News Releases

Listen to Westaff's Audio 3rd Quarter Conference Call

Click here for Financial Table

WALNUT CREEK, CA, Wednesday, August 21, 2002
Westaff, Inc. (NASDAQ: WSTF), a leading provider of temporary administrative and light industrial staff, today reported financial results for the third fiscal quarter, which ended July 13, 2002.

Westaff's third quarter sales increased 8.6% as compared to the second quarter of fiscal 2002 - the highest such third quarter rate of increase in more than five years. Also, primarily as a result of Westaff's improving sales and strict cost controls, the Company was able to generate operating income of $0.4 million during the third quarter.

"I am very pleased with the progress that Westaff is making with respect to both sales and profitability growth," said Westaff President and Chief Executive Officer Dwight S. Pedersen. "Based on recent trends, we hope to see year-over-year sales increases during the fourth quarter."

Sales of services and license fees were $119.1 million in the third quarter of fiscal 2002, a decrease of 4.0% as compared to $124.1 million in the third quarter of fiscal 2001. This decline is less than the fiscal 2002 second and first quarter year-over-year sales declines of 14.0% and 21.9%, respectively. The slowing rate of decline for the third quarter is indicative of improving economic conditions for the temporary staffing industry as well as Westaff's more aggressive approach to sales.

Westaff also reported $2.4 million in net income from continuing operations, or $0.15 per share, for the third quarter of fiscal 2002. That compares to $0.2 million, or $0.01 per share, for the corresponding fiscal 2001 quarter.

The Company recorded an income tax benefit of $2.5 million during the third quarter of fiscal 2002. This benefit is primarily attributable to a projected tax loss carryback. During the fourth quarter of fiscal 2001, Westaff established deferred tax asset valuation allowances of approximately $19.2 million. These allowances were recorded against the tax assets of the Company arising from future deductions of federal, state and foreign taxable income because, at that time, the Company determined that it was more likely than not that such deferred tax assets would not be realized. As a result of the extended net operating loss carryback provisions recently signed into law, the Company has re-established a portion of these deferred tax assets. Excluding the effect of this deferred tax asset valuation adjustment, the Company would have reported a net loss of $0.1 million or $0.01 per share.

Selling and administrative expenses declined $2.3 million for the third quarter of fiscal 2002 as compared to the third quarter of fiscal 2001 primarily as a result of the Company's implementing cost containment programs throughout fiscal 2002.

"We continue to watch our costs very closely," Pedersen said. "As part of that effort, we have an ongoing process to monitor and evaluate the performance of our field offices. As a result of this process, we may close or consolidate additional under-performing offices during the fourth quarter."

For the first 36 weeks of 2002, sales of services and license fees were $335.8 million, a decrease of $52.9 million or 13.6% over the same period in fiscal 2001. The Company reported a net loss from continuing operations of $4.0 million or $0.25 per share for the first 36 weeks of fiscal 2002 compared to income from continuing operations of $1.3 million or $0.08 per share for the same period in fiscal 2001.

The Company intends to accompany its Form 10-Q for the third quarter of fiscal 2002 with the certifications of Dwight S. Pedersen, its President and Chief Executive Officer, and Dirk A. Sodestrom, its Chief Financial Officer and Senior Vice President, as required by Section 906 of the Sarbanes-Oxley Act of 2002.

Westaff will discuss these results in a conference call at 8:00 a.m. (Pacific) on Thursday, August 22, 2002. The call will be Webcast live at www.vcall.com and will be available after the call on our Web site at www.westaff.com. The call will also be recorded so you may listen at your convenience. The recording will be available through August 26, 2002 by dialing 800-428-6051 and entering I.D. code 257134.

Westaff provides staffing services and employment opportunities for businesses in global markets. Westaff annually employs approximately 175,000 people and services more than 20,000 clients from more than 310 offices located throughout the U.S., the United Kingdom, Australia, New Zealand, Norway and Denmark. Westaff achieved fiscal 2001 system revenues of more than $580 million. For more information, please visit our Web site at www.westaff.com.

This press release contains forward-looking statements as defined in the Securities Exchange Act of 1934, and is subject to the safe harbors created by law. Forward-looking statements contained herein include, but are not limited to, the statements of Mr. Pedersen regarding fourth quarter sales and the consolidation of underperforming operations. The forward-looking statements contained herein involve a number of assumptions, risks and uncertainties. Actual results of future events could differ materially from estimates. Among the factors affecting future operating results are: compliance with debt covenants, liquidity, possible adverse effects of fluctuations in the general economy, reliance on executive management, uncertain ability to continue and manage growth, control by a significant shareholder, reliance on management information systems, risks related to international operations, variability of employee-related costs including workers' compensation liabilities, risks related to customers, variability of operating results and the seasonality of the business cycle, ability to attract and retain the services of qualified temporary personnel, a highly competitive market, reliance on field management, employer liability risks, risks related to franchise agent and licensed operations, the risk of Nasdaq de-listing and risks related to acquisitions.

Forward-looking statements are based on the beliefs and assumptions of the Company's management and on currently available information. The Company undertakes no responsibility to publicly update or revise any forward-looking statement. Additional information concerning the risks and uncertainties listed above, and other factors you may wish to consider, is contained in the Company's filings with the Securities and Exchange Commission, including the Company's most recent Form 10-K, Form 10-Q, Form 8-K and other filings.