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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): November 8, 2017
 
 
KELLY SERVICES, INC.
---------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
 
DELAWARE
0-1088
38-1510762
(State or other 
(Commission
(IRS Employer
jurisdiction of 
File Number)
Identification
incorporation) 
 
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))









1



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 and nine months ended October 1, 2017. 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 November 8, 2017.
99.2    Presentation materials for November 8, 2017 conference call.

















































2




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.
 
November 8, 2017
 
 
 
 
 
 
 
 
 
/s/ Olivier G. Thirot
Olivier G. Thirot
 
Senior Vice President and Chief Financial Officer
(Principal Financial Officer) 

 
 
 
 
November 8, 2017
 
 
 
 
 
 
 
 
 
/s/ Laura S. Lockhart
Laura S. Lockhart 

Vice President, Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
 






















3





EXHIBIT INDEX
  
Exhibit No.
                   Description
 
 
Press release dated November 8, 2017
Presentation materials for November 8, 2017 conference call


4

Exhibit

Exhibit 99.1

https://cdn.kscope.io/83090e6546ab9b1539b61f450e9a3992-pressreleaseheadera09.jpg
    
KELLY SERVICES® REPORTS
THIRD QUARTER 2017 EARNINGS

Financial Highlights
•
Q3 revenue up 6.5%, up 5.3% in constant currency
•
Q3 operating earnings of $18.2 million, down 3%
•
Q3 earnings per share of $0.58 compared to $2.06, or $0.44 on an adjusted basis, a 32% increase year-over-year on an adjusted basis.
    
TROY, MI (November 8, 2017) -- Kelly Services (Nasdaq: KELYA) (Nasdaq: KELYB), a global leader in providing workforce solutions, today announced results for the third quarter of 2017.

George S. Corona, President and Chief Executive Officer, announced revenue for the third quarter of 2017 totaled $1.3 billion, a 6.5% increase, or 5.3% in constant currency, compared to the corresponding quarter of 2016.
    
Earnings from operations for the third quarter of 2017 totaled $18.2 million, compared to $18.8 million reported for the third quarter of 2016.     

Diluted earnings per share in the third quarter of 2017 were $0.58 compared to $2.06 per share in the third quarter of 2016. During the third quarter of 2016, Kelly transferred its APAC staffing operations to the TS Kelly Asia Pacific joint venture and recorded a pre-tax gain of $87.2 million. Kelly retains a 49% ownership interest in the joint venture. Diluted earnings per share in the third quarter of 2016 include the $1.62 after-tax gain on the APAC JV transaction. Excluding the after-tax gain from 2016 third quarter results, adjusted earnings per share were $0.44 in the third quarter of 2016.
 
Reflecting on the results, Corona stated, “Our third quarter performance confirmed that we are continuing to drive top-line growth and shareholder value, even as we invest in talent, technology, and solutions to accelerate our progress. Our acquisition of Teachers On Call and our decision to implement a digital talent platform confirm that we are not content to stop at short-term growth, and we are strategically positioning Kelly for long-term success as the world of work evolves.”
    
Kelly also reported that on November 7, its board of directors declared a dividend of $0.075 per share. The dividend is payable December 7, 2017 to shareholders of record as of the close of business on November 22, 2017.

In conjunction with its third quarter earnings release, Kelly Services has published a financial presentation on the Investor Relations page of our public website and will host a conference call at 9:00 a.m. (ET) on November 8 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Internet:
Kellyservices.com

Via the Telephone:
U.S.
1 800 288-9626
International
1 651 291-5254
The pass code is Kelly Services

1


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 and disruptions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual property assets could be infringed upon or compromised, 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 including TS Kelly Asia Pacific, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, 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, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyber attacks or other breaches of network or information technology security, 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 developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, unemployment compensation, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), 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® 

As a global leader in providing workforce solutions, Kelly Services, Inc. (Nasdaq: KELYA, KELYB) and its subsidiaries, offer a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire, and direct-hire basis. Kelly® directly employs nearly 500,000 people around the world in addition to having a role in connecting thousands more with work through its global network of talent suppliers and partners. Revenue in 2016 was $5.3 billion.  Visit kellyservices.com and connect with us on Facebook, LinkedIn, & Twitter.




KLYA-FIN

# # #


ANALYST CONTACT:
MEDIA CONTACT:
James Polehna
Jane Stehney    
(248) 244-4586
(248) 244-5630
james_polehna@kellyservices.com
jane_stehney@kellyservices.com




2

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016
(UNAUDITED)
(In millions of dollars except per share data)
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
2016
 
Change
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,328.8

$
1,247.8

$
81.0

 
6.5

%
5.3

%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
1,098.1

 
1,032.7

 
65.4

 
6.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
230.7

 
215.1

 
15.6

 
7.3

 
6.2

 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
212.5

 
196.3

 
16.2

 
8.3

 
7.3

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
18.2

 
18.8

 
(0.6
)
 
(2.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on investment in TS Kelly Asia Pacific
 
—

 
87.2

 
(87.2
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense, net
 
(0.4
)
 
(0.4
)
 
—

 
(4.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes and equity in net earnings (loss) of affiliate
 
17.8

 
105.6

 
(87.8
)
 
(83.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax (benefit) expense
 
(4.1
)
 
24.7

 
(28.8
)
 
(116.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings before equity in net earnings (loss) of affiliate
 
21.9

 
80.9

 
(59.0
)
 
(72.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in net earnings (loss) of affiliate
 
1.1

 
—

 
1.1

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
23.0

$
80.9

$
(57.9
)
 
(71.5
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.59

$
2.08

$
(1.49
)
 
(71.6
)
%
 
 
Diluted earnings per share
$
0.58

$
2.06

$
(1.48
)
 
(71.8
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Staffing fee-based income (included in revenue from services)
$
14.2

$
13.2

$
1.0

 
6.9

%
4.1

%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
17.4

%
17.2

%
0.2

pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion rate
 
7.9

 
8.7

 
(0.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Return:
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
1.4

 
1.5

 
(0.1
)
 
 
 
 
 
Net earnings
 
1.7

 
6.5

 
(4.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective income tax rate
 
(22.9
)
%
23.4

%
(46.3
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average number of shares outstanding (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
38.3

 
38.1

 
 
 
 
 
 
 
     Diluted
 
38.8

 
38.4

 
 
 
 
 
 
 

3

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016
(UNAUDITED)
(In millions of dollars except per share data)
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
2016
 
Change
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
3,952.1

$
3,972.4

$
(20.3
)
 
(0.5
)
%
(0.7
)
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
3,261.0

 
3,294.1

 
(33.1
)
 
(1.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
691.1

 
678.3

 
12.8

 
1.9

 
1.7

 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
636.2

 
634.9

 
1.3

 
0.2

 
0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
54.9

 
43.4

 
11.5

 
26.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on investment in TS Kelly Asia Pacific
 
—

 
87.2

 
(87.2
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense, net
 
(2.5
)
 
(1.3
)
 
(1.2
)
 
(91.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before taxes and equity in net earnings (loss) of affiliate
 
52.4

 
129.3

 
(76.9
)
 
(59.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
0.1

 
28.2

 
(28.1
)
 
(99.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings before equity in net earnings (loss) of affiliate
 
52.3

 
101.1

 
(48.8
)
 
(48.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in net earnings (loss) of affiliate
 
1.6

 
(0.1
)
 
1.7

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
53.9

$
101.0

$
(47.1
)
 
(46.7
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
1.38

$
2.59

$
(1.21
)
 
(46.7
)
%
 
 
Diluted earnings per share
$
1.37

$
2.58

$
(1.21
)
 
(46.9
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Staffing fee-based income (included in revenue from services)
$
41.4

$
46.3

$
(4.9
)
 
(10.8
)
%
(11.7
)
%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
17.5

%
17.1

%
0.4

pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion rate
 
7.9

 
6.4

 
1.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Return:
 
 
 
 
 
 
 
 
 
 
 
Earnings from operations
 
1.4

 
1.1

 
0.3

 
 
 
 
 
Net earnings
 
1.4

 
2.5

 
(1.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective income tax rate
 
0.2

%
21.8

%
(21.6
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average number of shares outstanding (millions):
 
 
 
 
 
 
 
 
 
 
 
     Basic
 
38.3

 
38.0

 
 
 
 
 
 
 
     Diluted
 
38.8

 
38.3

 
 
 
 
 
 
 


4

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
 
2016
 
Change
 
Change
 
AMERICAS STAFFING
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
554.8

 
$
518.2

 
7.1

%
6.6

%
Gross profit
 
98.8

 
 
95.0

 
4.1

 
3.7

 
Total SG&A expenses
 
85.5

 
 
80.7

 
6.0

 
5.6

 
Earnings from operations
 
13.3

 
 
14.3

 
(6.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
17.8

%
 
18.3

%
(0.5
)
 pts.
 
 
Conversion rate
 
13.5

 
 
15.0

 
(1.5
)
 
 
 
Return on sales
 
2.4

 
 
2.8

 
(0.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GLOBAL TALENT SOLUTIONS
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
503.0

 
$
495.0

 
1.6

%
1.3

%
Gross profit
 
93.0

 
 
86.2

 
7.9

 
7.6

 
Total SG&A expenses
 
72.2

 
 
70.2

 
2.8

 
2.5

 
Earnings from operations
 
20.8

 
 
16.0

 
30.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
18.5

%
 
17.4

%
1.1

 pts.
 
 
Conversion rate
 
22.4

 
 
18.5

 
3.9

 
 
 
Return on sales
 
4.1

 
 
3.2

 
0.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTERNATIONAL STAFFING
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
275.6

 
$
239.3

 
15.2

%
10.4

%
Gross profit
 
39.5

 
 
35.0

 
12.7

 
7.7

 
Total SG&A expenses
 
32.3

 
 
30.5

 
6.1

 
1.9

 
Earnings from operations
 
7.2

 
 
4.5

 
57.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
14.3

%
 
14.7

%
(0.4
)
 pts.
 
 
Conversion rate
 
18.0

 
 
12.9

 
5.1

 
 
 
Return on sales
 
2.6

 
 
1.9

 
0.7

 
 
 

5

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
September Year to Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
 
2016
 
Change
 
Change
 
AMERICAS STAFFING
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,703.5

 
$
1,614.7

 
5.5

%
5.3

%
Gross profit
 
307.9

 
 
292.9

 
5.1

 
5.0

 
SG&A expenses excluding restructuring charges
 
252.6

 
 
244.1

 
3.5

 
3.4

 
Restructuring charges
 
0.4

 
 
1.8

 
(80.0
)
 
(79.8
)
 
Total SG&A expenses
 
253.0

 
 
245.9

 
2.9

 
2.8

 
Earnings from operations
 
54.9

 
 
47.0

 
16.8

 
 
 
Earnings from operations excluding restructuring charges
 
55.3

 
 
48.8

 
13.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
18.1

%
 
18.1

%
—

 pts.
 
 
Conversion rate
 
17.8

 
 
16.1

 
1.7

 
 
 
Conversion rate excluding restructuring charges
 
18.0

 
 
16.7

 
1.3

 
 
 
Return on sales
 
3.2

 
 
2.9

 
0.3

 
 
 
Return on sales excluding restructuring charges
 
3.2

 
 
3.0

 
0.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GLOBAL TALENT SOLUTIONS
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
1,495.8

 
$
1,486.5

 
0.6

%
0.6

%
Gross profit
 
272.2

 
 
257.2

 
5.8

 
5.9

 
SG&A expenses excluding restructuring charges
 
218.8

 
 
213.2

 
2.6

 
2.7

 
Restructuring charges
 
2.0

 
 
0.4

 
415.5

 
417.6

 
Total SG&A expenses
 
220.8

 
 
213.6

 
3.4

 
3.5

 
Earnings from operations
 
51.4

 
 
43.6

 
18.0

 
 
 
Earnings from operations excluding restructuring charges
 
53.4

 
 
44.0

 
21.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
18.2

%
 
17.3

%
0.9

 pts.
 
 
Conversion rate
 
18.9

 
 
16.9

 
2.0

 
 
 
Conversion rate excluding restructuring charges
 
19.6

 
 
17.1

 
2.5

 
 
 
Return on sales
 
3.4

 
 
2.9

 
0.5

 
 
 
Return on sales excluding restructuring charges
 
3.6

 
 
3.0

 
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTERNATIONAL STAFFING
 
 
 
 
 
 
 
 
 
 
Revenue from services
$
766.0

 
$
885.6

 
(13.5
)
%
(14.0
)
%
Gross profit
 
112.7

 
 
131.4

 
(14.2
)
 
(14.8
)
 
SG&A expenses excluding restructuring charges
 
96.2

 
 
115.1

 
(16.4
)
 
(16.8
)
 
Restructuring charges
 
—

 
 
1.2

 
(100.0
)
 
(100.0
)
 
Total SG&A expenses
 
96.2

 
 
116.3

 
(17.2
)
 
(17.6
)
 
Earnings from operations
 
16.5

 
 
15.1

 
9.1

 
 
 
Earnings from operations excluding restructuring charges
 
16.5

 
 
16.3

 
1.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit rate
 
14.7

%
 
14.8

%
(0.1
)
 pts.
 
 
Conversion rate
 
14.6

 
 
11.5

 
3.1

 
 
 
Conversion rate excluding restructuring charges
 
14.6

 
 
12.3

 
2.3

 
 
 
Return on sales
 
2.2

 
 
1.7

 
0.5

 
 
 
Return on sales excluding restructuring charges
 
2.2

 
 
1.8

 
0.4

 
 
 


6

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
October 1, 2017
 
Jan. 1, 2017
 
October 2, 2016
 
Current Assets
 
 
 
 
 
 
 
  Cash and equivalents
$
22.2

$
29.6

$
27.6

 
  Trade accounts receivable, less allowances of
 
 
 
 
 
 
 
    $13.1, $12.5 and $11.1, respectively
 
1,271.7

 
1,138.3

 
1,125.8

 
  Prepaid expenses and other current assets
 
70.0

 
46.7

 
53.0

 
Total current assets
 
1,363.9

 
1,214.6

 
1,206.4

 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
 
 
 
 
 
 
  Property and equipment, net
 
81.4

 
80.8

 
80.5

 
  Deferred taxes
 
192.0

 
180.1

 
179.8

 
  Goodwill
 
107.1

 
88.4

 
88.4

 
  Investment in equity affiliate
 
116.4

 
114.8

 
113.6

 
  Other assets
 
475.9

 
349.4

 
370.6

 
Total noncurrent assets
 
972.8

 
813.5

 
832.9

 
 
 
 
 
 
 
 
 
Total Assets
$
2,336.7

$
2,028.1

$
2,039.3

 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
  Short-term borrowings
$
23.9

$
—

$
8.7

 
  Accounts payable and accrued liabilities
 
496.1

 
455.1

 
408.7

 
  Accrued payroll and related taxes
 
312.6

 
241.5

 
276.9

 
  Accrued insurance
 
25.6

 
23.4

 
26.8

 
  Income and other taxes
 
60.0

 
51.1

 
56.9

 
Total current liabilities
 
918.2

 
771.1

 
778.0

 
 
 
 
 
 
 
 
 
Noncurrent Liabilities
 
 
 
 
 
 
 
  Accrued insurance
 
49.7

 
45.5

 
40.2

 
  Accrued retirement benefits
 
175.0

 
157.4

 
153.9

 
  Other long-term liabilities
 
66.8

 
42.1

 
50.7

 
Total noncurrent liabilities
 
291.5

 
245.0

 
244.8

 
 
 
 
 
 
 
 
 
Stockholders' Equity
 
 
 
 
 
 
 
  Common stock
 
40.1

 
40.1

 
40.1

 
  Treasury stock
 
(35.2
)
 
(39.0
)
 
(39.1
)
 
  Paid-in capital
 
30.0

 
28.6

 
26.2

 
  Earnings invested in the business
 
968.8

 
923.6

 
906.8

 
  Accumulated other comprehensive income
 
123.3

 
58.7

 
82.5

 
Total stockholders' equity
 
1,127.0

 
1,012.0

 
1,016.5

 
 
 
 
 
 
 
 
 
Total Liabilities and Stockholders' Equity
$
2,336.7

$
2,028.1

$
2,039.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATISTICS:
 
 
 
 
 
 
 
 Working Capital
$
445.7

$
443.5

$
428.4

 
 Current Ratio
 
1.5

 
1.6

 
1.6

 
 Debt-to-capital %
 
2.1

%
—

%
0.9

%
 Global Days Sales Outstanding
 
58

 
53

 
56

 
 Year-to-Date Free Cash Flow
$
18.2

$
26.9

$
20.4

 

7

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net earnings
$
53.9

$
101.0

Noncash adjustments:
 
 
 
 
Depreciation and amortization
 
16.5

 
16.0

Provision for bad debts
 
3.6

 
6.1

Stock-based compensation
 
6.8

 
7.6

Gain on investment in TS Kelly Asia Pacific equity affiliate
 
—

 
(87.2
)
Other, net
 
(2.3
)
 
(2.2
)
Changes in operating assets and liabilities, net of acquisition
 
(45.6
)
 
(13.1
)
 
 
 
 
 
Net cash from operating activities
 
32.9

 
28.2

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(14.7
)
 
(7.8
)
Acquisition of company, net of cash received
 
(37.2
)
 
—

Net cash proceeds from investment in TS Kelly Asia Pacific equity affiliate
 
—

 
18.8

Proceeds from repayment of loan to TS Kelly equity affiliate
 
0.6

 
—

Other investing activities
 
—

 
(0.4
)
 
 
 
 
 
Net cash (used in) from investing activities
 
(51.3
)
 
10.6

 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Net change in short-term borrowings
 
23.9

 
(47.8
)
Dividend payments
 
(8.7
)
 
(7.7
)
Payments of tax withholding for restricted shares
 
(1.7
)
 
(2.1
)
Other financing activities
 
(0.1
)
 
0.4

 
 
 
 
 
Net cash from (used in) financing activities
 
13.4

 
(57.2
)
 
 
 
 
 
Effect of exchange rates on cash and equivalents
 
(2.4
)
 
3.8

 
 
 
 
 
Net change in cash and equivalents
 
(7.4
)
 
(14.6
)
Cash and equivalents at beginning of period
 
29.6

 
42.2

 
 
 
 
 
 
 
 
 
 
Cash and equivalents at end of period
$
22.2

$
27.6



8

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter (Americas, International and GTS)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
2016
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
United States
$
941.1

$
900.3

 
4.5

%
4.5

%
Canada
 
37.1

 
34.9

 
6.2

 
1.9

 
Mexico
 
32.9

 
27.6

 
19.4

 
13.3

 
Puerto Rico
 
15.9

 
20.9

 
(23.8
)
 
(23.8
)
 
Brazil
 
12.3

 
13.3

 
(7.4
)
 
(9.4
)
 
Total Americas
 
1,039.3

 
997.0

 
4.2

 
3.9

 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
France
 
73.0

 
60.8

 
20.1

 
14.1

 
Switzerland
 
59.1

 
55.0

 
7.4

 
6.0

 
Portugal
 
46.0

 
39.2

 
17.5

 
11.6

 
United Kingdom
 
23.3

 
19.5

 
19.1

 
19.5

 
Russia
 
22.5

 
18.4

 
22.4

 
11.6

 
Italy
 
15.9

 
13.6

 
17.1

 
11.1

 
Germany
 
15.5

 
14.2

 
8.5

 
3.0

 
Norway
 
8.9

 
8.4

 
7.2

 
2.5

 
Ireland
 
8.3

 
7.7

 
8.1

 
2.6

 
Other
 
12.1

 
9.7

 
25.0

 
18.4

 
Total EMEA
 
284.6

 
246.5

 
15.5

 
10.7

 
 
 
 
 
 
 
 
 
 
 
Total APAC
 
4.9

 
4.3

 
12.6

 
8.8

 
 
 
 
 
 
 
 
 
 
 
Total Kelly Services, Inc.
$
1,328.8

$
1,247.8

 
6.5

%
5.3

%
 
 
 
 
 
 
 
 
 
 


9

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES
(UNAUDITED)
(In millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
September Year to Date (Americas, International and GTS)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
%
 
CC %
 
 
 
2017
 
2016
 
Change
 
Change
 
 
 
 
 
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
United States
$
2,866.8

$
2,765.8

 
3.7

%
3.7

%
Canada
 
105.8

 
105.2

 
0.6

 
(0.5
)
 
Mexico
 
85.0

 
79.6

 
6.8

 
9.1

 
Puerto Rico
 
51.2

 
65.9

 
(22.3
)
 
(22.3
)
 
Brazil
 
38.3

 
33.5

 
14.3

 
1.6

 
Total Americas
 
3,147.1

 
3,050.0

 
3.2

 
3.1

 
 
 
 
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
 
 
 
France
 
202.1

 
178.6

 
13.2

 
13.3

 
Switzerland
 
161.3

 
156.2

 
3.3

 
3.6

 
Portugal
 
124.0

 
111.6

 
11.1

 
11.2

 
Russia
 
69.3

 
49.0

 
41.5

 
21.5

 
United Kingdom
 
64.3

 
66.2

 
(2.9
)
 
5.7

 
Italy
 
45.3

 
42.1

 
7.6

 
7.7

 
Germany
 
43.3

 
45.3

 
(4.5
)
 
(4.3
)
 
Norway
 
24.9

 
24.4

 
2.2

 
1.0

 
Ireland
 
23.4

 
18.1

 
295.0

 
29.8

 
Other
 
33.5

 
27.8

 
20.7

 
20.5

 
Total EMEA
 
791.4

 
719.3

 
10.0

 
9.6

 
 
 
 
 
 
 
 
 
 
 
Total APAC
 
13.6

 
203.1

 
(93.3
)
 
(13.1
)
 
 
 
 
 
 
 
 
 
 
 
Total Kelly Services, Inc.
$
3,952.1

$
3,972.4

 
(0.5
)
%
(0.7
)
%
 
 
 
 
 
 
 
 
 
 


10

 KELLY SERVICES, INC. AND SUBSIDIARIES
 RECONCILIATION OF NON-GAAP MEASURES
FOR THE 13 AND 39 WEEKS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016
 (UNAUDITED)
 (In millions of dollars except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
September Year to Date
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Revenue from services
 
$
1,328.8

 
$
1,247.8

 
$
3,952.1

 
$
3,972.4

Disposal of APAC businesses (Note 1)
 
—

 
—

 
—

 
(191.1
)
Adjusted revenue from services
 
$
1,328.8

 
$
1,247.8

 
$
3,952.1

 
$
3,781.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
September Year to Date
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Gross profit
 
$
230.7

 
$
215.1

 
$
691.1

 
$
678.3

Disposal of APAC businesses (Note 1)
 
—

 
—

 
—

 
(30.2
)
Adjusted gross profit
 
$
230.7

 
$
215.1

 
$
691.1

 
$
648.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
September Year to Date
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Earnings from operations
 
$
18.2

 
$
18.8

 
$
54.9

 
$
43.4

Disposal of APAC businesses (Note 1)
 
—

 
—

 
—

 
(5.9
)
Restructuring charges (Note 2)
 
—

 
—

 
2.4

 
3.4

Adjusted earnings from operations
 
$
18.2

 
$
18.8

 
$
57.3

 
$
40.9


 
 
Third Quarter
 
 
2017
 
2016
 
 
Amount
 
Per Share
 
Amount
 
Per Share
 
 
 
 
 
 
 
 
 
Net earnings
 
$
23.0

 
$
0.58

 
$
80.9

 
$
2.06

Gain on investment in equity affiliate, net of taxes (Note 3)
 
—

 
—

 
(63.7
)
 
(1.62
)
Adjusted net earnings
 
$
23.0

 
$
0.58

 
$
17.2

 
$
0.44

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September Year to Date
 
 
2017
 
2016
 
 
Amount
 
Per Share
 
Amount
 
Per Share
 
 
 
 
 
 
 
 
 
Net earnings
 
$
53.9

 
$
1.37

 
$
101.0

 
$
2.58

Disposal of APAC businesses (Note 1)
 
—

 
—

 
(4.5
)
 
(0.12
)
Restructuring charges, net of taxes (Note 2)
 
1.7

 
0.04

 
2.5

 
0.07

Gain on investment in equity affiliate, net of taxes (Note 3)
 
—

 
—

 
(63.7
)
 
(1.63
)
Adjusted net earnings
 
$
55.6

 
$
1.41

 
$
35.3

 
$
0.90


Note: Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.

11

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2016 disposal of APAC businesses, 2017 and 2016 restructuring charges and the 2016 gain on investment of equity affiliate is useful to understand the Company's fiscal 2017 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items 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) Disposal of APAC businesses represents the 2016 operational results of business contributed to TS Kelly Asia Pacific in the third quarter of 2016.

(2) Restructuring charges in 2017 represent costs related primarily to optimizing our GTS service delivery models to deliver expected cost savings. Restructuring charges in 2016 include costs related to actions taken in the Americas and International regions designed to increase operational efficiency and align our staffing operations with opportunities for growth within their markets.

(3) Gain on investment in equity affiliate represents the difference between the fair value and book value of amounts contributed by the Company to the investment in TS Kelly Asia Pacific in the third quarter of 2016.



12
a3q2017earningsreleasesu
Kelly Services, Inc. Third Quarter November 8, 2017 Exhibit 99.2

 
Safe Harbor Statement 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, the risk our intellectual assets could be infringed upon or compromised, 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 developments or operational circumstances, 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 ), 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. 2

 
Third Quarter 2017 Highlights (YOY Comparisons)  Total revenue increased 6.5% – Increased 5.3% on a constant currency basis  Gross profit up 7.3% – up 6.2% on a constant currency basis  Earnings from operations of $18.2 million, down 3%  Diluted earnings per share of $0.58, compared to $2.06 per share last year – Excluding $1.62 after-tax gain on APAC JV transaction in 2016, diluted earnings per share up $0.14, a 32% increase 3

 
 Revenue increase reflects solid growth in Americas and International Staffing  Continued GP rate improvement reflects on-going structural progress, as we move to higher margin solutions in GTS, partially offset by margin rate declines in Americas and International Staffing due to business mix  Earnings from operations reflects solid GP growth, offset by the addition of resources to support market opportunities and higher performance based incentives  Excluding the impact of the gain on APAC JV transaction, EPS improved by $0.14 or 32% ----- (1)Constant Currency represent year-over-year changes resulting from translating 2017 financial data into USD using 2016 exchange rates. (2)Change includes $87.2 million gain on investment, $63.7 million net of income taxes expense or $1.62 per share, in 2016. Third Quarter 2017 Financial Summary 4 Actual Results Change Constant Currency Change(1) Reve ue $1.3B 6.5% 5.3% GP % 17.4% 20 bps Earnings from Operations $18.2M (2.9)% (6.0)% ROS % 1.4% (10) bps EPS(2) $0.58 ($1.48)

 
 Americas staffing revenues reflect continued solid top-line growth, primarily in light industrial staffing  International staffing delivered strong growth across the regions in Europe Third Quarter 2017 Revenue Growth 5 42% 21% 38% Business Mix Americas Staffing International Staffing Global Talent Solutions 0% 10% 20% 30% Total Americas Staffing International Staffing Global Talent Solutions YoY Growth Reported Constant Currency

 
Third Quarter 2017 Gross Profit Growth  Americas staffing and International staffing GP progress reflects top-line growth, partially offset by GP rate declines due to changes in business mix  GTS GP increase reflects solid GP rate improvement on modest revenue growth 6 43% 17% 40% Business Mix Americas Staffing International Staffing Global Talent Solutions 0% 5% 10% 15% Total Americas Staffing International Staffing Global Talent Solutions YoY Growth Reported Constant Currency

 
17.2% 17.4% 16.0% 16.2% 16.4% 16.6% 16.8% 17.0% 17.2% 17.4% 17.6% Q3 2016 GP Rate Americas Staffing International Staffing Global Talent Solutions Perm Fees Q3 2017 GP Rate Third Quarter 2017 Gross Profit Rate  Favorable impacts include an improving GP rate due to an improved mix of higher margin solutions in GTS and higher perm fees, primarily in International Staffing  Americas Staffing and International temporary staffing rate declines due to changes in business mix -10 bps 40 bps 7 -20 bps 10 bps

 
$196 $213 $180 $185 $190 $195 $200 $205 $210 $215 Q3 2016 SG&A International Staffing FX Americas Staffing Corporate Global Talent Solutions Q3 2017 SG&A Third Quarter 2017 SG&A  Corporate expenses primarily reflect higher performance based compensation expense and additional litigation related expenses  Americas Staffing expenses were up due to additional sales resources to capitalize on market opportunities and increased performance based compensation expenses $1 $2 $5 $2 $ in Millions $7 8

 
Third Quarter 2017 Conversion Rate ----- (1)Conversion rate represents earnings from operations as a percent of gross profit, or return on gross profit.  Americas Staffing conversion rate reflects additional resources to capitalize on market opportunities  GTS improved by 390 bps and reflects impact of an improving GP rate and cost management efforts  International staffing conversion rate improvement reflect strong GP growth combined with effective cost management  Total Company conversion rate is also impacted by higher Corporate performance based incentive expenses and additional litigation related expenses $ in Millions 9 2017 2016 Gross Earnings Conversion Gross Earnings Conversion Change Profit from Ops Rate(1) Profit from Ops Rate(1) (bps) Americas Staffing 98.8$ 13.3$ 13.5% 95.0$ 14.3$ 15.0% (150) Global Talent Solutions 93.0 20.8 22.4% 86.2 16.0 18.5% 390 International Staffing 39.5 7.2 18.0% 35.0 4.5 12.9% 510 Total Company 230.7$ 18.2$ 7.9% 215.1$ 18.8$ 8.7% (80) ----- (1)Conversion rate represents earnings from operations as a percent of gross profit, or return on gross profit.

 
$500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 2016 Q3 2016 2017 Q3 Accounts Receivable Third Quarter 2017 Balance Sheet Data 10  DSO is up 2 days versus the same period last year, and up 5 days from year end 2016. Q3 DSO reflects a seasonal increase related in our educational staffing business and the start of the school year  Quarter end debt was $24 million and reflects our cash paid for the Teachers On Call acquisition $ in Millions DSO 56 53 58 Debt-to- 0.9% 0.0% 2.1% Equity Ratio $0 $20 $40 2016 Q3 2016 2017 Q3 Debt (and Debt-to-Equity Ratio)

 
2017 Outlook – Fourth Quarter  Revenue up 8% to 9% YOY – 200 basis point improvement due to currency – 120 basis point impact from acquisition of Teachers On Call  Gross profit rate consistent YOY  SG&A up 4.5% to 5.5% YOY – Approximately half of increase is a result of higher performance based incentive compensation expenses and acquisition of Teachers On Call  Annual tax rate in mid-single digits 11

 
Teachers On Call acquisition  Stock purchase completed on September 5, 2017  Teachers On Call is a U.S. based provider of substitute teacher staffing services for K-12 public, private, and charter schools, and early child care centers focused on the upper mid-west  Complements Kelly Educational Staffing geographic and service footprint  Expands on Kelly’s existing leading position in the U.S. educational staffing market 12