SOURCE: Kelly Services

Kelly Services

May 07, 2014 07:30 ET

Kelly Services® Reports 1st Quarter Results

TROY, MI--(Marketwired - May 7, 2014) - 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 %
                       

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