Kelly Services Reports Revenue and Earnings For the 4th Quarter and Year Ended December 28, 2003
TROY, Mich., Jan. 21 -- Kelly Services, Inc., a global provider of staffing services, today announced revenue and earnings results for the fourth quarter and year ended December 28, 2003.
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Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the fourth quarter of 2003 totaled $1.165 billion, an 11.1% increase compared to the $1.048 billion for the corresponding quarter in 2002. Revenue for the fourth quarter increased 6.2% compared to the third quarter of 2003. Revenue for the year totaled $4.325 billion, a 6.6% increase compared to the $4.057 billion for 2002.
On constant currency basis total revenue for the fourth quarter of 2003 increased 7.2% compared to the corresponding quarter of 2002. Constant currency revenue for the full year of 2003 increased by 3.3% compared to 2002.
Net earnings for the fourth quarter of 2003 totaled $1.8 million, compared to $7.3 million reported for the fourth quarter of 2002. Net earnings for the fourth quarter increased by 20.5% compared to the third quarter of 2003. Net earnings for 2003 totaled $5.1 million, compared to the $18.6 million earned during 2002.
Diluted earnings per share in the fourth quarter of 2003 were $0.05 per share, as compared to fourth quarter 2002 earnings of $0.21 per share. Diluted earnings per share increased $0.01 sequentially compared to the third quarter of 2003. Diluted earnings per share for 2003 were $0.14 per share, compared to the $0.52 per share earned in 2002.
Commenting on the results, Adderley said, "We achieved a new sales record of $4.325 billion. With revenue growth of nearly 7% for the year, we in fact exceeded our record sales of $4.251 billion achieved in 2000. We continued to gain market share and are well positioned for 2004.
"However, as good as sales were, we are still a long way from our pre- recession earnings. We remain committed to returning to and exceeding our historic earnings levels, and expect to accomplish that over the next three to four years.
"Year over year, revenue in our U.S. Commercial staffing segment increased 4.0% during the fourth quarter, compared to the 2.6% decrease reported in the third quarter of 2003. The U.S. Commercial gross profit rate decreased 2.0 percentage points primarily due to increased workers' compensation costs and customer and service line mix. Expenses increased 7.2% compared to last year. Operating earnings totaled $23.1 million, a decrease of 33.0% compared to last year.
"Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased by 4.1% during the fourth quarter, compared to a third quarter decrease of 0.4%, with the individual business units showing mixed rates of growth. Kelly Financial Resources and Kelly Law Registry were the leading staffing unit performers in the fourth quarter. Kelly HRfirst and Kelly Vendor Management also continued to exhibit strong revenue growth. Kelly Scientific Resources, Kelly Home Care and the Automotive Services Group experienced revenue decreases during the quarter. The PTSA gross profit rate increased five-tenths of one percent compared to last year, while expenses increased 6.0% as compared to 2002. Operating earnings totaled $14.9 million and increased 8.6% on a year-over-year basis.
"International revenue, as measured in U.S. dollars, increased 30.6% during the fourth quarter, as compared to a 19.4% increase in the third quarter. The International gross profit rate decreased by 1.9 percentage points, due to gross profit rate decreases in UK, Continental Europe and Asia Pacific. Fee based income showed a small increase. Operating expenses increased by 21.0% in U.S. dollar terms. International operating earnings totaled $1.6 million, compared to earnings of $2.7 million last year.
"On a constant currency basis, International revenue increased 16.0% in the fourth quarter, as compared to 10.1% growth in the third quarter. Constant currency revenue growth was positive in all regions: Americas increased 11%, Asia Pacific increased 21%, UK/Ireland increased 30% and Continental Europe increased 10%. Expenses increased by 7.3% on a constant currency basis.
"As we prepare for 2004, the greatest unknown is the pace of economic recovery. In our judgment, the greatest probability is that this will be a more gradual recovery with a longer duration. Using moderate growth as a guideline, we expect that first quarter 2004 results will range from a loss of $0.01 per share to earnings of $0.04 per share, as compared to earnings of $0.01 per share in the first quarter of 2003."
In conjunction with its fourth quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on January 21, 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 Internet through 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 federal, state and international 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 human resources solutions that include temporary services, staff leasing, outsourcing, vendor on-site and full-time placement. With more than 2,400 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 www.kellyservices.com .
KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 13 WEEKS ENDED DECEMBER 28, 2003 AND DECEMBER 29, 2002 (UNAUDITED) (In thousands of dollars except per share data) 2003 2002 Change % Change Revenue from services $1,164,973 $1,048,201 $116,772 11.1 % Cost of services 978,905 866,913 111,992 12.9 Gross profit 186,068 181,288 4,780 2.6 Selling, general and administrative expenses 182,879 169,272 13,607 8.0 Earnings from operations 3,189 12,016 (8,827) (73.5) Interest (expense) income, net (119) 104 (223) (214.4) Earnings before taxes 3,070 12,120 (9,050) (74.7) Income taxes 1,258 4,787 (3,529) (73.7) Net earnings $1,812 $7,333 $(5,521) (75.3)% Basic earnings per share $0.05 $0.21 $(0.16) (76.2)% Diluted earnings per share $0.05 $0.21 $(0.16) (76.2)% STATISTICS: Gross profit rate 16.0 % 17.3 % (1.3)% Expenses as a % of revenue 15.7 16.1 (0.4) % Return - Earnings from operations 0.3 1.1 (0.8) Earnings before taxes 0.3 1.2 (0.9) Net earnings 0.2 0.7 (0.5) Effective income tax rate 41.0 39.5 1.5 Average number of shares outstanding (thousands): Basic 34,692 35,522 Diluted 34,945 35,637 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 52 WEEKS ENDED DECEMBER 28, 2003 AND DECEMBER 29, 2002 (In thousands of dollars except per share data) 2003 2002 Change % Change Revenue from services $4,325,155 $4,056,945 $268,210 6.6 % Cost of services 3,628,524 3,364,219 264,305 7.9 Gross profit 696,631 692,726 3,905 0.6 Selling, general and administrative expenses 687,894 662,334 25,560 3.9 Earnings from operations 8,737 30,392 (21,655) (71.3) Interest (expense) income, net (77) 362 (439) (121.3) Earnings before taxes 8,660 30,754 (22,094) (71.8) Income taxes 3,550 12,185 (8,635) (70.9) Net earnings $5,110 $18,569 $(13,459) (72.5)% Basic earnings per share $0.14 $0.52 $(0.38) (73.1)% Diluted earnings per share $0.14 $0.52 $(0.38) (73.1)% STATISTICS: Gross profit rate 16.1 % 17.1 % (1.0)% Expenses as a % of revenue 15.9 16.3 (0.4) % Return - Earnings from operations 0.2 0.7 (0.5) Earnings before taxes 0.2 0.8 (0.6) Net earnings 0.1 0.5 (0.4) Effective income tax rate 41.0 39.6 1.4 Average number of shares outstanding (thousands): Basic 35,289 35,724 Diluted 35,355 35,900 KELLY SERVICES, INC. RESULTS OF OPERATIONS BY SEGMENT (In thousands of dollars) Fourth Quarter (Unaudited) 2003 2002 Change % Change Revenue from Services: U.S. Commercial Staffing $569,210 $547,485 $21,725 4.0 % PTSA 228,557 219,462 9,095 4.1 International 367,206 281,254 85,952 30.6 $1,164,973 $1,048,201 $116,772 11.1 % Earnings from Operations: U.S. Commercial Staffing $23,072 $34,418 $(11,346) (33.0)% PTSA 14,891 13,711 1,180 8.6 International 1,571 2,684 (1,113) (41.5) Corporate (36,345) (38,797) 2,452 6.3 $3,189 $12,016 $(8,827) (73.5)% December Year to Date 2003 2002 Change % Change Revenue from Services: U.S. Commercial Staffing $2,131,529 $2,104,622 $26,907 1.3 % PTSA 895,002 870,370 24,632 2.8 International 1,298,624 1,081,953 216,671 20.0 $4,325,155 $4,056,945 $268,210 6.6 % Earnings from Operations: U.S. Commercial Staffing $92,943 $118,656 $(25,713) (21.7)% PTSA 52,992 50,954 2,038 4.0 International (984) 4,931 (5,915 (120.0) Corporate (136,214) (144,149) 7,935 5.5 $8,737 $30,392 $(21,655 (71.3)% KELLY SERVICES, INC. RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES (In thousands of dollars) Fourth Quarter (Unaudited) 2003 2002 Change % Change US Commercial $569,210 $547,485 $21,725 4.0 % PTSA 228,557 219,462 9,095 4.1 International - constant currency* 326,338 281,254 45,084 16.0 Revenue from services - constant currency 1,124,105 1,048,201 75,904 7.2 % Foreign currency impact 40,868 - 40,868 Revenue from services $1,164,973 $1,048,201 $116,772 11.1 % December Year to Date 2003 2002 Change % Change US Commercial $2,131,529 $2,104,622 $26,907 1.3 % PTSA 895,002 870,370 24,632 2.8 International - constant currency* 1,164,836 1,081,953 82,883 7.7 Revenue from services - constant currency 4,191,367 4,056,945 134,422 3.3 % Foreign currency impact 133,788 - 133,788 Revenue from services $4,325,155 $4,056,945 $268,210 6.6 % * 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) December 28, December 29, 2003 2002 Current Assets Cash and equivalents $76,378 $100,936 Short-term investments 457 599 Accounts receivable, less allowances of $14,983 and $12,533, respectively 658,090 567,517 Prepaid expenses and other current assets 31,784 26,387 Deferred taxes 24,962 23,916 Total current assets 791,671 719,355 Property and Equipment, Net 188,122 202,332 Noncurrent Deferred Taxes 14,606 21,065 Goodwill, Net 85,788 80,260 Other Assets 57,550 49,121 Total Assets $1,137,737 $1,072,133 Current Liabilities Short-term borrowings $39,190 $24,770 Accounts payable 92,265 85,310 Payroll and related taxes 200,503 181,585 Accrued insurance 36,016 27,912 Income and other taxes 49,342 47,617 Total current liabilities 417,316 367,194 Noncurrent Liabilities Accrued insurance 58,763 45,540 Accrued retirement benefits 48,025 40,335 Total noncurrent liabilities 106,788 85,875 Stockholders' Equity Common stock 40,116 40,116 Treasury stock (113,158) (92,159) Paid-in capital 19,096 17,902 Earnings invested in the business 656,726 665,759 Accumulated foreign currency adjustments 10,853 (12,554) Total stockholders' equity 613,633 619,064 Total Liabilities and Stockholders' Equity $1,137,737 $1,072,133 STATISTICS: Working Capital $374,355 $352,161 Current Ratio 1.9 2.0 Debt-to-Capital % 6.0 % 3.8 % Global Days Sales Outstanding Quarter 51 49 Year-to-date 55 51 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE 52 WEEKS ENDED DECEMBER 28, 2003 AND DECEMBER 29, 2002 (In thousands of dollars) 2003 2002 Cash flows from operating activities Net earnings $5,110 $18,569 Noncash adjustments: Depreciation and amortization 47,795 45,428 Increase in accounts receivable, net (63,516) (9,420) Changes in operating assets and liabilities 41,204 35,029 Net cash from operating activities 30,593 89,606 Cash flows from investing activities Capital expenditures (30,222) (33,406) Decrease in short-term investments 142 31 Increase in other assets (2,487) (3,476) Net cash from investing activities (32,567) (36,851) Cash flows from financing activities Increase (decrease) in short-term borrowings 10,280 (11,723) Dividend payments (14,143) (14,293) Stock options and other 3,865 991 Purchase of treasury stock (26,149) (13,216) Net cash from financing activities (26,147) (38,241) Effect of exchange rates on cash and equivalents 3,563 2,961 Net change in cash and equivalents (24,558) 17,475 Cash and equivalents at beginning of period 100,936 83,461 Cash and equivalents at end of period $76,378 $100,936SOURCE 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.
Web site: http://www.kellyservices.com (KELYA KELYB)