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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
Date of Report (Date of earliest event reported): November 7, 2016
 
 
KELLY SERVICES, INC.
---------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
 
DELAWARE
0-1088
38-1510762
(State or other 
(Commission
(IRS Employer
jurisdiction of 
File Number)
Identification
incorporation) 
 
Number)


                                     
999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
-------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
 
(248) 362-4444
----------------------------------------------------------------------
(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))








1


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 and nine months ended October 2, 2016. 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 7, 2016.       
99.2    Presentation materials for November 7, 2016 conference call.   
















































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.
 
November 7, 2016
 
 
 
 
 
 
 
 
 
/s/ Olivier G. Thirot
Olivier G. Thirot

Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
November 7, 2016
 
 
 
 
 
 
 
 
 
/s/ Laura S. Lockhart
Laura S. Lockhart 

Vice President, Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
 






















3




EXHIBIT INDEX
  
Exhibit No.
                   Description
 
 
99.1
Press Release dated November 7, 2016
99.2
Presentation materials for November 7, 2016 conference call


4
Exhibit

Exhibit 99.1

https://cdn.kscope.io/c2af981c28716d50d14a32cdb20b2f99-pressreleaseheadera03.jpg
    
KELLY SERVICES® REPORTS
THIRD QUARTER 2016 EARNINGS
AND ANNOUNCES EPS

Third Quarter Highlights
•
APAC Joint Venture completed
•
Total Revenue declines 8%; down 1% adjusted for APAC JV transaction
•
Operating earnings increase 13%; up 29% adjusted for APAC JV transaction
•
Earnings per share of $2.06 (Adjusted EPS of $0.44) versus $0.23 (Adjusted EPS of $0.19), a 132% increase on an adjusted basis

TROY, MI (November 7, 2016) -- Kelly Services (Nasdaq: KELYA) (Nasdaq: KELYB), a global leader in providing workforce solutions, today announced results for the third quarter of 2016.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the third quarter of 2016 totaled $1.2 billion, a 7.6% decrease (a 7.1% decrease on a constant currency basis) compared to the corresponding quarter of 2015. During the third quarter of 2016, Kelly transferred its APAC staffing operations to the TS Kelly Asia Pacific joint venture and recorded a gain of $87.2 million. Kelly retains a 49% ownership interest in the newly formed joint venture. Excluding the APAC staffing operations from the third quarter of 2015, adjusted 2016 third quarter revenue was down 0.7% year over year (a 0.1% decrease on a constant currency basis).

Earnings from operations for the third quarter of 2016 totaled $18.8 million, compared to $16.6 million reported for the third quarter of 2015. Excluding the APAC staffing operations from the third quarter of 2015, adjusted earnings from operations were $14.5 million; therefore, Kelly’s third quarter 2016 earnings increased 29% year-over-year on an adjusted basis.

Diluted earnings per share in the third quarter of 2016 were $2.06 compared to $0.23 per share in the third quarter of 2015. Excluding the gain from 2016 third quarter results and APAC staffing operations from 2015 third quarter results, adjusted earnings per share were $0.44 in the third quarter of 2016 and $0.19 in the third quarter of 2015.

Commenting on the third quarter, Camden stated, “Sorting through the financial complexity around the JV transaction, Kelly’s third quarter performance reflects good operating leverage on basically flat revenue. We increased our gross profit rate, reduced expenses, and turned in healthy operating earnings and solid returns for our shareholders. Our U.S. Staffing segment showed competitive strength and agility in an uncertain economic environment, and our OCG business delivered year-over-year GP improvement. With the APAC JV now firmly in place, we are operating as a more focused, disciplined company relentlessly committed to profitability.”

1

In conjunction with its third quarter earnings release, Kelly Services has published a financial presentation on the Investor Relations page of our public website and will host a conference call at 9:00 a.m. (ET) on November 7 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Internet:
www.kellyservices.com

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


This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties.  These factors include, but are not limited to, competitive market pressures including pricing and technology introductions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual assets could be infringed upon or compromised, our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, our increasing dependency on third parties for the execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated with investments in equity affiliates including TS Kelly Asia Pacific, material changes in demand from or loss of large corporate customers, risks associated with conducting business in foreign countries, including foreign currency fluctuations, availability of full-time employees to lead complex talent supply chain sales and operations, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, the risk of cyber attacks or other breaches of network or information technology security as well as risks associated with compliance on data privacy, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology programs, our ability to maintain adequate financial and management processes and controls, impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, disability and medical benefit plans, the impact of the Patient Protection and Affordable Care Act on our business, the impact of changes in laws and regulations (including federal, state and international tax laws ), the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission.  Actual results may differ materially from any forward looking statements contained herein, and we have no intention to update these statements.

About Kelly Services® 

As a global leader in providing workforce solutions, Kelly Services, Inc. (Nasdaq: KELYA, KELYB) and its subsidiaries, offer a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire, and direct-hire basis. In 2016, the Company is commemorating 70 years of industry leadership. Kelly® has a role in managing employment opportunities for more than one million workers around the globe by employing 550,000 of these individuals directly with the remaining workers engaged through its talent supply chain network of supplier partners.  Revenue in 2015 was $5.5 billion.  Visit kellyservices.com and connect with us on Facebook, LinkedIn, & Twitter.  



KLYA-FIN

# # #


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




2

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
(UNAUDITED)
(In millions of dollars except per share data)
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
2015
 
Change
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,247.8

$
1,351.0

$
(103.2
)
 
(7.6
)
%
(7.1
)
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
1,032.7

 
1,122.8

 
(90.1
)
 
(8.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
215.1

 
228.2

 
(13.1
)
 
(5.8
)
 
(5.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
196.3

 
211.6

 
(15.3
)
 
(7.3
)
 
(6.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
18.8

 
16.6

 
2.2

 
13.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on investment in TS Kelly Asia Pacific
 
87.2

 
—

 
87.2

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense, net
 
(0.4
)
 
—

 
(0.4
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes
 
105.6

 
16.6

 
89.0

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
24.7

 
7.5

 
17.2

 
230.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
80.9

$
9.1

$
71.8

 
NM

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.08

$
0.23

$
1.85

 
NM

%
 
 
Diluted earnings per share
$
2.06

$
0.23

$
1.83

 
NM

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
17.2

%
16.9

%
0.3

pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
    % of revenue
 
15.7

 
15.7

 
—

 
 
 
 
 
    % of gross profit
 
91.3

 
92.7

 
(1.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Return:
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
1.5

 
1.2

 
0.3

 
 
 
 
 
Earnings before taxes
 
8.5

 
1.2

 
7.3

 
 
 
 
 
Net earnings
 
6.5

 
0.7

 
5.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective income tax rate
 
23.4

%
45.2

%
(21.8
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average number of shares outstanding (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
38.1

 
37.9

 
 
 
 
 
 
 
     Diluted
 
38.4

 
37.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares adjusted for nonvested restricted awards (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
39.0

 
38.8

 
 
 
 
 
 
 
     Diluted
 
39.2

 
38.8

 
 
 
 
 
 
 


3

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
(UNAUDITED)
(In millions of dollars except per share data)
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
2015
 
Change
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
3,972.4

$
4,056.6

$
(84.2
)
 
(2.1
)
%
(0.7
)
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
3,294.1

 
3,385.8

 
(91.7
)
 
(2.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
678.3

 
670.8

 
7.5

 
1.1

 
2.3

 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
634.9

 
630.6

 
4.3

 
0.7

 
1.8

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
43.4

 
40.2

 
3.2

 
7.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on investment in TS Kelly Asia Pacific
 
87.2

 
—

 
87.2

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense, net
 
(1.4
)
 
(3.5
)
 
2.1

 
61.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes
 
129.2

 
36.7

 
92.5

 
252.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
28.2

 
17.1

 
11.1

 
65.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
101.0

$
19.6

$
81.4

 
414.7

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.59

$
0.51

$
2.08

 
NM

%
 
 
Diluted earnings per share
$
2.58

$
0.51

$
2.07

 
NM

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
17.1

%
16.5

%
0.6

pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
    % of revenue
 
16.0

 
15.5

 
0.5

 
 
 
 
 
    % of gross profit
 
93.6

 
94.0

 
(0.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Return:
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
1.1

 
1.0

 
0.1

 
 
 
 
 
Earnings before taxes
 
3.3

 
0.9

 
2.4

 
 
 
 
 
Net earnings
 
2.5

 
0.5

 
2.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective income tax rate
 
21.8

%
46.5

%
(24.7
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average number of shares outstanding (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
38.0

 
37.8

 
 
 
 
 
 
 
     Diluted
 
38.3

 
37.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares adjusted for nonvested restricted awards (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
39.0

 
38.8

 
 
 
 
 
 
 
     Diluted
 
39.2

 
38.8

 
 
 
 
 
 
 


4

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

 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
 
2015
 
Change
 
Change
 
AMERICAS
 
 
 
 
 
 
 
 
 
 
  Commercial
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
603.7

 
$
615.5

 
(1.9
)
%
(1.3
)
%
Staffing fee-based income included in revenue from services
 
4.2

 
 
3.8

 
10.0

 
10.1

 
Gross profit
 
94.9

 
 
96.6

 
(1.8
)
 
(1.3
)
 
Gross profit rate
 
15.7

%
 
15.7

%
—

 pts.
 
 
  PT
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
239.6

 
$
242.8

 
(1.3
)
%
(1.3
)
%
Staffing fee-based income included in revenue from services
 
4.4

 
 
4.7

 
(6.9
)
 
(6.9
)
 
Gross profit
 
41.4

 
 
41.0

 
1.0

 
1.0

 
Gross profit rate
 
17.3

%
 
16.9

%
0.4

 pts.
 
 
  Total Americas
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
843.3

 
$
858.3

 
(1.8
)
%
(1.3
)
%
Staffing fee-based income included in revenue from services
 
8.6

 
 
8.5

 
0.6

 
0.7

 
Gross profit
 
136.3

 
 
137.6

 
(1.0
)
 
(0.6
)
 
Total SG&A expenses
 
112.2

 
 
113.7

 
(1.4
)
 
(1.2
)
 
Earnings from operations
 
24.1

 
 
23.9

 
1.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
16.2

%
 
16.0

%
0.2

 pts.
 
 
Expense rates:
 
 
 
 
 
 
 
 
 
 
% of revenue
 
13.3

 
 
13.2

 
0.1

 
 
 
% of gross profit
 
82.3

 
 
82.7

 
(0.4
)
 
 
 
Return on sales
 
2.9

 
 
2.8

 
0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
 
  Commercial
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
197.6

 
$
199.0

 
(0.8
)
%
1.0

%
Staffing fee-based income included in revenue from services
 
3.3

 
 
3.2

 
5.0

 
6.7

 
Gross profit
 
26.8

 
 
27.7

 
(3.5
)
 
(2.5
)
 
Gross profit rate
 
13.6

%
 
13.9

%
(0.3
)
 pts.
 
 
  PT
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
41.7

 
$
43.6

 
(4.3
)
%
(2.9
)
%
Staffing fee-based income included in revenue from services
 
2.2

 
 
2.6

 
(16.1
)
 
(14.4
)
 
Gross profit
 
8.2

 
 
9.4

 
(11.7
)
 
(10.6
)
 
Gross profit rate
 
19.9

%
 
21.6

%
(1.7
)
 pts.
 
 
  Total EMEA
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
239.3

 
$
242.6

 
(1.4
)
%
0.3

%
Staffing fee-based income included in revenue from services
 
5.5

 
 
5.8

 
(4.6
)
 
(2.9
)
 
Gross profit
 
35.0

 
 
37.1

 
(5.6
)
 
(4.6
)
 
Total SG&A expenses
 
30.6

 
 
31.8

 
(3.5
)
 
(2.0
)
 
Earnings from operations
 
4.4

 
 
5.3

 
(17.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
14.7

%
 
15.3

%
(0.6
)
 pts.
 
 
Expense rates:
 
 
 
 
 
 
 
 
 
 
% of revenue
 
12.8

 
 
13.1

 
(0.3
)
 
 
 
% of gross profit
 
87.3

 
 
85.4

 
1.9

 
 
 
Return on sales
 
1.9

 
 
2.2

 
(0.3
)
 
 
 

5

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
 
2015
 
Change
 
Change
 
OCG
 
 
 
 
 
 
 
 
 
Revenue from services
$
178.2

 
$
171.8

 
3.7

%
3.9

%
Gross profit
 
45.0

 
 
41.4

 
8.5

 
8.9

 
Total SG&A expenses
 
37.3

 
 
33.2

 
12.3

 
12.8

 
Earnings from operations
 
7.7

 
 
8.2

 
(7.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
25.2

%
 
24.1

%
1.1

 pts.
 
 
Expense rates:
 
 
 
 
 
 
 
 
 
 
% of revenue
 
20.9

 
 
19.3

 
1.6

 
 
 
% of gross profit
 
83.0

 
 
80.2

 
2.8

 
 
 
Return on sales
 
4.3

 
 
4.8

 
(0.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
Total SG&A expenses
$
17.4

 
$
22.9

 
(24.4
)
%
 
 


6

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
September Year to Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
 
2015
 
Change
 
Change
 
AMERICAS
 
 
 
 
 
 
 
 
 
 
  Commercial
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,887.6

 
$
1,908.2

 
(1.1
)
%
0.2

%
Staffing fee-based income included in revenue from services
 
11.4

 
 
10.8

 
5.5

 
6.1

 
Gross profit
 
295.9

 
 
290.3

 
1.9

 
2.9

 
Gross profit rate
 
15.7

%
 
15.2

%
0.5

 pts.
 
 
  PT
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
718.3

 
$
721.8

 
(0.5
)
%
(0.4
)
%
Staffing fee-based income included in revenue from services
 
13.7

 
 
13.1

 
4.4

 
5.2

 
Gross profit
 
124.3

 
 
122.0

 
1.8

 
2.0

 
Gross profit rate
 
17.3

%
 
16.9

%
0.4

 pts.
 
 
  Total Americas
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
2,605.9

 
$
2,630.0

 
(0.9
)
%
—

%
Staffing fee-based income included in revenue from services
 
25.1

 
 
23.9

 
4.9

 
5.6

 
Gross profit
 
420.2

 
 
412.3

 
1.9

 
2.7

 
SG&A expenses excluding restructuring charges
 
340.5

 
 
339.8

 
0.2

 
0.9

 
Restructuring charges
 
2.2

 
 
—

 
NM

 

 
Total SG&A expenses
 
342.7

 
 
339.8

 
0.8

 
1.5

 
Earnings from operations
 
77.5

 
 
72.5

 
7.0

 
 
 
Earnings from operations excluding restructuring charges
 
79.7

 
 
72.5

 
10.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
16.1

%
 
15.7

%
0.4

 pts.
 
 
Expense rates (excluding restructuring charges):
 
 
 
 
 
 
 
 
 
 
% of revenue
 
13.1

 
 
12.9

 
0.2

 
 
 
% of gross profit
 
81.0

 
 
82.4

 
(1.4
)
 
 
 
Return on sales (excluding restructuring charges)
 
3.1

 
 
2.8

 
0.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
 
  Commercial
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
570.2

 
$
573.0

 
(0.5
)
%
2.3

%
Staffing fee-based income included in revenue from services
 
10.4

 
 
9.9

 
6.0

 
10.0

 
Gross profit
 
77.5

 
 
79.1

 
(2.1
)
 
0.2

 
Gross profit rate
 
13.6

%
 
13.8

%
(0.2
)
 pts.
 
 
  PT
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
126.4

 
$
126.8

 
(0.3
)
%
2.1

%
Staffing fee-based income included in revenue from services
 
7.3

 
 
7.7

 
(5.8
)
 
(2.1
)
 
Gross profit
 
25.6

 
 
27.2

 
(5.7
)
 
(3.2
)
 
Gross profit rate
 
20.3

%
 
21.5

%
(1.2
)
 pts.
 
 
  Total EMEA
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
696.6

 
$
699.8

 
(0.5
)
%
2.2

%
Staffing fee-based income included in revenue from services
 
17.7

 
 
17.6

 
0.8

 
4.7

 
Gross profit
 
103.1

 
 
106.3

 
(3.0
)
 
(0.6
)
 
SG&A expenses excluding restructuring charges
 
92.9

 
 
99.5

 
(6.5
)
 
(3.8
)
 
Restructuring charges
 
1.2

 
 
—

 
NM

 
 
 
Total SG&A expenses
 
94.1

 
 
99.5

 
(5.3
)
 
(2.7
)
 
Earnings from operations
 
9.0

 
 
6.8

 
30.5

 
 
 
Earnings from operations excluding restructuring charges
 
10.2

 
 
6.8

 
46.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
14.8

%
 
15.2

%
(0.4
)
 pts.
 
 
Expense rates (excluding restructuring charges):
 
 
 
 
 
 
 
 
 
 
% of revenue
 
13.4

 
 
14.2

 
(0.8
)
 
 
 
% of gross profit
 
90.1

 
 
93.5

 
(3.4
)
 
 
 
Return on sales (excluding restructuring charges)
 
1.5

 
 
1.0

 
0.5

 
 
 

7

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
September Year to Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
 
2015
 
Change
 
Change
 
OCG
 
 
 
 
 
 
 
 
 
Revenue from services
$
520.3

 
$
486.3

 
7.0

%
7.5

%
Gross profit
 
130.1

 
 
112.6

 
15.5

 
16.3

 
Total SG&A expenses
 
112.2

 
 
98.1

 
14.4

 
15.3

 
Earnings from operations
 
17.9

 
 
14.5

 
22.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
25.0

%
 
23.1

%
1.9

 pts.
 
 
Expense rates:
 
 
 
 
 
 
 
 
 
 
% of revenue
 
21.6

 
 
20.2

 
1.4

 
 
 
% of gross profit
 
86.3

 
 
87.1

 
(0.8
)
 
 
 
Return on sales
 
3.4

 
 
3.0

 
0.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
Total SG&A expenses
$
66.6

 
$
61.1

 
8.8

%
 
 


8

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
October 2, 2016
 
Jan. 3, 2016
 
September 27, 2015
 
Current Assets
 
 
 
 
 
 
 
  Cash and equivalents
$
27.6

$
42.2

$
44.9

 
  Trade accounts receivable, less allowances of
 
 
 
 
 
 
 
    $11.1, $10.5 and $9.7, respectively
 
1,125.8

 
1,139.1

 
1,160.3

 
  Prepaid expenses and other current assets
 
53.0

 
45.8

 
49.0

 
  Deferred taxes
 
—

 
—

 
35.0

 
Total current assets
 
1,206.4

 
1,227.1

 
1,289.2

 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
 
 
 
 
 
 
  Property and equipment, net
 
80.5

 
88.9

 
88.3

 
  Noncurrent deferred taxes
 
179.8

 
189.3

 
140.8

 
  Goodwill, net
 
88.4

 
90.3

 
90.3

 
  Investment in equity affiliate
 
113.6

 
9.4

 
9.4

 
  Other assets
 
370.6

 
334.6

 
331.9

 
Total noncurrent assets
 
832.9

 
712.5

 
660.7

 
 
 
 
 
 
 
 
 
Total Assets
$
2,039.3

$
1,939.6

$
1,949.9

 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
  Short-term borrowings
$
8.7

$
55.5

$
76.8

 
  Accounts payable and accrued liabilities
 
408.7

 
405.5

 
385.2

 
  Accrued payroll and related taxes
 
276.9

 
268.1

 
312.8

 
  Accrued insurance
 
26.8

 
26.7

 
25.9

 
  Income and other taxes
 
56.9

 
60.0

 
59.5

 
Total current liabilities
 
778.0

 
815.8

 
860.2

 
 
 
 
 
 
 
 
 
Noncurrent Liabilities
 
 
 
 
 
 
 
  Accrued insurance
 
40.2

 
40.0

 
42.2

 
  Accrued retirement benefits
 
153.9

 
141.0

 
139.5

 
  Other long-term liabilities
 
50.7

 
47.4

 
48.4

 
Total noncurrent liabilities
 
244.8

 
228.4

 
230.1

 
 
 
 
 
 
 
 
 
Stockholders' Equity
 
 
 
 
 
 
 
  Common stock
 
40.1

 
40.1

 
40.1

 
  Treasury stock
 
(39.1
)
 
(44.3
)
 
(46.9
)
 
  Paid-in capital
 
26.2

 
25.4

 
26.7

 
  Earnings invested in the business
 
906.8

 
813.5

 
781.3

 
  Accumulated other comprehensive income
 
82.5

 
60.7

 
58.4

 
Total stockholders' equity
 
1,016.5

 
895.4

 
859.6

 
 
 
 
 
 
 
 
 
Total Liabilities and Stockholders' Equity
$
2,039.3

$
1,939.6

$
1,949.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 Working Capital
$
428.4

$
411.3

$
429.0

 
 Current Ratio
 
1.6

 
1.5

 
1.5

 
 Debt-to-capital %
 
0.9

%
5.8

%
8.2

%
 Global Days Sales Outstanding
 
56

 
54

 
57

 

9

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
Net earnings
$
101.0

$
19.6

Noncash adjustments:
 
 
 
 
Depreciation and amortization
 
16.0

 
16.6

Provision for bad debts
 
6.1

 
3.3

Stock-based compensation
 
5.5

 
4.6

Gain on investment in TS Kelly Asia Pacific equity affiliate
 
(87.2
)
 
—

Other, net
 
(2.2
)
 
(0.7
)
Changes in operating assets and liabilities
 
(13.1
)
 
(44.9
)
 
 
 
 
 
Net cash from (used in) operating activities
 
26.1

 
(1.5
)
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(7.8
)
 
(12.3
)
Net cash proceeds from investment in TS Kelly Asia Pacific equity affiliate
 
18.8

 
—

Investment in TS Kelly equity affiliate
 
—

 
(0.5
)
Other investing activities
 
(0.4
)
 
(0.4
)
 
 
 
 
 
Net cash from (used in) investing activities
 
10.6

 
(13.2
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Net change in short-term borrowings
 
(47.8
)
 
(13.8
)
Dividend payments
 
(7.7
)
 
(5.7
)
Other financing activities
 
0.4

 
0.2

 
 
 
 
 
Net cash used in financing activities
 
(55.1
)
 
(19.3
)
 
 
 
 
 
Effect of exchange rates on cash and equivalents
 
3.8

 
(4.2
)
 
 
 
 
 
Net change in cash and equivalents
 
(14.6
)
 
(38.2
)
Cash and equivalents at beginning of period
 
42.2

 
83.1

 
 
 
 
 
 
 
 
 
 
Cash and equivalents at end of period
$
27.6

$
44.9



10

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter (Commercial, PT and OCG)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
2015
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
United States
$
900.3

$
899.8

 
0.1

%
0.1

%
Canada
 
34.9

 
37.9

 
(7.8
)
 
(8.5
)
 
Mexico
 
27.6

 
31.3

 
(12.3
)
 
0.4

 
Puerto Rico
 
20.9

 
23.8

 
(12.2
)
 
(12.2
)
 
Brazil
 
13.3

 
10.4

 
27.9

 
28.1

 
Total Americas
 
997.0

 
1,003.2

 
(0.6
)
 
(0.3
)
 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
France
 
60.8

 
63.1

 
(3.7
)
 
(4.1
)
 
Switzerland
 
55.0

 
58.0

 
(5.2
)
 
(3.9
)
 
Portugal
 
39.2

 
33.5

 
16.9

 
16.5

 
United Kingdom
 
19.5

 
27.7

 
(29.3
)
 
(16.4
)
 
Russia
 
18.4

 
17.0

 
7.9

 
11.2

 
Germany
 
14.2

 
15.4

 
(7.7
)
 
(8.1
)
 
Italy
 
13.6

 
14.0

 
(2.8
)
 
(3.1
)
 
Norway
 
8.4

 
10.1

 
(17.3
)
 
(15.9
)
 
Other
 
17.4

 
11.5

 
50.8

 
50.3

 
Total EMEA
 
246.5

 
250.3

 
(1.5
)
 
0.2

 
 
 
 
 
 
 
 
 
 
 
APAC
 
 
 
 
 
 
 
 
 
Australia
 
3.6

 
28.8

 
(87.5
)
 
(88.0
)
 
Singapore
 
0.1

 
32.6

 
(99.7
)
 
(99.7
)
 
New Zealand
 
0.1

 
9.4

 
(99.1
)
 
(99.2
)
 
Malaysia
 
0.1

 
14.0

 
(99.5
)
 
(99.5
)
 
Other
 
0.4

 
12.7

 
(96.5
)
 
(96.4
)
 
Total APAC
 
4.3

 
97.5

 
(95.6
)
 
(95.7
)
 
 
 
 
 
 
 
 
 
 
 
Total Kelly Services, Inc.
$
1,247.8

$
1,351.0

 
(7.6
)
%
(7.1
)
%
 
 
 
 
 
 
 
 
 
 


11

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
September Year to Date (Commercial, PT and OCG)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2016
 
2015
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
United States
$
2,765.8

$
2,706.4

 
2.2

%
2.2

%
Canada
 
105.2

 
122.2

 
(13.9
)
 
(9.9
)
 
Mexico
 
79.6

 
95.2

 
(16.4
)
 
(1.6
)
 
Puerto Rico
 
65.9

 
75.2

 
(12.4
)
 
(12.4
)
 
Brazil
 
33.5

 
34.2

 
(1.8
)
 
16.7

 
Total Americas
 
3,050.0

 
3,033.2

 
0.6

 
1.4

 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
France
 
178.6

 
180.4

 
(1.0
)
 
(1.0
)
 
Switzerland
 
156.2

 
160.7

 
(2.8
)
 
(0.1
)
 
Portugal
 
111.6

 
98.7

 
13.1

 
13.0

 
United Kingdom
 
66.2

 
78.4

 
(15.5
)
 
(7.2
)
 
Russia
 
49.0

 
57.4

 
(14.8
)
 
(2.2
)
 
Germany
 
45.3

 
43.1

 
5.0

 
5.0

 
Italy
 
42.1

 
39.5

 
6.5

 
6.3

 
Norway
 
24.4

 
29.5

 
(17.2
)
 
(11.8
)
 
Other
 
45.9

 
32.8

 
39.8

 
40.1

 
Total EMEA
 
719.3

 
720.5

 
(0.2
)
 
2.5

 
 
 
 
 
 
 
 
 
 
 
APAC
 
 
 
 
 
 
 
 
 
Singapore
 
64.9

 
96.9

 
(33.0
)
 
(31.6
)
 
Australia
 
64.2

 
92.1

 
(30.3
)
 
(26.2
)
 
Malaysia
 
27.8

 
45.4

 
(38.9
)
 
(31.4
)
 
New Zealand
 
19.3

 
30.2

 
(36.1
)
 
(29.8
)
 
Other
 
26.9

 
38.3

 
(29.5
)
 
(24.7
)
 
Total APAC
 
203.1

 
302.9

 
(32.9
)
 
(28.9
)
 
 
 
 
 
 
 
 
 
 
 
Total Kelly Services, Inc.
$
3,972.4

$
4,056.6

 
(2.1
)
%
(0.7
)
%
 
 
 
 
 
 
 
 
 
 


12

 KELLY SERVICES, INC. AND SUBSIDIARIES
 RECONCILIATION OF NON-GAAP MEASURES
FOR THE 13 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
 (UNAUDITED)
 (In millions of dollars except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
As Reported
 
Gain on Investment in Equity Affiliate
(Note 1)
 
Adjusted Earnings
 
Adjusted Earnings
 
% Change
 
CC % Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,247.8

$
—

$
1,247.8

$
1,257.0

 
(0.7
)
%
(0.1
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
1,032.7

 
—

 
1,032.7

 
1,042.6

 
(1.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
215.1

 
—

 
215.1

 
214.4

 
0.3

 
0.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SG&A expenses
 
196.3

 
—

 
196.3

 
199.9

 
(1.8
)
 
(1.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
18.8

 
—

 
18.8

 
14.5

 
29.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on investment in TS Kelly Asia Pacific
 
87.2

 
(87.2
)
 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other (expense) income, net
 
(0.4
)
 
—

 
(0.4
)
 
0.1

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes
 
105.6

 
(87.2
)
 
18.4

 
14.6

 
26.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inc. tax expense (benefit)
 
24.7

 
(23.5
)
 
1.2

 
7.1

 
(83.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
80.9

$
(63.7
)
$
17.2

$
7.5

 
130.7

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
2.08

$
(1.63
)
$
0.44

$
0.19

 
131.6

%
 
 
Diluted
$
2.06

$
(1.62
)
$
0.44

$
0.19

 
131.6

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


13

 KELLY SERVICES, INC. AND SUBSIDIARIES
 RECONCILIATION OF NON-GAAP MEASURES
FOR THE 13 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
 (UNAUDITED)
 (In millions of dollars except per share data)
 
 
 
 
 
 
2015
 
 
 
As Reported
 
Disposal of APAC Businesses
(Note 2)
 
Adjusted Earnings
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,351.0

$
(94.0
)
$
1,257.0

 
 
 
 
 
 
 
 
 
Cost of services
 
1,122.8

 
(80.2
)
 
1,042.6

 
 
 
 
 
 
 
 
 
Gross profit
 
228.2

 
(13.8
)
 
214.4

 
 
 
 
 
 
 
 
 
SG&A expenses
 
211.6

 
(11.7
)
 
199.9

 
 
 
 
 
 
 
 
 
Earnings from operations
 
16.6

 
(2.1
)
 
14.5

 
 
 
 
 
 
 
 
 
Other income, net
 
—

 
0.1

 
0.1

 
 
 
 
 
 
 
 
 
Earnings before taxes
 
16.6

 
(2.0
)
 
14.6

 
 
 
 
 
 
 
 
 
Inc. tax expense (benefit)
 
7.5

 
(0.4
)
 
7.1

 
 
 
 
 
 
 
 
 
Net earnings
$
9.1

$
(1.6
)
$
7.5

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.23

$
(0.04
)
$
0.19

 
Diluted
$
0.23

$
(0.04
)
$
0.19

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


14

 KELLY SERVICES, INC. AND SUBSIDIARIES
 RECONCILIATION OF NON-GAAP MEASURES
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
 (UNAUDITED)
 (In millions of dollars except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
As Reported
 
Gain on Investment in Equity Affiliate
(Note 1)
 
Restructuring Charges
(Note 3)
 
Adjusted Earnings
 
Adjusted Earnings
 
% Change
 
CC % Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
3,972.4

$
—

$
—

$
3,972.4

$
3,962.6

 
0.2

%
1.7

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
3,294.1

 
—

 
—

 
3,294.1

 
3,305.6

 
(0.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
678.3

 
—

 
—

 
678.3

 
657.0

 
3.2

 
4.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SG&A expenses
 
634.9

 
—

 
(3.4
)
 
631.5

 
618.9

 
2.0

 
3.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
43.4

 
—

 
3.4

 
46.8

 
38.1

 
22.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on investment in TS Kelly Asia Pacific
 
87.2

 
(87.2
)
 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense, net
 
(1.4
)
 
—

 
—

 
(1.4
)
 
(3.4
)
 
60.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes
 
129.2

 
(87.2
)
 
3.4

 
45.4

 
34.7

 
31.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inc. tax expense (benefit)
 
28.2

 
(23.5
)
 
0.9

 
5.6

 
16.7

 
(66.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
101.0

$
(63.7
)
$
2.5

$
39.8

$
18.0

 
121.5

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
2.59

$
(1.63
)
$
0.07

$
1.02

$
0.46

 
121.7

%
 
 
Diluted
$
2.58

$
(1.63
)
$
0.07

$
1.02

$
0.46

 
121.7

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



15

 
 KELLY SERVICES, INC. AND SUBSIDIARIES
 
 
 RECONCILIATION OF NON-GAAP MEASURES
 
 
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
 
 
 (UNAUDITED)
 
 
 (In millions of dollars except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
As Reported
 
Disposal of APAC Businesses
(Note 2)
 
Adjusted Earnings
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
4,056.6

$
(94.0
)
$
3,962.6

 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
3,385.8

 
(80.2
)
 
3,305.6

 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
670.8

 
(13.8
)
 
657.0

 
 
 
 
 
 
 
 
 
 
 
SG&A expenses
 
630.6

 
(11.7
)
 
618.9

 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
40.2

 
(2.1
)
 
38.1

 
 
 
 
 
 
 
 
 
 
 
Other (expense) income, net
 
(3.5
)
 
0.1

 
(3.4
)
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes
 
36.7

 
(2.0
)
 
34.7

 
 
 
 
 
 
 
 
 
 
 
Inc. tax expense (benefit)
 
17.1

 
(0.4
)
 
16.7

 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
19.6

$
(1.6
)
$
18.0

 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
$
0.51

$
(0.04
)
$
0.46

 
 
Diluted
$
0.51

$
(0.04
)
$
0.46

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


16

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

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2016 gain on investment in equity affiliate, 2016 restructuring charges and disposal of APAC businesses is useful to understand the Company's fiscal 2016 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items allows for a more meaningful comparison of current period operating performance with the operating results of prior periods. These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company's financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company's financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

(1) Gain on investment in equity affiliate represents the difference between the fair value and book value of amounts contributed by the Company to the investment in TS Kelly Asia Pacific.

(2) Disposal of APAC businesses represents the 2015 operational results of business contributed to TS Kelly Asia Pacific in the third quarter of 2016.

(3) Restructuring charges in 2016 include costs related to actions during the second quarter in the Americas and EMEA designed to increase operational efficiency and align our staffing operations with opportunities for growth within their markets.



17
a3q2016earningsreleasesu
Kelly Services, Inc. Third Quarter 2016 November 7, 2016 Exhibit 99.2

 
Safe Harbor Statement This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These factors include, but are not limited to, competitive market pressures including pricing and technology introductions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual assets could be infringed upon or compromised, our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, our increasing dependency on third parties for the execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated with investments in equity affiliates, material changes in demand from or loss of large corporate customers, risks associated with conducting business in foreign countries, including foreign currency fluctuations, availability of full-time employees to lead complex talent supply chain sales and operations, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, the risk of cyber attacks or other breaches of network or information technology security as well as risks associated with compliance on data privacy, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology programs, our ability to maintain adequate financial and management processes and controls, impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, disability and medical benefit plans, the impact of the Patient Protection and Affordable Care Act on our business, the impact of changes in laws and regulations (including federal, state and international tax laws ), the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. Actual results may differ materially from any forward looking statements contained herein, and we have no intention to update these statements. 2

 
3 Third Quarter 2016 Highlights (YOY Comparisons) • Total revenue declined 8%, or 7% in constant currency – Excluding APAC results in 2015, total revenue declined 0.7%, or 0.1% in constant currency • Gross profit down 6%, or 5% in constant currency – Excluding APAC results in 2015, gross profit up 0.3%, or 0.8% in constant currency • Earnings from operations of $18.8 million, up 13% YOY – Excluding APAC results in 2015, earnings from operations up 29% YOY • Diluted earnings per share of $2.06, up $1.83 – Excluding the gain on the APAC JV transaction and APAC staffing results in 2015, diluted earnings per share of $0.44, up $0.25

 
Third Quarter 2016 Financial Summary 4 • Results reflect the deconsolidation of APAC and a slow growth environment in the U.S. • Continued GP rate improvement • Earnings from operations grew by 13%, 14% on a constant currency basis, despite revenue declines • EPS growth due to $63.7 million after tax gain on investment as well as improvements in both operational performance and effective income tax rate ----- (1)Constant Currency represent year-over-year changes resulting from translating 2016 financial data into USD using 2015 exchange rates. Actual Results Change Constant Currency Change(1) Revenue $1.2B (7.6)% (7.1)% GP % 17.2% 30 bps Earnings from Operations $18.8M 13.1% 14.1% ROS % 1.5% 30 bps EPS $2.06 $1.83

 
Third Quarter 2016 Financial Summary (Excluding APAC 2015 Results) 5 ----- (1) Excludes 2015 results from APAC and OCG business related to the deconsolidation. (2) Excludes $87.2 million gain on investment, $63.7 million net of income tax expense or $1.62 per share, in 2016. (3) Constant Currency represent year-over-year changes resulting from translating 2016 financial data into USD using 2015 exchange rates. • Flat constant currency revenue growth reflects a slow growth economic environment • Despite flat revenue, earnings from operations continued to grow YOY due to an improvement in GP rate and expense savings • EPS growth due to improvements in both operational performance and effective income tax rate Actual Results Change(1) Constant Currency Change(3) Revenue $1.2B (0.7)% (0.1)% GP % 17.2% 10 bps Earnings from Operations $18.8M 29.4% 30.4% ROS % 1.5% 30 bps EPS(2) $0.44 $0.25

 
Third Quarter 2016 Revenue Growth 6 • OCG revenue growth of 4% for the quarter • Americas PT Staffing declined in Centralized Accounts while Branch-Delivered revenue growth improved versus the prior quarter • EMEA constant currency revenue growth has flattened as a result of uneven economic conditions -10% -5% 0% 5% Americas Commercial Americas PT EMEA OCG YoY Growth Reported Constant Currency 48% 19% 19% 14% Business Mix Americas Commercial Americas PT EMEA OCG

 
Third Quarter 2016 Gross Profit Growth 7 • Americas Commercial and PT staffing, and OCG comprise 84% of total company GP • GP growth in the Americas PT represents increasing GP rate on declining revenue • OCG GP growth reflects strong GP rate improvement on a single digit revenue increase • EMEA GP reflects staffing fee-based income declines as well as unfavorable customer and country mix 44% 19% 16% 21% Business Mix Americas Commercial Americas PT EMEA OCG -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Americas Commercial Americas PT EMEA OCG YoY Growth Reported Constant Currency

 
16.9% 17.2% 15.0% 15.2% 15.4% 15.6% 15.8% 16.0% 16.2% 16.4% 16.6% 16.8% 17.0% 17.2% 17.4% Q3 2015 GP Rate AMER GP Rate EMEA GP Rate OCG GP Rate Perm Fee and Other APAC Deconsolidation Q3 2016 GP Rate Third Quarter 2016 Gross Profit Rate 8 • Overall GP rate up due to improving GP rates in the Americas Staffing and global OCG businesses as well as the favorable impact related to the APAC deconsolidation, as APAC had lower GP rates than the Company average • Americas GP rate reflects continued management of temporary employee tax and benefit expenses, partially offset by increased workers’ compensation costs • OCG GP rate improvement due to a favorable customer mix 20 bps 10 bps (10) bps (10) bps 20 bps

 
$212 $196 $190 $195 $200 $205 $210 $215 Q3 2015 SG&A APAC Corporate FX Amer EMEA OCG Q3 2016 SG&A Third Quarter 2016 SG&A 9 • OCG expense growth results from increasing salaries as well as costs related to additional sales resources • Corporate expenses reflect a $7.5 million one-time savings related to lower performance- based compensation • APAC reflects the deconsolidation of our APAC business upon closing the APAC JV transaction at the beginning of the quarter $(11) $(6) $(1) $(1) $4 $ in Millions $(1)

 
Third Quarter 2016 Conversion Rate 10 ----- (1)Conversion rate represents earnings from operations as a percent of gross profit, or return on gross profit. • Total company conversion rate reflects continued progress against our goal to improve conversion rate on an ongoing basis • APAC results are no longer included in the Company’s results upon closing of the APAC JV transaction at the beginning of the third quarter $ in Millions 2016 2015 Gross Earnings Conversion Gross Earnings Conversion Change Profit from Ops Rate(1) Profit from Ops Rate(1) (bps) Americas 136.3$ 24.1$ 17.7% 137.6$ 23.9$ 17.3% 40 EMEA 35.0 4.4 12.7% 37.1 5.3 14.6% (190) APAC - - 0.0% 13.2 2.1 15.7% NM OCG 45.0 7.7 17.0% 41.4 8.2 19.8% (280) Total Company 215.1$ 18.8$ 8.7% 228.2$ 16.6$ 7.3% 140

 
Third Quarter 2016 Conversion Rate (Excluding APAC 2015 Results) 11 • Total company conversion rate reflects continued progress against our goal to improve conversion rate on an ongoing basis $ in Millions ----- (1) Excludes 2015 results from APAC and OCG business related to the deconsolidation. (2) Conversion rate represents earnings from operations as a percent of gross profit, or return on gross profit. 2016 2015 Gross Earnings Conversion Gross Earnings Conversion Change Profit from Ops Rate(2) Profit(1) from Ops(1) Rate(2) (bps) Americas 136.3$ 24.1$ 17.7% 137.6$ 23.9$ 17.3% 40 EMEA 35.0 4.4 12.7% 37.1 5.3 14.6% (190) APAC - - 0.0% - - 0.0% - OCG 45.0 7.7 17.0% 40.8 8.3 20.4% (340) Total Company 215.1$ 18.8$ 8.7% 214.4$ 14.5$ 6.8% 190

 
$0 $20 $40 $60 $80 $100 2015 Q3 2015 2016 Q3 Debt (and Debt-to-Equity Ratio) Third Quarter 2016 Balance Sheet Data 12 • DSO improved one day versus the same period last year • Debt-to-equity ratio at 0.9% continues to improve from the same period a year ago $ in Millions DSO 57 54 56 Debt-to- 8.2% 5.8% 0.9% Equity Ratio $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 2015 Q3 2015 2016 Q3 Accounts Receivable Excluding APAC APAC

 
2016 Outlook – Fourth Quarter • Revenue down 9% to 10% YOY in constant currency – Excluding 20 basis points of unfavorable foreign exchange impact – Excluding the impact of the APAC results in 2015, revenue down 2.0% to 3.0% in constant currency, or flat YOY excluding the 53rd week in 2015 • Gross profit rate up 20 basis points YOY – Includes 20 basis points of favorable impact from excluding the APAC results • SG&A down 9% to 10% YOY – Excluding APAC results in 2015, SG&A is down 3.0% to 4.0% 13

 
APPENDIX: TS KELLY ASIA PACIFIC JOINT VENTURE 14

 
• Joint Venture capitalizes on the strong reputation of Kelly Services as a leading talent provider in the region and on Temp Holdings’ regional presence – Provides accelerated growth opportunities, larger workforce solutions presence, and enhanced competitive positioning – Expands on 14-year strategic partnership between Kelly and Temp Holdings • TS Kelly Asia Pacific is expected to be one of the largest workforce solutions companies in the Asia Pacific region • Solidifies Kelly’s focus on OCG solutions in the APAC market – Opportunity to accelerate investment in high growth market – Kelly’s outsourcing and consulting group, KellyOCG, is not part of the joint venture and will continue to operate under the complete control of Kelly Highlights – TS Kelly Asia Pacific 15

 
• Expands scope from four geographies to twelve, with headquarters in Singapore • Brings together established businesses with approximately $500 million in revenue and 1,600 employees – TS Kelly North Asia – China, Hong Kong, Taiwan, South Korea – Kelly Services – Singapore, Malaysia, Australia, New Zealand, India, Indonesia, Thailand – Capita – Singapore and Malaysia – First Alliances – Vietnam – Intelligence – Indonesia, Vietnam, Singapore, Malaysia Highlights – TS Kelly Asia Pacific 16

 
• Closed on July 4, 2016, the JV was formed through asset transfers from Kelly and Temp Holdings, and a $36.5 million cash payment to Kelly at closing and a $4.5 million cash true-up payment made to Kelly in Q4 2016 • Temp Holdings owns 51%, Kelly owns 49% • Beginning in the third quarter, Kelly accounts for its 49% interest as an Equity Method Investment – APAC results are no longer included in the individual lines of Kelly’s consolidated income statement or balance sheet  Equity method investment asset will be reported as a single line item on the balance sheet  49% share of income reflected as Income from equity method investments (below earnings from operations), effective on the transaction closing date » Will no longer be included as revenue, cost of service, and SG&A expense TS Kelly Asia Pacific – Transaction Details 17