MPS Group Announces Third Quarter 2009 Results

October 29, 2009 7:00 AM EDT

JACKSONVILLE, Fla.--(BUSINESS WIRE)-- MPS Group, Inc. (NYSE: MPS), a leading provider of specialty staffing, consulting and business solutions, today announced financial results for the third quarter and nine months ended September 30, 2009. Third quarter revenue of $408 million was within the range of guidance previously provided by management, and diluted net income per common share of $0.06 was above the range of guidance previously provided by management, due primarily to lower general and administrative expenses and the benefit of a lower income tax rate.

MPS Group revenue decreased 29% versus last year's third quarter. Excluding the impact of changes in foreign currency exchange rates, revenue was down 25% versus the third quarter of 2008. On a sequential basis, revenue declined 2% versus the second quarter of 2009. Excluding the impact of changes in foreign currency exchange rates, revenue decreased 5% sequentially versus the second quarter of 2009.

Third quarter gross margin of 26.8% was adversely affected by fewer permanent placement fees, which represented 2.9% of total revenue in the third quarter of 2009 versus 5.3% of total revenue in the prior year's third quarter. In the third quarter, operating income was $8 million, or 2.1% of third quarter revenue, compared with $7 million, or 1.6% of revenue, in the second quarter of 2009.

A detailed analysis of revenue, gross profit and operating income by segment is provided below. A summary balance sheet is provided below as well.

Timothy Payne, MPS Group Chief Executive Officer, stated, "We were pleased with our financial performance for the quarter despite the current weakness in the employment market."

"During the quarter, general and administrative expenses declined $6 million sequentially versus the second quarter of 2009, which produced a higher level of taxable income resulting in a lower-than-expected effective income tax rate," added MPS Group Chief Financial Officer Robert Crouch. "The combination of these two items resulted in earnings per share being above the range of guidance previously provided."

As previously announced, MPS Group has signed a definitive agreement to be acquired by Adecco Group for $13.80 per common share in a cash transaction valued at approximately $1.3 billion. The Adecco Group (SIX:ADEN-VX) (Euronext: ADE), based in Zurich, Switzerland, is a Fortune Global 500 Company and the world's leading provider of human resource solutions with operations in over 60 countries. The transaction is expected to close in the first quarter of 2010 and is subject to MPS Group shareholder approval, antitrust clearance and certain other regulatory approvals and closing conditions.

About MPS Group

MPS Group is a leading provider of staffing, consulting, and solutions in the disciplines of information technology, finance and accounting, law, engineering, marketing and creative, property, and healthcare. MPS Group delivers its services to businesses and government entities in the United States, Europe, Canada, Australia, and Asia. A Fortune 1000 company with headquarters in Jacksonville, Florida, MPS Group trades on the New York Stock Exchange. For more information about MPS Group, please visit www.mpsgroup.com.

Additional Information and Where To Find It

In connection with the proposed merger, MPS Group will file a proxy statement with the Securities and Exchange Commission ("SEC"). Investors are urged to read the proxy statement when it becomes available because it will contain important information about the merger as well as other documents filed by MPS Group at the SEC's Internet site, www.sec.gov. These documents can also be obtained for free from MPS Group's Investor Relations web site (www.mpsgroup.com) or by calling 904-360-2500.

MPS Group and its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed merger. Information regarding MPS Group's directors and executive officers is available in MPS Group's proxy statement dated April 20, 2009, filed with the SEC. Additional information regarding the interests of participants of MPS Group will be included in the proxy statement to be filed with the SEC in connection with the merger.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to certain risks, uncertainties or assumptions described above and may be affected by other factors, including, but not limited to: fluctuations in the economies and financial markets in the U.S. and foreign countries where we do business and in the Company's industry segments in particular; the market price of the Company's common stock has been, and may continue to be, materially affected by the anticipated commencement and completion of the proposed acquisition of the Company, or the failure of the acquisition of the Company to be completed; uncertainties associated with the proposed acquisition may cause a loss of employees and may otherwise adversely affect the Company's business operations; the proposed acquisition agreement contains restrictive covenants that may limit the Company's ability to respond to changes in market conditions or pursue business opportunities; industry trends toward consolidating vendor lists; the demand for the Company's services, including the impact of changes in utilization rates; consolidation or bankruptcy of major customers; the effect of competition, including the Company's ability to expand into new markets and to remain profitable or maintain profit margins in the face of pricing pressures; the Company's ability to retain significant existing customers or obtain new customers; the Company's ability to recruit, place and retain consultants and professional employees; the Company's ability to identify and complete acquisition targets and to successfully integrate acquired operations into the Company; possible changes in governmental laws and regulations affecting the Company's operations, including possible changes to laws and regulations relating to benefits for consultants and temporary personnel, and possible increased regulation of the employer-employee relationship; employment-related claims, costs, and other litigation matters; adjustments during periodic tax audits; litigation relating to prior and current transactions and activities; claims and liabilities asserted for the acts or omissions of our temporary employees; fluctuations in interest rates or foreign currency exchange rates; loss of key employees; fluctuations in the price of the Company's common stock due to actual or anticipated changes in quarterly operating results, financial estimates, statements by securities analysts, and other events; and other factors discussed in the Company's filings with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as: "will," "may," "should," "could," "expects," "intends," "plans," "hopes," "indicates," "projects," "can," "anticipates," "perhaps," "probably," "believes," "estimates," "appears," "predicts," "potential," "continues," "would," or "become," or other comparable terminology or the negative of these terms or other comparable terminology. Readers are urged to review and consider the matters discussed in "Item 1A. Risk Factors" of the Company's Form 10-K for the year ended December 31, 2008 and discussion of risks or uncertainties in subsequent filings with the Securities and Exchange Commission.

Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements are based on beliefs and assumptions of the Company's management and on information then currently available to management. Undue reliance should not be placed on such forward-looking statements. Forward-looking statements are not guarantees of performance. Such forward-looking statements were prepared by the Company based upon information available at the time of such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.

MPS Group, Inc.

Unaudited Operating Highlights

(in thousands, except per share amounts)

                         Three Months Ended        Nine Months Ended

                         September 30,             September 30,

Operating Highlights:    2009        2008          2009            2008

Revenue:

North American           $ 128,257   $ 192,185     $ 421,893       $ 557,453
Professional Services

International              107,616     142,033       309,347         443,383
Professional Services

North American
Information Technology     124,793     154,765       376,343         471,854
Services

International
Information Technology     47,105      88,501        147,474         262,065
Services

Total revenue              407,771     577,484       1,255,057       1,734,755

Gross profit:

North American             37,101      58,380        120,344         171,296
Professional Services

International              23,826      41,597        71,293          135,046
Professional Services

North American
Information Technology     38,966      47,797        117,902         145,525
Services

International
Information Technology     9,522       16,320        29,073          45,631
Services

Total gross profit         109,415     164,094       338,612         497,498

Operating income:

North American             6,145       17,104        20,588          51,645
Professional Services

International              2,811       5,213         6,629           23,839
Professional Services

North American
Information Technology     6,613       10,367        14,663          33,326
Services

International
Information Technology     743         4,009         3,477           9,879
Services

Operating income
before unallocated         16,312      36,693        45,357          118,689
corporate expenses

Unallocated corporate      7,865       7,513         24,032          22,721
expenses

Total operating income     8,447       29,180        21,325          95,968

Other income               1,573       (2,715  )     601             (4,259    )
(expense), net

Income before
provision for income       10,020      26,465        21,926          91,709
taxes

Provision for income       4,568       9,257         11,950          34,702
taxes

Net income               $ 5,452     $ 17,208      $ 9,976         $ 57,007

Diluted net income per   $ 0.06      $ 0.19        $ 0.11          $ 0.62
common share

Diluted common shares      89,199      90,315        88,161          91,738
outstanding

                                                   As of

                                                   September 30,   December 31,

                                                   2009            2008

Cash and cash equivalents                          $ 152,848       $ 90,566

Accounts receivable, net of allowance                259,220         282,093

Other                                                32,111          24,198

Current assets                                       444,179         396,857

Long-term assets                                     384,422         399,035

Total assets                                       $ 828,601       $ 795,892

Current liabilities                                $ 178,795       $ 173,147

Other                                                28,568          31,275

Stockholders' equity                                 621,238         591,470

Total liabilities and stockholders' equity         $ 828,601       $ 795,892

Working capital                                    $ 265,384       $ 223,710

                         Three Months Ended

                         September 30, 2009

Net cash provided by     $ 29,773
operating activities

MPS Group, Inc.

Unaudited Reconciliation of Non-GAAP Financial Measures to Most Comparable GAAP
Financial Measures

Reconciliation of EBITDA to Net Income

(in thousands)

                    Three Months Ended             Nine Months Ended

                    September 30,                  September 30,

                    2009           2008            2009            2008

EBITDA              $ 12,529       $ 34,857        $ 34,428        $ 112,740

Depreciation and
intangibles           4,082          5,677           13,103          16,772
amortization

Operating income      8,447          29,180          21,325          95,968

Other income          1,573          (2,715 )        601             (4,259  )
(expense), net

Income before
provision for         10,020         26,465          21,926          91,709
income taxes

Provision for         4,568          9,257           11,950          34,702
income taxes

Net income          $ 5,452        $ 17,208        $ 9,976         $ 57,007

Reconciliation of Year-Over-Year Quarterly Revenue Growth Rate, Excluding

the Effects of Changes in Foreign Currency Exchange Rates

                                   MPS             N. American     International

                                   Group           Businesses      Businesses

Revenue growth rate 3Q2008 to
3Q2009, excluding the effects of     -25.4  %        -26.9  %        -23.2   %
changes in foreign currency
exchange rates

Revenue growth rate contributed
from effects of changes in           -4.0   %        -0.2   %        -9.7    %
currency

GAAP revenue growth rate 3Q2008      -29.4  %        -27.1  %        -32.9   %
to 3Q2009

Reconciliation of Year-Over-Year Quarterly Revenue Growth Rate, Excluding

the Effects of Changes in Foreign Currency Exchange Rates

                    Professional   IT              IT              Professional

                    N. American    N. American     International   International

Revenue growth
rate 3Q2008 to
3Q2009, excluding
the effects of        -33.3  %       -19.0  %        -39.3  %        -13.2   %
changes in
foreign currency
exchange rates

Revenue growth
rate contributed
from effects of       -              -0.4   %        -7.5   %        -11.0   %
changes in
currency

GAAP revenue
growth rate           -33.3  %       -19.4  %        -46.8  %        -24.2   %
3Q2008 to 3Q2009

Reconciliation of Sequential Quarterly Revenue Growth Rate, Excluding

the Effects of Changes in Foreign Currency Exchange Rates

                    MPS            International   IT              Professional

                    Group          Businesses      International   International

Revenue growth
rate 2Q2009 to
3Q2009, excluding
the effects of        -4.9   %       -4.5   %        -11.2  %        -1.3    %
changes in
foreign currency
exchange rates

Revenue growth
rate contributed
from effects of       2.5    %       6.4    %        5.7    %        6.9     %
changes in
currency

GAAP revenue
growth rate           -2.4   %       1.9    %        -5.5   %        5.6     %
2Q2009 to 3Q2009

    Source: MPS Group, Inc.

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