Securities
and Exchange Commission on March 28, 1997.
(5) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-8 (File No. 33-57078) filed with the
Securities and Exchange Commission on January 19, 1993.
(6) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 0-20540) filed with the Securities
and Exchange Commission on March 24, 1994.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Calabasas, California on this 29th day of March, 2000.
ON ASSIGNMENT, INC.
By: /s/ H. TOM BUELTER
-------------------------------
H. Tom Buelter
Chairman of the Board and
Chief Executive Officer
31
<PAGE> 32
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints H. Tom Buelter and Ronald W. Rudolph and
each of them, as his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and re-substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Report on Form 10-K, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ H. TOM BUELTER
- ------------------------- Chairman of the Board and March 29, 2000
H. Tom Buelter Chief Executive Officer
(Principal Executive Officer)
/s/ RONALD W. RUDOLPH
- ------------------------- Executive Vice President, Finance March 29, 2000
Ronald W. Rudolph and Chief Financial Officer
(Principal Financial and Accounting
Officer)
/s/ KAREN BRENNER
- ------------------------- Director March 29, 2000
Karen Brenner
/s/ JONATHAN S. HOLMAN
- ------------------------- Director March 29, 2000
Jonathan S. Holman
/s/ JEREMY M. JONES
- ------------------------- Director March 29, 2000
Jeremy M. Jones
/s/ WILLIAM E. BROCK
- ------------------------- Director March 29, 2000
William E. Brock
</TABLE>
32
<PAGE> 33
ON ASSIGNMENT, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
beginning of costs and other end of
Description period expenses accounts Deductions period
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts $ 553,000 451,000 -- (270,000) $ 734,000
Year ended December 31, 1998
Allowance for doubtful accounts $ 734,000 593,000 -- (318,000) $1,009,000
Year ended December 31, 1999
Allowance for doubtful accounts $1,009,000 738,000 -- (531,000) $1,216,000
</TABLE>
33
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Assignment Ready, Inc., a Delaware corporation, is a wholly owned subsidiary of
EnviroStaff, Inc., a Minnesota corporation, which in turn is a wholly owned
subsidiary of the Registrant. Assignment Ready, Inc. does business under the
names "Lab Support," "Healthcare Financial Staffing," "Clinical Lab Staff," and
"EnviroStaff."
Other subsidiaries of the Registrant are omitted from this exhibit pursuant to
Regulation S-K 601(b)(21)(ii).
34
<PAGE> 1
Exhibit 24.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-57078 and No. 333-38849 of On Assignment, Inc. and subsidiaries on Form
S-8 of our report dated January 25, 2000, with respect to the consolidated
financial statements and financial statement schedule of On Assignment, Inc.
appearing in this Annual Report on Form 10-K of On Assignment, Inc. for the year
ended December 31, 1999.
/s/ Deloitte & Touche LLP
- -------------------------------
Deloitte & Touche LLP
March 29, 2000
Los Angeles, California
35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS; CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 24,289,000
<SECURITIES> 13,407,000
<RECEIVABLES> 37,403,000
<ALLOWANCES> 1,216,000
<INVENTORY> 0
<CURRENT-ASSETS> 63,062,000
<PP&E> 7,778,000
<DEPRECIATION> 4,268,000
<TOTAL-ASSETS> 71,740,000
<CURRENT-LIABILITIES> 8,293,000
<BONDS> 0
0
0
<COMMON> 108,000
<OTHER-SE> 63,339,000
<TOTAL-LIABILITY-AND-EQUITY> 71,740,000
<SALES> 0
<TOTAL-REVENUES> 159,473,000
<CGS> 0
<TOTAL-COSTS> 107,652,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 738,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,028,000
<INCOME-TAX> 8,566,000
<INCOME-CONTINUING> 14,462,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,462,000
<EPS-BASIC> 1.32
<EPS-DILUTED> 1.29
</TABLE>
