ASGN Inc (ASGN) 2003 Q3 法說會逐字稿

Good morning. My name is Amanda, and I will be your conference facilitator. At this time, I would like to welcome everyone to On Assignment's quarterly earnings results conference call. (OPERATOR INSTRUCTIONS). I would now like to turn the conference over to Dr. Joe Peterson.

Thanks, Amanda. Good morning everyone. I am Joe Peterson, President and Chief Executive Officer of On Assignment. With me today is Ron Rudolph, Executive Vice President and Chief Financial Officer. I would like to take this opportunity to welcome everyone to our third-quarter 2003 earnings call.

Before I comment on the quarter, I would like to turn this over to Ron to read our forward-looking statement.

Thanks, Joe. Some statements included in today's conference call are not strictly historical in nature and involve important risks and uncertainties that could significantly affect anticipated results in the future. Such statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements are only predictions, and actual events or results may differ materially from any forward-looking statement made during today's conference call. Factors that could cause actual results to vary from these forward-looking statements are more fully described in our annual report on Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2002 under the heading, "Risk Factors."

Forward-looking statements made during today's conference call represent our current outlook only as of today's date. We do not undertake any obligation to update or supplement forward-looking statements to reflect subsequent events or circumstances, and we cannot assure you that projected results will be achieved or that predicted events will occur. Joe?

Let me comment briefly on the quarter. Ron will supply a more detailed review of our numbers for the quarter, and then we will take your questions.

One highlight of our quarter was the positive impact of our actions to reduce our operating expenses. This was a central factor in allowing us to generate $4.9 million in cash from operations. Our contract team and credit operations also supported our progress by continuing to avoid any increase in our bad debt expense, while our collections staff significantly reduced Accounts Receivable and DSO from last quarter.

We did take a charge for $814,000 for the quarter, primarily related to our reduction in real estate commitments. As I mentioned last quarter, our cost of real estate continues to represent an opportunity for substantial go-forward cost reductions, and we are not done with this process yet. That said, we are reducing our real estate expenses according to a plan developed in collaboration with our field force, the people in those offices, and so I don't expect the Q4 cost reductions based in additional consolidation of offices will create negative forces internally.

Collectively our actions resulted in our increasing cash and cash equivalents during the quarter from 31.6 million to more than $35.3 million, results that reflect our commitment to strengthen and protect our balance sheet as we focus upon growing revenues in this difficult environment.

Going forward, I expect that we will complete most of the available reductions in real estate costs by the end of Q4. Our ability to depart from an office heavy model and reduce lease expenses is a direct result of a fuel force that has been empowered by and equipped with the technology platform that now allows our staff and consultants complete mobile access to our upgraded information system.

Our experience with the marketplace mirrors which you have heard from other companies in the Specialty and Healthcare Staffing space, we're seeing no new demand. Positively and in contrast our internal trends suggest that we are beginning to operate more effectively in this disappointing environment. During the quarter, our open orders for nurses and the number of nurses working increased, and at the same time, our gross margins in Nurse Staffing rose 150 basis points through the quarter.

Our Lab Support division, while also finding no new demand and while revenues did decline 5.7 percent sequentially, has for the last two months delivered a stable count of clients, employees and revenue.

Of course, our primary going forward priority is the generation of revenue growth against our much reduced SG&A expenses. Our recent internal trends suggest that our operations are settling down after a year of restructuring and cost reduction. Our Lab Support team has added specialty engineers to their operations and is digging deeper in the marketplace and finding new midsize clients. Our Healthcare teams will continue to focus on expanding our single vendor client partnership solution. Now and into 2004, the capture of new revenue regardless of environment will continue to dominate our priorities.

Ron, let's review the numbers for the quarter.

Thank you, Joe. Just recapping on the revenue side and some of the other highlights first, and then we will get into more detail on the segments and margins and expenses. Revenue in the quarter of 50,467,000 represented a decrease from last year's third quarter of approximately 32 percent and a sequential drop of 6.8 percent. Earnings per share was 1 cent in the quarter versus 14 cents in the year ago quarter and a loss of 315 in the prior quarter, primarily attributable to the goodwill adjustment.

Joe highlighted additional charges we took in reducing our costs related to facilities consolidation, discontinuance of certain operations and severance related to downsizing our workforce. Just to recap those charges. They amounted to 349,000 in the first quarter of this year, 413,000 in the second quarter, and 814,000 in the quarter that we are talking about today. So the total for the year in those categories related to debt downsizing business and rightsizing it for the opportunities at hand is 1,576,000.

Cash flow from operations was (inaudible) million as Joe stated. Capital expenditures during the quarter 1.13 million. There was no stock buyback during the quarter. Cash and equivalents at the end of the quarter increased by 3.7 million to 35,360,000.

Onto the details, Lab segment revenues were 22.8 million during the quarter, representing a 19 percent drop from a year ago and a 5.7 percent decrease sequentially. Lab segment revenues comprise 45 percent of total revenue. Healthcare segment revenues were 27.7 million during the quarter. That represents a 40 percent drop from a year ago, a 7.8 percent sequential decrease, and Healthcare segment revenues make up the rest of the business, so it is 55 percent of total. International revenues during the quarter of 2.93 million, representing a drop of 14 percent from the year ago and a sequential increase of approximately 5 percent from the second quarter of this year.

Conversion fees during the quarter were 412,000 versus 642,000 in the year ago third quarter and 536,000 in the second quarter of this year. Gross margins on a consolidated basis from 27.66 percent overall represents a decrease of 164 basis points from a year ago and a 42 basis point drop sequentially. By segment, gross margins in Lab were 31.3 percent, 102 basis point drop over year ago's level and 196 percent quarter to quarter drop. The second quarter Lab Support revenues were influenced favorably -- I am sorry second quarter Lab Support gross margins were influenced favorably and positively by workers' comp adjustments, so that sequential decrease overstates the reality. The actual gross margins for Lab at the assignment level was based on the spread between bill and pay rates were fairly constant.

Gross margins for the Health segment are 24.67 percent, represents a drop of 281 basis points from a year ago third quarter and 76 point increase from the second quarter of this year. SG&A for the quarter is 13,650,000, including the 814,000 related to facilities, consolidations, office closings, discontinuance of certain operations and severance. That is a decrease from a year ago of 15 percent and a decrease sequentially of nearly 8 percent. Operating income for the quarter (technical difficulty)-- was 312,000. A year ago in the third quarter it was 5.78 million, and the operating income compares favorably to the second quarter of operating income, which free goodwill adjustment was approximately 433,000. EBITDA for the quarter as 1.95 million versus 2.5 million in the last quarter. We have already talked about cash and cash equivalents of over 35 million. That is a 30 percent increase year-over-year and almost a 12 percent increase sequentially. Accounts Receivable is 26.67 million. It is down from 28, almost 29 in the second quarter, reflecting the outstanding collection efforts of our Credit Collections department people. DSOs down from 59 to 56 on an average basis and is constant at 54 days outstanding on an ending Accounts Receivable balance basis.

In terms of guidance, we continue our policy we have throughout the year of providing no guidance for the quarter that we are currently in, and we have -- we certainly are not providing any guidance today for 2004. Just let me point out that there are trends and things that we will discuss during Q&A in terms of factors that impact fourth-quarter revenues that would cause replicating third-quarter results at the top line at least to be difficult. Those trends as you all are familiar with have to do with fewer billing days during the quarter. It affects all of our business, except for the Nurse Travel and the seasonal trends that usually cause a falloff in temporary staffing, beginning sometime before the Christmas holiday week.

So with that, it concludes our prepared remarks and highlights. Amanda, I would like you to open it up for questions.

(OPERATOR INSTRUCTIONS). Chandy Smith, CIBC World Markets.

My question relates to SG&A cost and where you think those could go over the next couple of quarters given additional signs in real estate commitment?

We have not programmed out the impact of the additional real estate reductions, and we are in the process of doing that. Certainly whatever we do there will have a favorable impact on the level of SG&A. In terms of the next couple of quarters and next year in particular, for the full year, there are things that will otherwise cause SG&A to go up. So we're working feverishly to reduce costs while working in a rising tide situation. Some of those things are amortization of additional investments in our infrastructure, PeopleSoft and IT related projects in particular, the impact of all of the Sarbanes-Oxley Section 404 compliance in terms of additional work on internal controls that need to be done. And so I guess the simple answer to your question is, where we expect to be in the next couple of quarters is kind of where we are now. But it could go up a little bit from what we just reported in this quarter.

Can you quantify essentially how much real estate, whether it is branches or square footage, that you have been able to eliminate by people working from home?

None from people working from home. We have not implemented that. Instead, we are looking at reducing like Los Angeles from six branches to two; we don't need six branches. The branches were originally created for the purposes of the convenience of tougher employees being interviewed, so we don't need multiple branches in large geographic markets. So I guess in terms of branch closings, it is now north of 30 to 40 at this point.

Yes, the operational motif there is just Los Angeles goes from six or seven branches to two; San Francisco goes from five branches to one. Just because we are not office spaced anymore, and if you recall, several years ago our staffing consultants had no connectivity to the mothership as it were and today they do, that is the nature of it. How many total offices we end up closing we can certainly make that available to you once it is done. It is a process as I said in my comments that we are doing with the staffing consultants in the field.

Okay. So how many branches to you now have?

Well, in the multiple way we have always counted branches (multiple speakers) --

Well, plus international, so it is approximately --

I would say 45 total, including international branches. And that is Lab Support, so Health branches are far fewer than that, maybe half of that many.

Marta Nichols, Bank of America Securities.

I am wondering just to follow-up on Chandy's question about the branches, I know in the past if we take the model back three or four years ago, the model was trying to open up branches in geographic areas, as you said, I think to make that more convenient for the temporary staffers. Do you have any sense of whether you limit yourselves in terms of total target markets being able to target employees, particularly once the job environment gets better if you don't have as many touch points with them and locations in each of your local markets?

It is not our impression (inaudible) that that actually is the core value of the offices today. The staffing consultants are quite happy to interview in a centralized office, interview in an executive suite reserved for the day, or interview at a hotel for the day, and that seems to work out quite nicely. We do need a physical base in large markets for a lot of administrative reasons.

The marketplace dynamics seems to be as much as anything -- seem to be is as much as anything the fact that from a client standpoint one of the ways that clients differentiate between staffing companies who are here today, gone tomorrow, and staffing companies who are established entities as to whether or not they have a physical presence in their particular market. So today the value of the physical office for us is a demonstration of commitment to the client and then the physical place where our teams come together and work with their marketplace manager as a sort of an administrative support house.

Speaker: Can I just add to that. If your premise came to pass, Marta, that that was a constraint, you know our ability to open branches if we got back to a booming environment and a labor shortage, we are fairly efficient at that. So if that was an obstacle to growth, we can open a branch and be up and running pretty quickly.

Can you just flesh out of a little bit more what potential impact we should be thinking about in the fourth quarter versus third quarter, holidays? How many billing days do you anticipate in this fourth quarter versus last year and versus the third quarter, and are there any other things beyond holidays -- for example, the fact that nurses I think last year took more time off than might have been anticipated -- that we should be trying to factor in?

Sure. Just on the surface of it with -- our first order of concern is just the billing days. For the month of November for instance, there are only 18 billing days. But for the total quarter, it is 63.5 days. In the third quarter, we are looking at 61.5. So we're going to lose two billing days which affects, like I said, almost everything except the Nurse Travel business; that is not five day a week business, but everything else we do dose.

As far as the seasonal impacts, we have had drops in the last couple of years from the preholiday peaks of 8 percent or so in terms of headcount. As you know, last year we put some fairly aggressive incentives in place to keep nurses working through the holidays, and that was quite expensive to do that. It certainly mitigated the drop in nurses, but early cost of damage to gross margins. So we are still -- not to say we are not doing incentive this year, but we are taking a different approach to offset the cost of those programs versus the number of nurses that are not going to work through that period.

So in terms of quantifying what is going on in the quarter, two fewer days for sure, and then a drop in headcount starting the week before Christmas, Christmas week of approximately 8 percent of our total employees. The issue is, and one I am sure it might be heading, is if everything else is good, what is the impact on the -- I think just those factors, the days and the drop would cause everything else being equal, would cause fourth-quarter revenue to drop sequentially by something on the order of 6 or 7 percent.

And that is for total, or you are talking just about Lab and --?

I am just talking total.

You I think alluded to something that you are doing that may be different from the retention bonuses that were used last year to keep nurses on staff. Can you give us any sense of what it is you're doing and what the cost of that may be relative to what you did last year?

Well, we are targeting -- yes, I think we overspent last year, and certainly the "but for" argument is always hard to play out in terms of what it would have been had we not overspent. We have budgeted -- yes, we budgeted something like $500,000 for incentives this year, which would be less than we spent last year. We will see how that plays out. We are certainly expecting that we will still have a pretty sizable drop-off in any event, but it is not the goldplated program it was last year.

We also have a substantial number of our nurses On Assignment today are now what we call Best Traveler nurses versus our Best Express brand. They are longer-term commitments, more commitments that are more traditionally like those supplied by Cross Country and AMN in the historic drive-in 13 week plus Travelers. That as you know is part of our strategy and initiative to be able to supply hospitals with nurses at different price points.

Those people stay on their assignments for longer periods of time. They are less able to decide two, four, six weeks before Christmas that they don't want to re-up for another assignment, and that substantially attenuates our need to incentivize people with money to stay on their assignments through the holidays. It's the original HPO Best Express nurses that have the ability to end their assignments within four weeks of the holidays that are the people that were the target of last year's retention bonus.

Joe, what is the mix of Best Traveler versus Best Express right now?

Probably a quarter Best Traveler and three quarters Best Express. You can expect that to increase over time. I mean a facility that is staffed in a balanced way needs all things. They need Best Express, Best Traveler, International Nurses, per diem, etc. etc.. And most facilities need some amount of Best Express nurses. I think over time you will see that our Best Traveler population, which happily has higher margins. It increases and our Best Express population will grow, but proportionally not as much.

And then the final question I had, I guess for Ron, can you flesh out in a little more detail what happened with the gross margins in the quarter? I think you mentioned that part of it was just a test sequential comparison, but I think on a year-over-year basis we saw margins decline in all of the segments. And I was wondering if you can just aggregate for us how much of that is due to the insurance versus bill rate and pay rate shifts and so forth?

Well, it is keeping us at segment level to answer your question. Lab -- gross margins down year-over-year by 100 basis points. That can all be explained by the decrease in conversion fees from a year ago. So if you actually look at the spreads and the margins at that level, it is pretty constant in Lab.

The sequential drop in Lab is really the other side of the sequential increase in Lab from first quarter to second quarter, which had to do with favorable workers' comp reserve adjustments during the quarter. That was not sustainable anyway, so my summary statement on Lab would be things are fairly steady, but there certainly is not any reason to forecast improved margins in Lab. There is still pricing pressure, lots of competition in that space, but we are holding the line and would expect gross margins in Lab at least in the fourth quarter to be comparable to third quarter level.

Healthcare is a mix of things. Obviously the segment numbers are impacted by the decrease in margins for the HPO business primarily. Again, if you were to extract with and without HPO, the legacy On Assignment local Healthcare business is still running, put margins 31 to 32 percent and somewhat impacted by lower conversion fees, but not to the degree that Lab is.

The Nurse Travel and HPO improvement in margins sequentially has to do with partly with what Joe just mentioned when he answered the question about the mix. We have 25 percent Best Traveler, longer term Traveler with gross margins, better spreads, and then we have combined with the lower workers' comp expense during the quarter, you know contribute that to 150 basis points sequentially, which helped the Health segment increase 76 percent or 76 points sequentially. So I think that gives you some color and flavor on it. It is certainly not all indirect category, in the indirect category. There is some compression in the business other than the Nurse Travel business, but nothing substantial that we see a trend that is of any concern at this point.

Jim Janesky, Janney Montgomery Scott.

A couple of questions. The first one is as a follow-up to the nurse staffing gross margins. Would it be fair to say that in the fourth quarter, they will come in somewhere in between what they were in the fourth quarter of last year and the third quarter of this year because you will be offering less incentives, but with just any incentives in general, the growth would probably come down in the fourth quarter?

I think it has to -- it may be be (inaudible), but I think rather than go back to last year, we know what we have budgeted for this year, and it is much less than last year. So I think a better starting point would be to take gross margins for the third quarter and take $500,000 out of the calculation and 500,000 with the nurse revenue is 20 million or so. That is 2 percentage points right there.

Okay. It seems as if with the gross margins in this quarter, you have been able to hold the line on pricing in the HPO business. Are pricing trends flat -- on an apples-to-apples basis, meaning obviously you're going to get less revenues per traveler on the longer week assignments because it's low price points. But on apples-to-apples within both the Travel and the Express market, have you been able to hold the line on pricing?

Yes.

Joe, could you give us a sense -- how you compete against the AMN and Cross Country's of the world? Are you just going to mainly your current base of customers where you have a sizable market share like in California and say use us for the additional service as well?

It is partially that, but we are also growing with new clients. We have spoken before as you know you if you get me started too much on what our large client strategy is we will be here for a long time, but we are pursuing what we simplistically call a single vendor strategy. What we are really doing there is partnering with hospitals on the management of their temporary staff at-large, and over time, you will see that the breadth of that partnership with them expand.

It would be fairer to say that with large clients we are increasingly able to supply them with multiple forms of nurses. So a lot of our growth is occurring, not just with existing clients but in large clients who now are trying to supply them will both Best Express and Best Traveler nurses. It gives them a sense that there is a lot less gouging going on than they thought was going on a year ago, and that is also combined with a high degree of personalized service to large accounts.

In the "go go" years of '98 and '99, there was a lot to be said for having an organization that had very few employees per client, and that had a certain protective value just because of the haze of activity and lack of dependency on any single large client. The flipside to that occurs in down economy where you just don't have the revenue volume from any given client to manage those relationships. As we now focus on both the general selling of nurses and also on the development of large clients, we have the time to put dedicated account managers and time for (inaudible) management into developing those large accounts. So existing and new that is where the growth is coming.

Okay. And, Ron, on operating expenses, is the base really more like 12.8 million from the third quarter when you exclude the 814,000? Is that what we should be looking for is the base that you said because of Sarbanes and some other issues that it could go up -- would that be the base?

I think there are some other aberrations in the quarter that might increase the base to answer your question to maybe make it 13. But we are certainly not projecting decreased expenses in the fourth quarter. It would be at least that 13 and probably more because some of these things that are happening are happening in the fourth quarter too, not just the beginning of next year.

And then last question is in the press release and in your comments, Joe, you talked about we expect demand to be flat, but then, Ron, you said that in overall revenues, could be expected to go down in the fourth quarter? Is the difference between that just purely seasonal? If the employment market and other areas of the market are recovering, we could see the first quarter off to a nice start so to speak for '04?

For the first part of your question, the answer in terms of fourth-quarter revenues is the answer to Marta Nichols' question, which is if it is too fewer days, then you have the normal seasonal drop and otherwise you were flat in headcount. What would happen, we would be down 6 percent in revenue. So it would be flat sequentially. We would have to grow headcount pretty dramatically between now and six weeks from now. So that is -- as we discussed before, it is sort of the laws of the universe that we can overcome those trends.

The trends are okay. We were pretty flat throughout the quarter, but flat in the fourth quarter does not get us to flat revenues (multiple speakers). As we just discussed, we came down for ten quarters and hit what appears to be the stop point at the beginning of the third quarter and we have been flat to up, flat to up, moderately up week-to-week and then flat again. So the trend you can say is not a buoyant trend, but it is a good trend to plan as the point of departure for budgets and strategies for next year.

But when we have a good first quarter, we are always starting at a low point. So it's hard to get back to that even in the last decade. It took anywhere from March to May to get back to the high point reached before the holidays. So to extrapolate from any of these comments the first quarter is going to be a good quarter, it sequentially would be a mistake.

Okay. Thanks for the clarification.

Ben Liblik (ph), Deutsche Bank.

Actually do you mind just repeating the DSO computation that you did?

We have done it to ways this time, so I will give you the two sets of numbers. The DSO on an average receivables basis was 56 days this quarter and 59 days in the second quarter. If you look at ending balances instead of average AR balances, those two numbers would be 54 and 54. And the big improvement in spite of the great collections we had in the third quarter, the big drop in DSO on an ending basis occurred between the first and second quarter, and it has been good relatively good since then. But the two numbers would be on an average basis 56 this quarter versus 59 last quarter and on an ending basis 54 to 54.

You think the current level is sustainable?

Yes.

Did you also say you had reduced the bad debt reserve? Did I hear you right?

The bad debt reserve we had a small favorable adjustment. We changed our -- under direction of the audit committee at the beginning of the year, we changed our methodology after much review, and we have never had an issue with the auditors in terms of the adequacy or the methodology. But we have been using methodology this year, which has a slightly over accrued pending year-end more thorough evaluation of the reserves, so the adjustment this quarter net net was something on the order of 100,000 favorable.

Great. Thanks. My other question is on the D&A line actually. I noticed it did tick down quarter-on-quarter. Is any of that related to the write-off in the second quarter?

What we did write-off some identifiable intangibles that had some impact, and I think that write-off was on the order of 300,000. So that would not have had a dramatic impact, but some impact on the third quarter.

Okay. Thanks.

Bill Mascovitz, Hartland Funds.

I was just wondering -- it is great to see the balance sheet continue to be improved and cash is up to something like 35 million I guess you said. What do you plan on doing with the cash with much lower CapEx going forward?

Well, we are all fighting to answer the question. The CFO spends, but let's not get radical with the cash because we will revisit at our Board meeting on December 9th whether or not to react -- reengage the stock buyback program, and we don't get as many calls on why we are not doing that as we used to. We did a reasonable amount of buybacks this year at an average price of something less than $4, so we feel good about the. Some possibility of a stock buyback; some possibility of a small tuck-in acquisition. Nothing that would be a departure in terms of a new vertical, but something that might accelerate the healthcare side, particularly the Best Traveler business, the longer-term Nurse Travel business.

Otherwise, no designs on the cash. CapEx level next year will be comparable on a run-rate to what we experienced third quarter this year, something on the order of 1.1 to 1.2 million per quarter CapEx. So that is the short -- the summary answer on cash planning at this point.

I would like to take the opportunity to put a little more context around this. We have gone through a year where we have taken lots of inefficiency out of the business. We have both reduced as you know the run-rate expense. We have also put out a number of fliers related to the declining economy and the impact on our position. We are, however, pursuing a very clear strategy, certainly in healthcare, of increasing the level of service we bring to the staffing function within any given hospital.

There are some logical components to that. Those include the management of the staffing office, the management of the master nursing schedule itself, and the technology that supports that, and those are certainly areas where growth in those areas and hospitals in the year forward will not only increase, if you will, our stickiness of those clients; it will improve our ability to deliver real value to them and should improve our pullthrough of temporary staff. So those are the areas that we are looking to continue to mature the strategy with large clients.

Could you review again how many shares did you buy back again this year?

1.1 million. Actually let me give you the breakdown. In the first quarter, (multiple speakers) 920,000 and 218,000 (ph), so 1.38 million shares at an average price of like 398. And there are 280,000 shares left on the current authorization.

(OPERATOR INSTRUCTIONS) Dan Dittler, Lehman Brothers.

Good morning. I was wondering if you could provide a little more color on how business has been trending in each segment in the first five weeks of the fourth quarter?

Well, the comment about being flat or slightly up from the beginning of July, it is pretty much across the board. I am just looking at the graph here. On a consolidated basis, Lab Support really is pretty consistent. There is nothing dropping radically and nothing going up dramatically.

I am sorry Joe is reminding me of this deal from the beginning of July until now the number of nurses, the number of orders and weekly revenues for nurses is higher than it was at the beginning of that period, and so if there is any fall-off in business, if you could say otherwise, you are flat once the squeeze factor here hits the local healthcare. Particularly healthcare financial staffing continues to be a problem.

And just to clarify your comment on the potential tuck-in acquisitions, would those serve to just fill in geographic voids versus what you said it would not be adding service on?

Well, geographic voids possibility or inventory. We're looking for more nurses of the Best Traveler. The new initiative for us is the longer-term travelers, and there is a difference in the makeup of those nurses, and we need to build that inventory a little faster. So we get the proposals every day from small companies that cannot grow and can't compete anymore. They do have a certain number of nurses, so that makes sense to do some tuck-in acquisitions in respect not just to geographical but expansions.

It is more a fleshing out of strategy. To the extent we are being circumspect on this, it is because we continue to form up our detailed analysis of how we might flesh out our strategy through acquisitions. We have talked to lots of people over time, but, as I said, what we are really doing is we are expanding our ability to deliver value to the entire staffing function in the hospital. So that includes out-sourced and interim nurse management; that includes performance management, consulting around the nurse staffing function and nurse staffing office, and thus all areas that we are looking into today. We do that effectively anyway.

Bill Mascovitz, Hartland Funds.

Could you -- perhaps I missed this -- give us a ballpark number in terms of what amount you have taken out of the business in terms of costs, whether it be this year or over the past couple of years?

Well, the best comparison in today's presentation is the reduction in SG&A from a year ago. It was slightly over 16 million a year ago and 13,650,000 this quarter with 800,000 related to sort of onetime charges for facilities, write-offs or consolidation and severance of discontinued operations in one respect, and then even sequentially, a drop from 14.8 million to 13,650,000. So this is an accumulation of cuts that were made in the first, second and third quarters of this year.

So the benefits of the more recent cuts will have a positive impact on the fourth quarter, which obviously the cuts made in the first and second quarter are already reflected in the third quarter numbers, but we do have some things that will cause those reductions to be offset in terms of some things we talked about -- amortization of investments and IT and all the things around Sarbanes-Oxley. But to that effect, I think you can say that a 2.3 million reduction in SG&A on a quarterly basis from a year ago is pretty good progress. That is 15 percent down from a year ago.

Eric Thompson, Legg Mason.

I was wondering if it would be possible to just give us some color on average assignments maybe across the business?

What dimension of average assignments? I don't think we are going to answer your question either way, but I need to understand it better. The numbers of people on assignment? We have not provided --

Maybe more just directionally. I know in your Qs you tend to disclose average assignments I think on the healthier side in the Lab side. That really is what I was looking for?

Okay. I am still not tracking with your question. The average numbers of assignments, the average length of assignments?

Average numbers.

I don't think we have provided that in the call, and I would rather just leave that for revelation in the Q.

Also, Ron, for the fourth quarter, what is your targeted spend rate on the PeopleSoft system?

The additional investments in the fourth quarter?

Yes.

$750,000 to $1 million.

Great. Thanks.

(OPERATOR INSTRUCTIONS). At this time, there are no further questions. Are there any closing remarks?

Well, we did appreciate everyone's attention to On Assignment for this quarter. We are happy to report progress as we make it, and we look forward to speaking to you all again after the first of the year. Thanks, Amanda.

This concludes On Assignment's quarterly earnings results conference call. You may now disconnect.