1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
October 21, 2003
Date of Report (Date of earliest event reported)
Commission File Number 0-1088
KELLY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE | 38-1510762 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
999 WEST BIG BEAVER ROAD, TROY, MICHIGAN | 48084 | |
(Address of principal executive offices) | (Zip Code) |
(248) 362-4444
(Registrants telephone number, including area code)
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Item 7. | Financial Statements and Exhibits |
(c) Exhibits
99.1 | Press Release dated October 21, 2003. |
Item 12. | Results of Operations and Financial Condition |
Kelly Services, Inc. today released financial information containing highlighted financial data for the three-month and nine-month periods ended September 28, 2003. A copy of the press release is attached as exhibit 99.1 herein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KELLY SERVICES, INC. | ||||||||
Date: October 21, 2003 | ||||||||
/s/ William K. Gerber | ||||||||
William K. Gerber | ||||||||
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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EXHIBIT INDEX
Exhibit No. |
Description | |
99.1 | Press release dated October 21, 2003 |
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Exhibit 99.1
ANALYST CONTACT: |
MEDIA CONTACT: | |
James Polehna |
Robert Doetsch | |
Director, Investor Relations |
Director, Public Relations | |
(248) 244-4586 |
(248) 244-5362 | |
james_polehna@kellyservices.com |
robert_doetsch@kellyservices.com |
KELLY SERVICES REPORTS SALES AND EARNINGS
FOR THE 3rd QUARTER OF 2003
TROY, MI (October 21, 2003)Kelly Services, Inc., a global provider of staffing services, today announced sales and earnings results for the third quarter ended September 28, 2003.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced sales for the third quarter of 2003 totaled $1.097 billion, a 3.8% increase compared to the $1.057 billion for the corresponding quarter in 2002. Sales for the third quarter increased 3.6% compared to the second quarter of 2003. Sales for the nine-month period totaled $3.160 billion, a 5.0% increase compared to the $3.009 billion for the first nine months of 2002.
Net earnings for the third quarter of 2003 totaled $1.5 million, compared to $6.5 million reported for the third quarter of 2002. Net earnings for the third quarter increased by 1.3% compared to the second quarter of 2003. Net earnings for the first nine months of 2003 totaled $3.3 million, compared to the $11.2 million earned during the comparable nine-month period in 2002.
Diluted earnings per share in the third quarter of 2003 were $0.04 per share, as compared to third quarter 2002 earnings of $0.18 per share. Diluted earnings per share were the same as reported for the second quarter of 2003. Diluted earnings per share for the first nine months of 2003 were $0.09 per share, compared to the $0.31 per share earned in the first nine months of 2002.
Commenting on the results, Adderley said, The decline in earnings during the third quarter reflected significant increases in workers compensation costs in our U.S. Commercial and Kelly Staff Leasing businesses. The third quarter results include an additional charge of $6.4 million related to increases in workers compensation, primarily due to escalating medical costs.
Substantial increases in state unemployment taxes that began in the first quarter are for the most part, now reflected in prices in our U.S. operations. Overall, expenses were well managed during the quarter.
Sales in our U.S. Commercial staffing segment decreased 2.6% during the third quarter, compared to the 0.7% sales decrease reported in the second quarter of 2003. The U.S. Commercial gross profit rate decreased 2.1 percentage points primarily due to increased workers compensation costs. Expenses decreased 5.1% compared to last year. Operating earnings totaled $22.7 million, a decrease of 31.8% compared to last year.
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Sales in our Professional, Technical, and Staffing Alternatives (PTSA) segment decreased by 0.4% during the third quarter, compared to second quarter sales growth of 1.6%, with the individual business units showing mixed rates of growth. Kelly Financial Resources and Kelly HR First continued to exhibit strong sales growth, while Kelly Scientific Resources and Kelly Home Care experienced sales decreases during the quarter. The PTSA gross profit rate decreased seven-tenths of a percent compared to last year, while expenses increased 0.3% as compared to 2002. Operating earnings totaled $11.5 million and decreased 13.7% on a year-over-year basis.
International revenue, as measured in U.S. dollars, increased 19.4% during the third quarter, as compared to a 16.8% increase in the second quarter. The International gross profit rate decreased by 1.4 percentage points, due to gross profit rate decreases in UK and Continental Europe along with decreases in fee based income. Operating expenses increased by 14.0% in U.S. dollar terms. International operating earnings totaled $1.6 million, compared to earnings of $3.1 million last year. Sequentially, the earnings show significant improvement compared to the second quarter, when the International operating loss totaled $1.0 million.
On a constant currency basis, International revenue increased 10.1% in the third quarter, as compared to 3.3% growth in the second quarter. Constant currency sales growth was positive in all regions: Americas increased 11%, Asia Pacific increased 12%, UK/Ireland increased 12% and Continental Europe increased 8%. Expenses increased by 4.8% on a constant currency basis.
After nearly three quarters of nearly flat growth, demand for temporary staffing began to improve significantly in the third quarter. We have seen strong sequential increases in assignments over the past eight weeks. Although we are optimistic that we have reached the turning point of this cycle, forecasting remains difficult. As a result, we will continue our practice of providing guidance on a quarterly basis. At this time, we expect that fourth quarter 2003 earnings will range from $0.00 per share to $0.04 per share, as compared to earnings of $0.21 per share in the fourth quarter of 2002.
In conjunction with its third quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on October 21, 2003 to review the results. The call may be accessed in one of the following ways:
Via the Telephone:
U.S. |
(888) 577-8991 | |
International |
1-773-756-4708 |
The conference call leader is Terence Adderley
The passcode is Kelly Services
Via the Internet:
You may access the call via the Internet through Kelly Services website:
www.kellyservices.com
This release contains statements that are forward looking in nature and accordingly, are subject to risks and uncertainties. These factors include: competition, changing market and economic conditions, currency fluctuations, changes in laws and regulations, including federal, state and international tax laws, the companys ability to effectively manage its information technology programs, and other factors discussed in this release and in the companys filings with the Securities and Exchange Commission. Actual results may differ materially from any projections contained herein.
Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a Fortune 500 company headquartered in Troy, Mich., offering human resources solutions that include temporary services, staff leasing, outsourcing, vendor on-site and full-time placement. With more than 2,400 company owned and operated offices in 26 countries, Kelly provides to its customers nearly 700,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, light industrial, education and health care. Sales in 2002 were $4.1 billion. Visit www.kellyservices.com.
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
(UNAUDITED)
(In thousands of dollars except per share data)
2003 |
2002 |
Change |
% Change |
||||||||||||
Sales of services |
$ | 1,097,268 | $ | 1,057,290 | $ | 39,978 | 3.8 | % | |||||||
Cost of services |
924,661 | 875,028 | 49,633 | 5.7 | |||||||||||
Gross profit |
172,607 | 182,262 | (9,655 | ) | (5.3 | ) | |||||||||
Selling, general and administrative expenses |
169,898 | 171,547 | (1,649 | ) | (1.0 | ) | |||||||||
Earnings from operations |
2,709 | 10,715 | (8,006 | ) | (74.7 | ) | |||||||||
Interest (expense) income, net |
(84 | ) | 35 | (119 | ) | (340.0 | ) | ||||||||
Earnings before taxes |
2,625 | 10,750 | (8,125 | ) | (75.6 | ) | |||||||||
Income taxes |
1,121 | 4,245 | (3,124 | ) | (73.6 | ) | |||||||||
Net earnings |
$ | 1,504 | $ | 6,505 | $ | (5,001 | ) | (76.9 | )% | ||||||
Basic earnings per share |
$ | 0.04 | $ | 0.18 | $ | (0.14 | ) | (77.8 | )% | ||||||
Diluted earnings per share |
$ | 0.04 | $ | 0.18 | $ | (0.14 | ) | (77.8 | )% | ||||||
STATISTICS: |
|||||||||||||||
Gross profit rate |
15.7 | % | 17.2 | % | (1.5 | )% | |||||||||
Expenses as a % of sales |
15.5 | 16.2 | (0.7 | ) | |||||||||||
% ReturnEarnings from operations |
0.2 | 1.0 | (0.8 | ) | |||||||||||
Earnings before taxes |
0.2 | 1.0 | (0.8 | ) | |||||||||||
Net earnings |
0.1 | 0.6 | (0.5 | ) | |||||||||||
Effective income tax rate |
42.7 | 39.5 | 3.2 | ||||||||||||
Average number of shares outstanding (thousands): |
|||||||||||||||
Basic |
35,321 | 35,508 | |||||||||||||
Diluted |
35,490 | 35,603 |
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
(UNAUDITED)
(In thousands of dollars except per share data)
2003 |
2002 |
Change |
% Change |
||||||||||||
Sales of services |
$ | 3,160,182 | $ | 3,008,744 | $ | 151,438 | 5.0 | % | |||||||
Cost of services |
2,649,619 | 2,497,306 | 152,313 | 6.1 | |||||||||||
Gross profit |
510,563 | 511,438 | (875 | ) | (0.2 | ) | |||||||||
Selling, general and administrative expenses |
505,015 | 493,062 | 11,953 | 2.4 | |||||||||||
Earnings from operations |
5,548 | 18,376 | (12,828 | ) | (69.8 | ) | |||||||||
Interest income, net |
42 | 258 | (216 | ) | (83.7 | ) | |||||||||
Earnings before taxes |
5,590 | 18,634 | (13,044 | ) | (70.0 | ) | |||||||||
Income taxes |
2,292 | 7,398 | (5,106 | ) | (69.0 | ) | |||||||||
Net earnings |
$ | 3,298 | $ | 11,236 | $ | (7,938 | ) | (70.6 | )% | ||||||
Basic earnings per share |
$ | 0.09 | $ | 0.31 | $ | (0.22 | ) | (71.0 | )% | ||||||
Diluted earnings per share |
$ | 0.09 | $ | 0.31 | $ | (0.22 | ) | (71.0 | )% | ||||||
STATISTICS: |
|||||||||||||||
Gross profit rate |
16.2 | % | 17.0 | % | (0.8 | )% | |||||||||
Expenses as a % of sales |
16.0 | 16.4 | (0.4 | ) | |||||||||||
% ReturnEarnings from operations |
0.2 | 0.6 | (0.4 | ) | |||||||||||
Earnings before taxes |
0.2 | 0.6 | (0.4 | ) | |||||||||||
Net earnings |
0.1 | 0.4 | (0.3 | ) | |||||||||||
Effective income tax rate |
41.0 | 39.7 | 1.3 | ||||||||||||
Average number of shares outstanding (thousands): |
|||||||||||||||
Basic |
35,488 | 35,792 | |||||||||||||
Diluted |
35,549 | 35,968 |
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KELLY SERVICES, INC.
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
Third Quarter |
|||||||||||||||
2003 |
2002 |
Change |
% Change |
||||||||||||
Sales: |
|||||||||||||||
U.S. Commercial Staffing |
$ | 535,345 | $ | 549,904 | $ | (14,559 | ) | (2.6 | )% | ||||||
PTSA |
221,221 | 221,999 | (778 | ) | (0.4 | ) | |||||||||
International |
340,702 | 285,387 | 55,315 | 19.4 | |||||||||||
$ | 1,097,268 | $ | 1,057,290 | $ | 39,978 | 3.8 | % | ||||||||
Earnings from Operations: |
|||||||||||||||
U.S. Commercial Staffing |
$ | 22,729 | $ | 33,319 | $ | (10,590 | ) | (31.8 | )% | ||||||
PTSA |
11,472 | 13,300 | (1,828 | ) | (13.7 | ) | |||||||||
International |
1,621 | 3,066 | (1,445 | ) | (47.1 | ) | |||||||||
Corporate |
(33,113 | ) | (38,970 | ) | 5,857 | 15.0 | |||||||||
$ | 2,709 | $ | 10,715 | $ | (8,006 | ) | (74.7 | )% | |||||||
September Year to Date |
|||||||||||||||
2003 |
2002 |
Change |
% Change |
||||||||||||
Sales: |
|||||||||||||||
U.S. Commercial Staffing |
$ | 1,562,319 | $ | 1,557,137 | $ | 5,182 | 0.3 | % | |||||||
PTSA |
666,445 | 650,908 | 15,537 | 2.4 | |||||||||||
International |
931,418 | 800,699 | 130,719 | 16.3 | |||||||||||
$ | 3,160,182 | $ | 3,008,744 | $ | 151,438 | 5.0 | % | ||||||||
Earnings from Operations: |
|||||||||||||||
U.S. Commercial Staffing |
$ | 69,871 | $ | 84,238 | $ | (14,367 | ) | (17.1 | )% | ||||||
PTSA |
38,101 | 37,243 | 858 | 2.3 | |||||||||||
International |
(2,555 | ) | 2,247 | (4,802 | ) | (213.7 | ) | ||||||||
Corporate |
(99,869 | ) | (105,352 | ) | 5,483 | 5.2 | |||||||||
$ | 5,548 | $ | 18,376 | $ | (12,828 | ) | (69.8 | )% | |||||||
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KELLY SERVICES, INC.
RECONCILIATION OF CONSTANT CURRENCY
SALES OF SERVICES TO REPORTED SALES OF SERVICES
(UNAUDITED)
(In thousands of dollars)
Third Quarter |
|||||||||||||
2003 |
2002 |
Change |
% Change |
||||||||||
US Commercial |
$ | 535,345 | $ | 549,904 | $ | (14,559 | ) | (2.6 | )% | ||||
PTSA |
221,221 | 221,999 | (778 | ) | (0.4 | ) | |||||||
Internationalconstant currency* |
314,264 | 285,387 | 28,877 | 10.1 | |||||||||
Sales of servicesconstant currency |
1,070,830 | 1,057,290 | 13,540 | 1.3 | % | ||||||||
Foreign currency impact |
26,438 | | 26,438 | ||||||||||
Sales of services |
$ | 1,097,268 | $ | 1,057,290 | $ | 39,978 | 3.8 | % | |||||
September Year to Date |
|||||||||||||
2003 |
2002 |
Change |
% Change |
||||||||||
US Commercial |
$ | 1,562,319 | $ | 1,557,137 | $ | 5,182 | 0.3 | % | |||||
PTSA |
666,445 | 650,908 | 15,537 | 2.4 | |||||||||
Internationalconstant currency* |
838,498 | 800,699 | 37,799 | 4.7 | |||||||||
Sales of servicesconstant currency |
3,067,262 | 3,008,744 | 58,518 | 1.9 | % | ||||||||
Foreign currency impact |
92,920 | | 92,920 | ||||||||||
Sales of services |
$ | 3,160,182 | $ | 3,008,744 | $ | 151,438 | 5.0 | % | |||||
* | Information on constant currencies is provided to allow investors to separate the impact of foreign currency translations on reported results. Constant currency results are calculated by translating the current year results at prior year average exchange rates. |
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KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands of dollars)
Sept. 28, 2003 |
December 29, 2002 |
Sept. 29, 2002 |
||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||
Current Assets |
||||||||||||
Cash and equivalents |
$ | 60,838 | $ | 100,936 | $ | 80,363 | ||||||
Short-term investments |
508 | 599 | 4,300 | |||||||||
Accounts receivable, less allowances of $14,541, $12,533 and $13,044, respectively |
637,850 | 567,517 | 590,976 | |||||||||
Prepaid expenses and other current assets |
30,478 | 26,387 | 25,653 | |||||||||
Deferred taxes |
22,355 | 23,916 | 20,815 | |||||||||
Total current assets |
752,029 | 719,355 | 722,107 | |||||||||
Property and Equipment, Net |
187,976 | 202,332 | 200,533 | |||||||||
Noncurrent Deferred Taxes |
20,909 | 21,065 | 26,802 | |||||||||
Goodwill, Net |
82,989 | 80,260 | 77,807 | |||||||||
Other Assets |
53,407 | 49,121 | 45,599 | |||||||||
Total Assets |
$ | 1,097,310 | $ | 1,072,133 | $ | 1,072,848 | ||||||
Current Liabilities |
||||||||||||
Short-term borrowings |
$ | 32,665 | $ | 24,770 | $ | 27,781 | ||||||
Accounts payable |
84,991 | 85,310 | 87,028 | |||||||||
Payroll and related taxes |
204,337 | 181,585 | 199,815 | |||||||||
Accrued insurance |
31,676 | 27,912 | 25,644 | |||||||||
Income and other taxes |
46,265 | 47,617 | 43,427 | |||||||||
Total current liabilities |
399,934 | 367,194 | 383,695 | |||||||||
Noncurrent Liabilities |
||||||||||||
Accrued insurance |
51,683 | 45,540 | 41,840 | |||||||||
Accrued retirement benefits |
43,962 | 40,335 | 37,992 | |||||||||
Total noncurrent liabilities |
95,645 | 85,875 | 79,832 | |||||||||
Stockholders Equity |
||||||||||||
Common stock |
40,116 | 40,116 | 40,116 | |||||||||
Treasury stock |
(116,412 | ) | (92,159 | ) | (92,324 | ) | ||||||
Paid-in capital |
18,404 | 17,902 | 17,873 | |||||||||
Earnings invested in the business |
658,381 | 665,759 | 661,980 | |||||||||
Accumulated foreign currency adjustments |
1,242 | (12,554 | ) | (18,324 | ) | |||||||
Total stockholders equity |
601,731 | 619,064 | 609,321 | |||||||||
Total Liabilities and Stockholders Equity |
$ | 1,097,310 | $ | 1,072,133 | $ | 1,072,848 | ||||||
STATISTICS: |
||||||||||||
Working Capital |
$ | 352,095 | $ | 352,161 | $ | 338,412 | ||||||
Current Ratio |
1.9 | 2.0 | 1.9 | |||||||||
Stockholders Equity Per Share |
$ | 17.38 | $ | 17.42 | $ | 17.15 | ||||||
Global Days Sales Outstanding |
||||||||||||
Quarter |
53 | 49 | 51 | |||||||||
Year-to-date |
55 | 51 | 54 |
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
(UNAUDITED)
(In thousands of dollars)
2003 |
2002 |
|||||||
Cash flows from operating activities |
||||||||
Net earnings |
$ | 3,298 | $ | 11,236 | ||||
Noncash adjustments: |
||||||||
Depreciation and amortization |
36,092 | 33,281 | ||||||
Increase in accounts receivable, net |
(63,572 | ) | (39,368 | ) | ||||
Changes in other operating assets and liabilities |
35,868 | 37,696 | ||||||
Net cash from operating activities |
11,686 | 42,845 | ||||||
Cash flows from investing activities |
||||||||
Capital expenditures |
(20,154 | ) | (20,027 | ) | ||||
Decrease (increase) in short-term investments |
91 | (3,670 | ) | |||||
(Increase) decrease in other assets |
(2,282 | ) | 6,705 | |||||
Net cash from investing activities |
(22,345 | ) | (16,992 | ) | ||||
Cash flows from financing activities |
||||||||
Increase (decrease) in short-term borrowings |
5,562 | (7,718 | ) | |||||
Dividend payments |
(10,676 | ) | (10,739 | ) | ||||
Stock options and other |
177 | 842 | ||||||
Purchase of treasury stock |
(26,141 | ) | (13,177 | ) | ||||
Net cash from financing activities |
(31,078 | ) | (30,792 | ) | ||||
Effect of exchange rates on cash and equivalents |
1,639 | 1,841 | ||||||
Net change in cash and equivalents |
(40,098 | ) | (3,098 | ) | ||||
Cash and equivalents at beginning of period |
100,936 | 83,461 | ||||||
Cash and equivalents at end of period |
$ | 60,838 | $ | 80,363 | ||||