Kelly Services Inc. Reports Operating Results (10-Q)
KELLY SERVICES INC. provides temporary office clerical marketing professional technical light industrial home care services management services and other business services to a diversified group of customers through offices located in major cities of the United States Australia Canada Denmark France Ireland Italy Luxembourg Mexico the Netherlands New Zealand Norway Russia Spain Switzerland and United Kingdom. Kelly Temporary Services provides office clerical marketing professional technical semi-skilled light industrial and management services. Kelly Services Inc. has a market cap of $389.8 million; its shares were traded at around $11.21 with and P/S ratio of 0.1. Kelly Services Inc. had an annual average earning growth of 62.9% over the past 5 years. Highlight of Business Operations:Revenue from services in the first quarter of 2009 totaled $1.0 billion, a decrease of 24.9% from the same period in 2008. This was the result of a decrease in hours worked of 20.7% combined with a decrease in average hourly bill rates of 6.9% (an increase of 1.1% on a constant currency basis). Fee-based income, which is included in revenue from services, totaled $23.5 million, or 2.3% of total revenue, for the first quarter of 2009, a decrease of 39.6% as compared to $38.9 million in the first quarter of 2008. Revenue for the quarter decreased in all seven business segments, reflecting the global economic slowdown.
During the first quarter of 2009, our U.K. operations disposed of or closed 37 branches in total and incurred $5.4 million of restructuring charges associated with these actions, which were reported as a component of selling, general and administrative expenses in the EMEA Commercial segment. We expect to incur approximately $1 to $2 million of additional facility and other exit costs in the second quarter of 2009, bringing total pre-tax charges related to the U.K. restructuring program to approximately $8 to $9 million. We expect that the U.K. restructuring plan will result in improved operating results by lowering selling, general and administrative expenses through reduced facilities and related expenses.
As a result of the above, we reported a loss from operations in the first quarter of 2009 totaling $30.6 million, compared to earnings from operations of $12.9 million reported for the first quarter of 2008.
Loss from continuing operations was $16.1 million in the first quarter of 2009, compared to earnings of $8.0 million in the first quarter of 2008. Included in loss from continuing operations in 2009 were $5.4 million related to the U.K. restructuring actions.
First quarter net loss for 2009 totaled $15.5 million, compared to net earnings of $8.2 million last year. Diluted loss from continuing operations per share for the first quarter of 2009 was $0.46, as compared to diluted earnings from continuing operations per share of $0.23 for the first quarter of 2008. Included in first quarter 2009 diluted loss per share from continuing operations was the $0.15 per share cost of the U.K. restructuring.
The decrease in the gross profit rate was due to customer mix, a decrease in fee-based income, as well as lower favorable workers compensation adjustments from prior years. As noted above, we revised our estimate of the cost of outstanding workers compensation claims and, accordingly, reduced expense in the first quarter. Of the total $1.3 million adjustment booked in the first quarter of 2009, $1.1 million is reflected in the results of Americas Commercial. This compares to an adjustment of $4.0 million in the first quarter of 2008.
Read the The complete ReportKELYA is in the portfolios of David Dreman of Dreman Value Management, Richard Pzena of Pzena Investment Management LLC, David Dreman of Dreman Value Management, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Charles Brandes of Brandes Investment.