The Caldwell Partners Issues Fiscal 2009 Year-End Financial Results

TORONTO, Nov. 11, 2009 (Canada NewsWire via COMTEX) --

    <<
    -  Company aggressively expands in 2009 as others in its industry
       contract, doubling the number of partners and significantly increasing
       the revenue-producing potential by entering the United States and
       adding partners in Canada
    -  Reports modest decline in operating revenue for the year, but expects
       growth in 2010 as it benefits from full year of contributions from new
       partners, most of whom joined over the course of the second half of
       the year
    -  Incurs loss for the year due to costs of expansion, effects of the
       recession, recognition of investment losses, and restructuring charges
    -  Focus on loss reduction in 2010 as economies recover and company
       continues to invest in growing its operations in North America
    >>

Retained executive search firm The Caldwell Partners International Inc. (TSX: CWL.A) today issued its financial results for the fiscal 2009 year ended August 31, 2009. All references to quarters or years are for the fiscal periods unless otherwise noted and all currency amounts are in Canadian dollars.

    <<
    Financial Highlights
    (in $000s)

    ------------------------------------------------------------ -------------
                    Three Months      Three Months    Year Ended  Year Ended
                   Ended August 31,  Ended August 31,  August 31,  August 31,
                        2009               2008           2009        2008
    ------------------------------------------------------------ -------------
    Operating
     revenue               $ 4,591           $ 4,531     $16,130     $17,212
    ------------------------------------------------------------ -------------
    Expenses                 6,379             5,670      20,864      18,743
    ------------------------------------------------------------ -------------
    Operating
     (loss) income          (1,728)           (1,138)     (4,734)     (1,531)
    ------------------------------------------------------------ -------------
    Investment income
     (loss) net             (1,567)             (542)     (2,647)        301
    ------------------------------------------------------------ -------------
    Net (loss) earnings    ($4,292)          ($1,188)    ($7,570)      ($747)
    ------------------------------------------------------------ -------------
    (Loss) earnings
     per share             ($0.252)          ($0.070)    ($0.461)    ($0.044)
    ------------------------------------------------------------ -------------
    >>

"During our 2009, as many companies in our industry contracted, The Caldwell Partners took advantage of our financial strength to pursue market opportunities to expand our business, establishing new sector practices and a significant presence in the U.S. market," said John N. Wallace, President and Chief Executive Officer. "In just one year, we doubled the number of partners, significantly increasing our future revenue-generating capacity.

"Reflecting the fact that economic conditions were worse than most had forecast, our operating revenues in Canada declined about 16 percent in 2009. However, incremental revenues generated during the year as we expanded our new operations in the United States combined with Canadian revenues to yield an overall decline of 6 percent. This performance does not fully reflect the benefits of our expansion as the majority of our new partners were only on board with our company for some months. The impact of their addition to our company will be greater throughout the course of our 2010," he continued.

"We have diligently worked to strategically transform our business platform during the year, the costs of which are reflected in the current year operating loss. Following the announcement of our plans in February 2009, we aggressively expanded into the United States, doubling the number of our offices and partners in North America. Nearly one-half of our current 27 partners are located in the United States. We added offices in Los Angeles, San Francisco, Dallas, New York, and Stamford, with additional partners in Chicago. We also added partners in Calgary and Toronto. Each new partner joined with a proven track record of success in the executive search industry. We elected to form an alliance with a firm in Montreal, rather than to continue operating our own office there, as a more effective means of servicing the Quebec market and we transitioned to a new compensation plan designed to better attract and retain top-producing professional staff," he said.

"We believe that we have built a solid platform for sustainable and profitable growth for The Caldwell Partners that will become increasingly evident as the North American and global economies recover. Our business is diversified across sectors and North America, making us less dependent on the performance of any particular industries or regions," Mr. Wallace said.

Financial Results

Operating revenue declined 6 percent in 2009 compared with 2008 and increased 1 percent in the 2009 fourth quarter compared with the prior-year period. The addition of partners in the United States generated operating revenue of $1.7 million in 2009 (10 percent of total operating revenues) and $0.7 million in the 2009 fourth quarter (16 percent of the total); there were no revenues generated in the United States in the comparable 2008 periods. The development of the company's operations in the United States did not offset the effects of the recession on the company's business in Canada. Operating revenue in Canada declined 16 percent in 2009 and 15 percent in the fourth quarter, compared with the respective 2008 levels. As the company focused on higher-value search assignments, the total number of searches in Canada declined in 2009 while the average fee revenues per engagement increased by 19%. Revenue for interim executive fulfillments also significantly increased in the 2009 periods compared with the 2008 levels. This was partially offset in the 2009 fourth quarter and for the year by a decline in print advertising revenue mainly as the result of a change in the mix of clients and a reduced number of assignments.

Direct costs associated with the generation of operating revenue increased about 24 percent in 2009 to $14.8 million and by 55 percent to $4.9 million in the fourth quarter, compared with the 2008 periods. The increases were mainly the result of the transition to a new partner compensation plan and the costs of adding new partners in the U.S. and Canada. The increased cost related to adding new partners and offices is consistent with the strategic growth plan that The Caldwell Partners has previously described for investors. The further execution of this plan is expected to continue to put pressure on the company's profitability through 2010.

Gross operating profit before general and administrative expenses for 2009 and the fourth quarter was affected by the decline in operating revenue levels and increased direct costs. Gross operating profit declined 75 percent for 2009 to $1.3 million from $5.2 million in 2008; for the fourth quarter, it decreased to a loss of $0.3 million from a profit of $1.4 million in the 2008 period. Average gross margins were 8 percent in 2009, down from 30 percent in 2008. For the fourth quarter, the negative gross margin in 2009 compared with 31 percent in the 2008 period.

The build-up of the offices and addition of partners in the United States in 2009 and addition of a new President and Chief Executive Officer for all of 2009 compared with six months in 2008 increased general and administrative expenses in 2009. However, this was more than offset by two main factors. Legal expenses in the 2009 fourth quarter were negligible after recognizing the benefit of insurance proceeds received during the quarter, compared with expenses of $0.8 million in the 2008 period (including a $0.5 million accrual for litigation settlement costs). Further, in the 2009 fourth quarter, the company reversed substantially all accruals made throughout the year for management bonuses that were ultimately not awarded. These expense reductions were partially offset by the costs related to closing the company's Montreal office in the 2009 fourth quarter at a cost of about $0.5 million.

In total, general and administrative expenses decreased in 2009 by about 10 percent to $6.0 million from $6.7 million in 2008. For the fourth quarter, general and administrative expenses decline 40 percent to $1.6 million, compared with $2.5 million in the 2008 period.

The operating loss for 2009 amounted to $4.7 million, compared with a loss of $1.5 million in 2008; the operating loss for the fourth quarter was $1.8 million and $1.1 million for the respective 2009 and 2008 quarters.

Operating revenue, gross operating profit/loss and operating income/loss are non-GAAP (generally accepted accounting principles) measures. The company believes, however, that they provide a useful understanding of the performance of its core human capital services operations as they exclude income or loss from investments and taxes.

For 2009, the company recorded an investment loss of $2.6 million, compared with a gain of $0.3 million in 2008. The loss is the result of realizing $1.9 million in capital losses that had been carried unrealized on the company's books for some time and of taking a provision of $929,000 for impairment in value of the preferred and common share portfolio.

Investment losses increased to $1.6 million in the 2009 fourth quarter from $0.5 million in the fourth quarter of 2008 as the result of realized capital losses of $0.7 million in the 2009 period incurred on the disposition of some of the funds managed by a third-party investment manager and the decision to take the impairment provision. These previously unrecognized losses were part of the other comprehensive loss reported in the third quarter of fiscal 2009. The company has reinvested the proceeds from the disposition in money-market instruments and high-interest savings accounts.

As at August 31, 2009, the market value of investments was $175,000 above book value. This unrealized gain has been reflected in both other comprehensive income and in the stated value of the investment portfolio.

The net loss for 2009 amounted to $7.6 million ($0.461 per share), compared with a net loss of $0.7 million ($0.044 per share) in 2008. For the fourth quarter of 2009, the net loss was $4.3 million ($0.252 per share), compared with a net loss in the 2008 period of $1.2 million ($0.070 per share).

As the result of the company's investment losses, operating loss, and use of cash to invest in the growth of its business in 2009 as at August 31, 2009, the Caldwell Partners had $5.3 million of marketable securities plus cash and cash equivalents of $4.7 million, for a total of $10.0 million, which was down from $18.9 million at the 2008 year-end.

The Company continues to take advantage of its financial strength and market opportunities to strategically expand its organization and business, and to build a solid platform for sustainable revenue and profitable future returns. These initiatives will require the investment of the Company's capital reserves over a period of time. Management believes that the Company has sufficient liquidity and cash resources to fund both its ongoing operations and its strategic growth initiatives.

Outlook

"Recent economic forecasts indicate that the recovery may have begun, but we remain cautious in our outlook. We enter 2010 with double the revenue-generating capability that we began the 2009 year with, as most of our new partners joined the company over the course of the second half of our year," said Mr. Wallace. "We are confident that our operating revenues will grow in 2010, reducing net operating losses.

"In fiscal 2010, we will continue to invest in expanding our business in several ways. While we do not plan to open additional offices, we expect to add partners to those that we have established to further strengthen our operations both geographically and in the key sectors that we have identified as offering the greatest opportunities for profitable growth. We will also continue to focus on a rigorous approach to marketing and business development to maintain and gain market share. As we invest in the growth of our business, consistent with the long-term strategic plan that we have adopted, there will be continued pressure on earnings for the coming year," Mr. Wallace said.

About The Caldwell Partners

Retained executive search firm The Caldwell Partners International Inc., founded in 1970, provides human-capital services to its clients through its offices and partners in Vancouver, San Francisco, Los Angeles, Dallas, Calgary, Chicago, Toronto, Stamford, and New York City. The Caldwell Partners focuses, in particular, on recruiting "C-class" executives (chief executive, chief financial, chief information officers, as well as other senior executives). The Caldwell Partners takes pride in delivering unmatched depth of service and expertise to its clients, the calibre and experience of its staff, and the successful completion of its engagements. The Caldwell Partners founded and continues to promote the prestigious national awards programs recognizing Canada's Outstanding CEO of the Year(TM) and Canada's Top 40 Under 40(TM), and advises and supports the Canada's CFO of the Year Award(TM) program. In 2009, the Canada's Outstanding CEO of the Year(TM) and Canada's Top 40 Under 40(TM) programs are marking their respective 19th and 14th anniversaries.

The Caldwell Partners' Class-A non-voting shares are listed on The Toronto Stock Exchange (TSX: CWL.A). Please visit our website at www.caldwell.ca for further information.

Forward-Looking Statements

Forward-looking statements in this document are based on current expectations that are subject to significant risks and uncertainties. Actual results might differ materially due to various factors such as the competitive nature of the executive search industry, the ability of the company to execute its growth strategies, the performance of the Canadian domestic and international economies, and the company's ability to retain key personnel. The Caldwell Partners assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements.

    <<
    THE CALDWELL PARTNERS INTERNATIONAL INC.

    CONSOLIDATED BALANCE SHEET

    ------------------------------------------------------------ -------------
                                                     As at          As at
                                                   August 31      August 31
                                                      2009           2008
    ------------------------------------------------------------ -------------
    Assets
    Current Assets
      Cash and cash equivalents                    $4,718,014     $8,007,963
      Marketable securities                         5,325,161     10,909,603
      Accounts receivable                           3,097,334      3,029,381
      Income taxes receivable                         320,578      1,081,032
      Prepaid expenses and other assets             1,020,029        266,222
    ------------------------------------------------------------ -------------
                                                   14,481,116     23,294,201

      Loans receivable, long-term                     418,937        333,978
      Property and equipment                        1,977,367      1,859,562
      Intangible assets                               925,925              0
      Goodwill                                        415,895              0
    ------------------------------------------------------------ -------------
                                                  $18,219,240    $25,487,741
    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------

    Liabilities
    Current Liabilities
      Accounts payable and accrued liabilities     $3,938,743     $4,637,343
      Deferred revenue                                326,209        256,409
      Current portion of incentive accrual            530,250        530,250
    ------------------------------------------------------------ -------------
                                                    4,795,202      5,424,002

    Long-term incentive accrual                     1,721,256      1,599,266

    Shareholders' equity
      Capital stock                                16,064,078     19,603,150
      Contributed surplus                           4,098,998        488,693
      Deficit                                      (8,635,678)    (1,066,075)
      Accumulated other comprehensive
       income/(loss)                                  175,384       (561,295)
    ------------------------------------------------------------ -------------
                                                   11,702,782     18,464,473
    ------------------------------------------------------------ -------------

                                                  $18,219,240    $25,487,741
    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------

    THE CALDWELL PARTNERS INTERNATIONAL INC.

    CONSOLIDATED STATEMENT OF LOSS

    ------------------------------------------------------------ -------------
                           Three months ended         Twelve months ended
                                August 31                   August 31
                           2009          2008          2009          2008
    ------------------------------------------------------------ -------------

    Operating revenue   $4,590,922    $4,531,484   $16,130,469   $17,212,296

    Expenses
      Employee
       compensation,
       general and
       administration   $5,720,675     5,579,841    19,851,426    18,383,466
      Other expenses       544,361             0       544,361             0
      Amortization         114,037        89,324       388,374       352,378
      Foreign exchage
       loss                    266           741        79,843         7,066
    ------------------------------------------------------------ -------------
                         6,379,339     5,669,906    20,864,004    18,742,910
    ------------------------------------------------------------ -------------
    Loss before the
     following          (1,788,417)   (1,138,422)   (4,733,535)   (1,530,614)

    Investment (loss)
     income, net        (1,567,100)     (542,100)   (2,647,068)      300,738
    ------------------------------------------------------------ -------------
    Net loss before
     tax                (3,355,517)   (1,680,522)   (7,380,603)   (1,229,876)

    Provision for
     (recovery of)
     income taxes
      Current              936,260      (165,166)      189,000      (156,000)
      Future                     0      (327,000)            0      (327,000)
    ------------------------------------------------------------ -------------
                           936,260      (492,166)      189,000      (483,000)
    ------------------------------------------------------------ -------------

    Net loss for the
     period            ($4,291,777)  ($1,188,356)  ($7,569,603)    ($746,876)
    ------------------------------------------------------------ -------------

    Loss per share         ($0.252)      ($0.070)      ($0.461)      ($0.044)

    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------

    CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE LOSS

    ------------------------------------------------------------ -------------
                           Three months ended         Twelve months ended
                                August 31                   August 31
                           2009          2008          2009          2008
    ------------------------------------------------------------ -------------
    Net loss for the
     period            ($4,291,777)  ($1,188,356)  ($7,569,603)    ($746,876)

    Unrealized gain/
     (loss) on
     available-for-sale
     marketable
     securities            175,384       (95,381)      175,384    (1,064,015)
    Reclassification
     of gains and
     losses included
     in net loss         1,806,190             0       561,295       160,857
    ------------------------------------------------------------ -------------
    Change in
     unrealized gain/
     (loss) on
     marketable
     securities          1,981,574       (95,381)      736,679      (903,158)
    ------------------------------------------------------------ -------------
    Comprehensive
     loss              ($2,310,203)  ($1,283,737)  ($6,832,924)  ($1,650,034)
    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------

    THE CALDWELL PARTNERS INTERNATIONAL INC.

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
    ACCUMULATED OTHER COMPREHENSIVE INCOME

    ------------------------------------------------------------ -------------
                           Three months ended         Twelve months ended
                                August 31                   August 31
                           2009          2008          2009          2008
    ------------------------------------------------------------ -------------

    Shareholders'
     equity -
     beginning
     of period         $13,992,430   $20,634,501   $18,464,473   $21,832,879

    Net loss for the
     period             (4,291,777)   (1,188,356)   (7,569,603)     (746,876)
    Stock
     compensation           20,555             0        78,628             0
    Repurchase and
     cancellation of
     Class A shares              0      (558,020)       (7,395)     (708,620)
    Dividends on
     Class A and
     Class B shares              0      (328,271)            0    (1,351,615)
    Adoption of new
     handbook standard
     (net of tax)                0             0             0       341,863
    Change in
     unrealized gains
     and losses on
     marketable
     securities
     available for
     sale                1,981,574       (95,381)      736,679      (903,158)
    ------------------------------------------------------------ -------------

    Shareholders'
     equity - end
     of period         $11,702,782   $18,464,473   $11,702,782   $18,464,473
    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------

    Accumulated other
     comprehensive
     income -
     beginning of
     period            ($1,806,189)    ($465,914)    ($561,295)           $0

    Adoption of new
     handbook standard
     (net of tax)                0             0             0       341,863

    Change in
     unrealized gains
     and losses on
     available-for-sale
     marketable
     securities          1,981,574       (95,381)      736,679      (903,158)
    ------------------------------------------------------------ -------------

    Accumulated other
     comprehensive
     income - end of
     period               $175,385     ($561,295)     $175,385     ($561,295)
    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------

    THE CALDWELL PARTNERS INTERNATIONAL INC.

    CONSOLIDATED STATEMENT OF CASH FLOWS

    ------------------------------------------------------------ -------------
                           Three months ended         Twelve months ended
                                August 31                   August 31
                           2009          2008          2009          2008
    ------------------------------------------------------------ -------------
    Operating
     Activities
      Net loss for
       the period      ($4,291,777)  ($1,188,356)  ($7,569,603)    ($746,876)
      Items not
       affecting cash
        Amortization       114,037        89,324       388,374       352,378
        Loss on sale
         of marketable
         securities        681,039             0     1,901,515       160,857
        Other realized
         losses on
         investments             0       638,992             0             0
        Provision for
         writedowns        929,459             0       929,459             0
        Future income
         taxes                   0      (433,874)            0      (327,000)
        Stock
         compensation
         expense            20,512             0        78,628             0
        Non-cash
         incentive
         compensation      125,277       238,626       121,990       792,368
    ------------------------------------------------------------ -------------
                        (2,421,454)     (655,288)   (4,149,637)      231,727

    Net changes in
     working capital
     balances:
        (Increase)
         decrease in
         accounts
         receivable       (843,547)     (146,535)      (67,953)      857,141
        Decrease
         (increase) in
         income taxes
         receivable        867,938      (169,984)      760,454      (401,623)
        Increase in
         prepaid
         expenses
         and other
         assets           (777,511)        4,528      (753,807)      (11,677)
        (Decrease)
         increase in
         accounts payable
         and accrued
         liabilities       884,865     1,344,779      (698,599)    1,675,856
        Increase
         (decrease)
         in deferred
         reveue             56,908      (153,595)       69,800      (141,445)
    ------------------------------------------------------------ -------------
                        (2,232,801)      223,905    (4,839,742)    2,209,979
    ------------------------------------------------------------ -------------
    Investment
     Activities
      Proceeds on sale
       of marketable
       securities        3,490,148             0     6,281,227     2,102,906
      Purchase of
       marketable
       securities                0             0    (2,791,079)            0
      Increase in loans
       receivable, net     804,622         3,768       (84,959)      (63,012)
      Acquisition of
       business         (1,384,086)            0    (1,384,086)            0
      Additions to
       property and
       equipment          (147,634)      (33,336)     (547,931)      (69,460)
      Disposals of
       property and
       equipment            84,016        48,493        84,016        48,493
    ------------------------------------------------------------ -------------
                         2,847,065        18,925     1,557,187     2,018,927
    ------------------------------------------------------------ -------------

    Financing
     Activities
      Dividends paid             0      (328,271)            0    (1,351,615)
      Repurchase of
       Class A Shares            0      (558,020)       (7,395)     (708,620)
    ------------------------------------------------------------ -------------
                                 0      (886,291)       (7,395)   (2,060,235)
    ------------------------------------------------------------ -------------

    Net increase
     (decrease) in
     cash and cash
     equivalents
     during the period     614,265      (643,461)   (3,289,949)    2,168,672
    Cash and cash
     equivalents,
     beginning of
     period              4,103,749     8,651,424     8,007,963     5,839,292
    ------------------------------------------------------------ -------------
    Cash and cash
     equivalents, end
     of period          $4,718,014    $8,007,963    $4,718,014    $8,007,963
    ------------------------------------------------------------ -------------
    ------------------------------------------------------------ -------------
    >>