EXHIBIT 99.1
FOR FURTHER INFORMATION:
AT THE COMPANY: AT FINANCIAL RELATIONS BOARD
Bob Ende General Info: Marilynn Meek (212) 445-8451
Senior Vice President of Finance Investor Info: Susan Garland (212) 445-8458
COMFORCE Corporation
(516) 437-3300
bende@comforce.com
FOR IMMEDIATE RELEASE
November 4, 2004
COMFORCE CORPORATION ANNOUNCES
THIRD QUARTER 2004 RESULTS
Revenues Increased 32.4% for the Quarter and 30.4% for Nine Months Over Prior
Year
Woodbury, NY - November 4, 2004 -- COMFORCE Corporation (AMEX: CFS), a leading
provider of high-tech professional staffing, consulting and outsourcing
services, today reported results for its third quarter ended September 26, 2004.
Revenues for the quarter increased 32.4% to $123.4 million, compared to revenues
of $93.2 million for the third quarter of 2003. Sequentially revenues increased
5.0%, compared to revenues of $117.6 million for the second quarter of 2004. The
improvement in revenues was primarily attributable to the continued strong
growth in PRO Unlimited representing the Human Capital Management segment. For
the quarter, PRO's revenues grew to $70.1 million, a 50.2% increase over the
same quarter last year. Staff Augmentation revenues also grew by 15.3% due
primarily to increases in Technical Services, which includes Government
Staffing, of 28.7% and Information Technologies of 9.9%.
Gross profit for the third quarter of 2004 was $17.5 million, or 14.2% of
revenues, compared to $15.2 million, or 16.3% of revenues in the third quarter
of 2003. Operating income for the third quarter was $3.4 million, compared to an
operating loss of $(26.5) million for the same quarter of last year. The 2003
third quarter operating loss included a non-cash charge for goodwill impairment
in the amount of $28.0 million. Excluding this non-cash charge, the 2003
operating income was $1.5 million. As a percentage of sales, operating income
was 2.7% in the third quarter of 2004, compared to 1.6%, excluding the non-cash
charge, in the third quarter of 2003.
Interest expense was $3.0 million for the third quarter of 2004, compared
to $3.3 million for the same quarter last year. As previously announced, a
reduction in COMFORCE's public debt of approximately $70.0 million since June
2000, has enabled the Company to reduce its annual interest expense by
approximately $7.5 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 interest rate convertible notes for this
public debt.
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The Company recorded income from continuing operations before income taxes
of $486,000 in the third quarter of 2004, compared to a loss from continuing
operations before income taxes of $(29.8) million in 2003. The Company recorded
a tax provision of $354,000 in the third quarter of 2004, compared to a tax
benefit of $3.7 million in the third quarter of 2003.
COMFORCE reported net income of $132,000 or $0.00 per basic and diluted
share for the third quarter of 2004, compared to a net loss of $(26.1) million,
or $(1.59) per basic and diluted share for the same period last year. The loss
for third quarter 2003 was primarily the result of the aforementioned non-cash
charge for goodwill impairment.
Nine Month Results
COMFORCE reported revenues of $348.4 million, a 30.4% increase for the
first nine months of 2004, compared to revenues of $267.1 million in the
comparable year period. Revenues were favorably impacted by the continued strong
performance of PRO Unlimited and certain sectors of Staff Augmentation,
particularly Technical Services.
Operating income for the first nine months of 2004 was $9.3 million,
compared to an operating loss of $(21.8) million in the first nine months of
2003. In the first nine months of 2003, under the provisions of SFAS 142, the
Company recorded a non-cash charge for goodwill impairment in the amount of
$28.0 million. Excluding the non-cash charge of $28.0 million, operating income
for the first nine months of 2003 was $6.2 million. Also, included in the first
nine months of 2003 was a $1.6 million insurance recovery related to a non-cash
charge for uncollectible funding and service fees receivable.
Interest expense for the first nine months of 2004 was $9.2 million,
compared to interest expense of $10.7 million for the same period last year.
During the first nine months of 2004 the Company repurchased $14.8 million
principal amount of Senior Notes resulting in a gain on debt extinguishment for
the Company of $2.0 million. As a result of the Company's repurchase of 12%
Senior Notes in the second quarter of 2003, and the Company's exchange and
repurchase of 15% PIK Debentures in the first quarter of 2003, the Company
recognized a gain on the extinguishment of debt of $8.8 million in the first
nine months of 2003.
Income from continuing operations before income taxes was $2.1 million for
the first nine months of 2004, compared to a loss from continuing operations
before income taxes of $(23.5) million for the same period last year. The
Company recorded a tax provision of $1.1 million in the first nine months of
2004 and a tax provision of $8,000 in the first nine months of 2003.
The Company recorded net income of $984,000, or $0.04 per basic and diluted
share for the first nine months of 2004, compared to net loss of $(23.4)
million, or $(1.44) per basic and diluted share for the first nine months of
2003, principally due to the $28.0 million write-off of goodwill.
COMMENTS FROM MANAGEMENT
John Fanning, Chairman and Chief Executive Officer of COMFORCE commented,
"It gives us great pleasure to report our third consecutive quarter of double
digit revenue growth year over year.
"As our numbers indicate, PRO Unlimited was the major contributor in our
overall growth, both for the quarter and our first nine months. PRO, as a market
leader in human capital management, continues to experience an increasing demand
for their services, particularly from Fortune 500 companies. We expect to see
this trend continue as the economy further strengthens.
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"Staff Augmentation is also experiencing increased revenue growth. This has been
particularly true in Technical Staffing, which includes our Government Staffing
division, where we experienced a marked increase in revenue for the quarter.
Technical staffing rose 28.7% in the third quarter.
"We continue to put an emphasis on RightSourcing Vendor Management, within
Healthcare Support Services and believe it represents an exciting opportunity
for future growth.
"Demand is also increasing in our Information Technology sector, where we
realized our third sequential quarter of revenue improvement. We believe that
this is a clear indicator of recovery and increased spending in this sector. The
positive response to our Sarbanes-Oxley specialists also contributed to this
revenue growth.
"I am also pleased to report that during the quarter we signed an amended
agreement with our credit facility, which will provide us with greater financial
flexibility to buy back more of the 12% Senior Notes."
Mr. Fanning concluded, "This has been a very rewarding and productive nine
months for COMFORCE. We remain committed to investing in and growing all areas
of our business and gaining market share. At the same time we will look to
manage our costs. We expect to report sound performance for the balance of
2004."
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
November 4, 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, and Other Staffing Services. The Financial Outsourcing
Services segment provides payroll, funding and outsourcing services to
independent consulting and staffing companies. COMFORCE has thirty-six (36)
offices nationwide.
To view the Company's web page visit http://www.comforce.com
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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: the
loss of key customers, weakness in job growth, a reduction in corporate or
government spending, adverse economic conditions generally or in key industries
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 heightened 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.
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COMFORCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
Sept 26, Sept 28, Sept 26, Sept 28,
2004 2003 2004 2003
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Revenue:
Net sales of services $ 123,392 $ 93,197 $ 348,391 $ 267,144
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Costs and expenses:
Cost of services 105,854 78,044 296,718 222,620
Selling, general and administrative expenses 13,179 12,616 39,390 35,109
Goodwill impairment - 28,000 - 28,000
Depreciation and amortization 1,002 1,081 3,028 3,185
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Total costs and expenses 120,035 119,741 339,136 288,914
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Operating income 3,357 (26,544) 9,255 (21,770)
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Other income (expense):
Interest expense (2,983) (3,267) (9,153) (10,678)
Write-off of deferred financing costs - - - (431)
Gain on debt extinguishment 8 - 1,979 8,774
Other (expense) income, net 104 (26) 47 619
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(2,871) (3,293) (7,127) (1,716)
Income (loss) from continuing operations before income taxes 486 (29,837) 2,128 (23,486)
Provision (benefit) for income taxes 354 (3,732) 1,127 8
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Income (loss) from continuing operations 132 (26,105) 1,001 (23,494)
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Income (loss) from discontinued operations, net of tax benefit
of $16 in 2004 and tax provision of $11 and $71
in three and nine months ended September 28, 2003 - 15 (17) 92
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Net income (loss) $ 132 $ (26,090) $ 984 $ (23,402)
Dividends on preferred stock 125 381 375 546
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Income available to common
stockholders $ 7 $ (26,471) $ 609 $ (23,948)
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Basic income (loss) per common share:
Income (loss) from continuing operations $ 0.00 $ (1.59) $ 0.04 $ (1.44)
Income (loss) from discontinued operations - 0.00 (0.00) -
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Net income (loss) $ 0.00 $ (1.59) $ 0.04 $ (1.44)
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Diluted income (loss) per common share:
Income (loss) from continuing operations $ 0.00 $ (1.59) $ 0.04 $ (1.44)
Income (loss) from discontinued operations - 0.00 (0.00) -
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Net income (loss) $ 0.00 $ (1.59) $ 0.04 $ (1.44)
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Weighted average common shares outstanding, basic 16,684 16,659 16,671 16,659
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Weighted average common shares outstanding, diluted 17,294 16,659 18,077 16,659
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COMFORCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
September 26, December 28,
2004 2003
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Assets (unaudited)
Current assets:
Cash and cash equivalents $ 5,780 7,598
Accounts receivable, net 66,791 52,378
Funding and service fees receivable, net 23,272 23,726
Prepaid expenses and other current assets 4,412 4,026
Net assets held for sale 211 -
Deferred income taxes, net 1,733 1,733
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Total current assets 102,199 89,461
Deferred income taxes, net 1,695 1,695
Property and equipment, net 6,561 8,499
Intangible assets, net 92 132
Goodwill, net 32,073 32,242
Deferred financing costs, net 1,717 2,284
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Total assets $ 144,337 134,313
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Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 2,961 2,757
Accrued expenses 56,519 42,127
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Total current liabilities 59,480 44,884
Long-term debt 122,342 127,960
Other liabilities 18 93
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Total liabilities 181,840 172,937
Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value; 100,000,000 shares authorized,
16,689,496 and 16,659,397 shares issued and
outstanding at September 26, 2004 and December 28, 2003, respectively 167 167
Convertible preferred stock, 6,148 Series 2003A and 513 Series 2003B
outstanding shares with an aggregate liquidation preference of 7,442
at September 26, 2004 4,817 4,817
Additional paid-in capital 50,611 50,501
Accumulated other comprehensive income 103 76
Accumulated deficit (93,201) (94,185)
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Total stockholders' deficit (37,503) (38,624)
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Total liabilities and stockholders' deficit $ 144,337 134,313
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