COMSYS IT Partners, Inc. Reports 2008 Second Quarter Results

HOUSTON--(Business Wire)--
COMSYS IT Partners, Inc. (NASDAQ:CITP), a leading provider of
information technology staffing and consulting services, today
announced results for its second quarter ended June 29, 2008.

Revenue for the second quarter of 2008 was $184.1 million, down
from $186.6 million for the second quarter of 2007 but up sequentially
from $183.4 million in the first quarter of this year. Excluding the
revenues from COMSYS' December 2007 acquisitions, revenue declined by
3.6% versus the prior-year period. Net income in the second quarter
was $6.2 million, down from $9.6 million in the second quarter of last
year, and diluted earnings per share of $0.30 were down from $0.47 per
diluted share over the same period. The second quarter of 2008
included the previously announced non-cash compensation charge
associated with the Praeos acquisition and a higher effective tax rate
than in the prior-year period. These items reduced earnings per share
in the second quarter of 2008 by $0.09 when compared to the second
quarter of 2007. Net income and diluted earnings per share in the
second quarter were both up sequentially from $5.1 million and $0.25,
respectively, in the first quarter this year.

"COMSYS' second quarter was good overall, and we're especially
pleased that our revenue and diluted earnings per share for the
quarter exceeded our guidance in an increasingly challenging
environment," said Larry L. Enterline, COMSYS Chief Executive Officer.
"After further billable headcount declines through the first six weeks
of the second quarter, headcount stabilized and our operating results
in the latter half of the quarter were better than anticipated. Our
expectations for the balance of the year are conservative in light of
the broader trends we see in the economic data, but we continue to
believe that we are positioned well to take advantage of whatever
opportunities our markets will offer.

"During the quarter, we rolled out our new TAPFIN Process
Solutions brand for our business process outsourcing offerings and
early results from that effort are encouraging," Enterline continued.
"Also, in late June, we completed two small acquisitions. The first
was a small, but rapidly growing, globalization and localization
practice that we have combined with our existing business in that
sector. The second was the acquisition of three vendor management
systems contracts, which we have added into TAPFIN's VMS business.
Neither of these acquisitions had any impact on our second quarter
operating results, but we do expect them both to contribute to our
earnings over the balance of this year."

"As always, I would like to thank our operations leaders and their
staffs for their continuing strong efforts," Enterline continued.
"We're in a tough environment and their continued focus and dedication
will ensure that we continue to meet all of our customers' needs."

Amy Bobbitt, Senior Vice President and Chief Accounting Officer,
commented, "We entered the second quarter of 2008 with 4,758
consultants on assignment and ended the second quarter with 4,646
consultants. Our current headcount is approximately the same as
headcount at the end of the quarter. Excluding the increase in
reimbursable expenses in the second quarter of 2008 and the impact of
higher payroll taxes in the first quarter of 2008, gross margin
declined sequentially by 0.4% in the second quarter. Despite the
slightly lower margins, we continue to generate strong cash flow, and
our average debt balance in the second quarter of 2008 was $82.6
million, or approximately $8.4 million lower than in the first
quarter.

"The Company expects to continue to reduce its average daily debt
balances in the third quarter of 2008 and for the remainder of this
year, although at a slower rate than 2007 in line with our
expectations for slower revenue growth," Bobbitt continued. "During
the second quarter of 2008, the Company generated EBITDA of $10.5
million compared with $9.9 million of EBITDA for the first quarter of
2008."

Selected operating data and reconciliations of non-GAAP financial
measures to GAAP results for the second quarter ended June 29, 2008,
are included below in a section before the financial tables.

Third Quarter 2008 Financial Guidance

For the third quarter of 2008, the Company expects to report
revenue in a range of $178 million to $184 million and net income in
the range of $3.5 million to $4.5 million, or approximately $0.17 to
$0.22 per diluted share, on one less billing day than the second
quarter of 2008. The net income estimates for the third quarter
include the $0.8 million (pre-tax) non-cash compensation charge for
the Praeos bonus plan that was previously announced. They are also
based on an effective tax rate of 42%, which is up significantly from
17.6% in the second quarter of 2008. The sequential increase in the
effective tax rate results in a $0.06 to $0.08 decrease in diluted
earnings per share in the third quarter of 2008 compared with the
second quarter. COMSYS has previously discussed the prospects of the
upcoming change in its tax rate, and the third quarter tax rate
assumes that the Company reaches a conclusion in the third quarter
that it is more likely than not that it will be able to receive the
benefit of its deferred tax assets and releases its valuation
allowance during the quarter. The third quarter guidance does not
include any tax benefit that the Company would record if it releases
the valuation allowance. Management does not expect to pay any
substantial amount of cash taxes in 2008.

Conference Call Information

COMSYS will host a conference call today (July 31) at 10:00 a.m.
Eastern time to discuss the quarterly financial results. The
conference call-in number is (913) 981-5539 and the confirmation
number is 4464227. The call will also be web cast live at
www.comsys.com and www.earnings.com and replayed for 30 days at
www.comsys.com. A seven-day telephonic replay of this conference call
will be available by dialing (719) 457-0820. Callers should use the
pass code 4464227 to gain access to the replay, which will be
available through the end of the day on August 7, 2008.

About COMSYS IT Partners

COMSYS IT Partners, Inc. (NASDAQ: CITP) is a leading IT services
company with 53 offices across the U.S. and offices in Puerto Rico,
Canada and the U.K. COMSYS service offerings include contingent and
direct hire placement of IT professionals as well as a wide range of
technical services and solutions addressing requirements across the
enterprise. TAPFIN Process Solutions delivers critical management
solutions across the resource spectrum from contingent workers to
outsourced services.

Forward-looking Statements

Certain information contained in this press release may be deemed
forward-looking statements regarding events and financial trends that
could affect the Company's plans, objectives, future operating
results, financial condition, performance and business. These
statements may be identified by words such as "estimate," "forecast,"
"plan," "intend," "believe," "should," "expect," "anticipate," or
variations or negatives thereof, or by similar or comparable words or
phrases. These forward-looking statements are largely based on the
Company's expectations and beliefs concerning future events, which
reflect estimates and assumptions made by management. These estimates
and assumptions reflect the Company's best judgment based on currently
known market conditions and other factors relating to its operations
and business environment, all of which are difficult to predict and
many of which are beyond its control, including:

-- economic declines that affect the Company's business,
including its profitability, liquidity or the ability to
comply with applicable loan covenants;

-- the Company's success in attracting, training, retaining and
motivating billable consultants and key officers and
employees;

-- the Company's ability to shift a larger percentage of its
business mix into IT solutions, project management and
business process outsourcing and, if successful, the Company's
ability to manage those types of business profitably;

-- changes in levels of unemployment and other economic
conditions in the United States, or in particular regions or
industries;

-- weakness or reductions in corporate information technology
spending levels;

-- the Company's ability to maintain existing client
relationships and attract new clients in the context of
changing economic or competitive conditions;

-- the financial stability of the Company's customers and other
business partners and their ability to pay their outstanding
obligations;

-- the impact of competitive pressures on the Company's ability
to maintain or improve its operating margins, including
pricing pressures as well as any change in the demand for its
services;

-- the entry of new competitors into the U.S. staffing services
market due to the limited barriers to entry or the expansion
of existing competitors in that market;

-- increases in employment-related costs such as healthcare and
unemployment taxes;

-- the possibility of the Company's incurring liability for the
activities of its billable consultants or for events impacting
its billable consultants on clients' premises;

-- the risk that the Company may be subject to claims for
indemnification under its customer contracts;

-- the risk in an uncertain economic environment of increased
incidences of employment disputes, employment litigation and
workers' compensation claims;

-- the risk that cost cutting or restructuring activities could
cause an adverse impact on certain of the Company's
operations;

-- adverse changes in credit and capital markets conditions that
may affect the Company's ability to obtain financing or
refinancing on favorable terms or that may warrant changes to
existing credit terms;

-- adverse changes to management's periodic estimates of future
cash flows that may affect the Company's assessment of its
ability to fully recover its goodwill; and

-- whether governments will amend existing regulations or impose
additional regulations or licensing requirements in such a
manner as to increase the Company's costs of doing business.

Although the Company believes its estimates and assumptions to be
reasonable, they are inherently uncertain and involve a number of
risks and uncertainties that are beyond its control. In addition,
management's assumptions about future events may prove to be
inaccurate. Management cautions all readers that the forward-looking
statements contained in this report are not guarantees of future
performance, and the Company cannot assure any reader that those
statements will be realized or that the forward-looking events and
circumstances will occur. Actual results may differ materially from
those anticipated or implied in the forward-looking statements due to
the factors listed in this section as well as the "Risk Factors"
section included in the Company's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission. All forward-looking
statements speak only as of the date of this report. The Company does
not intend to publicly update or revise any forward-looking statements
as a result of new information, future events or otherwise, except as
required by law. These cautionary statements qualify all
forward-looking statements attributable to us or persons acting on the
Company's behalf.

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*T
COMSYS IT PARTNERS, INC.
OPERATING DATA, SUPPLEMENTAL CASH FLOW INFORMATION AND NON-GAAP
MEASUREMENTS
(IN THOUSANDS, EXCEPT OPERATING DATA)

Three Months Ended
---------------------------
Operating Data: June 29, March 30, July 1,
2008 2008 2007
-------- --------- --------
Ending consultant headcount 4,646 4,758 4,996
Billing days 64 64 64
Revenue per billing day (in thousands) $ 2,876 $2,865 $ 2,916
Average bill rate $ 74.02 $73.96 $ 71.84
Gross margin 24.4% 24.4% 25.1%
Effective tax rate 17.6% 21.7% 4.6%
DSO 45 45 50

Three Months Ended
---------------------------
Supplemental Cash Flow Information: June 29, March 30, July 1,
2008 2008 2007
-------- --------- --------
Net cash provided by operating activities $ 2,629 $8,959 $10,514
Capital expenditures $ 2,143 $1,064 $ 261

Three Months Ended
---------------------------
Non-GAAP Financial Measures: June 29, March 30, July 1,
2008 2008 2007
-------- --------- --------
EBITDA:
GAAP net income $ 6,212 $5,104 $ 9,572
Depreciation and amortization 1,898 1,820 1,589
Interest expense, net 1,279 1,603 2,296
Other income, net (172) (53) (223)
Income tax expense 1,324 1,418 460
-------- --------- --------
EBITDA $10,541 $9,892 $13,694
======== ========= ========
EBITDA as a % of GAAP revenue 5.7% 5.4% 7.3%
*T

A non-GAAP financial measure is a numerical measure of a company's
performance, financial position, or cash flows that either excludes or
includes amounts that are not normally excluded or included in the
most directly comparable measure calculated and presented in
accordance with generally accepted accounting principles ("GAAP"). We
believe EBITDA to be relevant and useful information to our investors
in assessing our financial operating results as these measures are
used by our management in evaluating our financial performance,
liquidity, our ability to service debt and fund capital expenditures.
Additionally, our Debt to EBITDA ratio affects the interest rates we
pay on our credit agreements. However, these measures should be
considered in addition to, and not as a substitute for, or superior
to, measures of financial performance prepared in accordance with
generally accepted accounting principles, and may not be comparable to
similarly titled measures reported by other companies. The non-GAAP
measures included in this press release have been reconciled to the
nearest GAAP measures as required under SEC rules regarding the use of
non-GAAP financial measures.

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*T
COMSYS IT PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended Six Months Ended
----------------------------- -------------------
June 29, March 30, July 1, June 29, July 1,
2008 2008 2007 2008 2007
----------------------------- -------------------
Revenues from
services $184,064 $183,383 $186,602 $367,447 $372,810
Cost of services 139,232 138,727 139,768 277,959 280,975
----------------------------- -------------------
Gross profit 44,832 44,656 46,834 89,488 91,835
----------------------------- -------------------
Operating costs and
expenses:
Selling, general and
administrative 34,291 34,764 33,140 69,055 68,561
Depreciation and
amortization 1,898 1,820 1,589 3,718 3,047
----------------------------- -------------------
36,189 36,584 34,729 72,773 71,608
----------------------------- -------------------
Operating income 8,643 8,072 12,105 16,715 20,227
Interest expense, net 1,279 1,603 2,296 2,882 4,716
Other income, net (172) (53) (223) (225) (451)
----------------------------- -------------------
Income before income
taxes 7,536 6,522 10,032 14,058 15,962
Income tax expense 1,324 1,418 460 2,742 908
----------------------------- -------------------
Net income $ 6,212 $ 5,104 $ 9,572 $ 11,316 $ 15,054
============================= ===================

Earnings per common
share:
Basic $ 0.31 $ 0.25 $ 0.48 $ 0.56 $ 0.76
Diluted $ 0.30 $ 0.25 $ 0.47 $ 0.55 $ 0.75

Weighted average shares
outstanding:
Basic 19,592 19,579 19,243 19,585 19,044
Diluted 20,636 20,617 20,195 20,628 20,087
*T

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*T
COMSYS IT PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)

June 29, December 30,
2008 2007
---------------------
Assets
Current assets:
Cash $ 1,683 $ 1,594
Accounts receivable, net of allowance of
$3,117 and $3,389, respectively 218,576 189,317
Prepaid expenses and other 4,668 3,153
Restricted cash 3,411 3,365
---------------------
Total current assets 228,338 197,429
---------------------
Fixed assets, net 16,984 13,094
Goodwill 175,460 174,160
Other intangible assets, net 12,379 10,002
Deferred financing costs, net 1,610 2,044
Restricted cash 2,822 4,218
Other assets 1,414 1,522
---------------------
Total assets $439,007 $ 402,469
=====================

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $167,105 $ 145,622
Payroll and related taxes 29,837 29,574
Current maturities of long-term debt 2,500 5,000
Interest payable 246 365
Other current liabilities 8,756 7,897
---------------------
Total current liabilities 208,444 188,458
---------------------
Long-term debt 67,478 66,903
Other noncurrent liabilities 5,081 2,476
---------------------
Total liabilities 281,003 257,837
---------------------

Commitments and contingencies

Stockholders' equity:
Preferred stock, no par value; 5,000,000 shares
authorized; none issued - -
Common stock, par value $.01; 95,000,000 shares
authorized and 20,386,879 shares outstanding;
95,000,000 shares authorized and 20,180,578
shares outstanding, respectively 203 201
Common stock warrants 1,734 1,734
Accumulated other comprehensive income 73 57
Additional paid-in capital 225,212 223,174
Accumulated deficit (69,218) (80,534)
---------------------
Total stockholders' equity 158,004 144,632
---------------------
Total liabilities and stockholders' equity $439,007 $ 402,469
=====================
*T

COMSYS IT Partners, Inc.
David L. Kerr, 713-386-1420
Senior Vice President - Corporate Development
dkerr@comsys.com
or
Amy Bobbitt, 480-777-6680
Senior Vice President & Chief
Accounting Officer
abobbitt@comsys.com

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