UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017January 1, 2023

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 0-1088 

KELLY SERVICES, INC.
(Exact Name of Registrant as specified in its Charter)
Delaware  Delaware  38-1510762 
(State or other jurisdiction of (IRS Employer Identification Number) 
incorporation or organization) (I.R.S. Employer Identification No.)

999 West Big Beaver Road, Troy, Michigan 48084
999 West Big Beaver Road, Troy, Michigan  48084
(Address of Principal Executive Office) (Zipprincipal executive offices)  (Zip Code)

(248) 362-4444
(248) 362-4444
(Registrant’s Telephone Number, Including Area Code)telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: 
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 

Securities Registered Pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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 shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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 filer [ ]   Accelerated filer [X]  
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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.$668.3 million.
 
Registrant had 34,997,71533,831,598 shares of Class A and 3,431,8623,342,146 of Class B common stock, par value $1.00, outstanding as of February 6, 2018. 5, 2023.


Documents Incorporated by Reference
 
The proxy statement of the registrant with respect to its 20182023 Annual Meeting of Stockholders is incorporated by reference in Part III.

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PART I

Unless the context otherwise requires, throughout this Annual Report on Form 10-K the words “Kelly,” “Kelly Services,” “the Company,” “we,” “us” and “our” refer to Kelly Services, Inc. and its consolidated subsidiaries.

ITEM 1. BUSINESS.

History and Development of Business

Founded by William R.Russell Kelly in 1946, Kelly Services® pioneered an industry that connects people withto work in ways that enrich their lives. At ourOur inception we helped usher in and embolden a workforce of women, opening doors and creating opportunities where none had existed. Ascompletely new opportunities. Over the next 76 years, as work evolved, weKelly equipped people with the skills to master thenew technologies of the day:as they emerged: launching the first-of-its-kind online learning center for scientists; creating testing &and training packages for newbreakthrough office programs; and launching skill builders to alignthat aligned with new light industrial protocols. With each advance, we have empowered people to meetKelly met the needs of a changing marketplace,the marketplace; empowering our people to reach their personal goals and enabled companiesenabling our clients to access skilled talent that canto move their businessesorganizations forward.

As work has evolved so has ourKelly's range of solutions, growing over the years to reflect the changing needs of our customersemployers and the changing naturedesires and lifestyles of work itself.talent. We have progressed from a United States-based company concentrating primarily on traditional office staffing intobusiness to a workforce solutions leadercreative, insightful and agile talent company delivering expertise in a numberportfolio of specialty services. While rankingIn line with market demand, we are increasingly delivering a variety of outcome-based services in which we provide specialized talent and operational management of functions and departments on behalf of our clients.

We rank as one of the world’s largest scientific and clinical research staffing providers we alsoand place professional and technical employeestalent at allvarious levels in engineering, IT law and finance.telecommunications specialties. We are also a leading education staffing provider in the U.S., placing talent across the full education spectrum from early childhood education to higher education. These specialty services complement our expertise in professional office services, contact center and 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 companiesemployers 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

Headquartered in Troy, Michigan,the United States, Kelly provides workforce solutions to a diversifieddiverse group of customerslocal, regional and global clients in three regions: the Americas,; Europe and the Middle East, and Africa (“EMEA”); and Asia Pacific(“APAC”).Our customer base spansAsia-Pacific region across a variety of industries and includes 95 of the Fortune 100™ companies.industries.

In 2017,2022, we assigned nearly 500,000more than 300,000 temporary employees to a variety of customers around the globe.

Description of Business Segments
Our operations
Kelly is a talent solutions company organized into five specialty businesses, which are divided into three principal business segments: Americas Staffing, Global Talent Solutions (“GTS”)also our reportable segments, serving clients of all sizes across a variety of industries. This structure enables us to focus on specialties with robust demand, promising growth opportunities and International Staffing. In July 2016,areas in which we expanded our joint venture with Persol Holdings (formerly Temp Holdings) to form PersolKelly Asia Pacific (the “JV”)excel at attracting and moved our APACplacing talent.

Professional & Industrial – delivers staffing, operations into the JV. In early 2017, we restructured components of our previous Americas Commercial, Americas Professionaloutcome-based and Technical,permanent placement services focused on office, professional, light industrial and Outsourcing and Consulting Group segments under a single delivery organization, triggering a change in our operating structure. We now provide staffing through our branch networks in our Americas and International operations, with commercial and specialized professional/technical staffing businesses in each region. We also provide a suite of innovative talent fulfillment and outcome-based solutions through our GTS segment, which delivers integrated talent management solutions to meet customer needs across the entire spectrum of talent categories. Using talent supply chain strategies, GTS helps customers design, execute, and manage workforce programs that enable them to connect with talent across all work styles (full-time, contract, temporary, etc.), gain access to a vast network of service providers, and achieve their business goals on time and on budget.

Americas Staffing
Our Americas Staffing segment represents the Company’s branch-delivered staffing businesscontact center specialties in the U.S. and Canada, including our KellyConnect and Skilled Professional Solutions products

Science, Engineering & Technology ("SET") – delivers staffing, outcome-based and permanent placement services focused on science and clinical research, engineering, technology and telecommunications specialties predominantly in the U.S. and Canada and includes our Softworld, NextGen and Global Technology Associates subsidiaries

Education – delivers staffing, permanent placement and executive search services across the full education spectrum from early childhood to higher education in the U.S. and includes Teachers On Call, Insight Workforce Solutions, Greenwood/Asher and Pediatric Therapeutic Services ("PTS")

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Outsourcing & Consulting Group ("Outsourcing & Consulting," "OCG") – delivers Managed Service Provider ("MSP"), Puerto Rico, Canada, MexicoRecruitment Process Outsourcing ("RPO"), Payroll Process Outsourcing ("PPO") and Brazil. This segmentTalent Advisory Services to customers on a global basis and includes RocketPower

International – delivers temporary staffing, RPO and permanent placement services in 14 countries in Europe, as well as direct-hire placement services in a number of specialty staffing services, including: Office, providing trained employees for data entry, clerical and administrative support roles across numerous industries; Education, supplying schools nationwideMexico delivered in accordance with instructional and non-instructional employees; Marketing, providing support staff for seminars, sales and trade shows; Electronic Assembly, providing assemblers, quality control inspectors and technicians; Light Industrial, placing maintenance workers, material handlers and assemblers; Science, providing all levels of scientists and scientific and clinical research workforce solutions; Engineering, supplying engineering professionals across all disciplines, including aeronautical, chemical, civil/structural, electrical/instrumentation, environmental, industrial, mechanical, petroleum, pharmaceutical, quality and telecommunications; Information Technology, placing ITchanges in labor market regulations

specialists across all disciplines; Creative Services, placing creative talent in the spectrum of creative services positions; Finance and Accounting, serving the needs of corporate finance departments, accounting firms and financial institutions with all levels of financial professionals; and Law, placing legal professionals including attorneys, paralegals, contract administrators, compliance specialists and legal administrators.
Our services allow customers and temporary staff the opportunity to evaluate their relationship before making a full-time employment decision. We also offer direct-hire placement services.
International Staffing
Our International Staffing segment represents the Company’s branch-delivered staffing business in the EMEA region, as well as the Company’s APAC region staffing business prior to the transaction to form the PersolKelly Asia Pacific joint venture in July 2016. International Staffing provides a similar range of staffing services as described for our Americas Staffing segment above, including: Office, Engineering, Finance and Accounting, Healthcare, IT and Science. Additional service areas include: Catering and Hospitality, providing chefs, porters and hospitality representatives; and Industrial, supplying manual workers to semi-skilled professionals in a variety of trade, non-trade and operational positions.
GTS
Our GTS segment combines the delivery structure of the Company’s outsourcing and consulting group and centrally delivered staffing business. It reflects the trend of customers towards the adoption of holistic talent supply chain solutions which combine contingent labor, full-time hiring and outsourced services. Services in this segment include: Centrally delivered staffing for large accounts; Contingent Workforce Outsourcing (“CWO”), delivering contingent labor to customers using a managed service provider model; Recruitment Process Outsourcing (“RPO”), offering end-to-end talent acquisition solutions, including customized recruitment projects; Business Process Outsourcing (“BPO”), offering full staffing and operational management of non-core functions or departments; Payroll Process Outsourcing (“PPO”), providing centralized payroll processing solutions for our customers; KellyConnect, offering contact center staffing solutions which focus on delivering talent to a customer’s physical call center; and Kelly Legal Managed Services (“KLMS”), delivering a full suite of legal managed review solutions to our customers. This segment also provides executive placement, career transition/outplacement services and talent advisory services.
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.

Business Objectives
Kelly’s philosophy is rooted
By connecting our clients with qualified talent in our conviction that our business canan ever-evolving world of work, Kelly has a positive impact on the people, clients and does make a difference on a daily basis—for our customers, in the lives of our employees 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 designedclients, 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.
With more than one-third of the world’s workforce now participating as independent workers, morewe help companies are adoptingadopt strategies that recognize and utilize contingent labor, consultants and project-based work as keys toenablers of their ongoing success. We

We’re also using our position in the 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. Our Equity@Work initiative seeks to upend systemic barriers to employment and make the labor market more equitable and accessible for more people. While systemic change takes time, we continue to refine our core competencies to help them connectmake progress with talentadditional outreach, new alliances and realize their business objectives. Kelly offers world-class staffing on a temporarypartnerships 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 talent in the changing marketplace.continued executive commitment.


Business Operations

Service Marks

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.
Seasonality
Seasonality and Economic Cycles

Our quarterly operating results arehave historically been affected by the seasonality ofcyclical response to both economic downturns and upswings. Customers tend to use our customers’ businesses. Demandservices to supplement their existing workforce and generally hire permanent employees when long-term demand is expected to increase. As a consequence, our revenue from services tends to increase when the economy grows. Conversely, our revenue from services decreases when the economy declines and customer demand for staffingour services historically has been lower duringalso declines. Our business also experiences seasonal fluctuations, particularly in our Education operating segment. Revenue in Education is generally lowest in the firstthird quarter and typically increases during the remainder of the year.in line with schools’ summer break.

Working Capital

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 61 days as of January 1, 2023. Since receipts from customers generally lag payroll payments to temporary employees, working capital requirements increase and operating cash flows may 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.
Customers
Customers

Kelly’s client portfolio spans companiesemployers of all sizes, ranging from local and mid-sized businesses to the Fortune 500. In 2017,2022, an estimated 52%54% of total Companycompany revenue was attributed to our largest 100 large customers. Our largest single customer accounted for approximately fiveseven percent of total revenue in 2017.2022.


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Government Contracts

Although we conduct business under various federal, state and local government contracts, no single one accounts forcontract represents more than three percent of total Companycompany revenue in 2017. 2022.

Competition

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 2017,2022, our largest competitors were Randstad, Adecco S.A., Randstad Holding N.V.,Group, ManpowerGroup Inc., and Allegis Group and Recruit Holdings. Group.


Key factors that influence our success are quality of service, price and breadth of service.

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.
Breadth of service, or ability to manage staffing suppliers, has become more critical as customers
Companies may seek a single supplier to manage all of their demand for contingent talent. To provide the breadth of service required, clients may need us to manage staffing needs. Kelly’s talent supply chain management approachsuppliers and independent workers on their behalf. Kelly seeks to address this requirement for our larger customers,clients, enabling us to deliver talent wherever and whenever they need it around the world.
Environmental Concerns
BecauseCorporate Sustainability

Kelly is committed to the highest standards of corporate citizenship. Given the worldwide reach of our workers, clients, suppliers and partners, we recognize the global impact of our business practices and the importance of public accountability. We continue to advocate on behalf of the global workforce, improve our workplaces, contribute to the communities we serve and ensure our actions are socially, ethically and environmentally responsible.

Regulation

Our services are subject to a variety of complex federal and state laws and regulations in the countries where we operate. We continuously monitor legislation and regulatory changes for their potential effect on our business. We invest in technology and process improvements to implement required changes while minimizing the impact on our operating efficiency and effectiveness. Regulatory cost increases are passed through to our clients to the fullest extent possible. As a service business, we are involved in a service business,not materially impacted by federal, state or local laws that regulate the discharge of materials into the environment do not materially impact us. environment.
Employees
Human Capital

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. To succeed in our highly competitive and rapidly evolving market, we must attract and retain experienced internal employees, as well as talent we put to work for our customers. As part of these efforts, we strive to offer competitive total rewards programs, promote employee development, foster an inclusive and diverse environment and allow employees to give back to their communities and make a social impact.

We are committed to the health, safety and wellness of our employees and talent. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we seek to implement policies and practices that align with applicable laws and regulations and are in the best interest of our employees, talent and the communities in which we operate.

Internal Employees

As of January 1, 2023, we employed approximately 1,100 people at our corporate headquarters in Troy, Michigan, and approximately 6,7004,800 staff members in the United States and an additional 2,700 in our international locations. Kelly retention rates for high performing and high potential employees align with our comparable benchmark.

Compensation and Benefits. Kelly is committed to providing competitive, equitable and fiscally responsible total rewards programs to our employees.  Our compensation programs are designed to attract, retain and reward talented individuals
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with the skills necessary to achieve our strategic goals and create long-term value for our shareholders. We provide employees with competitive compensation opportunities, with strong pay-for-performance linkages that include a mix of base salary, short-term incentives and, in the case of our more senior employees, long-term equity awards. Our programs provide fair and competitive opportunities that align employee and stockholder interests. In addition to cash and equity compensation, we offer employees competitive benefits such as life and health (medical, dental and vision) insurance, paid time off, wellness benefits and defined contribution retirement plans. We review our compensation and benefits programs annually and respond to changes in market practice. For example, recent enhancements to our U.S. benefits program include additional time off for significant life events, a financial advisor program, support programs for certain chronic health conditions and introduction of a well-being app globally. In addition, pay and benefits programs for our international networkemployees align with competitive local practices.

Inclusion and Diversity. Since 1947, our founder fought to increase women's access to work, and we’ve long been an outspoken advocate for the value temporary and independent workers bring to the workplace. We are committed to fostering an inclusive and diverse workforce.  For example, most of branch offices.Kelly's U.S. workforce is female, including a majority of director and above roles. Additionally, for a fifth consecutive year, we’ve achieved a 100% rating from the Human Rights Campaign Foundation’s Corporate Equality Index for LGBTQ+ equality in the workplace. We believe an inclusive environment with diverse teams creates a workplace that is conducive to producing more creative solutions, results in better, more innovative products and services, and presents Kelly as a workplace leader, aiding our ability to attract and retain high-performing talent. We are focused on fostering a culture of belonging, where everyone feels welcomed and respected and can thrive as we work together. Kelly promotes employee development and internal career mobility to enable our team to achieve their full potential and to ensure we have the evolving workforce capabilities that the future demands.

Community Involvement. We consider sustainability a guiding principle in strengthening the relationship with our global workforce, suppliers and customers. Through our programs and initiatives, we seek to improve the quality of life of our employees, their families and the communities in which they live and serve. Designed on the concept of social investment and nurturing shared values, our approach ensures the creation of future development capacities instead of aiding on isolated occasions. We support initiatives where our employees can actively engage in the causes they believe in that are also connected to our sustainability strategy. In 2017,2022, we assigned nearly 500,000 temporaryachieved over 7,800 hours of volunteering (for the U.S. and Canada), engaging over 1,000 employees. Through our Equity@Work efforts, we are living our commitment to ensure equitable access to work and growth by creating alliances with like-minded companies, policy groups and institutions to positively impact how companies hire, advance and help more people thrive.

For more information on our diversity and inclusion and community involvement initiatives, please see our Sustainability Report - Growing with Purpose, which is available at kellyservices.com.

Talent

In addition to our internal employees, to a varietyKelly recruits talent on behalf of our customers around the globe.
While services may be provided inside the facilities of customers,globally.  In 2022, we remainplaced more than 300,000 individuals in positions with our customers.  Kelly remains the employer of record for our temporary employees. Weemployees working at our customer locations.  This means that we retain responsibility for employeeall assignments (including ensuring appropriate health and safety protocols in conjunction with our customers), wages, benefits, workers’ compensation insurance, and the employer’semployers’ share of all applicable payroll taxes andas well as the administration of the employee’semployee's share of these taxes.  We also offer our Kelly talent access to competitive health and benefit programs while they are working with us.


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

We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.

We make available, free of charge, through our website, and by responding to requests addressed to our senior vice president of investor relations, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
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amendments to those reports. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our website address is: www.kellyservices.com. The information contained on our website, or on other websites linked to our website, is not part of this report.



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ITEM 1A. RISK FACTORS.


Risks Related to Macroeconomic Conditions

Our business is significantly affected by fluctuations in general economic conditions.

Demand for staffing services is significantly affected by the general level of economic activity and employment in the United States and the other countries in which we operate. When economic activity increases, temporary employees are often added before full-time employees are hired. As economic activity slows, however, many companies reduce their use of temporary employees before laying off full-time employees. Customer responses to real or perceived economic conditions, including perceptions related to market conditions, labor supply and inflation, could negatively impact customer behavior. Significant swings in economic activity historically have had a disproportionate impact on staffing industry volumes. We may not fully benefit from times of increased economic activity should we experience shortages in the supply of temporary employees. We may also experience more competitive pricing pressure and slower customer payments during periods of economic downturn. A substantial portion of our revenues and earnings are generated by our business operations in the United States. Any significant economic downturn in the United States or certain other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.

Our business has been adversely impacted by the novel coronavirus (COVID-19) outbreak and could be impacted by future outbreaks.

The emergence of new strain(s) of COVID-19 that are more deadly, contagious, or vaccine resistant, or a decline in the effectiveness of vaccines or treatment regimens could result in another economic downturn, a decline in demand for our services, or increased worker absenteeism. Likewise, the financial viability of third parties on which we rely to provide staffing services or manage critical business functions could also be impacted by further negative COVID-19 developments.

Our stock price may be subject to significant volatility and could suffer a decline in value.

The market price of our common stock may be subject to significant volatility. We believe that many factors, including several which are beyond our control, have a significant effect on the market price of our common stock. These include:

actual or anticipated variations in our quarterly operating results;
announcements of new services by us or our competitors;
announcements relating to strategic relationships, acquisitions or divestitures;
changes in financial estimates by securities analysts;
changes in general economic conditions;
actual or anticipated changes in laws and government regulations;
commencement of, or involvement in, litigation;
any major change in our board or management;
changes in industry trends or conditions; and
sales of significant amounts of our common stock or other securities in the market.

In addition, the stock market in general, and the NASDAQ Global Market in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, securities class action litigation has often been instituted following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of our management’s attention and resources. Further, our operating results may be below the expectations of securities analysts or investors. In such event, the price of our common stock may decline.

Risks Related to our Industry Segment

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


The worldwide staffing services market is highly competitive with limited barriers to entry. We compete in global, national, regional and local markets with full-service and specialized temporary staffing and consulting companies. While the majority of our competitors are significantly smaller than us, several competitors, includingRandstad, Adecco S.A., Randstad Holding N.V.,Group, ManpowerGroup Inc., and Allegis Group and Recruit Holdings, are considerably larger than we are and have more substantial marketing and financial resources. Additionally, the emergence of online staffing platforms or other forms of disintermediation may pose a
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competitive threat to our services, which operate under a more traditional staffing business model. Price competition in the staffing industry is intense, particularly for the provision of office clerical, and light industrial and education personnel. We expect that the level of competition will remain high, which could limit our ability to maintain or increase our market share or profitability.


The number of customers distributing their staffing service purchases among a broader group of competitors continues to increase which, in some cases, may make it more difficult for us to obtain new customers, or to retain or maintain our current share of business, with existing customers. We also face the risk that our current or prospective customers may decide to provide similar services internally. As a result, there can be no assurance that we will not encounter increased competition in the future.


Our business is significantly affected by fluctuations in general economic conditions.

Demand for staffing services is significantly affected by the general level of economic activity and employment in the United States and the other countries in which we operate. When economic activity increases, temporary employees are often added before full-time employees are hired. As economic activity slows, however, many companies reduce their use of temporary employees before laying off full-time employees. Significant swings in economic activity historically have had a disproportionate impact on staffing industry volumes. We may also experience more competitive pricing pressure and slower customer payments during periods of economic downturn. A substantial portion of our revenues and earnings are generated by our business operations in the United States. Any significant economic downturn in the United States or certain other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.

Technological advances may significantly disrupt the labor market and weaken demand for human capital at a rapid rate.capital.


Our success is directly dependent on our customers’ demands for talent. As technology continues to evolve, more tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial intelligence, and other technological advances outside of our control. This trend poses a risk to the staffing industry, as a whole, particularly in lower-skill job categories that may be more susceptible to such replacement.

We may not achieve the intended effects of our business strategy.

Our business strategy focuses on driving growth in higher margin specialties. We have made targeted investments, adjusted our operating models and increased the resources necessary for driving sustainable growth within our targeted higher-margin solutions. If we are unsuccessful in executing our strategy, we may not achieve either our stated goal of strong revenue growth or the intended productivity improvements, which could negatively impact profitability.

We are at risk of damage to our brand, which is important to our success.

Our success depends, in part, on the goodwill associated with our brand. Because we assign employees to work under the direction and supervision of our customer at work locations not under Kelly’s control, we are at risk of our employees engaging in unauthorized conduct that could harm our reputation. Our Kelly Educational Staffing product is particularly susceptibleresponding to this exposure. An occurrence that damages Kelly’s reputationpotential shift in customer demand due to advancing technology it could cause the loss of current and future customers, additional regulatory scrutiny and liability to third parties.


Our intellectual property assets could be infringed upon or compromised, and there are limitations to our ability to protect against such events.

Our success is dependent in parthave a material adverse effect on our proprietary business processes, our intellectual property and our thought leadership. To protect those rights, we depend upon protections afforded by the laws of the various countries in which we operate, as well as contractual language and our own enforcement initiatives. These defenses may not be sufficient to fully protect us or to deter infringement or other misappropriation of our trade secrets and other intellectual property. In addition, third parties may challenge the validity or enforceability of our intellectual property rights. We also face the risk that third parties may allege that the operation of our business infringes or otherwise misappropriates intellectual property rights that they own or license. Losses or claims of this nature could cause us to incur significant expense, harm our reputation, reduce our competitive advantages or prevent us from offering certain services or solutions. The remedies available to us may be limited or leave us without full compensation.

If we fail to successfully develop new service offerings, we may be unable to retain our current customers and gain new customers and our revenues would decline.

The process of developing new service offerings requires accurate anticipation of customers’ changing needs and emerging technological trends. This may require that we make long-term investments and commit significant resources before knowing whether these investments will eventually result in service offerings that achieve customer acceptance and generate the revenues required to provide desired returns. If we fail to accurately anticipate and meet our customers’ needs through the development of new service offerings or do not successfully deliver new service offerings, our competitive position could be weakened and that could materially adversely affect our results of operations and financial condition.


Competition rules arising from government legislation, litigation or regulatory activity may limit how we structure and market our services.

As we increasingly offer services outside the realm of traditionala leading staffing including business process outsourcing,and recruiting company, we are exposedclosely scrutinized by government agencies under U.S. and foreign competition laws. An increasing number of governments are regulating competition law activities, leading to additional risksincreased scrutiny. Some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct.

The European Commission and its various competition authorities have targeted industry trade associations in which could have a material adverse effect onwe participate, resulting in the assessment of fines against our business.

Our business strategy focuses on growing our outsourcing and consulting business, including business process outsourcing, where we provide operational management of our customers’ non-core functions or departments. This could expose us to certain risks unique to that business, including product liability or product recalls.in the past. Although we have internal vetting processes intended to control such risks, there is no assurance that these processes will be effective. Additionally, while we maintain insurancesafeguards in types and amounts we believe are appropriate in light of the aforementioned exposures, there can also be no assurance that such insurance policies will remain available on reasonable terms or be sufficient in amount or scope of coverage.

We are increasingly dependent on third parties for the execution of critical functions.

We do not maintain our own vendor management technology, and we have outsourced certain other critical applications or business processes to external providers, including cloud-based services. We have elected to enter into supplier partnerships rather than establishing or maintaining our own operations in some of the territories where our customers require our services. We do not maintain a controlling interest in our expanded staffing joint venture in Asia Pacific (PersolKelly Asia Pacific) and have elected to rely on the joint venture to provide certain back office and administrative services to our GTS operations in the region. The failure or inability to perform on the part of one or more of these critical suppliers or partners could cause significant disruptions and increased costs.

Past and future acquisitions may not be successful.

From time to time, we acquire and invest in companies throughout the world. Acquisitions involve a number of risks, including the diversion of management’s attention from its existing operations, the failure to retain key personnel or customers of an acquired business, the failure to realize anticipated benefits such as cost savings and revenue enhancements, the potentially substantial transaction costs associated with acquisitions, the assumption of unknown liabilities of the acquired business and the inability to successfully integrate the business into our operations. Potential impairment losses could result if we overpay for an acquisition. There can be no assurance that any past or future acquired businesses will generate anticipated revenues or earnings.


Investments in equity affiliates expose us to additional risks and uncertainties.

We participate, or may participate in the future, in certain investments in equity affiliates, such as joint ventures or other equity investments with strategic partners, including PersolKelly Asia Pacific. These arrangements expose us to a number of risks, including the risk that the management of the combined venture may not be able to fulfill their performance obligations under the management agreements or that the joint venture parties may be incapable of providing the required financial support. Additionally, improper, illegal or unethical actions by the venture management could have a negative impact on the reputation of the venture and our company.

A loss of major customers or a change in such customers’ buying behavior could have a material adverse effect on our business.

Our business strategy is focused on serving large corporate customers through high volume global service agreements. While our strategy is intended to enable us to increase our revenues and earnings from our major corporate customers, the strategy also exposes us to increased risks arising from the possible loss of major customer accounts. The deterioration of the financial condition or business prospects of these customers could reduce their need for our services and result in a significant decrease in the revenues and earnings we derive from these customers. Continuing merger and acquisition activity involving our large corporate customers could put existing business at risk or impose additional pricing pressures. Since receipts from customers generally lag payroll to temporary employees, the bankruptcy of a major customer could have a material adverse impact on our ability to meet our working capital requirements. Additionally, most of our customer contracts can be terminated by the customer on short notice without penalty. This creates uncertainty with respect to the revenues and earnings we may recognize with respect to our customer contracts.

Our business with large customer accounts reflects a market-driven shift in buying behaviors in which reliance on a small number of staffing partners has shifted to reliance upon outsourced workforce solutions. The movement from single-sourced to competitively sourced staffing contracts may also substantially reduce our future revenues from such customers. While Kelly has sought to address this trend with the adoption of talent supply chain strategies, including providing CWO services within our GTS segment, we may not be selected or retained as the CWO service provider by our large customers. This may result in a material decrease in the revenue we derive from providing staffing services to such customers.

Our business with the federal government and government contractors presents additional risk considerations. We must comply with laws and regulations relating to the formation, administration and performance of federal government contracts. Failure to meet these obligations could result in civil penalties, fines, suspension of payments, reputational damage, disqualification from doing business with government agencies and other sanctions or adverse consequences. Government procurement practices may change in ways that impose additional costs or risks upon us or pose a competitive disadvantage. Our employees may be unable to obtain or retain the security clearances necessary to conduct business under certain contracts, or we could lose or be unable to secure or retain a necessary facility clearance. Government agencies may temporarily or permanently lose funding for awarded contracts, or there could be delays in the start-up of projects already awarded and funded.

We conduct a significant portion of our operations outside of the United States and we are subject to risks relating to our international business activities, including fluctuations in currency exchange rates and numerous legal and regulatory requirements.

We conduct our business in most major staffing markets throughout the world. Our operations outside the United States are subject to risks inherent in international business activities, including:

fluctuations in currency exchange rates;
restrictions or limitations on the transfer of funds;
government intrusions including asset seizures, expropriations or de facto control;
varying economic and political conditions;
differences in cultures and business practices;
differences in employment and tax laws and regulations;
differences in accounting and reporting requirements;
differences in labor and market conditions;
changing and, in some cases, complex or ambiguous laws and regulations; and
litigation, investigations and claims.

Our operations outside the United States are reported in the applicable local currencies and then translated into U.S. dollars at the applicable currency exchange rates for inclusion in our consolidated financial statements. Exchange rates for currencies of

these countries may fluctuate in relation to the U.S. dollar and these fluctuations may have an adverse or favorable effect on our operating results when translating foreign currencies into U.S. dollars.

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

The Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents. While we devote substantial resources to our global compliance programs and have implemented policies, training, and internal controls designed to reduce the risk of corrupt payments, our employees, vendors, or agents may violate our policies. Our failureplace to comply with Anti-Corruption Laws could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation. Operations outside the U.S. may be affected by changes in trade protectioncompetition laws, policies and measures, and other regulatory requirements affecting trade and investment. As a result, we may be subject to legal liability and reputational damage.

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

As we aim to expand the number of clients adopting talent supply chain management and other complex solutions in order to support our growth strategy, we are highly reliant on individuals who possess specialized knowledge and skills to lead complex solutions and operations.  There can be no assurance that qualified personnel will continue to be available.  Our success is increasingly dependent on our ability to attract, develop and retain these experts.

We depend on our ability to attract and retain qualified temporary personnel (employed directly by us or through third-party suppliers).

We depend on our ability to attract qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of our customers. We must continually evaluate our base of available qualified personnel to keep pace with changing customer needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available in sufficient numbers and on terms of employment acceptable to us and our customers. Our success is substantially dependent on our ability to recruit and retain qualified temporary personnel.

We may be exposed to employment-related claims and losses, including class action lawsuits and collective actions, which could have a material adverse effect on our business.

We employ and assign personnel in the workplaces of other businesses. The risks of these activities include possible claims relating to:

discrimination and harassment;
wrongful termination or retaliation;
violations of employment rights related to employment screening or privacy issues;
apportionment between us and our customer of legal obligations as an employer of temporary employees;
classification of workers as employees or independent contractors;
employment of unauthorized workers;
violations of wage and hour requirements;
retroactive entitlement to employee benefits, including health insurance;
failure to comply with leave policy requirements; and
errors and omissions by our temporary employees, particularly for the actions of professionals such as attorneys, accountants, teachers and scientists.

We are also subject to potential risks relating to misuse of customer proprietary information, misappropriation of funds, death or injury to our employees, damage to customer facilities due to negligence of temporary employees, criminal activity and other similar occurrences. We may incur fines and other losses or negative publicity with respect to these risks. In addition, these occurrences may give rise to litigation, which could be time-consuming and expensive. In the U.S. and certain other countries in which we operate, new employment and labor laws and regulations have been proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. In addition, such laws and regulations are arising with increasing frequency at the state and local level in the U.S. and the resulting inconsistency in such laws and regulations results in additional complexity. There can be no assurance that the corporate policies and practices we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of

these risks. Although we maintain insurance in types and amounts we believe are appropriate in light of the aforementioned exposures, there can also be no assurance that such insurance policies will remain available on reasonable terms or be sufficient in amount or scope of coverage. Additionally, should we have a material inability to produce records as a consequence of litigation or a government investigation, the cost or consequences of such matters could become much greater.

A failure to maintain the privacy of information entrusted to us could have significant adverse consequences.

In the normal course of business we control, we process or have access to personal information regarding our own employees or employment candidates, as well as that of many of our customers or managed suppliers. Information concerning our employees and candidates may also reside in systems controlled by third parties for purposes such as employee benefits and payroll administration. The legal and regulatory environment concerning data privacy is becoming more complex and challenging, and the potential consequences of non-compliance have become more severe. Any failure to protect such personal information from inappropriate access or disclosure, whether through social engineering or by accident or other cause, could have severe consequences including fines, litigation, regulatory sanctions including loss of our status as a subscriber to the EU-U.S. Privacy Shield Framework, reputational damage and loss of customers or employees. Although we have a program designed to preserve the privacy of the personal data that we control or process, as well as personal data that we entrust to third parties, there can be no assuranceguarantee that such safeguards will be successful. Any government regulatory actions may result in fines and penalties or hamper our program will meet all currentability to provide the cost-effective benefits to consumers and future regulatory requirements, anticipate all potential methodsbusinesses, reducing the attractiveness of unauthorized access,our services and the revenues that come from them. New competition law actions could be initiated. The outcome of such actions, or prevent all inappropriate disclosures. Our insurance coverage may not be sufficientsteps taken to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

Cyber attacks or other breaches of network or information technology securityavoid them, could have an adverse effect on our systems, services, reputation and financial results.

We rely upon multiple information technology systems and networks, some of which are web-based or managed by third parties, to process, transmit and store electronic information and to manage or supportadversely affect us in a variety of critical business processesways, including:

We may have to choose between withdrawing certain services from certain geographies to avoid fines or designing and activities. Our networks and applications are increasingly accessed from locations and by devices not within our physical control, and the specificsdeveloping alternative versions of our technology systems and networks may vary by geographic region. In the course of ordinary business, we may store or process proprietary or confidential information concerning our business and financial performance and current, past or prospective employees, customers, vendors and managed suppliers. The secure and consistent operation of these systems, networks and processes is criticalthose services to our business operations. Moreover, our temporary employees may be exposed to, or have access to, similar information in the course of their customer assignments. We routinely experience cyber attacks,comply with government rulings, which may include the use of malware, computer viruses, social engineering schemes and other means of attempted disruption or unauthorized access.

The actions we take to reduce the risk of impairments to our operations or systems and breaches of confidential or proprietary data may not be sufficient to prevent or repel future cyber events or other impairments of our networks or information technologies. An event involving the destruction, modification, accidental or unauthorized release, or theft of sensitive information from systems related to our business, or an attack that results in damage to or unavailability of our key technology systems or those of critical vendors, could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and remediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition. Our cyber security and business continuity plans may not be effective in anticipating, preventing and effectively responding to all potential cyber risk exposures. Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

Damage to our key data centers could affect our ability to sustain critical business applications.

Many business processes critical to our continued operation are housed in our data center situated within the corporate headquarters complex as well as regional data centers in Asia-Pacific and Europe. Those processes include, but are not limited to, payroll, customer reporting and order management. While we have taken steps to protect these operations and have developed remote recovery capabilities, the loss ofentail a data center would create a substantial risk of business interruption which could have a material adverse effect on our business, financial condition and results of operations.

Our information technology projects may not yield their intended results.

We have a number of information technology projects in process or in the planning stages, including improvements to applicant onboarding and tracking systems, order management, and improvements to financial processes such as billing and accounts

payable through system consolidation and upgrades. Although the technology is intended to increase productivity and operating efficiencies, these projects may not yield their intended results. Any delays in completing, or an inability to successfully complete, these technology initiatives or an inability to achieve the anticipated efficiencies could adversely affect our operations, liquidity and financial condition. In addition, our information technology investments and strategy may not provide the ability to keep up with evolving industry trends and customer expectations which could weaken our competitive position. We also do not currently utilize a single enterprise resource planning system, which limits our ability and increases the amount of investment and effort necessary to provide global service integration to our customers.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting. If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could have a negative effect on our stock price.

Impairment charges relating to our goodwill, intangibles and long-lived assets, including equity method investments, could adversely affect our results of operations.

We regularly monitor our goodwill, long-lived assets and equity method investments for impairment indicators.  In conducting our goodwill impairment testing, we compare the fair value of each of our reporting units with goodwill to the related net book value.  In conducting our impairment analysis of long-lived assets and intangibles, we compare the undiscounted cash flows expected to be generated from the long-lived assets and intangibles to the related net book values. We review our equity method investment for indicators of impairment on a periodic basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. Changes in economic or operating conditions impacting our estimates and assumptions could result in the impairment of our goodwill, intangibles, long-lived assets and equity method investments. In the event that we determine that there is an impairment, we may be required to record a significant non-cash charge to earnings that could adversely affect our results of operations.

Unexpected changes in claim trends on our workers’ compensation, unemployment, disability and medical benefit plans may negatively impact our financial condition.

We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program, disability and medical benefits claims. Unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates and medical cost inflation, could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to unforeseen circumstances, or if we must make unfavorable adjustments to accruals for prior accident years, our costs could increase significantly. In addition, unemployment insurance costs are dependent on benefit claims experience from employees which may vary from current levels and result in increased costs. There can be no assurance that we will be able to increase the fees charged to our customersdelay in a timely manner andservice delivery.
Adverse rulings may act as precedent in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.other competition law proceedings.


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.


The temporary employment industry is heavily regulated in many of the countries in which we operate. Changes in laws or government regulations may result in prohibition or restriction of certain types of employment services we are permitted to offer or the imposition of new or additional benefit, licensing or tax requirements that could reduce our revenues and earnings. In particular, we are subject to state unemployment taxes in the U.S., which typically increase during periods of increased levels of unemployment. We also receive benefits, such as the work opportunity income tax credit in the U.S., that regularly expire and may not be reinstated. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover increased costs as a result of any changes in laws or government regulations. Any future changes in laws or government regulations, or interpretations thereof, including additional laws and regulations enacted at a local level may make it more difficult or expensive for us to provide staffing services and could have a material adverse effect on our business, financial condition and results of operations.



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Government litigation
Unexpected changes in claim trends on our workers’ compensation, unemployment, disability and regulatory activity relatingmedical benefit plans may negatively impact our financial condition.

We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program, disability and medical benefits claims. Unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates and medical cost inflation, could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to competition rulesunforeseen circumstances, or if we must make unfavorable adjustments to accruals for prior accident years, our costs could increase significantly. In addition, unemployment insurance costs are dependent on benefit claims experience from employees which may limit howvary from current levels and result in increased costs. There can be no assurance that we structure and marketwill be able to increase the fees charged to our services.

As a leading staffing and recruiting company, we are closely scrutinized by government agencies under U.S. and foreign competition laws. An increasing number of governments are regulating competition law activities, leading to increased scrutiny. Some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct.

The European Commission and its various competition authorities have targeted industry trade associations in which we participate. Any government regulatory actions may hamper our ability to provide the cost-effective benefits to consumers and businesses, reducing the attractiveness of our services and the revenue that come from them. New competition law actions could be initiated. The outcome of such actions, or steps taken to avoid them, could adversely affect uscustomers in a variety of ways, including:
We may have to choose between withdrawing certain services from certain geographies to avoid fines or designingtimely manner and developing alternative versions of those services to comply with government rulings, which may entail a delay in a service delivery.sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.

Adverse rulings may act as precedent in other competition law proceedings.


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 in which 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 2010.  We are also subject to unclaimed or abandoned property (escheat) laws.operate. Our tax expense could be materially impacted by changes in tax laws in these jurisdictions, changes in the valuation of deferred tax assets and liabilities or changes in the mix of income by country. The demographicsoverall size of our workforce and the visibility of our industry may make it more likely we become a target of government investigations, and we are regularly subject to audit by tax authorities. Although we believe our tax and unclaimed property estimates are reasonable, the final determination of audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation could materially harm our business.


Risks Related to Strategy and Execution

Our future performance depends on the Company’s effective execution of our business strategy.

The performance of the Company’s business is dependent on our ability to effectively execute our growth strategy. Our strategy includes targeted investments in select specialty areas, focusing on growth platforms and implementation of a cost-effective operating model to bridge our strategy to execution. If we are unsuccessful in executing our strategy, we may not achieve either our stated goal of revenue growth or the intended productivity improvements, which could negatively impact profitability. Even if effectively executed, our strategy may be insufficient considering changes in market conditions, technology, competitive pressures or other external factors.

If we fail to successfully develop new service offerings, we may be unable to retain and acquire customers, resulting in a decline in revenues.

The Company’s successful execution of our growth strategy requires that we match evolving customer expectations with evolving service offerings. The development of new service offerings requires accurate anticipation of customer needs and emerging technology and workforce trends. We must make long-term investments in our information technology infrastructure and commit resources to development efforts before knowing whether these investments will result in service offerings that achieve customer acceptance and generate the revenues required to provide desired returns. If we fail to accurately anticipate and meet our customers’ needs through the development of new service offerings or do not successfully deliver new service offerings, our competitive position could weaken, causing a material adverse effect on our results of operations and financial condition.

A loss of major customers or a change in such customers’ buying behavior or economic strength could have a material adverse effect on our business.

We serve many large corporate customers through high volume service agreements. While we intend to maintain or increase our revenues and earnings from our major corporate customers, we are exposed to risks arising from the possible loss of major customer accounts. A change in labor strategy or the deterioration of the financial condition or business prospects of these customers could reduce their need for our services and result in a significant decrease in the revenues and earnings we derive from these customers. Such change could occur due to factors in our customers' control but also could occur due to economic, social, climate, or political factors outside of our customers' control. Our customers are also exposed to third-party risk through their use of vendors and suppliers which, in the event of a third-party incident at a customer, could result in a deterioration in their financial condition. Continuing merger and acquisition activity involving our large corporate customers could put existing business at risk or impose additional pricing pressures. Since receipts from customers generally lag payroll to temporary employees, the bankruptcy of a major customer could have a material adverse impact on our ability to meet our working capital requirements. The expansion of payment terms may extend our working capital requirements and reduce available capital for
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investment. Additionally, most of our customer contracts can be terminated by the customer on short notice without penalty. This creates uncertainty with respect to the revenues and earnings we may recognize with respect to our customer contracts.

Our business with large customer accounts reflects a market-driven shift in buying behaviors in which reliance on a small number of staffing partners has shifted to reliance upon a network of talent providers. The movement from single-sourced to competitively sourced staffing contracts may also substantially reduce our future revenues from such customers. While Kelly has sought to address this trend, including providing MSP services within our OCG segment, we may not be selected or retained as the MSP by our large customers. This may result in a material decrease in the revenue we derive from providing staffing services to such customers. In addition, revenues may be materially impacted from our decision to exit customers due to pricing pressure or other business factors.

Our business with the federal government and government contractors presents additional risk considerations. We must comply with laws and regulations relating to the formation, administration and performance of federal government contracts. Failure to meet these obligations could result in civil penalties, fines, suspension of payments, reputational damage, disqualification from doing business with government agencies and other sanctions or adverse consequences. Government procurement practices may change in ways that impose additional costs or risks upon us or pose a competitive disadvantage. Our employees may be unable to obtain or retain the security clearances necessary to conduct business under certain contracts, or we could lose or be unable to secure or retain a necessary facility clearance. Government agencies may temporarily or permanently lose funding for awarded contracts, or there could be delays in the start-up of projects already awarded and funded.

We are at risk of damage to our brands, which are important to our success.

Our success depends, in part, on the value associated with our brands. Because we assign employees to work under the direction and supervision of our customer at work locations not under Kelly’s control, we are at risk of our employees engaging in unauthorized conduct that could harm our reputation. Our Education segment is particularly susceptible to this exposure. Any incident, act or omission that damages Kelly’s reputation could cause the loss of current and future customers, additional regulatory scrutiny and liability to third parties, which could negatively impact profitability.

As we increasingly offer services outside the realm of traditional staffing, including business process outsourcing and services intended to connect talent to independent work, we are exposed to additional risks which could have a material adverse effect on our business.

Our business strategy focuses on driving profitable growth in key specialty areas, including through business process outsourcing arrangements, where we provide operational management of our customers’ non-core functions or departments. This could expose us to certain risks unique to that business, including product liability or product recalls. As the nature of work changes, we deliver services that connect talent to independent work with our customers and expose the Company to risks of misclassifying workers, which could result in regulatory audits and penalties. Although we have internal vetting processes intended to control such risks, there is no assurance that these processes will be effective or that we will be able to identify these potential risks in a timely manner. Our specialties also include professional services where errors or omissions by employees or independent contractors can result in substantial injury or damages. We attempt to mitigate and transfer such risks through contractual arrangements with our customers and suppliers; however, these services may give rise to liability claims and litigation. While we maintain specifiedinsurance in types and amounts we believe are appropriate for the contemplated risks, there is no assurance that such insurance coverage will remain available on reasonable terms or be sufficient in amount or scope.

We are increasingly dependent on third parties for the execution of critical functions.

We rely on third parties to support critical functions within our operations, including portions of our technology infrastructure, vendor management, customer relationship management, and applicant tracking systems. If we are unable to contract with third parties having the specialized skills needed to support our growth strategies or integrate their products and services with our business, or if they fail to meet our performance requirements, the results of operations could be adversely impacted. We also rely on supplier partnerships to deliver our services to customers in certain territories. If our suppliers fail to meet our standards and expectations or are unfavorably regarded by our customers, our ability to discontinue the relationship may be limited and could result in reputational damage, customer loss, and adversely affect our results of operations. The failure or inability to perform on the part of one or more of these critical suppliers or partners could cause significant disruptions and increased costs.

Our information technology strategy may not yield its intended results.

Our information technology strategy includes improvements to our applicant onboarding and tracking systems, order management, and improvements to financial covenantsprocesses such as billing and accounts payable through system consolidation and
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upgrades. We do not use a single enterprise resource planning system, which limits our ability to react to evolving technology and customer expectations and increases the amount of investment and effort necessary to provide global service integration to our customers. Although the technology strategy is intended to increase productivity and operating efficiencies, these initiatives may not yield their intended results. Any delays in completing, or an inability to successfully complete, these technology initiatives or an inability to achieve the anticipated efficiencies could adversely affect our operations, liquidity and financial condition. Some of the initiatives are dependent on the products and services of third party vendors. If our vendors are unable to provide these services, or fail to meet our standards and expectations, we could experience business interruptions or data loss which could have a material adverse effect on our business, financial condition and results of operations.

Past and future acquisitions may not be successful.

As a part of our growth strategy, we continue to monitor the market for acquisition targets to bolster our inorganic growth aspirations. Acquisitions involve a number of risks, including the diversion of management’s attention from its existing operations, the failure to retain key personnel or customers of an acquired business, the failure to realize anticipated benefits such as cost savings and revenue enhancements, potential substantial transaction costs associated with acquisitions, the assumption of unknown liabilities of the acquired business and the inability to successfully integrate the business into our operations. There can be no assurance that any past or future acquired businesses will generate anticipated revenues or earnings.

Further, acquisitions result in goodwill and intangible assets which have the risk of impairment if the future operating results and cash flows of such acquisitions are lower than our initial estimates. In the event that we determine that there is an impairment, we may be required to record a significant non-cash charge to earnings that could adversely affect our results of operations. In 2022, changes in market conditions related to demand in hiring in the high-tech industry and slowing growth in RPO more broadly, resulted in a goodwill impairment charge of $41.0 million.

Certain equity investments may expose us to additional risks and uncertainties.

We participate, or may participate in the future, in certain investments in equity affiliates, such as joint ventures or other investments with strategic partners, including PersolKelly Pte. Ltd. These investments or arrangements expose us to a number of risks, including the risk that the management of the investment or combined venture may not be able to fulfill their performance obligations under the management agreements or that the joint venture parties may be incapable of providing the required financial support. Additionally, improper, illegal or unethical actions by the investment or venture management could have a negative impact on the reputation of the investment or venture and our Company.

Risks Related to Operating a Global Enterprise

We conduct a significant portion of our operations outside of the United States and we are subject to risks relating to our international business activities, including fluctuations in currency exchange rates and numerous legal and regulatory requirements.

We conduct our business in major staffing markets throughout the world. Our operations outside the United States are subject to risks inherent in international business activities, including:

fluctuations in currency exchange rates;
restrictions or limitations on the transfer of funds;
government intrusions including asset seizures, expropriations or de facto control;
varying economic and geopolitical conditions;
differences in cultures and business practices;
differences in employment and tax laws and regulations;
differences in accounting and reporting requirements;
differences in labor and market conditions;
compliance with trade sanctions;
changing and, in some cases, complex or ambiguous laws and regulations; and
litigation, investigations and claims.

Our operations outside the United States are reported in the applicable local currencies and then translated into U.S. dollars at the applicable currency exchange rates for inclusion in our bank credit facilities,consolidated financial statements. Exchange rates for currencies of these countries may fluctuate in relation to the U.S. dollar and these fluctuations may have an adverse or credit market events beyondfavorable effect on our control, could adversely restrict our financial and operating flexibility andresults when translating foreign currencies into U.S. dollars.
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Our international operations subject us to potential liability under anti-corruption, trade protection, and other risks, includinglaws and regulations.

The Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents. While we devote substantial resources to our global compliance programs and have implemented policies, training, and internal controls designed to reduce the risk of losscorrupt payments, our employees, vendors, or agents may violate our policies. Our failure to comply with Anti-Corruption Laws could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of accessour business, and damage to capital markets.our reputation. Operations outside the U.S. may be affected by changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment. As a result, we may be subject to legal liability and reputational damage.


Our bank credit facilities contain covenants that require usRisks Related to maintain specified financial ratios and satisfy other financial conditions. During 2017, we met all of the covenant requirements. OurHuman Capital

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. Social, political and financial conditions can negatively impact the availability of qualified personnel. 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.

We depend on our ability to attract and retain qualified temporary personnel (employed directly by us or through third-party suppliers).

We depend on our ability to attract qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of our customers. We must continually evaluate our base of available qualified personnel to keep pace with changing customer needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. Low unemployment, as well as social, political and financial conditions can negatively impact the amount of qualified personnel available to meet the staffing requirements of our customers. There can be no assurance that qualified personnel will continue to meetbe available in sufficient numbers and on terms of employment acceptable to us and our customers. Our success is substantially dependent on our ability to recruit and retain qualified temporary personnel.

We may be exposed to employment-related claims and losses, including class action lawsuits and collective actions, which could have a material adverse effect on our business.

We employ and assign personnel in the workplaces of other businesses. The risks of these financial covenants,activities include possible claims relating to:

discrimination and harassment;
wrongful termination or retaliation;
violations of employment rights related to employment screening or privacy issues;
apportionment between us and our customer of legal obligations as an employer of temporary employees;
classification of workers as employees or independent contractors;
employment of unauthorized workers;
violations of wage and hour requirements;
entitlement to employee benefits, including health insurance and retroactive benefits;
failure to comply with leave policy and other labor requirements; and
errors and omissions by our temporary employees, particularly for the actions of professionals such as engineers, therapists, accountants, teachers and scientists.

We are also subject to potential risks relating to misuse of customer proprietary information, misappropriation of funds, death or injury to our employees, damage to customer facilities due to negligence of temporary employees, criminal activity and other similar occurrences. We may incur fines and other losses or negative publicity with respect to interest coverage (see Debt footnotethese risks. In addition, these occurrences may give rise to litigation, which could be time-consuming and expensive. In the U.S. and certain other countries in which we operate, new employment and labor laws and regulations have been proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. In addition, such laws and regulations are arising
13



with increasing frequency at the state and local level in the notesU.S. and the resulting inconsistency in such laws and regulations results in additional complexity. There can be no assurance that the corporate policies and practices we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. Although we maintain insurance in types and amounts we believe are appropriate in light of the aforementioned exposures, there can also be no assurance that such insurance policies will remain available on reasonable terms or be sufficient in amount or scope of coverage. Additionally, should we have a material inability to produce records as a consequence of litigation or a government investigation, the cost or consequences of such matters could become much greater.

Risks Related to Cyber Security and Data Privacy

Damage to our consolidated financial statements), maykey data centers could affect our ability to sustain critical business applications.

Many business processes critical to our continued operation are hosted in outsourced facilities in America, Europe and Asia. Certain other processes are hosted at our corporate headquarters complex or occur in cloud-based computer environments. These critical processes include, but are not be assured.  Iflimited to, payroll, customer reporting, and order management. Although we default under this or any otherhave taken steps to protect all such instances by establishing robust data backup and disaster recovery capabilities, the loss of these data centers or access to the cloud-based environments could create a substantial risk of business interruption which could have a material adverse effect on our business, financial condition and results of operations.

A failure to maintain the privacy of information entrusted to us could have significant adverse consequences.

In the normal course of business we control, process, or have access to personal information regarding our own employees or employment candidates, as well as that of many of our customers or managed suppliers. Information concerning these individuals may also reside in systems controlled by third parties for purposes such as employee benefits and payroll administration. The legal and regulatory environment concerning data privacy is becoming more complex and challenging, and the potential consequences of non-compliance have become more severe. The European Union’s General Data Protection Regulation, the California Consumer Privacy Act and similar laws impose additional compliance requirements related to the lenderscollection, use, processing, transfer, disclosure, and retention of personal information, which can increase operating costs and resources to accomplish. Any failure to abide by these regulations or to protect such personal information from inappropriate access or disclosure, whether through social engineering or by accident or other cause, could declare all outstanding borrowings, accrued interesthave severe consequences including fines, litigation, regulatory sanctions, reputational damage, and feesloss of customers or employees. Although we have a program designed to be due and payable or significantly increasepreserve the costprivacy rights of the facility.  In these circumstances,personal data that we control or process, as well as personal data that we entrust to third parties, there can be no assurance that our program will meet all current and future regulatory requirements, anticipate all potential methods of unauthorized access, or prevent all inappropriate disclosures. Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we wouldnow maintain will remain available under acceptable terms.

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

We rely upon multiple information technology systems and networks, some of which are web-based or managed by third parties, to repayprocess, transmit, and store electronic information and to manage or refinance this indebtedness at favorable ratessupport a variety of critical business processes and activities. Our networks and applications are increasingly accessed from locations and by devices not within our physical control, and the specifics of our technology systems and networks may vary by geographic region. In the course of ordinary business, we may store or at all. Events beyondprocess proprietary or confidential information concerning our controlbusiness and financial performance and current, past or prospective employees, customers, vendors and managed suppliers. The secure and consistent operation of these systems, networks and processes is critical to our business operations. Moreover, our temporary employees may be exposed to, or have access to, similar information in the course of their customer assignments. We routinely experience cyberattacks, which may include the use or attempted use of malware, ransomware, computer viruses, phishing, social engineering schemes and other means of attempted disruption or unauthorized access. Additionally, the rapid pace of change in information security and cyber security threats could result in a heightened threat level for us or companies in our industry with little notice. Our relationships with third parties, including suppliers we manage, customers, and vendors creates potential avenues for malicious actors to initiate a supply chain attack. Even in instances where we are not a target of a malicious actor, we could be exposed to risk due to our relationships and business processes with these third parties.

The actions we take to reduce the failurerisk of oneimpairments to our operations or moresystems and breaches of confidential or proprietary data may not be sufficient to prevent or repel future cyber events or other impairments of our banks, reducingnetworks or information technologies. An event involving the destruction, modification, accidental or unauthorized release, or theft of sensitive information from systems related to our accessbusiness, or an attack that results in damage to liquidityor unavailability of our key technology
14



systems or those of critical vendors (e.g., ransomware), could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and potentially resultingremediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition. Our cyber security and business continuity plans, and those of our third parties with whom we do business, may not be effective in reduced financialanticipating, preventing and operating flexibility.  If broader credit markets wereeffectively responding to experience dislocation, ourall potential accesscyber risk exposures. Our insurance coverage may not be sufficient to other funding sources wouldcover all such costs or consequences, and there can be limited.no assurance that any insurance that we now maintain will remain available under acceptable terms.


Risks Related to Our Capital Structure

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


The Terence E. Adderley Revocable Trust K (“Trust K”) which became irrevocable upon the Executive Chairmandeath of Terence E. Adderley on October 9, 2018, is our controlling stockholder. In accordance with the provisions of Trust K, William U. Parfet, David M. Hempstead and Andrew H. Curoe were appointed as successor trustees of the trust. Mr. Parfet is the brother of Donald R. Parfet, the Chairman of the Board of our board of directors and certain trusts with respect to which he acts as trustee or co-trustee, control approximately 93% of the outstandingCompany. The trustees, acting by majority vote, have sole investment and voting power over the shares of Kelly Class B common stock held by Trust K, which represent approximately 93.5% of the outstanding Class B shares. The voting rights of our Class B common stock are perpetual, and our Class B common stock is not subject to transfer restrictions or mandatory conversion obligations under our certificate of incorporation or bylaws.

Our Class B common stock is the only class of our common stock entitled to voting rights. Mr. Adderley isThe trustees of Trust K are therefore able to exercise voting control with respect to all matters requiring stockholder approval, including the election or removal from office of all members of the Company’s board of 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.


Our Class A and Class B common stock are quoted on the NASDAQ Global Market. Under the listing standards of the NASDAQ Global Market, we are deemed to be a “controlled company” by virtue of the fact that Terence E. Adderley, the Executive Chairman and Chairman of the Board of our board of directors, and certain trusts of which he acts as trustee or co-

trustee havedue to Trust K having voting power with respect to more than fifty percent of our outstanding voting stock. A controlled company is not required to have a majority of its board of directors comprised of independent directors. Director nominees are not required to be selected or recommended for the board’s selection by a majority of independent directors or a nominations committee comprised solely of independent directors, nor do the NASDAQ Global Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. A controlled company is also exempt from NASDAQ Global Market’s requirements regarding the determination of officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors. A controlled company is required to have an audit committee composed of at least three directors who are independent as defined under the rules of both the Securities and Exchange CommissionSEC and the NASDAQ Global Market. The NASDAQ Global Market further requires that all members of the audit committee have the ability to read and understand fundamental financial statements and that at least one member of the audit committee possess financial sophistication. The independent directors must also meet at least twice a year in meetings at which only they are present.


We currently comply with certain of the listing standards of the NASDAQ Global Market that do not apply to controlled companies. Our compliance is voluntary, however, and there can be no assurance that we will continue to comply with these standards in the future.


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


Our restated certificate of incorporation and bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. The acquirer would also be required to provide advance notice of its proposal to replace directors at any annual meeting and would not be able to cumulate votes at a meeting, which would require the acquirer to hold more shares to gain representation on the board of directors than if cumulative voting were permitted.


15



Our board of directors also has the ability to issue additional shares of common stock which could significantly dilute the ownership of a hostile acquirer. In addition, Section 203 of the Delaware General Corporation Law limits mergers and other business combination transactions involving 15 percent or greater stockholders of Delaware corporations unless certain board or stockholder approval requirements are satisfied. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation.

Our board of directors could choose not to negotiate with an acquirer that it did not believe was in our strategic interests. If an acquirer is discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by these or other measures, our shareholders could lose the opportunity to sell their shares at a favorable price.


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


Under our certificate of incorporation, the holders of shares of our Class A common stock are not entitled to voting rights, except as otherwise required by Delaware law. As a result, Class A common stock holdersstockholders do not have the right to vote for the election of directors or in connection with most other matters submitted for the vote of our stockholders.stockholders, including mergers and certain other business combination transactions involving the Company.


OurWe may not be able to realize value from, or otherwise preserve and utilize, our tax credit and net operating loss carryforwards.

Provisions in U.S. and foreign tax law could limit the use of tax credit and net operating loss carryforwards in the event of an ownership change. In general, an ownership change occurs under U.S. tax law if there is a change in the corporation’s equity ownership that exceeds 50% over a rolling three-year period. If we experience an ownership change, inclusive of our Class A and Class B common stock, priceour tax credit and net operating loss carryforwards generated prior to the ownership change may be subject to significant volatilityannual limitations that could reduce, eliminate or defer their utilization. Such limitation could materially impact our financial condition and could suffer a declineresults of operations.

Failure to maintain specified financial covenants in value.

Theour bank credit facilities, or credit market price of our common stock may be subject to significant volatility. We believe that many factors, including several which areevents beyond our control, have a significant effect oncould adversely restrict our financial and operating flexibility and subject us to other risks, including risk of loss of access to capital markets.

Our bank credit facilities contain covenants that require us to maintain specified financial ratios and satisfy other financial conditions. During 2022, we met all of the market price of our common stock. These include:

actual or anticipated variations in our quarterly operating results;
announcements of new services by us or our competitors;
announcements relatingcovenant requirements. Our ability to strategic relationships or acquisitions;
changes incontinue to meet these financial estimates by securities analysts;
changes in general economic conditions;
actual or anticipated changes in laws and government regulations;
commencement of, or involvement in, litigation;
any major change in our board or management;
changes in industry trends or conditions; and
sales of significant amounts of our common stock or other securitiescovenants, particularly with respect to interest coverage (see Debt footnote in the market.


notes to our consolidated financial statements), cannot be assured. If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable or significantly increase the cost of the facility. Additionally, our credit facilities contain cross-default provisions. In addition, the stock market in general, and the NASDAQ Global Market in particular,these circumstances, there can be no assurance that we would have experienced significant price and volume fluctuations that have often been unrelatedsufficient liquidity to repay or disproportionate to the operating performance of listed companies. These broad market and industry factors may seriously harm the market price ofrefinance this indebtedness at favorable rates or at all. Events beyond our common stock, regardless of our operating performance. In the past, securities class action litigation has often been instituted following periods of volatility in the market price of a company’s securities. A securities class action suit against uscontrol could result in substantial costs, potential liabilities and the diversionfailure of one or more of our management’s attentionbanks, reducing our access to liquidity and resources. Further,potentially resulting in reduced financial and operating flexibility. If broader credit markets were to experience dislocation, our operating results maypotential access to other funding sources would be below the expectations of securities analysts or investors. In such event, the price of our common stock may decline.limited.


ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.


ITEM 2. PROPERTIES.
We own our
Our headquarters is a leased facility located in Troy, Michigan whereand is available to our corporate, subsidiary and divisional offices are currently located. The original headquarters building was purchased in 1977. Headquarters operations were expanded into additional buildings purchased in 1991, 1997 and 2001. 
The combined usable floor space in the headquarters complex is approximately 345,000 square feet. Our buildings are in good condition and are currently adequate for their intended purpose and use.employees. We also own undeveloped landconduct business operations in Troyboth the U.S. and northern Oakland County, Michigan.
Branch office business is conductedinternational locations in additional leased premises withfacilities. Since 2020, the majority of leases being fixed for termsour internal employees have also conducted business remotely as part of generally three to five years in the U.S. and Canada and five to ten years outside the U.S. and Canada. We own virtually all of the office furniture and the equipment used in our corporate headquarters and branch offices.flexible work policy.

16



ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business the Company is the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damages may not be estimable. As previously disclosed, the Company entered into a settlement with plaintiffs in Hillson et. al. v Kelly Services in order to avoid the cost of continued litigation. On August 17, 2017, the District Court approved the settlement and entered a Final Order of Judgment and Dismissal. The Company made the final payment, which was accrued in 2015, on September 19, 2017.

In addition, theThe Company is continuously engaged in litigation, threatened ligation, 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, or anti-competition regulations. There areregulations, commercial and contractual disputes, and tax related matters that are currently stayed pendingwhich could result in a decision from the Supreme Court of the United States on whether the Company’s arbitration provision is enforceable.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 onand in accrued workers’ compensation and other claims in the consolidated balance sheet. 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 and other assets in the consolidated balance sheet.

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 liability placed on the investigation, and are supplying materials and information20 member companies. Our apportioned secondary liability as a member company is approximately $300,000. The matter is still pending. Certain member companies exercised their right to comply withchallenge the Authority’s undertakings.decision, which could impact the apportionment. 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.


ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.



17



PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information and Dividends

Our Class A and Class B common stock is traded on the NASDAQ Global Market under the symbols “KELYA” and “KELYB,” respectively. The high and low selling prices for our Class A common stock and Class B common stock as quoted by the NASDAQ Global Market and the dividends paid on the common stock for each quarterly period in the last two fiscal years are reported in the table below. Our ability to pay dividends is subject to compliance with certain financial covenants contained in our debt facilities, as described in the Debt footnote in the notes to our consolidated financial statements.
 Per share amounts (in dollars)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year
2022     
Class A common     
High$23.00 $21.69 $22.56 $18.78 $23.00 
Low16.22 16.73 13.41 13.64 13.41 
Class B common
High22.30 21.77 26.64 18.63 26.64 
Low16.74 17.01 13.64 14.04 13.64 
Dividends0.05 0.075 0.075 0.075 0.275 
2021     
Class A common     
High$23.90 $26.98 $25.00 $20.87 $26.98 
Low19.13 22.51 18.58 15.88 15.88 
Class B common     
High57.46 60.00 24.70 21.27 60.00 
Low18.00 22.15 17.95 16.63 16.63 
Dividends— — 0.05 0.05 0.10 
 Per share amounts (in dollars)
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 Year
2017         
Class A common         
High$23.48
 $24.70
 $25.48
 $30.93
 $30.93
Low20.87
 20.27
 21.01
 24.69
 20.27
          
Class B common         
High23.00
 23.75
 23.00
 28.50
 28.50
Low20.30
 20.18
 20.95
 27.20
 20.18
          
Dividends0.075
 0.075
 0.075
 0.075
 0.30
          
2016         
Class A common         
High$19.73
 $20.15
 $20.98
 $23.61
 $23.61
Low14.63
 17.81
 18.01
 18.06
 14.63
          
Class B common         
High18.04
 20.00
 21.60
 27.80
 27.80
Low15.43
 15.04
 17.23
 17.75
 15.04
          
Dividends0.05
 0.075
 0.075
 0.075
 0.275
 

Holders
Holders
The number of holders of record of our Class A and Class B common stock were approximately 6,60010,500 and 200,700, respectively, as of February 2, 2018. January 30, 2023. 

Recent Sales of Unregistered Securities 

None.

18



Issuer Purchases of Equity Securities

During the fourth quarter of 2017,2022, we reacquired shares of our Class A common stock as follows:
Period
Total Number
of Shares
(or Units)
Purchased
Average
Price Paid
per Share
(or Unit)
Total Number
of Shares (or
Units) Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
That May Yet Be
Purchased Under the
Plans or Programs
    (in millions of dollars)
October 3, 2022 through November 6, 2022143 $14.53 — $— 
November 7, 2022 through December 4, 202268,238 16.90 68,114 48.8 
December 5, 2022 through January 1, 2023408,607 16.41 406,530 42.2 
Total476,988 $16.48 474,644  
Period 
Total Number
of Shares
(or Units)
Purchased
 
Average
Price Paid
per Share
(or Unit)
 
Total Number
of Shares (or
Units) Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
That May Yet Be
Purchased Under the
Plans or Programs
        (in millions of dollars)
October 2, 2017 through November 5, 2017 845
 $26.31
 
 $
         
November 6, 2017 through December 3, 2017 289
 29.36
 
 
         
December 4, 2017 through December 31, 2017 
 
 
 
         
Total 1,134
 $27.09
 
  
 
On November 9, 2022, the Company's board of directors approved a plan for the Company to repurchase shares of its Class A common stock with a market value not to exceed $50.0 million through transactions executed in the open market within one year. We may also reacquire shares outside the program in connection with shares sold to cover taxesemployee tax withholdings due upon the vesting of restricted stock held by employees. Accordingly, 1,1342,344 shares were reacquired in transactions outside the repurchase program during the Company’s fourth quarter.

19



Performance Graph

The following graph compares the cumulative total return of our Class A common stock with that of the S&P SmallCap 600 Index and the S&P 1500 Human Resources and Employment Services Index for the five years ended December 31, 2017.2022. The graph assumes an investment of $100 on December 31, 20122017 and that all dividends were reinvested. 

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Assumes Initial Investment of $100
December 31, 20122017 – December 31, 20172022

kelya-20230101_g1.jpg

 201720182019202020212022
Kelly Services, Inc.$100.00 $76.01 $84.84 $77.59 $63.59 $65.03 
S&P SmallCap 600 Index$100.00 $91.52 $112.37 $125.05 $158.59 $133.06 
S&P 1500 Human Resources and Employment Services Index$100.00 $83.73 $102.81 $103.69 $156.71 $117.07 


ITEM 6. [RESERVED]

20
 201220132014201520162017
Kelly Services, Inc.$100.00
$160.17
$110.53
$106.17
$152.98
$184.46
S&P SmallCap 600 Index$100.00
$141.31
$149.45
$146.50
$185.40
$209.94
S&P 1500 Human Resources and Employment Services Index$100.00
$176.48
$177.11
$191.21
$209.27
$266.36



ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes selected financial information of Kelly Services, Inc. and its subsidiaries for each of the most recent five fiscal years. This table should be read in conjunction with the other financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements included elsewhere in this report. The statement of earnings data for the 2014 and 2013 fiscal years as well as the balance sheet data as of 2015, 2014 and 2013 are derived from consolidated financial statements previously on file with the SEC. 
(In millions except per share amounts) 2017 2016 
2015 (1)
 2014 2013
           
Revenue from services $5,374.4
 $5,276.8
 $5,518.2
 $5,562.7
 $5,413.1
Earnings from operations 83.3
 63.2
 53.8
 23.7
 58.9
Gain on investment in PersolKelly Asia Pacific (2)
 
 87.2
 
 
 
Net earnings 71.6
 120.8
 53.8
 23.7
 58.9
           
Basic earnings per share 1.84
 3.10
 1.39
 0.61
 1.54
Diluted earnings per share 1.81
 3.08
 1.39
 0.61
 1.54
           
Dividends per share          
Classes A and B common 0.30
 0.275
 0.20
 0.20
 0.20
           
Working capital (3)
 458.1
 443.5
 411.3
 428.1
 474.5
Total assets 2,376.3
 2,028.1
 1,939.6
 1,917.9
 1,798.6
Total noncurrent liabilities 300.5
 245.0
 228.4
 224.1
 214.0
(1)Fiscal year included 53 weeks.
(2)Represents the fair value of the Company’s investment in PersolKelly Asia Pacific in addition to the cash received less the carrying value of assets transferred to the joint venture.
(3)Working capital is calculated as current assets minus current liabilities.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Executive Overview
The Workforce Solutions Industry
The staffing industry has changed dramatically over the last decade—transformed by globalization, automation, competitive consolidation and secular shiftsIn 2022, Kelly moved forward on its strategic growth journey amid a dynamic macroeconomic environment in labor supply and demand. Global employment trends are reshaping and redefining traditional employment models, sourcing strategies and human resource capability requirements. In response, the industry has accelerated its evolution from commercial into specialized staffing, and has expanded into outsourced solutions.
The broader workforce solutions industry has continued to evolve to meet businesses’ growing demand for total workforce solutions. As clients’ workforce solutions strategies move up the maturity model, use of a talent supply chain management approach, which seeks to manage all categories of talent (temporary, project-based, outsourced and full-time), represents significant market potential.
Strategic clients are increasingly looking for global, flexible and holistic talent solutions that encompass all worker categories, driving adoption of a talent supply chain management approach covering temporary staffing, Contingent Workforce Outsourcing (“CWO”), Recruitment Process Outsourcing (“RPO”), Business Process Outsourcing (“BPO”), independent contractor management, strategic workforce planning, talent advisory services and more. Across all regions, the structural shifts toward higher-skilled, project-based specialized talent continue to represent long-term opportunities for the industry.

Our Business
Kelly Services is a global workforce solutions company, serving customers of all sizes in a variety of industries. In early 2017, we restructured components of our previous Americas Commercial, Americas PT and OCG segments under a single delivery organization, triggering a change in our operating structure. We now provide staffing through our branch networks in our Americas and International operations, with commercial and specialized professional/technical staffing businesses in the Americas and Europe, respectively. In July 2016, we moved our APAC staffing operations into our expanded joint venture with Persol Holdings (formerly Temp Holdings), PersolKelly Asia Pacific (the “JV”), enabling us to more efficiently provide staffing solutions to customers throughout the APAC region via the JV. We also provide a suite of innovative talent fulfillment and outcome-based solutions through our Global Talent Solutions (“GTS”) segment, which delivers integrated talent management solutions to meet customer needs across the entire spectrum of talent categories. Using talent supply chain strategies, GTS helps customers plan for, manage and execute their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and quality talent at competitive rates with minimized risk.
We earn revenues from the hourly sales of services by our temporary employees to customers, as a result of recruiting permanent employees for our customers, and through our talent advisory and outsourcing services. Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable. The nature of our business is such that trade accounts receivable are our most significant asset. Average days sales outstanding varies within and outside the U.S., but is 55 days on a global basis as of the 2017 year end. Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth.

Our Strategy and Outlook
Our long-term strategic objective is to create shareholder value by delivering a competitive profit from the best workforce solutions and talent in the industry. To achieve this, we are focused on the following key areas:

Continue to build our core strengths in branch-delivered staffing in key markets where we have scale or specialization;

Maintain our position as a market-leading provider of talent management solutions in our GTS segment; and

Lower our costs through deployment of efficient service delivery models.

2017 was a year of strategic and operational progress that demonstrated our commitment to profitable growth. We delivered solid top-line growth and increasing earnings, even as we invested in our future. Early in the year, we reorganized our operating segments and restructured to create a more efficient and focused delivery organization. We invested in our Americas Staffing and International Staffing operations by adding additional sales and recruiting talent. In GTS, we are exercising price discipline and are continuing to invest in higher margin outcome-based and outsourcing solutions that align with market demands. In September 2017, we completed our acquisition of Teachers On Call, which exemplifies our commitment to focus

and grow in solutions where we see outsized market potential. And finally, we are accelerating investment in initiatives to enhance technology and process automation. Our 2017 results confirm our growth strategy:

Earnings from operations for the full year of 2017 totaled $83.3 million compared to $63.2 million in 2016

We delivered gross profit growth of more than 5%, or nearly 9% when excluding our APAC staffing operations from the first half of 2016,the year. As the year progressed, a mixed pattern of revenue growth and our gross profit rate increased 60 basis pointsdeceleration emerged and persisted through the balance of 2022 driven by rising inflation, increasing interest rates and heightened economic uncertainty. Consequently, a growing number of employers scaled back or paused hiring – and in some cases reduced the size of their workforces – to 17.8%align their costs with declining growth. Notwithstanding these dynamics, the labor market remained tight. The economy continued to add jobs – albeit at a slightly slower pace to end the year – and unemployment remained at historically low levels, which contributed to ongoing challenges with sourcing talent.


Conversion rate, or return on gross profit, continues to be a key metric to measure our drive for profitable growth. Our 2017 conversion rate was 8.7% compared to 7.0% in 2016

Cash from operating activities and free cash flow generation increased year over year

Kelly continues to focus on accelerating the execution ofBy executing our strategy in a disciplined manner and makingfocusing on factors within our control, we managed through these ongoing headwinds and achieved solid growth over the necessary investmentsprior year.

We increased total company revenue driven by top-line growth in our Education, SET and adjustments to advance that strategy. We have set our sights on becoming an evenOCG business units.
Our more competitive, consultativeprofitable outcome-based solutions demonstrated resilience amid macroeconomic headwinds and profitable company, and we are reshaping our business to make that vision a reality. We will measure our progress against bothgenerated solid revenue and gross profit growth, as well as earningsgrowth.
Each of our five business units expanded itsgross profit rate, reflecting our ongoing drive to shift toward a higher-margin, higher-value business mix.
Excluding the impact of goodwill impairment charges and conversion rate. The goals we have established are baseda loss on the current economicdisposal of our Russian operations, we improved earnings from operations, demonstrating our ability to effectively translate gross margin expansion to earnings growth.

2022 was also a year in which we accelerated our transformation and business environment,streamlined our portfolio.

We ended the cross-ownership arrangement between Kelly and may change as conditions warrant. We expect:

To grow higher margin professional and technical specialty and outsourced solutions, creating a more balanced portfolio that yields benefits from an improved mix;

To build onPersol Holdings – selling our core strength in branch-delivered staffing;

To accelerate our ongoing investments in specialty solutions with significant growth opportunities, such as our acquisition of Teachers On Call to augment our Kelly Educational Staffing businessinvestment in the U.S.;common shares of Persol Holdings and repurchasing our Class A and B common shares held by Persol Holdings – and reduced our ownership interest in our PersolKelly joint venture, unlocking $235 million of liquidity.

We redeployed a portion of the net proceeds from these transactions to advance our inorganic growth strategy, while preserving the remaining capital to pursue additional high-margin, high-growth acquisitions in the future.
To deliver structural improvementsWe monetized non-core real estate holdings, unlocking more capital to invest in growth initiatives.
We acted decisively to transfer ownership of our Russian operations to a Russian company.
We increased our dividend to its pre-pandemic level and authorized a $50 million repurchase of outstanding Class A common shares.

Together, these achievements and actions demonstrate our commitment to our specialty growth strategy and create long-term value for all our stakeholders.

As the macroeconomic situation unfolds in 2023, we will stay the course in our pursuit of profitable growth while proactively controlling costs to manage through investmentsthis economic cycle. In each of our chosen specialties, we will continue to shift toward a business mix characterized not only by higher margins and value, but greater resilience to lessen the impact of market fluctuations. We also intend to drive inorganic growth using our available capital to pursue additional high-quality acquisitions in Education, SET and OCG. Finally, we will continue to invest in technology and process automationnew products that will improve the talent and customer experience, increase efficiency and enable organic growth. Together, these actions will ensure a return from our delivery infrastructure and, as a result;

Our conversion rate tothat we continue to improve.move forward on our strategic journey in pursuit of profitable, specialty growth.


Looking ahead, we are keeping a watchful eye on the global market while anticipating an increasing demand for skilled workers. We know that companies are relying more heavily on the use of flexible staffing models; there is growing acceptance of shifting work styles and contractual employment by companies and talent alike; and companies are seeking more comprehensive workforce management solutions that lend themselves to Kelly’s wide range of human resources solutions. This shift in demand for contingent labor and strategic solutions plays to our strengths and experience.

21



Financial Measures

The constant currency (“CC”) change amounts in the following tables refer to the year-over-year percentage changes resulting from translating 20172022 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2016.2021. 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 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.GAAP (Generally Accepted Accounting Principles). 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.

Reported and CC percentage changes were computed based on actual amounts in thousands of dollars.

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.

EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin (EBITDA divided by revenue from services) are measures used for understanding the Company's ability to generate cash flow and for judging overall operating performance.

NM (not meaningful) in the following tables is used in place of percentage changes where: the change is in excess of 500%, the change involves a comparison between earnings and loss amounts, or the comparison amount is zero.

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.

22
Staffing Fee-Based Income


Staffing fee-based income,
Results of Operations

Total Company
(Dollars in millions)

20222021Change
Revenue from services$4,965.4 $4,909.7 1.1 %
Gross profit1,011.8 919.2 10.1 
SG&A expenses excluding restructuring charges943.5 866.6 8.9 
Restructuring charges— 4.0 NM
Total SG&A expenses943.5 870.6 8.4 
Goodwill impairment charge(41.0)— NM
Loss on disposal(18.7)— NM
Gain on sale of assets6.2 — NM
Earnings (loss) from operations14.8 48.6 (69.7)
Gain (loss) on investment in Persol Holdings(67.2)121.8 NM
Loss on currency translation from liquidation of subsidiary(20.4)— NM
Gain on insurance settlement— 19.0 NM
Other income (expense), net1.6 (3.6)146.4 
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate(71.2)185.8 NM
Income tax expense (benefit)(7.9)35.1 (122.6)
Equity in net earnings (loss) of affiliate0.8 5.4 (85.9)
Net earnings (loss)$(62.5)$156.1 NM%
Gross profit rate20.4 %18.7 %1.7 pts.
Conversion rate1.5 5.3 (3.8)

The discussion that follows focuses on 2022 results compared to 2021. For a discussion of 2021 results compared to 2020, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed on February 17, 2022.

2022 vs. 2021

Revenue from services increased 1.1% on a reported basis and 3.2% on a constant currency basis, and reflects revenue increases in Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in Professional & Industrial and International segments. Our first quarter 2021 acquisition of Softworld, a technology staffing and solutions firm, and our first quarter 2022 acquisition of RocketPower, an RPO solutions provider, and our second quarter 2022 acquisition of PTS, a specialty firm that provides in-school therapy services, added approximately 180 basis points to the revenue growth rate. Compared to 2021, revenue from staffing services decreased 1.2% and revenue from outcome-based services increased 6.3%. Permanent placement revenue, which is included in revenue from services, increased 18.9% from 2021.

Gross profit increased 10.1% on a reported basis and 12.1% on a constant currency basis on higher revenue volume, combined with an increase in the following tables, has a significantgross profit rate. The gross profit rate increased 170 basis points due primarily to favorable product mix, lower employee-related costs, higher permanent placement income and the impact onof the acquisitions of Softworld, RocketPower and PTS, which generate higher gross profit rates. There areThe gross profit rate increased in all operating segments. Permanent placement revenue, which is included in revenue from services and has very low direct costs of services, associated with staffing fee-based income. Therefore, increases or decreases in staffing fee-based income can havehas a disproportionate impact on gross profit rates.



Results of Operations
2017 versus 2016

Total Company
(Dollars in millions)
 2017 2016 Change CC
Change
Revenue from services$5,374.4
 $5,276.8
 1.9%  1.3%
Gross profit954.1
 906.3
 5.3
  4.7
SG&A expenses excluding restructuring charges868.4
 839.7
 3.4
  3.0
Restructuring charges2.4
 3.4
 (31.6)  (31.2)
Total SG&A expenses870.8
 843.1
 3.3
  2.9
Earnings from operations83.3
 63.2
 31.7
   
Earnings from operations excluding restructuring charges85.7
 66.6
 28.5
   
         
Staffing fee-based income (included in revenue from services)57.3
 58.5
 (2.2)  (3.7)
Gross profit rate17.8% 17.2% 0.6
pts.  
Conversion rate8.7
 7.0
 1.7
   
Conversion rate excluding restructuring charges9.0
 7.4
 1.6
   
Return on sales1.5
 1.2
 0.3
   
Return on sales excluding restructuring charges1.6
 1.3
 0.3
   
Total Company revenue from services for 2017 was up 1.9% in comparison to the prior yearSG&A expenses increased 8.4% on a reported basis and up 1.3%10.0% on a CCconstant currency basis. As more fully describedApproximately 320 basis points of the year-over-year increase is attributable to the first quarter SG&A expenses for Softworld and the SG&A expenses for RocketPower and PTS, including amortization of intangibles and other operating expenses. The increase in SG&A
23



expenses also reflects increases in salary and related costs and increases in performance-based incentive compensation expenses.

The goodwill impairment charge relates to our RocketPower business, which delivers RPO services primarily to customers in the following discussions, revenue increaseshigh-tech industry, and is included in the Americas StaffingOutsourcing & Consulting segment. Changes in market conditions related to demand in hiring in the high-tech industry and GTS segmentsslowing growth in RPO more broadly resulted in a goodwill impairment charge of $41.0 million in 2022.

Loss on disposal relates to our decision in May 2022 to sell our business in Russia. As a result, our Russian operations were classified as a held for sale disposal group and an impairment loss of $18.5 million representing the excess carrying value over the fair value of the net assets, less costs to sell, was recognized in the second quarter of 2022 with an additional loss of $0.2 million recognized in the third quarter upon completion of the transaction. Gain on sale of assets relates to the disposition of under-utilized real property located in the United States.

Earnings from operations for 2022 totaled $14.8 million, compared to earnings of $48.6 million in 2021. The decline is due primarily to the goodwill impairment charge and the loss on disposal, partially offset by a decline in the International Staffing segment. During 2016, we transferred our APAC staffing businesses for a 49% interest in the PersolKelly Asia Pacific joint venture, which is accounted for as an equity method investment, resulting in the decrease in International Staffing segment revenue.
Thehigher gross profit, ratenet of increased 60 basis points year over year. As more fully described in the following discussions, increases in the GTS and Americas Staffing gross profit rates were partially offset by a decline in the gross profit rate in International Staffing.
Total SG&A expenses increased 3.3%and gain on a reported basis and 2.9% on a CC basis. Year-over-year increases in SG&A expenses in Americas Staffing and GTS reflect higher incentive-based compensation in those segments, and were partially offset by a decrease in International Staffing SG&A expenses, as a resultsale of the APAC transaction.assets. Included in total SG&A expenses for 2017 are restructuring chargesearnings from operations in 2022 is approximately $14.4 million related to Softworld, RocketPower and PTS earnings from operations, inclusive of $2.4amortization of intangibles but excluding the RocketPower goodwill impairment charge, and $6.3 million relating primarilyin 2021 related to an initiative to optimize our GTS service delivery models. IncludedSoftworld, inclusive of amortization of intangibles.

The loss on investment in total SG&A expenses for 2016 are restructuring charges of $3.4Persol Holdings in 2022 represented the $52.4 million which relate to actions takenloss resulting from changes in the Americas Staffingmarket price of our investment in the common stock of Persol Holdings up until the date of the transaction and International Staffing segmentsthe $14.8 million loss on sale, including transaction costs from the sale of the investment in an open-market transaction. The gain on the investment in Persol Holdings in 2021 resulted from changes in the quoted market price of the Persol Holdings common stock.

Loss on currency translation from liquidation of subsidiary represents the impact of the liquidation of our Kelly Japan subsidiary following the sale of the company’s investment in Persol Holdings and the return of capital through a dividend payment to increase operational efficiencyits U.S. parent.

The change in Other income (expense), net is primarily the result of $5.5 million of foreign exchange gains related to U.S.-denominated cash equivalents held by our Kelly Japan subsidiary following the sale of the Persol Holdings shares and prepareprior to its dividend payment to the businessesU.S. parent in the first quarter of 2022.

Income tax benefit was $7.9 million for future growth.
2022 and income tax expense was $35.1 million for 2021. 2022 benefited from lower pretax earnings, changes in the fair value of the Company’s investment in Persol Holdings, and the impairment of tax deductible goodwill. These benefits were offset by the charge associated with tax exempt life insurance cash surrender value losses. Income tax expense for 2017 was $12.8 million, compared to $30.0 million for 2016. 2021 included charges from changes in the fair value of the Company’s investment in Persol Holdings and the gain on insurance settlement. These amounts were offset by benefits from a change in tax rate in the United Kingdom and tax exempt life insurance cash surrender value gains.

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 non-taxable investments in life insurance policies that are used to fund nonqualified deferred compensation plans. 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, or changes in judgment regarding the realizability of deferred tax assets. Income tax expense in 2017 included a $13.9 million charge to revalue net deferred tax assets due to the U.S. Tax Cuts and Jobs Act, which reduced the U.S. federal corporate income tax rate from 35% to 21%.  This charge was offset by a benefit from tax-free income on life insurance policies, and a benefit from the release of valuation allowances in Norway, Germany and France.  Income tax expense in 2016 included a $23.5 million charge from the gain on the investment in PersolKelly Asia Pacific, partially offset by a benefit from the release of valuation allowances in Italy.  Both 2017 and 2016 benefitted from the work opportunity credit, which is a temporary provision in the U.S. tax law and expires for employees hired after 2019.  While the work opportunity credit has routinely been extended, it is uncertain whether it will again be extended.


Americas Staffing
(Dollars in millions)
 2017 2016 Change CC
Change
Revenue from services$2,345.9
 $2,191.6
 7.0%  6.8%
Gross profit429.1
 398.2
 7.8
  7.6
SG&A expenses excluding restructuring charges346.0
 327.6
 5.7
  5.5
Restructuring charges0.4
 1.8
 (80.0)  (79.8)
Total SG&A expenses346.4
 329.4
 5.2
  5.0
Earnings from operations82.7
 68.8
 20.0
   
Earnings from operations excluding restructuring charges83.1
 70.6
 17.5
   
         
Gross profit rate18.3% 18.2% 0.1
pts.  
Conversion rate19.3
 17.3
 2.0
   
Conversion rate excluding restructuring charges19.3
 17.7
 1.6
   
Return on sales3.5
 3.1
 0.4
   
Return on sales excluding restructuring charges3.5
 3.2
 0.3
   
The change in Americas Staffing revenue from services reflects a 7% increase in average bill rates, while hours volume was flat year over year. The increase in average bill rates was the result of wage increases and stronger revenue growth in our service lines with higher pay rates. Hours volume increases in the U.S. and Canada were offset by decreases in Mexico, Brazil and Puerto Rico. Americas Staffing represented 44% of total Company revenue in 2017 and 42% in 2016.
Revenue increased in educational staffing, which includes the impact of the September 2017 acquisition of Teachers On Call, light industrial, engineering, IT and science products.
The increase in the Americas Staffing gross profit rate was due to lower taxes and lower workers’ compensation expense, partially offset by negative customer mix. We regularly update our estimates of open workers’ compensation claims. As a result, we reduced our estimated costs of prior year workers’ compensation claims in Americas Staffing by $2.4 million for 2017. This compares to an adjustment reducing prior year workers’ compensation claims by $0.5 million for 2016.
Total SG&A expenses increased 5.2% year over year, due to higher performance-based compensation costs and additional sales and recruiting resources to capture growing demand in the last half of the year. Included in total SG&A expenses for 2016 are restructuring charges of $1.8 million, which represent severance costs related to headcount reductions as well as lease buyout costs due to branch consolidations.


GTS
(Dollars in millions)
 2017 2016 Change CC
Change
Revenue from services$1,998.9
 $1,977.1
 1.1%  1.0%
Gross profit373.7
 345.9
 8.1
  7.9
SG&A expenses excluding restructuring charges294.7
 287.3
 2.6
  2.5
Restructuring charges2.0
 0.4
 415.5
  417.6
Total SG&A expenses296.7
 287.7
 3.1
  3.0
Earnings from operations77.0
 58.2
 32.4
   
Earnings from operations excluding restructuring charges79.0
 58.6
 35.0
   
         
Gross profit rate18.7% 17.5% 1.2
pts.  
Conversion rate20.6
 16.8
 3.8
   
Conversion rate excluding restructuring charges21.1
 16.9
 4.2
   
Return on sales3.9
 2.9
 1.0
   
Return on sales excluding restructuring charges4.0
 3.0
 1.0
   
Revenue from services increased 1.1% in comparison to 2016. Revenue increases in KellyConnect, BPO and CWO practices were partially offset by declines in our centrally delivered staffing and payroll business. GTS revenue represented 37% of total Company revenue in 2017 and 38% in 2016.
The increase in the GTS gross profit rate was due to favorable product and customer mix, lower taxes and benefit costs, along with a decrease in workers’ compensation costs.
Total SG&A expenses increased 3.1% from 2016. Included in total SG&A expenses for 2017 are restructuring charges of $2.0 million, representing severance relating to an initiative to optimize our service delivery models in this segment. The remaining cost increase is due to headcount and salary costs related to additional and expanding programs, coupled with additional performance-based incentive costs. These increases were partially offset by lower bad debt expense compared to higher write-offs for certain accounts in 2016.







International Staffing
(Dollars in millions)
 2017 2016 Change CC
Change
Revenue from services$1,048.2
 $1,127.1
 (7.0)%  (9.0)%
Gross profit153.7
 166.4
 (7.7)  (9.8)
SG&A expenses excluding restructuring charges131.6
 145.7
 (9.8)  (11.6)
Restructuring charges
 1.2
 (100.0)  (100.0)
Total SG&A expenses131.6
 146.9
 (10.4)  (12.2)
Earnings from operations22.1
 19.5
 13.3
   
Earnings from operations excluding restructuring charges22.1
 20.7
 7.2
   
         
Gross profit rate14.7% 14.8% (0.1)pts.  
Conversion rate14.4
 11.7
 2.7
   
Conversion rate excluding restructuring charges14.4
 12.4
 2.0
   
Return on sales2.1
 1.7
 0.4
   
Return on sales excluding restructuring charges2.1
 1.8
 0.3
   

International Staffing includes the Company’s APAC region staffing business prior to the transaction to form the PersolKelly Asia Pacific joint venture in the third quarter of 2016, resulting in a 19% decrease in International Staffing revenue from services. This decrease, partially offset by a 9% increase in hours volume and 3% increase in average bill rates (flat on a CC basis) from our European operations, accounted for the change in revenue from services. The increase in hours volume was primarily due to increases in Portugal, France and Russia. International Staffing represented 20% of total Company revenue in 2017 and 21% in 2016.
The decline in the gross profit rate from 2016 is due to change in customer mix, partially offset by a one-time benefit related to French payroll tax adjustments.
Total SG&A expenses decreased 10.4% on a reported basis, due primarily to the transfer of the APAC staffing business, which resulted in a 16% decrease. This decrease was partially offset by a 5% increase in SG&A expenses related to continued investments in recruiters in the European branch network, and the effect of higher bad debt expense. Included in total SG&A expenses for 2016 are restructuring charges of $1.2 million. These charges reflect a repositioning of the operating model to pursue growth in staffing fee-based income and specialized temporary staffing business in Italy.






Results of Operations
2016 versus 2015

Total Company
(Dollars in millions)
  2016 
 (52 Weeks)
  2015 
 (53 Weeks)
 Change CC
Change
Revenue from services$5,276.8
 $5,518.2
 (4.4)%  (3.2)%
Gross profit906.3
 920.3
 (1.5)  (0.5)
SG&A expenses excluding restructuring charges839.7
 853.6
 (1.6)  (0.7)
Restructuring charges3.4
 
 NM
  NM
Total SG&A expenses843.1
 853.6
 (1.2)  (0.3)
Earnings from operations63.2
 66.7
 (5.2)   
Earnings from operations excluding restructuring charges66.6
 66.7
 (0.1)   
         
Staffing fee-based income (included in revenue from services)58.5
 65.3
 (10.3)  (8.3)
Gross profit rate17.2% 16.7% 0.5
pts.  
Conversion rate7.0
 7.2
 (0.2)   
Conversion rate excluding restructuring charges7.4
 7.2
 0.2
   
Return on sales1.2
 1.2
 
   
Return on sales excluding restructuring charges1.3
 1.2
 0.1
   
Total Company results of operations for 2016 were impacted by the transfer of APAC region staffing businesses to the PersolKelly Asia Pacific joint venture in the third quarter of 2016.
Total Company revenue from services for 2016 was down 4.4% in comparison to the prior year on a reported basis, and down 3.2% on a CC basis due, in part, to the transfer of the APAC operations and as more fully described in the following discussions. In addition, the 2015 fiscal year included a 53rd week. This fiscal leap year occurs every five or six years and is necessary to align the fiscal and calendar periods. The 53rd week added approximately 1% to 2015 revenue.
The gross profit rate increased 50 basis points year over year. The transfer 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 GTS and Americas Staffing gross profit rates were partially offset by a decline in the gross profit rate in International Staffing.
Total SG&A expenses decreased 1.2% on a reported basis and 0.3% on a CC basis. Included in SG&A expenses are restructuring charges of $3.4 million, which relate primarily to actions taken in the Americas Staffing and International Staffing regions to manage operating expenses and prepare the businesses for future growth. The year-over-year decrease in SG&A expenses reflects the transfer of APAC staffing operations to the joint venture, decreases in expense in our staffing operations and savings from reductions in performance-based compensation expenses. These decreases were partially offset by an increase in GTS SG&A expenses due to current and expected growth in that segment.
Income tax expense for 2016 was $30.0 million, compared to $8.7 million for 2015. 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 non-taxableexempt 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, or changes in judgment regarding the realizability of deferred tax assets. assets, the tax effects of stock compensation and, prior to February 2022, changes in the fair value of the Company’s investment in Persol Holdings which were treated as discrete since they could not be estimated.

The increase in income tax expense from the prior year is primarilynet loss for 2022 was $62.5 million, compared to net earnings of $156.1 million for 2021. This change was due to tax expensethe Persol Holdings investment, including the first quarter 2022 sale and related impacts, the goodwill impairment charge, the loss on disposal related to the sale of $23.5 million fromour Russian operations, partially offset by improved gross profit in 2022 and the gain on sale of under-utilized real property in the investment in PersolKelly Asia Pacific, the impact of which is partially offset by a benefit from the release of valuation allowances in Italy.United States.



24

Americas Staffing



Operating Results By Segment
(Dollars in millions)

  2016 
 (52 Weeks)
  2015 
 (53 Weeks)
 Change CC
Change
Revenue from services$2,191.6
 $2,209.0
 (0.8)%  0.3%
Gross profit398.2
 394.1
 1.0
  1.8
SG&A expenses excluding restructuring charges327.6
 333.6
 (1.8)  (1.2)
Restructuring charges1.8
 
 NM
  NM
Total SG&A expenses329.4
 333.6
 (1.3)  (0.7)
Earnings from operations68.8
 60.5
 13.8
   
Earnings from operations excluding restructuring charges70.6
 60.5
 16.8
   
         
Gross profit rate18.2% 17.8% 0.4
pts.  
Conversion rate17.3
 15.3
 2.0
   
Conversion rate excluding restructuring charges17.7
 15.3
 2.4
   
Return on sales3.1
 2.7
 0.4
   
Return on sales excluding restructuring charges3.2
 2.7
 0.5
   
 20222021% Change
Revenue From Services:
Professional & Industrial$1,666.2 $1,837.4 (9.3)%
Science, Engineering & Technology1,265.4 1,156.8 9.4 
Education636.2 416.5 52.7 
Outsourcing & Consulting468.0 432.1 8.3 
International932.2 1,067.8 (12.7)
Less: Intersegment revenue(2.6)(0.9)182.8 
Consolidated Total$4,965.4 $4,909.7 1.1 %
The decrease in reported Americas Staffing
2022 vs. 2021

Professional & Industrial revenue from services decreased 9.3%. The decrease was due primarily to a 2% decrease12.4% decline in staffing services resulting from lower hours volume, partially offset by higher bill rates. Included in the decline in hours was the impact from a 1%shift of a large staffing customer to a permanent placement model which resulted in lower staffing volume. Revenue from outcome-based services declined 0.3% due to lower demand for our call center specialty, partially offset by growth in other specialties.

Science, Engineering & Technology revenue from services increased 9.4% on a reported basis, which includes revenue from the acquisition of Softworld in the second quarter of 2021. Excluding the impact of the addition of Softworld revenue in the first quarter of 2022, the revenue growth was 6.1%, which was driven by increases in our outcome-based services as well as an increase in averagerevenue in our staffing business coming from increases in bill rates and permanent placement income, partially offset by a decline in hours.

Education revenue from services increased 52.7%. The revenue increase includes the impact of the acquisition of PTS in May 2022. On an organic basis, revenue increased 45.9% reflecting increased demand from existing customers, new customer wins and the impact of higher bill rates.

Outsourcing & Consulting revenue from services increased 8.3% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022. On an organic basis, revenue growth was 2.7% due primarily to strong demand for RPO services, coupled with revenue growth in MSP, partially offset by declines in PPO revenue.

International revenue from services decreased 12.7% on a reported basis and decreased 4.7% in constant currency. The decrease was primarily the result of the sale of our Russian operations in hours volume isJuly 2022, combined with revenue declines in Mexico due in part, to the 53rd weekimpact of legislation enacted in 2015,the third quarter of 2021, which added approximately 1% to 2015 revenueplaced restrictions on the staffing industry. Revenue in Americas Staffing. The increaseEurope decreased 9.2% on a reported basis and decreased 0.3% in average bill rates was primarilyconstant currency, with the impact of the sale of our Russian operations nearly offset by growth in most geographies.


25



Operating Results By Segment (continued)
(Dollars in millions)

 20222021Change
Gross Profit:
Professional & Industrial$302.5 $310.0 (2.4)%
Science, Engineering & Technology297.0 253.9 17.0 
Education100.3 65.1 54.0 
Outsourcing & Consulting169.6 141.4 20.0 
International142.4 148.8 (4.3)
Consolidated Total$1,011.8 $919.2 10.1 %
Gross Profit Rate:
Professional & Industrial18.2%16.9%1.3 pts.
Science, Engineering & Technology23.521.91.6 
Education15.815.60.2 
Outsourcing & Consulting36.332.73.6 
International15.313.91.4 
Consolidated Total20.4%18.7%1.7 pts.

2022 vs. 2021

Gross profit for the Professional & Industrial segment decreased due to wage inflation and the resulting impact on the bill rate. Americas Staffing represented 42% of total Companylower revenue in 2016 and 40% in 2015.
Thevolume, partially offset by an increase in the gross profit rate. In comparison to the prior year, the gross profit rate was primarilyincreased 130 basis points. This increase reflects improved business mix, higher permanent placement income, including conversion fees related to a large customer and lower employee-related costs.

Science, Engineering & Technology gross profit increased on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate increased 160 basis points due to lower taxes,improved specialty mix, including the acquisition of Softworld which generates higher gross profit margins, and increased permanent placement income, partially offset by higher workers’ compensationemployee-related costs.

Gross profit for the Education segment increased on higher revenue volume and employee benefit costs,an increase in the gross profit rate. The gross profit rate increased 20 basis points, due primarily to the acquisition of PTS which generates higher margins, and higher permanent placement income at Greenwood/Asher.

Outsourcing & Consulting gross profit increased on higher revenue volume, combined with an increase in the negative impactgross profit rate. The gross profit rate increased 360 basis points, primarily due to a change in product mix within this segment. Growth in RPO, including the acquisition of changesRocketPower, and MSP with higher margins, was coupled with decreased revenues in customer mix.our PPO product, which generates lower profit margins.
Total SG&A expenses
International gross profit decreased 1.3%4.3% on a reported basis and 0.7%improved 4.6% on a CCconstant currency basis. On a reported basis, due mainlylower revenue volume was partially offset by an improved gross profit rate. On a constant currency basis, the improved gross profit rate more than offset the impact of lower revenue volume. In comparison to lower performance-based compensation. Included in 2016 SG&A expenses are restructuring charges of $1.8 million. These charges represent severance costs related to headcount reductions as well as lease buyout coststhe prior year, the gross profit rate increased 140 basis points, primarily due to branch consolidations.improved business mix and higher permanent placement income.





GTS


26



Operating Results By Segment (continued)
(Dollars in millions)
20222021% Change
SG&A Expenses:
Professional & Industrial$270.5 $278.6 (2.9)%
Science, Engineering & Technology214.9 180.2 19.2 
Education81.8 62.1 31.7 
Outsourcing & Consulting149.8 122.7 22.1 
International132.5 138.9 (4.6)
Corporate expenses94.0 88.1 6.6 
Consolidated Total$943.5 $870.6 8.4 %
  2016 
 (52 Weeks)
  2015 
 (53 Weeks)
 Change CC
Change
Revenue from services$1,977.1
 $1,997.2
 (1.0)%  (0.7)%
Gross profit345.9
 331.4
 4.3
  4.8
SG&A expenses excluding restructuring charges287.3
 260.5
 10.3
  10.8
Restructuring charges0.4
 
 NM
  NM
Total SG&A expenses287.7
 260.5
 10.4
  11.0
Earnings from operations58.2
 70.9
 (18.0)   
Earnings from operations excluding restructuring charges58.6
 70.9
 (17.5)   
         
Gross profit rate17.5% 16.6% 0.9
pts.  
Conversion rate16.8
 21.4
 (4.6)   
Conversion rate excluding restructuring charges16.9
 21.4
 (4.5)   
Return on sales2.9
 3.6
 (0.7)   
Return on sales excluding restructuring charges3.0
 3.6
 (0.6)   

Revenue from services2022 vs. 2021

Total SG&A expenses in the GTS segmentProfessional & Industrial decreased during 2016 due2.9%, primarily to revenue declines in our centrally delivered staffing business due to lower demand. This decrease was partially offset by growthexpenses to support lower volumes in the BPO, CWOour staffing and RPO practice areas due primarily to the expansion of programs with existing customers and, to a lesser extent, new customer programs. The 53rd week in 2015 added approximately 1% to 2015 revenue in GTS. GTS revenue represented 38% of total Company revenue in 2016 and 36% in 2015.
The GTS gross profit rate increased primarily due to favorable product and customer mix and lower taxes,outcome-based call center specialties, partially offset by higher employee benefit costs.performance-based incentive compensation expense.

Total SG&A expenses in Science, Engineering & Technology increased 19.2%, and includes the impact of the acquisition of Softworld in the second quarter of 2021. Excluding the impact of the addition of Softworld expenses in the first quarter of 2022, SG&A expenses increased 13.6%. The increase in organic SG&A expenses is due primarily to higher performance-based incentive compensation expense and higher salary-related costs from increasing headcount.

Total SG&A expenses in Education increased 31.7%, and includes the impact of the acquisition of PTS in May 2022. Excluding the impact of the PTS acquisition, SG&A expenses increased 24.0%, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in Outsourcing & Consulting increased 22.1%, and includes the impact of the acquisition of RocketPower in March 2022. Excluding the impact of the RocketPower acquisition, SG&A expenses increased 12.0%, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in International decreased 4.6% on a reported basis and increased 3.6% on a constant currency basis. The increase in constant currency was primarily a resultdue to higher salary-related expenses driven by an increase in headcount, reflecting improving revenue in Europe, partially offset by the impact of costs relatedthe sale of our Russian operations in July 2022.

Corporate expenses increased 6.6%, primarily due to additional sales resources, costs associated with increased volume with existing customers and implementation of new business, including salaries andhigher performance-based incentive compensation and bad debt expense. The bad debt expense was primarily related to certain aged accounts receivable at a subsidiary in Germany.

27




International Staffing
Operating Results By Segment (continued)
(Dollars in millions)

  2016 
 (52 Weeks)
  2015 
 (53 Weeks)
 Change CC
Change
Revenue from services$1,127.1
 $1,332.7
 (15.4)%  (12.7)%
Gross profit166.4
 199.0
 (16.3)  (14.0)
SG&A expenses excluding restructuring charges145.7
 175.7
 (17.0)  (14.3)
Restructuring charges1.2
 
 NM
  NM
Total SG&A expenses146.9
 175.7
 (16.4)  (13.7)
Earnings from operations19.5
 23.3
 (16.2)   
Earnings from operations excluding restructuring charges20.7
 23.3
 (11.4)   
         
Gross profit rate14.8% 14.9% (0.1)pts.  
Conversion rate11.7
 11.7
 
   
Conversion rate excluding restructuring charges12.4
 11.7
 0.7
   
Return on sales1.7
 1.7
 
   
Return on sales excluding restructuring charges1.8
 1.7
 0.1
   
20222021% Change
Earnings (Loss) from Operations:
Professional & Industrial$32.0 $31.4 1.8 %
Science, Engineering & Technology82.1 73.7 11.4 
Education18.5 3.0 NM
Outsourcing & Consulting(21.2)18.7 NM
International9.9 9.9 (0.5)
Corporate(94.0)(88.1)(6.6)
Loss on disposal(18.7)— NM
Gain on sale of assets6.2 — NM
Consolidated Total$14.8 $48.6 (69.7)%
International Staffing includes the Company’s APAC region staffing business prior
2022 vs. 2021

Professional & Industrial reported earnings of $32.0 million, a 1.8% increase from 2021. The increase was due to the transaction to form the PersolKelly Asia Pacific joint venture in the third quartereffective cost management as gross profit declined.

Science, Engineering & Technology reported earnings of 2016, resulting in a 14% decrease in International Staffing revenue$82.1 million, an 11.4% increase from services. This decrease, combined with a 3% decrease in average bill rates (flat on a CC basis) and partially offset by a 2% increase in hours volume in our European operations, accounted for the change in revenue from services.2021. The increase in hours volumeearnings was primarily due to increased customer demandthe impact of the Softworld acquisition. In addition, increases in Portugal. International Staffing represented 21% of total Company revenue in 2016 and 24% in 2015. The 53rd week in 2015 added approximately 1% to 2015 revenue in International Staffing.
The International Staffing gross profit rate decreasein our outcome-based and telecom specialties were partially offset by increases in certain expenses in most of our specialties in the SET business unit, including those related to additional headcount and increased performance-based incentive compensation.

Education reported earnings of $18.5 million in 2022, compared to earnings of $3.0 million in 2021. The change was mainly driven by unfavorable customer mix in Switzerland.
Total SG&A expenses decreased 16.4% on a reported basis and 13.7% on a CC basis, primarily due to the transferincrease in revenue resulting from improved demand for our services as compared to 2021, coupled with operating leverage. 2022 results also include earnings of $3.8 million from PTS acquired in May 2022.

Outsourcing & Consulting reported a loss of $21.2 million in 2022, compared to earnings of $18.7 million in 2021, due primarily to a charge of $41.0 million related to the APAC staffing business. Additionally, SG&A expenses decreasedimpairment of goodwill of RocketPower in the EMEA region2022.

International reported earnings of $9.9 million in both 2022 and 2021. The decline in earnings due to effective cost controlthe sale of operations in headquarters expenses across the region. Included in SG&A expenses are restructuring charges of $1.2 million, which reflect a repositioning of the operating model to pursueRussia was nearly offset by growth in staffing fee-based income and specialized temporary staffing business in Italy.most geographies.



28



Results of Operations
Financial Condition
 
Historically, we have financed our operations through cash generated by operating activities and access to credit markets. 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. Since receipts from customers generally lag payroll paid to temporary employees, working capital requirements increase substantially in periods of growth. Conversely, when economic activity slows, working capital requirements may substantially decrease. This may result in an increase in our operating cash flows; however, any such increase would not be sustainable in the event that an economic downturn continued for an extended period.

As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components: cash, cash equivalents and equivalents,restricted cash, operating activities, investing activities and financing activities. 
Cash and Equivalents
Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash totaled $32.5$162.4 million at year-end 2017,2022, compared to $29.6$119.5 million at year-end 2016.2021. As further described below, during 2017,2022, we used $76.3 million of cash for operating activities, generated $71.2$167.5 million of cash from operatinginvesting activities and used $61.0$50.6 million of cash for investing activities and used $3.4 million in cash for financing activities.

Operating Activities

In 2017,2022, we generated $71.2used $76.3 million of net cash fromfor operating activities, as compared to generating $39.6$85.0 million in 20162021 and generating $25.3$186.0 million in 2015. 2020. Net cash used for operating activities in 2022 and 2021 included $86.8 million and $29.7 million, respectively, of cash outflows related to the repayment of U.S. payroll taxes originally deferred in 2020. Net cash from operating activities in 2020 benefited from the deferral of $117.0 million of U.S. payroll taxes. In addition, in 2022 we paid $48.4 million of income taxes related to the sale of Persol Holdings common stock.

The change from 20162021 to 20172022 was primarily driven bydue to the impact of payments related to the payroll tax deferral, income tax payments related to the sale of Persol Holdings common stock and increased working capital requirements. Trade accounts receivable totaled $1.5 billion at year-end 2022 and $1.4 billion at year-end 2021. Global DSO for the fourth quarter was 61 days for 2022, compared to 60 days for 2021. Accounts payable and accrued liabilities was $723.3 million and increased from year-end 2021 as a decrease in performance based compensationresult of increased MSP supplier payables. The change from 2020 to 2021 was primarily due to the deferral of payroll tax payments, partially offset by the impact of higher DSO as discussed below. The change from 2015 to 2016 was primarily due to lower growth in trade accounts receivable.global DSO.
Trade accounts receivable totaled $1.3 billion at year-end 2017 and $1.1 billion in 2016. Global DSO for the fourth quarter was 55 days for 2017, compared to 53 days for 2016. The increase of DSO by 2 days is due primarily to customer mix.
Our working capital position (total current assets less total current liabilities) was $458.1$586.4 million at year-end 2017,2022, an increase of $14.6$92.9 million from year-end 2016.2021. Excluding the increase in cash, working capital increased $51.9 million from year-end 2021. The current ratio (total current assets divided by total current liabilities) was 1.5 at year-end 20172022 and 1.6 at year-end 2016.2021.

Investing Activities

In 2017,2022, we used $61.0generated $167.5 million of net cash forfrom investing activities, compared to generating $10.3using $180.7 million in 20162021 and using $17.6generating $9.8 million in 2015. 2020. Included in cash generated from investing activities in 2022 is $196.9 million of proceeds from the sale of the investment in Persol Holdings, $119.5 million of proceeds from the sale of almost all of the Company's shares in our equity investment in PersolKelly and $10.1 million of proceeds from the sale of land and other real property. This was partially offset by $58.3 million of cash used for the acquisition of RocketPower in March 2022, net of cash received, $84.8 million of cash used for the acquisition of PTS in May 2022, net of cash received, and $6.0 million of cash disposed from the sale of our operations in Russia in July 2022, net of proceeds.

Included in cash used for investing activities in 20172021 is $37.2$213.0 million of cash used for the acquisition of Teachers On Call,Softworld in April 2021, net of cash received and including working capital adjustments. This was partially offset by $19.0 million of proceeds from an insurance settlement that represented a payment received in the cash received. fourth quarter of 2021 related to the settlement of claims under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld.

Included in cash generated from investing activities in 20162020 is $23.3$55.5 million of net cashproceeds representing the cash received, lessnet of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction and $5.6 million received from a payment on the loans to PersolKelly Pte. Ltd. This was partially offset by cash used for the acquisitions of
29



Insight in January 2020 and Greenwood/Asher in November 2020. Cash used for the acquisition of Insight totaled $36.4 million, net of the cash deconsolidated relating toreceived and including working capital adjustments. Cash used for the PersolKelly Asia Pacific joint venture transaction. acquisition of Greenwood/Asher totaled $2.8 million, net of the cash received and including working capital adjustments.

Capital expenditures which totaled $24.6$12.0 million in 2017, $12.72022, $11.2 million in 20162021 and $16.9$15.5 million in 2015, were2020. Capital expenditures in both 2022 and 2021 primarily related to the Company’sCompany's IT infrastructure, technology programs. The increase reflects higher spending for technology programs and headquarters furniture and fixtures. Capital expenditures in 2020 primarily related to the Company's headquarters leasehold improvements, IT infrastructure and headquarters building improvements in 2017 as compared to 2016.technology programs.

Financing Activities

In 2017,2022, we used $3.4$50.6 million of cash for financing activities, as compared to using $69.1$8.1 million in 2016both 2021 and using $44.0 million2020. The change in 2015. Changes in net cash fromused for financing activities arewas primarily related to short-term borrowing activities. Debt totaled $10.2 million at year-end 2017 and was zero at year-end 2016. Debt-to-total capital (total debt reported on the balance sheet divided by total debt plus stockholders’ equity) is a common ratio to measure the relative capital structure and leveragebuyback of the Company. Our ratioCompany's common shares held by Persol Holdings for $27.2 million in February 2022, $7.8 million in share repurchases of debt-to-total capital was 0.9% at year-end 2017the Company's Class A common stock in the fourth quarter of 2022 and 0.0% at year-end 2016. 
In 2017, the netyear-over-year change in short-term borrowings was primarily due to borrowings on our revolving credit facility. In 2016 and 2015, the net change in short-term borrowings was primarily due to payments on our U.S. securitization facility.
dividend payments. Dividends paid per common share were $0.30 in 2017, $0.275 in 20162022, $0.10 in 2021 and $0.20$0.075 in 2015.2020. Payments of dividends are restricted by the financial covenants contained in our debt facilities. Details of this restriction are contained in the Debt footnote in the notes to our consolidated financial statements.

Changes in net cash from financing activities are also impacted by short-term borrowing activities. Debt totaled $0.7 million at year-end 2022, which represented local borrowings, compared to no debt at year-end 2021. Debt-to-total capital (total debt reported in the consolidated balance sheet divided by total debt plus stockholders’ equity) is a common ratio to measure the relative capital structure and leverage of the Company. Our ratio of debt-to-total capital was 0.1% at year-end 2022 and 0.0% at year-end 2021.

In 2022, the net change in short-term borrowings was primarily due to borrowings on local lines of credit. In 2021 and 2020, the net change in short-term borrowings was primarily due to payments on local lines of credit.

Contractual Obligations and Commercial Commitments

Summarized below are our obligations and commitments to make future payments as of year-end 2017:2022:

 Payment due by period
  Payment due by period Total
Less than
1 year
1-3 Years3-5 Years
More than
5 years
Total 
Less than
1 year
 1-3 Years 3-5 Years 
More than
5 years
(In millions of dollars)
(In millions of dollars)
Operating leases$82.8
 $25.9
 $34.4
 $16.2
 $6.3
LeasesLeases$85.9 $19.1 $23.3 $13.2 $30.3 
Short-term borrowings10.2
 10.2
 
 
 
Short-term borrowings0.7 0.7 — — — 
Accrued insurance75.6
 25.7
 23.5
 9.8
 16.6
Accrued workers’ compensationAccrued workers’ compensation63.6 22.9 19.1 8.3 13.3 
Accrued retirement benefits193.2
 15.5
 31.1
 30.4
 116.2
Accrued retirement benefits197.5 23.4 46.7 46.9 80.5 
Other long-term liabilities8.5
 1.7
 3.1
 1.7
 2.0
Other liabilitiesOther liabilities7.4 2.2 4.2 0.6 0.4 
Uncertain income tax positions1.4
 0.1
 0.5
 0.3
 0.5
Uncertain income tax positions0.6 0.2 0.3 0.1 — 
Purchase obligations31.8
 20.4
 11.1
 0.3
 
Purchase obligations53.0 32.9 20.1 — — 
         
Total$403.5
 $99.5
 $103.7
 $58.7
 $141.6
Total$408.7 $101.4 $113.7 $69.1 $124.5 

Purchase obligations above represent unconditional commitments relating primarily to technology services and online tools and voice and data communications services which we expect to utilize generally within the next twothree fiscal years, in the ordinary course of business. We have no material, unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.

30



Liquidity 

We expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations, available cash and equivalents, securitization of customer receivables and committed unused credit facilities. Additional funding sources could include public or private bonds, asset-based lending, additional bank facilities issuanceor sale of equity or other sources.non-core assets. To meet significant cash requirements related to our nonqualified retirement plan, we may utilize proceeds from Company-owned life insurance policies. During 2020, cash generated from operations was supplemented by the deferral of payments of the Company's U.S. social security taxes as allowed by the Coronavirus Aid, Relief, and Economic Security Act. We have repaid the $117.0 million deferred payroll tax balances, including $29.5 million in the first quarter of 2022 and $57.3 million in the fourth quarter of 2022.

We utilize intercompany loans, dividends, capital contributions and redemptions to effectively manage our cash on a global basis. We periodically review our foreign subsidiaries’ cash balances and projected cash needs. As part of those reviews, we may identify cash that we feel should be repatriated to optimize the Company’s overall capital structure. As of the 20172022 year end, these reviews have not resulted in any specific plans to repatriate a majority of our international cash balances. We expect much of our international cash will be needed to fund working capital growth in our local operations. The majorityoperations as working capital needs, primarily trade accounts receivable, increase during periods of our international cash is concentrated in agrowth. A cash pooling arrangement (the “Cash Pool”) and is available to fund general corporate needs internationally. The Cash Pool is a set of cash accounts maintained with a single bank that must, as a whole, maintain at least a zero balance; individual accounts may be positive or negative. This allows countries with excess cash to invest and countries with cash needs to utilize the excess cash.

At year-end 2022, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $100.5 million of available capacity on our $150.0 million securitization facility. The securitization facility carried no short-term borrowings and $49.5 million of standby letters of credit related to workers’ compensation. Together, the revolving credit and securitization facilities provide the Company with committed funding capacity that may be used for general corporate purposes subject to financial covenants and restrictions. While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds. Throughout 2022 and as of the 2022 year end, we met the debt covenants related to our revolving credit facility and securitization facility.

At year-end 2022, we also had additional unsecured, uncommitted short-term credit facilities totaling $5.9 million, under which we had $0.7 million of borrowings. Details of our debt facilities as of the 2022 year end are contained in the Debt footnote in the notes to our consolidated financial statements.

We managehave historically managed our cash and debt very closely to optimize our capital structure. As our cash balances build, we tend to pay down debt as appropriate. Conversely, when working capital needs grow, we tend to use corporate cash and cash available in the Cash Pool first, and then access our borrowing facilities.
At year-end 2017, we had $140.5 million of available capacity on our $150.0 million revolving credit facility and $145.0 million of available capacity on our $200.0 million securitization facility. The securitization facility had no short-term borrowings and $55.0 million of standby letters of credit related to workers’ compensation. Together, the revolving credit and securitization facilities provide the Company with committed funding capacity that may be used for general corporate purposes. While we believe these facilities will cover We expect our working capital needs over the short term,requirements to increase if economic conditions or operating results change significantly, we may needdemand for our services increases. We also expect to seek additional sourcesuse $42.2 million of funds. Throughout 2017 and ascash for repurchases of the 2017 year end,Company's Class A common stock during 2023 pursuant to the $50.0 million plan approved by the Company's board of directors on November 9, 2022.

In February 2022, we metcompleted transactions to monetize a substantial portion of our assets in the debt covenants relatedAsia-Pacific region which will allow us to strategically redeploy resources to accelerate our growth. Specifically, we concluded our cross-shareholding arrangement with Persol Holdings and reduced our ownership interest in PersolKelly, our APAC joint venture. We sold our investment in Persol Holdings common stock in an open-market transaction. We repurchased the 1.6 million Kelly Class A and 1,475 Kelly Class B common shares owned by Persol Holdings at a price based on the last five trading days prior to the transaction. We sold almost all of our ownership interest in PersolKelly to our revolving credit facility and securitization facility.
At year-end 2017, we also had additional unsecured, uncommitted short-term credit facilities totaling $9.8joint venture partner. In 2022, the Company paid $48.4 million under which we had $0.7 million of borrowings. Details of our debt facilities asin taxes resulting from the sale of the 2017 year end are contained in the Debt footnote in the notes to our consolidated financial statements.Persol Holdings shares.


We monitor the credit ratings of our major banking partners on a regular basis and have regular discussions with them. Based on our reviews and communications, we believe the risk of one or more of our banks not being able to honor commitments is insignificant. We also review the ratings and holdings of our money market funds and other investment vehicles regularly to ensure high credit quality and access to our invested cash.

31



Critical Accounting Estimates 

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. In this process, it is necessary for us to make certain assumptions and related estimates affecting the amounts reported in the consolidated financial statements and the attached notes. Actual results can differ from assumed and estimated amounts. 

Critical accounting estimates are those that we believe require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those estimates may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following estimates to be most critical in understanding the judgments involved in preparing our consolidated financial statements. 

Workers’ Compensation

In the U.S., we have a combination of insurance and self-insurance contracts under which we effectively bear the first $1.0 million of risk per single accident. There is no aggregate limitation on our per-accident exposure under these insurance and self-insurance programs. We establish accruals for workers’ compensation utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims. We retain an independent consulting actuary to establish ultimate loss forecasts for the current and prior accident years of our insurance and self-insurance programs. The consulting actuary establishes loss development factors and loss rates, based on our historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of our ultimate claims liability. In preparing the estimates, the consulting actuary may consider factors such as the nature, frequency and severity of the claims; reserving practices of our third party claims administrators; performance of our medical cost management and return to work programs; changes in our territory and business line mix; and current legal, economic and regulatory factors such as industry estimates of medical cost trends. Where appropriate, multiple generally accepted actuarial techniques are applied and tested in the course of preparing the loss forecast. We use the ultimate loss forecasts, as developed by the consulting actuary, to establish total expected program costs for each accident year by adding our estimates of non-loss costs such as claims handling fees and excess insurance premiums. When claims exceed the applicable loss limit or self-insured retention and realization of recovery of the claim from existing insurance policies is deemed probable, we record a receivable from the insurance company for the excess amount.

We evaluate the accrual quarterly throughout the year and make adjustments as needed. The ultimate cost of these claims may be greater than or less than the established accrual. While we believe that the recorded amounts are reasonable, there can be no assurance that changes to our estimates will not occur due to limitations inherent in the estimation process. In the event we determine that a smaller or larger accrual is appropriate, we would record a credit or a charge to cost of services in the period in which we made such a determination. The accrual for workers’ compensation, net of related receivables which are included in prepaid expenses and other current assets and other assets in the consolidated balance sheet, was $59.4$43.3 million and $59.7$48.4 million at year-end 20172022 and 2016,2021, respectively.

Business Combinations

We account for business combinations using the acquisition method of accounting, in which the purchase price is allocated for assets acquired and liabilities assumed and recorded at the estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Management is required to make significant assumptions and estimates in determining the fair value of the assets acquired, particularly intangible assets. Purchased intangible assets are primarily comprised of acquired trade names and customer relationships that are recorded at fair value at the date of acquisition. We utilize third-party valuation specialists to assist us in the determination of the fair value of the intangibles. The fair value of trade name intangibles is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth rates, royalty rates and discount rates. The fair value of customer relationship intangibles is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth rates, customer attrition rates, profit margins and discount rates. Determining the useful lives of intangible assets also requires judgment and are inherently uncertain. There is a measurement period of up to one year in which to finalize the fair value determinations and preliminary fair value estimates may be revised if new information is obtained during this period.

32



Income Taxes

Income tax expense is based on expected income and statutory tax rates in the various jurisdictions in which we operate. Judgment is required in determining our income tax expense. We establish accruals for uncertain tax positions under generally accepted accounting principles, which require that a position taken or expected to be taken in a tax return be recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) the position would be sustained upon examination by tax authorities who have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

Our effective tax rate includes the impact of accruals and changes to accruals that we consider appropriate, as well as related interest and penalties. A number of years may lapse before a particular matter, for which we have or have not established an accrual, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our accruals are appropriate under generally accepted accounting principles. Favorable or unfavorable adjustments of the accrual for any particular issue would be recognized as an increase or decrease to our income

tax expense in the period of a change in facts and circumstances. Our current tax accruals are presented in income and other taxes in the consolidated balance sheet within income and other taxes and long-term tax accruals are presented in other long-term liabilities in the consolidated balance sheet within other long-term liabilities. sheet.

Tax laws require items to be included in the tax return at different times than the items are reflected in the consolidated financial statements. As a result, the income tax expense reflected in our consolidated financial statements is different than the liability reported in our tax return. Some of these differences are permanent, which are not deductible or taxable on our tax return, and some are temporary differences, which give rise to deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which we have already recorded the tax benefit in our consolidated income statement. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities generally represent items for which we have already taken a deduction on our tax return, but have not yet recognized as expense in our consolidated financial statements. Our net deferred tax asset is recorded using currently enacted tax laws, and may need to be adjusted in the event tax laws change. 

The U.S. work opportunity credit is allowed for wages earned by employees in certain targeted groups. The actual amount of creditable wages in a particular period is estimated, since the credit is only available once an employee reaches a minimum employment period and the employee’s inclusion in a targeted group is certified by the applicable state. As these events often occur after the period the wages are earned, judgment is required in determining the amount of work opportunity credits accrued for in each period. We evaluate the accrual regularly throughout the year and make adjustments as needed.


The U.S. Tax Cuts and Jobs Act (“The Act”) was signed into law on December 22, 2017. We have accounted for certain tax effects of The Act on a provisional basis, in accordance with SEC Staff Accounting Bulletin 118. We have determined reasonable estimates for any income tax effects whose analysis is incomplete. We have incorporated our reasonable estimates in our financial statements as of December 31, 2017 and plan to complete our accounting during the one-year measurement period.Goodwill

Equity Method Investment

We account for our investment in PersolKelly Asia Pacific under the equity method of accounting. We review our equity method investment for indicators of impairment on a periodic basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. An impairment assessment requires the exercise of judgment related to financial trends, forecasts, relevant events, as well as any operating, economic, legal or regulatory changes that may have an impact on the investment. There were no indicators of an other-than-temporary impairment in 2017 or 2016. As of year-end 2017 and 2016, the equity method investment was $117.4 million and $114.8 million, respectively. See the Investment in PersolKelly Asia Pacific footnote in the notes to our consolidated financial statements.

Goodwill
We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. Generally accepted accounting principles requireGAAP requires that goodwill be tested for impairment at a reporting unit level. WeFor segments with a goodwill balance, we have determined that our reporting units are the same as our operating and reportable segments. Ifsegments based on our organizational structure or one level below our operating segments (the component level).

We may first use a qualitative assessment ("step zero test") for the annual impairment test if we have determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value. In conducting the qualitative assessment, we assess the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. Such events and circumstances may include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, entity-specific events and events affecting a reporting unit.

If we may use aelect to forgo the qualitative assessment for the annual impairment test. 
Fora reporting units where the qualitative assessment is not used,unit, goodwill is tested for impairment using a two-step process. In the first step,by comparing the estimated fair value of a reporting unit is compared to its carrying value.value ("step one test"). If the estimated fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is not considered impaired and no further testing is required. To deriveIf the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference.

For the step one quantitative test, we determine the fair value of our reporting units we primarily relied on anusing the income approach. 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.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. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.
If the carrying value of the net assets assigned to a Our analysis used significant assumptions by reporting unit, exceedsincluding: expected future revenue growth rates, profit margins and discount rate.

33



The goodwill resulting from the estimated fair valueacquisition of a reporting unit, a second stepRocketPower during the first quarter of the impairment test is performed in order to determine the implied fair value of a reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of a reporting unit’s tangible and intangible assets and

liabilities in a manner similar2022 was allocated to the allocationOCG reportable segment and RocketPower was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of purchase price in a business combination. IfPTS during the carrying valuesecond quarter of a reporting unit’s goodwill exceeds its implied fair value, goodwill is deemed impaired and is written down2022 was allocated to the extentEducation reportable segment and PTS was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of Softworld during the difference. second quarter of 2021 was allocated to the SET reportable segment and Softworld was deemed to be a separate reporting unit. See the Acquisitions and Dispositions footnote in the notes to our consolidated financial statements for more information.

We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended 2017 and 2016 and determined that goodwill was not impaired. In 2017, we elected to perform2022. We performed a step one quantitative assessmenttest for the Americas StaffingSoftworld and GTSPTS reporting units. In 2016,As a result of the quantitative assessment, we electeddetermined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value. Additionally, we performed a step zero qualitative analysis for the Education and RocketPower reporting units to performdetermine whether a further quantitative analysis was necessary and concluded that a step one quantitative assessmentanalysis was not necessary at that time. As a result of the quantitative and qualitative assessments, the Company determined goodwill related to these reporting units was not impaired at that time.

During 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower's services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for goodwill as of the third quarter of 2022. Job eliminations in the high-tech industry vertical continued during the fourth quarter of 2022, indicating a broad, sustained reduction in hiring was likely and is now expected to last through much of 2023, directly impacting RocketPower and the demand for RocketPower's services in this vertical. These changes in market conditions caused another triggering event requiring an interim impairment test for goodwill as of year-end 2022.

We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value as of third quarter-end and year-end 2022. Based on the result of our previous Americas Commercial, Americas PTinterim goodwill impairment test, we recorded a goodwill impairment charge of $30.7 million in the third quarter of 2022 and OCG reporting units.we recorded an additional goodwill impairment charge of $10.3 million to write off the remaining balance of RocketPower’s goodwill in the fourth quarter of 2022, for a total goodwill impairment charge of $41.0 million as of year-end 2022.

Our step one analysis used significant assumptions, by segment, including: expected future revenue and expense growth rates, profit margins cost of capital,and discount rate and forecasted capital expenditures.rate. Although we believe the assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Different assumptions of the anticipated future results and growth from these businessesour business could result in an impairment charge, which would decrease operating income and result in lower asset values on our consolidated balance sheet. The estimated fair value of the Softworld and PTS reporting units exceeds the carrying value by more than 10%. As a measure of sensitivity bothof the fair value for the Softworld and PTS reporting units, havewhile holding all other assumptions constant, an estimated fair value that is at least doubleincrease in the carrying valuediscount rate of 100 basis points or a decrease of 100 basis points in 2017. In addition, reducing ourthe revenue growth rate assumptions by more than 100%for each forecasted period used to determine the fair value of both reporting units would not result in an impairment of goodwill.

We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended 2021. We performed a step one quantitative test for the Softworld reporting unit. As a result of the quantitative assessment, we determined that the estimated fair value falling below book valueof the Softworld reporting unit was more than its carrying value. Additionally, we performed a step zero qualitative analysis for boththe Education reporting units.unit to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary. As a result of the quantitative and qualitative assessments, the Company determined goodwill was not impaired as of year-end 2021.

At year-end 20172022 and 2016,2021, total goodwill amounted to $107.1$151.1 million and $88.4$114.8 million, respectively (seerespectively. See the Goodwill and Intangible Assets footnote in the notes to our consolidated financial statements).statements for more information.

34



Litigation 

Kelly is subject to legal proceedings, investigations and claims arising out of the normal course of business. Kelly routinely assesses the likelihood of any adverse judgments or outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the accruals required, if any, for these contingencies is made after analysis of each known issue. Development of the analysis includes consideration of many factors including: potential exposure, the status of proceedings, negotiations, discussions with our outside counsel and results of similar litigation and, in the case of class action lawsuits, participation rates.litigation. The required accruals may change in the future due to new developments in each matter. For further discussion, see the Contingencies footnote in the notes to our consolidated financial statements. At year-end 20172022 and 2016,2021, the gross accrual for litigation costs amounted to $5.3$2.3 million and $9.2$1.4 million, respectively, which areis included in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet.
Allowance for Uncollectible Accounts Receivable
We make ongoing estimates relating to the collectibility of our trade accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. In determining the amount of the allowance, we consider our historical level of credit losses and apply percentages to certain aged receivable categories. We also make judgments about the creditworthiness of significant customers based on ongoing credit evaluations, and we monitor historical trends that might impact the level of credit losses in the future. Historically, losses from uncollectible accounts have not exceeded our allowance. Since we cannot predict with certainty future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, a larger allowance may be required. 
In the event we determined that a smaller or larger allowance was appropriate, we would record a credit or a charge to SG&A expenses in the period in which we made such a determination. In addition, for billing adjustments related to errors, service issues and compromises on billing disputes, we also include a provision for sales allowances, based on our historical experience, in our allowance for uncollectible accounts receivable. If sales allowances vary from our historical experience, an adjustment to the allowance may be required, and we would record a credit or charge to revenue from services in the period in which we made such a determination. As of year-end 2017 and 2016, the allowance for uncollectible accounts receivable was $12.9 million and $12.5 million, respectively.

NEW ACCOUNTING PRONOUNCEMENTS 

See New Accounting Pronouncements footnote in the notes to our consolidated financial statements presented in Part II, Item 8 of this report for a description of new accounting pronouncements. 

35



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein and in this reportour investor conference call related to these results are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Actapplicable securities laws and regulations. These forward-looking statements are based on current expectations and assumptions and are subject to a number of 1995.significant risks and uncertainties. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or variations or negatives thereof or by similar or comparable words or phrases. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by us that may be provided by management, including oral statements or other written materials released to the public, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about our Company and economic and market factors in the countries in which we do business, among other things. These statements are not guarantees of future performance, and we have no specific intention to update these statements.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changing market and economic conditions, the impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, changingdisruption in the labor market and economic conditions,weakened demand for human capital resulting from technological advances, competition law risks, the impact of changes in laws and regulations (including federal, state and international tax laws), unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, or the risk of additional tax liabilities in excess of our estimates, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual property assets could be infringed upon or compromised, our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, our increasing dependency on third parties for the execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated with investments in equity affiliates including PersolKelly Asia Pacific, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with the government or government contractors, the risk of damage to our brands, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, exposure to risks associated with certain equity investments, including with strategic partners, risks associated with conducting business in foreign countries, including foreign currency fluctuations, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyber attackscyberattacks or other breaches of network or information technology security, our ability to sustain critical business applications throughrealize value from our key data centers, our ability to effectively implementtax credit and manage our information technology projects, our ability to maintain adequate financial and management processes and controls, risk of potential impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), competition law risks, the risk of additional tax or unclaimed property liabilities in excess of our estimates,net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this report and in our other filings with the Securities and Exchange Commission. Actual results may differ materially from any forward lookingforward-looking statements contained herein, and we haveundertake no intentionduty to update these statements. any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations. Certain risk factors are discussed more fully under “Risk Factors” in Part I, Item 1A of this report.





ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to foreign currency risk primarily related to our foreign subsidiaries.  Exchange rates impact the U.S. dollar value of our reported earnings, our investments in and held by subsidiaries, local currency denominated borrowings and intercompany transactions with and between subsidiaries.  Our foreign subsidiaries primarily derive revenues and incur expenses within a single country and currency which, as a result, provide a natural hedge against currency risks in connection with normal business operations.  Accordingly, changes in foreign currency rates vs. the U.S. dollar, euro or Swiss franc generally do not impact local cash flows.  Intercompany transactions which create transactional foreign currency risk include services, royalties, loans, contributions and distributions.


In addition, we are exposed to interest rate risks through our use of the multi-currency line of credit and other borrowings. A hypothetical fluctuation of 10% of market interest rates would not have had a material impact on 20172022 earnings. 
Marketable equity investments, representing our available-for-sale investment in Persol Holdings, are stated at fair value and marked to market through stockholders’ equity, net of tax. Impairments in value below historical cost, if any, deemed to be other than temporary, would be expensed in the consolidated statement of earnings. See the Fair Value Measurements footnote in the notes to our consolidated financial statements of this Annual Report on Form 10-K for further discussion.
We are exposed to market risk as a result of our obligation to pay benefits under our nonqualified deferred compensation plan and our related investments in company-owned variable universal life insurance policies. The obligation to employees increases and decreases based on movements in the equity and debt markets. The investments in mutual funds, as part of the
36



company-owned variable universal life insurance policies, are designed to mitigate, but not eliminate, this risk with offsetting gains and losses. 
Overall, our holdings and positions in market risk-sensitive instruments do not subject us to material risk.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data required by this Item are set forth in the accompanying index on page 4642 of this filing and are presented in pages 47-81.43-95.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
None.

ITEM 9A. CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures 

Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective at a reasonable assurance level. 

Management’s Report on Internal Control Over Financial Reporting

Management’s report on internal control over financial reporting is presented preceding the consolidated financial statements on page 4743 of this report. 

Attestation Report of Independent Registered Public Accounting Firm 

PricewaterhouseCoopers LLP, independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2017,January 1, 2023, as stated in their report which appears herein. 

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

ITEM 9B. OTHER INFORMATION.

None.


ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.
37



PART III

Information required by Part III with respect to Directors, Executive Officers and Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Item 12), Certain Relationships and Related Transactions, and Director Independence (Item 13) and Principal Accounting Fees and Services (Item 14), except as set forth under the titles “Executive Officers of the Registrant,” which is included on page 40,pages 38-39, and “Code of Business Conduct and Ethics,” which is included on page 41,40, (Item 10), and except as set forth under the title “Equity Compensation Plan Information,” which is included on pages 41-42,page 40, (Item 12), is to be included in a definitive proxy statement filed not later than 120 days after the close of our fiscal year and the proxy statement, when filed, is incorporated in this report by reference.

ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT.

The following individuals serve as executive officers of the Company as of December 31, 2017:January 1, 2023:

Name/OfficeAgeServed as an Officer SinceBusiness Experience During Last 5 Years
Peter W. Quigley
President and
  Chief Executive Officer
612004Served as officer of the Company.
Olivier G. Thirot
Executive Vice President
  and Chief Financial Officer
612008Served as officer of the Company.
Peter M. Boland
Senior Vice President
  Chief Marketing Officer
582018
January 2018 - Present
Served as officer of the Company.

Amy J. Bouque
Senior Vice President
  Chief People Officer
542020
September 2020 - Present
Served as officer of the Company.

January 2016 - August 2020
Executive Director - Talent Management -
Ally Financial, Detroit Michigan
Tammy L. Browning
Senior Vice President
  President, KellyOCG
492018
October 2018 - Present
Served as officer of the Company.

October 2010 - April 2018
SVP Global Operations - Yoh
Timothy L. Dupree
Senior Vice President
  President, Kelly Professional &
  Industrial
462014Served as officer of the Company.
Dinette Koolhaas
Senior Vice President
  President, Kelly International
532008Served as officer of the Company.



38



Name/Office Age 
Served as an
Officer Since
 
Business Experience
During Last 5 Years
George S. Corona
President and
  Chief Executive Officer
 59 2000 Served as officer of the Company.
       
Teresa S. Carroll
Executive Vice President,
  President, Global Talent Solutions
  and General Manager - Sales,
  Marketing and HR
 52 2000 Served as officer of the Company.
       
Peter W. Quigley
Executive Vice President,
  President, Global Staffing and
  General Manager - IT, Global
  Service and Global Business
  Service
 56 2004 Served as officer of the Company.
       
Steven S. Armstrong
Senior Vice President and
 General Manager, U.S. Operations
 60 1994 Served as officer of the Company.
       
Hannah S. Lim-Johnson (1)
Chief Legal Officer
 46 2017 September 2017 - Present
Served as officer of the Company

October 2016 - April 2017
Deputy General Counsel, Chief Litigation
Counsel & Assistant Corporate Secretary -
PSEG, Newark, NJ

June 2012 - September 2016
VP, Chief Litigation & Chief Compliance
Counsel - ADT Corp, Boca Raton, FL
       
Olivier G. Thirot
Senior Vice President and
  and Chief Financial Officer
 56 2008 Served as officer of the Company.
       
Laura S. Lockhart
Vice President, Corporate Controller
  and Chief Accounting Officer
 48 2008 Served as officer of the Company.
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
(1) Ms. Lim-Johnson was appointed Chief Legal Officer effective September 2017.
Name/OfficeAge
Served as an
Officer Since
Business Experience
During Last 5 Years
Daniel Hugo Malan
Senior Vice President
  President, Kelly Science,
  Engineering & Technology
532020
March 2020 - Present
Served as officer of the Company.

December 2019 - February 2020
Managing Partner - Talent Capital Advisors

August 2018 - November 2019
Chief Operating Officer - Employbridge

December 2016 - July 2018
President, Commercial Business -
Employbridge

Darren L. Simons
Senior Vice President and Chief
  Digital Officer
522021July 2021 - Present
  Served as officer of the Company.

July 2020 - July 2021
  President - RDI Global Solutions

May 2019 - July 2020
  President - Cielo

May 2014 - April 2019
  SVP and President - CDI
Nicola M. Soares
Senior Vice President
President, Kelly Education
542011Served as officer of the Company.
Vanessa P. Williams
Senior Vice President
  General Counsel
  Assistant Secretary
512020
October 2020 - Present
  Served as officer of the Company.

February 2020 - September 2020
  SVP, Division General Counsel-
  Transportation and Third Party
  Risk Management and Compliance -
  IHS Markit

December 2016 - February 2020
  VP, Division General Counsel -
  Transportation - IHS Markit
Laura S. Lockhart
Vice President, Corporate Controller
  and Chief Accounting Officer
532008Served as officer of the Company.



39




CODE OF BUSINESS CONDUCT AND ETHICS.

We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions. The Code of Business Conduct and Ethics is included as Exhibit 14 in the Index to Exhibits on page 82.96. We have posted our Code of Business Conduct and Ethics on our website at www.kellyservices.com. We intend to post any changes in or waivers from our Code of Business Conduct and Ethics applicable to any of these officers on our website.

ITEM 12. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

Equity Compensation Plan Information

The following table shows the number of shares of our Class A common stock that may be issued upon the exercise of outstanding options, warrants and rights, the weighted-average exercise price of outstanding options, warrants and rights, and the number of securities remaining available for future issuance under our equity compensation plans as of the fiscal year end for 2017. 
2022.
Number of securities to be issued upon exercise of outstanding options, warrants and rightsWeighted-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders - Evergreen provision (1), (2)

$

Equity compensation plans approved by security holders - Fixed Share provision(1), (3)(2)

$
— 
4,533,702
2,705,794 
Equity compensation plans not approved by security holders(4)(3)


93,055— 
Total
$
4,626,757
(1)TotalThe equity compensation plan approved by our stockholders is our Equity Incentive Plan.
— 
(2)$The Evergreen provision applied to shares granted prior to May 10, 2017, and the Equity Incentive Plan provided— 2,705,794 

(1)The equity compensation plan approved by our stockholders is our Equity Incentive Plan.

(2)The Fixed Share provision applies to shares granted on and after May 10, 2017, and the amended Equity Incentive Plan provides that the maximum number of shares available for grants, including stock options and restricted stock, was 15 percent of the outstanding Class A common stock, adjusted for plan activity over the preceding five years. The Company has no plans to issue additional shares under the Evergreen provision that was in effect prior to May 10, 2017.
The number of shares to be issued upon exercise of outstanding options, warrants and rights under the Evergreen provision excludes: 417,101 shares of restricted stock; performance shares that have been earned but not yet vested totaling 249,827 shares of financial measure performance awards, 216,942 shares of total shareholder return performance awards, and 34,700 shares of single financial measure performance awards; and performance shares granted to employees and not yet earned or vested totaling 574,201 shares of financial measure performance awards and 225,388 shares of total shareholder return performance awards, each calculated using an assumed maximum award performance level of 200%, at December 31, 2017.available for grants is 4,700,000.
(3)The Fixed Share provision applies to shares granted on and after May 10, 2017, and the amended Equity Incentive Plan provides that the maximum number of shares available for grants is 4,700,000.

The number of shares to be issued upon exercise of outstanding options, warrants and rights under the Fixed Share provision excludes: 22,750607,154 shares of restricted stock; performance shares that have been earned but not yet vested totaling 15,548 of8,388 financial measure performance awards, and 82,996 single financial measure performance awards; and performance shares granted to employees and not

yet earned or vested totaling 74,624893,573 shares of financial measure performance awards, and 37,308 shares of total shareholder return performance awards, each calculated using an assumed maximum award performance level of 200%, where applicable, at December 31, 2017.January 1, 2023.
(4)The Non-Employee Directors Deferred Compensation Plan is an equity compensation plan that has not been approved by our stockholders. This plan provides non-employee directors with the opportunity to defer all or a portion of the fees they receive. Participants may elect to have director fees that are paid in either cash or common stock, deferred into the plan. Participants choose from a list of investment funds as determined by the Company for their deferrals of cash. Deferrals of common stock must remain in common stock. Amounts deferred under the plan are subject to applicable tax withholding. The plan is intended to be a non-qualified deferred compensation arrangement in compliance with Section 409A of the Code. 100,000 shares were registered for use with issuing shares for this plan.


(3)The Non-Employee Directors Deferred Compensation Plan is an equity compensation plan that has not been approved by our stockholders. This plan provides non-employee directors with the opportunity to defer all or a portion of the fees they receive. Participants may elect to have director fees that are paid in either cash or common stock, deferred into the plan. Participants choose from a list of investment funds as determined by the Company for their deferrals of cash. Deferrals of common stock must remain in common stock. Amounts deferred under the plan are subject to applicable tax withholding. The plan is intended to be a non-qualified deferred compensation arrangement in compliance with Section 409A of the Code. Shares acquired by participants in this plan will be issued from the share reserve stated in the Equity Incentive Plan.

40



PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)The following documents are filed as part of this report:
(1)Financial statements:

(a)The following documents are filed as part of this report:

(i)Financial statements:

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)

Consolidated Statements of Earnings for the three fiscal years ended December 31, 2017January 1, 2023

Consolidated Statements of Comprehensive Income for the three fiscal years ended December 31, 2017January 1, 2023

Consolidated Balance Sheets at December 31, 2017January 1, 2023 and January 1, 20172, 2022

Consolidated Statements of Stockholders’ Equity for the three fiscal years ended December 31, 2017January 1, 2023

Consolidated Statements of Cash Flows for the three fiscal years ended December 31, 2017January 1, 2023

Notes to Consolidated Financial Statements
(2)Financial Statement Schedule -

(ii)Financial Statement Schedule -

For the three fiscal years ended December 31, 2017:January 1, 2023:

Schedule II - Valuation Reserves

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3)The Exhibits are listed in the Index to Exhibits included beginning at page 82, which is incorporated herein by reference.
(b)The Index to Exhibits and required Exhibits are included following the Financial Statement Schedule beginning at page 82 of this filing.
(c)None.

(iii)The Exhibits are listed in the Index to Exhibits included beginning at page 96, which is incorporated herein by reference.

(b)The Index to Exhibits and required Exhibits are included following the Financial Statement Schedule beginning at page 96 of this filing.

(c)None.

ITEM 16. FORM 10-K SUMMARY.

None.


SIGNATURES 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
41
Date: February 20, 2018
KELLY SERVICES, INC.
Registrant 
By /s/ Olivier G. Thirot
Olivier G. Thirot
Senior Vice President and Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: February 20, 2018*/s/ T. E. Adderley 
T. E. Adderley 
Executive Chairman and Chairman of the Board and Director 
Date: February 20, 2018/s/ G. S. Corona
G. S. Corona
President, Chief Executive Officer and Director 
(Principal Executive Officer) 
Date: February 20, 2018/s/ C. M. Adderley 
C. M. Adderley 
Director 
Date: February 20, 2018/s/ R. S. Cubbin
R. S. Cubbin
Director 
Date: February 20, 2018/s/ J. E. Dutton 
J. E. Dutton 
Director 
Date: February 20, 2018/s/ T. B. Larkin 
T. B. Larkin 
Director 
Date: February 20, 2018/s/ L. A. Murphy 
L. A. Murphy 
Director 
Date: February 20, 2018/s/ D. R. Parfet 
D. R. Parfet 
Director
Date: February 20, 2018*/s/ H. Takahashi
H. Takahashi
Director

SIGNATURES (continued)
Date: February 20, 2018/s/ O. G. Thirot
O. G. Thirot
Senior Vice President and Chief Financial Officer
(Principal Financial Officer) 
Date: February 20, 2018/s/ L. S. Lockhart
L. S. Lockhart
Vice President, Corporate Controller and Chief Accounting Officer 
(Principal Accounting Officer) 
Date: February 20, 2018*By /s/ O.G. Thirot
O.G. Thirot
Attorney-in-Fact 

KELLY SERVICES, INC. AND SUBSIDIARIES 

INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE


42



Management’s Report on Internal Control Over Financial Reporting 

The management of Kelly Services, Inc. (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change.

The Company completed the acquisition of RocketPower on March 7, 2022 and the acquisition of PTS on May 2, 2022. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. Accordingly, we have excluded the acquired RocketPower and PTS businesses from our assessment and report on internal control over financial reporting for the year ending January 1, 2023. We are in the process of integrating RocketPower and PTS into our system of internal control over financial reporting. RocketPower and PTS both individually accounted for less than 1% of the Company's total assets as of January 1, 2023 and less than 1% of the Company's total revenue for the year ended 2022.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.January 1, 2023. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). 

Based on our assessment, management determined that, as of December 31, 2017,January 1, 2023, the Company’s internal control over financial reporting was effective based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2017January 1, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on pages 48-49.44-46.

43



Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors and Stockholders of Kelly Services, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting


We have audited the accompanying consolidated balance sheets of Kelly Services, Inc. and its subsidiaries (the “Company”) as of December 31, 2017 andJanuary 1, 2017,2023 and January 2, 2022, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for each of the three years ended December 31, 2017, January 1, 2017,2023, January 2, 2022, and January 3, 2016,2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as ofDecember 31, 2017, January 1, 2023, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017January 1, 2023 and January 1, 2017,2, 2022, and the results of theirits operations and theirits cash flows for each of the three years ended December 31, 2017, January 1, 2017,2023, January 2, 2022, and January 3, 20162021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,January 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.


Basis for Opinions


The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.


Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.


As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, RocketPower) and Pediatric Therapeutic Services (PTS) from its assessment of internal control over financial reporting as of January 1, 2023, because they were acquired by the Company in purchase business combinations during 2022. We have also excluded RocketPower and PTS from our audit of internal control over financial reporting. RocketPower and PTS are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting both individually represented less than 1% of the related consolidated financial statement amounts as of and for the year ended January 1, 2023.

Definition and Limitations of Internal Control over Financial Reporting


A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
44



that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Interim Impairment Assessment – RocketPower Reporting Unit

As described in Notes 1, 4, and 9 to the consolidated financial statements, the Company’s goodwill balance was $151.1 million as of January 1, 2023, and the goodwill allocated to the RocketPower reporting unit was $41.0 million upon its March 2022 acquisition and $0 as of January 1, 2023. 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. If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference. During the third quarter of 2022, customers within the high-tech industry vertical in which RocketPower specializes reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for Recruitment Process Outsourcing (RPO) in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for goodwill. Based on the result of management’s interim goodwill impairment test as of third quarter 2022, management recorded a goodwill impairment charge of $30.7 million to write off a portion of RocketPower’s goodwill. Management determined the fair value of the RocketPower reporting unit using an income approach. 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. Management’s analysis used the following significant assumptions: expected future revenue growth rates, profit margins and discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the RocketPower reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to expected future revenue growth rates, profit margins and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of theRocketPower reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the income approach; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management related to expected future revenue growth rates, profit margins, and discount rate. Evaluating management’s assumptions related to expected future revenue growth rates and profit margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s income approach and the discount rate significant assumption.

Workers’ Compensation

As described in Note 1 to the consolidated financial statements, in the U.S., the Company has a combination of insurance and self-insurance contracts under which they effectively bear the first $1.0 million of risk per single accident. Management establishes the accrual for workers’ compensation claims utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims. Management
45



retains an independent consulting actuary to establish loss development factors and loss rates, based on historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of the ultimate claims liability. In preparing the estimates, the consulting actuary considers a number of assumptions and multiple generally accepted actuarial methods in the course of preparing the loss forecast for claims. When claims exceed the applicable loss limit or self-insured retention and realization of recovery of the claim from existing insurance policies is deemed probable, management records a receivable from the insurance company for the excess amount. Management evaluates the accrual quarterly throughout the year and makes adjustments as needed. As disclosed by management, as of January 1, 2023, the accrual for accrued workers’ compensation, net of related receivables, is $43.3 million.

The principal considerations for our determination that performing procedures relating to workers’ compensation is a critical audit matter are (i) the significant judgment by management when determining the actuarial methods and the significant assumptions to use in establishing the accrual for workers’ compensation claims; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s actuarial methods and significant assumptions related to the loss development factors and loss rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s accrual for workers’ compensation claims, including controls over the actuarial methods and development of significant assumptions. These procedures also included, among others (i) the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate for the accrual for workers’ compensation claims and (ii) comparing the independent estimate to management’s estimate to evaluate the reasonableness of management’s estimate. Developing the independent estimate involved (i) testing the completeness and accuracy of underlying data provided by management; (ii) evaluating management’s actuarial methods and significant assumptions related to the loss development factors and loss rates; and (iii) independently developing the loss development factors and loss rates and actuarial methods used.



/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
February 20, 201816, 2023


We have served as the Company’s auditor since at least 1960.

46





KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS


 202220212020
 (In millions of dollars except per share items)
Revenue from services$4,965.4 $4,909.7 $4,516.0 
Cost of services3,953.6 3,990.5 3,688.4 
Gross profit1,011.8 919.2 827.6 
Selling, general and administrative expenses943.5 870.6 805.6 
Goodwill impairment charge41.0 — 147.7 
Gain on sale of assets(6.2)— (32.1)
Loss on disposal18.7 — — 
Earnings (loss) from operations14.8 48.6 (93.6)
Gain (loss) on investment in Persol Holdings(67.2)121.8 (16.6)
Gain on insurance settlement 19.0 — 
Loss on currency translation from liquidation of subsidiary(20.4)— — 
Other income (expense), net1.6 (3.6)3.4 
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate(71.2)185.8 (106.8)
Income tax expense (benefit)(7.9)35.1 (34.0)
Net earnings (loss) before equity in net earnings (loss) of affiliate(63.3)150.7 (72.8)
Equity in net earnings (loss) of affiliate0.8 5.4 0.8 
Net earnings (loss)$(62.5)$156.1 $(72.0)
Basic earnings (loss) per share$(1.64)$3.93 $(1.83)
Diluted earnings (loss) per share$(1.64)$3.91 $(1.83)
Average shares outstanding (millions):   
Basic38.1 39.4 39.3 
Diluted38.1 39.5 39.3 

 2017 2016 
2015 (1)
 (In millions of dollars except per share items)
Revenue from services$5,374.4
 $5,276.8
 $5,518.2
      
Cost of services4,420.3
 4,370.5
 4,597.9
      
Gross profit954.1
 906.3
 920.3
      
Selling, general and administrative expenses870.8
 843.1
 853.6
      
Earnings from operations83.3
 63.2
 66.7
      
Gain on investment in PersolKelly Asia Pacific
 87.2
 
      
Other expense, net(1.6) (0.7) (3.5)
      
Earnings before taxes and equity in net earnings (loss) of affiliate81.7
 149.7
 63.2
      
Income tax expense12.8
 30.0
 8.7
      
Net earnings before equity in net earnings (loss) of affiliate68.9
 119.7
 54.5
      
Equity in net earnings (loss) of affiliate2.7
 1.1
 (0.7)
      
Net earnings$71.6
 $120.8
 $53.8
      
Basic earnings per share$1.84
 $3.10
 $1.39
Diluted earnings per share$1.81
 $3.08
 $1.39
      
Dividends per share$0.30
 $0.275
 $0.20
      
Average shares outstanding (millions):     
Basic38.3
 38.1
 37.8
Diluted39.0
 38.4
 37.9

(1)Fiscal year included 53 weeks.
See accompanying Notes to Consolidated Financial Statements.

47



KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 202220212020
 (In millions of dollars)
Net earnings (loss)$(62.5)$156.1 $(72.0)
Other comprehensive income (loss), net of tax:   
Foreign currency translation adjustments, net of tax benefit of $0.2 million and tax expense of $0.1 million and $0.2 million, respectively(7.5)(24.2)13.9 
Less: Reclassification adjustments included in net earnings (loss) - liquidation of Japan subsidiary20.4 — — 
Less: Reclassification adjustments included in net earnings (loss) - equity method investment and other4.7 — (1.5)
Foreign currency translation adjustments17.6 (24.2)12.4 
Pension liability adjustments, net of tax expense of $0.5 million and $0.2 million, respectively and tax benefit of $0.1 million1.5 0.5 (0.9)
Less: Reclassification adjustments included in net earnings0.1 0.2 0.1 
Pension liability adjustments1.6 0.7 (0.8)
Other comprehensive income (loss), net of tax19.2 (23.5)11.6 
Comprehensive income (loss)$(43.3)$132.6 $(60.4)
 2017 2016 
2015 (1)
 (In millions of dollars)
Net earnings$71.6
 $120.8
 $53.8
      
Other comprehensive income, net of tax:     
Foreign currency translation adjustments, net of tax expense of $0.2 million, tax expense of $0.0 million and tax benefit of $0.4 million, respectively16.4
 (0.6) (19.4)
Less: Reclassification adjustments included in net earnings
 (0.1) (0.2)
Foreign currency translation adjustments16.4
 (0.7) (19.6)
      
Unrealized gains (losses) on investment, net of tax expense of $30.2 million, tax benefit of $0.7 million and tax expense of $15.8 million, respectively56.2
 (1.1) 28.6
      
Pension liability adjustments, net of tax expense of $0.1 million, $0.0 million and $0.0 million, respectively(0.6) (0.3) 0.5
Less: Reclassification adjustments included in net earnings0.1
 0.1
 0.1
Pension liability adjustments(0.5) (0.2) 0.6
      
Other comprehensive income (loss)72.1
 (2.0) 9.6
      
Comprehensive Income$143.7
 $118.8
 $63.4


(1)Fiscal year included 53 weeks.
See accompanying Notes to Consolidated Financial Statements.

48



KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

20222021
2017 2016 (In millions of dollars)
AssetsAssets  
Current AssetsCurrent Assets  
Cash and equivalentsCash and equivalents$153.7 $112.7 
Trade accounts receivable, less allowances of $11.2 million and $12.6 million, respectivelyTrade accounts receivable, less allowances of $11.2 million and $12.6 million, respectively1,491.6 1,423.2 
Prepaid expenses and other current assetsPrepaid expenses and other current assets69.9 52.8 
(In millions of dollars)
ASSETS   
CURRENT ASSETS:   
Cash and equivalents$32.5
 $29.6
Trade accounts receivable, less allowances of $12.9 million and $12.5 million, respectively1,286.7
 1,138.3
Prepaid expenses and other current assets65.1
 46.7
Total current assets1,384.3
 1,214.6
Total current assets1,715.2 1,588.7 
   
NONCURRENT ASSETS:   
Noncurrent AssetsNoncurrent Assets
Property and equipment:   Property and equipment:  
Property and equipment291.8
 270.0
Property and equipment166.8 205.1 
Accumulated depreciation(205.7) (189.2)Accumulated depreciation(139.0)(169.8)
Net property and equipment86.1
 80.8
Net property and equipment27.8 35.3 
Operating lease right-of-use assetsOperating lease right-of-use assets66.8 75.8 
Deferred taxes183.4
 180.1
Deferred taxes299.7 302.8 
Goodwill, net107.1
 88.4
Goodwill, net151.1 114.8 
Investment in Persol HoldingsInvestment in Persol Holdings 264.3 
Investment in equity affiliate117.4
 114.8
Investment in equity affiliate 123.4 
Other assets499.9
 349.4
Other assets403.2 389.1 
Total noncurrent assets993.9
 813.5
Total noncurrent assets948.6 1,305.5 
   
TOTAL ASSETS$2,378.2
 $2,028.1
Total AssetsTotal Assets$2,663.8 $2,894.2 


See accompanying Notes to Consolidated Financial Statements.

49



KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


20222021
(In millions of dollars)
Liabilities and Stockholders' Equity  
Current Liabilities  
Short-term borrowings$0.7 $— 
Accounts payable and accrued liabilities723.3 687.2 
Operating lease liabilities14.7 17.5 
Accrued payroll and related taxes315.8 318.4 
Accrued workers' compensation and other claims22.9 20.8 
Income and other taxes51.4 51.3 
Total current liabilities1,128.8 1,095.2 
Noncurrent Liabilities  
Operating lease liabilities55.0 61.4 
Accrued payroll and related taxes 57.6 
Accrued workers' compensation and other claims40.7 37.0 
Accrued retirement benefits174.1 220.0 
Other long-term liabilities11.0 86.8 
Total noncurrent liabilities280.8 462.8 
Commitments and contingencies (See Commitments and Contingencies footnotes)
Stockholders' Equity  
Capital stock, $1.00 par value  
Class A common stock, 100.0 million shares authorized; 35.1 million shares issued at 2022 and 36.7 million shares issued at 202135.1 36.7 
Class B common stock, 10.0 million shares authorized; 3.4 million shares issued at 2022 and 20213.4 3.4 
Treasury stock, at cost  
Class A common stock, 1.0 million shares at 2022 and 0.7 million shares at 2021(19.5)(14.5)
Class B common stock(0.6)(0.6)
Paid-in capital28.0 23.9 
Earnings invested in the business1,216.3 1,315.0 
Accumulated other comprehensive income (loss)(8.5)(27.7)
Total stockholders' equity1,254.2 1,336.2 
Total Liabilities and Stockholders' Equity$2,663.8 $2,894.2 
 2017 2016
 (In millions of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY   
CURRENT LIABILITIES:   
Short-term borrowings$10.2
 $
Accounts payable and accrued liabilities537.7
 455.1
Accrued payroll and related taxes287.4
 241.5
Accrued insurance25.7
 23.4
Income and other taxes65.2
 51.1
Total current liabilities926.2
 771.1
    
NONCURRENT LIABILITIES:   
Accrued insurance49.9
 45.5
Accrued retirement benefits178.1
 157.4
Other long-term liabilities72.5
 42.1
Total noncurrent liabilities300.5
 245.0
    
Commitments and contingencies (See Commitments and Contingencies footnotes)
 
    
STOCKHOLDERS' EQUITY:   
Capital stock, $1.00 par value   
Class A common stock, shares issued 36.6 million at 2017 and 201636.6
 36.6
Class B common stock, shares issued 3.5 million at 2017 and 20163.5
 3.5
Treasury stock, at cost   
Class A common stock, 1.7 million shares at 2017 and 1.9 million at 2016(34.6) (38.4)
Class B common stock(0.6) (0.6)
Paid-in capital32.2
 28.6
Earnings invested in the business983.6
 923.6
Accumulated other comprehensive income130.8
 58.7
Total stockholders' equity1,151.5
 1,012.0
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$2,378.2
 $2,028.1


See accompanying Notes to Consolidated Financial Statements.

50




KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

2017 2016 
2015 (1)
202220212020
(In millions of dollars) (In millions of dollars)
Capital Stock     Capital Stock   
Class A common stock     Class A common stock   
Balance at beginning of year$36.6
 $36.6
 $36.6
Balance at beginning of year$36.7 $36.7 $36.6 
Conversions from Class B
 
 
Conversions from Class B — 0.1 
Share retirementShare retirement(1.6)— — 
Balance at end of year36.6
 36.6
 36.6
Balance at end of year35.1 36.7 36.7 
     
Class B common stock     Class B common stock   
Balance at beginning of year3.5
 3.5
 3.5
Balance at beginning of year3.4 3.4 3.5 
Conversions to Class A
 
 
Conversions to Class A — (0.1)
Balance at end of year3.5
 3.5
 3.5
Balance at end of year3.4 3.4 3.4 
     
Treasury Stock     Treasury Stock   
Class A common stock     Class A common stock   
Balance at beginning of year(38.4) (43.7) (49.2)Balance at beginning of year(14.5)(16.5)(20.3)
Issuance of restricted stock and other3.8
 5.3
 5.5
Net issuance of stock awardsNet issuance of stock awards2.8 2.0 3.8 
Purchase of treasury stockPurchase of treasury stock(7.8)— — 
Balance at end of year(34.6) (38.4) (43.7)Balance at end of year(19.5)(14.5)(16.5)
     
Class B common stock     Class B common stock   
Balance at beginning of year(0.6) (0.6) (0.6)Balance at beginning of year(0.6)(0.6)(0.6)
Issuance of restricted stock and other
 
 
Net issuance of stock awardsNet issuance of stock awards — — 
Balance at end of year(0.6) (0.6) (0.6)Balance at end of year(0.6)(0.6)(0.6)
     
Paid-in Capital     Paid-in Capital   
Balance at beginning of year28.6
 25.4
 24.9
Balance at beginning of year23.9 21.3 22.5 
Issuance of restricted stock and other3.6
 3.2
 0.5
Net issuance of stock awardsNet issuance of stock awards4.1 2.6 (1.2)
Balance at end of year32.2
 28.6
 25.4
Balance at end of year28.0 23.9 21.3 
     
Earnings Invested in the Business     Earnings Invested in the Business   
Balance at beginning of year923.6
 813.5
 767.4
Balance at beginning of year1,315.0 1,162.9 1,238.6 
Net earnings71.6
 120.8
 53.8
Cumulative-effect adjustment from adoption of ASU 2016-13, Credit LossesCumulative-effect adjustment from adoption of ASU 2016-13, Credit Losses — (0.7)
Net earnings (loss)Net earnings (loss)(62.5)156.1 (72.0)
Dividends(11.6) (10.7) (7.7)Dividends(10.6)(4.0)(3.0)
Share retirementShare retirement(25.6)— — 
Balance at end of year983.6
 923.6
 813.5
Balance at end of year1,216.3 1,315.0 1,162.9 
     
Accumulated Other Comprehensive Income     
Accumulated Other Comprehensive Income (Loss)Accumulated Other Comprehensive Income (Loss)   
Balance at beginning of year58.7
 60.7
 51.1
Balance at beginning of year(27.7)(4.2)(15.8)
Other comprehensive income (loss), net of tax72.1
 (2.0) 9.6
Other comprehensive income (loss), net of tax19.2 (23.5)11.6 
Balance at end of year130.8
 58.7
 60.7
Balance at end of year(8.5)(27.7)(4.2)
Stockholders’ Equity at end of year$1,151.5
 $1,012.0
 $895.4
Stockholders’ Equity at end of year$1,254.2 $1,336.2 $1,203.0 
(1)Fiscal year included 53 weeks.

See accompanying Notes to Consolidated Financial Statements.

51



KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

 202220212020
 (In millions of dollars)
Cash flows from operating activities:   
Net earnings (loss)$(62.5)$156.1 $(72.0)
Adjustments to reconcile net earnings to net cash from operating activities:   
Goodwill impairment charge41.0 — 147.7 
Deferred income taxes(72.1)21.6 (57.1)
Loss on disposal18.7 — — 
Depreciation and amortization33.4 29.8 24.2 
Operating lease asset amortization18.5 21.2 21.1 
Provision for credit losses and sales allowances1.5 1.6 12.8 
Stock-based compensation7.8 5.1 3.9 
(Gain) loss on investment in Persol Holdings67.2 (121.8)16.6 
Loss on cumulative translation adjustment reversal20.4 — — 
Gain on foreign currency remeasurement(5.5)— — 
Gain on insurance settlement (19.0)— 
Gain on sale of assets(6.2)— (32.1)
Equity in net (earnings) loss of PersolKelly Pte. Ltd.(0.8)(5.4)(0.8)
Other, net3.3 6.0 1.4 
Changes in operating assets and liabilities, net of acquisitions(141.0)(10.2)120.3 
Net cash (used in) from operating activities(76.3)85.0 186.0 
Cash flows from investing activities:   
Capital expenditures(12.0)(11.2)(15.5)
Proceeds from sale of assets10.1 — 55.5 
Acquisition of companies, net of cash received(143.1)(213.0)(39.2)
Cash disposed from sale of Russia, net of proceeds(6.0)— — 
Proceeds from sale of Persol Holdings investment196.9 — — 
Proceeds from sale of equity method investment119.5 — — 
Proceeds from company-owned life insurance1.5 12.2 2.3 
Proceeds from insurance settlement 19.0 — 
Proceeds from sale of Brazil, net of cash disposed — 1.2 
Proceeds (payments) related to loans to equity affiliate 5.9 5.6 
Proceeds from (investment in) equity securities 5.0 (0.2)
Other investing activities0.6 1.4 0.1 
Net cash from (used in) investing activities167.5 (180.7)9.8 
Cash flows from financing activities:   
Net change in short-term borrowings0.8 (0.2)(1.7)
Financing lease payments(1.4)(1.5)(2.0)
Dividend payments(10.6)(4.0)(3.0)
Payments of tax withholding for stock awards(0.9)(0.6)(1.2)
Buyback of common shares(27.2)— — 
Purchase of treasury stock(7.8)— — 
Contingent consideration payments(3.3)(1.6)— 
Other financing activities(0.2)(0.2)(0.2)
Net cash used in financing activities(50.6)(8.1)(8.1)
Effect of exchange rates on cash, cash equivalents and restricted cash2.3 (4.8)9.4 
Net change in cash, cash equivalents and restricted cash42.9 (108.6)197.1 
Cash, cash equivalents and restricted cash at beginning of year119.5 228.1 31.0 
Cash, cash equivalents and restricted cash at end of year(1)
$162.4 $119.5 $228.1 
52



 2017 2016 
2015 (1)
 (In millions of dollars)
Cash flows from operating activities:     
Net earnings$71.6
 $120.8
 $53.8
Noncash adjustments:     
Depreciation and amortization22.7
 21.3
 22.3
Provision for bad debts5.6
 11.0
 3.7
Stock-based compensation9.1
 10.2
 7.9
Deferred income taxes(5.9) 7.4
 (11.8)
Gain on investment in PersolKelly Asia Pacific equity affiliate
 (87.2) 
Other, net(2.5) (3.9) (4.7)
Changes in operating assets and liabilities, net of acquisition(29.4) (40.0) (45.9)
      
Net cash from operating activities71.2
 39.6
 25.3
      
      
Cash flows from investing activities:     
Capital expenditures(24.6) (12.7) (16.9)
Acquisition of company, net of cash received(37.2) 
 
Net cash proceeds from investment in PersolKelly Asia Pacific equity affiliate
 23.3
 
Proceeds from repayment of loan to PersolKelly equity affiliate0.6
 
 
Investment in PersolKelly equity affiliate
 
 (0.5)
Other investing activities0.2
 (0.3) (0.2)
      
Net cash (used in) from investing activities(61.0) 10.3
 (17.6)
      
      
Cash flows from financing activities:     
Net change in short-term borrowings10.1
 (55.9) (34.7)
Dividend payments(11.6) (10.7) (7.7)
Payments of tax withholding for restricted shares(1.8) (2.2) (1.8)
Other financing activities(0.1) (0.3) 0.2
      
Net cash used in financing activities(3.4) (69.1) (44.0)
      
Effect of exchange rates on cash and equivalents(3.9) 6.6
 (4.6)
      
Net change in cash and equivalents2.9
 (12.6) (40.9)
Cash and equivalents at beginning of year29.6
 42.2
 83.1
      
Cash and equivalents at end of year$32.5
 $29.6
 $42.2
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(1)Fiscal year included 53 weeks.

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported in our consolidated balance sheet:
202220212020
(In millions of dollars)
Reconciliation of cash, cash equivalents and restricted cash:
Current assets:
Cash and equivalents$153.7 $112.7 $223.0 
Restricted cash included in prepaid expenses and other current assets0.1 0.2 — 
Noncurrent assets:
Restricted cash included in other assets8.6 6.6 5.1 
Cash, cash equivalents and restricted cash at end of year$162.4 $119.5 $228.1 

See accompanying Notes to Consolidated Financial Statements.
53

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



1. Summary of Significant Accounting Policies 

Nature of Operations Kelly Services, Inc. is a globalspecialty talent and workforce solutions provider operating throughout the world.

Fiscal Year The Company’s fiscal year ends on the Sunday nearest to December 31. The three most recent years ended on December 31, 2017 (2017,January 1, 2023 (2022, which contained 52 weeks), January 1, 2017 (2016,2, 2022 (2021, which contained 52 weeks) and January 3, 2016 (2015,2021 (2020, which contained 53 weeks). Period costs included in selling, general and administrative (“SG&A”) expenses are recorded on a calendar-year basis. The Company’s operations in Brazil arewere accounted for on a one-month lag.lag, until the Company sold the Brazil operations in the third quarter of 2020. The Company’s equity method investment in PersolKelly Asia Pacific arePte. Ltd. was accounted for on a one-quarter lag prior to the sale of the majority of the investment in the first quarter of 2022 (see Investment in PersolKelly Asia PacificPte. Ltd. footnote). Any material transactions in the intervening period are disclosed or accounted for in the current reporting period.

Principles of Consolidation The consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries. In connection with the Company’s investment in PersolKelly Asia Pacific (formerly TS Kelly Asia Pacific) in the third quarter of 2016, the CommercialAll intercompany accounts and PT staffing operations and certain OCG businesses in the APAC region were deconsolidated at that time.transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current presentation. All intercompany accounts and transactions have been eliminated.
Available-For-Sale
Investment in Persol Holdings The Company’s available-for-saleprevious investment in Persol Holdings, as further described in the Fair Value MeasurementsInvestment in Persol Holdings footnote, iswas carried at fair value with the unrealized gains or losses,changes in fair value recognized in net of tax, included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Realized losses and declines in value below cost judged to be other-than-temporary, if any, are included as a component of asset impairments expense in the consolidated statement of earnings. The fair value of the available-for-saleinvestment was based on the quoted market price until the sale of the investment in the first quarter of 2022. 

Investment in PersolKelly Pte. Ltd. The Company had a 49% ownership interest in its equity affiliate, PersolKelly Pte. Ltd., which was accounted for under the equity method. The operating results of the equity affiliate were recorded on a one-quarter lag and included in equity in net earnings (loss) of affiliate in the consolidated statements of earnings, until the Company sold the majority of the investment in the first quarter of 2022 (see Investment in PersolKelly Pte. Ltd. footnote). The remaining investment is based on quoted market prices. accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote).

Foreign Currency Translation All of the Company’s international subsidiaries use their local currency as their functional currency, which is the currency in which they transact the majority of their activities. Revenue and expense accounts of foreign subsidiaries are translated to U.S. dollars at average exchange rates, while assets and liabilities are translated to U.S. dollars at year-end exchange rates. Resulting translation adjustments, net of tax, where applicable, are reported as accumulated foreign currency translation adjustments in stockholders’ equity and are recorded as a component of accumulated other comprehensive income. income (loss). 

Revenue Recognition Revenue from Revenues are recognized when control of the promised services is recognized astransferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Our revenues are recorded net of any sales, value added, or similar taxes collected from our customers. We generate revenue from: the hourly sales of services are provided by our temporary employees to customers (“staffing services” revenue), the temporary or contract employees. Revenue fromrecruiting of permanent placement services is recognized at the time the employees for our customers (“permanent placement candidate begins full-time employment. Revenue from other fee-based services is recognized when the services are provided. Revenuesplacement” revenue), and through our talent fulfillment and outcome-based activities (“talent solutions” and “outcome-based services” revenue).

We record revenues from sales of services and the related direct costs are recorded in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When Kelly is the principal, we actdemonstrate control over the service by being primarily responsible to our customers for fulfilling the contractual promise to provide the service. When Kelly does not demonstrate control over the service, which may be evident through the arrangement of other contingent labor suppliers and/or service providers to perform services for the customer or by Kelly not holding primary responsibility for the fulfillment of the contractual promise to provide services to the customer, the amounts billed to our customers are net of the amounts paid to the secondary suppliers/service providers and the net amount is recorded as an agent, we report the revenuesrevenues.

Staffing Services Revenue
Staffing services contracts are generally negotiated and invoiced on a net basis.per-hour or per-unit basis as the temporary staffing services are transferred to the customer. Revenue from the majority of our staffing services continues to be recognized over time as the customer simultaneously receives and consumes the services we provide. We have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer.

54

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Permanent Placement Revenue
Permanent placement revenue is recorded at the point in time the permanent placement candidate begins full-time employment. On the candidate start date, the customer accepts the candidate and can direct the use of the candidate as well as obtains the significant risk and rewards of the candidate. We consider this the point the control transfers to the customer.

Outcome-Based Services Revenue
Billings are generally negotiated and invoiced on a measure of time (hours, weeks, months) or per-unit basis for our services performed. We continue to recognize revenue from the majority of our outcome-based services over time as the customer simultaneously receives and consumes the services we provide. For the majority of our outcome-based services, we have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer.

Talent Solutions Revenue
Talent Solutions services include: overall program management of our client’s contingent workforce, external vendors and/or independent contractors, end-to-end talent acquisition, and payroll outsourcing. Billings are generally negotiated and invoiced as a fee-based commission contingent on the amount of services managed through the program, a monthly management fee, measure of time (hours), or a per-unit basis for our services performed. We continue to recognize revenue for talent solution services over time as the customer simultaneously receives and consumes the services we provide. We have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer.

Variable Consideration
Certain customers may receive cash-based incentives or credits, which are accounted for as a form of variable consideration. We estimate these amounts based on the expected or likely amount to be provided to customers and reduce revenues recognized to the extent that it is probable that a significant reversal of such adjustment will not occur. Provisions for sales allowances (billing adjustments related to errors, service issues and compromises on billing disputes), based on historical experience, are recognized at the time the related sale is recognized as a reduction in revenue from services.

Payment Terms
Customer payments are typically due within 60 days of invoicing, but may be shorter or longer depending on contract terms. Management does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the services to the customer will be less than one year. We do not have any significant financing components or extended payment terms.

Deferred Revenue
Items which are billed to the customer at a point in time, rather than billed over time as the services are delivered to the customer, are assessed for potential revenue deferral. At this time, the balance of the contract liability as well as the amount of revenue recognized in the reporting period that was included in the deferred revenue balance at the beginning of the period is not material.

Deferred Costs
Occasionally, fulfillment costs are incurred after obtaining a contract in order to generate a resource that will be used to provide our services. These costs are considered incremental and recoverable costs to fulfill our contract with the customer. These costs to fulfill a contract are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be the average length of assignment of the employees. We determined the period of benefit by taking into consideration our customer contracts, attrition rates and other relevant factors. Amortization expense is included in SG&A expenses in the consolidated statements of earnings.

Unsatisfied Performance Obligations
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Allowance for UncollectibleCredit Losses - Trade Accounts Receivable The Company records an allowance for uncollectible accounts receivable, billed and unbilled, based on historical loss experience, customer payment patterns, and current economic trends.trends, and reasonable and supportable forecasts, as applicable. The reserve for sales allowances as discussed above, is also included in the allowance for uncollectible accounts receivable. The Company estimates the current expected credit losses by applying internally developed loss rates to all outstanding receivable balances by aging category. Accounts receivable are written-off against the allowance when they are deemed uncollectible. The Company reviews the adequacy of the allowance for uncollectible accounts
55

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
receivable on a quarterly basis and, if necessary, increases or decreases the balance by recording a charge or credit to SG&A expenses for the portion of the adjustment relating to uncollectible accounts receivable, and a charge or credit to revenue from services for the portion of the adjustment relating to sales allowances.

We are exposed to credit losses primarily through our sales of workforce solution services to customers. We establish an allowance for estimated credit losses in the current period resulting from the failure of our customers to make required payments on their trade accounts receivable in future periods. We pool such assets by geography and other similar risk characteristics, such as accounts in collection, and apply an aging method to estimate future credit losses utilizing inputs such as historical write-off experience, customer payment patterns, current collection data, and reasonable and supportable forecasts, as applicable. Credit risk with respect to accounts receivable is limited due to short payment terms. The Company also performs ongoing credit evaluations using applicable credit ratings of its customers to help analyze credit risk. We monitor ongoing credit exposure through frequent review of past due accounts (based on the payment terms of the contract) and follow-up with customers, as appropriate.We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

Allowance for Credit Losses - Other Financial Assets The Company measures expected credit losses on qualified financial assets that do not result from revenue transactions using a probability of default method by type of financing receivable. The estimate of expected credit losses considers credit ratings, financial data, historical write-off experience, current conditions, and reasonable and supportable forecasts, as applicable, to estimate the risk of loss.

Cost of Services Cost of services are those costs directly associated with the earning of revenue. The primary examples of these types of costs are temporary employee wages, along with other employee related costs, including associated payroll taxes, temporary employee benefits, such as service bonus and holiday pay, and workers’ compensation costs. These costs differ fundamentally from SG&A expenses in that they arise specifically from the action of providing our services to customers whereas SG&A costs are incurred regardless of whether or not we place temporary employees with our customers. 

Advertising Expenses Advertising expenses, which are expensed as incurred and are included in SG&A expenses, were $7.9$6.4 million in 2017 and $7.62022, $7.5 million in 20162021 and 2015.$8.1 million in 2020.

Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for uncollectible accounts
KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

receivable and credit losses, workers’ compensation, goodwill and long-lived asset impairment, valuation of acquired intangibles, litigation costs and income taxes. Actual results could differ materially from those estimates.

Cash and Equivalents Cash and equivalents are stated at fair value. The Company considers securities with original maturities of three months or less to be cash and equivalents. 

Property and Equipment Property and equipment are stated at cost and are depreciated on a straight-line basis over their estimated useful lives. Cost and estimated useful lives of property and equipment by function are as follows:

Category 2017 2016 LifeCategory20222021Useful Life
 (In millions of dollars)   (In millions of dollars) 
Land $3.8
 $3.8
   Land$— $—   
Work in process 5.3
 0.8
   Work in process3.0 0.3   
Buildings and improvements 64.9
 61.1
 15to45 yearsBuildings and improvements0.4 12.9 15to40 years
Computer hardware and software 154.2
 145.0
 3to12 yearsComputer hardware and software126.8 147.9 3to12 years
Equipment, furniture and fixtures 37.9
 33.8
  5years Equipment, furniture and fixtures22.7 26.6  5years
Leasehold improvements 25.7
 25.5
 The lesser of the life of the lease or 5 years.Leasehold improvements13.9 17.4 HQ: 15 years
Branches: Lesser of the lease or 5 years
Total property and equipment $291.8
 $270.0
  Total property and equipment$166.8 $205.1  

The Company capitalizes external costs and internal payroll costs directly incurred in the development of software for internal use as required by the Internal-Use Software Subtopic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Work in process represents capitalized costs for internal useinternal-use software not yet in service. Depreciation expense was $21.8$13.6 million for 2017, $20.72022, $16.4 million for 20162021 and $21.4$16.8 million for 2015.2020.
Operating Leases
56

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

Cloud Computing Arrangements The Company recognizes rent expensehas cloud computing arrangements that are comprised of internal-use software platforms that are accounted for as service contracts. The Company does not have the ability to take possession of the software without significant penalty nor can the Company run the software on its own hardware or contract with another party unrelated to the vendor to host the software. Implementation costs associated with these cloud computing arrangements are capitalized when incurred during the application development phase. Amortization is calculated on a straight-line basis overand is a component of SG&A expenses in our consolidated statements of earnings.

Amortization expense was $4.2 million for 2022, $2.2 million for 2021, and $1.0 million for 2020. The related accumulated amortization totaled $7.3 million in 2022 and $3.2 million in 2021. Capitalized amounts related to such arrangements are recorded within prepaid and other current assets and non-current other assets in the lease term. This includesconsolidated balance sheet. As of year-end 2022 and 2021, the impact of both scheduled rent increasesCompany had $2.7 million recorded in prepaid expenses and free or reduced rents (commonly referred to as “rent holidays”). The Company records allowances provided by landlords for leasehold improvements as deferred rentother current assets in the consolidated balance sheet and as operating cash flows$21.0 million and $13.9 million, respectively, recorded in non-current other assets in the consolidated statementsbalance sheet related to capitalized cloud computing arrangements (see Other Assets footnote).

Leases Right-of-use("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of cash flows.lease payments over the lease term. Since most of the Company’s leases do not have an implicit borrowing rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our leases may include options allowing us in our sole discretion to extend or terminate the lease, and when it is reasonably certain that we will exercise those options, we will include those periods in our lease term. Variable costs, such as payments for insurance and tax payments, are expensed when the obligation for those payments is incurred.

Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the acquisition date fair value of net assets acquired. Purchased intangible assets with definite livesare primarily comprised of acquired trade names and customer relationships that are recorded at estimated fair value at the date of acquisitionacquisition. The fair value of trade name intangibles is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth rates, royalty rates and discount rates. The fair value of customer relationship intangibles is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth rates, customer attrition rates, profit margins and discount rates.

Purchased intangible assets with definite lives are amortized over their respective useful lives (from 35 to 15 years) on a straight-line basis or, if appropriate, on an accelerated basis commensurate with the related cash flows.basis.

Impairment of Long-Lived Assets, Intangible Assets, Goodwill, and Equity Method Investmentsand Equity Securities The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When estimated undiscounted future cash flows will not be sufficient to recover the asset group’s carrying amount of the asset group, in which the long-lived asset being tested for impairment resides, the asset is written down to its estimated fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or estimated fair value less cost to sell.
We test goodwill for impairment at the reporting unit level annually in the fourth quarter and whenever events or circumstances make it more likely than not that an impairment may have occurred. WeGenerally accepted accounting principles require that goodwill be tested for impairment at a reporting unit level. For segments with a goodwill balance, we have determined that our reporting units are the same as our operating and reportable segments based on our organizational structure. structure or one level below our operating segments (the component level).

We may first use a qualitative assessment for one or more reporting units("step zero test") for the annual goodwill impairment test if we have determined that it is more likely than not that the fair value of thefor one or more reporting unit(s)units is moregreater than their carrying value.
For The step zero test includes making judgments and assessments to determine whether any events or circumstances have occurred that makes it more likely than not that the fair value of a reporting units whereunit is less than its carrying amount. In conducting the qualitative assessment, is not used,we assess the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. Such events and circumstances may include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, entity-specific events and events affecting a reporting unit.

If we elect to forgo the qualitative assessment for a reporting unit, goodwill is tested for impairment using a two-step process. In the first step,by comparing the estimated fair value of a reporting unit is compared to its carrying value.value ("step one test"). If the estimated fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is not considered impaired and no further testing is required.
57

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
required. If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, a second step of the impairment test is performed in order to determine the implied fair value of a reporting unit’s goodwill. If the
KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

carrying value of a reporting unit’s goodwill exceeds its implied fair value, goodwill is deemed impaired and is written down to the extent of the difference.
We evaluate
For the step one quantitative test, we determine the fair value of our reporting units using the income approach. 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 unit. Assumptions and estimates about future cash flows and discount rates are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our analysis used the following significant assumptions: expected future revenue growth rates, profit margins and discount rate.

Prior to the sale of the majority of our investment in our equity affiliate, we evaluated our equity method investment for indicators of impairment on a periodicquarterly basis or whenever events or circumstances indicateindicated the carrying amount may be other-than-temporarily impaired. If we concludehad concluded that there iswas an other-than-temporary impairment of our equity method investment, we will adjustwould have adjusted our carrying amount of our investment to the adjusted fair value.

We evaluate our equity securities measured under the measurement alternative for indicators of impairment on a quarterly basis and whenever observable price changes occur. The measurement alternative represents cost, less impairment, plus or minus observable price changes. Quarterly, we also confirm the securities still qualify to be measured in accordance with the measurement alternative. The value of the securities will be adjusted for any increases or decreases as a result of an observable price change.

Accounts Payable Included in accounts payable balances are book overdrafts, which are outstanding checks in excess of funds on deposit. Such amounts totaled $7.3$0.4 million and $8.8$5.4 million at year-end 20172022 and 2016,2021, respectively.

Accrued Payroll and Related Taxes Included in current accrued payroll and related taxes are book overdrafts, which are outstanding checks in excess of funds on deposit. Such amounts totaled $18.6$67.6 million and $18.4$39.1 million at year-end 20172022 and 2016,2021, respectively. Payroll taxes for temporary employees are recognized proportionately to direct wages for interim periods based on expected full-year amounts. Included in 2021 current and noncurrent accrued payroll and related taxes are deferred U.S. payroll tax payments as allowed by COVID-19 economic relief legislation.

Income Taxes The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are provided 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. 

The U.S. work opportunity credit is allowed for wages earned by employees in certain targeted groups. The actual amount of creditable wages in a particular period is estimated, since the credit is only available once an employee reaches a minimum employment period and the employee’s inclusion in a targeted group is certified by the applicable state. As these events often occur after the period the wages are earned, judgment is required in determining the amount of work opportunity credits accrued for in each period. We evaluate the accrual regularly throughout the year and make adjustments as needed.

Uncertain tax positions that are taken or expected to be taken in a tax return are recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. 

Interest and penalties related to income taxes are classified as income tax expense. U.S. taxes on global intangible low-taxed income will be(“GILTI”) are accounted for as a current period expense when incurred.

Stock-Based Compensation The Company may grant restricted stock awards and units (collectively, “restricted stock”), stock options (both incentive and nonqualified), stock appreciation rights and performance awards of the Company's Class A stock to key employees associated with the Company’s Class A stock.employees. The Company utilizes the market price on the date of grant as the fair value for restricted stock and the market price on the date of grant less the present value of the expected dividends not received during the vesting period for performance awards. The Company also estimates a fair value of performance awards related to relative total shareholder return using a Monte Carlo simulation model. The Company estimates the fair value of stock option awards, if any, on the date of grant using an option-pricing model. The value of awards is recognized as expense, net of forfeitures as they occur, over the requisite service periods in SG&A expense in the Company’s consolidated statements of earnings. 

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Earnings Per Share Restricted stock that entitle their holders to receive nonforfeitable dividends before vesting are considered participating securities and, therefore, are included in the calculation of earnings per share using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under this method, earnings from continuing operations (or net earnings) is reduced by the amount of dividends declared, and the remaining undistributed earnings is allocated to common stock and participating securities based on the proportion of each class’s weighted average shares outstanding to the total weighted average shares outstanding. The calculation of diluted earnings per share includes the effect of potential common shares outstanding in the average weighted shares outstanding.

Workers’ Compensation In the U.S., the Company has a combination of insurance and self-insurance contracts under which we effectively bear the first $1.0 million of risk per single accident. The Company establishes accruals for workers’ compensation claims utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims. The estimates areCompany retains an independent consulting actuary to establish loss development factors and loss rates, based both on historical claims experience as well as industry experience, and applies those factors to current legal, economicclaims information to derive an estimate of the ultimate claims liability.

In preparing the estimates, the consulting actuary considers a number of assumptions and regulatory factors.multiple generally accepted actuarial methods in the course of preparing the loss forecast for claims. When claims exceed the applicable loss limit or self-insured retention and realization of recovery of the claim from existing insurance policies is deemed probable, the Company records a receivable from the insurance company for the excess amount. The receivable is included in prepaid expenses and other current assets and other assets in the consolidated balance sheet at year end. The Company regularly updates its estimates,evaluates the accrual quarterly throughout the year and makes adjustments as needed, and the ultimate cost of these claims may be greater than or less than the established accrual.
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2. Revenue
2. Acquisition

Revenue Disaggregated by Service Type
On
Kelly has five operating 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 of dollars):
December Year to Date
202220212020
Professional & Industrial
Staffing services$1,228.2 $1,402.4 $1,423.3 
Permanent placement28.9 24.7 9.9 
Outcome-based services409.1 410.3 425.2 
Total Professional & Industrial1,666.2 1,837.4 1,858.4 
Science, Engineering & Technology
Staffing services869.0 813.2 751.8 
Permanent placement29.7 24.4 12.5 
Outcome-based services366.7 319.2 254.8 
Total Science, Engineering & Technology1,265.4 1,156.8 1,019.1 
Education
Staffing services627.8 411.5 286.4 
Permanent placement8.4 5.0 0.5 
Total Education636.2 416.5 286.9 
Outsourcing & Consulting
Talent solutions468.0 432.1 363.5 
Total Outsourcing & Consulting468.0 432.1 363.5 
International
Staffing services892.3 1,032.9 971.8 
Permanent placement22.6 21.3 16.8 
Talent solutions17.3 13.6 — 
Total International932.2 1,067.8 988.6 
Total Intersegment(2.6)(0.9)(0.5)
Total Revenue from Services$4,965.4 $4,909.7 $4,516.0 

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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 Russian operations were sold in the third quarter of 2022 and our Brazil operations were sold in August 2020 (see Acquisitions and Dispositions footnote).

The below table presents our revenues disaggregated by geography (in millions of dollars):
December Year to Date
202220212020
Americas
United States$3,671.5 $3,513.4 $3,260.2 
Canada168.2 155.0 122.5 
Puerto Rico112.4 102.1 77.0 
Mexico46.5 92.7 114.4 
Brazil— — 17.0 
Total Americas Region3,998.6 3,863.2 3,591.1 
Europe
Switzerland222.8 222.2 200.4 
France199.4 223.1 198.2 
Portugal169.5 158.2 141.7 
Italy69.3 74.2 58.2 
Russia63.4 132.2 118.5 
United Kingdom57.1 68.3 73.7 
Other143.2 128.8 104.6 
Total Europe Region924.7 1,007.0 895.3 
Total Asia-Pacific Region42.1 39.5 29.6 
Total Kelly Services, Inc.$4,965.4 $4,909.7 $4,516.0 

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The below table presents our SET, OCG and International segment revenues disaggregated by geographic region (in millions of dollars):
December Year to Date
202220212020
Science, Engineering & Technology
Americas$1,250.3 $1,149.3 $1,013.7 
Europe15.1 7.5 5.4 
Total Science, Engineering & Technology$1,265.4 $1,156.8 $1,019.1 
Outsourcing & Consulting
Americas$403.3 $369.4 $302.2 
Europe22.6 23.2 31.7 
Asia-Pacific42.1 39.5 29.6 
Total Outsourcing & Consulting$468.0 $432.1 $363.5 
International
Americas$45.2 $91.5 $130.4 
Europe887.0 976.3 858.2 
Total International$932.2 $1,067.8 $988.6 

Deferred Costs

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $2.7 million as of year-end 2022 and $1.3 million as of 2021. Amortization expense for the deferred costs was $10.1 million for 2022, $20.5 million for 2021 and $21.5 million for 2020. As of year-end 2022, there was no impairment loss in relation to the costs capitalized.

3. Credit Losses

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 of dollars):

December Year to Date
202220212020
Allowance for credit losses:
Beginning balance$9.4 $9.8 $9.7 
Impact of adopting ASC 326— — 0.3 
Current period provision1.3 1.3 2.0 
Currency exchange effects(0.2)(0.5)0.1 
Write-offs(2.8)(1.2)(2.3)
Ending balance$7.7 $9.4 $9.8 

Write-offs are presented net of recoveries, which were not material for December year to date 2022, 2021 and 2020.

We were engaged in litigation with a customer over a disputed accounts receivable balance for certain services rendered more than five years ago, which had been recorded as a long-term receivable in other assets in the consolidated balance sheet. In September 5, 2017,2020, a ruling was issued in favor of the customer, which we appealed. Upon receiving the ruling, we increased our allowance for credit losses by $9.2 million in the third quarter of 2020 to reflect the likelihood of collection, which was recorded in other assets in the consolidated balance sheet. The related allowance for credit losses on this long-term customer receivable was $10.9 million as of year-end 2020 and represented the likelihood of collection. In September 2021, a final
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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
ruling in the case was entered in favor of the customer. As a result, in the third quarter of 2021, we wrote off the entire receivable balance with this customer, including $0.6 million not previously reserved. The unreserved portion was recorded in SG&A expenses in the consolidated statements of earnings. The rollforward of our allowance for credit losses related to the long-term customer receivable, which was recorded in other assets in the consolidated balance sheet, is as follows (in millions of dollars):

December Year to Date
20212020
Allowance for credit losses:
Beginning balance$10.9 $1.0 
  Impact of adopting ASC 326— 0.7 
  Current period provision0.6 9.5 
  Currency exchange effects— (0.3)
Write-offs(11.5)— 
Ending Balance$— $10.9 

There were no long-term customer receivables in 2022. No allowances related to other receivables were material for December year to date 2022, 2021 and 2020.

4. Acquisitions and Dispositions

Acquisitions

In the second quarter of 2022, Kelly Services USA, LLC ("KSU"), a wholly owned subsidiary of the Company, acquired Pediatric Therapeutic Services ("PTS"), as detailed below. In the first quarter of 2022, the Company acquired Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, "RocketPower"), as detailed below. In the second quarter of 2021, the Company acquired Softworld, Inc. ("Softworld"), as detailed below. In the fourth quarter of 2020, KSU acquired Greenwood/Asher & Associates, LLC ("Greenwood/Asher"), as detailed below. In the first quarter of 2020, KSU acquired Insight Workforce Solutions LLC and its affiliate, Insight EDU LLC (collectively, "Insight"), as detailed below.

Pediatric Therapeutic Services

On May 2, 2022, KSU acquired 100% of the issued and outstanding sharesmembership interests of Teachers On Call, Inc. (“TOC”), an educational staffing firm in the U.S.PTS for a purchase price of $41.0$82.1 million. PTS is a specialty firm that provides and manages various state and federally mandated in-school therapy services. This acquisition expands Education's K-12 solution offering in the education staffing market and serves as an entry point into the therapeutic services market. Under terms of the purchase agreement, the purchase price was adjusted for cash held by TOCPTS at the closing date less anand estimated working capital adjustmentadjustments resulting in the Company paying cash of $39.0$85.7 million. Total consideration includes $1.1 million at closing.of additional consideration that is payable to the seller related to employee retention credits and is recorded in accounts payable and accrued liabilities in the consolidated balance sheet. In the third quarter of 2022, the Company paid $0.1 million of the employee retention credits and the remainder is expected to be paid in the first quarter of 2023. The total consideration is as follows (in millions of dollars):

Cash consideration paid$85.7 
Additional consideration payable1.1 
Total consideration$86.8 

Due to the limited amount of time that has passed since acquiring PTS, the purchase price allocation for this acquisition is preliminary and could change. As of year-end 2017, there have been no significant purchase price adjustments.

This acquisition will increase our market share in the educational staffing market in the U.S. TOC’s results of operations are included in the Americas Staffing segment.

Pro forma results of operations for this acquisition have not been presented as it is not material to the consolidated statement of earnings. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):
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Cash$1.8
Other current assets3.6
Goodwill18.7
Intangibles18.3
Other noncurrent assets0.5
Current liabilities(3.9)
Purchase price paid at closing$39.0


Cash$0.9 
Trade accounts receivable10.0 
Prepaid expenses and other current assets1.6 
Net property and equipment0.4 
Goodwill36.3 
Intangibles40.3 
Accounts payable and accrued liabilities, current(2.6)
Accrued payroll and related taxes, current(0.1)
Total consideration, including working capital adjustments$86.8 

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the PTS acquisition was approximately $18.3$40.3 million of intangible assets,intangibles, made up of $12.0$29.8 million in customer relationships, $4.8$9.3 million associated with TOC’s trademarkPTS's trade names and $1.5$1.2 million for a candidate database. The customernon-compete agreements. Customer relationships are beingwill be amortized on a straight-line basis over 1015 years with no residual value, trade names will be amortized over 15 years with no residual value, and the database is beingnon-compete agreements will be amortized on a straight-line basis over fourfive years with no residual value. The trademark has an indefinite life. Goodwill generated from thisthe acquisition iswas primarily attributable to expected synergies from combining operations and expanding market potential and iswas assigned to the Americas Staffing reporting unitEducation operating segment (see Goodwill and Intangible Assets footnote). All of the goodwill is expected to be deductible for tax purposes.

PTS's results of operations are included in the Education segment. Our consolidated revenues and earnings from operations for the year ended 2022 included $28.5 million and $3.8 million, respectively, from PTS. Pro forma results of operations for this acquisition have not been presented as the acquisition does not have a material impact to the consolidated statements of earnings.

RocketPower

On March 7, 2022, the Company acquired 100% of the issued and outstanding membership interests of RocketPower for a purchase price of $59.3 million. RocketPower is a leading provider of RPO and other outsourced talent solutions to U.S. high-tech companies. This acquisition expands OCG's RPO solution and delivery offering and enhances the specialty RPO strategy and expertise within the high-tech industry. Under terms of the purchase agreement, the purchase price was adjusted for cash held by RocketPower at the closing date and estimated working capital adjustments resulting in the Company paying cash of $61.8 million. Total consideration includes $1.1 million of additional consideration that is payable to the seller in 2023 related to employee retention credits and contingent consideration with an initial estimated fair value of $0.6 million related to an earnout payment with a maximum potential cash payment of $31.8 million in the event certain financial metrics are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model and it was reassessed throughout 2022 (see Fair Value Measurements footnote). The total consideration is as follows (in millions of dollars):

Cash consideration paid$61.8 
Additional consideration payable1.1 
Contingent consideration0.6 
Total consideration$63.5 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Due to the limited amount of time that has passed since acquiring RocketPower, the purchase price allocation for this acquisition is preliminary and could change. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

Cash$3.5 
Trade accounts receivable6.9 
Prepaid expenses and other current assets1.8 
Net property and equipment0.1 
Goodwill41.0 
Intangibles15.8 
Accounts payable and accrued liabilities, current(2.9)
Accrued payroll and related taxes, current(1.5)
Other long-term liabilities(1.2)
Total consideration, including working capital adjustments$63.5 

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the RocketPower acquisition was $15.8 million of intangible assets, made up of $7.5 million in customer relationships, $6.6 million associated with RocketPower's trade names and $1.7 million for non-compete agreements. Customer relationships will be amortized over three years with no residual value, trade names will be amortized over 10 years with no residual value, and the non-compete agreements will be amortized over six years with no residual value. Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the OCG operating segment. The amount of goodwill expected to be deductible for tax purposes is approximately $18.3$27.5 million. An indemnification assetIn the third and fourth quarters of $2.82022, changes in market conditions triggered interim impairment tests for both long-lived assets and goodwill, resulting in the Company recording a goodwill impairment charge of $41.0 million was recognized(see Goodwill and Intangible Assets footnote).

RocketPower's results of operations are included in the OCG segment in 2022. Our consolidated revenues and earnings from operations for the year ended 2022 included $24.3 million and a loss of $43.5 million, which includes the $41.0 million goodwill impairment charge, respectively, from RocketPower. Pro forma results of operations for this acquisition have not been presented as the acquisition does not have a material impact to the consolidated statements of earnings.

Softworld

On April 5, 2021, the Company acquired 100% of the shares of Softworld for a purchase price of $215.0 million. Softworld is a leading technology staffing and workforce solutions firm that serves clients across several end-markets, including financial services, life sciences, aerospace, defense, insurance, retail and IT consulting. This acquisition is intended to expand our capabilities, scale and solution set in our technology specialty. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Softworld at the closing date relatedand estimated working capital adjustments resulting in the Company paying cash of $220.4 million. Total consideration included $2.6 million of additional consideration that was paid to pre-acquisition tax liabilities. At year-end 2017 the indemnification asset is $0.5 million with the change driven by cash received from the seller in the fourth quarter to pay pre-acquisition tax liabilities.

3. Investment in PersolKelly Asia Pacific
In 2016, the Company and Persol Holdings (formerly Temp Holdings), a leading integrated human resources company in Japan, completed a transaction to form a new joint venture, PersolKelly Asia Pacific (formerly TS Kelly Asia Pacific). The Company transferred its APAC staffing operations in exchange for a 49% ownership interest in PersolKelly Asia Pacific and $36.5 million in cash received at closing. The Company subsequently deconsolidated the contributed APAC staffing operations and recorded a $104.2 million investment in equity affiliate on the consolidated balance sheet, which represented the fair value of the Company’s ownership interest in PersolKelly Asia Pacific as of the date of the transaction.  As part of this transaction, in2022. In the third quarter of 2016, the Company deconsolidated the goodwill related to the contributed entities in our previous APAC PT and OCG segments amounting to $1.9 million.  In the fourth quarter of 2016,2021, the Company received cash for a $4.5 million post-close cash true-upworking capital adjustment from Persol Holdings.of $6.0 million. The total consideration was as follows (in millions of dollars):


The operating results
Cash consideration paid$220.4 
Additional consideration payable2.6 
Net working capital adjustment(6.0)
Total consideration$217.0 

As of first quarter-end 2022, the Company’s interest in PersolKelly Asia Pacific are accountedpurchase price allocation for on a one-quarter lag under the equity method and are included in equity in net earnings (loss) of affiliate in the consolidated statement of earnings, which amounted to $2.7 million in 2017 and $1.1 million in 2016. PersolKelly Asia Pacific will perform its annual impairment test of goodwill in its fourth quarter. Any impairment, if required, would then be recorded by the Company based on the one-quarter lag. We would consider any impairment recorded by PersolKelly Asia Pacific to be a triggering event to perform our own impairment analysis regarding our investment in PersolKelly Asia Pacific.this acquisition was final.
In 2015, equity in net earnings (loss) of affiliate represented the operating results of the Company’s interest in TS Kelly Workforce Solutions, a previous joint venture in which the Company held a 49% interest and which was transferred to PersolKelly Asia Pacific during the first quarter of 2017.
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The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

Cash$1.4 
Trade accounts receivable21.6 
Prepaid expenses and other current assets3.3 
Net property and equipment1.2 
Operating lease right-of-use assets7.6 
Non-current deferred tax5.9 
Goodwill111.3 
Intangibles79.4 
Other assets, noncurrent1.2 
Accounts payable and accrued liabilities, current(2.5)
Operating lease liabilities, current(1.3)
Accrued payroll and related taxes, current(4.6)
Income and other taxes, current(1.2)
Operating lease liabilities, noncurrent(6.3)
Total consideration, including working capital adjustments$217.0 

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the Softworld acquisition was $79.4 million of intangible assets, made up of $54.9 million in customer relationships, $23.1 million associated with Softworld's trade name, and $1.4 million for non-compete agreements. The customer relationships and trade name will be amortized over 10 years with no residual value and the non-compete agreements will be amortized over five years with no residual value. Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue synergies and was assigned to the SET operating segment (see Goodwill footnote). All of the goodwill is expected to be deductible for tax purposes.

During the third quarter of 2021, the Company filed a claim, in excess of policy limits, under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld. The claim asserted damages arising out of alleged breaches by the sellers of Softworld of certain representations and warranties contained in the purchase agreement relating to periods prior to the closing of the acquisition. In the fourth quarter of 2021, the Company reached a settlement with the insurer for $19.0 million and received the payment. The payment was recorded entirely in gain on insurance settlement in the consolidated statements of earnings and included within cash flows from investing activities in the consolidated statements of cash flows.

Softworld's results of operations are included in the SET segment. For the year ended 2021, our consolidated revenues and net earnings included $98.0 million and $4.7 million from Softworld, respectively. The date of the acquisition was the first day of our second quarter, therefore, our first quarter results of 2021 do not include any revenue or earnings from Softworld.

Pro Forma Information

The following unaudited pro forma information presents a summary of the operating results as if the Softworld acquisition had been completed as of December 30, 2019 (in millions of dollars):

December Year to Date
20212020
Pro forma revenues$4,940.9 $4,626.5 
Pro forma net earnings (loss)$157.7 $(70.8)

The pro forma results for 2021 and 2020 reflects amortization of the intangible assets of $2.0 million per quarter, a non-recurring adjustment to reclassify $1.3 million of transaction expenses from 2021 to 2020, deferred compensation from 2020 and applicable taxes. The unaudited pro forma information presented has been prepared for comparative purposes only and is
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not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed date, nor is it necessarily an indication of future operating results.

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 includes contingent consideration with an initial 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 it is revalued quarterly, resulting in a net increase of $2.5 million to the liability in 2021, and an increase of $1.0 million to the liability in 2022 (see Fair Value Measurements footnote). During the first quarter of 2022, the Company paid the first year earnout payment of $2.3 million. The earnout liability as of year-end 2022 is $3.3 million, which is recorded in accounts payable and accrued liabilities in the consolidated balance sheet, and is expected to be paid in the first quarter of 2023 pursuant to the terms of the purchase agreement. As of third quarter-end 2021, the purchase price allocation for this acquisition was final.

This acquisition is intended to expand our revenue opportunities in the education industry in the U.S. Greenwood/Asher's results of operations are included in the Education segment. Pro forma results of operations for this acquisition have not been presented as they are not material to the consolidated statements of earnings.

Insight

On January 14, 2020, KSU 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 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 were met per the terms of the agreement. The initial fair value of the earnout was established using a Monte Carlo simulation and the liability was 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 a further increase of $0.1 million in 2021. In the third quarter of 2016,2021, the Company paid the final earnout amount of $1.8 million in cash. In our consolidated statements of cash flows, $1.6 million of the payment is reflected as a financing activity representing the initial fair value of the earnout, with the remainder flowing through operating activities. There was no remaining liability for the earnout as of year-end 2022 or 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 was final.

This acquisition is intended to increase our market share in the education staffing market in the U.S. Insight's results of operations are included in the Education segment. Pro forma and actual results of operations for this acquisition have not been presented as it is not material to the consolidated statements of earnings.

Dispositions

Russia operations

On July 20, 2022, the Company completed the sale of its Russia operations ("disposal group"), which was included in the Company's International operating segment. The Company received cash proceeds of $7.4 million, which is less than the cash disposed of in the sale, resulting in investing cash outflows of $6.0 million in the consolidated statements of cash flows. The disposal group was previously reported as held for sale as of our second quarter-end 2022 with an $18.5 million impairment charge associated with the transaction. The total loss on the sale is $18.7 million, resulting from an additional $0.2 million loss on the transaction in the third quarter of 2022, which is recorded in loss on disposal in the consolidated statements of earnings. The loss on disposal includes the liquidation of the cumulative translation adjustment of $1.4 million.

The disposal group does not meet the requirements to be classified as discontinued operations as the sale does not have a material effect on the Company's operations and does not represent a strategic shift in the Company's strategy. Our consolidated revenue for the year ended 2022, 2021 and 2020 includes $63.4 million, $132.2 million, and $118.5 million, respectively, from the Russia operations and our consolidated earnings before taxes for the year ended 2022, 2021 and 2020 includes $1.4 million, $3.2 million and $2.4 million, respectively, from the Russia operations.

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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The major classes of divested assets and liabilities were as follows (in millions of dollars):

Assets divested
Cash and equivalents$13.4 
Trade accounts receivable, net22.8 
Prepaid expenses and other current assets0.7 
Property and equipment, net0.7 
Deferred taxes0.4 
Other assets0.3 
Assets divested38.3 
Liabilities divested
Accounts payable and accrued liabilities(0.6)
Accrued payroll and related taxes(7.3)
Income and other taxes(5.7)
Liabilities divested(13.6)
Disposal group, net$24.7 

Brazil operations

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 a pretax gainan indemnification liability of $87.2$2.5 million, on the investment in PersolKelly Asia Pacific in the consolidated statement of earnings, which represented the fair value of the liability at the time of disposition and completely offset the gain on the sale. The indemnification liability is revalued on a quarterly basis (see Fair Value Measurements footnote).

5. Investment in Persol Holdings

Prior to February 2022, the Company had 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 retainedjoint venture partner in PersolKelly Pte. Ltd. (the "JV"). In February 2022, the Company's board approved a series of transactions that ended the cross-shareholding agreement with Persol Holdings.

On February 14, 2022, the Company repurchased 1,576,169 Class A and 1,475 Class B common shares held by Persol Holdings for $27.2 million. The purchase price was based on the average closing price of the last five business days prior to the transaction. The shares were subsequently retired and returned to an authorized, unissued status. In accordance with the Company's policy, the amount paid to repurchase the shares in excess of par value of $25.6 million was recorded to earnings invested in the business in the consolidated balance sheet at the time of the share retirement.

On February 15, 2022, Kelly Services Japan, Inc. sold the investment in the common stock of Persol Holdings in an open-market transaction for proceeds of $196.9 million, net of transaction fees. As our investment was a noncontrolling interest in Persol Holdings, the investment was recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange through the date of the transaction (see Fair Value Measurements footnote). The $67.2 million loss in the first quarter of 2022 recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings included $52.4 million for losses related to changes in fair value up to the date of the transaction and $14.8 million for the discount from the market price on the date of the sale and transaction costs. A gain on the investment of $121.8 million and a loss on the investment of $16.6 million for the years ended 2021 and 2020, respectively, was recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

68

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Subsequent to the transaction discussed above, the Company commenced the dissolution process of its Kelly Services Japan, Inc. subsidiary, which was considered substantially liquidated as of first quarter-end 2022. As a result, the Company recognized a $20.4 million cumulative translation adjustment loss in the first quarter of 2022, which is recorded in loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings. The Company also recognized a $5.5 million foreign exchange gain related to U.S.-denominated cash equivalents held by Kelly Services Japan, Inc. following the sale of the Persol Holdings shares and prior to a dividend payment to the Company in the first quarter of 2022. The foreign exchange gain is recorded in other income (expense), net in the consolidated statements of earnings. The dissolution of the Kelly Services Japan, Inc. subsidiary was completed in the fourth quarter of 2022.

6. Investment in PersolKelly Pte. Ltd.

Prior to February 2022, the Company had 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. On February 14, 2022, the Company entered into an agreement to sell 95% of the Company's shares in the JV to Persol Asia Pacific in addition toPte. Ltd. On March 1, 2022, the Company received cash received less theproceeds of $119.5 million. The carrying value of net assets transferredthe shares sold was $117.6 million. In addition, the Company had $1.9 million of accumulated other comprehensive income representing the Company's share of the JV's other comprehensive income over time related to the joint venture. Income taxesshares sold that was realized upon the sale, offsetting the $1.9 million gain that resulted from the proceeds in excess of$23.5 million on this gain resulted primarily from recording deferred income taxes on outside basis differences. the carrying value.

The fair valueoperating results of the Company’s contributed operations was determined using both an income-basedinterest in the JV were accounted for on a one-quarter lag under the equity method and market-based approach. The income approach utilized a discounted cash flow analysis which included significant assumptions aboutwere reported in equity in net earnings (loss) of affiliate in the timingconsolidated statements of future cash flows, growth rates and discount rates commensurate withearnings through the underlying risksdate of the investment. The market approach entailed deriving market multiples from publicly traded companies with similar financial and operating characteristics to PersolKelly Asia Pacific and corroboratedsale. Such amounts were earnings of $0.8 million in 2022 representing the results through the date of the discounted cash flow method.sale, $5.4 million in 2021 and $0.8 million in 2020.

After the sale, the Company has a 2.5% ownership interest in the JV and discontinued its use of equity method accounting. The remaining investment is accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote). The equity investment, included in other assets on the Company's consolidated balance sheet, totaled $6.4 million as of year-end 2022 and the investment in equity affiliate on the Company’s consolidated balance sheet totaled $117.4$123.4 million as of year-end 20172021.
The Company made loans to the JV in prior years, proportionate to its 49% ownership, to fund working capital requirements as a result of their sustained revenue growth. In the fourth quarter of 2020, the JV repaid $5.6 million of the outstanding loan balance and $114.8in the second quarter of 2021, the JV repaid the remaining $5.8 million asof the loan balance. As of year-end 2016.2022, there is no outstanding loan balance or accrued interest receivable relating to the loan. The net amount due to PersolKelly Asia Pacific,the JV, a related party, was $2.3 millionnot material as of year-end 20172022 or 2021. Prior to receiving full repayment of the loans in 2021, the expected credit losses were estimated over the contractual term of the loans. The required allowance was based on current and $1.1 millionprojected financial information from the JV, market-specific information and other relevant data available to the Company, as ofapplicable. The allowance was not material at year-end 2016.2021. The amount included in trade accounts payable for staffing services provided by PersolKelly Asia Pacific asJV is a supplier to CWOcertain MSP programs was $2.5 million as of year-end 2017in the region and $3.1 million as of year-end 2016. In 2017, TS Kelly Workforce Solutions made a loan repayment of $0.6 millionthe amounts for services provided to the Company, which are included in accounts payable and accrued liabilities in 2015, we made cash contributionsthe consolidated balance sheet, are not material.
On April 1, 2020, 100% of the shares of Kelly Services Australia Pty Ltd and Kelly Services (New Zealand) Limited, both subsidiaries of the JV, were sold to TS Kelly Workforce Solutions totaling $0.5an affiliate of Persol Holdings. The JV received proceeds of $17.5 million upon the sale and the Company received a direct royalty payment of $0.7 million.

4.
7. Fair Value Measurements 

Trade accounts receivable, short-term borrowings, accounts payable, accrued liabilities and accrued payroll and related taxes and short-term borrowings 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 the assets carriedand liabilities measured at fair value on a recurring basis as of year-end 20172022 and 2016 on2021 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. 

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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Fair Value Measurements on a Recurring Basis
As of Year-End 2017
Fair Value Measurements on a Recurring Basis As of Year-End 2022
Description Total Level 1 Level 2 Level 3DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars) (In millions of dollars)
Money market funds $4.3
 $4.3
 $
 $
Money market funds$108.3 $108.3 $— $— 
Available-for-sale investment 228.1
 228.1
 
 
Investment in Persol HoldingsInvestment in Persol Holdings— — — — 
Total assets at fair valueTotal assets at fair value$108.3 $108.3 $— $— 
        
Total assets at fair value $232.4
 $232.4
 $
 $
Brazil indemnificationBrazil indemnification$(3.4)$— $— $(3.4)
Greenwood/Asher earnoutGreenwood/Asher earnout(3.3)— — (3.3)
RocketPower earnoutRocketPower earnout— — — — 
Total liabilities at fair valueTotal liabilities at fair value$(6.7)$— $— $(6.7)

 Fair Value Measurements on a Recurring Basis
As of Year-End 2016
Fair Value Measurements on a Recurring Basis As of Year-End 2021
Description Total Level 1 Level 2 Level 3DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars) (In millions of dollars)
Money market funds $4.0
 $4.0
 $
 $
Money market funds$96.3 $96.3 $— $— 
Available-for-sale investment 141.2
 141.2
 
 
Investment in Persol HoldingsInvestment in Persol Holdings264.3 264.3 — — 
Total assets at fair valueTotal assets at fair value$360.6 $360.6 $— $— 
        
Total assets at fair value $145.2
 $145.2
 $
 $
Brazil indemnificationBrazil indemnification$(2.4)$— $— $(2.4)
Greenwood/Asher earnoutGreenwood/Asher earnout(4.6)— — (4.6)
Total liabilities at fair valueTotal liabilities at fair value$(7.0)$— $— $(7.0)
 
Money market funds as of year-end 2017 and 2016 represent investments in money market accounts, allfunds that hold government securities, of which $8.6 million as of year-end 2022 and $6.5 million as of year-end 2021, are restricted as to use and are included in other assets onin the consolidated balance sheet. The money market funds that are restricted as to use account for the majority of our restricted cash balances 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 2022 and year-end 2021 are included in cash and equivalents in the consolidated balance sheet. The valuations of money market funds were based on quoted market prices of those accounts as of the respective period end.
Available-for-sale investment represents
On February 15, 2022, Kelly Services Japan, Inc. sold the Company’s investment in the common stock of Persol Holdings the Company’s joint venture partner in PersolKelly Asia Pacific, and is included in other assets on the consolidated balance sheet.an open-market transaction. The valuation isof the investment was based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of year-end 2021, and the related changes in fair value were recorded in the consolidated statements of earnings (See Investments in Persol Holdings footnote). The cost of this yen-denominated investment, which fluctuated based on foreign exchange rates, was $18.0 million as of year-end 2021.

As of year-end 2022, the Company had an indemnification liability totaling $3.4 million with $0.3 million in accounts payable and accrued liabilities and $3.1 million in other long-term liabilities, and $2.4 million at year-end 2021 in other long-term liabilities on the consolidated balance sheet related to the sale of the Brazil operations. As part of the sale, the Company agreed to indemnify the buyer for losses and costs incurred in connection with certain events or occurrences initiated within a six-year period end.after closing. The unrealized gain,aggregate losses for which the Company will provide indemnification will not exceed $8.8 million. 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 2022, the Company reassessed the value of the indemnification liability and determined it was necessary to record an increase to the liability of $0.8 million. Additionally, in 2022, the Company recognized an increase of $0.2 million to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of tax,earnings.

The Company recorded an earnout liability relating to the 2020 acquisition of $56.2Greenwood/Asher, totaling $3.3 million forat year-end 2022 in accounts payable and accrued liabilities and $4.6 million at year-end 2021 with $2.3 million in accounts payable and accrued liabilities and $2.3 million in other long-term liabilities in the year ended 2017 and unrealized loss, netconsolidated balance sheet. The initial valuation of tax, of $1.1 million for the year ended 2016 was
70

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

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 2022, the Company paid the one year portion of the earnout totaling $2.3 million. In the consolidated statements of cash flows, $0.7 million is reflected as a financing activity representing the initial fair value of the investment, with the remainder flowing through operating activities. During 2022, the Company reassessed the value of the earnout liability and determined that it was necessary to record an increase to the liability of $1.0 million.

The company recorded an initial earnout liability relating to the 2022 acquisition of RocketPower, totaling $0.6 million, with $0.5 million in accounts payable and accrued liabilities and $0.1 million 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 represented the fair value and was considered a level 3 liability. In the third quarter of 2022, we reassessed the value and determined that the fair value was zero. The maximum total cash payments which may be due related to the earnout liability is $31.8 million.

The Company recorded an earnout liability relating to the 2020 acquisition of Insight, totaling $1.7 million as of year-end 2020 in accounts payable and accrued liabilities in the consolidated balance sheet (see Acquisitions and Dispositions footnote). The valuation of the earnout liability was initially established using a Monte Carlo simulation and represented the fair value and was considered a level 3 liability. During 2021, the Company recognized $0.1 million of expenses related to the earnout liability within SG&A expenses in the consolidated statements of earnings. During the third quarter of 2021, the Company paid the earnout totaling $1.8 million.

Equity Investments Without Readily Determinable Fair Value

On March 1, 2022, the Company sold the majority of its investment in the JV (see Investment in PersolKelly Pte. Ltd. footnote), with the remaining 2.5% interest now being 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 sale of the shares of the JV represented an observable transaction requiring the Company to calculate the current fair value based on the purchase price of the shares, in which the resulting adjustment was not material. The investment totaled $6.4 million as of year-end 2022, representing total cost plus observable price changes to date.

Prior to April 2021, the Company had a minority investment in Business Talent Group, LLC, which was included in other assets in the consolidated balance sheet. This investment was measured using the measurement alternative for equity investments without a readily determinable fair value as described above. In the second quarter of 2021, BTG entered into a merger agreement which resulted in all of the Company's shares of BTG being automatically canceled upon approval of the merger and resulted in the receipt of $5.0 million in cash, which was equal to the carrying value and purchase price of the BTG investment.

Prior to March 2021, the Company had a minority investment in Kenzie Academy Inc., which was 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, the investment had a carrying value of $1.4 million, representing total cost plus observable price changes to date. In the first quarter of 2021, the asset was written down as a result of the sale and the loss of $1.4 million was recorded in other comprehensive income as well as(expense), net in accumulated other comprehensive income, a componentthe consolidated statements of stockholders’ equity. The cost of this yen-denominated investment, which fluctuates based on foreign exchange rates, was $18.4 million at year-end 2017 and $17.7 million at year-end 2016.earnings.

Assets Measured at Fair Value on a Nonrecurring Basis
We completed our annual impairment test of goodwill for all reporting units in
In the fourth quarter for the fiscal years ended 2017 and 2016 and determined thatof 2022, we performed our annual goodwill was not impaired. 
In 2017 and 2016, we elected to completeimpairment testing, which included a step one quantitative test for allthe Softworld and PTS reporting units. As a result of our reporting units with goodwill. For both years,the quantitative assessments, we determined that the estimated fair value of each reporting unit tested exceeded its related carrying value. As a result of these quantitative assessments, we determined it was more likely than not that the fair value of each of theSoftworld and PTS reporting units was more than its carrying value.
5. Restructuring

In Additionally, we performed a step zero qualitative analysis for the first quarterEducation reporting unit to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary. As a result of 2017,the quantitative and qualitative assessments, the Company took restructuring actions in Global Talent Solutions and Americas Staffingdetermined goodwill related to optimize service delivery models and deliver cost savings in 2017.

Restructuring costs incurred in 2017 totaled $2.4 million. Global Talent Solutions incurred $2.0 million and Americas Staffing incurred $0.4 million. All costs, which are primarily severance costs, were recorded entirely in SG&A expenses in the consolidated statement of earnings. Restructuring costs incurred in 2016 totaled $3.4 million and were recorded entirely in SG&A expenses in the consolidated statement of earnings. No restructuring costs were incurred in 2015.

A summary of our global restructuring balance sheet accrual, primarily included in accrued payroll and related taxes, is detailed below (in millions of dollars).

Balance as of year-end 2015$0.5
Additions charged to Americas Staffing1.8
Additions charged to International Staffing1.2
Additions charged to Global Talent Solutions0.4
Reductions for cash payments related to all restructuring activities(3.4)
Balance as of year-end 20160.5
Additions charged to charged to Global Talent Solutions2.0
Additions charged to Americas Staffing0.4
Reductions for cash payments related to all restructuring activities(2.7)
Balance as of year-end 2017$0.2

The remaining balance of $0.2 millionthese reporting units was not impaired as of year-end 2017 primarily represents severance costs2022.

During 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower's services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring interim impairment tests for both long-lived assets and goodwill as of third quarter of 2022. Job eliminations in the high-tech industry vertical continued during the fourth quarter of 2022, indicating a broad, sustained reduction in hiring was likely and is now expected to last through much of 2023, directly impacting RocketPower and the majority is expected to be paid during the first quarter of 2018. No material adjustments are expected to be recorded.demand for RocketPower's

71

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

services in this vertical. These changes in market conditions caused another triggering event requiring interim impairment tests for both long-lived assets and goodwill as of year-end 2022.
6. Goodwill
As discussedWe performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable as of third quarter-end and year-end 2022. We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value as of third quarter-end and year-end 2022. Based on the results of our interim goodwill impairment tests, we recorded a goodwill impairment charge of $30.7 million in the Segment Disclosures footnote, duringthird quarter of 2022 and we recorded an additional goodwill impairment charge of $10.3 million in the fourth quarter of 2022 to write off the remaining balance of RocketPower’s goodwill as of year-end, for a total goodwill impairment charge of $41.0 million as of year-end 2022 (see Goodwill and Intangible Assets footnote).

8. Restructuring

2022 Actions

In the first quarter of 20172022, the Company’s chief operating decision maker (“CODM”) changedCompany took restructuring actions designed to increase efficiency. Restructuring costs incurred in 2022 totaled $1.7 million and were recorded entirely in SG&A expenses in the way he regularly reviews information for purposesconsolidated statements of allocating resources and assessing performance, which resulted inearnings, as detailed below (in millions of dollars):
Severance CostsLease Termination CostsTotal
Professional & Industrial$0.1 $0.2 $0.3 
Education0.4 — 0.4 
Outsourcing & Consulting0.2 — 0.2 
Corporate0.8 — 0.8 
Total$1.5 $0.2 $1.7 

2021 Actions

In the fourth quarter of 2021, the Company initiated a change inseries of cost management actions designed to increase operational efficiencies within enterprise functions that provide centralized support to our operating segmentsunits. The actions are designed to align expenses with current expectations for top-line growth.

Restructuring costs incurred in 2021 totaled $4.0 million and reporting units. We allocated goodwill to our new reporting units using a relative fair value approach and completed an impairment test at that time and determined that no impairment existed. In addition, as discussedare recorded entirely in SG&A expenses in the Fair Value Measurements footnote, we completed our annual assessmentconsolidated statements of any potential goodwill impairment for all reporting unitsearnings, as detailed below (in millions of dollars):

Severance Costs
International$1.2 
Corporate2.8 
Total$4.0 

2020 Actions

In the first quarter of 2020, the Company took restructuring actions to align costs with goodwillexpected revenues, position the organization to adopt a new operating model later in 2020 and determined that no impairment existed.to align the U.S. field office facilities footprint with a more technology-enabled service delivery methodology.

In the fourth quarter of 2020, the Company took several restructuring actions with a goal to provide sustainable cost reductions as a result of the continuing COVID-19 demand disruption. The changes in the carrying amount of goodwill for the fiscal year 2017 arerestructuring actions included involuntary terminations, a Voluntary Separation Plan ("VSP") and a Voluntary Retirement Plan ("VRP"). Employees were included in the table below. See Acquisition footnote for a descriptionVSP based on the functions that were being reorganized, and not by age or years of service. For the additions to goodwillVRP, eligible employees were selected based on their age and years of service.

Restructuring costs incurred in 2017.2020 totaled $12.8 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars):
72
 As of Year-End 2016     As of Year-End 2017
 Goodwill,
Gross
 Accumulated Impairment Losses Goodwill,
Net
 Allocation of Goodwill Additions to Goodwill Goodwill
 (In millions of dollars)
Americas Commercial$40.0
 $(16.4) $23.6
 $(23.6) $
 $
Americas PT37.9
 
 37.9
 (37.9) 
 
EMEA Commercial50.4
 (50.4) 
 
 
 
EMEA PT22.0
 (22.0) 
 
 
 
APAC Commercial12.1
 (12.1) 
 
 
 
APAC PT
 
 
 
 
 
OCG26.9
 
 26.9
 (26.9) 
 
            
Americas Staffing
 
 
 25.9
 18.7
 44.6
Global Talent Solutions
 
 
 62.5
 
 62.5
International Staffing
 
 
 
 
 
            
 $189.3
 $(100.9) $88.4
 $
 $18.7
 $107.1



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


Lease Termination CostsSeverance CostsTotal
Professional & Industrial$3.5 $2.5 $6.0 
Science, Engineering & Technology0.5 0.1 0.6 
Education0.1 0.9 1.0 
Outsourcing & Consulting— 0.3 0.3 
International0.7 0.7 1.4 
Corporate— 3.5 3.5 
Total$4.8 $8.0 $12.8 

Accrual Summary

A summary of our 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 
Additions charged to International1.2 
Additions charged to Corporate2.8 
Reductions for cash payments related to all restructuring activities(4.6)
Balance as of year-end 20212.9 
Additions charged to Professional & Industrial0.3 
Additions charged to Outsourcing & Consulting0.2 
Additions charged to Education0.4 
Additions charged to Corporate0.8 
Reductions for cash payments related to all restructuring activities(4.0)
Accrual adjustments(0.3)
Balance as of year-end 2022$0.3 

The changes in the net carrying amountremaining balance of goodwill for the fiscal year 2016 are shown in the table below. Upon the formation of the PersolKelly Asia Pacific joint venture during the third quarter of 2016 (see Investment in PersolKelly Asia Pacific footnote), the Company deconsolidated the goodwill related to the contributed entities in our previous APAC PT and OCG segments amounting to $1.9 million.
 As of Year-End 2015   As of Year-End 2016
 
Goodwill,
Gross
 
Accumulated Impairment
Losses
 
Adjustments
to
Goodwill
 
Goodwill,
Gross
 
Accumulated
Impairment
Losses
 
Goodwill,
Net
 (In millions of dollars)
Americas           
Americas Commercial$40.0
 $(16.4) $
 $40.0
 $(16.4) $23.6
Americas PT37.9
 
 
 37.9
 
 37.9
Total Americas77.9
 (16.4) 
 77.9
 (16.4) 61.5
            
EMEA           
EMEA Commercial50.4
 (50.4) 
 50.4
 (50.4) 
EMEA PT22.0
 (22.0) 
 22.0
 (22.0) 
Total EMEA72.4
 (72.4) 
 72.4
 (72.4) 
            
APAC           
APAC Commercial12.1
 (12.1) 
 12.1
 (12.1) 
APAC PT1.4
 
 (1.4) 
 
 
Total APAC13.5
 (12.1) (1.4) 12.1
 (12.1) 
            
OCG27.4
 
 (0.5) 26.9
 
 26.9
Consolidated Total$191.2
 $(100.9) $(1.9) $189.3
 $(100.9) $88.4
7. Other Assets
Included in other assets are the following:
 2017 2016
 (In millions of dollars)
Life insurance cash surrender value (see Retirement Benefits footnote)$188.7
 $165.0
Available-for-sale investment (see Fair Value Measurements footnote)228.1
 141.2
Wage subsidy receivable28.1
 22.3
Workers' compensation receivable10.5
 6.8
Intangibles, net of accumulated amortization of $18.6 million in 2017 and $16.7 million in 201618.2
 0.6
Other26.3
 13.5
    
Other assets$499.9
 $349.4
Wage subsidy receivable is related to a law to enhance the competitiveness of businesses in France. Workers’ compensation receivable represents receivables from the insurance company for U.S. workers’ compensation claims in excess of the applicable loss limits. In 2017, $18.3$0.3 million of intangibles were acquired through the acquisition of TOC of which $13.5 million are definite-lived and amortized on a straight-line basis (see Acquisition footnote). Intangible amortization expense, which is included in SG&A expenses, was $0.9 million, $0.6 million and $0.9 million in 2017, 2016 and 2015, respectively. The amortization expense for the intangibles acquired in 2017 will be $1.6 million in 2018, 2019 and 2020, $1.5 million in 2021 and $1.2 million in 2022. Asas of year-end 2017, other includes a long-term customer receivable for $12.4 million.2022 primarily represents severance costs and the majority is expected to be paid by the first quarter-end 2023. No material adjustments are expected to be recorded.

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9. Goodwilland Intangible Assets
8.
The changes in the carrying amount of goodwill for the fiscal years 2022 and 2021 are included in the tables below (in millions of dollars):
As of Year-End 2021Additions to GoodwillImpairment AdjustmentsAs of Year-End 2022
Science, Engineering & Technology$111.3 $— $— $111.3 
Education3.5 36.3 — 39.8 
Outsourcing & Consulting— 41.0 (41.0)— 
Total$114.8 $77.3 $(41.0)$151.1 

As of Year-End 2020Additions to GoodwillImpairment AdjustmentsAs of Year-End 2021
Science, Engineering & Technology$— $111.3 $— $111.3 
Education3.5 — — 3.5 
Total$3.5 $111.3 $— $114.8 

The goodwill resulting from the acquisition of RocketPower during the first quarter of 2022 was allocated to the OCG reportable segment and RocketPower was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of PTS during the second quarter of 2022 was allocated to the Education reportable segment and PTS was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of Softworld during the second quarter of 2021 was allocated to the SET reportable segment and Softworld was deemed to be a separate reporting unit. (See Additions to Goodwill column in the table above and the Acquisitions and Dispositions footnote for more details regarding each acquisition.)

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. We also perform a qualitative review on a quarterly basis of our long-lived assets, comprised of net property and equipment and definite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

During the third quarter of 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for both long-lived assets and goodwill. RocketPower has definite-lived intangible assets, consisting of trades names, customer relationships and non-compete agreements, which are amortized over their estimated useful lives. We performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable. We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value. Based on the result of our interim goodwill impairment test as of third quarter-end 2022, we recorded a goodwill impairment charge of $30.7 million to write off a portion of RocketPower’s goodwill, with $10.3 million goodwill remaining in the OCG reportable segment as of third quarter-end 2022.

In the fourth quarter of 2022, we performed our annual goodwill impairment testing, which included a step one quantitative test for the Softworld and PTS reporting units. As a result of the quantitative assessment, we determined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value. Additionally, we performed a step zero qualitative analysis for the Education and RocketPower reporting units to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary at that time. As a result of the quantitative and qualitative assessments, the Company determined goodwill related to these reporting units was not impaired at that time.

Subsequent to our annual goodwill impairment testing, job eliminations in the high-tech industry vertical continued, indicating a broad, sustained reduction in hiring was likely and is now expected to last through much of 2023, directly impacting RocketPower and the demand for RocketPower's services in this vertical. These changes in market conditions caused a triggering event requiring another interim impairment test for both long-lived assets and goodwill as of year-end 2022. We performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable. We performed an interim step one quantitative test for
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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value. Based on the result of our interim goodwill impairment test as of year-end 2022, we recorded an additional goodwill impairment charge of $10.3 million in the fourth quarter of 2022 to write off the remaining balance of RocketPower’s goodwill, for a total goodwill impairment charge of $41.0 million as of year-end 2022. (See Impairment Adjustments column in the table above.)

If current expectations of future revenue and profit margins are not met, or if market factors outside of our control change significantly, including discount rate, it could result in an impairment charge, which would decrease operating income and result in lower asset values on our consolidated balance sheet.

Intangible assets, excluding fully-amortized intangibles, are included within other assets on our consolidated balance sheet and consist of the following (in millions of dollars):
20222021
Useful livesGross Carrying amountLess: Accumulated AmortizationNetGross Carrying amountLess: Accumulated AmortizationNet
Customer relationships10 years$141.1 $32.9 $108.2 $106.9 $22.2 $84.7 
Trade names10-15 years51.7 8.3 43.4 35.8 4.2 31.6 
Non-compete agreements5 years6.0 2.2 3.8 3.1 1.2 1.9 
Trademarks10 years4.8 1.5 3.3 4.8 1.0 3.8 
Total$203.6 $44.9 $158.7 $150.6 $28.6 $122.0 

The year-over-year change in total intangible assets was due to the intangibles purchased in connection with the RocketPower and PTS acquisitions (see Acquisitions and Dispositions footnote). Intangible amortization expense, which is included in SG&A expense in the consolidated statements of earnings, was $19.4 million, $13.0 million and $6.8 million in 2022, 2021 and 2020, respectively. The amortization expense will be $20.8 million in 2023, $20.5 million in 2024, $18.5 million in 2025, $17.8 million in 2026 and $17.2 million in 2027.

10. Other Assets

Included in other assets are the following (in millions of dollars):
20222021
Life insurance cash surrender value (see Retirement Benefits footnote)$194.3 $232.9 
Intangibles, net of accumulated amortization of $55.5 million in 2022 and $39.1 million in 2021(1)
158.7 122.0 
Long-term hosted software, net of accumulated amortization of $7.3 million in 2022 and $3.2 million in 2021(2)
13.7 10.7 
Noncurrent restricted cash8.6 6.6 
Workers' compensation and other claims receivable(3)
12.1 5.5 
Other(4)
15.8 11.4 
Other assets$403.2 $389.1 
(1) See Goodwill and Intangible Assets footnote for a detailed listing of intangible assets and related accumulated amortization.

(2) Long-term hosted software represents cloud computing arrangements that are comprised of internal-use software platforms that are accounted for as service contracts (see Summary of Significant Accounting Policies footnote).

(3) Workers’ compensation and other claims receivable represents receivables from the insurance company for U.S. workers’ compensation and automobile liability claims in excess of the applicable loss limits.

(4) Other in 2022 includes $6.4 million related to our equity investment in the JV (see Investment in PersolKelly Pte. Ltd footnote).

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11. Leases

The Company has operating and financing leases for headquarters and field offices and various equipment. Our leases generally have remaining lease terms of one year to 10 years. We determine if an arrangement is a lease at inception.

The components of lease expense are as follows (in millions of dollars):

December Year to Date
DescriptionStatements of Earnings Location202220212020
Operating:
Operating lease costSelling, general and administrative expenses$22.8 $25.8 $27.0 
Short-term lease costSelling, general and administrative expenses2.4 2.6 3.6 
Variable lease costSelling, general and administrative expenses5.2 5.7 6.8 
Financing:
Amortization of ROU assetsSelling, general and administrative expenses0.6 1.4 1.3 
Interest on lease liabilitiesOther income (expense), net0.1 0.2 0.4 
Total lease cost$31.1 $35.7 $39.1 

Supplemental consolidated balance sheet information related to leases is as follows (in millions of dollars):

DescriptionBalance Sheet LocationAs of Year-End 2022As of Year-End 2021
ROU Assets:
OperatingOperating lease right-of-use assets$66.8 $75.8 
FinancingProperty and equipment5.0 6.3 
Total lease assets$71.8 $82.1 
ROU Liabilities:
Operating - currentOperating lease liabilities, current$14.7 $17.5 
Financing - currentAccounts payable and accrued liabilities1.2 1.9 
Operating - noncurrentOperating lease liabilities, noncurrent55.0 61.4 
Financing - noncurrentOther long-term liabilities— 1.2 
Total lease liabilities$70.9 $82.0 

Weighted average remaining lease terms and discount rates are as follows:

December Year to Date
20222021
Weighted average remaining lease term (years):
Operating leases7.98.1
Financing leases1.32.1
Weighted average discount rate:
Operating leases5.1 %4.9 %
Financing leases5.4 %5.3 %

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other information related to leases is as follows (in millions of dollars):

December Year to Date
202220212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$22.4 $26.1 $25.4 
Financing cash flows from financing leases1.4 1.5 2.0 
ROU assets obtained in exchange for new lease obligations:
Operating leases$10.7 $14.9 $43.3 
Financing leases— — 3.1 

Maturities of lease liabilities as of year-end 2022 are as follows (in millions of dollars):

Operating LeasesFinancing Leases
2023$17.8 $1.3 
202413.2 — 
202510.1 — 
20267.7 — 
20275.5 — 
Thereafter30.3 — 
Total future lease payments84.6 1.3 
Less: Imputed interest15.0 0.1 
Total$69.6 $1.2 

During the first quarter of 2020, the Company sold three of four headquarters properties and entered into a leaseback agreement, which is accounted for as an operating lease (see Sale of Assets footnote). As of first quarter-end 2020, we recognized $37.6 million of ROU assets within operating lease right-of-use assets, $1.2 million of current lease liabilities within operating lease liabilities, current and $36.1 million of noncurrent lease liabilities within operating lease liabilities, noncurrent in the consolidated balance sheet, with a discount rate of 4.8% over a 15-year lease term related to this lease.

12. Debt

Short-Term Debt
The
On November 4, 2022, the Company has a $150.0entered into an agreement with its lenders to amend and restate its existing $200.0 million, five-year revolving credit facility (the “Facility”"Facility"), with a termination date of December 6, 2021.5, 2024. The amendment increased the limit on restricted payments from $50.0 million to $115.0 million and changed certain of the terms and conditions. The Facility allows for borrowings in various currencies and is available to be used to fund working capital, acquisitions and general corporate needs. The Facility is secured by certain assets of the Company, excluding U.S. trade accounts receivable.


At year-end 2017, borrowings under the Facility were $9.5 million with an interest rate of 4.70%,2022 and a remaining borrowing capacity of $140.5 million. At year-end 2016,2021, there were no borrowings under the Facility and thea remaining borrowing capacity was $150.0of $200.0 million. To maintain availability of the funds, we pay a facility fee on the full amount of the Facility, regardless of usage. The facility fee varies based on the Company’s leverage ratio as defined in the agreement. The Facility, which contains a cross-default clause that could result in termination if defaults occur under our other loan agreements, had a facility fee of 17.515.0 basis points at year-end 20172022 and 2016.2021. The Facility’s financial covenants and restrictions are described below, all of which were met at year-end 2017:2022:

We must maintain a certain minimum ratio of earnings before interest, taxes, depreciation, amortization (“EBITDA”) and certain cash and non-cash charges that are non-recurring in nature (“EBITDA”) to interest expense (“Interest Coverage Ratio”) as of the end of any fiscal quarter.

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We must maintain a certain maximum ratio of total indebtedness to the sum of net worth and total indebtedness at all times.

Dividends, stock buybacks and similar transactions are limited to certain maximum amounts.

We must adhere to other operating restrictions relating to the conduct of business, such as certain limitations on asset sales and the type and scope of investments. 
The
On September 21, 2022, the Company has a Receivables Purchase Agreement withand Kelly Receivables Funding, LLC, a wholly owned bankruptcy remote special purpose subsidiary of the Company (the “Receivables Entity”), amended the Receivables Purchase Agreement related to its $200.0$150.0 million, three-year, securitization facility (the “Securitization Facility”). The amendment changed certain of the terms and conditions, including extending the DSO terms from 65 days to 70 days. The Receivables Purchase Agreement will terminate December 5, 2019,2024, unless terminated earlier pursuant to its terms.


Under the Securitization Facility, the Company will sell certain trade receivables and related rights (“Receivables”), on a revolving basis, to the Receivables Entity. The Receivables Entity may from time to time sell an undivided variable percentage ownership interest in the Receivables. The Securitization Facility, which contains a cross-default clause that could result in termination if defaults occur under our other loan agreements, also allows for the issuance of standby letters of credit (“SBLC”) and contains certain restrictions based on the performance of the Receivables. 

As of year-end 2017,2022, the Securitization Facility had no short-term borrowings, SBLCs of $55.0$49.5 million related to workers’ compensation at a rate of 0.90% and a remaining capacity of $145.0$100.5 million. As of year-end 2016,2021, the Securitization Facility had no short-term borrowings, SBLCs of $50.4$53.0 million related to workers’ compensation at a rate of 0.90% and a remaining capacity of $149.6$97.0 million. The rate for short-term borrowings includes the LIBOR interestBloomberg Short-Term Bank Yield Index rate and a utilization rate on the amount of our borrowings. The rates for the SBLCs represent a utilization rate on the outstanding amount of the SBLCs. In addition, we pay a commitment fee of 40 basis points on the unused capacity.

The Receivables Entity’s sole business consists of the purchase or acceptance through capital contributions of trade accounts receivable and related rights from the Company. As described above, the Receivables Entity may retransfer these receivables or grant a security interest in those receivables under the terms and conditions of the Receivables Purchase Agreement. The Receivables Entity is a separate legal entity with its own creditors who would be entitled, if it were ever liquidated, to be satisfied out of its assets prior to any assets or value in the Receivables Entity becoming available to its equity holders, the Company. The assets of the Receivables Entity are not available to pay creditors of the Company or any of its other subsidiaries, until the creditors of the Receivables Entity have been satisfied. The assets and liabilities of the Receivables Entity are included in the consolidated financial statements of the Company. 

The Company had total unsecured, uncommitted short-term local credit facilities of $9.8$5.9 million as of year-end 2017.2022. There were $0.7 million borrowings under these lines at year-end 20172022, compared to zerono borrowings under these lines at year-end 2016.2021. The weighted average interest rate for these borrowings, which were primarilywas related to India, was 8.23%8.50% at year-end 2017.
KELLY SERVICES, INC. AND SUBSIDIARIES2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


9.13. Retirement Benefits

U.S. Defined Contribution Plans

The Company provides a qualified defined contribution plan covering substantially all U.S.-based full-time employees, except officers and certain other employees. The plan offers a savings feature with Company matching contributions. Assets of this plan are held by an independent trustee for the sole benefit of participating employees. 


A nonqualified plan is provided for officers and certain other employees. This plan includes provisions for salary deferrals and Company matching contributions. 

In addition to the plans above, the Company also provides a qualified plan and a nonqualified plan to certain U.S.-based temporary employees.

The liability for the nonqualified plans was $188.3$196.6 million and $166.7$237.2 million as of year-end 20172022 and 2016,2021, respectively, and is included in current accrued payroll and related taxes and noncurrent accrued retirement benefits.benefits in the consolidated balance sheet. The cost of participants’ earnings or loss on this liability, which were included in SG&A expenses werein the consolidated statements of earnings, was a loss of $36.3 million in 2022, earnings of $22.3$27.0 million in 2017,2021 and earnings of $10.5$23.0 million in 2016 and loss of $1.6 million in 2015. 2020.
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KELLY SERVICES, INC. AND SUBSIDIARIES
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In connection with the administration of these plans, the Company has purchased company-owned variable universal life insurance policies insuring the lives of certain current and former officers and key employees. The cash surrender value of these policies, which is based primarily on investments in mutual funds and can only be used for payment of the Company’s obligations related to the nonqualified deferred compensation plan noted above, was $188.7$194.3 million and $165.0$232.9 million at year-end 20172022 and 2016,2021, respectively. The cash surrender value of these insurance policies is included in other assets.assets in the consolidated balance sheet. During 2022, 2021 and 2020, proceeds of $1.5 million, $12.2 million and $2.3 million, respectively, were received in connection with these policies. Tax-free earnings or loss on these assets, which were included in SG&A expenses in the consolidated statements of earnings and which offset the related earnings or loss on the liability, were $22.3a loss of $36.0 million in 2017, $9.72022, earnings of $26.0 million in 20162021 and $0.3earnings of $23.1 million in 2015. 2020. 

The net expense for retirement benefits for the qualified and nonqualified plans, including Company matchingCompany-matching contributions for full-time employees, totaled $8.6$9.4 million in 2017, $9.02022, $10.0 million in 20162021 and $5.7$3.2 million in 2015. This expense in2020, and is included in total SG&A expenses in the consolidated statementstatements of earnings. The 2020 expense reflects the temporary suspension of Company-matching contributions from April to December 2020 to mitigate the impact of the COVID-19 pandemic on the results of our operations. The expense related to retirement plan contributions for temporary employees, which is included in cost of services, is reimbursed by our customers.

International Defined Benefit Plans

The Company has several defined benefit pension plans in locations outside of the United States. The total projected benefit obligation, assets and unfunded liability for these plans as of year-end 20172022 were $13.3$10.4 million, $8.4$7.5 million and $4.9$2.9 million, respectively. The total projected benefit obligation, assets and unfunded liability for these plans as of year-end 20162021 were $11.6$16.0 million, $7.6$10.9 million and $4.0$5.1 million, respectively. Total pension expense for these plans was $0.4 million in 2017 and 2016 and $0.32022, $0.5 million in 2015.2021 and $0.6 million in 2020. Pension contributions and the amount of accumulated other comprehensive income expected to be recognized in 20182023 are not significant.


10.14. Stockholders’ Equity

Common Stock

The authorized capital stock of the Company is 100,000,000 shares of Class A common stock and 10,000,000 shares of Class B common stock. Class A shares have no voting rights and are not convertible. Class B shares have voting rights and are convertible by the holder into Class A shares on a share-for-share basis at any time. Both classes of stock have identical rights in the event of liquidation. The voting rights of Class B shares are perpetual and Class B shares are not subject to transfer restrictions or mandatory conversion obligations under the Company's certificate of incorporation or bylaws.

Class A shares and Class B shares are both entitled to receive dividends, subject to the limitation that no cash dividend on the Class B shares may be declared unless the board of directors declares an equal or larger cash dividend on the Class A shares. As a result, a cash dividend may be declared on the Class A shares without declaring a cash dividend on the Class B shares.
The
On November 9, 2022, the Company's board of directors approved a plan for the Company made dividend payments totaling $11.6to repurchase shares of its Class A common stock with a market value not to exceed $50.0 million through transactions executed in 2017, $10.7the open market within one year. During 2022, the Company repurchased 474,644 Class A shares for $7.8 million. A total of $42.2 million in 2016 and $7.7 million in 2015.remains available under the share repurchase program as of year-end 2022.
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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, during 20172022, 2021 and 20162020 are included in the table below.below (in millions of dollars). Amounts in parentheses indicate debits.
 Foreign
Currency
Translation
Adjustments
 Unrealized
Gains and
Losses on
Investment
 Pension
Liability
Adjustments
 Total
 (In millions of dollars)
Balance at year-end 2016$(23.3) $83.8
 $(1.8) $58.7
        
Other comprehensive income (loss) before reclassifications16.4
 56.2
 (0.6) 72.0
        
Amounts reclassified from accumulated other comprehensive income
 
 0.1
(2) 
0.1
        
Net current-period other comprehensive income (loss)16.4
 56.2
 (0.5) 72.1
        
Balance at year-end 2017$(6.9) $140.0
 $(2.3) $130.8
202220212020
Foreign currency translation adjustments:
Beginning balance$(25.0)$(0.8)$(13.2)
Other comprehensive income (loss) before classifications(7.5)(24.2)13.9 
Amounts reclassified from accumulated other comprehensive income (loss) - liquidation of Japan subsidiary20.4 (1)— — 
Amounts reclassified from accumulated other comprehensive income (loss) - equity method investment and other4.7 (2)— (2)(1.5)(2)
Net current-period other comprehensive income (loss)17.6 (24.2)12.4 
Ending balance(7.4)(25.0)(0.8)
Pension liability adjustments:
Beginning balance(2.7)(3.4)(2.6)
Other comprehensive income (loss) before classifications1.5 0.5 (0.9)
Amounts reclassified from accumulated other comprehensive income0.1 (3)0.2 (3)0.1 (3)
Net current-period other comprehensive income (loss)1.6 0.7 (0.8)
Ending balance(1.1)(2.7)(3.4)
Total accumulated other comprehensive income (loss)$(8.5)$(27.7)$(4.2)

(1)Amount was recorded in the loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings.

(2)Of the amount included in this line item $1.9 million in 2022 was recorded in the other income (expense), net line item in the consolidated statements of earnings related to the investment in PersolKelly Pte. Ltd., (see Investment in PersolKelly Pte. Ltd. footnote for more details). In addition, $1.4 million in 2022 was recorded in the other income (expense), net line item in the consolidated statements of earnings related to other activities and $1.4 million in 2022 was recorded in loss on disposal line item in the consolidated statements of earnings related to the liquidation of the cumulative translation adjustment for the sale of our Russia operations, (see Acquisitions and Dispositions footnote for more details). All amounts in prior years were recorded in the other income (expense), net line item in the consolidated statements of earnings.

(3)Amount was recorded in the SG&A expenses line item in the consolidated statements of earnings.

80
 Foreign
Currency
Translation
Adjustments
 Unrealized
Gains and
Losses on
Investment
 Pension
Liability
Adjustments
 Total
 (In millions of dollars)
Balance at year-end 2015$(22.6) $84.9
 $(1.6) $60.7
        
Other comprehensive income (loss) before reclassifications(0.6) (1.1) (0.3) (2.0)
        
Amounts reclassified from accumulated other comprehensive income(0.1)
(1) 

 0.1
(2) 

        
Net current-period other comprehensive income (loss)(0.7) (1.1) (0.2) (2.0)
        
Balance at year-end 2016$(23.3) $83.8
 $(1.8) $58.7
(1)Amount was recorded in the other expense, net line item in the consolidated statement of earnings.
(2)Amount was recorded in the SG&A expenses line item in the consolidated statement of earnings.

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

11.15. Earnings (Loss) Per Share

The reconciliation of basic earnings (loss) per share on common stock for the year-end 2017, 20162022, 2021 and 20152020 follows (in millions of dollars except per share data).:
 202220212020
Net earnings (loss)$(62.5)$156.1 $(72.0)
Less: Earnings allocated to participating securities— (1.4)— 
Net earnings (loss) available to common shareholders$(62.5)$154.7 $(72.0)
Average common shares outstanding (millions):
Basic38.1 39.4 39.3 
Dilutive share awards— 0.1 — 
Diluted38.1 39.5 39.3 
Basic earnings (loss) per share$(1.64)$3.93 $(1.83)
Diluted earnings (loss) per share$(1.64)$3.91 $(1.83)
 2017 2016 2015
Net earnings$71.6
 $120.8
 $53.8
Less: Earnings allocated to participating securities(1.1) (2.6) (1.4)
Net earnings available to common shareholders$70.5
 $118.2
 $52.4
      
Average common shares outstanding (millions):     
Basic38.3
 38.1
 37.8
Dilutive share awards0.7
 0.3
 0.1
Diluted39.0
 38.4
 37.9
      
Basic earnings per share$1.84
 $3.10
 $1.39
Diluted earnings per share$1.81
 $3.08
 $1.39

Potentially dilutive shares outstanding for 2021 are primarily related to performancedeferred common stock related to the non-employee directors deferred compensation plan. Due to our net loss in 2022 and 2020, potentially dilutive shares for 2017outstanding, primarily related to deferred common stock associated with the non-employee directors deferred compensation plan, of 0.2 million shares in 2022 and 2016. Stock options excluded from the computation of0.1 million shares in 2020, had an anti-dilutive effect on diluted earnings per share due to their anti-dilutive effect for 2016 and 2015 were not significant, and all remaining stock options expired inexcluded from the second quarter of 2016.computation.

We have presented earnings per share for our two classes of common stock on a combined basis. This presentation is consistent with the earnings per share computations that result for each class of common stock utilizing the two-class method as described in ASC Topic 260, “Earnings Per Share”.Share.” The two-class method is an earnings allocation formula which determines earnings per share for each class of common stock according to the dividends declared (or accumulated) and participation rights in the undistributed earnings.

In applying the two classtwo-class method, we have determined that the undistributed earnings should be allocated to each class on a pro rata basis after consideration of all of the participation rights of the Class B shares (including voting and conversion rights) and our history of paying dividends equally to each class of common stock on a per share basis.

The Company’s Restated Certificate of Incorporation allows the board of directors to declare a cash dividend to Class A shares without declaring equal dividends to the Class B shares. Class B shares’ voting and conversion rights, however, effectively allow the Class B shares to participate in dividends equally with Class A shares on a per share basis.

The Class B shares are the only shares with voting rights. The Class B shareholders are therefore able to exercise voting control with respect to all matters requiring stockholder approval, including the election of or removal of directors. The board of directors has historically declared and the Company historically has paid equal per share dividends on both the Class A and Class B shares. Each class has participated equally in all dividends declared since 1987.

In addition, Class B shares are convertible, at the option of the holder, into Class A shares on a one-for-one basis. As a result, Class B shares can participate equally in any dividends declared on the Class A shares by exercising their conversion rights.

12.Dividends paid per share for Class A and Class B common stock were $0.275 for 2022, $0.10 for 2021 and $0.075 for 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Stock-Based Compensation

Under the Equity Incentive Plan, amended and restated February 15, 2017 and approved by the stockholders of the Company on May 10, 2017 (the “EIP”), the Company may grant stock options (both incentive and nonqualified), stock appreciation rights,to key employees restricted stock and performance awards to key employees associated with the Company’s Class A stock. For shares granted prior to May 10, 2017, the EIP provides that the maximum number of shares available for grants is 15 percent of the outstanding Class A Stock, adjusted for EIP activity over the preceding 5 years. For shares granted after May 10, 2017, theThe amended EIP provides that the maximum number of shares available for grants is 4.7 million. The Company has no plans to issue additional shares under the provision that was in effect prior to May 10, 2017. Under the provision that was in effect for shares granted after May 10, 2017, sharesShares available for future grants at year-end 2017 were 4.52022 are 2.7 million. The Company issues shares out of treasury stock to satisfy stock-based awards.awards, if available; otherwise new shares of common stock are issued from authorized shares. The Company presently has no intent to repurchase additional shares for the purpose of satisfying stock-based awards.

The Company recognized stock-based compensation cost of $9.1$7.8 million in 2017, $10.22022, $5.1 million in 20162021 and $7.9$3.9 million in 2015,2020, as well as related tax benefits of $4.2$1.1 million in 2017, $3.92022, $0.8 million in 20162021 and $3.0$0.4 million in 2015.2020.
KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock

Restricted stock, which typically vests pro-rata over four years, is issued to certain key employees and is subject to forfeiture until the end of an established restriction period. The Company utilizes the market price of its Class A stock on the date of grant as the fair value of restricted stock and expenses the fair value on a straight-line basis over the vesting period.

A summary of the status of nonvested restricted stock under the EIP as of year-end 20172022 and changes during this period is presented as follows below (in thousands of shares except per share data):
 
Restricted
Stock
Weighted
Average
Grant Date
Fair Value
Nonvested at year-end 2021403 $21.24 
Granted417 20.16 
Vested(112)22.25 
Forfeited(101)21.51 
Nonvested at year-end 2022607 $20.27 
 
Restricted
Stock
 
Weighted
Average
Grant Date
Fair Value
Nonvested at year-end 2016653
 $16.58
Granted209
 21.97
Vested(242) 16.93
Forfeited(180) 17.04
Nonvested at year-end 2017440
 $18.76

As of year-end 2017,2022, unrecognized compensation cost related to unvested restricted stock totaled $6.2$8.9 million. The weighted average period over which this cost is expected to be recognized is approximately 1.71.9 years. The weighted average grant date fair value per share of restricted stock granted during 2017, 20162022, 2021 and 20152020 was $21.97, $17.08$20.16, $20.91 and $15.85,$15.97, respectively. The total fair value of restricted stock, which vested during 2017, 20162022, 2021 and 2015,2020, was $5.8$2.3 million, $6.4$2.0 million and $5.4$2.4 million, respectively.


Performance Shares

During 2017, 2016,2022, 2021 and 2015,2020, the Company granted performance awards associated with the Company’s Class A stock to certain senior officers. The payment of performance shares,awards, which will be satisfied with the issuance of shares out of treasury stock, is contingent upon the achievement of specific gross profit and operating earnings performance goals unique to each grant ("financial measure performance awards") over a stated period of time.
2017 Grant
For Additionally, the 2017 performance share grant (“2017 grant”), the total target number of performance sharesCompany also granted is 387,000, of which 304,000 shares are eligible to earn up to the maximum number of performance shares of 609,000, which assumes 200% of the target shares originally granted. Target shares of 203,000 may be earned upon achievement of two financial goals (“financial measure performance shares”) and target shares of 101,000 may be earned based on the Company’s total shareholder return (“TSR”) relative to the S&P SmallCap 600 Index (“TSR performance shares”). These financial measure performance and TSR performance shares have a three-year performance period through December 31, 2019 and if earned, will cliff-vest after the approval by the Compensation Committee, which will be no later than March 15, 2020, if not forfeited by the recipient. No dividends are paid on financial measure and TSR performance shares. The 2017 grant also included 83,000 single financial measure performance shares to certain senior officers, which havewill be satisfied with the issuance of shares out of treasury stock, and is contingent upon the achievement of one performance measure with a one-year performance period. These single financial measure performance shares vest over four years and earn dividends, which are not paid until the awards vest.
The
On May 18, 2021, the Compensation Committee approved a modification to the performance goals of our 2021 and 2020 financial measure performance shares have a weighted average grant date fair value of $21.07. For eachawards to increase the goals to reflect the results of the two financial measures, there are annual goals set in Februaryacquisition of each year, withSoftworld. We accounted for this change as a Type I modification under ASC 718 as the total award payout based on a cumulative averageexpectation of the 2017, 2018, and 2019 goals. Accordingly, theachievement of certain performance conditions related to these awards remained probable-to-probable post-modification. The Company remeasuresdid not record any incremental stock compensation expense since the fair value of the 2017 financial measure performance shares each reporting period untilmodified awards immediately after the 2019 goals are set, after whichmodification was not greater than the fair value will be fixed forof the remaining performance period. As of year-end 2017,original awards immediately before the current fair value for financial measure performance shares is $26.40. The total nonvested shares at maximum level (200%) related to financial measure performance awards at year-end is 279,000.modification. All service-based vesting conditions were unaffected by the modification.
The TSR performance shares have an estimated fair value of $20.16, which was computed using a Monte Carlo simulation model incorporating assumptions for inputs of expected stock price volatility, dividend yield and risk-free rate. The total nonvested shares at maximum level (200%) related to TSR performance awards at year-end 2017 is 139,000.
82

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

2022 Grants
2016 Grant
For the 2016The annual 2022 performance share grant (“2016 grant”("2022 grant"), the total target number consisted of 186,000 financial measure performance shares granted is 332,000,awards, which are contingent upon achievement of specific revenue growth and theEBITDA margin performance goals. The maximum number of performance shares that may be earned is 663,000, which assumes 200% of the target shares originally granted. Target shares of 249,000 may be earned uponThese awards have three one-year performance periods: 2022, 2023 and 2024, with the achievement of three financial goals (“payout for each performance period based on separate financial measure goals that are set in February of each of the three performance shares”) and targetperiods. Earned shares of 83,000 may be earned based on the Company’s total shareholder return relative to the S&P SmallCap 600 Index (“TSR performance shares”). These financial measure performance and TSR performance shares have a three-yearduring each performance period through December 31, 2018, and if earned, will cliff-vestcliff vest in February 2025 after approval of the approvalfinancial results by the Compensation Committee, which will be no later than March 15, 2019, if not forfeited by the recipient. No dividends are paid on financial measure and TSRthese performance shares.
The financial measure performance shares have a weighted average grant date fair value of $15.85. For each of the three financial measures, there are annual goals set in February of each year, with the total award payout based on a cumulative average of the 2016, 2017 and 2018 goals. Accordingly, the Company remeasures the fair value of the 2016 financial measure performance shares each reporting period until the 2018 goals are set, after which the fair value will be fixed for the remaining performance period. As of year-end 2017, the current fair value for financial measure performance shares is $26.40. The total nonvested shares at maximum level (200%) related to financial measure performance awards at year-end 2017 is 370,000.
The TSR performance shares have an estimated fair value of $19.73, which was computed using a Monte Carlo simulation model incorporating assumptions for inputs of expected stock price volatility, dividend yield and risk-free interest rate. The total nonvested shares at maximum level (200%) related to TSR performance awards at year-end 2017 is 123,000.
2015 Grant
For the 2015 performance share grant (“2015 grant”), the total target number of performance shares granted is 375,000, and the maximum number of performance shares that may be earned is 750,000, which assumes 200% of the target shares originally granted. Target shares of 250,000 may be earned upon the achievement of two financial goals (“financial measure performance shares”) and target shares of 125,000 may be earned based on the Company’s total shareholder return relative to the S&P SmallCap 600 Index (“TSR performance shares”). No dividends are paid on financial measure or TSR performance shares.
The 2015 financial measure performance shares, which have a weighted average grant date fair value of $16.31, had a one-year performance measure through fiscal 2015 and will vest after the completion of an additional two-year service period. Based upon the level of achievement of specific financial performance goals for the 2015 grant, participants had the ability to receive up to 200% of the target number of shares originally granted. On February 17, 2016, the Compensation Committee approved the actual performance achievement of the financial measure performance shares for the 2015 grant. Actual performance resulted in participants achieving 115% of target. These financial measure performance shares will cliff-vest after the approval of the Compensation Committee, which will be no later than March 15, 2018, if not forfeited by the recipient. The total nonvested shares related to 2015 financial measure performance awards at year-end 2017 is 250,000.
The 2015 TSR performance shares have a three-year performance measure with vesting at the end of the performance period. TSR performance shares have an estimated fair value of $16.01, which was computed using a Monte Carlo simulation model incorporating assumptions for inputs of expected stock price volatility, dividend yield and risk-free interest rate. Based upon the level of achievement of the Company’s TSR relative to the S&P SmallCap 600 Index for the 20152022 annual grant, participants had the ability to receive up to 200% of the target number of shares originally granted. On February 14, 2018,2023, the Compensation Committee approved the actual performance achievement for the 2022 performance period of the TSR performance shares for the 2015annual 2022 grant. Actual performance resulted in participants achieving 200%72% of target. These TSRAll of the shares earned for the 2022 performance sharesperiod will cliff-vestvest in 2025 after the approval of the Compensation Committee, if not forfeited by the recipient.

The 2022 financial measure performance awards have a weighted average grant date fair value of $21.19, which was determined by the market price on the date of grant less the present value of the expected dividends not received during the vesting period.

The total nonvested shares related to 2022 financial measure performance awards at year-end 2022 is 186,000.

2021 Grants

The annual 2021 performance share grant ("2021 grant") consisted of 180,000 financial measure performance awards, which are contingent upon the achievement of specific revenue growth and EBITDA margin performance goals. 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 be no later than March 15, 2018,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 total nonvestedremaining 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.

Based upon the level of achievement of specific financial performance goals for the 2021 annual grant, participants had the ability to receive up to 200% of the target number of shares originally granted. On February 14, 2023, the Compensation Committee approved the actual performance achievement for the 2022 performance period of the annual 2021 grant. Actual performance resulted in participants achieving 72% of target. Half of the shares earned for the 2022 performance period will vest in 2023 after the approval of the Compensation Committee and the remaining half of the shares earned will vest in early 2024, if not forfeited by the recipient.

In December 2021, the Compensation Committee approved an additional retention-based grant of 308,000 financial measure performance awards to certain senior officers and may be earned upon achievement of three financial goals over a performance period beginning in fiscal 2022 through the third quarter of 2024, with each goal having a unique projected achievement date. Each goal can be earned independent of the other two goals. A goal is considered earned once it is achieved and maintained for two consecutive quarters at maximum level (200%)any point during the performance period. Any goal not achieved within one year of projected achievement date, will result in that portion of the award being forfeited. Any shares earned during the performance period will cliff-vest three years after achievement of the respective performance goals and approval of the financial results by the Compensation Committee. These awards earn dividends once the goal is achieved, but are not paid until the awards vest.

On February 14, 2023, the Compensation Committee approved the actual performance achievement of one of the financial goals related to TSR performancethe 2021 retention-based grant. At the same meeting, the Compensation Committee approved a modification to accelerate the vesting for the goal earned, where half of these awards at year-end 2017 is 217,000.will vest immediately upon approval of the results and the remaining half will vest in August 2023, if not forfeited by the recipient. We will account for this change as a Type I modification under ASC 718 as the expectation of vesting remained probable-to-probable post-modification. The Company did
83

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

not record any incremental stock compensation expense since the fair value of the modified awards immediately after the modification was not greater than the fair value of the original awards immediately before the modification. The Company will recognize the remaining stock compensation expense over the remaining portion of the modified service requisite period.

The 2021 financial measure performance awards have a weighted average grant date fair value of $18.21, which was determined by the market price on the date of grant less the present value of the expected dividends not received during the vesting period. The total nonvested shares related to 2021 financial measure performance awards at year-end 2022 is 423,000.

2020 Grant

The 2020 performance share grant ("2020 grant") consisted of 115,000 single financial measure performance shares, which have a one-year performance period based on a specific operating earnings performance goal. The 2020 single financial measure performance awards have a weighted average grant date fair value of $22.59 per share, which was determined by the market price on the date of grant. On February 15, 2022, the Compensation Committee approved the actual performance achievement of the 2020 single financial measure performance award. These awards will vest over the next four years, if not forfeited by the recipient. The total nonvested shares related to 2020 single financial performance awards at year-end 2022 is 78,000.

A summary of the status of all nonvested performance shares at target for 20172022 is presented as follows below (in thousands of shares except per share data). Forfeitures primarily relate toThe vesting adjustment in the retirementtable below represents the 2019 and a portion of the Company’s former President2021 performance period of the 2021 financial measure performance shares that did not vest because actual achievement was below the threshold level and Chief Executive Officerresulted in the second quarter of 2017.
no payout.
Financial Measure
Performance Shares
Financial Measure Performance Shares TSR Performance SharesSharesWeighted Average Grant Date Fair Value
Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
Nonvested at year-end 2016499
 $19.17
 208
 $17.49
Nonvested at year-end 2021Nonvested at year-end 2021708 $20.03 
Granted286
 21.32
 101
 20.16
Granted186 21.19 
Vested
 
 
 
Vested(48)22.55 
Forfeited(193) 20.51
 (69) 19.04
Forfeited(12)16.81 
Nonvested at year-end 2017592
 $22.32
 240
 $18.17
Vesting AdjustmentVesting Adjustment(142)24.45 
Nonvested at year-end 2022Nonvested at year-end 2022692 $19.41 

As of year-end 2017,2022, unrecognized compensation cost related to all unvested financial measure performance shares and TSR performance shares totaled $3.7 million and $1.2 million, respectively.$8.4 million. The weighted average period over which the costs are expected to be recognized is approximately 1.82.4 years for financial measure performance shares. The total fair value of financial measure performance shares, which vested during 2022, 2021 and 1.7 years2020, was $0.9 million, $0.3 million and $1.8 million, respectively.

17. Sale of Assets

In October 2022, Kelly Properties, LLC, a wholly owned subsidiary of the Company, sold real property located in Troy, Michigan for TSR performance shares.a purchase price of $6.0 million, subject to final closing adjustments. The Company received cash proceeds of $5.6 million in the fourth quarter of 2022, net of commissions and transaction expenses. As of the date of the sale, the property had a carrying value of $4.7 million, resulting in a $0.9 million gain on the sale, which is recorded in gain on sale of assets in the consolidated statements of earnings.

13.In June 2022, the Company sold an under-utilized real property for a purchase price of $4.5 million, subject to final closing adjustments. The Company received cash proceeds of $3.6 million in the second quarter of 2022 and previously received cash proceeds of $0.8 million as a deposit in 2021 when the contract was first executed. As of the date of the sale, the land had insignificant carrying value; as such, the resulting gain on the sale was $4.4 million, which is recorded in gain on sale of assets in the consolidated statements of earnings.

In January 2022, the Company sold a property for a purchase price of $0.9 million, subject to final closing adjustments. The Company received cash proceeds of $0.9 million in the first quarter of 2022. As of the date of the sale, the property had an immaterial carrying value; as such, the resulting gain on the sale of the property was $0.9 million, which is recorded in gain on sale of assets in the consolidated statements of earnings.
84

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

In the second quarter of 2020, the Company monetized wage subsidy receivables outside the U.S. for $16.9 million, net of fees and 5% retainer. The sale of these receivables was accounted for as a sale of financial assets with certain recourse provisions in which we derecognized the receivables. Although the sale of receivables is with recourse, the Company did not record a recourse obligation as the Company concluded the receivables were collectible. The net cash proceeds related to the sale were included in operating activities in the consolidated statements of cash flows and the fees related to the sale were included in SG&A expenses in the consolidated statements of earnings.

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 was recorded in gain on sale of assets in the consolidated statements of earnings. The Company leased back the main headquarters building on the same date; see the Leases footnote for discussion of the sale and leaseback transaction.

18. Other Expense,Income (Expense), Net

Included in other expense,income (expense), net are the following:
 202220212020
 (In millions of dollars)
Interest income$2.3 $0.2 $0.6 
Interest expense(2.1)(2.5)(3.0)
Dividend income— 2.7 2.4 
Foreign exchange gains (losses)4.8 (1.0)3.3 
Other(3.4)(3.0)0.1 
Other Income (Expense), Net$1.6 $(3.6)$3.4 
 2017 2016 2015
 (In millions of dollars)
Interest income$0.7
 $0.4
 $0.3
Interest expense(2.7) (3.8) (3.8)
Dividend income1.5
 1.2
 0.9
Foreign exchange (losses) gains(1.1) 1.6
 (0.9)
Other
 (0.1) 
      
Other expense, net$(1.6) $(0.7) $(3.5)

DividendThe decrease in dividend income includes dividends earned onin 2022 reflects the Company’ssale of the investment in the common stock of Persol Holdings during the first quarter of 2022. Included in foreign exchange gains (losses) for 2022 is a $5.5 million foreign exchange gain on a U.S. dollar-denominated cash balance held by the Company's Japan entity (see Investment in Persol Holdings footnote). Included in Other for 2022 are transaction-related expenses for the 2022 acquisitions of RocketPower and PTS and sale of our Russia operations (see Acquisitions and Dispositions footnote) and expense related to the remeasurement of the Brazil indemnification liability (see Fair Value Measurements footnote). Included in Other for 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 for the April 2021 acquisition of Softworld (see Acquisitions and Dispositions footnote).

14.
19. Income Taxes

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate for the years 2017, 20162022, 2021 and 20152020 were taxed under the following jurisdictions:
 202220212020
 (In millions of dollars)
Domestic$(39.4)$27.5 $(86.7)
Foreign(31.8)158.3 (20.1)
Total$(71.2)$185.8 $(106.8)

85
 2017 2016 2015
 (In millions of dollars)
Domestic$55.2
 $112.4
 $28.9
Foreign26.5
 37.3
 34.3
Total$81.7
 $149.7
 $63.2

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

The provision for income taxes was as follows:
 202220212020
 (In millions of dollars)
Current tax expense:   
U.S. federal$1.3 $1.0 $6.6 
U.S. state and local1.4 2.1 5.9 
Foreign61.5 10.4 10.6 
Total current64.2 13.5 23.1 
Deferred tax (benefit) expense:   
U.S. federal(2.5)(11.9)(35.8)
U.S. state and local0.7 (0.7)(12.3)
Foreign(70.3)34.2 (9.0)
Total deferred(72.1)21.6 (57.1)
Total provision$(7.9)$35.1 $(34.0)
 2017 2016 2015
 (In millions of dollars)
Current tax expense:     
U.S. federal$6.6
 $10.2
 $8.3
U.S. state and local2.4
 2.4
 1.4
Foreign9.7
 10.0
 10.8
Total current18.7
 22.6
 20.5
Deferred tax expense:     
U.S. federal0.4
 11.8
 (10.6)
U.S. state and local0.1
 2.0
 0.8
Foreign(6.4) (6.4) (2.0)
Total deferred(5.9) 7.4
 (11.8)
Total provision$12.8
 $30.0
 $8.7

Deferred income taxes reflect the temporary differences between the asset and liability basis for financial reporting purposes and the amounts used for income tax purposes, at the relevant tax rate. The deferred tax assets and liabilities are comprised of the following:
20222021
2017 2016 (In millions of dollars)
(In millions of dollars)
Depreciation and amortization$(13.4) $(14.6)
Fixed assets and right-of-use assetsFixed assets and right-of-use assets$(21.8)$(25.8)
Intangible assets and goodwillIntangible assets and goodwill20.7 16.3 
Employee compensation and benefit plans57.3
 75.5
Employee compensation and benefit plans62.0 70.4 
Workers’ compensation14.5
 22.4
Unrealized gain on securities(60.1) (33.6)
Accrued payroll and related taxesAccrued payroll and related taxes— 22.1 
Accrued workers’ compensationAccrued workers’ compensation10.2 11.7 
Investment in Persol HoldingsInvestment in Persol Holdings— (70.9)
Investment in equity affiliate(15.5) (22.7)Investment in equity affiliate(0.7)(13.3)
Operating lease liabilitiesOperating lease liabilities19.3 21.8 
Loss carryforwards38.8
 36.4
Loss carryforwards33.4 36.4 
Credit carryforwards132.7
 121.2
Credit carryforwards200.7 175.0 
Other, net3.1
 3.5
Other, net9.4 6.5 
Valuation allowance(34.6) (42.1)Valuation allowance(34.0)(19.0)
Net deferred tax assets$122.8
 $146.0
Net deferred tax assets$299.2 $231.2 

The deferred tax balance is classified in the consolidated balance sheet as:
2017 2016 20222021
(In millions of dollars) (In millions of dollars)
Deferred tax asset$183.4
 $180.1
Deferred tax asset$299.7 $302.8 
Other long-term liabilities(60.6) (34.1)Other long-term liabilities(0.5)(71.6)
$122.8
 $146.0
$299.2 $231.2 
KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 35% are as follows:
 2017 2016 2015
 (In millions of dollars)
Income tax based on statutory rate$28.6
 $52.4
 $22.1
State income taxes, net of federal benefit1.6
 2.9
 1.3
General business credits(18.1) (17.0) (17.9)
Life insurance cash surrender value(7.4) (3.0) 0.3
Foreign items(2.8) 0.4
 (2.5)
Foreign business taxes4.0
 3.6
 3.7
Tax law change13.9
 
 (0.7)
PersolKelly Asia Pacific transaction gain
 (4.8) 
Non-deductible expenses1.3
 1.6
 2.3
Change in deferred tax realizability(7.8) (5.9) 
Other, net(0.5) (0.2) 0.1
Total$12.8
 $30.0
 $8.7
General business credits primarily represent U.S. work opportunity credits. Foreign items include foreign income tax rate differences, foreign tax credits and deductions, and foreign non-deductible expenses and non-taxable income. Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC Topic 740 (“ASC 740”), Income Taxes. For 2017, tax law change represents the revaluing of net deferred tax assets as a result of the U.S. Tax Cuts and Jobs Act (“The Act”). Among other things, The Act reduced the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, and imposed a one-time transition tax on the Company's accumulated foreign earnings. Due to the ability for foreign deficits to offset foreign earnings, the Company does not anticipate paying a transition tax. As such, a provisional amount of zero has been recorded in accordance with SEC Staff Accounting Bulletin 118 for the transition tax due to the need for additional analysis of historical data. Any subsequent adjustment will be recorded in the applicable 2018 quarter. Also while the accounting for revaluing net deferred tax assets is complete, the issuance of additional guidance interpreting The Act may require adjustments.
The Company has U.S. general business credit carryforwards of $128.5$177.1 million which will expire from 20332034 to 2037,2042, foreign tax credit carryforwards of $4.1$23.6 million thatwhich will expire from 20222023 to 20262032 and $0.1 million ofminimal state credit carryforwards thatwhich will expire from 2026 to 2037, or have no expiration.2042. The net tax effect of state and foreign loss carryforwards at year-end 20172022 totaled $38.8$33.4 million, $2.7 million of which expire as follows (in millionsexpires between 2023 to 2042, and $30.7 million of dollars): which have no expiration.
Year Amount
2018-2020 $1.8
2021-2034 0.8
No expiration 36.2
Total $38.8

The Company has established a valuation allowance for loss carryforwards and future deductible items in certain foreign jurisdictions, and for U.S. foreign tax credit carryforwards. The increase in the valuation allowance in 2022 was primarily due to foreign tax credits generated from the sale of the Company's investment in Persol Holdings. The valuation allowance is determined in accordance with the provisions of ASC 740, "Income Taxes," which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The Company’s recent losses in these foreign
86

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
jurisdictions, and its recent lack of adequate U.S. foreign source income to fully utilize foreign tax credit carryforwards, represented sufficient negative evidence to require a valuation allowance under ASC 740. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support realization of the foreign deferred tax assets.

The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 21% in 2022, 2021, and 2020 are as follows:
 202220212020
 (In millions of dollars)
Income tax based on statutory rate$(14.9)$39.0 $(22.4)
State income taxes, net of federal benefit1.6 1.1 (5.1)
Foreign tax rate differential1.6 12.2 2.8 
General business credits(10.7)(9.7)(9.9)
Life insurance cash surrender value7.8 (5.2)(4.6)
Foreign items0.2 1.7 (1.8)
Sale of foreign subsidiaries3.9 — (6.6)
Foreign business taxes1.8 2.1 3.0 
Tax law change— (5.2)(1.7)
Non-deductible goodwill impairment2.7 — 11.9 
Other(1.9)(0.9)0.4 
Total$(7.9)$35.1 $(34.0)

Our tax benefit or 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 non-taxable 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 or changes in judgment regarding the realizability of deferred tax assets. Changes in the fair value of the Company’s investment in Persol Holdings were recognized in the consolidated statements of earnings. Gains and losses from this investment, which was sold in the first quarter of 2022, were treated as discrete since they could not be estimated.

Several items have contributed to the variance in our income tax benefit or expense over the last three years. 2022 benefited from lower pretax earnings, benefits of $16.9 million from changes in the fair value of the Company's investment in Persol Holdings and $7.1 million from the impairment of tax deductible goodwill. These benefits were offset by a $7.8 million charge from tax exempt life insurance cash surrender value losses. Income tax expense for 2021 included charges of $37.3 million from changes in the fair value of the Company's investment in Persol Holdings and $4.8 million from the gain on insurance settlement, offset by benefits of $5.2 million from a change in tax rate in the United Kingdom and $5.2 million from tax exempt life insurance cash surrender value gains. The 2020 income tax benefited from lower pretax earnings and benefits of $5.1 million from the loss on our investment in Persol Holdings, $6.6 million from the sale of Brazil operations, $23 million from the impairment of tax deductible goodwill and $4.6 million from tax exempt life insurance cash surrender value gains.

General business credits primarily represent U.S. work opportunity credits. Foreign items include foreign tax credits, foreign non-deductible expenses and non-taxable income. Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC 740.

Provision has not been made for additional income taxes on an estimated $124.8$156.5 million of foreign subsidiary undistributed earnings which are permanentlyindefinitely reinvested. If these earnings were to be repatriated, the Company could be subject to foreign withholding tax, federal and state income tax, net of federal benefit, of $5.3 million. There would also beand income taxes on foreign exchange gains or losses.losses, of $9.8 million.


87

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

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 202220212020
 (In millions of dollars)
Balance at beginning of the year$0.6 $0.5 $0.9 
Additions for prior years’ tax positions— 0.2 — 
Reductions for prior years’ tax positions— — — 
Additions for settlements— — — 
Reductions for settlements— — — 
Reductions for expiration of statutes(0.1)(0.1)(0.4)
Balance at end of the year$0.5 $0.6 $0.5 
 2017 2016 2015
 (In millions of dollars)
Balance at beginning of the year$1.4
 $1.7
 $2.4
      
Additions for prior years’ tax positions
 0.1
 0.1
Reductions for prior years’ tax positions
 
 (0.7)
Additions for settlements
 
 
Reductions for settlements
 
 
Reductions for expiration of statutes(0.2) (0.4) (0.1)
      
Balance at end of the year$1.2
 $1.4
 $1.7

If the $1.2$0.5 million in 2017, $1.42022, $0.6 million in 20162021 and $1.7$0.5 million in 20152020 of unrecognized tax benefits were recognized, they would have a favorable effect of $1.0$0.4 million in 2017 and 2016 and $1.12022, $0.5 million in 20152021 and $0.4 million in 2020 on income tax expense.

The Company recognizes both interest and penalties as part of the income tax provision. InterestThe benefit recognized in 2022 was not significant. The Company recognized expense of $0.1 million in 2021 and penalties expensea benefit of $0.1 million in 20172020 for interest and 2016 and benefit in 2015 were not significant.penalties. Accrued interest and penalties were $0.1 million at year-end 20172022 and 2016 were not significant.$0.2 million at year-end 2021.

The Company files income tax returns in the U.S. and in various states and foreign countries. The tax periods open to examination by the major taxing jurisdictions to which the Company is subject include the U.S. for fiscal years 2014 through 2017,2019 forward, Canada for fiscal years 2010 through 2017,2015 forward, France for fiscal years 2013 through 2017, Mexico2014 forward, Netherlands for fiscal years 2012 through 2017 forward, Portugal for fiscal years 2014 through 2017,2019 forward, Puerto Rico for fiscal years 2018 forward and Switzerland for fiscal years 2008 through 2017.2013 forward.

The Company and its subsidiaries have various income tax returns in the process of examination. The unrecognized tax benefit and related interest and penalty balances include approximately $0.1$0.2 million for 2017,2022, related to tax positions which are reasonably possible to change within the next twelve months due to income tax audits, settlements and statute expirations.

15.
20. Supplemental Cash Flow Information

Changes in operating assets and liabilities, net of acquisitions, as disclosed in the statements of cash flows, for the fiscal years 2017, 20162022, 2021 and 2015,2020, respectively, were as follows:
 202220212020
 (In millions of dollars)
(Increase) decrease in trade accounts receivable$(99.3)$(150.7)$55.9 
(Increase) decrease in prepaid expenses and other assets(24.6)5.0 21.8 
(Increase) decrease in ROU assets(0.1)7.7 0.2 
Increase (decrease) in accounts payable and accrued liabilities44.3 155.8 10.5 
Increase (decrease) in operating lease liabilities(18.7)(29.7)(21.1)
Increase (decrease) in accrued payroll and related taxes(59.3)12.5 71.9 
Increase (decrease) in accrued workers’ compensation and other claims(5.2)(6.2)(4.9)
Increase (decrease) in income and other taxes21.9 (4.6)(14.0)
Total changes in operating assets and liabilities, net of acquisitions$(141.0)$(10.2)$120.3 
 2017 2016 2015
 (In millions of dollars)
Increase in trade accounts receivable$(126.2) $(93.9) $(64.2)
Increase in prepaid expenses and other assets(13.8) (11.0) (5.2)
Increase in accounts payable and accrued liabilities63.9
 58.4
 50.9
Increase (decrease) in accrued payroll and related taxes32.9
 1.9
 (23.7)
Increase (decrease) in accrued insurance6.7
 2.4
 (4.2)
Increase in income and other taxes7.1
 2.2
 0.5
      
Total changes in operating assets and liabilities, net of acquisition$(29.4) $(40.0) $(45.9)

The Company paid interest of $1.9$1.3 million in 2017 and $2.72022, $1.7 million in 20162021 and 2015.$1.6 million in 2020. The Company paid income taxes of $20.1$61.2 million in 2017, $24.02022, $14.1 million in 20162021 and $23.5$26.4 million in 2015. 2020.

Non-cash capital expendituresaccruals totaled $3.0$1.2 million, $1.7$1.0 million and $1.8$1.4 million at year-end 2017, 20162022, 2021 and 2015,2020, respectively.

21. Commitments

In addition to lease agreements (see Leases footnote) and the indemnification agreement related to the sale of our Brazil operations (see Acquisitions and Dispositions footnote), the Company has entered into noncancelable purchase obligations totaling $53.0 million. These obligations relate primarily to technology services and online tools which the Company expects
88

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

16. Commitments
The Company conducts its branch-based operations primarily from leased facilities. The following is a schedule by fiscal year of future minimum commitments under operating leases as of year-end 2017 (in millions of dollars):
Fiscal year: 
2018$25.9
201919.7
202014.7
202110.3
20225.9
Later years6.3
  
Total$82.8
Lease expense for fiscal 2017, 2016 and 2015 amounted to $31.3 million, $33.1 million and $37.5 million, respectively. 
In addition to operating lease agreements, the Company has entered into noncancelable purchase obligations totaling $31.8 million. These obligations relate primarily to online tools and voice and data communications services which the Company expects to utilize generally within the next twothree fiscal years, in the ordinary course of business. The Company has no material unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities. See the Debt and Retirement Benefits footnotes for commitments related to debt and pension obligations.

17.
22. Contingencies
In the ordinary course of business the Company is the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damages may not be estimable. As previously disclosed, the Company entered into a settlement with plaintiffs in Hillson et. al. v Kelly Services in order to avoid the cost of continued litigation. On August 17, 2017, the District Court approved the settlement and entered a Final Order of Judgment and Dismissal. The Company made the final payment, which was accrued in 2015, on September 19, 2017.

In addition, theThe 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, or anti-competition regulations. There areregulations, commercial and contractual disputes, and tax-related matters that are currently stayed pendingwhich could result in a decision from the Supreme Court of the United States on whether the Company’s arbitration provision is enforceable.  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 onand in accrued workers’ compensation and other claims in the consolidated balance sheet. At year-end 2022 and 2021, the gross accrual for litigation costs amounted to $2.3 million and $1.4 million, respectively.

The Company maintains insurance coverage which may cover certain losses. When losses exceed the applicable policy deductible and realization of recovery of the loss 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 and other assets in the consolidated balance sheet. At year-end 2022 and 2021, the related insurance receivables amounted to $0.6 million and zero, respectively.

During the third quarter of 2021, the Company filed a claim under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld. The claim asserts damages arising out of alleged breaches by the sellers of Softworld of certain representations and warranties contained in the purchase agreement relating to periods prior to the closing of the acquisition. During the fourth quarter of 2021, the Company entered into a settlement agreement and mutual release with the insurer resolving all claims under the policy in exchange for a payment of $19.0 million, which was received prior to year-end 2021.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is zero to $5.6 million as of year-end 2022. 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.


At year-end 2017 and 2016, the gross accrual for litigation costs amounted to $5.3 million and $9.2 million, respectively, which are included in accounts payable and accrued liabilities in the consolidated balance sheet.

18.23. 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 CODMCompany’s chief operating decision-maker ("CODM", the Company’s CEO) to determine resource allocation and assess performance. DuringThe Company’s five reportable segments, (1) Professional & Industrial, (2) Science, Engineering & Technology, (3) Education, (4) Outsourcing & Consulting, and (5) International, reflect the first quarter of 2017, the Company’s CODM, who was previously the Company’s Chief Executive Officer (“CEO”) and Chief Operating Officer, was determined to be the Company’s CEO. The Company regularly assesses its organizational structure, product/service offerings and information evaluated by the CODM to determine whether any changes have occurred that would impact its segment reporting structure. During the first quarter of 2017,specialty services the Company realigned its business into three reportable segments, which reflect how the Company delivers servicesprovides to customers and represent how itsthe business is organized internally. These segments are: (1) Americas Staffing, (2) Global Talent Solutions (“GTS”) and (3) International Staffing. Accordingly, prior year’s segment information was recast to conform to the current presentation. Intersegment revenue represents revenue earned between the reportable segments and is eliminated from total segment revenue from services.
Americas Staffing represents the Company’s branch-delivered
Professional & Industrial delivers staffing, businessoutcome-based and permanent placement services focused on office, professional, light industrial and contact center specialties in the U.S., and Canada, Puerto Rico, Mexicoincluding our KellyConnect and Brazil.Skilled Professional Solutions products. Science, Engineering & Technology delivers staffing, outcome-based and permanent placement services focused on science and clinical research, engineering, technology and telecommunications specialties predominantly in the U.S. and Canada. Education delivers staffing, permanent placement and executive search services across the full education spectrum from early childhood to higher education in the U.S. Outsourcing & Consulting is focused on providing MSP, RPO, PPO and Talent Advisory Services to customers on a global basis. International Staffing represents the EMEA region branch-delivereddelivers staffing, business,RPO and permanent placement services in Europe, as well as the Company’s APACservices in Mexico in accordance with recent changes in labor market regulations and, prior to August 2020, Brazil (see Acquisitions and Dispositions footnote).

89

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

region staffing business prior to the transaction to form the PersolKelly Asia Pacific joint venture in July 2016. Americas Staffing and International Staffing both deliver temporary staffing, as well as direct-hire placement services, in office-clerical, educational, light industrial and professional and technical specialties within their geographic regions.
GTS combines the delivery structure of the Company’s outsourcing and consulting group and centrally delivered staffing business. It reflects the trend of customers towards the adoption of holistic talent supply chain solutions which combine contingent labor, full-time hiring and outsourced services. GTS includes centrally delivered staffing, recruitment process outsourcing (“RPO”), contingent workforce outsourcing (“CWO”), business process outsourcing (“BPO”), payroll process outsourcing (“PPO”), executive placement, career transition/outplacement services and talent advisory services.
Corporate expenses that directly support the operating units have been allocated to Americas Staffing, GTSProfessional & Industrial, Science, Engineering & Technology, Education, Outsourcing & Consulting and International Staffing based on work effort, volume or, in the absence of a readily available measurement process, proportionately based on gross profit realized. Unallocated corporate expenses include those related to incentive compensation, law and risk management, certain finance and accounting functions, executive management, corporate campus facilities, IT production support, certain legal costs and expenses related to corporate initiatives that do not directly benefit a specific operating segment.
In connection Consistent with the realignmentinformation provided to and evaluated by the CODM, the goodwill impairment charge in the first quarter of the segment structure, we reassessed the allocation of corporate expenses to the operating segments and updated the allocation method for corporate expenses which do not have a readily available measurement from revenue to gross profit. Prior periods have been recast to reflect the current period allocation method. The update had no impact on the consolidated financial information.2020 is included in Corporate expenses.

The following tables present information about the reported revenue from services and gross profit of the Company by reportable segment, along with a reconciliation to consolidated earnings (loss) before taxes and equity in net earnings (loss) of affiliate, for 2017, 20162022, 2021 and 2015. GTS segment SG&A expenses for 2016 include a $2.8 million out-of-period adjustment recorded in the fourth quarter of 2016 related to certain aged accounts receivable recorded prior to 2015 at a subsidiary in Germany. The correction did not have a material effect on any of the periods impacted.
2020.Asset information by reportable segment is not presented, since the Company does not produce such information internally nor does it use such datainformation to manage its business.

 202220212020
 (In millions of dollars)
Revenue from Services: 
Professional & Industrial$1,666.2 $1,837.4 $1,858.4 
Science, Engineering & Technology1,265.4 1,156.8 1,019.1 
Education636.2 416.5 286.9 
Outsourcing & Consulting468.0 432.1 363.5 
International932.2 1,067.8 988.6 
Less: Intersegment revenue(2.6)(0.9)(0.5)
Consolidated Total$4,965.4 $4,909.7 $4,516.0 
90
 2017 2016 2015
 (In millions of dollars)
Revenue from Services:     
Americas Staffing$2,345.9
 $2,191.6
 $2,209.0
Global Talent Solutions1,998.9
 1,977.1
 1,997.2
International Staffing1,048.2
 1,127.1
 1,332.7
      
Less: Intersegment revenue(18.6) (19.0) (20.7)
      
Consolidated Total$5,374.4
 $5,276.8
 $5,518.2

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

 202220212020
 (In millions of dollars)
Earnings (Loss) from Operations: 
Professional & Industrial gross profit$302.5 $310.0 $330.2 
Professional & Industrial SG&A expenses(270.5)(278.6)(288.6)
Professional & Industrial earnings (loss) from operations32.0 31.4 41.6 
Science, Engineering & Technology gross profit297.0 253.9 209.4 
Science, Engineering & Technology SG&A expenses(214.9)(180.2)(134.4)
Science, Engineering & Technology earnings (loss) from operations82.1 73.7 75.0 
Education gross profit100.3 65.1 42.2 
Education SG&A expenses(81.8)(62.1)(51.2)
Education earnings (loss) from operations18.5 3.0 (9.0)
Outsourcing & Consulting gross profit169.6 141.4 119.8 
Outsourcing & Consulting SG&A expenses(149.8)(122.7)(108.3)
Goodwill impairment charge(41.0)— — 
Outsourcing & Consulting earnings (loss) from operations(21.2)18.7 11.5 
International gross profit142.4 148.8 126.0 
International SG&A expenses(132.5)(138.9)(134.9)
International earnings (loss) from operations9.9 9.9 (8.9)
Corporate(94.0)(88.1)(203.8)
Loss on disposal(18.7)— — 
Gain on sale of assets6.2 — — 
Consolidated Total14.8 48.6 (93.6)
Gain (loss) on investment in Persol Holdings(67.2)121.8 (16.6)
Loss on currency translation from liquidation of subsidiary(20.4)— — 
Other income (expense), net1.6 15.4 3.4 
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate$(71.2)$185.8 $(106.8)

Depreciation and amortization expense included in SG&A expenses by segment above are as follows:

202220212020
(In millions of dollars)
Depreciation and amortization:
Professional & Industrial$3.7 $5.3 $5.5 
Science, Engineering & Technology12.7 10.6 4.2 
Education5.2 3.6 3.6 
Outsourcing & Consulting3.5 0.7 0.7 
International1.7 2.0 2.3 

91
 2017 2016 2015
 (In millions of dollars)
Earnings from Operations:     
Americas Staffing gross profit$429.1
 $398.2
 $394.1
Americas Staffing SG&A expenses(346.4) (329.4) (333.6)
Americas Staffing Earnings from Operations82.7
 68.8
 60.5
      
Global Talent Solutions gross profit373.7
 345.9
 331.4
Global Talent Solutions SG&A expenses(296.7) (287.7) (260.5)
Global Talent Solutions Earnings from Operations77.0
 58.2
 70.9
      
International Staffing gross profit153.7
 166.4
 199.0
International Staffing SG&A expenses(131.6) (146.9) (175.7)
International Staffing Earnings from Operations22.1
 19.5
 23.3
      
Less: Intersegment gross profit(2.4) (4.2) (4.2)
Less: Intersegment SG&A expenses2.4
 4.2
 4.2
Net Intersegment Activity
 
 
      
Corporate(98.5) (83.3) (88.0)
Consolidated Total83.3
 63.2
 66.7
Gain on investment in equity affiliate
 87.2
 
Other Expense, Net(1.6) (0.7) (3.5)
      
Earnings Before Taxes$81.7
 $149.7
 $63.2

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

A summary of revenue from services by geographic area for 2017, 20162022, 2021 and 20152020 follows:

202220212020
2017 2016 2015 (In millions of dollars)
(In millions of dollars)
Revenue From Services:     
Revenue from Services:Revenue from Services:   
United States$3,894.6
 $3,722.5
 $3,705.2
United States$3,671.5 $3,513.4 $3,260.2 
International1,479.8
 1,554.3
 1,813.0
ForeignForeign1,293.9 1,396.3 1,255.8 
     
Total$5,374.4
 $5,276.8
 $5,518.2
Total$4,965.4 $4,909.7 $4,516.0 

Foreign revenue is based on the country in which the legal subsidiary is domiciled. No single foreign country’s revenue represented more than 10% of the consolidated revenues of the Company. No single customer represented more than 10% of the consolidated revenues of the Company.

A summary of long-lived assets information by geographic area as of year-end 20172022 and 20162021 follows:

2017 2016 20222021
(In millions of dollars) (In millions of dollars)
Long-Lived Assets:   Long-Lived Assets:  
United States$74.3
 $69.5
United States$72.1 $86.3 
International11.8
 11.3
ForeignForeign22.5 24.8 
   
Total$86.1
 $80.8
Total$94.6 $111.1 

Long-lived assets represent property and equipment.equipment and ROU assets. No single foreign country’s long-lived assets represented more than 10% of the consolidated long-lived assets of the Company.

19.
24. New Accounting Pronouncements

Recently Adopted

In February 2018,October 2021, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”("ASU") 2018-02 allowing reclassification2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from accumulated other comprehensive incomeContracts with Customers, to retained earningsrequire that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the income tax effects resulting fromrelated revenue contracts in accordance with Topic 606 as if it had originated the Tax Cuts and Jobs Act (the “Act”) enacted by the U.S. federal governmentcontracts. The amendments in December 2017. The new guidance eliminates the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. It also requires certain disclosures about stranded tax effects. ASU 2018-02 relates only to the reclassification of the income tax effects of the Act and does not change the underlying guidance requiring that the effect of a change in tax laws or rates be included in income from continuing operations. The ASU isthis update are effective for annual periods, andfiscal years beginning after December 15 ,2022, including interim periods within those annual periods, beginning after December 15, 2018. Itfiscal years and should be applied eitherprospectively to business combinations that occur after the effective date. We early adopted this standard in the periodfirst quarter of 2022 and the adoption or retrospectivelydid not have a material impact to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. Early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures.statements.

In May 2017,March 2020, the FASB issued ASU 2017-09 clarifying2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was effective for the Company in the first quarter of fiscal 2021. The adoption of this standard did not have a material impact to our consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01 which clarifies the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when changes toconsidering observable transactions under the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. It does not change the accounting for modifications.measurement alternative. The ASU iswas effective prospectively for annual reporting periods beginning after December 15, 2017,2020, including interim reporting periods within those annual periods, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. We do not expect thepermitted. The adoption of this ASU willstandard did not have a material impact onto our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04 simplifying the accounting for goodwill impairment for all entities. The new guidance eliminates the requirement to calculate the implied fair value of goodwill (Step 2 of the current two-step goodwill impairment test under ASC 350). Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (Step 1 of the current two-step goodwill impairment test). The ASU is effective prospectively for reporting periods beginning after December 15, 2019, with early adoption permitted for annual and interim goodwill impairment testing dates after January 1, 2017. We are currently evaluating the impact of the new guidance on our goodwill impairment testing process and consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


In November 2016,December 2019, the FASB issued ASU 2016-18 amending2019-12 simplifying various aspects related to the presentationaccounting for income taxes. The guidance removes exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows.deferred tax liabilities for outside basis differences. The ASU iswas effective retrospectively for annual reporting periods beginning after December 15, 2017, with early adoption permitted.  We are currently evaluating the impact of the new guidance and we do not expect it to have a material impact on our consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15 clarifying how entities should classify certain cash receipts and payments on the statement of cash flows. The new guidance addresses classification of cash flows related to the following transactions: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies; 6) distributions received from equity method investees; and 7) beneficial interests in securitization transactions. ASU 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This ASU is effective for annual periods, and2020, including interim reporting periods within those annual periods, with early adoption permitted. The adoption of this standard did not have a material impact to our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The ASU was effective for annual reporting periods beginning after December 15, 2017 and requires retrospective application. Early2019, including interim reporting periods within those annual periods, with early adoption permitted. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively. We adopted this guidance prospectively effective December 30, 2019. In accordance with the standard, we present capitalized implementation costs incurred in a hosting arrangement that is permitted. We are currently evaluating the impact of the new guidancea service contract as other assets on our consolidated financialbalance sheet. This presentation is consistent with the presentation of the prepayment of fees for the hosting arrangement. We recognized $1.0 million of amortization expense for capitalized implementation costs incurred in hosting arrangements for the year ended 2020 as a component of SG&A expenses in our consolidated statements andof earnings. We recognized $5.1 million of payments for capitalized implementation costs for the year ended 2020 in the same manner as payments made for fees associated with the related disclosures.hosting arrangements as a component of net cash from operating activities in our consolidated statements of cash flows. The Company's cloud computing arrangements are comprised of internal-use software platforms accounted for as service contracts. The Company does not have the ability to take possession of the software without significant penalty nor can the Company run the software on its own hardware or contract with another party unrelated to the vendor to host the software. See Summary of Significant Accounting Policies footnote.

In June 2016, the FASB issued ASU 2016-13 (ASC Topic 326), as clarified in ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2018-19, amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the currentprior methodology of delaying recognition of credit losses until it is probable a loss has been incurred. The standard also requires additional quantitative and qualitative disclosures regarding credit risk inherent in a reporting entity's portfolio, how management monitors this risk, management's estimate of expected credit losses, and the changes in the estimate that has taken place during the period. This ASU iswas effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permitted for annual reporting periods beginning after December 15, 2018. We adopted this ASU using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures, as applicable. Results for reporting periods beginning after December 30, 2019 are currently evaluatingpresented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. We recorded a decrease to retained earnings of $0.7 million, net of tax, in the first quarter 2020 for the cumulative effect of adopting ASC 326. See Credit Losses footnote for the impact ofon the new guidance on our consolidated financial statements and related disclosures. This ASU applies to trade accounts receivable and may have an impact on our calculation of the allowance for uncollectible accounts receivable.statements.

In March 2016,August 2018, the FASB issued ASU 2016-09 amending several aspects of share-based payment accounting. This guidance requires all excess tax benefits2018-13 which eliminates, adds and tax deficiencies to be recorded in the income statement when the awards vest or are settled, with prospective application required.modifies certain fair value measurement disclosures. The guidance also changes the classification of such tax benefits or tax deficiencies on the statement of cash flows from a financing activity to an operating activity, with retrospective or prospective application allowed. Additionally, the guidance requires the classification of employee taxes paid when an employer withholds shares for tax-withholding purposes as a financing activity on the statement of cash flows, with retrospective application required. This ASU iswas effective for annual reporting periods andbeginning after December 15, 2019, including interim reporting periods within those annual periods, beginning after December 15, 2016. Earlywith early adoption is permitted. We adoptedThe adoption of this guidance effective January 2, 2017, and the adoptionstandard did not have a material effect on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02 amending the existing accounting standards for lease accounting and requiring lessees to recognize lease assets and lease liabilities for all leases with lease terms of more than 12 months, including those classified as operating leases. Both the asset and liability will initially be measured at the present value of the future minimum lease payments, with the asset being subject to adjustments such as initial direct costs. Consistent with current U.S. GAAP, the presentation of expenses and cash flows will depend primarily on the classification of the lease as either a finance or an operating lease. The new standard also requires additional quantitative and qualitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases in order to provide additional information about the nature of an organization’s leasing activities. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and requires modified retrospective application. Early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. As our branch operations are primarily conducted in leased facilities, this ASU will likely have a material impact on our consolidated balance sheet, may have a material impact to our consolidated statement of earnings and will require us to disclose additional information about our leasing activities. We established a cross-functional implementation team to further assess the impact of the standard.
In January 2016, the FASB issued ASU 2016-01 amending the current guidance for how entities measure certain equity investments, the accounting for financial liabilities under the fair value option, and the presentation and disclosure requirements relating to financial instruments. The new guidance requires entities to use fair value measurement for equity investments in unconsolidated entities, excluding equity method investments, and to recognize the changes in fair value in net income at the end of each reporting period. Under the new standard, for any financial liabilities in which the fair value option has been elected, the changes in fair value due to instrument-specific credit risk must be recognized separately in other comprehensive income. Presentation and disclosure requirements under the new guidance require public business entities to use the exit price
KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

when measuring the fair value of financial instruments measured at amortized cost. In addition, financial assets and liabilities must now be presented separately in the notes to the financial statements and grouped by measurement category and form of financial asset. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is only permitted for the financial liability provision. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. We expect to implement the standard with the modified retrospective method and the cumulative reclassification adjustment between other comprehensive income and retained earnings on the consolidated balance sheet is expected to be material. This standard will impact how we recognize changes in the fair value of our available-for-sale investment. Those amounts will now be recognized as gains or losses in our consolidated statements of earnings rather than as a component of other comprehensive income, and could have a material impact on our consolidated financial statements. For example, we have performed a sensitivity analysis in which a 140 yen, or 5%, change in the Persol stock price as of December 31, 2017 would result in an $11.4 million change in pretax income. See Fair Value Measurements footnote for additional information on the investment.
In May 2014, the FASB issued new revenue recognition guidance under ASU 2014-09 that will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard focuses on creating a single source of revenue guidance for revenue arising from contracts with customers for all industries. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. In July 2015, the FASB deferred the effective date by one year (ASU 2015-14). This ASU will now be effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2017. Since the issuance of the original standard, the FASB has issued several other subsequent updates including the following: 1) clarification of the implementation guidance on principal versus agent considerations (ASU 2016-08); 2) further guidance on identifying performance obligations in a contract as well as clarifications on the licensing implementation guidance (ASU 2016-10); 3) rescission of several SEC Staff Announcements that are codified in Topic 605 (ASU 2016-11); 4) additional guidance and practical expedients in response to identified implementation issues (ASU 2016-12); and 5) technical corrections and improvements (ASU 2016-20). The new standard is effective for us beginning January 1, 2018.
We established a cross-functional implementation team consisting of representatives from across our business segments and various departments. We utilized a bottom-up approach to analyze the impact of the standard on our various revenue streams by reviewing our current contracts with customers, accounting policies and business practices to identify potential differences that would result from applying the requirements of the new standard. In addition, we identified, and are in the process of implementing, appropriate changes to our business processes, systems and controls to support recognition and disclosure under the new standard.Not Yet Adopted
We have been closely monitoring FASB activity related to the new standard to conclude on specific interpretive issues. During 2016 and 2017, we made significant progress toward completing our evaluation of the potential impact that adopting the new standard will have on our consolidated financial statements. Based on our preliminary analysis, revenue from our temporary staffing contracts and substantially all of our other contracts with customers will continue to be recognized over time as services are rendered. The primary impact of adopting ASU 2014-09 is anticipated to be the deferral of contract costs. Additionally, we anticipate expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from our contracts with customers. As we finalize our review of current contracts with customers, accounting policies and business practices, we will continue to evaluate the impact of this guidance on our consolidated financial statements, disclosures and internal controls. Our preliminary assessments are subject to change. We expect to implement the standard with the modified retrospective approach effective January 1, 2018, which recognizes the cumulative effect of application recognized on that date. The cumulative effect adjustment is expected to be less than $5 million and the ongoing impact to revenue and earnings from operations is not expected to be material.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

20. Related Party Transactions
93
Terence E. Adderley, the Executive Chairman and Chairman of the Board of our board of directors, and certain trusts with respect to which he acts as trustee or co-trustee, control approximately 93% of the outstanding shares of Kelly Class B common stock, which is the only class of our common stock entitled to voting rights. Mr. Adderley receives compensation relative to his services as executive chairmen of the Company. There were no material transactions between the Company and Terence E. Adderley in 2017 or 2016.
See Investment in PersolKelly Asia Pacific footnote for a description of related party activity with PersolKelly Asia Pacific.

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

25. Related Party Transactions
21. Selected Quarterly Financial Data (unaudited)
The Terence E. Adderley Revocable Trust K (“Trust K”), which became irrevocable upon the death of Terence E. Adderley (the former Chairman of the Company's board of directors) on October 9, 2018, controls approximately 93.5% of the outstanding shares of Kelly Class B common stock. There were no material transactions between the Company and Trust K or its trustees in 2022, 2021 or 2020.

See Investment in PersolKelly Pte. Ltd. footnote for a description of related party activity with PersolKelly Pte. Ltd.

94
 Fiscal Year 2017
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 Year
 (In millions of dollars except per share data)
Revenue from services$1,289.7
 $1,333.6
 $1,328.8
 $1,422.3
 $5,374.4
Gross profit231.6
 228.8
 230.7
 263.0
 954.1
SG&A expenses (2)
215.2
 208.5
 212.5
 234.6
 870.8
Restructuring charges included in SG&A expenses2.4
 
 
 
 2.4
Net earnings12.2
 18.7
 23.0
 17.7
 71.6
Basic earnings per share (1)
0.31
 0.48
 0.59
 0.46
 1.84
Diluted earnings per share (1)
0.31
 0.47
 0.58
 0.45
 1.81
Dividends per share0.075
 0.075
 0.075
 0.075
 0.30

 Fiscal Year 2016
 First
Quarter
 Second
Quarter
 Third
Quarter
 
Fourth
Quarter
(3)
 Year
 (In millions of dollars except per share data)
Revenue from services$1,349.1
 $1,375.5
 $1,247.8
 $1,304.4
 $5,276.8
Gross profit232.7
 230.5
 215.1
 228.0
 906.3
SG&A expenses218.0
 220.6
 196.3
 208.2
 843.1
Restructuring charges included in SG&A expenses
 3.4
 
 
 3.4
Gain on investment in PersolKelly Asia Pacific
 
 87.2
 
 87.2
Net earnings11.2
 8.9
 80.9
 19.8
 120.8
Basic earnings per share (1)
0.29
 0.23
 2.08
 0.51
 3.10
Diluted earnings per share (1)
0.29
 0.23
 2.06
 0.51
 3.08
Dividends per share0.05
 0.075
 0.075
 0.075
 0.275

(1)Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.
(2)SG&A expenses in the third quarter and full year of 2017 includes a $2.8 million and $1.4 million, respectively, benefit resulting from an out-of-period correction of expenses that were overstated in prior periods.
(3)SG&A expenses in the fourth quarter of 2016 includes a $2.8 million out-of-period adjustment related to certain aged accounts receivable recorded prior to 2015 at a subsidiary in Germany. The correction did not have a material effect on any of the periods impacted.



KELLY SERVICES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION RESERVES
(In millions of dollars)
   Additions      
 Balance at beginning of year Charged to costs and expenses Charged to other accounts Currency exchange effects Deductions from reserves Balance at end of year
Description           
            
Fiscal year ended December 31, 2017           
            
Reserve deducted in the balance sheet from the assets to which it applies -           
            
Allowance for doubtful accounts$12.5
 5.3
 0.3
(1) 
0.6
 (5.8) $12.9
            
Deferred tax assets valuation allowance$42.1
 1.7
 
 3.3
 (12.5) $34.6
            
Fiscal year ended January 1, 2017           
            
Reserve deducted in the balance sheet from the assets to which it applies -           
            
Allowance for doubtful accounts$10.5
 10.2
 0.8
(1) 
(0.8) (8.2) $12.5
            
Deferred tax assets valuation allowance$50.9
 2.4
 
 (2.9) (8.3) $42.1
            
Fiscal year ended January 3, 2016           
            
Reserve deducted in the balance sheet from the assets to which it applies -           
            
Allowance for doubtful accounts$10.7
 3.7
 

(0.5) (3.4) $10.5
            
Deferred tax assets valuation allowance$58.5
 2.0
 
 (5.3) (4.3) $50.9
  Additions    
 Balance at beginning of yearCharged to costs and expensesCharged to other accounts Currency exchange effectsDeductions from reservesBalance at end of year
Description       
Fiscal year ended January 1, 2023       
Reserve deducted in the balance sheet from the assets to which it applies -       
Deferred tax assets valuation allowance$19.0 15.8 —  (0.7)(0.1)$34.0 
Fiscal year ended January 2, 2022       
Reserve deducted in the balance sheet from the assets to which it applies -       
Deferred tax assets valuation allowance$20.2 0.5 — (0.8)(0.9)$19.0 
Fiscal year ended January 3, 2021       
Reserve deducted in the balance sheet from the assets to which it applies -       
Deferred tax assets valuation allowance$19.0 3.7 — 0.5 (3.0)$20.2 
 

95



INDEX TO EXHIBITS
REQUIRED BY ITEM 601
REGULATIONS S-K
(1)Exhibit No.Adjustment to provision for sales allowances charged to revenue from services.


Description
INDEX TO EXHIBITS
REQUIRED BY ITEM 601
REGULATIONS S-K
Exhibit No.Description
Amended and Restated Certificate of Incorporation, effective May 6, 20099, 2018 (Reference is made to Exhibit 3.1 to the Form 10-Q8-K filed with the Commission on May 7, 2014,11, 2018, which is incorporated herein by reference).
By-laws, effective MayNovember 6, 20092018 (Reference is made to Exhibit 3.23.1 to the Form 10-Q8-K filed with the Commission on MayNovember 7, 2014,2018, which is incorporated herein by reference).
Description of Securities (Reference is made to Exhibit 4 to the Form 10-K filed with the Commission on February 13, 2020, which is incorporated herein by reference).
Kelly Services, Inc. Short-Term Incentive Plan, as amended and restated February 12, 2015January 1, 2020 (Reference is made to Exhibit 10.1 to the Form 10-Q10-K filed with the Commission on August 5, 2015,February 18, 2021, which is incorporated herein by reference).
Kelly Services, Inc. Equity Incentive Plan (Reference is made to Exhibit 10.1 to the Form 8-K filed with the Commission on May 12, 2017, which is incorporated herein by reference).
Kelly Services, Inc. Amended and Restated Senior Executive Severance Plan (Reference is made to Exhibit 10.310.1 to the Form 8-K filed with the Commission on May 4, 2021, which is incorporated herein by reference).
Kelly Services, Inc. Non-Employee Directors Deferred Compensation Plan (Reference is made to Exhibit 10.4 to the Form 10-K filed with the Commission on February 20, 2018, which is incorporated herein by reference).
First Amendment to the Kelly Services, Inc. Non-Employee Directors Deferred Compensation Plan (Reference is made to Exhibit 10.5 to the Form 10-K filed with the Commission on February 13, 2020, which is incorporated herein by reference).
First Amendment to Third Amended and Restated Credit Agreement, dated November 4, 2022 (Reference is made to Exhibit 10.8 to the Form 8-K filed with the Commission on November 10, 2022, which is incorporated herein by reference).
Agreement of Purchase and Sale, A.F.J. Development Company and Kelly Properties, LLC (Reference is made to Exhibit 10.7 to the Form 10-K filed with the Commission on February 13, 2020, which is incorporated herein by reference).
Employment Agreement between Kelly Services Management Sarl and Olivier Thirot (Reference is made to Exhibit 10.8 to the Form 10-Q filed with the Commission on May 11, 2017,12, 2022, which is incorporated herein by reference).
Second Addendum to Employment Agreement between Kelly Services Inc. Non-Employee Directors Deferred Compensation Plan.
Second amendedManagement Sarl and restated credit agreement, dated December 5, 2016Berendina Maria Bekhuis Koolhaas (Reference is made to Exhibit 10.610.9 to the Form 8-K10-Q filed with the Commission on December 9, 2016,August 11, 2022, which is incorporated herein by reference).
Kelly Services, Inc. 2008 Management Retirement Plan – Post 2004as amended and restated January 1, 2020 (Reference is made to Exhibit 10.12 to the Form 10-Q10-K filed with the Commission on November 7, 2012,February 18, 2021, which is incorporated herein by reference).
96


INDEX TO EXHIBITS
REQUIRED BY ITEM 601
REGULATION S-K (continued)
Exhibit No.Description
First Amendment to the Kelly Services, Inc. 2008 Management Retirement Plan (Reference is made to Exhibit 10.13 to the Form 10-Q filed with the Commission on November 7, 2012, which is incorporated herein by reference).
Amended and Restated Pledge and Security Agreement, dated September 28, 2009December 5, 2019 (Reference is made to Exhibit 10.14 to the Form 8-K filed with the Commission on September 29, 2009,December 9, 2019, which is incorporated herein by reference).
First Amended and Restated Receivables Purchase Agreement Amendment No. 2, dated December 5, 201630, 2021 (Reference is made to Exhibit 10.15 to the Form 8-K filed with the Commission on December 9, 2016,January 5, 2022, which is incorporated herein by reference).
First Amended and Restated Receivables Purchase Agreement Amendment to Kelly Services, Inc. 2008 Management Retirement Plan.No. 3, dated September 21, 2022 (Reference is made to Exhibit 10.2110.16 to the Form 8-K10-Q filed with the commissionCommission on August 11, 2014,November 10, 2022, which is incorporated herein by reference.)reference).
Code of Business Conduct and Ethics, adoptedrevised August 7, 2017.2022 (Reference is made to Exhibit 14 to the Form 10-Q filed with the commission on November 8, 2017,10, 2022, which is incorporated herein by reference.)
Subsidiaries of Registrant.

reference).
INDEX TO EXHIBITS
REQUIRED BY ITEM 601,
REGULATION S-K (continued)
Subsidiaries of Registrant.
Exhibit No.Description
Consent of Independent Registered Public Accounting Firm.
Power of Attorney.
Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.
Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema DocumentDocument.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentDocument.
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* Indicates a management contract or compensatory plan or arrangement.

97



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 16, 2023
KELLY SERVICES, INC.
Registrant 
By /s/ Olivier G. Thirot
Olivier G. Thirot
Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: February 16, 2023*/s/ P. W. Quigley
P. W. Quigley
President, Chief Executive Officer and Director 
(Principal Executive Officer) 
Date: February 16, 2023*/s/ D. R. Parfet 
D. R. Parfet 
Chairman of the Board and Director
Date: February 16, 2023*/s/ G. S. Adolph
G. S. Adolph 
Director 
Date: February 16, 2023*/s/ G. S. Corona
G. S. Corona
Director
Date: February 16, 2023*/s/ R. S. Cubbin
R. S. Cubbin
Director 
Date: February 16, 2023*
/s/ A.Duggirala
A. Duggirala
Director
Date: February 16, 2023*/s/ I. F. Johnson
I. F. Johnson
Director
Date: February 16, 2023*/s/ T. B. Larkin 
T. B. Larkin 
Director 
Date: February 16, 2023*/s/ L. A. Murphy 
L. A. Murphy 
Director 
83
98


SIGNATURES (continued)

Date: February 16, 2023/s/ O. G. Thirot
O. G. Thirot
Executive Vice President and Chief Financial Officer
(Principal Financial Officer) 
Date: February 16, 2023/s/ L. S. Lockhart
L. S. Lockhart
Vice President, Corporate Controller and Chief Accounting Officer 
(Principal Accounting Officer) 
Date: February 16, 2023*By/s/ O.G. Thirot
O.G. Thirot
Attorney-in-Fact 

99