1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 22, 2008
| KELLY SERVICES, INC.
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(Exact name of Registrant as specified in its charter) |
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| DELAWARE
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0-1088
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38-1510762
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
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| 999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
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(Address of principal executive offices) (Zip Code) |
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| (248) 362-4444
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(Registrant’s telephone number, including area code) |
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| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | ||||||||||||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||||||||
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||||||||
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||||||||
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||||||||
2
Item 2.02. Results of Operations and Financial Condition
Kelly Services, Inc. (the “Company”) today released financial information containing highlighted financial data for the three months and six months ended June 29, 2008. A copy of the press release is attached as exhibit 99.1 herein.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release dated July 22, 2008.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| KELLY SERVICES, INC. | ||||
| Date: July 22, 2008 | ||||
| /s/ Patricia Little | ||||
| Patricia Little | ||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||
| Date: July 22, 2008 | ||||
| /s/ Michael E. Debs | ||||
| Michael E. Debs | ||||
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | ||||
4
EXHIBIT INDEX
| Exhibit No. | Description | |||||||||
| 99.1 | Press release dated July 22, 2008 | |||||||||
5
Exhibit 99.1
| ANALYST CONTACT: | MEDIA CONTACT: | |||
| James Polehna | James McIntire | |||
| (248) 244-4586 | (248) 244-5370 | |||
| james_polehna@kellyservices.com | james_mcintire@kellyservices.com |
KELLY SERVICES REPORTS 2nd QUARTER 2008 RESULTS
TROY, MI (July 22, 2008) — Kelly Services, Inc., a world leader in human resources solutions, today announced results for the second quarter of 2008.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the second quarter of 2008 totaled $1.5 billion, a 3% increase compared to the corresponding quarter in 2007.
Earnings from operations for the second quarter of 2008 totaled $15.0 million, a 33% decrease compared to $22.3 million reported for the second quarter of 2007. Included in earnings from operations in the second quarter of 2007 are $2.4 million of restructuring costs related to our UK operations and a $3.8 million benefit related to a temporary change in the French payroll tax law.
Diluted earnings per share from continuing operations in the second quarter of 2008 were $0.30, a decrease of 27% as compared to second quarter 2007 earnings of $0.41 per share. Included in second quarter 2007 diluted earnings is the $0.07 per share cost of the UK restructuring and $0.07 per share benefit related to the temporary change in the French payroll tax law.
Commenting on the results, Camden said “Our second quarter performance reflects the deterioration in economic conditions and the further weakening of the staffing market, particularly in the U.S. These conditions are now beginning to ripple through other parts of the global economy.
Camden concluded, “Given this economic uncertainty continuing to cloud the outlook for our industry, we have elected not to provide quarterly earnings guidance. We remain focused on building value for our shareholders by executing our strategy to diversify geographically, moving into higher-margin, fee-based business, expanding our professional and technical businesses, and improving operating margins.”
In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 22, 2008 to review the results and answer questions. The call may be accessed in one of the following ways:
Via the Telephone:
| U.S. | 1-800-553-0272 | |
| International | 1-612-288-0329 |
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
6
This release contains statements that are forward looking in nature and accordingly, are subject to risks and uncertainties. These factors include: competition, changing market and economic conditions, currency fluctuations, changes in laws and regulations, including tax laws, and other factors discussed in this release and in the company’s filings with the Securities and Exchange Commission. Actual results may differ materially from any projections contained herein.
About Kelly Services
Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a world leader in human resources solutions headquartered in Troy, Michigan, offering temporary staffing services, outsourcing, vendor on-site and full-time placement to clients on a global basis. Kelly provides employment to more than 750,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, creative services, light industrial, education, and health care. Revenue in 2007 was $5.7 billion. Visit www.kellyservices.com.
7
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JUNE 29, 2008 AND JULY 1, 2007
(UNAUDITED)
(In thousands of dollars except per share data)
| 2008 | 2007 | Change | % Change | ||||||||||||||
| Revenue from services |
$ | 1,452,007 | $ | 1,415,674 | $ | 36,333 | 2.6 | % | |||||||||
| Cost of services |
1,194,605 | 1,168,108 | 26,497 | 2.3 | |||||||||||||
| Gross profit |
257,402 | 247,566 | 9,836 | 4.0 | |||||||||||||
| Selling, general and administrative expenses |
242,448 | 225,300 | 17,148 | 7.6 | |||||||||||||
| Earnings from operations |
14,954 | 22,266 | (7,312 | ) | (32.8 | ) | |||||||||||
| Other income, net |
149 | 930 | (781 | ) | (84.0 | ) | |||||||||||
| Earnings from continuing operations before taxes |
15,103 | 23,196 | (8,093 | ) | (34.9 | ) | |||||||||||
| Income taxes |
4,673 | 7,885 | (3,212 | ) | (40.7 | ) | |||||||||||
| Earnings from continuing operations |
10,430 | 15,311 | (4,881 | ) | (31.9 | ) | |||||||||||
| Earnings from discontinued operations, net of tax |
87 | 18 | 69 | 383.3 | |||||||||||||
| Net earnings |
$ | 10,517 | $ | 15,329 | $ | (4,812 | ) | (31.4 | )% | ||||||||
| Basic earnings per share |
|||||||||||||||||
| Earnings from continuing operations |
$ | 0.30 | $ | 0.42 | $ | (0.12 | ) | (28.6 | )% | ||||||||
| Earnings from discontinued operations |
- | - | - | - | |||||||||||||
| Net earnings |
$ | 0.30 | $ | 0.42 | $ | (0.12 | ) | (28.6 | )% | ||||||||
| Diluted earnings per share |
|||||||||||||||||
| Earnings from continuing operations |
$ | 0.30 | $ | 0.41 | $ | (0.11 | ) | (26.8 | )% | ||||||||
| Earnings from discontinued operations |
- | - | - | - | |||||||||||||
| Net earnings |
$ | 0.30 | $ | 0.41 | $ | (0.11 | ) | (26.8 | )% | ||||||||
| STATISTICS: |
|||||||||||||||||
| Gross profit rate |
17.7 | % | 17.5 | % | 0.2 | pts. | |||||||||||
| Selling, general and administrative expenses: |
|||||||||||||||||
| % of revenue |
16.7 | 15.9 | 0.8 | ||||||||||||||
| % of gross profit |
94.2 | 91.0 | 3.2 | ||||||||||||||
| % Return - |
Earnings from operations |
1.0 | 1.6 | (0.6 | ) | ||||||||||||
| Earnings from continuing operations before taxes |
1.0 | 1.6 | (0.6 | ) | |||||||||||||
| Earnings from continuing operations |
0.7 | 1.1 | (0.4 | ) | |||||||||||||
| Net earnings |
0.7 | 1.1 | (0.4 | ) | |||||||||||||
| Effective income tax rate |
30.9 | % | 34.0 | % | (3.1 | ) pts. | |||||||||||
| Average number of shares outstanding (thousands): |
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| Basic |
34,696 | 36,658 | |||||||||||||||
| Diluted |
34,805 | 36,962 | |||||||||||||||
8
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JUNE 29, 2008 AND JULY 1, 2007
(UNAUDITED)
(In thousands of dollars except per share data)
| 2008 | 2007 | Change | % Change | ||||||||||||||
| Revenue from services |
$ | 2,840,451 | $ | 2,766,532 | $ | 73,919 | 2.7 | % | |||||||||
| Cost of services |
2,333,162 | 2,289,758 | 43,404 | 1.9 | |||||||||||||
| Gross profit |
507,289 | 476,774 | 30,515 | 6.4 | |||||||||||||
| Selling, general and administrative expenses |
479,395 | 444,015 | 35,380 | 8.0 | |||||||||||||
| Earnings from operations |
27,894 | 32,759 | (4,865 | ) | (14.9 | ) | |||||||||||
| Other income, net |
98 | 1,603 | (1,505 | ) | (93.9 | ) | |||||||||||
| Earnings from continuing operations before taxes |
27,992 | 34,362 | (6,370 | ) | (18.5 | ) | |||||||||||
| Income taxes |
9,571 | 13,793 | (4,222 | ) | (30.6 | ) | |||||||||||
| Earnings from continuing operations |
18,421 | 20,569 | (2,148 | ) | (10.4 | ) | |||||||||||
| Earnings from discontinued operations, net of tax |
325 | 6,675 | (6,350 | ) | (95.1 | ) | |||||||||||
| Net earnings |
$ | 18,746 | $ | 27,244 | $ | (8,498 | ) | (31.2 | )% | ||||||||
| Basic earnings per share |
|||||||||||||||||
| Earnings from continuing operations |
$ | 0.53 | $ | 0.56 | $ | (0.03 | ) | (5.4 | )% | ||||||||
| Earnings from discontinued operations |
0.01 | 0.18 | (0.17 | ) | (94.4 | ) | |||||||||||
| Net earnings |
$ | 0.54 | $ | 0.74 | $ | (0.20 | ) | (27.0 | )% | ||||||||
| Diluted earnings per share |
|||||||||||||||||
| Earnings from continuing operations |
$ | 0.53 | $ | 0.56 | $ | (0.03 | ) | (5.4 | )% | ||||||||
| Earnings from discontinued operations |
0.01 | 0.18 | (0.17 | ) | (94.4 | ) | |||||||||||
| Net earnings |
$ | 0.54 | $ | 0.74 | $ | (0.20 | ) | (27.0 | )% | ||||||||
| STATISTICS: |
|||||||||||||||||
| Gross profit rate |
17.9 | % | 17.2 | % | 0.7 | pts. | |||||||||||
| Selling, general and administrative expenses: |
|||||||||||||||||
| % of revenue |
16.9 | 16.0 | 0.9 | ||||||||||||||
| % of gross profit |
94.5 | 93.1 | 1.4 | ||||||||||||||
| % Return - |
Earnings from operations |
1.0 | 1.2 | (0.2 | ) | ||||||||||||
| Earnings from continuing operations before taxes |
1.0 | 1.2 | (0.2 | ) | |||||||||||||
| Earnings from continuing operations |
0.6 | 0.7 | (0.1 | ) | |||||||||||||
| Net earnings |
0.7 | 1.0 | (0.3 | ) | |||||||||||||
| Effective income tax rate |
34.2 | % | 40.1 | % | (5.9 | ) pts. | |||||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||||
| Basic |
34,760 | 36,585 | |||||||||||||||
| Diluted |
34,878 | 36,948 | |||||||||||||||
9
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| Second Quarter | |||||||||||||||
| 2008 | 2007 | Change | % Change | ||||||||||||
| Revenue from Services: |
|||||||||||||||
| Americas Commercial |
$ | 654,167 | $ | 696,974 | $ | (42,807 | ) | (6.1 | )% | ||||||
| Americas PT |
238,493 | 236,406 | 2,087 | 0.9 | |||||||||||
| Total Americas Commercial and PT |
892,660 | 933,380 | (40,720 | ) | (4.4 | ) | |||||||||
| EMEA Commercial |
351,677 | 321,229 | 30,448 | 9.5 | |||||||||||
| EMEA PT |
46,315 | 39,165 | 7,150 | 18.3 | |||||||||||
| Total EMEA Commercial and PT |
397,992 | 360,394 | 37,598 | 10.4 | |||||||||||
| APAC Commercial |
90,895 | 77,888 | 13,007 | 16.7 | |||||||||||
| APAC PT |
9,411 | 5,917 | 3,494 | 59.1 | |||||||||||
| Total APAC Commercial and PT |
100,306 | 83,805 | 16,501 | 19.7 | |||||||||||
| OCG |
61,049 | 38,095 | 22,954 | 60.3 | |||||||||||
| Consolidated Total |
$ | 1,452,007 | $ | 1,415,674 | $ | 36,333 | 2.6 | % | |||||||
| Earnings from Operations: |
|||||||||||||||
| Americas Commercial |
$ | 19,706 | $ | 25,063 | $ | (5,357 | ) | (21.4 | )% | ||||||
| Americas PT |
14,101 | 13,803 | 298 | 2.2 | |||||||||||
| Total Americas Commercial and PT |
33,807 | 38,866 | (5,059 | ) | (13.0 | ) | |||||||||
| EMEA Commercial |
1,339 | 3,476 | (2,137 | ) | (61.5 | ) | |||||||||
| EMEA PT |
1,370 | 433 | 937 | 216.4 | |||||||||||
| Total EMEA Commercial and PT |
2,709 | 3,909 | (1,200 | ) | (30.7 | ) | |||||||||
| APAC Commercial |
514 | 1,498 | (984 | ) | (65.7 | ) | |||||||||
| APAC PT |
(151 | ) | (233 | ) | 82 | 35.2 | |||||||||
| Total APAC Commercial and PT |
363 | 1,265 | (902 | ) | (71.3 | ) | |||||||||
| OCG |
857 | 649 | 208 | 32.0 | |||||||||||
| Corporate Expense |
(22,782 | ) | (22,423 | ) | (359 | ) | (1.6 | ) | |||||||
| Consolidated Total |
$ | 14,954 | $ | 22,266 | $ | (7,312 | ) | (32.8 | )% | ||||||
| Earnings from Operations (Excluding Restructuring Charges): |
|||||||||||||||
| Americas Commercial |
$ | 19,706 | $ | 25,063 | $ | (5,357 | ) | (21.4 | )% | ||||||
| Americas PT |
14,101 | 13,803 | 298 | 2.2 | |||||||||||
| Total Americas Commercial and PT |
33,807 | 38,866 | (5,059 | ) | (13.0 | ) | |||||||||
| EMEA Commercial |
1,339 | 5,924 | (4,585 | ) | (77.4 | ) | |||||||||
| EMEA PT |
1,370 | 433 | 937 | 216.4 | |||||||||||
| Total EMEA Commercial and PT |
2,709 | 6,357 | (3,648 | ) | (57.4 | ) | |||||||||
| APAC Commercial |
514 | 1,498 | (984 | ) | (65.7 | ) | |||||||||
| APAC PT |
(151 | ) | (233 | ) | 82 | 35.2 | |||||||||
| Total APAC Commercial and PT |
363 | 1,265 | (902 | ) | (71.3 | ) | |||||||||
| OCG |
857 | 649 | 208 | 32.0 | |||||||||||
| Corporate Expense |
(22,782 | ) | (22,423 | ) | (359 | ) | (1.6 | ) | |||||||
| Consolidated Total |
$ | 14,954 | $ | 24,714 | $ | (9,760 | ) | (39.5 | )% | ||||||
10
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| June Year to Date | |||||||||||||||
| 2008 | 2007 | Change | % Change | ||||||||||||
| Revenue from Services: |
|||||||||||||||
| Americas Commercial |
$ | 1,294,106 | $ | 1,381,025 | $ | (86,919 | ) | (6.3 | )% | ||||||
| Americas PT |
470,670 | 464,035 | 6,635 | 1.4 | |||||||||||
| Total Americas Commercial and PT |
1,764,776 | 1,845,060 | (80,284 | ) | (4.4 | ) | |||||||||
| EMEA Commercial |
673,586 | 618,668 | 54,918 | 8.9 | |||||||||||
| EMEA PT |
90,102 | 75,281 | 14,821 | 19.7 | |||||||||||
| Total EMEA Commercial and PT |
763,688 | 693,949 | 69,739 | 10.0 | |||||||||||
| APAC Commercial |
177,588 | 140,687 | 36,901 | 26.2 | |||||||||||
| APAC PT |
17,897 | 10,516 | 7,381 | 70.2 | |||||||||||
| Total APAC Commercial and PT |
195,485 | 151,203 | 44,282 | 29.3 | |||||||||||
| OCG |
116,502 | 76,320 | 40,182 | 52.6 | |||||||||||
| Consolidated Total |
$ | 2,840,451 | $ | 2,766,532 | $ | 73,919 | 2.7 | % | |||||||
| Earnings from Operations: |
|||||||||||||||
| Americas Commercial |
$ | 41,901 | $ | 48,170 | $ | (6,269 | ) | (13.0 | )% | ||||||
| Americas PT |
28,204 | 27,355 | 849 | 3.1 | |||||||||||
| Total Americas Commercial and PT |
70,105 | 75,525 | (5,420 | ) | (7.2 | ) | |||||||||
| EMEA Commercial |
(240 | ) | (992 | ) | 752 | 75.8 | |||||||||
| EMEA PT |
2,394 | 749 | 1,645 | 219.6 | |||||||||||
| Total EMEA Commercial and PT |
2,154 | (243 | ) | 2,397 | NM | ||||||||||
| APAC Commercial |
579 | 2,174 | (1,595 | ) | (73.4 | ) | |||||||||
| APAC PT |
(361 | ) | (380 | ) | 19 | 5.0 | |||||||||
| Total APAC Commercial and PT |
218 | 1,794 | (1,576 | ) | (87.8 | ) | |||||||||
| OCG |
2,674 | 1,176 | 1,498 | 127.4 | |||||||||||
| Corporate Expense |
(47,257 | ) | (45,493 | ) | (1,764 | ) | (3.9 | ) | |||||||
| Consolidated Total |
$ | 27,894 | $ | 32,759 | $ | (4,865 | ) | (14.9 | )% | ||||||
| Earnings from Operations (Excluding Restructuring Charges): |
|||||||||||||||
| Americas Commercial |
$ | 41,901 | $ | 48,170 | $ | (6,269 | ) | (13.0 | )% | ||||||
| Americas PT |
28,204 | 27,355 | 849 | 3.1 | |||||||||||
| Total Americas Commercial and PT |
70,105 | 75,525 | (5,420 | ) | (7.2 | ) | |||||||||
| EMEA Commercial |
(240 | ) | 4,090 | (4,330 | ) | (105.9 | ) | ||||||||
| EMEA PT |
2,394 | 749 | 1,645 | 219.6 | |||||||||||
| Total EMEA Commercial and PT |
2,154 | 4,839 | (2,685 | ) | (55.5 | ) | |||||||||
| APAC Commercial |
579 | 2,174 | (1,595 | ) | (73.4 | ) | |||||||||
| APAC PT |
(361 | ) | (380 | ) | 19 | 5.0 | |||||||||
| Total APAC Commercial and PT |
218 | 1,794 | (1,576 | ) | (87.8 | ) | |||||||||
| OCG |
2,674 | 1,176 | 1,498 | 127.4 | |||||||||||
| Corporate Expense |
(47,257 | ) | (45,493 | ) | (1,764 | ) | (3.9 | ) | |||||||
| Consolidated Total |
$ | 27,894 | $ | 37,841 | $ | (9,947 | ) | (26.3 | )% | ||||||
11
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Second Quarter | |||||||||||||
| 2008 | 2007 | Change | % Change | ||||||||||
| Revenue from services - constant currency*: |
|||||||||||||
| Americas Commercial |
$ | 648,620 | $ | 696,974 | $ | (48,354 | ) | (6.9 | )% | ||||
| Americas PT |
238,248 | 236,406 | 1,842 | 0.8 | |||||||||
| Total Americas Commercial and PT - constant currency* |
886,868 | 933,380 | (46,512 | ) | (5.0 | ) | |||||||
| EMEA Commercial |
317,593 | 321,229 | (3,636 | ) | (1.1 | ) | |||||||
| EMEA PT |
41,346 | 39,165 | 2,181 | 5.6 | |||||||||
| Total EMEA Commercial and PT - constant currency* |
358,939 | 360,394 | (1,455 | ) | (0.4 | ) | |||||||
| APAC Commercial |
82,971 | 77,888 | 5,083 | 6.5 | |||||||||
| APAC PT |
8,424 | 5,917 | 2,507 | 42.4 | |||||||||
| Total APAC Commercial and PT - constant currency* |
91,395 | 83,805 | 7,590 | 9.1 | |||||||||
| OCG |
59,774 | 38,095 | 21,679 | 56.9 | |||||||||
| Total revenue from services - constant currency* |
1,396,976 | 1,415,674 | (18,698 | ) | (1.3 | )% | |||||||
| Foreign currency impact |
55,031 | 55,031 | |||||||||||
| Revenue from services |
$ | 1,452,007 | $ | 1,415,674 | $ | 36,333 | 2.6 | % | |||||
| June Year to Date | |||||||||||||
| 2008 | 2007 | Change | % Change | ||||||||||
| Revenue from services - constant currency*: |
|||||||||||||
| Americas Commercial |
$ | 1,279,931 | $ | 1,381,025 | $ | (101,094 | ) | (7.3 | )% | ||||
| Americas PT |
469,990 | 464,035 | 5,955 | 1.3 | |||||||||
| Total Americas Commercial and PT - constant currency* |
1,749,921 | 1,845,060 | (95,139 | ) | (5.2 | ) | |||||||
| EMEA Commercial |
610,257 | 618,668 | (8,411 | ) | (1.4 | ) | |||||||
| EMEA PT |
80,821 | 75,281 | 5,540 | 7.4 | |||||||||
| Total EMEA Commercial and PT - constant currency* |
691,078 | 693,949 | (2,871 | ) | (0.4 | ) | |||||||
| APAC Commercial |
160,475 | 140,687 | 19,788 | 14.1 | |||||||||
| APAC PT |
15,942 | 10,516 | 5,426 | 51.6 | |||||||||
| Total APAC Commercial and PT - constant currency* |
176,417 | 151,203 | 25,214 | 16.7 | |||||||||
| OCG |
114,113 | 76,320 | 37,793 | 49.5 | |||||||||
| Total revenue from services - constant currency* |
2,731,529 | 2,766,532 | (35,003 | ) | (1.3 | )% | |||||||
| Foreign currency impact |
108,922 | 108,922 | |||||||||||
| Revenue from services |
$ | 2,840,451 | $ | 2,766,532 | $ | 73,919 | 2.7 | % | |||||
| * | Information on constant currencies is provided to allow investors to separate the impact of foreign currency translations on reported results. Constant currency results are calculated by translating the current year results at prior year average exchange rates. |
12
KELLY SERVICES, INC. AND SUBSIDIARIES
SUMMARY OF DISCONTINUED OPERATIONS
(UNAUDITED)
(In thousands of dollars)
| Second Quarter | June Year to Date | |||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||
| Revenue from services |
$ | - | $ | - | $ | - | $ | 14,777 | ||||
| Operating income from discontinued operations |
$ | 141 | $ | 29 | $ | 526 | $ | 827 | ||||
| Less: Income taxes |
54 | 11 | 201 | 318 | ||||||||
| Earnings from discontinued operations, net of tax |
87 | 18 | 325 | 509 | ||||||||
| Gain on sale of discontinued operations |
- | - | - | 10,153 | ||||||||
| Less: Income taxes |
- | - | - | 3,987 | ||||||||
| Gain on sale of discontinued operations, net of tax |
- | - | - | 6,166 | ||||||||
| Discontinued operations, net of tax |
$ | 87 | $ | 18 | $ | 325 | $ | 6,675 | ||||
Effective March 31, 2007, the Company sold Kelly Home Care (“KHC”), a wholly owned subsidiary. Effective December 31, 2006, the Company sold Kelly Staff Leasing (“KSL”), a wholly owned subsidiary. The operating results for KHC and KSL, as well as the gain on the sale of KHC, have been excluded from earnings from continuing operations. This schedule provides information on KHC’s and KSL’s results from operations for the second quarter of 2008 and 2007 and June year to date 2008 and 2007, as well as the gain on the sale of KHC, all of which are included as discontinued operations on the face of the statements of earnings.
13
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands of dollars)
| June 29, 2008 |
December 30, 2007 |
July 1, 2007 |
||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 85,369 | $ | 92,817 | $ | 112,463 | ||||||
| Trade accounts receivable, less allowances of $16,952, $18,172 and $17,348, respectively |
952,511 | 888,334 | 869,256 | |||||||||
| Prepaid expenses and other current assets |
55,882 | 53,392 | 49,293 | |||||||||
| Deferred taxes |
23,151 | 29,294 | 27,960 | |||||||||
| Total current assets |
1,116,913 | 1,063,837 | 1,058,972 | |||||||||
| Property and Equipment, Net |
172,513 | 178,019 | 171,675 | |||||||||
| Noncurrent Deferred Taxes |
53,058 | 43,436 | 37,231 | |||||||||
| Goodwill, Net |
145,202 | 147,168 | 122,282 | |||||||||
| Other Assets |
141,854 | 141,537 | 143,815 | |||||||||
| Total Assets |
$ | 1,629,540 | $ | 1,573,997 | $ | 1,533,975 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 44,962 | $ | 49,729 | $ | 77,165 | ||||||
| Accounts payable |
209,899 | 171,471 | 153,373 | |||||||||
| Accrued payroll and related taxes |
290,777 | 270,575 | 265,065 | |||||||||
| Accrued insurance |
23,027 | 23,696 | 25,601 | |||||||||
| Income and other taxes |
65,076 | 69,779 | 63,379 | |||||||||
| Total current liabilities |
633,741 | 585,250 | 584,583 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Long-term debt |
51,349 | 48,394 | - | |||||||||
| Accrued insurance |
58,817 | 60,404 | 60,413 | |||||||||
| Accrued retirement benefits |
76,189 | 78,382 | 78,861 | |||||||||
| Other long-term liabilities |
15,436 | 13,338 | 19,802 | |||||||||
| Total noncurrent liabilities |
201,791 | 200,518 | 159,076 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(111,434 | ) | (106,312 | ) | (72,054 | ) | ||||||
| Paid-in capital |
33,257 | 34,500 | 32,112 | |||||||||
| Earnings invested in the business |
786,597 | 777,338 | 753,409 | |||||||||
| Accumulated other comprehensive income |
45,472 | 42,587 | 36,733 | |||||||||
| Total stockholders’ equity |
794,008 | 788,229 | 790,316 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,629,540 | $ | 1,573,997 | $ | 1,533,975 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 483,172 | $ | 478,587 | $ | 474,389 | ||||||
| Current Ratio |
1.8 | 1.8 | 1.8 | |||||||||
| Debt-to-capital % |
10.8 | % | 11.1 | % | 8.9 | % | ||||||
| Global Days Sales Outstanding |
51 | 49 | 51 | |||||||||
14
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JUNE 29, 2008 AND JULY 1, 2007
(UNAUDITED)
(In thousands of dollars)
| 2008 | 2007 | |||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 18,746 | $ | 27,244 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
22,504 | 20,868 | ||||||
| Provision for bad debts |
1,962 | 2,346 | ||||||
| Stock-based compensation |
1,637 | 1,361 | ||||||
| Gain on sale of discontinued operations |
- | (6,166 | ) | |||||
| Other, net |
1,824 | (371 | ) | |||||
| Changes in operating assets and liabilities |
(5,370 | ) | (15,608 | ) | ||||
| Net cash from operating activities |
41,303 | 29,674 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(15,614 | ) | (21,295 | ) | ||||
| Acquisition of companies, net of cash received |
(10,607 | ) | (24,733 | ) | ||||
| Proceeds from sale of discontinued operations |
- | 12,500 | ||||||
| Other investing activities |
(433 | ) | (754 | ) | ||||
| Net cash from investing activities |
(26,654 | ) | (34,282 | ) | ||||
| Cash flows from financing activities |
||||||||
| Net decrease in revolving line of credit |
(7,388 | ) | (720 | ) | ||||
| Proceeds from debt |
- | 8,223 | ||||||
| Dividend payments |
(9,487 | ) | (9,271 | ) | ||||
| Purchase of treasury stock |
(7,975 | ) | - | |||||
| Stock options and other stock sales |
53 | 5,649 | ||||||
| Other financing activities |
(704 | ) | (6,509 | ) | ||||
| Net cash from financing activities |
(25,501 | ) | (2,628 | ) | ||||
| Effect of exchange rates on cash and equivalents |
3,404 | 1,271 | ||||||
| Net change in cash and equivalents |
(7,448 | ) | (5,965 | ) | ||||
| Cash and equivalents at beginning of period |
92,817 | 118,428 | ||||||
| Cash and equivalents at end of period |
$ | 85,369 | $ | 112,463 | ||||
15
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Second Quarter | ||||||||||||
| 2008 | 2007 | % Change | ||||||||||
| US$ | Constant Currency |
|||||||||||
| Americas |
||||||||||||
| United States |
$ | 839,110 | $ | 866,447 | (3.2 | )% | (3.2 | )% | ||||
| Canada |
63,661 | 64,023 | (0.6 | ) | (8.5 | ) | ||||||
| Puerto Rico |
20,653 | 19,419 | 6.4 | 6.4 | ||||||||
| Mexico |
19,600 | 18,715 | 4.7 | 0.5 | ||||||||
| Total Americas |
943,024 | 968,604 | (2.6 | ) | (3.2 | ) | ||||||
| EMEA |
||||||||||||
| United Kingdom |
109,919 | 118,522 | (7.3 | ) | (6.6 | ) | ||||||
| France |
95,418 | 76,456 | 24.8 | 7.7 | ||||||||
| Switzerland |
52,265 | 44,828 | 16.6 | (1.7 | ) | |||||||
| Italy |
37,434 | 33,624 | 11.3 | (3.9 | ) | |||||||
| Norway |
24,256 | 18,481 | 31.2 | 11.0 | ||||||||
| Germany |
22,805 | 15,379 | 48.3 | 27.9 | ||||||||
| Russia |
22,501 | 16,172 | 39.1 | 27.2 | ||||||||
| Other |
40,894 | 37,394 | 9.4 | (5.6 | ) | |||||||
| Total EMEA |
405,492 | 360,856 | 12.4 | 1.3 | ||||||||
| APAC |
||||||||||||
| Australia |
38,040 | 31,637 | 20.2 | 5.9 | ||||||||
| Singapore |
18,714 | 14,590 | 28.3 | 14.9 | ||||||||
| Other |
46,737 | 39,987 | 16.9 | 10.2 | ||||||||
| Total APAC |
103,491 | 86,214 | 20.0 | 9.4 | ||||||||
| Total Kelly Services, Inc. |
$ | 1,452,007 | $ | 1,415,674 | 2.6 | % | (1.3 | )% | ||||
16
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| June Year to Date | ||||||||||||
| 2008 | 2007 | % Change | ||||||||||
| US$ | Constant Currency |
|||||||||||
| Americas |
||||||||||||
| United States |
$ | 1,659,850 | $ | 1,718,719 | (3.4 | )% | (3.4 | )% | ||||
| Canada |
125,500 | 123,467 | 1.6 | (9.6 | ) | |||||||
| Puerto Rico |
39,496 | 38,172 | 3.5 | 3.5 | ||||||||
| Mexico |
37,270 | 35,730 | 4.3 | 1.1 | ||||||||
| Total Americas |
1,862,116 | 1,916,088 | (2.8 | ) | (3.6 | ) | ||||||
| EMEA |
||||||||||||
| United Kingdom |
214,798 | 236,405 | (9.1 | ) | (9.3 | ) | ||||||
| France |
182,020 | 145,427 | 25.2 | 8.7 | ||||||||
| Switzerland |
94,456 | 81,389 | 16.1 | (0.9 | ) | |||||||
| Italy |
72,786 | 63,986 | 13.8 | (1.2 | ) | |||||||
| Norway |
44,232 | 34,621 | 27.8 | 8.6 | ||||||||
| Germany |
44,178 | 28,897 | 52.9 | 32.8 | ||||||||
| Russia |
43,245 | 31,334 | 38.0 | 26.6 | ||||||||
| Other |
81,352 | 72,733 | 11.9 | (2.7 | ) | |||||||
| Total EMEA |
777,067 | 694,792 | 11.8 | 1.2 | ||||||||
| APAC |
||||||||||||
| Australia |
73,740 | 60,938 | 21.0 | 5.9 | ||||||||
| Singapore |
36,505 | 27,720 | 31.7 | 19.5 | ||||||||
| Other |
91,023 | 66,994 | 35.9 | 25.4 | ||||||||
| Total APAC |
201,268 | 155,652 | 29.3 | 16.7 | ||||||||
| Total Kelly Services, Inc. |
$ | 2,840,451 | $ | 2,766,532 | 2.7 | % | (1.3 | )% | ||||
17
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
| Second Quarter | ||||||||||||||
| 2008 | 2007 | |||||||||||||
| Amount | Per Share | Amount | Per Share | |||||||||||
| Earnings from continuing operations |
$ | 10,430 | $ | 0.30 | $ | 15,311 | $ | 0.41 | ||||||
| U.K. restructuring charge (1) |
- | - | 2,448 | 0.07 | ||||||||||
| Earnings from continuing operations excluding the U.K. restructuring charge |
$ | 10,430 | $ | 0.30 | $ | 17,759 | $ | 0.48 | ||||||
| Second Quarter | ||||||||||||||
| 2008 | 2007 | % Change | ||||||||||||
| Selling, general and administrative expenses |
$ | 242,448 | $ | 225,300 | ||||||||||
| U.K. restructuring charge (1) |
- | (2,448 | ) | |||||||||||
| Selling, general and administrative expenses excluding the U.K. restructuring charge |
$ | 242,448 | $ | 222,852 | 8.8% | |||||||||
| Earnings from operations |
$ | 14,954 | $ | 22,266 | ||||||||||
| U.K. restructuring charge (1) |
- | 2,448 | ||||||||||||
| Earnings from operations excluding the U.K. restructuring charge |
$ | 14,954 | $ | 24,714 | (39.5% | ) | ||||||||
| EMEA Commercial selling, general and administrative expenses |
$ | 59,807 | $ | 55,762 | ||||||||||
| U.K. restructuring charge (1) |
- | (2,448 | ) | |||||||||||
| EMEA Commercial selling, general and administrative expenses excluding the U.K. restructuring charge |
$ | 59,807 | $ | 53,314 | 12.2% | |||||||||
| EMEA Commercial earnings from operations |
$ | 1,339 | $ | 3,476 | ||||||||||
| U.K. restructuring charge (1) |
- | 2,448 | ||||||||||||
| EMEA Commercial earnings from operations excluding the U.K. restructuring charge |
$ | 1,339 | $ | 5,924 | (77.4% | ) | ||||||||
| EMEA Commercial and PT earnings from operations |
$ | 2,709 | $ | 3,909 | ||||||||||
| U.K. restructuring charge (1) |
- | 2,448 | ||||||||||||
| EMEA Commercial and PT earnings from operations excluding the U.K. restructuring charge |
$ | 2,709 | $ | 6,357 | (57.4% | ) | ||||||||
18
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
| June Year to Date | |||||||||||||||
| 2008 | 2007 | ||||||||||||||
| Amount | Per Share | Amount | Per Share | ||||||||||||
| Earnings from continuing operations |
$ | 18,421 | $ | 0.53 | $ | 20,569 | $ | 0.56 | |||||||
| U.K. restructuring charge (1) |
- | - | 5,082 | 0.14 | |||||||||||
| Earnings from continuing operations excluding the U.K. restructuring charge |
$ | 18,421 | $ | 0.53 | $ | 25,651 | $ | 0.69 | |||||||
| June Year to Date | |||||||||||||||
| 2008 | 2007 | % Change | |||||||||||||
| Selling, general and administrative expenses |
$ | 479,395 | $ | 444,015 | |||||||||||
| U.K. restructuring charge (1) |
- | (5,082 | ) | ||||||||||||
| Selling, general and administrative expenses excluding the U.K. restructuring charge |
$ | 479,395 | $ | 438,933 | 9.2% | ||||||||||
| Earnings from operations |
$ | 27,894 | $ | 32,759 | |||||||||||
| U.K. restructuring charge (1) |
- | 5,082 | |||||||||||||
| Earnings from operations excluding the U.K. restructuring charge |
$ | 27,894 | $ | 37,841 | (26.3% | ) | |||||||||
| EMEA Commercial selling, general and administrative expenses |
$ | 116,998 | $ | 109,210 | |||||||||||
| U.K. restructuring charge (1) |
- | (5,082 | ) | ||||||||||||
| EMEA Commercial selling, general and administrative expenses excluding the U.K. restructuring charge |
$ | 116,998 | $ | 104,128 | 12.4% | ||||||||||
| EMEA Commercial earnings from operations |
$ | (240 | ) | $ | (992 | ) | |||||||||
| U.K. restructuring charge (1) |
- | 5,082 | |||||||||||||
| EMEA Commercial earnings from operations excluding the U.K. restructuring charge |
$ | (240 | ) | $ | 4,090 | (105.9% | ) | ||||||||
| EMEA Commercial and PT earnings from operations |
$ | 2,154 | $ | (243 | ) | ||||||||||
| U.K. restructuring charge (1) |
- | 5,082 | |||||||||||||
| EMEA Commercial and PT earnings from operations excluding the U.K. restructuring charge |
$ | 2,154 | $ | 4,839 | (55.5% | ) | |||||||||
19
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the restructuring charge from prior year results is useful to understand the Company’s fiscal 2008 financial performance and increases comparability. Specifically, Management believes that excluding this item allows for a more meaningful comparison of current period operating performance with the operating results of prior periods. These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company’s financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company’s financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
(1) The U.K. restructuring charge is comprised of facility exit costs associated with the closure of 22 branch locations and the accelerated depreciation of the leasehold improvements and personal property at the impacted locations.