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Index to Exhibits on page 12
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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 April 3, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1088
KELLY SERVICES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 38-1510762
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(810) 362-4444
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(Registrant's telephone number, including area code)
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
---- ----
At May 4, 1994, 34,350,366 shares of Class A and 3,603,124 shares of Class B
common stock of the Registrant were outstanding.
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KELLY SERVICES, INC. AND SUBSIDIARIES
Page
Number
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PART I. FINANCIAL INFORMATION
Statements of Earnings 3
Balance Sheets 4
Statements of Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Management's Discussion and
Analysis of Results of
Operations and Financial
Condition 8
PART II. OTHER INFORMATION 10
Signature 11
Index to Exhibits Required by
Item 601, Regulation S-K 12
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<TABLE>
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
(In thousands of dollars except per share items)
<CAPTION>
13 Weeks Ended
------------------------------
April 3, 1994 April 4, 1993
------------- -------------
<S> <C> <C>
Sales of services $530,191 $450,654
Cost of services 428,374 364,724
--------- ---------
Gross profit 101,817 85,930
Selling, general and
administrative expenses 88,424 77,196
--------- ---------
Earnings from operations 13,393 8,734
Interest income 1,505 1,965
--------- ---------
Earnings before income taxes 14,898 10,699
--------- ---------
Income taxes:
Federal 4,520 2,975
State and other 1,145 845
--------- ---------
Total income taxes 5,665 3,820
--------- ---------
Net earnings $ 9,233 $ 6,879
========= =========
Earnings per share $.24 $.18
Dividends per share $.16 $.152
Average shares outstanding
(thousands) 37,947 37,719
See accompanying Note to Financial Statements.
</TABLE>
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KELLY SERVICES, INC. AND SUBSIDIARIES
BALANCE SHEETS AS OF APRIL 3, 1994 AND JANUARY 2, 1994
(In thousands of dollars)
ASSETS 1994 1993
- ------ ------------ ------------
CURRENT ASSETS:
Cash and equivalents $ 39,753 $ 36,020
Short-term investments (at cost
which approximates market) 148,617 144,988
Accounts receivable, less
allowances of $4,980 and
$4,735, respectively 262,164 248,161
Prepaid expenses and other
current assets 18,800 17,881
--------- ---------
Total current assets 469,334 447,050
PROPERTY AND EQUIPMENT:
Land and buildings 30,035 29,882
Equipment, furniture and
leasehold improvements 85,606 82,227
Accumulated depreciation (48,046) (43,827)
--------- ---------
Total property and equipment 67,595 68,282
OTHER ASSETS 32,328 26,768
--------- ---------
TOTAL ASSETS $569,257 $542,100
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES:
Accounts payable $ 20,825 $ 24,621
Payroll and related taxes 86,526 68,451
Accrued insurance 52,593 51,841
Income and other taxes 14,503 10,968
--------- ---------
Total current liabilities 174,447 155,881
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STOCKHOLDERS' EQUITY:
Capital stock, $1 par value 40,116 40,116
Treasury stock, 2,162 shares in
1994 and 2,361 shares in 1993,
respectively, at cost (6,153) (6,702)
Paid-in capital 5,628 679
Earnings invested in the business 355,219 352,126
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Total stockholders' equity 394,810 386,219
--------- ---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $569,257 $542,100
========= =========
See accompanying Note to Financial Statements.
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<TABLE>
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands of dollars)
<CAPTION>
13 Weeks Ended
-----------------------------
April 3, 1994 April 4, 1993
------------- -------------
<S> <C> <C>
Capital Stock
Class A common stock
Balance at beginning of period $ 36,507 $ 29,195
Conversions from Class B -- 11
--------- ---------
Balance at end of period 36,507 29,206
Class B common stock
Balance at beginning of period 3,609 2,898
Conversions to Class A -- (11)
--------- ---------
Balance at end of period 3,609 2,887
Treasury Stock
Balance at beginning of period (6,702) (6,736)
Treasury stock issued for acquisition 529 --
Exercise of stock options 20 40
--------- ---------
Balance at end of period (6,153) (6,696)
Paid-in Capital
Balance at beginning of period 679 3,629
Treasury stock issued for acquisition 4,803 --
Exercise of stock options 146 318
--------- ---------
Balance at end of period 5,628 3,947
Earnings Invested in the Business
Balance at beginning of period 352,126 338,273
Net earnings 9,233 6,879
Cash dividends (6,072) (5,734)
Equity adjustment for foreign
currency translation (cumulative
charge of $6,581 in 1994 and
$3,291 in 1993) (68) 438
--------- ---------
Balance at end of period 355,219 339,856
Stockholders' Equity at end of period $394,810 $369,200
========= =========
See accompanying Note to Financial Statements.
</TABLE>
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KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED APRIL 3, 1994 AND APRIL 4, 1993
(In thousands of dollars)
1994 1993
---------- ----------
Cash flows from operating activities:
Net earnings $ 9,233 $ 6,879
Noncash adjustments:
Depreciation 4,217 4,016
Changes in certain working capital
components 3,605 3,218
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Cash from operating activities 17,055 14,113
-------- --------
Cash flows from investing activities:
Capital expenditures (3,544) (4,796)
Short-term investments (3,629) 2,007
Increase in other assets (243) (1,105)
-------- --------
Net cash from investing activities (7,416) (3,894)
-------- --------
Cash flows from financing activities:
Dividend payments (6,072) (5,734)
Exercise of stock options 166 358
-------- --------
Net cash from financing activities (5,906) (5,376)
-------- --------
Net change in cash and equivalents 3,733 4,843
Cash and equivalents at beginning
of period 36,020 29,700
-------- --------
Cash and equivalents at end of period $39,753 $34,543
======== ========
See accompanying Note to Financial Statements.
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KELLY SERVICES, INC. AND SUBSIDIARIES
NOTE TO FINANCIAL STATEMENTS
Acquisition
- -----------
In January, 1994, the Company acquired all outstanding stock of Your
Staff, Inc., an employee leasing company, through the issuance of Class
A common stock shares from treasury. The acquisition has been
accounted for using the purchase method of accounting and therefore the
accompanying financial statements include the accounts of Your Staff,
Inc. since the date of acquisition. Pro forma results of the
acquisition, assuming it had been made at the beginning of each period
presented, would not be materially different from the results reported.
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MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations:
First Quarter
Sales of services in the first quarter of 1994 totaled $530,191,000, an
increase of 17.6% from the same period in 1993. This increase
primarily reflected a growth in hours volume over the previous year.
Cost of services, consisting of payroll and related costs of temporary
employees, increased 17.5% in the first quarter as compared to the same
period in 1993. Average hourly payroll costs increased 4% over 1993
due to inflation.
The gross profit rate of 19.2% in the first quarter was .1 percentage
point higher than the previous year. Continued improvement in U.S.
temporary help margins since the middle of last year has helped to
offset pricing pressures in certain European countries.
Selling, general, and administrative expenses of $88,424,000 in the
first quarter increased 15% from the same period in 1993. This
increase was due to the higher level of business activity, new programs
and operating expenses incurred by new acquisitions.
Earnings before taxes were $14,898,000, an increase of 39.2% compared
to the pretax earnings for the same period in 1993. The pretax margin
was 2.8% compared to 2.4% in the first quarter of 1993. Income taxes
as a percentage of pretax earnings were 38.0%, 2.3 percentage points
more than the rate applicable to the first quarter of 1993. The 1994
rate reflected the impact of the retroactive statutory increase in the
corporate tax rate which was enacted in the second quarter of 1993, as
well as reduced tax exempt investment income.
Net earnings were $9,233,000 in the first quarter of 1994, compared to
$6,879,000 in 1993, an increase of 34.2%. Earnings per share, adjusted
for the 5-for-4 stock split, were $.24 compared to the $.18 earned in
the same period last year.
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Financial Condition
Assets totaled $569,257,000 at April 3, 1994, an increase of 5% over
the $542,100,000 at January 2, 1994. Working capital increased
$3,718,000 in the first quarter.
The quarterly dividend rate applicable to Class A and Class B shares
was $.16 per share in the first quarter, an effective 5% increase over
the rate paid in the same period last year, after adjustment for the
5-for-4 stock split of May, 1993.
The Company believes it is in a sound financial position to fully meet
its current working capital needs and its longer term capital
requirements.
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Companies for which this report is filed are: Kelly Services, Inc. and
its subsidiaries, Kelly Assisted Living Services, Inc., Kelly Properties,
Inc., Kelly Professional Services, Inc., Kelly Services (Canada), Ltd.,
Les Services Kelly (Quebec) Inc., Lenore Simpson Personnel, Ltd.,
Societe Services Kelly, Kelly Services (UK), Ltd., Kelly Services
(Ireland), Ltd., Kelly Services (Australia), Ltd., Kelly Services (New
Zealand), Ltd., Kelly Services (Nederland), B.V., Kelly Services of
Denmark, Inc., Kelly de Mexico, S.A. de C.V., Kelly Services Norge
A.S., KSI Acquisition Corp. and Your Staff, Inc.
The information furnished reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results
of operations for the period in this filing.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) See Index to Exhibits required by Item 601,
Regulation S-K, set forth on page 12 of this filing.
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
KELLY SERVICES, INC.
Date: May 11, 1994
/s/ R. F. Stoner
R. F. Stoner
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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INDEX TO EXHIBITS
REQUIRED BY ITEM 601,
REGULATION S-K
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Exhibit
No. Description
- ------- -----------
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.)
