|
|
TEAMSTAFF INC - 10-Q - : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge) Forward Looking and Cautionary Statements
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "1995 Reform Act"),
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). TeamStaff
desires to avail itself of certain "safe harbor" provisions of the 1995 Reform
Act and is therefore including this special note to enable TeamStaff to do so.
Forward-looking statements are identified by words such as "believe,"
"anticipate," "expect," "intend," "plan," "will," "may" and other similar
expressions. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements. Forward-looking statements included in this report involve known and
unknown risks, uncertainties and other factors which could cause TeamStaff's
actual results, performance (financial or operating) or achievements to differ
from the future results, performance (financial or operating) or achievements
expressed or implied by such forward-looking statements. We based these
forward-looking statements on our current expectations and best estimates and
projections about future events. Our actual results could differ materially from
those discussed in, or implied by, these forward-looking statements. The
following factors (among others) could cause our actual results to differ
materially from those implied by the forward-looking statements in this report:
our ability to secure contract awards, including the ability to secure renewals
of contracts under which we currently provide service; our ability to
17
-------------------------------------------------------------------------------- Table of Contents
enter into contracts with United States Government facilities and agencies on
terms attractive to us and to secure orders related to those contracts; changes
in the timing of orders for and our placement of professionals and
administrative staff; the overall level of demand for the services we provide;
the variation in pricing of the contracts under which we place professionals;
our ability to manage growth effectively; the performance of our management
information and communication systems; the effect of existing or future
government legislation and regulation; changes in government and customer
priorities and requirements (including changes to respond to the priorities of
Congress and the Administration, budgetary constraints, and cost-cutting
initiatives); economic, business and political conditions domestically; the
impact of medical malpractice and other claims asserted against us; the
disruption or adverse impact to our business as a result of a terrorist attack;
the loss of key officers, and management personnel; the competitive environment
for our services; the effect of recognition by us of an impairment to goodwill
and intangible assets; other tax and regulatory issues and developments; the
effect of adjustments by us to accruals for self-insured retentions; our ability
to obtain any needed financing; our ability to attract and retain sales and
operational personnel; and the effect of other events and important factors
disclosed previously and from time to time in Teamstaff's filings with the U.S.
Securities and Exchange Commission.
Other factors that could cause actual results to differ from those implied by
the forward-looking statements in this Quarterly Report on Form 10-Q are set
forth in our Annual Report on Form 10-K for the year ended September 30, 2011
and our other reports filed with the SEC, including this Quarterly Report on
Form 10-Q. In light of the significant risks and uncertainties inherent in the
forward looking statements included in the Company's reports, the inclusion of
such statements should not be regarded as a representation by or on behalf of
the Company that the objectives and plans of the Company will be achieved.We
undertake no obligation to update any forward-looking statement or statements in
this filing to reflect events or circumstances that occur after the date on
which the statement is made or to reflect the occurrence of unanticipated
events.
Critical Accounting Policies and Estimates
See Note 2 of TeamStaff's 2011 Annual Report on Form 10-K as well as "Critical
Accounting Policies and Estimates" contained therein for a discussion on
critical accounting policies and estimates.
In accordance with applicable accounting standards, TeamStaff does not amortize
goodwill. TeamStaff continues to review its goodwill for possible impairment or
loss of value at least annually or more frequently upon the occurrence of an
event or when circumstances indicate that a reporting unit's carrying amount is
greater than its fair value. At September 30, 2011, we performed a goodwill
impairment analysis. For the purposes of this analysis, our estimates of fair
value are based on the income approach, which estimates the fair value of the
DLH Solutions unit based on the future discounted cash flows. Based on the
results of the work performed, the Company has concluded that no impairment loss
on goodwill was warranted at September 30, 2011. Major assumptions in the
valuation study were the estimates of probability weighted future cash flows,
the estimated terminal value of the company and the discount factor applied to
the estimated future cash flows and terminal value. Estimates of future cash
flows were developed by management having regard to current expectations and
potential future opportunities. A terminal value for the forecast period was
estimated based upon data of public companies that management believes to be
similar with respect to the Company's economics, products and markets. The
discount factor used was a cost of capital estimate obtained from a leading
third party data provider. The resulting estimated fair value of goodwill
exceeded the carrying value at September 30, 2011 by more than 100%, resulting
in no impairment charge being taken against goodwill. However, a non-renewal of
a major contract (see Note 2-Liquidity) or other substantial changes in the
assumptions used in the valuation study could have a material adverse effect on
the valuation of goodwill in future periods and the resulting charge could be
material to future periods' results of operations. Teamstaff has concluded as
of December 31, 2011, that there is not any required write off of goodwill. If
an impairment write off of all the goodwill became necessary in future periods,
a charge of up to $8.6 million would be expensed in the Consolidated Statement
of Operations. All remaining goodwill is attributable to the DLH Solutions
reporting unit.
Intangible Assets
As required by applicable accounting standards, TeamStaff did not amortize its
tradenames, an indefinite life intangible asset. TeamStaff reviewed its
indefinite life intangible assets for possible impairment or loss of value at
least annually or more frequently upon the occurrence of an event or when
circumstances indicated that an asset's carrying amount was greater than its
fair value. On September 15, 2011, the Board of Directors of TeamStaff approved
the change of the corporate name of TeamStaff GS to DLH Solutions and also
approved a plan to change the corporate name of the Company to DLH Holdings
Corp. In connection with these actions, the Company will cease further use of
the TeamStaff trademark and implement new marketing and branding initiatives
associated with the new corporate identity being adopted by the Company. As a
result of the corporate name change, abandoning the use of the TeamStaff name
and associated rebranding efforts being implemented by the Company, the Company
concluded that it was required to record a non-cash impairment charge with
respect to the value of the "TeamStaff" trademark of $2.6 million to fully
write-off the value of this trademark during the fourth quarter of fiscal 2011.
18
--------------------------------------------------------------------------------
Table of Contents
Income Taxes
TeamStaff accounts for income taxes in accordance with the "liability" method,
whereby deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are reflected on the
consolidated balance sheet when it is determined that it is more likely than not
that the asset will be realized. This guidance also requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some or all of the deferred tax asset will not be realized. At December 31, 2011
and 2010, the Company recorded a 100% valuation allowance against its net
deferred tax assets of approximately $15.6 million.
Overview
Business Description
TeamStaff Inc., incorporated in New Jersey, is a full-service provider of
healthcare delivery solutions, logistics & technical services, and
contingency/staff augmentation services to government agencies including the
Department of Veteran Affairs, the Department of Defense, and other clients. The
Company principally operates through its wholly-owned subsidiary DLH
Solutions, Inc. ("DLH Solutions") and is headquartered in Atlanta, Georgia.
Business Units
As part of our overall strategic planning process, the Company realigned its
business into three operating units (Healthcare Delivery, Logistics and
Technical Services and Contingency/Staff Augmentation. This new structure
enables us to leverage our core competencies and drive towards profitable growth
within our expanded target markets. We recognize that some business units may
grow faster than others as a result of acquisitions or disposition of business.
In either case, we intend to enhance our delivery of quality products and
services.
Healthcare Delivery Solutions
The Healthcare Delivery Solutions business unit , provides a broad continuum of
care for our nation's servicemen/women and veterans in various settings and
facilities. These include Combat Trauma Centers (CTCs), Military Treatment
Facilities (MTFs), Medical Centers, Community-based Outpatient Clinics (CBOCs),
Pharmacy Distribution Centers (including VA Consolidated Mail-order Outpatient
Pharmacy), and an Armed Forces Retirement Facility. We leverage our network of
over 400 active clinicians and other healthcare workers throughout selected
regions in the US along with differentiating tools, databases and technology
(including e-PRAT and SPOT-m) to deliver these services. For over a decade, DLH
Solutions has been serving the DVA and DoD in providing qualified medical and
other professionals in a variety of positions. Healthcare Delivery Solutions is
one of our strategic focus areas for growth and a major business area that DLH
Solutions services. As more and more Federal and DoD programs increase their
performance-based requirements, DLH Solutions' workforce profile of medical
talent and credentials (as described above) will help it to compete and
differentiate itself in the market place. Our healthcare and medical service new
business pipleline adds important credentials strategically linked to
diversifying and profitably growing our Healthcare Delivery Solutions business
base. Professional services have included case management, health and injury
assessment, critical care, medical/surgical, emergency room/trauma center,
counseling, behavioral health and trauma brain injury, medical systems analysis,
and medical logistics. Allied support includes a wide range including MRI
technology, diagnostic sonography, phlebotomy, dosimetry, physical therapy,
pharmaceuticals and others. In fiscal 2011, approximately 45% of our revenue was
derived from the Healthcare Delivery Solutions business unit .
Logistics & Technical Services
The Logistics & Technical Services business unit draws heavily upon our proven
logistics expertise and processes. Our project manager's expertise range from
career government support employees to retired military veterans that have
extensive logistic experience. The experience of DLH Solutions' project managers
is diverse from operational unit level to systems command/headquarters program
office experience. Our core competencies include; supply chain management,
performance-based logistics, distribution center and inventory management,
statistical process control, packaging/handling/storage & transportation, and
supply support operations. In addition, it embodies program and project
management, systems engineering and applicable information technology services,
integrated logistics support (including operational systems), readiness
assessments, training, equipment and non-tactical vehicle operations and
maintenance, hazardous material management, facilities and shipyard support
services and more. DLH Solutions also provides logistics and administrative
professionals to the federal government specializing in logistics, office
administration, IT, and facilities/warehouse management.
19
-------------------------------------------------------------------------------- Table of Contents
Through competitively awarded contracts and task orders (including its LOGWORLD
contract) DLH Solutions has developed a strong portfolio of logistics processes,
personnel and tools to help its clients achieve nationally recognized awards for
customer satisfaction. While the DVA is its largest customer in this area, the
Company has taken steps to expand in adjacent logistics markets within DoD and
other federal agencies. In fiscal 2011, over 50% of our revenue was derived from
the Logistics & Technical Services business unit.
Contingency/Staff Augmentation
The Contingency/Staff Augmentation business unit provides disaster and emergency
response services and civilian workforce augmentation services. For example, the
Company's outstanding track record of response during hurricanes Rita and
Katrina demonstrated its ability to support major federal and DoD opportunities
in this area. General staffing and selective recruitment process outsourcing are
key components of this service area. Less than 5% of fiscal 2011 revenue was
derived from the Contingency/Staff Augmentation line of service.
Management believes that streamlining the Company's strategic focus around these
three business units enables us to better aligns its resources and make prudent
investment decisions built around a cohesive set of goals and objectives.
Equally important in this strategic alignment process is the decision to exit
markets where the cost to entry was high and the profit margins too low. .
Recent Business Trends
The Company continues to focus on executing its strategy developed in fiscal
2010 to build upon its healthcare and logistics competencies and align its
growth prospects with what continue to be some of the stronger budget areas on
both Capitol Hill and within the Pentagon. Though our nation's economy continues
to create headwinds for all markets, management has found that many government
services industry analysts project a favorable market outlook particularly in
select segments. Shortly after Defense Secretary Leon Panetta publicly briefed
the DoD Budget priorities, TeamStaff management met with the Deputy Secretary of
Defense to further address these national priorities. Management continues to
believe that the federal government healthcare budget including the Military
Healthcare Systems and Veterans Administration missions remain a top priority
and offer addressable and sustainable growth opportunities for the company.
[ Back To TMCnet.com's Homepage ]
|
|
|
|
TMCnet LOGIN
Webinars
