HIGHLIGHTS:
* Revenues for 1997 exceeded $1 billion, up 69% over 1996
* Income before restructuring charge for the quarter increased 82% to
$9.1 million ($0.28 per share) and for the year increased 77% to $30.8
million ($0.95 per share)
* Previously announced restructuring and impairment charge totaled $7.0
million, or $0.13 per share
* Higher-margin, higher-growth IT Services accounted for 66% of total
operating income
* Four businesses acquired in METAMOR Solutions and two businesses in
COMSYS IT Services since September 30, 1997
Summary Results of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
Revenues $281,239 $195,272 $1,008,059 $596,101
Gross profit $72,213 $46,591 $250,341 $144,596
Operating income before
restructuring charge $19,504 $12,307 $65,998 $36,725
Income before restructuring
charge $9,145 $4,078 $30,842 $17,394
After-tax restructuring
charge $4,039 $-- $4,039 $--
Net income $5,106 $4,078 $26,803 $16,454
Earnings per common share
(diluted):
Income before
restructuring
charge $0.28 $0.12 $0.95 $0.54
Net income $0.15 $0.12 $0.82 $0.54
HOUSTON, Feb. 10 /PRNewswire/ -- CORESTAFF, Inc. (Nasdaq: CSTF), one of
the largest national providers of information technology (IT) and staffing
services, today announced record results for the quarter and year ended
December 31, 1997. Excluding a previously announced restructuring charge, net
income was $9.1 million, or $0.28 per share, for the fourth quarter and $30.8
million, or $0.95 per share, for the full year. As previously announced, the
company took a $7.0 million pretax restructuring and impairment charge ($4.0
million after tax, or $0.13 per share) in the fourth quarter in connection
with the planned deployment of a new integrated information system in 1998.
Revenues in the quarter increased 44 percent to $281.2 million, up from
$195.3 million in the fourth quarter of 1996, and gross margin for the quarter
was 25.7 percent compared with 23.9 percent last year. The expansion in gross
margin reflects the shift in business mix toward higher-growth, higher-margin
IT services. The IT Services Group accounted for 56 percent and 65 percent of
CORESTAFF's consolidated revenues and gross profit, respectively, up from 46
percent and 52 percent, respectively, in the fourth quarter of 1996.
Operating income before the restructuring charge increased 58 percent to
$19.5 million, up from $12.3 million in 1996. The operating margin for the
current quarter was 6.9 percent compared with 6.3 percent for the fourth
quarter of 1996. The higher operating margin reflected the favorable business
mix shift, partially offset by personnel additions and investments in
infrastructure to grow and support the IT Services Group.
In the fourth quarter, the company recorded a pretax charge of $7.0
million, or $0.13 per share after tax, related to the deployment of a new
integrated front and back office information system. The deployment is
expected to begin in the second quarter of 1998 and the system should be fully
operational across the company's branch network by early 1999.
Pro Forma Results Confirm Robust Internal Growth. Pro forma revenues for
the current quarter were $284.1 million, up 20 percent from $237.0 million in
the fourth quarter of 1996. Excluding the restructuring charge, pro forma
income rose 66 percent to $9.2 million, or $0.28 per share, compared with pro
forma net income of $5.5 million, or $0.17 per share, in 1996. Pro forma
revenues for the full-year 1997 were $1.1 billion, up 26 percent from $834.2
million in 1996. Excluding the restructuring charge, pro forma net income
increased 60 percent to $33.3 million, or $1.02 per share, compared with pro
forma net income of $20.7 million, or $0.68 per share, in 1996.
Commenting on the results, Michael T. Willis, president and chief
executive officer, said, "This quarter we reached an important milestone in
the company's history -- revenues exceeded $1 billion in 1997. This is a
significant accomplishment for a company formed just four and a half years
ago.
"Operating results showed impressive growth in both the fourth quarter and
full-year 1997. These results make positive statements about our strategy of
executing selective acquisitions while focusing on driving internal growth,"
Willis continued.
"Twelve of our last 13 acquisitions have been in the IT Services area --
seven in the solutions area. This strategy of acquiring higher-margin,
higher-growth IT companies is reflected in revenue, earnings and margin
improvements at CORESTAFF. We expect to continue this focus on IT services in
1998," Willis said.
"During 1997, we invested heavily in infrastructure to support the
company's current and future growth," Willis noted. "Implementation of an
integrated information system is proceeding according to plan. We also made
significant investments in technical practices in the IT Services Group, in
the Productivity Solutions unit of the Staffing Services Group and in
enhancing our international recruiting capabilities. We recruited a number of
high-level executives and other senior managers to our METAMOR Solutions unit
to support the current and expected high rate of growth. We believe the
personnel additions and the improvements in systems and infrastructure will
allow us to effectively grow and manage the company in the future."
IT Services Group Accounted for 66 Percent of 1997 Operating Income.
Revenues and gross profit for the quarter were up 75 percent and 95 percent,
respectively, over the fourth quarter of 1996. Gross margin for the current
quarter increased to 30.0 percent from 26.9 percent in the fourth quarter of
1996, primarily due to the growth of METAMOR Solutions, the Group's IT
Solutions unit, which has higher internal growth rates and margins than
COMSYS, the Group's IT staff augmentation unit. METAMOR Solutions, which was
formed in March 1997, accounted for approximately 15 percent of the Group's
fourth-quarter revenues and 24 percent of its gross profit.
Pro forma revenues and gross profit for the quarter increased 33 percent
and 37 percent, respectively, from the fourth quarter of 1996. These
improvements reflect the continued strong demand for the company's IT
services. Pro forma gross margin for the quarter was 30.0 percent, up from
29.1 percent in the fourth quarter of 1996. This improvement was primarily
due to the higher internal growth rate of the higher-margin METAMOR Solutions
unit. METAMOR's internal growth rate for the quarter exceeded 60 percent
compared with the 28 percent internal growth rate for COMSYS.
Staffing Services Group Continues to Grow. Revenues and gross profit for
the fourth quarter were up 20 percent and 15 percent, respectively, over the
fourth quarter of 1996. Gross margin for the quarter was 20.2 percent,
compared with 21.2 percent for the fourth quarter of 1996. The lower gross
margin primarily related to a lower-margin business that was acquired in
January 1997. The Group's pro forma growth rate was 17 percent for the year
and 7 percent for the quarter. The growth rate for the fourth quarter was
effected by lower sales to certain large light industrial accounts.
Acquisition Program Focuses on IT Services. Since September 30, 1997, the
company has acquired six IT services businesses, four businesses in METAMOR
Solutions and two in COMSYS. Since January 1, 1997, the company has acquired
13 businesses having combined annual revenues in excess of $150 million at the
time of acquisition. Seven of the acquisitions were in METAMOR Solutions and
all but one were IT Services businesses.
Commenting on acquisitions, Willis said, "Our focus continues to be on
acquiring IT Services businesses. We continue to see strong deal flow and are
being very selective in pursuing those prospects that will increase the
quality of our IT service offerings and improve operating performance."
Established in 1993, CORESTAFF, Inc. is one of the largest national
providers of information technology (IT) services and staffing through its two
business groups: the IT Services Group, which is comprised of COMSYS
Information Technology Services and METAMOR Solutions, and the Staffing
Services Group, which operates under the name CORESTAFF Services. The
company, with revenues of more than $1.0 billion, operates 159 offices across
the United States, in India, the United Kingdom and Latin America.
This press release contains various forward-looking statements and
information that are based on management's belief as well as assumptions made
by and information currently available to management. When used in this
release, the words, "anticipate," "estimate," "project," "expect," and similar
expressions are intended to identify forward-looking statements. Although the
company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to have been correct. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated,
projected or expected. Among the key factors that may have a direct bearing
on the company's operating results are fluctuations in the economy, the degree
and nature of competition, demand for the company's services, and the
company's ability to integrate the operations of acquired businesses, to
recruit and place temporary and IT professionals, to expand into new markets,
and to maintain profit margins in the face of pricing pressures. In addition,
the information set forth under the captions "Risk Factors" in the company's
Registration Statement on Form S-3 (File No. 333-31509) and in the company's
Form 10-K for the fiscal year ended December 31, 1996, describe certain
additional risk and uncertainties that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
CORESTAFF, Inc. can be reached on the Internet at http://www.corestaff.com.
CORESTAFF, Inc. and Subsidiaries
Summary Consolidated Financial Data
(in thousands, except per share amounts)
Historical
Three Months Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
(unaudited) (unaudited)
Statement of Operations Data:
Revenues from services:
IT Services $156,645 $89,655 $530,364 $258,581
Staffing Services 124,594 103,549 477,695 329,142
Other -- 2,068 -- 8,378
Total 281,239 195,272 1,008,059 596,101
Gross profit:
IT Services 47,001 24,151 153,408 72,669
Staffing Services 25,212 21,909 96,933 69,828
Other -- 531 -- 2,099
Total 72,213 46,591 250,341 144,596
Selling, general and
administrative expenses 49,255 31,850 171,870 100,349
Restructuring and impairment
charge 6,965 -- 6,965 --
Depreciation and amortization 3,454 2,434 12,473 7,522
Operating income 12,539 12,307 59,033 36,725
Interest (expense) and other (3,736) (2,661) (12,821) (5,722)
Income before income taxes 8,803 9,646 46,212 31,003
Provision for income taxes 3,697 4,628 19,409 13,609
Income before extraordinary
loss 5,106 5,018 26,803 17,394
Extraordinary loss -- (940) -- (940)
Net income $5,106 $4,078 $26,803 $16,454
Earnings per share (B):
Basic $0.15 $0.12 $0.83 $0.55
Diluted $0.15 $0.12 $0.82 $0.54
Number of shares used to
calculate EPS:
Basic 32,246 31,925 32,104 29,853
Diluted 32,768 32,436 32,608 30,365
Pro Forma (Unaudited) (A)
Three Months Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
Statement of Operations Data:
Revenues from services:
IT Services $159,493 $119,974 $576,945 $425,257
Staffing Services 124,594 116,977 477,695 408,957
Other -- -- -- --
Total 284,087 236,951 1,054,640 834,214
Gross profit:
IT Services 47,864 34,944 171,027 125,647
Staffing Services 25,212 23,985 96,933 84,411
Other -- -- -- --
Total 73,076 58,929 267,960 210,058
Selling, general and
administrative expenses 49,758 38,308 181,186 138,737
Restructuring and impairment
charge 6,965 -- 6,965 --
Depreciation and amortization 3,535 3,350 13,765 12,571
Operating income 12,818 17,271 66,044 58,750
Interest (expense) and other (3,935) (5,071) (15,615) (20,351)
Income before income taxes 8,883 12,200 50,429 38,399
Provision for income taxes 3,731 5,711 21,180 16,714
Income before extraordinary
loss 5,152 6,489 29,249 21,685
Extraordinary loss -- (940) -- (940)
Net income $5,152 $5,549 $29,249 $20,745
Earnings per share (B):
Basic $0.16 $0.17 $0.91 $0.69
Diluted $0.16 $0.17 $0.90 $0.68
Number of shares used to
calculate EPS:
Basic 32,246 31,925 32,104 29,853
Diluted 32,768 32,436 32,608 30,365
December 31,
1997 1996
Balance Sheet Data:
Cash and cash equivalents $13,374 $6,521
Working capital 146,770 94,315
Long-term debt, net of
current maturities 246,883 107,839
Stockholders' equity 260,937 230,917
Total assets 581,371 396,397
(A) Pro forma data assume all acquisitions and the sale of the physical
therapy staffing business were consummated as of the beginning of the
periods presented.
(B) EPS for the 1996 periods are after the effects of the extraordinary
loss of $0.03 per share.
SOURCE CORESTAFF, Inc.
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Related links:
http://www.corestaff.com
CONTACT:
Austin P. Young, EVP or Edward L. Pierce,
CFO, of CORESTAFF, 713-548-3400; or Marilyn Windsor, General
Inquiries, 312-640-6692, Janine Warell, Analyst Inquiries,
312-640-6775, or Darcy Bretz, Media Inquiries, 312-640-6756, all
of The Financial Relations Board
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