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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 September 27, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1088
KELLY SERVICES, INC.
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware38-1510762
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

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

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

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

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



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
At October 26, 2020, 35,869,222 shares of Class A and 3,427,538 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 Ended39 Weeks Ended
 September 27,
2020
September 29,
2019
September 27,
2020
September 29,
2019
Revenue from services$1,038.2 $1,267.7 $3,274.6 $4,017.8 
Cost of services847.2 1,040.0 2,671.1 3,294.5 
Gross profit191.0 227.7 603.5 723.3 
Selling, general and administrative expenses193.4 210.6 591.0 666.9 
Goodwill impairment charge  147.7  
Gain on sale of assets  (32.1)(12.3)
Earnings (loss) from operations(2.4)17.1 (103.1)68.7 
Gain (loss) on investment in Persol Holdings16.8 (39.3)(31.4)35.1 
Other income (expense), net(0.7)(0.2)3.6 (1.1)
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate13.7 (22.4)(130.9)102.7 
Income tax expense (benefit)(1.2)(12.8)(36.5)6.3 
Net earnings (loss) before equity in net earnings (loss) of affiliate14.9 (9.6)(94.4)96.4 
Equity in net earnings (loss) of affiliate1.8 (0.9)(1.0)(1.0)
Net earnings (loss)$16.7 $(10.5)$(95.4)$95.4 
Basic earnings (loss) per share$0.42 $(0.27)$(2.43)$2.42 
Diluted earnings (loss) per share$0.42 $(0.27)$(2.43)$2.41 
Average shares outstanding (millions):  
Basic39.3 39.1 39.3 39.0 
Diluted39.4 39.1 39.3 39.2 
 
See accompanying unaudited Notes to Consolidated Financial Statements.
4


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In millions of dollars)
 
 13 Weeks Ended39 Weeks Ended
 September 27,
2020
September 29,
2019
September 27,
2020
September 29,
2019
Net earnings (loss)$16.7 $(10.5)$(95.4)$95.4 
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, respectively5.1 (6.2)0.4 (0.8)
Less: Reclassification adjustments included in net earnings(1.5) (1.5) 
Foreign currency translation adjustments3.6 (6.2)(1.1)(0.8)
Other comprehensive income (loss)3.6 (6.2)(1.1)(0.8)
Comprehensive income (loss)$20.3 $(16.7)$(96.5)$94.6 

See accompanying unaudited Notes to Consolidated Financial Statements.
5


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions) 
September 27,
2020
December 29,
2019
Assets
Current Assets  
Cash and equivalents$248.2 $25.8 
Trade accounts receivable, less allowances of $11.4 and $12.9, respectively1,111.4 1,282.2 
Prepaid expenses and other current assets71.4 76.5 
Properties held for sale 21.2 
Total current assets1,431.0 1,405.7 
Noncurrent Assets
Property and equipment:
Property and equipment220.6 225.8 
Accumulated depreciation(179.8)(182.7)
Net property and equipment40.8 43.1 
Operating lease right-of-use assets84.0 60.4 
Deferred taxes273.3 229.1 
Goodwill, net 127.8 
Investment in Persol Holdings145.8 173.2 
Investment in equity affiliate115.6 117.2 
Other assets301.2 324.1 
Total noncurrent assets960.7 1,074.9 
Total Assets$2,391.7 $2,480.6 

See accompanying unaudited Notes to Consolidated Financial Statements.

6


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions) 
September 27,
2020
December 29,
2019
Liabilities and Stockholders’ Equity
Current Liabilities  
Short-term borrowings$0.5 $1.9 
Accounts payable and accrued liabilities458.4 503.6 
Operating lease liabilities19.5 20.1 
Accrued payroll and related taxes240.7 267.6 
Accrued workers’ compensation and other claims25.0 25.7 
Income and other taxes52.4 65.2 
Total current liabilities796.5 884.1 
Noncurrent Liabilities  
Operating lease liabilities68.1 43.3 
Accrued payroll and related taxes75.7  
Accrued workers’ compensation and other claims44.4 45.8 
Accrued retirement benefits188.2 187.4 
Other long-term liabilities52.7 55.5 
Total noncurrent liabilities429.1 332.0 
Commitments and contingencies (see Contingencies footnote)
Stockholders’ Equity  
Capital stock, $1.00 par value  
Class A common stock, 100.0 shares authorized; 36.6 shares issued at 2020 and 201936.6 36.6 
Class B common stock, 10.0 shares authorized; 3.5 shares issued at 2020 and 20193.5 3.5 
Treasury stock, at cost 
Class A common stock, 0.8 shares at 2020 and 1.0 shares at 2019(16.6)(20.3)
Class B common stock(0.6)(0.6)
Paid-in capital20.6 22.5 
Earnings invested in the business1,139.5 1,238.6 
Accumulated other comprehensive income (loss)(16.9)(15.8)
Total stockholders’ equity1,166.1 1,264.5 
Total Liabilities and Stockholders’ Equity$2,391.7 $2,480.6 

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 Ended39 Weeks Ended
 September 27,
2020
September 29,
2019
September 27,
2020
September 29,
2019
Capital Stock  
Class A common stock  
Balance at beginning of period$36.6 $36.6 $36.6 $36.6 
Conversions from Class B— — — — 
Balance at end of period36.6 36.6 36.6 36.6 
Class B common stock  
Balance at beginning of period3.5 3.5 3.5 3.5 
Conversions to Class A— — — — 
Balance at end of period3.5 3.5 3.5 3.5 
Treasury Stock  
Class A common stock  
Balance at beginning of period(16.7)(20.9)(20.3)(25.4)
Net issuance of stock awards0.1 0.2 3.7 4.7 
Balance at end of period(16.6)(20.7)(16.6)(20.7)
Class B common stock  
Balance at beginning of period(0.6)(0.6)(0.6)(0.6)
Net issuance of stock awards    
Balance at end of period(0.6)(0.6)(0.6)(0.6)
Paid-in Capital  
Balance at beginning of period20.5 23.2 22.5 24.4 
Net issuance of stock awards0.1 (0.9)(1.9)(2.1)
Balance at end of period20.6 22.3 20.6 22.3 
Earnings Invested in the Business  
Balance at beginning of period1,122.8 1,238.1 1,238.6 1,138.1 
Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13, Credit Losses— — (0.7)— 
Net earnings (loss)16.7 (10.5)(95.4)95.4 
Dividends (3.0)(3.0)(8.9)
Balance at end of period1,139.5 1,224.6 1,139.5 1,224.6 
Accumulated Other Comprehensive Income (Loss)  
Balance at beginning of period(20.5)(11.7)(15.8)(17.1)
Other comprehensive income (loss), net of tax3.6 (6.2)(1.1)(0.8)
Balance at end of period(16.9)(17.9)(16.9)(17.9)
Stockholders’ Equity at end of period$1,166.1 $1,247.8 $1,166.1 $1,247.8 

See accompanying unaudited Notes to Consolidated Financial Statements.
8


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions of dollars)
 39 Weeks Ended
 September 27,
2020
September 29,
2019
Cash flows from operating activities:  
Net earnings (loss)$(95.4)$95.4 
Adjustments to reconcile net earnings (loss) to net cash from operating activities:  
Goodwill impairment charge147.7  
Deferred income taxes on goodwill impairment charge(23.0) 
Depreciation and amortization18.0 23.8 
Operating lease asset amortization15.9 16.9 
Provision for credit losses and sales allowances10.7 3.2 
Stock-based compensation2.9 4.7 
(Gain) loss on investment in Persol Holdings31.4 (35.1)
(Gain) loss on sale of assets(32.1)(12.3)
Equity in net (earnings) loss of PersolKelly Pte. Ltd.1.0 1.0 
Other, net1.8 (1.0)
Changes in operating assets and liabilities, net of acquisitions137.6 (22.4)
Net cash from operating activities216.5 74.2 
Cash flows from investing activities:  
Capital expenditures(12.3)(13.8)
Proceeds from sale of assets55.5 13.8 
Acquisition of companies, net of cash received(36.4)(86.4)
Proceeds from company-owned life insurance2.3 3.0 
Proceeds from sale of Brazil, net of cash disposed1.2  
Loans to equity affiliate (4.4)
Investment in equity securities(0.2)(1.0)
Other investing activities0.2  
Net cash from (used in) investing activities10.3 (88.8)
Cash flows from financing activities:  
Net change in short-term borrowings(1.5)15.2 
Financing lease payments(1.0)(0.4)
Dividend payments(3.0)(8.9)
Payments of tax withholding for stock awards(1.2)(2.3)
  Other financing activities(0.1) 
Net cash (used in) from financing activities(6.8)3.6 
Effect of exchange rates on cash, cash equivalents and restricted cash3.4 (0.5)
Net change in cash, cash equivalents and restricted cash223.4 (11.5)
Cash, cash equivalents and restricted cash at beginning of period31.0 40.1 
Cash, cash equivalents and restricted cash at end of period (1)
$254.4 $28.6 


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:
39 Weeks Ended
September 27,
2020
September 29,
2019
Reconciliation of cash, cash equivalents and restricted cash:
Current assets:
Cash and cash equivalents$248.2 $22.8 
Restricted cash included in prepaid expenses and other current assets0.9 0.8 
Noncurrent assets:
Restricted cash included in other assets5.3 5.0 
Cash, cash equivalents and restricted cash at end of period$254.4 $28.6 

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 December 29, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2020 (the 2019 consolidated financial statements). The Company’s third fiscal quarter ended on September 27, 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 to conform to the current year's presentation.




11

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

Kelly has five specialty segments: Professional & Industrial (“P&I” 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.

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

Third QuarterSeptember Year to Date
2020201920202019
Professional & Industrial
Staffing services$341.3 $445.0 $1,033.1 $1,398.5 
Permanent placement2.3 4.2 7.0 14.4 
Outcome-based services102.9 88.8 306.6 255.8 
Total Professional & Industrial446.5 538.0 1,346.7 1,668.7 
Science, Engineering & Technology
Staffing services181.6 213.5 562.3 646.7 
Permanent placement3.1 4.3 9.0 11.8 
Outcome-based services59.3 67.4 190.2 201.2 
Total Science, Engineering & Technology244.0 285.2 761.5 859.7 
Education
Staffing services27.4 56.9 194.9 313.3 
Permanent placement0.1 0.2 0.2 0.6 
Total Education27.5 57.1 195.1 313.9 
Outsourcing & Consulting
Talent solutions87.9 94.4 261.0 282.3 
Total Outsourcing & Consulting87.9 94.4 261.0 282.3 
International
Staffing services228.8 287.0 697.9 873.6 
Permanent placement3.6 6.4 12.7 20.0 
Total International232.4 293.4 710.6 893.6 
Total Intersegment(0.1)(0.4)(0.3)(0.4)
Total Revenue from Services$1,038.2 $1,267.7 $3,274.6 $4,017.8 

12

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

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

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

Third QuarterSeptember Year to Date
2020201920202019
Americas
United States$740.6 $903.2 $2,369.2 $2,913.4 
Canada30.3 34.6 88.7 100.8 
Mexico27.4 32.4 78.6 89.6 
Puerto Rico18.4 18.8 56.1 57.6 
Brazil1.8 8.4 17.0 25.1 
Total Americas Region818.5 997.4 2,609.6 3,186.5 
Europe
Switzerland49.6 50.6 141.2 150.0 
France48.8 59.7 141.2 188.6 
Portugal31.7 44.0 99.1 135.5 
Russia27.2 29.9 88.6 84.1 
United Kingdom16.4 24.9 56.5 81.6 
Italy14.5 18.5 42.5 59.8 
Germany7.0 11.5 22.1 32.5 
Ireland4.9 7.1 14.0 28.1 
Other12.0 16.6 38.7 51.5 
Total Europe Region212.1 262.8 643.9 811.7 
Total Asia-Pacific Region7.6 7.5 21.1 19.6 
Total Kelly Services, Inc.$1,038.2 $1,267.7 $3,274.6 $4,017.8 
















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):

Third QuarterSeptember Year to Date
2020201920202019
Science, Engineering & Technology
Americas$242.8 $283.2 $757.3 $852.3 
Europe1.2 2.0 4.2 7.4 
Total Science, Engineering & Technology$244.0 $285.2 $761.5 $859.7 
Outsourcing & Consulting
Americas$72.9 $78.9 $215.9 $238.2 
Europe7.4 8.0 24.0 24.5 
Asia-Pacific7.6 7.5 21.1 19.6 
Total Outsourcing & Consulting$87.9 $94.4 $261.0 $282.3 
International
Americas$28.9 $40.5 $94.9 $113.8 
Europe203.5 252.9 615.7 779.8 
Total International$232.4 $293.4 $710.6 $893.6 

Deferred Costs

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

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $4.0 million as of third quarter-end 2020 and $3.6 million as of year-end 2019. Amortization expense for the deferred costs for the third quarter and September year to date 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.

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 allowance for uncollectible 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 is also included in the allowance for uncollectible accounts receivable. The Company estimates the current expected credit losses by applying internally developed loss rates to all outstanding receivable balances by aging category. Accounts receivable are written-off against the allowance when they are deemed uncollectible. The Company reviews the adequacy of the allowance for uncollectible accounts receivable on a quarterly basis and, if necessary, increases or decreases the 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.
14

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

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.

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.

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. 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 3260.3 
Current period provision1.2 
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 3260.7 
  Current period provision9.5 
  Currency exchange effects(0.3)
Ending Balance$10.9 

15

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, 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 quarter of 2019, the Company acquired NextGen Global Resources LLC (“NextGen”) and Global Technology Associates, LLC (“GTA”), as detailed below. We have accounted for these acquisitions under ASC 805, Business Combinations.

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 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 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, the earnout was revalued, resulting in an increase to the liability of $0.5 million. In the second quarter of 2020, the Company paid a working capital adjustment of $0.1 million. The purchase price allocation for this acquisition is preliminary and could change.

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 receivable9.6 
Other current assets0.2 
Property and equipment0.2 
Goodwill19.9 
Intangibles10.6 
Other noncurrent assets0.2 
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 Americas Staffing reporting unit (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $18.6 million.






16

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 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).

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 in other long-term liabilities in the consolidated balance sheet, which represents 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 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 million and a loss on the investment of $31.4 million in the third quarter and September year to date 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.

17

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 business operating in eight 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 of $1.8 million and a loss of $1.0 million in the third 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. This investment is evaluated for indicators of impairment on a periodic 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 million as of third quarter-end 2020 and $117.2 million as of year-end 2019. The net amount due from the JV, a related party, was $