Exhibit 99.1
| |
|
|
|
|
Contacts: |
|
David L. Kerr |
|
Amy Bobbitt
|
|
|
Senior Vice President -- Corporate Development |
|
Senior Vice President & Chief |
|
|
713.386.1420 |
|
Accounting Officer |
|
|
dkerr@comsys.com |
|
480.777.6680 |
|
|
|
|
abobbitt@comsys.com |
COMSYS IT PARTNERS, INC. REPORTS 2008 THIRD QUARTER RESULTS
HOUSTON, TX (November 5, 2008) COMSYS IT Partners, Inc. (NASDAQ:CITP), a leading provider of
information technology staffing and consulting services, today announced results for its third
quarter ended September 28, 2008.
Revenue for the third quarter of 2008 was $183.7 million, compared to $187.2 million for the third
quarter of 2007. Excluding the revenues from COMSYS December 2007 and June 2008 acquisitions,
revenue declined by 7.1% versus the prior-year period. Net income in the third quarter was $6.0
million, compared to $9.6 million in the third quarter of last year, and third quarter diluted
earnings per share were $0.30 compared to $0.48 per diluted share in the prior-year period. The
third quarter this year included the previously announced non-cash compensation charge of $0.8
million associated with the Praeos acquisition and a higher effective tax rate than in the
prior-year period. These items reduced earnings per share in the third quarter of 2008 by $0.06
versus the third quarter of 2007.
The third quarter of 2008 results included an effective tax rate of 15.5%, which was significantly
lower than the 42% tax rate assumed in managements previous guidance for the quarter. The Company
did not release its tax valuation allowance in the third quarter as contemplated in our guidance.
Net income and diluted earnings per share were $6.2 million and $0.30, respectively, in the second
quarter of 2008.
We are pleased that our third quarter results were in line with expectations and attribute our
performance in large part to the focus on productivity and efficiency in our operations that we
have had throughout the year, said Larry L. Enterline, COMSYS Chief Executive Officer. Our plan
is to continue that focus in the near term as we consider accelerating a number of existing
efficiency initiatives, and the restructuring we are also announcing today will be an important
part of that effort. Although we believe our current results reflect the attention we have been
paying to our operations, we do not expect to be immune in coming quarters to the broader economic
forces that are dominating the headlines. We are planning for a more difficult environment, and
believe that we will be positioned well to take advantage of whatever opportunities our markets
will offer.
Enterline continued. As always, I would like to thank our operations leaders and their staffs for
their continuing strong efforts. We are in a challenging environment and their continued focus and
dedication will ensure that we continue to meet all of our customers needs.
Amy Bobbitt, Senior Vice President and Chief Accounting Officer, commented, We entered the third
quarter of 2008 with 4,646 consultants on assignment and ended the quarter with 4,729 consultants,
excluding businesses acquired during the quarter. Our current headcount in November is
approximately the same as headcount at the end of the third quarter. Gross margin in the third
quarter increased sequentially by 20 basis points over the second quarter due to higher margins
from the acquired businesses. Permanent placement revenue in the third quarter of 2008 declined by
35% from the same period last year to $1.4 million. Despite lower margins on our core staffing
business and $5.2 million of cash payments made for acquisitions at the beginning of the quarter,
we continue to generate strong
-MORE-
CITP Reports 2008 Third Quarter Results
Page 2
November 5, 2008
cash flow, and our average debt balance in the third quarter of 2008 was $76.0 million, or
approximately $6.6 million lower than in the second quarter. During the third quarter of 2008, our
EBITDA was $10.6 million, up sequentially from $10.5 million of EBITDA for the second quarter of
2008.
We expect further reductions in our average daily debt in the fourth quarter of
2008, although at a slower rate than 2007 which is in line with our expectations for slower revenue
growth.
Selected operating data and reconciliations of non-GAAP financial measures to GAAP results for the
third quarter ended September 28, 2008, are included below.
Restructuring Charges
The Company also announced a restructuring plan designed to improve operational efficiencies by
relocating certain administrative functions primarily from the Washington DC area and Portland,
Oregon into its new Phoenix customer service center facility. The Company expects to record
restructuring charges of approximately $3.3 million in the aggregate over the next three quarters.
All of these charges are expected to result in future cash expenditures. These charges primarily
will relate to employee termination benefits and lease termination costs for the Gaithersburg,
Maryland facility. The Company expects the restructuring plan to result in a reduction of at least
$1.6 million in annualized operating expenses beginning in the second quarter of 2009.
We have a stated priority to improve our processes and create efficiency in our operations, said
Larry Enterline. This restructuring is a continuation of our plan to centralize back office
operations into our Phoenix customer service facility to both enhance our customer service and
continue our efforts to reduce our cost structure.
Fourth Quarter and Full Year 2008 Financial Guidance
For the fourth quarter of 2008, the Company expects to report revenue in a range of $168 million to
$173 million and net income in the range of $2.5 million to $3.5 million, or approximately $0.12 to
$0.17 per diluted share, on one less billing day than the third quarter of 2008. The net income
estimates for the fourth quarter include the $0.8 million (pre-tax) non-cash compensation charge
for the Praeos bonus plan that was previously announced and approximately $0.6 million in
termination benefits as discussed above under Restructuring Charges. These estimates are also
based on an effective tax rate of approximately 18%. Due to continued uncertainty about the macro
economic environment, the Company does not anticipate releasing the valuation allowance it has
recorded against its deferred tax assets in 2008 as previously anticipated.
For the year ended December 28, 2008, the Company expects to report revenue in the range of $719
million to $724 million, and net income in the range of $19.9 million to $20.9 million, or
approximately $0.96 to $1.01 per diluted share. Management does not expect to make any substantial
cash payments for taxes in 2008.
-MORE-
CITP Reports 2008 Third Quarter Results
Page 3
November 5, 2008
Conference Call Information
COMSYS will host a conference call today (November 5) at 10:00 a.m. Eastern time to discuss the
quarterly financial results. The conference call-in number is (913) 981-4913 and the confirmation
number is 3384474. The call will also be web cast live at
www.comsys.com and www.earnings.com and
replayed for 30 days at www.comsys.com. A seven-day telephonic replay of this conference
call will be available by dialing (719) 457-0820. Callers should use the pass code 3384474 to gain
access to the replay, which will be available through the end of the day on November 12, 2008.
About COMSYS IT Partners
COMSYS IT Partners, Inc. (NASDAQ: CITP) is a leading IT services company with 53 offices across the
U.S. and offices in Puerto Rico, Canada and the U.K. COMSYS service offerings include contingent
and direct hire placement of IT professionals as well as a wide range of technical services and
solutions addressing requirements across the enterprise. TAPFIN Process Solutions delivers
critical management solutions across the resource spectrum from contingent workers to outsourced
services.
-MORE-
CITP Reports 2008 Third Quarter Results
Page 4
November 5, 2008
Forward-looking Statements
Certain information contained in this press release may be deemed forward-looking statements
regarding events and financial trends that could affect the Companys plans, objectives, future
operating results, financial condition, performance and business. These statements may be
identified by words such as estimate, forecast, plan, intend, believe, should,
expect, anticipate, or variations or negatives thereof, or by similar or comparable words or
phrases. These forward-looking statements are largely based on the Companys expectations and
beliefs concerning future events, which reflect estimates and assumptions made by management.
These estimates and assumptions reflect the Companys best judgment based on currently known market
conditions and other factors relating to its operations and business environment, all of which are
difficult to predict and many of which are beyond its control, including:
| |
|
|
economic declines that affect the Companys business, including its profitability,
liquidity or the ability to comply with applicable loan covenants; |
| |
| |
|
|
the financial stability of the Companys lenders and their ability to honor their
commitments related to our credit agreements; |
| |
| |
|
|
the financial stability of the Companys customers and other business partners and
their ability to pay their outstanding obligations; |
| |
| |
|
|
changes in levels of unemployment and other economic conditions in the United
States, or in particular regions or industries; |
| |
| |
|
|
the impact of competitive pressures on the Companys ability to maintain or improve
its operating margins, including pricing pressures as well as any change in the demand
for its services; |
| |
| |
|
|
the risk in an uncertain economic environment of increased incidences of employment
disputes, employment litigation and workers compensation claims; |
| |
| |
|
|
adverse changes in credit and capital markets conditions that may affect the
Companys ability to obtain financing or refinancing on favorable terms or that may
warrant changes to existing credit terms; |
| |
| |
|
|
the Companys success in attracting, training, retaining and motivating billable
consultants and key officers and employees; |
| |
| |
|
|
the Companys ability to shift a larger percentage of its business mix into IT
solutions, project management and business process outsourcing and, if successful, the
Companys ability to manage those types of business profitably; |
| |
| |
|
|
weakness or reductions in corporate information technology spending levels; |
| |
| |
|
|
the Companys ability to maintain existing client relationships and attract new
clients in the context of changing economic or competitive conditions; |
| |
| |
|
|
the entry of new competitors into the U.S. staffing services market due to the
limited barriers to entry or the expansion of existing competitors in that market; |
| |
| |
|
|
increases in employment-related costs such as healthcare and unemployment taxes; |
| |
| |
|
|
the possibility of the Companys incurring liability for the activities of its
billable consultants or for events impacting its billable consultants on clients
premises; |
| |
| |
|
|
the risk that the Company may be subject to claims for indemnification under its
customer contracts; |
| |
| |
|
|
the risk that cost cutting or restructuring activities could cause an adverse impact
on certain of the Companys operations; |
| |
| |
|
|
adverse changes to managements periodic estimates of future cash flows that may
affect the Companys assessment of its ability to fully recover its goodwill; and |
| |
| |
|
|
whether governments will amend existing regulations or impose additional regulations
or licensing requirements in such a manner as to increase the Companys costs of doing
business. |
-MORE-
CITP Reports 2008 Third Quarter Results
Page 5
November 5, 2008
Although the Company believes its estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are beyond its control. In
addition, managements assumptions about future events may prove to be inaccurate. Management
cautions all readers that the forward-looking statements contained in this report are not
guarantees of future performance, and the Company cannot assure any reader that those statements
will be realized or that the forward-looking events and circumstances will occur. Actual results
may differ materially from those anticipated or implied in the forward-looking statements due to
the factors listed in this section as well as the Risk Factors section included in the Companys
Annual Report on Form 10-K as filed with the Securities and Exchange Commission. All
forward-looking statements speak only as of the date of this report. The Company does not intend
to publicly update or revise any forward-looking statements as a result of new information, future
events or otherwise, except as required by law. These cautionary statements qualify all
forward-looking statements attributable to us or persons acting on the Companys behalf.
COMSYS IT PARTNERS, INC.
OPERATING DATA, SUPPLEMENTAL CASH FLOW INFORMATION AND NON-GAAP MEASUREMENTS
(IN THOUSANDS, EXCEPT OPERATING DATA)
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
| |
|
September 28, |
|
June 29, |
|
September 30, |
| Operating Data: |
|
2008 |
|
2008 |
|
2007 |
| |
|
|
Ending consultant headcount1 |
|
|
4,729 |
|
|
|
4,646 |
|
|
|
4,982 |
|
Billing days |
|
|
63 |
|
|
|
64 |
|
|
|
63 |
|
Revenue per billing day (in thousands) |
|
$ |
2,915 |
|
|
$ |
2,876 |
|
|
$ |
2,971 |
|
Average bill rate |
|
$ |
73.71 |
|
|
$ |
74.02 |
|
|
$ |
72.90 |
|
Gross margin |
|
|
24.6 |
% |
|
|
24.4 |
% |
|
|
25.2 |
% |
Effective tax rate |
|
|
15.5 |
% |
|
|
17.6 |
% |
|
|
8.9 |
% |
DSO |
|
|
49 |
|
|
|
45 |
|
|
|
48 |
|
Average daily debt balance (in millions) |
|
$ |
76.0 |
|
|
$ |
82.6 |
|
|
$ |
89.8 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
| |
|
September 28, |
|
June 29, |
|
September 30, |
| Supplemental Cash Flow Information: |
|
2008 |
|
2008 |
|
2007 |
| |
|
|
Net cash provided by operating activities |
|
$ |
3,549 |
|
|
$ |
2,629 |
|
|
$ |
26,951 |
|
Capital expenditures |
|
$ |
1,937 |
|
|
$ |
2,143 |
|
|
$ |
414 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
| |
|
September 28, |
|
June 29, |
|
September 30, |
| Non-GAAP Financial Measures: |
|
2008 |
|
2008 |
|
2007 |
| |
|
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income |
|
$ |
6,047 |
|
|
$ |
6,212 |
|
|
$ |
9,617 |
|
Depreciation and amortization |
|
|
2,185 |
|
|
|
1,898 |
|
|
|
1,653 |
|
Interest expense, net |
|
|
1,224 |
|
|
|
1,279 |
|
|
|
1,993 |
|
Other expense (income), net |
|
|
40 |
|
|
|
(172 |
) |
|
|
(18 |
) |
Income tax expense |
|
|
1,105 |
|
|
|
1,324 |
|
|
|
941 |
|
| |
|
|
EBITDA |
|
$ |
10,601 |
|
|
$ |
10,541 |
|
|
$ |
14,186 |
|
| |
|
|
EBITDA as a % of GAAP revenue |
|
|
5.8 |
% |
|
|
5.7 |
% |
|
|
7.6 |
% |
|
|
|
| 1 |
|
September 28, 2008, excludes 83 billable
resources from businesses acquired during the quarter |
A non-GAAP financial measure is a numerical measure of a companys performance, financial position,
or cash flows that either excludes or includes amounts that are not normally excluded or included
in the most directly comparable measure calculated and presented in accordance with generally
accepted accounting principles (GAAP). We believe EBITDA to be relevant and useful information
to our investors in assessing our financial operating results as these measures are used by our
management in evaluating our financial performance, liquidity, our ability to service debt and fund
capital expenditures. Additionally, our Debt to EBITDA ratio affects the interest rates we pay on
our credit agreements. However, these measures should be considered in addition to, and not as a
substitute for, or superior to, measures of financial performance prepared in accordance with
generally accepted accounting principles, and may not be comparable to similarly titled measures
reported by other companies. The non-GAAP measures included in this press release have been
reconciled to the nearest GAAP measures as required under SEC rules regarding the use of non-GAAP
financial measures.
-MORE-
CITP Reports 2008 Third Quarter Results
Page 6
November 5, 2008
COMSYS IT PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| |
|
|
|
|
| |
|
September 28, |
|
June 29, |
|
September 30, |
|
September 28, |
|
September 30, |
| |
|
2008 |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
| |
|
|
|
|
Revenues from services |
|
$ |
183,663 |
|
|
$ |
184,064 |
|
|
$ |
187,195 |
|
|
$ |
551,110 |
|
|
$ |
560,005 |
|
Cost of services |
|
|
138,483 |
|
|
|
139,232 |
|
|
|
139,945 |
|
|
|
416,442 |
|
|
|
420,920 |
|
| |
|
|
|
|
Gross profit |
|
|
45,180 |
|
|
|
44,832 |
|
|
|
47,250 |
|
|
|
134,668 |
|
|
|
139,085 |
|
| |
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
34,579 |
|
|
|
34,291 |
|
|
|
33,064 |
|
|
|
103,634 |
|
|
|
101,625 |
|
Depreciation and amortization |
|
|
2,185 |
|
|
|
1,898 |
|
|
|
1,653 |
|
|
|
5,903 |
|
|
|
4,700 |
|
| |
|
|
|
|
|
|
|
36,764 |
|
|
|
36,189 |
|
|
|
34,717 |
|
|
|
109,537 |
|
|
|
106,325 |
|
| |
|
|
|
|
Operating income |
|
|
8,416 |
|
|
|
8,643 |
|
|
|
12,533 |
|
|
|
25,131 |
|
|
|
32,760 |
|
Interest expense, net |
|
|
1,224 |
|
|
|
1,279 |
|
|
|
1,993 |
|
|
|
4,106 |
|
|
|
6,709 |
|
Other expense (income), net |
|
|
40 |
|
|
|
(172 |
) |
|
|
(18 |
) |
|
|
(185 |
) |
|
|
(469 |
) |
| |
|
|
|
|
Income before income taxes |
|
|
7,152 |
|
|
|
7,536 |
|
|
|
10,558 |
|
|
|
21,210 |
|
|
|
26,520 |
|
Income tax expense |
|
|
1,105 |
|
|
|
1,324 |
|
|
|
941 |
|
|
|
3,847 |
|
|
|
1,849 |
|
| |
|
|
|
|
Net income |
|
$ |
6,047 |
|
|
$ |
6,212 |
|
|
$ |
9,617 |
|
|
$ |
17,363 |
|
|
$ |
24,671 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.30 |
|
|
$ |
0.31 |
|
|
$ |
0.48 |
|
|
$ |
0.85 |
|
|
$ |
1.24 |
|
Diluted |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.48 |
|
|
$ |
0.84 |
|
|
$ |
1.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
19,612 |
|
|
|
19,592 |
|
|
|
19,459 |
|
|
|
19,594 |
|
|
|
19,182 |
|
Diluted |
|
|
20,455 |
|
|
|
20,636 |
|
|
|
20,118 |
|
|
|
20,611 |
|
|
|
20,101 |
|
-MORE-
CITP Reports 2008 Third Quarter Results
Page 7
November 5, 2008
COMSYS IT PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
| |
|
|
|
|
|
|
|
|
| |
|
September 28, |
|
December 30, |
| |
|
2008 |
|
2007 |
| |
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,590 |
|
|
$ |
1,594 |
|
Accounts receivable, net of allowance of $3,167 and $3,389, respectively |
|
|
237,969 |
|
|
|
189,317 |
|
Prepaid expenses and other |
|
|
3,649 |
|
|
|
3,153 |
|
Restricted cash |
|
|
3,427 |
|
|
|
3,365 |
|
| |
|
|
Total current assets |
|
|
246,635 |
|
|
|
197,429 |
|
| |
|
|
Fixed assets, net |
|
|
17,308 |
|
|
|
13,094 |
|
Goodwill |
|
|
175,045 |
|
|
|
174,160 |
|
Other intangible assets, net |
|
|
12,829 |
|
|
|
10,002 |
|
Deferred financing costs, net |
|
|
1,392 |
|
|
|
2,044 |
|
Restricted cash |
|
|
2,803 |
|
|
|
4,218 |
|
Other assets |
|
|
1,397 |
|
|
|
1,522 |
|
| |
|
|
Total assets |
|
$ |
457,409 |
|
|
$ |
402,469 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
177,296 |
|
|
$ |
145,622 |
|
Payroll and related taxes |
|
|
30,068 |
|
|
|
29,574 |
|
Current maturities of long-term debt |
|
|
1,250 |
|
|
|
5,000 |
|
Interest payable |
|
|
291 |
|
|
|
365 |
|
Other current liabilities |
|
|
9,939 |
|
|
|
7,897 |
|
| |
|
|
Total current liabilities |
|
|
218,844 |
|
|
|
188,458 |
|
| |
|
|
Long-term debt |
|
|
68,606 |
|
|
|
66,903 |
|
Other noncurrent liabilities |
|
|
4,865 |
|
|
|
2,476 |
|
| |
|
|
Total liabilities |
|
|
292,315 |
|
|
|
257,837 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock, no par value; 5,000,000 shares authorized; none issued |
|
|
|
|
|
|
|
|
Common stock, par value $.01; 95,000,000 shares authorized and 20,386,027 shares outstanding;
95,000,000 shares authorized and 20,180,578 shares outstanding, respectively |
|
|
203 |
|
|
|
201 |
|
Common stock warrants |
|
|
1,734 |
|
|
|
1,734 |
|
Accumulated other comprehensive income |
|
|
4 |
|
|
|
57 |
|
Additional paid-in capital |
|
|
226,324 |
|
|
|
223,174 |
|
Accumulated deficit |
|
|
(63,171 |
) |
|
|
(80,534 |
) |
| |
|
|
Total stockholders equity |
|
|
165,094 |
|
|
|
144,632 |
|
| |
|
|
Total liabilities and stockholders equity |
|
$ |
457,409 |
|
|
$ |
402,469 |
|
| |
|
|
-END-