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For the quarterly period ended June 30, 2020
For the transition period from                      to                     
Commission File Number 000-26058
Kforce Inc.
Exact name of registrant as specified in its charter
State or other jurisdiction of incorporation or organization
IRS Employer Identification No.

1001 East Palm Avenue, Tampa, Florida
Address of principal executive offices
Zip Code
Registrant’s telephone number, including area code: (813552-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 per shareKFRCNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.):    Yes    No  x
The number of shares outstanding of the registrant’s common stock as of August 5, 2020 was 21,947,455.

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Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
References in this document to the “Registrant,” “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context otherwise requires or indicates.
This report, particularly Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Part II. Item 1A. Risk Factors, and the documents we incorporate into this report contain certain statements that are, or may be deemed to be, forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements may include, but may not be limited to, projections of financial or operational performance, our beliefs regarding potential government actions or changes in laws and regulations, anticipated costs and benefits of proposed investments, effects of interest rate variations, financing needs or plans, funding of employee benefit plans, estimates concerning the effects of litigation or other disputes, the occurrence of unanticipated expenses, developments within the staffing sector including, but not limited to, the penetration rate (the percentage of temporary staffing to total employment) and growth rate in temporary staffing, a reduction in the supply of consultants and candidates or the Firm’s ability to attract such individuals, changes in client demand for our services and our ability to adapt to such changes, the entry of new competitors in the market, the ability of the Firm to maintain and attract clients in the face of changing economic or competitive conditions, the impact of the COVID-19 pandemic on the global and U.S. macro-economic environments, and our business, customers, financial condition and results of operations, as well as assumptions as to any of the foregoing and all statements that are not based on historical fact but rather reflect our current expectations concerning future results and events. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, refer to the Risk Factors and MD&A sections. In addition, when used in this discussion, the terms “anticipate,” “assume,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “may,” “likely,” “could,” “should,” “future” and variations thereof and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this report, which speak only as of the date of this report. Kforce undertakes no obligation to update any forward-looking statements.

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Three Months Ended June 30,Six Months Ended June 30,
Revenue$343,020  $338,861  $678,228  $665,599  
Direct costs245,659  237,835  486,343  471,397  
Gross profit97,361  101,026  191,885  194,202  
Selling, general and administrative expenses80,546  78,017  159,762  157,830  
Depreciation and amortization1,380  1,542  2,773  3,192  
Income from operations15,435  21,467  29,350  33,180  
Other expense, net1,427  403  2,808  1,326  
Income from continuing operations, before income taxes14,008  21,064  26,542  31,854  
Income tax expense4,123  4,988  7,551  7,804  
Income from continuing operations9,885  16,076  18,991  24,050  
Income from discontinued operations, net of tax  58,783    77,664  
Net income9,885  74,859  18,991  101,714  
Other comprehensive loss:
Change in fair value of interest rate swaps, net of tax(470) (478) (1,591) (758) 
Comprehensive income$9,415  $74,381  $17,400  $100,956  
Earnings per share – basic:
Continuing operations$0.48  $0.67  $0.90  $0.99  
Discontinued operations  2.46    3.21  
Earnings per share – basic$0.48  $3.13  $0.90  $4.20  
Earnings per share – diluted:
Continuing operations$0.47  $0.66  $0.89  $0.97  
Discontinued operations  2.40    3.14  
Earnings per share – diluted$0.47  $3.06  $0.89  $4.11  
Weighted average shares outstanding – basic20,790  23,901  21,171  24,207  
Weighted average shares outstanding – diluted21,078  24,458  21,469  24,745  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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June 30, 2020December 31, 2019
Current assets:
Cash and cash equivalents$52,371  $19,831  
Trade receivables, net of allowances of $4,572 and $2,078, respectively
242,391  217,929  
Prepaid expenses and other current assets7,563  7,475  
Total current assets302,325  245,235  
Fixed assets, net28,425  29,975  
Other assets, net70,721  72,838  
Deferred tax assets, net12,322  8,037  
Goodwill25,040  25,040  
Total assets$438,833  $381,125  
Current liabilities:
Accounts payable and other accrued liabilities$38,371  $33,232  
Accrued payroll costs54,314  44,001  
Current portion of operating lease liabilities4,942  5,685  
Income taxes payable11,353  878  
Other current liabilities 736  1,168  
Total current liabilities109,716  84,964  
Long-term debt – credit facility100,000  65,000  
Other long-term liabilities76,641  63,898  
Total liabilities286,357  213,862  
Commitments and contingencies (Note M)
Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding
Common stock, $0.01 par; 250,000 shares authorized, 72,237 and 72,202 issued, respectively
722  722  
Additional paid-in capital465,957  459,545  
Accumulated other comprehensive loss(3,117) (1,526) 
Retained earnings360,409  350,545  
Treasury stock, at cost; 50,295 and 49,277 shares, respectively
(671,495) (642,023) 
Total stockholders’ equity152,476  167,263  
Total liabilities and stockholders’ equity$438,833  $381,125  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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Common StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Loss
Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmount
Balance, December 31, 201972,202  $722  $459,545  $(1,526) $350,545  49,277  $(642,023) $167,263  
Net income—  —  —  —  9,106  —  —  9,106  
Adoption of new accounting standard (Note E), net of tax of $75
—  —  —  —  (214) —  —  (214) 
Issuance for stock-based compensation and dividends, net of forfeitures(4) —  218  —  (218) —  —    
Stock-based compensation expense—  —  2,896  —  —  —  —  2,896  
Employee stock purchase plan—  —  93  —  —  (4) 49  142  
Dividends ($0.20 per share)
—  —  —  —  (4,293) —  —  (4,293) 
Change in fair value of interest rate swaps, net of tax benefit of $384
—  —  —  (1,121) —  —  —  (1,121) 
Repurchases of common stock—  —  —  —  —  685  (20,380) (20,380) 
Balance, March 31, 202072,198  722  462,752  (2,647) 354,926  49,958  (662,354) 153,399  
Net income—  —  —  —  9,885  —  —  9,885  
Issuance for stock-based compensation and dividends, net of forfeitures39  —  240  —  (240) —  —    
Stock-based compensation expense—  —  2,903  —  —  —  —  2,903  
Employee stock purchase plan—  —  62  —  —  (5) 72  134  
Dividends ($0.20 per share)
—  —  —  —  (4,162) —  —  (4,162) 
Change in fair value of interest rate swaps, net of tax benefit of $160
—  —  —  (470) —  —  —  (470) 
Repurchases of common stock—  —  —  —  —  342  (9,213) (9,213) 
Balance, June 30, 202072,237  $722  $465,957  $(3,117) $360,409  50,295  $(671,495) $152,476  


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Common StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income (Loss)
Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmount
Balance, December 31, 201871,856  $719  $447,337  $1,296  $237,308  45,822  $(518,329) $168,331  
Net income—  —  —  —  26,855  —  —  26,855  
Reclassification of stranded tax effects—  —  —  168  (168) —  —    
Issuance for stock-based compensation and dividends, net of forfeitures4  —  233  —  (233) —  —    
Stock-based compensation expense—  —  2,620  —  —  —  —  2,620  
Employee stock purchase plan—  —  86  —  —  (5) 54  140  
Dividends ($0.18 per share)
—  —  —  —  (4,406) —  —  (4,406) 
Change in fair value of interest rate swap, net of tax benefit of $95
—  —  —  (280) —  —  —  (280) 
Repurchases of common stock—  —  —  —  —  432  (14,688) (14,688) 
Balance, March 31, 201971,860  719  450,276  1,184  259,356  46,249  (532,963) 178,572  
Net income—  —  —  —  74,859  —  —  74,859  
Issuance for stock-based compensation and dividends, net of forfeitures5  —  177  —  (177) —  —    
Stock-based compensation expense—  —  3,524  —  —  —  —  3,524  
Employee stock purchase plan—  —  94  —  —  (4) 49  143  
Dividends ($0.18 per share)
—  —  —  —  (4,278) —  —  (4,278) 
Change in fair value of interest rate swap, net of tax benefit of $162
—  —  —  (478) —  —  —  (478) 
Repurchases of common stock—  —  —  —  —  1,048  (37,486) (37,486) 
Balance, June 30, 201971,865  $719  $454,071  $706  $329,760  47,293  $(570,400) $214,856  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Six Months Ended June 30,
Cash flows from operating activities:
Net income$18,991  $101,714  
Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, net(3,741) 1,735  
Provision for credit losses2,835  797  
Depreciation and amortization2,773  3,623  
Stock-based compensation expense5,799  5,050  
Defined benefit pension plan expense422  431  
Loss (gain) on deferred compensation plan investments, net424  (10) 
Loss on disposal or impairment of assets1,092  970  
Noncash lease expense 3,086  3,187  
Loss on equity method investment1,134    
Gain on sale of discontinued operations  (80,004) 
Other176  636  
(Increase) decrease in operating assets
Trade receivables, net(27,585) (12,829) 
Other assets(2,510) (3,269) 
Increase (decrease) in operating liabilities
Accrued payroll costs10,588  1,298  
Other liabilities25,482  (999) 
Cash provided by operating activities38,966  22,330  
Cash flows from investing activities:
Capital expenditures(3,793) (4,184) 
Equity method investment(2,500) (7,500) 
Proceeds from the sale of assets held within the Rabbi Trust3,548    
Net proceeds from the sale of assets held for sale  122,696  
Cash (used in) provided by investing activities(2,745) 111,012  
Cash flows from financing activities:
Proceeds from credit facility35,000  80,100  
Payments on credit facility  (86,900) 
Repurchases of common stock(29,593) (51,546) 
Cash dividends(8,455) (8,684) 
Payments on other financing arrangements(633) (875) 
Other  (502) 
Cash used in financing activities(3,681) (68,407) 
Change in cash and cash equivalents32,540  64,935  
Cash and cash equivalents, beginning of period19,831  112  
Cash and cash equivalents, end of period$52,371  $65,047  


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Six Months Ended June 30,
Supplemental Disclosure of Cash Flow Information20202019
Cash Paid During the Period For:
Income taxes$1,043  $8,447  
Operating lease liabilities3,949  4,025  
Interest, net1,281  788  
Non-Cash Investing and Financing Transactions:
ROU assets obtained from operating leases$2,971  $1,355  
Employee stock purchase plan276  283  
Contingent contribution for equity method investment  1,500  
Unsettled repurchases of common stock  1,183  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Note A - Summary of Significant Accounting Policies
Unless otherwise noted below, there have been no material changes to the accounting policies presented in Note 1 - “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of the 2019 Annual Report on Form 10-K.
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnotes normally required by GAAP for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2019 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2019 was derived from our audited Consolidated Balance Sheet as of December 31, 2019, as presented in our 2019 Annual Report on Form 10-K.
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 higher costs in the first quarter of each fiscal year as a result of certain U.S. state and federal employment tax resets, which adversely affects our gross profit and overall profitability. The results of operations for any interim period may be impacted by these factors, among others, and are not necessarily indicative of, nor comparable to, the results of operations for a full year.
Principles of Consolidation
The unaudited condensed 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 health insurance and workers’ compensation; obligations for the pension plan; variable consideration for revenue recognition; and any asset impairments. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.
Health Insurance
Except for certain fully insured health insurance lines of coverage, Kforce retains the risk of loss per participant for each health insurance claim up to $600 thousand in claims annually. Additionally, for all claim amounts exceeding $600 thousand, Kforce retains the risk of loss up to an aggregate annual 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.
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 potentially dilutive securities such as unvested shares of restricted stock using the treasury stock method, except where the effect of including potential common shares would be anti-dilutive.

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For the three and six months ended June 30, 2020, 288 thousand and 298 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and six months ended June 30, 2019, 557 thousand and 538 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and six months ended June 30, 2020, there were 352 thousand and 346 thousand anti-dilutive common stock equivalents, respectively. For the three and six months ended June 30, 2019, there were insignificant anti-dilutive common stock equivalents.
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 E - “Allowance for Credit Losses” 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 we do not expect this standard to have a material effect on our consolidated financial statements.
Note B - Discontinued Operations
During 2019, management completed the sale of our 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 Solutions, Inc. (“KGS”), our federal government solutions business, and TraumaFX® Solutions, Inc. (“TFX”), our federal government product business. The results of operations for both KGS and TFX have been reported as discontinued operations in our consolidated financial statements for all prior periods presented.
The following table summarizes the line items of pretax profit of the GS segment (in thousands):
Three Months Ended
June 30, 2019
Six Months Ended
June 30, 2019
Revenue$1,311  $27,737  
Direct costs479  19,494  
Gross profit832  8,243  
Selling, general and administrative expenses1,424  6,842  
Depreciation and amortization58  307  
(Loss) income from discontinued operations(650) 1,094  
Gain on sale of discontinued operations80,004  80,004  
Other income (expense), net428  (436) 
Income from discontinued operations, before income taxes79,782  80,662  
Income tax expense (1)20,999  2,998  
Income from discontinued operations, net of tax$58,783  $77,664  

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(1) During the three months ended March 31, 2019, we entered into a definitive agreement to sell KGS and recorded $18.5 million to deferred tax assets and income tax benefit since it became apparent that the temporary difference for the excess of the outside tax basis in the equity of KGS over the amount of the inside basis in the assets of KGS would reverse in the foreseeable future. This deferred tax asset of $18.5 million was utilized and recorded as income tax expense during the three months ended June 30, 2019 when the divestiture was completed.
For the six months ended June 30, 2019, the accompanying Unaudited Condensed Consolidated Statements of Cash Flows are presented on a combined basis (continuing operations and discontinued operations) and cash provided by operating activities and cash provided by investing activities for discontinued operations were $5.1 million and $118.9 million, respectively.
Note C - Reportable Segments
Kforce provides services through our Technology (“Tech”) and Finance and Accounting (“FA”) segments. Historically, and for the three and six months ended June 30, 2020 and 2019, we have reported sales and gross profit information on a segment basis. Total assets, liabilities and operating expenses are not reported separately by segment as our operations are largely combined.
The following table provides information on the operations of our segments (in thousands):
Three Months Ended June 30,
Revenue$255,750  $87,270  $343,020  
Gross profit$72,192  $25,169  $97,361  
Operating and other expenses$83,353  
Income from continuing operations, before income taxes$14,008  
Revenue$265,305  $73,556  $338,861  
Gross profit$74,172  $26,854  $101,026  
Operating and other expenses$79,962  
Income from continuing operations, before income taxes$21,064  
Six Months Ended June 30,
Revenue$522,534  $155,694  $678,228  
Gross profit$144,646  $47,239  $191,885  
Operating and other expenses$165,343  
Income from continuing operations, before income taxes$26,542  
Revenue$520,948  $144,651  $665,599  
Gross profit$142,995  $51,207  $194,202  
Operating and other expenses$162,348  
Income from continuing operations, before income taxes$31,854  


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Note D - Disaggregation of Revenue
The following table provides the disaggregation of revenue by segment and type (in thousands):
Three Months Ended June 30,
Revenue by type:
Flex revenue$251,948  $84,469  $336,417  
Direct Hire revenue3,802  2,801  6,603  
Total Revenue$255,750  $87,270  $343,020  
Revenue by type:
Flex revenue$259,707  $65,647  $325,354  
Direct Hire revenue5,598  7,909  13,507  
Total Revenue$265,305  $73,556  $338,861  
Six Months Ended June 30,
Revenue by type:
Flex revenue$514,517