Corporate Resource Services, Inc. (OTCBB:CRRS), a national provider of diversified staffing, recruiting and consulting services, today reported results for its third quarter ended June 30, 2010. The Company’s quarterly results were materially impacted by its acquisition of certain assets of GT Systems on April 5, 2010.

Revenues for the third quarter increased to $32.5 million from $12.8 million in the third quarter of fiscal 2009. The increase of approximately 150% is primarily attributable to revenues generated as a result of the acquisition by the Company of certain assets of GT Systems. Since the acquisition, the acquired business has been operated by the Company’s wholly owned subsidiary, Corporate Resource Development (CRD). The balance of the increase is attributable to additional demand from existing customers, which the Company attributes to improvements in the industry as well as the Company’s ordinary business cycle.

Direct cost of services increased for the quarter to $25.9 million from approximately $11.1 million in the 2009 comparable period, an increase of approximately 130%. The increase in direct cost of services is a direct result of the increase in business and revenue. Gross profit increased by approximately 310% to $6.6 million from $1.6 million. The Company’s gross profit margin for the third quarter of fiscal 2010, as a percentage of revenues, was approximately 20%, as compared with a 13% gross margin for the third quarter of fiscal 2009. The increase in gross profit and in margins was a result of the gross profit generated from the higher margin CRD business following the April acquisition, all of which was realized during the third fiscal quarter.

The Company reported a net loss for the three months ended June 30, 2010 of $736,000, or ($.03) per share, versus a net loss of $75,000, or $.00 per share in the 2009 period. The increase in net loss was due to increases in marketing, selling and administrative expenses due to the acquisition, transaction costs associated with the acquisition and increases in interest expense due to acquisition financing incurred during the quarter.

For the nine months ended June 30, 2010, revenues totaled $60.1 million, as compared to $42.3 million for the comparable period during fiscal 2009. Direct cost of services for the nine months ended June 30, 2010 totaled $50,747,000, as compared to $36,770,000 for the nine months ended June 30, 2009. The increase in revenues and direct costs of services were the result of the operations of CRD following the GT acquisition.

Gross profit for the nine months ended June 30, 2010 totaled $9,360,000 (15.5% of consolidated revenues), as compared to $5,545,000 (13% of consolidated revenues) for the nine months ended June 30, 2009. The increase of $3,815,000 and the increase in gross profit as a percentage of consolidated revenues are primarily attributable to the gross profit generated by CRD, which was offset somewhat by pricing pressures in the Company’s other lines of business during the period.

The company reported a net loss for the nine months ended June 30, 2010 of $3,326,000, or ($.13) per share, as compared with a net loss of $568,000, or ($.01) per share, for the comparable period in fiscal 2009. The increase in net loss was due primarily to increases in marketing, selling and administrative expenses, transaction and interest expenses associated with the acquisition of certain assets of GT Systems, and losses of approximately $1.4 million recorded on exchanges of outstanding debt for equity, reported by the Company previously.

Jay Schecter, CEO of the Company, said, “We closed the acquisition of certain assets of GT Systems in early April, and this is the first quarter that our results include the operations of the acquired business. Our results are in line with our expectations, as we continue with the process of integrating the operations of this significant acquisition with our existing business. We believe the Company is now, and in the near future will continue to be, positioned to be a significant player in the staffing marketplace, as we continue to seek out acquisitions on favorable terms that will expand our presence in existing markets, as well as give us a foothold in attractive new markets throughout the country. We are also making investments in our sales organization which are critical and believe will show significant returns in future periods.”

About Corporate Resource Services

Through its two wholly-owned subsidiaries, Accountabilities and Corporate Resource Development, Corporate Resource Services is a national provider of diversified staffing, recruiting and consulting services, including temporary staffing services, with a focus on light industrial services and clerical and administrative support. The Company provides its services across a variety of industries and to a diverse range of clients ranging from sole proprietorships to Fortune 1000 companies. The Company conducts all of its business in the United States through the operation of 17 staffing and recruiting offices.

Safe Harbor Disclaimer: This press release contains “forward-looking statements”. These statements relate to expectations concerning matters that are not historical facts. Such forward-looking statements may be identified by words such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. These statements, and all phases of our operations, are subject to known and unknown risks, uncertainties and other factors, including, but not limited to, our ability to satisfy our working capital requirements; our ability to identify suitable acquisition candidates or investment opportunities; our ability to integrate any acquisitions made and fully realize the anticipated benefits of these acquisitions; successor liabilities that we may be subject to as a result of acquisitions; material employment related claims and costs as a result of the nature of our business; our ability to retain key management personnel; the financial difficulty of our clients, which may result in nonpayment of amounts owed to us; significant economic downturns resulting in reduced demand for our services; our ability to attract and retain qualified temporary personnel, who possess the skills and experience necessary to satisfy our clients and other risk factors as identified in our annual report on Form 10-K for the fiscal year ended September 30, 2009, and our other reports filed with the Securities and Exchange Commission, or SEC. Readers are cautioned not to place undue reliance on these forward-looking statements. Our actual results, levels of activity, performance or achievements and those of our industry may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Except as required by law, we undertake no obligation to update the forward-looking statements. We refer to our Quarterly Report on Form 10Q for the quarter and nine months ended June 20, 2010 for additional information regarding the Company’s results of operations, balance sheet, liquidity and working capital and strategy.
CORPORATE RESOURCE SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
  June 30,     September 30,
2010 2009
(unaudited)
ASSETS
 
Current assets
Cash $ 27,000 $ 63,000

Accounts and unbilled receivables – less allowance for doubtful accounts of $503,000 and $188,000, respectively
4,058,000 1,779,000
Due from financial institution 441,000 130,000
Prepaid expenses and other current assets 139,000 320,000
Total current assets 4,665,000 2,292,000
 
Property and equipment, net and other assets 844,000 162,000
Goodwill and intangible assets, net 5,240,000 3,891,000
 
Total assets $ 10,749,000 $ 6,345,000
 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
Current liabilities:
Accounts payable and accrued liabilities $ 2,962,000 $ 1,614,000
Accrued wages and related obligations-due to related party 2,846,000 1,801,000
Current portion of long-term debt 1,050,000 454,000
Current portion of related party long-term debt, and other related party obligations 2,585,000 1,155,000
Total current liabilities 9,443,000 5,024,000
 
Long term debt and other long-term liabilities, net of current portion 1,368,000 770,000
Total liabilities 10,811,000 5,794,000
 
 
Total Stockholders' equity (deficit) (62,000 ) 551,000
 
Total liabilities and stockholders’ equity (deficit) $ 10,749,000 $ 6,345,000
 
 
CORPORATE RESOURCE SERVICES, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
    Three Months Ended June 30,     Nine Months Ended June 30,
2010     2009 2010     2009
 
 
 
Revenue $ 32,522,000 $ 12,726,000 $ 60,107,000 $ 42,315,000
 
Gross profit 6,647,000 1,618,000 9,360,000 5,545,000
 
Selling, general and administrative expenses 7,091,000 1,689,000 10,809,000 5,461,000
Acquisition expenses 482,000 - 482,000 -
Other Income (446,000 ) - (446,000 ) -
 
Income (loss) from operations (480,000 ) (71,000 ) (1,485,000 ) 84,000
 
Interest expense 256,000 86,000 418,000 336,000
Net loss on debt extinguishment - - 1,423,000 -
 
Loss from continuing operations (736,000 ) (157,000 ) (3,326,000 ) (252,000 )
 
Income (loss) from discontinued operations - 82,000 - (316,000 )
 
Net Loss $ (736,000 ) $ (75,000 ) $ (3,326,000 ) $ (568,000 )
 
Net (loss) per share from continuing operations:
Basic EPS $ (0.03 ) $ (0.01 ) $ (0.13 ) $ (0.01 )
Diluted EPS $ (0.03 ) $ (0.01 ) $ (0.13 ) $ (0.01 )
 
Net loss per share from discontinued operations:
Basic EPS $ - $ - $ - $ (0.02 )
Diluted EPS $ - $ - $ - $ (0.02 )
 
Total net loss per share:
Basic EPS $ (0.03 ) $ - $ (0.13 ) $ (0.03 )
Diluted EPS $ (0.03 ) $ - $ (0.13 ) $ (0.03 )

Copyright Business Wire 2010

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