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EXHIBIT 99.4
[EDGEWATER TECHNOLOGY LETTERHEAD]
Contact: Clete T. Brewer, Chairman and Chief Executive Officer
Terry C. Bellora, Chief Financial Officer
Edgewater Technology, Inc.
(501) 973-6084
Lekha Rao
Brunswick Group
(212) 333-3810
Edgewater Technology, Inc. Announces Second Quarter 2000 Results And Discusses
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the Direction of the Company, Recent Events
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Fayetteville, Ark - August 2, 2000 - Edgewater Technology, Inc. (NASDAQ: EDGW,
the "Company"--previously known as StaffMark, Inc.), announced financial results
for the second fiscal quarter ended June 30, 2000. The Company also summarized
two recent transactions, announced a reduction in the carrying value of its
Professional/Information Technology segment and discussed its new strategic
direction.
. The Commercial Services Division (including the StaffMark name) was sold for
$190 million in cash.
. The Robert Walters plc ("Robert Walters") initial public offering ("IPO")
generated $199 million in gross proceeds. The Company no longer has any
equity interest in Robert Walters.
. The Company repaid all bank debt and invested $90 million in short-term
instruments.
. The Company recognized a $150 million impairment of goodwill in the
Professional/IT segment.
. The Company reported a second quarter 2000 loss of ($0.11) per share (from
continuing operations, before the impairment) vs. a profit of $0.11 EPS in
the same period last year. It reported a second quarter 2000 loss of ($3.61)
per share when including the results of discontinued operations for
Commercial Services and Robert Walters in addition to the impairment.
. The Board of Directors authorized an initial $30 million share repurchase
program to be conducted over the course of the next 12 months.
. The Company's focus is now clearly on Edgewater Technology ("Edgewater"), its
eSolutions business, which reported 61% organic revenue growth for the second
quarter of 2000.
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Clete T. Brewer, Chairman and Chief Executive Officer, commented, "Management is
excited about Edgewater's growth and historical profitability in the eSolutions
sector. We feel that our refocused initiatives may not be clearly reflected in
reported consolidated quarterly earnings for, perhaps, the remainder of the year
due to the accounting for the divestiture process, which is still progressing.
For example, the estimated $120 million pretax book gain from the July 6 closing
of Robert Walters' IPO is not reported in this quarter's results but instead
will be reflected in the third quarter."
Change of Business Model
------------------------
During the first quarter of 1999, market values for publicly traded staffing
companies began to decline. For many staffing companies, this trend
subsequently continued or deteriorated further and was compounded by a slowdown
in demand for information technology ("IT") staffing. These circumstances
contributed to depressed market valuations for companies like StaffMark. In
response to these developments, the Company, with guidance from its financial
advisor Credit Suisse First Boston, began to explore strategic alternatives for
each of its business platforms in an effort to maximize stockholder value.
After evaluating the Company's traditional businesses, its eSolutions business
and its debt levels, management and the Board of Directors chose to take
decisive action, including efforts to focus future growth initiatives on its
historically profitable eSolutions business, Edgewater. To further these
objectives, the Company sold its Commercial Services Division (including assets,
liabilities and the "StaffMark" name) to Stephens Group, Inc. for approximately
$190 million in cash before fees, expenses and taxes on June 29, 2000, as
previously announced. Simultaneous with the closing of this sale, the Company
changed its name to "Edgewater Technology, Inc." and its stock symbol to "EDGW."
On July 6, 2000, an IPO of the Company's former indirectly wholly-owned
subsidiary, Robert Walters was completed on the London Stock Exchange. As a
result of the IPO, on a consolidated basis, the Company received approximately
$199 million in total gross proceeds before commissions, expenses and taxes.
The Company no longer has any equity interest in Robert Walters.
The gross proceeds from the Commercial Services and Robert Walters transactions
were used to repay all the Company's bank debt of approximately $288 million and
to invest approximately $90 million in cash and short-term marketable
securities. The gross proceeds from these transactions will result in an
aggregate net book gain of approximately $115 million before taxes. Because the
Robert Walters transaction was completed in July, the gain on that transaction
will not be recorded until the third quarter of this year.
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Subsequent to the closing of these transactions, and as previously announced,
the Company's Board of Directors authorized management to initially use up to
$30 million to repurchase common stock over the course of the next twelve months
(unless shortened or extended by the Board of Directors). The repurchases will
be made from time to time on the open market at prevailing market prices or in
negotiated transactions off the market.
The Company is continuing to work with Credit Suisse First Boston in evaluating
strategic alternatives for the each of the three non-eSolutions platform
companies that comprise the Company's Professional/IT segment: IntelliMark
(providing traditional IT staffing and solutions), ClinForce (providing staffing
services for clinical trial clients, especially pharmaceutical companies), and
Strategic Legal Resources (providing legal staffing support for corporations and
legal firms). To that end, the Professional/IT segment was reexamined on its
stand-alone merits and management has decided to write-down the book value of
these Professional/IT assets by recognizing an impairment to goodwill values of
$150 million. This impairment is strictly a non-cash accounting reserve and has
no impact on cash-flow or on-going operations. Any amount that may ultimately
be realized if these assets were to be sold could have a significant positive or
negative variance from management's estimates of fair value. If the assets of
the Professional/IT segment are sold, management and the Board of Directors will
evaluate the alternative uses of these proceeds for the benefit of our
stockholders that may include additional share repurchases.
The Company has retained Banc of America Securities to evaluate and recommend an
optimal capital structure for Edgewater (as a pure-play eSolutions company) and
to advise on its positioning relative to the eSolutions peer group. We believe
our initiatives should position Edgewater to effectively execute its aggressive
growth plan, enhance Edgewater's branding and recruiting efforts and allow it to
compete more effectively with its pure-play public competitors.
Commenting on the announcement, Brewer said, "At Edgewater's current stock
price, we believe buying back our stock is a good and prudent use of our excess
cash. We intend to generate additional cash through the disposition of our
remaining non-eSolutions businesses. We will continue to look for ways to
increase profits in the Professional/IT segment and increase top-line growth in
our eSolutions segment. We have worked extremely hard to transform our business
and we hope to complete this repositioning by the end of the first quarter of
2001."
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Review of Results for the Three and Six Months
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Consolidated Results
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The financial results for all periods presented have been restated to present
the Commercial Services Division and Robert Walters as discontinued operations.
The sale of the Commercial Services Division is included in the discontinued
operation results; however, the sale of Robert Walters and its estimated pretax
gain of approximately $120 million will not be recognized until the third
quarter of this year since that transaction was not completed until July.
Consolidated revenues from continuing operations for the second quarter were
$65.0 million, 24.4% lower than the $86.1 million generated in the second
quarter of 1999. For the first six months of 2000, revenues of $136.2 million
decreased 16.4% from $162.9 million in the comparable period of 1999. The
primary reason for the lower revenues is the decline in demand for traditional
IT staffing during the current year as companies completed preparation for Y2K.
Demand in 2000 has moved away from the legacy systems and toward new skill sets
in the Internet and browser based systems. Gross profit from continuing
operations in the second quarter was $19.7 million, or 30.3% of revenues,
compared to $26.9 million and 31.3% in the same quarter last year. Gross profit
from continuing operations for the six months ended June 30, 2000 was $40.7
million, or 29.8% of revenues, compared to $49.4 million, or 30.3% of revenues,
respectively, in the year earlier period. Gross profit decreased as a result of
the lower demand for IT staffing and the associated lower revenues.
For the quarters ending June 30, earnings before interest, taxes, depreciation
and amortization ("EBITDA"), excluding the impairment charge of $150 million,
was $1.8 million this year and $10.7 million last year, or 2.8% and 12.5% of
revenues, respectively. On a diluted share basis, this represents $0.06 and
$0.37, respectively. For the six months ended June 30, 2000, EBITDA, excluding
the impairment charge, was $5.3 million, down from $18.9 million for the same
period in 1999. On a diluted share basis, EBITDA was $0.18 and $0.64 for the
respective six month periods.
Second quarter operating loss from continuing operations excluding the
impairment charge was ($1.9) million compared to operating income of $7.7
million in the same quarter last year. For the first six months, operating loss
excluding the impairment charge was ($2.3) million this year compared to
operating income of $13.3 million last year. Net loss from continuing
operations before impairment for the second quarter was ($3.3) million or
($0.11) per diluted share this year, compared with net income of $3.2 million or
$0.11 per diluted share in the second quarter last year. For the first six
months of 2000, net loss from continuing operations excluding the impairment
charge was ($5.3) million, or ($0.18) diluted EPS, compared with net income of
$5.6 million and $0.19 diluted EPS, respectively, in the first six months of
last year.
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"The year-over-year drop in EBITDA resulted not only from lower revenue and
gross profit in IntelliMark, but also because of increased expenses at the
Corporate offices in Fayetteville. After the completion of the Professional/IT
divestitures, the corporate offices will be resized appropriately and moved to
Edgewater's existing operations in Wakefield, Massachusetts."
Results for eSolutions Segment
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The eSolutions segment, under the name Edgewater, was acquired effective April
1, 1999. For comparability, this discussion of the six months ended June 30,
1999 includes preacquisition data for the first quarter of 1999. However,
operating results for the first quarter of 1999 have not been included in the
GAAP presentation in the accompanying financial statements. The segment posted
revenues of $8.0 million and $15.1 million for the three and six months ended
June 30, 2000, respectively, 60.7% and 53.9% increases compared with the same
periods in 1999. EBITDA for this division was $1.5 million (18.3% of revenues)
and $2.9 million (19.1% of revenues) for the three and six months ended June 30,
2000, respectively, compared to $1.5 million (31.3% of revenues) and $3.0
million (30.8% of revenues) in the same periods last year. The reduction in
EBITDA as a percentage of revenues was the result of a planned increase in both
sales and marketing expense and recruiting expense to support Edgewater's growth
plans. Edgewater is poised for continued growth as project backlog currently
stands at approximately $15.7 million, compared to $7.6 million a year ago. At
June 30, 2000, Edgewater had 210 total employees including approximately 180
billable consultants.
Results for Professional/IT Segment
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The Professional/IT segment had revenues of $57.1 million for the most recent
quarter, down 29.7% compared with the second quarter of 1999. Revenues were
$121.2 million and $158.0 million for the six months ended June 30, 2000 and
1999, respectively. Gross margin was 27.2% for the three and six months ended
June 2000. The primary cause of the decline was the 33.4% second quarter
decline in revenue for IntelliMark, the traditional IT staffing and solutions
platform, compared to the same period in the prior year, which resulted from a
decrease in consultant headcount and decreased demand for IT staffing. EBITDA
for the Professional/IT segment for the second quarter of 2000 (excluding the
impairment charge) decreased 64.8% to $3.9 million for the same period last
year. EBITDA for the six months ended June 30, 2000 (excluding the impairment
charge) and 1999 were $8.8 million and $20.4 million, respectively. The EBITDA
decrease is primarily the result of the decrease in revenues and gross profit in
the IT staffing sector.
Focus on the Future
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Edgewater is a full-service provider of eBusiness solutions and has developed a
solid service model and approach which includes eStrategy, eSolutions and
Internet Outsourcing:
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. eStrategy. Consulting services that aid clients in translating business
goals into eSolutions strategies that take full advantage of Internet
technologies to maximize market share and profitability.
. eSolutions. Development of customer eSolutions applications that fully
integrate the client's Web presences, customer service and back-office legacy
systems including fulfillment, procurement and financial.
. Internet Outsourcing. Provide a spectrum of services ranging from enhanced
site hosting through semi-custom and custom integrated Application Service
Provision ("ASP"), completed with total Internet application outsourcing.
Edgewater is set apart by its technology expertise, rapid deployment capability
and success in helping organizations move through the barriers of technology
transition. Every one of the client systems built by Edgewater has been
successfully put into production. Through its full range of eSolutions
services, Edgewater is able to assist clients in such vertical markets as retail
eCommerce, financial and asset management, healthcare, government and
agriculture. Edgewater consultants implement mission-critical solutions for
clients ranging from emerging businesses to long-established "brick and mortar"
companies.
To best take advantage of the current market growth and to set the company apart
from service providers in the industry, Edgewater has focused its strategy
around five principles:
. Middle Market. Edgewater targets the under-served middle market that just now
is contemplating a robust Internet strategy. Edgewater defines the middle
market as companies, or divisions of larger companies, ranging from $100
million to $1 billion in annual sales.
. Emerging Internet Businesses. Edgewater has a successful track record of
assisting venture stage and emerging Web enterprises, including HomeRuns.com
and Synapse Group, Inc. Edgewater has provided strategic guidance as well as
developed sophisticated B2B and B2C systems for this market segment. Because
dramatic growth is common in this sector, it is imperative that the systems
developed are highly scalable and reliable.
. Internet Outsourcing. The middle market customer is asking for much more than
strategy and systems development by demanding that a service provider offer
post-deployment support, maintenance and 7X24-hour monitoring. Edgewater has
met this challenge successfully by providing 12-month renewable service
contracts for systems that Edgewater has built.
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. Second-Tier City Presence. In addition to the traditional methods of finding
high-quality resources in a tight labor market, Edgewater supplements its
recruiting strategy by tapping into technical talent that is not necessarily
found in major metropolitan areas. Edgewater has already begun to expand
nationally and has set up solution centers in several second-tier cities and
plans to leverage Internet and telecommunication technologies to create a
"virtual development" capability.
. B2B and B2C Market. Headaches can accompany online shopping in the form of
order processing, fulfillment, tracking, logistical nightmares, and the
unproven reliability and scalability of high-volume transactional systems.
Edgewater's eight-year track record of building and deploying high-volume,
highly scalable systems along with integrating a host of legacy systems
strongly positions the company in this space.
About The Company
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Edgewater Technology, Inc., formerly known as StaffMark, Inc., is a holding
company which owns a portfolio of business service brands. Its primary
brand is Edgewater Technology, a national full-service provider of tailored
Internet-centric solutions, which assists clients through proven methodology,
including eStrategy, eSolutions and Internet Outsourcing. Edgewater Technology,
Inc.'s other specialty platforms are IntelliMark (information technology
staffing and solutions), ClinForce (clinical trials support services), and
Strategic Legal Resources (legal staffing). Find more information at
www.edgewater.com
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<TABLE>
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EDGEWATER TECHNOLOGY, INC.
Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Service revenues $ 65,040 $86,095 $ 136,241 $162,943
Cost of services 45,302 59,173 95,587 113,548
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Gross profit 19,738 26,922 40,654 49,395
Operating expenses
Selling, general and administrative 17,903 16,192 35,304 30,449
Depreciation and amortization 3,711 2,992 7,699 5,639
Non-recurring impairment charge 150,000 - 150,000 -
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Operating (loss) income (151,876) 7,738 (152,349) 13,307
Other expenses
Interest expense and other, net (3,146) (2,701) (5,622) (4,512)
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(Loss) income before income taxes (155,022) 5,037 (157,971) 8,795
Income tax provision (benefit) (52,709) 1,813 (53,650) 3,226
Net (loss) income from continuing operations ($102,313) $ 3,224 ($104,321) $ 5,569
Income from discontinued operations 1,711 7,536 5,650 11,597
Loss on sale of Commercial Division (6,175) - (6,175) -
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Net (loss) income ($106,777) $10,760 ($104,846) $ 17,166
============ ============ ============ ============
BASIC EARNINGS PER SHARE
From continuing operations ($3.47) $ 0.11 ($3.54) $ 0.19
From continuing operations excluding ($0.11) $ 0.11 ($0.18) $ 0.19
impairment
Including discontinued operations ($3.62) $ 0.37 ($3.55) $ 0.59
DILUTED EARNINGS PER SHARE
From continuing operations ($3.46) $ 0.11 ($3.53) $ 0.19
From continuing operations excluding ($0.11) $ 0.11 ($0.18) $ 0.19
impairment
Including discontinued operations ($3.61) $ 0.37 ($3.55) $ 0.58
AVERAGE SHARES OUTSTANDING - BASIC 29,526 29,174 29,494 29,211
AVERAGE SHARES OUTSTANDING - DILUTED 29,556 29,344 29,572 29,439
</TABLE>
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999 (1)
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<S> <C> <C> <C> <C>
Service revenues
eSolutions $ 7,968 $ 4,959 $ 15,055 $ 4,959
Professional/Information Technology 57,072 81,136 121,186 157,984
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Total service revenues 65,040 86,095 136,241 162,943
============ ============ =========== ============
Gross profit
eSolutions 4,242 2,748 7,959 2,748
Professional/Information Technology 15,496 24,174 32,695 46,647
------------ ------------ ----------- ------------
Total gross profit 19,738 26,922 40,654 49,395
============ ============ =========== ============
EBITDA
eSolutions 1,460 1,551 2,881 1,551
Professional/Information Technology 3,938 11,195 8,753 20,389
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Segment EBITDA 5,398 12,746 11,634 21,940
Less: Corporate EBITDA 3,563 2,016 6,284 2,994
Total EBITDA 1,835 10,730 5,350 18,946
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Operating (loss) income
eSolutions 370 1,353 724 1,353
Professional/Information Technology (148,630) 8,626 (146,473) 15,357
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Segment operating income (loss) (148,260) 9,979 (145,749) 16,710
Less: Corporate expenses 3,616 2,241 6,600 3,403
Total Operating (loss) income ($151,876) $ 7,738 ($152,349) $ 13,307
============ ============ =========== ============
</TABLE>
(1) eSolutions business was acquired effective April 1, 1999.
* * * * *
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 the book value asset estimates and prospects for the
Professional/IT segment, the amount of net gain or loss and anticipated uses of
proceeds from recent disposition, potential strategic alternatives for the
Professional/IT segment business, planned eSolutions capital growth, competitive
and strategic initiatives and potential stock repurchases. Words such as
"begin," "pursuing," "reviewed," "could," "will," "intend," "increasing,"
"provide," "should," "focus," "believe," "expect," "continue," 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
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actual results, financial statement effects, disposition plans or proceeds,
goals, targets, objectives or repurchases 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) inability to execute and close a sale of IntelliMark,
ClinForce and/or Strategic Legal Resources to a buyer or buyers (in general or
on terms acceptable to the Company); (ii) potential miscalculations of the
capital requirements, competitive and strategic positioning and growth of the
eSolutions business; (iii) inability to repurchase common stock on terms
acceptable to the Company; (iv) declines in demand for placement (permanent or
temporary) of staffing or solutions services; (v) changes in industry trends,
such as changes in the demand for or supply of professional/information
technology staffing or e-solutions personnel, whether on a temporary or
permanent placement basis; (vi) adverse developments involving debt, equity,
currency or technology market conditions; (vii) failure to obtain new customers
or retain significant existing customers; (viii) loss of key executives; and/or
(ix) general economic and business conditions (whether foreign, national, state
or local) which include but are not limited to changes in interest or currency
exchange rates. Actual events or results also 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 set forth under the headings "Management Discussion and
Analysis - Special Note Regarding Forward Looking Statements" in the Company's
Quarterly Report on Form 10-Q filed with the Securities & Exchange Commission on
May 8, 2000, and "Business - Factors Affecting Finances, Business Prospects and
Stock Volatility" in the Company's Form 10-K filed with the Securities &
Exchange Commission on March 20, 2000.
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