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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 11, 2010
KELLY SERVICES, INC.
(Exact name of registrant as specified in its charter)
         
DELAWARE   0-1088   38-1510762
         
(State or other jurisdiction
of incorporation) 		  (Commission File Number)   (IRS Employer Identification No.)
     

999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 		   
48084
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (248) 362-4444
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

Item 2.02. Results of Operations and Financial Condition
Kelly Services, Inc. (the “Company”) today released financial information containing highlighted financial data for the three months and six months ended July 4, 2010. A copy of the press release is attached as exhibit 99.1 herein.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
         
  99.1    
Press Release dated August 11, 2010.

 

2

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
         


Date: August 11, 2010  		 KELLY SERVICES, INC.


 		  
  /s/ Patricia Little    
  Patricia Little   
  Executive Vice President and
Chief Financial Officer
(Principal Financial Officer) 		  
     
Date: August 11, 2010  /s/ Michael E. Debs    
  Michael E. Debs   
  Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer) 		  
 

 

3

 

EXHIBIT INDEX
         
Exhibit No.   Description
       
 
  99.1    
Press release dated August 11, 2010

 

4

exv99w1
Exhibit 99.1
(KELLY LOGO)
KELLY SERVICES REPORTS 2nd QUARTER 2010 RESULTS
TROY, MI (August 11, 2010) — Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the second quarter of 2010.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the second quarter of 2010 totaled $1.2 billion, an 18% increase compared to the corresponding quarter in 2009. On a constant currency basis, revenue increased by 17%.
Earnings from operations for the second quarter of 2010 totaled $8.5 million, compared to losses from operations of $74.5 million reported for the second quarter of 2009. Included in the results from operations for the second quarter of 2010 are impairment charges of $1.5 million. The loss from operations in the second quarter of 2009 included impairment charges of $52.6 million and restructuring charges of $4.7 million. Excluding the impairment and restructuring charges, earnings from operations were $10.0 million in the second quarter of 2010 compared to a loss from operations of $17.2 million in 2009.
Diluted earnings per share from continuing operations in the second quarter of 2010 were $0.11 compared to second quarter 2009 losses of $1.89 per share. The impairment charges were $0.03 per share in the second quarter of 2010 and the impairment and restructuring charges totaled $1.52 per share in the second quarter of 2009.
Commenting on the second quarter results, Camden stated, “We’re pleased that global economic expansion continues and labor markets are slowly strengthening around the world. These trends had a positive impact on our second quarter earnings as demand for temporary staffing improved.
“Our efforts and discipline are clearly gaining traction. We’re confident that we have realigned our strategy to take advantage of future opportunities within our industry and we’ll continue to focus on improving profitability while holding expenses down, maintaining our commercial staffing stronghold, accelerating our PT and OCG growth, and winning new customers.”
In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on August 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
This release contains statements that are forward looking in nature and accordingly, are subject to risks and uncertainties. These factors include: competition, changing market and economic conditions, currency fluctuations, changes in laws and regulations, including tax laws, and other 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.

 

 

 

About Kelly Services
Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: 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, temp-to-hire and direct-hire basis. Serving clients around the globe, Kelly provides employment to 480,000 employees annually. Revenue in 2009 was $4.3 billion. Visit www.kellyservices.com.
     
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 JULY 4, 2010 AND JUNE 28, 2009
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    2010     2009     Change     % Change  
 
                                
Revenue from services
   $ 1,209.4     $ 1,028.9     $ 180.5       17.5 %
 
                                
Cost of services
     1,018.5       857.2       161.3       18.8  
 
                        
 
                                
Gross profit
     190.9       171.7       19.2       11.2  
 
                                
Selling, general and administrative expenses
     180.9       193.6       (12.7 )     (6.5 )
 
                                
Asset impairments
     1.5       52.6       (51.1 )     (97.1 )
 
                        
 
                                
Earnings (loss) from operations
     8.5       (74.5 )     83.0     NM  
 
                                
Other expense, net
     (2.1 )     (1.0 )     (1.1 )     (108.1 )
 
                        
 
                                
Earnings (loss) from continuing operations before taxes
     6.4       (75.5 )     81.9     NM  
 
                                
Income taxes
     2.5       (9.5 )     12.0       126.9  
 
                        
 
                                
Earnings (loss) from continuing operations
     3.9       (66.0 )     69.9     NM  
 
                                
Earnings from discontinued operations, net of tax
     —       —       —       —  
 
                        
 
                                
Net earnings (loss)
   $ 3.9     $ (66.0 )   $ 69.9     NM %
 
                        
 
                                
Basic earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.11     $ (1.89 )   $ 2.00     NM %
Earnings from discontinued operations
     —       —       —       —  
Net earnings (loss)
     0.11       (1.89 )     2.00     NM  
 
                                
Diluted earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.11     $ (1.89 )   $ 2.00     NM %
Earnings from discontinued operations
     —       —       —       —  
Net earnings (loss)
     0.11       (1.89 )     2.00     NM  
 
                                
STATISTICS:
                                
 
                                
Gross profit rate
     15.8 %     16.7 %   (0.9 ) pts.        
 
                                
Selling, general and administrative expenses:
                                
% of revenue
     15.0       18.8       (3.8 )        
% of gross profit
     94.8       112.7       (17.9 )        
 
                                
% Return — Earnings (loss) from operations
     0.7       (7.2 )     7.9          
Earnings (loss) from continuing operations before taxes
     0.5       (7.3 )     7.8          
Earnings (loss) from continuing operations
     0.3       (6.4 )     6.7          
Net earnings (loss)
     0.3       (6.4 )     6.7          
 
                                
Effective income tax rate
     39.8 %     12.5 %   27.3  pts.        
 
                                
Average number of shares outstanding (millions):
                                
Basic
     36.0       34.8                  
Diluted
     36.0       34.8                  

 

3

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JULY 4, 2010 AND JUNE 28, 2009
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    2010     2009     Change     % Change  
 
                                
Revenue from services
   $ 2,339.8     $ 2,071.5     $ 268.3       13.0 %
 
                                
Cost of services
     1,968.9       1,724.3       244.6       14.2  
 
                        
 
                                
Gross profit
     370.9       347.2       23.7       6.8  
 
                                
Selling, general and administrative expenses
     362.5       399.7       (37.2 )     (9.3 )
 
                                
Asset impairments
     1.5       52.6       (51.1 )     (97.1 )
 
                        
 
                                
Earnings (loss) from operations
     6.9       (105.1 )     112.0     NM  
 
                                
Other (expense) income, net
     (3.2 )     0.3       (3.5 )   NM  
 
                        
 
                                
Earnings (loss) from continuing operations before taxes
     3.7       (104.8 )     108.5     NM  
 
                                
Income taxes
     1.8       (22.7 )     24.5       108.1  
 
                        
 
                                
Earnings (loss) from continuing operations
     1.9       (82.1 )     84.0     NM  
 
                                
Earnings from discontinued operations, net of tax
     —       0.6       (0.6 )     (100.0 )
 
                        
 
                                
Net earnings (loss)
   $ 1.9     $ (81.5 )   $ 83.4     NM %
 
                        
 
                                
Basic earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.05     $ (2.36 )   $ 2.41     NM %
Earnings from discontinued operations
     —       0.02       (0.02 )     (100.0 )
Net earnings (loss)
     0.05       (2.34 )     2.39     NM  
 
                                
Diluted earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.05     $ (2.36 )   $ 2.41     NM %
Earnings from discontinued operations
     —       0.02       (0.02 )     (100.0 )
Net earnings (loss)
     0.05       (2.34 )     2.39     NM  
 
                                
STATISTICS:
                                
 
                                
Gross profit rate
     15.9 %     16.8 %   (0.9 ) pts.        
 
                                
Selling, general and administrative expenses:
                                
% of revenue
     15.5       19.3       (3.8 )        
% of gross profit
     97.7       115.1       (17.4 )        
 
                                
% Return — Earnings (loss) from operations
     0.3       (5.1 )     5.4          
Earnings (loss) from continuing operations before taxes
     0.2       (5.1 )     5.3          
Earnings (loss) from continuing operations
     0.1       (4.0 )     4.1          
Net earnings (loss)
     0.1       (3.9 )     4.0          
 
                                
Effective income tax rate
     49.3 %     21.7 %   27.6  pts.        
 
                                
Average number of shares outstanding (millions):
                                
Basic
     35.5       34.8                  
Diluted
     35.5       34.8                  

 

4

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                                 
    Second Quarter  
                            Constant  
                            Currency  
    2010     2009     Change     Change  
Americas Commercial
                                
Revenue from services (including fee-based income)
   $ 600.9     $ 473.0       27.0 %     25.5 %
Fee-based income
     2.2       1.6       41.8       38.3  
Gross profit
     85.7       70.6       21.2       20.0  
SG&A expenses excluding restructuring charges
     67.7       67.5       0.3          
Restructuring charges
     —       1.1       (100.0 )        
Total SG&A expenses
     67.7       68.6       (1.4 )     (2.5 )
Earnings from operations
     18.0       2.0     NM          
Earnings from operations excluding restructuring charges
     18.0       3.1       469.3          
 
                                
Gross profit rate
     14.3 %     14.9 %   (0.6 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     11.3       14.3       (3.0 )        
% of gross profit
     79.0       95.5       (16.5 )        
Operating margin (excluding restructuring charges)
     3.0       0.7       2.3          
 
                                
Americas PT
                                
Revenue from services (including fee-based income)
   $ 219.9     $ 194.8       12.9 %     12.6 %
Fee-based income
     2.2       2.3       (2.7 )     (3.1 )
Gross profit
     34.5       32.2       7.3       7.0  
SG&A expenses excluding restructuring charges
     22.7       25.5       (10.5 )        
Restructuring charges
     —       0.1       (100.0 )        
Total SG&A expenses
     22.7       25.6       (10.9 )     (11.1 )
Earnings from operations
     11.8       6.6       76.4          
Earnings from operations excluding restructuring charges
     11.8       6.7       73.3          
 
                                
Gross profit rate
     15.7 %     16.5 %   (0.8 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     10.3       13.0       (2.7 )        
% of gross profit
     65.8       78.8       (13.0 )        
Operating margin (excluding restructuring charges)
     5.4       3.5       1.9          
 
                                
EMEA Commercial
                                
Revenue from services (including fee-based income)
   $ 209.8     $ 211.7       (0.9 )%     2.4 %
Fee-based income
     5.1       3.9       33.2       35.5  
Gross profit
     33.8       34.4       (1.6 )     2.0  
SG&A expenses excluding restructuring charges
     30.9       36.6       (15.5 )        
Restructuring charges
     —       3.1       (100.0 )        
Total SG&A expenses
     30.9       39.7       (22.2 )     (19.6 )
Asset impairments
     1.5       —     NM          
Earnings from operations
     1.4       (5.3 )   NM          
Earnings from operations excluding restructuring charges
     1.4       (2.2 )   NM          
 
                                
Gross profit rate
     16.1 %     16.2 %   (0.1 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     14.7       17.3       (2.6 )        
% of gross profit
     91.5       106.5       (15.0 )        
Operating margin (excluding restructuring charges)
     0.6       (1.1 )     1.7          

 

5

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    Second Quarter  
                            Constant  
                            Currency  
    2010     2009     Change     Change  
EMEA PT
                                
Revenue from services (including fee-based income)
   $ 34.4     $ 33.1       4.1 %     8.6 %
Fee-based income
     3.9       3.8       3.6       5.2  
Gross profit
     9.3       8.8       6.2       9.8  
Total SG&A expenses
     8.8       10.1       (13.1 )     (10.0 )
Earnings from operations
     0.5       (1.3 )   NM          
 
                                
Gross profit rate
     27.1 %     26.6 %   0.5  pts.        
Expense rates:
                                
% of revenue
     25.5       30.6       (5.1 )        
% of gross profit
     94.1       115.1       (21.0 )        
Operating margin
     1.6       (4.0 )     5.6          
 
                                
APAC Commercial
                                
Revenue from services (including fee-based income)
   $ 83.7     $ 66.3       26.2 %     13.8 %
Fee-based income
     2.7       2.3       15.1       3.6  
Gross profit
     11.7       9.7       20.9       8.5  
SG&A expenses excluding restructuring charges
     10.7       10.8       (0.8 )        
Restructuring charges
     —       0.1       (100.0 )        
Total SG&A expenses
     10.7       10.9       (1.2 )     (11.3 )
Earnings from operations
     1.0       (1.2 )   NM          
Earnings from operations excluding restructuring charges
     1.0       (1.1 )   NM          
 
                                
Gross profit rate
     14.0 %     14.6 %   (0.6 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     12.8       16.3       (3.5 )        
% of gross profit
     91.8       111.8       (20.0 )        
Operating margin (excluding restructuring charges)
     1.2       (1.7 )     2.9          
 
                                
APAC PT
                                
Revenue from services (including fee-based income)
   $ 7.8     $ 5.5       41.1 %     28.8 %
Fee-based income
     2.8       0.8       227.9       211.0  
Gross profit
     3.5       1.7       103.8       90.4  
Total SG&A expenses
     3.9       2.1       84.2       70.7  
Earnings from operations
     (0.4 )     (0.4 )     2.5          
 
                                
Gross profit rate
     45.5 %     31.5 %   14.0  pts.        
Expense rates:
                                
% of revenue
     50.4       38.6       11.8          
% of gross profit
     110.8       122.6       (11.8 )        
Operating margin
     (4.9 )     (7.1 )     2.2          

 

6

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    Second Quarter  
                            Constant  
                            Currency  
    2010     2009     Change     Change  
OCG
                                
Revenue from services (including fee-based income)
   $ 60.4     $ 50.1       20.5 %     20.3 %
Fee-based income
     5.6       6.0       (6.1 )     (6.4 )
Gross profit
     13.0       14.6       (11.0 )     (10.9 )
SG&A expenses excluding restructuring charges
     18.8       17.4       7.9          
Restructuring charges
     —       0.4       (100.0 )        
Total SG&A expenses
     18.8       17.8       5.6       5.7  
Earnings from operations
     (5.8 )     (3.2 )     (80.8 )        
Earnings from operations excluding restructuring charges
     (5.8 )     (2.8 )     (104.8 )        
 
                                
Gross profit rate
     21.4 %     29.0 %   (7.6 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     31.1       34.7       (3.6 )        
% of gross profit
     144.9       119.5       25.4          
Operating margin (excluding restructuring charges)
     (9.6 )     (5.7 )     (3.9 )        
 
                                
Corporate Expense
                                
SG&A expenses excluding restructuring charges
   $ 18.0     $ 19.2       (5.8 )%        
Restructuring charges
     —       (0.1 )     (100.0 )        
Total SG&A expenses
     18.0       19.1       (5.4 )        
Asset impairments
     —       52.6       (100.0 )        
 
                                
Consolidated Total (net of intersegment activity)
                                
Revenue from services (including fee-based income)
   $ 1,209.4     $ 1,028.9       17.5 %     16.8 %
Fee-based income
     24.4       20.6       18.9       17.2  
Gross profit
     190.9       171.7       11.2       10.7  
SG&A expenses excluding restructuring charges
     180.9       188.9       (4.2 )        
Restructuring charges
     —       4.7       (100.0 )        
Total SG&A expenses
     180.9       193.6       (6.5 )     (6.9 )
Asset impairments
     1.5       52.6       (97.1 )        
Earnings from operations
     8.5       (74.5 )   NM          
Earnings from operations excluding restructuring charges
     8.5       (69.8 )   NM          
 
                                
Gross profit rate
     15.8 %     16.7 %   (0.9 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.0       18.4       (3.4 )        
% of gross profit
     94.8       110.0       (15.2 )        
Operating margin (excluding restructuring charges)
     0.7       (6.8 )     7.5          

 

7

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                                 
    June Year to Date  
                            Constant  
                            Currency  
    2010     2009     Change     Change  
Americas Commercial
                                
Revenue from services (including fee-based income)
   $ 1,148.6     $ 955.4       20.2 %     18.4 %
Fee-based income
     4.3       3.4       27.7       23.5  
Gross profit
     164.2       143.7       14.2       12.7  
SG&A expenses excluding restructuring charges
     132.8       139.3       (4.8 )        
Restructuring charges
     0.3       1.9       (81.5 )        
Total SG&A expenses
     133.1       141.2       (5.8 )     (7.1 )
Earnings from operations
     31.1       2.5     NM          
Earnings from operations excluding restructuring charges
     31.4       4.4     NM          
 
                                
Gross profit rate
     14.3 %     15.0 %   (0.7 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     11.6       14.6       (3.0 )        
% of gross profit
     80.8       96.9       (16.1 )        
Operating margin (excluding restructuring charges)
     2.7       0.5       2.2          
 
                                
Americas PT
                                
Revenue from services (including fee-based income)
   $ 425.5     $ 392.2       8.5 %     8.2 %
Fee-based income
     4.5       5.1       (11.2 )     (11.8 )
Gross profit
     66.0       63.7       3.8       3.5  
SG&A expenses excluding restructuring charges
     45.7       51.7       (11.3 )        
Restructuring charges
     —       0.1       (100.0 )        
Total SG&A expenses
     45.7       51.8       (11.5 )     (11.8 )
Earnings from operations
     20.3       11.9       70.2          
Earnings from operations excluding restructuring charges
     20.3       12.0       68.3          
 
                                
Gross profit rate
     15.5 %     16.2 %   (0.7 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     10.8       13.2       (2.4 )        
% of gross profit
     69.2       81.0       (11.8 )        
Operating margin (excluding restructuring charges)
     4.8       3.1       1.7          
 
                                
EMEA Commercial
                                
Revenue from services (including fee-based income)
   $ 414.7     $ 428.3       (3.2 )%     (5.1 )%
Fee-based income
     9.9       8.6       15.5       11.6  
Gross profit
     66.6       68.9       (3.3 )     (5.2 )
SG&A expenses excluding restructuring charges
     63.3       77.4       (18.3 )        
Restructuring charges
     2.7       8.9       (69.9 )        
Total SG&A expenses
     66.0       86.3       (23.6 )     (25.4 )
Asset impairments
     1.5       —     NM          
Earnings from operations
     (0.9 )     (17.4 )     94.8          
Earnings from operations excluding restructuring charges
     1.8       (8.5 )   NM          
 
                                
Gross profit rate
     16.1 %     16.1 %   0.0  pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.3       18.1       (2.8 )        
% of gross profit
     95.0       112.4       (17.4 )        
Operating margin (excluding restructuring charges)
     0.4       (2.0 )     2.4          

 

8

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    June Year to Date  
                            Constant  
                            Currency  
    2010     2009     Change     Change  
EMEA PT
                                
Revenue from services (including fee-based income)
   $ 69.3     $ 65.9       5.2 %     3.8 %
Fee-based income
     7.6       8.2       (6.2 )     (9.5 )
Gross profit
     18.7       18.2       3.3       1.1  
Total SG&A expenses
     18.3       20.1       (8.7 )     (10.7 )
Earnings from operations
     0.4       (1.9 )   NM          
 
                                
Gross profit rate
     27.1 %     27.6 %   (0.5 ) pts.        
Expense rates:
                                
% of revenue
     26.4       30.5       (4.1 )        
% of gross profit
     97.6       110.4       (12.8 )        
Operating margin
     0.7       (2.9 )     3.6          
 
                                
APAC Commercial
                                
Revenue from services (including fee-based income)
   $ 164.6     $ 130.7       25.9 %     10.4 %
Fee-based income
     5.5       4.5       20.3       5.7  
Gross profit
     23.1       19.2       20.7       4.8  
SG&A expenses excluding restructuring charges
     20.6       21.6       (4.6 )        
Restructuring charges
     0.5       0.1     NM          
Total SG&A expenses
     21.1       21.7       (2.4 )     (15.3 )
Earnings from operations
     2.0       (2.5 )   NM          
Earnings from operations excluding restructuring charges
     2.5       (2.4 )   NM          
 
                                
Gross profit rate
     14.0 %     14.6 %   (0.6 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     12.5       16.5       (4.0 )        
% of gross profit
     89.3       113.0       (23.7 )        
Operating margin (excluding restructuring charges)
     1.5       (1.9 )     3.4          
 
                                
APAC PT
                                
Revenue from services (including fee-based income)
   $ 15.4     $ 11.7       31.4 %     16.2 %
Fee-based income
     4.7       1.8       158.3       142.1  
Gross profit
     6.3       3.6       73.6       58.4  
Total SG&A expenses
     7.7       4.3       78.7       62.5  
Earnings from operations
     (1.4 )     (0.7 )     (107.8 )        
 
                                
Gross profit rate
     41.1 %     31.1 %   10.0  pts.        
Expense rates:
                                
% of revenue
     49.7       36.6       13.1          
% of gross profit
     121.0       117.5       3.5          
Operating margin
     (8.6 )     (5.4 )     (3.2 )        

 

9

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    June Year to Date  
                            Constant  
                            Currency  
    2010     2009     Change     Change  
OCG
                                
Revenue from services (including fee-based income)
   $ 115.7     $ 98.8       17.1 %     16.3 %
Fee-based income
     11.7       12.6       (7.0 )     (9.0 )
Gross profit
     27.0       30.5       (11.7 )     (12.8 )
SG&A expenses excluding restructuring charges
     37.2       34.4       8.2          
Restructuring charges
     0.1       0.5       (85.0 )        
Total SG&A expenses
     37.3       34.9       6.9       5.5  
Earnings from operations
     (10.3 )     (4.4 )     (134.9 )        
Earnings from operations excluding restructuring charges
     (10.2 )     (3.9 )     (162.6 )        
 
                                
Gross profit rate
     23.3 %     30.8 %   (7.5 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     32.2       34.8       (2.6 )        
% of gross profit
     138.3       112.9       25.4          
Operating margin (excluding restructuring charges)
     (8.9 )     (4.0 )     (4.9 )        
 
                                
Corporate Expense
                                
SG&A expenses excluding restructuring charges
   $ 33.5     $ 39.6       (15.1) %        
Restructuring charges
     0.8       0.4       90.8          
Total SG&A expenses
     34.3       40.0       (14.0 )        
Asset impairments
     —       52.6       (100.0 )        
 
                                
Consolidated Total (net of intersegment activity)
                                
Revenue from services (including fee-based income)
   $ 2,339.8     $ 2,071.5       13.0 %     10.5 %
Fee-based income
     48.1       44.1       9.2       4.7  
Gross profit
     370.9       347.2       6.8       4.5  
SG&A expenses excluding restructuring charges
     358.1       387.8       (7.6 )        
Restructuring charges
     4.4       11.9       (63.0 )        
Total SG&A expenses
     362.5       399.7       (9.3 )     (11.3 )
Asset impairments
     1.5       52.6       (97.1 )        
Earnings from operations
     6.9       (105.1 )   NM          
Earnings from operations excluding restructuring charges
     11.3       (93.2 )   NM          
 
                                
Gross profit rate
     15.9 %     16.8 %   (0.9 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.3       18.7       (3.4 )        
% of gross profit
     96.5       111.7       (15.2 )        
Operating margin (excluding restructuring charges)
     0.5       (4.5 )     5.0          

 

10

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JULY 4, 2010 AND JUNE 28, 2009
(UNAUDITED)
(In millions of dollars)
                 
    2010     2009  
Cash flows from operating activities
                
Net earnings (loss)
   $ 1.9     $ (81.5 )
Noncash adjustments:
                
Impairment of assets
     1.5       52.6  
Depreciation and amortization
     17.8       21.0  
Provision for bad debts
     0.5       1.3  
Stock-based compensation
     1.4       2.2  
Other, net
     0.8       (1.5 )
Changes in operating assets and liabilities
     (44.2 )     53.0  
 
            
 
                
Net cash from operating activities
     (20.3 )     47.1  
 
            
 
                
Cash flows from investing activities
                
Capital expenditures
     (3.8 )     (5.0 )
Acquisition of companies, net of cash received
     —       (7.5 )
Other investing activities
     0.9       (3.0 )
 
            
 
                
Net cash from investing activities
     (2.9 )     (15.5 )
 
            
 
                
Cash flows from financing activities
                
Net change in revolving line of credit
     (11.8 )     (13.1 )
Repayment of debt
     (7.3 )     (22.9 )
Sale of stock and other financing activities
     24.2       (0.8 )
 
            
 
                
Net cash from financing activities
     5.1       (36.8 )
 
            
 
                
Effect of exchange rates on cash and equivalents
     (5.5 )     2.1  
 
            
 
                
Net change in cash and equivalents
     (23.6 )     (3.1 )
Cash and equivalents at beginning of period
     88.9       118.3  
 
            
 
                
Cash and equivalents at end of period
   $ 65.3     $ 115.2  
 
            

 

11

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
                         
    July 4,     January 3,     June 28,  
    2010     2010     2009  
Current Assets
                        
Cash and equivalents
   $ 65.3     $ 88.9     $ 115.2  
Trade accounts receivable, less allowances of $13.0, $15.0 and $15.4, respectively
     751.8       717.9       681.0  
Prepaid expenses and other current assets
     60.7       70.6       57.2  
Deferred taxes
     21.2       21.0       29.7  
 
                  
 
                        
Total current assets
     899.0       898.4       883.1  
 
                        
Property and Equipment, Net
     112.1       127.1       137.7  
 
                        
Noncurrent Deferred Taxes
     74.2       77.5       40.2  
 
                        
Goodwill, Net
     67.3       67.3       67.3  
 
                        
Other Assets
     127.5       131.4       125.3  
 
                  
 
                        
Total Assets
   $ 1,280.1     $ 1,301.7     $ 1,253.6  
 
                  
 
                        
Current Liabilities
                        
Short-term borrowings and current portion of long-term debt
   $ 68.4     $ 79.6     $ 77.6  
Accounts payable and accrued liabilities
     144.8       182.6       205.2  
Accrued payroll and related taxes
     228.3       208.3       217.4  
Accrued insurance
     19.8       19.7       25.2  
Income and other taxes
     47.3       47.4       18.1  
 
                  
 
                        
Total current liabilities
     508.6       537.6       543.5  
 
                        
Noncurrent Liabilities
                        
Long-term debt
     49.9       57.5       —  
Accrued insurance
     47.1       47.3       44.6  
Accrued retirement benefits
     72.4       76.9       66.4  
Other long-term liabilities
     15.4       16.0       14.9  
 
                  
 
                        
Total noncurrent liabilities
     184.8       197.7       125.9  
 
                        
Stockholders’ Equity
                        
Common stock
     40.1       40.1       40.1  
Treasury stock
     (71.3 )     (107.2 )     (107.8 )
Paid-in capital
     26.8       36.9       34.7  
Earnings invested in the business
     573.4       571.5       594.5  
Accumulated other comprehensive income
     17.7       25.1       22.7  
 
                  
 
                        
Total stockholders’ equity
     586.7       566.4       584.2  
 
                  
 
                        
Total Liabilities and Stockholders’ Equity
   $ 1,280.1     $ 1,301.7     $ 1,253.6  
 
                  
 
                        
STATISTICS:
                        
Working Capital
   $ 390.4     $ 360.8     $ 339.6  
Current Ratio
     1.8       1.7       1.6  
Debt-to-capital %
     16.8 %     19.5 %     11.7 %
Global Days Sales Outstanding
     50       51       51  

 

12

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
                                 
    Second Quarter (Commercial, PT and OCG)  
                    % Change  
                            Constant  
    2010     2009     US$     Currency  
Americas
                                
United States
   $ 770.8     $ 633.3       21.7 %     21.7 %
Canada
     54.5       42.6       28.1       12.7  
Mexico
     21.9       16.1       36.5       28.9  
Puerto Rico
     19.2       14.6       31.2       31.2  
 
                            
Total Americas
     866.4       706.6       22.6       21.5  
 
                                
EMEA
                                
France
     67.6       62.9       7.4       15.1  
Switzerland
     40.7       32.5       25.4       25.0  
United Kingdom
     34.2       50.2       (32.0 )     (29.6 )
Russia
     25.4       15.1       68.5       59.6  
Portugal
     19.1       12.6       51.9       63.7  
Germany
     16.2       15.5       5.1       12.7  
Italy
     14.7       17.6       (16.5 )     (10.1 )
Norway
     14.1       15.1       (6.9 )     (10.4 )
Other
     16.9       27.1       (37.7 )     (34.5 )
 
                            
Total EMEA
     248.9       248.6       0.1       3.7  
 
                                
APAC
                                
Australia
     28.7       22.5       27.0       9.3  
Singapore
     19.6       15.2       29.6       22.6  
Malaysia
     16.3       12.0       35.8       24.0  
India
     15.2       7.8       93.9       82.3  
Other
     14.3       16.2       (12.0 )     (22.4 )
 
                            
Total APAC
     94.1       73.7       27.5       15.2  
 
                                
Total Kelly Services, Inc.
   $ 1,209.4     $ 1,028.9       17.5 %     16.8 %
 
                            

 

13

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
                                 
    June Year to Date (Commercial, PT and OCG)  
                    % Change  
                            Constant  
    2010     2009     US$     Currency  
Americas
                                
United States
   $ 1,481.0     $ 1,278.1       15.9 %     15.9 %
Canada
     106.1       83.5       27.1       9.2  
Mexico
     40.9       30.8       32.8       21.9  
Puerto Rico
     33.9       30.3       12.0       12.0  
 
                            
Total Americas
     1,661.9       1,422.7       16.8       15.5  
 
                                
EMEA
                                
France
     134.9       124.6       8.2       9.3  
Switzerland
     72.1       61.0       18.2       14.1  
United Kingdom
     71.8       112.8       (36.3 )     (37.8 )
Russia
     48.7       29.0       68.1       54.0  
Portugal
     37.5       24.3       54.7       56.9  
Germany
     32.5       30.9       5.4       6.4  
Italy
     31.4       36.5       (14.0 )     (13.2 )
Norway
     28.0       28.2       (0.8 )     (9.9 )
Other
     36.1       55.3       (34.8 )     (35.9 )
 
                            
Total EMEA
     493.0       502.6       (1.9 )     (3.7 )
 
                                
APAC
                                
Australia
     56.3       42.9       31.1       4.8  
Singapore
     38.5       30.1       28.0       20.0  
Malaysia
     30.9       24.1       28.0       17.8  
India
     28.9       14.8       95.2       82.0  
Other
     30.3       34.3       (11.7 )     (24.9 )
 
                            
Total APAC
     184.9       146.2       26.4       10.9  
 
                                
Total Kelly Services, Inc.
   $ 2,339.8     $ 2,071.5       13.0 %     10.5 %
 
                            

 

14

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    Second Quarter     June Year to Date  
    2010     2009     2010     2009  
Pretax earnings (loss) from operations
   $ 8.5     $ (74.5 )   $ 6.9     $ (105.1 )
 
                                
Restructuring charges (Note 1)
     —       4.7       4.4       11.9  
Asset impairments (Note 2)
     1.5       52.6       1.5       52.6  
Litigation charges
     —       —       —       0.9  
 
                        
 
                                
Earnings (loss) from operations excluding restructuring, asset impairment and litigation charges
   $ 10.0     $ (17.2 )   $ 12.8     $ (39.7 )
 
                        
                                 
    Second Quarter  
    2010     2009  
    Amount     Per Share     Amount     Per Share  
 
                                
Earnings (loss) from continuing operations, net of taxes
   $ 3.9     $ 0.11     $ (66.0 )   $ (1.89 )
 
                                
Restructuring charges, net of taxes (Note 1)
     —       —       4.0       0.11  
Asset impairments, net of taxes (Note 2)
     1.2       0.03       49.2       1.41  
 
                            
 
                                
Earnings (loss) from continuing operations excluding restructuring and asset impairment charges, net of taxes
   $ 5.1     $ 0.14     $ (12.8 )   $ (0.37 )
 
                        
                                 
    June Year to Date  
    2010     2009  
    Amount     Per Share     Amount     Per Share  
 
                                
Earnings (loss) from continuing operations, net of taxes
   $ 1.9     $ 0.05     $ (82.1 )   $ (2.36 )
 
                                
Restructuring charges, net of taxes (Note 1)
     3.6       0.10       10.4       0.30  
Asset impairments, net of taxes (Note 2)
     1.2       0.03       49.2       1.41  
Litigation charges
     —       —       0.6       0.02  
 
                            
 
                                
Earnings (loss) from continuing operations excluding restructuring, asset impairment and litigation charges, net of taxes
   $ 6.7     $ 0.19     $ (21.9 )   $ (0.63 )
 
                        

 

15

 

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, asset impairment and litigation charges is useful to understand the Company’s fiscal 2010 financial performance and increases comparability. Specifically, Management believes that excluding 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)   Restructuring charges represent global costs incurred in connection with the reduction in the number of permanent employees and the consolidation, sale or closure of branch locations. These costs include severance, lease terminations, asset write-offs and other miscellaneous costs.
 
(2)   In 2010, the asset impairment charges relate to the write-off of incomplete software projects in Europe. In 2009, the asset impairment charges included adjustments to the value of goodwill for the Company’s Americas Commercial, APAC Commercial and EMEA PT segments, as well as long-lived assets and intangibles related to operations in Japan.

 

16