Category: Business

The Week Ahead – FOMC Minutes and CPI Late Week

Posted on by phoffman@channelchek.com

Potential for a Change in Sentiment if Suprised by this Week’s FOMC Minutes, Jobs, and Inflation

When the world’s trading partners move interest rates in concert with each other, their actions are much smoother, this is because currency flows, which influence exchange rates, are less inclined to reprice dramatically. The U.S. has been comparatively aggressive in raising rates. This is part of why the Bank of England (BOE) shoring up its bond market, and the Japanese hawkish hesitancy has created disruptions and a historically strong U.S. dollar.

This week begins with Columbus Day; the bond markets are closed, and so are the banks. Stock market participants shouldn’t expect guidance from interest rate moves related to bond trading. The futures market will be active; moves from Interest rate futures from tickers such as ZB=F can be helpful while bonds are silent.  

Monday 10/10

  • 1:30 PM ET Federal Reserve Vice Chair Lael Brainard discusses restoring price stability at the National Association of Business Economics (NABE). Attend via Zoom.
  • Columbus Day, the potential for thin trading and big price swings.

Tuesday 10/11

  • NY Fed 5-year inflation expectations for one- and three-year-ahead inflation expectations had posted steep declines in August, from 6.2 percent and 3.2 percent in July to 5.7 percent and 2.8 percent, respectively. Investors will be watching to see if the declining expectations continue.
  • NFIB Small Business Optimism Index (NFIB), is a monthly survey that asks small businesses if they have plans to increase employment, plans to expand capital spending, increase inventories, expect economic improvement, expect higher retail sales, is now a good time to expand, current job openings, and earnings trends in their business. Health in small businesses can be an indicator of overall economic health and stock market strength. This report is released at 6 am last month, the index was 91.8, and the consensus is 91.5.
  • The Labor Department’s JOLTS has, in recent years, been referred to as the “Quits” report. The report tracks monthly changes in job openings and contains rates of hiring and quitting. The word JOLTS stands for Job Openings and Labor Turnover Survey.

Wednesday 10/12

  • The Producer Price Index (PPI) from the Bureau of Labor Statistics (BLS) is an inflation gauge that measures the average change over time in the prices received by U.S. producers of goods and services. The prices are typically considered input costs for final products and can impact CPI, it may also impact company costs of production and, therefore, profits. The trend has been lower, YOY PPI has been running at 8,7%, the consensus is for 8.4%.
  • The Mortgage Bankers Association (MBA) creates a statistic from several mortgage loan indexes. The Mortgage Applications index measures applications at mortgage lenders. It’s considered a leading indicator and is especially important for single-family home sales and housing construction. Both are considered foundational in a strong economy. L
  • ast week, the Purchase Index was -12.6%.
  • 10 Year Treasury Note Auction is held in the middle of each month and settles on or around the 15th (depending on weekends). The yield is a benchmark for 30-year mortgages and has recently been noted by investment markets because it has been trading at a yield lower than shorter maturities; this inversion of the yield curve has some market players suggesting a recession is expected in the future. Any surprises at the auction will reverberate through the stock market.
  • FOMC minutes (September meeting) – We’d all love to be a fly on the wall at the Fed’s meetings. The minutes detail the issues debated and the consensus among policymakers. This, of course, has ramifications if the contents of the minutes demonstrate an above-average hawkish or dovish change in tone. The Federal Open Market Committee issues minutes of its latest meeting three weeks after the meeting.

Thursday 10/13

  • US Consumer Price Index (CPI) is the inflation indicator most widely broadcast. With inflation being a primary focus, this will be the big number coming out this week. The number represents a basket of goods considered typical for an urban consumer and is taken as the change in the cost of that basket of goods. A percentage is derived from the change. CPI is also reported with food and energy removed as it is considered that other non-economic factors influence these prices. The August report indicated CPI rose 0.6% for the month and 8.3% YOY. Expectations are for a slowing to 0.4% for September and a YOY rate of 8.1%.
  • U.S. Jobless Claims, which represent the prior weeks of employment are expected to have increased to 225,000 from 219,000. From jobless claims, investors can gain a sense of how tight or how loose the job market is. If wage inflation takes hold, interest rates will likely rise, and bond and stock prices will fall.  Remember, the lower the number of unemployment claims, the stronger the job market, and vice versa.

Friday 10/14

  • U.S. retail sales have been lackluster, neither rising nor falling. As we head toward Thanksgiving and Black Friday sales levels, the market will be taking more and more interest in how strong the consumer is. Expectations for September are a rise of 0.2 percent overall, down 0.1 percent when excluding vehicles and up 0.4 when also excluding gasoline. The number is released at 8:30 am.
  • Business inventories are expressed in dollar value held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity. Rising inventories can be an indication of business optimism that sales will be growing in the coming months. However, if unintended inventory accumulation occurs, then production will probably have to slow while those inventories. The consensus is for a 0.9% increase after only increasing 0.6% for August.
  • U.S. Baker Hughes Rig Count tracks weekly changes in the number of active operating oil & gas rigs. Rigs that are not active are not counted. Components in the data are the United States and Canada, with a separate count for the Gulf of Mexico (which is a subset of the U.S. total). A significant increase or decrease could have ramifications on energy costs in North America. The rig count for the prior period in North America was 977, with 762 of those being from the U.S.

What Else

It is a light week for economic releases and Fed governor addresses, but late week could see a dramatic change in market sentiment as the Fed Minutes, CI, and even employment has the potential to impact thinking.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/newsevents/calendar.htm

http://global-premium.econoday.com/byweek.asp?cust=global-premium

https://www.channelchek.com/news-channel/noble_on_the_road___noble_capital_markets_in_person_roadshow_series

Musk, The Art of the Deal

Posted on by aweinsoff@channelchek.com
OnInnovation (Flickr)

Musk Plans to Go Ahead with Original Price of $54.20 a Share

All successful businessmen have their own style of negotiating. Elon Musk is better known as a whiz-kid/idea-man than a wheeler-dealer negotiator. But, he didn’t become the wealthiest person on planet Earth without being a master persuader. There’s no telling how much the on-again, off-again deal to buy Twitter was a “chess match” the entrepreneur was playing to accomplish a goal. Or if he backed himself into a corner that he could not get out of. In the end, Twitter had initially been fighting hard not to be bought for 54.20 a share, Twitter later wound up suing to be taken private for $54.20 a share. Assuming the final deal is near, this is either masterful brilliance or a costly mistake for the entrepreneur.

Will the Musk Twitter Deal Finally be Consummated?

Elon Musk, according to multiple news outlets, wrote to Twitter on Tuesday and offered to follow through with the deal to buy the company. The terms were the same as the original offer by the billionaire. If this is the final chapter of the interplay between Musk, who heads several companies, and Twitter, it will end the seven-month-long legal saga. It will also be the only company Musk owns that he has not built from the ground up.

Not coming to an agreement now would be difficult. Musk and Twitter are scheduled to meet in a Delaware court on October 17 as Twitter is looking to force the billionaire to purchase the company for the same terms Musk is said to have proposed in his letter.

As of 2:30 on Tuesday, the shares of Twitter are up 12.67%. The price is 11.50% below Musk’s per-share offering price.

Key Details

Twitter accepted Musk’s unsolicited takeover bid on April 25, three weeks after the billionaire disclosed he purchased a 9.2% stake in the company. This followed a short period where Twitter employees and a number of advocacy groups with names like Stop the Deal campaigned to prevent the purchase.

Musk is a uses the microblogging social media platform to communicate with his 108 million followers. However, he loathes the platform’s content moderation policy and wishes to change it to a more open, less moderated social media site. This was the reason given to his followers as to why he’d buy Twitter, to “fix it.”

He later said he was backing out of his offer, the reason was his due diligence allegedly uncovered a large number of fake and spam accounts on Twitter. Elon formally requested to be let out of the deal on July 8, using the reason Twitter lowballed the number of bot accounts in its public filings.

Twitter sued Musk four days later and argued his reasons for backing out of the deal were invalid. The company filed at a state court in Delaware to force Musk to buy Twitter at the originally agreed-upon terms. As the trial date drew nearer, more revelations about both Twitter and Musk emerged. One high drama event was Musk’s lawyers suggesting his case was strengthened by a whistleblower complaint from Twitter’s former head of security. The complaint alleged the company knowingly misled regulators and investors about the number of bots on the site.

The suit, if it had proceeded in two weeks, may have gotten messy as Musk’s texts between himself and  public figures like Twitter co-founder Jack Dorsey, popular podcaster Joe Rogan, and Florida Governor DeSantis were to be part of the suit.

Other Impacted Stocks

Late afternoon on Tuesday, Tesla (TSLA) stock was trading 2.25% higher on the day but off its highs from before the news. Digital World Acquisition Corp., the SPAC that has agreed to merge with Trump Media and its platform, Truth Social, is down 3.16% on the day, having fallen sharply as word spread about Musk’s plans to buy Twitter.

Paul Hoffman

Managing Editor, Channelchek

What To Watch Out For October 3rd – October 7th, 2022

Posted on by aweinsoff@channelchek.com

Monitoring the Week Ahead – Week Ending October 8th

Today is the first trading week of the new quarter and the first in October. It’s the start of what many hope will be a market turnaround and a strong positive close to the year.

Taking the new month and new quarter one day at a time, below are events scheduled this week that could prove important to our Channelchek subscribers. US data and events will be heavy most days this week, opening with the ISM Manufacturing Survey Monday and ending with monthly Employment on Friday. A variety of Fed Governors will be talking on a number of critical subjects, those talks most likely to move markets are listed.

All times are Eastern Time.

Monday 10/3

  • Noble Capital Markets in Chicago, interview E.W. Scripps (attend live)
  • 9 am Raphael Bostick, Federal Reserve Bank of Atlanta, President/CEO, Discusses technology and Disruption. Follow
  • US Construction Spending 10 am –  This reports the dollar value of new construction activity on residential, non-residential, and public projects. Construction spending fell 0.4 percent in July, marking the sixth straight lower-than-expected result. August’s consensus is a 0.1 percent decline.
  • ISM Manufacturing Index 10 am –  The survey gathers information from managers about the general direction (tracked in volumes) of production, new orders, order backlogs, inventories, employment, supplier deliveries, exports, and imports. It was 52.8 in each of the last two reports, this shows the ISM manufacturing index has stabilized at a level of modest growth. September’s consensus is 52.4.
  • TD Ameritrade’s Investor Movement Index 12:30 – The Investor Movement Index, (IMX), is a behavior-based index created by TD Ameritrade designed to shed insight into Main Street sentiment. The IMX strives to measure what investors are actually doing and how they are positioned in the markets. The index is a snapshot, but when compared to previous periods may be helpful to uncover trends or changes in focus.

Tuesday 10/4

  • Noble Capital Markets in Chicago, interview E.W. Scripps in Milwaukee (attend live)
  • Factory orders are a leading indicator. It is the dollar amount of new orders for both durable and nondurable goods. Factory orders are seen gaining 0.2 percent in August, which would follow a 1.0 percent decline in July. Durable goods orders, which have already been released and are one of two major components of this report, fell 0.2 percent in the month.
  • The Labor Department’s JOLTS has in recent years been referred to as the “Quits” report. The report tracks monthly changes in job openings and contains rates on hiring and quitting. The word JOLTS stands for Job Openings and Labor Turnover Survey.

Wednesday 10/4

  • OPEC meeting. OPEC meetings and the announcements post meeting with changes to production quotas, raising or lowering the global supply of crude oil can have a dramatic impact on energy prices, which currently have been feeding into inflation and business costs. The Organization of Petroleum Exporting Countries and associate members meet monthly.
  • U.S. MBA Mortgage Applications at 7 am. This is a gauge of both the demand for housing and economic momentum. Families and individuals are usually feeling comfortable and confident in their own financial position to buy a house. The changes in housing provide data that has a significant multiplier effect acting on the economy as other purchases follow. The indicated change in economic activity impacts many industries and investment markets.
  • U.S. International Trade in Goods and Services at 8:30. Trade numbers are available by export, import, and trade balance for six principal end-use commodity categories. The numbers will be for August and are expected to show a deficit of $68.0 billion for total goods and services trade which would compare with a $70.6 billion deficit in July. Advance data on the goods side of August’s report showed a nearly $3 billion narrowing in the deficit.
  • The U.S. PMI Composite (Final) or Purchasing Managers Index released at 9:45 am is based on a monthly survey collected from over 400 U.S. companies. The companies provide a leading indicator of what is occurring in the private sector economy.  At 49.2, the first indicator for September showed improvement from August’s 43.7. No change at 49.2 is the expectation for the final.
  • The U.S. Energy Information Administration (EIA) Petroleum report 10:30 am. This report provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. The level of inventories helps determine prices for petroleum products. The report is comprehensive and viewed by people in the industry at all levels.

Thursday 10/6

  • The Challenger Job-Cut Report at 7:30 am provides insight into where layoffs are occurring. There is industry and state-level detail, which makes it more insightful than a weekly jobless claims reports.
  • The Jobless Claims report is released each Thursday at 8:30. Jobless claims for the October 1 week are expected to come in at 203,000 versus 193,000 in the prior week, which was much lower than expected.
  • The U.S. Energy Information Administration (EIA) Natural Gas report 10:30 am. This report provides weekly information on natural gas inventories in the U.S., whether produced here or abroad. With winter approaching in the northern hemisphere, unresolved natural gas distribution issues in Europe have heightened the attention paid to this report.

Friday 10/7

  • U.S. Employment situation at 8:30 am is possibly the most closely followed of all economic indicators. It establishes the official unemployment rate. the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey, which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines, and the household survey, which interviews 60,000 households. August was the fifth straight month, and in seven of the last eight, payroll growth exceeded expectations. One widely followed estimate is that nonfarm payrolls rose 250,000 in September.
  • U.S. Wholesale Inventories at 10 am. Wholesale trade measures the dollar value of sales made and inventories held by merchant wholesalers. It is a component of business sales and inventories
  • Federal Reserve Governor Lisa Cook, 1 pm address at Peterson Institute for International Economics. Watch
  • U.S. Consumer Credit, released at 3 pm is expected to show an increase to $25.0 billion in August versus a $23.8 billion increase in July.

What Else

The U.S. markets have been taking good news as bad and bad news as good when it relates to the economy. The reasons are fear that if the economy shows too much strength, the Fed will continue its aggressive fight to tame it, possibly overshooting.

A quarterly report Metal & Mining Q3 was released Monday by Noble Capital Markets. Check back with Channelchek this week for other quarter-end industry reports, including energy expected on Tuesday.

When investing and trading, always be aware of your surroundings and what may be lurking in the next influential speech, event, or report. Wishing you all a profitable week.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/newsevents/calendar.htm

https://www.channelchek.com/news-channel/noble_on_the_road___noble_capital_markets_in_person_roadshow_series

http://global-premium.econoday.com/byweek.asp?cust=global-premium

https://www.marketwatch.com/economy-politics/calendar

Musk’s Attempt to Rein In the Securities and Exchange Commission

Posted on by cpatches
Image Credit:  Wired Photostream (Flickr)

Musk’s Lawyers Call SEC Agreement a “Government Imposed Muzzle”

Elon Musk has had enough of being gagged. It has been over four years since he tweeted to his 22 million Twitter followers that he could take Tesla private, at $420 per share (a substantial premium to its trading price at the time), and that funding for the transaction had been secured, adding the only remaining uncertainty was a shareholder vote. On September 27, 2018, the SEC charged Musk, CEO of Tesla Inc., with securities fraud for a series of false and misleading tweets about a potential transaction to take Tesla (TSLA) private. 

Part of the resolution with the Commission was that the CEO and chairman would not use Twitter and mention business without each tweet being vetted by a lawyer. Apparently, the provision restricting open communication with followers is difficult for Elon, who is quite active on the social media microblog platform. The easier part is the $40 million in cash that was part of the settlement ($20mm Musk, $20mm Tesla), and his resignation as Chairman of the Board.

In a brief filed with the 2nd U.S. Circuit Court of Appeals in Manhattan, on the fourth anniversary of the SEC’s charges, Musk’s lawyers called the pre-approval mandate a “government-imposed muzzle” that inhibited and chilled his lawful speech on a broad range of topics. The brief also said the requirement imposed by the SEC violated the U.S. Constitution and undermined public policy by running “contrary to the American principles of free speech and open debate.”

The SEC is expected to respond by filing its own brief with the appeals court.

Elon had filed an appeal previously to terminate the settlement agreement he had as CEO of Tesla with the SEC. That request was denied in April of this year. The denial was awkward as Mr. Musk was moving forward to acquire Twitter for $44 billion.

When on November 6, 2021 Musk asked Twitter followers whether he should sell 10% of his Tesla stake to cover tax bills on stock options, the SEC opened a probe and subpoenaed documents related to his compliance with the earlier settlement.

It’s time to rein in the SEC, according to the filing by Musk’s attorneys. It said the ruling is keeping Musk under “constant threat” as the Commission might reject his view as to which tweets require pre-approval from legal staff.

“Under the shadow of the consent decree, the SEC has increasingly surveilled, policed, and attempted to curb Mr. Musk’s protected speech that does not touch upon the federal securities laws,” the lawyers wrote.

In other events related to Twitter and the Tesla founder, Twitter has sued Musk to complete his purchase of the company. A nonjury trial is scheduled for October 17 in Delaware Chancery Court.

Paul Hoffman Managing Editor, Channelchek

Sources

https://www.sec.gov/news/press-release/2018-219

https://www.sec.gov/news/press-release/2018-226

https://www.reuters.com/legal/elon-musk-seeks-narrow-sec-consent-decree-end-pre-approval-tweets-2022-09-28/

https://www.politico.com/news/2022/04/27/judge-rejects-elon-musks-motion-sec-consent-decree-tweets-00028341

In-Person “Meet the Management” Series

Posted on by cpatches

Face-to-face with c-suite executives

Noble Capital Markets, a full-service SEC / FINRA registered broker-dealer, dedicated exclusively to serving underfollowed small/microcap companies through investment banking, wealth management, trading & execution, and equity research activities (and the provider of equity research on Channelchek), is pleased to announce the return of in-person meetings with executives from companies listed on Channelchek. Qualified Investors, at all levels, as well as registered representatives, are welcome to attend these breakfasts and lunches at no cost, and with no obligation to invest. LIMITED SEATING AVAILABILITY.  

To request attendance, click the registration link(s) below. A Noble representative will contact you to request qualification information, and to provide you full location and attendance details (based upon availability). NOTE: All attendees must be preregistered and qualified; no admittance of unregistered guests at the door. Limited opportunity to attend future meetings for no-shows. For general MEET the MANAGEMENT inquiries, please contact Dustin Cronk, Head of Institutional Relationships at Noble Capital Markets at dcronk@noblecapitalmarkets.com

Release – Kelly to Participate in the 15th Annual Barrington Research Virtual Fall Conference

Posted on by Admin



Kelly to Participate in the 15th Annual Barrington Research Virtual Fall Conference

Research, News, and Market Data on Kelly

August 31, 2022

TROY, Mich., 
Aug. 31, 2022 /PRNewswire/ — 
Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced it will participate in the 15th Annual 
Barrington Research Virtual Fall Conference on 
Thursday, September 8, 2022.

Peter Quigley , president and CEO,  Olivier Thirot , executive vice president and chief financial officer, and  James Polehna , chief investor relations officer and corporate secretary, will participate in virtual one-on-one meetings. A copy of Kelly’s investor presentation is also available at kellyservices.com.

About Kelly®

Kelly Services, Inc.
 (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, 
Light Industrial
, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was 
$4.9 billion. Visit 
kellyservices.com and let us help with what’s next for you.

KLYA-FIN

ANALYST & MEDIA CONTACT:
James Polehna
(248) 244-4586
james.polehna@kellyservices.com

 


When Corporate Governance Gets Sticky

Posted on by Admin 



Image Credit: NASA HQ Photo (Flickr)


Musk Confounds Experts in Corporate Governance Best Practices

According to the Chartered Governance Institute, “Good quality, ethical decision-making builds sustainable businesses and enables them to create long-term value more effectively.” So it’s no surprise that the head of start-up Neuralink (Elon Musk) has caused so many governance experts to try to wrap their brains around the decision he and a coworker made to have children together.

Often referred to as the richest man in the world, co-founder of Paypal (PYPL), SpaceX owner, Tesla (TSLA) CEO, and Boring Company President, Elon Musk has proven himself successful at managing unique companies through its growth phase. He’s respected worldwide, and a single snarky tweet from the South African-born American is powerful enough to change the fortunes of investors in crypto and some stocks.

Lately, the 51-year-old has been the subject of debate among those that report on company ESG (environmental, social, governance) standards. No, not because he smoked pot on The Joe Rogan Show, although in his role at SpaceX, the government did have some questions. This debate began after he and a direct report at Neuralink became the parents of twins back in November 2021. Neuralink is a less-known Musk creation with about 300 employees. It is developing chips that connect the human brain directly to machines.

The director-level subordinate has reportedly told coworkers that she was not and is not involved romantically with the boss. She has told them the children with Musk were conceived through in-vitro fertilization (IVF).

To avoid possible conflicts of interest, Neuralink’s employee handbook prohibits dating, “personal relationships,” and “close personal friendships” between employees in a direct supervisory dynamic. This is common language in employees’ agreements with their employer. It’s also considered best practice in corporate governance for those in significant management positions. It’s not uncommon for a “fling” to cost a CEO, or subordinate their job. The chief concern is conflicts of interest, putting the company and its investors first.


Musk Again Has Found a Different Path

But the reported circumstances surrounding the Neuralink babies are so unusual that Reuters reached out to corporate governance counselors and asked them to review the company policy and circumstances presented by the two involved. This is clearly a situation with many gray areas. There was no agreement amongst the experts, as with many other things that mix business and personal ethics.

Nell Minow, vice chair of corporate governance consultancy ValueEdge Advisors, told Reuters about the Code of Conduct, “Whatever lawyer wrote this language did not contemplate this situation.” Adding the facts appeared to “fall between the cracks” of the policy’s intent to avoid conflicts of interest due to worker relationships.

Four of the corporate governance experts said they believed the two producing children, even through IVF, is a “personal relationship” or “close friendship,” which Neuralink’s code of conduct requires to be disclosed to a “people operations manager.”  The code does not define a “close friendship” but defines a personal relationship as one where the individuals have a “continuing relationship of a romantic or intimate nature and who are not married to each other.”

Gabriel Rauterberg, a corporate law professor at the University of Michigan, told Reuters, “You’re layering intimate familial bonds over professional relationships,” he explained, “There is always the worry that someone with greater power will use their professional power in ways that are inappropriate.”

The remaining five corporate governance aficionados either did not think the parents’ arrangement was a breach under the Neuralink policy or were stumped by how far outside the box it was for them.

Joan Heminway, a business professor at the University of Tennessee’s law school, pointed out that one can’t demonstrate that the coworkers are close personally, despite the IVF matter, she said, “That’s the new wrench here.”

Usha Rodrigues, a professor at the University of Georgia’s law school, said the matter “may fall under ‘close friendship’ if there is an ongoing, co-parenting type relationship, but that is subject to interpretation.”

 

Business as “Usual”

The extent of Musk’s involvement in the life of his young twins is unclear. A court filing shows they asked for the children to take his last name; the parents also listed the same address in Texas.

Neuralink has accepted the new mom’s description that it is a non-romantic relationship, and she continues in her role as director of operations and special projects. The two still function as a team inside the workplace, each running internal and external meetings. 


Take Away

It’s difficult not to have an opinion on whether non-romantic parenting is an intimate relationship between coworkers or if such a policy is good corporate governance. Perhaps it is a policy that serves one company best yet would be a disaster imposed on another.

We’d like to know what you think. Leave a comment under this article on Channelchek’s Twitter account, and hit the “Follow” button while you’re there.

Paul Hoffman

Managing Editor, Channelchek

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Sources

https://www.cgi.org.uk/about-us/policy/what-is-corporate-governance

https://www.reuters.com/business/musk-tests-limits-governance-by-having-children-with-aide-2022-08-26/

Stay up to date. Follow us:

 

Release – Kelly Reports Second-Quarter 2022 Earnings

Posted on by Admin



Kelly Reports Second-Quarter 2022 Earnings

Research, News, and Market Data on Kelly

Kelly Reports Second-Quarter
2022 Earnings

August 11, 2022

  • Q2 revenue up 0.7% from a
    year ago; 2.7% in constant currency
  • Q2 operating earnings of $8.2
    million     and earnings per share of $0.06 down
    from a year ago primarily due to a non-cash impairment charge related to
    our operations in Russia
  • Adjusted operating earnings
    of $22.3 million; up
    63% from a year ago
  • Completed the acquisition
    of Pediatric Therapeutic Services in May to extend our leading position in
    K-12 education

TROY, Mich., 
Aug. 11, 2022 /PRNewswire/ — 
Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced results for the second quarter of 2022.

Peter Quigley , president and chief executive officer, announced revenue for the second quarter of 2022 totaled 
$1.3 billion, a 0.7% increase, or 2.7% in constant currency, compared to the corresponding quarter of 2021. Revenue improved year-over-year in the quarter reflecting increased customer demand compared to the COVID-19-impacted prior year period, as well as the impact of the recent acquisitions of RocketPower, a recruitment process outsourcing firm, and Pediatric Therapeutic Services, a specialty firm providing in-school therapy services.

Earnings from operations in the second quarter of 2022 totaled 
$8.2 million
, compared to 
$13.7 million
 reported in the second quarter of 2021. Earnings in the second quarter of 2022 include an asset impairment charge related to our decision to transition our business in 
Russia and a gain on sale of assets related to the disposition of under-utilized real property located in 
the United States. Excluding those items, adjusted earnings from operations were 
$22.3 million compared to 
$13.7 million in the second quarter of 2021. Earnings improved as a result of revenue growth combined with structural improvement in gross profit rate and expense leverage.

Earnings per share in the second quarter of 2022 were 
$0.06 compared to earnings per share of 
$0.60 in the second quarter of 2021. Included in the earnings per share in the second quarter of 2022 is a 
$0.48 per share asset impairment charge, net of tax, related to our decision to transition our business in 
Russia and an 
$0.08 per share gain on sale of assets, net of tax, related to the disposition of under-utilized real property located in 
the United States. Included in the second quarter of 2021 is earnings per share of 
$0.11 gain, net of tax, related to non-cash gains, net of tax, on 
Persol Holding
 common shares. On an adjusted basis, earnings per share were 
$0.45 in the second quarter of 2022 compared to 
$0.49 in the corresponding quarter of 2021. Adjusted earnings per share in the second quarter of 2022 declined as a result of higher 2022 tax expense compared to the same period in 2021.

“We saw solid demand for Kelly’s specialties in the second quarter and, importantly, we are successfully translating revenue into strong gross profit growth. We drove significant improvement in our gross profit rate year over year, due to our continued positive shift in business mix toward higher-margin products and specialties boosted by our specialty acquisitions,” said Quigley. “We have significant capital available to enable growth, and we are putting that capital to work to drive shareholder value. While there is some economic uncertainty in the second half of the year, we are confident that our focused and well-capitalized specialization strategy will continue to deliver value in 2022 and beyond.”

Kelly also reported that on 
August 10, its board of directors declared a dividend of 
$0.075 per share. The dividend is payable on 
September 7, 2022 to stockholders of record as of the close of business on 
August 24, 2022.

In conjunction with its second-quarter earnings release, Kelly has published a financial presentation on the Investor Relations page of its public website and will host a conference call at 
9 a.m. ET on August 11 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Internet:
Kellyservices.com

Via the Telephone
(877) 692-8955 (toll free) or (234) 720-6979 (caller paid)
Enter access code 5728672
After the prompt, please enter “#”

A recording of the conference call will be available after 
2:30 p.m. ET on 
August 11, 2022
, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 8237932#. The recording will also be available at kellyservices.com during this period.

This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These factors include, but are not limited to, changing market and economic conditions, the impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, disruption in the labor market and weakened demand for human capital resulting from technological advances, competition law risks, the impact of changes in laws and regulations (including federal, state and international tax laws), unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, or the risk of additional tax liabilities in excess of our estimates, our ability to achieve our business strategy, our ability to successfully develop new service offerings, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with government or government contractors, the risk of damage to our brand, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, risks associated with conducting business in foreign countries, including foreign currency fluctuations, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company’s filings with the 
Securities and Exchange Commission. Actual results may differ materially from any forward-looking statements contained herein, and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

About Kelly®

Kelly Services, Inc.
 (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, 
Light Industrial
, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was 
$4.9 billion. Visit 
kellyservices.com and let us help with what’s next for you.

KLYA-FIN

MEDIA CONTACT:

ANALYST CONTACT:

Jane
Stehney

James
Polehna

(248) 765-6864

(248) 244-4586

stehnja@kellyservices.com

james.polehna@kellyservices.com

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE 13 WEEKS ENDED JULY
3, 2022 AND JULY 4,
2021

(UNAUDITED)

(In millions of dollars except per share data)

%

CC %

2022

2021

Change

Change

Change

Revenue
from services

$

1,267.3

$

1,258.1

$

9.2

0.7

%

2.7

%

Cost of services

1,004.9

1,027.1

(22.2)

(2.2)

Gross
profit

262.4

231.0

31.4

13.6

15.6

Selling, general and administrative expenses

240.1

217.3

22.8

10.6

12.3

Impairment of assets held for sale

18.5

—

18.5

NM

Gain on sale of assets

(4.4)

—

(4.4)

NM

Earnings
from operations

8.2

13.7

(5.5)

(40.6)

Gain on investment in Persol Holdings

—

6.3

(6.3)

NM

Other expense, net

(1.1)

(0.3)

(0.8)

(350.6)

Earnings
before taxes and equity in net earnings (loss) of affiliate

7.1

19.7

(12.6)

(64.1)

Income tax expense (benefit)

4.9

(2.6)

7.5

282.9

Net
earnings before equity in net earnings (loss) of affiliate

2.2

22.3

(20.1)

(90.1)

Equity in net earnings (loss) of affiliate

—

1.7

(1.7)

NM

Net
earnings

$

2.2

$

24.0

$

(21.8)

(90.8)

Basic
earnings  per share

$

0.06

$

0.60

$

(0.54)

(90.0)

Diluted
earnings per share

$

0.06

$

0.60

$

(0.54)

(90.0)

STATISTICS:

Permanent placement revenue (included in revenue from services)

$

24.8

$

18.6

$

6.2

33.2

%

36.3

%

Gross profit rate

20.7

%

18.4

%

2.3

pts.

Conversion rate

3.1

%

5.9

%

(2.8)

pts.

Adjusted EBITDA

$

31.7

$

22.2

$

9.5

Adjusted EBITDA margin

2.5

%

1.8

%

0.7

pts.

Effective income tax rate

68.8

%

(13.5)

%

82.3

pts.

Average number of shares outstanding (millions):

     Basic

37.9

39.4

     Diluted

38.2

39.5

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE 26 WEEKS ENDED JULY
3, 2022 AND JULY 4,
2021

(UNAUDITED)

(In millions of dollars except per share data)

%

CC %

2022

2021

Change

Change

Change

Revenue
from services

$

2,563.7

$

2,464.0

$

99.7

4.0

%

5.8

%

Cost of services

2,042.7

2,019.7

23.0

1.1

Gross
profit

521.0

444.3

76.7

17.3

19.0

Selling, general and administrative expenses

476.2

420.0

56.2

13.4

14.8

Impairment of assets held for sale

18.5

—

18.5

NM

Gain on sale of assets

(5.3)

—

(5.3)

NM

Earnings
from operations

31.6

24.3

7.3

29.8

Gain (loss) on investment in Persol Holdings

(67.2)

36.3

(103.5)

NM

Loss on currency translation from liquidation of subsidiary(1)

(20.4)

—

(20.4)

NM

Other income (expense), net

1.7

(3.7)

5.4

147.2

Earnings
(loss) before taxes and equity in net earnings (loss) of affiliate

(54.3)

56.9

(111.2)

NM

Income tax expense (benefit)

(8.1)

7.9

(16.0)

(204.0)

Net
earnings (loss) before equity in net earnings (loss) of affiliate

(46.2)

49.0

(95.2)

NM

Equity in net earnings (loss) of affiliate

0.8

0.6

0.2

35.7

Net
earnings (loss)

$

(45.4)

$

49.6

$

(95.0)

NM

Basic
earnings (loss) per share

$

(1.19)

$

1.25

$

(2.44)

NM

Diluted
earnings (loss) per share

$

(1.19)

$

1.25

$

(2.44)

NM

STATISTICS:

Permanent placement revenue (included in revenue from services)

$

51.4

$

34.6

$

16.8

48.5

%

51.4

%

Gross profit rate

20.3

%

18.0

%

2.3

pts.

Conversion rate

6.1

%

5.5

%

0.6

pts.

Adjusted EBITDA

$

62.4

$

39.1

$

23.3

Adjusted EBITDA margin

2.4

%

1.6

%

0.8

pts.

Effective income tax rate

15.0

%

13.8

%

1.2

pts.

Average number of shares outstanding (millions):

     Basic

38.3

39.4

     Diluted

38.3

39.5

 

(1)

Subsequent to the sale of the Persol Holdings investment, the Company commenced the dissolution process of the Kelly Services Japan subsidiary, which was considered substantially liquidated as of the first quarter-end 2022, resulting in the recognition of the 
$20.4 million
 loss on currency translation from liquidation of this subsidiary in the first quarter of 2022.

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In millions of dollars)

Second Quarter

%

CC %

2022

2021

Change

Change

Professional
& Industrial

Revenue from services

$

415.8

$

466.5

(10.9)

%

(10.6)

%

Gross profit

77.8

75.2

3.6

3.9

Total SG&A expenses

67.4

69.0

(2.2)

(2.0)

Earnings (loss) from operations

10.4

6.2

68.6

Gross profit rate

18.7

%

16.1

%

2.6

 pts.

Science,
Engineering & Technology

Revenue from services

$

324.3

$

298.2

8.7

%

9.0

%

Gross profit

75.2

66.5

13.1

13.3

Total SG&A expenses

54.8

46.9

16.9

17.1

Earnings (loss) from operations

20.4

19.6

3.8

Gross profit rate

23.2

%

22.3

%

0.9

 pts.

Education

Revenue from services

$

155.5

$

105.9

46.8

%

46.8

%

Gross profit

26.0

16.8

55.0

55.0

Total SG&A expenses

20.4

15.3

33.4

33.4

Earnings (loss) from operations

5.6

1.5

278.6

Gross profit rate

16.7

%

15.8

%

0.9

 pts.

Outsourcing
& Consulting

Revenue from services

$

124.4

$

107.3

16.0

%

17.3

%

Gross profit

46.2

34.8

32.8

35.3

Total SG&A expenses

39.8

30.1

32.5

34.5

Earnings (loss) from operations

6.4

4.7

34.5

Gross profit rate

37.2

%

32.5

%

4.7

pts.

International

Revenue from services

$

247.6

$

280.4

(11.7)

%

(4.3)

%

Gross profit

37.2

37.7

(1.5)

7.3

Total SG&A expenses

34.6

34.6

(0.1)

8.2

Earnings (loss) from operations

2.6

3.1

(16.3)

Gross profit rate

15.0

%

13.4

%

1.6

pts.

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In millions of dollars)

June Year to Date

%

CC %

2022

2021

Change

Change

Professional
& Industrial

Revenue from services

$

860.1

$

934.1

(7.9)

%

(7.8)

%

Gross profit

160.9

151.1

6.5

6.7

Total SG&A expenses

138.8

138.4

0.3

0.4

Earnings (loss) from operations

22.1

12.7

74.2

Gross profit rate

18.7

%

16.2

%

2.5

 pts.

Science,
Engineering & Technology

Revenue from services

$

641.4

$

552.9

16.0

%

16.2

%

Gross profit

149.0

119.7

24.5

24.7

Total SG&A expenses

108.0

82.6

30.8

30.9

Earnings (loss) from operations

41.0

37.1

10.5

Gross profit rate

23.2

%

21.6

%

1.6

 pts.

Education

Revenue from services

$

328.9

$

217.5

51.2

%

51.2

%

Gross profit

52.6

34.0

54.9

54.9

Total SG&A expenses

39.0

29.5

32.4

32.4

Earnings (loss) from operations

13.6

4.5

203.1

Gross profit rate

16.0

%

15.6

%

0.4

 pts.

Outsourcing
& Consulting

Revenue from services

$

233.5

$

206.6

13.0

%

14.1

%

Gross profit

83.5

66.1

26.3

28.2

Total SG&A expenses

74.1

58.5

26.7

28.2

Earnings (loss) from operations

9.4

7.6

23.1

Gross profit rate

35.8

%

32.0

%

3.8

pts.

International

Revenue from services

$

500.4

$

553.3

(9.5)

%

(2.7)

%

Gross profit

75.0

73.4

2.1

10.0

Total SG&A expenses

67.8

67.7

0.2

7.4

Earnings (loss) from operations

7.2

5.7

25.7

Gross profit rate

15.0

%

13.3

%

1.7

pts.

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions of dollars)

July 3,
2022

January 2,
2022

July 4,
2021

Current
Assets

  Cash and equivalents

$

133.9

$

112.7

$

64.4

  Trade accounts receivable, less allowances of

    
$12.0, 
$12.6, and 
$12.5, respectively

1,497.9

1,423.2

1,362.5

  Prepaid expenses and other current assets

80.6

52.8

82.4

Assets held for sale

24.6

—

—

Total current assets

1,737.0

1,588.7

1,509.3

Noncurrent
Assets

  Property and equipment, net

25.4

35.3

37.7

  Operating lease right-of-use assets

70.1

75.8

83.2

  Deferred taxes

298.3

302.8

302.9

  
Goodwill, net

192.1

114.8

114.8

  Investment in Persol Holdings

—

264.3

187.7

  Investment in equity affiliate

—

123.4

120.0

  Other assets

412.3

389.1

391.3

Total noncurrent assets

998.2

1,305.5

1,237.6

Total
Assets

$

2,735.2

$

2,894.2

$

2,746.9

Current
Liabilities

  Short-term borrowings

$

—

$

—

$

0.1

  Accounts payable and accrued liabilities

734.7

687.2

612.6

  Operating lease liabilities

15.3

17.5

19.6

  Accrued payroll and related taxes

322.4

318.4

337.0

  Accrued workers’ compensation and other claims

24.4

20.8

22.0

  Income and other taxes

50.5

51.3

62.6

Liabilities held for sale

13.7

—

—

Total current liabilities

1,161.0

1,095.2

1,053.9

Noncurrent
Liabilities

  Operating lease liabilities

57.7

61.4

67.1

Accrued payroll and related taxes

—

57.6

58.5

  Accrued workers’ compensation and other claims

43.4

37.0

40.8

  Accrued retirement benefits

180.2

220.0

214.6

  Other long-term liabilities

16.0

86.8

68.2

Total noncurrent liabilities

297.3

462.8

449.2

Stockholders’
Equity

  Common stock

38.5

40.1

40.1

  
Treasury stock

(12.5)

(15.1)

(15.3)

  Paid-in capital

24.9

23.9

22.3

  Earnings invested in the business

1,239.2

1,315.0

1,212.5

  Accumulated other comprehensive income (loss)

(13.2)

(27.7)

(15.8)

Total stockholders’ equity

1,276.9

1,336.2

1,243.8

Total
Liabilities and Stockholders’ Equity

$

2,735.2

$

2,894.2

$

2,746.9

STATISTICS:

 Working Capital

$

576.0

$

493.5

$

455.4

 Current Ratio

1.5

1.5

1.4

 Debt-to-capital %

0.0

%

0.0

%

0.0

%

 Global Days Sales Outstanding

63

60

60

 Year-to-Date Free Cash Flow

$

(110.8)

$

73.8

$

42.7

               

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE 26 WEEKS ENDED JULY
3, 2022 AND JULY 4,
2021

(UNAUDITED)

(In millions of dollars)

2022

2021

Cash flows
from operating activities:

Net earnings (loss)

$

(45.4)

$

49.6

Adjustments to reconcile net earnings (loss) to net cash from operating activities:

Impairment of assets held for sale

18.5

—

Depreciation and amortization

16.1

14.1

Operating lease asset amortization

9.8

10.7

Provision for credit losses and sales allowances

1.3

—

Stock-based compensation

3.8

2.8

(Gain) loss on investment in Persol Holdings

67.2

(36.3)

Loss on currency translation from liquidation of subsidiary

20.4

—

Gain on foreign currency remeasurement

(5.5)

—

Gain on sale of assets

(5.3)

—

Equity in net (earnings) loss of 
PersolKelly Pte. Ltd.

(0.8)

(0.6)

Other, net

2.9

2.2

Changes in operating assets and liabilities, net of acquisitions

(190.3)

5.1

Net cash
(used in) from operating activities

(107.3)

47.6

Cash flows
from investing activities:

Capital expenditures

(3.5)

(4.9)

Proceeds from sale of assets

4.5

—

Acquisition of companies, net of cash received

(143.1)

(219.0)

Proceeds from company-owned life insurance

1.5

10.4

Proceeds from sale of Persol Holdings investment

196.9

—

Proceeds from sale of equity method investment

119.5

—

Proceeds related to loans with equity affiliate

—

5.8

Proceeds from equity securities

—

5.0

Other investing activities

(0.2)

1.0

Net cash
from (used in) investing activities

175.6

(201.7)

Cash flows
from financing activities:

Net change in short-term borrowings

—

(0.1)

Financing lease payments

(0.4)

(0.3)

Dividend payments

(4.8)

—

Payments of tax withholding for stock awards

(0.8)

(0.6)

Buyback of common shares

(27.2)

—

Contingent consideration payments

(0.7)

—

Net cash
used in financing activities

(33.9)

(1.0)

Effect of
exchange rates on cash, cash equivalents and restricted cash

0.1

(2.3)

Net change
in cash, cash equivalents and restricted cash

34.5

(157.4)

Cash, cash
equivalents and restricted cash at beginning of period

119.5

228.1

Cash, cash
equivalents and restricted cash at end of period

$

154.0

$

70.7

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

REVENUE FROM SERVICES BY GEOGRAPHY

(UNAUDITED)

(In millions of dollars)

Second Quarter

%

CC %

2022

2021

Change

Change

Americas

United States

$

928.9

$

894.6

3.8

%

3.8

%

Canada

40.3

39.5

1.8

6.0

Puerto Rico

28.9

26.9

7.7

7.7

Mexico

11.2

33.1

(66.3)

(66.2)

Total
Americas Region

1,009.3

994.1

1.5

1.7

Europe

Switzerland

55.3

54.0

2.4

8.7

France

50.4

57.5

(12.4)

(0.7)

Portugal

42.0

40.6

3.5

17.3

Russia

28.7

33.7

(14.6)

(24.6)

Italy

18.4

19.4

(5.4)

7.4

United Kingdom

16.0

17.7

(9.6)

1.0

Other

35.7

31.8

12.1

28.3

Total
Europe Region

246.5

254.7

(3.2)

5.4

Total
Asia-Pacific Region

11.5

9.3

24.2

32.1

Total
Kelly Services, Inc.

$

1,267.3

$

1,258.1

0.7

%

2.7

%

               

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

REVENUE FROM SERVICES BY GEOGRAPHY

(UNAUDITED)

(In millions of dollars)

June Year to Date

%

CC %

2022

2021

Change

Change

Americas

United States

$

1,885.5

$

1,753.1

7.6

%

7.6

%

Canada

79.4

73.6

7.8

10.1

Puerto Rico

56.5

51.1

10.7

10.7

Mexico

21.5

67.7

(68.3)

(68.1)

Total
Americas Region

2,042.9

1,945.5

5.0

5.1

Europe 

Switzerland

110.3

106.7

3.4

7.5

France

105.0

111.8

(6.1)

3.6

Portugal

83.9

84.3

(0.5)

9.9

Russia

58.4

66.3

(11.9)

(9.4)

Italy

37.9

37.5

0.8

11.3

United Kingdom

31.0

34.7

(10.7)

(4.0)

Other

72.0

59.6

20.8

33.9

Total
Europe Region

498.5

500.9

(0.5)

7.4

Total
Asia-Pacific Region

22.3

17.6

26.7

33.7

Total
Kelly Services, Inc.

$

2,563.7

$

2,464.0

4.0

%

5.8

%

 

 

 KELLY SERVICES, INC. AND SUBSIDIARIES

 RECONCILIATION OF NON-GAAP MEASURES

SECOND QUARTER

 (UNAUDITED)

 (In millions of dollars)

2022

2021

Earnings
(loss) from Operations:

As Reported

Gain on sale of
assets(3)

Impairment of
assets held

for sale(4)

Adjusted

As Reported

Professional & Industrial

$                  10.4

$                     —

$                     —

$                  10.4

$                    6.2

Science, Engineering & Technology

20.4

—

—

20.4

19.6

Education

5.6

—

—

5.6

1.5

Outsourcing & Consulting

6.4

—

—

6.4

4.7

International

2.6

—

—

2.6

3.1

Corporate

(23.1)

—

—

(23.1)

(21.4)

Impairment of assets held for sale

(18.5)

—

18.5

—

—

Gain on sale of assets

4.4

(4.4)

—

—

—

Total Company

$                    8.2

$                   (4.4)

$                  18.5

$                  22.3

$                  13.7

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

JUNE YEAR TO DATE

(UNAUDITED)

(In millions of dollars)

2022

2021

Earnings
(loss) from Operations:

As Reported

Gain on sale

of assets(3)

Impairment of
assets held

for sale(4)

Adjusted

As Reported

Professional & Industrial

$                  22.1

$                     —

$                     —

$                  22.1

$                  12.7

Science, Engineering & Technology

41.0

—

—

41.0

37.1

Education

13.6

—

—

13.6

4.5

Outsourcing & Consulting

9.4

—

—

9.4

7.6

International

7.2

—

—

7.2

5.7

Corporate

(48.5)

—

—

(48.5)

(43.3)

Impairment of assets held for sale

(18.5)

—

18.5

—

—

Gain on sale of assets

5.3

(5.3)

—

—

—

Total Company

$                  31.6

$                  (5.3)

$                  18.5

$                  44.8

$                  24.3

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

(UNAUDITED)

(In millions of dollars except per share data)

Second Quarter

June Year to Date

2022

2021

2022

2021

Income tax expense (benefit)

$                      4.9

$                     (2.6)

$                     (8.1)

$                      7.9

Taxes on investment in Persol Holdings(1)

—

(1.9)

18.4

(11.1)

Taxes on foreign currency matters(2)

—

—

(1.5)

—

Taxes on gain on sale of assets(3)

(1.1)

—

(1.3)

—

Taxes on impairment of assets held for sale(4)

—

—

—

—

Adjusted income tax expense (benefit)

$                      3.8

$                     (4.5)

$                      7.5

$                     (3.2)

Second Quarter

June Year to Date

2022

2021

2022

2021

Net earnings (loss)

$                      2.2

$                    24.0

$                  (45.4)

$                    49.6

(Gain) loss on investment in Persol Holdings, net of taxes(1)

—

(4.4)

48.8

(25.2)

Loss on foreign currency matters, net of taxes(2)

—

—

16.4

—

Gain on sale of assets, net of taxes(3)

(3.3)

—

(4.0)

—

Impairment of assets held for sale, net of taxes(4)

18.5

—

18.5

—

Adjusted net earnings

$                    17.4

$                    19.6

$                    34.3

$                    24.4

Second Quarter

June Year to Date

2022

2021

2022

2021

Per Share

Per Share

Net earnings (loss)

$                    0.06

$                    0.60

$                  (1.19)

$                    1.25

(Gain) loss on investment in Persol Holdings, net of taxes(1)

—

(0.11)

1.27

(0.63)

Loss on foreign currency matters, net of taxes(2)

—

—

0.43

—

Gain on sale of assets, net of taxes(3)

(0.08)

—

(0.10)

—

Impairment of assets held for sale, net of taxes(4)

0.48

—

0.48

—

Adjusted net earnings

$                    0.45

$                    0.49

$                    0.90

$                    0.61

Note: Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.

 

 

KELLY
SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

(UNAUDITED)

(In millions of dollars)

Second Quarter

June Year to Date

2022

2021

2022

2021

Net earnings (loss)

$                  2.2

$                24.0

$               (45.4)

$                49.6

Other (income) expense, net(2)

1.1

0.3

(1.7)

3.7

Income tax expense (benefit)

4.9

(2.6)

(8.1)

7.9

Depreciation and amortization

9.4

8.5

17.6

14.8

EBITDA

17.6

30.2

(37.6)

76.0

Equity in net (earnings) loss of affiliate

—

(1.7)

(0.8)

(0.6)

(Gain) loss on investment in Persol Holdings(1)

—

(6.3)

67.2

(36.3)

Loss on foreign currency matters(2)

—

—

20.4

—

Gain on sale of assets(3)

(4.4)

—

(5.3)

—

Held for sale impairment charge(4)

18.5

—

18.5

—

Adjusted
EBITDA

$                31.7

$                22.2

$                62.4

$                39.1

Adjusted
EBITDA margin

2.5 %

1.8 %

2.4 %

1.6 %

 

KELLY SERVICES,
INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2022 sale of the Persol Holdings investment, the 2022 and 2021 gains and losses on the fair value changes of the investment in Persol Holdings, the 2022 losses on foreign currency matters, the 2022 gains on sale of assets and the impairment of assets held for sale, are useful to understand the Company’s fiscal 2022 financial performance and increases comparability.  Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods.  Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance.

Management uses Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA Margin (percent of total GAAP revenue) which Management believes is useful to compare operating performance compared to prior periods and uses it in conjunction with GAAP measures to assess performance. Our calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies and should be used in conjunction with GAAP measurements.

These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share.  As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company’s financial performance.  Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company’s financial performance.  Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

(1)  In 2022, the loss on the investment in Persol Holdings represents the change in fair value up until the date of the sale of the investment on 
February 15, 2022 as well as the loss on the sale of the investment during the period presented and the related tax benefit.  In 2021, the gain on the investment in Persol Holdings represents the change in fair value of the investment during the period presented and the related tax expense.

(2)  In 2022, the loss on foreign currency matters includes a 
$20.4 million
 loss on currency translation resulting from the substantially complete liquidation of the Company’s 
Japan entity, partially offset by a 
$5.5 million foreign exchange gain on the 
Japan entity’s USD-denominated cash balance.  The foreign exchange gain is included in other (income) expense, net in the EBITDA calculation.

(3)  Gain on sale of assets in 2022 is related to the sale of under-utilized real property in the second quarter of 2022 and other real property sold in the first quarter of 2022.

(4)  Impairment of assets held for sale represents the write-down of the net assets of the Russian operations that are classified as held for sale as of the second quarter of 2022.

 

 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/kelly-reports-second-quarter-2022-earnings-301603707.html

SOURCE 
Kelly Services, Inc.


Release – Kelly (KELYA) to Participate in the Sidoti Virtual Investor Conference

Posted on by Admin



Kelly to Participate in the Sidoti Virtual Investor Conference

Research, News, and Market Data on Kelly

TROY, Mich., 
Aug. 3, 2022 /PRNewswire/ — Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced it will participate in the 
Sidoti Virtual Investor Conference on 
Wednesday, August 17, 2022.

 Peter Quigley, president and CEO,  Olivier Thirot , executive vice president and chief financial officer, and  James Polehna , chief investor relations officer and corporate secretary, will participate in virtual one-on-one meetings. A copy of Kelly’s investor presentation is also available at kellyservices.com.

About Kelly®

Kelly Services, Inc. (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, 
Light Industrial
, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was 
$4.9 billion. Visit 
kellyservices.com and let us help with what’s next for you.

KLYA-FIN

ANALYST & MEDIA CONTACT: 
 James Polehna
(248) 244-4586   
james.polehna@kellyservices.com


The GEO Group (GEO) – Continuing to Outperform Expectations

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Wednesday, August 03, 2022

The GEO Group (GEO)
Continuing to Outperform Expectations

The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 103 facilities totaling approximately 83,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

2Q22 Results. Sounding like a broken record, GEO posted above expected operating results for 2Q22. Revenue for the quarter came in at $588.2 million, up from $565.4 million a year ago. Adjusted EBITDA totaled $132.3 million, AFFO was $0.69 per diluted share, EPS was $0.37, and adjusted net income $0.42 per share. In the year ago period, GEO reported $118.4 million, $0.71, $0.29, and $0.41, respectively. We had forecast $560 million, $98.5 million, $0.58, $0.32, and $0.32, respectively. GEO’s results highlight the resiliency of the business model, in our opinion.

Drivers. Many parts of GEO’s business continue to show operating strength, driving the better than expected performance. BI continues to be an exceptional performer, while the Secured Services continues to perform even in the face of various headwinds….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Release – CoreCivic Reports Second Quarter 2022 Financial Results

Posted on by Admin



CoreCivic Reports Second Quarter 2022 Financial Results

Research, News, and Market Data on CoreCivic

Increases Share Buyback
authorization

BRENTWOOD, Tenn., Aug. 02, 2022 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (the Company) announced today its financial results for the second quarter of 2022 and provided an update on several significant transactions, including an increase in its share buyback program.

Damon T. Hininger, CoreCivic’s President and Chief Executive Officer, said, “We are pleased to have entered into an agreement during the second quarter to sell our 1,978-bed McRae Correctional Facility for a sale price of $130.0 million. This sale, which is expected to close later in the third quarter, will result in a gain on sale of $75.0 million to $80.0 million. The sale price represents approximately $66,000 per bed which, when used to approximate the value of our over 70,000 company-owned correctional beds, indicates a real estate value in excess of $4 billion, demonstrating the value of our portfolio. Monetizing this asset will generate additional liquidity, which we can use for general corporate purposes, including for our share repurchase program, which our board just increased to $225.0 million, and/or for additional debt reduction.

Hininger continued, “Our second quarter operations were affected by short-term earnings disruptions from transitioning populations at our La Palma Correctional Center in Arizona from an ICE population to an Arizona population, as a result of the previously announced state contract award, and a challenging labor market. Despite the short-term earnings disruption at the La Palma facility that we expect to normalize in the first quarter of 2023, we continue to make great strides in improving the position of our balance sheet, and we were able to begin returning capital to shareholders through our share repurchase authorization. We are pleased with our operational and financial performance and are confident in the long-term outlook for returning to earnings growth.”

Financial Highlights – Second Quarter 2022

  • Total revenue of $456.7 million
    • CoreCivic
      Safety       revenue of $416.4 million
    • CoreCivic
      Community       revenue of $25.8 million
    • CoreCivic
      Properties       revenue of $14.5 million
  • Net Income of $10.6 million
  • Diluted earnings per share of $0.09
  • Adjusted diluted EPS of $0.13
  • Funds From Operations per diluted share of $0.28
  • Normalized Funds From Operations per diluted share of $0.34
  • Adjusted EBITDA of $78.8 million

Second Quarter 2022 Financial Results Compared With Second
Quarter 2021

Net income in the second quarter of 2022 totaled $10.6 million, or $0.09 per diluted share, compared with net income in the second quarter of 2021 of $15.6 million, or $0.13 per diluted share. Adjusted for special items, adjusted net income in the second quarter of 2022 was $16.2 million, or $0.13 per diluted share (Adjusted Diluted EPS), compared with adjusted net income in the second quarter of 2021 of $31.1 million, or $0.25 per diluted share. Special items for each period are presented in detail in the calculation of Adjusted Diluted EPS in the Supplemental Financial Information following the financial statements presented herein.   The decline in adjusted per share amounts was primarily the result of transitioning to a new contract with the state of Arizona at our 3,060-bed La Palma Correctional Center in Arizona, the non-renewal of contracts in 2021 with the United States Marshals Service (USMS) at the 1,033-bed Leavenworth Detention Center in Kansas and the 600-bed West Tennessee Detention Facility, and the expiration of a managed-only contract with Marion County, Indiana at the Marion County Jail, which the County replaced with a newly constructed facility. We have two remaining direct contracts with the USMS expiring in 2023 and 2025, and we will work with the USMS to enable it to continue to fulfill its mission. Our renewal rate on owned and controlled facilities remained high at 95% over the previous five years. We believe our renewal rate on existing contracts remains high due to a variety of reasons including the aged and constrained supply of available beds within the U.S. correctional system, our ownership of the majority of the beds we operate, and the cost effectiveness of the services we provide.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $71.1 million in the second quarter of 2022, compared with $82.1 million in the second quarter of 2021. Adjusted EBITDA was $78.8 million in the second quarter of 2022, compared with $101.7 million in the second quarter of 2021. Adjusted EBITDA decreased from the prior year quarter primarily due to the sale of five non-core properties in our Properties segment and two under-utilized facilities in our Community segment, which generated $4.4 million in Adjusted EBITDA in the second quarter of 2021, the aforementioned transition of offender populations at our La Palma Correctional Center, which resulted in a reduction in EBITDA of $10.8 million, and the aforementioned non-renewal of contracts at three facilities that collectively resulted in a reduction in EBITDA of $4.5 million from the second quarter of 2021 to the second quarter of 2022.  

Funds From Operations (FFO) was $34.3 million, or $0.28 per diluted share, in the second quarter of 2022, compared to $11.4 million, or $0.09 per diluted share, in the second quarter of 2021. Normalized FFO, which excludes special items, was $40.7 million, or $0.34 per diluted share, in the second quarter of 2022, compared with $56.0 million, or $0.46 per diluted share, in the second quarter of 2021.   Normalized FFO was negatively impacted by the same factors that affected Adjusted EBITDA.

Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to net income, the most directly comparable GAAP measure.

New Bank Credit Facility

On May 12, 2022, we entered into a Third Amended and Restated Credit Agreement (New Bank Credit Facility) in an aggregate principal amount of $350.0 million, consisting of a $100.0 million Term Loan A and a revolving credit facility with a borrowing capacity of $250.0 million, which remains undrawn. The New Bank Credit Facility matures in May 2026 and replaced an existing facility (Previous Bank Credit Facility), which was scheduled to expire in April 2023.   The interest rates applicable to the New Bank Credit Facility are tiered based on the then-current total leverage ratio. Based on our current total leverage ratio, loans under the New Bank Credit Facility currently bear interest at a base rate plus a margin of 2.25% or at the Bloomberg Short-Term Bank Yield Index (BSBY) rate plus a margin of 3.25%. In connection with obtaining the New Bank Credit Facility, we paid-down the previous Term Loan A by $67.5 million, and recorded a charge of $0.8 million for the write-off of deferred loan costs associated with the Previous Bank Credit Facility.

Additional Debt Repayments

On May 19, 2022, we announced we voluntarily repaid the remaining $124.1 million outstanding principal balance under our Term Loan B, and satisfied all of our outstanding debt obligations under the agreement. We did not incur any prepayment penalties in connection with the repayment of the Term Loan B, which had a scheduled maturity of December 18, 2024. In connection with the prepayment, we recorded a charge of $6.0 million for the write-off of deferred loan costs, original issue discount and fees and expenses associated with the prepayment of the Term Loan B. The prepayment was made in full with cash on hand.

During the second quarter of 2022, we also purchased an additional $3.6 million of our 4.625% Senior Notes at a weighted average price approximately equal to par in open market purchases, reducing the outstanding balance of the 4.625% Senior Notes to $170.1 million.

Share Repurchases

On August 2, 2022, our Board of Directors authorized an increase in our share repurchase program of up to an additional $75.0 million in shares of our common stock. As a result of the increased authorization, the aggregate authorization under our share repurchase program increased from the original authorization of up to $150.0 million in shares of our common stock to up to $225.0 million shares of our common stock. Since May 16, 2022 through August 1, 2022, we have repurchased 4.2 million shares of our common stock at an aggregate purchase price of $50.6 million, excluding fees, commissions and other costs related to repurchases.

We currently have approximately $174.4 million remaining under the Board authorized share repurchase plan. Additional repurchases of common stock will be made in accordance with applicable securities laws and may be made at management’s discretion within parameters set by the Board of Directors from time to time in the open market, through privately negotiated transactions, or otherwise. The share repurchase program has no time limit and does not obligate us to purchase any particular amount of our common stock. The authorization for the share repurchase program may be terminated, suspended, increased or decreased by our Board in its discretion at any time.

Business Updates

Asset Sales. On July 25, 2022, we entered into a Purchase & Sale Agreement with the Georgia Building Authority to purchase our 1,978-bed McRae Correctional Facility in McRae, Georgia for a price of $130.0 million. We currently have a management contract with the Federal Bureau of Prisons (BOP) at the McRae Facility, which expires November 30, 2022.  As previously disclosed, we do not expect the contract at the McRae facility to be renewed upon its expiration.  We also entered into an agreement to lease the McRae facility from the Georgia Building Authority through November 30, 2022. We expect the sale, which is subject to customary closing conditions, to be completed during the third quarter of 2022. On July 19, 2022, we completed the sale of our Stockton Female Community Corrections Facility and our Long Beach Community Corrections Center, both located in California, to a third-party that resulted in net sales proceeds of $10.9 million. On July 20, 2022, we also completed the sale of an undeveloped parcel of land in California that resulted in net sales proceeds of $4.8 million.

We currently intend to use the net proceeds from the sales for general corporate purposes, which may include making repurchases under our share repurchase plan and/or reducing our outstanding indebtedness.

CoreCivic Safety and Community Contract Renewals. During the second quarter of 2022, we successfully renewed contracts with multiple government partners:

  • A local government agency exercised a two-year renewal option at our 2,672-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi, that allows the USMS to continue utilizing available capacity, extending the contract until June 30, 2024. This contract also has an indefinite number of two-year renewal options.
  • The BOP provided notice of its intent to renew our contract for residential reentry and home confinement services at our 60-bed South Raleigh Reentry Center in Raleigh, North Carolina.
  • The BOP provided notice of its intent to renew our contract for residential reentry and home confinement services at our 84-bed James River Residential Reentry Center and 36-bed Ghent Residential Reentry Center in the State of Virginia.
  • The Colorado Department of Public Safety notified us of its intent to award a contract to provide intensive residential treatment and sex offender supervision and treatment services across five of our residential reentry facilities located in the state.
  • The City of Mesa, Arizona renewed our contract to house approximately 120 inmates at our 4,128-bed Central Arizona Florence Correctional Complex in Florence, Arizona.

2022 Financial Guidance

Based on current business conditions, the Company is providing the following update to its financial guidance for the full year 2022:

 

Guidance

Full Year 2022

Prior Guidance

Full Year 2022
  • Net Income

$106.6 million –
$118.2 million

$77.1 million –
$94.4 million
  • Adjusted Net Income

$52.0 million –
$60.0 million

$75.5 million –
$92.8 million
  • Diluted EPS

$0.89 – $0.99

$0.64 – $0.79
  • Adjusted Diluted EPS

$0.44 – $0.50

$0.63 – $0.77
  • FFO per diluted share

$1.19 – $1.26

$1.45 – $1.60
  • Normalized FFO per diluted share

$1.25 – $1.32

$1.45 – $1.60
  • EBITDA

$375.2 million –
$386.2 million

$336.1 million –
$351.4 million
  • Adjusted EBITDA

$299.0 million –
$305.0 million

$333.9 million –
$349.1 million

Our updated 2022 guidance reflects a delay in the reversal of Title 42, a public health order that has been used since March 2020 to deny entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of COVID-19. On April 1, 2022, the Center for Disease Control and Prevention terminated Title 42 with an effective date of May 23, 2022. However, on April 25, 2022, a federal judge issued a temporary restraining order blocking its termination, and on May 20, 2022, ruled that the administration violated administrative law when it announced that it planned to cease Title 42. That ruling is under appeal with a decision unlikely before the first quarter of 2023.   The termination of Title 42 is expected to result in an increase in the number of undocumented people permitted into the United States to claim asylum, and could result in an increase in the number of people apprehended and detained by ICE, our largest government customer. However, it is difficult to predict when Title 42 will be terminated.   Our prior guidance anticipated higher occupancy levels from ICE from the potential termination of Title 42, which is no longer contemplated in our current guidance.

Our updated 2022 guidance also reflects a larger earnings disruption at our La Palma Correctional Center than previously estimated. During the second quarter of 2022, we agreed with the state of Arizona to extend the transition period from the fourth quarter of 2022 to the first quarter of 2023. However, we still expect the final ICE detainees to be transferred out of the La Palma facility during the third quarter of 2022.   Our 2022 guidance also reflects the continuation of a challenging labor market, including above average wage inflation.

During 2022, we expect to invest $79.5 million to $84.0 million in capital expenditures, consisting of $33.5 million to $34.0 million in maintenance capital expenditures on real estate assets, $30.0 million to $32.0 million for capital expenditures on other assets and information technology, and $16.0 million to $18.0 million for facility renovations.  

Supplemental Financial Information and Investor Presentations

We have made available on our website supplemental financial information and other data for the second quarter of 2022.   Interested parties may access this information through our website at http://ir.corecivic.com/ under “Financial Information” of the Investors section.   We do not undertake any obligation and disclaim any duties to update any of the information disclosed in this report.  

Management may meet with investors from time to time during the third quarter of 2022.   Written materials used in the investor presentations will also be available on our website beginning on or about August 12, 2022.   Interested parties may access this information through our website at http://ir.corecivic.com/ under “Events & Presentations” of the Investors section.

Conference Call, Webcast and Replay Information

We will host a webcast conference call at 10:00 a.m. central time (11:00 a.m. eastern time) on Wednesday, August 3, 2022, and will be accessible through the Company’s website at 
www.corecivic.com under the “Events & Presentations” section of the “Investors” page. The live broadcast can also be accessed by dialing 888-221-3881 in the U.S. and Canada, including the confirmation passcode 8733680. An online replay of the call will be archived on our website promptly following the conference call. In addition, there will be a telephonic replay available beginning at 1:15 p.m. central time (2:15 p.m. eastern time) on August 3, 2022, through 1:15 p.m. central time (2:15 p.m. eastern time) on August 11, 2022. To access the telephonic replay, dial 888-203-1112 in the U.S. and Canada. International callers may dial +1 719-457-0820 and enter passcode 8733680.

About CoreCivic

CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.

Forward-Looking Statements

This press release contains statements as to our beliefs and expectations of the outcome of future events that are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) changes in government policy (including the United States Department of Justice, or DOJ, not renewing contracts as a result of President Biden’s Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, or the Private Prison EO) (two agencies of the DOJ, the United States Federal Bureau of Prisons and the United States Marshals Service utilize our services), legislation and regulations that affect utilization of the private sector for corrections, detention, and residential reentry services, in general, or our business, in particular, including, but not limited to, the continued utilization of our correctional and detention facilities by the federal government, and the impact of any changes to immigration reform and sentencing laws (our company does not, under longstanding policy, lobby for or against policies or legislation that would determine the basis for, or duration of, an individual’s incarceration or detention); (ii) our ability to obtain and maintain correctional, detention, and residential reentry facility management contracts because of reasons including, but not limited to, sufficient governmental appropriations, contract compliance, negative publicity and effects of inmate disturbances; (iii) changes in the privatization of the corrections and detention industry, the acceptance of our services, the timing of the opening of new facilities and the commencement of new management contracts (including the extent and pace at which new contracts are utilized), as well as our ability to utilize available beds; (iv) general economic and market conditions, including, but not limited to, the impact governmental budgets can have on our contract renewals and renegotiations, per diem rates, and occupancy; (v) fluctuations in our operating results because of, among other things, changes in occupancy levels; competition; contract renegotiations or terminations; inflation and other increases in costs of operations, including a continuing rise in labor costs; fluctuations in interest rates and risks of operations; (vi) the duration of the federal government’s denial of entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of COVID-19, a policy known as Title 42 (On April 1, 2022, the Center for Disease Control and Prevention, or CDC, terminated Title 42, and began preparing for a resumption of regular migration at the United States southern border, effective May 23, 2022; however, on April 25, 2022, a judge issued a temporary restraining order blocking the termination of Title 42 and on May 20, 2022, ruled that the administration violated administrative law when it announced that it planned to cease Title 42.); (vii) government and staff responses to staff or residents testing positive for COVID-19 within public and private correctional, detention and reentry facilities, including the facilities we operate; (viii)  restrictions associated with COVID-19 that disrupt the criminal justice system, along with government policies on prosecutions and newly ordered legal restrictions that affect the number of people placed in correctional, detention, and reentry facilities, including those associated with a resurgence of COVID-19; (ix) whether revoking our REIT election, effective January 1, 2021, and our revised capital allocation strategy can be implemented in a cost effective manner that provides the expected benefits, including facilitating our planned debt reduction initiative and planned return of capital to shareholders; (x) our ability to successfully identify and consummate future development and acquisition opportunities and realize projected returns resulting therefrom; (xi) our ability to have met and maintained qualification for taxation as a REIT for the years we elected REIT status; and (xii) the availability of debt and equity financing on terms that are favorable to us, or at all. Other factors that could cause operating and financial results to differ are described in the filings we make from time to time with the Securities and Exchange Commission.

CoreCivic takes no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services.

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS

 

June 30,

2022

 

December 31,
2021

 

 

 

 

 

Cash and cash equivalents

 

$

115,611

 

 

$

299,645

 

Restricted cash

 

 

11,794

 

 

 

11,062

 

Accounts receivable, net of credit loss reserve of $8,946 and $7,931,         respectively

 

 

273,839

 

 

 

282,809

 

Prepaid expenses and other current assets

 

 

42,413

 

 

 

26,872

 

Assets held for sale

 

 

61,587

 

 

 

6,996

 

Total current assets

 

 

505,244

 

 

 

627,384

 

Real estate and related assets:

 

 

 

 

Property and equipment, net of accumulated depreciation of $1,671,088 and $1,657,709, respectively

 

 

2,197,463

 

 

 

2,283,256

 

Other real estate assets

 

 

213,164

 

 

 

218,915

 

Goodwill

 

 

4,844

 

 

 

4,844

 

Other assets

 

 

355,815

 

 

 

364,539

 

 

 

 

 

 

Total assets

 

$

3,276,530

 

 

$

3,498,938

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

294,435

 

 

$

305,592

 

Current portion of long-term debt

 

 

180,378

 

 

 

35,376

 

Total current liabilities

 

 

474,813

 

 

 

340,968

 

 

 

 

 

 

Long-term debt, net

 

 

1,148,679

 

 

 

1,492,046

 

Deferred revenue

 

 

25,070

 

 

 

27,551

 

Non-current deferred tax liabilities

 

 

91,828

 

 

 

88,157

 

Other liabilities

 

 

167,200

 

 

 

177,748

 

 

 

 

 

 

Total liabilities

 

 

1,907,590

 

 

 

2,126,470

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Preferred stock ? $0.01 par value; 50,000 shares authorized; none issued and outstanding at June 30, 2022, and December 31, 2021, respectively

 

 

–

 

 

 

–

 

Common stock ? $0.01 par value; 300,000 shares authorized; 118,620 and 120,285 shares issued and outstanding at June 30, 2022, and December 31, 2021, respectively

 

 

1,186

 

 

 

1,203

 

Additional paid-in capital

 

 

1,836,949

 

 

 

1,869,955

 

Accumulated deficit

 

 

(469,195

)

 

 

(498,690

)

Total stockholders’ equity

 

 

1,368,940

 

 

 

1,372,468

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,276,530

 

 

$

3,498,938

 

 

 

 

 

 

 

 

 

 

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

For the Three Months Ended

June 30,

 

2022

 

2021

 

 

 

 

REVENUE:

 

 

 

Safety

$

416,354

 

 

$

419,880

 

Community

 

25,775

 

 

 

24,929

 

Properties

 

14,526

 

 

 

19,732

 

Other

 

42

 

 

 

30

 

 

 

456,697

 

 

 

464,571

 

 

 

 

 

EXPENSES:

 

 

 

Operating

 

 

 

Safety

 

324,261

 

 

 

307,280

 

Community

 

21,282

 

 

 

20,024

 

Properties

 

3,377

 

 

 

5,668

 

Other

 

80

 

 

 

98

 

Total operating expenses

 

349,000

 

 

 

333,070

 

General and administrative

 

31,513

 

 

 

33,228

 

Depreciation and amortization

 

32,259

 

 

 

34,084

 

Shareholder litigation expense

 

1,900

 

 

 

2,550

 

Asset impairments

 

–

 

 

 

2,866

 

 

 

414,672

 

 

 

405,798

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

Interest expense, net

 

(21,668

)

 

 

(23,222

)

Expenses associated with debt repayments and refinancing transactions

 

(6,805

)

 

 

(52,167

)

Gain on sale of real estate assets, net

 

1,060

 

 

 

38,766

 

Other income (expense)

 

(37

)

 

 

(8

)

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

14,575

 

 

 

22,142

 

 

 

 

 

Income tax expense

 

(4,013

)

 

 

(6,519

)





NET INCOME





$




   
 10,562

 

 




$




15,623

 

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE

$

0.09

 

 

$

0.13

 

 

 

 

 

DILUTED EARNINGS PER SHARE

$

0.09

 

 

$

0.13

 

 

 

 

 

 

 

 

 

CORECIVIC, INC. AND SUBSIDIARIES

SUPPLEMENTAL
FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS

 

For the Three Months Ended

June 30,

 

2022

 

2021

 

 

 

 

Net income

$

10,562

 

 

$

15,623

 

 

 

 

 

Special items:

 

 

 

Expenses associated with debt repayments and refinancing transactions

 

6,805

 

 

 

52,167

 

Expenses associated with COVID-19

 

–

 

 

 

836

 

Gain on sale of real estate assets, net

 

(1,060

)

 

 

(38,766

)

Shareholder litigation expense

 

1,900

 

 

 

2,550

 

Asset impairments

 

–

 

 

 

2,866

 

Income tax benefit for special items

 

(2,041

)

 

 

(4,185

)

Adjusted net income

$

16,166

 

 

$

31,091

 

Weighted average common shares outstanding – basic

 

120,529

 

 

 

120,283

 

Effect of dilutive securities:

 

 

 

Restricted stock-based awards

 

817

 

 

 

434

 

Non-controlling interest – operating partnership units

 

–

 

 

 

1,342

 

Weighted average shares and assumed conversions – diluted

 

121,346

 

 

 

122,059

 

Adjusted Earnings Per Diluted Share

$

0.13

 

 

$

0.25

 

 

 

 

 

 

 

 

 

CORECIVIC, INC. AND SUBSIDIARIES

SUPPLEMENTAL
FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CALCULATION OF FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM
OPERATIONS

 

For the Three Months Ended

June 30,

 

2022

 

2021

 

 

 

 

Net income

$

10,562

 

 

$

15,623

 

Depreciation and amortization of real estate assets

 

24,501

 

 

 

24,926

 

Gain on sale of real estate assets, net

 

(1,060

)

 

 

(38,766

)

Income tax expense for special items

 

283

 

 

 

9,641

 

Funds From Operations

$

34,286

 

 

$

11,424

 

 

 

 

 

Expenses associated with debt repayments and refinancing transactions

 

6,805

 

 

 

52,167

 

Expenses associated with COVID-19

 

–

 

 

 

836

 

Income taxes associated with change in corporate tax structure and other special tax items

 

–

 

 

 

–

 

Shareholder litigation expense

 

1,900

 

 

 

2,550

 

Goodwill and other impairments

 

–

 

 

 

2,866

 

Income tax benefit for special items

 

(2,324

)

 

 

(13,826

)

Normalized Funds From Operations

$

40,667

 

 

$

56,017

 

 

 

 

 

Funds From Operations Per Diluted Share

$

0.28

 

 

$

0.09

 

Normalized Funds From Operations Per Diluted Share

$

0.34

 

 

$

0.46

 

 

 

 

 

 

 

 

 

CORECIVIC, INC. AND SUBSIDIARIES

SUPPLEMENTAL
FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CALCULATION OF EBITDA AND ADJUSTED EBITDA

 

For the Three Months Ended

June 30,

 

2022

 

2021

 

 

 

 

Net income

$

10,562

 

 

$

15,623

 

Interest expense

 

24,292

 

 

 

25,843

 

Depreciation and amortization

 

32,259

 

 

 

34,084

 

Income tax expense

 

4,013

 

 

 

6,519

 

EBITDA

$

71,126

 

 

$

82,069

 

Expenses associated with debt repayments and refinancing transactions

 

6,805

 

 

 

52,167

 

Expenses associated with COVID-19

 

–

 

 

 

836

 

Gain on sale of real estate assets, net

 

(1,060

)

 

 

(38,766

)

Shareholder litigation expense

 

1,900

 

 

 

2,550

 

Asset impairments

 

–

 

 

 

2,866

 

Adjusted EBITDA

$

78,771

 

 

$

101,722

 

 

 

 

 

 

 

 

 

GUIDANCE — CALCULATION OF ADJUSTED NET INCOME, FUNDS FROM
OPERATIONS, EBITDA & ADJUSTED EBITDA

 

For the Year Ending

December 31, 2022

 

Low End of Guidance

 

High End of Guidance

Net income

$

106,610

 

 

$

118,235

 

Expenses associated with debt repayments and refinancing transactions

 

6,805

 

 

 

6,805

 

Gain on sale of real estate assets, net

 

(84,921

)

 

 

(89,921

)

Shareholder litigation expense

 

1,900

 

 

 

1,900

 

Income tax expense for special items

 

21,606

 

 

 

22,981

 

Adjusted net income

$

52,000

 

 

$

60,000

 

 

 

 

 

Net income

$

106,610

 

 

$

118,235

 

Depreciation and amortization of real estate assets

 

97,000

 

 

 

97,500

 

Gain on sale of real estate assets, net

 

(84,921

)

 

 

(89,921

)

Income tax expense for special items

 

23,356

 

 

 

24,731

 

Funds From Operations

$

142,045

 

 

$

150,545

 

Expenses associated with debt repayments and refinancing transactions

 

6,805

 

 

 

6,805

 

Shareholder litigation expense

 

1,900

 

 

 

1,900

 

Income tax expense for special items

 

(1,750

)

 

 

(1,750

)

Normalized Funds From Operations

$

149,000

 

 

$

157,500

 

Diluted EPS

$

0.89

 

 

$

0.99

 

Adjusted diluted EPS

$

0.44

 

 

$

0.50

 

FFO per diluted share

$

1.19

 

 

$

1.26

 

Normalized FFO per diluted share

$

1.25

 

 

$

1.32

 

 

 

 

 

Net income

$

106,610

 

 

$

118,235

 

Interest expense

 

98,000

 

 

 

97,000

 

Depreciation and amortization

 

128,000

 

 

 

128,000

 

Income tax expense

 

42,606

 

 

 

42,981

 

EBITDA

$

375,216

 

 

$

386,216

 

Expenses associated with debt repayments and refinancing transactions

 

6,805

 

 

 

6,805

 

Gain on sale of real estate assets, net

 

(84,921

)

 

 

(89,921

)

Shareholder litigation expense

 

1,900

 

 

 

1,900

 

Adjusted EBITDA

$

299,000

 

 

$

305,000

 

 

 

 

 

 

 

 

 

NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION

Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share metrics are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company’s results of operations and are used to review and assess operating performance of the Company and its properties and their management teams. The Company believes that it is useful to provide investors, lenders and security analysts disclosures of its results of operations on the same basis that is used by management.  

FFO, in particular, is a widely accepted non-GAAP supplemental measure of performance of real estate companies, grounded in the standards for FFO established by the National Association of Real Estate Investment Trusts (NAREIT).   NAREIT defines FFO as net income computed in accordance with GAAP, excluding gains (or losses) from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate and after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis.   EBITDA, Adjusted EBITDA, and Normalized FFO are useful as supplemental measures of performance of the Company’s properties because such measures do not take into account depreciation and amortization, or with respect to EBITDA, the impact of the Company’s tax provisions and financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time.   Because of the unique structure, design and use of the Company’s properties, management believes that assessing performance of the Company’s properties without the impact of depreciation or amortization is useful. The Company may make adjustments to FFO from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary or ordinary component of the ongoing operations of the Company.   Normalized FFO excludes the effects of such items. The Company calculates Adjusted Net Income by adding to GAAP Net Income expenses associated with the Company’s debt repayments and refinancing transactions, and certain impairments and other charges that the Company believes are unusual or non-recurring to provide an alternative measure of comparing operating performance for the periods presented.

Other companies may calculate Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO differently than the Company does, or adjust for other items, and therefore comparability may be limited.   Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO and, where appropriate, their corresponding per share measures are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company’s operating performance or any other measure of performance derived in accordance with GAAP.   This data should be read in conjunction with the Company’s consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.

Contact:

Investors: Cameron Hopewell – Managing Director, Investor Relations – (615) 263-3024


Financial Media: David Gutierrez, Dresner Corporate Services – (312) 780-7204




Release – CoreCivic Announces 2022 Second Quarter Earnings Release and Conference Call Dates

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CoreCivic Announces 2022 Second Quarter Earnings Release and Conference Call Dates

Research, News, and Market Data on CoreCivic

BRENTWOOD, Tenn., July 25, 2022 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (the Company) announced today that it will release its 2022 second quarter financial results after the market closes on Tuesday, August 2, 2022.

A live broadcast of CoreCivic’s conference call will begin at 10:00 a.m. central time (11:00 a.m. eastern time) on Wednesday, August 3, 2022, and will be accessible through the Company’s website at www.corecivic.com under the “Events & Presentations” section of the “Investors” page. The live broadcast can also be accessed by dialing 888-221-3881 in the U.S. and Canada, including the confirmation passcode 8733680. An online replay of the call will be archived on our website promptly following the conference call. In addition, there will be a telephonic replay available beginning at 1:15 p.m. central time (2:15 p.m. eastern time) on August 3, 2022, through 1:15 p.m. central time (2:15 p.m. eastern time) on August 11, 2022. To access the telephonic replay, dial 888-203-1112 in the U.S. and Canada. International callers may dial +1 719-457-0820 and enter passcode 8733680.

About CoreCivic

CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.

Contact:

Investors: Cameron Hopewell – Managing Director, Investor Relations – (615) 263-3024
Media: Steve Owen – Vice President, Communications – (615) 263-3107

 


The Interplay Between the Values of Twitter, Tesla, and Trump Media

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Image Credit: Thomas Hawk (Flickr)


Investors Look for the Effects of Seemingly Unrelated Investment News

The story about Twitter (TWTR), Elon Musk’s Tesla (TSLA), and Trump Media & Technology (DWAC, *TMTR), can be viewed as a story of relationships. That is the relationship between the stocks of a social media start-up with aspirations to be unrestricted, a firmly entrenched social media giant, and a rich entrepreneur with aspirations to buy the entrenched social media giant to make it less restrictive.

The stock price relationship between all of the above tells a story that investors can pull ideas from, especially if this is not the story’s end. In this case the best way to understand the not-so-complicated relationship is by looking at the chart below of the companie’s three tickers and the S&P 500.

Flashback to early April when Musk put out a few tweets suggesting he may be interested in buying Twitter. The SPAC waiting to close on Trump
Media fell in an equal amount to the rise in Twitter’s value. Beginning on April 14th when a final deal was struck between Elon Musk and Twitter’s Board, they again ran in equal and opposite directions, again with Twitter rising. For Tesla’s part, while the founder was borrowing against shares, the stock seemed to get an early bounce on the Twitter purchase news and then followed and performed similar to the overall market.


Source: Koyfin

Over the months that followed TWTR and DWAC seemed to trade disconnected. That is until last week when there was updated news to trade from. The news started as a rumor, and became official on Friday, Elon Musk withdrew his tender offer. One can see on the below chart that while Twitter traded off on the rumor and then the news, the SPAC in the de-SPAC
phase rose significantly.

While the financialnews had focused on the drama unfolding between the richest man in the world, and a company people love to hate, the start-up with ties to ex-President Donald Trump had been impacted in ways that investors could have benefitted from. In short when Elon Musk was going to buy Twitter, Trump Media’s value was negatively impacted, when Musk later took steps to rescind his tender offer Trump Media’s value was positively impacted.

If the saga is not over, expect more negative correlation between TWTR and the current ticker DWAC. Twitter’s board announced it decided to fight Musk’s decision to renege on his offer in court. This is an interesting turnaround from when the board first sought to decline and fight Musk’s offer. The saga is not likely to fade from the headlines quickly. And for Elon’s part, anyone that personally owns a company that launches rockets into space can tell you, that deciding to scrub a launch does not mean that it can’t be rescheduled.

Paul Hoffman

Managing Editor, Channelchek

Suggested Content



The Financing of Trump’s TRUTH Social and Video on Demand Service

What Would Failure Look Like to Elon Musk if He Buys Twitter?




Placing a Bid to Own a Public Company

Lifecycle of a Special Purpose Acquisition Company


Sources

https://www.cnbc.com/2022/07/11/twitter-shares-sink-after-elon-musk-terminates-44-billion-deal.html

https://fortune.com/2022/07/02/trump-social-media-firm-that-runs-truth-social-subpoenaed-by-feds-stock-regulators/

Proposed acquisition of Twitter by Elon Musk – Wikipedia

https://investorplace.com/2022/07/why-is-digital-world-dwac-stock-roaring-higher-today/

https://app.koyfin.com/share/5629e1d417

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