Kelly Services Reports 2nd Quarter 2007 Results

24 Jul '07
Kelly Services Reports 2nd Quarter 2007 Results

TROY, MI, Jul 24, 2007 -- Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a global provider of staffing services, today announced results for the second quarter ended July 1, 2007.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the second quarter of 2007 totaled $1.416 billion, a 1.6% increase compared to the $1.393 billion for the corresponding quarter in 2006. On a constant currency basis revenue decreased 0.5%.

Earnings from operations for the second quarter of 2007 totaled $22.3 million, an 11.5% increase compared to $20.0 million reported for the second quarter of 2006. Included in earnings from operations are $2.4 million of costs related to the restructuring of the UK operations.

During the second quarter, the French government changed the method of computing payroll tax credits retroactive to the beginning of 2006 and on a go forward basis. Included in second quarter earnings from operations are approximately $3.8 million of French payroll tax credits, of which approximately $2.6 million relate to 2006, $600 thousand to first quarter 2007 and $600 thousand to second quarter 2007.

Diluted earnings per share from continuing operations in the second quarter of 2007 were $0.41, an increase of 24% as compared to second quarter 2006 earnings of $0.33 per share. Included in second quarter diluted earnings is the $0.07 per share cost of the UK restructuring. Also included are approximately $0.07 per share of French payroll tax credits, of which $0.05 per share relate to 2006, $0.01 per share to first quarter 2007 and $0.01 per share to second quarter 2007.

Commenting on the results, Camden said, "Despite continued slowing in the Americas Commercial staffing market, we're pleased that we delivered solid profitable results. We also accomplished a number of key strategic objectives during the quarter. We moved aggressively to diversify geographically and move into higher margin fee based businesses.

"We expanded our operations in China, Hong Kong and Singapore with the acquisition of P-Serv, a company specializing in temporary staffing, permanent placement, outsourcing and executive search. Through our strategic expansion in the Asia Pacific markets, we're well positioned to participate in this region's dynamic growth.

"Revenue in our Americas Commercial segment, which accounted for 49% of total sales, decreased 5.7% year over year in the second quarter. Operating earnings totaled $23.0 million, and decreased 12.9% compared to last year.

"Revenue in the Americas PTSA segment, which accounted for 19% of total sales, decreased 1.9% year over year in the second quarter. Operating earnings totaled $13.6 million and increased 1.3% on a year over year basis.

"Revenue in our International Commercial segment, which accounted for 28% of total sales, increased 16.0% year over year in the second quarter. On a constant currency basis revenue increased 8.8%. The segment operating earnings totaled $4.3 million, compared to a loss of $558 thousand the prior year. Included in the segment operating earnings are $2.4 million of UK restructuring costs and the $3.8 million of French payroll tax credits.

"Revenue in our International PTSA segment, which accounted for 4% of total sales, increased 42.9% year over year in the second quarter. On a constant currency basis revenue increased 33.8%. Operating earnings totaled $544 thousand, compared to a loss of $78 thousand the prior year.

"Corporate expenses totaled $19.2 million and were essentially unchanged from the prior year.

Mr. Camden added, "We expect third quarter 2007 earnings to be in the range of $0.41 to $0.46 per share, as compared to $0.45 per share from continuing operations in the third quarter of 2006. Not included in this guidance are planned restructuring costs in our UK and Americas operations.

"We expect the remaining restructuring costs in our UK operations to total approximately $1.3 million, or $0.04 per share, related primarily to the completion of the headquarters consolidation. In addition, we are announcing a restructuring of our Americas operations that will result in the closing of approximately 40 commercial branches. The estimated charge will total approximately $2.0 million pre tax, or about $0.03 per share, and is expected to occur over the third and fourth quarters of 2007.

Mr. Camden concluded, "For the full year of 2007, we are currently forecasting that earnings will range between $1.60 and $1.70 per share, compared to $1.56 per share from continuing operations in 2006. The range excludes the gain on the sale of the Home Care business and the UK and Americas restructuring costs. This guidance reflects our view that the U.S. economy will avoid a recession in 2007, and that our Americas staffing segments will resume positive revenue growth late in the 4th quarter of this year. "

In conjunction with its second quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on July 24, 2007 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Telephone:

U.S. 1-800-230-1085
International 1-612-332-0107

The pass code is Kelly Services

Via the Internet:

The call is also available via the internet through the Kelly Services website: 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: KELYA) (NASDAQ: KELYB) is a Fortune 500 company headquartered in Troy, Michigan, offering human resources solutions that include temporary staffing services, outsourcing, vendor on-site and full-time placement. Kelly operates in 33 countries and territories. Kelly provides employment to more than 750,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, creative services, light industrial, education, and health care. Revenue in 2006 was $5.5 billion. Visit www.kellyservices.com.

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SOURCE: Kelly Services, Inc.