Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ASGN > SEC Filings for ASGN > Form 10-Q on 8-Nov-2012All Recent SEC Filings

Show all filings for ON ASSIGNMENT INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ON ASSIGNMENT INC


8-Nov-2012

Quarterly Report


Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include statements regarding our anticipated financial and operating performance for future periods. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, the following: (1) the continued negative impact of the uncertain economic environment; (2) actual demand for our services; (3) our ability to attract, train and retain qualified staffing consultants; (4) our ability to remain competitive in obtaining and retaining temporary staffing clients; (5) the availability of qualified contract nurses and other qualified contract professionals; (6) our ability to manage our growth efficiently and effectively; (7) continued performance of our information systems; and (8) other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including in our Annual Report on Form 10-K, for the year ended December 31, 2011, as filed with the SEC on March 14, 2012, under the section "Risk Factors." Other factors also may contribute to the differences between our forward-looking statements and our actual results. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the date we file this Quarterly Report on Form 10-Q, and we assume no obligation to update any forward-looking statement or the reasons why our actual results may differ.

OVERVIEW

On Assignment, Inc. is a leading global provider of in-demand, skilled professionals in the growing technology, healthcare, and life sciences sectors. We provide clients with short- and long-term placement of contract, contract-to-hire, and direct hire professionals.

Our Technology service offering consists of two complementary segments uniquely positioned in the marketplace to offer our clients a broad spectrum of information technology, or IT, staffing solutions: Apex and Oxford, which was formerly known as the IT and Engineering segment. Our Apex segment provides mission-critical daily IT operation professionals for contract and contract-to-hire positions to Fortune 1000 and mid-market clients across the United States, and offers recruitment solutions for other select professional skills and workforce needs. Our Oxford segment proactively recruits and delivers high-end information technology, engineering, regulatory, and compliance professionals for consulting assignments and permanent placements across the United States, Canada, and Europe.

Our Healthcare service offering consists of two segments: Healthcare, which includes our Nurse Travel and Allied Healthcare lines of business, and Physician. Our Healthcare segment offers our healthcare clients locally-based and traveling contract professionals, from a number of healthcare, medical, financial and allied occupations. Our Healthcare segment contract professionals include nurses, specialty nurses, health information management professionals, dialysis technicians, surgical technicians, imaging technicians, x-ray technicians, medical technologists, medical assistants, pharmacists, pharmacy technicians, respiratory therapists, phlebotomists, coders, billers, claims processors and collections staff, and dental professionals - including dental assistants, hygienists and dentists and rehabilitation therapists. Our Physician segment is a leading provider of physician staffing, known as locum tenens, and permanent physician search services. Our Physician segment provides short- and long-term locum tenens services and full-service physician search and consulting services, primarily in the United States, with some locum tenens placements in Australia and New Zealand. We work with physicians in a wide range of specialties, placing them in hospitals, community-based practices and federal, state and local facilities.

Our Life Sciences service offering segment provides locally-based contract life science professionals to clients in the biotechnology, pharmaceutical, food and beverage, medical device, personal care, chemical, automotive, educational and environmental industries. Our contract professionals include chemists, clinical research associates, clinical lab assistants, engineers, biologists, biochemists, microbiologists, molecular biologists, food scientists, regulatory affairs specialists, lab assistants, biostatisticians, drug safety specialists, SAS programmers, medical writers, and other skilled scientific professionals.

Third Quarter 2012 Update

In the third quarter, consolidated revenues and earnings per share grew year-over-year and sequentially over the second quarter of 2012. During and exiting the third quarter, secular trends continued to permit temporary labor to see greater growth prospects than full-time labor. While the macroeconomic environment in North America, where we derive 95 percent of our total revenues, has become slightly more challenging, we continue to see a classical cyclical recovery in professional staffing. More specifically, we have not seen an appreciable change in demand trends in the markets we serve from those that we saw at the beginning of the third quarter. As for the financial services sector, although demand has slowed for the entire industry from the rate of growth in 2011, recently, we have seen a slight stronger demand from our clients in that sector.

On August 31, 2012, the Company withdrew its Common Stock from listing and trading on NASDAQ and transferred the Company's listing to the New York Stock Exchange (the "NYSE"). The Company's Common Stock was approved for listing on NYSE, and will continue to trade under the stock symbol "ASGN" on NYSE.

Seasonality

Demand for our staffing services historically has been lower during the first and fourth quarters due to fewer business days resulting from client shutdowns, adverse weather conditions and a decline in the number of contract professionals willing to work during the holidays. As is common in the staffing industry, we run special incentive programs to keep our contract professionals, particularly nurses, working through the holidays. Demand for our staffing services usually increases in the second and third quarters of the year. In addition, our cost of services typically increases in the first quarter primarily due to the reset of payroll taxes.


RESULTS OF OPERATIONS

The following table summarizes selected statements of operations data expressed
as a percentage of revenues:
                                     Three Months Ended               Nine Months Ended
                                       September 30,                    September 30,
                                    2012            2011            2,012             2011
Revenues                          100.0    %       100.0   %       100.0   %        100.0   %
Cost of services                   69.3             66.4            68.6             66.4
Gross profit                       30.7             33.6            31.4             33.6
Selling, general and
administrative expenses            21.3             25.1            23.5             26.5
Operating income                    9.4              8.5             7.9              7.1
Interest expense                   (1.6 )           (0.5 )          (1.4 )           (0.5 )
Interest income                       -                -               -                -
Income before income taxes          7.8              8.0             6.5              6.6
Provision for income taxes          3.3              3.2             2.7              2.7
Net income                          4.5    %         4.8   %         3.7   %  (1)     3.9   %
____

(1)column does not foot due to rounding

CHANGES IN RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012
COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 2011



Revenues
                                        Three Months Ended
                                          September 30,                 Change
                                        2012          2011           $            %
Revenues by segment (in thousands):
Apex                                 $  202,664    $       -    $ 202,664         -   %
Oxford (formerly IT and Engineering)     88,104       70,074       18,030      25.7   %
Life Sciences                            40,646       41,820       (1,174 )    (2.8 ) %
Healthcare                               29,390       27,091        2,299       8.5   %
Physician                                27,479       23,385        4,094      17.5   %
                                     $  388,283    $ 162,370    $ 225,913     139.1   %

Revenues increased $225.9 million, or 139.1 percent, mainly due to the acquisition of Apex and 14.3 percent year-over-year growth of our other business segments. Apex revenues for the three months ended September 30, 2012 were $202.7 million or 52.2 percent of total revenues. Apex was acquired on May 15, 2012.

Oxford segment, formerly known as the IT and Engineering segment, revenues increased $18.0 million, or 25.7 percent, comprised of a 22.5 percent increase in the average number of contract professionals on assignment and a 4.6 percent increase in the average bill rate. Demand for Oxford's IT consultants was strong in the third quarter in healthcare staffing and regulatory compliance. Companies in the high tech equipment, machinery manufacturing, and pharmaceutical industries continued to add consultants, while demand declined in medical equipment, appliance, and electronic product manufacturing companies.

Life Sciences segment revenues decreased $1.2 million, or 2.8 percent, primarily due to a $0.6 million decrease in direct hire revenue and the voluntary termination of a low margin client at the end of the first quarter. This decline was partially offset by a 0.7 percent increase in the average number of contract professionals on assignment and a 0.5 percent increase in the average bill rate.

Healthcare segment (comprised of our Nurse Travel and Allied Healthcare lines of business) revenues increased $2.3 million, or 8.5 percent. Nurse Travel revenues were $13.8 million, down $1.6 million year-over-year, primarily due to lower revenues from staffing services supporting customers experiencing labor disruptions ($1.7 million in revenues during the current quarter and $3.9 million in the same period in 2011). The average bill rate declined 3.2 percent year-over-year and the average number of nurses on assignment increased 10.4 percent. Allied Healthcare revenues were $15.6 million, up $3.9 million, or 32.9 percent. The increase was due to a 31.4 percent increase in the average number of contract professionals on assignment and a 1.1 percent increase in the average bill rate. The increase in revenues was attributable to improved economic trends in the healthcare sector, which resulted in a higher number of contract professionals on assignment, open orders and average bill rates. The Allied Healthcare operating environment continued to demonstrate signs of improvement as economic trends in our end markets showed signs of stabilization and growth as evidenced by year-over-year growth in the number of clients and contractors on billing, average bill rate and billable hours. Although the Healthcare segment remains soft, we continue to see signs of improvement in demand for contract professionals.


Physician segment revenues increased $4.1 million, or 17.5 percent, comprised of a 17.1 percent increase in the average number of physicians placed and working and a 1.6 percent increase in the average bill rate. Revenues from the legacy physician staffing business increased $2.3 million, or 11.9 percent, due to a 9.4 percent increase in the average number of physicians placed and working, a 4.3 percent increase in the average bill rate and a $0.2 million increase in direct hire and conversation fee revenues.

Gross Profit and Gross Margin

                                                            Three Months Ended
                                                              September 30,
                                            2012                                      2011
                               Gross Profit       Gross Margin       Gross Profit           Gross Margin
Gross Profit by segment (in
thousands):
Apex                         $       56,934            28.1 %      $            -               -         %
Oxford (formerly IT and
Engineering)                         31,250            35.5 %              25,113            35.8         %
Life Sciences                        14,002            34.4 %              14,163            33.9         %
Healthcare                            8,483            28.9 %               7,458            27.5         %
Physician                             8,370            30.5 %               7,794            33.3         %
                             $      119,039            30.7 %      $       54,528            33.6         %

The year-over-year gross profit increase was primarily due to higher revenues, which was partially offset by a 292 basis point contraction in consolidated gross margin. The decrease in gross margin was primarily attributable to the inclusion of Apex, which has a lower gross margin and lower mix of direct hire and conversion fee revenues.

Apex segment gross margin was 28.1 percent, up from 27.4 percent for the three months ended June 30, 2012. The sequential improvement in gross margin was attributable to a higher mix of direct hire and conversion fee revenues and higher gross margin on consultant revenues in the current quarter.

Oxford segment gross profit increased $6.1 million, or 24.4 percent, primarily due to an $18.0 million, or 25.7 percent increase in revenues, which was partially offset by a 37 basis point contraction in gross margin. Oxford experienced an increase in other employee expenses, which was partially offset by a 4.5 percent increase in bill/pay spread. In the current quarter, Oxford had a lower mix of direct hire and conversion fee revenues compared with the same period in 2011.

Life Sciences segment gross profit decreased $0.2 million, or 1.1 percent. The decrease in gross profit was primarily due to a 2.8 percent decrease in revenues, which was partially offset by a 58 basis point expansion in gross margin. The expansion in gross margin was due to a 2.3 percent increase in bill/pay spread, which was partially offset a $0.5 million decrease in direct hire and conversation fee revenues.

Healthcare segment gross profit increased $1.0 million, or 13.7 percent. The increase in gross profit was due to a 8.5 percent increase in revenues and a 133 basis point expansion in gross margin. The expansion in gross margin was mainly due to a decrease in the percentage of revenue for workers' compensation expenses, unemployment insurance expense and non-billable traveled related expenses. Within this segment, Allied Healthcare gross profit increased 36.1 percent, and gross margin increased 77 basis points, as a result of improvements in pricing, slightly offset by an increase in assignment related expenses. Nurse Travel gross profit decreased 8.5 percent and gross margin increased 45 basis points.

Physician segment gross profit increased $0.6 million, or 7.4 percent. The increase in gross profit was due to an $4.1 million, or 17.5 percent increase in segment revenues, partially offset by a 287 basis point contraction in gross margin. The contraction in gross margin was primarily due to the acquisition of HCP which has a lower gross margin than the legacy Physician business in part related to a greater concentration of government work. The physician segment also experienced a 5.8 percent decrease in bill/pay spread and higher non-billable expenses and medical malpractice insurance expense.

Selling, General and Administrative Expenses

For the quarter ended September 30, 2012, SG&A expenses increased $41.8 million, or 102.4 percent, to $82.5 million from $40.8 million for the same period in 2011. The increase in SG&A expenses was primarily due to $37.7 million in SG&A expenses from Apex, which was acquired on May 15, 2012, and $5.1 million, or a 17.3 percent increase, in compensation and benefits excluding Apex. The increase in compensation and benefits was due to a $3.5 million increase in bonuses and commissions as a result of increased revenues and the anticipated attainment of incentive compensation targets, and a $1.6 million increase in compensation expenses primarily as a result of headcount additions to support anticipated higher growth in certain segments. The increase in SG&A expenses was offset by a $1.0 million reduction in the HCP earn-out obligation. Total SG&A expenses as a percentage of revenues decreased to 21.3 percent for the quarter ended September 30, 2012 compared with 25.1 percent in the same period in 2011. Excluding acquisition-related costs of $0.8 million, total SG&A expenses as a percentage of revenues was 21.1 percent for the quarter ended September 30, 2012.


Interest Expense and Interest Income

Interest expense was $6.3 million compared with $0.8 million in the same period in 2011. This increase was primarily due to higher debt outstanding for the new senior secured credit agreement closed in May 2012 to fund the cash portion of the acquisition of Apex.

Provision for Income Taxes

The provision for income taxes was $12.8 million compared with $5.2 million for the same period in the prior year. The annual effective tax rate was 42.3 percent and 40.3 percent for the same period in 2011. The increase in the effective tax rate in 2012 is primarily related to the higher percentage of domestic income (as U.S. tax rates are higher than the foreign jurisdictions where we conduct business) due to the addition of Apex. We also incurred costs related to a secondary stock offering that were not deductible for tax that increased the tax rate for the three months ended September 30, 2012.
CHANGES IN RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2011

Revenues

                                        Nine Months Ended
                                          September 30,               Change
                                        2012         2011          $           %
Revenues by segment (in thousands):
Apex (from May 15, 2012)             $ 301,167    $       -    $ 301,167       -  %
Oxford (formerly IT and Engineering)   254,970      195,512       59,458    30.4  %
Life Sciences                          122,506      114,403        8,103     7.1  %
Healthcare                              82,796       68,671       14,125    20.6  %
Physician                               76,607       56,905       19,702    34.6  %
                                     $ 838,046    $ 435,491    $ 402,555    92.4  %

Revenues increased $402.6 million, or 92.4 percent, mainly due to the acquisition of Apex and 23.3 percent year-over-year growth of our other business segments. Apex revenues for the nine months ended September 30, 2012 were $301.2 million or 35.9 percent of total revenues. Apex was acquired on May 15, 2012 and is reported in the Apex segment.

Oxford segment revenues increased $59.5 million, or 30.4 percent, comprised of a 25.3 percent increase in the average number of contract professionals on assignment, a 4.6 percent increase in average bill rate and a $1.1 million increase in conversion and permanent placement revenue. Because many of our assignments involve capital projects, we believe one reason the demand for our services increased with the economic recovery is that more companies have increased their capital spending. In addition, due to the limited availability of senior IT and engineering consultants, the demand for our service has increased. We have continued to focus on diversifying this segment across clients and industries and have selectively added staffing consultants necessary for current and future growth. In their September report, Staffing Industry Analysts say the US IT Staffing market "will attain an all-time high of $24.9 billion in 2013".

Life Sciences segment revenues increased $8.1 million, or 7.1 percent, comprised of an 7.3 percent increase in the average number of contract professionals on assignment and a 0.7 percent increase in the average bill rate. The year-over-year increase in revenues was attributable to $18.6 million in revenues for the nine months ended September 30, 2012 from the Valesta acquisition compared with $14.4 million in the same period of 2011, and increased demand for our service offerings as our clients' end markets improved in the first half of 2012 with the economic recovery.

Healthcare segment (comprised of our Nurse Travel and Allied Healthcare lines of business) revenues increased $14.1 million, or 20.6 percent. Nurse Travel revenues were $40.9 million, up $5.1 million year-over-year primarily due to higher revenues from staffing services supporting customers experiencing labor disruptions ($7.0 million in revenues during the the nine months ended September 30, 2012 and $4.8 million in the same period in 2011). The average number of nurses on assignment increased 9.8 percent, which was slightly offset by a 0.1 percent decrease in the average bill rate. Allied Healthcare revenues were $41.9 million, up $9.1 million, or 27.7 percent. The average number of contract professionals on assignment increased, 23.2 percent, the average bill rate increased 1.1 percent, and conversion and permanent placement revenue increased $0.3 million. The increase in revenues was attributable to improved economic trends in the healthcare sector, which resulted in a higher number of contract professionals on assignment, open orders and average bill rates. The Allied Healthcare operating environment continued to demonstrate signs of improvement as economic trends in our end markets showed signs of stabilization and growth as evidenced by year-over-year growth in the number of clients and contractors on billing, average bill rate and billable hours. Although the Healthcare segment remains soft, we continue to see signs of improvement in demand for contract professionals.

Physician segment revenues increased $19.7 million, or 34.6 percent, comprised of a 42.0 percent increase in the average number of physicians placed and working, partially offset by a 2.3 percent decrease in the average bill rate. The increase in Physician segment revenues was also attributable to $19.4 million in revenues for the nine months ended September 30, 2012 from the HCP acquisition, compared with $4.5 million in the same period in 2011. Revenues from the legacy physician staffing business increased $4.8 million, or 9.2 percent, due to a 5.2 percent increase in average bill rate, 2.7 percent increase in the average number of physicians placed and working, and a $0.3 million increase in direct hire and conversation fee revenues.


Gross Profit and Gross Margin
                                                           Nine Months Ended
                                                             September 30,
                                         2012                                        2011
                              Gross Profit       Gross Margin        Gross Profit          Gross Margin
Gross Profit by segment (in
thousands):
Apex (from May 15, 2012)    $       83,917            27.9 %       $            -               -         %
Oxford (formerly IT and
Engineering)                        90,266            35.4 %               69,483            35.5         %
Life Sciences                       41,649            34.0 %               39,025            34.1         %
Healthcare                          23,622            28.5 %               19,242            28.0         %
Physician                           23,587            30.8 %               18,726            32.9         %
                            $      263,041            31.4 %       $      146,476            33.6         %

The year-over-year gross profit increase was primarily due to higher revenues, which was partially offset by a 226 basis point contraction in consolidated gross margin. The decrease in gross margin was primarily attributable to the inclusion of Apex, which has a lower gross margin, and lower mix of direct hire and conversion fee revenues.

Apex segment gross margin was 27.9 percent. We do not expect significant fluctuations in Apex gross margin.

Oxford segment gross profit increased $20.8 million, or 29.9 percent, primarily due to a $59.5 million, or 30.4 percent increase in revenues, which was partially offset by a 14 basis point contraction in gross margin. The contraction in gross margin was due to an increase in payroll taxes and holiday pay expenses that was partially offset by a $1.1 million increase in direct hire and conversion fee revenue.

Life Sciences segment gross profit increased $2.6 million, or 6.7 percent. The increase in gross profit was primarily due to a 7.1 percent increase in revenues, which was partially offset by an 11 basis point contraction in gross margin. The contraction in gross margin was due to an increase in payroll taxes related to higher European payroll tax rates for Valesta employees, and an increase in travel related expenses. This contraction in gross margin was partially offset by a 2.4 percent increase in bill/pay spread.

Healthcare segment gross profit increased $4.4 million, or 22.8 percent. The increase in gross profit was due to a 20.6 percent increase in revenues and a 51 basis point expansion in gross margin. Within this segment, Allied Healthcare gross profit increased 29.2 percent, while gross margin increased 37 basis points as a result of improvements in pricing, which was slightly offset by an increase in payroll taxes and other employee related expenses. Nurse Travel gross profit increased 15.2 percent and gross margin increased 23 basis points. The expansion in gross margin was primarily due to $7.0 million in labor disruption revenue for the nine months ended September 30, 2012, as compared with $4.8 million in 2011, which had a higher gross margin than other Nurse Travel revenue, which was partially offset by a $0.8 million increase in other employee expenses.

Physician segment gross profit increased $4.9 million, or 26.0 percent. The increase in gross profit was due to a $19.7 million, or 34.6 percent increase in the segment revenues, partially offset by a 212 basis point contraction in gross margin. The contraction in gross margin was primarily due to a 9.5 percent decrease in bill/pay spread in part related to a greater concentration of government work at HCP, which has a lower gross margin than the legacy Physician business. The physician segment also experienced an increase in non-billable expenses and other employee expenses, partially offset by a $0.5 million favorable actuarial adjustment to our medical malpractice insurance expense and increase in direct hire and conversation fee revenue.

Selling, General and Administrative Expenses

. . .

  Add ASGN to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ASGN - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.