Hewitt Associates Inc., a human resources services provider, announced a quarterly loss Monday that it blamed on a noncash charge related to its human resources outsourcing businesses.
The Lincolnshire, Ill., company posted a net loss of $202 million, or $1.88 per share, for its fiscal third quarter, ended June 30, compared to a profit of $33 million, or 31 cents per share, a year earlier. Quarterly sales fell 2%, to $698 million.
The results included $249 million of charges for its human resources outsourcing unit. The charges reflected lower expectations for profitability as well as loss provisions for some existing contracts, the company said.
Hewitt's stock price rose 5.87%, to $21.82 a share, in midday trading Monday.
In June, Bryan J. Doyle, 45, the president of human resources outsourcing, resigned from that post and the board of directors to pursue other opportunities, the company said at the time.
During the earnings call, Hewitt said that it had taken on too many clients and projects in too short a time, leading to trouble implementing some contracts and to a review of the human resources outsourcing business.
"It is clear with the benefit of 20/20 hindsight that we significantly underestimated the complexity and therefore the cost of taking on a large number of contracts," chief executive officer Dale Gifford said in the conference call. Hewitt has changed the way it evaluates and prices contracts and manages existing ones, he said.
Mr. Gifford, who announced in June that he planned to retire in September, is to be succeeded by Russell Fradin, the chief executive officer at Bisys Group whose hiring was announced Thursday.
Hewitt said it expects full-year revenue to be flat or down slightly as sales decline in outsourcing, its biggest segment. It estimated a core net loss of $100 million to $105 million for the full fiscal year.
Analysts said Hewitt has grown quickly in the past five years to become the largest human resources outsourcing company. In October 2004, it made its biggest splash - the purchase of Exult, an Irvine, Calif., provider of human resources business process outsourcing.
Hewitt controls 35% of the outsourcing market, according to the latest data available from Technology Partners International Inc. Its closest rival is Fidelity Investments, with a 14% market share, down from 30% at the end of the second quarter of 2005, TPI said.
The Exult deal was part of a consolidation in the human resources outsourcing industry. Gartner Inc., a Stamford, Conn., research and advisory firm, has said that employee benefit outsourcing is a $29.8 billion industry in the United States and predicted it would grow to $34.8 billion by the end of this year.
