(Mark One)

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

o   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

59-3264661

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1001 East Palm Avenue
TAMPA, FLORIDA

33605

(Address of principal executive offices)

(Zip-Code)

Registrant’s telephone number, including area code: (813) 552-5000

Yes   x

No   o

Yes   x

No   o

March 31,
2003

December 31,
2002

Assets:

Current Assets:

Cash and cash equivalents

$

1,803

$

1,053 

Trade receivables, net of allowance for doubtful accounts and fallouts of $6,388 and $5,827, respectively

65,651

63,092

Income tax refund receivables

737

809

Prepaid expenses and other current assets

4,904

3,838

Total current assets

73,095

68,792

Fixed assets, net

9,231

9,605

Other assets, net

12,164

11,982

Goodwill

61,798

61,798

Total assets

$

156,288

$

152,177 

Liabilities and Stockholders’ Equity:

Current Liabilities:

Accounts payable and other accrued liabilities

$

14,746

$

14,603

Accrued payroll costs

22,380

19,282

Other current liabilities

3,212

2,781

Total current liabilities

40,338

36,666

Long term debt

22,000

22,000

Other long-term liabilities

6,844

7,923

Total liabilities

69,182

66,589

Commitments and contingencies

Stockholders’ Equity:

Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding

—  

—  

Common stock, par value $.01; 250,000 shares authorized, 48,544 issued and outstanding

485

485

Additional paid-in-capital

194,150

196,510

Unamortized stock-based compensation

(839

)

(894

)

Accumulated other comprehensive loss

(233

)

(305

)

Deficit

(12,468

)

(12,756

)

Less reacquired stock at cost; 17,668 and 18,286 shares, respectively

(93,989

)

(97,452

)

Total stockholders’ equity

87,106

85,588

Total liabilities and stockholders’ equity

$

156,288

$

152,177 

THREE MONTHS ENDED

March 31,
2003

March 31,
2002

Net service revenues

$

123,724

$

131,671

Direct costs of services

85,307

87,901

Gross profit

38,417

43,770

Selling, general and administrative expenses

36,606

43,052

Depreciation and amortization expense

1,102

2,724

Income (loss) from operations

709

(2,006

)

Other expense, net

431

451

Income (loss) before income taxes

278

(2,457

)

Income tax benefit

10

860

Net income (loss)

288

(1,597

)

Other comprehensive (loss) income:

Change in fair value of cash flow hedges, net of income taxes of $0 and $93, respectively

(72

)

140

Comprehensive income (loss)

$

216

$

(1,457

)

Net income (loss) per share – Basic

$

.01

$

(.05

)

Weighted average shares outstanding – Basic

30,565

31,835

Net income (loss) per share – Diluted

$

.01

$

(.05

)

Weighted average shares outstanding – Diluted

30,603

31,835

THREE MONTHS ENDED

March 31,
2003

March 31,
2002

Cash flows from operating activities:

Net income (loss)

$

288

$

(1,597

)

Adjustments to reconcile net income (loss) to cash provided  by operating activities:

Depreciation and amortization

1,102

2,724

Provision for bad debts and fallouts on accounts receivable

243

933

Amortization of stock based compensation

55

50

(Gain) loss on asset sales/disposals

42

(19

)

Amortization of hedge interest

149

—  

Deferred compensation expense, net

379

552

(Increase) decrease in operating assets:

Trade receivables

(2,801

)

(1,668

)

Prepaid expenses and other current assets

(1,067

)

(105

)

Income taxes

72

3,890

Other assets, net

(189

)

1,287

(Decrease) increase in operating liabilities:

Accounts payable and other accrued liabilities

292

(747

)

Accrued payroll costs

3,266

2,011

Bank overdrafts

431

(2,258

)

Other long-term liabilities

(1,112

)

(1,917

)

Cash provided by operating activities

1,150

3,136

Cash flows from investing activities:

Capital expenditures, net

(400

)

(71

)

Proceeds from sale of furniture and equipment

—  

27

Cash used in investing activities

(400

)

(44

)

Cash flows from financing activities:

Repayments on bank line of credit

—  

(2,185

)

Proceeds from exercise of stock options

—  

117

Cash used in financing activities

—  

(2,068

)

Increase in cash and cash equivalents

750

1,024

Cash and cash equivalents at beginning of period

1,053

255

Cash and cash equivalents at end of period

$

1,803

$

1,279

Supplemental cash flow information:

Cash paid (received) during the period for:

Income taxes

$

(82

)

$

(4,750

)

Interest

307

591

Supplemental non-cash flow information:

Deferred compensation match

80

—  

Employee stock purchase plan contribution

314

542

Cash flow hedges, net of income taxes

77

140

Restricted stock issued in lieu of compensation, net of forfeitures

—  

1,201

THREE MONTHS ENDED
March 31,

2003

2002

Common stock – shares:

Shares at beginning of period

48,544

48,264

Exercise of stock options

—  

32

Shares at end of period

48,544

48,296

Common stock – par value