Derivative Instrument and Hedging Activity

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instrument and Hedging Activity

Derivative Instruments and Hedging Activity

As of September 30, 2022, the Firm did not have any outstanding derivative instruments. 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 matured on April 29, 2022. Other information related to Swap A is as follows: Notional amount - $25.0 million; and Fixed interest rate - 1.81%.

On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap B”, together with Swap A, the "Swaps"). Swap B was effective on March 17, 2020. Other information related to Swap B is as follows: Scheduled maturity date - May 30, 2025; Fixed interest rate - 0.61%; and Notional amount - $100.0 million.

The Firm used 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, was included in interest expense and recorded in Other (income) expense, net in the accompanying Consolidated Financial Statements of Operations and Comprehensive Income.

In May 2022, the Firm terminated Swap B in anticipation of paying the outstanding amount on its credit facility, which was $100.0 million. At the termination of Swap B, the amount recorded in Accumulated other comprehensive income was recognized. The Firm received $4.1 million in income, which represented the gain and fair value of Swap B at the time of termination, and is included in other income in the accompanying Consolidated Financial Statements of Operations and Comprehensive Income.

Both Swap A and B were designated as cash flow hedges. The change in the fair value of the Swaps was previously recorded as a component of Accumulated other comprehensive income (loss) in the unaudited consolidated financial statements.

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

	Nine Months Ended September 30,
	2022		2021
Accumulated derivative instrument gain (loss), beginning of period	$	823	$	(1,774)
Net change associated with current period hedging transactions (1)	(823)		1,478
Accumulated derivative instrument gain (loss), end of period	$	—	$	(296)

(1) The accumulated derivative instrument activity as of the end the nine month period ending September 30, 2022, includes the beginning balance of $823 thousand, a change in fair value of $3.1 million and a reversal due to termination of $3.9 million resulting in an ending balance of zero.