<PAGE>
Index to Exhibits on page 26
-1-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
__x__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) For the fiscal year ended January 2, 1994
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________________ to _____________________
Commission file number 0-1088
_________________KELLY SERVICES, INC._________________
(Exact Name of Registrant as specified in its Charter)
________Delaware________ __________38-1510762________
(State of Incorporation) (IRS Employer Identification
Number)
___999 West Big Beaver Road, Troy, Michigan___ ____48084___
(Address of Principal Executive Office) (Zip Code)
___________________(810) 362-4444___________________
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Class A Common NASDAQ/NMS
Class B Common NASDAQ/NMS
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. __x__
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 _____
The aggregate market value of the Class B common stock, par value $1.00, the
only class of the registrant's securities with voting rights, held by
non-affiliates of the registrant on March 1, 1994, based upon the last price on
that date of $33.00 was $12,680,019, as reported by the Wall
Street Journal.
Registrant had 34,346,459 shares of Class A and 3,603,124 of Class B
common stock, par value $1.00, outstanding as of March 1, 1994.
Documents Incorporated by Reference
The proxy statement of the registrant with respect to the 1994 Annual Meeting
of Stockholders is incorporated by reference in Part III.
Dated: March 11, 1994
<PAGE>
<PAGE>
-2-
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) General Development of Business. Registrant, a successor to the
business established by William R. Kelly in 1946, was incorporated under the
laws of Delaware on August 27, 1952. Throughout its existence, registrant has
been engaged in the temporary help service business. During the last fiscal
year, registrant continued to provide temporary help services and other
staffing and human resources services to a diversified group of customers.
(b) Financial Information about Industry Segments. Registrant operates
in a single industry segment of providing temporary help services. The
financial information concerning registrant is included in Item 8 in Part II
of this filing.
(c) Narrative Description of Business.
(i) Principal Services Rendered. Registrant, and its
subsidiaries, which are service organizations, provide temporary office
clerical, marketing, technical, light industrial, home care services to those
who need help with their daily living needs and personal care, managed
services, testing and training and other business services to a diversified
group of customers through offices located in major cities of the United
States, Australia, Canada, Mexico, England, France, Ireland, The Netherlands,
Denmark, New Zealand, Norway, Scotland, and Wales. Although registrant
operates in a single industry segment, these services are generally furnished
under the name of Kelly Temporary Services, with the following specific
services provided: office clerical, marketing, technical, semi-skilled light
industrial, managed services, skills testing and computer-based training.
Staff leasing services are provided in California through Your Staff, a
subsidiary of the registrant. Home care services to those who need help with
their daily living needs and personal care are furnished under the name of
Kelly Assisted Living Services, Inc., which is a wholly owned subsidiary of
registrant. Registrant performs these services through its temporary employees
by assigning them to work on the premises of registrant's customers.
The temporary services furnished by registrant afford economies and
flexibility in meeting uneven or peak work loads caused by such predictable
factors as vacations, inventories, month-end activities, special projects or
new promotions and such non-predictable factors as illnesses or emergencies.
When work peaks occur which cannot be handled by the customer's normal staff,
the customer can temporarily supplement regular personnel by the use of
registrant's services. The cost and inconvenience to the customer of hiring
additional employees, including advertising, interviewing, screening, testing
and training are eliminated. Also, recordkeeping is simplified because the
customer pays only one flat rate, based on hours of service furnished by
registrant.
Registrant serves a wide cross-section of customers from industry,
commerce, the professions, government, and individuals. During recent years
over 185,000 customers, including the largest industrial corporations in the
world, have used registrant's services. There have been no significant
changes in the services rendered or in the markets or methods of distribution
since the beginning of registrant's fiscal year.
<PAGE>
<PAGE>
-3-
Registrant operates through approximately 900 offices located in all 50
states, the District of Columbia, Puerto Rico, Australia, Mexico, Canada,
England, France, Ireland, The Netherlands, Denmark, New Zealand, Norway,
Scotland, and Wales. These offices may be classified as offices operated
directly by registrant (or one of its wholly owned subsidiaries) and offices
operated by licensees. Each office provides the services of one or more of
the divisions or subsidiaries. Approximately ninety-nine percent of the
offices are operated directly by registrant (or one of its wholly owned
subsidiaries). The remaining offices are operated by 10 licensees.
(ii) New Services. There are no new industry segments that the
registrant is planning to enter or new service areas that will require a
material investment of assets.
(iii) Raw Materials. Registrant is involved in a service business and
raw materials are nonexistent in the business.
(iv) Service Marks. Registrant is the owner of several service marks,
which are registered with the United States Patent and Trade Mark Office and
in a number of foreign countries. The most significant mark is "Kelly Girl",
which has indeterminable duration.
(v) Seasonal Business Implications. Registrant's business is not
seasonal.
(vi) Working Capital. Registrant believes there are no unusual or
special working capital requirements in the temporary help industry.
(vii) Customers. The business of registrant and its subsidiaries is
not dependent upon either a single customer or a limited number of customers.
(viii) Backlog. Backlog of orders is not material to the business of
registrant.
(ix) Government Contracts. Although registrant conducts business under
various government contracts, that portion of registrant's business is not
significant.
(x) Competition. Registrant is one of the largest suppliers of
temporary help services in the United States. Several companies which operate
nationally offer services competitive to those provided by registrant, and a
large number of organizations operating regionally or locally compete in
varying degrees in different localities where registrant operates branch
offices. The most significant competitive factors are price and service to
customers in the form of timely, efficient and reliable temporary help.
(xi) Research Activities. Registrant's expenditure for research and
the number of people involved are not material.
(xii) Environmental Matters. Registrant is involved in a service
business and is not affected by federal, state and local provisions regulating
the discharge of materials into the environment.
<PAGE>
<PAGE>
-4-
(xiii) Employees. Registrant and subsidiaries employ on a full time
basis approximately 800 persons at its headquarters in Troy, Michigan, and
approximately 3,500 persons in branch offices operated directly by registrant.
Registrant employed in the last fiscal year 630,000 men and women for temporary
periods. As the employer, registrant is responsible for and pays Social
Security taxes, workers' compensation, federal and state unemployment
compensation taxes, liability insurance and other similar costs, and is
responsible for payroll deductions of Social Security and income taxes.
Although the work may be done in the office of the registrant's customer,
registrant retains the right of control over its employees, including their
assignment and reassignment.
(d) Foreign Operations. Registrant operates in major cities in
Australia, Canada, Mexico, England, France, Ireland, The Netherlands, Denmark,
New Zealand, Norway, Scotland, and Wales; sales for these operations totalled
$235,000,000 in 1993, $225,000,000 in 1992 and $189,000,000 in 1991; operating
losses totalled $2,500,000 in 1993, $5,600,000 in 1992 and $4,100,000 in 1991.
Identifiable assets of these foreign operations were $70,900,000, $69,300,000
and $65,700,000 at the end of 1993, 1992 and 1991, respectively.
ITEM 2. PROPERTIES.
Registrant owns the premises in Troy, Michigan, from which its
headquarters, subsidiaries and divisional offices are presently operated.
Registrant purchased the original headquarters building in Troy, Michigan, in
1977 and has expanded operations into an adjacent building that was purchased
in 1991. The combined floor space for the headquarters complex approximates
175,000 square feet. The buildings are in good condition, are considered to be
adequate for the uses to which they are being put and are in regular use. In
addition, registrant owns vacant land in Troy and northern Oakland County,
Michigan, for future expansion. Registrant's direct operated branches are
conducted from premises which are leased. A majority of the leases are for
fixed terms, from one to five years. Registrant owns virtually all office
furniture and equipment used in its headquarters building and branch offices.
ITEM 3. LEGAL PROCEEDINGS.
The Internal Revenue Service (IRS) has proposed the imposition of an
accumulated earnings tax totalling $49 million for 1988, 1989 and 1990 in
connection with an audit of the Company's consolidated federal tax liability.
The Company believes that there is no factual or legal basis for the
imposition of any accumulated earnings tax and that the Company is fully
justified in making provision to meet the needs of Kelly's expanding business
operations. Moreover, tax counsel has advised that a substantial portion of
the IRS proposal results from computational and clerical errors in the
calculation of the tax. The Company is defending its position through the IRS
appeal process and into the courts if necessary. In the opinion of the
Company, the ultimate resolution of this issue will not materially affect its
financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the
fourth quarter of 1993.
<PAGE>
<PAGE>
-5-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Kelly Services' stock is traded over-the-counter in the NASDAQ National
Market System (NMS). The high and low selling prices for the Class A common
stock and Class B common stock as quoted by the National Association of
Securities Dealers, Inc. and the dividends paid on the common stock for each
quarterly period in the last two fiscal years are reported below:
Per share amounts (in dollars)*
----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -------
1993
- ----
Stock Prices
Class A common
High . . . . . . . . $36 5/8 $32 5/8 $33 1/2 $29 1/2 $36 5/8
Low . . . . . . . . 30 5/8 24 1/4 23 22 22
Class B common
High . . . . . . . . 34 1/4 32 7/8 33 31 34 1/4
Low . . . . . . . . 31 5/8 27 27 27 27
Dividends. . . . . . . . .152 .160 .160 .160 .632
1992
- ----
Stock Prices
Class A common
High . . . . . . . . 30 3/8 29 3/4 27 3/8 35 35
Low . . . . . . . . 22 1/4 22 3/4 22 1/4 26 1/4 22 1/4
Class B common
High . . . . . . . . 29 5/8 28 27 5/8 34 3/8 34 3/8
Low . . . . . . . . 24 26 24 3/8 25 5/8 24
Dividends. . . . . . . . .144 .144 .144 .152 .584
* Adjusted for the 5-for-4 stock split of May, 1993.
The approximate number of holders of record of the Class A and Class B common
stock, par value $1.00, of registrant were 1,323 and 320, respectively, as of
March 1, 1994.
<PAGE>
<PAGE>
-6-
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes selected financial information of Kelly
Services, Inc. and its subsidiaries for each of the six fiscal years ended
January 2, 1994. This table should be read in conjunction with other
financial information of the registrant including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and financial
statements included elsewhere herein.
<CAPTION>
(In millions except (1)
per share amounts) 1993 1992 1991 1990 1989 1988
- ------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
(2)
Sales of services . . . . $1,954.5 $1,712.7 $1,424.3 $1,456.3 $1,364.9 $1,262.1
Earnings before taxes . . 70.9 61.0 60.2 113.0 112.9 99.3
Net earnings. . . . . . . 44.6 39.2 38.6 71.2 70.8 60.3
(3)
Per share data :
Earnings . . . . . . . $ 1.18 $ 1.04 $ 1.03 $ 1.89 $ 1.89 $ 1.61
Dividends . . . . . . .
Class A common. . . . .63 .58 .57 .53 .46 .38
Class B common. . . . .63 .58 .57 .53 .46 .38
Working capital . . . . . $ 291.2 $ 279.8 $ 287.0 $ 287.2 $ 243.4 $ 195.7
Total assets. . . . . . . 542.1 496.1 479.4 443.8 394.3 326.4
<FN>
(1) Fiscal year included 53 weeks.
(2) Sales of services has been adjusted to exclude interest income.
(3) Adjusted for the 5-for-4 stock split of May, 1993.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
1993 versus 1992
Sales of services reached a record level of nearly $2 billion in 1993, an
increase of 14% over sales of $1.7 billion in 1992 (a 53-week year).
Excluding the 53rd week from the previous year, the 1993 sales were 16% over
1992. This improvement was attributable principally to increases in domestic
sales volume. International sales also reflected a strong increase; however,
the strengthening of the U.S. dollar moderated those results.
Cost of services, representing payroll and related taxes and benefits for
temporary employees, increased 15% over 1992. Strong sales volume and
increases in pay rates and payroll taxes accounted for this change.
Competitive pressures during 1993 were reflected in margins as gross profit
rates declined from 19.9% in 1992 to 19.5% in 1993. The trend in margins
during the last half of 1993 was positive, however.
Selling, general and administrative expenses rose 10% during 1993. As a
percent of sales, administrative expenses declined from 16.9% to 16.2% in
1993, the lowest rate in the Company's history. Branch automation has proven
to be an effective tool in achieving this productivity.
<PAGE>
<PAGE>
-7-
Earnings from operations this year totalled $63.9 million, an increase of
25% over 1992. The 1993 results, after restating the 1992 results to exclude
the 53rd week, were 31% over last year.
Interest income for 1993 was $7 million, down 29% from the 1992 level of
$9.8 million. The combination of a smaller investment portfolio and a
reduction in the interest rates accounted for the decline in interest income
during the year.
Earnings before taxes were $70.9 million, an increase of 16%. Pretax
margins were 3.6% for both 1993 and 1992. Income taxes increased 21% over
1992, with an effective tax rate of 37.1%, compared to a 35.7% rate in 1992.
The current year tax rate rose as a result of the federal statutory rate
increase and a reduction in tax exempt interest income.
Net earnings were $44.6 million for 1993, 14% above the 1992 results of
$39.2 million. The rate of return on sales was 2.3% in both years. Earnings
per share were $1.18 in 1993 and $1.04 in 1992. The 53rd week added $.04 to
earnings per share in 1992. The per share amounts have been adjusted for the
five-for-four stock split in 1993.
1992 versus 1991
Sales of services increased 20% in 1992, reflecting improved business
conditions. Cost of services increased 23% in 1992, reflecting greater sales
volume and increases in pay rates and benefits. Competitive market pressures
precluded these additional costs from being fully recovered by price
increases. As a result, gross profit margins were 1.8 percentage points below
the previous year. Selling, general and administrative expenses rose 10% in
1992. Expenses as a percentage of sales were 16.9% in 1992, compared to 18.4%
in 1991. Interest income for 1992 totaled $9.8 million, down 28% from 1991
results. Lower interest rates, along with a decline in funds available for
investment, accounted for the reduction in interest income.
Earnings before taxes were $61 million, an increase of 1.3% over 1991.
Pretax margins were 3.6% in 1992 and 4.2% in 1991. The effective income tax
rate on pretax earnings was 35.7%, compared to 35.9% in 1991.
Net earnings were $39.2 million in 1992, an increase of 1.6% over 1991
earnings of $38.6 million. Earnings per common share were $1.04 in 1992
versus $1.03 per share in 1991. The per share amounts have been adjusted for
the five-for-four stock split in 1993.
Liquidity and Capital Resources
Cash flow from operations for 1993 was $44.9 million. Funds were used
for additional working capital needs, cash dividends, the purchase of capital
equipment and investments in acquisitions and other business expansion. Cash
provided from operations totaled $12.2 million in 1992 and $58.5 million in
1991. The Company has used most of these funds in its operations and payments
of dividends.
The Company's working capital of $291 million increased 4% during the
year, after a 2.5% decline in 1992 and no change in 1991. The current ratios
were 2.9, 3.2 and 3.3 in 1993, 1992 and 1991, respectively.
<PAGE>
<PAGE>
-8-
Stockholders' equity grew 5% in 1993, which was higher than the 3%
increase reported in 1992 and equal to the 5% increase of 1991. The return on
average stockholders' equity was 11.8% this year, an improvement over the
previous two years' rates of 10.9% in 1992 and 11.1% in 1991. A five-for-four
stock split was approved by the Board of Directors in May, 1993. Equity per
share at year-end was $10.23 at 1993, $9.74 at 1992 and $9.43 at 1991.
Dividends per share over the past three years were $.63 in 1993, $.58 in 1992
and $.57 in 1991. The Company believes that its strong financial position,
including the absence of any long-term debt, will allow it to meet new capital
requirements as well as to aggressively pursue growth opportunities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item are
set in the accompanying index on page 13 of this filing and are presented in
pages 14-25.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
PART III
Information required by Part III with respect to Directors and Executive
Officers of the registrant, except as set forth under the title "Executive
Officers of the Registrant" which is included on page 9, (Item 10), Executive
Compensation (Item 11), Security Ownership of Certain Beneficial Owners and
Management (Item 12), and Certain Relationships and Related Transactions (Item
13) is to be included in a definitive proxy statement filed by the registrant
not later than 120 days after the close of its fiscal year and such proxy
statement, when filed, is incorporated herein by reference.
<PAGE>
<PAGE>
-9-
<TABLE>
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
<CAPTION>
Served as an Business Experience
Name/Office Age Officer Since (2) During Last 5 Years
- ------------------------ ---------------- ----------------- --------------------------------
<S> <C> <C> <C>
William R. Kelly 88 1952 Served as officer of registrant.
Chairman of the Board
Terence E. Adderley (1) 60 1961 Served as officer of registrant.
President
Robert G. Barranco 53 Served as officer of operating
Senior Vice President division since March, 1991.
and General Manager, Prior thereto, served as
Kelly Temporary officer of registrant.
Services Division
Donald A. Bobo 52 Served as officer of operating
Senior Vice President division since April, 1992.
and General Manager, Prior thereto, served as Vice
Kelly Temporary President of Staff Services at
Services Division John Labatt Foods.
Carolyn R. Fryar 51 Served as officer of operating
Senior Vice President division.
and General Manager,
Kelly Temporary
Services Division
Eugene L. Hartwig 60 1990 Served as officer of registrant
Senior Vice President, since March, 1990. Prior
General Counsel and thereto, served as of counsel
Secretary with Butzel Long.
Joanne E. Start 49 1989 Served as officer of registrant.
Senior Vice President
Robert F. Stoner 60 1969 Served as officer of registrant.
Senior Vice President
Robert E. Thompson 51 1982 Served as officer of registrant.
Senior Vice President
<PAGE>
<PAGE>
-10-
</TABLE>
<TABLE>
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
(continued)
<CAPTION>
Served as an Business Experience
Name/Officer Age Officer Since (2) During Last 5 Years
- ------------------------ --------------- ----------------- --------------------------------
<S> <C> <C> <C>
Noel S. Wheeler 53 Served as officer of operating
Senior Vice President division since January, 1991.
and Managing Director, Prior thereto, served as an
Kelly Temporary officer of registrant.
Services Division
(International)
<FN>
(1) Mr. Adderley is Mr. William R. Kelly's son.
(2) Each officer serves continuously until removed by the Board of Directors.
</TABLE>
<PAGE>
<PAGE>
-11-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements -
Report of Independent Accountants
Balance Sheets at January 2, 1994, January 3, 1993 and
December 29, 1991
Statements of Earnings for the three fiscal years ended
January 2, 1994
Statements of Cash Flows for the three fiscal years ended
January 2, 1994
Statements of Stockholders' Equity for the three fiscal years ended
January 2, 1994
Notes to Financial Statements
2. Financial Statement Schedules -
As of January 2, 1994:
I - Marketable Securities -- Other Investments
For the three fiscal years ended January 2, 1994:
VIII - Valuation Reserves
3. The Exhibits are listed in the Index to Exhibits Required by Item 601
of Regulation S-K at Item (c) below and included at page 26 which is
incorporated herein by reference.
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
No additional financial information has been provided for the registrant as an
individual company since the total amount of net assets of subsidiaries which
are restricted as to transfer to the registrant through intercompany loans,
advances or cash dividends does not exceed 25 percent of total consolidated net
assets at January 2, 1994.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
(c) The Index to Exhibits and required Exhibits are included following
the Financial Statement Schedules beginning at page 26 of this
filing.
(d) The Index to Financial Statements and Supplemental Schedules are
included following the signatures beginning at page 13 of this
filing.
<PAGE>
<PAGE>
-12-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 11, 1994 KELLY SERVICES, INC.
Registrant
By /s/ R. F. Stoner
---------------------------------------
R. F. Stoner
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 11, 1994 * W. R. Kelly
--------------------------------------
W. R. Kelly
Chairman of the Board
Date: March 11, 1994 * T. E. Adderley
--------------------------------------
T. E. Adderley
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Date: March 11, 1994 * C. V. Fricke
--------------------------------------
C. V. Fricke
Director
Date: March 11, 1994 * H. E. Guenther
--------------------------------------
H. E. Guenther
Director
Date: March 11, 1994 * V. G. Istock
--------------------------------------
V. G. Istock
Director
Date: March 11, 1994 /s/ R. F. Stoner
--------------------------------------
R. F. Stoner
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 11, 1994 *By /s/ R. F. Stoner
--------------------------------------
R. F. Stoner
Attorney-in-Fact
<PAGE>
<PAGE>
-13-
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
Kelly Services, Inc. and Subsidiaries
Page Reference
in Report on
Form 10-K
--------------
Report of Independent Accountants 14
Balance Sheets at January 2, 1994, January 3, 1993
and December 29, 1991 15
Statements of Earnings for the three fiscal years ended
January 2, 1994 16
Statements of Cash Flows for the three fiscal years ended
January 2, 1994 17
Statements of Stockholders' Equity for the three fiscal
years ended January 2, 1994 18
Notes to Financial Statements 19 - 23
Financial Statement Schedules -
Schedule I - Marketable Securities--
Other Investments 24
Schedule VIII - Valuation Reserves 25
<PAGE>
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-14-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors,
Kelly Services, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Kelly
Services, Inc. and its subsidiaries at January 2, 1994, January 3, 1993 and
December 29, 1991, and the results of their operations and their cash flows for
the years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse
- --------------------
Price Waterhouse
Detroit, Michigan
February 3, 1994
<PAGE>
<PAGE>
-15-
<TABLE>
BALANCE SHEETS
Kelly Services, Inc. and Subsidiaries
<CAPTION>
1993 1992 1991
---------- ---------- ----------
(In thousands of dollars)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents . . . . . . . . . . . . $ 36,020 $ 29,700 $ 41,283
Short-term investments . . . . . . . . . . . 144,988 154,602 186,173
Accounts receivable, less allowances of
$4,735, $3,775 and $3,180, respectively. . 248,161 209,045 170,819
Prepaid expenses and other current assets. . 17,881 15,225 13,195
---------- ---------- ----------
Total current assets. . . . . . . . . . 447,050 408,572 411,470
Property and Equipment
Land and buildings . . . . . . . . . . . . . 29,882 23,794 20,899
Equipment, furniture and leasehold
improvements . . . . . . . . . . . . . . . 82,227 83,475 59,822
Accumulated depreciation . . . . . . . . . . (43,827) (37,920) (29,221)
---------- ---------- ----------
Total property and equipment. . . . . . 68,282 69,349 51,500
Other Assets . . . . . . . . . . . . . . . . . 26,768 18,154 16,433
---------- ---------- ----------
Total Assets . . . . . . . . . . . . . . . . . $ 542,100 $ 496,075 $ 479,403
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . $ 24,621 $ 13,100 $ 24,017
Payroll and related taxes . . . . . . . . . 68,451 53,986 43,082
Accrued insurance. . . . . . . . . . . . . . 51,841 48,855 48,250
Income and other taxes . . . . . . . . . . . 10,968 12,875 9,097
---------- ---------- ----------
Total current liabilities . . . . . . . 155,881 128,816 124,446
Stockholders' Equity
Capital stock, $1.00 par value
Class A common stock, shares issued 36,507
in 1993, 29,195 in 1992 and 29,187
in 1991 . . . . . . . . . . . . . . . . 36,507 29,195 29,187
Class B common stock, shares issued 3,609
in 1993, 2,898 in 1992 and 2,906
in 1991 . . . . . . . . . . . . . . . . 3,609 2,898 2,906
Treasury stock, at cost
Class A common stock, 2,361 shares in
1993, 1,928 in 1992 and 1,994 in 1991. . (6,702) (6,736) (6,462)
Paid-in capital. . . . . . . . . . . . . . . 679 3,629 1,821
Earnings invested in the business. . . . . . 352,126 338,273 327,505
---------- ---------- ----------
Total stockholders' equity. . . . . . . 386,219 367,259 354,957
---------- ---------- ----------
Total Liabilities and Stockholders' Equity . . $ 542,100 $ 496,075 $ 479,403
========== ========== ==========
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
-16-
<TABLE>
STATEMENTS OF EARNINGS
Kelly Services, Inc. and Subsidiaries
<CAPTION>
(1)
1993 1992 1991
------------- ------------- -------------
(In thousands of dollars except per share items)
<S> <C> <C> <C>
Sales of services. . . . . . . . . . . . . . . . $ 1,954,534 $ 1,712,726 $ 1,424,309
Cost of services . . . . . . . . . . . . . . . . 1,573,797 1,372,387 1,115,635
------------ ------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . 380,737 340,339 308,674
Selling, general and administrative expenses . . 316,838 289,114 262,000
------------ ------------ ------------
Earnings from operations . . . . . . . . . . . . 63,899 51,225 46,674
Interest income . . . . . . . . . . . . . . . . 6,960 9,800 13,575
------------ ------------ ------------
Earnings before income taxes . . . . . . . . . . 70,859 61,025 60,249
Income taxes:
Federal . . . . . . . . . . . . . . . . . . . 20,595 16,840 16,605
State and other . . . . . . . . . . . . . . . 5,705 4,960 5,025
------------ ------------ ------------
Total income taxes . . . . . . . . . . . . . . . 26,300 21,800 21,630
------------ ------------ ------------
Net earnings . . . . . . . . . . . . . . . . . . $ 44,559 $ 39,225 $ 38,619
============ ============ ============
Earnings per share . . . . . . . . . . . . . . . $1.18 $1.04 $1.03
Dividends per share . . . . . . . . . . . . . . $ .63 $ .58 $ .57
Average shares outstanding (thousands) . . . . . 37,728 37,668 37,616
<FN>
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
</TABLE>
<PAGE>
<PAGE>
-17-
<TABLE>
STATEMENTS OF CASH FLOWS
Kelly Services, Inc. and Subsidiaries
<CAPTION>
(1)
1993 1992 1991
--------- --------- ---------
(In thousands of dollars)
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings . . . . . . . . . . . . . . . . . . $ 44,559 $ 39,225 $ 38,619
Noncash adjustments:
Depreciation . . . . . . . . . . . . . . . . . 16,614 13,977 9,805
Changes in certain working capital components. (16,300) (41,023) 10,066
--------- --------- ---------
Net cash from operating activities . . . . . 44,873 12,179 58,490
Cash flows from investing activities
Capital expenditures . . . . . . . . . . . . . . (16,056) (32,449) (23,509)
Short-term investments . . . . . . . . . . . . . 9,614 31,571 (65,422)
Increase in other assets . . . . . . . . . . . . (9,296) (2,419) (3,620)
--------- --------- ---------
Net cash from investing activities . . . . . (15,738) (3,297) (92,551)
Cash flows from financing activities
Dividend payments. . . . . . . . . . . . . . . . (23,846) (21,999) (21,666)
Exercise of stock options. . . . . . . . . . . . 1,049 1,617 474
Fractional shares paid . . . . . . . . . . . . . (18) -- --
Purchase of treasury stock . . . . . . . . . . . -- (83) (101)
--------- --------- ---------
Net cash from financing activities . . . . . (22,815) (20,465) (21,293)
Net change in cash and equivalents . . . . . . . . 6,320 (11,583) (55,354)
Cash and equivalents at beginning of year. . . . . 29,700 41,283 96,637
--------- --------- ---------
Cash and equivalents at end of year. . . . . . . . $ 36,020 $ 29,700 $ 41,283
========= ========= =========
<FN>
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
</TABLE>
<PAGE>
<PAGE>
-18-
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY
Kelly Services, Inc. and Subsidiaries
<CAPTION>
(1)
1993 1992 1991
---------- ---------- ----------
(In thousands of dollars)
<S> <C> <C> <C>
Capital Stock
Class A common stock
Balance at beginning of year . . . . . . . . $ 29,195 $ 29,187 $ 29,176
Five-for-four stock split. . . . . . . . . . 7,301 -- --
Conversions from Class B . . . . . . . . . . 11 8 11
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 36,507 29,195 29,187
Class B common stock
Balance at beginning of year . . . . . . . . 2,898 2,906 2,917
Five-for-four stock split. . . . . . . . . . 722 -- --
Conversions to Class A . . . . . . . . . . . (11) (8) (11)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 3,609 2,898 2,906
Treasury Stock
Balance at beginning of year . . . . . . . . (6,736) (6,462) (6,321)
Exercise of stock options. . . . . . . . . . 34 (191) (40)
Purchase of treasury stock . . . . . . . . . -- (83) (101)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . (6,702) (6,736) (6,462)
Paid-in Capital
Balance at beginning of year . . . . . . . . 3,629 1,821 1,307
Five-for-four stock split. . . . . . . . . . (3,965) -- --
Exercise of stock options. . . . . . . . . . 1,015 1,808 514
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 679 3,629 1,821
Earnings Invested in the Business
Balance at beginning of year . . . . . . . . 338,273 327,505 310,748
Net earnings . . . . . . . . . . . . . . . . 44,559 39,225 38,619
Cash dividends . . . . . . . . . . . . . . . (23,846) (21,999) (21,666)
Five-for-four stock split. . . . . . . . . . (4,058) -- --
Fractional shares paid . . . . . . . . . . . (18) -- --
Equity adjustment for foreign currency
translation; cumulative charge of
$6,513 in 1993 and $3,729 in 1992;
credit of $2,729 in 1991 . . . . . . . . . (2,784) (6,458) (196)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 352,126 338,273 327,505
Stockholders' Equity at end of year. . . . . . . $386,219 $367,259 $354,957
========= ========= =========
<FN>
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
</TABLE>
<PAGE>
<PAGE>
-19-
NOTES TO FINANCIAL STATEMENTS
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's fiscal year ends on the Sunday nearest to December 31. The
three most recent years ended at January 2, 1994 (1993), January 3, 1993
(1992) and December 29, 1991. The current fiscal year is a 52-week period,
while 1992 was a 53-week period and 1991 included 52 weeks.
The Company operates in the single industry segment of providing
temporary help services to a diversified group of customers.
The financial statements consolidate the accounts and operations of the
Company and its subsidiaries, all of which are wholly owned, after elimination
of all intercompany accounts and transactions. The accounts of the Company's
international operations are translated at appropriate rates of exchange. The
Company's international operations are conducted in Canada, Europe, Australia,
New Zealand and Mexico. Sales for these operations totalled $235,000 in 1993,
$225,000 in 1992 and $189,000 in 1991; operating losses totalled $2,500 in
1993, $5,600 in 1992, and $4,100 in 1991. Identifiable assets are $70,900,
$69,300 and $65,700 at the end of 1993, 1992 and 1991, respectively.
Cash and equivalents include highly liquid debt instruments purchased
with original maturities of three months or less. Short-term investments
include debt instruments having an original maturity of more than three months
and are stated at cost and accrued interest, which approximates market.
Properties are stated at cost and include expenditures for additions and
major improvements. Fully depreciated assets are eliminated from the
accounts. For financial reporting purposes, assets are depreciated over their
estimated useful lives, principally by the straight-line method.
Earnings per share are based on the average number of Class A and Class B
common shares outstanding during the year. All per share and share data in
the accompanying financial statements and notes have been restated to give
effect to stock splits.
Certain prior year amounts have been reclassified to conform with the
current presentation.
OTHER ASSETS
Other assets include $17,900, $12,100 and $12,700 of intangible assets at
January 2, 1994, January 3, 1993 and December 29, 1991, respectively,
representing primarily the cost over net assets of businesses acquired. These
intangible assets are being amortized over periods not exceeding 40 years.
Other balances in this account include deposits and cash values of company
owned life insurances.
<PAGE>
<PAGE>
-20-
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars except share and per share items)
(continued)
CAPITALIZATION AND STOCK SPLITS
The authorized capital stock of the Company is 100,000,000 shares of
Class A common stock and 10,000,000 shares of Class B common stock. Class A
shares have no voting rights and are not convertible. Class B shares have
voting rights and are convertible into Class A shares on a share-for-share
basis at any time. Both classes of stock have identical rights in the event
of liquidation.
In May 1993, the Board of Directors declared a five-for-four split of the
Class A and Class B common stock. At the same time the Board increased the
number of authorized Class A shares to 100,000,000, from 50,000,000.
RETIREMENT BENEFITS
The Company provides a qualified defined contribution plan covering
substantially all full-time employees, excepting officers and certain other
management employees. Upon approval by the Board of Directors, a contribution
based on eligible wages is funded annually. The plan offers a savings feature
and Company matching contributions. Assets of this plan are held in trust for
the sole benefit of employees.
For officers and certain other management employees, the Company provides
a nonqualified defined contribution plan. Upon approval by the Board of
Directors, a contribution based on eligible wages is set aside annually. This
plan also includes provisions for salary deferrals and Company matching
contributions.
The cost of retirement benefits totalled $3,430 in 1993, $3,365 in 1992
and $3,092 in 1991.
LEASE COMMITMENTS
The Company conducts its field operations primarily in leased facilities.
The following are future minimum lease commitments for the five-year period
commencing 1994: $23,800, $17,700, $12,100, $8,100 and $5,300. Lease
expenses for the fiscal years 1993, 1992, and 1991 were $24,900, $24,400 and
$24,400, respectively.
<PAGE>
<PAGE>
-21-
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars except share and per share items)
(continued)
PERFORMANCE INCENTIVE PLAN
In May 1992, the stockholders approved the Performance Incentive Plan
(the "Plan") to replace the Incentive Stock Option Plan which expired earlier
that year. Under the Plan, stock options (both incentive and nonqualified),
Stock Appreciation Rights (SARs), restricted awards, and performance awards
may be granted to key employees, utilizing the Company's Class A stock. Stock
options may not be granted at prices less than the fair market value on the
date of grant, nor for a term to exceed 10 years.
The Plan provides that the maximum number of shares available for grants
is 5 percent of the outstanding Class A stock, adjusted for Plan activity over
the preceding 5 years.
As of January 2, 1994, no SARs, restricted awards, or performance awards
have been granted under the Plan.
The combined 1993 activity under the two plans identified above is as follows:
Number of Exercise
Class A Price Range
Option Activity Shares Per Share
----------------------------- --------- ---------------
Outstanding at beginning
of year . . . . . . . . . . 158,040 $21.60 - $33.80
Granted . . . . . . . . . . . 367,271 $24.75 - $33.60
Exercised . . . . . . . . . . (53,653) $21.60 - $22.60
Cancelled . . . . . . . . . . (16,300) $21.60 - $29.20
--------
Outstanding at end of year. . 455,358 $21.92 - $33.80
========
At the end of 1993, there were 1,319,609 shares available for future
grants.
<PAGE>
<PAGE>
-22-
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars except share and per share items)
(continued)
INCOME TAXES
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. Previously the
Company used SFAS 96. Financial statements for prior years have not been
restated and the cumulative effect of the accounting change was not material.
The following summarizes the differences between income taxes for
financial reporting purposes and the United States statutory tax rate for the
years 1993, 1992 and 1991.
1993 1992 1991
---- ---- ----
Statutory rate . . . . . . . . . . . . 35.0% 34.0% 34.0%
State and local taxes, net of
federal benefit. . . . . . . . . . . 5.2 5.4 5.5
Tax exempt income and other tax
credits. . . . . . . . . . . . . . . (2.6) (4.1) (4.2)
Other. . . . . . . . . . . . . . . . . (0.5) 0.4 0.6
----- ----- -----
Effective tax rate . . . . . . . . . . 37.1% 35.7% 35.9%
===== ===== =====
Deferred taxes are provided for the effect of temporary differences
between financial and tax reporting. These differences are related
principally to depreciation, benefit plan expenses and provision for workers
compensation claims.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 was signed
into law. The Act increased the U.S. corporate statutory tax rate from 34% to
35% for years beginning after December 31, 1992, changed the deductibility of
certain expenses and extended certain tax credits. The effect of this
retroactive increase in the statutory tax rate was partially offset by a gain
from the revaluation of net deferred tax assets.
The Internal Revenue Service (IRS) has proposed the imposition of an
accumulated earnings tax totalling $49 million for 1988, 1989 and 1990 in
connection with an audit of the Company's consolidated federal tax liability.
The Company believes that there is no factual or legal basis for the
imposition of any accumulated earnings tax and that the Company is fully
justified in making provision to meet the needs of Kelly's expanding business
operations. Moreover, tax counsel has advised that a substantial portion of
the IRS proposal results from computational and clerical errors in the
calculation of the tax. The Company is defending its position through the IRS
appeal process and into the courts if necessary. In the opinion of the
Company, the ultimate resolution of this issue will not materially affect its
financial statements.
The Company paid income taxes of $34,800 in 1993, $21,402 in 1992 and
$24,017 in 1991.
<PAGE>
<PAGE>
-23-
<TABLE>
NOTES TO FINANCIAL STATEMENTS
(continued)
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----------
(In thousands of dollars except per share items)
<S> <C> <C> <C> <C>
Sales of services**
1993 . . . . . . . . . $450,654 $482,034 $517,585 $504,261 $1,954,534
1992 . . . . . . . . . 374,538 413,182 450,061 474,945 1,712,726
1991 . . . . . . . . . 326,547 343,495 374,716 379,551 1,424,309
Cost of services
1993 . . . . . . . . . 364,724 388,906 416,904 403,263 1,573,797
1992 . . . . . . . . . 298,270 332,458 361,835 379,824 1,372,387
1991 . . . . . . . . . 252,305 268,268 294,855 300,207 1,115,635
Selling, general and
administrative
1993 . . . . . . . . . 77,196 79,178 79,541 80,923 316,838
1992 . . . . . . . . . 69,440 69,965 72,843 76,866 289,114
1991 . . . . . . . . . 64,830 63,688 65,387 68,095 262,000
Net earnings
1993 . . . . . . . . . 6,879 10,009 14,028 13,643 44,559
1992 . . . . . . . . . 6,209 8,505 11,411 13,100 39,225
1991 . . . . . . . . . 8,450 9,710 11,368 9,091 38,619
Earnings per share*
1993 . . . . . . . . . .18 .27 .37 .36 1.18
1992 . . . . . . . . . .16 .23 .30 .35 1.04
1991 . . . . . . . . . .22 .26 .30 .25 1.03
Dividends per share*
1993 . . . . . . . . . .152 .160 .160 .160 .632
1992 . . . . . . . . . .144 .144 .144 .152 .584
1991 . . . . . . . . . .144 .144 .144 .144 .576
* Adjusted for the 5-for-4 stock split of May, 1993.
**Sales of services has been adjusted to exclude interest income.
</TABLE>
<PAGE>
<PAGE>
-24-
<TABLE>
SCHEDULE I - MARKETABLE SECURITIES -- OTHER INVESTMENTS
Kelly Services, Inc. and Subsidiaries
JANUARY 2, 1994
(In thousands of dollars)
<CAPTION>
COLUMN B COLUMN C COLUMN D*
COLUMN A Principal Amounts Cost Recorded Value
Name of Issuer and Title of Issue of Bonds and Notes of each Issue on Balance Sheet
<S> <C> <C> <C>
US GOVERNMENT AND ITS AGENCIES $ 33,562 $ 33,662 $ 33,828
STATE AND LOCAL GOVERNMENTS AND THEIR AGENCIES:
Alabama State, General Obligations 3,004 3,013 3,035
Baltimore County, MD General Obligation 1,045 1,045 1,054
Blackrock Insured Municipal Bond Fund 3,000 3,000 3,010
California Revenue Bonds 6,000 6,002 6,071
Chicago, IL Tender Notes 3,000 3,001 3,022
Cincinnati, OH Student Loan Fund Revenue Bonds 2,997 3,008 3,007
Erie County, N.Y. Revenue Anticipation Notes 3,013 3,037 3,051
Georgia State Municipal Electric Authority Revenue Bonds 1,121 1,148 1,157
Hawaii State, General Obligations 2,585 2,585 2,557
Homestead, FL Special Assessment Revenue Bonds 1,002 1,005 1,032
Illinois Revenue Bonds 5,835 5,837 5,956
Iowa School Corporate Warrant Certificates 3,011 3,011 3,046
Kentucky Housing Sr. A Revenue Bonds 1,345 1,351 1,372
Massachusetts Revenue Bonds 4,084 4,084 4,110
Metro Gvt. Nashville, TN Water & Sewer Revenue Bonds 2,996 2,996 3,044
Michigan Revenue Bonds 7,829 7,829 7,890
Missouri Higher Education Loan Authority Revenue Bonds 3,016 3,076 3,129
MuniYield Quality II C Auction Municipal Bond Fund 1,998 1,998 2,004
New Jersey Revenue Bonds 3,204 3,282 3,300
North Carolina Eastern Municipal Power Revenue Bonds 2,211 2,298 2,303
NuVeen Performance Plus Municipal Bond Fund 3,000 3,000 3,009
Pennsylvania Municipal Bonds 3,535 3,565 3,591
Phoenix, Arizona General Obligations 2,720 2,815 2,744
Private Colleges & Un. FA GA Revenue Bonds 3,000 3,001 3,007
Seattle, WA Sewer Revenue Bonds 1,289 1,289 1,310
Texas Revenue Bonds 1,700 1,702 1,714
Van Kampen Merritt Municipal Bond Fund 3,000 3,000 3,010
Virginia Beach Certificates of Participation 1,000 1,002 1,010
Wisconsin Municipal Bonds 4,096 4,096 4,140
-------- -------- ---------
Total State and Local Government Investments 85,636 86,076 86,685
MISCELLANEOUS ISSUES:
ABN Ambro Time Deposit 5,006 5,015 5,070
Comerica Bank Note 4,999 5,013 5,042
Republic Bank, N.Y. Bank Note 1,511 1,524 1,524
Western PA Power & Light Money Market Preferred Stock 3,000 3,000 3,018
Others 5,509 5,528 5,561
-------- -------- --------
Total Miscellaneous Issues 20,025 20,080 20,215
CERTIFICATES OF DEPOSIT 4,220 4,220 4,260
-------- -------- --------
TOTAL SHORT-TERM INVESTMENTS $143,443 $144,038 $144,988
<FN> ======== ======== ========
*Investments are stated at cost plus accrued interest, which approximates market.
</TABLE>
<PAGE>
<PAGE>
-25-
<TABLE>
SCHEDULE VIII - VALUATION RESERVES
Kelly Services, Inc. and Subsidiaries
JANUARY 2, 1994
(In thousands of dollars)
<CAPTION>
Additions
Balance at charged to Deductions - Balance at
beginning costs and uncollectible end
of year expenses accounts of year
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Description
- -----------
Fifty-two weeks ended January 2, 1994:
Reserve deducted in the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $3,775 $4,345 $3,385 $4,735
====== ====== ====== ======
Fifty-three weeks ended January 3, 1993:
Reserve deducted in the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $3,180 $4,115 $3,520 $3,775
====== ====== ====== ======
Fifty-two weeks ended December 29, 1991:
Reserve deducted in the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $3,615 $2,342 $2,777 $3,180
====== ====== ====== ======
</TABLE>
<PAGE>
<PAGE>
-26-
<TABLE>
INDEX TO EXHIBITS
REQUIRED BY ITEM 601,
REGULATION S-K
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
3.1 Certificate of Incorporation. (Reference is made to Exhibit 3.2
to the Form 10-Q for the quarterly period ended October 3, 1993,
filed with the Commission in November, 1993, which is incorporated
herein by reference).
3.2 By-laws. (Reference is made to Exhibit 3.3 to the Form 10-Q for
the quarterly period ended October 3, 1993, filed with the
Commission in November, 1993, which is incorporated herein by
reference).
4 Rights of security holders are defined in Articles Fourth, Fifth,
Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth,
Fourteenth and Fifteenth of the Certificate of Incorporation.
(Reference is made to Exhibit 3.2 to the Form 10-Q for the
quarterly period ended October 3, 1993, filed with the Commission
in November, 1993, which is incorporated herein by reference).
10.1 Forms of Branch Office Agreements. (Reference is made to Exhibit
13(a) to registrant's registration statement filed with the
Commission in October, 1961, which are incorporated herein by
reference).
10.2 Short-Term Incentive Plan. (Reference is made to Exhibit 10.3 to
the Form 10-K for the fiscal year ended January 3, 1993, filed
with the Commission in March, 1993, which is incorporated herein
by reference.)
10.3 Kelly Services, Inc. 1982 Incentive Stock Option Plan. 1
(Document 2)
10.4 Kelly Services, Inc. Performance Incentive Plan. (Reference is
made to Appendix to the Definitive Proxy for the fiscal year ended
December 30, 1991, filed with the Commission in April, 1992, which
is incorporated herein by reference).
11 Additional Earnings Per Share Information. 1
(Document 3)
21 Subsidiaries of Registrant. 1
(Document 4)
23 Consent of Independent Accountants. 1
(Document 5)
24 Powers of Attorney. 1
(Document 6)
</TABLE>
<PAGE>
<PAGE>
-1-
KELLY SERVICES, INC.
1982 INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of this Plan is to attract, retain and stimulate capable
management in order to assure the future success of the Company. This
Plan is being adopted to encourage qualified personnel to join the
Company, to provide an incentive for employees to remain with the Company
and to stimulate the maximum efforts of those employees, on which the
Company's success and future growth are dependent.
The Plan includes as eligible participants only the officers and
other key employees of the Company and its subsidiaries. It is designed
to give these employees the opportunity to purchase the common stock of
the Company on a basis mutually advantageous to the employees and the
Company. It is intended that stock options granted under the Plan will
satisfy the requirements of Section 422A of the Internal Revenue Code of
1954.
The provisions of this Plan do not apply to or affect any option
heretofore or hereafter granted under any other stock option plan of the
Company, and all such options continue to be governed by and subject to
the applicable provisions of the plan under which they were granted.
2. DEFINITIONS
2.01 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors
of the Company.
2.02 "CODE" means the Internal Revenue Code of 1954, as from time
to time amended.
2.03 "COMMON STOCK" means the common stock of the Company, par
value $1.00 per share.
2.04 "COMPANY" means Kelly Services, Inc., a Delaware corporation,
and any successor thereto.
2.05 "OPTION DATE" means the date upon which a Stock Option is
granted to a Participant.
2.06 "OPTION PRICE" means the price per share at which a Stock
Option may be exercised.
2.07 "PARTICIPANT" means an individual to whom a Stock Option has
been granted under the Plan.
2.08 "PLAN" means this 1982 Incentive Stock Option Plan, as from
time to time amended.
2.09 "STOCK OPTION" means the right of a participant to purchase a
specified number of shares of Common Stock, subject to the terms and
conditions of the Plan.
<PAGE>
<PAGE>
-2-
3. STOCK SUBJECT TO STOCK OPTIONS
3.01 NUMBER OF RESERVED SHARES. Except as otherwise provided in
Section 7, the aggregate number of shares of Common Stock that may be
issued under Stock Options granted under this Plan may not exceed three
hundred thousand (300,000) shares.
3.02 TYPES OF SHARES RESERVED. The shares reserved under this Plan
may be either authorized and unissued shares or treasury shares, as the
Board of Directors from time to time determine. Unless the Board of
Directors determines to purchase shares in the market for the purposes of
this Plan or to use treasury shares, the shares sold under the Plan will
be authorized and unissued shares reserved for that purpose. If any
Stock Options granted under this Plan terminate, lapse or expire for any
reason without having been exercised in full, the shares not purchased
under the terminated options will be available again for the purposes of
this Plan.
4. ADMINISTRATION
4.01 THE BOARD. The Plan is administered by the Board of
Directors. Members of the Board who are officers or key employees of the
Company are eligible to receive options under the Plan; provided,
however, that William R. Kelly shall not be eligible to be granted any
option under this Plan.
4.02 POWERS OF THE BOARD. In addition to any other powers set
forth in this Plan, the Board has the following powers;
(a) to construe and interpret the Plan;
(b) to establish, amend and rescind appropriate rules and
regulations relating to the Plan.
(c) subject to the express provisions of the Plan, to
determine the individuals who will receive Stock Options, the times
when they will receive them, the number of shares to be subject to
each option and the Option Price applicable to each option;
(d) to contest on behalf of the Company or optionees, at the
expense of the Company, any ruling or decision on any matter
relating to the Plan or any Stock Option; and
(e) generally, to administer the Plan, and to take all such
steps and make all such determinations in connection with the Plan
and the options granted thereunder as it may deem necessary or
advisable.
4.03 ACTION BY THE BOARD. All determinations of the Board are made
by a majority vote of its members. The Board's determinations are final
and binding on all Participants.
4.04 GENDER. Unless clearly inappropriate, all nouns of whatever
gender refer to persons or objects of any gender.
<PAGE>
<PAGE>
-3-
5. GRANT, OPTION PRICE, AND EXERCISE
5.01 ELIGIBLE EMPLOYEES. The Board may from time to time grant
Stock Options to officers and other key employees of the Company and its
subsidiaries, subject to the terms and conditions of the Plan. Unless
otherwise expressly stated by the Board in any specific instance, the
action of the Board naming an individual to receive a Stock Option under
this Plan, determining the number of shares subject to the option and
setting the Option Price constitutes the granting of the option, and the
date of the Board's action is the Option Date applicable to the option.
If an option is granted on a day other than a business day, the Option
Date is the last preceding business day.
5.02 OPTION PRICE. The Option Price of the Common Stock subject to
each Stock Option is the average of the closing bid and asked prices
quoted by NASDAQ on the applicable Option Date. If the Common Stock is
not quoted by NASDAQ on the Option Date, then the Option Price shall be
the average of the closing bid and asked prices on the most recent day
preceding the day on which the option is granted for which such prices
are available. If the Company should become listed on a national stock
exchange during the existence of this Plan and Stock Options are
thereafter granted under this Plan, the Option Price shall be the closing
price of the Common Stock on the stock exchange on the Option date (or on
the preceding day such stock was traded if it was not traded on the
Option Date).
5.03* LIMITATION ON STOCK OPTION GRANTS. In any single calendar
year, no Participant may be granted Stock Options, the aggregate Option
Price of which exceeds one hundred thousand dollars ($100,000).
5.04 MANNER OF EXERCISE. To exercise a Stock Option in whole or in
part, a Participant must give written notice to the Board, stating the
number of shares with respect to which he intends to exercise his Stock
Option. The Company will issue the shares with respect to which the
option is exercised upon payment in full, in cash, of the Option Price,
or, at Participant's option, upon payment with stock of the Company then
owned by the Participant; provided, however, that the Participant may not
use as payment in part or in full any shares of Common Stock acquired by
the Participant by exercising a grant within a period of four (4) years
prior to the payment for the shares being currently acquired. If the
Participant uses stock of the Company as payment of the Option Price, the
valuation of the stock given in payment shall be made as of the day of
delivery of the shares to the Company and in the manner in which the
Board would determine the Option Price if a Stock Option was being
granted.
5.05 INVESTMENT REPRESENTATIONS. The Board may require a
Participant, or any other person in whose name shares are issued upon the
exercise of an option, to represent that all shares so acquired are
purchased for investment and not with a view to distribution or resale or
to agree that such shares will not be sold except in accordance with such
restrictions or limitations as may be prescribed by the Board.
<PAGE>
<PAGE>
-4-
6. LIMITATIONS ON THE RIGHT TO EXERCISE
6.01 TIME OF EXERCISE. Except as otherwise provided in Sections
6.02, 6.03 and 6.04, no Stock Option may be exercised unless the
Participant has been in the employ of the Company or a subsidiary
continuously from the Option Date. Options are exercisable not later
than five (5) years after the Option Date.
6.02 EFFECT OF CORPORATE REORGANIZATION. In the event of a
dissolution, reorganization, merger, consolidation or transfer of assets,
as described in Section 7.02, or a transfer of more than eighty percent
(80%) of the then outstanding shares of the Company, each participant
may, before the effective date of the transaction, purchase the full
number of shares under his Stock Options that he otherwise would have
been entitled to purchase during the remaining term of the options.
6.03 TERMINATION OF EMPLOYMENT. If the employment of a Participant
with the Company or a subsidiary terminates (other than by reason of
death or disability) and he has been in the employ of the Company or a
subsidiary continuously from the Option Date until his termination of
employment, and if not otherwise affected, restricted, or encumbered by
the provisions of paragraph 12 of the Plan, he may exercise the option at
any time within the three (3) month period beginning on his date of
termination of employment, so long as the option has not otherwise
expired.
Options granted under this Plan are not affected by any change of
employment so long as the Participant continues to be an employee of
either the Company or a subsidiary of the Company. Nothing in this Plan
or in any option granted under it confers any right to continue in the
employ of the Company or any of its subsidiaries or interferes in any way
with the right of the Company or any of its subsidiaries to terminate any
person's employment at any time.
6.04 EFFECT OF DEATH OR DISABILITY. If the employment of a
Participant terminates by reason of his death or his total and permanent
disability (as determined by a physician selected by the Board) and if he
has been in the employ of either the Company or a subsidiary continuously
from the Option Date until his death or disability, his outstanding Stock
Options may be exercised by himself or, in the event of his death, by his
executor or administrator, at any time within one year after his
termination of employment (but not beyond the term of the option), to the
extent that he was entitled to exercise the options on the date of his
death or disability.
6.05* SEQUENCE OF EXERCISE. All Stock Options granted before 1987
to a Participant must be exercised in the order in which they were
granted. For purposes of this Section 6.05, an option that has been
cancelled is considered to remain outstanding until the date on which it
would otherwise expire in accordance with Section 6.01.
<PAGE>
<PAGE>
-5-
7. ADJUSTMENTS TO REFLECT CHANGES IN CAPITAL STRUCTURE
7.01 CHANGE IN CORPORATE STRUCTURE. In the event of a change in
the corporate structure or shares of the Company, the Board of Directors
(subject to any required action by the stockholders) may make any
adjustments necessary to prevent accretion, or to protect against
dilution, in the number and kind of shares authorized by the Plan and,
with respect to outstanding Stock Options, in the number and kind of
shares covered thereby and in the applicable Option Price. For the
purpose of this Section 7.01, a change in the corporate structure or
shares of the Company includes, without limitation, any change resulting
from recapitalization, stock split, consolidation, rights offering,
separation, reorganization, stock dividend or liquidation.
7.02 EXCHANGES OF COMMON STOCK. If the shares of Common Stock are
changed into or exchanged for a different number or kind of shares of
stock or other securities of another corporation, whether through merger,
consolidation, reorganization or otherwise, the Board will make
proportionate adjustments in the number or kind of shares or price per
share, or both, in order to preserve each optionee's proportionate
interest or in order to maintain unchanged the aggregate Option Price of
his Stock Options.
8. NON-TRANSFERABILITY OF STOCK OPTIONS
The Stock Options granted under the Plan are not transferable by a
Participant, voluntarily or involuntarily, other than by will or by the
laws of descent and distribution. During a Participant's lifetime, his
Stock Options may be exercised only by him.
9. RIGHTS AS STOCKHOLDER
No Common Stock may be delivered upon the exercise of any Stock
Option until full payment has been made. A Participant has no rights
whatsoever as a stockholder with respect to any shares covered by a Stock
Option until the date of the issuance of a stock certificate for the
shares. No adjustment will be made for dividends or other rights for
which the record date precedes the date on which a stock certificate is
issued.
10. AMENDMENT OF PLAN
The Board of Directors may from time to time amend or revise the
terms of this Plan in whole or in part and may, without limitation, adopt
any amendment deemed necessary to ensure compliance with Section 422A of
the Code; provided, however, that (a) no change in any Stock Option
previously granted to a Participant may be made that would impair the
rights of the Participant without the Participant's consent, and (b) the
Board of Directors may not, without further approval by the holders of a
majority of the outstanding shares of the Company, (i) change the
aggregate number of shares that may be sold pursuant to Stock Options
granted under the Plan (except in accordance with the provisions of
Section 7), (ii) change the class of eligible employees who may receive
Stock Options under the Plan, or (iii) adopt any amendment affecting the
Option Price at which Stock Options may be granted.
<PAGE>
<PAGE>
-6-
11. EFFECTIVE DATE AND TERMINATION OF PLAN
11.01 EFFECTIVE DATE. This Plan is effective as of its adoption by
the Board of Directors; provided, however, that if the Plan is not
approved by the stockholders of the Company within twelve (12) months
after adoption by the Board of Directors, the Plan and all Stock Options
granted under it will be void.
11.02 TERMINATION OF THE PLAN. The Board of Directors may terminate
the Plan at any time with respect to any shares that are not then subject
to Stock Options. Unless terminated earlier by the Board of Directors,
the plan will terminate ten (10) years after its effective date, and no
Stock Options may be granted after that date. Termination of the Plan
will not affect the rights and obligations of any Participant with
respect to Stock Options granted before termination.
12. EMPLOYMENT AGREEMENT
In consideration for any option granted to any Participant, the
Participant shall agree that if he voluntarily leaves the employment of
the Company or a subsidiary of the Company prior to two (2) years from
the date of such grant, he will pay to the Company the difference, if
any, by which the market value on the date of termination of employment
of the Common Stock acquired through the option exceeds the purchase
price, adjusted for any change in the stock as provided in paragraph 7 of
the Plan. For purposes of this paragraph, voluntary termination of
employment does not include retirement pursuant to the provisions of the
Company's Retirement Plan.
*As amended to conform to Tax Reform Act of 1986.
11/17/87
<PAGE>
-1-
<TABLE>
ADDITIONAL EARNINGS PER SHARE INFORMATION
Kelly Services, Inc. and Subsidiaries
Details of the common shares used to compute earnings per share are as follows (after adjustment for
the five-for-four stock splits of May, 1989 and 1993) in thousands except per share items:
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------
Dec. 31, Dec. 30, Dec. 29, Jan. 3, Jan. 2,
1989 1990 1991 1993 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Weighted average shares outstanding 37,548 37,586 37,616 37,668 37,728
Adjustment for dilutive shares from stock
options under the treasury stock method:
Shares assumed issued 281 301 249 188 473
Less - Shares assumed repurchased 180 232 185 123 408
------- --------- -------- -------- --------
Additional shares assumed outstanding 101 69 64 65 65
------- --------- -------- -------- --------
Applicable shares as adjusted 37,649 37,655 37,680 37,733 37,793
======= ========= ======== ======== ========
Net earnings $70,801 $71,194 $38,619 $39,225 $44,559
======= ======== ======== ======== ========
Earnings per common share $1.88 $1.89 $1.02 $1.04 $1.18
===== ===== ===== ===== =====
Percent dilution of earnings per share 0.3% 0.2% 0.2% 0.2% 0.2%
==== ==== ==== ==== ====
</TABLE>
<PAGE>
-1-
<TABLE>
SUBSIDIARIES OF REGISTRANT
Kelly Services, Inc.
<CAPTION>
State/Jurisdiction
Subsidiary of Incorporation Business Name
<S> <C> <C>
Kelly Services (Canada), Ltd. Canada Kelly Temporary Services
Les Services Kelly (Quebec) Inc. Quebec Les Services Kelly
(a subsidiary of Kelly Services (Canada), Ltd.)
Lenore Simpson Personnel, Ltd. Ontario Lenore Simpson Personnel
(a subsidiary of Kelly Services (Canada), Ltd.)
Societe Services Kelly Delaware Kelly Services
Kelly Properties, Inc. Michigan Kelly Properties
Kelly Services (Ireland), Ltd. Delaware Kelly Temporary Services
(a subsidiary of Kelly Properties, Inc.)
Kelly Services (UK), Ltd. Delaware Kelly Temporary Services
(a subsidiary of Kelly Services (Ireland), Ltd.)
Kelly Assisted Living Services, Inc. Delaware Kelly Assisted Living Services
Kelly Services (Australia), Ltd. Delaware Kelly Temporary Services
Kelly Services (New Zealand), Ltd. Delaware Kelly Temporary Services
Kelly Professional Services, Inc. Delaware Kelly Professional Services
Kelly Services of Denmark, Inc. Delaware Kelly Vikarer
Karin Lanng Kelly
Kelly Services (Nederland), B.V. The Netherlands Kelly Uitzendburo
Kelly Services Norge A.S. Norway Kelly Personal Byraet
(a subsidiary of Kelly Services (Nederland), B.V.)
Kelly de Mexico, S.A. de C.V. Mexico Kelly Temporary Services
KSI Acquisition Corporation California Your Staff
/TABLE
<PAGE>
<PAGE>
-1-
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Forms S-8 Number 2-85867,
33-48782 and 33-51239 of Kelly Services, Inc. of our report dated February 3,
1994, appearing on page 14 of this Annual Report on Form 10-K.
/s/ Price Waterhouse
- --------------------
Price Waterhouse
Detroit, Michigan
March 11, 1994
<PAGE>
<PAGE>
-1-
POWER OF ATTORNEY
The undersigned director of Kelly Services, Inc. does hereby appoint
each of Eugene L. Hartwig and Robert F. Stoner, signing singly, his true and
lawful attorneys, to execute for and on behalf of the undersigned the Form
10-K Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended January 2, 1994, to be filed with the
Securities and Exchange Commission in Washington, D.C. under the provisions
of the Securities Exchange Act of 1934, as amended, and any and all
amendments to said Form 10-K whether said amendments add to, delete from or
otherwise alter the Form 10-K, or add to or withdraw any exhibit or exhibits,
schedule or schedules to be filed therewith, and any and all instruments
necessary or incidental in connection therewith, hereby granting unto said
attorneys and each of them full power and authority to do and perform in the
name and on behalf of each of the undersigned, and in any and all capacities,
every act and thing whatsoever required or necessary to be done in the
exercise of any of the rights and powers herein granted, as fully and to all
intents and purposes as each of the undersigned might or could do in person,
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF the undersigned have caused this Power of Attorney to
be executed as of this 11th day of February, 1994.
/s/ William R. Kelly
--------------------
William R. Kelly
<PAGE>
<PAGE>
-2-
POWER OF ATTORNEY
Each of the undersigned directors of Kelly Services, Inc. does hereby
appoint each of Eugene L. Hartwig and Robert F. Stoner, signing singly, his
true and lawful attorneys, to execute for and on behalf of the undersigned
the Form 10-K Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 2, 1994, to be filed
with the Securities and Exchange Commission in Washington, D.C. under the
provisions of the Securities Exchange Act of 1934, as amended, and any and
all amendments to said Form 10-K whether said amendments add to, delete from
or otherwise alter the Form 10-K, or add to or withdraw any exhibit or
exhibits, schedule or schedules to be filed therewith, and any and all
instruments necessary or incidental in connection therewith, hereby granting
unto said attorneys and each of them full power and authority to do and
perform in the name and on behalf of each of the undersigned, and in any and
all capacities, every act and thing whatsoever required or necessary to be
done in the exercise of any of the rights and powers herein granted, as fully
and to all intents and purposes as each of the undersigned might or could do
in person, hereby ratifying and approving the acts of said attorneys and each
of them.
IN WITNESS WHEREOF the undersigned have caused this Power of Attorney to
be executed as of this 16th day of February, 1994.
/s/ Terence E. Adderley
-----------------------
Terence E. Adderley
/s/ Cedric V. Fricke
-----------------------
Cedric V. Fricke
/s/ Harold E. Guenther
-----------------------
Harold E. Guenther
/s/ Verne G. Istock
-----------------------
Verne G. Istock
<PAGE>
