Investment in TS Kelly Asia Pacific

12 Months Ended

Jan. 01, 2017

Equity Method Investments and Joint Ventures [Abstract]

Investment in TS Kelly Asia Pacific

Investment in TS Kelly Asia Pacific

On July 4, 2016, the Company and Temp Holdings, a leading integrated human resources company in Japan, completed a transaction to form a new joint venture, TS Kelly Asia Pacific. The Company transferred its Asia Pacific staffing operations and certain APAC OCG businesses in exchange for a 49% ownership interest in TS Kelly Asia Pacific and $36.5 million in cash received at closing. The Company subsequently deconsolidated the contributed APAC staffing and OCG operations and recorded a $104.2 million investment in equity affiliate on the consolidated balance sheet, which represented the fair value of the Company’s ownership interest in TS Kelly Asia Pacific as of July 4, 2016. As part of this transaction, in the third quarter of 2016, the Company deconsolidated the goodwill related to the contributed entities in our APAC PT and OCG segments amounting to$1.9 million.In the fourth quarter of 2016, the Company received a $4.5 million post-close cash true-up adjustment from Temp Holdings.

In the third quarter of 2016, the Company recorded a pretax gain of $87.2 million on the investment in TS Kelly Asia Pacificin the consolidated statement of earnings, which represents the fair value of the Company’s retained investment in TS Kelly Asia Pacific in addition to the cash received less the carrying value of net assets transferred to the joint venture. Income taxes of$23.5 millionon this gain result primarily from recording deferred income taxes on outside basis differences.The fair value of the Company’s contributed operations was determined using both an income-based and market-based approach. The income approach utilized a discounted cash flow analysis which included significant assumptions about the timing of future cash flows, growth rates and discount rates commensurate with the underlying risks of the investment. The market approach entailed deriving market multiples from publicly traded companies with similar financial and operating characteristics to TS Kelly Asia Pacific and corroborated the results of the discounted cash flow method.

The operating results of the Company’s interest in TS Kelly Asia Pacific are accounted for on a one-quarter lag under the equity method and are included in equity in net earnings (loss) of affiliate in the consolidated statement of earnings, which amounted to $1.1 million in 2016. In 2015 and 2014, equity in net earnings (loss) of affiliate represented the operating results of the Company’s interest in TS Kelly Workforce Solutions.

The investment in equity affiliate on the Company’s consolidated balance sheet, which includes both the investment in TS Kelly Asia Pacific and TS Kelly Workforce Solutions, totaled $114.8 million as of year-end 2016. The investment in TS Kelly Workforce Solutions totaled $9.4 million as of year-end 2015. The Company’s interest in TS Kelly Workforce Solutions is expected to be transferred to TS Kelly Asia Pacific in the first quarter of 2017 under the terms of the transaction agreement.

In 2015, we made cash contributions to TS Kelly Workforce Solutions totaling $0.5 million. In 2014, we made net cash contributions and loans to TS Kelly Workforce Solutions totaling $5.7 million, which includes $4.8 million for the acquisition of a China-based staffing company. The amount due to TS Kelly Asia Pacific, a related party, was$1.1 million as of year-end 2016. The amount included in trade accounts payable for staffing services provided by TS Kelly Asia Pacific as a supplier to CWO programs was$3.1 millionas of year-end 2016. The amount due to or due from TS Kelly Workforce Solutions was immaterial as of year-end 2015.