BRADENTON, Fla., May 11, 2009 (GLOBE NEWSWIRE) -- Gevity (Nasdaq:GVHR), a leading professional employer organization (PEO) that provides HR services to businesses nationwide, today reported a net loss from continuing operations for the first quarter of 2009 of $3.7 million or $0.15 per share, which compares to a net loss from continuing operations of $0.3 million or $0.01 per share for the first quarter of 2008. The net loss for the first quarter of 2009 also totaled $3.7 million as compared to a net loss of $1.6 million for the similar quarter in 2008.
First quarter operating results as compared to the same quarter a year ago were negatively affected by a 10.5% reduction in the average number of client employees paid, a lower gross profit per client employee combined with approximately $1.8 million of cost alignment charges and $1.6 million of merger-related expenses.
Revenues for the 2009 first quarter of $129.6 million increased 3.6% over 2008 fourth quarter revenues of $125.1 million, but declined 8.5% from the 2008 first quarter revenues of $141.7 million. The sequential increase in first quarter 2009 revenues over the fourth quarter of 2008 was due primarily to the seasonality of payroll-related taxes. The decline in revenues for the 2009 first quarter as compared to the similar quarter a year ago reflects the decrease in the average number of client employees paid and lower average professional service fees per client employee.
Gross profit for the 2009 first quarter totaled $25.6 million, which compares to $38.9 million for the fourth quarter of 2008 and $34.2 million for the first quarter 2008. The sequential decrease in gross profit from the 2008 fourth quarter to the 2009 first quarter was primarily attributable to favorable trends for workers' compensation costs recognized in the 2008 fourth quarter that were not present in the first quarter of 2009. The decline in gross profit for the 2009 first quarter compared to the 2008 first quarter was due to lower professional service fees and a lower margin generated from the Company's workers' compensation program.
Operating expenses totaled $31.4 million in the first quarter of 2009, as compared to $42.0 million in the fourth quarter of 2008 and $34.3 million for the 2008 first quarter. First quarter 2009 operating expenses, which included $1.8 million of cost alignment charges and $1.6 million of merger-related expenses, declined $10.6 million or 25.2% from the fourth quarter of 2008 due primarily to higher expense levels in 2008 owing to the inclusion of an $8.7 million impairment charge and higher incentive compensation expenses, offset in part by a reinsurance contract recovery of $1.7 million. First quarter 2009 operating expenses declined approximately $2.8 million or 8.2% from the 2008 first quarter due primarily to management's cost reduction efforts over the past year.
Similar to December 31, 2008, the Company had no borrowings outstanding under its revolving credit facility at March 31, 2009.
Client Portfolio
Gevity ended the first quarter of 2009 with 94,379 client employees, a decrease of 6.6% compared to 101,014 client employees at the end of the fourth quarter of 2008, and a decrease of 11.6% compared to 106,784 client employees at the end of the first quarter 2008. The Company produced sales of 6,295 new client employees during the 2009 first quarter, a 10.3% sequential increase over the 5,705 client employees in the fourth quarter of 2008 and a 39.7% increase over 4,506 new client employees in the first quarter of 2008.
Client employee attrition during the first quarter of 2009 totaled 12,930 client employees, a 44.2% increase over the fourth quarter 2008 of 8,969 client employees, and a 2.8% improvement over the 13,302 client employees of continuing business services in the first quarter of 2008. Client attrition continues to be primarily driven by economic conditions.
Special Meeting of Shareholders
As previously announced, the Company is holding a Special Meeting of Shareholders on May 20, 2009 at 10:00 am local time, at Gevity's Corporate Office, to consider and vote on the proposed merger with TriNet Group, Inc.
Conference Call
In view of the Company's entry into a definitive merger agreement with TriNet Group, Inc., management will not convene a conference call to discuss first quarter 2009 operating results.
About Gevity
As a leading provider of HR solutions, Gevity helps small businesses nationwide maximize performance through its world-class HR expertise and services -- including payroll, benefits, administrative processing, risk management, policies and procedures, new hire support, performance management, and employee development and retention. For more information, visit gevity.com.
A copy of this press release is also available online at gevity.com > newsroom & events.
Additional Information and Where to Find it
In connection with the proposed merger and required shareholder approval, Gevity has filed a proxy statement with the U.S. Securities and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT GEVITY AND THE MERGER. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC at the SEC's web site at www.sec.gov. In addition, the documents filed by Gevity with the SEC may be obtained free of charge by contacting Gevity at Gevity HR, Inc., Attn: Investor Relations, 9000 Town Center Parkway, Bradenton, Florida 34202, telephone: 1-800-243-8489, extension 4034. Our filings with the SEC are also available on our website at gevity.com.
Participants in the Solicitation
Gevity and its officers and directors may be deemed to be participants in the solicitation of proxies from Gevity's shareholders with respect to the merger. Information about Gevity's officers and directors and their ownership of Gevity's common shares is set forth in the proxy statement for Gevity's 2009 Special Meeting of Shareholders, which was filed with the SEC on April 15, 2009. Investors and security holders may obtain more detailed information regarding the direct and indirect interests of Gevity and its respective officers and directors in the merger by reading the preliminary and definitive proxy statements regarding the merger, which have been filed with the SEC.
Pursuant to the Private Securities Litigation Reform Act of 1995, the Company is hereby providing cautionary statements to identify important factors that could cause the Company's actual results to differ materially from forward-looking statements contained in, or implied by, this news release. Forward-looking statements are those that express expectations, beliefs, plans, objectives, assumptions or future events or performance that are not historical facts. Such statements are often expressed through the use of words or phrases such as "will result," "are expected to," "anticipated," "plans," "intends," "will continue," "estimated," "projection," "preliminary," "forecast" and similar expressions. The results or events contemplated by forward-looking statements are affected by known and unknown risks that may cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. Many of these risks are beyond the ability of the Company to control or to predict, such as risks relating to the following: to the Company's guidance, including the challenges to achieve its growth strategy, the completion of the merger, obtaining new client employees, while passing on increased pricing for its services, including professional service fees, retaining clients through annual benefit enrollment, the Company's dependence on technology services, the adequacy of the Company's insurance-related loss reserves, the availability of insurance coverage for workers' compensation and medical benefits, damage due to hurricanes and other natural disasters, risks inherent in the Company's acquisition strategy and its ability to successfully assimilate acquired entities, the Company's dependence on third-party technology licenses, the Company's dependence on key personnel, qualified service consultants and sales associates, fluctuations in the Company's quarterly results, variability in health insurance claims, state unemployment tax rates and workers' compensation rates, liabilities resulting from the Company's co-employment relationship with its clients, credit risks associated with the Company's large clients, short-termination provisions in the Company's professional services agreements, financial related concerns at clients which result in fewer employees or a termination of the relationship, the Company's geographic market concentration, collateral requirements of the Company's insurance programs, the ability of AIG, parent company of AIG Commercial Insurance, to continue as a going concern, regulatory compliance, the ultimate impact of the current economic environment, the liquidity of the financial markets, Internet and related data security risks, potential liabilities as a consequence of potentially being deemed an "employer" under ERISA and other tax regulations as well as other civil liabilities, challenges to expansion due to varying state regulatory requirements and competition and the pending merger transaction with TriNet Group, Inc. These and other factors are described in the Company's filings with the Securities and Exchange Commission, including under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008. Any forward-looking statement speaks only as of the date on which such statement is made and the reader should not place undue reliance on any forward-looking statement. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
For the Three
Months Ended
March 31,
------------------
2009 2008
-------- --------
Revenues $129,584 $141,698
Cost of services (exclusive of depreciation and
amortization shown below) 104,008 107,458
-------- --------
Gross profit 25,576 34,240
-------- --------
Operating expenses:
Salaries, wages and commissions 17,197 18,776
Other general and administrative 10,881 11,549
Depreciation and amortization 3,367 3,936
-------- --------
Total operating expenses 31,445 34,261
-------- --------
Operating loss (5,869) (21)
Interest expense, net (112) (399)
Other income (expense), net 15 (24)
-------- --------
Loss from continuing operations before income taxes (5,966) (444)
Income tax benefit 2,288 173
-------- --------
Loss from continuing operations (3,678) (271)
Loss from discontinued operations, net of tax (30) (1,344)
-------- --------
Net loss $ (3,708) $ (1,615)
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Loss from continuing operations per common share
- diluted $ (0.15) $ (0.01)
Loss from discontinued operations per common share
- diluted -- (0.06)
-------- --------
Net loss per common share - diluted $ (0.15) $ (0.07)
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Weighted average common shares outstanding -
diluted 24,304 23,207
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GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited) (Unaudited)
March 31, December 31,
2009 2008
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 29,317 $ 32,537
Marketable securities - restricted 4,850 4,836
Accounts receivable, net 117,327 97,897
Short-term workers' compensation
receivable, net 24,371 51,920
Other current assets 11,919 14,041
------------ ------------
Total current assets 187,784 201,231
Property and equipment, net 17,005 18,524
Long-term marketable securities -
restricted 4,060 4,048
Long-term workers' compensation
receivable, net 68,373 63,413
Intangible assets, net -- 1,825
Goodwill and other assets 14,670 13,895
------------ ------------
Total assets $ 291,892 $ 302,936
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll and payroll taxes $ 141,284 $ 125,571
Accrued insurance premiums and health
reserves 14,330 13,319
Customer deposits and prepayments 11,761 31,793
Deferred tax liability, net 2,265 5,261
Accounts payable and other accrued
liabilities 9,067 9,645
------------ ------------
Total current liabilities 178,707 185,589
Revolving credit facility -- --
Other long-term liabilities 4,472 4,432
------------ ------------
Total liabilities 183,179 190,021
Total shareholders' equity 108,713 112,915
------------ ------------
Total liabilities and shareholders'
equity $ 291,892 $ 302,936
============ ============
GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
For the Three
Months Ended
March 31,
(Unaudited)
------------------
2009 2008
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,708) $ (1,615)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,367 4,037
Impairment loss -- 532
Loss on the disposal of property, net 94 40
Deferred tax benefit, net (2,705) (528)
Stock-based compensation 585 280
Excess tax expense from share-based arrangements -- 120
Provision for bad debts 60 392
Other -- (3)
Changes in operating working capital 584 (18,714)
-------- --------
Net cash used in operating activities (1,723) (15,459)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and
certificates of deposit (26) (90)
Capital expenditures (135) (202)
-------- --------
Net cash used in investing activities (161) (292)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility -- 23,100
Capital lease payments (150) (80)
Proceeds from exercise of stock options 50 106
Excess tax expense from share-based arrangements -- (120)
Dividends paid (1,236) (2,095)
-------- --------
Net cash (used in) provided by financing
activities (1,336) 20,911
-------- --------
Net (decrease) increase in cash and cash
equivalents (3,220) 5,160
Cash and cash equivalents - beginning of period 32,537 9,950
-------- --------
Cash and cash equivalents - end of period $ 29,317 $ 15,110
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GEVITY HR, INC. AND SUBSIDIARIES
STATISTICAL DATA - CONTINUING OPERATIONS
(unaudited)
Gevity Edge
----------------------
1st 1st
Quarter Quarter Percentage
2009 2008 Change
---------- ---------- ----------
Client employees at period end 94,379 106,784 -11.6%
Clients at period end(1) 5,607 6,282 -10.7%
Average number of client employees/
clients at period end 17 17 0.0%
Average number of client employees
paid(2) 89,591 100,084 -10.5%
Annualized professional service
fees per average number of client
employees paid(3),(4) $ 1,031 $ 1,192 -13.5%
Annualized total gross profit per
average number of client
employees paid(3) $ 1,142 $ 1,368 -16.5%
Annualized operating (loss) income
per average number of client
employees paid(3) $ (262) $ (1) n/a
(1) Client accounts as measured by individual client Federal Employer
Identification Number ("FEIN").
(2) The average number of client employees paid is calculated based
upon the sum of the number of paid client employees at the end of
each month divided by the number of months in the period.
(3) Annualized statistical information is based upon actual
quarter-to-date amounts which have been annualized (divided by 3
and multiplied by 12) and then divided by the average number of
client employees paid.
(4) The annualized professional service fees is based upon
information from the following table (in thousands):
1st Quarter 1st Quarter
2009 2008
----------- -----------
Revenues:
Professional service fees $ 23,091 $ 29,829
Employee health and welfare benefits 78,393 83,814
Workers' compensation 12,228 15,846
State unemployment taxes and other 15,872 12,209
----------- -----------
Total revenues $ 129,584 $ 141,698
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