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WALNUT CREEK, Calif.--(BUSINESS WIRE)--Westaff, Inc. (NASDAQ:WSTF - News), a leading provider of staffing services, today reported financial results for its first fiscal
quarter, which ended January 20, 2007. Consistent with historical
financial reporting, the Company's first three fiscal quarters
comprise twelve weeks, while the fourth fiscal quarter comprises 16 or
17 weeks.
Operating income for the first quarter was $653,000, which
represents an increase of $875,000 as compared to the first quarter of
the prior year. This improvement was largely achieved as a result of
reduced operating expenses, which were $1,195,000 less than those
incurred in the first quarter of the prior year. The decrease in
operating expenses was achieved primarily through decreased salary and
related costs, decreased communications and outside services costs,
decreases in franchised agents' share of gross profits and decreased
depreciation costs. Overall, revenue decreased $8.7 million as
compared to the prior year, primarily due to lower domestic sales
volumes. Gross margins continued the trend noted in recent press
releases, as it grew to 17.6%, from 16.8% in the first quarter of
fiscal 2006. This increase is attributable to our continued focus on
increasing revenue from higher margin business such as clerical and
continued success with our permanent placement program. In light of
the decline in revenue, gross profit decreased only $320,000 as
compared to the prior year's first quarter, due to our efforts to
improve our gross margins.
President and CEO Trish Newman commented, "The first quarter
demonstrated some significant positives for Westaff. First, we
achieved operating income in our traditionally slowest and weakest
quarter, which has frequently generated an operating loss. This
provides us good, early indication that the many changes we
implemented during fiscal 2006 are paying off. Second, we continued
our success of increasing gross margins, which continues to be a
significant focus. Third, our Australian operations demonstrated
significantly improved operating results, as their operating income
increased 46% from the first quarter of last year." Newman continued,
"On the other hand, we have some areas for improvement going forward,
which include increasing our domestic revenue base and improving our
operating results in the United Kingdom. We have initiatives in place
to address both."
The Company continued to strengthen its financial position during
the first quarter of fiscal 2007. Working capital increased to $42.9
million at January 20, 2007, from $41.9 million at October 28, 2006.
In addition, the Company's cash balance increased 37% as compared to
its balance at October 28, 2006. Both of these achievements are
significant in light of the fact our first quarter is historically our
slowest quarter.
So far in the second quarter of fiscal 2007, the Company is still
experiencing some softening in domestic revenue as compared to the
second quarter of fiscal 2006, but to a lesser extent than what was
experienced in the first quarter. However, gross margins continue to
compare favorably to prior periods and if that trend continues, it may
offset the decrease in domestic revenue should that continue through
the remainder of the second quarter. We are hopeful the trend of
decreased operating expenses will also continue, as will an
improvement in operating results from international operations. Based
on all this, as of this date we believe there is a reasonable chance
our second quarter operating results for fiscal 2007 will demonstrate
an improvement as compared to the first quarter of fiscal 2007.
Westaff will discuss these results on a conference call at 8:00 AM
Pacific time on Friday, March 2, 2007. The call will be accessible by
dialing 1-877-407-0782 domestically or +1-201-689-8567
internationally. Following the completion of the call, we will post it
on our website at www.westaff.com, where it will be available for
replay until March 2, 2008.
Westaff provides staffing services and employment opportunities
for businesses in global markets. Westaff annually employs in excess
of 125,000 people and services more than 15,000 client accounts from
more than 230 offices located throughout the United States, the United
Kingdom, Australia and New Zealand. For more information, please visit
our website 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. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date
hereof. All forward-looking statements are qualified in their entirety
by this cautionary statement. Forward-looking statements contained
herein include, but are not limited to, the statements regarding
revenue, gross margins, growth rates and the Company's prospects for
fiscal 2007. The forward-looking statements contained herein involve a
number of assumptions, risks and uncertainties. Actual results could
differ materially from estimates. Among the factors affecting future
operating results are: an intensely price competitive market,
variability of the amount of collateral that we are required to
maintain to support our workers' compensation obligation, the
sufficiency of our workers' compensation claims reserve, variability
of employee-related costs, including workers' compensation
liabilities, variability on our heavy working capital needs and our
ability to borrow to meet those needs, our ability to borrow under our
credit facilities and our compliance with the debt covenants, possible
adverse effects of fluctuations in the general economy, our ability to
collect on our accounts receivable, risks related to franchise agent
operations, risks related to international operations and fluctuating
exchange rates, reliance on executive management and key personnel,
our ability to attract and retain the services of qualified temporary
personnel, the ability of our customers to terminate our service
agreement on short notice, variability of the cost of unemployment
insurance for our temporary employees, any difficulty with our
information technology system, potential exposure to
employment-related claims, risks related to control by a significant
shareholder, the volatility of the Company's stock price, increased
regulatory compliance costs and litigation and other claims.
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 Annual Report on Form 10-K for the
year ended October 28, 2006.
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 except as required by
applicable laws and regulations.
Westaff, Inc.
Unaudited Financial Highlights
(In thousands, except per share data)
Fiscal Quarter Ended
---------------------------------
January 20, 2007 January 21, 2006
---------------- ----------------
Revenue $ 129,949 $ 138,600
Costs of services 107,032 115,363
---------------- ----------------
Gross profit 22,917 23,237
Gross margin 17.6% 16.8%
Franchise agents' share of gross
profit 3,539 4,333
Selling and administrative expenses 17,810 17,957
Depreciation and amortization 915 1,169
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Operating income (loss) 653 (222)
Interest expense 319 309
Interest income (35) (18)
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Income (loss) before income taxes 369 (513)
Income tax benefit (35) (117)
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Net income (loss) $ 404 $ (396)
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Basic and diluted earnings (loss)
per share $ 0.02 $ (0.02)
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Weighted average common shares
outstanding - basic 16,590 16,378
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Weighted average common shares
outstanding - diluted 16,658 16,480
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Westaff, Inc.
Unaudited Financial Highlights
(In thousands, except per share data)
Balance Sheet: January 20, 2007 October 28, 2006
---------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,843 $ 3,545
Trade accounts receivable 72,899 76,267
Deferred income taxes 6,083 5,834
Prepaid expenses 4,541 4,732
Other current assets 3,153 4,694
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Total current assets 91,519 95,072
Property and equipment, net 14,783 15,046
Deferred income taxes 12,420 12,404
Goodwill and other intangible
assets 15,826 15,792
Other long-term assets 1,116 951
---------------- ----------------
Total assets $ 135,664 $ 139,265
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Borrowings under revolving credit
facilities $ 4,890 $ 4,790
Current portion of capital lease
obligations 358 345
Note payable to related party 2,000 2,000
Accounts payable 4,837 5,245
Accrued expenses 36,523 40,800
---------------- ----------------
Total current liabilities 48,608 53,180
Long-term capital lease
obligations 745 833
Other long-term liabilities 19,293 19,243
---------------- ----------------
Total liabilities 68,646 73,256
---------------- ----------------
Stockholders' equity:
Common stock 166 166
Additional paid-in capital 38,776 38,617
Retained earnings 27,674 27,270
Accumulated other comprehensive
loss 402 (44)
---------------- ----------------
Total stockholders' equity 67,018 66,009
---------------- ----------------
Total liabilities and
stockholders' equity $ 135,664 $ 139,265
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