KELLY SERVICES INC - 10-Q Quarterly Report

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 28, 2004

¨	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 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)

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 23, 2004, 31,566,405 shares of Class A and 3,472,598 shares of Class B common stock of the Registrant were outstanding.

KELLY SERVICES, INC. AND SUBSIDIARIES


		Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

	Statements of Earnings	3

	Balance Sheets	4

	Statements of Stockholders’ Equity	5

	Statements of Cash Flows	6

	Notes to Financial Statements	7

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		10

Item 4. Controls and Procedures		14

PART II. OTHER INFORMATION AND SIGNATURE

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		15

Item 6. Exhibits and Reports on Form 8-K		15

Signature		16

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

(UNAUDITED)

(In thousands of dollars except per share data)


	13 Weeks Ended
	March 28, 2004			March 30, 2003
Revenue from services	$	1,158,811		$	1,003,397
Cost of services		975,455			837,845

Gross profit		183,356			165,552
Selling, general and administrative expenses		181,342			165,162

Earnings from operations		2,014			390
Interest (expense) income, net		(239	)		122

Earnings before income taxes		1,775			512
Income taxes		710			202

Net earnings	$	1,065		$	310

Earnings per share:
Basic	$	.03		$	.01
Diluted		.03			.01
Average shares outstanding (thousands):
Basic		34,881			35,548
Diluted		35,302			35,626
Dividends per share	$	.10		$	.10

See accompanying Notes to Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

BALANCE SHEETS

(In thousands of dollars)


	March 28, 2004			December 28, 2003
	(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	55,347		$	76,378
Short-term investments		452			457
Trade accounts receivable, less allowances of $16,004 and $14,983, respectively		704,771			658,090
Prepaid expenses and other current assets		34,777			31,784
Deferred taxes		24,530			24,962

Total current assets		819,877			791,671
PROPERTY AND EQUIPMENT:
Land and buildings		57,650			57,543
Equipment, furniture and leasehold improvements		306,852			302,938
Accumulated depreciation		(183,015	)		(172,359	)

Total property and equipment		181,487			188,122
NONCURRENT DEFERRED TAXES		14,378			14,606
GOODWILL, NET		84,398			85,788
OTHER ASSETS		58,847			57,550

TOTAL ASSETS	$	1,158,987		$	1,137,737

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term borrowings	$	37,904		$	39,190
Accounts payable		96,561			92,265
Accrued payroll and related taxes		218,792			200,503
Accrued insurance		33,674			36,016
Income and other taxes		52,754			49,342

Total current liabilities		439,685			417,316

NONCURRENT LIABILITIES:
Accrued insurance		54,941			58,763
Accrued retirement benefits		48,788			48,025

Total noncurrent liabilities		103,729			106,788
STOCKHOLDERS’ EQUITY:
Capital stock, $1.00 par value
Class A common stock, shares issued 36,619,693 at 2004 and 36,619,148 at 2003		36,620			36,619
Class B common stock, shares issued 3,496,173 at 2004 and 3,496,718 at 2003		3,496			3,497
Treasury stock, at cost
Class A common stock, 5,077,112 shares at 2004 and 5,319,995 at 2003		(107,397	)		(112,535	)
Class B common stock, 23,575 shares at 2004 and 23,475 at 2003		(626	)		(623	)
Paid-in capital		19,651			19,096
Earnings invested in the business		654,300			656,726
Accumulated foreign currency adjustments		9,529			10,853

Total stockholders’ equity		615,573			613,633

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,158,987		$	1,137,737

See accompanying Notes to Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

(In thousands of dollars)


	13 Weeks Ended
	March 28, 2004			March 30, 2003
Capital Stock
Class A common stock
Balance at beginning of period	$	36,619		$	36,619
Conversions from Class B		1			—

Balance at end of period		36,620			36,619
Class B common stock
Balance at beginning of period		3,497			3,497
Conversions to Class A		(1	)		—

Balance at end of period		3,496			3,497
Treasury Stock
Class A common stock
Balance at beginning of period		(112,535	)		(91,648	)
Exercise of stock options, restricted stock awards and other		5,138			1,314

Balance at end of period		(107,397	)		(90,334	)
Class B common stock
Balance at beginning of period		(623	)		(511	)
Purchase of treasury stock		(3	)		(38	)

Balance at end of period		(626	)		(549	)
Paid-in Capital
Balance at beginning of period		19,096			17,902
Exercise of stock options, restricted stock awards and other		555			383

Balance at end of period		19,651			18,285
Earnings Invested in the Business
Balance at beginning of period		656,726			665,759
Net earnings		1,065			310
Dividends		(3,491	)		(3,555	)

Balance at end of period		654,300			662,514
Accumulated Foreign Currency Adjustments
Balance at beginning of period		10,853			(12,554	)
Equity adjustment for foreign currency		(1,324	)		3,920

Balance at end of period		9,529			(8,634	)

Stockholders’ Equity at end of period	$	615,573		$	621,398

Comprehensive Income
Net earnings	$	1,065		$	310
Other comprehensive income - Foreign currency adjustments		(1,324	)		3,920

Comprehensive income	$	(259	)	$	4,230

See accompanying Notes to Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands of dollars)


	13 Weeks Ended
	March 28, 2004			March 30, 2003
Cash flows from operating activities:
Net earnings	$	1,065		$	310
Noncash adjustments:
Depreciation and amortization		11,326			11,908
Increase in trade accounts receivable, net		(47,447	)		(22,552	)
Changes in operating assets and liabilities		18,743			(4,391	)

Net cash from operating activities		(16,313	)		(14,725	)

Cash flows from investing activities:
Capital expenditures		(4,375	)		(8,445	)
Proceeds from sales and maturities of short-term investments		80			259
Purchases of short-term investments		(75	)		(153	)
Increase in other assets		(173	)		(951	)

Net cash from investing activities		(4,543	)		(9,290	)

Cash flows from financing activities:
Decrease in short-term borrowings		(708	)		(1,034	)
Dividend payments		(3,491	)		(3,555	)
Stock options and other		4,169			6
Purchase of treasury stock		(3	)		(38	)

Net cash from financing activities		(33	)		(4,621	)

Effect of exchange rates on cash and equivalents		(142	)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents