KELYA Kelly Services Inc

TROY, Mich., Jan. 25 /PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for fourth quarter and full year ended January 1, 2006. (Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO ) Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the 13 week fourth quarter of 2005 totaled $1.384 billion, a 2.1% increase compared to the $1.356 billion for the corresponding 14 week quarter in 2004. On a comparable 13 week basis, fourth quarter revenue increased 6.9%. Sales for the 52 week fiscal year totaled $5.290 billion, a 6.1% increase compared to the $4.984 billion for the 53 week fiscal year of 2004. On a comparable 52 week basis, total year revenue increased 7.5%. Net earnings for the fourth quarter of 2005 totaled $13.3 million, a 68% increase compared to $8.0 million reported for the fourth quarter of 2004. Net earnings for the full year of 2005 totaled $39.3 million, an 85% increase compared to the $21.2 million earned during 2004. Diluted earnings per share in the fourth quarter of 2005 were $0.37, an increase of 68% as compared to fourth quarter 2004 earnings of $0.22 per share. Diluted earnings per share for the full year of 2005 were $1.09, an increase of 82% compared to the $0.60 per share earned in 2004. Commenting on the results, Adderley said, "Kelly turned in a very good year. Our full year sales of nearly $5.3 billion achieved a new sales record, exceeding the previous record we set in 2004 by over $300 million. "As the new year begins, we expect first quarter 2006 earnings to be in the range of $0.14 to $0.19, as compared to $0.11 per share in the first quarter of 2005. For the full year of 2006, we are currently forecasting earnings between $1.45 and $1.60 per share. This forecast is based on continued moderate global economic growth in 2006. "Revenue in our U.S. Commercial staffing segment, which accounted for 47% of total sales, increased 9.5% year over year in the fourth quarter on a comparable 13 week basis. The gross profit rate in this segment increased four-tenths of a percent, primarily due to lower workers' compensation costs and higher fee based income. Expenses increased 8.3% compared to last year. Operating earnings totaled $38.0 million, an increase of 6.1% compared to last year. "Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 21% of total sales, increased 10.0% year over year in the fourth quarter on a comparable 13 week basis. Kelly Engineering Resources and Kelly IT Resources were the leading professional and technical performers in the fourth quarter. Kelly HR First and Kelly Vendor Management continue to be the leading staffing alternatives units. Kelly Home Care, the Automotive Services Group, Kelly Law Registry and Kelly Staff Leasing experienced revenue decreases during the quarter. The PTSA gross profit rate increased four tenths of a percent, primarily due to lower workers' compensation expense and higher fee based income. Expenses decreased 1.1% as compared to last year. Operating earnings totaled $19.0 million and increased 23.6% on a year over year basis. "Revenue in our International segment, which accounted for 32% of total sales, increased 1.5% year over year during the fourth quarter on a comparable 13 week basis. The International gross profit rate increased by one-tenth of a percent, primarily due to growth in fee based income. Operating expenses decreased by 1.7% in U.S. dollar terms. Operating earnings totaled $5.2 million, compared to earnings of $5.5 million last year. "On a 13 week constant currency basis, International segment revenue increased 5.7% year over year in the fourth quarter. On a 13 week constant currency basis, total company revenue increased 8.3% year over year in the fourth quarter." Mr. Adderley concluded, "We believe 2006 should be another good year for Kelly. We expect to set sales records, gain market share, improve operating efficiency, and rapidly grow earnings." In conjunction with its fourth quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on January 25, 2006 to review the results. The call may be accessed in one of the following ways: * Via the Telephone: U.S. 1-800-230-1951 International 1-651-291-0618 The conference call leader is Terence Adderley The passcode is Kelly Services * Via the Internet: You may access the call via the Internet through the Kelly Services website: http://www.kellyservices.com/ This release contains statements that are forward looking in nature and accordingly, are subject to risks and uncertainties. These factors include: competition, changing market and economic conditions, currency fluctuations, changes in laws and regulations, including tax laws, and other factors discussed in this release and in the company's filings with the Securities and Exchange Commission. Actual results may differ materially from any projections contained herein. Kelly Services, Inc. (NASDAQ:KELYANASDAQ:KELYB) is a Fortune 500 company headquartered in Troy, Mich., offering staffing solutions that include temporary staffing services, staff leasing, outsourcing, vendor on-site and full-time placement. Kelly operates in 30 countries and territories. Kelly provides employment to over 700,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, light industrial, education, health care, and home care. Revenue in 2005 was $5.3 billion. Visit http://www.kellyservices.com/ . KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 13 WEEKS ENDED JANUARY 1, 2006 AND 14 WEEKS ENDED JANUARY 2, 2005 (UNAUDITED) (In thousands of dollars except per share data) 2005 2004 (13 weeks) (14 weeks) Change % Change Revenue from services $1,383,942 $1,355,922 $28,020 2.1% Cost of services 1,161,412 1,141,962 19,450 1.7 Gross profit 222,530 213,960 8,570 4.0 Selling, general and administrative expenses 203,410 202,743 667 0.3 Earnings from operations 19,120 11,217 7,903 70.5 Interest expense, net (10) (145) 135 93.1 Earnings before taxes 19,110 11,072 8,038 72.6 Income taxes 5,793 3,122 2,671 85.6 Net earnings $13,317 $7,950 $5,367 67.5% Basic earnings per share $0.37 $0.23 $0.14 60.9% Diluted earnings per share $0.37 $0.22 $0.15 68.2% STATISTICS: Gross profit rate 16.1% 15.8% 0.3% Expenses as a % of revenue 14.7 15.0 (0.3) % Return - Earnings from operations 1.4 0.8 0.6 Earnings before taxes 1.4 0.8 0.6 Net earnings 1.0 0.6 0.4 Effective income tax rate 30.3% 28.2% 2.1% Average number of shares outstanding (thousands): Basic 35,812 35,306 Diluted 36,064 35,588 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 52 WEEKS ENDED JANUARY 1, 2006 AND 53 WEEKS ENDED JANUARY 2, 2005 (In thousands of dollars except per share data) 2005 2004 (52 weeks) (53 weeks) Change % Change Revenue from services $5,289,825 $4,984,051 $305,774 6.1% Cost of services 4,430,931 4,186,285 244,646 5.8 Gross profit 858,894 797,766 61,128 7.7 Selling, general and administrative expenses 802,742 763,756 38,986 5.1 Earnings from operations 56,152 34,010 22,142 65.1 Interest expense, net (187) (861) 674 78.3 Earnings before taxes 55,965 33,149 22,816 68.8 Income taxes 16,702 11,938 4,764 39.9 Net earnings $39,263 $21,211 $18,052 85.1% Basic earnings per share $1.10 $0.60 $0.50 83.3% Diluted earnings per share $1.09 $0.60 $0.49 81.7% STATISTICS: Gross profit rate 16.2% 16.0% 0.2% Expenses as a % of revenue 15.2 15.3 (0.1) % Return - Earnings from operations 1.1 0.7 0.4 Earnings before taxes 1.1 0.7 0.4 Net earnings 0.7 0.4 0.3 Effective income tax rate 29.8% 36.0% (6.2)% Average number of shares outstanding (thousands): Basic 35,667 35,115 Diluted 35,949 35,461 KELLY SERVICES, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS BY SEGMENT (In thousands of dollars) Fourth Quarter (Unaudited) 2005 2004 (13 weeks) (14 weeks) Change % Change Revenue from Services: U.S. Commercial Staffing $649,709 $623,025 $26,684 4.3% PTSA 290,160 277,318 12,842 4.6 International 444,073 455,579 (11,506) (2.5) Consolidated Total $1,383,942 $1,355,922 $28,020 2.1% Earnings from Operations: U.S. Commercial Staffing $37,977 $35,782 $2,195 6.1% PTSA 18,957 15,336 3,621 23.6 International 5,212 5,469 (257) (4.7) Corporate Expense (43,026) (45,370) 2,344 5.2 Consolidated Total $19,120 $11,217 $7,903 70.5% December Year to Date 2005 2004 (52 weeks) (53 weeks) Change % Change Revenue from Services: U.S. Commercial Staffing $2,436,972 $2,327,592 $109,380 4.7% PTSA 1,128,435 1,033,745 94,690 9.2 International 1,724,418 1,622,714 101,704 6.3 Consolidated Total $5,289,825 $4,984,051 $305,774 6.1% Earnings from Operations: U.S. Commercial Staffing $134,757 $118,934 $15,823 13.3% PTSA 69,055 61,976 7,079 11.4 International 16,530 12,656 3,874 30.6 Corporate Expense (164,190) (159,556) (4,634) (2.9) Consolidated Total $56,152 $34,010 $22,142 65.1% KELLY SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES (UNAUDITED) (In thousands of dollars) Fourth Quarter 2005 2004 (13 weeks) (14 weeks) Change % Change U.S. Commercial $649,709 $623,025 $26,684 4.3% PTSA 290,160 277,318 12,842 4.6 International - constant currency* 462,079 455,579 6,500 1.4 Revenue from services - constant currency 1,401,948 1,355,922 46,026 3.4% Foreign currency impact (18,006) (18,006) Revenue from services $1,383,942 $1,355,922 $28,020 2.1% December Year to Date 2005 2004 (52 weeks) (53 weeks) Change % Change U.S. Commercial $2,436,972 $2,327,592 $109,380 4.7% PTSA 1,128,435 1,033,745 94,690 9.2 International - constant currency* 1,702,132 1,622,714 79,418 4.9 Revenue from services - constant currency 5,267,539 4,984,051 283,488 5.7% Foreign currency impact 22,286 22,286 Revenue from services $5,289,825 $4,984,051 $305,774 6.1% * Information on constant currencies is provided to allow investors to separate the impact of foreign currency translations on reported results. Constant currency results are calculated by translating the current year results at prior year average exchange rates. KELLY SERVICES, INC. RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES ADJUSTED FOR THE 53rd WEEK IN 2004 (UNAUDITED) (In thousands of dollars) Revenue from Services 2005 2004 Reported Reported Less: 14th Revenue Revenue Week 13 Weeks 14 Weeks Revenue U.S. Commercial Staffing $649,709 $623,025 $29,936 PTSA 290,160 277,318 13,552 International - constant currency 462,079 455,579 18,242 Revenue from services - constant currency 1,401,948 1,355,922 61,730 Foreign currency impact (18,006) Revenue from services $1,383,942 $1,355,922 $61,730 Revenue from Services 2004 Adjusted Revenue 13 Weeks Change % Change U.S. Commercial Staffing $593,089 $56,620 9.5% PTSA 263,766 26,394 10.0 International - constant currency 437,337 24,742 5.7 Revenue from services - constant currency 1,294,192 107,756 8.3 Foreign currency impact (18,006) Revenue from services $1,294,192 $89,750 6.9% Revenue from Services 2005 2004 Reported Reported Less: 53rd Revenue Revenue Week 52 Weeks 53 Weeks Revenue U.S. Commercial Staffing PTSA $2,436,972 $2,327,592 $29,936 International - constant currency 1,128,435 1,033,745 13,552 Revenue from services - constant currency 1,702,132 1,622,714 18,242 Foreign currency impact 5,267,539 4,984,051 61,730 22,286 Revenue from services $5,289,825 $4,984,051 $61,730 Revenue from Services 2004 Adjusted Revenue 52 Weeks Change % Change U.S. Commercial Staffing PTSA $2,297,656 $139,316 6.1% International - constant currency 1,020,193 108,242 10.6 Revenue from services - constant currency 1,604,472 97,660 6.1 Foreign currency impact 4,922,321 345,218 7.0 22,286 Revenue from services $4,922,321 $367,504 7.5% Information on the 14th week of the 2004 fourth quarter and 53rd week of the 2004 fiscal year is provided to allow investors to separate the impact of this extra week on reported results, in comparison to 2005 reported results. Information on constant currencies is provided to allow investors to separate the impact of foreign currency translations on reported results. Constant currency results are calculated by translating the current year results at prior year average exchange rates. Management believes these measurements are an important analytical tool to aid in understanding underlying operating trends without distortion due to the extra week included in the 2004 fiscal year and currency fluctuations. KELLY SERVICES, INC. AND SUBSIDIARIES BALANCE SHEETS (In thousands of dollars) January 1, January 2, 2006 2005 Current Assets Cash and equivalents $63,699 $79,348 Short-term investments 154 6,288 Trade accounts receivable, less allowances of $16,648 and $16,228, respectively 803,812 727,366 Prepaid expenses and other current assets 47,434 43,942 Deferred taxes 33,805 36,055 Total current assets 948,904 892,999 Property and Equipment, Net 165,757 181,086 Noncurrent Deferred Taxes 22,088 17,960 Goodwill, Net 88,217 94,652 Other Assets 87,891 63,059 Total Assets $1,312,857 $1,249,756 Current Liabilities Short-term borrowings $56,644 $34,289 Accounts payable 110,411 102,947 Accrued payroll and related taxes 263,112 241,651 Accrued insurance 34,097 33,165 Income and other taxes 56,651 67,839 Total current liabilities 520,915 479,891 Noncurrent Liabilities Accrued insurance 54,517 58,548 Accrued retirement benefits 57,443 50,892 Other long-term liabilities 7,939 6,374 Total noncurrent liabilities 119,899 115,814 Stockholders' Equity Common stock 40,116 40,116 Treasury stock (90,919) (97,693) Paid-in capital 27,015 24,045 Earnings invested in the business 688,033 663,039 Accumulated other comprehensive income 7,798 24,544 Total stockholders' equity 672,043 654,051 Total Liabilities and Stockholders' Equity $1,312,857 $1,249,756 STATISTICS: Working Capital $427,989 $413,108 Current Ratio 1.8 1.9 Debt-to-capital % 7.8% 5.0% Global Days Sales Outstanding Quarter 53 53 Year-to-date 55 54 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE 52 WEEKS ENDED JANUARY 1, 2006 AND 53 WEEKS ENDED JANUARY 2, 2005 (In thousands of dollars) 2005 2004 Cash flows from operating activities Net earnings $39,263 $21,211 Noncash adjustments: Depreciation and amortization 42,215 44,435 Increase in trade accounts receivable, net (97,880) (10,175) Changes in other operating assets and liabilities 40,666 (705) Net cash from operating activities 24,264 54,766 Cash flows from investing activities Capital expenditures (28,527) (36,801) Decrease in short-term investments 1,203 105 Increase in other assets (8,911) (736) Investments in unconsolidated affiliates (19,681) - Net cash from investing activities (55,916) (37,432) Cash flows from financing activities Increase (decrease) in short-term borrowings 6,833 (8,188) Financing to fund long-term investments in unconsolidated affiliates 19,681 - Dividend payments (14,269) (14,043) Stock options and other stock sales 5,786 15,199 Other financing activities 1,949 (6,777) Purchase of treasury stock - (3) Net cash from financing activities 19,980 (13,812) Effect of exchange rates on cash and equivalents (3,977) 1,815 Net change in cash and equivalents (15,649) 5,337 Cash and equivalents at beginning of period 79,348 74,011 Cash and equivalents at end of period $63,699 $79,348 First Call Analyst: FCMN Contact: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO DATASOURCE: Kelly Services, Inc. CONTACT: ANALYST CONTACT: James Polehna, +1-248-244-4586, , or MEDIA CONTACT: Renee Walker, +1-248-244-5362, , both of Kelly Services, Inc. Web site: http://www.kellyservices.com/

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