10-Q 1 kelya-20220403.htm 10-Q kelya-20220403
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1088
KELLY SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware38-1510762
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

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

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

No Change
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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 CommonKELYANASDAQ Global Market
Class B CommonKELYBNASDAQ Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
At May 2, 2022, 34,560,502 shares of Class A and 3,357,146 shares of Class B common stock of the Registrant were outstanding.
2


KELLY SERVICES, INC. AND SUBSIDIARIES 
 Page Number

3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In millions of dollars except per share data)
 
 13 Weeks Ended
 April 3,
2022
April 4,
2021
Revenue from services$1,296.4 $1,205.9 
Cost of services1,037.8 992.6 
Gross profit258.6 213.3 
Selling, general and administrative expenses235.2 202.7 
Earnings (loss) from operations23.4 10.6 
Gain (loss) on investment in Persol Holdings(67.2)30.0 
Loss on currency translation from liquidation of subsidiary(20.4) 
Other income (expense), net2.8 (3.4)
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate(61.4)37.2 
Income tax expense (benefit)(13.0)10.5 
Net earnings (loss) before equity in net earnings (loss) of affiliate(48.4)26.7 
Equity in net earnings (loss) of affiliate0.8 (1.1)
Net earnings (loss)$(47.6)$25.6 
Basic earnings (loss) per share$(1.23)$0.65 
Diluted earnings (loss) per share$(1.23)$0.64 
Average shares outstanding (millions):
Basic38.6 39.3 
Diluted38.6 39.5 
 
See accompanying unaudited Notes to Consolidated Financial Statements.
4


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In millions of dollars)
 
 13 Weeks Ended
 April 3,
2022
April 4,
2021
Net earnings (loss)$(47.6)$25.6 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax expense of $0.1 and $0.5, respectively(9.9)(13.6)
Less: Reclassification adjustments included in net earnings (loss) - liquidation of Japan subsidiary20.4  
Less: Reclassification adjustments included in net earnings (loss) - equity method investment and other2.5  
Foreign currency translation adjustments13.0 (13.6)
Other comprehensive income (loss)13.0 (13.6)
Comprehensive income (loss)$(34.6)$12.0 

See accompanying unaudited Notes to Consolidated Financial Statements.
5


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions)
April 3,
2022
January 2,
2022
Assets
Current Assets  
Cash and equivalents$230.3 $112.7 
Trade accounts receivable, less allowances of $12.2 and $12.6, respectively1,523.8 1,423.2 
Prepaid expenses and other current assets72.2 52.8 
Total current assets1,826.3 1,588.7 
Noncurrent Assets
Property and equipment:
Property and equipment201.9 205.1 
Accumulated depreciation(169.9)(169.8)
Net property and equipment32.0 35.3 
Operating lease right-of-use assets71.8 75.8 
Deferred taxes303.6 302.8 
Goodwill, net155.8 114.8 
Investment in Persol Holdings 264.3 
Investment in equity affiliate 123.4 
Other assets396.1 389.1 
Total noncurrent assets959.3 1,305.5 
Total Assets$2,785.6 $2,894.2 

See accompanying unaudited Notes to Consolidated Financial Statements.

6


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions)
April 3,
2022
January 2,
2022
Liabilities and Stockholders’ Equity
Current Liabilities  
Short-term borrowings$0.2 $ 
Accounts payable and accrued liabilities711.6 687.2 
Operating lease liabilities16.1 17.5 
Accrued payroll and related taxes338.9 318.4 
Accrued workers’ compensation and other claims20.4 20.8 
Income and other taxes109.1 51.3 
Total current liabilities1,196.3 1,095.2 
Noncurrent Liabilities  
Operating lease liabilities58.7 61.4 
Accrued payroll and related taxes 57.6 
Accrued workers’ compensation and other claims36.4 37.0 
Accrued retirement benefits205.1 220.0 
Other long-term liabilities15.6 86.8 
Total noncurrent liabilities315.8 462.8 
Commitments and contingencies (see Contingencies footnote)
Stockholders’ Equity  
Capital stock, $1.00 par value  
Class A common stock, 100.0 shares authorized; 35.1 shares issued at 2022 and 36.7 shares issued at 202135.1 36.7 
Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2022 and 20213.4 3.4 
Treasury stock, at cost 
Class A common stock, 0.6 shares at 2022 and 0.7 shares at 2021(12.4)(14.5)
Class B common stock(0.6)(0.6)
Paid-in capital22.8 23.9 
Earnings invested in the business1,239.9 1,315.0 
Accumulated other comprehensive income (loss)(14.7)(27.7)
Total stockholders’ equity1,273.5 1,336.2 
Total Liabilities and Stockholders’ Equity$2,785.6 $2,894.2 

See accompanying unaudited Notes to Consolidated Financial Statements.
7


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In millions of dollars)
 13 Weeks Ended
 April 3,
2022
April 4,
2021
Capital Stock
Class A common stock
Balance at beginning of period$36.7 $36.7 
Conversions from Class B— — 
Share retirement(1.6) 
Balance at end of period35.1 36.7 
Class B common stock
Balance at beginning of period3.4 3.4 
Conversions to Class A— — 
Balance at end of period3.4 3.4 
Treasury Stock
Class A common stock
Balance at beginning of period(14.5)(16.5)
Net issuance of stock awards2.1 1.4 
Balance at end of period(12.4)(15.1)
Class B common stock
Balance at beginning of period(0.6)(0.6)
Net issuance of stock awards  
Balance at end of period(0.6)(0.6)
Paid-in Capital
Balance at beginning of period23.9 21.3 
Net issuance of stock awards(1.1)(0.7)
Balance at end of period22.8 20.6 
Earnings Invested in the Business
Balance at beginning of period1,315.0 1,162.9 
Net earnings (loss)(47.6)25.6 
Dividends(1.9) 
Share retirement(25.6) 
Balance at end of period1,239.9 1,188.5 
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period(27.7)(4.2)
Other comprehensive income (loss), net of tax13.0 (13.6)
Balance at end of period(14.7)(17.8)
Stockholders’ Equity at end of period$1,273.5 $1,215.7 

See accompanying unaudited Notes to Consolidated Financial Statements.
8


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions of dollars)
 13 Weeks Ended
 April 3,
2022
April 4,
2021
Cash flows from operating activities:  
Net earnings (loss)$(47.6)$25.6 
Adjustments to reconcile net earnings (loss) to net cash from operating activities:  
Depreciation and amortization7.5 5.9 
Operating lease asset amortization5.0 5.2 
Provision for credit losses and sales allowances0.8 (0.1)
Stock-based compensation2.1 1.4 
(Gain) loss on investment in Persol Holdings67.2 (30.0)
Loss on currency translation from liquidation of subsidiary20.4  
Gain on foreign currency remeasurement(5.5) 
Equity in net (earnings) loss of PersolKelly Pte. Ltd.(0.8)1.1 
Other, net0.8 1.3 
Changes in operating assets and liabilities, net of acquisitions(156.0)0.1 
Net cash (used in) from operating activities(106.1)10.5 
Cash flows from investing activities:  
Capital expenditures(1.7)(2.7)
Acquisition of companies, net of cash received(58.3) 
Proceeds from company-owned life insurance 10.4 
Proceeds from sale of Persol Holdings investment196.9  
Proceeds from sale of equity method investment119.5  
Other investing activities0.7 0.2 
Net cash from investing activities257.1 7.9 
Cash flows from financing activities:  
Net change in short-term borrowings0.2 0.8 
Financing lease payments(0.3)(0.2)
Dividend payments(1.9) 
Payments of tax withholding for stock awards(0.8)(0.5)
Buyback of common shares(27.2) 
Contingent consideration payments(0.7) 
Net cash (used in) from financing activities(30.7)0.1 
Effect of exchange rates on cash, cash equivalents and restricted cash(1.7)(1.4)
Net change in cash, cash equivalents and restricted cash118.6 17.1 
Cash, cash equivalents and restricted cash at beginning of period119.5 228.1 
Cash, cash equivalents and restricted cash at end of period (1)
$238.1 $245.2 



9



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

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported in our consolidated balance sheets:
13 Weeks Ended
April 3,
2022
April 4,
2021
Reconciliation of cash, cash equivalents and restricted cash:
Current assets:
Cash and cash equivalents$230.3 $239.4 
Restricted cash included in prepaid expenses and other current assets0.4 0.2 
Noncurrent assets:
Restricted cash included in other assets7.4 5.6 
Cash, cash equivalents and restricted cash at end of period$238.1 $245.2 

See accompanying unaudited Notes to Consolidated Financial Statements.
10

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

1.  Basis of Presentation
The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the “Company,” “Kelly,” “we” or “us”) have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended January 2, 2022, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2022 (the 2021 consolidated financial statements). There were no changes in accounting policies as disclosed in the Form 10-K, with the exception of those described in the New Accounting Pronouncements footnote. The Company’s first fiscal quarter ended on April 3, 2022 (2022) and April 4, 2021 (2021), each of which contained 13 weeks.


11

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

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

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

First Quarter
20222021
Professional & Industrial
Staffing services$334.9 $352.5 
Permanent placement10.2 4.9 
Outcome-based services99.2 110.2 
Total Professional & Industrial444.3 467.6 
Science, Engineering & Technology
Staffing services220.6 186.2 
Permanent placement8.0 4.8 
Outcome-based services88.5 63.7 
Total Science, Engineering & Technology317.1 254.7 
Education
Staffing services171.9 110.8 
Permanent placement1.5 0.8 
Total Education173.4 111.6 
Outsourcing & Consulting
Talent solutions109.1 99.3 
Total Outsourcing & Consulting109.1 99.3 
International
Staffing services241.7 265.6 
Permanent placement6.9 5.5 
Talent solutions4.2 1.8 
Total International252.8 272.9 
Total Intersegment(0.3)(0.2)
Total Revenue from Services$1,296.4 $1,205.9 

12

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

Our operations are subject to different economic and regulatory environments depending on geographic location. Our P&I and Education segments operate in the Americas region, our SET segment operates in the Americas and Europe regions, and OCG operates in the Americas, Europe and Asia-Pacific regions. The International segment includes Europe and our Mexico operations, which are included in the Americas region.

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

First Quarter
20222021
Americas
United States$956.6 $858.5 
Canada39.1 34.1 
Puerto Rico27.6 24.2 
Mexico10.3 34.6 
Total Americas Region1,033.6 951.4 
Europe
Switzerland55.0 52.7 
France54.6 54.3 
Portugal41.9 43.7 
Russia29.7 32.6 
Italy19.5 18.1 
United Kingdom15.0 17.0 
Other36.3 27.8 
Total Europe Region252.0 246.2 
Total Asia-Pacific Region10.8 8.3 
Total Kelly Services, Inc.$1,296.4 $1,205.9 



















13

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
The below table presents our SET, OCG and International segment revenues disaggregated by geographic region (in millions of dollars):
First Quarter
20222021
Science, Engineering & Technology
Americas$313.8 $253.2 
Europe3.3 1.5 
Total Science, Engineering & Technology$317.1 $254.7 
Outsourcing & Consulting
Americas$92.3 $84.8 
Europe6.0 6.2 
Asia-Pacific10.8 8.3 
Total Outsourcing & Consulting$109.1 $99.3 
International
Americas$10.1 $34.3 
Europe242.7 238.6 
Total International$252.8 $272.9 

Deferred Costs

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $1.7 million as of first quarter-end 2022 and $1.3 million as of year-end 2021. Amortization expense for the deferred costs for the first quarter of 2022 was $1.9 million and in the first quarter of 2021 was $6.8 million.

3. Credit Losses
The rollforward of our allowance for credit losses related to trade accounts receivable, which is recorded in trade accounts receivable, less allowance in the consolidated balance sheet, is as follows (in millions of dollars):
First Quarter
20222021
Allowance for credit losses:
Beginning balance$9.4 $9.8 
Current period provision0.4 (0.2)
Currency exchange effects(0.1)(0.2)
Write-offs(1.2)(0.3)
Ending balance$8.5 $9.1 

Write-offs are presented net of recoveries, which were not material for first quarter-end 2022 and 2021.

We were engaged in litigation with a customer over a disputed accounts receivable balance for certain services rendered more than five years ago, which was recorded as a long-term receivable in other assets in the consolidated balance sheet as of first quarter-end 2021. The related allowance for credit losses on this long-term customer receivable was $10.9 million and represented the likelihood of collection as of first quarter-end 2021. Based on a final ruling in the case in favor of the customer, we wrote off the entire receivable balance in the third quarter of 2021. No other allowances related to other receivables were material for first quarter-end 2022.

14

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
4.  Acquisitions
In the first quarter of 2022, the Company acquired Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, "RocketPower"), as detailed below. In the second quarter of 2021, the Company acquired Softworld, Inc. ("Softworld"), as detailed below.

RocketPower

On March 7, 2022, the Company acquired 100% of the issued and outstanding membership interests of RocketPower for a purchase price of $59.3 million. RocketPower is a leading provider of RPO and other outsourced talent solutions to U.S. high-tech companies. This acquisition will expand OCG's RPO solution and delivery offering and enhance the specialty RPO strategy and expertise within the high-tech industry. Under terms of the purchase agreement, the purchase price was adjusted for cash held by RocketPower at the closing date and estimated working capital adjustments resulting in the Company paying cash of $61.8 million. Total consideration includes $1.1 million of additional consideration that is payable to the seller in 2023 related to employee retention credits and contingent consideration with an estimated fair value of $0.6 million related to an earnout payment with a maximum potential cash payment of $31.8 million in the event certain financial metrics are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model (see Fair Value Measurements footnote). The earnout is expected to be paid in 2023 and 2024 after each earn-out year pursuant to the terms of the purchase agreement. The total consideration is as follows (in millions of dollars):

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

Due to the limited amount of time that has passed since acquiring RocketPower, the purchase price allocation for this acquisition is preliminary and could change.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

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

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the RocketPower acquisition was $15.8 million of intangible assets, made up of $7.5 million in customer relationships, $6.6 million associated with RocketPower's trade names and $1.7 million for non-compete agreements. Customer relationships will be amortized over three years with no residual value, trade names will be amortized over 10 years with no residual value, and the non-compete agreements will be amortized over six years with no residual value. Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the OCG operating segment (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $28.0 million.

15

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
RocketPower's results of operations will be included in the OCG segment in 2022 on a one-month lag. Accordingly, for the first quarter-end 2022, our consolidated revenues and net earnings did not include any results from RocketPower. Pro forma results of operations for this acquisition have not been presented as it is not material to the consolidated statements of earnings.

Softworld

On April 5, 2021, the Company acquired 100% of the shares of Softworld for a purchase price of $215.0 million. Softworld is a leading technology staffing and workforce solutions firm that serves clients across several end-markets, including financial services, life sciences, aerospace, defense, insurance, retail and IT consulting. This acquisition is intended to expand our capabilities, scale and solution set in our technology specialty. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Softworld at the closing date and estimated working capital adjustments resulting in the Company paying cash of $220.4 million. Total consideration includes $2.6 million of additional consideration that is payable to the seller in 2022. In the third quarter of 2021, the Company received cash for a post-close working capital adjustment of $6.0 million. The total consideration is as follows (in millions of dollars):

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

As of first quarter-end 2022, the purchase price allocation for this acquisition is final. Our consolidated revenue from services and earnings from operations for the first quarter of 2022 included $37.9 million and $3.5 million, respectively, from Softworld. Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue synergies and was assigned to the SET operating segment (see Goodwill footnote). All of the goodwill is expected to be deductible for tax purposes.

5. Investment in Persol Holdings
Prior to February 2022, the Company had a yen-denominated investment through the Company's subsidiary, Kelly Services Japan, Inc., in the common stock of Persol Holdings Co., Ltd. ("Persol Holdings"), the 100% owner of Persol Asia Pacific Pte. Ltd., the Company’s joint venture partner in PersolKelly Pte. Ltd. (the "JV"). In February 2022, the Company's board approved a series of transactions that ended the cross-shareholding agreement with Persol Holdings.

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

On February 15, 2022, Kelly Services Japan, Inc. sold the investment in the common stock of Persol Holdings in an open-market transaction for proceeds of $196.9 million, net of transaction fees. As our investment was a noncontrolling interest in Persol Holdings, the investment was recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange through the date of the transaction (see Fair Value Measurements footnote). The $67.2 million loss in the first quarter of 2022 recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings included $52.4 million for losses related to changes in fair value up to the date of the transaction and $14.8 million for the discount from the market price on the date of the sale and transaction costs. The gain on the investment of $30.0 million in the first quarter 2021 was recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

Subsequent to the transaction discussed above, the Company commenced the dissolution process of its Kelly Services Japan, Inc. subsidiary, which was considered substantially liquidated as of first quarter-end 2022. As a result, the Company recognized a $20.4 million cumulative translation adjustment loss in the first quarter of 2022, which is recorded in loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings. The Company also recognized a $5.5 million foreign exchange gain related to U.S.-denominated cash equivalents held by Kelly Services Japan, Inc. following the sale of the Persol Holdings shares and prior to a dividend payment to the Company in the first quarter of 2022. The foreign exchange gain is recorded in other income (expense), net in the consolidated statements of earnings.
16

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
6.  Investment in PersolKelly Pte. Ltd.

Prior to February 2022, the Company had a 49% ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing services business operating in ten geographies in the Asia-Pacific region. On February 14, 2022, the Company entered into an agreement to sell 95% of the Company's shares in the JV to Persol Asia Pacific Pte. Ltd. On March 1, 2022, the Company received cash proceeds of $119.5 million. The carrying value of the shares sold was $117.6 million. In addition, the Company had $1.9 million of accumulated other comprehensive income representing the Company's share of the JV's other comprehensive income over time related to the shares sold that was realized upon the sale, offsetting the $1.9 million gain that resulted from the proceeds in excess of the carrying value.

The operating results of the Company’s interest in the JV were accounted for on a one-quarter lag under the equity method and were reported in equity in net earnings (loss) of affiliate in the consolidated statements of earnings through the date of the sale. Such amounts were earnings of $0.8 million in the first quarter of 2022 and a loss of $1.1 million in the first quarter of 2021.

After the sale, the Company has a 2.5% ownership interest in the JV and has discontinued its use of equity method accounting. The remaining investment will be accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote). The equity investment, included in other assets on the Company’s consolidated balance sheet, totaled $6.4 million as of first quarter-end 2022 and the investment in equity affiliate on the Company's consolidated balance sheet totaled $123.4 million as of year-end 2021.

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis as of first quarter-end 2022 and year-end 2021 in the consolidated balance sheet by fair value hierarchy level, as described below.

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

 As of First Quarter-End 2022
DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars)
Money market funds$122.3 $122.3 $ $ 
Investment in Persol Holdings    
Total assets at fair value$122.3 $122.3 $ $ 
Brazil indemnification$(2.9)$ $ $(2.9)
Greenwood/Asher earnout(2.3)  (2.3)
RocketPower earnout(0.6)  (0.6)
Total liabilities at fair value$(5.8)$ $ $(5.8)
17

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 As of Year-End 2021
DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars)
Money market funds$96.3 $96.3 $ $ 
Investment in Persol Holdings264.3 264.3   
Total assets at fair value$360.6 $360.6 $ $ 
Brazil indemnification$(2.4)$ $ $(2.4)
Greenwood/Asher earnout(4.6)  (4.6)
Total liabilities at fair value$(7.0)$ $ $(7.0)

Money market funds represent investments in money market funds that hold government securities, of which $7.3 million as of first quarter-end 2022 and $6.5 million as of year-end 2021, 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 first quarter-end 2022 and year-end 2021 are included in cash and equivalents in the consolidated balance sheet. The valuations of money market funds are based on quoted market prices of those accounts as of the respective period end.

On February 15, 2022, Kelly Services Japan, Inc. sold the investment in the common stock of Persol Holdings in an open-market transaction. The valuation of the investment was based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of year-end 2021, and the related changes in fair value were recorded in the consolidated statements of earnings (see Investment in Persol Holdings footnote). The cost of this yen-denominated investment, which fluctuated based on foreign exchange rates, was $18.0 million at year-end 2021.

As of first quarter-end 2022 and year-end 2021, the Company had an indemnification liability of $2.9 million and $2.4 million, respectively, in other long-term liabilities on the consolidated balance sheet related to the 2020 sale of the Brazil operations. As part of the sale, the Company agreed to indemnify the buyer for losses and costs incurred in connection with certain events or occurrences initiated within a six-year period after closing. The aggregate losses for which the Company will provide indemnification shall not exceed $8.8 million. The valuation of the indemnification liability was established using a discounted cash flow methodology based on probability weighted-average cash flows discounted by weighted-average cost of capital. The valuation, which represents the fair value, is considered a Level 3 liability, and is being measured on a recurring basis. During the first quarter of 2022, the Company recognized an increase of $0.5 million to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

The Company recorded an earnout liability relating to the 2020 acquisition of Greenwood/Asher, totaling $2.3 million at first quarter-end 2022 in accounts payable and accrued liabilities and $4.6 million at year-end 2021 with $2.3 million in accounts payable and accrued liabilities and $2.3 million in other long-term liabilities in the consolidated balance sheet. The initial valuation of the earnout liability was established using a Black Scholes model and represented the fair value and is considered a Level 3 liability. During the first quarter of 2022, the Company paid the year one portion of the earnout totaling $2.3 million. In the consolidated statements of cash flows, $0.7 million of the payment is reflected as a financing activity representing the initial fair value of the earnout, with the remainder flowing through operating activities.

The Company recorded an earnout liability relating to the 2022 acquisition of RocketPower, totaling $0.6 million at first quarter-end 2022 with $0.5 million in accounts payable and accrued liabilities and $0.1 million in other long-term liabilities in the consolidated balance sheet (see Acquisitions footnote). The maximum total cash payments which may be due related to the earnout liability is $31.8 million. 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.

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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
Equity Investment Without Readily Determinable Fair Value

On March 1, 2022, the Company sold the majority of its investment in the JV (see Investment in PersolKelly Pte. Ltd. footnote), with the remaining 2.5% interest now being measured using the measurement alternative for equity investments without a readily determinable fair value. The measurement alternative represents cost, less impairment, plus or minus observable price changes. The sale of the shares of the JV represented an observable transaction requiring the Company to calculate the current fair value based on the purchase price of the shares, in which the resulting adjustment was not material. The investment totaled $6.4 million as of first quarter-end 2022, representing total cost plus observable price changes to date.

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

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

8. Restructuring
In the first quarter of 2022, the Company took restructuring actions designed to increase efficiency. There were no restructuring charges incurred in the first quarter of 2021.

Restructuring costs incurred in the first quarter of 2022 totaled $1.7 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars):
Severance CostsLease Termination CostsTotal
Professional & Industrial$0.1 $0.2 $0.3 
Education0.4  0.4 
Outsourcing & Consulting0.2  0.2 
Corporate0.8  0.8 
Total$1.5 $0.2 $1.7 

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 2021$2.9 
Additions charged to Professional & Industrial0.3 
Additions charged to Outsourcing & Consulting0.2 
Additions charged to Education0.4 
Additions charged to Corporate0.8 
Reductions for cash payments related to all restructuring activities(2.0)
Balance as of first quarter-end 2022$2.6 

The remaining balance of $2.6 million as of first quarter-end 2022 primarily represents severance costs, and the majority is expected to be paid by second quarter-end 2022. No material adjustments are expected to be recorded.
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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
9. Goodwill
The changes in the carrying amount of goodwill as of first quarter-end 2022 are included in the table below. The goodwill resulting from the acquisition of RocketPower during the first quarter of 2022 (see Acquisitions footnote) was allocated to the OCG reportable segment.

As of
Year-End 2021
Additions to GoodwillImpairment AdjustmentsAs of First
Quarter-End 2022
(In millions of dollars)
Science, Engineering & Technology$111.3 $ $ $111.3 
Education3.5   3.5 
Outsourcing & Consulting 41.0  41.0 
Total$114.8 $41.0 $ $155.8 

10.  Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by component, net of tax, for the first quarter 2022 and 2021 are included in the table below. Amounts in parentheses indicate debits. Reclassification adjustments out of accumulated other comprehensive income (loss) related to the liquidation of the Japan subsidiary, as shown in the table below, were recorded in the loss on currency translation from liquidation of subsidiary line item in the consolidated statements of earnings. Reclassification adjustments out of accumulated other comprehensive income (loss) related to the equity method investment and other, as shown in the table below, which includes $1.9 million related to the investment in PersolKelly Pte. Ltd., were recorded in the other income (expense), net line item in the consolidated statement of earnings. See Investment in PersolKelly Pte. Ltd. footnote for more details.

First Quarter
20222021
(In millions of dollars)
Foreign currency translation adjustments:
Beginning balance$(25.0)$(0.8)
Other comprehensive income (loss) before reclassifications(9.9)(13.6)
Amounts reclassified from accumulated other comprehensive income (loss) - liquidation of Japan subsidiary20.4  
Amounts reclassified from accumulated other comprehensive income (loss) - equity method investment and other2.5  
Net current-period other comprehensive income (loss)13.0 (13.6)
Ending balance(12.0)(14.4)
Pension liability adjustments:
Beginning balance(2.7)(3.4)
Other comprehensive income (loss) before reclassifications  
Amounts reclassified from accumulated other comprehensive income (loss)  
Net current-period other comprehensive income (loss)  
Ending balance(2.7)(3.4)
Total accumulated other comprehensive income (loss)$(14.7)$(17.8)

20

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
11.  Earnings (Loss) Per Share
The reconciliation of basic and diluted earnings (loss) per share on common stock for the first quarter 2022 and 2021 follows (in millions of dollars except per share data):
 First Quarter
 20222021
Net earnings (loss)$(47.6)$25.6 
Less: earnings allocated to participating securities (0.2)
Net earnings (loss) available to common shareholders$(47.6)$25.4 
Average shares outstanding (millions):
Basic38.6 39.3 
Dilutive share awards 0.2 
Diluted38.6 39.5 
Basic earnings (loss) per share$(1.23)$0.65 
Diluted earnings (loss) per share$(1.23)$0.64 

Potentially dilutive shares outstanding are primarily related to deferred common stock related to the non-employee directors deferred compensation plan for the first quarter of 2021. Dividends paid per share for Class A and Class B common stock were $0.05 for the first quarter 2022 and $0.00 for the first quarter 2021.

21

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
12.  Stock-Based Compensation
For the first quarter of 2022, the Company recognized stock compensation expense of $2.1 million, and a related tax benefit of $0.3 million. For the first quarter of 2021, the Company recognized stock compensation expense of $1.4 million, and a related tax benefit of $0.1 million.
Performance Shares
During the first quarter of 2022, 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 earnings before interest, taxes, depreciation and amortization ("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: 2022, 2023 and 2024, 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. Earned shares during each performance period will cliff vest in February 2025 after approval of the financial results by the Compensation Committee, if not forfeited by the recipient. No dividends are paid on these performance shares.
A summary of the status of all nonvested performance shares at target as of first quarter-end 2022 and changes during this period is presented as follows below (in thousands of shares except per share data). The vesting adjustment in the table below represents the 2019 and a portion of the 2021 financial measure performance shares that did not vest because actual achievement was below the threshold level and resulted in no payout.
Financial Measure
Performance Shares
SharesWeighted Average Grant Date Fair Value
Nonvested at year-end 2021708 $20.03 
Granted186 21.19 
Vested(48)22.55 
Forfeited(6)16.81 
Vesting adjustment(142)24.45 
Nonvested at first quarter-end 2022698 $