Index to Exhibits on page 34
-1-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
__X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended January 3, 1999
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________________ to _____________________
Commission file number 0-1088
_________________KELLY SERVICES, INC._________________
(Exact Name of Registrant as specified in its Charter)
________Delaware________ __________38-1510762________
(State of Incorporation) (IRS Employer Identification
Number)
___999 West Big Beaver Road, Troy, Michigan___ ____48084___
(Address of Principal Executive Office) (Zip Code)
___________________(248) 362-4444___________________
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Class A Common NASDAQ/NMS
Class B Common NASDAQ/NMS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. __X__
The aggregate market value of the Class B common stock, par value $1.00, the
only class of the registrant's securities with voting rights, held by
non-affiliates of the registrant on March 22, 1999, was $10,043,711 based upon
the closing price of $28.63 per share.
Registrant had 32,270,788 shares of Class A and 3,567,329 of Class B
common stock, par value $1.00, outstanding as of March 22, 1999.
Documents Incorporated by Reference
The proxy statement of the registrant with respect to the 1999 Annual Meeting
of Stockholders is incorporated by reference in Part III.
Dated: March 31, 1999
-2-
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) General Development of Business. Registrant, a successor to the
business established by William R. Kelly in 1946, was incorporated under the
laws of Delaware on August 27, 1952. Throughout its existence, registrant has
been engaged in the business of providing staffing services to customers.
During the last fiscal year, registrant continued to provide staffing services
to a diversified group of customers.
(b) Financial Information about Industry Segments. The Company divides
its operations into three segments: (1) U.S. Commercial Staffing, (2)
Professional, Technical and Staffing Alternatives (PTSA) and (3)
International. PTSA includes the following: Kelly Scientific Resources, Kelly
Engineering Services, Information Technology Resources, Kelly Assisted Living
Services, Inc., The Law Registry (formerly The Wallace Law Registry), Kelly
Staff Leasing, Inc., National Payroll Services and Kelly Management Services.
The financial information concerning registrant is included in Item 8 in Part
II of this filing.
(c) Narrative Description of Business.
(i) Principal Services Rendered. Registrant, and its subsidiaries,
which are service organizations, provide staffing services to a diversified
group of customers through offices located in major cities of the United
States, Australia, Belgium, Canada, Denmark, France, Germany, Ireland, Italy,
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Puerto Rico, Russia,
Spain, Switzerland and the United Kingdom. These services are generally
furnished under the name of Kelly Services. U. S. Commercial Staffing includes
primarily office clerical, marketing and semi-skilled light industrial
services. PTSA includes technical skills related to engineering, information
technology, scientific, accounting and finance, and management services. Staff
leasing services are provided under the name of Kelly Staff Leasing, Inc., a
wholly owned subsidiary of registrant. Home care services to those who need
help with their daily living needs and personal care are furnished under the
name of Kelly Assisted Living Services, Inc., which is a wholly owned
subsidiary of registrant. Legal staffing services are provided under the name
of The Law Registry (formerly The Wallace Law Registry), a wholly owned
subsidiary of registrant. Registrant performs these staffing services through
its employees by assigning them to work on the premises of registrant's
customers.
The staffing services furnished by registrant afford economies and
flexibility in meeting uneven or peak work loads caused by such predictable
factors as vacations, inventories, month-end activities, special projects or
new promotions and such non-predictable factors as illnesses or emergencies.
When work peaks occur which cannot be handled by the customer's normal staff,
the customer can temporarily supplement regular personnel by the use of
registrant's services. The cost and inconvenience to the customer of hiring
additional employees, including advertising, interviewing, screening, testing
and training are eliminated. Also, recordkeeping is simplified because the
customer pays an hourly rate, based on hours of service furnished by
registrant.
-3-
Registrant serves a wide cross-section of customers from industry,
commerce, the professions, government, and individuals. During recent years
approximately 190,000 customers, including the largest corporations in the
world, use registrant's services. There have been no significant changes in
the services rendered or in the markets or methods of distribution since the
beginning of registrant's fiscal year.
Registrant operates through approximately 1,500 domestic and foreign
offices located in all 50 states and the District of Columbia; and Australia,
Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Luxembourg, Mexico,
the Netherlands, New Zealand, Norway, Puerto Rico, Russia, Spain, Switzerland
and the United Kingdom. Each office provides the services of one or more of
the divisions or subsidiaries and are operated directly by the registrant.
(ii) New Services. There are no new industry segments that the
registrant is planning to enter or new service areas that will require a
material investment of assets.
(iii) Raw Materials. Registrant is involved in a service business and
raw materials are nonexistent in the business.
(iv) Service Marks. Registrant is the owner of numerous service marks,
which are registered with the United States Patent and Trade Mark Office and in
foreign countries.
(v) Seasonal Business Implications. Registrant's business is not
seasonal.
(vi) Working Capital. Registrant believes there are no unusual or
special working capital requirements in the staffing services industry.
(vii) Customers. The business of registrant and its subsidiaries is not
dependent upon either a single customer or a limited number of customers.
(viii) Backlog. Backlog of orders is not material to the business of
registrant.
(ix) Government Contracts. Although registrant conducts business under
various government contracts, that portion of registrant's business is not
significant.
(x) Competition. Registrant is one of the largest global suppliers of
staffing services. In the United States, there are less than 100 national
competitors, and approximately 20,000 organizations locally compete in varying
degrees in different localities where registrant operates local offices. In
foreign markets there are several similar levels of global, national and local
competitors. The most significant competitive factors worldwide are geographic
coverage, breadth of service, service quality and price.
(xi) Research Activities. Registrant's expenditure for research and the
number of people involved are not material.
(xii) Environmental Matters. Registrant is involved in a service
business and is not generally affected by federal, state and local provisions
regulating the discharge of materials into the environment.
-4-
(xiii) Employees. Registrant and subsidiaries employ on a full time basis
approximately 1,200 persons at its headquarters in Troy, Michigan, and
approximately 6,000 persons in branch offices operated directly by registrant.
Registrant employed in the last fiscal year approximately 740,000 men and women
for temporary periods. As the employer of its temporary work force, registrant
is responsible for and pays Social Security (or its equivalent outside the
United States), Medicare and health care taxes, workers' compensation,
unemployment compensation taxes, liability insurance and other similar costs,
and is responsible for payroll deductions of Social Security, Medicare and
income taxes. Although the services may be provided in the office of the
registrant's customer, registrant remains the employer of its temporary
employees with responsibility for their assignment and reassignment.
(d) Foreign Operations. For information regarding sales, earnings from
operations and long-lived assets by domestic and foreign operations, reference
is made to the information presented in the Segment Disclosures note to the
consolidated financial statements presented in Item 8 in Part II of this
report.
ITEM 2. PROPERTIES.
Registrant owns the premises in Troy, Michigan, from which its
headquarters, subsidiaries and divisional offices are presently operated.
Registrant purchased the original headquarters building in Troy, Michigan, in
1977 and has expanded operations into adjacent buildings that were purchased in
1991 and 1997. The combined usable floor space for the headquarters complex
approximates 230,000 square feet, plus leased space nearby of 93,000 square
feet. The buildings are in good condition, are considered to be adequate for
the uses to which they are being put and are in regular use. In addition,
registrant owns vacant land in Troy and northern Oakland County, Michigan, for
future expansion. Registrant's branch offices are conducted from premises
which are leased. A majority of the leases are for fixed terms, from one to
five years. Registrant owns virtually all office furniture and equipment used
in its headquarters building and branch offices.
ITEM 3. LEGAL PROCEEDINGS.
Claims against the registrant are not considered by management and counsel
to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the
fourth quarter of 1998.
-5-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Kelly Services' stock is traded over-the-counter in the NASDAQ National
Market System (NMS). The high and low selling prices for the Class A common
stock and Class B common stock as quoted by the National Association of
Securities Dealers, Inc. and the dividends paid on the common stock for each
quarterly period in the last two fiscal years are reported below:
Per share amounts (in dollars)
----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -------
1998
- ----
Stock Prices
Class A common
High . . . . . . . . $37.75 $38.50 $35.63 $35.13 $38.50
Low . . . . . . . . 29.25 30.25 25.63 23.75 23.75
Class B common
High . . . . . . . . 58.75 38.00 36.25 33.50 58.75
Low . . . . . . . . 29.50 34.00 29.00 28.75 28.75
Dividends. . . . . . . . .22 .23 .23 .23 .91
1997
- ----
Stock Prices
Class A common
High . . . . . . . . $28.88 $32.50 $38.75 $38.38 $38.75
Low . . . . . . . . 26.50 23.25 29.75 28.13 23.25
Class B common
High . . . . . . . . 29.00 32.50 35.75 34.75 35.75
Low . . . . . . . . 27.00 23.00 30.75 30.00 23.00
Dividends. . . . . . . . .21 .22 .22 .22 .87
The number of holders of record of the Class A and Class B common stock, par
value $1.00, of registrant were 994 and 233, respectively, as of
March 22, 1999.
-6-
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes selected financial information of Kelly
Services, Inc. and its subsidiaries for each of the most recent six fiscal
years. This table should be read in conjunction with other financial
information of the registrant including "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and financial statements
included elsewhere herein.
(In millions except (1)
per share amounts) 1998 1997 1996 1995 1994 1993
- ------------------- ---- ---- ---- ---- ---- ----
Sales of services . . . . . $4,092.3 $3,852.9 $3,302.3 $2,689.8 $2,362.6 $1,954.5
Earnings before taxes . . . 143.6 137.0 122.9 113.3 98.5 70.9
Net earnings. . . . . . . . 84.7 80.8 73.0 69.5 61.1 44.6
Per share data:
Basic earnings . . . . .
per share . . . . . . . $ 2.24 $ 2.12 $ 1.92 $ 1.83 $ 1.61 $ 1.18
Diluted earnings
per share . . . . . . . $ 2.23 $ 2.12 $ 1.91 $ 1.83 $ 1.61 $ 1.18
Dividends per share
Classes A and B common. .91 .87 .83 .78 .70 .63
Working capital . . . . . . $ 293.4 $ 363.6 $ 336.6 $ 316.0 $ 315.8 $ 291.2
Total assets. . . . . . . . 964.2 967.2 838.9 718.7 642.4 542.1
(1) Fiscal year included 53 weeks.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
1998 versus 1997
Sales for the 53 week fiscal year reached a record $4.09 billion in 1998,
an increase of 6% compared to the $3.85 billion for the 52 week fiscal year in
1997. On a 52 week basis, sales increased 5% over 1997. Sales in the U.S.
Commercial Staffing segment grew by 3%, while Professional, Technical and
Staffing Alternatives (PTSA) sales grew by 8% compared to last year.
International sales grew by 13% as compared to 1997. International sales
represented 24% of total Company sales in 1998, as compared to 22% in 1997.
The 1998 gross profit rate averaged 17.9% versus 17.7% in 1997. The
improvement was principally related to an increased mix of fee-based permanent
placement income and an increase in the share of our international business as
a percentage of total revenue. The international component carries a higher
average gross profit rate than domestic commercial staffing.
-7-
Selling, general and administrative expenses increased 8% over 1997.
Expenses expressed as a percentage of sales were 14.4% as compared to 14.2%
last year. The rate of growth of expenses principally reflects increased
spending for the year 2000 and information technology programs.
Earnings from operations totaled $140.6 million, a 4% increase from the
$135.8 million reported last year. Earnings were 3.4% of sales as compared to
3.5% in 1997.
Interest income was $6.2 million, 41% higher than last year. Interest
expense totaled $3.2 million, virtually unchanged from 1997. The increase in
investment return related to an improved cash and investment position as
compared to 1997.
Earnings before income taxes were a record $144 million, a 5% increase
over 1997. As a percentage of sales, earnings before taxes were 3.5% compared
to 3.6% in 1997. The effective income tax rate was 41.0% in both 1998 and
1997.
Net earnings totaled a record $84.7 million in 1998, a 5% increase over
1997. The rate of return on sales was 2.1%, consistent with last year's 2.1%
rate. Basic earnings per share were $2.24 or 6% over last. year. Diluted
earnings per share were $2.23 or 5% higher than 1997.
Results of Operations
1997 versus 1996
Sales totaled $3.85 billion in 1997, an increase of 17% over 1996. U.S.
Commercial Staffing sales totaled $2.45 billion, reflecting 13% growth over
1996. PTSA sales were $546 million in 1997, a 31% increase over the prior
year. International sales totaled $855 million and grew 20% as compared to
1996.
Cost of services, representing payroll and related taxes and benefits for
temporary employees, increased 18%. Increases in pay rates and related taxes
and benefits accounted for the change. Gross profit rates held steady through
all four quarters of 1997 and averaged 17.7%. Gross profit rates in 1996
averaged 18.6%. While generally higher than 1997, the 1996 rates were
declining through much of that year. As in 1996, reduced margins on large
contracts and other competitive conditions worldwide were factors in the
reduced level of gross profit.
Selling, general and administrative expenses increased 11% over 1996.
The increase reflects continued worldwide expansion including the cost of
opening new offices in international locations. As a percentage of sales,
expenses decreased for the second consecutive year and reached 14.2%, down
from 14.9% in 1996.
Earnings from operations in 1997 were $136 million, an increase of 12%
over 1996. These earnings were 3.5% of sales, compared to 3.7% in 1996.
Interest income was $4.4 million in 1997, an increase of 4% over 1996.
An improved cash and investments position during the year which resulted from
improved collections of accounts receivable contributed to the increase.
-8-
Interest expense increased to $3.2 million from $2.2 million in 1996.
Short-term borrowings were used to finance continued business expansion in
Europe.
Earnings before income taxes were $137 million, an increase of 11% over
1996. As a percentage of sales, earnings before taxes were 3.6% in 1997 and
3.7% in 1996. The effective income tax rate was 41.0% in 1997 and 40.6% in
1996.
Net earnings totaled $80.8 million in 1997, 11% higher than the $73.0
million reported in 1996. The rate of return on sales was 2.1% in 1997 and
2.2% in 1996. Basic earnings per share were $2.12 compared to $1.92 per share
in 1996. Diluted earnings per share were $2.12 in 1997 compared to $1.91 per
share in 1996.
Liquidity and Capital Resources
Cash and short-term investments totaled $72 million at the end of 1998,
down from the $144 million at year-end 1997. The decrease was principally due
to the $76 million utilized for the share repurchase program completed during
the fourth quarter of 1998. Two negotiated share repurchase transactions were
completed with the William Russell Kelly Trust and 2.5 million Kelly Class A
shares were repurchased. This amounted to 6.5% of the then total outstanding
common shares and was accretive to earnings per share during the fourth
quarter of 1998.
Accounts receivable totaled $585 million at year end as compared to $572
million at year-end 1997. Strong accounts receivable management during the
year reduced global days sales outstanding to 53 days, down from 54 days in
1997.
Short-term debt totaled $48 million, a decrease from $55 million at year-
end 1997. During the fourth quarter the Company arranged a committed $100
million five-year multi-currency revolving credit facility. All short-term
borrowings are foreign currency denominated and support the Company's
international working capital position.
The Company's working capital position was $293 million at the end of
1998, a decrease of $70 million from 1997 and $43 million from 1996. The
current ratio in 1998 was 1.7, 1.9 in 1997 and 2.0 in 1996. The current year
decline was principally a result of the cash utilized in the share repurchase
program.
Assets totaled $964 million in 1998, virtually unchanged from 1997. In
1996 assets totaled $839 million. The return on average assets was 8.8% in
1998 and 8.9% in 1997. In 1996 the return was 9.4%.
Stockholders' equity was $538 million in 1998, which was 4% below 1997.
In 1997 stockholders' equity grew 8% over 1996. The return on average
stockholders' equity was 15.4% in 1998, 15.0% in 1997 and 14.7% in 1996.
Dividends paid per common share were $.91 in 1998, an increase of 5% over
1997. Dividends in 1997 were $.87 per share, also 5% more than 1996.
The Company's financial position remains very strong. The Company
continues to carry no long-term debt and expects to meet its growth
requirements principally through cash flow from operations.
-9-
Year 2000 Systems Update
The year 2000 problem is an issue regarding computer programs and
non-information technology systems that use embedded computer chips such as
microcontrollers. Many of these programs are unable to distinguish between a
year that begins with "20" instead of the familiar "19" and therefore could
fail or produce incorrect results.
In 1995, the Company embarked upon a global Year 2000 Project. The
project scope includes hardware, software and embedded chip technology. A
formal Project Office was established with complete executive sponsorship and
funding in February 1997. This initiated a global business system strategy
that included a wide-scale Oracle implementation of business and financial
systems, plus major enhancements to branch automation systems. Included in
these initiatives is the remediation of year 2000 non-compliant systems.
The Company's State of Readiness
Plans for remediation of year 2000 non-compliant systems are divided into
the following major initiatives: mainframe, client server, domestic and
international subsidiaries. The common project phases consisted of:
inventory all hardware, software and embedded systems; prioritize systems
based on business criticality; complete a risk assessment based on interviews
with business users and subject matter experts, analysis of date
functionality, and vendor documentation; test and decide to upgrade, replace
or retire, as appropriate; internal certification; and a return to production.
As a part of the risk assessment process, contingency plans will be developed
in the event of system failure. Compuware Corporation was selected to assist
in the inventory remediation and testing process.
The inventory and assessment phase is 100% complete for all business
areas. Remediation and testing is 100% complete for some of the Kelly
business units. Overall completion is approximately 70% when all countries
and business units are considered. The Company is 100% remediated of all
mission-critical customer support systems at year-end 1998. Testing will
continue throughout 1999 with planned completion during the third quarter of
1999. Testing teams are in place for mainframe, client server and
international. The testing process includes a detailed risk assessment to
determine the necessity and scope of testing. In some instances internal
certification is recommended without testing, based on the risk assessment.
This process will ensure resources remain focused on areas of greatest risk.
External communications and readiness assessments have been distributed
to all customers, landlords, vendors, suppliers and facilities for North
America. International communications and assessments were 100% complete at
year end 1998. First quarter 1999 analysis of responses received will
determine follow-up action including additional contingency planning.
The Costs to Address The Company's Year 2000 Issues
The total cost of the Year 2000 project is expected to be at least
somewhat offset by the benefits to be realized by the Company. These include:
enhanced functionality at the branch level; a worldwide inventory of
information technology and systems; a high-level documentation of business
-10-
processes used by strategic business units; rationalization and
standardization of diverse information systems; upgrades and standardization
of desktop computing; upgrade of wide area network to remote business units;
improved software quality assurance; and clean-up and documentation of older
program code.
Total cost of the Year 2000 remediation project is estimated to be
approximately $21 million. The total amount incurred to date is $9 million,
of which $1 million was expended in 1997 and $8 million expended in 1998.
Approximately $4 million of the total cost has been incurred for remediation
(code remediation, project management compliance and risk assessment), nearly
$3 million for testing, and the balance for contingency development.
The estimated future cost of completing the Year 2000 project is
approximately $12 million to be incurred throughout 1999 and early 2000. Of
these future costs the Company estimates approximately $4 million will relate
to remediation, over $5 million for testing and the balance for contingency
activities. Funds for the project are budgeted separately from other
Information Technology initiatives. These costs are being expensed as an
element of Selling, General and Administrative expense and are funded from
cash provided by operations.
The Risks Of The Company's Year 2000 Issues
The failure to correct a material Year 2000 problem could result in an
interruption, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. It is believed the
most significant of risks concern the Year 2000 readiness of third party
customers and suppliers. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity or
financial condition. The Year 2000 Project is expected to significantly
reduce the Company's level of uncertainty about the Year 2000 problem and
through, in particular, the Year 2000 readiness of its internal systems and
processes and its assessment of third-party preparedness.
In general, the Company believes all reasonable steps possible have been
taken or are in process to ensure operations will continue without disruption.
Additionally, in the event of circumstances resulting from the failure of a
third party, all reasonable steps possible will have been taken to ensure
appropriate contingency plans exist or are being developed to minimize the
impact of these failures.
Market Risk Sensitive Instruments and Positions
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential loss arising from adverse changes
in foreign currency exchange rates and interest rates. Foreign currency
exchange risk is mitigated by the availability of the Company's multi-currency
line of credit. This credit facility can be used to borrow in the local
currencies that can effectively hedge the exchange rate risk resulting from
foreign currencies weakening in relation to the U.S. dollar.
-11-
The Company's holdings and positions in market risk sensitive instruments
do not subject the Company to material risk exposures.
Adoption of the Euro
A segment of the global business system implementation is devoted to
changes necessary to deal with the introduction of a European single currency
(the Euro). The transition period for implementation is January 1, 1999
through January 1, 2002.
The Company does not expect that introduction and use of the Euro will
result in any material increase in costs.
Forward-Looking Statements
Except for the historical statements and discussions contained herein,
statements contained in this report relate to future events that are subject
to risks and uncertainties, such as: competition, changing market and
economic conditions, currency fluctuations, changes in laws and regulations,
the Company's ability to effectively implement and manage its information
technology programs, including the Year 2000 project, and other factors
discussed in the report and in the Company's filings with the Securities and
Exchange Commission. Actual results may differ materially from any
projections contained herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item are
set in the accompanying index on page 15 of this filing and are presented in
pages 16-33.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
PART III
Information required by Part III with respect to Directors and Executive
Officers of the registrant, except as set forth under the title "Executive
Officers of the Registrant" which is included on page 12, (Item 10), Executive
Compensation (Item 11), Security Ownership of Certain Beneficial Owners and
Management (Item 12), and Certain Relationships and Related Transactions (Item
13) is to be included in a definitive proxy statement filed by the registrant
not later than 120 days after the close of its fiscal year and such proxy
statement, when filed, is incorporated herein by reference.
-12-
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Served as an Business Experience
Name/Office Age Officer Since (1) During Last 5 Years
- ------------------------ ---------------- ----------------- --------------------------------
Terence E. Adderley 65 1961 Served as officer of registrant.
Chairman, President and Chief
Executive Officer
Carl T. Camden 44 1995 Served as officer of registrant
Executive Vice President since April, 1995. From 1993
served as Senior Vice President
at Key Corp., the parent of Key
Bank and Society Bank Groups.
William K. Gerber 45 1998 Served as officer of registrant
Senior Vice President and since April, 1998. Prior
Chief Financial Officer thereto, served as
Vice President of Finance
at The Limited, Inc.
George M. Reardon 51 1998 Served as officer of registrant.
Senior Vice President, since June, 1998. From 1994,
General Counsel and served in private practice in
Secretary Houston, Texas. Prior thereto,
served as Vice President,
General Counsel and Corporate
Secretary at The Talent Tree
Corporation.
Robert E. Thompson 56 1982 Served as officer of registrant.
Executive Vice President
Tommi A. White 48 1993 Served as officer of registrant.
Executive Vice President
(1) Each officer serves continuously until termination of employment or removal by the Board of
Directors.
-13-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial statements -
Report of Independent Accountants
Balance Sheets at January 3, 1999, December 28, 1997 and
December 29, 1996
Statements of Earnings for the three fiscal years ended
January 3, 1999
Statements of Cash Flows for the three fiscal years ended
January 3, 1999
Statements of Stockholders' Equity for the three fiscal years
ended January 3, 1999
Notes to Financial Statements
(2) Financial Statement Schedule -
For the three fiscal years ended January 3, 1999:
Schedule II - Valuation Reserves
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
(3) The Exhibits are listed in the Index to Exhibits Required by Item 601
of Regulation S-K at Item (c) below and included at page 34 which
is incorporated herein by reference.
No additional financial information has been provided for the registrant as an
individual company since the total amount of net assets of subsidiaries which
are restricted as to transfer to the registrant through intercompany loans,
advances or cash dividends does not exceed 25 percent of total consolidated net
assets at January 3, 1999.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
(c) The Index to Exhibits and required Exhibits are included following
the Financial Statement Schedule beginning at page 34 of this
filing.
(d) The Index to Financial Statements and Supplemental Schedule is
included following the signatures beginning at page 15 of this
filing.
-14-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 1999 KELLY SERVICES, INC.
Registrant
By /s/ W. K. Gerber
---------------------------------------
W. K. Gerber
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 31, 1999 * T. E. Adderley
--------------------------------------
T. E. Adderley
Chairman, President, Chief Executive
Officer and Director
(Principal Executive Officer)
Date: March 31, 1999 * C. V. Fricke
--------------------------------------
C. V. Fricke
Director
Date: March 31, 1999 * M. A. Fay, O.P.
--------------------------------------
M. A. Fay, O.P.
Director
Date: March 31, 1999 * V. G. Istock
--------------------------------------
V. G. Istock
Director
Date: March 31, 1999 * B. J. White
--------------------------------------
B. J. White
Director
Date: March 31, 1999 /s/ W. K. Gerber
--------------------------------------
W. K. Gerber
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 31, 1999 *By /s/ W. K. Gerber
--------------------------------------
W. K. Gerber
Attorney-in-Fact
-15-
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
Kelly Services, Inc. and Subsidiaries
Page Reference
in Report on
Form 10-K
--------------
Report of Independent Accountants 16
Balance Sheets at January 3, 1999, December 28, 1997
and December 29, 1996 17
Statements of Earnings for the three fiscal years ended
January 3, 1999 18
Statements of Cash Flows for the three fiscal years ended
January 3, 1999 19
Statements of Stockholders' Equity for the three fiscal
years ended January 3, 1999 20
Notes to Financial Statements 21 - 32
Financial Statement Schedule -
Schedule II - Valuation Reserves 33
-16-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors,
Kelly Services, Inc.
In our opinion, the accompanying financial statements as listed in Item 14(a) 1
and 2 of this Form 10-K present fairly, in all material respects, the financial
position of Kelly Services, Inc. and its subsidiaries at January 3, 1999,
December 28, 1997 and December 29, 1996, and the results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Detroit, Michigan
January 28, 1999
-17-
BALANCE SHEETS
Kelly Services, Inc. and Subsidiaries
1998 1997 1996
---------- ---------- ----------
(In thousands of dollars)
ASSETS
Current Assets
Cash and equivalents . . . . . . . . . . . . $ 59,799 $ 76,690 $ 33,408
Short-term investments . . . . . . . . . . . 12,069 67,301 28,035
Accounts receivable, less allowances of
$13,035, $12,375 and $8,320, respectively 584,653 572,134 554,025
Prepaid expenses and other current assets. . 15,012 12,892 12,883
Deferred taxes . . . . . . . . . . . . . . . 48,343 41,955 30,235
---------- ---------- ----------
Total current assets. . . . . . . . . . 719,876 770,972 658,586
Property and Equipment
Land and buildings . . . . . . . . . . . . . 44,135 44,405 43,748
Equipment, furniture and leasehold
improvements . . . . . . . . . . . . . . . 179,707 130,472 118,737
Accumulated depreciation . . . . . . . . . . (77,491) (62,144) (64,763)
---------- ---------- ----------
Total property and equipment. . . . . . 146,351 112,733 97,722
Intangibles and Other Assets . . . . . . . . . 98,020 83,524 82,571
---------- ---------- ----------
Total Assets . . . . . . . . . . . . . . . . . $ 964,247 $ 967,229 $ 838,879
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings. . . . . . . . . . . . $ 47,629 $ 54,958 $ 41,616
Accounts payable . . . . . . . . . . . . . . 79,089 60,408 48,111
Payroll and related taxes . . . . . . . . . 195,670 197,092 151,769
Accrued insurance. . . . . . . . . . . . . . 66,830 61,077 53,119
Income and other taxes . . . . . . . . . . . 37,265 33,865 27,365
---------- ---------- ----------
Total current liabilities . . . . . . . 426,483 407,400 321,980
Stockholders' Equity
Capital stock, $1.00 par value
Class A common stock, shares issued 36,540,770
in 1998, 36,537,584 in 1997 and 36,526,431
in 1996 . . . . . . . . . . . . . . . . 36,541 36,538 36,527
Class B common stock, shares issued 3,575,096
in 1998, 3,578,282 in 1997 and 3,589,435
in 1996 . . . . . . . . . . . . . . . . 3,575 3,578 3,589
Treasury stock, at cost
Class A common stock, 4,301,321 shares in 1998,
1,947,156 in 1997 and 2,051,038 in 1996. (81,669) (6,029) (6,012)
Class B common stock, 7,767 shares in 1998
and 5,830 in 1997 and 1996 . . . . . . . (248) (185) (185)
Paid-in capital. . . . . . . . . . . . . . . 14,844 10,980 8,265
Earnings invested in the business. . . . . . 572,517 522,039 474,409
Accumulated foreign currency adjustments . . (7,796) (7,092) 306
---------- ---------- ----------
Total stockholders' equity. . . . . . . 537,764 559,829 516,899
---------- ---------- ----------
Total Liabilities and Stockholders' Equity . . $ 964,247 $ 967,229 $ 838,879
========== ========== ==========
See accompanying Notes to Financial Statements.
-18-
STATEMENTS OF EARNINGS
Kelly Services, Inc. and Subsidiaries
(1)
1998 1997 1996
------------ ------------ ------------
(In thousands of dollars except per share items)
Sales of services. . . . . . . . . . . . . . . . $ 4,092,251 $ 3,852,935 $ 3,302,303
Cost of services . . . . . . . . . . . . . . . . 3,360,976 3,171,589 2,689,523
------------ ------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . 731,275 681,346 612,780
Selling, general and administrative expenses . . 590,659 545,582 491,828
------------ ------------ ------------
Earnings from operations . . . . . . . . . . . . 140,616 135,764 120,952
Interest income, net . . . . . . . . . . . . . . 2,999 1,216 1,957
------------ ------------ ------------
Earnings before income taxes . . . . . . . . . . 143,615 136,980 122,909
Income taxes . . . . . . . . . . . . . . . . . . 58,900 56,200 49,900
------------ ------------ ------------
Net earnings . . . . . . . . . . . . . . . . . . $ 84,715 $ 80,780 $ 73,009
============ ============ ============
Basic earnings per share . . . . . . . . . . . . $2.24 $2.12 $1.92
Diluted earnings per share . . . . . . . . . . . $2.23 $2.12 $1.91
Dividends per share . . . . . . . . . . . . . . $ .91 $ .87 $ .83
Average shares outstanding (thousands):
Basic . . . . . . . . . . . . . . . . . . . . 37,745 38,099 38,043
Diluted . . . . . . . . . . . . . . . . . . . 37,945 38,191 38,133
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
-19-
STATEMENTS OF CASH FLOWS
Kelly Services, Inc. and Subsidiaries
(1)
1998 1997 1996
--------- --------- ---------
(In thousands of dollars)
Cash flows from operating activities
Net earnings . . . . . . . . . . . . . . . . . . $ 84,715 $ 80,780 $ 73,009
Noncash adjustments:
Depreciation and amortization. . . . . . . . . 28,865 28,341 26,136
Changes in certain working capital components. 5,060 38,714 (112,763)
--------- --------- ---------
Net cash from operating activities . . . . . 118,640 147,835 (13,618)
Cash flows from investing activities
Capital expenditures . . . . . . . . . . . . . . (59,213) (39,731) (36,548)
Short-term investments . . . . . . . . . . . . . 55,232 (39,266) 46,702
Increase in intangibles and other assets . . . . (17,215) (8,446) (10,694)
--------- --------- ---------
Net cash from investing activities . . . . . (21,196) (87,443) (540)
Cash flows from financing activities
(Decrease) increase in short-term borrowings . . (7,329) 13,342 25,154
Dividend payments. . . . . . . . . . . . . . . . (34,237) (33,150) (31,579)
Exercise of stock options and restricted stock
awards . . . . . . . . . . . . . . . . . . . . 3,180 2,698 1,180
Purchase of treasury stock . . . . . . . . . . . (75,949) - -
--------- --------- ---------
Net cash from financing activities . . . . . (114,335) (17,110) (5,245)
Net change in cash and equivalents . . . . . . . . (16,891) 43,282 (19,403)
Cash and equivalents at beginning of year. . . . . 76,690 33,408 52,811
--------- --------- ---------
Cash and equivalents at end of year. . . . . . . . $ 59,799 $ 76,690 $ 33,408
========= ========= =========
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
-20-
STATEMENTS OF STOCKHOLDERS' EQUITY
Kelly Services, Inc. and Subsidiaries
(1)
1998 1997 1996
--------- --------- ---------
(In thousands of dollars)
Capital Stock
Class A common stock
Balance at beginning of year . . . . . . . . $ 36,538 $ 36,527 $ 36,512
Conversions from Class B . . . . . . . . . . 3 11 15
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 36,541 36,538 36,527
Class B common stock
Balance at beginning of year . . . . . . . . 3,578 3,589 3,604
Conversions to Class A . . . . . . . . . . . (3) (11) (15)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 3,575 3,578 3,589
Treasury Stock
Class A common stock
Balance at beginning of year . . . . . . . . (6,029) (6,012) (6,142)
Treasury stock issued for acquisition . . . 102 - -
Purchase of treasury stock . . . . . . . . . (75,886) - -
Exercise of stock options and restricted
stock awards . . . . . . . . . . . . . . . 144 (17) 130
--------- --------- ---------
Balance at end of year . . . . . . . . . . . (81,669) (6,029) (6,012)
Class B common stock
Balance at beginning of year . . . . . . . . (185) (185) (185)
Purchase of treasury stock . . . . . . . . . (63) - -
--------- --------- ---------
Balance at end of year . . . . . . . . . . . (248) (185) (185)
Paid-in Capital
Balance at beginning of year . . . . . . . . 10,980 8,265 7,215
Treasury stock issued for acquisition. . . . 828 - -
Exercise of stock options and restricted
stock awards . . . . . . . . . . . . . . . 3,036 2,715 1,050
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 14,844 10,980 8,265
Earnings Invested in the Business
Balance at beginning of year . . . . . . . . 522,039 474,409 432,979
Net earnings . . . . . . . . . . . . . . . . 84,715 80,780 73,009
Cash dividends . . . . . . . . . . . . . . . (34,237) (33,150) (31,579)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 572,517 522,039 474,409
Accumulated Foreign Currency Adjustments
Balance at beginning of year . . . . . . . . (7,092) 306 2,121
Equity adjustment for foreign currency . . . (704) (7,398) (1,815)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . (7,796) (7,092) 306
--------- --------- ---------
Stockholders' Equity at end of year. . . . . . . $537,764 $559,829 $516,899
========= ========= =========
Comprehensive Income
Net earnings . . . . . . . . . . . . . . . . $ 84,715 $ 80,780 $ 73,009
Other comprehensive income - Foreign
currency adjustments . . . . . . . . . . . (704) (7,398) (1,815)
--------- --------- ---------
Comprehensive income . . . . . . . . . . . . $ 84,011 $ 73,382 $ 71,194
========= ========= =========
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
-21-
NOTES TO FINANCIAL STATEMENTS
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's fiscal year ends on the Sunday nearest to December 31.
The three most recent years ended on January 3, 1999 (1998), December 28,
1997 (1997) and December 29, 1996 (1996).
The financial statements consolidate the accounts and operations of the
Company and its subsidiaries, all of which are wholly owned, after
elimination of all intercompany accounts and transactions.
The Company divides its operations into three segments: (1) U.S.
Commercial Staffing, (2) Professional, Technical and Staffing Alternatives
and (3) International. The accounts of the Company's foreign operations are
translated at appropriate rates of exchange. Revenues, costs and expenses of
foreign subsidiaries are translated to U.S. dollars at average-period
exchange rates. Assets and liabilities of foreign subsidiaries are
translated to U.S. dollars at year-end exchange rates with the effects of
these translation adjustments being reported as a separate component of
accumulated other comprehensive income in stockholders' equity.
Foreign operations are conducted in Australia, Belgium, Canada, Denmark,
France, Germany, Ireland, Italy, Luxembourg, Mexico, the Netherlands, New
Zealand, Norway, Puerto Rico, Russia, Spain, Switzerland and the United
Kingdom. Refer to the Segment Disclosures footnote for additional
information.
Revenue from sales of services is recognized as services are provided by
the temporary, contract or leased employees. Revenue from permanent
placement fees is recognized at the time the permanent placement candidate
begins full-time services.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform with the
current presentation.
2. CURRENT ASSETS
Cash and equivalents are stated at cost, which approximates market.
Included are highly liquid debt instruments with original maturities of three
months or less.
Short-term investments are debt instruments having original maturities
of more than three months and are classified as available for sale. Of these
investments, federal, state and local government obligations comprised
approximately 80% in 1998, 70% in 1997 and 90% in 1996. Short-term
investments due within one year totaled $64,000 in 1997 with the balance due
within two years. The entire short-term investments balance in 1998 and 1996
was due within one year. The difference between carrying amounts and market
was not material at January 3, 1999, December 28, 1997 and December 29, 1996.
-22-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
Interest income was $6,206, $4,390 and $4,204, respectively, for the
years 1998, 1997 and 1996.
3. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in certain working capital components, as disclosed in the
statements of cash flows, for the years 1998, 1997 and 1996 were as follows:
1998 1997 1996
------------ ------------ ------------
Increase in accounts
receivable . . . . . . . $ (13,355) $ (27,494) $ (158,596)
Increase in prepaid
expenses and other
current assets . . . . . (2,287) (1,502) (2,884)
Increase in deferred
taxes . . . . . . . . . (6,389) (11,732) (7,044)
Increase in accounts
payable. . . . . . . . . 19,003 16,069 12,325
Increase (decrease) in
payroll and related
taxes. . . . . . . . . . (1,224) 47,345 33,188
Increase in accrued
insurance. . . . . . . . 5,755 7,981 1,819
Increase in income and
other taxes . . . . . . 3,557 8,047 8,429
------------ ------------ ------------
Total. . . . . . . . . . . $ 5,060 $ 38,714 $ (112,763)
============ ============ ============
Cash flows from short-term investments for 1998, 1997 and 1996 were as
follows:
1998 1997 1996
------------ ------------ ------------
Sales/Maturities . . . . . $ 1,645,815 $ 1,749,954 $ 1,229,408
Purchases . . . . . . . . (1,590,583) (1,789,220) (1,182,706)
------------ ------------ ------------
Total . . . . . . . . . . $ 55,232 $ (39,266) $ 46,702
============ ============ ============
4. PROPERTY AND EQUIPMENT
Properties are stated at cost and include expenditures for additions and
major improvements. Fully depreciated assets are eliminated from the
accounts. For financial reporting purposes, assets are depreciated over
their estimated useful lives, principally by the straight-line method.
Estimated useful lives range from 15 to 45 years for land improvements,
buildings and building improvements, 5 years for equipment, furniture and
leasehold improvements and 3 to 12 years for computer hardware and software.
Depreciation expense was $25,400 for 1998, and $22,900 for 1997 and 1996.
-23-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
The Company conducts its field operations primarily from leased
facilities. The following is a schedule by fiscal year of future minimum
lease commitments as of January 3, 1999:
Fiscal year:
1999 . . . . . . $ 37,600
2000 . . . . . . 30,300
2001 . . . . . . 22,800
2002 . . . . . . 16,000
2003 . . . . . . 10,000
Later years. . . 18,700
-----------
Total. . . . . . $ 135,400
===========
Lease expense for 1998, 1997 and 1996 amounted to $38,600, $35,900 and
$32,900, respectively.
5. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets include goodwill of $64,100, $56,000 and
$58,000 at year-ends 1998, 1997 and 1996, respectively. Goodwill, which
represents the excess of cost over net assets of businesses acquired, is
amortized on a straight-line basis over periods not exceeding 40 years.
Accumulated amortization of goodwill at 1998, 1997 and 1996 was $6,900,
$5,300 and $4,200, respectively.
The Company periodically reviews the specific carrying amounts of
goodwill and has determined that no impairments have occurred. Such reviews
are based on various analyses including profitability projections and
management's judgment of the related business' ability to achieve sufficient
profitability.
Other assets include deposits and cash values of life insurance on the
lives of officers and key employees.
6. CAPITALIZATION
The authorized capital stock of the Company is 100,000,000 shares of
Class A common stock and 10,000,000 shares of Class B common stock. Class A
shares have no voting rights and are not convertible. Class B shares have
voting rights and are convertible into Class A shares on a share-for-share
basis at any time. Both classes of stock have identical rights in the event
of liquidation.
On September 29, 1998 and November 24, 1998, the Company repurchased
1,500,000 and 1,000,000 shares of its Class A common stock, respectively, in
negotiated transactions from the William R. Kelly Trust. The total value of
the Class A shares repurchased was $75,886. In addition, the Company
repurchased 1,937 Class B shares at a total cost of $63.
-24-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
7. EARNINGS PER SHARE
The reconciliations of earnings per share computations for the fiscal
years 1998, 1997 and 1996 were as follows:
1998 1997 1996
---------- ---------- ----------
Net earnings . . . . . . . . . . . . $ 84,715 $ 80,780 $ 73,009
========== ========== ==========
Determination of shares (thousands):
Weighted average common shares
outstanding . . . . . . . . . . . . 37,745 38,099 38,043
Effect of dilutive securities:
Stock options . . . . . . . . . . . 90 61 36
Restricted and performance awards . 110 31 54
--------- --------- ---------
Weighted average common
shares outstanding - assuming
dilution . . . . . . . . . . . . . 37,945 38,191 38,133
========== ========== ==========
Earnings per share - basic . . . . . $ 2.24 $ 2.12 $ 1.92
Earnings per share - assuming dilution $ 2.23 $ 2.12 $ 1.91
Stock options to purchase 458,000, 423,000 and 618,000 shares of common stock
at a weighted average price per share of $35.17, $31.02 and $30.46 were
outstanding during 1998, 1997 and 1996, respectively, but were not included
in the computation of diluted earnings per share. The options' exercise
price was greater than the average market price of the common shares and was
anti-dilutive.
8. SHORT-TERM BORROWINGS
Short-term borrowings of $47,629, $54,958 and $41,616 were outstanding
at year-ends 1998, 1997 and 1996, respectively. Weighted average interest
rates were 5.3%, 7.8% and 6.8% at year ends 1998, 1997 and 1996,
respectively. Interest expense and payments related to the short-term
borrowings for 1998, 1997 and 1996 were as follows:
1998 1997 1996
---------- ---------- ----------
Interest expense . . . . . . . . . . $ 3,207 $ 3,174 $ 2,247
Interest payments. . . . . . . . . . 3,956 2,174 2,100
During the fourth quarter of 1998 the Company entered into a committed
$100 million, five year multi-currency revolving credit facility to be used
to fund working capital, acquisitions, and for general corporate purposes.
The interest rate applicable to borrowings under the line of credit is 20
-25-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
basis points over LIBOR and may include additional costs if the funds are
drawn from certain countries. All of the borrowings are foreign currency
denominated and support the Company's international working capital position.
The carrying amounts of the Company's borrowings under the lines of credit
described above approximate their fair value.
9. RETIREMENT BENEFITS
The Company provides a qualified defined contribution plan covering
substantially all full-time employees, except officers and certain other
management employees. Upon approval by the Board of Directors, a
contribution based on eligible wages is funded annually. The plan offers a
savings feature with Company matching contributions. Assets of this plan are
held by an independent trustee for the sole benefit of participating
employees.
A nonqualified benefit plan is provided for officers and certain other
management employees. Upon approval by the Board of Directors, a
contribution based on eligible wages is set aside annually. This plan also
includes provisions for salary deferrals and Company matching contributions.
Amounts provided for retirement benefits totaled $7,000 in 1998, $6,300
in 1997 and $4,900 in 1996.
10. INCOME TAXES
Pretax income for the years 1998, 1997 and 1996 was taxed under the
following jurisdictions:
1998 1997 1996
---------- ---------- ----------
Domestic . . . . . . . . . . $ 134,731 $ 129,533 $ 113,048
Foreign. . . . . . . . . . . 8,884 7,447 9,861
---------- ---------- ----------
Total. . . . . . . . . . . . $ 143,615 $ 136,980 $ 122,909
========== ========== ==========
The provision for income taxes was as follows:
1998 1997 1996
---------- ---------- ----------
Current tax expense:
U.S. federal . . . . . . . $ 47,599 $ 52,517 $ 43,608
U.S. state and local . . . 12,000 10,715 9,340
Foreign. . . . . . . . . . 5,802 4,405 3,870
---------- ---------- ----------
Total current. . . . . . . 65,401 67,637 56,818
Total deferred
(primarily U.S.) . . . . . (6,501) (11,437) (6,918)
---------- ---------- ----------
Total provision. . . . . . . $ 58,900 $ 56,200 $ 49,900
========== ========== ==========
-26-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
Deferred tax assets (liabilities) are comprised of the following:
1998 1997 1996
---------- ---------- ----------
Depreciation and
amortization . . . . . . . $ (5,307) $ (5,604) $ (4,123)
Employee compensation
and benefit plans. . . . . 22,845 19,143 12,839
Workers' compensation. . . . 22,428 19,811 17,688
Loss carryforwards . . . . . 3,453 2,946 1,671
Other, net . . . . . . . . . 7,987 8,322 2,638
Valuation allowance . . . . (3,063) (2,663) (478)
---------- ---------- ----------
Total deferred tax assets. . 48,343 41,955 30,235
Total deferred tax
liabilities. . . . . . . . (1,279) (1,363) (1,067)
---------- ---------- ----------
Total. . . . . . . . . . . . $ 47,064 $ 40,592 $ 29,168
========== ========== ==========
The differences between income taxes for financial reporting purposes
and the U.S. statutory rate are as follows:
1998 1997 1996
---------- ---------- ----------
Income tax based on
statutory rate . . . . . . 35.0 % 35.0 % 35.0 %
State income taxes,
net of federal benefit . . 5.4 5.1 4.9
Other, net . . . . . . . . . 0.6 0.9 0.7
---------- ---------- ----------
Total. . . . . . . . . . . . 41.0 % 41.0 % 40.6 %
========== ========== ==========
The Company has loss carryforwards at January 3, 1999 totaling $3,453
which expire as follows:
Year Amount
---------------- -----------
2001 . . . . . . $ 743
2002 . . . . . . 267
2003 . . . . . . 1,217
2004 . . . . . . 221
2005 . . . . . . 352
2006-2008. . . . 174
No expiration. . 479
-----------
Total. . . . . . $ 3,453
===========
A valuation allowance of $3,063 has been recorded against the loss
carryforwards.
-27-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
Provision has not been made for U.S. or additional foreign income taxes
on an estimated $5,400 of undistributed earnings of foreign subsidiaries
which are permanently reinvested. If such earnings were to be remitted,
management believes that U.S. foreign tax credits would largely eliminate any
such U.S. and foreign income taxes.
The Company paid income taxes of $65,700 in 1998, $64,300 in 1997 and
$46,500 in 1996.
11. PERFORMANCE INCENTIVE PLAN
Under the 1992 Performance Incentive Plan as amended and restated in
1996 (the "Plan"), the Company may grant stock options (both incentive and
nonqualified), Stock Appreciation Rights (SARs), restricted awards and
performance awards to key employees utilizing the Company's Class A stock.
Stock options may not be granted at prices less than the fair market value on
the date of grant, nor for a term to exceed 10 years. The Plan provides that
the maximum number of shares available for grants is 7-1/2 percent of the
outstanding Class A stock, adjusted for Plan activity over the preceding five
years. Shares available for future grants at the end of 1998, 1997 and 1996
were 1,213,000, 1,149,000 and 1,394,000, respectively.
The Company applies Accounting Principles Board Opinion 25 and related
Interpretations in accounting for the Plan. Accordingly, no compensation
cost has been recognized for incentive and nonqualified stock options. If
compensation cost had been determined based on the fair value at the grant
dates for awards under the Plan consistent with the method of Statement of
Financial Accounting Standards 123, Accounting for Stock-Based Compensation,
the Company's net income would have been reduced by $1,135, $809 and $497 for
1998, 1997 and 1996, respectively; basic earnings per share would have been
reduced by $.03 in 1998, $.02 in 1997 and $.01 in 1996; and diluted earnings
per share would have been reduced by $.03 in 1998 and 1997 and $.01 in 1996.
Since stock options generally become exercisable over several years and
additional grants are likely to be made in future years, the pro forma
amounts for compensation cost may not be indicative of the effects on net
income and earnings per share for future years.
The fair value of each option included in the following tables is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions used for grants in 1998, 1997
and 1996, respectively: dividend yield of 3.0 percent in all three years,
expected volatility of 31, 30 and 31 percent, risk-free interest rates of
5.3, 5.9 and 5.7 percent and expected lives of six years in 1998 and seven
years in 1997 and 1996.
-28-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
A summary of the status of stock option grants under the Plan as of
January 3, 1999, December 28, 1997 and December 29, 1996, and changes during
the years ended on those dates, is presented as follows:
Weighted Avg.
Options Exercise Price
---------- ---------------
1998:
Outstanding at beginning of year. . 1,160,000 $28.68
Granted . . . . . . . . . . . . . . 448,000 35.16
Exercised . . . . . . . . . . . . . (104,000) 28.15
Cancelled . . . . . . . . . . . . . (174,000) 29.67
----------
Outstanding at end of year. . . . . 1,330,000 $30.78
==========
Options exercisable at year end . . 404,000 $28.07
Weighted average fair value of
options granted during the year . $10.06
1997:
Outstanding at beginning of year. . 1,022,000 $28.69
Granted . . . . . . . . . . . . . . 434,000 28.50
Exercised . . . . . . . . . . . . . (90,000) 27.76
Cancelled . . . . . . . . . . . . . (206,000) 28.72
----------
Outstanding at end of year. . . . . 1,160,000 $28.68
==========
Options exercisable at year end . . 280,000 $27.70
Weighted average fair value of
options granted during the year . $8.69
1996:
Outstanding at beginning of year. . 697,000 $27.36
Granted . . . . . . . . . . . . . . 457,000 30.55
Exercised . . . . . . . . . . . . . (21,000) 25.82
Cancelled . . . . . . . . . . . . . (111,000) 28.61
----------
Outstanding at end of year. . . . . 1,022,000 $28.69
==========
Options exercisable at year end . . 260,000 $27.10
Weighted average fair value of
options granted during the year . $9.46
/TABLE
-29-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
The following table summarizes information about options outstanding at
January 3, 1999:
Weighted
Average Weighted
Range of Amount Remaining Average
Exercise Outstanding Life Exercise
Prices as of 1/3/99 (Years) Price
- ------------- ------------ --------- --------
$24.50-28.00 250,000 5.60 $26.46
$28.01-29.00 302,000 8.13 28.18
$29.01-34.50 359,000 7.00 30.71
$34.51-35.00 314,000 9.18 34.94
$35.01-38.50 105,000 9.25 36.27
----------- --------- --------
$24.50-38.50 1,330,000 7.69 $30.78
=========== ========= ========
As of January 3, 1999, no SARs have been granted under the Plan.
Restricted awards are issued to certain key employees and are subject to
forfeiture until the end of an established restriction period. Restricted
awards totaling 14,500, 38,900 and 2,400 shares were granted under the Plan
during 1998, 1997 and 1996, respectively. The weighted average grant date
price of such awards was $35.64, $29.58 and $27.38 for 1998, 1997 and 1996,
respectively. Restricted awards outstanding totaled 36,200, 52,800 and
55,700 shares at year-ends 1998, 1997 and 1996, respectively, and have a
weighted average remaining life of 2.5 years at January 3, 1999.
Under the Plan, performance awards may be granted to senior executive
officers, the payout of which is determined by the degree of attainment of
objectively determinable performance goals over the established relevant
performance period. Performance awards totaling 51,500, 44,500 and 42,000
shares were granted under the Plan during 1998, 1997 and 1996, respectively.
The weighted average grant date prices of such awards were $34.94, $28.06 and
$29.75 for 1998, 1997 and 1996, respectively. Unearned performance awards
outstanding at year-ends 1998, 1997 and 1996 were 115,200, 76,300 and 38,500,
respectively, and have a weighted average remaining life of 1.1 years at
January 3, 1999. Total compensation cost recognized for restricted and
performance awards was $2,000, $1,400 and $1,300 for 1998, 1997 and 1996,
respectively.
12. CONTINGENCIES
The Company is subject to various legal proceedings, claims and
liabilities which arise in the ordinary course of its business. Litigation
is subject to many uncertainties, the outcome of individual litigated matters
is not predictable with assurance and it is reasonably possible that some of
the foregoing matters could be decided unfavorably to the Company. Although
the amount of the liability at January 3, 1999 with respect to these matters
cannot be ascertained, the Company believes that any resulting liability will
not be material to the financial statements of the Company at January 3,
1999.
-30-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
13. SEGMENT DISCLOSURES
In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) 131, Disclosures About Segments of an Enterprise and Related
Information. SFAS 131 supersedes SFAS 14, Financial Reporting for Segments
of a Business Enterprise, replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments.
Adoption of SFAS 131 did not affect results of operations or financial
position but did affect the disclosure of segment information. Prior years'
segment information has been restated to present the Company's reportable
segments. The accounting policies of the segments are the same as those
described in the "Summary of Significant Accounting Policies."
The Company has determined that its reportable segments are those that
are based on the Company's method of internal reporting, which disaggregates
its business by segment. The Company's reportable segments are: (1) U.S.
Commercial Staffing, (2) Professional, Technical and Staffing Alternatives
(PTSA) and (3) International.
The following table presents information about the reported operating
income of the Company for the fiscal years 1998, 1997 and 1996. Segment data
presented is net of intersegment revenues. Asset information by reportable
segment is not reported, since the Company does not produce such information
internally.
1998 1997 1996
----------- ----------- -----------
Sales:
U. S. Commercial Staffing. . . . . . $2,535,600 $2,452,000 $2,172,600
PTSA . . . . . . . . . . . . . . . . 591,900 546,400 418,100
International. . . . . . . . . . . . 964,800 854,500 711,600
----------- ----------- -----------
Consolidated Total . . . . . . . . $4,092,300 $3,852,900 $3,302,300
=========== =========== ===========
Earnings from Operations:
U. S. Commercial Staffing. . . . . . $ 221,000 $ 215,600 $ 192,900
PTSA . . . . . . . . . . . . . . . . 22,500 16,000 9,700
International. . . . . . . . . . . . 29,600 20,500 21,500
Corporate. . . . . . . . . . . . . . (132,500) (116,300) (103,100)
----------- ----------- -----------
Consolidated Total . . . . . . . . $ 140,600 $ 135,800 $ 121,000
=========== =========== ===========
-31-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
Specified items included in segment earnings from operations for the
fiscal years 1998, 1997 and 1996 were as follows:
1998 1997 1996
----------- ----------- -----------
Depreciation and Amortization:
U. S. Commercial Staffing. . . . . . $ 6,237 $ 7,531 $ 7,826
PTSA . . . . . . . . . . . . . . . . 1,977 1,972 480
International. . . . . . . . . . . . 10,262 9,213 6,666
Corporate . . . . . . . . . . . . . 10,389 9,625 11,164
----------- ----------- -----------
Consolidated Total . . . . . . . . $ 28,865 $ 28,341 $ 26,136
=========== =========== ===========
Interest Income:
U. S. Commercial Staffing. . . . . . $ - $ - $ -
PTSA . . . . . . . . . . . . . . . . 141 57 70
International. . . . . . . . . . . . 783 492 547
Corporate . . . . . . . . . . . . . 5,282 3,841 3,587
----------- ----------- -----------
Consolidated Total . . . . . . . . $ 6,206 $ 4,390 $ 4,204
=========== =========== ===========
Interest Expense:
U. S. Commercial Staffing. . . . . . $ - $ - $ -
PTSA . . . . . . . . . . . . . . . . - - -
International. . . . . . . . . . . . 3,207 2,774 2,247
Corporate . . . . . . . . . . . . . - 400 -
----------- ----------- -----------
Consolidated Total . . . . . . . . $ 3,207 $ 3,174 $ 2,247
=========== =========== ===========
The following is long-lived assets information by geographic area as of
the years ended 1998, 1997 and 1996:
1998 1997 1996
----------- ----------- -----------
Long-Lived Assets:
Domestic . . . . . . . . . . . . . . $ 170,500 $ 130,000 $ 120,900
International. . . . . . . . . . . . 73,900 66,300 59,400
----------- ----------- -----------
Total. . . . . . . . . . . . . . . $ 244,400 $ 196,300 $ 180,300
=========== =========== ===========
Long-lived assets include Property and Equipment and Intangibles and
Other Assets. Long-lived assets of no single foreign country were material
to the consolidated long-lived assets of the Company.
Foreign revenue is based on the country in which the legal subsidiary is
domiciled. Revenue from no single foreign country was material to the
consolidated revenues of the Company.
/TABLE
-32-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
--------- ----------- ----------- ----------- -----------
(In thousands of dollars except per share items)
Sales of services
1998 . . . . . . . . . $959,382 $1,001,286 $1,032,875 $1,098,708 $4,092,251
1997 . . . . . . . . . 880,846 959,726 1,001,209 1,011,154 3,852,935
1996 . . . . . . . . . 733,931 804,262 873,242 890,868 3,302,303
Cost of services
1998 . . . . . . . . . 791,472 823,542 846,094 899,868 3,360,976
1997 . . . . . . . . . 724,508 789,618 824,820 832,643 3,171,589
1996 . . . . . . . . . 596,245 652,007 711,950 729,321 2,689,523
Selling, general and
administrative
1998 . . . . . . . . . 143,069 143,584 145,404 158,602 590,659
1997 . . . . . . . . . 132,219 137,636 136,464 139,263 545,582
1996 . . . . . . . . . 117,302 123,778 125,101 125,647 491,828
Net earnings
1998 . . . . . . . . . 15,064 20,623 24,903 24,125 84,715
1997 . . . . . . . . . 14,228 19,443 23,587 23,522 80,780
1996 . . . . . . . . . 12,903 17,448 21,430 21,228 73,009
Basic earnings per share (1)
1998 . . . . . . . . . .39 .54 .65 .66 2.24
1997 . . . . . . . . . .37 .51 .62 .62 2.12
1996 . . . . . . . . . .34 .46 .56 .56 1.92
Diluted earnings per share (1)
1998 . . . . . . . . . .39 .54 .65 .66 2.23
1997 . . . . . . . . . .37 .51 .62 .61 2.12
1996 . . . . . . . . . .34 .46 .56 .56 1.91
Dividends per share
1998 . . . . . . . . . .22 .23 .23 .23 .91
1997 . . . . . . . . . .21 .22 .22 .22 .87
1996 . . . . . . . . . .20 .21 .21 .21 .83
(1) Earnings per share amounts for each quarter are required to be computed independently and
may not equal the amounts computed for the total year.
-33-
SCHEDULE II - VALUATION RESERVES
Kelly Services, Inc. and Subsidiaries
JANUARY 3, 1999
(In thousands of dollars)
Additions
------------------------
Balance at Charged to Deductions - Balance at
beginning costs and uncollectible end
of year expenses accounts of year
---------- --------- ------------- ----------
Description
- -----------
Fifty-three weeks ended January 3, 1999:
Reserve deducted in the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $12,375 $ 7,355 $6,695 $13,035
======== ======== ======= ========
Fifty-two weeks ended December 28, 1997:
Reserve deducted in the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $ 8,320 $12,250 $8,195 $12,375
======== ======== ======= ========
Fifty-two weeks ended December 29, 1996:
Reserve deducted in the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $ 6,950 $ 5,710 $4,340 $ 8,320
======== ======== ======= ========
-34-
INDEX TO EXHIBITS
REQUIRED BY ITEM 601,
REGULATION S-K
Exhibit
No. Description Page
- ------- ----------- ----
3.1 Certificate of Incorporation. (Reference is made to Exhibit 3.2
to the Form 10-Q for the quarterly period ended June 30, 1996,
filed with the Commission in August, 1996, which is incorporated
herein by reference).
3.2 By-laws. (Reference is made to Exhibit 3 to the Form 10-Q for
the quarterly period ended September 29, 1996, filed with the
Commission in November, 1996, which is incorporated herein by
reference).
4 Rights of security holders are defined in Articles Fourth, Fifth,
Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth,
Fourteenth and Fifteenth of the Certificate of Incorporation.
(Reference is made to Exhibit 3.2 to the Form 10-Q for the
quarterly period ended June 30, 1996, filed with the Commission
in August, 1996, which is incorporated herein by reference).
10.1 Short-Term Incentive Plan, as amended and restated on March 23, 1998.
(Reference is made to Exhibit 10 to the Form 10-Q for the
quarterly period ended June 28, 1998, filed with the Commission
in August, 1998, which is incorporated herein by reference).
10.2 Kelly Services, Inc. Amended and Restated Performance Incentive
Plan. (Reference is made to Exhibit B to the Definitive Proxy for
the fiscal year ended December 31, 1995, filed with the
Commission in April, 1996, which is incorporated herein by
reference).
10.3 Kelly Services, Inc. Non-employee Director Stock Award Plan. (Reference
is made to Exhibit A to the Definitive Proxy for the fiscal year ended
January 1, 1995, filed with the Commission in April, 1995, which is
incorporated herein by reference).
21 Subsidiaries of Registrant. 1
(Document 2)
23 Consent of Independent Accountants. 1
(Document 3)
24 Power of Attorney. 1
(Document 4)
27 1998 Financial Data Schedule. 1
(Document 5)
-1-
SUBSIDIARIES OF REGISTRANT
Kelly Services, Inc.
State/Jurisdiction
Subsidiary of Incorporation Business Name
Kelly Services (Canada), Ltd. Canada Kelly Temporary Services
Kelly Properties, Inc. Michigan Kelly Properties
Kelly Services (Ireland), Ltd. Delaware Kelly Services
(a subsidiary of Kelly Properties, Inc.)
Kelly Services (UK), Ltd. United Kingdom Kelly Temporary Services
(a subsidiary of Kelly Properties, Inc.)
Kelly Assisted Living Services, Inc. Delaware Kelly Assisted Living Services
Kelly Services (Australia), Ltd. Delaware Kelly Temporary Services
Kelly Services (New Zealand), Ltd. Delaware Kelly Temporary Services
Kelly Professional and Technical Services, Inc. Delaware Kelly Professional and Technical
Services
The Law Registry (formerly The Wallace Law Connecticut Law Registry
Registry, Inc.) (a subsidiary of Kelly
Professional and Technical Services, Inc.)
Kelly Professional Services (France), Inc. Delaware Kelly Professional Services
Kelly Services of Denmark, Inc. Delaware Kelly Services (Danmark)
Kelly Services (Nederland), B.V. The Netherlands Kelly Uitzendburo
Kelly Services Norge A.S. Norway Kelly Bemmanings/oslinger
(a subsidiary of Kelly Services (Nederland), B.V.)
Kelly de Mexico, S.A. de C.V. Mexico Kelly Temporary Services
KSI Acquisition Corporation California Kelly Staff Leasing
Kelly Services (Suisse) Holding S.A. Switzerland Kelly Services Suisse
Kelly Services France S.A. France Kelly Services France
Kelly Services Interim, S.A. France Kelly Services Interim
(a subsidiary of Kelly Services France S.A.)
-2-
SUBSIDIARIES OF REGISTRANT (continued)
Kelly Services, Inc.
State/Jurisdiction
Subsidiary of Incorporation Business Name
Kelly Formation S.A.R.L. France Kelly Formation
(a subsidiary of Kelly Services France S.A.)
Kelly Services Luxembourg S.A.R.L. Luxembourg Kelly Services
Kelly Services Italia Srl Italy Kelly Services
(a subsidiary of Kelly Services, Inc. and
Kelly Properties, Inc.)
Kelly Services (Societa di Italy Kelly Services Italia SpA
fornitura di lavaro temporaneo) SpA
(a subsidiary of Kelly Services, Inc. and
Kelly Properties, Inc.)
Kelly Services Iberia Holding Company, S.L. Spain Kelly Services E.T.T.
Kelly Services Empleo Empresa de Trabajo Spain Kelly Services E.T.T.
Temporal, S.L. (a subsidiary of Kelly
Services Iberia Holding Company, S.L.)
Kelly Services Seleccion y Formacion, S.L. Spain Kelly Services E.T.T.
(a subsidiary of Kelly Services Iberia
Holding Company, S.L.)
Kelly Services CIS, Inc. Delaware Kelly Services
ooo Kelly Services Russia Kelly Services
(a subsidiary of Daylesford Investments
Limited, a Cyprus Holding Company)
Kelly Services Deutschland GmbH Germany Kelly Services
Kelly Services Consulting GmbH Germany Kelly Services
(a subsidiary of Kelly Services
Deutschland GmbH)
Kelly Services Interim (Belgium) S.A., N.V. Belgium Kelly Services Interim
(a subsidiary of Kelly Services, Inc. and
Kelly Properties, Inc.)
Kelly Services Select (Belgium) S.A., N.V. Belgium Kelly Services Select
(a subsidiary of Kelly Services, Inc. and
Kelly Properties, Inc.)
-1-
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 Number 2-85867, 33-48782 and 33-51239 of Kelly
Services, Inc. of our report dated January 28, 1999, appearing on page 16 of
this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
____________________________
PricewaterhouseCoopers LLP
Detroit, Michigan
March 31, 1999
-1-
POWER OF ATTORNEY
Each of the undersigned directors of Kelly Services, Inc. does hereby
appoint each of George M. Reardon and William K. Gerber, signing singly, his
true and lawful attorneys, to execute for and on behalf of the undersigned
the Form 10-K Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 3, 1999, to be filed
with the Securities and Exchange Commission in Washington, D.C. under the
provisions of the Securities Exchange Act of 1934, as amended, and any and
all amendments to said Form 10-K whether said amendments add to, delete from
or otherwise alter the Form 10-K, or add to or withdraw any exhibit or
exhibits, schedule or schedules to be filed therewith, and any and all
instruments necessary or incidental in connection therewith, hereby granting
unto said attorneys and each of them full power and authority to do and
perform in the name and on behalf of each of the undersigned, and in any and
all capacities, every act and thing whatsoever required or necessary to be
done in the exercise of any of the rights and powers herein granted, as fully
and to all intents and purposes as each of the undersigned might or could do
in person, hereby ratifying and approving the acts of said attorneys and each
of them.
IN WITNESS WHEREOF the undersigned have caused this Power of Attorney to
be executed as of this 15th day of February, 1999.
/s/ Terence E. Adderley
-----------------------
Terence E. Adderley
/s/ Maureen A. Fay, O.P.
------------------------
Maureen A. Fay, O.P.
/s/ Cedric V. Fricke
-----------------------
Cedric V. Fricke
/s/ Verne G. Istock
-----------------------
Verne G. Istock
/s/ B. Joseph White
-----------------------
B. Joseph White
5
1,000
YEAR
JAN-03-1999
JAN-03-1999
59,799
12,069
597,688
13,035
0
719,876
223,842
77,491
964,247
426,483
0
0
0
40,116
497,648
964,247
0
4,092,251
0
3,360,976
0
0
0
143,615
58,900
84,715
0
0
0
84,715
2.24
2.23
