UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2002
OR
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission file number: 0-20540
ON ASSIGNMENT, INC.
Delaware (State of Incorporation) |
95-4023433 (IRS Employer Identification No.) |
26651 West Agoura Road, Calabasas, CA 91302
(Address of principal executive offices)
(Zip Code)
(818) 878-7900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
At June 30, 2002, the total number of outstanding shares of the Company’s Common Stock ($0.01 par value) was 26,888,097.
ON ASSIGNMENT, INC.
Index
| PAGE | ||||||
| NUMBER | ||||||
PART I — FINANCIAL INFORMATION |
||||||
| Item 1- | Consolidated Financial Statements |
|||||
Consolidated Balance Sheets at June 30, 2002 (unaudited) and
December 31, 2001 |
3-4 | |||||
Consolidated Statements of Income and Comprehensive
Income for the three months ended June 30, 2002 and
June 30, 2001 (unaudited) |
5 | |||||
Consolidated Statements of Income and Comprehensive
Income for the six months ended June 30, 2002 and
June 30, 2001 (unaudited) |
6 | |||||
Consolidated Statements of Cash Flows for the six
months ended June 30, 2002 and June 30, 2001
(unaudited) |
7-8 | |||||
Notes to Consolidated Financial Statements (unaudited) |
9-16 | |||||
| Item 2 - | Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
17-22 | ||||
| Item 3 - | Quantitative and Qualitative Disclosures about Market Risk |
23 | ||||
PART II — OTHER INFORMATION |
||||||
| Item 4 - | Submission of Matters to a Vote of Security Holders |
24 | ||||
| Item 5 - | Other information |
24 | ||||
| Item 6 - | Exhibits and Reports on Form 8-K |
24 | ||||
Signatures |
25 | |||||
2
PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Financial Statements
ON ASSIGNMENT, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
ASSETS |
||||||||||
Current Assets: |
||||||||||
Cash and cash equivalents |
$ | 34,511,000 | $ | 65,694,000 | ||||||
Marketable securities |
2,000,000 | 22,886,000 | ||||||||
Accounts receivable, net |
35,449,000 | 22,782,000 | ||||||||
Advances and deposits |
190,000 | 149,000 | ||||||||
Prepaid expenses |
2,517,000 | 2,030,000 | ||||||||
Income taxes receivable |
1,399,000 | 123,000 | ||||||||
Other current assets |
11,000 | — | ||||||||
Deferred income taxes |
2,498,000 | 2,659,000 | ||||||||
Total current assets |
78,575,000 | 116,323,000 | ||||||||
Office Furniture, Equipment and Leasehold Improvements, net |
4,574,000 | 2,804,000 | ||||||||
Marketable securities |
— | 2,000,000 | ||||||||
Deferred income taxes |
— | 454,000 | ||||||||
Identifiable intangible assets, net |
23,581,000 | 2,000 | ||||||||
Workers’ compensation restricted deposits |
118,000 | 77,000 | ||||||||
Restricted cash — HPO earn-out provision |
2,500,000 | — | ||||||||
Goodwill, net |
119,710,000 | 1,542,000 | ||||||||
Other assets |
1,992,000 | 2,049,000 | ||||||||
Total Assets |
$ | 231,050,000 | $ | 125,251,000 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||
Current Liabilities: |
||||||||||
Current portion of long-term debt |
$ | 4,406,000 | $ | — | ||||||
Line of credit |
2,731,000 | — | ||||||||
Accounts payable |
1,427,000 | 557,000 | ||||||||
Accrued payroll |
8,665,000 | 4,740,000 | ||||||||
Deferred compensation |
1,464,000 | 1,736,000 | ||||||||
Accrued workers’ compensation |
2,622,000 | 2,662,000 | ||||||||
Other accrued expenses |
1,685,000 | 777,000 | ||||||||
Total current liabilities |
23,000,000 | 10,472,000 | ||||||||
Long-term debt, net of current portion |
1,225,000 | — | ||||||||
Deferred income taxes |
8,514,000 | — | ||||||||
Total liabilities |
32,739,000 | 10,472,000 | ||||||||
See accompanying Notes to Consolidated Financial Statements
3
PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Financial Statements
ON ASSIGNMENT, INC.
CONSOLIDATED BALANCE SHEETS (continued)
| June 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
Stockholders’ Equity: |
||||||||||
Preferred stock |
— | — | ||||||||
Common stock |
280,000 | 238,000 | ||||||||
Paid-in capital |
116,832,000 | 40,402,000 | ||||||||
Deferred compensation liability |
265,000 | 294,000 | ||||||||
Retained earnings |
95,881,000 | 89,137,000 | ||||||||
Accumulated other comprehensive income |
363,000 | 18,000 | ||||||||
| 213,621,000 | 130,089,000 | |||||||||
Less: Treasury shares, at cost |
15,310,000 | 15,310,000 | ||||||||
Total stockholders’ equity |
198,311,000 | 114,779,000 | ||||||||
Total Liabilities and Stockholders’ Equity |
$ | 231,050,000 | $ | 125,251,000 | ||||||
See accompanying Notes to Consolidated Financial Statements
4
PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Financial Statements
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended June 30, | |||||||||
| 2002 | 2001 | ||||||||
| (Unaudited) | |||||||||
Revenues |
$ | 67,600,000 | $ | 49,674,000 | |||||
Cost of services |
47,443,000 | 33,609,000 | |||||||
Gross profit |
20,157,000 | 16,065,000 | |||||||
Selling, general and administrative expenses |
13,960,000 | 9,613,000 | |||||||
Operating income |
6,197,000 | 6,452,000 | |||||||
Interest income, net |
86,000 | 692,000 | |||||||
Income before income taxes |
6,283,000 | 7,144,000 | |||||||
Provision for income taxes |
2,409,000 | 2,641,000 | |||||||
Net income |
$ | 3,874,000 | $ | 4,503,000 | |||||
Basic earnings per share |
$ | 0.15 | $ | 0.20 | |||||
Weighted average number of common shares outstanding |
25,929,000 | 22,794,000 | |||||||
Diluted earnings per share |
$ | 0.15 | $ | 0.19 | |||||
Weighted average number of common and common
equivalent shares outstanding |
26,152,000 | 23,154,000 | |||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Three Months Ended June 30, | |||||||||
| 2002 | 2001 | ||||||||
| (Unaudited) | |||||||||
Net income |
$ | 3,874,000 | $ | 4,503,000 | |||||
Other comprehensive income (loss): |
|||||||||
Foreign currency translation adjustment |
417,000 | (3,000 | ) | ||||||
Comprehensive income |
$ | 4,291,000 | $ | 4,500,000 | |||||
See accompanying Notes to Consolidated Financial Statements
5
PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Financial Statements
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
| Six Months Ended June 30, | |||||||||
| 2002 | 2001 | ||||||||
| (Unaudited) | |||||||||
Revenues |
$ | 109,711,000 | $ | 100,855,000 | |||||
Cost of services |
76,008,000 | 68,064,000 | |||||||
Gross profit |
33,703,000 | 32,791,000 | |||||||
Selling, general and administrative expenses |
23,296,000 | 19,532,000 | |||||||
Operating income |
10,407,000 | 13,259,000 | |||||||
Interest income, net |
530,000 | 1,499,000 | |||||||
Income before income taxes |
10,937,000 | 14,758,000 | |||||||
Provision for income taxes |
4,193,000 | 5,429,000 | |||||||
Net income |
$ | 6,744,000 | $ | 9,329,000 | |||||
Basic earnings per share |
$ | 0.28 | $ | 0.41 | |||||
Weighted average number of common shares outstanding |
24,308,000 | 22,704,000 | |||||||
Diluted earnings per share |
$ | 0.27 | $ | 0.40 | |||||
Weighted average number of common and common
equivalent shares outstanding |
24,554,000 | 23,194,000 | |||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Six Months Ended June 30, | |||||||||
| 2002 | 2001 | ||||||||
| (Unaudited) | |||||||||
Net income |
$ | 6,744,000 | $ | 9,329,000 | |||||
Other comprehensive income: |
|||||||||
Foreign currency translation adjustment |
345,000 | 7,000 | |||||||
Comprehensive income |
$ | 7,089,000 | $ | 9,336,000 | |||||
See accompanying Notes to Consolidated Financial Statements
6
PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Financial Statements
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
| (Unaudited) | |||||||||||
Cash Flows From Operating Activities: |
|||||||||||
Net income |
$ | 6,744,000 | $ | 9,329,000 | |||||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
|||||||||||
Depreciation and amortization |
1,766,000 | 775,000 | |||||||||
Increase in allowance for doubtful accounts |
333,000 | 330,000 | |||||||||
Increase in deferred income taxes |
(184,000 | ) | (225,000 | ) | |||||||
Loss on disposal of office furniture and equipment |
2,000 | 1,000 | |||||||||
Tax benefit of disqualifying dispositions |
707,000 | 1,563,000 | |||||||||
Changes in operating assets and liabilities: |
|||||||||||
(Increase) Decrease in accounts receivable |
(1,460,000 | ) | 1,159,000 | ||||||||
Decrease in income taxes receivable |
2,118,000 | — | |||||||||
Increase in prepaid expenses |
(377,000 | ) | (140,000 | ) | |||||||
(Increase) Decrease in workers’ compensation deposits |
(1,000 | ) | 2,000 | ||||||||
(Decrease) Increase in accounts payable and accrued expenses |
(4,570,000 | ) | 1,857,000 | ||||||||
Increase in income taxes payable |
— | 946,000 | |||||||||
Net cash provided by operating activities |
5,078,000 | 15,597,000 | |||||||||
Cash Flows From Investing Activities: |
|||||||||||
Purchase of marketable securities |
(2,000,000 | ) | (11,080,000 | ) | |||||||
Proceeds from the maturity of marketable securities |
24,886,000 | 10,425,000 | |||||||||
Acquisition of office furniture, equipment and leasehold
improvements |
(783,000 | ) | (431,000 | ) | |||||||
(Increase) Decrease in advances and deposits |
(34,000 | ) | 108,000 | ||||||||
Cash used in acquisition, net of cash received |
(63,725,000 | ) | — | ||||||||
Restricted cash — HPO earn-out provision |
(2,500,000 | ) | — | ||||||||
Decrease (Increase) in other assets |
74,000 | (207,000 | ) | ||||||||
Net cash used for investing activities |
(44,082,000 | ) | (1,185,000 | ) | |||||||
Cash Flows From Financing Activities: |
|||||||||||
Proceeds from exercise of common stock options |
4,777,000 | 3,698,000 | |||||||||
Proceeds from issuance of common stock - |
|||||||||||
Employee Stock Purchase Plan |
126,000 | 128,000 | |||||||||
Repurchase of common stock |
— | (754,000 | ) | ||||||||
Borrowings on line of credit |
2,731,000 | — | |||||||||
Payments on notes payable |
(81,000 | ) | — | ||||||||
Payments on capital lease |
(17,000 | ) | — | ||||||||
Net cash provided by financing activities |
7,536,000 | 3,072,000 | |||||||||
Effect of exchange rate changes on cash and cash
equivalents |
285,000 | 36,000 | |||||||||
Net (Decrease) Increase In Cash and Cash Equivalents |
(31,183,000 | ) | 17,520,000 | ||||||||
Cash and Cash Equivalents at Beginning of Period |
65,694,000 | 51,202,000 | |||||||||
Cash and Cash Equivalents at End of Period |
$ | 34,511,000 | $ | 68,722,000 | |||||||
See accompanying Notes to Consolidated Financial Statements
7
PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Financial Statements
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
| Six Months Ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||