Kelly Services Inc. Reports Operating Results (10-Q)
Kelly Services Inc. has a market cap of $572.6 million; its shares were traded at around $16.37 with and P/S ratio of 0.1. KELYA is in the portfolios of David Dreman of Dreman Value Management, Richard Pzena of Pzena Investment Management LLC, Chuck Royce of Royce& Associates, Charles Brandes of Brandes Investment, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Revenue from services in the first quarter of 2010 totaled $1.13 billion, an increase of 8.4% from the same period in 2009. This was the result of an increase in hours worked of 8.1%, partially offset by a decrease in average hourly bill rates of 0.1% (3.4% on a constant currency basis). Fee-based income, which is included in revenue from services, totaled $23.7 million, or 2.1% of total revenue, for the first quarter of 2010, an increase of 0.7% (a decrease of 6.2% on a constant currency basis) as compared to $23.5 million in the first quarter of 2009. Revenue for the quarter increased in all business segments, with the exception of EMEA Commercial.
Selling, general and administrative (SG&A) expenses totaled $181.6 million, a year-over-year decrease of $24.5 million, or 11.9% (15.3% on a constant currency basis). Included in SG&A expenses for the first quarter of 2010 is a pretax charge of $4.4 million for restructuring costs. Included in SG&A expenses for the first quarter of 2009 are pretax charges of $7.2 million for restructuring costs and $0.9 million for litigation expenses. Restructuring charges in the first quarter of 2010 relate primarily 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, as well as severance costs related to the corporate headquarters.
As a result of the above, we reported a loss from operations in the first quarter of 2010 totaling $1.6 million, compared to a loss of $30.6 million reported for the first quarter of 2009.
Loss from continuing operations was $2.0 million in the first quarter of 2010, compared to a $16.1 million loss in the first quarter of 2009. Included in the loss from continuing operations in the first quarter of 2010 was $3.6 million, net of tax, of restructuring charges. Included in the loss from continuing operations in the first quarter of 2009 was $6.4 million, net of tax, of restructuring charges and $0.6 million, net of tax, related to litigation charges.
First quarter net loss for 2010 totaled $2.0 million, compared to a loss of $15.5 million last year. Diluted loss from continuing operations per share for the first quarter of 2010 was $0.06, as compared to a diluted loss of $0.46 for the first quarter of 2009.
The decrease in the gross profit rate was primarily due to an increase in the proportion of lower-margin light industrial business to higher-margin clerical business. Of the total $1.6 million workers compensation adjustment in 2010 noted above, $1.4 million is reflected in the results of Americas Commercial. This compares to an adjustment of $1.1 million in 2009.
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