EXHIBIT 99.5
ON ASSIGNMENT, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On April 19, 2002 the Company, through a newly formed wholly-owned subsidiary,
acquired Health Personnel Options Corporation (HPO), a privately held company
that provides temporary staffing of registered nurses, allied healthcare and
medical-financial personnel to hospitals and other medical facilities across the
United States
The total purchase price was approximately $147 million, consisting of the sum
of approximately $66 million in cash paid to shareholders, debt assumed of
approximately $9 million, the issuance of 3,902,000 shares of the Company's
common stock valued at $73,334,000 and approximately $3 million of transaction
related costs less $5 million related to a contingency provision included in the
Agreement and Plan of Merger, dated as of March 27, 2002. The contingency
provision requires $5 million, currently held in escrow, to be returned to the
Company if the revenues of certain operations conducted by HPO do not meet or
exceed specified target revenue amounts for the calender year 2002.
The acquisition is accounted for using the purchase method of accounting. The
net purchase price, plus the transaction costs, were allocated to tangible
assets and intangible assets. The excess of the aggregate purchase price over
the estimated fair value of the net assets acquired is recognized as other
identifiable intangible assets and goodwill. Other identifiable intangible
assets are being amortized over periods ranging from one to seven years.
Goodwill will be evaluated on a regular basis for any impairment. The allocation
of the purchase price is based on preliminary data and could change when final
valuation information is obtained.
The unaudited pro forma consolidated balance sheet as of March 31, 2002 gives
effect to the merger as if it had occurred on March 31, 2002. The unaudited pro
forma consolidated statement of operations for the three months ended March 31,
2002 and for the year ended December 31, 2001 give effect to the merger as if it
had occurred on January 1, 2001. The unaudited pro forma information is based on
the historical financial statements of On Assignment and HPO giving effect to
the transaction under the purchase method of accounting as well as assumptions
and adjustments as indicated in the Notes below.
ON ASSIGNMENT, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2002
(UNAUDITED)
Health
Personnel Pro Forma
On Assignment Options Adjustments Note Pro Forma
------------- ------------- ------------- ---- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 95,256,000 $ 1,000 $ (65,999,000) (B) $ 29,258,000
Marketable securities 4,520,000 -- 4,520,000
Accounts receivable, net 21,665,000 12,824,000 34,489,000
Advances and deposits 184,000 -- 184,000
Prepaid expenses 1,410,000 479,000 1,889,000
Income taxes receivable -- 535,000 535,000
Deferred income taxes 2,282,000 90,000 2,372,000
------------- ------------- ------------- -------------
Total current assets 125,317,000 13,929,000 (65,999,000) 73,247,000
------------- ------------- ------------- -------------
Office Furniture, Equipment and
Leasehold Improvements, net 2,919,000 1,658,000 4,577,000
Deferred income taxes 471,000 88,000 559,000
Workers' compensation restricted deposits 77,000 146,000 223,000
Goodwill, net 1,542,000 6,067,000 (6,067,000) (C) 122,759,000
121,217,000 (D)
Other assets 2,575,000 12,000 5,000,000 (B) 32,087,000
24,500,000 (E)
------------- ------------- ------------- -------------
Total assets $ 132,901,000 $ 21,900,000 $ 78,651,000 $ 233,452,000
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 970,000 $ 2,187,000 $ 3,000,000 (F) $ 6,157,000
Accrued payroll 5,149,000 3,636,000 8,785,000
Line of credit -- 1,255,000 1,255,000
Current portion of long-term debt -- 455,000 6,000,000 (B) 6,455,000
Income taxes payable 768,000 -- 768,000
Deferred compensation 1,697,000 -- 1,697,000
Accrued workers' compensation 2,437,000 -- 2,437,000
Other accrued expenses 764,000 -- 764,000
------------- ------------- ------------- -------------
Total current liabilities 11,785,000 7,533,000 9,000,000 28,318,000
------------- ------------- ------------- -------------
Deferred income taxes -- 83,000 9,310,000 (G) 9,393,000
Long-term debt -- 1,291,000 1,291,000
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock -- 3,305,000 (3,305,000) (C) --
Common Stock 240,000 2,425,000 39,000 (B) 279,000
(2,425,000) (C)
Paid-in capital 43,940,000 2,095,000 73,295,000 (B) 117,235,000
(2,095,000) (C)
Deferred compensation liability 294,000 -- 294,000
Retained earnings 92,006,000 5,458,000 (5,458,000) (C) 92,006,000
Accumulated other comprehensive income (54,000) -- (54,000)
------------- ------------- ------------- -------------
136,426,000 13,283,000 60,051,000 209,760,000
Less: Treasury Stock at cost 15,310,000 290,000 (290,000) (C) 15,310,000
------------- ------------- ------------- -------------
Total stockholders' equity 121,116,000 12,993,000 60,341,000 194,450,000
------------- ------------- ------------- -------------
Total Liabilities and Stockholders' Equity $ 132,901,000 $ 21,900,000 $ 78,651,000 $ 233,452,000
============= ============= ============= =============
See Notes to Pro Forma Consolidated Financial Statements.
ON ASSIGNMENT, INC.
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
Health
Personnel Pro Forma
On Assignment Options Adjustments Note Pro Forma
------------- ------------ ----------- ---- ------------
Revenues $ 42,111,000 $ 29,650,000 $ -- $ 71,761,000
Cost of services 28,566,000 22,126,000 -- 50,692,000
------------ ------------ ---------- ------------
Gross profit 13,545,000 7,524,000 -- 21,069,000
Selling, general and administrative expenses 8,947,000 4,107,000 (243,000) (H) 12,811,000
Depreciation and amortization 388,000 161,000 1,151,000 (I) 1,700,000
------------ ------------ ---------- ------------
Operating income 4,210,000 3,256,000 (908,000) 6,558,000
Interest income (expense), net 444,000 (58,000) (336,000) (J) 50,000
------------ ------------ ---------- ------------
Income before income taxes 4,654,000 3,198,000 (1,244,000) 6,608,000
Provision for income taxes 1,785,000 1,241,000 (345,000) (K) 2,681,000
------------ ------------ ---------- ------------
Net income $ 2,869,000 $ 1,957,000 $ (899,000) $ 3,927,000
============ ============ ========== ============
Basic earnings per share $ 0.13 $ 0.15
============ ============
Weighted average number of Common Shares
Outstanding 22,728,000 3,902,000 (L) 26,630,000
============ ========== ============
Diluted earnings per share $ 0.12 $ 0.15
============ ============
Weighted average number of Common and
Common Equivalent Shares Outstanding 22,997,000 3,902,000 (L) 26,899,000
============ ========== ============
See Notes to Pro Forma Consolidated Financial Statements
ON ASSIGNMENT, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(UNAUDITED)
Health
Personnel Pro Forma
On Assignment Options Adjustments Note Pro Forma
------------ ----------- ------------ ---- ------------
Revenues $ 194,620,000 $ 81,129,000 $ -- $ 275,749,000
Cost of services 131,343,000 60,903,000 -- 192,246,000
------------ ----------- ------------ ------------
Gross profit 63,277,000 20,226,000 -- 83,503,000
Selling, general and administrative expenses 37,229,000 10,023,000 -- 47,252,000
Depreciation and amortization 1,537,000 526,000 (4,605,000) (M) 6,668,000
------------ ----------- ------------ ------------
Operating income 24,511,000 9,677,000 (4,605,000) 29,583,000
Interest income (expense), net 2,575,000 (307,000) (2,360,000) (N) (92,000)
------------ ----------- ------------ ------------
Income before income taxes 27,086,000 9,370,000 (6,965,000) 29,491,000
Provision for income taxes 10,046,000 2,446,000 (1,704,000) (O) 10,788,000
------------ ----------- ------------ ------------
Net income $ 17,040,000 $ 6,924,000 $ (5,261,000) $ 18,703,000
============ =========== ============ ============
Basic earnings per share $ 0.75 $ 0.70
============ ============
Weighted average of Common Shares
Outstanding 22,645,000 3,902,000 (P) 26,547,000
============ ============ ============
Diluted earnings per share $ 0.74 $ 0.69
============ ============
Weighted average of Common and Common
Equivalent Shares Outstanding 23,037,000 3,902,000 (P) 26,939,000
============ ============ ============
See Notes to Pro Forma Consolidated Financial Statements
ON ASSIGNMENT, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(A) Certain reclassifications were made to conform Health Personnel Options
(HPO) categorizations to those of On Assignment, Inc.
NOTES TO PRO FORMA BALANCE SHEET AS OF MARCH 31, 2002
(B) Adjustment represents the cash paid and common stock issued to fund the
acquisition. Cash paid is $75,000,000 less outstanding debt of $3,001,000 at
March 31, 2002 plus estimated additional debt to be incurred before closing of
$6,000,000. There were 3,902,000 shares of common stock issued valued at
$18.7940 per share. The following table identifies the components of the
purchase price:
Cash paid $ 65,999,000
Long term debt assumed 3,001,000
Estimated additional debt 6,000,000
Estimated transaction costs 3,000,000
Common stock issued 73,334,000
Amount subject to earn-out (5,000,000)
------------
Total purchase price $146,334,000
============
(C) Adjustment represents the elimination of HPO's historical goodwill and
stockholders' equity.
(D) Represents the excess of purchase price over the current fair value of
identifiable HPO assets at the time of purchase. The following table calculates
goodwill:
Value
-----------
Total purchase price 146,334,000
Less:
Tangible assets acquired:
Net working capital (8,106,000)
Fixed Assets (1,658,000)
Other tangible assets (163,000) (9,927,000)
----------
Identifiable intangible assets (24,500,000)
Add:
Deferred income taxes related to identifiable
intangible assets at an effective rate of 38% 9,310,000
-----------
Goodwill 121,217,000
===========
(E) Preliminary valuation adjustments of HPO's identifiable intangible assets
resulting from the allocation of the purchase price, based on a third party
valuation. Identifiable intangible assets consist of the following:
Value Useful Lives
------------ ------------
Employment Agreements $ 600,000 2
Backlog 400,000 1
Covenants Not to Compete 700,000 2
Contractor Relationships 3,900,000 5
Tradename and Trademarks 7,800,000 Indefinite
Customer Relationships 11,100,000 7 years accelerated
------------
Total identifiable intangible assets $ 24,500,000
============
(F) Represents estimated transaction costs incurred in connection with the
acquisition, primarily investment banking, legal and accounting fees.
(G) Represents the estimated deferred tax liability related to the acquired
identifiable intangible assets calculated at an assumed tax rate of 38%.
ON ASSIGNMENT, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO PRO FORMA STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
2002
(H) Adjustment eliminates acquisition related expenses included in HPO's
selling, general and administrative expenses.
(I) Represents three months of amortization expense of acquired identifiable
intangible assets.
(J) Represents a reduction in three months of interest income, net based on cash
paid of $65,999,000 and estimated additional debt of $6,000,000. Interest income
is calculated at an annual rate of 1.87%, which approximates On Assignment's
effective interest rate on tax free investments for 2002.
(K) Represents the estimated tax effect of pro forma adjustments. The effective
tax rate used to calculate deferred taxes is assumed to be 38%, which
approximates On Assignment's effective tax rate for 2002.
(L) Represents shares of common stock issued to fund the acquisition. Stock
options granted to key employees of HPO in connection with employment agreements
for future services were at an exercise price equal to market value at the date
of grant. Such options had an anti-dilutive effect on earnings per share and are
not included in the diluted earnings per share calculation.
NOTES TO PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
(M) Represents twelve months of amortization expense of acquired identifiable
intangible assets.
(N) Represents a reduction in twelve months of interest income, net based on
cash paid of $65,999,000 and estimated additional debt of $6,000,000. Interest
income is calculated at an annual rate of 3.28% which approximates On
Assignment's effective interest rate on tax free investments for 2001.
(O) Represents the estimated tax effect of pro forma adjustments. The effective
tax rate used to calculate deferred taxes is assumed to be 37%, which
approximates On Assignment's effective tax rate for 2001.
(P) Represents shares of common stock issued to fund the acquisition. Stock
options granted to key employees of HPO in connection with employment agreements
for future services were at an exercise price equal to market value at the date
of grant. Such options had an anti-dilutive effect on earnings per share and
are not included in the diluted earnings per share calculation.