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Kforce Reports Revenues of $270.2 Million and EPS of $0.26 for the Third Quarter of 2012

Kforce Reports Revenues of $270.2 Million and EPS of $0.26 for the Third Quarter of 2012

Net Income and EPS From Continuing Operations up 46.6% and 52.9%

Kforce Inc. a provider of professional staffing services and solutions, has announced results for its third quarter of 2012. Revenues from continuing operations for the quarter ended September 30, 2012 were $270.2 million compared to $274.1 million for the quarter ended June 30, 2012, a decrease of 1.4% and compared to $261.0 million for the quarter ended September 30, 2011, an increase of 3.5%. In the quarter ended September 30, 2012, Kforce reported net income of $9.3 million, or $0.26 per share, versus $8.9 million, or $0.24 per share, excluding the goodwill impairment charge, for the quarter ended June 30, 2012. Net income and earnings per share for the third quarter of 2012 increased 9.7% and 18.2%, respectively, versus net income of $8.4 million, or $0.22 per share, for the third quarter of 2011. Net income and earnings per share from continuing operations for the quarter ended September 30, 2012 of $9.3 million and $0.26 per share, respectively, increased 46.6% and 52.9%, respectively, from $6.3 million, or $0.17 per share, for the quarter ended September 30, 2011.

David L. Dunkel, Chairman and CEO, said, "We are pleased with our Q3 '12 results as Kforce reported revenues for the quarter of $270.2 million and earnings per share of $0.26. The environment for professional staffing and the demand for our services, particularly in technology staffing, continues to be positive. Over the past few quarters, however, revenue growth has slowed as the uncertain economic outlook is dampening demand. The unemployment rate among college-degreed workers is roughly half that of the overall U.S. rate of unemployment, and is substantially lower in several of the skill sets in which Kforce specializes. We continue to see bill rates increase as supply for highly skilled candidates remains tight. 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 Q3 '12 another successful quarter for Kforce."

William L. Sanders, President, said, "The Firm continued its solid performance in the third quarter of 2012, where we experienced a flex margin increase of 30 basis points sequentially and 40 basis points year-over-year, which was primarily driven by the increase in the spread between bill and pay rates for our Tech segment, which is our largest segment. We intend to continue to aggressively manage our client portfolio to optimize both volume and rate. During the third quarter, 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 third quarter include:

Flex revenues from continuing operations of $257.8 million in Q3 '12 decreased 1.2% from $260.9 million in Q2 '12 and increased 3.4% from $249.4 million in Q3 '11.

Search revenues from continuing operations of $12.4 million in Q3 '12 decreased 6.3% from $13.2 million in Q2 '12 and increased 6.6% from $11.6 million in Q3 '11.

Sequential percentage changes in Flex revenues from continuing operations on a billing day basis by segment were: 1.2% increase for Tech, 2.0% decrease for FA, 7.1% decrease for HIM and a 6.8% increase for Government Solutions.

Year-over-year changes in Flex revenues from continuing operations on a billing day basis were a 4.8% increase in Tech, 9.2% increase in FA, 6.7% increase in HIM and a 3.5% decrease in Government Solutions.

Joseph J. Liberatore, Chief Financial Officer, said, "The Firm continued to perform well in Q3 '12. Q3 '12 contained 63 billing days while Q2 '12 and Q3 '11 each contained 64 billing days. The Firm has continued to improve earnings in this environment by improving bill/pay spreads through continued selective investments in its stronger products and markets and by generating operating leverage through efficiencies and scale. We expect modest revenue growth and Flex gross margin expansion in the near term and believe operating efficiencies will result in continued improvements in operating margins. We will continue to focus on execution in all aspects of our business including improving client relationships, solid expense management and continued efficiencies."

Financial highlights for the third quarter include:

Flex gross profit from continuing operations increased 30 basis points to 29.6% in Q3 '12 from 29.3% in Q2 '12 and increased 40 basis points from 29.2% in Q3 '11.

Selling, general and administrative expenses as a percentage of revenues decreased to 26.0% in Q3 '12 from 26.1% in Q2 '12 and from 27.3% in Q3 '11.

There was no bank debt at the end of Q3 '12 (and $5.4 million in cash and cash equivalents) compared to $11.0 million at the end of Q2 '12.

Earnings per share in Q3 '12 was $0.26 per share, an increase of 8.3% from $0.24 per share in Q2 '12, before the impact of the Q2 '12 goodwill impairment charge, and an increase of 18.2% from $0.22 in Q3 '11.

Mr. Liberatore stated, "In addition, looking forward to the fourth quarter of 2012, we expect revenues may be in the $267 million to $273 million range and earnings per share in the range of $0.22 to $0.24. The fourth quarter of 2012 has 62 billing days, one less than the third quarter of 2012. This guidance does not factor the potentially significant impact from the still unfolding dynamics as a result of Hurricane Sandy. Approximately 30% of Kforce revenue is derived from the Mid Atlantic - Northeast corridor."

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