Kelly Services® Reports 1st Quarter Results

May 7, 2014

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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Press Release Details

Kelly Services® Reports 1st Quarter Results