Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
___________________________________________ 
FORM 8-K
 
 ___________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 6, 2018
 
___________________________________________ 
Kforce Inc.
(Exact name of registrant as specified in its charter)
 
___________________________________________ 
 
 
 
 
 
 
Florida
 
000-26058
 
59-3264661
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
1001 East Palm Avenue, Tampa, Florida 33605
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (813) 552-5000
N/A
(Former name or former address, if changed since last report)
 
 ___________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 






Item 2.02 Results of Operations and Financial Condition.
On February 6, 2018, Kforce Inc. issued a press release regarding its earnings for the fourth quarter and fiscal year ended December 31, 2017. A copy of this press release is furnished as Exhibit 99.1 to this Report and is incorporated into this Report by reference.
The information furnished herewith pursuant to Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information contained in this Form 8-K and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by Kforce Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is furnished herewith:
 
Exhibit
Number
  
Description
 
 
  
Earnings Release of Kforce Inc. dated February 6, 2018.






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 INC.
 
 
 
 
(Registrant)
 
 
 
 
February 6, 2018
 
 
 
By:
 
/s/ DAVID M. KELLY
 
 
 
 
 
 
David M. Kelly,
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer
 
 
 
 
 
 
(Principal Financial Officer)
 
 
 
 
 
 
 
KFORCE INC.
 
 
 
 
(Registrant)
 
 
 
 
February 6, 2018
 
 
 
By:
 
/s/ JEFFREY B. HACKMAN
 
 
 
 
 
 
Jeffrey B. Hackman,
 
 
 
 
 
 
Senior Vice President, Finance & Accounting
 
 
 
 
 
 
(Principal Accounting Officer)


Exhibit


Exhibit 99.1
 
 
  
Kforce Inc.
1001 East Palm Ave.
Tampa, FL 33605
(NASDAQ: KFRC)
 
 
AT THE FIRM
Michael R. Blackman
Chief Corporate Development Officer
(813) 552-2927

KFORCE FOURTH QUARTER REVENUES OF $342.6 MILLION EXCEEDS GUIDANCE
FOURTH QUARTER EPS OF $0.24; ADJUSTED EPS OF $0.45
TAMPA, FL, February 6, 2018 (GLOBE NEWSWIRE) — Kforce Inc. (Nasdaq: KFRC), a provider of professional staffing services and solutions, today announced results for its fourth quarter and full year 2017. Revenues for the quarter ended December 31, 2017 were $342.6 million compared to $341.1 million for the quarter ended September 30, 2017, an increase of 3.7% on a billing day basis, and compared to $326.0 million for the quarter ended December 31, 2016, an increase of 5.1%. Net income for the quarter ended December 31, 2017 was $6.1 million, or $0.24 per share, as compared to $10.1 million, or $0.40 per share, for the quarter ended September 30, 2017, and $9.2 million, or $0.36 per share, for the quarter ended December 31, 2016. The Tax Cuts and Jobs Act (“TCJA”) resulted in a remeasurement of our net deferred tax assets, which negatively impacted fourth quarter net income by $5.4 million, or $0.21 per share. Adjusted earnings per share for the three months ended December 31, 2017 was $0.45 per share.
Kforce reported total revenues for the year ended December 31, 2017 of $1.36 billion, an increase of 2.9%, as compared to $1.32 billion for the year ended December 31, 2016. Net income for the year ended December 31, 2017 was $33.3 million, or $1.30 per share, which represent increases of 1.6% and 4.0%, respectively, compared to 2016.
David L. Dunkel, Chairman and Chief Executive Officer commented, “We are pleased with our fourth quarter results as we exceeded the top end of guidance for revenues and earnings per share, as adjusted for the impact of TCJA. Also, our year-over-year growth rates in our largest business, Tech Flex, continued to accelerate to 5.4% in the fourth quarter, despite the 130 basis point negative impact that the sale of our Global business had on our year-over-year growth rates. Thus, our core Tech Flex business is growing at 6.7% on a year-over-year basis. As we head into Q1 2018, we expect continued strength in our Tech Flex business. We are confident in the structure and strength of our organization and believe that we are well positioned in 2018 to capitalize on significant market opportunities that exist. The demand environment for our services, particularly in Tech Flex, appears very strong as companies continue to invest in technology to more effectively and efficiently meet the needs of their customers and are seeking flexible resources for a portion of their human capital needs. I want to thank all of our clients, consultants and core employees for making our mutual success possible.

Joseph J. Liberatore, President said, “We believe we are pursuing the mix of business that will lead to the greatest long-term success and remain highly focused on the actions necessary to further accelerate revenue growth and associate productivity.”
Mr. Liberatore noted additional operational results for the fourth quarter include:
Flex revenues of $332.4 million in Q4 2017 increased 4.4%, on a billing day basis, from $328.9 million in Q3 2017 and increased 5.6%, from $314.7 million in Q4 2016.
Quarterly year-over-year growth in Flex revenues for Tech, FA and GS was 5.4%, 0.3% and 25.7%, respectively.






David M. Kelly, Chief Financial Officer, said, “We remain confident in our belief that we will meet or exceed our 7.5% operating margin target when $1.6 billion in annualized revenue is reached and still expect to achieve an operating margin of at least 6.3% at $1.4 billion in annualized revenue, which we expect to occur in the second quarter of 2018. Over the last three years, we have returned $130.6 million to our shareholders, which is substantially all of our operating cash flows generated over that period. We expect to continue to invest in our business to take advantage of the positive demand environment. We are also pleased to announce that our Board of Directors declared a first quarter cash dividend on Kforce common stock of $0.12 per share. The cash dividend will be payable on March 23, 2018 to shareholders of record as of the close of business on March 9, 2018.”
Highlights for the fourth quarter include: 
Tech Flex gross profit margin of 27.2% in Q4 2017 increased 20 basis points from 27.0% in Q3 2017 and decreased 30 basis points from 27.5% in Q4 2016.
Selling, general and administrative expense as a percentage of revenues in Q4 2017 was 24.0% which remained flat as compared to Q3 2017 and is down 120 basis points from 25.2% in Q4 2016.
Operating cash flows in Q4 2017 were $23.7 million compared to $10.1 million in Q4 2016.
We repurchased approximately 451 thousand shares of common stock on the open market at a total cost of approximately $10.8 million during Q4 2017.
Looking forward to the first quarter of 2018, there will be 64 billing days, as compared to 61 billing days in the fourth quarter of 2017, and 64 billing days in the first quarter of 2017. Current estimates for the first quarter of 2018 are:
Revenues of $343 million to $347 million
Earnings per share of $0.35 to $0.38
Gross profit margin of 29.0% to 29.2%
Flex gross profit margin of 26.5% to 26.7%
SG&A expense as a percent of revenue of 24.4% to 24.6%
Operating margin of 3.8% to 4.2%
Effective tax rate of 26.0%
On Tuesday, February 6, 2018, Kforce will host a conference call to discuss these results. The call will begin at 5:00 p.m. EST. The prepared remarks for this call are available on the Investor Relations page of the Kforce Inc. website (http://investor.kforce.com/) under Events & Presentations.
The dial-in number is (877) 344-3890. The conference passcode is Kforce. The replay of the call will be available from 8:00 p.m. EST, Tuesday, February 6, 2018 through February 13, 2018 by dialing (855) 859-2056, passcode 9398667.
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 13, 2018.
Our 2018 Annual Meeting of Kforce Inc. Shareholders will be held on Tuesday, April 24, 2018 at 1001 East Palm Avenue, Tampa, Florida 33605, commencing at 8:00 a.m. EST.
About Kforce
Kforce (Nasdaq:KFRC) is a professional staffing and solutions firm providing temporary and permanent staffing solutions in the skill areas of technology and finance & accounting. Backed by nearly 2,600 associates and more than 12,000 consultants on assignment, Kforce is committed to “Great People = Great Results” for our valued clients and candidates. Kforce operates with 60 offices located throughout the United States. For more information, please visit our Web site at http://www.kforce.com.







Certain of the above statements contained in this press release, including earnings projections, 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 Exchange Act of 1934, as amended. Factors that could cause actual results to differ materially include the following: business conditions, growth in temporary staffing and the general economy; competitive factors, risks due to shifts in the market demand; a reduction in the supply of candidates or the Firm's ability to attract such candidates; the success of the Firm in attracting and retaining revenue-generating talent; changes in the service mix; ability of the Firm to repurchase shares; the effect of adverse weather conditions; changes in our effective tax rate; changes in government regulations, laws and policies that are adverse to our businesses; risk of contract performance, delays or termination or the failure to obtain awards, task orders or funding under contracts; changes in client demand; and the risk factors listed from time to time in the Firm’s reports filed with the Securities and Exchange Commission, including the Firm’s Form 10-K for the fiscal year ending December 31, 2016, as well as assumptions regarding the foregoing. In particular, the Firm makes no assurances that the estimates of continuing operations will be achieved or that we will continue to increase our market share, successfully manage risks to our revenue stream, successfully put into place the people and processes that will create future success or further accelerate our revenue. The terms “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan” and similar expressions and variations thereof contained in this press release identify certain of such forward-looking statements, which speak only as of the date of this press release. As a result, such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Future events and actual results may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements and the Firm undertakes no obligation to update any forward-looking statements.








Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
 
 
Three Months Ended
 
 
Dec. 31, 2017
 
Sept. 30, 2017
 
Dec. 31, 2016
Revenue by segment:
 
 
 
 
 
 
 Technology
 
$
227,816

 
$
229,281

 
$
216,807

 Finance & accounting
 
85,349

 
85,225

 
85,794

 Government solutions
 
29,421

 
26,547

 
23,397

Total Net service revenues
 
342,586

 
341,053

 
325,998

Direct costs of services
 
239,959

 
236,678

 
226,350

Gross profit
 
102,627

 
104,375

 
99,648

GP %
 
30.0
%
 
30.6
%
 
30.6
%
Flex GP %
 
27.8
%
 
28.0
%
 
28.1
%
Selling, general and administrative expenses
 
82,067

 
81,921

 
82,010

Depreciation and amortization
 
2,042

 
2,110

 
2,047

Income from operations
 
18,518

 
20,344

 
15,591

Other expense, net
 
629

 
1,364

 
824

Income before income taxes
 
17,889

 
18,980

 
14,767

Income tax expense
 
11,749

 
8,881

 
5,528

Net income
 
$
6,140

 
$
10,099

 
$
9,239

 
 
 
 
 
 
 
Earnings per share - diluted
 
$
0.24

 
$
0.40

 
$
0.36

 
 
 
 
 
 
 
Weighted average shares outstanding - diluted
 
25,462

 
25,535

 
25,821

Adjusted EBITDA
 
$
23,183

 
$
24,238

 
$
19,283

 
 
 
 
 
 
 
Billing days
 
61

 
63

 
61








Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
 
 
Twelve Months Ended
 
 
Dec. 31, 2017
 
Dec. 31, 2016
Revenue by segment:
 
 
 
 
Technology
 
$
907,511

 
$
883,477

Finance & accounting
 
346,135

 
337,601

Government solutions
 
104,294

 
98,628

Total Net service revenues
 
1,357,940

 
1,319,706

Direct costs of services
 
949,884

 
911,207

Gross profit
 
408,056

 
408,499

GP %
 
30.0
%
 
31.0
%
Flex GP %
 
27.5
%
 
28.2
%
Selling, general and administrative expenses
 
331,172

 
340,742

Depreciation and amortization
 
8,255

 
8,701

Income from operations
 
68,629

 
59,056

Other expense, net
 
4,535

 
3,101

Income before income taxes
 
64,094

 
55,955

Income tax expense
 
30,809

 
23,182

Net income
 
$
33,285

 
$
32,773

 
 
 
 
 
Earnings per share - diluted
 
$
1.30

 
$
1.25

 
 
 
 
 
Weighted average shares outstanding - diluted
 
25,586

 
26,274

Adjusted EBITDA
 
$
85,241

 
$
74,506

 
 
 
 
 
Billing days
 
252

 
253








Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
 
 
 
December 31,
 
 
2017
 
2016
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
379

 
$
1,482

Trade receivables, net of allowances
 
225,865

 
206,361

Income tax refund receivable
 
7,116

 
172

Prepaid expenses and other current assets
 
12,085

 
10,691

Total current assets
 
245,445

 
218,706

Fixed assets, net
 
39,680

 
43,145

Other assets, net
 
38,598

 
30,511

Deferred tax asset, net
 
11,316

 
23,449

Intangible assets, net
 
3,297

 
3,642

Goodwill
 
45,968

 
45,968

Total assets
 
$
384,304

 
$
365,421

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and other accrued liabilities
 
$
34,873

 
$
37,230

Accrued payroll costs
 
46,886

 
44,137

Other current liabilities
 
1,960

 
1,765

Income taxes payable
 

 
221

Total current liabilities
 
83,719

 
83,353

Long-term debt - credit facility
 
116,523

 
111,547

Long-term debt - other
 
2,597

 
3,984

Other long-term liabilities
 
47,188

 
44,801

Total liabilities
 
250,027

 
243,685

Commitments and contingencies
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock
 

 

Common stock
 
715

 
713

Additional paid-in capital
 
437,394

 
428,212

Accumulated other comprehensive income
 
100

 
184

Retained earnings
 
195,143

 
174,967

Treasury stock, at cost
 
(499,075
)
 
(482,340
)
Total stockholders’ equity
 
134,277

 
121,736

Total liabilities and stockholders’ equity
 
$
384,304

 
$
365,421








Kforce Inc.
Key Statistics
(Unaudited)
 
 
 
Q4 2017
 
Q3 2017
 
Q4 2016
Total Firm
 
 
 
 
 
 
Flex revenue (000’s)
 
$
332,416

 
$
328,904

 
$
314,714

Hours (000’s)
 
5,483

 
5,646

 
5,598

Flex GP %
 
27.8
%
 
28.0
%
 
28.1
%
Direct Hire revenue (000’s)
 
$
10,170

 
$
12,149

 
$
11,284

Placements
 
816

 
881

 
876

Average fee
 
$
12,469

 
$
13,784

 
$
12,891

Billing days
 
61

 
63

 
61

Technology
 
 
 
 
 
 
Flex revenue (000’s)
 
$
223,897

 
$
224,148

 
$
212,437

Hours (000’s)
 
3,101

 
3,299

 
3,152

Flex GP %
 
27.2
%
 
27.0
%
 
27.5
%
Direct Hire revenue (000’s)
 
$
3,919

 
$
5,133

 
$
4,370

Placements
 
225

 
303

 
260

Average fee
 
$
17,423

 
$
16,917

 
$
16,831

Finance & Accounting
 
 
 
 
 
 
Flex revenue (000’s)
 
$
79,098

 
$
78,209

 
$
78,880

Hours (000’s)
 
2,382

 
2,347

 
2,446

Flex GP %
 
28.5
%
 
29.0
%
 
29.1
%
Direct Hire revenue (000’s)
 
$
6,251

 
$
7,016

 
$
6,914

Placements
 
591

 
578

 
616

Average fee
 
$
10,583

 
$
12,139

 
$
11,230

Government Solutions
 
 
 
 
 
 
Flex revenue (000’s)
 
$
29,421

 
$
26,547

 
$
23,397

Flex GP %
 
30.3
%
 
34.3
%
 
30.3
%

Kforce Inc.
Revenue Growth Rates
(Unaudited)

 
 
Year-Over-Year Growth Rates
 
 
(Per Billing Day)
 
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
 
Q4 2016
Tech Flex
 
5.4
 %
 
3.3
 %
 
1.5
 %
 
2.7
 %
 
1.4
 %
Tech Direct Hire
 
(10.3
)%
 
1.3
 %
 
9.3
 %
 
(4.1
)%
 
(13.1
)%
Total Tech
 
5.1
 %
 
3.3
 %
 
1.7
 %
 
2.5
 %
 
1.1
 %
FA Flex
 
0.3
 %
 
4.1
 %
 
4.3
 %
 
7.5
 %
 
2.1
 %
FA Direct Hire
 
(9.6
)%
 
(9.0
)%
 
(2.4
)%
 
(11.7
)%
 
(15.4
)%
Total FA
 
(0.5
)%
 
2.9
 %
 
3.6
 %
 
5.8
 %
 
0.4
 %
Total Staffing (Total Tech and FA)
 
3.5
 %
 
3.2
 %
 
2.2
 %
 
3.4
 %
 
0.9
 %
GS
 
25.7
 %
 
0.6
 %
 
(6.4
)%
 
6.6
 %
 
4.0
 %
Total Firm
 
5.1
 %
 
3.0
 %
 
1.6
 %
 
3.7
 %
 
1.1
 %






Kforce Inc.
Non-GAAP Financial Measures
(In Thousands, Except Per Share Amounts)
(Unaudited)

The following non-GAAP financial measures presented may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently. The Company’s non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to amounts presented in accordance with GAAP. The Company views these non-GAAP financial measures as supplemental and they are not intended to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Free Cash Flow
“Free Cash Flow”, a non-GAAP financial measure, is defined by Kforce as net cash provided by operating activities determined in accordance with GAAP, less capital expenditures. Management believes this provides an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows and is useful information to investors as it provides a measure of the amount of cash generated from the business that can be used for strategic opportunities including investing in our business, making acquisitions, repurchasing common stock or paying dividends. Free Cash Flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. Therefore, we believe it is important to view Free Cash Flow as a complement to our financial statements.
(In Thousands)
 
Twelve Months Ended
 
 
Dec. 31, 2017
 
Dec. 31, 2016
Net income
 
$
33,285

 
$
32,773

Non-cash provisions and other
 
29,134

 
21,093

Changes in operating assets/liabilities
 
(33,080
)
 
(14,043
)
Net cash provided by operating activities
 
29,339

 
39,823

Capital expenditures
 
(5,846
)
 
(12,420
)
Free cash flow
 
23,493

 
27,403

Change in debt
 
4,976

 
31,075

Repurchases of common stock
 
(14,622
)
 
(46,013
)
Cash dividend
 
(12,144
)
 
(12,447
)
Other
 
(2,806
)
 
(33
)
Change in cash and cash equivalents
 
$
(1,103
)
 
$
(15
)





Adjusted EBITDA
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization, stock-based compensation expense, interest expense, net and income tax expense. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our past and future financial performance, and this presentation should not be construed as an inference by us that our future results will be unaffected by those items excluded from Adjusted EBITDA. Adjusted EBITDA is a key measure used by management to assess our operations including our ability to generate cash flows and our ability to repay our debt obligations. Management believes it is useful information to investors as it provides a good metric of our core profitability in comparing our performance to our competitors, as well as our performance over different time periods. The measure should not be considered in isolation or as an alternative to net income, cash flows or other financial statement information presented in the consolidated financial statements as indicators of financial performance or liquidity. The measure is not determined in accordance with GAAP and is susceptible to varying calculations, and as presented, may not be comparable to similarly titled measures of other companies.
(In Thousands)
 
Three Months Ended
 
 
Dec. 31, 2017
 
Sept. 30, 2017
 
Dec. 31, 2016
Net income
 
$
6,140

 
$
10,099

 
$
9,239

Depreciation and amortization
 
2,135

 
2,165

 
2,094

Stock-based compensation expense
 
1,933

 
1,798

 
1,663

Interest expense, net
 
1,226

 
1,295

 
759

Income tax expense
 
11,749

 
8,881

 
5,528

Adjusted EBITDA
 
$
23,183

 
$
24,238

 
$
19,283

(In Thousands)
 
Twelve Months Ended
 
 
Dec. 31, 2017
 
Dec. 31, 2016
Net income
 
$
33,285

 
$
32,773

Depreciation and amortization
 
8,508

 
8,796

Stock-based compensation expense
 
7,600

 
6,705

Interest expense, net
 
5,039

 
3,050

Income tax expense
 
30,809

 
23,182

Adjusted EBITDA
 
$
85,241

 
$
74,506







Adjusted Financial Performance Measures
The "Adjusted Financial Performance Measures" present non-GAAP financial information and should not be considered a measure of financial performance under generally accepted accounting principles. These measures are presented as a supplemental method for assessing the Company’s operating results by adjusting for the impact of certain non-recurring, infrequent or unusual items in a manner that is focused on the performance of our underlying operations. Each of these measures are intended to provide greater consistency, comparability and clarity of our results. Management uses this non-GAAP financial information to assess the Company's core operating results and consequently, management believes it is similarly useful information to investors. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP.
(In Thousands, Except Per Share Amounts)
 
Three Months Ended December 31,

 
 
2017
 
2016
 
 
Reported
(GAAP)
 
Adjustments (1)
 
Adjusted
(Non-GAAP)
 
Reported
(GAAP) (2)
Reconciliation of Tax Impact and Profitability:
 
 
 
 
 
 
 
 
Income before income taxes
 
$
17,889

 
$

 
$
17,889

 
$
14,767

Income tax expense
 
$
11,749

 
$
(5,360
)
 
$
6,389

 
$
5,528

Effective tax rate
 
65.7
%
 
(30.0
)%
 
35.7
%
 
37.4
%
Net income
 
$
6,140

 
$
5,360

 
$
11,500

 
$
9,239

Earnings per share - diluted
 
$
0.24

 
$
0.21

 
$
0.45

 
$
0.36

(1) The $5.4 million income tax expense adjustment is related to the remeasurement of our net deferred tax assets as a result of the Tax Cuts and Jobs Act.
(2) For the three months ended December 31, 2016, there were no charges or similar items requiring an adjustment.
(In Thousands, Except Per Share Amounts)
 
Twelve Months Ended
 
 
December 31, 2017
 
 
Reported
(GAAP)
 
Adjustments
 
Adjusted
(Non-GAAP)
Reconciliation of Revenue and Gross Profit:
 
 
 
 
 
 
Net service revenues (3)
 
$
1,357,940

 
$
1,000

 
$
1,358,940

Gross profit (3)
 
$
408,056

 
$
713

 
$
408,769

GP %
 
30.0
%
 
0.1
 %
 
30.1
%
Flex GP %
 
27.5
%
 
 %
 
27.5
%
 
 
 
 
 
 
 
Reconciliation of SG&A and Operating Margin:
 
 
 
 
 
 
Selling, general & administrative expenses (4)
 
$
331,172

 
$
1,156

 
$
332,328

SG&A as a percentage of net service revenues
 
24.4
%
 
0.1
 %
 
24.5
%
Income from operations
 
$
68,629

 
$
(443
)
 
$
68,186

Operating margin
 
5.1
%
 
(0.1
)%
 
5.0
%
 
 
 
 
 
 
 
Reconciliation of Tax Impact and Profitability:
 
 
 
 
 
 
Income before income taxes
 
$
64,094

 
$
(443
)
 
$
63,651

Income tax expense (5)
 
$
30,809

 
$
(7,200
)
 
$
23,609

Effective tax rate
 
48.1
%
 
(11.0
)%
 
37.1
%
Net income
 
$
33,285

 
$
6,757

 
$
40,042

Earnings per share - diluted
 
$
1.30

 
$
0.27

 
$
1.57

(3) The $1.0 million revenue adjustment and the related $0.7 million gross profit adjustment was related to the impact from Hurricanes Harvey and Irma.





(4) The $1.2 million adjustment was related to a $1.0 million disaster relief contribution and $1.1 million in charges for role eliminations related to refining how we support and service our largest strategic clients, offset by a $3.3 million gain on sale of Global's assets.
(5) Adjustments to income tax expense include (i) tax expense of $5.4 million related to the remeasurement of our net deferred tax assets as a result of the Tax Cuts and Jobs Act, (ii) a $1.6 million valuation allowance placed on our foreign tax credit deferred tax asset that we expect may not be realizable as a result of the sale of Global's assets and (iii) a net income tax benefit of $0.2 million related to the income before income taxes adjustments described within this table, which was calculated using the third quarter effective tax rate, of 38.0%.
(In Thousands, Except Per Share Amounts)
 
Twelve Months Ended
 
 
December 31, 2016
 
 
Reported
(GAAP)
 
Adjustments
 
Adjusted
(Non-GAAP)
Reconciliation of SG&A and Operating Margin:
 
 
 
 
 
 
Selling, general & administrative expenses (6)
 
$
340,742

 
$
(6,015
)
 
$
334,727

SG&A as a percentage of net service revenues
 
25.8
%
 
(0.4
)%
 
25.4
%
Income from operations
 
$
59,056

 
$
6,015

 
$
65,071

Operating margin
 
4.5
%
 
0.4
 %
 
4.9
%
 
 
 
 
 
 
 
Reconciliation of Tax Impact and Profitability:
 
 
 
 
 
 
Income before income taxes
 
$
55,955

 
$
6,015

 
$
61,970

Income tax expense (7)
 
23,182

 
681

 
23,863

Effective tax rate
 
41.4
%
 
(2.9
)%
 
38.5
%
Net income
 
$
32,773

 
$
5,334

 
$
38,107

Earnings per share - diluted
 
$
1.25

 
$
0.20

 
$
1.45

(6) The $6.0 million adjustment was related to severance charges associated with certain realignment activities focused on further streamlining our organization.
(7) The income tax expense reconciling item is composed of (i) an income tax expense of $1.7 million related to certain one-time non-cash adjustments, and (ii) an income tax benefit of $2.3 million related to the severance costs, which was calculated using the applicable quarterly effective tax rate, excluding the impact of the severance costs and certain tax adjustments.