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Acquisitions and Dispositions | 12 Months Ended
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Dec. 29, 2024
Business Combinations [Abstract] |
Acquisitions and Dispositions | 4. Acquisitions and Dispositions Acquisitions Children's Therapy Center On November 13, 2024, Kelly Services USA, LLC ("KSU"), a wholly owned subsidiary of the Company, acquired 100% of the issued and outstanding limited liability company interests of Children's Therapy Center ("CTC"). CTC specializes in occupational, physical, and speech therapy for children and will expand the Company's growth opportunities in therapeutic services. Under terms of the purchase agreement, the purchase price of $3.3 million was adjusted for cash held by CTC at the closing date and estimated working capital adjustments, resulting in the company paying cash of $3.1 million. Goodwill generated from the acquisition of $3.0 million was primarily attributable to expanding market potential and was assigned to the Education operating segment (see Goodwill and Intangible Assets footnote). CTC's results of operations are included in the Education segment. 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. Motion Recruitment Partners On May 31, 2024, the Company indirectly acquired 100% of the equity interests in Motion Recruitment Partners, LLC ("MRP") by way of a merger with MRP Merger Sub, Inc. ("Merger Sub"), a newly-formed, wholly owned subsidiary of the Company, with and into MRP Topco ("Topco"), the indirect parent company of MRP and Littlejohn Fund V, L.P. ("Littlejohn"), with Topco surviving the merger (the "Merger"). MRP is a parent company to a group of leading global talent solutions providers and the acquisition is expected to strengthen the scale and capabilities of Kelly's solutions portfolio. Under terms of the merger agreement, the $425.0 million purchase price was adjusted for estimated cash held by MRP at the closing date and estimated working capital adjustments, resulting in the Company paying cash of $440.0 million. The acquisition was funded with cash on hand and available credit facilities (see Debt footnote). Total consideration included $3.4 million of contingent consideration related to an earnout payment with a maximum potential cash payment of $60.0 million in the event certain financial metrics are met per the terms of the agreement. The earnout payment is based upon a multiple of gross profit in excess of an agreed-upon amount during the earnout period, defined as the 12 months ending March 31, 2025, and any necessary payment is due to the seller in the second quarter of 2025. The initial fair value of the earnout was established using a Monte Carlo simulation model, reassessed quarterly, and was written down to zero in the fourth quarter of 2024 (see Fair Value Measurements footnote). In the fourth quarter of 2024, the Company paid a post-close net working capital adjustment of $1.4 million. The merger agreement contains representations and warranties and covenants customary for a transaction of this nature. The total consideration is as follows (in millions of dollars):
Cash consideration paid | $ | 425.0 |
Estimated cash acquired | 13.6 |
Estimated net working capital adjustment | 1.4 |
Total cash consideration | 440.0 |
Additional consideration payable | 3.4 |
Net working capital adjustment | 1.4 |
Total consideration | $ | 444.8 |
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 and equivalents | $ | 12.6 |
Trade accounts receivable | 89.1 |
Prepaid expenses and other current assets | 8.5 |
Net property and equipment | 3.1 |
Operating lease right-of-use assets | 11.9 |
Goodwill | 222.9 |
Intangibles, net | 145.9 |
Other assets, noncurrent | 10.6 |
Accounts payable and accrued liabilities, current | (12.1) |
Operating lease liabilities, current | (4.0) |
Accrued payroll and related taxes, current | (15.9) |
Income and other taxes, current | (0.5) |
Operating lease liabilities, noncurrent | (9.0) |
Other long-term liabilities | (18.3) |
Total consideration, including working capital adjustments | $ | 444.8 |
The fair value of the acquired receivables represents the contractual value net of the allowance for potentially uncollectible accounts. Included in the assets purchased in the MRP acquisition was $145.9 million of intangible assets, made up of $88.1 million in customer relationships, $56.5 million associated with MRP's trade names, and $1.3 million for non-compete agreements. The customer relationships are amortized over 15 years with no residual value, the trade names are amortized over 10-15 years with no residual value, and the non-compete agreements are amortized over four years with no residual value. Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue and operational synergies and was assigned to the SET operating segment (see Goodwill and Intangible Assets footnote). None of the goodwill generated from the acquisition is expected to be deductible for tax purposes. MRP's results of operations are included in the SET segment. For year-end 2024, our consolidated revenues and net earnings (loss) include $285.8 million and $4.2 million of earnings from MRP, respectively. Pro Forma Information The following unaudited pro forma information presents a summary of the operating results as if the MRP acquisition had been completed as of January 2, 2023 (in millions of dollars):
|  |  |  |  | 2024 |  | 2023
Pro forma revenues |  |  |  |  | $ | 4,552.2 |  |  | $ | 5,389.8 |
Pro forma net earnings (loss) |  |  |  |  | $ | (4.9) |  |  | $ | 30.8 |
The pro forma results for the periods above include adjustments to amortization expense for the intangible assets, reversal of MRP's interest expense on credit facilities that were settled upon completion of the acquisition, interest expense and associated amortization of debt issuance costs for financing the acquisition, reclassification of transaction expenses to the appropriate period, 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 acquisition occurred on the assumed date, nor is it necessarily an indication of future operating results. Pediatric Therapeutic Services In the second quarter of 2022, KSU, a wholly owned subsidiary of the Company, acquired 100% of the membership interests of Pediatric Therapeutic Services ("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 expanded Education's K-12 solution offering in the education staffing market and served 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. PTS's results of operations are included in the Education segment. RocketPower In the first quarter of 2022, the Company acquired Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, "RocketPower") and 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 expanded OCG's RPO solution and delivery offering and enhanced 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. RocketPower's results of operations are included in the OCG segment. 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. In 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). Dispositions Disposition of EMEA Staffing Operations On January 2, 2024, the Company completed the sale of its EMEA staffing operations ("disposal group"), which was included in the Company's International operating segment, to Gi Group Holdings S.P.A. ("Gi"). Upon closing, the Company received cash proceeds of $110.6 million, or $77.1 million net of cash disposed, which is included in investing activities in the consolidated statements of cash flows. The Company expects to receive additional net cash proceeds to reflect the cash-free, debt-free transaction basis, as well as working capital and other adjustments. The Company will not receive any proceeds from the contingent consideration opportunity associated with the transaction. In the first quarter of 2024, the Company recorded a euro-denominated receivable from Gi of $26.9 million representing the adjustments that were determinable and expected to be received. In the second quarter of 2024, the Company recorded negative working capital and other adjustments of $10.1 million, which reduced the net receivable from Gi to $16.8 million. As of year-end 2024, the net receivable is $16.4 million, with the change of $0.4 million from the second quarter reflecting foreign currency remeasurements. The Company is actively reconciling the receivable in accordance with the purchase agreement and expects it to be settled upon completion of this process. The receivable is included in prepaid expenses and other current assets in the consolidated balance sheet and included in the gain on the transaction. The total gain on the transaction at year-end 2024 is $1.6 million, which is recorded in the gain on sale of EMEA staffing operations in the consolidated statements of earnings. 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. As of December 31, 2023, the disposal group was classified as held for sale and held at its carrying value. Our consolidated earnings from operations in 2023 included earnings of $4.3 million from the EMEA staffing operations. The major classes of divested assets and liabilities were as follows (in millions of dollars):
Assets divested |  |
Cash and equivalents |  | $ | 33.5 |
Trade accounts receivable, net |  | 202.8 |
Prepaid expenses and other current assets |  | 29.0 |
Property and equipment, net |  | 4.2 |
Operating lease right-of-use assets |  | 14.2 |
Deferred taxes |  | 4.1 |
Other assets |  | 5.4 |
Assets divested |  | 293.2 |
Liabilities divested |  |
Accounts payable and accrued liabilities |  | (24.5) |
Operating lease liabilities, current |  | (5.7) |
Accrued payroll and related taxes |  | (91.6) |
Income and other taxes |  | (32.9) |
Operating lease liabilities, noncurrent |  | (8.9) |
Accrued retirement benefits |  | (1.7) |
Other long-term liabilities |  | (4.6) |
Liabilities divested |  | (169.9) |
Disposal group, net |  | $ | 123.3 |
Disposition of Russia Operations On July 20, 2022, the Company completed the sale of its Russia operations, 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 transaction resulted in a loss on the sale of $18.7 million, which was recorded in loss on disposal in the consolidated statements of earnings. The Russia operations 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 year ended 2022 included $63.4 million from the Russia operations and our consolidated earnings before taxes for the year ended 2022 included $1.4 million from the Russia operations.

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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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