SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 15, 2003
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TEAMSTAFF, INC.
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(Exact name of Registrant as specified in charter)
New Jersey 0-18492 22-1899798
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(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
300 Atrium Drive, Somerset, N.J. 08873
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 748-1700
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(Former name or former address, if changed since last report.)
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
The following exhibit is filed herewith:
EXHIBIT NO. DESCRIPTION
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99.1 Press release issued by Teamstaff, Inc. dated May 15, 2003.
ITEM 9: REGULATION FD DISCLOSURE (INFORMATION PROVIDED UNDER ITEM 12 - RESULTS
OF OPERATIONS AND FINANCIAL CONDITION).
This information, furnished under this "Item 9. Regulation FD
Disclosure," is intended to be furnished under "Item 12. Disclosure of Results
of Operations and Financial Condition" in accordance with SEC Release No.
33-8216.
On May 15, 2003, Teamstaff, Inc. (the "Registrant") issued a press
release announcing results for the fiscal quarter ended March 31, 2003. A copy
of the press release is attached as exhibit 99.1. The information in this report
shall not be deemed to be "filed" for purposes of Section 18 of, or otherwise
regarded as filed under, the Securities Exchange Act of 1934, as amended. Unless
expressly incorporated into a filing of the Registrant under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, made
after the date hereof, the information contained herein shall not be
incorporated by reference into any filing of the Registrant, whether made before
or after the date hereof, regardless of any general incorporation language in
such filing.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: May 16, 2003 TEAMSTAFF, INC.
(Registrant)
By /s/ Gerard A. Romano
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Gerard A. Romano
Corporate Controller
EXHIBIT 99.1
[TEAMSTAFF LOGO]
CONTACT INFORMATION:
TEAMSTAFF, INC. COFFIN, MOTTOLA COMMUNICATIONS
300 Atrium Drive 19800 Mac Arthur Blvd. #970
Somerset, NJ 08873 Irvine, CA 92612
(732) 748-1700 (949) 851-1109
DONALD W. KAPPAUF, PRESIDENT & CEO CHRISTI MOTTOLA
MANAGING PARTNER
cmottola@aol.com
TEAMSTAFF REPORTS SECOND QUARTER RESULTS, INCLUDING $26 MILLION WRITE-DOWN OF
GOODWILL AND INTANGIBLE ASSETS, AND PROVIDES OUTLOOK FOR THE FUTURE
Somerset, NJ - May 15, 2003- TeamStaff, Inc. (NASDAQ: TSTF), one of the nation's
leading Business Process Outsourcers and Professional Employer Organizations
(PEOs), today reported revenue and earnings results for the fiscal quarter
ending March 31, 2003. TeamStaff's quarterly results are affected heavily by its
determination, substantiated by independent valuations, to take a pre-tax write
down of goodwill and intangible assets of approximately $26,000,000 affecting
its PEO division.
Donald W. Kappauf, President and CEO, stated, "In the second quarter, several
one-time issues or temporary trends converged into a 'perfect storm' that had a
negative impact on our results in the short term, including: the large
write-down of goodwill and intangible assets representing approximately
$26,000,000 million of the total $29,000,000 million pre-tax loss we
experienced; industry wide tactics on the part of medical staffing customers
that are being used to avoid hiring temporary help and that we see as
unsustainable over time; charges connected with our supplemental retirement
plan; and unusually high claims development in the inherently volatile workers'
compensation area."
Kappauf noted, "We made a critical decision this quarter, substantiated by
independent valuations, to take substantial goodwill and intangible impairment
charges affecting our PEO division. In making that determination, we considered
a variety of factors. While these charges certainly are significant, we believe
they were necessary at this point."
Kappauf added, "Since the books closed on the second quarter, we see evidence
across all divisions that the losses we have experienced and which have had an
impact on our overall performance are passing or, in many key areas, have
bottomed out, and we see nothing to prevent a return to profitable operating
trends by the end of the year. While we know that this was a disappointing
quarter for our company and our shareholders for a variety of reasons, we have
taken the opportunity to position TeamStaff for future growth and
profitability."
In the quarter ended March 31, 2003, TeamStaff incurred a $20,396,000 goodwill
impairment charge and a $5,700,000 intangible impairment charge. The decision to
test for impairment was based on a variety of factors, including, but not
limited to, the overall downturn in the nation's economy, the relatively recent
substantial decrease in the number of PEO worksite employees, the poor
performance of the marketing agreement established at the time of the BrightLane
acquisition, the reduced valuations of individual PEOs by various market
analysts and the associated market downgrade in the PEO industry in general.
Net loss for the quarter ended March 31, 2003 was $(25,957,000), or $(1.65) per
fully diluted share, as compared to net income of $444,000, or $0.03 per fully
diluted share, for the quarter ended March 31, 2002. This decrease is
predominantly due to the write down from impaired goodwill and intangible assets
representing $(1.53) per fully diluted share discussed above. Additional losses
resulted from increased workers' compensation reserves, increased state
unemployment taxes, an accrual for TeamStaff's potential obligations to its
former Chief Financial Officer under his severance agreement and TeamStaff's
obligations to its President and Chief Executive Officer and its former Chief
Financial Officer under its Supplemental Retirement Plan, and the decreased
performance of TeamStaff's Medical Staffing division. Net loss for the six
months ended March 31, 2003 was $(25,872,000), or $(1.64) per fully diluted
share, as compared to net income of $1,071,000, or $0.07 per fully diluted share
for the same period last year.
2
TeamStaff's revenues for the quarter ending March 31, 2003 and its comparative
results reflect TeamStaff's previously-announced decision, after discussion with
Securities and Exchange Commission staff and with the concurrence of its
auditors, to report its PEO division revenues net of worksite employee payroll
costs. TeamStaff's revenues for the three months ended March 31, 2003 and 2002
were $37,947,000 and $45,028,000, respectively, which represents a decrease of
$7,081,000, or 15.7% over the prior year fiscal quarter. Decreased revenues in
TeamStaff's Medical Staffing division accounted for approximately $3,200,000
less revenue, while our PEO division accounted for approximately $3,900,000 less
revenue. TeamStaff's Medical Staffing business, TeamStaff Rx, has, on a
percentage of revenue basis, historically been our fastest growing business
segment. However, in comparison to the second fiscal quarter of 2002, revenue
for this segment decreased by 17%. This decrease has partially been attributed
to our closing of the division's Houston, Texas office in April 2002. This
office was primarily involved in staffing per diem nurses in the local Houston
market. The overhead necessary to support per diem nursing did not justify
keeping this business segment in operation. In addition, due to the increased
number of temporary medical staffing companies that have appeared over the last
few years, our Medical Staffing business segment is facing increased competition
from a number of companies. While many of these companies had traditionally
concentrated in the nursing market, they have expanded their operations into
markets, such as imaging personnel staffing, where TeamStaff Rx has
concentrated, and which previously were substantially less competitive. Also
contributing to the decrease in revenues is the recent practice among hospitals
of forcing overtime to permanent staff and replacing temporary positions with
permanent hires. The PEO division's reduced revenue is being affected in part by
the program, begun in the second fiscal quarter of 2002, to review the
profitability of all PEO clients and effect price increases where appropriate to
meet a targeted level of profitability. The declining economic conditions in the
United States also contributed to a reduced workforce for our clients of
approximately 4,000 worksite employees.
TeamStaff's revenues for the six months ended March 31, 2003 and 2002 were
$80,318,000 and $89,223,000, respectively, which represents a decrease of
$8,905,000, or 10.0%. Decreased revenues in TeamStaff's Medical Staffing
division accounted for approximately $6,000,000, or 16%, less revenue while our
PEO division accounted for approximately $3,000,000 less revenue. The reduced
Medical Staffing and PEO revenues are a result of the same reasons stated above.
This loss in PEO business was somewhat offset by revenue generated by our
acquisition of the assets of Corporate
3
Staffing Concepts in January of 2002, which resulted in increased PEO division
revenue of $1,100,000 for the six months ended March 31, 2003 compared to the
same period last year.
Commenting on TeamStaff's performance, Donald W. Kappauf stated, "While our
operating results for the quarter were disappointing, TeamStaff has posted a
profit in all but two of the last 23 quarters. We remain focused on improving
our technology systems and the sales and marketing efforts in each of our
business units. In early April we undertook a cost containment program that
resulted in over $2 million of annualized cost reductions or pricing increases.
We have also purged a significant amount of business in our PEO unit over the
last several months to improve both our risk metrics and our profitability per
client and worksite employee. This has resulted in a larger than anticipated
loss of worksite employees. However, new sales, which are increasing, are being
added at substantially higher profit margins than those we lost. We also saw a
significant loss of worksite employees at our existing clients, which we believe
to be principally attributable to the current challenges of the U.S. economy.
Going forward, we expect increased sales activity combined with moderate price
increases for the balance of our fiscal year. We are also very encouraged by
efforts in the information technology area that will have our PEO operations
fully converted to a single software platform early in the fourth quarter of
fiscal 2003."
Kappauf continued, "TeamStaff Rx has experienced a tightening market as new
competitors have focused on the medical imaging market where we have
specialized. This, coupled with hospitals and other clients seeking
opportunities to reduce the use of `travelers' through increased hiring of
permanent staff and pushing additional overtime on current staff, has also
reduced orders and billing. We do not see this as a long-term solution for our
clients. Although we have seen the temporary placement aspect of our business
experience a dip, due to this recent trend we have seen growth in our permanent
placement business, which has offset some of these losses. Some of our recent
initiatives to increase profits in our medical staffing division include lower
operating costs, the implementation of a proactive direct sales and marketing
program, increased diversification of our sales focus in this division by the
introduction of new specialties, and a new Director of Sales to drive our
marketing efforts. We have also launched a new web site for our medical staffing
division at www.teamstaffrx.com. Higher spending on external recruiting
initiatives, which will have a long-term positive effect, has had a negative
impact on the quarter. Over the last several weeks, however, we have, in fact,
seen an increase in orders in our medical staffing business."
4
Kappauf also commented, "Our Payroll business, which has maintained 90% client
retention and consistent gross profit margins of over 55%, is now poised for
future geographic growth. We have been developing a new web-enabled front end to
our payroll program through our BrightLane division. This program is in a
testing mode and due to be released early in our fourth quarter of fiscal 2003.
When fully deployed this will allow us to effectively market our payroll service
bureau business to geographic markets outside of the greater metropolitan New
York area and further reduce costs."
ABOUT TEAMSTAFF
Headquartered in Somerset, NJ, TeamStaff serves over 3,000 clients and over
45,000 employees throughout the United States as a full service provider of
employer outsourcing and staffing solutions. Through its Professional Employer
Organization, TeamStaff provides small and medium sized businesses throughout
the nation with a better way to employ their people by delivering off-site,
full-service human resource outsourcing solutions.
TeamStaff's comprehensive employer services include employment administration,
benefits management, government compliance, recruiting and selection, employer
liability management, training and development and performance management tools.
TeamStaff's PEO ranks as one of the top PEOs in the nation .
In addition to its Professional Employer Organization, TeamStaff operates two
other employer-outsourcing services. Through TeamStaff Rx, TeamStaff provides
temporary and permanent medical staffing services throughout the country and is
the largest provider of medical imaging personnel in its field.
TeamStaff also operates DSI, its niche payroll service bureau offering payroll
services and payroll tax processing to over 700 clients and 30,000 employees,
mostly in the construction industries in New York and New Jersey.
For more information, visit the TeamStaff web site at www.teamstaff.com.
5
The statements contained in this press release that are not historical facts are
forward-looking statements that involve a number of risks and uncertainties.
Therefore, the actual results of future events described in such forward-looking
statements could differ materially from those stated in such forward-looking
statements. Among those factors that could cause actual results to differ
materially are: (i) regulatory and tax developments; (ii) changes in direct
costs and operating expenses; (iii) the estimated costs and effectiveness of
capital projects and investments in technology infrastructure; (iv) ability to
effectively implement its e-business strategy and operating efficiency
initiatives; (v) the effectiveness of sales and marketing efforts, including the
company's marketing arrangements with other companies: and (vi) changes in the
competitive environment in the PEO industry. These factors are described in
further detail in TeamStaff's filings with the Securities and Exchange
Commission.
# # #
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TEAMSTAFF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE
FOR THE THREE MONTHS ENDED
MONTHS ENDED March 31,
March 31, 2002
2003 AS RESTATED
Unaudited Unaudited
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REVENUES $ 37,947,000 $ 45,028,000
DIRECT EXPENSES 32,833,000 37,514,000
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Gross profit 5,114,000 7,514,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 7,783,000 6,838,000
GOODWILL IMPAIRMENT WRITE DOWN 20,396,000 --
INTANGIBLE IMPAIRMENT WRITE DOWN 5,700,000 --
DEPRECIATION AND AMORTIZATION 318,000 289,000
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Income (loss) from operations (29,083,000) 387,000
OTHER INCOME (EXPENSE)
Interest and other income 132,000 274,000
Interest expense (104,000) (19,000)
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28,000 255,000
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Income (loss) before tax (29,055,000) 642,000
INCOME TAX EXPENSE 3,098,000 (198,000)
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Net income (loss) $(25,957,000) $ 444,000
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EARNINGS (LOSS) PER SHARE - BASIC & DILUTED $ (1.65) $ 0.03
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BASIC AVERAGE SHARES OUTSTANDING 15,755,702 16,067,679
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DILUTED SHARES OUTSTANDING 15,755,702 16,201,497
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TEAMSTAFF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX
FOR THE SIX MONTHS ENDED
MONTHS ENDED March 31,
March 31, 2002
2003 AS RESTATED
Unaudited Unaudited
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REVENUES $ 80,318,000 $ 89,223,000
DIRECT EXPENSES 68,215,000 73,735,000
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Gross profit 12,103,000 15,488,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 14,474,000 13,708,000
GOODWILL IMPAIRMENT WRITE DOWN 20,396,000 --
INTANGIBLE IMPAIRMENT WRITE DOWN 5,700,000 --
DEPRECIATION AND AMORTIZATION 658,000 691,000
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Income (loss) from operations (29,125,000) 1,089,000
OTHER INCOME (EXPENSE)
Interest and other income 327,000 588,000
Interest expense (170,000) (32,000)
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157,000 556,000
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Income (loss) before tax (28,968,000) 1,645,000
INCOME TAX EXPENSE 3,096,000 (574,000)
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Net income (loss) $(25,872,000) $ 1,071,000
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EARNINGS (LOSS) PER SHARE - BASIC & DILUTED $ (1.64) $ 0.07
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BASIC AVERAGE SHARES OUTSTANDING 15,772,550 16,069,031
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DILUTED SHARES OUTSTANDING 15,772,550 16,265,240
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