Investment in Equity Affiliate

9 Months Ended

Oct. 02, 2016

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Investment in TS Kelly Asia Pacific

On July 4, 2016, the Company and Temp Holdings Co., Ltd. (“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. The operating results of the Company’s interest in TS Kelly Asia Pacific will be accounted for on a one-quarter lag under the equity method. Accordingly, the consolidated financial statements for the third quarter of 2016 do not include operating results for TS Kelly Asia Pacific. In the fourth quarter, the Company will also receive a $4.5 million post-close cash true-up adjustment from Temp Holdings. The Company’s interest in TS Kelly Workforce Solutions is expected to be transferred to TS Kelly Asia Pacific in the fourth quarter under the terms of the transaction agreement.

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.

As part of this transaction, the Company deconsolidated the goodwill related to the contributed entities in our APAC PT and OCG segments amounting to $1.9 million.

The amount due to TS Kelly Asia Pacific was $2.1 million as of third quarter-end 2016.