| | Investor Contact: | Randal Atkinson |
| | | (954) 308-7639 |
| | | randalatkinson@spherion.com |
| |
| | Media Contact: | Kip Havel |
| FOR IMMEDIATE RELEASE | | (800) 422-3819 |
| | | kiphavel@spherion.com |
SPHERION ANNOUNCES THIRD QUARTER 2008 FINANCIAL RESULTS
FORT LAUDERDALE, Fla., October 30, 2008 — Spherion Corporation (NYSE: SFN) today announced financial results for the third quarter ended September 28, 2008.
Spherion President and Chief Executive Officer Roy Krause commented, “We continue to focus on executing our strategy, emphasizing higher margin businesses such as Professional Services and Recruitment Outsourcing, while also adjusting our cost structure to reflect anticipated business levels. Based on current economic conditions, we will remain disciplined in our strategy execution, focused on cash flow, and cautious with our cost structure.”
FINANCIAL HIGHLIGHTS
- Third quarter 2008 revenues increased 9.5% year over year, $542 million compared with $495 million last year.
- Earnings from continuing operations in the third quarter were $4.1 million, or $0.08 per share, compared with $9.0 million, or $0.16 per share, in the prior year.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter was $15.4 million compared with $19.6 million in the third quarter last year.
- Revenues for the first nine months of 2008 were $1,682 million compared with $1,436 million for the same period in 2007. Adjusted earnings from continuing operations for the first nine months of 2008 were $11.8 million or $0.22 per share compared with $21.5 million or $0.38 per share for the same period in 2007. EBITDA for the first nine months was $43.7 million compared with $48.2 million for the same period last year.
Krause continued, “We reduced SG&A about $10 million in the third quarter compared with the second quarter, reflecting the final reductions related to the Technisource integration, reduced revenue levels, and other adjustments made in response to economic conditions. We will carefully watch gross profit trends and will continue to adjust our cost structure to maintain appropriate cash flow levels while keeping Spherion positioned to respond positively as the economy improves.”
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OPERATING PERFORMANCE
Within Professional Services, third quarter revenues were up 36.9% due to the 2007 acquisition of Technisource. On an acquisition adjusted comparable basis (i.e., including the acquisitions in the prior year on a pro forma basis) revenues were down 14.9% in the quarter. Professional Services now represent 34% of total revenues, up from 27% in the third quarter of last year. Gross profit margins in the third quarter of 2008 were 29.3% compared with 34.0% in the prior year reflecting the change in mix resulting from the acquisition of Technisource and a greater relative decline of permanent placement revenue. Permanent placement revenue made up 6.4% of total Professional Services revenue in the third quarter compared with 10.4% in the third quarter of 2007. Selling, general and administrative expenses decreased to 24.8% of revenue in the third quarter of 2008 compared with 29.3% of revenue in the third quarter last year. Segment operating profit was $8 .3 million or 4.5% of revenue compared with $6.2 million last year or 4.7% of revenue.
Within Staffing Services, year over year revenues in the quarter were down 0.6% . On an acquisition adjusted comparable basis, adjusting for the acquisition of Todays Office Professionals and several franchise buybacks, revenues were down 9.5% in the quarter compared with last year. Gross profit margins were 18.1% in the third quarter of 2008 compared with 20.4% in the third quarter of 2007. Selling, general and administrative expenses decreased to 16.4% of revenue in the third quarter of 2008 compared with 17.1% of revenue last year. Segment operating profit was $6.1 million or 1.7% of revenue compared with $11.9 million or 3.3% in the third quarter of 2007.
OTHER ITEMS
The tax rate for the quarter was 37.7% . The Company had net debt of $71.3 million and availability on its credit facilities of $94 million at the end of the quarter. Net debt at the end of 2007 was $92.9 million. Capital expenditures during the third quarter were $2.4 million. The Company purchased 1,762,955 shares of its common stock during the third quarter of 2008 at an average price of $5.11 per share.
The Company has now completed all purchases under the Board of Directors’ January, 2008, $25 million repurchase authorization.
OUTLOOK
Spherion’s average daily revenue during the first 3 weeks of October was consistent with the average daily revenue in the third quarter. However, the recent 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 the fourth quarter of 2008. 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 and that operating cash flows in future quarters should allow for debt reductions.
ABOUT SPHERION
Spherion Corporation (NYSE:SFN) 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 700 locations in the United States and Canada, Spherion delivers innovative workforce solutions that improve business performance. Spherion provides its services to more than 8,000 customers, from Fortune 500 companies to a wide range of small and mid-size organizations. Employing more than 300,000 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, visitwww.spherion.com
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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; 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; Disposition of businesses - the disposition of businesses previously so ld may create contractual liabilities associated with indemnifications provided; 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; Common stock – the price of our common stock may fluctuate significantly, which may result in losses for our investors; Government Regulation - government regulation may increase our costs; International operations – we are subject to business risks associated with our operations in Canada which could make those operations more costly; Integrating acquisitions -managing or integrating any future acquisitions may strain our resources; and Debt compliance – failure to meet certain covenant requirements under our credit facility could impact part or all of our availability to borrow, and could impact our ability to continue purchasing Company stock under any authorized program. 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). Organic revenue growth is a non-GAAP financial measure, which includes pro-forma revenues of acquired companies. 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 interest expense related to adjustment of the Canadian purchase liability, restructuring and other charges related to acquisitions, and a tax valuation allowance adjustment. EBITDA from continuing operations is a non-GAAP financial measure which excludes interest, taxes, depreciation and amortization from earnings from continuing operations. Organic growth, adjusted earnings and EBITDA from continuing operations are key measures used by management to evaluate its operations. Management includes r evenues prior to acquisition date for acquired companies in the organic revenue growth calculation in order to evaluate the Company’s operating performance. Organic growth, adjusted earnings and 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 Earnings 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 earnings from continuing operations are significant components in understanding and assessing financial performance.
7
| SPHERION CORPORATION AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
| (unaudited, in thousands, except per share amounts) |
| |
| | Three Months Ended |
| | September 28, | | September 30, |
| | 2008 | | 2007 |
| Revenues(1) | $ | 542,175 | | | $ | 495,168 | |
| Cost of services(2) | | 423,628 | | | | 376,164 | |
| Gross profit | | 118,547 | | | | 119,004 | |
| Selling, general and administrative expenses | | 108,412 | | | | 104,767 | |
| Amortization of intangibles | | 2,037 | | | | 290 | |
| Interest expense | | 1,573 | | | | 259 | |
| Interest income | | (69 | ) | | | (1,285 | ) |
| | | 111,953 | | | | 104,031 | |
| |
| Earnings from continuing operations before income taxes | | 6,594 | | | | 14,973 | |
| Income tax expense | | (2,486 | ) | | | (5,989 | ) |
| |
| Earnings from continuing operations | | 4,108 | | | | 8,984 | |
| Earnings from discontinued operations, net of tax | | 56 | | | | 497 | |
| Net earnings | $ | 4,164 | | | $ | 9,481 | |
| |
| |
| |
| Earnings per share, Basic and Diluted: | | | | | | | |
| Earnings from continuing operations | $ | 0.08 | | | $ | 0.16 | |
| Earnings from discontinued operations | | - | | | | 0.01 | |
| | $ | 0.08 | | | $ | 0.17 | |
| |
| Weighted-average shares used in computation of earnings per share: | | | | | | | |
| Basic | | 52,336 | | | | 56,072 | |
| Diluted | | 52,873 | | | | 56,749 | |
| (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. |
| |
8
| SPHERION CORPORATION AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
| (unaudited, in thousands, except per share amounts) |
| |
| | Nine Months Ended |
| | September 28, | | September 30, |
| | 2008 | | 2007 |
| Revenues(1) | $ | 1,681,615 | | | $ | 1,435,514 | |
| Cost of services(2) | | 1,304,713 | | | | 1,092,129 | |
| Gross profit | | 376,902 | | | | 343,385 | |
| Selling, general and administrative expenses | | 347,190 | | | | 311,829 | |
| Amortization of intangibles | | 6,124 | | | | 538 | |
| Interest expense | | 4,897 | | | | 2,591 | |
| Interest income | | (320 | ) | | | (3,762 | ) |
| Restructuring and other charges | | 1,940 | | | | - | |
| | | 359,831 | | | | 311,196 | |
| |
| Earnings from continuing operations before income taxes | | 17,071 | | | | 32,189 | |
| Income tax expense | | (5,421 | ) | | | (13,069 | ) |
| |
| Earnings from continuing operations | | 11,650 | | | | 19,120 | |
| Loss from discontinued operations, net of tax | | (3,898 | ) | | | (3,621 | ) |
| Net earnings | $ | 7,752 | | | $ | 15,499 | |
| |
| |
| |
| Earnings per share, Basic: | | | | | | | |
| Earnings from continuing operations | $ | 0.22 | | | $ | 0.34 | |
| Loss from discontinued operations | | (0.07 | ) | | | (0.06 | ) |
| | $ | 0.14 | | | $ | 0.28 | |
| |
| Earnings per share, Diluted:(3) | | | | | | | |
| Earnings from continuing operations | $ | 0.21 | | | $ | 0.34 | |
| Loss from discontinued operations | | (0.07 | ) | | | (0.06 | ) |
| | $ | 0.14 | | | $ | 0.27 | |
| |
| Weighted-average shares used in computation of earnings per share: | | | | | | | |
| Basic | | 54,143 | | | | 56,321 | |
| Diluted | | 54,668 | | | | 56,978 | |
| (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. |
|
| (3) | Earnings per share amounts are calculated independently for each component and may not add due to rounding. |
| |
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| SPHERION CORPORATION AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (unaudited, in thousands, except share data) |
| |
| |
| |
| | September 28, | | December 30, |
| Assets | 2008 | | 2007 |
| Current Assets: | | | | | | | |
| Cash and cash equivalents | $ | 14,002 | | | $ | 15,324 | |
| Receivables, less allowance for doubtful accounts of $3,866 and $6,523, respectively | | 310,766 | | | | 347,908 | |
| Deferred tax asset | | 10,164 | | | | 13,413 | |
| Insurance deposit | | 524 | | | | 6,986 | |
| Other current assets | | 22,667 | | | | 22,606 | |
| Total current assets | | 358,123 | | | | 406,237 | |
| Goodwill | | 145,706 | | | | 146,584 | |
| Property and equipment, net of accumulated depreciation of $124,001 | | | | | | | |
| and $109,229 respectively | | 69,718 | | | | 78,077 | |
| Deferred tax asset | | 103,022 | | | | 102,024 | |
| Trade names and other intangibles, net | | 70,670 | | | | 76,776 | |
| Insurance deposit | | - | | | | 11,259 | |
| Other assets | | 21,871 | | | | 23,861 | |
| | $ | 769,110 | | | $ | 844,818 | |
| |
| Liabilities and Stockholders' Equity | | | | | | | |
| Current Liabilities: | | | | | | | |
| Current portion of long-term debt and revolving lines of credit | $ | 83,176 | | | $ | 86,035 | |
| Accounts payable and other accrued expenses | | 69,966 | | | | 79,779 | |
| Accrued salaries, wages and payroll taxes | | 65,682 | | | | 78,850 | |
| Accrued insurance reserves | | 20,173 | | | | 19,174 | |
| Accrued income tax payable | | 662 | | | | 1,042 | |
| Other current liabilities | | 5,366 | | | | 16,419 | |
| Total current liabilities | | 245,025 | | | | 281,299 | |
| Long-term debt, net of current portion | | 2,126 | | | | 22,148 | |
| Accrued insurance reserves | | 16,379 | | | | 20,501 | |
| Deferred compensation | | 16,278 | | | | 17,287 | |
| Other long-term liabilities | | 4,059 | | | | 2,923 | |
| Total liabilities | | 283,867 | | | | 344,158 | |
| 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, 13,872,796 and 9,443,034 shares, respectively | | (106,909 | ) | | | (83,681 | ) |
| Additional paid-in capital | | 849,928 | | | | 848,628 | |
| Accumulated deficit | | (265,641 | ) | | | (273,393 | ) |
| Accumulated other comprehensive income | | 7,212 | | | | 8,453 | |
| Total stockholders' equity | | 485,243 | | | | 500,660 | |
| | $ | 769,110 | | | $ | 844,818 | |
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| SPHERION CORPORATION AND SUBSIDIARIES |
| RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION |
| (unaudited, in thousands, except per share amounts) |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 28, | | September 30, | | September 28, | | September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| Adjusted earnings from continuing operations | $ | 4,108 | | | $ | 9,019 | | | $ | 11,767 | | | $ | 21,466 | |
| | | | | | | | | | | | | | | | |
| Adjustment of tax valuation allowance | | - | | | | - | | | | 1,064 | | | | - | |
| | | | | | | | | | | | | | | | |
| Adjustment of Canadian Acquisition | | - | | | | (35 | ) | | | - | | | | (2,346 | ) |
| | | | | | | | | | | | | | | | |
| Restructuring and other charges, net of tax benefit | | - | | | | - | | | | (1,181 | ) | | | - | |
| | | | | | | | | | | | | | | | |
| Earnings from continuing operations | | 4,108 | | | | 8,984 | | | | 11,650 | | | | 19,120 | |
| | | | | | | | | | | | | | | | |
| Loss from discontinued operations, net of tax | | 56 | | | | 497 | | | | (3,898 | ) | | | (3,621 | ) |
| | | | | | | | | | | | | | | | |
| Net earnings | $ | 4,164 | | | $ | 9,481 | | | $ | 7,752 | | | $ | 15,499 | |
| |
| Per share-Diluted amounts :(1) | | | | | | | | | | | | | | | |
| Adjusted earnings from continuing operations | $ | 0.08 | | | $ | 0.16 | | | $ | 0.22 | | | $ | 0.38 | |
| | | | | | | | | | | | | | | | |
| Adjustment of tax valuation allowance | | - | | | | - | | | | 0.02 | | | | - | |
| | | | | | | | | | | | | | | | |
| Adjustment of Canadian Acquisition | | - | | | | - | | | | - | | | | (0.04 | ) |
| | | | | | | | | | | | | | | | |
| Restructuring and other charges, net of tax benefit | | - | | | | - | | | | (0.02 | ) | | | - | |
| | | | | | | | | | | | | | | | |
| Earnings from continuing operations | | 0.08 | | | | 0.16 | | | | 0.21 | | | | 0.34 | |
| | | | | | | | | | | | | | | | |
| Earnings (loss) from discontinued operations, net of tax | | - | | | | 0.01 | | | | (0.07 | ) | | | (0.06 | ) |
| | | | | | | | | | | | | | | | |
| Net earnings | $ | 0.08 | | | $ | 0.17 | | | $ | 0.14 | | | $ | 0.27 | |
| |
| Diluted weighted-average shares used in computation of earnings per share | | 52,873 | | | | 56,749 | | | | 54,668 | | | | 56,978 | |
| |
| (1)Earnings per share amounts are calculated independently for each component and may not add due to rounding. |
| |
| RECONCILIATION OF EBITDA TO EARNINGS FROM CONTINUING OPERATIONS |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 28, | | September 30, | | September 28, | | September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| EBITDA from continuing operations | $ | 15,426 | | | $ | 19,584 | | | $ | 43,718 | | | $ | 48,202 | |
| | | | | | | | | | | | | | | | |
| Interest income | | 69 | | | | 1,285 | | | | 320 | | | | 3,762 | |
| | | | | | | | | | | | | | | | |
| Interest expense | | (1,573 | ) | | | (259 | ) | | | (4,897 | ) | | | (2,591 | ) |
| | | | | | | | | | | | | | | | |
| Depreciation and amortization(2) | | (7,328 | ) | | | (5,637 | ) | | | (22,070 | ) | | | (17,184 | ) |
| | | | | | | | | | | | | | | | |
| Earnings from continuing operations before income taxes | | 6,594 | | | | 14,973 | | | | 17,071 | | | | 32,189 | |
| | | | | | | | | | | | | | | | |
| Income tax expense | | (2,486 | ) | | | (5,989 | ) | | | (5,421 | ) | | | (13,069 | ) |
| | | | | | | | | | | | | | | | |
| Earnings from continuing operations | $ | 4,108 | | | $ | 8,984 | | | $ | 11,650 | | | $ | 19,120 | |
| |
| EBITDA as a percentage of revenue | | 2.8 | % | | | 4.0 | % | | | 2.6 | % | | | 3.4 | % |
|
| (2)Includes depreciation and amortization from continuing operations only. |
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| SPHERION CORPORATION AND SUBSIDIARIES |
| RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION |
| (unaudited) |
| |
| RECONCILIATION OF YEAR-OVER-YEAR ORGANIC(1)REVENUE GROWTH |
| |
| | Three Months Ended | | Nine Months Ended | | | |
| | September 28, 2008 | | September 28, 2008 | | | |
| | Total | | Professional | | Staffing | | Total | | Professional | | Staffing | | | |
| | Company | | Services | | Services | | Company | | Services | | Services | | | |
| Organic revenue growth | (11.4 | %) | | (14.9 | %) | | (9.5 | %) | | (5.6 | %) | | (6.7 | %) | | (5.1 | %) | | | |
| Impact of acquisitions and business reclassifications | 20.9 | % | | 51.8 | % | | 8.9 | % | | 22.7 | % | | 56.2 | % | | 10.1 | % | | | |
| GAAP revenue growth | 9.5 | % | | 36.9 | % | | (0.6 | %) | | 17.1 | % | | 49.5 | % | | 5.0 | % | | | |
| |
| |
| | Three Months Ended September 28, 2008 |
| | Revenue Growth Rate by Skill | | Revenue Growth Rate by Service |
| | Total | | Information | | Finance & | | | | Total | | Permanent | | Temporary |
| Professional Services | Professional | | Technology | | Accounting | | Other | | Professional | | Placement | | Staffing(2) |
| Organic revenue growth | (14.9 | %) | | (16.4 | %) | | (10.5 | %) | | (8.1 | %) | | (14.9 | %) | | (22.6 | %) | | (14.3 | %) |
| Impact of acquisitions and business reclassifications | 51.8 | % | | 76.8 | % | | 6.0 | % | | (4.3 | %) | | 51.8 | % | | 7.1 | % | | 57.3 | % |
| GAAP revenue growth | 36.9 | % | | 60.4 | % | | (4.5 | %) | | (12.4 | %) | | 36.9 | % | | (15.5 | %) | | 43.0 | % |
| |
| |
| | Nine Months Ended September 28, 2008 |
| | Revenue Growth Rate by Skill | | Revenue Growth Rate by Service |
| | Total | | Information | | Finance & | | | | Total | | Permanent | | Temporary |
| Professional Services | Professional | | Technology | | Accounting | | Other | | Professional | | Placement | | Staffing(2) |
| Organic revenue growth | (6.7 | %) | | (8.4 | %) | | (4.5 | %) | | 6.0 | % | | (6.7 | %) | | (13.2 | %) | | (6.2 | %) |
| Impact of acquisitions and business reclassifications | 56.2 | % | | 83.1 | % | | 6.9 | % | | (3.8 | %) | | 56.2 | % | | 7.7 | % | | 62.5 | % |
| GAAP revenue growth | 49.5 | % | | 74.7 | % | | 2.4 | % | | 2.2 | % | | 49.5 | % | | (5.5 | %) | | 56.3 | % |
| |
| |
| | Three Months Ended September 28, 2008 |
| | Revenue Growth Rate by Skill | | Revenue Growth Rate by Service |
| | Total | | | | Light | | Total | | Permanent | | Temporary | | Managed |
| Staffing Services | Staffing | | Clerical | | Industrial | | Staffing | | Placement | | Staffing(2) | | Services(2) |
| Organic revenue growth | (9.5 | %) | | (4.9 | %) | | (17.0 | %) | | (9.5 | %) | | (45.5 | %) | | (9.0 | %) | | (8.4 | %) |
| Impact of acquisitions and business reclassifications | 8.9 | % | | 11.2 | % | | 5.9 | % | | 8.9 | % | | 7.4 | % | | 13.1 | % | | (18.3 | %) |
| GAAP revenue growth | (0.6 | %) | | 6.3 | % | | (11.1 | %) | | (0.6 | %) | | (38.1 | %) | | 4.1 | % | | (26.7 | %) |
| |
| |
| | Nine Months Ended September 28, 2008 |
| | Revenue Growth Rate by Skill | | Revenue Growth Rate by Service |
| | Total | | | | Light | | Total | | Permanent | | Temporary | | Managed |
| Staffing Services | Staffing | | Clerical | | Industrial | | Staffing | | Placement | | Staffing(2) | | Services(2) |
| Organic revenue growth | (5.1 | %) | | (3.3 | %) | | (8.2 | %) | | (5.1 | %) | | (34.2 | %) | | (4.9 | %) | | (1.2 | %) |
| Impact of acquisitions and business reclassifications | 10.1 | % | | 12.3 | % | | 6.6 | % | | 10.1 | % | | 8.8 | % | | 14.8 | % | | (20.6 | %) |
| GAAP revenue growth | 5.0 | % | | 9.0 | % | | (1.6 | %) | | 5.0 | % | | (25.4 | %) | | 9.9 | % | | (21.8 | %) |
| (1) | Organic revenue growth is calculated assuming that all acquisitions were consummated on January 1, 2007. This calculation has the effect of adding revenues for the acquired businesses prior to their acquisition dates to Spherion Corporation's reported revenues. In addition, organic revenue growth is calculated assuming that business reclassifications were effective on January 1, 2007, so that revenues for this business are included in the same segment, skill and service in the current and prior for purposes of calculating year over year growth. |
|
|
|
| (2) | Effective with the first quarter of 2008, the management of certain customer contracts was transferred between operating segments, primarily to Professional Services from Staffing Services, and has been adjusted for purposes of calculating organic growth. |
| |
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| SPHERION CORPORATION AND SUBSIDIARIES |
| SEGMENT INFORMATION |
| (unaudited, dollar amounts in thousands) |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 28, | | September 30, | | June 29, | | September 28, | | September 30, |
| | 2008 | | 2007 | | 2008 | | 2008 | | 2007 |
| Revenues: | | | | | | | | | | | | | | | | | | | |
| Professional Services | $ | 181,908 | | | $ | 132,906 | | | $ | 197,356 | | | $ | 583,717 | | | $ | 390,369 | |
| Staffing Services | | 360,267 | | | | 362,262 | | | | 365,621 | | | | 1,097,898 | | | | 1,045,145 | |
| Segment revenue | $ | 542,175 | | | $ | 495,168 | | | $ | 562,977 | | | $ | 1,681,615 | | | $ | 1,435,514 | |
| |
| Gross profit: | | | | | | | | | | | | | | | | | | | |
| Professional Services | $ | 53,314 | | | $ | 45,149 | | | $ | 60,884 | | | $ | 173,650 | | | $ | 132,284 | |
| Staffing Services | | 65,233 | | | | 73,855 | | | | 69,303 | | | | 203,252 | | | | 211,101 | |
| Segment gross profit | $ | 118,547 | | | $ | 119,004 | | | $ | 130,187 | | | $ | 376,902 | | | $ | 343,385 | |
| |
| Segment SG&A expenses: | | | | | | | | | | | | | | | | | | | |
| Professional Services | $ | (45,064 | ) | | $ | (38,958 | ) | | $ | (49,009 | ) | | $ | (142,837 | ) | | $ | (112,128 | ) |
| Staffing Services | | (59,099 | ) | | | (61,933 | ) | | | (65,802 | ) | | | (191,824 | ) | | | (187,724 | ) |
| Segment SG&A | $ | (104,163 | ) | | $ | (100,891 | ) | | $ | (114,811 | ) | | $ | (334,661 | ) | | $ | (299,852 | ) |
| |
| Segment operating profit: | | | | | | | | | | | | | | | | | | | |
| Professional Services | $ | 8,250 | | | $ | 6,191 | | | $ | 11,875 | | | $ | 30,813 | | | $ | 20,156 | |
| Staffing Services | | 6,134 | | | | 11,922 | | | | 3,501 | | | | 11,428 | | | | 23,377 | |
| Segment operating profit | | 14,384 | | | | 18,113 | | | | 15,376 | | | | 42,241 | | | | 43,533 | |
| |
| Unallocated corporate costs | | (4,249 | ) | | | (3,876 | ) | | | (4,064 | ) | | | (12,529 | ) | | | (11,977 | ) |
| Amortization of intangibles | | (2,037 | ) | | | (290 | ) | | | (2,043 | ) | | | (6,124 | ) | | | (538 | ) |
| Interest expense | | (1,573 | ) | | | (259 | ) | | | (1,575 | ) | | | (4,897 | ) | | | (2,591 | ) |
| Interest income | | 69 | | | | 1,285 | | | | 72 | | | | 320 | | | | 3,762 | |
| Restructuring and other charges | | - | | | | - | | | | (944 | ) | | | (1,940 | ) | | | - | |
| |
| Earnings from continuing operations before income taxes | $ | 6,594 | | | $ | 14,973 | | | $ | 6,822 | | | $ | 17,071 | | | $ | 32,189 | |
| |
| MEMO: | | | | | | | | | | | | | | | | | | | |
| Gross profit margin: | | | | | | | | | | | | | | | | | | | |
| Professional Services | | 29.3 | % | | | 34.0 | % | | | 30.8 | % | | | 29.7 | % | | | 33.9 | % |
| Staffing Services | | 18.1 | % | | | 20.4 | % | | | 19.0 | % | | | 18.5 | % | | | 20.2 | % |
| Total Spherion | | 21.9 | % | | | 24.0 | % | | | 23.1 | % | | | 22.4 | % | | | 23.9 | % |
| |
| Segment SG&A: | | | | | | | | | | | | | | | | | | | |
| Professional Services | | 24.8 | % | | | 29.3 | % | | | 24.8 | % | | | 24.5 | % | | | 28.7 | % |
| Staffing Services | | 16.4 | % | | | 17.1 | % | | | 18.0 | % | | | 17.5 | % | | | 18.0 | % |
| Total Spherion | | 19.2 | % | | | 20.4 | % | | | 20.4 | % | | | 19.9 | % | | | 20.9 | % |
| |
| Segment operating profit margin: | | | | | | | | | | | | | | | | | | | |
| Professional Services | | 4.5 | % | | | 4.7 | % | | | 6.0 | % | | | 5.3 | % | | | 5.2 | % |
| Staffing Services | | 1.7 | % | | | 3.3 | % | | | 1.0 | % | | | 1.0 | % | | | 2.2 | % |
| Total Spherion | | 2.7 | % | | | 3.7 | % | | | 2.7 | % | | | 2.5 | % | | | 3.0 | % |
| |
| Segment revenue per billing day: | | | | | | | | | | | | | | | | | | | |
| Professional Services | $ | 2,887 | | | $ | 2,110 | | | $ | 3,084 | | | $ | 3,072 | | | $ | 2,044 | |
| Staffing Services | $ | 5,719 | | | $ | 5,750 | | | $ | 5,713 | | | $ | 5,778 | | | $ | 5,472 | |
| Total Spherion | $ | 8,606 | | | $ | 7,860 | | | $ | 8,797 | | | $ | 8,851 | | | $ | 7,516 | |
| |
| Supplemental Cash Flow and Other Information: | | | | | | | | | | | | | | | | | | | |
| Operating cash flow | $ | 6,754 | | | $ | 11,232 | | | $ | 28,377 | | | $ | 43,706 | | | $ | 36,262 | |
| Capital expenditures | $ | 2,418 | | | $ | 2,051 | | | $ | 2,256 | | | $ | 7,281 | | | $ | 6,006 | |
| Depreciation and amortization | $ | 7,328 | | | $ | 5,637 | | | $ | 7,303 | | | $ | 22,070 | | | $ | 17,184 | |
| DSO | | 53 | | | | 53 | | | | 52 | | | | 53 | | | | 53 | |
| Billing Days | | 63 | | | | 63 | | | | 64 | | | | 190 | | | | 191 | |
13
| SPHERION CORPORATION AND SUBSIDIARIES |
| SUPPLEMENTAL FINANCIAL INFORMATION |
| (unaudited, dollar amounts in thousands) |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 28, 2008 | | September 30, 2007 | | June 29, 2008 | | September 28, 2008 | | September 30, 2007 |
| Professional Services | | | | | | | | | | | | | | | | | | | |
| Revenue by Skill: | | | | | | | | | | | | | | | | | | | |
| Information Technology | $ | 139,614 | | | $ | 87,053 | | | $ | 148,925 | | | $ | 444,946 | | | $ | 254,722 | |
| Finance & Accounting | | 25,758 | | | | 26,980 | | | | 29,584 | | | | 84,170 | | | | 82,209 | |
| Other | | 16,536 | | | | 18,873 | | | | 18,847 | | | | 54,601 | | | | 53,438 | |
| Segment Revenue | $ | 181,908 | | | $ | 132,906 | | | $ | 197,356 | | | $ | 583,717 | | | $ | 390,369 | |
| |
| Revenue by Service: | | | | | | | | | | | | | | | | | | | |
| Temporary Staffing (1) | $ | 170,216 | | | $ | 119,071 | | | $ | 181,913 | | | $ | 543,432 | | | $ | 347,747 | |
| Permanent Placement | | 11,692 | | | | 13,835 | | | | 15,443 | | | | 40,285 | | | | 42,622 | |
| Segment Revenue | $ | 181,908 | | | $ | 132,906 | | | $ | 197,356 | | | $ | 583,717 | | | $ | 390,369 | |
| |
| Gross Profit Margin by Service: | | | | | | | | | | | | | | | | | | | |
| (As % of Applicable Revenue) | | | | | | | | | | | | | | | | | | | |
| Temporary Staffing | | 24.5 | % | | | 26.3 | % | | | 25.0 | % | | | 24.5 | % | | | 25.8 | % |
| Permanent Placement | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| Total Professional Services | | 29.3 | % | | | 34.0 | % | | | 30.8 | % | | | 29.7 | % | | | 33.9 | % |
| |
| Revenue per billing day by Skill: | | | | | | | | | | | | | | | | | | | |
| Information Technology | $ | 2,216 | | | $ | 1,382 | | | $ | 2,327 | | | $ | 2,342 | | | $ | 1,334 | |
| Finance & Accounting | $ | 409 | | | $ | 428 | | | $ | 462 | | | $ | 443 | | | $ | 430 | |
| Other | $ | 262 | | | $ | 300 | | | $ | 294 | | | $ | 287 | | | $ | 280 | |
| |
| Revenue per billing day by Service: | | | | | | | | | | | | | | | | | | | |
| Temporary Staffing | $ | 2,702 | | | $ | 1,890 | | | $ | 2,842 | | | $ | 2,860 | | | $ | 1,821 | |
| Permanent Placement | $ | 186 | | | $ | 220 | | | $ | 241 | | | $ | 212 | | | $ | 223 | |
| |
| Staffing Services | | | | | | | | | | | | | | | | | | | |
| Revenue by Skill: | | | | | | | | | | | | | | | | | | | |
| Clerical | $ | 233,393 | | | $ | 219,546 | | | $ | 239,743 | | | $ | 714,817 | | | $ | 655,890 | |
| Light Industrial | | 126,874 | | | | 142,716 | | | | 125,878 | | | | 383,081 | | | | 389,255 | |
| Segment Revenue | $ | 360,267 | | | $ | 362,262 | | | $ | 365,621 | | | $ | 1,097,898 | | | $ | 1,045,145 | |
| |
| Revenue by Service: | | | | | | | | | | | | | | | | | | | |
| Temporary Staffing | $ | 322,455 | | | $ | 309,739 | | | $ | 325,683 | | | $ | 975,999 | | | $ | 888,399 | |
| Managed Services (1) | | 34,074 | | | | 46,480 | | | | 35,775 | | | | 108,904 | | | | 139,320 | |
| Permanent Placement | | 3,738 | | | | 6,043 | | | | 4,163 | | | | 12,995 | | | | 17,426 | |
| Segment Revenue | $ | 360,267 | | | $ | 362,262 | | | $ | 365,621 | | | $ | 1,097,898 | | | $ | 1,045,145 | |
| |
| Gross Profit Margin by Service: | | | | | | | | | | | | | | | | | | | |
| (As % of Applicable Revenue) | | | | | | | | | | | | | | | | | | | |
| Temporary Staffing | | 16.1 | % | | | 17.3 | % | | | 16.9 | % | | | 16.2 | % | | | 17.0 | % |
| Managed Services | | 28.4 | % | | | 30.4 | % | | | 28.5 | % | | | 29.7 | % | | | 30.5 | % |
| Permanent Placement | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| Total Staffing Services | | 18.1 | % | | | 20.4 | % | | | 19.0 | % | | | 18.5 | % | | | 20.2 | % |
| |
| Revenue per billing day by Skill: | | | | | | | | | | | | | | | | | | | |
| Clerical | $ | 3,705 | | | $ | 3,485 | | | $ | 3,746 | | | $ | 3,762 | | | $ | 3,434 | |
| Light Industrial | $ | 2,014 | | | $ | 2,265 | | | $ | 1,967 | | | $ | 2,016 | | | $ | 2,038 | |
| |
| Revenue per billing day by Service: | | | | | | | | | | | | | | | | | | | |
| Temporary Staffing | $ | 5,118 | | | $ | 4,916 | | | $ | 5,089 | | | $ | 5,137 | | | $ | 4,651 | |
| Managed Services | $ | 541 | | | $ | 738 | | | $ | 559 | | | $ | 573 | | | $ | 729 | |
| Permanent Placement | $ | 59 | | | $ | 96 | | | $ | 65 | | | $ | 68 | | | $ | 91 | |
| | | | | | | | | | | | | | | | | | | |
| (1) Effective with the first quarter of 2008, the management of certain customer contracts was transferred to Professional Services from Staffing Services. This change is being reported on a prospective basis. | |
14
