UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2003
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1088
KELLY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
| DELAWARE |
38-1510762 | |
| (State or other jurisdiction |
(I.R.S. Employer | |
| of incorporation or organization) |
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)
No Change
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
At April 29, 2003, 32,116,968 shares of Class A and 3,476,043 shares of Class B common stock of the Registrant were outstanding.
1
KELLY SERVICES, INC. AND SUBSIDIARIES
| Page Number | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 6 | ||
| 7 | ||
| Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition |
10 | |
| 14 | ||
| 15 | ||
| 16 | ||
| 17 |
2
KELLY SERVICES, INC. AND SUBSIDIARIES
(UNAUDITED)
(In thousands of dollars except per share data)
| 13 Weeks Ended | ||||||
| March 30, 2003 |
March 31, 2002 | |||||
| Sales of services |
$ |
1,003,397 |
$ |
936,613 | ||
| Cost of services |
|
837,845 |
|
777,653 | ||
| Gross profit |
|
165,552 |
|
158,960 | ||
| Selling, general and administrative expenses |
|
165,162 |
|
157,774 | ||
| Earnings from operations |
|
390 |
|
1,186 | ||
| Interest income, net |
|
122 |
|
141 | ||
| Earnings before income taxes |
|
512 |
|
1,327 | ||
| Income taxes |
|
202 |
|
531 | ||
| Net earnings |
$ |
310 |
$ |
796 | ||
| Earnings per share: |
||||||
| Basic |
$ |
.01 |
$ |
.02 | ||
| Diluted |
|
.01 |
|
.02 | ||
| Average shares outstanding (thousands): |
||||||
| Basic |
|
35,548 |
|
35,890 | ||
| Diluted |
|
35,626 |
|
36,001 | ||
| Dividends per share |
$ |
.10 |
$ |
.10 | ||
See accompanying Notes to Financial Statements.
3
KELLY SERVICES, INC. AND SUBSIDIARIES
(In thousands of dollars)
| March 30, 2003 |
December 29, 2002 |
|||||||
| (UNAUDITED) |
||||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and equivalents |
$ |
72,637 |
|
$ |
100,936 |
| ||
| Short-term investments |
|
493 |
|
|
599 |
| ||
| Accounts receivable, less allowances of $13,155 and $12,533, respectively |
|
593,858 |
|
|
567,517 |
| ||
| Prepaid expenses and other current assets |
|
37,298 |
|
|
26,387 |
| ||
| Deferred taxes |
|
22,586 |
|
|
23,916 |
| ||
| Total current assets |
|
726,872 |
|
|
719,355 |
| ||
| PROPERTY AND EQUIPMENT: |
||||||||
| Land and buildings |
|
56,990 |
|
|
57,111 |
| ||
| Equipment, furniture and leasehold improvements |
|
304,269 |
|
|
295,536 |
| ||
| Accumulated depreciation |
|
(162,277 |
) |
|
(150,315 |
) | ||
| Total property and equipment |
|
198,982 |
|
|
202,332 |
| ||
| NONCURRENT DEFERRED TAXES |
|
21,055 |
|
|
21,065 |
| ||
| GOODWILL, NET |
|
81,027 |
|
|
80,260 |
| ||
| OTHER ASSETS |
|
48,798 |
|
|
49,121 |
| ||
| TOTAL ASSETS |
$ |
1,076,734 |
|
$ |
1,072,133 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Short-term borrowings |
$ |
24,441 |
|
$ |
24,770 |
| ||
| Accounts payable |
|
79,194 |
|
|
85,310 |
| ||
| Payroll and related taxes |
|
192,021 |
|
|
181,585 |
| ||
| Accrued insurance |
|
27,877 |
|
|
27,912 |
| ||
| Income and other taxes |
|
45,647 |
|
|
47,617 |
| ||
| Total current liabilities |
|
369,180 |
|
|
367,194 |
| ||
| NONCURRENT LIABILITIES: |
||||||||
| Accrued insurance |
|
45,467 |
|
|
45,540 |
| ||
| Accrued retirement benefits |
|
40,689 |
|
|
40,335 |
| ||
| Total noncurrent liabilities |
|
86,156 |
|
|
85,875 |
| ||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Capital stock, $1.00 par value |
||||||||
| Class A common stock, shares issued 36,619,148 at 2003 and 2002 |
|
36,619 |
|
|
36,619 |
| ||
| Class B common stock, shares issued 3,496,718 at 2003 and 2002 |
|
3,497 |
|
|
3,497 |
| ||
| Treasury stock, at cost |
||||||||
| Class A common stock, 4,502,503 shares at 2003 and 4,567,975 at 2002 |
|
(90,334 |
) |
|
(91,648 |
) | ||
| Class B common stock, 20,575 shares at 2003 and 18,875 at 2002 |
|
(549 |
) |
|
(511 |
) | ||
| Paid-in capital |
|
18,285 |
|
|
17,902 |
| ||
| Earnings invested in the business |
|
662,514 |
|
|
665,759 |
| ||
| Accumulated foreign currency adjustments |
|
(8,634 |
) |
|
(12,554 |
) | ||
| Total stockholders’ equity |
|
621,398 |
|
|
619,064 |
| ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
1,076,734 |
|
$ |
1,072,133 |
| ||
See accompanying Notes to Financial Statements.
4
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands of dollars)
| 13 Weeks Ended |
||||||||
| March 30, 2003 |
March 31, 2002 |
|||||||
| Capital Stock |
||||||||
| Class A common stock |
||||||||
| Balance at beginning of period |
$ |
36,619 |
|
$ |
36,609 |
| ||
| Conversions from Class B |
|
— |
|
|
— |
| ||
| Balance at end of period |
|
36,619 |
|
|
36,609 |
| ||
| Class B common stock |
||||||||
| Balance at beginning of period |
|
3,497 |
|
|
3,507 |
| ||
| Conversions to Class A |
|
— |
|
|
— |
| ||
| Balance at end of period |
|
3,497 |
|
|
3,507 |
| ||
| Treasury Stock |
||||||||
| Class A common stock |
||||||||
| Balance at beginning of period |
|
(91,648 |
) |
|
(81,721 |
) | ||
| Exercise of stock options, restricted stock awards and other |
|
1,314 |
|
|
1,177 |
| ||
| Treasury stock issued for acquisition |
|
— |
|
|
408 |
| ||
| Balance at end of period |
|
(90,334 |
) |
|
(80,136 |
) | ||
| Class B common stock |
||||||||
| Balance at beginning of period |
|
(511 |
) |
|
(435 |
) | ||
| Purchase of treasury stock |
|
(38 |
) |
|
— |
| ||
| Balance at end of period |
|
(549 |
) |
|
(435 |
) | ||
| Paid-in Capital |
||||||||
| Balance at beginning of period |
|
17,902 |
|
|
17,035 |
| ||
| Exercise of stock options, restricted stock awards and other |
|
383 |
|
|
332 |
| ||
| Treasury stock issued for acquisition |
|
— |
|
|
92 |
| ||
| Balance at end of period |
|
18,285 |
|
|
17,459 |
| ||
| Earnings Invested in the Business |
||||||||
| Balance at beginning of period |
|
665,759 |
|
|
661,483 |
| ||
| Net earnings |
|
310 |
|
|
796 |
| ||
| Dividends |
|
(3,555 |
) |
|
||||