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
July 22, 2003
Date of Report (Date of earliest event reported)
Commission File Number 0-1088
KELLY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
| DELAWARE | 38-1510762 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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)
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| Item 7. | Financial Statements and Exhibits |
(c) Exhibits
| 99.1 Press Release dated July 22, 2003. |
| Item 9. | Regulation FD Disclosure (Item 12. Results of Operations and Financial Condition). |
The following information is being furnished under Item 12 of Form 8-K “Results of Operations and Financial Condition” and is included under this Item 9 in accordance with SEC Release No. 33-8216 (March 27, 2003).
Kelly Services, Inc. today released financial information containing highlighted financial data for the three-month and six-month periods ended June 29, 2003. A copy of the press release is attached as exhibit 99.1 herein.
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SIGNATURE
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, thereunto duly authorized.
| KELLY SERVICES, INC. | ||||||||
| Date: July 22, 2003 | ||||||||
| /s/ WILLIAM K. GERBER | ||||||||
| William K. Gerber | ||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||||||
3
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press release dated July 22, 2003 | |
4
Exhibit 99.1
| ANALYST CONTACT: |
MEDIA CONTACT: | |
| James Polehna |
Robert Doetsch | |
| Director, Investor Relations |
Director, Public Relations | |
| (248) 244-4586 |
(248) 244-5362 | |
| james_polehna@kellyservices.com |
robert_doetsch@kellyservices.com |
KELLY SERVICES REPORTS SALES AND EARNINGS
FOR THE 2nd QUARTER OF 2003
TROY, MI (July 22, 2003) – Kelly Services, Inc., a global provider of staffing services, today announced sales and earnings results for the second quarter ended June 29, 2003.
Terence E. Adderley, Kelly Services chairman and chief executive officer, announced sales for the second quarter of 2003 totaled $1.060 billion, a 4.4% increase compared to the $1.015 billion for the corresponding quarter in 2002. Sales for the second quarter increased 5.6% sequentially, as compared to the first quarter of 2003. Sales for the six-month period totaled $2.063 billion, a 5.7% increase compared to the $1.951 billion for the first six months of 2002.
Net earnings for the second quarter of 2003 totaled $1.5 million, compared to $3.9 million reported for the second quarter of 2002. Net earnings for the second quarter increased by $1.2 million sequentially, as compared to the first quarter of 2003. Net earnings for the first six months of 2003 totaled $1.8 million, compared to the $4.7 million earned during the comparable six-month period in 2002.
Diluted earnings per share in the second quarter of 2003 were $0.04 per share, as compared to second quarter 2002 earnings of $0.11 per share. Diluted earnings per share increased $0.03 sequentially, as compared to first quarter 2003 earnings of $0.01 per share. Diluted earnings per share for the first six months of 2003 were $0.05 per share, compared to the $0.13 per share earned in the first six months of 2002.
Commenting on the results, Adderley said, “Our earnings performance during the second quarter reflected a stalled global economic recovery.
“The decline in earnings during the second quarter was largely the result of a five-tenths of a percent decrease in the company’s gross profit rate. Workers’ compensation costs increased significantly in our U.S. Commercial business, while fee based income continued to decrease in our International segment. Substantial increases in state unemployment taxes that began in the first quarter, are for the most part, now reflected in prices in our U.S. operations. Overall, expenses were well managed during the quarter.
“U.S. Commercial staffing sales decreased 0.7% during the second quarter, compared to the 4.9% sales increase reported in the first quarter of 2003. The U.S. Commercial gross profit rate decreased seven-tenths of a percent primarily due to increased workers’ compensation costs. Expenses were flat compared to last year. Operating earnings totaled $23.1 million, a decrease of 16.4% compared to the last year.
“Professional, Technical, and Staffing Alternatives (PTSA) sales increased by 1.6% during the second quarter, compared to first quarter sales growth of 6.1%, with most of the individual business units showing reduced rates of growth. Kelly Financial Resources and Kelly HR First continued to exhibit strong sales growth, while Kelly Scientific Resources and Kelly Home Care experienced sales decreases during the quarter. The PTSA gross profit rate was the same as last year, while expenses increased 1.8% as compared to 2002. Operating earnings totaled $12.8 million and increased 2.8% on a year-over-year basis.
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“International revenue, as measured in U.S. dollars, increased 16.8% during the second quarter, as compared to a 12.3% increase in the first quarter. On a constant currency basis, International revenue increased 3% in the second quarter, as compared to a flat performance in the first quarter. Constant currency sales growth continued to be positive in the Americas and Asia Pacific. Sales in the U.K. turned positive during the second quarter, while sales in Continental Europe improved slightly, but remained negative. The International gross profit rate decreased by eight-tenths of a percent, primarily due to decreases in fee based income. Operating expenses increased by 15.0% in U.S. dollar terms, while on a constant currency basis expenses increased by less than 1%. The International operating loss totaled $1.0 million, compared to a profit of $0.4 million last year. Sequentially, the loss is a significant improvement compared to the first quarter, when the International operating loss totaled $3.2 million.
“We continue to see a pattern of economic weakness and related lack of growth in demand for staffing services. We are uncertain when a robust economic recovery will occur. As a result, we will continue our practice of providing guidance on a quarterly basis. At this time, we expect that third quarter 2003 earnings will range from $0.04 per share to $0.08 per share, as compared to earnings of $0.18 per share in the third quarter of 2002.”
In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 22, 2003 to review the results. The call may be accessed in one of the following ways:
Via the Telephone:
U.S. (800) 369-2104
International 1-210-234-0002
The conference call leader 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. Sales in 2002 were $4.1 billion. Visit www.kellyservices.com.
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JUNE 29, 2003 AND JUNE 30, 2002
(In thousands of dollars except per share data)
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Sales of services |
$ | 1,059,517 | $ | 1,014,841 | $ | 44,676 | 4.4 | % | |||||||
| Cost of services |
887,113 | 844,625 | 42,488 | 5.0 | |||||||||||
| Gross profit |
172,404 | 170,216 | 2,188 | 1.3 | |||||||||||
| Selling, general and administrative expenses |
169,955 | 163,741 | 6,214 | 3.8 | |||||||||||
| Earnings from operations |
2,449 | 6,475 | (4,026 | ) | (62.2 | ) | |||||||||
| Interest income, net |
4 | 82 | (78 | ) | (95.1 | ) | |||||||||
| Earnings before taxes |
2,453 | 6,557 | (4,104 | ) | (62.6 | ) | |||||||||
| Income taxes |
969 | 2,622 | (1,653 | ) | (63.0 | ) | |||||||||
| Net earnings |
$ | 1,484 | $ | 3,935 | $ | (2,451 | ) | (62.3 | )% | ||||||
| Basic earnings per share |
$ | 0.04 | $ | 0.11 | $ | (0.07 | ) | (63.6 | )% | ||||||
| Diluted earnings per share |
$ | 0.04 | $ | 0.11 | $ | (0.07 | ) | (63.6 | )% | ||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.3 | % | 16.8 | % | (0.5 | )% | |||||||||
| Expenses as a % of sales |
16.0 | 16.1 | (0.1 | ) | |||||||||||
| % Return – Earnings from operations |
0.2 | 0.6 | (0.4 | ) | |||||||||||
| Earnings before taxes |
0.2 | 0.6 | (0.4 | ) | |||||||||||
| Net earnings |
0.1 | 0.4 | (0.3 | ) | |||||||||||
| Effective income tax rate |
39.5 | 40.0 | (0.5 | ) | |||||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,596 | 35,977 | |||||||||||||
| Diluted |
35,624 | 36,252 | |||||||||||||
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JUNE 29, 2003 AND JUNE 30, 2002
(In thousands of dollars except per share data)
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Sales of services |
$ | 2,062,914 | $ | 1,951,454 | $ | 111,460 | 5.7 | % | |||||||
| Cost of services |
1,724,958 | 1,622,278 | 102,680 | 6.3 | |||||||||||
| Gross profit |
337,956 | 329,176 | 8,780 | 2.7 | |||||||||||
| Selling, general and administrative expenses |
335,117 | 321,515 | 13,602 | 4.2 | |||||||||||
| Earnings from operations |
2,839 | 7,661 | (4,822 | ) | (62.9 | ) | |||||||||
| Interest income, net |
126 | 223 | (97 | ) | (43.5 | ) | |||||||||
| Earnings before taxes |
2,965 | 7,884 | (4,919 | ) | (62.4 | ) | |||||||||
| Income taxes |
1,171 | 3,153 | (1,982 | ) | (62.9 | ) | |||||||||
| Net earnings |
$ | 1,794 | $ | 4,731 | $ | (2,937 | ) | (62.1 | )% | ||||||
| Basic earnings per share |
$ | 0.05 | $ | 0.13 | $ | (0.08 | ) | (61.5 | )% | ||||||
| Diluted earnings per share |
$ | 0.05 | $ | 0.13 | $ | (0.08 | ) | (61.5 | )% | ||||||
| STATISTICS: |
|||||||||||||||
| Gross profit rate |
16.4 | % | 16.9 | % | (0.5 | )% | |||||||||
| Expenses as a % of sales |
16.2 | 16.5 | (0.3 | ) | |||||||||||
| % Return – Earnings from operations |
0.1 | 0.4 | (0.3 | ) | |||||||||||
| Earnings before taxes |
0.1 | 0.4 | (0.3 | ) | |||||||||||
| Net earnings |
0.1 | 0.2 | (0.1 | ) | |||||||||||
| Effective income tax rate |
39.5 | 40.0 | (0.5 | ) | |||||||||||
| Average number of shares outstanding (thousands): |
|||||||||||||||
| Basic |
35,572 | 35,933 | |||||||||||||
| Diluted |
35,584 | 36,152 | |||||||||||||
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KELLY SERVICES, INC.
RESULTS OF OPERATIONS BY SEGMENT
(In thousands of dollars)
| Second Quarter |
|||||||||||||||
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Sales: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 522,665 | $ | 526,561 | $ | (3,896 | ) | (0.7 | )% | ||||||
| PTSA |
223,565 | 220,044 | 3,521 | 1.6 | |||||||||||
| International |
313,287 | 268,236 | 45,051 | 16.8 | |||||||||||
| $ | 1,059,517 | $ | 1,014,841 | $ | 44,676 | 4.4 | % | ||||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 23,103 | $ | 27,620 | $ | (4,517 | ) | (16.4 | )% | ||||||
| PTSA |
12,769 | 12,420 | 349 | 2.8 | |||||||||||
| International |
(1,019 | ) | 426 | (1,445 | ) | (339.2 | ) | ||||||||
| Corporate |
(32,404 | ) | (33,991 | ) | 1,587 | 4.7 | |||||||||
| $ | 2,449 | $ | 6,475 | $ | (4,026 | ) | (62.2 | )% | |||||||
| June Year to Date |
|||||||||||||||
| 2003 |
2002 |
Change |
% Change |
||||||||||||
| Sales: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 1,026,974 | $ | 1,007,233 | $ | 19,741 | 2.0 | % | |||||||
| PTSA |
445,224 | 428,909 | 16,315 | 3.8 | |||||||||||
| International |
590,716 | 515,312 | 75,404 | 14.6 | |||||||||||
| $ | 2,062,914 | $ | 1,951,454 | $ | 111,460 | 5.7 | % | ||||||||
| Earnings from Operations: |
|||||||||||||||
| U.S. Commercial Staffing |
$ | 47,142 | $ | 50,919 | $ | (3,777 | ) | (7.4 | )% | ||||||
| PTSA |
26,115 | 23,917 | 2,198 | 9.2 | |||||||||||
| International |
(4,176 | ) | (819 | ) | (3,357 | ) | (409.9 | ) | |||||||
| Corporate |
(66,242 | ) | (66,356 | ) | 114 | 0.2 | |||||||||
| $ | 2,839 | $ | 7,661 | $ | (4,822 | ) | (62.9 | )% | |||||||
9
KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands of dollars)
| June 29, 2003 |
December 29, 2002 |
June 30, 2002 |
||||||||||
| Current Assets |
||||||||||||
| Cash and equivalents |
$ | 76,961 | $ | 100,936 | $ | 76,958 | ||||||
| Short-term investments |
518 | 599 | 574 | |||||||||
| Accounts receivable, less allowances of $13,698, $12,533 and $13,048, respectively |
617,600 | 567,517 | 589,147 | |||||||||
| Prepaid expenses and other current assets |
34,411 | 26,387 | 27,503 | |||||||||
| Deferred taxes |
23,407 | 23,916 | 21,657 | |||||||||
| Total current assets |
752,897 | 719,355 | 715,839 | |||||||||
| Property and Equipment, Net |
194,971 | 202,332 | 207,218 | |||||||||
| Noncurrent Deferred Taxes |
21,010 | 21,065 | 31,415 | |||||||||
| Goodwill, Net |
83,086 | 80,260 | 78,293 | |||||||||
| Other Assets |
53,363 | 49,121 | 51,278 | |||||||||
| Total Assets |
$ | 1,105,327 | $ | 1,072,133 | $ | 1,084,043 | ||||||
| Current Liabilities |
||||||||||||
| Short-term borrowings |
$ | 24,234 | $ | 24,770 | $ | 29,902 | ||||||
| Accounts payable |
76,764 | 85,310 | 89,413 | |||||||||
| Payroll and related taxes |
205,294 | 181,585 | 192,883 | |||||||||
| Accrued insurance |
30,219 | 27,912 | 24,972 | |||||||||
| Income and other taxes |
46,525 | 47,617 | 45,013 | |||||||||
| Total current liabilities |
383,036 | 367,194 | 382,183 | |||||||||
| Noncurrent Liabilities |
||||||||||||
| Accrued insurance |
49,304 | 45,540 | 40,744 | |||||||||
| Accrued retirement benefits |
44,491 | 40,335 | 40,939 | |||||||||
| Total noncurrent liabilities |
93,795 | 85,875 | 81,683 | |||||||||
| Stockholders’ Equity |
||||||||||||
| Common stock |
40,116 | 40,116 | 40,116 | |||||||||
| Treasury stock |
(90,774 | ) | (92,159 | ) | (79,911 | ) | ||||||
| Paid-in capital |
18,332 | 17,902 | 17,686 | |||||||||
| Earnings invested in the business |
660,438 | 665,759 | 659,027 | |||||||||
| Accumulated foreign currency adjustments |
384 | (12,554 | ) | (16,741 | ) | |||||||
| Total stockholders’ equity |
628,496 | 619,064 | 620,177 | |||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,105,327 | $ | 1,072,133 | $ | 1,084,043 | ||||||
| STATISTICS: |
||||||||||||
| Working Capital |
$ | 369,861 | $ | 352,161 | $ | 333,656 | ||||||
| Current Ratio |
2.0 | 2.0 | 1.9 | |||||||||
| Stockholders’ Equity Per Share |
$ | 17.65 | $ | 17.42 | $ | 17.23 | ||||||
| Global Days Sales Outstanding |
||||||||||||
| Quarter |
53 | 49 | 53 | |||||||||
| Year-to-date |
54 | 51 | 55 | |||||||||
10
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JUNE 29, 2003 AND JUNE 30, 2002
(In thousands of dollars)
| 2003 |
2002 |
|||||||
| Cash flows from operating activities |
||||||||
| Net earnings |
$ | 1,794 | $ | 4,731 | ||||
| Noncash adjustments: |
||||||||
| Depreciation and amortization |
24,043 | 21,079 | ||||||
| Increase in accounts receivable, net |
(36,350 | ) | (35,603 | ) | ||||
| Changes in other operating assets and liabilities |
11,404 | 27,361 | ||||||
| Net cash from operating activities |
891 | 17,568 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(15,146 | ) | (14,229 | ) | ||||
| Decrease in short-term investments |
81 | 56 | ||||||
| (Increase) decrease in other assets |
(1,808 | ) | 1,181 | |||||
| Net cash from investing activities |
(16,873 | ) | (12,992 | ) | ||||
| Cash flows from financing activities |
||||||||
| Decrease in short-term borrowings |
(2,667 | ) | (5,916 | ) | ||||
| Dividend payments |
(7,115 | ) | (7,187 | ) | ||||
| Stock options and other |
14 | 832 | ||||||
| Purchase of treasury stock |
(67 | ) | (19 | ) | ||||
| Net cash from financing activities |
(9,835 | ) | (12,290 | ) | ||||
| Effect of exchange rates on cash and equivalents |
1,842 | 1,211 | ||||||
| Net change in cash and equivalents |
(23,975 | ) | (6,503 | ) | ||||
| Cash and equivalents at beginning of period |
100,936 | 83,461 | ||||||
| Cash and equivalents at end of period |
$ | 76,961 | $ | 76,958 | ||||
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