Press Release Archive
Spherion President and CEO Cinda A. Hallman commented, “We continued to see gradual improvement in our Recruitment business throughout the third quarter. We remain committed to our Technology and Outsourcing service offerings, but have additional work to continue strengthening our selling efforts in order to deliver additional revenue and profit growth.”
For the nine month period ended
During the third quarter, gross profit margins declined approximately 40 basis points to 24.9% as compared with 25.3% for the second quarter of 2002, due primarily to pricing pressure within the Technology segment. To a lesser extent margins were also impacted by the growth in the Recruitment segment, which generates slightly lower gross profit margins than the Technology and Outsourcing segments.
Cost containment initiatives resulted in a decrease of selling, general and administrative expenses of approximately $1.8 million in the third quarter as compared with second quarter 2002.
During the third quarter the Company repurchased $44.0 million face value of its 4.5% Convertible Subordinated Notes. The debt was purchased at a discount, resulting in a pre-tax gain on the retirement of debt of approximately $3.9 million, which is included in other gains for the third quarter. The Company repurchased an additional $60.3 million face value of the Notes, to date in the fourth quarter. These purchases were all privately negotiated transactions. Additional repurchases, if any, will depend on factors such as the prevailing market price of the Notes, overall market conditions and alternative uses of the Company’s liquidity.
Through the first few weeks of the fourth quarter, Recruitment revenues continue to show modest improvement. However, this improvement is not expected to compensate for anticipated seasonal downtime at client facilities in November and December in each of the operating segments. As a result, the Company expects fourth quarter revenues to decline sequentially 1% to 3% as compared with third quarter.
Based on a small decline in revenues, management currently expects earnings per share from continuing operations, including the pre-tax gain on retirement of Notes of approximately $6.0 million, to be between $0.05 and $0.10, for the fourth quarter of 2002. Management’s guidance includes a projected effective tax rate of 50%.
In addition, the Company was notified during the quarter that a staffing contract with a large customer will be impacted by the customer’s recent renegotiation of contracts with its labor unions. As a result, Spherion’s Recruitment revenues will be impacted by approximately $65 million on an annualized basis, beginning in the first quarter of 2003.
Hallman commented, ”We are committed to more than replace these lost revenues during 2003. We have specific plans in place and have already taken actions to do so.”
Spherion Corporation provides Recruitment, Technology and Outsourcing services. Founded in 1946, with operations in
This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. Factors that could cause future results to differ from current expectations include risks associated with: Competition - our business operates in highly competitive markets with low barriers to entry; Economic conditions - a significant economic downturn could result in our clients using fewer flexible employees or the loss of a significant client; Changing market conditions - our business is dependent upon the availability of qualified personnel; Corporate strategy - we may not achieve the intended effect of our business transformation strategy; Litigation - we are a defendant in a variety of litigation and other actions from time to time and we may be exposed to employment-related claims and costs; Other - government regulation may increase our costs; business risks associated with international operations could make those operations more costly; failure or inability to complete our outsourcing projects could result in damage to our reputation and give rise to legal claims; managing or integrating any future acquisitions may strain our resources, and certain contracts contain termination provisions and pricing risks. Additional repurchases, if any, of our Convertible Subordinated Notes is subject to the prevailing market price for the Notes, overall market conditions, the Company’s liquidity and other factors. No assurance can be given that the Company will repurchase any additional Convertible Subordinated Notes. These and additional factors discussed in this release and in Spherion’s filings with the Securities and Exchange Commission could cause the Company’s actual results to differ materially from any projections contained in this release.