SOURCE: Kelly Services

Kelly Services

November 07, 2016 07:30 ET

Kelly Services® Reports Third Quarter 2016 Earnings and Announces EPS

TROY, MI--(Marketwired - November 07, 2016) -

Third Quarter Highlights

  • APAC Joint Venture completed
  • Total Revenue declines 8%; down 1% adjusted for APAC JV transaction
  • Operating earnings increase 13%; up 29% adjusted for APAC JV transaction
  • Earnings per share of $2.06 (Adjusted EPS of $0.44) versus $0.23 (Adjusted EPS of $0.19), a 132% increase on an adjusted basis

Kelly Services (NASDAQ: KELYA) (NASDAQ: KELYB), a global leader in providing workforce solutions, today announced results for the third quarter of 2016.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the third quarter of 2016 totaled $1.2 billion, a 7.6% decrease (a 7.1% decrease on a constant currency basis) compared to the corresponding quarter of 2015. During the third quarter of 2016, Kelly transferred its APAC staffing operations to the TS Kelly Asia Pacific joint venture and recorded a gain of $87.2 million. Kelly retains a 49% ownership interest in the newly formed joint venture. Excluding the APAC staffing operations from the third quarter of 2015, adjusted 2016 third quarter revenue was down 0.7% year over year (a 0.1% decrease on a constant currency basis).

Earnings from operations for the third quarter of 2016 totaled $18.8 million, compared to $16.6 million reported for the third quarter of 2015. Excluding the APAC staffing operations from the third quarter of 2015, adjusted earnings from operations were $14.5 million; therefore, Kelly's third quarter 2016 earnings increased 29% year-over-year on an adjusted basis.

Diluted earnings per share in the third quarter of 2016 were $2.06 compared to $0.23 per share in the third quarter of 2015. Excluding the gain from 2016 third quarter results and APAC staffing operations from 2015 third quarter results, adjusted earnings per share were $0.44 in the third quarter of 2016 and $0.19 in the third quarter of 2015.

Commenting on the third quarter, Camden stated, "Sorting through the financial complexity around the JV transaction, Kelly's third quarter performance reflects good operating leverage on basically flat revenue. We increased our gross profit rate, reduced expenses, and turned in healthy operating earnings and solid returns for our shareholders. Our U.S. Staffing segment showed competitive strength and agility in an uncertain economic environment, and our OCG business delivered year-over-year GP improvement. With the APAC JV now firmly in place, we are operating as a more focused, disciplined company relentlessly committed to profitability."

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 7 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Internet:
www.kellyservices.com

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

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 including TS Kelly Asia Pacific, 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.

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. In 2016, the Company is commemorating 70 years of industry leadership. Kelly® has a role in managing employment opportunities for more than one million workers around the globe by employing 550,000 of these individuals directly with the remaining workers engaged through its talent supply chain network of supplier partners. Revenue in 2015 was $5.5 billion. Visit kellyservices.com and connect with us on Facebook, LinkedIn, & Twitter.

KLYA-FIN

   
KELLY SERVICES, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF EARNINGS  
FOR THE 13 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015  
(UNAUDITED)  
(In millions of dollars except per share data)  
                 %  CC %  
   2016   2015   Change     Change  Change  
                          
Revenue from services  $1,247.8   $1,351.0   $(103.2 )   (7.6 )%(7.1 )%
                          
Cost of services   1,032.7    1,122.8    (90.1 )   (8.0 )   
                          
Gross profit   215.1    228.2    (13.1 )   (5.8 )(5.3 )
                          
Selling, general and administrative expenses   196.3    211.6    (15.3 )   (7.3 )(6.9 )
                          
Earnings from operations   18.8    16.6    2.2     13.1     
                          
Gain on investment in TS Kelly Asia Pacific   87.2    -    87.2     NM     
                          
Other expense, net   (0.4 )  -    (0.4 )   NM     
                          
Earnings before taxes   105.6    16.6    89.0     NM     
                          
Income tax expense   24.7    7.5    17.2     230.6     
                          
Net earnings  $80.9   $9.1   $71.8     NM %   
                          
Basic earnings per share  $2.08   $0.23   $1.85     NM %   
Diluted earnings per share  $2.06   $0.23   $1.83     NM %   
                          
                          
STATISTICS:                         
                          
Gross profit rate   17.2 %  16.9 %  0.3   pts.       
                          
Selling, general and administrative expenses:                         
  % of revenue   15.7    15.7    -           
  % of gross profit   91.3    92.7    (1.4 )         
                          
% Return:                         
 Earnings from operations   1.5    1.2    0.3           
 Earnings before taxes   8.5    1.2    7.3           
 Net earnings   6.5    0.7    5.8           
                          
Effective income tax rate   23.4 %  45.2 %  (21.8 ) pts.       
                          
Average number of shares outstanding (millions):                         
  Basic   38.1    37.9                
  Diluted   38.4    37.9                
                          
Shares adjusted for nonvested restricted awards (millions):                         
  Basic   39.0    38.8                
  Diluted   39.2    38.8                
                   
  
KELLY SERVICES, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF EARNINGS  
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015  
(UNAUDITED)  
(In millions of dollars except per share data)  
                 %  CC %  
   2016   2015   Change     Change  Change  
                          
Revenue from services  $3,972.4   $4,056.6   $(84.2 )   (2.1 )%(0.7 )%
                          
Cost of services   3,294.1    3,385.8    (91.7 )   (2.7 )   
                          
Gross profit   678.3    670.8    7.5     1.1  2.3  
                          
Selling, general and administrative expenses   634.9    630.6    4.3     0.7  1.8  
                          
Earnings from operations   43.4    40.2    3.2     7.9     
                          
Gain on investment in TS Kelly Asia Pacific   87.2    -    87.2     NM     
                          
Other expense, net   (1.4 )  (3.5 )  2.1     61.2     
                          
Earnings before taxes   129.2    36.7    92.5     252.3     
                          
Income tax expense   28.2    17.1    11.1     65.4     
                          
Net earnings  $101.0   $19.6   $81.4     414.7 %   
                          
Basic earnings per share  $2.59   $0.51   $2.08     NM %   
Diluted earnings per share  $2.58   $0.51   $2.07     NM %   
                          
                          
STATISTICS:                         
                          
Gross profit rate   17.1 %  16.5 %  0.6   pts.       
                          
Selling, general and administrative expenses:                         
  % of revenue   16.0    15.5    0.5           
  % of gross profit   93.6    94.0    (0.4 )         
                          
% Return:                         
 Earnings from operations   1.1    1.0    0.1           
 Earnings before taxes   3.3    0.9    2.4           
 Net earnings   2.5    0.5    2.0           
                          
Effective income tax rate   21.8 %  46.5 %  (24.7 ) pts.       
                          
Average number of shares outstanding (millions):                         
  Basic   38.0    37.8                
  Diluted   38.3    37.8                
                          
Shares adjusted for nonvested restricted awards (millions):                         
  Basic   39.0    38.8                
  Diluted   39.2    38.8                
                     
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
RESULTS OF OPERATIONS BY SEGMENT  
(UNAUDITED)  
(In millions of dollars)  
                    
   Third Quarter  
                    
           %     CC %  
   2016   2015   Change     Change  
AMERICAS                     
 Commercial                     
  Revenue from services  $603.7   $615.5   (1.9 )%   (1.3 )%
  Staffing fee-based income included in revenue from services   4.2    3.8   10.0     10.1  
  Gross profit   94.9    96.6   (1.8 )   (1.3 )
  Gross profit rate   15.7 %  15.7 % -   pts.    
 PT                     
  Revenue from services  $239.6   $242.8   (1.3 )%   (1.3 )%
  Staffing fee-based income included in revenue from services   4.4    4.7   (6.9 )   (6.9 )
  Gross profit   41.4    41.0   1.0     1.0  
  Gross profit rate   17.3 %  16.9 % 0.4   pts.    
 Total Americas                     
  Revenue from services  $843.3   $858.3   (1.8 )%   (1.3 )%
  Staffing fee-based income included in revenue from services   8.6    8.5   0.6     0.7  
  Gross profit   136.3    137.6   (1.0 )   (0.6 )
  Total SG&A expenses   112.2    113.7   (1.4 )   (1.2 )
  Earnings from operations   24.1    23.9   1.0        
                       
  Gross profit rate   16.2 %  16.0 % 0.2   pts.    
  Expense rates:                     
   % of revenue   13.3    13.2   0.1        
   % of gross profit   82.3    82.7   (0.4 )      
  Return on sales   2.9    2.8   0.1        
                      
EMEA                     
 Commercial                     
  Revenue from services  $197.6   $199.0   (0.8 )%   1.0 %
  Staffing fee-based income included in revenue from services   3.3    3.2   5.0     6.7  
  Gross profit   26.8    27.7   (3.5 )   (2.5 )
  Gross profit rate   13.6 %  13.9 % (0.3 ) pts.    
 PT                     
  Revenue from services  $41.7   $43.6   (4.3 )%   (2.9 )%
  Staffing fee-based income included in revenue from services   2.2    2.6   (16.1 )   (14.4 )
  Gross profit   8.2    9.4   (11.7 )   (10.6 )
  Gross profit rate   19.9 %  21.6 % (1.7 ) pts.    
 Total EMEA                     
  Revenue from services  $239.3   $242.6   (1.4 )%   0.3 %
  Staffing fee-based income included in revenue from services   5.5    5.8   (4.6 )   (2.9 )
  Gross profit   35.0    37.1   (5.6 )   (4.6 )
  Total SG&A expenses   30.6    31.8   (3.5 )   (2.0 )
  Earnings from operations   4.4    5.3   (17.8 )      
                      
  Gross profit rate   14.7 %  15.3 % (0.6 ) pts.    
  Expense rates:                     
   % of revenue   12.8    13.1   (0.3 )      
   % of gross profit   87.3    85.4   1.9        
  Return on sales   1.9    2.2   (0.3 )      
                  
 
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
                   
   Third Quarter
                   
           %    CC %  
   2016   2015   Change    Change  
OCG                    
 Revenue from services  $178.2   $171.8   3.7 %  3.9 %
 Gross profit   45.0    41.4   8.5    8.9  
 Total SG&A expenses   37.3    33.2   12.3    12.8  
 Earnings from operations   7.7    8.2   (7.0 )     
                     
 Gross profit rate   25.2 %  24.1 % 1.1  pts.    
 Expense rates:                    
  % of revenue   20.9    19.3   1.6       
  % of gross profit   83.0    80.2   2.8       
 Return on sales   4.3    4.8   (0.5 )     
                     
Corporate                   
 Total SG&A expenses  $17.4   $22.9   (24.4 )%     
               
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
RESULTS OF OPERATIONS BY SEGMENT  
(UNAUDITED)  
(In millions of dollars)  
                    
   September Year to Date  
                    
           %     CC %  
   2016   2015   Change     Change  
AMERICAS                     
 Commercial                     
  Revenue from services  $1,887.6   $1,908.2   (1.1 )%   0.2 %
  Staffing fee-based income included in revenue from services   11.4    10.8   5.5     6.1  
  Gross profit   295.9    290.3   1.9     2.9  
  Gross profit rate   15.7 %  15.2 % 0.5   pts.    
 PT                     
  Revenue from services  $718.3   $721.8   (0.5 )%   (0.4 )%
  Staffing fee-based income included in revenue from services   13.7    13.1   4.4     5.2  
  Gross profit   124.3    122.0   1.8     2.0  
  Gross profit rate   17.3 %  16.9 % 0.4   pts.    
 Total Americas                     
  Revenue from services  $2,605.9   $2,630.0   (0.9 )%   - %
  Staffing fee-based income included in revenue from services   25.1    23.9   4.9     5.6  
  Gross profit   420.2    412.3   1.9     2.7  
  SG&A expenses excluding restructuring charges   340.5    339.8   0.2     0.9  
  Restructuring charges   2.2    -   NM        
  Total SG&A expenses   342.7    339.8   0.8     1.5  
  Earnings from operations   77.5    72.5   7.0        
  Earnings from operations excluding restructuring charges   79.7    72.5   10.0        
                      
  Gross profit rate   16.1 %  15.7 % 0.4   pts.    
  Expense rates (excluding restructuring charges):                     
   % of revenue   13.1    12.9   0.2        
   % of gross profit   81.0    82.4   (1.4 )      
  Return on sales (excluding restructuring charges)   3.1    2.8   0.3        
                      
EMEA                     
 Commercial                     
  Revenue from services  $570.2   $573.0   (0.5 )%   2.3 %
  Staffing fee-based income included in revenue from services   10.4    9.9   6.0     10.0  
  Gross profit   77.5    79.1   (2.1 )   0.2  
  Gross profit rate   13.6 %  13.8 % (0.2 ) pts.    
 PT                     
  Revenue from services  $126.4   $126.8   (0.3 )%   2.1 %
  Staffing fee-based income included in revenue from services   7.3    7.7   (5.8 )   (2.1 )
  Gross profit   25.6    27.2   (5.7 )   (3.2 )
  Gross profit rate   20.3 %  21.5 % (1.2 ) pts.    
 Total EMEA                     
  Revenue from services  $696.6   $699.8   (0.5 )%   2.2 %
  Staffing fee-based income included in revenue from services   17.7    17.6   0.8     4.7  
  Gross profit   103.1    106.3   (3.0 )   (0.6 )
  SG&A expenses excluding restructuring charges   92.9    99.5   (6.5 )   (3.8 )
  Restructuring charges   1.2    -   NM        
  Total SG&A expenses   94.1    99.5   (5.3 )   (2.7 )
  Earnings from operations   9.0    6.8   30.5        
  Earnings from operations excluding restructuring charges   10.2    6.8   46.7        
                      
  Gross profit rate   14.8 %  15.2 % (0.4 ) pts.    
  Expense rates (excluding restructuring charges):                     
   % of revenue   13.4    14.2   (0.8 )      
   % of gross profit   90.1    93.5   (3.4 )      
  Return on sales (excluding restructuring charges)   1.5    1.0   0.5        
                
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
RESULTS OF OPERATIONS BY SEGMENT  
(UNAUDITED)  
(In millions of dollars)  
                   
   September Year to Date  
                   
           %    CC %  
   2016   2015   Change    Change  
OCG                    
 Revenue from services  $520.3   $486.3   7.0 %  7.5 %
 Gross profit   130.1    112.6   15.5    16.3  
 Total SG&A expenses   112.2    98.1   14.4    15.3  
 Earnings from operations   17.9    14.5   22.8       
                     
 Gross profit rate   25.0 %  23.1 % 1.9  pts.    
 Expense rates:                    
  % of revenue   21.6    20.2   1.4       
  % of gross profit   86.3    87.1   (0.8 )     
 Return on sales   3.4    3.0   0.4       
                     
Corporate                   
 Total SG&A expenses  $66.6   $61.1   8.8 %     
                
  
KELLY SERVICES, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(UNAUDITED)  
(In millions of dollars)  
              
   October 2, 2016   Jan. 3, 2016   September 27, 2015  
Current Assets                
 Cash and equivalents  $27.6   $42.2   $44.9  
 Trade accounts receivable, less allowances of $11.1, $10.5 and $9.7, respectively   
1,125.8
   
1,139.1
   
1,160.3
 
 Prepaid expenses and other current assets   53.0    45.8    49.0  
 Deferred taxes   -    -    35.0  
Total current assets   1,206.4    1,227.1    1,289.2  
                 
Noncurrent Assets                
 Property and equipment, net   80.5    88.9    88.3  
 Noncurrent deferred taxes   179.8    189.3    140.8  
 Goodwill, net   88.4    90.3    90.3  
 Investment in equity affiliate   113.6    9.4    9.4  
 Other assets   370.6    334.6    331.9  
Total noncurrent assets   832.9    712.5    660.7  
                 
Total Assets  $2,039.3   $1,939.6   $1,949.9  
                 
Current Liabilities                
 Short-term borrowings  $8.7   $55.5   $76.8  
 Accounts payable and accrued liabilities   408.7    405.5    385.2  
 Accrued payroll and related taxes   276.9    268.1    312.8  
 Accrued insurance   26.8    26.7    25.9  
 Income and other taxes   56.9    60.0    59.5  
Total current liabilities   778.0    815.8    860.2  
                 
Noncurrent Liabilities                
 Accrued insurance   40.2    40.0    42.2  
 Accrued retirement benefits   153.9    141.0    139.5  
 Other long-term liabilities   50.7    47.4    48.4  
Total noncurrent liabilities   244.8    228.4    230.1  
                 
Stockholders' Equity                
 Common stock   40.1    40.1    40.1  
 Treasury stock   (39.1 )  (44.3 )  (46.9 )
 Paid-in capital   26.2    25.4    26.7  
 Earnings invested in the business   906.8    813.5    781.3  
 Accumulated other comprehensive income   82.5    60.7    58.4  
Total stockholders' equity   1,016.5    895.4    859.6  
                 
Total Liabilities and Stockholders' Equity  $2,039.3   $1,939.6   $1,949.9  
                 
                 
STATISTICS:                
 Working Capital  $428.4   $411.3   $429.0  
 Current Ratio   1.6    1.5    1.5  
 Debt-to-capital %   0.9 %  5.8 %  8.2 %
 Global Days Sales Outstanding   56    54    57  
              
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015  
(UNAUDITED)  
(In millions of dollars)  
      
   2016   2015  
Cash flows from operating activities:           
 Net earnings  $101.0   $19.6  
 Noncash adjustments:           
  Depreciation and amortization   16.0    16.6  
  Provision for bad debts   6.1    3.3  
  Stock-based compensation   5.5    4.6  
  Gain on investment in TS Kelly Asia Pacific equity affiliate   (87.2 )  -  
  Other, net   (2.2 )  (0.7 )
 Changes in operating assets and liabilities   (13.1 )  (44.9 )
            
  Net cash from (used in) operating activities   26.1    (1.5 )
            
Cash flows from investing activities:           
 Capital expenditures   (7.8 )  (12.3 )
 Net cash proceeds from investment in TS Kelly Asia Pacific equity affiliate   18.8    -  
 Investment in TS Kelly equity affiliate   -    (0.5 )
 Other investing activities   (0.4 )  (0.4 )
            
  Net cash from (used in) investing activities   10.6    (13.2 )
            
Cash flows from financing activities:           
 Net change in short-term borrowings   (47.8 )  (13.8 )
 Dividend payments   (7.7 )  (5.7 )
 Other financing activities   0.4    0.2  
            
  Net cash used in financing activities   (55.1 )  (19.3 )
            
Effect of exchange rates on cash and equivalents   3.8    (4.2 )
            
Net change in cash and equivalents   (14.6 )  (38.2 )
Cash and equivalents at beginning of period   42.2    83.1  
            
            
Cash and equivalents at end of period  $27.6   $44.9  
         
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
REVENUE FROM SERVICES  
(UNAUDITED)  
(In millions of dollars)  
                
   Third Quarter (Commercial, PT and OCG)  
                
         %   CC %  
   2016  2015  Change   Change  
                  
Americas                 
 United States  $900.3  $899.8  0.1 % 0.1 %
 Canada   34.9   37.9  (7.8 ) (8.5 )
 Mexico   27.6   31.3  (12.3 ) 0.4  
 Puerto Rico   20.9   23.8  (12.2 ) (12.2 )
 Brazil   13.3   10.4  27.9   28.1  
Total Americas   997.0   1,003.2  (0.6 ) (0.3 )
                  
EMEA                 
 France   60.8   63.1  (3.7 ) (4.1 )
 Switzerland   55.0   58.0  (5.2 ) (3.9 )
 Portugal   39.2   33.5  16.9   16.5  
 United Kingdom   19.5   27.7  (29.3 ) (16.4 )
 Russia   18.4   17.0  7.9   11.2  
 Germany   14.2   15.4  (7.7 ) (8.1 )
 Italy   13.6   14.0  (2.8 ) (3.1 )
 Norway   8.4   10.1  (17.3 ) (15.9 )
 Other   17.4   11.5  50.8   50.3  
Total EMEA   246.5   250.3  (1.5 ) 0.2  
                  
APAC                 
 Australia   3.6   28.8  (87.5 ) (88.0 )
 Singapore   0.1   32.6  (99.7 ) (99.7 )
 New Zealand   0.1   9.4  (99.1 ) (99.2 )
 Malaysia   0.1   14.0  (99.5 ) (99.5 )
 Other   0.4   12.7  (96.5 ) (96.4 )
Total APAC   4.3   97.5  (95.6 ) (95.7 )
                  
Total Kelly Services, Inc.  $1,247.8  $1,351.0  (7.6 )% (7.1 )%
                  
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
REVENUE FROM SERVICES  
(UNAUDITED)  
(In millions of dollars)  
                
   September Year to Date (Commercial, PT and OCG)  
                
         %   CC %  
   2016  2015  Change   Change  
                  
Americas                 
 United States  $2,765.8  $2,706.4  2.2 % 2.2 %
 Canada   105.2   122.2  (13.9 ) (9.9 )
 Mexico   79.6   95.2  (16.4 ) (1.6 )
 Puerto Rico   65.9   75.2  (12.4 ) (12.4 )
 Brazil   33.5   34.2  (1.8 ) 16.7  
Total Americas   3,050.0   3,033.2  0.6   1.4  
                  
EMEA                 
 France   178.6   180.4  (1.0 ) (1.0 )
 Switzerland   156.2   160.7  (2.8 ) (0.1 )
 Portugal   111.6   98.7  13.1   13.0  
 United Kingdom   66.2   78.4  (15.5 ) (7.2 )
 Russia   49.0   57.4  (14.8 ) (2.2 )
 Germany   45.3   43.1  5.0   5.0  
 Italy   42.1   39.5  6.5   6.3  
 Norway   24.4   29.5  (17.2 ) (11.8 )
 Other   45.9   32.8  39.8   40.1  
Total EMEA   719.3   720.5  (0.2 ) 2.5  
                  
APAC                 
 Singapore   64.9   96.9  (33.0 ) (31.6 )
 Australia   64.2   92.1  (30.3 ) (26.2 )
 Malaysia   27.8   45.4  (38.9 ) (31.4 )
 New Zealand   19.3   30.2  (36.1 ) (29.8 )
 Other   26.9   38.3  (29.5 ) (24.7 )
Total APAC   203.1   302.9  (32.9 ) (28.9 )
                  
Total Kelly Services, Inc.  $3,972.4  $4,056.6  (2.1 )% (0.7 )%
                  
   
KELLY SERVICES, INC. AND SUBSIDIARIES  
RECONCILIATION OF NON-GAAP MEASURES  
FOR THE 13 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015  
(UNAUDITED)  
(In millions of dollars except per share data)  
                      
   2016  2015        
   As Reported  Gain on Investment in Equity Affiliate
(Note 1)
  Adjusted Earnings  Adjusted Earnings  % Change  CC % Change  
                          
Revenue from services  $1,247.8  $-   $1,247.8  $1,257.0  (0.7 )%(0.1 )%
                          
Cost of services   1,032.7   -    1,032.7   1,042.6  (1.0 )   
                          
Gross profit   215.1   -    215.1   214.4  0.3  0.8  
                          
SG&A expenses   196.3   -    196.3   199.9  (1.8 )(1.4 )
                          
Earnings from operations   18.8   -    18.8   14.5  29.4     
                          
Gain on investment in TS Kelly Asia Pacific   87.2   (87.2 )  -   -  -     
                          
Other (expense) income, net   (0.4 ) -    (0.4 ) 0.1  NM     
                          
Earnings before taxes   105.6   (87.2 )  18.4   14.6  26.7     
                          
Inc. tax expense (benefit)   24.7   (23.5 )  1.2   7.1  (83.1 )   
                          
Net earnings  $80.9  $(63.7 ) $17.2  $7.5  130.7 %   
                          
Earnings per share:                         
 Basic  $2.08  $(1.63 ) $0.44  $0.19  131.6 %   
 Diluted  $2.06  $(1.62 ) $0.44  $0.19  131.6 %   
                   
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.
 
 
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
FOR THE 13 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015
(UNAUDITED)
(In millions of dollars except per share data)
    
   2015
   As Reported  Disposal of APAC Businesses
(Note 2)
  Adjusted Earnings
              
Revenue from services  $1,351.0  $(94.0 ) $1,257.0
              
Cost of services   1,122.8   (80.2 )  1,042.6
              
Gross profit   228.2   (13.8 )  214.4
              
SG&A expenses   211.6   (11.7 )  199.9
              
Earnings from operations   16.6   (2.1 )  14.5
              
Other income, net   -   0.1    0.1
              
Earnings before taxes   16.6   (2.0 )  14.6
              
Inc. tax expense (benefit)   7.5   (0.4 )  7.1
              
Net earnings  $9.1  $(1.6 ) $7.5
              
Earnings per share:             
 Basic  $0.23  $(0.04 ) $0.19
 Diluted  $0.23  $(0.04 ) $0.19
              
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.
 
  
KELLY SERVICES, INC. AND SUBSIDIARIES  
RECONCILIATION OF NON-GAAP MEASURES  
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015  
(UNAUDITED)  
(In millions of dollars except per share data)  
                         
   2016  2015        
   As Reported  Gain on Investment in Equity Affiliate
(Note 1)
  Restructuring Charges
(Note 3)
 Adjusted Earnings  Adjusted Earnings  % Change  CC % Change  
                              
Revenue from services  $3,972.4  $-   $-  $3,972.4  $3,962.6  0.2 %1.7 %
                              
Cost of services   3,294.1   -    -   3,294.1   3,305.6  (0.3 )   
                              
Gross profit   678.3   -    -   678.3   657.0  3.2  4.5  
                              
SG&A expenses   634.9   -    (3.4 ) 631.5   618.9  2.0  3.2  
                              
Earnings from operations   43.4   -    3.4   46.8   38.1  22.8     
                              
Gain on investment in TS Kelly Asia Pacific   87.2   (87.2 )  -   -   -  -     
                              
Other expense, net   (1.4 ) -    -   (1.4 ) (3.4 )60.3     
                              
Earnings before taxes   129.2   (87.2 )  3.4   45.4   34.7  31.1     
                              
Inc. tax expense (benefit)   28.2   (23.5 )  0.9   5.6   16.7  (66.6 )   
                              
Net earnings  $101.0  $(63.7 ) $2.5  $39.8  $18.0  121.5 %   
                              
Earnings per share:                             
 Basic  $2.59  $(1.63 ) $0.07  $1.02  $0.46  121.7 %   
 Diluted  $2.58  $(1.63 ) $0.07  $1.02  $0.46  121.7 %   
                              
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.
 
  
KELLY SERVICES, INC. AND SUBSIDIARIES  
RECONCILIATION OF NON-GAAP MEASURES  
FOR THE 39 WEEKS ENDED OCTOBER 2, 2016 AND SEPTEMBER 27, 2015  
(UNAUDITED)  
(In millions of dollars except per share data)  
              
   2015  
   As Reported   Disposal of APAC Businesses
(Note 2)
  Adjusted Earnings  
                 
Revenue from services  $4,056.6   $(94.0 ) $3,962.6  
                 
Cost of services   3,385.8    (80.2 )  3,305.6  
                 
Gross profit   670.8    (13.8 )  657.0  
                 
SG&A expenses   630.6    (11.7 )  618.9  
                 
Earnings from operations   40.2    (2.1 )  38.1  
                 
Other (expense) income, net   (3.5 )  0.1    (3.4 )
                 
Earnings before taxes   36.7    (2.0 )  34.7  
                 
Inc. tax expense (benefit)   17.1    (0.4 )  16.7  
                 
Net earnings  $19.6   $(1.6 ) $18.0  
                 
Earnings per share:                
 Basic  $0.51   $(0.04 ) $0.46  
 Diluted  $0.51   $(0.04 ) $0.46  
                 
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.
 

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 gain on investment in equity affiliate, 2016 restructuring charges and disposal of APAC businesses is useful to understand the Company's fiscal 2016 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) 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.
  
 (2) Disposal of APAC businesses represents the 2015 operational results of business contributed to TS Kelly Asia Pacific in the third quarter of 2016.
  
 (3) Restructuring charges in 2016 include costs related to actions during the second quarter in the Americas and EMEA designed to increase operational efficiency and align our staffing operations with opportunities for growth within their markets.
  

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