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, Mich., Oct. 19 -- 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.
(Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO )
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.
"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: http://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 http://www.kellyservices.com .
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
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.
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.
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.
KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands of dollars)
September 26, December 28, September 28,
2004 2003 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 woncurrent
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
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
SOURCE Kelly Services, Inc.
CONTACT: ANALYST CONTACT: James Polehna, +1-248-244-4586,
james_polehna@kellyservices.com , or MEDIA CONTACT: Renee Walker,
+1-248-244-5362, renee_walker@kellyservices.com , both of Kelly Services,
Inc.
Web site: http://www.kellyservices.com
(KELYA KELYB)