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): October 21, 2008
KELLY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
| DELAWARE
|
0-1088
|
38-1510762
|
||||||||||||||||||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
||||||||||||||||||
999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
(Address of principal executive offices)
(Zip Code)
(248) 362-4444
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
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 nine months ended September 28, 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 October 21, 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: October 21, 2008 | ||
| /s/ Patricia Little | ||
| Patricia Little | ||
| Executive Vice President and | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| Date: October 21, 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 October 21, 2008 | |
5
Exhibit 99.1
KELLY SERVICES REPORTS 3rd QUARTER 2008 RESULTS
TROY, MI (October 21, 2008) — Kelly Services, Inc., a world leader in human resources solutions, today announced results for the third quarter of 2008.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the third quarter of 2008 totaled $1.4 billion, a 2% decrease compared to the corresponding quarter in 2007.
Losses from operations for the third quarter of 2008 totaled $14.5 million, compared to $20.8 million earnings from operations reported for the third quarter of 2007. Included in the results of operations for the third quarter 2008 is a $22.5 million pre-tax charge related to several litigation matters. Earnings from operations in the third quarter of 2007 included $2.5 million of pre-tax restructuring costs.
Diluted losses per share from continuing operations in the third quarter of 2008 were $0.33, compared to third quarter 2007 earnings of $0.40 per share. The litigation charge in 2008 was $0.40 per diluted share from continuing operations. Included in third quarter 2007 diluted earnings is the $0.05 per share cost of restructuring.
Year-to-date 2008 earnings from continuing operations totaled $6.9 million or $0.20 per share.
Commenting on the results, Camden said “Our third quarter performance reflects the rapid deterioration in global economic conditions and further weakening of the staffing market, particularly in the U.S. Absent the litigation charge, we would have reported modest earnings for the quarter. Although a disappointment, these lawsuits do not affect our ability to execute our long-term strategy.”
Camden concluded, “In spite of the tumultuous economic landscape and the cyclical nature of our business, Kelly remains focused on building a stronger company for our employees and customers, while creating lasting value for our shareholders.”
In conjunction with its third quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on October 21, 2008 to review the results and answer questions. The call may be accessed in one of the following ways:
Via the Telephone:
| U.S. | 1-800-398-9398 | |
| 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
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.
6
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.
| ANALYST CONTACT: | MEDIA CONTACT: | |
| James Polehna | Judith Clark | |
| (248) 244-4586 | (248) 244-5362 | |
| james_polehna@kellyservices.com | judith_clark@kellyservices.com |
7
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED SEPTEMBER 28, 2008 AND SEPTEMBER 30, 2007
(UNAUDITED)
(In thousands of dollars except per share data)
| 2008 | 2007 | Change | % Change | ||||||||||||
| Revenue from services |
$ | 1,397,748 | $ | 1,425,298 | $ | (27,550) | (1.9) | % | |||||||
| Cost of services |
1,152,032 | 1,178,419 | (26,387) | (2.2) | |||||||||||
| Gross profit |
245,716 | 246,879 | (1,163) | (0.5) | |||||||||||
| Selling, general and administrative expenses |
260,260 | 226,099 | 34,161 | 15.1 | |||||||||||
| (Loss) earnings from operations |
(14,544) | 20,780 | (35,324) | (170.0) | |||||||||||
| Other (expense) income, net |
(124) | 587 | (711) | (121.1) | |||||||||||
| (Loss) earnings from continuing operations before taxes |
(14,668) | 21,367 | (36,035) | (168.6) | |||||||||||
| Income taxes |
(3,115) | 6,685 | (9,800) | (146.6) | |||||||||||
| (Loss) earnings from continuing operations |
(11,553) | 14,682 | (26,235) | (178.7) | |||||||||||
| (Loss) earnings from discontinued operations, net of tax |
(663) | 459 | (1,122) | (244.4) | |||||||||||
| Net (loss) earnings |
$ | (12,216) | $ | 15,141 | $ | (27,357) | (180.7) | % | |||||||
| Basic (loss) earnings per share |
|||||||||||||||
| (Loss) earnings from continuing operations |
$ | (0.33) | $ | 0.40 | $ | (0.73) | (182.5) | % | |||||||
| (Loss) earnings from discontinued operations |
(0.02) | 0.01 | (0.03) | (300.0) | |||||||||||
| Net (loss) earnings |
$ | (0.35) | $ | 0.41 | $ | (0.76) | (185.4) | % | |||||||
| Diluted (loss) earnings per share |
|||||||||||||||
| (Loss) earnings from continuing operations |
$ | (0.33) | $ | 0.40 | $ | (0.73) | (182.5) | % | |||||||
| (Loss) earnings from discontinued operations |
(0.02) | 0.01 | (0.03) | (300.0) | |||||||||||
| Net (loss) earnings |
$ | (0.35) | $ | 0.41 | $ | (0.76) | (185.4) | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
17.6 | % | 17.3 | % | 0.3 | pts. | |||||||||
| Selling, general and administrative expenses: |
|||||||||||||||
| % of revenue |
18.6 | 15.9 | 2.7 | ||||||||||||
| % of gross profit |
105.9 | 91.6 | 14.3 | ||||||||||||
| % Return - (Loss) earnings from operations |
(1.0) | 1.5 | (2.5) | ||||||||||||
| (Loss) earnings from continuing |
(1.0) | 1.5 | (2.5) | ||||||||||||
| (Loss) earnings from continuing |
(0.8) | 1.0 | (1.8) | ||||||||||||
| Net (loss) earnings |
(0.9) | 1.1 | (2.0) | ||||||||||||
| Effective income tax rate |
21.2 | % | 31.3 | % | (10.1) | pts. | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
34,759 | 36,500 | |||||||||||||
| Diluted |
34,801 | 36,537 | |||||||||||||
8
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED SEPTEMBER 28, 2008 AND SEPTEMBER 30, 2007
(UNAUDITED)
(In thousands of dollars except per share data)
| 2008 | 2007 | Change | % Change | ||||||||||||
| Revenue from services |
$ | 4,238,199 | $ | 4,191,830 | $ | 46,369 | 1.1 | % | |||||||
| Cost of services |
3,485,194 | 3,468,177 | 17,017 | 0.5 | |||||||||||
| Gross profit |
753,005 | 723,653 | 29,352 | 4.1 | |||||||||||
| Selling, general and administrative expenses |
739,655 | 670,114 | 69,541 | 10.4 | |||||||||||
| Earnings from operations |
13,350 | 53,539 | (40,189) | (75.1) | |||||||||||
| Other (expense) income, net |
(26) | 2,190 | (2,216) | (101.2) | |||||||||||
| Earnings from continuing operations before taxes |
13,324 | 55,729 | (42,405) | (76.1) | |||||||||||
| Income taxes |
6,456 | 20,478 | (14,022) | (68.5) | |||||||||||
| Earnings from continuing operations |
6,868 | 35,251 | (28,383) | (80.5) | |||||||||||
| (Loss) earnings from discontinued operations, net of tax |
(338) | 7,134 | (7,472) | (104.7) | |||||||||||
| Net earnings |
$ | 6,530 | $ | 42,385 | $ | (35,855) | (84.6) | % | |||||||
| Basic earnings per share |
|||||||||||||||
| Earnings from continuing operations |
$ | 0.20 | $ | 0.96 | $ | (0.76) | (79.2) | % | |||||||
| (Loss) earnings from discontinued operations |
(0.01) | 0.20 | (0.21) | (105.0) | |||||||||||
| Net earnings |
$ | 0.19 | $ | 1.16 | $ | (0.97) | (83.6) | % | |||||||
| Diluted earnings per share |
|||||||||||||||
| Earnings from continuing operations |
$ | 0.20 | $ | 0.96 | $ | (0.76) | (79.2) | % | |||||||
| (Loss) earnings from discontinued operations |
(0.01) | 0.19 | (0.20) | (105.3) | |||||||||||
| Net earnings |
$ | 0.19 | $ | 1.15 | $ | (0.96) | (83.5) | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
17.8 | % | 17.3 | % | 0.5 | pts. | |||||||||
| Selling, general and administrative expenses: |
|||||||||||||||
| % of revenue |
17.5 | 16.0 | 1.5 | ||||||||||||
| % of gross profit |
98.2 | 92.6 | 5.6 | ||||||||||||
| % Return - Earnings from operations |
0.3 | 1.3 | (1.0) | ||||||||||||
| Earnings from continuing |
0.3 | 1.3 | (1.0) | ||||||||||||
| Earnings from continuing |
0.2 | 0.8 | (0.6) | ||||||||||||
| Net earnings |
0.2 | 1.0 | (0.8) | ||||||||||||
| Effective income tax rate |
48.5 | % | 36.7 | % | 11.8 | pts. | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
34,759 | 36,557 | |||||||||||||
| Diluted |
34,850 | 36,843 | |||||||||||||
9
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
| Third Quarter | ||||||||||||||||||
| 2008 | 2007 | Change | Constant Currency Change |
|||||||||||||||
| Americas Commercial |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 618.3 | $ | 682.5 | (9.4) | % | (9.6) | % | ||||||||||
| Fee-based income |
4.3 | 4.9 | (10.9) | (11.2) | ||||||||||||||
| Earnings from operations |
11.8 | 20.9 | (43.3) | |||||||||||||||
| Earnings from operations (excluding restructuring charges) |
11.8 | 22.4 | (47.2) | |||||||||||||||
| Gross profit rate |
15.4 | % | 15.7 | % | (0.3) | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
13.4 | 12.7 | 0.7 | |||||||||||||||
| % of gross profit |
87.5 | 80.5 | 7.0 | |||||||||||||||
| Operating margin |
1.9 | 3.1 | (1.2) | |||||||||||||||
| Americas PT |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 228.2 | $ | 235.6 | (3.1) | % | (3.2) | % | ||||||||||
| Fee-based income |
5.0 | 5.6 | (10.7) | (10.7) | ||||||||||||||
| Earnings from operations |
10.0 | 13.2 | (24.2) | |||||||||||||||
| Gross profit rate |
17.0 | % | 17.7 | % | (0.7) | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
12.6 | 12.1 | 0.5 | |||||||||||||||
| % of gross profit |
74.2 | 68.4 | 5.8 | |||||||||||||||
| Operating margin |
4.4 | 5.6 | (1.2) | |||||||||||||||
| EMEA Commercial |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 353.6 | $ | 332.9 | 6.2 | % | 1.3 | % | ||||||||||
| Fee-based income |
10.2 | 9.8 | 3.9 | (0.1) | ||||||||||||||
| Earnings from operations |
4.0 | 3.8 | 6.7 | |||||||||||||||
| Earnings from operations (excluding restructuring charges) |
4.0 | 4.7 | (14.9) | |||||||||||||||
| Gross profit rate |
17.8 | % | 17.2 | % | 0.6 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
16.7 | 16.1 | 0.6 | |||||||||||||||
| % of gross profit |
93.6 | 93.4 | 0.2 | |||||||||||||||
| Operating margin |
1.1 | 1.1 | 0.0 | |||||||||||||||
| EMEA PT |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 44.0 | $ | 40.4 | 8.9 | % | 2.7 | % | ||||||||||
| Fee-based income |
6.7 | 5.8 | 15.3 | 7.2 | ||||||||||||||
| Earnings from operations |
0.4 | 1.1 | (61.4) | |||||||||||||||
| Gross profit rate |
29.3 | % | 28.8 | % | 0.5 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
28.3 | 26.2 | 2.1 | |||||||||||||||
| % of gross profit |
96.8 | 90.7 | 6.1 | |||||||||||||||
| Operating margin |
0.9 | 2.7 | (1.8) | |||||||||||||||
10
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
| Third Quarter | ||||||||||||||||||
| 2008 | 2007 |
Change | Constant Currency Change |
|||||||||||||||
| APAC Commercial |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 84.9 | $ | 80.6 | 5.4 | % | 1.7 | % | ||||||||||
| Fee-based income |
4.5 | 4.1 | 10.0 | 6.4 | ||||||||||||||
| Earnings from operations |
0.2 | 1.2 | (84.3) | |||||||||||||||
| Gross profit rate |
17.3 | % | 17.3 | % | 0.0 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
17.1 | 15.8 | 1.3 | |||||||||||||||
| % of gross profit |
98.7 | 91.6 | 7.1 | |||||||||||||||
| Operating margin |
0.2 | 1.5 | (1.3) | |||||||||||||||
| APAC PT |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 9.2 | $ | 8.0 | 14.8 | % | 9.5 | % | ||||||||||
| Fee-based income |
1.5 | 1.5 | 0.4 | (4.3) | ||||||||||||||
| Earnings from operations |
0.1 | 0.1 | 26.1 | |||||||||||||||
| Gross profit rate |
31.2 | % | 33.3 | % | (2.1) | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
29.6 | 31.8 | (2.2) | |||||||||||||||
| % of gross profit |
94.9 | 95.7 | (0.8) | |||||||||||||||
| Operating margin |
1.6 | 1.4 | 0.2 | |||||||||||||||
| OCG |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 59.6 | $ | 45.3 | 31.5 | % | 30.5 | % | ||||||||||
| Fee-based income |
7.4 | 4.0 | 86.4 | 83.3 | ||||||||||||||
| Earnings from operations |
0.1 | 1.9 | (94.7) | |||||||||||||||
| Gross profit rate |
31.1 | % | 26.9 | % | 4.2 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
31.0 | 22.8 | 8.2 | |||||||||||||||
| % of gross profit |
99.5 | 84.6 | 14.9 | |||||||||||||||
| Operating margin |
0.2 | 4.1 | (3.9) | |||||||||||||||
| Corporate Expense |
$ | (41.2) | $ | (21.3) | (93.5) | % | ||||||||||||
11
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
| September Year to Date | ||||||||||||||||||
| 2008 | 2007 | Change | Constant Currency Change |
|||||||||||||||
| Americas Commercial |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 1,912.4 | $ | 2,063.6 | (7.3) | % | (8.1) | % | ||||||||||
| Fee-based income |
13.0 | 14.0 | (7.7) | (9.5) | ||||||||||||||
| Earnings from operations |
53.7 | 69.1 | (22.2) | |||||||||||||||
| Earnings from operations (excluding restructuring charges) |
53.7 | 70.6 | (23.9) | |||||||||||||||
| Gross profit rate |
15.8 | % | 15.8 | % | 0.0 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
13.0 | 12.4 | 0.6 | |||||||||||||||
| % of gross profit |
82.2 | 78.8 | 3.4 | |||||||||||||||
| Operating margin |
2.8 | 3.3 | (0.5) | |||||||||||||||
| Americas PT |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 698.8 | $ | 699.6 | (0.1) | % | (0.2) | % | ||||||||||
| Fee-based income |
15.8 | 15.6 | 1.2 | 0.9 | ||||||||||||||
| Earnings from operations |
38.2 | 40.5 | (5.8) | |||||||||||||||
| Gross profit rate |
17.6 | % | 17.7 | % | (0.1) | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
12.2 | 11.9 | 0.3 | |||||||||||||||
| % of gross profit |
69.0 | 67.2 | 1.8 | |||||||||||||||
| Operating margin |
5.5 | 5.8 | (0.3) | |||||||||||||||
| EMEA Commercial |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 1,027.2 | $ | 951.6 | 7.9 | % | (0.4) | % | ||||||||||
| Fee-based income |
32.0 | 28.2 | 13.5 | 5.2 | ||||||||||||||
| Earnings from operations |
3.8 | 2.8 | 36.3 | |||||||||||||||
| Earnings from operations (excluding restructuring charges) |
3.8 | 8.8 | (57.2) | |||||||||||||||
| Gross profit rate |
17.5 | % | 17.4 | % | 0.1 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
17.1 | 17.1 | 0.0 | |||||||||||||||
| % of gross profit |
97.9 | 98.3 | (0.4) | |||||||||||||||
| Operating margin |
0.4 | 0.3 | 0.1 | |||||||||||||||
| EMEA PT |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 134.1 | $ | 115.7 | 15.9 | % | 5.7 | % | ||||||||||
| Fee-based income |
21.3 | 15.5 | 37.5 | 23.9 | ||||||||||||||
| Earnings from operations |
2.8 | 1.8 | 53.7 | |||||||||||||||
| Gross profit rate |
29.8 | % | 27.9 | % | 1.9 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
27.7 | 26.3 | 1.4 | |||||||||||||||
| % of gross profit |
93.0 | 94.3 | (1.3) | |||||||||||||||
| Operating margin |
2.1 | 1.6 | 0.5 | |||||||||||||||
12
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT (continued)
(UNAUDITED)
(In millions of dollars)
| September Year to Date | ||||||||||||||||||
| 2008 | 2007 | Change | Constant Currency Change |
|||||||||||||||
| APAC Commercial |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 262.5 | $ | 221.3 | 18.6 | % | 9.6 | % | ||||||||||
| Fee-based income |
13.9 | 11.0 | 26.3 | 17.1 | ||||||||||||||
| Earnings from operations |
0.8 | 3.3 | (77.2) | |||||||||||||||
| Gross profit rate |
17.1 | % | 17.2 | % | (0.1) | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
16.8 | 15.7 | 1.1 | |||||||||||||||
| % of gross profit |
98.3 | 91.2 | 7.1 | |||||||||||||||
| Operating margin |
0.3 | 1.5 | (1.2) | |||||||||||||||
| APAC PT |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 27.1 | $ | 18.5 | 46.3 | % | 33.4 | % | ||||||||||
| Fee-based income |
4.3 | 3.7 | 18.1 | 8.3 | ||||||||||||||
| Earnings from operations |
(0.2) | (0.3) | 18.5 | |||||||||||||||
| Gross profit rate |
30.7 | % | 33.5 | % | (2.8) | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
31.5 | 34.9 | (3.4) | |||||||||||||||
| % of gross profit |
102.6 | 104.3 | (1.7) | |||||||||||||||
| Operating margin |
(0.8) | (1.4) | 0.6 | |||||||||||||||
| OCG |
||||||||||||||||||
| Revenue from services (including fee-based income) |
$ | 176.1 | $ | 121.6 | 44.8 | % | 42.4 | % | ||||||||||
| Fee-based income |
20.6 | 11.7 | 76.3 | 71.2 | ||||||||||||||
| Earnings from operations |
2.8 | 3.0 | (9.0) | |||||||||||||||
| Gross profit rate |
31.0 | % | 26.5 | % | 4.5 | pts. | ||||||||||||
| Expense rates: |
||||||||||||||||||
| % of revenue |
29.5 | 24.0 | 5.5 | |||||||||||||||
| % of gross profit |
94.9 | 90.6 | 4.3 | |||||||||||||||
| Operating margin |
1.6 | 2.5 | (0.9) | |||||||||||||||
| Corporate Expense |
$ | (88.5) | $ | (66.8) | (32.5) | % | ||||||||||||
13
KELLY SERVICES, INC. AND SUBSIDIARIES
SUMMARY OF DISCONTINUED OPERATIONS
(UNAUDITED)
(In thousands of dollars)
| Third Quarter | Sept. Year to Date | |||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||
| Revenue from services |
$ | - | $ | - | $ | - | $ | 14,777 | ||||
| Operating (loss) income from discontinued operations |
$ | (1,073) | $ | 746 | $ | (547) | $ | 1,573 | ||||
| Less: Income taxes |
(410) | 287 | (209) | 605 | ||||||||
| (Loss) earnings from discontinued operations, net of tax |
(663) | 459 | (338) | 968 | ||||||||
| 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 |
$ | (663) | $ | 459 | $ | (338) | $ | 7,134 | ||||
|
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 third quarter of 2008 and 2007 and September 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. |
||||||||
14
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands of dollars)
| September 28, 2008 |
December 30, 2007 |
September 30, 2007 |
||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 113,566 | $ | 92,817 | $ | 102,982 | ||||||
| Trade accounts receivable, less allowances of $18,550, $18,172 and $18,357, respectively |
913,742 | 888,334 | 903,566 | |||||||||
| Prepaid expenses and other current assets |
59,651 | 53,392 | 49,734 | |||||||||
| Deferred taxes |
30,237 | 29,294 | 30,342 | |||||||||
| Total current assets |
1,117,196 | 1,063,837 | 1,086,624 | |||||||||
| Property and Equipment, Net |
168,288 | 178,019 | 175,106 | |||||||||
| Noncurrent Deferred Taxes |
48,639 | 43,436 | 37,458 | |||||||||
| Goodwill, Net |
161,439 | 147,168 | 122,917 | |||||||||
| Other Assets |
134,189 | 141,537 | 147,570 | |||||||||
| Total Assets |
$ | 1,629,751 | $ | 1,573,997 | $ | 1,569,675 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 63,274 | $ | 49,729 | $ | 75,489 | ||||||
| Accounts payable |
242,127 | 171,471 | 161,843 | |||||||||
| Accrued payroll and related taxes |
282,004 | 270,575 | 286,056 | |||||||||
| Accrued insurance |
23,281 | 23,696 | 25,495 | |||||||||
| Income and other taxes |
62,398 | 69,779 | 65,073 | |||||||||
| Total current liabilities |
673,084 | 585,250 | 613,956 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Long-term debt |
51,245 | 48,394 | - | |||||||||
| Accrued insurance |
59,488 | 60,404 | 59,489 | |||||||||
| Accrued retirement benefits |
70,196 | 78,382 | 81,249 | |||||||||
| Other long-term liabilities |
16,981 | 13,338 | 17,865 | |||||||||
| Total noncurrent liabilities |
197,910 | 200,518 | 158,603 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(111,346) | (106,312) | (84,323) | |||||||||
| Paid-in capital |
34,511 | 34,500 | 33,406 | |||||||||
| Earnings invested in the business |
769,599 | 777,338 | 763,577 | |||||||||
| Accumulated other comprehensive income |
25,877 | 42,587 | 44,340 | |||||||||
| Total stockholders’ equity |
758,757 | 788,229 | 797,116 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,629,751 | $ | 1,573,997 | $ | 1,569,675 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 444,112 | $ | 478,587 | $ | 472,668 | ||||||
| Current Ratio |
1.7 | 1.8 | 1.8 | |||||||||
| Debt-to-capital % |
13.1 | % | 11.1 | % | 8.7 | % | ||||||
| Global Days Sales Outstanding |
51 | 49 | 52 | |||||||||
15
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 28, 2008 AND SEPTEMBER 30, 2007
(UNAUDITED)
(In thousands of dollars)
| 2008 | 2007 | |||||
| Cash flows from operating activities |
||||||
| Net earnings |
$ | 6,530 | $ | 42,385 | ||
| Noncash adjustments: |
||||||
| Depreciation and amortization |
34,145 | 31,051 | ||||
| Provision for bad debts |
4,813 | 4,926 | ||||
| Stock-based compensation |
3,004 | 2,683 | ||||
| Gain on sale of discontinued operations |
- | (6,166) | ||||
| Other, net |
1,767 | (422) | ||||
| Changes in operating assets and liabilities |
36,166 | (24,808) | ||||
| Net cash from operating activities |
86,425 | 49,649 | ||||
| Cash flows from investing activities |
||||||
| Capital expenditures |
(23,519) | (33,567) | ||||
| Acquisition of companies, net of cash received |
(32,433) | (25,255) | ||||
| Proceeds from sale of discontinued operations |
- | 12,500 | ||||
| Other investing activities |
(409) | (586) | ||||
| Net cash from investing activities |
(56,361) | (46,908) | ||||
| Cash flows from financing activities |
||||||
| Net increase (decrease) in revolving line of credit |
12,483 | (3,469) | ||||
| Proceeds from debt |
- | 8,223 | ||||
| Dividend payments |
(14,269) | (14,244) | ||||
| Purchase of treasury stock |
(7,975) | (12,500) | ||||
| Stock options and other stock sales |
98 | 5,760 | ||||
| Other financing activities |
1,033 | (5,767) | ||||
| Net cash from financing activities |
(8,630) | (21,997) | ||||
| Effect of exchange rates on cash and equivalents |
(685) | 3,810 | ||||
| Net change in cash and equivalents |
20,749 | (15,446) | ||||
| Cash and equivalents at beginning of period |
92,817 | 118,428 | ||||
| Cash and equivalents at end of period |
$ | 113,566 | $ | 102,982 | ||
16
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Third Quarter (Commercial, PT and OCG) | ||||||||||||
| % Change | ||||||||||||
| 2008 | 2007 | US$ | Constant Currency |
|||||||||
| Americas |
||||||||||||
| United States |
$ | 795,791 | $ | 854,563 | (6.9) | % | (6.9) | % | ||||
| Canada |
62,084 | 67,542 | (8.1) | (8.6) | ||||||||
| Mexico |
20,849 | 19,119 | 9.0 | 2.5 | ||||||||
| Puerto Rico |
19,304 | 19,169 | 0.7 | 0.7 | ||||||||
| Total Americas |
898,028 | 960,393 | (6.5) | (6.7) | ||||||||
| Europe |
||||||||||||
| United Kingdom |
102,530 | 119,385 | (14.1) | (8.6) | ||||||||
| France |
93,707 | 82,497 | 13.6 | 3.4 | ||||||||
| Switzerland |
49,007 | 49,363 | (0.7) | (11.5) | ||||||||
| Italy |
33,868 | 28,795 | 17.6 | 7.4 | ||||||||
| Russia |
25,339 | 17,542 | 44.4 | 37.7 | ||||||||
| Norway |
24,911 | 21,902 | 13.7 | 5.2 | ||||||||
| Germany |
21,131 | 16,605 | 27.3 | 16.3 | ||||||||
| Other |
52,247 | 38,074 | 37.2 | 25.9 | ||||||||
| Total Europe |
402,740 | 374,163 | 7.6 | 2.5 | ||||||||
| Asia-Pacific |
||||||||||||
| Australia |
33,893 | 35,169 | (3.6) | (8.4) | ||||||||
| Singapore |
18,656 | 16,354 | 14.1 | 5.1 | ||||||||
| Other |
44,431 | 39,219 | 13.3 | 12.6 | ||||||||
| Total Asia-Pacific |
96,980 | 90,742 | 6.9 | 3.1 | ||||||||
| Total Kelly Services, Inc. |
$ | 1,397,748 | $ | 1,425,298 | (1.9) | % | (3.6) | % | ||||
17
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| September Year to Date (Commercial, PT and OCG) | ||||||||||||
| % Change | ||||||||||||
| 2008 | 2007 | US$ | Constant Currency |
|||||||||
| Americas |
||||||||||||
| United States |
$ | 2,455,641 | $ | 2,573,282 | (4.6) | % | (4.6) | % | ||||
| Canada |
187,584 | 191,009 | (1.8) | (9.3) | ||||||||
| Puerto Rico |
58,800 | 57,341 | 2.5 | 2.5 | ||||||||
| Mexico |
58,119 | 54,849 | 6.0 | 1.6 | ||||||||
| Total Americas |
2,760,144 | 2,876,481 | (4.0) | (4.6) | ||||||||
| Europe |
||||||||||||
| United Kingdom |
317,328 | 355,790 | (10.8) | (9.1) | ||||||||
| France |
275,727 | 227,924 | 21.0 | 6.8 | ||||||||
| Switzerland |
143,463 | 130,752 | 9.7 | (4.9) | ||||||||
| Italy |
106,654 | 92,781 | 15.0 | 1.5 | ||||||||
| Norway |
69,143 | 56,523 | 22.3 | 7.3 | ||||||||
| Russia |
68,584 | 48,876 | 40.3 | 30.6 | ||||||||
| Germany |
65,309 | 45,502 | 43.5 | 26.8 | ||||||||
| Other |
133,599 | 110,807 | 20.6 | 7.1 | ||||||||
| Total Europe |
1,179,807 | 1,068,955 | 10.4 | 1.6 | ||||||||
| Asia-Pacific |
||||||||||||
| Australia |
107,633 | 96,107 | 12.0 | 0.7 | ||||||||
| Singapore |
55,161 | 44,074 | 25.2 | 14.2 | ||||||||
| Other |
135,454 | 106,213 | 27.5 | 20.7 | ||||||||
| Total Asia-Pacific |
298,248 | 246,394 | 21.0 | 11.7 | ||||||||
| Total Kelly Services, Inc. |
$ | 4,238,199 | $ | 4,191,830 | 1.1 | % | (2.1) | % | ||||
18
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In thousands of dollars except per share data)
| Third Quarter | ||||||||||||
| 2008 | 2007 | |||||||||||
| Amount | Per Share | Amount | Per Share | |||||||||
| (Loss) earnings from continuing operations |
$ | (11,553) | $ | (0.33) | $ | 14,682 | $ | 0.40 | ||||
| Restructuring charges, net of taxes (Notes 1 and 2) |
- | - | 1,882 | 0.05 | ||||||||
| (Loss) earnings from continuing operations excluding restructuring charges, net of taxes |
$ | (11,553) | $ | (0.33) | $ | 16,564 | $ | 0.45 | ||||
| Third Quarter | ||||||||||||
| 2008 | 2007 | % Change | ||||||||||
| Selling, general and administrative expenses |
$ | 260,260 | $ | 226,099 | ||||||||
| Restructuring charges (Notes 1 and 2) |
- | (2,464) | ||||||||||
| Selling, general and administrative expenses excluding restructuring charges |
$ | 260,260 | $ | 223,635 | 16.4% | |||||||
| (Loss) earnings from operations |
$ | (14,544) | $ | 20,780 | ||||||||
| Restructuring charges (Notes 1 and 2) |
- | 2,464 | ||||||||||
| Earnings from operations excluding restructuring charges |
$ | (14,544) | $ | 23,244 | (162.6%) | |||||||
| Americas Commercial selling, general and administrative expenses |
$ | 83,124 | $ | 86,529 | ||||||||
| Americas restructuring charge (1) |
- | (1,511) | ||||||||||
| Americas Commercial selling, general and administrative expenses excluding the Americas restructuring charge |
$ | 83,124 | $ | 85,018 | (2.2%) | |||||||
| Americas Commercial earnings from operations |
$ | 11,848 | $ | 20,911 | ||||||||
| Americas restructuring charge (1) |
- | 1,511 | ||||||||||
| Americas Commercial earnings from operations excluding the Americas restructuring charge |
$ | 11,848 | $ | 22,422 | (47.2%) | |||||||
| EMEA Commercial Earnings from operations |
$ | 4,010 | $ | 3,758 | ||||||||
| UK restructuring charge (Note 2) |
- | 953 | ||||||||||
| EMEA Commercial earnings from operations excluding the UK restructuring charge |
$ | 4,010 | $ | 4,711 | (14.9%) | |||||||
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 Americas restructuring charge is comprised of facility exit costs associated with the closure of 42 branch locations and the accelerated depreciation of the leasehold improvements and personal property at the impacted locations.
(2) The UK 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.