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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): April 25, 2006
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 months ended April 2, 2006. A copy of the press release is attached as exhibit 99.1 herein.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits
99.1 Press Release dated April 25, 2006.
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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: April 25, 2006 | ||
| /s/ William K. Gerber | ||
| William K. Gerber | ||
| Executive Vice President and | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| Date: April 25, 2006 | ||
| /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 April 25, 2006 |
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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 117% NET EARNINGS
GROWTH FOR THE FIRST QUARTER OF 2006
TROY, MI (April 25, 2006)—Kelly Services, Inc., a global provider of staffing services, today announced record revenue and 117% net earnings growth for the first quarter ended April 2, 2006.
Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2006 totaled $1.360 billion, an 8.9% increase compared to the $1.249 billion for the corresponding quarter in 2005.
Net earnings for the first quarter of 2006 totaled $8.6 million, a 117% increase compared to $3.9 million reported for the first quarter of 2005.
Diluted earnings per share in the first quarter of 2006 were $0.24, an increase of 118% as compared to first quarter 2005 earnings of $0.11 per share.
Commenting on the results, Camden said, “I’m very pleased to report that Kelly has gotten off to a great start in 2006. We continue to transform solid sales increases into market share gains, improve operating efficiency, and produce strong earnings growth.
“We are particularly encouraged by the results of our expense control efforts. We now have improved our expense efficiency in 15 out of the last 16 quarters. We reduced expenses to 15.1% of sales in the first quarter, which is the lowest first quarter expense rate Kelly has achieved in over 20 years.
“We expect second quarter 2006 earnings to be in the range of $0.34 to $0.39, as compared to $0.26 per share in the second quarter of 2005. Based on the strength of the first quarter, we are raising the lower end of our annual guidance by $0.05 per share. For the full year, we are currently forecasting earnings between $1.50 and $1.60 per share.
“Revenue in our U.S. Commercial segment, which accounted for 46% of total sales, increased 9.4% year over year in the first quarter. Operating earnings totaled $29.5 million, an increase of 16.3% compared to last year.
“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 22% of total sales, increased 9.6% year over year in the first quarter. Kelly Scientific Resources, Kelly Engineering Resources and Kelly IT Resources were the leading professional and technical performers. Kelly HRfirst, Kelly Vendor Management and Kelly Management Services continue to be the leading staffing alternatives units. Kelly Home Care, the Automotive Services Group, and Kelly Staff Leasing reported revenue decreases during the quarter. Operating earnings totaled $19.3 million and increased 32.4% on a year over year basis.
“Revenue in our International segment, which accounted for about 32% of total sales, increased 7.6% year over year during the first quarter. Operating earnings totaled $3.3 million, compared to earnings of $48 thousand last year.
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“On a constant currency basis, International segment revenue increased 12.6% year over year in the first quarter. On a constant currency basis, total company revenue increased 10.5% year over year in the first quarter.”
Mr. Camden concluded, “We believe 2006 should be another good year for Kelly. We expect to set sales records, improve operating efficiency, and rapidly grow earnings.”
In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on April 25, 2006 to review the results and answer questions. The call may be accessed in one of the following ways:
| Via the Telephone: | ||
| U.S. | 1-800-553-5275 | |
| International | 1-612-332-0725 | |
The conference call leader is Carl Camden
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, 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 operates in 30 countries and territories. Kelly provides employment to more than 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 2005 was $5.3 billion. Visit www.kellyservices.com.
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED APRIL 2, 2006 AND APRIL 3, 2005
(UNAUDITED)
(In thousands of dollars except per share data)
| 2006 |
2005 |
Change |
% Change |
||||||||||||
| Revenue from services |
$ | 1,360,089 | $ | 1,249,335 | $ | 110,754 | 8.9 | % | |||||||
| Cost of services |
1,140,727 | 1,045,251 | 95,476 | 9.1 | |||||||||||
| Gross profit |
219,362 | 204,084 | 15,278 | 7.5 | |||||||||||
| Selling, general and administrative expenses |
205,925 | 197,989 | 7,936 | 4.0 | |||||||||||
| Earnings from operations |
13,437 | 6,095 | 7,342 | 120.5 | |||||||||||
| Interest income (expense), net |
40 | (35 | ) | 75 | 214.3 | ||||||||||
| Earnings before taxes |
13,477 | 6,060 | 7,417 | 122.4 | |||||||||||
| Income taxes |
4,919 | 2,122 | 2,797 | 131.8 | |||||||||||
| Net earnings |
$ | 8,558 | $ | 3,938 | $ | 4,620 | 117.3 | % | |||||||
| Basic earnings per share |
$ | 0.24 | $ | 0.11 | $ | 0.13 | 118.2 | % | |||||||
| Diluted earnings per share |
$ | 0.24 | $ | 0.11 | $ | 0.13 | 118.2 | % | |||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.1 | % | 16.3 | % | (0.2 | )% | |||||||||
| Expenses as a % of revenue |
15.1 | 15.8 | (0.7 | ) | |||||||||||
| % Return - Earnings from operations |
1.0 | 0.5 | 0.5 | ||||||||||||
| Earnings before taxes |
1.0 | 0.5 | 0.5 | ||||||||||||
| Net earnings |
0.6 | 0.3 | 0.3 | ||||||||||||
| Effective income tax rate |
36.5 | 35.0 | 1.5 | ||||||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,872 | 35,535 | |||||||||||||
| Diluted |
36,076 | 35,934 | |||||||||||||
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KELLY SERVICES, INC.
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
| First Quarter |
|||||||||||||||
| 2006 |
2005 |
Change |
% Change |
||||||||||||
| Revenue from Services: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 618,843 | $ | 565,514 | $ | 53,329 | 9.4 | % | |||||||
| PTSA |
298,513 | 272,422 | 26,091 | 9.6 | |||||||||||
| International |
442,733 | 411,399 | 31,334 | 7.6 | |||||||||||
| Consolidated Total |
$ | 1,360,089 | $ | 1,249,335 | $ | 110,754 | 8.9 | % | |||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 29,535 | $ | 25,401 | $ | 4,134 | 16.3 | % | |||||||
| PTSA |
19,271 | 14,555 | 4,716 | 32.4 | |||||||||||
| International |
3,321 | 48 | 3,273 | NM | |||||||||||
| Corporate Expense |
(38,690 | ) | (33,909 | ) | (4,781 | ) | (14.1 | ) | |||||||
| Consolidated Total |
$ | 13,437 | $ | 6,095 | $ | 7,342 | 120.5 | % | |||||||
NM Percentage not meaningful.
| Note: | Earnings from Operations for 2005 were reclassified to reflect the chargeback of payroll, billing and accounts receivable costs previously included in Corporate Expense to the U.S. Commercial, PTSA and International segments. This change did not affect Consolidated Total Earnings from Operations. |
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KELLY SERVICES, INC.
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
| First Quarter |
||||||||||||||
| 2006 |
2005 |
Change |
% Change |
|||||||||||
| U.S. Commercial Staffing |
$ | 618,843 | $ | 565,514 | $ | 53,329 | 9.4 | % | ||||||
| PTSA |
298,513 | 272,422 | 26,091 | 9.6 | ||||||||||
| International - constant currency* |
463,261 | 411,399 | 51,862 | 12.6 | ||||||||||
| Revenue from services - constant currency |
1,380,617 | 1,249,335 | 131,282 | 10.5 | % | |||||||||
| Foreign currency impact |
(20,528 | ) | (20,528 | ) | ||||||||||
| Revenue from services |
$ | 1,360,089 | $ | 1,249,335 | $ | 110,754 | 8.9 | % | ||||||
| * | 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)
| April 2, 2006 |
January 1, 2006 |
April 3, 2005 |
||||||||||
| (UNAUDITED) | (UNAUDITED) | |||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 60,395 | $ | 63,699 | $ | 65,849 | ||||||
| Short-term investments |
252 | 154 | 512 | |||||||||
| Trade accounts receivable, less allowances of $17,114, $16,648 and |
819,995 | 803,812 | 740,980 | |||||||||
| Prepaid expenses and other current assets |
43,540 | 47,434 | 45,129 | |||||||||
| Deferred taxes |
33,586 | 33,805 | 37,146 | |||||||||
| Total current assets |
957,768 | 948,904 | 889,616 | |||||||||
| Property and Equipment, Net |
161,569 | 165,757 | 176,105 | |||||||||
| Noncurrent Deferred Taxes |
22,442 | 22,088 | 18,489 | |||||||||
| Goodwill, Net |
89,324 | 88,217 | 92,031 | |||||||||
| Other Assets |
106,173 | 87,891 | 82,706 | |||||||||
| Total Assets |
$ | 1,337,276 | $ | 1,312,857 | $ | 1,258,947 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 51,298 | $ | 56,644 | $ | 47,061 | ||||||
| Accounts payable |
114,236 | 110,411 | 109,387 | |||||||||
| Accrued payroll and related taxes |
270,985 | 263,112 | 239,981 | |||||||||
| Accrued insurance |
32,798 | 34,097 | 32,734 | |||||||||
| Income and other taxes |
52,279 | 56,651 | 62,419 | |||||||||
| Total current liabilities |
521,596 | 520,915 | 491,582 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
52,465 | 54,517 | 57,828 | |||||||||
| Accrued retirement benefits |
61,522 | 57,443 | 52,156 | |||||||||
| Other long-term liabilities |
13,273 | 7,939 | 7,372 | |||||||||
| Total noncurrent liabilities |
127,260 | 119,899 | 117,356 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(88,999 | ) | (90,919 | ) | (96,328 | ) | ||||||
| Paid-in capital |
27,651 | 27,015 | 24,546 | |||||||||
| Earnings invested in the business |
692,961 | 688,033 | 663,423 | |||||||||
| Accumulated other comprehensive income |
16,691 | 7,798 | 18,252 | |||||||||
| Total stockholders’ equity |
688,420 | 672,043 | 650,009 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,337,276 | $ | 1,312,857 | $ | 1,258,947 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 436,172 | $ | 427,989 | $ | 398,034 | ||||||
| Current Ratio |
1.8 | 1.8 | 1.8 | |||||||||
| Debt-to-capital % |
6.9 | % | 7.8 | % | 6.8 | % | ||||||
| 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 APRIL 2, 2006 AND APRIL 3, 2005
(UNAUDITED)
(In thousands of dollars)
| 2006 |
2005 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 8,558 | $ | 3,938 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
10,329 | 10,382 | ||||||
| Stock-based compensation |
1,297 | 574 | ||||||
| Increase in trade accounts receivable, net |
(13,344 | ) | (21,698 | ) | ||||
| Changes in other operating assets and liabilities |
4,155 | 11,348 | ||||||
| Net cash from operating activities |
10,995 | 4,544 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(5,950 | ) | (5,945 | ) | ||||
| (Increase) decrease in short-term investments |
(97 | ) | 834 | |||||
| Increase in other assets |
(295 | ) | (2,867 | ) | ||||
| Investment in unconsolidated affiliate |
— | (18,450 | ) | |||||
| Net cash from investing activities |
(6,342 | ) | (26,428 | ) | ||||
| Cash flows from financing activities |
||||||||
| Decrease in short-term borrowings |
(5,891 | ) | (3,776 | ) | ||||
| Dividend payments |
(3,630 | ) | (3,554 | ) | ||||
| Stock options and other |
1,330 | 1,128 | ||||||
| Other financing activities |
393 | (1,905 | ) | |||||
| Financing to fund long-term investment in unconsolidated affiliate |
— | 18,450 | ||||||
| Net cash from financing activities |
(7,798 | ) | 10,343 | |||||
| Effect of exchange rates on cash and equivalents |
(159 | ) | (1,958 | ) | ||||
| Net change in cash and equivalents |
(3,304 | ) | (13,499 | ) | ||||
| Cash and equivalents at beginning of period |
63,699 | 79,348 | ||||||
| Cash and equivalents at end of period |
$ | 60,395 | $ | 65,849 | ||||