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SFN Group Announces Fourth Quarter 2010 Financial Results

SFN Group Announces Fourth Quarter 2010 Financial Results

SFN Group, Inc. has announced its financial results for the fourth quarter ended December 26, 2010.

SFN Group President and CEO Roy Krause commented, "Our fourth quarter and full year results reflect solid execution of our strategy and disciplined operational management. We took advantage of improving industry trends to grow revenue, particularly within Professional Services, improve EBITDA margins to 3.0% for the full year and generate significant operating cash flow. I would like to thank our associates for delivering strong results in 2010."


Fourth quarter 2010 revenues were $549 million compared with $456 million last year, an increase of 20.5%.

Earnings from continuing operations in the fourth quarter were $9.4 million, or $0.17 per share on a diluted basis, compared with breakeven results in the prior year.

Adjusted earnings from continuing operations (defined below) in the fourth quarter were $9.4 million, or $0.17 per share, compared with adjusted earnings from continuing operations in the same prior-year period of $3.2 million, or $0.06 per share.

Adjusted EBITDA (defined below) in the fourth quarter was $24.3 million, or 4.4% of revenues, compared with $14.8 million, or 3.2% of revenues, in the prior year.
In 2010, revenues were $2.1 billion for the full year compared with $1.7 billion in 2009. Adjusted EBITDA increased to $62.5 million, or 3.0% of revenue, for the 12 month period in 2010, compared with $34.0 million, or 2.0% of revenue, for the same period in 2009.

Operating cash flow in the fourth quarter was $46.5 million and total debt was $5.0 million at the end of the period. Availability under the credit facility was $157.6 million as of the end of the quarter.

Krause continued, "Longer-term industry dynamics are positive, and we are positioned well for continued growth. In the second half of 2010, we made operating investments in sales and recruiting staff to further organic growth. Additionally, in the fourth quarter, we repaid the balance on our revolver with our strong cash flow. Future investments will be focused on expanding our presence in key Professional Services areas and share repurchases, as appropriate."


In the fourth quarter, Professional Services revenues were up 28.8% compared with the same prior-year period. Professional Services represented 46.3% of total Company revenues and experienced increases due to the first quarter Tatum LLC acquisition and continued year-over-year growth in all skills and services. Gross profit margin of 28.2% is up 350 basis points from the same period last year, primarily a result of increased pay/bill spreads, growth in higher-margin outsourcing and permanent placement services and lower payroll taxes. Segment operating profit was $14.4 million in the fourth quarter, or 5.6% of revenues, compared with $9.3 million or 4.7% in the prior year.

Staffing Services revenues increased 14.2% year over year in the fourth quarter compared with the same period last year. Gross profit margins increased 50 basis points compared with last year, primarily as a result of increased pay/bill spreads. SG&A expenses were $41.1 million or 14% of revenue in 2010, a 110 basis point improvement from the same period last year. Segment operating profit increased to $8.7 million or 3.0% of revenues, compared with $3.4 million or 1.3% of revenues in the fourth quarter of last year.


Revenue trends in the first four weeks of January 2011 are consistent with normal seasonal pullback in revenues in the first quarter of approximately 5% to 8% compared with the fourth quarter of 2010. Based on continued improvements in industry trends and anticipated growth in our business, we expect to further improve our operating leverage and increase our adjusted EBITDA margin by 50 to 90 basis points over the course of the year, generating a full-year adjusted EBITDA margin of between 3.5% and 3.9% of revenue in 2011.


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