SEC Filing | Kelly Services Inc.

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Form 8-K

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): January 26, 2005

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))

Item 2.02.

Results of Operations and Financial Condition

Kelly Services, Inc. today released financial information containing highlighted financial data for the three months and year ended January 2, 2005. A copy of the press release is attached as exhibit 99.1 herein.

Item 9.01.

Financial Statements and Exhibits


99.1		Press Release dated January 26, 2005.

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: January 26, 2005

		/s/ William K. Gerber
		William K. Gerber

		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

Date: January 26, 2005
		/s/ Michael E. Debs
		Michael E. Debs

		Vice President and Corporate Controller
		(Principal Accounting Officer)

EXHIBIT INDEX


Exhibit No.		Description

99.1		Press release dated January 26, 2005

Press Release

Exhibit 99.1

LOGO


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 FOUR-FOLD

EARNINGS GROWTH FOR THE 4th QUARTER AND FULL YEAR OF 2004

TROY, MI (January 26, 2005)—Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for fourth quarter and full year ended January 2, 2005.

Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the 14 week fourth quarter of 2004 totaled $1.356 billion, a 16.4% increase compared to the $1.165 billion for the corresponding 13 week quarter in 2003. Sales for the 53 week fiscal year totaled $4.984 billion, a 15.2% increase compared to the $4.325 billion for the 52 week fiscal year of 2003.

Net earnings for the fourth quarter of 2004 totaled $8.6 million, compared to $1.8 million reported for the fourth quarter of 2003. Net earnings for the full year of 2004 totaled $22.1 million, compared to the $5.1 million earned during 2003.

Diluted earnings per share in the fourth quarter of 2004 were $0.24, as compared to fourth quarter 2003 earnings of $0.05 per share. Diluted earnings per share for the full year of 2004 were $0.62, compared to the $0.14 per share earned in 2003.

Commenting on the results, Adderley said, “Kelly turned in a very good year. Our full year sales of nearly $5 billion achieved a new sales record, exceeding the previous record we set in 2003 by $659 million.

“As the new year begins, we expect first quarter 2005 earnings to be in the range of $0.09 to $0.14, as compared to $0.03 per share in the first quarter of 2004. For the full year of 2005, we are currently forecasting earnings between $1.00 and $1.20 per share. This forecast is based on solid, but not robust, global economic growth in 2005.

- more -

“Revenue in our U.S. Commercial staffing segment, which accounted for 46% of total sales, increased 9.5% year over year during the 14 week fourth quarter. The gross profit rate in this segment increased eight-tenths of a percent, primarily due to lower workers compensation costs. Expenses decreased 2.0% compared to last year. Operating earnings totaled $36.3 million, an increase of 56.5% compared to last year.

“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 20% of total sales, increased 21.3% year over year during the 14 week fourth quarter. Kelly Scientific Resources and Kelly Engineering Resources were the leading professional and technical performers in the fourth 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 small revenue decreases during the quarter. The PTSA gross profit rate decreased 2.1 percentage points, primarily due to gross profit decreases at Kelly Staff Leasing and Kelly Home Care, partially offset by higher fee based income. Expenses increased 7.4% as compared to last year. Operating earnings totaled $16.1 million and increased 8.9% on a year over year basis.

“Revenue in our International segment, which accounted for 34% of total sales, increased 24.1% year over year during the 14 week fourth quarter. The International gross profit rate decreased by four-tenths of a percent, primarily due to lower temporary staffing gross profit offset by growth in fee based income. Operating expenses increased by 15.2% in U.S. dollar terms. Operating earnings totaled $5.5 million, a significant improvement compared to earnings of $1.6 million last year.

“On a 13 week constant currency basis, International segment revenue increased 10.8% year over year in the fourth quarter. On a 13 week constant currency basis, total company revenue increased 8.5% year over year in the fourth quarter.”

Mr. Adderley concluded, “In short, as we see it, 2005 should be another good year for Kelly. We expect to set sales records, gain market share, improve operating efficiency, and rapidly grow earnings.”

In conjunction with its fourth quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on January 26, 2005 to review the results. The call may be accessed in one of the following ways:


Via the Telephone:
U.S.		1-800-553-0329
International		1-612-332-0630

- more -

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 27 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 2004 was $4.98 billion. Visit www.kellyservices.com.

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

FOR THE 14 WEEKS ENDED JANUARY 2, 2005 AND 13 WEEKS ENDED DECEMBER 28, 2003

(UNAUDITED)

(In thousands of dollars except per share data)


	2004			2003			Change			% Change
Revenue from services	$	1,355,922		$	1,164,973		$	190,949		16.4	%
Cost of services		1,141,222			978,905			162,317		16.6

Gross profit		214,700			186,068			28,632		15.4
Selling, general and administrative expenses		202,359			182,879			19,480		10.7

Earnings from operations		12,341			3,189			9,152		287.0
Interest expense, net		(145	)		(119	)		(26	)	(21.8	)

Earnings before taxes		12,196			3,070			9,126		297.3
Income taxes		3,550			1,258			2,292		182.2

Net earnings	$	8,646		$	1,812		$	6,834		377.2	%

Basic earnings per share	$	0.24		$	0.05		$	0.19		380.0	%

Diluted earnings per share	$	0.24		$	0.05		$	0.19		380.0	%

STATISTICS:
Gross profit rate		15.8	%		16.0	%		(0.2	)%
Expenses as a % of revenue		14.9			15.7			(0.8	)
% Return—Earnings from operations		0.9			0.3			0.6
Earnings before taxes		0.9			0.3			0.6
Net earnings		0.6			0.2			0.4
Effective income tax rate		29.1			41.0			(11.9	)
Average number of shares outstanding (thousands):
Basic		35,306			34,692
Diluted		35,588			34,945

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

FOR THE 53 WEEKS ENDED JANUARY 2, 2005 AND 52 WEEKS ENDED DECEMBER 28, 2003

(In thousands of dollars except per share data)


	2004			2003			Change			% Change
Revenue from services	$	4,984,051		$	4,325,155		$	658,896		15.2	%
Cost of services		4,185,545			3,628,524			557,021		15.4

Gross profit		798,506			696,631			101,875		14.6
Selling, general and administrative expenses		763,013			687,894			75,119		10.9

Earnings from operations		35,493			8,737			26,756		306.2
Interest expense, net		(861	)		(77	)		(784	)	NM

Earnings before taxes		34,632			8,660			25,972		299.9
Income taxes		12,502			3,550			8,952		252.2

Net earnings	$	22,130		$	5,110		$	17,020		333.1	%

Basic earnings per share	$	0.63		$	0.14		$	0.49		350.0	%

Diluted earnings per share	$	0.62		$	0.14		$	0.48		342.9	%

STATISTICS:
Gross profit rate		16.0	%		16.1	%		(0.1	)%
Expenses as a % of revenue		15.3			15.9			(0.6	)
% 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		36.1			41.0			(4.9	)
Average number of shares outstanding (thousands):
Basic		35,115			35,289
Diluted		35,461			35,355

Percentage change not meaningful.

KELLY SERVICES, INC.

RESULTS OF OPERATIONS BY SEGMENT

(In thousands of dollars)


	Fourth Quarter (Unaudited)
	2004 (14 weeks)			2003 (13 weeks)			Change			% Change
Revenue from Services:
U.S. Commercial Staffing	$	623,049		$	569,210		$	53,839		9.5	%
PTSA		277,294			228,557			48,737		21.3
International		455,579			367,206			88,373		24.1

Consolidated Total	$	1,355,922		$	1,164,973		$	190,949		16.4	%

Earnings from Operations:
U.S. Commercial Staffing	$	36,320		$	23,210		$	13,110		56.5	%
PTSA		16,141			14,826			1,315		8.9
International		5,514			1,645			3,869		235.2
Corporate		(45,634	)		(36,492	)		(9,142	)	(25.1	)

Consolidated Total	$	12,341		$	3,189		$	9,152		287.0	%


	December Year to Date
	2004 (53 weeks)			2003 (52 weeks)			Change			% Change
Revenue from Services:
U.S. Commercial Staffing	$	2,327,910		$	2,131,529		$	196,381		9.2	%
PTSA		1,033,427			895,002			138,425		15.5
International		1,622,714			1,298,624			324,090		25.0

Consolidated Total	$	4,984,051		$	4,325,155		$	658,896		15.2	%

Earnings (Loss) from Operations:
U.S. Commercial Staffing	$	119,974		$	93,429		$	26,545		28.4	%
PTSA		63,005			52,856			10,149		19.2
International		12,831			(751	)		13,582		1,808.5
Corporate		(160,317	)		(136,797	)		(23,520	)	(17.2	)

Consolidated Total	$	35,493		$	8,737		$	26,756		306.2	%

KELLY SERVICES, INC.

RECONCILIATION OF CONSTANT CURRENCY

REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES

UNAUDITED

(In thousands of dollars)


	Fourth Quarter
	2004 (14 weeks)		2003 (13 weeks)		Change		% Change
U.S. Commercial Staffing	$	623,049	$	569,210	$	53,839	9.5	%
PTSA		277,294		228,557		48,737	21.3
International—constant currency*		423,980		367,206		56,774	15.5

Revenue from services—constant currency		1,324,323		1,164,973		159,350	13.7	%
Foreign currency impact		31,599				31,599

Revenue from services	$	1,355,922	$	1,164,973	$	190,949	16.4	%


	December Year to Date
	2004 (53 weeks)		2003 (52 weeks)		Change		% Change
U.S. Commercial Staffing	$	2,327,910	$	2,131,529	$	196,381	9.2	%
PTSA		1,033,427		895,002		138,425	15.5
International—constant currency*		1,493,831		1,298,624		195,207	15.0

Revenue from services—constant currency		4,855,168		4,325,155		530,013	12.3	%
Foreign currency impact		128,883				128,883

Revenue from services	$	4,984,051	$	4,325,155	$	658,896	15.2	%

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.

KELLY SERVICES, INC.

RECONCILIATION OF CONSTANT CURRENCY

REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES

ADJUSTED FOR THE 53rd WEEK

(UNAUDITED)

(In thousands of dollars)


	2004						2003
	Reported Revenue 14 Weeks		Less: 14th Week Revenue		Adjusted Revenue 13 Weeks		Reported Revenue 13 Weeks		Change		% Change
U.S. Commercial Staffing	$	623,049	$	29,936	$	593,113	$	569,210	$	23,903	4.2	%
PTSA		277,294		13,552		263,742		228,557		35,185	15.4
International—constant currency		423,980		17,072		406,908		367,206		39,702	10.8

Revenue from services—constant currency		1,324,323		60,560		1,263,763		1,164,973		98,790	8.5
Foreign currency impact		31,599		1,170		30,429				30,429

Revenue from services	$	1,355,922	$	61,730	$	1,294,192	$	1,164,973	$	129,219	11.1	%


	2004						2003
	Reported Revenue 53 Weeks		Less: 53rd Week Revenue		Adjusted Revenue 52 Weeks		Reported Revenue 52 Weeks		Change		% Change
U.S. Commercial Staffing	$	2,327,910	$	29,936	$	2,297,974	$	2,131,529	$	166,445	7.8	%
PTSA		1,033,427		13,552		1,019,875		895,002		124,873	14.0
International—constant currency		1,493,831		17,072		1,476,759		1,298,624		178,135	13.7

Revenue from services—constant currency		4,855,168		60,560		4,794,608		4,325,155		469,453	10.9
Foreign currency impact		128,883		1,170		127,713				127,713

Revenue from services	$	4,984,051	$	61,730	$	4,922,321	$	4,325,155	$	597,166	13.8	%

Information on the 14th week of the 2004 fourth quarter and 53rd week of the 2004 fiscal year is provided to allow investors to separate the impact of this extra week on reported results, in comparison to 2003 reported results. 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. Management believes these measurements are an important analytical tool to aid in understanding underlying operating trends without distortion due to the extra week included in the 2004 fiscal year and currency fluctuations.

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

FOR THE 53 WEEKS ENDED JANUARY 2, 2005 AND 52 WEEKS ENDED DECEMBER 28, 2003

(In thousands of dollars)


	2004			2003
Cash flows from operating activities
Net earnings	$	22,130		$	5,110
Noncash adjustments:
Depreciation and amortization		44,137			47,795
Increase in trade accounts receivable, net		(48,755	)		(63,516	)
Changes in other operating assets and liabilities		41,848			41,204

Net cash from operating activities		59,360			30,593

Cash flows from investing activities
Capital expenditures		(35,556	)		(30,222	)
Decrease in short-term investments		105			142
Increase in other assets		(736	)		(2,487	)

Net cash from investing activities		(36,187	)		(32,567	)

Cash flows from financing activities
(Decrease) increase in short-term borrowings		(8,188	)		10,280
Dividend payments		(14,043	)		(14,143	)
Stock options and other		8,422			3,865
Purchase of treasury stock		(3	)		(26,149	)

Net cash from financing activities		(13,812	)		(26,147	)

Effect of exchange rates on cash and equivalents		1,815			3,563

Net change in cash and equivalents		11,176			(24,558	)
Cash and equivalents at beginning of period		76,378			100,936

Cash and equivalents at end of period	$	87,554		$	76,378

KELLY SERVICES, INC. AND SUBSIDIARIES

BALANCE SHEETS

(In thousands of dollars)


	January 2, 2005			December 28, 2003
Current Assets
Cash and equivalents	$	87,554		$	76,378
Short-term investments		1,288			457
Trade accounts receivable, less allowances of $16,228 and $14,983, respectively		727,366			658,090
Prepaid expenses and other current assets		40,736			31,784
Deferred taxes		34,967			24,962

Total current assets		891,911			791,671
Property and Equipment, Net		179,786			188,122
Noncurrent Deferred Taxes		17,960			14,606
Goodwill, Net		94,652			85,788
Other Assets		63,059			57,550

Total Assets	$	1,247,368		$	1,137,737

Current Liabilities
Short-term borrowings	$	34,289		$	39,190
Accounts payable		102,264			92,265
Accrued payroll and related taxes		246,061			200,503
Accrued insurance		33,165			36,016
Income and other taxes		67,839			49,342

Total current liabilities		483,618			417,316
Noncurrent Liabilities
Accrued insurance		58,548			58,763
Accrued retirement benefits		50,892			48,025

Total noncurrent liabilities		109,440			106,788
Stockholders’ Equity
Common stock		40,116			40,116
Treasury stock		(97,693	)		(113,158	)
Paid-in capital		22,530			19,096
Earnings invested in the business		664,813			656,726
Accumulated other comprehensive income		24,544			10,853

Total stockholders’ equity		654,310			613,633

Total Liabilities and Stockholders’ Equity	$	1,247,368		$	1,137,737

STATISTICS:
Working Capital	$	408,293		$	374,355
Current Ratio		1.8			1.9
Debt-to-Capital %		5.0	%		6.0	%
Global Days Sales Outstanding
Quarter		53			51
Year-to-date		54			55