Derivative Instrument and Hedging Activity

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instrument and Hedging Activity

Derivative Instruments and Hedging Activity

On April 21, 2017, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap A”). Swap A was effective on May 31, 2017 and matures on April 29, 2022. Swap A has a fixed interest rate of 1.81% and a notional amount of $65.0 million at March 31, 2020, which decreases to $25.0 million in May 2020.

On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A. (“Swap B”). Swap B was effective on March 17, 2020 and matures on May 30, 2025. Swap B has a fixed interest rate of 0.61% and a notional amount of $35.0 million at March 31, 2020, which increases to $75.0 million and $100.0 million in May 2020 and May 2022, respectively, and subsequently decreases to $75.0 million and $40.0 million in May 2023 and May 2024, respectively. The increases in the notional amount of Swap B correspond to the decreases in the notional amount for Swap A.

The Firm uses interest rate swaps as an interest rate risk management tool to mitigate the potential impact of rising interest rates on variable rate debt. The fixed interest rate for each swap, plus the applicable interest margin under our credit facility, is included in interest expense and recorded in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. Both Swap A and B have been designated as cash flow hedges and were effective at March 31, 2020. The change in the fair value of the swaps is recorded as a component of other comprehensive income in the consolidated financial statements.

The following table sets forth the activity in the accumulated derivative instrument activity (in thousands):

	Three Months Ended March 31,
	2020		2019
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