Kelly Services(KELYA) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited). Q1 2020 financial statements report a $153.2 million net loss, primarily due to goodwill impairment and investment loss, alongside an 8.8% revenue decline Consolidated Statements of Earnings This section presents the company's consolidated statements of earnings for the first quarters of 2020 and 2019, highlighting revenue, expenses, and net income | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Change (YoY) | | :-------------------------------- | :------------------- | :------------------- | :------------- | | Revenue from services | 1,261.1 | 1,382.6 | -8.8% | | Cost of services | 1,037.8 | 1,131.0 | -8.3% | | Gross profit | 223.3 | 251.6 | -11.3% | | Selling, general and administrative expenses | 219.5 | 234.8 | -6.5% | | Goodwill impairment charge | 147.7 | — | NM | | Gain on sale of assets | (32.1) | — | NM | | Earnings (loss) from operations | (111.8) | 16.8 | NM | | Gain (loss) on investment in Persol Holdings | (77.8) | 13.2 | NM | | Net earnings (loss) | (153.2) | 22.1 | NM | | Basic earnings (loss) per share | (3.91) | 0.56 | NM | | Diluted earnings (loss) per share | (3.91) | 0.56 | NM | Consolidated Statements of Comprehensive Income (Loss) This section details the consolidated statements of comprehensive income (loss), including net earnings and other comprehensive income components | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | | :-------------------------------- | :------------------- | :------------------- | | Net earnings (loss) | (153.2) | 22.1 | | Foreign currency translation adjustments, net of tax | (7.4) | (1.5) | | Other comprehensive income (loss) | (7.4) | (1.5) | | Comprehensive income (loss) | (160.6) | 20.6 | Consolidated Balance Sheets This section provides a snapshot of the company's financial position at March 29, 2020, and December 29, 2019, detailing assets, liabilities, and equity | Metric | March 29, 2020 (Millions $) | December 29, 2019 (Millions $) | Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :------- | | Total Assets | 2,261.8 | 2,480.6 | -8.8% | | Cash and equivalents | 48.3 | 25.8 | +87.2% | | Trade accounts receivable, less allowances | 1,236.1 | 1,282.2 | -3.6% | | Goodwill, net | — | 127.8 | -100% | | Investment in Persol Holdings | 96.8 | 173.2 | -44.1% | | Total current liabilities | 842.8 | 884.1 | -4.6% | | Total noncurrent liabilities | 318.9 | 332.0 | -3.9% | | Total Liabilities | 1,161.7 | 1,216.1 | -4.5% | | Total Stockholders' Equity | 1,100.1 | 1,264.5 | -13.0% | Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including net earnings, dividends, and other comprehensive income adjustments | Metric | March 29, 2020 (Millions $) | March 31, 2019 (Millions $) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Earnings Invested in the Business (beginning balance) | 1,238.6 | 1,138.1 | | Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13 | (0.7) | — | | Net earnings (loss) | (153.2) | 22.1 | | Dividends | (3.0) | (3.0) | | Accumulated Other Comprehensive Income (Loss) (ending balance) | (23.2) | (18.6) | | Stockholders' Equity at end of period | 1,100.1 | 1,177.8 | Consolidated Statements of Cash Flows This section presents the company's cash flow activities from operations, investing, and financing for the first quarters of 2020 and 2019 | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Change | | :-------------------------------- | :------------------- | :------------------- | :------- | | Net cash from operating activities | 8.4 | 21.2 | -60.4% | | Net cash from (used in) investing activities | 15.9 | (90.3) | NM | | Net cash (used in) from financing activities | (4.6) | 66.7 | NM | | Effect of exchange rates on cash, cash equivalents and restricted cash | 2.8 | (1.9) | NM | | Net change in cash, cash equivalents and restricted cash | 22.5 | (4.3) | NM | | Cash, cash equivalents and restricted cash at end of period | 53.5 | 35.8 | +49.4% | - Investing activities in Q1 2020 included $55.5 million proceeds from the sale of assets, partially offset by $36.3 million for the acquisition of Insight. In Q1 2019, investing activities included $50.8 million for NextGen and $35.6 million for GTA acquisitions[179] Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements 1. Basis of Presentation This note describes the accounting principles and preparation methods used for the unaudited consolidated financial statements - The unaudited consolidated financial statements are prepared in accordance with Rule 10-01 of Regulation S-X and do not include all GAAP information[27] - The first fiscal quarter ended on March 29, 2020, and March 31, 2019, each containing 13 weeks[27] 2. Revenue This note provides a breakdown of revenue from services by segment and geography, along with details on deferred costs | Segment/Type | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Change (YoY) | | :-------------------------- | :------------------- | :------------------- | :------------- | | Total Revenue from Services | 1,261.1 | 1,382.6 | -8.8% | | Americas Staffing | 533.4 | 626.5 | -14.9% | | International Staffing | 227.6 | 258.9 | -12.1% | | Global Talent Solutions | 503.2 | 501.0 | +0.4% | | Revenue by Geography: | | | | | Americas | 1,016.8 | 1,107.1 | -8.2% | | EMEA | 237.6 | 270.0 | -12.0% | | APAC | 6.7 | 5.5 | +21.8% | - Deferred sales commissions were $1.3 million at Q1 2020 (down from $1.5 million at year-end 2019), with amortization expense of $0.3 million in Q1 2020[36] - Deferred fulfillment costs were $2.8 million at Q1 2020 (down from $3.6 million at year-end 2019), with amortization expense of $4.8 million in Q1 2020[37] 3. Credit Losses This note details the company's accounting for credit losses, including the adoption of ASC Topic 326 and the allowance for bad debt - The company adopted ASC Topic 326 on December 30, 2019, using the modified retrospective method for financial assets and off-balance-sheet credit exposures[39] | Allowance for bad debt (Millions $) | Q1 2020 | | :-------------------------------- | :------ | | Beginning balance | $9.7 | | Impact of adopting ASC 326 | $0.3 | | Current period provision | $(0.4) | | Currency exchange effects | $(0.5) | | Write-offs | $(0.2) | | Ending balance | $8.9 | - Credit risk is primarily from sales of workforce solution services, with short payment terms and ongoing credit evaluations[42] 4. Acquisitions This note outlines recent acquisition activities, including the purchase of Insight Workforce Solutions and the impact on goodwill - On January 14, 2020, Kelly Services USA, LLC acquired Insight Workforce Solutions LLC for $38.1 million cash, expanding its market share in the U.S. education staffing market[48][49] - In Q1 2019, the company acquired NextGen Global Resources LLC for $54.3 million and Global Technology Associates, LLC for $35.7 million, both enhancing telecommunications staffing and consulting solutions[50][53] - Goodwill generated from these acquisitions was included in the $147.7 million impairment charge taken in Q1 2020 due to negative market reaction to the COVID-19 crisis[55] 5. Investment in Persol Holdings This note describes the company's noncontrolling investment in Persol Holdings and the associated gains or losses - The company holds a yen-denominated noncontrolling investment in Persol Holdings Co., Ltd., recorded at fair value[56] - A loss of $77.8 million on the investment was recorded in Q1 2020, compared to a gain of $13.2 million in Q1 2019[56] 6. Investment in PersolKelly Pte. Ltd. This note details the company's equity method investment in PersolKelly Pte. Ltd. and its share of the affiliate's earnings or losses - The company has a 49% ownership interest in PersolKelly Pte. Ltd. (JV), accounted for under the equity method[57] - Equity in net earnings (loss) of affiliate was a loss of $1.5 million in Q1 2020, compared to a loss of $0.4 million in Q1 2019[57] - Subsequent to Q1 2020, the JV sold its Australian and New Zealand subsidiaries for $17.5 million, with the company receiving a direct royalty payment of $0.7 million[63] 7. Fair Value Measurements This note provides information on assets measured at fair value and the impact of a goodwill impairment charge | Asset (Level 1) | March 29, 2020 (Millions $) | December 29, 2019 (Millions $) | | :------------------------ | :--------------------------- | :--------------------------- | | Money market funds | 4.9 | 4.9 | | Investment in Persol Holdings | 96.8 | 173.2 | | Total assets at fair value | 101.7 | 178.1 | - A goodwill impairment charge of $147.7 million was recorded in Q1 2020 due to negative market reaction to the COVID-19 crisis, triggering an interim impairment test[74] 8. Restructuring This note details the restructuring actions taken in Q1 2020, including associated lease termination and severance costs | Restructuring Costs (Millions $) | Lease Termination Costs | Severance Costs | Total | | :------------------------------- | :---------------------- | :-------------- | :---- | | Americas Staffing | $4.1 | $1.5 | $5.6 | | Global Talent Solutions | — | $0.9 | $0.9 | | International Staffing | $0.7 | $0.4 | $1.1 | | Corporate | — | $1.1 | $1.1 | | Total | $4.8 | $3.9 | $8.7 | - Restructuring actions in Q1 2020 aimed to align costs with expected revenues and position the organization for a new operating model[75] - The remaining balance of $3.9 million as of Q1 2020 primarily represents severance costs, expected to be paid by the end of 2020[78] 9. Goodwill This note explains the goodwill impairment charge recorded in Q1 2020 and its impact on reporting units - A goodwill impairment charge of $147.7 million was recorded in Q1 2020, writing off all goodwill for the Americas Staffing and Global Talent Solutions reporting units[82][84] - The impairment was triggered by a significant decline in the company's common stock price due to negative market reaction to the COVID-19 crisis[82] 10. Accumulated Other Comprehensive Income (Loss) This note provides a breakdown of the components of accumulated other comprehensive income (loss) | Component (Millions $) | Q1 2020 | Q1 2019 | | :-------------------------------- | :------ | :------ | | Foreign currency translation adjustments (ending balance) | $(20.6) | $(17.2) | | Pension liability adjustments (ending balance) | $(2.6) | $(1.4) | | Total accumulated other comprehensive income (loss) | $(23.2) | $(18.6) | 11. Earnings Per Share This note presents the calculation of basic and diluted earnings per share for common shareholders | Metric | Q1 2020 | Q1 2019 | | :-------------------------------- | :------ | :------ | | Net earnings (loss) available to common shareholders | $(153.2) | $21.9 | | Basic earnings (loss) per share | $(3.91) | $0.56 | | Diluted earnings (loss) per share | $(3.91) | $0.56 | | Average shares outstanding (diluted, millions) | 39.2 | 39.1 | - Dividends paid per share for Class A and Class B common stock were $0.075 for both Q1 2020 and Q1 2019[88] 12. Stock-Based Compensation This note details the stock compensation expense and vesting status of performance share grants - Stock compensation expense decreased to $1.2 million in Q1 2020 from $3.2 million in Q1 2019[90] - The majority of the 2017 performance share grant cliff-vested in Q1 2020, but 2017 Total Shareholder Return (TSR) performance shares did not vest due to actual achievement being below the threshold level[91] - The grant date fair value for the 2018 financial measure performance shares was fixed at $17.35 per share in Q1 2020[93] 13. Sale of Assets This note describes the sale and leaseback transaction of headquarters properties and the resulting gain - On March 20, 2020, the company sold three headquarters properties for $58.5 million ($55.5 million cash proceeds net of expenses) as part of a sale and leaseback transaction[97] - The sale resulted in a gain of $32.1 million, recorded in the consolidated statements of earnings[97] 14. Other Income (Expense), Net This note provides a breakdown of other income and expenses, including interest and foreign exchange gains/losses | Metric (Millions $) | Q1 2020 | Q1 2019 | | :-------------------- | :------ | :------ | | Interest income | $0.3 | $0.2 | | Interest expense | $(0.9) | $(1.1) | | Foreign exchange gain (loss) | $2.4 | $(0.6) | | Other income (expense), net | $1.7 | $(1.1) | 15. Leases This note discusses the adoption of ASC 842 and the recognition of right-of-use assets and lease liabilities - The company adopted ASC 842, Leases, at the beginning of Q1 2019[100] - In Q1 2020, following the headquarters sale and leaseback, the company recognized $37.6 million of ROU assets and $37.3 million of current and noncurrent operating lease liabilities[101] 16. Contingencies This note addresses ongoing legal proceedings and the company's assessment of potential losses - Accruals for litigation costs amounted to $2.9 million at Q1 2020, down from $9.9 million at year-end 2019[104] - The estimated aggregate range of reasonably possible losses, in excess of amounts accrued, is $0.0 million to $2.4 million as of Q1 2020[106] - Management believes the resolution of legal proceedings will not have a material adverse effect on financial condition, results of operations, or cash flows[107] 17. Income Taxes This note details the income tax benefit or expense, including the impact of goodwill impairment and investment losses - Income tax benefit was $36.2 million for Q1 2020, compared to an income tax expense of $6.4 million for Q1 2019[109] - The Q1 2020 benefit includes a $23.0 million tax benefit on goodwill impairment and a $23.8 million tax benefit for the loss on the investment in Persol Holdings[109] 18. Segment Disclosures This note provides financial information by operating segment, including revenue and earnings from operations | Segment | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Change (YoY) | | :---------------------- | :------------------- | :------------------- | :------------- | | Americas Staffing Revenue | 533.4 | 626.5 | -14.9% | | Global Talent Solutions Revenue | 503.2 | 501.0 | +0.4% | | International Staffing Revenue | 227.6 | 258.9 | -12.1% | | Consolidated Total Revenue | 1,261.1 | 1,382.6 | -8.8% | | Segment | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Change (YoY) | | :-------------------------------- | :------------------- | :------------------- | :------------- | | Americas Staffing Earnings from Operations | 0.1 | 16.0 | -99.5% | | Global Talent Solutions Earnings from Operations | 26.5 | 25.7 | +2.9% | | International Staffing Earnings from Operations | 0.6 | 3.3 | -81.7% | | Corporate | (139.0) | (28.2) | NM | | Consolidated Total Earnings (loss) from Operations | (111.8) | 16.8 | NM | - The goodwill impairment charge in Q1 2020 is included in Corporate expenses[116] 19. New Accounting Pronouncements This note outlines recently adopted and not yet adopted accounting standards and their impact - The company adopted ASU 2018-15 (capitalizing implementation costs for hosting arrangements) and ASU 2016-13 (credit losses) in Q1 2020[121][123] - Adoption of ASU 2016-13 resulted in a $0.7 million decrease to retained earnings, net of tax, in Q1 2020[123] - The company is currently evaluating the impact of ASU 2020-01 (equity securities) and ASU 2019-12 (income taxes), effective for annual reporting periods beginning after December 15, 2020[125][126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management discusses COVID-19's impact, leading to cost reductions and a goodwill impairment, while maintaining commitment to specialized talent solutions despite Q1 2020 revenue declines Executive Overview This section provides a high-level summary of the company's performance and strategic responses to the evolving economic landscape - The impact of COVID-19 has resulted in dramatic shifts in the economy and how professional and private lives are conducted[130] - Kelly remains committed to its 'Noble Purpose' to connect people to work and intends to emerge as a more agile and focused organization[130][131] The Talent Solutions Industry This section discusses the current trends and changes within the talent solutions industry, including automation and skills gaps - Labor markets are undergoing change due to automation, secular shifts, and skills gaps, with the current economic situation expected to accelerate these changes[132] - The talent solutions industry is evolving to meet demand for talent through novel sourcing approaches, including gig platforms and independent contractors[133] Our Business This section describes Kelly Services' core business, operating segments, and working capital requirements - Kelly Services is a talent and global workforce solutions company offering outsourcing, consulting, and staffing services (temporary, temporary-to-hire, and direct-hire)[135] - The company operates through Americas Staffing, International Staffing, and Global Talent Solutions (GTS) segments, providing specialized talent solutions[135][136] - Working capital requirements are primarily driven by temporary employee payroll and customer accounts receivable; global Days Sales Outstanding (DSO) was 59 days at Q1 2020[137][139] Our Perspective This section outlines management's view on the company's short-term challenges and future strategic direction Short Term This subsection details the immediate actions taken in response to COVID-19 and anticipated near-term financial impacts - In April 2020, the company took proactive actions in response to COVID-19, including a 10% pay cut for salaried employees, reduced senior leader compensation, temporary furloughs, suspension of retirement account match, reduction of discretionary expenses, a hiring freeze, and suspension of the quarterly dividend[140] - The company expects a material decline in revenues during the period of stay-at-home orders and other limitations, and anticipates a decline in Q2 and full-year earnings year-over-year[141] - A $147.7 million non-cash goodwill impairment charge was recorded in Q1 2020 due to negative market reaction to the COVID-19 crisis[142] Moving Forward This subsection describes the company's ongoing strategic initiatives, including investments in technology and cost reduction - The company continues to pursue a specialized talent solutions strategy, investing in specialty growth platforms, including expanding its engineering portfolio with 2019 acquisitions (GTA and NextGen) and education staffing with the 2020 Insight acquisition[143] - Investments in technology are accelerating, particularly front office platforms, to streamline processes and enhance the experience for job seekers[144] - Cost reduction actions in Q1 2020, including branch network reduction and severance, are expected to result in approximately $20 million in annual expense savings[145] Financial Measures This section defines key financial metrics used by management to assess performance, including non-GAAP constant currency measures - The company uses constant currency (CC) measures as non-GAAP metrics to analyze operational trends without distortion from currency fluctuations[147] - Key financial measures for progress include revenue growth (organic and inorganic), gross profit rate improvement, conversion rate, and EBITDA margin[146] - Days Sales Outstanding (DSO) is calculated by dividing average net sales per day (based on a rolling three-month period) into trade accounts receivable, net of allowances[150] Results of Operations This section provides a detailed analysis of the company's financial performance for the first quarter, broken down by segment Total Company - First Quarter This subsection summarizes the overall financial results for the company during the first quarter, including revenue and profitability | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Reported Change | CC Change | | :-------------------------------- | :------------------- | :------------------- | :-------------- | :---------- | | Revenue from services | 1,261.1 | 1,382.6 | (8.8)% | (8.3)% | | Gross profit | 223.3 | 251.6 | (11.3)% | (10.9)% | | Total SG&A expenses | 219.5 | 234.8 | (6.5)% | (6.3)% | | Goodwill impairment charge | 147.7 | — | NM | | | Gain on sale of assets | 32.1 | — | NM | | | Earnings (loss) from operations | (111.8) | 16.8 | NM | | | Diluted earnings (loss) per share | (3.91) | 0.56 | NM | | | Gross profit rate | 17.7% | 18.2% | (0.5) pts. | | - The economic slow-down from COVID-19 began in March 2020, resulting in a 2.7% decline in year-over-year revenues for the quarter[153] - The Insight acquisition added approximately 110 basis points to the total revenue growth rate[153] Americas Staffing - First Quarter This subsection analyzes the financial performance of the Americas Staffing segment, highlighting revenue and gross profit changes | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Reported Change | CC Change | | :-------------------------------- | :------------------- | :------------------- | :-------------- | :---------- | | Revenue from services | 533.4 | 626.5 | (14.9)% | (14.6)% | | Gross profit | 93.6 | 117.2 | (20.2)% | (20.0)% | | Total SG&A expenses | 93.5 | 101.2 | (7.6)% | (7.6)% | | Earnings from operations | 0.1 | 16.0 | (99.5)% | | | Gross profit rate | 17.5% | 18.7% | (1.2) pts. | | - Revenue decrease reflects a 15% decrease in hours volume and a 3% decrease in average bill rates, partially offset by the Insight acquisition[160] - The decline also reflects an approximately 5% decrease in revenues due to COVID-19, primarily in education and manufacturing[160] GTS - First Quarter This subsection reviews the financial performance of the Global Talent Solutions (GTS) segment, including revenue drivers and profitability | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Reported Change | CC Change | | :-------------------------------- | :------------------- | :------------------- | :-------------- | :---------- | | Revenue from services | 503.2 | 501.0 | 0.4% | 0.6% | | Gross profit | 100.2 | 100.4 | (0.2)% | 0.1% | | Total SG&A expenses | 73.7 | 74.7 | (1.3)% | (1.0)% | | Earnings from operations | 26.5 | 25.7 | 2.9% | | | Gross profit rate | 19.9% | 20.0% | (0.1) pts. | | - Revenue increased due to program expansions and new customer contracts in BPO and KellyConnect products, partially offset by lower demand in centrally delivered staffing and PPO[166] - The impact of COVID-19 on GTS revenues was not significant in Q1 2020, as many customers are in essential industries or facilitated remote work[166] International Staffing - First Quarter This subsection examines the financial performance of the International Staffing segment, noting revenue declines and contributing factors | Metric | Q1 2020 (Millions $) | Q1 2019 (Millions $) | Reported Change | CC Change | | :-------------------------------- | :------------------- | :------------------- | :-------------- | :---------- | | Revenue from services | 227.6 | 258.9 | (12.1)% | (10.7)% | | Gross profit | 29.9 | 34.6 | (13.4)% | (11.8)% | | Total SG&A expenses | 29.3 | 31.3 | (6.2)% | (5.0)% | | Earnings from operations | 0.6 | 3.3 | (81.7)% | | | Gross profit rate | 13.2% | 13.3% | (0.1) pts. | | - Revenue decline was primarily due to decreased hours volume in France, Switzerland, and Italy, and an approximately 2% impact from COVID-19 disruption[170] - Increased revenue in Russia, driven by higher hours volume and average bill rates, partially offset these decreases[170] Financial Condition This section discusses the company's working capital, cash position, and cash flow activities - Working capital position was $523.0 million at Q1 2020, an increase of $1.4 million from year-end 2019, with a current ratio of 1.6[178] - Cash, cash equivalents, and restricted cash totaled $53.5 million at Q1 2020, up from $31.0 million at year-end 2019[176] - Net cash from operating activities was $8.4 million in Q1 2020, while investing activities generated $15.9 million (driven by asset sales) and financing activities used $4.6 million[177][179][180] New Accounting Pronouncements This section refers to the detailed disclosures on new accounting standards in the notes to financial statements - Refers to the 'New Accounting Pronouncements' footnote in the Notes to Consolidated Financial Statements for details on recently adopted and not yet adopted standards[182] Critical Accounting Estimates This section highlights key accounting estimates and judgments, particularly regarding the goodwill impairment charge - Refers to the 2019 Form 10-K for a discussion of critical accounting estimates, with specific mention of the goodwill impairment charge in Q1 2020[183] Contractual Obligations and Commercial Commitments This section addresses any significant changes to the company's contractual obligations since the last annual report - No significant changes to contractual obligations and commercial commitments from those disclosed in the 2019 Form 10-K, other than the sale and leaseback of the main headquarters building[184] Liquidity This section discusses the company's ability to meet its short-term and long-term cash requirements - The company expects to meet cash requirements through cash from operations, available cash, securitization of customer receivables, and committed unused credit facilities[185] - As of Q1 2020, the company had $200.0 million available on its revolving credit facility and $96.8 million on its securitization facility[187] - Subsequent to Q1 2020, the company borrowed $70 million under the securitization facility to enhance financial flexibility due to COVID-19 uncertainty[188] Forward-Looking Statements This section cautions readers about the inherent risks and uncertainties associated with forward-looking information - The report contains forward-looking statements that are subject to risks, uncertainties, and assumptions, including the recent COVID-19 outbreak, competitive market pressures, and changing economic conditions[192][193] - Actual events and results may differ materially from those expressed or forecasted, and the company has no specific intention to update these statements[193] Item 3. Quantitative and Qualitative Disclosures About Market Risk. The company faces foreign currency, interest rate, and market risks from its international operations, borrowings, and investments, including its nonqualified deferred compensation plan - The company is exposed to foreign currency risk primarily related to its foreign subsidiaries and intercompany transactions[195] - Interest rate risks arise from the multi-currency line of credit and other borrowings; a hypothetical 10% fluctuation would not materially impact Q1 2020 earnings[196] - Market and currency risks are associated with the yen-denominated investment in Persol Holdings, which is marked to market through net earnings[197] Item 4. Controls and Procedures. The CEO and CFO affirmed the effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting during Q1 2020 - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures are effective at a reasonable assurance level[199] - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[200] PART II. OTHER INFORMATION Item 1. Legal Proceedings. The company is involved in ongoing legal proceedings with $2.9 million in Q1 2020 accruals, which management believes will not materially impact financial results - The company is continuously engaged in litigation, threatened litigation, claims, audits, or investigations arising in the ordinary course of its business[202] - Accruals for litigation costs amounted to $2.9 million at Q1 2020, compared to $9.9 million at year-end 2019[104][202] - Management believes the resolution of any such proceedings will not have a material adverse effect on the company's financial condition, results of operations, or cash flows[203] Item 1A. Risk Factors. The company anticipates adverse impacts from the COVID-19 outbreak on economic activity, employment, and customer demand, with uncertain but potentially material effects - The company expects its business to be adversely impacted by the recent novel coronavirus (COVID-19) outbreak[208] - The downturn, which began in March 2020, is expected to negatively impact customer demand for staffing services and could affect the financial viability of third parties[208] - The extent or duration of the impact on the business, financial condition, and results of operations cannot be predicted with certainty, but such impacts could be material[208] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. The company reacquired 57,832 shares of Class A common stock at an average of $19.39 per share in Q1 2020, mainly for employee tax withholdings upon vesting | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------------------------------------- | :----------------------------- | :--------------------------- | | December 30, 2019 through February 2, 2020 | 985 | $22.23 | | February 3, 2020 through March 1, 2020 | 56,383 | $19.39 | | March 2, 2020 through March 29, 2020 | 464 | $13.35 | | Total | 57,832 | $19.39 | - Shares were reacquired to cover employee tax withholdings due upon the vesting of restricted stock and performance shares[209] Item 3. Defaults Upon Senior Securities. This section is not applicable to the company for the reported period - Not applicable[210] Item 4. Mine Safety Disclosures. This section is not applicable to the company for the reported period - Not applicable[211] Item 5. Other Information. This section is not applicable to the company for the reported period - Not applicable[212] Item 6. Exhibits. This section lists the exhibits filed with the Form 10-Q, including various certifications and Inline XBRL documents - Exhibits include certifications pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act and 18 U.S.C. Section 1350 of the Sarbanes-Oxley Act[216] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File) are also included[216] SIGNATURES This section confirms the official signing of the report by the company's Executive Vice President and Chief Financial Officer, and Vice President, Corporate Controller and Chief Accounting Officer - The report was signed on May 7, 2020, by Olivier G. Thirot, Executive Vice President and Chief Financial Officer, and Laura S. Lockhart, Vice President, Corporate Controller and Chief Accounting Officer[221]