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Form 8-K
 
 
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): February 3, 2011
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 year ended January 2, 2011. 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 February 3, 2011.

 

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.
         
 
  KELLY SERVICES, INC.    
 
        
Date: February 3, 2011
        
 
  /s/ Patricia Little
 
Patricia Little 		   
 
  Executive Vice President and    
 
  Chief Financial Officer    
 
  (Principal Financial Officer)    
 
        
Date: February 3, 2011
        
 
        
 
  /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 February 3, 2011

 

4

Exhibit 99.1
Exhibit 99.1
(LOGO)
KELLY SERVICES REPORTS 4th QUARTER AND FULL YEAR 2010 RESULTS
TROY, MI (February 3, 2011) — Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the fourth quarter and full year 2010.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the fourth quarter of 2010 totaled $1.3 billion, an 11% increase compared to the corresponding quarter in 2009. Revenue for the full year totaled $5.0 billion, a 15% increase compared to the prior year. The fourth quarter of 2009 included an extra week which reduces the quarterly and annual comparisons by approximately 5% and 1%, respectively.
Earnings from operations for the fourth quarter of 2010 totaled $16.9 million, compared to losses from operations of $13.0 million reported for the fourth quarter of 2009. Included in the results from operations for the fourth quarter of 2009 are restructuring charges of $13.4 million.
Earnings from operations for the full year of 2010 totaled $38.1 million compared to a loss of $146.1 million in 2009. The results for the full year 2010 include $7.2 million of restructuring charges. The results for 2009 include $29.9 million of restructuring charges and $53.1 million of goodwill and related impairment charges.
Diluted earnings per share from continuing operations in the fourth quarter of 2010 were $0.39 compared to fourth quarter 2009 losses of $0.23 per share. The restructuring charges were $0.29 per share in the fourth quarter of 2009.
Diluted earnings per share from continuing operations for the full year of 2010 were $0.71 compared to 2009 losses of $3.01 per share. In 2010, the restructuring charges totaled $0.15 per share. In 2009, the restructuring charges totaled $0.69 per share and goodwill and related impairment charges totaled $1.43 per share.
Commenting on the fourth quarter results, Camden stated, “We’re pleased to report another successful quarter fueled by sustained demand for temporary staffing, a healthier global economy, and Kelly’s focus on business execution and operational excellence.”
Camden added that 2010 was much improved over a very difficult 2009, and Kelly made significant progress during the year in response to a changing labor market.
“As we begin 2011 and look to the future, we will continue to focus on building shareholder value by delivering a competitive profit in our industry, from the right solutions for our customers, delivered by the best talent in the business,” said Camden.
In conjunction with its fourth quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on February 3, 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, but are not limited to, competitive market pressures including pricing, changing market and economic conditions, material changes in demand from large corporate customers, availability of temporary workers with appropriate skills required by customers, increases in wages paid to temporary workers, liabilities for client and employee actions, foreign currency fluctuations, changes in laws and regulations (including federal, state and international tax laws), continued availability of financing for funding working capital and acquisitions and for general corporate purposes, the Company’s ability to effectively implement and manage its information technology programs, the ability of the Company to successfully expand into new markets and service lines, and other risks, uncertainties and factors discussed in this release and in the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2010 filed 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, 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

 

2

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JANUARY 2, 2011 AND 14 WEEKS ENDED JANUARY 3, 2010
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    2010     2009     Change     % Change  
 
                                
Revenue from services
   $ 1,325.8     $ 1,194.1     $ 131.7       11.0 %
 
                                
Cost of services
     1,109.4       1,005.8       103.6       10.3  
 
                        
 
                                
Gross profit
     216.4       188.3       28.1       15.0  
 
                                
Selling, general and administrative expenses
     199.0       201.3       (2.3 )     (1.1 )
 
                                
Asset impairments
     0.5       —       0.5     NM  
 
                        
 
                                
Earnings (loss) from operations
     16.9       (13.0 )     29.9     NM  
 
                                
Other expense, net
     (0.7 )     (0.9 )     0.2       14.6  
 
                        
 
                                
Earnings (loss) from continuing operations before taxes
     16.2       (13.9 )     30.1     NM  
 
                                
Income taxes
     1.6       (5.7 )     7.3       127.2  
 
                        
 
                                
Earnings (loss) from continuing operations
     14.6       (8.2 )     22.8     NM  
 
                                
Earnings from discontinued operations, net of tax
     —       —       —     NM  
 
                        
 
                                
Net earnings (loss)
   $ 14.6     $ (8.2 )   $ 22.8     NM %
 
                        
 
                                
Basic earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.39     $ (0.23 )   $ 0.62     NM %
Earnings from discontinued operations
     —       —       —     NM  
Net earnings (loss)
     0.39       (0.23 )     0.62     NM  
 
                                
Diluted Earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.39     $ (0.23 )   $ 0.62     NM %
Earnings from discontinued operations
     —       —       —     NM  
Net earnings (loss)
     0.39       (0.23 )     0.62     NM  
 
                                
STATISTICS:
                                
 
                                
Gross profit rate
     16.3 %     15.8 %     0.5 pts.        
 
                                
Selling, general and administrative expenses:
                                
% of revenue
     15.0       16.8       (1.8 )        
% of gross profit
     92.0       106.9       (14.9 )        
 
                                
% Return — Earnings (loss) from operations
     1.3       (1.1 )     2.4          
Earnings (loss) from continuing operations before taxes
     1.2       (1.2 )     2.4          
Earnings (loss) from continuing operations
     1.1       (0.7 )     1.8          
Net earnings (loss)
     1.1       (0.7 )     1.8          
 
                                
Effective income tax rate
     9.5 %     41.0 %     (31.5 )pts.        
 
                                
Average number of shares outstanding (millions):
                                
Basic
     36.7       34.9                  
Diluted
     36.7       34.9                  

 

3

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 52 WEEKS ENDED JANUARY 2, 2011 AND 53 WEEKS ENDED JANUARY 3, 2010
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    2010     2009     Change     % Change  
 
                                
Revenue from services
   $ 4,950.3     $ 4,314.8     $ 635.5       14.7 %
 
                                
Cost of services
     4,155.8       3,613.1       542.7       15.0  
 
                        
 
                                
Gross profit
     794.5       701.7       92.8       13.2  
 
                                
Selling, general and administrative expenses
     754.4       794.7       (40.3 )     (5.1 )
 
                                
Asset impairments
     2.0       53.1       (51.1 )     (96.2 )
 
                        
 
                                
Earnings (loss) from operations
     38.1       (146.1 )     184.2       NM  
 
                                
Other expense, net
     (5.4 )     (2.2 )     (3.2 )     (144.7 )
 
                        
 
                                
Earnings (loss) from continuing operations before taxes
     32.7       (148.3 )     181.0       NM  
 
                                
Income taxes
     6.6       (43.2 )     49.8       115.3  
 
                        
 
                                
Earnings (loss) from continuing operations
     26.1       (105.1 )     131.2       NM  
 
                                
Earnings from discontinued operations, net of tax
     —       0.6       (0.6 )     (100.0 )
 
                        
 
                                
Net earnings (loss)
   $ 26.1     $ (104.5 )   $ 130.6       NM %
 
                        
 
                                
Basic earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.71     $ (3.01 )   $ 3.72     NM %
Earnings from discontinued operations
     —       0.02       (0.02 )     (100.0 )
Net earnings (loss)
     0.71       (3.00 )     3.71       NM  
 
                                
Diluted Earnings (loss) per share on common stock
                                
Earnings (loss) from continuing operations
   $ 0.71     $ (3.01 )   $ 3.72     NM %
Earnings from discontinued operations
     —       0.02       (0.02 )     (100.0 )
Net earnings (loss)
     0.71       (3.00 )     3.71       NM  
 
                                
STATISTICS:
                                
 
                                
Gross profit rate
     16.0 %     16.3 %     (0.3 )pts.        
 
                                
Selling, general and administrative expenses:
                                
% of revenue
     15.2       18.4       (3.2 )        
% of gross profit
     94.9       113.2       (18.3 )        
 
                                
% Return — Earnings (loss) from operations
     0.8       (3.4 )     4.2          
Earnings (loss) from continuing operations before taxes
     0.7       (3.4 )     4.1          
Earnings (loss) from continuing operations
     0.5       (2.4 )     2.9          
Net earnings (loss)
     0.5       (2.4 )     2.9          
 
                                
Effective income tax rate
     20.2 %     29.1 %     (8.9 )pts.        
 
                                
Average number of shares outstanding (millions):
                                
Basic
     36.1       34.9                  
Diluted
     36.1       34.9                  

 

4

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                                 
    Fourth Quarter  
                            Constant  
    2010     2009             Currency  
    (13 Weeks)     (14 Weeks)     Change     Change  
Americas Commercial
                                
Revenue from services (including fee-based income)
   $ 646.3     $ 557.4       16.0 %     15.3 %
Fee-based income
     2.3       1.5       49.9       48.6  
Gross profit
     98.4       79.8       23.3       22.6  
SG&A expenses excluding restructuring charges
     73.4       67.9       8.2          
Restructuring charges
     —       3.5       (100.0 )        
Total SG&A expenses
     73.4       71.4       2.9       2.4  
Earnings from operations
     25.0       8.4       194.8          
Earnings from operations excluding restructuring charges
     25.0       11.9       108.3          
 
                                
Gross profit rate
     15.2 %     14.3 %     0.9 pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     11.4       12.2       (0.8 )        
% of gross profit
     74.6       85.0       (10.4 )        
Operating margin (excluding restructuring charges)
     3.9       2.2       1.7          
 
                                
Americas PT
                                
Revenue from services (including fee-based income)
   $ 229.9     $ 208.3       10.4 %     10.3 %
Fee-based income
     2.3       2.2       4.8       4.6  
Gross profit
     36.8       31.9       15.2       15.1  
SG&A expenses excluding restructuring charges
     24.5       24.7       (0.8 )        
Restructuring charges
     —       0.8       (100.0 )        
Total SG&A expenses
     24.5       25.5       (3.9 )     (4.0 )
Earnings from operations
     12.3       6.4       92.0          
Earnings from operations excluding restructuring charges
     12.3       7.2       70.5          
 
                                
Gross profit rate
     16.0 %     15.3 %     0.7 pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     10.7       11.9       (1.2 )        
% of gross profit
     66.8       77.5       (10.7 )        
Operating margin (excluding restructuring charges)
     5.3       3.4       1.9          
 
                                
EMEA Commercial
                                
Revenue from services (including fee-based income)
   $ 229.2     $ 238.9       (4.0 )%     0.6 %
Fee-based income
     4.7       4.3       9.9       14.8  
Gross profit
     37.2       37.4       (0.6 )     4.4  
SG&A expenses excluding restructuring charges
     34.8       35.2       (1.4 )        
Restructuring charges
     —       4.9       (100.0 )        
Total SG&A expenses
     34.8       40.1       (13.3 )     (9.7 )
Earnings from operations
     2.4       (2.7 )   NM          
Earnings from operations excluding restructuring charges
     2.4       2.2       12.8          
 
                                
Gross profit rate
     16.2 %     15.7 %     0.5 pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.2       14.8       0.4          
% of gross profit
     93.5       94.2       (0.7 )        
Operating margin (excluding restructuring charges)
     1.1       0.9       0.2          

 

5

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    Fourth Quarter  
                            Constant  
    2010     2009             Currency  
    (13 Weeks)     (14 Weeks)     Change     Change  
EMEA PT
                                
Revenue from services (including fee-based income)
   $ 41.2     $ 39.6       4.0 %     9.8 %
Fee-based income
     3.8       3.6       5.1       10.0  
Gross profit
     10.4       9.8       6.9       12.7  
Total SG&A expenses
     9.3       10.6       (12.7 )     (8.6 )
Earnings from operations
     1.1       (0.8 )   NM          
 
                                
Gross profit rate
     25.4 %     24.7 %     0.7 pts.        
Expense rates:
                                
% of revenue
     22.5       26.8       (4.3 )        
% of gross profit
     88.7       108.5       (19.8 )        
Operating margin
     2.9       (2.1 )     5.0          
 
                                
APAC Commercial
                                
Revenue from services (including fee-based income)
   $ 102.0     $ 83.0       22.9 %     14.8 %
Fee-based income
     2.9       2.9       0.7       (6.1 )
Gross profit
     12.9       12.1       6.0       (1.1 )
SG&A expenses excluding restructuring charges
     13.1       11.6       13.7          
Restructuring charges
     —       1.4       (100.0 )        
Total SG&A expenses
     13.1       13.0       0.9       (5.7 )
Earnings from operations
     (0.2 )     (0.9 )     72.3          
Earnings from operations excluding restructuring charges
     (0.2 )     0.5     NM          
 
                                
Gross profit rate
     12.6 %     14.6 %     (2.0 )pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     12.9       13.9       (1.0 )        
% of gross profit
     101.8       95.0       6.8          
Operating margin (excluding restructuring charges)
     (0.2 )     0.7       (0.9 )        
 
                                
APAC PT
                                
Revenue from services (including fee-based income)
   $ 8.9     $ 7.2       23.8 %     16.2 %
Fee-based income
     2.9       1.0       189.7       174.1  
Gross profit
     3.8       2.1       86.7       76.1  
Total SG&A expenses
     5.0       2.6       93.3       82.8  
Earnings from operations
     (1.2 )     (0.5 )     (119.4 )        
 
                                
Gross profit rate
     43.2 %     28.6 %     14.6 pts.        
Expense rates:
                                
% of revenue
     55.9       35.8       20.1          
% of gross profit
     129.6       125.2       4.4          
Operating margin
     (12.8 )     (7.2 )     (5.6 )        

 

6

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    Fourth Quarter  
                            Constant  
    2010     2009             Currency  
    (13 Weeks)     (14 Weeks)     Change     Change  
OCG
                                
Revenue from services (including fee-based income)
   $ 75.0     $ 68.2       9.9 %     10.1 %
Fee-based income
     7.3       6.0       21.4       21.7  
Gross profit
     17.6       15.5       13.5       14.1  
SG&A expenses excluding restructuring charges
     20.7       17.9       15.8          
Restructuring charges
     —       1.3       (100.0 )        
Total SG&A expenses
     20.7       19.2       8.2       8.5  
Earnings from operations
     (3.1 )     (3.7 )     14.0          
Earnings from operations excluding restructuring charges
     (3.1 )     (2.4 )     (30.6 )        
 
                                
Gross profit rate
     23.4 %     22.7 %     0.7 pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     27.6       26.2       1.4          
% of gross profit
     118.0       115.7       2.3          
Operating margin (excluding restructuring charges)
     (4.2 )     (3.6 )     (0.6 )        
 
                                
Corporate Expense
                                
SG&A expenses excluding restructuring charges
   $ 18.9     $ 17.7       6.7 %        
Restructuring charges
     —       1.5       (100.0 )        
Total SG&A expenses
     18.9       19.2       (1.7 )        
Asset impairments
     0.5       —     NM          
 
                                
Consolidated Total (net of intersegment activity)
                                
Revenue from services (including fee-based income)
   $ 1,325.8     $ 1,194.1       11.0 %     11.3 %
Fee-based income
     26.0       21.5       21.7       21.8  
Gross profit
     216.4       188.3       15.0       15.4  
SG&A expenses excluding restructuring charges
     199.0       187.9       6.0          
Restructuring charges
     —       13.4       (100.0 )        
Total SG&A expenses
     199.0       201.3       (1.1 )     (0.9 )
Asset impairments
     0.5       —     NM          
Earnings from operations
     16.9       (13.0 )   NM          
Earnings from operations excluding restructuring charges
     16.9       0.4     NM          
 
                                
Gross profit rate
     16.3 %     15.8 %     0.5 pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.0       15.7       (0.7 )        
% of gross profit
     92.0       99.8       (7.8 )        
Operating margin (excluding restructuring charges)
     1.3       0.0       1.3          

 

7

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                                 
    December Year to Date  
                            Constant  
    2010     2009             Currency  
    (52 Weeks)     (53 Weeks)     Change     Change  
Americas Commercial
                                
Revenue from services (including fee-based income)
   $ 2,428.2     $ 1,980.3       22.6 %     21.4 %
Fee-based income
     8.8       6.6       31.8       29.0  
Gross profit
     354.9       290.7       22.0       21.0  
SG&A expenses excluding restructuring charges
     275.3       273.2       0.7          
Restructuring charges
     0.3       7.2       (95.0 )        
Total SG&A expenses
     275.6       280.4       (1.7 )     (2.6 )
Earnings from operations
     79.3       10.3     NM          
Earnings from operations excluding restructuring charges
     79.6       17.5       352.7          
 
                                
Gross profit rate
     14.6 %     14.7 %     (0.1 )pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     11.3       13.8       (2.5 )        
% of gross profit
     77.5       93.9       (16.4 )        
Operating margin (excluding restructuring charges)
     3.3       0.9       2.4          
 
                                
Americas PT
                                
Revenue from services (including fee-based income)
   $ 889.0     $ 792.6       12.2 %     12.0 %
Fee-based income
     9.0       9.4       (4.5 )     (4.9 )
Gross profit
     140.0       125.1       12.0       11.8  
SG&A expenses excluding restructuring charges
     93.7       100.9       (7.0 )        
Restructuring charges
     —       1.0       (100.0 )        
Total SG&A expenses
     93.7       101.9       (8.0 )     (8.2 )
Earnings from operations
     46.3       23.2       100.1          
Earnings from operations excluding restructuring charges
     46.3       24.2       91.4          
 
                                
Gross profit rate
     15.8 %     15.8 %     — pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     10.5       12.7       (2.2 )        
% of gross profit
     67.0       80.7       (13.7 )        
Operating margin (excluding restructuring charges)
     5.2       3.0       2.2          
 
                                
EMEA Commercial
                                
Revenue from services (including fee-based income)
   $ 872.0     $ 895.2       (2.6 )%     (0.9 )%
Fee-based income
     19.1       16.6       15.9       16.0  
Gross profit
     141.0       140.2       0.6       2.3  
SG&A expenses excluding restructuring charges
     130.5       150.3       (13.2 )        
Restructuring charges
     2.7       15.6       (82.8 )        
Total SG&A expenses
     133.2       165.9       (19.7 )     (18.9 )
Asset impairments
     1.5       —     NM          
Earnings from operations
     6.3       (25.7 )   NM          
Earnings from operations excluding restructuring charges
     9.0       (10.1 )   NM          
 
                                
Gross profit rate
     16.2 %     15.7 %     0.5 pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.0       16.8       (1.8 )        
% of gross profit
     92.6       107.2       (14.6 )        
Operating margin (excluding restructuring charges)
     1.0       (1.1 )     2.1          

 

8

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    December Year to Date  
                            Constant  
    2010     2009             Currency  
    (52 Weeks)     (53 Weeks)     Change     Change  
EMEA PT
                                
Revenue from services (including fee-based income)
   $ 147.6     $ 141.9       4.0 %     6.7 %
Fee-based income
     15.0       15.7       (4.3 )     (4.1 )
Gross profit
     38.7       37.8       2.9       4.8  
Total SG&A expenses
     36.9       40.6       (9.3 )     (8.2 )
Earnings from operations
     1.8       (2.8 )   NM          
 
                                
Gross profit rate
     26.3 %     26.6 %     (0.3 )pts.        
Expense rates:
                                
% of revenue
     25.0       28.6       (3.6 )        
% of gross profit
     94.8       107.6       (12.8 )        
Operating margin
     1.4       (2.0 )     3.4          
 
                                
APAC Commercial
                                
Revenue from services (including fee-based income)
   $ 355.3     $ 284.9       24.7 %     12.9 %
Fee-based income
     11.4       9.7       16.6       5.6  
Gross profit
     48.4       41.6       16.2       4.6  
SG&A expenses excluding restructuring charges
     45.1       44.6       1.3          
Restructuring charges
     0.5       1.6       (66.5 )        
Total SG&A expenses
     45.6       46.2       (1.0 )     (10.7 )
Earnings from operations
     2.8       (4.6 )   NM          
Earnings from operations excluding restructuring charges
     3.3       (3.0 )   NM          
 
                                
Gross profit rate
     13.6 %     14.6 %     (1.0 )pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     12.7       15.6       (2.9 )        
% of gross profit
     93.3       107.0       (13.7 )        
Operating margin (excluding restructuring charges)
     0.9       (1.0 )     1.9          
 
                                
APAC PT
                                
Revenue from services (including fee-based income)
   $ 32.5     $ 25.4       28.2 %     16.8 %
Fee-based income
     10.5       3.8       172.1       156.3  
Gross profit
     13.9       7.7       81.3       68.3  
Total SG&A expenses
     17.0       9.2       85.1       72.0  
Earnings from operations
     (3.1 )     (1.5 )     (104.5 )        
 
                                
Gross profit rate
     42.7 %     30.2 %     12.5 pts.        
Expense rates:
                                
% of revenue
     52.2       36.2       16.0          
% of gross profit
     122.3       119.8       2.5          
Operating margin
     (9.5 )     (6.0 )     (3.5 )        

 

9

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    December Year to Date  
                            Constant  
    2010     2009             Currency  
    (52 Weeks)     (53 Weeks)     Change     Change  
OCG
                                
Revenue from services (including fee-based income)
   $ 254.8     $ 219.9       15.8 %     15.6 %
Fee-based income
     25.6       24.4       4.9       3.9  
Gross profit
     60.0       59.7       0.2       (0.1 )
SG&A expenses excluding restructuring charges
     77.5       69.6       11.3          
Restructuring charges
     0.1       1.9       (96.0 )        
Total SG&A expenses
     77.6       71.5       8.5       8.1  
Earnings from operations
     (17.6 )     (11.8 )     (50.8 )        
Earnings from operations excluding restructuring charges
     (17.5 )     (9.9 )     (78.3 )        
 
                                
Gross profit rate
     23.5 %     27.2 %     (3.7 )pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     30.4       31.7       (1.3 )        
% of gross profit
     129.5       116.6       12.9          
Operating margin (excluding restructuring charges)
     (6.9 )     (4.5 )     (2.4 )        
 
                                
Corporate Expense
                                
SG&A expenses excluding restructuring charges
   $ 73.6     $ 77.5       (5.1) %        
Restructuring charges
     3.6       2.6       37.4          
Total SG&A expenses
     77.2       80.1       (3.7 )        
Asset impairments
     0.5       53.1       (99.1 )        
 
                                
Consolidated Total (net of intersegment activity)
                                
Revenue from services (including fee-based income)
   $ 4,950.3     $ 4,314.8       14.7 %     13.7 %
Fee-based income
     99.0       86.1       15.0       12.6  
Gross profit
     794.5       701.7       13.2       12.3  
SG&A expenses excluding restructuring charges
     747.2       764.8       (2.3 )        
Restructuring charges
     7.2       29.9       (75.8 )        
Total SG&A expenses
     754.4       794.7       (5.1 )     (5.9 )
Asset impairments
     2.0       53.1       (96.2 )        
Earnings from operations
     38.1       (146.1 )   NM          
Earnings from operations excluding restructuring charges
     45.3       (116.2 )   NM          
 
                                
Gross profit rate
     16.0 %     16.3 %     (0.3 )pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     15.1       17.7       (2.6 )        
% of gross profit
     94.0       109.0       (15.0 )        
Operating margin (excluding restructuring charges)
     0.9       (2.7 )     3.6          

 

10

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
                 
    January 2,     January 3,  
    2011     2010  
Current Assets
                
Cash and equivalents
   $ 80.5     $ 88.9  
Trade accounts receivable, less allowances of $12.3 and $15.0, respectively
     810.9       717.9  
Prepaid expenses and other current assets
     44.8       70.6  
Deferred taxes
     22.4       21.0  
 
            
 
                
Total current assets
     958.6       898.4  
 
                
Property and Equipment, Net
     104.0       127.1  
 
                
Noncurrent Deferred Taxes
     84.0       77.5  
 
                
Goodwill, Net
     67.3       67.3  
 
                
Other Assets
     154.5       142.2  
 
            
 
                
Total Assets
   $ 1,368.4     $ 1,312.5  
 
            
 
                
Current Liabilities
                
Short-term borrowings and current portion of long-term debt
   $ 78.8     $ 79.6  
Accounts payable and accrued liabilities
     181.6       182.6  
Accrued payroll and related taxes
     243.3       208.3  
Accrued insurance
     31.3       22.9  
Income and other taxes
     56.0       47.4  
 
            
 
                
Total current liabilities
     591.0       540.8  
 
                
Noncurrent Liabilities
                
Long-term debt
     —       57.5  
Accrued insurance
     53.6       54.9  
Accrued retirement benefits
     85.4       76.9  
Other long-term liabilities
     14.6       16.0  
 
            
 
                
Total noncurrent liabilities
     153.6       205.3  
 
                
Stockholders’ Equity
                
Common stock
     40.1       40.1  
Treasury stock
     (70.9 )     (107.2 )
Paid-in capital
     28.0       36.9  
Earnings invested in the business
     597.6       571.5  
Accumulated other comprehensive income
     29.0       25.1  
 
            
 
                
Total stockholders’ equity
     623.8       566.4  
 
            
 
                
Total Liabilities and Stockholders’ Equity
   $ 1,368.4     $ 1,312.5  
 
            
 
                
STATISTICS:
                
Working Capital
   $ 367.6     $ 357.6  
Current Ratio
     1.6       1.7  
Debt-to-capital %
     11.2 %     19.5 %
Global Days Sales Outstanding
     49       51  

 

11

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 52 WEEKS ENDED JANUARY 2, 2011 AND 53 WEEKS ENDED JANUARY 3, 2010
(UNAUDITED)
(In millions of dollars)
                 
    2010     2009  
 
                
Cash flows from operating activities
                
Net earnings (loss)
   $ 26.1     $ (104.5 )
Noncash adjustments:
                
Impairment of assets
     2.0       53.1  
Depreciation and amortization
     34.9       40.9  
Provision for bad debts
     2.1       2.2  
Stock-based compensation
     3.2       5.1  
Other, net
     0.5       (2.2 )
Changes in operating assets and liabilities
     (27.0 )     (22.0 )
 
            
 
                
Net cash from operating activities
     41.8       (27.4 )
 
            
 
                
Cash flows from investing activities
                
Capital expenditures
     (11.0 )     (13.1 )
Acquisition of companies, net of cash received
     —       (7.5 )
Other investing activities
     (0.3 )     (2.8 )
 
            
 
                
Net cash from investing activities
     (11.3 )     (23.4 )
 
            
 
                
Cash flows from financing activities
                
Net change in short-term borrowings
     (44.8 )     52.7  
Repayment of debt
     (14.9 )     (30.5 )
Sale of stock and other financing activities
     24.4       (2.6 )
 
            
 
                
Net cash from financing activities
     (35.3 )     19.6  
 
            
 
                
Effect of exchange rates on cash and equivalents
     (3.6 )     1.8  
 
            
 
                
Net change in cash and equivalents
     (8.4 )     (29.4 )
Cash and equivalents at beginning of period
     88.9       118.3  
 
            
 
                
Cash and equivalents at end of period
   $ 80.5     $ 88.9  
 
            

 

12

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
                                 
    Fourth Quarter (Commercial, PT and OCG)  
                    % Change  
    2010     2009             Constant  
    (13 Weeks)     (14 Weeks)     US$     Currency  
 
                                
Americas
                                
United States
   $ 829.6     $ 733.1       13.2 %     13.2 %
Canada
     56.2       51.5       8.9       4.4  
Mexico
     27.6       19.0       45.2       37.4  
Puerto Rico
     22.6       15.0       51.5       51.5  
 
                            
Total Americas
     936.0       818.6       14.4       13.9  
 
                                
EMEA
                                
France
     72.2       78.7       (8.2 )     (0.0 )
Switzerland
     50.7       38.8       30.5       24.5  
United Kingdom
     28.5       43.1       (33.9 )     (31.6 )
Russia
     28.1       19.9       41.3       47.4  
Portugal
     21.8       19.4       12.5       22.5  
Germany
     19.2       17.6       8.3       17.9  
Italy
     17.2       19.0       (9.5 )     (1.3 )
Norway
     14.3       17.3       (17.3 )     (13.6 )
Other
     23.8       29.0       (17.7 )     (11.4 )
 
                            
Total EMEA
     275.8       282.8       (2.5 )     2.4  
 
                                
APAC
                                
Australia
     40.6       30.4       33.8       23.2  
Singapore
     24.1       17.9       34.6       25.7  
Malaysia
     15.9       13.7       15.9       6.1  
India
     17.0       11.9       43.1       37.8  
Other
     16.4       18.8       (13.1 )     (16.6 )
 
                            
Total APAC
     114.0       92.7       23.0       14.9  
 
                                
Total Kelly Services, Inc.
   $ 1,325.8     $ 1,194.1       11.0 %     11.3 %
 
                            

 

13

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
                                 
    December Year to Date (Commercial, PT and OCG)  
                    % Change  
    2010     2009             Constant  
    (52 Weeks)     (53 Weeks)     US$     Currency  
 
                                
Americas
                                
United States
   $ 3,121.9     $ 2,634.3       18.5 %     18.5 %
Canada
     219.0       183.4       19.4       8.3  
Mexico
     93.7       66.5       40.8       32.2  
Puerto Rico
     78.2       57.9       35.1       35.1  
 
                            
Total Americas
     3,512.8       2,942.1       19.4       18.5  
 
                                
EMEA
                                
France
     278.4       272.7       2.1       7.6  
Switzerland
     170.7       138.6       23.2       18.6  
United Kingdom
     134.1       206.7       (35.1 )     (34.5 )
Russia
     103.6       65.4       58.4       53.0  
Portugal
     80.6       59.5       35.5       43.4  
Germany
     69.8       65.1       7.1       13.1  
Italy
     63.3       72.9       (13.2 )     (8.6 )
Norway
     57.4       61.7       (7.0 )     (10.2 )
Other
     80.7       111.2       (27.4 )     (24.6 )
 
                            
Total EMEA
     1,038.6       1,053.8       (1.4 )     0.4  
 
                                
APAC
                                
Australia
     128.8       98.3       31.1       13.5  
Singapore
     84.3       64.4       30.8       22.5  
Malaysia
     63.3       50.1       26.3       15.2  
India
     61.4       36.6       67.8       59.0  
Other
     61.1       69.5       (12.1 )     (20.8 )
 
                            
Total APAC
     398.9       318.9       25.1       13.3  
 
                                
Total Kelly Services, Inc.
   $ 4,950.3     $ 4,314.8       14.7 %     13.7 %
 
                            

 

14

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    Fourth Quarter     December Year to Date  
    2010     2009     2010     2009  
 
                                
Pretax earnings (loss) from operations
   $ 16.9     $ (13.0 )   $ 38.1     $ (146.1 )
 
                                
Restructuring charges (Note 1)
     —       13.4       7.2       29.9  
Goodwill and related impairment charges (Note 2)
     —       —       —       53.1  
 
                        
 
                                
Earnings (loss) from operations excluding restructuring and goodwill and related impairment charges
   $ 16.9     $ 0.4     $ 45.3     $ (63.1 )
 
                        
                                 
    Fourth Quarter  
    2010     2009  
    Amount     Per Share     Amount     Per Share  
 
                                
Earnings (loss) from continuing operations, net of taxes
   $ 14.6     $ 0.39     $ (8.2 )   $ (0.23 )
 
                                
Restructuring charges, net of taxes (Note 1)
     —       —       10.1       0.29  
 
                            
 
                                
Earnings from continuing operations excluding restructuring charges, net of taxes
   $ 14.6     $ 0.39     $ 1.9     $ 0.05  
 
                        
                                 
    December Year to Date  
    2010     2009  
    Amount     Per Share     Amount     Per Share  
 
                                
Earnings (loss) from continuing operations, net of taxes
   $ 26.1     $ 0.71     $ (105.1 )   $ (3.01 )
 
                                
Restructuring charges, net of taxes (Note 1)
     5.4       0.15       24.0       0.69  
Goodwill and related impairment charges, net of taxes (Note 2)
     —       —       50.0       1.43  
 
                            
 
                                
Earnings (loss) from continuing operations excluding restructuring and goodwill and related impairment charges, net of taxes
   $ 31.5     $ 0.86     $ (31.1 )   $ (0.89 )
 
                        

 

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 and impairment 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) In 2010, restructuring costs relate 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 2009, restructuring costs relate primarily to global severance, lease terminations, asset write-offs and other miscellaneous costs incurred in connection with the reduction in the number of permanent employees and the consolidation, sale or closure of branch locations.
(2) In 2009, the goodwill and related 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 and Europe.

 

16