Kelly Services Reports Record Revenue and Strong Earnings Growth
for the 1st Quarter of 2005 TROY, Mich., April 26
/PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider
of staffing services, today announced record revenue and strong
earnings growth for first quarter ended April 3, 2005. (Logo:
http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO ) Terence E.
Adderley, Kelly Services chairman and chief executive officer,
announced revenue for the first quarter of 2005 totaled $1.249
billion, a 7.8% increase compared to the $1.159 billion for the
corresponding quarter in 2004. Net earnings for the first quarter
of 2005 totaled $4.1 million, a 286% increase compared to $1.1
million reported for the first quarter of 2004. Diluted earnings
per share in the first quarter of 2005 were $0.11, a 267% increase
as compared to first quarter 2004 earnings of $0.03 per share.
Commenting on the results, Adderley said, "Our first quarter sales
of $1.249 billion achieved a new sales record for the first
quarter, exceeding the previous record we set in 2004 by over $90
million. "We expect second quarter 2005 earnings to be in the range
of $0.24 to $0.29, as compared to $0.14 per share in the second
quarter of 2004. For the full year of 2005, we are maintaining our
forecast that earnings will range between $1.00 and $1.20 per
share. This forecast is based on moderate global economic growth in
2005. "Revenue in our U.S. Commercial staffing segment, which
accounted for 45% of total sales, increased 2.9% year over year
during the first quarter. The gross profit rate in this segment
increased nine-tenths of a percent, due to a combination of
improved pricing, the decision to exit certain customers, lower
workers compensation costs, and higher fee based income. Expenses
increased 4.9% compared to last year. Operating earnings totaled
$29.4 million, an increase of 20.9% compared to last year. "Revenue
in our Professional, Technical, and Staffing Alternatives (PTSA)
segment, which accounted for 22% of total sales, increased 14.1%
year over year during the first quarter. Kelly Scientific
Resources, Kelly Engineering Resources and Kelly Financial
Resources were the leading professional and technical performers in
the first quarter. Kelly HRfirst continued to be the leading
staffing alternatives unit. Kelly Home Care and the Automotive
Services Group experienced small revenue decreases during the
quarter. Kelly Staff Leasing revenue also declined, reflecting the
repositioning of its customer mix. The PTSA gross profit rate
decreased one tenth of a percent, primarily due to business unit
mix, partially offset by higher fee based income. Expenses
increased 14.7% as compared to last year. Operating earnings
totaled $15.5 million and increased 10.2% on a year over year
basis. "Revenue in our International segment, which accounted for
33% of total sales, increased 11.0% year over year during the first
quarter. The International gross profit rate increased by
two-tenths of a percent, primarily due to growth in fee based
income. Operating expenses increased by 9.8% in U.S. dollar terms.
Operating earnings totaled $537 thousand, a significant improvement
compared to a loss of $905 thousand last year. "On a constant
currency basis, International segment revenue increased 6.8%, and
total Company revenue increased 6.5% year over year in the first
quarter." On February 7, 2005, the SEC issued a general letter on
lease accounting. As a result, nearly 250 public companies have
announced lease related restatements, adjustments or reviews of
lease accounting. The Company is in process of completing a review
of its lease accounting practices, and in consultation with its
audit committee, plans to restate its financial statements for
2002, 2003 and 2004 to reflect what are expected to be certain
immaterial adjustments. This conclusion has been discussed with the
Company's independent registered public accountants. The Company is
revising its accounting for branch leases to recognize step rent
increases on a straight line basis over the lease term. For over
twenty- five years, the Company had consistently recognized rent
expense as paid. Although the corrections are not expected to be
material to any period, the Company will provide comparable
historical information by restating its financial statements for
2002, 2003 and 2004. Selling, general and administrative expense is
estimated to increase or decrease by immaterial amounts for each of
the three years. The Company will also record allowances provided
by landlords as deferred rent. Previously, these allowances had
been recorded as reductions of property and equipment. The balance
sheet correction is expected to increase property and equipment and
deferred rent in equal amounts. The net cumulative effect of the
estimated corrections to lease accounting for all years prior to
2002, and any other prior period adjustments resulting from the
restatement, are expected to be recorded as an adjustment to
beginning of year 2002 retained earnings. The combined estimated
after tax adjustment is expected to represent less than three
tenths of a percent of stockholders' equity. The adjustments for
lease accounting, and any other adjustments resulting from the
restatement, are not expected to have a material effect on
historically reported diluted earnings per share. The adjustments
are not expected to have any effect on historical or future total
cash flows, or the timing of payments under the related leases. The
adjustment for lease accounting had no material impact on first
quarter 2005 results, and is not presently expected to have a
material impact on future results. In conjunction with its first
quarter earnings release, Kelly Services, Inc. will host a
conference call at 9:00 a.m. (ET) on April 26, 2005 to review the
results. The call may be accessed in one of the following ways: Via
the Telephone: U.S. 1-888-423-3281 International 1-612-332-0345 The
conference call leader is Terence Adderley The passcode is Kelly
Services Via the Internet: You may access the call via the internet
through 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:KELYANASDAQ:KELYB) is a Fortune 500 company headquartered
in Troy, Mich., offering staffing solutions that include temporary
staffing services, staff leasing, outsourcing, vendor on-site and
full-time placement. Kelly owns and operates nearly 2,600 offices
in 27 countries. Kelly provides employment to over 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 2004 was $4.98 billion. Visit
http://www.kellyservices.com/. KELLY SERVICES, INC. AND
SUBSIDIARIES PRELIMINARY STATEMENTS OF EARNINGS FOR THE 13 WEEKS
ENDED APRIL 3, 2005 AND MARCH 28, 2004 (UNAUDITED) (In thousands of
dollars except per share data) 2005 2004 Change % Change Revenue
from services $1,249,335 $1,158,811 $90,524 7.8% Cost of services
1,044,967 975,455 69,512 7.1 Gross profit 204,368 183,356 21,012
11.5 Selling, general and administrative expenses 197,989 181,342
16,647 9.2 Earnings from operations 6,379 2,014 4,365 216.7
Interest expense, net (35) (239) 204 85.4 Earnings before taxes
6,344 1,775 4,569 257.4 Income taxes 2,230 710 1,520 214.1 Net
earnings $4,114 $1,065 $3,049 286.3% Basic earnings per share $0.12
$0.03 $0.09 300.0% Diluted earnings per share $0.11 $0.03 $0.08
266.7% STATISTICS: Gross profit rate 16.4% 15.8% 0.6% Expenses as a
% of revenue 15.8 15.6 0.2 % Return - Earnings from operations 0.5
0.2 0.3 Earnings before taxes 0.5 0.2 0.3 Net earnings 0.3 0.1 0.2
Effective income tax rate 35.2 40.0 (4.8) Average number of shares
outstanding (thousands): Basic 35,535 34,881 Diluted 35,934 35,302
The financial information above is considered preliminary and is
subject to change related to the Company's review of lease
accounting. KELLY SERVICES, INC. PRELIMINARY RESULTS OF OPERATIONS
BY SEGMENT (UNAUDITED) (In thousands of dollars) First Quarter 2005
2004 Change % Change Revenue from Services: U.S. Commercial
Staffing $565,514 $549,330 $16,184 2.9% PTSA 272,422 238,790 33,632
14.1 International 411,399 370,691 40,708 11.0 Consolidated Total
$1,249,335 $1,158,811 $90,524 7.8% Earnings (Loss) from Operations:
U.S. Commercial Staffing $29,386 $24,307 $5,079 20.9% PTSA 15,469
14,032 1,437 10.2 International 537 (905) 1,442 N/A Corporate
Expense (39,013) (35,420) (3,593) (10.1) Consolidated Total $6,379
$2,014 $4,365 216.7% The financial information above is considered
preliminary and is subject to change related to the Company's
review of lease accounting. KELLY SERVICES, INC. PRELIMINARY
RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO
REPORTED REVENUE FROM SERVICES UNAUDITED (In thousands of dollars)
First Quarter 2005 2004 Change % Change U.S. Commercial Staffing
$565,514 $549,330 $16,184 2.9% PTSA 272,422 238,790 33,632 14.1
International - constant currency* 395,789 370,691 25,098 6.8
Revenue from services - constant currency 1,233,725 1,158,811
74,914 6.5% Foreign currency impact 15,610 15,610 Revenue from
services $1,249,335 $1,158,811 $90,524 7.8% * 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. The financial
information above is considered preliminary and is subject to
change related to the Company's review of lease accounting. KELLY
SERVICES, INC. AND SUBSIDIARIES PRELIMINARY BALANCE SHEETS
UNAUDITED (In thousands of dollars) April 3, January 2, March 28,
2005 2005 2004 Current Assets Cash and equivalents $69,531 $87,554
$55,347 Short-term investments 512 1,288 452 Trade accounts
receivable, less allowances of $16,296, $16,228 and $16,004,
respectively 740,980 727,366 704,771 Prepaid expenses and other
current assets 41,447 40,736 34,777 Deferred taxes 36,339 34,967
24,530 Total current assets 888,809 891,911 819,877 Property and
Equipment, Net 174,805 179,786 181,487 Noncurrent Deferred Taxes
18,489 17,960 14,378 Goodwill, Net 92,031 94,652 84,398 Other
Assets 82,706 63,059 58,847 Total Assets $1,256,840 $1,247,368
$1,158,987 Current Liabilities Short-term borrowings $47,061
$34,289 $37,904 Accounts payable 109,635 102,264 96,561 Accrued
payroll and related taxes 245,442 246,061 218,792 Accrued insurance
32,734 33,165 33,674 Income and other taxes 62,419 67,839 52,754
Total current liabilities 497,291 483,618 439,685 Noncurrent
Liabilities Accrued insurance 57,828 58,548 54,941 Accrued
retirement benefits 52,156 50,892 48,788 Total noncurrent
liabilities 109,984 109,440 103,729 Stockholders' Equity Common
stock 40,116 40,116 40,116 Treasury stock (96,328) (97,693)
(108,023) Paid-in capital 22,787 22,530 19,651 Earnings invested in
the business 664,738 664,813 654,300 Accumulated other
comprehensive income 18,252 24,544 9,529 Total stockholders' equity
649,565 654,310 615,573 Total Liabilities and Stockholders' Equity
$1,256,840 $1,247,368 $1,158,987 STATISTICS: Working Capital
$391,518 $408,293 $380,192 Current Ratio 1.8 1.8 1.9
Debt-to-capital % 6.8% 5.0% 5.8% Global Days Sales Outstanding
Year-to-date 54 54 55 The financial information above is considered
preliminary and is subject to change related to the Company's
review of lease accounting. KELLY SERVICES, INC. AND SUBSIDIARIES
PRELIMINARY STATEMENTS OF CASH FLOWS FOR THE 13 WEEKS ENDED APRIL
3, 2005 AND MARCH 28, 2004 UNAUDITED (In thousands of dollars) 2005
2004 Cash flows from operating activities Net earnings $4,114
$1,065 Noncash adjustments: Depreciation and amortization 10,382
11,326 Increase in trade accounts receivable, net (21,698) (47,447)
Changes in other operating assets and liabilities 7,222 18,743 Net
cash from operating activities 20 (16,313) Cash flows from
investing activities Capital expenditures (5,945) (4,375) Decrease
in short-term investments 834 5 Increase in other assets (2,867)
(173) Investment in unconsolidated affiliate (18,450) - Net cash
from investing activities (26,428) (4,543) Cash flows from
financing activities Increase (decrease) in short-term borrowings
14,674 (708) Dividend payments (3,554) (3,491) Stock options and
other (777) 4,169 Purchase of treasury stock - (3) Net cash from
financing activities 10,343 (33) Effect of exchange rates on cash
and equivalents (1,958) (142) Net change in cash and equivalents
(18,023) (21,031) Cash and equivalents at beginning of period
87,554 76,378 Cash and equivalents at end of period $69,531 $55,347
The financial information above is considered preliminary and is
subject to change related to the Company's review of lease
accounting. http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO
DATASOURCE: Kelly Services, Inc. CONTACT: ANALYST CONTACT: James
Polehna, +1-248-244-4586, , or MEDIA CONTACT: Renee Walker,
+1-248-244-5362, , both of Kelly Services, Inc. Web site:
http://www.kellyservices.com/
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