UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 29, 2009.
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 000-27792
COMSYS IT PARTNERS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware
(State or other jurisdiction
of incorporation or organization)
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56-1930691
(I.R.S. Employer
Identification Number)
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4400 Post Oak Parkway, Suite 1800
Houston, TX 77027
(Address, including zip code, of principal executive offices)
(713) 386-1400
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer
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Accelerated filer
þ
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes
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No
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The number of shares of the registrants common stock outstanding as of May 1, was 20,811,016.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Quarterly Report on Form 10-Q, including information
incorporated by reference, contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities
Litigation Reform Act of 1995, that are subject to risks and uncertainties. Forward-looking
statements give our current expectations and projections relating to the financial condition,
results of operations, plans, objectives, future performance and business of COMSYS IT Partners,
Inc. and its subsidiaries. You can identify these statements by the fact that they do not relate
strictly to historical or current facts. These statements may include words such as anticipate,
estimate, expect, project, intend, plan, believe and other words and terms of similar
meaning in connection with any discussion of the timing or nature of future operating or financial
performance or other events. All statements other than statements of historical facts included in,
or incorporated into, this report that address activities, events or developments that we expect,
believe or anticipate will or may occur in the future are forward-looking statements.
These forward-looking statements are largely based on our expectations and beliefs concerning
future events, which reflect estimates and assumptions made by our management. These estimates and
assumptions reflect our best judgment based on currently known market conditions and other factors
relating to our operations and business environment, all of which are difficult to predict and many
of which are beyond our control, including:
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economic declines that affect our business, including our profitability, liquidity
or the ability to comply with applicable loan covenants;
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the financial stability of our lenders and their ability to honor their commitments
related to our credit agreements;
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whether governments will amend existing regulations or impose additional regulations
or licensing requirements in such a manner as to increase our costs of doing business
or restrict access to qualified technology workers;
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the risk of increased tax rates;
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adverse changes in credit and capital markets conditions that may affect our ability
to obtain financing or refinancing on favorable terms or that may warrant changes to
existing credit terms;
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the financial stability of our customers and other business partners and their
ability to pay their outstanding obligations or provide committed services;
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changes in levels of unemployment and other economic conditions in the United
States, or in particular regions or industries;
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the impact of competitive pressures on our ability to maintain or improve our
operating margins, including pricing pressures as well as any change in the demand for
our services;
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the risk in an uncertain economic environment of increased incidences of employment
disputes, employment litigation and workers compensation claims;
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our success in attracting, training, retaining and motivating billable consultants
and key officers and employees;
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our ability to shift a larger percentage of our business mix into IT solutions,
project management and business process outsourcing and, if successful, our ability to
manage those types of business profitably;
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weakness or reductions in corporate information technology spending levels;
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our ability to maintain existing client relationships and attract new clients in the
context of changing economic or competitive conditions;
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the entry of new competitors into the U.S. staffing services market due to the
limited barriers to entry or the expansion of existing competitors in that market;
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increases in employment-related costs such as healthcare and unemployment taxes;
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the possibility of our incurring liability for the activities of our billable
consultants or for events impacting our billable consultants on our clients premises;
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the risk that we may be subject to claims for indemnification under our customer
contracts;
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the risk that cost cutting or restructuring activities could cause an adverse impact
on certain of our operations; and
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adverse changes to managements periodic estimates of future cash flows that may
affect our assessment of our ability to fully recover our goodwill.
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Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain
and involve a number of risks and uncertainties that are beyond our control. In addition,
managements assumptions about future events may prove to be inaccurate. Management cautions all
readers that the forward-looking statements contained in this report are not guarantees of future
performance, and we cannot assure any reader that those statements will be realized or that the
forward-looking events and circumstances will occur. Actual results may differ materially from
those anticipated or implied in the forward-looking statements due to various factors, including
the factors listed in this section and the Risk Factors sections contained in this report and our
most recent Annual Report on Form 10-K. All forward-looking statements speak only as of the date
of this report. We do not intend to publicly update or revise any forward-looking statements as a
result of new information, future events or otherwise, except as required by law. These cautionary
statements qualify all forward-looking statements attributable to us or persons acting on our
behalf.
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMSYS IT Partners, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
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Three Months Ended
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March 29,
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March 30,
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2009
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2008
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(In thousands, except per share amounts)
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Revenues from services
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$
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162,694
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$
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183,383
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Cost of services
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124,598
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138,727
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Gross profit
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38,096
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44,656
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Operating costs and expenses:
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Selling, general and administrative
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33,183
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34,764
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Restructuring costs
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3,620
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Depreciation and amortization
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2,074
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1,820
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38,877
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36,584
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Operating income (loss)
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(781
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8,072
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Interest expense, net
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952
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1,603
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Other income, net
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(105
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(53
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Income (loss) before income taxes
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(1,628
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6,522
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Income tax expense
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243
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1,418
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Net income (loss)
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$
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(1,871
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$
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5,104
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Basic net income (loss) per common share
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$
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(0.09
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$
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0.25
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Diluted net income (loss) per common share
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$
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(0.09
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$
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0.25
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Weighted average basic and diluted shares outstanding:
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Basic
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19,774
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19,579
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Diluted
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19,774
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20,617
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See notes to consolidated financial statements
3
COMSYS IT Partners, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
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Three Months Ended
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March 29,
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March 30,
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2009
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2008
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(In thousands)
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Net income (loss)
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$
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(1,871
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$
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5,104
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Foreign currency translation adjustments
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5
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21
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Total comprehensive income (loss)
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$
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(1,866
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$
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5,125
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See notes to consolidated financial statements
4
COMSYS IT Partners, Inc. and Subsidiaries
Consolidated Balance Sheets
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March 29,
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December 28,
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2009
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2008
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(Unaudited)
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(Note 1)
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(In thousands, except share and par value amounts)
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Assets
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Current assets:
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Cash and cash equivalents
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$
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1,215
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$
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22,695
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Accounts receivable, net of allowance of $3,596 and $3,232, respectively
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193,405
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202,297
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Prepaid expenses and other
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3,660
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3,116
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Restricted cash
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2,487
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2,489
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Total current assets
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200,767
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230,597
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Fixed assets, net
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15,846
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16,596
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Goodwill
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88,709
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89,064
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Other intangible assets, net
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11,058
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11,962
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Deferred financing costs, net
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3,240
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1,175
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Restricted cash
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308
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308
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Other assets
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1,264
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1,478
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Total assets
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$
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321,192
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$
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351,180
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Liabilities and stockholders equity
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Current liabilities:
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Accounts payable
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$
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138,466
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$
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156,528
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Payroll and related taxes
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23,812
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25,975
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Interest payable
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295
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337
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Other current liabilities
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9,167
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9,728
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Total current liabilities
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171,740
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192,568
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Long-term debt
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60,013
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69,692
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Other liabilities
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6,965
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5,435
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Total liabilities
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238,718
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267,695
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Commitments and contingencies
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Stockholders equity:
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Preferred stock, no par value; 5,000,000 shares authorized; none issued
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Common
stock, par value $.01; 95,000,000 shares authorized and 20,811,293 shares outstanding in 2009; 95,000,000 shares authorized and 20,465,028 shares outstanding in 2008
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207
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203
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Common stock warrants
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1,734
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1,734
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Accumulated other comprehensive loss
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(85
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)
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(90
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)
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Additional paid-in capital
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228,211
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227,360
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Accumulated deficit
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(147,593
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(145,722
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)
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Total stockholders equity
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82,474
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83,485
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Total liabilities and stockholders equity
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$
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321,192
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$
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351,180
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See notes to consolidated financial statements
5
COMSYS IT Partners, Inc. and Subsidiaries
Consolidated Statements of Shareholders Equity
(Unaudited)
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Accumulated
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Common
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Other
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Additional
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Total
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Common
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Stock
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Comprehensive
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Paid-in
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Accumulated
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Stockholders'
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Stock
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Warrants
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Income (Loss)
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Capital
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Deficit
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Equity
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(In thousands, except share data)
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Balance as of December 30, 2007
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$
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201
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$
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1,734
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$
|
57
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$
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223,174
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$
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(80,534
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)
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$
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144,632
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Net loss
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(65,188
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)
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(65,188
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Foreign currency translations
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(147
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(147
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Issuance of 342,878 shares of restricted common stock
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2
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(2
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Forfeiture of 25,132 vested shares of restricted common stock
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(332
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)
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(332
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)
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Options exercised for 8,200 shares of common stock
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83
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83
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Stock-based compensation
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4,437
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4,437
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Balance as of December 28, 2008
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|
203
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|
|
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1,734
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|
|
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(90
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)
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227,360
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|
|
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(145,722
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)
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83,485
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Net loss
|
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(1,871
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)
|
|
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(1,871
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)
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Foreign currency translations
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5
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5
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Issuance of 351,500 shares of restricted common stock
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4
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(4
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)
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Forfeiture of 4,902 shares of restricted common stock
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(12
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)
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|
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|
|
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(12
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)
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Stock-based compensation
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|
|
|
|
|
|
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|
|
867
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|
|
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|
867
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|
|
|
|
Balance as of March 29, 2009
|
|
$
|
207
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|
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$
|
1,734
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|
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$
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(85
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)
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$
|
228,211
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|
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$
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(147,593
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)
|
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$
|
82,474
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|
|
|
|
See notes to consolidated financial statements
6
COMSYS IT Partners, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
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|
|
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Three Months Ended
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March 29,
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March 30,
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2009
|
|
|
2008
|
|
|
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(In thousands)
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|
|
|
|
|
|
|
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Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,871
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)
|
|
$
|
5,104
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
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Depreciation and amortization
|
|
|
2,074
|
|
|
|
1,820
|
|
Restructuring costs
|
|
|
3,223
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
443
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|
|
|
18
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|
Stock-based compensation
|
|
|
867
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|
|
|
1,100
|
|
Amortization of deferred financing costs
|
|
|
228
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|
|
|
217
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Other noncash expense, net
|
|
|
243
|
|
|
|
1,418
|
|
Loss on asset disposal
|
|
|
2
|
|
|
|
|
|
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
8,420
|
|
|
|
2,765
|
|
Prepaid expenses and other
|
|
|
(525
|
)
|
|
|
(1,183
|
)
|
Accounts payable
|
|
|
(16,065
|
)
|
|
|
607
|
|
Payroll and related taxes
|
|
|
(2,175
|
)
|
|
|
(3,071
|
)
|
Other
|
|
|
(1,612
|
)
|
|
|
164
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(6,748
|
)
|
|
|
8,959
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(439
|
)
|
|
|
(1,064
|
)
|
Acquisitions, net of cash acquired
|
|
|
(2,300
|
)
|
|
|
(1,387
|
)
|
|
|
|
Net cash used in investing activities
|
|
|
(2,739
|
)
|
|
|
(2,451
|
)
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Repayments under revolving credit facility, net
|
|
|
(9,679
|
)
|
|
|
(5,277
|
)
|
Cash paid for financing costs
|
|
|
(2,293
|
)
|
|
|
|
|
Repayments of long-term debt
|
|
|
|
|
|
|
(1,250
|
)
|
Proceeds from issuance of common stock, net of issuance costs
|
|
|
|
|
|
|
13
|
|
|
|
|
Net cash used in financing activities
|
|
|
(11,972
|
)
|
|
|
(6,514
|
)
|
|
|
|
Effect of exchange rates on cash
|
|
|
(21
|
)
|
|
|
(3
|
)
|
|
|
|
Net decrease in cash
|
|
|
(21,480
|
)
|
|
|
(9
|
)
|
Cash, beginning of period
|
|
|
22,695
|
|
|
|
1,594
|
|
|
|
|
Cash, end of period
|
|
$
|
1,215
|
|
|
$
|
1,585
|
|
|
|
|
See notes to consolidated financial statements
7
COMSYS IT Partners, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. General
The unaudited consolidated financial statements included herein have been prepared in accordance
with the instructions to Form 10-Q and do not include all the information and footnotes required by
accounting principles generally accepted in the U.S.; however, they do include all adjustments of a
normal recurring nature that, in the opinion of management, are necessary to present fairly the
results of operations of COMSYS IT Partners, Inc. and its subsidiaries (collectively, the
Company) for the interim periods presented. The consolidated balance sheet information as of
December 28, 2008, and the consolidated statement of shareholders equity information for the
period from December 30, 2007, through December 28, 2008, have been derived from the Companys
audited financial statements but do not include the financial statement footnote information
required for audited financial statements. These interim financial statements should be read in
conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended December 28,
2008, as filed with the Securities and Exchange Commission (the SEC). Due to the seasonal nature
of the Companys business, the results of operations for the three months ended March 29, 2009, are
not necessarily indicative of results to be expected for the entire fiscal year.
The Company provides a full range of specialized IT staffing and project implementation services,
including website development and integration, application programming and development,
client/server development, systems software architecture and design, systems engineering and
systems integration. The Company also provides services that complement its IT staffing services,
such as vendor management, project solutions, process solutions and permanent placement of IT
professionals. The Companys TAPFIN Process Solutions division offers total human capital
fulfillment and management solutions within three core service areas: vendor management services,
services procurement management and recruitment process outsourcing.
The Companys fiscal year ends on the Sunday closest to December 31st and its first three fiscal
quarters are 13 calendar weeks each (and each also ends on a Sunday). The fiscal first
quarter-ends for 2009 and 2008 were March 29, 2009, and March 30, 2008, respectively.
The Company follows Statement of Financial Accounting Standards (SFAS) No. 131,
Disclosures About
Segments of an Enterprise and Related Information
. As the Companys consolidated financial
information is reviewed by the chief decision makers, and the business is managed under one
operating strategy, the Company operates under one reportable segment. The Companys principal
operations are located in the United States, and the results of operations and long-lived assets in
geographic regions outside of the United States are not material. During the three months ended
March 29, 2009, and March 30, 2008, no individual customer accounted for more than 10% of the
Companys consolidated revenues.
2. Business Combinations
On September 30, 2004, COMSYS Holding, Inc. (COMSYS Holding or Old COMSYS) completed a merger
transaction with Venturi Partners, Inc. (Venturi), a publicly-held IT and commercial staffing
company, in which COMSYS Holding merged with a subsidiary of Venturi (the merger). At the
effective time of the merger, Venturi changed its name to COMSYS IT Partners, Inc. and issued new
shares of its common stock to stockholders of COMSYS Holding, resulting in former COMSYS Holding
stockholders owning approximately 55.4% of Venturis outstanding common stock on a fully-diluted
basis. Since former COMSYS Holding stockholders owned a majority of the Companys outstanding
common stock upon consummation of the merger, COMSYS Holding was deemed the acquiring company for
accounting and financial reporting purposes. References to Old COMSYS are to COMSYS Holding and
its consolidated subsidiaries prior to the merger, and references to COMSYS or the Company are
to COMSYS IT Partners, Inc. and its consolidated subsidiaries after the merger. References to
Venturi are to Venturi and its consolidated subsidiaries prior to the merger.
On October 31, 2005, the Company purchased all of the outstanding stock of Pure Solutions, Inc.
(Pure Solutions), an information technology services company with operations in California. This
acquisition was not material to the Companys business. The purchase price was comprised of a $7.5
million cash payment at closing plus up to $8.25 million of earnout payments over three years. In
connection with the purchase, the Company recorded a customer list intangible asset in the amount
of $6.6 million, which was valued using a discounted cash flow analysis. The fair value of Pure
Solutions net identifiable assets exceeded the initial purchase price by $1.1 million, and this
amount was recorded as a liability at the date of purchase. The final earnout period ended in
2008, and the total amount of earnout payments made was $8.25 million. The final payment of $2.0
million was made in January 2009 in
8
accordance with the terms of the purchase agreement. These earnouts were recorded to goodwill,
except for $1.1 million, which was charged to the liability. The operations of Pure Solutions are
included in the Consolidated Statements of Operations for periods subsequent to the purchase.
On May 31, 2007, the Company purchased all of the issued and outstanding membership interests in
Plum Rhino Consulting, LLC (Plum Rhino), a specialty staffing services provider to the financial
services industry with offices in Georgia, Illinois, Missouri and North Carolina. This acquisition
was not material to the Companys business. The purchase price included the issuance of 253,606
shares of the Companys common stock to the Plum Rhino members, debt payments of approximately $0.2
million and up to $3.7 million of earnout payments based on Plum Rhinos achievement of specified
annual EBITDA targets over a three-year period. The former owners of Plum Rhino and the Company
have agreed that the earnout target was not met for the first period. In November 2008, the
remaining earnout payments were determined by the Companys Board of Directors to be unattainable.
In order to retain the services of Plum Rhinos former owners and to provide an incentive for their
continued contribution to the Companys long-term success, the Companys Board of Directors granted
75,000 restricted shares to these former owners, which will vest based on Plum Rhinos achievement
of specified annual EBITDA targets over a three-year period in exchange for the former Plum Rhino
owners relinquishing their rights to the additional earnout payments under the purchase agreement.
In connection with the purchase, the Company recorded a customer list intangible asset in the
amount of $3.2 million, which was valued using a discounted cash flow analysis, $2.2 million of
goodwill and $0.6 million of tangible net assets. The operations of Plum Rhino are included in the
Consolidated Statements of Operations subsequent to the purchase.
On December 12, 2007, the Company purchased all of the outstanding stock in Praeos Technologies,
Inc. (Praeos), an Atlanta-based provider of IT consulting services specializing in the business
intelligence and business analytics sectors. This acquisition was not material to the Companys
business. The purchase price was comprised of a $12.0 million cash payment at closing plus up to a
$5.5 million earnout payment based on Praeos achievement of a specified annual EBITDA target in
2008. The former owners of Praeos and the Company have agreed that the earnout target was not met
for the period. In connection with the purchase, the Company recorded $6.2 million of goodwill and
$2.4 million of tangible net assets. In addition, the Company escrowed $3.4 million of restricted
cash for a payment required to be made to employees or former shareholders in December 2008. In
December 2008, the Company paid $3.4 million out of the escrow account to former employees that
participated in the Praeos bonus plan that were still employed by the Company at the one-year
anniversary of the closing date. The Company has determined that the bonus plan acquired at
acquisition was a compensatory arrangement and, accordingly, recognized compensation expense
ratably in 2008 in the amount of $3.4 million. In addition, the Company is party to a $1.4 million
escrow set up to indemnify the Company for the breach of any representation, covenant or obligation
by the seller. This amount will be paid out within 18 months of the closing date of the
acquisition to the former owners of Praeos. The operations of Praeos are included in the
Consolidated Statements of Operations subsequent to the purchase.
On December 19, 2007, the Company purchased the assets and assumed specified liabilities of T.
Williams Consulting, LLC (TWC), a Philadelphia-based provider of recruitment process outsourcing
and specialty human resources consulting services. This acquisition was not material to the
Companys business. Subsequent to the purchase, the Company changed the name of TWC to TAPFIN,
LLC. The purchase price was comprised of a $16.5 million cash payment at closing plus up to a $7.5
million earnout payment based on TWCs achievement of a specified annual EBITDA target in 2008.
The former owners of TWC and the Company have agreed that the earnout target was not met for the
period. In connection with the purchase, the Company recorded a customer list intangible asset in
the amount of $2.8 million, which was valued using a discounted cash flow analysis, an assembled
methodology intangible asset in the amount of $0.2 million, which was valued using an estimated
development cost analysis, $11.8 million of goodwill and $1.7 million of tangible net assets. The
operations of TWC are included in the Consolidated Statements of Operations subsequent to the
purchase.
On June 26, 2008, the Company purchased all of the issued and outstanding stock in ASET
International Services Corporation (ASET), a Virginia-based provider of globalization,
localization and interactive language services. This acquisition was not material to the Companys
business. The purchase price was comprised of a $5.0 million cash payment at closing, $1.0 million
in notes payable to the former owners and up to a $1.0 million earnout payment based on ASETs
achievement of a specified EBITDA target over the 12 months following the acquisition. As of March
29, 2009, the Company has accrued $1.0 million related to the potential earnout payment, and this
amount has been charged to goodwill. The notes accrue interest at the rate of 6% annually. In
April 2009, the Company paid $30,000 of accrued interest. Interest accrued as of June 30, 2009,
will be paid on that date, with the remaining interest payable in six-month increments. The notes
are included in other liabilities on the Consolidated Balance Sheets. In connection with the
purchase, the Company recorded a customer list intangible asset in the amount of $2.1 million,
which was valued using a discounted cash flow analysis, $1.9 million of goodwill and $2.0 million
of tangible net assets. The operations of ASET are included in the Consolidated Statements of
Operations subsequent to the purchase.
9
None of these acquisitions, individually or in aggregate, required financial statement filings
under Rule 3-05 of Regulation S-X.
3. Fair Value of Financial Instruments
The Company follows SFAS No. 157,
Fair Value Measurements
(SFAS 157), as a framework for
measuring fair value and uses fair value measurements in areas that include, but are not limited
to: the allocation of purchase price consideration to acquired tangible and identifiable
intangible assets, impairment testing of goodwill and long-lived assets and stock-based
compensation arrangements. The carrying values of cash, accounts receivable, restricted cash,
accounts payable, and payroll and related taxes approximate their fair values due to the short-term
maturity of these instruments. The carrying value of the Companys revolving line of credit,
senior term loan and interest payable approximates fair value due to the variable nature of the
interest rates under the Companys senior credit agreement. However, considerable judgment is
required in interpreting data to develop the estimates of fair value.
4. Restructuring Costs
In November 2008, the Company announced a restructuring plan designed to improve operational
efficiencies by relocating certain administrative functions primarily from the Washington DC area
and Portland, Oregon into its new Phoenix customer service center facility. The plan has
essentially been completed. The costs associated with this plan were approximately $1.0 million
higher than originally estimated. See Managements Discussion and Analysis of Financial Condition
and Results of Operations Overview of First Quarter 2009 Results. The Company expects to
record restructuring charges from this plan through the second quarter of 2009. All of these
charges are expected to result in future cash expenditures. These charges primarily will relate to
employee termination benefits and lease abandonment costs for the Companys Washington DC area
facility.
The change in the restructuring liability during 2008 and the three months ended March 29, 2009, is
set forth below, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
|
|
|
|
|
|
|
severance
|
|
|
Lease costs
|
|
|
Total
|
|
|
|
|
Balance as of December 30, 2007
|
|
$
|
|
|
|
$
|
355
|
|
|
$
|
355
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges
|
|
|
453
|
|
|
|
64
|
|
|
|
517
|
|
Cash payments
|
|
|
(41
|
)
|
|
|
(177
|
)
|
|
|
(218
|
)
|
|
|
|
Balance as of December 28, 2008
|
|
|
412
|
|
|
|
242
|
|
|
|
654
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges
|
|
|
215
|
|
|
|
3,195
|
|
|
|
3,410
|
|
Cash payments
|
|
|
(248
|
)
|
|
|
(75
|
)
|
|
|
(323
|
)
|
|
|
|
Balance as of March 29, 2009
|
|
$
|
379
|
|
|
$
|
3,362
|
|
|
$
|
3,741
|
|
|
|
|
The Company recorded additional restructuring charges related to lease abandonment costs in
the first quarter of 2009 related to its reduction in space at the Companys Washington DC area
facility. These lease charges will be paid from 2009 through 2014.
5. Long-Term Debt
Long-term debt was $60.0 million and $69.7 million at March 29, 2009, and December 28, 2008,
respectively. These amounts were made up entirely of borrowings under our revolving credit
agreement (revolver or senior credit agreement).
In March 2009, the Company entered into a Ninth Amendment to its senior credit agreement (the
Amendment). Among other things, the Amendment provided for (i) a decrease in the Companys
borrowing capacity under its existing revolving credit facility from $160.0 million to $110.0
million, (ii) an extension of the maturity date for the facility for an additional two years to
March 31, 2012, and (iii) increases in the applicable interest rates under the facility to LIBOR
plus a margin of 3.75% or, at the Companys option, the prime rate plus a margin of 2.75%. The
Amendment also permits the Company to make up to $10.0 million in stock redemptions and/or dividend
payments in the aggregate subject to the terms and conditions
specified.
The Company pays a quarterly commitment fee of 0.75% per annum on the unused portion of the
revolver. The Company and certain of its subsidiaries guarantee the loans and other obligations
under the senior credit agreement. The obligations under the senior credit agreement are secured
by a perfected first priority security interest in substantially all of the assets of the Company
and its U.S.
10
subsidiaries, as well as the shares of capital stock of its direct and indirect U.S.
subsidiaries and certain of the capital stock of its foreign subsidiaries. Pursuant to the terms
of the senior credit agreement, the Company maintains a zero balance in its primary domestic cash
accounts. Any excess cash in those domestic accounts is swept on a daily basis and applied to
repay borrowings under the revolver, and any cash needs are satisfied through borrowings under the
revolver.
Borrowings under the revolver are limited to 85% of eligible accounts receivable, as defined in the
senior credit agreement, as amended, reduced by the amount of outstanding letters of credit and
designated reserves. At March 29, 2009, these designated reserves were:
|
|
|
a $5.0 million minimum availability reserve,
|
|
|
|
|
a $1.5 million reserve for outstanding letters of credit, and
|
|
|
|
a $1.0 million reserve for the ASET acquisition earnout.
|
At March 29, 2009, the Company had outstanding borrowings of $60.0 million under the revolver at
interest rates ranging from 4.3% to 6.0% per annum (weighted average rate of 4.3%) and excess
borrowing availability under the revolver of $48.5 million for general corporate purposes. Fees
paid on outstanding letters of credit are equal to the LIBOR margin then applicable to the
revolver, which at March 29, 2009, was 3.75%. At March 29, 2009, outstanding letters of credit
totaled $1.5 million.
The Companys credit facilities contain a number of covenants that, among other things, restrict
its ability to:
|
|
|
incur additional indebtedness;
|
|
|
|
|
paying more than $10 million for stock repurchases and dividends;
|
|
|
|
|
incur liens;
|
|
|
|
|
make capital expenditures;
|
|
|
|
|
make certain investments or acquisitions;
|
|
|
|
|
repay debt; and
|
|
|
|
|
dispose of property.
|
In addition, under the credit facilities, there are springing financial covenants that would
require the Company to satisfy a minimum fixed charge coverage ratio and a maximum total leverage
ratio if our excess availability falls below $25 million. A breach of any covenants governing the
Companys debt would permit the acceleration of the related debt and potentially other indebtedness
under cross-default provisions. As of March 29, 2009, we were in compliance with these
requirements.
The senior credit agreement contains various events of default, including failure to pay principal
and interest when due, breach of covenants, materially incorrect representations, default under
other agreements, bankruptcy or insolvency, the occurrence of specified ERISA events, entry of
enforceable judgments against the Company in excess of $2.0 million not stayed and the occurrence
of a change of control. In the event of a default, all commitments under the revolver may be
terminated and all of the Companys obligations under the senior credit agreement could be
accelerated by the lenders, causing all loans and borrowings outstanding (including accrued
interest and fees payable thereunder) to be declared immediately due and payable. In the case of
bankruptcy or insolvency, acceleration of obligations under the Companys senior credit agreement
is automatic.
6. Income Taxes
The income tax expense of $0.2 million for the three months ended March 29, 2009, contains expenses
totaling $0.2 million for miscellaneous state and foreign income taxes.
The Company records an income tax valuation allowance when it is more likely than not that certain
deferred tax assets will not be realized. The Company carried a valuation allowance against most
of its deferred tax assets as of March 29, 2009. These deferred tax items represent expenses or
operating losses recognized for financial reporting purposes, which will result in tax deductions
over varying future periods. The judgments, assumptions and estimates that may affect the amount
of the valuation allowance include estimates of future taxable income, timing or amount of future
reversals of existing deferred tax liabilities and other tax planning strategies that may be
available to the Company. The Company will evaluate quarterly its estimates of the recoverability
of its deferred tax assets based on its assessment of whether its more likely than not that any
portion of these fully reserved assets become recoverable through future taxable income. At such time that the Company no longer has a reserve
for its deferred tax assets, it will record a deferred tax asset and related tax benefit in the
period the valuation allowance is reversed, and it will begin to provide for taxes at the full
statutory rate.
11
As of March 29, 2009, the Company had $65.1 million in net deferred tax assets and had recorded a
valuation allowance against $64.3 million of those assets. The increase in the valuation
allowance from December 28, 2008, resulted primarily from pre-tax book net loss recorded during the
three months ended March 29, 2009.
The Companys net deferred tax assets are substantially offset with a valuation allowance as
discussed above. For the years ended December 28, 2008 and prior, a portion of its fully reserved
deferred tax assets that become realized through operating profits were recognized as a reduction
to goodwill to the extent they related to benefits acquired in the merger. This resulted in a
deferred tax expense in the year the acquired deferred tax assets were utilized. This portion of
deferred tax expense represented the consumption of pre-merger deferred tax assets that were
acquired with zero basis. In accordance with the provisions of SFAS No. 109,
Accounting for Income
Taxes
, the Company calculated a goodwill bifurcation ratio in the year of the merger to determine
the amount of deferred tax expense that should be offset to goodwill prospectively.
Due to the adoption of SFAS No. 141 (revised 2007),
Business Combinations
(SFAS 141(R)),
effective for fiscal 2009 and forward, no expense will be required to be recorded when there is a
release of the valuation allowance on Venturis acquired net deferred tax assets from the merger.
The offset to the deferred tax expense will be recorded as income tax expense in lieu of goodwill.
The Company has not paid United States federal income tax on the undistributed foreign earnings of
its foreign subsidiaries as it is the Companys intent to reinvest such earnings in its foreign
subsidiaries. Pretax income attributable to the Companys profitable foreign operations amounted
to $0 and $0.1 million in the three months ended March 29, 2009, and March 30, 2008, respectively.
The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions,
although any such assessments historically have been minimal and immaterial to its financial
results. In the event it has received an assessment for interest and/or penalties, it has been
classified in the financial statements as selling, general and administrative expense. For the
three months ended March 29, 2009, and March 30, 2008, the Company has not recorded any interest or
penalties.
7. Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding for the period. Diluted net income
(loss) per share is computed on the basis of the weighted average number of shares of common stock
plus the effect of dilutive potential common shares outstanding during the period using the
treasury stock method.
Potentially dilutive securities at March 29, 2009, include 248,654 warrants to purchase the
Companys common stock. The warrant holders are entitled to participate in dividends declared on
common stock as if the warrants were exercised for common stock. As a result, for purposes of
calculating basic net income (loss) per common share, income (loss) attributable to warrant holders
has been excluded from net income (loss).
Additionally, potentially dilutive securities include 779,348 unvested restricted shares at March
29, 2009. The unvested restricted stock holders are entitled to participate in dividends declared
on common stock as if the shares were fully vested. As a result, for purposes of calculating basic
net income (loss) per common share, income (loss) attributable to unvested restricted stock holders
has been excluded from net income (loss).
12
The computation of basic and diluted net income (loss) per share is as follows, in thousands,
except per share amounts:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Net income (loss) attributable to common stockholders basic
|
|
$
|
(1,779
|
)
|
|
$
|
4,905
|
|
Net income (loss) attributable to unvested restricted stock holders
|
|
|
(69
|
)
|
|
|
138
|
|
Net income (loss) attributable to warrant holders
|
|
|
(23
|
)
|
|
|
61
|
|
|
|
|
Total net income (loss)
|
|
$
|
(1,871
|
)
|
|
$
|
5,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
19,774
|
|
|
|
19,579
|
|
Add: dilutive restricted stock, stock options and warrants
|
|
|
|
|
|
|
1,038
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
19,774
|
|
|
|
20,617
|
|
|
|
|
Basic net income (loss) per common share
|
|
$
|
(0.09
|
)
|
|
$
|
0.25
|
|
Diluted net income (loss) per common share
|
|
$
|
(0.09
|
)
|
|
$
|
0.25
|
|
For the three months ended March 29, 2009, and March 30, 2008, 1,362,377 shares and 350,169
shares, respectively, attributable to outstanding stock options, warrants and restricted stock were
excluded from the calculation of diluted net income (loss) per share because their inclusion would
have been antidilutive.
8. Commitments and Contingencies
The Company has agreed to indemnify members of its board of directors and its corporate officers
against any threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that the individual is or was a director or
officer of the Company. The individuals will be indemnified, to the fullest extent permitted by
law, against related expenses, judgments, fines and any amounts paid in settlement. The Company
also maintains directors and officers insurance coverage in order to mitigate exposure to these
indemnification obligations. The maximum amount of future payments is generally unlimited. There
was no amount recorded for these indemnification obligations at March 29, 2009, and December 28,
2008. Due to the nature of these obligations, it is not possible to make a reasonable estimate of
the maximum potential loss or range of loss. No assets are held as collateral and no specific
recourse provisions exist related to these indemnifications.
The Company leases various office space and equipment under noncancelable operating leases expiring
through 2018. Certain leases include free rent periods, rent escalation clauses and renewal
options. Rent expense is recorded on a straight-line basis over the term of the lease. Rent
expense was $2.2 million and $1.8 million for the three months ended March 29, 2009, and March 30,
2008, respectively. Sublease income was $0.2 million and $0.1 million for the three months ended
March 29, 2009, and March 30, 2008, respectively.
In connection with the merger and the sale of Venturis commercial staffing business, the Company
placed $2.5 million of cash and 187,556 shares of its common stock in separate escrows pending the
final determination of certain state tax and unclaimed property assessments. The shares were
released from escrow on September 30, 2006, in accordance with the merger agreement, while the cash
remains in escrow. The cash escrow account will terminate on December 31, 2009 (the Termination
Date), unless certain events occur to accelerate the Termination Date. On the Termination Date,
the Company will receive the full amount remaining in the escrow account. The Company has recorded
liabilities for amounts management believes are adequate to resolve all of the matters these
escrows were intended to cover; however, management cannot ascertain at this time what the final
outcome of these assessments will be in the aggregate and it is possible that managements
estimates could change. The escrowed cash is included in restricted cash on the Consolidated
Balance Sheets. A final determination of one of these liabilities was made in 2007 after the
Company was able to accumulate the required data to finalize the assessment with one of the
jurisdictions. The final determination resulted in a $3.8 million reduction to goodwill and other
current liabilities.
In connection with the purchase of Praeos in December 2007, $1.4 million was placed in an escrow
account to indemnify the Company for the breach of any representation, covenant or obligation by
the seller, as specified in the purchase agreement. This amount will be paid out within 18 months
of the closing date of the acquisition to the former owners of Praeos if there are no claims.
The Company has entered into employment agreements with certain of its executives covering, among
other things, base salary, incentive bonus determinations and payments in the event of termination
or a change of control of the Company.
13
The Company is a defendant in various lawsuits and claims arising in the normal course of business
and is defending them vigorously. While the results of litigation cannot be predicted with
certainty, management believes the final outcome of such litigation will not have a material
adverse effect on the consolidated financial position, results of operations or cash flows of the
Company. Any cost to settle litigation will be included in selling, general and administrative
expense on the Consolidated Statements of Operations.
9. Stock Compensation Plans
The Company has four stock-based compensation plans with outstanding equity awards: the 1995
Equity Participation Plan (1995 Plan), the 2003 Equity Incentive Plan (2003 Equity Plan), the
COMSYS IT Partners, Inc. 2004 Stock Incentive Plan As Amended and Restated Effective April 13, 2007
(2004 Equity Plan) and the 2004 Management Incentive Plan (2004 Incentive Plan).
Plan Descriptions
In 2003, Venturi terminated the 1995 Plan in connection with its financial restructuring. As a
result of the merger, all outstanding options under the 1995 Plan were vested and are exercisable.
Although the 1995 Plan has been terminated and no future option issuances will be made under it,
the remaining outstanding stock options will continue to be exercisable in accordance with their
terms.
In 2003, Venturi adopted the 2003 Equity Plan under which the Company may grant non-qualified stock
options, incentive stock options and other stock-based awards in the Companys common stock to
officers and other key employees. On the date of the merger, all outstanding options under the
2003 Equity Plan at that time vested and became exercisable. Options granted under the 2003 Equity
Plan have a term of 10 years.
In connection with the merger, the Companys Board of Directors adopted and the stockholders
approved the 2004 Equity Plan, which was subsequently amended and restated in 2007. Under the 2004
Equity Plan, the Company may grant non-qualified stock options, incentive stock options, restricted
stock and other stock-based awards in its common stock to officers, employees, directors and
consultants. Options granted under this plan generally vest over a three-year period from the date
of grant and have a term of 10 years. Restricted stock awards granted under this plan generally
vest over a three-year period from the date of grant.
Effective January 1, 2004, Old COMSYS adopted the 2004 Incentive Plan. The 2004 Incentive Plan was
structured as a stock issuance program under which certain executive officers and key employees
might receive shares of Old COMSYS nonvoting Class D Preferred Stock in exchange for payment at the
then current fair market value of these shares. Effective July 1, 2004, 1,000 shares of Class D
Preferred Stock were issued by Old COMSYS under the 2004 Incentive Plan. Effective with the
merger, these shares were exchanged for a total of 1,405,844 shares of restricted common stock of
COMSYS. Of these shares, one-third vested on the date of the merger, one-third was scheduled to
vest over a three-year period subsequent to merger, and one-third was scheduled to vest over a
three-year period subject to specific performance criteria being met. Effective September 30,
2006, the Compensation Committee of the Companys Board of Directors (the Committee) made certain
modifications to the 2004 Incentive Plan after concluding that the performance vesting targets
appeared to be unattainable, as noted below. Although there will be no future restricted stock
issuances under the 2004 Incentive Plan, the remaining outstanding restricted stock awards will
continue to vest in accordance with their terms. In accordance with the terms of the 2004
Incentive Plan, any shares forfeited by participants will be distributed to certain stockholders of
Old COMSYS.
14
Stock Options
A summary of the activity related to stock options granted under the 1995 Plan, the 2003 Equity
Plan and the 2004 Equity Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
1995
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
Exercise Price
|
|
|
|
Plan
|
|
|
Equity Plan
|
|
|
Equity Plan
|
|
|
Total
|
|
|
Per Share
|
|
|
|
|
Outstanding at December 30, 2007
|
|
|
1,250
|
|
|
|
445,000
|
|
|
|
330,266
|
|
|
|
776,516
|
|
|
$
|
9.75
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
(8,200
|
)
|
|
|
(8,200
|
)
|
|
$
|
8.55
|
|
Forfeited
|
|
|
(527
|
)
|
|
|
(1,387
|
)
|
|
|
(18,336
|
)
|
|
|
(20,250
|
)
|
|
$
|
17.94
|
|
|
|
|
|
|
|
|
Outstanding at December 28, 2008
|
|
|
723
|
|
|
|
443,613
|
|
|
|
303,730
|
|
|
|
748,066
|
|
|
$
|
9.54
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
(1,387
|
)
|
|
|
(3,333
|
)
|
|
|
(4,720
|
)
|
|
$
|
10.32
|
|
|
|
|
|
|
|
|
Outstanding at March 29, 2009
|
|
|
723
|
|
|
|
442,226
|
|
|
|
300,397
|
|
|
|
743,346
|
|
|
$
|
9.54
|
|
|
|
|
|
|
|
|
Exercisable at March 29, 2009
|
|
|
723
|
|
|
|
425,529
|
|
|
|
300,397
|
|
|
|
726,649
|
|
|
$
|
9.56
|
|
|
|
|
|
|
|
|
Available for issuance at March 29, 2009
|
|
|
|
|
|
|
55,809
|
|
|
|
181,801
|
|
|
|
237,610
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information related to stock options outstanding and
exercisable under the Companys stock-based compensation plans at March 29, 2009:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Contractual
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Options
|
|
Years
|
|
Exercise Price
|
|
Options
|
|
Exercise Price
|
Range of Exercise Prices
|
|
Outstanding
|
|
Remaining
|
|
per Share
|
|
Exercisable
|
|
per Share
|
|
$7.80
|
|
|
219,000
|
|
|
|
4.04
|
|
|
$
|
7.80
|
|
|
|
219,000
|
|
|
$
|
7.80
|
|
$8.55 to $8.88
|
|
|
223,961
|
|
|
|
5.34
|
|
|
$
|
8.56
|
|
|
|
207,264
|
|
|
$
|
8.57
|
|
$11.05 to $11.98
|
|
|
299,662
|
|
|
|
5.68
|
|
|
$
|
11.32
|
|
|
|
299,662
|
|
|
$
|
11.32
|
|
$63.25 to $132.75
|
|
|
723
|
|
|
|
0.86
|
|
|
$
|
100.64
|
|
|
|
723
|
|
|
$
|
100.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$7.80 to $132.75
|
|
|
743,346
|
|
|
|
5.09
|
|
|
$
|
9.54
|
|
|
|
726,649
|
|
|
$
|
9.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For additional vesting information on stock option grants issued or modified prior to 2009,
see Footnote 10 in the Companys Annual Report on Form 10-K for the fiscal year ended December 28,
2008.
Cash received from option and warrant exercises during the three months ended March 29, 2009, and
March 30, 2008, was $0 in both periods. The total intrinsic value of options exercised during the
three months ended March 29, 2009, and March 30, 2008, was $0 in both periods. The Company has
historically used newly issued shares to satisfy stock option exercises and expects to continue to
do so in future periods.
Restricted Stock Awards
Restricted stock awards are grants that entitle the holder to shares of common stock as the awards
vest. The Company measures the fair value of restricted shares based upon the closing market price
of the Companys common stock on the date of grant. Restricted stock awards that vest in
accordance with service conditions are amortized over their applicable vesting period using the
straight-line method. For nonvested share awards subject partially or wholly to performance
conditions, the Company is required to assess the probability that such performance conditions will be met. If the likelihood of the performance
condition being met is deemed probable, the Company will recognize the expense using the
straight-line attribution method.
15
A summary of the activity related to restricted stock granted under the 2004 Equity Plan and the
2004 Incentive Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
Nonvested balance at December 30, 2007
|
|
|
490,635
|
|
|
$
|
18.34
|
|
Granted
|
|
|
342,878
|
|
|
$
|
11.09
|
|
Vested
|
|
|
(147,227
|
)
|
|
$
|
17.35
|
|
Forfeited
|
|
|
(79,443
|
)
|
|
$
|
17.30
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 28, 2008
|
|
|
606,843
|
|
|
$
|
14.62
|
|
Granted
|
|
|
351,500
|
|
|
$
|
2.42
|
|
Vested
|
|
|
(178,662
|
)
|
|
$
|
15.37
|
|
Forfeited
|
|
|
(333
|
)
|
|
$
|
20.21
|
|
|
|
|
|
|
|
|
|
Nonvested balance at March 29, 2009
|
|
|
779,348
|
|
|
$
|
8.94
|
|
|
|
|
|
|
|
|
|
The nonvested shares in the table above issued to non-executive employees are subject to a
three-year time-based vesting requirement. The nonvested shares issued to executive officers are
subject to either a three-year time-based vesting requirement or a three-year performance-based
vesting requirement. The compensation expense associated with these shares is amortized using the
straight-line method. For additional vesting information on restricted stock grants issued or
modified prior to 2009, see Footnote 10 in the Companys Annual
Report on Form
10-K
for the fiscal
year ended December 28, 2008.
Effective January 2, 2009, the Committee approved equity grants to five executive officers,
including the Companys Chief Executive Officer. These shares are 100% performance-based, and will
vest (if at all) at the end of the three-year period ending December 31, 2011, based on the
Companys earnings per share (EPS) growth as against the BMO staffing stock index during the
three-year period. The shares will fully vest if the Companys EPS growth is in the top 25% of the
index. The shares will vest 50% or 25% if the Companys EPS growth is in the second 25% or third
25% of the index, respectively. No shares will vest if the Companys EPS growth is in the bottom
25% of the index. The vesting percentages will be prorated within individual tiers, except that no
shares will vest for EPS growth in the bottom tier.
As of March 29, 2009, there was $4.6 million of total unrecognized compensation costs related to
nonvested option and restricted stock awards granted under the plans, which are expected to be
recognized over a weighted-average period of 20 months. The total fair value of shares and options
that vested during the three months ended March 29, 2009, was $3.2 million.
10. Related Party Transactions
Elias J. Sabo, a member of the Companys board of directors, also serves on the board of directors
of The Compass Group, the parent company of StaffMark. StaffMark provides commercial staffing
services to the Company and its clients in the normal course of its business. During the three
months ended March 29, 2009, the Company and its clients purchased approximately $1.7 million of
staffing services from StaffMark for services provided to the Companys vendor management clients.
At March 29, 2009, the Company had approximately $0.6 million in accounts payable to StaffMark.
Frederick W. Eubank II and Courtney R. McCarthy, members of the Companys board of directors, are
employees of Wachovia Investors, Inc., the Companys largest shareholder and a subsidiary of
Wachovia Corporation (Wachovia). Plum Rhino provides staffing services to Wachovia in the normal
course of its business. During the three months ended March 29, 2009, Plum Rhino recorded revenue
of approximately $1.0 million related to Wachovias purchase of staffing services. At March 29,
2009, Plum Rhino had approximately $0.2 million in accounts receivable from Wachovia.
In June 2008, the Company received proceeds from Amalgamated Gadget, LP, a greater than 10%
shareholder at that time, equal to the profits realized on sales of Company stock that was
purchased and sold within a six-month or less time frame. Under Section 16(b) of the Securities
and Exchange Act, the profits realized from these transactions by the greater than 10% shareholder
must be disgorged to the Company under certain circumstances. The Company received proceeds of
approximately $164,209 related to these transactions.
16
11. Recent Accounting Pronouncements
In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2 (FSP 157-2). FSP 157-2
delays the effective date of SFAS 157 for non-financial assets and non-financial liabilities,
except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis, to fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years. In February 2008, the FASB also issued FSP No. 157-1 that would exclude
leasing transactions accounted for under SFAS No. 13,
Accounting for Leases
, and its related
interpretive accounting pronouncements. In October 2008, the FASB issued FSP No. 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active
(FSP
157-3), which applies to financial assets within the scope of accounting pronouncements that
require or permit fair value measurements in accordance with SFAS 157. FSP 157-3 clarifies the
application of SFAS 157 in a market that is not active and defines additional key criteria in
determining the fair value of a financial asset when the market for that financial asset is not
active. The Company adopted the SFAS 157 guidance in its fiscal first quarter of 2009. The
adoption of the SFAS 157 guidance did not have a material effect on the Companys consolidated
financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations
(SFAS
141(R)), which provides new accounting requirements for business combinations. SFAS 141(R)
defines a business combination as a transaction or other event in which an acquirer obtains control
of one of more businesses. SFAS 141(R) is effective for financial statements issued for fiscal
years beginning after December 15, 2008. The Company adopted SFAS 141(R) in its fiscal first
quarter of 2009. The adoption of SFAS 141(R) did have a material impact on its income tax
provision calculated for the quarter. SFAS 141(R) requires any future release of the existing tax
valuation allowance related to acquired tax benefits in a purchase business combination when
reversed, will be reflected as an income tax benefit in its Consolidated Statement of Operations.
Under the previous accounting standards, the reversal would have been recorded to goodwill as well
as income tax expense. As a result, the Company expects its reported income tax expense to decline
in 2009.
In April 2008, the FASB issued FSP FAS 142-3,
Determination of the Useful Life of Intangible Assets
(FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal
or extension assumptions used in determining the useful life of a recognized intangible asset under
SFAS No. 142,
Goodwill and Other Intangible Assets.
This new guidance applies prospectively to
intangible assets that are acquired individually or with a group of other assets in business
combinations and asset acquisitions. The Company adopted FSP FAS 142-3 in its fiscal first quarter
of 2009. The adoption of FSP FAS 142-3 did not have a material effect on the Companys
consolidated financial statements.
In June 2008, the FASB issued FSP Emerging Issues Task Force 03-6-1,
Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF
03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings per share pursuant to
the two-class method. Upon adoption, a company is required to retrospectively adjust its earnings
per share data (including any amounts related to interim periods, summaries of earnings and
selected financial data) to conform with the provisions of FSP EITF 03-6-1. The Company adopted
FSP EITF 03-6-1 in its fiscal first quarter of 2009. The adoption of EITF 03-6-1 did not have a
material effect on the Companys consolidated financial statements.
12. Subsequent Event
On April 30, 2009, the Company announced that its Board of Directors authorized the repurchase of
up to $5.0 million of the Companys common stock from time to time on the open market or in
privately negotiated transactions. The timing and amount of any shares repurchased will be
determined by the Companys management based on its evaluation of market conditions and other
factors. The repurchase program may be suspended or discontinued at any time until its termination
on April 27, 2010.
17
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited consolidated
financial statements and related notes appearing elsewhere in this report, as well as other reports
we file with the Securities and Exchange Commission. This discussion contains forward-looking
statements reflecting our current expectations and estimates and assumptions concerning events and
financial trends that may affect our future operating results or financial position. Actual
results and the timing of events may differ materially from those contained in these
forward-looking statements due to a number of factors, including those discussed in the section
entitled Cautionary Note Regarding Forward-Looking Statements included elsewhere in this report
and in the sections entitled Risk Factors included in this report and our Annual Report on Form
10-K for the fiscal year ended December 28, 2008.
Our Business
COMSYS IT Partners, Inc. and our wholly-owned subsidiaries (collectively, us, our or we)
provide a full range of specialized IT staffing and project implementation services, including
website development and integration, application programming and development, client/server
development, systems software architecture and design, systems engineering and systems integration.
We also provide services that complement our IT staffing services, such as vendor management,
project solutions, process solutions and permanent placement of IT professionals. Our TAPFIN
Process Solutions division offers total human capital fulfillment and management solutions within
three core service areas: vendor management services, services procurement management and
recruitment process outsourcing. We operate through the following wholly-owned subsidiaries:
|
|
|
COMSYS Services, LLC (COMSYS Services), an IT staffing services provider,
|
|
|
|
|
COMSYS Information Technology Services, Inc. (COMSYS IT), an IT staffing
services provider,
|
|
|
|
|
Pure Solutions, Inc. (Pure Solutions), an information technology services
company,
|
|
|
|
|
Econometrix, LLC (Econometrix), a vendor management systems software
provider,
|
|
|
|
|
Plum Rhino Consulting LLC (Plum Rhino), a specialty staffing services
provider to the financial services industry,
|
|
|
|
|
Praeos Technologies, Inc. (Praeos), a business intelligence and business
analytics consulting services provider,
|
|
|
|
|
TAPFIN, LLC (TAPFIN), a provider of vendor management services, recruitment
process outsourcing services and human resources consulting, and
|
|
|
|
|
ASET International Services, Inc. (ASET), a globalization, localization and
interactive language services provider.
|
Our mission is to become a leading company in the IT staffing services industry in the United
States. We intend to pursue this mission through a combination of internal growth and strategic
acquisitions that complement or enhance our business.
Industry trends that affect our business include:
|
|
|
rate of technological change;
|
|
|
|
|
rate of growth in corporate IT and professional services budgets;
|
|
|
|
|
penetration of IT and professional services staffing in the general workforce;
|
|
|
|
|
outsourcing of the IT and professional services workforce; and
|
|
|
|
consolidation of supplier bases.
|
We anticipate our growth will be primarily generated from greater penetration of our service
offerings with our current clients, introducing new service offerings to our customers and
obtaining new clients. Our strategy for achieving this growth includes cross-selling our vendor
management services, project solutions services and process solutions services to existing IT
staffing customers, aggressively marketing our services to new clients, expanding our range of
value-added services, enhancing brand recognition and making strategic acquisitions.
The success of our business depends primarily on the volume of assignments we secure, the bill
rates for those assignments, the costs of the consultants that provide the services and the quality
and efficiency of our recruiting, sales and marketing and administrative functions. Our
experienced, tenured workforce, our proven track record, our recruiting and candidate screening
processes, our strong account management team and our efficient and consistent administrative
processes are factors that we believe are key to the success of our business. Factors outside of
our control, such as the demand for IT and other professional services, general economic conditions
and the supply of qualified professionals, will also affect our success.
18
Our revenue is primarily driven by bill rates and billable hours. Most of our billings for our
staffing and project solutions services are on a time-and-materials basis, which means that we bill
our customers based on pre-agreed bill rates for the number of hours that each of our consultants
works on an assignment. Hourly bill rates are typically determined based on the level of skill and
experience of the consultants assigned and the supply and demand in the current market for those
qualifications. General economic conditions, macro IT and professional service expenditure trends
and competition may create pressure on our pricing. Increasingly, large customers, including those
with preferred supplier arrangements, have been seeking pricing discounts in exchange for higher
volumes of business or maintaining existing levels of business. Billable hours are affected by
numerous factors, such as the quality and scope of our service offerings and competition at the
national and local levels. We also generate fee income by providing vendor management and
permanent placement services.
Our principal operating expenses are cost of services and selling, general and administrative
expenses. Cost of services is comprised primarily of the costs of consultant labor, including
employees, subcontractors and independent contractors, and related employee benefits.
Approximately 65% of our consultants are employees and the remainder are subcontractors and
independent contractors. We compensate most of our consultants only for the hours that we bill to
our clients, which allows us to better match our labor costs with our revenue generation. With
respect to our consultant employees, we are responsible for employment-related taxes, medical and
health care costs and workers compensation. Labor costs are sensitive to shifts in the supply and
demand of professionals, as well as increases in the costs of benefits and taxes.
The principal components of selling, general and administrative expenses are salaries, selling and
recruiting commissions, advertising, lead generation and other marketing costs and branch office
expenses. Our branch office network allows us to leverage certain selling, general and
administrative expenses, such as advertising and back office functions.
Our back office functions, including payroll, billing, accounts payable, collections and financial
reporting, are consolidated in our customer service center in Phoenix, Arizona, which operates on a
PeopleSoft platform. We also have a proprietary, web-enabled front-office system that facilitates
the identification, qualification and placement of consultants in a timely manner. We maintain a
national recruiting center, a centralized call center for scheduling sales appointments and a
centralized proposals and contract services department. We believe this scalable infrastructure
allows us to provide high quality service to our customers and will facilitate our internal growth
strategy and allow us to continue to integrate acquisitions rapidly.
Our fiscal year ends on the Sunday closest to December 31
st
and our first three fiscal
quarters each have 13 weeks and also end on a Sunday. Therefore, the fiscal first quarter-ends for
2009 and 2008 were March 29, 2009, and March 30, 2008, respectively.
Overview of First Quarter 2009
Revenue for the first quarter of 2009 was $162.7 million, down from $183.4 million for the first
quarter of 2008. Net loss in the first quarter was $1.9 million, down from net income of $5.1
million in the first quarter of last year. The first quarter of 2008 included the previously
discussed non-cash compensation charge associated with the Praeos acquisition.
During the quarter we completed a two-year extension of our debt facility to March 2012 that should
give us the financial flexibility to make appropriate investments in our business and maintain our
infrastructure through the duration of this recession. It also allows us to repurchase common
stock or pay dividends subject to stated conditions, and we have been authorized by our Board of
Directors to repurchase up to $5 million of our common stock from time to time over the next year
based on managements evaluation of market conditions and other factors.
Results for the first quarter of 2009 also included restructuring costs of approximately $3.6
million, with the majority of this charge related to our Washington, DC area lease. The
restructuring we announced in November 2008 has essentially been completed, and the cost associated
with the restructuring was approximately $1 million higher than originally expected. The increase
was primarily due to the deteriorating sublease market in the area of our Washington, D.C. area
lease, where we have abandoned substantial back office space. As a result of these conditions, we
lowered our expectations for a sublease recovery on that space from what was originally estimated.
2009 Priorities
We attribute our first quarter performance in large part to obtaining to new clients, our success
in remaining on existing client vendor lists, the performance of our TAPFIN and globalization
service lines as well as the focus on productivity and efficiency in our operations that we have
had over the last several quarters. Our priorities for the balance of this year are centered on
our clients, our
19
employees, the productivity and efficiency of our operations and our liquidity. We have taken an
approach we consider to be conservative in light of the broader trends we see in the economic data.
We plan to continue our focus on TAPFIN and its business model, which has significant advantage to
clients who need to gain efficiencies in their operations. Our operating efficiency is of
particular importance. We continue to refine our hiring process with the goal of hiring and
retaining top talent. At the same time, we are implementing targeted training programs to increase
productivity among our existing sales and recruiting forces. Additionally, our balance sheet is
strong, and we will continue to review acquisitions in the normal course of our business; however,
due to current market conditions we will be much more selective in pursuing opportunities this
year. With our credit agreement extended, our primary balance sheet focus for the remainder of
2009 will be on continuing to further reduce our debt balance, along with selectively repurchasing
our stock based on prevailing market conditions.
Results of Operations
Three Months Ended March 29, 2009, Compared to Three Months Ended March 30, 2008
The following table sets forth the percentage relationship to revenues of certain items included in
our unaudited Consolidated Statements of Operations, in thousands, except percentages and headcount
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Percent of Revenues
|
|
Percent Change
|
|
|
March 29,
|
|
March 30,
|
|
March 29,
|
|
March 30,
|
|
2009 $ vs.
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2008 $
|
|
|
|
|
|
|
|
Revenues from services
|
|
$
|
162,694
|
|
|
$
|
183,383
|
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
-11.3
|
%
|
Cost of services
|
|
|
124,598
|
|
|
|
138,727
|
|
|
|
76.6
|
%
|
|
|
75.6
|
%
|
|
|
-10.2
|
%
|
|
|
|
|
|
|
|
Gross profit
|
|
|
38,096
|
|
|
|
44,656
|
|
|
|
23.4
|
%
|
|
|
24.4
|
%
|
|
|
-14.7
|
%
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
33,183
|
|
|
|
34,764
|
|
|
|
20.4
|
%
|
|
|
19.0
|
%
|
|
|
-4.5
|
%
|
Restructuring costs
|
|
|
3,620
|
|
|
|
|
|
|
|
2.2
|
%
|
|
|
0.0
|
%
|
|
NA
|
Depreciation and amortization
|
|
|
2,074
|
|
|
|
1,820
|
|
|
|
1.3
|
%
|
|
|
1.0
|
%
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
|
|
38,877
|
|
|
|
36,584
|
|
|
|
23.9
|
%
|
|
|
20.0
|
%
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(781
|
)
|
|
|
8,072
|
|
|
|
-0.5
|
%
|
|
|
4.4
|
%
|
|
|
-109.7
|
%
|
Interest expense, net
|
|
|
952
|
|
|
|
1,603
|
|
|
|
0.6
|
%
|
|
|
0.8
|
%
|
|
|
-40.6
|
%
|
Other income, net
|
|
|
(105
|
)
|
|
|
(53
|
)
|
|
|
-0.1
|
%
|
|
|
0.0
|
%
|
|
|
98.1
|
%
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(1,628
|
)
|
|
|
6,522
|
|
|
|
-1.0
|
%
|
|
|
3.6
|
%
|
|
|
-125.0
|
%
|
Income tax expense
|
|
|
243
|
|
|
|
1,418
|
|
|
|
0.2
|
%
|
|
|
0.8
|
%
|
|
|
-82.9
|
%
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,871
|
)
|
|
$
|
5,104
|
|
|
|
-1.2
|
%
|
|
|
2.8
|
%
|
|
|
-136.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Billable hours during the period
|
|
|
2,092,521
|
|
|
|
2,321,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded an operating loss of $0.8 million and a net loss of $1.9 million in the first
quarter of 2009 compared to operating income of $8.1 million and net income of $5.1 million in the
first quarter of 2008. The decrease in net income was due primarily to lower revenue and an
increase in restructuring costs. Additionally, management has decided to maintain our
infrastructure through the duration of this recession, which has resulted in selling, general and
administrative expenses decreasing at a slower rate than revenue. As a result selling, general and
administrative expenses have increased as a percentage of revenue.
Revenues.
Revenues for the first quarters of 2009 and 2008 were $162.7 million and $183.4 million,
respectively, a decrease of 11.3%. The decrease was due primarily to a decrease in billable hours
between periods on lower average headcount. Reimbursable expense revenue increased to $3.4 million
in the first quarter of 2009 from $3.0 million in the first quarter of 2008. This increase had no
impact on gross margin dollars as the related reimbursable expense was recognized in the same
period. We continued to see bill rate pressures from our customers, particularly among Fortune 500
clients. Revenues from the pharmaceutical/biotechnology and government sectors increased in the
first quarter of 2009 from the first quarter of 2008. These increases were partially offset by
revenue decreases in the telecommunications and financial services sectors, respectively, over the
same period.
Cost of Services
.
Cost of services for the first quarters of 2009 and 2008 were $124.6 million and
$138.7 million, respectively, a decrease of 10.2%. The decrease was due primarily to decreases in
billable headcount between periods partially offset by the increase in reimbursable expenses.
Cost of services as a percentage of revenue increased to 76.6% in the
first quarter of 2009 from 75.6% in
20
the first quarter of 2008 due to the downward pricing pressure
from customers and the market place, which could only be partially mitigated by reductions in
average pay rates.
Selling, General and Administrative Expenses
.
Selling, general and administrative expenses in the
first quarters of 2009 and 2008 were $33.2 million and $34.8 million, respectively, a decrease of
4.5%. The decrease was due primarily to our targeted selling, general and administrative
reductions as well as the non-cash charge of approximately $0.8 million in the first quarter of
2008 for additional employee compensation relating to the Praeos purchase. Included in these
amounts are $0.9 million and $1.1 million of stock-based compensation, respectively. As a
percentage of revenue, selling, general and administrative expenses increased to 20.4% in the first
quarter of 2009 from 19.0% in the first quarter of 2008.
Restructuring Costs
.
Restructuring costs for 2009 were $3.6 million, or 2.2% of revenue. These
employee termination benefits and lease abandonment costs related primarily to the relocation of
certain administrative functions into our new Phoenix customer service center facility.
Depreciation and Amortization
.
Depreciation and amortization expense consists primarily of
depreciation of our fixed assets and amortization of our customer base intangible assets. For the
first quarters of 2009 and 2008, depreciation and amortization expense was $2.1 million and $1.8
million, respectively, an increase of 14.0%. The increase in depreciation and amortization expense
was primarily due to the depreciation of our enterprise software system and the amortization of
intangible assets resulting from previous acquisitions.
Interest Expense, Net.
Interest expense, net, was $1.0 million and $1.6 million in the first
quarters of 2009 and 2008, respectively, a decrease of 40.6%. The decrease was due to our overall
debt reduction, which was partially offset by an increase in interest rates and the amortization of
deferred financing costs after our March 2009 debt refinancing.
Provision for Income Taxes
.
The income tax expense of $0.2 million for the three months ended
March 29, 2009, contains expenses totaling $0.2 million for miscellaneous state and foreign income
taxes. Our net deferred tax asset is substantially offset with a valuation allowance. Prior to
2009, a portion of our fully-reserved deferred tax assets that became realized through operating
profits was recognized as a reduction to goodwill to the extent it related to benefits acquired in
the merger. This resulted in deferred tax expense as the assets were utilized. This portion of
deferred tax expense represented the consumption of pre-merger deferred tax assets that were
acquired with zero basis. In accordance with the provisions of SFAS No. 109,
Accounting for Income
Taxes
, we calculated a goodwill bifurcation ratio in the year of the merger to determine the amount
of deferred tax expense that should be offset to goodwill prospectively. Under the new accounting
pronouncement, Statement of Financial Accounting Standard No. 141 (revised 2007),
Business
Combinations
, effective 2009 and forward, the offset to the deferred tax expense will be recorded
against income tax expense in lieu of goodwill.
Our future effective tax rates could be adversely affected by changes in the valuation of our
deferred tax assets or liabilities or changes in tax laws or interpretations thereof. We continue
to evaluate quarterly our estimates of the recoverability of our deferred tax assets based on our
assessment of whether it is more likely than not any portion of these fully reserved are
recoverable through future taxable income. At such time that we no longer have a reserve for our
deferred tax assets, we will begin to provide for taxes at the full statutory rate. In addition,
we are subject to the examination of our income tax returns by the Internal Revenue Service and
other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these
examinations to determine the adequacy of our provision for income taxes.
Liquidity and Capital Resources
Overview
We extended the maturity of our senior credit agreement in March 2009 through March 31, 2012, as
discussed below in
Credit Facilities and Related Covenants
. Management felt it was important to
refinance the senior credit agreement prior to its expiration in March 2010 in order to give us the
financial flexibility to make appropriate investments in our business and maintain our
infrastructure through the duration of this recession. We feel that we received favorable terms in
the refinancing.
We typically finance our operations through cash flow from operations and borrowings under our
credit facilities. Due to the requirements of our senior credit agreement, as discussed in more
detail below under the
Cash Flows
section, we do not maintain a significant cash balance in our
primary domestic cash accounts. Excess borrowing availability under our existing revolving credit
facility at March 29, 2009, was $48.5 million. Our borrowing availability is impacted by the
timing of cash receipts and
21
disbursements. Timing of receipts and disbursements in our vendor
management business can have a material impact on the debt levels we report at any period, and;
therefore, in 2008 we began reporting average daily debt for each quarter, as discussed below in
Credit Facilities and Related Covenants
.
We believe our cash flow provided by operating activities along with availability under our
revolving credit facility will be sufficient to fund our working capital, debt service and
purchases of fixed assets through fiscal 2009. In the event that we make future acquisitions, we
may need to seek additional capital from our lenders or the capital markets; there can be no
assurance that additional capital will be available when we need it, or, if available, that it will
be available on favorable terms.
The performance of our business is dependent on many factors and subject to risks and
uncertainties. See Risks Related to Our Business and Risk Related to Our Indebtedness under
Risk Factors included in our most recent Annual Report on Form 10-K as filed with the Securities
and Exchange Commission (SEC).
Working Capital
Accounts receivable are a significant component of our working capital. We monitor our accounts
receivable through a variety of metrics, including days sales outstanding (DSO). We calculate
our consolidated DSO by determining average daily revenue based on an annualized three-month
analysis and dividing it into the gross accounts receivable balance as of the end of the period.
Accounts receivable, net, were $193.4 million and $202.3 million as of March 29, 2009, and December
28, 2008, respectively. Our consolidated DSO was 44 days and 43 days as of March 29, 2009, and
December 28, 2008, respectively. As a result of the timing of vendor management receipts and the
seasonality in our operations, our consolidated DSO may materially fluctuate. The non-seasonal
trends in consolidated DSO for 2008 can be attributed to the timing of certain receipts and
disbursements in a large vendor management engagement.
Additionally, we separately calculate a DSO for vendor management services (VMS DSO) by
determining average daily vendor management service gross revenue based on an annualized
three-month analysis and dividing it into the gross vendor management accounts receivable balance
as of the end of the period. Vendor management accounts receivable were $91.9 million and $96.7
million as of March 29, 2009, and December 28, 2008, respectively. As of March 29, 2009, our VMS
DSO was 36 days as compared to 35 days as of December 28, 2008. The increase in VMS DSO is
primarily due to the timing of vendor management receipts. As a result of the timing of vendor
management receipts and the seasonality in our operations, our VMS DSO may materially fluctuate.
The non-seasonal trends in VMS DSO for 2008 can be attributed to the timing of certain receipts and
disbursements in a large vendor management engagement.
Our total accounts payable were $138.5 million and $156.5 million as of March 29, 2009, and
December 28, 2008, respectively. The decrease was due primarily to normal seasonal fluctuations in
payments as well as the January 2009 payment of the final Pure Solutions earnout amounts. Our
vendor management services accounts payable and other liabilities were $98.5 million and $104.1
million as of March 29, 2009, and December 28, 2008, respectively.
Credit Agreement
In March 2009, we entered into a Ninth Amendment to our senior credit agreement (the Amendment).
Among other things, the Amendment provided for (i) a decrease in our borrowing capacity under our
existing revolving credit facility from $160.0 million to $110.0 million, (ii) an extension of the
maturity date for the facility of an additional two years to March 31, 2012, and (iii) increases in
the applicable interest rates under the facility to LIBOR plus a margin of 3.75% or, at our option,
the prime rate plus a margin of 2.75%. The Amendment also permits us to make up to $10.0 million
in stock redemptions and/or dividend payments in the aggregate subject to the terms and conditions
specified.
We pay a quarterly commitment fee of 0.75% per annum on the unused portion of the revolver. We and
certain of our subsidiaries guarantee the loans and other obligations under the senior credit
agreement. The obligations under the senior credit agreement are secured by a perfected first
priority security interest in substantially all of the assets of us and our U.S. subsidiaries, as
well as the shares of capital stock of our direct and indirect U.S. subsidiaries and certain of the
capital stock of our foreign subsidiaries. Pursuant to the terms of the senior credit agreement,
we maintain a zero balance in our primary domestic cash accounts. Any excess cash in those
domestic accounts is swept on a daily basis and applied to repay borrowings under the revolver, and
any cash needs are satisfied through borrowings under the revolver.
22
Borrowings under the revolver are limited to 85% of eligible accounts receivable, as defined in the
senior credit agreement, as amended, reduced by the amount of outstanding letters of credit and
designated reserves. At March 29, 2009, these designated reserves were:
|
|
|
a $5.0 million minimum availability reserve,
|
|
|
|
|
a $1.5 million reserve for outstanding letters of credit, and
|
|
|
|
a $1.0 million reserve for the ASET acquisition.
|
At March 29, 2009, we had outstanding borrowings of $60.0 million under the revolver at interest
rates ranging from 4.3% to 6.0% per annum (weighted average rate of 4.3%) and excess borrowing
availability under the revolver of $48.5 million for general corporate purposes. Fees paid on
outstanding letters of credit are equal to the LIBOR margin then applicable to the revolver, which
at March 29, 2009, was 3.75%. At March 29, 2009, outstanding letters of credit totaled $1.5
million.
Debt Compliance
Our credit facilities contain a number of covenants that, among other things, restrict our ability
to:
|
|
|
incur additional indebtedness;
|
|
|
|
|
paying more than $10 million for stock repurchases and dividends;
|
|
|
|
|
incur liens;
|
|
|
|
|
make capital expenditures;
|
|
|
|
make certain investments or acquisitions;
|
|
|
|
|
repay debt; and
|
In addition, our credit facilities have springing financial covenants that would require us to
satisfy a minimum fixed charge coverage ratio and a maximum total leverage ratio if our excess
availability falls below $25 million. A breach of any covenants governing our debt would permit
the acceleration of the related debt and potentially other indebtedness under cross-default
provisions, which could harm our business and financial condition. These restrictions may place us
at a disadvantage compared to our competitors that are not required to operate under such
restrictions or that are subject to less stringent restrictive covenants. As of March 29, 2009, we
were in compliance with these requirements and we believe we will be able to comply with these
terms throughout 2009.
The senior credit agreement contains various events of default, including failure to pay principal
and interest when due, breach of covenants, materially incorrect representations, default under
other agreements, bankruptcy or insolvency, the occurrence of specified ERISA events, entry of
enforceable judgments against us in excess of $2.0 million not stayed and the occurrence of a
change of control. In the event of a default, all commitments under the revolver may be terminated
and all of our obligations under the senior credit agreement could be accelerated by the lenders,
causing all loans and borrowings outstanding (including accrued interest and fees payable
thereunder) to be declared immediately due and payable. In the case of bankruptcy or insolvency,
acceleration of our obligations under our senior credit agreement is automatic.
Cash Flows
The following table summarizes our cash flow activity for the periods indicated, in thousands:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 29,
|
|
March 30,
|
|
|
2009
|
|
2008
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(6,748
|
)
|
|
$
|
8,959
|
|
Net cash used in investing activities
|
|
|
(2,739
|
)
|
|
|
(2,451
|
)
|
Net cash used in financing activities
|
|
|
(11,972
|
)
|
|
|
(6,514
|
)
|
Effect of exchange rates on cash
|
|
|
(21
|
)
|
|
|
(3
|
)
|
|
|
|
Net decrease in cash
|
|
$
|
(21,480
|
)
|
|
$
|
(9
|
)
|
|
|
|
Cash used in operating activities in the three months ended March 29, 2009, was $6.7 million
compared to cash provided by operating activities of $9.0 million in the three months ended March
30, 2008. In addition to cash provided by earnings, cash flows from
23
operating activities are
affected by the timing of cash receipts and disbursements and the working capital requirements of
the business. The non-seasonal trends in cash provided by operating activities for 2008 can be
attributed to the timing of certain receipts and disbursements in a large vendor management
engagement.
Cash used in investing activities in the three months ended March 29, 2009, was $2.7 million
compared to $2.5 million in the three months ended March 30, 2008. Our cash flows associated with
investing activities in 2009 and 2008 included capital expenditures of $0.4 million and $1.1
million, respectively, and cash paid for acquisitions of $2.3 million and $1.4 million,
respectively. Cash paid for acquisitions consists primarily of earnout payments related to the
acquisition of Pure Solutions. We expect to pay an additional $1.0 million in cash earnout
payments during the next 12 months, which have been fully accrued in the Consolidated Balance Sheet
as of March 29, 2009.
Capital expenditures for the three months ended March 29, 2009, related primarily to the purchase
of computer hardware and leasehold improvements. Capital expenditures in 2009 are currently
expected to be approximately $2.0 million to $3.0 million. This spending level is lower than 2008
due to the completion of several projects during 2008 as well as a planned reduction in capital
projects.
Cash used in financing activities was $12.0 million in the three months ended March 29, 2009,
compared to $6.5 million in the three months ended March 30, 2008. Cash flows associated with
financing activities primarily represent borrowings and payments on our revolving credit facility.
Cash used in financing activities in the three months ended March 29, 2009, also includes $2.3
million related to cash paid for debt issuance costs related to the refinance of our credit
agreement in March 2009.
Pursuant to the terms of the senior credit agreement, we maintain a zero balance in our primary
domestic cash accounts. Any excess cash in our accounts is swept on a daily basis and applied to
repay borrowings under the revolver, and any cash needs are satisfied through borrowings under the
revolver. Cash and cash equivalents recorded on our Consolidated Balance Sheet at March 29, 2009,
and December 28, 2008, in the amount of $1.2 million and $22.7 million, respectively, represented
cash balances at our Toronto and United Kingdom subsidiaries and $20.0 million we had invested in a
US Treasury money market fund. We used these funds to repay a portion of our senior credit
agreement during the first quarter of 2009.
We believe the most strategic uses of our cash and cash equivalents are repayment of our long-term
debt, making strategic acquisitions, capital expenditures and investments in revenue-producing
personnel. There are no transactions, arrangements and other relationships with unconsolidated
entities or other persons that are reasonably likely to materially affect liquidity or the
availability of our requirements for capital.
Seasonality
Our business is affected by seasonal fluctuations in corporate IT expenditures. Generally,
expenditures are lowest during the first quarter of the year when our clients are finalizing their
IT budgets. In addition, our quarterly results may fluctuate depending on, among other things, the
number of billing days in a quarter and the seasonality of our clients businesses. Our business
is also affected by the timing of holidays and seasonal vacation patterns, generally resulting in
lower revenues and gross margins in the fourth quarter of each year. Extreme weather conditions
may also affect demand in the first and fourth quarters of the year as certain of our clients
facilities are located in geographic areas subject to closure or reduced hours due to inclement
weather. In addition, we experience an increase in our cost of sales and a corresponding decrease
in gross profit and gross margin in the first fiscal quarter of each year as a result of resetting
certain state and federal employment tax rates and related salary limitations.
Off-Balance Sheet Arrangements
As of March 29, 2009, we are not involved in any off-balance sheet arrangements, as defined in Item
303(a)(4)(ii) of SEC Regulation S-K.
Related Party Transactions
Elias J. Sabo, a member of our board of directors, also serves on the board of directors of The
Compass Group, the parent company of StaffMark. StaffMark provides commercial staffing services to
us and to our clients in the normal course of its business. During the three months ended March
29, 2009, we and our clients purchased approximately $1.7 million of staffing services from
StaffMark for services provided to our vendor management clients. At March 29, 2009, we had
approximately $0.6 million in accounts payable to StaffMark.
24
Frederick W. Eubank II and Courtney R. McCarthy, members of our board of directors, are employees
of Wachovia Investors Inc., our largest shareholder and a subsidiary of Wachovia Corporation
(Wachovia). Plum Rhino, a wholly-owned subsidiary of us, provides commercial staffing services
to Wachovia in the normal course of its business. During the three months ended March 29, 2009,
Plum Rhino recorded revenue of approximately $1.0 million related to Wachovias purchase of
staffing services. At March 29, 2009, Plum Rhino had approximately $0.2 million in accounts
receivable from Wachovia.
In June 2008, we received proceeds from Amalgamated Gadget, LP, a greater than 10% shareholder at
that time, equal to the profits realized on sales of our stock that was purchased and sold within a
six month or less time frame. Under Section 16(b) of the Securities and Exchange Act, the profits
realized from these transactions by the greater than 10% shareholder must be disgorged to us under
certain circumstances. We received proceeds of approximately $164,209 related to these
transactions.
Contingencies and Indemnifications
Details about our contingencies and indemnifications are available in Note 8 to our unaudited
consolidated financial statements included elsewhere in this report.
Critical Accounting Policies and Estimates
There were no changes from the Critical Accounting Policies as previously disclosed in our Annual
Report on Form 10-K for the fiscal year ended December 28, 2008.
Recent Accounting Pronouncements
Details about recent accounting pronouncements are available in Note 11 to our unaudited
consolidated financial statements included elsewhere in this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following assessment of our market risks does not include uncertainties that are either
nonfinancial or nonquantifiable, such as political, economic, tax and credit risks.
We are exposed to market risks, primarily related to interest rate, foreign currency and equity
price fluctuations. Our use of derivative instruments has historically been insignificant and it
is expected that our use of derivative instruments will continue to be minimal.
Interest Rate Risks
Outstanding debt under our senior credit agreement at March 29, 2009, was approximately $60.0
million. Interest on borrowings under the agreement is based on the prime rate or LIBOR plus a
fixed margin. Based on the outstanding balance at March 29, 2009, a change of 1% in the interest
rate would cause a change in interest expense of approximately $0.6 million on an annual basis.
Foreign Currency Risks
Our primary exposures to foreign currency fluctuations are associated with transactions and related
assets and liabilities related to our operations in Canada and the United Kingdom. Changes in
foreign currency exchange rates impact translations of foreign denominated assets and liabilities
into U.S. dollars and future earnings and cash flows from transactions denominated in different
currencies. Revenues and expenses denominated in foreign currencies are translated into U.S.
dollars at the monthly average exchange rates prevailing during the period. The assets and
liabilities on our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rate in
effect at the end of a reporting period. The resulting translation adjustments are recorded in
Stockholders Equity, as a component of accumulated other comprehensive income (loss), in our
Consolidated Balance Sheets. These operations are not material to our overall business.
25
Equity Market Risks
The trading price of our common stock has been and is likely to continue to be highly volatile and
could be subject to wide fluctuations. Such fluctuations could impact our decision or ability to
utilize the equity markets as a potential source of our funding needs in the future.
As a result of the decline in our trading stock price during the fourth quarter of 2008, we
recorded a goodwill impairment charge. Further declines in our stock price could result in
additional impairment charges.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management has established and maintains a system of disclosure controls and procedures
designed to provide reasonable assurance that information required to be disclosed by us in the
reports filed or submitted by us under the Securities Exchange Act of 1934, as amended (the
Exchange Act), is recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms, and include controls and procedures designed to provide reasonable
assurance that information required to be disclosed by us in those reports is accumulated and
communicated to our management, including our Chief Executive Officer and our Chief Accounting
Officer (our principal executive officer and principal financial officer, respectively), as
appropriate to allow timely decisions regarding required disclosure. As of March 29, 2009, our
management, including our Chief Executive Officer and our Chief Accounting Officer, conducted an
evaluation of our disclosure controls and procedures. Based on this evaluation, our Chief
Executive Officer and Chief Accounting Officer concluded that our disclosure controls and
procedures are effective.
All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended
March 29, 2009, that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
26
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are involved in certain disputes and litigation relating to claims arising out
of our operations in the ordinary course of business. Further, we are periodically subject to
government audits and inspections. In the opinion of our management, matters presently pending
will not, individually or in the aggregate, have a material adverse effect on our results of
operations or financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes from risk factors as previously disclosed in our Annual Report
on Form 10-K in response to Item 1A. to Part I of Form 10-K for the year ended December 28, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information relating to our purchase of shares of our common stock in
the first quarter of 2009. These purchases reflect shares withheld upon vesting of restricted
stock, to satisfy statutory minimum tax withholding obligations.
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
Average Price
|
Period
|
|
Shares Purchased
|
|
Paid per Share
|
|
December 29, 2008 January 25, 2009
|
|
|
4,902
|
|
|
$
|
2.44
|
|
January 26, 2009 February 22, 2009
|
|
|
|
|
|
$
|
|
|
February 23, 2009 March 29, 2009
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,902
|
|
|
$
|
2.44
|
|
|
|
|
|
|
|
|
|
|
We intend to continue to satisfy minimum tax withholding obligations in connection with the
vesting of outstanding restricted stock through the withholding of shares.
On April 30, 2009, we announced that our Board of Directors authorized the repurchase of up to $5.0
million of our common stock from time to time on the open market or in privately negotiated
transactions. The timing and amount of any shares repurchased will be determined by our management
based on their evaluation of market conditions and other factors. The repurchase program may be
suspended or discontinued at any time until its termination on April 27, 2010.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Each exhibit identified below is filed as part of this report. Exhibits designated with an * are
filed as an exhibit to this Quarterly Report on Form 10-Q. The exhibit designated with a # is
substantially identical to the Common Stock Purchase Warrant issued by us on the same date to Bank
One, N.A., and to Common Stock Purchase Warrants, reflecting a transfer of a portion of such Common
Stock Purchase Warrants, issued by us, as of the same date, to each of Inland Partners, L.P., Links
Partners L.P., MatlinPatterson Global Opportunities Partners L.P. and R2 Investments, LDC.
Exhibits previously filed as indicated below are incorporated by reference.
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Exhibit
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Description
|
|
Form
|
|
Number
|
|
Filing Date
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation of COMSYS IT Partners, Inc.
|
|
8-K
|
|
|
3.1
|
|
|
October 4, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
Amended and Restated Bylaws of COMSYS IT Partners, Inc.
|
|
8-K
|
|
|
3.2
|
|
|
October 4, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
|
First Amendment to the Amended and Restated Bylaws of COMSYS IT Partners, Inc.
|
|
8-K
|
|
|
3.1
|
|
|
May 4, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
|
Registration Rights Agreement, dated as of September 30, 2004, between COMSYS
IT Partners, Inc. and certain of the old COMSYS Holdings stockholders party
thereto
|
|
8-A/A
|
|
|
4.2
|
|
|
November 2, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
|
Amendment No. 1 to Registration Rights Agreement dated April 1, 2005 between
COMSYS IT Partners, Inc., and certain of the old COMSYS Holdings stockholders
party thereto
|
|
10-Q
|
|
|
4.2
|
|
|
May 6, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
|
Amended and Restated Registration Rights Agreement, dated as of September 30,
2004, between COMSYS IT Partners, Inc. and certain of the old Venturi
stockholders party thereto
|
|
8-A/A
|
|
|
4.3
|
|
|
November 2, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.4
|
|
|
Amendment No. 1 to Amended and Restated Registration Rights Agreement dated
April 1, 2005 between COMSYS IT Partners, Inc., and certain of the old
Venturi stockholders party thereto
|
|
10-Q
|
|
|
4.4
|
|
|
May 6, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7#
|
|
|
Common Stock Purchase Warrant dated as of April 14, 2003, issued by the
Company in favor of BNP Paribas
|
|
8-K
|
|
|
99.16
|
|
|
April 25, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
|
Specimen Certificate for Shares of Common Stock
|
|
10-K
|
|
|
4.6
|
|
|
April 1, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
|
Consent and Ninth Amendment to Credit Agreement, dated as of March 23, 2009,
among COMSYS Services LLC, COMSYS Information Technology Services, Inc., Pure
Solutions, Inc., Plum Rhino Consulting, LLC, Praeos Technologies, LLC, ASET
International Services Corporation, and TAPFIN LLC, as borrowers, COMSYS IT
Partners, Inc., PFI LLC, COMSYS IT Canada, Inc., Econometrix, LLC, as
guarantors, COMSYS Services LLC, acting in its capacity as borrowing agent
and funds administrator for the borrowers, GE Business Financial Services,
Inc., as administrative agent, a lender, sole bookrunner and sole lead
arranger, ING Capital LLC, Allied Irish Banks PLC and BMO Capital Markets
Financing, Inc., as co-documentation agents and as lenders, GMAC Commercial
Finance LLC, as syndication agent and as a lender, and the lenders from time
to time party thereto
|
|
8-K
|
|
|
10.1
|
|
|
March 24, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1*
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2*
|
|
|
Certification of Chief Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32*
|
|
|
Certification of Chief Executive Officer and Chief Accounting Officer
pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
|
|
|
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
COMSYS IT PARTNERS, INC.
|
|
Date: May 7, 2009
|
By:
|
/s/ Larry L. Enterline
|
|
|
Name:
|
Larry L. Enterline
|
|
|
Title:
|
Chief Executive Officer
|
|
|
|
|
|
Date: May 7, 2009
|
By:
|
/s/ Amy Bobbitt
|
|
|
Name:
|
Amy Bobbitt
|
|
|
Title:
|
Senior Vice President and Chief Accounting Officer
|
|
29
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Exhibit
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Description
|
|
Form
|
|
Number
|
|
Filing Date
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation of COMSYS IT Partners, Inc.
|
|
8-K
|
|
|
3.1
|
|
|
October 4, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
Amended and Restated Bylaws of COMSYS IT Partners, Inc.
|
|
8-K
|
|
|
3.2
|
|
|
October 4, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
|
First Amendment to the Amended and Restated Bylaws of COMSYS IT Partners, Inc.
|
|
8-K
|
|
|
3.1
|
|
|
May 4, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
|
Registration Rights Agreement, dated as of September 30, 2004, between COMSYS
IT Partners, Inc. and certain of the old COMSYS Holdings stockholders party
thereto
|
|
8-A/A
|
|
|
4.2
|
|
|
November 2, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
|
Amendment No. 1 to Registration Rights Agreement dated April 1, 2005 between
COMSYS IT Partners, Inc., and certain of the old COMSYS Holdings stockholders
party thereto
|
|
10-Q
|
|
|
4.2
|
|
|
May 6, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
|
Amended and Restated Registration Rights Agreement, dated as of September 30,
2004, between COMSYS IT Partners, Inc. and certain of the old Venturi
stockholders party thereto
|
|
8-A/A
|
|
|
4.3
|
|
|
November 2, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.4
|
|
|
Amendment No. 1 to Amended and Restated Registration Rights Agreement dated
April 1, 2005 between COMSYS IT Partners, Inc., and certain of the old
Venturi stockholders party thereto
|
|
10-Q
|
|
|
4.4
|
|
|
May 6, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7#
|
|
|
Common Stock Purchase Warrant dated as of April 14, 2003, issued by the
Company in favor of BNP Paribas
|
|
8-K
|
|
|
99.16
|
|
|
April 25, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
|
Specimen Certificate for Shares of Common Stock
|
|
10-K
|
|
|
4.6
|
|
|
April 1, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
|
Consent and Ninth Amendment to Credit Agreement, dated as of March 23, 2009,
among COMSYS Services LLC, COMSYS Information Technology Services, Inc., Pure
Solutions, Inc., Plum Rhino Consulting, LLC, Praeos Technologies, LLC, ASET
International Services Corporation, and TAPFIN LLC, as borrowers, COMSYS IT
Partners, Inc., PFI LLC, COMSYS IT Canada, Inc., Econometrix, LLC, as
guarantors, COMSYS Services LLC, acting in its capacity as borrowing agent
and funds administrator for the borrowers, GE Business Financial Services,
Inc., as administrative agent, a lender, sole bookrunner and sole lead
arranger, ING Capital LLC, Allied Irish Banks PLC and BMO Capital Markets
Financing, Inc., as co-documentation agents and as lenders, GMAC Commercial
Finance LLC, as syndication agent and as a lender, and the lenders from time
to time party thereto
|
|
8-K
|
|
|
10.1
|
|
|
March 24, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1*
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2*
|
|
|
Certification of Chief Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32*
|
|
|
Certification of Chief Executive Officer and Chief Accounting Officer pursuant
to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
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