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
Date of Report (Date of earliest event reported): October 19, 2004
KELLY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
| DELAWARE | 0-1088 | 38-1510762 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
| 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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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| Item 2.02. | 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 26, 2004. A copy of the press release is attached as exhibit 99.1 herein.
| Item 9.01. | Financial Statements and Exhibits |
| (c) | Exhibits |
| 99.1 | Press Release dated October 19, 2004. | |
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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: October 19, 2004 | ||||||||
| /s/ William K. Gerber | ||||||||
| William K. Gerber | ||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
| Date: October 19, 2004 | ||||||||
| /s/ Michael E. Debs | ||||||||
| Michael E. Debs | ||||||||
| Vice President and Corporate Controller (Principal Accounting Officer) | ||||||||
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EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press release dated October 19, 2004 | |
5
Exhibit 99.1
| ANALYST CONTACT: | MEDIA CONTACT: | |
| James Polehna | Renee Walker | |
| (248) 244-4586 | (248) 244-5362 | |
| james_polehna@kellyservices.com | renee_walker@kellyservices.com |
KELLY SERVICES REPORTS RECORD REVENUE AND STRONG
EARNINGS GROWTH FOR THE 3rd QUARTER OF 2004
Revenue increased 13.5% and net earnings increased nearly five fold.
TROY, MI (October 19, 2004)—Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for the third quarter ended September 26, 2004.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the third quarter of 2004 totaled $1.245 billion, a 13.5% increase compared to the $1.097 billion for the corresponding quarter in 2003. Sales for the nine-month period totaled $3.628 billion, a 14.8% increase compared to the $3.160 billion for the first nine months of 2003.
Net earnings for the third quarter of 2004 totaled $7.4 million, compared to $1.5 million reported for the third quarter of 2003. Net earnings for the first nine months of 2004 totaled $13.5 million, compared to the $3.3 million earned during the comparable nine-month period in 2003.
Diluted earnings per share in the third quarter of 2004 were $0.21, as compared to third quarter 2003 earnings of $0.04 per share. Diluted earnings per share for the first nine months of 2004 were $0.38, compared to the $0.09 per share earned in the first nine months of 2003.
Commenting on the results, Adderley said, “The economic recovery is well underway, and our third quarter sales of $1.245 billion set a new all time record for any quarter.
“We’re pleased with our progress so far this year. We believe the balance of the year will continue on course, and our fourth quarter 2004 earnings per share should range from $0.19 to $0.24, as compared to $0.05 per share in the fourth quarter of 2003. Full year earnings per share should range from $0.57 to $0.62, as compared to $0.14 in 2003. The fourth quarter of 2004 ends on January 2, 2005. Accordingly, our fourth quarter will contain 14 weeks, and our fiscal year will include 53 weeks. This fiscal “leap year” occurs every five or six years, and is necessary to align the fiscal and calendar periods.
“Revenue in our U.S. Commercial staffing segment increased 7.2% year over year during the third quarter, compared to the 11.3% increase reported in the second quarter. The gross profit rate in this segment increased seven-tenths of a percent, primarily due to lower workers compensation costs. Expenses increased 4.5% compared to last year. Operating earnings totaled $29.7 million, an increase of 29.9% compared to last year.
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“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased 18.0% year over year during the third quarter, compared to the prior quarter’s increase of 14.7%. Kelly Law Registry and Kelly Engineering Resources were the leading professional and technical performers in the third quarter. Kelly HR First and Kelly Vendor Management continue to be 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 11.6% as compared to last year. Operating earnings totaled $16.5 million and increased 38.0% on a year over year basis.
“Revenue in our International segment, as measured in U.S. dollars, increased 20.3% year over year during the third quarter, as compared to a 23.4% increase in the second quarter. The International gross profit rate increased by two-tenths of a percent, primarily due to growth in fee based income. Operating expenses increased by 14.7% in U.S. dollar terms. Operating earnings totaled $6.2 million, a significant improvement compared to earnings of $1.7 million last year.
“On a constant currency basis, International segment revenue increased 11.5% year over year in the third quarter, as compared to 15.9% growth in the second quarter. Total company revenue for the third quarter of 2004 increased 10.7% on a constant currency basis as compared to 13.4% growth in the second quarter. Constant currency revenue growth was positive in all regions: Americas increased 12%, Europe increased 10%, and Asia Pacific increased 17%. International expenses increased by 5.8% on a constant currency basis.”
Mr. Adderley concluded, “With three solid quarters behind us, 2004 is turning out to be a very good year. We are well positioned for a strong performance in 2005.”
In conjunction with its third quarter earnings release, Kelly Services, Inc. will host a conference call at 8:30 a.m. (ET) on October 19, 2004 to review the results. The call may be accessed in one of the following ways:
Via the Telephone:
| U.S. | 1-800-230-1074 | |||
| International | 1-612-288-0318 |
The conference call leader is Terence Adderley
The passcode is Kelly Services
Via the Internet:
You may access the call via the internet through 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 staffing solutions that include temporary staffing 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 SEPTEMBER 26, 2004 AND SEPTEMBER 28, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 1,244,854 | $ | 1,097,268 | $ | 147,586 | 13.5 | % | |||||||
| Cost of services |
1,042,486 | 924,661 | 117,825 | 12.7 | |||||||||||
| Gross profit |
202,368 | 172,607 | 29,761 | 17.2 | |||||||||||
| Selling, general and administrative expenses |
189,908 | 169,898 | 20,010 | 11.8 | |||||||||||
| Earnings from operations |
12,460 | 2,709 | 9,751 | 359.9 | |||||||||||
| Interest expense, net |
(194 | ) | (84 | ) | (110 | ) | (131.0 | ) | |||||||
| Earnings before taxes |
12,266 | 2,625 | 9,641 | 367.3 | |||||||||||
| Income taxes |
4,894 | 1,121 | 3,773 | 336.6 | |||||||||||
| Net earnings |
$ | 7,372 | $ | 1,504 | $ | 5,868 | 390.2 | % | |||||||
| Basic earnings per share |
$ | 0.21 | $ | 0.04 | $ | 0.17 | 425.0 | % | |||||||
| Diluted earnings per share |
$ | 0.21 | $ | 0.04 | $ | 0.17 | 425.0 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.3 | % | 15.7 | % | 0.6 | % | |||||||||
| Expenses as a % of revenue |
15.3 | 15.5 | (0.2 | ) | |||||||||||
| % Return—Earnings from operations |
1.0 | 0.2 | 0.8 | ||||||||||||
| Earnings before taxes |
1.0 | 0.2 | 0.8 | ||||||||||||
| Net earnings |
0.6 | 0.1 | 0.5 | ||||||||||||
| Effective income tax rate |
39.9 | % | 42.7 | % | (2.8 | )% | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,199 | 35,321 | |||||||||||||
| Diluted |
35,424 | 35,490 | |||||||||||||
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED SEPTEMBER 26, 2004 AND SEPTEMBER 28, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 3,628,129 | $ | 3,160,182 | $ | 467,947 | 14.8 | % | |||||||
| Cost of services |
3,044,323 | 2,649,619 | 394,704 | 14.9 | |||||||||||
| Gross profit |
583,806 | 510,563 | 73,243 | 14.3 | |||||||||||
| Selling, general and administrative expenses |
560,654 | 505,015 | 55,639 | 11.0 | |||||||||||
| Earnings from operations |
23,152 | 5,548 | 17,604 | 317.3 | |||||||||||
| Interest (expense) income, net |
(716 | ) | 42 | (758 | ) | NM | |||||||||
| Earnings before taxes |
22,436 | 5,590 | 16,846 | 301.4 | |||||||||||
| Income taxes |
8,952 | 2,292 | 6,660 | 290.6 | |||||||||||
| Net earnings |
$ | 13,484 | $ | 3,298 | $ | 10,186 | 308.9 | % | |||||||
| Basic earnings per share |
$ | 0.38 | $ | 0.09 | $ | 0.29 | 322.2 | % | |||||||
| Diluted earnings per share |
$ | 0.38 | $ | 0.09 | $ | 0.29 | 322.2 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.1 | % | 16.2 | % | (0.1 | )% | |||||||||
| Expenses as a % of revenue |
15.5 | 16.0 | (0.5 | ) | |||||||||||
| % Return—Earnings from operations |
0.6 | 0.2 | 0.4 | ||||||||||||
| Earnings before taxes |
0.6 | 0.2 | 0.4 | ||||||||||||
| Net earnings |
0.4 | 0.1 | 0.3 | ||||||||||||
| Effective income tax rate |
39.9 | % | 41.0 | % | (1.1 | )% | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,046 | 35,488 | |||||||||||||
| Diluted |
35,400 | 35,549 | |||||||||||||
NM Percentage change not meaningful.
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KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| Third Quarter |
|||||||||||||||
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 573,972 | $ | 535,345 | $ | 38,627 | 7.2 | % | |||||||
| PTSA |
260,965 | 221,221 | 39,744 | 18.0 | |||||||||||
| International |
409,917 | 340,702 | 69,215 | 20.3 | |||||||||||
| Consolidated Total |
$ | 1,244,854 | $ | 1,097,268 | $ | 147,586 | 13.5 | % | |||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 29,696 | $ | 22,852 | $ | 6,844 | 29.9 | % | |||||||
| PTSA |
16,480 | 11,938 | 4,542 | 38.0 | |||||||||||
| International |
6,199 | 1,672 | 4,527 | 270.8 | |||||||||||
| Corporate Expense |
(39,915 | ) | (33,753 | ) | (6,162 | ) | (18.3 | ) | |||||||
| Consolidated Total |
$ | 12,460 | $ | 2,709 | $ | 9,751 | 359.9 | % | |||||||
| September Year to Date |
|||||||||||||||
| 2004 |
2003 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 1,704,861 | $ | 1,562,319 | $ | 142,542 | 9.1 | % | |||||||
| PTSA |
756,133 | 666,445 | 89,688 | 13.5 | |||||||||||
| International |
1,167,135 | 931,418 | 235,717 | 25.3 | |||||||||||
| Consolidated Total |
$ | 3,628,129 | $ | 3,160,182 | $ | 467,947 | 14.8 | % | |||||||
| Earnings (Loss) from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 83,654 | $ | 70,219 | $ | 13,435 | 19.1 | % | |||||||
| PTSA |
46,864 | 38,030 | 8,834 | 23.2 | |||||||||||
| International |
7,317 | (2,396 | ) | 9,713 | NM | ||||||||||
| Corporate Expense |
(114,683 | ) | (100,305 | ) | (14,378 | ) | (14.3 | ) | |||||||
| Consolidated Total |
$ | 23,152 | $ | 5,548 | $ | 17,604 | 317.3 | % | |||||||
NM Percentage change not meaningful.
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KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| Third Quarter |
||||||||||||
| 2004 |
2003 |
Change |
% Change |
|||||||||
| U.S. Commercial |
$ | 573,972 | $ | 535,345 | $ | 38,627 | 7.2 | % | ||||
| PTSA |
260,965 | 221,221 | 39,744 | 18.0 | ||||||||
| International—constant currency* |
379,795 | 340,702 | 39,093 | 11.5 | ||||||||
| Revenue from services—constant currency |
1,214,732 | 1,097,268 | 117,464 | 10.7 | % | |||||||
| Foreign currency impact |
30,122 | 30,122 | ||||||||||
| Revenue from services |
$ | 1,244,854 | $ | 1,097,268 | $ | 147,586 | 13.5 | % | ||||
| September Year to Date |
||||||||||||
| 2004 |
2003 |
Change |
% Change |
|||||||||
| U.S. Commercial |
$ | 1,704,861 | $ | 1,562,319 | $ | 142,542 | 9.1 | % | ||||
| PTSA |
756,133 | 666,445 | 89,688 | 13.5 | ||||||||
| International—constant currency* |
1,069,851 | 931,418 | 138,433 | 14.9 | ||||||||
| Revenue from services—constant currency |
3,530,845 | 3,160,182 | 370,663 | 11.7 | % | |||||||
| Foreign currency impact |
97,284 | 97,284 | ||||||||||
| Revenue from services |
$ | 3,628,129 | $ | 3,160,182 | $ | 467,947 | 14.8 | % | ||||
| * | 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)
| September 26, 2004 |
December 28, 2003 |
September 28, 2003 |
||||||||||
| (UNAUDITED) | (UNAUDITED) | |||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 87,236 | $ | 76,378 | $ | 60,838 | ||||||
| Short-term investments |
377 | 457 | 508 | |||||||||
| Trade accounts receivable, less allowances of $16,637, $14,983 and $14,541, respectively |
741,938 | 658,090 | 637,850 | |||||||||
| Prepaid expenses and other current assets |
36,834 | 31,784 | 30,478 | |||||||||
| Deferred taxes |
21,287 | 24,962 | 22,355 | |||||||||
| Total current assets |
887,672 | 791,671 | 752,029 | |||||||||
| Property and Equipment, Net |
171,940 | 188,122 | 187,976 | |||||||||
| Noncurrent Deferred Taxes |
11,741 | 14,606 | 20,909 | |||||||||
| Goodwill, Net |
84,875 | 85,788 | 82,989 | |||||||||
| Other Assets |
58,674 | 57,550 | 53,407 | |||||||||
| Total Assets |
$ | 1,214,902 | $ | 1,137,737 | $ | 1,097,310 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 43,109 | $ | 39,190 | $ | 32,665 | ||||||
| Accounts payable |
91,458 | 92,265 | 84,991 | |||||||||
| Accrued payroll and related taxes |
254,813 | 200,503 | 204,337 | |||||||||
| Accrued insurance |
38,602 | 36,016 | 31,676 | |||||||||
| Income and other taxes |
47,503 | 49,342 | 46,265 | |||||||||
| Total current liabilities |
475,485 | 417,316 | 399,934 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
62,982 | 58,763 | 51,683 | |||||||||
| Accrued retirement benefits |
49,274 | 48,025 | 43,962 | |||||||||
| Total noncurrent liabilities |
112,256 | 106,788 | 95,645 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(103,830 | ) | (113,158 | ) | (116,412 | ) | ||||||
| Paid-in capital |
20,917 | 19,096 | 18,404 | |||||||||
| Earnings invested in the business |
659,693 | 656,726 | 658,381 | |||||||||
| Accumulated foreign currency adjustments |
10,265 | 10,853 | 1,242 | |||||||||
| Total stockholders’ equity |
627,161 | 613,633 | 601,731 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,214,902 | $ | 1,137,737 | $ | 1,097,310 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 412,187 | $ | 374,355 | $ | 352,095 | ||||||
| Current Ratio |
1.9 | 1.9 | 1.9 | |||||||||
| Debt-to-capital % |
6.4 | % | 6.0 | % | 5.1 | % | ||||||
| Global Days Sales Outstanding |
||||||||||||
| Quarter |
54 | 51 | 53 | |||||||||
| Year-to-date |
56 | 55 | 55 | |||||||||
12
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 26, 2004 AND SEPTEMBER 28, 2003
(UNAUDITED)
(In thousands of dollars)
| 2004 |
2003 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 13,484 | $ | 3,298 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
33,297 | 36,092 | ||||||
| Increase in trade accounts receivable, net |
(83,377 | ) | (63,572 | ) | ||||
| Changes in other operating assets and liabilities |
69,096 | 35,868 | ||||||
| Net cash from operating activities |
32,500 | 11,686 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(16,665 | ) | (20,154 | ) | ||||
| Decrease in short-term investments |
80 | 91 | ||||||
| Increase in other assets |
(769 | ) | (2,282 | ) | ||||
| Net cash from investing activities |
(17,354 | ) | (22,345 | ) | ||||
| Cash flows from financing activities |
||||||||
| Increase in short-term borrowings |
3,896 | 5,562 | ||||||
| Dividend payments |
(10,517 | ) | (10,676 | ) | ||||
| Stock options and other |
2,568 | 177 | ||||||
| Purchase of treasury stock |
(3 | ) | (26,141 | ) | ||||
| Net cash from financing activities |
(4,056 | ) | (31,078 | ) | ||||
| Effect of exchange rates on cash and equivalents |
(232 | ) | 1,639 | |||||
| Net change in cash and equivalents |
10,858 | (40,098 | ) | |||||
| Cash and equivalents at beginning of period |
76,378 | 100,936 | ||||||
| Cash and equivalents at end of period |
$ | 87,236 | $ | 60,838 | ||||