Kelly Services® Reports 1st Quarter Results

07 May '14

TROY, MI -- (Marketwired) -- 05/07/14 -- Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the first quarter of 2014.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2014 totaled $1.3 billion, a 1% increase compared to the corresponding quarter of 2013.

Earnings from operations for the first quarter of 2014 totaled $6.3 million, compared to $7.1 million reported for the first quarter of 2013.

Diluted earnings per share in the first quarter of 2014 were $0.07 compared to $0.34 per share in the first quarter of 2013.

"We're pleased with our first quarter performance, which is better than expectations and confirms our strategic direction," stated Camden. "It's clear we are making progress on adjusting our operating models and focusing on higher-margin growth -- and we're delivering a profit while investing aggressively in Kelly's long-term success."

Camden noted that although confidence is returning among many U.S. companies, that isn't necessarily translating into strong job growth. "Rather than waiting for the job market to change significantly in 2014, Kelly is taking the necessary steps to secure our position in the specialty staffing and outsourcing and consulting markets. In particular, we continue to see strong demand and revenue growth in the talent supply chain management approach delivered through our OCG segment."

Kelly also reported that on May 6, 2014, its board of directors declared a dividend of $0.05 per share. The dividend is payable June 3, 2014 to shareholders of record as of the close of business on May 19, 2014.

In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on May 7, to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Telephone:

U.S. 1 800 288-9626
International 1 651 291-5254

The pass code is Kelly Services

Via the Internet:

The call is also available via the internet through the Kelly Services website:
www.kellyservices.com

This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These factors include, but are not limited to, competitive market pressures including pricing and technology introductions, changing market and economic conditions, our ability to achieve our business strategy, our ability to retain the services of our senior management, local management and field personnel, our ability to adequately protect our intellectual property rights, including our brand, our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, 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 temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, liability for improper disclosure of sensitive or private employee information, 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 or market developments, unexpected changes in claim trends on workers' compensation, disability and medical benefit plans, the net financial 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 and the expiration and/or reinstatement of the U.S. work opportunity credit program), 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, our ability to access credit markets and continued availability of financing for funding working capital, and other risks, uncertainties and factors discussed in this release and in the Company's filings with the Securities and Exchange Commission. Actual results may differ materially from any forward looking statements contained herein, and we have no intention to update these statements.

About Kelly Services®
Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB) is a leader in providing workforce solutions. Kelly® offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire, and direct-hire basis. Serving clients around the globe, Kelly provided employment to approximately 540,000 employees in 2013. Revenue in 2013 was $5.4 billion. Visit kellyservices.com and connect with us on Facebook, LinkedIn, and Twitter. Download The Talent Project, a free iPad® app by Kelly Services.

iPad is a trademark of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED MARCH 30, 2014 AND MARCH 31, 2013
(UNAUDITED)
(In millions of dollars except per share data)
2014 2013 Change % Change
Revenue from services $ 1,330.8 $ 1,314.8 $ 16.0 1.2 %
Cost of services 1,108.5 1,097.9 10.6 1.0
Gross profit 222.3 216.9 5.4 2.5
Selling, general and administrative expenses 216.0 209.8 6.2 3.0
Earnings from operations 6.3 7.1 (0.8 ) (11.8 )
Other expense, net 1.7 1.0 0.7 73.3
Earnings before taxes 4.6 6.1 (1.5 ) (25.1 )
Income tax expense (benefit) 2.1 (6.8 ) 8.9 130.4
Net earnings 2.5 12.9 (10.4 ) (80.5 )
Basic earnings per share 0.07 0.34 (0.27 ) (79.4 )%
Diluted earnings per share 0.07 0.34 (0.27 ) (79.4 )%
STATISTICS:
Gross profit rate 16.7 % 16.5 % 0.2 pts.
Selling, general and administrative expenses:
% of revenue 16.2 16.0 0.2
% of gross profit 97.2 96.7 0.5
% Return:
Earnings from operations 0.5 0.5 0.0
Earnings before taxes 0.3 0.5 (0.2 )
Net earnings 0.2 1.0 (0.8 )
Effective income tax rate 45.1 % (110.9 )% 156.0 pts.
Average number of shares outstanding
(millions):
Basic 37.4 37.2
Diluted 37.4 37.2
Shares adjusted for nonvested restricted awards
(millions):
Basic 38.5 38.2
Diluted 38.5 38.2
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
First Quarter
Constant
Currency
2014 2013 Change Change
AMERICAS
Commercial
Revenue from services $ 613.2 $ 638.3 (3.9 )% (2.7 )%
Staffing fee-based income (included in revenue from services) 3.7 3.9 (4.4 ) (2.4 )
Gross profit 91.8 93.5 (1.8 ) (0.7 )
Gross profit rate 15.0 % 14.7 % 0.3 pts.
PT
Revenue from services $ 236.4 $ 242.6 (2.6 )% (2.4 )%
Staffing fee-based income (included in revenue from services) 4.1 3.9 5.7 6.3
Gross profit 39.8 38.3 4.0 4.2
Gross profit rate 16.8 % 15.8 % 1.0 pts.
Total Americas
Revenue from services $ 849.6 $ 880.9 (3.6 )% (2.6 )%
Staffing fee-based income (included in revenue from services) 7.8 7.8 0.6 1.9
Gross profit 131.6 131.8 (0.2 ) 0.7
Total SG&A expenses 109.5 107.9 1.5 2.4
Earnings from operations 22.1 23.9 (7.6 )
Gross profit rate 15.5 % 15.0 % 0.5 pts.
Expense rates:
% of revenue 12.9 12.3 0.6
% of gross profit 83.3 81.9 1.4
Return on sales 2.6 2.7 (0.1 )
EMEA
Commercial
Revenue from services $ 221.9 $ 201.0 10.4 % 9.6 %
Staffing fee-based income (included in revenue from services) 5.1 5.5 (7.8 ) (5.0 )
Gross profit 32.9 31.1 5.9 5.2
Gross profit rate 14.8 % 15.5 % (0.7 ) pts.
PT
Revenue from services $ 47.7 $ 43.5 9.6 % 6.9 %
Staffing fee-based income (included in revenue from services) 3.6 4.0 (8.8 ) (7.9 )
Gross profit 11.1 10.7 3.8 2.3
Gross profit rate 23.3 % 24.6 % (1.3 ) pts.
Total EMEA
Revenue from services $ 269.6 $ 244.5 10.3 % 9.1 %
Staffing fee-based income (included in revenue from services) 8.7 9.5 (8.2 ) (6.2 )
Gross profit 44.0 41.8 5.4 4.4
SG&A expenses excluding restructuring charges 41.9 42.2 (0.6 )
Restructuring charges - (0.2 ) (100.0 )
Total SG&A expenses 41.9 42.0 (0.2 ) (1.4 )
Earnings from operations 2.1 (0.2 ) NM
Earnings from operations excluding restructuring charges 2.1 (0.4 ) NM
Gross profit rate 16.3 % 17.1 % (0.8 ) pts.
Expense rates (excluding restructuring charges):
% of revenue 15.5 17.2 (1.7 )
% of gross profit 95.1 100.8 (5.7 )
Return on sales (excluding restructuring charges) 0.8 (0.1 ) 0.9
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
First Quarter
Constant
Currency
2014 2013 Change Change
APAC
Commercial
Revenue from services $ 83.0 $ 81.5 1.8 % 9.3 %
Staffing fee-based income (included in revenue from services) 2.2 2.7 (20.4 ) (12.9 )
Gross profit 12.3 11.6 6.5 14.3
Gross profit rate 14.8 % 14.2 % 0.6 pts.
PT
Revenue from services $ 8.6 $ 10.2 (15.3 )% (7.2 )%
Staffing fee-based income (included in revenue from services) 1.7 2.0 (14.0 ) (6.0 )
Gross profit 2.8 3.3 (16.5 ) (8.6 )
Gross profit rate 32.0 % 32.5 % (0.5 ) pts.
Total APAC
Revenue from services $ 91.6 $ 91.7 (0.1 )% 7.5 %
Staffing fee-based income (included in revenue from services) 3.9 4.7 (17.8 ) (10.0 )
Gross profit 15.1 14.9 1.4 9.2
SG&A expenses excluding restructuring charges 14.3 15.6 (7.8 )
Restructuring charges - 0.2 (100.0 )
Total SG&A expenses 14.3 15.8 (9.0 ) (1.1 )
Earnings from operations 0.8 (0.9 ) NM
Earnings from operations excluding restructuring charges 0.8 (0.7 ) NM
Gross profit rate 16.5 % 16.2 % 0.3 pts.
Expense rates (excluding restructuring charges):
% of revenue 15.7 17.0 (1.3 )
% of gross profit 95.1 104.7 (9.6 )
Return on sales (excluding restructuring charges) 0.8 (0.8 ) 1.6
OCG
Revenue from services $ 134.4 $ 107.4 25.1 % 25.9 %
Gross profit 32.6 29.2 11.8 12.3
Total SG&A expenses 31.4 26.7 17.9 18.4
Earnings from operations 1.2 2.5 (52.6 )
Gross profit rate 24.3 % 27.2 % (2.9 ) pts.
Expense rates:
% of revenue 23.4 24.8 (1.4 )
% of gross profit 96.3 91.4 4.9
Return on sales 0.9 2.3 (1.4 )
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
Mar. 30, 2014 Dec. 29, 2013 Mar. 31, 2013
Current Assets
Cash and equivalents $ 57.9 $ 125.7 $ 62.1
Trade accounts receivable, less allowances of $10.2, $9.9 and $10.1, respectively 1,080.2 1,023.1 999.8
Prepaid expenses and other current assets 61.6 52.2 56.8
Deferred taxes 29.2 35.5 36.3
Total current assets 1,228.9 1,236.5 1,155.0
Property and Equipment, Net 90.8 92.0 87.5
Noncurrent Deferred Taxes 129.3 121.7 106.6
Goodwill, Net 90.3 90.3 90.3
Other Assets 265.1 258.1 208.6
Total Assets $ 1,804.4 $ 1,798.6 $ 1,648.0
Current Liabilities
Short-term borrowings $ 54.8 $ 28.3 $ 50.2
Accounts payable and accrued liabilities 321.7 342.4 311.8
Accrued payroll and related taxes 291.2 294.9 250.2
Accrued insurance 25.5 27.6 31.4
Income and other taxes 68.4 68.8 61.2
Total current liabilities 761.6 762.0 704.8
Noncurrent Liabilities
Accrued insurance 45.4 46.0 41.6
Accrued retirement benefits 140.4 134.7 120.2
Other long-term liabilities 31.8 33.3 22.9
Total noncurrent liabilities 217.6 214.0 184.7
Stockholders' Equity
Common stock 40.1 40.1 40.1
Treasury stock (56.0 ) (56.2 ) (61.1 )
Paid-in capital 27.5 26.0 27.8
Earnings invested in the business 751.9 751.3 711.0
Accumulated other comprehensive income 61.7 61.4 40.7
Total stockholders' equity 825.2 822.6 758.5
Total Liabilities and Stockholders' Equity $ 1,804.4 $ 1,798.6 $ 1,648.0
STATISTICS:
Working Capital $ 467.3 $ 474.5 $ 450.2
Current Ratio 1.6 1.6 1.6
Debt-to-capital % 6.2 % 3.3 % 6.2 %
Global Days Sales Outstanding 57 52 54
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED MARCH 30, 2014 AND MARCH 31, 2013
(UNAUDITED)
(In millions of dollars)
2014 2013
Cash flows from operating activities
Net earnings $ 2.5 $ 12.9
Noncash adjustments:
Depreciation and amortization 5.3 5.3
Provision for bad debts 1.6 0.4
Stock-based compensation 1.7 1.2
Other, net 0.3 0.2
Changes in operating assets and liabilities (102.2 ) (14.1 )
Net cash (used in) from operating activities (90.8 ) 5.9
Cash flows from investing activities
Capital expenditures (3.3 ) (2.8 )
Investment in equity affiliate (0.6 ) -
Other investing activities 0.1 0.2
Net cash used in investing activities (3.8 ) (2.6 )
Cash flows from financing activities
Net change in short-term borrowings 26.5 (13.7 )
Dividend payments (1.9 ) (1.9 )
Net cash from (used in) financing activities 24.6 (15.6 )
Effect of exchange rates on cash and equivalents 2.2 (1.9 )
Net change in cash and equivalents (67.8 ) (14.2 )
Cash and equivalents at beginning of period 125.7 76.3
Cash and equivalents at end of period $ 57.9 $ 62.1
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
First Quarter (Commercial, PT and OCG)
% Change
Constant
2014 2013 US$ Currency
Americas
United States $ 839.9 $ 839.5 0.0 % 0.0 %
Canada 46.7 56.0 (16.6 ) (8.9 )
Mexico 30.7 30.4 0.8 5.6
Puerto Rico 25.1 23.1 8.5 8.5
Brazil 15.9 18.5 (13.9 ) 0.0
Total Americas 958.3 967.5 (1.0 ) (0.1 )
EMEA
France 62.8 57.3 9.7 5.6
Switzerland 62.3 53.4 16.6 11.8
Russia 34.9 34.5 1.2 16.6
United Kingdom 27.8 25.8 7.7 1.0
Portugal 26.6 17.8 49.8 43.9
Germany 16.7 16.0 4.2 0.3
Italy 14.9 15.1 (1.3 ) (5.0 )
Norway 14.4 14.8 (3.1 ) 4.7
Other 17.1 17.4 (1.6 ) (4.6 )
Total EMEA 277.5 252.1 10.1 8.9
APAC
Singapore 30.3 26.1 16.1 19.0
Australia 26.5 32.7 (19.0 ) (6.3 )
Malaysia 16.5 16.7 (0.7 ) 6.2
New Zealand 12.3 11.5 7.4 7.2
Other 9.4 8.2 14.7 31.4
Total APAC 64.7 69.1 (0.1 ) 7.7
Total Kelly Services, Inc. $ 1,300.5 $ 1,288.7 1.2 % 2.2 %

ANALYST CONTACT:
James Polehna
(248) 244-4586
james_polehna@kellyservices.com

MEDIA CONTACT:
Jane Stehney
(248) 244-5630
jane_stehney@kellyservices.com

Source: Kelly Services

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