KFORCE INC - FORM 8-K - EX-99.2 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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file	filename
8-K - 8-K - KFORCE INC	d771983d8k.htm
EX-10.1 - STOCK PURCHASE AGREEMENT - KFORCE INC	d771983dex101.htm
EX-99.1 - PRESS RELEASE - KFORCE INC	d771983dex991.htm

Exhibit 99.2

KFORCE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

FOR THE QUARTER ENDED MARCH 31, 2014

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical		Pro Forma Adjustments			Pro Forma
Net service revenues	$	305,312	$	23,288	(a)	$	282,024
Direct costs of services		214,213		15,715	(a)		198,498

Gross profit		91,099		7,573			83,526
Selling, general and administrative expenses		78,210		4,527	(b)		73,683
Depreciation and amortization		2,363		—			2,363

Income from operations		10,526		3,046			7,480
Other expense		365		27	(c)		338

Income before income taxes		10,161		3,019			7,142
Income tax expense		3,912		1,187	(e)		2,725

Net income	$	6,249	$	1,832		$	4,417

Earnings per share – basic	$	0.19				$	0.13
Earnings per share – diluted	$	0.19				$	0.13

Weighted average shares outstanding – basic		32,969					32,969
Weighted average shares outstanding – diluted		33,168					33,168

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, 2013

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical			Pro Forma Adjustments			Pro Forma
Net service revenues	$	1,151,887		$	78,159	(a)	$	1,073,728
Direct costs of services		782,275			52,923	(a)		729,352

Gross profit		369,612			25,236			344,376
Selling, general and administrative expenses		323,933			15,989	(b)		307,944
Goodwill impairment		14,510			—			14,510
Depreciation and amortization		9,846			—			9,846

Income from operations		21,323			9,247			12,076
Other expense (income):
Interest expense		1,302			77	(c)		1,225
Other (income) expense		(77	)		1	(d)		(78	)

Income before income taxes		20,098			9,169			10,929
Income tax expense		9,311			3,676	(e)		5,635

Net income	$	10,787		$	5,493		$	5,294

Earnings per share – basic	$	0.32					$	0.16
Earnings per share – diluted	$	0.32					$	0.16

Weighted average shares outstanding – basic		33,511						33,511
Weighted average shares outstanding – diluted		33,643						33,643

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, 2012

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical			Pro Forma Adjustments			Pro Forma
Net service revenues	$	1,082,479		$	76,992	(a)	$	1,005,487
Direct costs of services		734,546			49,645	(a)		684,901

Gross profit		347,933			27,347			320,586
Selling, general and administrative expenses		322,436			16,496	(b)		305,940
Goodwill impairment		69,158			—			69,158
Depreciation and amortization		10,789			—			10,789

(Loss) income from operations		(54,450	)		10,851			(65,301	)
Other expense:
Interest expense		1,009			55	(c)		954
Other expense		107			4	(d)		103

(Loss) income from continuing operations before income taxes		(55,566	)		10,792			(66,358	)
Income tax (benefit) expense		(19,854	)		4,373	(e)		(24,227	)

(Loss) income from continuing operations		(35,712	)		6,419			(42,131	)
Income from discontinued operations, net of income taxes		22,009			—			22,009
Net (loss) income	$	(13,703	)	$	6,419		$	(20,122	)

(Loss) earnings per share – basic:
From continuing operations	$	(1.00	)				$	(1.18	)
From discontinued operations	$	0.62					$	0.62

(Loss) earnings per share – basic	$	(0.38	)				$	(0.56	)

(Loss) earnings per share – diluted:
From continuing operations	$	(1.00	)				$	(1.18	)
From discontinued operations	$	0.62					$	0.62

(Loss) earnings per share – diluted	$	(0.38	)				$	(0.56	)

Weighted average shares outstanding – basic		35,791						35,791
Weighted average shares outstanding – diluted		35,791						35,791

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, 2011

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Historical		Pro Forma Adjustments			Pro Forma
Net service revenues	$	1,004,747	$	68,711	(a)	$	936,036
Direct costs of services		687,000		44,235	(a)		642,765

Gross profit		317,747		24,476			293,271
Selling, general and administrative expenses		274,072		14,596	(b)		259,476
Depreciation and amortization		12,505		—			12,505

Income from operations		31,170		9,880			21,290
Other expense:
Interest expense		1,196		36	(c)		1,160
Other expense		60		—			60

Income from continuing operations before income taxes		29,914		9,844			20,070
Income tax expense		10,858		3,872	(e)		6,986

Income from continuing operations		19,056		5,972			13,084
Income from discontinued operations, net of income taxes		8,100		—			8,100
Net income	$	27,156	$	5,972		$	21,184

Earnings per share – basic:
From continuing operations	$	0.50				$	0.35
From discontinued operations	$	0.22				$	0.21

Earnings per share – basic	$	0.72				$	0.56

Earnings per share – diluted:
From continuing operations	$	0.49				$	0.34
From discontinued operations	$	0.21				$	0.21

Earnings per share – diluted	$	0.70				$	0.55

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

BALANCE SHEET AS OF MARCH 31, 2014

(IN THOUSANDS)


	Historical			Pro Forma Adjustments				Pro Forma
ASSETS
Current Assets:
Cash and cash equivalents	$	816		$	12,495		(f)	$	13,311
Trade receivables, net of allowances of $2,053		187,844			(13,732	)	(g)		174,112
Income tax refund receivable		5,274			—				5,274
Deferred tax assets, net		4,350			—				4,350
Prepaid expenses and other current assets		11,811			(325	)	(g)		11,486

Total current assets		210,095			(1,562	)			208,533
Fixed assets, net		36,194			(161	)	(g)		36,033
Other assets, net		30,642			(81	)	(g)		30,561
Deferred tax assets, net		21,629			—				21,629
Intangible assets, net		4,834			—				4,834
Goodwill		48,900			(4,886	)	(h)		44,014

Total assets	$	352,294		$	(6,690	)		$	345,604

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and other accrued liabilities	$	28,241			(603	)	(g)	$	27,638
Accrued payroll costs		58,821			(4,105	)	(g)		54,716
Other current liabilities		1,098			—				1,098
Income taxes payable		3,811			—				3,811

Total current liabilities		91,971			(4,708	)			87,263
Long-term debt – credit facility		61,216			(61,216	)	(f)		—
Long-term debt – other		1,133			—				1,133
Other long-term liabilities		36,571			(1,514	)	(g)		35,057

Total liabilities		190,891			(67,438	)			123,453

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, 69,679 issued		697			—				697
Additional paid-in capital		406,170			648		(i)		406,818
Accumulated other comprehensive loss		282			—				282
Retained earnings		50,462			60,100		(i)		110,562
Treasury stock, at cost; 35,757 shares		(296,208	)		—				(296,208	)

Total stockholders’ equity		161,403			60,748				222,151

Total liabilities and stockholders’ equity	$	352,294		$	(6,690	)		$	345,604

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 Healthcare, Inc. (“KHI”) sold to RCM Acquisition, Inc. (“Purchaser”).

(b)

This adjustment reflects the elimination of the selling, general and administrative expenses of KHI, 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 KHI. This adjustment does not reflect any general corporate overhead costs.

(c)	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.

(d)	This adjustment reflects the elimination of other expenses of KHI.

(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 KHI for the periods presented.

(f)

This adjustment reflects the receipt of proceeds of $119,000, less approximately $45,300 which represents: (i) transaction costs including legal, advisory and other professional fees and transaction bonuses; (ii) the estimated difference in the working capital requirement in the Stock Purchase Agreement and working capital as of March 31, 2014; and (iii) estimated taxes on the disposition of KHI. The net proceeds on the disposition of KHI first reduced outstanding borrowings per a requirement under our Credit Facility Agreement.

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

(h)	This adjustment reflects the elimination of the amount of goodwill allocated to KHI.

(i)

This adjustment reflects the estimated net gain of approximately $60,100 arising from the transaction. The estimated gain has not been reflected in the unaudited pro forma condensed 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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