Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 28, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | KFORCE INC | |
Entity Central Index Key | 930,420 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 26,781,240 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Net service revenues | $ 333,992 | $ 322,201 |
Direct costs of services | 236,857 | 225,012 |
Gross profit | 97,135 | 97,189 |
Selling, general and administrative expenses | 84,678 | 85,455 |
Depreciation and amortization | 2,050 | 2,327 |
Income from operations | 10,407 | 9,407 |
Other expense, net | 1,185 | 668 |
Income before income taxes | 9,222 | 8,739 |
Income tax expense | 3,320 | 5,089 |
Net income | 5,902 | 3,650 |
Other comprehensive (loss) income: | ||
Defined benefit pension plans, net of tax | (5) | (3) |
Comprehensive income | $ 5,897 | $ 3,647 |
Earnings per share – basic (in dollars per share) | $ 0.23 | $ 0.14 |
Earnings per share – diluted (in dollars per share) | $ 0.23 | $ 0.14 |
Weighted average shares outstanding – basic (in shares) | 25,223 | 26,693 |
Weighted average shares outstanding – diluted (in shares) | 25,509 | 26,842 |
Dividends declared per share (in dollars per share) | $ 0.12 | $ 0.12 |
UNAUDITED CONDENSED CONSOLIDAT3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 2,738 | $ 1,482 |
Trade receivables, net of allowances of $2,563 and $2,066, respectively | 227,634 | 206,361 |
Income tax refund receivable | 898 | 172 |
Prepaid expenses and other current assets | 10,709 | 10,691 |
Total current assets | 241,979 | 218,706 |
Fixed assets, net | 42,732 | 43,145 |
Other assets, net | 32,767 | 30,511 |
Deferred tax assets, net | 21,991 | 23,449 |
Intangible assets, net | 3,556 | 3,642 |
Goodwill | 45,968 | 45,968 |
Total assets | 388,993 | 365,421 |
Current Liabilities: | ||
Accounts payable and other accrued liabilities | 34,212 | 37,230 |
Accrued payroll costs | 45,603 | 44,137 |
Other current liabilities | 1,920 | 1,765 |
Income taxes payable | 843 | 221 |
Total current liabilities | 82,578 | 83,353 |
Long-term debt – credit facility | 131,966 | 111,547 |
Long-term debt – other | 3,734 | 3,984 |
Other long-term liabilities | 45,508 | 44,801 |
Total liabilities | 263,786 | 243,685 |
Commitments and contingencies (see Note B) | ||
Stockholders’ Equity: | ||
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding | 0 | 0 |
Common stock, $0.01 par; 250,000 shares authorized, 71,281 and 71,268 issued, respectively | 713 | 713 |
Additional paid-in capital | 431,345 | 428,212 |
Accumulated other comprehensive income | 179 | 184 |
Retained earnings | 177,199 | 174,967 |
Treasury stock, at cost; 44,546 and 44,469 shares, respectively | (484,229) | (482,340) |
Total stockholders’ equity | 125,207 | 121,736 |
Total liabilities and stockholders’ equity | $ 388,993 | $ 365,421 |
UNAUDITED CONDENSED CONSOLIDAT4
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Trade receivables, allowances | $ 2,563 | $ 2,066 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 15,000,000 | 15,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
Common stock, shares issued (in shares) | 71,281,000 | 71,268,000 |
Treasury stock, shares (in shares) | 44,546,000 | 44,469,000 |
UNAUDITED CONDENSED CONSOLIDAT5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Stock |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative effect upon adoption of new accounting standard (Note A) | $ 769 | $ (469) | ||||
Shares at beginning of period (in shares) at Dec. 31, 2016 | 71,268 | 44,469 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Issuance for stock-based compensation and dividends, net of forfeitures (in shares) | 8 | |||||
Exercise of stock options (in shares) | 5 | |||||
Repurchases of common stock (in shares) | 83 | |||||
Employee stock purchase plan (in shares) | (6) | |||||
Shares at end of period (in shares) at Mar. 31, 2017 | 71,281 | 44,546 | ||||
Balance at beginning of period at Dec. 31, 2016 | $ 121,736 | $ 713 | 428,212 | $ 184 | 174,967 | $ (482,340) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Issuance for stock-based compensation and dividends, net of forfeitures | 0 | 164 | ||||
Exercise of stock options | 0 | 72 | ||||
Stock-based compensation expense | 2,064 | |||||
Repurchases of common stock | (1,952) | |||||
Employee stock purchase plan | 127 | 64 | 63 | |||
Defined benefit pension plans, net of tax of $2 | (5) | 5 | ||||
Net income | 5,902 | 5,902 | ||||
Dividends, net of forfeitures ($0.12 per share) | (3,201) | |||||
Balance at end of period at Mar. 31, 2017 | $ 125,207 | $ 713 | $ 431,345 | $ 179 | $ 177,199 | $ (484,229) |
UNAUDITED CONDENSED CONSOLIDAT6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Parenthetical) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($)$ / shares | |
Defined benefit pension plans, tax | $ 2 |
Dividend (in dollars per share) | $ / shares | $ 0.12 |
Accounting Standards Update 2016-09 | |
Deferred tax assets, net | $ 300 |
UNAUDITED CONDENSED CONSOLIDAT7
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 5,902 | $ 3,650 |
Deferred income tax provision, net | 1,758 | 3,343 |
Adjustments to reconcile net income to cash (used in) provided by operating activities: | ||
Provision for bad debts on accounts receivable | 392 | 356 |
Depreciation and amortization | 2,103 | 2,337 |
Stock-based compensation expense | 2,064 | 1,944 |
Defined benefit pension plans expense | 239 | 497 |
Loss on deferred compensation plan investments, net | 104 | 171 |
Other | 272 | 56 |
(Increase) decrease in operating assets | ||
Trade receivables, net | (21,665) | (11,867) |
Income tax refund receivable | (725) | 459 |
Prepaid expenses and other current assets | (20) | (1,404) |
Other assets, net | (127) | (95) |
(Decrease) increase in operating liabilities | ||
Accounts payable and other current liabilities | (2,113) | (2,548) |
Accrued payroll costs | 1,593 | 4,604 |
Income taxes payable | 623 | 799 |
Other long-term liabilities | (913) | 1,039 |
Cash (used in) provided by operating activities | (10,513) | 3,341 |
Cash flows from investing activities: | ||
Capital expenditures | (2,272) | (1,294) |
Cash used in investing activities | (2,272) | (1,294) |
Cash flows from financing activities: | ||
Proceeds from credit facility | 274,553 | 251,095 |
Payments on credit facility | (254,134) | (228,113) |
Payments on other financing arrangements | (526) | (485) |
Proceeds from exercise of stock options | 72 | 109 |
Repurchases of common stock | (2,887) | (22,084) |
Cash dividend | (3,037) | (3,146) |
Cash provided by (used in) financing activities | 14,041 | (2,624) |
Change in cash and cash equivalents | 1,256 | (577) |
Cash and cash equivalents at beginning of period | 1,482 | 1,497 |
Cash and cash equivalents at end of period | $ 2,738 | $ 920 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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 2016 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 accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although Kforce 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 2016 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2016 was derived from our audited Consolidated Balance Sheet as of December 31, 2016 , as presented in our 2016 Annual Report on Form 10-K. Our quarterly operating results are affected by the number of billing days in a quarter and the seasonality of our customers’ businesses. In addition, we experience an increase in direct costs of services and a corresponding decrease in gross profit in the first fiscal quarter of each year as a result of certain U.S. state and federal employment tax resets. Thus, 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. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “the Registrant,” “Kforce,” “the Company,” “we,” “the Firm,” “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 important of these estimates and assumptions relate to the following: allowance for doubtful accounts, fallouts and other accounts receivable reserves; accounting for goodwill and identifiable intangible assets; self-insured liabilities for workers’ compensation and health insurance; obligations for pension plans; accounting for income taxes and expected annual commission rates. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. Stock-Based Compensation Kforce accounts for stock-based compensation by measuring the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the requisite service period. Effective January 1, 2017, as a result of our adoption of a recently issued accounting standard, the Firm changed its accounting policy regarding forfeitures and elected to recognize them as they occur. Income Taxes Kforce accounts for income taxes using the asset and liability approach to the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Unless it is more likely than not that a deferred tax asset can be utilized to offset future taxes, a valuation allowance is recorded against that asset. Effective January 1, 2017, as a result of our adoption of a recently issued accounting standard, excess tax benefits or deficiencies of deductions attributable to employees’ vesting of restricted stock are reflected in Income tax expense in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. Kforce evaluates tax positions that have been taken or are expected to be taken in its tax returns, and records a liability for uncertain tax positions. Kforce uses a two-step approach to recognize and measure uncertain tax positions. First, tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, tax positions are measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. Kforce recognizes interest and penalties related to unrecognized tax benefits in Income tax expense in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. 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 $350 thousand in claims annually. Additionally, for all claim amounts exceeding $350 thousand, Kforce retains the risk of loss up to an aggregate annual loss of those claims of $700 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 earnings divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per common share is computed by dividing the earnings attributable to common shareholders by diluted WASO. Diluted WASO includes the dilutive effect of stock options and other 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. For the three months ended March 31, 2017 and 2016 , there were 286 thousand and 149 thousand common stock equivalents included in the diluted WASO. For the three months ended March 31, 2017 and 2016 , there was an insignificant amount of anti-dilutive common stock equivalents. New Accounting Standards Recently Adopted Accounting Standards In March 2017, the FASB issued authoritative guidance requiring that an employer disaggregate the service cost component from the other components of net periodic benefit cost for defined benefit pension plans. The amendments also provide explicit guidance on how to present the service cost component and the other components of net periodic benefit cost in the income statement. The guidance is to be applied for annual periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. The guidance should be applied retrospectively for the presentation of the service cost component and the other components of net periodic benefit cost in the income statements. We elected to early adopt this guidance as of January 1, 2017 due to the ease of implementation. The impact of early adoption resulted in a retrospective adjustment to the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income to reclass the interest cost component of net periodic benefit cost from Selling, general and administrative expenses to Other expense, net. The amount of the reclassification was approximately $0.1 million for the three months ended March 31, 2017 and March 31, 2016, respectively. In January 2017, the FASB issued authoritative guidance simplifying the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this guidance, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance is to be applied for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The guidance requires companies to apply the requirements prospectively. We elected to early adopt this guidance as of January 1, 2017 in order to simplify our processes. The adoption of this guidance did not have an impact on the Firm’s consolidated financial statements. In March 2016, the FASB issued authoritative guidance regarding the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liability, and classification in the statement of cash flows. This guidance was effective for us on January 1, 2017. The impact of this guidance resulted in the following: • All excess tax benefits and deficiencies will be recognized as income tax benefit or expense in the income statement. Prior to the effective date, they were recognized as a change to additional paid-in capital. The Firm will apply this amendment prospectively. For the three months ended March 31, 2017 , the Firm recorded approximately $0.2 million of excess tax benefits as a reduction to Income tax expense in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. This resulted in a reduction to our quarterly effective tax rate of 2.4% and an increase to our diluted earnings per share of $0.01 for the three months ended March 31, 2017 . This accounting standard guidance could continue to create volatility in the Firm’s effective tax rate in the future. • Excess tax benefits and deficiencies will be classified as an operating activity in the statement of cash flows. Prior to the effective date, they were included in financing activities in the statement of cash flows. The Firm elected to apply this amendment retrospectively. This change increased our net cash provided by operating activities by $0.2 million and $0.3 million for the three months ended March 31, 2017 and March 31, 2016, respectively, in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows. • An entity is allowed to make a policy election as to whether they will include an estimate for awards expected to be forfeited or whether they will account for forfeitures as they occur. The Firm elected to change its policy on accounting for forfeitures and to account for them as they occur in order to simplify our processes. This policy election is to be applied using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the effective date. The impact to the beginning balance of retained earnings was $0.5 million , which is net of taxes of $0.3 million . In November 2015, the FASB issued authoritative guidance requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance was effective for us on January 1, 2017. The Firm elected to apply this guidance retrospectively. As a result, $4.8 million of current deferred tax assets, net was reclassified to noncurrent deferred tax assets, net as of December 31, 2016. Accounting Standards Not Yet Adopted In February 2016, the FASB issued authoritative guidance regarding the accounting for leases. The guidance is to be applied for annual periods beginning after December 15, 2018 and interim periods within those annual periods, and early adoption is permitted. The guidance requires companies to apply the requirements retrospectively to all prior periods presented, including interim periods. Kforce elected not to adopt this standard early. The Firm has made progress with assessing contractual arrangements that may be impacted by the new standard. Kforce anticipates that the adoption of this standard will have a significant impact to its consolidated balance sheet as it will result in recording substantially all operating leases as a right-to-use asset and lease obligation. Kforce continues to assess all potential impacts of the standard, especially with respect to our disclosures. In May 2014, the FASB issued authoritative guidance regarding revenue from contracts with customers, which specifies that revenue should be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued authoritative guidance deferring the effective date of the new revenue standard by one year for all entities. The one-year deferral results in the guidance being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and entities are not permitted to adopt the standard earlier than the original effective date. Since May 2014, the FASB has issued additional and amended authoritative guidance regarding revenue from contracts with customers in order to clarify and improve the understanding of the implementation guidance. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. We have selected the modified retrospective transition method. Based on our preliminary assessment, we believe that the timing of our revenue recognition will not be impacted for at least 95% of our revenues. The remainder of our revenues are derived from Government Solutions (“GS”) fixed-price contracts. We are reviewing these contracts in order to determine if there may be any change to the timing. We are continuing to evaluate various items that may impact our revenue transaction prices. Furthermore, we do anticipate an increase in the level of disclosure around our arrangements and resulting revenue recognition. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation We are involved in legal proceedings, claims, and administrative matters that arise in the ordinary course of our business. We have made accruals with respect to certain of these matters, where appropriate, that are reflected in our unaudited condensed 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. Accordingly, we disclose matters below for which a material loss is reasonably possible. On August 25, 2016, Kforce Flexible Solutions LLC (along with co-defendant BMO Harris Bank) was served with a complaint brought in the Northern District of Illinois, U.S. District Court, Eastern District of Illinois. Shepard v. BMO Harris Bank N.A. et al., Case No.: 1:16-cv-08288. The plaintiff purports to bring claims on her own behalf and on behalf of putative class of telephone-dedicated workers for alleged violations of the Fair Labor Standards Act, the Illinois Minimum Wage Law, and the Illinois Wage Payment and Collection Act based upon the defendants’ purported failure to pay her and other class members all earned regular and overtime pay for all time worked. More specifically, the plaintiff alleges that class employees were required to perform unpaid work before and after the start and end times of their shifts. She seeks unpaid back regular and overtime wages, liquidated damages, statutory penalties, and attorney fees and costs. We are vigorously defending each of the plaintiff’s claims. 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; however, based on our current knowledge, we believe that the final outcome of this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. Employment Agreements Kforce has entered into 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 of 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. These agreements contain certain post-employment restrictive covenants. Kforce’s liability at March 31, 2017 would be approximately $40.8 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 $16.7 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. On March 31, 2017, Peter M. Alonso, the Firm’s Chief Talent Officer, notified the Firm he was resigning for good reason pursuant to the terms of his employment agreement. Per his employment agreement, that was most recently amended on February 20, 2017, the Firm accrued $862,110 of severance, which was recorded in Selling, general and administrative expenses within the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income during the three months ended March 31, 2017 . |
Accounts Payable and Other Accr
Accounts Payable and Other Accrued Liabilities | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Other Accrued Liabilities | Accounts Payable and Other Accrued Liabilities Accounts payable and other accrued liabilities consisted of the following (in thousands): March 31, 2017 December 31, 2016 Accounts payable $ 18,877 $ 20,321 Accrued liabilities 15,335 16,909 $ 34,212 $ 37,230 Our accounts payable balance includes trade creditor and independent contractor payables. Our accrued liabilities balance includes the current portion of our deferred compensation plans liability, accrued customer rebates and other accrued liabilities. |
Accrued Payroll Costs
Accrued Payroll Costs | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Payroll Costs | Accrued Payroll Costs Accrued payroll costs consisted of the following (in thousands): March 31, 2017 December 31, 2016 Payroll and benefits $ 38,322 $ 37,409 Health insurance liabilities 3,735 2,790 Payroll taxes 2,263 2,640 Workers’ compensation liabilities 1,283 1,298 $ 45,603 $ 44,137 |
Credit Facility
Credit Facility | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Credit Facility | Credit Facility On September 20, 2011, Kforce entered into a Third Amended and Restated Credit Agreement, with a syndicate led by Bank of America, N.A. This was amended on March 30, 2012 through the execution of a Consent and First Amendment, on December 27, 2013 through the execution of a Second Amendment and Joinder, and further amended on December 23, 2014 through the execution of a Third Amendment (as amended to date, the “Credit Facility”) resulting in a maximum borrowing capacity of $170.0 million , as well as an accordion option of $50.0 million . The maximum borrowings available to Kforce under the Credit Facility, absent Kforce exercising all or a portion of the accordion, are limited to: (a) a revolving Credit Facility of up to $170.0 million and (b) a $15.0 million sub-limit included in the Credit Facility for letters of credit. Available borrowings under the Credit Facility are limited to 85% of the net amount of eligible accounts receivable (billed and unbilled), plus 80% of the net amount of eligible employee placement accounts, plus 80% of the appraised market value of the Firm’s corporate headquarters reduced each subsequent quarter by an amount equal to 1/80th of the initial amount, minus certain minimum availability reserves. Borrowings under the Credit Facility are secured by substantially all of the assets of the Firm, including the Firm’s corporate headquarters property. Outstanding borrowings under the revolving Credit Facility bear interest at a rate of: (a) LIBOR plus an applicable margin based on various factors; or (b) the higher of (1) the prime rate, (2) the federal funds rate plus 0.50% or (3) LIBOR plus 1.25% . Fluctuations in the ratio of unbilled to billed receivables could result in material changes to availability from time to time. Letters of credit issued under the Credit Facility require Kforce to pay a fronting fee equal to 0.125% of the amount of each letter of credit issued, plus a per annum fee equal to the applicable margin for LIBOR loans based on the total letters of credit outstanding. To the extent that Kforce has unused availability under the Credit Facility, an unused line fee is required to be paid on a monthly basis equal to: (a) if the average daily aggregate revolver outstanding are less than 35% of the amount of the commitments, 0.35% or (b) if the average daily aggregate revolver outstanding are greater than 35% of the amount of the commitments, 0.25% times the amount by which the maximum revolver amount exceeded the sum of the average daily aggregate revolver outstanding, during the immediately preceding month or shorter period if calculated for the first month hereafter or on the termination date. Under the Credit Facility, Kforce is subject to certain affirmative and negative covenants including, but not limited to, a fixed charge coverage ratio, which is only applicable in the event that the Firm’s availability under the Credit Facility falls below the greater of (a) 10% of the aggregate amount of the commitment of all of the lenders under the Credit Facility and (b) $11 million . 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, including the amortization of stock-based compensation expense (disclosed as “Adjusted EBITDA”), less cash paid for capital expenditures. The denominator is defined as Kforce’s fixed charges such as interest expense, principal payments paid or payable on outstanding debt other than borrowings under the Credit Facility, income taxes payable, and certain other payments. This financial covenant, if applicable, requires that the numerator be equal to or greater than the denominator. Our ability to repurchase equity securities could be limited if the Firm’s availability is less than the greater of (a) 15.0% of the aggregate amount of the commitment of all lenders under the Credit Facility or (b) $15.0 million . Also, our ability to make distributions could be limited if the Firm’s availability is less than the greater of (a) 12.5% of the aggregate amount of the commitment of all lenders under the Credit Facility and (b) $20.6 million . Since Kforce had availability under the Credit Facility of $20.9 million as of March 31, 2017 , the fixed charge coverage ratio covenant was not applicable. As of March 31, 2017 , Kforce was limited in making distributions and executing repurchases of its equity securities. However, as of March 24, 2017, the payment date of our quarterly dividend, we had sufficient availability to make this distribution. Kforce believes that the limitations on making distributions and executing repurchases of our equity securities will be short-term in nature. Additionally, we believe we will be able to maintain the minimum availability requirement of our fixed charge coverage ratio. However, in the event that Kforce is unable to do so, Kforce could fail the fixed charge coverage ratio, which would constitute an event of default. The Credit Facility expires December 23, 2019. As of March 31, 2017 and December 31, 2016 , $132.0 million and $111.5 million was outstanding under the Credit Facility, respectively. As of April 28, 2017 , $125.6 million was outstanding and $27.3 million was available under the Credit Facility. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans 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 Unaudited Condensed Consolidated Balance Sheets. At March 31, 2017 and December 31, 2016 , amounts included in Accounts payable and other accrued liabilities related to the deferred compensation plans totaled $3.7 million and $2.7 million, respectively. At March 31, 2017 and December 31, 2016 , amounts included in Other long-term liabilities related to the deferred compensation plans totaled $27.0 million and $27.5 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 our Rabbi Trust. The balance of the assets within the Rabbi Trust, including the cash surrender value of the Company-owned life insurance policies, was $28.6 million and $27.3 million as of March 31, 2017 and December 31, 2016 , respectively, and is included in Other assets, net in the accompanying Unaudited Condensed Consolidated Balance Sheets. Supplemental Executive Retirement Plan Kforce maintains a Supplemental Executive Retirement Plan (the “SERP”) for the benefit of certain executive officers. The primary goals of the SERP are to create an additional wealth accumulation opportunity, restore lost qualified pension benefits due to government limitations and retain our covered executive officers. The SERP is a non-qualified benefit plan and does not include elective deferrals of covered executive officers’ compensation. The following table presents the components of net periodic benefit cost (in thousands): Three Months Ended March 31, 2017 2016 Service cost $ 80 $ 328 Interest cost 134 113 Net periodic benefit cost $ 214 $ 441 The service cost is recorded in Selling, general and administrative expenses and the interest cost is recorded in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The projected benefit obligation as of March 31, 2017 and December 31, 2016 was $13.7 million and $13.4 million, respectively, and is recorded in Other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. There is no requirement for Kforce to fund the SERP and, as a result, no contributions were made to the SERP during the three months ended March 31, 2017 . Kforce does no t currently anticipate funding the SERP during the year ended December 31, 2017 . |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the three months ended March 31, 2017 . Kforce’s financial statements include a contingent consideration liability related to a non-significant acquisition of a business within our GS reporting segment, which is measured on a recurring basis and is recorded at fair value, determined using the discounted cash flow method. The inputs used to calculate the fair value of the contingent consideration liability are considered to be Level 3 inputs due to the lack of relevant market activity and significant management judgment. An increase in future cash flows may result in a higher estimated fair value while a decrease in future cash flows may result in a lower estimated fair value of the contingent consideration liability. Remeasurements to fair value are recorded in Other expense, net within the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. There was no activity during the period in our recurring Level 3 fair value measurements. The contingent consideration liability is recorded in Other long-term liabilities within the accompanying Unaudited Condensed Consolidated Balance Sheets and the estimated fair value as of March 31, 2017 and December 31, 2016 was $756 thousand. Certain assets, in specific circumstances, are measured at fair value on a non-recurring basis utilizing Level 3 inputs such as goodwill, other intangible assets and other long-lived assets. 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. |
Stock Incentive Plans
Stock Incentive Plans | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Incentive Plans | Stock Incentive Plans On April 18, 2017, the Kforce shareholders approved the 2017 Stock Incentive Plan (“2017 Plan”). The 2017 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 2017 Plan is approximately 3.0 million shares. The 2017 Plan terminates on April 18, 2027. Prior to the effective date of the 2017 Plan, the Company granted stock awards to eligible participants under our 2016 Stock Incentive Plan (“2016 Plan”), 2013 Stock Incentive Plan (“2013 Plan”) and 2006 Stock Incentive Plan (“2006 Plan”). As of the effective date of the 2017 Plan, no additional awards may be granted pursuant to the 2016 Plan, 2013 Plan and 2006 Plan; however, awards outstanding as of the effective date will continue to vest in accordance with the terms of the 2016 Plan, 2013 Plan and 2006 Plan, respectively. On April 19, 2016, the Kforce shareholders approved the 2016 Plan. The aggregate number of shares of common stock that are subject to awards under the 2016 Plan was approximately 1.6 million shares. The 2016 Plan terminates on April 19, 2026. During the three months ended March 31, 2017 and 2016 , Kforce recognized total stock-based compensation expense of $2.1 million and $1.9 million, respectively. Restricted Stock Restricted stock (including RSAs and RSUs) are granted to executives and management either: (1) for awards related to Kforce’s annual long-term incentive (“LTI”) compensation program, or (2) as part of a compensation package and in order to retain directors, executives and management. The LTI award amounts are generally based on total shareholder return performance goals, which are established by Kforce’s Compensation Committee during the first quarter of the year of performance. Restricted stock granted during the three months ended March 31, 2017 will vest over a period of ten years , with equal vesting annually. 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 three months ended March 31, 2017 (in thousands, except per share amounts): Number of Restricted Stock Weighted Average Total Intrinsic Outstanding as of December 31, 2016 1,708 $ 21.86 Granted 24 $ 25.25 Forfeited/Canceled (17 ) $ 19.48 Vested (214 ) $ 21.88 $ 5,054 Outstanding as of March 31, 2017 1,501 $ 21.91 As of March 31, 2017 , total unrecognized compensation expense related to restricted stock was $28.0 million, which will be recognized over a weighted average remaining period of 4.4 years. |
Reportable Segments
Reportable Segments | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Reportable Segments | Reportable Segments Kforce’s reportable segments are as follows: (1) Technology (“Tech”); (2) Finance and Accounting (“FA”); and (3) Government Solutions (“GS”). This determination is supported by, among other factors: the existence of individuals responsible for the operations of each segment and who also report directly to our chief operating decision maker (“CODM”), the nature of the segment’s operations and information presented to Kforce’s Board and our CODM. Kforce also reports Flex and Direct Hire revenues separately by segment, which has been incorporated into the table below. Historically, and for the three months ended March 31, 2017 and 2016 , Kforce has generated only sales and gross profit information on a segment basis. Substantially all operations and long-lived assets are located in the United States. We do not report total assets or income separately by segment as our operations are largely combined. The following table provides information concerning the operations of our segments (in thousands): Tech FA GS Total Three Months Ended March 31, 2017 Net service revenues: Flex revenues $ 216,886 $ 80,949 $ 24,652 $ 322,487 Direct Hire revenues 5,159 6,346 — 11,505 Total net service revenues $ 222,045 $ 87,295 $ 24,652 $ 333,992 Gross profit $ 61,100 $ 28,655 $ 7,380 $ 97,135 Operating expenses 87,913 Income before income taxes $ 9,222 2016 Net service revenues: Flex revenues $ 211,209 $ 75,306 $ 23,121 $ 309,636 Direct Hire revenues 5,379 7,186 — 12,565 Total net service revenues $ 216,588 $ 82,492 $ 23,121 $ 322,201 Gross profit $ 61,791 $ 28,821 $ 6,577 $ 97,189 Operating expenses 88,450 Income before income taxes $ 8,739 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 3 Months Ended |
Mar. 31, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Cash Flow Information | Supplemental Cash Flow Information Supplemental cash flow information is as follows (in thousands): Three Months Ended March 31, 2017 2016 Cash paid during the period for: Income taxes, net $ 482 $ 476 Interest, net $ 678 $ 466 Non-cash transaction information: Employee stock purchase plan $ 127 $ 192 Equipment acquired under capital leases $ 441 $ 788 |
Subsequent Event
Subsequent Event | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On April 21, 2017, Kforce entered into a forward starting interest rate swap agreement with Wells Fargo Bank, N.A. (the “Swap”) to mitigate the risk of rising interest rates on the Firm’s financial statements. The Swap rate is 1.81% , which is added to our interest rate margin to get the fixed rate that the Firm will pay to the counterparty during the term of the Swap based on the notional amount of the Swap. The effective date of the Swap is May 31, 2017 and the maturity date is April 29, 2022. The notional amount of the Swap is $65 million for the first three years and amortizes down to $25 million for years four and five. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
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 accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although Kforce 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 2016 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2016 was derived from our audited Consolidated Balance Sheet as of December 31, 2016 , as presented in our 2016 Annual Report on Form 10-K. Our quarterly operating results are affected by the number of billing days in a quarter and the seasonality of our customers’ businesses. In addition, we experience an increase in direct costs of services and a corresponding decrease in gross profit in the first fiscal quarter of each year as a result of certain U.S. state and federal employment tax resets. Thus, 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. |
Principles of Consolidation | The unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “the Registrant,” “Kforce,” “the Company,” “we,” “the Firm,” “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 important of these estimates and assumptions relate to the following: allowance for doubtful accounts, fallouts and other accounts receivable reserves; accounting for goodwill and identifiable intangible assets; self-insured liabilities for workers’ compensation and health insurance; obligations for pension plans; accounting for income taxes and expected annual commission rates. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. |
Stock-Based Compensation | Kforce accounts for stock-based compensation by measuring the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the requisite service period. Effective January 1, 2017, as a result of our adoption of a recently issued accounting standard, the Firm changed its accounting policy regarding forfeitures and elected to recognize them as they occur. |
Income Taxes | Kforce accounts for income taxes using the asset and liability approach to the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Unless it is more likely than not that a deferred tax asset can be utilized to offset future taxes, a valuation allowance is recorded against that asset. Effective January 1, 2017, as a result of our adoption of a recently issued accounting standard, excess tax benefits or deficiencies of deductions attributable to employees’ vesting of restricted stock are reflected in Income tax expense in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. Kforce evaluates tax positions that have been taken or are expected to be taken in its tax returns, and records a liability for uncertain tax positions. Kforce uses a two-step approach to recognize and measure uncertain tax positions. First, tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, tax positions are measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. Kforce recognizes interest and penalties related to unrecognized tax benefits in Income tax expense in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. |
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 $350 thousand in claims annually. Additionally, for all claim amounts exceeding $350 thousand, Kforce retains the risk of loss up to an aggregate annual loss of those claims of $700 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 earnings divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per common share is computed by dividing the earnings attributable to common shareholders by diluted WASO. Diluted WASO includes the dilutive effect of stock options and other 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. |
New Accounting Standards | Recently Adopted Accounting Standards In March 2017, the FASB issued authoritative guidance requiring that an employer disaggregate the service cost component from the other components of net periodic benefit cost for defined benefit pension plans. The amendments also provide explicit guidance on how to present the service cost component and the other components of net periodic benefit cost in the income statement. The guidance is to be applied for annual periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. The guidance should be applied retrospectively for the presentation of the service cost component and the other components of net periodic benefit cost in the income statements. We elected to early adopt this guidance as of January 1, 2017 due to the ease of implementation. The impact of early adoption resulted in a retrospective adjustment to the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income to reclass the interest cost component of net periodic benefit cost from Selling, general and administrative expenses to Other expense, net. The amount of the reclassification was approximately $0.1 million for the three months ended March 31, 2017 and March 31, 2016, respectively. In January 2017, the FASB issued authoritative guidance simplifying the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this guidance, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance is to be applied for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The guidance requires companies to apply the requirements prospectively. We elected to early adopt this guidance as of January 1, 2017 in order to simplify our processes. The adoption of this guidance did not have an impact on the Firm’s consolidated financial statements. In March 2016, the FASB issued authoritative guidance regarding the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liability, and classification in the statement of cash flows. This guidance was effective for us on January 1, 2017. The impact of this guidance resulted in the following: • All excess tax benefits and deficiencies will be recognized as income tax benefit or expense in the income statement. Prior to the effective date, they were recognized as a change to additional paid-in capital. The Firm will apply this amendment prospectively. For the three months ended March 31, 2017 , the Firm recorded approximately $0.2 million of excess tax benefits as a reduction to Income tax expense in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. This resulted in a reduction to our quarterly effective tax rate of 2.4% and an increase to our diluted earnings per share of $0.01 for the three months ended March 31, 2017 . This accounting standard guidance could continue to create volatility in the Firm’s effective tax rate in the future. • Excess tax benefits and deficiencies will be classified as an operating activity in the statement of cash flows. Prior to the effective date, they were included in financing activities in the statement of cash flows. The Firm elected to apply this amendment retrospectively. This change increased our net cash provided by operating activities by $0.2 million and $0.3 million for the three months ended March 31, 2017 and March 31, 2016, respectively, in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows. • An entity is allowed to make a policy election as to whether they will include an estimate for awards expected to be forfeited or whether they will account for forfeitures as they occur. The Firm elected to change its policy on accounting for forfeitures and to account for them as they occur in order to simplify our processes. This policy election is to be applied using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the effective date. The impact to the beginning balance of retained earnings was $0.5 million , which is net of taxes of $0.3 million . In November 2015, the FASB issued authoritative guidance requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance was effective for us on January 1, 2017. The Firm elected to apply this guidance retrospectively. As a result, $4.8 million of current deferred tax assets, net was reclassified to noncurrent deferred tax assets, net as of December 31, 2016. Accounting Standards Not Yet Adopted In February 2016, the FASB issued authoritative guidance regarding the accounting for leases. The guidance is to be applied for annual periods beginning after December 15, 2018 and interim periods within those annual periods, and early adoption is permitted. The guidance requires companies to apply the requirements retrospectively to all prior periods presented, including interim periods. Kforce elected not to adopt this standard early. The Firm has made progress with assessing contractual arrangements that may be impacted by the new standard. Kforce anticipates that the adoption of this standard will have a significant impact to its consolidated balance sheet as it will result in recording substantially all operating leases as a right-to-use asset and lease obligation. Kforce continues to assess all potential impacts of the standard, especially with respect to our disclosures. In May 2014, the FASB issued authoritative guidance regarding revenue from contracts with customers, which specifies that revenue should be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued authoritative guidance deferring the effective date of the new revenue standard by one year for all entities. The one-year deferral results in the guidance being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and entities are not permitted to adopt the standard earlier than the original effective date. Since May 2014, the FASB has issued additional and amended authoritative guidance regarding revenue from contracts with customers in order to clarify and improve the understanding of the implementation guidance. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. We have selected the modified retrospective transition method. Based on our preliminary assessment, we believe that the timing of our revenue recognition will not be impacted for at least 95% of our revenues. The remainder of our revenues are derived from Government Solutions (“GS”) fixed-price contracts. We are reviewing these contracts in order to determine if there may be any change to the timing. We are continuing to evaluate various items that may impact our revenue transaction prices. Furthermore, we do anticipate an increase in the level of disclosure around our arrangements and resulting revenue recognition. |
Accounts Payable and Other Ac20
Accounts Payable and Other Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and other accrued liabilities consisted of the following (in thousands): March 31, 2017 December 31, 2016 Accounts payable $ 18,877 $ 20,321 Accrued liabilities 15,335 16,909 $ 34,212 $ 37,230 |
Accrued Payroll Costs (Tables)
Accrued Payroll Costs (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Components of Accrued Payroll Costs | Accrued payroll costs consisted of the following (in thousands): March 31, 2017 December 31, 2016 Payroll and benefits $ 38,322 $ 37,409 Health insurance liabilities 3,735 2,790 Payroll taxes 2,263 2,640 Workers’ compensation liabilities 1,283 1,298 $ 45,603 $ 44,137 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Components of Net Periodic Benefit Cost | The following table presents the components of net periodic benefit cost (in thousands): Three Months Ended March 31, 2017 2016 Service cost $ 80 $ 328 Interest cost 134 113 Net periodic benefit cost $ 214 $ 441 |
Stock Incentive Plans (Tables)
Stock Incentive Plans (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Restricted Stock Activity | The following table presents the restricted stock activity for the three months ended March 31, 2017 (in thousands, except per share amounts): Number of Restricted Stock Weighted Average Total Intrinsic Outstanding as of December 31, 2016 1,708 $ 21.86 Granted 24 $ 25.25 Forfeited/Canceled (17 ) $ 19.48 Vested (214 ) $ 21.88 $ 5,054 Outstanding as of March 31, 2017 1,501 $ 21.91 |
Reportable Segments (Tables)
Reportable Segments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Operations of Segments | The following table provides information concerning the operations of our segments (in thousands): Tech FA GS Total Three Months Ended March 31, 2017 Net service revenues: Flex revenues $ 216,886 $ 80,949 $ 24,652 $ 322,487 Direct Hire revenues 5,159 6,346 — 11,505 Total net service revenues $ 222,045 $ 87,295 $ 24,652 $ 333,992 Gross profit $ 61,100 $ 28,655 $ 7,380 $ 97,135 Operating expenses 87,913 Income before income taxes $ 9,222 2016 Net service revenues: Flex revenues $ 211,209 $ 75,306 $ 23,121 $ 309,636 Direct Hire revenues 5,379 7,186 — 12,565 Total net service revenues $ 216,588 $ 82,492 $ 23,121 $ 322,201 Gross profit $ 61,791 $ 28,821 $ 6,577 $ 97,189 Operating expenses 88,450 Income before income taxes $ 8,739 |
Supplemental Cash Flow Inform25
Supplemental Cash Flow Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
Details of Supplemental Cash Flow Information | Supplemental cash flow information is as follows (in thousands): Three Months Ended March 31, 2017 2016 Cash paid during the period for: Income taxes, net $ 482 $ 476 Interest, net $ 678 $ 466 Non-cash transaction information: Employee stock purchase plan $ 127 $ 192 Equipment acquired under capital leases $ 441 $ 788 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, shares in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | |||
Minimum likelihood of being realized upon settlement of uncertain tax positions | 50.00% | ||
Health Insurance | |||
Health insurance maximum risk of loss liability per employee insurance plan (up to) | $ 350,000 | ||
Health insurance maximum aggregate amount of risk of loss liability for employee insurance plans (up to) | $ 700,000 | ||
Earnings per Share | |||
Common stock equivalents (in shares) | 286 | 149 | |
Anti-dilutive common stock equivalents (in shares) | 0 | 0 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Selling, general and administrative expenses | $ 84,678,000 | $ 85,455,000 | |
Other expense, net | 1,185,000 | 668,000 | |
Cash provided by operating activities | (10,513,000) | 3,341,000 | |
Deferred tax assets, net, noncurrent | $ 21,991,000 | $ 23,449,000 | |
Percent of timing of revenue recognition not impacted by new accounting pronouncement | 95.00% | ||
Retained Earnings | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Cumulative effect of new accounting principle in period of adoption | (469,000) | ||
Accounting Standards Update 2016-09 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Excess tax benefits from share-based compensation | $ 200,000 | ||
Decrease in effective income tax rate | 2.40% | ||
Increase to earnings per share (in dollars per share) | $ 0.01 | ||
Deferred tax assets, net | $ 300,000 | ||
Cash provided by operating activities | 200,000 | 300,000 | |
Accounting Standards Update 2016-09 | Retained Earnings | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Cumulative effect of new accounting principle in period of adoption | 500,000 | ||
Accounting Standards Update 2015-07 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Deferred tax assets, net, current | (4,800,000) | ||
Deferred tax assets, net, noncurrent | $ 4,800,000 | ||
New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2017-07 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Selling, general and administrative expenses | (100,000) | (100,000) | |
Other expense, net | $ 100,000 | $ 100,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Other Commitments [Line Items] | |
Employees under contract terminated by employer without good cause or change in control | $ 40,800,000 |
Employees under contract terminated by employer without good cause or in absence of change in control | 16,700,000 |
Accrued severance | $ 862,110 |
Minimum | |
Other Commitments [Line Items] | |
Period for providing minimum compensation salary and continuation of certain benefits to executives under employment agreements | 6 months |
Severance payment as a percentage of annual salary | 100.00% |
Severance payment as a percentage of annual bonus | 50.00% |
Maximum | |
Other Commitments [Line Items] | |
Period for providing minimum compensation salary and continuation of certain benefits to executives under employment agreements | 3 years |
Severance payment as a percentage of annual salary | 300.00% |
Severance payment as a percentage of annual bonus | 300.00% |
Accounts Payable and Other Ac28
Accounts Payable and Other Accrued Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 18,877 | $ 20,321 |
Accrued liabilities | 15,335 | 16,909 |
Total | $ 34,212 | $ 37,230 |
Accrued Payroll Costs (Details)
Accrued Payroll Costs (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Payroll and benefits | $ 38,322 | $ 37,409 |
Health insurance liabilities | 3,735 | 2,790 |
Payroll taxes | 2,263 | 2,640 |
Workers’ compensation liabilities | 1,283 | 1,298 |
Total | $ 45,603 | $ 44,137 |
Credit Facility (Details)
Credit Facility (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Apr. 28, 2017 | Dec. 31, 2016 | |
Line of Credit Facility [Line Items] | |||
Long-term debt – credit facility | $ 131,966,000 | $ 111,547,000 | |
Revolving Credit Facility | |||
Line of Credit Facility [Line Items] | |||
Line of credit maximum borrowing capacity | 170,000,000 | ||
Line of credit current borrowing capacity available from amendment | $ 50,000,000 | ||
Line of credit maximum borrowing percentage of accounts receivable | 85.00% | ||
Line of credit maximum borrowing percentage of employee placement accounts | 80.00% | ||
Line of credit maximum borrowings percentage of corporate headquarters | 80.00% | ||
Quarterly reduction of additional corporate headquarters borrowing base | 1.25% | ||
Line of credit facility basis spread on variable rate under condition two | 0.50% | ||
Line of credit basis spread on variable rate under condition one | 1.25% | ||
Line of credit basis spread on variable rate under condition three | 0.125% | ||
Line of credit unused capacity commitment fee percentage threshold | 35.00% | ||
Percentage of commitment of all lenders as condition to maintain min fixed charge coverage ratio | 10.00% | ||
Amount of commitment of all lenders as condition to maintain min fixed charge coverage ratio | $ 11,000,000 | ||
Line of credit limit on equity security repurchases, max percent availability of borrowing capacity | 15.00% | ||
Line of credit limit on equity security repurchases availability of borrowing capacity | $ 15,000,000 | ||
Line of credit covenant limit on distributions max percent availability of borrowing capacity | 12.50% | ||
Line of credit covenant limit on distributions availability of borrowing capacity | $ 20,600,000 | ||
Line of credit remaining borrowing capacity | $ 20,900,000 | ||
Revolving Credit Facility | Subsequent Event | |||
Line of Credit Facility [Line Items] | |||
Line of credit remaining borrowing capacity | $ 27,300,000 | ||
Long-term debt – credit facility | $ 125,600,000 | ||
Revolving Credit Facility | Below Threshold | |||
Line of Credit Facility [Line Items] | |||
Line of credit unused capacity commitment fee percentage | 0.35% | ||
Revolving Credit Facility | Above Threshold | |||
Line of Credit Facility [Line Items] | |||
Line of credit unused capacity commitment fee percentage | 0.25% | ||
Letter of Credit | |||
Line of Credit Facility [Line Items] | |||
Line of credit facility sub limit for letters of credit | $ 15,000,000 |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Current deferred compensation liability | $ 3,700,000 | $ 2,700,000 |
Deferred compensation plan | 27,000,000 | 27,500,000 |
Deferred compensation plan assets | 28,600,000 | 27,300,000 |
Supplemental Executive Retirement Plan | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Supplemental executive retirement plan | 13,700,000 | $ 13,400,000 |
Employer contributions to benefit plans | 0 | |
Expected funding of the SERP in the current year | $ 0 |
Employee Benefit Plans - Compon
Employee Benefit Plans - Components of Net Periodic Benefit Cost (Details) - Supplemental Executive Retirement Plan - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Service cost | $ 80 | $ 328 |
Interest cost | 134 | 113 |
Net periodic benefit cost | $ 214 | $ 441 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | ||
Transfers into or out of Level 1, 2 or 3 assets | $ 0 | |
Significant Unobservable Inputs (Level 3) | Recurring Basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | $ 756,000 | $ 756,000 |
Stock Incentive Plans - Additio
Stock Incentive Plans - Additional Information (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Apr. 18, 2017 | Apr. 19, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 2.1 | $ 1.9 | ||
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Restricted stock granted, vesting period | 10 years | |||
Total unrecognized compensation expenses | $ 28 | |||
Weighted average period expected to be recognized | 4 years 5 months 5 days | |||
2017 Stock Incentive Plan | Subsequent Event | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares available for grant (in shares) | 3 | |||
2016 Stock Incentive Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares available for grant (in shares) | 1.6 |
Stock Incentive Plans - Summary
Stock Incentive Plans - Summary of Restricted Stock Activity (Details) - Restricted Stock $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($)$ / sharesshares | |
Number of Restricted Stock | |
Outstanding, as of beginning of period (in shares) | shares | 1,708 |
Granted (in shares) | shares | 24 |
Forfeited/Canceled (in shares) | shares | (17) |
Vested (in shares) | shares | (214) |
Outstanding, as of end of period (in shares) | shares | 1,501 |
Weighted Average Grant Date Fair Value | |
Outstanding, as of beginning of period (in dollars per share) | $ / shares | $ 21.86 |
Granted (in dollars per share) | $ / shares | 25.25 |
Forfeited/Canceled (in dollars per share) | $ / shares | 19.48 |
Vested (in dollars per share) | $ / shares | 21.88 |
Outstanding, as of end of period (in dollars per share) | $ / shares | $ 21.91 |
Vested, total intrinsic value of restricted stock vested | $ | $ 5,054 |
Reportable Segments - Operation
Reportable Segments - Operations of Segments (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Segment Reporting Information [Line Items] | ||
Total net service revenues | $ 333,992 | $ 322,201 |
Gross profit | 97,135 | 97,189 |
Operating expenses | 87,913 | 88,450 |
Income before income taxes | 9,222 | 8,739 |
Flex revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 322,487 | 309,636 |
Direct Hire revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 11,505 | 12,565 |
Tech | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 222,045 | 216,588 |
Gross profit | 61,100 | 61,791 |
Tech | Flex revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 216,886 | 211,209 |
Tech | Direct Hire revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 5,159 | 5,379 |
FA | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 87,295 | 82,492 |
Gross profit | 28,655 | 28,821 |
FA | Flex revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 80,949 | 75,306 |
FA | Direct Hire revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 6,346 | 7,186 |
GS | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 24,652 | 23,121 |
Gross profit | 7,380 | 6,577 |
GS | Flex revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | 24,652 | 23,121 |
GS | Direct Hire revenues | ||
Segment Reporting Information [Line Items] | ||
Total net service revenues | $ 0 | $ 0 |
Supplemental Cash Flow Inform37
Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash paid during the period for: | ||
Income taxes, net | $ 482 | $ 476 |
Interest, net | 678 | 466 |
Non-cash transaction information: | ||
Employee stock purchase plan | 127 | 192 |
Equipment acquired under capital leases | $ 441 | $ 788 |
Subsequent Event (Details)
Subsequent Event (Details) - Scenario, Forecast - Interest Rate Swap - USD ($) | May 31, 2020 | May 31, 2017 |
Subsequent Event [Line Items] | ||
Derivative, notional amount | $ 25,000,000 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Derivative rate | 1.81% | |
Derivative, notional amount | $ 65,000,000 |