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
April 20, 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 April 20, 2004. | |
| Item 12. | Results of Operations and Financial Condition |
Kelly Services, Inc. today released financial information containing highlighted financial data for the three months ended March 28, 2004. 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: April 20, 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 April 20, 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 INCREASED REVENUE AND EARNINGS
FOR THE 1st QUARTER OF 2004
TROY, MI (April 20, 2004)—Kelly Services, Inc., a global provider of staffing services, today announced revenue and earnings results for the first quarter ended March 28, 2004.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the first quarter of 2004 totaled $1.159 billion, a 15.5% increase compared to the $1.003 billion for the corresponding quarter in 2003.
Net earnings for the first quarter of 2004 totaled $1.1 million, compared to $310 thousand reported for the first quarter of 2003. Diluted earnings per share in the first quarter of 2004 were $0.03, as compared to first quarter 2003 earnings of $0.01 per share.
Commenting on the results, Adderley said, “The economic recovery is well underway, and I am pleased with our first quarter results. We achieved a new first quarter sales record of $1.159 billion. Revenue growth of 15.5% for the quarter was the strongest growth achieved since the second quarter of 1997. Additionally, the first quarter earnings improvement puts us on track to achieve strong earnings growth in 2004.
“We’re off to a great start, and we expect it to continue. Assuming just moderate economic growth, second quarter 2004 earnings per share should range from $0.08 to $0.13, as compared to $0.04 per share in the second quarter of 2003.
“Revenue in our U.S. Commercial staffing segment increased 8.9% year over year during the first quarter, compared to the 4.0% increase reported in the fourth quarter of 2003. The gross profit rate in this segment decreased nine-tenths of a percent, primarily due to increased workers’ compensation costs, higher state unemployment taxes, and the impact of customer mix. Expenses increased 3.2% compared to last year. Operating earnings totaled $24.3 million, an increase of 0.9% compared to last year.
“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased 7.7% year over year during the first quarter, compared to the prior quarter’s increase of 4.1%. Kelly Law Registry and Kelly Healthcare Resources were the leading professional and technical performers in the first quarter. Kelly HR First and Kelly Vendor Management were the leading staffing alternatives units. Kelly Home Care and the Automotive Services Group experienced revenue decreases during the quarter. The PTSA gross profit rate decreased two-tenths of one percent, primarily due to increased workers’ compensation costs at Kelly Staff Leasing. Expenses increased 7.4% as compared to last year principally due to planned expansion of Kelly Vendor Management and Kelly FedSecure. Operating earnings totaled $14.2 million and increased 5.8% on a year-over-year basis.
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“Revenue in our International segment, as measured in U.S. dollars, increased 33.6% year over year during the first quarter, as compared to a 30.6% increase in the fourth quarter. The International gross profit rate decreased by nine-tenths of a percent, primarily due to gross profit rate decreases in Europe. Fee based income showed a modest increase. Operating expenses increased by 20.9% in U.S. dollar terms. The international operating loss totaled $952 thousand, a significant improvement compared to a loss of $3.2 million last year.
“On a constant currency basis, International revenue increased 17.8% year over year in the first quarter, as compared to 16.0% growth in the fourth quarter. Total company revenue for the first quarter of 2004 increased 11.1% on a constant currency basis compared to the corresponding quarter of 2003. Constant currency revenue growth was positive in all regions: Americas increased 15%, Europe increased 18%, and Asia Pacific increased 21%. International expenses increased by 6.3% on a constant currency basis.”
In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on April 20, 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 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 nearly 2,500 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 MARCH 28, 2004 AND MARCH 30, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 1,158,811 | $ | 1,003,397 | $ | 155,414 | 15.5 | % | |||||||
| Cost of services |
975,455 | 837,845 | 137,610 | 16.4 | |||||||||||
| Gross profit |
183,356 | 165,552 | 17,804 | 10.8 | |||||||||||
| Selling, general and administrative expenses |
181,342 | 165,162 | 16,180 | 9.8 | |||||||||||
| Earnings from operations |
2,014 | 390 | 1,624 | 416.4 | |||||||||||
| Interest (expense) income, net |
(239 | ) | 122 | (361 | ) | (295.9 | ) | ||||||||
| Earnings before taxes |
1,775 | 512 | 1,263 | 246.7 | |||||||||||
| Income taxes |
710 | 202 | 508 | 251.5 | |||||||||||
| Net earnings |
$ | 1,065 | $ | 310 | $ | 755 | 243.5 | % | |||||||
| Basic earnings per share |
$ | 0.03 | $ | 0.01 | $ | 0.02 | 200.0 | % | |||||||
| Diluted earnings per share |
$ | 0.03 | $ | 0.01 | $ | 0.02 | 200.0 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
15.8 | % | 16.5 | % | (0.7 | )% | |||||||||
| Expenses as a % of revenue |
15.6 | 16.5 | (0.9 | ) | |||||||||||
| % Return—Earnings from operations |
0.2 | 0.0 | 0.2 | ||||||||||||
| Earnings before taxes |
0.2 | 0.1 | 0.1 | ||||||||||||
| Net earnings |
0.1 | 0.0 | 0.1 | ||||||||||||
| Effective income tax rate |
40.0 | % | 39.5 | % | 0.5 | % | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
34,881 | 35,548 | |||||||||||||
| Diluted |
35,302 | 35,626 | |||||||||||||
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KELLY SERVICES, INC.
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| March Year to Date |
|||||||||||||||
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 549,422 | $ | 504,309 | $ | 45,113 | 8.9 | % | |||||||
| PTSA |
238,698 | 221,659 | 17,039 | 7.7 | |||||||||||
| International |
370,691 | 277,429 | 93,262 | 33.6 | |||||||||||
| Consolidated Total |
$ | 1,158,811 | $ | 1,003,397 | $ | 155,414 | 15.5 | % | |||||||
| Earnings (Loss) from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 24,313 | $ | 24,100 | $ | 213 | 0.9 | % | |||||||
| PTSA |
14,162 | 13,388 | 774 | 5.8 | |||||||||||
| International |
(952 | ) | (3,157 | ) | 2,205 | 69.8 | |||||||||
| Corporate |
(35,509 | ) | (33,941 | ) | (1,568 | ) | (4.6 | ) | |||||||
| Consolidated Total |
$ | 2,014 | $ | 390 | $ | 1,624 | 416.4 | % | |||||||
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KELLY SERVICES, INC.
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| March Year to Date |
||||||||||||
| 2004 |
2003 |
Change |
% Change |
|||||||||
| US Commercial |
$ | 549,422 | $ | 504,309 | $ | 45,113 | 8.9 | % | ||||
| PTSA |
238,698 | 221,659 | 17,039 | 7.7 | ||||||||
| International—constant currency* |
326,841 | 277,429 | 49,412 | 17.8 | ||||||||
| Revenue from services—constant currency |
1,114,961 | 1,003,397 | 111,564 | 11.1 | % | |||||||
| Foreign currency impact |
43,850 | — | 43,850 | |||||||||
| Revenue from services |
$ | 1,158,811 | $ | 1,003,397 | $ | 155,414 | 15.5 | % | ||||
| * | 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)
| March 28, 2004 |
December 28, 2003 |
March 30, 2003 |
||||||||||
| (UNAUDITED) | (UNAUDITED) | |||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 55,347 | $ | 76,378 | $ | 72,637 | ||||||
| Short-term investments |
452 | 457 | 493 | |||||||||
| Trade accounts receivable, less allowances of $16,004, $14,983 and $13,155, respectively |
704,771 | 658,090 | 593,858 | |||||||||
| Prepaid expenses and other current assets |
34,777 | 31,784 | 37,298 | |||||||||
| Deferred taxes |
24,530 | 24,962 | 22,586 | |||||||||
| Total current assets |
819,877 | 791,671 | 726,872 | |||||||||
| Property and Equipment, Net |
181,487 | 188,122 | 198,982 | |||||||||
| Noncurrent Deferred Taxes |
14,378 | 14,606 | 21,055 | |||||||||
| Goodwill, Net |
84,398 | 85,788 | 81,027 | |||||||||
| Other Assets |
58,847 | 57,550 | 48,798 | |||||||||
| Total Assets |
$ | 1,158,987 | $ | 1,137,737 | $ | 1,076,734 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 37,904 | $ | 39,190 | $ | 24,441 | ||||||
| Accounts payable |
96,561 | 92,265 | 79,194 | |||||||||
| Accrued payroll and related taxes |
218,792 | 200,503 | 192,021 | |||||||||
| Accrued insurance |
33,674 | 36,016 | 27,877 | |||||||||
| Income and other taxes |
52,754 | 49,342 | 45,647 | |||||||||
| Total current liabilities |
439,685 | 417,316 | 369,180 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
54,941 | 58,763 | 45,467 | |||||||||
| Accrued retirement benefits |
48,788 | 48,025 | 40,689 | |||||||||
| Total noncurrent liabilities |
103,729 | 106,788 | 86,156 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(108,023 | ) | (113,158 | ) | (90,883 | ) | ||||||
| Paid-in capital |
19,651 | 19,096 | 18,285 | |||||||||
| Earnings invested in the business |
654,300 | 656,726 | 662,514 | |||||||||
| Accumulated foreign currency adjustments |
9,529 | 10,853 | (8,634 | ) | ||||||||
| Total stockholders’ equity |
615,573 | 613,633 | 621,398 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,158,987 | $ | 1,137,737 | $ | 1,076,734 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 380,192 | $ | 374,355 | $ | 357,692 | ||||||
| Current Ratio |
1.9 | 1.9 | 2.0 | |||||||||
| Debt-to-capital % |
5.8 | % | 6.0 | % | 3.8 | % | ||||||
| Global Days Sales Outstanding |
||||||||||||
| Year to Date |
55 | 55 | 54 | |||||||||
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED MARCH 28, 2004 AND MARCH 30, 2003
(UNAUDITED)
(In thousands of dollars)
| 2004 |
2003 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 1,065 | $ | 310 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
11,326 | 11,908 | ||||||
| Increase in trade accounts receivable, net |
(47,447 | ) | (22,552 | ) | ||||
| Changes in operating assets and liabilities |
18,743 | (4,391 | ) | |||||
| Net cash from operating activities |
(16,313 | ) | (14,725 | ) | ||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(4,375 | ) | (8,445 | ) | ||||
| Decrease in short-term investments |
5 | 106 | ||||||
| Increase in other assets |
(173 | ) | (951 | ) | ||||
| Net cash from investing activities |
(4,543 | ) | (9,290 | ) | ||||
| Cash flows from financing activities |
||||||||
| Decrease in short-term borrowings |
(708 | ) | (1,034 | ) | ||||
| Dividend payments |
(3,491 | ) | (3,555 | ) | ||||
| Stock options and other |
4,169 | 6 | ||||||
| Purchase of treasury stock |
(3 | ) | (38 | ) | ||||
| Net cash from financing activities |
(33 | ) | (4,621 | ) | ||||
| Effect of exchange rates on cash and equivalents |
(142 | ) | 337 | |||||
| Net change in cash and equivalents |
(21,031 | ) | (28,299 | ) | ||||
| Cash and equivalents at beginning of period |
76,378 | 100,936 | ||||||
| Cash and equivalents at end of period |
$ | 55,347 | $ | 72,637 | ||||