KFORCE INC - 10-Q Quarterly Report

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 September 30, 2004

¨	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 000-26058

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 November 5, 2004 the registrant had 37,240,840 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)


	September 30, 2004			December 31, 2003
ASSETS

Current Assets:
Cash and cash equivalents	$	2,907		$	13,715
Trade receivables, net of allowance for doubtful accounts and fallouts of $7,536 and $5,624, respectively		102,131			62,274
Income tax refund receivable		567			—
Prepaid expenses and other current assets		6,848			3,055

Total current assets		112,453			79,044

Fixed assets, net		7,428			7,422
Other assets, net		22,135			12,053
Goodwill		131,294			61,798

Total assets	$	273,310		$	160,317

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and other accrued liabilities	$	17,733		$	12,949
Accrued payroll costs		43,742			20,523
Bank overdrafts		5,503			3,389
Income taxes payable		250			—

Total current liabilities		67,228			36,861

Long-term debt under bank credit facility		39,000			22,000
Other long-term liabilities		13,749			10,051

Total liabilities		119,977			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, 55,228 and 48,903 issued, respectively		552			489
Additional paid-in capital		251,427			197,660
Unamortized stock-based compensation		(580	)		(863	)
Accumulated other comprehensive income (loss)		11			(151	)
Accumulated deficit		(272	)		(7,638	)
Less reacquired shares at cost; 18,263 and 18,350 shares, respectively		(97,805	)		(98,092	)

Total stockholders’ equity		153,333			91,405

Total liabilities and stockholders’ equity	$	273,310		$	160,317

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	THREE MONTHS ENDED					NINE MONTHS ENDED
	September 30, 2004		September 30, 2003			September 30, 2004		September 30, 2003
Net service revenues	$	188,862	$	122,958		$	471,232	$	369,847
Direct costs of services		130,987		85,109			327,388		254,776

Gross profit		57,875		37,849			143,844		115,071

Selling, general and administrative expenses		50,131		35,175			132,562		108,649
Depreciation, amortization and asset disposals		1,556		1,051			3,656		3,326

Income from operations		6,188		1,623			7,626		3,096

Other expense, net		480		267			1,161		775

Income before income taxes		5,708		1,356			6,465		2,321

Income tax benefit (expense)		339		(2	)		901		8

Net income		6,047		1,354			7,366		2,329

Other comprehensive income (loss):
Change in fair value of cash flow hedges		7		60			162		(237	)

Comprehensive income	$	6,054	$	1,414		$	7,528	$	2,092

Earnings per share – Basic	$	.16	$	.04		$	.22	$	.08

Weighted average shares outstanding – Basic		36,912		30,653			33,365		30,528

Earnings per share – Diluted	$	.16	$	.04		$	.21	$	.08

Weighted average shares outstanding – Diluted		38,314		31,873			35,201		30,964

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(AMOUNTS IN THOUSANDS)


	Nine Months Ended September 30, 2004
Common stock – shares:
Shares at beginning of period		48,903
Exercise of stock options		420
Issuance of restricted stock		205
Stock issued for business acquired		5,700

Shares at end of Period		55,228

Common stock – par value:
Balance at beginning of period	$	489
Exercise of stock options		4
Issuance of restricted stock		2
Stock issued for business acquired		57

Balance at end of Period	$	552

Additional paid in capital:
Balance at beginning of period	$	197,660
Exercise of stock options		1,924
Employee stock purchase plan		68
Issuance of restricted stock		817
Stock issued for business acquired		50,958

Balance at end of Period	$	251,427

Unamortized stock based compensation:
Balance at beginning of period	$	(863	)
Issuance of restricted stock		(819	)
Amortization of stock-based compensation		1,102

Balance at end of Period	$	(580	)

Accumulated other comprehensive income (loss):
Balance at beginning of period	$	(151	)
Change in fair value of cash flow hedges, net of taxes		162

Balance at end of Period	$	11

Accumulated deficit:
Balance at beginning of period	$	(7,638	)
Net income		7,366

Balance at end of Period	$	(272	)

Treasury stock – shares:
Shares at beginning of period		18,350
Employee stock purchase plan		(121	)
Repurchase of common stock		34

Shares at end of Period		18,263

Treasury stock – cost:
Balance at beginning of period	$	(98,092	)
Employee stock purchase plan		646
Repurchase of common stock		(359	)

Balance at end of Period	$	(97,805	)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


	NINE MONTHS ENDED
	September 30, 2004			September 30, 2003
Cash flows from operating activities:
Net income	$	7,366		$	2,329
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		3,445			3,203
Loss on asset sales/disposals		211			123
Provision for (recovery of) bad debts on accounts receivable and fallouts		1,028			(399	)
Amortization of stock-based compensation		1,102			284
Amortization of hedge interest		—			305
Gain (loss) on cash surrender value of company owned life insurance		207			(833	)
Deferred compensation (reductions) expense, net		(264	)		632
(Increase) decrease in operating assets:
Trade receivables		(24,130	)		(474	)
Prepaid expenses and other current assets		(1,922	)		438
Income taxes, net		(149	)		183
Other assets, net		(1,250	)		82
(Decrease) increase in operating liabilities:
Accounts payable and other accrued liabilities		(4,673	)		(801	)
Accrued payroll costs		19,489			7,263
Bank overdrafts		2,114			290
Other long-term liabilities		(1,062	)		207

Cash provided by operating activities		1,512			12,832

Cash flows used by investing activities:
Acquisition, net of cash received		(27,807	)		—
Capital expenditures, net		(3,496	)		(1,112	)
Proceeds from sale of furniture and equipment		33			108

Cash used in investing activities		(31,270	)		(1,004	)

Cash flows from financing activities:
Proceeds from bank line of credit