BRADENTON, Fla., March 16, 2009 (GLOBE NEWSWIRE) -- Gevity (Nasdaq:GVHR), a leading professional employer organization (PEO) that provides HR services to businesses nationwide, today reported a net loss for the fourth quarter of 2008 of $1.4 million or $0.06 per share, which compares to net income of $0.3 million or $0.01 per share for the fourth quarter of 2007. The Company's loss from continuing operations for the 2008 fourth quarter totaled $1.2 million or $0.05 per share, as compared to income from continuing operations of $6.6 million or $0.28 per share for the fourth quarter of 2007. Operating results from continuing operations for the fourth quarter of 2008 were negatively impacted by a non-cash pre-tax charge of $8.7 million or $0.22 per share related to goodwill impairment and conversely were benefited by a pre-tax insurance recovery of $2.0 million or $0.05 per share.
Revenues for the 2008 fourth quarter of $125.1 million were comparable to the 2008 third quarter of $125.1 million, but declined 14.3% from the 2007 fourth quarter revenues of $146.0 million. The decline in revenues for the 2008 fourth quarter as compared to the similar quarter a year ago reflects the decrease in the average number of paid client employees.
Gross profit for the 2008 fourth quarter totaled $38.9 million, a 13% improvement over the $34.3 million for the third quarter of 2008, and compares to $50.4 million in the fourth quarter of 2007. The increase in gross profit over the 2008 third quarter was primarily attributable to continued favorable trends in workers' compensation claims costs development, which equate to higher gross profit contributions from the workers' compensation program. The decline in gross profit from the fourth quarter of 2007 was primarily due to the decrease in the average number of paid employees.
Operating expenses totaled $42.0 million in the fourth quarter of 2008, as compared to $34.8 million in the third quarter of 2008. Fourth quarter 2008 operating expenses included the previously mentioned non-cash pre-tax goodwill impairment charge of $8.7 million, which arose from the Company's annual test for goodwill impairment, wherein it was determined that the implied fair value of goodwill was zero, thereby eliminating goodwill in its entirety. Fourth quarter 2008 operating expenses were reduced by the $2.0 million pre-tax recovery from a former workers' compensation reinsurance provider, of which $1.65 million was recognized as income from the previously written off reinsurance contract.
Efforts undertaken by management during 2008 to strengthen the financial condition of the Company, including the negotiated reduction of the $14 million fourth quarter workers' compensation loss fund collateral payments to AIG Commercial Insurance, resulted in a year end cash balance of $32.5 million compared to $10 million at December 31, 2007. Moreover, the Company had no outstanding borrowings under its revolving line of credit as of December 31, 2008.
Client Portfolio
Gevity ended the fourth quarter of 2008 with 101,014 client employees, a decrease of 3% compared to 104,278 client employees at the end of the third quarter of 2008, and a decrease of 13% compared to 115,580 client employees at the end of the fourth quarter 2007. The Company produced sales of 5,705 client employees during the 2008 fourth quarter, a 6% sequential increase over the 5,389 client employees in the third quarter of 2008 and a 13% increase over production of 5,049 client employees for continuing business services in the fourth quarter of 2007.
Client employee attrition during the fourth quarter of 2008 totaled 8,943 client employees, a 1% increase over the third quarter 2008 of 8,813 client employees, and a 10% increase over the 8,154 client employees of continuing business services in the fourth quarter of 2007. Client attrition was largely driven by economic conditions.
Outlook
Management recently initiated a number of actions to improve the liquidity and operating results of the Company throughout 2009. These actions included:
* A negotiated early release in January 2009 of excess workers' compensation collateral from AIG totaling $26.6 million and reductions in cash funding requirements for the 2009 insurance program; * Initiated reductions in operating cost structure that we expect will achieve annualized savings of $19 million or 16% compared to 2008.
While the Company announced on March 5, 2009 that it has entered into a definitive merger agreement with TriNet Group, Inc., which is expected to close during the second quarter of 2009, subject to shareholder approval, customary regulatory approvals and other closing conditions, management remains focused on improving business performance through a variety of production, client retention, and operational cost improvement initiatives.
Conference Call
In view of the Company's recent announcement that it has entered into a definitive merger agreement with TriNet Group, Inc., management will not convene a conference call to discuss fourth quarter 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.
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, 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 not 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, 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 Annual Report on Form 10-K. 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.
Additional Information and Where to Find it
In connection with the merger with TriNet, Gevity plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF GEVITY ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. The final proxy statement will be mailed to shareholders of Gevity. Investors and security holders may obtain a free copy of the proxy statement when it becomes available, and other documents filed by Gevity with the SEC, at the SEC's web site at http://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. Gevity's filings with the SEC are also available on its website at gevity.com.
Gevity and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from Gevity's shareholders with respect to the merger. Information about Gevity's executive officers and directors and their ownership of Gevity's common shares is set forth in the proxy statement for Gevity's 2008 annual meeting of shareholders, which was filed with the SEC on April 17, 2008. Investors and security holders may obtain more detailed information regarding the direct and indirect interests of Gevity and its respective executive officers and directors in the Merger by reading the preliminary and definitive proxy statement regarding the Merger, which will be filed with the SEC.
GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited) (Unaudited)
For the Three For the Year
Months Ended Ended
December 31, December 31,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues $ 125,109 $ 146,017 $ 520,540 $ 601,594
Cost of services (exclusive
of depreciation and
amortization shown below) 86,224 95,663 375,203 415,567
--------- --------- --------- ---------
Gross profit 38,885 50,354 145,337 186,027
--------- --------- --------- ---------
Operating expenses:
Salaries, wages and
commissions 19,174 21,244 75,263 83,737
Other general and
administrative 12,045 13,091 48,090 55,937
Impairment loss 8,692 -- 8,692 --
Reinsurance contract
recovery (1,650) -- (1,650) --
Depreciation and
amortization 3,774 3,895 15,745 15,326
--------- --------- --------- ---------
Total operating
expenses 42,035 38,230 146,140 155,000
--------- --------- --------- ---------
Operating (loss) income (3,150) 12,124 (803) 31,027
Interest expense, net (359) (424) (2,119) (1,897)
Other income (expense),
net 21 (538) 56 (558)
--------- --------- --------- ---------
(Loss) income from
continuing operations
before income taxes (3,488) 11,162 (2,866) 28,572
Income tax (benefit)
provision (2,265) 4,522 (1,555) 10,475
--------- --------- --------- ---------
(Loss) income from
continuing operations (1,223) 6,640 (1,311) 18,097
Loss from discontinued
operations, net of tax (161) (6,339) (3,451) (8,138)
--------- --------- --------- ---------
Net (loss) income $ (1,384) $ 301 $ (4,762) $ 9,959
========= ========= ========= =========
(Loss) income from
continuing operations
per common share -
diluted $ (0.05) $ 0.28 $ (0.05) $ 0.75
Loss from discontinued
operations per common
share - diluted (0.01) (0.27) (0.15) (0.34)
--------- --------- --------- ---------
Net (loss) income per
common share - diluted $ (0.06) $ 0.01 $ (0.20) $ 0.41
========= ========= ========= =========
Weighted average common
shares outstanding -
diluted 24,264 23,607 23,573 24,247
========= ========= ========= =========
GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited) (Unaudited)
Dec. 31, Dec. 31,
2008 2007
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 32,537 $ 9,950
Marketable securities - restricted 4,836 6,102
Accounts receivable, net 97,897 130,209
Short-term workers' compensation
receivable, net 51,920 16,950
Other current assets 14,041 14,515
----------- -----------
Total current assets 201,231 177,726
Property and equipment, net 18,524 22,176
Long-term marketable securities -
restricted 4,048 3,934
Long-term workers' compensation
receivable, net 63,413 105,321
Intangible assets, net 1,825 11,386
Goodwill and other assets 13,895 21,368
----------- -----------
Total assets $302,936 $341,911
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll and payroll taxes $125,571 $151,105
Accrued insurance premiums and health
reserves 13,319 13,557
Customer deposits and prepayments 31,793 13,581
Deferred tax liability, net 5,261 11,674
Accounts payable and other
accrued liabilities 9,645 13,977
----------- -----------
Total current liabilities 185,589 203,894
Revolving credit facility -- 17,367
Other long-term liabilities 4,432 5,088
----------- -----------
Total liabilities 190,021 226,349
Total shareholders' equity 112,915 115,562
----------- -----------
Total liabilities and
shareholders' equity $302,936 $341,911
=========== ===========
GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
For the Year Ended
December 31,
(Unaudited)
--------------------
2008 2007
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (4,762) $ 9,959
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 16,020 16,270
Impairment loss 9,224 8,477
Loss on the disposal of property, net 1,097 594
Deferred tax benefit, net (7,937) (15,217)
Stock-based compensation 1,962 2,079
Excess tax benefit from share-based
arrangements (882) (56)
Provision for bad debts 2,097 1,764
Other -- (13)
Changes in operating working capital 26,437 (12,453)
--------- ---------
Net cash provided by operating activities 43,256 11,404
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and
certificates of deposit (248) (1,811)
Proceeds from sale of marketable securities 1,400 --
Capital expenditures (3,244) (5,889)
Business acquisition -- (9,495)
--------- ---------
Net cash used in investing activities (2,092) (17,195)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving
credit facility (17,367) 17,367
Capital lease payments (465) (130)
Proceeds from exercise of stock options 4,043 1,033
Excess tax benefit from
share-based arrangements 882 56
Dividends paid (5,670) (8,586)
Purchase of treasury stock -- (30,290)
--------- ---------
Net cash used in financing activities (18,577) (20,550)
--------- ---------
Net increase (decrease) in cash
and cash equivalents 22,587 (26,341)
Cash and cash equivalents - beginning of period 9,950 36,291
--------- ---------
Cash and cash equivalents - end of period $ 32,537 $ 9,950
========= =========
GEVITY HR, INC. AND SUBSIDIARIES
STATISTICAL DATA - CONTINUING OPERATIONS
(unaudited)
Gevity Edge
-----------------
4th 4th Percentage
Quarter Quarter Change
2008 2007
-------- -------- --------
Client employees at period end 101,014 115,580 -12.6%
Clients at period end (1) 5,779 6,728 -14.1%
Average number of client employees/
clients at period end 17 17 0.0%
Average number of client employees
paid (2) 93,619 107,893 -13.2%
Annualized professional service
fees per average number of client
employees paid (3), (4) $ 1,154 $ 1,238 -6.8%
Annualized total gross profit per
average number of client
employees paid (3) $ 1,661 $ 1,867 -11.0%
Annualized operating (loss) income
per average number of client
employees paid (3) $ (135) $ 449 -130.1%
(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):
4th Quarter 4th Quarter
2008 2007
-------------- --------------
Revenues:
Professional service fees $ 27,016 $ 33,381
Employee health and welfare benefits 80,987 89,112
Workers' compensation 15,050 20,951
State unemployment taxes and other 2,056 2,573
-------------- --------------
Total revenues $ 125,109 $ 146,017
============== ==============
GEVITY HR, INC. AND SUBSIDIARIES
STATISTICAL DATA - CONTINUING OPERATIONS
(unaudited)
Gevity Edge
-------------------
Twelve Twelve
Months Months Percentage
2008 2007 Change
-------- -------- --------
Client employees at period end 101,014 115,580 -12.6%
Clients at period end (1) 5,779 6,728 -14.1%
Average number of client employees/
clients at period end 17 17 0.0%
Average number of client employees
paid (2) 96,938 113,094 -14.3%
Professional service fees per average
number of client employees paid (3),
(4) $ 1,171 $ 1,251 -6.4%
Total gross profit per average number
of client employees paid (3) $ 1,499 $ 1,645 -8.9%
Operating (loss) income per average
number of client employees paid (3) $ (8) $ 274 -102.9%
(1) Client accounts as measured by individual client 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) Statistical information is based upon actual year-to-date amounts
divided by the average number of client employees paid.
(4) Professional service fees are based upon information from the
following table (in thousands):
Twelve Months Twelve Months
2008 2007
-------------- --------------
Revenues:
Professional service fees $ 113,545 $ 141,496
Employee health and welfare benefits 325,265 350,965
Workers' compensation 61,106 84,513
State unemployment taxes and other 20,624 24,620
-------------- --------------
Total revenues $ 520,540 $ 601,594
============== ==============