EX-99.1 2 com_8k1102ex.htm PRESS RELEASE ISSUED NOVEMBER 1, 2007 com_8k1102ex.htm
 
Exhibit 99.1
 
news
 
 



FOR FURTHER INFORMATION:
   
AT THE COMPANY:
AT FINANCIAL RELATIONS BOARD
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
November 1, 2007

COMFORCE CORPORATION ANNOUNCES
THIRD QUARTER 2007 RESULTS

·  
17th consecutive quarter of improved year-over-year revenues
·  
Net income up 91% in third quarter and 73% for first nine months of 2007, compared to same periods last year
·  
Interest expense continues to decline
 

Woodbury, NY -- November 1, 2007 -- COMFORCE Corporation (AMEX: CFS), a leading provider of outsourced staffing management services, specialty staffing and consulting services today reported results for its third quarter ended September 30, 2007.  Revenues for the quarter rose 7.5% to $150.7 million, compared to revenues of $140.2 million for the third quarter 2006.  The increase in revenues was primarily due to continued growth in the Human Capital Management Services segment, consisting of PRO Unlimited®, where revenues increased $8.7 million, or 10.3% over third quarter 2006.  Further, PRO recorded gross profit for the third quarter of $12.1 million, compared to $10.6 million for the comparable quarter last year.   Staff Augmentation revenues increased by $1.9 million, or 3.5%, principally due to a $2.1 million increase in Technical Services sales and a $1.2 million increase in services provided to Information Technology customers. This was partially offset by a $2.0 million decrease in Telecom Services revenue to $2.0 million, compared to $4.0 million for last year's third quarter.
Gross profit for the third quarter of 2007 was $23.2 million, or 15.4% of revenues, compared to $22.0 million, or 15.7% of revenues for the third quarter of 2006.
The Company reported operating income of $4.2 million for the quarter, compared to operating income of $4.1 million for the same period last year.

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Interest expense was $1.9 million for the third quarter of 2007, compared to $2.3 million for the third quarter of 2006.  As of September 30, 2007 the Company's public debt stood at $12.9 million, compared to $138.8 million in June 2000.
COMFORCE recorded income before income taxes of $2.7 million for the third quarter of 2007, compared to income before income taxes of $1.8 million for the same period last year.  The Company recognized a tax provision of $874,000 for the third quarter of 2007, compared to a tax provision of $816,000 in the third quarter of 2006.
Net income for the third quarter was $1.8 million or $0.09 per basic share and $0.06 per diluted share, compared to net income of $935,000, or $0.04 per basic share and $0.03 per diluted for the third quarter of 2006.

Nine Months Results
COMFORCE reported revenues of $442.0 million for the first nine months of 2007, compared to revenues of $418.7 million for the first nine months of 2006, a 5.5% increase.  The Company's revenues for the first nine months were favorably impacted by the continued strong performance of PRO Unlimited, where revenues increased $25.5 million over the first nine months of 2006.  PRO recorded gross profit of $35.8 million for the nine month period, compared to gross profit of $30.5 million for the comparable period last year.
The Company's gross profit for the first nine months of 2007 was $68.6 million, or 15.5% of revenues, compared to a gross profit of $64.3 million, or 15.3% of revenues for the first nine months of 2006.
Operating income was $11.8 million for the first nine months of 2007, compared to $11.5 million for the first nine months of 2006.
COMFORCE reported income before income taxes of $6.1 million for the first nine months of 2007, compared to income before income taxes of $4.4 million for the first nine months of 2006. In the second quarter of 2007, COMFORCE redeemed $10.0 million principal amount of 12% Senior Notes, resulting in a loss on debt extinguishment of $424,000 for the first nine months of 2007. The Company recognized a tax provision of $2.3 million for the nine month period ended September 30, 2007, compared to a tax provision of $2.2 million for the same period last year.
COMFORCE reported net income of $3.8 million for the first nine months of 2007, or $0.17 per basic share and $0.12 per diluted share, compared to a net income of $2.2 million, or $0.08 per basic share and $0.07 per diluted share for the first nine months of 2006.

Comments from Management
John Fanning, Chairman and Chief Executive Office of COMFORCE commented, "We are most pleased with our increase in revenues and net income for both the third quarter and nine months. The third quarter represented our 17th consecutive quarter of year-over-year increased revenue growth. PRO Unlimited continued to be the main driver behind our improved performance.  At the same time PRO's gross profit increased to $12.1 million for the quarter, up from $10.6 million for the same period last year.
"We were also happy to have posted increases in revenues of $1.9 million in Staff Augmentation primarily as a result of increased sales to our Technical and Information Technology customers."
Mr. Fanning concluded, "We are pleased with the results for the first nine months and will continue to work to grow our company.  I remain optimistic about COMFORCE's prospects, especially as it relates to PRO for the balance of 2007 and for 2008."

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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 services, 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, 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 customers to defer hiring contingent workers or reduce spending on the human capital management services and staffing that we provide;
 
·  
significant increases in the effective rates of any payroll-related costs that we are unable to pass on to our customers;  
 
·  
increases in the costs of complying with the complex federal, state and foreign laws and regulations under which we operate, or our inability to comply with these laws and regulations;
 
·  
our inability to collect fees due to the bankruptcy of our customers, including the amount of any wages we have paid to our employees for work performed for these customers;
 
·  
our inability to keep pace with rapid changes in technology in our industry;
 

 
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·  
in that we place our employees in other workplaces, losses incurred by reason of our employees’ misuse of customer proprietary information, misappropriation of funds, discrimination, harassment, theft of property, accidents, torts or other claims;
 
·  
increases in interest rates, which could significantly increase our interest expense under our bank credit facility;
 
·  
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 the documents governing our Senior Notes and bank credit facility, or any future debt instruments, our inability to use available cash in the manner management believes will maximize shareholder value; or

·  
any of the other factors described under “Risk Factors” in Item 1A of the Company’s annual report on Form 10-K for the year ended December 31, 2006 (a copy of which may be accessed through www.sec.gov or www.comforce.com).


-Financial Tables Follow-







COMFORCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30, 2007
   
September 24, 2006 [1]
   
September 30, 2007
   
September 24, 2006 [1]
 
                         
Net sales of services
  $
150,667
    $
140,158
    $
441,966
    $
418,736
 
                                 
Costs and expenses:
                               
Cost of services
   
127,503
     
118,207
     
373,399
     
354,471
 
Selling, general and administrative expenses
   
18,313
     
17,034
     
54,798
     
50,407
 
Depreciation and amortization
   
679
     
787
     
2,018
     
2,337
 
                                 
Total costs and expenses
   
146,495
     
136,028
     
430,215
     
407,215
 
                                 
Operating income
   
4,172
     
4,130
     
11,751
     
11,521
 
                                 
Other (expense) income:
                               
Interest expense
    (1,872 )     (2,292 )     (5,921 )     (7,222 )
Loss on debt extinguishment
   
      (151 )     (424 )     (169 )
Other income (expense), net
   
363
     
64
     
703
     
264
 
      (1,509 )     (2,379 )     (5,642 )     (7,127 )
                                 
Income before income taxes
   
2,663
     
1,751
     
6,109
     
4,394
 
Provision for income taxes
   
874
     
816
     
2,332
     
2,207
 
Net income
  $
1,789
    $
935
    $
3,777
    $
2,187
 
                                 
Dividends on preferred stock
   
252
     
252
     
754
     
754
 
                                 
Net income available to common stockholders
  $
1,537
    $
683
    $
3,023
    $
1,433
 
                                 
Basic income per common share
  $
0.09
    $
0.04
    $
0.17
    $
0.08
 
                                 
Diluted income per common share
  $
0.06
    $
0.03
    $
0.12
    $
0.07
 
                                 
Weighted average common shares outstanding, basic
   
17,387
     
17,337
     
17,385
     
17,302
 
Weighted average common shares outstanding, diluted
   
32,341
     
31,420
     
31,903
     
26,741
 

[1] Revised for the adoption of SAB 108 effective December 26, 2005.




COMFORCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
September 30, 2007 and December 31, 2006
(in thousands, except share and per share amounts)
(unaudited)
 
   
September 30, 2007
   
December 31, 2006
 
Assets
           
Current assets:
           
Cash and cash equivalents
  $
4,200
     
3,782
 
Accounts receivable, less allowance of $ 144 in 2007 and $195 in 2006
   
118,453
     
114,079
 
Funding and service fees receivable, less allowance of $64 in 2007 and $81 in 2006
   
13,557
     
13,170
 
Prepaid expenses and other current assets
   
4,064
     
3,863
 
Deferred income taxes, net
   
836
     
1,500
 
Total current assets
   
141,110
     
136,394
 
                 
Deferred income taxes, net
   
1,037
     
263
 
Property and equipment, net
   
7,652
     
5,376
 
Deferred financing costs, net
   
534
     
765
 
Goodwill
   
32,073
     
32,073
 
Other assets, net
   
246
     
267
 
                 
Total assets
  $
182,652
     
175,138
 
Liabilities and Stockholders’ Deficit
               
Current liabilities:
               
Accounts payable
  $
2,375
     
3,281
 
Accrued expenses
   
100,562
     
100,768
 
Total current liabilities
   
102,937
     
104,049
 
                 
Long-term debt (including related party debt of $1,581 in 2007 and  $1,520 in 2006)
   
90,471
     
89,770
 
Other liabilities
   
936
     
34
 
                 
Total liabilities
   
194,344
     
193,853
 
                 
Commitments and contingencies
               
                 
Stockholders’deficit:
               
Common stock, $.01 par value; 100,000,000 shares authorized,17,387,553 and 17,370,551 shares issued and outstanding in 2007 and 2006, respectively
   
174
     
174
 
Convertible preferred stock, $.01 par value:
               
Series 2003A, 6,500 shares authorized, 6,148 shares issued and outstanding at September 30, 2007 and December 31, 2006,with an aggregate liquidation preference of $8,273 at September 30, 2007 and $7,928 at December 31, 2006
   
4,304
     
4,304
 
Series 2003B, 3,500 shares authorized, 513 shares issued and outstanding at September 30, 2007 and December 31, 2006,with an aggregate liquidation preference of $667 at September 30, 2007 and $638 at December 31, 2006
   
513
     
513
 
Series 2004A, 15,000 shares authorized, 6,737 shares issued and outstanding at September 30, 2007 and December 31, 2006,with an aggregate liquidation preference of $8,158 at September 30, 2007 and $7,778 at December 31, 2006
   
10,264
     
10,264
 
Additional paid-in capital
   
48,345
     
48,190
 
Accumulated other comprehensive income
    (222 )    
55
 
Accumulated deficit
    (75,070 )     (82,215 )
                 
Total stockholders’ deficit
    (11,692 )     (18,715 )
                 
Total liabilities and stockholders’ deficit
  $
182,652
     
175,138
 
 
 
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