Press Release Archive
Investor Contact: Teri Miller
Media Contact: Kip Havel
FOR IMMEDIATE RELEASE
SPHERION ANNOUNCES FOURTH QUARTER AND YEAR ENDED 2003 FINANCIAL RESULTS
FORT LAUDERDALE, Fla., February 2, 2004 — Spherion Corporation (NYSE: SFN) today announced financial results for the fourth quarter and year ended December 26, 2003.
Financial results for the fourth quarter and year-ended 2003:
Fourth quarter 2003 revenues were $555.0 million compared with $526.5 million in the fourth quarter of 2002.
The net loss for the three months was ($0.7) million or ($0.01) per share in 2003 and ($277.7) million or ($4.66) per share in 2002.
The loss from continuing operations was ($1.6) million or ($0.03) per share in the fourth quarter 2003 compared with ($274.2) million or ($4.60) per share in the fourth quarter 2002.
Excluding restructuring, goodwill impairment and other charges and gains, adjusted earnings from continuing operations for the fourth quarter were $0.5 million or $0.01 per share in 2003 and $2.6 million or $0.04 per share in 2002.
Revenues in both 2003 and 2002 were $2.1 billion. The net loss for 2003 was ($13.9) million or ($0.23) per share compared with ($903.3) million or ($15.20) per share in 2002.
Spherion president and chief operating officer Roy Krause commented, “U.S. temporary staffing sales trends continued to improve throughout the fourth quarter, increasing our confidence that sales efforts are delivering results and economic conditions impacting our business are steadily improving. Total Company revenue increased 5% on a sequential quarterly basis driven by strength in light industrial and clerical staffing and new account wins.”
Krause continued, “We are pleased that we continue to gain sales momentum, but have further work to do to realize the benefits of the operating leverage that exists within the Company. Today’s business environment of lower gross margins and increasing employment related costs require increased efficiency to produce acceptable returns. Our new operating structure and enterprise-wide information systems will allow us to capitalize on economies of scale in our two principal business lines, which will allow us to deliver higher staffing volume with a lower, more efficient cost structure. Leveraging these operating enhancements to drive profitable revenue growth and increase operating cash flow are our primary objectives in 2004.”
Effective for the fourth quarter 2003, the Company introduced new operating segments as a result of changes to operating management structures. Historical segment information has been restated for 2003 and 2002. Restated information is available on the investor relations page of the Company’s web site at www.spherion.com.
The Staffing Services segment includes clerical and light industrial temporary staffing, permanent placement and managed services that were previously reported primarily under the Recruitment and Outsourcing segments. In the fourth quarter, on an organic basis, the Staffing Services segment revenue was flat year over year. Temporary staffing revenue grew approximately 5.3% from last year, the first year over year growth since 1999, which was offset by declines in technical and call center managed services. Competitive pricing, as well as the growth in lower margin temporary staffing services, resulted in a decline in gross profit margins to 19.1% in 2003 from 22.1% in 2002. Active expense management helped to mitigate the gross profit declines resulting in a fourth quarter segment contribution of 2.4%.
The Professional Services segment includes temporary staffing and permanent placement of employees that specialize in information technology, finance and accounting, administrative, legal and other professional functions. Professional Services performance improved during the fourth quarter, primarily a result of increased sales and profitability in North America. Specifically, the recently combined North American professional recruiting and technology staffing operations increased revenue 2.9% and improved segment contribution by $1.8 million from last year. However, results in Europe and Australia negatively impacted segment profitability due to weak sales performance and gross profit margin erosion, which were a loss of ($2.9) million in the fourth quarter, compared with a loss of ($2.3) million a year ago.
During the fourth quarter, the Company began the front-office rollout and the final phase of the enterprise-wide system implementation. To date approximately 100 locations have successfully been converted to the new system. Based on the current, revised roll-out schedule, the completion of the system implementation is expected early in the third quarter of 2004. The Company anticipates that it will begin to realize productivity improvements and reduce operating expenses in the latter part of 2004 from this technology investment and standardization of business processes.
As previously disclosed, the Company will incur the last of three restructuring charges in the first quarter of 2004, as the system implementation and further integration of several business lines near completion. In the fourth quarter, the Company recorded a pre-tax restructuring charge of approximately $3.2 million primarily 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 first quarter 2004, primarily related to facility consolidation and severance.
Krause commented, “Weekly sales trends in the U.S. staffing business for the first three weeks of January continue to show improvement over the same period last year. Due to seasonal patterns in the business, first quarter revenues have historically been lower than fourth quarter revenues. Additionally, while new pricing programs are helping mitigate the impact of significant state unemployment rate increases and seasonal effect of payroll taxes, we expect to see some gross profit margin decline in the first quarter.”
The Company currently anticipates revenue for the first quarter 2004 will be between $520 and $540 million and the loss from continuing operations will be between ($0.04) and ($0.09) per share. This guidance includes a charge of approximately ($0.03) per share for the restructuring activities expected during the first quarter and assumes a 40% effective tax rate. Excluding the restructuring charge, the Company anticipates that first quarter adjusted loss from continuing operations will be between ($0.01) and ($0.06) per share.
Spherion Corporation is a leader in the staffing industry, providing value-added staffing, and recruiting and workforce solutions. Founded in 1946, with operations in North and Central America, Europe and Asia/Pacific, Spherion helps companies efficiently plan, acquire and optimize talent to improve their bottom line. To learn more, visit www.spherion.com.
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 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 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; Debt Compliance- Failure to meet certain covenant requirements under our credit facility could impact part or all of our availability to borrow; 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 perform under customer contracts 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, goodwill impairment charges 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.