Modis Professional Services Announces Third Quarter Results
EPS from Continuing Operations (Before Restatement) Up 33% to $.20 vs. $.15
JACKSONVILLE, Fla.--(BUSINESS WIRE)--Nov. 12, 1998-- Revenues from Continuing
Operations up 46% to $441.6 Million vs. $302.3 Million
Modis Professional Services, Inc. (NYSE:MPS - news), a global provider of
information technology and professional services, including consulting,
outsourcing, outplacement, training, and professional staffing services, today
announced results for the third quarter and nine months ended September 30,
1998.
Financial Results
The discussion below includes results of continuing and discontinued operations
and the change in accounting treatment (restatement) of the Actium acquisition
from a pooling of interests to a purchase. On October 31, 1998, the Company's
Board of Directors authorized the repurchase of up to $200 million of the
Company's common stock. The Company first considered the repurchase on August
31, 1998, shortly after it announced the sale of its commercial businesses
(``Strategix'') to Randstad for $850 million as a result of an unsolicited
offer. Prior to the Randstad offer, the Company had announced plans to sell 20%
of Strategix in an initial public offering with a subsequent spin-off of the
Company's interest to its shareholders, subject to certain market conditions.
As a result of the aforementioned events, the Company believes it is now
appropriate to change the accounting treatment for its acquisition of Actium,
Inc. on March 27, 1998, from a pooling of interests to a purchase. As a result,
the Company has recorded goodwill of approximately $130.0 million, based on the
preliminary allocation of purchase price. Prior periods have been restated to
eliminate the Actium results and, starting in the second quarter of 1998,
included amortization of goodwill from the purchase. In addition, as a result of
the sale of Strategix, the Company will present those financial results as
discontinued operations for all periods presented and discussed.
Continuing Operations
Revenues for the third quarter of 1998 totaled $441.6 million, an increase of
46% over revenues of $302.3 million in the year-earlier period. Net income for
the quarter, before the pooling restatement, totaled $22.8 million, an increase
of 38% over third quarter 1997 net income of $16.5 million. After giving effect
to the pooling restatement, net income for the 1998 third quarter totaled $22.0
million, an increase of 33% over third quarter 1997 net income of $16.5 million.
Net income per diluted common share, before the pooling restatement, rose 33% to
$0.20 per share, compared with net income of $0.15 per diluted common share for
the third quarter of 1997. After giving effect to the pooling restatement, net
income per diluted common share for the third quarter of 1998 rose 27% to $0.19
per share compared with net income of $0.15 per diluted common share for the
third quarter of 1997.
For the nine months ended September 30, 1998, revenues totaled $1.24 billion, an
increase of 52% over revenues of $818.0 million in the prior-year period. Net
income year to date, before the pooling restatement, totaled $69.9 million
before non-recurring merger costs, an increase of 54% over net income for the
first nine months of 1997 of $45.4 million. Diluted net income per common share,
before the pooling restatement, rose 40% to $0.60 per share, compared with $0.43
per diluted common share for the year-earlier period. After giving effect to the
pooling restatement, net income for the nine months ended September 30, 1998,
totaled $68.3 million, up 50% over net income for the prior-year period of $45.4
million, and net income per diluted common share rose 37% to $0.59 per share for
the nine months ended September 30, 1998, compared with net income per diluted
common share of $0.43 for the year-earlier period.
Revenues for the third quarter of 1998, broken down by division, are as follows:
Information Technology $301 million and Professional $141 million. This compares
with third quarter 1997 revenue of $198 million for Information Technology and
$104 million for Professional. Professional revenue was affected by the
disposition of an unprofitable foreign technical/engineering unit that would
have contributed approximately $3 million in revenue this quarter. In addition,
the impact on revenue from holidays (July 4th and Labor Day) was greater than
expected in the two divisions, which contributed to fewer billable hours.
Gross margin percentages for the third quarter of 1998, broken down into the two
aforementioned divisions, are: Information Technology -- U.S. 27.7% and
International 18.8%; Professional Services 30%. This compares with third quarter
1997 gross margins of 27.4% for Information Technology -- U.S. and 17% for
Information Technology -- International on a pro forma basis; 32.6% for
Professional Services.
The comparative gross margin in the professional division is affected by the
relative revenue contribution each quarter of each separate line of business --
accounting, legal, engineering/technical, scientific, outplacement/workforce,
and consulting -- and the fact that in the 1997 quarter, the international
portion of professional services (which historically has lower gross margins)
was a much smaller part of the total revenue mix.
Sale of Discontinued Operations
As previously announced, the Company sold Strategix, its commercial staffing
services business, effective September 27, 1998. The results of this business
prior to the sale have been reported as discontinued operations. The after-tax
proceeds from the sale totaled approximately $600 million and were used to
retire all borrowings under the Company's credit facility with the remaining
proceeds available for other corporate purposes. The after-tax gain on the sale
of $216 million, or $1.79 per share, was recognized in the current quarter.
Management Comments
Commenting on the results, Modis Professional Services Chairman, President and
Chief Executive Officer Derek E. Dewan said, ``We are pleased with our third
quarter results and have made significant progress. Highlights during the third
quarter include:
o Sale of our commercial businesses -- Strategix -- for $850
million and use of a portion of the proceeds to pay off our
credit facility;
o Announcement of a share repurchase program of up to $200
million of common stock, which may be additive to earnings
per share;
o Secured a new $500 million revolving credit facility;
o Transformed our company into a world class information
technology and professional services firm.
``We have made several investments in infrastructure -- systems, sales and
marketing -- and added strong operational leadership in each division,'' Dewan
continued. ``Our goal is to continue to generate strong internal growth and
capture greater market share in each service line.
``The acquisition pipeline is full and purchase multiples have adjusted
downward. We plan to accelerate our activity in making strategic cash
acquisitions that are accretive to earnings per share and that fill in a
specialty area or a geographic need in both divisions. We are well positioned to
do so with our strong cash position and new credit facility.''
Timothy D. Payne, President and Chief Operating Officer of modis, the Company's
billion-dollar information technology services division, added, ``The
information technology sector is strong and vibrant. Our size, geographic
diversity, and breadth of I.T. services -- enterprise resource planning
implementation, data warehousing, software application development, systems
integration, electronic commerce, Internet and Web enablement services -- allow
us to compete very effectively for new clients and expand services to existing
customers. Additionally, we have designed our organizational structure along
practice specialties for modis Solutions to help facilitate and accelerate
cross-selling with the modis Consulting branch network.''
About Modis Professional Services, Inc.
Modis Professional Services, Inc. is a global provider of business services,
including consulting, outsourcing, outplacement, training, and professional
staffing services. The Company provides strategic solutions in the information
technology, accounting, legal, engineering/technical, and scientific areas.
Headquartered in Jacksonville, Florida, the Company serves the Fortune 1000 and
other leading businesses through its offices located in the United States,
Canada, the United Kingdom, Continental Europe, and Latin America. For more
information about Modis Professional Services, please visit the following web
site: www.modispro.com.
Statements made in this press release, other than those concerning historical
information, should be considered forward-looking and subject to various risks
and uncertainties. The Company's actual results may differ materially from the
results anticipated in these forward-looking statements as a result of certain
factors set forth under Risk Factors and elsewhere in the Company's reports on
Forms 10-K, 10-Q and 8-K made under the Securities Exchange Act of 1934. For
instance, the Company's results of operations may differ materially from those
anticipated in the forward-looking statements due to, among other things: the
Company's ability to successfully identify suitable acquisition candidates,
complete acquisitions or integrate the acquired business into its operations;
the general level of economic activity in the Company's markets; increased price
competition; and the continued availability of qualified temporary personnel --
particularly in the information technology and other professional segments of
the Company's businesses. In addition, the market price of the company's stock
may from time to time be significantly volatile as a result of, among other
things: the Company's operating results; the operating results of other
temporary staffing companies; and changes in the performance of the stock market
in general.
MODIS PROFESSIONAL SERVICES, INC.
Unaudited Financial Highlights
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
Operating Highlights: 1998 1997 1998 1997
Revenue $441,580 $302,300 $1,241,456 $818,179
Gross profit 120,700 87,990 342,953 229,292
Net income from continuing
operations 22,021 16,548 68,252 45,424
Net income from discontinued
operations 6,907 12,141 30,020 28,614
Gain on sale of discontinued
operations, net 216,365 -- 216,365 --
Net income $245,293 $28,689 $314,637 $74,038
Diluted net income per common share:
From continuing operations
(before restatement) $ 0.20 $ 0.15 $ 0.60 $ 0.43
From continuing operations
(restated) 0.19 0.15 0.59 0.43
From discontinued operations 0.06 0.11 0.25 0.25
Gain on sale of discontinued
operations 1.79 -- 1.80 --
Net income per common share $ 2.04 $ 0.26 $ 2.64 $ 0.68
Weighted average shares
outstanding 120,875 113,966 119,921 112,567
As of
Sept. 30, Dec. 31,
Balance Sheet Highlights: 1998 1997
Working capital $ 404,109 $514,966
Total assets 2,038,650 1,369,022
Long-term debt 2,596 347,785
Convertible debentures 86,250 86,250
Stockholders' equity 1,313,900 812,842
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Contact:
Modis Professional Services Inc., Jacksonville
Michael D. Abney, 904/360-2550
or
Derek E. Dewan, 904/360-2525
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