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): July 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)) |
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| Item 2.02. | Results of Operations and Financial Condition |
Kelly Services, Inc. (the “Company”) today released financial information containing highlighted financial data for the three and six-month periods ended July 3, 2005. 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 July 26, 2005.
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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: July 26, 2005 | ||
| /s/ William K. Gerber | ||
| William K. Gerber | ||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
| Date: July 26, 2005 | ||
| /s/ Michael E. Debs | ||
| Michael E. Debs | ||
| Senior Vice President and Corporate Controller (Principal Accounting Officer) | ||
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EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press release dated July 26, 2005 |
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 2nd QUARTER OF 2005
TROY, MI (July 26, 2005)—Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for second quarter ended July 3, 2005.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the second quarter of 2005 totaled $1.312 billion, a 7.1% increase compared to the $1.224 billion for the corresponding quarter in 2004. Revenue for the six-month period totaled $2.561 billion, a 7.5% increase compared to the $2.383 billion for the first six months of 2004.
Net earnings for the second quarter of 2005 totaled $9.3 million, a 91% increase compared to $4.9 million reported for the second quarter of 2004. Net earnings for the first six months of 2005 totaled $13.3 million, a 157% increase compared to the $5.2 million earned during the comparable six-month period of 2004.
Diluted earnings per share in the second quarter of 2005 were $0.26, an 86% increase as compared to second quarter 2004 earnings of $0.14 per share. Diluted earnings per share for the first six months of 2005 were $0.37, a 147% increase compared to the $0.15 per share earned in the first six months of 2004.
Commenting on the results, Adderley said, “Our sales of $1.312 billion achieved a new sales record for the second quarter, exceeding the previous record we set in 2004 by over $87 million.
“We expect third quarter 2005 earnings to be in the range of $0.30 to $0.35, as compared to $0.23 per share in the third quarter of 2004. Our 2005 year to date results, combined with our third quarter guidance, keeps us on track to achieve our current forecast that earnings will range between $1.00 and $1.15 per share for the full year. This forecast is based on moderate global economic growth over the balance of 2005.
“Revenue in our U.S. Commercial staffing segment, which accounted for 46% of total sales, increased 3.6% year over year during the second quarter. The gross profit rate in this segment increased four-tenths of a percent, due to a combination of improved pricing, lower workers compensation costs, and higher fee based income. Expenses increased 4.0% compared to last year. Operating earnings totaled $32.8 million, an increase of 11.0% compared to last year.
“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 21% of total sales, increased 9.5% year over year during the second quarter. Kelly Scientific Resources and Kelly Engineering Resources were the leading professional and technical performers in the second quarter. Kelly HRfirst continued to be the leading staffing alternatives unit. The Automotive Services Group and the Kelly Law Registry experienced revenue decreases during the quarter. Kelly Staff Leasing revenue also declined, reflecting the repositioning of its customer mix. The PTSA gross profit rate decreased eight-tenths of a percent, primarily due to changes in business unit mix and rates, partially offset by higher fee based income. Expenses increased 3.5% as compared to last year. Operating earnings totaled $17.1 million and increased 5.7% on a year over year basis.
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“Revenue in our International segment, which accounted for 33% of total sales, increased 10.9% year over year during the second quarter. The International gross profit rate increased by three-tenths of a percent, primarily due to growth in fee based income. Operating expenses increased by 9.5% in U.S. dollar terms. Operating earnings totaled $4.4 million, more than doubling the $2.0 million earned last year.
“On a constant currency basis, International segment revenue increased 6.3%, and total Company revenue increased 5.7% year over year in the second quarter.”
In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 26, 2005 to review the results. The call may be accessed in one of the following ways:
| Via the Telephone: | ||
| U.S. | 1-800-230-1093 | |
| International | 1-612-234-9959 | |
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. Kelly owns and operates nearly 2,600 offices in 29 countries and territories. Kelly provides employment to over 700,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, light industrial, education, health care, and home care. Revenue in 2004 was $4.98 billion. Visit www.kellyservices.com.
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JULY 3, 2005 AND JUNE 27, 2004
(UNAUDITED)
(In thousands of dollars except per share data)
| 2005 |
2004 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 1,311,904 | $ | 1,224,464 | $ | 87,440 | 7.1 | % | |||||||
| Cost of services |
1,097,802 | 1,026,382 | 71,420 | 7.0 | |||||||||||
| Gross profit |
214,102 | 198,082 | 16,020 | 8.1 | |||||||||||
| Selling, general and administrative expenses |
200,494 | 189,494 | 11,000 | 5.8 | |||||||||||
| Earnings from operations |
13,608 | 8,588 | 5,020 | 58.5 | |||||||||||
| Interest expense, net |
(152 | ) | (283 | ) | 131 | 46.3 | |||||||||
| Earnings before taxes |
13,456 | 8,305 | 5,151 | 62.0 | |||||||||||
| Income taxes |
4,123 | 3,429 | 694 | 20.2 | |||||||||||
| Net earnings |
$ | 9,333 | $ | 4,876 | $ | 4,457 | 91.4 | % | |||||||
| Basic earnings per share |
$ | 0.26 | $ | 0.14 | $ | 0.12 | 85.7 | % | |||||||
| Diluted earnings per share |
$ | 0.26 | $ | 0.14 | $ | 0.12 | 85.7 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.3 | % | 16.2 | % | 0.1 | % | |||||||||
| Expenses as a% of revenue |
15.3 | 15.5 | (0.2 | ) | |||||||||||
| % Return - Earnings from operations |
1.0 | 0.7 | 0.3 | ||||||||||||
| Earnings before taxes |
1.0 | 0.7 | 0.3 | ||||||||||||
| Net earnings |
0.7 | 0.4 | 0.3 | ||||||||||||
| Effective income tax rate |
30.6 | % | 41.3 | % | (10.7 | )% | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,597 | 35,057 | |||||||||||||
| Diluted |
35,841 | 35,431 | |||||||||||||
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JULY 3, 2005 AND JUNE 27, 2004
(UNAUDITED)
(In thousands of dollars except per share data)
| 2005 |
2004 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 2,561,239 | $ | 2,383,275 | $ | 177,964 | 7.5 | % | |||||||
| Cost of services |
2,143,053 | 2,001,837 | 141,216 | 7.1 | |||||||||||
| Gross profit |
418,186 | 381,438 | 36,748 | 9.6 | |||||||||||
| Selling, general and administrative expenses |
398,483 | 370,976 | 27,507 | 7.4 | |||||||||||
| Earnings from operations |
19,703 | 10,462 | 9,241 | 88.3 | |||||||||||
| Interest expense, net |
(187 | ) | (522 | ) | 335 | 64.2 | |||||||||
| Earnings before taxes |
19,516 | 9,940 | 9,576 | 96.3 | |||||||||||
| Income taxes |
6,245 | 4,773 | 1,472 | 30.8 | |||||||||||
| Net earnings |
$ | 13,271 | $ | 5,167 | $ | 8,104 | 156.8 | % | |||||||
| Basic earnings per share |
$ | 0.37 | $ | 0.15 | $ | 0.22 | 146.7 | % | |||||||
| Diluted earnings per share |
$ | 0.37 | $ | 0.15 | $ | 0.22 | 146.7 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.3 | % | 16.0 | % | 0.3 | % | |||||||||
| Expenses as a% of revenue |
15.6 | 15.6 | 0.0 | ||||||||||||
| % Return - Earnings from operations |
0.8 | 0.4 | 0.4 | ||||||||||||
| Earnings before taxes |
0.8 | 0.4 | 0.4 | ||||||||||||
| Net earnings |
0.5 | 0.2 | 0.3 | ||||||||||||
| Effective income tax rate |
32.0 | % | 48.0 | % | (16.0 | )% | |||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,566 | 34,969 | |||||||||||||
| Diluted |
35,957 | 35,369 | |||||||||||||
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KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| Second Quarter |
|||||||||||||||
| 2005 |
2004 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 602,425 | $ | 581,364 | $ | 21,061 | 3.6 | % | |||||||
| PTSA |
280,964 | 256,573 | 24,391 | 9.5 | |||||||||||
| International |
428,515 | 386,527 | 41,988 | 10.9 | |||||||||||
| Consolidated Total |
$ | 1,311,904 | $ | 1,224,464 | $ | 87,440 | 7.1 | % | |||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 32,772 | $ | 29,513 | $ | 3,259 | 11.0 | % | |||||||
| PTSA |
17,145 | 16,224 | 921 | 5.7 | |||||||||||
| International |
4,430 | 1,967 | 2,463 | 125.2 | |||||||||||
| Corporate Expense |
(40,739 | ) | (39,116 | ) | (1,623 | ) | (4.1 | ) | |||||||
| Consolidated Total |
$ | 13,608 | $ | 8,588 | $ | 5,020 | 58.5 | % | |||||||
| June Year to Date |
|||||||||||||||
| 2005 |
2004 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 1,167,939 | $ | 1,130,694 | $ | 37,245 | 3.3 | % | |||||||
| PTSA |
553,386 | 495,363 | 58,023 | 11.7 | |||||||||||
| International |
839,914 | 757,218 | 82,696 | 10.9 | |||||||||||
| Consolidated Total |
$ | 2,561,239 | $ | 2,383,275 | $ | 177,964 | 7.5 | % | |||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 61,959 | $ | 53,742 | $ | 8,217 | 15.3 | % | |||||||
| PTSA |
32,529 | 30,230 | 2,299 | 7.6 | |||||||||||
| International |
4,967 | 1,026 | 3,941 | 384.1 | |||||||||||
| Corporate Expense |
(79,752 | ) | (74,536 | ) | (5,216 | ) | (7.0 | ) | |||||||
| Consolidated Total |
$ | 19,703 | $ | 10,462 | $ | 9,241 | 88.3 | % | |||||||
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 |
||||||||||||
| 2005 |
2004 |
Change |
% Change |
|||||||||
| U.S. Commercial |
$ | 602,425 | $ | 581,364 | $ | 21,061 | 3.6 | % | ||||
| PTSA |
280,964 | 256,573 | 24,391 | 9.5 | ||||||||
| International - constant currency* |
410,960 | 386,527 | 24,433 | 6.3 | ||||||||
| Revenue from services - constant currency |
1,294,349 | 1,224,464 | 69,885 | 5.7 | % | |||||||
| Foreign currency impact |
17,555 | 17,555 | ||||||||||
| Revenue from services |
$ | 1,311,904 | $ | 1,224,464 | $ | 87,440 | 7.1 | % | ||||
| June Year to Date |
||||||||||||
| 2005 |
2004 |
Change |
% Change |
|||||||||
| U.S. Commercial |
$ | 1,167,939 | $ | 1,130,694 | $ | 37,245 | 3.3 | % | ||||
| PTSA |
553,386 | 495,363 | 58,023 | 11.7 | ||||||||
| International - constant currency* |
806,749 | 757,218 | 49,531 | 6.5 | ||||||||
| Revenue from services - constant currency |
2,528,074 | 2,383,275 | 144,799 | 6.1 | % | |||||||
| Foreign currency impact |
33,165 | 33,165 | ||||||||||
| Revenue from services |
$ | 2,561,239 | $ | 2,383,275 | $ | 177,964 | 7.5 | % | ||||
| * | 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)
| July 3, 2005 |
January 2, 2005 |
June 27, 2004 |
||||||||||
| (UNAUDITED) | (UNAUDITED) | |||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 69,504 | $ | 82,554 | $ | 65,006 | ||||||
| Short-term investments |
214 | 6,288 | 1,229 | |||||||||
| Trade accounts receivable, less allowances of $16,724, $16,228 and $16,314, respectively |
756,951 | 727,366 | 728,056 | |||||||||
| Prepaid expenses and other current assets |
42,027 | 40,736 | 37,421 | |||||||||
| Deferred taxes |
39,987 | 36,055 | 22,620 | |||||||||
| Total current assets |
908,683 | 892,999 | 854,332 | |||||||||
| Property and Equipment, Net |
171,161 | 181,086 | 179,577 | |||||||||
| Noncurrent Deferred Taxes |
19,662 | 17,960 | 13,307 | |||||||||
| Goodwill, Net |
88,431 | 94,652 | 84,610 | |||||||||
| Other Assets |
83,794 | 63,059 | 59,564 | |||||||||
| Total Assets |
$ | 1,271,731 | $ | 1,249,756 | $ | 1,191,390 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 56,449 | $ | 34,289 | $ | 37,537 | ||||||
| Accounts payable |
111,076 | 105,685 | 97,631 | |||||||||
| Accrued payroll and related taxes |
241,095 | 246,802 | 242,433 | |||||||||
| Accrued insurance |
33,537 | 33,165 | 35,608 | |||||||||
| Income and other taxes |
69,779 | 67,839 | 51,846 | |||||||||
| Total current liabilities |
511,936 | 487,780 | 465,055 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
59,451 | 58,548 | 58,096 | |||||||||
| Accrued retirement benefits |
53,988 | 50,892 | 49,999 | |||||||||
| Total noncurrent liabilities |
113,439 | 109,440 | 108,095 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(94,789 | ) | (97,693 | ) | (105,149 | ) | ||||||
| Paid-in capital |
23,137 | 22,530 | 20,042 | |||||||||
| Earnings invested in the business |
669,198 | 663,039 | 654,041 | |||||||||
| Accumulated other comprehensive income |
8,694 | 24,544 | 9,190 | |||||||||
| Total stockholders’ equity |
646,356 | 652,536 | 618,240 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,271,731 | $ | 1,249,756 | $ | 1,191,390 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 396,747 | $ | 405,219 | $ | 389,277 | ||||||
| Current Ratio |
1.8 | 1.8 | 1.8 | |||||||||
| Debt-to-capital % |
8.0 | % | 5.0 | % | 5.7 | % | ||||||
| Global Days Sales Outstanding |
||||||||||||
| Quarter |
53 | 53 | 54 | |||||||||
| Year-to-date |
54 | 54 | 56 | |||||||||
12
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JULY 3, 2005 AND JUNE 27, 2004
(UNAUDITED)
(In thousands of dollars)
| 2005 |
2004 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 13,271 | $ | 5,167 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
21,128 | 22,501 | ||||||
| Increase in trade accounts receivable, net |
(53,222 | ) | (72,036 | ) | ||||
| Changes in other operating assets and liabilities |
28,753 | 50,992 | ||||||
| Net cash from operating activities |
9,930 | 6,624 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(12,726 | ) | (13,398 | ) | ||||
| Decrease in short-term investments |
1,142 | 5 | ||||||
| Increase in other assets |
(8,503 | ) | (731 | ) | ||||
| Investment in unconsolidated affiliate |
(18,450 | ) | — | |||||
| Net cash from investing activities |
(38,537 | ) | (14,124 | ) | ||||
| Cash flows from financing activities |
||||||||
| Increase (decrease) in short-term borrowings |
7,161 | (899 | ) | |||||
| Financing to fund long-term investment in unconsolidated affiliate |
18,450 | — | ||||||
| Dividend payments |
(7,112 | ) | (6,997 | ) | ||||
| Stock options and other stock sales |
1,745 | 6,944 | ||||||
| Other financing activities |
(2,428 | ) | (2,710 | ) | ||||
| Purchase of treasury stock |
— | (3 | ) | |||||
| Net cash from financing activities |
17,816 | (3,665 | ) | |||||
| Effect of exchange rates on cash and equivalents |
(2,259 | ) | (207 | ) | ||||
| Net change in cash and equivalents |
(13,050 | ) | (11,372 | ) | ||||
| Cash and equivalents at beginning of period |
82,554 | 76,378 | ||||||
| Cash and equivalents at end of period |
$ | 69,504 | $ | 65,006 | ||||