Kelly Services® Reports 1st Quarter 2015 Results

06 May '15

TROY, MI -- (Marketwired) -- 05/06/15 -- Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the first quarter of 2015.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2015 totaled $1.3 billion, a 1% decrease (a 4% increase on a constant currency basis) compared to the corresponding quarter of 2014.

Earnings from operations for the first quarter of 2015 totaled $12.1 million, compared to $6.3 million reported for the first quarter of 2014.

Diluted earnings per share in the first quarter of 2015 were $0.10 compared to $0.07 per share in the first quarter of 2014.

Commenting on the first quarter, Camden stated, "We're pleased with Kelly's overall performance and our ability to double operating earnings over the same period last year. Our U.S. local markets are off to a strong start in 2015, and our expanded PT sales and recruiting teams are showing the solid growth we expected from our 2014 investments. In addition, our continued success in our OCG segment reflects our ability to help some of the world's largest companies design and deliver more holistic solutions for acquiring and managing their talent."

Kelly also reported that on May 5, its board of directors declared a dividend of $0.05 per share. The dividend is payable June 2 to shareholders of record as of the close of business on May 18.

In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on May 6, 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, the risk of damage to our brand, 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 or market developments, 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 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 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®

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 555,000 employees in 2014. Revenue in 2014 was $5.6 billion. Visit kellyservices.com and connect with us on Facebook, LinkedIn, & Twitter.

KLYA-FIN

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
(In millions of dollars except per share data)
% CC %
2015 2014 Change Change Change
Revenue from services $ 1,320.6 $ 1,330.8 $ (10.2 ) (0.8 )% 4.4 %
Cost of services 1,100.3 1,108.5 (8.2 ) (0.7 )
Gross profit 220.3 222.3 (2.0 ) (0.9 ) 3.8
Selling, general and administrative expenses 208.2 216.0 (7.8 ) (3.6 ) 1.0
Earnings from operations 12.1 6.3 5.8 94.0
Other expense, net 2.5 1.7 0.8 (51.5 )
Earnings before taxes 9.6 4.6 5.0 109.4
Income tax expense 5.9 2.1 3.8 183.7
Net earnings $ 3.7 $ 2.5 $ 1.2 48.3 %
Basic earnings per share $ 0.10 $ 0.07 $ 0.03 42.9 %
Diluted earnings per share $ 0.10 $ 0.07 $ 0.03 42.9 %
STATISTICS:
Gross profit rate 16.7 % 16.7 % -- pts.
Selling, general and administrative expenses:
% of revenue 15.8 16.2 (0.4 )
% of gross profit 94.5 97.2 (2.7 )
% Return:
Earnings from operations 0.9 0.5 0.4
Earnings before taxes 0.7 0.3 0.4
Net earnings 0.3 0.2 0.1
Effective income tax rate 61.1 % 45.1 % 16.0 pts.
Average number of shares outstanding (millions):
Basic 37.7 37.4
Diluted 37.8 37.4
Shares adjusted for nonvested restricted awards (millions):
Basic 38.8 38.5
Diluted 38.8 38.5
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
First Quarter
Constant
Currency
2015 2014 Change Change
AMERICAS
Commercial
Revenue from services $ 641.4 $ 613.2 4.6 % 6.2 %
Staffing fee-based income included in revenue from services 3.5 3.2 6.0 8.4
Gross profit 97.8 91.8 6.6 7.9
Gross profit rate 15.3 % 15.0 % 0.3 pts.
PT
Revenue from services $ 232.8 $ 236.4 (1.5 )% (1.1 )%
Staffing fee-based income included in revenue from services 3.5 3.6 (2.6 ) (2.0 )
Gross profit 38.9 39.8 (2.1 ) (1.7 )
Gross profit rate 16.7 % 16.8 % (0.1 ) pts.
Total Americas
Revenue from services $ 874.2 $ 849.6 2.9 % 4.2 %
Staffing fee-based income included in revenue from services 7.0 6.8 1.5 3.0
Gross profit 136.7 131.6 4.0 5.0
Total SG&A expenses 113.5 109.5 3.7 4.7
Earnings from operations 23.2 22.1 5.2
Gross profit rate 15.6 % 15.5 % 0.1 pts.
Expense rates:
% of revenue 13.0 12.9 0.1
% of gross profit 83.0 83.3 (0.3 )
Return on sales 2.7 2.6 0.1
EMEA
Commercial
Revenue from services $ 178.3 $ 221.9 (19.7 )% (1.8 )%
Staffing fee-based income included in revenue from services 3.5 4.8 (26.9 ) (7.2 )
Gross profit 24.6 32.9 (25.2 ) (8.9 )
Gross profit rate 13.8 % 14.8 % (1.0 ) pts.
PT
Revenue from services $ 40.3 $ 47.7 (15.4 )% 2.2 %
Staffing fee-based income included in revenue from services 2.6 3.6 (28.8 ) (10.9 )
Gross profit 8.7 11.1 (21.8 ) (4.5 )
Gross profit rate 21.5 % 23.3 % (1.8 ) pts.
Total EMEA
Revenue from services $ 218.6 $ 269.6 (18.9 )% (1.1 )%
Staffing fee-based income included in revenue from services 6.1 8.4 (27.7 ) (8.8 )
Gross profit 33.3 44.0 (24.4 ) (7.8 )
Total SG&A expenses 33.5 41.9 (20.1 ) (3.1 )
Earnings from operations (0.2 ) 2.1 NM
Gross profit rate 15.2 % 16.3 % (1.1 ) pts.
Expense rates:
% of revenue 15.3 15.5 (0.2 )
% of gross profit 100.5 95.1 5.4
Return on sales (0.1 ) 0.8 (0.9 )
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
First Quarter
Constant
Currency
2015 2014 Change Change
APAC
Commercial
Revenue from services $ 85.6 $ 83.0 3.2 % 12.5 %
Staffing fee-based income included in revenue from services 1.5 1.9 (21.6 ) (15.7 )
Gross profit 13.0 12.3 5.3 14.7
Gross profit rate 15.2 % 14.8 % 0.4 pts.
PT
Revenue from services $ 10.5 $ 8.6 22.1 % 34.1 %
Staffing fee-based income included in revenue from services 1.6 1.7 (4.3 ) 3.0
Gross profit 2.9 2.8 4.8 13.9
Gross profit rate 27.5 % 32.0 % (4.5 ) pts.
Total APAC
Revenue from services $ 96.1 $ 91.6 5.0 % 14.5 %
Staffing fee-based income included in revenue from services 3.1 3.6 (13.5 ) (6.9 )
Gross profit 15.9 15.1 5.2 14.5
Total SG&A expenses 12.1 14.3 (15.5 ) (8.3 )
Earnings from operations 3.8 0.8 410.2
Gross profit rate 16.5 % 16.5 % -- pts.
Expense rates:
% of revenue 12.6 15.7 (3.1 )
% of gross profit 76.4 95.1 (18.7 )
Return on sales 3.9 0.8 3.1
OCG
Revenue from services $ 149.5 $ 134.4 11.2 % 12.6 %
Gross profit 35.5 32.6 8.9 10.0
Total SG&A expenses 32.7 31.4 4.0 6.5
Earnings from operations 2.8 1.2 138.6
Gross profit rate 23.8 % 24.3 % (0.5 ) pts.
Expense rates:
% of revenue 21.9 23.4 (1.5 )
% of gross profit 92.0 96.3 (4.3 )
Return on sales 1.9 0.9 1.0
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
March 29, 2015 Dec. 28, 2014 March 30, 2014
Current Assets
Cash and equivalents $ 49.4 $ 83.1 $ 57.9
Trade accounts receivable, less allowances of $11.5, $10.7 and $10.2, respectively 1,099.3 1,122.8 1,080.2
Prepaid expenses and other current assets 52.0 47.9 61.6
Deferred taxes 32.4 34.4 29.2
Total current assets 1,233.1 1,288.2 1,228.9
Property and Equipment, Net 89.8 93.0 90.8
Noncurrent Deferred Taxes 147.9 146.3 129.3
Goodwill, Net 90.3 90.3 90.3
Other Assets 305.2 300.1 265.1
Total Assets $ 1,866.3 $ 1,917.9 $ 1,804.4
Current Liabilities
Short-term borrowings $ 80.6 $ 91.9 $ 54.8
Accounts payable and accrued liabilities 344.4 364.0 321.7
Accrued payroll and related taxes 292.8 308.5 291.2
Accrued insurance 26.7 26.9 25.5
Income and other taxes 64.6 68.8 68.4
Total current liabilities 809.1 860.1 761.6
Noncurrent Liabilities
Accrued insurance 43.5 43.9 45.4
Accrued retirement benefits 144.9 140.8 140.4
Other long-term liabilities 37.7 39.4 31.8
Total noncurrent liabilities 226.1 224.1 217.6
Stockholders' Equity
Common stock 40.1 40.1 40.1
Treasury stock (49.7 ) (49.8 ) (56.0 )
Paid-in capital 25.9 24.9 27.5
Earnings invested in the business 769.2 767.4 751.9
Accumulated other comprehensive income 45.6 51.1 61.7
Total stockholders' equity 831.1 833.7 825.2
Total Liabilities and Stockholders' Equity $ 1,866.3 $ 1,917.9 $ 1,804.4
STATISTICS:
Working Capital $ 424.0 $ 428.1 $ 467.3
Current Ratio 1.5 1.5 1.6
Debt-to-capital % 8.8 % 9.9 % 6.2 %
Global Days Sales Outstanding 57 54 57
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED MARCH 29, 2015 AND MARCH 30, 2014
(UNAUDITED)
(In millions of dollars)
2015 2014
Cash flows from operating activities:
Net earnings $ 3.7 $ 2.5
Noncash adjustments:
Depreciation and amortization 5.5 5.3
Provision for bad debts 1.2 1.6
Stock-based compensation 1.2 1.7
Other, net (0.6 ) 0.3
Changes in operating assets and liabilities (27.4 ) (102.2 )
Net cash used in operating activities (16.4 ) (90.8 )
Cash flows from investing activities:
Capital expenditures (2.6 ) (3.3 )
Investment in equity affiliate -- (0.6 )
Other investing activities (0.2 ) 0.1
Net cash used in investing activities (2.8 ) (3.8 )
Cash flows from financing activities:
Net change in short-term borrowings (11.0 ) 26.5
Dividend payments (1.9 ) (1.9 )
Net cash (used in) from financing activities (12.9 ) 24.6
Effect of exchange rates on cash and equivalents (1.6 ) 2.2
Net change in cash and equivalents (33.7 ) (67.8 )
Cash and equivalents at beginning of period 83.1 125.7
Cash and equivalents at end of period $ 49.4 $ 57.9
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
First Quarter (Commercial, PT and OCG)
% Change
Constant
2015 2014 US$ Currency
Americas
United States $ 883.0 $ 839.9 5.1 % 5.1 %
Canada 42.7 46.7 (8.6 ) 2.3
Mexico 31.9 30.7 4.1 17.6
Puerto Rico 24.8 25.1 (0.8 ) (0.8 )
Brazil 13.9 15.9 (12.5 ) (1.0 )
Total Americas 996.3 958.3 4.0 5.1
EMEA
France 56.4 62.8 (10.3 ) 8.7
Switzerland 48.1 62.3 (22.7 ) (17.4 )
Portugal 31.3 26.6 17.8 43.2
United Kingdom 23.6 27.8 (15.2 ) (7.5 )
Russia 18.2 34.9 (47.9 ) (6.6 )
Germany 13.4 16.7 (19.7 ) (3.0 )
Italy 12.5 14.9 (15.7 ) 2.4
Norway 9.4 14.4 (34.8 ) (17.1 )
Other 11.0 17.1 (35.6 ) (21.8 )
Total EMEA 223.9 277.5 (19.3 ) (1.7 )
APAC
Singapore 31.3 30.3 3.2 10.2
Australia 30.4 26.5 14.9 31.0
Malaysia 15.5 16.5 (6.7 ) 2.3
New Zealand 10.5 12.3 (14.7 ) (5.2 )
Other 12.7 9.4 35.0 36.7
Total APAC 100.4 95.0 5.5 15.2
Total Kelly Services, Inc. $ 1,320.6 $ 1,330.8 (0.8 )% 4.4 %

Source: Kelly Services

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