þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 38-1510762 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
2
Item 1. | Financial Statements |
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
Oct. 2, 2011 | Oct. 3, 2010 | Oct. 2, 2011 | Oct. 3, 2010 | |||||||||||||
Revenue from services |
$ | 1,409.8 | $ | 1,284.7 | $ | 4,154.7 | $ | 3,624.5 | ||||||||
Cost of services |
1,181.2 | 1,077.5 | 3,487.8 | 3,046.4 | ||||||||||||
Gross profit |
228.6 | 207.2 | 666.9 | 578.1 | ||||||||||||
Selling, general and
administrative expenses |
206.5 | 192.9 | 621.9 | 555.4 | ||||||||||||
Asset impairments |
| | | 1.5 | ||||||||||||
Earnings from operations |
22.1 | 14.3 | 45.0 | 21.2 | ||||||||||||
Other income (expense), net |
1.0 | (1.5 | ) | (0.1 | ) | (4.7 | ) | |||||||||
Earnings from continuing operations before taxes |
23.1 | 12.8 | 44.9 | 16.5 | ||||||||||||
Income taxes |
3.4 | 3.2 | 4.1 | 5.0 | ||||||||||||
Earnings from continuing operations |
19.7 | 9.6 | 40.8 | 11.5 | ||||||||||||
Loss from discontinued operations, net of tax |
| | (1.2 | ) | | |||||||||||
Net earnings |
$ | 19.7 | $ | 9.6 | $ | 39.6 | $ | 11.5 | ||||||||
Basic earnings (loss) per share: |
||||||||||||||||
Earnings from continuing operations |
$ | 0.52 | $ | 0.26 | $ | 1.09 | $ | 0.32 | ||||||||
Loss from discontinued operations |
$ | | $ | | $ | (0.03 | ) | $ | | |||||||
Net earnings |
$ | 0.52 | $ | 0.26 | $ | 1.05 | $ | 0.32 | ||||||||
Diluted earnings (loss) per share: |
||||||||||||||||
Earnings from continuing operations |
$ | 0.52 | $ | 0.26 | $ | 1.09 | $ | 0.32 | ||||||||
Loss from discontinued operations |
$ | | $ | | $ | (0.03 | ) | $ | | |||||||
Net earnings |
$ | 0.52 | $ | 0.26 | $ | 1.05 | $ | 0.32 | ||||||||
Dividends per share |
$ | 0.05 | $ | | $ | 0.05 | $ | | ||||||||
Average shares outstanding (millions): |
||||||||||||||||
Basic |
36.8 | 36.7 | 36.8 | 35.9 | ||||||||||||
Diluted |
36.8 | 36.7 | 36.8 | 35.9 |
3
October 2, 2011 | January 2, 2011 | |||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and equivalents |
$ | 73.5 | $ | 80.5 | ||||
Trade accounts receivable, less allowances of $13.7 and $12.3, respectively |
939.9 | 810.9 | ||||||
Prepaid expenses and other current assets |
53.7 | 44.8 | ||||||
Deferred taxes |
27.0 | 22.4 | ||||||
Total current assets |
1,094.1 | 958.6 | ||||||
PROPERTY AND EQUIPMENT: |
||||||||
Property and equipment |
323.9 | 319.3 | ||||||
Accumulated depreciation |
(232.3 | ) | (215.3 | ) | ||||
Net property and equipment |
91.6 | 104.0 | ||||||
NONCURRENT DEFERRED TAXES |
89.6 | 84.0 | ||||||
GOODWILL, NET |
67.3 | 67.3 | ||||||
OTHER ASSETS |
145.6 | 154.5 | ||||||
TOTAL ASSETS |
$ | 1,488.2 | $ | 1,368.4 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Short-term borrowings and current portion of long-term debt |
$ | 79.0 | $ | 78.8 | ||||
Accounts payable and accrued liabilities |
227.7 | 181.6 | ||||||
Accrued payroll and related taxes |
283.0 | 243.3 | ||||||
Accrued insurance |
31.4 | 31.3 | ||||||
Income and other taxes |
60.0 | 56.0 | ||||||
Total current liabilities |
681.1 | 591.0 | ||||||
NONCURRENT LIABILITIES: |
||||||||
Accrued insurance |
53.7 | 53.6 | ||||||
Accrued retirement benefits |
82.8 | 85.4 | ||||||
Other long-term liabilities |
13.6 | 14.6 | ||||||
Total noncurrent liabilities |
150.1 | 153.6 | ||||||
STOCKHOLDERS EQUITY: |
||||||||
Capital stock, $1.00 par value |
||||||||
Class A common stock, shares issued 36.6 million at 2011 and 2010 |
36.6 | 36.6 | ||||||
Class B common stock, shares issued 3.5 million at 2011 and 2010 |
3.5 | 3.5 | ||||||
Treasury stock, at cost |
||||||||
Class A common stock, 3.3 million shares at 2011 and
3.4 million at 2010 |
(68.0 | ) | (70.3 | ) | ||||
Class B common stock |
(0.6 | ) | (0.6 | ) | ||||
Paid-in capital |
29.3 | 28.0 | ||||||
Earnings invested in the business |
635.3 | 597.6 | ||||||
Accumulated other comprehensive income |
20.9 | 29.0 | ||||||
Total stockholders equity |
657.0 | 623.8 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 1,488.2 | $ | 1,368.4 | ||||
4
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
Oct. 2, | Oct. 3, | Oct. 2, | Oct. 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Capital Stock |
||||||||||||||||
Class A common stock |
||||||||||||||||
Balance at beginning of period |
$ | 36.6 | $ | 36.6 | $ | 36.6 | $ | 36.6 | ||||||||
Conversions from Class B |
| | | | ||||||||||||
Balance at end of period |
36.6 | 36.6 | 36.6 | 36.6 | ||||||||||||
Class B common stock |
||||||||||||||||
Balance at beginning of period |
3.5 | 3.5 | 3.5 | 3.5 | ||||||||||||
Conversions to Class A |
| | | | ||||||||||||
Balance at end of period |
3.5 | 3.5 | 3.5 | 3.5 | ||||||||||||
Treasury Stock |
||||||||||||||||
Class A common stock |
||||||||||||||||
Balance at beginning of period |
(68.1 | ) | (70.7 | ) | (70.3 | ) | (106.6 | ) | ||||||||
Sale of stock, exercise of stock options,
restricted stock awards and other |
0.1 | 0.1 | 2.3 | 36.0 | ||||||||||||
Balance at end of period |
(68.0 | ) | (70.6 | ) | (68.0 | ) | (70.6 | ) | ||||||||
Class B common stock |
||||||||||||||||
Balance at beginning of period |
(0.6 | ) | (0.6 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Exercise of stock options, restricted stock
awards and other |
| | | | ||||||||||||
Balance at end of period |
(0.6 | ) | (0.6 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Paid-in Capital |
||||||||||||||||
Balance at beginning of period |
28.0 | 26.8 | 28.0 | 36.9 | ||||||||||||
Sale of stock, exercise of stock options,
restricted stock awards and other |
1.3 | 0.7 | 1.3 | (9.4 | ) | |||||||||||
Balance at end of period |
29.3 | 27.5 | 29.3 | 27.5 | ||||||||||||
Earnings Invested in the Business |
||||||||||||||||
Balance at beginning of period |
617.5 | 573.4 | 597.6 | 571.5 | ||||||||||||
Net earnings |
19.7 | 9.6 | 39.6 | 11.5 | ||||||||||||
Dividends |
(1.9 | ) | | (1.9 | ) | | ||||||||||
Balance at end of period |
635.3 | 583.0 | 635.3 | 583.0 | ||||||||||||
Accumulated Other Comprehensive Income |
||||||||||||||||
Balance at beginning of period |
40.3 | 17.7 | 29.0 | 25.1 | ||||||||||||
Foreign currency translation adjustments, net of tax |
(18.8 | ) | 11.6 | (7.0 | ) | 2.5 | ||||||||||
Unrealized (losses) gains on investments, net of tax |
(0.6 | ) | (0.4 | ) | (1.1 | ) | 1.3 | |||||||||
Balance at end of period |
20.9 | 28.9 | 20.9 | 28.9 | ||||||||||||
Stockholders Equity at end of period |
$ | 657.0 | $ | 608.3 | $ | 657.0 | $ | 608.3 | ||||||||
Comprehensive Income |
||||||||||||||||
Net earnings |
$ | 19.7 | $ | 9.6 | $ | 39.6 | $ | 11.5 | ||||||||
Foreign currency translation adjustments, net of tax |
(17.3 | ) | 11.6 | (5.5 | ) | 2.5 | ||||||||||
Unrealized (losses) gains on investments, net of tax |
(0.6 | ) | (0.4 | ) | (1.1 | ) | 1.3 | |||||||||
Reclassification adjustments included in net earnings |
(1.5 | ) | | (1.5 | ) | | ||||||||||
Comprehensive Income |
$ | 0.3 | $ | 20.8 | $ | 31.5 | $ | 15.3 | ||||||||
5
39 Weeks Ended | ||||||||
Oct. 2, | Oct. 3, | |||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ | 39.6 | $ | 11.5 | ||||
Noncash adjustments: |
||||||||
Impairment of assets |
| 1.5 | ||||||
Depreciation and amortization |
23.9 | 26.5 | ||||||
Provision for bad debts |
3.5 | 1.0 | ||||||
Stock-based compensation |
3.5 | 2.2 | ||||||
Other, net |
(1.5 | ) | 1.0 | |||||
Changes in operating assets and liabilities |
(63.4 | ) | (43.6 | ) | ||||
Net cash from operating activities |
5.6 | 0.1 | ||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(10.0 | ) | (5.9 | ) | ||||
Settlement of forward exchange contracts |
0.7 | | ||||||
Other investing activities |
0.3 | 0.5 | ||||||
Net cash from investing activities |
(9.0 | ) | (5.4 | ) | ||||
Cash flows from financing activities: |
||||||||
Net change in short-term borrowings |
61.9 | (12.8 | ) | |||||
Repayment of debt |
(62.9 | ) | (7.3 | ) | ||||
Dividend payments |
(1.9 | ) | | |||||
Sale of stock and other financing activities |
(1.0 | ) | 24.3 | |||||
Net cash from financing activities |
(3.9 | ) | 4.2 | |||||
Effect of exchange rates on cash and equivalents |
0.3 | (0.6 | ) | |||||
Net change in cash and equivalents |
(7.0 | ) | (1.7 | ) | ||||
Cash and equivalents at beginning of period |
80.5 | 88.9 | ||||||
Cash and equivalents at end of period |
$ | 73.5 | $ | 87.2 | ||||
6
Fair Value Measurements on a Recurring Basis | ||||||||||||||||
As of October 2, 2011 | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(In millions of dollars) | ||||||||||||||||
Money market funds |
$ | 1.5 | $ | 1.5 | $ | | $ | | ||||||||
Available-for-sale investment |
28.0 | 28.0 | | | ||||||||||||
Total assets at fair value |
$ | 29.5 | $ | 29.5 | $ | | $ | | ||||||||
Fair Value Measurements on a Recurring Basis | ||||||||||||||||
As of January 2, 2011 | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(In millions of dollars) | ||||||||||||||||
Money market funds |
$ | 4.1 | $ | 4.1 | $ | | $ | | ||||||||
Available-for-sale investment |
27.8 | 27.8 | | | ||||||||||||
Forward exchange contracts |
0.7 | | 0.7 | | ||||||||||||
Total assets at fair value |
$ | 32.6 | $ | 31.9 | $ | 0.7 | $ | | ||||||||
7
8
Balance at beginning of year |
$ | 4.7 | ||
Amounts charged (credited) to operations |
4.0 | |||
Reductions for cash payments |
(1.1 | ) | ||
Balance at April 3, 2011 |
7.6 | |||
Amounts charged (credited) to operations |
(0.6 | ) | ||
Reductions for cash payments |
(0.4 | ) | ||
Balance at July 3, 2011 |
6.6 | |||
Amounts charged (credited) to operations |
(0.6 | ) | ||
Reductions for cash payments |
(0.6 | ) | ||
Balance at October 2, 2011 |
$ | 5.4 | ||
9
| The Company must not allow its ratio of earnings before interest, taxes, depreciation, amortization and certain cash and non-cash charges that are non-recurring in nature (EBITDA) to interest expense (Interest Coverage Ratio) for the last twelve months to be below 4.0 to 1.0 as of the end of any fiscal quarter ending prior to the fourth quarter of 2012 and 5.0 to 1.0 thereafter. | ||
| The Company must keep its ratio of total indebtedness to the sum of net worth and total indebtedness below 0.4 to 1.0 at all times. | ||
| Dividends, stock buybacks and similar transactions are limited based on the Interest Coverage Ratio. When the Interest Coverage Ratio is below 5.0 to 1.0, the Company may pay up to $20 million in aggregate over the four most recent fiscal quarters including the current quarter; when the Interest Coverage Ratio is above 5.0 to 1.0, the Company may pay up to $30 million in aggregate over the four most recent fiscal quarters including the current quarter. | ||
| The Company must adhere to other operating restrictions relating to the conduct of business, such as certain limitations on asset sales and the type and scope of investments. |
10
11
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Earnings from continuing operations |
$ | 19.7 | $ | 9.6 | $ | 40.8 | $ | 11.5 | ||||||||
Less: Earnings allocated to participating securities |
(0.5 | ) | (0.1 | ) | (0.9 | ) | (0.1 | ) | ||||||||
Earnings from continuing operations available to
common shareholders |
$ | 19.2 | $ | 9.5 | $ | 39.9 | $ | 11.4 | ||||||||
Loss from discontinued operations |
$ | | $ | | $ | (1.2 | ) | $ | | |||||||
Less: Loss allocated to participating securities |
| | | | ||||||||||||
Loss from discontinued operations available to
common shareholders |
$ | | $ | | $ | (1.2 | ) | $ | | |||||||
Net earnings |
$ | 19.7 | $ | 9.6 | $ | 39.6 | $ | 11.5 | ||||||||
Less: Earnings allocated to participating securities |
(0.5 | ) | (0.1 | ) | (0.9 | ) | (0.1 | ) | ||||||||
Net earnings available to common shareholders |
$ | 19.2 | $ | 9.5 | $ | 38.7 | $ | 11.4 | ||||||||
Basic earnings (loss) per share on common stock: |
||||||||||||||||
Earnings from continuing operations |
$ | 0.52 | $ | 0.26 | $ | 1.09 | $ | 0.32 | ||||||||
Loss from discontinued operations |
$ | | $ | | $ | (0.03 | ) | $ | | |||||||
Net earnings |
$ | 0.52 | $ | 0.26 | $ | 1.05 | $ | 0.32 | ||||||||
Diluted earnings (loss) per share on common stock: |
||||||||||||||||
Earnings from continuing operations |
$ | 0.52 | $ | 0.26 | $ | 1.09 | $ | 0.32 | ||||||||
Loss from discontinued operations |
$ | | $ | | $ | (0.03 | ) | $ | | |||||||
Net earnings |
$ | 0.52 | $ | 0.26 | $ | 1.05 | $ | 0.32 | ||||||||
Average common shares outstanding (millions) |
||||||||||||||||
Basic |
36.8 | 36.7 | 36.8 | 35.9 | ||||||||||||
Diluted |
36.8 | 36.7 | 36.8 | 35.9 |
12
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions of dollars) | (In millions of dollars) | |||||||||||||||
Interest income |
$ | 0.3 | $ | 0.2 | $ | 0.8 | $ | 0.6 | ||||||||
Interest expense |
(0.7 | ) | (1.4 | ) | (2.6 | ) | (4.4 | ) | ||||||||
Dividend income |
| | 0.2 | 0.2 | ||||||||||||
Foreign exchange gains (losses) |
1.5 | (0.3 | ) | 1.6 | (1.1 | ) | ||||||||||
Other |
(0.1 | ) | | (0.1 | ) | | ||||||||||
Other income (expense), net |
$ | 1.0 | $ | (1.5 | ) | $ | (0.1 | ) | $ | (4.7 | ) | |||||
13
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions of dollars) | (In millions of dollars) | |||||||||||||||
Revenue from Services: |
||||||||||||||||
Americas Commercial |
$ | 661.7 | $ | 633.3 | $ | 1,985.3 | $ | 1,781.9 | ||||||||
Americas PT |
250.8 | 233.6 | 739.1 | 659.1 | ||||||||||||
Total Americas Commercial and PT |
912.5 | 866.9 | 2,724.4 | 2,441.0 | ||||||||||||
EMEA Commercial |
261.0 | 228.1 | 751.3 | 642.8 | ||||||||||||
EMEA PT |
46.8 | 37.1 | 134.0 | 106.4 | ||||||||||||
Total EMEA Commercial and PT |
307.8 | 265.2 | 885.3 | 749.2 | ||||||||||||
APAC Commercial |
101.8 | 88.7 | 303.8 | 253.3 | ||||||||||||
APAC PT |
14.1 | 8.2 | 39.1 | 23.6 | ||||||||||||
Total APAC Commercial and PT |
115.9 | 96.9 | 342.9 | 276.9 | ||||||||||||
OCG |
80.7 | 64.1 | 222.9 | 179.8 | ||||||||||||
Less: Intersegment revenue |
(7.1 | ) | (8.4 | ) | (20.8 | ) | (22.4 | ) | ||||||||
Consolidated Total |
$ | 1,409.8 | $ | 1,284.7 | $ | 4,154.7 | $ | 3,624.5 | ||||||||
14
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions of dollars) | (In millions of dollars) | |||||||||||||||
Earnings (Loss) from Operations: |
||||||||||||||||
Americas Commercial |
$ | 21.8 | $ | 23.2 | $ | 61.5 | $ | 54.3 | ||||||||
Americas PT |
12.0 | 13.7 | 30.9 | 34.0 | ||||||||||||
Total Americas Commercial and PT |
33.8 | 36.9 | 92.4 | 88.3 | ||||||||||||
EMEA Commercial |
6.5 | 4.8 | 11.1 | 3.9 | ||||||||||||
EMEA PT |
1.6 | 0.3 | 3.3 | 0.7 | ||||||||||||
Total EMEA Commercial and PT |
8.1 | 5.1 | 14.4 | 4.6 | ||||||||||||
APAC Commercial |
0.6 | 1.0 | 1.2 | 3.0 | ||||||||||||
APAC PT |
(0.1 | ) | (0.5 | ) | (1.6 | ) | (1.9 | ) | ||||||||
Total APAC Commercial and PT |
0.5 | 0.5 | (0.4 | ) | 1.1 | |||||||||||
OCG |
(0.2 | ) | (4.2 | ) | (3.4 | ) | (14.5 | ) | ||||||||
Corporate |
(20.1 | ) | (24.0 | ) | (58.0 | ) | (58.3 | ) | ||||||||
Consolidated Total |
$ | 22.1 | $ | 14.3 | $ | 45.0 | $ | 21.2 | ||||||||
15
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
| We achieved year-over-year revenue growth in all business segments. |
| Our gross profit rate improved slightly to 16.2% for the quarter compared to the third quarter of 2010. |
| Diluted earnings per share totaled $0.52, compared to $0.26 last year. |
Total Company - Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 1,409.8 | $ | 1,284.7 | 9.7 | % | 6.1 | % | ||||||||
Fee-based income (included in revenue) |
36.7 | 24.9 | 48.5 | 40.1 | ||||||||||||
Gross profit |
228.6 | 207.2 | 10.4 | 6.3 | ||||||||||||
SG&A expenses excluding restructuring charges |
207.1 | 190.1 | 9.0 | |||||||||||||
Restructuring charges |
(0.6 | ) | 2.8 | (120.7 | ) | |||||||||||
Total SG&A expenses |
206.5 | 192.9 | 7.1 | 3.0 | ||||||||||||
Earnings from operations |
22.1 | 14.3 | 54.7 | |||||||||||||
Gross profit rate |
16.2 | % | 16.1 | % | 0.1 | pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
14.7 | 14.8 | (0.1 | ) | ||||||||||||
% of gross profit |
90.6 | 91.7 | (1.1 | ) | ||||||||||||
Operating margin |
1.6 | 1.1 | 0.5 |
16
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 661.7 | $ | 633.3 | 4.5 | % | 3.8 | % | ||||||||
Fee-based income (included in revenue) |
3.2 | 2.2 | 47.7 | 46.3 | ||||||||||||
Gross profit |
93.9 | 92.3 | 1.7 | 1.1 | ||||||||||||
SG&A expenses |
72.1 | 69.1 | 4.3 | 3.7 | ||||||||||||
Earnings from operations |
21.8 | 23.2 | (5.9 | ) | ||||||||||||
Gross profit rate |
14.2 | % | 14.6 | % | (0.4 | )pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
10.9 | 10.9 | | |||||||||||||
% of gross profit |
76.7 | 74.8 | 1.9 | |||||||||||||
Operating margin |
3.3 | 3.7 | (0.4 | ) |
17
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 250.8 | $ | 233.6 | 7.4 | % | 7.3 | % | ||||||||
Fee-based income (included in revenue) |
3.2 | 2.2 | 48.1 | 47.7 | ||||||||||||
Gross profit |
38.0 | 37.2 | 2.0 | 1.9 | ||||||||||||
SG&A expenses |
26.0 | 23.5 | 10.6 | 10.4 | ||||||||||||
Earnings from operations |
12.0 | 13.7 | (12.6 | ) | ||||||||||||
Gross profit rate |
15.1 | % | 15.9 | % | (0.8 | )pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
10.4 | 10.1 | 0.3 | |||||||||||||
% of gross profit |
68.4 | 63.1 | 5.3 | |||||||||||||
Operating margin |
4.8 | 5.9 | (1.1 | ) |
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 261.0 | $ | 228.1 | 14.4 | % | 2.8 | % | ||||||||
Fee-based income (included in revenue) |
6.5 | 4.5 | 45.2 | 33.1 | ||||||||||||
Gross profit |
42.2 | 37.2 | 13.4 | 1.7 | ||||||||||||
SG&A expenses excluding restructuring charges |
36.3 | 32.4 | 11.8 | |||||||||||||
Restructuring charges |
(0.6 | ) | | NM | ||||||||||||
Total SG&A expenses |
35.7 | 32.4 | 10.0 | (1.7 | ) | |||||||||||
Earnings from operations |
6.5 | 4.8 | 36.7 | |||||||||||||
Gross profit rate |
16.2 | % | 16.3 | % | (0.1 | )pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
13.9 | 14.2 | (0.3 | ) | ||||||||||||
% of gross profit |
86.0 | 87.2 | (1.2 | ) | ||||||||||||
Operating margin |
2.5 | 2.1 | 0.4 |
18
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 46.8 | $ | 37.1 | 26.3 | % | 14.1 | % | ||||||||
Fee-based income (included in revenue) |
5.3 | 3.6 | 45.9 | 34.5 | ||||||||||||
Gross profit |
12.7 | 9.6 | 31.6 | 19.9 | ||||||||||||
SG&A expenses |
11.1 | 9.3 | 20.2 | 8.3 | ||||||||||||
Earnings from operations |
1.6 | 0.3 | 312.1 | |||||||||||||
Gross profit rate |
27.1 | % | 26.0 | % | 1.1 | pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
23.8 | 25.0 | (1.2 | ) | ||||||||||||
% of gross profit |
87.7 | 96.1 | (8.4 | ) | ||||||||||||
Operating margin |
3.3 | 1.0 | 2.3 |
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 101.8 | $ | 88.7 | 14.7 | % | 4.5 | % | ||||||||
Fee-based income (included in revenue) |
3.8 | 3.0 | 28.3 | 17.2 | ||||||||||||
Gross profit |
14.7 | 12.4 | 18.8 | 7.6 | ||||||||||||
SG&A expenses |
14.1 | 11.4 | 23.5 | 11.4 | ||||||||||||
Earnings from operations |
0.6 | 1.0 | (35.5 | ) | ||||||||||||
Gross profit rate |
14.5 | % | 14.0 | % | 0.5 | pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
13.8 | 12.8 | 1.0 | |||||||||||||
% of gross profit |
95.7 | 92.0 | 3.7 | |||||||||||||
Operating margin |
0.6 | 1.1 | (0.5 | ) |
19
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 14.1 | $ | 8.2 | 72.3 | % | 58.8 | % | ||||||||
Fee-based income (included in revenue) |
4.2 | 2.9 | 47.1 | 36.2 | ||||||||||||
Gross profit |
5.6 | 3.8 | 52.2 | 40.0 | ||||||||||||
SG&A expenses |
5.7 | 4.3 | 31.5 | 20.3 | ||||||||||||
Earnings from operations |
(0.1 | ) | (0.5 | ) | 89.3 | |||||||||||
Gross profit rate |
39.9 | % | 45.2 | % | (5.3 | )pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
40.4 | 53.0 | (12.6 | ) | ||||||||||||
% of gross profit |
101.2 | 117.1 | (15.9 | ) | ||||||||||||
Operating margin |
(0.5 | ) | (7.7 | ) | 7.2 |
Third Quarter | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 80.7 | $ | 64.1 | 25.9 | % | 24.4 | % | ||||||||
Fee-based income (included in revenue) |
10.5 | 6.6 | 60.3 | 53.6 | ||||||||||||
Gross profit |
22.2 | 15.4 | 44.1 | 40.4 | ||||||||||||
SG&A expenses |
22.4 | 19.6 | 14.5 | 10.8 | ||||||||||||
Earnings from operations |
(0.2 | ) | (4.2 | ) | 94.0 | |||||||||||
Gross profit rate |
27.5 | % | 24.0 | % | 3.5 | pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
27.8 | 30.5 | (2.7 | ) | ||||||||||||
% of gross profit |
101.1 | 127.2 | (26.1 | ) | ||||||||||||
Operating margin |
(0.3 | ) | (6.5 | ) | 6.2 |
20
Total Company - September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 4,154.7 | $ | 3,624.5 | 14.6 | % | 11.2 | % | ||||||||
Fee-based income (included in revenue) |
104.2 | 73.0 | 43.1 | 34.9 | ||||||||||||
Gross profit |
666.9 | 578.1 | 15.4 | 11.4 | ||||||||||||
SG&A expenses excluding restructuring charges |
619.1 | 548.2 | 12.9 | |||||||||||||
Restructuring charges |
2.8 | 7.2 | (61.7 | ) | ||||||||||||
Total SG&A expenses |
621.9 | 555.4 | 12.0 | 8.0 | ||||||||||||
Asset impairments |
| 1.5 | (100.0 | ) | ||||||||||||
Earnings from operations |
45.0 | 21.2 | 112.3 | |||||||||||||
Gross profit rate |
16.1 | % | 16.0 | % | 0.1 | pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
14.9 | 15.1 | (0.2 | ) | ||||||||||||
% of gross profit |
92.8 | 94.8 | (2.0 | ) | ||||||||||||
Operating margin |
1.1 | 0.6 | 0.5 |
21
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 1,985.3 | $ | 1,781.9 | 11.4 | % | 10.7 | % | ||||||||
Fee-based income (included in revenue) |
8.8 | 6.5 | 36.9 | 35.3 | ||||||||||||
Gross profit |
280.1 | 256.5 | 9.2 | 8.5 | ||||||||||||
SG&A expenses excluding restructuring charges |
218.6 | 201.9 | 8.3 | |||||||||||||
Restructuring charges |
| 0.3 | (100.0 | ) | ||||||||||||
Total SG&A expenses |
218.6 | 202.2 | 8.1 | 7.5 | ||||||||||||
Earnings from operations |
61.5 | 54.3 | 13.3 | |||||||||||||
Gross profit rate |
14.1 | % | 14.4 | % | (0.3 | )pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
11.0 | 11.3 | (0.3 | ) | ||||||||||||
% of gross profit |
78.0 | 78.7 | (0.7 | ) | ||||||||||||
Operating margin |
3.1 | 3.1 | |
22
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 739.1 | $ | 659.1 | 12.1 | % | 12.0 | % | ||||||||
Fee-based income (included in revenue) |
9.7 | 6.7 | 45.2 | 44.9 | ||||||||||||
Gross profit |
110.1 | 103.2 | 6.6 | 6.5 | ||||||||||||
Total SG&A expenses |
79.2 | 69.2 | 14.4 | 14.2 | ||||||||||||
Earnings from operations |
30.9 | 34.0 | (9.1 | ) | ||||||||||||
Gross profit rate |
14.9 | % | 15.7 | % | (0.8 | )pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
10.7 | 10.5 | 0.2 | |||||||||||||
% of gross profit |
71.9 | 67.0 | 4.9 | |||||||||||||
Operating margin |
4.2 | 5.2 | (1.0 | ) |
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 751.3 | $ | 642.8 | 16.9 | % | 6.5 | % | ||||||||
Fee-based income (included in revenue) |
18.9 | 14.4 | 30.9 | 20.0 | ||||||||||||
Gross profit |
121.8 | 103.8 | 17.3 | 6.6 | ||||||||||||
SG&A expenses excluding restructuring charges |
107.9 | 95.7 | 12.7 | |||||||||||||
Restructuring charges |
2.8 | 2.7 | 4.0 | |||||||||||||
Total SG&A expenses |
110.7 | 98.4 | 12.5 | 2.2 | ||||||||||||
Asset Impairments |
| 1.5 | (100.0 | ) | ||||||||||||
Earnings from operations |
11.1 | 3.9 | 187.7 | |||||||||||||
Gross profit rate |
16.2 | % | 16.1 | % | 0.1 | pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
14.4 | 14.9 | (0.5 | ) | ||||||||||||
% of gross profit |
88.6 | 92.2 | (3.6 | ) | ||||||||||||
Operating margin |
1.5 | 0.6 | 0.9 |
23
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 134.0 | $ | 106.4 | 26.0 | % | 15.4 | % | ||||||||
Fee-based income (included in revenue) |
15.0 | 11.2 | 32.8 | 22.5 | ||||||||||||
Gross profit |
36.1 | 28.3 | 26.9 | 16.7 | ||||||||||||
SG&A expenses |
32.8 | 27.6 | 19.0 | 8.5 | ||||||||||||
Earnings from operations |
3.3 | 0.7 | 289.0 | |||||||||||||
Gross profit rate |
26.9 | % | 26.7 | % | 0.2 | pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
24.5 | 25.9 | (1.4 | ) | ||||||||||||
% of gross profit |
91.0 | 97.1 | (6.1 | ) | ||||||||||||
Operating margin |
2.4 | 0.8 | 1.6 |
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 303.8 | $ | 253.3 | 19.9 | % | 8.9 | % | ||||||||
Fee-based income (included in revenue) |
11.0 | 8.5 | 30.4 | 18.4 | ||||||||||||
Gross profit |
42.5 | 35.5 | 19.9 | 8.1 | ||||||||||||
SG&A expenses excluding restructuring charges |
41.3 | 32.0 | 29.1 | |||||||||||||
Restructuring charges |
| 0.5 | (100.0 | ) | ||||||||||||
Total SG&A expenses |
41.3 | 32.5 | 26.9 | 14.2 | ||||||||||||
Earnings from operations |
1.2 | 3.0 | (58.8 | ) | ||||||||||||
Gross profit rate |
14.0 | % | 14.0 | % | | pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
13.6 | 12.6 | 1.0 | |||||||||||||
% of gross profit |
97.2 | 90.3 | 6.9 | |||||||||||||
Operating margin |
0.4 | 1.2 | (0.8 | ) |
24
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 39.1 | $ | 23.6 | 65.5 | % | 52.1 | % | ||||||||
Fee-based income (included in revenue) |
12.2 | 7.6 | 63.1 | 50.3 | ||||||||||||
Gross profit |
16.2 | 10.1 | 61.5 | 48.1 | ||||||||||||
SG&A expenses |
17.8 | 12.0 | 48.9 | 36.1 | ||||||||||||
Earnings from operations |
(1.6 | ) | (1.9 | ) | 15.7 | |||||||||||
Gross profit rate |
41.5 | % | 42.5 | % | (1.0 | )pts. | ||||||||||
Expense rates: |
||||||||||||||||
% of revenue |
45.7 | 50.8 | (5.1 | ) | ||||||||||||
% of gross profit |
110.2 | 119.6 | (9.4 | ) | ||||||||||||
Operating margin |
(4.2 | ) | (8.3 | ) | 4.1 |
September Year to Date | ||||||||||||||||
Constant | ||||||||||||||||
Currency | ||||||||||||||||
2011 | 2010 | Change | Change | |||||||||||||
(In millions of dollars) | ||||||||||||||||
Revenue from services |
$ | 222.9 | $ | 179.8 | 24.0 | % | 22.6 | % | ||||||||
Fee-based income (included in revenue) |
28.7 | 18.3 | 57.0 | 50.8 | ||||||||||||
Gross profit |
62.1 | 42.4 | 46.7 | 43.3 | ||||||||||||
SG&A expenses excluding restructuring charges |
65.5 | 56.8 | 15.4 | |||||||||||||
Restructuring charges |
| 0.1 | (100.0 | ) | ||||||||||||
Total SG&A expenses |
65.5 | 56.9 | 15.3 | 11.7 | ||||||||||||
Earnings from operations |
(3.4 | ) | (14.5 | ) | 76.1 | |||||||||||
Gross profit rate |
27.8 | % | 23.5 | % | 4.3 | pts. | ||||||||||
Expense rates (excluding restructuring charges): |
||||||||||||||||
% of revenue |
29.4 | 31.6 | (2.2 | ) | ||||||||||||
% of gross profit |
105.6 | 134.3 | (28.7 | ) | ||||||||||||
Operating margin |
(1.6 | ) | (8.1 | ) | 6.5 |
25
26
27
28
Item 4. | Controls and Procedures. |
29
Item 1A. | Risk Factors. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Maximum Number | ||||||||||||||||
(or Approximate | ||||||||||||||||
Total Number | Dollar Value) of | |||||||||||||||
of Shares (or | Shares (or Units) | |||||||||||||||
Total Number | Average | Units) Purchased | That May Yet Be | |||||||||||||
of Shares | Price Paid | as Part of Publicly | Purchased Under the | |||||||||||||
(or Units) | per Share | Announced Plans | Plans or Programs | |||||||||||||
Period | Purchased | (or Unit) | or Programs | (in millions of dollars) | ||||||||||||
July 4, 2011 through
August 7, 2011 |
949 | $ | 15.29 | | $ | | ||||||||||
August 8, 2011 through
September 4, 2011 |
| | | $ | | |||||||||||
September 5, 2011 through
October 2, 2011 |
801 | 12.33 | | $ | | |||||||||||
Total |
1,750 | $ | 13.93 | | ||||||||||||
Item 6. | Exhibits. |
30
KELLY SERVICES, INC. |
||||
Date: November 9, 2011 | ||||
/s/ Patricia Little | ||||
Patricia Little | ||||
Executive Vice President and
Chief Financial Officer (Principal Financial Officer) |
/s/ Michael E. Debs | ||||
Michael E. Debs | ||||
Senior Vice President and
Chief Accounting Officer (Principal Accounting Officer) |
31
Exhibit No. | Description | |||
10.4 | Kelly Services, Inc. Non-Employee Directors Stock Option Plan
(Reference is made to Exhibit 10.4 to the Form 10-Q filed with
the Commission on May 11, 2011, which is incorporated herein
by reference). |
|||
10.6 | Amended and restated five-year, secured, revolving credit
agreement, dated March 31, 2011 (Reference is made to Exhibit
10.6 to the Form 8-K filed with the Commission on April 6,
2011, which is incorporated herein by reference). |
|||
10.16 | Receivables Purchase Agreement Amendment No. 2 (Reference is
made to Exhibit 10.16 to the Form 8-K filed with the
Commission on April 6, 2011, which is incorporated herein by
reference). |
|||
31.1 | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act, as amended. |
|||
31.2 | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act, as amended. |
|||
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
101.INS | XBRL Instance Document |
|||
101.SCH | XBRL Taxonomy Extension Schema Document |
|||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
|||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
|||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
|||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
32
1. | I have reviewed this quarterly report on Form 10-Q of Kelly Services, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
/s/ Carl T. Camden | ||||
Carl T. Camden | ||||
President and Chief Executive Officer |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
/s/ Patricia Little | ||||
Patricia Little | ||||
Executive Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Carl T. Camden | ||||
Carl T. Camden | ||||
President and Chief Executive Officer | ||||
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Patricia Little | ||||
Patricia Little | ||||
Executive Vice President and Chief Financial Officer | ||||
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Millions, except Per Share data | Oct. 02, 2011 | Jan. 02, 2011 |
---|---|---|
CURRENT ASSETS: | ||
Allowance for trade accounts receivable | $ 13.7 | $ 12.3 |
STOCKHOLDERS' EQUITY: | ||
Common stock, par value | $ 1.00 | $ 1.00 |
Common Class A | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, shares issued | 36.6 | 36.6 |
Treasury stock, shares | 3.3 | 3.4 |
Common Class B | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, shares issued | 3.5 | 3.5 |
Document and Entity Information (USD $) | 9 Months Ended | |||
---|---|---|---|---|
Oct. 02, 2011 | Jul. 03, 2011 | Oct. 28, 2011
Common Class A | Oct. 28, 2011
Common Class B | |
Entity Registrant Name | KELLY SERVICES INC | |||
Entity Central Index Key | 0000055135 | |||
Document Type | 10-Q | |||
Document Period End Date | Oct. 02, 2011 | |||
Amendment Flag | false | |||
Document Fiscal Year Focus | 2011 | |||
Document Fiscal Period Focus | Q3 | |||
Current Fiscal Year End Date | --01-01 | |||
Entity Well-known Seasoned Issuer | No | |||
Entity Voluntary Filers | No | |||
Entity Current Reporting Status | Yes | |||
Entity Filer Category | Accelerated Filer | |||
Entity Public Float | $ 487,710,754 | |||
Entity Common Stock, Shares Outstanding | 33,367,074 | 3,454,485 |
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Stockholders' Equity | 9 Months Ended |
---|---|
Oct. 02, 2011 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity |
6. Stockholders’ Equity
On May 11, 2010, the Company sold 1,576,169 shares of Kelly’s Class A common stock to Temp
Holdings. The shares were sold in a private transaction at $15.42 per share, which was the average
of the closing prices of the Class A common stock for the five days from May 3, 2010 through May 7,
2010, and represented 4.8 percent of the outstanding Class A shares after the completion of the
sale. As part of this transaction, Kelly added a representative of Temp Holdings to Kelly’s board
of directors.
During the third quarter of 2011, the Company made dividend payments totaling $1.9 million.
|
Fair Value Measurements | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
2. Fair Value Measurements
Trade accounts receivable, accounts payable, accrued liabilities, accrued payroll and related taxes
and short-term borrowings approximate their fair values due to the short-term maturities of these
assets and liabilities.
Assets Measured at Fair Value on a Recurring Basis
The following tables present assets measured at fair value on a recurring basis as of October 2,
2011 and January 2, 2011 on the consolidated balance sheet by fair value hierarchy level, as
described below.
Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or
liabilities. Level 2 measurements include quoted prices in markets that are not active or model
inputs that are observable either directly or indirectly for substantially the full term of the
asset or liability. Level 3 measurements include significant unobservable inputs.
Money market funds as of October 2, 2011 represent investments in money market accounts, all of
which is restricted cash that is included in prepaid expenses and other current assets on the
consolidated balance sheet. Money market funds as of January 2, 2011 represent investments in
money market accounts, of which $2.9 million is included in cash and equivalents and $1.2 million
of restricted cash is included in prepaid expenses and other current assets on the consolidated
balance sheet. The valuations were based on quoted market prices of those accounts as of the
respective period end.
Available-for-sale investment represents the Company’s investment in Temp Holdings Co., Ltd. (“Temp
Holdings”), a leading integrated human resources company in Japan, and is included in other assets
on the consolidated balance sheet. The valuation is based on the quoted market price of Temp
Holdings stock on the Tokyo Stock Exchange as of the period end. The unrealized loss of $0.6
million for the 13 weeks ended October 2, 2011 and unrealized loss of $0.4 million for the 13 weeks
ended October 3, 2010 was recorded in other comprehensive income, a component of stockholders’
equity. The unrealized loss of $1.1 million for the 39 weeks ended October 2, 2011 and unrealized
gain of $1.3 million for the 39 weeks ended October 3, 2010 was recorded in other comprehensive
income.
During the second quarter of 2010, the Company entered into two forward foreign currency exchange
contracts to offset the variability in exchange rates on its yen-denominated debt. One contract
matured on May 13, 2011 and the other contract matured November 2010. During the first quarter of
2011, the yen-denominated debt was paid in full. As a result, the Company entered into an
additional forward foreign currency exchange contract during the first quarter of 2011 to offset
the remaining open contract that was purchased during 2010.
Prior to maturity, these contracts, which were included in prepaid expenses and other current
assets on the consolidated balance sheet, were valued using market exchange rates and were not
designated as hedging instruments. Accordingly, gains and losses resulting from recording the
foreign exchange contracts at fair value were reported in other expense, net on the consolidated
statement of earnings, and amounted to a minor loss for the 39 weeks ended October 2, 2011 and
gains of $0.7 million and $1.2 million, respectively, for the 13 and 39 weeks ended October 3,
2010.
The two aforementioned forward currency exchange contracts, one to buy Japanese yen with a U.S.
dollar equivalent of $6.1 million and one to sell Japanese yen with a U.S. dollar equivalent of
$6.8 million, matured on May 13, 2011. At October 2, 2011, the Company had no open forward foreign
currency exchange contracts. At January 2, 2011, the Company had one open forward foreign currency
exchange contract with an expiration date of less than one year to buy foreign currencies with a
U.S. dollar equivalent of $6.1 million. The Company does not use financial instruments for trading
or speculative purposes.
|
Contingencies | 9 Months Ended |
---|---|
Oct. 02, 2011 | |
Contingencies [Abstract] | |
Contingencies |
8. Contingencies
The Company is the subject of two pending class action lawsuits. The two lawsuits, Fuller v. Kelly
Services, Inc. and Kelly Home Care Services, Inc., pending in the Superior Court of California, Los
Angeles, and Sullivan v. Kelly Services, Inc., pending in the U.S. District Court Southern District
of California, both involve claims for monetary damages by current and former temporary employees
working in the State of California.
The Fuller matter involves claims relating to alleged misclassification of personal attendants as
exempt and not entitled to overtime compensation under state law and alleged technical violations
of a state law governing the content of employee pay stubs. The Sullivan matter relates to claims
by temporary workers for compensation while interviewing for assignments. Tentative settlements
have been reached in both matters and are awaiting final court approval. A $1.2 million after-tax
charge related to the Fuller matter was recognized in discontinued operations during the second
quarter of 2011.
The Company is continuously engaged in litigation arising in the ordinary course of its business,
typically matters alleging employment discrimination, alleging wage and hour violations or
enforcing the restrictive covenants in the Company’s employment agreements. While there is no
expectation that any of these matters will have a material adverse effect on the Company’s results
of operations, financial position or cash flows, litigation is always subject to inherent
uncertainty and the Company is not able to reasonably predict if any matter will be resolved in a
manner that is materially adverse to the Company.
|
Segment Disclosures | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 02, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Disclosures |
9. Segment Disclosures
The Company’s segments are based on the organizational structure for which financial results are
regularly evaluated by the Company’s chief operating decision maker to determine resource
allocation and assess performance. The Company’s seven reporting segments are: (1) Americas
Commercial, (2) Americas Professional and Technical (“Americas PT”), (3) Europe, Middle East and
Africa Commercial (“EMEA Commercial”), (4) Europe, Middle East and Africa Professional and
Technical (“EMEA PT”), (5) Asia Pacific Commercial (“APAC Commercial”), (6) Asia Pacific
Professional and Technical (“APAC PT”) and (7) Outsourcing and Consulting Group (“OCG”).
The Commercial business segments within the Americas, EMEA and APAC regions represent traditional
office services, contact-center staffing, marketing, electronic assembly, light industrial and
substitute teachers. The PT segments encompass a wide range of highly skilled temporary employees,
including scientists, financial professionals, attorneys, engineers, IT specialists and healthcare
workers. OCG includes recruitment process outsourcing (“RPO”), contingent workforce outsourcing
(“CWO”), business process outsourcing (“BPO”), payroll process outsourcing (“PPO”), executive
placement and career transition/outplacement services. Corporate expenses that directly support
the operating units have been allocated to the seven segments based on a work effort, volume or, in
the absence of a readily available measurement process, proportionately based on revenue from
services.
The following tables present information about the reported revenue from services and earnings from
operations of the Company for the 13 and 39 weeks ended October 2, 2011 and October 3, 2010. Asset
information by reportable segment is not presented, since the Company does not produce such
information internally, nor does it use such data to manage its business.
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Other Expense, Net | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 02, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Expense, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Expense, Net |
7. Other Expense, Net
Included in other income (expense), net are the following:
Included in foreign exchange gains for the 13 and 39 weeks ended October 2, 2011 is a $1.5 million
gain related to the release into earnings of accumulated currency translation adjustments upon the
substantially complete liquidation of certain EMEA subsidiaries. The disposals of these operations
were not reported in discontinued operations due to immateriality.
|
Restructuring | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 02, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring |
3. Restructuring
Restructuring costs incurred in the third quarter and first nine months of 2010 totaled $2.8
million and $7.2 million, respectively, and primarily related to severance and lease termination
costs for branches in the EMEA Commercial and APAC Commercial segments that were in the process of
closure at the end of 2009, and severance costs related to the corporate headquarters.
Restructuring costs incurred in the third quarter and first nine months of 2011 amounted to a
credit of $0.6 million and expense of $2.8 million, respectively, and primarily relate to revisions
of the estimated lease termination costs for EMEA Commercial branches that closed in prior years.
These costs were reported as a component of SG&A expenses. Total costs incurred since July 2008
for our restructuring efforts amounted to $46.4 million.
A summary of the balance sheet accrual related to the global restructuring costs follows (in
millions of dollars):
The remaining balance of $5.4 million as of October 2, 2011 represents primarily future lease
payments and is expected to be paid by 2018. On a quarterly basis, the Company reassesses the
accrual associated with restructuring costs and adjusts it as necessary.
|
Debt | 9 Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 02, 2011 | ||||||||||||||||||||
Debt [Abstract] | ||||||||||||||||||||
Debt |
4. Debt
On March 31, 2011, the Company entered into an agreement with its lenders to amend and restate its
existing $90 million, three-year revolving credit facility (the “Facility”). The amendment
increased the capacity of the Facility to $150 million, and extended the term of the Facility to
March 31, 2016 from September 28, 2012. The Facility allows for borrowings in various currencies
and is used to fund working capital, acquisitions, and general corporate needs.
The interest rate applicable to borrowings under the Facility at October 2, 2011 was 200 basis
points over the London InterBank Offering Rate (“LIBOR”) in addition to a facility fee of 25 basis
points. LIBOR rates vary by currency. The Company may also borrow using rates based on the Prime
Rate; these loans have shorter notice periods and interest periods. At October 2, 2011, the
prime-rate based loans were available to the Company at the Prime Rate plus 100 basis points and a
facility fee of 25 basis points.
At October 2, 2011, borrowings under the Facility were $5.0 million, with an interest rate of
2.48%, and the Facility had a remaining capacity of $145.0 million. In connection with the
refinancing, certain of the Facility’s financial covenants and restrictions were amended and are
described below, all of which were met at October 2, 2011:
At January 2, 2011, there were no borrowings under the Facility.
On March 31, 2011, the Company and Kelly Receivables Funding, LLC, a wholly owned bankruptcy remote
special purpose subsidiary of the Company (the “Receivables Entity”), amended the Receivables
Purchase Agreement related to a $100 million securitization facility (“the Securitization
Facility”). The amendment (i) extended the term of the Securitization Facility from 364 days to
three years, (ii) reduced borrowing costs, and (iii) increased the capacity from $100 to $150
million. The Receivables Purchase Agreement will terminate December 4, 2014, unless terminated
earlier pursuant to its terms.
Under the Securitization Facility, the Company will sell certain trade receivables and related
rights (“Receivables”), on a revolving basis, to the Receivables Entity. The Receivables Entity
may from time to time sell an undivided variable percentage ownership interest in the Receivables.
The Securitization Facility also allows for the issuance of standby letters of credit (“SBLC”).
The Securitization Facility contains a cross-default clause that could result in termination if
defaults occur under our other loan agreements. The Securitization Facility also contains certain
restrictions based on the performance of the Receivables.
As of October 2, 2011, the Securitization Facility carried $74.0 million of short-term borrowings
at a rate of 1.39% and $51.4 million of SBLCs related to workers’ compensation. The interest rate
applicable to borrowings under the Securitization Facility at October 2, 2011 was 55 basis points
over the cost of commercial paper, in addition to a facility fee of 60 basis points. The cost of
borrowings on this facility varies on a daily basis, along with the cost of commercial paper. The
remaining capacity on the Facility was $24.6 million at October 2, 2011. As of January 2, 2011,
the Securitization Facility carried $17.0 million of short-term borrowings at a rate of 1.57%,
SBLCs related to workers’ compensation of $45.7 million and remaining capacity of $37.3 million.
The Receivables Entity’s sole business consists of the purchase or acceptance through capital
contributions of trade accounts receivable and related rights from the Company. As described
above, the Receivables Entity may retransfer these receivables or grant a security interest in
those receivables under the terms and conditions of the Receivables Purchase Agreement. The
Receivables Entity is a separate legal entity with its own creditors who would be entitled, if it
were ever liquidated, to be satisfied out of its assets prior to any assets or value in the
Receivables Entity becoming available to its equity holders. The assets of the Receivables Entity
are not available to pay creditors of the Company or any of its other subsidiaries. The assets and
liabilities of the Receivables Entity are included in the consolidated financial statements of the
Company.
The Company had a three-year syndicated term loan facility comprised of 9 million euros and 5
million U.K. pounds, and a five-year, 6 billion yen-denominated loan agreement, all of which had a
maturity date of October 3, 2011. On March 22, 2011, the Company fully paid the euro and U.K.
pound loans. On March 24, 2011, the Company also fully paid the yen loan using borrowings from the
revolving credit facility and Securitization Facility.
As of January 2, 2011, the U.S. dollar amount outstanding on the euro and U.K. pound facility,
which fluctuated based on foreign exchange rates, totaled approximately $19.7 million, all of which
was classified as current, and carried an interest rate which ranged from 4.24% to 4.44%. As of
January 2, 2011, the U.S. dollar amount outstanding on the yen-denominated loan balance, which also
fluctuated based on foreign exchange rates, totaled approximately $42.0 million, all of which was
classified as current, and carried an interest rate of 3.7%.
|
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Earnings Per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
5. Earnings Per Share
The reconciliation of basic and diluted earnings per share on common stock for the 13 and 39 weeks
ended October 2, 2011 and October 3, 2010 follows (in millions of dollars except per share data):
Stock options representing 0.6 million and 0.7 million shares, respectively, for the 13 weeks ended
October 2, 2011 and October 3, 2010, and 0.6 million and 0.7 million shares, respectively, for the
39 weeks ended October 2, 2011 and October 3, 2010, were excluded from the computation of diluted
earnings per share due to their anti-dilutive effect.
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Basis of Presentation | 9 Months Ended |
---|---|
Oct. 02, 2011 | |
Basis of Presentation [Abstract] | |
Basis of Presentation |
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the
“Company,” “Kelly,” “we” or “us”) have been prepared in accordance with Rule 10-01 of Regulation
S-X and do not include all the information and notes required by generally accepted accounting
principles for complete financial statements. All adjustments, including normal recurring
adjustments, have been made which, in the opinion of management, are necessary for a fair statement
of the results of the interim periods. The results of operations for such interim periods are not
necessarily indicative of results of operations for a full year. The unaudited consolidated
financial statements should be read in conjunction with the Company’s consolidated financial
statements and notes thereto for the fiscal year ended January 2, 2011, included in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2011
(the 2010 consolidated financial statements).
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All intercompany balances and transactions have been eliminated.
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New Accounting Pronouncements | 9 Months Ended |
---|---|
Oct. 02, 2011 | |
New Accounting Pronouncements [Abstract] | |
New Accounting Pronouncements |
10. New Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) amended its guidance on the
presentation of comprehensive income to increase the prominence of items reported in other
comprehensive income. The new guidance requires that all components of comprehensive income in
stockholders’ equity be presented either in a single continuous statement of comprehensive income
or in two separate but consecutive statements. The new guidance will be effective for us at the
beginning of fiscal 2012 and its adoption will not have any impact on our financial condition,
results of operations or cash flows.
In September 2011, the FASB issued updated guidance on the periodic testing of goodwill for
impairment. This guidance will allow companies to assess qualitative factors to determine if it is
more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the
two-step goodwill impairment test required under current accounting standards. The guidance will be
effective for us at the beginning of fiscal 2012, with early adoption permitted. We do not expect
the adoption of this guidance to have a material impact on our financial condition, results of
operations or cash flows.
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