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, 19941, 1995
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 _____
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. _____
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, 1994,10, 1995, based upon the last price
on that date of $33.00$31.50 was $12,680,019,$12,047,585, as reported by the Wall
Street Journal.
Registrant had 34,346,45934,369,035 shares of Class A and 3,603,1243,601,127 of Class B
common stock, par value $1.00, outstanding as of March 1, 1994.10, 1995.
Documents Incorporated by Reference
The proxy statement of the registrant with respect to the 19941995 Annual Meeting
of Stockholders is incorporated by reference in Part III.
Dated: March 11, 199424, 1995
-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, professional, 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, Switzerland, 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 throughunder the name of
Your Staff, a wholly owned 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 flatan hourly 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 185,000approximately 200,000 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.
-3-
Registrant operates through approximately 9001,000 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, Switzerland, 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. ApproximatelyAt fiscal year-end 1994 approximately
ninety-nine percent of the offices arewere operated directly by the registrant (or
one of its wholly owned subsidiaries). The with the remaining offices are operated by 105
licensees. In February, 1995 the remaining licensed branches were converted to
direct operated branches.
(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.
-4-
(xiii) Employees. Registrant and subsidiaries employ on a full time
basis approximately 800900 persons at its headquarters in Troy, Michigan, and
approximately 3,5003,900 persons in branch offices operated directly by registrant.
Registrant employed in the last fiscal year 630,000665,000 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, Switzerland, and Wales; sales forof these
operations totalledtotaled $357,000,000 in 1994, $235,000,000 in 1993 and $225,000,000
in 19921992; operating profit totaled $4,500,000 in 1994 and $189,000,000 in 1991; operating losses
totalledtotaled $2,500,000 in 1993 and $5,600,000 in 1992 and $4,100,000 in 1991.1992. Identifiable assets of these foreign operations wereare
$117,600,000, $70,900,000 $69,300,000
and $65,700,000$69,300,000 at the end of 1994, 1993 1992 and 1991,1992,
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
175,000206,000 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.
TheIn 1992 the Internal Revenue Service (IRS) has proposed the imposition of an
accumulated earnings tax totallingtotaling $49 million for 1988, 1989 and 1990 in
connection with an audit of the Company's consolidated federal tax liability.
The proposed amount has been subsequently reduced to $11 million. 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 present and future needs of Kelly'sits 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 1993.1994.
-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
------- ------- ------- ------- -------
1994
----
Stock Prices
Class A common
High . . . . . . . . $31 1/4 $29 $32 $30 1/2 $32
Low . . . . . . . . 23 23 24 25 3/4 23
Class B common
High . . . . . . . . 34 33 1/2 33 1/2 29 1/2 34
Low . . . . . . . . 28 28 29 27 1/4 27 1/4
Dividends. . . . . . . . .160 .180 .180 .180 .700
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 1,3231,283 and 320,304, respectively, as of March 1, 1994.10,
1995.
-6-
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, 1994.1, 1995. 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.
(In millions except (1)
per share amounts) 1994 1993 1992 1991 1990 1989 1988
-
------------------- ---- ---- ---- ---- ---- ----
(2)
Sales of services . . . . $2,362.6 $1,954.5 $1,712.7 $1,424.3 $1,456.3 $1,364.9
$1,262.1
Earnings before taxes . . 98.5 70.9 61.0 60.2 113.0 112.9 99.3
Net earnings. . . . . . . 61.1 44.6 39.2 38.6 71.2 70.8
60.3
(3)
Per share data :data:
Earnings . . . . . . . $ 1.61 $ 1.18 $ 1.04 $ 1.03 $ 1.89 $ 1.89 $ 1.61
Dividends . . . . . . .
Class A common. . . . .70 .63 .58 .57 .53 .46 .38
Class B common. . . . .70 .63 .58 .57 .53 .46 .38
Working capital . . . . . $ 315.8 $ 291.2 $ 279.8 $ 287.0 $ 287.2 $ 243.4
$ 195.7
Total assets. . . . . . . 642.1 542.1 496.1 479.4 443.8 394.3 326.4
(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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
1994 versus 1993
Sales reached a record level of $2.36 billion in 1994, an increase of 21%
over 1993. Increases in domestic sales, acquisitions completed during the
year, and the strengthening of worldwide economies all contributed to this
growth.
Cost of services, representing payroll and related taxes and benefits for
temporary employees, increased 21%. Strong sales volume and increases in pay
rates and payroll taxes accounted for this change. Gross profit, as a percent
of sales, rose from 19.5% in 1993 to 19.6% in 1994. Excluding the effect of
our employee leasing business acquired in 1994, gross profit averaged 20.1%
during 1994.
Selling, general and administrative expenses rose 17% during 1994. As a
percent of sales, expenses declined from 16.2% to 15.7% in 1994. Excluding
the effects of the employee leasing business (with its inherently lower cost
structure), the expense to sales relationship was 16.1% in 1994. Earnings
from operations this year totaled approximately $92 million, an increase of
44% over 1993.
-7-
Interest income for 1994 was $6.7 million, down 3.6% from the 1993 level
of $7.0 million. The reduction in the interest rates accounted for the slight
decline in interest income during the year.
Earnings before taxes were $98.5 million, an increase of 39%. Pretax
margins were 4.2% in 1994, improved from 3.6% in 1993. Income taxes increased
42% over 1993, with an effective tax rate of 38.0%, compared to a 37.1% rate
in 1993. The current year tax rate rose primarily as a result of the
reduction in tax exempt interest income and the absence of a credit from a
change in accounting for taxes which was reflected in the 1993 tax rate.
Net earnings were $61.1 million in 1994, 37% above the 1993 results of
$44.6 million. The rate of return on sales was 2.6%, up from the 1993 return
of 2.3%. Earnings per share were $1.61 in 1994 and $1.18 in 1993.
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 up 16% over
1992.. This improvement was attributable
principally to increases in domestic sales volume. InternationalThe effect of an increase
in international sales also reflected a strong increase; however,
the strengthening of the U.S. dollarwas moderated those results.by less favorable currency exchange
rates.
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.1993. Branch automation
has provencontributed to be an effective tool in achieving this productivity.
-7-
Earnings from operations this year totalledin 1993 totaled $63.9 million, an increase of
25% over 1992. The 1993 results, after restating the 1992 results to exclude
the 53rd week, were up 31% over last year..
Interest income for 1993 was $7$7.0 million, down 29% from the 1992 level
of $9.8 million. The combination of aA smaller investment portfolio and a
reduction in thelower interest rates
accounted for the decline in interest income
during the year.decline.
Earnings before taxes were $70.9 million, an increase of 16%. Pretax
margins were 3.6% forin 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 year1993 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, adjusted for the stock split in 1993, 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.
-8-
Liquidity and Capital Resources
Cash flow from operations for 1993in 1994 was $44.9$67 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
providedacquisitions. Net cash from operations totaled $12.2$45 million in
19921993 and $58.5$12 million in 1991. The Company has used most of these funds in its operations and payments
of dividends.1992.
The Company's working capital of $291$316 million increased 4%8% during the
year, after a 4% increase in 1993 and a 2.5% decline in 1992 and no change in 1991.1992. The current
ratios were 2.5, 2.9 and 3.2 in 1994, 1993 and 3.3 in 1993, 1992, respectively. The
current ratios have declined, primarily because of expanding business
activity, including acquisitions, and 1991, respectively.
-8-the resulting effect upon working
capital requirements.
Stockholders' equity grew 5%12% in 1993, which was higher than the 3%
increase reported in 1992 and equal1994, compared to the 5% increase
in 1993 and the 3% increase of 1991.1992. The return on average stockholders'
equity was 11.8%14.9% this year, an improvement over the previous two years' rates
of 11.8% in 1993 and 10.9% in 1992 and 11.1% in 1991. A five-for-four
stock split was approved by the Board of Directors in May, 1993.1992. Equity per share at year-end wasincreased to $11.37 in
1994 from $10.23 atin 1993 and $9.74 at 1992 and $9.43 at 1991.in 1992. Dividends per share over the past
three years were $.70 in 1994, $.63 in 1993 and $.58 in 1992
and $.57 in 1991.1992. 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 1314 of this filing and are presented in
pages 14-25.15-25.
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.
-9-
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Served as an Business Experience
Name/Office Age Officer Since (2) During Last 5 Years
- ------------------------ ---------------- ----------------- --------------------------------
William R. Kelly 8889 1952 Served as officer of registrant.
Chairman of the Board
Terence E. Adderley (1) 6061 1961 Served as officer of registrant.
President and Chief
Executive Officer
Christopher A. Arnette 38 1995 Served as officer of registrant
Senior Vice President since January, 1995. Prior
thereto, served as Vice
President and Chief
Information Officer of
Ameritech Advertising Services
since 1992. Prior thereto,
served as Vice President,
Information Systems of Dun &
Bradstreet Corporation.
Robert G. Barranco 5354 1989 Served as officer of registrant
Executive Vice President since May, 1994. Served as
officer of operating Senior Vice President division
sincefrom March, 1991.
and General Manager,1991 until May,
1994. Prior thereto, served as
Kelly Temporary officer of registrant.
Services Division
Donald A. Bobo 5253 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 5152 Served as officer of operating
Senior Vice President division.
and General Manager,
Kelly Temporary
Services Division
Eugene L. Hartwig 60 1990
-10-
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
(continued)
Served as an Business Experience
Name/Office Age Officer Since (2) During Last 5 Years
------------------------ --------------- ----------------- --------------------------------
Paul K. Geiger 61 1993 Served as officer of registrant
Senior Vice President since March, 1990.April, 1993. Served as
Vice President and Chief
Financial Officer of the
University of Detroit Mercy from
September, 1990 until April,
1992. Prior thereto, served as
Partner with Ernst & Young.
Eugene L. Hartwig 61 1990 Served as officer of registrant.
Senior Vice President,
General Counsel and
Secretary
Michael J. McGowan 41 Served as officer of operating
Senior Vice President division since January, 1995.
and General Manager, Prior thereto, served as Vice
Kelly Temporary President and General Manager
Services Division and in other capacities of
counsel
Secretary with Butzel Long.Employer Systems and Services
business unit of The MEDSTAT
Group since 1992. From 1977 to
1992 served as Acting General
Manager and in other capacities
of divisions of Automated Data
Processing, including ADP
Employer Services Division, ADP
Automotive Information Services
Division and ADP Dealer Services
Division.
Robert H. McNabb 47 Served as officer of operating
Senior Vice President division since September, 1994.
and General Manager, From 1991, served as President
Kelly Temporary of the Central Division and
Services Division National Accounts of Talent
Tree Personnel Services. Prior
thereto, served as employee of
James River Corporation.
-11-
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
(continued)
Served as an Business Experience
Name/Office Age Officer Since (2) During Last 5 Years
------------------------ --------------- ----------------- ---------------------------------
Joanne E. Start 4950 1989 Served as officer of registrant.
Senior Vice President
Robert F. Stoner 6061 1969 Served as officer of registrant.
Senior Vice President
Robert E. Thompson 5152 1982 Served as officer of registrant.
SeniorExecutive Vice President
-10-
ITEM 10
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
(continued)
Served as an Business Experience
Name/Officer Age Officer Since (2) During Last 5 Years
- ------------------------ --------------- ----------------- --------------------------------
Noel S. Wheeler 53Tommi A. White 44 1993 Served as officer of operatingregistrant
Senior Vice President division since January, 1991.
and Managing Director,November, 1993. From
1992, served as Vice President
Rollout Operations of Automated
Data Processing. Prior thereto,
served as an
Kelly Temporary officerheld senior positions at Skandia
Direct Operations Corporation,
American Express, Ryder System
and National Bank of registrant.
Services Division
(International)Detroit.
(1) Mr. Adderley is Mr. William R. Kelly's son.
(2) Each officer serves continuously until removed by the Board of Directors.
-11--12-
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 1, 1995, January 2, 1994 and
January 3, 1993 and
December 29, 1991
Statements of Earnings for the three fiscal years ended
January 2, 19941, 1995
Statements of Cash Flows for the three fiscal years ended
January 2, 19941, 1995
Statements of Stockholders' Equity for the three fiscal years ended
January 2, 19941, 1995
Notes to Financial Statements
2. Financial Statement SchedulesSchedule -
As of January 2, 1994:
I - Marketable Securities -- Other Investments
For the three fiscal years ended January 2, 1994:
VIII1, 1995:
II - 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, 1994.1, 1995.
(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 SchedulesSchedule beginning at page 26 of this
filing.
(d) The Index to Financial Statements and Supplemental Schedules areSchedule is
included following the signatures beginning at page 1314 of this
filing.
-12--13-
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, 199424, 1995 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, 199424, 1995 * W. R. Kelly
--------------------------------------
W. R. Kelly
Chairman of the Board
Date: March 11, 199424, 1995 * T. E. Adderley
--------------------------------------
T. E. Adderley
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Date: March 11, 199424, 1995 * C. V. Fricke
--------------------------------------
C. V. Fricke
Director
Date: March 11, 199424, 1995 * H. E. Guenther
--------------------------------------
H. E. Guenther
Director
Date: March 11, 199424, 1995 * V. G. Istock
--------------------------------------
V. G. Istock
Director
Date: March 11, 199424, 1995 /s/ R. F. Stoner
--------------------------------------
R. F. Stoner
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 11, 199424, 1995 *By /s/ R. F. Stoner
--------------------------------------
R. F. Stoner
Attorney-in-Fact
-13--14-
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULESSCHEDULE
Kelly Services, Inc. and Subsidiaries
Page Reference
in Report on
Form 10-K
--------------
Report of Independent Accountants 1415
Balance Sheets at January 1, 1995, January 2, 1994
and January 3, 1993 and December 29, 1991 1516
Statements of Earnings for the three fiscal years ended
January 2, 1994 161, 1995 17
Statements of Cash Flows for the three fiscal years ended
January 2, 1994 171, 1995 18
Statements of Stockholders' Equity for the three fiscal
years ended January 2, 1994 181, 1995 19
Notes to Financial Statements 1920 - 2324
Financial Statement SchedulesSchedule -
Schedule I - Marketable Securities--
Other Investments 24
Schedule VIIIII - Valuation Reserves 25
-14--15-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors,
Kelly Services, Inc.
In our opinion, the accompanying consolidated balance sheetsfinancial statements as listed
in Item 14(a) 1 and the related
consolidated statements2 of earnings, of stockholders' equity and of cash flowsthis Form 10-K present fairly, in all material
respects, the financial position of Kelly Services, Inc. and its subsidiaries
at January 1, 1995, January 2, 1994 and 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 - --------------------LLP
------------------------
Price Waterhouse LLP
Detroit, Michigan
February 3, 19941, 1995
-15--16-
BALANCE SHEETS
Kelly Services, Inc. and Subsidiaries
1994 1993 1992 1991
---------- ---------- ----------
(In thousands of dollars)
ASSETS
Current Assets
Cash and equivalents . . . . . . . . . . . . $ 49,207 $ 36,020 $ 29,700 $ 41,283
Short-term investments . . . . . . . . . . . 142,723 144,988 154,602 186,173
Accounts receivable, less allowances of
$5,660, $4,735 $3,775 and $3,180,$3,325, respectively. . 307,478 248,161 209,045 170,819
Prepaid expenses and other current assets. . 27,018 17,881 15,225 13,195
---------- ---------- ----------
Total current assets. . . . . . . . . . 526,426 447,050 408,572 411,470
Property and Equipment
Land and buildings . . . . . . . . . . . . . 34,044 29,882 23,794 20,899
Equipment, furniture and leasehold
improvements . . . . . . . . . . . . . . . 90,868 82,227 83,475 59,822
Accumulated depreciation . . . . . . . . . . (54,731) (43,827) (37,920) (29,221)
---------- ---------- ----------
Total property and equipment. . . . . . 70,181 68,282 69,349
51,500Intangibles and Other Assets . . . . . . . . . . . . . . . . .45,491 26,768 18,154 16,433
---------- ---------- ----------
Total Assets . . . . . . . . . . . . . . . . . $ 642,098 $ 542,100 $ 496,075 $ 479,403
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . $ 33,716 $ 24,621 $ 13,100 $ 24,017
Payroll and related taxes . . . . . . . . . 102,911 68,451 53,986 43,082
Accrued insurance. . . . . . . . . . . . . . 57,390 51,841 48,855 48,250
Income and other taxes . . . . . . . . . . . 16,565 10,968 12,875 9,097
---------- ---------- ----------
Total current liabilities . . . . . . . 210,582 155,881 128,816 124,446
Stockholders' Equity
Capital stock, $1.00 par value
Class A common stock, shares issued 36,507
in 1994, 36,507 in 1993 and 29,195
in 1992 and 29,187
in 1991 . . . . . . . . . . . . . . . . 36,507 36,507 29,195 29,187
Class B common stock, shares issued 3,609
in 1994, 3,609 in 1993 and 2,898
in 1992 and 2,906
in 1991 . . . . . . . . . . . . . . . . 3,609 3,609 2,898 2,906
Treasury stock, at cost
Class A common stock, 2,3612,153 shares in
1994, 2,361 in 1993 and 1,928 in 1992 and 1,994 in 1991.1992. . (6,186) (6,702) (6,736) (6,462)
Paid-in capital. . . . . . . . . . . . . . . 5,868 679 3,629 1,821
Earnings invested in the business. . . . . . 391,718 352,126 338,273 327,505
---------- ---------- ----------
Total stockholders' equity. . . . . . . 431,516 386,219 367,259 354,957
---------- ---------- ----------
Total Liabilities and Stockholders' Equity . . $ 642,098 $ 542,100 $ 496,075 $ 479,403
========== ========== ==========
See accompanying Notes to Financial Statements.
-16--17-
STATEMENTS OF EARNINGS
Kelly Services, Inc. and Subsidiaries
(1)
1994 1993 1992 1991
------------- ------------- -------------
(In thousands of dollars except per share items)
Sales of services. . . . . . . . . . . . . . . . $ 2,362,561 $ 1,954,534 $ 1,712,726 $ 1,424,309
Cost of services . . . . . . . . . . . . . . . . 1,899,552 1,573,797 1,372,387 1,115,635
------------ ------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . 463,009 380,737 340,339 308,674
Selling, general and administrative expenses . . 371,262 316,838 289,114 262,000
------------ ------------ ------------
Earnings from operations . . . . . . . . . . . . 91,747 63,899 51,225 46,674
Interest income . . . . . . . . . . . . . . . . 6,710 6,960 9,800 13,575
------------ ------------ ------------
Earnings before income taxes . . . . . . . . . . 98,457 70,859 61,025 60,249
Income taxes:
Federal . . . . . . . . . . . . . . . . . . . 29,915 20,595 16,840 16,605
State and other . . . . . . . . . . . . . . . 7,485 5,705 4,960 5,025
------------ ------------ ------------
Total income taxes . . . . . . . . . . . . . . . 37,400 26,300 21,800 21,630
------------ ------------ ------------
Net earnings . . . . . . . . . . . . . . . . . . $ 61,057 $ 44,559 $ 39,225 $ 38,619
============ ============ ============
Earnings per share . . . . . . . . . . . . . . . $1.61 $1.18 $1.04 $1.03
Dividends per share . . . . . . . . . . . . . . $ .70 $ .63 $ .58 $ .57
Average shares outstanding (thousands) . . . . . 37,956 37,728 37,668 37,616
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
-17--18-
STATEMENTS OF CASH FLOWS
Kelly Services, Inc. and Subsidiaries
(1)
1994 1993 1992 1991
--------- --------- ---------
(In thousands of dollars)
Cash flows from operating activities
Net earnings . . . . . . . . . . . . . . . . . . $ 61,057 $ 44,559 $ 39,225 $ 38,619
Noncash adjustments:
Depreciation . . . . . . . . . . . . . . . . . 17,309 16,614 13,977 9,805
Changes in certain working capital components. (11,000) (16,300) (41,023) 10,066
--------- --------- ---------
Net cash from operating activities . . . . . 67,366 44,873 12,179 58,490
Cash flows from investing activities
Capital expenditures . . . . . . . . . . . . . . (18,433) (16,056) (32,449) (23,509)
Short-term investments . . . . . . . . . . . . . 2,265 9,614 31,571
(65,422)
Increase in intangibles and other assets . . . . . . . . . . . .(11,814) (9,296) (2,419) (3,620)
--------- --------- ---------
Net cash from investing activities . . . . . (27,982) (15,738) (3,297) (92,551)
Cash flows from financing activities
Dividend payments. . . . . . . . . . . . . . . . (26,570) (23,846) (21,999) (21,666)
Exercise of stock options. . . . . . . . . . . . 373 1,049 1,617 474
Fractional shares paid . . . . . . . . . . . . . -- (18) -- --
Purchase of treasury stock . . . . . . . . . . . -- -- (83) (101)
--------- --------- ---------
Net cash from financing activities . . . . . (26,197) (22,815) (20,465) (21,293)
Net change in cash and equivalents . . . . . . . . 13,187 6,320 (11,583) (55,354)
Cash and equivalents at beginning of year. . . . . 36,020 29,700 41,283 96,637
--------- --------- ---------
Cash and equivalents at end of year. . . . . . . . $ 49,207 $ 36,020 $ 29,700 $ 41,283
========= ========= =========
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
-18--19-
STATEMENTS OF STOCKHOLDERS' EQUITY
Kelly Services, Inc. and Subsidiaries
(1)
1994 1993 1992 1991
---------- ---------- ----------
(In thousands of dollars)
Capital Stock
Class A common stock
Balance at beginning of year . . . . . . . . $ 36,507 $ 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 36,507 29,195 29,187
Class B common stock
Balance at beginning of year . . . . . . . . 3,609 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 3,609 2,898 2,906
Treasury Stock
Balance at beginning of year . . . . . . . . (6,702) (6,736) (6,462)
(6,321)Treasury stock issued for acquisition. . . . 529 -- --
Exercise of stock options. . . . . . . . . . (13) 34 (191) (40)
Purchase of treasury stock . . . . . . . . . -- -- (83) (101)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . (6,186) (6,702) (6,736) (6,462)
Paid-in Capital
Balance at beginning of year . . . . . . . . 679 3,629 1,821
1,307
Five-for-fourTreasury stock split.issued for acquisition. . . . . . . . . . (3,965)4,803 -- --
Exercise of stock options. . . . . . . . . . 386 1,015 1,808
514Five-for-four stock split. . . . . . . . . . -- (3,965) --
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 5,868 679 3,629 1,821
Earnings Invested in the Business
Balance at beginning of year . . . . . . . . 352,126 338,273 327,505 310,748
Net earnings . . . . . . . . . . . . . . . . 61,057 44,559 39,225 38,619
Cash dividends . . . . . . . . . . . . . . . (26,570) (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 $1,408
in 1994, $6,513 in 1993 and $3,729 in
1992;
credit of $2,729 in 19911992 . . . . . . . . . . . . . . . . . . . 5,105 (2,784) (6,458) (196)
--------- --------- ---------
Balance at end of year . . . . . . . . . . . 391,718 352,126 338,273 327,505
Stockholders' Equity at end of year. . . . . . . $431,516 $386,219 $367,259 $354,957
========= ========= =========
See accompanying Notes to Financial Statements.
(1) Fiscal year included 53 weeks.
-19--20-
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 aton January 1, 1995 (1994), January 2, 1994
(1993), and January 3, 1993 (1992). The fiscal years 1994 and December 29, 1991. The current1993 were
52-week periods and fiscal year is a 52-week period,
while 1992 was a 53-week period and 1991 included 52 weeks.period.
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 internationalInternational operations are conducted in Canada, Europe, Australia, New
Zealand and Mexico. Sales forof these operations totalledtotaled $357,000 in 1994,
$235,000 in 1993 and $225,000 in 19921992; operating profit totaled $4,500 in
1994 and $189,000 in 1991; operating losses totalledtotaled $2,500 in 1993 and $5,600 in 1992, and $4,100 in 1991.1992.
Identifiable assets are $117,600, $70,900 $69,300 and $65,700$69,300 at the end of 1994,
1993 and 1992, and 1991, respectively.
Certain prior year amounts have been reclassified to conform with the
current presentation.
CURRENT ASSETS
Cash and equivalents includeare stated at cost, which approximates market.
Included are highly liquid debt instruments purchased with original maturities of three
months or less.
Short-term investments includeare debt instruments having an original maturitymaturities
of more than three monthsmonths. Approximately 80% are federal, state and local
government obligations and $119,000 are stateddue within one year. The balance is
due within two years and is available for sale. The difference between
carrying amounts and market is not material at cost and accrued interest, which approximates market.January 1, 1995.
PROPERTY AND EQUIPMENT
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 shareThe Company conducts its field operations primarily from leased
facilities. The following are based onfuture minimum lease commitments for the
average number of Class Afive-year period commencing in 1995: $25,700, $19,600, $14,300, $9,300 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,$5,800. Lease expense for 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 deposits1992 amounted to $26,700, $24,900,
and cash values of company
owned life insurances.$24,400, respectively.
-20--21-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
(continued)INTANGIBLES AND OTHER ASSETS
Intangibles and other assets include $34,500, $17,900 and $12,100 of
intangibles at year-end 1994, 1993 and 1992, respectively. These intangible
assets represent primarily the excess of cost over net assets of businesses
acquired, amortized over periods not exceeding 40 years. Other assets include
deposits and cash values of life insurance on the lives of officers and key
employees.
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 increasedstockholders approved
an increase in 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 officersAll per share and certain other
management employees. Upon approval byshare data in the Board of Directors, a contributionaccompanying financial
statements and notes have been restated to give effect to stock splits.
Earnings per share are based on eligible wages is funded annually. The plan offers a savings featurethe average number of Class A and Company matching contributions. Assets of this plan are held in trust forClass B
common shares outstanding during 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.
-21-
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars except share and per share items)
(continued)year.
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 5five percent of the outstanding Class A stock, adjusted for Plan activity
over the preceding 5five years.
As of January 2,During 1994, no SARs, restricted awards totaling 53,000 shares were granted under
the Plan and remain outstanding. No SARs or performance awards have beenwere granted
under the Plan.in 1994.
-22-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
The combined 19931994 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 $21.60455,358 $21.92 - $33.80
Granted . . . . . . . . . . . 367,271 $24.75307,929 $24.50 - $33.60$30.25
Exercised . . . . . . . . . . (53,653) $21.60(19,150) $21.92 - $22.60$24.80
Cancelled . . . . . . . . . . (16,300) $21.60(46,123) $24.75 - $29.20$33.80
--------
Outstanding at end of year. . 455,358 $21.92698,014 $22.60 - $33.80
========
At the end of 1993, there1994, 1,060,947 shares were 1,319,609 shares available for future grants.
-22-
NOTES TO FINANCIAL STATEMENTS
(In thousandsRETIREMENT BENEFITS
The Company provides a qualified defined contribution plan covering
substantially all full-time employees, except officers and certain other
management employees. Upon approval by the Board of dollars except shareDirectors, a contribution
based on eligible wages is funded annually. The plan offers a savings feature
with Company matching contributions. Assets of this plan are held by an
independent trustee for the sole benefit of participating employees.
A nonqualified defined contribution plan is provided for officers and
per share items)
(continued)certain other management employees. 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 total amounts provided for retirement benefits amounted to $3,916 in
1994, $3,430 in 1993 and $3,365 in 1992.
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.
-23-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
(In thousands of dollars except share and per share items)
The following summarizes the differences between income taxes for
financial reporting purposes and the United States statutory tax rate for the
years 1994, 1993 and 1992.
1994 1993 1992 and 1991.
1993 1992 1991
---- ---- ----
Statutory rate . . . . . . . . . . . . 35.0% 34.0%35.0% 34.0%
State and local taxes, net of
federal benefit. . . . . . . . . . . 4.9 5.2 5.4 5.5
Tax exempt income and other tax
credits. . . . . . . . . . . . . . . (2.2) (2.6) (4.1) (4.2)
Other. . . . . . . . . . . . . . . . . 0.3 (0.5) 0.4 0.6
----- ----- -----
Effective tax rate . . . . . . . . . . 38.0% 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 expensescosts and provision for workersworkers'
compensation claims.
In August 1993,1992 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 totallingtotaling $49 million for 1988, 1989 and 1990 in
connection with an audit of the Company's consolidated federal tax liability.
The proposed amount has been subsequently reduced to $11 million. 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 present and future needs of Kelly'sits 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 $43,300 in 1994, $34,800 in 1993 and
$21,402 in 1992 and
$24,017 in 1991.1992.
-23--24-
NOTES TO FINANCIAL STATEMENTS (continued)
Kelly Services, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----------
(In thousands of dollars except per share items)
Sales of services**services
1994 . . . . . . . . . $530,191 $570,813 $630,196 $631,361 $2,362,561
1993 . . . . . . . . . $450,654 $482,034 $517,585 $504,261 $1,954,534450,654 482,034 517,585 504,261 1,954,534
1992 . . . . . . . . . 374,538 413,182 450,061 474,945 1,712,726
1991Cost of services
1994 . . . . . . . . . 326,547 343,495 374,716 379,551 1,424,309
Cost of services428,374 461,093 505,668 504,417 1,899,552
1993 . . . . . . . . . 364,724 388,906 416,904 403,263 1,573,797
1992 . . . . . . . . . 298,270 332,458 361,835 379,824 1,372,387
1991Selling, general and
administrative
1994 . . . . . . . . . 252,305 268,268 294,855 300,207 1,115,635
Selling, general and
administrative88,424 88,111 95,070 99,657 371,262
1993 . . . . . . . . . 77,196 79,178 79,541 80,923 316,838
1992 . . . . . . . . . 69,440 69,965 72,843 76,866 289,114
1991Net earnings
1994 . . . . . . . . . 64,830 63,688 65,387 68,095 262,000
Net earnings9,233 14,420 19,289 18,115 61,057
1993 . . . . . . . . . 6,879 10,009 14,028 13,643 44,559
1992 . . . . . . . . . 6,209 8,505 11,411 13,100 39,225
1991Earnings per share
1994 . . . . . . . . . 8,450 9,710 11,368 9,091 38,619
Earnings per share*.24 .38 .51 .48 1.61
1993 . . . . . . . . . .18 .27 .37 .36 1.18
1992 . . . . . . . . . .16 .23 .30 .35 1.04
1991Dividends per share
1994 . . . . . . . . . .22 .26 .30 .25 1.03
Dividends per share*.160 .180 .180 .180 .700
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.
-24-
SCHEDULE I - MARKETABLE SECURITIES -- OTHER INVESTMENTS
Kelly Services, Inc. and Subsidiaries
JANUARY 2, 1994
(In thousands of dollars)
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
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
======== ======== ========
*Investments are stated at cost plus accrued interest, which approximates market..152 .584
-25-
SCHEDULE VIIIII - VALUATION RESERVES
Kelly Services, Inc. and Subsidiaries
JANUARY 2, 19941, 1995
(In thousands of dollars)
Additions
------------------------
Balance at chargedCharged to Deductions -
beginning Charged to other uncollectible Balance at
beginningof year costs and uncollectibleaccounts accounts end
(B) expenses (A) (B) of year
expenses accounts of year---------- ---------- ---------- ------------- ----------
Description
-----------
Fifty-two weeks ended January 1, 1995:
Reserve deducted in the balance sheet
from the assets to which it applies -
-----------Allowance for doubtful accounts $4,735 $4,005 $280 $3,360 $5,660
====== ====== ==== ====== ======
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$3,325 $4,345 $3,385-- $2,935 $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$2,730 $4,115 -- $3,520 $3,775$3,325
====== ====== ====== ======
Fifty-two weeks ended December 29, 1991:
Reserve deducted in(A) Allowance of companies acquired.
(B) Certain amounts have been reclassified
to conform with the balance sheet
from the assets to which it applies -
Allowance for doubtful accounts $3,615 $2,342 $2,777 $3,180
====== ====== ====== ======current presentation.
-26-
INDEX TO EXHIBITS
REQUIRED BY ITEM 601,
REGULATION S-K
Exhibit
No. Description Page
-
------- ----------- ----
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)(Reference
is made to Exhibit 10.3 to the Form 10-K for the fiscal year
ended January 2, 1994, filed with the Commission in March, 1994,
which is incorporated herein by reference.)
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)2)
21 Subsidiaries of Registrant. 1
(Document 4)3)
23 Consent of Independent Accountants. 1
(Document 5)4)
24 Powers of Attorney. 1
(Document 5)
27 Financial Data Schedule 1
(Document 6)