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 05, 2020
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(Exact name of Registrant as specified in its charter)
| (State or other | (Commission | (IRS Employer | ||||||
| jurisdiction of | File Number) | Identification | ||||||
| incorporation) | Number) | |||||||
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(Address of principal executive offices)
(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):
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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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 September 27, 2020. A copy of the press release is attached as exhibit 99.1 herein.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description | ||||
| Press Release dated November 5, 2020. | |||||
| Presentation materials for November 5, 2020 conference call. | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
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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 5, 2020 | ||||||||
/s/ Olivier G. Thirot Olivier G. Thirot Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
| November 5, 2020 | ||||||||
/s/ Laura S. Lockhart Laura S. Lockhart Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) | ||||||||
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EXHIBIT INDEX
| Exhibit No. | Description | ||||
| 99.1 | Press Release dated November 5, 2020. | ||||
| 99.2 | Presentation materials for November 5, 2020 conference call. | ||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
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Exhibit 99.1
KELLY® REPORTS
THIRD QUARTER EARNINGS
Financial Highlights
•Q3 revenue declined 18.1% as COVID-19 related demand declines persist
•Q3 operating loss of $2.4 million, or earnings of $7.0 million as adjusted, compared to earnings of $17.0 million last year as adjusted
•Q3 earnings per share of $0.42 or $0.29 as adjusted, compared to $0.43 last year as adjusted
TROY, Mich. (November 5, 2020) – Kelly (Nasdaq: KELYA) (Nasdaq: KELYB), a leading specialty talent solutions provider, today announced results for the third quarter of 2020.
Peter Quigley, president and chief executive officer, announced revenue for the third quarter of 2020 totaled $1.0 billion, an 18.1% decline compared to the corresponding quarter of 2019. Revenues declined year-over-year in the quarter as the continuing effects of the COVID-19 crisis impacted customer demand.
Losses from operations for the third quarter of 2020 totaled $2.4 million, compared to earnings of $17.1 million reported for the third quarter of 2019. The 2020 third quarter results include a non-cash charge to allowance for doubtful accounts related to a customer dispute and an adjustment to restructuring charges. The third quarter of 2019 results included an adjustment to restructuring charges. On an adjusted basis, earnings from operations were $7.0 million compared to $17.0 million in the corresponding quarter of 2019.
Diluted earnings per share in the third quarter of 2020 were $0.42 compared to a loss per share of $0.27 in the third quarter of 2019. Included in the earnings per share in the third quarter of 2020 is a non-cash gain, net of tax, on Kelly’s investment in Persol Holdings common stock of $0.29, partially offset by a loss of $0.17 related to the customer dispute charge, net of tax. Included in the loss per share in the third quarter of 2019 is $0.70 from a non-cash loss per share on Kelly’s investment in Persol Holdings common stock, net of tax. On an adjusted basis, earnings per share were $0.29 for the third quarter of 2020 compared to $0.43 for the corresponding quarter of 2019.
“As a gradual recovery from the pandemic continued into the third quarter, revenue trends in all of Kelly’s segments showed some sequential improvement,” stated Quigley. “Our higher-margin specialties, such as outsourcing & consulting, science, and virtual call center, proved to be particularly resilient. Kelly has also made significant progress on reinventing ourselves in a tumultuous year. We executed on our plan to adopt a new operating model, and we reported third quarter financial results by our five specialty business segments: Science, Engineering & Technology; Education; Professional & Industrial; OCG; and International. This is an important step forward in redefining Kelly as a specialty talent provider in skill sets modern organizations need to grow and thrive. While we continue to carefully manage expenses and track the trajectory of the crisis, we expect our disciplined specialty focus to deliver profitable growth in a post-pandemic business environment. I’m proud of our teams for the agility, creativity, and character they’ve shown in response to this crisis, and I’m encouraged by the early traction we’re seeing as a result of their efforts.”
In conjunction with its third quarter earnings release, Kelly has published a financial presentation on the Investor Relations page of its public website and will host a conference call at 9:00 a.m. (ET) on November 5 to review the results and answer questions. The call may be accessed in one of the following ways:
Via the Internet:
Kellyservices.com
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Via the Telephone
(877) 692-8955 (toll free) or (234) 720-6979 (caller paid)
Enter access code 5728672
After the prompt, please enter “#”
A recording of the conference call will be available after 2:30 p.m. ET on November 5, 2020 at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 8818296#. The recording will also be available at kellyservices.com during this period.
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, the recent novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual property 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 and services connecting talent to independent work, 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 PersolKelly Pte. Ltd., material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with government or government contractors, risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology projects, our ability to maintain adequate financial and management processes and controls, risk of potential impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), competition law risks, the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to realize value from our tax credit and net operating loss carryforwards, 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®
Kelly Services, Inc. (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, Light Industrial, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ nearly 440,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2019 was $5.4 billion. Visit kellyservices.com and let us help with what’s next for you.
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| MEDIA CONTACT: | ANALYST CONTACT: | ||||||||||
| Jane Stehney | James Polehna | ||||||||||
| (248) 574-9800 | (248) 244-4586 | ||||||||||
| stehnja@kellyservices.com | james.polehna@kellyservices.com | ||||||||||
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| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||||||||||||||||||||||||
| FOR THE 13 WEEKS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019 | |||||||||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||||||||
| (In millions of dollars except per share data) | |||||||||||||||||||||||||||||||||||
| % | CC % | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Change | Change | |||||||||||||||||||||||||||||||
| Revenue from services | $ | 1,038.2 | $ | 1,267.7 | $ | (229.5) | (18.1) | % | (18.2) | % | |||||||||||||||||||||||||
| Cost of services | 847.2 | 1,040.0 | (192.8) | (18.5) | |||||||||||||||||||||||||||||||
| Gross profit | 191.0 | 227.7 | (36.7) | (16.1) | (16.3) | ||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 193.4 | 210.6 | (17.2) | (8.2) | (8.1) | ||||||||||||||||||||||||||||||
| Earnings (loss) from operations | (2.4) | 17.1 | (19.5) | NM | |||||||||||||||||||||||||||||||
| Gain (loss) on investment in Persol Holdings | 16.8 | (39.3) | 56.1 | NM | |||||||||||||||||||||||||||||||
| Other income (expense), net | (0.7) | (0.2) | (0.5) | (286.4) | |||||||||||||||||||||||||||||||
| Earnings (loss) before taxes and equity in net earnings (loss) of affiliate | 13.7 | (22.4) | 36.1 | NM | |||||||||||||||||||||||||||||||
| Income tax expense (benefit) | (1.2) | (12.8) | 11.6 | 90.9 | |||||||||||||||||||||||||||||||
| Net earnings (loss) before equity in net earnings (loss) of affiliate | 14.9 | (9.6) | 24.5 | NM | |||||||||||||||||||||||||||||||
| Equity in net earnings (loss) of affiliate | 1.8 | (0.9) | 2.7 | NM | |||||||||||||||||||||||||||||||
| Net earnings (loss) | $ | 16.7 | $ | (10.5) | $ | 27.2 | NM | ||||||||||||||||||||||||||||
| Basic earnings (loss) per share | $ | 0.42 | $ | (0.27) | $ | 0.69 | NM | ||||||||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | 0.42 | $ | (0.27) | $ | 0.69 | NM | ||||||||||||||||||||||||||||
| STATISTICS: | |||||||||||||||||||||||||||||||||||
| Permanent placement revenue (included in revenue from services) | $ | 9.1 | $ | 15.1 | $ | (6.0) | (40.2) | % | (40.6) | % | |||||||||||||||||||||||||
| Gross profit rate | 18.4 | % | 18.0 | % | 0.4 | pts. | |||||||||||||||||||||||||||||
| Conversion rate | (1.3) | 7.5 | (8.8) | ||||||||||||||||||||||||||||||||
| % Return: | |||||||||||||||||||||||||||||||||||
| Earnings (loss) from operations | (0.2) | 1.3 | (1.5) | ||||||||||||||||||||||||||||||||
| Net earnings (loss) | 1.6 | (0.8) | 2.4 | ||||||||||||||||||||||||||||||||
| Effective income tax rate | (8.5) | % | 57.3 | % | (65.8) | pts. | |||||||||||||||||||||||||||||
| Average number of shares outstanding (millions): | |||||||||||||||||||||||||||||||||||
| Basic | 39.3 | 39.1 | |||||||||||||||||||||||||||||||||
| Diluted | 39.4 | 39.1 | |||||||||||||||||||||||||||||||||
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| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||||||||||||||||||||||||
| FOR THE 39 WEEKS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019 | |||||||||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||||||||
| (In millions of dollars except per share data) | |||||||||||||||||||||||||||||||||||
| % | CC % | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Change | Change | |||||||||||||||||||||||||||||||
| Revenue from services | $ | 3,274.6 | $ | 4,017.8 | $ | (743.2) | (18.5) | % | (18.0) | % | |||||||||||||||||||||||||
| Cost of services | 2,671.1 | 3,294.5 | (623.4) | (18.9) | |||||||||||||||||||||||||||||||
| Gross profit | 603.5 | 723.3 | (119.8) | (16.6) | (16.2) | ||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 591.0 | 666.9 | (75.9) | (11.4) | (11.0) | ||||||||||||||||||||||||||||||
| Goodwill impairment charge | 147.7 | — | 147.7 | NM | |||||||||||||||||||||||||||||||
| Gain on sale of assets | (32.1) | (12.3) | (19.8) | (161.6) | |||||||||||||||||||||||||||||||
| Earnings (loss) from operations | (103.1) | 68.7 | (171.8) | NM | |||||||||||||||||||||||||||||||
| Gain (loss) on investment in Persol Holdings | (31.4) | 35.1 | (66.5) | NM | |||||||||||||||||||||||||||||||
| Other income (expense), net | 3.6 | (1.1) | 4.7 | 421.4 | |||||||||||||||||||||||||||||||
| Earnings (loss) before taxes and equity in net earnings (loss) of affiliate | (130.9) | 102.7 | (233.6) | NM | |||||||||||||||||||||||||||||||
| Income tax expense (benefit) | (36.5) | 6.3 | (42.8) | NM | |||||||||||||||||||||||||||||||
| Net earnings (loss) before equity in net earnings (loss) of affiliate | (94.4) | 96.4 | (190.8) | NM | |||||||||||||||||||||||||||||||
| Equity in net earnings (loss) of affiliate | (1.0) | (1.0) | — | (1.8) | |||||||||||||||||||||||||||||||
| Net earnings (loss) | $ | (95.4) | $ | 95.4 | $ | (190.8) | NM | ||||||||||||||||||||||||||||
| Basic earnings (loss) per share | $ | (2.43) | $ | 2.42 | $ | (4.85) | NM | ||||||||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | (2.43) | $ | 2.41 | $ | (4.84) | NM | ||||||||||||||||||||||||||||
| STATISTICS: | |||||||||||||||||||||||||||||||||||
| Permanent placement revenue (included in revenue from services) | $ | 28.9 | $ | 46.7 | $ | (17.8) | 38.1 | % | (37.6) | % | |||||||||||||||||||||||||
| Gross profit rate | 18.4 | % | 18.0 | % | 0.4 | pts. | |||||||||||||||||||||||||||||
| Conversion rate | (17.1) | 9.5 | (26.6) | ||||||||||||||||||||||||||||||||
| % Return: | |||||||||||||||||||||||||||||||||||
| Earnings (loss) from operations | (3.1) | 1.7 | (4.8) | ||||||||||||||||||||||||||||||||
| Net earnings (loss) | (2.9) | 2.4 | (5.3) | ||||||||||||||||||||||||||||||||
| Effective income tax rate | 27.9 | % | 6.1 | % | 21.8 | pts. | |||||||||||||||||||||||||||||
| Average number of shares outstanding (millions): | |||||||||||||||||||||||||||||||||||
| Basic | 39.3 | 39.0 | |||||||||||||||||||||||||||||||||
| Diluted | 39.3 | 39.2 | |||||||||||||||||||||||||||||||||
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| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| RESULTS OF OPERATIONS BY SEGMENT | ||||||||||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||||||||||
| (In millions of dollars) | ||||||||||||||||||||||||||||||||
| Third Quarter | ||||||||||||||||||||||||||||||||
| % | CC % | |||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Change | |||||||||||||||||||||||||||||
| Professional & Industrial | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 446.5 | $ | 538.0 | (17.0) | % | (17.0) | % | ||||||||||||||||||||||||
| Gross profit | 77.1 | 91.8 | (16.1) | (16.0) | ||||||||||||||||||||||||||||
| SG&A expenses excluding restructuring charges | 65.4 | 77.7 | (15.8) | (15.8) | ||||||||||||||||||||||||||||
| Restructuring charges | (0.1) | (0.1) | (24.7) | (24.7) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 65.3 | 77.6 | (15.8) | (15.8) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | 11.8 | 14.2 | (17.6) | |||||||||||||||||||||||||||||
| Earnings (loss) from operations excluding restructuring charges | 11.7 | 14.1 | (17.5) | |||||||||||||||||||||||||||||
| Gross profit rate | 17.3 | % | 17.1 | % | 0.2 | pts. | ||||||||||||||||||||||||||
| Science, Engineering & Technology | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 244.0 | $ | 285.2 | (14.4) | % | (14.4) | % | ||||||||||||||||||||||||
| Gross profit | 50.7 | 58.3 | (13.1) | (13.1) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 31.3 | 36.0 | (13.0) | (13.1) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | 19.4 | 22.3 | (13.2) | |||||||||||||||||||||||||||||
| Gross profit rate | 20.8 | % | 20.4 | % | 0.4 | pts. | ||||||||||||||||||||||||||
| Education | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 27.5 | $ | 57.1 | (51.8) | % | (51.8) | % | ||||||||||||||||||||||||
| Gross profit | 4.1 | 8.6 | (51.1) | (51.1) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 11.6 | 13.8 | (15.5) | (15.5) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | (7.5) | (5.2) | (43.2) | |||||||||||||||||||||||||||||
| Gross profit rate | 15.2 | % | 15.0 | % | 0.2 | pts. | ||||||||||||||||||||||||||
| Outsourcing & Consulting | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 87.9 | $ | 94.4 | (7.0) | % | (7.4) | % | ||||||||||||||||||||||||
| Gross profit | 29.1 | 29.5 | (1.5) | (2.5) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 25.4 | 29.1 | (12.7) | (13.7) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | 3.7 | 0.4 | NM | |||||||||||||||||||||||||||||
| Gross profit rate | 33.1 | % | 31.3 | % | 1.8 | pts. | ||||||||||||||||||||||||||
| International | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 232.4 | $ | 293.4 | (20.8) | % | (21.1) | % | ||||||||||||||||||||||||
| Gross profit | 30.0 | 39.5 | (23.9) | (24.5) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 39.9 | 35.3 | 13.1 | 14.3 | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | (9.9) | 4.2 | NM | |||||||||||||||||||||||||||||
| Gross profit rate | 12.9 | % | 13.5 | % | (0.6) | pts. | ||||||||||||||||||||||||||
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| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| RESULTS OF OPERATIONS BY SEGMENT | ||||||||||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||||||||||
| (In millions of dollars) | ||||||||||||||||||||||||||||||||
| September Year to Date | ||||||||||||||||||||||||||||||||
| % | CC % | |||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Change | |||||||||||||||||||||||||||||
| Professional & Industrial | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 1,346.7 | $ | 1,668.7 | (19.3) | % | (19.2) | % | ||||||||||||||||||||||||
| Gross profit | 241.1 | 291.6 | (17.3) | (17.3) | ||||||||||||||||||||||||||||
| SG&A expenses excluding restructuring charges | 206.1 | 241.7 | (14.7) | (14.6) | ||||||||||||||||||||||||||||
| Restructuring charges | 4.3 | 5.2 | (18.8) | (18.8) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 210.4 | 246.9 | (14.8) | (14.7) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | 30.7 | 44.7 | (31.4) | |||||||||||||||||||||||||||||
| Earnings (loss) from operations excluding restructuring charges | 35.0 | 49.9 | (30.1) | |||||||||||||||||||||||||||||
| Gross profit rate | 17.9 | % | 17.5 | % | 0.4 | pts. | ||||||||||||||||||||||||||
| Science, Engineering & Technology | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 761.5 | $ | 859.7 | (11.4) | % | (11.4) | % | ||||||||||||||||||||||||
| Gross profit | 156.0 | 171.8 | (9.3) | (9.2) | ||||||||||||||||||||||||||||
| SG&A expenses excluding restructuring charges | 98.6 | 111.0 | (11.2) | (11.2) | ||||||||||||||||||||||||||||
| Restructuring charges | 0.5 | 0.4 | 45.2 | 45.2 | ||||||||||||||||||||||||||||
| Total SG&A expenses | 99.1 | 111.4 | (11.1) | (11.0) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | 56.9 | 60.4 | (5.9) | |||||||||||||||||||||||||||||
| Earnings (loss) from operations excluding restructuring charges | 57.4 | 60.8 | (5.6) | |||||||||||||||||||||||||||||
| Gross profit rate | 20.5 | % | 20.0 | % | 0.5 | pts. | ||||||||||||||||||||||||||
| Education | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 195.1 | $ | 313.9 | (37.8) | % | (37.8) | % | ||||||||||||||||||||||||
| Gross profit | 28.8 | 49.9 | (42.2) | (42.2) | ||||||||||||||||||||||||||||
| SG&A expenses excluding restructuring charges | 36.9 | 41.5 | (11.0) | (11.0) | ||||||||||||||||||||||||||||
| Restructuring charges | 0.8 | — | NM | NM | ||||||||||||||||||||||||||||
| Total SG&A expenses | 37.7 | 41.5 | (9.1) | (9.1) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | (8.9) | 8.4 | NM | |||||||||||||||||||||||||||||
| Earnings (loss) from operations excluding restructuring charges | (8.1) | 8.4 | NM | |||||||||||||||||||||||||||||
| Gross profit rate | 14.8 | % | 15.9 | % | (1.1) | pts. | ||||||||||||||||||||||||||
| Outsourcing & Consulting | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 261.0 | $ | 282.3 | (7.6) | % | (7.3) | % | ||||||||||||||||||||||||
| Gross profit | 87.1 | 90.7 | (4.0) | (3.7) | ||||||||||||||||||||||||||||
| Total SG&A expenses | 79.1 | 90.9 | (13.0) | (13.0) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | 8.0 | (0.2) | NM | |||||||||||||||||||||||||||||
| Gross profit rate | 33.4 | % | 32.2 | % | 1.2 | pts. | ||||||||||||||||||||||||||
| International | ||||||||||||||||||||||||||||||||
| Revenue from services | $ | 710.6 | $ | 893.6 | (20.5) | % | (18.7) | % | ||||||||||||||||||||||||
| Gross profit | 90.5 | 119.3 | (24.1) | (22.5) | ||||||||||||||||||||||||||||
| SG&A expenses excluding restructuring charges | 100.3 | 107.2 | (6.4) | (4.5) | ||||||||||||||||||||||||||||
| Restructuring charges | 1.1 | — | NM | NM | ||||||||||||||||||||||||||||
| Total SG&A expenses | 101.4 | 107.2 | (5.4) | (3.5) | ||||||||||||||||||||||||||||
| Earnings (loss) from operations | (10.9) | 12.1 | NM | |||||||||||||||||||||||||||||
| Earnings (loss) from operations excluding restructuring charges | (9.8) | 12.1 | NM | |||||||||||||||||||||||||||||
| Gross profit rate | 12.7 | % | 13.3 | % | (0.6) | pts. | ||||||||||||||||||||||||||
6
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||
| September 27, 2020 | December 29, 2019 | September 29, 2019 | |||||||||||||||||||||
| Current Assets | |||||||||||||||||||||||
| Cash and equivalents | $ | 248.2 | $ | 25.8 | $ | 22.8 | |||||||||||||||||
| Trade accounts receivable, less allowances of | |||||||||||||||||||||||
| $11.4, $12.9, and $12.2, respectively | 1,111.4 | 1,282.2 | 1,262.3 | ||||||||||||||||||||
| Prepaid expenses and other current assets | 71.4 | 76.5 | 80.7 | ||||||||||||||||||||
| Properties held for sale | — | 21.2 | — | ||||||||||||||||||||
| Total current assets | 1,431.0 | 1,405.7 | 1,365.8 | ||||||||||||||||||||
| Noncurrent Assets | |||||||||||||||||||||||
| Property and equipment, net | 40.8 | 43.1 | 82.7 | ||||||||||||||||||||
| Operating lease right-of-use assets | 84.0 | 60.4 | 62.2 | ||||||||||||||||||||
| Deferred taxes | 273.3 | 229.1 | 221.0 | ||||||||||||||||||||
| Goodwill, net | — | 127.8 | 127.8 | ||||||||||||||||||||
| Investment in Persol Holdings | 145.8 | 173.2 | 174.9 | ||||||||||||||||||||
| Investment in equity affiliate | 115.6 | 117.2 | 120.4 | ||||||||||||||||||||
| Other assets | 301.2 | 324.1 | 321.5 | ||||||||||||||||||||
| Total noncurrent assets | 960.7 | 1,074.9 | 1,110.5 | ||||||||||||||||||||
| Total Assets | $ | 2,391.7 | $ | 2,480.6 | $ | 2,476.3 | |||||||||||||||||
| Current Liabilities | |||||||||||||||||||||||
| Short-term borrowings | $ | 0.5 | $ | 1.9 | $ | 17.5 | |||||||||||||||||
| Accounts payable and accrued liabilities | 458.4 | 503.6 | 484.6 | ||||||||||||||||||||
| Operating lease liabilities | 19.5 | 20.1 | 19.8 | ||||||||||||||||||||
| Accrued payroll and related taxes | 240.7 | 267.6 | 285.3 | ||||||||||||||||||||
| Accrued workers' compensation and other claims | 25.0 | 25.7 | 25.1 | ||||||||||||||||||||
| Income and other taxes | 52.4 | 65.2 | 67.7 | ||||||||||||||||||||
| Total current liabilities | 796.5 | 884.1 | 900.0 | ||||||||||||||||||||
| Noncurrent Liabilities | |||||||||||||||||||||||
| Operating lease liabilities | 68.1 | 43.3 | 45.3 | ||||||||||||||||||||
| Accrued payroll and related taxes | 75.7 | — | — | ||||||||||||||||||||
| Accrued workers' compensation and other claims | 44.4 | 45.8 | 48.7 | ||||||||||||||||||||
| Accrued retirement benefits | 188.2 | 187.4 | 179.0 | ||||||||||||||||||||
| Other long-term liabilities | 52.7 | 55.5 | 55.5 | ||||||||||||||||||||
| Total noncurrent liabilities | 429.1 | 332.0 | 328.5 | ||||||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||||
| Common stock | 40.1 | 40.1 | 40.1 | ||||||||||||||||||||
| Treasury stock | (17.2) | (20.9) | (21.3) | ||||||||||||||||||||
| Paid-in capital | 20.6 | 22.5 | 22.3 | ||||||||||||||||||||
| Earnings invested in the business | 1,139.5 | 1,238.6 | 1,224.6 | ||||||||||||||||||||
| Accumulated other comprehensive income (loss) | (16.9) | (15.8) | (17.9) | ||||||||||||||||||||
| Total stockholders' equity | 1,166.1 | 1,264.5 | 1,247.8 | ||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,391.7 | $ | 2,480.6 | $ | 2,476.3 | |||||||||||||||||
| STATISTICS: | |||||||||||||||||||||||
| Working Capital | $ | 634.5 | $ | 521.6 | $ | 465.8 | |||||||||||||||||
| Current Ratio | 1.8 | 1.6 | 1.5 | ||||||||||||||||||||
| Debt-to-capital % | 0.0 | % | 0.1 | % | 1.4 | % | |||||||||||||||||
| Global Days Sales Outstanding | 61 | 58 | 59 | ||||||||||||||||||||
| Year-to-Date Free Cash Flow | $ | 204.2 | $ | 82.2 | $ | 60.4 | |||||||||||||||||
7
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| FOR THE 39 WEEKS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019 | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| (In millions of dollars) | ||||||||||||||
| 2020 | 2019 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net earnings (loss) | $ | (95.4) | $ | 95.4 | ||||||||||
| Adjustments to reconcile net earnings (loss) to net cash from operating activities: | ||||||||||||||
| Goodwill impairment charge | 147.7 | — | ||||||||||||
| Deferred income taxes on goodwill impairment charge | (23.0) | — | ||||||||||||
| Depreciation and amortization | 18.0 | 23.8 | ||||||||||||
| Operating lease asset amortization | 15.9 | 16.9 | ||||||||||||
| Provision for credit losses and sales allowances | 10.7 | 3.2 | ||||||||||||
| Stock-based compensation | 2.9 | 4.7 | ||||||||||||
| (Gain) loss on investment in Persol Holdings | 31.4 | (35.1) | ||||||||||||
| (Gain) loss on sale of assets | (32.1) | (12.3) | ||||||||||||
| Equity in net (earnings) loss of PersolKelly Pte. Ltd. | 1.0 | 1.0 | ||||||||||||
| Other, net | 1.8 | (1.0) | ||||||||||||
| Changes in operating assets and liabilities, net of acquisitions | 137.6 | (22.4) | ||||||||||||
| Net cash from operating activities | 216.5 | 74.2 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | (12.3) | (13.8) | ||||||||||||
| Proceeds from sale of assets | 55.5 | 13.8 | ||||||||||||
| Acquisition of companies, net of cash received | (36.4) | (86.4) | ||||||||||||
| Proceeds from company-owned life insurance | 2.3 | 3.0 | ||||||||||||
| Proceeds from sale of Brazil, net of cash disposed | 1.2 | — | ||||||||||||
| Loans to equity affiliate | — | (4.4) | ||||||||||||
| Investment in equity securities | (0.2) | (1.0) | ||||||||||||
| Other investing activities | 0.2 | — | ||||||||||||
| Net cash from (used in) investing activities | 10.3 | (88.8) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Net change in short-term borrowings | (1.5) | 15.2 | ||||||||||||
| Financing lease payments | (1.0) | (0.4) | ||||||||||||
| Dividend payments | (3.0) | (8.9) | ||||||||||||
| Payments of tax withholding for stock awards | (1.2) | (2.3) | ||||||||||||
| Other financing activities | (0.1) | — | ||||||||||||
| Net cash (used in) from financing activities | (6.8) | 3.6 | ||||||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | 3.4 | (0.5) | ||||||||||||
| Net change in cash, cash equivalents and restricted cash | 223.4 | (11.5) | ||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 31.0 | 40.1 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 254.4 | $ | 28.6 | ||||||||||
8
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| REVENUE FROM SERVICES BY GEOGRAPHY | |||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||||||||
| Third Quarter | |||||||||||||||||||||||||||||
| % | CC % | ||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Change | ||||||||||||||||||||||||||
| Americas | |||||||||||||||||||||||||||||
| United States | $ | 740.6 | $ | 903.2 | (18.0) | % | (18.0) | % | |||||||||||||||||||||
| Canada | 30.3 | 34.6 | (12.5) | (11.7) | |||||||||||||||||||||||||
| Mexico | 27.4 | 32.4 | (15.7) | (4.2) | |||||||||||||||||||||||||
| Puerto Rico | 18.4 | 18.8 | (2.4) | (2.4) | |||||||||||||||||||||||||
| Brazil | 1.8 | 8.4 | (78.3) | (71.0) | |||||||||||||||||||||||||
| Total Americas Region | 818.5 | 997.4 | (17.9) | (17.5) | |||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Switzerland | 49.6 | 50.6 | (2.0) | (8.5) | |||||||||||||||||||||||||
| France | 48.8 | 59.7 | (18.2) | (22.0) | |||||||||||||||||||||||||
| Portugal | 31.7 | 44.0 | (28.0) | (31.6) | |||||||||||||||||||||||||
| Russia | 27.2 | 29.9 | (8.8) | 3.7 | |||||||||||||||||||||||||
| United Kingdom | 16.4 | 24.9 | (34.1) | (37.1) | |||||||||||||||||||||||||
| Italy | 14.5 | 18.5 | (21.8) | (25.5) | |||||||||||||||||||||||||
| Germany | 7.0 | 11.5 | (39.7) | (42.6) | |||||||||||||||||||||||||
| Ireland | 4.9 | 7.1 | (31.6) | (35.0) | |||||||||||||||||||||||||
| Other | 12.0 | 16.6 | (27.6) | (28.9) | |||||||||||||||||||||||||
| Total Europe Region | 212.1 | 262.8 | (19.3) | (21.5) | |||||||||||||||||||||||||
| Total Asia-Pacific Region | 7.6 | 7.5 | 1.0 | (0.9) | |||||||||||||||||||||||||
| Total Kelly Services, Inc. | $ | 1,038.2 | $ | 1,267.7 | (18.1) | % | (18.2) | % | |||||||||||||||||||||
9
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| REVENUE FROM SERVICES BY GEOGRAPHY | |||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||||||||
| September Year to Date | |||||||||||||||||||||||||||||
| % | CC % | ||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Change | ||||||||||||||||||||||||||
| Americas | |||||||||||||||||||||||||||||
| United States | $ | 2,369.2 | $ | 2,913.4 | (18.7) | % | (18.7) | % | |||||||||||||||||||||
| Canada | 88.7 | 100.8 | (12.0) | (10.6) | |||||||||||||||||||||||||
| Mexico | 78.6 | 89.6 | (12.3) | (1.8) | |||||||||||||||||||||||||
| Puerto Rico | 56.1 | 57.6 | (2.7) | (2.7) | |||||||||||||||||||||||||
| Brazil | 17.0 | 25.1 | (31.9) | (17.5) | |||||||||||||||||||||||||
| Total Americas Region | 2,609.6 | 3,186.5 | (18.1) | (17.6) | |||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| France | 141.2 | 188.6 | (25.1) | (25.1) | |||||||||||||||||||||||||
| Switzerland | 141.2 | 150.0 | (5.9) | (10.1) | |||||||||||||||||||||||||
| Portugal | 99.1 | 135.5 | (26.9) | (26.7) | |||||||||||||||||||||||||
| Russia | 88.6 | 84.1 | 5.3 | 14.1 | |||||||||||||||||||||||||
| United Kingdom | 56.5 | 81.6 | (30.7) | (30.4) | |||||||||||||||||||||||||
| Italy | 42.5 | 59.8 | (29.0) | (28.9) | |||||||||||||||||||||||||
| Germany | 22.1 | 32.5 | (32.1) | (31.9) | |||||||||||||||||||||||||
| Ireland | 14.0 | 28.1 | (50.2) | (50.3) | |||||||||||||||||||||||||
| Other | 38.7 | 51.5 | (24.9) | (21.9) | |||||||||||||||||||||||||
| Total Europe Region | 643.9 | 811.7 | (20.7) | (20.3) | |||||||||||||||||||||||||
| Total Asia-Pacific Region | 21.1 | 19.6 | 7.6 | 11.1 | |||||||||||||||||||||||||
| Total Kelly Services, Inc. | $ | 3,274.6 | $ | 4,017.8 | (18.5) | % | (18.0) | % | |||||||||||||||||||||
10
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||||||||||
| THIRD QUARTER | |||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| SG&A Expenses: | As Reported | Customer Dispute(4) | Restructuring(5) | Adjusted | Adjusted | ||||||||||||||||||||||||
| Professional & Industrial | $ | 65.3 | $ | — | $ | 0.1 | $ | 65.4 | $ | 77.7 | |||||||||||||||||||
| Science, Engineering & Technology | 31.3 | — | — | 31.3 | 36.0 | ||||||||||||||||||||||||
| Education | 11.6 | — | — | 11.6 | 13.8 | ||||||||||||||||||||||||
| Outsourcing & Consulting | 25.4 | — | — | 25.4 | 29.1 | ||||||||||||||||||||||||
| International | 39.9 | (9.5) | — | 30.4 | 35.3 | ||||||||||||||||||||||||
| Corporate | 19.9 | — | — | 19.9 | 18.8 | ||||||||||||||||||||||||
| Intersegment | — | — | — | — | — | ||||||||||||||||||||||||
| Total Company | $ | 193.4 | $ | (9.5) | $ | 0.1 | $ | 184.0 | $ | 210.7 | |||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Earnings (loss) from Operations: | As Reported | Customer Dispute(4) | Restructuring(5) | Adjusted | Adjusted | ||||||||||||||||||||||||
| Professional & Industrial | $ | 11.8 | $ | — | $ | (0.1) | $ | 11.7 | $ | 14.1 | |||||||||||||||||||
| Science, Engineering & Technology | 19.4 | — | — | 19.4 | 22.3 | ||||||||||||||||||||||||
| Education | (7.5) | — | — | (7.5) | (5.2) | ||||||||||||||||||||||||
| Outsourcing & Consulting | 3.7 | — | — | 3.7 | 0.4 | ||||||||||||||||||||||||
| International | (9.9) | 9.5 | — | (0.4) | 4.2 | ||||||||||||||||||||||||
| Corporate | (19.9) | — | — | (19.9) | (18.8) | ||||||||||||||||||||||||
| Total Company | $ | (2.4) | $ | 9.5 | $ | (0.1) | $ | 7.0 | $ | 17.0 | |||||||||||||||||||
11
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||
| THIRD QUARTER | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| (In millions of dollars) | |||||||||||||||||
| 2019 | |||||||||||||||||
| SG&A Expenses: | As Reported | Restructuring(5) | Adjusted | ||||||||||||||
| Professional & Industrial | $ | 77.6 | $ | 0.1 | $ | 77.7 | |||||||||||
| Science, Engineering & Technology | 36.0 | — | 36.0 | ||||||||||||||
| Education | 13.8 | — | 13.8 | ||||||||||||||
| Outsourcing & Consulting | 29.1 | — | 29.1 | ||||||||||||||
| International | 35.3 | — | 35.3 | ||||||||||||||
| Corporate | 18.8 | — | 18.8 | ||||||||||||||
| Intersegment | — | — | — | ||||||||||||||
| Total Company | $ | 210.6 | $ | 0.1 | $ | 210.7 | |||||||||||
| 2019 | |||||||||||||||||
| Earnings (loss) from Operations: | As Reported | Restructuring(5) | Adjusted | ||||||||||||||
| Professional & Industrial | $ | 14.2 | $ | (0.1) | $ | 14.1 | |||||||||||
| Science, Engineering & Technology | 22.3 | — | 22.3 | ||||||||||||||
| Education | (5.2) | — | (5.2) | ||||||||||||||
| Outsourcing & Consulting | 0.4 | — | 0.4 | ||||||||||||||
| International | 4.2 | — | 4.2 | ||||||||||||||
| Corporate | (18.8) | — | (18.8) | ||||||||||||||
| Total Company | $ | 17.1 | $ | (0.1) | $ | 17.0 | |||||||||||
12
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||||||||||||||||||||||
| SEPTEMBER YEAR TO DATE | |||||||||||||||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
| SG&A Expenses: | As Reported | Goodwill impairment(1) | Gain on sale of assets(3) | Customer Dispute(4) | Restructuring(5) | Adjusted | Adjusted | ||||||||||||||||||||||||||||||||||
| Professional & Industrial | $ | 210.4 | $ | — | $ | — | $ | — | $ | (4.3) | $ | 206.1 | $ | 241.7 | |||||||||||||||||||||||||||
| Science, Engineering & Technology | 99.1 | — | — | — | (0.5) | 98.6 | 111.0 | ||||||||||||||||||||||||||||||||||
| Education | 37.7 | — | — | — | (0.8) | 36.9 | 41.5 | ||||||||||||||||||||||||||||||||||
| Outsourcing & Consulting | 79.1 | — | — | — | — | 79.1 | 90.9 | ||||||||||||||||||||||||||||||||||
| International | 101.4 | — | — | (9.5) | (1.1) | 90.8 | 107.2 | ||||||||||||||||||||||||||||||||||
| Corporate | 63.3 | — | — | — | (1.7) | 61.6 | 69.0 | ||||||||||||||||||||||||||||||||||
| Total Company | $ | 591.0 | $ | — | $ | — | $ | (9.5) | $ | (8.4) | $ | 573.1 | $ | 661.3 | |||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
| Earnings (loss) from Operations: | As Reported | Goodwill impairment(1) | Gain on sale of assets(3) | Customer Dispute(4) | Restructuring(5) | Adjusted | Adjusted | ||||||||||||||||||||||||||||||||||
| Professional & Industrial | $ | 30.7 | $ | — | $ | — | $ | — | $ | 4.3 | $ | 35.0 | $ | 49.9 | |||||||||||||||||||||||||||
| Science, Engineering & Technology | 56.9 | — | — | — | 0.5 | 57.4 | 60.8 | ||||||||||||||||||||||||||||||||||
| Education | (8.9) | — | — | — | 0.8 | (8.1) | 8.4 | ||||||||||||||||||||||||||||||||||
| Outsourcing & Consulting | 8.0 | — | — | — | — | 8.0 | (0.2) | ||||||||||||||||||||||||||||||||||
| International | (10.9) | — | — | 9.5 | 1.1 | (0.3) | 12.1 | ||||||||||||||||||||||||||||||||||
| Corporate | (178.9) | 147.7 | (32.1) | — | 1.7 | (61.6) | (69.0) | ||||||||||||||||||||||||||||||||||
| Total Company | $ | (103.1) | $ | 147.7 | $ | (32.1) | $ | 9.5 | $ | 8.4 | $ | 30.4 | $ | 62.0 | |||||||||||||||||||||||||||
13
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||||
| SEPTEMBER YEAR TO DATE | |||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||
| 2019 | |||||||||||||||||||||||
| SG&A Expenses: | As Reported | Gain on sale of assets(3) | Restructuring(5) | Adjusted | |||||||||||||||||||
| Professional & Industrial | $ | 246.9 | $ | — | $ | (5.2) | $ | 241.7 | |||||||||||||||
| Science, Engineering & Technology | 111.4 | — | (0.4) | 111.0 | |||||||||||||||||||
| Education | 41.5 | — | — | 41.5 | |||||||||||||||||||
| Outsourcing & Consulting | 90.9 | — | — | 90.9 | |||||||||||||||||||
| International | 107.2 | — | — | 107.2 | |||||||||||||||||||
| Corporate | 69.0 | — | — | 69.0 | |||||||||||||||||||
| Intersegment | — | — | — | — | |||||||||||||||||||
| Total Company | $ | 666.9 | $ | — | $ | (5.6) | $ | 661.3 | |||||||||||||||
| 2019 | |||||||||||||||||||||||
| Earnings (loss) from Operations: | As Reported | Gain on sale of assets(3) | Restructuring(5) | Adjusted | |||||||||||||||||||
| Professional & Industrial | $ | 44.7 | $ | — | $ | 5.2 | $ | 49.9 | |||||||||||||||
| Science, Engineering & Technology | 60.4 | — | 0.4 | 60.8 | |||||||||||||||||||
| Education | 8.4 | — | — | 8.4 | |||||||||||||||||||
| Outsourcing & Consulting | (0.2) | — | — | (0.2) | |||||||||||||||||||
| International | 12.1 | — | — | 12.1 | |||||||||||||||||||
| Corporate | (56.7) | (12.3) | — | (69.0) | |||||||||||||||||||
| Total Company | $ | 68.7 | $ | (12.3) | $ | 5.6 | $ | 62.0 | |||||||||||||||
14
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES (continued) | ||||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||||
| (In millions of dollars except per share data) | ||||||||||||||||||||||||||
| Third Quarter | September Year to Date | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Income tax expense (benefit) | $ | (1.2) | $ | (12.8) | $ | (36.5) | $ | 6.3 | ||||||||||||||||||
Taxes on goodwill impairment charge(1) | — | — | 23.0 | — | ||||||||||||||||||||||
Taxes on investment in Persol Holdings(2) | (5.2) | 12.1 | 9.6 | (10.7) | ||||||||||||||||||||||
Taxes on gain on sale of assets(3) | — | — | (8.1) | (3.3) | ||||||||||||||||||||||
Taxes on customer dispute(4) | 2.8 | — | 2.8 | — | ||||||||||||||||||||||
Taxes on restructuring charges(5) | — | — | 2.2 | 1.5 | ||||||||||||||||||||||
| Adjusted income tax expense (benefit) | $ | (3.6) | $ | (0.7) | $ | (7.0) | $ | (6.2) | ||||||||||||||||||
| Third Quarter | September Year to Date | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Net earnings (loss) | $ | 16.7 | $ | (10.5) | $ | (95.4) | $ | 95.4 | ||||||||||||||||||
Goodwill impairment charge, net of taxes(1) | — | — | 124.7 | — | ||||||||||||||||||||||
(Gain) loss on investment in Persol Holdings, net of taxes(2) | (11.6) | 27.2 | 21.8 | (24.4) | ||||||||||||||||||||||
(Gain) loss on sale of assets, net of taxes(3) | 0.1 | — | (23.9) | (9.0) | ||||||||||||||||||||||
Customer dispute, net of taxes(4) | 6.7 | — | 6.7 | — | ||||||||||||||||||||||
Restructuring charges, net of taxes(5) | (0.1) | (0.1) | 6.2 | 4.1 | ||||||||||||||||||||||
| Adjusted net earnings | $ | 11.8 | $ | 16.6 | $ | 40.1 | $ | 66.1 | ||||||||||||||||||
| Third Quarter | September Year to Date | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Per Share | Per Share | |||||||||||||||||||||||||
| Net earnings (loss) | $ | 0.42 | $ | (0.27) | $ | (2.43) | $ | 2.41 | ||||||||||||||||||
Goodwill impairment charge, net of taxes(1) | — | — | 3.18 | — | ||||||||||||||||||||||
(Gain) loss on investment in Persol Holdings, net of taxes(2) | (0.29) | 0.70 | 0.56 | (0.62) | ||||||||||||||||||||||
Gain on sale of assets, net of taxes(3) | — | — | (0.61) | (0.23) | ||||||||||||||||||||||
Customer dispute, net of taxes(4) | 0.17 | — | 0.17 | — | ||||||||||||||||||||||
Restructuring charges, net of taxes(5) | — | — | 0.16 | 0.11 | ||||||||||||||||||||||
| Adjusted net earnings | $ | 0.29 | $ | 0.43 | $ | 1.02 | $ | 1.67 | ||||||||||||||||||
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
(UNAUDITED)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2020 goodwill impairment charge, the 2020 and 2019 gains and losses on the investment in Persol Holdings, the 2020 and 2019 gains on sale of assets, the 2020 customer dispute, and the 2020 and 2019 restructuring charges, are useful to understand the Company's fiscal 2020 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods. Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance.
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 goodwill impairment charge is the result of an interim impairment test the Company performed during the first quarter of 2020, due to a triggering event caused by a decline in the Company's common stock price.
(2) The gains and losses on the investment in Persol Holdings represent the change in fair value of the investment during the period presented and the related tax expense and benefit.
(3) Gain on sale of assets in 2020 primarily represents the excess of the proceeds over the cost of the headquarters properties sold during the first quarter of 2020. Gain on sale of assets in 2019 primarily represents the excess of the proceeds over the cost of an unused parcel of land located near the Company headquarters sold during the second quarter of 2019.
(4) Customer dispute represents a non-cash charge in Mexico to increase the reserve against a long-term receivable from a former customer based on an updated probability of loss assessment.
(5) Restructuring charges in 2020 represent severance costs and lease terminations in preparation for the new operating model adopted in the third quarter of 2020. Restructuring charges in 2019 represent severance costs primarily related to U.S. branch-based staffing operations.
16
Exhibit 99.2 THIRD QUARTER 2020 NOVEMBER 5, 2020
THIRD QUARTER TAKEWAYS COVID-19 pandemic impacts global economy and demand for our services • Q3 revenue down 18.1%, down 18.2% in constant currency(1) ‒ September exit rate up slightly from quarterly trend, reflecting slow and uneven improvement • Demand from Education customers and from small and medium-sized businesses is the most impacted Near-term COVID-19 pandemic response • Nearly all full-time employees continue to work remotely utilizing technology • Developed robust return to work protocols to protect the health and safety of all talent • Continued short-term cost reductions and initiated plan to address full-time staffing levels in areas of the business where demand declines are the most severe and persistent Continued focus on our future • As of July 1, 2020, operating as five specialty business units: Professional & Industrial; Science, Engineering & Technology; Education; Outsourcing & Consulting; and International ‒ Our new operating model is designed to focus on profitable growth in our chosen specialties • Launched the Equity@Work platform as an extension of our Noble Purpose to upend systemic barriers to employment and make the labor market more equitable and accessible for more people • Recognized by EcoVadis for a third consecutive year as a Silver Supplier and ranked in the 91st percentile of the 400-plus firms assessed – confirming Kelly’s commitment to doing the right thing for the talent and communities we serve (1)Constant Currency represents year-over-year changes resulting from translating 2020 financial data into USD using 2019 exchange rates. | 2
THIRD QUARTER 2020 FINANCIAL SUMMARY Constant Currency Actual Results Change Change(1) Revenue $1.0B (18.1%) (18.2%) Gross Profit % 18.4% 40 bps Loss from Operations ($2.4M) NM NM Earnings Per Share $0.42 $0.69 • Revenue declined in all segments from decrease in demand related to the COVID-19 pandemic. Temporary staffing declined 22%, which was partially offset by a 4% increase in outcome-based services. Permanent placement revenue also declined 40% • GP rate improved on lower employee-related costs and structural improvement in product mix, partially offset by lower permanent placement revenue and unfavorable customer mix as the recovery of demand from large accounts with lower margins outpaced the recovery of small and medium-sized customers • Loss from operations is a result of the effect of weakening revenues and gross profit, partially offset by reduced expenses from efforts to align costs with GP trends. 2020 results also included a $9.5 million charge related to a customer dispute in Mexico that resulted in additional uncollectible accounts receivable charges • Q3 2020 EPS reflects lower earnings and includes a $0.17 non-cash charge related to a customer dispute in Mexico, net of tax and $0.29 non-cash gain from the investment in Persol Holdings common stock, net of tax. Q3 2019 EPS includes an after-tax loss of $0.70 from investment in Persol Holdings common stock (1)Constant Currency represents year-over-year changes resulting from translating 2020 financial data into USD using 2019 exchange rates. | 3
THIRD QUARTER 2020 FINANCIAL SUMMARY (Excluding Gain/loss on investment in Persol Holdings, Customer Dispute Charge, Gain on Sale of Assets and Restructuring) Constant Currency Actual Results Change Change(3) Revenue $1.0B (18.1%) (18.2%) Gross Profit % 18.4% 40 bps Earnings from Operations(1) $7.0M (58.6%) (56.7%) Earnings Per Share(1),(2) $0.29 ($0.14) • Revenue declined in all segments from decrease in demand related to the COVID-19 pandemic. Temporary staffing declined 22%, which was partially offset by a 4% increase in outcome-based services. Permanent placement revenue also declined 40% • GP rate improved on lower employee-related costs and structural improvement in product mix, partially offset by lower permanent placement revenue and unfavorable customer mix as the recovery of demand from large accounts with lower margins outpaced the recovery of small and medium-sized customers • Earnings from operations declined as the effect of weakening revenues and gross profit was only partially offset by reduced expenses from efforts to align costs with GP trends • EPS declined on lower earnings (1)Change excludes: ‒ Customer dispute charge related to Mexico of $9.5 million, $6.7 million, net of tax or $0.17 per share in Q3 2020. ‒ Restructuring accrual adjustments of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2020. ‒ Restructuring accrual adjustments of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2019. (2) Change excludes: ‒ Gain on investment in Persol Holdings of $16.8 million, $11.6 million, net of tax or $0.29 per share in Q3 2020 and loss on investment in Persol Holdings of $39.3 million, $27.2 million, net of tax or $0.70 per share in Q3 2019. ‒ Gain on sale of assets of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2020. | 4 (3)Constant Currency represents year-over-year changes resulting from translating 2020 financial data into USD using 2019 exchange rates.
THIRD QUARTER 2020 EPS SUMMARY $ in millions except per share data Third Quarter 2020 2019 Amount Per Share Amount Per Share Net earnings (loss) $16.7 $0.42 ($10.5) ($0.27) (Gain) loss on investment in Persol Holdings, net of taxes(1) (11.6) (0.29) 27.2 0.70 Gain on sale of assets, net of taxes(2) 0.1 - - - Customer dispute charge, net of taxes(3) 6.7 0.17 - - Restructuring charges, net of taxes(4) (0.1) - (0.1) - Adjusted net earnings $11.8 $0.29 $16.6 $0.43 • As adjusted, net earnings and EPS declined by 30% and 33%, respectively, on lower earnings from operations (1)Gain on investment in Persol Holdings of $16.8 million, $11.6 million, net of tax or $0.29 per share in Q3 2020 and loss on investment in Persol Holdings of $39.3 million, $27.2 million, net of tax or $0.70 per share in Q3 2019. (2)Gain on sale of assets of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2020. (3)Customer dispute charge related to Mexico of $9.5 million, $6.7 million, net of tax or $0.17 per share in Q3 2020. (4)Restructuring accrual adjustments of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2020 and restructuring accrual adjustments of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2019. | 5
STEPPING UP THE PACE Foundational Elements on Which to Build Challenges to Overcome • Recognized thought leader and • Caught between scale and specialty industry innovator • Lagging industry peers’ top-line growth • Strong brand recognition rate and financial return • Scale in commercial, education, • Specialties need broader customer base engineering, science and MSP • Historic under-investment in • Decisive SG&A management technology • No debt and significant unused borrowing capacity | 6
A MODEL FOR GROWTH We have redesigned our operating model to drive profitable growth in our chosen specialties. 1 2 3 4 5 Professional Science, Education Outsourcing & International & Industrial Engineering Consulting & Technology Revenue $2.2B $1.1B $0.5B $0.4B $1.2B GP Rate 17.5% 20.0% 15.7% 32.4% 13.5% Geographic North America North America U.S. Global EMEA & Mexico Span Specialties ‒ Industrial ‒ Engineering ‒ K-12 ‒ MSP ‒ EMEA ‒ Contact ‒ Science & ‒ Early ‒ RPO Regional Life Center Clinical Childhood ‒ PPO Sciences ‒ Office ‒ IT ‒ Higher Ed ‒ Consulting ‒ Local Niches ‒ Professional ‒ Telecom ‒ Special Needs (future) Kelly size and margin profiles are based on 2019 full year actuals, with the exception of Education, which includes the results from our Q1 2020 acquisition of Insight as if it was acquired as of the beginning of 2019. | 7
The right model and mindset for growth We’ve set a new Our new operating We have stage and pace model aggregates streamlined our for growth. assets to resources to accelerate support growth. specialty growth and profitability. Our aggressive We understand We are investment talent and are accountable for strategy will drive transforming our growth and are additional go-to-market tracking our inorganic growth. strategy. progress. | 8
THIRD QUARTER 2020 REVENUE GROWTH REVENUE MIX BY SEGMENT REVENUE GROWTH BY SEGMENT 0% Reported (10%) (7.0%)(7.4%) Constant Professional & Currency Industrial (14.4%)(14.4%) 22% (20%) (17.0%)(17.0%) (18.1%) (18.2%) Science, (20.8%) (21.1%) Engineering & 43% Technology (30%) 8% Education (40%) Outsourcing & 3% Consulting International 24% (50%) (51.8%) (51.8%) (60%) Total Professional & Science, Education Outsourcing & International Industrial Engineering & Consulting Technology • Total revenue declines reflect the impact of COVID-19 on the global economy and a decrease in demand for our services • Education revenue declined as schools began the school year in a variety of instructional models in response to the COVID-19 pandemic, including online and hybrid, which reduces the demand for our services • Outsourcing & Consulting revenue declines reflect the economic impact of COVID-19 on the industries serviced by this segment, as demand from Oil & Gas customers declined, but was more resilient from Life Science customers | 9
Revenue Trends Percent in Constant Currency(1) September 2020 Q3 2020 (Exit Rates) Total (18.2%) (18.0%) Professional & Industrial (17.0%) (16.3%) Science, Engineering & (14.4%) (13.9%) Technology Education (51.8%) (44.8%) Outsourcing & (7.4%) (3.4%) Consulting International (21.1%) (18.8%) (1)Constant Currency represents year-over-year changes resulting from translating 2020 financial data into USD using 2019 exchange rates. | 10
THIRD QUARTER 2020 GROSS PROFIT GROWTH GROSS PROFIT MIX BY SEGMENT GROSS PROFIT GROWTH BY SEGMENT 0% (1.5%)(2.5%) Reported (10%) Constant Professional & 16% (13.1%)(13.1%) Currency Industrial (20%) (16.1%)(16.3%) (16.1%)(16.0%) Science, 40% Engineering & (23.9%) (30%) (24.5%) Technology 15% Education (40%) Outsourcing & 2% Consulting (50%) International 27% (51.1%)(51.1%) (60%) Total Professional & Science, Education Outsourcing & International Industrial Engineering & Consulting Technology • Total gross profit declined as lower revenues were partially offset by an improved GP rate ‒ GP rate improved on lower employee-related costs and structural improvement in product mix, partially offset by lower permanent placement revenue and unfavorable customer mix as the recovery of demand from large accounts with lower margins outpaced the recovery of small and medium-sized customers • Education’s 51.1% decline in gross profit reflects the 51.8% decrease in revenue, partially offset by a 20 bps increase in GP rate • Outsourcing & Consulting’s 1.5% decline reflects a 7.0% decrease in revenue, partially offset by a 180 bps improvement in GP rate as improving product mix was coupled with lower employee-related costs in the PPO product • International’s 23.9% decline in gross profit reflects a 20.8% decrease in revenue and a 60 bps decline in GP rate due primarily to lower permanent placement revenue | 11
THIRD QUARTER 2020 GROSS PROFIT RATE GROWTH 20.0% 19.5% 19.0% 18.4% 18.5% 10 bps 10 bps 20 bps 18.0% 18.0% 17.5% 17.0% 16.5% 16.0% 15.5% 15.0% Q3 2019 GP Rate Professional & Science, Engineering Outsourcing & Q3 2020 GP Rate Industrial & Technology Consulting • Overall GP rate improved due to lower employee-related costs and structural improvement in product mix, partially offset by lower permanent placement revenue and unfavorable customer mix as the recovery of demand from large accounts with lower margins outpaced the recovery of small and medium-sized customers • GP rate improved in all segments, excluding International. Professional & Industrial’s impact on the overall GP rate reflects the share of revenue delivered by the segment | 12
THIRD QUARTER 2020 SG&A $ in millions $230 $220 $211 $210 $200 $193 ($13) $10 $190 ($5) ($2) ($4) $1 $180 ($5) $170 $160 $150 Q3 2019 SG&A Professional & Science, Education Outsourcing & International Corporate Customer Q3 2020 SG&A Industrial Engineering & Consulting Dispute Charge Technology • The decrease in SG&A for the quarter reflects lower salaries and benefits cost from temporary expense mitigation actions taken in response to COVID-19, lower incentive compensation expenses in certain business units and the benefit of COVID-19 government subsidies related to full-time employees that were recognized in the quarter • Corporate expenses increased due to the year-over-year impact of adjustments which lowered corporate performance-based compensation expense in the third quarter of 2019, along with increased rent expense for the headquarters building as a result of the 2020 first quarter sale-leaseback transaction. These increases were partially offset by lower employee salaries and benefits related to COVID-19 cost savings actions taken • The customer dispute charge is a non-cash charge related to a customer dispute in Mexico that resulted in additional uncollectible accounts receivable charges | 13
THIRD QUARTER 2020 BALANCE SHEET DATA $ in millions ACCOUNTS RECEIVABLE CASH, NET OF SHORT-TERM BORROWINGS $1,500 $300 $248 $250 $1,300 $1,262 $1,282 $1,111 $200 $1,100 $150 $900 $100 $700 $50 $24 $5 $500 $0 Q3 2019 Q4 2019 Q3 2020 Q3 2019 Q4 2019 Q3 2020 • Accounts Receivable reflects DSO of 61 days, up 2 days from a year ago. The increase reflects the impact of customer cash management efforts and changes in customer mix resulting in a greater proportion of large customers with extended payment terms • Cash, net of short-term borrowings of $248 million reflects the reduction in working capital, primarily Accounts Receivable, as revenue declined since the mid-March decline in demand as a result of COVID-19, the benefit of deferring certain payroll tax payments under the CARES Act, partially offset by the unfavorable impact on Accounts Receivable from higher DSO ‒ U.S. credit facilities include a $150 million securitization facility and a $200 million revolving credit facility | 14
PORTFOLIO PROGRESS We are using M&A activity to increase our focus on specialization Kelly and Kelly sells Kelly sells Kelly acquires Kelly acquires Persol form a Kelly Healthcare Kelly Legal Global Insight JV combining Resources to Managed Technology the staffing InGenesis Services to Associates operations in Trustpoint.One APAC 2016 2017 2018 2019 2020 Kelly Innovation Fund Kelly acquires Kelly announces Kelly sells Kelly acquires invests in Kenzie Kelly invests NextGen Global sale/leaseback of Brazil staffing Teachers On Call Academy in BTG Resources HQ real estate operations | 15
RECENT ACQUISITION: INSIGHT • Education service staffing company with experience in partnering with school districts in Illinois, Massachusetts, New Jersey and Pennsylvania | 16
NON-GAAP MEASURES Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2020 and 2019 gains and losses on the investment in Persol Holdings, the 2020 gain on sale of assets, the 2020 customer dispute and the 2020 and 2019 restructuring accrual adjustments, are useful to understand the Company's fiscal 2020 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods. Additionally, the Company does not acquire businesses on a predictable cycle and the terms of each acquisition are unique and may vary significantly. Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance. 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. | 17
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, the recent novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual property 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 and services connecting talent to independent work, 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 PersolKelly Pte. Ltd., material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with government or government contractors, risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology projects, our ability to maintain adequate financial and management processes and controls, risk of potential impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), competition law risks, the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to realize value from our tax credit and net operating loss carryforwards, 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. | 18