Kelly Services Reports Increased Revenue and Earnings for the 1st Quarter of 2004
TROY, Mich., April 20 -- Kelly Services, Inc., a global provider of staffing services, today announced revenue and earnings results for the first quarter ended March 28, 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO )
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the first quarter of 2004 totaled $1.159 billion, a 15.5% increase compared to the $1.003 billion for the corresponding quarter in 2003.
Net earnings for the first quarter of 2004 totaled $1.1 million, compared to $310 thousand reported for the first quarter of 2003. Diluted earnings per share in the first quarter of 2004 were $0.03, as compared to first quarter 2003 earnings of $0.01 per share.
Commenting on the results, Adderley said, "The economic recovery is well underway, and I am pleased with our first quarter results. We achieved a new first quarter sales record of $1.159 billion. Revenue growth of 15.5% for the quarter was the strongest growth achieved since the second quarter of 1997. Additionally, the first quarter earnings improvement puts us on track to achieve strong earnings growth in 2004.
"We're off to a great start, and we expect it to continue. Assuming just moderate economic growth, second quarter 2004 earnings per share should range from $0.08 to $0.13, as compared to $0.04 per share in the second quarter of 2003.
"Revenue in our U.S. Commercial staffing segment increased 8.9% year over year during the first quarter, compared to the 4.0% increase reported in the fourth quarter of 2003. The gross profit rate in this segment decreased nine- tenths of a percent, primarily due to increased workers' compensation costs, higher state unemployment taxes, and the impact of customer mix. Expenses increased 3.2% compared to last year. Operating earnings totaled $24.3 million, an increase of 0.9% compared to last year.
"Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased 7.7% year over year during the first quarter, compared to the prior quarter's increase of 4.1%. Kelly Law Registry and Kelly Healthcare Resources were the leading professional and technical performers in the first 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 decreased two-tenths of one percent, primarily due to increased workers' compensation costs at Kelly Staff Leasing. Expenses increased 7.4% as compared to last year principally due to planned expansion of Kelly Vendor Management and Kelly FedSecure. Operating earnings totaled $14.2 million and increased 5.8% on a year-over-year basis.
"Revenue in our International segment, as measured in U.S. dollars, increased 33.6% year over year during the first quarter, as compared to a 30.6% increase in the fourth quarter. The International gross profit rate decreased by nine-tenths of a percent, primarily due to gross profit rate decreases in Europe. Fee based income showed a modest increase. Operating expenses increased by 20.9% in U.S. dollar terms. The international operating loss totaled $952 thousand, a significant improvement compared to a loss of $3.2 million last year.
"On a constant currency basis, International revenue increased 17.8% year over year in the first quarter, as compared to 16.0% growth in the fourth quarter. Total company revenue for the first quarter of 2004 increased 11.1% on a constant currency basis compared to the corresponding quarter of 2003. Constant currency revenue growth was positive in all regions: Americas increased 15%, Europe increased 18%, and Asia Pacific increased 21%. International expenses increased by 6.3% on a constant currency basis."
In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on April 20, 2004 to review the results. The call may be accessed in one of the following ways:
Via the Telephone:
U.S. 888-730-9134
International 1-773-756-4625
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 staffing solutions that include temporary services, staff leasing, outsourcing, vendor on-site and full-time placement. Kelly serves 200,000 customers through 2,500 company owned and operated offices in 26 countries. Kelly provides employment for nearly 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 2003 was $4.3 billion. Visit www.kellyservices.com .
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED MARCH 28, 2004 AND MARCH 30, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
2004 2003 Change % Change
Revenue from services $1,158,811 $1,003,397 $155,414 15.5%
Cost of services 975,455 837,845 137,610 16.4
Gross profit 183,356 165,552 17,804 10.8
Selling, general and
administrative
expenses 181,342 165,162 16,180 9.8
Earnings from operations 2,014 390 1,624 416.4
Interest (expense)
income, net (239) 122 (361) (295.9)
Earnings before taxes 1,775 512 1,263 246.7
Income taxes 710 202 508 251.5
Net earnings $1,065 $310 $755 243.5%
Basic earnings per share $0.03 $0.01 $0.02 200.0%
Diluted earnings per share $0.03 $0.01 $0.02 200.0%
STATISTICS:
Gross profit rate 15.8% 16.5% (0.7)%
Expenses as a % of revenue 15.6 16.5 (0.9)
% Return -
Earnings from operations 0.2 0.0 0.2
Earnings before taxes 0.2 0.1 0.1
Net earnings 0.1 0.0 0.1
Effective income tax rate 40.0% 39.5% 0.5%
Average number of shares
outstanding (thousands):
Basic 34,881 35,548
Diluted 35,302 35,626
KELLY SERVICES, INC.
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
March Year to Date
2004 2003 Change % Change
Revenue from Services:
U.S. Commercial Staffing $549,422 $504,309 $45,113 8.9%
PTSA 238,698 221,659 17,039 7.7
International 370,691 277,429 93,262 33.6
Consolidated Total $1,158,811 $1,003,397 $155,414 15.5%
Earnings (Loss) from Operations:
U.S. Commercial Staffing $24,313 $24,100 $213 0.9%
PTSA 14,162 13,388 774 5.8
International (952) (3,157) 2,205 69.8
Corporate (35,509) (33,941) (1,568) (4.6)
Consolidated Total $2,014 $390 $1,624 416.4%
KELLY SERVICES, INC.
RECONCILIATION OF CONSTANT CURRENCY
REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
(UNAUDITED)
(In thousands of dollars)
March Year to Date
2004 2003 Change % Change
US Commercial $549,422 $504,309 $45,113 8.9%
PTSA 238,698 221,659 17,039 7.7
International - constant
currency* 326,841 277,429 49,412 17.8
Revenue from services -
constant currency 1,114,961 1,003,397 111,564 11.1%
Foreign currency impact 43,850 - 43,850
Revenue from services $1,158,811 $1,003,397 $155,414 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.
KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands of dollars)
March 28, December 28, March 30,
2004 2003 2003
Current Assets (UNAUDITED) (UNAUDITED)
Cash and equivalents $55,347 $76,378 $72,637
Short-term investments 452 457 493
Trade accounts receivable, less
allowances of $16,004, $14,983
and $13,155, respectively 704,771 658,090 593,858
Prepaid expenses and other
current assets 34,777 31,784 37,298
Deferred taxes 24,530 24,962 22,586
Total current assets 819,877 791,671 726,872
Property and Equipment, Net 181,487 188,122 198,982
Noncurrent Deferred Taxes 14,378 14,606 21,055
Goodwill, Net 84,398 85,788 81,027
Other Assets 58,847 57,550 48,798
Total Assets $1,158,987 $1,137,737 $1,076,734
Current Liabilities
Short-term borrowings $37,904 $39,190 $24,441
Accounts payable 96,561 92,265 79,194
Accrued payroll and related taxes 218,792 200,503 192,021
Accrued insurance 33,674 36,016 27,877
Income and other taxes 52,754 49,342 45,647
Total current liabilities 439,685 417,316 369,180
Noncurrent Liabilities
Accrued insurance 54,941 58,763 45,467
Accrued retirement benefits 48,788 48,025 40,689
Total noncurrent
liabilities 103,729 106,788 86,156
Stockholders' Equity
Common stock 40,116 40,116 40,116
Treasury stock (108,023) (113,158) (90,883)
Paid-in capital 19,651 19,096 18,285
Earnings invested in the business 654,300 656,726 662,514
Accumulated foreign currency
adjustments 9,529 10,853 (8,634)
Total stockholders' equity 615,573 613,633 621,398
Total Liabilities and Stockholders'
Equity $1,158,987 $1,137,737 $1,076,734
STATISTICS:
Working Capital $380,192 $374,355 $357,692
Current Ratio 1.9 1.9 2.0
Debt-to-capital % 5.8% 6.0% 3.8%
Global Days Sales Outstanding
Year to Date 55 55 54
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED MARCH 28, 2004 AND MARCH 30, 2003
(UNAUDITED)
(In thousands of dollars)
2004 2003
Cash flows from operating activities
Net earnings $1,065 $310
Noncash adjustments:
Depreciation and amortization 11,326 11,908
Increase in trade accounts
receivable, net (47,447) (22,552)
Changes in operating assets and
liabilities 18,743 (4,391)
Net cash from operating activities (16,313) (14,725)
Cash flows from investing activities
Capital expenditures (4,375) (8,445)
Decrease in short-term investments 5 106
Increase in other assets (173) (951)
Net cash from investing activities (4,543) (9,290)
Cash flows from financing activities
Decrease in short-term borrowings (708) (1,034)
Dividend payments (3,491) (3,555)
Stock options and other 4,169 6
Purchase of treasury stock (3) (38)
Net cash from financing activities (33) (4,621)
Effect of exchange rates on cash and
equivalents (142) 337
Net change in cash and equivalents (21,031) (28,299)
Cash and equivalents at beginning of
period 76,378 100,936
Cash and equivalents at end of period $55,347 $72,637
SOURCE Kelly Services, Inc.
CONTACT: ANALYST CONTACT: James Polehna, Director, Investor Relations,
+1-248-244-4586, james_polehna@kellyservices.com , or MEDIA CONTACT: Robert
Doetsch, Director, Public Relations, +1-248-244-5362,
robert_doetsch@kellyservices.com , both of Kelly Services, Inc.