KELLY SERVICES INC - Annual Report: 2012 (Form 10-K)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL 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

Commission file number 0-1088

KELLY SERVICES, INC.

(Exact Name of Registrant as specified in its Charter)

Delaware		38-1510762
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

999 West Big Beaver Road, Troy, Michigan		48084
(Address of Principal Executive Office)		(Zip Code)

(248) 362-4444

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class Class A Common Class B Common		Name of each exchange on which registered NASDAQ Global Market NASDAQ Global Market

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $487,710,754.

Registrant had 33,459,401 shares of Class A and 3,454,485 of Class B common stock, par value $1.00, outstanding as of February 6, 2012.

Documents Incorporated by Reference

The proxy statement of the registrant with respect to its 2012 Annual Meeting of Stockholders is incorporated by reference in Part III.

 

 

PART I

Unless the context otherwise requires, throughout this Annual Report on Form 10-K the words “Kelly,” “Kelly Services,” “the Company,” “we,” “us” and “our” refer to Kelly Services, Inc. and its consolidated subsidiaries.

ITEM 1. BUSINESS.

History and Development of Business

Founded by William R. Kelly in 1946, Kelly Services^® has developed innovative workforce solutions for customers in a variety of industries throughout our 65-year history. Our range of solutions has grown steadily over the years to match the expanding needs of our customers.

We have evolved from a United States-based company concentrating primarily on traditional office staffing into a global workforce solutions leader with a breadth of specialty businesses. We currently assign professional and technical employees in the fields of education, legal, health care, and creative services, while ranking as one of the world’s largest scientific staffing providers, and among the leaders in information technology, engineering and financial staffing. These specialty service lines complement our expertise in office services, contact center, light industrial and electronic assembly staffing. As the human capital arena has become more complex, we have also developed a suite of innovative solutions to help customers manage their flexible workforce. We offer outsourcing, consulting, recruitment, career transition and vendor management services.

Geographic Breadth of Services

Headquartered in Troy, Michigan, we provide temporary employment for approximately 550,000 employees annually to a variety of customers around the globe — including nearly 90 percent of the Fortune 500 companies.

Kelly’s workforce solutions are provided to a diversified group of customers in three regions: the Americas, Europe, the Middle East, and Africa (“EMEA”), and Asia Pacific (“APAC”).

Description of Business Segments

Our operations are divided into seven principal business segments: Americas Commercial, Americas Professional and Technical (“Americas PT”), EMEA Commercial, EMEA Professional and Technical (“EMEA PT”), APAC Commercial, APAC Professional and Technical (“APAC PT”) and the Outsourcing and Consulting Group (“OCG”).

Americas Commercial

Our Americas Commercial segment includes: Kelly Office Services™, offering trained employees who work in word processing, data entry and as administrative support staff; KellyConnect^®, providing staff for contact centers, technical support hotlines and telemarketing units; Kelly Educational Staffing^®, the first nationwide program supplying qualified substitute teachers; Kelly Marketing Services, including support staff for seminars, sales and trade shows; Kelly Electronic Assembly Services^®, providing technicians to serve the technology, aerospace and pharmaceutical industries; Kelly Light Industrial Services^®, placing maintenance workers, material handlers and assemblers; KellySelect, a temporary to full-time service that provides both customers and temporary staff the opportunity to evaluate their relationship before making a full-time employment decision; and KellyDirect^®, a direct-hire placement service used across all staffing business units.

Americas PT

Our Americas PT segment includes a number of industry-specific services: Kelly Scientific Resources^®, a leading provider of scientific and clinical research workforce solutions; Kelly Engineering Resources^®, supplying engineering professionals across all disciplines including aeronautical, chemical, civil/structural, electrical/instrumentation, environmental, industrial, mechanical, petroleum, pharmaceutical, quality and telecommunications; Kelly IT Resources^®, placing information technology specialists across all IT disciplines; CGR/seven, placing employees in creative services positions; Kelly Financial Resources^®, serving the needs of corporate finance departments, accounting firms and financial institutions with professional personnel; Kelly Government Solutions, providing a full spectrum of talent management solutions to the U.S. federal government; Kelly Healthcare Resources^®, providing all levels of healthcare specialists and professionals for work in hospitals, ambulatory care centers, HMOs and other health insurance companies; and Kelly Law Registry^®, placing legal professionals including attorneys, paralegals, contract administrators, compliance specialists and legal administrators. Our temporary-to-hire service, KellySelect, and direct-hire placement service, KellyDirect, are also offered in this segment.

EMEA Commercial

Our EMEA Commercial segment provides a similar range of commercial staffing services as described for our Americas Commercial segment above, including: Kelly Office Services, KellyConnect, Kelly Light Industrial Services and KellySelect. Additional service areas of focus include Kelly Catering and Hospitality, providing chefs, porters and hospitality representatives; and Kelly Industrial, supplying manual workers to semi-skilled professionals in a variety of trade, non-trade and operational positions.

EMEA PT

Our EMEA PT segment provides many of the same services as described for our Americas PT segment, including: Kelly Engineering Resources, Kelly Financial Resources, Kelly Healthcare Resources, Kelly IT Resources and Kelly Scientific Resources.

APAC Commercial

Our APAC Commercial segment offers a similar range of commercial staffing services as described for our Americas and EMEA Commercial segments above, through staffing solutions that include permanent placement, temporary staffing, temporary to full-time staffing and vendor on-site management.

APAC PT

Our APAC PT segment provides many of the same services as described for our Americas and EMEA PT segments, including: Kelly Engineering Resources, Kelly IT Resources and Kelly Scientific Resources. Additional service areas include Kelly Selection and Kelly Executive (Australia and New Zealand only), which offer mid- to senior-level search and selection of leaders in core practice areas such as HR, Sales and Marketing, Finance, Procurement and General Management.

OCG

Kelly’s OCG segment delivers integrated talent management solutions configured to satisfy our customers’ needs across multiple regions, skill sets and the entire spectrum of human resources. Services in this segment include: Recruitment Process Outsourcing (“RPO”), offering end-to-end talent acquisition solutions, including customized recruitment projects; Contingent Workforce Outsourcing (“CWO”), providing globally managed service solutions that integrate supplier and vendor management technology partners to optimize contingent workforce spend; Independent Contractor Solutions, delivering evaluation, classification and risk management services that enable safe access to this critical talent pool; Payroll Process Outsourcing (“PPO”), providing centralized payroll processing solutions globally for our customers; Business Process Outsourcing (“BPO”), offering full staffing and operational management of non-core functions or departments; Career Transition & Organizational Effectiveness, offering a range of custom solutions to maintain effective operations and maximize employee motivation and performance in the wake of corporate restructurings; and Executive Search, providing leadership in executive placement in various regions throughout the world.

Financial information regarding our industry segments is included in the Segment Disclosures note to our consolidated financial statements presented in Part II, Item 8 of this report.

Business Objectives

Kelly’s philosophy is rooted in our conviction that we can and do make a difference on a daily basis — for our customers, in the lives of our employees, in the local communities we serve and in our industry. Our vision is “To provide the world’s best workforce solutions.” We aspire to be a strategic business partner to our customers, and strive to assist them in operating efficient, profitable organizations. Our consultative approach to customer relationships leverages a collective expertise spanning 65 years of thought leadership, while Kelly solutions are customizable to benefit them on any scope or scale required.

As the use of contingent labor, consultants, and independent contractors becomes more prevalent and critical to the ongoing success of our customer base, our core competencies are refined to help them realize their respective business objectives. Kelly offers a comprehensive array of outsourcing and consulting services, as well as world-class staffing on a temporary, temp-to-hire and direct placement basis. Kelly will continue to deliver the strategic expertise our customers need to transform their workforce management challenges into opportunities.

Business Operations

Service Marks

We own numerous service marks that are registered with the United States Patent and Trademark Office, the European Union Community Trademark Office and numerous individual country trademark offices.

Seasonality

Our quarterly operating results are affected by the seasonality of our customers’ businesses. Demand for staffing services historically has been lower during the first and fourth quarters, in part as a result of holidays, and typically increases during the second and third quarters of the year.

Working Capital

Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable. Since receipts from customers generally lag payroll to temporary employees, working capital requirements increase substantially in periods of growth.

Customers

We are not dependent on any single customer, or a limited segment of customers. In 2011, an estimated 50% of total Company revenue was attributed to 100 large customers. Our largest single customer accounted for approximately four percent of total revenue in 2011.

Government Contracts

Although we conduct business under various federal, state, and local government contracts, they do not account for a significant portion of our business.

Competition

The worldwide temporary staffing industry is competitive and highly fragmented. In the United States, approximately 100 competitors operate nationally, and approximately 10,000 smaller companies compete in varying degrees at local levels. Additionally, several similar staffing companies compete globally. In 2011, our largest competitors were Allegis Group, Adecco S.A, Manpower Inc., Robert Half International, Inc. and Randstad Holding N.V.

Key factors that influence our success are geographic coverage, breadth of service, quality of service, and price.

Geographic presence is important, as temporary employees are generally unwilling to travel great distances for assignment, and customers prefer working with companies in their local market. Breadth of service, or ability to manage staffing suppliers, has become more critical as customers seek “one-stop shopping” for all their staffing needs.

Quality of service is highly dependent on the availability of qualified, competent temporary employees, and our ability to recruit, screen, train, retain, and manage a pool of employees who match the skills required by particular customers. During an economic downturn, we must balance competitive pricing pressures with the need to retain a qualified workforce. Price competition in the staffing industry is intense — particularly for office clerical and light industrial personnel — and pricing pressure from customers and competitors continues to be significant.

Environmental Concerns

Because we are involved in a service business, federal, state or local laws that regulate the discharge of materials into the environment do not materially impact us.

Employees

We employ approximately 1,100 people at our corporate headquarters in Troy, Michigan, and approximately 7,100 staff members in our international network of branch offices. In 2011, we assigned approximately 550,000 temporary employees to a variety of customers around the globe.

While services may be provided inside the facilities of customers, we remain the employer of record for our temporary employees. We retain responsibility for employee assignments, the employer’s share of all applicable payroll taxes and the administration of the employee’s share of these taxes.

Foreign Operations

For information regarding sales, earnings from operations and long-lived assets by domestic and foreign operations, please refer to the information presented in the Segment Disclosures note to our consolidated financial statements, presented in Part II, Item 8 of this report.

Access to Company Information

We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 100 F. Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.

We make available, free of charge, through our Internet website, and by responding to requests addressed to our vice president of investor relations, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our website address is: www.kellyservices.com. The information contained on our website, or on other websites linked to our website, is not part of this report.

ITEM 1A. RISK FACTORS.

We operate in a highly competitive industry with low barriers to entry, and may be unable to compete successfully against existing or new competitors.

The worldwide staffing services market is highly competitive with limited barriers to entry. We compete in global, national, regional and local markets with full-service and specialized temporary staffing companies. While the majority of our competitors are significantly smaller than us, several competitors, including Allegis Group, Adecco S.A, Manpower Inc., Robert Half International, Inc. and Randstad Holding N.V., have substantial marketing and financial resources. In particular, Adecco S.A, Manpower Inc. and Randstad Holding N.V. are considerably larger than we are and, thus, have significantly more marketing and financial resources than we do. Price competition in the staffing industry is intense, particularly for the provision of office clerical and light industrial personnel. We expect that the level of competition will remain high, which could limit our ability to maintain or increase our market share or profitability.

The number of customers consolidating their staffing services purchases with a single provider or small group of providers continues to increase which, in some cases, may make it more difficult for us to obtain or retain customers. We also face the risk that our current or prospective customers may decide to provide similar services internally. As a result, there can be no assurance that we will not encounter increased competition in the future.

Our business is significantly affected by fluctuations in general economic conditions.

Demand for staffing services is significantly affected by the general level of economic activity and employment in the United States and the other countries in which we operate. When economic activity increases, temporary employees are often added before full-time employees are hired. As economic activity slows, however, many companies reduce their use of temporary employees before laying off full-time employees. Significant swings in economic activity historically have had a disproportionate impact on staffing industry volumes. We may also experience more competitive pricing pressure during periods of economic downturn. A substantial portion of our revenues and earnings are generated by our business operations in the United States. Any significant economic downturn in the United States or certain other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.

We may not achieve the intended effects of our business strategy.

Our business strategy focuses on improving profitability through scale and specialization, particularly with our professional and technical and OCG businesses. We have also implemented steps to increase our operating efficiency in our commercial staffing markets, grow our higher margin specialty staffing and grow our outsourcing and consulting business. We plan to implement cost-efficient service delivery models to enable local teams to focus on profit-generating activities and relationships. If we are not successful in achieving these objectives, our revenues, costs and overall profitability could be negatively affected. If we are unable to execute our business strategy effectively, our productivity and cost competitiveness could be negatively affected.

Our loss of major customers or the deterioration of their financial condition or prospects could have a material adverse effect on our business.

Our business strategy is focused on serving large corporate customers through high volume global service agreements. While our strategy is intended to enable us to increase our revenues and earnings from our major corporate customers, the strategy also exposes us to increased risks arising from the possible loss of major customer accounts. In addition, some of our customers are in industries, such as the automotive and manufacturing industries, that have experienced adverse business and financial conditions in recent years. The deterioration of the financial condition or business prospects of these customers could reduce their need for temporary employment services and result in a significant decrease in the revenues and earnings we derive from these customers. The bankruptcy of a major customer could have a material adverse impact on our ability to meet our working capital requirements.

Impairment charges relating to our goodwill and long-lived assets could adversely affect our results of operations.

We regularly monitor our goodwill and long-lived assets for impairment indicators. In conducting our goodwill impairment testing, we compare the fair value of each of our reporting units to the related net book value. In conducting our impairment analysis of long-lived assets, we compare the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. Changes in economic or operating conditions impacting our estimates and assumptions could result in the impairment of our goodwill or long-lived assets. In the event that we determine that our goodwill or long-lived assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our results of operations.

Our customer contracts contain termination provisions that could decrease our future revenues and earnings.

Most of our customer contracts can be terminated by the customer on short notice without penalty. Our customers are, therefore, not contractually obligated to continue to do business with us in the future. This creates uncertainty with respect to the revenues and earnings we may recognize with respect to our customer contracts.

We depend on our ability to attract and retain qualified temporary personnel (employed directly by us or through a third-party supplier).

We depend on our ability to attract qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of our customers. We must continually evaluate our base of available qualified personnel to keep pace with changing customer needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available in sufficient numbers and on terms of employment acceptable to us. Our success is substantially dependent on our ability to recruit and retain qualified temporary personnel.

We may be exposed to employment-related claims and losses, including class action lawsuits and collective actions, which could have a material adverse effect on our business.

We employ and assign personnel in the workplaces of other businesses. The risks of these activities include possible claims relating to:

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discrimination and harassment;

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wrongful termination or denial of employment;

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violations of employment rights related to employment screening or privacy issues;

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classification of employees including independent contractors;

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employment of illegal aliens;

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violations of wage and hour requirements;

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retroactive entitlement to employee benefits; and

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errors and omissions by our temporary employees, particularly for the actions of professionals such as attorneys, accountants and scientists.

We are also subject to potential risks relating to misuse of customer proprietary information, misappropriation of funds, damage to customer facilities due to negligence of temporary employees, criminal activity and other similar claims. We may incur fines and other losses or negative publicity with respect to these problems. In addition, these claims may give rise to litigation, which could be time-consuming and expensive. In the U.S. and certain other countries in which we operate, new employment and labor laws and regulations have been proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. There can be no assurance that the corporate policies we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. Although we maintain insurance in types and amounts we believe are appropriate in light of the aforementioned exposures, there can also be no assurance that such insurance policies will remain available on reasonable terms or be sufficient in amount or scope of coverage.

Improper disclosure of sensitive or private information could result in liability and damage our reputation.

Our business involves the use, storage and transmission of information about full-time and temporary employees. Additionally, our employees may have access or exposure to customer data and systems, the misuse of which could result in legal liability. We are dependent on the security provisions of vendors who have custodial control of our data. We have established policies and procedures to help protect the security and privacy of this information. It is possible that our security controls over personal and other data and other practices we follow may not prevent the improper access to or disclosure of personally identifiable or otherwise confidential information. Such disclosure could harm our reputation and subject us to liability under our contracts and laws that protect personal data and confidential information, resulting in increased costs or loss of revenue. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability, additional compliance costs or damage to our reputation in the marketplace.

Unexpected changes in claim trends on our workers’ compensation and benefit plans may negatively impact our financial condition.

We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program and medical benefits claims. Unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates and medical cost inflation could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to unforeseen circumstances, our costs could increase significantly. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.

Failure to maintain specified financial covenants in our bank credit facilities, or credit market events beyond our control, could adversely restrict our financial and operating flexibility and subject us to other risks, including risk of loss of access to capital markets.

Our bank credit facilities contain covenants that require us to maintain specified financial ratios and satisfy other financial conditions. During 2011, we met all of the covenant requirements. Our ability to continue to meet these financial covenants, particularly with respect to interest coverage (see Debt note in the footnotes to the consolidated financial statements), may not be assured. If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable or significantly increase the cost of the facility. In these circumstances, there can be no assurance that we would have sufficient liquidity to repay or refinance this indebtedness at favorable rates or at all. Events beyond our control could result in the failure of one or more of our banks, reducing our access to liquidity and potentially resulting in reduced financial and operating flexibility. If broader credit markets were to experience dislocation, our potential access to other funding sources would be limited.

Damage to our key data centers could affect our ability to sustain critical business applications.

Many business processes critical to our continued operation are housed in our data center situated within the corporate headquarters complex as well as regional data centers in Asia-Pacific and Europe. Those processes include, but are not limited to, payroll, customer reporting and order management. While we have taken steps to protect these operations, the loss of a data center would create a substantial risk of business interruption.

Our investment in our PeopleSoft payroll, billing and accounts receivable project may not yield its intended results.

In the fourth quarter of 2004, we commenced our PeopleSoft project to replace our payroll, billing and accounts receivable information systems in the United States, Canada, Puerto Rico, the United Kingdom and Ireland. To date we have several modules in production including accounts receivable in all locations, payroll in Canada, payroll and billing in the United Kingdom and Ireland and general ledger and fixed assets in the U.S., Puerto Rico and Canada. We anticipate spending approximately $20 to $25 million from 2012 through 2015 to complete the PeopleSoft project. Although the technology is intended to increase productivity and operating efficiencies, the PeopleSoft project may not yield its intended results. Any delays in completing, or an inability to successfully complete, this technology initiative or an inability to achieve the anticipated efficiencies could adversely affect our operations, liquidity and financial condition. There is also a risk that if the remaining modules are not completed or the cost of completion is prohibitive, an impairment charge relating to all or a portion of the $4.8 million capitalized cost of the in-process modules as of January 1, 2012 could be required.

We are highly dependent on our senior management and the continued performance and productivity of our local management and field personnel.

We are highly dependent on the continued efforts of the members of our senior management. We are also highly dependent on the performance and productivity of our local management and field personnel. The loss of any of the members of our senior management may cause a significant disruption in our business. In addition, the loss of any of our local managers or field personnel may jeopardize existing customer relationships with businesses that use our services based on relationships with these individuals. The loss of the services of members of our senior management could have a material adverse effect on our business.

Our business is subject to extensive government regulation, which may restrict the types of employment services we are permitted to offer or result in additional or increased taxes, including payroll taxes, or other costs that reduce our revenues and earnings.

The temporary employment industry is heavily regulated in many of the countries in which we operate. Changes in laws or government regulations may result in prohibition or restriction of certain types of employment services we are permitted to offer or the imposition of new or additional benefit, licensing or tax requirements that could reduce our revenues and earnings. In particular, we are subject to state unemployment taxes in the U.S. which typically increase during periods of increased levels of unemployment. We also receive benefits, such as the work opportunity credit in the U.S., that regularly expire and may not be reinstated. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover increased costs as a result of any changes in laws or government regulations. Any future changes in laws or government regulations, or interpretations thereof, may make it more difficult or expensive for us to provide staffing services and could have a material adverse effect on our business, financial condition and results of operations.

The net financial impact of recent U.S. healthcare legislation on our results of operations could be significant.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Acts”) were signed into U.S. law. The Acts represent comprehensive healthcare reform legislation that, in addition to other provisions, will require that we provide healthcare coverage to our temporary employees in the United States or incur penalties. Although we intend to bill these costs to our customers, there can be no assurance that we will be able to increase the fees charged to our customers in a sufficient amount to cover the increased costs. Additionally, since significant provisions of the Acts will not become effective until 2014, possible future changes to the Acts could significantly impact any estimates we develop during that period. While we are unable at this time to estimate the net impact of the Acts, we believe the net financial impact on our results of operations could be significant.

We conduct a significant portion of our operations outside of the United States and we are subject to risks relating to our international business activities, including fluctuations in currency exchange rates.

We conduct our business in all major staffing markets throughout the world. Our operations outside the United States are subject to risks inherent in international business activities, including:

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fluctuations in currency exchange rates;

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varying economic and political conditions;

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differences in cultures and business practices;

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differences in employment and tax laws and regulations;

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differences in accounting and reporting requirements;

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changing and, in some cases, complex or ambiguous laws and regulations; and

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litigation and claims.

Our operations outside the United States are reported in the applicable local currencies and then translated into U.S. dollars at the applicable currency exchange rates for inclusion in our consolidated financial statements. Exchange rates for currencies of these countries may fluctuate in relation to the U.S. dollar and these fluctuations may have an adverse or favorable effect on our operating results when translating foreign currencies into U.S. dollars.

Our controlling stockholder exercises voting control over our company and has the ability to elect or remove from office all of our directors.

Terence E. Adderley, the Chairman of our board of directors, and certain trusts with respect to which he acts as trustee or co-trustee, control approximately 93% of the outstanding shares of Kelly Class B common stock, which is the only class of our common stock entitled to voting rights. Mr. Adderley is therefore able to exercise voting control with respect to all matters requiring stockholder approval, including the election or removal from office of all members of the Board of Directors.

We are not subject to most of the listing standards that normally apply to companies whose shares are quoted on the NASDAQ Global Market.

Our Class A and Class B common stock are quoted on the NASDAQ Global Market. Under the listing standards of the NASDAQ Global Market, we are deemed to be a “controlled company” by virtue of the fact that Terence E. Adderley, the Chairman of our board of directors, and certain trusts of which he acts as trustee or co-trustee have voting power with respect to more than fifty percent of our outstanding voting stock. A controlled company is not required to have a majority of its board of directors comprised of independent directors. Director nominees are not required to be selected or recommended for the board’s selection by a majority of independent directors or a nominations committee comprised solely of independent directors, nor do the NASDAQ Global Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. A controlled company is also exempt from NASDAQ Global Market’s requirements regarding the determination of officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors. A controlled company is required to have an audit committee composed of at least three directors, who are independent as defined under the rules of both the Securities and Exchange Commission and the NASDAQ Global Market. The NASDAQ Global Market further requires that all members of the audit committee have the ability to read and understand fundamental financial statements and that at least one member of the audit committee possess financial sophistication. The independent directors must also meet at least twice a year in meetings at which only they are present.

We currently comply with certain of the listing standards of the NASDAQ Global Market that do not apply to controlled companies. Our compliance is voluntary, however, and there can be no assurance that we will continue to comply with these standards in the future.

Provisions in our certificate of incorporation and bylaws and Delaware law may delay or prevent an acquisition of our company.

Our restated certificate of incorporation and bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. The acquirer would also be required to provide advance notice of its proposal to replace directors at any annual meeting, and would not be able to cumulate votes at a meeting, which would require the acquirer to hold more shares to gain representation on the board of directors than if cumulative voting were permitted.

Our board of directors also has the ability to issue additional shares of common stock that could significantly dilute the ownership of a hostile acquirer. In addition, Section 203 of the Delaware General Corporation Law limits mergers and other business combination transactions involving 15 percent or greater stockholders of Delaware corporations unless certain board or stockholder approval requirements are satisfied. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation.

Our board of directors could choose not to negotiate with an acquirer that it did not believe was in our strategic interests. If an acquirer is discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by these or other measures, our shareholders could lose the opportunity to sell their shares at a favorable price.

The holders of shares of our Class A common stock are not entitled to voting rights.

Under our certificate of incorporation, the holders of shares of our Class A common stock are not entitled to voting rights, except as otherwise required by Delaware law. As a result, Class A common stock holders do not have the right to vote for the election of directors or in connection with most other matters submitted for the vote of our stockholders.

Our stock price may be subject to significant volatility and could suffer a decline in value.

The market price of our common stock may be subject to significant volatility. We believe that many factors, including several which are beyond our control, have a significant effect on the market price of our common stock. These include:

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actual or anticipated variations in our quarterly operating results;

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announcements of new services by us or our competitors;

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announcements relating to strategic relationships or acquisitions;

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changes in financial estimates by securities analysts;

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changes in general economic conditions;

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actual or anticipated changes in laws and government regulations;

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changes in industry trends or conditions; and

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sales of significant amounts of our common stock or other securities in the market.

In addition, the stock market in general, and the NASDAQ Global Market in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, securities class action litigation has often been instituted following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of our management’s attention and resources. Further, our operating results may be below the expectations of securities analysts or investors. In such event, the price of our common stock may decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

We own our headquarters in Troy, Michigan, where corporate, subsidiary and divisional offices are currently located. The original headquarters building was purchased in 1977. Headquarters operations were expanded into additional buildings purchased in 1991, 1997 and 2001.

The combined usable floor space in the headquarters complex is approximately 350,000 square feet. Our buildings are in good condition and are currently adequate for their intended purpose and use. We also own undeveloped land in Troy and northern Oakland County, Michigan.

Branch office business is conducted in leased premises with the majority of leases being fixed for terms of generally three to five years in the United States and Canada and five to ten years outside the United States and Canada. We own virtually all of the office furniture and the equipment used in our corporate headquarters and branch offices.

ITEM 3. LEGAL PROCEEDINGS.

The Company is awaiting final court approval of a settlement of a single class action, Fuller v. Kelly Services, Inc. and Kelly Home Care Services, Inc. pending in the Superior Court of California, Los Angeles, which involves a claim for monetary damages by current and former temporary employees in the State of California. The claims are related 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. A $1.2 million after tax charge relating to the settlement was recognized in discontinued operations during the second quarter 2011.

During the fourth quarter of 2011, the Company paid $1.9 million to settle a previous legal matter, Sullivan v. Kelly Services, Inc., which had been pending in the U.S. District Court Southern District of California. The Company established a reserve for this case in 2010.

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.

Disclosure of Certain IRS Penalties

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information and Dividends

Our Class A and Class B common stock is traded on the NASDAQ Global Market under the symbols “KELYA” and “KELYB,” respectively. The high and low selling prices for our Class A common stock and Class B common stock as quoted by the NASDAQ Global Market and the dividends paid on the common stock for each quarterly period in the last two fiscal years are reported in the table below. Payments of dividends are restricted by the financial covenants contained in our debt facilities, as described in the Debt footnote to the consolidated financial statements.

		Per share amounts (in dollars)
		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter				Year
2011
Class A common
High		$	22.99			$	21.41			$	17.58			$	17.00			$	22.99
Low			17.50				14.61				10.95				10.77				10.77
Class B common
High			22.99				21.30				16.70				17.12				22.99
Low			18.10				14.53				12.23				11.26				11.26
Dividends			—				—				0.05				0.05				0.10
2010
Class A common
High		$	18.02			$	18.93			$	16.28			$	20.29			$	20.29
Low			11.80				12.80				10.07				11.70				10.07
Class B common
High			17.56				18.54				14.40				20.90				20.90
Low			10.66				13.16				10.45				10.51				10.45
Dividends			—				—				—				—				—

Holders

The number of holders of record of our Class A and Class B common stock were approximately 8,600 and 300, respectively, as of February 6, 2012.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

														Maximum Number
										Total Number				(or Approximate
										of Shares (or				Dollar Value) of
		Total Number				Average				Units) Purchased				Shares (or Units)
		of Shares				Price Paid				as Part of Publicly				That May Yet Be
		(or Units)				per Share				Announced Plans				Purchased Under the
Period		Purchased				(or Unit)				or Programs				Plans or Programs
														(in millions of dollars)
October 3, 2011 through November 6, 2011			261			$	15.29				—			$	—
November 7, 2011 through December 4, 2011			28,975				14.23				—				—
December 5, 2011 through January 1, 2012			1,137				14.10				—				—
Total			30,373			$	14.23				—

We may reacquire shares to cover taxes due upon the vesting of restricted stock held by employees. Accordingly, 30,373 shares were reacquired during the Company’s fourth quarter.

Performance Graph

The following graph compares the cumulative total return of our Class A common stock with that of the S&P 600 SmallCap Index and the S&P 1500 Human Resources and Employment Services Index for the five years ended December 31, 2011. The graph assumes an investment of $100 on December 31, 2006 and that all dividends were reinvested.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Assumes Initial Investment of $100
December 31, 2006 — December 31, 2011

		2006				2007				2008				2009				2010				2011
Kelly Services, Inc.		$	100.00			$	65.87			$	47.41			$	43.48			$	68.51			$	50.19
S&P SmallCap 600 Index		$	100.00			$	99.70			$	68.72			$	86.28			$	108.98			$	108.73
S&P 1500 Human Resources and Employment Services Index		$	100.00			$	76.32			$	49.10			$	67.86			$	78.49			$	66.30

ITEM 6. SELECTED FINANCIAL DATA.

The following table summarizes selected financial information of Kelly Services, Inc. and its subsidiaries for each of the most recent five fiscal years. This table should be read in conjunction with the other financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements included elsewhere in this report.

(In millions except per share amounts)		2011				2010 (2)				2009 (1,2)				2008 (2)				2007
Revenue from services		$	5,551.0			$	4,950.3			$	4,314.8			$	5,517.3			$	5,667.6
Earnings (loss) from continuing operations			64.9				26.1				(105.1	)			(81.7	)			53.7
(Loss) earnings from discontinued operations, net of tax (3)			(1.2	)			—				0.6				(0.5	)			7.3
Net earnings (loss)			63.7				26.1				(104.5	)			(82.2	)			61.0
Basic earnings (loss) per share:
Earnings (loss) from continuing operations			1.72				0.71				(3.01	)			(2.35	)			1.46
(Loss) earnings from discontinued operations			(0.03	)			—				0.02				(0.02	)			0.20
Net earnings (loss)			1.69				0.71				(3.00	)			(2.37	)			1.65
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations			1.72				0.71				(3.01	)			(2.35	)			1.45
(Loss) earnings from discontinued operations			(0.03	)			—				0.02				(0.02	)			0.20
Net earnings (loss)			1.69				0.71				(3.00	)			(2.37	)			1.65
Dividends per share
Classes A and B common			0.10				—				—				0.54				0.52
Working capital			417.0				367.6				357.6				427.4				478.6
Total assets			1,541.7				1,368.4				1,312.5				1,457.3				1,574.0
Total noncurrent liabilities			168.3				153.6				205.3				203.8				200.5

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Overview

The U.S. and global economies slowly strengthened during 2011. For the year, more than 1.8 million jobs were created in the U.S., the best performance in five years. Moreover, positive trends within the U.S. labor market continue to favor the staffing industry. Within the U.S. staffing industry, more than 650,000 jobs have been added since the recovery began in September 2009, and the temporary help penetration rate (the percentage of staffing jobs to total nonfarm jobs in the U.S.) has grown steadily for the past six months, concluding the year at 1.81%. We are encouraged by the positive economic and industry trends, which should lead to greater demand for our services.

For Kelly, the strengthening trends are reflected in our 2011 fiscal year results:

•

We achieved year-over-year revenue growth in all business segments.

•

Operating earnings increased by over 50%, due to improved operational leverage.

•

Year over year, OCG revenue increased 25% and results from operations improved by $15 million.

•

Diluted earnings per share totaled $1.69 compared to $0.71 last year.

•

We reinstated the Company dividend to stockholders during the third quarter.

Our financial results were also enhanced by a very favorable tax rate. Work opportunity and HIRE Act tax credits provided over $28 million of combined benefit in 2011. Because both of these tax credit programs have expired, and it is uncertain if or when the work opportunity credit program will be reinstated, we expect our tax rate to be much higher in 2012.

Kelly operates in a highly cyclical industry, which is very dependent on the global economy. Despite economic, geopolitical and other challenges we faced during the year, Kelly demonstrated its resolve to improve its financial performance and strategic position in the marketplace. We are encouraged by the trends this year, but current economic conditions across Europe are a concern. Looking forward, we remain committed to executing a business strategy that is aligned with the evolving workforce – one that is focused on growing higher-margin PT staffing, expanding fee-based business and delivering customer-focused workforce solutions.

Results of Operations
2011 versus 2010

		Total Company
														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	5,551.0			$	4,950.3				12.1	%			9.6	%
Fee-based income (included in revenue)			138.0				99.0				39.4				33.4
Gross profit			894.1				794.5				12.5				9.6
SG&A expenses excluding restructuring charges			833.6				747.2				11.6
Restructuring charges			2.8				7.2				(61.7	)
Total SG&A expenses			836.4				754.4				10.9				7.9
Asset impairments			—				2.0				(100.0	)
Earnings from operations			57.7				38.1				51.4
Gross profit rate			16.1	%			16.0	%		0.1		pts.
Expense rates (excluding restructuring charges):
% of revenue			15.0				15.1				(0.1	)
% of gross profit			93.2				94.0				(0.8	)
Operating margin			1.0				0.8				0.2

The year-over-year change in revenue resulted primarily from a 7% increase in hours worked, combined with a 2% increase in average bill rates on a constant currency basis. On a constant currency basis, revenue increased in all business segments.

Compared to 2010, the 2011 gross profit rate improved slightly. The growth in fee-based income offset a decline in the temporary staffing gross profit rate due to the unfavorable impact related to the expiration of the HIRE Act payroll tax benefit in the U.S. The Hiring Incentives to Restore Employment (“HIRE”) Act, which allowed employers to receive tax incentives for hiring and retaining previously unemployed individuals, resulted in a benefit to our gross profit of $21 million in 2010. HIRE Act benefits were also available in 2011, but as an income tax credit, rather than a benefit to the Company’s gross profit.

Fee-based income has a significant impact on gross profit rates. There are very low direct costs of services associated with fee-based income. Therefore, increases or decreases in fee-based income can have a disproportionate impact on gross profit rates.

Selling, general and administrative (“SG&A”) expenses increased year over year due primarily to higher compensation costs. During the year we have hired full-time employees, primarily in our PT and OCG businesses, reinstated certain retirement benefits and merit increase programs and increased incentive-based compensation. Restructuring costs incurred in 2011 primarily relate to revisions of the estimated lease termination costs for EMEA Commercial branches that closed in prior years. Restructuring costs incurred in 2010 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.

Income tax benefit for 2011 was $7.3 million (-12.6%), compared to income tax expense of $6.6 million (20.2%) for 2010. The income tax benefit in 2011 was largely impacted by significant employment-related income tax credits, including the favorable impact of the HIRE Act retention credit ($11 million) and continued strong work opportunity credits ($17 million). Together, these income tax credits totaled $28.5 million in 2011, compared to $11.7 million in 2010. The Company also determined that for tax reporting purposes it was eligible for worthless stock deductions related to foreign subsidiaries, which provided U.S. federal and state benefits of $8.4 million in 2011, compared to $1.0 million in 2010. The HIRE Act retention credit is available only in 2011, and is in addition to the HIRE Act payroll tax benefits recognized in cost of services in 2010. The work opportunity credit program expired at the end of 2011, and it is uncertain if or when it will be reinstated.

Included in earnings from continuing operations were restructuring charges of $2.8 million, net of tax, for 2011 and $5.4 million, net of tax, for 2010. Diluted earnings from continuing operations per share for 2011 were $1.72, as compared to $0.71 for 2010. Discontinued operations in 2011 represents costs of litigation, net of tax, retained from the 2007 sale of the Kelly Home Care business unit.

Americas Commercial

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	2,660.9			$	2,428.2				9.6	%			9.2	%
Fee-based income (included in revenue)			12.0				8.8				38.1				37.0
Gross profit			377.0				354.9				6.2				5.8
SG&A expenses excluding restructuring charges			293.1				275.3				6.5
Restructuring charges			—				0.3				(100.0	)
Total SG&A expenses			293.1				275.6				6.3				6.0
Earnings from operations			83.9				79.3				5.9
Gross profit rate			14.2	%			14.6	%		(0.4		)pts.
Expense rates (excluding restructuring charges):
% of revenue			11.0				11.3				(0.3	)
% of gross profit			77.7				77.5				0.2
Operating margin			3.2				3.3				(0.1	)

The change in Americas Commercial revenue from services reflected a 7% increase in hours worked, combined with a 2% increase in average bill rates on a constant currency basis. Americas Commercial represented 48% of total Company revenue in 2011 and 49% in 2010.

The change in the gross profit rate was due primarily to the unfavorable impact related to the expiration of the HIRE Act payroll tax benefit. SG&A expenses increased due to the reinstatement of merit increases and certain retirement benefits and higher incentive-based compensation.

Americas PT

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	982.8			$	889.0				10.6	%			10.5	%
Fee-based income (included in revenue)			13.3				9.0				48.3				48.1
Gross profit			148.2				140.0				5.9				5.8
SG&A expenses			105.4				93.7				12.4				12.3
Earnings from operations			42.8				46.3				(7.4	)
Gross profit rate			15.1	%			15.8	%		(0.7		)pts.
Expense rates:
% of revenue			10.7				10.5				0.2
% of gross profit			71.1				67.0				4.1
Operating margin			4.4				5.2				(0.8	)

The change in Americas PT revenue from services reflected an increase in hours worked of 7%, combined with a 3% increase in average bill rates on a constant currency basis. Americas PT revenue represented 18% of total Company revenue in both 2011 and 2010.

The Americas PT gross profit rate decreased primarily due to the unfavorable impact related to the expiration of the HIRE Act payroll tax benefit, partially offset by the favorable impact of increased fee-based income.

The increase in SG&A expenses was primarily due to the reinstatement of merit increases and certain retirement benefits, additional staff and increased performance-based compensation.

EMEA Commercial

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	990.1			$	872.0				13.6	%			5.6	%
Fee-based income (included in revenue)			24.9				19.1				29.7				21.5
Gross profit			160.6				141.0				13.9				5.7
SG&A expenses excluding restructuring charges			144.0				130.5				10.3
Restructuring charges			2.8				2.7				4.0
Total SG&A expenses			146.8				133.2				10.2				2.4
Asset impairments			—				1.5				(100.0	)
Earnings from operations			13.8				6.3				119.1
Gross profit rate			16.2	%			16.2	%		—		pts.
Expense rates (excluding restructuring charges):
% of revenue			14.5				15.0				(0.5	)
% of gross profit			89.7				92.6				(2.9	)
Operating margin			1.4				0.7				0.7

The change in revenue from services in EMEA Commercial resulted from a 6% increase in average hourly bill rates on a constant currency basis. EMEA Commercial revenue represented 18% of total Company revenue in both 2011 and 2010.

The increase in SG&A expenses was due to increased hiring of full-time employees in specific countries with identified high-growth potential.

EMEA PT

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	178.9			$	147.6				21.2	%			13.4	%
Fee-based income (included in revenue)			19.2				15.0				27.3				19.7
Gross profit			47.4				38.7				22.0				14.5
SG&A expenses			43.2				36.9				17.4				9.4
Earnings from operations			4.2				1.8				105.3
Gross profit rate			26.5	%			26.3	%		0.2		pts.
Expense rates:
% of revenue			24.2				25.0				(0.8	)
% of gross profit			91.3				94.8				(3.5	)
Operating margin			2.3				1.4				0.9

The change in revenue from services in EMEA PT resulted from an 8% increase in hours worked, combined with a 4% increase in average hourly bill rates on a constant currency basis. EMEA PT revenue represented 3% of total Company revenue in both 2011 and 2010.

The change in the EMEA PT gross profit rate was primarily due to increases in fee-based income. SG&A expenses increased, due to hiring of full-time employees and investments in additional branches in Russia, Germany and the U.K.

APAC Commercial

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	397.6			$	355.3				11.9	%			4.1	%
Fee-based income (included in revenue)			13.9				11.4				23.0				14.2
Gross profit			55.7				48.4				15.3				6.6
SG&A expenses excluding restructuring charges			53.8				45.1				19.3
Restructuring charges			—				0.5				(100.0	)
Total SG&A expenses			53.8				45.6				17.9				8.8
Earnings from operations			1.9				2.8				(29.1	)
Gross profit rate			14.0	%			13.6	%		0.4		pts.
Expense rates (excluding restructuring charges):
% of revenue			13.5				12.7				0.8
% of gross profit			96.6				93.3				3.3
Operating margin			0.5				0.8				(0.3	)

The change in revenue from services in APAC Commercial resulted from a 6% increase in hours worked, partially offset by a 2% decline in average hourly bill rates on a constant currency basis. APAC Commercial revenue represented 7% of total Company revenue in both 2011 and 2010.

The change in the APAC Commercial gross profit rate was primarily due to higher growth in fee-based income. SG&A expenses increased, primarily due to higher salaries and related costs from the investment in additional full-time employees across the region.

APAC PT

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	51.4			$	32.5				58.1	%			48.9	%
Fee-based income (included in revenue)			15.3				10.5				47.7				37.9
Gross profit			20.6				13.9				48.4				38.4
SG&A expenses			23.2				17.0				37.0				27.7
Earnings from operations			(2.6	)			(3.1	)			14.1
Gross profit rate			40.1	%			42.7	%		(2.6		)pts.
Expense rates:
% of revenue			45.3				52.2				(6.9	)
% of gross profit			112.9				122.3				(9.4	)
Operating margin			(5.2	)			(9.5	)			4.3

The change in revenue from services in APAC PT resulted primarily from an increase in temporary sales growth in Australia and India. APAC PT revenue represented 1% of total Company revenue in both 2011 and 2010.

The change in the APAC PT gross profit rate was due primarily to a decline in fee-based income as a percentage of total revenue from services, along with changes in temporary business mix with higher volume in the IT divisions. SG&A expenses increased, due to hiring of permanent placement recruiters and increases in incentive-based compensation.

OCG

														Constant
														Currency
		2011				2010				Change				Change
		(In millions of dollars)
Revenue from services		$	317.3			$	254.8				24.5	%			23.6	%
Fee-based income (included in revenue)			39.5				25.6				54.3				49.8
Gross profit			87.3				60.0				45.7				43.3
SG&A expenses excluding restructuring charges			89.9				77.5				16.0
Restructuring charges			—				0.1				(100.0	)
Total SG&A expenses			89.9				77.6				15.9				13.1
Earnings from operations			(2.6	)			(17.6	)			85.0
Gross profit rate			27.5	%			23.5	%		4.0		pts.
Expense rates (excluding restructuring charges):
% of revenue			28.3				30.4				(2.1	)
% of gross profit			103.1				129.5				(26.4	)
Operating margin			(0.8	)			(7.0	)			6.2

Revenue from services in the OCG segment for 2011 increased in the Americas, EMEA and APAC regions, due primarily to growth in our BPO, RPO and CWO practices. OCG revenue represented 6% of total Company revenue in 2011 and 5% in 2010.

The OCG gross profit rate increased primarily due to increased volume mix in the BPO, RPO and CWO practice areas, as well as increases in gross profit rates for both the BPO and RPO practice areas for the year. The increase in SG&A expenses is primarily the result of support costs associated with the expansion of customer programs, as well as higher volumes on existing programs, in our RPO and CWO practice areas.

Results of Operations
2010 versus 2009

		Total Company
														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	4,950.3			$	4,314.8				14.7	%			13.7	%
Fee-based income (included in revenue)			99.0				86.1				15.0				12.6
Gross profit			794.5				701.7				13.2				12.3
SG&A expenses excluding restructuring charges			747.2				764.8				(2.3	)
Restructuring charges			7.2				29.9				(75.8	)
Total SG&A expenses			754.4				794.7				(5.1	)			(5.9	)
Asset impairments			2.0				53.1				(96.2	)
Earnings from operations			38.1				(146.1	)		NM
Gross profit rate			16.0	%			16.3	%		(0.3		)pts.
Expense rates (excluding restructuring charges):
% of revenue			15.1				17.7				(2.6	)
% of gross profit			94.0				109.0				(15.0	)
Operating margin			0.8				(3.4	)			4.2

The year-over-year change in revenue was the result of an increase in hours worked of 17%, partially offset by a decrease in average hourly bill rates of 3% on a constant currency basis. On a constant currency basis, revenue for 2010 increased in all seven business segments, with the exception of EMEA Commercial. The 2009 fiscal year included a 53^rd week. This fiscal leap year occurs every five or six years and is necessary to align the fiscal and calendar periods. The 53^rd week added approximately 1% to 2009 revenue.

Compared to 2009, the 2010 gross profit rate decreased or remained flat in all business segments, with the exception of EMEA Commercial and APAC PT. The decrease in the gross profit rate was caused by a reduction in our temporary margins, primarily within the Americas and OCG businesses. Our average temporary margin continued to be impacted by shifts to a higher proportion of light industrial business compared to clerical, to large corporate customers compared to retail and, within OCG, to a higher proportion of the lower-margin PPO business. In addition, our temporary margins were impacted by higher state unemployment taxes in the Americas to the extent not recovered through pricing. All of these items negatively impacting the gross profit rate were partially offset by the favorable impact from the HIRE Act payroll tax benefit. The HIRE Act resulted in a benefit of $21 million in 2010. The HIRE Act expired at the end of 2010.

SG&A expenses decreased year over year due to the impact of expense reduction initiatives implemented in 2009 and lower restructuring costs, partially offset by an increase in incentive compensation.

Restructuring costs in 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. Restructuring costs in 2009 relate primarily to global severance, lease terminations, asset write-offs and other miscellaneous costs incurred in connection with the reduction in the number of permanent employees and the consolidation, sale or closure of branch locations.

Asset impairment charges in 2010 represent the write-off of incomplete software projects in Europe and the U.S. Asset impairment charges in 2009 represent goodwill impairment losses related to Americas Commercial, EMEA PT and APAC Commercial, and impairment of long-lived assets and intangible assets in Japan and Europe.

We recorded income tax expense for 2010 at an effective rate of 20.2%, compared to an income tax benefit at an effective rate of 29.1% in 2009. The 2010 rate was positively impacted by nontaxable income from the cash surrender value of life insurance policies used to fund the Company’s deferred compensation plan, and by work opportunity tax credits. The 2009 rate was positively impacted by these items, but was also negatively impacted by non-deductible asset impairment charges and valuation allowances on operating losses and restructuring charges in certain foreign countries.

Earnings from continuing operations were $26.1 million in 2010, compared to a loss of $105.1 million in 2009. Included in earnings from continuing operations for 2010 was $5.4 million, net of tax, of restructuring charges and $1.5 million, net of tax, of asset impairment charges. Included in loss from continuing operations in 2009 were $24.0 million, net of tax, of restructuring charges and $50.0 million, net of tax, of asset impairment charges.

Net earnings for 2010 totaled $26.1 million, compared to a loss of $104.5 million in 2009. Diluted earnings from continuing operations per share for 2010 was $0.71, as compared to diluted loss from continuing operations per share of $3.01 for 2009.

Americas Commercial

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	2,428.2			$	1,980.3				22.6	%			21.4	%
Fee-based income (included in revenue)			8.8				6.6				31.8				29.0
Gross profit			354.9				290.7				22.0				21.0
SG&A expenses excluding restructuring charges			275.3				273.2				0.7
Restructuring charges			0.3				7.2				(95.0	)
Total SG&A expenses			275.6				280.4				(1.7	)			(2.6	)
Earnings from operations			79.3				10.3			NM
Gross profit rate			14.6	%			14.7	%		(0.1		)pts.
Expense rates (excluding restructuring charges):
% of revenue			11.3				13.8				(2.5	)
% of gross profit			77.5				93.9				(16.4	)
Operating margin			3.3				0.5				2.8

The change in Americas Commercial revenue from services reflected an increase in hours worked of 22%. Americas Commercial represented 49% of total Company revenue for 2010 and 46% for 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 and higher state unemployment taxes to the extent not recovered through pricing, partially offset by the impact of HIRE Act payroll tax benefit. The HIRE Act benefit impacted the gross profit rate by 60 basis points. SG&A expenses excluding restructuring were essentially flat as lower facilities costs, depreciation and corporate allocation offset higher performance-based compensation.

Americas PT

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	889.0			$	792.6				12.2	%			12.0	%
Fee-based income (included in revenue)			9.0				9.4				(4.5	)			(4.9	)
Gross profit			140.0				125.1				12.0				11.8
SG&A expenses excluding restructuring charges			93.7				100.9				(7.0	)
Restructuring charges			—				1.0				(100.0	)
Total SG&A expenses			93.7				101.9				(8.0	)			(8.2	)
Earnings from operations			46.3				23.2				100.1
Gross profit rate			15.8	%			15.8	%		—		pts.
Expense rates (excluding restructuring charges):
% of revenue			10.5				12.7				(2.2	)
% of gross profit			67.0				80.7				(13.7	)
Operating margin			5.2				2.9				2.3

The change in Americas PT revenue from services reflected an increase in hours worked of 9%, combined with an increase in average billing rates of 3% on a constant currency basis. Americas PT revenue represented 18% of total Company revenue in both 2010 and 2009.

The Americas PT gross profit rate was unchanged, as higher state unemployment taxes to the extent not recovered through pricing were offset by the impact of HIRE Act payroll tax benefit. The HIRE Act benefit impacted the gross profit rate by 60 basis points. The decrease in SG&A expenses was primarily due to lower salary expense related to reductions in personnel.

EMEA Commercial

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	872.0			$	895.2				(2.6	)%			(0.9	)%
Fee-based income (included in revenue)			19.1				16.6				15.9				16.0
Gross profit			141.0				140.2				0.6				2.3
SG&A expenses excluding restructuring charges			130.5				150.3				(13.2	)
Restructuring charges			2.7				15.6				(82.8	)
Total SG&A expenses			133.2				165.9				(19.7	)			(18.9	)
Asset impairments			1.5				—			NM
Earnings from operations			6.3				(25.7	)		NM
Gross profit rate			16.2	%			15.7	%		0.5		pts.
Expense rates (excluding restructuring charges):
% of revenue			15.0				16.8				(1.8	)
% of gross profit			92.6				107.2				(14.6	)
Operating margin			0.7				(2.9	)			3.6

The change in revenue from services in EMEA Commercial resulted from a decrease in average hourly bill rates of 6% on a constant currency basis, partially offset by a 5% increase in hours worked. The decrease in the constant currency average hourly bill rates for EMEA Commercial was due to a change in the mix from countries with higher average bill rates to those with lower average bill rates, such as Russia and Portugal. During 2009, EMEA Commercial completed a significant restructuring within the United Kingdom and exited the staffing business in Spain, Turkey, Ukraine and Finland, and in 2010 exited the staffing business in the Czech Republic. Exiting these locations accounted for approximately 4 percentage points of the 2010 constant currency decline. EMEA Commercial revenue represented 18% of total Company revenue in 2010 and 21% in 2009.

The change in the gross profit rate is due to higher fee-based income, as well as higher temporary margins as a result of business and customer mix. The restructuring actions and other continuing cost-savings initiatives, partially offset by higher incentive-based compensation, resulted in the decrease in SG&A expenses.

EMEA PT

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	147.6			$	141.9				4.0	%			6.7	%
Fee-based income (included in revenue)			15.0				15.7				(4.3	)			(4.1	)
Gross profit			38.7				37.8				2.9				4.8
SG&A expenses			36.9				40.6				(9.3	)			(8.2	)
Earnings from operations			1.8				(2.8	)		NM
Gross profit rate			26.3	%			26.6	%		(0.3		)pts.
Expense rates:
% of revenue			25.0				28.6				(3.6	)
% of gross profit			94.8				107.6				(12.8	)
Operating margin			1.4				(2.0	)			3.4

The change in revenue from services in EMEA PT resulted from a 7% increase in hours worked. EMEA PT revenue represented 3% of total Company revenue in both 2010 and 2009.

The decrease in the EMEA PT gross profit rate was primarily due to decreases in fee-based income. SG&A expenses declined due to reductions in personnel.

APAC Commercial

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	355.3			$	284.9				24.7	%			12.9	%
Fee-based income (included in revenue)			11.4				9.7				16.6				5.6
Gross profit			48.4				41.6				16.2				4.6
SG&A expenses excluding restructuring charges			45.1				44.6				1.3
Restructuring charges			0.5				1.6				(66.5	)
Total SG&A expenses			45.6				46.2				(1.0	)			(10.7	)
Earnings from operations			2.8				(4.6	)		NM
Gross profit rate			13.6	%			14.6	%		(1.0		)pts.
Expense rates (excluding restructuring charges):
% of revenue			12.7				15.6				(2.9	)
% of gross profit			93.3				107.0				(13.7	)
Operating margin			0.8				(1.6	)			2.4

The change in revenue from services in APAC Commercial resulted from an increase in hours worked of 18%, partially offset by a decrease in average hourly bill rates of 5% on a constant currency basis. The decrease in the constant currency average hourly bill rates for APAC Commercial was primarily due to the decision to exit the staffing market in Japan. Excluding Japan, the average bill rate increased by 1% on a constant currency basis. APAC Commercial revenue represented 7% of total Company revenue in both 2010 and 2009.

The decrease in the APAC Commercial gross profit rate was due to a decrease in temporary gross profit rates due to growth in lower margin business, primarily in Australia and Malaysia, as well as our decision to exit the staffing business in Japan. The decision to exit the staffing business in Japan impacted constant currency revenue and SG&A expense comparisons by approximately 8 percentage points and 11 percentage points, respectively.

APAC PT

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	32.5			$	25.4				28.2	%			16.8	%
Fee-based income (included in revenue)			10.5				3.8				172.1				156.3
Gross profit			13.9				7.7				81.3				68.3
SG&A expenses			17.0				9.2				85.1				72.0
Earnings from operations			(3.1	)			(1.5	)			(104.5	)
Gross profit rate			42.7	%			30.2	%		12.5		pts.
Expense rates:
% of revenue			52.2				36.2				16.0
% of gross profit			122.3				119.8				2.5
Operating margin			(9.5	)			(6.0	)			(3.5	)

The change in revenue from services in APAC PT resulted from an increase in fee-based income and an increase in hours worked of 6%, partially offset by a decrease in average hourly bill rates of 13% on a constant currency basis. The decrease in the constant currency average hourly bill rates for APAC PT was due to a change in mix from countries with higher average bill rates to those with lower average bill rates, such as India, as well as the decision to exit the staffing market in Japan. APAC PT revenue represented 1% of total Company revenue in both 2010 and 2009.

The change in the APAC PT gross profit rate was due primarily to increases in fee-based income. SG&A expenses increased, due primarily to hiring of permanent placement recruiters.

OCG

														Constant
		2010				2009								Currency
		(52 Weeks)				(53 Weeks)				Change				Change
		(In millions of dollars)
Revenue from services		$	254.8			$	219.9				15.8	%			15.6	%
Fee-based income (included in revenue)			25.6				24.4				4.9				3.9
Gross profit			60.0				59.7				0.2				(0.1	)
SG&A expenses excluding restructuring charges			77.5				69.6				11.3
Restructuring charges			0.1				1.9				(96.0	)
Total SG&A expenses			77.6				71.5				8.5				8.1
Earnings from operations			(17.6	)			(11.8	)			(50.8	)
Gross profit rate			23.5	%			27.2	%		(3.7		)pts.
Expense rates (excluding restructuring charges):
% of revenue			30.4				31.7				(1.3	)
% of gross profit			129.5				116.6				12.9
Operating margin			(7.0	)			(5.3	)			(1.7	)