Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HzIOsLy1zTtWKNQq98jAMMuRXQ2SLlSLKpCDbzZJzlMStfuqBVqNCEVmssWBep7j upsReLIdIcDwB0PZxVNixA== 0001193125-09-168889.txt : 20090807 0001193125-09-168889.hdr.sgml : 20090807 20090807142922 ACCESSION NUMBER: 0001193125-09-168889 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20090630 FILED AS OF DATE: 20090807 DATE AS OF CHANGE: 20090807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPS GROUP INC CENTRAL INDEX KEY: 0000924646 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 593116655 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24484 FILM NUMBER: 09994930 BUSINESS ADDRESS: STREET 1: 1 INDEPENDENT DR CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043602000 MAIL ADDRESS: STREET 1: 1 INDEPENDENT DR CITY: JACKSONVILLE STATE: FL ZIP: 32202 FORMER COMPANY: FORMER CONFORMED NAME: MODIS PROFESSIONAL SERVICES INC DATE OF NAME CHANGE: 19981001 FORMER COMPANY: FORMER CONFORMED NAME: ACCUSTAFF INC DATE OF NAME CHANGE: 19940606 10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

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, 2009

¨	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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

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 July 24, 2009:

93,142,942 shares of $0.01 par value common stock

MPS Group, Inc. and Subsidiaries

Index


Part I	Financial Information

Item 1	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008	3

	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2009 and 2008	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2009 and 2008	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4	Controls and Procedures	28

Part II	Other Information

Item 1A	Risk Factors	29

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 4	Submission of Matters to a Vote of Security Holders	29

Item 6	Exhibits	30

	Signatures	31

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, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	124,357		$	90,566
Accounts receivable, net of allowance of $18,526 and $20,502, respectively		260,157			282,093
Prepaid expenses		11,696			10,929
Deferred income taxes		3,080			3,508
Other		16,663			9,761

Total current assets		415,953			396,857
Furniture, equipment, and leasehold improvements, net		31,480			34,763
Goodwill, net		302,567			293,275
Deferred income taxes		39,277			49,085
Other assets, net		18,825			21,912

Total assets	$	808,102		$	795,892

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	88,854		$	86,890
Accrued payroll and related taxes		77,945			83,497
Income taxes payable		—			2,760

Total current liabilities		166,799			173,147
Income taxes payable		7,628			7,458
Credit facility		—			7,313
Other		20,874			16,504

Total liabilities		195,301			204,422

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; 93,136,442 and 90,841,454 shares issued, respectively		931			908
Additional contributed capital		443,283			440,353
Retained earnings		189,583			185,059
Accumulated other comprehensive loss		(20,996	)		(34,850	)

Total stockholders’ equity		612,801			591,470

Total liabilities and stockholders’ equity	$	808,102		$	795,892

See accompanying notes to unaudited condensed consolidated financial statements.

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended					Six Months Ended
(dollar amounts in thousands except per share amounts)	June 30, 2009		June 30, 2008			June 30, 2009			June 30, 2008
Revenue	$	417,935	$	589,490		$	847,286		$	1,157,271
Cost of revenue		304,364		418,356			618,089			823,867

Gross profit		113,571		171,134			229,197			333,404

Operating expenses:
General and administrative		102,568		130,789			207,298			255,521
Depreciation and intangibles amortization		4,226		5,524			9,021			11,095

Total operating expenses		106,794		136,313			216,319			266,616

Income from operations		6,777		34,821			12,878			66,788
Other income (expense), net		135		(813	)		(972	)		(1,544	)

Income before provision for income taxes		6,912		34,008			11,906			65,244
Provision for income taxes		3,986		13,263			7,382			25,445

Net income	$	2,926	$	20,745		$	4,524		$	39,799

Basic net income per common share	$	0.03	$	0.23		$	0.05		$	0.44

Average common shares outstanding, basic		86,529		89,590			86,456			91,010

Diluted net income per common share	$	0.03	$	0.23		$	0.05		$	0.43

Average common shares outstanding, diluted		87,960		91,191			87,643			92,449

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)	2009			2008
Cash flows from operating activities:
Net income	$	4,524		$	39,799
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		10,582			12,392
Share-based plans expense		6,832			5,408
Depreciation and intangibles amortization		9,021			11,095
Changes in certain assets and liabilities, net of acquisitions:
Accounts receivable		30,455			(12,095	)
Prepaid expenses and other assets		(767	)		(3,305	)
Accounts payable and accrued expenses		(14,918	)		(15,076	)
Accrued payroll and related taxes		(7,907	)		6,390
Other, net		7,927			(613	)

Net cash provided by operating activities		45,749			43,995

Cash flows from investing activities:
Proceeds from sale of short term investments		—			2,500
Purchase of furniture, equipment and leasehold improvements, net of disposals		(1,939	)		(9,244	)
Purchase of businesses, including additional consideration on acquisitions, net of cash acquired		(1,574	)		(46,104	)

Net cash used in investing activities		(3,513	)		(52,848	)

Cash flows from financing activities:
Settlement of share-based awards		(1,945	)		(1,855	)
Repurchases of common stock		—			(54,677	)
Borrowings on indebtedness		—			29,973
Repayments on indebtedness		(8,977	)		(7,078	)
Other, net		37			1,260

Net cash used in financing activities		(10,885	)		(32,377	)

Effect of exchange rate changes on cash and cash equivalents		2,440			733
Net increase (decrease) in cash and cash equivalents		33,791			(40,497	)
Cash and cash equivalents, beginning of period		90,566			105,285

Cash and cash equivalents, end of period	$	124,357		$	64,788

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. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by MPS Group, Inc. (“MPS”, “we”, “us”, or “our”) 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 accounting principles generally accepted in the United States of America have been condensed or omitted. The financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Form 10-K for the year ended December 31, 2008.

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.

Additionally, we have performed an evaluation of subsequent events through August 7, 2009, which is the date the financial statements were issued.

Cash and Cash Equivalents

Cash and cash equivalents include deposits in banks and money market funds. On January 1, 2008, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 157 Fair Value Measurements (“SFAS 157”), for financial assets and liabilities. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principals, and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors: Level 1—quoted prices in active markets using identical assets; Level 2—significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs; and Level 3—significant unobservable inputs. Our money market funds are Level 1 fair value measurement financial assets.

Furniture, Equipment, and Leasehold Improvements

Furniture, equipment, and leasehold improvements are recorded at cost less accumulated depreciation and amortization. Depreciation of furniture and equipment is computed using the straight-line method over the estimated useful lives of the related assets. We have developed a proprietary software package, which allows us to implement imaging, time capture, and data-warehouse reporting. The costs associated with the development of this proprietary software package have been capitalized, and are being amortized over a five-year period.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we evaluate the recoverability of our carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Carrying value write-downs and gains and losses on disposition of property and equipment are reflected in the Consolidated Statements of Operations.

Goodwill and Other Identifiable Intangible Assets

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

Goodwill and Other Intangible Assets, requires us to perform goodwill impairment reviews at least annually, and between tests if an event occurs or circumstances change that would more likely than not reduce the fair-value of a reporting unit below it’s carrying amount. We evaluate goodwill impairment using the two-step process prescribed in SFAS No. 142. In the first step we determine the fair value of each reporting unit using a blend of the discounted cash flow valuation methodology (“DCF”) and a guideline public company valuation methodology. For purposes of this assessment our reporting units are our segments or the operating units one level below our segments. We then compare the fair value to carrying value. If the fair value of the reporting unit exceeds the carrying value of the unit’s net assets, goodwill is not impaired and no further testing is performed.

If, however, a reporting unit’s carrying value exceeds its fair value, we must perform a second impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to its net assets, including identifiable intangible assets, in order to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge. Identifiable intangible assets identified in this second impairment assessment include customer relationships, trade names and developed technology. We utilized income approach analyses to arrive at the fair values of these identifiable intangible assets.

In accordance with SFAS No. 142, we perform valuation testing annually as of October 1 and between tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We did not incur any goodwill impairment resulting from our valuation testing performed in the fourth quarters of 2007 and 2006. During the first three quarters of 2008, we did not experience significant adverse changes in the business climate that would cause us to accelerate the timing of our valuation testing. During the fourth quarter of 2008, the downturn in the economic conditions in the countries in which we do business, primarily the United States and the United Kingdom, reduced the demand for our services resulting in a significant decrease in our revenues and profits across all of our reporting units. During the latter half of the fourth quarter of 2008, it became apparent that the deterioration of macroeconomic conditions in the United States and the United Kingdom would continue into 2009. As such, we concluded that the acceleration of certain negative trends in sales activities that we were experiencing during the fourth quarter of 2008 would also continue into 2009. In addition, in comparison to the third quarter of 2008 we experienced an approximate 35% decline in our average market capitalization in the fourth quarter of 2008 along with a material decline in the valuations of our market comparable companies. The combination of the deterioration of macroeconomic conditions in the United States and the United Kingdom, which resulted in us updating our financial outlook for each of our reporting units, and the decline in our market capitalization and valuations of our market comparable companies were the primary factors contributing to our goodwill and identifiable intangible assets impairment charge. Our valuation testing considered both the continued economic and market valuation deteriorations that occurred during the fourth quarter. We expect that our revenue and profitability will continue to be significantly less than recent historical levels as long as the current negative economic conditions persist.

Based on the results of our valuation testing performed in the fourth quarter of 2008, we recorded a goodwill and intangible impairment charge of $379.3 million, or $303.4 million net of the related tax benefit. It should be noted that the impairment charge did not negatively impact our liquidity, as the financial covenants within our credit facility exclude this non-cash charge.

As previously mentioned, we use a blended value of a DCF and a guideline public company methodology to arrive at fair value for SFAS No. 142. We have historically utilized a blended value of these two methodologies to arrive at fair value. The details and assumptions used in the DCF and guideline public company valuation methodologies we use for goodwill impairment testing are each discussed in more detail below.

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

Discounted Cash Flow Methodology. DCF establishes fair value by estimating the present value of projected future cash flows. Our DCF is prepared from three primary components: (a) our internally prepared five year projections of financial performance; (b) a discount rate; and (c) a terminal value. Assumptions we used in preparing our financial projections and in choosing a discount rate and terminal value are each discussed in more detail below.

•

We prepared five year financial projections for purposes of establishing inputs for the fair value calculations. In those projections we:

•

Assumed the current economic downturn would mirror the most recent economic downturn, which produced several sequential quarters of sequential revenue declines.

•

Assumed the current economic downturn would continue for all reporting units through 2009, followed by a recovery period at a moderate rate of growth starting in 2010. The growth rates from 2010 through 2013 used in our 2008 impairment testing were significantly lower than those utilized in prior years’ impairment testing.

•

Projected greater revenue declines in our IT reporting units than in our Professional reporting units and greater recovery rates from 2010 through 2013 in our Professional reporting units compared to our IT reporting units.

•

Applied profitability assumptions consistent with each reporting unit’s historical trends at various revenue levels.

•

In our testing we assumed a 3% terminal value to reflect the growth in our business for years beyond our five year financial projections. This is consistent with the terminal value used in the prior year’s impairment testing.

•

The discount rates applied to the projected future cash flows to arrive at the present value are based on a weighted average cost of capital intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The discount rates used in our 2008 testing for each reporting unit, which were either 14% or 15%, were developed considering contemporaneous market data including the risk free rate of return on long-term treasury securities, beta indications from guideline companies, the risk associated with investing in similar equity securities, and the cost of debt for issuers of investment grade quality. The discount rates were lower than those used in prior years due to a reduction in risk free market rates and perceived forecast risk, which more than offset an increase in market risk premiums. In addition, the discount rate conclusions were compared to rates published in a third party research report, as a test of reasonableness.

Guideline Public Company Methodology. The guideline public company methodology establishes fair value by comparing us to other similar publicly traded companies on the basis of risk characteristics to determine our risk profile relative to the comparable companies as a group. This analysis generally focuses on quantitative considerations, which include financial performance and other quantifiable data, and qualitative considerations, which may include any factors which are expected to impact future financial performance. The most significant assumptions affecting the guideline public company methodology are the market multiples and control premium. The market multiples we use for each reporting unit are: (a) enterprise value to revenue and (b) enterprise value to EBITDA. A control premium represents the value an investor would pay above minority interest transaction prices in order to obtain a controlling interest in the respective company. We utilized a 20% control premium based on indications of premiums paid in transactions of controlling interests in employment services companies in 2007 and 2008.

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

and six months ended June 30, 2009, we compared the assumptions utilized in our goodwill impairment test conducted during the fourth quarter of 2008 to the operating results of the three and six months ended June 30, 2009, along with expected or projected future operating results. During the first six months of 2009, we saw a substantial decrease in demand for our services due to the poor macroeconomic conditions in the United States and the United Kingdom, the countries in which we primarily do business. The majority of this decrease occurred in the first three months of 2009. This deterioration was more pronounced in our permanent placement business than in our staffing business. The forecasts used in our fourth quarter 2008 goodwill impairment test anticipated these declines. As such, our cash flow and profitability in the three and six months ended June 30, 2009 were substantially consistent with the assumptions utilized in the 2008 goodwill impairment test. In addition, we considered the following factors, the presence of which could indicate potential impairment, and concluded that they did not exist in comparison to the assumptions utilized in our 2008 goodwill impairment test:

•

significant changes to our overall business strategy and allocation of resources within our reporting units;

•

significant adverse change in the business climate; and/or

•

significant decline for a sustained period in our market capitalization relative to our net book value.

For the three and six months ended June 30, 2009, we concluded that given the results of our comparison of operating results and outlook to forecasts utilized in our fourth quarter 2008 goodwill impairment test, it was more likely than not that the fair value of all of our reporting units was greater than their respective carrying values.

Revenue Recognition

We recognize substantially all revenue at the time services are provided and the revenue is recorded on a time and materials basis. In most cases, the consultant is our employee and all costs of employing the worker are our responsibility and are included in cost of revenue. Revenues generated when we permanently place an individual with a client are recorded at the time of start.

Foreign Operations

The financial position and operating results of foreign operations are consolidated using the local currency as the functional currency. These operating results are considered to be permanently invested in foreign operations. Local currency assets and liabilities are translated at the rate of exchange to the U.S. dollar on the balance sheet date, and the local currency revenues and expenses are translated at average rates of exchange to the U.S. dollar during the period.

Income Taxes

We adopted FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on recognition, classification, and disclosure of tax positions.

The provision for income taxes is based on income before taxes as reported in the accompanying Condensed Consolidated Statements of Operations. Deferred tax assets and liabilities are recognized for the expected future

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets. This assessment includes anticipating future taxable income.

Net Income per Common Share

The consolidated financial statements include ‘basic’ and ‘diluted’ per share information. Basic net income per common share information is calculated by dividing net income by the weighted average number of common shares outstanding. Diluted net income per common share information is calculated by also considering the impact of potential common stock equivalents on both net income and the weighted average number of common shares outstanding. The weighted average number of common shares used in the basic net income per common share computations was 86.5 million for the three and six months ended June 30, 2009, and 89.6 million and 91.0 million in the three and six months ended June 30, 2008, respectively. The only difference in the computation of basic and diluted net income per common share is the inclusion of 1.4 million and 1.2 million incremental common shares from the assumed exercise of stock options and restricted stock awards for the three and six months ended June 30, 2009, respectively, and 1.6 million and 1.4 million incremental common shares for the three and six months ended June 30, 2008, respectively. See Footnote 2.

Pervasiveness of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although management believes these estimates and assumptions are adequate, actual results may differ from the estimates and assumptions used.

New Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. SFAS 165 also requires disclosure of the date through which the entity has evaluated subsequent events and the basis for that date. Our adoption of SFAS No. 165 during the three months ended June 30, 2009 did not have a material effect on our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principals—A Replacement of FASB Statement No. 162 (“SFAS 168”). SFAS No. 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principals, and establishes the FASB Accounting Standards Codification as the single source of authoritative United States GAAP. SFAS No. 168 is effective for interim and annual periods ending after September 15, 2009. We do not expect the adoption of SFAS No. 168 to have a material effect on our consolidated financial statements.

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

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, 2009		June 30, 2008		June 30, 2009		June 30, 2008
Basic income per common share computation:
Net income	$	2,926	$	20,745	$	4,524	$	39,799

Basic average common shares outstanding		86,529		89,590		86,456		91,010
Incremental shares from assumed exercise of stock options and restricted stock awards		1,431		1,601		1,187		1,439

Diluted average common shares outstanding		87,960		91,191		87,643		92,449

Basic net income per common share	$	0.03	$	0.23	$	0.05	$	0.44

Diluted net income per common share	$	0.03	$	0.23	$	0.05	$	0.43

Options to purchase approximately 2.3 million and 308,000 shares of common stock that were outstanding during the three months ended June 30, 2009 and 2008, 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 respective periods. For the six months ended June 30, 2009 and 2008, options to purchase approximately 2.4 million and 349,000 shares of common stock, respectively, were not included in the computation of diluted earnings per share for the aforementioned reason.

3. Commitments and Contingencies

We are a party to a number of lawsuits and claims arising out of the ordinary conduct of our 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 us, our financial position, results of operations, or cash flows, but litigation is subject to inherent uncertainties.

4. Segment Reporting

We disclose segment information in accordance with SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information. We have four reportable segments: North American Professional Services, International Professional Services, North American IT Services, and International IT Services. Our 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. Our segment results include the results from acquisitions discussed in Footnote 3 to our Form 10-K for the year ended December 31, 2008. We evaluate segment performance based on revenues, gross profit, and income before provision for income taxes. We do not allocate income taxes, interest or unusual items to the segments. In addition, we do not report total assets by segment.

The accounting policies of the segments are consistent with those described in the summary of significant accounting policies in Footnote 1 herein, and all intersegment sales and transfers are eliminated. In addition, no one customer represents more than 5% of our overall revenue.

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

The following tables summarize performance, accounts receivable, net, and long-lived assets by segment, and revenue by geographic location:


	Three Months Ended						Six Months Ended
(dollar amounts in thousands)	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Revenue
North American Professional Services	$	141,917		$	185,590		$	293,636		$	365,268
International Professional Services		101,930			153,530			201,731			301,350
North American IT Services		124,243			158,218			251,550			317,089
International IT Services		49,845			92,152			100,369			173,564

Total revenue	$	417,935		$	589,490		$	847,286		$	1,157,271

Gross profit
North American Professional Services	$	40,893		$	58,163		$	83,243		$	112,916
International Professional Services		23,594			47,945			47,467			93,449
North American IT Services		39,256			49,210			78,936			97,728
International IT Services		9,828			15,816			19,551			29,311

Total gross profit	$	113,571		$	171,134		$	229,197		$	333,404

Income before provision for income taxes
North American Professional Services	$	7,131		$	17,861		$	14,443		$	34,541
International Professional Services		2,132			9,350			3,818			18,626
North American IT Services		4,662			12,134			8,050			22,959
International IT Services		1,567			3,285			2,734			5,870

		15,492			42,630			29,045			81,996
Corporate expenses (1)		(8,715	)		(7,809	)		(16,167	)		(15,208	)
Other income (expense), net		135			(813	)		(972	)		(1,544	)

Total income before provision for income taxes	$	6,912		$	34,008		$	11,906		$	65,244

Geographic Areas
Revenue
North American	$	266,160		$	343,808		$	545,186		$	682,357
International		151,775			245,682			302,100			474,914

Total revenue	$	417,935		$	589,490		$	847,286		$	1,157,271

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, 2009		December 31, 2008
Accounts receivable, net
North American Professional Services	$	78,815	$	91,099
International Professional Services		53,878		47,497
North American IT Services		92,221		104,110
International IT Services		35,243		39,387

Total accounts receivable, net	$	260,157	$	282,093

Long-lived assets
North American Professional Services	$	164,122	$	164,103
International Professional Services		58,838		53,463
North American IT Services		84,204		84,128
International IT Services		17,919		16,054

		325,083		317,748
Corporate		8,964		10,290

Total long-lived assets	$	334,047	$	328,038

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

5. Comprehensive Income

We disclose 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, 2009 and 2008 is as follows:


	Three Months Ended				Six Months Ended
(dollar amounts in thousands)	June 30, 2009		June 30, 2008		June 30, 2009		June 30, 2008
Net income	$	2,926	$	20,745	$	4,524	$	39,799
Unrealized gain on foreign currency translation adjustments (1)		17,704		2,426		13,854		3,794

Comprehensive income	$	20,630	$	23,171	$	18,378	$	43,593

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

MPS Group, Inc. and Subsidiaries

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

(dollar amounts in thousands except per share amounts)

6. Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for 2009 are as follows:


	Professional Services						IT Services
(dollar amounts in thousands)	North American			International			North American			International			Total
Balance as of December 31, 2008	$	158,735		$	48,039		$	72,735		$	13,766		$	293,275
Acquisitions		739			—			65			1,540			2,344
Effect of foreign currency exchange rates		—			(950	)		(138	)		(830	)		(1,918	)

Balance as of March 31, 2009		159,474			47,089			72,662			14,476			293,701
Acquisitions		(33	)		—			203			293			463
Effect of foreign currency exchange rates		—			7,011			557			835			8,403

Balance as of June 30, 2009	$	159,441		$	54,100		$	73,422		$	15,604		$	302,567

We allocated the purchase price of acquisitions in accordance with SFAS 141, Business Combinations. At June 30, 2009 and December 31, 2008, there was $2.7 million and $4.1 million, respectively, of identifiable intangible assets on our Condensed Consolidated Balance Sheets relating to our acquisitions. Identifiable intangible assets relate primarily to the value of the acquired business’ customer relationships and trade names at the acquisition date.

Item 2.

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

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

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 our Form 10-K for the year ended December 31, 2008 in Part I, Item 1A under ‘Risk Factors,’ in Part II, Item 5 under ‘Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities’, and Part II, Item 7 under ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’ In some cases, you can identify forward-looking statements by terminology such as ‘may,’ ‘should,’ ‘could,’ ‘expects,’ ‘plans,’ ‘indicates,’ ‘projects,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘appears,’ ‘predicts,’ ‘potential,’ ‘continues,’ ‘can,’ ‘hopes,’ ‘perhaps,’ ‘would,’ ‘seek,’ or ‘become,’ or the negative of these terms or other comparable terminology. In addition, except for historical facts, all information provided in Part II, Item 7A of our Form 10-K for the year ended December 31, 2008, under ‘Quantitative and Qualitative Disclosures About Market Risk’ as referenced by Item 3 herein should be considered forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of MPS 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 our management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and MPS undertakes no obligation to publicly update 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.

Critical Accounting Policies

We prepare our financial statements in conformity with GAAP. We believe the following are our most critical accounting policies in that they are the most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective or complex judgments.

Revenue Recognition

We recognize substantially all revenue at the time services are provided, and on a time and materials basis. In most cases, the consultant is our employee and all costs of employing the worker are our responsibility and are included in cost of revenue. Revenues generated when we permanently place an individual with a client are recorded on the date the individual begins employment with the client.

Allowance for Doubtful Accounts

We regularly monitor and assess our risk of not collecting amounts we are owed by our customers. This evaluation is based upon a variety of factors, including an analysis of amounts current and past due, along with relevant history and facts particular to the customer. Based upon the results of this analysis, we record an allowance for uncollectible accounts for this risk. Our allowance for doubtful accounts, as a percentage of gross accounts receivable was 6.8% and 6.6% as of December 31, 2008 and June 30, 2009, respectively. As of June 30, 2009, a five-percentage point deviation in our allowance for doubtful accounts would have resulted in an increase or decrease to the allowance of $926,000. This analysis requires us to make significant estimates, and changes in facts and circumstances could result in material changes in the allowance for doubtful accounts.

Income Taxes

The provision for income taxes is based on income before taxes as reported in the Consolidated Statements of Operations. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets. This assessment includes anticipating future income.

Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. Management evaluates all available evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The establishment and amount of a valuation allowance requires significant estimates and judgment and can materially affect our results of operations. Our effective tax rate may vary from period to period based, for example, on changes in estimated taxable income or loss, changes to the valuation allowance, changes to federal, state or foreign tax laws, completion of federal, state or foreign audits, deductibility of certain costs and expenses by jurisdiction, and as a result of acquisitions.

Impairment of Tangible and Intangible Assets

For acquisitions, we allocate the excess of the cost of the acquisition over the fair market value of the net tangible assets acquired first to identifiable intangible assets, if any, and then to goodwill. SFAS No. 142, Goodwill and Other Intangible Assets, requires us to perform goodwill impairment reviews at least annually, and between tests if an event occurs or circumstances change that would more likely than not reduce the fair-value of a reporting unit below it’s carrying amount. We evaluate goodwill impairment using the two-step process prescribed in SFAS No. 142. In the first step we determine the fair value of each reporting unit using a blend of the DCF and a guideline public company valuation methodology. For purposes of this assessment our reporting units are our segments or the operating units one level below our segments. We then compare the fair value to carrying value. If the fair value of the reporting unit exceeds the carrying value of the unit’s net assets, goodwill is not impaired and no further testing is performed.

do business, primarily the United States and the United Kingdom, reduced the demand for our services resulting in a significant decrease in our revenues and profits across all of our reporting units. During the latter half of the fourth quarter of 2008, it became apparent that the deterioration of macroeconomic conditions in the United States and the United Kingdom would continue into 2009. As such, we concluded that the acceleration of certain negative trends in sales activities that we were experiencing during the fourth quarter of 2008 would also continue into 2009. In addition, in comparison to the third quarter of 2008 we experienced an approximate 35% decline in our average market capitalization in the fourth quarter of 2008, along with a material decline in the valuations of our market comparable companies. The combination of the deterioration of macroeconomic conditions in the United States and the United Kingdom, which resulted in us updating our financial outlook for each of our reporting units, and the decline in our market capitalization and valuations of our market comparable companies were the primary factors contributing to our goodwill and identifiable intangible assets impairment charge. Our valuation testing considered both the continued economic and market valuation deteriorations that occurred during the fourth quarter. We expect that our revenue and profitability will continue to be significantly less than recent historical levels as long as the current negative economic conditions persist.

The following table summarizes this charge by reporting segment:


(dollar amounts in thousands)	Three Months Ended December 31, 2008
Goodwill and intangible impairment charge
North American Professional Services	$	49,928
International Professional Services		94,336
North American IT Services		205,114
International IT Services		29,891

Total goodwill and intangible impairment charge	$	379,269

The following table summarizes the carrying amount of goodwill for each of our reporting units as of December 31, 2008. The North American IT Services and the International IT Services segment each have one reporting unit:


(dollar amounts in thousands)	December 31, 2008
Accounting and legal reporting unit	$	59,234
Engineering reporting unit		55,533
Healthcare reporting unit		43,968

North American Professional Services	$	158,735

UK professional reporting unit	$	43,861
Other international professional reporting unit		4,178

International Professional Services	$	48,039

North American IT Services	$	72,735

International IT Services	$	13,766

Balance as of December 31, 2008	$	293,275

•

We prepared five year financial projections for purposes of establishing inputs for the fair value calculations. In those projections we:

•

Assumed the current economic downturn would mirror the most recent economic downturn, which produced several sequential quarters of sequential revenue declines.

•

Applied profitability assumptions consistent with each reporting unit’s historical trends at various revenue levels.

•

Sensitivity Analysis. In our engineering and healthcare reporting units, the fair value as determined in the first step of our goodwill impairment testing exceeded their respective carrying values. In order to evaluate the sensitivity of the fair value calculations on our goodwill impairment testing, we applied hypothetical decreases to these two units’ fair values. We determined that hypothetical decreases in fair value of at least 49% and 15% would be required before the engineering and healthcare reporting units, respectively, would have a carrying value in excess of its fair value. As part of this goodwill impairment testing for the healthcare reporting unit, we assumed a cumulative annual cash flow growth rate of approximately 3% from 2010 through 2013. In order for the fair value of this reporting unit to decrease by at least 15%, we would need to have a negative cumulative annual cash flow growth rate of approximately 3% from 2010 through 2013.

We performed a sensitivity analysis of the assumptions utilized in our fourth quarter 2008 goodwill impairment test for our North American IT Services reporting unit, the Accounting and legal reporting unit of our North American Professional Services segment, and the UK reporting unit of our International Professional Services segment. The following table summarizes the additional impairment we would have had on each of these reporting units if, separately, the discount rate increased by 1%, and the revenue growth and profitability growth rates decreased by 1%:


	Approximate Increase to Impairment Charge
(amounts in thousands)	North American IT Services		Accounting and Legal		UK Professional Services
Discount rate increased by 1%	$	10,260	$	6,660	$	7,080
Revenue growth rate decreased by 1%	$	3,840	$	2,760	$	3,120
Profitability growth rate decreased by 1%	$	6,060	$	4,320	$	6,780

Consideration of Interim Testing. We regularly monitor business conditions for events that may indicate that the carrying value of each reporting unit exceeds its fair value, in accordance with SFAS No. 142. For the three and six months ended June 30, 2009, we compared the assumptions utilized in our goodwill impairment test conducted during the fourth quarter of 2008 to the operating results of the three and six months ended June 30, 2009, along with expected or projected future operating results. During the three and six months ended June 30, 2009, we saw a substantial decrease in demand for our services due to the poor macroeconomic conditions in the United States and the United Kingdom, the countries in which we primarily do business. The majority of this decrease occurred in the first three months of 2009. This deterioration was more pronounced in our permanent placement business than in our staffing business. The forecasts used in our fourth quarter 2008 goodwill impairment test anticipated these declines. As such, our cash flow and profitability in the three and six months ended June 30, 2009 were substantially consistent with the assumptions utilized in the 2008 goodwill impairment test. In addition, we considered the following factors, the presence of which could indicate potential impairment, and concluded that they did not exist in comparison to the assumptions utilized in our 2008 goodwill impairment test:

•

significant changes to our overall business strategy and allocation of resources within our reporting units;

•

significant adverse change in the business climate; and/or

•

significant decline for a sustained period in our market capitalization relative to our net book value.

As previously mentioned, the process of evaluating goodwill for impairment involves the determination of the fair values of our reporting units. Inherent in such fair value determinations are significant judgments and

estimates relating to future cash flows, including our interpretation of current economic indicators and market valuations, and assumptions about our strategic plans with regard to our operations. To the extent additional information arises, market conditions change or our strategies change, it is possible that our conclusion regarding whether remaining goodwill is impaired could change and result in an additional goodwill and intangible impairment charge, which could have a material effect on our consolidated financial position or results of operations. However, it should be noted that since such impairment charges are non-cash charges and the financial covenants of our credit facility exclude this non-cash charge in calculating the availability of borrowings from our facility, we would not expect such an additional charge to have an adverse affect on our liquidity. Additional information on Goodwill can be found in Footnote 6 to the Condensed Consolidated Financial Statements.

We amortize the cost of identifiable intangible assets (either through acquisition or as part of our internally generated intellectual property) over their estimated useful lives, unless such lives are deemed indefinite. We review our long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In performing the review for recoverability, we estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment charge is recognized. Otherwise, an impairment charge is not recognized. Measurement of an impairment charge for long-lived assets and identifiable intangibles would be based on the fair value of the asset. Included in the aforementioned goodwill and intangible impairment charge was a $2.5 million impairment charge to identifiable intangible assets.

Share-Based Compensation

Under our employee and director share-based compensation plans, participants have received or may receive grants of stock options, stock appreciation rights, restricted stock, restricted stock units, and performance shares. For 2009, we have solely utilized restricted stock for our share-based awards. Historically, we have utilized both restricted stock and stock options.

Effective January 1, 2006, we adopted the provisions of SFAS 123R, Share-Based Payment, using the modified prospective transition method to all past awards outstanding and unvested as of the effective date of January 1, 2006; accordingly, prior periods have not been restated. SFAS 123R requires the recognition of expense only for awards that are expected to vest, rather than recording forfeitures when they occur as previously permitted. Our forfeiture rates are based mainly upon historical share-based compensation cancellations. However, if the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. A one-percentage point deviation in the estimated forfeiture rates would have resulted in a $30,000 increase or decrease in compensation expense related to restricted stock for the quarter ended June 30, 2009.

New Accounting Pronouncements

Executive Summary

We are a leading provider of business services with over 210 offices in the United States, Canada, the United Kingdom, continental Europe, Australia, and Asia. 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^®
Healthcare		Soliant Health^®
Workforce Automation		Beeline^®

We present the financial results of the above brands under our four reporting segments: North American Professional Services, International Professional Services, North American IT Services and International IT Services. The accounting policies of these segments are consistent with those described herein as Critical Accounting Policies.

The following detailed analysis of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the 2008 Consolidated Financial Statements and related notes included in our Form 10-K for the year ended December 31, 2008.

Results of Operations for the Three and Six Months Ended June 30, 2009 and 2008—Consolidated

The following tables summarize our consolidated results of operations:


	Three Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	417,935		$	589,490		(29.1	%)
Gross profit	$	113,571		$	171,134		(33.6	%)
Gross margin		27.2	%		29.0	%	(1.8	%)
General and Administrative (included in Total operating expenses)	$	102,568		$	130,789		(21.6	%)
Unallocated corporate expenses (included in Total operating expenses)	$	8,715		$	7,809		11.6	%
Unallocated corporate expenses as a percentage of revenue		2.1	%		1.3	%	0.8	%
Total operating expenses	$	106,794		$	136,313		(21.7	%)
Income from operations	$	6,777		$	34,821		(80.5	%)
Income from operations as a percentage of revenue		1.6	%		5.9	%	(4.3	%)
Other income (expense), net	$	135		$	(813	)
Provision for income taxes	$	3,986		$	13,263		(69.9	%)
Effective tax rate		57.7	%		39.0	%	18.7	%
Net income	$	2,926		$	20,745		(85.9	%)


	Six Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	847,286		$	1,157,271		(26.8	%)
Gross profit	$	229,197		$	333,404		(31.3	%)
Gross margin		27.1	%		28.8	%	(1.7	%)
General and administrative (included in Total operating expenses)	$	207,298		$	255,521		(18.9	%)
Unallocated corporate expenses (included in Total operating expenses)	$	16,167		$	15,208		6.3	%
Unallocated corporate expenses as a percentage of revenue		1.9	%		1.3	%	.6	%
Total operating expenses	$	216,319		$	266,616		(18.9	%)
Income from operations	$	12,878		$	66,788		(80.7	%)
Income from operations as a percentage of revenue		1.5	%		5.8	%	(4.3	%)
Other income (expense), net	$	(972	)	$	(1,544	)
Provision for income taxes	$	7,382		$	25,445		(71.0	%)
Effective tax rate		62.0	%		39.0	%	23	%
Net income	$	4,524		$	39,799		(88.6	%)

For the quarter ended June 30, 2009, our consolidated revenue decreased 29% and our consolidated operating income decreased 81%, compared to the second quarter of the prior year. The demand for our services is highly dependent upon the state of the economy in the markets in which we operate, particularly the United States and the United Kingdom, and upon the staffing needs of our clients. During the first six months of 2009, we saw a substantial decrease in demand for our services due to the poor macroeconomic conditions in the United States and the United Kingdom, the countries in which we primarily do business. The majority of this decrease occurred in the first three months of 2009. This deterioration was more pronounced in our permanent placement business than in our staffing business. Permanent placement fees decreased 62% from the three months ended June 30, 2008 to the three months ended June 30, 2009, with staffing services revenue decreasing 27% during the same time period. We believe macroeconomic conditions will continue to erode demand for both our permanent placement and staffing services, further decreasing our revenues and profits. However, our ability to provide guidance on future results is made more difficult by the uncertain macroeconomic conditions.

Our results are impacted by fluctuations in foreign currency exchange rates. The British Pound, the main functional currency for our international segments, weakened substantially against the United States Dollar, primarily during the fourth quarter of 2008. Although the value of the British Pound versus the United States Dollar increased in the three months ended June 30, 2009, the average exchange rate for the second quarter of 2009 was still approximately 23% lower than the average exchange rate for the second quarter of 2008. Additionally, any future devaluation of the British Pound versus the United States Dollar would have a negative impact on our results.

While our compensation expenses decrease generally in proportion to our revenue as many of our employees are compensated based on revenue production, we have additionally taken a variety of steps to improve our cost efficiency. These steps have included slowing the hiring of new staff, reducing personnel through attrition and eliminating certain staff positions. For example, we have reduced our staff headcount by approximately 17% from the second quarter of 2008 to the second quarter of 2009. If we do not continue to undertake short term steps to improve our cost efficiency, further revenue declines could have a greater negative impact on our operating income. However, we must strive to refrain from actions that may impede our ability to grow revenue once the economic conditions strengthen.

Unallocated corporate expenses, included in consolidated operating expenses, pertain to certain functions such as executive management, accounting, administration, tax and treasury that are not directly attributable to our operating units.

Other income (expense), net, primarily includes changes in the cash surrender value of our company-owned life insurance, 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 increase in the effective tax rate for the three and six months ended June 30, 2009 was due primarily to the increased impact of our permanent non-tax deductible items in relation to the decreased level of pre-tax income. If we continue to experience decreased levels of pre-tax income throughout the year, our effective tax rate will remain at an increased level.

Results of Operations for the Three and Six Months Ended June 30, 2009 and 2008—By Business Segment

Professional Services Division

North American Professional Services Segment

The following tables summarize the results of operations of our North American Professional Services Segment:


	Three Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	141,917		$	185,590		(23.5	%)
Gross profit	$	40,893		$	58,163		(29.7	%)
Gross margin		28.8	%		31.3	%	(2.5	%)
General and administrative	$	32,731		$	38,948		(16.0	%)
General and administrative as a percentage of revenue		23.1	%		21.0	%	2.1	%
Income from operations	$	7,131		$	17,861		(60.1	%)
Income from operations as a percentage of revenue		5.0	%		9.6	%	(4.6	%)

	Six Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	293,636		$	365,268		(19.6	%)
Gross profit	$	83,243		$	112,916		(26.3	%)
Gross margin		28.3	%		30.9	%	(2.6	%)
General and administrative	$	66,661		$	75,843		(12.1	%)
General and administrative as a percentage of revenue		22.7	%		20.8	%	1.9	%
Income from operations	$	14,443		$	34,541		(58.2	%)
Income from operations as a percentage of revenue		4.9	%		9.5	%	(4.6	%)

An acquisition completed in 2008 contributed $4.2 million and $10.4 million in revenue in the three and six months ended June 30, 2009, respectively. Excluding the impact of this acquisition, revenue for the three and six months ended June 30, 2009 decreased in all of the North American Professional Services businesses due to weaker staffing services demand.

Revenue contribution from the North American Professional Services businesses for the three and six months ended June 30, 2009 and 2008 were as follows:


	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
Entegee	40.7	%	43.8	%	42.3	%	43.8	%
Special Counsel	25.0		26.6		24.0		26.7
Accounting Principals	12.9		13.6		12.3		13.9
Soliant Health	21.4		16.0		21.4		15.6

The aforementioned acquisition contributed $1.2 million and $2.9 million in gross profit in the three and six months ended June 30, 2009, respectively. The decrease in gross margin in the three and six months ended June 30, 2009 was due primarily to a decreased level of permanent placement fees, most notably in the Accounting Principals and Special Counsel business units, and to a lesser extent a decrease in the staffing gross margins in the Accounting Principals, Special Counsel, and Entegee business units. For the three and six months ended June 30, 2009, respectively, approximately 210 basis points and 180 basis points of the gross margin decrease was due to the decreased level of permanent placement fees. Permanent placement fees decreased to 3.7% of the segment’s revenue for the three months ended June 30, 2009, from 6.5% in the year earlier period, and decreased to 3.7% of the segment’s revenue for the six months ended June 30, 2009, from 6.1% in the year earlier period.

The decrease in G&A expenses for the three and six months ended June 30, 2009 was due primarily to a combination of decreases in compensation expense associated with decreases in revenue and decreases in compensation expense resulting from reduced personnel.

International Professional Services Segment

The following tables summarize the results of operations of our International Professional Services Segment:


	Three Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	101,930		$	153,530		(33.6	%)
Gross profit	$	23,594		$	47,945		(50.8	%)
Gross margin		23.1	%		31.2	%	(8.1	%)
General and administrative	$	20,585		$	37,282		(44.8	%)
General and administrative as a percentage of revenue		20.2	%		24.3	%	(4.1	%)
Income from operations	$	2,132		$	9,350		(77.2	%)
Income from operations as a percentage of revenue		2.1	%		6.1	%	(4.0	%)

	Six Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	201,731		$	301,350		(33.1	%)
Gross profit	$	47,467		$	93,449		(49.2	%)
Gross margin		23.5	%		31.0	%	(7.5	%)
General and administrative	$	41,427		$	71,932		(42.4	%)
General and administrative as a percentage of revenue		20.5	%		23.9	%	(3.4	%)
Income from operations	$	3,818		$	18,626		(79.5	%)
Income from operations as a percentage of revenue		1.9	%		6.2	%	(4.3	%)

Changes in foreign currency exchange rates decreased revenue by $29.2 million and $65.3 million, from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009, respectively. Apart from the effect of changes in foreign currency exchange rates, the decrease in revenue for the three and six months ended June 30, 2009 was due to the decreased demand for our services.

Changes in foreign currency exchange rates decreased gross profit by $6.6 million and $14.9 million from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009, respectively. The decrease in gross margin for the three and six months ended June 30, 2009 was due primarily to decreased permanent placement fees, and to a lesser extent a decrease in gross margins from the segment’s staffing services, resulting predominantly from the mix of staffing services, as more of our revenue was contributed by public sector clients which carry a lower gross margin than our other clients. For the three and six months ended June 30, 2009, respectively, approximately 540 basis points and 520 basis points of the gross margin decrease was due to the

decreased level of permanent placement fees. Permanent placement fees decreased to 6.0% of the segment’s revenue for the three months ended June 30, 2009, from 12.5% in the year earlier period, and decreased to 5.7% of the segment’s revenue for the six months ended June 30, 2009, from 12.1% in the year earlier period.

The decrease in G&A expenses for the three and six months ended June 30, 2009, was due primarily to decreases in compensation expense related to decreases in the segment’s revenue and reduced personnel, and a lesser extent to changes in foreign currency exchange rates.

IT Services Division

North American IT Services Segment

The following tables summarize the results of operations of our North American IT Services Segment:


	Three Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	124,243		$	158,218		(21.5	%)
Gross profit	$	39,256		$	49,210		(20.2	%)
Gross margin		31.6	%		31.1	%	0.5	%
General and administrative	$	32,598		$	34,825		(6.4	%)
General and administrative as a percentage of revenue		26.2	%		22.0	%	4.2	%
Income from operations	$	4,662		$	12,134		(61.6	%)
Income from operations as a percentage of revenue		3.8	%		7.7	%	(3.9	%)

	Six Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	251,550		$	317,089		(20.7	%)
Gross profit	$	78,936		$	97,728		(19.2	%)
Gross margin		31.4	%		30.8	%	0.6	%
General and administrative	$	66,867		$	70,295		(4.9	%)
General and administrative as a percentage of revenue		26.6	%		22.2	%	4.4	%
Income from operations	$	8,050		$	22,959		(64.9	%)
Income from operations as a percentage of revenue		3.2	%		7.2	%	(4.0	%)

Changes in foreign currency exchange rates decreased revenue by $1.2 million and $2.8 million, from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009, respectively. One acquisition completed in 2008 contributed $894,000 in revenue in the three months ended June 30, 2009, and two acquisitions completed in 2008 contributed $2.0 million in revenue in the six months ended June 30, 2009. Apart from the effect of changes in foreign currency exchange rates, the decrease in revenue for the three and six months ended June 30, 2009 was due to the decreased demand for our services.

Revenue within the North American IT Services segment is generated primarily from Modis, as it generated 80.0% and 78.2% of the segment’s revenue for the three months ended June 30, 2009 and 2008, respectively. Idea Integration and Beeline are responsible for the remainder of this segment’s revenue.

Changes in foreign currency exchange rates decreased gross profit by $235,000 and $553,000, from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009, respectively. The aforementioned acquisitions completed in 2008 contributed $384,000 and $1.1 million in gross profit in the three and six months ended June 30, 2009, respectively. The increase in gross margin for the three months ended June 30, 2009 was due primarily to increased gross margins from Modis staffing services, and to a lesser extent to increased margins from the Beeline and Idea Integration business units. The increase in gross margin for the six months ended June 30, 2009 was due primarily to an increase in the percentage of total segment revenue attributable to our Beeline business unit, which generates higher margins than the other business units. Permanent

placement fees decreased to .9% of the segment’s revenue for the three months ended June 30, 2009, from 1.7% in the year earlier period, and decreased to 1.1% of the segment’s revenue for the six months ended June 30, 2009, from 1.7% in the year earlier period.

The decrease in the segment’s G&A expenses for the three and six months ended June 30, 2009 was due primarily to decreases in compensation expense related to the decreases in the segment’s revenue and reduced personnel.

International IT Services Segment

The following tables summarize the results of operations of our International IT Services Segment:


	Three Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	49,845		$	92,152		(45.9	%)
Gross profit	$	9,828		$	15,816		(37.9	%)
Gross margin		19.7	%		17.2	%	2.5	%
General and administrative	$	7,939		$	11,925		(33.4	%)
General and administrative as a percentage of revenue		15.9	%		12.9	%	3.0	%
Income from operations	$	1,567		$	3,285		(52.3	%)
Income from operations as a percentage of revenue		3.1	%		3.6	%	(0.5	%)

	Six Months Ended
(amounts in thousands)	June 30, 2009			June 30, 2008			Increase/ (Decrease)
Revenue	$	100,369		$	173,564		(42.2	%)
Gross profit	$	19,551		$	29,311		(33.3	%)
Gross margin		19.5	%		16.9	%	2.6	%
General and administrative	$	16,176		$	22,242		(27.3	%)
General and administrative as a percentage of revenue		16.1	%		12.8	%	3.3	%
Income from operations	$	2,734		$	5,870		(53.4	%)
Income from operations as a percentage of revenue		2.7	%		3.4	%	(0.7	%)

Changes in foreign currency exchange rates decreased revenue by $13.7 million and $31.0 million, from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009, respectively. An acquisition completed in 2008 contributed $1.1 million and $4.8 million in revenue in the three and six months ended June 30, 2009. Apart from the effect of changes in foreign currency exchange rates, the decrease in revenue for the three and six months ended June 30, 2009 was due to the decreased demand for our services.

Changes in foreign currency exchange rates decreased gross profit by $2.6 million and $5.8 million, from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009, respectively. The aforementioned acquisition contributed $280,000 and $1.1 million in gross profit in the three and six months ended June 30, 2009, respectively. The increase in gross margin for the three and six months ended June 30, 2009 was due to increased gross margins on the segment’s staffing services resulting from a mix shift in client revenue. Permanent placement fees decreased to 2.4% of the segment’s revenue for the three months ended June 30, 2009, from 2.8% in the year earlier period, and decreased to 2.5% of the segment’s revenue for the six months ended June 30, 2009, from 2.7% in the year earlier period.

The decrease in G&A expenses in the three months ended June 30, 2009 was due primarily to decreases in compensation expense related to the decreases in the segment’s revenue and reduced personnel, and to a lesser extent changes in foreign currency exchange rates. The decrease in G&A expenses in the six months ended June 30, 2009 was due primarily to changes in foreign currency exchange rates, and to a lesser extent decreases in compensation expense related to the decreases in the segment’s revenue and reduced personnel.

Liquidity and Capital Resources

Overview

We intend to generate stockholder value through strategic investments in our existing businesses, acquisitions and stock repurchases, as appropriate. Changes to our liquidity have historically been due primarily to the net effect of: (i) funds generated by operations; and (ii) funds used for acquisitions, repurchases of common stock and capital expenditures. While there can be no assurances in this regard, we believe that funds provided by operations, our current cash balances, and borrowings available to us under our existing credit facility 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 twelve months.

In the six months ended June 30, 2009, the $48.2 million of cash provided from operating activities and the effect of changes in foreign currency exchange rates exceeded the $14.4 million used in investing and financing activities. Our net increase in cash in the six months ended June 30, 2009 was due primarily to increased cash collections on trade receivables. In the six months ended June 30, 2008, cash of $85.2 million used in investing and financing activities exceeded the $44.7 million of cash provided from operating activities and the effect of changes in foreign currency exchange rates. Our net decrease in cash in the six months ended June 30, 2008 was due primarily to repurchases of our common stock and acquisitions. The table below highlights working capital and cash and cash equivalents as of June 30, 2009 and December 31, 2008, respectively:


(dollar amounts in millions)	June 30, 2009		December 31, 2008
Working capital	$	249.2	$	223.7
Cash and cash equivalents	$	124.4	$	90.6

Operating cash flows

For the six months ended June 30, 2009 and 2008, we generated $45.7 million and $44.0 million of cash flow from operations, respectively. The increase in cash flow from operations was due primarily to increased cash collections on trade receivables. During a period of decreasing revenue, such as we experienced in the first half of 2009, the cost and cash outflows associated with our billable employees decline immediately with the decline in weekly payroll associated with our billable employees, while we continue to collect receivables from earlier periods, resulting in an acceleration of operating cash flow.

Investing cash flows

For the six months ended June 30, 2009, we used $3.5 million of cash for investing activities, including $1.6 million for consideration on acquisitions completed in earlier periods, and $1.9 million for capital expenditures.

For the six months ended June 30, 2008, we used $52.8 million of cash for investing activities, including $46.1 million for acquisitions, net of cash acquired, and $9.2 million for capital expenditures.

We anticipate that capital expenditures for furniture and equipment, including improvements to our management information and operating systems, for the remainder of 2009 will be approximately $5.0 million.

Financing cash flows

For the six months ended June 30, 2009, we used $10.9 million of cash for financing activities, consisting primarily of $7.3 million for the repayment of borrowings on our revolving credit facility, $1.9 million for the settlement of share based awards and $1.6 million used for the repayment of acquisition related notes.

For the six months ended June 30, 2008, we used $32.4 million of cash for financing activities, consisting primarily of $54.7 million for the repurchase of common stock and $7.1 million used for the repayment of acquisition related notes, net of $30.0 million borrowed from our revolving credit facility.

Indebtedness of the Company

We have a $250 million revolving credit facility which is syndicated to a group of leading financial institutions and contains certain financial and non-financial covenants relating to our operations. Certain of the financial covenants include the maintenance of financial ratios, of which EBITDA is a main component. Because our EBITDA levels have decreased in recent quarters, the amount of available borrowings under this facility has also decreased. We had approximately $220 million of borrowing capacity available under this facility as of June 30, 2009. We expect the availability of borrowings under this facility to decrease in the third quarter, as EBITDA is expected to remain at these decreased levels. Repayment of the credit facility is guaranteed by substantially all of our subsidiaries. The facility expires in November 2011. As of July 24, 2009, we have no borrowings outstanding under this facility, other than $9.3 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.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

For information regarding our exposure to certain market risk, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A to our Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009. There were no material changes to our market risk for the three and six months ended June 30, 2009.

Item 4.

Controls and Procedures

We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the supervision and participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

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

Part II. Other Information

Item 1A.

Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Form 10-K for the year ended December 31, 2008, which could materially affect our business, financial condition or future results.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases of Equity Securities

Our Board of Directors has authorized certain repurchases of our common stock. From the third quarter of 2002 through December 31, 2008, we have repurchased a total of 27.4 million shares at a cost of $293.2 million under this plan. For the three and six months ended June 30, 2009, we did not repurchase any shares under this authorization. We have approximately $24.3 million remaining under this authorization as of July 24, 2009. There is no expiration date for this authorization. The following table sets forth information about our common stock repurchases, as well as shares acquired in satisfaction of tax withholding obligations relating to equity awards, for the three months ended June 30, 2009.


Period(1)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as 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, 2009 to April 30, 2009	75,824	(2)	$	—	—	$	24,311,305
May 1, 2009 to May 31, 2009	20,090	(2)		—	—		24,311,305
June 1, 2009 to June 30, 2009	69,483	(2)		—	—		24,311,305

Total	165,397		$	—	—	$	24,311,305

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

(2)	Shares of restricted stock delivered by directors and employees to us, upon vesting, to satisfy tax withholding requirements.

Item 4.

Submission of Matters to a Vote of Security Holders

The Annual Meeting of the Company’s shareholders was held on May 15, 2009. Proxies were solicited from shareholders of record as of March 26, 2009, and filed on the close of business on April 20, 2009. On March 26, 2009, there were 92,503,986 shares outstanding and entitled to vote at the Annual Meeting. At the Annual Meeting, the following proposals were 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	84,970,200	3,666,959
Timothy D. Payne	85,648,400	2,988,759
Peter J. Tanous	85,680,054	2,957,105
T. Wayne Davis	51,988,935	36,648,224
John R. Kennedy	59,242,576	29,394,583
Michael D. Abney	85,674,355	2,962,804
William M. Issac	86,122,606	2,514,553
Darla D. Moore	59,249,895	29,387,264
Arthur B. Laffer	59,243,554	29,393,605
Robert P. Crouch	77,485,307	11,151,852

Approval of material terms for performance-based awards for executive officers under the Company’s Executive Annual Incentive Plan:


For	Against	Abstain	Non-Votes
85,061,715	2,820,675	754,769	0

Ratification of the appointment of PricewaterhouseCoopers LLP to serve as the independent registered certified public accounting firm for the Company for the fiscal year ending December 31, 2009:


For	Against	Abstain	Non-Votes
88,091,224	527,899	18,035	0

Item 6.

Exhibits

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

See Index of Exhibits.


Exhibit No.		Description

10.1*		Executive Employment Agreement with Jon D. Kerner

10.2*		Executive Annual Incentive Plan

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, the registrant has duly caused this report to be signed on its behalf by the undersigned there onto duly authorized.


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 7, 2009

EX-10.1 2 dex101.htm EXECUTIVE EMPLOYMENT AGREEMENT WITH JON D. KERNER Executive Employment Agreement with Jon D. Kerner

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is made effective as of the 17th day of April, 2009, by and between MPS GROUP, INC., a Florida corporation, and its successors (“Employer”), and JON D. KERNER, a resident of the State of Florida (“Executive”).

WHEREAS, the Employer and the Executive entered into a Letter of Understanding on December 7, 2007; and

WHEREAS, the Employer and the Executive desire to enter into an employment agreement, which agreement shall replace and thereby supersede all prior employment agreements and similar understandings previously executed or agreed between the Employer and the Executive;

NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants, and subject to the terms and conditions contained in this Agreement, the Employer and Executive, intending to be legally bound, hereby agree as follows:

1. Employment. Employer hereby employs Executive as Senior Vice President and Chief Information Officer, and Executive hereby accepts employment by Employer, in accordance with and subject to the terms and conditions of this Agreement. The Executive will report directly to one or both of the principal executive or principal financial officers of the Employer.

2. Duties and Authority. As Senior Vice President and Chief Information Officer of Employer, Executive shall be responsible for administering the affairs of the Employer to the extent, and otherwise performing such duties as are, customarily performed by a Senior Vice President and Chief Information Officer of a company of similar size and structure to the Employer. Executive agrees to devote his full time, attention and best efforts to the performance of his duties hereunder; provided, however, it shall not be considered a violation of the foregoing for the Executive to assist in the financial affairs of corporate affiliates or to serve on corporate, industry, civic or charitable boards or committees, so long as such activities do not materially interfere with the performance of the Executive’s responsibility as an employee of the Employer in accordance with this Agreement.

3. Initial Term; Employment Period. The initial term of employment shall begin on April 17, 2009 and end on December 31, 2009 (the “Term of this Agreement”). The Term of this Agreement shall be extended automatically for one year on December 31, 2009, and each annual anniversary thereof (the “Extension Date”) unless, and until, at least 90 days prior to the applicable Extension Date either the Employer or the Executive provides written notice to the other party that this Agreement is not to be extended (the later of December 31, 2009 or the last date to which the Term is extended shall be the “End of Term”). For purposes of this Agreement, the period beginning on January 1, 2008, and ending on the Date of Termination (as hereafter defined) shall be referred to herein as the “Employment Period.”

4. Compensation. During the Employment Period which is in the Term of this Agreement, Executive shall receive the following compensation:

A. Base Salary. A base annual salary of $250,000, payable in accordance with the Employer’s standard practice for other comparable executives. Executive’s base salary shall be subject to annual review by the Board of Directors of the Employer (the “Board”) for discretionary periodic increases in accordance with the Employer’s compensation policies. References to “Base Salary” in this Agreement shall be to the base salary set forth in this Paragraph 4.A. and shall include any increases to such base salary made hereby.

B. Incentive Compensation. The Executive shall be entitled to a target incentive compensation opportunity expressed as a percentage of Base Salary of not less than 50% under the Executive Annual Incentive Plan (“Incentive Plan”), as amended from time to time, or pursuant to a newly established or successor plan.

C. Management Savings Plan. The Executive shall be entitled each year to an annual contribution of at least the minimum annual award level under the Management Savings Plan, as amended from time to time, or pursuant to a newly established or successor plan.

5. Equity Compensation. Employer shall continue to grant to Executive stock options, restricted stock, stock appreciation rights or other equity compensation awards from time to time in a manner consistent with that to which it makes such grants to other senior executive officers of the Employer pursuant to the MPS Group, Inc. 2004 Equity Incentive Plan, as amended from time to time, or pursuant to a newly established or successor plan.

A. Vesting and Exercise. Any existing or future equity compensation awards shall provide for:

(i) with respect to stock options, exercisability of vested stock options (including those vested under Paragraph 5.A.(ii) below) for at least two years following the Executive’s termination of employment with the Employer (or if sooner, 10 years from date of grant of the option);

(ii) with respect to all stock options, restricted stock or other equity compensation awards, full vesting upon a Change in Control (as hereafter defined) or termination of the Executive’s employment with the Employer by reason of Executive’s death or Disability (as hereafter defined) or for reasons other than termination (i) by the Employer for Cause (as hereafter defined), or (ii) by the Executive without Good Reason (as hereafter defined); and

(iii) with respect to all stock options, restricted stock or other equity compensation awards, exercisability only to the extent vested on the date of the Executive’s termination of employment with the Employer, in the event of termination (i) by the Employer for Cause, or (ii) by the Executive without Good Reason.

B. For purposes of this Agreement, “Change in Control” shall mean:

(i) the acquisition by any person or persons (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended) of legal or beneficial ownership of 35% or more of either (a) the then outstanding shares of common stock of the Employer or (b) the combined voting power of the then outstanding voting securities of the Employer entitled to vote generally in the election of directors;

(ii) individuals who, as of the date hereof, constitute the Board cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Employer’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Board shall be considered as though such individual were a member of the Board as of the date hereof;

(iii) approval by the shareholders of the Employer of a reorganization, merger, or consolidation, in each case unless the shareholders of the Employer immediately before such reorganization, merger, or consolidation own, directly or indirectly, immediately following such reorganization, merger, or consolidation at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from such reorganization, merger, or consolidation in substantially the same proportion as their ownership of the voting securities immediately before such reorganization, merger or consolidation; or

(iv) approval by the shareholders of the Employer of (a) a complete liquidation or dissolution of the Employer or (b) the sale or other disposition of more than 50% of the assets of the Employer within a twelve month period.

6. Benefits. To the extent not otherwise provided herein (it being the intent not to duplicate benefits) during the term of this Agreement, Employer shall provide the Executive with all retirement, welfare, deferred compensation, disability and other benefits generally provided to all of the Employer’s other senior executive officers. Executive shall be entitled to three (3) weeks of paid vacation per calendar year. Unused vacation shall be paid out at calendar year end. The Employer shall reimburse the Executive for all reasonable and necessary expenses incurred while conducting business in accordance with policies adopted by the Employer from time to time. The Executive acknowledges that pursuant to the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder, the Employer may be required to report for tax purposes all or a portion of certain of the benefits and reimbursements provided in this Agreement as income in respect of the Executive. In all events, the aforementioned benefit and expense reimbursements will be made no later than the year following the year in which the expense was incurred. Notwithstanding any other provision of this Section 6 to the contrary, any expense reimbursed by the Employer in one taxable year in no event will affect the amount of expenses required to be reimbursed or in-kind benefits required to be provided by the Employer in any other taxable year.

7. Non-Compete; Confidentiality. In consideration of the employment of Executive by Employer, Executive agrees as follows:

A. Non-Compete and Non-Solicitation. During the Employment Period and for a period of two years after the Date of Termination, Executive will not, directly or indirectly, within a fifty mile radius of any office of Employer (or a consolidated subsidiary) in existence on the Date of Termination, own, manage, be employed by, work for, consult for, be an officer or director of, advise, represent, engage in or carry on any business which competes with the business of Employer. During the Employment Period and for a period of two (2) years after the Date of Termination, Executive will not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the Employer (or a consolidated subsidiary) to leave the Employer (or a consolidated subsidiary) for any reason whatsoever, or solicit the services of any employee of the Employer (or a consolidated subsidiary).

B. Non-Disclosure of Information. Executive will not at any time, during or after the term of this Agreement in any fashion, form, or manner, either directly or indirectly, divulge, disclose, or communicate to any person, firm, or corporation, in any manner whatsoever, any information of any kind, nature, or description concerning any matters affecting or relating to the business of the Employer, including, but not limited to, the names of any of its customers or prospective customers or any other information concerning the business of the Employer, its manner of operation, its plans, its vendors, its suppliers, its advertising, its marketing, its methods, its practices, or any other information of any kind, nature, or description, without regard to whether any or all of the foregoing matters would otherwise be deemed confidential, material, or important; provided, however that this provision shall not prevent disclosures by Executive to the extent such disclosures are (i) believed by the Executive, in good faith and acting reasonably, to be in the best interest of the Employer, (ii) of information that is public at the time of the disclosure (other than as a result of the Executive’s violation of this Paragraph 7.B.), or (iii) as required by law or legal process (and, if the Executive is so required to disclose, Executive shall provide the Employer notice of such to allow the Company the opportunity to contest such disclosure).

8. Termination of Employment.

A. Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. Additionally, if the Employer determines in good faith that the Executive has incurred a Disability, it may give the Executive written notice of its intention to terminate the Executive’s employment, and in such event, the Executive’s employment with the Employer shall terminate effective on the later of (i) the date in the notice, (ii) the day after receipt of such notice by the Executive, or (iii) the date the Disability has been considered to occur (the “Disability Effective Date”), provided that, prior to such date, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall have the meaning set forth in the Employer’s long term disability plan or policy covering the Executive and shall not be considered to have occurred until after the waiting period as required by such plan or policy.

B. Cause. The Employer may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean (i) a breach by the Executive of the Executive’s obligations under Paragraph 2 above (other than as a result of temporary incapacity due to physical or mental illness, or Disability) which is demonstrably willful and deliberate on the Executive’s part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Employer and which is not remedied in a reasonable period of time (to be not less than 15 days) after receipt of written notice from the Employer specifying such breach; or (ii) the conviction of the Executive of a felony; or (iii) a breach of the Executive’s fiduciary duty. No act or failure to act on the Executive’s part shall be considered willful unless done or omitted in bad faith and without reasonable belief that the action or omission was in the best interest of the Employer.

C. Good Reason. The Executive’s employment may be terminated by the Executive at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:

(i) a material diminution in the Executive’s position, authority, duties or responsibilities;

(ii) a material diminution in the Executive’s Base Salary (except if such reduction is a part of a reduction for all executive officers of the Employer);

(iii) a material diminution in the Executive’s overall compensation opportunity (except if such reduction is part of a reduction for all executive officers of the Employer);

(iv) any other failure by the Employer to comply with any of the provisions of this Agreement that constitutes a material breach of this Agreement;

(v) Employer’s requiring the Executive to be based at any office or location other than Jacksonville, Florida, provided such requirement constitutes a material change in the geographic location at which Executive must perform services; or

(vi) the Employer’s providing notice to the Executive pursuant to Paragraph 3 that the Agreement will not be extended, unless the purpose of such notice is to negotiate the terms of a new agreement between the Employer and the Executive and the notice provides that the Agreement continues in effect until such new agreement is entered into.

For purposes of this Paragraph 8.C., any good faith determination of “Good Reason” made by the Executive shall be conclusive. However, no such event described hereunder shall constitute Good Reason unless the Executive has given written notice to the Employer specifying the event relied upon for such termination within 90 days after the initial occurrence of such event and the Employer has not remedied such within 60 days of receipt of such notice; and provided, further, that in all cases the termination of the Executive’s employment with the Employer shall not constitute a termination for Good

Reason unless such termination occurs not more than two (2) years following the initial occurrence of the event(s) claimed to constitute Good Reason. The Employer and the Executive, upon mutual written agreement, may waive any of the foregoing provisions which would otherwise constitute Good Reason.

D. Notice of Termination. Any termination by the Employer for Cause, or by the Executive for Good Reason, shall be communicated to the other party by Notice of Termination. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment; and (iii) specifies the Date of Termination (as defined below). Notice of intent to terminate employment for Good Reason must be provided pursuant to Paragraph 8.C. of this Agreement. The failure by the Executive or the Employer to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Employer hereunder or preclude the Executive or the Employer from asserting such fact or circumstance in enforcing the Executive’s or the Employer’s rights hereunder.

E. Date of Termination. “Date of Termination” means the date on which the Executive incurs a “separation from service” within the meaning of Section 409A of the Code, which to the extent permissible means (i) if the Executive’s employment is terminated by the Employer for Cause, the date specified in the Notice of Termination as the Date of Termination; (ii) if the Executive’s employment is terminated by the Executive for Good Reason, the date specified in the Notice of Termination as the Date of Termination, provided the Date of Termination is no more than two years following the initial occurrence of the Good Reason event; (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be; and (iv) if Executive’s employment is terminated by either party other than for death, Disability, Cause or Good Reason, the date set forth in the notice required under Paragraph 8.D. above as the Date of Termination is to be effective.

9. Obligations of the Employer upon Termination. Upon termination of the Executive’s employment for any reason during the Term of this Agreement, Executive shall be entitled to Base Salary and all benefits through the Date of Termination, and to exercise then vested stock options in accordance with Paragraph 5.A.(i) above. Upon the termination of the Executive’s employment during the Term of this Agreement by reason of the Executive’s death or Disability, or by the Executive for Good Reason, or by the Employer for any reason other than Cause, Executive shall in addition be entitled to exercise stock options, restricted stock and other equity-based awards with accelerated vesting pursuant to Paragraph 5.A.(ii) above. In addition, upon the termination of the Executive’s employment during the Term of this Agreement by the Executive for Good Reason, or by the Employer for any reason other than Cause, or for other than Executive’s Disability or death, the Executive shall be entitled to receive:

A. During the first five (5) years of the Term: (i) a lump sum payment within thirty (30) days equal to the sum of (a) Executive’s Base Salary as of the Date of Termination and (b) the Executive’s target bonus opportunity under the Incentive Plan based on the target bonus opportunity for the year of termination; and (ii) continued participation in the Company’s group health insurance plans at the Company’s expense until the earlier of (x) the expiration of one (1) year from the effective date of termination or (y) Executive’s eligibility for participation in the group health plan of a subsequent employer or entity for which Executive provides services; and

B. From and after completion of the first five (5) years of the Term: (i) a lump sum payment within thirty (30) days equal to two (2) times the sum of (a) Executive’s Base Salary as of the Date of Termination and (b) the Executive’s target bonus opportunity under the Incentive Plan based on the target bonus opportunity for the year of termination; and (ii) continued participation in the Company’s group health insurance plans at the Company’s expense until the earlier of (x) the expiration of the two (2) years from the effective date of termination or (y) Executive’s eligibility for participation in the group health plan of a subsequent employer or entity for which Executive provides services.

10. Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The amounts provided for under this Agreement shall not be reduced by any compensation earned or benefits received by the Executive as the result of self-employment or employment by another employer or otherwise.

11. Tax Effect. If Independent Tax Counsel shall determine that the aggregate payments made, and benefits provided, to the Executive pursuant to this Agreement and any other payments, and benefits provided, to the Executive from the Employer, its affiliates and plans, which constitute “parachute payments” as defined in Section 280G of the Code (or any successor provision thereto) (“Parachute Payments”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount (determined by Independent Tax Counsel) such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes, the Executive retains from the Gross-Up Payment an amount equal to the Excise Tax imposed upon the payments.

For purposes of this Paragraph, “Independent Tax Counsel” shall mean a lawyer, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of executive compensation tax law, who shall be selected by the Employer and shall be reasonably acceptable to the Executive, and whose fees and disbursements shall be paid by the Employer.

A. If Independent Tax Counsel shall determine that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that the Executive has substantial authority not to report any Excise Tax on the Executive’s Federal income tax return. If the Executive is subsequently required to make a payment of any Excise Tax, then the Independent Tax Counsel shall determine the amount of such additional payment (“Gross-Up Underpayment”), and any such Gross-Up Underpayment shall be promptly paid by the Employer to or for the benefit of the Executive. The fees and disbursements of the Independent Tax Counsel shall be paid by the Employer.

B. The Executive shall notify the Employer in writing within 15 days of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of a Gross-Up Payment. If the Employer notifies the Executive in writing that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall:

(i) give the Employer any information reasonably requested by the Employer relating to such claim;

(ii) take such action in connection with contesting such claim as the Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Employer;

(iii) cooperate with the Employer in good faith in order to effectively contest such claim; and

(iv) permit the Employer to participate in any proceedings relating to such claim; provided, however, that the Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. The Employer shall control all proceedings taken in connection with such contest; provided, however, that if the Employer directs the Executive to pay such claim and sue for a refund, the Employer shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance.

C. If, after the receipt by the Executive of an amount advanced by the Employer pursuant to this Paragraph 11, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall, within 10 days, pay to the Employer the amount of such refund, together with any interest paid or credited thereon after taxes applicable thereto.

Payment of a Gross-Up Payment or a Gross-Up Underpayment shall be made no later than the end of the Executive’s taxable year next following the Executive’s taxable year in which the Executive remits the related taxes.

12. Mandatory Deductions. Any amounts to which Executive is entitled as compensation, bonus, merit bonus, or any other form of compensation subject to withholding, shall be subject to usual deduction for appropriate federal, state, and local income and employment tax obligations of Executive.

13. Notices. Any notice provided for in this Agreement shall be given in writing. Notices shall be effective from the date of receipt, if delivered personally to the party to whom notice is to be given, or on the second day after mailing, if mailed by first class mail, postage prepaid. Notices shall be properly addressed to the parties at their respective addresses set forth below or to such other address as either party may later specify by notice to the other:

If to Employer:

MPS Group, Inc.

Attn: Chief Executive Officer

1 Independent Drive

Jacksonville, Florida 32202

If to Executive:

Jon D. Kerner at the then current address of the Executive

appearing in the corporate records of Employer

14. Entire Agreement. This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof, including, but not limited to, any and all prior employment agreements and related amendments entered into between the Employer and the Executive. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment or modification is sought.

15. Waiver. The waiver by one party of a breach of any of the provisions of this Agreement by the other shall not be construed as a waiver of any subsequent breach.

16. Attorney’s Fees. In the event of litigation or other dispute resolution proceeding involving the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover from the other all fees, costs and expenses incurred in connection therewith, including attorney’s fees through appeal. In order to comply with Section 409A of the Code, in no event shall the payments by the Company under this Paragraph 16 be made later than the end

of the calendar year next following the calendar year in which such fees and expenses were incurred, provided, that the Executive shall have submitted an invoice for such fees and expenses at least ten (10) days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred. The amount of such legal fees and expenses that the Company is obligated to pay in any given calendar year shall not affect the legal fees and expenses that the Company is obligated to pay in any other calendar year, and the Executive’s right to have the Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit

17. Tax Withholding. The Employer shall have the right to deduct from all benefits and/or payments under the Agreement any taxes required by law to be paid or withheld with respect to such benefits or payments.

18. Governing Law; Venue. The Agreement shall be construed and enforced in accordance with the laws of the State of Florida. Duval County, Florida, shall be proper venue for any litigation arising out of this Agreement.

19. Paragraph Headings. Paragraph headings are for convenience only and are not intended to expand or restrict the scope or substance of the provisions of this Agreement.

20. Assignability. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. This Agreement is a personal employment agreement and the rights, obligations and interests of the Executive hereunder may not be sold, assigned, transferred, pledged or hypothecated.

21. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement shall remain in full force and shall in no way be impaired.

22. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to account for more than one such counterpart.

23. Code Section 409A Compliance. To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code. This Agreement will be administered in a manner consistent with this intent. References to Section 409A of the Code will include any proposed, temporary or final regulation, or any other formal guidance, promulgated with respect to such section by the U.S. Department of Treasury or the Internal Revenue Service. Each payment to be made to the Executive under the provisions of this Agreement will be considered to be a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

EXECUTIVE

/s/ Jon D. Kerner

Jon D. Kerner

EMPLOYER:

By: /s/ Timothy D. Payne

Name: Timothy D. Payne

Title: President and Chief Executive Officer

EX-10.2 3 dex102.htm EXECUTIVE ANNAUL INCENTIVE PLAN Executive Annaul Incentive Plan

Exhibit 10.2

MPS GROUP, INC.

EXECUTIVE ANNUAL INCENTIVE PLAN

SECTION 1

Establishment and Purpose. MPS Group, Inc., a Florida corporation (the “Company”), hereby establishes an incentive compensation plan, which shall be known as the MPS Group, Inc. Executive Annual Incentive Plan (the “Plan”). The purposes of the Plan are to further the growth and financial success of the Company by offering performance incentives to designated executives who have significant responsibility for such success, to encourage management to focus on key corporate, business unit and individual performance objectives, and to assist in the attraction and retention of qualified management talent through a competitive compensation package. All Awards granted under the Plan shall be governed solely by the terms of the Plan, the Award Notification, the Plan Rules and applicable law.

SECTION 2

Definitions.

“Affiliate” means a company or organization that directly, or indirectly through one or more intermediaries, is controlled by the Company, whether through the ownership of voting securities, by contract or otherwise, and may be an unincorporated entity, division or operating unit of the Company or any its Affiliates.

“Award” means the cash incentive bonus granted to a Participant in accordance with the provisions of the Plan.

“Award Notification” means the written terms and conditions applicable to an Award granted to a Participant, substantially in the form attached as Appendix B.

“Award Opportunity” means the percentages, as set forth in the Award Notification, that are to determine the amount of the Participant’s Award. Award Opportunity levels shall generally be dependent upon an individual’s position in the Company or an Affiliate and level of responsibility.

“Base Annual Salary” means the actual regular annual base salary paid to a Participant during the applicable Plan Year, excluding bonus, automobile allowance, dues or other special awards (but as increased by the amount of any pre-tax deferrals or other pre-tax payments made by the Participant to the Company’s deferred compensation or welfare plans (whether qualified or non-qualified)). Base Annual Salary shall not include income from stock options, restricted stock awards, fringe benefits, tax gross-ups or similar items.

“Board of Directors” or “Board” means the Board of Directors of the Company.

“Change in Control” means any of the following events:

(a) The acquisition by any “person,” as the term person is used for purposes of Sections 13(d) or 14(d) of the Exchange Act, of legal or beneficial ownership of 35% or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors;

(b) Individuals who, as of the Effective Date constitute the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Board of Directors shall be considered as though such individual were a member of the Board of Directors as of the date hereof;

(c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case unless the shareholders of the Company immediately before such reorganization, merger or consolidation own,

directly or indirectly, immediately following such reorganization, merger or consolidation at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the voting securities immediately before such reorganization, merger or consolidation; or

(d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company, or (ii) the sale or other disposition of more than 50% of the assets of the Company within a twelve month period.

“Chief Executive Officer” means the chief executive officer of the Company, unless otherwise specified.

“Chief Financial Officer” means the chief financial officer of the Company, unless otherwise specified.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board of Directors, or any subcommittee thereof, comprised of not less than the minimum number of persons from time to time required by Section 16(b) of the Exchange Act or Code Section 162(m), or any other committee designated by the Board of Directors which is responsible for administering the Plan.

“Company” means MPS Group, Inc., a Florida corporation, and its successors.

“Effective Date” shall have the meaning ascribed to it in Section 7(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financial Performance Criteria” means one or more criteria selected by the Committee to measure performance for the year and which are listed on Appendix A attached hereto.

“Financial Performance Objective” means one or more Financial Performance Criteria that are applied to a Participant in determining the component of the Plan that relates to financial performance.

“Key Performance Objective” means an established individual goal applied to a Participant in determining a component of the Plan that relates to other than financial performance.

“Maximum Award” means the maximum percentage of Base Annual Salary which may be paid to a Participant as an Award based upon the performance during the Plan Year.

“Named Executive Officer” means a Participant who for a particular Plan Year is one of the group of “covered employees” under Code Section 162(m) and the regulations thereunder.

“Participant” means an employee of the Company or an Affiliate who is designated by the Committee in its sole discretion to participate in the Plan.

“Performance Level” means one or more related levels of Financial Performance Objectives and Key Performance Objectives as established by the Committee. Each Performance Level may be expressed on an absolute and/or relative basis; or may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company and/or the past or current performance of other companies; and in the case of earnings-based measures, may consist of or utilize comparisons related to capital, shareholders’ equity and/or shares outstanding, or to assets or net assets.

“Plan Rules” has the meaning ascribed to it by Section 3(a).

“Plan Year” means the twelve month period which is the same as the Company’s fiscal year. The initial Plan Year shall be January 1, 2004 through December 31, 2004.

“Target Award” means the percentage of Base Annual Salary which will be paid to a Participant as an Award if the Performance Level applicable to the Participant for the Plan Year is achieved, as reflected in the Plan Rules for such Plan Year.

“Threshold Award” means the percentage of Base Annual Salary which may be paid to a Participant as an Award based on the minimum acceptable performance during the Plan Year.

SECTION 3

Administration.

(a)

The Plan will be administered by the Committee, subject to its right to delegate responsibility for administration of the Plan as set forth herein. Subject to the terms of the Plan and applicable law, the Committee will have authority to establish: (i) the employees who are to become Participants in the Plan; (ii) the Target Award, Maximum Award and Threshold Award that can be granted to each Participant and the method for determining such award which the Committee may amend from time to time; (iii) the applicable Financial Performance Objectives and Key Performance Objectives for each Participant, which Financial Performance Objectives will include one or more of the Financial Performance Criteria listed on Appendix A attached hereto, as determined by the Committee each year; (iv) the time or times and the conditions subject to which any Award may become payable; and (v) the form of payment of an Award (collectively, the matters referred to in (i) – (v) above are “Plan Rules”).

(b)

The Plan Rules will be adopted by the Committee prior to, or as soon as practical after, the commencement of each Plan Year, provided that with respect to Named Executive Officers such Plan Rules will be adopted within the time provided in the regulations under Code Section 162(m) if compliance therewith is necessary or desirable in the Committee’s determination. Subject to the provisions of the Plan and the Committee’s right to delegate its responsibilities, the Committee will also have the discretionary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations deemed necessary or advisable in administering the Plan. The determinations of the Committee on the matters referred to in paragraphs (a)(i) through (iv) of this Section 3 with respect to Named Executive Officers (and such other Participants as the Committee may determine) may be submitted at least annually to the Board of Directors for its consideration and ratification, provided that with respect to the Chief Executive Officer the Committee shall establish the Award level and performance targets. For Participants who are not Named Executive Officers, or for Named Executive Officers for which the Committee may determine that compliance with Code Section 162(m) is not necessary or warranted in any Plan Year, the Committee may in its discretion establish Financial Performance Criteria or other performance measures not listed on Appendix A without obtaining shareholder approval.

SECTION 4

Eligibility. The Committee will designate by name or position the Participants for each Plan Year, which designation may be based upon the recommendations of the Chief Executive Officer and other designees. Any employee who is a Participant in one Plan Year may be excluded from participation in any other Plan Year. If, during the Plan Year, a Participant, other than a Named Executive Officer for which compliance with Code Section 162(m) is warranted or desirable in the Committee’s determination, changes employment positions to a new position that corresponds to a different Award level, the Committee may, in its discretion, adjust the Participant’s Award level for such Plan Year. The Committee may, in its discretion, designate employees who are hired after the beginning of the Plan Year as Participants for such Plan Year and as eligible to receive a full or partial Award for such year.

SECTION 5

Awards.

(a)

Each Participant shall receive an annual Award Notification that shall address the terms and conditions of his/her annual Award Opportunity. The Award Notification shall address the weighting between the Financial Performance Objectives and any Key Performance Objectives; the Performance Levels for each objective; and such other terms and conditions applicable to the Award, as determined by the Committee, not inconsistent with the terms of the Plan.

(b)

At the end of each Plan Year, the finance department of the Company will determine the actual financial performance for the Plan Year. The Chief Executive Officer will review any individual Key Performance Objectives for other Participants to determine the achievement of those Performance Levels. Once the Performance Levels have been determined, the Chief Financial Officer or its designee will calculate the actual Award payment.

(c)

At the end of each Plan Year, the Committee shall certify the extent to which the Financial Performance Objectives and Key Performance Objectives have been achieved for such Plan Year based upon information provided by the Company and such other information related to the Participant as the Committee deems necessary. Subject to the right to decrease an Award as described in the next paragraph, the Participant’s Award shall be computed by the Committee based upon the achievement of the established Financial Performance Objectives and/or Key Performance Objectives, the Plan Rules, measurement criteria and the requirements of the Plan. In addition to any adjustments which the Committee may provide for in the Award or the Plan Rules, the Committee may, in determining whether Financial Performance Objectives and Key Performance Objectives have been met, adjust the Company’s or Affiliate’s financial results to exclude the effect of unusual charges or income items, changes in accounting rules or other events (such as acquisitions, divestitures and equity and similar restructurings, force reductions or similar corporate restructurings, asset impairments), ((including impairments of goodwill and other intangible assets)), which in the Committee’s judgment distort the comparison of results from one year to another (either on a segment or consolidated basis). The Committee may also make adjustments to eliminate the effects of changes in tax law, rules and regulations. With respect to Named Executive Officers, the Committee shall consider the provisions of Section 162(m) of the Code in making adjustments for awards intended to comply with Section 162(m) of the Code.

(d)

The Committee may, in its discretion, decrease the amount of a Participant’s Award for a Plan Year based upon such factors as it may determine, including the failure of the Company or Affiliate to meet certain performance goals or of a Participant to meet his or her Key Performance Objectives. The factors to be used in reducing an Award shall be established at the beginning of a Plan Year and may vary among Participants.

(e)

In the event that the Company’s or Affiliate’s performance is below the performance standards for the Plan Year and the Awards are reduced or cancelled, the Committee may in its discretion grant Awards (or increase the otherwise earned Awards) under the Plan to deserving Participants, except that any adjustments for Participants who are Named Executive Officers shall be made in a manner consistent with the next paragraph.

(f)

The Plan Rules and Awards under the Plan shall be administered in a manner to qualify payments under the Plan to Named Executive Officers for the performance-based exception under Code Section 162(m) and the regulations thereunder, except where the Committee or the Board of Directors determines such compliance is not desirable or required. The maximum Award that may be paid to an individual Participant for a Plan Year shall be $3 million.

(g)

No Participant will have any vested right to receive payment of any Award until such date as the Committee has made its determination with respect to the payment of such Participant’s Award; provided, that where the Committee determines that Board ratification of its determination is necessary or desirable, then no right to payment of any Award to such Participant is vested until the Board has so ratified the Committee’s determination. Except as provided herein or stated otherwise in a Participant’s employment agreement,

severance agreement or other arrangement, no Award will be paid to any Participant who is not an active employee of the Company or an Affiliate at the end of the Plan Year to which the Award relates; provided, that, at the discretion of the Committee or its designee, partial Awards may be authorized by the Committee to be paid to Participants (or their beneficiaries) who are terminated without cause (as determined by the Committee or its designee) or who retire, die or become permanently and totally disabled during the Plan Year. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any Participant or person acquires a right to receive payments from the Company or an Affiliate pursuant to an Award, such right shall entail no interest in any specific asset of the Company or Affiliate and shall be no greater than the right of any employee of the Company or Affiliate generally.

(h)

Payment of the Awards will be made as soon as practicable after their determination (but in no event later than March 15th of the year following the Plan Year for which the Award is earned), subject to a Participant’s right to defer payment pursuant to any applicable deferred compensation plans or arrangements of the Company. Payment will generally be made in a lump sum in cash, unless the Committee otherwise determines at the beginning of the Plan Year.

SECTION 6

General.

(a)

Notwithstanding the responsibilities of the Committee set forth herein, the Committee may delegate to the Chief Executive Officer or others all or any portion of its responsibility for administration of the Plan. Such delegation may include, without limitation, the authority to designate employees who can participate in the Plan, to establish Plan Rules, to interpret the Plan, to determine the extent to which performance criteria have been achieved, and to adjust any Awards that are payable. In the case of each such delegation, the administrative actions of the delegate shall be subject to the approval of the person within the Company to whom the delegate reports (or, in the case of a delegation to the Chief Executive Officer, to the approval of the Committee to the extent a Named Executive Officer is involved).

(b)

Upon the occurrence of a Change in Control, unless the Participant otherwise elects in writing, the Participant’s Award for the Plan Year shall be awarded at the greater of the Target Award level, or the actual level of achievement of the Financial Performance Objective(s), Key Performance Objectives or Performance Levels for such Plan Year to the date of the Change in Control (determined by projecting the achievement level to the date of the Change in Control as performance for the full Plan Year), without any reductions under this Plan, and shall be deemed to have been fully earned for the Plan Year, provided that the Participant shall only be entitled to payment of a pro rata portion of the Award based upon the number of days within the Plan Year that had elapsed as of the effective date of the Change in Control. Notwithstanding the foregoing sentence or anything stated herein elsewhere, nothing in this Plan is intended or should be construed to alter, limit or diverge from the terms of any employment agreement or severance agreement between a Participant and the Company or any Affiliate where such employment agreement or severance agreement provides for a greater payment on account of an Award in the event of a change in control (as defined in such employment or severance agreement), and the terms of any employment agreement or severance agreement between a Participant and the Company or any Affiliate that provide for a greater payment of an Award to a Participant in the event of a change in control (as defined in such employment or severance agreement) shall prevail and/or control over the terms in this Plan, and the Participant shall be due the benefit of the greater payment of an Award provided for pursuant to the terms of such employment agreement or severance agreement with the Company or an Affiliate, provided that nothing stated herein is intended to duplicate payment to a Participant on account of any Award. The Award amount shall be paid in cash within thirty (30) days after the effective date of the Change in Control.

(c)	Except as provided below, no Award shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by will or the laws of descent and distribution.

(d)

The Committee may provide for each Participant to designate a person or persons to receive, in the event of death, any Award to which the Participant would then be entitled under this Plan. Such designation will be made in the manner determined by the Committee and may be revoked by the Participant in writing. If the Committee does not provide for such designation, or if a Participant fails effectively to designate a beneficiary, then the estate of the Participant will be deemed to be the beneficiary.

(e)	The Company shall deduct from each Award the amount of any taxes required to be withheld by any governmental authority, or the Participant may make other arrangements that the Committee may accept at the Committee’s discretion to satisfy such tax obligations.

(f)

Subject to employment agreement or applicable law, no person shall have any claim to be named as a Participant, and there is no obligation for uniformity of treatment of employees, Participants or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each Participant.

(g)

Nothing in the Plan or in any Award shall confer (or be deemed to confer) upon any Participant any rights to continued employment, or interfere with or restrict in any way the rights of the Company or an Affiliate to suspend, alter or terminate the employment of any Participant at any time for any reason whatsoever, with or without cause.

(h)

Unless otherwise expressly provided in the Plan or binding employment or severance agreements, all designations, determinations, interpretations and other decisions, under or with respect to the Plan or any Award, shall be within the discretion of the Committee, may be made at any time, and shall be final, conclusive and binding upon all persons, including the Company and any Affiliate, any Participant and any holder or beneficiary of any Award. The Committee shall have full power and authority to determine whether, and to what extent, any Award shall be canceled or suspended if the Participant (a) without the consent of the Committee, while employed by the Company or an Affiliate, or after termination of such employment but while payment of an Award otherwise still remains due, becomes associated with, employed by, renders services to, or owns any interest in, other than any non-substantial interest, as determined by the Committee, any business that is in competition with the Company or such Affiliate, or (b) is terminated for cause as determined by the Committee.

(i)	No member of the Board or Committee, or designee, shall be personally liable for any action taken or determination made with respect to the Plan or any Award or payment granted or not granted hereunder.

(j)

All obligations of the Company under the Plan with respect to Plan Rules issued and Awards granted hereunder shall be binding upon any assignee or successor to the Company, whether such assignee or successor is the result of an acquisition of stock or assets of the Company, a merger, consolidation or otherwise.

(k)	The Plan shall be interpreted and construed under the laws of the State of Florida without giving effect to conflict of law principles.

SECTION 7

Term of the Plan.

(a)	The Plan shall be effective as of January 1, 2004 (the “Effective Date”).

(b) The Committee (subject to the ratification rights of the Board of Directors) or the Board may suspend or terminate the Plan at any time, or amend the Plan in any respect, provided that no such action will, without the consent of an affected Participant, adversely affect the Participant’s rights under an existing Award.

[Remainder of Page Intentionally Left Blank]

MPS GROUP, INC.

EXECUTIVE ANNUAL INCENTIVE PLAN

For purposes of the Plan, Financial Performance Criteria shall be one or more of the following Company, Affiliate, operating unit or division financial performance measures:

(i)	“EBITDA” which means earnings before interest, taxes, depreciation and/or amortization

(ii)	“EBIT” which means earnings before interest and taxes

(iii)

Earnings, consolidated pre-tax earnings, net earnings, earnings per share

(iv)	Operating income

(v)	Gross margin, gross margin growth

(vi)	Revenues, revenue growth, revenue per employee

(vii)

Market value added, economic value added

(viii)

Budget goals

(ix)	Cost goals

(x)	Return on equity, assets, net assets, capital employed, incremental equity or investment

(xi)	Total shareholder return

(xii)

Profit, economic profit, capitalized economic profit, after tax profit, pre-tax profit

(xiii)

Cash flow measures, cash flow return

(xiv)

Sales, sales volume

(xv)	Stock price

(xvi)

Market capitalization

(xvii)

Business expansion goals

(xviii)

Goals relating to acquisitions or divestitures.

Notwithstanding the foregoing: (a) the Committee may provide in an Award Notification that, for purposes of measuring attainment of the foregoing Financial Performance Criteria, results may exclude or discount amounts attributable to earnings of Affiliates acquired after the Effective Date and during the Plan Year; and (b) in the event any newly established branch operation commences business after the Effective Date, the financial performance of such branch operation shall not be included in the calculation of any earnings measure during the first nine months of such operations, unless such branch operation has positive earnings within the nine month period and then only for the period in which such is positive.

MPS GROUP, INC.

EXECUTIVE ANNUAL INCENTIVE PLAN

FORM OF AWARD NOTIFICATION

AWARD NOTIFICATION

EXECUTIVE ANNUAL INCENTIVE PLAN

[200X]

Name: [Name]

Position: [Title]

This document serves as notification of your base salary and performance goals effective January 1, 200X.

Base Annual Salary: $[ .00]

Annual Incentive Award Opportunity:

Threshold Award – XX%

Target Award – XX%

Maximum Award – XXX%

Performance Objectives; Weightings

Performance Level

Threshold Performance – XX%

Target Performance – XX%

Maximum Performance – XXX%

EX-31.1 4 dex311.htm SECTION 302 CERTIFICATION OF CEO Section 302 Certification of CEO

Exhibit 31.1

MPS GROUP, INC. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Timothy D. Payne, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MPS Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2009

/s/ Timothy D. Payne

Timothy D. Payne
President and Chief Executive Officer

EX-31.2 5 dex312.htm SECTION 302 CERTIFICATION OF CFO Section 302 Certification of CFO

Exhibit 31.2

MPS GROUP, INC. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Robert P. Crouch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MPS Group, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2009

/s/ Robert P. Crouch

Robert P. Crouch
Senior Vice President, Treasurer and
Chief Financial Officer

EX-32.1 6 dex321.htm SECTION 906 CERTIFICATION OF CEO Section 906 Certification of CEO

Exhibit 32.1

MPS GROUP, INC. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2009 of MPS Group, Inc. (the “Form 10-Q”), I, Timothy D. Payne, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Timothy D. Payne

Timothy D. Payne
President and Chief Executive Officer

August 7, 2009

EX-32.2 7 dex322.htm SECTION 906 CERTIFICATION OF CFO Section 906 Certification of CFO

Exhibit 32.2

MPS GROUP, INC. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2009 of MPS Group, Inc. (the “Form 10-Q”), I, Robert P. Crouch, Senior Vice President, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert P. Crouch

Robert P. Crouch
Senior Vice President, Treasurer and
Chief Financial Officer

August 7, 2009

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