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
January 21, 2004
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
(Registrant’s telephone number, including area code)
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| Item 7. | Financial Statements and Exhibits |
(c) Exhibits
| 99.1 | Press Release dated January 21, 2004. | |
| Item 12. | Results of Operations and Financial Condition |
Kelly Services, Inc. today released financial information containing highlighted financial data for the three months and year ended December 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, hereunto duly authorized.
| KELLY SERVICES, INC. | ||||||||
| Date: January 21, 2004 | ||||||||
| /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 January 21, 2004 | |
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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 REVENUE AND EARNINGS
FOR THE 4th QUARTER AND YEAR ENDED DECEMBER 28, 2003
TROY, MI (January 21, 2004)—Kelly Services, Inc., a global provider of staffing services, today announced revenue and earnings results for the fourth quarter and year ended December 28, 2003.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the fourth quarter of 2003 totaled $1.165 billion, an 11.1% increase compared to the $1.048 billion for the corresponding quarter in 2002. Revenue for the fourth quarter increased 6.2% compared to the third quarter of 2003. Revenue for the year totaled $4.325 billion, a 6.6% increase compared to the $4.057 billion for 2002.
On constant currency basis total revenue for the fourth quarter of 2003 increased 7.2% compared to the corresponding quarter of 2002. Constant currency revenue for the full year of 2003 increased by 3.3% compared to 2002.
Net earnings for the fourth quarter of 2003 totaled $1.8 million, compared to $7.3 million reported for the fourth quarter of 2002. Net earnings for the fourth quarter increased by 20.5% compared to the third quarter of 2003. Net earnings for 2003 totaled $5.1 million, compared to the $18.6 million earned during 2002.
Diluted earnings per share in the fourth quarter of 2003 were $0.05 per share, as compared to fourth quarter 2002 earnings of $0.21 per share. Diluted earnings per share increased $0.01 sequentially compared to the third quarter of 2003. Diluted earnings per share for 2003 were $0.14 per share, compared to the $0.52 per share earned in 2002.
Commenting on the results, Adderley said, “We achieved a new sales record of $4.325 billion. With revenue growth of nearly 7% for the year, we in fact exceeded our record sales of $4.251 billion achieved in 2000. We continued to gain market share and are well positioned for 2004.
“However, as good as sales were, we are still a long way from our pre-recession earnings. We remain committed to returning to and exceeding our historic earnings levels, and expect to accomplish that over the next three to four years.
“Year over year, revenue in our U.S. Commercial staffing segment increased 4.0% during the fourth quarter, compared to the 2.6% decrease reported in the third quarter of 2003. The U.S. Commercial gross profit rate decreased 2.0 percentage points primarily due to increased workers’ compensation costs and customer and service line mix. Expenses increased 7.2% compared to last year. Operating earnings totaled $23.1 million, a decrease of 33.0% compared to last year.
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“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased by 4.1% during the fourth quarter, compared to a third quarter decrease of 0.4%, with the individual business units showing mixed rates of growth. Kelly Financial Resources and Kelly Law Registry were the leading staffing unit performers in the fourth quarter. Kelly HR First and Kelly Vendor Management also continued to exhibit strong revenue growth. Kelly Scientific Resources, Kelly Home Care and the Automotive Services Group experienced revenue decreases during the quarter. The PTSA gross profit rate increased five-tenths of one percent compared to last year, while expenses increased 6.0% as compared to 2002. Operating earnings totaled $14.9 million and increased 8.6% on a year-over-year basis.
“International revenue, as measured in U.S. dollars, increased 30.6% during the fourth quarter, as compared to a 19.4% increase in the third quarter. The International gross profit rate decreased by 1.9 percentage points, due to gross profit rate decreases in UK, Continental Europe and Asia Pacific. Fee based income showed a small increase. Operating expenses increased by 21.0% in U.S. dollar terms. International operating earnings totaled $1.6 million, compared to earnings of $2.7 million last year.
“On a constant currency basis, International revenue increased 16.0% in the fourth quarter, as compared to 10.1% growth in the third quarter. Constant currency revenue growth was positive in all regions: Americas increased 11%, Asia Pacific increased 21%, UK/Ireland increased 30% and Continental Europe increased 10%. Expenses increased by 7.3% on a constant currency basis.
“As we prepare for 2004, the greatest unknown is the pace of economic recovery. In our judgment, the greatest probability is that this will be a more gradual recovery with a longer duration. Using moderate growth as a guideline, we expect that first quarter 2004 results will range from a loss of $0.01 per share to earnings of $0.04 per share, as compared to earnings of $0.01 per share in the first quarter of 2003.”
In conjunction with its fourth quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on January 21, 2004 to review the results. The call may be accessed in one of the following ways:
Via the Telephone:
| U.S. | 888-730-9134 | |||
| International | 1-773-756-4625 |
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 company’s ability to effectively manage its information technology programs, and other factors discussed in this release and in the company’s 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. Revenue in 2003 was $4.3 billion. Visit www.kellyservices.com.
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED DECEMBER 28, 2003 AND DECEMBER 29, 2002
(UNAUDITED)
(In thousands of dollars except per share data)
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 1,164,973 | $ | 1,048,201 | $ | 116,772 | 11.1 | % | |||||||
| Cost of services |
978,905 | 866,913 | 111,992 | 12.9 | |||||||||||
| Gross profit |
186,068 | 181,288 | 4,780 | 2.6 | |||||||||||
| Selling, general and administrative expenses |
182,879 | 169,272 | 13,607 | 8.0 | |||||||||||
| Earnings from operations |
3,189 | 12,016 | (8,827 | ) | (73.5 | ) | |||||||||
| Interest (expense) income, net |
(119 | ) | 104 | (223 | ) | (214.4 | ) | ||||||||
| Earnings before taxes |
3,070 | 12,120 | (9,050 | ) | (74.7 | ) | |||||||||
| Income taxes |
1,258 | 4,787 | (3,529 | ) | (73.7 | ) | |||||||||
| Net earnings |
$ | 1,812 | $ | 7,333 | $ | (5,521 | ) | (75.3 | ) % | ||||||
| Basic earnings per share |
$ | 0.05 | $ | 0.21 | $ | (0.16 | ) | (76.2 | ) % | ||||||
| Diluted earnings per share |
$ | 0.05 | $ | 0.21 | $ | (0.16 | ) | (76.2 | ) % | ||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.0 | % | 17.3 | % | (1.3 | )% | |||||||||
| Expenses as a % of revenue |
15.7 | 16.1 | (0.4 | ) | |||||||||||
| % Return—Earnings from operations |
0.3 | 1.1 | (0.8 | ) | |||||||||||
| Earnings before taxes |
0.3 | 1.2 | (0.9 | ) | |||||||||||
| Net earnings |
0.2 | 0.7 | (0.5 | ) | |||||||||||
| Effective income tax rate |
41.0 | 39.5 | 1.5 | ||||||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
34,692 | 35,522 | |||||||||||||
| Diluted |
34,945 | 35,637 | |||||||||||||
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 52 WEEKS ENDED DECEMBER 28, 2003 AND DECEMBER 29, 2002
(In thousands of dollars except per share data)
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 4,325,155 | $ | 4,056,945 | $ | 268,210 | 6.6 | % | |||||||
| Cost of services |
3,628,524 | 3,364,219 | 264,305 | 7.9 | |||||||||||
| Gross profit |
696,631 | 692,726 | 3,905 | 0.6 | |||||||||||
| Selling, general and administrative expenses |
687,894 | 662,334 | 25,560 | 3.9 | |||||||||||
| Earnings from operations |
8,737 | 30,392 | (21,655 | ) | (71.3 | ) | |||||||||
| Interest (expense) income , net |
(77 | ) | 362 | (439 | ) | (121.3 | ) | ||||||||
| Earnings before taxes |
8,660 | 30,754 | (22,094 | ) | (71.8 | ) | |||||||||
| Income taxes |
3,550 | 12,185 | (8,635 | ) | (70.9 | ) | |||||||||
| Net earnings |
$ | 5,110 | $ | 18,569 | $ | (13,459 | ) | (72.5 | )% | ||||||
| Basic earnings per share |
$ | 0.14 | $ | 0.52 | $ | (0.38 | ) | (73.1 | )% | ||||||
| Diluted earnings per share |
$ | 0.14 | $ | 0.52 | $ | (0.38 | ) | (73.1 | )% | ||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.1 | % | 17.1 | % | (1.0 | )% | |||||||||
| Expenses as a % of revenue |
15.9 | 16.3 | (0.4 | ) | |||||||||||
| % Return—Earnings from operations |
0.2 | 0.7 | (0.5 | ) | |||||||||||
| Earnings before taxes |
0.2 | 0.8 | (0.6 | ) | |||||||||||
| Net earnings |
0.1 | 0.5 | (0.4 | ) | |||||||||||
| Effective income tax rate |
41.0 | 39.6 | 1.4 | ||||||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,289 | 35,724 | |||||||||||||
| Diluted |
35,355 | 35,900 | |||||||||||||
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KELLY SERVICES, INC.
RESULTS OF OPERATIONS BY SEGMENT
(In thousands of dollars)
| Fourth Quarter (Unaudited) |
|||||||||||||||
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 569,210 | $ | 547,485 | $ | 21,725 | 4.0 | % | |||||||
| PTSA |
228,557 | 219,462 | 9,095 | 4.1 | |||||||||||
| International |
367,206 | 281,254 | 85,952 | 30.6 | |||||||||||
| $ | 1,164,973 | $ | 1,048,201 | $ | 116,772 | 11.1 | % | ||||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 23,072 | $ | 34,418 | $ | (11,346 | ) | (33.0 | )% | ||||||
| PTSA |
14,891 | 13,711 | 1,180 | 8.6 | |||||||||||
| International |
1,571 | 2,684 | (1,113 | ) | (41.5 | ) | |||||||||
| Corporate |
(36,345 | ) | (38,797 | ) | 2,452 | 6.3 | |||||||||
| $ | 3,189 | $ | 12,016 | $ | (8,827 | ) | (73.5 | )% | |||||||
| December Year to Date |
|||||||||||||||
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 2,131,529 | $ | 2,104,622 | $ | 26,907 | 1.3 | % | |||||||
| PTSA |
895,002 | 870,370 | 24,632 | 2.8 | |||||||||||
| International |
1,298,624 | 1,081,953 | 216,671 | 20.0 | |||||||||||
| $ | 4,325,155 | $ | 4,056,945 | $ | 268,210 | 6.6 | % | ||||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 92,943 | $ | 118,656 | $ | (25,713 | ) | (21.7 | )% | ||||||
| PTSA |
52,992 | 50,954 | 2,038 | 4.0 | |||||||||||
| International |
(984 | ) | 4,931 | (5,915 | ) | (120.0 | ) | ||||||||
| Corporate |
(136,214 | ) | (144,149 | ) | 7,935 | 5.5 | |||||||||
| $ | 8,737 | $ | 30,392 | $ | (21,655 | ) | (71.3 | )% | |||||||
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KELLY SERVICES, INC.
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(In thousands of dollars)
| Fourth Quarter (Unaudited) |
||||||||||||
| 2003 |
2002 |
Change |
% Change |
|||||||||
| US Commercial |
$ | 569,210 | $ | 547,485 | $ | 21,725 | 4.0 | % | ||||
| PTSA |
228,557 | 219,462 | 9,095 | 4.1 | ||||||||
| International—constant currency* |
326,338 | 281,254 | 45,084 | 16.0 | ||||||||
| Revenue from services—constant currency |
1,124,105 | 1,048,201 | 75,904 | 7.2 | % | |||||||
| Foreign currency impact |
40,868 | — | 40,868 | |||||||||
| Revenue from services |
$ | 1,164,973 | $ | 1,048,201 | $ | 116,772 | 11.1 | % | ||||
| December Year to Date |
||||||||||||
| 2003 |
2002 |
Change |
% Change |
|||||||||
| US Commercial |
$ | 2,131,529 | $ | 2,104,622 | $ | 26,907 | 1.3 | % | ||||
| PTSA |
895,002 | 870,370 | 24,632 | 2.8 | ||||||||
| International—constant currency* |
1,164,836 | 1,081,953 | 82,883 | 7.7 | ||||||||
| Revenue from services—constant currency |
4,191,367 | 4,056,945 | 134,422 | 3.3 | % | |||||||
| Foreign currency impact |
133,788 | — | 133,788 | |||||||||
| Revenue from services |
$ | 4,325,155 | $ | 4,056,945 | $ | 268,210 | 6.6 | % | ||||
| * | 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. |
11
KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands of dollars)
| December 28, 2003 |
December 29, 2002 |
|||||||
| Current Assets |
||||||||
| Cash and equivalents |
$ | 76,378 | $ | 100,936 | ||||
| Short-term investments |
457 | 599 | ||||||
| Accounts receivable, less allowances of $14,983 and $12,533, respectively |
658,090 | 567,517 | ||||||
| Prepaid expenses and other current assets |
31,784 | 26,387 | ||||||
| Deferred taxes |
24,962 | 23,916 | ||||||
| Total current assets |
791,671 | 719,355 | ||||||
| Property and Equipment, Net |
188,122 | 202,332 | ||||||
| Noncurrent Deferred Taxes |
14,606 | 21,065 | ||||||
| Goodwill, Net |
85,788 | 80,260 | ||||||
| Other Assets |
57,550 | 49,121 | ||||||
| Total Assets |
$ | 1,137,737 | $ | 1,072,133 | ||||
| Current Liabilities |
||||||||
| Short-term borrowings |
$ | 39,190 | $ | 24,770 | ||||
| Accounts payable |
92,265 | 85,310 | ||||||
| Payroll and related taxes |
200,503 | 181,585 | ||||||
| Accrued insurance |
36,016 | 27,912 | ||||||
| Income and other taxes |
49,342 | 47,617 | ||||||
| Total current liabilities |
417,316 | 367,194 | ||||||
| Noncurrent Liabilities |
||||||||
| Accrued insurance |
58,763 | 45,540 | ||||||
| Accrued retirement benefits |
48,025 | 40,335 | ||||||
| Total noncurrent liabilities |
106,788 | 85,875 | ||||||
| Stockholders’ Equity |
||||||||
| Common stock |
40,116 | 40,116 | ||||||
| Treasury stock |
(113,158 | ) | (92,159 | ) | ||||
| Paid-in capital |
19,096 | 17,902 | ||||||
| Earnings invested in the business |
656,726 | 665,759 | ||||||
| Accumulated foreign currency adjustments |
10,853 | (12,554 | ) | |||||
| Total stockholders’ equity |
613,633 | 619,064 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,137,737 | $ | 1,072,133 | ||||
| STATISTICS: |
||||||||
| Working Capital |
$ | 374,355 | $ | 352,161 | ||||
| Current Ratio |
1.9 | 2.0 | ||||||
| Debt-to-Capital % |
6.0 | % | 3.8 | % | ||||
| Global Days Sales Outstanding |
||||||||
| Quarter |
51 | 49 | ||||||
| Year-to-date |
55 | 51 | ||||||
12
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 52 WEEKS ENDED DECEMBER 28, 2003 AND DECEMBER 29, 2002
(In thousands of dollars)
| 2003 |
2002 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 5,110 | $ | 18,569 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
47,795 | 45,428 | ||||||
| Increase in accounts receivable, net |
(63,516 | ) | (9,420 | ) | ||||
| Changes in operating assets and liabilities |
41,204 | 35,029 | ||||||
| Net cash from operating activities |
30,593 | 89,606 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(30,222 | ) | (33,406 | ) | ||||
| Decrease in short-term investments |
142 | 31 | ||||||
| Increase in other assets |
(2,487 | ) | (3,476 | ) | ||||
| Net cash from investing activities |
(32,567 | ) | (36,851 | ) | ||||
| Cash flows from financing activities |
||||||||
| Increase (decrease) in short-term borrowings |
10,280 | (11,723 | ) | |||||
| Dividend payments |
(14,143 | ) | (14,293 | ) | ||||
| Stock options and other |
3,865 | 991 | ||||||
| Purchase of treasury stock |
(26,149 | ) | (13,216 | ) | ||||
| Net cash from financing activities |
(26,147 | ) | (38,241 | ) | ||||
| Effect of exchange rates on cash and equivalents |
3,563 | 2,961 | ||||||
| Net change in cash and equivalents |
(24,558 | ) | 17,475 | |||||
| Cash and equivalents at beginning of period |
100,936 | 83,461 | ||||||
| Cash and equivalents at end of period |
$ | 76,378 | $ | 100,936 | ||||