1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
------------------------------
COMMISSION FILE NUMBER 0-26058
kforce.com, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-3264661
--------------------------------- -------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
120 WEST HYDE PARK PLACE
SUITE 150
TAMPA, FLORIDA 33606
- ---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP-CODE)
Registrant's telephone number, including area code: (813) 251-1700
--------------
------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
As of November 3, 2000 the registrant had 42,155,869 shares of common stock,
$.01 par value per share, issued and outstanding.
================================================================================
2
ITEM 1. FINANCIAL STATEMENTS
kforce.com, Inc.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
Assets:
Current Assets:
Cash and cash equivalents $ 2,273 $ 7,919
Trade receivables, net of allowance for doubtful accounts of $5,684 and
$4,417, respectively 135,125 112,545
Income tax receivable 2,034 23,038
Deferred tax asset, current 3,546 3,546
Prepaid expenses and other current assets 7,126 3,669
--------- ---------
Total current assets 150,104 150,717
Receivables from related parties, less current portion 958 960
Furniture and equipment, net 22,107 27,758
Other assets, net 25,168 21,060
Goodwill, net of accumulated amortization of $12,110 and $9,452, respectively 93,789 95,692
--------- ---------
Total assets $ 292,126 $ 296,187
========= =========
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable and other accrued liabilities $ 18,839 $ 24,180
Accrued payroll costs 45,478 31,922
Bank overdrafts 1,741 5,824
Income taxes payable 545 --
Current portion of capital lease obligations -- 481
Current portion of payables to related parties -- 2,000
--------- ---------
Total current liabilities 66,603 64,407
Bank line of credit -- --
Capital lease obligations, less current portion -- --
Other long-term liabilities, less current portion 14,269 13,575
--------- ---------
Total liabilities 80,872 77,982
--------- ---------
Commitments and contingencies -- --
Shareholders' Equity:
Preferred stock, par value $.01; 15,000 shares authorized, none issued and outstanding -- --
Common stock, par value $.01; 250,000 shares authorized,
46,958 and 46,687 issued and outstanding, respectively 470 467
Additional paid-in-capital 190,373 187,262
Retained earnings 46,353 46,646
Cumulative translation adjustment (232) (170)
Less reacquired stock at cost; 4,565 and 2,613 shares, respectively (25,710) (16,000)
--------- ---------
Total shareholders' equity 211,254 218,205
--------- ---------
Total liabilities and shareholders' equity $ 292,126 $ 296,187
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
3
kforce.com, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Net service revenues $202,193 $ 191,707 $ 594,917 $ 565,192
Direct costs of services 108,566 109,492 321,471 322,937
-------- --------- --------- ---------
Gross profit 93,627 82,215 273,446 242,255
Selling, general and administrative expenses 88,744 78,892 263,435 218,171
Depreciation and amortization expense 4,032 3,462 11,480 8,683
Other (income) expense, net 464 (203) (805) (1,261)
-------- --------- --------- ---------
Income (Loss) before income taxes 387 64 (664) 16,662
Provision for (benefit from) income taxes 92 (840) (371) 6,298
-------- --------- --------- ---------
Net income (Loss) $ 295 $ 904 $ (293) $ 10,364
======== ========= ========= =========
Comprehensive Income(Loss):
Foreign currency translation 4 -- (62) (207)
-------- --------- --------- ---------
Comprehensive Income (Loss) $ 299 $ 904 $ (355) $ 10,157
======== ========= ========= =========
Net income (Loss) per share- Basic $ .01 $ .02 $ (.01) $ 0.23
======== ========= ========= =========
Weighted average shares outstanding- Basic 43,284 44,350 43,860 44,960
======== ========= ========= =========
Net income (Loss) per share- Diluted $ .01 $ .02 $ (.01) $ .23
======== ========= ========= =========
Weighted average shares outstanding- Diluted 43,376 44,564 43,860 45,393
======== ========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
4
kforce.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------- -------------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net (loss) income $ (293) $ 10,364
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 11,480 8,683
Provision for losses on accounts and notes receivable 3,791 2,594
Deferred taxes -- (103)
Loss on asset sales/disposals 503 --
(Increase) decrease in operating assets:
Trade receivables, net (26,371) (31,262)
Prepaid expenses and other current assets (3,457) (2,954)
Other assets, net (231) (977)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities (5,728) 9,472
Accrued payroll costs 16,147 (7,705)
Bank overdrafts (4,083) --
Accrued merger, restructuring and integration expense -- (3,621)
Income taxes 21,912 (4,824)
Other long-term liabilities 654 2,334
-------- --------
Cash provided by (used in) operating activities 14,324 (17,999)
-------- --------
Cash flows from investing activities:
Capital expenditures (2,611) (10,869)
Acquisitions, net of cash acquired and earnout settlements (1,283) (15,088)
Proceeds from sale of furniture and equipment 38 --
Proceeds from the sale of short-term investments -- 12,000
Increase in cash surrender value of life insurance policies (4,449) (2,856)
-------- --------
Cash used in investing activities (8,305) (16,813)
-------- --------
Cash flows from financing activities:
Proceeds from bank line of credit -- 735
Payments on capital lease obligations (481) (674)
Payments on notes payable to related parties (2,000) --
Payments on receivables from related parties -- 19
Issuance of notes receivable from related parties -- (216)
Proceeds from exercise of stock options 2,511 1,501
Repurchase of treasury stock (11,633) (12,280)
-------- --------
Cash used in financing activities (11,603) (10,915)
-------- --------
Decrease in cash and cash equivalents (5,584) (45,727)
Cumulative translation adjustment (62) (207)
Cash and cash equivalents at beginning of period 7,919 68,821
-------- --------
Cash and cash equivalents at end of period $ 2,273 $ 22,887
======== ========
Supplemental Cash Flows Information
Cash paid (received) during the period for:
Income taxes $(21,920) $ 11,224
Interest 656 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
kforce.com, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS) (UNAUDITED)
COMMON ADDITIONAL CUMULATIVE RETAINED REACQUIRED
STOCK PAID-IN TRANSLATION EARNINGS STOCK TOTAL
CAPITAL ADJUSTMENT
Shares Amounts Shares Amounts
SHAREHOLDERS' EQUITY:
Balance at December 31, 1999 46,687 $467 $ 187,262 $ (170) $ 46,646 2,613 ($16,000) $218,205
Exercise of stock options 271 3 2,508 2,511
stock options 363 363
Foreign currency translation
adjustment (62) (62)
Net loss (293) (293)
Sale of treasury stock 240 (288) 1,923 2,163
Repurchase of common stock 2,240 (11,633) (11,633)
------ ---- --------- -------- -------- ----- -------- --------
Balance at September 30, 2000 46,958 $470 $ 190,373 $ (232) $ 46,353 4,565 ($25,710) $211,254
====== ==== ========= ======== ======== ===== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
6
kforce.com, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include the
accounts of kforce.com, Inc. (the "Company") and its subsidiaries.
Interim Financial Information. The Consolidated Financial Statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC") and, in management's opinion, include all adjustments
necessary for a fair statement of results for such interim periods. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules or regulations; however,
the Company believes that the disclosures made are adequate to make the
information presented not misleading.
Revenue Recognition. Net service revenues consist of sales, net of credits and
discounts. The Company recognizes Flexible Billings based on hours worked by
assigned personnel on a weekly basis. Search Fees are recognized in contingency
search engagements upon the successful completion of the assignment. Revenue
from search fees is shown on the Consolidated Statements of Operations net of
amounts written off for adjustments due to placed candidates not remaining in
employment for the guarantee period.
Cash and Cash Equivalents. The Company classifies all highly-liquid investments
with an initial maturity of three months or less as cash equivalents.
Self-insurance. The Company offers an employee benefit program for all eligible
employees for which it is self-insured for a portion of the cost. The Company is
liable for claims up to $125 per claim and aggregate claims up to a defined
yearly payment limit. All full-time employees and salaried consultants are
eligible to participate in the program. Self-insurance costs are accrued using
estimates to approximate the liability for reported claims and claims incurred
but not reported.
Income Taxes. The Company accounts for income taxes under the principles of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach to the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of differences between the carrying amounts and the tax bases of
other assets and liabilities. The tax effects of deductions attributable to
employees' disqualifying dispositions of shares obtained from incentive stock
options are reflected in additional paid-in capital.
Foreign Currency Translation. Foreign currency translation adjustments arise
primarily from activities of the Company's Canadian operations. Results of
operations are translated using the weighted average exchange rates during the
period, while assets and liabilities are translated into U.S. dollars using
current rates. Resulting foreign currency translation adjustments are recorded
in Shareholder's Equity.
Earnings Per Share. Options to purchase 3,005 and 3,229 shares of common stock
were not included in the computation of diluted earnings per share during the
nine months ended September 30, 2000 and 1999, respectively, because these
options were anti-dilutive.
7
NOTE B -- SEGMENT ANALYSIS
In 1998, the Company adopted Statement of Accounting Standards No. 131,
"Disclosures about Segments of Enterprise and Related Information" ("SFAS 131").
SFAS 131 supersedes SFAS 14, "Financial Reporting for Segments of a Business
Enterprise," replacing the "industry segment" approach with the "management"
approach of determining reportable segments of an organization. The management
approach designates the internal organization that is used by management for
making operation decisions and addressing performance as the source of
determining the Company's reportable segments. Beginning in 1997, the Company
revised its organizational structure to provide internal reporting following its
four functional service offerings, including: Information Technology, Finance
and Accounting, Human Resources and Operating Specialties.
The Company generates only sales and gross profit information on a functional
basis. As such, asset information by segment is not disclosed. Substantially all
operations and long-lived assets are located in the U.S.
For the three months ended September 30, 2000 and 1999:
Information Finance & Human Operating
Technology Accounting Resources Specialty TOTAL
----------- ----------- --------- --------- --------
2000
Sales $112,133 $ 57,553 $5,829 $26,678 $202,193
Gross Profit 48,579 33,614 2,010 9,424 93,627
1999
Sales 114,658 52,741 4,706 19,602 191,707
Gross Profit 43,860 30,084 1,672 6,599 82,215
For the nine months ended September 30, 2000 and 1999:
Information Finance & Human Operating
Technology Accounting Resources Specialty TOTAL
----------- ----------- --------- --------- --------
2000
Sales $332,646 $170,651 $17,282 $74,338 $594,917
Gross Profit 140,445 99,682 5,802 27,517 273,446
1999
Sales 345,097 154,474 13,803 51,818 565,192
Gross Profit 134,201 85,784 4,634 17,636 242,255
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements,
particularly with respect to the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Additional written or oral forward-looking statements may be made by
the Company from time to time, in filings with the SEC or otherwise. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of
1934. Such statements may include, but not be limited to, projections of
revenue, income, losses, cash flows, capital expenditures, plans for future
operations, financing needs or plans, plans relating to products or services of
the Company, estimates concerning the effects of litigation or other disputes,
as well as assumptions to any of the foregoing. In addition, when used in this
discussion the words "anticipate", "estimates", "expects", "intends", "plans",
and variations thereof and similar expressions are intended to identify forward
looking statements.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which can not be predicted. Future events and actual results could
differ materially from those set forth in or underlying the forward looking
statements. Readers are cautioned not to place undue reliance on any forward
looking statements contained in this report which speak only as of the date of
this report. The Company undertakes no obligation to publicly publish the
results of any adjustments to these forward looking statements that may be made
to reflect events on or after the date of this report or to reflect the
occurrence of unexpected events.
Results of Operations
The following table sets forth certain items in the Company's consolidated
statements of operations, as a percentage of net service revenues, for the
indicated periods:
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
Flexible billings 77.2% 80.7% 76.7% 80.4%
Search Fees 22.8 19.3 23.3 19.6
Net service revenues 100.0 100.0 100.0 100.0
Gross profit 46.3 42.9 46.0 42.9
Selling, general, and administrative expenses 43.9 41.2 44.3 38.6
Income (Loss) before taxes 0.2 0.0 (0.1) 3.0
Net income (Loss) 0.1 0.5 (0.1) 1.8
Results of Operations for Each of the Three and Nine Months Ended September 30,
2000 and 1999
Net service revenues. Net service revenues increased 5.5% and 5.3%,
respectively, to $202.2 million and $594.9 million for the three and nine month
periods ending September 30, 2000, as compared to $191.7 and $565.2 million for
the same periods in 1999. These increases were primarily comprised of increases
of $1.4 million and $1.5 million in Flexible Billings for the three and nine
month periods ending September 30, 2000, respectively, and increases of $9.1
million and $28.3 million in Search Services for the same periods, as described
below.
Flexible Billings increased 0.9% and 0.3% to $156.2 million and $456.1 million
for the three and nine month periods ending September 30, 2000, respectively, as
compared to $154.7 million and $454.6 million for the same periods in 1999. The
increases in Flexible Billings for the three and nine months ended September 30,
2000 are primarily attributable to an increase of approximately 1% in average
billing rates in each period, partially offset by a slight decrease in the
number of hours billed, as compared to the same periods in 1999.
Search Services increased 24.5% and 25.5%, respectively, to $46.0 million and
$138.8 million for the three and nine month periods ended September 30, 2000, as
compared to $37.0 and $110.6 million for the same periods in 1999. The increase
in revenue for both the three and nine month periods ended September 30, 2000,
is primarily the result of increases in both the number of placements made
(increases of approximately 12% and 13%, respectively) and the average fee for
these placements (increases of approximately 9% and 10%, respectively).
Gross profit. Gross profit increased 13.9% and 12.9%, respectively, to $93.6
million and $273.4 million during the three and nine month periods ended
September 30, 2000, as compared to $82.2 million and $242.3 million for the same
periods in 1999. Gross profit as a percentage of net service revenues increased
to 46.3% and 46.0%, respectively, for the three and nine month periods
9
ending September 30, 2000 as compared to 42.9% for both the three and nine month
periods in 1999. The increase in the gross profit percentage for both the three
and nine month periods in 2000 is primarily attributable to a change in revenue
mix, with Search Services, which has a higher gross profit margin, comprising
22.8% and 23.3% of total revenue for the three and nine month periods ended
September 30, 2000, as compared to 19.3% and 19.6% for the same periods in 1999.
Gross profit margin on Flexible Billings improved to 30.5% and 29.5% for the
three and nine month periods, respectively, compared to 29.2% and 29.0% for the
prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 12.5% and 20.7%, respectively to $88.7 million
and $263.4 million for the three and nine month periods ended September 30,
2000, as compared to $78.9 million and $218.2 million for the same periods in
1999. Selling, general and administrative expenses as a percentage of net
service revenues increased to 43.9% and 44.3%, respectively, for the three and
nine month periods ended September 30, 2000, compared to 41.2% and 38.6% for the
same periods in 1999. The increase in selling, general and administrative
expense as a percentage of net service revenues in the three and nine month
periods ended September 30, 2000 resulted primarily from 1) increased
advertising and marketing related to the Company's efforts to expand its
brand-name recognition and increase the exposure of its online interactive
career management and recruitment resource 2) investments in future growth,
including leadership development, increasing the number of sales consultants and
development of educational services, emerging technologies and operating
specialties 3) restructuring of the Company's back office operations and
relocation of computer equipment to a new outsourced data center 4) incremental
costs incurred of approximately $1.7 million related to termination costs for
non-revenue producing employees and to a decision to have a third party
developer construct and own the Company's new Tampa, FL headquarters building
5) increased commission expense related to the higher level of Search Services
compared to Flexible Billings in the current year.
Depreciation and amortization expense. Depreciation and amortization expense
increased 16.5% and 32.2%, respectively, to $4.0 million and $11.5 million for
the three and nine month periods ended September 30, 2000, compared to $3.5
million and $8.7 million for the same periods in 1999. Depreciation and
amortization expense as a percentage of net service revenues increased to 2.0%
and 1.9% for the three and nine month periods ended September 30, 2000, as
compared to 1.8% and 1.5%, for each of the periods in 1999. The increase as
a percentage of net service revenues for both periods in 2000 as compared to the
same periods in 1999 is due primarily to additional depreciation on computer
hardware related to the Company's online interactive career management
activities and the automation/reengineering of the Company's back office
operations during the last half of 1999 and early 2000, and to the September
2000 write off of previously deferred fees on the Company's bank line of credit.
Other (income) expense, net. Other (income) expense, net, decreased 328.6% and
36.2% for the three and nine months ended September 30, 2000, respectively,
compared to the same periods in 1999. The decrease during both periods in 2000
as compared to 1999 was due primarily to a decrease in interest income and an
increase in interest expense resulting from the increased cash requirements to
fund operations and for the Company's repurchases of common stock, and from the
write off of old fixed assets.
Income Before Taxes. Income before income taxes increased 404.7% and decreased
104.0% for the three and nine months ended September 30, 2000 to income of $0.4
million and a loss of $0.7 million, respectively, as compared to income of $0.1
million and $16.7 million for the same periods in 1999, primarily as a result of
the factors discussed above regarding revenues and selling, general and
administrative expenses.
Provision for income taxes. The provision for income taxes increased 111.0% and
decreased 105.9%, respectively, to $0.1 million and ($0.4) million for the three
and nine month periods ended September 30, 2000 compared to ($0.8) million and
$6.3 million for the same periods in 1999. The effective tax rate was 55.9% for
the nine months ended September 30, 2000 compared to 37.8% for the same period
in 1999. The increase in the tax rate in 2000 as compared to 1999 is primarily
due to the effect of non-deductible expenses which remained relatively unchanged
in dollar amount from 1999 to 2000, resulting in an increase in the effective
tax rate as the amount of reported pretax income decreased.
Net Income. Net income decreased 67.4% to $0.3 million in the three months ended
September 30, 2000 and decreased 102.8% to ($0.3) million for the nine months
ended September 30, 2000 as compared to the $0.9 million and $10.4 million for
the same periods in 1999. The changes are primarily a result of the factors
discussed above related to selling, general and administrative expenses,
partially offset by the increase in revenue during 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company's sources of liquidity included $2.3
million in cash and cash equivalents, and $81.2 million in additional net
working capital. In addition, as of September 30, 2000, there were no amounts
outstanding on the Company's $35 million Revolving Line of Credit Agreement
with Bank of America, N.A. (the "Line of Credit"). Subsequent to September 30,
2000 the Company negotiated an Amended and Restated Credit Agreement (the "New
Credit Facility") with Bank of America, N.A. (the "BA"). The New Credit
Facility provides for a maximum revolving credit facility of $90 million (not
to exceed 85% of the Company's Eligible Receivables, as defined in the New
Credit Facility). Under its terms, prepayments on the New Credit Facility are
allowed at any time, with any remaining unpaid balance due November 30, 2003.
Borrowings under the New Credit Facility are secured by all of the
10
assets of the Company and its subsidiaries. Amounts borrowed under the New
Credit Facility will bear interest during the period beginning on November 3,
2000 until BA's receipt of the Company's financial statements for the fiscal
quarter ended March 31, 2001 at a rate per annum equal either to 0.50% plus BA's
Prime Rate ("Prime") or to reserve adjusted LIBOR (as defined in the New Credit
Facility) plus 2.70%. Following delivery of the Company's financial statements
for the fiscal quarter ended March 31, 2001, performance pricing will be
available, ranging from Prime to Prime plus 0.75% and LIBOR plus 1.5% to LIBOR
plus 3.25%, pursuant to certain financial performance targets as set forth in
the New Credit Facility. Pricing will thereafter be changed quarterly based on
the previous four quarter's performance. The terms of the New Credit Facility
also include certain financial covenants if the availability in the New Credit
Facility is less than $20.0 million. The financial covenants relate to quarterly
EBITDA as compared to the Company's EBITDA projections. There are also certain
limitations on investments and acquisitions, dividends and repurchases of the
Company's stock.
During the nine months ended September 30, 2000, cash flow provided by
operations was $14.3 million, resulting primarily from depreciation and
amortization, refunds of prior income tax payments and an increase in accrued
payroll costs, partially offset by an increase in accounts receivable and a
decrease in accounts payable and other accrued liabilities. The increase in
accounts receivable reflects the increased volume of business during the first
nine months of 2000. The increase in accrued payroll costs and the decreases in
accounts payable and other accrued liabilities are primarily due to the timing
of payment of these liabilities.
For the nine months ended September 30, 2000, cash flow used in investing
activities was $8.3 million, resulting primarily from an increase of $4.4
million in the value of assets in the Company's deferred compensation plan, the
use of approximately $1.3 million for contingent earnout payments on prior
acquisitions and $2.6 million in capital expenditures.
During the nine months ended September 30, 2000, cash flow used in financing
activities was $11.6 million primarily from the Company's repurchases of stock
for $11.6 million.
On March 11, 1999, the Company announced that its Board of Directors had
authorized the repurchase of up to $50 million of its common stock on the open
market, from time to time, depending on market conditions. On October 24, 2000,
the Board of Directors authorized an increase to up to $100 million for stock
repurchases. As of September 30 and November 3, 2000, the Company had
repurchased approximately 4.2 million shares and 4.4 million shares for
approximately $26.7 million and $27.7 million. If additional shares of stock are
repurchased, there may be a material impact on the Company's cash flow
requirements in the next twelve months.
Dutch Auction tender offer. On November 6, 2000, the Company announced a
"modified Dutch Auction" tender offer, consisting of an offer to purchase up to
10 million shares of its common stock at a purchase price between $5.50 and
$4.75 per share net to the seller in cash, without interest. This price range
represents a 23.1% premium to a 6.3% premium to the November 3, 2000 closing
sales price of $4.47 per share. Based upon the maximum and minimum offering
prices specified in the offer, the aggregate purchase price if 10 million
shares are purchased would range from approximately $55 million to $47.5
million. The Company will finance the offer from borrowings under its New
Credit Facility.
The modified Dutch Auction tender procedure allows shareholders to select the
price within the specified range at which each shareholder is willing to sell
all or a portion of his or her shares to the Company. Based on the number of
shares tendered and the prices specified by the tendering shareholders, the
Company will determine the single per share price within the range that will
allow it to buy 10 million shares (or such lesser number of shares that are
properly tendered) at a price between $5.50 and $4.75 per share net to the
seller in cash, without interest. The offer will not be contingent upon any
minimum number of shares being tendered. All of the shares that are properly
tendered at prices at or below the purchase price determined by the Company (and
not properly withdrawn) will, subject to possible proration and provisions
relating to the tender of "odd lots", be purchased for cash, without interest,
at such purchase price promptly after the expiration of the tender offer. All
shares purchased in the offer will receive the same price. All other shares that
have been tendered and not purchased will be promptly returned to the
shareholder. The offer is scheduled to expire at 12:00 midnight, Eastern
Standard time, on Tuesday, December 5, 2000, unless extended by the Company.
The Company may resume its open market share repurchase program no earlier than
10 business days following completion of the modified Dutch Auction tender
offer, at which time the Company anticipates having over $17 million remaining
under its $100 million share repurchase authorization of March 11, 1999, as
increased on October 24, 2000.
The Company believes that cash flow from operations and borrowings under its New
Credit Facility, or other credit facilities that may become available to the
Company in the foreseeable future will be adequate to meet the working capital
requirements of current operations for at least the next twelve months. However,
there is no assurance (i) that the Company will be able to obtain financing in
amounts sufficient to meet its operating requirements or at terms which are
satisfactory and which allow the Company to remain competitive, or (ii) that the
Company will be able to meet the financial covenants contained in the New Credit
Facility. The Company's estimate of the period that existing resources will fund
its working capital requirements is a forward-looking statement that is subject
to risks and uncertainties. Actual results could differ from those indicated as
a result of a number of factors, including the use of such resources for
possible acquisitions and the announced stock repurchase plan.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates on its borrowings. The Company does
not engage in trading market risk sensitive instruments for speculative or
hedging purposes. The Company does not believe that changes in interest rates or
foreign currency are material to its operations.
12
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Amendment to Rights Agreement, dated as of October 24,
2000, between the Company and State Street Bank and Trust
Company, as Rights Agent (incorporated by reference to the
Company's Form 8-K, filed on November 3, 2000).
10.1 Executive Investment Plan, effective February 1, 2000.
10.2 Amended and Restated Credit Agreement between the
Company and Bank of America, N.A., dated as of November 3, 2000
(incorporated by reference to Amendment No. 1 to the Company's
Schedule TO, filed November 6, 2000).
27.1 - Financial Data Schedule for the nine months ended
September 30, 2000 (for SEC use only).
(b) Reports:
Current Report on Form 8-K was filed during the quarter ended
September 30, 2000 as follows : Form 8-K dated August 3, 2000
(filed on August 9, 2000) regarding a change in the Company's
independent accountants from PricewaterhouseCoopers, LLP to
Deloitte & Touche, LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
kforce.com, Inc.
(Registrant)
By: /s/ William L. Sanders
-----------------------------------
William L. Sanders, Vice President,
Chief Financial Officer
Date: November 8, 2000