KELLY SERVICES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 11, 2017

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Exhibit 99.1

pressreleaseheadera07.jpg
    
KELLY SERVICES® REPORTS
FIRST QUARTER EARNINGS

Financial Highlights
•
Q1 revenue down 4%; up 3% adjusted for the APAC Joint Venture transaction in 2016
•
Q1 operating earnings up 11%; up 83% adjusted for 2017 restructuring charges and the APAC Joint Venture transaction in 2016
•
Q1 earnings per share of $0.31 versus $0.29 (Adjusted EPS of $0.35 and $0.19)
    
TROY, MI (May 11, 2017) -- Kelly Services (Nasdaq: KELYA) (Nasdaq: KELYB), a global leader in providing workforce solutions, today announced results for the first quarter 2017.

George S. Corona, President and Chief Executive Officer, announced revenue for the first quarter of 2017 totaled $1.3 billion, a 4.4% decrease compared to the corresponding quarter of 2016. Revenue comparisons are unfavorably impacted by the transfer of APAC staffing operations to the TS Kelly Asia Pacific Joint Venture at the beginning of the third quarter of 2016.
    
Earnings from operations for the first quarter of 2017 totaled $16.4 million, compared to $14.7 million reported for the first quarter of 2016. Included in the results of operations in the first quarter of 2017 are restructuring charges of $2.4 million. Excluding the restructuring charges in 2017 and excluding the APAC staffing operations from 2016, earnings from operations were $18.8 million and $10.2 million, respectively.
    
Diluted earnings per share in the first quarter of 2017 were $0.31 compared to $0.29 per share in the first quarter of 2016. Excluding restructuring charges, earnings per share were $0.35 in the first quarter of 2017.

Reflecting on the first quarter, Corona stated, “It was a strong start to the year, and we’re pleased with Kelly’s performance. We returned to top-line growth, delivered healthy operating earnings in each of our segments, and provided solid returns for our shareholders.” Commenting on the first quarter restructuring charges, Corona added, “Our operating structures are now fully aligned with how companies are choosing to access talent, and confirm our strategic approach to delivering accelerated growth.”
    
Kelly also reported that on May 10, its board of directors declared a dividend of $0.075 per share. The dividend is payable June 7, 2017 to shareholders of record as of the close of business on May 23, 2017.

In conjunction with its first quarter earnings release, Kelly Services has published a financial presentation on the Investor Relations page of our public website and 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 Internet:
Kellyservices.com

Via the Telephone:
U.S.
1 800 288-9626
International
1 651 291-5254
The pass code is Kelly Services

1


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 and technology introductions and disruptions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual property assets could be infringed upon or compromised, our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, our increasing dependency on third parties for the execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated with investments in equity affiliates including TS Kelly Asia Pacific, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks associated with conducting business in foreign countries, including foreign currency fluctuations, availability of full-time employees to lead complex talent supply chain sales and operations, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyber attacks or other breaches of network or information technology security, 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 maintain adequate financial and management processes and controls, impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, unemployment compensation, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, 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® 

As a global leader in providing workforce solutions, Kelly Services, Inc. (Nasdaq: KELYA, KELYB) and its subsidiaries, offer a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire, and direct-hire basis. Kelly® directly employs nearly 500,000 people around the world in addition to having a role in connecting thousands more with work through its global network of talent suppliers and partners. Revenue in 2016 was $5.3 billion.  Visit kellyservices.com and connect with us on Facebook, LinkedIn, & Twitter.  


KLYA-FIN

# # #


ANALYST CONTACT:
MEDIA CONTACT:
James Polehna
Jane Stehney    
(248) 244-4586
(248) 244-5630
james_polehna@kellyservices.com
jane_stehney@kellyservices.com




2

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED APRIL 2, 2017 AND APRIL 3, 2016
(UNAUDITED)
(In millions of dollars except per share data)
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
2016
 
Change
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,289.7

$
1,349.1

$
(59.4
)
 
(4.4
)
%
(4.2
)
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
1,058.1

 
1,116.4

 
(58.3
)
 
(5.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
231.6

 
232.7

 
(1.1
)
 
(0.5
)
 
(0.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
215.2

 
218.0

 
(2.8
)
 
(1.3
)
 
(1.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
16.4

 
14.7

 
1.7

 
11.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense, net
 
(1.6
)
 
(0.9
)
 
(0.7
)
 
(74.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes and equity in net earnings (loss) of affiliate
 
14.8

 
13.8

 
1.0

 
6.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
2.7

 
2.7

 
—

 
(0.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings before equity in net earnings (loss) of affiliate
 
12.1

 
11.1

 
1.0

 
8.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in net earnings (loss) of affiliate
 
0.1

 
0.1

 
—

 
(7.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
12.2

$
11.2

$
1.0

 
8.4

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.31

$
0.29

$
0.02

 
6.9

%
 
 
Diluted earnings per share
$
0.31

$
0.29

$
0.02

 
6.9

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Staffing fee-based income (included in revenue from services)
$
13.5

$
16.5

$
(3.0
)
 
(18.7
)
%
(18.9
)
%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
18.0

%
17.3

%
0.7

pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion rate
 
7.1

 
6.3

 
0.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Return:
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
1.3

 
1.1

 
0.2

 
 
 
 
 
Net earnings
 
0.9

 
0.8

 
0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective income tax rate
 
18.4

%
19.7

%
(1.3
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average shares outstanding (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
38.3

 
38.0

 
 
 
 
 
 
 
     Diluted
 
38.7

 
38.2

 
 
 
 
 
 
 

3

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
 
2016
 
Change
 
Change
 
AMERICAS STAFFING
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
573.1

 
$
554.1

 
3.4

%
3.4

%
Gross profit
 
105.3

 
 
100.7

 
4.6

 
4.4

 
SG&A expenses excluding restructuring charges
 
83.7

 
 
83.6

 
0.1

 
0.1

 
Restructuring charges
 
0.4

 
 
—

 
NM

 
NM

 
Total SG&A expenses
 
84.1

 
 
83.6

 
0.5

 
0.5

 
Earnings from operations
 
21.2

 
 
17.1

 
24.3

 
 
 
Earnings from operations excluding restructuring charges
 
21.6

 
 
17.1

 
26.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
18.4

%
 
18.2

%
0.2

 pts.
 
 
Conversion rate
 
20.1

 
 
16.9

 
3.2

 
 
 
Conversion rate excluding restructuring charges
 
20.5

 
 
16.9

 
3.6

 
 
 
Return on sales
 
3.7

 
 
3.1

 
0.6

 
 
 
Return on sales excluding restructuring charges
 
3.8

 
 
3.1

 
0.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GLOBAL TALENT SOLUTIONS
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
487.3

 
$
490.9

 
(0.7
)
%
(0.8
)
%
Gross profit
 
90.5

 
 
85.3

 
6.1

 
6.2

 
SG&A expenses excluding restructuring charges
 
73.2

 
 
71.6

 
2.2

 
2.4

 
Restructuring charges
 
2.0

 
 
—

 
NM

 
NM

 
Total SG&A expenses
 
75.2

 
 
71.6

 
5.0

 
5.2

 
Earnings from operations
 
15.3

 
 
13.7

 
11.6

 
 
 
Earnings from operations excluding restructuring charges
 
17.3

 
 
13.7

 
26.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
18.6

%
 
17.4

%
1.2

 pts.
 
 
Conversion rate
 
16.9

 
 
16.0

 
0.9

 
 
 
Conversion rate excluding restructuring charges
 
19.1

 
 
16.0

 
3.1

 
 
 
Return on sales
 
3.1

 
 
2.8

 
0.3

 
 
 
Return on sales excluding restructuring charges
 
3.5

 
 
2.8

 
0.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTERNATIONAL STAFFING
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
233.6

 
$
309.0

 
(24.4
)
%
(23.2
)
%
Gross profit
 
36.4

 
 
47.8

 
(23.9
)
 
(22.6
)
 
Total SG&A expenses
 
31.2

 
 
41.2

 
(24.2
)
 
(23.3
)
 
Earnings from operations
 
5.2

 
 
6.6

 
(21.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
15.6

%
 
15.5

%
0.1

 pts.
 
 
Conversion rate
 
14.4

 
 
14.0

 
0.4

 
 
 
Return on sales
 
2.2

 
 
2.2

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 

4

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
April 2, 2017
 
Jan. 1, 2017
 
April 3, 2016
 
Current Assets
 
 
 
 
 
 
 
  Cash and equivalents
$
46.0

$
29.6

$
46.4

 
  Trade accounts receivable, less allowances of
 
 
 
 
 
 
 
    $11.9, $12.5 and $11.6, respectively
 
1,164.6

 
1,138.3

 
1,168.8

 
  Prepaid expenses and other current assets
 
59.0

 
46.7

 
53.0

 
Total current assets
 
1,269.6

 
1,214.6

 
1,268.2

 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
 
 
 
 
 
 
  Property and equipment, net
 
79.0

 
80.8

 
85.7

 
  Deferred taxes
 
183.5

 
180.1

 
193.6

 
  Goodwill
 
88.4

 
88.4

 
90.3

 
  Investment in equity affiliate
 
114.9

 
114.8

 
9.5

 
  Other assets
 
399.7

 
349.4

 
331.1

 
Total noncurrent assets
 
865.5

 
813.5

 
710.2

 
 
 
 
 
 
 
 
 
Total Assets
$
2,135.1

$
2,028.1

$
1,978.4

 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
  Short-term borrowings
$
—

$
—

$
39.3

 
  Accounts payable and accrued liabilities
 
471.9

 
455.1

 
437.4

 
  Accrued payroll and related taxes
 
276.5

 
241.5

 
277.6

 
  Accrued insurance
 
22.3

 
23.4

 
27.0

 
  Income and other taxes
 
54.7

 
51.1

 
57.8

 
Total current liabilities
 
825.4

 
771.1

 
839.1

 
 
 
 
 
 
 
 
 
Noncurrent Liabilities
 
 
 
 
 
 
 
  Accrued insurance
 
43.3

 
45.5

 
40.5

 
  Accrued retirement benefits
 
164.3

 
157.4

 
145.2

 
  Other long-term liabilities
 
52.4

 
42.1

 
42.8

 
Total noncurrent liabilities
 
260.0

 
245.0

 
228.5

 
 
 
 
 
 
 
 
 
Stockholders' Equity
 
 
 
 
 
 
 
  Common stock
 
40.1

 
40.1

 
40.1

 
  Treasury stock
 
(38.1
)
 
(39.0
)
 
(43.7
)
 
  Paid-in capital
 
31.5

 
28.6

 
27.4

 
  Earnings invested in the business
 
932.9

 
923.6

 
822.8

 
  Accumulated other comprehensive income
 
83.3

 
58.7

 
64.2

 
Total stockholders' equity
 
1,049.7

 
1,012.0

 
910.8

 
 
 
 
 
 
 
 
 
Total Liabilities and Stockholders' Equity
$
2,135.1

$
2,028.1

$
1,978.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 Working Capital
$
444.2

$
443.5

$
429.1

 
 Current Ratio
 
1.5

 
1.6

 
1.5

 
 Debt-to-capital %
 
—

%
—

%
4.1

%
 Global Days Sales Outstanding
 
55

 
53

 
55

 
 Year-to-Date Free Cash Flow
$
21.5

$
24.7

$
18.7

 

5

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED APRIL 2, 2017 AND APRIL 3, 2016
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net earnings
$
12.2

$
11.2

Noncash adjustments:
 
 
 
 
Depreciation and amortization
 
5.3

 
5.6

Provision for bad debts
 
1.5

 
1.7

Stock-based compensation
 
3.9

 
2.7

Other, net
 
(0.2
)
 
(0.1
)
Changes in operating assets and liabilities
 
1.6

 
(0.9
)
 
 
 
 
 
Net cash from operating activities
 
24.3

 
20.2

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(2.8
)
 
(1.5
)
Other investing activities
 
(0.1
)
 
(0.3
)
 
 
 
 
 
Net cash used in investing activities
 
(2.9
)
 
(1.8
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Net change in short-term borrowings
 
—

 
(16.4
)
Dividend payments
 
(2.9
)
 
(1.9
)
Other financing activities
 
(0.1
)
 
—

 
 
 
 
 
Net cash used in financing activities
 
(3.0
)
 
(18.3
)
 
 
 
 
 
Effect of exchange rates on cash and equivalents
 
(2.0
)
 
4.1

 
 
 
 
 
Net change in cash and equivalents
 
16.4

 
4.2

Cash and equivalents at beginning of period
 
29.6

 
42.2

 
 
 
 
 
 
 
 
 
 
Cash and equivalents at end of period
$
46.0

$
46.4



6

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter (Americas, International and GTS)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
2016
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
United States
$
955.6

$
934.7

 
2.2

%
2.2

%
Canada
 
34.1

 
34.5

 
(1.3
)
 
(4.6
)
 
Mexico
 
23.8

 
26.6

 
(10.3
)
 
0.7

 
Puerto Rico
 
17.7

 
22.5

 
(21.4
)
 
(21.4
)
 
Brazil
 
13.3

 
10.0

 
33.5

 
8.5

 
Total Americas
 
1,044.5

 
1,028.3

 
1.6

 
1.5

 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
France
 
60.8

 
56.5

 
7.6

 
11.6

 
Switzerland
 
48.3

 
46.6

 
3.6

 
4.9

 
Portugal
 
36.3

 
33.7

 
7.8

 
11.9

 
Russia
 
22.8

 
14.0

 
63.0

 
29.2

 
United Kingdom
 
20.2

 
23.6

 
(14.4
)
 
(1.2
)
 
Italy
 
13.7

 
13.4

 
2.1

 
6.1

 
Germany
 
13.2

 
15.4

 
(14.8
)
 
(11.6
)
 
Ireland
 
7.7

 
5.0

 
55.7

 
61.5

 
Norway
 
7.6

 
7.6

 
0.5

 
(1.5
)
 
Other
 
10.4

 
8.7

 
19.6

 
23.8

 
Total EMEA
 
241.0

 
224.5

 
7.3

 
9.2

 
 
 
 
 
 
 
 
 
 
 
Total APAC
 
4.2

 
96.3

 
(95.6
)
 
(95.7
)
 
 
 
 
 
 
 
 
 
 
 
Total Kelly Services, Inc.
$
1,289.7

$
1,349.1

 
(4.4
)
%
(4.2
)
%
 
 
 
 
 
 
 
 
 
 


7

 KELLY SERVICES, INC. AND SUBSIDIARIES
 RECONCILIATION OF NON-GAAP MEASURES
FOR THE 13 WEEKS ENDED APRIL 2, 2017 AND APRIL 3, 2016
 (UNAUDITED)
 (In millions of dollars except per share data)
 
 
 
 
 
 
 
 
 
 
First Quarter
 
 
2017
 
2016
 
 
 
 
 
Revenue from services
 
$
1,289.7

 
$
1,349.1

Disposal of APAC businesses (Note 1)
 
—

 
(92.7
)
Adjusted revenue from services
 
$
1,289.7

 
$
1,256.4

 
 
 
 
 
 
 
 
 
 
 
 
First Quarter
 
 
2017
 
2016
 
 
 
 
 
Gross profit
 
$
231.6

 
$
232.7

Disposal of APAC businesses (Note 1)
 
—

 
(16.3
)
Adjusted gross profit
 
$
231.6

 
$
216.4

 
 
 
 
 
 
 
 
 
 
 
 
First Quarter
 
 
2017
 
2016
 
 
 
 
 
Earnings from operations
 
$
16.4

 
$
14.7

Disposal of APAC businesses (Note 1)
 
—

 
(4.5
)
Restructuring charges (Note 2)
 
2.4

 
—

Adjusted earnings from operations
 
$
18.8

 
$
10.2


 
 
First Quarter
 
 
2017
 
2016
 
 
Amount
 
Per Share
 
Amount
 
Per Share
 
 
 
 
 
 
 
 
 
Net earnings
 
$
12.2

 
$
0.31

 
$
11.2

 
$
0.29

Disposal of APAC businesses, net of taxes (Note 1)
 
—

 
—

 
(3.7
)
 
(0.09
)
Restructuring charges, net of taxes (Note 2)
 
1.7

 
0.04

 
—

 
—

Adjusted net earnings
 
$
13.9

 
$
0.35

 
$
7.5

 
$
0.19


Note: Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.


8

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

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2017 restructuring charges and 2016 disposal of APAC businesses is useful to understand the Company's fiscal 2017 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items 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) Disposal of APAC businesses represents the first quarter 2016 operational results of businesses contributed to TS Kelly Asia Pacific in the third quarter of 2016.

(2) Restructuring charges in 2017 represent costs related primarily to optimizing our GTS service delivery models to deliver expected cost savings.



9

KELLY SERVICES INC Reports