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,
2012
Sept. 30,
2012
Dec. 31,
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,
2012
Dec. 31,
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 2012Q3 2012Q4 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
Dec. 31, 2012
Twelve Months Ended
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,
2012
Sept. 30,
2012
Dec. 31,
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,
2012
Dec. 31,
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.
CONTACT: Michael R. Blackman
         Chief Corporate Development Officer
         (813) 552-2927

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