Form 10-Q

10-Q 1 d10q.htm FORM 10-Q Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 0-24484

MPS GROUP, INC.

(Exact name of registrant as specified in its charter)


Florida		59-3116655
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Independent Drive, Jacksonville, FL		32202
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number including area code): (904) 360-2000

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 x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s class of common stock as of October 27, 2006:

102,478,121 shares of $0.01 par value common stock

MPS Group, Inc. and Subsidiaries

Index


Part I	Financial Information

Item 1	Consolidated Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005	3

	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2006 and 2005	4

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months ended September 30, 2006	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2006 and 2005	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4	Controls and Procedures	26

Part II	Other Information

Item 1A	Risk Factors	27

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 6	Exhibits	27

	Signatures	28

Part I. Financial Information

Item 1.

Financial Statements

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


(dollar amounts in thousands except share amounts)	September 30, 2006			December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	130,674		$	142,951
Accounts receivable, net of allowance of $14,475 and $11,872, respectively		302,118			244,506
Prepaid expenses		9,632			7,131
Deferred income taxes		1,528			5,749
Other		19,923			16,091

Total current assets		463,875			416,428
Furniture, equipment, and leasehold improvements, net		26,801			24,542
Goodwill, net		592,096			545,363
Deferred income taxes		13,265			27,277
Other assets, net		21,310			14,396

Total assets	$	1,117,347		$	1,028,006

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	87,151		$	65,869
Accrued payroll and related taxes		73,904			58,711
Income taxes payable		7,359			11,989

Total current liabilities		168,414			136,569
Other		18,452			15,397

Total liabilities		186,866			151,966

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued		—			—
Common stock, $.01 par value; 400,000,000 shares authorized; 114,615,327 and 111,169,227 shares issued, respectively		1,146			1,112
Additional contributed capital		712,697			687,661
Retained earnings		312,257			257,563
Deferred stock compensation		—			(4,630	)
Accumulated other comprehensive income		30,185			11,560
Treasury stock, at cost (12,196,472 and 8,834,114 shares, respectively)		(125,804	)		(77,226	)

Total stockholders’ equity		930,481			876,040

Total liabilities and stockholders’ equity	$	1,117,347		$	1,028,006

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended				Nine Months Ended
(dollar amounts in thousands except per share amounts)	September 30, 2006		September 30, 2005		September 30, 2006		September 30, 2005
Revenue	$	483,085	$	426,961	$	1,390,819	$	1,259,506
Cost of revenue		348,559		313,016		1,008,197		932,708

Gross profit		134,526		113,945		382,622		326,798

Operating expenses:
General and administrative		99,795		84,198		286,231		254,754
Depreciation and intangibles amortization		4,064		3,830		11,518		11,683

Total operating expenses		103,859		88,028		297,749		266,437

Income from operations		30,667		25,917		84,873		60,361
Other income, net		1,326		1,355		4,060		2,639

Income before provision for income taxes		31,993		27,272		88,933		63,000
Provision for income taxes		12,317		10,151		34,239		23,419

Net income	$	19,676	$	17,121	$	54,694	$	39,581

Basic net income per common share	$	0.19	$	0.17	$	0.54	$	0.39

Average common shares outstanding, basic		101,025		100,701		101,595		101,836

Diluted net income per common share	$	0.19	$	0.16	$	0.52	$	0.37

Average common shares outstanding, diluted		103,192		105,119		104,428		105,897

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)


(dollar amounts in thousands except common share amounts)	Common Stock					Additional Contributed Capital			Retained Earnings		Accumulated Other Comprehensive Income		Deferred Stock Compensation			Treasury Stock			Total
	Shares		Amount			Additional Contributed Capital			Retained Earnings		Accumulated Other Comprehensive Income		Deferred Stock Compensation			Treasury Stock			Total
Balance, December 31, 2005	111,169,227		$	1,112		$	687,661		$	257,563	$	11,560	$	(4,630	)	$	(77,226	)	$	876,040
Comprehensive income:
Net income	—			—			—			54,694		—		—			—
Foreign currency translation	—			—			—			—		18,625		—			—
Total comprehensive income	—			—			—			—		—		—			—			73,319

Reclassification of deferred stock compensation upon adoption of SFAS 123R	—			—			(4,630	)		—		—		4,630			—			—
Excess tax benefit from share-based awards	—			—			11,867			—		—		—			—			11,867
Exercise of stock options	2,212,522			22			13,254			—		—		—			—			13,276
Purchase of treasury stock	—			—			—			—		—		—			(41,019	)		(41,019	)
Settlement of share-based awards	—			—			—			—		—		—			(7,559	)		(7,559	)
Issuance of restricted stock	1,309,828			12			(12	)		—		—		—			—			—
Cancellation of restricted stock	(76,250	)		(0	)		0			—		—		—			—			0
Share-based plans expense	—			—			4,557			—		—		—			—			4,557

Balance, September 30, 2006	114,615,327		$	1,146		$	712,697		$	312,257	$	30,185	$	—		$	(125,804	)	$	930,481

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine months ended September 30,
(dollar amounts in thousands)	2006			2005
Cash flows from operating activities:
Net income	$	54,694		$	39,581
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		17,354			16,397
Excess tax benefit from share-based awards		(11,825	)		—
Share-based plans expense		4,557			2,497
Depreciation and intangibles amortization		11,518			11,683
Changes in certain assets and liabilities, net of acquisitions:
Accounts receivable		(38,384	)		(32,220	)
Prepaid expenses and other assets		(1,502	)		(261	)
Accounts payable and accrued expenses		7,570			13,276
Accrued payroll and related taxes		17,488			17,100
Other, net		(3,717	)		(957	)

Net cash provided by operating activities		57,753			67,096

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