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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 4, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1088
KELLY SERVICES, INC.
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware38-1510762
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

999 West Big Beaver Road, Troy, Michigan 48084
-------------------------------------------------------------------------------
(Address of principal executive offices)  (Zip Code)

(248) 362-4444
----------------------------------------------------------------------
(Registrant’s telephone number, including area code)

No Change
-----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:
Title of each
class
Trading
Symbols
Name of each exchange
on which registered
Class A CommonKELYANASDAQ Global Market
Class B CommonKELYBNASDAQ Global Market
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 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 shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)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 Exchange Act).
Yes No
At May 3, 2021, 36,010,525 shares of Class A and 3,358,521 shares of Class B common stock of the Registrant were outstanding.
2


KELLY SERVICES, INC. AND SUBSIDIARIES 
 Page Number

3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In millions of dollars except per share data)
 
 13 Weeks Ended
 April 4,
2021
March 29,
2020
Revenue from services$1,205.9 $1,261.1 
Cost of services992.6 1,037.8 
Gross profit213.3 223.3 
Selling, general and administrative expenses202.7 219.5 
Goodwill impairment charge 147.7 
Gain on sale of assets (32.1)
Earnings (loss) from operations10.6 (111.8)
Gain (loss) on investment in Persol Holdings30.0 (77.8)
Other income (expense), net(3.4)1.7 
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate37.2 (187.9)
Income tax expense (benefit)10.5 (36.2)
Net earnings (loss) before equity in net earnings (loss) of affiliate26.7 (151.7)
Equity in net earnings (loss) of affiliate(1.1)(1.5)
Net earnings (loss)$25.6 $(153.2)
Basic earnings (loss) per share$0.65 $(3.91)
Diluted earnings (loss) per share$0.64 $(3.91)
Average shares outstanding (millions):
Basic39.3 39.2 
Diluted39.5 39.2 
 
See accompanying unaudited Notes to Consolidated Financial Statements..
4


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In millions of dollars)
 
 13 Weeks Ended
 April 4,
2021
March 29,
2020
Net earnings (loss)$25.6 $(153.2)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax expense of $0.5 and $0.1, respectively(13.6)(7.4)
Less: Reclassification adjustments included in net earnings (loss)  
Foreign currency translation adjustments(13.6)(7.4)
Other comprehensive income (loss)(13.6)(7.4)
Comprehensive income (loss)$12.0 $(160.6)

See accompanying unaudited Notes to Consolidated Financial Statements.
5


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions) 
April 4,
2021
January 3,
2021
Assets
Current Assets  
Cash and equivalents$239.4 $223.0 
Trade accounts receivable, less allowances of $12.6 and $13.3, respectively1,279.7 1,265.2 
Prepaid expenses and other current assets76.5 61.4 
Total current assets1,595.6 1,549.6 
Noncurrent Assets
Property and equipment:
Property and equipment215.4 222.3 
Accumulated depreciation(176.5)(181.3)
Net property and equipment38.9 41.0 
Operating lease right-of-use assets79.0 83.2 
Deferred taxes286.4 282.0 
Goodwill, net3.5 3.5 
Investment in Persol Holdings181.7 164.2 
Investment in equity affiliate118.7 118.5 
Other assets306.3 319.9 
Total noncurrent assets1,014.5 1,012.3 
Total Assets$2,610.1 $2,561.9 

See accompanying unaudited Notes to Consolidated Financial Statements.
=
6


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions) 
April 4,
2021
January 3,
2021
Liabilities and Stockholders’ Equity
Current Liabilities  
Short-term borrowings$1.1 $0.3 
Accounts payable and accrued liabilities554.3 536.8 
Operating lease liabilities18.8 19.6 
Accrued payroll and related taxes309.9 293.0 
Accrued workers’ compensation and other claims21.9 22.7 
Income and other taxes56.9 53.2 
Total current liabilities962.9 925.6 
Noncurrent Liabilities  
Operating lease liabilities63.9 67.5 
Accrued payroll and related taxes58.5 58.5 
Accrued workers’ compensation and other claims40.7 42.2 
Accrued retirement benefits204.7 205.8 
Other long-term liabilities63.7 59.3 
Total noncurrent liabilities431.5 433.3 
Commitments and contingencies (see Contingencies footnote)
Stockholders’ Equity  
Capital stock, $1.00 par value  
Class A common stock, 100.0 shares authorized; 36.7 shares issued at 2021 and 202036.7 36.7 
Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2021 and 20203.4 3.4 
Treasury stock, at cost 
Class A common stock, 0.7 shares at 2021 and 0.8 shares at 2020(15.1)(16.5)
Class B common stock(0.6)(0.6)
Paid-in capital20.6 21.3 
Earnings invested in the business1,188.5 1,162.9 
Accumulated other comprehensive income (loss)(17.8)(4.2)
Total stockholders’ equity1,215.7 1,203.0 
Total Liabilities and Stockholders’ Equity$2,610.1 $2,561.9 

See accompanying unaudited Notes to Consolidated Financial Statements.
7


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In millions of dollars)

 13 Weeks Ended
 April 4,
2021
March 29,
2020
Capital Stock
Class A common stock
Balance at beginning of period$36.7 $36.6 
Conversions from Class B— — 
Balance at end of period36.7 36.6 
Class B common stock
Balance at beginning of period3.4 3.5 
Conversions to Class A— — 
Balance at end of period3.4 3.5 
Treasury Stock
Class A common stock
Balance at beginning of period(16.5)(20.3)
Net issuance of stock awards1.4 2.9 
Balance at end of period(15.1)(17.4)
Class B common stock
Balance at beginning of period(0.6)(0.6)
Net issuance of stock awards  
Balance at end of period(0.6)(0.6)
Paid-in Capital
Balance at beginning of period21.3 22.5 
Net issuance of stock awards(0.7)(3.0)
Balance at end of period20.6 19.5 
Earnings Invested in the Business
Balance at beginning of period1,162.9 1,238.6 
Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13, Credit Losses— (0.7)
Net earnings (loss)25.6 (153.2)
Dividends (3.0)
Balance at end of period1,188.5 1,081.7 
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period(4.2)(15.8)
Other comprehensive income (loss), net of tax(13.6)(7.4)
Balance at end of period(17.8)(23.2)
Stockholders’ Equity at end of period$1,215.7 $1,100.1 

See accompanying unaudited Notes to Consolidated Financial Statements.
8


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions of dollars)
 13 Weeks Ended
 April 4,
2021
March 29,
2020
Cash flows from operating activities:  
Net earnings (loss)$25.6 $(153.2)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:  
Goodwill impairment charge 147.7 
Deferred income taxes on goodwill impairment charge (23.0)
Depreciation and amortization5.9 6.0 
Operating lease asset amortization5.2 5.3 
Provision for credit losses and sales allowances(0.1)(0.4)
Stock-based compensation1.4 1.2 
(Gain) loss on investment in Persol Holdings(30.0)77.8 
Gain on sale of assets (32.1)
Equity in net (earnings) loss of PersolKelly Pte. Ltd.1.1 1.5 
Other, net1.3 0.7 
Changes in operating assets and liabilities, net of acquisitions0.1 (23.1)
Net cash from operating activities10.5 8.4 
Cash flows from investing activities:  
Capital expenditures(2.7)(3.0)
Proceeds from company-owned life insurance10.4  
Proceeds from sale of assets 55.5 
Acquisition of companies, net of cash received (36.3)
Investment in equity securities (0.3)
Other investing activities0.2  
Net cash from investing activities7.9 15.9 
Cash flows from financing activities:  
Net change in short-term borrowings0.8 (0.1)
Financing lease payments(0.2)(0.3)
Payments of tax withholding for stock awards(0.5)(1.1)
Dividend payments (3.0)
  Other financing activities (0.1)
Net cash from (used in) financing activities0.1 (4.6)
Effect of exchange rates on cash, cash equivalents and restricted cash(1.4)2.8 
Net change in cash, cash equivalents and restricted cash17.1 22.5 
Cash, cash equivalents and restricted cash at beginning of period228.1 31.0 
Cash, cash equivalents and restricted cash at end of period (1)
$245.2 $53.5 




9


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(In millions of dollars)

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported in our consolidated balance sheets:
13 Weeks Ended
April 4,
2021
March 29,
2020
Reconciliation of cash, cash equivalents and restricted cash:
Current assets:
Cash and cash equivalents$239.4 $48.3 
Restricted cash included in prepaid expenses and other current assets0.2 0.2 
Noncurrent assets:
Restricted cash included in other assets5.6 5.0 
Cash, cash equivalents and restricted cash at end of period$245.2 $53.5 

See accompanying unaudited Notes to Consolidated Financial Statements.
10

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.  Basis of Presentation
The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the “Company,” “Kelly,” “we” or “us”) have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended January 3, 2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 18, 2021 (the 2020 consolidated financial statements). The Company’s first fiscal quarter ended on April 4, 2021 (2021) and March 29, 2020 (2020), each of which contained 13 weeks.

As discussed in the Segment Disclosures footnote, the Company changed its reportable segments during the third quarter of 2020. As a result, certain reclassifications have been made to the financial statements for the first quarter of 2020 to conform to our updated reportable segment presentation.




11

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
2.  Revenue
Revenue Disaggregated by Service Type

Kelly has five specialty segments: Professional & Industrial (“P&I”), Science, Engineering & Technology (“SET”), Education, Outsourcing & Consulting Group ("Outsourcing & Consulting," "OCG") and International. Other than OCG, each segment delivers talent through staffing services, permanent placement or outcome-based services. Our OCG segment delivers talent solutions including managed service provider ("MSP"), payroll process outsourcing ("PPO"), recruitment process outsourcing ("RPO"), and talent advisory services. International also delivers RPO talent solutions within its local markets.

The following table presents our segment revenues disaggregated by service type (in millions):

First Quarter
20212020
Professional & Industrial
Staffing services$352.5 $388.4 
Permanent placement4.9 3.0 
Outcome-based services110.2 102.4 
Total Professional & Industrial467.6 493.8 
Science, Engineering & Technology
Staffing services186.2 199.2 
Permanent placement4.8 3.4 
Outcome-based services63.7 67.6 
Total Science, Engineering & Technology254.7 270.2 
Education
Staffing services110.8 142.4 
Permanent placement0.8 0.1 
Total Education111.6 142.5 
Outsourcing & Consulting
Talent solutions99.3 89.5 
Total Outsourcing & Consulting99.3 89.5 
International
Staffing services265.6 259.5 
Permanent placement5.5 5.7 
Talent solutions1.8  
Total International272.9 265.2 
Total Intersegment(0.2)(0.1)
Total Revenue from Services$1,205.9 $1,261.1 

12

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
Revenue Disaggregated by Geography

Our operations are subject to different economic and regulatory environments depending on geographic location. Our P&I and Education segments operate in the Americas region, our SET segment operates in the Americas and Europe regions, and OCG operates in the Americas, Europe and Asia-Pacific regions. The International segment includes Europe and our Brazil and Mexico operations, which are included in the Americas region. Our Brazil operations were sold in August 2020 (see Acquisitions and Disposition footnote).

The below table presents our revenues disaggregated by geography (in millions):

First Quarter
20212020
Americas
United States$858.5 $928.5 
Mexico34.6 28.7 
Canada34.1 32.8 
Puerto Rico24.2 17.7 
Brazil 9.1 
Total Americas Region951.4 1,016.8 
Europe
France54.3 52.5 
Switzerland52.7 44.2 
Portugal43.7 43.6 
Russia32.6 32.1 
Italy18.1 14.7 
United Kingdom17.0 22.3 
Germany7.1 8.0 
Ireland5.1 5.0 
Other15.6 15.2 
Total Europe Region246.2 237.6 
Total Asia-Pacific Region8.3 6.7 
Total Kelly Services, Inc.$1,205.9 $1,261.1 
















13

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
The below table presents our SET, OCG and International segment revenues disaggregated by geographic region (in millions):

First Quarter
20212020
Science, Engineering & Technology
Americas$253.2 $268.4 
Europe1.5 1.8 
Total Science, Engineering & Technology$254.7 $270.2 
Outsourcing & Consulting
Americas$84.8 $74.6 
Europe6.2 8.2 
Asia-Pacific8.3 6.7 
Total Outsourcing & Consulting$99.3 $89.5 
International
Americas$34.3 $37.6 
Europe238.6 227.6 
Total International$272.9 $265.2 

Deferred Costs

Deferred sales commissions, which are included in other assets in the consolidated balance sheet, were $1.0 million as of first quarter-end 2021 and year-end 2020. Amortization expense for the deferred costs for the first quarter 2021 was $0.2 million and in the first quarter 2020 was $0.3 million.

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $2.4 million as of first quarter-end 2021 and $4.1 million as of year-end 2020. Amortization expense for the deferred costs for the first quarter 2021 was $6.8 million and in the first quarter 2020 was $4.8 million.

3. Credit Losses
On December 30, 2019, we adopted Accounting Standards Codification ("ASC") Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures, as applicable.

The rollforward of our allowance for credit losses related to trade accounts receivable, which is recorded in trade accounts receivable, less allowance in the consolidated balance sheet, is as follows (in millions):
First Quarter
20212020
Allowance for credit losses:
Beginning balance$9.8 $9.7 
Impact of adopting ASC 326 0.3 
Current period provision(0.2)(0.4)
Currency exchange effects(0.2)(0.5)
Write-offs(0.3)(0.2)
Ending balance$9.1 $8.9 

14

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
Write-offs are presented net of recoveries, which were not material for first quarter-end 2020 and 2021.

We are engaged in litigation with a customer over a disputed accounts receivable balance of approximately $10 million for certain services rendered more than five years ago, which is recorded as a long-term receivable in other assets in the consolidated balance sheet. In September 2020, a ruling was issued in favor of the customer, which we have appealed. Upon receiving the ruling, we increased our allowance for credit losses by $9.2 million to reflect the likelihood of collection, which is recorded in other assets in the consolidated balance sheet.

The rollforward of our allowance for credit losses related to the long-term customer receivable, which is recorded in other assets in the consolidated balance sheet, is as follows (in millions):

First Quarter
20212020
Allowance for credit losses:
Beginning balance$10.9 $1.0 
  Impact of adopting ASC 326 0.7 
  Current period provision  
  Currency exchange effects  
Ending Balance$10.9 $1.7 

We are also exposed to credit losses from our loan to PersolKelly Pte. Ltd. and other receivables measured at amortized cost. No other allowances related to the loan or other receivables were material for first quarter-end 2021. See Investment in PersolKelly Pte. Ltd. footnote for more information on the loan to PersolKelly Pte. Ltd.

4.  Acquisitions and Disposition
Acquisitions

In the first quarter of 2020, Kelly Services USA ("KSU"), LLC, a wholly owned subsidiary of the Company, acquired Insight Workforce Solutions LLC and its affiliate, Insight EDU LLC (collectively, "Insight"), as detailed below. In the fourth quarter of 2020, KSU acquired Greenwood/Asher & Associates, LLC ("Greenwood/Asher"), as detailed below.

Greenwood/Asher

On November 18, 2020, KSU acquired 100% of the membership interests of Greenwood/Asher, a premier specialty education executive search firm in the U.S., for a purchase price of $3.5 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Greenwood/Asher at the closing date and estimated working capital adjustments resulting in the Company paying cash of $5.2 million. The purchase price of the acquisition also included contingent consideration with an estimated fair value of $2.1 million related to an earnout payment in the event certain conditions are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model and the liability is recorded in accounts payable and accrued liabilities and other noncurrent liabilities in the consolidated balance sheet (see Fair Value Measurements footnote). Subsequently, the earnout was revalued, resulting in a decrease to the liability of $0.4 million in the first quarter of 2021. The earnout is expected to be paid in 2022 and 2023 after each earnout year pursuant to the terms of the purchase agreement. The purchase price allocation for this acquisition is preliminary and could change.

Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining operations and expanding market potential, and was assigned to the Education reporting unit (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $0.9 million.

Insight

On January 14, 2020, Kelly Services USA, LLC acquired 100% of the membership interests of Insight, an educational staffing company in the U.S, for a purchase price of $34.5 million. Under terms of the purchase agreement, the purchase price was
15

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
adjusted for cash held by Insight at the closing date and estimated working capital adjustments resulting in the Company paying cash of $38.1 million. The purchase price of the acquisition also included contingent consideration with an estimated fair value of $1.6 million related to an earnout payment in the event certain conditions are met per the terms of the agreement. The initial fair value of the earnout was established using a Monte Carlo simulation and the liability is recorded in accounts payable and accrued liabilities in the consolidated balance sheet (see Fair Value Measurements footnote). Subsequently, the earnout was revalued, resulting in a net increase to the liability of $0.1 million in 2020 and there were no material adjustments to the liability in the first quarter of 2021. In the second quarter of 2020, the Company paid a working capital adjustment of $0.1 million. As of year-end 2020, the purchase price allocation for this acquisition is final.

Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining operations and expanding market potential, and was assigned to the former Americas Staffing reporting unit. The goodwill related to this acquisition was included in the goodwill impairment charge taken in the first quarter of 2020. The goodwill impairment charge resulted from an interim goodwill impairment test triggered by declines in our common stock price as a result of negative market reaction to the COVID-19 crisis (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $18.6 million.

Disposition

On August 18, 2020, the Company sold its Brazil operations for a purchase price of $1.4 million. The Company received cash proceeds of $1.2 million, net of cash disposed. As a part of the transaction, the Company has agreed to indemnify the buyer for losses and costs incurred in connection with certain events or occurrences initiated within a six-year period after closing. The aggregate losses for which the Company will provide indemnification shall not exceed $8.8 million. Accordingly, the Company recorded an indemnification liability of $2.5 million at the time of disposition in other long-term liabilities in the consolidated balance sheet, which represented the fair value of the liability (see Fair Value Measurements footnote) and completely offset the gain on the sale.

5. Investment in Persol Holdings
The Company has a yen-denominated investment through the Company's subsidiary, Kelly Services Japan, Inc., in the common stock of Persol Holdings Co., Ltd. ("Persol Holdings"), the 100% owner of Persol Asia Pacific Pte. Ltd., the Company’s joint venture partner in PersolKelly Pte. Ltd. (the "JV"). As our investment is a noncontrolling interest in Persol Holdings, this investment is recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end (see Fair Value Measurements footnote). A gain on the investment of $30.0 million in the first quarter of 2021 and a loss on the investment of $77.8 million in the first quarter of 2020 was recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

6.  Investment in PersolKelly Pte. Ltd.

The Company has a 49% ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing services business operating in ten geographies in the Asia-Pacific region. The operating results of the Company’s interest in the JV are accounted for on a one-quarter lag under the equity method and are reported in equity in net earnings (loss) of affiliate in the consolidated statements of earnings, which amounted to a loss of $1.1 million in the first quarter of 2021 and a loss of $1.5 million in the first quarter of 2020. This investment is evaluated for indicators of impairment on a quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. If we conclude that there is an other-than-temporary impairment of this equity investment, we will adjust the carrying amount of the investment to the current fair value.
The investment in equity affiliate on the Company’s consolidated balance sheet totaled $118.7 million as of first quarter-end 2021 and $118.5 million as of year-end 2020. The net amount due from the JV, a related party, was $5.2 million as of the first quarter-end 2021 and $5.6 million as of year-end 2020. The Company made loans in prior years, proportionate to its 49% ownership, to the JV to fund working capital requirements as a result of their sustained revenue growth. As of first quarter-end 2021, the outstanding loan balance is $5.8 million and is recorded in prepaid expenses and other current assets in the consolidated balance sheet and included in the net amounts due from the JV. The carrying value of the loan approximates the fair value based on market interest rates. The allowance for credit losses related to the loan is not material as of the first quarter-end 2021. The Company received payment from the JV for the remaining balance of the loan in April 2021. Accrued interest receivable, which is included in prepaid expenses and other current assets in the consolidated balance sheet, was not material at first quarter-end 2021 and year-end 2020. The JV is a supplier to certain MSP programs in the region and the
16

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
amounts for services provided to the Company, which are included in accounts payable and accrued liabilities in the consolidated balance sheet, are not material.

7.  Fair Value Measurements
Trade accounts receivable, short-term borrowings, accounts payable, accrued liabilities and accrued payroll and related taxes approximate their fair values due to the short-term maturities of these assets and liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis as of first quarter-end 2021 and year-end 2020 in the consolidated balance sheet by fair value hierarchy level, as described below.

Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs.

 As of First Quarter-End 2021
DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars)
Money market funds$5.6 $5.6 $ $ 
Investment in Persol Holdings181.7 181.7   
Total assets at fair value$187.3 $187.3 $ $ 
Brazil indemnification$(2.4)$ $ $(2.4)
Greenwood/Asher earnout(1.7)  (1.7)
Insight earnout(1.7)  (1.7)
Total liabilities at fair value$(5.8)$ $ $(5.8)

 As of Year-End 2020
DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars)
Money market funds$120.3 $120.3 $ $ 
Investment in Persol Holdings164.2 164.2   
Total assets at fair value$284.5 $284.5 $ $ 
Brazil indemnification$(2.6)$ $ $(2.6)
Greenwood/Asher earnout(2.1)  (2.1)
Insight earnout(1.7)  (1.7)
Total liabilities at fair value$(6.4)$ $ $(6.4)

Money market funds represent investments in money market funds that hold government securities, of which $5.6 million as of first quarter-end 2021 and $5.1 million as of year-end 2020, are restricted as to use and are included in other assets in the consolidated balance sheet. The money market funds that are restricted as to use account for the majority of our restricted cash balance and represents cash balances that are required to be maintained to fund disability claims in California. The remaining money market funds as of year-end 2020 are included in cash and equivalents in the consolidated balance sheet. The valuations
17

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
of money market funds are based on quoted market prices of those accounts as of the respective period end. The decrease in money market funds from year-end 2020 resulted from the transfer to other cash and cash equivalent accounts at the end of the first quarter of 2021.

The valuation of the investment in Persol Holdings is based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end, and the related changes in fair value are recorded in the consolidated statements of earnings (see Investment in Persol Holdings footnote). The cost of this yen-denominated investment, which fluctuates based on foreign exchange rates, was $18.7 million as of the first quarter-end 2021 and $20.1 million at year-end 2020.

As of first quarter-end 2021 and year-end 2020, the Company had an indemnification liability of $2.4 million and $2.6 million, respectively, in other long-term liabilities on the consolidated balance sheet related to the sale of the Brazil operations (see Acquisitions and Disposition footnote). The valuation of the indemnification liability was established using a discounted cash flow methodology based on probability weighted-average cash flows discounted by weighted-average cost of capital. The valuation, which represents the fair value, is considered a level 3 liability, and is being measured on a recurring basis. During the first quarter of 2021, the Company recorded a reduction of $0.2 million to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

The Company recorded an earnout liability relating to the 2020 acquisition of Insight, totaling $1.7 million at first quarter-end 2021 and year-end 2020 in accounts payable and accrued liabilities in the consolidated balance sheet (see Acquisitions and Disposition footnote). The valuation of the earnout liability was initially established using a Monte Carlo simulation and represents the fair value and is considered a level 3 liability.

The Company recorded an earnout liability relating to the 2020 acquisition of Greenwood/Asher, totaling $1.7 million at first quarter-end 2021 in accounts payable and accrued liabilities and other long-term liabilities in the consolidated balance sheet and $2.1 million as of year-end 2020 in other long-term liabilities in the consolidated balance sheet (see Acquisitions and Dispositions footnote). The initial valuation of the earnout liability was established using a Black Scholes model and represents the fair value and is considered a level 3 liability. During the first quarter of 2021, the Company recorded a reduction of $0.4 million to the earnout liability in SG&A expenses in the consolidated statements of earnings.

Equity Investment Without Readily Determinable Fair Value

The Company has a minority investment in Business Talent Group, LLC, which is included in other assets in the consolidated balance sheet. This investment is measured using the measurement alternative for equity investments without a readily determinable fair value. The measurement alternative represents cost, less impairment, plus or minus observable price changes. The carrying amount of $5.0 million as of the first quarter-end 2021 and year-end 2020 represents the purchase price. There have been no material price changes to the carrying amount or impairments.

The Company has a minority investment in Kenzie Academy Inc., which is included in other assets in the consolidated balance sheet. The investment was also measured using the measurement alternative for equity investments without a readily determinable fair value as described above. On March 8, 2021, Kenzie entered into a transaction to sell its assets. As of the date of the sale and year-end 2020, the investment had a carrying value of $1.4 million, representing total cost plus observable price changes to date. The asset was written down as a result of the sale and the loss of $1.4 million was recorded in other income (expense), net in the consolidated statements of earnings.

Assets Measured at Fair Value on a Nonrecurring Basis

Due to the negative market reaction to the COVID-19 crisis, including declines in our common stock price, management determined that a triggering event occurred during the first quarter of 2020. We therefore performed an interim step one quantitative impairment test for both of our previous reporting units with goodwill. As a result of this quantitative assessment, we determined that the estimated fair value of the reporting units no longer exceeded the carrying value, and recorded a goodwill impairment charge of $147.7 million in the first quarter of 2020 (see Goodwill footnote).

8. Restructuring
There were no restructuring charges incurred in the first quarter of 2021. In the first quarter of 2020, the Company took restructuring actions to align costs with expected revenues, position the organization to adopt a new operating model in the third
18

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
quarter of 2020 and to align the U.S. branch network facilities footprint with a more technology-enabled service delivery methodology.

Restructuring costs incurred in the first quarter of 2020 totaled $8.7 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars).

Lease Termination CostsSeverance CostsTotal
Professional & Industrial$0.9 $3.5 $4.4 
Science, Engineering & Technology 0.5 0.5 
Education0.8 0.1 0.9 
International0.4 0.7 1.1 
Corporate1.8  1.8 
Total$3.9 $4.8 $8.7 

A summary of the global restructuring balance sheet accrual, included in accrued payroll and related taxes and accounts payable and accrued liabilities in the consolidated balance sheet, is detailed below (in millions of dollars).

Balance as of year-end 2020$3.5 
Reductions for cash payments related to all restructuring activities(2.0)
Balance as of first quarter-end 2021$1.5 

The remaining balance of $1.5 million as of first quarter-end 2021 primarily represents severance costs, and the majority is expected to be paid by the end of 2021. No material adjustments are expected to be recorded.

9. Goodwill
The Company performs its annual goodwill impairment testing in the fourth quarter each year and regularly assesses whenever events or circumstances make it more likely than not that an impairment may have occurred. During the first quarter of 2020, negative market reaction to the COVID-19 crisis, including declines in our common stock price, caused our market capitalization to decline significantly compared to the fourth quarter of 2019, causing a triggering event. Therefore, we performed an interim step one quantitative test for our previous reporting units with goodwill, Americas Staffing and GTS, and determined that the estimated fair values of both reporting units no longer exceeded their carrying values. Based on the result of our interim goodwill impairment test as of the first quarter of 2020, we recorded a goodwill impairment charge of $147.7 million to write off goodwill for both reporting units. A portion of the goodwill balance was deductible for tax purposes.

In performing the step one quantitative test and consistent with our prior practice, we determined the fair value of each reporting unit using the income approach, which is validated through reconciliation to observable market capitalization data. Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured. Estimated future cash flows are based on our internal projection model and reflects management’s outlook for the reporting units. Assumptions and estimates about future cash flows and discount rates are complex and often subjective. Our analysis used significant assumptions by segment, including: expected future revenue and expense growth rates, profit margins, cost of capital, discount rate and forecasted capital expenditures and working capital.

During the third quarter of 2020, the Company adopted a new operating model reflecting the Company's focus on delivering specialty talent solutions, which resulted in a change in our operating segments and reporting units. Due to the complete write-off of goodwill in the first quarter of 2020, reallocation of goodwill to the new reporting units as part of the third quarter 2020 change in segment reporting was not necessary. Subsequently, the goodwill resulting from the acquisition of Greenwood/Asher
19

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
during the fourth quarter of 2020 (see Acquisitions and Disposition footnote) was allocated to the Education operating segment, which was deemed to be a reporting unit, under the new operating model.

As of first quarter-end 2021, there were no changes in the carrying amount of goodwill from year-end 2020.

10.  Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by component, net of tax, for the first quarter 2021 and 2020 are included in the table below. Amounts in parentheses indicate debits.

First Quarter
20212020
(In millions of dollars)
Foreign currency translation adjustments:
Beginning balance$(0.8)$(13.2)
Other comprehensive income (loss) before reclassifications(13.6)(7.4)
Amounts reclassified from accumulated other comprehensive income (loss)  
Net current-period other comprehensive income (loss)(13.6)(7.4)
Ending balance(14.4)(20.6)
Pension liability adjustments:
Beginning balance(3.4)(2.6)
Other comprehensive income (loss) before reclassifications  
Amounts reclassified from accumulated other comprehensive income (loss)  
Net current-period other comprehensive income (loss)  
Ending balance(3.4)(2.6)
Total accumulated other comprehensive income (loss)$(17.8)$(23.2)

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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
11.  Earnings (Loss) Per Share
The reconciliation of basic and diluted earnings (loss) per share on common stock for the first quarter 2021 and 2020 follows (in millions of dollars except per share data):
 First Quarter
 20212020
Net earnings (loss)$25.6 $(153.2)
Less: earnings allocated to participating securities(0.2) 
Net earnings (loss) available to common shareholders$25.4 $(153.2)
Average shares outstanding (millions):
Basic39.3 39.2 
Dilutive share awards0.2  
Diluted39.5 39.2 
Basic earnings (loss) per share$0.65 $(3.91)
Diluted earnings (loss) per share$0.64 $(3.91)

Potentially dilutive shares outstanding are primarily related to performance shares for the first quarter 2021. There were no dividends paid per share for Class A and Class B common stock for the first quarter of 2021. Dividends paid per share for Class A and Class B common stock were $0.075 for the first quarter of 2020.

12.  Stock-Based Compensation
For the first quarter of 2021, the Company recognized stock compensation expense of $1.4 million, and related tax benefit of $0.1 million. For the first quarter of 2020, the Company recognized stock compensation expense of $1.2 million, and related tax expense of $0.2 million.
Performance Shares
During 2021, the Company granted performance share awards associated with the Company’s Class A common stock to certain senior officers. The payment of performance share awards, which will be satisfied with the issuance of shares out of treasury stock, is contingent upon the achievement of specific revenue growth and EBITDA margin performance goals ("financial measure performance share awards") over a stated period of time. The maximum number of performance shares that may be earned is 200% of the target shares originally granted. These awards have three one-year performance periods: 2021, 2022 and 2023, with the payout for each performance period based on separate financial measure goals that are set in February of each of the three performance periods.
For the 2021 and 2022 performance periods, half of the shares earned in each respective performance period will vest after achievement of the respective performance goals for the year and approval of the financial results by the Compensation Committee, in early 2022 and 2023, respectively, if not forfeited by the recipient. The remaining half of the shares earned for the 2021 and 2022 performance periods will vest in early 2024, based on continuous employment. For the 2023 performance period, any shares earned will vest after achievement of the 2023 performance goals for the year and approval of the financial results by the Compensation Committee in early 2024, if not forfeited by the recipient. No dividends are paid on these performance shares.
A summary of the status of all nonvested performance shares at target as of first quarter-end 2021 and changes during this period is presented as follows below (in thousands of shares except per share data). The vesting adjustment in the table below represents the 2018 financial measure performance shares and the 2018 Total Shareholder Return ("TSR") performance shares that did not vest because actual achievement was below the threshold level and resulted in no payout.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
Financial Measure
Performance Shares
TSR
Performance Shares
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Nonvested at year-end 2020366 $22.40 47 $31.38 
Granted180 20.20   
Vested(12)25.10   
Forfeited(11)24.30   
Vesting adjustment(93)16.99 (47)31.38 
Nonvested at first quarter-end 2021430 $23.69  $ 

Restricted Stock

A summary of the status of nonvested restricted stock as of first quarter-end 2021 and changes during this period is presented as follows below (in thousands of shares except per share data).
SharesWeighted Average Grant Date Fair Value
Nonvested at year-end 2020281 $22.74 
Granted195 21.05 
Vested(83)23.36 
Forfeited(10)24.45 
Nonvested at first quarter-end 2021383 $21.70 

13. Sale of Assets

On March 20, 2020, the Company sold three of our four headquarters properties for a purchase price of $58.5 million as a part of a sale and leaseback transaction. The properties included the parcels of land, together with all rights and easements, in addition to all improvements located on the land, including buildings. The Company received cash proceeds of $55.5 million, which was net of transaction expenses. As of the date of the sale, the properties had a combined net carrying amount of $23.4 million. The resulting gain on the sale of the assets was $32.1 million which is recorded in gain on sale of assets in the consolidated statements of earnings. The Company leased back the headquarters buildings on the same date.

14.  Other Income (Expense), Net 
Included in other income (expense), net for the first quarter 2021 and 2020 are the following: 
 First Quarter
20212020
(In millions of dollars)
Interest income$0.1 $0.3 
Interest expense(0.6)(0.9)
Foreign exchange gains (losses)(0.2)2.4 
Other(2.7)(0.1)
Other income (expense), net$(3.4)$1.7 

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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
Included in Other for the first quarter of 2021 is a loss from the sale of the assets related to our minority investment in Kenzie Academy (see Fair Value Measurements footnote) and transaction-related expenses from the April 2021 acquisition of Softworld (see Subsequent Event footnote).

15. Income Taxes
Income tax expense was $10.5 million for the first quarter of 2021 and income tax benefit was $36.2 million for the first quarter of 2020. The first quarter of 2021 includes tax expense of $9.2 million for the gain on the Company's investment in Persol Holdings. The first quarter of 2020 includes a tax benefit of $23.0 million on the impairment of goodwill and a tax benefit of $23.8 million for the loss on the Company's investment in Persol Holdings. The first quarter of 2020 benefit was partially offset by losses on tax exempt investments in life insurance policies and income from the sale of assets discussed in the Sale of Assets footnote.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S. work opportunity credits and the change in cash surrender value of tax exempt investments in life insurance policies. It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes, changes in judgment regarding the realizability of deferred tax assets, the tax effects of stock compensation, and changes in the fair value of the Company’s investment in Persol Holdings, which are treated as discrete since they cannot be estimated. The first quarter of 2020 impairment of goodwill was treated as discrete.

The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. At this time, we have no valuation allowance against our Mexican deferred tax asset of $4.2 million, though it is possible this may change as we assess the impacts of the new labor laws enacted in the second quarter of 2021 on our Mexican business operations.

16.  Contingencies 
The Company is continuously engaged in litigation, threatened litigation, claims, audits or investigations arising in the ordinary course of its business, such as matters alleging employment discrimination, wage and hour violations, claims for indemnification or liability, violations of privacy rights, anti-competition regulations, commercial and contractual disputes, and tax related matters which could result in a material adverse outcome.

We record accruals for loss contingencies when we believe it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Such accruals are recorded in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet. At first quarter-end 2021 and year-end 2020, the gross accrual for litigation costs amounted to $1.2 million and $1.4 million, respectively.

The Company maintains insurance coverage which may cover certain claims. When claims exceed the applicable policy deductible and realization of recovery of the claim from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount, which are included in prepaid expenses and other current assets in the consolidated balance sheet. At first quarter-end 2021 and year-end 2020, there were no related insurance receivables.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is $0.1 million to $1.8 million as of first quarter-end 2021. This range includes matters where a liability has been accrued but it is reasonably possible that the ultimate loss may exceed the amount accrued and for matters where a loss is believed to be reasonably possible, but a liability has not been accrued. The aggregate range only represents matters in which we are currently able to estimate a range of loss and does not represent our maximum loss exposure. The estimated range is subject to significant judgment and a variety of assumptions and only based upon currently available information. For other matters, we are currently not able to estimate the reasonably possible loss or range of loss.

While the ultimate outcome of these matters cannot be predicted with certainty, we believe that the resolution of any such proceedings will not have a material adverse effect on our financial condition, results of operations or cash flows.

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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
17.  Segment Disclosures
The Company’s operating segments, which also represent its reporting segments, are based on the organizational structure for which financial results are regularly evaluated by the Company’s chief operating decision-maker ("CODM", the Company’s CEO) to determine resource allocation and assess performance. The Company’s