Press Release Archive
Investor Contact: Teri Miller
Media Contact: Kip Havel
FOR IMMEDIATE RELEASE
SPHERION ANNOUNCES SECOND QUARTER 2004 FINANCIAL RESULTS
FORT LAUDERDALE, Fla., July 26, 2004 — Spherion Corporation (NYSE: SFN) today announced financial results for the second quarter ended June 25, 2004.
Second quarter 2004 revenues from continuing operations were $496.3 million compared with $425.3 million in the second quarter of 2003, an increase of 16.7%.
The net earnings (loss) for the second quarter were $2.8 million or $0.05 per share in 2004 compared with ($6.5) million or ($0.11) per share in 2003.
Earnings (loss) from continuing operations were $3.2 million or $0.05 per share in the second quarter 2004 compared with ($1.4) million or ($0.02) per share in the second quarter 2003.
Revenues for the first six months of 2004 were $974.8 million compared with $839.4 million for the same period in 2003. The net loss for the six-month period was ($5.3) million or ($0.09) per share in 2004 compared with ($11.3) million or ($0.19) per share in 2003.
Spherion President and Chief Operating Officer Roy Krause commented, “Our trends indicate that our strategic focus on staffing and recruiting and execution of our growth initiatives are resulting in market share gains. Strong revenue growth and increasing operating leverage within the Company have improved profitability. With our breadth of services, the Company is positioned well within the industry and we are encouraged by solid demand, including increasing permanent placement, indicating further improvement in the employment sector.”
Krause continued, “Pricing in both Staffing and Professional Services was stable in the second quarter compared with the first quarter. Gross profit margins for the Company increased slightly on a sequential basis due to a higher mix of professional services revenues, seasonal improvement in payroll taxes and lower workers’ compensation expenses.”
Staffing Services revenue growth in the second quarter increased to 16.6% year over year, driven primarily by light industrial and to a lesser extent clerical temporary staffing. Sequential quarterly improvements in temporary staffing gross profit margins as compared with the first quarter of 2004 were more than offset by declines in managed services, primarily attributable to call center operations. Year over year decreases in segment gross profit margins are primarily a result of higher state unemployment taxes and a shift in service mix toward temporary staffing. The Staffing Services segment operating profit margin was 1.0% in the second quarter 2004 compared with 1.2% in second quarter of 2003.
Professional Services revenue growth increased to 17.2% on a year over year basis in the second quarter 2004, reflecting growth in information technology, finance and accounting on both a temporary staffing and permanent placement basis. Gross profit margins in the second quarter of 2004 were approximately the same as the prior year, reflecting a higher mix of permanent placement revenue which was offset by the cumulative effect of pricing declines experienced during 2003 and increased state unemployment taxes in 2004. Strong revenue growth in both temporary and permanent placement services along with good expense management improved the segment operating margin to 7.6% in the second quarter of 2004 compared with 1.6% in the second quarter of 2003.
The Company continues to implement the final phase of its enterprise-wide information system. To date approximately 380 locations are operating on the new system and the Company continues to expect to be substantially complete with the branch roll-out by the end of the third quarter.
During the second quarter, the Company completed the sale of its staffing operation in The Netherlands and received $2.4 million in cash proceeds. Early in the third quarter, the sale of the Company’s Australian operations was completed and initial proceeds of $14.6 million were received with an additional $3.5 million due in September 2005. The Company currently anticipates that the sale of its staffing operation in the United Kingdom will be completed within the third quarter. All of these businesses are classified as discontinued operations in the accompanying financial statements.
Additionally, early in the third quarter 2004, the Company amended its bank credit facility to expand the facility to $250 million and extend the maturity through 2009. The Company is also calling its $89.6 million of outstanding 4.5% Convertible Notes. Cash on hand, proceeds from the sale of its discontinued operations and borrowings under the amended credit facility will be used to fund the redemption, which is expected to be completed in the third quarter.
Krause commented, “Based on recent weekly sales trends, the Company currently anticipates revenue for the third quarter 2004 will be between $500 and $520 million or growth of 11-16% year over year. Earnings from continuing operations are expected to be between $0.05 and $0.09 per share, assuming an effective tax rate of 42% for the third quarter 2004.”
Spherion Corporation is a leader in the staffing industry in North America, providing value-added staffing, recruiting and workforce solutions. Spherion has helped companies improve their bottom line by efficiently planning, acquiring and optimizing talent since 1946. 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; certain contracts contain termination provisions and pricing risks; the disposition of our discontinued operations may create future liabilities related to contract indemnifications; and managing or integrating any future acquisitions may strain our resources. 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.