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Kelly Services Inc. Reports Operating Results (10-Q)

August 05, 2009 | About:
10qk

Kelly Services Inc. (KELYA) filed Quarterly Report for the period ended 2009-06-28.

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 $434.7 million; its shares were traded at around $12.49 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:

For the second quarter of 2009, Kelly reported a net loss from continuing operations of $1.89 per diluted share, compared to net earnings of $0.30 per diluted share in the second quarter of 2008. Included in the 2009 results are impairment charges of $1.41 per diluted share.

During the second quarter of 2009, Kelly U.K. incurred $2.4 million of restructuring charges associated with these actions, which were reported as a component of SG&A 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 half of 2009, bringing total pre-tax charges related to the U.K. restructuring program to approximately $10 to $11 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.

During the second quarter of 2009, asset impairment charges of $52.6 million were also recorded. Due to significantly worse than anticipated economic conditions and the impacts to our business in the second quarter of 2009, we revised our internal forecasts for all of our segments, which we deemed to be a triggering event for purposes of assessing goodwill for impairment. Accordingly, goodwill at all of our reporting units was tested for impairment in the second quarter of 2009. This resulted in the recognition of a goodwill impairment loss of $50.5 million in total, of which $16.4 million related to the Americas Commercial segment, $12.1 million related to the APAC Commercial segment and $22.0 million related to the EMEA PT segment.

Income tax benefit on continuing operations for the second quarter of 2009 was $9.5 million, compared to expense of $4.7 million for the second quarter of 2008. Our tax benefit for the second quarter of 2009 is reduced by the non-deductibility of asset impairment and restructuring charges. In the second quarter of 2008, we determined it was more likely than not that we would realize the deferred tax assets of our Italian subsidiaries. As a result, we reversed the valuation allowance recorded against those deferred tax assets, resulting in a benefit of $1.4 million.

Loss from continuing operations was $66.0 million in the second quarter of 2009, compared to earnings of $10.4 million in the second quarter of 2008. Included in loss from continuing operations in 2009 were asset impairment charges, net of tax, of $49.2 million and $2.4 million, net of tax, related to the U.K. restructuring actions.

Second quarter net loss for 2009 totaled $66.0 million, compared to net earnings of $10.5 million last year. Diluted loss from continuing operations per share for the second quarter of 2009 was $1.89, as compared to diluted earnings from continuing operations per share of $0.30 for the second quarter of 2008. Included in second quarter 2009 diluted loss per share from continuing operations was the $1.41 per share cost of the asset impairments and $0.07 per share cost of the U.K. restructuring.

Read the The complete ReportKELYA is in the portfolios of David Dreman of Dreman Value Management, Richard Pzena of Pzena Investment Management LLC, Charles Brandes of Brandes Investment.

Rating: 5.0/5 (2 votes)

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