NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies.
Principles of Consolidation.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
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.
Revenue Recognition.
Revenues from contract assignments, net of sales adjustments and discounts, are recognized when earned, based on hours worked by the Company’s contract professionals on a weekly basis. Conversion and direct hire fees are recognized when employment candidates begin permanent employment. The Company records a sales allowance against consolidated revenues, which is an estimate based on historical billing adjustment experience. The sales allowance is recorded as a reduction to revenues and an increase to the allowance for billing adjustments. The billing adjustment reserve includes an allowance for fallouts. Fallouts are direct hire and conversion fees that do not complete the contingency period, which is typically 90 days or less. The Company includes reimbursed expenses, in revenues and the associated amounts of reimbursable expenses in cost of services.
The Company records revenues on a gross basis as a principal or on a net basis as an agent depending on the arrangement. The key indicators as to whether it acts as a principal or an agent are whether the Company (i) has the direct contractual relationships with its customers, (ii) bears the risks and rewards of the transactions, and (iii) has the discretion to select the contract professionals and establish their price.
Income Taxes.
Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized.
The Company makes a comprehensive review of its uncertain tax positions regularly. An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed return, or planned to be taken in a future tax return or claim that has not been reflected in measuring income tax expense for financial reporting purposes. In general, until these positions are sustained by the taxing authorities or statutes expire for the year that the position was taken, the Company does not recognize the tax benefits resulting from such positions and reports the tax effects as a liability for uncertain tax positions.
Foreign Currency Translation.
The functional currency of the Company’s foreign operations is their local currency, and as such, their assets and liabilities are translated into U.S. dollars at the rate of exchange in effect on the balance sheet date. Revenue and expenses are translated at the average rates of exchange prevailing during each monthly 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. Gains and losses resulting from foreign currency transactions, which are not material, are included in Selling, general and administrative (SG&A) expenses in the Consolidated Statements of Operations and Comprehensive Income.
Cash and Cash Equivalents.
The Company considers all highly liquid investments with a maturity of three months or less on the date of purchase to be cash equivalents.
Allowance for Doubtful Accounts and Billing Adjustments.
The Company estimates an allowance for doubtful accounts and an allowance for billing adjustments related to trade receivables based on an analysis of historical collection and billing adjustment experience. The Company applies bad debt percentages based on experience to the outstanding accounts receivable balances at the end of the period, as well as analyzes specific reserves as needed. Impaired receivables, or portions thereof, are written-off when deemed uncollectible.
Property and Equipment.
Property and equipment 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. Leasehold improvements are amortized over the shorter of the life of the related asset or the remaining term of the lease. Costs associated with customized internal-use software systems that have reached the application development stage and meet recoverability tests are capitalized. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees who are directly associated with the application development.
Goodwill and Identifiable Intangible Assets.
Goodwill and intangible assets with indefinite lives are tested for impairment on an annual basis as of October 31, and for goodwill whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount and for indefinite lived intangibles, if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.
Intangible assets with indefinite lives consist of trademarks. The Company tests trademarks for impairment on an annual basis, on October 31. In order to test the trademarks for impairment, the Company determines the fair value of the trademarks and compares such amount to its carrying value. The fair value of the trademarks is determined using a projected discounted cash flow analysis based on the relief-from-royalty approach. The principal factors used in the discounted cash flow analysis requiring judgment are projected net sales, discount rate, royalty rate and terminal value assumption. The royalty rate used in the analysis is based on transactions that have occurred in our industry. Intangible assets having finite lives are amortized over their useful lives and are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Customer relations are amortized using an accelerated method. Contractor relations and non-compete agreements are amortized using the straight-line method. The Company did not have any impairments of indefinite lived or finite lived intangibles in
2013
,
2012
, or
2011
.
Goodwill is tested for impairment using a two-step process in which the first step compares the fair value of a reporting unit, which is generally an operating segment or one level below the operating segment level, which is a business and for which discrete financial information is available and reviewed by segment management, to the reporting unit's carrying value. The second step measures the amount of impairment by comparing the implied fair value of the respective reporting unit's goodwill with the carrying value of that goodwill. The goodwill impairment loss is measured by the amount the carrying value of goodwill exceeds the implied fair value of goodwill.
The Company performed the step one goodwill impairment tests for each reporting unit as of October 31, 2013 as this is the annual impairment test date. Based upon the annual goodwill impairment tests in
2013
,
2012
and
2011
, there was no goodwill impairment charge.
Impairment or Disposal of Long-Lived Assets.
The Company evaluates long-lived assets, other than goodwill and identifiable intangible assets with indefinite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the asset, in which case a write-down is recorded to reduce the related asset to its estimated fair value.
Workers’ Compensation and Medical Malpractice Loss Reserves.
The Company carries retention policies for its workers’ compensation liability and medical malpractice liability exposures. In connection with these programs, the Company pays 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. The workers' compensation and medical malpractice loss reserves are based upon an actuarial report obtained from a third party and determined based on claims filed and claims incurred but not reported. The Company accounts for claims incurred but not yet reported based on estimates derived from historical claims experience and current trends of industry data. Changes in estimates and differences in estimates and actual payments for claims are recognized in the period that the estimates changed or the payments were made.
The Company has restated certain amounts in the Consolidated Balance Sheet at December 31, 2012. The restatement had no effect on the Consolidated Statements of Operations and Comprehensive Income or Consolidated Statements of Cash Flows, as previously reported. The restatement reclassified
$16.4 million
of workers compensation and medical malpractice receivables recorded as an offset in the workers’ compensation and medical malpractice loss reserves to workers’ compensation and medical malpractice receivable. The workers' compensation and medical malpractice loss reserves disclosure in Note 8 “Commitments and Contingencies” has been restated to reflect the workers’ compensation and medical malpractice receivables on a gross basis at December 31, 2012. The total assets disclosure in Note 12 “Business Segments” has been restated to reflect the workers’ compensation and medical malpractice receivables on a gross basis for all periods presented.
Contingencies.
The Company records an estimated loss from a loss contingency when information available prior to issuance of its financial statements indicates it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated. Accounting for contingencies, such as legal settlements, workers’ compensation matters and medical malpractice insurance matters, requires the Company to use judgment.
Business Combinations.
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices and estimates made by management. Accordingly, these can be affected by contract performance and other factors over time, which may cause final amounts to differ materially from original estimates. The Company adjusts the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date if it obtains more information regarding asset valuations and liabilities assumed.
Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. Acquisition related costs are recognized separately from the acquisition and are expensed as incurred.
Stock-Based Compensation.
The Company records compensation expense for restricted stock awards and restricted stock units based on the fair market value of the awards on the date of grant. Compensation expense for performance-based awards is measured based on the amount of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The Company accounts for stock options granted and Employee Stock Purchase plan ("ESPP") shares based on an estimated fair market value using a Black-Scholes option valuation model. This methodology requires the use of subjective assumptions including expected stock price volatility and the estimated life of each award. The fair value of equity-based compensation awards less the estimated forfeitures is amortized over the vesting period of the award.
Concentration of Credit Risk.
Financial instruments that potentially subject the Company to credit risks consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and cash equivalents in low risk investments with quality credit institutions and limits the amount of credit exposure with any single institution above FDIC insured limits. Concentration of credit risk with respect to accounts receivable is 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.
Derivative Instruments.
The Company utilizes derivative financial instruments to manage interest rate risk. The Company does not use derivative financial instruments for trading or speculative purposes, nor does it use leveraged financial instruments.
Advertising Costs.
Advertising costs, which are expensed as incurred, were
$5.0 million
in
2013
,
$4.6 million
in
2012
, and
$2.6 million
in
2011
, and are included in selling, general and adminsitrative ("SG&A") expenses.
Reclassifications.
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These changes consisted of reclassifications to separate or combine certain line items in the accompanying consolidated balance sheets, consolidated statements of operations comprehensive income and consolidated statements of cash flows. Additionally, some reclassifications relate to the required presentation of income from discontinued operations during the years ended
December 31, 2013
,
2012
, and
2011
. Please refer to Note 4 for further details. All such reclassifications do not affect net income as presented in previous years.
2. Property and Equipment.
Property and equipment at
December 31, 2013
and
2012
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
Furniture, fixtures and equipment
|
|
$
|
8,409
|
|
|
$
|
6,891
|
|
Computers and related equipment
|
|
12,155
|
|
|
6,918
|
|
Computer software
|
|
37,800
|
|
|
32,871
|
|
Leasehold improvements
|
|
6,059
|
|
|
5,417
|
|
Work-in-progress
|
|
14,929
|
|
|
9,937
|
|
|
|
79,352
|
|
|
62,034
|
|
Less -- accumulated depreciation and amortization
|
|
(40,761
|
)
|
|
(35,172
|
)
|
|
|
$
|
38,591
|
|
|
$
|
26,862
|
|
Depreciation and amortization expense related to property and equipment was
$8.0 million
in
2013
,
$6.5 million
in
2012
and
$5.3 million
in
2011
, and is included in SG&A expenses.
The Company has capitalized costs related to its various technology initiatives. The net book value of the property and equipment related to software development was
$13.5 million
as of
December 31, 2013
and
$12.1 million
as of
December 31, 2012
, which includes work-in-progress of
$10.0 million
and
$7.5 million
, respectively.
3. Acquisitions.
On
December 5, 2013
, the Company acquired all of the outstanding shares of
CyberCoders Holdings, Inc
. ("CyberCoders"),
a privately-owned provider of permanent placement services headquartered in Irvine, California.
The primary reason for the acquisition was to expand the Company's permanent placement services.
The purchase price was
$98.6 million
, comprised of
$93.6 million
in cash paid at closing and potential future earn-out consideration of
$5.0 million
(the maximum earn-out opportunity is capped at
$11.0 million
) based on estimated financial performance of CyberCoders through 2015. Acquisition costs of approximately
$1.5 million
were expensed in 2013. Goodwill deductible for tax purposes is
$10.3 million
for this transaction. The results of operations for the acquisition have been combined with those of the Company from the acquisition date. CyberCoders revenues and net income (loss) included in the Statement of Operations for the year ended December 31, 2013 were
$3.6 million
and
$(0.1) million
, respectively.
On
December 2, 2013
, the Company acquired all of the outstanding partnership interests of
Whitaker Medical, LLC
,
a privately-owned provider of physician staffing services headquartered in Houston, Texas.
The primary reason for the acquisition was to expand the Company's Physician staffing services.
The purchase price was
$21.3 million
, comprised of
$18.5 million
in cash paid at closing and potential future earn-out consideration of
$2.8 million
(the maximum earn-out opportunity is capped at
$5.0 million
) based on estimated financial performance of Whitaker through 2015. Acquisition costs of approximately
$0.4 million
were expensed in 2013. Goodwill is deductible for tax purposes. The results of operations for the acquisition have been combined with those of the Company from the acquisition date. Whitaker revenues and net income (loss) included in the Statement of Operations for the year ended December 31, 2013 were
$2.3 million
and
$(28,000)
, respectively.
On
May 15, 2012
, the Company acquired all of the outstanding shares of
Apex Systems, Inc.
,
a privately-owned provider of information technology staffing headquartered in Richmond, Virginia.
The primary reason for the acquisition was to expand the Company's information technology staffing services.
The purchase price totaled approximately
$610.8 million
, comprised of
$385.0 million
paid in cash
at closing,
$0.3 million
paid in the third quarter of 2012 related to the net working capital adjustments, and
14.3 million
shares of common stock of the Company issued to the holders of shares of common stock and options to purchase common stock of Apex immediately prior to the effective time of the merger. Acquisition costs related to this transaction totaled approximately
$9.8 million
and were expensed in 2012. Goodwill and the identifiable intangible assets are deductible for tax purposes. The results of operations of Apex have been combined with those of the Company since the acquisition date.
On
July 31, 2011
, the Company acquired all of the outstanding shares of
HealthCare Partners, Inc. ("HCP")
,
a privately-owned provider of physician staffing headquartered in Atlanta, Georgia
.
The primary reasons for the acquisition were to expand the Physician segment business operations geographic coverage and to leverage the Company’s infrastructure.
The purchase price for HCP was approximately
$19.1 million
comprised of
$15.7 million
in cash paid at closing and potential future earn-out consideration of
$3.4 million
(the maximum earn-out opportunity was capped at
$3.7 million
) based on estimated financial performance of HCP through 2013. Acquisition costs of approximately
$57,000
were expensed in
2011. The Company discontinued the use of the HCP tradename during 2012. Go
odwill is deductible for tax purposes. The results of operations for the acquisition have been combined with those of the Company since the acquisition date.
On
February 28, 2011
, the Company acquired all of the outstanding shares of
Warphi N.V. and its subsidiaries (collectively, "Valesta")
,
a privately-owned provider of specialized clinical research staffing headquartered in Belgium
.
The primary reasons for the acquisition were to expand the Life Sciences business operations and to leverage the Company’s infrastructure
. The purchase price for Valesta totaled
$23.7 million
, comprised of
$16.8 million
in cash paid at closing and potential future earn-out consideration of
$6.9 million
(the maximum earn-out was capped at a Euro value of
€5.0 million
) based on estimated financial performance of Valesta through 2013. Acquisition costs of approximately
$0.4 million
were expensed in 2011. Goodwill is not deductible for tax purposes. The results of operations for the acquisition have been combined with those of the Company since the acquisition date.
Assets and liabilities of the acquired companies were recorded at their estimated fair values at the dates of acquisition. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired has been allocated to goodwill. The fair value assigned to identifiable intangible assets was determined primarily by using a discounted cash flow method.
The Company's allocation for the purchase price for Apex has been finalized. The Company's allocation for the purchase price of CyberCoders and Whitaker remains incomplete with respect to opening net assets, intangible assets, taxes and contingent consideration. Measurement period adjustments resulting from the finalization of the purchase price allocation will be recorded retrospectively to the acquisition date. The preliminary fair value of contingent consideration is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the respective purchase agreements. There are numerous inputs for this valuation, which the Company will finalize during the measurement period. Significant changes are likely and will change the contingent consideration and the amount allocated to goodwill. See Note 13 Fair Value Measurements for further information regarding the fair value of contingent consideration and the level 3 rollforward disclosure.
The following tables summarize (in thousands) the purchase price allocations for the acquisitions of CyberCoders and Whitaker, which are subject to finalization during the measurement period, and Apex, HCP and Valesta:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 Acquisitions
|
|
2012 Acquisition
|
|
2011 Acquisitions
|
|
CyberCoders
|
|
Whitaker
|
|
Apex
|
|
HCP
|
|
Valesta
|
Current assets
|
$
|
10,805
|
|
|
$
|
8,909
|
|
|
$
|
172,042
|
|
|
$
|
3,950
|
|
|
$
|
6,332
|
|
Property and equipment
|
3,790
|
|
|
272
|
|
|
902
|
|
|
123
|
|
|
299
|
|
Goodwill
|
70,527
|
|
|
7,452
|
|
|
264,590
|
|
|
14,398
|
|
|
17,911
|
|
Identifiable intangible assets
|
36,450
|
|
|
9,760
|
|
|
251,555
|
|
|
1,784
|
|
|
5,679
|
|
Other
|
915
|
|
|
568
|
|
|
494
|
|
|
13
|
|
|
26
|
|
Total assets acquired
|
$
|
122,487
|
|
|
$
|
26,961
|
|
|
$
|
689,583
|
|
|
$
|
20,268
|
|
|
$
|
30,247
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
8,022
|
|
|
$
|
5,083
|
|
|
$
|
77,905
|
|
|
$
|
1,070
|
|
|
$
|
4,774
|
|
Other
|
15,817
|
|
|
551
|
|
|
850
|
|
|
49
|
|
|
1,814
|
|
Total liabilities assumed
|
23,839
|
|
|
5,634
|
|
|
78,755
|
|
|
1,119
|
|
|
6,588
|
|
Total purchase price
|
$
|
98,648
|
|
|
$
|
21,327
|
|
|
$
|
610,828
|
|
|
$
|
19,149
|
|
|
$
|
23,659
|
|
The following table summarizes (in thousands) the allocation of the purchase price among the identifiable intangible assets for the acquisitions of CyberCoders and Whitaker, which are subject to finalization during the measurement period, and Apex, HCP and Valesta:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Intangible Asset Value
|
|
|
|
2013 Acquisitions
|
|
2012 Acquisition
|
|
2011 Acquisitions
|
|
Useful life
|
|
CyberCoders
|
|
Whitaker
|
|
Apex
|
|
HCP
|
|
Valesta
|
Contractor relations
|
2 – 5 years
|
|
$
|
3,900
|
|
|
$
|
1,800
|
|
|
$
|
10,589
|
|
|
$
|
814
|
|
|
$
|
266
|
|
Customer relations
|
2 – 10 years
|
|
750
|
|
|
5,900
|
|
|
92,147
|
|
|
950
|
|
|
2,395
|
|
Non-compete agreements
|
2 – 7 years
|
|
800
|
|
|
60
|
|
|
2,076
|
|
|
20
|
|
|
440
|
|
In-use software
|
6 years
|
|
18,900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Trademarks
|
indefinite
|
|
12,100
|
|
|
2,000
|
|
|
146,743
|
|
|
—
|
|
|
2,578
|
|
|
|
|
$
|
36,450
|
|
|
$
|
9,760
|
|
|
$
|
251,555
|
|
|
$
|
1,784
|
|
|
$
|
5,679
|
|
The summary below (in thousands, except for per share data) presents pro forma unaudited consolidated results of operations for each of the years in the period ended
December 31, 2013
as if the acquisitions of HCP and Valesta occurred on January 1, 2010, the acquisition of Apex occurred on January 1, 2011, and the acquisitions of CyberCoders and Whitaker occurred on January 1, 2012. The pro forma financial information gives effect to certain adjustments, including: the amortization of intangible assets and interest expense on acquisition-related debt, changes in the management fees, and increased number of common shares as a result of the acquisition. Acquisition-related costs are assumed to have occurred at the beginning of the year prior to acquisition. The pro forma financial information is not necessarily indicative of the operating results that would have occurred if the acquisition had been consummated as of the date indicated, nor are they necessarily indicative of future operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
(unaudited)
|
Revenues
|
$
|
1,717,337
|
|
|
$
|
1,494,542
|
|
|
$
|
1,234,468
|
|
Income from continuing operations
|
$
|
59,598
|
|
|
$
|
52,538
|
|
|
$
|
22,676
|
|
Net income
|
$
|
89,756
|
|
|
$
|
58,732
|
|
|
$
|
26,109
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
Income from continuing operations
|
$
|
1.11
|
|
|
$
|
1.01
|
|
|
$
|
0.44
|
|
Net income
|
$
|
1.68
|
|
|
$
|
1.13
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
Income from continuing operations
|
$
|
1.09
|
|
|
$
|
0.99
|
|
|
$
|
0.44
|
|
Net income
|
$
|
1.65
|
|
|
$
|
1.10
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
53,481
|
|
|
52,103
|
|
|
51,180
|
|
Weighted average number of shares and dilutive shares outstanding
|
54,555
|
|
|
53,190
|
|
|
52,062
|
|
4. Discontinued Operations.
On December 2, 2013, the Company completed the sale of its Allied Healthcare division for
$28.7 million
in cash and recognized a gain of
$16.4 million
, net of income taxes of
$10.4 million
. The Allied Healthcare division, previously included in the Healthcare segment, has been presented as discontinued operations in our Consolidated Statements of Operations for all periods presented.
On February 12, 2013, the Company completed the sale of the Nurse Travel division for
$33.7 million
in cash and recognized a gain of
$14.4 million
, net of income taxes of
$9.1 million
. The Nurse Travel division, previously included in the Healthcare segment, has been presented as discontinued operations in our Consolidated Statements of Operations for all periods presented.
The following is a summary of Allied Healthcare's and Nurse Travel's combined operating results for each of the years in the period ended December 31,
2013
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
Revenues
|
$
|
44,569
|
|
|
$
|
101,719
|
|
|
$
|
81,697
|
|
Income (loss) before income taxes
|
$
|
(967
|
)
|
|
$
|
10,356
|
|
|
$
|
5,766
|
|
Provision for income taxes
|
$
|
(284
|
)
|
|
$
|
4,162
|
|
|
$
|
2,333
|
|
Net income (loss)
|
$
|
(683
|
)
|
|
$
|
6,194
|
|
|
$
|
3,433
|
|
5. Long-Term Debt.
Long-term debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
Senior Secured Debt
|
|
|
|
$125 million revolving credit facility, due May 2018
|
$
|
44,500
|
|
|
$
|
—
|
|
$100 million term A loan facility, due May 2018
|
92,500
|
|
|
—
|
|
$275 million term B loan facility, due May 2020
|
262,813
|
|
|
—
|
|
$75 million revolving credit facility
|
—
|
|
|
—
|
|
$100 million term A loan facility, repaid May 2013
|
—
|
|
|
92,500
|
|
$365 million term B loan facility, repaid May 2013
|
—
|
|
|
334,088
|
|
|
$
|
399,813
|
|
|
$
|
426,588
|
|
On May 16, 2013, the Company entered into a new
$500.0 million
credit facility and repaid all borrowing under the old facility. The new facility consists of (i) a
$100.0 million
, five-year term A loan facility, (ii) a
$275.0 million
seven-year term B loan facility and (iii) a
$125.0 million
, five-year revolving loan facility. Under terms of the new facility, the Company has the ability to increase the loan facilities for up to
$100.0 million
under certain specified conditions. During
2013
, we expensed unamortized capitalized loan costs of
$15.0 million
related to the old borrowing facility.
Borrowings under the new facility bear interest at the Company's option, either the Eurodollar rate (LIBOR) or the base rate, plus
1.75%
to
2.50%
for the term A and revolving loans and LIBOR, with a floor of
1.0%
, plus
2.50%
for the term B loans. At
December 31, 2013
, borrowings on the term A loan bore interest at
2.2%
, borrowings on the term B loan bore interest at
3.5%
, and the revolving loan bore interest of
0.17%
base rate plus
2.0%
. The weighted average interest rate at
December 31, 2013
was
3.0%
. The commitment fee on the undrawn portion available under the revolving loan facility ranges from
0.25%
to
0.40%
.
During the remainder of this fiscal year, each of the next four years and thereafter, the Company will be required to make payments as follows (in thousands):
|
|
|
|
|
|
2014
|
|
$
|
10,000
|
|
2015
|
|
10,000
|
|
2016
|
|
10,000
|
|
2017
|
|
10,875
|
|
2018
|
|
99,750
|
|
Thereafter
|
|
259,188
|
|
Total
|
|
$
|
399,813
|
|
The Company is required to make mandatory prepayments of loans under the new facility, subject to specified exceptions, from excess cash flow and with the proceeds of asset sales, debt issuances and specified other events.
The Company's obligations under the credit facility are guaranteed by substantially all of its direct and indirect domestic subsidiaries and secured by a lien on substantially all of the Company's tangible and intangible property and by a pledge of (i) all of the equity interests in its direct and indirect domestic subsidiaries and (ii)
65%
of the equity interests in its first-tier foreign subsidiaries.
In addition to other covenants, the maximum ratio of consolidated funded debt to consolidated EBITDA steps down from
4.00
:1.00 as of
December 31, 2013
to
3.25
:1.00 by June 30, 2015. There are limits on the Company's and its subsidiaries' ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, declare dividends or redeem or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem or purchase subordinated debt and amend or otherwise alter debt agreements.
At
December 31, 2013
and
December 31, 2012
, the Company was in compliance with all of its debt covenants. At
December 31, 2013
, the Company had a ratio of funded debt to consolidated EBITDA of
2.20
:1.00 and had $
77.8 million
of borrowing available under the revolving credit facility.
6. Goodwill and Other Identifiable Intangible Assets.
The changes in the carrying amount of goodwill for the years ended
December 31, 2013
and
2012
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apex
|
|
Oxford
|
|
Life Sciences
|
|
Healthcare
|
|
Physician
|
|
Total
|
Balance as of December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
$
|
—
|
|
|
$
|
149,483
|
|
|
$
|
27,668
|
|
|
$
|
122,230
|
|
|
$
|
51,570
|
|
|
$
|
350,951
|
|
Accumulated impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(121,717
|
)
|
|
—
|
|
|
(121,717
|
)
|
|
—
|
|
|
149,483
|
|
|
27,668
|
|
|
513
|
|
|
51,570
|
|
|
229,234
|
|
Apex Acquisition (see Note 3)
|
264,590
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
264,590
|
|
Acquisition Accounting
|
—
|
|
|
—
|
|
|
1,814
|
|
|
—
|
|
|
(9
|
)
|
|
1,805
|
|
Translation adjustment
|
—
|
|
|
—
|
|
|
529
|
|
|
—
|
|
|
—
|
|
|
529
|
|
Balance as of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
264,590
|
|
|
149,483
|
|
|
30,011
|
|
|
122,230
|
|
|
51,561
|
|
|
617,875
|
|
Accumulated impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(121,717
|
)
|
|
—
|
|
|
(121,717
|
)
|
|
264,590
|
|
|
149,483
|
|
|
30,011
|
|
|
513
|
|
|
51,561
|
|
|
496,158
|
|
Whitaker acquisition (see Note 3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,452
|
|
|
7,452
|
|
CyberCoders acquisition (see Note 3)
|
—
|
|
|
70,527
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70,527
|
|
Divestiture - gross goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
(121,717
|
)
|
|
—
|
|
|
(121,717
|
)
|
Divestiture - accumulated impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
121,717
|
|
|
—
|
|
|
121,717
|
|
Transfers
|
—
|
|
|
513
|
|
|
—
|
|
|
(513
|
)
|
|
—
|
|
|
—
|
|
Translation adjustment
|
—
|
|
|
—
|
|
|
811
|
|
|
—
|
|
|
—
|
|
|
811
|
|
Balance as of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
264,590
|
|
|
220,523
|
|
|
30,822
|
|
|
—
|
|
|
59,013
|
|
|
574,948
|
|
Accumulated impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
264,590
|
|
|
$
|
220,523
|
|
|
$
|
30,822
|
|
|
$
|
—
|
|
|
$
|
59,013
|
|
|
$
|
574,948
|
|
As of
December 31, 2013
and
December 31, 2012
, the Company had the following acquired intangible assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
Estimated Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
Subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relations
|
|
3 months – 10 years
|
|
$
|
110,007
|
|
|
$
|
41,564
|
|
|
$
|
68,443
|
|
|
$
|
103,285
|
|
|
$
|
23,338
|
|
|
$
|
79,947
|
|
Contractor relations
|
|
2 - 7 years
|
|
43,598
|
|
|
30,737
|
|
|
12,861
|
|
|
37,871
|
|
|
27,754
|
|
|
10,117
|
|
Non-compete agreements
|
|
2 - 7 years
|
|
3,863
|
|
|
1,424
|
|
|
2,439
|
|
|
2,986
|
|
|
1,062
|
|
|
1,924
|
|
In-use software
|
|
6 years
|
|
18,900
|
|
|
263
|
|
|
18,637
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
176,368
|
|
|
73,988
|
|
|
102,380
|
|
|
144,142
|
|
|
52,154
|
|
|
91,988
|
|
Not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
186,075
|
|
|
—
|
|
|
186,075
|
|
|
171,852
|
|
|
—
|
|
|
171,852
|
|
Goodwill
|
|
|
|
574,948
|
|
|
—
|
|
|
574,948
|
|
|
496,158
|
|
|
—
|
|
|
496,158
|
|
Total
|
|
|
|
$
|
937,391
|
|
|
$
|
73,988
|
|
|
$
|
863,403
|
|
|
$
|
812,152
|
|
|
$
|
52,154
|
|
|
$
|
759,998
|
|
Amortization expense for intangible assets with finite lives was
$21.8 million
in
2013
,
$18.0 million
in
2012
and
$2.3 million
in
2011
. Estimated amortization for the each of the next five fiscal years and thereafter follows (in thousands):
|
|
|
|
|
2014
|
$
|
24,509
|
|
2015
|
21,326
|
|
2016
|
17,721
|
|
2017
|
12,888
|
|
2018
|
10,307
|
|
Thereafter
|
15,629
|
|
|
$
|
102,380
|
|
Goodwill and other intangible assets having an indefinite useful life are not amortized for financial statement purposes. Goodwill and intangible assets with indefinite lives are reviewed for impairment on an annual basis as of
October 31
in 2013 and as of December 31, for prior periods, and whenever certain events or changes in circumstances occur.
No impairment charge was recorded for any of the reporting units during
2013
,
2012
and
2011
.
7. 401(k) Retirement Savings Plan, Deferred Compensation Plan and Change in Control Severance Plan.
Under the Company’s 401(k) Retirement Savings Plan, which covers eligible employees of On Assignment and its wholly-owned subsidiaries, Assignment Ready Inc., On Assignment Staffing Services, Inc., VISTA, and Oxford, eligible employees may elect to have a portion of their salary deferred and contributed to the plans. The amount of salary deferred, up to certain limits set by the IRS, is not subject to federal and state income tax at the time of deferral, but together with any earnings on deferred amounts, is subject to taxation upon distribution. The plan covers all eligible employees and permits matching or other discretionary contributions at the Company’s discretion. Eligible employees may enroll once they complete
three
months of service prior to the next quarterly offering. Apex sponsors a 401(k) plan for the benefit of all eligible Apex employees. Employees are eligible to participate after
12
months of service,
1,000 hours of work,
and attaining the age of
18
. Under the terms of the plan, employees are entitled to contribute a portion of their total compensation, within limitations established by the Internal Revenue Code. The Company pledged to make contributions to the 401(k) plans of
$6.0 million
in
2013
and made contributions of
$3.7 million
and
$1.1 million
in
2012
and
2011
, respectively.
Effective January 1, 1998, the Company implemented the On Assignment, Inc. Deferred Compensation Plan. On September 4, 2008, effective as of January 1, 2008, the Company amended the On Assignment Deferred Compensation Plan and adopted a new plan, called the On Assignment Deferred Compensation Plan – Effective January 1, 2008, applicable to deferrals made on or after January 1, 2005 (referred to herein as the 2008 Deferred Compensation Plan). On April 20, 2011, the Company’s Board of Directors authorized and directed the termination of the 1998 Deferred Compensation Plan and the 2008 Deferred Compensation Plan, effective May 2, 2011.
The Company terminated its deferred compensation plans in 2012. As a result of the termination, the Company received
$1.5 million
related to the cash surrender value of the life insurance proceeds, which were maintained as a funding source to the deferred compensation plans, and in June 2012, distributed
$1.2 million
to plan participants according to the terms of the plans.
As a result of the merger with Apex, the Company assumed
a long-term incentive program, which began in 2010, that provides for a total award of up to
$10.0 million
to eligible employees, based on the attainment by Apex of stipulated revenues and EBITDA goals during a three-year performance period. The Company determined that it was probable that the revenue and EBITDA goals for Apex would be reached in 2012 and the Company accrued approximately
$7.9 million
at May 15, 2012 (the effective date of the acquisition), and
$10.0 million
at December 31, 2012, which is included in deferred compensation in the Consolidated Balance Sheet. The deferred compensation balance was
$20,000
at
December 31, 2013
.
The Company adopted the On Assignment, Inc. Change in Control Severance Plan (the "CIC Plan") to provide severance benefits for certain officers and other employees who are terminated following an acquisition of the Company. This CIC Plan was adopted as of February 12, 2004 and amended and restated on June 21, 2013. Under the CIC Plan, eligible participants who are involuntarily terminated within
18 months
after a change in control, as defined in the CIC Plan will be entitled to (i) a payment equal to a portion or multiple of the employee's annual salary plus the employee's target bonus, payable in a lump sum, and (ii) a lump sum payment representing the cost of continuation of health and welfare benefits, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Severance pay under the CIC Plan varies depending on the eligible employee's length of service and position with the Company.
The Company entered into an Amended and Restated Executive Change of Control Agreement with the Chief Executive Officer on December 11, 2008, primarily for the purpose of causing his previous agreement to meet the requirements of Code Section 409A. This agreement supersedes the CIC Plan and provides, in the event of an
involuntary termination occurring within six months and ten days
following a change of control of the Company, that the Chief Executive Officer is entitled to the benefits including three times his salary and target bonus payments, continuation of health and welfare benefits and car allowance for up to 18 months, and payment for outplacement services. Additionally, under the arrangements, immediately prior to a change of control, all outstanding Company stock options, restricted stock and stock units held by the Chief Executive Officer will become fully vested (and, in the case of options, remain exercisable for an extended period), subject to any express limitations contained in the Chief Executive Officer's employment agreement. In addition, the
agreement entitles the Chief Executive Officer to tax gross-up payments in the event that any payments are subject to “golden parachute” excise taxes under IRS Code Section 280G.
The Company entered into an Executive Change of Control Agreement with the Chief Financial Officer on September 1, 2012. This agreement supersedes the CIC Plan and provides, in the event of an involuntary termination occurring within six months and ten days following a change of control of the Company, for benefits including salary and bonus payments, car allowance, healthcare coverage, cash payment equal to premiums for life insurance and disability insurance, and payment for outplacement services. Immediately prior to a change of control, all outstanding Company stock options, restricted stock and restricted stock units held by the officer will become fully vested (and, in the case of options, remain exercisable for an extended period). The agreement provides the Chief Financial Officer with a best pay cap reduction for any excess parachute payments under Code Section 280G unless he would receive a greater after-tax benefit without the reduction and after paying the related excise tax.
8. Commitments and Contingencies.
The Company leases its facilities and certain office equipment under operating leases, which expire at various dates through 2023. Certain leases contain rent escalations and/or renewal options. Rent expense for all significant leases is recognized on a straight-line basis. The balance of the deferred rent liability reflected in other current liabilities in the accompanying Consolidated Balance Sheets was
$0.4 million
and
0.3 million
at December 31,
2013
and
2012
respectively and the balance reflected in other long-term liabilities was
$3.6 million
and
$3.8 million
, at December 31,
2013
and
2012
respectively.
The following is a summary of specified contractual cash obligation payments by the Company, including discontinued operations, as of
December 31, 2013
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Related Party Leases
|
|
Total
|
2014
|
|
$
|
15,685
|
|
|
$
|
1,299
|
|
|
$
|
16,984
|
|
2015
|
|
13,863
|
|
|
1,168
|
|
|
15,031
|
|
2016
|
|
11,236
|
|
|
694
|
|
|
11,930
|
|
2017
|
|
7,523
|
|
|
175
|
|
|
7,698
|
|
2018
|
|
5,351
|
|
|
—
|
|
|
5,351
|
|
Thereafter
|
|
8,699
|
|
|
—
|
|
|
8,699
|
|
Total
|
|
$
|
62,357
|
|
|
$
|
3,336
|
|
|
$
|
65,693
|
|
Rent expense totaled
$16.6 million
for
2013
,
$12.8 million
for
2012
, and
$7.2 million
for
2011
, and is included in SG&A expenses.
As discussed in Note 1, the Company carries large retention policies for its workers’ compensation liability and its medical malpractice exposures. The workers' compensation and medical malpractice loss reserves are based upon an actuarial report obtained from a third party and determined based on claims filed and claims incurred but not reported. The Company accounts for claims incurred but not yet reported based on estimates derived from historical claims experience and current trends of industry data. Changes in estimates, differences in estimates, and actual payments for claims, are recognized in the period that the estimates changed or the payments were made. The workers' compensation and medical malpractice loss reserves were approximately
$32.8 million
and
$26.8 million
at
December 31, 2013
and
2012
, respectively. Additionally, the Company has unused stand-by letters of credit outstanding to secure obligations for workers’ compensation claims with various insurance carriers. The unused stand-by letters of credit at
December 31, 2013
and
December 31, 2012
were
$2.7 million
and
$2.8 million
, respectively.
The Company is subject to earn-out obligations entered into in connection with certain of its acquisitions. If the acquired businesses meet predetermined financial targets, the Company is obligated to make additional cash payments in accordance with the terms of such earn-out obligations. As of
December 31, 2013
, the Company has potential future earn-out obligations of approximately
$16.0 million
through 2015.
The Company has entered into various non-cancelable operating leases, primarily related to its facilities and certain office equipment used in the ordinary course of business. As a result of the Apex acquisition, the Company leases
two
properties owned by related parties.
At
December 31, 2013
and
2012
, the Company has an income tax reserve in other long-term liabilities related to uncertain tax positions of
$1.6 million
and
$0.4 million
, respectively. Income tax reserves are not set forth in the table above. The Company is unable to make reasonably reliable estimates of the period of cash settlement since the statute of limitations might expire without examination by the respective tax authority.
Legal Proceedings
The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business. The Company has accrued approximately
$2.1 million
for a settlement, inclusive of all plaintiffs’ costs and legal expenses, to resolve an alleged class action dispute regarding the payment of certain of our nurses when we owned a Nurse Travel division from 2008 to 2013. Based on the facts
currently available, the Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements, other than described above.
9. Income Taxes.
The provision (benefit) for income taxes consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
28,142
|
|
|
$
|
17,083
|
|
|
$
|
7,723
|
|
State
|
|
5,266
|
|
|
2,742
|
|
|
1,223
|
|
Foreign
|
|
1,223
|
|
|
2,645
|
|
|
1,465
|
|
|
|
34,631
|
|
|
22,470
|
|
|
10,411
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal & State
|
|
4,245
|
|
|
6,235
|
|
|
4,354
|
|
Foreign
|
|
(84
|
)
|
|
(564
|
)
|
|
68
|
|
|
|
4,161
|
|
|
5,671
|
|
|
4,422
|
|
|
|
$
|
38,792
|
|
|
$
|
28,141
|
|
|
$
|
14,833
|
|
Income from continuing operations before income taxes consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
United States
|
|
$
|
88,637
|
|
|
$
|
61,828
|
|
|
$
|
31,639
|
|
Foreign
|
|
4,510
|
|
|
2,772
|
|
|
4,058
|
|
|
|
$
|
93,147
|
|
|
$
|
64,600
|
|
|
$
|
35,697
|
|
The components of deferred tax assets (liabilities) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2013
|
|
December 31,
2012
|
Deferred income tax assets (liabilities):
|
|
|
|
|
Current:
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
1,578
|
|
|
$
|
1,150
|
|
Employee related accruals
|
|
6,663
|
|
|
3,419
|
|
State taxes
|
|
611
|
|
|
1,064
|
|
Workers’ compensation and medical malpractice loss reserves
|
|
4,767
|
|
|
4,683
|
|
Other
|
|
3,595
|
|
|
(169
|
)
|
|
|
17,214
|
|
|
10,147
|
|
Non-current:
|
|
|
|
|
|
Intangibles
|
|
(49,122
|
)
|
|
(23,662
|
)
|
Depreciation expense
|
|
(6,147
|
)
|
|
(4,449
|
)
|
Stock-based compensation
|
|
3,761
|
|
|
2,852
|
|
Net operating loss carryforwards
|
|
1,612
|
|
|
1,191
|
|
Other
|
|
1,822
|
|
|
1,975
|
|
|
|
(48,074
|
)
|
|
(22,093
|
)
|
Valuation allowance
|
|
(1,511
|
)
|
|
(916
|
)
|
Total net deferred income tax liability
|
|
$
|
(32,371
|
)
|
|
$
|
(12,862
|
)
|
The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of
35.0 percent
to income before income taxes and the income tax provision is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Income tax provision at the statutory rate
|
|
$
|
32,602
|
|
|
$
|
22,610
|
|
|
$
|
12,494
|
|
State income taxes, net of federal benefit
|
|
4,039
|
|
|
2,555
|
|
|
1,283
|
|
Disallowed meals and entertainment expenses
|
|
1,592
|
|
|
1,681
|
|
|
1,020
|
|
Other
|
|
559
|
|
|
1,295
|
|
|
36
|
|
|
|
$
|
38,792
|
|
|
$
|
28,141
|
|
|
$
|
14,833
|
|
As of
December 31, 2013
, the Company had
no
federal net operating losses, state net operating losses of approximately
$6.9 million
and foreign net operating losses of approximately
$6.0 million
. The state net operating losses can be carried forward up to 20 years and begin expiring in 2014. The foreign net operating losses in the United Kingdom can be carried forward indefinitely and the net operating losses in Spain can be carried forward up to 18 years beginning from the first period of profits. The Company has recorded a valuation allowance of approximately
$1.5 million
and
$0.9 million
at
December 31, 2013
and
December 31, 2012
, respectively, related to net operating loss carryforwards.
Basis differences in investments in foreign subsidiaries primarily related to undistributed earnings amounted to approximately
$17.8 million
at
December 31, 2013
. Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credit carryforwards would be available to reduce some portion of the US liability.
The Company had gross deferred tax assets of
$27.9 million
and
$17.7 million
, and gross deferred tax liabilities of
$58.8 million
and
$30.5 million
, at
December 31, 2013
and
2012
, respectively. Management has determined the gross deferred tax assets are realizable.
At December 31, 2013, 2012 and 2011, there were
$1.3 million
,
$0.3 million
and
$0.2 million
of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The gross unrecognized tax benefit is carried in other long-term liabilities. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The amount of interest and penalties recognized in the financial statements is not significant.
The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Unrecognized Tax Benefit beginning of year
|
|
$
|
376
|
|
|
$
|
251
|
|
|
$
|
358
|
|
Gross increases - tax positions in prior year
|
|
1,240
|
|
|
159
|
|
|
—
|
|
Gross decreases - tax positions in prior year
|
|
(177
|
)
|
|
(34
|
)
|
|
—
|
|
Lapse of the statute of limitations
|
|
—
|
|
|
—
|
|
|
(107
|
)
|
Unrecognized Tax Benefit end of year
|
|
$
|
1,439
|
|
|
$
|
376
|
|
|
$
|
251
|
|
The Company believes that there will be no significant increases or decreases to unrecognized tax benefits within the next 12 months. The Company is subject to taxation in the United States and various states and foreign jurisdictions. For U.S. federal income tax, the Company remains subject to examination for 2010 and subsequent years. For major U.S. states, with few exceptions, the Company remains subject to examination for 2009 and subsequent years. Generally, for the foreign countries, the Company remains subject to examination for 2008 and subsequent years.
10. Earnings per Share
.
Basic earnings per share are computed based upon the weighted average number of shares outstanding and diluted earnings per share are computed based upon the weighted average number of shares and dilutive share equivalents (consisting of incentive stock options, non-qualified stock options, restricted stock units, restricted stock awards and employee stock purchase plan contributions) outstanding during the periods using the treasury stock method.
The following is a reconciliation of the shares used to compute basic and diluted earnings per share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Weighted average number of common shares
|
|
53,481
|
|
|
46,739
|
|
|
36,876
|
|
Dilutive effect of stock-based awards
|
|
1,074
|
|
|
1,087
|
|
|
882
|
|
Number of shares used to compute diluted earnings per share
|
|
54,555
|
|
|
47,826
|
|
|
37,758
|
|
The following table presents the weighted average share equivalents outstanding during each period that were excluded from the computation of diluted earnings per share because the exercise price for these options was greater than the average market price of the Company’s shares of common stock during the respective periods. Also excluded from the computation of diluted earnings per share were other share equivalents that became anti-dilutive when applying the treasury stock method.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Anti-dilutive common share equivalents outstanding
|
|
7
|
|
|
83
|
|
|
1,039
|
|
11. Stock-based Compensation: Incentive Award Plan and Employee Stock Purchase Plan.
The Company believes that stock-based compensation better aligns the interests of its employees and directors with those of its stockholders versus exclusively providing cash-based compensation. Stock-based compensation provides incentives to retain and motivate executive officers and key employees responsible for driving Company performance and maintaining important relationships that contribute to the growth of the Company.
Compensation expense charged to operations related to stock-based compensation, which totaled
$14.1 million
,
$9.5 million
, and
$6.8 million
for each of the years ended
December 31, 2013
,
2012
and
2011
, respectively, is included in the Consolidated Statements of Operations and Comprehensive Income in SG&A expenses. The Company has recognized an income tax benefit of
$5.1 million
,
$3.5 million
, and
$2.5 million
for the years ended
December 31, 2013
,
2012
and
2011
, respectively in the consolidated statements of operations for stock-based compensation arrangements.
Effective
June 3, 2010
, stockholders of the Company approved the adoption of the On Assignment, Inc. 2010 Incentive Award Plan, as amended and restated in June 2013 (the "2010 Plan"), which replaced the Company’s Restated 1987 Stock Option Plan (the "1987 Plan"). The 2010 Plan permits the grant of stock options, including incentive stock options, nonqualified stock options, restricted stock awards, dividend equivalent rights, stock payments, deferred stock, restricted stock units ("RSUs"), performance shares and other incentive awards, stock appreciation rights and cash awards to its employees, directors and consultants. The 2010 Plan allows for stock option awards to be granted with an exercise price equal to the closing market price of the Company’s stock at the date of grant. Stock option awards generally vest over
four
years of continuous service with the Company and generally have
ten
-year contractual terms. RSUs generally vest over a
three
or
four
year continuous service period, though individual award vesting terms vary within these parameters. Certain stock option awards and RSUs provide for accelerated vesting in the event of a change in control (see Note 7). Options or awards that are canceled or forfeited are added back to the pool of shares available for issuance under the 2010 Plan. As of
December 31, 2013
, there were
3,726,322
shares available for issuance under the 2010 Plan.
Effective May 15, 2012 (amended and restated as of December 13, 2012), the Board of Directors adopted the 2012 Employment Inducement Incentive Award Plan ("2012 Inducement Award Plan"). The 2012 Inducement Award Plan includes terms similar to the 2010 Plan and allows for grants of stock to employees as employment inducement awards pursuant to NYSE rules.
The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that incorporates assumptions disclosed in the table below. Expected volatility is based on historical volatility of the underlying stock for a period consistent with the expected lives of the stock options as the Company believes this is a reasonable representation of future volatility. Additionally, the Company analyzes historical stock option exercise behavior and vesting patterns for RSUs in order to estimate employee turnover rates (i.e. forfeiture rates). The forfeiture rate, set by management, is used to estimate the number of options and awards that will eventually vest and the associated impact on stock-based compensation expense. The expected life, or term, of options granted is derived from historical exercise behavior and represents the period of time that stock option awards are expected to be outstanding. The Company has selected a risk-free rate based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the options’ expected term. For RSUs, the Company records compensation expense based on the fair market value of the awards on the grant date.
The preceding paragraphs describe the general terms of most stock-based incentive awards granted by the Company. However, the Company has granted a discrete set of stock-based awards to its Chief Executive Officer ("CEO") and other corporate officers that differ from those generally stated terms. The impact of these awards is reflected in the detailed disclosures below. All awards are subject to the officer’s continued employment through such vesting dates, however, the vesting of certain awards will accelerate upon the occurrence of a change in control of the Company and/or upon certain qualifying terminations of employment.
CEO Awards
On March 4, 2013, the CEO was awarded
143,182
RSUs with a grant date fair market value of
$3.2 million
. The award vests in
three
equal annual increments on January 4, 2014, January 4, 2015 and January 4, 2016, contingent upon the Company achieving certain performance objectives based on Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization of identifiable intangible assets, but excluding gains, losses or expenses associated with unusual items such as equity-based compensation expense, impairment charges and acquisition related costs) during 2013 and approved by the Compensation Committee.
The Company granted discrete stock-based awards to its CEO as follows: (i) a market-based award in 2010 with a grant date fair market value of
$0.5 million
. The award was expensed over a service perio
d of
2.6 years
and the number of shares were determined by dividing
$0.5 million
by the closing price of the Company stock on February 1, 2013, contingent upon
the achievement of defined market targets, which were met,
(ii) a performance based award on March 8, 2011, which had a grant date fair market value of
$1.0 million
and was expensed over a service period of
9.9 months
, the financial performance objectives were met by the Company during the 12-month period ending December 31, 2011, and
24,654
shares vested on December 31, 2012, and
16,772
shares vested on February 1, 2014, (iii) a performance based award on
March 23, 2012
, which had a grant date fair market value of
$1.5 million
and was expensed over a service period of
9.3 months
, the performance objectives were met by the Company during the 12-month period ending December 31, 2012 and
24,654
shares vested on December 31, 2012,
16,772
shares vested on February 1, 2014 and the remaining number of shares will be determined by dividing
$0.5 million
by the closing price of the Company’s stock on February 1, 2015, and (i
v) a performance-based award on March 4, 2013, which had a grant date fair market value of
$1.0 million
and was expensed over a service period of
10.1 months
, the performance objectives were met by the Company during the 12-month period ending December 31, 2013, with
16,233
shares vesting on February 1, 2014 and the remaining number of shares will be determined by dividing
$0.5 million
by the closing price of the Company’s stock on February 1, 2015. The Company classifies these awards as liab
ility awards until the number of shares is determined. The liability of
$2.5 million
related to these awards is included in other accrued expenses and other long-term liabilities in the accompanying Consolidated Balance Sheets as of December 31, 2013.
On December 31, 2012, the CEO was awarded
39,448
RSUs with a grant date fair market value of
$0.8 million
, contingent upon the Company meeting certain financial performance objectives based on adjusted EBITDA approved by the Compensation Committee over the 12-month period ending December 31, 2013 and continued employment through January 1, 2014.
On March 5, 2012, the CEO was awarded
45,372
performance-based RSUs with a grant date fair market value of
$0.6 million
, of which
22,686
shares vested on December 31, 2012 and
22,686
shares vested on January 4, 2014.
On March 8, 2011, the CEO was awarded
58,754
performance-based
RSUs with a grant date fair market value of
$0.6 million
, of which
29,377
shares vested on January 1, 2012 and
29,377
shares vested on December 31, 2012.
On March 17, 2010, the CEO was granted
67,568
performance-based
RSUs, with a grant-date fair value of
$0.5 million
, of which
33,784
shares vested on February 1, 2011 and
33,784
shares vested on February 1, 2012.
On November 4, 2009, the Company entered into an employment agreement with the CEO that provided for
three
annual stock award grants with grant-date values of
$0.8 million
each, based on performance objectives for 2010 through 2012 that vested on February 1, 2011, January 1, 2012, and December 31, 2012, respectively.
The grant-date fair value of the awards are expensed over the vesting term, based on an estimate of the percentage achievement of the applicable performance targets. All awards were subject to the CEO’s continued employment through applicable vesting dates. All awards may vest on an accelerated basis in part or in full upon the occurrence of certain events.
Other Executive Officer Awards
The Company records stock-based compensation expense over the vesting period of the awards based on the probability that the performance objectives will be met and that the executives will maintain their employment through the respective vesting dates.
On March 4, 2013 the Company granted performance-based RSUs to certain other executive officers with an aggregate grant-date fair value of
$1.0 million
, which vested on January 2, 2014, as certain performance objectives were obtained and certified by the Compensation Committee.
On June 1, 2013, the Company granted performance-based RSUs to certain executive officers. The aggregate grant-date fair value of these grants was
$0.1 million
, which vested on January 2, 2014, as certain performance objectives were obtained and certified by the Compensation Committee. On June 21, 2013, the Company granted performance-based RSUs to certain executive officers with an aggregate grant-date fair value of
$0.3 million
, which will vest on May 31, 2014, subject to continued employment, attaining certain performance objectives and certification by the Compensation Committee.
On March 5, 2012, the Company granted performance-based RSUs to certain executive officers with an aggregate grant-date fair value of
$0.8 million
, which vested on December 31, 2012,
as certain performance objectives were attained and certified by the Compensation Committee.
On May 15, 2012, the Company granted performance-based RSUs to certain executive officers in conjunction with the acquisition of Apex. The aggregate grant-date fair value of these grants was
$0.2 million
, a portion of which vested on May 31, 2013, based on the percentage achievement of certain performance objectives and certified by the Compensation Committee.
On March 8, 2011, the Company granted performance-based RSUs to certain executive officers with an aggregate grant-date fair value of
$0.7 million
, which vested on January 3, 2012, as certain performance objectives were attained and certified by the Compensation Committee.
Stock Options
The following table displays the weighted average assumptions that have been applied to estimate the fair value of stock option awards on the date of grant. During 2013, the Company did not grant any stock option awards.
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2012
|
|
2011
|
Dividend yield
|
|
—
|
|
|
—
|
|
Risk-free interest rate
|
|
1.19
|
%
|
|
0.92
|
%
|
Expected volatility
|
|
64.15
|
%
|
|
75.67
|
%
|
Expected lives
|
|
7.3 years
|
|
|
3.6 years
|
|
The following summarizes pricing and term information for options outstanding as of
December 31, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Number Outstanding at
|
|
Weighted Average Remaining Contractual Life (years)
|
|
Weighted Average Exercise Price
|
|
Number Exercisable at
|
|
Weighted Average Exercise Price
|
Range of Exercise Prices
|
|
December 31, 2013
|
|
|
|
December 31, 2013
|
|
$
|
4.44
|
|
|
─
|
|
$
|
8.26
|
|
|
255,250
|
|
|
4.8
|
|
|
$
|
6.62
|
|
|
|
214,351
|
|
|
|
$
|
6.34
|
|
|
8.38
|
|
|
─
|
|
11.39
|
|
|
272,121
|
|
|
5.1
|
|
|
10.90
|
|
|
|
196,831
|
|
|
|
11.08
|
|
|
11.56
|
|
|
─
|
|
12.90
|
|
|
213,724
|
|
|
3.1
|
|
|
12.39
|
|
|
|
213,724
|
|
|
|
12.39
|
|
|
13.31
|
|
|
─
|
|
13.58
|
|
|
43,850
|
|
|
3.3
|
|
|
13.32
|
|
|
|
43,006
|
|
|
|
13.31
|
|
|
16.51
|
|
|
─
|
|
16.51
|
|
|
75,000
|
|
|
8.7
|
|
|
16.51
|
|
|
|
23,437
|
|
|
|
16.51
|
|
|
$
|
4.44
|
|
|
─
|
|
$
|
16.51
|
|
|
859,945
|
|
|
4.8
|
|
|
$
|
10.61
|
|
|
|
691,349
|
|
|
|
$
|
10.34
|
|
|
The following table is a summary of stock option activity under the Plan as of
December 31, 2013
and changes for the year then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Stock Options
|
|
Non- Qualified Stock Options
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted Average Remaining Contractual
Term (Years)
|
|
Aggregate Intrinsic Value
|
Outstanding at January 1, 2013
|
|
129,423
|
|
1,156,937
|
|
$
|
9.83
|
|
|
|
5.6
|
|
|
$
|
13,442,000
|
|
Exercised
|
|
(59,806)
|
|
(333,377)
|
|
$
|
8.13
|
|
|
|
|
|
|
|
|
Canceled
|
|
(201)
|
|
(33,031)
|
|
$
|
9.65
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
69,416
|
|
790,529
|
|
$
|
10.61
|
|
|
|
4.8
|
|
|
$
|
20,903,000
|
|
Vested and Expected to Vest at December 31, 2013
|
|
69,416
|
|
772,942
|
|
$
|
10.56
|
|
|
|
4.7
|
|
|
$
|
20,521,000
|
|
Exercisable at December 31, 2013
|
|
69,386
|
|
621,963
|
|
$
|
10.34
|
|
|
|
4.0
|
|
|
$
|
16,995,000
|
|
There were
no
non-employee director stock options outstanding during the year ended
December 31, 2013
.
The weighted-average grant-date fair value of options granted during the years ended
December 31, 2012
and
2011
was
$10.34
, and
$5.04
per option, respectively. The total intrinsic value of options exercised during the years ended
December 31, 2013
,
2012
and
2011
was
$7.6 million
,
$9.7 million
, and
$1.3 million
.
As of
December 31, 2013
there was unrecognized compensation expense of
$0.9 million
related to unvested stock options based on options that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of
1.97 years
.
Restricted Stock Units and Restricted Stock Awards
A summary of the status of the Company’s unvested RSUs as of
December 31, 2013
and changes during the year then ended are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units / Awards
|
|
Weighted Average Grant-Date Fair Value Per Unit / Award
|
Unvested RSUs outstanding at January 1, 2013
|
|
1,390,834
|
|
|
|
$
|
14.31
|
|
|
Granted
|
|
621,262
|
|
|
|
26.77
|
|
|
Market value share count adjustment for liability awards
|
|
(55,664
|
)
|
|
|
34.92
|
|
|
Vested
|
|
(538,525
|
)
|
|
|
14.76
|
|
|
Forfeited
|
|
(50,669
|
)
|
|
|
15.75
|
|
|
Unvested RSUs outstanding at December 31, 2013
|
|
1,367,238
|
|
|
|
$
|
18.90
|
|
|
Unvested and expected to vest RSUs outstanding at December 31, 2013
|
|
1,201,190
|
|
|
|
$
|
19.12
|
|
|
The number of shares vested in the table above includes
168,954
shares surrendered by the employees to the Company for payment of minimum tax withholding obligations. Shares of stock withheld for purposes of satisfying minimum tax withholding obligations are again available for issuance under the Plan.
The table above includes
59,942
performance-based RSU grants to certain Apex employees on May 15, 2013. The awards vest, if the performance objective is attained, in
12
equal installments beginning on April 1, 2014 and on each quarterly anniversary thereafter, subject to continued employment through each vesting date.
Additionally, the table above includes
26,064
RSUs that were awarded to non-employee directors on
August 1, 2013
, of which
13,032
shares vested immediately upon issuance and the remaining shares will vest on August 1, 2014. The weighted average grant-date fair value of these awards was
$30.69
. There was unrecognized compensation expense of
$212,391
as of
December 31, 2013
related to these RSUs that will be recorded over the remaining term of
seven
months.
The weighted-average grant-date fair value of RSUs granted during the years ended
December 31, 2013
,
2012
and
2011
was
$26.17
,
$16.01
and
$9.18
per award, respectively. The total intrinsic value of RSUs vested during the years ended
December 31, 2013
,
2012
and
2011
was
$15.0 million
,
$13.7 million
and
$6.4 million
, respectively.
As of
December 31, 2013
, there was unrecognized compensation expense of
$15.5 million
related to unvested RSUs based on awards that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of
2.0 years
.
Employee Stock Purchase Plan
Effective
June 3, 2010
, the date of stockholder approval of the On Assignment 2010 Employee Stock Purchase Plan (the ESPP), the Company reinstated the employee stock purchase program for issuance of up to
3,500,000
shares of common stock with the first offering periods. The ESPP allows eligible employees to purchase common stock of the Company, through payroll deductions, at
85 percent
of the lower of the market price on the first day or the last day of semi-annual purchase periods. The ESPP is intended to qualify as an “employee stock purchase plan” under IRS Code Section 423. Eligible employees may contribute up to a certain percentage set by the plan administrator of their eligible earnings toward the purchase of the stock (subject to certain IRS limitations).
In accordance with the ESPP, shares of common stock are transferred to participating employees at the conclusion of each six month enrollment period, which now end on the last business day of the month in March and September each year. The Company issued
203,200
,
154,934
, and
187,036
shares of common stock in
2013
,
2012
, and
2011
respectively, under the ESPP.
Compensation expense of shares purchased under the ESPP is measured based on a Black-Scholes option-pricing model. The model accounts for the discount from market value and applies an expected life in line with each six month purchase period. The weighted average fair value of stock purchased under the ESPP was
$7.16
,
$3.53
, and
$2.10
for the years ended
December 31, 2013
,
2012
, and
2011
, respectively. The stock-based compensation expense related to the ESPP was
$1.2 million
in
2013
,
$0.8 million
in
2012
and
$0.4 million
in
2011
.
12. Business Segments.
The Company has
four
reportable segments: Apex, Oxford, Life Sciences, and Physician.
The Apex segment provides mission-critical IT operations professionals for contract, contract-to-hire and permanent placement positions to Fortune 1000 and mid-market clients across the United States, and offers consulting services for other select project-based needs. Apex provides staffing and services support for companies from all major industries, including financial services, business services, consumer and industrials, technology, healthcare, government services, and communications.
The Oxford segment provides high-end contract and direct placement services of information technology and engineering professionals with expertise in specialized information technology; software and hardware engineering; and mechanical, electrical, validation and telecommunications engineering fields.
The Life Sciences segment provides contract, contract-to-permanent and direct placement services of laboratory and scientific professionals to the biotechnology, pharmaceutical, food and beverage, medical device, personal care, chemical and environmental industries. These contract staffing specialties include chemists, clinical research associates, clinical lab assistants, engineers, biologists, biochemists, microbiologists, molecular biologists, food scientists, regulatory affairs specialists, lab assistants and other skilled scientific professionals.
The Physician segment provides contract and direct placement physicians to healthcare organizations. The Physician segment works with nearly all medical specialties, placing locum tenens physicians in hospitals, community-based practices, and federal, state and local facilities.
During 2013, the Company sold its Nurse Travel line of business and most of the Allied Healthcare line of business. See Note 4 Discontinued Operations for further information. As a result of these sales, the Healthcare segment no longer exists and Health Information Management ("HIM"), formerly included in the Healthcare Segment, is included in the Oxford Segment and unallocated corporate expenses are separately disclosed in order to align with the revised internal reporting package reviewed by the Chief Operating Decision Maker. All prior periods have been restated to conform to this presentation.
The Company’s management evaluates the performance of each segment primarily based on revenues, gross profit and operating income. The information in the following table is derived directly from the segments’ internal financial reporting used for corporate management purposes.
The following table represents revenues, gross profit, operating income, amortization and total assets by reportable segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2013
|
|
Apex
|
|
Oxford
|
|
Life Sciences
|
|
Physician
|
|
Corporate
|
|
Total
|
Revenues
|
$
|
942,463
|
|
|
$
|
412,189
|
|
|
$
|
171,518
|
|
|
$
|
105,827
|
|
|
$
|
—
|
|
|
$
|
1,631,997
|
|
Gross Profit
|
258,150
|
|
|
143,334
|
|
|
56,308
|
|
|
30,614
|
|
|
—
|
|
|
488,406
|
|
Operating income
|
76,971
|
|
|
58,990
|
|
|
28,354
|
|
|
8,852
|
|
|
(49,199
|
)
|
|
123,968
|
|
Amortization
|
19,524
|
|
|
965
|
|
|
429
|
|
|
742
|
|
|
91
|
|
|
21,751
|
|
Total assets
(1)
|
656,733
|
|
|
365,118
|
|
|
128,824
|
|
|
110,519
|
|
|
—
|
|
|
1,261,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2012
|
|
Apex
|
|
Oxford
|
|
Life Sciences
|
|
Physician
|
|
Corporate
|
|
Total
|
Revenues
|
$
|
508,743
|
|
|
$
|
363,765
|
|
|
$
|
162,799
|
|
|
$
|
102,679
|
|
|
$
|
—
|
|
|
$
|
1,137,986
|
|
Gross Profit
|
140,669
|
|
|
127,895
|
|
|
55,874
|
|
|
31,455
|
|
|
—
|
|
|
355,893
|
|
Operating income
|
36,416
|
|
|
56,289
|
|
|
25,632
|
|
|
9,998
|
|
|
(47,154
|
)
|
|
81,181
|
|
Amortization
|
15,665
|
|
|
437
|
|
|
807
|
|
|
817
|
|
|
290
|
|
|
18,016
|
|
Total assets
(1)
|
642,594
|
|
|
235,099
|
|
|
150,696
|
|
(2)
|
86,074
|
|
|
—
|
|
|
1,114,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2011
|
|
Apex
|
|
|
Oxford
|
|
|
Life Sciences
|
|
|
Physician
|
|
|
Corporate
|
|
Total
|
Revenues
|
$
|
—
|
|
|
$
|
279,643
|
|
|
$
|
155,324
|
|
|
$
|
80,617
|
|
|
$
|
—
|
|
|
$
|
515,584
|
|
Gross Profit
|
—
|
|
|
99,187
|
|
|
52,643
|
|
|
25,858
|
|
|
—
|
|
|
177,688
|
|
Operating income
|
—
|
|
|
37,676
|
|
|
24,883
|
|
|
6,699
|
|
|
(30,625
|
)
|
|
38,633
|
|
Amortization
|
—
|
|
|
821
|
|
|
901
|
|
|
415
|
|
|
209
|
|
|
2,346
|
|
Total assets
(1)
|
—
|
|
|
221,690
|
|
|
119,563
|
|
(2)
|
86,014
|
|
|
—
|
|
|
427,267
|
|
______
|
|
|
|
|
|
|
|
|
|
|
|
(1) As of end of the year.
(2) Life Sciences total assets as of December 31, 2012 and 2011 include assets related to the Healthcare segment, which were sold and included in discontinued operations in 2013. Historically, the Company has not reported Life Science and Healthcare segments' total assets separately as the operations were largely centralized.
The Company operates internationally, with operations in the United States, Europe, Canada, China, Australia, and New Zealand. The following table represents revenues by geographic location (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Revenues:
|
|
|
|
|
|
|
Domestic
|
|
$
|
1,552,322
|
|
|
$
|
1,060,217
|
|
|
$
|
447,453
|
|
Foreign
|
|
79,675
|
|
|
77,769
|
|
|
68,131
|
|
|
|
$
|
1,631,997
|
|
|
$
|
1,137,986
|
|
|
$
|
515,584
|
|
The following table represents long-lived assets by geographic location (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Long-lived Assets:
|
|
|
|
|
|
|
Domestic
|
|
$
|
45,061
|
|
|
$
|
40,062
|
|
|
$
|
19,078
|
|
Foreign
|
|
2,856
|
|
|
2,006
|
|
|
1,033
|
|
|
|
$
|
47,917
|
|
|
$
|
42,068
|
|
|
$
|
20,111
|
|
13. Fair Value Measurements.
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. Long-term debt recorded in the Company’s Consolidated Balance Sheets at
December 31, 2013
was
$399.8 million
. The fair value of the long-term debt was determined using the quoted price technique, based on Level 2 inputs including the yields of comparable companies with similar credit characteristics, was
$400.2 million
.
The Company has obligations, to be paid in cash, to the former owners of CyberCoders and Whitaker, if certain future financial goals are met. The fair value of this contingent consideration is determined using an expected present value technique. Expected cash flows are determined using the probability - weighted average of possible outcomes that would occur should certain financial metrics be reached. There is no market data available to use in valuing the contingent consideration, therefore, the Company developed its own assumptions related to the future financial performance of the businesses to evaluate the fair value of these liabilities. As such, the contingent consideration is classified within Level 3.
In connection with estimating the fair value of the contingent consideration, the Company develops various scenarios (base case, downside case, and upside case) and weights each according to the probability of occurrence. The probabilities range from
10 percent
to
60 percent
, with the most significant weighting given to the base case at
60%
for Whitaker and
50%
for CyberCoders. These scenarios are developed based on the expected financial performance of the acquired companies, with revenue growth rates being a primary input to the calculation. These revenue growth rates range from
2.0 percent
to
15.0 percent
for Whitaker, and from
9.6 percent
to
25.0 percent
. An increase or decrease in the probability of achievement of any of these scenarios could result in a significant increase or decrease to the estimated fair value.
The fair value is reviewed on a quarterly basis based on most recent financial performance of the most recent fiscal quarter. An analysis is performed at the end of each fiscal quarter to compare actual results to forecasted financial performance. If performance has deviated from projected levels, the valuation is updated for the latest information available.
The significant assumptions that may materially affect the fair value are developed in conjunction with the guidance of the division presidents, division vice presidents, and chief financial officer to ensure that the most accurate and latest financial projections are used and compared with the most recent financial results in the fair value measurement.
The liabilities for the contingent consideration were established at the time of the acquisition and are evaluated at each reporting period. The current liability is included in the Consolidated Balance Sheets in other and the non-current portion is included in other long-term liabilities. Fair value adjustments are included in the Consolidated Statements of Operations and Comprehensive Income in S&GA expenses.
The assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
Fair Value Measurements Using
|
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
Contingent consideration to be paid in cash for the acquisitions
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(8,527
|
)
|
|
$
|
(8,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
Fair Value Measurements Using
|
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
Contingent consideration to be paid in cash for the acquisitions
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7,577
|
)
|
|
$
|
(7,577
|
)
|
Reconciliations of liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
Contingent consideration for acquisitions --
|
|
|
|
|
Balance at beginning of year
|
|
$
|
(7,577
|
)
|
|
$
|
(9,856
|
)
|
Additions for acquisitions
|
|
(7,860
|
)
|
|
—
|
|
Payments on contingent consideration
|
|
3,425
|
|
|
1,198
|
|
Settlements of contingent consideration
|
|
—
|
|
|
—
|
|
Fair value adjustments
|
|
3,584
|
|
|
1,215
|
|
Foreign currency translation adjustment
|
|
(99
|
)
|
|
(134
|
)
|
Balance at end of year
|
|
$
|
(8,527
|
)
|
|
$
|
(7,577
|
)
|
Certain assets and liabilities, such as goodwill, are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). For
2013
and
2012
, no fair
value adjustments were required for non-financial assets or liabilities.
14. Unaudited Quarterly Results.
The following tables present unaudited quarterly financial information during the years ended
December 31, 2013
and
2012
. In the opinion of the Company’s management, the quarterly information contains all adjustments, consisting only of 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 periods. Nurse Travel and Allied Healthcare are presented as discontinued operations for all periods presented, see Note 4 for further information regarding the divestitures.
Subsequent to the issuance of the Company's annual report on Form 10-K for the year ended December 31, 2012 ("2012 Form 10-K"), and the consolidated financial statements included in Exhibit 99.1 of the Form 8-K filed on June 13, 2013 ("Form 8-K"), the Company identified an immaterial error in Note 16, "Unaudited Quarterly Results," of the 2012 Form 10-K and Note 17, "Unaudited Quarterly Results," of the Form 8-K. The error related to the retrospective quarterly presentation of income from continuing operations, net income and the respective per share amounts, upon finalization of the valuation of identifiable intangible assets and amortization methods for Apex, and the related tax impact. The Company considers this an immaterial misstatement and has retrospectively restated income from continuing operations, net income and the respective per share amounts for each of the quarters in the year ended December 31, 2012 in the table below. Income from continuing operations have been restated to reflect the resulting additional amortization expense of
$1.6 million
(
$1.0 million
, net of taxes), and
$3.4 million
(
$1.9 million
, net of taxes) for the quarters ended June 30, 2012, and September 30, 2012, respectively and a reduction of amortization expense of
$5.0 million
(
$2.9 million
, net of taxes) for the quarter ended December 31, 2012.
This error had no effect on the Company's consolidated balance sheet as of December 31, 2012, the consolidated statement of operations and comprehensive income or the consolidated statement of cash flows for the year ended December 31, 2012.
Subsequent to the issuance of the Company's quarterly report on Form 10-Q for the second quarter of 2012, the Company identified an immaterial classification error of
$0.5 million
related to certain vendor fees paid by Apex Systems, Inc., which we acquired in May 2012 (see Note 3 - Acquisitions). Such fees should have been recorded as revenues, rather than in costs of services. The Company considers this an immaterial reclassification and has presented the revenues and cost of services for the year ended December 31, 2012 reflecting the reclassification in the pro forma revenues in Note 3 - Acquisitions, and revenues in the table below. This reclassification has no effect on the Company's consolidated balance sheets or consolidated statement of cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
Dec. 31,
|
|
Sep. 30,
|
|
June 30,
|
|
Mar. 31,
|
|
|
(in thousands, except per share data)
|
Revenues
|
|
$
|
423,598
|
|
|
$
|
421,491
|
|
|
$
|
407,864
|
|
|
$
|
379,044
|
|
Gross profit
|
|
$
|
129,753
|
|
|
$
|
127,210
|
|
|
$
|
121,332
|
|
|
$
|
110,111
|
|
Income from continuing operations
|
|
$
|
17,425
|
|
|
$
|
19,471
|
|
|
$
|
7,243
|
|
|
$
|
10,216
|
|
Income from discontinued operations, net of income taxes
|
|
14,985
|
|
|
679
|
|
|
96
|
|
|
14,397
|
|
Net income
|
|
$
|
32,410
|
|
|
$
|
20,150
|
|
|
$
|
7,339
|
|
|
$
|
24,613
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.32
|
|
|
$
|
0.36
|
|
|
$
|
0.14
|
|
|
$
|
0.19
|
|
Income from discontinued operations
|
|
0.28
|
|
|
0.02
|
|
|
—
|
|
|
0.27
|
|
Net income
|
|
$
|
0.60
|
|
|
$
|
0.38
|
|
|
$
|
0.14
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.32
|
|
|
$
|
0.36
|
|
|
$
|
0.13
|
|
|
$
|
0.19
|
|
Income from discontinued operations
|
|
0.27
|
|
|
0.01
|
|
|
0.01
|
|
|
0.27
|
|
Net income
|
|
$
|
0.59
|
|
|
$
|
0.37
|
|
|
$
|
0.14
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
Dec. 31,
|
|
Sep. 30,
|
|
June 30,
|
|
Mar. 31,
|
|
|
(in thousands, except per share data)
|
Revenues
|
|
$
|
369,441
|
|
|
$
|
363,882
|
|
|
$
|
256,386
|
|
|
$
|
148,277
|
|
Gross profit
|
|
$
|
112,054
|
|
|
$
|
112,213
|
|
|
$
|
81,509
|
|
|
$
|
50,117
|
|
Income from continuing operations
|
|
$
|
12,004
|
|
|
$
|
14,078
|
|
|
$
|
5,586
|
|
|
$
|
4,791
|
|
Income from discontinued operations, net of income taxes
|
|
2,201
|
|
|
1,425
|
|
|
1,976
|
|
|
592
|
|
Net income
|
|
$
|
14,205
|
|
|
$
|
15,503
|
|
|
$
|
7,562
|
|
|
$
|
5,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.23
|
|
|
$
|
0.27
|
|
|
$
|
0.12
|
|
|
$
|
0.13
|
|
Income from discontinued operations
|
|
0.04
|
|
|
0.03
|
|
|
0.05
|
|
|
0.01
|
|
Net income
|
|
$
|
0.27
|
|
|
$
|
0.30
|
|
|
$
|
0.17
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.22
|
|
|
$
|
0.26
|
|
|
$
|
0.12
|
|
|
$
|
0.13
|
|
Income from discontinued operations
|
|
0.04
|
|
|
0.03
|
|
|
0.04
|
|
|
0.01
|
|
Net income
|
|
$
|
0.26
|
|
|
$
|
0.29
|
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|