Press Release Archive
Investor Contact: Teri Miller
Media Contact: Kip Havel
FOR IMMEDIATE RELEASE
SPHERION ANNOUNCES FIRST QUARTER 2004 FINANCIAL RESULTS
FORT LAUDERDALE, Fla., April 26, 2004 — Spherion Corporation (NYSE: SFN) today announced financial results for the first quarter ended March 26, 2004.
First quarter 2004 revenues from continuing operations were $478.6 million compared with $414.1 million in the first quarter of 2003, an increase of 15.6%.
The net loss for the three months was ($8.1) million or ($0.13) per share in 2004 and ($4.8) million or ($0.08) per share in 2003.
The loss from continuing operations was ($4.0) million or ($0.07) per share in the first quarter 2004 compared with ($2.7) million or ($0.05) per share in the first quarter 2003.
Excluding restructuring and other charges, adjusted earnings (loss) from continuing operations for the first quarter were $1.8 million or $0.03 per share in 2004 and ($2.7) million or ($0.05) per share in 2003.
Spherion President and Chief Operating Officer Roy Krause commented, “Our strategy to focus on recruiting based services in the North American market, the organizational changes we made recently to support that strategy, as well as investments in sales resources, are yielding strong improvements in our business results. Excluding the impact of our Canadian franchise acquisition in 2003, revenue growth from continuing operations was 10.7% year over year, attributable to strong sales execution from both our Staffing and Professional Services segments. Demand for staffing services increased in the first quarter across all skill sets, including information technology, and was fairly broad based throughout North America. Our business trends are encouraging and our internal efforts have positioned us well to benefit from the improving employment market.”
Krause continued, “We are encouraged by the wide spread demand for traditional temporary staffing services, as well as our progress in increasing revenues from some of our higher value managed service offerings. As expected, gross profit margins declined due to dramatic increases in state unemployment taxes in 2004 and the cumulative impact of competitive pricing over the last year. We continue to carefully manage expenses as market demand increases and expect to further improve operating leverage as the business grows.”
As previously announced, the Company plans to divest certain non-core assets, which will allow greater focus on its North American staffing and recruiting operations. The businesses held for sale have been reclassified in the financial statements as discontinued operations. Historical segment information has been restated and is available on the investor relations page of the Company’s web site at www.spherion.com.
Staffing Services revenues increased 10.9% year over year, excluding the impact of the 2003 Canadian franchise acquisition, and the typical seasonal decline in revenues in the first quarter was less than in prior years. Demand continues to be driven primarily by light industrial staffing, but clerical staffing and several areas of the managed services business also improved. In the Staffing Services segment, average pricing was stable as compared with the fourth quarter of 2003. Year over year decreases in temporary staffing gross profit margins were partially offset by a shift in the mix of services toward higher margin managed services and permanent placement revenue. The segment operating profit margin improved to 1.8% in the first quarter 2004.
Professional Services revenue growth on a year over year basis accelerated to 10.2% in the first quarter 2004. This reflects improvements in each skill category, including 10.9% growth in information technology staffing. Gross profit margins declined due to pricing pressure in our largest accounts, growth in technology staffing, which has lower average margins, and increased unemployment taxes. These declines were partially offset by increased permanent placement revenue. Increased volume combined with reduced operating expenses resulted in an improved segment operating profit margin of 2.4%.
The Company continues to implement the final phase of its enterprise-wide system. To date approximately 225 locations have been successfully converted to the new system. The Company anticipates the system implementation will be substantially complete during the third quarter.
As previously announced, the Company recorded restructuring and other charges of $8.9 million on a pre-tax basis for the termination of the employment contract of its former chief executive officer, facility consolidation and severance.
The Company’s discontinued operations consist of staffing operations in Europe and Australia and the court reporting business in the U.S. The loss from discontinued operations includes pre-tax operating losses of $4.8 million and a pre-tax charge of $1.9 million for the estimated loss on disposal of its discontinued operations.
Krause commented, “Weekly sales trends in late March and for the first three weeks of April are showing continued growth versus last year, reflective of new account wins and increased volume at existing accounts. Based on these trends, the Company currently anticipates revenue for the second quarter 2004 will be between $485 and $505 million and earnings from continuing operations will be between $0.03 and $0.07 per share. This compares with revenue of $425.3 million and a loss per share from continuing operations of ($0.02) in the second quarter of 2003. We have also assumed an effective tax rate of 40% for the second 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; 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.