Summary of Historical Results of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
1996 1995 1996 1995
Revenues $195,272 $100,658 $596,101 $344,548
Operating income $12,307 $6,605 $36,725 $17,807
Income before one-time
charges $6,418 $2,777 $18,794 $6,357
Income before extraordinary
item $5,018 $2,777 $17,394 $6,357
Net income $4,078 $2,777 $16,454 $6,357
Earnings per common share:
Income before one-time
charges $0.20 $0.11 $0.62 $0.29
Income before
extraordinary item $0.15 $0.11 $0.57 $0.29
Net income $0.12 $0.11 $0.54 $0.29
Average shares
outstanding 32,427 23,581 30,365 19,715
HOUSTON, Feb. 11 /PRNewswire/ -- CORESTAFF, INC. (Nasdaq: CSTF), one of
the largest national providers of information technology and staffing
services, today announced record results for the quarter and year ended
December 31, 1996. These record results include the after-tax effects of two
one-time charges totaling $2.3 million, or $0.08 per share, in the current
quarter for (i) the write-down to net realizable value of the Company's
physical therapy staffing business, a non-core business that was sold in
January 1997, and (ii) an extraordinary item to write-off deferred loan costs
of a $130 million credit facility that was replaced with a $200 million
credit facility in November 1996. Excluding these one-time charges, income
was $6.4 million, or $0.20 per share, for the fourth quarter and
$18.8 million, or $0.62 per share, for the full year.
Income before one-time charges for the current quarter increased
131% to $6.4 million compared with income of $2.8 million in the fourth
quarter of 1995. Earnings per share before one-time charges increased 82% to
$0.20 per share from $0.11 per share in 1995. Net income and earnings per
share increased 47% and 9%, respectively, over that reported for the fourth
quarter of 1995. The average number of shares outstanding during the current
quarter was 38% higher than a year ago, as a result of the Company's initial
and follow-on public offerings. The average number of shares for all periods
has been retroactively adjusted to give effect to the two three-for-two stock
splits that occurred in 1996.
Revenues in the current quarter increased 94% to $195.3 million from
$100.7 million in the fourth quarter of 1995. Operating income rose 86% to
$12.3 million from $6.6 million in the same period a year ago. Gross margin
for the current quarter was 23.9% or 150 basis points lower than the fourth
quarter of 1995 due to (i) higher revenue volume from large
Vender-in-Partnership (VIP) programs in the staffing services group and (ii)
the acquisition of certain lower-margin businesses in 1996. VIP programs
have lower gross margins than the Company's other staffing services business,
but higher operating leverage. Operating margin for the fourth quarter was
6.3% or 30 basis points lower than 1995, due to the lower gross margin, which
was partially offset by improved operating leverage.
Pro forma operating results, which assume all acquisitions were made as of
the beginning of the periods presented, demonstrate the high internal growth
rate of the Company's information technology and staffing services groups
during the current quarter. Pro forma revenues for the current quarter were
$206.3 million, up 26% from $163.7 million in the fourth quarter of 1995; pro
forma income before one-time charges rose 175% to $6.7 million, or $0.21 per
share, compared with pro forma income of $2.4 million, or $0.10 per share, in
1995.
For the year ended December 31, 1996, income before one-time charges was
$18.8 million, up 196% from income of $6.4 million for 1995. Earnings per
share before one-time charges increased 114% to $0.62 per share from $0.29 per
share for 1995. Revenues for 1996 were $596.1 million, up 73% from $344.5
million a year ago. Operating income rose 106% to $36.7 million from $17.8
million in 1995.
Information Technology Services ("IT") -- For the current quarter, the
IT group accounted for 45% and 51% of CORESTAFF's consolidated revenues
and gross profit, respectively, up from 34% and 38%, respectively, in
the fourth quarter of 1995. These increases reflect the higher internal
growth rate of this group compared with staffing services and CORESTAFF's
focus on acquiring businesses in the IT sector. Revenues and gross profit
for the current quarter were up 160% and 147%, respectively, over the fourth
quarter of 1995. Gross margin for the current quarter was 26.9% or 140 basis
points below that for the fourth quarter of 1995 primarily due to the
acquisition of certain lower-margin businesses in 1996.
Pro forma revenues and gross profit for the current quarter, which can be
used as a measure of internal growth, increased 37% and 43%, respectively,
from the fourth quarter of 1995. These improvements reflect the continued
strong demand for the Company's information technology services. Pro forma
gross margin was 110 basis points higher in the current quarter due to margin
expansion in the current year in certain lower-margin businesses that were
acquired in 1996.
Staffing Services Group -- For the current quarter, staffing services
accounted for 53% and 47% of CORESTAFF's consolidated revenues and gross
profit, respectively, down from 63% and 59%, respectively, in the fourth
quarter of 1995. Revenues and gross profit for the current quarter were up
63% and 45%, respectively, over the fourth quarter of 1995. Gross margin for
the current quarter was 21.2% or 260 basis points lower than the fourth
quarter of 1995, primarily due to (i) the higher proportion of revenues being
generated from VIP programs, (ii) lower internal growth of the Company's
higher-margin businesses and (iii) acquisitions in 1996 of businesses having
lower margins than the gross margin for staffing services in 1995.
Pro forma revenues and gross profit for the current quarter increased
19% and 12%, respectively, from the fourth quarter of 1995. These
improvements primarily reflect the increase in revenues from the VIP programs,
including new programs that were added in 1996. Pro forma gross margin for
the current quarter was 21.2% or 120 basis points lower than the fourth
quarter of 1995, reflecting the change in business mix related to higher
revenues from the VIP programs.
Acquisition Activity -- CORESTAFF acquired three IT businesses and one
staffing services business during the current quarter. These businesses
were acquired in all cash transactions totaling $57 million. The acquired IT
businesses had combined revenues of approximately $46 million and the staffing
services business had revenues of $34 million for the twelve-month period
preceding their acquisition. In January 1997, the Company acquired a staffing
services business that had 1996 revenues of $36 million for $8 million in
cash.
One-time Charges -- During the current quarter, the Company took two
one-time charges, which net of income tax totaled $2.3 million, or $0.08 per
share.
Approximately $1.4 million of the one-time charges related to a write-down
to net realizable value of CORESTAFF's investment in its non-core, physical
therapy business. This business, which was sold in January 1997, accounted
for less than 2% of the Company's 1996 revenues and operating income. The
sale related to the Company's decision to exit the healthcare staffing
business and focus on the development of its core businesses of information
technology and staffing services.
The remaining $0.9 million charge, which is reported as a extraordinary
item, was for the write-off of deferred loan costs related to the Company's
$130 million credit facility. This facility was replaced in November 1996
with a new $200 million credit facility. The terms of the $200 million
facility, including interest rates, facility fees and financial covenants, are
more favorable to the Company than the $130 million facility.
Fourth Quarter Review
Commenting on the results, Michael T. Willis, chairman and CEO, said, "We
are very pleased with the record financial results for the fourth quarter and
the full year of 1996. These results demonstrate our ability to generate high
internal growth, while executing a successful and focused acquisition program.
"During the quarter, the Company's internal growth rate exceeded
26 percent and we completed four strategic acquisitions: three IT businesses
and one staffing services business. We also expanded our acquisition capital
by replacing our $130 million credit facility with a new facility that
includes the ability to increase the commitment to $250 million. CORESTAFF's
strong operating capabilities and well-disciplined acquisition program,
together with our access to capital, will position the Company to continue its
high rate of growth."
In commenting on the acquisitions, Mr. Willis stated, "During 1996,
CORESTAFF was one of the most active consolidators in the industry. During
the year, the Company acquired ten IT services businesses and four staffing
services businesses. Combined revenues of the acquired companies for the
12 months prior to acquisition were in excess of $238 million. Our
acquisition focus continues to be on medium-sized companies in the IT sector.
We have acquired these companies at more attractive purchase price multiples
than the purchase price multiples currently being paid for large regional
companies.
"Our recent IT acquisitions have not only improved our geographic market
presence, but they also increased our access to foreign technology
consultants, particularly those from India, South Africa and the Pacific Rim.
We consider this particularly significant since we believe supply of
consultants is the largest single issue facing the IT industry. In addition,
we have increased the number of consultants having experience with
high-demand technologies, such as SAP. We believe that supplementing our
domestic consultants with foreign consultants will position us to meet the
strong demand for technology consultants as it becomes more acute."
Looking Forward
"We're excited about our acquisition opportunities and are evaluating
strategies for vertical integration in both the IT and staffing services
sectors. We believe vertical integration in these sectors will allow us to
move into higher-margin, value-added services and will create significant
synergy with our existing core businesses," Mr. Willis said.
Established in 1993, CORESTAFF, INC. has quickly become one of the largest
national providers of information technology and staffing services through its
two key operating units: COMSYS Information Technology Services and CORESTAFF
Services. The Company, with pro forma revenues in excess of $730 million,
operates 150 branches across the United States and has operations in the
United Kingdom.
Except for historical information, all of the statements, expectations
and assumptions contained in the foregoing are forward-looking statements
that involve a number of risks and uncertainties. Although the Company has
used its best efforts to be accurate in making those forward-looking
statements, it is possible that the assumptions made by management may not
materialize. In addition, important factors which could cause results to
differ materially are set forth under the caption "Risk Factors" in the
Company's annual report on Form 10-K, a copy of which is available upon
request from CORESTAFF's investor relations department.
CORESTAFF, INC. and Subsidiaries
Summary Consolidated Results of Operations
(In thousands, except per share amounts)
Historical
Three Months Ended Year Ended
December 31, December 31,
1996(2) 1995 1996(2) 1995
(unaudited) (unaudited)
Revenues $195,272 $100,658 $596,101 $344,548
Gross profit 46,591 25,530 144,596 82,456
SG&A expenses 31,850 17,647 100,349 60,434
Depreciation and
amortization 2,434 1,278 7,522 4,215
Operating income 12,307 6,605 36,725 17,807
Income before one-time
charges 6,418 2,777 18,794 6,357
Income before extraordinary
item 5,018 2,777 17,394 6,357
Extraordinary item (940) -- (940) --
Net income $4,078 $2,777 $16,454 $6,357
Earnings per common share:(1)
Income before one-time
charges $0.20 $0.11 $0.62 $0.29
Income before extraordinary
item $0.15 $0.11 $0.57 $0.29
Net income $0.12 $0.11 $0.54 $0.29
Number of shares used to
compute earnings per
share 32,427 23,581 30,365 19,715
Pro Forma(3)
Three Months Ended Year Ended
December 31, December 31,
1996(2) 1995 1996(2) 1995
(unaudited) (unaudited)
Revenues $206,289 $163,720 $734,186 $601,289
Gross profit 49,700 39,398 179,101 145,492
SG&A expenses 33,344 26,923 120,864 101,655
Depreciation and
amortization 2,651 2,415 9,917 9,079
Operating income 13,705 10,060 48,321 34,758
Income before one-time
charges 6,673 2,423 21,039 6,019
Income before extraordinary
item 5,273 2,423 19,639 6,019
Extraordinary item (940) -- (940) --
Net income $4,333 $2,423 $18,699 $6,019
Earnings per common share:(1)
Income before one-time
charges $0.21 $0.10 $0.70 $0.27
Income before extraordinary
item $0.16 $0.10 $0.65 $0.27
Net income $0.13 $0.10 $0.62 $0.27
Number of shares used to
compute earnings per
share 32,427 23,581 30,365 19,715
(1) 1995 amounts have been adjusted to give retroactive effect to the
conversion of preferred stock to common stock.
(2) Includes the after-tax effects of two one-time charges totaling
$2.3 million ($0.08 per share), of which approximately
$0.9 million ($0.03 per share) is reported as an extraordinary item.
(3) Assumes all acquisitions were made as of the beginning of the periods
presented.
CORESTAFF, INC. and Subsidiaries
Summary Financial Data by Business Line
(Unaudited)
Historical
Three Months Ended
December 31,
1996 1995
(dollars in thousands)
Revenues from Services:
Staffing Services $103,549 53.0% $63,650 63.2%
Information Technology
Services 88,458 45.3% 34,060 33.8%
Other 3,265 1.7% 2,948 3.0%
Total $195,272 100.0% $100,658 100.0%
Gross Profit:
Staffing Services $21,909 47.0% $15,118 59.2%
Information Technology
Services 23,783 51.0% 9,645 37.8%
Other 899 2.0% 767 3.0%
Total $46,591 100.0% $25,530 100.0%
Gross Margin:
Staffing Services 21.2% -- 23.8% --
Information Technology
Services 26.9% -- 28.3% --
Other 27.5% -- 26.0% --
Consolidated 23.9% -- 25.4% --
Historical
Year Ended
December 31,
1996 1995
(dollars in thousands)
Revenues from Services:
Staffing Services $329,142 55.2% $233,823 67.9%
Information Technology
Services 255,150 42.8% 99,497 28.9%
Other 11,809 2.0% 11,228 3.2%
Total $596,101 100.0% $344,548 100.0%
Gross Profit:
Staffing Services $69,828 48.3% $52,076 63.2%
Information Technology
Services 71,598 49.5% 27,555 33.4%
Other 3,170 2.2% 2,825 3.4%
Total $144,596 100.0% $82,456 100.0%
Gross Margin:
Staffing Services 21.2% -- 22.3% --
Information Technology
Services 28.1% -- 27.7% --
Other 26.8% -- 25.2% --
Consolidated 24.3% -- 23.9% --
Pro Forma(1)
Three Months Ended
December 31,
1996 1995
(dollars in thousands)
Revenues from Services:
Staffing Services $104,974 50.9% $88,556 54.1%
Information Technology
Services 98,050 47.5% 71,490 43.7%
Other 3,265 1.6% 3,674 2.2%
Total $206,289 100.0% $163,720 100.0%
Gross Profit:
Staffing Services $22,248 44.8% $19,841 50.4%
Information Technology
Services 26,553 53.4% 18,616 47.2%
Other 899 1.8% 941 2.4%
Total $49,700 100.0% $39,398 100.0%
Gross Margin:
Staffing Services 21.2% -- 22.4% --
Information Technology
Services 27.1% -- 26.0% --
Other 27.5% -- 25.6% --
Consolidated 24.1% -- 24.1% --
Pro Forma(1)
Year Ended
December 31,
1996 1995
(dollars in thousands)
Revenues from Services:
Staffing Services $371,755 50.6% $323,340 53.8%
Information Technology
Services 349,258 47.6% 264,480 44.0%
Other 13,173 1.8% 13,469 2.2%
Total $734,186 100.0% $601,289 100.0%
Gross Profit:
Staffing Services $78,829 44.0% $69,427 47.7%
Information Technology
Services 96,764 54.0% 72,703 50.0%
Other 3,508 2.0% 3,362 2.3%
Total $179,101 100.0% $145,492 100.0%
Gross Margin:
Staffing Services 21.2% -- 21.5% --
Information Technology
Services 27.7% -- 27.5% --
Other 26.6% -- 25.0% --
Consolidated 24.4% -- 24.2% --
(1) Assumes all acquisitions were made as of the beginning of the periods
presented.
SOURCE CORESTAFF, Inc.
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CONTACT:
Austin P. Young, EVP, or Edward L. Pierce,
CFO, of CORESTAFF, Inc., 713-961-3633; or Marilyn Windsor,
General Inquiries, 312-640-6692, or Janine Warell, Analysts,
312-640-6775, Laura Kuhlmann, Media, 312-640-6727, all of the
Financial Relations Board
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