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Third quarter (loss) earnings from continuing operations were ($0.03) per share in 2003 compared with $0.06 per share in 2002. However, excluding restructuring charges and gain on the retirement of debt, adjusted (loss) earnings from continuing operations was $0.00 on a per share basis for the third quarter 2003 and $0.02 per share in the same period of 2002.
Spherion president and chief operating officer Roy Krause commented, “We are pleased with the 5.2% sequential quarterly revenue growth generated in the third quarter. We experienced strength within our core Recruitment businesses, reflecting the result of initiatives undertaken over the last two years to increase our sales effectiveness. We also continued to make progress on streamlining our infrastructure and, in October, we achieved key milestones in the implementation of our ERP system. The early signs of operational and economic improvement we experienced during the third quarter are encouraging.”
For the nine months ended
Additionally, Krause commented, “In the Recruitment segment the greatest revenue gains were reported by our staffing operation compared with the second quarter 2003. In the third quarter, pricing in our staffing business was reasonably stable. However, overall gross profit margins in the Recruitment segment were impacted sequentially by business mix shift due to higher growth rates within lower margin staffing services, weaker pricing for higher level skills, primarily internationally, and to a lesser extent higher employment related costs.”
He continued, “While Outsourcing results were consistent with the second quarter 2003, the Technology segment revenues and gross profit margins continued to decline this quarter. As a result of these ongoing trends and after careful consideration of alternatives, we are consolidating the technology business unit with our professional recruiting group. Our professional recruiting group has achieved sequential revenue growth for six consecutive quarters in a challenging economic environment. We expect to leverage the business models and natural synergies that exist between the two groups to improve operating results.”
Other Items
Effective with the start of the fourth quarter 2003, the Company successfully implemented the payroll and human resource management phase of its new enterprise-wide information system. In October, the Company began converting its staffing branches to the new front-office system, marking an on-time start of the front-office rollout and the final phase of the system implementation, which will continue through March of 2004. The Company anticipates that the technology investment and standardization of business processes will significantly enhance productivity and reduce operating expenses in future periods.
As previously disclosed, the Company will incur restructuring charges, primarily related to severance, as it completes each phase of the enterprise-wide information system implementation and other cost containment initiatives. In the third quarter, the Company recorded a pre-tax restructuring charge of approximately $2.5 million for severance related to redundancies and centralization of several business support functions. The Company currently anticipates a charge of approximately $3 million on a pre-tax basis in the fourth quarter 2003.
Outlook
Krause commented, “Weekly sales trends in the staffing business for the first three weeks of October were modestly higher than September levels. However, based on the additional holiday downtime traditionally experienced in the fourth quarter, we anticipate revenues will be roughly flat or only modestly higher compared with the third quarter. Excluding the restructuring charge, we are anticipating a slight profit on the bottom line, assuming no significant changes to recent sales trends.”
The Company currently anticipates revenue for the fourth quarter 2003 will be between $520 and $540 million and (loss) earnings from continuing operations will be between ($0.05) and $0.00 per share. This guidance includes a charge of approximately ($0.03) per share for the restructuring activities expected during the fourth quarter and assumes a 33% effective tax rate. Excluding the restructuring charge, the Company anticipates that fourth quarter adjusted (loss) earnings from continuing operations will be between ($0.02) and $0.03 per share.
About Spherion
Spherion Corporation provides recruitment, technology and outsourcing services. Founded in 1946, with operations in North and
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 or bankruptcy of a significant client could materially adversely affect our business results; 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 strategy; Technology demand – lack of client investments in new technology may result in reduced demand for our Technology services; Technology Investments – our investment in technology initiatives may not yield their intended results; Tax filings – regulatory challenges to our tax filing positions could result in additional taxes; Credit Rating – further reduction in the Company’s credit rating may affect our ability to borrow and increase future borrowing costs; 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. 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.
Spherion Corporation prepares its financial statements in accordance with generally accepted accounting principles (GAAP). Adjusted earnings (loss) from continuing operations is a non-GAAP financial measure, which excludes certain non-operating related charges and gains. Items excluded from the calculation of adjusted earnings (loss) from continuing operations include, but are not limited to, restructuring charges, gains/losses on the sale of assets, and gains on the early retirement of debt, net of taxes. Adjusted earnings (loss) from continuing operations is a key measure used by management to evaluate its operations. Management does not consider the items excluded to be operating costs/gains and therefore, excludes them from the evaluation of the Company’s operating performance. Adjusted earnings (loss) from continuing operations should not be considered a measure of financial performance in isolation or as an alternative to earnings (loss) from continuing operations or net earnings (loss) as determined in the Statement of Operations in accordance with GAAP, and, as presented, may not be comparable to similarly titled measures of other companies. Items excluded from adjusted earnings (loss) from continuing operations are significant components in understanding and assessing financial performance.
Spherion Corporation and Subsidiaries Financial Statements
- Consolidated Third Quarter Income Statement
- Consolidated Year-to-Date Income Statement
- Consolidated Balance Sheets
- Segment Information
- Reconciliation of Non-GAAP Financial Information
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