SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-26058
Kforce Inc.
(Exact name of registrant as specified in its charter)
| FLORIDA (State or other jurisdiction of incorporation or organization) |
59-3264661 (I.R.S. Employer Identification No.) |
|
| 1001 East Palm Avenue TAMPA, FLORIDA (Address of principal executive offices) |
33605 (Zip-Code) |
Registrant’s telephone number, including area code: (813) 552-5000
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) had been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
As of August 12, 2002 the registrant had 31,650,727 shares of common stock, $.01 par value per share, issued and outstanding.
ITEM 1. FINANCIAL STATEMENTS
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
| June 30, | December 31, | ||||||||||
| 2002 | 2001 | ||||||||||
Assets: |
|||||||||||
Current Assets: |
|||||||||||
Cash and cash equivalents |
$ | 3,301 | $ | 255 | |||||||
Trade receivables, net of allowance for doubtful accounts and
fallouts of $6,305 and $5,470, respectively |
68,747 | 71,133 | |||||||||
Income tax refund receivables |
5,553 | 5,233 | |||||||||
Deferred tax asset, current |
2,222 | 4,037 | |||||||||
Prepaid expenses and other current assets |
4,903 | 4,956 | |||||||||
Total current assets |
84,726 | 85,614 | |||||||||
Receivables from officers and related parties, net of
allowance of $300 |
735 | 726 | |||||||||
Fixed assets, net |
12,736 | 15,367 | |||||||||
Deferred tax asset, non-current |
— | 1,847 | |||||||||
Other assets, net |
16,004 | 23,414 | |||||||||
Goodwill, net of accumulated amortization of $16,955 |
95,621 | 95,804 | |||||||||
Total assets |
$ | 209,822 | $ | 222,772 | |||||||
Liabilities and Stockholders’ Equity: |
|||||||||||
Current Liabilities: |
|||||||||||
Accounts payable and other accrued liabilities |
$ | 13,197 | $ | 14,231 | |||||||
Accrued payroll costs |
22,733 | 21,326 | |||||||||
Bank overdrafts |
4,735 | 6,974 | |||||||||
Total current liabilities |
40,665 | 42,531 | |||||||||
Long term debt |
22,000 | 28,185 | |||||||||
Deferred tax liability, non-current |
335 | — | |||||||||
Other long-term liabilities |
9,824 | 13,247 | |||||||||
Total liabilities |
72,824 | 83,963 | |||||||||
Commitments and contingencies |
|||||||||||
Stockholders’ Equity: |
|||||||||||
Preferred stock, par value $.01; 15,000 shares authorized,
none issued and outstanding |
— | — | |||||||||
Common stock, par value $.01; 250,000 shares authorized,
48,335 and 48,264 issued and outstanding, respectively |
483 | 483 | |||||||||
Additional paid-in-capital |
196,634 | 195,177 | |||||||||
Unamortized stock based compensation |
(1,091 | ) | — | ||||||||
Accumulated other comprehensive loss |
(538 | ) | (596 | ) | |||||||
Retained earnings |
31,971 | 34,275 | |||||||||
Less reacquired stock at cost; 16,511 and 16,524 shares,
respectively |
(90,461 | ) | (90,530 | ) | |||||||
Total stockholders’ equity |
136,998 | 138,809 | |||||||||
Total liabilities and stockholders’equity |
$ | 209,822 | $ | 222,772 | |||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| THREE MONTHS ENDED | SIX MONTHS ENDED | ||||||||||||||||
| June 30, | June 30, | June 30, | June 30, | ||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Net service revenues |
$ | 129,467 | $ | 176,910 | $ | 261,140 | $ | 372,201 | |||||||||
Direct costs of services |
86,035 | 107,835 | 173,937 | 223,026 | |||||||||||||
Gross profit |
43,432 | 69,075 | 87,203 | 149,175 | |||||||||||||
Selling, general and administrative expenses |
41,358 | 60,286 | 84,411 | 130,321 | |||||||||||||
Depreciation and amortization expense |
2,503 | 4,602 | 5,227 | 8,592 | |||||||||||||
(Loss) income from operations |
(429 | ) | 4,187 | (2,435 | ) | 10,262 | |||||||||||
Other expense, net |
541 | 665 | 992 | 1,730 | |||||||||||||
(Loss) income before income taxes |
(970 | ) | 3,522 | (3,427 | ) | 8,532 | |||||||||||
(Benefit from) provision for income taxes |
(263 | ) | 1,713 | (1,123 | ) | 3,880 | |||||||||||
Net (loss) income |
(707 | ) | 1,809 | (2,304 | ) | 4,652 | |||||||||||
Other comprehensive income (loss): |
|||||||||||||||||
Foreign currency translation |
— | (15 | ) | — | (15 | ) | |||||||||||
Change in fair value of cash flow hedges,
net of taxes |
(82 | ) | (62 | ) | 58 | (62 | ) | ||||||||||
Comprehensive (loss) income |
$ | (789 | ) | $ | 1,732 | $ | (2,246 | ) | $ | 4,575 | |||||||
(Loss) earnings per share — Basic |
$ | (.02 | ) | $ | .06 | $ | (.07 | ) | $ | .14 | |||||||
Weighted average shares outstanding — Basic |
31,839 | 31,928 | 31,836 | 32,321 | |||||||||||||
(Loss) earnings per share — Diluted |
$ | (.02 | ) | $ | .06 | $ | (.07 | ) | $ | .14 | |||||||
Weighted average shares outstanding — Diluted |
31,839 | 32,739 | 31,836 | 32,714 | |||||||||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| SIX MONTHS ENDED | ||||||||||||
| June 30, | June 30, | |||||||||||
| 2002 | 2001 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net income (loss) |
$ | (2,304 | ) | $ | 4,652 | |||||||
Adjustments to reconcile net income (loss) to cash provided
by operating activities: |
||||||||||||
Depreciation and amortization |
5,227 | 8,592 | ||||||||||
Provision for (recovery of)fallouts and bad debts on
accounts and notes receivable |
739 | (351 | ) | |||||||||
Amortization of stock based compensation |
110 | — | ||||||||||
(Gain) loss on asset sales/disposals |
(22 | ) | 81 | |||||||||
Loss on asset impairment |
807 | — | ||||||||||
Deferred compensation expense, net |
124 | (503 | ) | |||||||||
(Increase) decrease in operating assets: |
||||||||||||
Trade receivables |
1,647 | 22,506 | ||||||||||
Prepaid expenses and other current assets |
(223 | ) | (6,932 | ) | ||||||||
Income taxes, net |
3,665 | (1,475 | ) | |||||||||
Other assets, net |
567 | 309 | ||||||||||
Deferred compensation plan, net |
(12 | ) | — | |||||||||
(Decrease) increase in operating liabilities: |
||||||||||||
Accounts payable and other accrued liabilities |
(550 | ) | 1,348 | |||||||||
Accrued payroll costs |
1,949 | (3,790 | ) | |||||||||
Bank overdrafts |
(2,239 | ) | (6,403 | ) | ||||||||
Other long-term liabilities |
(170 | ) | (553 | ) | ||||||||
Cash provided by operating activities |
9,315 | 17,481 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Capital expenditures, net |
(357 | ) | (3,503 | ) | ||||||||
Proceeds from sale of furniture and equipment |
30 | 5 | ||||||||||
Cash used in investing activities |
(327 | ) | (3,498 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Repayments on bank line of credit |
(6,185 | ) | (7,000 | ) | ||||||||
Proceeds from exercise of stock options |
243 | 79 | ||||||||||
Repurchase of common stock |
— | (8,058 | ) | |||||||||
Cash used in financing activities |
(5,942 | ) | (14,979 | ) | ||||||||
Increase in cash and cash equivalents |
3,046 | (996 | ) | |||||||||
Cumulative translation adjustment |
— | (15 | ) | |||||||||
Cash and cash equivalents at beginning of period |
255 | 1,865 | ||||||||||
Cash and cash equivalents at end of period |
$ | 3,301 | $ | 854 | ||||||||
Supplemental Cash Flow Information |
||||||||||||
Cash (refunded) paid during the period for: |
||||||||||||
Income taxes |
$ | (4,750 | ) | $ | 5,348 | |||||||
Interest |
1,205 | 1,249 | ||||||||||
Supplemental Non Cash Flow Information |
||||||||||||
401(k)
matching contribution |
— | 847 | ||||||||||
Deferred compensation plan contribution |
— | 1,017 | ||||||||||
Employee stock purchase plan contribution |
542 | 1,079 | ||||||||||
Change in the fair value of cash flow hedges, net of
taxes |
58 | (62 | ) | |||||||||
Issuance of restricted stock |
1,201 | — | ||||||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
KFORCE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
| SIX MONTHS ENDED | ||||||||||
| June 30, | ||||||||||
| 2002 | 2001 | |||||||||
Common stock — shares: |
||||||||||
Shares at beginning of period |
48,264 | 46,959 | ||||||||
Exercise of stock options |
71 | 23 | ||||||||
Shares at end of Period |
48,335 | 46,982 | ||||||||
Common stock — par value |
$ | 483 | $ | 470 | ||||||
Additional paid in capital: |
||||||||||
Balance at beginning of period |
$ | 195,177 | $ | 191,007 | ||||||
Exercise of stock options |
242 | 79 | ||||||||
Disqualifying dispositions |
26 | 4 | ||||||||
401K matching contribution |
— | (502 | ) | |||||||
Deferred compensation plan net
(contributions)/forfeitures |
1 | (578 | ) | |||||||
Employee stock purchase plan contribution |
(13 | ) | (1,235 | ) | ||||||
Issuance of restricted stock |
1,201 | — | ||||||||
Balance at end of Period |
$ | 196,634 | $ | 188,775 | ||||||
Unamortized stock based compensation: |
||||||||||
Balance at beginning of period |
$ | — | $ | — | ||||||
Issuance of restricted stock |
(1,201 | ) | — | |||||||
Amortization of stock based compensation |
110 | |||||||||
Balance at end of Period |
$ | (1,091 | ) | $ | — | |||||
Accumulated other comprehensive loss: |
||||||||||
Balance at beginning of period |
$ | (596 | ) | $ | (267 | ) | ||||
Foreign currency translation adjustment |
— | (15 | ) | |||||||
Change in fair value of cash flow hedges,
net of taxes |
58 | (62 | ) | |||||||
Balance at end of Period |
$ | (538 | ) | $ | (344 | ) | ||||
Retained earnings: |
||||||||||
Balance at beginning of period |
$ | 34,275 | $ | 46,363 | ||||||
Net (loss) income |
(2,304 | ) | 4,652 | |||||||
Balance at end of Period |
$ | 31,971 | $ | 51,015 | ||||||
Treasury stock — shares: |
||||||||||
Shares at beginning of period |
16,524 | 14,802 | ||||||||
401K matching contribution |
— | (242 | ) | |||||||
Deferred compensation plan net
(contributions)/forfeitures |
88 | (328 | ) | |||||||
Employee stock purchase plan contribution |
(101 | ) | (415 | ) | ||||||
Repurchase of common stock |
— | 1,675 | ||||||||
Shares at end of Period |
16,511 | 15,492 | ||||||||
Treasury stock — cost: |
||||||||||
Balance at beginning of period |
$ | (90,530 | ) | $ | (82,536 | ) | ||||
401K matching contribution |
— | 1,349 | ||||||||
Deferred compensation plan net
(contributions)/forfeitures |
||||||||||