Kelly Services Reports Record Revenue and Strong Earnings Growth for the 2nd Quarter of 2005

July 26, 2005

TROY, Mich., July 26 -- 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: KELYA, 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


SOURCE Kelly Services, Inc.

CONTACT: ANALYST CONTACT: James Polehna, +1-248-244-4586, james_polehna@kellyservices.com , or MEDIA CONTACT: Renee Walker, +1-248-244-5362, renee_walker@kellyservices.com , both of Kelly Services, Inc.