We were founded in 1948 and incorporated in California in 1954. In October 1995, we reincorporated in Delaware. Our corporate name was changed to Westaff, Inc. in September 1998. Our executive offices are located at 298 North Wiget Lane, Walnut Creek, California 94598-2453, and our telephone number is (925) 930-5300. We transact business through our subsidiaries, the largest of which is Westaff (USA), Inc., a California corporation, which is the primary operating entity.
During the third quarter of fiscal 2005, we sold our operations in Norway and Denmark, and, during fiscal 1999, we sold our medical business, primarily operated through Western Medical Services, Inc. (“Western Medical”), a wholly owned subsidiary of us. As a result, we have classified these operations as discontinued operations in our consolidated financial statements.
Services
Our service offerings are focused primarily on placing clerical/administrative and light industrial personnel into both temporary and permanent positions.
Clerical/Administrative Services. Clerical/administrative services personnel are placed for a broad range of general business positions including receptionists, administrative assistants, data entry operators, word processors, customer service representatives, telemarketers and various other general office, accounting, bookkeeping and clerical staff. Clerical/administrative positions also include call center agents, such as customer service, help desk and technical support staff.
Light Industrial Services. Light industrial services personnel are placed for a variety of assignments including general factory and manufacturing work (including production, assembly and support workers, merchandise packers and machine operators), warehouse work (such as general laborers, stock clerks, material handlers, order pickers, forklift operators and shipping/receiving clerks), technical work (such as lab technicians, inspectors, quality control technicians and drafters) and general services (such as maintenance and repair personnel, janitors and food service workers).
Permanent Placement Services. Permanent placement services are typically contingent fee-based services to recruit and fill regular staff positions for customers. These services include locating, screening and assessing candidates on behalf of customers. If the candidate is hired by the customer, we are generally paid a fee based on a percentage of the annual starting compensation for the candidate placed.
Management believes that clerical/administrative and light industrial staffing services are the foundation of the staffing industry and will remain a significant market for the foreseeable future. Management also believes that employees performing clerical/administrative and light industrial staffing functions are, and will remain, an integral part of the labor market in local, regional and national economies in which we operate.
We also provide other services within the clerical/administrative and light industrial staffing market such as temp-to-hire services, payrolling, on-site and on-location services, and other professional services including skills and behavioral assessments and coordination of drug testing and background checking.
· Temp-to-hire services represent the placement of temporary staff with a customer with the option to convert the temporary staff to a permanent customer employee at a later date.
· Payrolling typically involves the transfer of some of the customer’s short-term seasonal or special use employees to our payroll for a designated period.
· On-site programs provide administrative services for our customers such as coordinating all temporary staffing services throughout a customer’s location, including skills assessment and training.
· On-location programs provide for an independent branch office located at the customer’s facility. They are typically intended for large non-seasonal accounts with more than $1.0 million in annual revenue. This type of branch office is generally staffed by at least one manager-level employee.
Both on-site and on-location relationships provide customers with dedicated account management, which can more effectively meet the customer’s changing staffing needs with high quality, consistent service. These programs tend to have comparatively lower operating expenses and relatively longer customer relationships.
To complement our service offerings, we utilize a number of tools focused on increasing the pool of qualified candidates using advanced selection procedures for potential candidates (Talent Trak®) as well as technology-based management services that allow clients to maximize workforce productivity (Time Trak®). We believe that these tools enhance our competitive edge and position us to more effectively pursue high growth market niches such as financial services, customer interaction centers and high-end administrative placement.
Talent Trak®. To ensure high quality placements for customers and employees, we use Talent Trak® to strengthen the quality of our selection process. This comprehensive selection process includes flexible recruiting methods, interviewing and reference checking. We conduct advanced skills and behavioral assessments using Talent Trak®, and also provide the option for both background and drug testing that can be customized to meet a customer’s specific needs. We maintain contracts with national drug testing and background testing service providers to help ensure high quality and consistency in assessing our candidates.
Time Trak®. This tool provides customers with a web-based management system to assist in maximizing workforce productivity. Time Trak® is a flexible system allowing customers access to information to track a variety of performance measurements such as workforce hours, labor costs, attendance and staff performance. Time Trak® also includes features to automate timecard and payroll processing.
Markets
We provide staffing services primarily in “secondary markets,” as well as in the downtown areas of certain “primary markets” in the United States, the United Kingdom, Australia and New Zealand.
We capitalize on our presence in secondary markets to build market share by targeting small to medium-sized customers, including divisions of Fortune 500 companies. We believe that in many cases, such markets are less competitive and less costly to operate in than in the more central areas of primary markets, where a large number of staffing services companies frequently compete for business and occupancy costs are relatively high. In addition, management believes that secondary markets are more
likely to provide the opportunity to sell commercial and recurring business that is characterized by relatively higher gross margins.
We augment this concentration on secondary markets by also focusing on selected national contracts with customers having a large presence in these marketplaces. Such accounts include large clients in multiple locations supported by a dedicated corporate-level business relationship manager. We currently have existing national accounts across many different business sectors such as manufacturing, government, financial services, technology and communications. We maintain a professional sales team that services and leverages existing relationships to retain and grow these accounts. In addition, we continue to develop aggressive marketing programs to target and acquire additional clients that fit our branch system footprint. Management believes that our geographic alignment allows us to effectively compete for some of these national contracts.
We market our staffing services to local and regional customers through a network of Company-owned and franchise agent offices, as well as through our on-site and on-location service locations and through one licensed office. Domestically, our national marketing campaigns are coordinated through our corporate headquarters in cooperation with U.S. field offices. Marketing efforts for regional and international markets are generally conducted at the local level. New customers are developed by the field offices primarily through direct sales efforts and referrals. We have a robust targeted marketing program and a consultative sales process that includes telemarketing, e-mail marketing and direct mail campaigns.
Recruiting
We believe that a key component of our success is the ability to recruit and maintain a pool of qualified personnel and regularly place them into desirable and appropriate positions. We use comprehensive methods to identify, assess, select and, when appropriate, measure the skills of our temporary employees and permanent placement candidates to meet the needs of our customers. Domestically, we believe one of our key competitive advantages in attracting and retaining staffing personnel is our payroll system, which provides us with the ability to print payroll checks at virtually all of our branch offices within 24 hours after receipt of a timecard. Most Company-owned offices offer temporary employees a benefit package, including a service bonus and holiday pay. Franchise agent offices have the option to offer this benefit. All eligible temporary employees have the option to participate in our 401(k) plan and discounted employee stock purchase plan.
Operations
We operate each Company-owned office as a separate profit center and provide managers considerable operational autonomy and financial incentives. We also operate franchise agent offices in appropriate markets. Managers focus on business opportunities within markets and are provided centralized support to achieve success in those markets. We believe that this structure allows us to recruit and retain highly motivated managers who have demonstrated the ability to succeed in a competitive environment. This structure also allows managers and staff to focus on market development while relying on centralized services for support in back-office operations, such as risk management programs and unemployment insurance, credit, collections, accounting, advice on legal and regulatory matters, quality standards and marketing.
As of October 28, 2006, we operated through a network of 239 offices in 45 states and three foreign countries. In addition, from time to time we establish recruiting offices both for recruiting candidates and for testing demand for our services in new market areas. Our operations are decentralized with branch, market and district managers, regional vice presidents and franchise agents enjoying considerable autonomy in hiring, determining business mix and advertising.
The following table sets forth information as to the number of offices in operation as of the dates indicated:
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