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8-K - FORM 8-K - KFORCE INCd481055d8k.htm

Exhibit 99.1

 

      Kforce Inc.
      1001 East Palm Ave.
      Tampa, FL 33605
      (NASDAQ: KFRC)

AT THE FIRM

Michael R. Blackman

Chief Corporate Development Officer

(813) 552-2927

KFORCE REPORTS FOURTH QUARTER AND FULL YEAR 2012 RESULTS

 

   

FOURTH QUARTER REVENUES OF $269.8 MILLION

 

   

FOURTH QUARTER NET INCOME OF $8.6 MILLION, OR $0.24 PER SHARE, EXCLUDING NON-CASH IMPAIRMENT CHARGE

TAMPA, Fla., Feb. 5, 2013 (GLOBE NEWSWIRE) — Kforce Inc. (Nasdaq:KFRC), a provider of professional staffing services and solutions, today announced results for its fourth quarter of 2012. Revenue from continuing operations for the quarter ended December 31, 2012 was $269.8 million compared to $270.2 million for the quarter ended September 30, 2012, a decrease of 0.1% and compared to $259.3 million for the quarter ended December 31, 2011, an increase of 4.0%. Excluding the after-tax non-cash impairment charge of $2.5 million related to the completion of the Q2 ‘12 impairment test for our Government Solutions reporting unit, which was recorded during the quarter ended December 31, 2012, Kforce reported net income of $8.6 million, or $0.24 per share, versus $9.3 million, or $0.26 per share, for the quarter ended September 30, 2012. Excluding the impairment charge, net income and earnings per share for the fourth quarter of 2012 increased 21.0% and 20.0%, respectively, versus the fourth quarter of 2011, which had net income of $7.1 million, or $0.20 per share.

Kforce reported total revenue from continuing operations for the year ended December 31, 2012 of $1.08 billion as compared to $1.00 billion for 2011, an increase of 7.7%. Excluding the after-tax non-cash goodwill impairment charge of $44.5 million recorded during the year ended December 31, 2012 related to our Government Solutions reporting unit, Kforce reported net income of $30.8 million, or $0.85 per share, for the year ended December 31, 2012, versus net income of $27.2 million, or $0.70 per share, for 2011, which represents an increase of 13.4% in net income and 21.4% in earnings per share.


David L. Dunkel, Chairman and CEO, said, “The Firm continued to perform well in the fourth quarter. We have continued to see consistent demand for our services and have been able to capitalize on this demand through both increases in revenue and improvements in operating margins. Total Tech revenue for 2012 of $675.6 million represents historically high revenues for that business unit. We also experienced a sequential revenue increase during Q4 in all our Flex business lines on a billing day basis. During the fourth quarter, we significantly intensified our focus on accelerating future revenue growth by adding a significant number of sales associates as a result of our view that we will remain in a positive environment for professional temporary staffing for the foreseeable future. I want to thank all of our employees, consultants and clients for making 2012 another successful year for Kforce.”

Joseph J. Liberatore, President, said, “Our foundation of great people, processes and flexible operating model along with our tenured leadership and sales teams, drove revenues from continuing operations of $1.08 billion in 2012 while setting annual revenue records for Tech and HIM. In the fourth quarter of 2012, the Firm continued its solid performance driving year-over-year Flex margin increases across all segments, which aggregated to a 100 basis point improvement on a total Firm basis, primarily driven by the increase in the spread between our bill and pay rates. We were able to profitably grow revenues with both large and small clients. Discussions with our clients and certain key performance indicators indicate consistent demand for our service offerings, particularly in Technology. With a renewed emphasis on Focus, Simplicity and Accountability, Kforce intends to continue to aggressively pursue business opportunities with the goal of gaining significant client and market share.”

Mr. Liberatore noted additional operational results for the fourth quarter include:

 

   

Flex revenue per billing day of $4.2 million in Q4 ‘12 increased 2.0% from $4.1 million in Q3 ‘12 and increased 2.2% from $4.1 million in Q4 ‘11.

 

   

Sequential percentage changes in Flex revenue on a billing day basis by segment were: 8.7% increase for HIM, 8.3% increase for Government Solutions, 2.1% increase for FA, and a 0.3% increase for Tech.

 

   

Year-over-year changes in Flex revenue on a billing day basis were a 3.3% increase in HIM, 2.7% increase in Tech, 2.1% increase in Government Solutions, and a 0.2% increase in FA.

 

   

Search revenue of $11.1 million in Q4 ‘12 decreased 10.3% from $12.4 million in Q3 ‘12 and increased 9.2% from $10.2 million in Q4 ‘11.

David M. Kelly, Chief Financial Officer, said, “The Firm continued to perform well in Q4 ‘12. Q4 ‘12 contained 62 billing days while Q3 ‘12 contained 63 billing days and Q4 ‘11 contained 61 billing days.” Mr. Kelly continued, “In 2012, the Firm took advantage of our flexibility and capacity to gain market share while protecting our strong balance sheet and delivering solid financial results. Cash flow and EBITDA continued to be strong in 2012. During 2012, the Firm repurchased approximately 3.4 million shares of Kforce common stock which represented 8.9% of outstanding shares at December 31, 2011. We will continue to be opportunistic in future repurchases as cash flow and market conditions warrant. On February 1, 2013, the Kforce Board of Directors increased the outstanding stock repurchase authorization by $50.0 million to $89.9 million. The Firm also issued a special dividend of $1.00 per share during December 2012, which we believe provided a significant return to our shareholders. We believe we are well positioned to take advantage of available opportunities in 2013 and grow revenues and profitability.”


Financial highlights for the fourth quarter and 2012 include:

 

   

Flex gross profit increased 30 basis points to 29.9% in Q4 ‘12 from 29.6% in Q3 ‘12 and increased 100 basis points from 28.9% in Q4 ‘11.

 

   

Selling, general and administrative expenses as a percentage of revenues for Q4 ‘12 was 26.9% compared to 27.3% for Q4 ‘11.

 

   

At the end of Q4 ‘12, the Firm had bank debt of $21.0 million, which was a result of the special dividend issued in December 2012 of $35.2 million and $19.0 million of open market repurchases of Kforce common stock during Q4 ‘12. There was no bank debt at the end of Q3 ‘12.

 

   

Net income from continuing operations in Q4 ‘12 before the impact of the impairment charge was $8.4 million, or $0.24 per share, an increase of 64.6% and 71.4%, respectively, from Q4 ‘11 which had net income of $5.1 million, or $0.14 per share.

Mr. Kelly stated, “In addition, looking forward to the first quarter of 2013, we expect revenues may be in the $268 million to $274 million range and earnings per share in the range of $0.09 to $0.12. The first quarter of 2013 has 63 billing days, one more than the fourth quarter of 2012. Implicit in the first quarter’s guidance is a $0.09-$0.10 sequential impact from payroll taxes and a $0.03-$0.04 impact from human capital investments.”

On Tuesday, February 5, 2013, Kforce will host a conference call to discuss these results. The call will begin at 5:00 p.m. Eastern Time.

The dial-in number is (877) 344-3890. The conference passcode is Kforce. The replay of the call will be available from 8:00 p.m. EST, Wednesday, February 6, 2013 through February 20, 2013 by dialing (855) 859-2056, passcode 43184399

This call is being webcast by Shareholder.com and can be accessed at Kforce’s web site at www.kforce.com (select “Investor Relations”). The webcast replay will be available until February 20, 2013.


About Kforce

Kforce (Nasdaq:KFRC) is a professional staffing and solutions firm providing flexible and permanent staffing solutions in the skill areas of technology, finance & accounting, health information management and government solutions. Backed by more than 2,500 associates and approximately 10,700 consultants on assignment, Kforce is committed to “Great People = Great Results” for our valued clients and candidates. Kforce operates with 63 offices located throughout the United States and one office in the Philippines. For more information, please visit our Web site at http://www.kforce.com.

The Kforce Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3749.

Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Factors that could cause actual results to differ materially include the following: business conditions and growth in the staffing industry and general economy; competitive factors, risks due to shifts in the market demand, including, without limitation, shifts in demand for our Technology, Finance and Accounting, Health Information Management and Government Solutions segments, as well as the market for search and flexible staffing assignments; changes in the service mix; ability of the Firm to complete acquisitions; and the risk factors listed from time to time in the Firm’s reports filed with the Securities and Exchange Commission, as well as assumptions regarding the foregoing. In particular, there can be no assurance that we will continue to increase our market share, successfully manage risks to our revenue stream and successfully put into place the people and processes that will create future success. The words “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan” and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. The Firm undertakes no obligation to publicly update or revise any forward-looking statements. As a result, such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.


Kforce Inc.

Summary of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

 

     Three Months Ended  
     Dec. 31,     Sept. 30,     Dec. 31,  
     2012     2012     2011  

Revenue by function:

      

Technology

   $ 167,616      $ 170,577      $ 160,822   

Finance & accounting

     58,624        58,729        56,672   

Health information management

     19,406        18,157        18,578   

Government solutions

     24,193        22,698        23,269   
  

 

 

   

 

 

   

 

 

 

Total revenue

     269,839        270,161        259,341   

Costs of services

     181,259        181,399        177,091   
  

 

 

   

 

 

   

 

 

 

Gross profit

     88,580        88,762        82,250   

GP %

     32.8     32.9     31.7

Flex GP %

     29.9     29.6     28.9

Selling, general & administrative expenses

     72,540        70,367        70,849   

Goodwill impairment

     3,858        —           —      

Depreciation & amortization

     2,371        2,659        3,013   
  

 

 

   

 

 

   

 

 

 

Income from operations

     9,811        15,736        8,388   

Other expense, net

     171        288        349   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations, before income taxes

     9,640        15,448        8,039   

Income tax expense

     3,718        6,173        2,952   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations

     5,922        9,275        5,087   

Income (loss) from discontinued operations, net of income taxes

     198        (7     1,998   
  

 

 

   

 

 

   

 

 

 

Net income

   $ 6,120      $ 9,268      $ 7,085   
  

 

 

   

 

 

   

 

 

 

Earnings per share - diluted

   $ 0.17      $ 0.26      $ 0.20   

Adjusted EBITDA per share

   $ 0.45      $ 0.51      $ 0.41   

Shares outstanding - diluted

     35,573        36,243        35,709   

Adjusted EBITDA

   $ 16,070      $ 18,415      $ 14,584   

Other information:

      

Capital expenditures

   $ 1,472      $ 1,568      $ 2,445   

Equity-based compensation expense, net of income taxes

   $ 33      $ 23      $ 2,037   

Billing days

     62        63        61   


Kforce Inc.

Summary of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

 

     Twelve Months Ended  
     Dec. 31,     Dec. 31,  
     2012     2011  

Revenue by function:

    

Technology

   $ 675,587      $ 624,012   

Finance & accounting

     238,476        219,575   

Health information management

     76,992        68,711   

Government solutions

     91,424        92,449   
  

 

 

   

 

 

 

Total revenue

     1,082,479        1,004,747   

Costs of services

     734,546        687,000   
  

 

 

   

 

 

 

Gross profit

     347,933        317,747   

GP %

     32.1     31.6

Flex GP %

     29.0     28.5

Selling, general & administrative expenses

     322,436        274,072   

Goodwill impairment

     69,158        —      

Depreciation & amortization

     10,789        12,505   
  

 

 

   

 

 

 

(Loss) income from operations

     (54,450     31,170   

Other expense, net

     1,116        1,256   
  

 

 

   

 

 

 

(Loss) income from continuing operations, before income taxes

     (55,566     29,914   

Income tax (benefit) expense

     (19,854     10,858   
  

 

 

   

 

 

 

(Loss) income from continuing operations

     (35,712     19,056   

Income from discontinued operations, net of income taxes

     22,009        8,100   
  

 

 

   

 

 

 

Net (loss) income

   $ (13,703   $ 27,156   
  

 

 

   

 

 

 

Earnings (loss) per share - diluted

   $ (0.38   $ 0.70   

Adjusted EBITDA per share

   $ 1.42      $ 1.43   

Shares outstanding - diluted

     35,791        38,831   

Adjusted EBITDA

   $ 51,063      $ 55,510   

Other information:

    

Capital expenditures

   $ 6,518      $ 7,662   

Equity-based compensation expense, net of income taxes

   $ 16,587      $ 7,529   

Billing days

     253        252   


Kforce Inc.

Key Statistics

(Unaudited)

 

     Q4 2012     Q3 2012     Q4 2011  

Total Firm

      

Flex revenue (000’s)

   $ 258,743      $ 257,790      $ 249,183   

Revenue per billing day (000’s)

   $ 4,173      $ 4,092      $ 4,085   

Sequential flex revenue change

     0.4     -1.2     -0.1

Hours (000’s)

     4,405        4,328        4,225   

Flex GP %

     29.9     29.6     28.9

Search revenue (000’s)

   $ 11,096      $ 12,371      $ 10,158   

Placements

     791        856        759   

Average fee

   $ 14,027      $ 14,456      $ 13,389   

Billing days

     62        63        61   

Technology

      

Flex revenue (000’s)

   $ 163,282      $ 165,342      $ 156,543   

Revenue per billing day (000’s)

   $ 2,634      $ 2,625      $ 2,566   

Sequential flex revenue change

     -1.2     -0.4     -2.3

Hours (000’s)

     2,511        2,520        2,420   

Flex GP %

     28.4     28.4     27.8

Search revenue (000’s)

   $ 4,334      $ 5,235      $ 4,279   

Placements

     290        337        280   

Average fee

   $ 14,960      $ 15,536      $ 15,318   

Finance & Accounting

      

Flex revenue (000’s)

   $ 51,936      $ 51,661      $ 50,926   

Revenue per billing day (000’s)

   $ 837      $ 820      $ 835   

Sequential flex revenue change

     0.5     -3.5     6.0

Hours (000’s)

     1,607        1,545        1,517   

Flex GP %

     30.8     30.9     30.0

Search revenue (000’s)

   $ 6,688      $ 7,068      $ 5,746   

Placements

     498        513        450   

Average fee

   $ 13,434      $ 13,783      $ 12,759   

Health Information Management

      

Flex revenue (000’s)

   $ 19,332      $ 18,089      $ 18,445   

Revenue per billing day (000’s)

   $ 312      $ 287      $ 302   

Sequential flex revenue change

     6.9     -8.5     7.2

Hours (000’s)

     287        263        288   

Flex GP %

     35.2     35.9     34.6

Search revenue (000’s)

   $ 74      $ 68      $ 133   

Placements

     3        6        29   

Average fee

   $ 21,043      $ 11,384      $ 4,582   

Government Solutions

      

Flex revenue (000’s)

   $ 24,193      $ 22,698      $ 23,269   

Revenue per billing day (000’s)

   $ 390      $ 360      $ 382   

Sequential flex revenue change

     6.6     5.4     -2.6

Flex GP %

     34.3     30.5     29.5


Kforce Inc.

Consolidated Balance Sheets

(In Thousands)

(Unaudited)

 

     Dec. 31, 2012     Dec. 31, 2011  
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 1,381      $ 939   

Trade receivables, net of allowances

     151,570        174,764   

Income tax refund receivable

     1,750        250   

Deferred tax asset, net

     9,494        4,694   

Prepaid expenses and other current assets

     7,364        5,592   
  

 

 

   

 

 

 

Total current assets

     171,559        186,239   

Fixed assets, net

     34,883        36,124   

Other assets, net

     28,038        32,554   

Deferred tax asset, net

     21,523        10,042   

Intangible assets, net

     5,736        6,635   

Goodwill

     63,410        138,078   
  

 

 

   

 

 

 

Total assets

   $ 325,149      $ 409,672   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Accounts payable and other accrued liabilities

   $ 36,205      $ 26,314   

Accrued payroll costs

     50,063        55,151   

Other current liabilities

     11,564        1,463   

Income taxes payable

     1,042        236   
  

 

 

   

 

 

 

Total current liabilities

     98,874        83,164   

Long-term debt - credit facility

     21,000        49,526   

Long-term debt - other

     1,144        1,609   

Other long-term liabilities

     34,285        42,258   
  

 

 

   

 

 

 

Total liabilities

     155,303        176,557   

Commitments and contingencies

    

Stockholders’ Equity:

    

Preferred stock

     —          —     

Common stock

     685        686   

Additional paid-in capital

     400,688        372,212   

Accumulated other comprehensive loss

     (2,713     (4,050

Retained earnings

     40,203        89,135   

Treasury stock, at cost

     (269,017     (224,868
  

 

 

   

 

 

 

Total stockholders’ equity

     169,846        233,115   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 325,149      $ 409,672   
  

 

 

   

 

 

 


Kforce Inc.

Selected Financial Information and Reconciliations

(In Thousands, Except Per Share Amounts)

(Unaudited)

Adjusted Net Income and Earnings Per Share

Before Impairment Charge

 

     Three Months Ended     Twelve Months Ended  
     Dec. 31, 2012     Dec. 31, 2012  
     $     Per
share
    $     Per
share
 

Net income (loss)

   $ 6,120      $ 0.17      $ (13,703   $ (0.38

Goodwill impairment, pre-tax

     3,858        0.11        69,158        1.93   

Tax benefit from impairment charge

     (1,405     (0.04     (24,670     (0.69
  

 

 

   

 

 

   

 

 

   

 

 

 

Goodwill impairment, after-tax

     2,453        0.07        44,488        1.24   

Earnings Per Share Adjustment (*)

     —           —           —           (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income and earnings per share before impairment charge

   $ 8,573      $ 0.24      $ 30,785      $ 0.85   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding - basic

     35,530          35,791     

Weighted average shares outstanding - diluted

     35,573          36,025     

“Adjusted Net Income and Earnings Per Share Before Impairment Charge”, a non-GAAP financial measure, is defined as net income before the non-cash impairment charges related to goodwill. “Adjusted Net Income and Earnings Per Share Before Impairment Charge” should not be considered a measure of financial performance under generally accepted accounting principles and has been provided for consistency and comparability of the 2012 results with net income and earnings per share from prior periods.

(*) This earnings per share adjustment is necessary to properly reconcile net loss per share on a GAAP basis to Adjusted Net Income per share. Earnings Per Share Before Impairment Charge, a non-GAAP financial measure, is based on Net Income Before Impairment Charge and diluted weighted average shares outstanding; however, the reconciling items within the table above are based on basic weighted average shares outstanding, as the inclusion of dilutive securities such as stock options and stock awards would have an anti-dilutive effect on loss per share.


Quarterly Adjusted EBITDA

 

     Three Months Ended  
     Dec. 31,      Sept. 30,     Dec. 31,  
     2012      2012     2011  
     $      Per
share
     $     Per
share
    $      Per
share
 

Net income

   $ 6,120       $ 0.17       $ 9,268      $ 0.26      $ 7,085       $ 0.20   

Income (loss) from discontinued operations, net of income taxes

     198         0.00         (7     (0.00     1,998         0.06   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Income from continuing operations

   $ 5,922       $ 0.17       $ 9,275      $ 0.26      $ 5,087       $ 0.14   

Goodwill impairment, pre-tax

     3,858         0.11         —           —           —            —      

Depreciation & amortization

     2,371         0.07         2,659        0.07        3,013         0.09   

Amortization of restricted stock & PARS

     53         0.00         38        0.00        3,190         0.09   

Interest expense and other

     148         0.00         270        0.01        342         0.01   

Income tax expense

     3,718         0.10         6,173        0.17        2,952         0.08   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 16,070       $ 0.45       $ 18,415      $ 0.51      $ 14,584       $ 0.41   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding - basic

     35,530            36,204          34,549      

Weighted average shares outstanding - diluted

     35,573            36,243          35,709      

 

 

Full Year Adjusted EBITDA

 

     Twelve Months Ended  
     Dec. 31,     Dec. 31,  
     2012     2011  
     $     Per
share
    $      Per
share
 

Net (loss) income

   $ (13,703   $ (0.38   $ 27,156       $ 0.70   

Income from discontinued operations, net of income taxes

     22,009        0.62        8,100         0.21   
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) income from continuing operations

   $ (35,712   $ (1.00   $ 19,056       $ 0.49   

Goodwill impairment, pre-tax

     69,158        1.93        —            —      

Depreciation & amortization

     10,789        0.30        12,505         0.32   

Acceleration of restricted stock & PARS

     22,158        0.62        —            —      

Amortization of restricted stock & PARS

     3,530        0.10        11,819         0.30   

Interest expense and other

     994        0.03        1,272         0.04   

Income tax (benefit) expense

     (19,854     (0.55     10,858         0.28   

Earnings Per Share Adjustment (*)

     —           (0.01     —            —      
  

 

 

   

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 51,063      $ 1.42      $ 55,510       $ 1.43   
  

 

 

   

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding - basic

     35,791          37,835      

Weighted average shares outstanding - diluted

     36,025          38,831      


Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before discontinued operations, non-cash impairment charges, interest, income taxes, depreciation and amortization and stock-based compensation expense. Adjusted EBITDA should not be considered a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance.

(*) This earnings per share adjustment is necessary to properly reconcile net loss per share on a GAAP basis to Adjusted Net Income per share. Earnings Per Share Before Impairment Charge, a non-GAAP financial measure, is based on Net Income Before Impairment Charge and diluted weighted average shares outstanding; however, the reconciling items within the table above are based on basic weighted average shares outstanding, as the inclusion of dilutive securities such as stock options and stock awards would have an anti-dilutive effect on loss per share.

Adjusted Net Income and Earnings Per Share Before Impairment Charge and Adjusted EBITDA are key measures used by management to evaluate its operations and to provide useful information to investors. These measures should not be considered in isolation or as an alternative to net income, cash flows data or other financial statement information presented in the consolidated financial statements as indicators of financial performance or liquidity. These measurements are not determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations. The measures as presented may not be comparable to similarly titled measures of other companies.