This excerpt taken from the ASGN 8-K filed Feb 21, 2008.
Fourth Quarter Revenues of $152.0 Million Exceeded Company Guidance
CALABASAS, Calif., February 21, 2008 On Assignment, Inc. (NASDAQ: ASGN), a diversified professional staffing firm providing flexible and permanent staffing solutions in specialty skills including Laboratory/Scientific, Healthcare/Nursing, Physicians, Medical Financial, Information Technology and Engineering, today reported results for the quarter and year ended December 31, 2007.
Fourth Quarter 2007 Financial Comparisons and Analysis
· Revenues for the fourth quarter of 2007 were $152.0 million, up 98.7% from the fourth quarter of 2006 and above the high-end of the Companys previously-announced estimate of $148.0 million. The fourth quarter included $2.6 million in revenues from two long-standing customers experiencing labor disruptions, of which $1.0 million was included in the Companys fourth quarter estimates.
· Gross margins were 31.8%, up from 27.2% in the fourth quarter of 2006.
· Net income was $2.2 million, or $0.06 per share, in line with the Companys previously-announced estimates of $0.06 to $0.09 per share. Net income for the quarter included the effects of the following unanticipated items:
· Executive severance of $531,000 incurred in connection with the separation of the President of the Healthcare Staffing Division
· Write-off of $268,000 of in process capitalized software development costs of the IT and Engineering segment
· A non-cash expense of $722,000 related to the mark-to-market of the Companys $73 million interest rate swap
· Adjustments to the full year income tax provision that increased the effective tax rate to 44.6% for the full year and to 53.1% for the fourth quarter
· Net Income for the fourth quarter of 2006 was $6.1 million, or $0.20 per share, which included $3.0 million in net income related to the reversal of a valuation allowance on deferred tax assets and $392,000 in expense ($0.2 million net of tax) related to severance of a former executive.
· Excluding $799,000 in unanticipated items related to executive severance and the write-off of software development costs, discussed above, Adjusted EBITDA (a non-GAAP measurement defined below) was $15.6 million for the fourth quarter of 2007 compared with $6.4 million for the same period in 2006, which also excludes $392,000 in expense related to executive severance.
Included in the Companys 2007 fourth quarter results was net interest expense of $2.5 million versus interest income of $800,000 in the fourth quarter of 2006. The companys tax rate for the fourth quarter of 2007 was 53.1%, compared with a tax benefit of 38.2% in the fourth quarter of 2006.
For the fourth quarter of 2007, the Life Sciences segment revenues were $35,134,000, up 12.1% from $31,346,000 in the same period of 2006. The Healthcare segment revenues, which include Nurse Travel and Allied Healthcare lines of business, were down 2.1% to $44,254,000 compared with $45,183,000 in the same period of 2006. Nurse Travel revenues of $31,366,000, which included $2,649,000 in revenues derived from supporting two long standing customers experiencing labor disruptions, were down 2.0% from $31,997,000 in the same period of 2006. Allied Healthcare revenues were down 2.3% to $12,888,000 from $13,186,000 in the same period of 2006. The Physician segment had revenues of $19,362,000, an increase of 14.6% over the pro-forma fourth quarter revenue of 2006, and the IT and Engineering segment revenues were $53,290,000, an increase of 16.1% over the pro-forma fourth quarter of 2006. The Physician and IT and Engineering segments were businesses acquired by the Company in early 2007.
Peter Dameris, President and Chief Executive Officer of On Assignment, Inc., said, We are very pleased with our financial and operating performance in the fourth quarter and for the full-year 2007. This was a year of significant growth and achievement for On Assignment. Through two strategic acquisitions, we entered the physician, IT and engineering staffing markets. Both of our acquisitions performed extremely well, and we have enhanced their operating margins over their historical levels. For the full year we increased our gross margin by 460 basis points to 31.7% and our Adjusted EBITDA was up 200%. Our earnings per share of $0.26 included $0.25 per share in non-cash expenses related to amortization of identifiable intangibles from the acquisitions and the mark-to-market of our $73 million interest rate swap. Dameris concluded, We remain focused on improving the performance of our Healthcare segment and diversifying our Nurse Travel customer base. In the fourth quarter of 2007, we reduced revenues derived from our top ten Nurse Travel customers to 28% of the divisions revenue, down from 48% in the fourth quarter of 2006.
Jim Brill, Senior Vice President and Chief Financial Officer of On Assignment, Inc. stated, Our fourth quarter gross margins were 31.8%, up significantly from 27.2% in last years fourth quarter. Although a portion of this increase related to the higher gross margins in our acquired businesses, each of our segments saw year-over-year increases. In the fourth quarter of 2007, gross margins in Life Sciences increased to 33.2% from 33.0% in 2006, and Healthcare gross margins increased to 25.7% from 23.1%. Our Physician segment and IT and Engineering segment gross margins remained strong at 27.4% and 37.5%, respectively.
We demonstrated our ability to generate cash, ending the quarter with $37.8 million in cash and cash equivalents, up from $37.0 million in the third quarter. Additionally, during the fourth quarter we used $8 million to reduce our bank loan to $135.9 million and approximately $2.0 million to repurchase 278,000 shares of our stock. Amortization of intangibles was $3.7 million, depreciation was $1.7 million and equity-based compensation expense was $1.6 million.
First Quarter 2008 Financial Guidance
Based on revenues in the first six weeks of the first quarter of 2008, taking into account the Companys normal seasonal patterns and assuming no deterioration in the staffing markets On Assignment serves, the Company provided the following financial guidance for the quarter ending March 31, 2008:
· Revenues of $146.5 to $149.5 million
· Gross Margins of 31.1% to 31.5% including the reset of employment taxes
· SG&A of $39.0 to $40.0 million, including depreciation of approximately $1.5 million, amortization of approximately $2.4 million and approximately $1.5 million in equity based compensation expense
· Adjusted EBITDA of $11.0 to $13.5 million
· Net income of $2.0 to $3.4 million
· Earnings per share of $0.06 to $0.10
On Assignment will hold its quarterly conference call to discuss its fourth quarter and full year 2007 financial results this afternoon, Thursday February 21, 2008 at 1:30 p.m. Pacific Time. Interested parties are invited to listen to the conference call by dialing (800) 309-8283 or (706) 634-1958 ten minutes before the call. The conference code is 32583192. A replay of the conference call can be accessed from approximately 2:30 p.m. Pacific Time Thursday February 21, 2008 through Friday February 29, 2008 by dialing (800) 642-1687 or (706) 645-9291 with the access code 32583192.
This call is being webcast by Thomson/CCBN and can be accessed via On Assignments web site at www.onassignment.com. Individual investors can also listen at Thomson/CCBNs site at www.fulldisclosure.com or by visiting any of the investor sites in Thomson/CCBNs Individual Investor Network. Institutional investors can access the call via Thomson/CCBNs password-protected event management site, StreetEvents at www.streetevents.com.