Document

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



	13 Weeks Ended						39 Weeks Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Revenue from services	$	1,328.8		$	1,247.8		$	3,952.1		$	3,972.4

Cost of services	1,098.1			1,032.7			3,261.0			3,294.1

Gross profit	230.7			215.1			691.1			678.3

Selling, general and administrative expenses	212.5			196.3			636.2			634.9

Earnings from operations	18.2			18.8			54.9			43.4

Gain on investment in TS Kelly Asia Pacific	—			87.2			—			87.2

Other expense, net	(0.4		)	(0.4		)	(2.5		)	(1.3		)

Earnings before taxes and equity in net earnings (loss) of affiliate	17.8			105.6			52.4			129.3

Income tax (benefit) expense	(4.1		)	24.7			0.1			28.2

Net earnings before equity in net earnings (loss) of affiliate	21.9			80.9			52.3			101.1

Equity in net earnings (loss) of affiliate	1.1			—			1.6			(0.1		)

Net earnings	$	23.0		$	80.9		$	53.9		$	101.0

Basic earnings per share	$	0.59		$	2.08		$	1.38		$	2.59
Diluted earnings per share	$	0.58		$	2.06		$	1.37		$	2.58

Dividends per share	$	0.075		$	0.075		$	0.225		$	0.20

Average shares outstanding (millions):
Basic	38.3			38.1			38.3			38.0
Diluted	38.8			38.4			38.8			38.3



	13 Weeks Ended				39 Weeks Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Net earnings	$	23.0	$	80.9	$	53.9	$	101.0

Other comprehensive income, net of tax:
Foreign currency translation adjustments, net of tax expense of $0.2, tax benefit of $1.8, tax expense of $0.3 and tax benefit of $1.7, respectively	3.4		1.8		16.0		13.1
Less: Reclassification adjustments included in net earnings	—		0.2		—		(0.1		)
Foreign currency translation adjustments	3.4		2.0		16.0		13.0

Unrealized gains on investment, net of tax expense of $12.9, $0.6, $21.9 and $4.3, respectively	28.8		1.3		48.6		8.8

Other comprehensive income	32.2		3.3		64.6		21.8

Comprehensive income	$	55.2	$	84.2	$	118.5	$	122.8



ASSETS	October 1, 2017			January 1, 2017
CURRENT ASSETS:
Cash and equivalents	$	22.2		$	29.6
Trade accounts receivable, less allowances of $13.1 and $12.5, respectively	1,271.7			1,138.3
Prepaid expenses and other current assets	70.0			46.7
Total current assets	1,363.9			1,214.6

NONCURRENT ASSETS:
Property and equipment:
Property and equipment	285.0			270.0
Accumulated depreciation	(203.6		)	(189.2		)
Net property and equipment	81.4			80.8
Deferred taxes	192.0			180.1
Goodwill	107.1			88.4
Investment in equity affiliate	116.4			114.8
Other assets	475.9			349.4
Total noncurrent assets	972.8			813.5

TOTAL ASSETS	$	2,336.7		$	2,028.1



LIABILITIES AND STOCKHOLDERS’ EQUITY	October 1, 2017			January 1, 2017
CURRENT LIABILITIES:
Short-term borrowings	$	23.9		$	—
Accounts payable and accrued liabilities	496.1			455.1
Accrued payroll and related taxes	312.6			241.5
Accrued insurance	25.6			23.4
Income and other taxes	60.0			51.1
Total current liabilities	918.2			771.1

NONCURRENT LIABILITIES:
Accrued insurance	49.7			45.5
Accrued retirement benefits	175.0			157.4
Other long-term liabilities	66.8			42.1
Total noncurrent liabilities	291.5			245.0

Commitments and contingencies (see contingencies footnote)

STOCKHOLDERS’ EQUITY:
Capital stock, $1.00 par value
Class A common stock, shares issued 36.6 at 2017 and 2016	36.6			36.6
Class B common stock, shares issued 3.5 at 2017 and 2016	3.5			3.5
Treasury stock, at cost
Class A common stock, 1.7 shares at 2017 and 1.9 shares at 2016	(34.6		)	(38.4		)
Class B common stock	(0.6		)	(0.6		)
Paid-in capital	30.0			28.6
Earnings invested in the business	968.8			923.6
Accumulated other comprehensive income	123.3			58.7
Total stockholders’ equity	1,127.0			1,012.0

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,336.7		$	2,028.1



	13 Weeks Ended						39 Weeks Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Capital Stock
Class A common stock
Balance at beginning of period	$	36.6		$	36.6		$	36.6		$	36.6
Conversions from Class B	—			—			—			—
Balance at end of period	36.6			36.6			36.6			36.6

Class B common stock
Balance at beginning of period	3.5			3.5			3.5			3.5
Conversions to Class A	—			—			—			—
Balance at end of period	3.5			3.5			3.5			3.5

Treasury Stock
Class A common stock
Balance at beginning of period	(37.0		)	(41.5		)	(38.4		)	(43.7		)
Issuance of restricted stock and other	2.4			3.0			3.8			5.2
Balance at end of period	(34.6		)	(38.5		)	(34.6		)	(38.5		)

Class B common stock
Balance at beginning of period	(0.6		)	(0.6		)	(0.6		)	(0.6		)
Issuance of restricted stock and other	—			—			—			—
Balance at end of period	(0.6		)	(0.6		)	(0.6		)	(0.6		)

Paid-in Capital
Balance at beginning of period	31.1			28.1			28.6			25.4
Issuance of restricted stock and other	(1.1		)	(1.9		)	1.4			0.8
Balance at end of period	30.0			26.2			30.0			26.2

Earnings Invested in the Business
Balance at beginning of period	948.7			828.8			923.6			813.5
Net earnings	23.0			80.9			53.9			101.0
Dividends	(2.9		)	(2.9		)	(8.7		)	(7.7		)
Balance at end of period	968.8			906.8			968.8			906.8

Accumulated Other Comprehensive Income
Balance at beginning of period	91.1			79.2			58.7			60.7
Other comprehensive income, net of tax	32.2			3.3			64.6			21.8
Balance at end of period	123.3			82.5			123.3			82.5

Stockholders’ Equity at end of period	$	1,127.0		$	1,016.5		$	1,127.0		$	1,016.5



	39 Weeks Ended
	October 1, 2017			October 2, 2016
Cash flows from operating activities:
Net earnings	$	53.9		$	101.0
Noncash adjustments:
Depreciation and amortization	16.5			16.0
Provision for bad debts	3.6			6.1
Stock-based compensation	6.8			7.6
Gain on investment in TS Kelly Asia Pacific equity affiliate	—			(87.2		)
Other, net	(2.3		)	(2.2		)
Changes in operating assets and liabilities, net of acquisition	(45.6		)	(13.1		)

Net cash from operating activities	32.9			28.2

Cash flows from investing activities:
Capital expenditures	(14.7		)	(7.8		)
Acquisition of company, net of cash received	(37.2		)	—
Net cash proceeds from investment in TS Kelly Asia Pacific equity affiliate	—			18.8
Proceeds from repayment of loan to TS Kelly equity affiliate	0.6			—
Other investing activities	—			(0.4		)

Net cash (used in) from investing activities	(51.3		)	10.6

Cash flows from financing activities:
Net change in short-term borrowings	23.9			(47.8		)
Dividend payments	(8.7		)	(7.7		)
Payments of tax withholding for restricted shares	(1.7		)	(2.1		)
Other financing activities	(0.1		)	0.4

Net cash from (used in) financing activities	13.4			(57.2		)

Effect of exchange rates on cash and equivalents	(2.4		)	3.8

Net change in cash and equivalents	(7.4		)	(14.6		)
Cash and equivalents at beginning of period	29.6			42.2


Cash and equivalents at end of period	$	22.2		$	27.6

The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the “Company,” “Kelly,” “we” or “us”) have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended January 1, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2017 (the 2016 consolidated financial statements). The Company’s third fiscal quarter ended on October 1, 2017 (2017) and October 2, 2016 (2016), each of which contained 13 weeks. The corresponding September year to date periods for 2017 and 2016 each contained 39 weeks.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. SG&A expenses for the 13 and 39 weeks ended October 1, 2017 include a $2.8 million and $1.4 million, respectively, benefit resulting from an out-of-period correction of expenses that were overstated in prior periods. The out-of-period errors and adjustments did not have a material effect on any of the periods impacted.

On September 5, 2017, Kelly Services USA, LLC, a wholly owned subsidiary of the Company, acquired 100% of the issued and outstanding shares of Teachers On Call, Inc. (“TOC”), an educational staffing firm in the U.S. for a purchase price of $41.0 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by TOC at the closing date less an estimated working capital adjustment resulting in the Company paying cash of $39.0 million at closing. The final purchase price is subject to a final working capital adjustment calculation, which is not expected to be material. The purchase price allocation for this acquisition is preliminary and could change.

Included in the assets purchased was approximately $18.3 million of intangible assets, made up of $12.0 million in customer relationships, $4.8 million associated with TOC’s trademark and $1.5 million for a candidate database. The customer relationships will be amortized over 10 years with no residual value and the database will be amortized over four years with no residual value. The trademark has an indefinite life. Goodwill generated from this acquisition is primarily attributable to expected synergies from combining operations and expanding market potential, and is assigned to the Americas Staffing reporting unit (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is

The Company has a 49% ownership interest in TS Kelly Asia Pacific. 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 reported in the equity in net earnings (loss) of affiliate in the consolidated statement of earnings. These operating results include the operating results of the Company’s interest in TS Kelly Workforce Solutions, a previous joint venture in which the Company held a 49% interest, which was transferred to TS Kelly Asia Pacific during the first quarter of 2017. In the third quarter of 2016, the Company recorded a pretax gain of $87.2 million on the investment in TS Kelly Asia Pacific in the consolidated statement of earnings, which represented 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.

The investment in equity affiliate on the Company’s consolidated balance sheet totaled $116.4 million as of third quarter-end 2017 and $114.8 million as of year-end 2016. The net amount due to TS Kelly Asia Pacific, a related party, was $3.8 million as of the third quarter-end 2017 and $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 $2.4 million as of third quarter-end 2017 and $3.1 million as of year-end 2016.

Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs.

Money market funds as of third quarter-end 2017 and 2016 represent investments in money market accounts, all of which are restricted as to use and included in other assets on the consolidated balance sheet. The valuations of money market funds were based on quoted market prices of those accounts as of the respective period end.

Available-for-sale investment represents the Company’s investment in Persol Holdings (formerly Temp Holdings), the Company’s joint venture partner in TS Kelly Asia Pacific, and is included in other assets on the consolidated balance sheet. The valuation is based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end. The unrealized gain, net of tax, of $28.8 million for the third quarter of 2017 and $1.3 million for the third quarter of 2016 was recorded in other comprehensive income, and in accumulated other comprehensive income, a component of stockholders’ equity. The unrealized gain, net of tax, of $48.6 million for September year to date 2017 and $8.8 million for September year to date 2016 was recorded in other comprehensive income, as well as in accumulated other comprehensive income. The cost of this yen-denominated investment, which fluctuates based on foreign exchange rates, was $18.4 million as of the third quarter-end 2017 and $17.7 million at year-end 2016.

The realignment of the Company’s operations into three reportable segments effective with the first quarter of 2017 (see Goodwill and Segment Disclosures footnotes) resulted in a change in our reporting units. As a result, we completed a step one quantitative test for our new reporting units with goodwill. We determined the estimated fair value of each reporting unit tested exceeded its related carrying value. As a result of these quantitative assessments, we determined it was more likely than not that the fair value of each of the reporting units was in excess of its carrying value.

Restructuring costs incurred in the first quarter of 2017 totaled $2.4 million. Global Talent Solutions incurred $2.0 million and Americas Staffing incurred $0.4 million. All costs, which are primarily severance costs, were recorded entirely in selling, general and administrative (“SG&A”) expenses in the consolidated statement of earnings.

A summary of the global restructuring balance sheet accrual, primarily included in accrued payroll and related taxes, is detailed below (in millions of dollars).



Balance as of year-end 2016	$	0.5
Additions charged to Global Talent Solutions	2.0
Additions charged to Americas Staffing	0.4
Reductions for cash payments related to all restructuring activities	(0.7		)
Balance as of first quarter-end 2017	2.2
Reductions for cash payments related to all restructuring activities	(1.3		)
Balance as of second quarter-end 2017	0.9
Reductions for cash payments related to all restructuring activities	(0.4		)
Balance as of third quarter-end 2017	$	0.5

As discussed in the Segment Disclosures footnote, during the first quarter of 2017 the Company’s chief operating decision maker (“CODM”) changed the way he regularly reviews information for purposes of allocating resources and assessing performance, which resulted in a change in our operating segments and reporting units. We allocated goodwill to our new reporting units using a relative fair value approach. In addition, as discussed in the Fair Value Measurements footnote, we completed an assessment of any potential goodwill impairment for all reporting units with goodwill and determined that no impairment existed.



	As of Year-End 2016												As of Third Quarter-End 2017
	Goodwill, Gross		Accumulated Impairment Losses			Goodwill, Net		Allocation of Goodwill			Additions to Goodwill		Goodwill
	(In millions of dollars)

Americas Commercial	$	40.0	$	(16.4	)	$	23.6	$	(23.6	)	$	—	$	—
Americas PT	37.9		—			37.9		(37.9		)	—		—
EMEA Commercial	50.4		(50.4		)	—		—			—		—
EMEA PT	22.0		(22.0		)	—		—			—		—
APAC Commercial	12.1		(12.1		)	—		—			—		—
APAC PT	—		—			—		—			—		—
OCG	26.9		—			26.9		(26.9		)	—		—

Americas Staffing	—		—			—		25.9			18.7		44.6
Global Talent Solutions	—		—			—		62.5			—		62.5
International Staffing	—		—			—		—			—		—

	$	189.3	$	(100.9	)	$	88.4	$	—		$	18.7	$	107.1

The changes in accumulated other comprehensive income by component, net of tax, for the third quarter and September year to date 2017 and 2016 are included in the tables below. Amounts in parentheses indicate debits. Reclassification adjustments out of accumulated other comprehensive income, as shown in the tables below, were recorded in the other expense, net line item in the consolidated statement of earnings.



	Third Quarter 2017
	Foreign Currency Translation Adjustments			Unrealized Gains and Losses on Investment		Pension Liability Adjustments			Total
	(In millions of dollars)
Beginning balance	$	(10.7	)	$	103.6	$	(1.8	)	$	91.1
Other comprehensive income before reclassifications	3.4			28.8		—			32.2
Amounts reclassified from accumulated other comprehensive income	—			—		—			—
Net current-period other comprehensive income	3.4			28.8		—			32.2

Ending balance	$	(7.3	)	$	132.4	$	(1.8	)	$	123.3



	September Year to Date 2017
	Foreign Currency Translation Adjustments			Unrealized Gains and Losses on Investment		Pension Liability Adjustments			Total
	(In millions of dollars)
Beginning balance	$	(23.3	)	$	83.8	$	(1.8	)	$	58.7
Other comprehensive income before reclassifications	16.0			48.6		—			64.6
Amounts reclassified from accumulated other comprehensive income	—			—		—			—
Net current-period other comprehensive income	16.0			48.6		—			64.6

Ending balance	$	(7.3	)	$	132.4	$	(1.8	)	$	123.3



	Third Quarter 2016
	Foreign Currency Translation Adjustments			Unrealized Gains and Losses on Investment		Pension Liability Adjustments			Total
	(In millions of dollars)
Beginning balance	$	(11.6	)	$	92.4	$	(1.6	)	$	79.2
Other comprehensive income before reclassifications	1.8			1.3		—			3.1
Amounts reclassified from accumulated other comprehensive income	0.2			—		—			0.2
Net current-period other comprehensive income	2.0			1.3		—			3.3

Ending balance	$	(9.6	)	$	93.7	$	(1.6	)	$	82.5



	September Year to Date 2016
	Foreign Currency Translation Adjustments			Unrealized Gains and Losses on Investment		Pension Liability Adjustments			Total
	(In millions of dollars)
Beginning balance	$	(22.6	)	$	84.9	$	(1.6	)	$	60.7
Other comprehensive income before reclassifications	13.1			8.8		—			21.9
Amounts reclassified from accumulated other comprehensive income	(0.1		)	—		—			(0.1		)
Net current-period other comprehensive income	13.0			8.8		—			21.8

Ending balance	$	(9.6	)	$	93.7	$	(1.6	)	$	82.5

The reconciliation of basic and diluted earnings per share on common stock for the third quarter and September year to date 2017 and 2016 follows (in millions of dollars except per share data):



	Third Quarter						September Year to Date
	2017			2016			2017			2016
Net earnings	$	23.0		$	80.9		$	53.9		$	101.0
Less: earnings allocated to participating securities	(0.3		)	(1.8		)	(0.9		)	(2.3		)
Net earnings available to common shareholders	$	22.7		$	79.1		$	53.0		$	98.7

Average shares outstanding (millions):
Basic	38.3			38.1			38.3			38.0
Dilutive share awards	0.5			0.3			0.5			0.3
Diluted	38.8			38.4			38.8			38.3

Basic earnings per share	$	0.59		$	2.08		$	1.38		$	2.59
Diluted earnings per share	$	0.58		$	2.06		$	1.37		$	2.58

Potentially dilutive shares outstanding are primarily related to performance shares for the third quarter and September year to date 2017 and 2016. Stock options excluded from the computation of diluted earnings per share due to their anti-dilutive effect for September year to date 2016 were not significant, and all remaining stock options expired in the second quarter 2016.

For the third quarter 2017 and 2016, respectively, the Company recognized stock compensation expense of $2.6 million and $2.4 million, and related tax benefit of $1.5 million and $0.9 million. For September year to date 2017 and 2016, respectively, the Company recognized stock compensation expense of $6.8 million and $7.6 million, and related tax benefit of $3.3 million and $2.9 million.

During 2017, the Company granted performance awards associated with the Company’s Class A stock to certain senior officers. The payment of performance shares, which will be satisfied with the issuance of shares out of treasury stock, is contingent upon the achievement of specific performance goals over a stated period of time. The maximum number of performance shares that may be earned is 200% of the target shares originally granted. These awards have a three-year performance period and will cliff vest after the approval by the Compensation Committee, if not forfeited by the recipient. No dividends are paid on these performance shares.

Financial measure performance goals may be earned upon the achievement of two financial goals and had a weighted average grant date fair value of $21.07. For each of the two financial measures, there are annual goals set in February of each year, with the total award payout based on a cumulative average of the 2017, 2018 and 2019 goals. Accordingly, the Company remeasures the fair value of the 2017 and 2016 financial measure performance shares each reporting period until the third year goals are set, after which the fair value will be fixed for the remaining performance period. As of third quarter-end 2017, for the performance shares granted in 2017 and 2016, the current fair value for the financial measure performance shares was $24.22 and $24.29, respectively.

Total shareholder return (“TSR”) performance shares may be earned based on the Company’s TSR relative to the S&P SmallCap 600 Index. The TSR performance shares have an estimated fair value of $20.16, which was computed using a Monte Carlo simulation model incorporating assumptions for inputs of expected stock price volatility, dividend yield and risk-free interest rate.



	Financial Measure Performance Shares				TSR Performance Shares
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Nonvested at year-end 2016	499		$	19.17	208		$	17.49
Granted	286		21.32		101		20.16
Vested	—		—		—		—
Forfeited	(182	)	20.32		(65	)	18.99
Nonvested at third quarter-end 2017	603		$	21.19	244		$	18.20

A summary of the status of nonvested restricted stock as of third quarter-end 2017 and year-to-date changes, is presented as follows below (in thousands of shares except per share data). Forfeitures primarily relate to the retirement of the Company’s former President and Chief Executive Officer during the second quarter of 2017.

Income tax benefit was $4.1 million (a (22.9)% effective tax rate) for the third quarter of 2017 and income tax expense was $24.7 million (a 23.4% effective tax rate) for the third quarter of 2016. Income tax expense was $0.1 million (a 0.2% effective tax rate) for September year to date 2017 and $28.2 million (a 21.8% effective tax rate) for September year to date 2016. 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 non-taxable 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, or changes in judgment regarding the realizability of deferred tax assets. Income tax expense in the third quarter of 2017 included a $5.1 million benefit from the release of a valuation allowance in Germany, while the third quarter of 2016 included a $23.5 million charge from the gain on the investment in TS Kelly Asia Pacific. For September year to date 2017, income tax expense also benefitted from the release of a valuation allowance in Norway in the second quarter.

In the ordinary course of business the Company is the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damages may not be estimable. As previously disclosed, the Company entered into a settlement with plaintiffs in Hillson et. al. v Kelly Services in order to avoid the cost of continued litigation. On August 17, 2017, the District Court approved the settlement and entered a Final Order of Judgment and Dismissal. The Company made the final payment, which was accrued in 2015, on September 19, 2017.

In addition, the Company is continuously engaged in litigation arising in the ordinary course of its business, such as matters alleging employment discrimination, alleging wage and hour violations, or enforcing the restrictive covenants in the Company’s employment agreements. There are matters that are currently stayed pending a decision from the Supreme Court of the United States on whether the Company’s arbitration provision is enforceable. We record accruals for loss contingencies when we believe it is probable that liability has been incurred and the amount of loss can be reasonably estimated. Such accruals are recorded in accounts payable and accrued liabilities on the consolidated balance sheet. While the ultimate outcome of these matters cannot be predicted with certainty, we believe that the resolution of any such proceedings will not have a material adverse effect on our financial condition, results of operations or cash flows.

The Company’s segments are based on the organizational structure for which financial results are regularly evaluated by the CODM to determine resource allocation and assess performance. During the first quarter of 2017, the Company’s CODM, who was previously the Company’s Chief Executive Officer (“CEO”) and Chief Operating Officer, was determined to be the Company’s CEO. The Company regularly assesses its organizational structure, product/service offerings and information evaluated by the CODM to determine whether any changes have occurred that would impact its segment reporting structure. During the first quarter of 2017, the Company realigned its business into three reportable segments, which reflect how the Company delivers services to customers and how its business is organized internally. These segments are: (1) Americas Staffing, (2) Global Talent Solutions (“GTS”) and (3) International Staffing. Accordingly, prior year’s segment information was recast to conform to the current presentation. Intersegment revenue represents revenue earned between the reportable segments and is eliminated from total segment revenue from services.

Americas Staffing represents the Company’s branch-delivered staffing business in the U.S., Canada, Puerto Rico, Mexico and Brazil. International Staffing represents the EMEA region branch-delivered staffing business, as well as the Company’s APAC region staffing business prior to the transaction to form the TS Kelly Asia Pacific joint venture in July 2016. Americas Staffing and International Staffing both deliver temporary staffing, as well as direct-hire placement services, in office-clerical, educational, light industrial and professional and technical specialties within their geographic regions.

GTS combines the delivery structure of the Company’s outsourcing and consulting group and centrally delivered staffing business. It reflects the trend of customers towards the adoption of holistic talent supply chain solutions which combine contingent labor, full-time hiring and outsourced services. GTS includes centrally delivered staffing, recruitment process outsourcing (“RPO”), contingent workforce outsourcing (“CWO”), business process outsourcing (“BPO”), payroll process outsourcing (“PPO”), executive placement, career transition/outplacement services and advisory services.

Corporate expenses that directly support the operating units have been allocated to Americas Staffing, GTS and International Staffing based on work effort, volume or, in the absence of a readily available measurement process, proportionately based on gross profit realized. In connection with the realignment of the segment structure, we reassessed the allocation of corporate

The following tables present information about the reported revenue from services and gross profit of the Company by segment, along with a reconciliation to consolidated earnings before taxes and equity in net earnings (loss) of affiliate, for the third quarter and September year to date 2017 and 2016. Asset information by reportable segment is not presented, since the Company does not produce such information internally nor does it use such data to manage its business.



	Third Quarter						September Year to Date
	2017			2016			2017			2016
	(In millions of dollars)
Revenue from Services:

Americas Staffing	$	554.8		$	518.2		$	1,703.5		$	1,614.7
Global Talent Solutions	503.0			495.0			1,495.8			1,486.5
International Staffing	275.6			239.3			766.0			885.6

Less: Intersegment revenue	(4.6		)	(4.7		)	(13.2		)	(14.4		)

Consolidated Total	$	1,328.8		$	1,247.8		$	3,952.1		$	3,972.4



	Third Quarter						September Year to Date
	2017			2016			2017			2016
	(In millions of dollars)
Earnings from Operations:

Americas Staffing gross profit	$	98.8		$	95.0		$	307.9		$	292.9
Americas Staffing SG&A expenses	(85.5		)	(80.7		)	(253.0		)	(245.9		)
Americas Staffing Earnings from Operations	13.3			14.3			54.9			47.0

Global Talent Solutions gross profit	93.0			86.2			272.2			257.2
Global Talent Solutions SG&A expenses	(72.2		)	(70.2		)	(220.8		)	(213.6		)
Global Talent Solutions Earnings from Operations	20.8			16.0			51.4			43.6

International Staffing gross profit	39.5			35.0			112.7			131.4
International Staffing SG&A expenses	(32.3		)	(30.5		)	(96.2		)	(116.3		)
International Staffing Earnings from Operations	7.2			4.5			16.5			15.1

Less: Intersegment gross profit	(0.6		)	(1.1		)	(1.7		)	(3.2		)
Less: Intersegment SG&A expenses	0.6			1.1			1.7			3.2
Net Intersegment Activity	—			—			—			—

Corporate	(23.1		)	(16.0		)	(67.9		)	(62.3		)
Consolidated Total	18.2			18.8			54.9			43.4
Gain on investment in TS Kelly Asia Pacific	—			87.2			—			87.2
Other Expense, Net	(0.4		)	(0.4		)	(2.5		)	(1.3		)

Earnings before taxes and equity in net earnings (loss) of affiliate	$	17.8		$	105.6		$	52.4		$	129.3

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09 clarifying when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. It does not change the accounting for modifications. The ASU is effective prospectively for reporting periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. We do not expect the adoption of this ASU will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 simplifying the accounting for goodwill impairment for all entities. The new guidance eliminates the requirement to calculate the implied fair value of goodwill (Step 2 of the current two-step goodwill impairment test under ASC 350). Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (Step 1 of the current two-step goodwill impairment test). The ASU is effective prospectively for reporting periods beginning after December 15, 2019, with early adoption permitted for annual and interim goodwill impairment testing dates after January 1, 2017. We are currently evaluating the impact of the new guidance on our goodwill impairment testing process and consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18 amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The ASU is effective retrospectively for reporting periods beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the impact of the new guidance and we do not expect it to have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15 clarifying how entities should classify certain cash receipts and payments on the statement of cash flows. The new guidance addresses classification of cash flows related to the following transactions: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies; 6) distributions received from equity method investees; and 7) beneficial interests in securitization transaction. ASU 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and requires retrospective application. Early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13 amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permitted for annual reporting periods beginning after December 15, 2018. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. This ASU applies to trade accounts receivable and may have an impact on our calculation of the allowance for uncollectible accounts receivable.

In March 2016, the FASB issued ASU 2016-09 amending several aspects of share-based payment accounting. This guidance requires all excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled, with prospective application required. The guidance also changes the classification of such tax benefits or tax deficiencies on the statement of cash flows from a financing activity to an operating activity, with retrospective or prospective application allowed. Additionally, the guidance requires the classification of employee taxes paid when an employer withholds shares for tax-withholding purposes as a financing activity on the statement of cash flows, with retrospective application required. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted. We adopted this guidance effective January 2, 2017, and the adoption did not have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 amending the existing accounting standards for lease accounting and requiring lessees to recognize lease assets and lease liabilities for all leases with lease terms of more than 12 months, including those classified as operating leases. Both the asset and liability will initially be measured at the present value of the future minimum lease payments, with the asset being subject to adjustments such as initial direct costs. Consistent with current U.S. GAAP, the presentation of expenses and cash flows will depend primarily on the classification of the lease as either a finance or an operating lease. The new standard also requires additional quantitative and qualitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases in order to provide additional information about the nature of an organization’s leasing activities. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and requires modified retrospective application. Early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. As our branch operations are primarily conducted in leased facilities, this ASU will likely have a material impact on our consolidated balance sheet, may have a material impact to our consolidated statement of earnings and will require us to disclose additional information about our leasing activities. We established a cross-functional implementation team to further assess the impact of the standard.

In January 2016, the FASB issued ASU 2016-01 amending the current guidance for how entities measure certain equity investments, the accounting for financial liabilities under the fair value option, and the presentation and disclosure requirements relating to financial instruments. The new guidance requires entities to use fair value measurement for equity investments in unconsolidated entities, excluding equity method investments, and to recognize the changes in fair value in net income at the end of each reporting period. Under the new standard, for any financial liabilities in which the fair value option has been elected, the changes in fair value due to instrument-specific credit risk must be recognized separately in other comprehensive income. Presentation and disclosure requirements under the new guidance require public business entities to use the exit price when measuring the fair value of financial instruments measured at amortized cost. In addition, financial assets and liabilities must now be presented separately in the notes to the financial statements and grouped by measurement category and form of financial asset. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017. Early adoption is only permitted for the financial liability provision. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. We expect to implement the standard with the modified retrospective method and the cumulative reclassification adjustment between other comprehensive income and retained earnings on the consolidated balance sheet is expected to be material. This standard will impact how we recognize changes in the fair value of our available-for-sale investment and could have a material impact on our consolidated financial statements.

In May 2014, the FASB issued new revenue recognition guidance under ASU 2014-09 that will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard focuses on creating a single source of revenue guidance for revenue arising from contracts with customers for all industries. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. In July 2015, the FASB deferred the effective date by one year (ASU 2015-14). This ASU will now be effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2017. Since the issuance of the original standard, the FASB has issued several other subsequent updates including the following: 1) clarification of the implementation guidance on principal versus agent considerations (ASU 2016-08); 2) further guidance on identifying performance obligations in a contract as well as clarifications on the licensing implementation guidance (ASU 2016-10); 3) rescission of several SEC Staff Announcements that are codified in Topic 605 (ASU 2016-11); 4) additional guidance and practical expedients in response to identified implementation issues (ASU 2016-12); and 5) technical corrections and improvements (ASU 2016-20). The new standard will be effective for us beginning January 1, 2018.

We established a cross-functional implementation team consisting of representatives from across our business segments and various departments. We utilized a bottom-up approach to analyze the impact of the standard on our various revenue streams by reviewing our current contracts with customers, accounting policies and business practices to identify potential differences that would result from applying the requirements of the new standard. In addition, we identified, and are in the process of implementing, appropriate changes to our business processes, systems and controls to support recognition and disclosure under the new standard.

We have been closely monitoring FASB activity related to the new standard to conclude on specific interpretive issues. During 2016 and 2017, we have made significant progress toward completing our evaluation of the potential impact that adopting the new standard will have on our consolidated financial statements. Based on our preliminary analysis, revenue from our temporary staffing contracts and substantially all of our other contracts with customers will continue to be recognized over time as services are rendered. The primary impact of adopting ASU 2014-09 is anticipated to be the deferral of contract costs. Additionally, we anticipate expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from our contracts with customers. We will continue to evaluate the impact of this guidance on our consolidated financial statements, disclosures and internal controls. Our preliminary assessments are subject to change. We expect to implement the standard with the modified retrospective approach beginning January 1, 2018, which recognizes the cumulative effect of application recognized on that date.

The staffing industry has changed dramatically over the last decade - transformed by globalization, competitive consolidation and secular shifts in labor supply and demand. Global employment trends are reshaping and redefining traditional employment models, sourcing strategies and human resource capability requirements. In response, the industry has accelerated its evolution from commercial into specialized staffing, and has expanded into outsourced solutions.

The broader workforce solutions industry has continued to evolve to meet businesses’ growing demand for total workforce or talent supply chain management (“TSCM”) solutions. As clients’ workforce solutions strategies move up the maturity model, the TSCM concept seeks to manage all categories of talent (temporary, project-based, outsourced and full-time) and thus represents significant market potential.

Strategic clients are increasingly looking for global, flexible and holistic talent solutions that encompass all worker categories, driving adoption of our TSCM approach covering temporary staffing, Contingent Workforce Outsourcing (“CWO”), Recruitment Process Outsourcing (“RPO”), Business Process Outsourcing (“BPO”), independent contractor management, strategic workforce planning and more. Across all regions, the structural shifts toward higher-skilled, project-based specialized talent continue to represent long-term opportunities for the industry.

Kelly Services is a global workforce solutions company, serving customers of all sizes in a variety of industries. In July 2016, we expanded our joint venture with Persol Holdings (formerly Temp Holdings) to form TS Kelly Asia Pacific (the “JV”) and moved our APAC staffing operations into the JV. In early 2017, we restructured components of our previous Americas Commercial, Americas PT and OCG segments under a single delivery organization, triggering a change in our operating structure. We now provide staffing through our branch networks in our Americas and International operations, with commercial and specialized professional/technical staffing businesses in each region. We also provide a suite of innovative talent fulfillment and outcome-based solutions through our Global Talent Solutions (“GTS”) segment, which delivers integrated talent management solutions to meet customer needs across the entire spectrum of talent categories. Using talent supply chain strategies, GTS helps customers plan for, manage and execute their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and quality talent at competitive rates with minimized risk.

We earn revenues from the hourly sales of services by our temporary employees to customers, as a result of recruiting permanent employees for our customers, and through our outsourcing activities. Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable. The nature of our business is such that trade accounts receivable are our most significant financial asset. Average days sales outstanding varies within and outside the U.S., but was 58 days on a global basis as of the 2017 third quarter end, 53 days as of the 2016 year end and 56 days as of the 2016 third quarter end. Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth.

Kelly remains focused on executing a well-formed strategy with increased speed and precision, making the necessary investments and adjustments to advance that strategy. We have set our sights on becoming an even more competitive, consultative and profitable company, and we are reshaping our business to make that vision a reality. We will measure our progress against both revenue and gross profit growth, and we expect to improve our conversion rate. The goals we have established are based on the current economic and business environment, and may change as conditions warrant. We expect:

Looking ahead, we are keeping a watchful eye on the global market while anticipating an increasing demand for skilled workers. We know that companies are relying more heavily on the use of flexible staffing models; there is growing acceptance of free agents and contractual employment by companies and talent alike; and companies are seeking more comprehensive workforce management solutions that lend themselves to Kelly’s wide range of human resources solutions. This shift in demand for contingent labor and strategic solutions plays to our strengths and experience.

The constant currency (“CC”) change amounts in the following tables refer to the year-over-year percentage changes resulting from translating 2017 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2016. We believe that CC measurements are a useful measure, indicating the actual trends of our operations without distortion due to currency fluctuations. We use CC results when analyzing the performance of our segments and measuring our results against those of our competitors. Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and SG&A within a single country and currency which, as a result, provides a natural hedge against currency risks in connection with their normal business operations.

CC measures are non-GAAP (Generally Accepted Accounting Principles) measures and are used to supplement measures in accordance with GAAP. Our non-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Staffing fee-based income, which is included in revenue from services in the following table, has a significant impact on gross profit rates. There are very low direct costs of services associated with staffing fee-based income. Therefore, increases or decreases in staffing fee-based income can have a disproportionate impact on gross profit rates.



	2017			2016			Change			CC Change
Revenue from services	$	1,328.8		$	1,247.8		6.5	%		5.3	%
Gross profit	230.7			215.1			7.3			6.2
Total SG&A expenses	212.5			196.3			8.3			7.3
Earnings from operations	18.2			18.8			(2.9	)

Staffing fee-based income (included in revenue from services)	14.2			13.2			6.9			4.1
Gross profit rate	17.4		%	17.2		%	0.2		pts.
Conversion rate	7.9			8.7			(0.8	)
Return on sales	1.4			1.5			(0.1	)

Total Company revenue from services for the third quarter of 2017 was up 6.5% (5.3% on a CC basis) in comparison to the prior year. During the third quarter of 2017, the U.S. dollar weakened against certain currencies, primarily the Euro and the Russian ruble, resulting in the CC impact of 120 basis points. The increase in revenue from last year was primarily due to strong growth in locally delivered staffing business in the Americas Staffing and International Staffing segments. Additionally, the acquisition of Teachers On Call (“TOC”) during the third quarter of 2017 added approximately 30 basis points to the total revenue growth rate.

Total SG&A expenses increased 8.3% on a reported basis. SG&A growth in the operating segments reflect investments to capitalize on market opportunities within the locally delivered staffing business in the U.S. and international markets, along with higher incentive-based compensation. These increases were partially offset by the effect of an out-of-period adjustment relating to overstated expense accruals. Corporate expenses increased year over year, reflecting a return to normalized levels of performance-based compensation expenses, along with increased legal expenses.

(Dollars in millions)



	2017			2016			Change			CC Change
Revenue from services	$	554.8		$	518.2		7.1	%			6.6	%
Gross profit	98.8			95.0			4.1			3.7
Total SG&A expenses	85.5			80.7			6.0			5.6
Earnings from operations	13.3			14.3			(6.7	)

Gross profit rate	17.8		%	18.3		%	(0.5	)	pts.
Conversion rate	13.5			15.0			(1.5	)
Return on sales	2.4			2.8			(0.4	)

The change in Americas Staffing revenue from services reflect the increase in average bill rates. Hours volume was flat in comparison to the prior year. The increase in average bill rates was the result of wage increases, which are passed through to customers. Americas Staffing represented 42% of total Company revenue in the third quarter of 2017 and 2016.

(Dollars in millions)



	2017			2016			Change			CC Change
Revenue from services	$	503.0		$	495.0		1.6	%		1.3	%
Gross profit	93.0			86.2			7.9			7.6
Total SG&A expenses	72.2			70.2			2.8			2.5
Earnings from operations	20.8			16.0			30.3

Gross profit rate	18.5		%	17.4		%	1.1		pts.
Conversion rate	22.4			18.5			3.9
Return on sales	4.1			3.2			0.9

GTS revenue represented 38% of total Company revenue in the third quarter of 2017 and 40% in the third quarter of 2016. Revenue from services was up 1.6% compared to last year. Revenue increases in KellyConnect, BPO and CWO practices were partially offset by declines in our centrally delivered staffing business and payroll business.

Total SG&A expenses increased 2.8% from the prior year. The increase is primarily due to increases in performance-based incentive costs, coupled with headcount and salary costs related to additional programs. These increases are partially offset by cost reductions resulting from our services delivery optimization initiative in our talent fulfillment business which we undertook in the first quarter of 2017 in line with demand, and the effect of an out-of-period adjustment relating to overstated expense accruals.

International Staffing revenue from services increased 15.2%, of which 4.8% related to changes in foreign currency exchange rates. The remainder of the increase was due to an 8% increase in hours volume from our European operations, combined with a 7% increase in average bill rates (a 3% increase on a CC basis). The increase in hours volume was due to Portugal and France. International Staffing represented 21% of total Company revenue in the third quarter of 2017 and 19% in the third quarter of 2016.



	2017			2016			Change			CC Change
Revenue from services	$	3,952.1		$	3,972.4		(0.5	)%		(0.7	)%
Gross profit	691.1			678.3			1.9			1.7
SG&A expenses excluding restructuring charges	633.8			631.5			0.4			0.3
Restructuring charges	2.4			3.4			(31.6	)		(31.2	)
Total SG&A expenses	636.2			634.9			0.2			0.1
Earnings from operations	54.9			43.4			26.5
Earnings from operations excluding restructuring charges	57.3			46.8			22.2

Staffing fee-based income (included in revenue from services)	41.4			46.3			(10.8	)		(11.7	)
Gross profit rate	17.5		%	17.1		%	0.4		pts.
Conversion rate	7.9			6.4			1.5
Conversion rate excluding restructuring charges	8.3			6.9			1.4
Return on sales	1.4			1.1			0.3
Return on sales excluding restructuring charges	1.4			1.2			0.2

During the third quarter of 2016, we transferred our APAC staffing business in exchange for a 49% interest in the TS Kelly Asia Pacific joint venture. As a result, for the first six months of 2017, year-over-year revenue comparisons were negatively impacted. Total Company revenue from services for the first nine months of 2017 was down 0.5% in comparison to the prior year. The decrease was due to the effect of the transfer of the APAC staffing operations, as well as the changes noted in the following Americas Staffing and GTS segment discussions.

Total SG&A expenses increased 0.2% on a reported basis. Year-over-year increases in SG&A expenses in Americas Staffing and GTS reflect higher incentive-based compensation in those segments, while the transfer of the APAC staffing operations resulted in a decrease in International Staffing SG&A expenses. Corporate expenses increased due primarily to higher incentive-based compensation. Included in total SG&A expenses for the first nine months of 2017 are restructuring charges of $2.4 million, relating primarily to an initiative to optimize our GTS service delivery models. Included in total SG&A expenses for the first nine months of 2016 are restructuring charges of $3.4 million, which relate to actions taken primarily in the Americas Staffing and International Staffing segments to increase operational efficiency and prepare the businesses for future growth.



	2017			2016			Change			CC Change
Revenue from services	$	1,703.5		$	1,614.7		5.5	%		5.3	%
Gross profit	307.9			292.9			5.1			5.0
SG&A expenses excluding restructuring charges	252.6			244.1			3.5			3.4
Restructuring charges	0.4			1.8			(80.0	)		(79.8	)
Total SG&A expenses	253.0			245.9			2.9			2.8
Earnings from operations	54.9			47.0			16.8
Earnings from operations excluding restructuring charges	55.3			48.8			13.2

Gross profit rate	18.1		%	18.1		%	—		pts.
Conversion rate	17.8			16.1			1.7
Conversion rate excluding restructuring charges	18.0			16.7			1.3
Return on sales	3.2			2.9			0.3
Return on sales excluding restructuring charges	3.2			3.0			0.2

The change in Americas Staffing revenue from services reflects a 6% increase in average bill rates, partially offset by a 1% decrease in hours volume. The increase in average bill rates was the result of wage increases and stronger revenue growth in our service lines with higher pay rates. Americas Staffing represented 43% of total Company revenue in the first nine months of 2017 and 41% in the first nine months of 2016.

Total SG&A expenses increased 2.9% year over year, due to higher performance-based compensation costs and additional sales and recruiting resources to capture growing demand. Included in total SG&A expenses for the first nine months of 2016 are restructuring charges of $1.8 million, which represent severance costs related to headcount reductions as well as lease buyout costs due to branch consolidations.



DELAWARE		38-1510762
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer [ ]	Accelerated filer [X]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]
Emerging growth company [ ]



	Page Number

PART I. FINANCIAL INFORMATION	3

Item 1. Financial Statements (unaudited).	3

Consolidated Statements of Earnings	3

Consolidated Statements of Comprehensive Income	4

Consolidated Balance Sheets	5

Consolidated Statements of Stockholders' Equity	7

Consolidated Statements of Cash Flows	8

Notes to Consolidated Financial Statements	9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	34

Item 4. Controls and Procedures.	35

PART II. OTHER INFORMATION	35

Item 1. Legal Proceedings.	35

Item 1A. Risk Factors.	35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	36

Item 3. Defaults Upon Senior Securities.	36

Item 4. Mine Safety Disclosures.	36

Item 5. Other Information.	36

Item 6. Exhibits.	36

SIGNATURES	37



	Shares		Weighted Average Grant Date Fair Value
Nonvested at year-end 2016	653		$	16.58
Granted	189		21.90
Vested	(74	)	17.25
Forfeited	(163	)	16.91
Nonvested at second quarter-end 2017	605		18.07
Granted	19		21.85
Vested	(164	)	16.73
Forfeited	(2	)	19.82
Nonvested at third quarter-end 2017	458		$	18.71



Cash	$	1.8
Other current assets	3.6
Goodwill	18.7
Intangibles	18.3
Other noncurrent assets	0.5
Current liabilities	(3.9		)
Purchase price paid at closing	$	39.0



	Fair Value Measurements on a Recurring Basis As of Third Quarter-End 2017
Description	Total		Level 1		Level 2		Level 3
	(In millions of dollars)
Money market funds	$	4.2	$	4.2	$	—	$	—
Available-for-sale investment	212.4		212.4		—		—

Total assets at fair value	$	216.6	$	216.6	$	—	$	—


•	Continue to build our core strengths in branch-delivered staffing in key markets;


•	Maintain our position as a market-leading provider of talent supply chain management in our GTS segment; and


•	Lower our costs through deployment of efficient service delivery models.


•	Earnings from operations for the third quarter of 2017 totaled $18.2 million, compared to $18.8 million in the third quarter of 2016. The conversion rate for the third quarter was 7.9%, compared to 8.7% in the same period last year.


•	In the Americas Staffing segment, revenue grew 7% year over year, and earnings from operations were $13.3 million, compared to $14.3 million in the third quarter last year.


•	The GTS segment delivered 8% gross profit growth and 30% earnings from operations growth year over year.


•	In the International Staffing segment, year-over-year revenue improved 15%, or 10% in constant currency, as the segment delivered strong growth across Europe.


•	To grow professional and technical specialty and outsourced solutions, creating a more balanced portfolio that yields benefits from an improved mix;


•	Locally delivered staffing to remain a core component of our strategy;


•	Kelly Educational Staffing, including Teachers On Call, to continue to be a market leader in the U.S.;


•	To exercise strict expense control, delivering structural improvements that ensure a return from our investments in delivery infrastructure and, as a result;