Kforce(US:KFRC)2020-05-07 20:07markdown PART I - FINANCIAL INFORMATION This section presents Kforce Inc.'s unaudited condensed consolidated financial statements and detailed notes for the three months ended March 31, 2020 and 2019 [Item 1. Financial Statements.](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section provides Kforce Inc.'s unaudited condensed consolidated financial statements and comprehensive notes for the periods ended March 31, 2020 and 2019 [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME) This statement details Kforce Inc.'s unaudited consolidated operating results and comprehensive income for the three months ended March 31, 2020 and 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Revenue | $335,208 | $326,738 | | Gross profit | $94,524 | $93,176 | | Income from operations | $13,915 | $11,713 | | Net income | $9,106 | $26,855 | | Comprehensive income | $7,985 | $26,575 | | Earnings per share – basic (Continuing operations) | $0.42 | $0.33 | | Earnings per share – diluted (Continuing operations) | $0.42 | $0.32 | | Weighted average shares outstanding – basic | 21,553 | 24,516 | | Weighted average shares outstanding – diluted | 21,860 | 25,019 | [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This statement presents Kforce Inc.'s unaudited consolidated financial position, including assets, liabilities, and equity, as of March 31, 2020 and December 31, 2019 | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total assets | $405,488 | $381,125 | | Total liabilities | $252,089 | $213,862 | | Total stockholders' equity | $153,399 | $167,263 | | Cash and cash equivalents | $31,774 | $19,831 | | Trade receivables, net | $235,587 | $217,929 | | Long-term debt – credit facility | $100,000 | $65,000 | [Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) This statement outlines the changes in Kforce Inc.'s unaudited consolidated stockholders' equity from December 31, 2019, to March 31, 2020 | Metric | Balance, December 31, 2019 (in thousands) | Balance, March 31, 2020 (in thousands) | | :-------------------------------- | :---------------------------------------- | :--------------------------------------- | | Total Stockholders' Equity | $167,263 | $153,399 | | Net income | $9,106 | $9,106 | | Dividends ($0.20 per share) | N/A | $(4,293) | | Repurchases of common stock | N/A | $(20,380) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement presents Kforce Inc.'s unaudited consolidated cash flows from operating, investing, and financing activities for the three months ended March 31, 2020 and 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Cash provided by operating activities | $3,005 | $11,789 | | Cash used in investing activities | $(1,971) | $(2,496) | | Cash provided by (used in) financing activities | $10,909 | $(9,146) | | Change in cash and cash equivalents | $11,943 | $147 | | Cash and cash equivalents, end of period | $31,774 | $259 | | Supplemental Disclosure | 2020 (in thousands) | 2019 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Cash Paid During the Period For: | | | | Income taxes | $399 | $184 | | Operating lease liabilities | $1,987 | $1,836 | | Interest, net | $541 | $627 | | Non-Cash Investing and Financing Transactions: | | | | ROU assets obtained from new operating leases | $924 | $817 | | Unsettled repurchases of common stock | $910 | $369 | | Employee stock purchase plan | $142 | $140 | [Note A - Summary of Significant Accounting Policies](index=9&type=section&id=Note%20A%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note details Kforce Inc.'s significant accounting policies, including the adoption of new standards and factors influencing quarterly operating results - The company adopted new accounting standards for credit losses (CECL model) and reference rate reform (LIBOR) effective **January 1, 2020**. The CECL adoption resulted in a **$0.3 million increase** to the allowance for credit losses[31](index=31&type=chunk)[32](index=32&type=chunk)[41](index=41&type=chunk) - Quarterly operating results are affected by billing days, client business seasonality, and increased holiday/vacation days. First quarters typically see increased costs from U.S. state and federal employment tax resets, negatively impacting gross profit and profitability[26](index=26&type=chunk) [Note B - Discontinued Operations](index=10&type=section&id=Note%20B%20-%20Discontinued%20Operations) This note reports on the sale of Kforce's Government Solutions segment and its financial results as discontinued operations for prior periods - Kforce completed the sale of its Government Solutions (GS) segment in 2019 to focus on commercial technical and professional staffing services. The GS segment's results are reported as discontinued operations for all prior periods[34](index=34&type=chunk) | Metric | Three Months Ended March 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------------------------- | | Revenue | $26,426 | | Income from discontinued operations, before income taxes | $880 | | Income tax benefit | $18,001 | | Income from discontinued operations, net of tax | $18,881 | - Cash provided by operating activities and cash used in investing activities for discontinued operations were **$5.7 million** and **$0.1 million**, respectively, for the three months ended **March 31, 2019**[36](index=36&type=chunk) [Note C - Reportable Segments](index=11&type=section&id=Note%20C%20-%20Reportable%20Segments) This note provides financial information for Kforce's Technology and Finance and Accounting reportable segments - Kforce operates through two segments: Technology (Tech) and Finance and Accounting (FA)[37](index=37&type=chunk) | Segment | Revenue (3 Months Ended March 31, 2020, in thousands) | Gross Profit (3 Months Ended March 31, 2020, in thousands) | | :-------- | :---------------------------------------------------- | :------------------------------------------------------- | | Tech | $266,784 | $72,454 | | FA | $68,424 | $22,070 | | Total | $335,208 | $94,524 | | Segment | Revenue (3 Months Ended March 31, 2019, in thousands) | Gross Profit (3 Months Ended March 31, 2019, in thousands) | | :-------- | :---------------------------------------------------- | :------------------------------------------------------- | | Tech | $255,643 | $68,822 | | FA | $71,095 | $24,354 | | Total | $326,738 | $93,176 | [Note D - Disaggregation of Revenue](index=11&type=section&id=Note%20D%20-%20Disaggregation%20of%20Revenue) This note disaggregates Kforce's revenue by service type (Flex and Direct Hire) across its Technology and Finance and Accounting segments | Revenue Type | Tech (3 Months Ended March 31, 2020, in thousands) | FA (3 Months Ended March 31, 2020, in thousands) | Total (3 Months Ended March 31, 2020, in thousands) | | :------------- | :------------------------------------------------- | :----------------------------------------------- | :------------------------------------------------ | | Flex revenue | $262,569 | $63,540 | $326,109 | | Direct Hire revenue | $4,215 | $4,884 | $9,099 | | Total Revenue | $266,784 | $68,424 | $335,208 | | Revenue Type | Tech (3 Months Ended March 31, 2019, in thousands) | FA (3 Months Ended March 31, 2019, in thousands) | Total (3 Months Ended March 31, 2019, in thousands) | | :------------- | :------------------------------------------------- | :----------------------------------------------- | :------------------------------------------------ | | Flex revenue | $250,216 | $64,765 | $314,981 | | Direct Hire revenue | $5,427 | $6,330 | $11,757 | | Total Revenue | $255,643 | $71,095 | $326,738 | [Note E - Allowance for Credit Losses](index=12&type=section&id=Note%20E%20-%20Allowance%20for%20Credit%20Losses) This note details Kforce's methodology for determining the allowance for credit losses and the impact of the COVID-19 crisis on this estimate - The allowance for credit losses is determined by historical trends, specific analysis of past-due balances, client concentration, and the U.S. economy. The company applies credit loss rates by aging category and performs quarterly credit reviews for certain clients[40](index=40&type=chunk) | Metric | Amount (in thousands) | | :---------------------------------------------------- | :-------------------- | | Allowance for credit losses, January 1, 2020 | $1,843 | | Current period provision | $2,229 | | Write-offs charged against the allowance, net of recoveries | $(182) | | Allowance for credit losses, March 31, 2020 | $3,890 | - Due to the COVID-19 crisis, Kforce increased its allowance for credit losses by applying higher credit loss rates to receivables in significantly impacted industries and for higher-risk clients[43](index=43&type=chunk) [Note F - Other Assets, Net](index=12&type=section&id=Note%20F%20-%20Other%20Assets%2C%20Net) This note provides a breakdown of Kforce's other assets, net, including assets held in Rabbi Trust, right-of-use assets, and equity method investments | Asset Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Assets held in Rabbi Trust | $30,843 | $35,413 | | Right-of-use assets for operating leases, net | $17,606 | $18,344 | | Capitalized software, net | $9,841 | $8,759 | | Equity method investment | $7,574 | $8,169 | | Deferred loan costs, net | $766 | $855 | | Other non-current assets | $1,048 | $1,298 | | Total Other assets, net | $67,678 | $72,838 | - Kforce holds a **50% noncontrolling interest** in WorkLLama, LLC, accounted for as an equity method investment. A loss of **$0.6 million** from this investment was recorded for the three months ended **March 31, 2020**[45](index=45&type=chunk) [Note G - Current Liabilities](index=13&type=section&id=Note%20G%20-%20Current%20Liabilities) This note provides a detailed breakdown of Kforce's current liabilities, including accounts payable, accrued payroll costs, and current operating lease liabilities | Liability Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Accounts payable and other accrued liabilities | $37,125 | $33,232 | | Accrued payroll costs | $45,988 | $44,001 | | Current portion of operating lease liabilities | $5,201 | $5,685 | | Income taxes payable | $4,026 | $878 | | Other current liabilities | $954 | $1,168 | | Total current liabilities | $93,294 | $84,964 | | Accrued Payroll Costs Breakdown | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Payroll and benefits | $40,141 | $38,035 | | Health insurance liabilities | $3,976 | $3,907 | | Payroll taxes | $870 | $992 | | Workers' compensation liabilities | $1,001 | $1,067 | | Total Accrued payroll costs | $45,988 | $44,001 | [Note H - Other Long-Term Liabilities](index=13&type=section&id=Note%20H%20-%20Other%20Long-Term%20Liabilities) This note details Kforce's other long-term liabilities, including deferred compensation, SERP, and long-term operating lease liabilities | Liability Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Deferred compensation plan | $24,044 | $30,361 | | Supplemental executive retirement plan | $18,290 | $18,080 | | Operating lease liabilities | $14,235 | $14,627 | | Interest rate swap derivative instruments | $1,684 | $179 | | Other long-term liabilities | $542 | $651 | | Total Other long-term liabilities | $58,795 | $63,898 | [Note I - Employee Benefit Plans](index=13&type=section&id=Note%20I%20-%20Employee%20Benefit%20Plans) This note describes Kforce's Supplemental Executive Retirement Plan (SERP) and its net periodic benefit cost for the reported periods - Kforce maintains a non-qualified Supplemental Executive Retirement Plan (SERP) for two executives. The projected benefit obligation was **$18.3 million** as of **March 31, 2020**, with no contributions made or anticipated for 2020[49](index=49&type=chunk)[50](index=50&type=chunk) | Net Periodic Benefit Cost Component | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Service cost | $86 | $65 | | Interest cost | $125 | $151 | | Net periodic benefit cost | $211 | $216 | [Note J - Stock Incentive Plans](index=14&type=section&id=Note%20J%20-%20Stock%20Incentive%20Plans) This note outlines Kforce's stock incentive plans, including the 2020 plan, restricted stock activity, and related compensation expense - Shareholders approved the 2020 Stock Incentive Plan on **April 28, 2020**, reserving approximately **3.6 million shares** for various stock-based awards[51](index=51&type=chunk) | Restricted Stock Activity | Number of Restricted Stock (in thousands) | Weighted-Average Grant Date Fair Value | | :-------------------------------- | :---------------------------------------- | :------------------------------------- | | Outstanding at December 31, 2019 | 1,180 | $29.51 | | Granted | 7 | $29.60 | | Forfeited | (12) | $22.62 | | Vested | (8) | $22.15 | | Outstanding at March 31, 2020 | 1,167 | $29.63 | - Total unrecognized stock-based compensation expense related to restricted stock was **$29.0 million** as of **March 31, 2020**, to be recognized over a weighted-average remaining period of **3.3 years**. Stock-based compensation expense from continuing operations was **$2.9 million** for the three months ended **March 31, 2020**, up from **$2.5 million** in 2019[52](index=52&type=chunk) [Note K - Derivative Instruments and Hedging Activity](index=14&type=section&id=Note%20K%20-%20Derivative%20Instruments%20and%20Hedging%20Activity) This note details Kforce's use of interest rate swaps as cash flow hedges to manage interest rate risk on variable rate debt - Kforce uses interest rate swaps (Swap A and Swap B) as cash flow hedges to mitigate rising interest rate risks on variable rate debt. Swap A has a fixed rate of **1.81%** and a notional amount of **$65.0 million** (decreasing to **$25.0 million** in **May 2020**). Swap B, entered in **March 2020**, has a fixed rate of **0.61%** and a notional amount of **$35.0 million** (increasing to **$75.0 million** in **May 2020** and **$100.0 million** in **May 2022**)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) | Derivative Instrument Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Accumulated derivative instrument (loss) gain, beginning of period | $(179) | $900 | | Net change associated with current period hedging transactions | $(1,505) | $(375) | | Accumulated derivative instrument (loss) gain, end of period | $(1,684) | $525 | [Note L - Fair Value Measurements](index=15&type=section&id=Note%20L%20-%20Fair%20Value%20Measurements) This note describes the fair value measurement of Kforce's interest rate swap derivative instruments using Level 2 inputs - Interest rate swaps are measured at fair value using Level 2 inputs (readily observable inputs) and are recorded as Other long-term liabilities[58](index=58&type=chunk) | Asset/(Liability) Measured at Fair Value | At March 31, 2020 (in thousands) | At December 31, 2019 (in thousands) | | :--------------------------------------- | :------------------------------- | :-------------------------------- | | Interest rate swap derivative instruments | $(1,684) | $(179) | [Note M - Commitments and Contingencies](index=15&type=section&id=Note%20M%20-%20Commitments%20and%20Contingencies) This note outlines Kforce's commitments and contingencies, including executive employment agreements, legal matters, and joint venture obligations - Kforce has employment agreements with certain executives that include severance payments under specific termination circumstances, with potential liabilities of **$39.7 million** (change in control) or **$16.8 million** (no change in control) as of **March 31, 2020**[60](index=60&type=chunk) - The company is involved in ordinary course legal proceedings, claims, and administrative matters, for which accruals have been made but are not considered individually or in aggregate material[61](index=61&type=chunk) - Under the WorkLLama joint venture, Kforce is obligated to make additional cash contributions contingent on operational and financial milestones, with a maximum potential of **$22.5 million**. **$9.0 million** was contributed in 2019, and no contingent contributions were recorded as of **March 31, 2020**, due to early stage uncertainty[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's analysis of Kforce's financial condition and operating results for Q1 2020, focusing on COVID-19 impacts, revenue, expenses, and liquidity [Executive Summary](index=16&type=section&id=EXECUTIVE%20SUMMARY) This summary provides an overview of Kforce's business, the initial impact of the COVID-19 crisis, and proactive liquidity management measures - Kforce provides professional staffing services (Flex and Direct Hire) through its Tech and FA segments, operating with **50 field offices** and over **2,200 associates** and **10,000 consultants**[64](index=64&type=chunk) - The COVID-19 crisis began negatively impacting operating trends in **March 2020**, particularly in FA Flex and Direct Hire, leading to significant uncertainty in near-term results[65](index=65&type=chunk)[66](index=66&type=chunk) - The company took proactive measures, including drawing down **$35.0 million** from its credit facility and entering a new interest rate swap to take advantage of low rates and reduce liquidity risk[66](index=66&type=chunk) - Kforce returned **$24.6 million** to shareholders through dividends (**$4.3 million**) and stock repurchases (**$20.3 million**) during **Q1 2020**, and the Board increased the repurchase authorization to **$100.0 million**[66](index=66&type=chunk) [Results of Operations](index=16&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes Kforce's operating performance, including revenue growth, segment contributions, and profitability for the reported periods - Revenue for **Q1 2020** increased **2.6%** (**1.0%** on a billing day basis) to **$335.2 million** from **$326.7 million** in **Q1 2019**[66](index=66&type=chunk) - Flex revenue increased **3.5%** to **$326.1 million**, with Tech Flex up **4.9%** and FA Flex down **1.9%**. Direct Hire revenue decreased **22.6%** to **$9.1 million**[66](index=66&type=chunk) - Income from continuing operations increased **14.2%** to **$9.1 million**, or **$0.42 per diluted share**, from **$8.0 million**, or **$0.32 per diluted share**, in **Q1 2019**, partly due to significant stock repurchases[66](index=66&type=chunk) - The company secured large, temporary opportunities in customer service, loan processing, and administration to assist the U.S. economy during the crisis, expected to partially offset negative impacts in Q2 revenues by **$20-30 million**[69](index=69&type=chunk)[74](index=74&type=chunk) | Metric (as % of Revenue) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Tech Revenue | 79.6% | 78.2% | | FA Revenue | 20.4% | 21.8% | | Flex Revenue | 97.3% | 96.4% | | Direct Hire Revenue | 2.7% | 3.6% | | Gross profit | 28.2% | 28.5% | | Selling, general and administrative expenses | 23.6% | 24.4% | | Income from operations | 4.2% | 3.6% | | Net income | 2.7% | 8.2% | [Liquidity and Capital Resources](index=23&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section examines Kforce's liquidity, capital resources, credit facility utilization, and shareholder return activities - Kforce relies on operating cash flow and its **$300.0 million** credit facility for liquidity. Cash and cash equivalents increased to **$31.8 million** at **March 31, 2020**, from **$19.8 million** at **December 31, 2019**[96](index=96&type=chunk) - In **March 2020**, the company drew an additional **$35.0 million** from its credit facility, bringing the total outstanding balance to **$100.0 million**, to leverage low interest rates and mitigate liquidity risks during the COVID-19 crisis[97](index=97&type=chunk) - Working capital (excluding cash) was approximately **$150.0 million** as of **March 31, 2020**, providing a reliable source of liquidity amidst expected revenue declines[98](index=98&type=chunk) - The CARES Act is expected to significantly benefit cash flows through provisions like deferment of employer social security payments and employee retention credits[99](index=99&type=chunk) | Cash Flow Impact of Common Stock Repurchase Activity (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Open market repurchases | $19,382 | $14,775 | | Repurchase of shares related to tax withholding requirements | $88 | $100 | | Total cash flow impact of common stock repurchases | $19,470 | $14,875 | - The Board approved an **11% increase** in the quarterly dividend to **$0.20 per share** in **January 2020**. Dividends paid were **$4.3 million** (**$0.20 per share**) in **Q1 2020**, compared to **$4.4 million** (**$0.18 per share**) in **Q1 2019**[106](index=106&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section discusses critical accounting estimates, including goodwill impairment and allowance for credit losses, and their sensitivity to the COVID-19 crisis - The COVID-19 crisis introduces uncertainty and disruption, potentially impacting inputs and assumptions for critical accounting estimates, including goodwill and equity method investment impairment, and allowance for credit losses[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) - The valuation methodologies for goodwill and equity method investment fair value estimates are sensitive to critical estimates like forecasted operating results, long-term growth rates, future economic cycles, and market multiples[115](index=115&type=chunk) - The allowance for credit losses on trade receivables is based on factors such as write-off and delinquency trends, specific analysis of past-due balances, client concentration, and the U.S. economy[116](index=116&type=chunk) [New Accounting Standards](index=25&type=section&id=NEW%20ACCOUNTING%20STANDARDS) This section refers to Note A for details on recently adopted and not yet adopted accounting standards - Refer to Note A for a discussion of recently adopted accounting standards (credit losses and reference rate reform) and standards not yet adopted (defined benefit plan disclosure requirements)[118](index=118&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section updates disclosures on market risk, specifically highlighting the company's recent actions regarding interest rate swaps to manage exposure to variable interest rates - Kforce entered into an additional forward-starting interest rate swap agreement on **March 12, 2020**, effective **March 17, 2020**, maturing **May 30, 2025**. This swap has a fixed interest rate of **0.61%** and a notional amount of **$35.0 million** at **March 31, 2020**, which will increase to **$75.0 million** in **May 2020** and **$100.0 million** in **May 2022**[120](index=120&type=chunk) [Item 4. Controls and Procedures.](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section details the evaluation of Kforce's disclosure controls and procedures, confirming their effectiveness as of March 31, 2020. It also states that no material changes occurred in internal control over financial reporting during the last fiscal quarter - The CEO and CFO concluded that the design and operation of Kforce's Disclosure Controls were effective as of **March 31, 2020**, ensuring timely and accurate financial reporting[121](index=121&type=chunk) - No material changes in internal control over financial reporting occurred during the last fiscal quarter[122](index=122&type=chunk) - The report acknowledges the inherent limitations of internal control over financial reporting, including the possibility of collusion or management override, which could lead to undetected misstatements[123](index=123&type=chunk) PART II - OTHER INFORMATION This section provides other information, including legal proceedings, updated risk factors, equity security sales, and a list of exhibits [Item 1. Legal Proceedings.](index=26&type=section&id=Item%201.%20Legal%20Proceedings.) This section confirms no material developments in legal proceedings since the 2019 Annual Report on Form 10-K - No material developments in legal proceedings have occurred since the **2019 Annual Report on Form 10-K**[126](index=126&type=chunk) - The company is involved in ordinary course legal proceedings, claims, and administrative matters, which are not considered material[126](index=126&type=chunk) [Item 1A. Risk Factors.](index=26&type=section&id=Item%201A.%20Risk%20Factors.) This section updates risk factors, focusing on the material adverse effects of the COVID-19 global pandemic on Kforce's business and financial results - The COVID-19 pandemic may have a material adverse effect on Kforce's business and financial results due to reduced client demand, cost-cutting initiatives, and negative impacts on profitability or accounts receivable collection[128](index=128&type=chunk) - Specific impacts include reduction/elimination of consultants, lower bill rates, extended payment terms, temporary furloughs, and decreased leading indicators like job orders and direct hire placements[128](index=128&type=chunk) - Operational disruptions from COVID-19, such as worker absences, office closures, and travel restrictions, could impair the ability to serve clients and potentially lead to an event of default under credit facility covenants[129](index=129&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This section details Kforce's common stock repurchase activities during Q1 2020, including increased authorization - In **March 2020**, the Board approved an increase in the stock repurchase authorization to an aggregate total of **$100.0 million**[130](index=130&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------- | | January 1, 2020 to January 31, 2020 | — | $— | — | $44,297,260 | | February 1, 2020 to February 29, 2020 | 284,333 | $33.59 | 281,748 | $34,834,323 | | March 1, 2020 to March 31, 2020 | 400,357 | $27.05 | 400,357 | $93,634,225 | | Total | 684,690 | $29.76 | 682,105 | $93,634,225 | [Item 3. Defaults Upon Senior Securities.](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) This section states that there were no defaults upon senior securities [Item 4. Mine Safety Disclosures.](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This section states that there are no mine safety disclosures [Item 5. Other Information.](index=26&type=section&id=Item%205.%20Other%20Information.) This section indicates that there is no other information to report [Item 6. Exhibits.](index=27&type=section&id=Item%206.%20Exhibits.) This section lists all exhibits filed with the Form 10-Q, including corporate documents, stock incentive plans, certifications, and XBRL data - Exhibits include Amended and Restated Articles of Incorporation, Amended & Restated Bylaws, Kforce Inc. 2020 Stock Incentive Plan, Form of Restricted Stock Award Agreement, CEO and CFO Certifications (Section 302 and 906 of Sarbanes-Oxley Act), and XBRL formatted financial data[133](index=133&type=chunk) [SIGNATURES](index=28&type=section&id=SIGNATURES) This section contains the signatures of authorized officers certifying the report - The report is signed by David M. Kelly, Executive Vice President and Chief Financial Officer, and Jeffrey B. Hackman, Senior Vice President, Finance and Accounting, on **May 7, 2020**[137](index=137&type=chunk)