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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from              to             

COMMISSION FILE NUMBER: 0-24484

MPS GROUP, INC.

(Exact name of registrant as specified in its charter)

(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 is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 29, 2004:

102,548,157 shares of $0.01 par value Common Stock

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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 Part I, Item 2 of this report under the heading ‘Factors Which May Impact Future Results and Financial Condition.’ In some cases, you can identify forward-looking statements by terminology such as ‘will,’ ‘may,’ ‘should,’ ‘could,’ ‘expects,’ ‘plans,’ ‘indicates,’ ‘projects,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘appears,’ ‘predicts,’ ‘potential,’ ‘continues,’ ‘can,’ ‘hopes,’ ‘perhaps,’ ‘would,’ or ‘become’ or the negative of these terms or other comparable terminology. In addition, except for historical facts, all information provided in Part I, Item 3, under ‘Quantitative and Qualitative Disclosures About Market Risk’ 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 the Company 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 the Company’s management and on information currently available to management. Forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly 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.

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MPS Group, Inc. and Subsidiaries

Index

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Part I. Financial Information

Item 1. Financial Statements

MPS Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

See accompanying notes to unaudited condensed consolidated financial statements.

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MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

See accompanying notes to unaudited condensed consolidated financial statements.

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MPS Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

See accompanying notes to unaudited condensed consolidated financial statements.

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MPS Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

(dollar amounts in thousands except per share amounts)

1. Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by MPS Group, Inc. (‘MPS’ or the ‘Company’) 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 generally accepted accounting principles have been condensed or omitted. The financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Form 10-K for the year ended December 31, 2003.

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.

Stock-Based Compensation

The Company accounts for its employee and director stock option plans in accordance with Accounting Principles Board Opinion No. 25, ‘Accounting for Stock Issued to Employees,’ and related interpretations. The Company measures compensation expense for employee and director stock options as the aggregate difference between the fair value of its common stock and exercise prices of the options on the date that both the number of shares the grantee is entitled to receive and the exercise prices are known. Compensation expense associated with restricted stock grants is equal to the fair value of the shares on the date of grant and is recorded pro rata over the required holding period. If the Company had elected to recognize compensation cost for all outstanding options granted by the Company by applying the fair value recognition provisions of Statement of Financial Accounting Standards (‘SFAS’) No. 148, ‘Accounting for Stock-Based Compensation—Transition and Disclosure,’ to stock-based employee compensation, net income and earnings per share would have been reduced to the pro forma amounts indicated below.

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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:

Options to purchase shares of common stock were not included in the computation of diluted earnings per share if the exercise prices of these options were greater than the average market price of the common shares. For the three months ended September 30, 2004 and 2003, options to purchase 924,000 and 1.2 million shares of common stock, respectively, were not included in the computation of diluted earnings per share. For the nine months ended September 30, 2004 and 2003, options to purchase 743,000 and 2.0 million shares of common stock, respectively, were not included in the computation of diluted earnings per share.

3. Commitments and Contingencies

Litigation

The Company is a party to a number of lawsuits and claims arising out of the ordinary conduct of its 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 the Company, its financial position, its results of operations, or its cash flows.

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4. Segment Reporting

The Company discloses segment information in accordance with SFAS No. 131, ‘Disclosure About Segments of an Enterprise and Related Information,’ which requires companies to report selected segment information on a quarterly basis and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports material revenues.

The Company has three reportable segments: professional services, IT services, and IT solutions. The Company’s reportable segments are strategic divisions that offer different services and are managed separately, as each division requires different resources and marketing strategies. The professional services division provides expertise in a wide variety of disciplines including accounting and finance, law, engineering, and health care. The IT services division offers value-added solutions, such as IT project support and staffing, recruitment of full-time positions, project-based solutions, supplier management solutions, and on-site recruiting support. The IT solutions division provides IT strategy consulting, design and branding, application development, and integration. The professional services division’s results for 2004, include the results from the acquisitions of three legal staffing businesses acquired in February of 2003, August of 2003, and August of 2004, two health care staffing businesses acquired in February and March of 2004, and two accounting staffing business acquired in February and July of 2004. The Company evaluates segment performance based on revenues, gross profit, and income before provision for income taxes. The Company does not allocate income taxes, interest, or unusual items to the segments.

The following table summarizes segment and geographic information:

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5. Comprehensive Income

The Company discloses 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 nine months ended September 30, 2004 and 2003, is as follows:

6. Excess Real Estate Obligations

In 2001 and 2002, the Company experienced a material decrease in demand for its domestic operations. To reflect this decreased demand, the Company made attempts to realign its real estate capacity needs by vacating and reorganizing certain office space.

In 2002, management determined that the Company would not be able to utilize this vacated office space and, therefore, notified the respective lessors of its intentions. This determination eliminated the economic benefit associated with the vacated office space. As a result, the Company recorded a charge for contract termination costs, mainly due to costs that will continue to be incurred under the lease contract for its remaining term without economic benefit to the Company. While the Company looks to settle excess lease obligations, the current economic environment has made it difficult for the Company to either settle or find acceptable subleasing opportunities. The average remaining lease term for the lease obligations included herein is approximately 2.0 years.

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The charge for contract termination costs was recorded in accordance with SFAS No. 146, ‘Accounting for Costs Associated with Exit or Disposal Activities.’ The following table summarizes the activity of the charge for contract termination costs from origination through September 30, 2004 by reportable segment:

7. Discontinued Operations

In December 2003, the Company sold certain operating assets and transferred certain operating liabilities of its outplacement unit, Manchester. For the three months ended September 30, 2003, Manchester’s revenue and loss before taxes were $4.2 million and $1.8 million, respectively. For the nine months ended September 30, 2003, Manchester’s revenue and loss before taxes were $17.5 million and $2.8 million, respectively. The remaining net liabilities of Manchester as of September 30, 2004 were $490,000, primarily for contract termination costs associated with abandoned real estate. The remaining net liabilities of Manchester are included in the line item ‘Accounts payable and accrued expenses’ in the Company’s Condensed Consolidated Balance Sheets.

8. Business Combinations

In the nine months ended September 30, 2004, the Company acquired five businesses in its professional services division: two health care staffing businesses, Management Search and Sunbelt Staffing, acquired in February and March of 2004; two accounting staffing business, Lillian Kloock and Associates and Accounting Alternatives, acquired in February and July of 2004; and one legal staffing business, Legal Networks, acquired in August 2004. Purchase consideration for the five acquisitions totaled $17.8 million in cash at closing, and deferred cash payments of $1.8 million. These acquisitions were immaterial to the Company’s results of operations on an actual and pro forma basis for the three and nine months ended September 30, 2004.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2004 are as follows:

Subsequent to September 30, 2004, the Company acquired an accounting staffing business, Accounting Solutions, and a legal services business, Alderson. Purchase consideration for these two acquisitions totaled $24.6 million in cash at closing, and deferred cash payments of $4.4 million. Results from these two acquisitions will be included in the Company’s results of operations in the fourth quarter of 2004.

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

MPS (the ‘Company’) is a leading global provider of business services with over 160 offices throughout the United States, Canada, the United Kingdom, and continental Europe. MPS delivers a mix of consulting, solutions, and staffing services in disciplines such as IT services, finance and accounting, legal, engineering, IT solutions, health care, and human capital automation.

Non-GAAP Financial Measures

The following detailed analysis of operations contains certain financial information on a ‘constant currency’ basis. Such constant currency financial data is not a U.S. generally accepted accounting principles (‘GAAP’) financial measure. Constant currency removes from financial data the impact of changes in exchange rates between the U.S. dollar and the functional currencies of the Company’s foreign subsidiaries, by translating the current period financial data into U.S. dollars using the same foreign currency exchange rates that were used to translate the financial data for the previous period. The Company believes presenting certain results on a constant currency basis is useful to investors because it allows a more meaningful comparison of the performance of its foreign operations from period to period. Additionally, certain internal reporting and compensation targets are based on constant currency financial data for the Company’s various foreign subsidiaries. However, constant currency measures should not be considered in isolation or as an alternative to financial measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with GAAP.

In 2003 and through the third quarter of 2004, the Company acquired seven businesses for its professional services division (together, the ‘Acquisitions’): three legal staffing businesses acquired in February of 2003, August of 2003, and August of 2004; two health care staffing businesses acquired in February and March of 2004; and two accounting staffing businesses acquired in February and July of 2004. The following detailed analysis of operations presents the revenue generated by the Company’s professional services division in the United States excluding the effect of the Acquisitions. Such financial data that excludes the effect of businesses we acquire is not a GAAP financial measure. The Company believes presenting some results excluding the effects of businesses we acquire is helpful to investors because it permits a comparison of the performance of its core internal operations from period to period. Additionally, certain internal reporting and compensation targets are based on the performance of core internal operations. The effect of businesses we acquire are excluded for the first 12 months following the acquisition date. Subsequent to this, these businesses are considered to be integrated for reporting purposes. Again however, such measures should be considered only in conjunction with the correlative measures that include the results from acquisitions, as calculated and presented in accordance with GAAP.

Additionally, from time to time the Company may use EBITDA to measure results of operations. EBITDA is a non-GAAP financial measure that is defined as earnings before interest, taxes, depreciation and amortization. The Company believes EBITDA is a meaningful measure of operating performance as it gives management a consistent measurement tool for evaluating the operating activities of the business as a whole, as well as, the various operating units, before the effect of investing activities, interest and taxes. In addition, the Company believes EBITDA provides useful information to investors, analysts, lenders, and other interested parties because it excludes transactions that management considers unrelated to core business operations, thereby helping interested parties to more meaningfully evaluate, trend and analyze the operating performance of the business. The Company also uses EBITDA for certain internal reporting purposes, and certain compensation targets may be based on EBITDA. Finally, certain covenants in the Company’s debt facility are based on EBITDA performance measures. EBITDA, as with all non-GAAP financial measures, should be considered only in conjunction with the comparable measures, as calculated and presented in accordance with GAAP, including net income.

Discontinued Operations

In December 2003, the Company sold certain operating assets and transferred certain operating liabilities of its outplacement unit, Manchester. As a result of the sale of Manchester and in accordance with GAAP, the Company’s Consolidated Financial Statements and Management’s Discussion and Analysis of Financial

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Condition and Results of Operations report the results of operations of Manchester as discontinued operations for all periods presented. For the three months ended September 30, 2003, Manchester’s revenue and loss before taxes were $4.2 million and $1.8 million, respectively. For the nine months ended September 30, 2003, Manchester’s revenue and loss before taxes were $17.5 million and $2.8 million, respectively.

The following detailed analysis of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes thereto included in Part 1, Item 1 of this Quarterly Report and the 2003 Consolidated Financial Statements and related notes included in the Company’s Form 10-K for the year ended December 31, 2003.

Three Months Ended September 30, 2004 Compared To Three Months Ended September 30, 2003

Revenue. Revenue increased $87.6 million, or 31.9%, to $362.3 million in the three months ended September 30, 2004, from $274.7 million in the year earlier period. The increase was due to an increase in revenue in the Company’s professional services division of 36.9%, an increase in the Company’s IT services division of 29.0%, and an increase in the Company’s IT solutions division of 14.8%.

Approximately 40% of the Company’s revenue for the three months ended September 30, 2004, was generated internationally, primarily in the United Kingdom. The Company’s revenue is therefore subject to changes in foreign currency exchange rates. The weakening of the U.S. dollar since the second quarter of 2003 had an impact on revenue, as changes in foreign currency exchange rates contributed $15.9 million in revenue for the three months ended September 30, 2004. Acquisitions contributed $14.8 million in revenue for the three months ended September 30, 2004, and $2.4 million in the year earlier period.

Gross profit. Gross profit increased $18.0 million, or 24.4%, to $91.7 million in the three months ended September 30, 2004, from $73.7 million in the year earlier period. Changes in foreign currency exchange rates and Acquisitions contributed $3.4 million and $4.7 million in gross profit, respectively, for the three months ended September 30, 2004. Gross margin decreased to 25.3% in the three months ended September 30, 2004, from 26.8% in the year earlier period. The lower gross margin is due primarily to a combination of the following: a higher concentration of the Company’s IT services revenue being generated internationally, which operates at a lower gross margin compared to the Company’s domestic operations; lower gross margins in the international operations of the Company’s professional services division; lower utilization in the Company’s IT solutions division; and lower gross margins in the domestic operations of the Company’s IT services division.

Operating expenses. Total operating expenses increased $14.4 million, or 23.2%, to $76.5 million in the three months ended September 30, 2004, from $62.1 million in the year earlier period. The Company’s general and administrative (‘G&A’) expenses, which are included in operating expenses, increased $14.9 million, or 25.7%, to $72.9 million in the three months ended September 30, 2004, from $58.0 million in the year earlier period. The change in G&A expenses was due to the following: the increase in compensation expense related to the increase in revenue; the hiring of additional sales and recruiting personnel throughout 2004; the impact of changes in foreign currency exchange rates; and the additional G&A expenses from Acquisitions. While the Company’s G&A expenses increased, G&A expenses as a percentage of revenue decreased to 20.1% in the three months ended September 30, 2004, from 21.1% in the year earlier period.

Operating income. Operating income increased $3.5 million, or 30.2%, to $15.1 million in the three months ended September 30, 2004, from $11.6 million in the year earlier period. Operating income as a percentage of revenue remained constant at 4.2% in both the three months ended September 30, 2004 and 2003.

Other income, net. Other income, net primarily includes interest income related to the Company’s investments and cash on hand, net of interest expense related to notes issued in connection with acquisitions and fees related to the Company’s credit facility.

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Income taxes. The Company’s effective tax rate decreased slightly to 39.0% in the three months ended September 30, 2004, as compared to 39.2% in the year earlier period.

Income from continuing operations. As a result of the foregoing, income from continuing operations increased $2.2 million, or 30.6%, to $9.4 million in the three months ended September 30, 2004, from $7.2 million in the year earlier period. Income from continuing operations as a percentage of revenue remained constant at 2.6% in both the three months ended September 30, 2004 and 2003.

Segment Results

Professional Services division

Revenue in the professional services division increased $48.8 million, or 36.9%, to $181.1 million in the three months ended September 30, 2004, from $132.3 million in the year earlier period. Changes in foreign currency exchange rates and Acquisitions contributed $8.6 million and $14.8 million in revenue, respectively, for the three months ended September 30, 2004. Acquisitions contributed $2.4 million in revenue in the year earlier period.

Of the division’s revenue, approximately 59% and 61% was generated in the United States in the three months ended September 30, 2004 and 2003, respectively. The remainder was generated in the United Kingdom. For the three months ended September 30, 2004, revenue generated in the United States increased 16.1% excluding the effect of Acquisitions and 30.8% including them, compared to the prior year period. Revenue generated in the United Kingdom increased 46.4% over the prior year period. On a constant currency basis United Kingdom revenue increased 29.7% over the prior year period.

Revenue contribution from the professional services division’s operating units for the three months ended September 30, 2004 and 2003 are as follows:

Gross profit for the professional services division increased $12.7 million, or 32.6%, to $51.6 million in the three months ended September 30, 2004, from $38.9 million in the year earlier period. Changes in foreign currency exchange rates and Acquisitions contributed $2.4 million and $4.7 million in gross profit, respectively, for the three months ended September 30, 2004. The gross margin decreased to 28.5% in the three months ended September 30, 2004, compared to 29.4% in the three months ended September 30, 2003. The gross margin in the division’s international operations decreased to 28.1% in the three months ended September 30, 2004, from 30.4% in the year earlier period.

The professional services division’s G&A expenses increased $9.6 million, or 33.0%, to $38.7 million in the three months ended September 30, 2004, from $29.1 million in the year earlier period. The change in the division’s G&A expenses was due primarily to the following: the increase in compensation expense related to the increase in revenue; the hiring of additional sales and recruiting personnel throughout 2004; the impact of changes in foreign currency exchange rates; and the additional G&A expenses from Acquisitions. While the division’s G&A expenses increased, G&A expenses as a percentage of revenue decreased to 21.4% in the three months ended September 30, 2004, from 22.0% in the year earlier period.

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As a result of the above, operating income for the professional services division increased $3.0 million, or 34.9%, to $11.6 million in the three months ended September 30, 2004, from $8.6 million in the year earlier period.

IT Services division

Revenue in the IT services division increased $36.3 million, or 29.0%, to $161.6 million in the three months ended September 30, 2004, from $125.3 million in the year earlier period. Changes in foreign currency exchange rates contributed $7.3 million in revenue for the three months ended September 30, 2004.

Of the division’s revenue, approximately 58% and 64% was generated in the United States in the three months ended September 30, 2004 and 2003, respectively. The remainder was generated internationally, primarily in the United Kingdom. Revenue generated in the United States increased 16.2% in the three months ended September 30, 2004, compared to the year earlier period. Revenue generated internationally increased 50.9% over the prior year period. On a constant currency basis revenue generated internationally increased 33.6%, compared to the year earlier period.

Gross profit for the IT services division increased $5.2 million, or 18.0%, to $34.1 million in the three months ended September 30, 2004, from $28.9 million in the year earlier period. However, the gross margin decreased to 21.1% in the three months ended September 30, 2004, from 23.0% in the year earlier period. The gross margin in the division’s domestic operations decreased to 26.7% in the three months ended September 30, 2004, from 27.6% in the year earlier period. The gross margin in the division’s international operations decreased to 13.6% in the three months ended September 30, 2004, from 14.9% in the year earlier period.

The IT services division’s G&A expenses increased $5.2 million, or 21.8%, to $29.0 million in the three months ended September 30, 2004, from $23.8 million in the year earlier period. As a percentage of revenue, the division’s G&A expenses decreased to 18.0% in the three months ended September 30, 2004, from 19.0% in the year earlier period. The increase in the division’s G&A expenses was associated with the following: the increase in compensation expense related to the increase in revenue; the hiring of additional sales and recruiting personnel throughout 2004; and the impact of changes in foreign currency exchange rates.

As a result of the above, operating income for the IT services division increased $300,000, or 10.7%, to $3.1 million in the three months ended September 30, 2004, from $2.8 million in the year earlier period.

IT Solutions division

Revenue in the IT solutions division increased $2.5 million, or 14.6%, to $19.6 million in the three months ended September 30, 2004, from $17.1 million in the year earlier period.

Gross profit for the IT solutions division decreased $100,000, or 1.7%, to $5.9 million in the three months ended September 30, 2004 from $6.0 million in the year earlier period. The gross margin decreased to 30.0% in the three months ended September 30, 2004, from 34.9% in the year earlier period. This decrease was driven by lower utilization of the division’s salaried consultants. This division’s business model, unlike the Company’s other divisions, uses primarily salaried consultants to meet customer demand.

The IT solutions division’s G&A expenses increased $200,000, or 4.0%, to $5.2 million in the three months ended September 30, 2004, from $5.0 million in the year earlier period. As a percentage of revenue, the division’s G&A expenses decreased to 26.3% in the three months ended September 30, 2004, from 29.3% in the year earlier period.

As a result of the above, operating income for the IT solutions division remained constant at $200,000 in both the three months ended September 30, 2004 and 2003.

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Nine months Ended September 30, 2004 Compared To Nine months Ended September 30, 2003

Revenue. Revenue increased $194.0 million, or 23.9%, to $1.0 billion in the nine months ended September 30, 2004, from $812.1 million in the year earlier period. The increase was due to an increase in revenue in both the Company’s professional services and IT services divisions of 34.5% and 17.4%, respectively. This increase was offset slightly by a revenue decrease of 3.8% in the Company’s IT solutions division.

Approximately 39% of the Company’s revenue for the nine months ended September 30, 2004, was generated internationally, primarily in the United Kingdom. The Company’s revenue is therefore subject to changes in foreign currency exchange rates. The weakening of the U.S. dollar since the second quarter of 2003 had an impact on revenue, as changes in foreign currency exchange rates contributed $43.7 million in revenue for the nine months ended September 30, 2004. Acquisitions contributed $40.8 million in revenue for the nine months ended September 30, 2004, and $3.3 million in the year earlier period.

Gross profit. Gross profit increased $40.8 million, or 19.0%, to $255.1 million in the nine months ended September 30, 2004, from $214.3 million in the year earlier period. Changes in foreign currency exchange rates and Acquisitions contributed $9.4 million and $12.6 million in gross profit, respectively, for the nine months ended September 30, 2004. Gross margin decreased to 25.4% in the nine months ended September 30, 2004, from 26.4% in the year earlier period. The lower margin is due primarily to a combination of the following: a higher concentration of the Company’s IT services revenue being generated internationally, which operates at a lower gross margin compared to the Company’s domestic operations; lower gross margins in the international operations of the Company’s professional services division; lower utilization in the Company’s IT solutions division; and lower gross margins in the domestic operations of the Company’s IT services division.

Operating expenses. Total operating expenses increased $31.8 million, or 17.0%, to $218.6 million in the nine months ended September 30, 2004, from $186.8 million in the year earlier period. The Company’s general and administrative (‘G&A’) expenses, which are included in operating expenses, increased $33.3 million, or 19.1%, to $207.3 million in the nine months ended September 30, 2004, from $174.0 million in the year earlier period. The change in G&A expenses was due primarily to the following: the increase in compensation expense related to the increase in revenue; the hiring of additional sales and recruiting personnel throughout 2004; the impact of changes in foreign currency exchange rates; and the additional G&A expenses from Acquisitions. While the Company’s G&A expenses increased, G&A expenses as a percentage of revenue decreased to 20.6% in the nine months ended September 30, 2004, from 21.4% in the year earlier period.

Operating income. Operating income increased $8.9 million, or 32.4%, to $36.4 million in the nine months ended September 30, 2004, from $27.5 million in the year earlier period. Operating income as a percentage of revenue increased to 3.6% in the nine months ended September 30, 2004, from 3.4% in the year earlier period.