Press Release Archive
Spherion President and CEO Cinda A. Hallman commented, “Although visibility of revenue trends continues to be low, we remain strongly focused on executing initiatives outlined last summer as part of our business transformation strategy. I am also pleased that despite decreases in revenues and gross profits, we successfully eliminated another $10 million of operating expenses during the quarter. While we still have much work to do in achieving our goals, I am encouraged by the early results of our efforts. We remain committed to driving productivity improvements throughout our operations and delivering sustainable profit growth.”
On a GAAP basis, revenues for the first quarters of 2002 and 2001 were $539.3 million and $854.6 million, respectively. Loss before cumulative effect of changes in accounting principles for the first quarters of 2002 and 2001 were ($3.7) million and ($22.8) million, respectively, and related per share amounts were ($0.06) per share and ($0.38) per share for the same periods. As previously announced, the Company adopted FAS 142, Goodwill and Other Intangible Assets, effective first quarter 2002. As a result, Spherion recorded a non-cash, pre-tax charge for the impairment in value of goodwill of $692 million. Including the impact of adopting new accounting principles, the loss per share in the first quarter of 2002 was ($10.46) compared with ($0.39) per share in the first quarter of 2001.
SEGMENT REVIEW - FIRST QUARTER 2002
Hallman continued, “As we have previously stated, while revenues in our Recruitment segment are expected to decline in 2002, our goal is to increase profit margins. In fact, this quarter segment profit margin in fifty percent of our staffing markets improved when compared with fourth quarter 2001 despite seasonal revenue declines in nearly all of those markets, indicating early signs of progress from our market optimization efforts. I am confident that our actions to consolidate markets and invest in dedicated sales professionals will position Spherion to take advantage of future increases in client demand.”
Recruitment revenues for the first quarter were $356.7 million, a decline of 18.9% compared with the same period a year ago. On a sequential quarter basis, revenues declined 10.6% due to seasonal declines in the commercial staffing area and the impact of strategic initiatives to exit unprofitable markets and certain customer accounts. Gross profit margins were 22.9% in the first quarter of 2002 compared with 23.9% in the fourth quarter of 2001, declining primarily due to statutory unemployment rate increases in the current quarter. Primarily as a result of the decline in gross profit margins, Recruitment segment operating profit margins decreased to 0.1% in first quarter 2002 compared with 1.2% in fourth quarter 2001, despite reductions of approximately $7 million in S,G&A expenses.
Information Technology revenues were $97.2 million in the first quarter of 2002, compared with $140.3 million in the first quarter of 2001, a decline of 30.7%. When compared with the fourth quarter 2001, revenues declined 4.3%. Gross profit margins were 27.2% in first quarter 2002 compared with 28.0% last quarter. Segment operating profit margins were (1.9%) and (0.7%) in first quarter 2002 and fourth quarter 2001, respectively. Improvements in consultant utilization and the impact of compensation reductions were offset by holiday downtime in January and higher statutory unemployment rates and medical costs, reducing first quarter gross profit and segment operating profit margins.
Outsourcing revenues declined 10.2% from first quarter 2001 to $85.3 million in first quarter 2002. On a sequential quarter basis, revenues declined 5.3%, reflecting decreased volumes in certain older outsourcing contracts and lower outplacement revenue. Gross profit and segment operating profit margins were 25.8% and 3.7%, respectively, in the first quarter of 2002 compared with 28.5% and 6.4% in the fourth quarter of 2001. Gross profit and segment operating profit margins were negatively impacted on a sequential basis primarily due to the decline in high margin outplacement services during the current quarter.
Although revenue trends have not yet shown significant improvement, the Company has seen some early signs of stabilization within our staffing operation. Most recruitment and technology clients continue to be cautious about significantly increasing spending. Therefore, based on current information, management expects revenue for the second quarter to be between $535-$545 million, which is relatively consistent with first quarter 2002 levels. The Company expects earnings (loss) per share between ($0.05) to breakeven for the second quarter of 2002.
Spherion Corporation provides Recruitment, Technology and Outsourcing services. Founded in 1946, with operations in the
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 temporary 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; our liquidity may be affected if we are not able to renegotiate our Revolving Loan Facility; failure or inability to complete our outsourcing projects could result in damage to our reputation and give rise to legal claims, and certain contracts contain termination provisions and pricing risks. 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.