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 June 30, 2005

¨	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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of July 29, 2005:

100,876,980 shares of $0.01 par value Common Stock

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to certain risks, uncertainties or assumptions and may be affected by certain factors, including but not limited to the specific factors discussed in Part I, Item 2 of this report under the heading ‘Factors Which May Impact Future Results and Financial Condition.’ In some cases, you can identify forward-looking statements by terminology such as ‘will,’ ‘may,’ ‘should,’ ‘could,’ ‘expects,’ ‘plans,’ ‘indicates,’ ‘projects,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘appears,’ ‘predicts,’ ‘potential,’ ‘continues,’ ‘can,’ ‘hopes,’ ‘perhaps,’ ‘would,’ or ‘become’ or the negative of these terms or other comparable terminology. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are based on beliefs and assumptions of the Company’s management and on information currently available to management. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.

MPS Group, Inc. and Subsidiaries

Index


		Page
Part I	Financial Information

Item 1	Consolidated Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	4
	Unaudited Condensed Consolidated Statements of Income for the Three and Six Months ended June 30, 2005 and 2004	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2005 and 2004	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4	Controls and Procedures	21

Part II	Other Information

Item 1	Legal Proceedings	22

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3	Defaults Upon Senior Securities	22

Item 4	Submission of Matters to a Vote of Security Holders	22

Item 5	Other Information	23

Item 6	Exhibits	23

	Signatures	24

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)	June 30, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	103,199		$	106,497
Accounts receivable, net of allowance of $10,730 and $9,836, respectively		227,032			209,512
Prepaid expenses		7,419			6,405
Deferred income taxes		941			836
Other		15,373			15,532

Total current assets		353,964			338,782
Furniture, equipment, and leasehold improvements, net		26,808			26,878
Goodwill, net		528,074			529,292
Deferred income taxes		38,541			48,518
Other assets, net		10,516			11,134

Total assets	$	957,903		$	954,604

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	46,548		$	51,944
Accrued payroll and related taxes		57,516			45,353
Income taxes payable		11,814			9,352

Total current liabilities		115,878			106,649
Other		13,079			12,292

Total liabilities		128,957			118,941

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; 108,748,977 and 108,434,541 shares issued, respectively		1,087			1,085
Additional contributed capital		666,725			664,440
Retained earnings		220,426			197,966
Accumulated other comprehensive income		11,971			18,497
Deferred stock compensation		(5,864	)		(6,383	)
Treasury stock, at cost (7,893,014 and 5,078,514 shares, respectively)		(65,399	)		(39,942	)

Total stockholders’ equity		828,946			835,663

Total liabilities and stockholders’ equity	$	957,903		$	954,604

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)


	Three Months Ended				Six Months Ended
(dollar amounts in thousands except per share amounts)	June 30, 2005		June 30, 2004		June 30, 2005		June 30, 2004
Revenue	$	424,836	$	333,245	$	832,545	$	643,726
Cost of revenue		313,917		248,089		619,692		480,335

Gross profit		110,919		85,156		212,853		163,391

Operating expenses:
General and administrative		87,338		68,089		170,556		134,383
Depreciation and intangibles amortization		3,736		3,794		7,853		7,716

Total operating expenses		91,074		71,883		178,409		142,099

Income from operations		19,845		13,273		34,444		21,292
Other income, net		682		96		1,284		731

Income before provision for income taxes		20,527		13,369		35,728		22,023
Provision for income taxes		7,416		4,025		13,268		7,246

Net income	$	13,111	$	9,344	$	22,460	$	14,777

Basic net income per common share	$	0.13	$	0.09	$	0.22	$	0.14

Average common shares outstanding, basic		101,860		103,655		102,404		103,158

Diluted net income per common share	$	0.12	$	0.09	$	0.21	$	0.14

Average common shares outstanding, diluted		105,499		107,527		106,287		106,955

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six months ended June 30,
(dollar amounts in thousands)	2005			2004
Cash flows from operating activities:
Net income	$	22,460		$	14,777
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		9,872			7,875
Deferred compensation		1,611			1,578
Depreciation and intangibles amortization		7,853			7,716
Changes in certain assets and liabilities, net of acquisitions:
Accounts receivable		(24,779	)		(26,613	)
Prepaid expenses and other assets		(1,024	)		(1,781	)
Accounts payable and accrued expenses		1,230			7,653
Accrued payroll and related taxes		13,145			4,502
Other, net		(291	)		(2,496	)

Net cash provided by operating activities		30,077			13,211

Cash flows from investing activities:
Sale of assets		3,674			2,442
Purchase of furniture, equipment and leasehold improvements, net of disposals		(7,243	)		(5,658	)
Purchase of businesses, including additional consideration on acquisitions, net of cash acquired		(878	)		(15,970	)

Net cash used in investing activities		(4,447	)		(19,186	)

Cash flows from financing activities:
Repurchases of common stock		(25,457	)		(3,760	)
Discount realized on employee stock purchase plan		(210	)		(204	)
Proceeds from stock options exercised		1,064			10,900
Repayments on indebtedness		(1,633	)		(400	)

Net cash (used in) provided by financing activities		(26,236	)		6,536

Effect of exchange rate changes on cash and cash equivalents		(2,692	)		752

Net (decrease) increase in cash and cash equivalents		(3,298	)		1,313

Net cash provided by operating activities of discontinued operations		—			1,343

Cash and cash equivalents, beginning of period		106,497			124,830

Cash and cash equivalents, end of period	$	103,199		$	127,486

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands except per share amounts)

1. Basis of Presentation.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by MPS Group, Inc. (‘MPS’ or the ‘Company’) in accordance with the rules and regulations of the Securities and Exchange Commission (‘SEC’). Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Form 10-K for the year ended December 31, 2004.

The accompanying condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for an interim period are not necessarily indicative of the results of operations for a full fiscal year.

Stock-Based Compensation

The Company accounts for its employee and director stock option plans in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB Opinion No. 25”), and related interpretations. The Company measures compensation expense for employee and director stock options as the aggregate difference between the fair value of its common stock and exercise prices of the options on the date that both the number of shares the grantee is entitled to receive and the exercise prices are known. Compensation expense associated with restricted stock grants is equal to the fair value of the shares on the date of grant and is recorded pro rata over the required holding period. If the Company had elected to recognize compensation cost for all outstanding options granted by the Company by applying the fair value recognition provisions of Statement of Financial Accounting Standards (‘SFAS’) No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, to stock-based employee compensation, net income and earnings per share would have been reduced to the pro forma amounts indicated below.


	Three Months Ended						Six Months Ended
(dollar amounts in thousands except per share amounts)	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Net income
As reported	$	13,111		$	9,344		$	22,460		$	14,777
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(6,200	)		(934	)		(9,539	)		(1,617	)

Pro forma	$	6,911		$	8,410		$	12,921		$	13,160

Basic net income per common share
As reported	$	0.13		$	0.09		$	0.22		$	0.14
Pro forma	$	0.07		$	0.08		$	0.13		$	0.13
Diluted net income per common share
As reported	$	0.12		$	0.09		$	0.21		$	0.14
Pro forma	$	0.07		$	0.08		$	0.12		$	0.12

New Accounting Pronouncements

MPS Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(dollar amounts in thousands except per share amounts)

No. 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first interim or annual period after June 15, 2005. In April 2005, the SEC amended the compliance date to the first annual period beginning after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. The Company expects to adopt the provisions of SFAS No. 123R in the first quarter of 2006. The Company is evaluating the requirements of SFAS 123R and has not yet determined the method of adoption or the effect of adopting SFAS 123R, and the Company has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

2. Net Income per Common Share

The calculation of basic net income per common share and diluted net income per common share is presented below:


	Three Months Ended				Six Months Ended
(dollar amounts in thousands except per share amounts)	June 30, 2005		June 30, 2004		June 30, 2005		June 30, 2004
Basic income per common share computation:
Net income	$	13,111	$	9,344	$	22,460	$	14,777

Basic average common shares outstanding		101,860		103,655		102,404		103,158
Incremental shares from assumed exercise of stock options and restricted stock awards		3,639		3,872		3,883		3,797

Diluted average common shares outstanding		105,499		107,527		106,287		106,955

Basic net income per common share	$	0.13	$	0.09	$	0.22	$	0.14

Diluted net income per common share	$	0.12	$	0.09	$	0.21	$	0.14

Options to purchase approximately 1.6 million and 599,000 shares of common stock that were outstanding during the three months ended June 30, 2005 and 2004, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of the common shares. For the six months ended June 30, 2005 and 2004, options to purchase approximately 1.3 million and 766,000 shares of common stock, respectively, were not included in the computation of diluted earnings per share for the aforementioned reason.

3. Commitments and Contingencies

Litigation

The Company is a party to a number of lawsuits and claims arising out of the ordinary conduct of its business. In the opinion of management, based on the advice of in-house and external legal counsel, the lawsuits and claims pending are not likely to have a material adverse effect on the Company, its financial position, its results of operations, or its cash flows.

MPS Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(dollar amounts in thousands except per share amounts)

4. Segment Reporting

The Company discloses segment information in accordance with SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information, which requires companies to report selected segment information on a quarterly basis and to report certain entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues.

The Company has four reportable segments: North American Professional Services, European Professional Services, North American Information Technology (‘IT’) Services, and European IT Services. The Company’s reportable segments offer different services, have different client bases, experience differing economic characteristics, and are managed separately as each requires different resources and marketing strategies. The North American Professional Services segment provides specialized staffing and recruiting in the disciplines of accounting, finance, law, engineering and healthcare in North America. The European Professional Services segment provides specialized staffing and recruiting for accounting, financial services, legal, human resources, not-for-profit and public-sector positions in Europe, principally in the United Kingdom. The North American IT Services segment offers value-added solutions such as IT project support and staffing, recruitment of full-time positions, project-based solutions, supplier management solutions, on-site recruiting support, IT strategy consulting, design and branding, application development, and integration in North America. The European IT Services segment provides value-added solutions such as IT project support and staffing, and recruitment of full-time positions, specialized staffing and solutions in Europe, principally in the United Kingdom.

The North American Professional Services segment’s results for 2005 include the results from the acquisitions of two health care staffing businesses, which were acquired by the Company in February and March of 2004, two legal staffing businesses, which were acquired in September and October of 2004, and three accounting and finance businesses, which were acquired in February, July and October of 2004.

MPS Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(dollar amounts in thousands except per share amounts)

The Company evaluates segment performance based on revenues, gross profit, and income from operations before provision for income taxes. The Company does not allocate income taxes, interest or unusual items to the segments. In addition, the Company does not report total assets by segment. No one customer represents more than 5% of the Company’s overall revenue, and as a result, the Company does not believe it has a material reliance on any one customer. The following tables summarize performance, identifiable assets, and long-lived assets by segment and revenue by geographic location:


	Three Months Ended						Six Months Ended
(dollar amounts in thousands)	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Revenue
North American Professional Services	$	131,766		$	102,509		$	257,175		$	195,312
European Professional Services		92,539			66,168			177,125			129,933
North American IT Services		126,232			108,437			251,725			210,226
European IT Services		74,299			56,131			146,520			108,255

Total revenue	$	424,836		$	333,245		$	832,545		$	643,726

Gross profit
North American Professional Services	$	39,359		$	29,317		$	75,265		$	55,134
European Professional Services		26,833			18,882			50,672			36,546
North American IT Services		35,676			29,208			68,633			56,960
European IT Services		9,051			7,749			18,283			14,751

Total gross profit	$	110,919		$	85,156		$	212,853		$	163,391

Income from operations before provision for income taxes
North American Professional Services	$	10,205		$	8,459		$	17,432		$	12,854
European Professional Services		6,469			2,972			11,855			5,880
North American IT Services		9,006			6,232			16,996			12,059
European IT Services		931			521			1,936			725

		26,611			18,184			48,219			31,518
Corporate expenses (1)		(6,766	)		(4,911	)		(13,775	)		(10,226	)
Other income, net		682			96			1,284			731

Total income from operations before provision for income taxes	$	20,527		$	13,369		$	35,728		$	22,023

Geographic Areas
Revenue
North America	$	257,998		$	210,946		$	508,900		$	405,538
Europe		166,838			122,299			323,645			238,188

Total revenue	$	424,836		$	333,245		$	832,545		$	643,726

(1)	Corporate expenses include unallocated expenses not directly related to the segments’ operations.

MPS Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(dollar amounts in thousands except per share amounts)


(dollar amounts in thousands)	June 30, 2005		December 31, 2004
Accounts receivable, net
North American Professional Services	$	69,349	$	60,623
European Professional Services		35,459		32,433
North American IT Services		81,472		78,367
European IT Services		40,752		38,089

Total accounts receivable, net	$	227,032	$	209,512

Long-lived assets
North American Professional Services	$	156,016	$	154,412
European Professional Services		106,317		105,542
North American IT Services		251,368		253,378
European IT Services		35,777		35,904

		549,478		549,236
Corporate		5,404		6,934

Total long-lived assets	$	554,882	$	556,170

5. Comprehensive Income

The Company discloses other comprehensive income in accordance with SFAS No. 130, ‘Reporting Comprehensive Income’. Comprehensive income includes unrealized gains and losses on foreign currency translation adjustments. A summary of comprehensive income for the three and six months ended June 30, 2005 and 2004, is as follows:


	Three Months Ended						Six Months Ended
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Net income	$	13,111		$	9,344		$	22,460		$	14,777
Unrealized (loss) gain on foreign currency translation adjustments (1)		(5,192	)		(1,205	)		(6,526	)		1,703

Comprehensive income	$	7,919		$	8,139		$	15,934		$	16,480

(1)	The currency translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.

6. Excess Real Estate Obligations

In 2002, management determined that the Company would not be able to utilize certain vacated office space, thus eliminating the economic benefit associated with the vacated office space. As a result, the Company recorded a charge for contract termination costs, in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, mainly due to costs that will continue to be incurred under the lease contract for its remaining term without economic benefit to the Company. As of December 31, 2004, there were $1.5 million of contract termination costs remaining, all under the North America IT Services reporting segment. During the three and six months ended June 30, 2005, $193,000 and $411,000, respectively, were paid or otherwise settled, which reduced the outstanding termination costs to $1.1 million at June 30, 2005.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

References to “we”, “our”, “us”, “MPS” or the “Company” in this Quarterly Report on Form 10-Q refer to MPS Group, Inc. and its consolidated subsidiaries, unless the context requires otherwise.

MPS Group, Inc. is a leading provider of business services with over 185 offices throughout the United States, Canada, the United Kingdom, and continental Europe. We deliver specialty staffing, consulting and business solutions to virtually all industries in the following disciplines, through the following primary brands:


Discipline		Brand(s)
Information Technology (IT) Services		Modis^®
Accounting and Finance		Badenoch & Clark^®, Accounting Principals^®
Engineering		Entegee^®
Legal		Special Counsel^®
IT Solutions		Idea Integration^®
Health Care		Soliant Health^®
Human Capital Automation		Beeline^®

Executive Summary

We believe that economic conditions strengthened during 2004 and into 2005, both in the United States and abroad, which had a favorable impact on both MPS and our industry. In the second quarter of 2005 compared to the second quarter of 2004, we were able to grow revenue in all of our segments. In addition to the improved macroeconomic conditions, we believe this growth is attributable to recent investments we have made in our business including our investments in additional sales and recruiting staff, acquisitions, new service offerings, and new office openings. Specifically for 2004, we acquired seven businesses for our North American Professional Services segment (together, the ‘Acquisitions’): two legal staffing businesses acquired in August and October of 2004; two health care staffing businesses acquired in February and March of 2004; and three accounting staffing businesses acquired in February, July, and October of 2004. For the second half of 2005, while we continue to believe we will experience future revenue growth, our revenue will be impacted by general macroeconomic conditions.

Our revenue increased 29.3% and our operating income increased 61.8% from the first half of 2004. Direct hire fees increased 68.7% from the first half of 2004, and now represent 4.0% of revenue, up from 3.0% in the prior year. In addition, we continued to diversify as revenue from our Professional Services division represents a greater proportion of consolidated revenue than it did a year ago. Throughout the remainder of 2005, we will continue to look for opportunities to increase gross margin along with increasing operating leverage within each segment. Specifically within the European IT Services segment, our lowest gross margin segment, we have begun the process of scaling back relationships with certain low-margin, high-volume clients in order to focus on higher-margin clients. In addition, we have a foundation for growth with more than $103 million of cash on hand at quarter end, a $150 million credit facility with no outstanding borrowings, no long-term debt, and working capital of $238.1 million.

The following detailed analysis of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes thereto included in Part 1, Item 1 of this Quarterly Report and the 2004 Consolidated Financial Statements and related notes included in our Form 10-K for the year ended December 31, 2004.

Results Of Operations For The Three and Six Months Ended June 30, 2005 and 2004

Consolidated revenue was $424.8 million and $333.2 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 27.5% during the three months ended June 30, 2005. Consolidated revenue was $832.5 million and $643.7 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 29.3% during the six months ended June 30, 2005.

Consolidated gross profit was $110.9 million and $85.2 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 30.2% during the three months ended June 30, 2005. Consolidated gross margin was 26.1% and 25.6% in the three months ended June 30, 2005 and 2004, respectively. Consolidated gross profit was $212.9 million and $163.4 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 30.3% during the six months ended June 30, 2005. Consolidated gross margin was 25.6% and 25.4% in the six months ended June 30, 2005 and 2004, respectively.

Consolidated operating expenses were $91.1 million and $71.9 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 26.7% during the three months ended June 30, 2005. General and administrative (G&A) expenses, which are included in operating expenses, were $87.3 million and $68.1 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 28.2% during the three months ended June 30, 2005. Consolidated operating expenses were $178.4 million and $142.1 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 25.6% during the six months ended June 30, 2005. General and administrative (G&A) expenses, which are included in operating expenses, were $170.6 million and $134.4 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 26.9% during the six months ended June 30, 2005.

Consolidated operating income was $19.8 million and $13.3 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 48.9% during the three months ended June 30, 2005. Operating income as a percentage of revenue was 4.7% and 4.0% for the three months ended June 30, 2005 and 2004, respectively. Consolidated operating income was $34.4 million and $21.3 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 61.5% during the six months ended June 30, 2005. Operating income as a percentage of revenue was 4.1% and 3.3% for the six months ended June 30, 2005 and 2004, respectively.

Segment Results

Professional Services division

North American Professional Services Segment

Revenue in our North American Professional Services segment was $131.8 million and $102.5 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 28.6% during the three months ended June 30, 2005. Revenue was $257.2 million and $195.3 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 31.7% during the six months ended June 30, 2005. Acquisitions contributed $12.7 million and $31.3 million in revenue, respectively, in the three and six months ended June 30, 2005. The following contributed to the increase in revenue for both the three and six months ended June 30, 2005: throughout 2004, we executed on our acquisition strategy; made considerable investments in sales and recruiting staff; and introduced additional service offerings. We completed seven acquisitions during 2004, and between these acquisitions and internal staff investments, we increased our staff headcount by 25% from June 30, 2004 to June 30, 2005. The internal staff investments were in anticipation of increased demand and were coupled with the added service offerings to our Special Counsel, Accounting Principals, and Soliant Health brands/operating units during 2004.

Revenue contribution from the North American Professional Services operating units for the three and six months ended June 30, 2005 and 2004 as a percentage of the total North American Professional Services segment revenues were as follows:


	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Entegee	46.7	%	50.7	%	47.0	%	51.5	%
Special Counsel	23.9		25.0		23.2		26.0
Accounting Principals	17.1		9.9		18.0		9.5
Soliant Health	12.3		12.8		11.8		10.9
Other	—		1.6		—		2.1

Gross profit in our North American Professional Services segment was $39.4 million and $29.3 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 34.5% during the three months ended June 30, 2005. Gross profit was $75.3 million and $55.1 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 36.7% during the six months ended June 30, 2005. Acquisitions contributed $4.6 million and $10.8 million in gross profit in the three and six months ended June 30, 2005, respectively. Gross margin in our North American Professional Services segment was 29.9% and 28.6% in the three months ended June 30, 2005 and 2004, respectively, and 29.3% and 28.2% in the six months ended June 30, 2005 and 2004, respectively. The increase in gross margin in both the three and six months ended June 30, 2005 was due primarily to an increase in direct hire fees. Direct hire fees, which generate a higher margin, increased to 5.6% of the segment’s revenue for the three months ended June 30, 2005, from 4.0% in the year earlier period. For the six months ended June 30, 2005, direct hire fees increased to 5.5% of the segment’s revenue, from 3.8% in the year earlier period.

G&A expenses in our North American Professional Services segment were $27.8 million and $19.9 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 39.7% during the three months ended June 30, 2005. As a percentage of revenue, G&A expenses were 21.1% and 19.4% in the three months ended June 30, 2005 and 2004, respectively. G&A expenses were $55.0 million and $40.3 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 36.5% during the six months ended June 30, 2005. As a percentage of revenue, G&A expenses were 21.4% and 20.6% in the six months ended June 30, 2005 and 2004, respectively. The increase in G&A expenses was due primarily to the increase in compensation expense related to the increases in the segment’s revenue, our investment in additional sales and recruiting personnel, and additional G&A from Acquisitions.

Operating income was $10.2 million and $8.5 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 20.0% during the three months ended June 30, 2005. Operating income as a percentage of revenue was 7.7% and 8.3% in the three months ended June 30, 2005 and 2004, respectively. Operating income was $17.4 million and $12.9 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 34.9% during the six months ended June 30, 2005. Operating income as a percentage of revenue was 6.8% and 6.6% in the six months ended June 30, 2005 and 2004, respectively.

European Professional Services Segment

Revenue in our European Professional Services segment was $92.5 million and $66.2 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 39.7% during the three months ended June 30, 2005. Revenue was $177.1 million and $129.9 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 36.3% during the six months ended June 30, 2005. Changes in foreign currency exchange rates contributed $2.4 million in revenue from the three months ended June 30, 2004 to the three months ended June 30, 2005, and $4.6 million in revenue from the six months ended June 30, 2004 to the six

months ended June 30, 2005. The remaining increase in revenue for both three and six months ended June 30, 2005, was due to an overall improvement of the economic environment, and our investment in sales and recruiting personnel across our service lines. Specifically, we increased our staff headcount by 24% during 2004, in anticipation of increased demand.

Gross profit in our European Professional Services segment was $26.8 million and $18.9 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 41.8% during the three months ended June 30, 2005. Gross profit was $50.7 million and $36.5 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 38.9% during the six months ended June 30, 2005. Changes in foreign currency exchange rates contributed $690,000 in gross profit from the three months ended June 30, 2004 to the three months ended June 30, 2005, and $1.3 million in gross profit from the six months ended June 30, 2004 to the six months ended June 30, 2005. Gross margin in our European Professional Services segment was 29.0% and 28.5% in the three months ended June 30, 2005 and 2004, respectively. The increase in our gross margin in the three months ended June 30, 2005 was due primarily to a change in the mix of business. Gross margin was 28.6% and 28.1% in the six months ended June 30, 2005 and 2004, respectively. The increase in gross margin in the six months ended June 30, 2005 was due primarily to an increase in direct hire fees. Direct hire fees increased to 7.8% of the segment’s revenue, from 7.0% in the year earlier period.

G&A expenses in our European Professional Services segment were $19.9 million and $15.5 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 28.4% during the three months ended June 30, 2005. As a percentage of revenue, G&A expenses were 21.5% and 23.4% in the three months ended June 30, 2005 and 2004, respectively. G&A expenses were $37.9 million and $29.9 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 26.8% during the six months ended June 30, 2005. As a percentage of revenue, G&A expenses were 21.4% and 23.0 % in the six months ended June 30, 2005 and 2004, respectively. The increase in G&A expenses for both the three and six months ended June 30, 2005, was due primarily to the following: the increase in compensation expense related to the increases in the segment’s revenue, our investment in additional sales and recruiting personnel, and the effect of changes in foreign currency exchange rates.

Operating income was $6.5 million and $3.0 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 116.7% during the three months ended June 30, 2005. Operating income as a percentage of revenue was 7.0% and 4.5% in the three months ended June 30, 2005 and 2004, respectively. Operating income was $11.9 million and $5.9 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 101.7% during the six months ended June 30, 2005. Operating income as a percentage of revenue was 6.7% and 4.5% in the six months ended June 30, 2005 and 2004, respectively.

IT Services division

North American IT Services Segment

Revenue in our North American IT Services segment was $126.2 million and $108.4 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 16.4% during the three months ended June 30, 2005. Revenue was $251.7 million and $210.2 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 19.7% during the six months ended June 30, 2005. The increase in revenue for both the three and six months ended June 30, 3005, was due to a combination of increased spending on IT initiatives by our clients and our additional investment in sales and recruiting staff.

Revenue within the North American IT Services segment is generated primarily from Modis, as it generated 85.3% and 82.7% of the segment’s revenue for the three months ended June 30, 2005 and 2004, respectively and 86.2% and 82.5% in the six months ended June 30, 2005 and 2004, respectively. Idea Integration and Beeline are responsible for the remainder of this segment’s revenue.

Gross profit for the North American IT Services segment was $35.7 million and $29.2 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 22.3% during the three months ended June 30, 2005. Gross profit was $68.6 million and $57.0 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 20.4% during the six months ended June 30, 2005. Gross margin in our North American IT Services segment was 28.3% and 26.9% in the three months ended June 30, 2005 and 2004, respectively. The increase in gross margin is due primarily to the higher utilization of Idea Integration’s salaried consultants. Gross margin was 27.3% and 27.1% in the six months ended June 30, 2005 and 2004, respectively.

The North American IT Services segment’s G&A expenses were $25.1 million and $20.8 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 20.7% during the three months ended June 30, 2005. As a percentage of revenue, G&A expenses were 20.0% and 19.2% in the three months ended June 30, 2005 and 2004, respectively. G&A expenses were $48.2 million and $40.5 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 19.0% during the six months ended June 30, 2005. As a percentage of revenue, G&A expenses were 19.2% and 19.3% in the six months ended June 30, 2005 and 2004, respectively. The increase in the segment’s G&A expenses for both the three and six months ended June 30, 2005, was due to the increase in compensation expense related to the increase in revenue and our investment in additional sales and recruiting personnel.

Operating income was $9.0 million and $6.2 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 45.2% during the three months ended June 30, 2005. Operating income as a percentage of revenue was 7.1% and 5.7% in the three months ended June 30, 2005 and 2004, respectively. Operating income was $17.0 million and $12.1 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 40.5% during the six months ended June 30, 2005. Operating income as a percentage of revenue was 6.8% and 5.7% in the six months ended June 30, 2005 and 2004, respectively.

European IT Services Segment

Revenue in our European IT Services segment was $74.3 million and $56.1 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 32.4% during the three months ended June 30, 2005. Revenue was $146.5 million and $108.3 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 35.3% during the six months ended June 30, 2005. Changes in foreign currency exchange rates contributed $1.9 million and $3.8 million in revenue from the three and six months ended June 30, 2004 to the three and six months ended June 30, 2005, respectively. The remaining increase in revenue for both the three and six months ended June 30, 2005, is due primarily to increased spending on IT initiatives by our UK market clients. However, for the remainder of 2005, we expect revenue growth to slow or possibly decline as we have begun the process of scaling back relationships with certain low-margin, high-volume clients. While we expect this to have a negative impact on revenue, we do not expect it to have a material adverse impact on this segment’s operating income.

Gross profit in our European IT Services segment was $9.1 million and $7.7 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 18.2% during the three months ended June 30, 2005. Gross profit was $18.3 million and $14.8 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 23.6% during the six months ended June 30, 2005. Changes in foreign currency exchange rates contributed $232,000 and $478,000 in gross profit from the three and six months ended June 30, 2004 to the three and six months ended June 30, 2005, respectively. Gross margin in our European IT Services segment was 12.2% and 13.8% in the three months ended June 30, 2005 and 2004, respectively, and 12.5% and 13.6% in the six months ended June 30, 2005 and 2004, respectively. The decrease in gross margin was due primarily to a higher proportion of the segment’s growth being in the UK market, compared to the continental European market. As the UK market has a higher concentration of low-margin high-volume clients, we have begun the process of scaling back relationships with certain low-margin, high-volume clients in order to focus on higher-margin clients.

G&A expenses in our European IT Services segment were $7.8 million and $7.0 million in the three months ended June 30, 2005 and 2004, respectively, increasing by 11.4% during the three months ended June 30, 2005. As a percentage of revenue, G&A expenses were 10.5% and 12.4% in the three months ended June 30, 2005 and 2004, respectively. G&A expenses were $15.6 million and $13.4 million in the six months ended June 30, 2005 and 2004, respectively, increasing by 16.4% during the six months ended June 30, 2005. As a percentage of revenue, G&A expenses were 10.7% and 12.4% in the six months ended June 30, 2005 and 2004, respectively. The increase in G&A expenses for both the three and six months ended June 30, 2005, was due to the increase in compensation expense related to the increases in the segment’s revenue, and the effect of changes in foreign currency exchange rates.

Operating income was $931,000 and $521,000 in the three months ended June 30, 2005 and 2004, respectively, increasing by 78.7% during the three months ended June 30, 2005. Operating income as a percentage of revenue was 1.3% and 0.9% in the three months ended June 30, 2005 and 2004, respectively. Operating income was $1.9 million and $725,000 in the six months ended June 30, 2005 and 2004, respectively, increasing by 162.1% during the six months ended June 30, 2005. Operating income as a percentage of revenue was 1.3% and .7% in the six months ended June 30, 2005 and 2004, respectively.

Corporate expenses

Unallocated corporate expenses pertain to certain functions, such as executive management, accounting, administration, tax, and treasury that are not attributable to our operating units. Unallocated corporate expense was $6.8 million and $4.9 million in the three months ended June 30, 2005 and 2004, respectively, increasing 38.8%. As a percentage of revenue, unallocated corporate expense was 1.6% and 1.5% for the three months ended June 30, 2005 and 2004, respectively. Unallocated corporate expense was $13.8 million and $10.2 million in the six months ended June 30, 2005 and 2004, respectively, increasing 35.3%. As a percentage of revenue, unallocated corporate expense was 1.7% and 1.6% for the six months ended June 30, 2005 and 2004, respectively. The increase in unallocated corporate expense for both the three and six months ended June 30, 2005, was due primarily to the following: expenses related to compliance with the new internal control requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002 and the standards of the Public Company Accounting Oversight Board, and an increase in non-cash compensation expense from our use of restricted stock.

Consolidated other income, net, was $682,000 and $96,000 in the three months ended June 30, 2005 and 2004, respectively, and $1.3 million and $731,000 in the six months ended June 30, 2005 and 2004, respectively. Other income, net, primarily includes interest income related to our investments and cash on hand, net of interest expense related to notes issued in connection with acquisitions and fees and interest on our credit facility.

The consolidated income tax provision was $7.4 million and $4.0 million in the three months ended June 30, 2005 and 2004, respectively. The effective tax rate was 36.1% and 30.1% in the three months ended June 30, 2005 and 2004, respectively. The consolidated income tax provisions included $521,000 and $1.3 million of tax benefits associated with the settlement of certain state income tax audits in the three months ended June 30, 2005 and 2004, respectively. The consolidated income tax provision was $13.3 million and $7.2 million in the six months ended June 30, 2005 and 2004, respectively. The effective tax rate was 37.1% and 32.9% in the six months ended June 30, 2005 and 2004, respectively.

Consolidated net income from operations was $13.1 million and $9.3 million in the three months ended June 30, 2005 and 2004, respectively, and $22.5 million and $14.8 million in the six months ended June 30, 2005 and 2004, respectively.

Factors Which May Impact Future Results And Financial Condition

Demand for our services is affected by the economic climate in the industries and markets we serve. The demand for our services, in particular our staffing services, is highly dependent upon the state of economy and upon the staffing needs of our clients. Any variation in the economic condition or unemployment levels of the United States, United Kingdom or of any of the other foreign countries in which we do business, may severely reduce the demand for our services and thereby significantly decrease our revenues and profits.

Our market is highly competitive with low barriers to entry. Our industry is intensely competitive and highly fragmented, and because it is a service business, the barriers to entry are quite low. There are many competitors, and new ones are entering the market constantly. In addition, some of these competitors have greater resources than us. Competition arises locally, regionally, nationally, internationally and in certain cases from remote locations, particularly from offshore locations such as India.

Certain of our contracts are awarded on the basis of competitive proposals, which can be periodically re-bid by the client. There can be no assurance that existing contracts will be renewed on satisfactory terms or that additional or replacement contracts will be awarded to us. In addition, long-term contracts form a negligible portion of our revenue. Therefore, there can be no assurance that we will be able to retain clients or market share in the future. Nor can there be any assurance that we will, in light of competitive pressures, be able to remain profitable or, if profitable, maintain our current profit margins.

Our business requires a qualified candidate pool, which we may not be able to recruit or maintain. Our staffing services consist of the placement of individuals seeking employment in specialized IT and professional positions. Some of these sectors are characterized by a shortage of qualified candidates. There can be no assurance that suitable candidates for employment will continue to be available or will continue to seek employment through us. Candidates generally seek temporary or regular positions through multiple sources, including us and our competitors. Any shortage of qualified candidates could materially adversely affect us.

Our business depends on key personnel, including executive officers, local managers and field personnel. We are engaged in a services business. As such, our success or failure is highly dependent upon the performance of our management personnel and employees, rather than upon technology or upon tangible assets (of which we have few). There can be no assurance that we will be able to attract and retain the personnel that are essential to our success.

We have to comply with existing government regulation and are exposed to increased regulation of the workplace. Our business is subject to regulation or licensing in many states and in certain foreign countries. While we have had no material difficulty complying with regulations in the past, there can be no assurance we will be able to continue to obtain all necessary licenses or approvals or that the cost of compliance will not prove to be material in the future. Any inability to comply with government regulation or licensing requirements, or increase in the cost of compliance, could materially adversely affect us. Additionally, our staffing services entail employing individuals on a temporary basis and placing such individuals in clients’ workplaces. Increased government regulation of the workplace or of the employer-employee relationship could materially adversely affect us.

We are exposed to employment-related claims and costs and other litigation. Our staffing services entail employing individuals on a temporary basis and placing such individuals in clients’ workplaces. Our ability to control the workplace environment is limited. As the employer of record of our temporary employees, we incur a risk of liability to our temporary employees for various workplace events, including claims of physical injury, discrimination, harassment, or retroactive entitlement to employee benefits. We also incur a risk of liability to our clients resulting from allegations of errors, omissions, misappropriation, or theft of property or information by our temporary employees. While we maintain insurance with respect to many of such claims and such claims have not historically had a material adverse effect on us, there can be no assurance that we will continue to be

able to obtain insurance at a cost that does not have a material adverse effect upon us or that such claims (whether by reason of us not having insurance or by reason of such claims being outside the scope of our insurance) will not have a material adverse effect upon us.

We depend on our reputation to sell our services. The success of our brands is highly dependent upon their reputations. The reputations of our staffing businesses in turn depend upon the perceived quality of the professionals we employ and staff with our customers. Consequently, if our customers are dissatisfied with our employees, our brands will be harmed. Any event that adversely impacts the reputation of a brand could materially affect our results of operations.

The price of our common stock may fluctuate significantly. The market price for our common stock can fluctuate as a result of a variety of factors, including factors listed in these “Risk Factors,” many of which are beyond our control. These factors include actual or anticipated variations in quarterly operating results; announcements of new services by our competitors or us; announcements relating to strategic relationships or acquisitions; changes in financial estimates or other statements by securities analysts; and other changes in general economic conditions. Because of this, we may fail to meet or exceed the expectations of our shareholders or of our securities analysts, and the market price for our common stock could fluctuate as a result.

Liquidity and Capital Resources

Changes to our liquidity for both the three and six months ended June 30, 2005 and 2004, are due primarily to the net effect of (i) funds generated by operations, a sale of assets, and stock option exercises, and (ii) funds used for acquisitions, repurchases of common stock and capital expenditures.

In the six months ended June 30, 2005, $33.4 million of cash used in investing activities, financing activities, and the effect of changes in foreign currency exchange rates exceeded the $30.1 million of cash provided from operating activities. Our net decrease of cash in the six months ended June 30, 2005 was due primarily to the repurchase of common stock and capital expenditures. In the six months ended June 30, 2004, cash of $21.8 million provided from operating activities, financing activities, the effect of changes in foreign currency exchange rates, and discontinued operations exceeded the $19.2 million of cash used in investing activities. Our net increase in cash in the six months ended June 30, 2004 was due primarily to a higher level of cash provided by operating activities and proceeds from the exercise of stock options. The below table highlights working capital and cash and cash equivalents as of June, 2005 and December 31, 2004, respectively:


(dollar amounts in millions)	June 30, 2005		December 31, 2004
Working capital	$	238.1	$	232.1

Cash and cash equivalents	$	103.2	$	106.5

For the six months ended June 30, 2005 and 2004, we generated $30.1 million and $13.2 million of cash flow from operations, respectively. The increase in cash flow from operations, from 2004 to 2005, is primarily due to our increased level of income.

For the six months ended June 30, 2005, we used $4.4 million of cash for investing activities, including $7.2 million for capital expenditures and $878,000 for acquisitions, net of $3.7 million generated from a sale of certain assets within our North American IT Services segment.

For the six months ended June 30, 2004, we used $19.2 million of cash for investing activities including $16.0 million for acquisitions and $5.7 million for capital expenditures, net of $2.4 million generated from the sale of certain assets within our North American Professional Services segment.

For the six months ended June 30, 2005, we used $26.2 million of cash for financing activities, primarily $25.5 million for the repurchase of common stock and $1.6 million of repayments on indebtedness, net of

$1.1 million generated from stock option exercises. For the six months ended June 30, 2004, we generated $6.5 million of cash from financing activities, primarily from stock option exercises, net of $3.8 million used to repurchase common stock.

Our Board of Directors has authorized the repurchase of our Common Stock, comprised of an initial $65.0 million authorization and an additional $65.0 million authorization in the second quarter of 2005. During the second quarter of 2005, we repurchased 2.8 million shares at a cost of $25.5 million. At July 29, 2005, the total amount repurchased under this plan was 7.9 million shares at a cost of $65.4 million. We anticipate that we will continue to purchase shares under this authorization in the future.

We anticipate that capital expenditures for furniture and equipment, including improvements to our management information and operating systems, during the remainder of 2005 will be approximately $4.0 million.

While there can be no assurance in this regard, we believe that funds provided by operations, available borrowings under the credit facility, and current amounts of cash will be sufficient to meet our presently anticipated needs for working capital, capital expenditures, repurchases of common stock and acquisitions for at least the next 12 months.

Indebtedness of the Company

In 2003, we closed on a $150 million revolving credit facility syndicated by a group of leading financial institutions. The credit facility contains certain financial and non-financial covenants relating to our operations, including maintaining certain financial ratios. Repayment, if applicable, of funds borrowed under the credit facility is guaranteed by substantially all of our subsidiaries. The facility matures in November 2006. To date, there have been no borrowings outstanding under this facility, other than $6.3 million of standby letters of credit for certain operational matters.

Seasonality

Our quarterly operating results are affected by the number of billing days in the quarter and the seasonality of our customers’ businesses. Demand for our services has historically been lower during the calendar year-end, as a result of holidays, through February of the following year, as our customers approve annual budgets. Extreme weather conditions may also adversely affect demand in the early part of the year as certain of our clients’ facilities are located in geographic areas subject to closure or reduced hours due to inclement weather. In addition, we experience an increase in our cost of sales and a corresponding decrease in gross profit and gross margin in the first fiscal quarter of each year, as a result of certain state and federal employment tax resets.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), Share-Based Payments (“SFAS 123R”), which replaces SFAS No. 123 and supercedes APB Opinion No. 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first interim or annual period after June 15, 2005. In April 2005, the SEC amended the compliance date to the first annual period beginning after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. The Company expects to adopt the provisions of SFAS No. 123R in the first quarter of 2006. The Company is evaluating the requirements of SFAS 123R and has not yet determined the method of adoption or the effect of adopting SFAS 123R, and the Company has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

Item 3.

Quantitative And Qualitative Disclosures About Market Risk

There have been no material changes to the disclosure on this matter that was made in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Item 4.

Controls And Procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

There have been no changes in the Company’s internal control structure over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that occurred during the Company’s last fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

Part II. Other Information

Item 1.

Legal Proceedings

No disclosure required.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases of Equity Securities (1)


Period (2)	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Purchased Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Programs
April 1, 2005 to April 30, 2005	123,500	$	7.99	123,500	$	24,071,105
May 1, 2005 to May 31, 2005	1,762,700		8.81	1,762,700		8,538,720
June 1, 2005 to June 30, 2005	928,300		9.63	928,300		64,600,558

Total	2,814,500	$	9.05	2,814,500	$	64,600,558

(1)

In 1999, The Company’s Board of Directors authorized the repurchase of up to $65.0 million of the Company’s common stock. In June 2005, the Company’s Board of Directors authorized the repurchase of an additional $65.0 million of the Company’s common stock. During 2004, the Company repurchased 3.5 million shares of common stock at an average price of $8.91. The following table sets forth information about the Company’s common stock repurchases for the three months ended June 30, 2005. There were no common stock repurchases by the Company during the first quarter of 2005. There is no expiration date for this authorization.

(2)	Based on trade date, not settlement date.

Item 3.

Defaults Upon Senior Securities

No disclosure required.

Item 4.

Submission of Matters to a Vote of Security Holders

The Annual Meeting of the Company’s shareholders was held on May 19, 2005. Proxies were solicited from shareholders of record as of March 31, 2005 on the close of business on April 22, 2005. On March 31, 2005, there were 103,849,750 shares outstanding and entitled to vote at the Annual Meeting. At the Annual Meeting, the following proposal was submitted to a shareholder vote:

Approval of a Proposal to Elect the Following Individuals as Directors of the Company:


Name	For	Withhold Authority
Derek E. Dewan	89,996,668	2,965,847
Timothy D. Payne	90,084,000	2,878,515
Peter J. Tanous	88,126,419	4,836,096
T. Wayne Davis	89,707,350	3,255,165
John R. Kennedy	89,750,372	3,212,143
Michael D. Abney	90,074,980	2,887,535
William M. Issac	89,704,354	3,258,161
Darla D. Moore	91,097,003	1,865,512
Arthur B. Laffer	88,625,752	4,336,763

Item 5.

Other Information

No disclosure required.

Item 6.

Exhibits

A. Exhibits Required by Item 601 of Regulation S-K:

See Index of Exhibits.


Exhibit No.		Description

31.1*		Certification of Timothy D. Payne pursuant to Rule 13a-14(a).

31.2*		Certification of Robert P. Crouch pursuant to Rule 13a-14(a).

32.1*		Certification of Timothy D. Payne pursuant to 18 U.S.C. Section 1350.

32.2*		Certification of Robert P. Crouch pursuant to 18 U.S.C. Section 1350.

*	Copy of Exhibit is filed herewith.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


MPS GROUP, INC.

By:		/s/ ROBERT P. CROUCH
		Robert P. Crouch
		Senior Vice President, Treasurer, and Chief Financial Officer (Principal Financial Officer and duly authorized signatory)

Date: August 9, 2005

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