Derivative Instrument and Hedging Activity

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instrument and Hedging Activity

Kforce is exposed to interest rate risk as a result of our corporate borrowing activities. The Firm uses an interest rate swap derivative as a risk management tool to mitigate the potential impact of rising interest rates on our variable rate debt.

On April 21, 2017, Kforce entered into Swap A. Swap A was effective on May 31, 2017 and matures on April 29, 2022. Swap A has a rate of 1.81%, which is added to our interest rate margin to determine the fixed rate that the Firm will pay to the counterparty during the term of Swap A based on the notional amount of Swap A. The notional amount of Swap A through maturity is $25.0 million.

On March 12, 2020, Kforce entered into Swap B. Swap B was effective on March 17, 2020 and matures on May 30, 2025. Swap B has a fixed interest rate of 0.61% and a notional amount of $75.0 million and increases to $100.0 million in May 2022, and

subsequently decreases $75.0 million and $40.0 million in May 2023 and May 2024, respectively. The increases in the notional amount of Swap B correspond to the decreases in the notional amount of Swap A.

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

The following table sets forth the activity in the accumulated derivative instrument gain (loss) for the years ended (in thousands):


	December 31,
	2020		2019
Accumulated derivative instrument gain, beginning of year	$	(179)	$	900
Net change associated with current period hedging transactions	(1,595)		(1,079)

Accumulated derivative instrument loss, end of year	$	(1,774)	$	(179)