Press Room

Financial Highlights

• First quarter 2005 revenues were $505.5 million compared with $467.2 million in the first quarter of 2004, an increase of 8.2%. 
• Net loss for the first quarter of 2005 was ($1.2) million or ($0.02) per share, compared with ($8.1) million or ($0.13) per share in the first quarter of 2004.
• Earnings from continuing operations were $1.0 million or $0.02 per share in the first quarter 2005. This compares with a loss of ($4.2) million or ($0.07) per share in the first quarter of 2004.
• Adjusted earnings from continuing operations, which excludes restructuring and other charges in both periods, were $2.1 million or $0.03 per diluted share for the first quarter of 2005 and $1.6 million or $0.03 per share in the first quarter of 2004.

Spherion President and Chief Executive Officer Roy Krause commented, “Our year over year growth trends, although a bit slower than recent quarters, were consistent with the North American market.  Revenue growth in key customer segments, coupled with gross profit margin improvement is indicative of good progress on key 2005 business initiatives.”

Krause continued, “In addition to solid growth and gross profit margin improvements, we spent considerable effort on operational effectiveness and business process improvements as evidenced by operating cash flow of over $20 million for the first quarter driven primarily by a three-day reduction in our DSO from December.”

Operating Performance
Staffing Services first quarter revenue increased by 7.5% year over year, with continued strength in temporary staffing trends, led by strong growth in clerical temporary staffing. Growth in temporary staffing was partially offset by lower revenues in managed services. Total segment gross profit margins in Staffing Services were 18.3% in the first quarter of 2005 compared with 19.1% in the first quarter of 2004. Temporary staffing gross profit margins improved year over year due to pricing increases and lower worker’s compensation costs. However, these improvements were offset by comparatively lower revenue and gross profit margin in managed services. Selling, general and administrative costs were approximately flat as a percentage of revenue in the first quarter 2005 compared with the same period in the prior year. Segment operating profit of $3.4 million for the first quarter 2005 or 0.8% of revenue decreased from $6.7 million and 1.8% of revenue in the first quarter of 2004.

Professional Services revenue growth was 11.1% on a year over year basis in the first quarter 2005, driven by particular strength in finance and accounting temporary staffing. Gross profit margins in the first quarter of 2005 were 30.6%, an increase of 110 basis points compared with the first quarter of 2004, reflecting improved temporary staffing margins and a higher mix of permanent placement revenue. Temporary staffing gross profit margins were higher than the same period last year due primarily to lower employee benefit costs. Selling, general and administrative expenses increased slightly to 27.2% of segment revenue in the first quarter from 27.0% last year reflecting continued investment in sales and recruiting staff in the business. Segment operating profit was $3.5 million or 3.4% of revenue in the first quarter of 2005 compared with $2.3 million or 2.4% in the first quarter of 2004.

Other Items
The Company recorded restructuring charges of approximately $1.9 million for severance related costs to eliminate certain positions following the previously announced termination of a customer contract and other changes within the managed services portion of its Staffing Services segment.

Outlook
Krause commented, “Based on recent sales trends, which slowed a bit in March and April, the Company currently anticipates revenue for the second quarter of 2005 will be between $480 and $500 million, including the impact of the recently transitioned managed service contract. Earnings from continuing operations are expected to be between $0.01 and $0.05 per share.”

About Spherion
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.

Spherion Corporation and Subsidiaries Financial Statements

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; Technology investments – our investment in technology initiatives may not yield their intended results; Debt compliance – failure to meet certain covenant requirements under our credit facility could impact part or all of our availability to borrow; Disposition of businesses - the disposition of businesses previously sold, or in the process of being sold, may create future liabilities related to contract indemnifications; Termination provisions - certain contracts contain termination provisions and pricing risks; Tax filings – regulatory challenges to our tax filing positions could result in additional taxes; Corporate strategy – we may not achieve the intended effect of our business strategy; 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 - business risks associated with international operations could make those operations more costly; government regulation may increase our costs; failure or inability to perform under customer contracts could result in damage to our reputation and give rise to legal claims; our business is dependent upon the availability of qualified personnel; 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, 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.