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Kforce Reports Revenues of $274.1 Million and EPS of $0.24 Before Impairment Charge

Kforce Reports Revenues of $274.1 Million and EPS of $0.24 Before Impairment Charge for the Second Quarter of 2012

Excluding Impairment Charge, Second Quarter Net Income of $8.9 Million, or $0.24 Per Share

Total Revenues Increased 10.5% Year Over Year

After Tax Non-Cash Impairment Charge of $42.0 Million

Kforce Inc. a provider of professional staffing services and solutions, today announced results for its second quarter of 2012. Revenue from continuing operations for the quarter ended June 30, 2012 was $274.1 million compared to $268.4 million for the quarter ended March 31, 2012, an increase of 2.2% and compared to $248.0 million for the quarter ended June 30, 2011, an increase of 10.5%. Excluding the non-cash goodwill impairment charge (the "impairment charge") recorded in the quarter ended June 30, 2012, Kforce reported net income of $8.9 million, or $0.24 per share, versus $4.1 million, or $0.12 per share, for the quarter ended March 31, 2012. Excluding the impairment charge, net income and earnings per share for the second quarter of 2012 increased 30.7% and 41.2%, respectively, versus the second quarter of 2011, which had net income of $6.8 million, or $0.17 per share. On a GAAP basis, Kforce reported a net loss for the quarter ended June 30, 2012 of $33.2 million, or a loss of $0.90 per share.

During the quarter ended June 30, 2012, Kforce recorded a pre-tax impairment charge in its Government Solutions (GS) reporting unit of $65.3 million. The income tax benefit associated with this impairment charge was $23.3 million, resulting in an after-tax impairment charge of $42.0 million or $1.14 per share.

David L. Dunkel, Chairman and CEO, said, "We are pleased with our Q2 '12 results as Kforce reported revenue for the quarter of $274.1 million, a year-over-year increase of 10.5%. Additionally, earnings per share of $0.24, excluding the impairment charge, came in above guidance. The strong bottom line results were driven by improving bill/pay spreads across all of our staffing businesses, strong performance in search and continued SG&A discipline. We are particularly pleased with the year-over-year Flex revenue increases in HIM, FA and Tech of 19.1%, 12.7% and 10.7%, respectively. We believe our diverse service offerings and highly elastic front and back office platforms position Kforce well to navigate through the significant uncertainties that exist in the macroeconomic environment. I want to thank all of our employees, consultants and clients for making Q2 '12 another successful quarter for Kforce."

William L. Sanders, President, said, "The Firm continued its solid performance in the second quarter of 2012, where we experienced sequential increases in total Firm Flex and Search revenues of 1.4% and 19.9%, respectively. We were able to continue to take advantage of our highly advanced sales and delivery platform that leverages our field associates, Strategic Accounts strategy and the National Recruiting Center to profitably grow revenues with both large and small clients. Discussions with our clients and certain key performance indicators indicate demand for temporary staffing to be stable, though growth is being impacted by prolonged decision making from our clients as well as an increase in conversions. Kforce continues to aggressively pursue business opportunities with the goal of continuing to gain client and market share."

Mr. Sanders noted additional operational results for the second quarter include:

Flex revenues from continuing operations of $260.9 million in Q2 '12 increased 1.4% from $257.3 million in Q1 '12 and increased 10.5% from $236.1 million in Q2 '11.

Search revenues from continuing operations of $13.2 million in Q2 '12 increased 19.9% from $11.0 million in Q1 '12 and increased 10.4% from $12.0 million in Q2 '11.

Sequential percentage increases in Search revenues for the FA and Tech segments were 30.0% and 8.2%, respectively.

Sequential percentage changes in Flex revenues by segment were a 3.5% increase for Tech, 2.3% increase for HIM, 2.0% decrease for FA, and a 6.3% decrease for Government Solutions.

Joseph J. Liberatore, Chief Financial Officer, said, "The Firm continued to perform well in Q2 '12. Q2 '12, Q1 '12 and Q2 '11 each contained 64 billing days. We believe our second quarter results reflect our strong culture, tenured sales associate population and a continued focus on execution in all aspects of the business, including improving client relationships, solid expense management and continued efficiencies and operating leverage provided by the NRC."

Financial highlights for the second quarter include:

Flex gross profit from continuing operations increased 220 basis points to 29.3% in Q2 '12 from 27.1% in Q1 '12 and increased 70 basis points from 28.6% in Q2 '11.

Selling, general and administrative expenses as a percentage of revenues decreased to 26.1% in Q2 '12 from 40.3% in Q1 '12 and from 27.6% in Q2 '11.

Bank debt at the end of Q2 '12 was $11.0 million.

Earnings per share before the impact of the impairment charge for Q2 '12 was $0.24 per share, an increase of 100.0% from $0.12 per share in Q1 '12 and an increase of 41.2% from $0.17 in Q2 '11.

Mr. Liberatore stated, "In addition, looking forward to the third quarter of 2012, we expect revenues may be in the $271 million to $277 million range and earnings per share in the range of $0.23 to $0.25. The third quarter of 2012 has 63 billing days, one less than the second quarter of 2012. 

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