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SFN Group Announces Second Quarter 2011 Financial Results

SFN Group Announces Second Quarter 2011 Financial Results

SFN Group Inc. (NYSE: SFN) today announced financial results for the second quarter ended June 26, 2011.

SFN Group president and CEO Roy Krause commented, "We continue to focus on executing our strategy to drive growth among our targeted customer segments. Expansion in our higher margin services and operating discipline in the second quarter contributed to a 70 basis point improvement year over year in Adjusted EBITDA to 3.6%."


Second quarter 2011 revenues were $512 million, compared with $514 million in the second quarter of last year.

Earnings from continuing operations in the second quarter 2011 were $8.6 million, or $0.16 per diluted share, compared with $2.7 million, or $0.05 per share, in the prior year.

Adjusted EBITDA (defined below) in the second quarter was $18.2 million, or 3.6% of revenues, compared with $14.7 million, or 2.9% of revenues, in the prior year.

Operating cash flow in the second quarter was $16.5 million and total debt was $6.8 million at the end of the period. Availability under the credit facility was $155 million as of the end of the quarter.

Krause continued, "We are very pleased with our continued ability to expand EBITDA margins and generate strong cash flow. During the second quarter, our small and mid-sized customers grew approximately 12% year over year, while our large customer account base experienced slowing trends through the quarter. As a result, across all of our services, we are accelerating our investments in sales and recruiting staff and expect to see improving growth trends through the second half of 2011 and beyond."


In the second quarter, Professional Services revenues represented 48% of total Company revenues and decreased 2.4% compared with the same prior year period. Revenues were lower on a year over year basis primarily related to the completion of several professional contingent workforce solutions projects. Excluding the impact of professional contingent workforce solutions, Professional Services had revenue growth of 3.5% year over year in the second quarter, primarily due to growth among small and mid-sized customers. Gross profit margin of 28.1% was up 250 basis points from the same period last year, primarily a result of increased pay/bill spreads and growth in higher margin services, including permanent placement and Recruitment Process Outsourcing. Segment operating profit was $14.5 million in the second quarter, or 6.0% of revenues, compared with $8.6 million, or 3.5% of revenues in the prior year.

Staffing Services revenues increased 1.7% year over year in the second quarter compared with the same period last year, primarily due to growth in small and mid-sized customers. Gross profit margin decreased 40 basis points compared with last year primarily as a result increased payroll taxes. Payroll tax expense increased due to rising state unemployment taxes in 2011 combined with the impact of a payroll tax credit in the second quarter of 2010, which more than offset improvements in pay/bill spreads. SG&A was 13.9% of revenues in the second quarter of both 2011 and 2010. Segment operating profit decreased to $3.9 million or 1.4% of revenues, compared with $4.7 million or 1.8% of revenues in the second quarter of last year.


During the second quarter, the Company purchased approximately 1,932,000 of its common shares at an average price of $10.56 per share, under its existing authorization. Additionally, on May 27, 2011, the Company's Board of Directors approved an additional authorization to purchase up to $75 million of common stock. There were no purchases during the quarter related to this authorization.


As previously announced, the Company has entered into a definitive agreement to be acquired by Randstad Holding nv (Euronext Amsterdam: RAND.AS) for $14.00 per common share through a cash tender offer, which values the Company's equity at approximately $770 million. Randstad, based in The Netherlands, is a leading global provider of HR Services. The transaction, which is subject to customary closing conditions, including regulatory approvals and the tender of greater than 50% of SFN Group's outstanding shares, is expected to close late in the third quarter.


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