KELYA Kelly Services Inc

Kelly Services Reports Record Revenue and Strong Earnings Growth for the 2nd Quarter of 2005 TROY, Mich., July 26 /PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for second quarter ended July 3, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO ) Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the second quarter of 2005 totaled $1.312 billion, a 7.1% increase compared to the $1.224 billion for the corresponding quarter in 2004. Revenue for the six-month period totaled $2.561 billion, a 7.5% increase compared to the $2.383 billion for the first six months of 2004. Net earnings for the second quarter of 2005 totaled $9.3 million, a 91% increase compared to $4.9 million reported for the second quarter of 2004. Net earnings for the first six months of 2005 totaled $13.3 million, a 157% increase compared to the $5.2 million earned during the comparable six-month period of 2004. Diluted earnings per share in the second quarter of 2005 were $0.26, an 86% increase as compared to second quarter 2004 earnings of $0.14 per share. Diluted earnings per share for the first six months of 2005 were $0.37, a 147% increase compared to the $0.15 per share earned in the first six months of 2004. Commenting on the results, Adderley said, "Our sales of $1.312 billion achieved a new sales record for the second quarter, exceeding the previous record we set in 2004 by over $87 million. "We expect third quarter 2005 earnings to be in the range of $0.30 to $0.35, as compared to $0.23 per share in the third quarter of 2004. Our 2005 year to date results, combined with our third quarter guidance, keeps us on track to achieve our current forecast that earnings will range between $1.00 and $1.15 per share for the full year. This forecast is based on moderate global economic growth over the balance of 2005. "Revenue in our U.S. Commercial staffing segment, which accounted for 46% of total sales, increased 3.6% year over year during the second quarter. The gross profit rate in this segment increased four-tenths of a percent, due to a combination of improved pricing, lower workers compensation costs, and higher fee based income. Expenses increased 4.0% compared to last year. Operating earnings totaled $32.8 million, an increase of 11.0% compared to last year. "Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 21% of total sales, increased 9.5% year over year during the second quarter. Kelly Scientific Resources and Kelly Engineering Resources were the leading professional and technical performers in the second quarter. Kelly HRfirst continued to be the leading staffing alternatives unit. The Automotive Services Group and the Kelly Law Registry experienced revenue decreases during the quarter. Kelly Staff Leasing revenue also declined, reflecting the repositioning of its customer mix. The PTSA gross profit rate decreased eight-tenths of a percent, primarily due to changes in business unit mix and rates, partially offset by higher fee based income. Expenses increased 3.5% as compared to last year. Operating earnings totaled $17.1 million and increased 5.7% on a year over year basis. "Revenue in our International segment, which accounted for 33% of total sales, increased 10.9% year over year during the second quarter. The International gross profit rate increased by three-tenths of a percent, primarily due to growth in fee based income. Operating expenses increased by 9.5% in U.S. dollar terms. Operating earnings totaled $4.4 million, more than doubling the $2.0 million earned last year. "On a constant currency basis, International segment revenue increased 6.3%, and total Company revenue increased 5.7% year over year in the second quarter." In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 26, 2005 to review the results. The call may be accessed in one of the following ways: Via the Telephone: U.S. 1-800-230-1093 International 1-612-234-9959 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, the company's ability to effectively manage its information technology programs, 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 owns and operates nearly 2,600 offices in 29 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 2004 was $4.98 billion. Visit http://www.kellyservices.com/ . KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 13 WEEKS ENDED JULY 3, 2005 AND JUNE 27, 2004 (UNAUDITED) (In thousands of dollars except per share data) 2005 2004 Change % Change Revenue from services $1,311,904 $1,224,464 $87,440 7.1 % Cost of services 1,097,802 1,026,382 71,420 7.0 Gross profit 214,102 198,082 16,020 8.1 Selling, general and administrative expenses 200,494 189,494 11,000 5.8 Earnings from operations 13,608 8,588 5,020 58.5 Interest expense, net (152) (283) 131 46.3 Earnings before taxes 13,456 8,305 5,151 62.0 Income taxes 4,123 3,429 694 20.2 Net earnings $9,333 $4,876 $4,457 91.4 % Basic earnings per share $0.26 $0.14 $0.12 85.7 % Diluted earnings per share $0.26 $0.14 $0.12 85.7 % STATISTICS: Gross profit rate 16.3 % 16.2 % 0.1 % Expenses as a % of revenue 15.3 15.5 (0.2) % Return - Earnings from operations 1.0 0.7 0.3 Earnings before taxes 1.0 0.7 0.3 Net earnings 0.7 0.4 0.3 Effective income tax rate 30.6 % 41.3 % (10.7)% Average number of shares outstanding (thousands): Basic 35,597 35,057 Diluted 35,841 35,431 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE 26 WEEKS ENDED JULY 3, 2005 AND JUNE 27, 2004 (UNAUDITED) (In thousands of dollars except per share data) 2005 2004 Change % Change Revenue from services $2,561,239 $2,383,275 $177,964 7.5 % Cost of services 2,143,053 2,001,837 141,216 7.1 Gross profit 418,186 381,438 36,748 9.6 Selling, general and administrative expenses 398,483 370,976 27,507 7.4 Earnings from operations 19,703 10,462 9,241 88.3 Interest expense, net (187) (522) 335 64.2 Earnings before taxes 19,516 9,940 9,576 96.3 Income taxes 6,245 4,773 1,472 30.8 Net earnings $13,271 $5,167 $8,104 156.8 % Basic earnings per share $0.37 $0.15 $0.22 146.7 % Diluted earnings per share $0.37 $0.15 $0.22 146.7 % STATISTICS: Gross profit rate 16.3 % 16.0 % 0.3 % Expenses as a % of revenue 15.6 15.6 0.0 % Return - Earnings from operations 0.8 0.4 0.4 Earnings before taxes 0.8 0.4 0.4 Net earnings 0.5 0.2 0.3 Effective income tax rate 32.0 % 48.0 % (16.0)% Average number of shares outstanding (thousands): Basic 35,566 34,969 Diluted 35,957 35,369 KELLY SERVICES, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS BY SEGMENT (UNAUDITED) (In thousands of dollars) Second Quarter 2005 2004 Change % Change Revenue from Services: U.S. Commercial Staffing $602,425 $581,364 $21,061 3.6 % PTSA 280,964 256,573 24,391 9.5 International 428,515 386,527 41,988 10.9 Consolidated Total $1,311,904 $1,224,464 $87,440 7.1 % Earnings from Operations: U.S. Commercial Staffing $32,772 $29,513 $3,259 11.0 % PTSA 17,145 16,224 921 5.7 International 4,430 1,967 2,463 125.2 Corporate Expense (40,739) (39,116) (1,623) (4.1) Consolidated Total $13,608 $8,588 $5,020 58.5 % June Year to Date 2005 2004 Change % Change Revenue from Services: U.S. Commercial Staffing $1,167,939 $1,130,694 $37,245 3.3 % PTSA 553,386 495,363 58,023 11.7 International 839,914 757,218 82,696 10.9 Consolidated Total $2,561,239 $2,383,275 $177,964 7.5 % Earnings from Operations: U.S. Commercial Staffing $61,959 $53,742 $8,217 15.3 % PTSA 32,529 30,230 2,299 7.6 International 4,967 1,026 3,941 384.1 Corporate Expense (79,752) (74,536) (5,216) (7.0) Consolidated Total $19,703 $10,462 $9,241 88.3 % KELLY SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF CONSTANT CURRENCY REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES (UNAUDITED) (In thousands of dollars) Second Quarter 2005 2004 Change % Change U.S. Commercial $602,425 $581,364 $21,061 3.6 % PTSA 280,964 256,573 24,391 9.5 International - constant currency* 410,960 386,527 24,433 6.3 Revenue from services - constant currency 1,294,349 1,224,464 69,885 5.7 % Foreign currency impact 17,555 17,555 Revenue from services $1,311,904 $1,224,464 $87,440 7.1 % June Year to Date 2005 2004 Change % Change U.S. Commercial $1,167,939 $1,130,694 $37,245 3.3 % PTSA 553,386 495,363 58,023 11.7 International - constant currency* 806,749 757,218 49,531 6.5 Revenue from services - constant currency 2,528,074 2,383,275 144,799 6.1 % Foreign currency impact 33,165 33,165 Revenue from services $2,561,239 $2,383,275 $177,964 7.5 % * 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) July 3, January 2, June 27, 2005 2005 2004 (UNAUDITED) (UNAUDITED) Current Assets Cash and equivalents $69,504 $82,554 $65,006 Short-term investments 214 6,288 1,229 Trade accounts receivable, less allowances of $16,724, $16,228 and $16,314, respectively 756,951 727,366 728,056 Prepaid expenses and other current assets 42,027 40,736 37,421 Deferred taxes 39,987 36,055 22,620 Total current assets 908,683 892,999 854,332 Property and Equipment, Net 171,161 181,086 179,577 Noncurrent Deferred Taxes 19,662 17,960 13,307 Goodwill, Net 88,431 94,652 84,610 Other Assets 83,794 63,059 59,564 Total Assets $1,271,731 $1,249,756 $1,191,390 Current Liabilities Short-term borrowings $56,449 $34,289 $37,537 Accounts payable 111,076 105,685 97,631 Accrued payroll and related taxes 241,095 246,802 242,433 Accrued insurance 33,537 33,165 35,608 Income and other taxes 69,779 67,839 51,846 Total current liabilities 511,936 487,780 465,055 Noncurrent Liabilities Accrued insurance 59,451 58,548 58,096 Accrued retirement benefits 53,988 50,892 49,999 Total noncurrent liabilities 113,439 109,440 108,095 Stockholders' Equity Common stock 40,116 40,116 40,116 Treasury stock (94,789) (97,693) (105,149) Paid-in capital 23,137 22,530 20,042 Earnings invested in the business 669,198 663,039 654,041 Accumulated other comprehensive income 8,694 24,544 9,190 Total stockholders' equity 646,356 652,536 618,240 Total Liabilities and Stockholders' Equity $1,271,731 $1,249,756 $1,191,390 STATISTICS: Working Capital $396,747 $405,219 $389,277 Current Ratio 1.8 1.8 1.8 Debt-to-capital % 8.0 % 5.0 % 5.7 % Global Days Sales Outstanding Quarter 53 53 54 Year-to-date 54 54 56 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE 26 WEEKS ENDED JULY 3, 2005 AND JUNE 27, 2004 (UNAUDITED) (In thousands of dollars) 2005 2004 Cash flows from operating activities Net earnings $13,271 $5,167 Noncash adjustments: Depreciation and amortization 21,128 22,501 Increase in trade accounts receivable, net (53,222) (72,036) Changes in other operating assets and liabilities 28,753 50,992 Net cash from operating activities 9,930 6,624 Cash flows from investing activities Capital expenditures (12,726) (13,398) Decrease in short-term investments 1,142 5 Increase in other assets (8,503) (731) Investment in unconsolidated affiliate (18,450) - Net cash from investing activities (38,537) (14,124) Cash flows from financing activities Increase (decrease) in short-term borrowings 7,161 (899) Financing to fund long-term investment in unconsolidated affiliate 18,450 - Dividend payments (7,112) (6,997) Stock options and other stock sales 1,745 6,944 Other financing activities (2,428) (2,710) Purchase of treasury stock - (3) Net cash from financing activities 17,816 (3,665) Effect of exchange rates on cash and equivalents (2,259) (207) Net change in cash and equivalents (13,050) (11,372) Cash and equivalents at beginning of period 82,554 76,378 Cash and equivalents at end of period $69,504 $65,006 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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