Kelly Services Inc (KELYA) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Kelly Services fourth-quarter 2008 earnings conference call. All parties will be on listen-only until the question-and-answer portion of the presentation. Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Carl Camden, President and CEO. Sir, please go ahead.

Thank you, John. Good morning and welcome to Kelly Services 2008 fourth-quarter and year-end conference call.

Before we begin, let me quickly review the agenda. I'll lead off with a few comments on the current economic situation and its impact on the labor market. Then I will discuss Kelly's earnings and review fourth-quarter operating results by segment. Following that, Patricia Little, our CFO, will provide more detailed financial commentary, including some additional cost-cutting actions that we're announcing today.

Finally, I will recap Kelly's strategic initiatives in response to the changing economic landscape and make a few closing comments before opening the call for questions. Let me remind you that any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. Please refer to our 2007 10-K for a description of the risk factors that could influence the Company's actual future performance.

In addition, we also make reference to non-GAAP performance measures. Please refer to the schedules attached to our press release for information on the performance measures and a comparison to our reported financial results.

As you are all aware, the fourth quarter was an especially rough one. The widespread economic slowdown and anxiety over the global financial crisis intensified. We saw unprecedented reductions in temporary employment and belatedly received confirmation that we are, in fact, in a global recession.

Like virtually all other industries, ours has been seriously affected, particularly here in the US, where businesses are retrenching, putting expansion plans on hold, and taking actions to optimize their operating results, including reducing personnel expenses. December saw the 12th straight month of overall job losses in the US. What's more, jobless claims have reached a 26-year high and the unemployment rate stands at 7.2%, its highest rate in 16 years.

Since the beginning of 2008, the US economy has lost 2.6 million jobs with roughly $1.9 million disappearing in the last four months. This compares to 2.1 million jobs created in 2006 and $1.1 million in 2007. In this environment, it comes as no surprise that demand for temporary staffing is declining at an accelerating rate. In fact, temporary employment has posted 21 consecutive months of year-over-year declines with December's drop being the highest in this cycle. As a percentage of the total workforce, US temporary workers now represent only 1.54%, a level not seen since 1996.

Outside of the US, the effects of a global recession have also been felt. The list of nations declaring economic recession is growing, and we have seen greater than expected deterioration of employment markets as jobless rates swell around the world. Kelly's strategic plan to diversify business offerings and expand our geographies, and the progress that we've made have allowed us to deflect some of the damage. And the steps we're taking to reduce costs, consolidate facilities and close nonprofitable branches are helping as well. But there is no doubt the deteriorating economy took a significant toll on our earnings performance.

For the fourth quarter, Kelly sustained a loss from operations of $1.6 million, excluding impairment and restructuring charges. That compares to $27.9 million earned in the fourth quarter of 2007, excluding restructuring charges. And Patricia will cover impairment and restructuring charges a bit later.

Let me now go through these operating results by business segment, starting with Americas Commercial, which is 46% of our revenue. Reported revenue in Americas Commercial declined about 15% in the fourth quarter, continuing the accelerated slowing that occurred throughout all of 2008. Intra-quarter, year-over-year revenue was down 13% in October, 16% in November and 17% in December.

Our historic seasonal increase, which typically happens in the third and fourth quarters, did not materialize this year. In addition, in early November, our customers actually began further reductions in their temporary staffing. And we saw even more pronounced temporary staff reductions in December.

So far into 2009, our customers have been cautious in adding back temporary employees, and as a reminder, revenue in the first week in our fiscal January was light due to extended holiday shutdowns.

Our combined temp-to-perm and direct placement fees reported a 43% year-over-year decrease for the quarter, a precipitous deceleration from the 14% decline we saw in the third. Both temp-to-perm and direct hire fees were equally down. October was down 42%. December dropped 47% and December fell 21% due to easier comparables. Sequentially in 2008, fourth-quarter placement fees were about 33% lower than in the third quarter.

Our gross profit rate continues to be resilient under these difficult economic conditions. For the current quarter, the gross profit rate was 16.3%, 20 basis points higher than the same period last year. And sequentially, this was a 90 basis point improvement from the third quarter. This increase was primarily the result of favorable workers' compensation adjustments from prior years.

We remain focused on maintaining good expense control in our Americas Commercial segment, reducing spending this quarter by about 7% compared to last year. This was the largest year-over-year percentage decline for any quarter in 2008. We continue to prudently minimize spending through targeted staff reductions, lower incentive compensation, and by reducing expenses not related to revenue generation.

In addition, in the fourth quarter, we consolidated 13 branches at a cost of about $300,000, resulting in future cost savings. We continue to actively evaluate our branch network, closing our consolidating branches without sacrificing revenue, or jeopardizing important customer relationships. However, negative expense leverage on the 15% revenue decline resulted in year-over-year operating earnings for Americas Commercial being down about 39%.

Next is America's Professional and Technical, which is about 17% of Company revenue. Revenue dropped by 7%, considerably slower than the 3% turndown in the third quarter. Intra-quarter, year-over-year revenue was down 6% in October and 8% in both November and December. We have seen large double-digit, year-over-year revenue declines in our law and finance businesses. On the other hand, we saw smaller single-digit declines in engineering, IT, science, and healthcare.

Combined temp-to-perm and direct placement fees for professional and technical were down 27% compared with the same period last year, considerably slower than the 16% reduction in the third quarter. The largest contributor to this decline was our PT direct placement fees and, secondarily, conversion fees.

Intra-quarter combined fee performance showed declines of 15% in October, 35% in November and 37% in December. Lower year-over-year fee performance is now being seen across the majority of our PT businesses, and sequentially, fourth-quarter placement fees were about 26% lower than in the third.

For the entire segment, the gross profit rate was 17.5%, up 50 basis points sequentially from the third quarter and down 60 basis points from the same quarter last year. The sequential decline was primarily due to lower fees.

For the quarter, expenses decreased about 4% and are at the lowest quarterly amount for the year. As I mentioned earlier, we are keeping a careful eye on expenses.

In a difficult environment, PT earnings were down 27%. But despite the strong headwinds, we are pleased that several of our individual businesses continue to perform well.

Let's now turn to our operations outside of the Americas, beginning with EMEA, which comprises 25% of our revenue. EMEA Commercial dramatically slowed in the fourth quarter with reported revenue decreasing 17% compared with a 6% increase in the third. On a constant currency basis, revenue was down 5%. Excluding the acquisition of Randstad Portugal, constant currency revenue was down 10%.

For the remainder of my EMEA discussion, all revenue results will be discussed in constant currency.

By month, during the quarter, excluding the acquisition, October was down 7%; November 11%; and December nearly 13%. With the general economic conditionings worsening during the quarter in Europe, the majority of countries saw revenue declines in the range of 10% to 30%. Western Europe was down roughly 14%, while revenue in the UK was down 10% in the quarter.

As you may recall in early 2007, we took actions to stabilize our UK operations, closing 22 underperforming branches and consolidating headquarters locations. Our principal goal was to become more competitive, streamline the infrastructure and, thereby lower our cost. And while I am pleased that we achieved our cost reduction goals, unfortunately, market conditions have significantly worsened, prompting us to take further action to bring our operational structure in line with current UK market conditions and labor trends.

By the end of 2009, we expect to consolidate certain operations and make additional staff reductions. We believe this action will result in tangible cost savings while allowing us to maintain a very visible and competitive staffing presence in what is still a very important market. We will update you on our progress in future conference calls.

Eastern Europe, on the other hand, continued to see strong sales performance with revenue growth of nearly 40%, largely driven by our strong performance in Russia.

Turning to fees, the slowing trends seen in the third quarter continued. Reported fee revenue for the fourth was down 15% year over year. By month, October was down 9%; November 27%; and December 5%, again, due to easier comparables. Primarily driving the decline was the UK, which saw a decline in fees of 38%. Excluding the UK, fees were about flat for the fourth quarter with very solid fee performance in some markets such as France, which was up nearly 40%.

The quarterly GP rate was 16.8% compared to 18.6% last year. This decrease is attributable to declines in temporary margins, primarily in the UK.

Excluding the Portugal acquisition and the UK restructuring, expenses were up about 1% in constant currency for the quarter due to our diligent cost control efforts across the region; was especially gratifying given that this expense included $1.8 million related to the closing of 20 commercial branches during the quarter, primarily in Western Europe. And we anticipate these closures will reduce operating costs by more than $6 million annually.

EMEA Commercial reported an operating loss of $5.3 million for the quarter, excluding the UK restructuring. That's a decrease of about $11 million compared to the same period last year.

EMEA Professional and Technical, which is about 3% of total Company revenue, also slowed during the quarter, increasing 2% compared to 3% growth seen in the third. Particularly strong growth was seen in France and Germany. The gross profit rate in this segment was 29.1% for the quarter, about flat compared to last year. PT expenses increased by 12% in constant currency versus last year.

But as an aside, for the entire EMEA region, Commercial and PT, expenses were down over 9% sequentially compared to the third quarter. And excluding acquisitions, expenses were down nearly 12%. EMEA PT operating earnings were at a loss of $500,000 compared to a profit of roughly $600,000 last year.

Our APAC region, which comprises 6% of total Company sales, experienced significant slowing this quarter. Deterioration of the economic landscape of this region has also caused several countries to tip into recession and forced companies to scale back year-end projects and turn more cautious in their hiring plans. Commercial revenue in APAC declined nearly 18% year over year during the fourth quarter compared with 17% growth in the second and 5% growth in the third. On a constant currency basis, revenue decreased by 6%.

The gross profit rate declined by 130 basis points when compared with the same period last year. This decrease was largely due to reductions in temporary margins, primarily in New Zealand and Singapore. Losses from APAC Commercial operations were $1.1 million, a year-over-year decline of $1 million from the fourth quarter of 2007.

Exhibiting considerable slowing as well, PT revenue for the fourth quarter in APAC declined 12% year over year after seeing growth of almost 15% in the third and nearly 60% in the second. On a constant currency basis, revenue declined by roughly 2%. The gross profit rate declined to 26.4% in the quarter from the 31.9% achieved in the same period last year. This decrease was the result of a sharp decline in perm fees for the quarter.

On a year-over-year basis, earnings from operations for APAC PT slowed to a small loss in the quarter compared to a year ago. On a combined basis, with more pronounced slowing in the region, we're focusing on proactively managing our operating expenses to bring them more in line with current revenue and market trends. Expenses for the region during the quarter were down 16%, 4% on a constant currency basis year over year, and declined 15% compared to the third quarter.

Our final segment is our Outsourcing and Consulting Group, representing 6% of Company revenue. OCG revenue increased by more than 4% in the fourth quarter compared to the same period last year. This was down from the 60% year-over-year revenue increase we reported in the second quarter and the 32% revenue increase in the third.

All three regions of OCG, while still showing positive year-over-year growth, have also felt the impact of the worsening economic slowdown. The negative effects on revenue were most visible in our Americas recruiting process outsourcing, RPO practice; our retail-based arm of our BPO organization; and our executive placement business unit in Asia. On the other hand, we continue to see solid double-digit revenue growth from The Ayers Group, our career transition unit, and Kelly Vendor Management Services.

OCG's total gross profit rate was 26.6% for the quarter compared to 26.2% for the same period last year and compared to the 31.1% reported for the third quarter. The slowing demand in our RPO and executive placement units has resulted in a significantly lower revenue mix of these higher GP business units, coupled with lower gross profits within the RPO business itself. In response to further deterioration of global market conditions, we have continued to slow investment activities.

For the quarter, expenses were basically flat sequentially. This was achieved in spite of rollouts and investment in our new KellyConnect unit and the relaunch of our independent contractor services business unit.

Year over year, earnings were down $4.3 million compared with the same quarter last year. All three OCG regions showed lower earnings than last year.

Declines in Europe and Asia operating earnings continued to be the result of delays and implementations in corresponding revenue streams from new client wins. Clients are becoming increasingly cautious. This, coupled with the softness in the European RPO and Asian executive placement business, had fairly significant negative impact on these two regions' results. However, with our infrastructure for these programs already in place, we should see immediate leverage as clients ramp up.

Now I'll turn over the call to Patricia, who will cover our quarterly results for the entire Company.

Thank you, Carl. Before I get into the operating results, let me provide a little more information on the fourth-quarter accounting charges.

We took a non-cash, pretax charge of $80.5 million or $2.22 per share for asset impairments in the fourth quarter. $50 million of the impairment charge was a write-down of goodwill. During the fourth quarter, we completed our annual analysis of goodwill. And after carefully reviewing the current equity market and economic conditions, as well as projected cash flows, we determined that goodwill in our EMEA commercial segment was impaired and an accounting charge was appropriate.

We also wrote down $18.7 million for our investment in Tempstaff, a Japanese staffing company. Although we still believe this is a good, long-term investment, the market value has been lower than our cost for nine months, and it is appropriate under GAAP to write the investment down to its year-end market value. Also, as a result of continued poor operating results in the UK, we reduced the carrying value of our assets there by $11.4 million. All of these charges are non-cash.

Carl talked about our UK operations, where we have made a decision to further restructure our operations. We expect to consolidate and close a number of branches, and we are still working through the restructuring plans, but I anticipate total charges of between $11 million and $14 million, primarily for lease termination and severance costs. $1.5 million of these costs were included in the fourth quarter, and we expect the remainder, $9.5 million to $12.5 million, to occur during 2009.

Additionally, you may recall that we recorded a restructuring charge of $1.3 million, or $0.02 per share in the fourth quarter of 2007. All of the comparisons we referenced this morning exclude impairment and restructuring charges.

Now, moving to our operating results for the quarter, revenue totaled $1.3 billion, a decrease of 13% compared to last year. On a constant currency basis, revenue decreased by 8% compared to last year. And this compares to a year-over-year decrease of 4% in the third quarter.

As Carl discussed, we're now seeing revenue fall off worldwide. Our gross profit rate was 17.6%, a decrease of 40 basis points compared to last year, due to pressure on our temporary gross profit rates in EMEA commercial, which was significantly impacted by the UK. As you would expect in this economic environment, we're very focused on expenses.

On a year-over-year basis, excluding impairment and restructuring costs, selling, general and administrative expenses are down 5% and up 1% on a constant currency basis. Expenses are down in all segments except OCG and EMEA, where investments, including acquisitions, are driving year-over-year increases. Elsewhere, SG&A expense decreased by 3% in the Americas, 4% in APAC and 16% in our corporate headquarters.

Compared to the third quarter, SG&A expense, excluding our third-quarter litigation charges, was down 5%. Our first emphasis on cost-cutting is focused on actions which will reduce indirect costs while protecting our investment in customer and employee-facing activities. And you can see that in the disproportionately high reduction in corporate SG&A.

We have reduced our corporate headquarters' permanent staff by about 6%, and our headquarters' temporary staff by about 20%. Because these actions are relatively recent, their impact was muted in the fourth quarter, but will contribute more fully to 2009 results. Additionally, neither management incentive compensation nor discretionary retirement plan contributions will be paid for 2008. In addition to the UK restructuring we announced, we continue to evaluate our branch operations around the world in the normal course of business.

To summarize Carl's remarks, during 2008, we consolidated or closed 41 branches and incurred lease termination and severance costs of $2.9 million throughout the year, and we expect these costs will have a very short payback.

Looking ahead, there are a number of additional actions we're taking today in order to bring down our costs quickly. These actions will remain in place until economic conditions change. We are suspending the majority of our field-based incentive plans.

We are also suspending discretionary grants in our long-term stock incentive plan. We have suspended the match for our management retirement plan, and we have reduced the match for our 401(k) plan to a level we can fund from within the plan. And as a result, we will eliminate matching expense. We have put a salary freeze in place. We have a hiring freeze on indirect staff, and we are avoiding discretionary spending on travel, general expenses, and branch relocations.

In summary on costs, we are reacting decisively to the changing economic conditions. Because of the lack of clarity on the economic front and the short cycle of our business, we are targeting actions which will allow us to be flexible in responding to changing conditions, both on the upside and on the downside.

Moving back to the 2008 results, our loss from operations, excluding charges, was $1.6 million compared with an income of $27.9 million in 2007, essentially breakeven in a difficult quarter. We also had FX losses of $4 million, which are included in our other expenses line. And so our loss from continuing operations before taxes totaled $5 million compared to income of $28.9 million last year. On a GAAP basis, we had a loss of $87 million compared with a pretax profit of $27.6 million in 2007.

Income tax expense in the fourth quarter was $1.5 million on that large pretax loss of $87 million. But for accounting purposes, most of the $80.5 million of impairment charges is not tax-deductible. And so if you exclude the charges and their related tax effect, we still had tax expense of about $5 million on a $5 million pretax loss.

The expense was caused by nondeductible market losses on our management retirement plan assets and by losses in countries which are in a net operating loss position. Adjusted diluted loss per share from continuing operations totaled $0.29 per share compared to adjusted earnings from continuing operations of $0.54 in 2007. The loss was primarily due to tax expense and FX losses.

Now, turning to the balance sheet, I will provide a few highlights. Cash remains strong, totaling $118 million. We remain very focused on cash management and were able to improve our cash position by $25 million during the year. We continue to keep a close eye on our investments. We remain comfortable with our conservative investment policy, which emphasizes goals of maintaining the principal and liquidity of invested cash.

Accounts receivable totaled $816 million and decreased approximately $72 million compared to the prior year. For the quarter, our global DSO was 50 days, up one day compared to the prior year. Debt of $115 million is consistent with the third quarter, and increased compared to the $98 million last year as a result of our third-quarter acquisitions of Randstad Portugal and Toner Graham. We have carefully maintained a conservative capital structure with limited and prudent use of debt financing. As a result, at the end of the year, debt to total capital was a conservative 15%.

The large majority of Kelly's debt obligations mature in 2010 or later. Of the $115 million of debt outstanding, $80 million is long-term in nature, maturing in 2011 and later. Of the short-term portion of debt, $8 million was drawn under the multicurrency revolving credit line that matures in November of 2010. The remainder matures this year, and we plan to evaluate our funding needs on an ongoing basis and may repay debt opportunistically to the extent we have available cash. Available committed capacity on our multicurrency revolving line of credit was $142 million at the end of the year.

Turning to our cash flow, net cash provided by operating activities was very strong at $102 million compared to $73 million last year. The improvement was primarily related to improved working capital, as we reduced our accounts receivable by more than $70 million. In these difficult times, we remain committed to aggressive cost actions, diligent management of our balance sheet, and the preservation of our ability to compete. I'll turn it back over to Carl for his concluding thoughts.

Thank you, Patricia. I wish that I could tell you that we see an end to the economic turmoil, but unfortunately, the indicators that we monitor offer neither clarity nor signs of a bottom to this downturn. In fact, trends and economic benchmarks of the past 18 months suggest that the world economy could realistically deteriorate further before it begins to turn around. What's certain is this recession and the circumstances that surround it are unprecedented.

In response, we are taking prudent measures, bracing Kelly for what might be a protracted downturn while taking defensive actions to minimize short-term risk the best we can. But amidst all the chaos, our overarching goal remains unchanged -- to position Kelly as the staffing company of choice. And our strategic plan to achieve this is straightforward. We will continue to reduce our dependence on the US by diversifying geographically. We will continue to grow profitable, higher margin, more recession-resistant businesses to accelerate the globalization of our professional and technical staffing and to aggressively manage expenses, maintain a strong balance sheet, and improve operating margins.

And in spite of the economic challenges we faced, I am pleased to report we made noteworthy progress on these strategies this year. In key growth areas around the world, we continue to invest. For example, we purchased Randstad's Portuguese operations. In response to demand for technically skilled, degreed, and certified professional workers throughout the world, we opened roughly 50 new PT and OCG branches outside of the US.

We also expanded into more fee-based businesses through the acquisition of access, a recruiting and outsourcing operation in Germany and Austria. And during the third quarter, we purchased Toner Graham, a financial recruiting and accounting firm in the UK.

Here in the US, we're focusing on more recession resilient sectors, such as education and the government, two businesses that have continued to perform well and offer promising growth opportunities. Those actions affirm our determination to continue cautious investment that we believe will serve Kelly well in the longer term.

But we are equally serious about cutting costs and preserving cash without impairing our ability to meet the current and future staffing needs of our customers. Patricia highlighted some of the difficult actions we are taking to reduce expenses. And as we announced this morning, the further deterioration of market conditions in the UK are causing us to reorganize our operations there.

As I mentioned, we will continue to have a highly visible presence across the UK, offering a full complement of staffing services, but we are redirecting resources to those staffing disciplines with the greatest potential for future revenue and profit growth, such as higher margin professional and technical staffing and outsourcing and consulting services. While it's true that it may take time for global economies and labor markets to improve and reach more stable and predictable levels, we do believe the long-term outlook for the staffing industry remains positive with ample opportunity for growth.

As for the present, Kelly is guided by a seasoned leadership team, taking the right steps, cutting costs, investing carefully, and executing a solid strategic plan. Taken together, we believe these strengths will hasten our growth when we emerge from this recession and create lasting shareholder value.

This ends our formal comments. Patricia and I will now be happy to answer your questions. John, the call can now be opened.

(Operator Instructions). Tobey Sommer, SunTrust Robinson Humphrey.

Thank you. Thanks for the very detailed prepared remarks. I was wondering if I could ask a question about your OCG business. You seem to suggest that you've got some infrastructure that you've put in place for some recent wins that should allow some good leverage when those contracts and relationships ramp up. Could you give us some more color to the degree what makes you confident that those are still ramping, etc.? And maybe the proportion of new sales that are yet to ramp up? Thanks.

Some of the details I can't go through, but let me step back, Tobey, and start first with what I see taking place within our OCG unit. There still are a good number of new account wins countervailing against that or decreased volumes inside the accounts that we have already won. Given a good number of the fees inside OCG business are transaction-sensitive, as hiring decreases, for example, you would see RPO fees come down. And so we have new account wins on one side producing growth, but you have lower volumes now taking place in some of the accounts that we've won.

Additionally then, several of the accounts, particularly in the VMS space, are global accounts. Their customers have an ability to dial up or dial down how fast they incur their own implementation charges related to that. And customers have slowed down the implementation on some of these accounts. We have in place that global infrastructure to implement these accounts. The pace is just going slower than originally projected. And so what you should look to see would be none of the extremely rapid increases that you have seen in the past as we've been building up the infrastructure, but by no means should you be looking for significant decreases in the expense base either.

Thank you. That's helpful. And then, if I heard this correctly. I apologize if I didn't. Eastern European markets still showing some growth? Is there an expectation for that to continue? And if so, what may be the drivers of that kind of pocket of growth? Is it just small numbers, etc.?

Yes to many of your conjectures. No, I'm not -- the global economic slowdown is a global economic slowdown. You are already seeing that take place in countries like Russia, where, in fact, we had a very strong performance. But in terms of macroeconomics, Russia is already also beginning to experience, particularly with the price of oil and other resources in decline, are experiencing severe economic turmoil too.

It is the case that Eastern Europe is one of our smallest regions. For sure around the world, it is small numbers and outsized performance with a customer or two can produce strong results for Kelly.

I don't expect long-term for Eastern Europe to outperform dramatically as it did this time the rest of Western Europe. I think the economies are interdependent between Western and Eastern Europe. But Eastern Europe has been and will continue to be the stronger part of the European economic growth, and it will be for us also.

One last question and I'll get back in the queue. Could you comment on what you are seeing in terms of bill rates and customer response to those here in the US? Thanks.

Yes, what we're not seeing, which I think is behind your question, that we saw much of in the last recession, was large numbers of customers saying that pay rates and then, therefore, the bill rate that comes after that, are going to be cut for all temporary employees by X%; or there are some customers who are focused on trying to bring down their pay rates, yes, but nothing like we had seen in the last cycle.

The other element of the question is, is that last cycle, you had several customers trying to unilaterally impose a gross profit rate reduction in order to retain the business. And again, while there is isolated customers, that also is not widespread in taking place. So that pressure on bill rate either from a reduction of the pay to temporaries or unilateral reductions in the GP rate -- and again, you heard both Patricia's comments and mine on the GP rate -- is not being seen.

Thank you very much.

Andrew Steinerman, JPMorgan.

Hi, Carl and Patricia. My question is sort of around the same subject. US Commercial gross margins up sequentially and year over year. Could you give us a sense of what the underlying trends would have been on temp gross margins if not for the workers' comp adjustment? And my question also sort of in a bigger picture standpoint is, what is Kelly's pricing strategy as we go through these more difficult times with the economy?

Let me answer the second part of your question first. As I have said at a variety of the conferences and so on, the industry is showing much more discipline in terms of prices and customers are showing more much discipline in their response to the long-term needs that they're going to have for talent. I do not see the industry responding with dramatic price decreases in margin. Kelly has maintained, as you have been seeing, if you look quarter by quarter at the numbers, Andrew, you've seen Kelly maintaining good discipline on the GP rate. So I'm not anticipating any particular change in Kelly's pricing strategy.

In terms of the impact on the temp GP rate, overall, we basically have seen over the course of the year, basic core pricing has been relatively stable throughout the year. There's been variations from quarter to quarter, obviously, based on the inclusion of workers' comp credits and how they flowed against prior-year adjustments. But in terms of the underlying core temp GP rate in Americas Commercial, it's been stable.

Okay. And will workers' comp be a headwind or tailwind for 2009?

We wouldn't make a forward comment about how that plays out. But if you are asking are we seeing a worsening of workers' compensation experience, no.

Right. That is what I was asking. Thanks so much.

(Operator Instructions). Mr. Camden, there are no further questions in queue.

Thank you, John, and thank you all for listening and look forward to better days ahead.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.