SOURCE: Kelly Services, Inc.

Kelly Services, Inc.

May 11, 2011 07:30 ET

Kelly Services® Reports 1st Quarter 2011 Results

TROY, MI--(Marketwire - May 11, 2011) - Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a leader in providing workforce solutions, today announced results for the first quarter.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2011 totaled $1.3 billion, a 19% increase compared to the corresponding quarter in 2010.

Earnings from operations for the first quarter of 2011 totaled $1.6 million, compared to losses from operations of $1.6 million reported for the first quarter of 2010. Included in the results from operations are restructuring charges of $4.0 million in the first quarter of 2011 and $4.4 million in the first quarter of 2010. Excluding restructuring charges, earnings from operations were $5.6 million in the first quarter of 2011 and $2.8 million in the first quarter of 2010.

Diluted earnings per share in the first quarter of 2011 were $0.03 compared to first quarter 2010 losses of $0.06 per share. Excluding restructuring charges, diluted earnings per share were $0.14 in the first quarter of 2011 and $0.05 in the first quarter of 2010.

Commenting on the first quarter results, Camden stated, "We continue to see evidence of a solid, sustainable economic recovery. Kelly's revenue growth for the period certainly confirms that we are on track for a profitable year."

Camden added, "Until full confidence is restored, and employers remain cautious about ramping up too aggressively, this environment seems to favor the staffing industry -- and we intend to capitalize on the opportunities presented.

"Going forward, Kelly is committed to improving our competitive position and enhancing shareholder value by delivering customer-focused workforce solutions -- spanning traditional staffing, professional and technical offerings, and outsourcing and consulting services, and maintaining talent excellence throughout our company."

In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on May 11, 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, changing market and economic conditions, our ability to achieve our business strategy, including our ability to successfully expand into new markets and service lines, material changes in demand from or loss of large corporate customers, further impairment charges initiated by adverse industry or market developments, unexpected termination of customer contracts, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits, unexpected changes in claim trends on workers' compensation and benefit plans, 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, 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 retain the services of our senior management, local management and field personnel, the impact of changes in laws and regulations (including federal, state and international tax laws), the net financial impact of recent U.S. healthcare legislation on our business, risks associated with conducting business in foreign countries, including foreign currency fluctuations, 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 provides employment to more than 530,000 employees annually. Revenue in 2010 was $5 billion. Visit www.kellyservices.com and connect with us on Facebook®, LinkedIn®, and Twitter®.

                  KELLY SERVICES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF EARNINGS
          FOR THE 13 WEEKS ENDED APRIL 3, 2011 AND APRIL 4, 2010
                                (UNAUDITED)
              (In millions of dollars except per share data)

                                      2011      2010    Change    % Change
                                    --------  --------  ------     -------
Revenue from services               $1,339.1  $1,130.4  $208.7        18.5%

Cost of services                     1,125.4     950.4   175.0        18.4
                                    --------  --------  ------     -------

Gross profit                           213.7     180.0    33.7        18.7

Selling, general and administrative
 expenses                              212.1     181.6    30.5        16.8
                                    --------  --------  ------     -------

Earnings (loss) from operations          1.6      (1.6)    3.2          NM

Other expense, net                      (0.4)     (1.1)    0.7        60.5
                                    --------  --------  ------     -------

Earnings (loss) before taxes             1.2      (2.7)    3.9          NM

Income taxes                             0.1      (0.7)    0.8       107.7
                                    --------  --------  ------     -------

Net earnings (loss)                 $    1.1  $   (2.0) $  3.1          NM%
                                    ========  ========  ======     =======

Earnings (loss) per share
 Basic                              $   0.03  $  (0.06) $ 0.09          NM%
 Diluted                            $   0.03  $  (0.06) $ 0.09          NM%


STATISTICS:

Gross profit rate                       16.0%     15.9%    0.1pts.

Selling, general and administrative
 expenses:
 % of revenue                           15.8      16.1    (0.3)
 % of gross profit                      99.2     100.9    (1.7)

% Return - Earnings (loss) from
 operations                              0.1      (0.1)    0.2
           Earnings (loss)
            before taxes                 0.1      (0.2)    0.3
           Net earnings (loss)           0.1      (0.2)    0.3


Effective income tax rate                4.5%     26.4%  (21.9)pts.

Average number of shares outstanding
 (millions):
 Basic                                  36.7      35.0
 Diluted                                36.7      35.0

Shares adjusted for nonvested
 restricted awards (millions):
 Basic                                  37.4       N/A
 Diluted                                37.4       N/A






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


                                                First Quarter
                                    --------------------------------------
                                                                  Constant
                                                                  Currency
                                      2011     2010     Change     Change
                                    -------  -------    ------    --------
Americas Commercial
  Revenue from services (including
   fee-based income)                $ 653.3  $ 547.7      19.3%       18.5%
  Fee-based income                      2.8      2.1      34.2        32.6
  Gross profit                         92.5     78.5      17.8        17.1
  SG&A expenses excluding
   restructuring charges               75.8     65.1      16.6
  Restructuring charges                   -      0.3    (100.0)
  Total SG&A expenses                  75.8     65.4      16.0        15.4
  Earnings from operations             16.7     13.1      26.8
  Earnings from operations
   excluding restructuring charges     16.7     13.4      23.4

  Gross profit rate                    14.2%    14.3%     (0.1)pts.
  Expense rates (excluding
   restructuring charges):
    % of revenue                       11.6     11.9      (0.3)
    % of gross profit                  82.0     82.8      (0.8)
  Operating margin (excluding
   restructuring charges)               2.6      2.5       0.1

Americas PT
  Revenue from services (including
   fee-based income)                $ 240.6  $ 205.6      17.0%       16.9%
  Fee-based income                      2.8      2.3      21.2        21.0
  Gross profit                         36.1     31.5      14.5        14.4
  Total SG&A expenses                  27.6     23.0      19.8        19.7
  Earnings from operations              8.5      8.5       0.2

  Gross profit rate                    15.0%    15.3%     (0.3)pts.
  Expense rates:
    % of revenue                       11.5     11.2       0.3
    % of gross profit                  76.4     73.0       3.4
  Operating margin                      3.5      4.1      (0.6)

EMEA Commercial
  Revenue from services (including
   fee-based income)                $ 231.5  $ 204.9      13.0%       10.1%
  Fee-based income                      5.8      4.8      19.4        16.1
  Gross profit                         37.3     32.8      13.7        10.8
  SG&A expenses excluding
   restructuring charges               35.3     32.4       9.0
  Restructuring charges                 4.0      2.7      47.9
  Total SG&A expenses                  39.3     35.1      12.0         8.1
  Earnings from operations             (2.0)    (2.3)     13.1
  Earnings from operations
   excluding restructuring charges      2.0      0.4     378.2

  Gross profit rate                    16.1%    16.0%      0.1pts.
  Expense rates (excluding
   restructuring charges):
    % of revenue                       15.2     15.8      (0.6)
    % of gross profit                  94.6     98.7      (4.1)
  Operating margin (excluding
   restructuring charges)               0.9      0.2       0.7






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


                                                First Quarter
                                       -----------------------------------
                                                                  Constant
                                                                  Currency
                                        2011   2010     Change     Change
                                       -----  ------    ------    --------
EMEA PT
  Revenue from services (including
   fee-based income)                   $41.4  $ 34.9      18.6%       16.3%
  Fee-based income                       4.4     3.7      18.5        15.7
  Gross profit                          11.0     9.4      16.6        14.4
  Total SG&A expenses                   10.7     9.5      12.4         9.0
  Earnings from operations               0.3    (0.1)       NM

  Gross profit rate                     26.6%   27.1%     (0.5)pts.
  Expense rates:
    % of revenue                        25.9    27.3      (1.4)
    % of gross profit                   97.3   101.0      (3.7)
  Operating margin                       0.7    (0.3)      1.0

APAC Commercial
  Revenue from services (including
   fee-based income)                   $99.7  $ 80.9      23.2%       13.5%
  Fee-based income                       3.5     2.8      26.6        16.4
  Gross profit                          13.5    11.4      18.7         8.8
  SG&A expenses excluding
   restructuring charges                13.3     9.9      35.1
  Restructuring charges                    -     0.5    (100.0)
  Total SG&A expenses                   13.3    10.4      28.1        17.7
  Earnings from operations               0.2     1.0     (82.8)
  Earnings from operations excluding
   restructuring charges                 0.2     1.5     (89.0)

  Gross profit rate                     13.6%   14.1%     (0.5)pts.
  Expense rates (excluding
   restructuring charges):
    % of revenue                        13.4    12.2       1.2
    % of gross profit                   98.8    86.8      12.0
  Operating margin (excluding
   restructuring charges)                0.2     1.9      (1.7)

APAC PT
  Revenue from services (including
   fee-based income)                   $11.5  $  7.6      50.6%       40.6%
  Fee-based income                       3.8     1.9     104.0        90.0
  Gross profit                           5.0     2.8      79.4        66.8
  Total SG&A expenses                    5.7     3.8      52.9        42.2
  Earnings from operations              (0.7)   (1.0)     25.6

  Gross profit rate                     43.7%   36.7%      7.0pts.
  Expense rates:
    % of revenue                        49.8    49.1       0.7
    % of gross profit                  114.0   133.8     (19.8)
  Operating margin                      (6.1)  (12.4)      6.3






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

                                                First Quarter
                                   ---------------------------------------
                                                                  Constant
                                                                  Currency
                                     2011      2010      Change    Change
                                   --------  --------    ------   --------
OCG
  Revenue from services (including
   fee-based income)               $   68.2  $   55.3      23.4%      22.7%
  Fee-based income                      8.7       6.1      42.6       39.6
  Gross profit                         18.9      14.0      35.5       33.9
  SG&A expenses excluding
   restructuring charges               21.3      18.4      15.4
  Restructuring charges                   -       0.1    (100.0)
  Total SG&A expenses                  21.3      18.5      14.9       13.0
  Earnings from operations             (2.4)     (4.5)     48.0
  Earnings from operations
   excluding restructuring charges     (2.4)     (4.4)     47.1

  Gross profit rate                    27.7%     25.3%      2.4pts.
  Expense rates (excluding
   restructuring charges):
    % of revenue                       31.2      33.4      (2.2)
    % of gross profit                 112.5     132.1     (19.6)
  Operating margin (excluding
   restructuring charges)              (3.5)     (8.1)      4.6

Corporate Expense
  SG&A expenses excluding
   restructuring charges           $   19.0  $   15.5      22.0%
  Restructuring charges                   -       0.8    (100.0)
  Total SG&A expenses                  19.0      16.3      16.3

Consolidated Total (net of
 intersegment activity)
  Revenue from services (including
   fee-based income)               $1,339.1  $1,130.4      18.5%      16.7%
  Fee-based income                     31.8      23.7      34.3       29.9
  Gross profit                        213.7     180.0      18.7       16.8
  SG&A expenses excluding
   restructuring charges              208.1     177.2      17.4
  Restructuring charges                 4.0       4.4     (10.3)
  Total SG&A expenses                 212.1     181.6      16.8       14.6
  Earnings from operations              1.6      (1.6)       NM
  Earnings from operations
   excluding restructuring charges      5.6       2.8      95.7

  Gross profit rate                    16.0%     15.9%      0.1pts.
  Expense rates (excluding
   restructuring charges):
    % of revenue                       15.5      15.7      (0.2)
    % of gross profit                  97.4      98.4      (1.0)
  Operating margin (excluding
   restructuring charges)               0.4       0.3       0.1






                  KELLY SERVICES, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                                (UNAUDITED)
                         (In millions of dollars)

                                             April 3,  January 2, April 4,
                                               2011       2011      2010
                                             --------  ---------  --------
Current Assets
  Cash and equivalents                       $   59.8  $    80.5  $   55.7
  Trade accounts receivable, less allowances
   of $13.2, $12.3 and $14.4, respectively      875.8      810.9     727.3
  Prepaid expenses and other current assets      68.4       44.8      79.7
  Deferred taxes                                 17.4       22.4      18.4
                                             --------  ---------  --------
            Total current assets              1,021.4      958.6     881.1

Property and Equipment, Net                      99.5      104.0     120.0

Noncurrent Deferred Taxes                        83.9       84.0      76.9

Goodwill, Net                                    67.3       67.3      67.3

Other Assets                                    154.9      154.5     144.7

                                             --------  ---------  --------
Total Assets                                 $1,427.0  $ 1,368.4  $1,290.0
                                             ========  =========  ========

Current Liabilities
  Short-term borrowings and current portion
   of long-term debt                         $   65.4  $    78.8  $   68.2
  Accounts payable and accrued liabilities      207.3      181.6     165.8
  Accrued payroll and related taxes             270.9      243.3     218.2
  Accrued insurance                              31.5       31.3      22.5
  Income and other taxes                         61.7       56.0      46.5
                                             --------  ---------  --------
  Total current liabilities                     636.8      591.0     521.2

Noncurrent Liabilities
  Long-term debt                                    -          -      56.1
  Accrued insurance                              54.1       53.6      53.7
  Accrued retirement benefits                    90.2       85.4      77.7
  Other long-term liabilities                    14.2       14.6      15.5
                                             --------  ---------  --------
            Total noncurrent liabilities        158.5      153.6     203.0

Stockholders' Equity
  Common stock                                   40.1       40.1      40.1
  Treasury stock                                (70.8)     (70.9)   (106.7)
  Paid-in capital                                29.3       28.0      37.4
  Earnings invested in the business             598.7      597.6     569.5
  Accumulated other comprehensive income         34.4       29.0      25.5
                                             --------  ---------  --------
            Total stockholders' equity          631.7      623.8     565.8
                                             --------  ---------  --------

Total Liabilities and Stockholders' Equity   $1,427.0  $ 1,368.4  $1,290.0
                                             ========  =========  ========


STATISTICS:
 Working Capital                             $  384.6  $   367.6  $  359.9
 Current Ratio                                    1.6        1.6       1.7
 Debt-to-capital %                                9.4%      11.2%     18.0%
 Global Days Sales Outstanding                     52         49        51






                  KELLY SERVICES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE 13 WEEKS ENDED APRIL 3, 2011 AND APRIL 4, 2010
                                (UNAUDITED)
                         (In millions of dollars)

                                                            2011     2010
                                                          -------  -------

Cash flows from operating activities
   Net earnings (loss)                                    $   1.1  $  (2.0)
   Noncash adjustments:
     Depreciation and amortization                            8.3      9.1
     Provision for bad debts                                  1.2      0.1
     Stock-based compensation                                 1.4      1.1
     Other, net                                              (0.1)     0.2
   Changes in operating assets and liabilities              (16.9)   (27.4)
                                                          -------  -------

        Net cash from operating activities                   (5.0)   (18.9)
                                                          -------  -------

Cash flows from investing activities
   Capital expenditures                                      (2.5)    (1.4)
   Other investing activities                                   -      0.1
                                                          -------  -------

        Net cash from investing activities                   (2.5)    (1.3)
                                                          -------  -------

Cash flows from financing activities
   Net change in short-term borrowings                       48.3    (11.2)
   Repayment of debt                                        (62.9)       -
   Other financing activities                                (1.0)       -
                                                          -------  -------

        Net cash from financing activities                  (15.6)   (11.2)
                                                          -------  -------

Effect of exchange rates on cash and equivalents              2.4     (1.8)
                                                          -------  -------

Net change in cash and equivalents                          (20.7)   (33.2)
Cash and equivalents at beginning of period                  80.5     88.9
                                                          -------  -------


Cash and equivalents at end of period                     $  59.8  $  55.7
                                                          =======  =======






                  KELLY SERVICES, INC. AND SUBSIDIARIES
                          REVENUE FROM SERVICES
                                (UNAUDITED)
                         (In millions of dollars)

                                    First Quarter (Commercial, PT and OCG)
                                    --------------------------------------
                                                             % Change
                                                                  Constant
                                      2011      2010      US$     Currency
                                    --------- --------- --------  --------

Americas
  United States                     $   839.7 $   710.2     18.2%     18.2%
  Canada                                 59.4      51.6     15.1       9.2
  Mexico                                 25.1      19.0     32.1      25.0
  Puerto Rico                            22.1      14.7     49.6      49.6
                                    --------- ---------
Total Americas                          946.3     795.5     18.9      18.4

EMEA
  France                                 70.0      67.3      4.0       4.9
  Switzerland                            47.2      31.4     50.6      33.5
  Russia                                 34.2      23.3     46.8      43.6
  United Kingdom                         31.1      37.6    (17.4)    (19.9)
  Portugal                               20.6      18.4     12.3      12.8
  Germany                                20.3      16.3     24.7      25.5
  Italy                                  16.6      16.7     (0.8)     (0.5)
  Norway                                 15.1      13.9      8.8       6.1
  Other                                  23.2      19.2     20.7      20.3
                                    --------- ---------
Total EMEA                              278.3     244.1     14.0      11.3

APAC
  Australia                              36.4      27.6     31.7      18.4
  Singapore                              26.1      18.9     38.1      25.6
  Malaysia                               17.6      14.6     20.7       9.3
  India                                  17.6      13.7     28.5      26.8
  Other                                  16.8      16.0      4.6      (1.0)
                                    --------- ---------
Total APAC                              114.5      90.8     26.0      16.3

Total Kelly Services, Inc.          $ 1,339.1 $ 1,130.4     18.5%     16.7%
                                    ========= =========





                  KELLY SERVICES, INC. AND SUBSIDIARIES
                    RECONCILIATION OF NON-GAAP MEASURES
                                (UNAUDITED)
              (In millions of dollars except per share data)

                                             First Quarter
                                            --------------
                                             2011    2010
                                            ------- ------

 Pretax earnings (loss) from operations     $   1.6 $ (1.6)

 Restructuring charges (Note 1)                 4.0    4.4
                                            ------- ------

 Earnings from operations excluding
  restructuring charges                     $   5.6 $  2.8
                                            ======= ======


                                                    First Quarter
                                            ------------------------------
                                                 2011            2010
                                            --------------  --------------
                                                      Per             Per
                                            Amount   Share  Amount   Share
                                            ------- ------  ------  ------
 Net earnings (loss)                        $   1.1 $ 0.03  $ (2.0) $(0.06)

 Restructuring charges, net of taxes
  (Note 1)                                      4.0   0.11     3.6    0.10
                                            -------         ------

 Net earnings excluding restructuring
  charges, net of taxes                     $   5.1 $ 0.14  $  1.6  $ 0.05
                                            ======= ======  ======  ======



KELLY SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

(UNAUDITED)

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the restructuring charges is useful to understand the Company's fiscal 2011 financial performance and 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) In 2010, restructuring costs related primarily to severance and lease termination costs for branches in the EMEA and APAC Commercial segments that were in the process of closure at the end of 2009, as well as severance costs related to the corporate headquarters. In 2011, restructuring costs relate primarily to revisions of the estimated lease termination costs for EMEA Commercial branches that closed in prior years.

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