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Acquisitions and Disposition | 12 Months Ended
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Dec. 31, 2023
Business Combinations [Abstract] |
Acquisitions and Disposition | Acquisitions and Disposition Acquisitions In the second quarter of 2022, Kelly Services USA, LLC ("KSU"), a wholly owned subsidiary of the Company, acquired Pediatric Therapeutic Services ("PTS"), as detailed below. In the first quarter of 2022, the Company acquired Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, "RocketPower"), as detailed below. In the second quarter of 2021, the Company acquired Softworld, Inc. ("Softworld"), as detailed below. Pediatric Therapeutic Services On May 2, 2022, KSU acquired 100% of the membership interests of PTS for a purchase price of $82.1 million. PTS is a specialty firm that provides and manages various state and federally mandated in-school therapy services. This acquisition expands Education's K-12 solution offering in the education staffing market and serves as an entry point into the therapeutic services market. Under terms of the purchase agreement, the purchase price was adjusted for cash held by PTS at the closing date and estimated working capital adjustments resulting in the Company paying cash of $85.7 million. Total consideration included $1.1 million of additional consideration that was payable to the seller related to employee retention credits and was recorded in accounts payable and accrued liabilities in the consolidated balance sheet. In the third quarter of 2022, the Company paid $0.1 million of the employee retention credits and the remaining $1.0 million was paid in the second quarter of 2023. There is no remaining liability related to the additional consideration as of year-end 2023. The total consideration was as follows (in millions of dollars):
Cash consideration paid | $ | 85.7 |
Additional consideration payable | 1.1 |
Total consideration | $ | 86.8 |
As of May 2023, the purchase price allocation for this acquisition was final. 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 | $ | 0.9 |
Trade accounts receivable | 10.0 |
Prepaid expenses and other current assets | 1.6 |
Net property and equipment | 0.4 |
Goodwill | 36.3 |
Intangibles | 40.3 |
Accounts payable and accrued liabilities, current | (2.6) |
Accrued payroll and related taxes, current | (0.1) |
Total consideration, including working capital adjustments | $ | 86.8 |
The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the PTS acquisition was $40.3 million of intangibles, made up of $29.8 million in customer relationships, $9.3 million associated with PTS's trade names and $1.2 million for non-compete agreements. Customer relationships are amortized over 15 years with no residual value, trade names are amortized over 15 years with no residual value, and the non-compete agreements are amortized over five 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 Education operating segment (see Goodwill and Intangible Assets footnote). All of the goodwill is expected to be deductible for tax purposes. PTS's results of operations are included in the Education segment. Our consolidated revenues and earnings from operations for the year ended 2023 included $52.3 million and $7.7 million, respectively, from PTS. Our consolidated revenues and earnings from operations for the year ended 2022 included $28.5 million and $3.8 million, respectively, from PTS. Pro forma results of operations for this acquisition have not been presented as the acquisition does not have a material impact to the consolidated statements of earnings. RocketPower On March 7, 2022, the Company acquired 100% of the issued and outstanding membership interests of RocketPower for a purchase price of $59.3 million. RocketPower is a provider of RPO solutions to U.S. high-tech companies. This acquisition expands OCG's RPO solution and delivery offering and enhances the specialty RPO strategy and expertise within the high-tech industry. Under terms of the purchase agreement, the purchase price was adjusted for cash held by RocketPower at the closing date and estimated working capital adjustments resulting in the Company paying cash of $61.8 million. Total consideration included $1.1 million of additional consideration that was payable to the seller in 2023 related to employee retention credits and was settled in the second quarter of 2023 and there is no remaining liability. The total consideration also included contingent consideration with an initial estimated fair value of $0.6 million related to an earnout payment with a maximum potential cash payment of $31.8 million in the event certain financial metrics are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model, see the Fair Value Measurements footnote for information regarding subsequent reassessments. The total consideration was as follows (in millions of dollars):
Cash consideration paid | $ | 61.8 |
Additional consideration payable | 1.1 |
Contingent consideration | 0.6 |
Total consideration | $ | 63.5 |
As of first-quarter end 2023, the purchase price allocation for this acquisition was final. 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 receivable | 6.9 |
Prepaid expenses and other current assets | 1.8 |
Net property and equipment | 0.1 |
Goodwill | 41.0 |
Intangibles | 15.8 |
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 are amortized over three years with no residual value, trade names are amortized over 10 years with no residual value, and the non-compete agreements are amortized over six years with no residual value. Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the OCG operating segment. The amount of goodwill expected to be deductible for tax purposes is approximately $27.3 million. In the third and fourth quarters of 2022, changes in market conditions triggered interim impairment tests for both long-lived assets and goodwill, resulting in the Company recording a goodwill impairment charge of $41.0 million (see Goodwill and Intangible Assets footnote). RocketPower's results of operations are included in the OCG segment. Our consolidated revenues and earnings from operations for the year ended 2023 included $7.1 million and a loss of $5.3 million, respectively, from RocketPower. Our consolidated revenues and earnings from operations for the year ended 2022 included $24.3 million and a loss of $43.5 million, which includes the $41.0 million goodwill impairment charge, respectively, from RocketPower. Pro forma results of operations for this acquisition have not been presented as the acquisition does not have a material impact to the consolidated statements of earnings. Softworld On April 5, 2021, the Company acquired 100% of the shares of Softworld for a purchase price of $215.0 million. Softworld is a leading technology staffing and workforce solutions firm that serves clients across several end-markets, including financial services, life sciences, aerospace, defense, financial services, 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 included $2.6 million of additional consideration that was paid to the seller in the fourth quarter of 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 was as follows (in millions of dollars):
Cash consideration paid | $ | 220.4 |
Additional consideration payable | 2.6 |
Net working capital adjustment | (6.0) |
Total consideration | $ | 217.0 |
As of first quarter-end 2022, the purchase price allocation for this acquisition was final. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):
Cash | $ | 1.4 |
Trade accounts receivable | 21.6 |
Prepaid expenses and other current assets | 3.3 |
Net property and equipment | 1.2 |
Operating lease right-of-use assets | 7.6 |
Non-current deferred tax | 5.9 |
Goodwill | 111.3 |
Intangibles | 79.4 |
Other assets, noncurrent | 1.2 |
Accounts payable and accrued liabilities, current | (2.5) |
Operating lease liabilities, current | (1.3) |
Accrued payroll and related taxes, current | (4.6) |
Income and other taxes, current | (1.2) |
Operating lease liabilities, noncurrent | (6.3) |
Total consideration, including working capital adjustments | $ | 217.0 |
The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the Softworld acquisition was $79.4 million of intangible assets, made up of $54.9 million in customer relationships, $23.1 million associated with Softworld's trade name, and $1.4 million for non-compete agreements. The customer relationships and trade name are amortized over 10 years with no residual value and the non-compete agreements are amortized over five years with no residual value. Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue synergies and was assigned to the SET operating segment (see Goodwill footnote). All of the goodwill is expected to be deductible for tax purposes. During the third quarter of 2021, the Company filed a claim, in excess of policy limits, under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld. The claim asserted damages arising out of alleged breaches by the sellers of Softworld of certain representations and warranties contained in the purchase agreement relating to periods prior to the closing of the acquisition. In the fourth quarter of 2021, the Company reached a settlement with the insurer for $19.0 million and received the payment. The payment was recorded entirely in gain on insurance settlement in the consolidated statements of earnings and included within cash flows from investing activities in the consolidated statements of cash flows. Softworld's results of operations are included in the SET segment. For the year ended 2021, our consolidated revenues and net earnings included $98.0 million and $4.7 million from Softworld, respectively. The date of the acquisition was the first day of our second quarter, therefore, our first quarter results of 2021 do not include any revenue or earnings from Softworld. Pro Forma Information The following unaudited pro forma information presents a summary of the operating results as if the Softworld acquisition had been completed as of December 30, 2019 (in millions of dollars):
|  |  | December Year to Date
|  |  |  |  | 2021 |  |
Pro forma revenues |  |  |  |  | $ | 4,940.9 |  |  |
Pro forma net earnings |  |  |  |  | $ | 157.7 |  |  |
The pro forma results for 2021 reflects amortization of the intangible assets of $2.0 million per quarter and applicable taxes. The unaudited pro forma information presented has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed date, nor is it necessarily an indication of future operating results. Disposition On July 20, 2022, the Company completed the sale of its Russia operations ("disposal group"), which was included in the Company's International operating segment. The Company received cash proceeds of $7.4 million, which was less than the cash disposed of in the sale, resulting in investing cash outflows of $6.0 million in the consolidated statements of cash flows. The disposal group was previously reported as held for sale as of our second quarter-end 2022 with an $18.5 million impairment charge associated with the transaction. The total loss on the sale is $18.7 million, resulting from an additional $0.2 million loss on the transaction in the third quarter of 2022, which was recorded in loss on disposal in the consolidated statements of earnings. The loss on disposal includes the liquidation of the cumulative translation adjustment of $1.4 million. The disposal group did not meet the requirements to be classified as discontinued operations as the sale did not have a material effect on the Company's operations and did not represent a strategic shift in the Company's strategy. Our consolidated revenue for the years ended 2022 and 2021 included $63.4 million and $132.2 million, respectively, from the Russia operations and our consolidated earnings before taxes for the year ended 2022 and 2021 included $1.4 million and $3.2 million, respectively, from the Russia operations. The major classes of divested assets and liabilities were as follows (in millions of dollars):
Assets divested |  |
Cash and equivalents |  | $ | 13.4 |
Trade accounts receivable, net |  | 22.8 |
Prepaid expenses and other current assets |  | 0.7 |
Property and equipment, net |  | 0.7 |
Deferred taxes |  | 0.4 |
Other assets |  | 0.3 |
Assets divested |  | 38.3 |
Liabilities divested |  |
Accounts payable and accrued liabilities |  | (0.6) |
Accrued payroll and related taxes |  | (7.3) |
Income and other taxes |  | (5.7) |
Liabilities divested |  | (13.6) |
Disposal group, net |  | $ | 24.7 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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