Annual
Report
2020
We Love What We Do. We Love Who We Serve.®
Kforce is a professional staffing services and
solutions firm that specializes in the areas
of Technology and Finance and Accounting.
Each year, through our network of field
offices located throughout the U.S. and
two national delivery centers, we provide
opportunities for over 30,000 highly skilled
professionals who work with over 3,000
clients, including a significant majority of
the Fortune 500. Founded in 1962, our
name stands for KnowledgeForce® which
describes the customer-centric Kforce
Knowledge Process that delivers high-
touch, relationship-driven results backed
by progressive technologies. At Kforce, our
promise is to deliver great results through
strategic partnership and knowledge sharing.
Our total shareholder return (TSR) since going
public in August 1995 has been approximately
1,310%, roughly 2.3 times greater than the
Russell 2000 over the same period.
KFRC
Russell 2000
1,600%
1,200%
800%
400%
0
Kforce TSR vs. Russell 2000 Index stock performance
from 8/15/95 (IPO) to 12/31/20
TECHNOLOGY
FINANCE AND ACCOUNTING
As the 5th largest finance and accounting staffing
firm in the U.S., we engage more than 11,000
highly skilled professionals annually in finance and
accounting roles on a temporary, consulting and
direct-hire basis, in addition to select large scale
opportunities in professional administration.
Our Finance and Accounting professionals are a
blend of these roles, but we are shifting focus
toward higher skilled analytics and decision support:
STRATEGIC resources supporting senior level
decision making, from financial, risk and M&A to
business intelligence and data science.
OPERATIONAL AND TECHNICAL professionals
perform day-to-day accounting and staff-level
analysis, which includes directing, controlling
and planning.
TRANSACTIONAL functions include accounts
receivable, accounts payable and payroll.
As the 5th largest technology staffing firm in the
U.S., we engage more than 14,000 consultants
annually in technology roles on a temporary,
consulting and direct-hire basis. Our Technology
professionals range from project managers
and managed solution providers to developers,
security engineers, data and network architects
and technicians:
APPLICATION DEVELOPMENT supports applications
and systems software creation and maintenance,
including web, mobile and client service.
SECURITY for today’s complex network infrastructure
and evolving threats.
PROJECT MANAGEMENT AND SOLUTIONS offers a
full suite of functional professionals to support the
full scope of your initiative.
ENTERPRISE DATA MANAGEMENT supports any
operating environment from unstructured to mature
Big Data.
INFRASTRUCTURE specializes in providing reliable
infrastructure support to build and maintain the
backbone of your organization.
MANAGED TEAMS AND SOLUTION resources to help
drive full scope and ownership of your most complex
technological needs.
This Annual Report contains forward-looking statements (within the meaning of the federal securities laws). Please see the “Cautionary
Note Regarding Forward-Looking Statements” contained in the introductory portion of our Annual Report on Form 10-K for the year
ended December 31, 2020 for additional information regarding forward-looking statements.
TO OUR FELLOW SHAREHOLDERS, CLIENTS, CONSULTANTS AND EMPLOYEES:
Given the devastating effects of COVID-19, the year 2020 will be
remembered as one of the greatest health and economic crises in
modern times. The suddenness of the COVID-19 pandemic and its
dramatic effect on businesses, communities and families across
the world cannot be overstated. The devastating impacts of the
economic and health crisis were followed by civil unrest and other
social issues, political turmoil and a change in administration.
Disruption to our daily lives has been very significant. Reflecting
back and considering all of these challenges our nation and
world endured, it is remarkable to see how we have adapted,
persevered, and in some cases, prospered. Through it all, the
heroes are those who have stepped up through incredible
personal sacrifice to serve others experiencing crisis.
Against this incredibly challenging backdrop, our talented team of
“Kforcers” delivered extraordinary financial results and advanced
many of our strategic objectives while adapting to the dramatic
changes in their own lives. They also found time in their hearts
to serve others in their communities through our Corporate
Social Responsibilities (CSR) initiatives; we are immensely proud
of our team.
Among our strategic and financial accomplishments in 2020:
Overall revenues and earnings per share grew approximately
3% on a billing day basis and 14%, respectively.
After a mild decline at the outset of the pandemic, our tech flex
business began to improve in June 2020 with a resumption of
growth on a year-over-year basis in the fourth quarter.
We retired all outstanding net debt in 2020 and ended the year
with net cash of $3.5 million and trailing twelve months EBITDA
of roughly $97 million.
Our total shareholder return over the last three years of nearly
80% was #1 in our peer group for the second consecutive year.
Successfully implemented two of three waves of technological
functionality associated with our talent relationship
management capability, with the last wave successfully
implemented in the first quarter of 2021.
Laid the foundation, we believe, for an improved quality revenue
stream in the future with outsized growth in our managed
teams, managed solutions technology offering and began the
migration of our FA business into higher-value skill sets in 2021.
We seamlessly transitioned our entire workforce to work
remotely within 24 hours and have since significantly
progressed our Kforce Reimagined efforts to provide a more
flexible hybrid work environment and enhanced experience to
our people, clients and consultants.
Intensified our efforts with respect to diversity, equity and
inclusion by instituting leadership and engaging independent
third-party experts to assist Kforce in further building out our
long-term strategy and achieving our mission.
Our customer and employee satisfaction levels are at an all-time
high as measured by our Net Promoter Score, Glassdoor and
internal surveys.
Shortly after year-end, our Board of Directors approved a 15%
increase to our dividend from $0.80 per share to $0.92 per share.
Advanced our Board refreshment activities by welcoming
Ms. Catherine Cloudman and Mr. Derrick Brooks as the newest
members of our outstanding Board of Directors.
2020 BUSINESS LINE PERFORMANCE
Revenues for our technology segment (approximately 75% of
overall revenues) of $1.05 billion declined nearly 1% in 2020, per
billing day, versus 2019 levels. Staffing Industry Analysts (SIA)
expected the domestic technology staffing market to decline 9%
in 2020, which suggests to us that we were successful again in
2020 in capturing additional market share. Key to our success
was the strategic decision to construct a client portfolio that
is comprised of primarily Fortune 500 and similarly situated
companies where our scale, depth of service offerings and
reputation in the market for providing superior quality are
aligned with our clients’ interests. For these large, sophisticated
companies, our efforts are focused on assisting them attain their
strategic objectives by providing critical technology talent and
solutions. Along those lines, we have also made solid progress
maturing our managed teams and solutions capability by
investing significantly in resources dedicated to this offering.
Our clients are increasingly looking to companies such as Kforce
to assume a greater role in more complex technical projects and
serve as a cost-efficient yet effective alternative or complement
to other larger consulting and solutions organizations. As a
result, we experienced great market receptivity and growth in
this offering in 2020 and are continuing to invest in this capability
in 2021. We expect a robust demand environment in the more
than $30 billion domestic technology staffing market and greater
than $100 billion market for IT solutions.
Revenues for our finance and accounting (FA) segment
(approximately 25% of overall revenues) of approximately $348
million increased nearly 20% in 2020, per billing day, compared to
2019 levels. Our client relationships and capability to source talent
very quickly at scale allowed us to be successful supporting several
COVID-19 government-sponsored initiatives, which generated
approximately $115 million in revenue in 2020. We have intensified
our efforts to migrate this business towards more highly skilled
assignments such as analytics and decision-support roles that are
less susceptible to technological change and automation and more
synergistic with our technology business.
KFORCE INC. AND SUBSIDIARIES 1
In addition to the solid top line performance in 2020, we have
experienced higher profitability levels against our previously
communicated operating margin targets and achieved 2020 EPS
of $2.62. We believe the improving quality of our revenue stream,
continued improvements in associate productivity, technology
investments and ongoing structural reductions in operating costs
will continue to drive enhanced profitability levels. As a result,
when we reported our fourth quarter 2020 results, we raised our
operating margin targets by 20 basis points from prior levels.
LOOKING AHEAD
As we look to 2021, we are very excited about our strategic
position and ability to execute within what we believe will be a
continued strong demand environment for our services. It’s
our belief that the pandemic has exponentially elevated and
accelerated the imperative for companies to rapidly digitize their
businesses, transform business models and drive productivity
gains through technology investment.
We also believe the macro and secular trends play to the heart
of the position of Kforce as a technology and professional
services and solutions firm. We will continue to place a priority on
improving associate productivity while allocating capital to grow
our technology business, especially in our managed teams and
managed solutions practice.
We have built an exceptional team and armed them with a
technology-enabled operating model that, we believe, will allow
us to outperform the market on a sustained basis. Foundational
to our expectations for 2021 is (i) continued strong growth in
our technology business, (ii) expected revenue declines in our
government-sponsored COVID-19 business compared to 2020,
(iii) the strategic migration of our FA business into higher-skilled
areas such as analytical and decision support and (iv) enhanced
profitability levels.
Revenue of $1.368 billion to $1.430 billion
Operating margin of 6.0% to 6.3%
Earnings per share of $2.68 to $3.00
As our revenue mix evolves, we would expect to enter 2022 with
85% our revenues focused in technology.
SOCIAL RESPONSIBILITY
Our CSR efforts reflect our desire to “Empower people through
Knowledge Sharing®” with a focus on charitable organizations
that provide education, human services and community
development, our three CSR pillars. Despite our associates
working remotely in 2020, they remained dedicated to improving
their communities throughout the year. This commitment was
seen in successful efforts to raise awareness and much needed
funds for organizations such as American Heart Association,
2 KFORCE INC. AND SUBSIDIARIES
Best Buddies and Feeding America. Contactless school supplies
and food drives for those in need were also held throughout the
pandemic, showcasing the Firm’s continued focus on our Core
Value of Stewardship. We continued hosting our annual Kforce
Kids’ STEM Fairs virtually, which advances our commitment
to educating the next generation of innovators, creators and
experts. Our CSR efforts are also seen in our focus on the
environment by being mindful of our impact and seizing every
opportunity to be eco-friendly. In 2020, Kforce’s headquarters
became ENERGY STAR® certified, which means our Tampa office
performs in the top 25% of buildings nationwide due to the
year-round maintenance and services of our facilities team. This
certification is just one small part of how we’re working hard to
conserve the environment for years to come.
Our mission is to establish and promote an authentic culture of
diversity, equity and inclusion (DE&I) within Kforce. In 2020, we
intensified our DE&I efforts by appointing leadership responsible
for overseeing the development of our strategies and objectives.
We have also engaged independent third-party experts to assist
Kforce in conducting a comprehensive review of our DE&I program
including, but not limited to, building an increasingly robust pipeline
of diverse candidates in our talent acquisition efforts (for both our
associates and consultants), supplier diversity practices, training
and mentorship programs as well as the focus of our stewardship
activities. This review is intended as a means to strengthen and
refine existing significant activities in these areas.
Thank you for your interest in and support of Kforce. Our total
shareholder return since going public in August 1995 has been
approximately 1,310%, roughly 2.3 times greater than the Russell
2000 over the same period. Given that we are in the early innings
of the massive digital transformation of the U.S. economy, we
believe the future of Kforce has never been brighter. The results
that we are experiencing are the result of a lot of hard work, and
tough decisions, by our team and I am grateful for their tenacity.
While we have much more to do, we would like to say thank you
to each and every member of our field and corporate teams, and
to our clients and consultants, for allowing us the privilege of
serving you.
David L. Dunkel
Chairman and
Chief Executive Officer
Joseph J. Liberatore
President
SELECTED FINANCIAL DATA
The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction
with Kforce’s Consolidated Financial Statements and the related notes thereto (”Consolidated Financial Statements”) incorporated into
this Annual Report.
Years Ended December 31,
(In thousands, except per share amounts)
Revenue
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Other expense, net
Income from continuing operations,
before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations,
net of tax
Net income
2020
2019(1)
2018
2017(2)
2016(3)
$1,397,700
396,224
310,713
5,255
5,044
$1,347,387
395,038
314,167
6,050
3,425
$1,303,937
386,487
307,250
6,836
4,521
$1,253,646
375,597
308,313
7,266
5,100
$1,221,078
376,393
318,970
7,549
3,101
75,212
19,173
56,039
71,396
16,830
54,566
67,880
17,004
50,876
54,918
25,324
29,594
46,773
19,751
27,022
—
56,039
$
76,296
$ 130,862
7,104
$ 57,980
3,691
$ 33,285
5,751
$ 32,773
Earnings per share—basic, continuing operations
Earnings per share—diluted, continuing operations
Weighted average shares outstanding—basic
Weighted average shares outstanding—diluted
Dividends declared per share
$2.67
$2.62
20,983
21,395
$0.80
$2.35
$2.29
23,186
23,772
$0.72
$2.05
$2.02
24,738
25,251
$0.60
$1.17
$1.16
25,222
25,586
$0.48
$1.04
$1.03
26,099
26,274
$0.48
As of December 31,
(In thousands)
Cash and cash equivalents
Working capital
Total assets
Total outstanding borrowings on credit facility
Total long-term liabilities
Stockholders’ equity
2020
2019
2018
2017
2016
$ 103,486
$ 230,726
$ 479,049
$ 100,000
$ 190,948
$ 179,935
$ 19,831
$ 160,271
$ 381,125
$ 65,000
$ 128,898
$ 167,263
$ 112
$ 158,104
$ 379,908
$ 71,800
$ 121,219
$ 168,331
$ 379
$ 161,726
$ 384,304
$ 116,523
$ 166,308
$ 134,277
$ 1,482
$ 135,353
$ 365,421
$ 111,547
$ 160,332
$ 121,736
(1) SG&A expenses for the year ended December 31, 2019 include $2.0 million of severance and other costs due to actions taken as a result of the GS segment divestiture,
which negatively impacted SG&A.
(2) The Tax Cuts and Jobs Act (“TCJA”) was enacted in December 2017, which reduced the U.S. federal corporate tax rate from 35.0% to 21.0% in 2018. As a result,
we revalued our net deferred income tax assets and recorded $3.6 million of additional income tax expense from continuing operations during the year ended
December 31, 2017.
(3) During 2016, Kforce incurred approximately $6.0 million in severance costs associated with realignment activities focused on further streamlining our organization,
which were recorded in SG&A.
During the year ended December 31, 2019, Kforce completed the sale of the GS segment and the results of operations for the
GS segment have been presented as discontinued operations for all of the years presented above. Refer to Note 2 — “Discontinued
Operations” in the Notes to Consolidated Financial Statements, included in this Annual Report, for a more detailed discussion.
KFORCE INC. AND SUBSIDIARIES 3
STOCK PRICE PERFORMANCE
The following graph compares the cumulative five-year total return on our common stock, the NASDAQ Stock Market (U.S.) Index and
our Peer Group using the value of an investment of $100 on December 31, 2015 with dividends fully reinvested. All returns are weighted
based on market capitalization at the end of each discrete measurement period. Historical stock prices of our common stock are not
necessarily indicative of future stock price performance.
$275
$250
$225
$200
$175
$150
$125
$100
$75
2015
2016
2017
2018
2019
2020
Kforce Inc.
NASDAQ Stock Market (Composite)
Peer Group
Index
Kforce Inc.
NASDAQ Stock Market (Composite)
Peer Group (1)
(1) Peer Group:
AMN Healthcare Services, Inc.
ASGN Incorporated
Cross Country Healthcare, Inc.
Computer Task Group, Incorporated
2015
$100.0
100.0
100.0
2016
$ 93.6
107.5
112.1
2017
$104.7
137.9
139.6
2018
$130.5
132.5
119.3
2019
$171.1
179.2
145.8
2020
$185.6
257.4
146.3
The Hackett Group, Inc.
Heidrick & Struggles International, Inc.
Huron Consulting Group, Inc.
Kelly Services, Inc.
Korn/Ferry International
Manpower Group Inc.
Resources Connection, Inc.
Robert Half International Inc.
True Blue, Inc.
Volt Information Sciences, Inc.
The Committee utilizes a peer group of companies as a source for executive compensation benchmarking data and comparisons to
Kforce’s executive compensation levels; for insight into external compensation practices; and for determining specific financial objectives
for our performance-based compensation. Additionally, our peer group is used to determine annual equity LTI compensation levels based
on our relative TSR performance.
The Committee focuses on selecting peers that are publicly traded professional staffing companies active in recruiting and placing
similar skill sets at similar types of clients, including companies we consider to be our direct business competitors. The specialty staffing
industry is made up of thousands of companies, most of which are small local firms providing limited service offerings to a relatively small
local client base. According to a report published by Staffing Industry Analysts in 2020, Kforce is one of the 15 largest publicly traded
specialty staffing firms in the U.S., so the size of our peer companies vary considerably. Therefore, the Committee selects other peers that
are similar in terms of size (revenue and market capitalization), but may not be in the staffing industry. The primary criteria for selection
include customers, revenue footprint, geographical/domestic presence, talent, complexity of operating model and companies with which
we compete for executive level talent.
4 KFORCE INC. AND SUBSIDIARIES
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Holders of Common Stock
Our common stock trades on the NASDAQ using the ticker symbol “KFRC”. As of February 23, 2021, there were 144 holders of record.
Purchases of Equity Securities by the Issuer
In March 2020, the Board approved an increase in our stock repurchase authorization bringing the then-available authorization to
$100.0 million. Purchases of common stock under the Plan are subject to certain price, market, volume and timing constraints, which are
specified in the plan. As a reaction to the COVID-19 pandemic, Kforce suspended open market purchases of shares in the early part of
the second quarter of 2020. The following table presents information with respect to our repurchases of Kforce common stock during
the three months ended December 31, 2020:
Period
October 1, 2020 to October 31, 2020
November 1, 2020 to November 30, 2020
December 1, 2020 to December 31, 2020
Total Number of
Shares Purchased
(1)(2)(3)
4,949
1,362
135,079
Average Price
Paid Per Share
$37.50
$40.24
$42.57
Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans or Programs
—
—
—
Approximate Dollar
Value of Shares
That May Yet Be
Purchased Under the
Plans or Programs
$84,540,188
$84,540,188
$84,540,188
Total
141,390
$42.37
—
$84,540,188
(1) Includes 4,949 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period October 1, 2020 to October 31, 2020.
(2) Includes 1,362 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period November 1, 2020 to November 30, 2020.
(3) Includes 135,079 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period December 1, 2020 to December 31, 2020.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In addition to the inherent operational risks, Kforce is exposed to certain market risks, primarily related to changes in interest rates.
As of December 31, 2020, we had $100.0 million outstanding under our credit facility. Refer to Note 14 — “Credit Facility” in the
Notes to Consolidated Financial Statements, included in this Annual Report, for further details on our Credit Facility. A hypothetical
10% increase in interest rates on variable debt in effect at December 1, 2020 would have had no effect on our annual interest expense
because we had no variable debt at December 31, 2020.
On April 21, 2017, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A. (“Swap A”) to
mitigate the risk of rising interest rates on the Firm’s financial statements. Swap A has a rate of 1.81%, which is added to our interest
rate margin to determine the fixed rate that the Firm will pay to the counterparty during the term of the Swap based on the notional
amount of Swap A. The effective date of Swap A is May 31, 2017, and the maturity date is April 29, 2022. The notional amount of Swap A
was $65.0 million and decreased to $25.0 million at May 2020, and will remain at that amount through maturity.
On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank N.A. (“Swap B”). Swap B
was effective on March 17, 2020 and matures on May 30, 2025. Swap B has a fixed interest rate of 0.61% and a notional amount of
$75.0 million and increases to $100.0 million in May 2022, and subsequently decreases to $75.0 million and $40.0 million in May 2023
and May 2024, respectively. The increases in the notional amount of Swap B correspond to the decreases in the notional amount of
Swap A.
LIBOR is expected to be discontinued after 2021. In March 2020, the FASB issued authoritative guidance, which provides optional
expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions that reference
LIBOR and are affected by reference rate reform if certain criteria are met. Entities may adopt the provisions of the new standard as of
the beginning of the reporting period when the election is made between March 12, 2020 through December 31, 2022. We adopted this
optional standard effective January 1, 2020 using the prospective method, and utilized the optional expedients for cash flow hedges to
assume that a hedged forecasted transaction is probable of occurring and that the reference rate will not be replaced for the remainder
of a hedging relationship.
KFORCE INC. AND SUBSIDIARIES 5
for delivering quality services. Within our Tech segment, we
provide services to clients in a variety of industries with a
diversified footprint in, among others, financial and business
services, communications and technology. Revenue for our
Tech segment decreased 0.8% to $1.0 billion in 2020 on a year-
over-year basis. The average bill rate for Tech Flex in 2020 was
approximately $79 per hour, which increased 4.3%, as compared
to 2019. Our average assignment duration for Tech Flex is nearly
10 months, which has steadily increased over the last several
years. Tech Flex continues to benefit from improving bill rates
and longer assignment durations, which we believe is related to
the acute labor shortage, particularly the shortage of labor for
highly-skilled positions. In addition to our capability to source
highly qualified U.S. domestic technology talent, we believe an
important differentiator in a candidate-constrained environment
is our capability to source highly qualified foreign-born talent
working domestically in the U.S. in higher-end technology roles.
We operate this capability on a centralized basis, which allows us
to operate consistently with a keen focus on ensuring compliance
in this highly regulated space.
The September 2020 report published by Staffing Industry
Analysts (“SIA”) stated that temporary technology staffing
is expected to experience growth of 7% in 2021. Digital
transformation, as a general trend, is driving organizations
across all industries to increase their technology investments as
competition and the speed of change intensifies. Nontraditional
competitors are also entering new emerging technologies and
markets. This development puts increased pressure on companies
to invest in innovation and the evolution of their business models.
We believe the secular drivers of technology spend generally
remain intact with many companies becoming increasingly
dependent on the efficiencies provided by technology and the
need for innovation to support business strategies and sustain
relevancy in today’s rapidly changing marketplace. At the macro
level, demand is also being driven by an ever-changing and
complex regulatory and employment law environment, which
increases the overall cost of employment for many companies.
We believe that these factors, among others, are continuing to
drive companies to look to temporary staffing providers, such as
Kforce, to meet their human capital needs.
We are pleased with our above-market performance in our Tech
business in 2020 and remain very excited about our strategic
position and ability to execute in 2021, in what we believe will be
a strong demand environment for our services.
BUSINESS OVERVIEW
Company Overview
Kforce Inc. and its subsidiaries (collectively, “Kforce”) provide
professional staffing services and solutions to our clients on
both a temporary (“Flex”) and permanent (“Direct Hire”) basis
through our Technology (“Tech”) and Finance and Accounting
(“FA”) segments. While our workforce has been working remotely
since March 2020 due to the COVID-19 pandemic, our physical
worksites include our corporate headquarters in Tampa, Florida
and approximately 40 field offices located throughout the U.S.
Kforce was incorporated in 1994 and completed its Initial Public
Offering in August 1995, but its predecessor companies have
been providing staffing services since 1962.
Kforce serves clients across many industries and geographies as
well as organizations of all sizes, with a particular focus on serving
Fortune 1000 and other large companies. We believe that our
portfolio of service offerings is a key contributor to our long-term
financial stability. Our 10 largest clients represented approximately
28% of revenue for the year ended December 31, 2020.
Our efforts to strategically position Kforce as a professional and
technical services company has resulted in several divestitures
over the last 10 years. Most recently, during 2019, Kforce sold
its Government Solutions (“GS”) segment, which has been
reported as discontinued operations in the consolidated financial
statements. Except as specifically noted, our discussions in this
report exclude any activity related to the GS segment. Refer to
Note 2 — “Discontinued Operations” in the Notes to Consolidated
Financial Statements, included in this Annual Report, for a more
detailed discussion.
Our quarterly operating results can be affected by:
the number of billing days in a particular quarter;
the seasonality of our clients’ businesses;
increased holidays and vacation days taken, which is usually
highest in the fourth quarter of each calendar year; and
increased costs as a result of certain annual U.S. state and
federal employment tax resets that occur at the beginning
of each calendar year, which negatively impacts our gross
profit and overall profitability in the first fiscal quarter of each
calendar year.
Tech Segment
Our largest segment, Tech, provides both Flex and Direct
Hire services to our clients, focusing primarily on areas of
information technology such as systems/applications architecture
and development, data management, business and artificial
intelligence, machine learning and network architecture and
security. One of our strategies over the last several years has
been to invest in our managed teams and solutions capabilities
in order to provide a higher-value, differentiated offering to our
clients. Kforce has been successfully winning these more complex
technology projects due to, we believe, the strong long-standing
partnerships we have built with our clients and our reputation
6 KFORCE INC. AND SUBSIDIARIES
We believe proper execution by our associates and consultants
directly impacts the longevity of the assignments, increases
the likelihood of generating repeat business with our clients and
fosters a better experience for our consultants, which has a direct
correlation to consultant redeployment.
The key drivers of Flex revenue are the number of consultants
on assignment, billable hours, the bill rate per hour and, to a
limited extent, the amount of billable expenses incurred by Kforce.
Our Flex gross profit is determined by deducting related costs of
employment for consultants, including compensation, payroll
taxes, certain fringe benefits and independent contractor costs
from Flex revenue. Associate and management commissions,
compensation, payroll taxes and other fringe benefits are included
in selling, general and administrative expenses (“SG&A”), along with
other customary costs such as administrative and corporate costs.
Direct Hire Revenue
Our Direct Hire business involves locating qualified individuals
(“candidates”) for permanent placement with our clients. Direct
Hire revenue represents approximately 3% of total revenue over
the last three fiscal years. Although it is a smaller portion of our
business, it continues to be an important capability in ensuring
that we have the flexibility to meet the talent needs of our clients.
We recruit candidates using methods that are consistent with
Flex consultants. Candidate searches are generally performed on
a contingency basis (as opposed to a retained search); therefore,
revenue is earned only if the candidates are ultimately hired by our
clients. The typical fee structure is based upon a percentage of the
candidate’s annual compensation in their first year of employment,
which is determined or estimated at the time of placement.
The key drivers of Direct Hire revenue are the number of
placements and the associated placement fee. Direct Hire
revenue also includes conversion revenue, which may occur when
a consultant initially assigned to a client on a temporary basis
is later converted to a permanent placement for a fee. Direct
Hire revenue is recorded net of an allowance for “fallouts,” which
occurs when a candidate does not complete the contingency
period (typically 90 days or less). There are no consultant payroll
costs associated with Direct Hire placements; therefore, all Direct
Hire revenue increases gross profit by the full amount of the fee,
which constitutes a disproportionate percentage of our gross
profit. Commissions, compensation and benefits for Direct Hire
associates are included in SG&A.
FA Segment
Our FA segment provides both Flex and Direct Hire services
to our clients in areas such as accounting, transactional finance
(e.g. payables, receivables, business and cost analysis), financial
analysis and reporting, taxation, budgeting, loan servicing,
professional administration, audit services and systems and
controls analysis and documentation. Within our FA segment,
we provide services to clients in a variety of industries with a
diversified footprint in the financial services, healthcare and
manufacturing sectors. Revenue for our FA segment increased
20.2% to $348.1 million in 2020 on a year-over-year basis
primarily as a result of certain contracts we secured in the second
quarter to support government-sponsored COVID-19 related
initiatives (the “COVID-19 Business”). These contracts contributed
$114.7 million in revenue in 2020. Excluding the contribution of
revenue from our COVID-19 Business, our FA segment would
have decreased 19.4% on a year-over-year basis. The average
bill rate for FA Flex in 2020 was approximately $34 per hour, which
decreased 6.3% as compared to 2019. This decrease is primarily a
result of lower pay rates on the COVID-19 Business.
Strategically, in late 2020, we began intensifying our efforts
to migrate our FA Flex business toward higher-end skill sets
that are less susceptible to technological change, location and
automation such as analytics and decision-support roles. This
strategic effort will continue into 2021 and we expect will result
in natural assignment ends of lower skilled roles where strategic
client relationships do not exist.
The September 2020 report published by SIA stated that
finance and accounting temporary staffing is expected to
experience growth of 12% in 2021. For Kforce, we expect overall
FA revenues in 2021 to decline from 2020 levels due to expected
declines in our COVID-19 Business as well as the migration of our
FA Flex business.
Flex Revenue
Flex revenue represents approximately 97% of total revenue
over the last three fiscal years. We provide our clients with
qualified individuals (“consultants”), or teams of consultants in the
case of a project-based solution, on a temporary basis when the
consultant’s set of skills and experience is the right match for our
clients. We utilize a diversified set of recruitment platforms and
tools to identify and engage with candidates. The vast majority
of our consultants are directly employed by Kforce, including
domestic and foreign workers sponsored by Kforce, with a smaller
composition representing qualified independent contractors. Our
success is dependent upon our internal employees’ (“associates”)
ability to: (1) acknowledge, understand and participate in creating
solutions for our clients’ needs; (2) determine and understand
the experience and capabilities of the consultants being recruited
or teams of consultants being formed; (3) ensure excellence in
delivering and managing the client-consultant relationship; and
(4) have access to a sufficient pool of qualified consultants.
KFORCE INC. AND SUBSIDIARIES 7
Industry Overview
The professional staffing industry is made up of thousands of
companies, most of which are small local firms providing limited
service offerings to a relatively small local client base. A report
published by SIA in 2020 indicated that, in the U.S., Kforce is one
of the 15 largest publicly-traded specialty staffing firms, the fifth
largest technology temporary staffing firm and the fifth largest
finance and accounting temporary staffing firm.
From an economic standpoint, temporary employment figures
and trends are important indicators of staffing demand, based
on data published by the Bureau of Labor Statistics and SIA.
The penetration rate (the percentage of temporary staffing to
total employment) and unemployment rate were 1.9% and 6.7%,
respectively, in December 2020, down from 2.0% (penetration)
and up from 3.5% (unemployment), respectively, in December
2019. Temporary help employment was down 7.6% year-over-year
as of December 2020, and total non-farm employment was down
6.2% year-over-year. In addition, the college-level unemployment
rate, which we believe serves as a proxy for professional
employment and therefore aligns well with the consultant and
candidate population that Kforce most typically serves, was 3.8%
in December 2020, which represented an increase from December
2019. Further, we believe that the unemployment rate in the
specialties we serve, especially in certain technology skill sets, is
significantly lower than the published averages. We believe this
speaks to the overall secular drivers of demand in technology, the
critical nature of the technology initiatives being driven by our
clients, as well as the challenges of finding an adequate supply
of qualified talent.
According to the September 2020 SIA report, the technology
temporary staffing industry and finance and accounting temporary
staffing industry are expected to generate projected revenues of
$31.7 billion and $7.8 billion, respectively, in 2021. Based on these
projected revenues, our current market share is approximately 3%.
Our business strategies are focused on expanding our share of the
U.S. temporary staffing industry and investing in our capability to
provide higher level IT services and solutions. According to SIA,
the addressable market in the technology solutions space was
approximately $29.5 billion in 2020.
Business Strategies
Our primary objectives are driving long-term shareholder
value by achieving above-market revenue growth, making
prudent investments to enhance our efficiency and effectiveness
within our operating model and significantly improving levels of
operating profitability. We believe the following strategies will help
us achieve our objectives.
Evolving our Managed Services and Solutions Offerings. Our
clients have increasingly been looking for firms such as Kforce
to assume a greater level of responsibility in assisting them
with their digital transformation efforts. The total addressable
market in the higher end IT services and solutions is significantly
larger than in the traditional technology staff augmentation
market. The use of firms such as Kforce, which can provide cost
effective access to highly skilled talent, is a significant driver for
this increased demand. We are leveraging the longevity of our
relationships, primarily with Fortune 1000 companies, and our
understanding of existing client needs to provide talent beyond
traditional staff augmentation into areas including resource and
capacity management as well as managed services and solutions.
As an example, we have an engagement with a communications
company to assist with an upgrade of its legacy infrastructure and
migration to the cloud to improve its end customer’s experience.
Kforce was responsible for defining the cloud strategy, from
architecture to the implementation roadmap, and assisted
with cloud-native development, data security, compliance and
reporting. We are continuing to make significant headcount
investments in defined practice areas and our delivery assurance
capabilities to grow this offering organically. We also believe
there may be inorganic growth opportunities to supplement our
existing business.
Further Improve the Quality of our Revenue Stream. In addition
to the significant progress we have made in evolving our
managed services and solutions offering, we are also focused
on further improving the quality of our revenue stream through
the migration of our FA business towards more highly skilled
assignments in decision-support and analytical roles that are less
susceptible to technological change, location and automation.
Historically, we have supported professional administrative roles
such as customer service, data entry, and call center. We do not
intend on focusing our efforts on these, among other, types
of roles in 2021 and beyond unless there is a strategic client
relationship or other strategic rationale.
Reimagining a More Flexible Work Environment. The COVID-19
pandemic has caused what some have referred to as a global
work-from-home experiment. For Kforce, our associates have
been working remotely since March 2020. Based on our frequent
communications and dialogue with our associates, they have
been largely successful working in this environment and have
proven to exercise great ingenuity in continuing to support our
clients and consultants. It was our view, early on in the COVID-
19 pandemic, that the work-from-home experiment was likely to
forever change the future work environment. Given this view, we
initiated a “Kforce Reimagined” effort to begin positioning Kforce
to provide a more flexible work environment for our associates,
which will involve streamlining our real estate footprint and
investing in technology and other tools to provide a seamless
in-office and remote experience. The culmination of these efforts
should provide significant contributions to improving productivity
and profitability.
8 KFORCE INC. AND SUBSIDIARIES
Improving the Productivity of our Talent. We believe that it
is critical to provide our associates with high quality tools to
effectively and efficiently perform their roles, better evaluate
business opportunities and advance the value we bring to our
clients and consultants. We continue to enhance our sales and
delivery methodologies and processes in ways we believe will
allow us to better evaluate and shape business opportunities with
our clients as well as train our sales and delivery associates to
follow our consistent and uniform methodology.
During 2020, we continued developing and began implementing
a new talent relationship management (TRM) system that we
expect will better leverage our delivery strategies and processes
and improve our capabilities. We have agilely deployed our TRM
system and the final release of the initial functionality is expected
to be completed in the first quarter of 2021. Going forward, we
will continue to make enhancements to our business and data
intelligence capabilities. These investments are part of a multi-year
effort to upgrade our technology tools to equip our associates
with improved capabilities to deliver exceptional service to our
clients, consultants and candidates and improve the productivity
of our associates and the scalability of our organization.
Critical to improving the performance of our associates is the
development of a strong management team. A key pillar of our
talent development strategy is to provide our leaders with the
skills necessary to lead their teams effectively. During 2020, we
initiated leadership development activities that included ongoing
training both specific to our industry and generally on leading
people. These activities will be ongoing and, we believe, will lead
to improved associate performance and higher retention levels of
our associates.
In 2021, we will also begin an assessment of our middle
and back office capabilities that will support the investments
we have made in our front office and we believe will ultimately
bring significant efficiency and effectiveness to our back office
support organization.
Enhancing our Client Relationships. We strive to differentiate
ourselves by working collaboratively with our clients to better
understand their business challenges and help them attain their
organizational objectives. This collaboration focuses on building
a consultative partnership rather than a transactional client
relationship, which increases the intimacy we have with our clients
and improves our ability to offer higher value and a broader array
of services and support to our clients. To accomplish this, we
align our revenue-generating talent with clients based on their
experience with markets, products, industries and in the case of
a managed teams and solutions offering, expertise in the related
technology or project.
We measure our success in building long-lasting relationships
with our clients using staffing industry benchmarks and Net
Promoter Score (“NPS”) surveys conducted by a specialized,
independent third-party provider. Our client NPS ratings are
amongst the highest in the industry and provide helpful insights
from our clients on how to continue improving our relationships.
We believe long-lasting relationships with our clients is a critical
element in revenue growth.
Improving the Job Seeker Experience. Our consultants are a
critical component of our business and essential in sustaining
our client relationships. In 2020, we were able to utilize our talent
community platform through WorkLLama, specifically its referral
management capability, to provide us leverage in the timely
sourcing of qualified candidates. We believe this seamlessly
connects the candidate with the recruiter, which improves the
job seeker’s experience and provides a better quality candidate.
We are focused on effective and efficient processes and tools
to find and attract prospective consultants, matching them to a
client assignment and supporting them during their tenure with
Kforce. Our success in this regard would be expected to positively
influence the tenure and loyalty of our consultants and be their
employer of choice, thus enabling us to deliver the highest quality
talent to our clients.
We measure the quality of our service to and support of our
consultants using staffing industry benchmarks and NPS surveys
conducted by a specialized, independent third-party provider. Our
consultant NPS ratings, similar to our client ratings, are well above
staffing industry averages. We continually seek direct feedback
from our consultants, which helps us identify opportunities to
refine our services.
COMPETITION
We operate in a highly competitive and fragmented staffing
industry comprised of large national and local staffing firms.
The local firms are typically operator-owned, and each market
generally has one or more significant competitors. Within our
managed teams and solutions business, we also face competition
from national and regional accounting, consulting and advisory
firms and national and regional strategic consulting and systems
implementation firms. We believe that our boundaryless reach
within the U.S., physical presence in larger markets, concentration
of service offerings in areas of greatest demand (especially
technology), national delivery teams, centralized delivery
channels for foreign consultants, including those obtained
via the H-1B visa program which optimizes distribution and
strengthens compliance, longevity of our brand and reputation in
the market, along with our dedicated compliance and regulatory
infrastructure, all provide a competitive advantage.
KFORCE INC. AND SUBSIDIARIES 9
Many clients utilize Managed Service Providers (“MSP”) or
Vendor Management Organizations (“VMO”) for the management
and procurement of staffing services. Generally, MSPs and VMOs
standardize processes through the use of Vendor Management
Systems (“VMS”), which are tools used to aggregate spend and
measure supplier performance. VMSs are also offered through
independent providers. Typically, MSPs, VMOs and/or VMS
providers charge staffing firms administrative fees ranging from
1% to 4% of revenue. In addition, the aggregation of services
by MSPs for their clients into a single program can result in
significant buying power and, thus, pricing power. Therefore, the
use of MSPs by our clients has, in certain instances, resulted in
margin compression, but has also led to incremental client share
through our client’s vendor consolidation efforts. Kforce does
not currently provide MSP or VMO services directly to our clients;
rather, our strategy has been to work with MSPs, VMOs and VMS
providers that enable us to better extend our services to current
and prospective clients.
We believe that the principal elements of competition in our
industry are differentiated offerings, reputation, the availability
and quality of associates, consultants and candidates, level
of service, effective monitoring of job performance, scope of
geographic service, types of service offerings and compliance
orientation. To attract consultants and candidates, we emphasize
our ability to provide competitive compensation and benefits,
quality and varied assignments, scheduling flexibility and
permanent placement opportunities, all of which are important to
Kforce being the employer of choice. Because individuals pursue
other employment opportunities on a regular basis, it is important
that we respond to market conditions affecting these individuals
and focus on our consultant relationship objectives. Additionally,
in certain markets, from time to time we have experienced
significant pricing pressure as a result of our competitors’ pricing
strategies, which may result in us not being able to effectively
compete or choosing to not participate in certain business that
does not meet our profitability standard.
REGULATORY ENVIRONMENT
Staffing firms are generally subject to one or more of the
following types of government regulations: (1) regulation of
the employer/employee relationship, such as wage and hour
regulations, tax withholding and reporting, immigration/H-1B
visa regulations, social security and other retirement, anti-
discrimination, employee benefits and workers’ compensation
regulations; (2) registration, licensing, recordkeeping and
reporting requirements; and (3) worker classification regulations.
INSURANCE
Kforce maintains a number of insurance policies including
general liability, automobile liability, workers’ compensation
and employers’ liability, liability for certain foreign exposure,
umbrella and excess liability, property, crime, fiduciary, directors
and officers, employment practices liability, cybersecurity,
professional liability and excess health insurance coverage. These
policies provide coverage subject to their terms, conditions, limits
of liability and deductibles, for certain liabilities that may arise
from Kforce’s operations. There can be no assurance that any of
the above policies will be adequate for our needs or that we will
maintain all such policies in the future.
HUMAN CAPITAL MANAGEMENT
Core Values
At the heart of Kforce, as an organization, is a deep
understanding and unwavering commitment to our core values,
which are:
We’re a team that values one another through mutual
RESPECT, earned in our daily interactions.
INTEGRITY fuels our actions with the strength to do the right
thing.
We rely on one another and let TRUST drive our team results.
We want to give our clients, consultants and each other
EXCEPTIONAL SERVICE every chance we get.
COMMITMENT keeps us together as one team dedicated to
individual and Firm success.
Our spirit and culture need FUN to truly thrive.
Standing up for STEWARDSHIP & COMMUNITY with a servant’s
heart keeps us grounded and humble.
Commitment to Values and Ethics
Along with our core values, we act in accordance with our
Code of Business Conduct and Ethics (“Code of Conduct”), which
sets forth expectations and guidance for associates to make
appropriate decisions. Our Code of Conduct covers topics such as
anti-corruption, discrimination, harassment, privacy, appropriate
use of company assets, protecting confidential information
and reporting violations. The Code of Conduct reflects our
commitment to operating in a fair, honest, responsible and ethical
manner and also provides direction for reporting complaints in
the event of alleged violations of our policies (including through
an anonymous hotline).
10 KFORCE INC. AND SUBSIDIARIES
Employees and Personnel
As of December 31, 2020, Kforce employed approximately
2,000 associates, including roughly 1,300 supporting the
revenue-generating aspects of our business and approximately
700 supporting the revenue-enabling aspects. We also had
approximately 11,900 consultants on assignment providing
flexible staffing services and solutions to our clients.
Approximately 90% of these consultants are employed directly
by Kforce and 10% are qualified independent contractors. As
the employer, Kforce is responsible for the employer’s share
of applicable social security taxes (“FICA”), federal and state
unemployment taxes, workers’ compensation insurance and other
direct labor costs relating to our employees. The more pertinent
health, welfare and retirement benefits include: comprehensive
health insurance; workers’ compensation benefits, retirement
plan options; employee stock purchase plan and paid time off.
We have no collective bargaining agreements covering any of our
employees, have never experienced any material labor disruption,
and are unaware of any current efforts or plans of our employees
to organize.
Health and Safety
Central to our overall operating philosophy is our belief that
our employees are key to achieving our business objectives;
therefore, their safety is our highest priority. In keeping with this
principle, we have been thoughtful and aggressive in responding
to the COVID-19 pandemic as it relates to our employees. Some
of the measures include:
Requiring our associates to work remotely since March 2020;
Prohibiting non-essential travel for all employees;
Initiating regular communications from our executives
regarding impacts of the COVID-19 pandemic, including
health and safety protocols and procedures;
Establishing new physical distancing procedures for employees
and employees who need to be onsite;
Procuring personal protective equipment, including, among
other items, masks, sanitization stations, temperature-
reading devices, plexiglass workstation dividers, for
distribution to our associates and consultants and use in our
physical workspaces;
Distributing corporate assets, including, among other
items, office chairs, computer monitors, docking stations,
communication devices, to employees to enable remote work,
as necessary;
Providing a one-time subsidy to each of our associates to
cover business expenses and other unanticipated needs
stemming from the COVID-19 pandemic, including, among
things, child-care, tutoring services;
Enhancing our health and wellness offerings to include a
digital self-care platform to help our associates with any
mental health concerns;
Investing in technologies and tools to improve the
effectiveness of our associates while working remotely; and
Improving our associate outreach efforts to detect and
try to address any challenges or needs of our associates.
Talent Management and Leadership Development
Our key talent philosophy is to identify, train and develop
talent from within to help ensure that we maintain a consistent
operating model. A core objective is to add new associates in
entry-level recruiting roles so that our new associates learn the
proper foundational understanding of our business. We believe
that this will result in improving productivity and increased talent
retention. This approach has yielded a deep understanding
among our employee base of our business, our products, and our
customers, while adding new employees and ideas in support of
our continuous improvement mindset.
Among our key initiatives has been our:
Leadership Development Program, led by an independent
third-party specialist, which is aimed at building the
skills necessary to nurture strong relationships, maintain
accountability and enhance productivity among the leaders
across Kforce;
Leadership Accelerator Program, which is a cross-functional,
collaborative, skill-building program aligned with Kforce’s
Leader’s Creed, Core Values and leadership competencies;
and,
Career Progression Program, which creates awareness of
opportunities to develop and grow within Kforce by, among
other things, using tools such as a digital guide to navigate
career paths and required KPIs, competencies and training.
Our talent management activities also include, but are not
limited to, conducting the following activities:
Periodic performance appraisals to promote engaging and
productive communications between leaders and their
team members about performance, career progression and
advancement opportunities;
Calibration sessions during the performance appraisal
process to help ensure consistency across Kforce in assigning
appraisal ratings; and
9-Box exercises are conducted to evaluate our talent for
targeted areas of development, assess opportunities for our
talent across the Firm and for succession planning purposes.
Diversity, Equity and Inclusion Program
Kforce’s diversity, equity and inclusion (DE&I) program is
overseen by Andrew Thomas, Chief Marketing and Talent Officer,
and led by Donald Harvey, Senior Vice President of Diversity and
Inclusion, with the mission of establishing and promoting an
authentic culture of diversity, equity and inclusion at Kforce.
With the assistance of independent third party specialists,
Kforce is conducting a comprehensive review of our DE&I program
including, but not limited to, building an increasingly robust
pipeline of diverse candidates in our talent acquisition efforts
(for both associates and consultants), supplier diversity practices,
training and mentorship programs as well as the focus of our
stewardship activities to meet the mission and objectives of our
DE&I program. This review is intended as a means to strengthen
and refine already significant activities in these areas.
KFORCE INC. AND SUBSIDIARIES 11
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This MD&A should be read in conjunction with our Consolidated
Financial Statements and the accompanying notes thereto and
the Business Overview included in this Annual Report, for an
overview of our operations and business environment.
EXECUTIVE SUMMARY
The following is an executive summary of what Kforce believes
are highlights for 2020, which should be considered in the context
of the additional discussions herein and in conjunction with the
consolidated financial statements and notes thereto.
Revenue for the year ended December 31, 2020 increased
3.3%, on a billing day basis, to $1.40 billion in 2020 from
$1.35 billion in 2019. Revenue decreased 0.8% for Tech and
increased 20.2% for FA.
Flex revenue increased 4.5% on a billing day basis, to $1.36
billion in 2020 from $1.30 billion in 2019. Flex revenue
decreased 0.8%, on a billing day basis, for Tech and increased
25.8%, on a billing day basis, for FA. During 2020, we secured
contracts to support government-sponsored COVID-19
related initiatives that benefited FA Flex with $114.7 million
in revenues for the year ended December 31, 2020. Excluding
revenues from the COVID-19 Business, our FA Flex business
would have declined 17.5% in 2020 on a year-over-year basis.
Direct Hire revenue decreased 29.6% to $33.6 million in 2020
from $47.7 million in 2019.
Gross profit margin decreased 100 basis points to 28.3% in
2020 due primarily to lower Direct Hire revenue mix. Flex gross
profit margin decreased 10 basis points to 26.6% in 2020 from
26.7% in 2019. Flex gross profit margin increased 10 basis
points for Tech and decreased 140 basis points for FA.
SG&A expenses as a percentage of revenue for the year ended
December 31, 2020 decreased to 22.2% from 23.3% in 2019.
The decrease is primarily related to leverage from our revenue
growth, continued improvements in associate productivity,
reductions in certain areas such as travel and office related
expenses given pandemic restrictions and overall tight
management of spend.
Income from continuing operations for the year ended
December 31, 2020, increased 2.7% to $56.0 million, or $2.62
per share, from $54.6 million, or $2.29 per share, in 2019.
The Firm returned $46.2 million of capital to our shareholders
in the form of open market repurchases totaling $29.4
million, or 1.0 million shares, and quarterly dividends totaling
$16.8 million, or $0.80 per share, during the year ended
December 31, 2020.
In March 2020, Kforce entered into a forward-starting interest
rate swap agreement with an interest rate of 0.61%, which
is added to the applicable margin under our credit facility,
resulting in a notional amount of our interest rates swap of
$35.0 million, for a total notional amount of $100.0 million for
our two interest rate swaps. This was done to primarily reduce
liquidity risk at the beginning of the COVID-19 pandemic and
to take advantage of historically low interest rates.
The total amount outstanding under our Credit Facility
increased $35.0 million to $100.0 million as of December 31,
2020 as compared to $65.0 million as of December 31, 2019.
We exited the year with $3.5 million of net cash compared to
$45.2 million of net debt as of December 31, 2019.
Cash provided by operating activities was $109.2 million
during the year ended December 31, 2020 compared to $66.6
million for 2019, primarily due to the deferral of roughly $38.6
million in payroll taxes as a result of the Coronavirus, Aid,
Relief and Economic Security Act (the “CARES Act”).
RESULTS OF OPERATIONS
Certain discussions of the changes in our results of operations
from the year ended December 31, 2019 as compared to the year
ended December 31, 2018 have been omitted from this Annual
Report, but may be found in “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of
our Form 10-K for the fiscal year ended December 31, 2019 filed
with the SEC on February 21, 2020.
In 2020, the U.S. and global macro-economic environments
were severely impacted by the COVID-19 economic and health
crisis. Certain sectors of the U.S. economy were more acutely
impacted by this crisis, such as the hospitality, transportation,
retail, entertainment, health services and manufacturing sectors.
We generate revenue within each of the aforementioned sectors
of the U.S. economy though our top three industries served are
financial services, business services and telecommunications,
which have not been as acutely impacted by this crisis.
Despite certain adverse effects to our business due to the
abrupt economic disruption from the COVID-19 economic and
health crisis and related governmental rules and regulations,
we believe we were strategically well-situated as we entered the
crisis in early 2020. The decisions we made to principally focus
our efforts on helping world-class companies solve their strategic
objectives by providing critical technology talent and solutions
provided an important level of resilience to our revenues in 2020.
In addition, the COVID-19 Business provided an important level
of support to overall FA revenues, which were more acutely
impacted at the beginning of this crisis. Our strategic positioning
and execution resulted in what we believe is strong financial
performance in 2020 and provides us confidence moving forward.
12 KFORCE INC. AND SUBSIDIARIES
The following table presents certain items in our Consolidated Statements of Operations and Comprehensive Income as a percentage of
revenue for the years ended:
December 31,
Revenue by segment:
Tech
FA
Total Revenue
Revenue by type:
Flex
Direct Hire
Total Revenue
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Income from continuing operations, before income taxes
Income from continuing operations
Income from discontinued operations, net of tax
Net income
2020
2019
2018
75.1%
24.9
100.0%
97.6%
2.4
100.0%
28.3%
22.2%
0.4%
5.7%
5.4%
4.0%
— %
4.0%
78.5%
21.5
100.0%
96.5%
3.5
100.0%
29.3%
23.3%
0.4%
5.6%
5.3%
4.0%
5.7%
9.7%
75.9%
24.1
100.0%
96.5%
3.5
100.0%
29.6%
23.6%
0.5%
5.6%
5.2%
3.9%
0.5%
4.4%
Revenue. The following table presents revenue by type for each segment and percentage change from the prior period for the years
ended December 31 (in thousands):
Tech
Flex revenue
Direct Hire revenue
Total Tech revenue
FA
Flex revenue
Direct Hire revenue
Total FA revenue
Total Flex revenue
Total Direct Hire revenue
Total Revenue
Increase
(Decrease)
2020
2019
Increase
(Decrease)
2018
$1,032,901
16,727
$1,049,628
$ 331,196
16,876
$ 348,072
$1,364,097
33,603
$1,397,700
(0.4)%
(18.3)%
(0.8)%
26.3%
(38.0)%
20.2%
5.0%
(29.6)%
3.7%
$1,037,380
20,479
$1,057,859
6.8%
9.1%
6.8%
$ 971,310
18,779
$ 990,089
$ 262,307
27,221
$ 289,528
$1,299,687
47,700
$1,347,387
(8.6)%
1.2%
(7.7)%
3.3%
4.4%
3.3%
$ 286,939
26,909
$ 313,848
$1,258,249
45,688
$1,303,937
Our quarterly operating results are affected by the number of billing days in a quarter. The following table presents the year-over-year
revenue growth rates, on a billing day basis, for the last five quarters (in thousands, except Billing Days):
Year-Over-Year Revenue Growth Rates
(Per Billing Day)
Billing days
Tech Flex
FA Flex
Total Flex
Q4 2020
Q3 2020
Q2 2020
62
0.8%
26.0%
5.9%
64
(4.2)%
51.6%
6.9%
64
(3.0)%
28.7%
3.4%
Q1 2020
64
3.3%
(3.4)%
1.9%
Q4 2019
62
4.8%
(7.6)%
2.1%
KFORCE INC. AND SUBSIDIARIES 13
Flex Revenue. The key drivers of Flex revenue are the number of
consultants on assignment, billable hours, the bill rate per hour and,
to a limited extent, the amount of billable expenses incurred by Kforce.
Flex revenue for our largest segment, Tech, decreased 0.4%
(0.8% on a billing day basis) during the year ended December 31,
2020, as compared to the same period in 2019. The decline was
primarily driven by assignment ends with clients in industries that
were most significantly impacted by the COVID-19 economic and
health crisis and lower overall demand for our services as a result
of the crisis. The number of consultants on assignment in Tech Flex
have grown 15% since early June 2020 and new assignment starts
in the fourth quarter of 2020 increased 16% from the third quarter
of 2020. Additionally, lower billable hours in our Tech business were
partially offset by higher average bill rates, which increased 4.3%
on a year-over-year basis in 2020. This increase was primarily due
to our clients retaining our more highly skilled consultants given the
scarcity of talent and the assignments that were ended at the onset
of this pandemic were lower skilled areas that were less capable
of working remotely. We believe that the crisis has exponentially
elevated the imperative for companies to rapidly digitize their
businesses, transform business models and drive productivity
gains through technology investment. We expect growth in our
Tech Flex business in 2021 as COVID-19 related restrictions ease
and economic momentum builds.
Our FA segment experienced an increase in Flex revenue of
26.3% during the year ended December 31, 2020, as compared to
the same period in 2019, primarily driven by the COVID-19 Business
that contributed approximately $114.7 million in revenue during
the year ended December 31, 2020. This positively impacted FA
Flex revenue growth rates by 43.7% for 2020. Similar to our Tech
Flex business, we have been successful at growing the number
of consultants on assignment in our FA business (excluding the
COVID-19 Business) by 33% since early June 2020. As we move into
2021, we expect overall revenues in FA Flex to decline as a result
of expected declines in revenues from our COVID-19 Business as
well as the strategic migration of our FA business towards more
highly-skilled roles that are less susceptible to technological change
location and automation.
The following table presents the key drivers for the change in Flex revenue by segment over the prior period (in thousands):
Year Ended December 31,
Key Drivers—Increase (Decrease)
Volume—hours billed
Bill rate
Billable expenses
Total change in Flex revenue
2020 vs. 2019
2019 vs. 2018
Tech
FA
Tech
FA
$(41,950)
42,088
(4,617)
$ (4,479)
$ 91,662
(22,396)
(377)
$ 68,889
$35,194
30,469
407
$66,070
$(38,922)
14,145
145
$(24,632)
The following table presents total Flex hours billed by segment and percentage change over the prior period for the years ended
December 31 (in thousands):
Tech
FA
Total Flex hours billed
2020
13,070
9,615
22,685
Increase
(Decrease)
(4.1)%
35.0%
9.4%
2019
13,625
7,120
20,745
Increase
(Decrease)
3.7%
(13.6)%
(3.0)%
2018
13,145
8,241
21,386
Direct Hire Revenue. The key drivers of Direct Hire revenue are the number of placements and the associated placement fee. Direct Hire
revenue also includes conversion revenue, which may occur when a consultant initially assigned to a client on a temporary basis is later
converted to a permanent placement for a fee.
Direct Hire revenue decreased 29.6% during the year ended December 31, 2020, as compared to the same period in 2019,
primarily driven by a significant decline in the volume of placements due to the economic environment. However, we have seen a
sequential increase in our Direct Hire revenue during the third and fourth quarters of 2020 and expect this trend to continue in the first
quarter of 2021.
The following table presents the key drivers for the change in Direct Hire revenue over the prior period (in thousands):
Year Ended December 31,
Key Drivers—Increase (Decrease)
Volume—number of placements
Placement fee
Total change in Direct Hire revenue
14 KFORCE INC. AND SUBSIDIARIES
2020 vs. 2019
2019 vs. 2018
Tech
FA
Tech
FA
$(4,331)
579
$(3,752)
$(10,636)
291
$(10,345)
$1,113
587
$1,700
$(1,903)
2,215
$ 312
The following table presents the total number of placements by segment and percentage change over the prior period for the years
ended December 31:
Tech
FA
Total number of placements
2020
868
1,176
2,044
Increase
(Decrease)
(21.2)%
(39.1)%
(32.6)%
2019
1,101
1,930
3,031
Increase
(Decrease)
6.0%
(7.1)%
(2.7)%
2018
1,039
2,077
3,116
The following table presents the average fee per placement by segment and percentage change over the prior period for the years
ended December 31:
Tech
FA
Total average placement fee
2020
$19,271
$14,351
$16,440
Increase
(Decrease)
3.6%
1.8%
4.5%
2019
$18,604
$14,103
$15,738
Increase
(Decrease)
3.0%
8.8%
7.3%
2018
$18,070
$12,957
$14,662
Gross Profit. Gross profit is determined by deducting direct costs (primarily consultant compensation, payroll taxes, payroll-related
insurance and certain fringe benefits, as well as independent contractor costs) from total revenue. In addition, there are no consultant payroll
costs associated with Direct Hire placements; thus, all Direct Hire revenue increases gross profit by the full amount of the placement fee.
The following table presents the gross profit percentage (gross profit as a percentage of total revenue) for each segment and percentage
change over the prior period for the years ended December 31:
Tech
FA
Total gross profit percentage
2020
27.6%
30.6%
28.3%
Increase
(Decrease)
(0.4)%
(13.1)%
(3.4)%
2019
27.7%
35.2%
29.3%
Increase
(Decrease)
(1.1)%
1.1%
(1.0)%
2018
28.0%
34.8%
29.6%
Total gross profit percentage decreased 100 basis points for the year ended December 31, 2020, as compared to the same period in 2019,
primarily driven by the decrease in the mix of Direct Hire revenue.
Flex gross profit percentage (Flex gross profit as a percentage of Flex revenue) provides management with helpful insight into the other drivers
of total gross profit percentage driven by our Flex business such as changes in the spread between the consultants’ bill rate and pay rate.
The following table presents the Flex gross profit percentage for each segment and percentage change over the prior period for the years
ended December 31:
Tech
FA
Total gross profit percentage
2020
26.4%
27.1%
26.6%
Increase
(Decrease)
0.4%
(4.9)%
(0.4)%
2019
26.3%
28.5%
26.7%
Increase
(Decrease)
(1.1)%
(0.3)%
(1.5)%
2018
26.6%
28.6%
27.1%
The 10 basis point decrease in Flex gross profit percentage for
the year ended December 31, 2020, as compared to the same
period in 2019, was primarily due to lower Flex gross profit margins
on the COVID-19 Business and some spread compression in our
FA business unrelated to the COVID-19 Business.
Overall, our Flex gross profit percentage decreased slightly for the
year ended December 31, 2020, as compared to the same period in
2019, although there were notable fluctuations within our segments.
Tech Flex gross profit margins increased 10 basis points for
the year ended December 31, 2020 as compared to the same
period in 2019, primarily due to a more favorable payroll tax
environment. As we look towards 2021, we expect spreads in our
Tech Flex business to be relatively stable.
FA Flex gross profit margins decreased 140 basis points for
the year ended December 31, 2020, as compared to the same
period in 2019, primarily due to the COVID-19 Business, which
contributed a lower gross profit margin than the rest of the
FA portfolio. The estimated Flex gross profit margin for the
COVID-19 business was 25.4%, which is roughly 250 basis points
lower thanBthe remaining FA Flex business. As we look towards
2021, we expect spreads to be relatively stable outside of the
revenue mix impact from the COVID-19 Business, which will likely
continue to impact Flex gross profit margins on a year-over-year
basis in the first quarter of 2021.
KFORCE INC. AND SUBSIDIARIES 15
The following table presents the key drivers for the change in Flex gross profit by segment over the prior period (in thousands):
Year Ended December 31,
Key Drivers—Increase (Decrease)
Revenue impact
Profitability impact
Total change in Flex gross profit
2020 vs. 2019
Tech
FA
2019 vs. 2018
Tech
FA
$(1,177)
1,669
$ 492
$19,655
(4,864)
$14,791
$17,592
(3,700)
$13,892
$(7,056)
(297)
$(7,353)
Kforce continues to focus on effective pricing and optimizing the spread between bill rates and pay rates. We believe this will serve
over time to obtain the optimal volume, rate, effort and duration of assignment, while ultimately maximizing the benefit for our clients,
our consultants and Kforce.
SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 83.0%,
83.1% and 83.6% of SG&A for the years ended December 31, 2020, 2019 and 2018, respectively. Commissions and other bonus
incentives for our revenue-generating talent are variable costs driven primarily by revenue and gross profit levels, and associate
performance. Therefore, as gross profit levels change, these expenses would also generally be anticipated to change, but remain
relatively consistent as a percentage of revenue.
The following table presents certain components of SG&A as a percentage of total revenue for the years ended December 31
(in thousands):
2020 % of Revenue
2019 % of Revenue
2018 % of Revenue
Compensation, commissions,
payroll taxes and benefits costs
Other(1)
Total SG&A
$257,802
52,911
$310,713
18.4%
3.8%
22.2%
$261,185
52,982
$314,167
19.4%
3.9%
23.3%
$256,793
50,457
$307,250
19.7%
3.9%
23.6%
(1) Includes items such as bad debt expense, lease expense, professional fees, travel, telephone, computer and certain other expenses.
SG&A as a percentage of revenue decreased 110 basis points in 2020, as compared to 2019. The decrease is primarily driven by
leverage from our revenue growth, continued improvements in associate productivity, reductions in certain areas such as travel
and office related expenses given COVID-19 restrictions and overall tight management of spend. During 2020, we prioritized the
retention of our most productive people and more tightly managed overall SG&A spend. For the year ended December 31, 2020,
SG&A was negatively impacted by an increase in credit loss reserves due to a higher estimated risk of default within our accounts
receivable portfolio resulting from the current economic and health crisis, as well as approximately $1.9 million in operating lease
and other expenses related to the streamlining of our field offices. Included in the year ended December 31, 2019 was approximately
$2.0 million of severance and other costs due to actions taken as a result of the KGS divestiture, which negatively impacted SG&A.
The Firm continues to focus on improving the productivity of our associates and generating increased operating leverage as
revenues grow.
Depreciation and Amortization. The following table presents depreciation and amortization expense and percentage change over
the prior period by major category for the years ended December 31 (in thousands):
Fixed asset depreciation (includes finance leases)
Capitalized software amortization
Total Depreciation and amortization
2020
$4,073
1,182
$5,255
Increase
(Decrease)
(17.4)%
5.4%
(13.1)%
2019
$4,929
1,121
$6,050
Increase
(Decrease)
(13.7)%
(0.3)%
(11.5)%
2018
$5,712
1,124
$6,836
Other Expense, Net. Other expense, net was $5.0 million in 2020, $3.4 million in 2019 and $4.5 million in 2018, and consisted primarily of
interest expense related to outstanding borrowings under our credit facility.
During the years ended December 31, 2020 and 2019, Other expense, net also included our proportionate share of the loss from WorkLLama,
LLC (“WorkLLama”), equity method investment of $1.7 million and $0.8 million, respectively. Although the impact of the COVID-19 economic
and health crisis remains highly uncertain, it could have a material adverse effect on the fair value of our equity method investment in
WorkLLama. If the fair value falls below the book value of the equity method investment, we would be required to evaluate whether an
16 KFORCE INC. AND SUBSIDIARIES
other-than-temporary impairment has occurred. Refer to Note 1 —
“Summary of Significant Accounting Policies” in the Notes to
Consolidated Financial Statements, included in this Annual Report,
for a more detailed discussion on our equity method investment.
Income Tax Expense. Income tax expense as a percentage of
income from continuing operations, before income taxes (our
“effective tax rate” for continuing operations) for the years ended
December 31, 2020, 2019 and 2018 were 25.5%, 23.6% and
25.1%, respectively. The 2020 effective tax rate was negatively
impacted by a lower Work Opportunity Tax Credit in 2020 versus
2019. The 2019 effective tax rate was favorably impacted primarily
by a greater tax benefit from the vesting of restricted stock and
favorable tax adjustments compared to 2018.
Income from Discontinued Operations, Net of Tax. During
2019, we completed the sale of the GS segment, which consisted
of KGS and TraumaFX® Solutions, Inc. (“TFX”), our federal
government product business. Kforce did not have significant
continuing involvement in the operations of KGS or TFX after the
sale and reported the GS segment as discontinued operations in
the consolidated statements of operations for all years presented.
Refer to Note 2 — “Discontinued Operations” in the Notes to
Consolidated Financial Statements, included in this Annual Report,
for a more detailed discussion.
On April 1, 2019, Kforce completed the sale of all of the issued and
outstanding stock of Kforce Government Holdings, Inc., including
its wholly-owned subsidiary, KGS, to ManTech International
Corporation for a cash purchase price of $115.0 million. Our gain on
the sale of KGS, net of transaction costs, was $72.3 million. Total
transaction costs were $9.6 million, which primarily includes legal
and broker fees, transaction bonuses and accelerated stock-based
compensation expense for KGS management triggered by a change
in control of KGS.
On June 7, 2019, Kforce completed the sale of all of the issued
and outstanding stock of TFX to an unaffiliated third party for a
cash purchase price of $18.4 million less a post-closing working
The following table presents Free Cash Flow (in thousands):
Years Ended December 31,
Net income
Non-cash provisions and other
Changes in operating assets/liabilities
Net cash provided by operating activities
Capital expenditures
Free cash flow
Equity method investment
Change in debt
Repurchases of common stock
Cash dividends
Net proceeds from the sale of assets held for sale
Other
Change in cash and cash equivalents
capital adjustment of $0.7 million. Our gain on the sale of TFX,
net of transaction costs, was $7.0 million. Total transaction costs
were $2.2 million, which primarily includes legal and broker fees
and transaction bonuses. Due to the sale of TFX, we finalized the
settlement of a contingent consideration liability related to the
acquisition of TFX in 2014 and paid $0.6 million during the year
ended December 31, 2019.
The effective tax rates for discontinued operations, including
the gain on sale of discontinued operations, for the years ended
December 31, 2019 and 2018 were 4.4% and 23.4%, respectively.
There was no activity relating to discontinued operations in 2020.
The GS effective tax rate for 2019 was low because of the minimal
income tax obligation for the sale of KGS due to the efficient tax
structure of the transaction. The GS effective tax rate for 2018 was
positively impacted by the TCJA. The GS effective tax rate for 2017
was unfavorably impacted by the revaluation of our net deferred
tax assets as a result of the TCJA.
NON-GAAP FINANCIAL MEASURES
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 Consolidated
Statements of Cash Flows. Free cash flows includes results from
discontinued operations for the years ended December 31, 2020,
2019 and 2018.
2020
$ 56,039
27,582
25,538
109,159
(6,475)
102,684
(4,000)
35,000
(35,613)
(16,787)
3,548
(1,177)
2019
$ 130,862
(51,650)
(12,595)
66,617
(10,359)
56,258
(9,000)
(6,800)
(124,453)
(16,608)
122,544
(2,222)
2018
$ 57,980
22,643
7,100
87,723
(5,170)
82,553
—
(44,723)
(22,187)
(14,871)
1,000
(2,039)
$ 83,655
$ 19,719
$ (267)
KFORCE INC. AND SUBSIDIARIES 17
Adjusted EBITDA. “Adjusted EBITDA”, a non-GAAP financial
measure, is defined by Kforce as net income before income
from discontinued operations, net of tax, depreciation and
amortization, stock-based compensation expense, interest
expense, net, income tax expense and loss from equity method
investment. 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 addition, although we excluded amortization of stock-based
compensation expense because it is a non-cash expense, we
expect to continue to incur stock-based compensation in the future
and the associated stock issued may result in an increase in our
outstanding shares of stock, which may result in the dilution of
our shareholder ownership interest. We suggest that you evaluate
these items and the potential risks of excluding such items when
analyzing our financial position.
The following table presents Adjusted EBITDA and includes a reconciliation of Adjusted EBITDA to net income (in thousands):
Years Ended December 31,
Net income
Income from discontinued operations, net of tax
Income from continuing operations
Depreciation and amortization
Stock-based compensation expense
Interest expense, net
Income tax expense
Loss from equity method investment
Adjusted EBITDA
2020
$56,039
—
56,039
5,255
11,595
3,396
19,173
1,681
$97,139
2019
$130,862
76,296
54,566
6,050
9,825
2,586
16,830
831
2018
$57,980
7,104
50,876
6,836
8,489
4,468
17,004
—
$ 90,688
$87,673
Adjusted EBITDA, for the year ended December 31, 2019, was
negatively impacted by $2.0 million of severance and other costs
due to actions taken as a result of the KGS divestiture.
LIQUIDITY AND CAPITAL RESOURCES
To meet our capital and liquidity requirements, we primarily rely
on operating cash flow, as well as borrowings under our credit
facility. At December 31, 2020 and 2019, we had $103.5 million
and $19.8 million, respectively, in cash and cash equivalents,
which consisted primarily of government money market funds. At
December 31, 2020, Kforce had $230.7 million in working capital
compared to $160.3 million at December 31, 2019.
Cash Flows
Our business has historically generated a significant amount of
operating cash flows, which gives us a great opportunity to balance
deploying available capital towards (i) investing in our infrastructure
to allow sustainable growth via capital expenditures, (ii) our dividend
and share repurchase programs, and (iii) maintaining sufficient
liquidity to complete acquisitions or other strategic investments.
The following table presents a summary of our net cash flows
from operating, investing and financing activities (in thousands):
Years Ended December 31,
2020
2019
2018
Cash Provided by (Used in)
Operating activities
Investing activities
Financing activities
Change in cash and
cash equivalents
$109,159 $ 66,617
(6,927) 103,185
(150,083)
(18,577)
$ 87,723
(4,170)
(83,820)
$ 83,655 $ 19,719
$ (267)
Our Consolidated Statements of Cash Flows are presented
on a combined basis (continuing operations and discontinued
operations). As previously discussed, the GS segment was sold and
has been reflected as discontinued operations. The absence of cash
flows from the GS segment is not expected to have a significant
effect on the future liquidity, financial position or capital resources
of Kforce.
18 KFORCE INC. AND SUBSIDIARIES
The following table provides information for the total operating
and investing cash flows for the GS segment (in thousands):
The following table presents the cash flow impact of the common
stock repurchase activity for the years ended December 31
(in thousands):
Years Ended December 31,
2020
2019
2018
Cash Provided by (Used in)
GS Operating Activities
$ — $ 4,547
$10,937
GS Investing Activities
$ — $117,798
$ (927)
Operating Activities
Cash provided by operating activities was $109.2 million during
the year ended December 31, 2020, as compared to $66.6 million
during the year ended December 31, 2019. Our largest source of
operating cash flows is the collection of trade receivables, and our
largest use of operating cash flows is the payment of our associate
and consultant compensation. The increase was primarily driven
by the deferral of the employer portion of social security taxes,
which amounted to $38.6 million, which will be paid equally in
2021 and 2022 as prescribed by the CARES Act, continued positive
performance of our accounts receivable portfolio and profitable
revenue growth.
Investing Activities
Cash used in investing activities was $6.9 million during the
year ended December 31, 2020, as compared to cash provided
by investing activities of $103.2 million during the year ended
December 31, 2019, which includes capital expenditures. Cash flows
from investing activities for the year ended December 31, 2020
includes the receipt of proceeds from the sale of assets held within
the Rabbi Trust, as well as capital investments in our WorkLLama
joint venture. Cash flows from investing activities during the year
ended December 31, 2019, include the net proceeds from the sale
of assets held for sale, as well as capital invested in WorkLLama.
We expect to continue selectively investing in our infrastructure,
primarily focusing on implementing new and upgrading existing
technologies that we expect will provide the most benefit.
Financing Activities
Cash used in financing activities was $18.6 million during the year
ended December 31, 2020, as compared to $150.1 million during
the year ended December 31, 2019. This was primarily driven by
the $35.0 million draw down on our Credit Facility during the year
ended December 31, 2020, partially offset by a decrease in cash
used for repurchases of common stock to conserve our liquidity
during the pandemic.
Open market repurchases
Repurchase of shares related
to tax withholding
requirements for vesting of
restricted stock
Total cash flow impact
of common stock
repurchases
Cash paid in current year for
settlement of prior year
2020
2019
2018
$ 29,386 $ 118,324
$ 16,069
6,227
6,129
6,118
$35,613 $124,453
$22,187
repurchases
$ — $ 556
$ 3,323
During the years ended December 31, 2020, 2019 and 2018,
Kforce declared and paid dividends of $16.8 million ($0.80 per
share), $16.6 million ($0.72 per share) and $14.9 million ($0.60
per share), respectively. On February 5, 2021, Kforce’s Board
approved a 15% increase to the Company’s quarterly dividend
from $0.20 per share to $0.23 per share. The declaration,
payment and amount of future dividends are discretionary and
will be subject to determination by Kforce’s Board each quarter
following its review of, among other things, the Firm’s current
and expected financial performance as well as the ability to pay
dividends under applicable law.
We believe that existing cash and cash equivalents, cash flow
from operations and available borrowings under our credit facility
will be adequate to meet the capital expenditure and working capital
requirements of our operations for at least the next 12 months.
However, a material deterioration in the economic environment or
market conditions, among other things, could negatively impact
operating results and liquidity, as well as the ability of our lenders
to fund borrowings. Actual results could also differ materially from
those indicated as a result of a number of factors, including the
use of currently available resources for potential acquisitions and
additional stock repurchases.
Credit Facility
On May 25, 2017, the Firm entered into a credit agreement with
Wells Fargo Bank, National Association, as administrative agent,
Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank
of America, N.A., as syndication agent, Regions Bank and BMO Harris
Bank, N.A., as co-documentation agents, and the lenders referred
to therein (the “Credit Facility”). The maturity date of the Credit
Facility is May 25, 2022. Borrowings under the Credit Facility are
secured by substantially all of the tangible and intangible assets of
the Firm, excluding the Firm’s corporate headquarters and certain
other designated collateral. Refer to Note 14 — “Credit Facility” in
the Notes to Consolidated Financial Statements, included in this
Annual Report, for a complete discussion of our Credit Facility.
As of December 31, 2020, $100.0 million was outstanding and
$198.5 million, subject to certain covenants, was available and as
of December 31, 2019, $65.0 million was outstanding under the
Credit Facility.
KFORCE INC. AND SUBSIDIARIES 19
Kforce entered into two forward-starting interest rate swap
agreements (the “Swaps”) to mitigate the risk of rising interest
rates and the Swaps have been designated as a cash flow hedges.
Refer to Note 15 — “Derivative Instrument and Hedging Activity”
in the Notes to Consolidated Financial Statements, included in
this Annual Report, for a complete discussion of the Swaps. As of
December 31, 2020 and 2019, the fair value of the Swaps was a
liability of $1.8 million and $0.2 million, respectively.
Stock Repurchases
The following table presents the open market repurchase activity
under the Board-authorized common stock repurchase program for
the years ended December 31 (in thousands):
2020 (1)(2)
2019
Shares $ Shares $
Open market
repurchases
1,020
$29,386 3,315 $117,768
(1) In March 2020, the Board approved an increase in our stock repurchase
authorization to an aggregate total of $100.0 million.
(2) In April 2020, we suspended open market stock repurchases.
As of December 31, 2020, $84.5 million remained available for
further repurchases under the Board-authorized common stock
repurchase program.
Off-Balance Sheet Arrangements
Kforce provides letters of credit to certain vendors in lieu of
cash deposits. At December 31, 2020, Kforce had letters of credit
outstanding for operating lease and insurance coverage deposits
totaling $1.5 million.
In June 2019, we entered into a joint venture whereby Kforce
has a 50% noncontrolling interest in WorkLLama, a newly formed
LLC that is accounted for as an equity method investment. Refer
to Note 1 — “Summary of Significant Accounting Policies” in the
Notes to Consolidated Financial Statements, included in this Annual
Report, which discusses a contingent obligation related to this
equity method investment.
These off-balance sheet arrangements do not have a material
impact on our liquidity or capital resources. These off-balance sheet
arrangements do not provide financing, liquidity, market or credit
risk support.
Contractual Obligations and Commitments
The following table presents our expected future contractual obligations as of December 31, 2020 (in thousands):
Credit facility (1)
Operating lease obligations
Finance lease obligations
Purchase obligations (2)
Notes and interest payable (3)
Deferred compensation plans liability (4)
Supplemental Executive Retirement Plan (5)
Liability for unrecognized tax positions (6)
Payments due by period
Total
$107,847
21,917
131
11,739
224
38,344
24,967
—
Less than
1 year
$ 2,554
6,115
88
9,328
224
3,842
—
—
1-3 Years
$103,968
4,390
35
1,786
—
6,035
15,231
—
Total
$205,169
$22,151
$131,445
3-5 Years
$ 1,325
8,968
8
625
—
5,953
—
—
$16,879
More than
5 years
$ —
2,444
—
—
—
22,514
9,736
—
$34,694
(1) Our credit facility matures May 25, 2022. Our interest rate as of December 31, 2020 was used to forecast the expected future interest rate payments. These payments are
inherently uncertain due to fluctuations in interest rates and outstanding borrowings that will occur over the remaining term of the credit facility.
(2) Purchase obligations include agreements to purchase goods and services that are enforceable, legally binding and specify all significant terms.
(3) Our notes payable as of December 31, 2020 relates to equipment financing arrangements and are classified in Other current liabilities if payable within the next year or in Other
long-term liabilities if payable after the next year in the accompanying Consolidated Balance Sheets. The interest rate on the notes range from 2.58% to 2.71% and expire
between April 2020 and October 2021.
(4) Kforce maintains various non-qualified deferred compensation plans pursuant to which eligible management and highly-compensated key employees may elect to defer all or
part of their compensation to later years. These amounts are included in the accompanying Consolidated Balance Sheets and classified as Accounts payable and other accrued
liabilities and Other long-term liabilities, as appropriate, and are payable based upon the elections of the plan participants (e.g. retirement, termination of employment, change-
in-control). Amounts payable upon the retirement or termination of employment may become payable during the next five years if covered employees schedule a distribution,
retire or terminate during that time.
(5) There is no funding requirement associated with our Supplemental Executive Retirement Plan (“SERP”) and, as a result, no contributions have been made through the year
ended December 31, 2020. Kforce does not currently anticipate funding the SERP during 2021. Kforce has included the total undiscounted projected benefit payments, as
determined at December 31, 2020, in the table above.
(6) Kforce’s liability for unrecognized tax positions, as of December 31, 2020, was $0.2 million. This balance has been excluded from the table above due to the significant uncertainty
with respect to the timing and amount of settlement, if any.
20 KFORCE INC. AND SUBSIDIARIES
CRITICAL ACCOUNTING ESTIMATES
Accounting for Income Taxes
Our significant accounting policies are discussed in Note 1 —
“Summary of Significant Accounting Policies” in the Notes to
Consolidated Financial Statements, included in this Annual Report.
Our consolidated financial statements are prepared in accordance
with GAAP. In connection with the preparation of our consolidated
financial statements, we are required to make assumptions and
estimates about future events, and apply judgments that affect
the reported amount of assets, liabilities, revenues, expenses
and the related disclosures. We base our assumptions, estimates
and judgments on historical experience, current trends and other
factors that management believes to be relevant at the time
our consolidated financial statements are prepared. On a regular
basis, management reviews the accounting policies, estimates,
assumptions and judgments to ensure that our consolidated
financial statements are presented fairly and in accordance with
GAAP. However, because future events and their effects cannot
be determined with certainty, actual results could differ from our
assumptions and estimates, and such differences could be material.
Management believes that the following accounting estimates
are the most critical to aid in fully understanding and evaluating
our reported financial results, and they require management’s
most difficult, subjective or complex judgments, resulting from
the need to make estimates about the effect of matters that are
inherently uncertain. We have not made any material changes in
our accounting methodologies used in prior years.
Allowance for Credit Losses
Management performs an ongoing analysis of factors in
establishing its allowance for doubtful accounts including recent
write-off and delinquency trends, a specific analysis of significant
receivable balances that are past due, the concentration of accounts
receivable among clients and higher-risk sectors, and the current
state of the U.S. economy. A 10% change in accounts reserved,
at December 31, 2020, would have impacted our net income by
approximately $0.3 million in 2020.
On January 1, 2020, we adopted an accounting standard that
requires companies to estimate and recognize lifetime expected
losses, rather than incurred losses, which results in the earlier
recognition of credit losses even if the expected risk of credit
loss is remote. The accounting standard applies to most financial
assets, including trade receivables and direct financing leases. The
standard does not apply to the receivables arising from operating
leases. Upon adoption of the new standard on January 1, 2020,
we recognized a credit loss adjustment related to adoption of
this accounting standard as a cumulative adjustment to retained
earnings. For details, refer to Note 5 — “Allowance for credit losses”
in the Notes to Consolidated Financial Statements, included in this
Annual Report.
Our effective income tax rate is influenced by tax planning
opportunities available to us in the various jurisdictions in which we
conduct business. Significant judgment is required in determining
our effective tax rate and in evaluating our tax positions, including
those that may be uncertain.
We are also required to exercise judgment with respect to the
realization of our net deferred tax assets. Management evaluates
positive and negative evidence and exercises judgment regarding
past and future events to determine if it is more likely than not that
all or some portion of the deferred tax assets may not be realized.
If appropriate, a valuation allowance is recorded against deferred
tax assets to offset future tax benefits that may not be realized.
A 0.5% change in our effective tax rate would have impacted our
net income by approximately $0.4 million in 2020.
Refer to Note 7 — “Income Taxes” in the Notes to Consolidated
Financial Statements, included in this Annual Report, for a complete
discussion of the components of our income tax expense, as well
as the temporary differences that exist as of December 31, 2020.
Equity Method Investment
Initial Investment. In June 2019, we entered into a joint venture
whereby Kforce has a 50% noncontrolling interest in WorkLLama,
which is accounted for us as an equity method investment. Under
the joint venture operating agreement, Kforce is obligated to make
additional cash contributions subsequent to the initial contribution,
contingent on certain operational and financial milestones.
Management evaluated the probability of the achievement of these
milestones and recorded the estimated future contributions as part
of the initial investment.
Impairment Assessment. We review the equity method
investment for impairment whenever events or changes in
circumstances indicate that the carrying amount of the investment
may not be recoverable. An impairment loss is recognized in the event
that an other-than-temporary decline in fair value of an investment
occurs. Management’s estimate of fair value of an investment is
based on the income approach and/or market approach. For the
income approach, we utilize estimated discounted future cash
flows expected to be generated by the investee. For the market
approach, we utilize market multiples of revenue and earnings
derived from comparable publicly-traded companies. These
types of analyses contain uncertainties because they require
management to make significant assumptions and judgments
including: (1) an appropriate rate to discount the expected
future cash flows; (2) the inherent risk in achieving forecasted
for future economic cycles; (5) market comparable companies
and appropriate adjustments thereto; and (6) market multiples.
Changes in key assumptions about the financial condition of an
investee or actual conditions that differ from estimates could result
in an impairment charge.
Refer to Note 1 — “Summary of Significant Accounting Policies”
in the Notes to Consolidated Financial Statements, included in this
Annual Report, for a complete discussion of our equity method
investment.
KFORCE INC. AND SUBSIDIARIES 21
Our self-insured liabilities contain uncertainties because
management is required to make assumptions and to apply
judgment to estimate the ultimate total cost to settle reported
claims and claims incurred but not reported (“IBNR”) as of the
balance sheet date. A 10% change in our self-insured liabilities
related to health insurance, as of December 31, 2020, would have
impacted our net income by approximately $0.5 million in 2020.
Defined Benefit Pension Plan
The SERP is a defined benefit pension plan that benefits
certain named executive officers. The SERP was not funded as of
December 31, 2020 or 2019. When estimating the obligation for
our pension benefit plan, management is required to make certain
assumptions and to apply judgment with respect to determining
an appropriate discount rate, bonus percentage assumptions
and expected effect of future compensation increases for the
participants in the plan.
A 10% change in the discount rate used to measure the net
periodic pension cost for the SERP would have had an insignificant
impact on our net income in 2020.
Refer to Note 13 — “Employee Benefit Plans” in the Notes to
Consolidated Financial Statements, included in this Annual Report,
for a complete discussion of the terms of this plan.
NEW ACCOUNTING STANDARDS
Refer to Note 1 — “Summary of Significant Accounting Policies”
in the Notes to Consolidated Financial Statements, included in this
Annual Report, for a discussion of new accounting standards.
Goodwill Impairment
Goodwill is tested at the reporting unit level which is generally
an operating segment, or one level below the operating segment
level, where a business operates and for which discrete financial
information is available and reviewed by segment management.
We evaluate goodwill for impairment annually or more frequently
whenever events or circumstances indicate that the fair value
of a reporting unit is below its carrying value. We monitor the
existence of potential impairment indicators throughout the
year. It is our policy to conduct impairment testing based on
our current business strategy in light of present industry and
economic conditions, as well as future expectations.
When performing a quantitative assessment, we determine the
fair value of our reporting units using widely accepted valuation
techniques, including the discounted cash flow, guideline
transaction and guideline company methods. These types of
analyses contain uncertainties because they require management
to make significant assumptions and judgments including:
(1) an appropriate rate to discount the expected future cash flows;
(2) the inherent risk in achieving forecasted operating results;
(3) long-term growth rates; (4) expectations for future economic
cycles; (5) market comparable companies and appropriate
adjustments thereto; and (6) market multiples. When performing
a qualitative assessment, we assess qualitative factors to
determine whether the existence of events or circumstances
indicated that it was more likely than not that the fair value of
the reporting unit was less than its carrying amount.
Refer to Note 9 — “Goodwill” in the Notes to Consolidated
Financial Statements, included in this Annual Report, for a complete
discussion of the valuation methodologies employed.
Self-Insured Liabilities
We are self-insured for certain losses related to health insurance
claims that are below insurable limits. However, we obtain
third-party insurance coverage to limit our exposure to claims
in excess of insurable limits. When estimating our self-insured
liabilities, we consider a number of factors, including historical
claims experience, plan structure, internal claims management
activities, demographic factors and severity factors. Periodically,
management reviews its assumptions to determine the adequacy
of our self-insured liabilities.
22 KFORCE INC. AND SUBSIDIARIES
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Kforce is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) of the Exchange Act. Kforce’s internal control system was designed to provide reasonable assurance to
Kforce’s management and the Board regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of the CEO and the CFO, Kforce’s management assessed the effectiveness of
Kforce’s internal control over financial reporting as of December 31, 2020. In making this assessment, it used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).
Based on our assessment we believe that, as of December 31, 2020, Kforce’s internal control over financial reporting is effective based
on those criteria.
Kforce’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an audit report on our internal control over
financial reporting, which is included herein.
KFORCE INC. AND SUBSIDIARIES 23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Kforce Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Kforce Inc. and subsidiaries (“Kforce”) as of December 31, 2020
and 2019, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash
flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“financial statements”). We also have audited Kforce’s internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kforce as
of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion,
Kforce maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control — Integrated Framework (2013) issued by COSO.
Change in Accounting Principle
Effective January 2019, Kforce adopted the FASB’s new standard related to leases using the optional transition method without
retrospective application to comparative periods.
Basis for Opinions
Kforce’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an
opinion on Kforce’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Kforce in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
24 KFORCE INC. AND SUBSIDIARIES
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures
to which it relates.
Equity Method Investment — Refer to Note 1 to the Consolidated Financial Statements
Critical Audit Matter Description
In June 2019, Kforce entered into a joint venture whereby Kforce has a 50% noncontrolling ownership in WorkLLama, LLC
(“WorkLLama”). The noncontrolling interest in WorkLLama, a variable interest entity, is accounted for as an equity method investment.
Under the equity method, the investment carrying value is recorded at cost and adjusted for the proportionate share of earnings or
losses. Management reviews the equity method investment for impairment whenever events or changes in circumstances indicate that
the carrying amount of the investment may not be recoverable. An impairment loss would be recognized in the event that an other-
than-temporary decline in fair value of an investment occurs. Management’s estimate of fair value of an investment is based on the
income approach and/or market approach, which requires management to make significant estimates and assumptions related to the
discount rate and forecasted operating results for WorkLLama. Changes in these assumptions could have a significant impact on either
the fair value, the amount of any impairment charge, or both. The balance of the investment in WorkLLama of $10.5 million was included
in Other assets, net in the Consolidated Balance Sheet at December 31, 2020.
We identified management’s quantitative impairment analysis for the equity method investment in WorkLLama as a critical audit
matter because of the significant amount of judgment required by management to estimate the fair value of WorkLLama. This required
a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists, when performing
audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount
rate and forecasted operating results.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the discount rate and forecasted operating results used by management to estimate the fair value
of WorkLLama included the following, among others:
We tested the effectiveness of controls over management’s impairment evaluation, including those over the discount rate and
forecasted operating results. ent, we evaluated the reasonableness of management’s revenue forecasts as follows:
Due to the lack of operating history available for the equity method investment, we evaluated the reasonableness of management’s
forecasts as follows:
Obtained an understanding of and performed audit procedures over management’s forecasting process, including the sources
of information used, the underlying significant assumptions, and sensitivity to changes in these significant assumptions.
Compared the forecast to (1) internal communications to management and Board of Directors, (2) current year operating
results, and (3) forecasted information included in analyst and industry reports for the Company.
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and assumptions
used to determine the fair value of WorkLLama, such as the discount rate, by:
Testing the underlying source information and mathematical accuracy of the calculations.
Developing a range of independent estimates and comparing those to the assumptions used by management.
For the discount rate, we compared the amount used by management to the amounts associated with other companies with
a similar risk profile, and
Evaluating the interaction between the discount rate and the forecasts to understand and sensitize management’s
assumptions regarding risk inherent in the forecast.
Tampa, Florida
February 26, 2021
We have served as Kforce’s auditor since 2000.
KFORCE INC. AND SUBSIDIARIES 25
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
Years Ended December 31,
Revenue
Direct costs
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Other expense, net
Income from continuing operations, before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations, net of tax
Net income
Other comprehensive (loss) income:
Defined benefit pension plans, net of tax
Change in fair value of interest rate swap, net of tax
Comprehensive income
Earnings per share — basic:
Continuing operations
Discontinued operations
Earnings per share — basic
Earnings per share — diluted:
Continuing operations
Discontinued operations
Earnings per share — diluted
Weighted average shares outstanding — basic
Weighted average shares outstanding — diluted
The accompanying notes are an integral part of these consolidated financial statements.
2020
2019
2018
$1,397,700
1,001,476
$1,347,387
952,349
$1,303,937
917,450
396,224
310,713
5,255
80,256
5,044
75,212
19,173
56,039
—
56,039
(1,706)
(1,191)
395,038
314,167
6,050
74,821
3,425
71,396
16,830
54,566
76,296
130,862
386,487
307,250
6,836
72,401
4,521
67,880
17,004
50,876
7,104
57,980
(2,183)
(807)
881
315
$ 53,142
$ 127,872
$ 59,176
$2.67
—
$2.67
$2.62
—
$2.62
20,983
21,395
$2.35
3.29
$5.64
$2.29
3.21
$5.50
23,186
23,772
$2.05
0.29
$2.34
$2.02
0.28
$2.30
24,738
25,251
26 KFORCE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
ASSETS
Current assets:
Cash and cash equivalents
Trade receivables, net of allowances of $3,204 and $2,078, respectively
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Other assets, net
Deferred tax assets, net
Goodwill
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities
Accrued payroll costs
Current portion of operating lease liabilities
Other current liabilities
Income taxes payable
Total current liabilities
Long-term debt — credit facility
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding
Common stock, $0.01 par; 250,000 shares authorized, 72,600 and 72,202 issued and
outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock, at cost; 50,427 and 49,277 shares, respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
2020
2019
$ 103,486
228,373
7,033
$ 19,831
217,929
7,475
338,892
26,804
77,575
10,738
25,040
245,235
29,975
72,838
8,037
25,040
$ 479,049
$ 381,125
$ 35,533
65,849
5,520
300
964
108,166
100,000
90,948
299,114
$ 33,232
44,001
5,685
1,168
878
84,964
65,000
63,898
213,862
—
—
726
472,378
(4,423)
388,645
(677,391)
722
459,545
(1,526)
350,545
(642,023)
179,395
167,263
$ 479,049
$ 381,125
KFORCE INC. AND SUBSIDIARIES 27
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
Balance, December 31, 2017
Net income
Cumulative effect of revenue recognition accounting standard, net of tax of $63
Issuance for stock-based compensation and dividend equivalents, net of forfeitures
Exercise of stock options
Stock-based compensation expense
Employee stock purchase plan
Dividends ($0.60 per share)
Defined benefit pension plans, net of tax benefit of $314
Change in fair value of interest rate swap, net of tax of $107
Repurchases of common stock
Balance, December 31, 2018
Net income
Reclassification of stranded tax effects (Note 1)
Issuance for stock-based compensation and dividend equivalents, net of forfeitures
Exercise of stock options
Stock-based compensation expense
Employee stock purchase plan
Dividends ($0.72 per share)
Defined benefit pension plan, no tax benefit
Change in fair value of interest rate swap, net of tax of $272
Repurchases of common stock
Balance, December 31, 2019
Net income
Adoption of new accounting standard (Note 5), net of tax of $75
Issuance for stock-based compensation and dividend equivalents, net of forfeitures
Stock-based compensation expense
Employee stock purchase plan
Dividends ($0.80 per share)
Defined benefit pension plan, no tax benefit
Change in fair value of interest rate swap, net of tax benefit of $404
Repurchases of common stock
Balance, December 31, 2020
The accompanying notes are an integral part of these consolidated financial statements.
71,494
—
—
357
5
—
—
—
—
—
—
71,856
—
—
346
—
—
—
—
—
—
—
72,202
—
—
398
—
—
—
—
—
—
72,600
Common Stock
Shares Amount
Additional
Paid-In
Capital
Accumulated Other
Comprehensive
Income (Loss)
$715
—
—
4
—
—
—
—
—
—
—
719
—
—
3
—
—
—
—
—
—
—
722
—
—
4
—
—
—
—
—
—
$437,394
—
—
762
46
8,797
338
—
—
—
—
447,337
—
—
846
—
11,007
355
—
—
—
—
459,545
—
—
934
11,595
304
—
—
—
—
$ 100
—
—
—
—
—
—
—
881
315
—
1,296
—
168
—
—
—
—
—
(2,183)
(807)
—
(1,526)
—
—
—
—
—
—
(1,706)
(1,191)
—
Retained
Earnings
$195,143
57,980
(179)
(766)
—
—
—
(14,870)
—
—
—
237,308
130,862
(168)
(849)
—
—
—
(16,608)
—
—
—
350,545
56,039
(214)
(938)
—
—
(16,787)
—
—
—
Treasury Stock
Shares Amount
Total
Stockholders’
Equity
45,167
—
—
—
1
—
(19)
—
—
—
673
45,822
—
—
—
—
—
(17)
—
—
—
3,472
49,277
—
—
—
—
(19)
—
—
—
1,169
50,427
$(499,075)
—
—
—
(46)
—
211
—
—
—
(19,419)
(518,329)
—
—
—
—
—
203
—
—
—
(123,897)
(642,023)
—
—
—
—
245
—
—
—
(35,613)
$ 134,277
57,980
(179)
—
—
8,797
549
(14,870)
881
315
(19,419)
168,331
130,862
—
—
—
11,007
558
(16,608)
(2,183)
(807)
(123,897)
167,263
56,039
(214)
—
11,595
549
(16,787)
(1,706)
(1,191)
(35,613)
$(677,391)
$ 179,935
$726
$472,378
$(4,423)
$388,645
28 KFORCE INC. AND SUBSIDIARIES
28 KFORCE INC. AND SUBSIDIARIES
KFORCE INC. AND SUBSIDIARIES 29
KFORCE INC. AND SUBSIDIARIES 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
Cash flows from operating activities:
2020
2019
2018
Net income
Adjustments to reconcile net income to cash provided by operating activities:
$ 56,039
$ 130,862
$ 57,980
Gain on sale of assets held for sale
Deferred income tax provision, net
Provision for bad debts
Depreciation and amortization
Stock-based compensation expense
Defined benefit pension plans expense
Loss on deferred compensation plan investments, net
Loss on disposal or impairment of assets
Noncash lease expense
Loss on equity method investment
Contingent consideration liability remeasurement and other
(Increase) decrease in operating assets
Trade receivables, net
Other assets
Increase (decrease) in operating liabilities
Accrued payroll costs
Other liabilities
Cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Equity method investment
Net proceeds from the sale of assets held for sale
Cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from credit facility
Payments on credit facility
Payments on other financing arrangements, payment of
contingent consideration liability and other
Repurchases of common stock
Cash dividends
Cash used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Income taxes (1)
Operating lease liabilities
Interest, net
Non-Cash Financing and Investing Transactions:
ROU assets obtained from operating leases
Employee stock purchase plan
Unsettled repurchases of common stock
—
(2,298)
2,130
5,255
11,595
842
702
1,822
5,499
1,681
354
(12,863)
(4,485)
22,397
20,489
109,159
(6,475)
(4,000)
3,548
(6,927)
35,000
—
(1,177)
(35,613)
(16,787)
(18,577)
83,655
19,831
$103,486
$ 21,737
7,330
2,574
$ 5,695
549
—
(79,318)
(49)
1,209
6,481
9,912
862
245
1,084
6,282
831
811
(5,360)
(9,639)
4,567
(2,163)
66,617
(10,359)
(9,000)
122,544
103,185
—
989
1,820
8,265
8,797
1,821
563
38
—
—
350
(10,851)
5,741
1,350
10,860
87,723
(5,170)
—
1,000
(4,170)
80,100
(86,900)
450,400
(495,123)
(2,222)
(124,453)
(16,608)
(150,083)
19,719
112
(2,039)
(22,187)
(14,871)
(83,820)
(267)
379
$ 19,831
$ 112
$ 24,935
8,186
1,480
$ 13,442
—
3,814
$ 9,205
558
—
$ —
549
556
(1) During the year ended December 31, 2018, cash provided by operating activities included the receipt of an income tax refund in the amount of $6.8 million.
The accompanying notes are an integral part of these consolidated financial statements.
30 KFORCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Flex Revenue
Basis of Presentation
The consolidated financial statements have been prepared
in conformity with Generally Accepted Accounting Principles
(“GAAP”) and the rules of the Securities and Exchange Commission
(“the SEC”).
Certain prior year amounts have been reclassified to conform
with the current period presentation for amounts related to
discontinued operations. Refer to Note 2 — “Discontinued
Operations” for further information.
Principles of Consolidation
The consolidated financial statements include the accounts
of Kforce Inc. and its subsidiaries. All intercompany transactions
and balances have been eliminated in consolidation. References
in this document to “Kforce,” the “Company,” “we,” the “Firm,”
“management,” “our” or “us” refer to Kforce Inc. and its
subsidiaries, except where the context indicates otherwise.
Use of Estimates
The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The most critical of these
estimates and assumptions relate to the following: allowance for
credit losses; income taxes; self-insured liabilities for workers’
compensation and health insurance; obligations for the pension
plan; and the impairment of goodwill, other long-lived assets
and the equity method investment. Although these and other
estimates and assumptions are based on the best available
information, actual results could be materially different from
these estimates.
Revenue Recognition
All of our revenue and trade receivables are generated from
contracts with customers and our revenues are derived from U.S.
domestic operations.
Revenue is recognized when control of the promised services
is transferred to our customers at an amount that reflects the
consideration to which we expect to be entitled to in exchange for
those services. Revenue is recorded net of sales or other transaction
taxes collected from clients and remitted to taxing authorities.
For substantially all of our revenue transactions, we have
determined that the gross reporting of revenues as a principal,
versus net as an agent, is the appropriate accounting treatment
because Kforce: (i) is primarily responsible for fulfilling the promise
to provide the specified service to the customer; (ii) has discretion
in selecting and assigning the temporary workers to particular
jobs and establishing the bill rate; and (iii) bears the risk and
rewards of the transaction, including credit risk if the customer
fails to pay for services performed.
Substantially all of our Flex revenue is recognized over time
as temporary staffing services are provided by our consultants
at the contractually established bill rates, net of applicable
variable consideration, such as customer rebates and discounts.
Reimbursements of travel and out-of-pocket expenses (“billable
expenses”) are also recorded within Flex revenue when incurred
and the equivalent amount of expense is recorded in Direct costs
in the Consolidated Statements of Operations and Comprehensive
Income. We recognize revenue in the amount of consideration to
which we have the right to invoice when it corresponds directly
to the services transferred to the customer satisfied over time.
A relatively insignificant portion of our Flex revenue is outcome-
based, as specified in our contractual arrangements with our
clients. These arrangements are managed principally on a time
and materials basis but do involve an element of financial risk and
is monitored by the Company.
Direct Hire Revenue
Direct Hire revenue is recognized at the agreed upon rate at
the point in time when the performance obligation is considered
complete. Our policy requires the following criteria to be met in
order for the performance obligation to be considered complete:
(i) the candidate accepted the position; (ii) the candidate resigned
from their current employer; and (iii) the agreed upon start date
falls within the following month. Since the client has accepted the
candidate and can direct the use of and obtains the significant
risk and rewards of the placement, we consider this point as the
transfer of control to our client.
Variable Consideration
Transaction prices for Flex revenue
include variable
consideration. Management evaluates the facts and circumstances
of each contract to estimate the variable consideration using
the most likely amount method which utilizes management’s
expectation of the volume of services to be provided over the
applicable period.
Direct Hire revenue is recorded net of a fallout reserve. Direct
Hire fallouts occur when a candidate does not remain employed
with the client through the respective contingency period
(typically 90 days or less). Management uses the expected value
method to estimate the fallout reserve based on a combination
of past experience and current trends.
Payment Terms
Our payment terms and conditions vary by arrangement.
While terms are typically less than 90 days, during this abrupt
economic disruption from the COVID-19 crisis, we have extended
our payment terms beyond 90 days for certain of our customers.
Generally, the timing between the satisfaction of the performance
obligation and the payment is not significant and we do not
currently have any significant financing components.
KFORCE INC. AND SUBSIDIARIES 31
Unsatisfied Performance Obligations
Income Taxes
We do not disclose the value of unsatisfied performance
obligations for contracts if either the original expected length
is one year or less or if revenue is recognized at the amount to
which we have the right to invoice for services performed.
Contract Balances
We record accounts receivable when our right to consideration
becomes unconditional and services have been performed. Other
than our trade receivable balance, we do not have any material
contract assets as of December 31, 2020 and 2019.
We record a contract liability when we receive consideration
from a customer prior to transferring services to the customer.
We recognize the contract liability as revenue after we have
transferred control of the goods or services to the customer.
Contract liabilities are recorded within Accounts payable and
other accrued liabilities if expected to be recognized in less than
one year and Other long-term liabilities, if over one year, in
the Consolidated Balance Sheets. We do not have any material
contract liabilities as of December 31, 2020 and 2019.
Cost of Services
Direct costs are composed of all related costs of employment
for consultants, including compensation, payroll taxes, certain
fringe benefits and subcontractor costs. Direct costs exclude
depreciation and amortization expense, which is presented on a
separate line in the accompanying Consolidated Statements of
Operations and Comprehensive Income.
Associate and field management compensation, payroll
taxes and fringe benefits are included in SG&A along with other
customary costs such as administrative and corporate costs.
Commissions
Our associates make placements and earn commissions as a
percentage of revenue or gross profit pursuant to a commission
plan. The amount of associate commissions paid increases
as volume increases. Commissions are accrued at an amount
equal to the percent of total expected commissions payable to
total revenue or gross profit for the commission-plan period,
as applicable. We generally expense sales commissions and
any other incremental costs of obtaining a contract as incurred
because the amortization period is typically less than one year.
Stock-Based Compensation
Stock-based compensation is measured using the grant-date fair
value of the award of equity instruments. The expense is recognized
over the requisite service period and forfeitures are recognized
as incurred. Excess tax benefits or deficiencies of deductions
attributable to employees’ vesting of restricted stock are
reflected in Income tax expense in the accompanying Consolidated
Statements of Operations and Comprehensive Income.
Income taxes are recorded using the asset and liability approach
for deferred tax assets and liabilities and the expected future tax
consequences of differences between carrying amounts and
the tax basis of assets and liabilities. A valuation allowance is
recorded unless it is more likely than not that the deferred tax
asset can be utilized to offset future taxes.
Management evaluates tax positions taken or expected to be
taken in our tax returns and records a liability (including interest
and penalties) for uncertain tax positions. We recognize tax
benefits from uncertain tax positions when it is more likely than
not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes. The
Company recognizes interest and penalties related to uncertain tax
positions in Income tax expense in the accompanying Consolidated
Statements of Operations and Comprehensive Income.
Cash and Cash Equivalents
All highly liquid investments with original maturity dates of
three months or less at the time of purchase are classified as cash
equivalents. Cash and cash equivalents are stated at cost, which
approximates fair value because of the short-term nature of these
instruments. Our cash equivalents are held in government money
market funds and at times may exceed federally insured limits.
Trade Receivables and Related Reserves
Trade receivables are recorded net of allowance for credit
losses. The allowance for credit losses is determined under the
newly adopted guidance, which requires the application of a
current expected credit loss model, a new impairment model,
which measures expected credit losses based on relevant
information, including historical experience, current conditions
and reasonable and supportable forecasts. Trade receivables
are written off after all reasonable collection efforts have been
exhausted. Trade accounts receivable reserves as a percentage
of gross trade receivables was approximately 1% at both
December 31, 2020 and 2019.
Fixed Assets
Fixed assets are carried at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. The cost of leasehold
improvements is amortized using the straight-line method over
the lesser of the estimated useful lives of the assets or the
expected terms of the related leases. Upon sale or disposition
of our fixed assets, the cost and accumulated depreciation
are removed and any resulting gain or loss, net of proceeds,
is reflected within SG&A in the Consolidated Statements of
Operations and Comprehensive Income.
32 KFORCE INC. AND SUBSIDIARIES
Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. Recoverability
of long-lived assets is measured by a comparison of the carrying
amount of the asset group to the future undiscounted net cash
flows expected to be generated by those assets. If an analysis
indicates the carrying amount of these long-lived assets exceeds
the fair value, an impairment loss is recognized to reduce the
carrying amount to its fair market value, as determined based on
the present value of projected future cash flows.
Goodwill
Management has determined that the reporting units for the
goodwill analysis is consistent with our reporting segments. We
evaluate goodwill for impairment either through a qualitative or
quantitative approach annually, or more frequently if an event
occurs or circumstances change that indicate the carrying value
of a reporting unit may not be recoverable. If we perform a
quantitative assessment that indicates the carrying amount of a
reporting unit exceeds its fair market value, an impairment loss is
recognized to reduce the carrying amount to its fair market value.
Kforce determines the fair market value of each reporting unit
based on a weighting of the present value of projected future
cash flows (the “income approach”) and the use of comparative
market approaches (“market approach”). Factors requiring
significant judgment include, among others, the assumptions
related to discount rates, forecasted operating results, long-term
growth rates, the determination of comparable companies and
market multiples. Changes in economic and operating conditions
or changes in Kforce’s business strategies that occur after the
annual impairment analysis may impact these assumptions and
result in a future goodwill impairment charge, which could be
material to our consolidated financial statements.
Equity Method Investment
In June 2019, we entered into a joint venture whereby Kforce
has a 50% noncontrolling interest in WorkLLama. WorkLLama
has developed and continues to mature the technology for
a SaaS platform focused on talent communities in areas that
include consultant engagement, on-demand staffing and referral
technologies, which we believe has enhanced our capability to
more efficiently and effectively identify and place consultants on
assignment. Our noncontrolling interest in WorkLLama, a variable
interest entity, is accounted for as an equity method investment.
Under the equity method, our carrying value is at cost and
adjusted for our proportionate share of earnings or losses. There
are no basis differences between our carrying value and the
underlying equity in net assets that would result in adjustments
to our proportionate share of earnings or losses. We recorded
a loss related to our equity method investment of $1.7 million
and $0.8 million during the years ended December 31, 2020 and
2019, respectively. The balance of the investment in WorkLLama
of $10.5 million and $8.2 million was included in Other assets,
net in the Consolidated Balance Sheet at December 31, 2020 and
2019, respectively.
Under the joint venture operating agreement for WorkLLama,
Kforce was obligated to make additional cash contributions
subsequent to the
initial contribution, contingent on
WorkLLama’s achievement of certain operational and financial
milestones, which are centered around the market acceptance
of its technologies and success with internal operating and
strategic objectives. Management evaluated the probability of
WorkLLama’s achievement of these milestones and recorded the
estimated future contributions as part of the initial investment.
Under the operating agreement, our maximum potential capital
contributions were $22.5 million. During the years ended
December 31, 2020 and 2019, we contributed $4.0 million and
$9.0 million of capital contributions, respectively.
We review the equity method investment for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the investment may not be recoverable. An
impairment loss is recognized in the event that an other-than-
temporary decline in the fair value of the investment occurs.
Management’s estimate of the fair value of an investment is
based on the income approach and market approach. Like most
companies, WorkLLama has been impacted by the COVID-19
pandemic and made adjustments to its strategic objectives as a
result. The impact of COVID-19 negatively impacted WorkLLama’s
financial objectives for 2020; thus, management determined the
COVID-19 pandemic was a triggering event in its assessment of
recoverability of the equity method investment. We performed
an impairment test as of December 31, 2020, utilizing the market
and income approach as described above in our section titled
Goodwill, which notes the use of factors requiring significant
judgement, including assumptions related to discount rates,
forecasted operating results, long-term growth rates, the
determination of comparable companies and market multiples.
We concluded that the carrying value of the equity method
investment was not impaired.
Operating Leases
Kforce leases property for our field offices as well as certain
office equipment, which limits our exposure to risks related to
ownership. We determine if a contract or arrangement meets the
definition of a lease at inception. We elected not to separate lease
and non-lease components when determining the consideration
in the contract. Right-of-use (“ROU”) assets and lease liabilities
are recognized based on the present value of the lease payments
over the lease term at the commencement date. If there is no
rate implicit in the lease, we use our incremental borrowing
rate in the present value calculation, which is based on our
collateralized borrowing rate and determined based on the terms
of our leases and the economic environment in which they exist.
Our lease agreements do not contain any material residual value
guarantees or restrictive covenants.
KFORCE INC. AND SUBSIDIARIES 33
ROU assets for operating leases, net of amortization, are
recorded within Other assets, net and operating lease liabilities
are recorded within current liabilities if expected to be recognized
in less than one year and in Other long-term liabilities, if over
one year, in the Consolidated Balance Sheet. Operating lease
additions are non-cash transactions and the amortization of
the ROU assets is reflected as Noncash lease expense within
operating activities in the Consolidated Statement of Cash Flows.
Our lease terms typically range from three to five years with
some containing options to renew or terminate. The exercise of
renewal options is at our sole discretion and is included in the
lease term if we are reasonably certain that the renewal option
will be exercised.
We elected the short-term practical expedient for leases with
an initial term of 12 months or less and do not recognize ROU
assets or lease liabilities for these short-term leases.
In addition to base rent, certain of our operating leases require
variable payments of property taxes, insurance and common
area maintenance. These variable lease costs, other than those
dependent upon an index or rate, are expensed when the
obligation for those payments is incurred.
Capitalized Software
Kforce purchases, develops and implements software to
enhance the performance of our technology infrastructure.
Direct internal costs, such as payroll and payroll-related costs,
and external costs incurred during the development stage are
capitalized and classified as capitalized software. Capitalized
software development costs and the associated accumulated
amortization are included in Other assets, net in the accompanying
Consolidated Balance Sheets. Amortization expense is computed
using the straight-line method over the estimated useful lives of
the software, which range from one to ten years. Amortization
expense of capitalized software during the years ended
December 31, 2020, 2019 and 2018 was $1.1 million in each year.
Health Insurance
Except for certain fully insured health insurance lines of
coverage, Kforce retains the risk of loss for each health insurance
plan participant up to $600 thousand in claims annually.
Additionally, for all claim amounts exceeding $600 thousand,
Kforce retains the risk of loss up to an annual aggregate loss of
those claims of $200 thousand. For its partially self-insured lines
of coverage, health insurance costs are accrued using estimates
to approximate the liability for reported claims and incurred but
not reported claims, which are primarily based upon an evaluation
of historical claims experience, actuarially-determined completion
factors and a qualitative review of our health insurance exposure
including the extent of outstanding claims and expected changes
in health insurance costs.
Legal Costs
Legal costs incurred in connection with loss contingencies are
expensed as incurred.
Defined Benefit Pension Plan
Because our defined benefit pension plan is unfunded as of
December 31, 2020, actuarial gains and losses may arise as a
result of the actuarial experience of the plan, as well as changes in
actuarial assumptions in measuring the associated obligation as of
year-end, or an interim date if any re-measurement is necessary.
The net after-tax impact of unrecognized actuarial gains and
losses related to our defined benefit pension plan is recorded in
Accumulated other comprehensive loss in our consolidated financial
statements. The unfunded status of the defined benefit pension
plan is recorded as a liability in our Consolidated Balance Sheets.
Amortization of a net unrecognized gain or loss in accumulated
other comprehensive loss is included as a component of net
periodic benefit cost if, as of the beginning of the year, that net
gain or loss exceeds 10% of the projected benefit obligation. If
amortization is required, the minimum amortization shall be that
excess divided by the average remaining service period of active
plan participants. The interest cost component of the net periodic
benefit cost is included in Other expense, net in the Consolidated
Statements of Operations and Comprehensive Income.
Earnings per Share
Basic earnings per share is computed as net income divided
by the weighted-average number of common shares outstanding
(“WASO”) during the period. WASO excludes unvested shares
of restricted stock. Diluted earnings per share is computed by
dividing net income by diluted WASO. Diluted WASO includes
the dilutive effect of unvested shares of restricted stock using
the treasury stock method, except where the effect of including
potential common shares would be anti-dilutive.
For the years ended December 31, 2020, 2019 and 2018, there
were 412 thousand, 586 thousand and 513 thousand common
stock equivalents, respectively, included in the diluted WASO. For
the years ended December 31, 2020, 2019 and 2018, there were
249 thousand, 1 thousand and nil, respectively, of anti-dilutive
common stock equivalents.
Treasury Stock
The Board may authorize share repurchases of our common
stock. Shares repurchased under Board authorizations are held
in treasury for general corporate purposes. Treasury shares are
accounted for under the cost method and reported as a reduction
of stockholders’ equity in the accompanying consolidated
financial statements.
34 KFORCE INC. AND SUBSIDIARIES
New Accounting Standards
Recently Adopted Accounting Standards
In June 2016, the FASB issued authoritative guidance on
accounting for credit losses on financial instruments, including
trade receivables, and has since issued subsequent updates to the
initial guidance. The amended guidance requires the application
of a current expected credit loss model, a new impairment
model, which measures expected credit losses based on relevant
information, including historical experience, current conditions
and reasonable and supportable forecasts. The guidance is
effective for annual periods beginning after December 15, 2019.
We adopted this standard using the modified retrospective
approach as of January 1, 2020, as required. Refer to Note 5 —
“Allowance for Credit Losses” for additional accounting policy and
transition disclosures related to our allowance for credit losses.
In March 2020, the FASB issued authoritative guidance, which
provides optional expedients and exceptions for applying GAAP
to contract modifications, hedging relationships and other
transactions that reference LIBOR and are affected by reference
rate reform if certain criteria are met. Entities may adopt the
provisions of the new standard as of the beginning of the
reporting period when the election is made between March 12,
2020 through December 31, 2022. We adopted this optional
standard effective January 1, 2020 using the prospective
method, and utilized the optional expedients for cash flow hedges
to assume that a hedged forecasted transaction is probable of
occurring and that the reference rate will not be replaced for the
remainder of a hedging relationship.
Accounting Standards Not Yet Adopted
In August 2018, the FASB issued authoritative guidance
regarding changes to the disclosure requirement for defined
benefit plans including additions and deletions to certain
disclosure requirements for employers that sponsor defined
benefit pension or other post-retirement plans. The guidance is
effective for fiscal periods beginning after December 15, 2020,
with the retrospective method required for all periods presented.
The adoption of this guidance will modify our disclosures but
is not expected to have a material effect on our consolidated
financial statements.
Derivative Instrument
Our interest rate swap derivative instruments have been
designated as cash flow hedges and are recorded at fair value
on the Consolidated Balance Sheets. The effective portion of
the gain or loss on the derivative instruments are recorded as
a component of Accumulated other comprehensive loss, net of
tax, and reclassified into earnings when the hedged items affect
earnings and into the line item of the hedged item. Any ineffective
portion of the gain or loss is recognized immediately into Other
expense, net on the Consolidated Statements of Operations
and Comprehensive Income. Cash flows from the derivative
instrument are classified in the Consolidated Statements of Cash
Flows in the same category as the hedged item.
Fair Value Measurements
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability
in an orderly transaction between market participants at the
measurement date.
The fair value hierarchy uses a framework which requires
categorizing assets and liabilities into one of three levels based
on the inputs used in valuing the asset or liability.
Level 1 inputs are unadjusted, quoted market prices in active
markets for identical assets or liabilities.
Level 2 inputs are observable inputs other than quoted prices
included in Level 1, such as quoted prices for similar assets
or liabilities in active markets or quoted prices for identical
assets or liabilities in inactive markets.
Level 3 inputs include unobservable inputs that are supported
by little, infrequent or no market activity and reflect
management’s own assumptions about inputs used in pricing
the asset or liability.
Level 1 provides the most reliable measure of fair value, while
Level 3 generally requires significant management judgment. Assets
and liabilities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
Fair value measurements include, but are not limited to: the
impairment of goodwill, other long-lived assets and the equity
method investment; stock-based compensation and the interest
rate swap. The carrying values of cash and cash equivalents,
trade receivables, other current assets and accounts payable
and other accrued liabilities approximate fair value because of
the short-term nature of these instruments. Using available
market information and appropriate valuation methodologies,
management has determined the estimated fair value
measurements; however, considerable judgment is required in
interpreting data to develop the estimates of fair value.
KFORCE INC. AND SUBSIDIARIES 35
2. DISCONTINUED OPERATIONS
During 2019, management divested the Government Solutions
(“GS”) segment as a result of the Firm’s decision to focus solely on
the commercial technical and professional staffing services and
solutions space. The GS segment consisted of Kforce Government
Solution (“KGS”), our federal government solutions business, and
TFX, our federal government product business.
On April 1, 2019, Kforce completed the sale of all of the
issued and outstanding stock of Kforce Government Holdings,
Inc., including its wholly-owned subsidiary KGS, to ManTech
International Corporation for a cash purchase price of $115.0
million. Our gain on the sale of KGS, net of transaction costs, was
$72.3 million. Total transaction costs were $9.6 million, which
primarily includes legal and broker fees, transaction bonuses
and accelerated stock-based compensation expense for KGS
management triggered by a change in control of KGS.
On June 7, 2019, Kforce completed the sale of all of the issued
and outstanding stock of TFX to an unaffiliated third party for a
cash purchase price of $18.4 million less a post-closing working
capital adjustment of $0.7 million. Our gain on the sale of TFX,
net of transaction costs, was $7.0 million. Total transaction costs
were $2.2 million, which primarily includes legal and broker fees
and transaction bonuses. Due to the sale of TFX, we finalized the
settlement of a contingent consideration liability related to the
acquisition of TFX in 2014 and paid $0.6 million during the year
ended December 31, 2019.
Since the divestitures, Kforce has had no significant continuing
involvement in the operations of KGS and TFX.
The results of operations for both KGS and TFX have been
reported as discontinued operations in our consolidated financial
statements prior to their disposition.
The following table summarizes the income from discontinued operations, net of tax for the GS segment (in thousands):
Years Ended December 31,
Revenue
Direct costs
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Income from discontinued operations
Gain on sale of discontinued operations
Other (expense) income, net
Income from discontinued operations, before income taxes
Income tax expense
2020
$ —
—
2019
2018
$27,737
19,494
$114,416
82,295
—
—
—
—
—
—
—
—
8,243
6,988
307
948
79,318
(436)
79,830
3,534
32,121
21,862
995
9,264
—
9
9,273
2,169
Income from discontinued operations, net of tax
$ —
$76,296
$ 7,104
The effective tax rates for discontinued operations, including the gain on sale of discontinued operations, were nil, 4.4%, and 23.4%
for the years ended December 31, 2020, 2019, and 2018, respectively. For the year ended December 31, 2019, there was minimal
income tax obligation for the sale of KGS due to the efficient tax structure of the transaction. The GS effective tax rate for 2018 was
positively impacted by the Tax Cut and Jobs Act (“TCJA”).
36 KFORCE INC. AND SUBSIDIARIES
The accompanying Consolidated Statements of Cash Flows
are presented on a combined basis (continuing operations
and discontinued operations). The following table provides
information for the total operating and investing cash flows for
the GS segment (in thousands):
Years Ended December 31,
Cash Provided by (Used in)
GS Operating Activities
GS Investing Activities
2020
2019
2018
$ — $ 4,547 $10,937
$ — $117,798 $ (927)
3. REPORTABLE SEGMENTS
Kforce’s reportable segments are Tech and FA. Historically, and for the year ended December 31, 2019, Kforce has generated only
sales and gross profit information on a segment basis. We do not report total assets or income from continuing operations separately
by segment as our operations are largely combined.
The following table provides information concerning the operations of our segments for the years ended December 31 (in thousands):
2020
Revenue
Gross profit
Operating and other expenses
Income from continuing operations, before income taxes
2019
Revenue
Gross profit
Operating and other expenses
Income from continuing operations, before income taxes
2018
Revenue
Gross profit
Operating and other expenses
Income from continuing operations, before income taxes
Tech
FA
Total
$1,049,628
$ 289,720
$348,072
$106,504
$1,057,859
$ 292,980
$289,528
$102,058
$ 990,089
$ 277,388
$313,848
$109,099
$1,397,700
$ 396,224
321,012
$ 75,212
$1,347,387
$ 395,038
323,642
$ 71,396
$1,303,937
$ 386,487
318,607
$ 67,880
4. DISAGGREGATION OF REVENUE
The following table provides information about disaggregated revenue by segment and revenue type for the years ended
December 31 (in thousands):
2020
Flex revenue
Direct Hire revenue
Total Revenue
2019
Flex revenue
Direct Hire revenue
Total Revenue
2018
Flex revenue
Direct Hire revenue
Total Revenue
Tech
FA
Total
$1,032,901
16,727
$1,049,628
$1,037,380
20,479
$1,057,859
$331,196
16,876
$348,072
$1,364,097
33,603
$1,397,700
$262,307
27,221
$289,528
$1,299,687
47,700
$1,347,387
$ 971,310
18,779
$ 990,089
$286,939
26,909
$1,258,249
45,688
$313,848
$1,303,937
KFORCE INC. AND SUBSIDIARIES 37
5. ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses on trade receivables is
determined based on the newly adopted accounting standard that
requires companies to estimate and recognize lifetime expected
losses, rather than incurred losses, which results in the earlier
recognition of credit losses even if the expected risk of credit loss
is remote. Upon adoption of the new standard on January 1, 2020,
we recognized a credit loss adjustment related to adoption of this
accounting standard as a cumulative adjustment to the allowance
for credit losses. As part of our analysis, we apply credit loss rates
to outstanding receivables by aging category. For certain clients,
we perform a quarterly credit review, which considers the client’s
credit rating and financial position as well as our total credit loss
exposure. Trade receivables are written off after all reasonable
collection efforts have been exhausted. Recoveries of trade
receivables previously written off are recorded when received
and are immaterial for the year ended December 31, 2020.
The following table presents the activity within the allowance for
credit losses on trade receivables for the year ended December 31,
2020 (in thousands):
Allowance for credit losses, January 1, 2020(1)
Current period provision
Write-offs charged against the allowance, net of
recoveries of amounts previously written off
$ 1,843
2,130
(1,216)
Allowance for credit losses, December 31, 2020
$ 2,757
(1) As a result of the adoption of the new credit losses accounting standard, we
recorded a cumulative effect adjustment to increase the allowance for credit
losses of $0.3 million as of January 1, 2020.
6. FIXED ASSETS, NET
The following table presents major classifications of fixed assets and related useful lives (in thousands):
December 31,
Land
Building and improvements
Furniture and equipment
Computer equipment
Leasehold improvements
Total fixed assets
Less accumulated depreciation
Total Fixed assets, net
USEFUL LIFE
2020
2019
3-40 years
1-10 years
1-5 years
1-8 years
$ 5,892
25,964
6,926
5,472
6,185
50,439
(23,635)
$ 26,804
$ 5,892
25,990
8,760
6,446
9,482
56,570
(26,595)
$ 29,975
Depreciation expense was $4.1 million, $4.9 million and $5.7 million during the years ended December 31, 2020, 2019 and 2018, respectively.
7. INCOME TAXES
The provision for income taxes from continuing operations consists of the following (in thousands):
Years Ended December 31,
Current tax expense:
Federal
State
Deferred tax expense
Total Income tax expense
2020
2019
2018
$17,278
4,119
(2,224)
$19,173
$12,074
5,057
(301)
$16,830
$12,032
5,369
(397)
$17,004
38 KFORCE INC. AND SUBSIDIARIES
The provision for income taxes from continuing operations
shown above varied from the statutory federal income tax rate
for those periods as follows:
Years Ended December 31,
Federal income tax rate
State income taxes,
net of Federal tax effect
Non-deductible compensation
and meals and entertainment
Tax credits
Tax benefit from restricted
stock vesting
Other
Effective tax rate
2020
21.0%
2019
2018
21.0% 21.0%
5.3
5.8
6.1
1.4
(1.5)
(1.5)
0.8
25.5%
1.6
(2.1)
1.7
(2.5)
(1.6)
(1.1)
(0.8)
(0.4)
23.6% 25.1%
The 2020 effective tax rate was unfavorably impacted by a
lower Work Opportunity Tax Credit in 2020 versus 2019, and
the 2019 effective tax rate was favorably impacted primarily by
a greater tax benefit from the vesting of restricted stock and a
favorable tax adjustment related to our valuation allowance on
the foreign tax credit.
Deferred tax assets and liabilities are composed of the following
(in thousands):
December 31,
2020
2019
Deferred tax assets:
Accounts receivable reserves
1,657
Accrued liabilities
5,046
Deferred compensation obligation
618
Stock-based compensation
Operating lease liabilities
5,223
Pension and post-retirement benefit plans 3,721
4,978
Deferred payroll taxes
461
Other
$ 829 $ 542
1,161
4,715
739
5,497
3,745
—
160
22,533 16,559
Deferred tax assets
Deferred tax liabilities:
Prepaid expenses
Fixed assets
Deferred payroll taxes
ROU assets for operating leases
Partnership basis difference
Other
Deferred tax liabilities
Valuation allowance
Total Deferred tax assets, net
(459)
(965)
(1,889)
(4,767)
—
(328)
(489)
(2,811)
(2,370)
(4,347)
(1,469)
(309)
(11,795)
—
(8,408)
(114)
$ 10,738 $ 8,037
In evaluating the realizability of Kforce’s deferred tax assets,
management assesses whether it is more likely than not that
some portion, or all, of the deferred tax assets, will be realized.
Management considers, among other things, the ability to
generate future taxable income (including reversals of deferred
tax liabilities) during the periods in which the related temporary
differences will become deductible. In 2019, management elected
to treat foreign taxes paid as a deduction on our tax return and,
accordingly, reversed the deferred tax asset and corresponding
valuation allowance during the year ended December 31, 2019.
Kforce is periodically subject to IRS audits, as well as state and
other local income tax audits for various tax years. Although
Kforce has not experienced any material liabilities in the past due
to income tax audits, Kforce can make no assurances concerning
any future income tax audits.
Uncertain Income Tax Positions
The following table presents a reconciliation of the beginning
and ending balance of unrecognized tax benefits for the years
ended (in thousands):
December 31,
2020
2019
2018
Unrecognized tax benefits,
beginning
Additions for prior year
tax positions
Additions for current year
tax positions
Lapse of statute of
$ 383
$ 906
$1,127
—
—
—
—
41
—
limitations
(188)
(497)
(248)
Reductions for tax positions
of prior years
Settlements
Unrecognized tax benefits,
(13)
—
—
(26)
(14)
—
ending
$ 182
$ 383
$ 906
As of December 31, 2020, the amount of unrecognized tax
benefit that would impact the effective tax rate, if recognized, is
$0.2 million. Kforce does not expect any significant changes to its
uncertain tax positions in the next 12 months.
Kforce and its subsidiaries file income tax returns in the U.S.
federal jurisdiction and various states. With a few exceptions,
Kforce is no longer subject to federal, state, local, or non-U.S.
income tax examinations by tax authorities for years before 2017.
KFORCE INC. AND SUBSIDIARIES 39
8. OTHER ASSETS, NET
10. CURRENT LIABILITIES
Other assets, net consisted of the following (in thousands):
The following table provides information on certain current
December 31,
Assets held in Rabbi Trust
ROU assets for operating leases, net
Equity method investment
Capitalized software, net(1)
Deferred loan costs, net
Other non-current assets
Total Other assets, net
2020
2019
$36,164 $35,413
16,835 18,344
8,169
10,488
8,759
12,802
855
501
1,298
785
$77,575 $72,838
(1) Accumulated amortization of capitalized software was $34.0 million and
$34.2 million as of December 31, 2020 and 2019, respectively.
9. GOODWILL
The following table presents the gross amount and accumulated
impairment losses for each of our reporting units as of
December 31, 2020, 2019 and 2018 (in thousands):
Goodwill, gross amount
Accumulated impairment
Tech
FA
Total
$ 156,391 $ 19,766 $ 176,157
losses
(139,357)
(11,760)
(151,117)
Goodwill, carrying value
$ 17,034
$ 8,006 $ 25,040
liabilities (in thousands):
December 31,
Accounts payable
Accrued liabilities
Total Accounts payable and
other accrued liabilities
Payroll and benefits
Payroll taxes
Health insurance liabilities
Workers’ compensation liabilities
Total Accrued payroll costs
2020
2019
$20,177 $20,267
12,965
15,356
$35,533 $33,232
$38,035
$38,257
992
21,842
3,907
4,641
1,067
1,109
$65,849 $44,001
Our accounts payable balance includes vendor and independent
contractor payables. Our accrued liabilities balance includes
approximately $19.3 million in payroll tax payments as a result
of the application of the CARES Act 2020, the current portion of
our deferred compensation plans liability, contract liabilities from
contracts with customers (such as customer rebates) and other
accrued liabilities.
11. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following
There was no impairment expense related to goodwill for each
(in thousands):
of the years ended December 31, 2020, 2019 and 2018.
Management performed its annual impairment assessment of
the carrying value of goodwill as of December 31, 2020 and 2019.
For each of our reporting units, we assessed qualitative factors
to determine whether the existence of events or circumstances
indicated that it was more likely than not that the fair value of
the reporting units was less than its carrying amount. Based on
the qualitative assessments, management determined that it was
not more likely than not that the fair values of the reporting units
were less than the carrying values at December 31, 2020 and
2019. A deterioration in any of the assumptions could result in
an impairment charge in the future.
40 KFORCE INC. AND SUBSIDIARIES
December 31,
Deferred compensation plan
Supplemental executive retirement plan
Operating lease liabilities
Interest rate swap derivative instrument
Other long-term liabilities(1)
Total Other long-term liabilities
2019
2020
$34,501
20,628
14,692
1,774
19,353
$30,361
18,080
14,627
179
651
$90,948 $63,898
(1) As a result of the application of the CARES Act, we have approximately $19.3
million in payroll tax payments recorded within Other long-term liabilities as of
December 31, 2020. This amount is expected to be paid during our fiscal year
ending December 31, 2022.
12. OPERATING LEASES
The following table presents weighted-average terms for our
operating leases:
December 31,
Weighted-average discount rate
Weighted-average remaining
lease term
2020
3.5%
2019
3.8%
4.5 years 4.5 years
The following table presents operating lease expense included
in SG&A (in thousands):
December 31,
Lease Cost
Operating lease expense
Variable lease costs
Short-term lease expense
Sublease income
Total operating lease expense
2020
2019
$7,669
1,387
855
(344)
$9,567
$6,847
1,689
792
(445)
$8,883
The following table presents the maturities of operating lease
liabilities as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total maturities of operating lease liabilities
Less: imputed interest
Total operating lease liabilities
$ 6,115
4,390
3,997
2,938
2,033
2,444
21,917
1,705
$20,212
13. EMPLOYEE BENEFIT PLANS
401(k) Savings Plans
The Firm maintains various qualified defined contribution
401(k) retirement savings plans for eligible employees. Assets of
these plans are held in trust for the sole benefit of employees
and/or their beneficiaries. Employer matching contributions are
discretionary and are funded annually as approved by the Board.
Kforce accrued matching 401(k) contributions for continuing
operations of $1.7 million and $1.4 million as of December 31,
2020 and 2019, respectively.
Employee Stock Purchase Plan
Kforce’s employee stock purchase plan allows all eligible
employees to enroll each quarter to purchase Kforce’s common
stock at a 5% discount from its market price on the last day of
the quarter. Kforce issued 19 thousand, 17 thousand, and 19
thousand shares of common stock at an average purchase price
of $29.43, $32.79 and $28.93 per share during the years ended
December 31, 2020, 2019 and 2018, respectively. All shares
purchased under the employee stock purchase plan were settled
using Kforce’s treasury stock.
Deferred Compensation Plans
The Firm maintains various non-qualified deferred
compensation plans, pursuant to which eligible management
and highly compensated key employees, as defined by IRS
regulations, may elect to defer all or part of their compensation
to later years. These amounts are classified in Accounts payable
and other accrued liabilities if payable within the next year or in
Other long-term liabilities if payable after the next year, upon
retirement or termination of employment in the accompanying
Consolidated Balance Sheets. At December 31, 2020 and 2019,
amounts related to the deferred compensation plans included in
Accounts payable and other accrued liabilities were $4.2 million
and $3.6 million, respectively, and $34.5 million and $30.4 million
was included in Other long-term liabilities at December 31, 2020
and 2019, respectively, in the Consolidated Balance Sheets.
For the years ended December 31, 2020, 2019 and 2018, we
recognized compensation expense for the plans of $1.0 million,
$0.4 million and $0.8 million, respectively.
Kforce maintains a Rabbi Trust and holds life insurance policies
on certain individuals to assist in the funding of the deferred
compensation liability. If necessary, employee distributions are
funded through proceeds from the sale of assets held within
the Rabbi Trust. During the year ended December 31, 2020,
the Company received proceeds of $3.5 million from the sale of
Company-owned life insurance policies. The balance of the assets
held within the Rabbi Trust, including the cash surrender value of
the Company-owned life insurance policies, was $36.2 million and
$35.4 million as of December 31, 2020 and 2019, respectively,
and is recorded in Other assets, net in the accompanying
Consolidated Balance Sheets. As of December 31, 2020, the life
insurance policies had a net death benefit of $169.6 million.
Supplemental Executive Retirement Plan
Kforce maintains a SERP for the benefit of two executive
officers. Normal retirement age under the SERP is defined as age
65; however, certain conditions allow for early retirement as early
as age 55 or upon a change in control. Both participants are fully
vested in accordance with the plan’s provisions. The SERP will be
funded entirely by Kforce, and benefits are taxable to the covered
executive officer upon receipt and will be deductible (though may
not be fully deductible) by Kforce when paid. Benefits payable
under the SERP upon the occurrence of a qualifying distribution
event, as defined, are targeted at 45% of the covered executive
officers’ average salary and bonus, as defined, from the three
years in which the covered executive officer earned the highest
salary and bonus during the last 10 years of employment. The
benefits under the SERP are reduced for a participant that has
not reached age 62 with 10 years of service or age 55 with 25
years of service with a percentage reduction up to the normal
retirement age.
Benefits under the SERP are based on the lump sum present
value but may be paid over the life of the covered executive
officer or 10-year annuity, as elected by the covered executive
officer upon commencement of participation in the SERP. None
of the benefits earned pursuant to the SERP are attributable
to services provided prior to the effective date of the plan. For
purposes of the measurement of the benefit obligation as of
December 31, 2020, Kforce has assumed that both participants
will elect to take the lump sum present value option based on
historical trends.
KFORCE INC. AND SUBSIDIARIES 41
Actuarial Assumptions
Net Periodic Benefit Cost
The following table presents the components of net periodic
benefit cost for the years ended (in thousands):
December 31,
Service cost
Interest cost
Net periodic benefit cost
2020
$345
497
$842
2019
$261
601
2018
$1,353
468
$862
$1,821
The service cost is recorded in SG&A and the interest cost is
recorded in Other expense, net in the accompanying Consolidated
Statements of Operations and Comprehensive Income.
Changes in Benefit Obligation
The following table presents the changes in the projected
benefit obligation for the years ended (in thousands):
December 31,
Projected benefit obligation, beginning
Service cost
Interest cost
Actuarial experience and changes
in actuarial assumptions
Projected benefit obligation, ending
2020
2019
$18,080 $15,035
261
601
345
497
1,706
2,183
$20,628 $18,080
There were no payments made under the SERP during the years
ended December 31, 2020 and 2019, respectively. The projected
benefit obligation is recorded in Other long-term liabilities in the
accompanying Consolidated Balance Sheets. The accumulated
benefit obligation is the actuarial present value of all benefits
attributed to past service, excluding future salary increases. The
accumulated benefit obligation as of December 31, 2020 and
2019 was $20.6 million and $18.1 million, respectively.
Contributions
There is no requirement for Kforce to fund the SERP and,
as a result, no contributions have been made to the SERP
through the year ended December 31, 2020. Kforce does not
currently anticipate funding the SERP during the year ending
December 31, 2021.
Due to the SERP being unfunded as of December 31, 2020 and
2019, it is not necessary for Kforce to determine the expected
long-term rate of return on plan assets. The following table
presents the weighted-average actuarial assumptions used
to determine the actuarial present value of projected benefit
obligations at:
December 31,
Discount rate
Rate of future compensation increase
2020
2.00%
2.90%
2019
2.75%
2.90%
The following table presents the weighted-average actuarial
assumptions used to determine net periodic benefit cost for the
years ended:
December 31,
Discount rate
Rate of future compensation
2019
2020
2.75% 4.00%
2018
3.25%
increase
2.90% 2.90%
2.90%
The discount rate was determined using the Moody’s Aa long-
term corporate bond yield as of the measurement date with a
maturity commensurate with the expected payout of the SERP
obligation. This rate is also compared against the Citigroup Pension
Discount Curve and Liability Index to ensure the rate used is
reasonable and may be adjusted accordingly. This index is widely
used by companies throughout the U.S. and is considered to be
one of the preferred standards for establishing a discount rate.
The assumed rate of future compensation increases is based
on a combination of factors, including the historical compensation
increases and future target compensation levels for its covered
executive officers, taking into account the covered executive
officers’ assumed retirement date.
The periodic benefit cost is based on actuarial assumptions
that are reviewed on an annual basis; however, management
monitors these assumptions on a periodic basis to ensure that
they accurately reflect current expectations of the cost of
providing retirement benefits.
42 KFORCE INC. AND SUBSIDIARIES
Estimated Future Benefit Payments
Undiscounted projected benefit payments attributed to the
SERP, which reflect the anticipated future service of participants,
are expected to be paid as follows during the years ended
December 31 (in thousands):
Projected Annual Benefit Payments
2021
2022
2023
2024
2025
2025-2030
$ —
15,231
—
—
—
9,736
The estimated future benefit amounts and timing of these
payments were determined using assumed retirement dates for
the participants, among other assumptions, as of December 31,
2020; however, no specific plans or timelines have been
established for or by these participants and the assumptions are
subject to change, which could impact the future amounts and
timing of payments.
14. CREDIT FACILITY
On May 25, 2017, the Firm entered into the Credit Facility
with Wells Fargo Bank, N.A., as administrative agent, Wells
Fargo Securities, LLC, as lead arranger and bookrunner, Bank
of America, N.A., as syndication agent, Regions Bank and BMO
Harris Bank, N.A., as co-documentation agents, and the lenders
referred to therein. Under the Credit Facility, the Firm has a
maximum borrowing capacity of $300.0 million, which may,
subject to certain conditions and the participation of the lenders,
be increased up to an aggregate additional amount of $150.0
million, which is available to the Firm in the form of revolving
credit loans, swingline loans and letters of credit. Letters of
credit and swingline loans under the Credit Facility are subject to
sublimits of $10.0 million. The maturity date of the Credit Facility
is May 25, 2022. Borrowings under the Credit Facility are secured
by substantially all of the tangible and intangible assets of the
Firm, excluding the Firm’s corporate headquarters and certain
other designated collateral.
Revolving credit loans under the Credit Facility bears interest
at a rate equal to: (a) the Base Rate (as described below) plus the
Applicable Margin (as described below); or (b) the LIBOR Rate plus
the Applicable Margin. Swingline loans under the Credit Facility
bears interest at a rate equal to the Base Rate plus the Applicable
Margin. The Base Rate is the highest of: (i) the Wells Fargo Bank,
N.A. prime rate; (ii) the federal funds rate plus 0.50%; or (iii) one-
month LIBOR plus 1.00%, and the LIBOR Rate is reserve-adjusted
LIBOR for the applicable interest period, but not less than zero.
The Applicable Margin is based on the Firm’s total leverage
ratio. The Applicable Margin for Base Rate loans ranges from
0.25% to 0.75% and the Applicable Margin for LIBOR Rate loans
ranges from 1.25% to 1.75%. The Firm will pay a quarterly non-
refundable commitment fee equal to the Applicable Margin on the
average daily unused portion of the Commitment (swingline loans
do not constitute usage for this purpose). The Applicable Margin
for the commitment fee is based on the Firm’s total leverage ratio
and ranges between 0.20% and 0.35%.
The Firm is subject to certain affirmative and negative
covenants including (but not limited to), the maintenance of a
fixed charge coverage ratio of no less than 1.25 to 1.00 and the
maintenance of a total leverage ratio of no greater than 3.25 to
1.00. The numerator in the fixed charge coverage ratio is defined
pursuant to the Credit Facility as earnings before interest expense,
income taxes, depreciation and amortization, stock-based
compensation expense and other permitted items pursuant to
our Credit Facility, less cash paid for capital expenditures, income
taxes and dividends. The denominator is defined as Kforce’s fixed
charges such as interest expense and principal payments paid or
payable on outstanding debt other than borrowings under the
Credit Facility. The total leverage ratio is defined pursuant to
the Credit Facility as total indebtedness divided by Consolidated
EBITDA. Our ability to make distributions or repurchases of equity
securities could be limited if an event of default has occurred.
Furthermore, our ability to repurchase equity securities could be
limited if: (a) the total leverage ratio is greater than 2.75 to 1.00;
and (b) the Firm’s availability, inclusive of unrestricted cash, is
less than $25.0 million. At December 31, 2020, Kforce was not
limited in making distributions and executing repurchases of our
equity securities.
In an effort to address the pending economic disruption from
the COVID-19 crisis, we took a proactive measure in March 2020
to draw down $35.0 million under our credit facility. We took this
proactive action to take advantage of historically low interest
rates and reduce potential risks of not being able to access the
availability under our credit facility. As of December 31, 2020
and 2019, $100.0 million and $65.0 million was outstanding on
the Credit Facility, respectively. Kforce had $1.5 million and $3.4
million of outstanding letters of credit at December 31, 2020 and
2019, respectively, which pursuant to the Credit Facility, reduces
the availability.
KFORCE INC. AND SUBSIDIARIES 43
15. DERIVATIVE INSTRUMENT AND HEDGING ACTIVITY
Kforce is exposed to interest rate risk as a result of our
corporate borrowing activities. The Firm uses an interest rate
swap derivative as a risk management tool to mitigate the
potential impact of rising interest rates on our variable rate debt.
On April 21, 2017, Kforce entered into Swap A. Swap A was
effective on May 31, 2017 and matures on April 29, 2022. Swap A
has a rate of 1.81%, which is added to our interest rate margin to
determine the fixed rate that the Firm will pay to the counterparty
during the term of Swap A based on the notional amount of Swap A.
The notional amount of Swap A through maturity is $25.0 million.
On March 12, 2020, Kforce entered into Swap B. Swap B was
effective on March 17, 2020 and matures on May 30, 2025. Swap B
has a fixed interest rate of 0.61% and a notional amount of
$75.0 million and increases to $100.0 million in May 2022, and
subsequently decreases $75.0 million and $40.0 million in May
2023 and May 2024, respectively. The increases in the notional
amount of Swap B correspond to the decreases in the notional
amount of Swap A.
The Firm uses the Swaps as an interest rate risk management
tool to mitigate the potential impact of rising interest rates
on variable rate debt. The fixed interest rate for each swap,
plus the applicable interest margin under our Credit Facility, is
included in interest expense and recorded in Other expense,
net in the accompanying Consolidated Financial Statements of
Operations and Comprehensive Income. Both Swap A and B have
been designated as cash flow hedges and were effective as of
December 31, 2020. The change in the fair value of the Swaps are
recorded as a component of Accumulated other comprehensive
(loss) income in the consolidated financial statements.
The following table sets forth the activity in the accumulated
instrument gain (loss) for the years ended
derivative
(in thousands):
December 31,
2020
2019
Accumulated derivative instrument
gain, beginning of year
Net change associated with current
period hedging transactions
Accumulated derivative instrument
$ (179)
$ 900
(1,595)
(1,079)
loss, end of year
$(1,774)
$ (179)
16. FAIR VALUE MEASUREMENTS
The Swaps are measured at fair value using readily observable
inputs, such as the LIBOR interest rate, which are considered to
be Level 2 inputs. Refer to Note 15 — “Derivative Instrument
and Hedging Activity” in the Notes to the Consolidated Financial
Statements, included in this report for a complete discussion of
the Firm’s derivative instruments.
Certain assets, in specific circumstances, are measured at
fair value on a non-recurring basis utilizing Level 3 inputs such
as goodwill, other long-lived assets and the equity method
investment. For these assets, measurement at fair value in
periods subsequent to their initial recognition would be applicable
if one or more of these assets were determined to be impaired.
The following table sets forth by level, within the fair value hierarchy, estimated fair values on a recurring basis at December 31, 2020
and 2019 were as follows (in thousands):
Assets/(Liabilities) Measured at Fair Value:
At December 31, 2020
Recurring basis:
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Asset/
(Liability)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Interest rate swap derivative instruments
$(1,774)
$ —
$(1,774)
At December 31, 2019
Recurring basis:
Interest rate swap derivative instrument
$ (179)
$ —
$ (179)
$ —
$ —
There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the years ended December 31, 2020 and 2019.
44 KFORCE INC. AND SUBSIDIARIES
17. STOCK INCENTIVE PLANS
Restricted Stock
On April 22, 2020, the Kforce shareholders approved the 2020
Stock Incentive Plan (the “2020 Plan”). The 2020 Plan allows for
the issuance of stock options, stock appreciation rights, stock
awards (including restricted stock awards (“RSAs”) and restricted
stock units (“RSUs”)) and other stock-based awards. The
aggregate number of shares of common stock that are subject to
awards under the 2020 Plan is approximately 3.7 million shares.
The 2020 Plan terminates on April 28, 2030. Prior to the effective
date of the 2020 Plan, the Company granted stock awards to
eligible participants under our 2017 Stock Incentive Plan, 2016
Stock Incentive Plan and 2013 Stock Incentive Plan (collectively
the “Prior Plans”). As of the effective date of the 2020 Plan, no
additional awards may be granted pursuant to the Prior Plans;
however, awards outstanding as of the effective date will
continue to vest in accordance with the terms of the Prior Plans.
During the years ended December 31, 2020, 2019 and
2018, stock-based compensation expense was $11.6 million,
$9.8 million and $8.5 million, respectively. The related tax benefit
for the years ended December 31, 2020, 2019 and 2018 was
$3.4 million, $2.3 million, and $2.1 million, respectively.
Restricted stock (including RSAs and RSUs) are granted to
executives and management either: for awards related to Kforce’s
annual long-term incentive (“LTI”) compensation program, or as part
of a compensation package in order to retain directors, executives
and management. The LTI award amounts are based on Kforce’s
total shareholder return versus a pre-defined peer group. The
LTI restricted stock granted during the year ended December 31,
2020, will vest ratably over a period of three to four years. Other
restricted stock granted during the year ended December 31,
2020, will vest ratably over a period of one to ten years.
RSAs contain the same voting rights as other common stock as
well as the right to forfeitable dividends in the form of additional
RSAs at the same rate as the cash dividend on common stock and
containing the same vesting provisions as the underlying award.
RSUs contain no voting rights, but have the right to forfeitable
dividend equivalents in the form of additional RSUs at the same
rate as the cash dividend on common stock and containing the
same vesting provisions as the underlying award. The distribution
of shares of common stock for each RSU, pursuant to the terms of
the Kforce Inc. Director’s Restricted Stock Unit Deferral Plan, can
be deferred to a date later than the vesting date if an appropriate
election was made. In the event of such deferral, vested RSUs
have the right to dividend equivalents.
The following table presents the restricted stock activity for the years ended December 31, 2020, (in thousands, except per
share amounts):
Outstanding at December 31, 2019
Granted
Forfeited/Canceled
Vested
Outstanding at December 31, 2020
Number of
Restricted Stock
Weighted-Average
Grant Date
Fair Value
Total Instrinsic
Value of Restricted
Stock Vested
1,180
410
(12)
(441)
1,137
$29.51
$40.11
$22.62
$28.94
$33.63
$17,958
The weighted-average grant date fair value of restricted stock granted was $40.11, $38.37 and $29.72 during the years ended
December 31, 2020, 2019 and 2018, respectively. The total intrinsic value of restricted stock vested was $18.0 million, $18.8 million
and $11.9 million during the years ended December 31, 2020, 2019 and 2018, respectively.
The fair market value of restricted stock is determined based on the closing stock price of Kforce’s common stock at the date of grant,
and is amortized on a straight-line basis over the requisite service period. As of December 31, 2020, total unrecognized stock-based
compensation expense related to restricted stock was $35.7 million, which will be recognized over a weighted-average remaining period
of 3.3 years.
KFORCE INC. AND SUBSIDIARIES 45
18. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
Kforce has various commitments to purchase goods and
services in the ordinary course of business. These commitments
are primarily related to software and online application licenses and
hosting. As of December 31, 2020, these purchase commitments
amounted to approximately $11.7 million and are expected to
be paid as follows: $9.3 million in 2021; $1.5 million in 2022 and
$0.3 million in years 2023, 2024 and 2025, respectively.
Letters of Credit
Kforce provides letters of credit to certain vendors in lieu of
cash deposits. At December 31, 2020, Kforce had letters of credit
outstanding for operating lease and insurance coverage deposits
totaling $1.5 million.
Litigation
We are involved in legal proceedings, claims and administrative
matters that arise in the ordinary course of business. We have
made accruals with respect to certain of these matters, where
appropriate, that are reflected in our consolidated financial
statements but are not, individually or in the aggregate,
considered material. For other matters for which an accrual
has not been made, we have not yet determined that a loss is
probable or the amount of loss cannot be reasonably estimated.
While the ultimate outcome of the matters cannot be determined,
we currently do not expect that these proceedings and claims,
individually or in the aggregate, will have a material effect on
our financial position, results of operations or cash flows. The
outcome of any litigation is inherently uncertain, however, and
if decided adversely to us, or if we determine that settlement of
particular litigation is appropriate, we may be subject to liability
that could have a material adverse effect on our financial position,
results of operations or cash flows. Kforce maintains liability
insurance in amounts and with such coverage and deductibles
as management believes is reasonable. The principal liability risks
that Kforce insures against are workers’ compensation, personal
injury, bodily injury, property damage, directors’ and officers’
liability, errors and omissions, cyber liability, employment
practices liability and fidelity losses. There can be no assurance
that Kforce’s liability insurance will cover all events or that the
limits of coverage will be sufficient to fully cover all liabilities.
On August 23, 2019, Kforce Inc. was served with a complaint,
as amended, brought in the U.S. District Court, Middle District of
Florida, Tampa Division. Maurcus Smith, Alvin Hodge and David
Kortright, et al. v. Kforce Inc., Case No.: 8:19-cv-02068-CEH-CPT.
The plaintiffs purport to bring claims on their own behalf and
on behalf of a putative class of consumers/applicants who were
the subject of consumer reports used for employment purposes
for alleged violations of the Fair Credit Reporting Act of 1970,
as amended, (“FCRA”), 15 U.S.C. § 1681 et seq. based upon
the defendant’s purported failure to provide stand-alone FCRA
disclosures and obtain valid authorizations. The plaintiffs seek
statutory damages, punitive damages, costs, attorney’s fees and
other relief under the FCRA. On February 10, 2020, the parties
reached a preliminary settlement of the case. The Court approved
the preliminary settlement on December 9, 2020 and scheduled
a final fairness hearing for April 16, 2021. We believe that this
matter is unlikely to have a material adverse effect on our
business, consolidated financial position, results of operations,
or cash flows.
On December 17, 2019, Kforce Inc., et al. was served with a
complaint brought in Superior Court of the State of California,
Alameda County. Kathleen Wahrer, et al. v. Kforce Inc., et al.,
Case No.: RG19047269. The former employee purports to
bring a representative action on her own behalf and on behalf
of other current and former aggrieved employees pursuant to
Private Attorneys General Act (“PAGA”) alleging violations of
the California Labor Code (“Labor Code”). The purported Labor
Code violations include failure to provide and pay proper wages
for meal and rest periods, failure to properly calculate and pay
minimum and overtime wages, failure to provide compliant wage
statements, failure to timely pay wages during employment and
upon termination, and failure to reimburse business expenses.
The plaintiff seeks civil penalties, interest, attorneys’ fees and
costs under the Labor Code. At this stage in the litigation it is
not feasible to predict the outcome of this matter or reasonably
estimate a range of loss, should a loss occur, from this proceeding.
On November 18, 2020, Kforce Inc., et al. was served with a
complaint brought in the Superior Court of the State of California,
San Diego County. Bernardo Buchsbaum, et al. v. Kforce Inc.,
et al., Case No.: 37-2020-00030994-CU-OE-CTL. The former
employee purports to bring a representative action on his own
behalf and on behalf of other current and former California
aggrieved employees pursuant to the Private Attorneys General
Act (“PAGA”) alleging violations of the California Labor Code
(“Labor Code”). The purported Labor Code violations include the
failure to: (i) pay all earned wages, including minimum wages and
46 KFORCE INC. AND SUBSIDIARIES
overtime wages; (ii) provide and pay proper wages for meal and
rest periods; (iii) reimburse all reasonable and necessary business
expenses; (iv) provide accurate itemized wage statements;
and (v) provide unused vacation wages upon termination.
The plaintiff seeks civil penalties, interest, attorney’s fees and
costs under the Labor Code. On January 21, 2021, the Plaintiff
served an amended complaint to add Kforce Flexible Solutions
as a party and narrow the scope of alleged aggrieved employees
to “internal” commissioned employees. At this stage in the
litigation it is not feasible to predict the outcome of this matter
or reasonably estimate a range of loss, should a loss occur, from
this proceeding.
On October 13, 2020, Kforce Inc. was served with a complaint
brought in the U.S. District Court, Eastern District of Pennsylvania.
Hope Gofton and Adam Kimbrel, et al. v. Kforce Inc., Case No.:
2:20-cv-04886 on behalf of themselves and other similarly
situated current and former employees. The plaintiffs purport to
bring a collective action for alleged violations of the Fair Labor
Standards Act, 29 U.S.C. § 201, et seq., and a class action for
alleged violations of the Pennsylvania Minimum Wage Act, 43
P.S. §§ 333.101, et seq., based upon the defendant’s purported
failure to pay federal and state overtime wages. The plaintiffs
allege that the defendant improperly classified as exempt the
plaintiffs and other putative collective and class members,
and allegedly failed to pay overtime wages. The plaintiffs seek
payment of unpaid overtime wages, liquidated damages, interest,
attorney’s fees, costs and other relief deemed equitable by the
Court. At this stage in the litigation, it is not feasible to predict the
outcome of this matter or reasonably estimate a range of loss,
should a loss occur, from this proceeding.
On December 24, 2020, a complaint was filed and on January 5,
2021, the complaint was served against Kforce Inc., et al. in
Superior Court of the State of California, Los Angeles County.
Sydney Elliott-Brand, et. al. v. Kforce Inc., et al., Case No.:
20STCV49193. On behalf of herself and a putative class of
current and former commissioned employees employed by
Defendants, the plaintiff purports to bring a collective action
for alleged violations of the California Labor Code, §201, et
seq., Industrial Welfare Commission (“IWC”) Wage Orders, and
the California Business and Professions Code, §17200, et. seq,
based upon the defendants’ alleged failure to: (i) pay minimum
and overtime wages; (ii) timely pay all earned wages; (iii) provide
meal periods and rest breaks; (iv) reimburse business expenses;
(v) provide accurate itemized wage statements; and (vi) timely
pay wages and vacation pay upon separation of employment; as
well as associated unfair competition. The plaintiff seeks payment
to recover minimum, regular, and/or overtime wages for all hours
worked as required by law, meal period premiums, rest period
premiums, unpaid business expenses, reasonable attorneys’
fees, cost of suit and interest, statutory penalties and liquidated
damages, and also seeks an order requiring Defendants to restore
and disgorge all funds acquired by means of unfair competition
under the California Business and Professions Code. At this stage
in the litigation it is not feasible to predict the outcome of this
matter or reasonably estimate a range of loss, should a loss
occur, from this proceeding.
Employment Agreements
Kforce has employment agreements with certain executives
that provide for minimum compensation, salary and continuation
of certain benefits for a six-month to a three-year period after
their employment ends under certain circumstances. Certain of
the agreements also provide for a severance payment ranging
from one to three times annual salary and one-half to three times
average annual bonus if such an agreement is terminated without
good cause by Kforce or for good reason by the executive subject to
certain post-employment restrictive covenants. At December 31,
2020, our liability would be approximately $45.0 million if,
following a change in control, all of the executives under contract
were terminated without good cause by the employer or if the
executives resigned for good reason and $17.2 million if, in
the absence of a change in control, all of the executives under
contract were terminated by Kforce without good cause or if the
executives resigned for good reason.
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
Our quarterly operating results are affected by the number of
billing days in a particular quarter, the seasonality of our clients’
businesses and increased holiday and vacation days taken. In
addition, we typically experience an increase in costs in the first
quarter of each fiscal year as a result of certain U.S. state and
federal employment tax resets, which negatively impact our
gross profit and overall profitability. The results of operations
for any interim period may be impacted by these factors and are
not necessarily indicative of, nor comparable to, the results of
operations for a full year.
KFORCE INC. AND SUBSIDIARIES 47
The following table provides quarterly information for the years ended December 31, 2020 and 2019 (in thousands, except per
share amounts):
Three Months Ended
2020
Revenue
Gross profit
Income from continuing operations
Income (loss) from discontinued operations, net of tax
Net income
Earnings per share — basic, continuing operations
Earnings per share — diluted, continuing operations
Earnings per share — basic
Earnings per share — diluted
2019
Revenue
Gross profit
Income from continuing operations
Income (loss) from discontinued operations, net of tax
Net income
Earnings per share — basic, continuing operations
Earnings per share — diluted, continuing operations
Earnings per share — basic
Earnings per share — diluted
March 31
June 30 September 30 December 31
$335,208
94,524
9,106
—
$343,020
97,361
9,885
—
$365,424
103,878
18,763
—
$ 9,106
$ 9,885
$ 18,763
$0.42
$0.42
$0.42
$0.42
$0.48
$0.47
$0.48
$0.47
$0.90
$0.89
$0.90
$0.89
$354,048
100,461
18,285
—
$ 18,285
$0.88
$0.86
$0.88
$0.86
$326,738
93,176
7,974
18,881
$338,861
101,026
16,076
58,783
$345,558
102,811
15,907
(967)
$336,230
98,025
14,609
(401)
$ 26,855
$ 74,859
$ 14,940
$ 14,208
$0.33
$0.32
$1.10
$1.07
$0.67
$0.66
$3.13
$3.06
$0.70
$0.68
$0.66
$0.64
$0.68
$0.66
$0.66
$0.64
During the second quarter of 2019, in connection with the disposition of the GS segment, income from discontinued operations
included a gain on the sale of discontinued operations, net of transactions costs, of $80.0 million. There were post-closing working
capital adjustments included in the loss from discontinued operations during the third and fourth quarter of 2019 of $0.4 million and
$0.3 million, respectively. Refer to Note 2 — “Discontinued Operations” for a more detailed discussion.
48 KFORCE INC. AND SUBSIDIARIES
CORPORATE INFORMATION
TRANSFER AGENT
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
www.computershare.com/investor
Shareholder services:
1 (877) 373-6374
FORM 10-K AVAILABLE
A copy of the Kforce Inc.’s Annual
Report on Form 10-K (excluding
exhibits thereto) is available to
any investor without charge upon
written request to:
Michael R. Blackman
Chief Corporate Development Officer
Kforce Inc.
1001 East Palm Avenue
Tampa, Florida 33605
Or call Investor Relations:
1 (813) 552-2927
ANNUAL MEETING
The annual meeting of shareholders
will be held on April 22, 2021 at
8:00 a.m. ET at Kforce Inc.
headquarters in Tampa, Florida.
WEBSITE INFORMATION
For a comprehensive profile of
Kforce Inc., visit the Firm’s
website at: www.kforce.com.
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
David L. Dunkel
Chairman and
Chief Executive Officer
Joseph J. Liberatore
President
David M. Kelly
Chief Financial Officer
and Secretary
Kye L. Mitchell
Chief Operations Officer
Andrew G. Thomas
Chief Marketing Officer
Michael R. Blackman
Chief Corporate
Development Officer
Jeffrey B. Hackman
Senior Vice President,
Finance and Accounting
CORPORATE COUNSEL
Holland & Knight LLP
Tampa, Florida
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Tampa, Florida
David L. Dunkel
Chairman and
Chief Executive Officer,
Kforce Inc.
Derrick Brooks
Executive Vice President,
Corporate & Community
Business Development,
Vinik Sports Group
Catherine Cloudman
President and
Chief Executive Officer,
CHC Advisors, LLC
Ann E. Dunwoody
General (Retired),
U.S. Army
President,
First 2 Four, LLC
Mark F. Furlong
President and
Chief Executive Officer (Retired),
BMO Harris Bank N.A.
Randall A. Mehl
President and
Chief Investment Officer,
Stewardship Capital Advisors, LLC
Elaine D. Rosen
Nonexecutive Chair of the Board,
Assurant, Inc.
Chair of the Board,
The Kresge Foundation
N. John Simmons
Chief Executive Officer,
Growth Advisors, LLC
Ralph E. Struzziero
Lead Independent Director
Corporate Headquarters:
1001 East Palm Avenue
Tampa, Florida 33605
(813) 552-5000
OFFICE LOCATIONS
ARIZONA
Phoenix
CALIFORNIA
Costa Mesa
Culver City
La Jolla (San Diego)
San Ramon
COLORADO
Denver
CONNECTICUT
Rocky Hill
Shelton
FLORIDA
Doral (Miami)
Orlando
Sunrise (Ft. Lauderdale)
Tampa
GEORGIA
Atlanta
ILLINOIS
Chicago
Rolling Meadows
KENTUCKY
Louisville
MARYLAND
Linthicum (Baltimore)
MASSACHUSETTS
Boston
Burlington
MICHIGAN
Grand Rapids
Southfield (Detroit)
MISSOURI
St. Louis
NEW YORK
New York
NORTH CAROLINA
Charlotte
OHIO
Dublin (Columbus)
OREGON
Portland
PENNSYLVANIA
King of Prussia
Pittsburgh
TEXAS
Austin
Dallas
Fort Worth
Houston
San Antonio
UTAH
Murray (Salt Lake City)
VIRGINIA
Reston
WASHINGTON
Kirkland (Seattle)
WISCONSIN
Madison
Milwaukee