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. 

                                                           

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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $699,819,783.$524.3 million.

 

Registrant had 34,997,71535,929,080 shares of Class A and 3,431,8623,372,521 of Class B common stock, par value $1.00, outstanding as of February 6, 2018. 08, 2021.

Documents Incorporated by Reference

 

The proxy statement of the registrant with respect to its 20182021 Annual Meeting of Stockholders is incorporated by reference in Part III.

History and Development of Business

We rank as one of the world’s largest scientific and clinical staffing providers we alsoand place professional and technical employeestalent at allvarious levels in engineering, IT law and finance. We are also the leading provider in the K-12 educational staffing market in the U.S., while also providing talent in early childhood education, non-instructional roles and adjunct professors. These specialty services complement our expertise in professional office services, contact center, light industrial and electronic assembly staffing, as well as our leading position in the K-12 educational staffing market in the U.S.staffing. As work has evolved and workforcetalent management has become more complex, we have also developed a talent supply chain management approachinnovative solutions to help many of the world’s largest companies plan for and manage their workforce. Innovative solutions supporting this approach spanworkforce through recruitment outsourcing, consulting, recruitment,payroll processing, talent advisory, career transition and vendorsupplier management services.

Geographic Breadth of Services

In 2017,2020, we assigned nearly 500,000370,000 temporary employees to a variety of customers around the globe.

Description of Business Segments

Financial information regarding our industryreportable segments is included in the Segment Disclosures footnote in the notes to our consolidated financial statements presented in Part II, Item 8 of this report.

By connecting our customers with qualified talent in an ever-evolving world of work, Kelly has a positive impact on the lives of our employeespeople, businesses and talent networks, in the local communities we serve and in the broader economy. We aspire to beserve. As a destination for top talent and a strategic business partner for our customers. Our solutions are designedcustomers, we continue to connect with talent across targeted specialties and flexible work styles, and to offer customers access to workforce solutions that can be customized to any scope or scale as they seek to operate more efficient, competitive organizations. To achieve these goals, we will adopt forward-looking technologies and innovative business practices and forward-looking technologies that can drive success in a dynamic market.

We’re also using our core competencies to help them connect with talent and realize their business objectives. Kelly offers world-class staffing on a temporary and direct placement basis, as well as a comprehensive array of outsourcing, consulting and talent advisory services. Kelly will continue to target our areas of investment and expertise to solve our customers’ workforce challenges and create opportunity for talentposition in the changing marketplace.middle of the talent supply and demand equation to challenge outdated barriers that hold back far too many people from attaining meaningful work, supporting their families and contributing to the economy. In 2020, Kelly launched its Equity@Work platform, which seeks to upend systemic barriers to employment and make the U.S. labor market more equitable and accessible for more people.

Business Operations

We own numerous service marks that are registered with the United States Patent and Trademark Office, the European Union Community TrademarkIntellectual Property Office and numerous individual country trademark offices.

Our working capital requirements are primarily generated from temporary employee payroll which is generally paid weekly or monthly and customer accounts receivable.receivable which is generally outstanding for longer periods, with days sales outstanding ("DSO") of 64 days as of January 3, 2021. Since receipts from customers generally lag payroll payments to temporary employees, working capital requirements increase and operating cash flows decrease substantially in periods of growth. Conversely, when economic activity slows, working capital requirements may substantially decrease and operating cash flows increase. Such increases dissipate over time if the economic downturn continues for an extended period.

Although we conduct business under various federal, state, and local government contracts, no single one accounts forcontract represents more than threefour percent of total Companycompany revenue in 2017. 2020.

The worldwide temporary staffingworkforce solutions industry is competitive and highly fragmented. In the United States, approximately 100 competitorswe compete with other firms that operate nationally and approximately 10,000offer a breadth of service similar to ours, and with thousands of smaller regional or specialized companies that compete in varying degrees at local levels. Additionally, severaldegrees. Outside the United States, we face similar staffing companies compete globally.competition. In 2017,2020, our largest competitors were Randstad, Adecco S.A., Randstad Holding N.V.,Group, ManpowerGroup Inc., Recruit Holdings and Allegis Group and Recruit Holdings. Group.

Key factors that influence our success are quality of service, price and breadth of service. service, including our ability to manage staffing suppliers.

Quality of service is highly dependent on the availability of qualified, competent talent, and our ability to promptly and effectively recruit, screen, train, retain and manage a pool of employees who match the skills required by particularour customers. During an economic downturn, weWe must balance competitive pricing pressures, which may intensify during an economic downturn, with the need to attract and retain a qualified workforce. Price competition in the staffing industry is intense, particularly for education, office clerical and light industrial personnel, and pricing pressure from customers and competitors continues to be significant.

The ability to manage staffing suppliers has become more critical as customers seek a single supplier to manage all of their staffing needs.demand for contingent talent. Kelly’s talent supply chain management approach seeks to address this requirement for our larger customers, enabling us to deliver talent wherever and whenever they need it around the world.

We employare a talent solutions company dedicated to connecting people to work in ways that enrich their lives and our employees are critical to achieving this noble purpose. In order to compete and succeed in our highly competitive and rapidly evolving market, it is crucial that we attract and retain experienced internal employees, as well as talent to work for our customers. As part of these efforts, we strive to offer competitive total rewards programs, foster an inclusive and diverse environment, and give employees the opportunity to give back to their communities and make a social impact.

As of January 3, 2021, we employed approximately 1,100 people1,000 staff members at our corporate headquarters in Troy, Michigan, and approximately 6,7003,300 staff members in other locations in the United States and an additional 2,800 in our international locations. While our retention of employees improved year over year, it still lags our comparable external benchmarks. Our retention rates for employees identified as High Performing and High Potential align with our comparable external benchmark.

In 2017,addition to our internal employees, Kelly recruits talent on behalf of our customers on a global basis.  In 2020, we assignedplaced nearly 500,000 temporary employees to a variety370,000 individuals in positions with our customers.  In all of customers around the globe.

Foreign Operations

For information regarding sales, earnings from operations and long-lived assets by domestic and foreign operations, please refer to the information presented in the Segment Disclosures footnote in the notes to our consolidated financial statements, presented in Part II, Item 8 of this report.

Access to Company Information

ITEM 1A. RISK FACTORS.

We operate in a highly competitive industry with low barriers to entry and may be unable to compete successfully against existing or new competitors.

categories that may be more susceptible to such replacement.

Our business is subject to extensive government regulation, which may restrict the types of employment services we are permitted to offer or result in additional or increased taxes, including payroll taxes or other costs that reduce our revenues and earnings.

We may have additional tax or unclaimed property liabilities that exceed our estimates.

We are subject to a multitude of federal, state, local, and localforeign taxes in the jurisdictions we operate in, including the tax provisions of the U.S. Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of

Our investment in Persol Holdings exposes us to potential market events beyondand currency exchange risks.

Our international operations subject us to potential liability under anti-corruption, trade protection, and other risks, includinglaws and regulations.

We depend on our ability to attract, develop and retain qualified permanent full-time employees.

As we aim to expand the number of clients utilizing our higher margin specialty solutions in support of our growth strategy, we are highly reliant on individuals who possess specialized knowledge and skills to lead related specialty solutions and operations. There can be no assurance that qualified personnel will continue to be available. Competition for individuals with proven specialized knowledge and skills is intense, and demand for these individuals is expected to remain strong in the foreseeable future. Our success is dependent on our ability to attract, develop and retain these employees.

Cyberattacks or other breaches of network or information technology security could have sufficient liquidityan adverse effect on our systems, services, reputation and financial results.

Our controlling stockholder exercises voting control over our company and has the ability to elect or remove from office all of our directors.

We are not subject to certain of the listing standards that normally apply to companies whose shares are quoted on the NASDAQ Global Market.

Provisions in our certificate of incorporation and bylaws and Delaware law may delay or prevent an acquisition of our company.Company.

The holders of shares of our Class A common stock are not entitled to voting rights.

Failure to maintain specified financial covenants in value.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

Our headquarters is located in Troy, Michigan where corporate, subsidiary and divisional offices are currently located. The original headquarters building was purchased in 1977. Headquartersoperate from both leased and owned facilities. Our remaining business operations were expanded into additional buildings purchased in 1991, 1997 and 2001. 

ITEM 3. LEGAL PROCEEDINGS.

While the ultimate outcome of these matters currently pending 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.

In January 2018, the Hungarian Competition Authority initiated proceedings against the Company, along with a local industry trade association and its members, due to alleged infringement of national competition regulations. We are fully cooperatingThe Authority announced its decision on December 18, 2020, levying a fine against the trade association with joint and several secondary liabilities placed on the investigation, and are supplying materials and information20 member companies. Our apportioned secondary liability is approximately $300,000. Member companies may exercise their right to comply withchallenge the Authority’s undertakings.decision, which could impact the apportionment. However, we anticipate resolution within this year. The Company does not believe that resolution of this matter will have a material adverse effect upon the Company’s competitive position, results of operations, cash flows or financial position.

Not applicable.

The number of holders of record of our Class A and Class B common stock were approximately 6,6008,700 and 200, respectively, as of February 2, 2018. January 29, 2021. 

Recent Sales of Unregistered Securities 

During the fourth quarter of 2017,2020, we reacquired shares of our Class A common stock as follows:

Financial Measures

The constant currency (“CC”) change amounts in the following tables refer to the year-over-year percentage changes resulting from translating 20172020 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2016.2019. We believe that CC measurements are a useful measure, indicating the actual trends of our operations without distortion due to currency fluctuations. We use CC results when analyzing the performance of our segments and measuring our results against those of our competitors. Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and selling, general and administrative expenses (“SG&A”) expenses within a single country and currency which, as a result, provides a natural hedge against transactional currency risks in connection with their normal business operations.

CC measures are non-GAAP (Generally Accepted Accounting Principles) measures and are used to supplement measures in accordance with GAAP. Our non-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) in the following tables are ratios used to measure the Company’s operating efficiency.

Days sales outstanding (“DSO”) represents the number of days that sales remain unpaid for the period being reported. DSO is calculated by dividing average net sales per day (net sales excluding secondary supplier expense for(based on a rolling three-month period) into trade accounts receivable, net of allowances at the period end. Although secondary supplier revenues are recorded on a net basis (net of secondary supplier expense), secondary supplier revenue is included in the daily sales calculation in order to properly reflect the gross revenue amounts billed to the customer.

Revenue from services for 2020 declined in all segments, reflecting the impact of COVID-19, and resulting in a decline in demand for both our staffing and permanent placement services across a broad range of industries and geographies. Revenue from staffing services declined 20% compared to 2019. Permanent placement revenue, which is included in revenue from services, in the following tables, has a significant impact on gross profit rates. There are very low direct costs of services associated with staffing fee-based income. Therefore, increases or decreases in staffing fee-based income can have a disproportionate impact on gross profit rates.

Gross profit declined as a result of lower revenue volume, partially offset by an increase in the gross profit rate. The gross profit rate increased 5020 basis points year over year. The transferin comparison to 2019. With the exception of the APAC businesses, which had lower gross profit rates than the Company average, accounted for 10 basis points of the increase. Additionally, as more fully described in the following discussions, increases in the GTSEducation and Americas Staffing gross profit rates were partially offset by a decline inInternational, the gross profit rate increased in International Staffing.all other operating segments, primarily reflecting improved product mix and lower employee-related costs. The gross profit rate for Education declined primarily as a result of increased pricing pressures. International's gross profit rate was negatively impacted by the decrease in permanent placement revenue. The total Company 2020 gross profit rate includes approximately 20 basis points related to COVID-19 government subsidies.

During 2020, the negative reaction to the joint venture, decreasespandemic by the global equity markets also resulted in expensea decline in our staffingthe Company's common stock price. This triggered an interim goodwill impairment test, resulting in a $147.7 million goodwill impairment charge in the first quarter of 2020.