KFORCE INC - FORM 8-K - EX-99.1 - UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

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8-K - FORM 8-K - KFORCE INC	d330405d8k.htm

Exhibit 99.1

KFORCE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical		Pro Forma Adjustments			Pro Forma
Net service revenues	$	1,110,919	$	106,172	(a)	$	1,004,747
Direct costs of services		764,616		77,616	(a)		687,000

Gross profit		346,303		28,556			317,747
Selling, general and administrative expenses		288,981		14,909	(b)		274,072
Depreciation and amortization		12,694		189	(c)		12,505

Income from continuing operations		44,628		13,458			31,170
Other expense (income):
Interest expense		1,256		60	(d)		1,196
Other expense (income)		61		0			61

Income from continuing operations before income taxes		43,311		13,398			29,913
Income tax expense		16,155		5,298	(e)		10,857


Net income from continuing operations	$	27,156	$	8,100		$	19,056


Earnings per share – basic
From continuing operations	$	0.72	$	0.22		$	0.50
Earnings per share – diluted
From continuing operations	$	0.70	$	0.21		$	0.49

Weighted average shares outstanding – basic		37,835		37,835			37,835
Weighted average shares outstanding – diluted		38,831		38,831			38,831

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2010

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical		Pro Forma Adjustments			Pro Forma
Net service revenues	$	990,807	$	104,150	(a)	$	886,657
Direct costs of services		678,393		75,582	(a)		602,811

Gross profit		312,414		28,568			283,846
Selling, general and administrative expenses		265,183		14,027	(b)		251,156
Depreciation and amortization		12,611		22	(c)		12,589

Income from continuing operations		34,620		14,519			20,101
Other expense (income):
Interest expense		1,274		60	(d)		1,214
Other expense (income)		22		0			22

Income from continuing operations before income taxes		33,324		14,459			18,865
Income tax expense		12,690		5,821	(e)		6,869


Net income from continuing operations	$	20,634	$	8,638		$	11,996


Earnings per share – basic
From continuing operations	$	0.52	$	0.22		$	0.30
Earnings per share – diluted
From continuing operations	$	0.51	$	0.21		$	0.30

Weighted average shares outstanding – basic		39,480		39,480			39,480
Weighted average shares outstanding – diluted		40,503		40,503			40,503

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2009

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical			Pro Forma Adjustments			Pro Forma
Net service revenues	$	910,136		$	108,028	(a)	$	802,108
Direct costs of services		624,157			79,279	(a)		544,878

Gross profit		285,979			28,749			257,230
Selling, general and administrative expenses		251,268			12,903	(b)		238,365
Depreciation and amortization		11,673			0	(c)		11,673

Income from continuing operations		23,038			15,846			7,192
Other expense (income):
Interest expense		1,437			60	(d)		1,377
Other expense (income)		(292	)		0			(292	)

Income from continuing operations before income taxes		21,893			15,786			6,107
Income tax expense		9,020			6,336	(e)		2,684


Net income from continuing operations	$	12,873		$	9,450		$	3,423


Earnings per share – basic
From continuing operations	$	0.33		$	0.24		$	0.09
Earnings per share – diluted
From continuing operations	$	0.33		$	0.24		$	0.09

Weighted average shares outstanding – basic		38,485			38,485			38,485
Weighted average shares outstanding – diluted		39,330			39,330			39,330

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

BALANCE SHEET AS OF DECEMBER 31, 2011

(IN THOUSANDS)


	Historical			Pro Forma Adjustments			Pro Forma
ASSETS
Current Assets:
Cash and cash equivalents	$	939		$	(3	) (f)	$	936
Trade receivables, net of allowance of $2,457		174,764			(13,692	) (f)		161,072
Income tax refund receivable		250			—			250
Deferred tax assets, net		4,694			—			4,694
Prepaid expenses and other current assets		5,592			(449	) (f)		5,143

Total current assets		186,239			(14,144	)		172,095
Fixed assets, net		36,124			—			36,124
Other assets, net		32,554			(885	) (f)		31,669
Deferred tax assets, net		10,042			—			10,042
Intangible assets, net		6,635			—			6,635
Goodwill		138,078			(5,474	) (g)		132,604

Total assets	$	409,672			(20,503	)		389,169


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and other accrued liabilities	$	26,314			(862	) (f)		25,452
Accrued payroll costs		55,151			(4,698	) (f)		50,453
Other current liabilities		1,463			—			1,463
Income taxes payable		236			—			236

Total current liabilities		83,164			(5,560	)		77,604
Long-term debt – credit facility		49,526			(35,049	) (h)		14,477
Long-term debt – other		1,609			—			1,609
Other long-term liabilities		42,258			—			42,258

Total liabilities		176,557			(40,609	)		135,948


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, 68,566 and 66,542 issued, respectively		686			—			686
Additional paid-in capital		372,212			—			372,212
Accumulated other comprehensive loss		(4,050	)		—			(4,050	)
Retained earnings		89,135			20,106	(i)		109,241
Treasury stock, at cost; 30,644 and 24,823 shares, respectively		(224,868	)		—			(224,868	)

Total stockholders’ equity		233,115			20,106			253,221

Total liabilities and stockholders’ equity	$	409,672			(20,503	)		389,169

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

KFORCE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS)

(a)	This adjustment reflects the elimination of the revenues and cost of services of Kforce Clinical Research, Inc. (“KCR”) sold to inVentiv Health, Inc.

(b)

This adjustment reflects the elimination of the selling, general and administrative expenses of KCR, inclusive of certain reasonable allocations of costs incurred by Kforce Inc. and its subsidiaries that are necessary for and associated with revenue producing activities of KCR. This adjustment does not reflect any general corporate overhead costs.

(c)	This adjustment represents the elimination of amortization expense attributable to capitalized software development costs related to the clinical monitoring management solution for KCR, which was sold to inVentiv Health, Inc.

(d)	This adjustment represents an elimination of interest expense based on the proportion of assets sold to the total assets of Kforce Inc. and its subsidiaries.

(e)	This adjustment represents the estimated income tax effect of the pro forma adjustments. The tax effect of the pro forma adjustments was calculated using the historical statutory rates in the U.S. and any permanent differences attributable to KCR for the periods presented.

(f)	This adjustment reflects the elimination of assets and liabilities attributable to the disposition.

(g)	This adjustment reflects the elimination of the amount of goodwill allocated to KCR.

(h)

This adjustment reflects the receipt of the proceeds of $50,000, less transaction costs of approximately $2,470, including legal, advisory and other professional fees and transaction bonuses, less estimated taxes on the disposition of KCR of $16,065, plus the estimated excess of the working capital of KCR over the working capital requirement in the Stock Purchase Agreement as of December 31, 2011 of $3,584. The net proceeds on the disposition of KCR reduced outstanding borrowings under our Credit Facility.

In connection with the disposition of KCR, Kforce Inc.’s Board of Directors exercised its discretion to accelerate the vesting of all outstanding and unvested restricted stock awards and alternative long-term incentive awards (“ALTI”) effective March 30, 2012 for tax planning purposes. Kforce Inc. will recognize a tax benefit from the acceleration of the vesting of restricted stock and ALTI, which will allow it to defer all of the tax liability generated from the sale of KCR. However, no adjustment was made for this tax deduction in the unaudited pro forma condensed consolidated balance sheet.

(i)

This adjustment reflects the estimated gain of approximately $36,171 arising from the transaction, net of taxes of $16,065. The estimated gain has not been reflected in the pro forma consolidated statements of operations as it is considered to be nonrecurring in nature. No adjustment has been made to the sale proceeds to give effect to any potential post-closing adjustments under the terms of the Stock Purchase Agreement.

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