UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 27, 2020~~April 4, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-1088

KELLY SERVICES, INC.

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(Exact name of registrant as specified in its charter)


Delaware						38-1510762
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

999 West Big Beaver Road, Troy, Michigan 48084

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(Address of principal executive offices) (Zip Code)

(248) 362-4444

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(Registrant’s telephone number, including area code)

No Change

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(Former name, former address and former fiscal year, if changed since last report.)

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


Title of each class	Trading Symbols	Name of each exchange on which registered
Class A Common	KELYA	NASDAQ Global Market
Class B Common	KELYB	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒☐	Accelerated filer	☐☒
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At ~~October 26, 2020, 35,869,222~~May 3, 2021, 36,010,525 shares of Class A and ~~3,427,538~~3,358,521 shares of Class B common stock of the Registrant were outstanding.

KELLY SERVICES, INC. AND SUBSIDIARIES


			Page Number

PART I. FINANCIAL INFORMATION			4

Item 1. Financial Statements (unaudited).			4

Consolidated Statements of Earnings			4

Consolidated Statements of Comprehensive Income (Loss)			5

Consolidated Balance Sheets			6

Consolidated Statements of Stockholders' Equity			8

Consolidated Statements of Cash Flows			9

Notes to Consolidated Financial Statements			11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			3027

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			4540

Item 4. Controls and Procedures.			4540

PART II. OTHER INFORMATION			4540

Item 1. Legal Proceedings.			4540

Item 1A. Risk Factors.			4641

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			4742

Item 3. Defaults Upon Senior Securities.			4742

Item 4. Mine Safety Disclosures.			4742

Item 5. Other Information.			4742

Item 6. Exhibits.			4742

SIGNATURES			4944

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

(In millions of dollars except per share data)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			April 4, 2021		March 29, 2020
Revenue from services	Revenue from services	$	1,038.2	$	1,267.7	$	3,274.6	$	4,017.8	Revenue from services	$	1,205.9	$	1,261.1

Cost of services	Cost of services	847.2		1,040.0		2,671.1		3,294.5		Cost of services	992.6		1,037.8

Gross profit	Gross profit	191.0		227.7		603.5		723.3		Gross profit	213.3		223.3

Selling, general and administrative expenses	Selling, general and administrative expenses	193.4		210.6		591.0		666.9		Selling, general and administrative expenses	202.7		219.5

Goodwill impairment charge	Goodwill impairment charge	0		0		147.7		0		Goodwill impairment charge	0		147.7

Gain on sale of assets	Gain on sale of assets	0		0		(32.1)		(12.3)		Gain on sale of assets	0		(32.1)

Earnings (loss) from operations	Earnings (loss) from operations	(2.4)		17.1		(103.1)		68.7		Earnings (loss) from operations	10.6		(111.8)

Gain (loss) on investment in Persol Holdings	Gain (loss) on investment in Persol Holdings	16.8		(39.3)		(31.4)		35.1		Gain (loss) on investment in Persol Holdings	30.0		(77.8)

Other income (expense), net	Other income (expense), net	(0.7)		(0.2)		3.6		(1.1)		Other income (expense), net	(3.4)		1.7

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	13.7		(22.4)		(130.9)		102.7		Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	37.2		(187.9)

Income tax expense (benefit)	Income tax expense (benefit)	(1.2)		(12.8)		(36.5)		6.3		Income tax expense (benefit)	10.5		(36.2)

Net earnings (loss) before equity in net earnings (loss) of affiliate	Net earnings (loss) before equity in net earnings (loss) of affiliate	14.9		(9.6)		(94.4)		96.4		Net earnings (loss) before equity in net earnings (loss) of affiliate	26.7		(151.7)

Equity in net earnings (loss) of affiliate	Equity in net earnings (loss) of affiliate	1.8		(0.9)		(1.0)		(1.0)		Equity in net earnings (loss) of affiliate	(1.1)		(1.5)

Net earnings (loss)	Net earnings (loss)	$	16.7	$	(10.5)	$	(95.4)	$	95.4	Net earnings (loss)	$	25.6	$	(153.2)

Basic earnings (loss) per share	Basic earnings (loss) per share	$	0.42	$	(0.27)	$	(2.43)	$	2.42	Basic earnings (loss) per share	$	0.65	$	(3.91)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.42	$	(0.27)	$	(2.43)	$	2.41	Diluted earnings (loss) per share	$	0.64	$	(3.91)

Average shares outstanding (millions):	Average shares outstanding (millions):									Average shares outstanding (millions):
Basic	Basic	39.3		39.1		39.3		39.0		Basic	39.3		39.2
Diluted	Diluted	39.4		39.1		39.3		39.2		Diluted	39.5		39.2

See accompanying unaudited Notes to Consolidated Financial ~~Statements.~~Statements..

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In millions of dollars)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			April 4, 2021		March 29, 2020
Net earnings (loss)	Net earnings (loss)	$	16.7	$	(10.5)	$	(95.4)	$	95.4	Net earnings (loss)	$	25.6	$	(153.2)

Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax expense of $0.4, tax benefit of $0.2, tax expense of $0.0 and tax benefit of $0.1, respectively		5.1		(6.2)		0.4		(0.8)
Less: Reclassification adjustments included in net earnings		(1.5)		0		(1.5)		0
Foreign currency translation adjustments, net of tax expense of $0.5 and $0.1, respectively										Foreign currency translation adjustments, net of tax expense of $0.5 and $0.1, respectively	(13.6)		(7.4)
Less: Reclassification adjustments included in net earnings (loss)										Less: Reclassification adjustments included in net earnings (loss)	0		0
Foreign currency translation adjustments	Foreign currency translation adjustments	3.6		(6.2)		(1.1)		(0.8)		Foreign currency translation adjustments	(13.6)		(7.4)

Other comprehensive income (loss)	Other comprehensive income (loss)	3.6		(6.2)		(1.1)		(0.8)		Other comprehensive income (loss)	(13.6)		(7.4)

Comprehensive income (loss)	Comprehensive income (loss)	$	20.3	$	(16.7)	$	(96.5)	$	94.6	Comprehensive income (loss)	$	12.0	$	(160.6)

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions)


		September 27, 2020		December 29, 2019			April 4, 2021		January 3, 2021
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and equivalents	Cash and equivalents	$	248.2	$	25.8	Cash and equivalents	$	239.4	$	223.0
Trade accounts receivable, less allowances of $11.4 and $12.9, respectively		1,111.4		1,282.2
Trade accounts receivable, less allowances of $12.6 and $13.3, respectively						Trade accounts receivable, less allowances of $12.6 and $13.3, respectively	1,279.7		1,265.2
Prepaid expenses and other current assets	Prepaid expenses and other current assets	71.4		76.5		Prepaid expenses and other current assets	76.5		61.4
Properties held for sale		0		21.2

Total current assets	Total current assets	1,431.0		1,405.7		Total current assets	1,595.6		1,549.6

Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Property and equipment:	Property and equipment:					Property and equipment:
Property and equipment	Property and equipment	220.6		225.8		Property and equipment	215.4		222.3
Accumulated depreciation	Accumulated depreciation	(179.8)		(182.7)		Accumulated depreciation	(176.5)		(181.3)
Net property and equipment	Net property and equipment	40.8		43.1		Net property and equipment	38.9		41.0
Operating lease right-of-use assets	Operating lease right-of-use assets	84.0		60.4		Operating lease right-of-use assets	79.0		83.2
Deferred taxes	Deferred taxes	273.3		229.1		Deferred taxes	286.4		282.0
Goodwill, net	Goodwill, net	0		127.8		Goodwill, net	3.5		3.5
Investment in Persol Holdings	Investment in Persol Holdings	145.8		173.2		Investment in Persol Holdings	181.7		164.2
Investment in equity affiliate	Investment in equity affiliate	115.6		117.2		Investment in equity affiliate	118.7		118.5
Other assets	Other assets	301.2		324.1		Other assets	306.3		319.9
Total noncurrent assets	Total noncurrent assets	960.7		1,074.9		Total noncurrent assets	1,014.5		1,012.3

Total Assets	Total Assets	$	2,391.7	$	2,480.6	Total Assets	$	2,610.1	$	2,561.9

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions)


		September 27, 2020		December 29, 2019			April 4, 2021		January 3, 2021
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-term borrowings	Short-term borrowings	$	0.5	$	1.9	Short-term borrowings	$	1.1	$	0.3
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	458.4		503.6		Accounts payable and accrued liabilities	554.3		536.8
Operating lease liabilities	Operating lease liabilities	19.5		20.1		Operating lease liabilities	18.8		19.6
Accrued payroll and related taxes	Accrued payroll and related taxes	240.7		267.6		Accrued payroll and related taxes	309.9		293.0
Accrued workers’ compensation and other claims	Accrued workers’ compensation and other claims	25.0		25.7		Accrued workers’ compensation and other claims	21.9		22.7
Income and other taxes	Income and other taxes	52.4		65.2		Income and other taxes	56.9		53.2

Total current liabilities	Total current liabilities	796.5		884.1		Total current liabilities	962.9		925.6

Noncurrent Liabilities	Noncurrent Liabilities					Noncurrent Liabilities
Operating lease liabilities	Operating lease liabilities	68.1		43.3		Operating lease liabilities	63.9		67.5
Accrued payroll and related taxes	Accrued payroll and related taxes	75.7		0		Accrued payroll and related taxes	58.5		58.5
Accrued workers’ compensation and other claims	Accrued workers’ compensation and other claims	44.4		45.8		Accrued workers’ compensation and other claims	40.7		42.2
Accrued retirement benefits	Accrued retirement benefits	188.2		187.4		Accrued retirement benefits	204.7		205.8
Other long-term liabilities	Other long-term liabilities	52.7		55.5		Other long-term liabilities	63.7		59.3
Total noncurrent liabilities	Total noncurrent liabilities	429.1		332.0		Total noncurrent liabilities	431.5		433.3

Commitments and contingencies (see Contingencies footnote)	Commitments and contingencies (see Contingencies footnote)					Commitments and contingencies (see Contingencies footnote)	0		0

Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Capital stock, $1.00 par value	Capital stock, $1.00 par value					Capital stock, $1.00 par value
Class A common stock, 100.0 shares authorized; 36.6 shares issued at 2020 and 2019		36.6		36.6
Class B common stock, 10.0 shares authorized; 3.5 shares issued at 2020 and 2019		3.5		3.5
Class A common stock, 100.0 shares authorized; 36.7 shares issued at 2021 and 2020						Class A common stock, 100.0 shares authorized; 36.7 shares issued at 2021 and 2020	36.7		36.7
Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2021 and 2020						Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2021 and 2020	3.4		3.4
Treasury stock, at cost	Treasury stock, at cost					Treasury stock, at cost
Class A common stock, 0.8 shares at 2020 and 1.0 shares at 2019		(16.6)		(20.3)
Class A common stock, 0.7 shares at 2021 and 0.8 shares at 2020						Class A common stock, 0.7 shares at 2021 and 0.8 shares at 2020	(15.1)		(16.5)
Class B common stock	Class B common stock	(0.6)		(0.6)		Class B common stock	(0.6)		(0.6)
Paid-in capital	Paid-in capital	20.6		22.5		Paid-in capital	20.6		21.3
Earnings invested in the business	Earnings invested in the business	1,139.5		1,238.6		Earnings invested in the business	1,188.5		1,162.9
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(16.9)		(15.8)		Accumulated other comprehensive income (loss)	(17.8)		(4.2)
Total stockholders’ equity	Total stockholders’ equity	1,166.1		1,264.5		Total stockholders’ equity	1,215.7		1,203.0

Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	2,391.7	$	2,480.6	Total Liabilities and Stockholders’ Equity	$	2,610.1	$	2,561.9

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In millions of dollars)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			April 4, 2021		March 29, 2020
Capital Stock	Capital Stock									Capital Stock
Class A common stock	Class A common stock									Class A common stock
Balance at beginning of period	Balance at beginning of period	$	36.6	$	36.6	$	36.6	$	36.6	Balance at beginning of period	$	36.7	$	36.6
Conversions from Class B	Conversions from Class B	—		—		—		—		Conversions from Class B	—		—
Balance at end of period	Balance at end of period	36.6		36.6		36.6		36.6		Balance at end of period	36.7		36.6

Class B common stock	Class B common stock									Class B common stock
Balance at beginning of period	Balance at beginning of period	3.5		3.5		3.5		3.5		Balance at beginning of period	3.4		3.5
Conversions to Class A	Conversions to Class A	—		—		—		—		Conversions to Class A	—		—
Balance at end of period	Balance at end of period	3.5		3.5		3.5		3.5		Balance at end of period	3.4		3.5

Treasury Stock	Treasury Stock									Treasury Stock
Class A common stock	Class A common stock									Class A common stock
Balance at beginning of period	Balance at beginning of period	(16.7)		(20.9)		(20.3)		(25.4)		Balance at beginning of period	(16.5)		(20.3)
Net issuance of stock awards	Net issuance of stock awards	0.1		0.2		3.7		4.7		Net issuance of stock awards	1.4		2.9
Balance at end of period	Balance at end of period	(16.6)		(20.7)		(16.6)		(20.7)		Balance at end of period	(15.1)		(17.4)

Class B common stock	Class B common stock									Class B common stock
Balance at beginning of period	Balance at beginning of period	(0.6)		(0.6)		(0.6)		(0.6)		Balance at beginning of period	(0.6)		(0.6)
Net issuance of stock awards	Net issuance of stock awards	0		0		0		0		Net issuance of stock awards	0		0
Balance at end of period	Balance at end of period	(0.6)		(0.6)		(0.6)		(0.6)		Balance at end of period	(0.6)		(0.6)

Paid-in Capital	Paid-in Capital									Paid-in Capital
Balance at beginning of period	Balance at beginning of period	20.5		23.2		22.5		24.4		Balance at beginning of period	21.3		22.5
Net issuance of stock awards	Net issuance of stock awards	0.1		(0.9)		(1.9)		(2.1)		Net issuance of stock awards	(0.7)		(3.0)
Balance at end of period	Balance at end of period	20.6		22.3		20.6		22.3		Balance at end of period	20.6		19.5

Earnings Invested in the Business	Earnings Invested in the Business									Earnings Invested in the Business
Balance at beginning of period	Balance at beginning of period	1,122.8		1,238.1		1,238.6		1,138.1		Balance at beginning of period	1,162.9		1,238.6

Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13, Credit Losses	Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13, Credit Losses	—		—		(0.7)		—		Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13, Credit Losses	—		(0.7)
Net earnings (loss)	Net earnings (loss)	16.7		(10.5)		(95.4)		95.4		Net earnings (loss)	25.6		(153.2)
Dividends	Dividends	0		(3.0)		(3.0)		(8.9)		Dividends	0		(3.0)
Balance at end of period	Balance at end of period	1,139.5		1,224.6		1,139.5		1,224.6		Balance at end of period	1,188.5		1,081.7

Accumulated Other Comprehensive Income (Loss)	Accumulated Other Comprehensive Income (Loss)									Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period	Balance at beginning of period	(20.5)		(11.7)		(15.8)		(17.1)		Balance at beginning of period	(4.2)		(15.8)

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	3.6		(6.2)		(1.1)		(0.8)		Other comprehensive income (loss), net of tax	(13.6)		(7.4)
Balance at end of period	Balance at end of period	(16.9)		(17.9)		(16.9)		(17.9)		Balance at end of period	(17.8)		(23.2)

Stockholders’ Equity at end of period	Stockholders’ Equity at end of period	$	1,166.1	$	1,247.8	$	1,166.1	$	1,247.8	Stockholders’ Equity at end of period	$	1,215.7	$	1,100.1

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In millions of dollars)


		39 Weeks Ended					13 Weeks Ended
		September 27, 2020		September 29, 2019			April 4, 2021		March 29, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings (loss)	Net earnings (loss)	$	(95.4)	$	95.4	Net earnings (loss)	$	25.6	$	(153.2)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:	Adjustments to reconcile net earnings (loss) to net cash from operating activities:					Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Goodwill impairment charge	Goodwill impairment charge	147.7		0		Goodwill impairment charge	0		147.7
Deferred income taxes on goodwill impairment charge	Deferred income taxes on goodwill impairment charge	(23.0)		0		Deferred income taxes on goodwill impairment charge	0		(23.0)
Depreciation and amortization	Depreciation and amortization	18.0		23.8		Depreciation and amortization	5.9		6.0
Operating lease asset amortization	Operating lease asset amortization	15.9		16.9		Operating lease asset amortization	5.2		5.3
Provision for credit losses and sales allowances	Provision for credit losses and sales allowances	10.7		3.2		Provision for credit losses and sales allowances	(0.1)		(0.4)
Stock-based compensation	Stock-based compensation	2.9		4.7		Stock-based compensation	1.4		1.2
(Gain) loss on investment in Persol Holdings	(Gain) loss on investment in Persol Holdings	31.4		(35.1)		(Gain) loss on investment in Persol Holdings	(30.0)		77.8
(Gain) loss on sale of assets		(32.1)		(12.3)
Gain on sale of assets						Gain on sale of assets	0		(32.1)
Equity in net (earnings) loss of PersolKelly Pte. Ltd.	Equity in net (earnings) loss of PersolKelly Pte. Ltd.	1.0		1.0		Equity in net (earnings) loss of PersolKelly Pte. Ltd.	1.1		1.5
Other, net	Other, net	1.8		(1.0)		Other, net	1.3		0.7
Changes in operating assets and liabilities, net of acquisitions	Changes in operating assets and liabilities, net of acquisitions	137.6		(22.4)		Changes in operating assets and liabilities, net of acquisitions	0.1		(23.1)

Net cash from operating activities	Net cash from operating activities	216.5		74.2		Net cash from operating activities	10.5		8.4

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(12.3)		(13.8)		Capital expenditures	(2.7)		(3.0)
Proceeds from company-owned life insurance						Proceeds from company-owned life insurance	10.4		0
Proceeds from sale of assets	Proceeds from sale of assets	55.5		13.8		Proceeds from sale of assets	0		55.5
Acquisition of companies, net of cash received	Acquisition of companies, net of cash received	(36.4)		(86.4)		Acquisition of companies, net of cash received	0		(36.3)
Proceeds from company-owned life insurance		2.3		3.0
Proceeds from sale of Brazil, net of cash disposed		1.2		0
Loans to equity affiliate		0		(4.4)

Investment in equity securities	Investment in equity securities	(0.2)		(1.0)		Investment in equity securities	0		(0.3)
Other investing activities	Other investing activities	0.2		0		Other investing activities	0.2		0

Net cash from (used in) investing activities		10.3		(88.8)
Net cash from investing activities						Net cash from investing activities	7.9		15.9

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net change in short-term borrowings	Net change in short-term borrowings	(1.5)		15.2		Net change in short-term borrowings	0.8		(0.1)
Financing lease payments	Financing lease payments	(1.0)		(0.4)		Financing lease payments	(0.2)		(0.3)
Payments of tax withholding for stock awards						Payments of tax withholding for stock awards	(0.5)		(1.1)
Dividend payments	Dividend payments	(3.0)		(8.9)		Dividend payments	0		(3.0)
Payments of tax withholding for stock awards		(1.2)		(2.3)
Other financing activities	Other financing activities	(0.1)		0		Other financing activities	0		(0.1)

Net cash (used in) from financing activities		(6.8)		3.6
Net cash from (used in) financing activities						Net cash from (used in) financing activities	0.1		(4.6)

Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	3.4		(0.5)		Effect of exchange rates on cash, cash equivalents and restricted cash	(1.4)		2.8

Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	223.4		(11.5)		Net change in cash, cash equivalents and restricted cash	17.1		22.5

Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	31.0		40.1		Cash, cash equivalents and restricted cash at beginning of period	228.1		31.0

Cash, cash equivalents and restricted cash at end of period (1)	Cash, cash equivalents and restricted cash at end of period (1)	$	254.4	$	28.6	Cash, cash equivalents and restricted cash at end of period (1)	$	245.2	$	53.5

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(UNAUDITED)

(In millions of dollars)

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported in our consolidated balance sheets:


		39 Weeks Ended					13 Weeks Ended
		September 27, 2020		September 29, 2019			April 4, 2021		March 29, 2020
Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:					Reconciliation of cash, cash equivalents and restricted cash:
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	248.2	$	22.8	Cash and cash equivalents	$	239.4	$	48.3
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	0.9		0.8		Restricted cash included in prepaid expenses and other current assets	0.2		0.2
Noncurrent assets:	Noncurrent assets:					Noncurrent assets:
Restricted cash included in other assets	Restricted cash included in other assets	5.3		5.0		Restricted cash included in other assets	5.6		5.0
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	254.4	$	28.6	Cash, cash equivalents and restricted cash at end of period	$	245.2	$	53.5

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the “Company,” “Kelly,” “we” or “us”) have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended ~~December 29, 2019,~~January 3, 2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February ~~13,~~18, 2021 (the 2020 ~~(the 2019~~ consolidated financial statements). The Company’s ~~third~~first fiscal quarter ended on ~~September 27,~~April 4, 2021 (2021) and March 29, 2020 (2020) ~~and September 29, 2019 (2019)~~, each of which contained 13 weeks. ~~The corresponding September year to date periods for 2020 and 2019 each contained 39 weeks.~~

Noncurrent accrued payroll and related taxes of $75.7 million in the consolidated balance sheet as of third quarter-end 2020 represent deferred U.S. payroll tax payments as allowed by COVID-19 economic relief legislation. Approximately half of the balance is expected to be paid by the end of fiscal 2021, with the remaining amount expected to be paid by the end of fiscal 2022.

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

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

2. Revenue

Revenue Disaggregated by Service Type

Kelly has five specialty segments: Professional & Industrial (“P&I” ~~formerly Commercial)~~), 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):


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
Professional & Industrial	Professional & Industrial									Professional & Industrial
Staffing services	Staffing services	$	341.3	$	445.0	$	1,033.1	$	1,398.5	Staffing services	$	352.5	$	388.4
Permanent placement	Permanent placement	2.3		4.2		7.0		14.4		Permanent placement	4.9		3.0
Outcome-based services	Outcome-based services	102.9		88.8		306.6		255.8		Outcome-based services	110.2		102.4
Total Professional & Industrial	Total Professional & Industrial	446.5		538.0		1,346.7		1,668.7		Total Professional & Industrial	467.6		493.8

Science, Engineering & Technology	Science, Engineering & Technology									Science, Engineering & Technology
Staffing services	Staffing services	181.6		213.5		562.3		646.7		Staffing services	186.2		199.2
Permanent placement	Permanent placement	3.1		4.3		9.0		11.8		Permanent placement	4.8		3.4
Outcome-based services	Outcome-based services	59.3		67.4		190.2		201.2		Outcome-based services	63.7		67.6
Total Science, Engineering & Technology	Total Science, Engineering & Technology	244.0		285.2		761.5		859.7		Total Science, Engineering & Technology	254.7		270.2

Education	Education									Education
Staffing services	Staffing services	27.4		56.9		194.9		313.3		Staffing services	110.8		142.4
Permanent placement	Permanent placement	0.1		0.2		0.2		0.6		Permanent placement	0.8		0.1
Total Education	Total Education	27.5		57.1		195.1		313.9		Total Education	111.6		142.5

Outsourcing & Consulting	Outsourcing & Consulting									Outsourcing & Consulting
Talent solutions	Talent solutions	87.9		94.4		261.0		282.3		Talent solutions	99.3		89.5
Total Outsourcing & Consulting	Total Outsourcing & Consulting	87.9		94.4		261.0		282.3		Total Outsourcing & Consulting	99.3		89.5

International	International									International
Staffing services	Staffing services	228.8		287.0		697.9		873.6		Staffing services	265.6		259.5
Permanent placement	Permanent placement	3.6		6.4		12.7		20.0		Permanent placement	5.5		5.7
Talent solutions										Talent solutions	1.8		0
Total International	Total International	232.4		293.4		710.6		893.6		Total International	272.9		265.2

Total Intersegment	Total Intersegment	(0.1)		(0.4)		(0.3)		(0.4)		Total Intersegment	(0.2)		(0.1)

Total Revenue from Services	Total Revenue from Services	$	1,038.2	$	1,267.7	$	3,274.6	$	4,017.8	Total Revenue from Services	$	1,205.9	$	1,261.1

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Revenue Disaggregated by Geography

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

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


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
Americas	Americas									Americas
United States	United States	$	740.6	$	903.2	$	2,369.2	$	2,913.4	United States	$	858.5	$	928.5
Mexico										Mexico	34.6		28.7
Canada	Canada	30.3		34.6		88.7		100.8		Canada	34.1		32.8
Mexico		27.4		32.4		78.6		89.6
Puerto Rico	Puerto Rico	18.4		18.8		56.1		57.6		Puerto Rico	24.2		17.7
Brazil	Brazil	1.8		8.4		17.0		25.1		Brazil	0		9.1
Total Americas Region	Total Americas Region	818.5		997.4		2,609.6		3,186.5		Total Americas Region	951.4		1,016.8

Europe	Europe									Europe
France										France	54.3		52.5
Switzerland	Switzerland	49.6		50.6		141.2		150.0		Switzerland	52.7		44.2
France		48.8		59.7		141.2		188.6
Portugal	Portugal	31.7		44.0		99.1		135.5		Portugal	43.7		43.6
Russia	Russia	27.2		29.9		88.6		84.1		Russia	32.6		32.1
Italy										Italy	18.1		14.7
United Kingdom	United Kingdom	16.4		24.9		56.5		81.6		United Kingdom	17.0		22.3
Italy		14.5		18.5		42.5		59.8
Germany	Germany	7.0		11.5		22.1		32.5		Germany	7.1		8.0
Ireland	Ireland	4.9		7.1		14.0		28.1		Ireland	5.1		5.0

Other	Other	12.0		16.6		38.7		51.5		Other	15.6		15.2
Total Europe Region	Total Europe Region	212.1		262.8		643.9		811.7		Total Europe Region	246.2		237.6

Total Asia-Pacific Region	Total Asia-Pacific Region	7.6		7.5		21.1		19.6		Total Asia-Pacific Region	8.3		6.7

Total Kelly Services, Inc.	Total Kelly Services, Inc.	$	1,038.2	$	1,267.7	$	3,274.6	$	4,017.8	Total Kelly Services, Inc.	$	1,205.9	$	1,261.1

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

The below table presents our SET, OCG and International segment revenues disaggregated by geographic region (in millions):


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
Science, Engineering & Technology	Science, Engineering & Technology									Science, Engineering & Technology
Americas	Americas	$	242.8	$	283.2	$	757.3	$	852.3	Americas	$	253.2	$	268.4
Europe	Europe	1.2		2.0		4.2		7.4		Europe	1.5		1.8
Total Science, Engineering & Technology	Total Science, Engineering & Technology	$	244.0	$	285.2	$	761.5	$	859.7	Total Science, Engineering & Technology	$	254.7	$	270.2

Outsourcing & Consulting	Outsourcing & Consulting									Outsourcing & Consulting
Americas	Americas	$	72.9	$	78.9	$	215.9	$	238.2	Americas	$	84.8	$	74.6
Europe	Europe	7.4		8.0		24.0		24.5		Europe	6.2		8.2
Asia-Pacific	Asia-Pacific	7.6		7.5		21.1		19.6		Asia-Pacific	8.3		6.7
Total Outsourcing & Consulting	Total Outsourcing & Consulting	$	87.9	$	94.4	$	261.0	$	282.3	Total Outsourcing & Consulting	$	99.3	$	89.5

International	International									International
Americas	Americas	$	28.9	$	40.5	$	94.9	$	113.8	Americas	$	34.3	$	37.6
Europe	Europe	203.5		252.9		615.7		779.8		Europe	238.6		227.6
Total International	Total International	$	232.4	$	293.4	$	710.6	$	893.6	Total International	$	272.9	$	265.2

Deferred Costs

Deferred sales commissions, which are included in other assets in the consolidated balance sheet, were $1.0 million as of ~~third~~first quarter-end ~~2020~~2021 and ~~$1.5 million as of~~ year-end ~~2019.~~2020. Amortization expense for the deferred costs for the ~~third~~first quarter ~~and September year to date 2020~~2021 was $0.2 million and ~~$0.8 million, respectively.~~in the first quarter 2020 was ~~Amortization expense for the deferred costs for the third quarter and September year to date 2019 was $0.4 million and $1.3 million, respectively.~~$0.3 million.

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were ~~$4.0~~$2.4 million as of ~~third~~first quarter-end ~~2020~~2021 and ~~$3.6~~$4.1 million as of year-end ~~2019.~~2020. Amortization expense for the deferred costs for the ~~third~~first quarter 2021 was $6.8 million and ~~September year to date~~in the first quarter 2020 was ~~$5.3 million and $14.9 million, respectively.~~ ~~Amortization expense for the deferred costs for the third quarter and September year to date 2019 was $3.8 million and $10.3 million, respectively.~~$4.8 million.

3. Credit Losses

On December 30, 2019, we adopted Accounting Standards Codification ("ASC") Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures, as applicable. Results for reporting periods beginning after December 30, 2019 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. As a result of adopting this guidance, we have updated our accounting policies as follows.

~~Allowance for Uncollectible Accounts Receivable~~The ~~Company records an~~rollforward of our allowance for ~~uncollectible~~credit losses related to trade accounts receivable, ~~billed and unbilled, based on historical loss experience, customer payment patterns, current economic trends, and reasonable and supportable forecasts, as applicable. The reserve for sales allowances~~which is ~~also included~~recorded in trade accounts receivable, less allowance 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 receivable on a quarterly basis and, if necessary, increases or decreases theconsolidated balance by recording a charge or credit to selling, general and administrative ("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.sheet, is as follows (in millions):


	First Quarter
	2021		2020
Allowance for credit losses:
Beginning balance	$	9.8	$	9.7
Impact of adopting ASC 326	0		0.3
Current period provision	(0.2)		(0.4)
Currency exchange effects	(0.2)		(0.5)
Write-offs	(0.3)		(0.2)
Ending balance	$	9.1	$	8.9

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

~~Allowance~~Write-offs are presented net of recoveries, which were not material for ~~Credit Losses - Other Financial Assets~~first quarter-end 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,2020 and ~~reasonable and supportable forecasts, as applicable, to estimate the risk of loss.~~

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.~~2021.

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

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


	First Quarter
	2021		2020
Allowance for credit losses:
Beginning balance	$	10.9	$	1.0
Impact of adopting ASC 326	0		0.7
Current period provision	0		0
Currency exchange effects	0		0
Ending Balance	$	10.9	$	1.7

We are also exposed to credit losses from our loan to PersolKelly Pte. Ltd. and other receivables measured at amortized cost. No other allowances related to the loan or other receivables were material for ~~September year to date 2020.~~first quarter-end 2021. See Investment in PersolKelly Pte. Ltd. footnote for more information on the loan to PersolKelly Pte. Ltd.

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):


	~~September Year to Date~~
	~~2020~~
~~Allowance for credit losses:~~
~~Beginning balance~~	$	~~9.7~~
~~Impact of adopting ASC 326~~	~~0.3~~
~~Current period provision~~	~~1.2~~
~~Currency exchange effects~~	~~(0.2)~~
~~Write-offs~~	~~(1.6)~~
~~Ending balance~~	$	~~9.4~~

~~Write-offs are presented net of recoveries, which were not material for September year to date 2020.~~

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


	~~September Year to Date~~
	~~2020~~
~~Allowance for credit losses:~~
~~Beginning balance~~	$	~~1.0~~
~~Impact of adopting ASC 326~~	~~0.7~~
~~Current period provision~~	~~9.5~~
~~Currency exchange effects~~	~~(0.3)~~
~~Ending Balance~~	$	~~10.9~~

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

4. Acquisitions and Disposition

Acquisitions

In the first quarter of 2020, Kelly Services USA ("KSU"), LLC, a wholly owned subsidiary of the Company, acquired Insight Workforce Solutions LLC and its affiliate, Insight EDU LLC (collectively, "Insight"), as detailed below. In the ~~first~~fourth quarter of ~~2019, the Company~~2020, KSU acquired ~~NextGen Global Resources LLC (“NextGen”) and Global Technology~~Greenwood/Asher & Associates, LLC ~~(“GTA”~~("Greenwood/Asher"), as detailed below. ~~We have accounted~~

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 ~~these acquisitions under ASC 805, Business Combinations.~~a purchase price of $3.5 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Greenwood/Asher at the closing date and estimated working capital adjustments resulting in the Company paying cash of $5.2 million. The purchase price of the acquisition also included contingent consideration with an estimated fair value of $2.1 million related to an earnout payment in the event certain conditions are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model and the liability is recorded in accounts payable and accrued liabilities and other noncurrent liabilities in the consolidated balance sheet (see Fair Value Measurements footnote). Subsequently, the earnout was revalued, resulting in a decrease to the liability of $0.4 million in the first quarter of 2021. The earnout is expected to be paid in 2022 and 2023 after each earnout year pursuant to the terms of the purchase agreement. The purchase price allocation for this acquisition is preliminary and could change.

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

Insight

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

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

adjusted for cash held by Insight at the closing date and estimated working capital adjustments resulting in the Company paying cash of $38.1 million. The purchase price of the acquisition also ~~includes~~included contingent consideration with an estimated fair value of $1.6 million related to an earnout payment in the event certain conditions are met per the terms of the agreement. The initial fair value of the earnout was established using a Monte Carlo simulation and the liability is recorded in accounts payable and accrued liabilities in the consolidated balance sheet (see Fair Value Measurements footnote). ~~In the third quarter of 2020,~~Subsequently, the earnout was revalued, resulting in ana net increase to the liability of ~~$0.5 million.~~$0.1 million in 2020 and there were no material adjustments to the liability in the first quarter of 2021. In the second quarter of 2020, the Company paid a working capital adjustment of $0.1 million. ~~The~~As of year-end 2020, the purchase price allocation for this acquisition is ~~preliminary and could change.~~final.

This acquisition will 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 results of operations for this acquisition have not been presented as it is not material to the consolidated statements 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):~~


~~Cash~~	$	~~1.8~~
~~Trade accounts receivable~~	~~9.6~~
~~Other current assets~~	~~0.2~~
~~Property and equipment~~	~~0.2~~
~~Goodwill~~	~~19.9~~
~~Intangibles~~	~~10.6~~
~~Other noncurrent assets~~	~~0.2~~
~~Current liabilities~~	~~(2.6)~~
~~Noncurrent liabilities~~	~~(0.1)~~
~~Assets acquired net of liabilities assumed~~	$	~~39.8~~

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the Insight acquisition was approximately $10.6 million of intangible assets, made up entirely of customer relationships. The fair value of the customer relationships was determined using the multi-period excess earnings method. The customer relationships will be amortized over 10 years with no residual value. Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining operations and expanding market potential, and was assigned to the former Americas Staffing reporting ~~unit (see Goodwill footnote).~~unit. The ~~amount of goodwill expected to be deductible for tax purposes is approximately $18.6 million.~~

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

~~NextGen Global Resources~~

On January 2, 2019, the Company acquired 100% of the membership interests of NextGen, a leading provider of telecommunications staffing solutions, for a purchase price of $51.0 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by NextGen at the closing date and estimated working capital adjustments resulting in the Company paying cash of $54.3 million. Due to the date of the acquisition, the third quarter and September year to date 2019 actual results represent the third quarter and September year to date 2019 pro forma results.

Goodwill generated from this acquisition was primarily attributable to the market potential as a staffing solutions provider to the expanding telecommunications industry, and was assigned to the Americas Staffing reporting unit (see Goodwill footnote).

~~Global Technology Associates~~

On January 2, 2019, in a separate transaction, the Company acquired 100% of the membership interests of GTA, a leading provider of engineering, technology and business consulting solutions in the telecommunications industry, for a purchase price of $34.0 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by GTA at the closing date and estimated working capital adjustments resulting in the Company paying cash of $35.7 million. Due to the date of the acquisition, the third quarter and September year to date 2019 actual results represent the third quarter and September year to date 2019 pro forma results.

Goodwill generated from this acquisition is primarily attributable to the market potential as a solutions provider to the expanding telecommunications industry, and was assigned to the GTS reporting unit (see Goodwill footnote).

~~As noted above,~~ goodwill related to ~~these acquisitions was assigned to the Americas Staffing and GTS reporting units and~~this acquisition was included in the goodwill impairment charge taken in the first quarter of 2020. The goodwill impairment charge resulted from an interim goodwill impairment test triggered by declines in our common stock price as a result of negative market reaction to the COVID-19 crisis (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $18.6 million.

Disposition

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

5. Investment in Persol Holdings

The Company has a yen-denominated investment through the Company's subsidiary, Kelly Services Japan, Inc., in the common stock of Persol Holdings Co., Ltd. ("Persol Holdings"), the 100% owner of Persol Asia Pacific Pte. Ltd., the Company’s joint venture partner in PersolKelly Pte. Ltd. (the "JV"). As our investment is a noncontrolling interest in Persol Holdings, this investment is recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end (see Fair Value Measurements footnote). A gain on the investment of ~~$16.8~~$30.0 million in the first quarter of 2021 and a loss on the investment of ~~$31.4~~$77.8 million in the ~~third~~first quarter ~~and September year to date~~of 2020 ~~respectively, and a loss on the investment of $39.3 million and a gain on the investment of $35.1 million in the third quarter and September year to date 2019, respectively,~~ was recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

6. Investment in PersolKelly Pte. Ltd.

The Company has a 49% ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing ~~solutions~~services business operating in ~~eight~~ten geographies in the Asia-Pacific region. The operating results of the Company’s interest in the JV are accounted for on a one-quarter lag under the equity method and are reported in equity in net earnings (loss) of affiliate in the consolidated statements of earnings, which amounted to a ~~gain~~loss of ~~$1.8~~$1.1 million in the first quarter of 2021 and a loss of ~~$1.0~~$1.5 million in the ~~third~~first quarter ~~and September year to date 2020, respectively, and a loss~~ of ~~$0.9 million and $1.0 million in the third quarter and September year to date 2019, respectively.~~2020. This investment is evaluated for indicators of impairment on a ~~periodic~~quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. If we conclude that there is an other-than-temporary impairment of this equity investment, we will adjust the carrying amount of the investment to the current fair value.

The investment in equity affiliate on the Company’s consolidated balance sheet totaled ~~$115.6~~$118.7 million as of ~~third~~first quarter-end ~~2020~~2021 and ~~$117.2~~$118.5 million as of year-end ~~2019.~~2020. The net amount due from the JV, a related party, was ~~$10.9~~$5.2 million as of the ~~third~~first quarter-end ~~2020~~2021 and $5.6 million as of year-end ~~2019.~~2020. The Company made loans in prior years, proportionate to its 49% ownership, to the JV ~~for $7.0 million in 2018 and an additional $4.4 million in 2019~~ to fund working capital requirements as a result of their sustained revenue growth. ~~The loans, which are~~As of first quarter-end 2021, the outstanding ~~as of third quarter-end 2020, are~~loan balance is $5.8 million and is recorded in prepaid expenses and other current assets in the consolidated balance sheet and included in the net amounts due from the JV. Subsequent to the third quarter of 2020, the JV repaid $5.6 million of the outstanding loan balance; therefore, as of the third quarter-end 2020, $5.6 million of the loan balance is included in prepaid expenses and other current assets, and the remaining balance is included in other assets in the consolidated balance sheet. The carrying value of the ~~loans~~loan approximates the fair value based on market interest rates. The allowance for credit losses related to the loan is not material as of the first quarter-end 2021. The Company received payment from the JV for the remaining balance of the loan in April 2021. Accrued interest receivable, which is included in prepaid expenses and other current assets in the consolidated balance sheet, was not material at ~~third~~first quarter-end ~~2020~~2021 and year-end ~~2019.~~2020. The JV is a supplier to certain MSP programs in the region and the

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

amounts for services provided to the Company, which are included in ~~trade~~ accounts payable and accrued liabilities in the consolidated balance sheet, are not material.

Expected credit losses are estimated over the contractual term of the loans. The required allowance is based on current and projected financial information from the JV, market-specific information and other relevant data available to the Company, as applicable. The allowance was not material at the third quarter-end 2020.

The Company has accrued interest receivable from our loan to the JV. If applicable, we write off the uncollectible accrued interest receivable balance related to our loan to the JV within the same quarter the interest is determined to be uncollectible, which is considered timely. As such, an allowance for credit losses is not deemed necessary. Any write offs, if necessary, are recorded by reversing interest income.

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 an 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.

7. Fair Value Measurements

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis as of ~~third~~first quarter-end ~~2020~~2021 and year-end ~~2019~~2020 in the consolidated balance sheet by fair value hierarchy level, as described below.

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

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~


		As of Third Quarter-End 2020									As of First Quarter-End 2021
Description	Description	Total		Level 1		Level 2		Level 3		Description	Total		Level 1		Level 2		Level 3
		(In millions of dollars)									(In millions of dollars)
Money market funds	Money market funds	$	153.5	$	153.5	$	0	$	0	Money market funds	$	5.6	$	5.6	$	0	$	0
Investment in Persol Holdings	Investment in Persol Holdings	145.8		145.8		0		0		Investment in Persol Holdings	181.7		181.7		0		0

Total assets at fair value	Total assets at fair value	$	299.3	$	299.3	$	0	$	0	Total assets at fair value	$	187.3	$	187.3	$	0	$	0

Brazil indemnification	Brazil indemnification	(2.5)		0		0		(2.5)		Brazil indemnification	$	(2.4)	$	0	$	0	$	(2.4)
Greenwood/Asher earnout										Greenwood/Asher earnout	(1.7)		0		0		(1.7)
Insight earnout	Insight earnout	(2.1)		0		0		(2.1)		Insight earnout	(1.7)		0		0		(1.7)

Total liabilities at fair value	Total liabilities at fair value	$	(4.6)	$	0	$	0	$	(4.6)	Total liabilities at fair value	$	(5.8)	$	0	$	0	$	(5.8)


		As of Year-End 2019									As of Year-End 2020
Description	Description	Total		Level 1		Level 2		Level 3		Description	Total		Level 1		Level 2		Level 3
		(In millions of dollars)									(In millions of dollars)
Money market funds	Money market funds	$	4.9	$	4.9	$	0	$	0	Money market funds	$	120.3	$	120.3	$	0	$	0
Investment in Persol Holdings	Investment in Persol Holdings	173.2		173.2		0		0		Investment in Persol Holdings	164.2		164.2		0		0

Total assets at fair value	Total assets at fair value	$	178.1	$	178.1	$	0	$	0	Total assets at fair value	$	284.5	$	284.5	$	0	$	0

Brazil indemnification										Brazil indemnification	$	(2.6)	$	0	$	0	$	(2.6)
Greenwood/Asher earnout										Greenwood/Asher earnout	(2.1)		0		0		(2.1)
Insight earnout										Insight earnout	(1.7)		0		0		(1.7)

Total liabilities at fair value										Total liabilities at fair value	$	(6.4)	$	0	$	0	$	(6.4)

Money market funds ~~as of third quarter-end 2020 and year-end 2019~~ represent investments in money market funds that hold government securities, of which ~~$5.3~~$5.6 million as of first quarter-end 2021 and ~~$4.9~~$5.1 million ~~respectively,~~as of year-end 2020, are restricted as to use and are included in other assets in the consolidated balance sheet. The money market funds that are restricted as to use account for the majority of our restricted cash balance and represents cash balances that are required to be maintained to fund disability claims in California. The remaining money market funds as of year-end 2020 are included in cash and equivalents in the consolidated balance sheet. The valuations

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

of money market funds are based on quoted market prices of those accounts as of the respective period end. The ~~increase~~decrease in money market funds from year-end ~~2019 was~~2020 resulted from the ~~result of higher~~transfer to other cash and cash equivalent ~~balances as of~~accounts at the end of the ~~third~~first quarter ~~from an increase in cash flows from operations.~~of 2021.

The valuation of the investment in Persol Holdings is based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end, and the related changes in fair value are recorded in the consolidated statements of earnings (see Investment in Persol Holdings footnote). The cost of this yen-denominated investment, which fluctuates based on foreign exchange rates, was ~~$19.6~~$18.7 million as of the ~~third~~first quarter-end ~~2020~~2021 and ~~$18.9~~$20.1 million at year-end ~~2019.~~2020.

As of ~~third~~first quarter-end 2021 and year-end 2020, the Company had an indemnification liability of ~~$2.5~~$2.4 million and $2.6 million, respectively, in other long-term liabilities on the consolidated balance sheet related to the sale of the Brazil operations (see Acquisitions and Disposition footnote). The valuation of the indemnification liability was established using a discounted cash flow methodology based on probability weighted-average cash flows discounted by weighted-average cost of capital. The valuation, which represents the fair value, is considered a level 3 liability, and ~~will be~~is being measured on a recurring basis. During the ~~third~~first quarter ~~and September year to date 2020,~~of 2021, the Company ~~recognized $2.5~~recorded a reduction of $0.2 million ~~in expenses related~~ to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

~~In connection with~~The Company recorded an earnout liability relating to the ~~first quarter~~ 2020 acquisition of Insight, ~~the Company has recorded an earnout liability~~ totaling

~~$2.1~~ $1.7 million ~~as of third~~at first quarter-end 2021 and year-end 2020 in accounts payable and accrued liabilities in the consolidated balance sheet (see Acquisitions and Disposition footnote). The valuation of the earnout liability was initially established using a Monte Carlo simulation and represents the fair value and is considered a level 3 liability.

The Company ~~recognized $0.5~~recorded an earnout liability relating to the 2020 acquisition of Greenwood/Asher, totaling $1.7 million at first quarter-end 2021 in accounts payable and accrued liabilities and other long-term liabilities in the consolidated balance sheet and $2.1 million as of ~~expense related~~year-end 2020 in other long-term liabilities in the consolidated balance sheet (see Acquisitions and Dispositions footnote). The initial valuation of the earnout liability was established using a Black Scholes model and represents the fair value and is considered a level 3 liability. During the first quarter of 2021, the Company recorded a reduction of $0.4 million to the earnout liability ~~in the third quarter of 2020,~~ in SG&A expenses in the consolidated statements of earnings.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

Equity Investment Without Readily Determinable Fair Value

The Company has a minority investment in Business Talent Group, LLC, which is included in other assets in the consolidated balance sheet. This investment is measured using the measurement alternative for equity investments without a readily determinable fair value. The measurement alternative represents cost, less impairment, plus or minus observable price changes. The carrying amount of $5.0 million as of the ~~third~~first quarter-end ~~2020~~2021 and year-end ~~2019~~2020 represents the purchase price. There have been no ~~observable~~material price changes to the carrying amount or impairments.

The Company ~~also~~ has a minority investment in Kenzie Academy Inc., which is included in other assets in the consolidated balance sheet. ~~This~~The investment iswas also measured using the measurement alternative for equity investments without a readily determinable fair value as described above. ~~The investment totaled $1.4 million as~~On March 8, 2021, Kenzie entered into a transaction to sell its assets. As of the ~~third quarter-end~~date of the sale and year-end 2020, ~~and $1.3~~the investment had a carrying value of $1.4 million, ~~at year-end 2019,~~ representing total cost plus observable price changes to date. The asset was written down as a result of the sale and the loss of $1.4 million was recorded in other income (expense), net in the consolidated statements of earnings.

Assets Measured at Fair Value on a Nonrecurring Basis

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

8. Restructuring

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

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

quarter of 2020 and to align the U.S. branch network facilities footprint with a more technology-enabled service delivery methodology.

Restructuring costs incurred in the first quarter of 2020 totaled ~~$8.4~~$8.7 million and ~~are~~were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars).


		Lease Termination Costs		Severance Costs		Total			Lease Termination Costs		Severance Costs		Total

Professional & Industrial	Professional & Industrial	$	3.5	$	0.8	$	4.3	Professional & Industrial	$	0.9	$	3.5	$	4.4
Science, Engineering & Technology	Science, Engineering & Technology	0.5		0		0.5		Science, Engineering & Technology	0		0.5		0.5
Education	Education	0.1		0.7		0.8		Education	0.8		0.1		0.9

International	International	0.7		0.4		1.1		International	0.4		0.7		1.1
Corporate	Corporate	0		1.7		1.7		Corporate	1.8		0		1.8

Total	Total	$	4.8	$	3.6	$	8.4	Total	$	3.9	$	4.8	$	8.7

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

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


Balance as of year-end ~~2019~~2020	$	~~0.3~~
~~Additions charged to Professional & Industrial~~	~~4.4~~
~~Additions charged to Science, Engineering & Technology~~	~~0.5~~3.5

~~Additions charged to Education~~	~~0.9~~
~~Additions charged to International~~	~~1.1~~
~~Additions charged to Corporate~~	~~1.8~~
~~Reductions for lease termination costs related to fixed assets~~	~~(0.6)~~


Reductions for cash payments related to all restructuring activities	~~(4.5)~~(2.0)
Balance as of first quarter-end ~~2020~~	~~3.9~~
~~Reductions for cash payments related to all restructuring activities~~	~~(2.1)~~
~~Accrual adjustments~~	~~(0.2)~~
~~Balance as of second quarter-end 2020~~	~~1.6~~
~~Reductions for cash payments related to all restructuring activities~~	~~(0.8)~~
~~Accrual adjustments~~	~~(0.1)~~
~~Balance as of third quarter-end 2020~~2021	$	~~0.7~~1.5

The remaining balance of ~~$0.7~~$1.5 million as of ~~third~~first quarter-end ~~2020~~2021 primarily represents severance costs, and the majority is expected to be paid by the end of ~~2020.~~2021. No material adjustments are expected to be recorded.

9. Goodwill

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

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

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

~~The changes in~~During the ~~carrying amount of goodwill as of June year to date 2020 are included in the table below. See Acquisitions and Disposition footnote for a description of the addition to goodwill in the first~~third quarter of ~~2020.~~2020, the Company adopted a new operating model reflecting the Company's focus on delivering specialty talent solutions, which resulted in a change in our operating segments and reporting units. Due to the complete write-off of goodwill in the first quarter of 2020, reallocation of goodwill to the new reporting units as part of the third quarter 2020 change in segment reporting ~~(see Segment Disclosures footnote)~~ was not necessary. ~~There~~Subsequently, the goodwill resulting from the acquisition of Greenwood/Asher

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

during the fourth quarter of 2020 (see Acquisitions and Disposition footnote) was allocated to the Education operating segment, which was deemed to be a reporting unit, under the new operating model.

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

As of Year-End 2019 Additions to Goodwill Impairment Adjustments As of Second Quarter-End 2020
(In millions of dollars)
Americas Staffing $ 58.5 $ 19.9 $ (78.4) $ 0
Global Talent Solutions 69.3 0 (69.3) 0
Total $ 127.8 $ 19.9 $ (147.7) $ 0

10. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, for the ~~third~~first quarter 2021 and ~~September year to date~~ 2020 ~~and 2019~~ are included in the table below. Amounts in parentheses indicate debits. Reclassification adjustments out of accumulated other comprehensive income (loss), as shown in the table below, were recorded in the other income (expense), net line item in the consolidated statements of earnings.


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
		(In millions of dollars)									(In millions of dollars)
Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Beginning balance	Beginning balance	$	(17.9)	$	(10.3)	$	(13.2)	$	(15.7)	Beginning balance	$	(0.8)	$	(13.2)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	5.1		(6.2)		0.4		(0.8)		Other comprehensive income (loss) before reclassifications	(13.6)		(7.4)
Amounts reclassified from accumulated other comprehensive income (loss)	Amounts reclassified from accumulated other comprehensive income (loss)	(1.5)		0		(1.5)		0		Amounts reclassified from accumulated other comprehensive income (loss)	0		0
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	3.6		(6.2)		(1.1)		(0.8)		Net current-period other comprehensive income (loss)	(13.6)		(7.4)
Ending balance	Ending balance	(14.3)		(16.5)		(14.3)		(16.5)		Ending balance	(14.4)		(20.6)

Pension liability adjustments:	Pension liability adjustments:									Pension liability adjustments:
Beginning balance	Beginning balance	(2.6)		(1.4)		(2.6)		(1.4)		Beginning balance	(3.4)		(2.6)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	0		0		0		0		Other comprehensive income (loss) before reclassifications	0		0
Amounts reclassified from accumulated other comprehensive income (loss)	Amounts reclassified from accumulated other comprehensive income (loss)	0		0		0		0		Amounts reclassified from accumulated other comprehensive income (loss)	0		0
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	0		0		0		0		Net current-period other comprehensive income (loss)	0		0
Ending balance	Ending balance	(2.6)		(1.4)		(2.6)		(1.4)		Ending balance	(3.4)		(2.6)

Total accumulated other comprehensive income (loss)	Total accumulated other comprehensive income (loss)	$	(16.9)	$	(17.9)	$	(16.9)	$	(17.9)	Total accumulated other comprehensive income (loss)	$	(17.8)	$	(23.2)

2220

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

11. Earnings (Loss) Per Share

The reconciliation of basic and diluted earnings (loss) per share on common stock for the ~~third~~first quarter 2021 and ~~September year to date~~ 2020 ~~and 2019~~ follows (in millions of dollars except per share data):


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
Net earnings (loss)	Net earnings (loss)	$	16.7	$	(10.5)	$	(95.4)	$	95.4	Net earnings (loss)	$	25.6	$	(153.2)
Less: earnings allocated to participating securities	Less: earnings allocated to participating securities	(0.2)		0		0		(1.0)		Less: earnings allocated to participating securities	(0.2)		0
Net earnings (loss) available to common shareholders	Net earnings (loss) available to common shareholders	$	16.5	$	(10.5)	$	(95.4)	$	94.4	Net earnings (loss) available to common shareholders	$	25.4	$	(153.2)

Average shares outstanding (millions):	Average shares outstanding (millions):									Average shares outstanding (millions):
Basic	Basic	39.3		39.1		39.3		39.0		Basic	39.3		39.2
Dilutive share awards	Dilutive share awards	0.1		0		0		0.2		Dilutive share awards	0.2		0
Diluted	Diluted	39.4		39.1		39.3		39.2		Diluted	39.5		39.2

Basic earnings (loss) per share	Basic earnings (loss) per share	$	0.42	$	(0.27)	$	(2.43)	$	2.42	Basic earnings (loss) per share	$	0.65	$	(3.91)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.42	$	(0.27)	$	(2.43)	$	2.41	Diluted earnings (loss) per share	$	0.64	$	(3.91)

Potentially dilutive shares outstanding are primarily related to performance shares for the ~~third~~first quarter 2021. There were 0 dividends paid per share for Class A and ~~September year to date 2020 and 2019.~~Class B common stock for the first quarter of 2021. Dividends paid per share for Class A and Class B common stock were ~~$0.00 for the third quarter 2020,~~ $0.075 for the ~~third~~first quarter ~~2019 and September year to date 2020, and $0.225 for September year to date 2019.~~of 2020.

12. Stock-Based Compensation

For the ~~third~~first quarter of 2021, the Company recognized stock compensation expense of $1.4 million, and related tax benefit of $0.1 million. For the first quarter of 2020, the Company recognized stock compensation expense of ~~$0.5~~$1.2 million, and related tax ~~benefit~~expense of $0.2 million. For the third quarter of 2019, the Company recognized stock compensation benefit of $0.5 million, and related tax benefit of $0.4 million. For September year to date 2020, the Company recognized stock compensation expense of $2.9 million, and related tax benefit of $0.2 million. For September year to date 2019, the Company recognized stock compensation expense of $4.7 million, and related tax benefit of $1.1 million.

Performance Shares

During 2021, the Company granted performance share awards associated with the Company’s Class A common stock to certain senior officers. The payment of performance share awards, which will be satisfied with the issuance of shares out of treasury stock, is contingent upon the achievement of specific revenue growth and EBITDA margin performance goals ("financial measure performance share awards") over a stated period of time. The maximum number of performance shares that may be earned is 200% of the target shares originally granted. These awards have three one-year performance periods: 2021, 2022 and 2023, with the payout for each performance period based on separate financial measure goals that are set in February of each of the three performance periods.

For the 2021 and 2022 performance periods, half of the shares earned in each respective performance period will vest after achievement of the respective performance goals for the year and approval of the financial results by the Compensation Committee, in early 2022 and 2023, respectively, if not forfeited by the recipient. The remaining half of the shares earned for the 2021 and 2022 performance periods will vest in early 2024, based on continuous employment. For the 2023 performance period, any shares earned will vest after achievement of the 2023 performance goals for the year and approval of the financial results by the Compensation Committee in early 2024, if not forfeited by the recipient. No dividends are paid on these performance shares.

A summary of the status of all nonvested performance shares at target as of ~~third~~first quarter-end ~~2020~~2021 and ~~year-to-date~~ changes during this period is presented as follows below (in thousands of shares except per share data). There has been no grant of performance shares since year-end 2019. The majority of the vested shares in the table below is related to the 2017 performance share grant, which cliff-vested after approval from the Compensation Committee during the first quarter of 2020. The majority of the forfeited shares in the table below is related to the separation of two former senior officers during the third quarter of 2020. The vesting adjustment in the table below represents the ~~2017~~2018 financial measure performance shares and the 2018 Total Shareholder Return ("TSR") performance shares that did not vest because actual achievement was below the threshold level and resulted in no payout.

Financial Measure
Performance Shares TSR
Performance Shares
Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
Nonvested at year-end 2019 502 $ 24.21 114 $ 25.24
Granted 0 0 0 0
Vested (155) 24.02 0 0
Forfeited (96) 24.85 (5) 31.38
Vesting adjustment 0 0 (62) 20.15
Nonvested at third quarter-end 2020 251 $ 22.32 47 $ 31.38

2321

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

~~2018 Grant Update~~

For the 2018 financial measure performance awards, the annual goals are set in February of each year, with the total award payout for 2018 grants based on a cumulative measure of the 2018, 2019 and 2020 goals. Accordingly, the Company remeasures the fair value of the 2018 financial measure performance shares each reporting period until the third year goals are set, after which the grant date fair value will be fixed for the remaining performance period. During the first quarter 2020, the final year of goals was set for the performance shares granted in 2018 and the grant date fair value for the 2018 financial measure performance shares was set at $17.35 per share. The grant date fair value per share will remain fixed for the remaining performance period.


	Financial Measure Performance Shares			TSR Performance Shares
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested at year-end 2020	366	$	22.40	47	$	31.38
Granted	180	20.20		0	0
Vested	(12)	25.10		0	0
Forfeited	(11)	24.30		0	0
Vesting adjustment	(93)	16.99		(47)	31.38
Nonvested at first quarter-end 2021	430	$	23.69	0	$	0

Restricted Stock

A summary of the status of nonvested restricted stock as of ~~third~~first quarter-end ~~2020~~2021 and ~~year-to-date~~ changes during this period is presented as follows below (in thousands of shares except per share data). ~~The majority of the restricted stock granted related to new hires in the first quarter of 2020.~~


		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Nonvested at year-end 2019		360	$	24.92
Nonvested at year-end 2020					Nonvested at year-end 2020	281	$	22.74
Granted	Granted	64	14.69		Granted	195	21.05
Vested	Vested	(114)	24.07		Vested	(83)	23.36
Forfeited	Forfeited	(30)	24.64		Forfeited	(10)	24.45
Nonvested at third quarter-end 2020		280	$	22.91
Nonvested at first quarter-end 2021					Nonvested at first quarter-end 2021	383	$	21.70

13. Sale of Assets

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 of the third quarter 2020 as the Company has concluded the receivables are collectible. The net cash proceeds related to the sale are included in operating activities in the consolidated statements of cash flows and the fees related to the sale are included in SG&A expenses in the consolidated statements of earnings.

On March 20, 2020, the Company sold 3 of our 4 headquarters properties for a purchase price of $58.5 million as a part of a sale and leaseback transaction. The properties included the parcels of land, together with all rights and easements, in addition to all improvements located on the land, including buildings. The Company received cash proceeds of $55.5 million, which was net of transaction expenses. As of the date of the sale, the properties had a combined net carrying amount of $23.4 million. The resulting gain on the sale of the assets was $32.1 million which is recorded in gain on sale of assets in the consolidated statements of earnings. The Company leased back the headquarters buildings on the same ~~date; see the Leases footnote for discussion of the sale and leaseback transaction.~~date.

Gain on sale of assets of $12.3 million in the second quarter of 2019 primarily represents the sale of unused land located near the Company headquarters, and includes the excess of the $11.7 million sale proceeds over the cost of the parcel. The gain on sale of assets also includes proceeds of $2.1 million from the transfer of customer contracts related to the Company's legal specialty operations to a third party during the second quarter of 2019.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

14. Other Income (Expense), Net

Included in other income (expense), net for the ~~third~~first quarter 2021 and ~~September year to date~~ 2020 ~~and 2019~~ are the following:


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
		(In millions of dollars)									(In millions of dollars)
Interest income	Interest income	$	0.1	$	0.4	$	0.5	$	0.8	Interest income	$	0.1	$	0.3
Interest expense	Interest expense	(0.5)		(0.9)		(2.2)		(3.2)		Interest expense	(0.6)		(0.9)
Dividend income		0		0		1.3		1.3

Foreign exchange gains (losses)	Foreign exchange gains (losses)	(0.2)		0.3		3.5		(0.4)		Foreign exchange gains (losses)	(0.2)		2.4
Other	Other	(0.1)		0		0.5		0.4		Other	(2.7)		(0.1)

Other income (expense), net	Other income (expense), net	$	(0.7)	$	(0.2)	$	3.6	$	(1.1)	Other income (expense), net	$	(3.4)	$	1.7

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Included in Other for the first quarter of 2021 is a loss from the sale of the assets related to our minority investment in Kenzie Academy (see Fair Value Measurements footnote) and transaction-related expenses from the April 2021 acquisition of Softworld (see Subsequent Event footnote).

15. Income Taxes

Income tax ~~benefit~~expense was ~~$1.2 million and $12.8~~$10.5 million for the ~~third~~first quarter of ~~2020~~2021 and ~~2019, respectively. Income~~income tax benefit was ~~$36.5 million and expense was $6.3~~$36.2 million for ~~September year to date 2020 and 2019, respectively. These amounts were impacted by changes in~~ the ~~fair value~~first quarter of 2020. The first quarter of 2021 includes tax expense of $9.2 million for the gain on the Company's investment in Persol ~~Holdings, which resulted in a charge of $5.2 million for the third~~Holdings. The first quarter of 2020 and a benefit of $9.6 million for September year to date 2020, compared to a benefit of $12.1 million for the third quarter of 2019 and a charge of $10.7 million for September year to date 2019. September year to date 2020 includes a tax benefit of $23.0 million on the impairment of goodwill and a ~~second quarter~~ tax benefit of ~~$7.7~~$23.8 million for the loss on the Company's investment in Persol Holdings. The first quarter of 2020 benefit was partially offset by losses on tax exempt investments in life insurance policies and income from ~~Brazil outside basis differences. September year to date 2019 includes a second quarter net benefit~~the sale of ~~$10.4 million from valuation allowance changes~~assets discussed in the ~~United Kingdom and Germany.~~Sale of Assets footnote.

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

The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of the ~~recording~~deferred tax asset will not be realized. At this time, we have no valuation allowance against our Mexican deferred tax asset of ~~deferred taxes on Brazil outside basis differences~~$4.2 million, though it is possible this may change as we assess the impacts of the new labor laws enacted in the second quarter of ~~2020, and the valuation allowance changes in the second quarter of 2019 were treated as discrete items.~~

The work opportunity credit program is a temporary provision in the U.S. tax law and expires for employees hired after 2020. While the program has routinely been extended, it is uncertain whether it will again be extended. In the event the program is not renewed, we will continue to receive credits for qualified employees hired prior to 2021. The impact of the current economic slow-down resulting from the COVID-19 crisis did not change2021 on our ~~judgment on the realizability of deferred tax assets or our plans to repatriate cash from foreign subsidiaries.~~

~~16. Leases~~

The Company has operating and financing leases for field offices and various equipment. Our leases have remaining lease terms of one year to 15 years. We determine if an arrangement is a lease at inception.

At the beginning of the first quarter of 2019, we adopted ASC 842, Leases, using an optional transition method which allowed us to adopt the new lease standard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the beginning balance of earnings invested in theMexican business in the period of adoption. We recorded $74.1 million of right-of-use (“ROU”) assets within operating lease right-of-use assets, $19.8 million of current lease liabilities within operating lease liabilities, current and $54.3 million of noncurrent lease liabilities within operating lease liabilities, noncurrent in the consolidated balance sheet on the date of adoption. No adjustment to the beginning balance of earnings invested in the business was necessary as a result of adopting this standard.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

During the first quarter 2020, the Company sold its main headquarters building and entered into a leaseback agreement, which is accounted for as an operating lease. 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. The sale and leaseback obligation matures as follows: $0.8 million in fiscal 2020, remaining; $3.3 million in fiscal 2021; $3.3 million in fiscal 2022; $3.4 million in fiscal 2023; $3.4 million in fiscal 2024; $3.4 million in fiscal 2025 and $34.0 million thereafter.operations.

~~17.~~16. Contingencies

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

We record accruals for loss contingencies when we believe it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Such accruals are recorded in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet. At ~~third~~first quarter-end ~~2020~~2021 and year-end ~~2019,~~2020, the gross accrual for litigation costs amounted to ~~$0.8~~$1.2 million and ~~$9.9~~$1.4 million, respectively. ~~The decrease in the gross accrual from year-end 2019 was due to cash payments made and the liabilities related to our Brazil operations which were sold during 2020.~~

The Company maintains insurance coverage which may cover certain claims. When claims exceed the applicable policy deductible and realization of recovery of the claim from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount, which are included in prepaid expenses and other current assets in the consolidated balance sheet. At ~~third~~first quarter-end ~~2020~~2021 and year-end ~~2019, the~~2020, there were no related insurance ~~receivables amounted to $0.0 million and $4.1 million, respectively.~~receivables.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is ~~$0.0~~$0.1 million to ~~$1.4~~$1.8 million as of ~~third~~first quarter-end ~~2020.~~2021. This range includes matters where a liability has been accrued but it is reasonably possible that the ultimate loss may exceed the amount accrued and for matters where a loss is believed to be reasonably possible, but a liability has not been accrued. The aggregate range only represents matters in which we are currently able to estimate a range of loss and does not represent our maximum loss exposure. The estimated range is subject to significant judgment and a variety of assumptions and only based upon currently available information. For other matters, we are currently not able to estimate the reasonably possible loss or range of loss.

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

2623

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

~~18.~~17. Segment Disclosures

~~Beginning in the third quarter of 2020, the Company adopted a new operating model reflecting the Company's focus on delivering specialty talent solutions.~~ The Company’s ~~new~~ operating segments, which also represent its reporting segments, are based on the organizational structure for which financial results are regularly evaluated by the Company’s chief operating decision-maker ("CODM", the Company’s CEO) to determine resource allocation and assess performance. The Company’s 5 reportable segments, (1) Professional & Industrial, (2) Science, Engineering & Technology, (3) Education, (4) Outsourcing & Consulting, and (5) International, reflect the specialty services the Company provides to customers and represent how the business is organized internally. Intersegment revenue represents revenue earned between the reportable segments and is eliminated from total segment revenue from services.

Professional & Industrial specializes in delivering professional and industrial talent to customers including staffing, KellyConnect, and outcome-based solutions in the Americas region. Science, Engineering & Technology delivers both staffing and outcome-based solutions in the specialty areas of science, technology, telecom and engineering primarily in the U.S. and Canada. Education primarily specializes in K-12 substitute teachers and support staff, as well as some early childhood and higher education support, in the Americas region. Outsourcing & Consulting is focused on providing RPO, MSP and PPO solutions in the Americas, Europe and Asia-Pacific regions. International provides talent to customers across all specialties primarily through staffing services within Europe as well as Brazil and Mexico in the Americas region. Our Brazil operations were sold in August 2020 (see Acquisitions and Disposition footnote).

Corporate expenses that directly support the operating units have been allocated to Professional & Industrial, Science, Engineering & Technology, Education, Outsourcing & Consulting, and International 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. Consistent with the information provided to and evaluated by the CODM, the goodwill impairment charge in the first quarter of 2020 iswas included in Corporate expenses.

The following tables present information about the reported revenue from services and gross profit of the Company by segment, along with a reconciliation to earnings (loss) before taxes and equity in net earnings (loss) of affiliate, for the first quarter 2021 and 2020. The Company changed its reportable segments during the third quarter ~~and September year~~of 2020. As a result, certain reclassifications have been made to ~~date 2020 and 2019 based on~~ the ~~new operating model. Prior year~~ reportable segment results ~~were recast~~for the first quarter of 2020 to ~~align with~~conform to the ~~current~~updated reportable segment presentation. Asset information by reportable segment is not presented, since the Company does not produce such information internally nor does it use such data to manage its business.


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
		(In millions of dollars)									(In millions of dollars)
Revenue from Services:	Revenue from Services:									Revenue from Services:

Professional & Industrial	Professional & Industrial	$	446.5	$	538.0	$	1,346.7	$	1,668.7	Professional & Industrial	$	467.6	$	493.8
Science, Engineering & Technology	Science, Engineering & Technology	244.0		285.2		761.5		859.7		Science, Engineering & Technology	254.7		270.2
Education	Education	27.5		57.1		195.1		313.9		Education	111.6		142.5
Outsourcing & Consulting	Outsourcing & Consulting	87.9		94.4		261.0		282.3		Outsourcing & Consulting	99.3		89.5
International	International	232.4		293.4		710.6		893.6		International	272.9		265.2

Less: Intersegment revenue	Less: Intersegment revenue	(0.1)		(0.4)		(0.3)		(0.4)		Less: Intersegment revenue	(0.2)		(0.1)

Consolidated Total	Consolidated Total	$	1,038.2	$	1,267.7	$	3,274.6	$	4,017.8	Consolidated Total	$	1,205.9	$	1,261.1

2724

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)


		Third Quarter				September Year to Date					First Quarter
		2020		2019		2020		2019			2021		2020
		(In millions of dollars)									(In millions of dollars)
Earnings (loss) from Operations:	Earnings (loss) from Operations:									Earnings (loss) from Operations:

Professional & Industrial gross profit	Professional & Industrial gross profit	$	77.1	$	91.8	$	241.1	$	291.6	Professional & Industrial gross profit	$	75.9	$	85.1
Professional & Industrial SG&A expenses	Professional & Industrial SG&A expenses	(65.3)		(77.6)		(210.4)		(246.9)		Professional & Industrial SG&A expenses	(69.4)		(80.5)
Professional & Industrial earnings (loss) from operations	Professional & Industrial earnings (loss) from operations	11.8		14.2		30.7		44.7		Professional & Industrial earnings (loss) from operations	6.5		4.6

Science, Engineering & Technology gross profit	Science, Engineering & Technology gross profit	50.7		58.3		156.0		171.8		Science, Engineering & Technology gross profit	53.2		54.7
Science, Engineering & Technology SG&A expenses	Science, Engineering & Technology SG&A expenses	(31.3)		(36.0)		(99.1)		(111.4)		Science, Engineering & Technology SG&A expenses	(35.7)		(36.5)
Science, Engineering & Technology earnings (loss) from operations	Science, Engineering & Technology earnings (loss) from operations	19.4		22.3		56.9		60.4		Science, Engineering & Technology earnings (loss) from operations	17.5		18.2

Education gross profit	Education gross profit	4.1		8.6		28.8		49.9		Education gross profit	17.2		20.4
Education SG&A expenses	Education SG&A expenses	(11.6)		(13.8)		(37.7)		(41.5)		Education SG&A expenses	(14.2)		(16.6)
Education earnings (loss) from operations	Education earnings (loss) from operations	(7.5)		(5.2)		(8.9)		8.4		Education earnings (loss) from operations	3.0		3.8

Outsourcing & Consulting gross profit	Outsourcing & Consulting gross profit	29.1		29.5		87.1		90.7		Outsourcing & Consulting gross profit	31.3		28.8
Outsourcing & Consulting SG&A expenses	Outsourcing & Consulting SG&A expenses	(25.4)		(29.1)		(79.1)		(90.9)		Outsourcing & Consulting SG&A expenses	(28.4)		(28.6)
Outsourcing & Consulting earnings (loss) from operations	Outsourcing & Consulting earnings (loss) from operations	3.7		0.4		8.0		(0.2)		Outsourcing & Consulting earnings (loss) from operations	2.9		0.2

International gross profit	International gross profit	30.0		39.5		90.5		119.3		International gross profit	35.7		34.3
International SG&A expenses	International SG&A expenses	(39.9)		(35.3)		(101.4)		(107.2)		International SG&A expenses	(33.1)		(33.2)
International earnings (loss) from operations	International earnings (loss) from operations	(9.9)		4.2		(10.9)		12.1		International earnings (loss) from operations	2.6		1.1

Less: Intersegment gross profit		0		0		0		0
Less: Intersegment SG&A expenses		0		0		0		0
Net Intersegment activity		0		0		0		0

Corporate	Corporate	(19.9)		(18.8)		(178.9)		(56.7)		Corporate	(21.9)		(139.7)
Consolidated Total	Consolidated Total	(2.4)		17.1		(103.1)		68.7		Consolidated Total	10.6		(111.8)
Gain (loss) on investment in Persol Holdings	Gain (loss) on investment in Persol Holdings	16.8		(39.3)		(31.4)		35.1		Gain (loss) on investment in Persol Holdings	30.0		(77.8)
Other income (expense), net	Other income (expense), net	(0.7)		(0.2)		3.6		(1.1)		Other income (expense), net	(3.4)		1.7

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	$	13.7	$	(22.4)	$	(130.9)	$	102.7	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	$	37.2	$	(187.9)

~~19.~~18. New Accounting Pronouncements

Recently ~~Adopted~~

In August 2018, the FASB issued Accounting Standards Update ("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 is effective for annual reporting periods beginning after December 15, 2019, 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 a service contract as other assets on our consolidated balance sheet. This presentation is consistent with the presentation of the prepayment of fees for the hosting arrangement. We recognized $0.3 million of amortization expense for capitalized implementation costs incurred in hosting arrangements September year to date 2020 as a component of SG&A expenses in our consolidated statements of earnings. We recognized $3.6 million of payments for capitalized implementation costs September year to date 2020 in the same manner as payments made for fees associated with the related 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

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(UNAUDITED)~~

~~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.~~

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 prior 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 is 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 presented 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. Related disclosures have been updated throughout the financial statements and footnotes.

In August 2018, the FASB issued ASU 2018-13 which eliminates, adds and modifies certain fair value measurement disclosures. The ASU is effective for annual reporting periods beginning after December 15, 2019, 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.

~~Not Yet~~ Adopted

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 considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. ~~We are currently evaluating the~~The adoption of this standard did not have a material impact ~~of the new guidance on~~to our consolidated financial ~~statements and related disclosures.~~statements.

In December 2019, the FASB issued ASU 2019-12 simplifying various aspects related to the accounting 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 deferred tax liabilities for outside basis differences. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. ~~We are currently evaluating the~~The adoption of this standard did not have a material impact ~~of the new guidance on~~to our consolidated financial ~~statements and related disclosures.~~statements.

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.~~

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

19. Subsequent Event

~~In October 2020, management made~~On April 5, 2021, the ~~decision~~Company acquired 100% of the shares of Softworld, Inc. ("Softworld") for $215.0 million of cash, subject to ~~begin reducing~~working capital adjustments. Softworld is a leading technology staffing ~~levels~~and workforce solutions firm that serves clients across several end-markets, including financial services, life sciences, aerospace, defense, insurance, retail and IT consulting. The related acquisition costs, which are included in all segments and Corporate through involuntary terminations. Restructuring charges of approximately $4-$5 million for severance and related benefits to be paid to impacted employees will be recognized as a charge to SG&A expensesother income (expense), net in the ~~fourth quarter~~consolidated statements of ~~2020.~~earnings, were $1.3 million. The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time since the acquisition date and the ongoing status of the valuation. Therefore, it is impracticable for the Company to provide the major classes of assets acquired and liabilities assumed or pro forma revenue and earnings.

2926

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Executive Overview

~~The~~During the past year, the COVID-19 pandemic and related containment measures have resulted in dramatic shifts in most aspects of the economy and how professional and private lives are conducted. While the pace of change was unprecedented and the resulting impacts are still being determined, our Noble Purpose, “We connect people to work in ways that enrich their lives,” will continue to guide our strategy and actions. ~~Kelly remains committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the global markets in which we choose to compete.~~ As we navigate ~~the uncertainty over the next several quarters,~~a world of work now impacted by these changes, we will continue to demonstrate our expected behaviors and actions:

•Employ a talent-first mentality

•Relentlessly deliver for customers

•Grow through discipline and focus

•Deliver efficiency and effectiveness in everything we do

Kelly remains committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the global markets in which we choose to compete. By aligning ourselves with our Noble Purpose and executing against these behaviors, we ~~intend to weather~~have weathered the ~~current situation~~past year and ~~emerge~~are emerging as a more agile and focused organization, prepared to achieve new levels of growth and profitability as we further develop our portfolio of businesses.

The Talent Solutions Industry

Prior to the COVID-19 pandemic, labor markets were in the midst of change due to automation, secular shifts in labor supply and demand and skills gaps, and ~~we expect~~ the current economic situation ~~to further accelerate~~is accelerating that change. Global demographic trends are reshaping and redefining the way in which companies find and use talent and the COVID-19 pandemic is changing where and how companies expect work to be performed. In response, the talent solutions industry is adjusting how it sources, recruits, trains and places talent.

Our industry is evolving to meet businesses’ growing demand for specialized talent, whether delivered as a single individual or as part of a total workforce solution. Companies in our industry are using novel sourcing approaches—including gig platforms, independent contractors and other talent pools—to create customized workforce solutions that are flexible and responsive to the labor market.

In addition, today’s companies are elevating their commitment to talent, with the growing realization that meeting the changing needs and requirements of talent is essential to remain competitive. The ways in which people view, find and conduct work are undergoing fundamental shifts. And as the demand for skilled talent continues to climb, workers’ changing ideas about the integration of work into life are becoming more important. In this increasingly talent-driven market, a diverse set of workers, empowered by technology, is seeking to take greater control over their career trajectories andKelly’s Talent Promise confirms our responsibility to workers in search of a better way to work.

Our Business

Kelly is a talent and global workforce solutions company serving customers of all sizes in a variety of industries. We offer innovative outsourcing and consulting services, as well as staffing on a temporary and direct-hire basis. AtIn 2020, we adopted the ~~beginning of the third quarter, we have adopted our new~~ Kelly Operating Model and ~~have~~ realigned our business into five specialty business units which are also our reportable segments.

•Professional & Industrial – delivers staffing, outcome-based and direct-hire services focused on office, ~~Professional, Light Industrial~~professional, light industrial and ~~Contact Center~~contact center specialties in the U.S. and Canada, including our KellyConnect product

•Science, Engineering & Technology – delivers staffing, outcome-based and direct-hire services focused on science and clinical research, engineering, information technology and telecommunications specialties predominately in the U.S. and Canada and includes our NextGen and Global Technology Associates subsidiaries, as well as our Softworld, Inc. subsidiary as of the beginning of the second quarter of 2021

3027

•Education– delivers staffing, direct-hire and ~~direct-hire~~executive search services to the K-12, early childhood and higher education ~~market~~markets in the U.S., ~~including our recent acquisitions,~~and includes several acquisitions: Teachers On Call, ~~and~~ Insight Workforce Solutions and Greenwood/Asher & Associates

•Outsourcing & Consulting – delivers Master Service Provider ("MSP"), Recruitment Process Outsourcing ("RPO"), Business Process Outsourcing ("BPO") and Advisory Services to customers on a global basis

•International – delivers staffing and direct-hire services in ~~fifteen~~15 countries in Europe, as well as Mexico

In addition, we provide staffing services to customers in ~~APAC~~the Asia-Pacific region through PersolKelly Pte. Ltd., our joint venture with Persol Asia Pacific Pte. Ltd, a wholly owned subsidiary of Persol Holdings, a leading provider of HR solutions in Japan.

We earn revenues from customers that procure the services of our temporary employees on a time and materials basis, that use us to recruit permanent employees, and that rely on 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. and was 6160 days on a global basis as of the ~~2020 third quarter~~ end ~~58 days as~~ of the ~~2019 year end~~first quarter of 2021 and 59 days as of the ~~2019 third~~end of the first quarter ~~end.~~of 2020. Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth and decline in periods of economic contraction.

Our Perspective

Short Term

While far from certain, the impacts of COVID-19 on the global economy, the talent solutions industry, our customers and our talent have become ~~more clear~~clearer since the beginning of the pandemic. ~~Year-over-year~~During 2020 and into the first quarter of 2021, year-over-year revenue declines have been substantial ~~and~~while recent trends have pointed to a slow recovery in demand. In response to the crisis, in April 2020 we took a series of proactive actions. These actions were designed to reduce spending, minimize layoffs, and bolster the strength and flexibility of Kelly’s finances. These actions ~~include:~~included:

•a 10% pay cut for full-time salaried employees in the U.S., Puerto Rico and Canada, in addition to certain actions in ~~EMEA~~Europe and ~~APAC;~~Asia-Pacific;

•substantially reduced CEO compensation and reduced compensation of 10% or more for senior leaders;

•temporary furloughing and/or redeployment of some employees until business conditions improve;

•suspension of the Company match to certain retirement accounts in the U.S. and Puerto Rico;

•reduction of discretionary expenses and projects, including capital expenditures; and

•a hiring freeze with the exception of critical revenue-generating positions.

The actions ~~have~~ generated substantial cost savings and ~~have~~ allowed us the time necessary to assess the variety of impacts the crisis has had on our business.These initial actions were intentionally broad in scope and ~~as we have moved forward our actions are becoming~~became more targeted to the areas of business where demand declines have been more significant and persistent.Actions such as the 10% pay cut, compensation adjustments for senior leaders and temporary furloughs were ~~ended~~in place until early in the fourth quarter of 2020.The suspension of the Company match to retirement accounts ~~will end~~ended in January 2021 and others, such as reductions in discretionary spending, capital expenditures and carefully managing staffing levels in non-revenue generating positions, will continue. In ~~October~~addition, we benefited in 2020 from CARES Act provisions allowing deferral of employer social security tax payments. In connection with expiration of the temporary cost reduction measures noted above, management ~~made the decision to begin reducing~~reduced staffing levels ~~through involuntary terminations,~~to align with expected revenue levels and recorded restructuring charges of ~~approximately $4-$5~~$4.4 million for severance and related benefits ~~to be paid to~~for impacted employees ~~are expected to be recognized~~ in ~~our~~the fourth quarter ~~results.~~ of 2020.

Given the level of uncertainty surrounding the duration of the COVID-19 crisis, Kelly’s board also voted to suspend the quarterly dividend ~~until~~in May 2020 and has continued to assess economic and business conditions ~~improve and continues~~ to ~~assess~~determine future actions with respect to our dividend policy.

The impact of the pandemic began in March 2020 with the limitations on public life in the U.S. and the European markets we serve and ~~have~~has continued inthrough the ~~second and third quarters~~end of first quarter of 2021 as the effect of the pandemic response ~~has~~ slowed global economic activity.We do expect that ~~there~~demand for our services will ~~continue to be a material decline in our year-over-year revenues through~~gradually recover from the ~~first quarter~~economic slowdown and the effects of

3128

~~of 2021 as demand for our services is dampened by reaction to the economic slowdown and by companies~~customer and talent concerns related to operating safely during a pandemic. The impact on the revenues of each segment will vary, given the differences in pandemic-related measures enacted in each geography, the customer industries served and the skill sets of the talent provided to our customers and their ability to work remotely.We currently expect a gradual return to pre-crisis levels of customer demand, however, the pace of such a return may be delayed by repeated cycles of increased economic activity and subsequent disruption caused by a resurgence in infection leading to additional containment measures.~~While our cost reduction efforts are expected to reduce year-over-year expenses significantly in the fourth quarter, they will not be enough to completely offset declines in revenue and gross profit.~~As ~~a result,~~2021 progresses, we expect that our ~~fourth quarter~~revenue will reflect a continued gradual improvement in demand and ~~full year~~result in improvements in year-over-year gross profit and earnings ~~to decline year-over-year.~~from operations.

~~In addition,~~The negative market reaction to the COVID-19 crisis in March 2020 ~~including declines~~also resulted in a decline in our common stock price which caused our market capitalization to decline ~~significantly.~~significantly at the end of the first quarter of 2020. This triggered an interim goodwill impairment test and resulted in a $147.7 million non-cash goodwill impairment charge in the first quarter of 2020.

Moving Forward

While the ~~severity of the~~continuing economic ~~impacts~~ and ~~their duration~~labor market recovery cannot be precisely predicted, we believe that the mid-term impacts on how people view, find and conduct work will continue to align with our strategic path.

As a result, we have continued to move forward with our specialization strategy, reinventing our operating model and reorganizing our business into five distinct reporting segments. These specialties represent areas where we see the most robust demand, the most promising growth opportunities, and where we believe we excel in attracting and placing talent. Our ~~new~~current operating segments also reflect our desire to shift our portfolio toward high-margin, higher-value specialties.

Kelly has done business in these specialties for many years, but our ~~new~~current operating model represents a new approach – one that brings together both staffing and outcome-based pieces of a specialty under a single specialty leader and aggregates assets to accelerate specialty growth and profitability. We believe this ~~new~~ specialty structure ~~will give~~gives us greater advantages in the market, and we expect our disciplined focus to deliver profitable growth coming out of the crisis. In addition, we intend to invest in strategic, targeted M&A opportunities in our specialties, while optimizing our portfolio, as demonstrated by the recent announcement of our acquisition of Softworld, Inc. in the second quarter of 2021, the completed acquisition of Greenwood/Asher & Associates in the fourth quarter of 2020 and the sale of our operations in Brazil during the third ~~quarter.~~quarter of 2020.

Faced with market conditions that may ~~temporarily delay our growth efforts,~~continue to be uneven in the near term, Kelly continues to focus on accelerating the execution of our strategic plan and making necessary investments to advance that strategy.

•We are making strides in our digital transformation journey, building a technology foundation to sustain ~~growth.~~

•~~We’re capturing a larger share of voice in the marketplace, using television spots~~growth and ~~targeted social media campaigns~~ to ~~re-introduce Kelly~~support our teams, clients and talent with powerful new technologies that make it faster and easier than ever to ~~companies, highlight our specialty skills sets, and showcase our refreshed brand.~~connect.

•We are ~~consistently investing to better understand and support~~using our ~~talent. And we have affirmed our commitment to that talent, recently introducing our five-point Talent Promise and reallocating resources to be solely focused on the temporary worker experience.~~

•~~Using our unique position in the middle of the supply and demand equation, we are stepping up with a new~~ platform, ~~called~~ Equity@Work, to break down long-standing, systemic barriers that make it difficult for many people to secure enriching work. This powerful extension of our Noble Purpose ~~will~~uses our unique position in the middle of the supply and demand equation to help more people flow into Kelly’s talent pools, while also helping families, communities and economies thrive.

•

We are committed to helping each Kelly team define the fastest, most efficient and creative paths to achieving their business goals by removing unnecessary work and refocusing efforts in the right places to achieve our defined performance expectations in the most effective way possible.

3229

While the COVID-19 pandemic has resulted in uncertainty in the economy and the labor markets that will affect our near-term financial performance, we have determined long-term measures to gauge our progress, including:

•Revenue growth (both organic and inorganic)

•Gross profit rate improvement

•Conversion rate and EBITDA margin

Financial Measures

The constant currency (“CC”) change amounts ~~in the following tables~~ refer to the year-over-year percentage changes resulting from translating ~~2020~~2021 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for ~~2019.~~2020. 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 (“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. 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 ~~in the following tables~~ 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) are ratios used to measure the Company’s operating efficiency.

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 (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.

3330

Results of Operations

Total Company

(Dollars in millions)


		Third Quarter								September Year to Date									First Quarter
		2020			2019			% Change		2020			2019			% Change			2021			2020			% Change
Revenue from services	Revenue from services	$	1,038.2		$	1,267.7		(18.1)	%	$	3,274.6		$	4,017.8		(18.5)	%	Revenue from services	$	1,205.9		$	1,261.1		(4.4)	%
Gross profit	Gross profit	191.0			227.7			(16.1)		603.5			723.3			(16.6)		Gross profit	213.3			223.3			(4.5)
SG&A expenses excluding restructuring charges	SG&A expenses excluding restructuring charges	193.5			210.7			(8.1)		582.6			661.3			(11.9)		SG&A expenses excluding restructuring charges	202.7			210.8			(3.8)
Restructuring charges	Restructuring charges	(0.1)			(0.1)			68.5		8.4			5.6			49.1		Restructuring charges	—			8.7			NM
Total SG&A expenses	Total SG&A expenses	193.4			210.6			(8.2)		591.0			666.9			(11.4)		Total SG&A expenses	202.7			219.5			(7.7)

Goodwill impairment charge	Goodwill impairment charge	—			—			—		147.7			—			NM		Goodwill impairment charge	—			147.7			NM
Gain on sale of assets	Gain on sale of assets	—			—			—		32.1			12.3			161.6		Gain on sale of assets	—			(32.1)			NM
Earnings (loss) from operations	Earnings (loss) from operations	(2.4)			17.1			NM		(103.1)			68.7			NM		Earnings (loss) from operations	10.6			(111.8)			NM
Gain (loss) on investment in Persol Holdings	Gain (loss) on investment in Persol Holdings	16.8			(39.3)			NM		(31.4)			35.1			NM		Gain (loss) on investment in Persol Holdings	30.0			(77.8)			NM
Other income (expense), net	Other income (expense), net	(0.7)			(0.2)			(286.4)		3.6			(1.1)			421.4		Other income (expense), net	(3.4)			1.7			(308.2)
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	13.7			(22.4)			NM		(130.9)			102.7			NM		Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	37.2			(187.9)			NM
Income tax expense (benefit)	Income tax expense (benefit)	(1.2)			(12.8)			90.9		(36.5)			6.3			NM		Income tax expense (benefit)	10.5			(36.2)			129.0
Equity in net earnings (loss) of affiliate	Equity in net earnings (loss) of affiliate	1.8			(0.9)			NM		(1.0)			(1.0)			(1.8)		Equity in net earnings (loss) of affiliate	(1.1)			(1.5)			29.7
Net earnings (loss)	Net earnings (loss)	$	16.7		$	(10.5)		NM		$	(95.4)		$	95.4		NM		Net earnings (loss)	$	25.6		$	(153.2)		NM

Gross profit rate	Gross profit rate	18.4		%	18.0		%	0.4	pts.	18.4		%	18.0		%	0.4	pts.	Gross profit rate	17.7		%	17.7		%	—	pts.
Conversion rate	Conversion rate	(1.3)			7.5			(8.8)		(17.1)			9.5			(26.6)		Conversion rate	5.0			(50.1)			55.1

~~Third~~First Quarter Results

Revenue from services in the ~~third~~first quarter declined 4.4% on a reported basis and 5.5% on a constant currency basis. Revenue declined in ~~all~~the Professional & Industrial, Science, Engineering & Technology and Education segments, reflecting the continuing impact of the COVID-19 pandemic and resulting mitigation efforts.~~These efforts have resulted~~ Revenue increased in ~~a decline in demand for our temporary staffing~~the Outsourcing & Consulting and ~~permanent placement services across a broad range of industries and geographies.~~International segments. Revenue from staffing services declined ~~22%~~7.5% compared to the ~~third~~first quarter of 2019. Additionally, permanent placement revenue, which is included in revenue from services, decreased 40% year-over-year as the impact of economic uncertainty depressed full-time hiring in all operating segments. These declines were2020. This decline was partially offset by ana 2.5% increase in outcome-based services, ~~of 4%~~ as demand from customers utilizing these services increased during the ~~quarter.~~quarter, and a 29.9% increase in permanent placement revenue, which is included in revenue from services.

Gross profit declined as a result of lower revenue ~~volume, partially offset by an increase in the gross profit rate.~~volume. The gross profit rate ~~increased 40 basis points from the prior year. The increase in the gross profit rate~~ was ~~due to~~flat year over year, as the impact of ~~lower employee-related costs and improved product mix. This~~higher permanent placement income was ~~partially~~ offset by the negative impact of ~~lower permanent placement revenue~~higher employee-related benefit costs. Decreases in the gross profit rate for Professional & Industrial and ~~unfavorable~~Outsourcing & Consulting were partially offset by increases in the gross profit rate for Science, Engineering & Technology, Education and International. This variability in gross profit rates reflects shifts in customer ~~mix. The recovery~~and product mix, along with the impact of certain one-time costs associated with expected increases in customer demand ~~for temporary staffing services from large customers with lower margins outpaced the recovery for small and medium-sized customers.~~in Professional & Industrial.

Total SG&A expenses decreased ~~8.2%~~7.7% compared to last year. This decrease reflects lower salaries and benefits costs as a result of temporary expense mitigation actions that were taken in response to the COVID-19 crisis, lower incentive compensation expenses and the benefit of COVID-19 government subsidies related to full-time employees recognized in the third quarter. Included in SG&A expenses in the ~~third~~first quarter of 2020 ~~is a $9.5 million non-cash charge in the International segment related to a customer dispute that resulted in additional uncollectible accounts receivable charges.~~

~~The loss from operations for the quarter of $2.4 million reflects a decline from the $17.1~~was $8.7 million of ~~earnings from operations in the prior year.Our earnings from operations declined as a result of lower gross profit, partially offset by lower expenses due to cost reduction efforts.~~

~~Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings.The gains or losses fluctuate each quarter based on the quoted market price of the Persol Holdings common stock at period end.~~

~~Income tax benefit was $1.2 million and $12.8 million for the third quarter of 2020 and 2019, respectively. These amounts~~restructuring charges. Actions were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in an income tax charge of $5.2 million for the third quarter of 2020 compared to an income tax benefit of $12.1 million for the third quarter of 2019. The change in income taxes also reflects a decline in earnings from operations in the third quarter of 2020.

The net earnings for the period of $16.7 million, an increase of $27.2 million from the third quarter of 2019, was due primarily to increased gains of Persol Holdings common stock and a lower effective income tax rate, partially offset by lower earnings from operations.

~~September Year-to-Date Results~~

Revenue from services for the first nine months of 2020 declined in all segments, reflecting the impact of COVID-19, and resulting in a decline in demand for our staffing services and permanent placement services across a broad range of industries and geographies. Revenue from staffing services declined 23% compared to last year. Permanent placement revenue, which is included in revenue from services, decreased 38% year-over-year as the impact of economic uncertainty depressed full-time hiring in all operating segments. These declines were partially offset by an increase in outcome-based services of 9% as demand from customers utilizing these services increased during the year.

Gross profit declined as a result of lower revenue volume, partially offset by an increase in the gross profit rate. The gross profit rate increased 40 basis points in comparison to the prior year. With the exception of Education and International, the gross profit rate increased in all other operating segments, primarily reflecting improved product mix and lower employee-related costs. International's gross profit rate was negatively impacted by the decrease in permanent placement revenue. Government subsidies accounted for approximately 20 basis points of the increase for the year.

Total SG&A expenses decreased 11.4% in comparison to the prior year. This decrease was due primarily to lower administrative salaries and performance-based compensation, including additional short-term cost reductions implemented to further align costs with current revenue volume trends. Included in total SG&A expenses are restructuring charges of $8.4 milliontaken in the first ~~nine months~~quarter of ~~2020. This is related to actions taken~~2020 to position the Company to adopt the ~~new~~updated operating model and to align the U.S. branch network facilities footprint with a more technology-enabled service delivery methodology. ~~Restructuring charges~~Overall, SG&A expense reductions in all segments reflect management of ~~$5.6 million~~expense levels in ~~the first nine months of 2019 represent severance costs primarily related to U.S. branch-based staffing operations.~~line with revenue trends.

During the first ~~nine months~~quarter of 2020, the negative reaction to the pandemic by the global equity markets also resulted in a decline in the Company's common stock price. This triggered an interim goodwill impairment test, resulting in a $147.7 million goodwill impairment charge in the first quarter of 2020.

Gain on sale of assets of $32.1 million in 2020 represents the excess of the proceeds over the cost of the headquarters properties sold in

the first quarter of 2020. The main headquarters building was subsequently leased back toby the Company during the first quarter

of 2020. ~~Gain on sale of assets of $12.3 million primarily represents the excess of the proceeds over the cost of an unused~~

~~parcel of land located near the Company headquarters sold during the second quarter of 2019.~~

~~The loss~~Earnings from operations for the first ~~nine months~~quarter of ~~2020~~2021 totaled $10.6 million, compared to a loss from operations of ~~$103.1~~$111.8 million ~~reflects a decline from~~in the ~~$68.7 million~~first quarter of 2020. The increase in earnings from operations infrom the prior ~~year.Our earnings from operations declined as a result~~year primarily reflects the impact of the goodwill impairment charge and ~~lower gross profit,~~restructuring charge in 2020, partially offset by the 2020 gain on sale of ~~assets and lower expenses due to cost reduction efforts.~~assets.

Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings.The gains or losses fluctuate each quarter based on the quoted market price of the Persol Holdings common stock at period end.

Other expense for the first quarter of 2021 totaled $3.4 million, compared to other income of $1.7 million for the first quarter of 2020. Included in the 2021 first quarter amount are transaction-related expenses from the April 2021 acquisition of Softworld, Inc., a technology staffing and solutions firm, and a one-time non-cash write-down of an equity investment.

Income tax expense was $10.5 million in the first quarter of 2021 and income tax benefit was ~~$36.5 million and expense was $6.3~~$36.2 million for ~~September year to date 2020 and 2019, respectively. These amounts were impacted by changes in~~ the ~~fair value~~first quarter of 2020. The first quarter of 2021 includes tax expense of $9.2 million for the gain on the Company's investment in Persol ~~Holdings, which resulted in an income tax benefit~~Holdings. The first quarter of ~~$9.6 million for September year to date 2020, compared to an income tax charge of $10.7 million for September year to date 2019. September year to date~~ 2020 includes a ~~first quarter~~ tax benefit of $23.0 million on the impairment of goodwill and a ~~second quarter~~ tax benefit of ~~$7.7~~$23.8 million for the loss on the Company's investment in Persol Holdings. The first quarter of 2020 benefit was partially offset by losses on tax exempt investments in life insurance policies and income from ~~Brazil outside basis differences. September year to date 2019 includes a net benefit~~the sale of ~~$10.4 million from valuation allowance changes~~assets discussed in the ~~United Kingdom and Germany.~~Sale of Assets footnote.

The net ~~loss~~earnings for the period were $25.6 million, compared to a net loss of ~~$95.4 million, a decrease of $190.8~~$153.2 million from the ~~prior year,~~first quarter of 2020. This change was due primarily to ~~lower~~higher earnings from operations ~~due to the goodwill impairment charge taken in the first quarter of 2020, combined with~~and increased ~~losses~~gains of Persol Holdings common stock, partially offset by ~~the impact of an~~a higher effective income tax ~~benefit in comparison to income tax expense last year.~~rate.

Operating Results By Segment

(Dollars in millions)


		Third Quarter						September Year to Date							First Quarter
		2020		2019		% Change		2020		2019		% Change			2021		2020		% Change
		(Dollars in millions)													(Dollars in millions)
Revenue from Services:	Revenue from Services:													Revenue from Services:
Professional & Industrial	Professional & Industrial	$	446.5	$	538.0	(17.0)	%	$	1,346.7	$	1,668.7	(19.3)	%	Professional & Industrial	$	467.6	$	493.8	(5.3)	%
Science, Engineering & Technology	Science, Engineering & Technology	244.0		285.2		(14.4)		761.5		859.7		(11.4)		Science, Engineering & Technology	254.7		270.2		(5.7)
Education	Education	27.5		57.1		(51.8)		195.1		313.9		(37.8)		Education	111.6		142.5		(21.7)
Outsourcing & Consulting	Outsourcing & Consulting	87.9		94.4		(7.0)		261.0		282.3		(7.6)		Outsourcing & Consulting	99.3		89.5		11.0
International	International	232.4		293.4		(20.8)		710.6		893.6		(20.5)		International	272.9		265.2		2.9
Less: Intersegment revenue	Less: Intersegment revenue	(0.1)		(0.4)		(69.6)		(0.3)		(0.4)		(31.9)		Less: Intersegment revenue	(0.2)		(0.1)		204.5
Consolidated Total	Consolidated Total	$	1,038.2	$	1,267.7	(18.1)	%	$	3,274.6	$	4,017.8	(18.5)	%	Consolidated Total	$	1,205.9	$	1,261.1	(4.4)	%

~~Third~~First Quarter Results

Professional & Industrial revenue from services decreased due primarily to decreases in ~~our~~the hours volume in our staffing businesses, which continue to be impacted by COVID-19, ~~due to~~as talent supply constraints and internal fulfillment challenges have resulted in a ~~slow~~gradual recovery rate. These decreases were partially offset by increased revenue in our outcome-based businesses due to program ~~expansions.~~expansions and increased permanent placement income in our staffing business.

Science, Engineering & Technology revenue from services decreased due to lower hours volume in our staffing business across most specialties due to the continued impact of COVID-19, ~~with the exception of our government staffing business, which has seen increased~~except where we have experienced a steady demand infor talent to support life sciences and clinical research. The staffing decrease was partially offset by an increase in permanent placement income.

Education revenue from services decreased due primarily to the impact of ~~COVID-19. School districts delayed starts and when instruction did begin,~~COVID-19 as many districts ~~used a~~continued to use virtual or hybrid ~~instructional style,~~instruction, reducing the ~~typical demand for Education services. These decreases were partially offset by the revenues from the first quarter 2020 acquisition of Insight.~~

Outsourcing & Consulting revenue from services decreased due primarily to decreases in our PPO, MSP and RPO products due somewhat to COVID-19-related demand impacts as well as lower demand in the Oil and Gas Industry, partially offset by increases in our Career Transitions product.

International revenue from services decreased 20.8% on a reported basis and 21.1% in CC. The decline was primarily due to a decrease in hours volume as COVID-19 disruptions continued across operations in all countries, in particular Portugal and France. Revenue was also impacted following the sale of operations in Brazil in August 2020.

~~Overall, although COVID-19 related demand declines continued, demand for our services in the third quarter of 2020 in each segment has increased sequentially since the second quarter of 2020.~~

~~September Year-to-Date Results~~

Professional & Industrial revenue from services decreased due primarily to decreases in our hours volume in our staffing businesses which were impacted by COVID-19. These decreases were partially offset by increased revenue in our outcome-based products due to program expansions.

Science, Engineering & Technology revenue from services decreased due to lower hours volume in our staffing business across most products due to the continued impact of COVID-19, with the exception of our government staffing business, which has seen increased demand in life sciences support.

~~Education revenue from services decreased due to the impact of COVID-19. Temporary school closures, delayed starts and use of virtual or hybrid instructional styles reduced the typical~~historical demand for our Education services. ~~These decreases were partially offset by the revenues from the first quarter acquisition of Insight.~~

Outsourcing & Consulting revenue from services ~~decreased~~increased due primarily to ~~decreases~~the increase in revenue volume in our ~~PPO, MSP and RPO products due somewhat to COVID-19 as well as lower demand in the Oil and Gas Industry.~~payroll processing outsourcing specialty.

International revenue from services ~~decreased 20.5%~~increased 2.9% on a reported basis and ~~18.7%~~decreased 1.1% in constant currency. Year-over-year revenue comparisons were unfavorably impacted by the sale of our staffing operations in Brazil in August 2020. Excluding Brazil, revenue increased 6.5% on a CCreported basis and 2.4% on a constant currency basis. The ~~decline~~increase was primarily due to a decrease in hours volume as COVID-19 disruptions continued across operations in all countries, in particular France, Portugal and the U.K. These decreases were partially offset by increased revenue in Russia, due to higher hours volume, ~~combined with higher average bill rates.~~particularly in Mexico.

3733

Operating Results By Segment (continued)

(Dollars in millions)


		Third Quarter								September Year to Date									First Quarter
		2020			2019			Change		2020			2019			Change			2021			2020			Change
		(Dollars in millions)																	(Dollars in millions)
Gross Profit:	Gross Profit:																	Gross Profit:
Professional & Industrial	Professional & Industrial	$	77.1		$	91.8		(16.1)	%	$	241.1		$	291.6		(17.3)	%	Professional & Industrial	$	75.9		$	85.1		(10.7)	%
Science, Engineering & Technology	Science, Engineering & Technology	50.7			58.3			(13.1)		156.0			171.8			(9.3)		Science, Engineering & Technology	53.2			54.7			(2.8)
Education	Education	4.1			8.6			(51.1)		28.8			49.9			(42.2)		Education	17.2			20.4			(15.7)
Outsourcing & Consulting	Outsourcing & Consulting	29.1			29.5			(1.5)		87.1			90.7			(4.0)		Outsourcing & Consulting	31.3			28.8			8.8
International	International	30.0			39.5			(23.9)		90.5			119.3			(24.1)		International	35.7			34.3			4.1

Consolidated Total	Consolidated Total	$	191.0		$	227.7		(16.1)	%	$	603.5		$	723.3		(16.6)	%	Consolidated Total	$	213.3		$	223.3		(4.5)	%

Gross Profit Rate:	Gross Profit Rate:																	Gross Profit Rate:
Professional & Industrial	Professional & Industrial	17.3		%	17.1		%	0.2	pts.	17.9		%	17.5		%	0.4	pts.	Professional & Industrial	16.2		%	17.2		%	(1.0)	pts.
Science, Engineering & Technology	Science, Engineering & Technology	20.8			20.4			0.4		20.5			20.0			0.5		Science, Engineering & Technology	20.9			20.3			0.6
Education	Education	15.2			15.0			0.2		14.8			15.9			(1.1)		Education	15.4			14.3			1.1
Outsourcing & Consulting	Outsourcing & Consulting	33.1			31.3			1.8		33.4			32.2			1.2		Outsourcing & Consulting	31.5			32.2			(0.7)
International	International	12.9			13.5			(0.6)		12.7			13.3			(0.6)		International	13.1			12.9			0.2
Consolidated Total	Consolidated Total	18.4		%	18.0		%	0.4	pts.	18.4		%	18.0		%	0.4	pts.	Consolidated Total	17.7		%	17.7		%	—	pts.

~~Third~~First Quarter Results

Gross ~~Profit~~profit for the Professional & Industrial segment declined as the result of lower revenue volume ~~partially offset by an improved~~and a decline in the gross profit rate. The gross profit rate ~~increased 20~~decreased 100 basis points due to ~~lower employee-related~~one-time costs ~~coupled~~associated with ~~improved product mix, as~~expected future volume increases in our contact center business, partially offset by the impact of an increase in permanent placement income this year. Permanent placement revenue, which is included in revenue from services and has very low direct costs of services, has a ~~greater proportion of the segment revenue came from outcome-based services with higher margins.~~disproportionate impact on gross profit rates.

The Science, Engineering & Technology gross profit declined as lower revenue volume was partially offset by a higher gross profit rate. The gross profit rate increased 4060 basis points due to ~~lower employee-related costs, partially offset by~~increased permanent placement income, coupled with improved specialty mix.

Gross profit for the Education segment declined as a result of lower revenue volume, partially offset by an improved gross profit rate. The gross profit rate increased 20110 basis points due primarily to higher permanent placement fee income and lower employee-related costs, partially offset by ~~increased pricing pressures.~~the impact of unfavorable customer mix.

The Outsourcing & Consulting gross profit ~~declined~~increased on ~~lower~~higher revenue volume, partially offset by ~~an improved gross profit rate. The gross profit rate increased by 180 basis points due to improved product mix coupled with lower employee-related costs in the PPO product.~~

~~International gross profit declined as~~ a ~~result of lower revenue volume and a decline~~decrease in the gross profit rate. The gross profit rate decreased by 70 basis points primarily due to ~~lower permanent placement revenue. Permanent placement revenue, which is included~~a change in ~~revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates.~~product mix within this segment.

~~September Year-to-Date Results~~

~~Gross Profit for the Professional & Industrial segment declined as the result of lower~~International gross profit increased on higher revenue volume ~~partially offset by~~and an ~~improved~~increase in the gross profit rate. The gross profit rate increased 4020 basis points primarily due to customer mix, partially offset by lower ~~employee-related costs coupled with improved product mix, as a greater proportion of the segment revenue came from outcome-based services with higher margins.~~permanent placement income.

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The Science, Engineering & Technology gross profit declined as lower revenue volume was partially offset by a higher gross profit rate. The gross profit rate increased 50 basis points due to lower employee-related costs, partially offset by specialty mix.

Gross profit for the Education segment declined as a result of lower revenue volume, combined with a lower gross profit rate. The Education gross profit rate decreased 110 basis points due to increased pricing pressures, partially offset by lower employee-related costs.

The Outsourcing & Consulting gross profit declined on lower revenue volume, partially offset by an improved gross profit rate. The Outsourcing & Consulting gross profit rate increased 120 basis points due to improved product mix coupled with lower employee-related costs in the PPO product.

International gross profit declined as a result of lower revenue volume and a decline in the gross profit rate. The International gross profit rate decreased primarily due to lower permanent placement revenue.

Operating Results By Segment (continued)

(Dollars in millions)


		Third Quarter						September Year to Date							First Quarter
		2020		2019		% Change		2020		2019		% Change			2021		2020		% Change
		(Dollars in millions)													(Dollars in millions)
SG&A Expenses:	SG&A Expenses:													SG&A Expenses:
Professional & Industrial	Professional & Industrial	$	65.3	$	77.6	(15.8)	%	$	210.4	$	246.9	(14.8)	%	Professional & Industrial	$	69.4	$	80.5	(13.8)	%
Science, Engineering & Technology	Science, Engineering & Technology	31.3		36.0		(13.0)		99.1		111.4		(11.1)		Science, Engineering & Technology	35.7		36.5		(2.1)
Education	Education	11.6		13.8		(15.5)		37.7		41.5		(9.1)		Education	14.2		16.6		(14.5)
Outsourcing & Consulting	Outsourcing & Consulting	25.4		29.1		(12.7)		79.1		90.9		(13.0)		Outsourcing & Consulting	28.4		28.6		(0.6)
International	International	39.9		35.3		13.1		101.4		107.2		(5.4)		International	33.1		33.2		(0.4)

Corporate expenses	Corporate expenses	19.9		18.8		5.3		63.3		69.0		(8.3)		Corporate expenses	21.9		24.1		(9.5)
Consolidated Total	Consolidated Total	$	193.4	$	210.6	(8.2)	%	$	591.0	$	666.9	(11.4)	%	Consolidated Total	$	202.7	$	219.5	(7.7)	%

		Third Quarter						September Year to Date							First Quarter
		2020		2019		% Change		2020		2019		% Change			2021		2020		% Change
		(Dollars in millions)													(Dollars in millions)
Restructuring Charges Included in SG&A Expenses:	Restructuring Charges Included in SG&A Expenses:													Restructuring Charges Included in SG&A Expenses:
Professional & Industrial	Professional & Industrial	$	(0.1)	$	(0.1)	(24.7)	%	$	4.3	$	5.2	(18.8)	%	Professional & Industrial	$	—	$	4.4	NM	%
Science, Engineering & Technology	Science, Engineering & Technology	—		—		—		0.5		0.4		45.2		Science, Engineering & Technology	—		0.5		NM
Education	Education	—		—		—		0.8		—		NM		Education	—		0.9		NM
Outsourcing & Consulting	Outsourcing & Consulting	—		—		—		—		—		—		Outsourcing & Consulting	—		—		NM
International	International	—		—		—		1.1		—		NM		International	—		1.1		NM
Corporate expenses	Corporate expenses	—		—		—		1.7		—		NM		Corporate expenses	—		1.8		NM
Consolidated Total	Consolidated Total	$	(0.1)	$	(0.1)	68.5	%	$	8.4	$	5.6	49.1	%	Consolidated Total	$	—	$	8.7	NM	%

~~Third~~First Quarter Results

Total SG&A expenses in Professional & Industrial decreased ~~15.8%~~13.8%, or 8.8% excluding restructuring charges, due primarily to lower salaries and related costs from cost management actions and initiatives taken to ~~help~~ mitigate the impact of lower revenue volume as a result of the COVID-19 disruption, coupled with the impact of the restructuring actions taken in the first quarter of ~~this year.~~last year prior to the impact of COVID-19.

Total SG&A expenses in Science, Engineering & Technology decreased ~~13.0%~~2.1% in total from a year ago and decreased 0.7% excluding last year’s restructuring charges. This reduction was due primarily to lower ~~salaries~~travel and non-salary related sales costs ~~resulting from the cost management actions and initiatives taken~~due to ~~help mitigate the lower revenue volume as a result of the~~continued COVID-19 disruption.

Total SG&A expenses in Education decreased ~~15.5%~~14.5%, or 9.6% excluding restructuring charges, due primarily to lower salaries and related costs as a result of cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption. ~~This decrease was partially offset by the impact of the acquisition of Insight that took place in the first quarter.~~

Total SG&A expenses in Outsourcing & Consulting decreased ~~12.7%~~0.6%. This reduction was due primarily to lower ~~salaries~~travel and non-salary related sales costs due to ~~cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the~~continued COVID-19 ~~disruption, partially offset by higher performance-based compensation.~~disruption.

Total SG&A expenses in International ~~increased 13.1% due to~~decreased 0.4% on a ~~specific customer credit loss provision~~reported basis and decreased 5.2% on a constant currency basis. Excluding the restructuring charge in ~~Mexico~~the first quarter of 2020, expenses decreased 2.1% on a constant currency basis. Expenses were lower as a result of an unfavorable ruling in on-going litigation. The disputed accounts receivable balance relates to services rendered more than five years ago. Excluding this provision, total SG&A expenses decreased 14.0% driven by cost management, ~~to contend with the COVID-19 disruption, due primarily to lower salaries,~~ combined with the ~~effect~~impact of the sale of staffing operations in Brazil in August 2020.

Corporate expenses increased due to the year-over-year impact of adjustments which lowered performance-based compensation expense in the third quarter of 2019, along with increased rent expense for the headquarters building as a result of the 2020 first quarter sale-leaseback transaction. These increases were partially offset by lower employee salaries and benefits related to COVID-19 cost-saving actions taken.

Subsequent to the end of the third quarter, several temporary expense mitigation actions taken in response to COVID-19 such as furloughs and reductions in compensation for officers and employees in the U.S., were ended in the fourth quarter.~~Reductions in staffing levels in areas of the business in which the demand declines have been the most severe and pervasive have been initiated.~~

~~September Year-to-Date Results~~

~~Total SG&A expenses in Professional & Industrial~~ decreased ~~14.8%~~9.5% due primarily to lower salaries and related costs due to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption, coupled with the impact of the restructuring actions taken in the first quarter of this year which reduced salaries and relatedemployee-related costs and ~~facilities expenses.~~

~~Total SG&A expenses in Science, Engineering & Technology decreased 11.1% due primarily to cost management actions and initiatives taken to help mitigate~~ the ~~lower revenue volume as a result of the COVID-19 disruption.~~

Total SG&A expenses in Education decreased 9.1% due primarily to lower salaries and related costs resulting from the cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption. This decrease was2020 restructuring charges, partially offset by ~~the impact of the acquisition of Insight that took place in the first quarter.~~

Total SG&A expenses in Outsourcing & Consulting decreased 13.0% due primarily to lower salaries and related expenses resulting from cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption.

Total SG&A expenses in International decreased 5.4%. Excluding the previously mentioned specific customer credit loss provision in Mexico, total SG&A expenses decreased 14.3% due primarily to lower salaries, driven by cost management to contend with the COVID-19 disruption, combined with lowerhigher incentive-based compensation.

Corporate expenses decreased as a result of lower performance-based compensation expense and lower employee salaries and benefits related to COVID-19 cost-saving actions taken. These decreases were partially offset by rent expense for the headquarters building as a result of the 2020 first quarter sale-leaseback transaction.

Operating Results By Segment (continued)

(Dollars in millions)


		Third Quarter						September Year to Date							First Quarter
		2020		2019		% Change		2020		2019		% Change			2021		2020		% Change
		(Dollars in millions)													(Dollars in millions)
Earnings (Loss) from Operations:	Earnings (Loss) from Operations:													Earnings (Loss) from Operations:
Professional & Industrial	Professional & Industrial	$	11.8	$	14.2	(17.6)	%	$	30.7	$	44.7	(31.4)	%	Professional & Industrial	$	6.5	$	4.6	42.3	%
Science, Engineering & Technology	Science, Engineering & Technology	19.4		22.3		(13.2)		56.9		60.4		(5.9)		Science, Engineering & Technology	17.5		18.2		(4.2)
Education	Education	(7.5)		(5.2)		(43.2)		(8.9)		8.4		NM		Education	3.0		3.8		(21.2)
Outsourcing & Consulting	Outsourcing & Consulting	3.7		0.4		NM		8.0		(0.2)		NM		Outsourcing & Consulting	2.9		0.2		NM
International	International	(9.9)		4.2		NM		(10.9)		12.1		NM		International	2.6		1.1		135.1
Corporate	Corporate	(19.9)		(18.8)		(5.3)		(178.9)		(56.7)		(215.1)		Corporate	(21.9)		(139.7)		84.3
Consolidated Total	Consolidated Total	$	(2.4)	$	17.1	NM		$	(103.1)	$	68.7	NM		Consolidated Total	$	10.6	$	(111.8)	NM	%

~~Third~~First Quarter Results

Professional & Industrial reported earnings of ~~$11.8~~$6.5 million for the quarter, a ~~17.6% decrease~~42.3% increase from a year ago. The ~~decrease~~increase in earnings was primarily due to ~~the impact~~decreased expenses of ~~COVID-19 on our staffing operations,~~$11.1 million described above, partially offset by ~~increases~~the lower staffing services volumes and one-time costs in ~~our outcome-based products and~~ the ~~cost management initiatives taken to mitigate the impact of the pandemic on our operations.~~call center business.

Science, Engineering & Technology reported earnings of ~~$19.4~~$17.5 million for the quarter, a ~~13.2%~~4.2% decrease from a year ago. The decrease in earnings was primarily due to the impact of COVID-19 on our operations, partially offset by the cost management initiatives taken to mitigate its impact.

Education reported ~~a loss~~earnings of ~~$7.5~~$3.0 million for the quarter, a ~~43.2% increase~~21.2% decrease from a year ago. The ~~increased loss~~decrease was primarily due to the impact of COVID-19 on our operations, partially offset by the cost management initiatives taken to mitigate its impact.

Outsourcing & Consulting reported earnings of ~~$3.7~~$2.9 million for the quarter, ~~a $3.3~~compared to earnings of $0.2 million ~~increase over~~ a year ago. The increase in earnings was primarily due to the impact of increased revenue volumes within the ~~cost management initiatives taken to mitigate the impact of COVID-19 as well as improved product mix.~~segment.

International reported ~~a loss~~earnings of $2.6 million for the quarter, ~~driven by a specific customer provision in Mexico. Excluding this effect, the loss was $0.4 million, as the cost management actions only partially offset the lower revenues due~~compared to ~~the COVID-19 impact on operations.~~

~~September Year-to-Date Results~~

~~Professional & Industrial reported~~ earnings of ~~$30.7~~$1.1 million a 31.4% decrease from a year ago. The decrease in earnings was primarily due to the impact of COVID-19 on our staffing operations, partially offset by increases in our outcome-based products and the cost management initiatives taken to mitigate the impact of the pandemic on our operations.

Science, Engineering & Technology reported earnings of $56.9 million, a 5.9% decrease from a year ago. The decrease in earnings was primarily due to the impact of COVID-19 on our operations, partially offset by the cost management initiatives taken to mitigate its impact.

~~Education reported a loss of $8.9 million. The year-to-date loss is due to the impact of COVID-19 on our revenue, partially offset by the cost management initiatives taken to mitigate its impact.~~

~~Outsourcing & Consulting reported earnings of $8.0 million, an $8.2 million increase over~~ a year ago. The increase in earnings was primarily due to the year-over-year impact of restructuring charges incurred in the ~~cost management initiatives taken to mitigate the impact~~first quarter of ~~COVID-19 as well as improved product mix.~~2020.

4136

International reported a loss on a year-to-date basis, largely driven by a specific customer provision in Mexico. Excluding this effect, the loss was $1.4 million, as the cost management actions only partially offset the lower revenues due to the COVID-19 impact on 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 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. The impact of the current economic slow-down resulting from the COVID-19 crisis began in March 2020 and continued during the ~~third quarter. Consistent with our historical results, the impact~~first quarter of ~~the current economic conditions resulted in declines in working capital requirements, primarily trade accounts receivable, and increases in cash flows from operations as revenues slowed.~~2021.

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 restricted cash, operating activities, investing activities and financing activities.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash totaled ~~$254.4~~$245.2 million at the end of the ~~third~~first quarter of ~~2020~~2021 and ~~$31.0~~$228.1 million at year-end ~~2019.~~2020. As further described below, we generated ~~$216.5~~$10.5 million of cash from operating activities, generated ~~$10.3~~$7.9 million of cash from investing activities and ~~used $6.8~~generated $0.1 million of cash ~~for~~from financing activities.

Operating Activities

In the first ~~nine~~three months of ~~2020,~~2021, we generated ~~$216.5~~$10.5 million of net cash from operating activities, as compared to generating ~~$74.2~~$8.4 million in the first ~~nine~~three months of ~~2019. This change was~~2020, due to ~~reduced~~recurring working capital requirements as revenues slowed. In addition, the Company deferred $75.7 million of tax payments as allowed by COVID-19 economic relief in several jurisdictions. In the second quarter of 2020, the Company also monetized wage subsidy receivables outside the U.S. for $16.9 million in cash.changes.

Trade accounts receivable totaled ~~$1.1~~$1.3 billion at the end of the ~~third~~first quarter of ~~2020.~~2021. Global DSO was 6160 days at the end of the ~~third~~first quarter of 2021, 64 days at year-end 2020 and 59 days at the end of the ~~third~~first quarter of ~~2019.~~2020. The ~~increase~~decrease since year-end 2020 reflects the collection of ~~two days was~~receivables from several large customers who were carrying higher balances due to ~~certain customers taking advantage of full payment terms, along with a shift in customer mix to larger customers with longer payment terms.~~customer-driven administrative issues at year end.

Our working capital position (total current assets less total current liabilities) was ~~$634.5~~$632.7 million at the end of the ~~third~~first quarter of ~~2020,~~2021, an increase of ~~$112.9~~$8.7 million from year-end ~~2019.~~2020. Excluding additional cash, working capital declined ~~$109.5~~$7.7 million from year-end ~~2019.~~2020. The current ratio (total current assets divided by total current liabilities) was ~~1.8~~1.7 at the end of the ~~third~~first quarter of ~~2020~~2021 and ~~1.6~~ at year-end ~~2019.~~2020.

Investing Activities

In the first ~~nine~~three months of ~~2020,~~2021, we generated ~~$10.3~~$7.9 million of cash from investing activities, as compared to ~~using $88.8~~generating $15.9 million in the first ~~nine~~three months of ~~2019.~~2020. Included in cash from investing activities in the first ~~nine~~three months of 2021 is $10.4 million of proceeds from company-owned life insurance. Included in cash from investing activities in the first three months of 2020 is $55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction. This was partially offset by ~~$36.4~~$36.3 million of cash used for the acquisition of Insight in January 2020, net of the cash received and including working capital adjustments. Included in cash used for investing activities in the first nine months of 2019 is $50.8 million for the acquisition of NextGen in January 2019, net of the cash received, and $35.6 million for the acquisition of GTA in January 2019, net of the cash received. ~~These amounts were partially offset by proceeds of $13.8 million primarily from the sale of unused land.~~

Financing Activities

In the first ~~nine~~three months of ~~2020,~~2021, we ~~used $6.8~~generated $0.1 million of cash ~~for~~from financing activities, as compared to ~~generating $3.6~~using $4.6 million in the first ~~nine~~three months of ~~2019.~~2020. The change in cash ~~used in~~from financing activities was primarily related to the year-over-year change in dividend payments. Dividends paid per common share were $0.075 in first three months of 2020, while no dividends were paid in the first three months of 2021.

Changes in net cash from financing activities are also impacted by short-term borrowing activities. Debt totaled ~~$0.5~~$1.1 million at the end of the ~~third~~first quarter of ~~2020~~2021 and was ~~$1.9~~$0.3 million at year-end ~~2019.~~2020, and represented local borrowings in both periods. 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 ~~0.0%~~0.1% at the end of the ~~third~~first quarter of ~~2020~~2021 and ~~0.1%~~0.0% at year-end ~~2019.~~

2020.

The change in short-term borrowings in the first ~~nine~~three months of 2021 was primarily due to borrowings on local lines of credit. The change in short-term borrowings in the first three months of 2020 was primarily due to payments on local lines of credit. ~~The change in short-term borrowings in the first nine months of 2019 was primarily due to borrowings on our securitization facility.~~

~~We made dividend payments of $3.0 million in the first nine months of 2020 and $8.9 million in the first nine months of 2019.~~

New Accounting Pronouncements

See New Accounting Pronouncements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a description of new accounting pronouncements.

Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2019~~2020 Form 10-K. For a discussion of the goodwill impairment charge recognized during the first quarter of 2020, see the Goodwill footnote in the Notes to our Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more information.

Contractual Obligations and Commercial Commitments

There were no significant changes to our contractual obligations and commercial commitments from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2019~~2020 Form 10-K, with the exception of the sale and leaseback of the main headquarters building and the indemnification agreement related to the sale of our Brazil operations. Details of the lease payments by year are disclosed in the Leases footnote in the Notes to Consolidated Financial Statements in this Form 10-Q filing. Details of the indemnification agreement are disclosed in the Acquisitions and Disposition footnote and the Fair Value Measurements footnote in the Notes to the Consolidated Financial Statements in this Form 10-Q filing.10-K. We have no material unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.

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 asset-based lending, or additional bank ~~facilities.~~facilities or sale of 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,~~2021, cash generated from operations will continue to be supplemented by recent enactment of laws providing COVID-19 relief, most notably the Coronavirus Aid, Relief, and Economic Security Act which allows for the deferral of payments of the Company's U.S. social security taxes. Such deferrals are required to be repaid inby the end of 2021 and 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 ~~2020 third~~2021 first quarter 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 as working capital needs, primarily trade accounts receivable, increase during periods of growth. A cash pooling arrangement (the “Cash Pool”) 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.

As of the end of the ~~third~~first quarter of ~~2020,~~2021, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and ~~$96.8~~$97.0 million of available capacity on our $150.0 million securitization facility. The securitization facility carried no short-term borrowings and ~~$53.2~~$53.0 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 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. As of the end of the ~~third~~first quarter of ~~2020,~~2021, we met the debt covenants related to our revolving credit facility and securitization facility.

We have 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. ~~As cash flows generated from operations through the third quarter of 2020 have been higher than our historical results and uncertainty remains surrounding the duration of the~~

~~COVID-19 crisis, we anticipate maintaining a higher level of cash than our prior practice.~~ We do believe that we may ~~begin to~~ utilize a portion of our existing cash balances to fund working capital requirements over the next several quarters if demand for our services continues to ~~increase.~~increase and to pay 50% of deferred payroll tax balances which are due in the fourth quarter of 2021.

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.

Forward-Looking Statements

Certain statements contained in this report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 recent novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, ~~changing~~disruption 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 and services connecting talent to independent work, 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 Pte. Ltd., 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 brand, 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 investments in equity affiliates including PersolKelly Pte. Ltd., risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, risks associated with violations of ~~anti-corruption,~~anticorruption, 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 cyberattacks or other breaches of network or information technology security, our ability to sustain critical business applications through our key data centers, our ability to effectively implement 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, our ability to realize value from our tax credit and 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-looking statements contained herein, and we ~~have~~undertake no ~~intention~~duty 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 the Company’s Annual Report on Form 10-K.

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Item 3. 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 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 ~~2020 third~~2021 first quarter earnings.

We are exposed to market and currency risks on our investment in Persol Holdings, which may be material. The investment is stated at fair value and is marked to market through net earnings. Foreign currency fluctuations on this yen-denominated investment are reflected as a component of other comprehensive income (loss). See Fair Value Measurements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q 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 Company-owned variable universal life insurance policies, are designed to mitigate, but not eliminate, this risk with offsetting gains and losses.

Item 4. Controls and Procedures.

Based on their evaluation as of the end of the period covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s 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.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The 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, anti-competition regulations, commercial and contractual disputes, and tax related matters which could result in a material adverse outcome. We record accruals for loss contingencies when we believe it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Such accruals are recorded in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet. The Company maintains insurance coverage which may cover certain claims. When claims exceed the applicable policy deductible and realization of recovery of the claim from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount, which are included in prepaid expenses and other current assets in the consolidated balance sheet.

While the 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. The ~~matter~~Authority announced its decision on December 18, 2020, levying a fine against the trade association with joint and several secondary liabilities placed on the 20 member companies. Our apportioned secondary liability is ~~progressing and we anticipate resolution within~~approximately $300,000. Certain other member companies exercised their right to challenge the ~~next year. We are fully cooperating with~~decision, which could impact the ~~investigation.~~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.

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Item 1A. Risk Factors.

The following risk factor ~~is in addition to~~has been updated from the Company's risk factors previously disclosed in Part I, Item 1A of the Company's Annual Report filed on the Form 10-K for year ended ~~December 29, 2019.~~January 3, 2021.

Our business has been adversely impacted by the recent novel coronavirus (COVID-19) outbreak and we expect adverse business and economic conditions will continue in the future.

The outbreak of the novel coronavirus across the globe continues to negatively impact the economies and general welfare in the countries in which we ~~operate.~~operate, as well as in the countries in which demand for our customers' goods and services are created. As the pandemic continues, we have maintained our focus on the health and safety of our employees, contractors, customers and suppliers around the world. Our emergency management team continues to track the impact of COVID-19, ~~implement~~including the deployment of vaccines, implementation of health and safety measures across our various business ~~lines,~~segments, and ~~develop~~development of plans for safely continuing operations induring the ~~event of an extended duration of the~~ pandemic.

The demand for staffing services is significantly affected by general economic conditions. The economic downturn and uncertainties related to the duration of the COVID-19 pandemic have had and isare expected ~~to continue~~ to have an adverse impact on the staffing industry and the Company’s ability to forecast its financial performance. Containment and mitigation measures taken to combat the spread of COVID-19, including travel bans, quarantines, shelter-in-place orders, temporary shutdowns, ~~and~~ social distancing, and other health and safety precautions have decreased customer demand for staffing ~~services, specifically~~services. In our Education segment, many school districts previously responded to an increase in ~~our~~COVID-19 cases by moving to virtual or hybrid education ~~business unit where~~models. While many school districts have ~~remained closed for physical~~returned to in-person instruction, ~~since March 2020.~~ ~~The~~future disruptions in on-site instruction and the uncertainties related to the deployment of services via virtual and hybrid education models may ~~continue to~~ materially impact the Company’s financial performance.We continue to assess and address the impact of COVID-19 on the financial viability of third parties on which we rely to provide staffing services or manage critical business functions.

The COVID-19 outbreak and related containment and mitigation efforts resulted in a substantial decline in our revenues.We expect that the revenue decline will continue in the future until demand for our services recovers. We are not able to predict the timing or the extent of the recovery. Business decisions by customers made in response to the COVID-19 pandemic, including automation, social distancing, and remote work, if sustained in a post-pandemic business environment, could negatively impact customer demand for our services.

In the second quarter of 2020, we took a number of cost management actions to address declines in our revenues and adverse business conditions. Certain actions, such as reducing officer and employee compensation and furloughing and redeploying employees, ended in the fourth ~~quarter.~~ quarter of 2020. Other actions taken, including reducing full-time employee staffing levels, reducing discretionary expenses and projects, ~~enacting certain hiring freezes~~ and suspending dividends payable on our common stock, continue. There can be no assurance that these actions will be adequate, and further actions may be required in the future.Due to uncertainty regarding the sufficiency of the containment and mitigation measures to combat the COVID-19 outbreak and the duration of their implementation, coupled with the unknown timeline for ~~development~~effective deployment of COVID-19 ~~treatments or~~ vaccines to a large portion of the workforce, the extent or the duration of the impact on our business, financial condition, ability to meet financial covenants and restrictions in our debt facilities, and results of operations cannot be predicted with certainty, however, such impacts could be material.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Sales of Equity Securities Not Registered Under the Securities Exchange Act of 1933

None.

During the ~~third~~first quarter of ~~2020,~~2021, 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)
June 29, 2020 through August 2, 2020 167 $ 15.56 — $ —
August 3, 2020 through August 30, 2020 1,618 17.13 — $ —
August 31, 2020 through September 27, 2020 210 16.87 — $ —
Total 1,995 $ 16.97 —


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)
January 4, 2021 through February 7, 2021	559	$	21.26	—	$	—

February 8, 2021 through March 7, 2021	22,444	21.09		—	$	—

March 8, 2021 through April 4, 2021	3,879	21.97		—	$	—

Total	26,882	$	21.22	—

We may reacquire shares sold to cover employee tax withholdings due upon the vesting of restricted stock and performance shares held by employees. Accordingly, ~~1,995~~26,882 shares were reacquired in transactions during the quarter.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

See Index to Exhibits required by Item 601, Regulation S-K, set forth on page 4843 of this filing.

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INDEX TO EXHIBITS

REQUIRED BY ITEM 601,

REGULATION S-K


Exhibit No.						Description
14						~~Code of Business Conduct and Ethics, revised August 2020.~~

31.1						Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.

31.2						Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.

32.1						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline 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.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			KELLY SERVICES, INC.

Date: ~~November 5, 2020~~May 13, 2021

			/s/ Olivier G. Thirot
			Olivier G. Thirot

			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)


Date: ~~November 5, 2020~~May 13, 2021

			/s/ Laura S. Lockhart
			Laura S. Lockhart

			Vice President, Corporate Controller
			and Chief Accounting Officer
			(Principal Accounting Officer)

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	As of Year-End 2019		Additions to Goodwill		Impairment Adjustments		As of Second Quarter-End 2020

	(In millions of dollars)








Americas Staffing	$	58.5	$	19.9	$	(78.4)	$	0
Global Talent Solutions	69.3		0		(69.3)		0
Total	$	127.8	$	19.9	$	(147.7)	$	0