EXHIBIT 99.1
FINANCIAL
RELATIONS BOARD
FOR FURTHER INFORMATION:
AT THE COMPANY: AT FINANCIAL RELATIONS BOARD
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Bob Ende General Info: Marilynn Meek (212) 827-3773
Senior Vice President - Finance Investor Info: Susan Garland (212) 827-3775
COMFORCE Corporation
(516) 437-3300
bende@comforce.com
FOR IMMEDIATE RELEASE
May 5, 2005
COMFORCE CORPORATION ANNOUNCES FIRST QUARTER 2005 RESULTS
Revenues Increase 15.1% Over Previous Year
Woodbury, NY - May 5, 2005 - COMFORCE Corporation (AMEX: CFS), a leading
provider of high-tech professional staffing, consulting and outsourcing
services, today reported results for its first quarter ended March 27, 2005.
Revenues for the quarter were $123.7 million, up 15.1% from $107.4 million in
the same quarter last year. The improvement in revenues was primarily due to
continued growth in PRO Unlimited, the Human Capital Management segment, which
had an increase in revenue of 24.2% over the prior year's first quarter. The
Company also experienced growth in certain sectors of Staff Augmentation.
Information Technologies revenues improved 27.9% over the first quarter of 2004.
At the same time, Technical Services, which includes Government Staffing, was up
6.2%.
Gross profit for the first quarter of 2005 was $16.9 million, or 13.7% of
sales, compared to $16.4 million or 15.3% of sales in the first quarter of 2004.
The decline in gross profit as a percentage of sales was principally due to a
decrease in service revenues in the Financial Outsourcing Services segment
coupled with an increase in PRO revenues, a lower margin product, and to
heightened pricing pressures generally from competition in the staffing
industry. Operating income for the first quarter was $2.3 million, compared to
operating income of $2.7 million in the first quarter of 2004.
Interest expense was $2.8 million for the first quarter of 2005, compared
to $3.2 million for the first quarter of 2004. Since June 2000, the Company has
reduced its public debt from $138.8 million to $58.4 million. This reduction in
debt includes the Company's recently announced repurchase of $6.0 million
principal amount of its 12% Senior Notes. As a result, the Company has reduced
its annual interest expense by approximately $9.0 million from 2000 levels. The
Company recorded a loss from continuing operations before income taxes for the
first quarter of 2005 of $(459,000), compared to income from continuing
operations before income taxes of $1.5 million in the first quarter of 2004. The
income before income taxes recorded for the first quarter of 2004 included a
gain on debt
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extinguishment of $2.0 million. The Company recognized a tax benefit of
$(209,000) in the first quarter of 2005 and a tax provision of $713,000 in the
first quarter of 2004.
The Company reported a net loss of $(250,000), or $(0.03) per basic and
diluted share for the first quarter of 2005, compared to net income of $787,000
or $0.04 per basic and $0.03 per diluted share for the first quarter of 2004.
Comments from Management
John Fanning, Chairman and Chief Executive Officer of COMFORCE commented,
"As we indicated in our fourth quarter 2004 earnings release, and reported
today, revenues for the first quarter of 2005 would track below the fourth
quarter. However, in what is typically our slowest quarter for the year, we were
pleased to report a revenue increase of 15.1% over the first quarter of 2004.
"PRO Unlimited continued to show strong growth and was the major
contributor to our first quarter revenue growth. As stated previously, we expect
PRO to be a major contributor to growth in 2005 as we continue to see increasing
demand for human capital management services. We also experienced increased
demand in our Staff Augmentation segment in Information Technology and Technical
Services.
"We are most enthusiastic about PRO Unlimited and expect to see
continued growth in this sector. We also continue to believe that RightSourcing
and Government Staffing represent further opportunity for growth during the
year.
"Looking at our second quarter, our current run rates are tracking
slightly better than the first quarter of this year. We will continue to monitor
the impact of pricing pressures on our margins so as to best position the
Company in the current economic environment. We remain optimistic about our
business opportunities and we will continue to invest in our business in order
to gain market share. At the same time reduction in debt remains a priority for
the Company."
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 May 5,
2005. 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 reply.
About COMFORCE
COMFORCE Corporation provides specialty staffing, consulting and
outsourcing services primarily to Fortune 1000 companies and other large
employers. 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
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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
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 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 26, 2004 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
March 27, March 28,
2005 2004
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Net sales of services $ 123,694 $ 107,441
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Costs and expenses:
Cost of services 106,803 91,000
Selling, general and administrative expenses 13,704 12,668
Depreciation and amortization 846 1,029
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Total costs and expenses 121,353 104,697
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Operating income 2,341 2,744
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Other (expense) income:
Interest expense (2,825) (3,156)
Gain on debt extinguishment - 1,971
Other income (expense), net 25 (42)
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(2,800) (1,227)
(Loss) income from continuing operations before income taxes (459) 1,517
(Benefit) provision for income taxes (209) 713
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(Loss) income from continuing operations (250) 804
Loss from discontinued operations, net of tax benefit of $16 - (17)
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Net (loss) income $ (250) $ 787
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Dividends on preferred stock 250 125
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(Loss) income available to common
stockholders $ (500) $ 662
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Basic (loss) income per common share:
(Loss) income from continuing operations $ (0.03) $ 0.04
Loss from discontinued operations - (0.00)
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Net (loss) income $ (0.03) $ 0.04
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Diluted (loss) income per common share:
(Loss) income from continuing operations $ (0.03) $ 0.03
Loss from discontinued operations - (0.00)
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Net (loss) income $ (0.03) $ 0.03
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Weighted average common shares outstanding, basic 16,759 16,659
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Weighted average common shares outstanding, diluted 16,759 28,381
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COMFORCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 27, 2005 and December 26, 2004
(in thousands, except share and per share amounts)
March 27, December 26,
Assets 2005 2004
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(unaudited)
Current assets:
Cash and cash equivalents $ 5,744 $ 15,233
Accounts receivable, net 70,319 64,421
Funding and service fees receivable, net 16,504 21,822
Prepaid expenses and other current assets 4,210 3,488
Deferred income taxes, net 2,404 2,404
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Total current assets 99,181 107,368
Deferred income taxes, net 1,281 1,281
Property and equipment, net 6,078 6,293
Intangible assets, net 71 81
Goodwill, net 32,073 32,073
Deferred financing costs, net 1,383 1,464
Other assets 188 188
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Total assets $ 140,255 $ 148,748
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Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 2,670 $ 4,325
Accrued expenses 59,100 57,025
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Total current liabilities 61,770 61,350
Long-term debt 108,176 117,227
Other liabilities 1 6
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Total liabilities 169,947 178,583
Commitments and contingencies
Stockholders'deficit:
Common stock 169 167
Convertible preferred stock 15,081 15,081
Additional paid-in capital 47,575 47,193
Accumulated other comprehensive income 162 153
Accumulated deficit (92,679) (92,429)
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Total stockholders' deficit (29,692) (29,835)
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Total liabilities and stockholders' deficit $ 140,255 $ 148,748
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