* Fourth Quarter Net Income of $7.4 Million, or $0.19 Per Share, Excluding Impairment Charge * Records Non-Cash Impairment Charge of $115.2 Million, After Tax
TAMPA, Fla., Feb. 10, 2009 (GLOBE NEWSWIRE) -- Kforce Inc. (Nasdaq:KFRC), a provider of professional staffing services and solutions, today announced results for its fourth quarter of 2008. For the quarter ended December 31, 2008, revenue from continuing operations was $241.0 million, a decrease of 2.4% over the quarter ended December 31, 2007 and 4.0% over the quarter ended September 30, 2008. Excluding the non-cash goodwill and other intangible assets impairment charge recorded in the quarter ended December 31, 2008, Kforce reported net income of $7.4 million, or $0.19 per share, versus $10.0 million, or $0.24 per share, in the comparable quarter in 2007, which represents a year-over-year decline of 26.2% in net income and 20.8% in earnings per share. Net income for the quarter ended September 30, 2008 was $7.9 million, or $0.20 per share.
Excluding the non-cash goodwill and other intangible assets impairment charge, Kforce reported net income of $31.1 million, or $0.78 per share, for the year ended December 31, 2008, versus net income of $40.4 million and $0.95 per share for 2007 representing a year-over-year decline of 22.9% in net income and 17.9% in earnings per share.
Kforce also announced that it has recorded a non-cash goodwill and other intangible assets impairment charge (the "impairment charge") in the fourth quarter of 2008 of $129.4 million on a pre-tax basis. The income tax benefit associated with this impairment charge was $14.2 million resulting in an after-tax charge to net income of $115.2 million. On a GAAP basis, Kforce reported a net loss for the quarter ended December 31, 2008 of $107.9 million, or $2.81 loss per share, and a net loss for the year ended December 31, 2008 of $84.1 million, or $2.13 loss per share.
The impairment charge results primarily from the impact that the unprecedented economic environment, including the turmoil in financial and credit markets, and increasing jobless claims and unemployment rates have had on overall equity values as well as on our operations, forecasted cash flows and market capitalization. Kforce does not expect the impairment charge to result in any cash expenditures and it is not expected to affect Kforce's cash position, cash flow from operating activities, liquidity position or availability under its Credit Facility, nor does it have any effect on current or future operations of Kforce.
"The Firm delivered solid performance in the fourth quarter during a period where there continued to be extraordinary concerns and significant deterioration in the macroeconomic environment," said David L. Dunkel, Chairman and CEO. Mr. Dunkel continued, "While there remains uncertainty about the length and depth of this recession, we believe the secular drivers for professional staffing and solutions remain intact. We have made and will continue to make adjustments as necessary to put Kforce in a position to perform well as we navigate through this recession and for continued strong performance as the economy improves. We believe Kforce has an experienced management team and a strong balance sheet, which allows us to be flexible from an operational and financial standpoint. During this phase of the economic cycle, our priorities are to maintain positive cash flow and retain the highly talented people that are the lifeblood of our future success. We will continue to use cash flow for debt retirement, share repurchases and acquisitions that meet very high thresholds as was the case with the recent acquisition of dNovus RDI, which we believe is a significant enhancement to our Government Solutions' revenue footprint in the federal government sector. We are pleased to have crossed the $100 million annualized revenue threshold in the government sector, which we believe gives us a scalable platform for sustained growth. We also believe that our concerted efforts to maintain a professional staffing and solutions revenue stream that is almost entirely domestic and well-diversified from a client perspective has positioned Kforce well for the future."
William L. Sanders, President, said, "Our vision is to be the Firm most respected by those we serve. A key aspect of our vision is building a Firm that delivers sustainable and consistent revenue and earnings performance. From our experience in past recessions, we believe we have carefully managed the risks to our revenue stream, particularly in permanent placement. We believe that steps taken during the past six years have prepared the Firm for this economic down cycle. We believe our mix of service offerings has a significantly lower exposure to economic pressures than during the last down cycle. We have exited businesses that were not aligned with our operating model. It also appears that clients have been more rational in their hiring during the past up cycle, particularly in Technology. In addition, the completion of our upgraded technology platform, the creation of our centralized National Recruiting Center and the implementation of a volume account strategy have, we believe, enhanced operating leverage and positioned the Firm well."
Mr. Sanders noted additional operational highlights of the fourth quarter include:
* Flex revenue of $228.2 million decreased 3.1% from $235.4 million in Q3 '08 and decreased 0.5% from $229.3 million in Q4 '07, * Search revenue of $12.8 million decreased 17.5% from $15.5 million in Q3 '08 and decreased 27.6% from $17.7 million in Q4 '07, * Flex revenue per billing day of $3.7 million in Q4 '08 was flat with Q3 '08 and decreased 2.1% from $3.8 million in Q4 '07, * Flex revenue per billing day in Q4 '08 by segment was $2.0 million for Technology, $0.6 million for F&A, $0.7 million for HLS and $0.3 million for Government Solutions. Sequential percentage changes on a billing day basis by segment were 2.1% increase for Technology, 5.0% decrease for F&A, 6.5% decrease for HLS and an 15.3% increase for Government Solutions, * Flex gross profit declined sequentially 40 basis points to 29.8% in Q4 '08 from 30.2% in Q3 '08 and 110 basis points from 30.9% in Q4 '07.
Joe Liberatore, Chief Financial Officer said, "During these unprecedented times and as we head into 2009, we are very pleased with our revenue footprint and strength of our balance sheet. Our working capital at the end of 2008 is $60.3 million and our current ratio is 1.7. Additionally, during the fourth quarter of '08, the Board of Directors increased its authorization to repurchase up to $75 million in Kforce common stock."
Financial highlights for 2008:
* Total revenue from continuing operations for 2008 was $997.0 million, an increase of 2.5% from $972.8 million in 2007, * Earnings per share before the impact of equity based compensation expense and impairment charge for 2008 was $0.84, an 11.6% decrease from $0.95 in 2007, * Cash flows from operating activities for 2008 of $89.3 million increased 83.2% from $48.8 million in 2007, * During 2008, we repurchased 4.5 million shares of common stock at a total cost of $37.9 million with $74.8 million remaining under current Board authorizations as of December 31, 2008, * After taking into account the share repurchases and acquisition of dNovus RDI in December 2008, bank debt at the end of Q4 '08 was $38.0 million, reflecting a reduction of $12.3 million from $50.3 million at the end of 2007.
Mr. Liberatore continued, "Looking forward to the first quarter of 2009 we expect revenue may be in the $226 million to $235 million range, and earnings per share in the range of $0.05 to $0.09 which reflects an impact of approximately $0.05 per share of payroll tax related costs."
On Tuesday, February 10, 2009, 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 800-811-0667. The replay of the call will be available from 7:00 p.m. Eastern Daylight Time Tuesday, February 10 to February 25, 2009 by dialing 888-203-1112, passcode 5468013.
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 25, 2009.
About Kforce
Kforce (Nasdaq:KFRC) is a professional staffing firm providing flexible and permanent staffing solutions in the skill areas of technology, finance & accounting, and health and life sciences. Backed by over 2,000 staffing specialists, Kforce is committed to "Great People = Great Results" for our valued clients and candidates. Kforce operates with 63 offices in 41 markets in North America and two 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
About Kforce Government Solutions
KGS provides innovative technology, financial management, data architecture and continuous process improvement and finance and accounting solutions to federal government clients. KGS, with over 700 professionals currently on assignment, has been partnering with our clients since 1970 to successfully solve their challenges. KGS' in-depth operational knowledge and understanding of Federal Agencies, the Defense Department, Homeland Security and industry best practices, combined with expert and highly-skilled professionals, have resulted in a comprehensive portfolio of technologically advanced and innovative consulting solutions designed to guide clients through today's environment of complex challenges, risk, and cost. For more information, visit http://www.kforcegov.com/.
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 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 Kforce Government Solutions, Health and Life Sciences, Finance and Accounting and Technology groups, 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. 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, 2008 2008 2007 --------- --------- --------- Revenue by Function: Technology $ 128,781 $ 131,203 $ 131,664 Finance & Accounting 46,428 51,182 56,392 Health & Life Sciences 45,048 50,005 42,448 Government Solutions 20,697 18,528 16,451 --------- --------- --------- Total Revenue 240,954 250,918 246,955 Revenue by Time: Perm 12,775 15,487 17,652 Flexible 228,179 235,431 229,303 --------- --------- --------- Total Revenue 240,954 250,918 246,955 Direct Costs Of Services 160,249 164,351 158,445 --------- --------- --------- Gross Profit 80,705 86,567 88,510 GP % 33.5% 34.5% 35.8% Flex GP % 29.8% 30.2% 30.9% Selling, General & Administrative: Selling, General & Administrative, Excluding Impairment 65,785 71,613 68,914 Goodwill & Intangible Assets Impairment 129,409 -- -- --------- --------- --------- Total Selling, General & Administrative 195,194 71,613 68,914 Depreciation & Amortization 3,174 3,028 3,687 --------- --------- --------- (Loss) Income from Operations (117,663) 11,926 15,909 Other Expense, Net 371 422 1,031 --------- --------- --------- (Loss) Income from Continuing Operations, Before Income Taxes (118,034) 11,504 14,878 Income Tax (Benefit) Expense (10,196) 4,522 5,709 --------- --------- --------- (Loss) Income from Continuing Operations (107,838) 6,982 9,169 (Loss) Income from Discontinued Operations, Net of Income Taxes (40) 910 802 --------- --------- --------- Net (Loss) Income $(107,878) $ 7,892 $ 9,971 ========= ========= ========= (Loss) Earnings Per Share - Diluted $ (2.81) $ 0.20 $ 0.24 Adjusted EBITDA Per Share $ 0.40 $ 0.41 $ 0.49 Shares Outstanding - Diluted 38,408 39,977 42,209 Adjusted EBITDA $ 15,634 $ 16,421 $ 20,528 Selected Cash Flow Information: Bad Debt (Recovery) Expense from Continuing Operations $ (183) $ 3,789 $ (123) Capital Expenditures $ 1,471 $ 2,371 $ 3,533 Other Information: Equity-Based Compensation Expense, Net $ 462 $ 885 $ 426 Billing Days 62 64 61 Kforce Inc. Summary of Operations (In Thousands, Except Per Share Amounts) (Unaudited) Twelve Months Ended -------------------- Dec. 31, Dec. 31, 2008 2007 --------- --------- Revenue by Function: Technology $ 519,867 $ 518,788 Finance & Accounting 211,259 233,125 Health & Life Sciences 189,666 159,104 Government Solutions 76,225 61,764 --------- --------- Total Revenue 997,017 972,781 Revenue by Time: Perm 65,985 75,747 Flexible 931,032 897,034 --------- --------- Total Revenue 997,017 972,781 Direct Costs Of Services 652,366 620,758 --------- --------- Gross Profit 344,651 352,023 GP % 34.6% 36.2% Flex GP % 29.9% 30.8% Selling, General & Administrative: Selling, General & Administrative, Excluding Impairment 286,475 272,335 Goodwill & Intangible Assets Impairment 129,409 -- --------- --------- Total Selling, General & Administrative 415,884 272,335 Depreciation & Amortization 13,824 14,487 --------- --------- (Loss) Income from Operations (85,057) 65,201 Other Expense, Net 2,136 4,422 --------- --------- (Loss) Income from Continuing Operations, Before Income Taxes (87,193) 60,779 Income Tax Expense 1,928 23,856 --------- --------- (Loss) Income from Continuing Operations (89,121) 36,923 Income from Discontinued Operations, Net of Income Taxes 5,013 3,444 --------- --------- Net (Loss) Income $ (84,108) $ 40,367 ========= ========= (Loss) Earnings Per Share - Diluted $ (2.13) $ 0.95 Adjusted EBITDA Per Share $ 1.75 $ 1.97 Shares Outstanding - Diluted 39,471 42,294 Adjusted EBITDA $ 70,042 $ 83,121 Selected Cash Flow Information: Bad Debt Expense from Continuing Operations $ 5,205 $ 835 Capital Expenditures $ 10,368 $ 14,815 Other Information: Equity-Based Compensation Expense, Net $ 7,265 $ 2,473 Billing Days 253 251 Kforce Inc. Key Statistics (Unaudited) Q4 2008 Q3 2008 Q4 2007 --------- --------- --------- Total Firm ---------- Flex Revenue (000's) $ 228,179 $ 235,431 $ 229,303 Revenue per billing day (000's) $ 3,680 $ 3,679 $ 3,759 Sequential Flex Revenue Change -3.1% 0.1% 1.2% Hours (000's) 3,794 3,862 3,831 Flex GP % 29.8% 30.2% 30.9% Search Revenue (000's) $ 12,775 $ 15,487 $ 17,652 Placements 840 1,120 1,308 Average Fee $ 15,207 $ 13,825 $ 13,486 Billing days 62 64 61 Technology ---------- Flex Revenue (000's) $ 123,648 $ 125,019 $ 124,897 Revenue per billing day (000's) $ 1,994 $ 1,953 $ 2,047 Sequential Flex Revenue Change -1.1% 0.9% 0.4% Hours (000's) 1,920 1,926 1,881 Flex GP % 27.4% 27.4% 28.0% Search Revenue (000's) $ 5,133 $ 6,184 $ 6,766 Placements 313 407 468 Average Fee $ 16,414 $ 15,179 $ 14,463 Finance & Accounting -------------------- Flex Revenue (000's) $ 39,192 $ 42,604 $ 46,164 Revenue per billing day (000's) $ 632 $ 666 $ 757 Sequential Flex Revenue Change -8.0% -4.6% 2.4% Hours (000's) 1,127 1,181 1,277 Flex GP % 34.0% 34.0% 33.8% Search Revenue (000's) $ 7,236 $ 8,578 $ 10,229 Placements 491 675 797 Average Fee $ 14,727 $ 12,712 $ 12,825 Health & Life Sciences ---------------------- Flex Revenue (000's) $ 44,642 $ 49,280 $ 41,791 Revenue per billing day (000's) $ 720 $ 770 $ 685 Sequential Flex Revenue Change -9.4% 3.2% 1.0% Hours (000's) 505 553 501 Flex GP % 29.2% 30.7% 33.8% Search Revenue (000's) $ 406 $ 725 $ 657 Placements 36 38 43 Average Fee $ 11,287 $ 19,077 $ 15,224 Government Solutions -------------------- Flex Revenue (000's) $ 20,697 $ 18,528 $ 16,451 Revenue per billing day (000's) $ 334 $ 289 $ 270 Sequential Flex Revenue Change 11.7% -2.0% 4.0% Hours (000's) 242 202 172 Flex GP % 37.1% 39.0% 37.4% Kforce Inc. Key Statistics - Health & Life Sciences (Unaudited) Q4 2008 Q3 2008 Q4 2007 --------- --------- --------- Clinical Research ----------------- Flex Revenue (000's) $ 27,058 $ 29,980 $ 24,677 Revenue per billing day (000's) $ 436 $ 468 $ 404 Sequential Flex Revenue Change -9.7% 1.8% -1.0% Hours (000's) 304 332 277 Flex GP % 26.7% 27.5% 31.7% Search Revenue (000's) $ 272 $ 490 $ 439 Placements 24 23 27 Average Fee $ 11,343 $ 21,311 $ 16,143 Healthcare ---------- Flex Revenue (000's) $ 17,584 $ 19,300 $ 17,114 Revenue per billing day (000's) $ 284 $ 302 $ 281 Sequential Flex Revenue Change -8.9% 5.4% 4.0% Hours (000's) 201 221 224 Flex GP % 33.1% 35.5% 36.9% Search Revenue (000's) $ 134 $ 235 $ 218 Placements 12 15 16 Average Fee $ 11,176 $ 15,653 $ 13,683 Kforce Inc. Consolidated Balance Sheets (In Thousands) (Unaudited) Dec. 31, Dec. 31, 2008 2007 --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 660 $ 1,083 Trade receivables, net of allowance for doubtful accounts and fallouts 132,428 166,777 Income tax refund receivable 487 377 Deferred tax asset, net 5,994 8,409 Prepaid expenses and other current assets 6,177 4,268 --------- --------- Total current assets 145,746 180,914 Fixed assets, net 14,687 13,355 Other assets, net 29,032 31,982 Deferred tax asset non-current, net 10,627 -- Intangible assets, net 10,604 12,276 Goodwill 140,119 237,609 --------- --------- Total assets $ 350,815 $ 476,136 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and other accrued liabilities $ 28,084 $ 25,222 Accrued payroll costs 51,310 53,613 Other current debt 1,917 3,859 Income taxes payable 4,133 2,872 --------- --------- Total current liabilities 85,444 85,566 Long-term debt - credit facility 38,022 50,330 Long-term debt - other 2,294 2,670 Deferred tax liability, net -- 6,624 Other long-term liabilities 19,212 18,478 --------- --------- Total liabilities 144,972 163,668 Commitments and Contingencies Stockholders' Equity: Preferred stock -- -- Common stock 619 609 Additional paid-in capital 325,187 310,165 Accumulated other comprehensive income 389 -- Retained earnings 28,472 112,580 Less reacquired shares at cost (148,824) (110,886) --------- --------- Total stockholders' equity 205,843 312,468 --------- --------- Total liabilities and stockholders' equity $ 350,815 $ 476,136 ========= ========= Kforce Inc. Selected Financial Information and Reconciliations (In Thousands, Except Per Share Amounts) (Unaudited) Net Income and Earnings Per Share Before Impairment Charge Three Months Ended Twelve Months Ended Dec. 31, 2008 Dec. 31, 2008 ------------------ ------------------ $ Per share $ Per share --------- ------ --------- ------ GAAP Net Loss $(107,878) $(2.81) $ (84,108) $(2.13) Goodwill & Intangible Assets Impairment, Pre-Tax 129,409 3.37 129,409 3.28 Tax benefit from impairment charge (14,174) (0.37) (14,174) (0.36) --------- ------ --------- ------ Goodwill & Intangible Assets Impairment, After-Tax 115,235 3.00 115,235 2.92 Earnings Per Share Adjustment (*) -- -- -- (0.01) --------- ------ --------- ------ Adjusted Net Income and Earnings Per Share $ 7,357 $ 0.19 $ 31,127 $ 0.78 Weighted Average Shares Outstanding - Basic 38,408 39,471 Weighted Average Shares Outstanding - Diluted 38,860 39,926 Adjusted Net Income and Earnings Per Share, a non-GAAP financial measure, is defined as net income before the non-cash impairment charges related to goodwill and intangible assets. Adjusted Net Income should not be considered a measure of financial performance under generally accepted accounting principles and has been provided for consistency and comparability of the 2008 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, 2008 Sept. 30, 2008 Dec. 31, 2007 ------------------ --------------- --------------- Per Per Per $ share $ share $ share --------- ------ ------- ----- ------- ----- GAAP Net (Loss) Income $(107,878) $(2.81) $ 7,892 $0.20 $ 9,971 $0.24 (Loss) Income from Discontinued Operations, Net of Income Taxes (40) (0.00) 910 0.02 802 0.02 --------- ------ ------- ----- ------- ----- (Loss) Income from Continuing Operations $(107,838) $(2.81) $ 6,982 $0.18 $ 9,169 $0.22 Goodwill & Intangible Assets Impairment, Pre-Tax 129,409 3.37 -- -- -- -- Depreciation & Amortiza- tion 3,174 0.08 3,028 0.08 3,687 0.09 Amortization of Stock Options & SARS 147 0.00 668 0.01 611 0.01 Amortization of Restricted Stock & PARS 571 0.01 791 0.02 303 0.01 Interest Expense and Other 367 0.01 430 0.01 1,049 0.02 Income Tax (Benefit) Expense (10,196) (0.27) 4,522 0.11 5,709 0.14 Earnings Per Share Adjustment (*) -- 0.01 -- -- -- -- --------- ------ ------- ----- ------- ----- Adjusted EBITDA $ 15,634 $ 0.40 $16,421 $0.41 $20,528 $0.49 ========= ====== ======= ===== ======= ===== Weighted Average Shares Outstanding - Basic 38,408 39,249 41,548 Weighted Average Shares Outstanding - Diluted 38,860 39,977 42,209 Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before income (loss) from discontinued operations, non-cash impairment charges, interest, income taxes, depreciation and amortization and amortization of 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 EBITDA per share. Adjusted EBITDA Per Share, a non-GAAP financial measure, is based on Adjusted EBITDA 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 Net Income before Equity-Based Compensation Expense and Impairment Charge Three Months Ended ------------------------------------------------------ Dec. 31, 2008 Sept. 30, 2008 Dec. 31, 2007 ------------------ --------------- --------------- Per Per Per $ share $ share $ share --------- ------ ------- ----- ------- ----- GAAP Net (Loss) Income $(107,878) $(2.81) $ 7,892 $0.20 $ 9,971 $0.24 (Loss) Income from Discontinued Operations, Net of Income Taxes (40) (0.00) 910 0.02 802 0.02 --------- ------ ------- ----- ------- ----- (Loss) Income from Continuing Operations $(107,838) $(2.81) $ 6,982 $0.18 $ 9,169 $0.22 Goodwill & Intangible Assets Impairment, Net of Income Taxes 115,235 3.00 -- -- -- -- Equity-Based Compensation Expense, Net: Alternative LTI Valuation Expense -- -- -- -- (213) 0.00 Amortization of Stock Options & SARS 147 0.00 668 0.01 611 0.01 Amortization of Restricted Stock & PARS 571 0.01 791 0.02 303 0.01 Income Tax (Benefit) Expense (256) 0.00 (574) (0.01) (275) (0.01) --------- ------ ------- ----- ------- ----- Equity-Based Compensation Expense, Net 462 0.01 885 0.02 426 0.01 --------- ------ ------- ----- ------- ----- Net Income before Equity-Based Compensation Expense and Impairment Charge $ 7,859 $ 0.20 $ 7,867 $0.20 $ 9,595 $0.23 ========= ====== ======= ===== ======= ===== Weighted Average Shares Outstanding - Basic 38,408 39,249 41,548 Weighted Average Shares Outstanding - Diluted 38,860 39,977 42,209 "Net Income before Equity-Based Compensation Expense and Impairment Charge", a non-GAAP financial measure, is defined as income from continuing operations, excluding non-cash impairment charges, before compensation expense incurred in conjunction with awards accounted for under Statement of Financial Accounting Standards No. 123R "Share-Based Payment" ("SFAS 123R"). SFAS 123R requires Kforce to measure the cost of employee services received in exchange for an equity based award based on the grant-date fair value of the award (with limited exceptions). That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period. Adjusted Net Income, Adjusted EBITDA and Net Income before Equity-Based Compensation Expense and Impairment Charge 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. Kforce Inc. Selected Financial Information and Reconciliations (In Thousands, Except Per Share Amounts) (Unaudited) Year to Date Adjusted EBITDA Twelve Months Ended ------------------------------------------- Dec. 31, 2008 Dec. 31, 2007 -------------------- ------------------ $ Per share $ Per share --------- ------ -------- ------ GAAP Net (Loss) Income $ (84,108) $(2.13) $ 40,367 $ 0.95 Income from Discontinued Operations, Net of Income Taxes 5,013 0.13 3,444 0.07 --------- ------ -------- ------ (Loss) Income from Continuing Operations $ (89,121) $(2.26) $ 36,923 $ 0.88 Goodwill & Intangible Assets Impairment, Pre-Tax 129,409 3.28 -- -- Depreciation & Amortization 13,824 0.35 14,487 0.35 Acceleration of SARS & PARS 6,009 0.15 -- -- Amortization of Stock Options & SARS 2,363 0.06 2,310 0.05 Amortization of Restricted Stock & PARS 3,372 0.09 1,120 0.03 Interest Expense and Other 2,258 0.06 4,425 0.10 Income Tax Expense 1,928 0.05 23,856 0.56 Earnings Per Share Adjustment (*) -- (0.03) -- -- --------- ------ -------- ------ Adjusted EBITDA $ 70,042 $ 1.75 $ 83,121 $ 1.97 ========= ====== ======== ====== Weighted Average Shares Outstanding - Basic 39,471 41,308 Weighted Average Shares Outstanding - Diluted 39,926 42,294 Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before income from discontinued operations, non-cash impairment charges, interest, income taxes, depreciation and amortization and amortization of 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 EBITDA per share. Adjusted EBITDA Per Share is based on Adjusted EBITDA 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. Year to Date Net Income before Equity-Based Compensation Expense and Impairment Charge Twelve Months Ended ------------------------------------------- Dec. 31, 2008 Dec. 31, 2007 -------------------- ------------------ $ Per share $ Per share --------- ------ -------- ------ GAAP Net (Loss) Income $ (84,108) $(2.13) $ 40,367 $ 0.95 Income from Discontinued Operations, Net of Income Taxes 5,013 0.13 3,444 0.07 --------- ------ -------- ------ (Loss) Income from Continuing Operations $ (89,121) $(2.26) $ 36,923 $ 0.88 Goodwill & Intangible Assets Impairment, Net of Income Taxes 115,235 2.92 -- Equity-Based Compensation Expense, Net: Alternative LTI Valuation Expense -- -- 641 0.03 Acceleration of SARS & PARS 6,009 0.15 -- -- Amortization of Stock Options & SARS 2,363 0.06 2,310 0.05 Amortization of Restricted Stock & PARS 3,372 0.09 1,120 0.03 Income Tax Expense (4,479) (0.12) (1,598) (0.04) --------- ------ -------- ------ Equity-Based Compensation Expense, Net 7,265 0.18 2,473 0.07 --------- ------ -------- ------ Net Income before Equity-Based Compensation Expense and Impairment Charge $ 33,379 $ 0.84 $ 39,396 $ 0.95 ========= ====== ======== ====== Weighted Average Shares Outstanding - Basic 39,471 41,308 Weighted Average Shares Outstanding - Diluted 39,926 42,294 "Net Income before Equity-Based Compensation Expense and Impairment Charge", a non-GAAP financial measure, is defined as income from continuing operations, excluding non-cash impairment charges, before compensation expense incurred in conjunction with awards accounted for under Statement of Financial Accounting Standards No. 123R "Share-Based Payment" ("SFAS 123R"). SFAS 123R requires Kforce to measure the cost of employee services received in exchange for an equity based award based on the grant-date fair value of the award (with limited exceptions). That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period. Adjusted EBITDA and Net Income before Equity-Based Compensation Expense and Impairment Charge 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.