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 June 30, 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 August 9, 2004 the registrant had 36,859,026 shares of common stock, $.01 par value per share, issued and outstanding.
1
| ITEM 1. | FINANCIAL STATEMENTS |
KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 509 | $ | 13,715 | ||||
| Trade receivables, net of allowance for doubtful accounts and fallouts of $7,979 and $5,624, respectively |
94,784 | 62,274 | ||||||
| Prepaid expenses and other current assets |
7,613 | 3,055 | ||||||
| Total current assets |
102,906 | 79,044 | ||||||
| Fixed assets, net |
7,205 | 7,422 | ||||||
| Other assets, net |
22,015 | 12,053 | ||||||
| Goodwill |
131,428 | 61,798 | ||||||
| Total assets |
$ | 263,554 | $ | 160,317 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Accounts payable and other accrued liabilities |
$ | 21,104 | $ | 12,949 | ||||
| Accrued payroll costs |
37,028 | 20,523 | ||||||
| Bank overdrafts |
3,973 | 3,389 | ||||||
| Total current liabilities |
62,105 | 36,861 | ||||||
| Long-term debt under bank credit facility |
40,666 | 22,000 | ||||||
| Other long-term liabilities |
14,898 | 10,051 | ||||||
| Total liabilities |
117,669 | 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, 55,038 and 48,903 issued, respectively |
550 | 489 | ||||||
| Additional paid-in capital |
250,455 | 197,660 | ||||||
| Unamortized stock-based compensation |
(723 | ) | (863 | ) | ||||
| Accumulated other comprehensive income (loss) |
4 | (151 | ) | |||||
| Accumulated deficit |
(6,320 | ) | (7,638 | ) | ||||
| Less reacquired shares at cost; 18,315 and 18,350 shares, respectively |
(98,081 | ) | (98,092 | ) | ||||
| Total stockholders’ equity |
145,885 | 91,405 | ||||||
| Total liabilities and stockholders’ equity |
$ | 263,554 | $ | 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
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| THREE MONTHS ENDED |
SIX MONTHS ENDED |
|||||||||||||
| June 30, 2004 |
June 30, 2003 |
June 30, 2004 |
June 30, 2003 |
|||||||||||
| Net service revenues |
$ | 152,162 | $ | 123,165 | $ | 282,370 | $ | 246,889 | ||||||
| Direct costs of services |
104,901 | 84,360 | 196,401 | 169,667 | ||||||||||
| Gross profit |
47,261 | 38,805 | 85,969 | 77,222 | ||||||||||
| Selling, general and administrative expenses |
45,410 | 36,868 | 82,431 | 73,474 | ||||||||||
| Depreciation, amortization and asset disposals |
1,209 | 1,132 | 2,100 | 2,275 | ||||||||||
| Income from operations |
642 | 805 | 1,438 | 1,473 | ||||||||||
| Other expense, net |
391 | 119 | 682 | 508 | ||||||||||
| Income before income taxes |
251 | 686 | 756 | 965 | ||||||||||
| Income tax benefit |
— | — | 562 | 10 | ||||||||||
| Net income |
251 | 686 | 1,318 | 975 | ||||||||||
| Other comprehensive income (loss): |
||||||||||||||
| Change in fair value of cash flow hedges |
196 | (219 | ) | 155 | (296 | ) | ||||||||
| Comprehensive income |
$ | 447 | $ | 467 | $ | 1,473 | $ | 679 | ||||||
| Earnings per share – Basic |
$ | .01 | $ | .02 | $ | .04 | $ | .03 | ||||||
| Weighted average shares outstanding – Basic |
32,424 | 30,836 | 31,590 | 30,512 | ||||||||||
| Earnings per share – Diluted |
$ | .01 | $ | .02 | $ | .04 | $ | .03 | ||||||
| Weighted average shares outstanding – Diluted |
34,374 | 31,039 | 33,642 | 30,608 | ||||||||||
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
(AMOUNTS IN THOUSANDS)
| Six Months Ended June 30, 2004 |
||||
| Common stock – shares: |
||||
| Shares at beginning of period |
48,903 | |||
| Exercise of stock options |
230 | |||
| Issuance of restricted stock |
205 | |||
| Stock issued for business acquired |
5,700 | |||
| Shares at end of Period |
55,038 | |||
| Common stock – par value: |
||||
| Balance at beginning of period |
$ | 489 | ||
| Exercise of stock options |
2 | |||
| Issuance of restricted stock |
2 | |||
| Stock issued for business acquired |
57 | |||
| Balance at end of Period |
$ | 550 | ||
| Additional paid in capital: |
||||
| Balance at beginning of period |
$ | 197,660 | ||
| Exercise of stock options |
1,089 | |||
| Employee stock purchase plan |
(69 | ) | ||
| Issuance of restricted stock |
817 | |||
| Stock issued for business acquired |
50,958 | |||
| Balance at end of Period |
$ | 250,455 | ||
| Unamortized stock based compensation: |
||||
| Balance at beginning of period |
$ | (863 | ) | |
| Issuance of restricted stock |
(819 | ) | ||
| Amortization of stock-based compensation |
959 | |||
| Balance at end of Period |
$ | (723 | ) | |
| Accumulated other comprehensive income (loss): |
||||
| Balance at beginning of period |
$ | (151 | ) | |
| Change in fair value of cash flow hedges, net of taxes |
155 | |||
| Balance at end of Period |
$ | 4 | ||
| Accumulated deficit: |
||||
| Balance at beginning of period |
$ | (7,638 | ) | |
| Net income |
1,318 | |||
| Balance at end of Period |
$ | (6,320 | ) | |
| 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)
| SIX MONTHS ENDED |
||||||||
| June 30, 2004 |
June 30, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 1,318 | $ | 975 | ||||
| Adjustments to reconcile net income to cash provided by (used in ) operating activities: |
||||||||
| Depreciation and amortization |
1,878 | 2,175 | ||||||
| Loss on asset sales/disposals |
222 | 100 | ||||||
| Provision for bad debts on accounts receivable and fallouts |
(7 | ) | 346 | |||||
| Amortization of stock based compensation |
959 | 165 | ||||||
| Amortization of hedge interest |
— | 243 | ||||||
| Gain on cash surrender value of company owned life insurance |
(79 | ) | (630 | ) | ||||
| Deferred compensation expense, net |
20 | 459 | ||||||
| (Increase) decrease in operating assets: |
||||||||
| Trade receivables |
(15,749 | ) | (13 | ) | ||||
| Prepaid expenses and other current assets |
(2,420 | ) | (104 | ) | ||||
| Other assets, net |
(278 | ) | 130 | |||||
| (Decrease) increase in operating liabilities: |
||||||||
| Accounts payable and other accrued liabilities |
(1,402 | ) | 144 | |||||
| Accrued payroll costs |
12,362 | 4,518 | ||||||
| Bank overdrafts |
583 | 1,260 | ||||||
| Other long-term liabilities |
(85 | ) | (1,115 | ) | ||||
| Cash provided by (used in) operating activities |
(2,678 | ) | 8,653 | |||||
| Cash flows used by investing activities: |
||||||||
| Acquisition, net of cash received |
(27,807 | ) | — | |||||
| Capital expenditures, net |
(2,500 | ) | (497 | ) | ||||
| Cash used in investing activities |
(30,307 | ) | (497 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from bank line of credit |
18,666 | — | ||||||
| Proceeds from capital expenditure financing |
432 | — | ||||||
| Repayment of capital expenditure financing |
(51 | ) | — | |||||
| Proceeds from exercise of stock options |
1,091 | 29 | ||||||
| Repurchase of common stock |
(359 | |||||||