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 $416.2 million; its shares were traded at around $11.91 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 third quarter of 2009 totaled $1.05 billion, a decrease of 24.9% from the same period in 2008. This was the result of a decrease in hours worked of 21.6% combined with a decrease in average hourly bill rates of 5.1% (a decrease of 1.4% on a constant currency basis). Fee-based income, which is included in revenue from services, totaled $20.5 million, or 2.0% of total revenue, for the third quarter of 2009, a decrease of 48.2% as compared to $39.6 million in the third quarter of 2008. Revenue for the quarter decreased in all seven business segments, reflecting the global economic slowdown.
Selling, general and administrative (SG&A) expenses totaled $193.7 million, a year-over-year decrease of $66.5 million, or 25.6% (23.4% on a constant currency basis). Included in SG&A expenses is a pretax charge of $4.3 million for litigation expenses in the third quarter of 2009 and $22.5 million in the third quarter of 2008. Details of the decrease in SG&A expenses in the third quarter of 2009 are estimated to be as follows (in millions of dollars):
Structural changes represent actions we have taken around the world during the last 15 months to reduce expenses, including a reduction of approximately 1,600 full-time employees and the closing, sale or consolidation of approximately 130 branches. Compensation and other discretionary savings represent the impact of expense-reduction initiatives implemented during the first quarter, including the suspension of headquarters and field-based incentive compensation and retirement matching contribution, along with a reduction in discretionary spending on travel and general expenses. These savings were partially offset by severance and lease termination costs, including expenses related to restructuring actions in the U.K. (see Restructuring Note 4), and incremental costs related to prior years acquisitions and investments. Severance and lease termination costs incurred during the last 15 months, including those related to the U.K. restructuring action, are estimated to be $23 million ($4 million estimated for the third quarter of 2009).
As a result of the above, we reported a loss from operations in the third quarter of 2009 totaling $28.0 million, compared to $14.5 million reported for the third quarter of 2008.
Loss from continuing operations was $14.8 million in the third quarter of 2009, compared to $11.5 million in the third quarter of 2008. Included in the loss from continuing operations in 2009 was $2.7 million, net of tax, related to litigation expenses, $3 million, net of tax, for estimated costs associated with other expense reduction initiatives (including the $0.7 million related to the U.K. restructuring action) and $0.5 million, net of tax, related to asset impairments. Included in the loss from continuing operations in 2008 was $13.9 million, net of tax, of litigation expenses.
Third quarter net loss for 2009 totaled $14.8 million, compared to $12.2 million last year. Diluted loss from continuing operations per share for the third quarter of 2009 was $0.43, as compared to $0.33 for the third 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, Charles Brandes of Brandes Investment.