KELYA Kelly Services Inc

TROY, Mich., July 25 /PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider of staffing services, today announced record revenue and a 36% increase in net earnings for the second quarter ended July 2, 2006. (Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO ) Carl T. Camden, President and Chief Executive Officer, announced revenue for the second quarter of 2006 totaled $1.416 billion, an 8.0% increase compared to the $1.312 billion for the corresponding quarter in 2005. Revenue for the six-month period totaled $2.776 billion, an 8.4% increase compared to the $2.561 billion for the first six months of 2005. Net earnings for the second quarter of 2006 totaled $12.7 million, a 35.8% increase compared to $9.3 million reported for the second quarter of 2005. Net earnings for the first six months of 2006 totaled $21.2 million, a 60.0% increase compared to the $13.3 million earned in the comparable period of 2005. Diluted earnings per share in the second quarter of 2006 were $0.35, an increase of 34.6% as compared to second quarter 2005 earnings of $0.26 per share. Diluted earnings per share for the first six months of 2006 were $0.59, a 59.5% increase compared to the $0.37 per share earned last year. Commenting on the results, Camden said, "We're very pleased that we combined solid sales increases with improved operating efficiency to generate strong earnings growth. "Our earnings before taxes were very strong and grew by nearly 62% during the second quarter. However, our net earnings after taxes increased at a lower rate of 36%, because our tax rate was significantly higher than last year. This was primarily due to the fact that legislation to retroactively extend Work Opportunity Credits for 2006 was not passed in the second quarter, as was originally expected. It is not unusual for the credits to be delayed, and we remain confident that this legislation will be passed before year end. "Revenue in our U.S. Commercial segment, which accounted for 45% of total sales, increased 6.1% year over year in the second quarter. Operating earnings totaled $33.6 million, an increase of 16.2% compared to last year. "Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 21% of total sales, increased 4.3% year over year in the second quarter. Operating earnings totaled $18.6 million and increased 14.1% on a year over year basis. "Revenue in our International segment, which accounted for 34% of total sales, increased 13.0% year over year in the second quarter. Operating earnings totaled $5.2 million, and increased 31.8% compared to last year. "On a constant currency basis, International segment revenue increased 11.8% year over year in the second quarter. On a constant currency basis, total company revenue increased 7.6% year over year in the second quarter. "Corporate expenses totaled $36.0 million and increased 1.4% compared to last year. Operating earnings totaled $21.3 million, and increased 56.7% on a year over year basis." Mr. Camden concluded, "We expect third quarter 2006 earnings to be in the range of $0.43 to $0.48, as compared to $0.35 per share in the third quarter of 2005. This guidance includes a tax rate of approximately 26%, which assumes legislation to retroactively extend Work Opportunity Credits to the beginning of 2006 will be signed during the third quarter. For the full year, we continue to forecast earnings between $1.50 and $1.60 per share." In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 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. 1-800-230-1074 International 1-612-288-0340 The pass code is Kelly Services Via the Internet: The call is also available 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 JULY 2, 2006 AND JULY 3, 2005 (UNAUDITED) (In thousands of dollars except per share data) 2006 2005 Change % Change Revenue from services $1,416,409 $1,311,904 $104,505 8.0% Cost of services 1,186,186 1,097,802 88,384 8.1 Gross profit 230,223 214,102 16,121 7.5 Selling, general and administrative expenses 208,897 200,494 8,403 4.2 Earnings from operations 21,326 13,608 7,718 56.7 Other income (expense), net 465 (152) 617 405.9 Earnings before taxes 21,791 13,456 8,335 61.9 Income taxes 9,118 4,123 4,995 121.1 Net earnings $12,673 $9,333 $3,340 35.8% Basic earnings per share $0.35 $0.26 $0.09 34.6% Diluted earnings per share $0.35 $0.26 $0.09 34.6% STATISTICS: Gross profit rate 16.3% 16.3% 0.0% Expenses as a % of revenue 14.7 15.3 (0.6) % Return -- Earnings from operations 1.5 1.0 0.5 Earnings before taxes 1.5 1.0 0.5 Net earnings 0.9 0.7 0.2 Effective income tax rate 41.8% 30.6% 11.2% Average number of shares outstanding (thousands): Basic 35,943 35,597 Diluted 36,198 35,841 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 26 WEEKS ENDED JULY 2, 2006 AND JULY 3, 2005 (UNAUDITED) (In thousands of dollars except per share data) 2006 2005 Change % Change Revenue from services $2,776,498 $2,561,239 $215,259 8.4% Cost of services 2,326,913 2,143,053 183,860 8.6 Gross profit 449,585 418,186 31,399 7.5 Selling, general and administrative expenses 414,822 398,483 16,339 4.1 Earnings from operations 34,763 19,703 15,060 76.4 Other income (expense), net 505 (187) 692 370.1 Earnings before taxes 35,268 19,516 15,752 80.7 Income taxes 14,037 6,245 7,792 124.8 Net earnings $21,231 $13,271 $7,960 60.0% Basic earnings per share $0.59 $0.37 $0.22 59.5% Diluted earnings per share $0.59 $0.37 $0.22 59.5% STATISTICS: Gross profit rate 16.2% 16.3% (0.1)% Expenses as a % of revenue 14.9 15.6 (0.7) % Return -- Earnings from operations 1.3 0.8 0.5 Earnings before taxes 1.3 0.8 0.5 Net earnings 0.8 0.5 0.3 Effective income tax rate 39.8% 32.0% 7.8% Average number of shares outstanding (thousands): Basic 35,907 35,566 Diluted 36,187 35,957 KELLY SERVICES, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS BY SEGMENT (UNAUDITED) (In thousands of dollars) Second Quarter 2006 2005 Change % Change Revenue from Services: U.S. Commercial Staffing $639,213 $602,425 $36,788 6.1% PTSA 293,085 280,964 12,121 4.3 International 484,111 428,515 55,596 13.0 Consolidated Total $1,416,409 $1,311,904 $104,505 8.0% Earnings from Operations: U.S. Commercial Staffing $33,553 $28,877 $4,676 16.2% PTSA 18,552 16,253 2,299 14.1 International 5,178 3,929 1,249 31.8 Corporate Expense (35,957) (35,451) (506) (1.4) Consolidated Total $21,326 $13,608 $7,718 56.7% June Year to Date 2006 2005 Change % Change Revenue from Services: U.S. Commercial Staffing $1,258,056 $1,167,939 $90,117 7.7% PTSA 591,598 553,386 38,212 6.9 International 926,844 839,914 86,930 10.3 Consolidated Total $2,776,498 $2,561,239 $215,259 8.4% Earnings from Operations: U.S. Commercial Staffing $63,088 $54,278 $8,810 16.2% PTSA 37,823 30,808 7,015 22.8 International 8,499 3,977 4,522 113.7 Corporate Expense (74,647) (69,360) (5,287) (7.6) Consolidated Total $34,763 $19,703 $15,060 76.4% 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. AND SUBSIDIARIES RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES (UNAUDITED) (In thousands of dollars) Second Quarter 2006 2005 Change % Change U.S. Commercial $639,213 $602,425 $36,788 6.1% PTSA 293,085 280,964 12,121 4.3 International - constant currency* 479,169 428,515 50,654 11.8 Revenue from services - constant currency 1,411,467 1,311,904 99,563 7.6% Foreign currency impact 4,942 4,942 Revenue from services $1,416,409 $1,311,904 $104,505 8.0% June Year to Date 2006 2005 Change % Change U.S. Commercial $1,258,056 $1,167,939 $90,117 7.7% PTSA 591,598 553,386 38,212 6.9 International - constant currency* 942,430 839,914 102,516 12.2 Revenue from services - constant currency 2,792,084 2,561,239 230,845 9.0% Foreign currency impact (15,586) (15,586) Revenue from services $2,776,498 $2,561,239 $215,259 8.4% * 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 (UNAUDITED) (In thousands of dollars) July 2, January 1, July 3, 2006 2006 2005 Current Assets Cash and equivalents $72,309 $63,699 $65,042 Short-term investments 252 154 214 Trade accounts receivable, less allowances of $17,709, $16,648 and $16,724, respectively 844,175 803,812 756,951 Prepaid expenses and other current assets 44,198 47,434 46,489 Deferred taxes 31,227 33,805 39,987 Total current assets 992,161 948,904 908,683 Property and Equipment, Net 161,437 165,757 171,161 Noncurrent Deferred Taxes 20,819 22,088 19,662 Goodwill, Net 96,043 88,217 88,431 Other Assets 107,070 87,891 83,794 Total Assets $1,377,530 $1,312,857 $1,271,731 Current Liabilities Short-term borrowings $54,789 $56,644 $56,449 Accounts payable 114,298 110,411 107,133 Accrued payroll and related taxes 277,379 263,112 236,030 Accrued insurance 33,793 34,097 33,537 Income and other taxes 59,572 56,651 69,779 Total current liabilities 539,831 520,915 502,928 Noncurrent Liabilities Accrued insurance 54,350 54,517 59,451 Accrued retirement benefits 61,008 57,443 53,988 Other long-term liabilities 14,130 7,939 7,731 Total noncurrent liabilities 129,488 119,899 121,170 Stockholders' Equity Common stock 40,116 40,116 40,116 Treasury stock (87,335) (90,919) (94,789) Paid-in capital 27,250 27,015 24,414 Earnings invested in the business 701,997 688,033 669,198 Accumulated other comprehensive income 26,183 7,798 8,694 Total stockholders' equity 708,211 672,043 647,633 Total Liabilities and Stockholders' Equity $1,377,530 $1,312,857 $1,271,731 STATISTICS: Working Capital $452,330 $427,989 $405,755 Current Ratio 1.8 1.8 1.8 Debt-to-capital % 7.2% 7.8% 8.0% Global Days Sales Outstanding Quarter 54 53 53 Year-to-date 55 55 54 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE 26 WEEKS ENDED JULY 2, 2006 AND JULY 3, 2005 (UNAUDITED) (In thousands of dollars) 2006 2005 Cash flows from operating activities Net earnings $21,231 $13,271 Noncash adjustments: Depreciation and amortization 20,610 21,128 Stock-based compensation 2,246 1,163 Increase in trade accounts receivable, net (20,191) (53,222) Changes in other operating assets and liabilities 16,065 26,334 Net cash from operating activities 39,961 8,674 Cash flows from investing activities Capital expenditures (14,563) (12,726) (Increase) decrease in short-term investments (97) 1,142 Increase in other assets (364) (8,503) Acquisition of company, net of cash received (4,469) - Investment in unconsolidated affiliate - (18,450) Net cash from investing activities (19,493) (38,537) Cash flows from financing activities (Decrease) increase in short-term borrowings (4,016) 7,161 Dividend payments (7,267) (7,112) Stock options and other stock sales 1,526 1,745 Other financing activities (2,692) (2,428) Financing to fund long-term investment in unconsolidated affiliate - 18,450 Net cash from financing activities (12,449) 17,816 Effect of exchange rates on cash and equivalents 591 (2,259) Net change in cash and equivalents 8,610 (14,306) Cash and equivalents at beginning of period 63,699 79,348 Cash and equivalents at end of period $72,309 $65,042 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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