Kelly Services Reports Record Revenue and Strong Earnings Growth for the 2nd Quarter of 2004
TROY, Mich., July 20 -- Kelly Services, Inc. (Nasdaq: KELYA, KELYB), a global provider of staffing services, today announced record revenue and strong earnings growth for the second quarter ended June 27, 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 second quarter of 2004 totaled $1.224 billion, a 15.6% increase compared to the $1.060 billion for the corresponding quarter in 2003. Sales for the six-month period totaled $2.383 billion, a 15.5% increase compared to the $2.063 billion for the first six months of 2003.
Net earnings for the second quarter of 2004 totaled $5.0 million, compared to $1.5 million reported for the second quarter of 2003. Net earnings for the first six months of 2004 totaled $6.1 million, compared to the $1.8 million earned during the comparable six-month period in 2003.
Diluted earnings per share in the second quarter of 2004 were $0.14, as compared to second quarter 2003 earnings of $0.04 per share. Diluted earnings per share for the first six months of 2004 were $0.17, compared to the $0.05 per share earned in the first six months of 2003.
Commenting on the results, Adderley said, "The economic recovery is well underway, and our second quarter sales of $1.224 billion set a new all time record for any quarter.
"We're off to a great start this year. We believe the balance of the year will continue on course, and our third quarter 2004 earnings per share should range from $0.16 to $0.21, as compared to $0.04 per share in the third quarter of 2003.
"Revenue in our U.S. Commercial staffing segment increased 11.3% year over year during the second quarter, compared to the 8.9% increase reported in the first quarter. The gross profit rate in this segment decreased two-tenths of a percent, primarily due to higher state unemployment taxes. Expenses increased 2.9% compared to last year. Operating earnings totaled $29.6 million, an increase of 27.7% compared to last year.
"Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment increased 14.7% year over year during the second quarter, compared to the prior quarter's increase of 7.7%. Kelly Law Registry and Kelly Healthcare Resources were the leading professional and technical performers in the second 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 increased three-tenths of one percent, primarily due to increased fee based income. Expenses increased 11.4% as compared to last year. Operating earnings totaled $16.4 million and increased 27.7% on a year-over-year basis.
"Revenue in our International segment, as measured in U.S. dollars, increased 23.4% year over year during the second quarter, as compared to a 33.6% increase in the first quarter. The International gross profit rate decreased by five-tenths of a percent, primarily due to gross profit rate decreases in Europe. Operating expenses increased by 14.3% in U.S. dollar terms. Operating earnings totaled $1.9 million, a significant improvement compared to a loss of $1.0 million last year.
"On a constant currency basis, International segment revenue increased 15.9% year over year in the second quarter, as compared to 17.8% growth in the first quarter. Total company revenue for the second quarter of 2004 increased 13.4% on a constant currency basis as compared to 11.1% growth in the first quarter. Constant currency revenue growth was positive in all regions: Americas increased 16%, Europe increased 15%, and Asia Pacific increased 25%. International expenses increased by 7.1% on a constant currency basis."
In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 20, 2004 to review the results. The call may be accessed in one of the following ways:
Via the Telephone:
U.S. 888-677-5721
International 1-773-756-4624
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:
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 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 http://www.kellyservices.com .
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JUNE 27, 2004 AND JUNE 29, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
2004 2003 Change % Change
Revenue from services $1,224,464 $1,059,517 $164,947 15.6%
Cost of services 1,026,382 887,113 139,269 15.7
Gross profit 198,082 172,404 25,678 14.9
Selling, general and
administrative expenses 189,404 169,955 19,449 11.4
Earnings from operations 8,678 2,449 6,229 254.3
Interest (expense)
income, net (283) 4 (287) NM
Earnings before taxes 8,395 2,453 5,942 242.2
Income taxes 3,348 969 2,379 245.5
Net earnings $5,047 $1,484 $3,563 240.1%
Basic earnings per share $0.14 $0.04 $0.10 250.0%
Diluted earnings per share $0.14 $0.04 $0.10 250.0%
STATISTICS:
Gross profit rate 16.2% 16.3% (0.1)%
Expenses as a % of revenue 15.5 16.0 (0.5)
% Return - Earnings from
operations 0.7 0.2 0.5
Earnings before taxes 0.7 0.2 0.5
Net earnings 0.4 0.1 0.3
Effective income tax rate 39.9% 39.5% 0.4%
Average number of shares
outstanding (thousands):
Basic 35,057 35,596
Diluted 35,431 35,624
NM Percentage change not meaningful.
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JUNE 27, 2004 AND JUNE 29, 2003
(UNAUDITED)
(In thousands of dollars except per share data)
2004 2003 Change % Change
Revenue from services $2,383,275 $2,062,914 $320,361 15.5%
Cost of services 2,001,837 1,724,958 276,879 16.1
Gross profit 381,438 337,956 43,482 12.9
Selling, general and
administrative expenses 370,746 335,117 35,629 10.6
Earnings from operations 10,692 2,839 7,853 276.6
Interest (expense)
income, net (522) 126 (648) NM
Earnings before taxes 10,170 2,965 7,205 243.0
Income taxes 4,058 1,171 2,887 246.5
Net earnings $6,112 $1,794 $4,318 240.7 %
Basic earnings per share $0.17 $0.05 $0.12 240.0 %
Diluted earnings per share $0.17 $0.05 $0.12 240.0 %
STATISTICS:
Gross profit rate 16.0% 16.4% (0.4)%
Expenses as a % of revenue 15.6 16.2 (0.6)
% Return - Earnings from
operations 0.4 0.1 0.3
Earnings before taxes 0.4 0.1 0.3
Net earnings 0.3 0.1 0.2
Effective income tax rate 39.9% 39.5% 0.4%
Average number of shares
outstanding (thousands):
Basic 34,969 35,572
Diluted 35,369 35,584
NM Percentage change not meaningful.
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In thousands of dollars)
Second Quarter
2004 2003 Change % Change
Revenue from Services:
U.S. Commercial Staffing $581,467 $522,665 $58,802 11.3%
PTSA 256,470 223,565 32,905 14.7
International 386,527 313,287 73,240 23.4
Consolidated Total $1,224,464 $1,059,517 $164,947 15.6%
Earnings (Loss) from
Operations:
U.S. Commercial Staffing $29,645 $23,215 $6,430 27.7%
PTSA 16,361 12,812 3,549 27.7
International 1,931 (1,019) 2,950 NM
Corporate Expense (39,259) (32,559) (6,700) (20.6)
Consolidated Total $8,678 $2,449 $6,229 254.3%
June Year to Date
2004 2003 Change % Change
Revenue from Services:
U.S. Commercial Staffing $1,130,889 $1,026,974 $103,915 10.1 %
PTSA 495,168 445,224 49,944 11.2
International 757,218 590,716 166,502 28.2
Consolidated Total $2,383,275 $2,062,914 $320,361 15.5 %
Earnings (Loss) from
Operations:
U.S. Commercial Staffing $53,958 $47,367 $6,591 13.9 %
PTSA 30,523 26,200 4,323 16.5
International 979 (4,176) 5,155 NM
Corporate Expense (74,768) (66,552) (8,216) (12.3)
Consolidated Total $10,692 $2,839 $7,853 276.6 %
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)
Second Quarter
2004 2003 Change % Change
U.S. Commercial $581,467 $522,665 $58,802 11.3%
PTSA 256,470 223,565 32,905 14.7
International - constant
currency* 363,215 313,287 49,928 15.9
Revenue from services -
constant currency 1,201,152 1,059,517 141,635 13.4%
Foreign currency impact 23,312 23,312
Revenue from services $1,224,464 $1,059,517 $164,947 15.6%
June Year to Date
2004 2003 Change % Change
U.S. Commercial $1,130,889 $1,026,974 $103,915 10.1%
PTSA 495,168 445,224 49,944 11.2
International - constant
currency* 690,056 590,716 99,340 16.8
Revenue from services -
constant currency 2,316,113 2,062,914 253,199 12.3%
Foreign currency impact 67,162 67,162
Revenue from services $2,383,275 $2,062,914 $320,361 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)
June 27, December 28, June 29,
2004 2003 2003
(UNAUDITED) (UNAUDITED)
Current Assets
Cash and equivalents $65,006 $76,378 $76,961
Short-term investments 452 457 518
Trade accounts receivable, less
allowances of $16,314, $14,983
and $13,698, respectively 728,056 658,090 617,600
Prepaid expenses and other
current assets 37,421 31,784 34,411
Deferred taxes 22,921 24,962 23,407
Total current assets 853,856 791,671 752,897
Property and Equipment, Net 178,683 188,122 194,971
Noncurrent Deferred Taxes 13,307 14,606 21,010
Goodwill, Net 84,610 85,788 83,086
Other Assets 59,564 57,550 53,363
Total Assets $1,190,020 $1,137,737 $1,105,327
Current Liabilities
Short-term borrowings $37,537 $39,190 $24,234
Accounts payable 94,623 92,265 76,764
Accrued payroll and related taxes 242,433 200,503 205,294
Accrued insurance 35,608 36,016 30,219
Income and other taxes 51,846 49,342 46,525
Total current
liabilities 462,047 417,316 383,036
Noncurrent Liabilities
Accrued insurance 58,096 58,763 49,304
Accrued retirement benefits 49,999 48,025 44,491
Total noncurrent
liabilities 108,095 106,788 93,795
Stockholders' Equity
Common stock 40,116 40,116 40,116
Treasury stock (105,149) (113,158) (90,774)
Paid-in capital 20,042 19,096 18,332
Earnings invested in the business 655,841 656,726 660,438
Accumulated foreign currency
adjustments 9,028 10,853 384
Total stockholders'
equity 619,878 613,633 628,496
Total Liabilities and Stockholders'
Equity $1,190,020 $1,137,737 $1,105,327
STATISTICS:
Working Capital $391,809 $374,355 $369,861
Current Ratio 1.8 1.9 2.0
Debt-to-capital % 5.7% 6.0% 3.7%
Global Days Sales Outstanding
Quarter 54 51 53
Year-to-date 56 55 54
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JUNE 27, 2004 AND JUNE 29, 2003
(UNAUDITED)
(In thousands of dollars)
2004 2003
Cash flows from operating activities
Net earnings $6,112 $1,794
Noncash adjustments:
Depreciation and amortization 22,410 24,043
Increase in trade accounts
receivable, net (72,036) (36,350)
Changes in other operating assets
and liabilities 49,506 11,404
Net cash from operating activities 5,992 891
Cash flows from investing activities
Capital expenditures (12,766) (15,146)
Decrease in short-term investments 5 81
Increase in other assets (731) (1,808)
Net cash from investing activities (13,492) (16,873)
Cash flows from financing activities
Decrease in short-term borrowings (899) (2,667)
Dividend payments (6,997) (7,115)
Stock options and other 4,234 14
Purchase of treasury stock (3) (67)
Net cash from financing activities (3,665) (9,835)
Effect of exchange rates on cash
and equivalents (207) 1,842
Net change in cash and equivalents (11,372) (23,975)
Cash and equivalents at beginning of period 76,378 100,936
Cash and equivalents at end of period $65,006 $76,961
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.
Web site: http://www.kellyservices.com
(KELYA KELYB)