KELYA Kelly Services Inc

TROY, Mich., April 25 /PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider of staffing services, today announced record revenue and 117% net earnings growth for the first quarter ended April 2, 2006. (Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO ) Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2006 totaled $1.360 billion, an 8.9% increase compared to the $1.249 billion for the corresponding quarter in 2005. Net earnings for the first quarter of 2006 totaled $8.6 million, a 117% increase compared to $3.9 million reported for the first quarter of 2005. Diluted earnings per share in the first quarter of 2006 were $0.24, an increase of 118% as compared to first quarter 2005 earnings of $0.11 per share. Commenting on the results, Camden said, "I'm very pleased to report that Kelly has gotten off to a great start in 2006. We continue to transform solid sales increases into market share gains, improve operating efficiency, and produce strong earnings growth. "We are particularly encouraged by the results of our expense control efforts. We now have improved our expense efficiency in 15 out of the last 16 quarters. We reduced expenses to 15.1% of sales in the first quarter, which is the lowest first quarter expense rate Kelly has achieved in over 20 years. "We expect second quarter 2006 earnings to be in the range of $0.34 to $0.39, as compared to $0.26 per share in the second quarter of 2005. Based on the strength of the first quarter, we are raising the lower end of our annual guidance by $0.05 per share. For the full year, we are currently forecasting earnings between $1.50 and $1.60 per share. "Revenue in our U.S. Commercial segment, which accounted for 46% of total sales, increased 9.4% year over year in the first quarter. Operating earnings totaled $29.5 million, an increase of 16.3% compared to last year. "Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 22% of total sales, increased 9.6% year over year in the first quarter. Kelly Scientific Resources, Kelly Engineering Resources and Kelly IT Resources were the leading professional and technical performers. Kelly HRfirst, Kelly Vendor Management and Kelly Management Services continue to be the leading staffing alternatives units. Kelly Home Care, the Automotive Services Group, and Kelly Staff Leasing reported revenue decreases during the quarter. Operating earnings totaled $19.3 million and increased 32.4% on a year over year basis. "Revenue in our International segment, which accounted for about 32% of total sales, increased 7.6% year over year during the first quarter. Operating earnings totaled $3.3 million, compared to earnings of $48 thousand last year. "On a constant currency basis, International segment revenue increased 12.6% year over year in the first quarter. On a constant currency basis, total company revenue increased 10.5% year over year in the first quarter." Mr. Camden concluded, "We believe 2006 should be another good year for Kelly. We expect to set sales records, improve operating efficiency, and rapidly grow earnings." In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on April 25, 2006 to review the results and answer questions. The call may be accessed in one of the following ways: Via the Telephone: U.S. 1-800-553-5275 International 1-612-332-0725 The conference call leader is Carl Camden 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 more than 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 APRIL 2, 2006 AND APRIL 3, 2005 (UNAUDITED) (In thousands of dollars except per share data) 2006 2005 Change % Change Revenue from services $1,360,089 $1,249,335 $110,754 8.9% Cost of services 1,140,727 1,045,251 95,476 9.1 Gross profit 219,362 204,084 15,278 7.5 Selling, general and administrative expenses 205,925 197,989 7,936 4.0 Earnings from operations 13,437 6,095 7,342 120.5 Interest income (expense), net 40 (35) 75 214.3 Earnings before taxes 13,477 6,060 7,417 122.4 Income taxes 4,919 2,122 2,797 131.8 Net earnings $8,558 $3,938 $4,620 117.3% Basic earnings per share $0.24 $0.11 $0.13 118.2% Diluted earnings per share $0.24 $0.11 $0.13 118.2% STATISTICS: Gross profit rate 16.1% 16.3% (0.2)% Expenses as a % of revenue 15.1 15.8 (0.7) % Return - Earnings from operations 1.0 0.5 0.5 Earnings before taxes 1.0 0.5 0.5 Net earnings 0.6 0.3 0.3 Effective income tax rate 36.5 35.0 1.5 Average number of shares outstanding (thousands): Basic 35,872 35,535 Diluted 36,076 35,934 KELLY SERVICES, INC. RESULTS OF OPERATIONS BY SEGMENT (UNAUDITED) (In thousands of dollars) First Quarter 2006 2005 Change % Change Revenue from Services: U.S. Commercial Staffing $618,843 $565,514 $53,329 9.4% PTSA 298,513 272,422 26,091 9.6 International 442,733 411,399 31,334 7.6 Consolidated Total $1,360,089 $1,249,335 $110,754 8.9% Earnings from Operations: U.S. Commercial Staffing $29,535 $25,401 $4,134 16.3% PTSA 19,271 14,555 4,716 32.4 International 3,321 48 3,273 NM Corporate Expense (38,690) (33,909) (4,781) (14.1) Consolidated Total $13,437 $6,095 $7,342 120.5% NM Percentage not meaningful. Note: Earnings from Operations for 2005 were reclassified to reflect the chargeback of payroll, billing and accounts receivable costs previously included in Corporate Expense to the U.S. Commercial, PTSA and International segments. This change did not affect Consolidated Total Earnings from Operations. KELLY SERVICES, INC. RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES (UNAUDITED) (In thousands of dollars) First Quarter 2006 2005 Change % Change U.S. Commercial Staffing $618,843 $565,514 $53,329 9.4% PTSA 298,513 272,422 26,091 9.6 International - constant currency* 463,261 411,399 51,862 12.6 Revenue from services - constant currency 1,380,617 1,249,335 131,282 10.5% Foreign currency impact (20,528) (20,528) Revenue from services $1,360,089 $1,249,335 $110,754 8.9% * 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. AND SUBSIDIARIES BALANCE SHEETS (In thousands of dollars) April 2, January 1, April 3, 2006 2006 2005 (UNAUDITED) (UNAUDITED) Current Assets Cash and equivalents $60,395 $63,699 $65,849 Short-term investments 252 154 512 Trade accounts receivable, less allowances of $17,114, $16,648 and $16,296, respectively 819,995 803,812 740,980 Prepaid expenses and other current assets 43,540 47,434 45,129 Deferred taxes 33,586 33,805 37,146 Total current assets 957,768 948,904 889,616 Property and Equipment, Net 161,569 165,757 176,105 Noncurrent Deferred Taxes 22,442 22,088 18,489 Goodwill, Net 89,324 88,217 92,031 Other Assets 106,173 87,891 82,706 Total Assets $1,337,276 $1,312,857 $1,258,947 Current Liabilities Short-term borrowings $51,298 $56,644 $47,061 Accounts payable 114,236 110,411 109,387 Accrued payroll and related taxes 270,985 263,112 239,981 Accrued insurance 32,798 34,097 32,734 Income and other taxes 52,279 56,651 62,419 Total current liabilities 521,596 520,915 491,582 Noncurrent Liabilities Accrued insurance 52,465 54,517 57,828 Accrued retirement benefits 61,522 57,443 52,156 Other long-term liabilities 13,273 7,939 7,372 Total noncurrent liabilities 127,260 119,899 117,356 Stockholders' Equity Common stock 40,116 40,116 40,116 Treasury stock (88,999) (90,919) (96,328) Paid-in capital 27,651 27,015 24,546 Earnings invested in the business 692,961 688,033 663,423 Accumulated other comprehensive income 16,691 7,798 18,252 Total stockholders' equity 688,420 672,043 650,009 Total Liabilities and Stockholders' Equity $1,337,276 $1,312,857 $1,258,947 STATISTICS: Working Capital $436,172 $427,989 $398,034 Current Ratio 1.8 1.8 1.8 Debt-to-capital % 6.9% 7.8% 6.8% Global Days Sales Outstanding Year-to-date 55 55 54 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE 13 WEEKS ENDED APRIL 2, 2006 AND APRIL 3, 2005 (UNAUDITED) (In thousands of dollars) 2006 2005 Cash flows from operating activities Net earnings $8,558 $3,938 Noncash adjustments: Depreciation and amortization 10,329 10,382 Stock-based compensation 1,297 574 Increase in trade accounts receivable, net (13,344) (21,698) Changes in other operating assets and liabilities 4,155 11,348 Net cash from operating activities 10,995 4,544 Cash flows from investing activities Capital expenditures (5,950) (5,945) (Increase) decrease in short-term investments (97) 834 Increase in other assets (295) (2,867) Investment in unconsolidated affiliate - (18,450) Net cash from investing activities (6,342) (26,428) Cash flows from financing activities Decrease in short-term borrowings (5,891) (3,776) Dividend payments (3,630) (3,554) Stock options and other 1,330 1,128 Other financing activities 393 (1,905) Financing to fund long-term investment in unconsolidated affiliate - 18,450 Net cash from financing activities (7,798) 10,343 Effect of exchange rates on cash and equivalents (159) (1,958) Net change in cash and equivalents (3,304) (13,499) Cash and equivalents at beginning of period 63,699 79,348 Cash and equivalents at end of period $60,395 $65,849 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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