What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-06 · 297 added, 219 removed, 142 unchanged (78% of the section changed)

21 unchanged sentences

Kelly is a talent and global workforce solutions company serving customers of all sizes in a variety of industries.

We offer innovative outsourcing and consulting services, as well as staffing on a temporary, temporary-to-hire and direct-hire basis.

We provide commercial and professional/technical staffing in our Americas Staffing and International Staffing segments and, in APAC, we provide staffing solutions to customers through PersolKelly Pte.

We offer innovative outsourcing and consulting services, as well as staffing on a temporary and direct-hire basis.

At the beginning of the third quarter, we have adopted our new Kelly Operating Model and have realigned our business into five specialty business units which are also our reportable segments.

• Professional & Industrial – delivers staffing, outcome-based and direct-hire services focused on office, Professional, Light Industrial and Contact Center specialties in the U.S.

and Canada, including our KellyConnect product

• Science, Engineering & Technology – delivers staffing, outcome-based and direct-hire services focused on science and clinical research, engineering, information technology and telecommunications specialties predominately in the U.S.

and Canada and includes our NextGen and Global Technology Associates subsidiaries

• Education – delivers staffing and direct-hire services to the K-12, early childhood and higher education market in the U.S., including our recent acquisitions, Teachers On Call and Insight Workforce Solutions

• Outsourcing & Consulting – delivers Master Service Provider ("MSP"), Recruitment Process Outsourcing ("RPO"), Business Process Outsourcing ("BPO") and Advisory Services to customers on a global basis

• International – delivers staffing and direct-hire services in fifteen countries in Europe, as well as Mexico

In addition, we provide staffing services to customers in APAC through PersolKelly Pte.

Ltd., our joint venture with Persol Holdings, a leading provider of HR solutions in Japan.

education market, Kelly Education is the leading provider of substitute teachers to more than 7,000 schools nationwide.

We also provide a suite of talent fulfillment and outcome-based solutions through our Global Talent Solutions (“GTS”) segment, which delivers integrated talent management solutions on a global basis.

GTS provides Contingent Workforce Outsourcing ("CWO"), Recruitment Process Outsourcing ("RPO"), Business Process Outsourcing ("BPO"), Advisory and Talent Fulfillment solutions to help customers plan for, manage and execute their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and qualified talent quickly, at competitive rates, with minimized risk.

We earn revenues from customers that procure the services of our temporary employees on a time and materials basis, that use us to recruit permanent employees, and that rely on our talent advisory and outsourcing services.

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Average days sales outstanding varies within and outside the U.S.

but was 61 days on a global basis as of the 2020 second quarter end, 58 days as of the 2019 year end and 57 days as of the 2019 second quarter end.

and was 61 days on a global basis as of the 2020 third quarter end, 58 days as of the 2019 year end and 59 days as of the 2019 third quarter end.

Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth and decline in periods of economic contraction.

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While far from certain, the impacts of COVID-19 on the global economy, the talent solutions industry, our customers and our talent have become more clear since the beginning of the pandemic.

Revenue declines have been substantial, and while recently trends have pointed to a slow recovery in demand, revenue declines are likely to continue for the next several quarters.

Year-over-year revenue declines have been substantial and recent trends have pointed to a slow recovery in demand.

In response to the crisis, in April 2020 we took a series of proactive actions.

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• a hiring freeze with the exception of critical revenue-generating positions.

Given the level of uncertainty surrounding the duration of the COVID-19 crisis, Kelly’s board also voted to suspend the quarterly dividend until conditions improve.

The actions have generated substantial cost savings and have allowed us the time necessary to assess the variety of impacts the crisis has had on our business.

These initial actions were intentionally broad in scope and as we have moved forward our actions are becoming more targeted to the areas of business where demand declines have been more significant and persistent.

Actions such as the 10% pay cut, compensation adjustments for senior leaders and temporary furloughs were ended early in the fourth quarter of 2020.

The suspension of the Company match to retirement accounts will end in January 2021 and others such as reductions in discretionary spending, capital expenditures and carefully managing staffing levels in non-revenue generating positions will continue.

In October 2020, management made the decision to begin reducing staffing levels through involuntary terminations, and restructuring charges of approximately $4-$5 million for severance and related benefits to be paid to impacted employees are expected to be recognized in our fourth quarter results.

Given the level of uncertainty surrounding the duration of the COVID-19 crisis, Kelly’s board also voted to suspend the quarterly dividend until conditions improve and continues to assess future actions with respect to dividend policy.

The impact of the pandemic began in March 2020 with the limitations on public life in the U.S.

and the European markets we serve and have continued in the second quarter as the effect of the pandemic response has slowed global economic activity.

We do expect that there will be a material decline in our revenues during the period of time in which demand for our services is dampened by reaction to the economic slowdown and by companies and talent concerns related to operating safely during a pandemic.

and the European markets we serve and have continued in the second and third quarters as the effect of the pandemic response has slowed global economic activity.

We do expect that there will continue to be a material decline in our year-over-year revenues through the first quarter

of 2021 as demand for our services is dampened by reaction to the economic slowdown and by companies and talent concerns related to operating safely during a pandemic.

The impact on the revenues of each segment will vary given the differences in pandemic-related measures enacted in each geography, the customer industries served and the skill sets of the talent provided to our customers and their ability to work remotely.

We currently expect a gradual return to pre-crisis levels of customer demand over the next several quarters, however, the pace of such a return may be further delayed by repeated cycles of increased economic activity and a resurgence in infection leading to additional containment measures.

While our cost reduction efforts are expected to reduce year-over-year expenses significantly in the third quarter, they will not be enough to completely offset declines in revenue and gross profit.

As a result, we expect our third quarter and full year earnings to decline year-over-year.

We currently expect a gradual return to pre-crisis levels of customer demand, however, the pace of such a return may be delayed by repeated cycles of increased economic activity and a resurgence in infection leading to additional containment measures.

While our cost reduction efforts are expected to reduce year-over-year expenses significantly in the fourth quarter, they will not be enough to completely offset declines in revenue and gross profit.

As a result, we expect our fourth quarter and full year earnings to decline year-over-year.

In addition, negative market reaction to the COVID-19 crisis in March 2020, including declines in our common stock price, caused our market capitalization to decline significantly.

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Moving Forward

While the severity of the economic impacts and the duration of these impacts cannot be precisely measured at this time, we do believe that the mid-term impacts on how people view, find and conduct work will continue to align with our current strategic path.

We continue to pursue a specialized talent solutions strategy and have identified several specialty growth platforms for investment.

We expanded our engineering portfolio with the January 2, 2019 acquisitions of Global Technology Associates, LLC (“GTA”) and NextGen Global Resources LLC (“NextGen”), leaders in the growing 5G telecommunications market.

These position Kelly as one of the leading engineering workforce solutions companies in this fast-growing market.

On January 14, 2020, we acquired Insight Workforce Solutions LLC ("Insight"), an educational staffing company, to expand our leadership position in the U.S.

education talent solutions industry.

We intend to further accelerate our efforts to drive revenue and earnings growth through additional inorganic growth platforms, making smart acquisitions that align with Kelly's focus on specialization as market conditions improve.

We continue to make investments in technology, particularly those which support greater efficiency in finding talent to answer customer needs.

We accelerated the implementation of our front office platform which was deployed to most U.S.

operations in June 2020.

This platform will streamline the processes and workflows associated with recruiting, onboarding and reassigning workers.

This investment creates the platform from which we have begun to deploy additional operational improvements, and will continue over the next several years to enhance the experience of the hundreds of thousands of job seekers who interact and work with Kelly each year.

In the first quarter of 2020, we completed a review of the U.S.

branch network of physical locations and reduced the number of branch locations utilized.

In addition, we took similar actions on branch locations in International Staffing.

During the first six months of 2020, we recorded $4.8 million of lease termination costs and fixed asset write-offs related to those actions.

In addition, we took cost reduction actions in Americas Staffing, GTS, International Staffing and corporate support functions which resulted in $3.7 million of severance costs and eliminated 123 positions.

We expect that the expense savings from the first quarter of 2020 actions will be approximately $20 million on an annual basis.

Beginning in the third quarter of 2020, in connection with the adoption of a new operating model reflecting the Company's focus on delivering specialty talent solutions, the Company will be revising the reportable segments and recasting prior year reportable segment results.

While faced with market conditions that may temporarily delay our efforts, Kelly continues to focus on accelerating the execution of our strategic plan and making the necessary investments and adjustments to advance that strategy.

Our objective is to become an even more agile, consultative and profitable company, and we are reshaping our business to make that goal a reality.

While the COVID-19 pandemic has resulted in uncertainty in the economy and the labor markets that will affect our near term financial performance, we will measure our progress using financial measures, including:

While the severity of the economic impacts and their duration cannot be precisely predicted, we believe that the mid-term impacts on how people view, find and conduct work will continue to align with our strategic path.

As a result, we have continued to move forward with our specialization strategy, reinventing our operating model and reorganizing our business into five distinct reporting segments.

These specialties represent areas where we see the most robust demand, the most promising growth opportunities, and where we believe we excel in attracting and placing talent.

Our new segments also reflect our desire to shift our portfolio toward high-margin, higher-value specialties.

Kelly has done business in these specialties for many years, but our new operating model represents a new approach – one that brings together both staffing and outcome-based pieces of a specialty under a single specialty leader and aggregates assets to accelerate specialty growth and profitability.

We believe this new specialty structure will give us greater advantages in the market, and we expect our disciplined focus to deliver profitable growth coming out of the crisis.

In addition, we intend to invest in strategic, targeted M&A opportunities in our specialties, while optimizing our portfolio, as demonstrated by the sale of our operations in Brazil during the third quarter.

Faced with market conditions that may temporarily delay our growth efforts, Kelly continues to focus on accelerating the execution of our strategic plan and making necessary investments to advance that strategy.

• We are making strides in our digital transformation journey, building a technology foundation to sustain growth.

• We’re capturing a larger share of voice in the marketplace, using television spots and targeted social media campaigns to re-introduce Kelly to companies, highlight our specialty skills sets, and showcase our refreshed brand.

• We are consistently investing to better understand and support our talent.

And we have affirmed our commitment to that talent, recently introducing our five-point Talent Promise and reallocating resources to be solely focused on the temporary worker experience.

• Using our unique position in the middle of the supply and demand equation, we are stepping up with a new platform called Equity@Work to break down long-standing, systemic barriers that make it difficult for many people to secure enriching work.

This powerful extension of our Noble Purpose will help more people flow into Kelly’s talent pools, while also helping families, communities and economies thrive.

While the COVID-19 pandemic has resulted in uncertainty in the economy and the labor markets that will affect our near-term financial performance, we have determined long-term measures to gauge our progress, including:

• Revenue growth (both organic and inorganic)

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Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) are ratios used to measure the Company’s operating efficiency.

NM ("not meaningful") in the following tables is used in place of percentage changes where:

the change is in excess of 500%, the change involves a comparison between earnings and loss amounts, or the comparison amount is zero.

Days sales outstanding (“DSO”) represents the number of days that sales remain unpaid for the period being reported.

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Results of Operations

Total Company - Second Quarter

(Dollars in millions)

2020 2019 Change CC

Revenue from services $ 975.3 $ 1,367.5 (28.7) % (27.7) %

Gross profit 189.2 244.0 (22.5) (21.7)

SG&A expenses excluding restructuring charges 178.3 222.1 (19.7) (19.0)

Restructuring charges (0.2) (0.6) (66.5) (66.5)

Total SG&A expenses 178.1 221.5 (19.6) (18.9)

Gain on sale of assets — 12.3 NM

Earnings from operations 11.1 34.8 (68.2)

Earnings from operations excluding restructuring charges 10.9 34.2 (68.2)

Diluted earnings per share 1.04 2.12 (50.9)

Permanent placement income (included in revenue from services) 7.6 15.7 (51.5) (50.5)

Gross profit rate 19.4 % 17.8 % 1.6 pts.

Total Company revenue from services for the second quarter of 2020 declined 28.7% in comparison to the prior year and declined 27.7% on a CC basis.

As noted in the following discussions, revenue decreased in all three segments, due primarily to lower demand as a result of the COVID-19 pandemic and the resulting economic slow-down.

Revenue from services for the second quarter of 2020 includes the results of the Insight acquisition, which added approximately 40 basis points to the total revenue growth rate.

The gross profit rate increased by 160 basis points from the prior year.

The increase was due primarily to government wage subsidies, received as the employer of record, which accounted for approximately 100 basis points, lower employee-related costs and the impact of improved product mix.

As noted in the following discussions, increases in the GTS and Americas Staffing gross profit rates were partially offset by a decrease in the gross profit rate of International Staffing.

Total SG&A expenses decreased 19.6% on a reported basis and 18.9% on a CC basis.

This decrease was due primarily to lower administrative salaries and performance-based compensation, including additional short-term cost reductions implemented to further align costs with current revenue volume trends.

Included in total SG&A expenses are adjustments to previously recorded restructuring charges of $0.2 million in the second quarter of 2020 and $0.6 million in the second quarter of 2019.

Gain on sale of assets of $12.3 million primarily represents the excess of the proceeds over the cost of an unused parcel of land located near the Company headquarters sold during the second quarter of 2019.

Diluted earnings per share for the second quarter of 2020 was $1.04, as compared to diluted earnings per share of $2.12 for the second quarter of 2019.

The 2020 second quarter diluted earnings per share was impacted by a gain, net of tax, of approximately $0.52 per share related to the investment in Persol Holdings.

The 2019 second quarter diluted earnings per share were impacted by a gain, net of tax, of approximately $1.07 per share related to the gain on the investment in Persol Holdings, a gain, net of tax, of approximately $0.23 related to a gain on sale of an unused parcel of land and approximately $0.01 per share, net of tax, related to adjustments to restructuring charges.

Americas Staffing - Second Quarter

(Dollars in millions)

2020 2019 Change CC

Revenue from services $ 326.7 $ 597.6 (45.3) % (44.1) %

Gross profit 63.4 108.8 (41.7) (40.9)

SG&A expenses excluding restructuring charges 69.8 93.8 (25.5) (24.7)

Restructuring charges (0.1) (0.6) (88.3) (88.3)

Total SG&A expenses 69.7 93.2 (25.1) (24.3)

Earnings (loss) from operations (6.3) 15.6 NM

Earnings (loss) from operations excluding restructuring charges (6.4) 15.0 NM

Gross profit rate 19.4 % 18.2 % 1.2 pts.

The change in Americas Staffing revenue from services reflects a 40% decrease in hours volume and a 9% decrease in average bill rates (a 6% decrease on a CC basis), partially offset by the impact of the January 2020 acquisition of Insight.

The decline in hours reflects the impact from the challenging market conditions resulting from COVID-19, primarily in education related to school closures, and in manufacturing industry clients from the temporary closure of customer facilities.

The decrease in average bill rates was related to both customer mix and product mix due to lower education volume.

Americas Staffing represented 33% of total Company revenue in the second quarter of 2020 and 44% in the second quarter of 2019.

From a product perspective, the change in revenue reflects lower volume in all products, most significantly in commercial and education.

The Americas Staffing gross profit rate increased 120 basis points in comparison to the prior year, due primarily to lower overall employee costs.

Total SG&A expenses decreased 25.1% from the prior year, due primarily to lower administrative salaries and performance-based compensation, including additional short-term cost reductions implemented to further align costs with current revenue volume trends.

Included in total SG&A expenses in the second quarter of 2020 and 2019 are credits of $0.1 million and $0.6 million, respectively, related primarily to the adjustments of previously accrued severance charges for U.S.

branch-based staffing operations.

GTS - Second Quarter

(Dollars in millions)

2020 2019 Change CC

Revenue from services $ 466.9 $ 505.9 (7.7) % (7.5) %

Gross profit 103.0 99.7 3.3 3.8

SG&A expenses excluding restructuring charges 64.3 74.3 (13.5) (13.2)

Restructuring charges (0.1) — NM NM

Total SG&A expenses 64.2 74.3 (13.6) (13.4)

Earnings from operations 38.8 25.4 53.3

Earnings from operations excluding restructuring charges 38.7 25.4 52.7

Gross profit rate 22.1 % 19.7 % 2.4 pts.

Revenue from services decreased 7.7% compared to last year.

While many of GTS’s products and customers are in essential industries and have been generally resilient during the COVID-19 pandemic, there was a decline in the second quarter of 2020 volume in centrally delivered staffing business and PPO businesses, predominantly in the automotive manufacturing, industrial and energy industries.

These reductions were partially offset by increases from program expansions and new customer contracts in our KellyConnect and BPO products.

GTS revenue represented 48% of total Company revenue in the second quarter of 2020 and 37% in the second quarter of 2019.

The increase in the GTS gross profit rate was due to lower employee-related costs and the continued structural improvement in our product mix.

Total SG&A expenses decreased 13.6% from the prior year, due to effective cost management and the impact of short-term cost reduction actions.

These actions were taken in the second quarter of 2020 to mitigate the impact of COVID-19 related demand disruption to further align the costs with current revenue volume trends.

International Staffing - Second Quarter

(Dollars in millions)

2020 2019 Change CC

Revenue from services $ 184.6 $ 268.1 (31.1) % (29.3) %

Gross profit 23.2 36.1 (36.0) (34.3)

Total SG&A expenses 25.1 32.6 (23.2) (21.5)

Earnings (loss) from operations (1.9) 3.5 NM

Gross profit rate 12.5 % 13.5 % (1.0) pts.

In comparison to the prior year, International Staffing revenue from services decreased 31.1% on a reported basis and 29.3% on a CC basis.

The decline was primarily due to a decrease in hours volume as COVID-19 disrupted operations across the segment and, in particular, in Portugal, France and the U.K.

These decreases were partially offset by increased revenue in Russia, due to increased information technology and call center business.

International Staffing represented 19% of total Company revenue in the second quarter of 2020 and 20% in the second quarter of 2019.

The International Staffing gross profit rate decreased primarily due to lower permanent placement income, as well as unfavorable customer mix.

Permanent placement income, which is included in revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates.

Total SG&A expenses decreased 23.2% due to cost management to mitigate the impact of the COVID-19 disruption.

Results of Operations

Total Company - June Year to Date

Total Company

(Dollars in millions)

2020 2019 Change CC

Third Quarter September Year to Date

2020 2019 % Change 2020 2019 % Change

Revenue from services $ 1,038.2 $ 1,267.7 (18.1) % $ 3,274.6 $ 4,017.8 (18.5) %

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Gain on sale of assets — — — 32.1 12.3 161.6

Earnings (loss) from operations (100.7) 51.6 NM

Earnings (loss) from operations excluding restructuring charges (92.2) 57.3 NM

Diluted earnings (loss) per share (2.86) 2.68 NM

Permanent placement income (included in revenue from services) 19.9 31.6 (37.0) (36.1)

Earnings (loss) from operations (2.4) 17.1 NM (103.1) 68.7 NM

Gain (loss) on investment in Persol Holdings 16.8 (39.3) NM (31.4) 35.1 NM

Other income (expense), net (0.7) (0.2) (286.4) 3.6 (1.1) 421.4

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate 13.7 (22.4) NM (130.9) 102.7 NM

Income tax expense (benefit) (1.2) (12.8) 90.9 (36.5) 6.3 NM

Equity in net earnings (loss) of affiliate 1.8 (0.9) NM (1.0) (1.0) (1.8)

Net earnings (loss) $ 16.7 $ (10.5) NM $ (95.4) $ 95.4 NM

Gross profit rate 18.4 % 18.0 % 0.4 pts.

Total Company revenue from services for the first six months of 2020 declined 18.7% in comparison to the prior year and declined 18.0% on a CC basis.

As noted in the following discussions, revenue decreased in all three segments, due primarily to the impact of COVID-19, which began in mid-March of this year.

Revenue from services for the first six months of 2020 includes the results of the Insight acquisition, which added approximately 70 basis points to the total revenue growth rate.

The gross profit rate increased by 40 basis points from the prior year.

As noted in the following discussions, an increase in the GTS gross profit rate was partially offset by decreases in the gross profit rate in Americas Staffing and International Staffing.

Total SG&A expenses decreased 12.9% on a reported basis and 12.4% on a CC basis.

18.4 % 18.0 % 0.4 pts.

Conversion rate (1.3) 7.5 (8.8) (17.1) 9.5 (26.6)

Third Quarter Results

Revenue from services in the third quarter declined in all segments, reflecting the continuing impact of the COVID-19 pandemic and resulting mitigation efforts.

These efforts have resulted in a decline in demand for our temporary staffing and permanent placement services across a broad range of industries and geographies.

Revenue from staffing services declined 22% compared to the third quarter of 2019.

Additionally, permanent placement revenue, which is included in revenue from services, decreased 40% year-over-year as the impact of economic uncertainty depressed full-time hiring in all operating segments.

These declines were partially offset by an increase in outcome-based services of 4% as demand from customers utilizing these services increased during the quarter.

Gross profit declined as a result of lower revenue volume, partially offset by an increase in the gross profit rate.

The gross profit rate increased 40 basis points from the prior year.

The increase in the gross profit rate was due to the impact of lower employee-related costs and improved product mix.

This was partially offset by the negative impact of lower permanent placement revenue and unfavorable customer mix.

The recovery of demand for temporary staffing services from large customers with lower margins outpaced the recovery for small and medium-sized customers.

Total SG&A expenses decreased 8.2% compared to last year.

This decrease reflects lower salaries and benefits costs as a result of temporary expense mitigation actions that were taken in response to the COVID-19 crisis, lower incentive compensation expenses and the benefit of COVID-19 government subsidies related to full-time employees recognized in the third quarter.

Included in SG&A expenses in the third quarter of 2020 is a $9.5 million non-cash charge in the International segment related to a customer dispute that resulted in additional uncollectible accounts receivable charges.

The loss from operations for the quarter of $2.4 million reflects a decline from the $17.1 million of earnings from operations in the prior year.

Our earnings from operations declined as a result of lower gross profit, partially offset by lower expenses due to cost reduction efforts.

Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings.

The gains or losses fluctuate each quarter based on the quoted market price of the Persol Holdings common stock at period end.

Income tax benefit was $1.2 million and $12.8 million for the third quarter of 2020 and 2019, respectively.

These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in an income tax charge of $5.2 million for the third quarter of 2020 compared to an income tax benefit of $12.1 million for the third quarter of 2019.

The change in income taxes also reflects a decline in earnings from operations in the third quarter of 2020.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S.

work opportunity credits and the change in cash surrender value of tax exempt investments in life insurance policies.

It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes, changes in judgment regarding the realizability of deferred tax assets, the tax effects of stock compensation, and changes in the fair value of the Company’s investment in Persol Holdings, which are treated as discrete since they cannot be estimated.

The net earnings for the period of $16.7 million, an increase of $27.2 million from the third quarter of 2019, was due primarily to increased gains of Persol Holdings common stock and a lower effective income tax rate, partially offset by lower earnings from operations.

September Year-to-Date Results

Revenue from services for the first nine months of 2020 declined in all segments, reflecting the impact of COVID-19, and resulting in a decline in demand for our staffing services and permanent placement services across a broad range of industries and geographies.

Revenue from staffing services declined 23% compared to last year.

Permanent placement revenue, which is included in revenue from services, decreased 38% year-over-year as the impact of economic uncertainty depressed full-time hiring in all operating segments.

These declines were partially offset by an increase in outcome-based services of 9% as demand from customers utilizing these services increased during the year.

Gross profit declined as a result of lower revenue volume, partially offset by an increase in the gross profit rate.

The gross profit rate increased 40 basis points in comparison to the prior year.

With the exception of Education and International, the gross profit rate increased in all other operating segments, primarily reflecting improved product mix and lower employee-related costs.

International's gross profit rate was negatively impacted by the decrease in permanent placement revenue.

Government subsidies accounted for approximately 20 basis points of the increase for the year.

Total SG&A expenses decreased 11.4% in comparison to the prior year.

Included in total SG&A expenses are restructuring charges of $8.5 million in the first six months of 2020.

This is related to actions taken to position the Company to adopt a new operating model later in 2020 and to align the U.S.

Included in total SG&A expenses are restructuring charges of $8.4 million in the first nine months of 2020.

This is related to actions taken to position the Company to adopt the new operating model and to align the U.S.

branch network facilities footprint with a more technology-enabled service delivery methodology.

Restructuring charges of $5.7 million in the first six months of 2019 represent severance costs primarily related to U.S.

Restructuring charges of $5.6 million in the first nine months of 2019 represent severance costs primarily related to U.S.

branch-based staffing operations.

During the first six months of 2020, the negative reaction to the pandemic by the global equity markets also resulted in a decline in the Company's common stock price.

During the first nine months of 2020, the negative reaction to the pandemic by the global equity markets also resulted in a decline in the Company's common stock price.

This triggered an interim goodwill impairment test, resulting in a $147.7 million goodwill impairment charge in the first quarter of 2020.

Gain on sale of assets of $32.1 million represents the excess of the proceeds over the cost of the headquarters properties sold in the first quarter of 2020.

The main headquarters building was subsequently leased back to the Company during the first quarter of 2020.

Diluted loss per share for the first six months of 2020 was $2.86, as compared to diluted earnings per share of $2.68 for the first six months of 2019.

The 2020 diluted loss per share was impacted by the goodwill impairment charge, net of tax, of approximately $3.18 per share, a loss, net of tax, of approximately $0.85 per share related to the investment in Persol Holdings, gain on sale of assets, net of tax, of approximately $0.61 per share and restructuring charges, net of tax, of approximately $0.16 per share.

The 2019 diluted earnings per share were impacted by a gain, net of tax, of approximately $1.31 per share related to the gain on the investment in Persol Holdings, gain on sale of assets, net of tax, of approximately $0.23 per share and restructuring charges, net of tax, of approximately $0.11 per share.

Americas Staffing - June Year to Date

Gain on sale of assets of $32.1 million represents the excess of the proceeds over the cost of the headquarters properties sold in

the first quarter of 2020.

The main headquarters building was subsequently leased back to the Company during the first quarter

Gain on sale of assets of $12.3 million primarily represents the excess of the proceeds over the cost of an unused

parcel of land located near the Company headquarters sold during the second quarter of 2019.

The loss from operations for the first nine months of 2020 of $103.1 million reflects a decline from the $68.7 million of earnings from operations in the prior year.

Our earnings from operations declined as a result of the goodwill impairment charge and lower gross profit, partially offset by the gain on sale of assets and lower expenses due to cost reduction efforts.

Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings.

The gains or losses fluctuate based on the quoted market price of the Persol Holdings common stock at period end.

Income tax benefit was $36.5 million and expense was $6.3 million for September year to date 2020 and 2019, respectively.

These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in an income tax benefit of $9.6 million for September year to date 2020, compared to an income tax charge of $10.7 million for September year to date 2019.

September year to date 2020 includes a first quarter tax benefit of $23.0 million on the impairment of goodwill and a second quarter tax benefit of $7.7 million from Brazil outside basis differences.

September year to date 2019 includes a net benefit of $10.4 million from valuation allowance changes in the United Kingdom and Germany.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S.

work opportunity credits and the change in cash surrender value of tax exempt investments in life insurance policies.

The impairment of goodwill in the first quarter of 2020 and the recording of deferred taxes on Brazil outside basis differences in the second quarter of 2020 were treated as discrete items.

The net loss for the period of $95.4 million, a decrease of $190.8 million from the prior year, was due primarily to lower earnings from operations due to the goodwill impairment charge taken in the first quarter of 2020, combined with increased losses of Persol Holdings common stock, partially offset by the impact of an income tax benefit in comparison to income tax expense last year.

Operating Results By Segment

(Dollars in millions)

2020 2019 Change CC

Revenue from services $ 860.1 $ 1,224.1 (29.7) % (29.0) %

Gross profit 157.0 226.0 (30.5) (30.1)

SG&A expenses excluding restructuring charges 157.7 188.7 (16.4) (16.0)

Restructuring charges 5.5 5.7 (2.3) (2.3)

Total SG&A expenses 163.2 194.4 (16.0) (15.6)

Earnings (loss) from operations (6.2) 31.6 NM

Earnings (loss) from operations excluding restructuring charges (0.7) 37.3 NM

Gross profit rate 18.3 % 18.5 % (0.2) pts.

The change in Americas Staffing revenue from services reflects a 28% decrease in hours volume and a 5% decrease in average bill rates (a 4% decrease on a CC basis), partially offset by the impact of the January 2020 acquisition of Insight.

The decrease in average bill rates was related to customer mix in commercial, education and engineering products as well as product mix from lower education volumes.

Americas Staffing represented 39% of total Company revenue in the first six months of 2020 and 45% in the first six months of 2019.

From a product perspective, the change in revenue reflects lower volume in all products, most significantly in commercial and education.

The Americas Staffing gross profit rate decreased in comparison to the prior year, due primarily to customer mix.

Total SG&A expenses decreased 16.0% from the prior year, due primarily to lower administrative salaries and performance-based compensation, including additional short-term cost reductions implemented to further align costs with current revenue volume trends.

The restructuring costs in the first six months of 2020 primarily represent facilities lease buy-out costs and severance costs related to U.S.

branch-based staffing operations.

The restructuring costs in the first six months of 2019 primarily represent severance costs related to U.S.

branch-based staffing operations.

GTS - June Year to Date

Third Quarter September Year to Date

2020 2019 % Change 2020 2019 % Change

(Dollars in millions)

2020 2019 Change CC

Revenue from Services:

Gross profit 203.2 200.1 1.6 1.9

SG&A expenses excluding restructuring charges 137.1 149.0 (8.0) (7.7)

Restructuring charges 0.8 — NM NM

Total SG&A expenses 137.9 149.0 (7.5) (7.2)

Earnings from operations 65.3 51.1 27.8

Earnings from operations excluding restructuring charges 66.1 51.1 29.4

Gross profit rate 20.9 % 19.9 % 1.0 pts.

Revenue from services decreased 3.7% compared to last year.

While many of GTS’s products and customers are in essential industries and have been generally resilient during the COVID-19 pandemic, there was a decline in second quarter of 2020 volume in centrally delivered staffing business and PPO businesses, predominantly in the automotive manufacturing, industrial and energy industries.

These reductions were partially offset by increases from program expansions and new customer contracts in our BPO and KellyConnect products.

GTS revenue represented 43% of total Company revenue in the first six months of 2020 and 37% in the first six months of 2019.

The increase in the GTS gross profit rate was due to continued structural improvement in our product mix and lower employee-related costs.

Total SG&A expenses decreased 7.5% from the prior year, due to effective cost management and short-term cost reduction actions.

These actions were taken in the first six months of 2020 to mitigate the impact of COVID-19 related demand disruption to further align the costs with current revenue volume trends.

Included in total SG&A expenses are $0.8 million related to restructuring charges, representing primarily employee separation costs.

International Staffing - June Year to Date

Professional & Industrial $ 446.5 $ 538.0 (17.0) % $ 1,346.7 $ 1,668.7 (19.3) %

Science, Engineering & Technology 244.0 285.2 (14.4) 761.5 859.7 (11.4)

Education 27.5 57.1 (51.8) 195.1 313.9 (37.8)

Outsourcing & Consulting 87.9 94.4 (7.0) 261.0 282.3 (7.6)

International 232.4 293.4 (20.8) 710.6 893.6 (20.5)

Intersegment revenue (0.1) (0.4) (69.6) (0.3) (0.4) (31.9)

Consolidated Total $ 1,038.2 $ 1,267.7 (18.1) % $ 3,274.6 $ 4,017.8 (18.5) %

Third Quarter Results

Professional & Industrial revenue from services decreased due primarily to decreases in our hours volume in our staffing businesses which continue to be impacted by COVID-19 due to a slow recovery rate.

These decreases were partially offset by increased revenue in our outcome-based businesses due to program expansions.

Science, Engineering & Technology revenue from services decreased due to lower hours volume in our staffing business across most specialties due to the continued impact of COVID-19, with the exception of our government staffing business, which has seen increased demand in talent to support life sciences and clinical research.

Education revenue from services decreased due primarily to the impact of COVID-19.

School districts delayed starts and when instruction did begin, many districts used a virtual or hybrid instructional style, reducing the typical demand for Education services.

These decreases were partially offset by the revenues from the first quarter 2020 acquisition of Insight.

Outsourcing & Consulting revenue from services decreased due primarily to decreases in our PPO, MSP and RPO products due somewhat to COVID-19-related demand impacts as well as lower demand in the Oil and Gas Industry, partially offset by increases in our Career Transitions product.

International revenue from services decreased 20.8% on a reported basis and 21.1% in CC.

The decline was primarily due to a decrease in hours volume as COVID-19 disruptions continued across operations in all countries, in particular Portugal and France.

Revenue was also impacted following the sale of operations in Brazil in August 2020.

Overall, although COVID-19 related demand declines continued, demand for our services in the third quarter of 2020 in each segment has increased sequentially since the second quarter of 2020.

September Year-to-Date Results

Professional & Industrial revenue from services decreased due primarily to decreases in our hours volume in our staffing businesses which were impacted by COVID-19.

These decreases were partially offset by increased revenue in our outcome-based products due to program expansions.

Science, Engineering & Technology revenue from services decreased due to lower hours volume in our staffing business across most products due to the continued impact of COVID-19, with the exception of our government staffing business, which has seen increased demand in life sciences support.

Education revenue from services decreased due to the impact of COVID-19.

Temporary school closures, delayed starts and use of virtual or hybrid instructional styles reduced the typical demand for our Education services.

These decreases were partially offset by the revenues from the first quarter acquisition of Insight.

Outsourcing & Consulting revenue from services decreased due primarily to decreases in our PPO, MSP and RPO products due somewhat to COVID-19 as well as lower demand in the Oil and Gas Industry.

International revenue from services decreased 20.5% on a reported basis and 18.7% on a CC basis.

The decline was primarily due to a decrease in hours volume as COVID-19 disruptions continued across operations in all countries, in particular France, Portugal and the U.K.

These decreases were partially offset by increased revenue in Russia, due to higher hours volume combined with higher average bill rates.

Operating Results By Segment (continued)

(Dollars in millions)

2020 2019 Change CC

Revenue from services $ 412.2 $ 527.0 (21.8) % (20.2) %

Third Quarter September Year to Date

2020 2019 Change 2020 2019 Change

(Dollars in millions)

Gross Profit:

SG&A expenses excluding restructuring charges 53.3 63.9 (16.6) (15.1)

Restructuring charges 1.1 — NM NM

Total SG&A expenses 54.4 63.9 (14.9) (13.4)

Earnings (loss) from operations (1.3) 6.8 NM

Earnings (loss) from operations excluding restructuring charges (0.2) 6.8 NM

Gross profit rate 12.9 % 13.4 % (0.5) pts.

In comparison to the prior year, International Staffing revenue from services decreased 21.8% on a reported basis and 20.2% on a CC basis.

The decline was primarily due to a decrease in hours volume in France, Portugal and Italy, due to declining market conditions early in the year as a result of the COVID-19 economic disruption.

These decreases were partially offset by increased revenue in Russia, due to increased information technology and call center business.

International Staffing represented 18% of total Company revenue in the first six months of 2020 and 19% in the first six months of 2019.

The International Staffing gross profit rate decreased primarily due to lower permanent placement income, as well as unfavorable customer mix.

Total SG&A expenses decreased 14.9% due to cost management to mitigate the impact of the COVID-19 disruption and a continued focus on increased productivity in our branch network.

Included in total SG&A are $1.1 million of restructuring charges, which primarily related to France staffing operations to reposition our operating model to pursue growth through specialized staffing business.

Professional & Industrial $ 77.1 $ 91.8 (16.1) % $ 241.1 $ 291.6 (17.3) %

Science, Engineering & Technology 50.7 58.3 (13.1) 156.0 171.8 (9.3)

Education 4.1 8.6 (51.1) 28.8 49.9 (42.2)

Outsourcing & Consulting 29.1 29.5 (1.5) 87.1 90.7 (4.0)

International 30.0 39.5 (23.9) 90.5 119.3 (24.1)

Consolidated Total $ 191.0 $ 227.7 (16.1) % $ 603.5 $ 723.3 (16.6) %

Gross Profit Rate:

Professional & Industrial 17.3 % 17.1 % 0.2 pts.

17.9 % 17.5 % 0.4 pts.

Science, Engineering & Technology 20.8 20.4 0.4 20.5 20.0 0.5

Education 15.2 15.0 0.2 14.8 15.9 (1.1)

Outsourcing & Consulting 33.1 31.3 1.8 33.4 32.2 1.2

International 12.9 13.5 (0.6) 12.7 13.3 (0.6)

Consolidated Total 18.4 % 18.0 % 0.4 pts.

18.4 % 18.0 % 0.4 pts.

Third Quarter Results

Gross Profit for the Professional & Industrial segment declined as the result of lower revenue volume, partially offset by an improved gross profit rate.

The gross profit rate increased 20 basis points due to lower employee-related costs coupled with improved product mix, as a greater proportion of the segment revenue came from outcome-based services with higher margins.

The Science, Engineering & Technology gross profit declined as lower revenue volume was partially offset by a higher gross profit rate.

The gross profit rate increased 40 basis points due to lower employee-related costs, partially offset by specialty mix.

Gross profit for the Education segment declined as a result of lower revenue volume, partially offset by an improved gross profit rate.

The gross profit rate increased 20 basis points due to lower employee-related costs, partially offset by increased pricing pressures.

The Outsourcing & Consulting gross profit declined on lower revenue volume, partially offset by an improved gross profit rate.

The gross profit rate increased by 180 basis points due to improved product mix coupled with lower employee-related costs in the PPO product.

International gross profit declined as a result of lower revenue volume and a decline in the gross profit rate.

The gross profit rate decreased primarily due to lower permanent placement revenue.

Permanent placement revenue, which is included in revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates.

September Year-to-Date Results

Gross Profit for the Professional & Industrial segment declined as the result of lower revenue volume, partially offset by an improved gross profit rate.

The gross profit rate increased 40 basis points due to lower employee-related costs coupled with improved product mix, as a greater proportion of the segment revenue came from outcome-based services with higher margins.

The Science, Engineering & Technology gross profit declined as lower revenue volume was partially offset by a higher gross profit rate.

The gross profit rate increased 50 basis points due to lower employee-related costs, partially offset by specialty mix.

Gross profit for the Education segment declined as a result of lower revenue volume, combined with a lower gross profit rate.

The Education gross profit rate decreased 110 basis points due to increased pricing pressures, partially offset by lower employee-related costs.

The Outsourcing & Consulting gross profit declined on lower revenue volume, partially offset by an improved gross profit rate.

The Outsourcing & Consulting gross profit rate increased 120 basis points due to improved product mix coupled with lower employee-related costs in the PPO product.

International gross profit declined as a result of lower revenue volume and a decline in the gross profit rate.

The International gross profit rate decreased primarily due to lower permanent placement revenue.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2020 2019 % Change 2020 2019 % Change

(Dollars in millions)

SG&A Expenses:

Professional & Industrial $ 65.3 $ 77.6 (15.8) % $ 210.4 $ 246.9 (14.8) %

Science, Engineering & Technology 31.3 36.0 (13.0) 99.1 111.4 (11.1)

Education 11.6 13.8 (15.5) 37.7 41.5 (9.1)

Outsourcing & Consulting 25.4 29.1 (12.7) 79.1 90.9 (13.0)

International 39.9 35.3 13.1 101.4 107.2 (5.4)

Corporate expenses 19.9 18.8 5.3 63.3 69.0 (8.3)

Consolidated Total $ 193.4 $ 210.6 (8.2) % $ 591.0 $ 666.9 (11.4) %

Third Quarter September Year to Date

2020 2019 % Change 2020 2019 % Change

(Dollars in millions)

Restructuring Charges Included in SG&A Expenses:

Professional & Industrial $ (0.1) $ (0.1) (24.7) % $ 4.3 $ 5.2 (18.8) %

Science, Engineering & Technology — — — 0.5 0.4 45.2

Education — — — 0.8 — NM

Outsourcing & Consulting — — — — — —

International — — — 1.1 — NM

Corporate expenses — — — 1.7 — NM

Consolidated Total $ (0.1) $ (0.1) 68.5 % $ 8.4 $ 5.6 49.1 %

Third Quarter Results

Total SG&A expenses in Professional & Industrial decreased 15.8% due primarily to lower salaries and related costs from cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption, coupled with the impact of the restructuring actions taken in the first quarter of this year.

Total SG&A expenses in Science, Engineering & Technology decreased 13.0% due primarily to lower salaries and related costs resulting from the cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption.

Total SG&A expenses in Education decreased 15.5% due primarily to lower salaries and related costs as a result of cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption.

This decrease was partially offset by the impact of the acquisition of Insight that took place in the first quarter.

Total SG&A expenses in Outsourcing & Consulting decreased 12.7% due primarily to lower salaries and related costs due to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption, partially offset by higher performance-based compensation.

Total SG&A expenses in International increased 13.1% due to a specific customer credit loss provision in Mexico as a result of an unfavorable ruling in on-going litigation.

The disputed accounts receivable balance relates to services rendered more than five years ago.

Excluding this provision, total SG&A expenses decreased 14.0% driven by cost management to contend with the COVID-19 disruption, due primarily to lower salaries, combined with the effect of the sale of operations in Brazil in August 2020.

Corporate expenses increased due to the year-over-year impact of adjustments which lowered performance-based compensation expense in the third quarter of 2019, along with increased rent expense for the headquarters building as a result of the 2020 first quarter sale-leaseback transaction.

These increases were partially offset by lower employee salaries and benefits related to COVID-19 cost-saving actions taken.

Subsequent to the end of the third quarter, several temporary expense mitigation actions taken in response to COVID-19 such as furloughs and reductions in compensation for officers and employees in the U.S., were ended in the fourth quarter.

Reductions in staffing levels in areas of the business in which the demand declines have been the most severe and pervasive have been initiated.

September Year-to-Date Results

Total SG&A expenses in Professional & Industrial decreased 14.8% due primarily to lower salaries and related costs due to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption, coupled with the impact of the restructuring actions taken in the first quarter of this year which reduced salaries and related costs and facilities expenses.

Total SG&A expenses in Science, Engineering & Technology decreased 11.1% due primarily to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption.

Total SG&A expenses in Education decreased 9.1% due primarily to lower salaries and related costs resulting from the cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption.

This decrease was partially offset by the impact of the acquisition of Insight that took place in the first quarter.

Total SG&A expenses in Outsourcing & Consulting decreased 13.0% due primarily to lower salaries and related expenses resulting from cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the COVID-19 disruption.

Total SG&A expenses in International decreased 5.4%.

Excluding the previously mentioned specific customer credit loss provision in Mexico, total SG&A expenses decreased 14.3% due primarily to lower salaries, driven by cost management to contend with the COVID-19 disruption, combined with lower incentive-based compensation.

Corporate expenses decreased as a result of lower performance-based compensation expense and lower employee salaries and benefits related to COVID-19 cost-saving actions taken.

These decreases were partially offset by rent expense for the headquarters building as a result of the 2020 first quarter sale-leaseback transaction.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2020 2019 % Change 2020 2019 % Change

(Dollars in millions)

Earnings (Loss) from Operations:

Professional & Industrial $ 11.8 $ 14.2 (17.6) % $ 30.7 $ 44.7 (31.4) %

Science, Engineering & Technology 19.4 22.3 (13.2) 56.9 60.4 (5.9)

Education (7.5) (5.2) (43.2) (8.9) 8.4 NM

Outsourcing & Consulting 3.7 0.4 NM 8.0 (0.2) NM

International (9.9) 4.2 NM (10.9) 12.1 NM

Corporate (19.9) (18.8) (5.3) (178.9) (56.7) (215.1)

Consolidated Total $ (2.4) $ 17.1 NM $ (103.1) $ 68.7 NM

Third Quarter Results

Professional & Industrial reported earnings of $11.8 million for the quarter, a 17.6% decrease from a year ago.

The decrease in earnings was primarily due to the impact of COVID-19 on our staffing operations, partially offset by increases in our outcome-based products and the cost management initiatives taken to mitigate the impact of the pandemic on our operations.

Science, Engineering & Technology reported earnings of $19.4 million for the quarter, a 13.2% decrease from a year ago.

The decrease in earnings was primarily due to the impact of COVID-19 on our operations, partially offset by the cost management initiatives taken to mitigate its impact.

Education reported a loss of $7.5 million for the quarter, a 43.2% increase from a year ago.

The increased loss was primarily due to the impact of COVID-19 on our operations, partially offset by the cost management initiatives taken to mitigate its impact.

Outsourcing & Consulting reported earnings of $3.7 million for the quarter, a $3.3 million increase over a year ago.

The increase in earnings was primarily due to the impact of the cost management initiatives taken to mitigate the impact of COVID-19 as well as improved product mix.

International reported a loss for the quarter, driven by a specific customer provision in Mexico.

Excluding this effect, the loss was $0.4 million, as the cost management actions only partially offset the lower revenues due to the COVID-19 impact on operations.

September Year-to-Date Results

Professional & Industrial reported earnings of $30.7 million, a 31.4% decrease from a year ago.

Science, Engineering & Technology reported earnings of $56.9 million, a 5.9% decrease from a year ago.

The decrease in earnings was primarily due to the impact of COVID-19 on our operations, partially offset by the cost management initiatives taken to mitigate its impact.

Education reported a loss of $8.9 million.

The year-to-date loss is due to the impact of COVID-19 on our revenue, partially offset by the cost management initiatives taken to mitigate its impact.

Outsourcing & Consulting reported earnings of $8.0 million, an $8.2 million increase over a year ago.

The increase in earnings was primarily due to the impact of the cost management initiatives taken to mitigate the impact of COVID-19 as well as improved product mix.

International reported a loss on a year-to-date basis, largely driven by a specific customer provision in Mexico.

Excluding this effect, the loss was $1.4 million, as the cost management actions only partially offset the lower revenues due to the COVID-19 impact on operations.

Financial Condition

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however, any such increase would not be sustainable in the event that an economic downturn continued for an extended period.

The impact of the current economic slow-down resulting from the COVID-19 crisis began in March 2020 and continued during the second quarter.

Consistent with our historical results, the impact of the current economic conditions resulted in declines in working capital requirements, primarily Accounts Receivable, and increases in cash flows from operations as revenues slowed.

The impact of the current economic slow-down resulting from the COVID-19 crisis began in March 2020 and continued during the third quarter.

Consistent with our historical results, the impact of the current economic conditions resulted in declines in working capital requirements, primarily trade accounts receivable, and increases in cash flows from operations as revenues slowed.

As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components:

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Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash totaled $221.9 million at the end of the second quarter of 2020 and $31.0 million at year-end 2019.

Cash, cash equivalents and restricted cash totaled $254.4 million at the end of the third quarter of 2020 and $31.0 million at year-end 2019.

As further described below, we generated $216.5 million of cash from operating activities, generated $10.3 million of cash from investing activities and used $6.8 million of cash for financing activities.

Operating Activities

In the first six months of 2020, we generated $178.1 million of net cash from operating activities, as compared to generating $73.5 million in the first six months of 2019.

In the first nine months of 2020, we generated $216.5 million of net cash from operating activities, as compared to generating $74.2 million in the first nine months of 2019.

This change was due to reduced working capital requirements as revenues slowed.

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for $16.9 million in cash.

Trade accounts receivable totaled $1.1 billion at the end of the second quarter of 2020.

Global DSO was 61 days at the end of the second quarter of 2020 and 57 days at the end of the second quarter of 2019.

Our working capital position (total current assets less total current liabilities) was $585.8 million at the end of the second quarter of 2020, an increase of $64.2 million from year-end 2019.

Trade accounts receivable totaled $1.1 billion at the end of the third quarter of 2020.

Global DSO was 61 days at the end of the third quarter of 2020 and 59 days at the end of the third quarter of 2019.

The increase of two days was due to certain customers taking advantage of full payment terms, along with a shift in customer mix to larger customers with longer payment terms.

Our working capital position (total current assets less total current liabilities) was $634.5 million at the end of the third quarter of 2020, an increase of $112.9 million from year-end 2019.

Excluding additional cash, working capital declined $109.5 million from year-end 2019.

The current ratio (total current assets divided by total current liabilities) was 1.7 at the end of the second quarter of 2020 and 1.6 at year-end 2019.

The current ratio (total current assets divided by total current liabilities) was 1.8 at the end of the third quarter of 2020 and 1.6 at year-end 2019.

Investing Activities

In the first six months of 2020, we generated $13.3 million of cash from investing activities, as compared to using $79.6 million in the first six months of 2019.

Included in cash from investing activities in the first six months of 2020 is $55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction.

In the first nine months of 2020, we generated $10.3 million of cash from investing activities, as compared to using $88.8 million in the first nine months of 2019.

Included in cash from investing activities in the first nine months of 2020 is $55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction.

This was partially offset by $36.4 million of cash used for the acquisition of Insight in January 2020, net of the cash received and including working capital adjustments.

Included in cash used for investing activities in the first six months of 2019 is $50.8 million for the acquisition of NextGen in January 2019, net of the cash received, and $35.6 million for the acquisition of GTA in January 2019, net of the cash received.

Included in cash used for investing activities in the first nine months of 2019 is $50.8 million for the acquisition of NextGen in January 2019, net of the cash received, and $35.6 million for the acquisition of GTA in January 2019, net of the cash received.

These amounts were partially offset by proceeds of $13.8 million primarily from the sale of unused land.

Financing Activities

In the first six months of 2020, we used $6.2 million of cash for financing activities, as compared to generating $8.6 million in the first six months of 2019.

In the first nine months of 2020, we used $6.8 million of cash for financing activities, as compared to generating $3.6 million in the first nine months of 2019.

The change in cash used in financing activities was primarily related to the year-over-year change in short-term borrowing activities.

Debt totaled $0.3 million at the end of the second quarter of 2020 and was $1.9 million at year-end 2019.

Debt totaled $0.5 million at the end of the third quarter of 2020 and was $1.9 million at year-end 2019.

Debt-to-total capital (total debt reported in the consolidated balance sheet divided by total debt plus stockholders’ equity) is a common ratio to measure the relative capital structure and leverage of the Company.

Our ratio of debt-to-total capital was 0.0% at the end of the second quarter of 2020 and 0.1% at year-end 2019.

The change in short-term borrowings in the first six months of 2020 was primarily due to payments on local lines of credit.

The change in short-term borrowings in the first six months of 2019 was primarily due to borrowings on our securitization facility.

We made dividend payments of $3.0 million in the first six months of 2020 and $5.9 million in the first six months of 2019.

Our ratio of debt-to-total capital was 0.0% at the end of the third quarter of 2020 and 0.1% at year-end 2019.

The change in short-term borrowings in the first nine months of 2020 was primarily due to payments on local lines of credit.

The change in short-term borrowings in the first nine months of 2019 was primarily due to borrowings on our securitization facility.

We made dividend payments of $3.0 million in the first nine months of 2020 and $8.9 million in the first nine months of 2019.

New Accounting Pronouncements

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Contractual Obligations and Commercial Commitments

There were no significant changes to our contractual obligations and commercial commitments from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Form 10-K, other than the sale and leaseback of the main headquarters building.

There were no significant changes to our contractual obligations and commercial commitments from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Form 10-K, with the exception of the sale and leaseback of the main headquarters building and the indemnification agreement related to the sale of our Brazil operations.

Details of the lease payments by year are disclosed in the Leases footnote in the Notes to Consolidated Financial Statements in this Form 10-Q filing.

Details of the indemnification agreement are disclosed in the Acquisitions and Disposition footnote and the Fair Value Measurements footnote in the Notes to the Consolidated Financial Statements in this Form 10-Q filing.

We have no material unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.

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Additional funding sources could include asset-based lending or additional bank facilities.

During 2020, cash generated from operations will be supplemented by recent enactment of laws providing COVID-19 relief, most notably the Coronavirus Aid, Relief, and Economic Security Act which allows for the deferral of payments of the Company's U.S.

During 2020, cash generated from operations will continue to be supplemented by recent enactment of laws providing COVID-19 relief, most notably the Coronavirus Aid, Relief, and Economic Security Act which allows for the deferral of payments of the Company's U.S.

social security taxes.

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As part of those reviews, we may identify cash that we feel should be repatriated to optimize the Company’s overall capital structure.

As of the 2020 second quarter end, these reviews have not resulted in any specific plans to repatriate a majority of our international cash balances.

We expect much of our international cash will be needed to fund working capital growth in our local operations as working capital needs, primarily Accounts Receivable, increase during periods of growth.

The majority of our international cash is concentrated in a cash pooling arrangement (the “Cash Pool”) and is available to fund general corporate needs internationally.

As of the 2020 third quarter end, these reviews have not resulted in any specific plans to repatriate a majority of our international cash balances.

We expect much of our international cash will be needed to fund working capital growth in our local operations as working capital needs, primarily trade accounts receivable, increase during periods of growth.

A cash pooling arrangement (the “Cash Pool”) is available to fund general corporate needs internationally.

The Cash Pool is a set of cash accounts maintained with a single bank that must, as a whole, maintain at least a zero balance;

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This allows countries with excess cash to invest and countries with cash needs to utilize the excess cash.

As of the end of the second quarter of 2020, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $96.8 million of available capacity on our $150.0 million securitization facility.

As of the end of the third quarter of 2020, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $96.8 million of available capacity on our $150.0 million securitization facility.

The securitization facility carried no short-term borrowings and $53.2 million of standby letters of credit related to workers’ compensation.

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While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds.

As of the end of the second quarter of 2020, we met the debt covenants related to our revolving credit facility and securitization facility.

As of the end of the third quarter of 2020, we met the debt covenants related to our revolving credit facility and securitization facility.

We have historically managed our cash and debt very closely to optimize our capital structure.

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Conversely, when working capital needs grow, we tend to use corporate cash and cash available in the Cash Pool first, and then access our borrowing facilities.

Given the cash generated from operating activities through the second quarter of 2020 and the level of uncertainty surrounding the duration of the COVID-19 crisis, we anticipate maintaining a higher level of cash than our prior practice.

As cash flows generated from operations through the third quarter of 2020 have been higher than our historical results and uncertainty remains surrounding the duration of the

COVID-19 crisis, we anticipate maintaining a higher level of cash than our prior practice.

We do believe that we may begin to utilize a portion of our existing cash balances to fund working capital requirements over the next several quarters if demand for our services continues to increase.

We monitor the credit ratings of our major banking partners on a regular basis and have regular discussions with them.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis