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WALNUT CREEK, CA, Wednesday, January 7, 2004
Westaff, Inc. (NASDAQ: WSTF),
a leading provider of temporary light industrial, clerical/administrative
and call center staff, today reported financial results for the fourth quarter
and fiscal year, which ended November 1, 2003.
Fiscal 2003 Fourth Quarter Results
Revenues for the fourth quarter of fiscal 2003 were
$178.9 million, down slightly compared with $179.5
million for the fourth quarter of fiscal 2002. Domestic
revenues declined 4.7% due largely to a reduction
in sales for certain high volume, low margin government
business. Revenues from international operations
increased 21.9%. Excluding the effects of exchange
rate fluctuations, international revenues for the
quarter increased 7.0%, reflecting continuing success
in developing new business opportunities in the Company's
overseas operations.
"While the overall results for the fourth quarter
reflect the lingering effects of the recent economic
downturn
in the United States, we are optimistic about the potential
for future sales growth," commented Westaff President
and CEO, Dwight S. Pedersen. "We are continuing
our focus on implementation of programs that will result
in increased opportunities for growth in our business.
This focus has been especially concentrated on enhancing
the consistency and quality of our service offerings
and strengthening both our sales process and our direct
hire programs."
Gross margin for the quarter was 16.6% compared with
18.2% for the fourth quarter of fiscal 2002. The lower
gross margin reflects a $1.8 million fourth quarter
charge to increase the Company's domestic workers'
compensation reserves. This increase was a result of
continuing negative loss development trends in workers'
compensation. Fourth quarter 2003 gross margins were
also negatively affected by the competitive pricing
environment that continues to exist in the temporary
staffing industry.
"Westaff has been especially impacted by the
difficult environments relating to workers' compensation
and
unemployment insurance in the United States," Mr.
Pedersen continued. "We remain optimistic about
our potential for revenue growth in fiscal 2004 but
will also focus our efforts on mitigating the negative
effects of expected increases in costs associated with
state unemployment and workers' compensation insurance."
Selling and administrative expenses for the fourth
quarter of fiscal 2003 were $21.1 million compared
to $23.5 million in the fourth quarter of 2002. As
a percentage of revenues, selling and administrative
expenses were down from 13.1% in the fourth quarter
of fiscal 2002 to 11.8% in 2003. The Company has been
successful throughout fiscal 2003 in reducing and controlling
its operating costs and is committed to aggressively
continuing these efforts. The fourth quarter of fiscal
2003 included a $950,000 charge for an unfavorable
California appellate court decision which reversed
a Superior Court ruling regarding a binding arbitration
award issued in January of 2002. "We were extremely
disappointed that the appellate court chose to overturn
the decision of the Superior Court and the arbitration
panel", commented Mr. Pedersen. "This exemplifies
the challenges of operating in the current legal and
regulatory environment."
The Company reported operating income of $49,000
in the fourth quarter of 2003 compared with $1.5 million
in 2002. The Company also reported a net loss of
$600,000,
or ($0.04) per share, for the fourth quarter of fiscal
2003 compared with net income of $2.4 million, or
$0.15 per share, in 2002.
Fiscal 2003 Results
The Company reported an operating loss of $2.8 million
for fiscal 2003 compared with an operating loss of
$3.5 million for fiscal 2002. Revenues for fiscal
2003 were $530.3 million compared with $515.3 million
for 2002, an increase of 2.9%. Gross margin was 17.1%
for 2003 compared with 18.5% for fiscal 2002. Fiscal
2002 included a net tax benefit of $4.1 million primarily
relating to a change in the tax law in 2002 that
extended the net operating loss carryback period
from two to five years which increased the Company's
fiscal 2002 tax refund. The income tax charge of
$361,000 for fiscal 2003 primarily reflects certain
international and state income taxes. The Company
recognized a 100% valuation allowance against its
fiscal 2003 income tax benefit resulting from its
net loss for the year.
As a result of its adoption of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," the Company recorded an impairment
loss of $670,000 for goodwill associated with its Australian
operations. The loss was recorded as a cumulative effect
of a change in accounting principle and its effect
was to reduce fiscal 2003 earnings per share by $0.04.
Westaff provides staffing services and employment
opportunities for businesses in global markets. Westaff
annually
employs approximately 150,000 people and services
more than 14,000 client accounts from 270 offices located
throughout the U.S., the United Kingdom, Australia,
New Zealand, Norway and Denmark. 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 sales, margins and costs and the prospects
for fiscal 2004. 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, variability of employee-related
costs including workers' compensation liabilities,
a highly competitive market, control by a significant
shareholder, reliance on management information
systems, risks related to customers, variability of
operating
results and the seasonality of the business cycle,
reliance on executive management, risks related
to international operations, risks related to franchise
agent and licensed operations, uncertain ability
to continue and manage growth, reliance on field
management,
employer liability risks and ability to attract
and
retain the services of qualified temporary personnel.
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.
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