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
July 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 |
(I.R.S. Employer | |
| of incorporation or organization) |
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)
2
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release dated July 20, 2004.
Item 12. Results of Operations and Financial Condition
Kelly Services, Inc. today released financial information containing highlighted financial data for the three-month and six-month periods ended June 27, 2004. A copy of the press release is attached as exhibit 99.1 herein.
3
SIGNATURES
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: July 20, 2004 | ||||||||
| /s/ William K. Gerber | ||||||||
| William K. Gerber | ||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
| Date: July 20, 2004 |
||||||||
| /s/ Michael E. Debs | ||||||||
| Michael E. Debs | ||||||||
| Vice President and Corporate Controller (Principal Accounting Officer) | ||||||||
4
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release dated July 20, 2004 | |
5
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 RECORD REVENUE AND
STRONG EARNINGS GROWTH FOR THE 2nd QUARTER OF 2004
TROY, MI (July 20, 2004) – Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for the second quarter ended June 27, 2004.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the second quarter of 2004 totaled $1.224 billion, a 15.6% increase compared to the $1.060 billion for the corresponding quarter in 2003. Sales for the six-month period totaled $2.383 billion, a 15.5% increase compared to the $2.063 billion for the first six months of 2003.
Net earnings for the second quarter of 2004 totaled $5.0 million, compared to $1.5 million reported for the second quarter of 2003. Net earnings for the first six months of 2004 totaled $6.1 million, compared to the $1.8 million earned during the comparable six-month period in 2003.
Diluted earnings per share in the second quarter of 2004 were $0.14, as compared to second quarter 2003 earnings of $0.04 per share. Diluted earnings per share for the first six months of 2004 were $0.17, compared to the $0.05 per share earned in the first six months of 2003.
Commenting on the results, Adderley said, “The economic recovery is well underway, and our second quarter sales of $1.224 billion set a new all time record for any quarter.
“We’re off to a great start this year. We believe the balance of the year will continue on course, and our third quarter 2004 earnings per share should range from $0.16 to $0.21, as compared to $0.04 per share in the third quarter of 2003.
“Revenue in our U.S. Commercial staffing segment increased 11.3% year over year during the second quarter, compared to the 8.9% increase reported in the first quarter. The gross profit rate in this segment decreased two-tenths of a percent, primarily due to higher state unemployment taxes. Expenses increased 2.9% compared to last year. Operating earnings totaled $29.6 million, an increase of 27.7% compared to last year.
“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased 14.7% year over year during the second quarter, compared to the prior quarter’s increase of 7.7%. Kelly Law Registry and Kelly Healthcare Resources were the leading professional and technical performers in the second 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 increased three-tenths of one percent, primarily due to increased fee based income. Expenses increased 11.4% as compared to last year. Operating earnings totaled $16.4 million and increased 27.7% on a year-over-year basis.
- more -
6
“Revenue in our International segment, as measured in U.S. dollars, increased 23.4% year over year during the second quarter, as compared to a 33.6% increase in the first quarter. The International gross profit rate decreased by five-tenths of a percent, primarily due to gross profit rate decreases in Europe. Operating expenses increased by 14.3% in U.S. dollar terms. Operating earnings totaled $1.9 million, a significant improvement compared to a loss of $1.0 million last year.
“On a constant currency basis, International segment revenue increased 15.9% year over year in the second quarter, as compared to 17.8% growth in the first quarter. Total company revenue for the second quarter of 2004 increased 13.4% on a constant currency basis as compared to 11.1% growth in the first quarter. Constant currency revenue growth was positive in all regions: Americas increased 16%, Europe increased 15%, and Asia Pacific increased 25%. International expenses increased by 7.1% on a constant currency basis.”
In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 20, 2004 to review the results. The call may be accessed in one of the following ways:
| Via the Telephone: | ||
| U.S. | 888-677-5721 | |
| International |
1-773-756-4624 | |
| The conference call leader is Terence Adderley | ||
| The passcode is Kelly Services | ||
Via the Internet:
You may access the call via the 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.
7
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JUNE 27, 2004 AND JUNE 29, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 1,224,464 | $ | 1,059,517 | $ | 164,947 | 15.6 | % | |||||||
| Cost of services |
1,026,382 | 887,113 | 139,269 | 15.7 | |||||||||||
| Gross profit |
198,082 | 172,404 | 25,678 | 14.9 | |||||||||||
| Selling, general and administrative expenses |
189,404 | 169,955 | 19,449 | 11.4 | |||||||||||
| Earnings from operations |
8,678 | 2,449 | 6,229 | 254.3 | |||||||||||
| Interest (expense) income, net |
(283 | ) | 4 | (287 | ) | NM | |||||||||
| Earnings before taxes |
8,395 | 2,453 | 5,942 | 242.2 | |||||||||||
| Income taxes |
3,348 | 969 | 2,379 | 245.5 | |||||||||||
| Net earnings |
$ | 5,047 | $ | 1,484 | $ | 3,563 | 240.1 | % | |||||||
| Basic earnings per share |
$ | 0.14 | $ | 0.04 | $ | 0.10 | 250.0 | % | |||||||
| Diluted earnings per share |
$ | 0.14 | $ | 0.04 | $ | 0.10 | 250.0 | % | |||||||
| STATISTICS: |
| ||||||||||||||
| Gross profit rate |
16.2 | % | 16.3 | % | (0.1 | )% | |||||||||
| Expenses as a % of revenue |
15.5 | 16.0 | (0.5 | ) | |||||||||||
| % Return - Earnings from operations |
0.7 | 0.2 | 0.5 | ||||||||||||
| Earnings before taxes |
0.7 | 0.2 | 0.5 | ||||||||||||
| Net earnings |
0.4 | 0.1 | 0.3 | ||||||||||||
| Effective income tax rate |
39.9 | % | 39.5 | % | 0.4 | % | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,057 | 35,596 | |||||||||||||
| Diluted |
35,431 | 35,624 | |||||||||||||
| NM Percentage change not meaningful. |
|||||||||||||||
8
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JUNE 27, 2004 AND JUNE 29, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 2,383,275 | $ | 2,062,914 | $ | 320,361 | 15.5 | % | |||||||
| Cost of services |
2,001,837 | 1,724,958 | 276,879 | 16.1 | |||||||||||
| Gross profit |
381,438 | 337,956 | 43,482 | 12.9 | |||||||||||
| Selling, general and administrative expenses |
370,746 | 335,117 | 35,629 | 10.6 | |||||||||||
| Earnings from operations |
10,692 | 2,839 | 7,853 | 276.6 | |||||||||||
| Interest (expense) income, net |
(522 | ) | 126 | (648 | ) | NM | |||||||||
| Earnings before taxes |
10,170 | 2,965 | 7,205 | 243.0 | |||||||||||
| Income taxes |
4,058 | 1,171 | 2,887 | 246.5 | |||||||||||
| Net earnings |
$ | 6,112 | $ | 1,794 | $ | 4,318 | 240.7 | % | |||||||
| Basic earnings per share |
$ | 0.17 | $ | 0.05 | $ | 0.12 | 240.0 | % | |||||||
| Diluted earnings per share |
$ | 0.17 | $ | 0.05 | $ | 0.12 | 240.0 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.0 | % | 16.4 | % | (0.4 | )% | |||||||||
| Expenses as a % of revenue |
15.6 | 16.2 | (0.6 | ) | |||||||||||
| % Return - Earnings from operations |
0.4 | 0.1 | 0.3 | ||||||||||||
| Earnings before taxes |
0.4 | 0.1 | 0.3 | ||||||||||||
| Net earnings |
0.3 | 0.1 | 0.2 | ||||||||||||
| Effective income tax rate |
39.9 | % | 39.5 | % | 0.4 | % | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
34,969 | 35,572 | |||||||||||||
| Diluted |
35,369 | 35,584 | |||||||||||||
NM Percentage change not meaningful.
9
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| Second Quarter |
|||||||||||||||
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 581,467 | $ | 522,665 | $ | 58,802 | 11.3 | % | |||||||
| PTSA |
256,470 | 223,565 | 32,905 | 14.7 | |||||||||||
| International |
386,527 | 313,287 | 73,240 | 23.4 | |||||||||||
| Consolidated Total |
$ | 1,224,464 | $ | 1,059,517 | $ | 164,947 | 15.6 | % | |||||||
| Earnings (Loss) from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 29,645 | $ | 23,215 | $ | 6,430 | 27.7 | % | |||||||
| PTSA |
16,361 | 12,812 | 3,549 | 27.7 | |||||||||||
| International |
1,931 | (1,019 | ) | 2,950 | NM | ||||||||||
| Corporate Expense |
(39,259 | ) | (32,559 | ) | (6,700 | ) | (20.6 | ) | |||||||
| Consolidated Total |
$ | 8,678 | $ | 2,449 | $ | 6,229 | 254.3 | % | |||||||
| June Year to Date |
|||||||||||||||
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 1,130,889 | $ | 1,026,974 | $ | 103,915 | 10.1 | % | |||||||
| PTSA |
495,168 | 445,224 | 49,944 | 11.2 | |||||||||||
| International |
757,218 | 590,716 | 166,502 | 28.2 | |||||||||||
| Consolidated Total |
$ | 2,383,275 | $ | 2,062,914 | $ | 320,361 | 15.5 | % | |||||||
| Earnings (Loss) from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 53,958 | $ | 47,367 | $ | 6,591 | 13.9 | % | |||||||
| PTSA |
30,523 | 26,200 | 4,323 | 16.5 | |||||||||||
| International |
979 | (4,176 | ) | 5,155 | NM | ||||||||||
| Corporate Expense |
(74,768 | ) | (66,552 | ) | (8,216 | ) | (12.3 | ) | |||||||
| Consolidated Total |
$ | 10,692 | $ | 2,839 | $ | 7,853 | 276.6 | % | |||||||
NM Percentage change not meaningful.
10
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Second Quarter | ||||||||||||
| 2004 |
2003 |
Change |
% Change |
|||||||||
| U.S. Commercial |
$ | 581,467 | $ | 522,665 | $ | 58,802 | 11.3 | % | ||||
| PTSA |
256,470 | 223,565 | 32,905 | 14.7 | ||||||||
| International-constant currency* |
363,215 | 313,287 | 49,928 | 15.9 | ||||||||
| Revenue from services-constant currency |
1,201,152 | 1,059,517 | 141,635 | 13.4 | % | |||||||
| Foreign currency impact |
23,312 | 23,312 | ||||||||||
| Revenue from services |
$ | 1,224,464 | $ | 1,059,517 | $ | 164,947 | 15.6 | % | ||||
| June Year to Date | ||||||||||||
| 2004 |
2003 |
Change |
% Change |
|||||||||
| U.S. Commercial |
$ | 1,130,889 | $ | 1,026,974 | $ | 103,915 | 10.1 | % | ||||
| PTSA |
495,168 | 445,224 | 49,944 | 11.2 | ||||||||
| International - constant currency* |
690,056 | 590,716 | 99,340 | 16.8 | ||||||||
| Revenue from services - constant currency |
2,316,113 | 2,062,914 | 253,199 | 12.3 | % | |||||||
| Foreign currency impact |
67,162 | 67,162 | ||||||||||
| Revenue from services |
$ | 2,383,275 | $ | 2,062,914 | $ | 320,361 | 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. |
11
KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands of dollars)
| June 27, 2004 |
December 28, 2003 |
June 29, 2003 |
||||||||||
| (UNAUDITED) | (UNAUDITED) | |||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 65,006 | $ | 76,378 | $ | 76,961 | ||||||
| Short-term investments |
452 | 457 | 518 | |||||||||
| Trade accounts receivable, less allowances of $16,314, $14,983 and $13,698, respectively |
728,056 | 658,090 | 617,600 | |||||||||
| Prepaid expenses and other current assets |
37,421 | 31,784 | 34,411 | |||||||||
| Deferred taxes |
22,921 | 24,962 | 23,407 | |||||||||
| Total current assets |
853,856 | 791,671 | 752,897 | |||||||||
| Property and Equipment, Net |
178,683 | 188,122 | 194,971 | |||||||||
| Noncurrent Deferred Taxes |
13,307 | 14,606 | 21,010 | |||||||||
| Goodwill, Net |
84,610 | 85,788 | 83,086 | |||||||||
| Other Assets |
59,564 | 57,550 | 53,363 | |||||||||
| Total Assets |
$ | 1,190,020 | $ | 1,137,737 | $ | 1,105,327 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 37,537 | $ | 39,190 | $ | 24,234 | ||||||
| Accounts payable |
94,623 | 92,265 | 76,764 | |||||||||
| Accrued payroll and related taxes |
242,433 | 200,503 | 205,294 | |||||||||
| Accrued insurance |
35,608 | 36,016 | 30,219 | |||||||||
| Income and other taxes |
51,846 | 49,342 | 46,525 | |||||||||
| Total current liabilities |
462,047 | 417,316 | 383,036 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
58,096 | 58,763 | 49,304 | |||||||||
| Accrued retirement benefits |
49,999 | 48,025 | 44,491 | |||||||||
| Total noncurrent liabilities |
108,095 | 106,788 | 93,795 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(105,149 | ) | (113,158 | ) | (90,774 | ) | ||||||
| Paid-in capital |
20,042 | 19,096 | 18,332 | |||||||||
| Earnings invested in the business |
655,841 | 656,726 | 660,438 | |||||||||
| Accumulated foreign currency adjustments |
9,028 | 10,853 | 384 | |||||||||
| Total stockholders’ equity |
619,878 | 613,633 | 628,496 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,190,020 | $ | 1,137,737 | $ | 1,105,327 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 391,809 | $ | 374,355 | $ | 369,861 | ||||||
| Current Ratio |
1.8 | 1.9 | 2.0 | |||||||||
| Debt-to-capital % |
5.7 | % | 6.0 | % | 3.7 | % | ||||||
| Global Days Sales Outstanding |
||||||||||||
| Quarter |
54 | 51 | 53 | |||||||||
| Year-to-date |
56 | 55 | 54 | |||||||||
12
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JUNE 27, 2004 AND JUNE 29, 2003
(UNAUDITED)
(In thousands of dollars)
| 2004 |
2003 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 6,112 | $ | 1,794 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
22,410 | 24,043 | ||||||
| Increase in trade accounts receivable, net |
(72,036 | ) | (36,350 | ) | ||||
| Changes in other operating assets and liabilities |
49,506 | 11,404 | ||||||
| Net cash from operating activities |
5,992 | 891 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(12,766 | ) | (15,146 | ) | ||||
| Decrease in short-term investments |
5 | 81 | ||||||
| Increase in other assets |
(731 | ) | (1,808 | ) | ||||
| Net cash from investing activities |
(13,492 | ) | (16,873 | ) | ||||
| Cash flows from financing activities |
||||||||
| Decrease in short-term borrowings |
(899 | ) | (2,667 | ) | ||||
| Dividend payments |
(6,997 | ) | (7,115 | ) | ||||
| Stock options and other |
4,234 | 14 | ||||||
| Purchase of treasury stock |
(3 | ) | (67 | ) | ||||
| Net cash from financing activities |
(3,665 | ) | (9,835 | ) | ||||
| Effect of exchange rates on cash and equivalents |
(207 | ) | 1,842 | |||||
| Net change in cash and equivalents |
(11,372 | ) | (23,975 | ) | ||||
| Cash and equivalents at beginning of period |
76,378 | 100,936 | ||||||
| Cash and equivalents at end of period |
$ | 65,006 | $ | 76,961 | ||||