Gevity back to basics; layoffs continue

By BRIAN NEILL

bneill@bradenton.com

LAKEWOOD RANCH --

Just a year after entering a new line of business through acquisition of a North Carolina company, local human resources firm Gevity says it is selling the firm to offset plummeting earnings.

Gevity also has laid off roughly 50 employees and closed branches in Baltimore, Nashville, Colorado Springs and Port Charlotte, company officials announced Tuesday during a quarterly earnings conference call.

The Lakewood Ranch-based company purchased Charlotte, N.C.-based HRAmerica last February for $10 million. HRAmerica and its infrastructure allowed Gevity to take on clients who needed human resources services for their employees, but didn't want to enroll their workers in Gevity's insurance pool.

That move deviated from Gevity's traditional role as a professional employer organization - a company that handles payroll, insurance and other human resources issues for client employees.

At the time, some analysts criticized the move, saying that Gevity should instead focus on the traditional PEO functions.

Comments made Tuesday by Gevity's Chairman and Chief Executive Officer Designate Michael Lavington echoed that assessment.

"The continued aggressive pursuit of market share in this highly competitive market would have been disruptive and cash dilutive in 2008," Lavington said. "It is more important at this moment and time for Gevity and its shareholders to regain a leadership position in the PEO business than to develop an alternative revenue stream. In 2008, we don't need distractions."

Gevity's net income for the three months ending Dec. 31 was $301,000, compared with $10.6 million for the same period in 2006, according to its earnings report.

The company's earnings were impacted by an $8.5 million charge on its balance sheets of intangible factors related to purchasing HRAmerica.

Gevity (NASDAQ: GVHR) also incurred a $1.6 million charge related to severance expenses for former CEO Erik Vonk, who resigned in October.

Though Gevity has recently started to see an increase in new client employee acquisitions, the company saw its total client employee base fall 2.1 percent during the fourth quarter to 132,600, according to its earnings report.

During 2007, Gevity's core PEO portfolio dropped from 127,800 client employees to 115,600 - a 10 percent decrease, said Chief Financial Officer Gary Welch.

Lavington said the closing of branches and laying off of 50 employees would save the company $5 million to $6 million annually and help strengthen the company.

Gevity has struggled with sales staff turnover and declining fees for the services it provides. The company laid off roughly 75 workers last year and its shares have fluctuated in the past year from a high of $22.51 to a low of $4.06.

Shares of Gevity were up $1.41 on Tuesday to close at $8.00 in above-average volume on the news of the company's change in strategy.

Gevity deviated from its traditional role and found the venture 'disruptive and cash dilutive'