1
Index to Exhibits on page 16
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 October 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1088
KELLY SERVICES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 38-1510762
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(248) 362-4444
----------------------------------------------------
(Registrant's telephone number, including area code)
No Change
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
At November 5, 1999, 32,381,813 shares of Class A and 3,510,406
shares of Class B common stock of the Registrant were outstanding.
2
KELLY SERVICES, INC. AND SUBSIDIARIES
Page
Number
------
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 9
PART II. OTHER INFORMATION 14
Signature 15
Index to Exhibits Required by
Item 601, Regulation S-K 16
<TABLE>
<CAPTION>
3
KELLY SERVICES, INC. and SUBSIDIARIES
STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands of dollars except per share data)
13 Weeks Ended 39 Weeks Ended
---------------------------- -----------------------------
Oct. 3, 1999 Sept. 27, 1998 Oct. 3, 1999 Sept. 27, 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales of services $ 1,092,002 $ 1,032,875 $ 3,184,744 $ 2,993,543
Cost of services 893,900 846,094 2,617,537 2,461,108
----------- ----------- ----------- -----------
Gross profit 198,102 186,781 567,207 532,435
Selling, general and
administrative expenses 155,390 145,404 463,770 432,057
----------- ----------- ----------- -----------
Earnings from operations 42,712 41,377 103,437 100,378
Interest (expense) income, net (309) 841 (147) 2,327
----------- ----------- ----------- -----------
Earnings before income taxes 42,403 42,218 103,290 102,705
Income taxes 17,385 17,315 42,350 42,115
----------- ----------- ----------- -----------
Net earnings $ 25,018 $ 24,903 $ 60,940 $ 60,590
=========== =========== =========== ===========
Earnings per share:
Basic $ .70 $ .65 $ 1.70 $ 1.58
Diluted .69 .65 1.69 1.58
Average shares outstanding (thousands):
Basic 35,868 38,271 35,842 38,228
Diluted 36,060 38,419 36,000 38,446
Dividends per share $ .24 $ .23 $ .71 $ .68
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
4
KELLY SERVICES, INC. and SUBSIDIARIES
BALANCE SHEETS AS OF OCTOBER 3, 1999 AND JANUARY 3, 1999
(In thousands of dollars)
ASSETS 1999 1998
----------- -----------
CURRENT ASSETS: (UNAUDITED)
<S> <C> <C>
Cash and equivalents $ 54,671 $ 59,799
Short-term investments 5,999 12,069
Accounts receivable, less allowances of
$14,265 and $13,035, respectively 620,643 584,653
Prepaid expenses and other current assets 19,248 15,012
Deferred taxes 47,583 48,343
----------- -----------
Total current assets 748,144 719,876
PROPERTY AND EQUIPMENT:
Land and buildings 48,890 44,135
Equipment, furniture and
leasehold improvements 232,352 179,707
Accumulated depreciation (97,966) (77,491)
----------- -----------
Total property and equipment 183,276 146,351
INTANGIBLES AND OTHER ASSETS 108,010 98,020
----------- -----------
TOTAL ASSETS $ 1,039,430 $ 964,247
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 49,150 $ 47,629
Accounts payable 57,055 79,089
Payroll and related taxes 246,839 195,670
Accrued insurance 69,484 66,830
Income and other taxes 45,983 37,265
----------- -----------
Total current liabilities 468,511 426,483
STOCKHOLDERS' EQUITY:
Capital stock, $1 par value
Class A common stock, shares issued 36,559,993
in 1999 and 36,540,770 in 1998 36,560 36,541
Class B common stock, shares issued 3,555,873
in 1999 and 3,575,096 in 1998 3,556 3,575
Treasury stock, at cost
Class A common stock, 4,223,840 shares in 1999
and 4,301,321 in 1998 (80,211) (81,669)
Class B common stock, 7,767 shares in 1999 and 1998 (248) (248)
Paid-in capital 15,665 14,844
Earnings invested in the business 608,008 572,517
Accumulated foreign currency adjustments (12,411) (7,796)
----------- -----------
Total stockholders' equity 570,919 537,764
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,039,430 $ 964,247
=========== ===========
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
5
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands of dollars)
13 Weeks Ended 39 Weeks Ended
------------------------------ -----------------------------
Oct. 3, 1999 Sept. 27, 1998 Oct. 3, 1999 Sept. 27, 1998
------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Capital Stock
Class A common stock
Balance at beginning of period $ 36,548 $ 36,541 $ 36,541 $ 36,538
Conversions from Class B 12 -- 19 3
--------- --------- --------- ---------
Balance at end of period 36,560 36,541 36,560 36,541
Class B common stock
Balance at beginning of period 3,568 3,575 3,575 3,578
Conversions to Class A (12) -- (19) (3)
--------- --------- --------- ---------
Balance at end of period 3,556 3,575 3,556 3,575
Treasury Stock
Class A common stock
Balance at beginning of period (80,635) (5,958) (81,669) (6,029)
Exercise of stock options, restricted stock awards
and other 278 10 1,312 81
Treasury stock issued for acquisition 146 102 146 102
--------- --------- --------- ---------
Balance at end of period (80,211) (5,846) (80,211) (5,846)
Class B common stock
Balance at beginning of period (248) (185) (248) (185)
Purchase of treasury stock -- (64) -- (64)
--------- --------- --------- ---------
Balance at end of period (248) (249) (248) (249)
Paid-in Capital
Balance at beginning of period 15,448 13,751 14,844 10,980
Exercise of stock options, restricted stock awards
and other 151 79 755 2,850
Treasury stock issued for acquisition 66 828 66 828
--------- --------- --------- ---------
Balance at end of period 15,665 14,658 15,665 14,658
Earnings Invested in the Business
Balance at beginning of period 591,599 540,526 572,517 522,039
Net earnings 25,018 24,903 60,940 60,590
Dividends (8,609) (8,801) (25,449) (26,001)
--------- --------- --------- ---------
Balance at end of period 608,008 556,628 608,008 556,628
Accumulated Foreign Currency Adjustments
Balance at beginning of period (17,129) (10,958) (7,796) (7,092)
Equity adjustment for foreign currency 4,718 3,890 (4,615) 24
--------- --------- --------- ---------
Balance at end of period (12,411) (7,068) (12,411) (7,068)
--------- --------- --------- ---------
Stockholders' Equity at end of period $ 570,919 $ 598,239 $ 570,919 $ 598,239
========= ========= ========= =========
Comprehensive Income
Net earnings $ 25,018 $ 24,903 $ 60,940 $ 60,590
Other comprehensive income - Foreign
currency adjustments 4,718 3,890 (4,615) 24
--------- --------- --------- ---------
Comprehensive Income $ 29,736 $ 28,793 $ 56,325 $ 60,614
========= ========= ========= =========
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
6
KELLY SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE 39 WEEKS ENDED OCTOBER 3, 1999 AND SEPTEMBER 27, 1998
(In thousands of dollars)
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 60,940 $ 60,590
Noncash adjustments:
Depreciation and amortization 24,044 20,906
Changes in certain working capital components 13 18,817
----------- -----------
Net cash from operating activities 84,997 100,313
----------- -----------
Cash flows from investing activities:
Capital expenditures (60,621) (39,309)
Proceeds from sales and maturities of short-term investments 671,510 1,312,378
Purchases of short-term investments (665,440) (1,292,178)
Increase in intangibles and other assets (9,195) (5,491)
Acquisition of companies, net of cash received (4,189) (4,642)
----------- -----------
Net cash from investing activities (67,935) (29,242)
----------- -----------
Cash flows from financing activities:
Increase/(Decrease) in short-term borrowings 1,521 (13,015)
Dividend payments (25,438) (26,001)
Exercise of stock options, restricted stock awards and other 1,727 2,931
Purchase of treasury stock -- (64)
----------- -----------
Net cash from financing activities (22,190) (36,149)
----------- -----------
Net change in cash and equivalents (5,128) 34,922
Cash and equivalents at beginning of period 59,799 76,690
----------- -----------
Cash and equivalents at end of period $ 54,671 $ 111,612
=========== ===========
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
7
KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands of dollars)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company
have been prepared in accordance with Rule 10-01 of Regulation S-X and do not
include all the information and notes required by generally accepted
accounting principles for complete financial statements. All adjustments,
consisting only of normal recurring adjustments, have been made which, in the
opinion of management, are necessary for a fair presentation of the results
of the interim periods. The results of operations for such interim periods
are not necessarily indicative of results of operations for a full year. The
unaudited consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and notes thereto for
the fiscal year ended January 3, 1999 (the 1998 consolidated financial
statements).
2. Segment Disclosures
The Company's reportable segments, which are based on the Company's method of
internal reporting, are: (1) U.S. Commercial Staffing, (2) Professional,
Technical and Staffing Alternatives (PTSA) and (3) International. The
following table presents information about the reported sales and earnings
from operations of the Company for the 13-week and 39-week periods ended
October 3, 1999 and September 27, 1998. Segment data presented is net of
intersegment revenues. Asset information by reportable segment is not
presented, since the Company does not produce such information internally.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
U.S. Commercial Staffing $ 571,441 $ 572,204 $ 1,685,781 $ 1,668,854
PTSA 236,285 215,179 700,662 635,466
International 284,276 245,492 798,301 689,223
----------- ----------- ----------- -----------
Consolidated Total $ 1,092,002 $ 1,032,875 $ 3,184,744 $ 2,993,543
=========== =========== =========== ===========
Earnings from Operations:
U.S. Commercial Staffing $ 51,715 $ 52,250 $ 144,625 $ 144,480
PTSA 14,071 10,891 40,178 31,742
International 11,359 9,559 22,963 17,915
Corporate (34,433) (31,323) (104,329) (93,759)
----------- ----------- ----------- -----------
Consolidated Total $ 42,712 $ 41,377 $ 103,437 $ 100,378
=========== =========== =========== ===========
</TABLE>
3. Contingencies
The Company is subject to various legal proceedings, claims and liabilities
which arise in the ordinary course of its business. Litigation is subject to
many uncertainties, the outcome of individual litigated matters is not
predictable with assurance and it is reasonably possible that some of the
foregoing matters could be decided unfavorably to the Company. Although the
amount of the liability at October 3, 1999 with respect to these matters
cannot be ascertained, the Company believes that any resulting liability will
not be material to the financial statements of the Company at October 3,
1999.
8
4. Earnings Per Share
The reconciliations of earnings per share computations for the 13-week and
39-week periods ended October 3, 1999 and September 27, 1998,
were as follows:
13 Weeks Ended 39 Weeks Ended
1999 1998 1999 1998
------- ------- ------- -------
Net earnings $25,018 $24,903 $60,940 $60,590
======= ======= ======= =======
Determination of shares (thousands):
Weighted average common
shares outstanding 35,868 38,271 35,842 38,228
Effect of dilutive securities:
Stock options and other 109 67 89 122
Restricted and performance awards 83 81 69 96
------- ------- ------- -------
Weighted average common shares
outstanding - assuming dilution 36,060 38,419 36,000 38,446
======= ======= ======= =======
Earnings per share - basic $ .70 $ .65 $ 1.70 $ 1.58
Earnings per share - assuming dilution $ .69 $ .65 $ 1.69 $ 1.58
9
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations:
Third Quarter
Sales of services in the third quarter of 1999 were $1.092 billion, an
increase of 5.7% from the same period in 1998. Sales in the U.S. Commercial
Staffing segment were essentially flat. Continued tightness in the U.S. labor
market is the principal constraint on growth in this segment. Professional,
Technical and Staffing Alternatives (PTSA) sales grew by 9.8% while
International sales grew by 15.8% as compared to the third quarter of 1998.
Cost of services, consisting of payroll and related tax and benefit costs of
employees assigned to customers, increased 5.7% in the third quarter as
compared to the same period in 1998. Direct wage costs have increased from
1998 at a rate somewhat higher than the general inflation rate, due to strong
worldwide demand for labor.
Gross profit of $198.1 million was 6.1% higher than the third quarter of
1998, and gross profit as a percentage of sales was 18.1% in 1999 and 1998.
Although the total company gross profit rate was consistent with last year,
there was an increase in the gross profit rate of the Company's Professional,
Technical and Staffing Alternatives businesses, which offset a small decrease
in the Company's International segment.
Selling, general and administrative expenses were $155.4 million in the third
quarter, an increase of 6.9% over the same period in 1998. Expenses averaged
14.2% of sales as compared to 14.1% in last year's third quarter. The rate of
growth of these expenses is attributable primarily to increased depreciation
associated with our 1998 and 1999 year-to-date information technology capital
investments.
Earnings from operations of $42.7 million were 3.2% greater than the third
quarter of 1998. Third quarter net interest expense was $309 thousand, which
was a change of $1.2 million from last year's net interest income of $841
thousand. The decrease is attributable to lower cash and short-term
investment balances than a year ago as a result of the $76 million utilized
in the Company's share repurchase program during the fourth quarter of 1998,
and a 54% increase in year-to-date capital expenditures compared to the same
period in 1998.
Earnings before income taxes were $42.4 million, an increase of 0.4%,
compared to pretax earnings of $42.2 million for the same period in 1998. The
pretax margin was 3.9% as compared to 4.1% in last year's third quarter, due
primarily to the effect of lower net interest (expense) income noted above.
Income taxes were 41.0% of pretax income in the third quarters of 1999 and
1998.
Net earnings were $25.0 million in the third quarter of 1999, an increase of
0.5% over the third quarter of 1998. Diluted earnings per share were $.69
compared to $.65 in the same period last year, a 6.2% increase. The rate of
growth of diluted earnings per share exceeded the rate of growth of net
earnings as a result of the 2.5 million shares repurchased during the fourth
quarter of 1998.
Year-to-Date
Sales of services totaled $3.185 billion during the first nine months of
1999, an increase of 6.4% over 1998. Sales in the U.S. Commercial Staffing
segment grew by 1.0%, while Professional, Technical and Staffing Alternatives
(PTSA) sales grew by 10.3% compared to last year. International sales grew by
15.8% as compared to the first nine months of 1998.
Cost of services of $2.618 billion was 6.4% higher than last year, reflecting
volume growth and increases in payroll rates due to strong demand for labor
worldwide.
Gross profit increased 6.5% in 1999 due to increased sales. The gross profit
rate was 17.8% for the first nine months of 1999 and 1998. There was a small
decrease in the gross profit rate within the International segment, but the
overall impact was immaterial.
10
Selling, general and administrative expenses of $463.8 million were 7.3%
higher than last year. The spending rate was 14.6% of sales, 0.2 percentage
points above last year's rate. Increased information technology systems
depreciation and year 2000 related conversion costs caused the year-to-date
increase in the spending rate.
Earnings before taxes were $103.3 million, an increase of 0.6% over 1998.
These earnings averaged a pretax margin of 3.2% in the first nine months of
1999 compared to 3.4% in 1998. Income taxes were 41.0% of pretax earnings in
the first nine months of 1999 and 1998.
Net earnings were $60.9 million or 0.6% above the first nine months of 1998.
Diluted earnings per share were $1.69, an increase of 7.0% as compared to
$1.58 in the first nine months of 1998.
Financial Condition
Assets totaled $1.039 billion at October 3, 1999, an increase of 7.8% over
the $964.2 million at January 3, 1999. Working capital decreased $13.8
million during the nine-month period. The current ratio was 1.6 at October 3,
1999, and 1.7 at January 3, 1999.
During the first nine months of 1999, net cash from operating activities was
$85.0 million, a decrease of 15.3% from the comparable period in 1998. This
decrease resulted principally from an increase in the accounts receivable
balance. The Company's global days sales outstanding for the 39-week period
were 53 days, as compared to 54 days for the same period last year.
Capital expenditures of $60.6 million in 1999 and $39.3 million in 1998 were
principally for developing new information systems.
The quarterly dividend rate applicable to Class A and Class B shares
outstanding was $.24 per share in the third quarter of 1999. This represents
a 4.3% increase compared to a dividend rate of $.23 per share in the third
quarter of 1998.
The Company's financial position continues to be strong. This strength will
allow it to continue to aggressively pursue growth opportunities, while
supporting current operations.
Year 2000 Systems Update
The Year 2000 problem is an issue regarding computer programs and
non-information technology systems that use embedded computer chips such as
microcontrollers. Many of these programs are unable to distinguish between a
year that begins with "20" instead of the familiar "19" and therefore could
fail or produce incorrect results.
In 1995, the Company embarked upon a global Year 2000 Project. The project
scope includes hardware, software and embedded chip technology. A formal
Project Office was established with complete executive sponsorship and
funding in February 1997. This initiated a global business system strategy
that included a wide-scale Oracle implementation of business and financial
systems, plus major enhancements to branch automation systems. Included in
these initiatives is the remediation of Year 2000 non-compliant systems.
The Company's State of Readiness
Remediation of Year 2000 non-compliant systems was divided into the following
major initiatives: mainframe, client server, domestic and international
subsidiaries. The common project phases consisted of: inventory all hardware,
software and embedded systems; prioritize systems based on business
criticality; complete a risk assessment based on interviews with business
users and subject matter experts, analysis of date functionality, and vendor
documentation; test and decide to upgrade, replace or retire, as appropriate;
internal certification; a return to production and business contingency
planning. Compuware Corporation was selected to assist in the inventory
remediation and testing process.
The inventory and assessment phase is 100% complete. Remediation and testing
is 100% complete for all business critical systems in all business areas.
Overall, the project is 98% complete with final testing scheduled for only
legally required changes associated with tax, benefit and payroll systems. A
freeze on all non-essential systems changes has been put into effect and will
remain in effect until after January 15, 2000.
11
External communications and readiness assessments have been distributed to
all customers, landlords, vendors, suppliers and facilities for North
America. International communications and assessments were 100% complete at
year-end 1998. Ongoing analysis of responses will determine follow-up action
including additional contingency plans.
To deal with any unforeseen issues, a Business Continuity Command Center has
been established and will be operational at the Company's world headquarters
from December 28, 1999 through January 9, 2000. This Command Center will
function as a central point of contact to manage and bring resolution to
Y2K-related issues. Regional Command Centers will be set up around the world
to monitor and report current business conditions as well as invoke
continuity plans if needed. Plans have been established to relocate critical
business groups to a continuous power site in the event of a widespread power
outage.
The Costs To Address The Company's Year 2000 Issues
The total cost of the Year 2000 project is expected to be at least somewhat
offset by the benefits to be realized by the Company. These include: enhanced
functionality at the branch level; a worldwide inventory of information
technology and systems; a high-level documentation of business processes used
by strategic business units; rationalization and standardization of diverse
information systems; upgrades and standardization of desktop computing;
upgrade of wide area network to remote business units; improved software
quality assurance; and clean-up and documentation of older program code.
Total cost of the Year 2000 remediation project is estimated to be
approximately $21 million. The total amount incurred to date is $18 million,
of which $1 million was expended in 1997, $8 million in 1998 and $8 million
in 1999. Approximately $8 million of the total cost has been incurred for
remediation (code remediation, project management compliance and risk
assessment), $7 million for testing, and the balance for contingency
development.
The estimated future cost of completing the Year 2000 project is
approximately $3 million to be incurred in the fourth quarter of 1999 and
early 2000. Of these future costs the Company estimates approximately $1
million will relate to remediation, $2 million for testing and the balance
for contingency activities. Funds for the project are budgeted separately
from other Information Technology initiatives. These costs are being expensed
as an element of Selling, General and Administrative expense and are funded
from cash provided by operations.
The Risks Of The Company's Year 2000 Issues
The failure to correct a material Year 2000 problem could result in an
interruption, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. It is believed the
most significant of risks concern the Year 2000 readiness of third party
customers and suppliers. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity or
financial condition. The Year 2000 Project is expected to significantly
reduce the Company's level of uncertainty about the Year 2000 problem and
through, in particular, the Year 2000 readiness of its internal systems and
processes and its assessment of third-party preparedness.
In general, all reasonable steps have been taken or are in process to ensure
operations will continue without disruption. Additionally, in the event of
circumstances resulting from the failure of a third party, all reasonable
steps will have been taken to ensure appropriate contingency plans exist or
are being developed to minimize the impact of these failures.
Market Risk Sensitive Instruments and Positions
The market risk inherent in the Company's market risk sensitive instruments
and positions is the potential loss arising from adverse changes in foreign
currency exchange rates and interest rates. Foreign currency exchange risk is
mitigated by the availability of the Company's multi-currency line of credit.
This credit facility can be used to borrow in the local currencies that can
effectively hedge the exchange rate risk resulting from foreign currencies
weakening in relation to the U.S. dollar.
The Company's holdings and positions in market risk sensitive instruments do
not subject the Company to material risk exposures.
12
Forward-Looking Statements
Except for the historical statements and discussions contained herein,
statements contained in this report relate to future events that are subject
to risks and uncertainties, such as: competition, changing market and
economic conditions, currency fluctuations, changes in laws and regulations,
the Company's ability to effectively implement and manage its information
technology programs, including the Year 2000 project, and other factors
discussed in the report and in the Company's filings with the Securities and
Exchange Commission. Actual results may differ materially from any
projections contained herein.
13
Companies for which this report is filed are:
Kelly Services, Inc. and its subsidiaries:
Kelly Assisted Living Services, Inc.
Kelly Properties, Inc.
Kelly Professional and Technical Services, Inc.
Kelly Services (Canada), Ltd.
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.
Kelly Staff Leasing, Inc.
The Law Registry
Kelly Services (Suisse) Holding S.A.
Kelly Professional Services (France), Inc.
Kelly Services France S.A.
Kelly Formation S.A.R.L.
Kelly Services Luxembourg S.A.R.L.
Kelly Services Italia Srl
Kelly Services Iberia Holding Company, S.L.
Kelly Services Empleo Empresa de Trabajo Temporal, S.L.
Kelly Services Seleccion y Formacion, S.L.
Kelly Services CIS, Inc.
ooo Kelly Services
Kelly Services (societa di fornitura di lavaro temporaneo) SpA
Kelly Services Interim, S.A.
Kelly Services Deutchland GmbH
Kelly Services Consulting GmbH
Kelly Services Interim (Belgium) S.A., N.V.
Kelly Services Select (Belgium) S.A., N.V.
Kelly Services Sverige A.B.
LabStaff Pty. Ltd.
HTM Group
Interim Job S.A.R.L.
14
PART II. OTHER INFORMATION
Item 2. Changes in Securities.
On November 5, 1999, Kelly Services, Inc. ("KSI"), through
its wholly owned subsidiaries Kelly de Mexico, S.A. de C.V.
and Kelly Properties, Inc., acquired all of the issued and
outstanding shares of Manufactura de Alta Tecnologia S.A.
de C.V. ("MAT"), Outsourcing de Servicios y Manufactura,
S.A. de C.V. ("OSM") and QSM, S.A. de C.V. The companies
are engaged in the business of providing employees on a
temporary or permanent basis.
KSI delivered 5,188 shares of its Class A Common Stock from
Treasury as part of the consideration for the shares.
Subject to satisfaction of the conditions in the agreement
and adjustment based on the future price of KSI Class A
Common Stock and currency exchange rates, KSI will deliver
up to approximately 11,000 additional shares over the next
two years. The shares of KSI stock were and will be
delivered pursuant to an agreement among certain KSI
subsidiaries and the holders of the shares of MAT, OSM and
QSM. The shares of KSI stock were issued pursuant to
Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D thereunder. The owners of the companies
purchased represented that they, either alone or through
their purchaser representative, have such knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment
in KSI. There were no underwriters or other distributors.
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 16 of this filing.
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
15
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: November 16, 1999
/s/ William K. Gerber
William K. Gerber
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
16
INDEX TO EXHIBITS
REQUIRED BY ITEM 601,
REGULATION S-K
Exhibit
No. Description Document
- ------- ----------- --------
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 June 30, 1996, filed with the
Commission in August, 1996, which is incorporated
herein by reference).
27 Financial Data Schedule for nine months ended
October 3, 1999. 2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> OCT-03-1999
<CASH> 54,671
<SECURITIES> 5,999
<RECEIVABLES> 634,908
<ALLOWANCES> 14,265
<INVENTORY> 0
<CURRENT-ASSETS> 748,144
<PP&E> 281,242
<DEPRECIATION> 97,966
<TOTAL-ASSETS> 1,039,430
<CURRENT-LIABILITIES> 468,511
<BONDS> 0
0
0
<COMMON> 40,116
<OTHER-SE> 530,803
<TOTAL-LIABILITY-AND-EQUITY> 1,039,430
<SALES> 0
<TOTAL-REVENUES> 3,184,744
<CGS> 0
<TOTAL-COSTS> 2,617,537
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 103,290
<INCOME-TAX> 42,350
<INCOME-CONTINUING> 60,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,940
<EPS-BASIC> 1.70
<EPS-DILUTED> 1.69
</TABLE>
