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8-K - 8-K - KELLY SERVICES INCc16488e8vk.htm
Exhibit 99.1
(Kelly Services Logo)
KELLY SERVICES REPORTS 1st QUARTER 2011 RESULTS
TROY, MI (May 11, 2011) — Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the first quarter.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2011 totaled $1.3 billion, a 19% increase compared to the corresponding quarter in 2010.
Earnings from operations for the first quarter of 2011 totaled $1.6 million, compared to losses from operations of $1.6 million reported for the first quarter of 2010. Included in the results from operations are restructuring charges of $4.0 million in the first quarter of 2011 and $4.4 million in the first quarter of 2010. Excluding restructuring charges, earnings from operations were $5.6 million in the first quarter of 2011 and $2.8 million in the first quarter of 2010.
Diluted earnings per share in the first quarter of 2011 were $0.03 compared to first quarter 2010 losses of $0.06 per share. Excluding restructuring charges, diluted earnings per share were $0.14 in the first quarter of 2011 and $0.05 in the first quarter of 2010.
Commenting on the first quarter results, Camden stated, “We continue to see evidence of a solid, sustainable economic recovery. Kelly’s revenue growth for the period certainly confirms that we are on track for a profitable year.”
Camden added, “Until full confidence is restored, and employers remain cautious about ramping up too aggressively, this environment seems to favor the staffing industry — and we intend to capitalize on the opportunities presented.
“Going forward, Kelly is committed to improving our competitive position and enhancing shareholder value by delivering customer-focused workforce solutions — spanning traditional staffing, professional and technical offerings, and outsourcing and consulting services, and maintaining talent excellence throughout our company.”
In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on May 11, to review the results and answer questions. The call may be accessed in one of the following ways:
Via the Telephone:
     
U.S.
  1 800 288 9626
International
  1 651 291 5254
The pass code is Kelly Services
Via the Internet:
The call is also available via the internet through the Kelly Services website:
www.kellyservices.com

 

5


 

This release contains statements that are forward looking in nature and accordingly, are subject to risks and uncertainties. These factors include, but are not limited to, competitive market pressures including pricing, changing market and economic conditions, our ability to achieve our business strategy, including our ability to successfully expand into new markets and service lines, material changes in demand from or loss of large corporate customers, further impairment charges initiated by adverse industry or market developments, unexpected termination of customer contracts, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits, unexpected changes in claim trends on workers’ compensation and benefit plans, our ability to maintain specified financial covenants in our bank facilities, our ability to access credit markets and continued availability of financing for funding working capital, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology programs, our ability to retain the services of our senior management, local management and field personnel, the impact of changes in laws and regulations (including federal, state and international tax laws), the net financial impact of recent U.S. healthcare legislation on our business, risks associated with conducting business in foreign countries, including foreign currency fluctuations, and other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. Actual results may differ materially from any forward looking statements contained herein, and we have no intention to update these statements.
About Kelly Services
Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a leader in providing workforce solutions. Kelly® offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire and direct-hire basis. Serving clients around the globe, Kelly provides employment to more than 530,000 employees annually. Revenue in 2010 was $5.0 billion. Visit www.kellyservices.com and connect with us on facebook.com/kellyservices, linkedin.com/companies/kelly-services and twitter.com/kellyservices.
#
     
ANALYST CONTACT:
  MEDIA CONTACT:
James Polehna
  Jane Stehney
(248) 244-4586
  (248) 244-5630
james_polehna@kellyservices.com
  jane_stehney@kellyservices.com

 

6


 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED APRIL 3, 2011 AND APRIL 4, 2010
(UNAUDITED)

(In millions of dollars except per share data)
                                 
    2011     2010     Change     % Change  
Revenue from services
  $ 1,339.1     $ 1,130.4     $ 208.7       18.5 %
 
                               
Cost of services
    1,125.4       950.4       175.0       18.4  
 
                       
 
                               
Gross profit
    213.7       180.0       33.7       18.7  
 
                               
Selling, general and administrative expenses
    212.1       181.6       30.5       16.8  
 
                       
 
                               
Earnings (loss) from operations
    1.6       (1.6 )     3.2     NM  
 
                               
Other expense, net
    (0.4 )     (1.1 )     0.7       60.5  
 
                       
 
                               
Earnings (loss) before taxes
    1.2       (2.7 )     3.9     NM  
 
                               
Income taxes
    0.1       (0.7 )     0.8       107.7  
 
                       
 
                               
Net earnings (loss)
  $ 1.1     $ (2.0 )   $ 3.1       NM %
 
                       
 
                               
Earnings (loss) per share
                               
Basic
  $ 0.03     $ (0.06 )   $ 0.09       NM %
Diluted
  $ 0.03     $ (0.06 )   $ 0.09       NM %
 
                               
STATISTICS:
                               
 
                               
Gross profit rate
    16.0 %     15.9 %     0.1 pts.        
 
                               
Selling, general and administrative expenses:
                               
% of revenue
    15.8       16.1       (0.3 )        
% of gross profit
    99.2       100.9       (1.7 )        
 
                               
% Return — Earnings (loss) from operations
    0.1       (0.1 )     0.2          
Earnings (loss) before taxes
    0.1       (0.2 )     0.3          
Net earnings (loss)
    0.1       (0.2 )     0.3          
 
                               
Effective income tax rate
    4.5 %     26.4 %     (21.9 )pts.        
 
                               
Average number of shares outstanding (millions):
                               
Basic
    36.7       35.0                  
Diluted
    36.7       35.0                  
 
                               
Shares adjusted for nonvested restricted awards (millions):
                               
Basic
    37.4       N/A                  
Diluted
    37.4       N/A                  

 

7


 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)

(In millions of dollars)
                                 
    First Quarter  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
Americas Commercial
                               
Revenue from services (including fee-based income)
  $ 653.3     $ 547.7       19.3 %     18.5 %
Fee-based income
    2.8       2.1       34.2       32.6  
Gross profit
    92.5       78.5       17.8       17.1  
SG&A expenses excluding restructuring charges
    75.8       65.1       16.6          
Restructuring charges
          0.3       (100.0 )        
Total SG&A expenses
    75.8       65.4       16.0       15.4  
Earnings from operations
    16.7       13.1       26.8          
Earnings from operations excluding restructuring charges
    16.7       13.4       23.4          
 
                               
Gross profit rate
    14.2 %     14.3 %     (0.1 )pts.        
Expense rates (excluding restructuring charges):
                               
% of revenue
    11.6       11.9       (0.3 )        
% of gross profit
    82.0       82.8       (0.8 )        
Operating margin (excluding restructuring charges)
    2.6       2.5       0.1          
 
                               
Americas PT
                               
Revenue from services (including fee-based income)
  $ 240.6     $ 205.6       17.0 %     16.9 %
Fee-based income
    2.8       2.3       21.2       21.0  
Gross profit
    36.1       31.5       14.5       14.4  
Total SG&A expenses
    27.6       23.0       19.8       19.7  
Earnings from operations
    8.5       8.5       0.2          
 
                               
Gross profit rate
    15.0 %     15.3 %     (0.3 )pts.        
Expense rates:
                               
% of revenue
    11.5       11.2       0.3          
% of gross profit
    76.4       73.0       3.4          
Operating margin
    3.5       4.1       (0.6 )        
 
                               
EMEA Commercial
                               
Revenue from services (including fee-based income)
  $ 231.5     $ 204.9       13.0 %     10.1 %
Fee-based income
    5.8       4.8       19.4       16.1  
Gross profit
    37.3       32.8       13.7       10.8  
SG&A expenses excluding restructuring charges
    35.3       32.4       9.0          
Restructuring charges
    4.0       2.7       47.9          
Total SG&A expenses
    39.3       35.1       12.0       8.1  
Earnings from operations
    (2.0 )     (2.3 )     13.1          
Earnings from operations excluding restructuring charges
    2.0       0.4       378.2          
 
                               
Gross profit rate
    16.1 %     16.0 %     0.1 pts.        
Expense rates (excluding restructuring charges):
                               
% of revenue
    15.2       15.8       (0.6 )        
% of gross profit
    94.6       98.7       (4.1 )        
Operating margin (excluding restructuring charges)
    0.9       0.2       0.7          

 

8


 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)

(In millions of dollars)
                                 
    First Quarter  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
EMEA PT
                               
Revenue from services (including fee-based income)
  $ 41.4     $ 34.9       18.6 %     16.3 %
Fee-based income
    4.4       3.7       18.5       15.7  
Gross profit
    11.0       9.4       16.6       14.4  
Total SG&A expenses
    10.7       9.5       12.4       9.0  
Earnings from operations
    0.3       (0.1 )   NM          
 
                               
Gross profit rate
    26.6 %     27.1 %     (0.5 )pts.        
Expense rates:
                               
% of revenue
    25.9       27.3       (1.4 )        
% of gross profit
    97.3       101.0       (3.7 )        
Operating margin
    0.7       (0.3 )     1.0          
 
                               
APAC Commercial
                               
Revenue from services (including fee-based income)
  $ 99.7     $ 80.9       23.2 %     13.5 %
Fee-based income
    3.5       2.8       26.6       16.4  
Gross profit
    13.5       11.4       18.7       8.8  
SG&A expenses excluding restructuring charges
    13.3       9.9       35.1          
Restructuring charges
          0.5       (100.0 )        
Total SG&A expenses
    13.3       10.4       28.1       17.7  
Earnings from operations
    0.2       1.0       (82.8 )        
Earnings from operations excluding restructuring charges
    0.2       1.5       (89.0 )        
 
                               
Gross profit rate
    13.6 %     14.1 %     (0.5 )pts.        
Expense rates (excluding restructuring charges):
                               
% of revenue
    13.4       12.2       1.2          
% of gross profit
    98.8       86.8       12.0          
Operating margin (excluding restructuring charges)
    0.2       1.9       (1.7 )        
 
                               
APAC PT
                               
Revenue from services (including fee-based income)
  $ 11.5     $ 7.6       50.6 %     40.6 %
Fee-based income
    3.8       1.9       104.0       90.0  
Gross profit
    5.0       2.8       79.4       66.8  
Total SG&A expenses
    5.7       3.8       52.9       42.2  
Earnings from operations
    (0.7 )     (1.0 )     25.6          
 
                               
Gross profit rate
    43.7 %     36.7 %     7.0 pts.        
Expense rates:
                               
% of revenue
    49.8       49.1       0.7          
% of gross profit
    114.0       133.8       (19.8 )        
Operating margin
    (6.1 )     (12.4 )     6.3          

 

9


 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)

(In millions of dollars)
                                 
    First Quarter  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
OCG
                               
Revenue from services (including fee-based income)
  $ 68.2     $ 55.3       23.4 %     22.7 %
Fee-based income
    8.7       6.1       42.6       39.6  
Gross profit
    18.9       14.0       35.5       33.9  
SG&A expenses excluding restructuring charges
    21.3       18.4       15.4          
Restructuring charges
          0.1       (100.0 )        
Total SG&A expenses
    21.3       18.5       14.9       13.0  
Earnings from operations
    (2.4 )     (4.5 )     48.0          
Earnings from operations excluding restructuring charges
    (2.4 )     (4.4 )     47.1          
 
                               
Gross profit rate
    27.7 %     25.3 %     2.4 pts.        
Expense rates (excluding restructuring charges):
                               
% of revenue
    31.2       33.4       (2.2 )        
% of gross profit
    112.5       132.1       (19.6 )        
Operating margin (excluding restructuring charges)
    (3.5 )     (8.1 )     4.6          
 
                               
Corporate Expense
                               
SG&A expenses excluding restructuring charges
  $ 19.0     $ 15.5       22.0 %        
Restructuring charges
          0.8       (100.0 )        
Total SG&A expenses
    19.0       16.3       16.3          
 
                               
Consolidated Total (net of intersegment activity)
                               
Revenue from services (including fee-based income)
  $ 1,339.1     $ 1,130.4       18.5 %     16.7 %
Fee-based income
    31.8       23.7       34.3       29.9  
Gross profit
    213.7       180.0       18.7       16.8  
SG&A expenses excluding restructuring charges
    208.1       177.2       17.4          
Restructuring charges
    4.0       4.4       (10.3 )        
Total SG&A expenses
    212.1       181.6       16.8       14.6  
Earnings from operations
    1.6       (1.6 )   NM          
Earnings from operations excluding restructuring charges
    5.6       2.8       95.7          
 
                               
Gross profit rate
    16.0 %     15.9 %     0.1 pts.        
Expense rates (excluding restructuring charges):
                               
% of revenue
    15.5       15.7       (0.2 )        
% of gross profit
    97.4       98.4       (1.0 )        
Operating margin (excluding restructuring charges)
    0.4       0.3       0.1          

 

10


 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(In millions of dollars)
                         
            January 2,        
    April 3, 2011     2011     April 4, 2010  
Current Assets
                       
Cash and equivalents
  $ 59.8     $ 80.5     $ 55.7  
Trade accounts receivable, less allowances of $13.2, $12.3 and $14.4, respectively
    875.8       810.9       727.3  
Prepaid expenses and other current assets
    68.4       44.8       79.7  
Deferred taxes
    17.4       22.4       18.4  
 
                 
 
                       
Total current assets
    1,021.4       958.6       881.1  
 
                       
Property and Equipment, Net
    99.5       104.0       120.0  
 
                       
Noncurrent Deferred Taxes
    83.9       84.0       76.9  
 
                       
Goodwill, Net
    67.3       67.3       67.3  
 
                       
Other Assets
    154.9       154.5       144.7  
 
                 
 
                       
Total Assets
  $ 1,427.0     $ 1,368.4     $ 1,290.0  
 
                 
 
                       
Current Liabilities
                       
Short-term borrowings and current portion of long-term debt
  $ 65.4     $ 78.8     $ 68.2  
Accounts payable and accrued liabilities
    207.3       181.6       165.8  
Accrued payroll and related taxes
    270.9       243.3       218.2  
Accrued insurance
    31.5       31.3       22.5  
Income and other taxes
    61.7       56.0       46.5  
 
                 
 
                       
Total current liabilities
    636.8       591.0       521.2  
 
                       
Noncurrent Liabilities
                       
Long-term debt
                56.1  
Accrued insurance
    54.1       53.6       53.7  
Accrued retirement benefits
    90.2       85.4       77.7  
Other long-term liabilities
    14.2       14.6       15.5  
 
                 
 
                       
Total noncurrent liabilities
    158.5       153.6       203.0  
 
                       
Stockholders’ Equity
                       
Common stock
    40.1       40.1       40.1  
Treasury stock
    (70.8 )     (70.9 )     (106.7 )
Paid-in capital
    29.3       28.0       37.4  
Earnings invested in the business
    598.7       597.6       569.5  
Accumulated other comprehensive income
    34.4       29.0       25.5  
 
                 
 
                       
Total stockholders’ equity
    631.7       623.8       565.8  
 
                 
 
                       
Total Liabilities and Stockholders’ Equity
  $ 1,427.0     $ 1,368.4     $ 1,290.0  
 
                 
 
                       
STATISTICS:
                       
Working Capital
  $ 384.6     $ 367.6     $ 359.9  
Current Ratio
    1.6       1.6       1.7  
Debt-to-capital %
    9.4 %     11.2 %     18.0 %
Global Days Sales Outstanding
    52       49       51  

 

11


 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED APRIL 3, 2011 AND APRIL 4, 2010
(UNAUDITED)

(In millions of dollars)
                 
    2011     2010  
 
               
Cash flows from operating activities
               
Net earnings (loss)
  $ 1.1     $ (2.0 )
Noncash adjustments:
               
Depreciation and amortization
    8.3       9.1  
Provision for bad debts
    1.2       0.1  
Stock-based compensation
    1.4       1.1  
Other, net
    (0.1 )     0.2  
Changes in operating assets and liabilities
    (16.9 )     (27.4 )
 
           
 
               
Net cash from operating activities
    (5.0 )     (18.9 )
 
           
 
               
Cash flows from investing activities
               
Capital expenditures
    (2.5 )     (1.4 )
Other investing activities
          0.1  
 
           
 
               
Net cash from investing activities
    (2.5 )     (1.3 )
 
           
 
               
Cash flows from financing activities
               
Net change in short-term borrowings
    48.3       (11.2 )
Repayment of debt
    (62.9 )      
Other financing activities
    (1.0 )      
 
           
 
               
Net cash from financing activities
    (15.6 )     (11.2 )
 
           
 
               
Effect of exchange rates on cash and equivalents
    2.4       (1.8 )
 
           
 
               
Net change in cash and equivalents
    (20.7 )     (33.2 )
Cash and equivalents at beginning of period
    80.5       88.9  
 
           
 
               
Cash and equivalents at end of period
  $ 59.8     $ 55.7  
 
           

 

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KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)

(In millions of dollars)
                                 
    First Quarter (Commercial, PT and OCG)  
                    % Change  
                            Constant  
    2011     2010     US$     Currency  
 
                               
Americas
                               
United States
  $ 839.7     $ 710.2       18.2 %     18.2 %
Canada
    59.4       51.6       15.1       9.2  
Mexico
    25.1       19.0       32.1       25.0  
Puerto Rico
    22.1       14.7       49.6       49.6  
 
                           
Total Americas
    946.3       795.5       18.9       18.4  
 
                               
EMEA
                               
France
    70.0       67.3       4.0       4.9  
Switzerland
    47.2       31.4       50.6       33.5  
Russia
    34.2       23.3       46.8       43.6  
United Kingdom
    31.1       37.6       (17.4 )     (19.9 )
Portugal
    20.6       18.4       12.3       12.8  
Germany
    20.3       16.3       24.7       25.5  
Italy
    16.6       16.7       (0.8 )     (0.5 )
Norway
    15.1       13.9       8.8       6.1  
Other
    23.2       19.2       20.7       20.3  
 
                           
Total EMEA
    278.3       244.1       14.0       11.3  
 
                               
APAC
                               
Australia
    36.4       27.6       31.7       18.4  
Singapore
    26.1       18.9       38.1       25.6  
Malaysia
    17.6       14.6       20.7       9.3  
India
    17.6       13.7       28.5       26.8  
Other
    16.8       16.0       4.6       (1.0 )
 
                           
Total APAC
    114.5       90.8       26.0       16.3  
 
                               
Total Kelly Services, Inc.
  $ 1,339.1     $ 1,130.4       18.5 %     16.7 %
 
                           

 

13


 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)

(In millions of dollars except per share data)
                 
    First Quarter  
    2011     2010  
 
               
Pretax earnings (loss) from operations
  $ 1.6     $ (1.6 )
 
               
Restructuring charges (Note 1)
    4.0       4.4  
 
           
 
               
Earnings from operations excluding restructuring charges
  $ 5.6     $ 2.8  
 
           
                                 
    First Quarter  
    2011     2010  
    Amount     Per Share     Amount     Per Share  
 
                               
Net earnings (loss)
  $ 1.1     $ 0.03     $ (2.0 )   $ (0.06 )
 
                               
Restructuring charges, net of taxes (Note 1)
    4.0       0.11       3.6       0.10  
 
                           
 
                               
Net earnings excluding restructuring charges, net of taxes
  $ 5.1     $ 0.14     $ 1.6     $ 0.05  
 
                       

 

14


 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the restructuring charges is useful to understand the Company’s fiscal 2011 financial performance and increases comparability. Specifically, Management believes that excluding this item allows for a more meaningful comparison of current period operating performance with the operating results of prior periods. These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company’s financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company’s financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
 
     
(1)   In 2010, restructuring costs related primarily to severance and lease termination costs for branches in the EMEA and APAC Commercial segments that were in the process of closure at the end of 2009, as well as severance costs related to the corporate headquarters. In 2011, restructuring costs relate primarily to revisions of the estimated lease termination costs for EMEA Commercial branches that closed in prior years.

 

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