Company Quick10K Filing
Quick10K
Kforce
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$35.33 25 $898
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-04-25 Officers
8-K 2019-04-23 Shareholder Vote
8-K 2019-04-01 M&A, Regulation FD, Exhibits
8-K 2019-03-06 Other Events
8-K 2019-02-06 Earnings, Exhibits
8-K 2019-01-31 Officers
8-K 2018-12-26 Earnings, Exhibits
8-K 2018-11-21 Other Events
8-K 2018-10-31 Earnings, Exhibits
8-K 2018-08-24 Officers
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-04-26 Shareholder Vote
8-K 2018-03-15 Other Events
8-K 2018-02-06 Earnings, Exhibits
MDB Mongodb 7,420
JHG Janus Henderson Group 4,390
SMAR Smartsheet 3,100
PPDF Ppdai Group 1,580
TRUE Truecar 758
CSLT Castlight Health 546
BPT BP Prudhoe Bay Royalty Trust 424
SOAN Angiosoma 0
SRNA Surna 0
SFRX Seafarer Exploration 0
KFRC 2019-03-31
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 kforce-stockpurchaseag.htm
EX-10.2 kforce-amendment1tosto.htm
EX-10.4 a2019restrictedstockaw.htm
EX-10.5 kforcecreditfacilityfi.htm
EX-31.1 exhibit311q12019.htm
EX-31.2 exhibit312q12019.htm
EX-32.1 exhibit321q12019.htm
EX-32.2 exhibit322q12019.htm

Kforce Earnings 2019-03-31

KFRC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
____________________________________________________________________________________________
 
FORM 10-Q
 ________________________________________________________

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019 
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 000-26058
_________________________________________________________________
 Kforce Inc.
Exact name of registrant as specified in its charter
_________________________________________________________________ 
FLORIDA
59-3264661
State or other jurisdiction of incorporation or organization
IRS Employer Identification No.

1001 EAST PALM AVENUE, TAMPA, FLORIDA
33605 
Address of principal executive offices
Zip Code
Registrant’s telephone number, including area code: (813) 552-5000
 _______________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 per shareKFRCNASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.):    Yes  ¨  No  x
The number of shares outstanding of the registrant’s common stock as of April 29, 2019 was 25,420,500.





KFORCE INC.
TABLE OF CONTENTS
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
References in this document to “the Registrant,” “Kforce,” “the Company,” “we,” “the Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context otherwise requires or indicates.
This report, particularly Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Part II. Item 1A. Risk Factors, and the documents we incorporate into this report contain certain statements that are, or may be deemed to be, forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements may include, but may not be limited to, projections of financial or operational performance, our beliefs regarding potential government actions or changes in laws and regulations, anticipated costs and benefits of proposed acquisitions, divestitures and investments, effects of interest rate variations, financing needs or plans, funding of employment benefit plans, estimates concerning the effects of litigation or other disputes, the occurrence of unanticipated expenses, estimates concerning our ability to collect on our trade accounts receivable, developments within the staffing sector including, but not limited to, the penetration rate (the percentage of temporary staffing to total employment) and growth in temporary staffing, a reduction in the supply of consultants and candidates or the Firm’s ability to attract such individuals, changes in client demand for our services and our ability to adapt to such changes, the entry of new competitors in the market, the ability of the Firm to maintain and attract clients in the face of changing economic or competitive conditions, as well as assumptions as to any of the foregoing and all statements that are not based on historical fact but rather reflect our current expectations concerning future results and events. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, refer to the Risk Factors and MD&A sections. In addition, when used in this discussion, the terms “anticipate,” “assume,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “may,” “likely,” “could,” “should,” “future” and variations thereof and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this report, which speak only as of the date of this report. Kforce undertakes no obligation to update any forward-looking statements.
2


PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
Three Months Ended March 31,
20192018
Revenue$326,738 $317,441 
Direct costs233,562 224,904 
Gross profit93,176 92,537 
Selling, general and administrative expenses79,813 78,797 
Depreciation and amortization1,650 1,751 
Income from operations11,713 11,989 
Other expense, net923 1,344 
Income from continuing operations, before income taxes10,790 10,645 
Income tax expense2,816 2,660 
Income from continuing operations7,974 7,985 
Income from discontinued operations, net of tax18,881 1,190 
Net income26,855 9,175 
Other comprehensive (loss) income:
Change in fair value of interest rate swap, net of tax(280)517 
Comprehensive income$26,575 $9,692 
Earnings per share – basic:
Continuing operations$0.33 $0.32 
Discontinued operations0.77 0.05 
Earnings per share – basic$1.10 $0.37 
Earnings per share – diluted:
Continuing operations$0.32 $0.32 
Discontinued operations0.75 0.05 
Earnings per share – diluted$1.07 $0.37 
Weighted average shares outstanding – basic24,516 24,804 
Weighted average shares outstanding – diluted25,019 25,094 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

3


KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

March 31, 2019December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents$259 $112 
Trade receivables, net of allowances of $2,915 and $2,800, respectively220,520 210,559 
Income tax refund receivable113 319 
Prepaid expenses and other current assets7,956 7,699 
Current assets held for sale 26,688 29,773 
Total current assets255,536 248,462 
Fixed assets, net28,940 34,322 
Other assets, net56,429 36,664 
Deferred tax assets, net7,642 7,147 
Goodwill25,040 25,040 
Noncurrent assets held for sale51,025 28,273 
Total assets$424,612 $379,908 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities$32,151 $32,542 
Accrued payroll costs40,311 39,384 
Current portion of operating lease liabilities5,861 — 
Other current liabilities 1,398 1,616 
Income taxes payable7,809 4,553 
Current liabilities held for sale17,609 12,263 
Total current liabilities105,139 90,358 
Long-term debt – credit facility82,500 71,800 
Long-term debt – other1,092 1,359 
Other long-term liabilities55,339 43,509 
Noncurrent liabilities held for sale1,970 4,551 
Total liabilities246,040 211,577 
Commitments and contingencies (Note E)
Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding  
Common stock, $0.01 par; 250,000 shares authorized, 71,860 and 71,856 issued and outstanding, respectively719 719 
Additional paid-in capital450,276 447,337 
Accumulated other comprehensive income1,184 1,296 
Retained earnings259,356 237,308 
Treasury stock, at cost; 46,249 and 45,822 shares, respectively(532,963)(518,329)
Total stockholders’ equity178,572 168,331 
Total liabilities and stockholders’ equity$424,612 $379,908 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

4


KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
 
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmount
Balance, December 31, 201871,856 $719 $447,337 $1,296 $237,308 45,822 $(518,329)$168,331 
Net income— — — — 26,855 — — 26,855 
Reclassification of stranded tax effects (Note A)— — — 168 (168)— —  
Issuance for stock-based compensation and dividends, net of forfeitures4 — 233 — (233)— —  
Stock-based compensation expense— — 2,620 — — — — 2,620 
Employee stock purchase plan— — 86 — — (5)54 140 
Dividends ($0.18 per share)— — — — (4,406)— — (4,406)
Change in fair value of interest rate swap, net of tax benefit of $95— — — (280)— — — (280)
Repurchases of common stock— — — — — 432 (14,688)(14,688)
Balance, March 31, 201971,860 $719 $450,276 $1,184 $259,356 46,249 $(532,963)$178,572 

Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmount
Balance, December 31, 201771,494 $715 $437,394 $100 $195,143 45,167 $(499,075)$134,277 
Net income— — — — 9,175 — — 9,175 
Cumulative effect of revenue recognition accounting standard, net of tax of $63— — — — (179)— — (179)
Issuance for stock-based compensation and dividends, net of forfeitures63 1 166 — (167)— —  
Exercise of stock options5 — 46 — — 1 (46) 
Stock-based compensation expense— — 2,260 — — — — 2,260 
Employee stock purchase plan— — 71 — — (6)61 132 
Dividends ($0.12 per share)— — — — (2,973)— — (2,973)
Change in fair value of interest rate swap, net of tax of $176— — — 517 — — — 517 
Repurchases of common stock— — — — — 319 (8,715)(8,715)
Balance, March 31, 201871,562 $716 $439,937 $617 $200,999 45,481 $(507,775)$134,494 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5


KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended March 31,
20192018
Cash flows from operating activities:
Net income$26,855 $9,175 
Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, net(18,314)41 
Provision for bad debts349 368 
Depreciation and amortization1,972 2,115 
Stock-based compensation expense2,620 2,260 
Defined benefit pension plan expense216 455 
Loss on deferred compensation plan investments, net89 110 
Loss on disposal or impairment of property and equipment801 5 
Contingent consideration liability remeasurement886  
Noncash lease expense 1,662 — 
Other87 91 
(Increase) decrease in operating assets
Trade receivables, net(7,377)(12,350)
Income tax refund receivable206 6,341 
Prepaid expenses and other current assets894 91 
Other assets, net(1,493)69 
Increase (decrease) in operating liabilities
Accounts payable and other accrued liabilities5,841 (2,096)
Accrued payroll costs380 317 
Income taxes payable2,951 3,388 
Other long-term liabilities(6,836)(130)
Cash provided by operating activities11,789 10,250 
Cash flows from investing activities:
Capital expenditures(1,496)(1,469)
Other(1,000) 
Cash used in investing activities(2,496)(1,469)
Cash flows from financing activities:
Proceeds from credit facility78,300 193,400 
Payments on credit facility(67,600)(186,723)
Payments on other financing arrangements(540)(569)
Repurchases of common stock(14,875)(12,038)
Cash dividend(4,406)(2,973)
Other(25) 
Cash used in financing activities(9,146)(8,903)
Change in cash and cash equivalents147 (122)
Cash and cash equivalents at beginning of period112 379 
Cash and cash equivalents at end of period$259 $257 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6


KFORCE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - 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 2018 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 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 2018 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from our audited Consolidated Balance Sheet as of December 31, 2018, as presented in our 2018 Annual Report on Form 10-K.
Certain prior year amounts have been reclassified to conform with the current period presentation for amounts related to a disposal group held for sale and discontinued operations. Refer to Note B - “Assets Held For Sale and Discontinued Operations” for further information.
Our quarterly operating results are affected by the number of billing days in a particular quarter, the seasonality of our clients’ businesses and increased holiday and vacation days taken. In addition, we typically experience an increase in costs in the first quarter of each fiscal year as a result of certain U.S. state and federal employment tax resets, which negatively impacts our gross profit and overall profitability. 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 subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “Kforce,” “the Company,” “we,” “the Firm,” “management,” “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; income taxes; self-insured liabilities for workers’ compensation and health insurance; obligations for the pension plan and goodwill and any related impairment. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.
Earnings per Share
Basic earnings per share is computed as net income divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per share is computed by dividing net income by diluted WASO. Diluted WASO includes the dilutive effect of 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, 2019 and 2018, there were 503 thousand and 290 thousand common stock equivalents included in the diluted WASO, respectively. For the three months ended March 31, 2019 and 2018, there were insignificant anti-dilutive common stock equivalents.
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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 $500 thousand in claims annually. 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.
New Accounting Standards
Recently Adopted Accounting Standards
In August 2018, the FASB issued authoritative guidance regarding a customer's accounting for implementation costs incurred for a cloud computing arrangement that is a service contract. The amendment aligns the requirements for capitalizing these implementation costs with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, and defer these costs over the non-cancelable term of the cloud computing arrangements plus any optional renewal periods that are reasonably certain to be exercised. This amendment also requires entities to present cash flows, capitalized costs and amortization expense in the same financial statement line items as the service costs incurred for such arrangements. The guidance is effective for fiscal periods beginning after December 15, 2019 with retrospective application or prospective to all implementation costs incurred after the date of adoption. We early adopted this standard using the prospective method effective January 1, 2019. Our hosting arrangements that are service contracts relate to technology solutions applicable to our business. Historically, these implementation costs were recorded as capital expenditures within investing cash flows and the capitalized costs were included in Other assets, net in the consolidated balance sheets. Due to the adoption of this standard and effective January 1, 2019, these implementation costs will be recorded within operating cash flows going forward. Capitalized costs will be recorded in Prepaids and other current assets if expected to be recognized within one year and Other assets, net, if over one year, in the Unaudited Condensed Consolidated Balance Sheets. As of March 31, 2019, implementation costs capitalized were $0.2 million, and there was no accumulated amortization or amortization expense recorded during the three months ended March 31, 2019.
In February 2018, the FASB issued authoritative guidance regarding the reclassification of certain stranded tax effects from accumulated other comprehensive income to retained earnings as a result of the change in tax rates related to the Tax Cuts and Jobs Act. The guidance is effective for fiscal periods beginning after December 15, 2018. We elected to adopt this optional standard and reclassified approximately $168 thousand from accumulated other comprehensive income to retained earnings on January 1, 2019 using the period of adoption method.
In August 2017, the FASB issued authoritative guidance targeting improvements to accounting for hedging activities, which expands and clarifies hedge accounting for nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements, and simplifies the requirements for assessing effectiveness in a hedging relationship. The guidance is effective for annual periods beginning after December 15, 2018. We adopted this standard using the modified retrospective approach with no required cumulative adjustments as of January 1, 2019. Additionally, we adopted the presentation and disclosure requirements using the prospective method as required. Refer to Note L - “Derivative Instrument and Hedging Activity” for the additional disclosures of the Firm’s derivative instrument.
In February 2016, the FASB issued authoritative guidance regarding the accounting for leases, and has since issued subsequent updates to the initial guidance. The amended guidance requires the recognition of assets and liabilities for operating leases. The guidance is effective for annual periods beginning after December 15, 2018. We adopted this standard using the optional transition method as of January 1, 2019, without retrospective application to comparative periods. Refer to Note I - "Leases" for additional accounting policy and transition disclosures related to our leases. 

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Accounting Standards Not Yet Adopted
In August 2018, the FASB issued authoritative guidance regarding changes to the disclosure requirement for defined benefit plans including additions and deletions to certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The guidance is effective for fiscal periods beginning after December 15, 2020 with the retrospective method required for all periods presented. The adoption of this guidance will modify our disclosures but is not expected to have a material effect on our consolidated financial statements.
In August 2018, the FASB issued authoritative guidance regarding changes to the disclosure requirements for fair value measurement. The amendments pertaining to changes in unrealized gains and losses, the weighted average and range of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The guidance is effective for fiscal periods beginning after December 15, 2019. The adoption of this guidance will modify our disclosures but is not expected to have a material effect on our consolidated financial statements.
In June 2016, the FASB issued authoritative guidance on accounting for credit losses on financial instruments, including trade receivables. The guidance requires the application of a current expected credit loss model, which measures credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual periods beginning after December 15, 2019. The guidance requires adoption using a modified retrospective approach. We are currently evaluating the potential impact on our consolidated financial statements, especially with respect our disclosures.
Note B - Assets Held For Sale and Discontinued Operations
During the three months ended March 31, 2019, management committed to a plan to divest of our Government Solutions (“GS”) segment as a result of the Firm’s strategic decision to focus solely on the commercial technical and professional staffing services and solutions space. The GS segment consisted of Kforce Government Solutions, Inc. (“KGS”), our federal government solutions business, and TraumaFX®, our federal government product business. We evaluated the six criteria for classification of assets held for sale and determined that the GS segment was a disposal group held for sale as of March 31, 2019. We determined that the divestiture of the GS segment was a strategic shift that will have a major effect on operations and financial results of the Firm. Kforce will not have significant continuing involvement in the operations of the GS segment after its disposition. Therefore, the GS segment was reflected as held for sale on the consolidated balance sheets as of March 31, 2019 and December 31, 2018, and included in discontinued operations in the consolidated statements of operations for the three months ended March 31, 2019 and 2018.
The following table summarizes the line items of pretax profit for the GS segment (in thousands):
Three Months Ended March 31,
20192018
Revenue$26,426 $28,852 
Direct costs19,015 21,201 
Gross profit7,411 7,651 
Selling, general and administrative expenses5,432 5,810 
Depreciation and amortization235 242 
Income from discontinued operations1,744 1,599 
Other expense (income), net864 (4)
Income from discontinued operations, before income taxes880 1,603 
Income tax (benefit) expense(18,001)413 
Income from discontinued operations, net of tax$18,881 $1,190 

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Historically, Kforce was not required to record a deferred tax asset for the excess of the outside tax basis in the equity of KGS over the amount of the inside basis in the assets of KGS used for external reporting under GAAP as it was not apparent that this deferred tax asset would be realized. During the three months ended March 31, 2019, we entered into a definitive agreement to sell the stock of KGS; therefore, we were required to record an increase of $18.5 million to deferred tax assets since it became apparent that the temporary difference would reverse in the foreseeable future. The corresponding income tax benefit was included in Income from discontinued operations, net of tax in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.
The following table summarizes the carrying amounts of the major classes of assets and liabilities held for sale for the GS segment (in thousands):
March 31, 2019December 31, 2018
ASSETS
Current assets held for sale:
Trade receivables $21,403 $24,336 
Prepaid expenses and other current assets5,285 5,437 
Total Current assets held for sale$26,688 $29,773 
Noncurrent assets held for sale:
Fixed assets, net$1,354 $1,496 
Other assets, net1,559 293 
Deferred tax assets, net20,518 2,604 
Intangible assets, net2,866 2,952 
Goodwill20,928 20,928 
Total Noncurrent assets held for sale (1)$47,225 $28,273 
LIABILITIES
Current liabilities held for sale:
Accounts payable and other accrued liabilities$11,727 $6,064 
Accrued payroll costs5,192 5,878 
Current portion of operating lease liabilities682  
Other current liabilities 8 16 
Income taxes payable 305 
Total Current liabilities held for sale $17,609 $12,263 
Noncurrent liabilities held for sale:
Other long-term liabilities$1,970 $4,551 
Total Noncurrent liabilities held for sale$1,970 $4,551 
(1) At March 31, 2019, Noncurrent assets held for sale in the Unaudited Condensed Consolidated Balance Sheets of $51.0 million also includes $3.8 million related to a long-lived asset unrelated to the GS segment.
Management considered the qualitative and quantitative factors for the goodwill associated with the GS reporting unit and determined that there was no indication that the carrying value was likely impaired. The GS reporting unit's goodwill balance of $20.9 million was reclassified to assets held for sale at March 31, 2019 and December 31, 2018.

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The contingent consideration liability, related to the acquisition of TraumaFX® in 2014, of $1.1 million is included in Accounts payable and other accrued liabilities within Current liabilities held for sale as of March 31, 2019 and $0.2 million is included in Other long-term liabilities within Noncurrent liabilities held for sale as of December 31, 2018. This liability is remeasured at fair value on a recurring basis 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. For the three months ended March 31, 2019, approximately $0.9 million of expense was recognized due to the remeasurement of our contingent consideration liability. Remeasurements to fair value are recorded in Income from discontinued operations, net of tax within the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.
For the three months ended March 31, 2019, 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, 2018, cash provided by operating activities and cash used in investing activities for discontinued operations were $0.5 million and $0.4 million, respectively.
Subsequent Event
On April 1, 2019, Kforce completed the sale of all the issued and outstanding stock of Kforce Government Holdings, Inc., including its wholly-owned subsidiary KGS, to ManTech International Corporation for a cash purchase price of $115.0 million, subject to a post-closing working capital adjustment. We expect a gain on the sale, net of transaction costs, of approximately $72.0 million. The transaction costs are expected to total approximately $9.5 million and primarily include legal fees, commissions, transaction bonuses and accelerated stock-based compensation expense triggered by a change in control of KGS. The Firm does not expect to pay any income tax on this transaction due to it being structured as a stock sale and Kforce’s significant outside tax basis, which has been recognized as a deferred tax asset in accordance with GAAP as of March 31, 2019, as discussed above. The gain on the sale of KGS and the reversal of the related deferred tax asset and income tax benefit of $18.5 million will be recorded in discontinued operations during the three months ended June 30, 2019.
While the sale of KGS did not include TraumaFX®, management announced on March 1, 2019 that it is exploring strategic alternatives for TraumaFX® which includes, but is not limited to, a potential sale of the business. This process is continuing and there can be no assurance of any particular outcome. The conclusion of the process is expected to occur within the next year.
Note C - Reportable Segments
Kforce provides services through the following segments: Technology (“Tech”) and Finance and Accounting (“FA”). Historically, and for the three months ended March 31, 2019 and 2018, we have reported sales and gross profit information on a segment basis. Total assets, liabilities and operating expenses are not reported separately by segment as our operations are largely combined.
The following table provides information on the operations of our segments (in thousands):
TechFATotal
Three Months Ended March 31,
2019
Revenue$255,643 $71,095 $326,738 
Gross profit$68,822 $24,354 $93,176 
Operating expenses and other expenses82,386 
Income from continuing operations, before income taxes$10,790 
2018
Revenue$236,497 $80,944 $317,441 
Gross profit$65,376 $27,161 $92,537 
Operating expenses and other expenses81,892 
Income from continuing operations, before income taxes$10,645 

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Note D - Revenue
The following table provides information on revenue by segment and type (in thousands):
TechFATotal
Three Months Ended March 31,
2019
Revenue by type:
Flex revenue$250,216 $64,765 $314,981 
Direct Hire revenue5,427 6,330 11,757 
Total Revenue$255,643 $71,095 $326,738 
2018
Revenue by type:
Flex revenue$231,496 $74,550 $306,046 
Direct Hire revenue5,001 6,394 11,395 
Total Revenue$236,497 $80,944 $317,441 

Note E - Commitments and Contingencies
Employment Agreements
Kforce has 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 ranging from 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 subject to certain post-employment restrictive covenants. At March 31, 2019, our liability would be approximately $32.8 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 $14.3 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.
Litigation
We are involved in legal proceedings, claims and administrative matters that arise in the ordinary course of 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. Legal costs incurred in connection with loss contingencies are expensed as incurred.

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Note F - Other Assets, Net
Other assets, net consisted of the following (in thousands):
March 31, 2019December 31, 2018
Assets held in Rabbi Trust$32,593 $29,134 
Right-of-use assets for operating leases, net15,289 — 
Capitalized software, net5,477 4,828 
Deferred loan costs, net1,120 1,182 
Interest rate swap derivative instrument525 900 
Other non-current assets1,425 620 
Total Other assets, net$56,429 $36,664 

Note G - Current Liabilities
The following table provides information on certain current liabilities balances (in thousands):
March 31, 2019December 31, 2018
Accounts payable and other accrued liabilities:
Accounts payable$20,571 $18,793 
Accrued liabilities11,580 13,749 
Total Accounts payable and other accrued liabilities$32,151 $32,542 
Accrued payroll costs:
Payroll and benefits$34,525 $34,768 
Health insurance liabilities3,873 2,680 
Payroll taxes898 920 
Workers’ compensation liabilities1,015 1,016 
Total Accrued payroll costs$40,311 $39,384 
Our accounts payable balance includes vendor and independent contractor payables. Our accrued liabilities balance includes the current portion of the deferred compensation plans liability, contract liabilities from contracts with customers (such as rebates) and other accrued liabilities.
Note H - Other Long-Term Liabilities 
Other long-term liabilities consisted of the following (in thousands):
March 31, 2019December 31, 2018
Deferred compensation plan $27,343 $25,672 
Supplemental executive retirement plan15,250 15,035 
Operating lease liabilities11,452  
Other long-term liabilities1,294 2,802 
Total Other long-term liabilities$55,339 $43,509 


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Note I - Leases
We determine if a contract or arrangement meets the definition of a lease at inception. Kforce leases property for our field offices as well as certain office equipment. We adopted the new lease standard using the optional transition method in the period of adoption as of January 1, 2019, without retrospective application to comparative periods. We recorded approximately $17.6 million of right-of-use (“ROU”) assets and $21.0 million of lease liabilities on our consolidated balance sheet on January 1, 2019 related to operating leases. The difference between the ROU assets and lease liabilities balances relates to the lease incentive liabilities as of December 31, 2018 in accordance with the previous lease accounting guidance. We determined that no cumulative effect adjustment to retained earnings was necessary upon adoption. ROU assets for operating leases are recorded within Other assets, net and operating lease liabilities are recorded within Other current liabilities if expected to be recognized in less than one year and Other long-term liabilities, if over one year, in the Unaudited Condensed Consolidated Balance Sheet. Operating lease additions are disclosed as a non-cash transaction in Note N - "Supplemental Cash Flow Information" and the amortization of the ROU assets is reflected as Noncash lease expense within operating activities in the Unaudited Condensed Consolidated Statement of Cash Flows. We elected the package of practical expedients and did not reassess our prior conclusions regarding lease identification, lease classification and initial direct costs. We did not elect the hindsight practical expedient.
Finance leases are not significant to our operations as of and for the three months ended March 31, 2019.
Operating Leases
We elected not to separate lease and non-lease components when determining the consideration in the contract. ROU assets and lease liabilities are recognized based on the present value of the lease payments over the lease term at the commencement date. If there is no rate implicit in the lease, we use our incremental borrowing rate in the present value calculation, which is based on our collateralized borrowing rate and determined based on the terms of our leases and the economic environment in which they exist. Our weighted-average discount rate was 4.00% on March 31, 2019. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.
Our lease terms typically range from three to five years with one or more options to renew with similar terms. The exercise of renewal options is at our sole discretion and is included in the lease term if we are reasonably certain that the renewal option will be exercised. Our weighted-average remaining lease term was 3.5 years on March 31, 2019.
We elected the short term practical expedient for any leases with an initial term of 12 months or less and did not recognize ROU assets or lease liabilities for those leases.
Certain of our operating leases require variable payments of property taxes, insurance and common area maintenance, in addition to base rent. Variable lease costs, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred.
The following table presents operating lease expense included in selling, general and administrative expenses ("SG&A") for the three months ended March 31, 2019 (in thousands):
Three Months Ended
Lease CostMarch 31, 2019
Operating lease expense$1,768 
Variable lease costs382 
Short term lease expense180 
Sublease income(106)
Total operating lease expense$2,224 

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The following table presents the maturities of operating lease liabilities as of March 31, 2019 (in thousands):
Remainder of 2019$4,725 
20205,855 
20213,431 
20221,832 
20231,590 
2024740 
Thereafter459 
Total maturities of operating lease liabilities18,632 
Less: Interest1,319 
Total operating lease liabilities$17,313 
The following table presents the expected future contractual operating lease obligations as of December 31, 2018 (in thousands):
2019$6,994 
20206,177 
20213,731 
20222,142 
20231,745 
Thereafter1,199 
Total future contractual operating lease obligations$21,988 

Note J - Employee Benefit Plans
Supplemental Executive Retirement Plan
Kforce maintains a Supplemental Executive Retirement Plan (“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,
20192018
Service cost$65 $338 
Interest cost151 117 
Net periodic benefit cost$216 $455 
The service cost is recorded in SG&A 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, 2019 and December 31, 2018 was $15.3 million and $15.0 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, 2019. Kforce does not currently anticipate funding the SERP during the year ended December 31, 2019.

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Note K - Stock Incentive Plans
On April 23, 2019, the Kforce shareholders approved the 2019 Stock Incentive Plan (the “2019 Plan”). The 2019 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 2019 Plan is approximately 2.8 million shares. The 2019 Plan terminates on April 23, 2029. Prior to the effective date of the 2019 Plan, the Company granted stock awards to eligible participants under our 2017 Stock Incentive Plan, 2016 Stock Incentive Plan and 2013 Stock Incentive Plan (collectively the “Prior Plans”). As of the effective date of the 2019 Plan, no additional awards may be granted pursuant to the Prior Plans; however, awards outstanding as of the effective date will continue to vest in accordance with the terms of the Prior Plans.
During the three months ended March 31, 2019 and 2018, stock-based compensation expense from continuing operations was $2.5 million and $2.2 million, respectively.
Restricted Stock
Restricted stock (including RSAs and RSUs) are granted to executives and management either: for awards related to Kforce’s annual long-term incentive (“LTI”) compensation program or as part of a compensation package in order to retain directors, executives and management. The LTI award amounts are generally based on total shareholder return performance goals. Restricted stock granted during the three months ended March 31, 2019 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 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 is 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, 2019 (in thousands, except per share amounts):
Number of Restricted StockWeighted-Average
Grant Date
Fair Value
Total Intrinsic
Value of Restricted
Stock Vested
Outstanding at December 31, 20181,320 $24.94 
Granted12 $30.72 
Forfeited(8)$24.63 
Vested(8)$20.15 $308 
Outstanding at March 31, 20191,316 $25.02 
The weighted-average grant date fair value at December 31, 2018 has been updated in the table above to correct an immaterial reporting error in our 2018 Annual Report on Form 10-K.
As of March 31, 2019, total unrecognized stock-based compensation expense related to restricted stock was $26.9 million, which will be recognized over a weighted-average remaining period of 3.8 years.

Note L - 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.

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On April 21, 2017, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A. (the “Swap”). The Swap was effective May 31, 2017 and matures April 29, 2022. The Swap rate is 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 the Swap based on the notional amount of the Swap. The notional amount of the Swap is $65.0 million for the first three years and decreases to $25.0 million for years four and five. 
The Swap has been designated as a cash flow hedge and was effective as of March 31, 2019. The change in the fair value of the Swap was recorded as a component of Accumulated other comprehensive income in the Unaudited Condensed Consolidated Balance Sheets.
The following table sets forth the activity in the accumulated derivative instrument gain for the three months ended March 31, 2019 (in thousands):
Accumulated derivative instrument gain, beginning of period$900 
Net change associated with current period hedging transactions(375)
Accumulated derivative instrument gain, end of period$525 

Note M - Fair Value Measurements
Kforce’s interest rate swap is measured at fair value using readily observable inputs, such as the LIBOR interest rate, which are considered to be Level 2 inputs. The Swap is recorded in Other assets, net within the accompanying Unaudited Condensed Consolidated Balance Sheets. Refer to Note L - “Derivative Instrument and Hedging Activity” for a complete discussion of the Firm’s derivative instrument.
Certain assets, in specific circumstances, are measured at fair value on a non-recurring basis utilizing Level 3 inputs such as goodwill 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.
The following table sets forth by level, within the fair value hierarchy, estimated fair values on a recurring basis (in thousands):
Assets/(Liabilities) Measured at Fair Value:Asset/(Liability)Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
At March 31, 2019
Recurring basis:
Interest rate swap derivative instrument$525 $ $525 $ 
At December 31, 2018
Recurring basis:
Interest rate swap derivative instrument$900 $ $900 $ 
There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the three months ended March 31, 2019.

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Note N - Supplemental Cash Flow Information
The following table provides information regarding supplemental cash flows (in thousands):
Three Months Ended March 31,
20192018
Cash Paid During the Period For:
Income taxes$184 $89 
Interest, net627 1,343 
Operating lease liabilities1,836 — 
Non-Cash Financing and Investing Transactions:
ROU assets obtained from new operating leases$817 $— 
Unsettled repurchases of common stock369  
Employee stock purchase plan140 132 
Shares tendered in payment of exercise price of stock options 46 
During the three months ended March 31, 2018, cash provided by operating activities included the receipt of an income tax refund in the amount of $6.8 million.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
EXECUTIVE SUMMARY
During the three months ended March 31, 2019, management announced that Kforce entered into a definitive agreement to sell KGS and is exploring strategic alternatives for TraumaFX®. KGS and TraumaFX® comprised the Firm’s GS segment, which was included in discontinued operations in the consolidated financial statements for the three months ended March 31, 2019 and 2018. Refer to Note B - “Assets Held For Sale and Discontinued Operations” to the Notes to the Unaudited Condensed Consolidated Financial Statements for a more detailed discussion. Except as specifically noted, our discussions below exclude any activity related to the GS segment, which is addressed separately in the discussion of income from discontinued operations, net of tax, and certain prior year amounts have been reclassified to conform to current year presentation.
The following is an executive summary of what Kforce believes are highlights as of and for the three months ended March 31, 2019, which should be considered in the context of the additional discussions herein and in conjunction with the unaudited condensed consolidated financial statements and notes thereto.
Revenue for the three months ended March 31, 2019 increased 2.9% (4.6% on a billing day basis) to $326.7 million from $317.4 million in the comparable period in 2018.
Flex revenue for the three months ended March 31, 2019 increased 2.9% (4.6% on a billing day basis) over the comparable period in 2018. Flex revenue increased 8.1% for Tech (9.8% on a billing day basis) and decreased 13.1% for FA (11.7% on a billing day basis).
Direct Hire revenue for the three months ended March 31, 2019 increased 3.2% to $11.8 million from $11.4 million in the comparable period in 2018.
Flex gross profit margin for the three months ended March 31, 2019 decreased 70 basis points to 25.8% from 26.5% in the comparable period in 2018. For the three months ended March 31, 2019, Flex gross profit decreased 80 basis points and 10 basis points for Tech and FA, respectively.
SG&A as a percentage of revenue for the three months ended March 31, 2019 decreased to 24.4% from 24.8% in the comparable period in 2018. SG&A expenses for the three months ended March 31, 2019 include $2.0 million of severance and other costs due to actions taken as a result of the KGS divestiture, which negatively impacted SG&A. The overall improvement in SG&A was primarily due to an improvement in associate productivity, lower overall headcount and a continued focus on expense discipline.
Income from continuing operations for the quarter ended March 31, 2019 of $8.0 million, or $0.32 per share, remained flat as compared to the quarter ended March 31, 2018. The aforementioned severance and other costs negatively impacted EPS from continuing operations.
The total amount outstanding under our Credit Facility as of March 31, 2019 was $82.5 million, which increased $10.7 million from December 31, 2018, due to the amount of capital returned to our shareholders in the first quarter of 2019.
The Firm returned $19.0 million of capital to our shareholders in the form of a quarterly dividend of $4.4 million, or $0.18 per share, and common stock repurchases of $14.6 million during the three months ended March 31, 2019.
Cash provided by operating activities was $11.8 million during the three months ended March 31, 2019 compared to $10.3 million for the three months ended March 31, 2018.


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RESULTS OF OPERATIONS
Business Overview
Kforce provides professional staffing services and solutions to clients through our Tech and FA segments. Kforce provides staffing services and solutions on both a temporary (“Flex”) and permanent (“Direct Hire”) basis. We operate through our corporate headquarters in Tampa, Florida with approximately 50 field offices located throughout the United States. As of March 31, 2019, Kforce employed nearly 2,400 associates and more than 10,300 consultants on assignment.
Kforce serves clients across many industries and geographies as well as companies of all sizes with a particular focus on Fortune 1000 and similarly-sized companies. We believe that our portfolio of service offerings are a key contributor to our long-term financial stability.
From an economic standpoint, temporary employment figures and trends are important indicators of staffing demand, which have continued to be positive during 2019, based on data published by the Bureau of Labor Statistics and Staffing Industry Analysts. The penetration rate (the percentage of temporary staffing to total employment) and unemployment rate were 2.0% and 4.1%, respectively, in March 2019. Total non-farm employment was up 1.5% year-over-year as of March 2019, and temporary help employment was up 3.8% for the same period. In addition, the college-level unemployment rate, which we believe serves as a proxy for professional employment and therefore aligns well with the candidate and consultant population that Kforce most typically serves, was 2.0% in March 2019. Further, we believe that the unemployment rate in the specialties we serve, especially in certain technology skill sets, is lower than the published averages, which we believe speaks to the demand environment in which we are operating.
Operating Results - Three Months Ended March 31, 2019 and 2018
The following table presents, as a percentage of revenue, certain items in our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income:
Three Months Ended
March 31,
20192018
Revenue by segment:
Tech78.2 %74.5 %
FA21.8  25.5  
Total Revenue100.0 %100.0 %
Revenue by type:
Flex96.4 %96.4 %
Direct Hire3.6  3.6  
Total Revenue100.0 %100.0 %
Gross profit28.5 %29.2 %
Selling, general and administrative expenses24.4 %24.8 %
Depreciation and amortization0.5 %0.6 %
Income from operations3.6 %3.8 %
Income from continuing operations, before income taxes3.3 %3.4 %
Income from continuing operations2.4 %2.5 %
Income from discontinued operations, net of tax5.8 %0.4 %
Net income8.2 %2.9 %
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Revenue. The following table presents revenue by type for each segment and the percentage change from the prior period (in thousands):
Three Months Ended March 31,
2019Increase
(Decrease)
2018
Tech
Flex revenue$250,216 8.1 %$231,496 
Direct Hire revenue5,427 8.5