Jeff JoerresThanks, Mike. The second quarter, given the economic volume, was a hard-fought quarter that yielded profits within our guidance. We did see declining trends throughout the quarter but for the most part, excluding the non-recurring items and the change in currency, which only affects us really on a translation basis, our operations came in where we anticipated. We were anticipating constant currency revenue of flat to minus two. We came in down 1% for the second quarter. The revenue performances across the board were pretty much in line with what we had anticipated from a segment perspective with no segment being down more than 2.7% (inaudible). Americas, slightly up at 1.4% as well as Asia up by 1.8%. And Right Management finished the second quarter up by 2.9%. We expected to have an earnings per share between $0.68 and $0.76 and, in fact, we earned $0.76 excluding the effect of the non-recurring items. As we talked about in our conference calls, we see this current downturn as quite different than what we experienced in 2008. There really is no major fall off but rather a slow, decline of business that is holding true across all geographies at this time. In total, our operating profit increased 11% in constant currency and our earnings per share dropped 5% in constant, (including) the non-recurring items. While we were able to do a fair amount of work on our gross profit margin, we – there still is a lot more to do. In fact, we saw some drop in our permanent recruitment, which is what we've been seeing across the board for a little bit of time right now and we are still seeing some challenges in the staffing part of our business. That is an overview. I'd like to turn it over to Mike to discuss the details.
Mike Van HandelOkay, thanks, Jeff. I'll begin today with some overall comments on the quarter followed by a discussion of each of our operating segments and then a review of our cash flow and balance sheet. Lastly, I'll comment on our outlook of the third quarter. As Jeff mentioned, our operational performance in the quarter was in line with expectations and the midpoint of our guidance. However, there are a number of unique items included in the reported results which I will try and unpack to give you a clear view of our underlying performance. Revenue in the quarter was down 1% in constant currency, right at the midpoint of our guidance range of flat to minus 2%. Our operating profit margin, excluding non-recurring items, came in at 2.4% also in line with expectations at the midpoint of our guidance range. While we delivered on our operating profit margin, our gross margin fell short of expectations but we're able to compensate for that with productivity improvements and expense reductions. I'll comment on both of these elements in just a bit. Our reported earnings per share were $0.51 which includes reorganization cost of $0.17 and legal cost of $0.08, which gets you to an adjusted earnings per share of $0.76, which is at the higher end of our guidance range. Of the $18.7 million reorganization charge, $10.4 million relates to the final phase of the reorganization plan announced in the fourth quarter for Right Management. This plan included realigning our management structure to more effectively deliver service to our clients and reducing our office cost by combing our office footprint for the professional business in certain markets. Under this reorganization plan, Right was able to continue to deliver their market leading services in a more efficient and effective way while maintaining a strong presence in each of its markets.
This portion of the reorganization plan will result in additional annual savings of $6 million bringing the total reorganization plan savings to $20 million annually.Also included in reorganization charges is a $8.3 million charge in the Americas, of which $6.9 million relates to the US. Roughly half of these costs are severance costs associated with business realignment and half relate to office rents as a result of utilizing less office space in some markets and office consolidation in other markets. Also included in reported earnings in the US is the non-recurring legal charge of $10 million primarily related to the settlement of an alleged class action lawsuit regarding our vacation pay policies in Illinois. While we deny any liability in this matter, we concluded a settlement was in our best interest given the cost of ongoing litigation. Our earnings before non-recurring items of $0.76 per share was favorably impacted $0.04 as a result of a lower than planned income tax rate due to ta benefits from internal reorganizations. Our effective tax rate on earnings before non-recurring items was 45.1% compared to a forecast of 48%. Earnings were also favorably impacted by $0.01 as a result of a lower share count due to share repurchases in the quarter. I'll discuss this in more detail later in the call. Finally, our earnings were unfavorably impacted $0.03 more than expected from exchange rates as a total negative impact was $0.07 per share compared to a forecast of $0.04 per share. The gross profit margin in the quarter came in at 16.6% which is short of expectations and below prior year by 40 basis points. The shortfall from expectations is attributed to lower recruitment revenues and a lower temporary recruitment gross margin in some European countries. Read the rest of this transcript for free on seekingalpha.com