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COMFORCE Corporation Announces Third Quarter 2009 Results
PR Newswire
Nov 05, 2009
WOODBURY, N.Y., Nov. 5 /PRNewswire-FirstCall/ -- COMFORCE Corporation (NYSE Amex: CFS), a leading provider of outsourced staffing management services, specialty staffing and consulting services today announced results for its third quarter ended September 27, 2009. Revenues for the quarter declined 6.5% to $139.7 million compared to revenues of $149.4 million for the third quarter of 2008. Lower revenues for the quarter continued to be impacted by global economic conditions, which continue to adversely affect demand in the labor markets.
Revenues of PrO Unlimited®, the Company's Human Capital Management segment, increased $3.0 million, or 3.0% over third quarter 2008. PrO's increase in the third quarter of 2009 as compared to third quarter 2008 was primarily due to an increase in services provided to new clients, which was partially offset by a decrease in services provided to existing clients. Staff Augmentation revenues decreased by $12.2 million, or 23.7% due primarily to a decrease in client demand for services in this sector.
Gross profit for the third quarter of 2009 was $19.9 million, or 14.3% of sales, compared to $23.6 million, or 15.8% of sales for the third quarter of 2008. The decrease in gross profit is the result of pricing pressures the Company is facing in the current economic environment, and also due to lower sales volume on higher margin services. In addition, the Company recorded an accrual of approximately $600,000 in the third quarter of 2009 related to a state tax examination.
COMFORCE reported operating income of $2.6 million for the third quarter, compared to $4.0 million for the same quarter last year.
Interest expense was $398,000 for the third quarter of 2009, compared to $1.0 million for the third quarter of 2008. This decrease was primarily due to the Company's retirement and redemption of $11.7 million of 12% Senior Notes in 2008 and to lower interest rates being charged under the Company's credit facility.
Other expense, net, for the third quarter of 2009 of $286,000, as compared to $445,000 for the same quarter last year, principally consists of losses on foreign currency exchanges.
COMFORCE recorded income before income taxes of $1.9 million for the third quarter, compared to $2.4 million for the comparable quarter last year.
The Company recognized a provision for income taxes of $883,000 in the third quarter of 2009, compared to $1.1 million in the third quarter of 2008.
Net income for the third quarter was $1.1 million, or $0.05 per basic share and $0.03 per diluted share, compared to net income of $1.3 million, or $0.06 per basic share and $0.04 per diluted share for the same quarter last year.
Nine Month Results
COMFORCE reported revenues of $419.4 million for the first nine months of 2009, compared to revenues of $452.4 million for the first nine months of 2008. PrO Unlimited revenues declined less than 1.0% for the first nine months of 2009.
The Company's gross profit for the first nine months was $60.8 million, or 14.5% of sales, compared to $71.8 million, or 15.9% of sales for the same period last year. The decrease in gross profit is the result of pricing pressures the Company is facing in the current economic environment and lower sales volume on higher margin services. In addition, the Company recorded an additional accrual of approximately $1.5 million in the second and third quarters of 2009 related to a state tax examination.
Operating income for the nine month period was $4.7 million, compared to $11.5 million for the first nine months of 2008.
Interest expense for the first nine months of 2009 was $1.5 million, compared to $3.5 million for the first nine months of 2008. This lower interest expense was primarily due to the repurchase and redemption of the 12% Senior Notes mentioned above and lower interest rates under the Company's credit facility.
Other income, net, for the first nine months of 2009 of $106,000 principally consists of gains on foreign currency exchanges as compared to other expense, net, for the first nine months of 2008 of $622,000 principally consisting of losses on foreign currency exchanges.
COMFORCE reported income before income taxes of $3.3 million for the first nine months of 2009, compared to income before income taxes of $7.1 million for the first nine months of 2008.
The Company recognized a tax provision of $1.5 million for the first nine months of 2009, compared to a tax provision of $3.2 million for the first nine months of 2008.
COMFORCE reported net income of $1.8 million for the first nine months of 2009, or $0.06 per basic share and $0.05 per diluted share, compared to a net income of $3.9 million for the first nine months of 2008, or $0.18 per basic share and $0.12 per diluted share.
Comments from Management
John Fanning, Chairman and CEO of COMFORCE commented, "We had indicated that 2009 would be a demanding year and it has been. However we believe our results, albeit not at the level we would like, demonstrate the flexibility of our management team, the validity of our business plan and our commitment to containing costs, even as we look to grow our business. We were pleased to report a sequential improvement in PrO's revenues of 2.6% over the second quarter.
Mr. Fanning continued, "We, like other companies in our industry, are continuing to be negatively impacted by the current economic environment and weak labor markets. Even though the rate of job losses has decreased in recent months, job losses continue and we still have no visibility as to when this might translate into a real recovery in our business.
"Earlier this week, we announced that COMFORCE has amended our revolving credit facility to extend our maturity date from July 2010 to November 2012. The confidence our bankers have shown in our management team validates our business plan and financial discipline."
Mr. Fanning concluded "We remain confident in COMFORCE's prospects and we continue to work to weather the current environment and to position COMFORCE for future growth as the economy improves."
About COMFORCE
COMFORCE Corporation is a leading provider of outsourced staffing management services that enable Fortune 1000 companies and other large employers to consolidate, automate and manage staffing, compliance and oversight processes for their contingent workforces. We also provide specialty staffing, consulting and other outsourcing services to Fortune 1000 companies and other large employers for their healthcare support, technical and engineering, information technology, telecommunications and other staffing needs. We operate in three 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, Technical, Information Technology and Other Staffing Services. The Financial Outsourcing Services segment provides funding and back office support services to independent consulting and staffing companies.
To view the Company's web page visit www.comforce.com
We have made statements in this release, including the comments from management that are forward-looking statements such as projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business and industry. These statements are only predictions based on our current expectations and projections about future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, particularly in light of the current global economic crisis that has been marked by dramatic and rapid shifts in market conditions and government responses, nor will we undertake any obligation to update any of these statements. Factors which may cause our actual results to differ materially from those expressed or implied by the forward-looking statements include the following:
-- unfavorable global, national or local economic conditions that cause our
clients to defer hiring contingent workers or reduce spending on the
human capital management services and staffing that we provide;
-- the current economic crisis has created a tightening of the credit
markets coupled with increasing interest rates, which, if these
conditions persist or deteriorate, could significantly increase our
interest expense;
-- in the current economic climate, some state taxing authorities are more
strictly interpreting business tax laws and regulations and more
aggressively seeking to enforce these laws and regulations to address
shortfalls in state tax revenues;
-- increases in the effective rates of any payroll-related costs or
business taxes that we are unable to pass on to or recover from our
clients, particularly in a climate of heightened competitive pressure;
-- increases in the costs of complying with the complex federal, state and
foreign laws and regulations in which we operate, or our inability to
comply with these laws and regulations;
-- our inability to collect fees due to the bankruptcy of our clients,
including the amount of any wages we have paid to our employees for work
performed for these clients;
-- our inability to keep pace with rapid changes in technology in our
industry;
-- potential losses relating to the placement of our employees in other
workplaces, including our employees' misuse of client proprietary
information, misappropriation of funds, discrimination, harassment,
theft of property, accidents, torts or other claims;
-- our inability to successfully develop new services or enhance our
existing services as the markets in which we compete grow more
competitive;
-- unfavorable developments in our business may result in the necessity of
writing off goodwill in future periods;
-- as a result of covenants and restrictions in our credit facility, our
inability to use available cash in the manner we believe will maximize
stockholder value;
-- unfavorable press or analysts' reports concerning our industry or our
company could negatively affect the perception investors have of our
company and our prospects; or
-- any of the other factors described under "Risk Factors" in Item 1A of
our annual report on Form 10-K for the year ended December 28, 2008
(copies of which may be accessed through www.sec.gov or
www.comforce.com).
COMFORCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September September September September
27, 28, 27, 28,
2009 2008 2009 2008
-------- -------- -------- --------
Net sales of services $139,710 $149,435 $419,428 $452,401
-------- -------- -------- --------
Costs and expenses:
Cost of services 119,762 125,884 358,651 380,651
Selling, general
and administrative
expenses 16,405 18,727 53,425 57,978
Depreciation and
amortization 920 824 2,633 2,237
--- --- ----- -----
Total costs and
expenses 137,087 145,435 414,709 440,866
------- ------- ------- -------
Operating income 2,623 4,000 4,719 11,535
----- ----- ----- ------
Other (expense) income:
Interest expense (398) (963) (1,483) (3,531)
Loss on debt
extinguishment - (149) - (278)
Other (expense)
income, net (286) (445) 106 (622)
---- ---- --- ----
(684) (1,557) (1,377) (4,431)
Income before income
taxes 1,939 2,443 3,342 7,104
Provision for income
taxes 883 1,096 1,532 3,166
Net income $1,056 $1,347 $1,810 $3,938
------ ------ ------ ------
Dividends on preferred
stock 252 252 754 754
--- --- --- ---
Net income available
to common
stockholders $804 $1,095 $1,056 $3,184
==== ====== ====== ======
Basic income per common
share $0.05 $0.06 $0.06 $0.18
===== ===== ===== =====
Diluted income per
common share $0.03 $0.04 $0.05 $0.12
===== ===== ===== =====
Weighted average common
shares outstanding,
basic 17,388 17,388 17,388 17,388
====== ====== ====== ======
Weighted average common
shares outstanding,
diluted 33,834 33,021 28,209 32,612
====== ====== ====== ======
COMFORCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 27, 2009 and December 28, 2008
(in thousands, except share and per share amounts)
(unaudited)
September 27, December 28,
Assets 2009 2008
-------- --------
Current assets:
Cash and cash equivalents $3,819 6,137
Accounts receivable, less allowance of
$128 in 2009 and $92 in 2008 121,516 140,763
Funding and service fees receivable,
less allowance of $8 in 2009 and $20
in 2008 7,877 8,941
Prepaid expenses and other current
assets 3,252 3,014
Deferred income taxes, net 353 353
--- ---
Total current assets 136,817 159,208
Property and equipment, net 9,183 10,057
Deferred financing costs, net 96 213
Goodwill 32,073 32,073
Other assets, net 85 185
-- ---
Total assets $178,254 201,736
======== =======
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $4,362 2,675
Short-term debt (related party) 1,849 1,778
Accrued expenses 107,226 131,441
------- -------
Total current liabilities 113,437 135,894
Long-term debt 65,198 68,200
Deferred income taxes, net 1,205 1,074
Other liabilities 190 401
--- ---
Total liabilities 180,030 205,569
------- -------
Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value;
100,000,000 shares authorized;
17,387,649 and 17,387,560 shares
issued and outstanding in 2009 and
2008, respectively 174 174
Convertible preferred stock, $.01
par value:
Series 2003A, 6,500 shares authorized,
6,148 shares issued and outstanding
at September 27, 2009 and December 28,
2008, with an aggregate liquidation
preference of $9,195 at September 27,
2009 and $8,850 at December 28, 2008 4,304 4,304
Series 2003B, 3,500 shares authorized,
513 shares issued and outstanding at
September 27, 2009 and December 28,
2008, with an aggregate liquidation
preference of $743 at September 27,
2009 and $714 at December 28, 2008 513 513
Series 2004A, 15,000 shares authorized,
6,737 shares issued and outstanding at
September 27, 2009 and December 28,
2008, with an aggregate liquidation
preference of $9,170 at September 27,
2009 and $8,790 at December 28, 2008 10,264 10,264
Additional paid-in capital 48,458 48,406
Accumulated other comprehensive loss (327) (522)
Accumulated deficit (65,162) (66,972)
------- -------
Total stockholders' deficit (1,776) (3,833)
------ ------
Total liabilities and
stockholders' deficit $178,254 201,736
======== =======
SOURCE COMFORCE Corporation
Copyright (2009) PR Newswire. All Rights Reserved.
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