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FORT LAUDERDALE, Fla., April 29 /PRNewswire-FirstCall/ -- Spherion Corporation today announced financial results for the first quarter ended March 29, 2009.
Spherion President and Chief Executive Officer Roy Krause commented, "Over the last two quarters, unprecedented numbers of jobs lost in the economy resulted in significant reductions in customer demand. Despite this environment of lower demand and extreme pricing pressure we generated positive cash flow and reduced our debt by $8 million during the quarter. We continue to respond with strict attention to productivity metrics and simplification of our infrastructure to reduce selling, general & administrative (SG&A) expenses and maximize cash flow."
FINANCIAL HIGHLIGHTS
- First quarter 2009 revenues were $426 million, compared with $576 million last year.
- Loss from continuing operations in the first quarter was $6.5 million, or $0.12 per share, including $0.04 per share in restructuring and other costs, compared with earnings of $2.2 million, or $0.04 per share, in the prior year.
- Adjusted loss from continuing operations in first quarter 2009 was $4.1 million, or $0.08 per share, compared with adjusted earnings in the same prior year period of $2.8 million, or $0.05 per share. Adjusted (loss) earnings from continuing operations exclude restructuring and other charges.
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $0.6 million compared with $13.7 million in the first quarter last year.
- Net debt was $24.0 million at the end of the first quarter, compared with net debt of $31.7 million at the end of 2008. The Company had unused availability on its credit facilities of approximately $55.5 million at the end of the quarter.
Krause continued, "As we exited March and entered April our total company temporary staffing revenue per day trends appeared to be stabilizing, particularly within the Professional Services segment which now represents over 40% of our total revenues. Based upon cost reduction actions taken and with stabilizing trends, we can continue to pay down debt and are better positioned to achieve our 2% EBITDA margin goals for the remaining quarters in 2009."
OPERATING PERFORMANCE
Within Professional Services, first quarter revenues were down 28.5%. Gross profit margins in first quarter 2009 were 26.6% compared with 29.7% in the same prior year period, primarily reflecting the change in mix resulting from a 62.7% decline in permanent placement revenue. Permanent placement revenue made up 2.8% of total Professional Services revenue in the first quarter compared with 5.4% in first quarter 2008. Revenue de-leveraging caused SG&A expenses to increase to 25.1% of revenue in first quarter 2009 compared with 24.3% of revenue in the first quarter last year despite a 26.0% reduction in SG&A . Segment operating profit was $2.7 million or 1.5% of revenue compared with $13.8 million last year or 5.4% of revenue.
Within Staffing Services, year over year revenues in the quarter were down 24.3%. Gross profit margins were 14.2% in first quarter 2009 compared with 16.3% in first quarter 2008, primarily reflecting pay bill spread contraction and lower permanent placement revenue mix. SG&A expenses as a percentage of revenues were 15.9% in first quarter 2009 compared with 16.7% in the same prior year period reflecting a 28.1% reduction in SG&A. Segment operating profit was a loss of $4.1 million or (1.7%) of revenue compared with a loss of $1.4 million or (0.4%) in first quarter 2008.
OTHER ITEMS
The Company recorded restructuring and other charges during the quarter in conjunction with its ongoing plans to adjust operating expenses to anticipated gross profit levels. The $3.8 million charge ($2.3 million after tax, or $0.04 per share) was associated with actions undertaken to reduce operating expenses, and with these reductions the Company's 2009 SG&A run rate is now positioned to be approximately $105 million, or about 23%, below 2008's total SG&A of $450 million. The Company continues to adjust operating expenses based upon customer demand and may incur further restructuring and other charges in 2009.
The Company realigned its operating segments during first quarter 2009. The Recruitment Process Outsourcing and Todays Office Professionals businesses are now reported in Professional Services rather than within Staffing Services. Internal organizational and business strategy changes precipitated these movements. Historical operating segment results reflecting these changes have been posted on the Company's website for the quarters of 2008 and 2007. This information can be accessed in the Investor Relations section of the Spherion website at www.spherion.com.
OUTLOOK
The continuing economic volatility makes it difficult to predict with any certainty the amount of demand that will be seen in the market, and therefore management has elected not to provide revenue and earnings guidance for second quarter 2009. The Company believes that a combination of existing cash balances, operating cash flows and existing revolving lines of credit, taken together, provide adequate resources to fund ongoing operations.
ABOUT SPHERION
Spherion Corporation is a leading recruiting and staffing company that provides integrated solutions and breakout specialties to meet the evolving needs of companies and job candidates. As an industry pioneer for more than 60 years, Spherion has sourced, screened and placed millions of individuals in temporary, temp-to-hire and full-time jobs.
With approximately 630 locations in the United States and Canada, Spherion delivers innovative workforce solutions that improve business performance. Spherion provides its services to approximately 10,000 customers, from Fortune 500 companies to a wide range of small and mid-size organizations. Employing more than 215,000 people annually through its network, Spherion is one of North America's largest employers. Spherion operates under the following brands: Spherion Staffing Services Group for administrative, clerical and light industrial workers; Technisource for technology professionals and solutions; The Mergis Group for accounting and finance and other professional positions; Todays Office Professionals for specialty administrative personnel; and Spherion Recruitment Process Outsourcing. 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 - any significant economic downturn could result in lower revenues or a significant reduction in demand from our customers may result in a material impact on the results of our operations; Customers - a loss of customers may result in a material impact on our results of operations; Debt and debt compliance - market conditions and failure to meet certain requirements could impact our availability to borrow under our revolving lines of credit and the cost of our borrowings; Corporate strategy - we may not achieve the intended effects of our business strategy; Termination provisions - certain contracts contain termination provisions and pricing risks; Failure to perform - our failure or inability to perform under customer contracts could result in damage to our reputation and give rise to legal claims; Acquisitions - managing or integrating past and future acquisitions may strain our resources; Business interruptions - natural disasters or failures with hardware, software or utilities could adversely affect our ability to complete normal business processes; Tax filings - regulatory challenges to our tax filing positions could result in additional taxes; Personnel - our business is dependent upon the availability of qualified personnel and we may lose key personnel which could cause our business to suffer; Litigation - we may be exposed to employment-related claims and costs and we are a defendant in a variety of litigation and other actions from time to time; Government Regulation - government regulation may significantly increase our costs; International operations - we are subject to business risks associated with our operations in Canada, which could make those operations significantly more costly; and Common stock - the price of our common stock may fluctuate significantly, which may result in losses for our investors, and further decreases in the Company's common stock price and market capitalization may impact our ability to comply with the NYSE continued listing standards. 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 from continuing operations is a non-GAAP financial measure, which excludes certain non-operating related charges. Items excluded from the calculation of adjusted earnings from continuing operations include restructuring and other charges related to and other cost reduction initiatives. Adjusted EBITDA from continuing operations is a non-GAAP financial measure which excludes interest, restructuring and other charges, taxes, depreciation and amortization from earnings from continuing operations. Adjusted earnings and adjusted EBITDA from continuing operations are key measures used by management to evaluate its operations. Adjusted earnings and adjusted EBITDA from continuing operations should not be considered measures of financial performance in isolation or as an alternative to revenue growth or earnings 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, and therefore this measure has material limitations. Items excluded from adjusted (loss) earnings from continuing operations are significant components in understanding and assessing financial performance.
SPHERION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
Three Months Ended
------------------
March 29, March 30,
2009 2008
---- ----
Revenues(1) $425,922 $576,463
Cost of services 342,821 448,295
------- -------
Gross profit(2) 83,101 128,168
------ -------
Selling, general and administrative expenses 87,631 119,903
Amortization of intangibles 1,630 2,044
Interest expense 758 1,749
Interest income (53) (179)
Restructuring and other charges 3,799 996
----- ---
93,765 124,513
------ -------
(Loss) earnings from continuing operations
before income taxes (10,664) 3,655
Income tax benefit (expense) 4,211 (1,462)
----- ------
(Loss) earnings from continuing operations (6,453) 2,193
Loss from discontinued operations, net of tax (283) (911)
---- ----
Net (loss) earnings $(6,736) $1,282
======= ======
(Loss) earnings per share, Basic and Diluted:
(Loss) earnings from continuing operations $(0.12) $0.04
Loss from discontinued operations (0.01) (0.02)
----- -----
$(0.13) $0.02
====== =====
Weighted-average shares used in computation
of (loss) earnings per share:
Basic 52,294 55,740
Diluted 52,294 56,303
(1) Includes sales of all company-owned and franchised offices and
royalties on sales of area-based franchised offices.
(2) Gross profit is revenues less temporary employee wages, employment
related taxes such as FICA, federal and state unemployment taxes,
medical and other insurance for temporary employees, workers'
compensation, benefits, billable expenses and other direct costs.
SPHERION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share data)
March 29, December 28,
Assets 2009 2008
---- ----
Current Assets:
Cash and cash equivalents $7,234 $7,601
Receivables, less allowance for doubtful
accounts of $2,322 and $2,978, respectively 245,942 269,203
Deferred tax asset 10,852 11,198
Other current assets 13,661 14,430
------ ------
Total current assets 277,689 302,432
Property and equipment, net of accumulated
depreciation of $127,240 and $128,323
respectively 62,403 67,269
Deferred tax asset 136,372 132,412
Goodwill, trade names and other intangibles, net 64,552 65,856
Other assets 14,973 16,412
------ ------
$555,989 $584,381
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt and
revolving lines of credit $29,544 $37,699
Accounts payable and other accrued expenses 60,917 67,638
Accrued salaries, wages and payroll taxes 49,509 49,888
Accrued insurance reserves 18,810 20,145
Accrued income tax payable 512 1,236
Other current liabilities 11,200 13,234
------ ------
Total current liabilities 170,492 189,840
Long-term debt, net of current portion 1,682 1,646
Accrued insurance reserves 17,342 16,912
Deferred compensation 10,658 12,404
Other long-term liabilities 6,302 7,391
----- -----
Total liabilities 206,476 228,193
------- -------
Stockholders' Equity:
Preferred stock, par value $0.01 per share;
authorized, 2,500,000 shares;
none issued or outstanding - -
Common stock, par value $0.01 per share;
authorized, 200,000,000; issued
65,341,609 shares 653 653
Treasury stock, at cost, 14,780,114 and
13,860,739 shares, respectively (108,467) (106,500)
Additional paid-in capital 852,711 850,653
Accumulated deficit (398,618) (391,882)
Accumulated other comprehensive income 3,234 3,264
----- -----
Total stockholders' equity 349,513 356,188
------- -------
$555,989 $584,381
======== ========
SPHERION CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(unaudited, in thousands, except per share amounts)
Three Months Ended
------------------
March 29, March 30,
2009 2008
---- ----
Adjusted (loss) earnings from continuing operations $(4,139) $2,800
Restructuring and other charges, net of tax benefit (2,314) (607)
------ -----
(Loss) earnings from continuing operations (6,453) 2,193
------ -----
Loss from discontinued operations, net of tax (283) (911)
------- ------
Net (loss) earnings $(6,736) $1,282
======= ======
Per share-Diluted amounts :
Adjusted (loss) earnings from continuing operations $(0.08) $0.05
Restructuring and other charges, net of tax benefit (0.04) (0.01)
----- ----
(Loss) earnings from continuing operations (0.12) 0.04
----- ----
Loss from discontinued operations, net of tax (0.01) (0.02)
------ -----
Net (loss) earnings $(0.13) $0.02
====== =====
Weighted-average shares used in computation
of (loss) earnings per share 52,294 56,303
RECONCILIATION OF ADJUSTED EBITDA TO (LOSS) EARNINGS FROM
CONTINUING OPERATIONS
Three Months Ended
------------------
March 29, March 30,
2009 2008
---- ----
Adjusted EBITDA from continuing operations $627 $13,660
Interest income 53 179
Restructuring and other charges (3,799) (996)
Interest expense (758) (1,749)
Depreciation and amortization (1) (6,787) (7,439)
------- -----
(Loss) earnings from continuing operations
before income taxes (10,664) 3,655
------- -----
Income tax benefit (expense) 4,211 (1,462)
------- ------
(Loss) earnings from continuing operations $(6,453) $2,193
======= ======
Adjusted EBITDA as a percentage of revenue 0.1% 2.4%
(1) Includes depreciation and amortization from continuing operations
only.
SPHERION CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(unaudited, dollar amounts in thousands)
Three Months Ended
--------------------------------
March 29, Dec. 28, March 30,
2009 2008 2008
---- ---- ----
Revenues:
Professional Services $181,772 $206,105 $254,068
Staffing Services 244,150 301,436 322,395
------- ------- -------
Segment revenue $425,922 $507,541 $576,463
======== ======== ========
Gross profit:
Professional Services $48,348 $55,935 $75,580
Staffing Services 34,753 49,166 52,588
------ ------ ------
Segment gross profit $83,101 $105,101 $128,168
======= ======== ========
Segment SG&A:
Professional Services $(45,674) $(48,828) $(61,749)
Staffing Services (38,807) (48,414) (53,938)
------- ------- -------
Segment SG&A $(84,481) $(97,242) $(115,687)
======== ======== =========
Segment operating (loss) profit:
Professional Services $2,674 $7,107 $13,831
Staffing Services (4,054) 752 (1,350)
------ --- ------
Segment operating
(loss) profit (1,380) 7,859 12,481
Unallocated corporate costs (3,150) (4,183) (4,216)
Goodwill and intangible asset
impairment - (149,793) -
Amortization of intangibles (1,630) (2,018) (2,044)
Interest expense (758) (806) (1,749)
Interest income 53 87 179
Restructuring and
other charges (3,799) (9,487) (996)
------ ------ ----
(Loss) earnings from
Continuing operations before
income taxes $(10,664) $(158,341) $3,655
======== ========= ======
MEMO:
Gross profit margin:
Professional Services 26.6% 27.1% 29.7%
Staffing Services 14.2% 16.3% 16.3%
Total Spherion 19.5% 20.7% 22.2%
Segment SG&A:
Professional Services 25.1% 23.7% 24.3%
Staffing Services 15.9% 16.1% 16.7%
Total Spherion 19.8% 19.2% 20.1%
Segment operating (loss)
profit margin:
Professional Services 1.5% 3.4% 5.4%
Staffing Services (1.7%) 0.2% (0.4%)
Total Spherion (0.3%) 1.5% 2.2%
Segment revenue per billing day:
Professional Services $2,863 $3,324 $4,033
Staffing Services $3,845 $4,862 $5,117
Total Spherion (1) $6,707 $8,186 $9,150
Supplemental Cash Flow and
Other Information:
Operating cash flow $11,922 $35,477 $8,263
Capital expenditures $828 $1,716 $2,607
Depreciation and
amortization $6,787 $7,303 $7,439
DSO 53 49 53
Billing Days 63.5 62.0 63.0
(1) Segment Revenue per billing day is calculated
independently for each segment and may not add due to
rounding.
SPHERION CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited, dollar amounts in thousands)
Three Months Ended
--------------------------------------------------
March 29, 2009 December 28, 2008 March 30, 2008
-------------- ----------------- ---------------
Professional Services
Revenues by Skill:
Information
Technology $117,297 $130,057 $158,140
Finance & Accounting 22,431 23,385 28,828
Administration 22,431 28,659 31,932
Other 19,613 24,004 35,168
------ ------ ------
Segment Revenues $181,772 $206,105 $254,068
======== ======== ========
Revenues by Service:
Temporary Staffing
& Other $176,661 $199,404 $240,370
Permanent Placement 5,111 6,701 13,698
----- ----- ------
Segment Revenues $181,772 $206,105 $254,068
======== ======== ========
Gross Profit Margin by
Service:
(As % of Applicable
Revenues)
Temporary Staffing
& Other 24.5% 24.7% 25.7%
Permanent Placement 100.0% 100.0% 100.0%
Total
Professional
Services 26.6% 27.1% 29.7%
Revenues per billing day
by Skill: (1)
Information
Technology $1,847 $2,098 $2,510
Finance & Accounting $353 $377 $458
Administration $353 $462 $507
Other $309 $387 $558
Revenues per billing day
by Service: (1)
Temporary Staffing
& Other $2,782 $3,216 $3,815
Permanent Placement $80 $108 $217
Staffing Services
Revenues by Skill:
Clerical $161,158 $184,267 $192,066
Light Industrial 82,992 117,169 130,329
------ ------- -------
Segment Revenues $244,150 $301,436 $322,395
======== ======== ========
Revenues by Service:
Temporary Staffing
& Other $242,380 $299,122 $317,849
Permanent Placement 1,770 2,314 4,546
----- ----- -----
Segment Revenues $244,150 $301,436 $322,395
======== ======== ========
Gross Profit Margin by
Service:
(As % of Applicable
Revenues)
Temporary Staffing
& Other 13.6% 15.7% 15.1%
Permanent Placement 100.0% 100.0% 100.0%
Total Staffing
Services 14.2% 16.3% 16.3%
Revenues per billing day
by Skill: (1)
Clerical $2,538 $2,972 $3,049
Light Industrial $1,307 $1,890 $2,069
Revenues per billing day
by Service: (1)
Temporary Staffing
& Other $3,817 $4,825 $5,045
Permanent Placement $28 $37 $72
(1) Segment Revenue per billing day is calculated independently for
each segment and may not add due to rounding.
SOURCE: Spherion Corporation
Web site: http://www.spherion.com/
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