UNITED STATES
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 March 31, 2004
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 | 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
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
As of May 10, 2004 the registrant had 30,847,533 shares of common stock, $.01 par value per share, issued and outstanding.
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 10,243 | $ | 13,715 | ||||
| Trade receivables, net of allowance for doubtful accounts and fallouts of $5,382 and $5,624, respectively |
69,670 | 62,274 | ||||||
| Income tax refund receivable |
196 | — | ||||||
| Prepaid expenses and other current assets |
5,304 | 3,055 | ||||||
| Total current assets |
85,413 | 79,044 | ||||||
| Fixed assets, net |
6,942 | 7,422 | ||||||
| Other assets, net |
13,843 | 12,053 | ||||||
| Goodwill |
61,798 | 61,798 | ||||||
| Total assets |
$ | 167,996 | $ | 160,317 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable and other accrued liabilities |
$ | 11,335 | $ | 12,949 | ||||
| Accrued payroll costs |
26,583 | 20,523 | ||||||
| Bank overdrafts |
4,606 | 3,389 | ||||||
| Total current liabilities |
42,524 | 36,861 | ||||||
| Long-term debt under bank credit facility |
22,000 | 22,000 | ||||||
| Other long-term liabilities |
10,016 | 10,051 | ||||||
| Total liabilities |
74,540 | 68,912 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding |
— | — | ||||||
| Common stock, $0.01 par; 250,000 shares authorized, 49,162 and 48,903 issued, respectively |
491 | 489 | ||||||
| Additional paid-in capital |
198,675 | 197,660 | ||||||
| Unamortized stock-based compensation |
(866 | ) | (863 | ) | ||||
| Accumulated other comprehensive loss |
(192 | ) | (151 | ) | ||||
| Accumulated deficit |
(6,571 | ) | (7,638 | ) | ||||
| Less reacquired shares at cost; 18,315 and 18,350 shares, respectively |
(98,081 | ) | (98,092 | ) | ||||
| Total stockholders’ equity |
93,456 | 91,405 | ||||||
| Total liabilities and stockholders’ equity |
$ | 167,996 | $ | 160,317 | ||||
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 |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| Net service revenues |
$ | 130,208 | $ | 123,724 | ||||
| Direct costs of services |
91,500 | 85,307 | ||||||
| Gross profit |
38,708 | 38,417 | ||||||
| Selling, general and administrative expenses |
37,021 | 36,606 | ||||||
| Depreciation and amortization expense |
883 | 1,102 | ||||||
| Income from operations |
804 | 709 | ||||||
| Other expense, net |
299 | 431 | ||||||
| Income before income taxes |
505 | 278 | ||||||
| Income tax benefit |
562 | 10 | ||||||
| Net income |
1,067 | 288 | ||||||
| Other comprehensive loss: |
||||||||
| Change in fair value of cash flow hedges |
(41 | ) | (72 | ) | ||||
| Comprehensive income |
$ | 1,026 | $ | 216 | ||||
| Earnings per share – Basic |
$ | .03 | $ | .01 | ||||
| Weighted average shares outstanding – Basic |
30,790 | 30,565 | ||||||
| Earnings per share – Diluted |
$ | .03 | $ | .01 | ||||
| Weighted average shares outstanding – Diluted |
32,941 | 30,603 | ||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
| THREE MONTHS ENDED |
||||
| Common stock – shares: |
||||
| Shares at beginning of period |
48,903 | |||
| Exercise of stock options |
54 | |||
| Issuance of restricted stock |
205 | |||
| Shares at end of period |
49,162 | |||
| Common stock – par value: |
||||
| Balance at beginning of period |
$ | 489 | ||
| Exercise of stock options |
— | |||
| Issuance of restricted stock |
2 | |||
| Balance at end of period |
$ | 491 | ||
| Additional paid-in capital: |
||||
| Balance at beginning of period |
$ | 197,660 | ||
| Exercise of stock options |
267 | |||
| Employee stock purchase plan |
(69 | ) | ||
| Issuance of restricted stock |
817 | |||
| Balance at end of period |
$ | 198,675 | ||
| Unamortized stock-based compensation: |
||||
| Balance at beginning of period |
$ | (863 | ) | |
| Issuance of restricted stock |
819 | |||
| Amortization of stock-based compensation |
(816 | ) | ||
| Balance at end of period |
$ | (866 | ) | |
| Accumulated other comprehensive loss: |
||||
| Balance at beginning of period |
$ | (151 | ) | |
| Change in fair value of cash flow hedges |
(41 | ) | ||
| Balance at end of period |
$ | (192 | ) | |
| Accumulated deficit: |
||||
| Balance at beginning of period |
$ | (7,638 | ) | |
| Net income |
1,067 | |||
| Balance at end of period |
$ | (6,571 | ) | |
| Treasury stock – shares: |
||||
| Shares at beginning of period |
18,350 | |||
| Employee stock purchase plan |
(69 | ) | ||
| Repurchase of common stock |
34 | |||
| Shares at end of period |
18,315 | |||
| Treasury stock – cost: |
||||
| Balance at beginning of period |
$ | (98,092 | ) | |
| Employee stock purchase plan |
370 | |||
| Repurchase of common stock |
(359 | ) | ||
| Balance at end of period |
$ | (98,081 | ) | |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| THREE MONTHS ENDED |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 1,067 | $ | 288 | ||||
| Adjustments to reconcile net income to cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
883 | 1,102 | ||||||
| (Recovery of) provision for bad debts on accounts receivable and fallouts |
(226 | ) | 243 | |||||
| Amortization of stock-based compensation |
816 | 55 | ||||||
| Loss on asset sales/disposals |
8 | 42 | ||||||
| (Gain) loss on cash surrender value of company-owned life insurance policies |
(119 | ) | 120 | |||||
| Deferred compensation expenses (reductions) |
112 | (106 | ) | |||||
| Amortization of hedged interest |
— | 149 | ||||||
| (Increase) decrease in operating assets: |
||||||||
| Trade receivables |
(7,170 | ) | (2,801 | ) | ||||
| Prepaid expenses and other current assets |
(2,248 | ) | (1,067 | ) | ||||
| Income taxes |
(196 | ) | 72 | |||||
| Other assets, net |
(680 | ) | (28 | ) | ||||
| (Decrease) increase in operating liabilities: |
||||||||
| Accounts payable and other accrued liabilities |
(1,422 | ) | 143 | |||||
| Accrued payroll costs |
6,361 | 3,412 | ||||||
| Bank overdrafts |
1,216 | 431 | ||||||
| Other long-term liabilities |
(986 | ) | (759 | ) | ||||
| Cash (used in) provided by operating activities |
(2,584 | ) | 1,296 | |||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures, net |
(1,447 | ) | (400 | ) | ||||
| Proceeds from sale of furniture and equipment |
3 | — | ||||||
| Cash used in investing activities |
(1,444 | ) | (400 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of stock options |
267 | — | ||||||
| Proceeds from capital expenditure financing |
648 | — | ||||||
| Repurchase of common stock |
(359 | ) | (146 | ) | ||||
| Cash provided by (used in) financing activities |
556 | (146 | ) | |||||
| (Decrease) increase in cash and cash equivalents |
(3,472 | ) | 750 | |||||
| Cash and cash equivalents at beginning of period |
13,715 | 1,053 | ||||||
| Cash and cash equivalents at end of period |
$ | 10,243 | $ | 1,803 | ||||
| Supplemental cash flow information: |
||||||||
| Cash paid (received) during the period for: |
||||||||
| Income taxes |
$ | — | $ | (82 | ) | |||
| Interest |
379 | 307 | ||||||
| Supplemental non-cash flow information: |
||||||||
| Deferred compensation match |
— | 80 | ||||||
| Employee stock purchase plan |
301 | 314 | ||||||
| Cash flow hedges, net of income taxes |
41 | 72 | ||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
KFORCE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES