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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): November 9, 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 nine months ended October 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 November 9, 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: November 9, 2011
        
 
        
 
  /s/ Patricia Little
 
Patricia Little 		   
 
  Executive Vice President and    
 
  Chief Financial Officer    
 
  (Principal Financial Officer)    
 
        
Date: November 9, 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 November 9, 2011

 

4

Exhibit 99.1
Exhibit 99.1
(KELLY LOGO)
KELLY SERVICES REPORTS 3rd QUARTER 2011 RESULTS
TROY, MI (November 9, 2011) — Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the third quarter.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the third quarter of 2011 totaled $1.4 billion, a 10% increase compared to the corresponding quarter in 2010.
Earnings from operations for the third quarter of 2011 totaled $22 million, compared to earnings from operations of $14 million reported for the third quarter of 2010.
Diluted earnings per share from continuing operations in the third quarter of 2011 were $0.52 compared to third quarter 2010 earnings of $0.26 per share.
In view of the economic challenges, Camden called Kelly’s third quarter performance solid and particularly encouraging. “We are seeing continued demand for temporary staffing services ahead of last year. Today’s employers are seeking greater workforce flexibility as they adapt to new market realities, and Kelly is in an excellent position to provide customized solutions – particularly through outsourcing and consulting, and highly skilled professional and technical services. When coupled with our leaner cost structure, that business mix has the potential to accelerate profit growth going forward.”
In conjunction with its third quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on November 9, 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, our ability to achieve our business strategy, including our ability to successfully expand into new markets and service lines, material changes in demand from or loss of large corporate customers, impairment charges initiated by adverse industry or market developments, unexpected termination of customer contracts, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits, liability for improper disclosure of sensitive or private employee information, unexpected changes in claim trends on workers’ compensation and benefit plans, our ability to maintain specified financial covenants in our bank facilities, our ability to access credit markets and continued availability of financing for funding working capital, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology programs, our ability to retain the services of our senior management, local management and field personnel, the impact of changes in laws and regulations (including federal, state and international tax laws and the upcoming expiration of the U.S. work opportunity credit program), the net financial impact of recent U.S. healthcare legislation on our business, risks associated with conducting business in foreign countries, including foreign currency fluctuations, and other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. Actual results may differ materially from any forward looking statements contained herein, and we have no intention to update these statements.
About Kelly Services
Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a leader in providing workforce solutions. Kelly® offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire and direct-hire basis. Serving clients around the globe, Kelly provides employment to more than 530,000 employees annually. Revenue in 2010 was $5.0 billion. Visit www.kellyservices.com and connect with us on facebook.com/kellyservices, linkedin.com/companies/kelly-services and twitter.com/kellyservices.
#
     
ANALYST CONTACT:
  MEDIA CONTACT:
James Polehna
  Jane Stehney
(248) 244-4586
  (248) 244-5630
james_polehna@kellyservices.com
  jane_stehney@kellyservices.com

 

2

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED OCTOBER 2, 2011 AND OCTOBER 3, 2010
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    2011     2010     Change     % Change  
 
                                
Revenue from services
   $ 1,409.8     $ 1,284.7     $ 125.1       9.7 %
 
                                
Cost of services
     1,181.2       1,077.5       103.7       9.6  
 
                        
 
                                
Gross profit
     228.6       207.2       21.4       10.4  
 
                                
Selling, general and administrative expenses
     206.5       192.9       13.6       7.1  
 
                        
 
                                
Earnings from operations
     22.1       14.3       7.8       54.7  
 
                                
Other income (expense), net
     1.0       (1.5 )     2.5       161.7  
 
                        
 
                                
Earnings from continuing operations before taxes
     23.1       12.8       10.3       80.2  
 
                                
Income taxes
     3.4       3.2       0.2       4.6  
 
                        
 
                                
Earnings from continuing operations
     19.7       9.6       10.1       105.6  
 
                                
Loss from discontinued operations, net of tax
     —       —       —     NM  
 
                        
 
                                
Net earnings
   $ 19.7     $ 9.6     $ 10.1       105.6 %
 
                        
 
                                
Basic earnings per share on common stock
                                
Earnings from continuing operations
   $ 0.52     $ 0.26     $ 0.26       100.0 %
Loss from discontinued operations
     —       —       —     NM  
Net earnings
     0.52       0.26       0.26       100.0  
 
                                
Diluted earnings per share on common stock
                                
Earnings from continuing operations
   $ 0.52     $ 0.26     $ 0.26       100.0 %
Loss from discontinued operations
     —       —       —     NM  
Net earnings
     0.52       0.26       0.26       100.0  
 
                                
STATISTICS:
                                
 
                                
Gross profit rate
     16.2 %     16.1 %   0.1  pts.      
 
                                
Selling, general and administrative expenses:
                                
% of revenue
     14.6       15.0       (0.4 )        
% of gross profit
     90.3       93.1       (2.8 )        
 
                                
% Return — Earnings from operations
     1.6       1.1       0.5          
Earnings from continuing operations before taxes
     1.6       1.0       0.6          
Earnings from continuing operations
     1.4       0.7       0.7          
Net earnings
     1.4       0.7       0.7          
 
                                
Effective income tax rate
     14.6 %     25.1 %   (10.5 ) pts.      
 
                                
Average number of shares outstanding (millions):
                                
Basic
     36.8       36.7                  
Diluted
     36.8       36.7                  
 
                                
Shares adjusted for nonvested restricted awards (millions):
                                
Basic
     37.8       37.0                  
Diluted
     37.8       37.0                  

 

3

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED OCTOBER 2, 2011 AND OCTOBER 3, 2010
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    2011     2010     Change     % Change  
 
                                
Revenue from services
   $ 4,154.7     $ 3,624.5     $ 530.2       14.6 %
 
                                
Cost of services
     3,487.8       3,046.4       441.4       14.5  
 
                        
 
                                
Gross profit
     666.9       578.1       88.8       15.4  
 
                                
Selling, general and administrative expenses
     621.9       555.4       66.5       12.0  
 
                                
Asset impairments
     —       1.5       (1.5 )     (100.0 )
 
                        
 
                                
Earnings from operations
     45.0       21.2       23.8       112.3  
 
                                
Other expense, net
     (0.1 )     (4.7 )     4.6       97.3  
 
                        
 
                                
Earnings from continuing operations before taxes
     44.9       16.5       28.4       171.3  
 
                                
Income taxes
     4.1       5.0       (0.9 )     (18.9 )
 
                        
 
                                
Earnings from continuing operations
     40.8       11.5       29.3       254.9  
 
                                
Loss from discontinued operations, net of tax
     (1.2 )     —       (1.2 )   NM  
 
                        
 
                                
Net earnings
   $ 39.6     $ 11.5     $ 28.1       244.7 %
 
                        
 
                                
Basic earnings per share on common stock
                                
Earnings from continuing operations
   $ 1.09     $ 0.32     $ 0.77       240.6 %
Loss from discontinued operations
     (0.03 )     —       (0.03 )   NM  
Net earnings
     1.05       0.32       0.73       228.1  
 
                                
Diluted earnings per share on common stock
                                
Earnings from continuing operations
   $ 1.09     $ 0.32     $ 0.77       240.6 %
Loss from discontinued operations
     (0.03 )     —       (0.03 )   NM  
Net earnings
     1.05       0.32       0.73       228.1  
 
                                
STATISTICS:
                                
 
                                
Gross profit rate
     16.1 %     16.0 %   0.1  pts.      
 
                                
Selling, general and administrative expenses:
                                
% of revenue
     15.0       15.3       (0.3 )        
% of gross profit
     93.3       96.1       (2.8 )        
 
                                
% Return — Earnings from operations
     1.1       0.6       0.5          
Earnings from continuing operations before taxes
     1.1       0.5       0.6          
Earnings from continuing operations
     1.0       0.3       0.7          
Net earnings
     1.0       0.3       0.7          
 
                                
Effective income tax rate
     9.1 %     30.6 %   (21.5 ) pts.      
 
                                
Average number of shares outstanding (millions):
                                
Basic
     36.8       35.9                  
Diluted
     36.8       35.9                  
 
                                
Shares adjusted for nonvested restricted awards (millions):
                                
Basic
     37.6       36.3                  
Diluted
     37.6       36.3                  

 

4

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                                 
    Third Quarter  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
Americas Commercial
                                
Revenue from services (including fee-based income)
   $ 661.7     $ 633.3       4.5 %     3.8 %
Fee-based income
     3.2       2.2       47.7       46.3  
Gross profit
     93.9       92.3       1.7       1.1  
Total SG&A expenses
     72.1       69.1       4.3       3.7  
Earnings from operations
     21.8       23.2       (5.9 )        
 
                                
Gross profit rate
     14.2 %     14.6 %   (0.4 ) pts.      
Expense rates:
                                
% of revenue
     10.9       10.9       —          
% of gross profit
     76.7       74.8       1.9          
Operating margin
     3.3       3.7       (0.4 )        
 
                                
Americas PT
                                
Revenue from services (including fee-based income)
   $ 250.8     $ 233.6       7.4 %     7.3 %
Fee-based income
     3.2       2.2       48.1       47.7  
Gross profit
     38.0       37.2       2.0       1.9  
Total SG&A expenses
     26.0       23.5       10.6       10.4  
Earnings from operations
     12.0       13.7       (12.6 )        
 
                                
Gross profit rate
     15.1 %     15.9 %   (0.8 ) pts.      
Expense rates:
                                
% of revenue
     10.4       10.1       0.3          
% of gross profit
     68.4       63.1       5.3          
Operating margin
     4.8       5.9       (1.1 )        
 
                                
EMEA Commercial
                                
Revenue from services (including fee-based income)
   $ 261.0     $ 228.1       14.4 %     2.8 %
Fee-based income
     6.5       4.5       45.2       33.1  
Gross profit
     42.2       37.2       13.4       1.7  
SG&A expenses excluding restructuring charges
     36.3       32.4       11.8          
Restructuring charges
     (0.6 )     —     NM          
Total SG&A expenses
     35.7       32.4       10.0       (1.7 )
Earnings from operations
     6.5       4.8       36.7          
Earnings from operations excluding restructuring charges
     5.9       4.8       24.3          
 
                                
Gross profit rate
     16.2 %     16.3 %   (0.1 ) pts.      
Expense rates (excluding restructuring charges):
                                
% of revenue
     13.9       14.2       (0.3 )        
% of gross profit
     86.0       87.2       (1.2 )        
Operating margin (excluding restructuring charges)
     2.3       2.1       0.2          

 

5

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    Third Quarter  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
EMEA PT
                                
Revenue from services (including fee-based income)
   $ 46.8     $ 37.1       26.3 %     14.1 %
Fee-based income
     5.3       3.6       45.9       34.5  
Gross profit
     12.7       9.6       31.6       19.9  
Total SG&A expenses
     11.1       9.3       20.2       8.3  
Earnings from operations
     1.6       0.3       312.1          
 
                                
Gross profit rate
     27.1 %     26.0 %   1.1  pts.      
Expense rates:
                                
% of revenue
     23.8       25.0       (1.2 )        
% of gross profit
     87.7       96.1       (8.4 )        
Operating margin
     3.3       1.0       2.3          
 
                                
APAC Commercial
                                
Revenue from services (including fee-based income)
   $ 101.8     $ 88.7       14.7 %     4.5 %
Fee-based income
     3.8       3.0       28.3       17.2  
Gross profit
     14.7       12.4       18.8       7.6  
Total SG&A expenses
     14.1       11.4       23.5       11.4  
Earnings from operations
     0.6       1.0       (35.5 )        
 
                                
Gross profit rate
     14.5 %     14.0 %   0.5  pts.      
Expense rates:
                                
% of revenue
     13.8       12.8       1.0          
% of gross profit
     95.7       92.0       3.7          
Operating margin
     0.6       1.1       (0.5 )        
 
                                
APAC PT
                                
Revenue from services (including fee-based income)
   $ 14.1     $ 8.2       72.3 %     58.8 %
Fee-based income
     4.2       2.9       47.1       36.2  
Gross profit
     5.6       3.8       52.2       40.0  
Total SG&A expenses
     5.7       4.3       31.5       20.3  
Earnings from operations
     (0.1 )     (0.5 )     89.3          
 
                                
Gross profit rate
     39.9 %     45.2 %   (5.3 ) pts.      
Expense rates:
                                
% of revenue
     40.4       53.0       (12.6 )        
% of gross profit
     101.2       117.1       (15.9 )        
Operating margin
     (0.5 )     (7.7 )     7.2          

 

6

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    Third Quarter  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
OCG
                                
Revenue from services (including fee-based income)
   $ 80.7     $ 64.1       25.9 %     24.4 %
Fee-based income
     10.5       6.6       60.3       53.6  
Gross profit
     22.2       15.4       44.1       40.4  
Total SG&A expenses
     22.4       19.6       14.5       10.8  
Earnings from operations
     (0.2 )     (4.2 )     94.0          
 
                                
Gross profit rate
     27.5 %     24.0 %   3.5  pts.      
Expense rates:
                                
% of revenue
     27.8       30.5       (2.7 )        
% of gross profit
     101.1       127.2       (26.1 )        
Operating margin
     (0.3 )     (6.5 )     6.2          
 
                                
Corporate Expense
                                
SG&A expenses excluding restructuring charges
   $ 20.1     $ 21.2       (4.8 )%        
Restructuring charges
     —       2.8       (100.0 )        
Total SG&A expenses
     20.1       24.0       (16.1 )        
 
                                
Consolidated Total (net of intersegment activity)
                                
Revenue from services (including fee-based income)
   $ 1,409.8     $ 1,284.7       9.7 %     6.1 %
Fee-based income
     36.7       24.9       48.5       40.1  
Gross profit
     228.6       207.2       10.4       6.3  
SG&A expenses excluding restructuring charges
     207.1       190.1       9.0          
Restructuring charges
     (0.6 )     2.8       (120.7 )        
Total SG&A expenses
     206.5       192.9       7.1       3.0  
Earnings from operations
     22.1       14.3       54.7          
Earnings from operations excluding restructuring charges
     21.5       17.1       25.6          
 
                                
Gross profit rate
     16.2 %     16.1 %   0.1  pts.      
Expense rates (excluding restructuring charges):
                                
% of revenue
     14.7       14.8       (0.1 )        
% of gross profit
     90.6       91.7       (1.1 )        
Operating margin (excluding restructuring charges)
     1.5       1.3       0.2          

 

7

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                                 
    September Year to Date  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
Americas Commercial
                                
Revenue from services (including fee-based income)
   $ 1,985.3     $ 1,781.9       11.4 %     10.7 %
Fee-based income
     8.8       6.5       36.9       35.3  
Gross profit
     280.1       256.5       9.2       8.5  
SG&A expenses excluding restructuring charges
     218.6       201.9       8.3          
Restructuring charges
     —       0.3       (100.0 )        
Total SG&A expenses
     218.6       202.2       8.1       7.5  
Earnings from operations
     61.5       54.3       13.3          
Earnings from operations excluding restructuring charges
     61.5       54.6       12.6          
 
                                
Gross profit rate
     14.1 %     14.4 %   (0.3 ) pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     11.0       11.3       (0.3 )        
% of gross profit
     78.0       78.7       (0.7 )        
Operating margin (excluding restructuring charges)
     3.1       3.1       —          
 
                                
Americas PT
                                
Revenue from services (including fee-based income)
   $ 739.1     $ 659.1       12.1 %     12.0 %
Fee-based income
     9.7       6.7       45.2       44.9  
Gross profit
     110.1       103.2       6.6       6.5  
Total SG&A expenses
     79.2       69.2       14.4       14.2  
Earnings from operations
     30.9       34.0       (9.1 )        
 
                                
Gross profit rate
     14.9 %     15.7 %   (0.8 ) pts.        
Expense rates:
                                
% of revenue
     10.7       10.5       0.2          
% of gross profit
     71.9       67.0       4.9          
Operating margin
     4.2       5.2       (1.0 )        
 
                                
EMEA Commercial
                                
Revenue from services (including fee-based income)
   $ 751.3     $ 642.8       16.9 %     6.5 %
Fee-based income
     18.9       14.4       30.9       20.0  
Gross profit
     121.8       103.8       17.3       6.6  
SG&A expenses excluding restructuring charges
     107.9       95.7       12.7          
Restructuring charges
     2.8       2.7       4.0          
Total SG&A expenses
     110.7       98.4       12.5       2.2  
Asset impairments
     —       1.5       (100.0 )        
Earnings from operations
     11.1       3.9       187.7          
Earnings from operations excluding restructuring charges
     13.9       6.6       112.3          
 
                                
Gross profit rate
     16.2 %     16.1 %   0.1  pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     14.4       14.9       (0.5 )        
% of gross profit
     88.6       92.2       (3.6 )        
Operating margin (excluding restructuring charges)
     1.8       1.0       0.8          

 

8

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    September Year to Date  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
EMEA PT
                                
Revenue from services (including fee-based income)
   $ 134.0     $ 106.4       26.0 %     15.4 %
Fee-based income
     15.0       11.2       32.8       22.5  
Gross profit
     36.1       28.3       26.9       16.7  
Total SG&A expenses
     32.8       27.6       19.0       8.5  
Earnings from operations
     3.3       0.7       289.0          
 
                                
Gross profit rate
     26.9 %     26.7 %   0.2  pts.        
Expense rates:
                                
% of revenue
     24.5       25.9       (1.4 )        
% of gross profit
     91.0       97.1       (6.1 )        
Operating margin
     2.4       0.8       1.6          
 
                                
APAC Commercial
                                
Revenue from services (including fee-based income)
   $ 303.8     $ 253.3       19.9 %     8.9 %
Fee-based income
     11.0       8.5       30.4       18.4  
Gross profit
     42.5       35.5       19.9       8.1  
SG&A expenses excluding restructuring charges
     41.3       32.0       29.1          
Restructuring charges
     —       0.5       (100.0 )        
Total SG&A expenses
     41.3       32.5       26.9       14.2  
Earnings from operations
     1.2       3.0       (58.8 )        
Earnings from operations excluding restructuring charges
     1.2       3.5       (65.2 )        
 
                                
Gross profit rate
     14.0 %     14.0 %   —  pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     13.6       12.6       1.0          
% of gross profit
     97.2       90.3       6.9          
Operating margin (excluding restructuring charges)
     0.4       1.4       (1.0 )        
 
                                
APAC PT
                                
Revenue from services (including fee-based income)
   $ 39.1     $ 23.6       65.5 %     52.1 %
Fee-based income
     12.2       7.6       63.1       50.3  
Gross profit
     16.2       10.1       61.5       48.1  
Total SG&A expenses
     17.8       12.0       48.9       36.1  
Earnings from operations
     (1.6 )     (1.9 )     15.7          
 
                                
Gross profit rate
     41.5 %     42.5 %   (1.0 ) pts.        
Expense rates:
                                
% of revenue
     45.7       50.8       (5.1 )        
% of gross profit
     110.2       119.6       (9.4 )        
Operating margin
     (4.2 )     (8.3 )     4.1          

 

9

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
                                 
    September Year to Date  
                            Constant  
                            Currency  
    2011     2010     Change     Change  
OCG
                                
Revenue from services (including fee-based income)
   $ 222.9     $ 179.8       24.0 %     22.6 %
Fee-based income
     28.7       18.3       57.0       50.8  
Gross profit
     62.1       42.4       46.7       43.3  
SG&A expenses excluding restructuring charges
     65.5       56.8       15.4          
Restructuring charges
     —       0.1       (100.0 )        
Total SG&A expenses
     65.5       56.9       15.3       11.7  
Earnings from operations
     (3.4 )     (14.5 )     76.1          
Earnings from operations excluding restructuring charges
     (3.4 )     (14.4 )     76.0          
 
                                
Gross profit rate
     27.8 %     23.5 %   4.3  pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     29.4       31.6       (2.2 )        
% of gross profit
     105.6       134.3       (28.7 )        
Operating margin (excluding restructuring charges)
     (1.6 )     (8.1 )     6.5          
 
                                
Corporate Expense
                                
SG&A expenses excluding restructuring charges
   $ 58.0     $ 54.7       5.9 %        
Restructuring charges
     —       3.6       (100.0 )        
Total SG&A expenses
     58.0       58.3       (0.6 )        
 
                                
Consolidated Total (net of intersegment activity)
                                
Revenue from services (including fee-based income)
   $ 4,154.7     $ 3,624.5       14.6 %     11.2 %
Fee-based income
     104.2       73.0       43.1       34.9  
Gross profit
     666.9       578.1       15.4       11.4  
SG&A expenses excluding restructuring charges
     619.1       548.2       12.9          
Restructuring charges
     2.8       7.2       (61.7 )        
Total SG&A expenses
     621.9       555.4       12.0       8.0  
Asset impairments
     —       1.5       (100.0 )        
Earnings from operations
     45.0       21.2       112.3          
Earnings from operations excluding restructuring charges
     47.8       28.4       67.9          
 
                                
Gross profit rate
     16.1 %     16.0 %   0.1  pts.        
Expense rates (excluding restructuring charges):
                                
% of revenue
     14.9       15.1       (0.2 )        
% of gross profit
     92.8       94.8       (2.0 )        
Operating margin (excluding restructuring charges)
     1.2       0.8       0.4          

 

10

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
                         
    October 2,     January 2,     October 3,  
    2011     2011     2010  
Current Assets
                        
Cash and equivalents
   $ 73.5     $ 80.5     $ 87.2  
Trade accounts receivable, less allowances of $13.7, $12.3 and $13.0, respectively
     939.9       810.9       831.3  
Prepaid expenses and other current assets
     53.7       44.8       54.7  
Deferred taxes
     27.0       22.4       25.5  
 
                  
 
                        
Total current assets
     1,094.1       958.6       998.7  
 
                        
Property and Equipment, Net
     91.6       104.0       107.2  
 
                        
Noncurrent Deferred Taxes
     89.6       84.0       80.4  
 
                        
Goodwill, Net
     67.3       67.3       67.3  
 
                        
Other Assets
     145.6       154.5       147.3  
 
                  
 
                        
Total Assets
   $ 1,488.2     $ 1,368.4     $ 1,400.9  
 
                  
 
                        
Current Liabilities
                        
Short-term borrowings and current portion of long-term debt
   $ 79.0     $ 78.8     $ 68.3  
Accounts payable and accrued liabilities
     227.7       181.6       167.6  
Accrued payroll and related taxes
     283.0       243.3       273.0  
Accrued insurance
     31.4       31.3       23.8  
Income and other taxes
     60.0       56.0       56.6  
 
                  
 
                        
Total current liabilities
     681.1       591.0       589.3  
 
                        
Noncurrent Liabilities
                        
Long-term debt
     —       —       52.7  
Accrued insurance
     53.7       53.6       56.3  
Accrued retirement benefits
     82.8       85.4       79.0  
Other long-term liabilities
     13.6       14.6       15.3  
 
                  
 
                        
Total noncurrent liabilities
     150.1       153.6       203.3  
 
                        
Stockholders’ Equity
                        
Common stock
     40.1       40.1       40.1  
Treasury stock
     (68.6 )     (70.9 )     (71.2 )
Paid-in capital
     29.3       28.0       27.5  
Earnings invested in the business
     635.3       597.6       583.0  
Accumulated other comprehensive income
     20.9       29.0       28.9  
 
                  
 
                        
Total stockholders’ equity
     657.0       623.8       608.3  
 
                  
 
                        
Total Liabilities and Stockholders’ Equity
   $ 1,488.2     $ 1,368.4     $ 1,400.9  
 
                  
 
                        
STATISTICS:
                        
Working Capital
   $ 413.0     $ 367.6     $ 409.4  
Current Ratio
     1.6       1.6       1.7  
Debt-to-capital %
     10.7 %     11.2 %     16.6 %
Global Days Sales Outstanding
     52       49       52  

 

11

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED OCTOBER 2, 2011 AND OCTOBER 3, 2010
(UNAUDITED)
(In millions of dollars)
                 
    2011     2010  
 
Cash flows from operating activities
                
Net earnings
   $ 39.6     $ 11.5  
Noncash adjustments:
                
Impairment of assets
     —       1.5  
Depreciation and amortization
     23.9       26.5  
Provision for bad debts
     3.5       1.0  
Stock-based compensation
     3.5       2.2  
Other, net
     (1.5 )     1.0  
Changes in operating assets and liabilities
     (63.4 )     (43.6 )
 
            
 
                
Net cash from operating activities
     5.6       0.1  
 
            
 
                
Cash flows from investing activities
                
Capital expenditures
     (10.0 )     (5.9 )
Settlement of forward exchange contracts
     0.7       —  
Other investing activities
     0.3       0.5  
 
            
 
                
Net cash from investing activities
     (9.0 )     (5.4 )
 
            
 
                
Cash flows from financing activities
                
Net change in short-term borrowings
     61.9       (12.8 )
Repayment of debt
     (62.9 )     (7.3 )
Dividend payments
     (1.9 )     —  
Sale of stock and other financing activities
     (1.0 )     24.3  
 
            
 
                
Net cash from financing activities
     (3.9 )     4.2  
 
            
 
                
Effect of exchange rates on cash and equivalents
     0.3       (0.6 )
 
            
 
                
Net change in cash and equivalents
     (7.0 )     (1.7 )
Cash and equivalents at beginning of period
     80.5       88.9  
 
            
 
                
Cash and equivalents at end of period
   $ 73.5     $ 87.2  
 
            

 

12

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
                                 
    Third Quarter (Commercial, PT and OCG)  
                    % Change  
                            Constant  
    2011     2010     US$     Currency  
 
Americas
                                
United States
   $ 858.6     $ 811.3       5.8 %     5.8 %
Canada
     66.0       56.7       16.3       9.8  
Mexico
     27.1       25.2       7.7       4.0  
Puerto Rico
     24.5       21.7       13.3       13.3  
 
                            
Total Americas
     976.2       914.9       6.7       6.2  
 
                                
EMEA
                                
France
     76.6       71.3       7.5       (1.4 )
Switzerland
     68.3       47.9       42.4       13.9  
Russia
     36.4       26.8       36.4       30.4  
United Kingdom
     30.9       33.8       (8.3 )     (11.5 )
Portugal
     22.8       21.3       6.9       (1.9 )
Germany
     21.4       18.1       18.3       8.5  
Norway
     18.3       15.1       21.2       8.5  
Italy
     18.2       14.7       23.2       13.4  
Other
     21.7       20.8       4.5       (4.5 )
 
                            
Total EMEA
     314.6       269.8       16.6       4.9  
 
                                
APAC
                                
Australia
     36.8       31.9       15.3       (0.1 )
Singapore
     26.2       21.7       20.8       9.6  
Malaysia
     18.1       16.5       9.5       5.1  
India
     18.0       15.5       15.6       14.2  
Other
     19.9       14.4       38.2       23.9  
 
                            
Total APAC
     119.0       100.0       18.9       8.5  
 
                                
Total Kelly Services, Inc.
   $ 1,409.8     $ 1,284.7       9.7 %     6.1 %
 
                            

 

13

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
                                 
    September Year to Date (Commercial, PT and OCG)  
                    % Change  
                            Constant  
    2011     2010     US$     Currency  
 
Americas
                                
United States
   $ 2,561.6     $ 2,292.3       11.7 %     11.7 %
Canada
     186.8       162.8       14.7       8.3  
Mexico
     79.8       66.1       20.8       14.4  
Puerto Rico
     70.7       55.6       27.2       27.2  
 
                            
Total Americas
     2,898.9       2,576.8       12.5       11.9  
 
                                
EMEA
                                
France
     224.7       206.2       9.0       1.7  
Switzerland
     177.8       120.0       48.1       20.9  
Russia
     108.4       75.5       43.7       36.5  
United Kingdom
     92.5       105.6       (12.4 )     (16.8 )
Portugal
     66.1       58.8       12.5       4.8  
Germany
     62.7       50.6       23.8       15.6  
Italy
     53.3       46.1       15.5       7.6  
Norway
     50.9       43.1       18.1       7.4  
Other
     67.4       56.9       18.6       10.0  
 
                            
Total EMEA
     903.8       762.8       18.5       8.1  
 
                                
APAC
                                
Australia
     110.3       88.2       25.1       8.3  
Singapore
     78.6       60.2       30.6       17.8  
Malaysia
     54.5       47.4       15.0       7.2  
India
     53.1       44.4       19.6       17.7  
Other
     55.5       44.7       24.0       13.1  
 
                            
Total APAC
     352.0       284.9       23.5       12.3  
 
                                
Total Kelly Services, Inc.
   $ 4,154.7     $ 3,624.5       14.6 %     11.2 %
 
                            

 

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KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars except per share data)
                                 
    Third Quarter     September Year to Date  
    2011     2010     2011     2010  
 
Pretax earnings from operations
   $ 22.1     $ 14.3     $ 45.0     $ 21.2  
 
                                
Restructuring charges (Note 1)
     (0.6 )     2.8       2.8       7.2  
Asset impairments (Note 2)
     —       —       —       1.5  
 
                        
 
                                
Earnings from operations excluding restructuring and asset impairment charges
   $ 21.5     $ 17.1     $ 47.8     $ 29.9  
 
                        
                                 
    Third Quarter  
    2011     2010  
    Amount     Per Share     Amount     Per Share  
 
                                
Earnings from continuing operations, net of taxes
   $ 19.7     $ 0.52     $ 9.6     $ 0.26  
 
                                
Restructuring charges, net of taxes (Note 1)
     (0.6 )     (0.02 )     1.8       0.05  
 
                            
 
                                
Earnings from continuing operations excluding restructuring charges, net of taxes
   $ 19.1     $ 0.51     $ 11.4     $ 0.31  
 
                        
 
                                
                                 
    September Year to Date  
    2011     2010  
    Amount     Per Share     Amount     Per Share  
 
                                
Earnings from continuing operations, net of taxes
   $ 40.8     $ 1.09     $ 11.5     $ 0.32  
 
                                
Restructuring charges, net of taxes (Note 1)
     2.8       0.07       5.4       0.15  
Asset impairments, net of taxes (Note 2)
     —       —       1.2       0.03  
 
                            
 
                                
Earnings from continuing operations excluding restructuring and asset impairment charges, net of taxes
   $ 43.6     $ 1.16     $ 18.1     $ 0.50  
 
                        

 

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 2011 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 related primarily to severance and lease termination costs for branches in the EMEA and APAC Commercial segments that were in the process of closure at the end of 2009, as well as severance costs related to the corporate headquarters. In 2011, restructuring costs relate primarily to revisions of the estimated lease termination costs for EMEA Commercial branches that closed in prior years.
(2) Asset impairment charges relate to the write-off of incomplete software projects in Europe.

 

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