1
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): October 23, 2007
| KELLY SERVICES, INC.
|
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|
(Exact name of Registrant as specified in its charter) |
| DELAWARE
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0-1088
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38-1510762
| ||||||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
| 999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
|
||||
|
(Address of principal executive offices) |
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| (Zip Code) |
| (248) 362-4444
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|
(Registrant’s telephone number, including area code) |
| 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 (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
2
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 September 30, 2007. 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 October 23, 2007.
3
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: October 23, 2007 | ||
| /s/ William K. Gerber | ||
| William K. Gerber | ||
| Executive Vice President and | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| Date: October 23, 2007 | ||
| /s/ Michael E. Debs | ||
| Michael E. Debs | ||
| Senior Vice President and Corporate Controller | ||
| (Principal Accounting Officer) | ||
4
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release dated October 23, 2007 | |
5
Exhibit 99.1
| ANALYST CONTACT: | MEDIA CONTACT: | |
| James Polehna | Renee Walker | |
| (248) 244-4586 | (248) 244-5362 | |
| james_polehna@kellyservices.com | renee_walker@kellyservices.com |
KELLY SERVICES REPORTS 3rd QUARTER 2007 RESULTS
TROY, MI (October 23, 2007) — Kelly Services, Inc., a global provider of staffing services, today announced results for the third quarter ended September 30, 2007.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the third quarter of 2007 totaled $1.425 billion, a 2.0% increase compared to the $1.397 billion for the corresponding quarter in 2006. On a constant currency basis revenue decreased 0.6%.
Earnings from operations for the third quarter of 2007 totaled $20.8 million, a 9.6% decrease compared to $23.0 million reported for the third quarter of 2006. Included in earnings from operations are $2.5 million of costs related to the restructuring of our Americas Commercial and UK operations.
Diluted earnings per share from continuing operations in the third quarter of 2007 were $0.40, a decrease of 11% as compared to third quarter 2006 earnings of $0.45 per share. Included in third quarter diluted earnings is the $0.05 per share cost of the Americas Commercial and UK restructuring.
Commenting on the results, Camden said, “Despite continued weakness in the U.S. staffing market, we’re pleased that we delivered solid profitable results. We also accomplished a number of key strategic objectives during the quarter as we continue to diversify geographically and move into higher margin fee based businesses.
“We recently announced an agreement to acquire access AG, a $15 million revenue recruiting process outsourcing firm with operations in Germany and Austria. The acquisition of access AG will position Kelly as a leader in one of the fastest growing recruitment markets in the world.
“Revenue in our Americas Commercial segment, which accounted for 48% of total sales, decreased 5.7% year over year in the third quarter. Operating earnings totaled $19.0 million, and decreased 26.4% compared to last year. Included in the segment operating earnings are $1.5 million of restructuring costs.
“Revenue in the Americas PTSA segment, which accounted for 19% of total sales, increased 1.6% year over year in the third quarter. Operating earnings totaled $14.5 million and decreased 3.1% on a year over year basis.
“Revenue in our International Commercial segment, which accounted for 29% of total sales, increased 13.8% year over year in the third quarter. On a constant currency basis revenue increased 5.8%. The segment operating earnings totaled $4.6 million, an increase of 43.5% compared to $3.2 million the prior year. Included in the segment operating earnings are $953 thousand of UK restructuring costs.
“Revenue in our International PTSA segment, which accounted for 4% of total sales, increased 40.4% year over year in the third quarter. On a constant currency basis revenue increased 30.3%. Operating earnings totaled $950 thousand, an increase of 230% compared to earnings of $288 thousand the prior year.
“Corporate expenses totaled $18.3 million, a decrease of 14.2% compared to the prior year.
6
Mr. Camden added, “We expect fourth quarter 2007 earnings to be in the range of $0.46 to $0.51 per share, as compared to $0.56 per share from continuing operations in the fourth quarter of 2006. Last year the fourth quarter benefited from an unusually low 11.3% effective tax rate. Not included in this guidance are planned restructuring costs in our Americas operations.
“We have completed our UK restructuring at a total cost of approximately $6.0 million, or $0.16 per share. In addition, we plan to complete our restructuring of our Americas operations in the fourth quarter. The full year charge will total approximately $2.1 million pre tax, or about $0.03 per share, including approximately $600 thousand pre tax, or about $0.01 per share, in the fourth quarter of 2007.
Mr. Camden concluded, “For the full year of 2007, we are currently forecasting that earnings will range between $1.61 and $1.66 per share, compared to $1.56 per share from continuing operations in 2006. The range excludes the gain on the sale of the Home Care business and the UK and Americas restructuring costs.”
In conjunction with its third quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on October 23, 2007 to review the results and answer questions. The call may be accessed in one of the following ways:
Via the Telephone:
| U.S. | 1-800-288-8960 | |
| International | 1-612-288-0337 |
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 projections contained herein.
Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a world leader in human resources solutions headquartered in Troy, Michigan, offering temporary staffing services, outsourcing, vendor on-site and full-time placement. Kelly operates in 33 countries and territories. Kelly provides employment to more than 750,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, creative services, light industrial, education, and health care. Revenue in 2006 was $5.5 billion. Visit www.kellyservices.com.
7
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED SEPTEMBER 30, 2007 AND OCTOBER 1, 2006
(UNAUDITED)
(In thousands of dollars except per share data)
| 2007 | 2006 | Change | % Change | ||||||||||||
| Revenue from services |
$ | 1,425,298 | $ | 1,396,911 | $ | 28,387 | 2.0 | % | |||||||
| Cost of services |
1,178,419 | 1,166,061 | 12,358 | 1.1 | |||||||||||
| Gross profit |
246,879 | 230,850 | 16,029 | 6.9 | |||||||||||
| Selling, general and administrative expenses |
226,099 | 207,870 | 18,229 | 8.8 | |||||||||||
| Earnings from operations |
20,780 | 22,980 | (2,200 | ) | (9.6 | ) | |||||||||
| Other income, net |
587 | 348 | 239 | 68.7 | |||||||||||
| Earnings from continuing operations before taxes |
21,367 | 23,328 | (1,961 | ) | (8.4 | ) | |||||||||
| Income taxes |
6,685 | 6,893 | (208 | ) | (3.0 | ) | |||||||||
| Earnings from continuing operations |
14,682 | 16,435 | (1,753 | ) | (10.7 | ) | |||||||||
| Earnings from discontinued operations, net of tax |
459 | 1,383 | (924 | ) | (66.8 | ) | |||||||||
| Net earnings |
$ | 15,141 | $ | 17,818 | $ | (2,677 | ) | (15.0 | ) % | ||||||
| Basic earnings per share |
|||||||||||||||
| Earnings from continuing operations |
$ | 0.40 | $ | 0.46 | $ | (0.06 | ) | (13.0 | ) % | ||||||
| Earnings from discontinued operations |
0.01 | 0.04 | (0.03 | ) | (75.0 | ) | |||||||||
| Net earnings |
$ | 0.41 | $ | 0.49 | $ | (0.08 | ) | (16.3 | ) % | ||||||
| Diluted earnings per share |
|||||||||||||||
| Earnings from continuing operations |
$ | 0.40 | $ | 0.45 | $ | (0.05 | ) | (11.1 | ) % | ||||||
| Earnings from discontinued operations |
0.01 | 0.04 | (0.03 | ) | (75.0 | ) | |||||||||
| Net earnings |
$ | 0.41 | $ | 0.49 | $ | (0.08 | ) | (16.3 | ) % | ||||||
| STATISTICS: | |||||||||||||||
| Gross profit rate |
17.3 | % | 16.5 | % | 0.8 | % | |||||||||
| Expenses as a % of revenue |
15.9 | 14.9 | 1.0 | ||||||||||||
| % Return - Earnings from operations |
1.5 | 1.6 | (0.1 | ) | |||||||||||
| Earnings from continuing operations before taxes | 1.5 | 1.7 | (0.2 | ) | |||||||||||
| Earnings from continuing operations | 1.0 | 1.2 | (0.2 | ) | |||||||||||
| Net earnings | 1.1 | 1.3 | (0.2 | ) | |||||||||||
| Effective income tax rate |
31.3 | % | 29.5 | % | 1.8 | % | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
36,500 | 35,997 | |||||||||||||
| Diluted |
36,537 | 36,225 | |||||||||||||
8
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED SEPTEMBER 30, 2007 AND OCTOBER 1, 2006
(UNAUDITED)
(In thousands of dollars except per share data)
| 2007 | 2006 | Change | % Change | ||||||||||||
| Revenue from services |
$ | 4,191,830 | $ | 4,125,402 | $ | 66,428 | 1.6 | % | |||||||
| Cost of services |
3,468,177 | 3,458,168 | 10,009 | 0.3 | |||||||||||
| Gross profit |
723,653 | 667,234 | 56,419 | 8.5 | |||||||||||
| Selling, general and administrative expenses |
670,114 | 611,494 | 58,620 | 9.6 | |||||||||||
| Earnings from operations |
53,539 | 55,740 | (2,201 | ) | (3.9 | ) | |||||||||
| Other income, net |
2,190 | 853 | 1,337 | 156.7 | |||||||||||
| Earnings from continuing operations before taxes |
55,729 | 56,593 | (864 | ) | (1.5 | ) | |||||||||
| Income taxes |
20,478 | 20,136 | 342 | 1.7 | |||||||||||
| Earnings from continuing operations |
35,251 | 36,457 | (1,206 | ) | (3.3 | ) | |||||||||
| Earnings from discontinued operations, net of tax |
7,134 | 2,592 | 4,542 | 175.2 | |||||||||||
| Net earnings |
$ | 42,385 | $ | 39,049 | $ | 3,336 | 8.5 | % | |||||||
| Basic earnings per share |
|||||||||||||||
| Earnings from continuing operations |
$ | 0.96 | $ | 1.01 | $ | (0.05 | ) | (5.0 | ) % | ||||||
| Earnings from discontinued operations |
0.20 | 0.07 | 0.13 | 185.7 | |||||||||||
| Net earnings |
$ | 1.16 | $ | 1.09 | $ | 0.07 | 6.4 | % | |||||||
| Diluted earnings per share |
|||||||||||||||
| Earnings from continuing operations |
$ | 0.96 | $ | 1.01 | $ | (0.05 | ) | (5.0 | ) % | ||||||
| Earnings from discontinued operations |
0.19 | 0.07 | 0.12 | 171.4 | |||||||||||
| Net earnings |
$ | 1.15 | $ | 1.08 | $ | 0.07 | 6.5 | % | |||||||
| STATISTICS: | |||||||||||||||
| Gross profit rate |
17.3 | % | 16.2 | % | 1.1 | % | |||||||||
| Expenses as a % of revenue |
16.0 | 14.8 | 1.2 | ||||||||||||
| % Return - Earnings from operations |
1.3 | 1.4 | (0.1 | ) | |||||||||||
| Earnings from continuing operations before taxes | 1.3 | 1.4 | (0.1 | ) | |||||||||||
| Earnings from continuing operations | 0.8 | 0.9 | (0.1 | ) | |||||||||||
| Net earnings | 1.0 | 0.9 | 0.1 | ||||||||||||
| Effective income tax rate |
36.7 | % | 35.6 | % | 1.1 | % | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
36,557 | 35,937 | |||||||||||||
| Diluted |
36,843 | 36,226 | |||||||||||||
9
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| Third Quarter | |||||||||||||||
| 2007 | 2006 | Change | % Change | ||||||||||||
| Revenue from Services: |
|||||||||||||||
| Americas - Commercial |
$ | 682,534 | $ | 723,762 | $ | (41,228 | ) | (5.7 | ) % | ||||||
| Americas - PTSA |
277,859 | 273,482 | 4,377 | 1.6 | |||||||||||
| Total Americas |
960,393 | 997,244 | (36,851 | ) | (3.7 | ) | |||||||||
| International - Commercial |
412,292 | 362,187 | 50,105 | 13.8 | |||||||||||
| International - PTSA |
52,613 | 37,480 | 15,133 | 40.4 | |||||||||||
| Total International |
464,905 | 399,667 | 65,238 | 16.3 | |||||||||||
| $ | 1,425,298 | $ | 1,396,911 | $ | 28,387 | 2.0 | % | ||||||||
| Earnings from Operations (As Reported): |
|||||||||||||||
| Americas - Commercial |
$ | 19,001 | $ | 25,808 | $ | (6,807 | ) | (26.4 | ) % | ||||||
| Americas - PTSA |
14,532 | 15,003 | (471 | ) | (3.1 | ) | |||||||||
| Total Americas |
33,533 | 40,811 | (7,278 | ) | (17.8 | ) | |||||||||
| International - Commercial |
4,605 | 3,209 | 1,396 | 43.5 | |||||||||||
| International - PTSA |
950 | 288 | 662 | 229.9 | |||||||||||
| Total International |
5,555 | 3,497 | 2,058 | 58.9 | |||||||||||
| Corporate Expense |
(18,308 | ) | (21,328 | ) | 3,020 | 14.2 | |||||||||
| $ | 20,780 | $ | 22,980 | $ | (2,200 | ) | (9.6 | ) % | |||||||
| Earnings from Operations (Excluding the Restructuring Charges): |
|||||||||||||||
| Americas - Commercial |
$ | 20,512 | $ | 25,808 | $ | (5,296 | ) | (20.5 | ) % | ||||||
| Americas - PTSA |
14,532 | 15,003 | (471 | ) | (3.1 | ) | |||||||||
| Total Americas |
35,044 | 40,811 | (5,767 | ) | (14.1 | ) | |||||||||
| International - Commercial |
5,558 | 3,209 | 2,349 | 73.2 | |||||||||||
| International - PTSA |
950 | 288 | 662 | 229.9 | |||||||||||
| Total International |
6,508 | 3,497 | 3,011 | 86.1 | |||||||||||
| Corporate Expense |
(18,308 | ) | (21,328 | ) | 3,020 | 14.2 | |||||||||
| $ | 23,244 | $ | 22,980 | $ | 264 | 1.1 | % | ||||||||
10
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| September Year to Date | |||||||||||||||
| 2007 | 2006 | Change | % Change | ||||||||||||
| Revenue from Services: |
|||||||||||||||
| Americas - Commercial |
$ | 2,063,559 | $ | 2,176,961 | $ | (113,402 | ) | (5.2 | ) % | ||||||
| Americas - PTSA |
812,922 | 830,982 | (18,060 | ) | (2.2 | ) | |||||||||
| Total Americas |
2,876,481 | 3,007,943 | (131,462 | ) | (4.4 | ) | |||||||||
| International - Commercial |
1,168,924 | 1,013,698 | 155,226 | 15.3 | |||||||||||
| International - PTSA |
146,425 | 103,761 | 42,664 | 41.1 | |||||||||||
| Total International |
1,315,349 | 1,117,459 | 197,890 | 17.7 | |||||||||||
| $ | 4,191,830 | $ | 4,125,402 | $ | 66,428 | 1.6 | % | ||||||||
| Earnings from Operations (As Reported): |
|||||||||||||||
| Americas - Commercial |
$ | 63,051 | $ | 73,321 | $ | (10,270 | ) | (14.0 | ) % | ||||||
| Americas - PTSA |
41,745 | 43,005 | (1,260 | ) | (2.9 | ) | |||||||||
| Total Americas |
104,796 | 116,326 | (11,530 | ) | (9.9 | ) | |||||||||
| International - Commercial |
4,406 | 312 | 4,094 | NM | |||||||||||
| International - PTSA |
1,742 | 390 | 1,352 | 346.7 | |||||||||||
| Total International |
6,148 | 702 | 5,446 | 775.8 | |||||||||||
| Corporate Expense |
(57,405 | ) | (61,288 | ) | 3,883 | 6.3 | |||||||||
| $ | 53,539 | $ | 55,740 | $ | (2,201 | ) | (3.9 | ) % | |||||||
| Earnings from Operations (Excluding the Restructuring Charges): |
|||||||||||||||
| Americas - Commercial |
$ | 64,562 | $ | 73,321 | $ | (8,759 | ) | (11.9 | ) % | ||||||
| Americas - PTSA |
41,745 | 43,005 | (1,260 | ) | (2.9 | ) | |||||||||
| Total Americas |
106,307 | 116,326 | (10,019 | ) | (8.6 | ) | |||||||||
| International - Commercial |
10,441 | 312 | 10,129 | NM | |||||||||||
| International - PTSA |
1,742 | 390 | 1,352 | 346.7 | |||||||||||
| Total International |
12,183 | 702 | 11,481 | NM | |||||||||||
| Corporate Expense |
(57,405 | ) | (61,288 | ) | 3,883 | 6.3 | |||||||||
| $ | 61,085 | $ | 55,740 | $ | 5,345 | 9.6 | % | ||||||||
11
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Third Quarter | |||||||||||||
| 2007 | 2006 | Change | % Change | ||||||||||
| Revenue from services - constant currency*: |
|||||||||||||
| Americas - Commercial |
$ | 678,265 | $ | 723,762 | $ | (45,497 | ) | (6.3 | ) % | ||||
| Americas - PTSA |
277,611 | 273,482 | 4,129 | 1.5 | |||||||||
| Total Americas - constant currency* |
955,876 | 997,244 | (41,368 | ) | (4.1 | ) | |||||||
| International - Commercial |
383,372 | 362,187 | 21,185 | 5.8 | |||||||||
| International - PTSA |
48,835 | 37,480 | 11,355 | 30.3 | |||||||||
| Total International - constant currency* |
432,207 | 399,667 | 32,540 | 8.1 | |||||||||
| Total revenue from services - constant currency* |
1,388,083 | 1,396,911 | (8,828 | ) | (0.6 | ) % | |||||||
| Foreign currency impact |
37,215 | 37,215 | |||||||||||
| Revenue from services |
$ | 1,425,298 | $ | 1,396,911 | $ | 28,387 | 2.0 | % | |||||
| September Year to Date | |||||||||||||
| 2007 | 2006 | Change | % Change | ||||||||||
| Revenue from services - constant currency*: |
|||||||||||||
| Americas - Commercial |
$ | 2,059,003 | $ | 2,176,961 | $ | (117,958 | ) | (5.4 | ) % | ||||
| Americas - PTSA |
812,639 | 830,982 | (18,343 | ) | (2.2 | ) | |||||||
| Total Americas - constant currency* |
2,871,642 | 3,007,943 | (136,301 | ) | (4.5 | ) | |||||||
| International - Commercial |
1,086,089 | 1,013,698 | 72,391 | 7.1 | |||||||||
| International - PTSA |
135,821 | 103,761 | 32,060 | 30.9 | |||||||||
| Total International - constant currency* |
1,221,910 | 1,117,459 | 104,451 | 9.3 | |||||||||
| Total revenue from services - constant currency* |
4,093,552 | 4,125,402 | (31,850 | ) | (0.8 | ) % | |||||||
| Foreign currency impact |
98,278 | 98,278 | |||||||||||
| Revenue from services |
$ | 4,191,830 | $ | 4,125,402 | $ | 66,428 | 1.6 | % | |||||
| * | Information on constant currencies is provided to allow investors to separate the impact of foreign currency translations on reported results. Constant currency results are calculated by translating the current year results at prior year average exchange rates. |
12
KELLY SERVICES, INC. AND SUBSIDIARIES
SUMMARY OF DISCONTINUED OPERATIONS
(UNAUDITED)
(In thousands of dollars)
| Third Quarter | September Year to Date | |||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||
| Revenue from services |
$ | - | $ | 21,893 | $ | 14,777 | $ | 69,900 | ||||
| Operating income from discontinued operations |
$ | 746 | $ | 2,272 | $ | 1,573 | $ | 4,275 | ||||
| Less: Income taxes |
287 | 889 | 605 | 1,683 | ||||||||
| Earnings from discontinued operations, net of tax |
459 | 1,383 | 968 | 2,592 | ||||||||
| Gain on sale of discontinued operations |
- | - | 10,153 | - | ||||||||
| Less: Income taxes |
- | - | 3,987 | - | ||||||||
| Gain on sale of discontinued operations, net of tax |
- | - | 6,166 | - | ||||||||
| Discontinued operations, net of tax |
$ | 459 | $ | 1,383 | $ | 7,134 | $ | 2,592 | ||||
Effective March 31, 2007, the Company sold Kelly Home Care (“KHC”), a wholly owned subsidiary. Effective December 31, 2006, the Company sold Kelly Staff Leasing (“KSL”), a wholly owned subsidiary. The operating results for KHC and KSL, as well as the gain on the sale of KHC, have been excluded from earnings from continuing operations. This schedule provides information on KHC's and KSL’s results from operations for the third quarter of 2007 and 2006 and September year to date 2007 and 2006 as well as the gain on the sale of KHC, all of which are included as discontinued operations on the face of the statements of earnings.
13
KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
(In thousands of dollars)
| September 30, 2007 |
December 31, 2006 |
October 1, 2006 |
||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 102,982 | $ | 118,428 | $ | 77,493 | ||||||
| Trade accounts receivable, less allowances of $18,357, $16,818 and $17,840, respectively |
903,566 | 838,246 | 878,336 | |||||||||
| Prepaid expenses and other current assets |
49,734 | 45,316 | 45,076 | |||||||||
| Deferred taxes |
30,342 | 29,543 | 34,693 | |||||||||
| Total current assets |
1,086,624 | 1,031,533 | 1,035,598 | |||||||||
| Property and Equipment, Net |
175,106 | 170,288 | 162,791 | |||||||||
| Noncurrent Deferred Taxes |
37,458 | 35,437 | 23,128 | |||||||||
| Goodwill, Net |
122,917 | 96,504 | 94,592 | |||||||||
| Other Assets |
147,570 | 135,662 | 113,599 | |||||||||
| Total Assets |
$ | 1,569,675 | $ | 1,469,424 | $ | 1,429,708 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 75,489 | $ | 68,928 | $ | 58,375 | ||||||
| Accounts payable |
161,843 | 132,819 | 125,213 | |||||||||
| Accrued payroll and related taxes |
286,056 | 274,284 | 293,223 | |||||||||
| Accrued insurance |
25,495 | 24,191 | 32,728 | |||||||||
| Income and other taxes |
65,073 | 68,055 | 63,559 | |||||||||
| Total current liabilities |
613,956 | 568,277 | 573,098 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
59,489 | 57,277 | 53,294 | |||||||||
| Accrued retirement benefits |
81,249 | 71,990 | 63,641 | |||||||||
| Other long-term liabilities |
17,865 | 13,323 | 15,238 | |||||||||
| Total noncurrent liabilities |
158,603 | 142,590 | 132,173 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(84,323 | ) | (78,841 | ) | (86,665 | ) | ||||||
| Paid-in capital |
33,406 | 32,048 | 28,955 | |||||||||
| Earnings invested in the business |
763,577 | 735,104 | 715,249 | |||||||||
| Accumulated other comprehensive income |
44,340 | 30,130 | 26,782 | |||||||||
| Total stockholders’ equity |
797,116 | 758,557 | 724,437 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,569,675 | $ | 1,469,424 | $ | 1,429,708 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 472,668 | $ | 463,256 | $ | 462,500 | ||||||
| Current Ratio |
1.8 | 1.8 | 1.8 | |||||||||
| Debt-to-capital % |
8.7 | % | 8.3 | % | 7.5 | % | ||||||
| Global Days Sales Outstanding |
||||||||||||
| Quarter |
58 | 54 | 57 | |||||||||
| Year-to-date |
59 | 55 | 58 | |||||||||
14
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 30, 2007 AND OCTOBER 1, 2006
(UNAUDITED)
(In thousands of dollars)
| 2007 | 2006 | |||||||
| Cash flows from operating activities | ||||||||
| Net earnings |
$ | 42,385 | $ | 39,049 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
31,051 | 30,949 | ||||||
| Provision for bad debts |
4,926 | 3,981 | ||||||
| Stock-based compensation |
2,683 | 3,913 | ||||||
| Gain on sale of discontinued operations |
(6,166 | ) | - | |||||
| Other, net |
(422 | ) | (99 | ) | ||||
| Changes in operating assets and liabilities |
(24,808 | ) | (18,679 | ) | ||||
| Net cash from operating activities |
49,649 | 59,114 | ||||||
| Cash flows from investing activities | ||||||||
| Capital expenditures |
(33,567 | ) | (26,111 | ) | ||||
| Proceeds from sale of discontinued operations |
12,500 | - | ||||||
| Acquisition of companies, net of cash received |
(25,255 | ) | (4,531 | ) | ||||
| Other investing activities |
(586 | ) | (541 | ) | ||||
| Net cash from investing activities |
(46,908 | ) | (31,183 | ) | ||||
| Cash flows from financing activities | ||||||||
| Net decrease in revolving line of credit |
(3,469 | ) | (5,369 | ) | ||||
| Proceeds from short-term debt |
8,223 | 5,080 | ||||||
| Dividend payments |
(14,244 | ) | (11,833 | ) | ||||
| Purchase of treasury stock |
(12,500 | ) | - | |||||
| Stock options and other stock sales |
5,760 | 1,683 | ||||||
| Other financing activities |
(5,767 | ) | (4,504 | ) | ||||
| Net cash from financing activities |
(21,997 | ) | (14,943 | ) | ||||
| Effect of exchange rates on cash and equivalents | 3,810 | 806 | ||||||
| Net change in cash and equivalents | (15,446 | ) | 13,794 | |||||
| Cash and equivalents at beginning of period | 118,428 | 63,699 | ||||||
| Cash and equivalents at end of period | $ | 102,982 | $ | 77,493 | ||||
15
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Third Quarter | ||||||||||||
| % Change | ||||||||||||
| 2007 | 2006 | US$ | Constant Currency |
|||||||||
| Americas |
||||||||||||
| United States |
$ | 854,562 | $ | 890,940 | (4.1 | ) % | (4.1 | ) % | ||||
| Canada |
67,541 | 69,619 | (3.0 | ) | (9.5 | ) | ||||||
| Puerto Rico |
19,171 | 18,338 | 4.5 | 4.5 | ||||||||
| Mexico |
19,119 | 18,347 | 4.2 | 4.4 | ||||||||
| Total Americas |
960,393 | 997,244 | (3.7 | ) | (4.1 | ) | ||||||
| EMEA |
||||||||||||
| United Kingdom |
119,385 | 111,687 | 6.9 | (0.9 | ) | |||||||
| France |
82,498 | 72,574 | 13.7 | 5.4 | ||||||||
| Switzerland |
49,363 | 46,945 | 5.2 | 1.8 | ||||||||
| Italy |
28,795 | 28,638 | 0.5 | (6.9 | ) | |||||||
| Norway |
21,902 | 17,118 | 27.9 | 16.6 | ||||||||
| Russia |
17,542 | 14,256 | 23.0 | 17.0 | ||||||||
| Germany |
16,605 | 11,268 | 47.4 | 36.6 | ||||||||
| Other |
38,071 | 30,927 | 23.1 | 13.8 | ||||||||
| Total EMEA |
374,161 | 333,413 | 12.2 | 4.6 | ||||||||
| APAC |
||||||||||||
| Australia |
35,169 | 29,958 | 17.4 | 4.8 | ||||||||
| Singapore |
16,354 | 12,702 | 28.8 | 23.6 | ||||||||
| Other |
39,221 | 23,594 | 66.2 | 53.6 | ||||||||
| Total APAC |
90,744 | 66,254 | 37.0 | 25.8 | ||||||||
| Total Kelly Services, Inc. |
$ | 1,425,298 | $ | 1,396,911 | 2.0 | % | (0.6 | ) % | ||||
16
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| September Year to Date | ||||||||||||
| % Change | ||||||||||||
| 2007 | 2006 | US$ | Constant Currency |
|||||||||
| Americas |
||||||||||||
| United States |
$ | 2,573,282 | $ | 2,692,586 | (4.4 | ) % | (4.4 | ) % | ||||
| Canada |
191,009 | 205,986 | (7.3 | ) | (9.7 | ) | ||||||
| Puerto Rico |
57,341 | 57,577 | (0.4 | ) | (0.4 | ) | ||||||
| Mexico |
54,849 | 51,794 | 5.9 | 6.3 | ||||||||
| Total Americas |
2,876,481 | 3,007,943 | (4.4 | ) | (4.5 | ) | ||||||
| EMEA |
||||||||||||
| United Kingdom |
355,790 | 331,239 | 7.4 | (1.7 | ) | |||||||
| France |
227,924 | 201,991 | 12.8 | 4.5 | ||||||||
| Switzerland |
130,752 | 114,595 | 14.1 | 10.6 | ||||||||
| Italy |
92,781 | 87,757 | 5.7 | (2.1 | ) | |||||||
| Norway |
56,523 | 40,832 | 38.4 | 29.5 | ||||||||
| Russia |
48,876 | 37,574 | 30.1 | 23.1 | ||||||||
| Germany |
45,502 | 29,386 | 54.8 | 43.4 | ||||||||
| Other |
110,807 | 85,834 | 29.1 | 19.3 | ||||||||
| Total EMEA |
1,068,955 | 929,208 | 15.0 | 6.9 | ||||||||
| APAC |
||||||||||||
| Australia |
96,107 | 87,344 | 10.0 | 0.0 | ||||||||
| Singapore |
44,074 | 37,934 | 16.2 | 10.9 | ||||||||
| Other |
106,213 | 62,973 | 68.7 | 57.9 | ||||||||
| Total APAC |
246,394 | 188,251 | 30.9 | 21.6 | ||||||||
| Total Kelly Services, Inc. |
$ | 4,191,830 | $ | 4,125,402 | 1.6 | % | (0.8 | ) % | ||||
17
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
| Third Quarter | ||||||||||||||
| 2007 | 2006 | |||||||||||||
| Amount | Per Share | Amount | Per Share | |||||||||||
| Earnings from continuing operations |
$ | 14,682 | $ | 0.40 | $ | 16,435 | $ | 0.45 | ||||||
| Restructuring charges, net of taxes (Notes 1 & 2) |
1,882 | 0.05 | - | - | ||||||||||
| Earnings from continuing operations excluding restructuring charges, net of taxes |
$ | 16,564 | $ | 0.45 | $ | 16,435 | $ | 0.45 | ||||||
| Third Quarter | ||||||||||||||
| 2007 | 2006 | % Change | ||||||||||||
| Selling, general and administrative expenses |
$ | 226,099 | $ | 207,870 | ||||||||||
| Restructuring charges (Notes 1 & 2) |
(2,464 | ) | - | |||||||||||
| Selling, general and administrative expenses excluding restructuring charges |
$ | 223,635 | $ | 207,870 | 7.6 | % | ||||||||
| Earnings from operations |
$ | 20,780 | $ | 22,980 | ||||||||||
| Restructuring charges (Notes 1 & 2) |
2,464 | - | ||||||||||||
| Earnings from operations excluding restructuring charges |
$ | 23,244 | $ | 22,980 | 1.1 | % | ||||||||
| Americas Commercial selling, general and administrative expenses |
$ | 88,440 | $ | 85,971 | ||||||||||
| Americas restructuring charge (Note 1) |
(1,511 | ) | - | |||||||||||
| Americas Commercial selling, general and administrative expenses excluding the Americas restructuring charge |
$ | 86,929 | $ | 85,971 | 1.1 | % | ||||||||
| Americas Commercial Earnings from operations |
$ | 19,001 | $ | 25,808 | ||||||||||
| Americas restructuring charge (Note 1) |
1,511 | - | ||||||||||||
| Americas Commercial earnings excluding the Americas restructuring charge |
$ | 20,512 | $ | 25,808 | (20.5 | ) % | ||||||||
18
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES (continued)
(UNAUDITED)
(In thousands of dollars except per share data)
| Third Quarter | ||||||||||||
| 2007 | 2006 | % Change | ||||||||||
| Americas Earnings from operations |
$ | 33,533 | $ | 40,811 | ||||||||
| Americas restructuring charge (Note 1) |
1,511 | - | ||||||||||
| Americas earnings excluding the Americas restructuring charge |
$ | 35,044 | $ | 40,811 | (14.1 | ) % | ||||||
| International Commercial selling, general and administrative expenses |
$ | 66,822 | $ | 58,598 | ||||||||
| UK restructuring charge (Note 2) |
(953 | ) | - | |||||||||
| International Commercial selling, general and administrative expenses excluding the UK restructuring charge |
$ | 65,869 | $ | 58,598 | 12.4 | % | ||||||
| International Commercial Earnings from operations |
$ | 4,605 | $ | 3,209 | ||||||||
| UK restructuring charge (Note 2) |
953 | - | ||||||||||
| International Commercial earnings excluding the UK restructuring charge |
$ | 5,558 | $ | 3,209 | 73.2 | % | ||||||
| International Earnings from operations |
$ | 5,555 | $ | 3,497 | ||||||||
| UK restructuring charge (Note 2) |
953 | - | ||||||||||
| International earnings excluding the UK restructuring charge |
$ | 6,508 | $ | 3,497 | 86.1 | % | ||||||
19
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
| September Year to Date | ||||||||||||||
| 2007 | 2006 | |||||||||||||
| Amount | Per Share | Amount | Per Share | |||||||||||
| Earnings from continuing operations |
$ | 35,251 | $ | 0.96 | $ | 36,457 | $ | 1.01 | ||||||
| Restructuring charges, net of taxes (Notes 1 & 2) |
6,964 | 0.19 | - | - | ||||||||||
| Earnings from continuing operations excluding restructuring charges, net of taxes |
$ | 42,215 | $ | 1.15 | $ | 36,457 | $ | 1.01 | ||||||
| September Year to Date | ||||||||||||||
| 2007 | 2006 | % Change | ||||||||||||
| Selling, general and administrative expenses |
$ | 670,114 | $ | 611,494 | ||||||||||
| Restructuring charges (Notes 1 & 2) |
(7,546 | ) | - | |||||||||||
| Selling, general and administrative expenses excluding restructuring charges |
$ | 662,568 | $ | 611,494 | 8.4 | % | ||||||||
| Earnings from operations |
$ | 53,539 | $ | 55,740 | ||||||||||
| Restructuring charges (Notes 1 & 2) |
7,546 | - | ||||||||||||
| Earnings from operations excluding restructuring charges |
$ | 61,085 | $ | 55,740 | 9.6 | % | ||||||||
| Americas Commercial selling, general and administrative expenses |
$ | 262,530 | $ | 257,036 | ||||||||||
| Americas restructuring charge (Note 1) |
(1,511 | ) | - | |||||||||||
| Americas Commercial selling, general and administrative expenses excluding the Americas restructuring charge |
$ | 261,019 | $ | 257,036 | 1.5 | % | ||||||||
| Americas Commercial Earnings from operations |
$ | 63,051 | $ | 73,321 | ||||||||||
| Americas restructuring charge (Note 1) |
1,511 | - | ||||||||||||
| Americas Commercial Earnings excluding the Americas restructuring charge |
$ | 64,562 | $ | 73,321 | (11.9 | ) % | ||||||||
20
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES (continued)
(UNAUDITED)
(In thousands of dollars except per share data)
| September Year to Date | ||||||||||||
| 2007 | 2006 | % Change | ||||||||||
| Americas Earnings from operations |
$ | 104,796 | $ | 116,326 | ||||||||
| Americas restructuring charge (Note 1) |
1,511 | - | ||||||||||
| Americas Earnings excluding the Americas restructuring charge |
$ | 106,307 | $ | 116,326 | (8.6 | )% | ||||||
| International Commercial selling, general and administrative expenses |
$ | 199,111 | $ | 171,205 | ||||||||
| UK restructuring charge (Note 2) |
(6,035 | ) | - | |||||||||
| International Commercial selling, general and administrative expenses excluding the UK restructuring charge |
$ | 193,076 | $ | 171,205 | 12.8 | % | ||||||
| International Commercial Earnings from operations |
$ | 4,406 | $ | 312 | ||||||||
| UK restructuring charge (Note 2) |
6,035 | - | ||||||||||
| International Commercial Earnings excluding the UK restructuring charge |
$ | 10,441 | $ | 312 | NM | |||||||
| International Earnings from operations |
$ | 6,148 | $ | 702 | ||||||||
| UK restructuring charge (Note 2) |
6,035 | - | ||||||||||
| International Earnings excluding the UK restructuring charge |
$ | 12,183 | $ | 702 | NM | |||||||
21
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the restructuring charges is useful to understand the Company's fiscal 2007 financial performance and increases comparability with prior year results. Specifically, Management believes that excluding this item allows for a more meaningful comparison of current period operating performance with the operating results of prior periods. These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company's financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company's financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
(1) The Americas restructuring charge is comprised of facility exit costs associated with the closure of 42 branch locations and the accelerated depreciation of the leasehold improvements and personal property at the impacted locations.
(2) The UK restructuring charge is comprised of facility exit costs associated with the closure of 22 branch locations and the accelerated depreciation of the leasehold improvements and personal property at the impacted locations.