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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 2000
STAFFMARK, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-20971 71-0788538
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
234 East Millsap Road, Fayetteville, Arkansas 72703
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (501) 973-6000
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Not applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
Attached as an exhibit to this Form 8-K is a copy of a StaffMark, Inc.
press release which was disseminated publicly on April 27, 2000.
(c) Exhibits. The following exhibit is filed with this Form 8-K:
99.1 StaffMark, Inc. Press Release dated April 27, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAFFMARK, INC.
(Registrant)
Date: April 27, 2000 By: /s/ Terry C. Bellora
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Terry C. Bellora
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 StaffMark, Inc. Press Release dated April 27, 2000.
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EXHIBIT 99.1
Contact: Clete T. Brewer, Chairman and Chief Executive Officer
Terry C. Bellora, Chief Financial Officer
StaffMark, Inc.
(501) 973-6084
Cindy Leggett-Flynn/Lekha Rao
Brunswick Group
(212) 333-3810
StaffMark focuses on Growing E-Business Consultancy;
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Announces Robert Walters IPO; and Announces Q1 Results
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Fayetteville, Arkansas - April 27, 2000 - StaffMark, Inc. (NASDAQ: STAF) today
announced its intention to refocus its business model by concentrating its
growth efforts and resources on its e-solutions firm, Edgewater Technology, Inc.
. StaffMark plans to sell through an indirect wholly owned subsidiary
substantially all of its equity interest in Robert Walters, its indirect
wholly owned subsidiary, via an initial public offering (IPO) on the London
Stock Exchange.
. Proceeds from this IPO would be used to pay down outstanding StaffMark bank
debt.
. StaffMark announced that first quarter revenues were up 5.0% to $294.3
million versus 1999 Q1 revenues of $280.3 million and net income was $1.9
million versus 1999 Q1 of $6.4 million.
Clete Brewer, Chairman and CEO of StaffMark, said, "We are experiencing high
demand for Edgewater's e-solutions expertise. By focusing our attention on
Edgewater and providing the resources required, the Company will be able to
compete effectively in the rapidly growing Internet professional services
space."
He continued, "The Robert Walters share offering and our focus to unlock
Edgewater as a pure play e-solution business are totally directed at increasing
stockholder returns."
Change of Business Model
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The Board of Directors hired Credit Suisse First Boston to help explore
strategic alternatives due to the depressed values of U.S. publicly traded
staffing companies and the continued weakness in IT staffing demand in the U.S.
"This has been a beneficial process which has allowed us to examine each of our
six business brands closely. The emergence of Edgewater as a major player in
the middle market e-solutions segment and the higher values the public market is
assigning to this type of business has led to our decision to reposition that
business as a stand-alone or pure play business. We are considering strategic
alternatives for each of the other businesses, including possible divestitures,
that could potentially result in our retention of Edgewater as the primary
operating unit of our public company. In light of complex structural, legal and
other considerations, we expect to conclude our analyses and make a further
announcement concerning our plans within the next two weeks," Brewer said.
The listing of Robert Walters on the London Stock Exchange, and further
potential transactions, are designed to allow Edgewater to more effectively
execute its aggressive growth plan, realize an appropriate stand-alone valuation
and attract and retain talented Internet professionals. This action will
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also enhance branding efforts and allow the Company to compete more effectively
with its already-public competitors such as Sapient, Scient, Viant, Agency.com
and marchFIRST, Inc.
The Listing of Robert Walters
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The Company is pursuing the sale of substantially all of its interests in Robert
Walters through an initial public offering on the London Stock Exchange. Robert
Walters is a global resource consultancy service with 17 offices in 13
countries, headquartered in London. Interests in Robert Walters will not be
offered for sale in the U.S.
StaffMark acquired Robert Walters in 1998 because it offered global expansion,
new product offerings and opportunity for growth. Robert Walters has performed
successfully as it has expanded into three new countries, and has increased
revenues, operating income and EBITDA during this time. Robert Walters has
operated independently of the other StaffMark businesses since the acquisition,
has a strong management team and is a highly regarded brand. As we have
endeavored to focus our attention in the e-solutions space, we believe the best
use of our Robert Walters resource would be divestiture through an offering. For
the full year 1999, Robert Walters recorded revenues of $291.0 million,
operating income of $18.5 million and EBITDA of $21.8 million.
StaffMark expects to use the proceeds of the offering to repay bank debt and
increase the dedication of operating resources to Edgewater. It is expected
that the Robert Walters IPO would occur in the third quarter of 2000, depending
on market conditions.
Review of the Quarter
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Revenues increased 5.0% to $294.3 million compared with $280.3 million in the
first quarter of 1999. Gross profit increased 5.9% to $73.0 million as compared
to $68.9 million in the same quarter last year. Gross margins, which increased
20 basis points compared to the same period last year, increased sequentially
110 basis points from the fourth quarter 1999 to the current quarter. Net
income for the quarter was $2.4 million, or $0.08 per share on a diluted basis
before the change in amortization discussed below, compared with net income of
$6.4 million, or $0.22 per share in the same quarter of 1999. Earnings before
interest, taxes, depreciation and amortization ("EBITDA") in the most recent
quarter were $14.4 million, down from $18.4 million in the first quarter of
1999. On a per-share basis, EBITDA of $0.48 decreased 22.2% compared with $0.62
in the same period last year.
"While we are pleased with the growth and results of our StaffMark Commercial,
Robert Walters, and Edgewater businesses, we continue to see softness in the IT
Staffing sector from the wind-down of Y2K. As previously reported, this has
caused, and continues to cause, unpredictability in IntelliMark and their
operating results. We believe the downward trend in the IT Staffing unit of
IntelliMark has ended and we are cautiously optimistic that we will see growth
in the second quarter of 2000," Brewer concluded.
As a result of the Company's decision to operate its e-solutions business unit
as a separate segment, management reevaluated the estimated useful life of the
intangible assets associated with the 1999 acquisition of Edgewater Technology,
Inc. relative to the practice of other stand-alone e-solutions companies. As a
result of an independent valuation, the Company has reduced the amortization
period from 30 years to 10 years for these intangibles. This change was
effective January 1, 2000, and resulted in increased quarterly amortization
expense of approximately $0.6 million. Including this change in amortization
period, net income was $1.9 million, or $0.07 per diluted share for the first
quarter of 2000.
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Edgewater
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Edgewater, located in Boston's Route 128 technology corridor, is an award
winning e-solutions business and Internet professional services firm. Edgewater
posted revenues of $7.0 million for the first quarter of 2000, a 47% increase
compared with the same period last year. For the first quarter of 2000,
Edgewater has EBITDA of $1.4 million, or 20% as a percentage of revenue for the
period, compared to $1.5 million, or 30% as a percentage of revenue, in the same
period of 1999. Edgewater is poised for rapid growth in the year 2000 as
project backlog currently stands at approximately $14.4 million at March 31,
2000 compared to $3.8 million at the same time last year.
At March 31, 2000, Edgewater had 199 total employees, including approximately
161 billable consultants. Edgewater applies its e-strategy, e-solutions and
Internet outsourcing services to vertical markets, including retail e-commerce,
financial services, healthcare, agriculture and customer relationship management
(CRM). Edgewater consultants have implemented mission-critical e-solutions for
clients ranging from Internet pure-play dot.coms to long-established "brick-and-
mortar" companies.
Shirley Singleton and David Clancey, both veterans of Logica North America,
founded Edgewater in 1992. Edgewater was acquired by StaffMark in May 1999 and
has operated independently, retaining its pre-acquisition management. Upon
completion of the corporate repositioning, Singleton and Clancey will remain in
their current positions of Chief Executive Officer and Chief Technology Officer,
respectively. Dave Gallo will serve as Chief Operating Officer.
Edgewater is set apart by its technology expertise, rapid deployment capability
and success in helping organizations move through the barriers of technology
transition. Edgewater provides its clients with a full range of e-solutions
services from initial e-strategy development to operations support:
. e-strategy: Consulting services that aid clients in defining strategies for
integrating their Internet goals with their current business processes.
. e-solutions: Custom applications development to integrate client Web front
ends with legacy systems and customer service capabilities, providing an
integrated Internet business model.
. Internet Outsourcing: A spectrum of Internet services ranging from enhanced
site hosting, through semi-custom and custom integrated Application Service
Provider (ASP), completed with total Internet application outsourcing.
Shirley Singleton said, "Our strategic focus and efforts at Edgewater are to
expand our business and ensure that we are able to capitalize on our fast
growing e-business capabilities, where we are targeting the under-served middle
market business segment."
Results from Other Operating Segments
Commercial Services
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In the first quarter of 2000, StaffMark's Commercial Services segment grew
revenues approximately 15% to reach $154.9 million in revenue for the first
quarter of 2000. Commercial revenues contributed approximately 53% of revenues
in the quarter. Gross profit increased 11% from $29.4 million in the first
quarter of 1999 to $32.6 million for the first quarter of 2000. First quarter
gross margins decreased on a year over year comparison by 80 basis points;
however, margins increased 80 basis points on a sequential basis relative to the
fourth quarter of 1999. EBITDA decreased 7.0% to $8.3 million for the current
quarter. Brewer said, "Commercial Services' planned investments in Call Center
Solutions, Technology
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Training Centers and the Strategic Resources Group increased our current
operating expense but allowed us to grow this division at a 15% internal growth
rate."
Professional/IT
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Although the Professional/IT segment had revenues of $132.3 million, which was
approximately 9% lower than the first quarter of 1999, gross margin increased
from 26.9% in the first quarter of 1999 to 27.9% in the first quarter of 2000,
primarily the result of increased perm placement revenues. U.S. IntelliMark
revenues decreased approximately 21% or $13.3 million and EBITDA decreased 45%
or $3.3 million compared with the first quarter of 1999. We continued to see
the Y2K-related decline in demand for IT staffing. The rest of the
Professional/IT segment recorded an internal growth rate of approximately 3%.
Robert Walters group, also hampered by the overall decline in IT demand and a
very slow January, was able to grow revenues and more importantly increased
EBITDA by 24% compared to the same period in 1999. ClinForce and Strategic
Legal Resources accounted for $12.0 million in revenues and $1.2 million EBITDA,
a modest increase over the same period in 1999. Operating income for the
Professional/IT segment was $6.5 million in the first quarter of 2000 and was
$9.1 million in the same quarter last year.
- Tables Follow -
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STAFFMARK, INC.
Statements of Income
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, %
2000 1999 Change
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<S> <C> <C> <C>
SERVICE REVENUES $294,285 $280,312 5.0%
COST OF SERVICES 221,268 211,367
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Gross profit 73,017 68,945 5.9%
OPERATING EXPENSES:
Selling, general and administrative 58,655 50,514
Depreciation and amortization 6,586 4,816
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Operating income 7,776 13,615 (42.9%)
OTHER EXPENSE
Interest expense and other, net 4,941 3,351
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Income before income taxes 2,835 10,264
PROVISION FOR INCOME TAXES 904 3,857
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Net income $ 1,931 $ 6,407 (69.9%)
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Net income before amortization expense, net
of taxes $ 5,050 $ 8,497 (40.6%)
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EARNINGS PER SHARE BEFORE CHANGE
IN AMORTIZATION
Basic $ 0.08 $ 0.22
Diluted $ 0.08 $ 0.22
EARNINGS PER SHARE
Basic $ 0.07 $ 0.22
Diluted $ 0.07 $ 0.22
CASH EARNINGS PER SHARE
(Diluted EPS plus after tax intangibles) $ 0.17 $ 0.29
AVERAGE SHARES OUTSTANDING
Basic 29,461 29,289
Diluted 29,676 29,626
Gross margin 24.8% 24.6%
Operating margin 2.6% 4.9%
EBITDA margin 4.9% 6.6%
Net margin 0.7% 2.3%
</TABLE>
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<TABLE>
<CAPTION>
SUPPLEMENTAL SEGMENT DATA:
Three Months Ended
March 31,
2000 1999
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<S> <C> <C>
SERVICE REVENUES:
Professional/Information Technology $132,338 $145,733
Commercial 154,860 134,579
Edgewater 7,087 -
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Total service revenues 294,285 280,312
OPERATING INCOME:
Professional/Information Technology 6,480 9,072
Commercial 6,491 7,289
Edgewater 354 -
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Total operating income 13,325 16,361
Less: Corporate expenses 5,549 2,746
Operating income $ 7,776 $ 13,615
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</TABLE>
This Press Release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including statements
made with respect to StaffMark's plans to de-leverage and refocus its business
model, divest its interest in Robert Walters, and establish and grow a pure-play
or stand-alone e-solutions business, and with respect to future IT staffing
growth and business trends. Words such as "will," "focus," "believe,"
"expect," "continue," "hope" and "plan," or the negative thereof or variations
thereon and similar expressions are intended to identify forward-looking
statements. These forward-looking statements inherently involve certain risks
and uncertainties, although they are based on our current plans or assessments
that are believed to be reasonable as of the date of this Press Release.
Factors that may cause actual results, goals, targets or objectives to differ
materially from those contemplated, projected, forecast, estimated, anticipated,
planned or budgeted in such forward-looking statements include, among others,
the following possibilities: (i) the continuation or worsening of declines in
demand for information technology staffing or solutions services; (ii) changes
in industry trends such as changes in the demand for or supply of personnel;
(iii) adverse developments involving debt, equity or currency markets that
affect our plans or operations; (iv) failure to obtain new customers or retain
significant existing customers; (v) loss of key executives; and/or (vi) general
economic and business conditions (whether foreign, national, state or local)
which include but are not limited to changes in interest rates. Actual events or
results may differ materially from those discussed, contemplated, forecasted,
estimated, anticipated, planned or implied in the forward-looking statements as
a result of the various factors described above and those further factors set
forth under the headings "Management Discussion and Analysis-Year 2000
Compliance" and "Special Note Regarding Forward-Looking Statements" in the
Company's Quarterly Report on Form 10-Q filed with the Securities & Exchange
Commission on November 12, 1999, "Business--Factors Affecting Finances, Business
Prospects and Stock Volatility" in the Company's Form 10-K filed with the
Securities and Exchange Commission on March 20, 2000, and under the heading
"Potential Risks, Detriments and Other Considerations Associated With The
Transaction" in the Company's definitive proxy statement dated September 25,
1998, which was filed with the Securities and Exchange Commission on September
25, 1998.
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