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| TSTF > SEC Filings for TSTF > Form 10-Q on 15-May-2009 | All Recent SEC Filings |
15-May-2009
Quarterly Report
Revenues related to retroactive billings in 2008 (see Note 4 to the Consolidated
Financial Statements) from an agency of the Federal government are recognized
when: (1) the Company develops and calculates an amount for such prior period
services and has a contractual right to bill for such amounts under its
arrangements and (2) there are no remaining unfulfilled conditions for approval
of such billings. The related direct costs, principally comprised of salaries
and benefits, are recognized to match the recognized reimbursements from the
Federal agency; upon approval, wages are processed for payment to the employees.
During the year ended September 30, 2008, TeamStaff recognized revenues of
$10.8 million and direct costs of $10.2 million related to these non-recurring
arrangements. At March 31, 2009, the amount of the remaining accounts receivable
with the DVA approximates $9.3 million and accrued liabilities for salaries to
employees and related benefits totaled $8.7 million. Accounts receivable
includes $7.6 million that was unbilled to the DVA at March 31, 2009. At
present, the Company expects to collect such amounts by the end of the current
fiscal year.
Staffing (whether medical or administrative) revenue is recognized as service is
rendered. TeamStaff bills its clients based on an hourly rate. The hourly rate
is intended to cover TeamStaff's direct labor costs of the temporary employees,
plus an estimate for overhead expenses and a profit margin. Additionally,
commissions from permanent placements are included in revenue as placements are
made. Commissions from permanent placements result from the successful placement
of a medical staffing employee to a customer's workforce as a permanent
employee. The Company also reviews the status of such placements to assess the
Company's future performance obligations under such contracts.
Direct costs of services are reflected in TeamStaff's Consolidated Statements of
Operations as "direct expenses" and are reflective of the type of revenue being
generated. Direct costs of the temporary staffing business include wages,
employment related taxes and reimbursable expenses.
Prepaid Workers' Compensation
From November 17, 2003 through April 14, 2009, inclusive, TeamStaff's workers'
compensation insurance program was provided by Zurich American Insurance Company
("Zurich"). This program covered TeamStaff's temporary employees and its
corporate employees. This program was a fully insured, guaranteed cost program
that contained no deductible or retention feature. The premium for the program
was paid monthly based upon actual payroll and is subject to a policy year-end
audit. Effective April 15, 2009, TeamStaff entered into a partially self-funded
workers' compensation insurance program with a national insurance carrier for
the premium year April 15, 2009 through April 14, 2010. The Company will pay a
base premium plus actual losses incurred, not to exceed certain stop-loss
limits. The Company is insured for losses above these limits, both per
occurrence and in the aggregate.
As part of the Company's discontinued PEO operations, TeamStaff had a workers'
compensation program with Zurich, which covered the period from March 22, 2002
through November16, 2003, inclusive. Payments for the policy were made to the
trust monthly based on projected claims for the policy period. Interest on all
assets held in the trust is credited to TeamStaff. Payments for claims and
claims expenses are made from the trust. From time-to-time, trust assets have
been refunded to the Company based on Zurich's and managers' overall assessment
of claims experience and historical and projected settlements. In March 2008,
Zurich reduced the collateral requirements on outstanding workers' compensation
claims and released $350,000 in trust account funds back to the Company. The
final amount of trust funds that could be refunded to the Company is subject to
a number of uncertainties (e.g. claim settlements and experience, health care
costs, the extended statutory filing periods for such claims); however, based on
a third party's study of claims experience, TeamStaff estimates that at
March 31, 2009, the remaining prepaid asset of $0.4 million will be received
within the next twelve to thirty-six months. A portion of this is reflected on
TeamStaff's balance sheet as of March 31, 2009 as a current asset, in addition
to approximately $0.2 million related to current policy deposits.
As of March 31, 2009 the adequacy of the workers' compensation reserves (which
are offset against the trust fund balances in prepaid assets) was determined, in
management's opinion, to be reasonable. In determining our reserves we rely in
part upon information regarding loss data received from our workers'
compensation insurance carriers that may include loss data for claims incurred
during prior policy periods. In addition, these reserves are for claims that
have not been sufficiently developed and such variables as timing of payments
and investment returns thereon are uncertain or unknown, therefore actual
results may vary from current estimates. TeamStaff will continue to monitor the
development of these reserves, the actual payments made against the claims
incurred, the timing of these payments, the interest accumulated in TeamStaff's
prepayments and adjust the related reserves as deemed appropriate.
Income Taxes
TeamStaff accounts for income taxes in accordance with Statements of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities, using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred tax assets are reflected on the balance sheet when it is
determined that it is more likely than not that the asset will be realized. SFAS
No. 109 also requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some or all of the deferred tax
asset will not be realized.
At March 31, 2009, the Company provided a 100% deferred tax valuation allowance
of approximately $11.6 million. In assessing the need for a valuation allowance,
the Company historically has considered all positive and negative factors,
including scheduled reversals of deferred tax liabilities, prudent and feasible
tax planning strategies and recent financial performance. The Company determined
that negative factors, including historic and current taxable losses, as well as
uncertainties related to the ability to utilize certain Federal and state net
loss carry forwards, outweighed any objectively verifiable positive factors, and
as such, continues to conclude that a valuation allowance is necessary. The
Company is providing a 100% valuation allowance that it is more likely than not
that it will not be able to realize the full benefit of the deferred tax asset.
The establishment of the deferred tax asset allowance does not preclude the
Company from reversing any or all of the allowance in future periods if the
Company believes the positive factors are sufficient enough to utilize the
deferred tax asset, nor does it limit the ability to utilize losses for tax
purposes, subject to loss carry forward limitations and periods permitted by
law.
Recently Issued Accounting Pronouncements Affecting the Company
In June 2006, the Financial Accounting Standards Board issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity's financial statements and prescribes a recognition
threshold of more-likely-than-not to be sustained upon examination. Measurement
of the tax uncertainty occurs if the recognition threshold has been met. This
Interpretation also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. TeamStaff conducts business solely in the U.S. and, as a result,
files income tax returns for U.S., New Jersey and various other states and
jurisdictions. In the normal course of business the Company is subject to
examination by taxing authorities. At present, there are no ongoing income tax
audits or unresolved disputes with the various tax authorities that the Company
currently files or has filed with. Given the Company's substantial net operating
loss carryforwards, which are subject to a full valuation allowance, as well as
the historical operating losses in prior periods, the adoption of FIN 48 on
October 1, 2007 did not have any effect on our financial position, results of
operations or cash flows as of the adoption date.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS
157"). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with accounting principles generally accepted in the United
States, and expands disclosures about fair value measurements. SFAS No. 157 was
effective for financial statements issued for fiscal years beginning after
November 15, 2007, with earlier application encouraged. Any amounts recognized
upon adoption as a cumulative effect adjustment will be recorded to the opening
balance of retained earnings in the year of adoption. In February 2008, the FASB
issued Staff Position 157-2, "Effective Date of FASB Statement No. 157", which
delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually),
until fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years. The Company adopted SFAS No. 157 on October 1, 2008 with no
effect on its financial position, results of operations and cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure, on an item-by-item basis, specified financial
instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are required to be
reported in earnings at each reporting date. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, the provisions of which are
required to be applied prospectively. The Company adopted SFAS No. 159 on
October 1, 2008 with no effect on its financial position, results of operations
and cash flows.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable users of the financial statements to
better understand the effects on an entity's financial position, financial
performance, and cash flows. It is effective for financial statements issued for
interim periods beginning after November 15, 2008, with early application
encouraged. The Company currently does not believe that the adoption of this
standard will have a material effect on our consolidated financial statements.
Overview
Business Description
TeamStaff provides specialized medical, nursing, logistics and administrative
staffing services by supplying allied healthcare and nursing professionals,
logistics and administrative personnel through two staffing subsidiaries. The
Company's TeamStaff Rx subsidiary is a JCAHO certified staffing provider which
operates throughout the United States and specializes in providing travel allied
medical employees and nurses on a short term assignment basis, as well as
permanent placement services. Allied medical staff includes MRI technicians,
mammographers, dosimetrists, ultrasound staff and physicists. JCAHO
certification validates the Company's hiring practices and our commitment to
providing quality healthcare services. During the last six months, TeamStaff Rx
placed temporary employees at approximately 110 client facilities. The Company's
TeamStaff GS subsidiary specializes in providing medical and office
administration/technical professionals through FSS contracts with both the GSA
and DVA. During the last six months, TeamStaff GS placed temporary employees at
approximately 30 client facilities.
Recent Business Trends
TeamStaff Rx
The current operating environment for TeamStaff Rx continued to decline in the
second fiscal quarter of 2009. Demand for travelers has continued to be soft due
to hospital budget constraints and continued low patient census. During a period
of economic instability there is lower staff turnover and permanent hospital
staff is willing to work more overtime. This has, in turn, reduced hospital
reliance on the outsourced labor market.
As a result of these factors, TeamStaff Rx faces a very weak demand environment.
For the second quarter of fiscal 2009, average hours billed were down 34% from
the 2008 quarter. Correspondingly, this led to a 35% reduction in revenue as
compared to the second quarter of fiscal 2008. To address the unfavorable trends
in the non-government medical staffing market, the Company has taken several
steps. We have offered loyalty programs to clients who renew extensions, we have
trimmed headcount and modified our advertising spend. Management is reluctant to
substantially reduce its advertising program since it believes that it is a
prudent investment of our capital to continue to market the TeamStaff brand
while competitors are reducing their advertising. Currently, we are obtaining
prime advertising spots at reasonable rates. We believe this has helped
contribute to an increase in traveler applicant activity of 51% over the past
3 months.
The Company is also increasing its focus on oncology, which continues to be in
demand. We recently signed an agreement to provide medical healthcare
professionals to one of the nation's largest oncology networks. TeamStaff was
one of three preferred vendors chosen to be given the first opportunity to fill
this network's healthcare staffing needs. This provides us with a competitive
advantage and additional revenue opportunity in subsequent quarters. No
assurances can be given as to the amount and timing of the revenues which may be
generated from this opportunity.
Longer term, we continue to believe the demand for temporary medical personnel
will rebound as a result of key drivers in our business segment such as the
declining health of an aging population, advances in medical technology,
hospital employee turnover and growth in hospital admissions. We believe our
TeamStaff Rx subsidiary is well positioned to increase its market share once the
economy improves.
TeamStaff Government Solutions
TeamStaff GS is expanding its reach within the government sector beyond DVA
opportunities by bidding on Department of Defense ("DOD") staffing contracts
afforded to large businesses and GSA's e-Buy portal, an electronic Request for
Quote (RFQ) / Request for Proposal (RFP) system designed to allow Federal buyers
to request information, find sources, and prepare RFQs/RFPs, online, for various
services offered through GSA's Multiple Award Schedule. Effective April 6, 2009,
TeamStaff GS was awarded an Information Technology ("IT") Schedule Contract for
professional services by the GSA As an IT schedule holder, TeamStaff GS is also
now eligible, along with a select number of companies, to participate in bid
opportunities and requests for quotes for the Federal government's IT staffing
needs. Additionally, TeamStaff GS is evaluating opportunities to satisfy the
staffing needs of other government agencies in addition to the DVA and DOD as a
means of horizontal expansion of its client base.
We believe demand will be strong in the second half of our fiscal year and
beyond as the government releases stimulus funds related to the American
Recovery and Reinvestment Act of 2009 to the DVA to maintain or improve social
services provided to our returning veterans, as well as funding to other federal
agencies that TeamStaff GS provides services to. In addition, we believe the
government staffing business is stable in an economic downturn due to the longer
term duration of its contracts. Management believes that, under the current
administration, there will not be a reduction in government spending supporting
social programs that benefit military personnel and veterans.
Results of Operations
The following table summarizes, for the periods indicated, selected consolidated
statements of operations data expressed as a percentage of revenue:
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