EXHIBIT 99.1
FOR FURTHER INFORMATION:
AT THE COMPANY: AT FINANCIAL RELATIONS BOARD
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Bob Ende General Info: Marilynn Meek (212) 445-8451
Senior Vice President - Finance Investor Info: Susan Garland (212) 445-8458
COMFORCE Corporation
(516) 437-3300
bende@comforce.com
FOR IMMEDIATE RELEASE
August 5, 2004
COMFORCE CORPORATION ANNOUNCES
SECOND QUARTER 2004 RESULTS
Revenues Rise 32.3% for Quarter and 29.3% for Six Months Over Prior Year
Woodbury, NY - August 5, 2004 -- COMFORCE Corporation (AMEX: CFS) a leading
provider of high-tech professional staffing, consulting and outsourcing
services, today reported results for its second quarter ended June 27, 2004.
Revenues rose 32.3% to $117.6 million from $88.9 million for the second quarter
of 2003. Sequentially, revenues increased 9.4%, compared to revenues of $107.4
million for the first quarter of 2004. The improvement in revenues was primarily
attributable to the continued strong growth in PRO Unlimited. For the quarter,
PRO's revenue grew to $65.6 million, a 43.1% increase over the comparable
quarter last year. The Company also realized growth in certain sectors of Staff
Augmentation. Technical Services, which includes Government Staffing, rose
27.6%. Service revenues in Financial Outsourcing also increased.
Gross profit for the second quarter of 2004 was $17.7 million, or 15.1% of
revenues, compared to $14.8 million, or 16.6% of revenues in the second quarter
of 2003. Operating income for the second quarter was $3.2 million, compared to
operating income of $1.9 million for the same quarter last year. As a percentage
of sales, operating income was 2.7% in the second quarter of 2004, compared to
2.1% in the prior year's period.
Interest expense in the second quarter of 2004 was $3.0 million, compared
to $3.7 million for the second quarter of 2003. As previously announced, a
reduction in the Company's public debt of approximately $70 million since June
2000, has enabled COMFORCE to reduce its annual interest expense by
approximately $7.0 million, including borrowing at the lower rates available
under its bank credit facilities to effectuate repurchases of public debt and by
exchanging preferred equity and lower
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interest rate convertible notes for this public debt. During the second quarter
of 2003, the Company wrote-off approximately $431,000 of deferred financing
costs relating to its previous credit facility.
During the second quarter of 2003, the Company reported a gain on debt
extinguishment of $983,000, which related to the repurchase of 12% Senior Notes.
The Company recorded income from continuing operations before income taxes
of $125,000 in the second quarter of 2004, compared to a loss of $(1.0) million
in the same quarter last year. The Company recorded a tax provision of $60,000
in the second quarter of 2004, compared to a tax provision of $538,000 in the
second quarter of 2003.
COMFORCE reported net income of $65,000, or $0.00 per basic and diluted
share for the second quarter of 2004, compared to a net loss of $(1.5) million,
or $(0.10) per basic and diluted share in the second quarter of 2003.
SIX MONTHS RESULTS
COMFORCE reported revenues of $225.0 million for the first six months of
2004, an increase of 29.3%, compared to revenues of $173.9 million for the same
period last year. Revenues were favorably impacted by the continued strong
performance of PRO Unlimited and certain sectors of Staff Augmentation,
including Technical Services. Service revenues in Financial Outsourcing also
increased.
Operating income was $5.9 million for the first half of 2004, compared to
an operating income of $4.8 million for the first half of 2003. Included in
operating income for the first six months of 2003 was a $1.6 million insurance
recovery related to a non-cash charge for uncollectible funding and service fees
receivable.
As previously announced, in the first quarter of 2004 the Company
repurchased $13.5 million principal amount of Senior Notes resulting in a gain
on debt extinguishment for the Company of $2.0 million. This compares to the
Company's $8.8 million gain on debt extinguishment in the first six months of
2003 for its purchase or exchange of its 12% Senior Notes and 15% PIK
Debentures.
COMFORCE reported net income from continuing operations before income taxes
for the first six months of 2004 of $1.6 million, compared to $6.4 million in
the first six months of 2003. The Company recorded a tax provision of $773,000
in the first six months of 2004 and a tax provision of $3.7 million in the first
six months of 2003.
The Company recorded net income of $852,000, or $0.04 per basic and diluted
share for the first six months of 2004, compared to net income of $2.7 million,
or $0.15 per basic and $0.10 per diluted share for the first six months of 2003.
COMMENTS FROM MANAGEMENT
John Fanning, Chairman and Chief Executive Officer of COMFORCE commented,
"We are most pleased to have reported our second consecutive quarter of double
digit revenue growth over the prior year's period.
"In particular, we are enthusiastic concerning PRO Unlimited, which is
continuing to propel our overall revenue growth. PRO was primarily responsible
for the general improved revenue growth, both year-over-year and sequentially.
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"We believe PRO's expertise in human capital management separates it from
its competitors and has enabled it to become one of the recognized leaders in
the human capital management field. The increase in revenues PRO has been
realizing is being driven by Fortune 500 companies continued demand for the
types of services that PRO offers.
"We are also excited and encouraged by the strong growth we are seeing in
various segments of Staff Augmentation. We have long believed that government
staffing represents an excellent growth opportunity for COMFORCE and recent
government funding initiatives are bearing out our beliefs. We expect that we
will continue to benefit from this increased spending and our positive
governmental relationships.
"We also believe that our RightSourcing Vendor Management Services within
Healthcare Support Services present strong opportunities for future revenue
expansion, and we are continuing to put an emphasis on growing these areas.
"Further, we are encouraged by the initial response that we are receiving
concerning the staffing of Sarbanes-Oxley specialists and believe that this
represents another niche market opportunity for COMFORCE."
Mr. Fanning concluded, "We are pleased with our six months results and we
expect to see solid performance for the balance of 2004.
"We will continue to focus on growing all areas of our business and gaining
market share with the improving economy. We intend to continue to prudently
invest in our business, while controlling costs."
COMFORCE Corporation will hold an investor conference call to discuss the
Company's financial and operational results at 2:00 p.m. Eastern Time on August
5, 2004. Investors will have the opportunity to listen to the conference call
through the Internet at www.fulldisclosure.com. To listen to the live call,
please go to the web site at least 15 minutes before the start of the call. For
those who cannot listen to the live broadcast, a replay will be available
beginning approximately one hour after the call and continuing for 90 days at
the above web site. We expressly disclaim any responsibility for updating the
information in the broadcast during the period it remains available for replay.
About COMFORCE
COMFORCE Corporation provides specialty staffing, consulting and outsourcing
services primarily to Fortune 500 companies. The Company operates in three
business segments - Human Capital Management Services, Staff Augmentation, and
Financial Outsourcing Services. The Human Capital Management Services segment
provides consulting services for managing the contingent workforce through its
PRO Unlimited subsidiary. The Staff Augmentation segment provides Healthcare
Support Services, including RightSourcing Vendor Management Services, and Nurse
Staffing Services, Sarbanes-Oxley Specialists, Technical Services, Information
Technology (IT), Telecom,
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and Other Staffing Services. The Financial Outsourcing Services segment provides
payroll, funding and outsourcing services to independent consulting and staffing
companies. COMFORCE has thirty-seven (37) offices nationwide.
To view the Company's web page visit http://www.comforce.com
Various statements made in this release concerning the Company's expectations
are forward looking statements. The Company may be unable to realize its
objectives due to various important factors, including, but not limited to:
weakness in job growth or renewed economic malaise generally or in key
industries served by the Company, such as aircraft manufacturing and information
technology, a reduction in government spending in key sectors served by the
Company, or a reduction in the demand for outsourcing services generally which
could heighten competition among staffing companies and negatively impact
revenues and margins; the Company's significant leverage may leave it with a
diminished ability to obtain additional financing for working capital, capital
expenditures or acquisitions, for retiring higher interest rate debt or for
otherwise improving the Company's competitiveness and capital structure or
expanding its operations; and the recent effectiveness of new accounting rules
will heighten the standards under which the Company must evaluate annually the
retention of goodwill on its books and create a greater likelihood that the
Company will be required to write-off goodwill in future periods (in addition to
the write-offs of $74.0 million in 2002 and $28.0 million in 2003), which could
have a material adverse impact on its financial condition and results of
operations. Additional important factors are described under "Forward Looking
Statements" in Part II, Item 7 of the Company's 10-K for the year ended December
28, 2003 and under "Risk Factors" in the S-8 of the Company filed with the SEC
on April 24, 2003 (Registration No. 333-104730). These disclosures may be
accessed through the SEC's web site at "www.sec.gov" and will be forwarded free
of charge upon request made to Linda Annicelli, VP of Administration, at
COMFORCE Corporation, 415 Crossways Park Drive, P.O. Box 9006, Woodbury, New
York 11797, telephone 516-437-3300.
-Financial Tables Follow -
COMFORCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
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June 27, June 29, June 27, June 29,
2004 2003 (1) 2004 2003 (1)
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Revenue:
Net sales of services $ 117,558 $ 88,860 $ 224,999 $ 173,947
Costs and expenses:
Cost of services 99,864 74,072 190,864 144,576
Selling, general and administrative expenses 13,543 11,837 26,211 22,493
Depreciation and amortization 997 1,059 2,026 2,104
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Total costs and expenses 114,404 86,968 219,101 169,173
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Operating income 3,154 1,892 5,898 4,774
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Other income (expense):
Interest expense (3,014) (3,720) (6,170) (7,411)
Write-off of deferred financing costs - (431) - (431)
Gain on debt extinguishment - 983 1,971 8,774
Other (expense) income, net (15) 271 (57) 645
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(3,029) (2,897) (4,256) 1,577
Income (loss) from continuing operations before income taxes 125 (1,005) 1,642 6,351
Provision for income taxes 60 538 773 3,740
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Income (loss) from continuing operations 65 (1,543) 869 2,611
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Income (loss) from discontinued operations, net of tax benefit
of $16 in 2004 and tax provision of $36 and $60
in three and six months ended June 29, 2003 - 46 (17) 77
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Net income (loss) $ 65 $ (1,497) $ 852 $ 2,688
Dividends on preferred stock 125 115 250 165
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Income available to common
stockholders $ (60) $ (1,612) $ 602 $ 2,523
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Basic income (loss) per common share:
Income (loss) from continuing operations $ 0.00 $ (0.10) $ 0.04 $ 0.15
Income (loss) from discontinued operations - - - -
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Net income (loss) $ 0.00 $ (0.10) $ 0.04 $ 0.15
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Diluted income (loss) per common share:
Income (loss) from continuing operations $ 0.00 $ (0.10) $ 0.04 $ 0.10
Income (loss) from discontinued operations - - - -
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Net income (loss) $ 0.00 $ (0.10) $ 0.04 $ 0.10
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Weighted average common shares outstanding, basic 16,669 16,659 16,664 16,659
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Weighted average common shares outstanding, diluted 16,669 16,659 17,953 27,716
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(1) Historical results have been reclassified to reflect the sale of the
customer premise equipment services niche as discontinued operations.
COMFORCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
June 27, December 28,
Assets 2004 2003
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Current assets:
Cash and cash equivalents $ 2,489 7,598
Accounts receivable, net 57,179 52,378
Funding and service fees receivable, net 24,533 23,726
Prepaid expenses and other current assets 2,650 4,026
Net assets held for sale 869 -
Deferred income taxes, net 1,733 1,733
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Total current assets 89,453 89,461
Deferred income taxes, net 1,695 1,695
Property and equipment, net 7,054 8,499
Intangible assets, net 102 132
Goodwill, net 32,073 32,242
Deferred financing costs, net 1,876 2,284
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Total assets $ 132,253 134,313
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Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 1,514 2,757
Accrued expenses 42,855 42,127
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Total current liabilities 44,369 44,884
Long-term debt 125,549 127,960
Other liabilities 30 93
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Total liabilities 169,948 172,937
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Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value; 100,000,000 shares authorized,
16,679,484 and 16,659,397 shares issued and
outstanding at June 27, 2004 and December 28, 2003, respectively 167 167
Preferred stock 4,817 4,817
Additional paid-in capital 50,604 50,501
Accumulated other comprehensive income 50 76
Accumulated deficit (93,333) (94,185)
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Total stockholders' deficit (37,695) (38,624)
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Total liabilities and stockholders' deficit $ 132,253 134,313
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