SEC Filing | Kelly Services Inc.

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Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 25, 2006

KELLY SERVICES, INC.

(Exact name of Registrant as specified in its charter)


DELAWARE	0-1088	38-1510762
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084

(Address of principal executive offices)

(Zip Code)

(248) 362-4444

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.

Results of Operations and Financial Condition

Kelly Services, Inc. (the “Company”) today released financial information containing highlighted financial data for the three months and year ended January 1, 2006. A copy of the press release is attached as exhibit 99.1 herein.

Item 9.01.

Financial Statements and Exhibits

(d)

Exhibits


99.1		Press Release dated January 25, 2006.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.


				KELLY SERVICES, INC.

Date: January 25, 2006

				/s/ William K. Gerber
				William K. Gerber

				Executive Vice President and
				Chief Financial Officer
				(Principal Financial Officer)


Date: January 25, 2006

				/s/ Michael E. Debs
				Michael E. Debs

				Senior Vice President and Corporate Controller
				(Principal Accounting Officer)

EXHIBIT INDEX


Exhibit No.		Description
99.1		Press release dated January 25, 2006

Press Release

Exhibit 99.1

LOGO


ANALYST CONTACT:		MEDIA CONTACT:
James Polehna		Renee Walker
(248) 244-4586		(248) 244-5362
james_polehna@kellyservices.com		renee_walker@kellyservices.com

KELLY SERVICES REPORTS RECORD REVENUE

AND 85% NET EARNINGS GROWTH FOR THE FULL YEAR OF 2005

TROY, MI (January 25, 2006) – Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for fourth quarter and full year ended January 1, 2006.

Terence E. Adderley, Kelly Services chairman and chief executive officer, announced revenue for the 13 week fourth quarter of 2005 totaled $1.384 billion, a 2.1% increase compared to the $1.356 billion for the corresponding 14 week quarter in 2004. On a comparable 13 week basis, fourth quarter revenue increased 6.9%.

Sales for the 52 week fiscal year totaled $5.290 billion, a 6.1% increase compared to the $4.984 billion for the 53 week fiscal year of 2004. On a comparable 52 week basis, total year revenue increased 7.5%.

Net earnings for the fourth quarter of 2005 totaled $13.3 million, a 68% increase compared to $8.0 million reported for the fourth quarter of 2004. Net earnings for the full year of 2005 totaled $39.3 million, an 85% increase compared to the $21.2 million earned during 2004.

Diluted earnings per share in the fourth quarter of 2005 were $0.37, an increase of 68% as compared to fourth quarter 2004 earnings of $0.22 per share. Diluted earnings per share for the full year of 2005 were $1.09, an increase of 82% compared to the $0.60 per share earned in 2004.

Commenting on the results, Adderley said, “Kelly turned in a very good year. Our full year sales of nearly $5.3 billion achieved a new sales record, exceeding the previous record we set in 2004 by over $300 million.

“As the new year begins, we expect first quarter 2006 earnings to be in the range of $0.14 to $0.19, as compared to $0.11 per share in the first quarter of 2005. For the full year of 2006, we are currently forecasting earnings between $1.45 and $1.60 per share. This forecast is based on continued moderate global economic growth in 2006.

“Revenue in our U.S. Commercial staffing segment, which accounted for 47% of total sales, increased 9.5% year over year in the fourth quarter on a comparable 13 week basis. The gross profit rate in this segment increased four-tenths of a percent, primarily due to lower workers compensation costs and higher fee based income. Expenses increased 8.3% compared to last year. Operating earnings totaled $38.0 million, an increase of 6.1% compared to last year.

- more -

“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 21% of total sales, increased 10.0% year over year in the fourth quarter on a comparable 13 week basis. Kelly Engineering Resources and Kelly IT Resources were the leading professional and technical performers in the fourth quarter. Kelly HR First and Kelly Vendor Management continue to be the leading staffing alternatives units. Kelly Home Care, the Automotive Services Group, Kelly Law Registry and Kelly Staff Leasing experienced revenue decreases during the quarter. The PTSA gross profit rate increased four tenths of a percent, primarily due to lower workers compensation expense and higher fee based income. Expenses decreased 1.1% as compared to last year. Operating earnings totaled $19.0 million and increased 23.6% on a year over year basis.

“Revenue in our International segment, which accounted for 32% of total sales, increased 1.5% year over year during the fourth quarter on a comparable 13 week basis. The International gross profit rate increased by one-tenth of a percent, primarily due to growth in fee based income. Operating expenses decreased by 1.7% in U.S. dollar terms. Operating earnings totaled $5.2 million, compared to earnings of $5.5 million last year.

“On a 13 week constant currency basis, International segment revenue increased 5.7% year over year in the fourth quarter. On a 13 week constant currency basis, total company revenue increased 8.3% year over year in the fourth quarter.”

Mr. Adderley concluded, “We believe 2006 should be another good year for Kelly. We expect to set sales records, gain market share, improve operating efficiency, and rapidly grow earnings.”

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, 2006 to review the results. The call may be accessed in one of the following ways:


Via the Telephone:
U.S.		1-800-230-1951
International		1-651-291-0618

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:

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, 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 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 2005 was $5.3 billion. Visit www.kellyservices.com.

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

FOR THE 13 WEEKS ENDED JANUARY 1, 2006 AND 14 WEEKS ENDED JANUARY 2, 2005

(UNAUDITED)

(In thousands of dollars except per share data)


	2005 (13 weeks)			2004 (14 weeks)			Change			% Change
Revenue from services	$	1,383,942		$	1,355,922		$	28,020		2.1	%

Cost of services		1,161,412			1,141,962			19,450		1.7

Gross profit		222,530			213,960			8,570		4.0

Selling, general and administrative expenses		203,410			202,743			667		0.3

Earnings from operations		19,120			11,217			7,903		70.5

Interest expense, net		(10	)		(145	)		135		93.1

Earnings before taxes		19,110			11,072			8,038		72.6

Income taxes		5,793			3,122			2,671		85.6

Net earnings	$	13,317		$	7,950		$	5,367		67.5	%

Basic earnings per share	$	0.37		$	0.23		$	0.14		60.9	%

Diluted earnings per share	$	0.37		$	0.22		$	0.15		68.2	%


STATISTICS:

Gross profit rate		16.1	%		15.8	%		0.3	%

Expenses as a % of revenue		14.7			15.0			(0.3	)

% Return - Earnings from operations		1.4			0.8			0.6
Earnings before taxes		1.4			0.8			0.6
Net earnings		1.0			0.6			0.4

Effective income tax rate		30.3	%		28.2	%		2.1	%

Average number of shares outstanding (thousands):
Basic		35,812			35,306
Diluted		36,064			35,588

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

FOR THE 52 WEEKS ENDED JANUARY 1, 2006 AND 53 WEEKS ENDED JANUARY 2, 2005

(In thousands of dollars except per share data)


	2005 (52 weeks)			2004 (53 weeks)			Change			% Change
Revenue from services	$	5,289,825		$	4,984,051		$	305,774		6.1	%

Cost of services		4,430,931			4,186,285			244,646		5.8

Gross profit		858,894			797,766			61,128		7.7

Selling, general and administrative expenses		802,742			763,756			38,986		5.1

Earnings from operations		56,152			34,010			22,142		65.1

Interest expense, net		(187	)		(861	)		674		78.3

Earnings before taxes		55,965			33,149			22,816		68.8

Income taxes		16,702			11,938			4,764		39.9

Net earnings	$	39,263		$	21,211		$	18,052		85.1	%

Basic earnings per share	$	1.10		$	0.60		$	0.50		83.3	%

Diluted earnings per share	$	1.09		$	0.60		$	0.49		81.7	%

STATISTICS:

Gross profit rate		16.2	%		16.0	%		0.2	%

Expenses as a % of revenue		15.2			15.3			(0.1	)

% Return - Earnings from operations		1.1			0.7			0.4
Earnings before taxes		1.1			0.7			0.4
Net earnings		0.7			0.4			0.3

Effective income tax rate		29.8	%		36.0	%		(6.2	)%

Average number of shares outstanding (thousands):
Basic		35,667			35,115
Diluted		35,949			35,461

KELLY SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(In thousands of dollars)


	Fourth Quarter (Unaudited)
	2005 (13 weeks)			2004 (14 weeks)			Change			% Change
Revenue from Services:
U.S. Commercial Staffing	$	649,709		$	623,025		$	26,684		4.3	%
PTSA		290,160			277,318			12,842		4.6
International		444,073			455,579			(11,506	)	(2.5	)

Consolidated Total	$	1,383,942		$	1,355,922		$	28,020		2.1	%

Earnings from Operations:
U.S. Commercial Staffing	$	37,977		$	35,782		$	2,195		6.1	%
PTSA		18,957			15,336			3,621		23.6
International		5,212			5,469			(257	)	(4.7	)
Corporate Expense		(43,026	)		(45,370	)		2,344		5.2

Consolidated Total	$	19,120		$	11,217		$	7,903		70.5	%


	December Year to Date
	2005 (52 weeks)			2004 (53 weeks)			Change			% Change
Revenue from Services:
U.S. Commercial Staffing	$	2,436,972		$	2,327,592		$	109,380		4.7	%
PTSA		1,128,435			1,033,745			94,690		9.2
International		1,724,418			1,622,714			101,704		6.3

Consolidated Total	$	5,289,825		$	4,984,051		$	305,774		6.1	%

Earnings from Operations:
U.S. Commercial Staffing	$	134,757		$	118,934		$	15,823		13.3	%
PTSA		69,055			61,976			7,079		11.4
International		16,530			12,656			3,874		30.6
Corporate Expense		(164,190	)		(159,556	)		(4,634	)	(2.9	)

Consolidated Total	$	56,152		$	34,010		$	22,142		65.1	%

KELLY SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF CONSTANT CURRENCY

REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES

(UNAUDITED)

(In thousands of dollars)


	Fourth Quarter
	2005 (13 weeks)			2004 (14 weeks)		Change			% Change
U.S. Commercial	$	649,709		$	623,025	$	26,684		4.3	%
PTSA		290,160			277,318		12,842		4.6
International - constant currency*		462,079			455,579		6,500		1.4

Revenue from services - constant currency		1,401,948			1,355,922		46,026		3.4	%
Foreign currency impact		(18,006	)				(18,006	)

Revenue from services	$	1,383,942		$	1,355,922	$	28,020		2.1	%


	December Year to Date
	2005 (52 weeks)			2004 (53 weeks)		Change			% Change
U.S. Commercial	$	2,436,972		$	2,327,592	$	109,380		4.7	%
PTSA		1,128,435			1,033,745		94,690		9.2
International - constant currency*		1,702,132			1,622,714		79,418		4.9

Revenue from services - constant currency		5,267,539			4,984,051		283,488		5.7	%
Foreign currency impact		22,286					22,286

Revenue from services	$	5,289,825		$	4,984,051	$	305,774		6.1	%

*	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.

RECONCILIATION OF CONSTANT CURRENCY

REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES

ADJUSTED FOR THE 53rd WEEK IN 2004

(UNAUDITED)

(In thousands of dollars)


	2005			Revenue from Services 2004						Change			% Change
	Reported Revenue 13 Weeks			Reported Revenue 14 Weeks		Less: 14th Week Revenue		Adjusted Revenue 13 Weeks		Change			% Change
U.S. Commercial Staffing	$	649,709		$	623,025	$	29,936	$	593,089	$	56,620		9.5	%
PTSA		290,160			277,318		13,552		263,766		26,394		10.0
International - constant currency		462,079			455,579		18,242		437,337		24,742		5.7

Revenue from services - constant currency		1,401,948			1,355,922		61,730		1,294,192		107,756		8.3
Foreign currency impact		(18,006	)								(18,006	)

Revenue from services	$	1,383,942		$	1,355,922	$	61,730	$	1,294,192	$	89,750		6.9	%


	2005			Revenue from Services 2004						Change			% Change
	Reported Revenue 52 Weeks			Reported Revenue 53 Weeks		Less: 53rd Week Revenue		Adjusted Revenue 52 Weeks		Change			% Change
U.S. Commercial Staffing	$	2,436,972		$	2,327,592	$	29,936	$	2,297,656	$	139,316		6.1	%
PTSA		1,128,435			1,033,745		13,552		1,020,193		108,242		10.6
International - constant currency		1,702,132			1,622,714		18,242		1,604,472		97,660		6.1

Revenue from services - constant currency		5,267,539			4,984,051		61,730		4,922,321		345,218		7.0
Foreign currency impact		22,286									22,286

Revenue from services	$	5,289,825		$	4,984,051	$	61,730	$	4,922,321	$	367,504		7.5	%

Information on the 14th week of the 2004 fourth quarter and 53rd week of the 2004 fiscal year is provided to allow investors to separate the impact of this extra week on reported results, in comparison to 2005 reported results. 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. Management believes these measurements are an important analytical tool to aid in understanding underlying operating trends without distortion due to the extra week included in the 2004 fiscal year and currency fluctuations.

KELLY SERVICES, INC. AND SUBSIDIARIES

BALANCE SHEETS

(In thousands of dollars)


	January 1, 2006			January 2, 2005
Current Assets
Cash and equivalents	$	63,699		$	79,348
Short-term investments		154			6,288
Trade accounts receivable, less allowances of $16,648 and $16,228, respectively		803,812			727,366
Prepaid expenses and other current assets		47,434			43,942
Deferred taxes		33,805			36,055

Total current assets		948,904			892,999

Property and Equipment, Net		165,757			181,086

Noncurrent Deferred Taxes		22,088			17,960

Goodwill, Net		88,217			94,652

Other Assets		87,891			63,059

Total Assets	$	1,312,857		$	1,249,756

Current Liabilities
Short-term borrowings	$	56,644		$	34,289
Accounts payable		110,411			102,947
Accrued payroll and related taxes		263,112			241,651
Accrued insurance		34,097			33,165
Income and other taxes		56,651			67,839

Total current liabilities		520,915			479,891

Noncurrent Liabilities
Accrued insurance		54,517			58,548
Accrued retirement benefits		57,443			50,892
Other long-term liabilities		7,939			6,374

Total noncurrent liabilities		119,899			115,814

Stockholders’ Equity
Common stock		40,116			40,116
Treasury stock		(90,919	)		(97,693	)
Paid-in capital		27,015			24,045
Earnings invested in the business		688,033			663,039
Accumulated other comprehensive income		7,798			24,544

Total stockholders’ equity		672,043			654,051

Total Liabilities and Stockholders’ Equity	$	1,312,857		$	1,249,756


STATISTICS:
Working Capital	$	427,989		$	413,108
Current Ratio		1.8			1.9
Debt-to-capital %		7.8	%		5.0	%
Global Days Sales Outstanding
Quarter		53			53
Year-to-date		55			54

KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

FOR THE 52 WEEKS ENDED JANUARY 1, 2006 AND 53 WEEKS ENDED JANUARY 2, 2005

(In thousands of dollars)


	2005			2004
Cash flows from operating activities
Net earnings	$	39,263		$	21,211
Noncash adjustments:
Depreciation and amortization		42,215			44,435
Increase in trade accounts receivable, net		(97,880	)		(10,175	)
Changes in other operating assets and liabilities		40,666			(705	)

Net cash from operating activities		24,264			54,766

Cash flows from investing activities
Capital expenditures		(28,527	)		(36,801	)
Decrease in short-term investments		1,203			105
Increase in other assets		(8,911	)		(736	)
Investments in unconsolidated affiliates		(19,681	)		—

Net cash from investing activities		(55,916	)		(37,432	)

Cash flows from financing activities
Increase (decrease) in short-term borrowings		6,833			(8,188	)
Financing to fund long-term investments in unconsolidated affiliates		19,681			—
Dividend payments		(14,269	)		(14,043	)
Stock options and other stock sales		5,786			15,199
Other financing activities		1,949			(6,777	)
Purchase of treasury stock		—			(3	)

Net cash from financing activities		19,980			(13,812	)

Effect of exchange rates on cash and equivalents		(3,977	)		1,815

Net change in cash and equivalents		(15,649	)		5,337
Cash and equivalents at beginning of period		79,348			74,011

Cash and equivalents at end of period	$	63,699		$	79,348