KELYA Kelly Services Inc

TROY, Mich., Jan. 25 /PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider of staffing services, today announced record revenue and a strong earnings growth for the fourth quarter and full year ended December 31, 2006. (Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO ) Carl T. Camden, President and Chief Executive Officer, announced revenue for the fourth quarter of 2006 totaled $1.436 billion, a 4.4% increase compared to the $1.375 billion for the corresponding quarter in 2005. Revenue for the full year totaled $5.606 billion, a 6.7% increase compared to the $5.252 billion for the full year of 2005. Net earnings for the fourth quarter of 2006 totaled $24.4 million, an 84% increase compared to $13.3 million reported for the fourth quarter of 2005. Effective December 31, 2006, the Company sold its Staff Leasing business unit for cash proceeds of $6.5 million and recorded an after tax gain on sale of $2.3 million. Excluding the gain on sale, net earnings were $22.2 million, a 67% increase compared to last year. Net earnings for the full year of 2006 totaled $63.5 million, a 62% increase compared to the $39.3 million earned in the full year of 2005. Excluding the gain on sale of the Staff Leasing business unit, net earnings for the full year were $61.2 million, a 56% increase compared to last year. Diluted earnings per share in the fourth quarter of 2006 were $0.67, an increase of 81% as compared to fourth quarter 2005 earnings of $0.37 per share. Excluding the $0.06 per share after tax gain on sale, diluted earnings were $0.61 per share, a 65% increase compared to last year. Diluted earnings per share for the full year of 2006 were $1.75, a 61% increase compared to the $1.09 per share earned in 2005. Excluding the $0.06 per share after tax gain on sale, diluted earnings were $1.69 per share, a 55% increase compared to last year. Commenting on the results, Camden said, "We're pleased that we delivered a very strong year, despite continued slowing in the U.S. economy. Our PTSA and International segments delivered particularly strong profit increases. "Revenue in our U.S. Commercial segment, which accounted for 45% of total sales, decreased 1.3% year over year in the fourth quarter. Operating earnings totaled $36.6 million, an increase of 8.5% compared to last year. "Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 20% of total sales, increased 1.1% year over year in the fourth quarter. Operating earnings totaled $18.8 million and increased 18.7% on a year over year basis. "Revenue in our International segment, which accounted for 35% of total sales, increased 15.0% year over year in the fourth quarter. Operating earnings totaled $7.8 million, and increased 67.0% compared to last year. "On a constant currency basis, International segment revenue increased 8.4% year over year in the fourth quarter. On a constant currency basis, total company revenue increased 2.3% year over year in the fourth quarter. "Corporate expenses totaled $40.5 million and increased 7.9% compared to last year. Operating earnings from continuing operations totaled $22.6 million, and increased 35.9% on a year over year basis. "The effective tax rate from continuing operations for the fourth quarter was 11.7%, compared to 29.1% last year. The 2006 fourth quarter rate reflects a full year impact of work opportunity credits, which were retroactively extended by Congress late in the year. The 2006 full year tax rate of 28.7% is comparable to the 29.0% rate last year, as both included a full year's impact of the work opportunity credits." Mr. Camden added, "We expect first quarter 2007 earnings to be in the range of $0.25 to $0.30 per share, as compared to $0.23 per share from continuing operations in the first quarter of 2006. Not included in this guidance are planned restructuring costs of approximately $6 to $7 million, or $0.16 to $0.19 per share related primarily to branch closings, headquarters consolidation and related severance costs in our UK operation." Mr. Camden concluded, "For the full year of 2007, we are initially forecasting that earnings will range between $1.90 and $2.05 per share, excluding the UK restructuring costs." 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, 2007 to review the results and answer questions. The call may be accessed in one of the following ways: Via the Telephone: U.S. 1-866-254-5941 International 1-612-288-0337 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, 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 2006 was $5.6 billion. Visit http://www.kellyservices.com/. KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 13 WEEKS ENDED DECEMBER 31, 2006 AND JANUARY 1, 2006 (UNAUDITED) (In thousands of dollars except per share data) 2006 2005 Change % Change Revenue from services $1,435,990 $1,374,967 $61,023 4.4 % Cost of services 1,191,722 1,156,084 35,638 3.1 Gross profit 244,268 218,883 25,385 11.6 Selling, general and administrative expenses 221,631 202,221 19,410 9.6 Earnings from operations 22,637 16,662 5,975 35.9 Other income (expense), net 618 (10) 628 NM Earnings from continuing operations before taxes 23,255 16,652 6,603 39.7 Income taxes 2,723 4,840 (2,117) (43.7) Earnings from continuing operations 20,532 11,812 8,720 73.8 Earnings from discontinued operations, net of tax 3,910 1,505 2,405 159.8 Net earnings $ 24,442 $ 13,317 $11,125 83.5 % Basic earnings per share Earnings from continuing operations $ 0.57 $ 0.33 $ 0.24 72.7 % Earnings from discontinued operations 0.11 0.04 0.07 175.0 Net earnings $ 0.68 $ 0.37 $ 0.31 83.8 % Diluted earnings per share Earnings from continuing operations $ 0.56 $ 0.33 $ 0.23 69.7 % Earnings from discontinued operations 0.11 0.04 0.07 175.0 Net earnings $ 0.67 $ 0.37 $ 0.30 81.1 % STATISTICS: Gross profit rate 17.0 % 15.9 % 1.1 % Expenses as a % of revenue 15.4 14.7 0.7 % Return - Earnings from operations 1.6 1.2 0.4 Earnings from continuing operations before taxes 1.6 1.2 0.4 Earnings from continuing operations 1.4 0.9 0.5 Net earnings 1.7 1.0 0.7 Effective income tax rate 11.7 % 29.1 % (17.4)% Average number of shares outstanding (thousands): Basic 36,182 35,812 Diluted 36,524 36,064 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 52 WEEKS ENDED DECEMBER 31, 2006 AND JANUARY 1, 2006 (UNAUDITED) (In thousands of dollars except per share data) 2006 2005 Change % Change Revenue from services $5,605,752 $5,251,712 $354,040 6.7 % Cost of services 4,680,538 4,402,618 277,920 6.3 Gross profit 925,214 849,094 76,120 9.0 Selling, general and administrative expenses 846,198 797,813 48,385 6.1 Earnings from operations 79,016 51,281 27,735 54.1 Other income (expense), net 1,471 (187) 1,658 NM Earnings from continuing operations before taxes 80,487 51,094 29,393 57.5 Income taxes 23,112 14,813 8,299 56.0 Earnings from continuing operations 57,375 36,281 21,094 58.1 Earnings from discontinued operations, net of tax 6,116 2,982 3,134 105.1 Net earnings $ 63,491 $ 39,263 $ 24,228 61.7 % Basic earnings per share Earnings from continuing operations $ 1.59 $ 1.02 $ 0.57 55.9 % Earnings from discontinued operations 0.17 0.08 0.09 112.5 Net earnings $ 1.76 $ 1.10 $ 0.66 60.0 % Diluted earnings per share Earnings from continuing operations $ 1.58 $ 1.01 $ 0.57 56.4 % Earnings from discontinued operations 0.17 0.08 0.09 112.5 Net earnings $ 1.75 $ 1.09 $ 0.66 60.6 % STATISTICS: Gross profit rate 16.5 % 16.2 % 0.3 % Expenses as a % of revenue 15.1 15.2 (0.1) % Return - Earnings from operations 1.4 1.0 0.4 Earnings from continuing operations before taxes 1.4 1.0 0.4 Earnings from continuing operations 1.0 0.7 0.3 Net earnings 1.1 0.7 0.4 Effective income tax rate 28.7 % 29.0 % (0.3)% Average number of shares outstanding (thousands): Basic 35,999 35,667 Diluted 36,314 35,949 KELLY SERVICES, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS BY SEGMENT (In thousands of dollars) Fourth Quarter (Unaudited) 2006 2005 Change % Change Revenue from Services: U.S. Commercial Staffing $ 641,175 $ 649,709 $ (8,534) (1.3)% PTSA 284,138 281,185 2,953 1.1 International 510,677 444,073 66,604 15.0 Consolidated Total $1,435,990 $1,374,967 $ 61,023 4.4 % Earnings from Operations: U.S. Commercial Staffing $ 36,572 $ 33,706 $ 2,866 8.5 % PTSA 18,768 15,812 2,956 18.7 International 7,791 4,666 3,125 67.0 Corporate Expense (40,494) (37,522) (2,972) (7.9) Consolidated Total $22,637 $ 16,662 $ 5,975 35.9 % December Year to Date 2006 2005 Change % Change Revenue from Services: U.S. Commercial Staffing $2,524,472 $2,436,972 $ 87,500 3.6 % PTSA 1,137,788 1,090,322 47,466 4.4 International 1,943,492 1,724,418 219,074 12.7 Consolidated Total $5,605,752 $5,251,712 $354,040 6.7 % Earnings from Operations: U.S. Commercial Staffing $ 132,191 $ 118,850 $ 13,341 11.2 % PTSA 73,776 60,866 12,910 21.2 International 26,680 14,485 12,195 84.2 Corporate Expense (153,631) (142,920) (10,711) (7.5) Consolidated Total $ 79,016 $ 51,281 $ 27,735 54.1 % 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) Fourth Quarter 2006 2005 Change % Change U.S. Commercial $641,175 $649,709 $(8,534) (1.3)% PTSA 284,138 281,185 2,953 1.1 International - constant currency* 481,448 444,073 37,375 8.4 Revenue from services - constant currency 1,406,761 1,374,967 31,794 2.3 % Foreign currency impact 29,229 29,229 Revenue from services $1,435,990 $1,374,967 $61,023 4.4 % December Year to Date 2006 2005 Change % Change U.S. Commercial $2,524,472 $2,436,972 $87,500 3.6 % PTSA 1,137,788 1,090,322 47,466 4.4 International - constant currency* 1,911,855 1,724,418 187,437 10.9 Revenue from services - constant currency 5,574,115 5,251,712 322,403 6.1 % Foreign currency impact 31,637 31,637 Revenue from services $5,605,752 $5,251,712 $354,040 6.7 % * 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 SUMMARY OF DISCONTINUED OPERATIONS (UNAUDITED) (In thousands of dollars) Fourth Quarter 2006 2005 Sales $7,733 $8,975 Operating income from discontinued operations $2,637 $2,458 Income taxes 981 953 Earnings from discontinued operations, net of tax 1,656 1,505 Gain on sale on discontinued operations 3,731 - Income taxes 1,477 - Gain on sale on discontinued operations, net of tax 2,254 - Discontinued operations, net of tax $3,910 $1,505 Full Year 2006 2005 Sales $33,273 $38,113 Operating income from discontinued operations $6,273 $4,871 Income taxes 2,411 1,889 Earnings from discontinued operations, net of tax 3,862 2,982 Gain on sale on discontinued operations 3,731 - Income taxes 1,477 - Gain on sale on discontinued operations, net of tax 2,254 - Discontinued operations, net of tax $6,116 $2,982 Effective December 31, 2006 the Company sold Kelly Staff Leasing ("KSL"), a wholly owned subsidiary. The operating results for KSL, as well as the gain on the sale of KSL have been excluded from earnings from continuing operations. This schedule provides information on KSL's results from operations and the gain on the sale of KSL, both of which are included as discontinued operations on the face of the statements of earnings. KELLY SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF EARNINGS EXCLUDING THE GAIN ON THE SALE OF KSL (UNAUDITED) (In thousands of dollars) Fourth Quarter 2006 2005 Per Per Dollars Share Dollars Share Net earnings $24,442 $0.67 $13,317 $0.37 Gain on the sale of Kelly Staff Leasing 2,254 0.06 - - Net earnings excluding the gain on the sale of Kelly Staff Leasing $22,188 $0.61 $13,317 $0.37 Full Year 2006 2005 Dollars Per Per Share Dollars Share Net earnings $63,491 $1.75 $39,263 $1.09 Gain on the sale of Kelly Staff Leasing 2,254 0.06 - - Net earnings excluding the gain on the sale of Kelly Staff Leasing $61,237 $1.69 $39,263 $1.09 Management believes that the information on earnings excluding the gain on the sale of KSL is useful to understand the Company's fiscal 2006 financial performance and increases comparability with prior year results. Management considers this measure, along with reported results, when it reviews and evaluates the Company's financial performance. KELLY SERVICES, INC. AND SUBSIDIARIES BALANCE SHEETS (In thousands of dollars) December 31, January 1, 2006 2006 Current Assets Cash and equivalents $118,428 $63,699 Short-term investments 126 154 Trade accounts receivable, less allowances of $16,818 and $16,648, respectively 838,246 803,812 Prepaid expenses and other current assets 45,190 47,434 Deferred taxes 29,543 33,805 Total current assets 1,031,533 948,904 Property and Equipment, Net 170,288 165,757 Noncurrent Deferred Taxes 35,437 22,088 Goodwill, Net 96,504 88,217 Other Assets 135,662 87,891 Total Assets $1,469,424 $1,312,857 Current Liabilities Short-term borrowings $68,928 $56,644 Accounts payable 132,819 110,411 Accrued payroll and related taxes 274,284 263,112 Accrued insurance 24,191 34,097 Income and other taxes 68,055 56,651 Total current liabilities 568,277 520,915 Noncurrent Liabilities Accrued insurance 57,277 54,517 Accrued retirement benefits 71,990 57,443 Other long-term liabilities 13,323 7,939 Total noncurrent liabilities 142,590 119,899 Stockholders' Equity Common stock 40,116 40,116 Treasury stock (78,841) (90,919) Paid-in capital 32,048 27,015 Earnings invested in the business 735,104 688,033 Accumulated other comprehensive income 30,130 7,798 Total stockholders' equity 758,557 672,043 Total Liabilities and Stockholders' Equity $1,469,424 $1,312,857 STATISTICS: Working Capital $463,256 $427,989 Current Ratio 1.8 1.8 Debt-to-capital % 8.3 % 7.8 % Global Days Sales Outstanding Quarter 53 53 Year-to-date 54 56 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE 52 WEEKS ENDED DECEMBER 31, 2006 AND JANUARY 1, 2006 (In thousands of dollars) 2006 2005 Cash flows from operating activities Net earnings $63,491 $39,263 Noncash adjustments: Depreciation and amortization 41,730 42,215 Stock-based compensation 5,286 3,418 Gain on sale of discontinued operations (2,254) - Other, net (405) 525 Increase in trade accounts receivable, net (6,639) (97,880) Changes in other operating assets and liabilities 15,056 33,223 Net cash from operating activities 116,265 20,764 Cash flows from investing activities Capital expenditures (45,526) (28,527) Decrease in short-term investments 28 1,203 Increase in other assets (578) (5,411) Acquisition of company, net of cash received (4,663) - Proceeds from sale of discontinued operations 6,500 - Investment in unconsolidated affiliates (20,729) (19,681) Net cash from investing activities (64,968) (52,416) Cash flows from financing activities Net (decrease) increase in short- term borrowings (11,022) 6,833 Financing to fund long-term investment in unconsolidated affiliate 20,729 19,681 Dividend payments (16,420) (14,269) Stock options and other stock sales 10,973 5,786 Other financing activities (2,873) 1,949 Net cash from financing activities 1,387 19,980 Effect of exchange rates on cash and equivalents 2,045 (3,977) Net change in cash and equivalents 54,729 (15,649) Cash and equivalents at beginning of period 63,699 79,348 Cash and equivalents at end of period $118,428 $63,699 http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO DATASOURCE: Kelly Services, Inc. CONTACT: Analysts, James Polehna, +1-248-244-4586, or , or Media, Renee Walker, +1-248-244-5362, or , both of Kelly Services, Inc. Web site: http://www.kellyservices.com/

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