8-K

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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): July 26, 2005

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))

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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 and six-month periods ended July 3, 2005. A copy of the press release is attached as exhibit 99.1 herein.

Item 9.01. Financial Statements and Exhibits

(c) Exhibits

99.1 Press Release dated July 26, 2005.

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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: July 26, 2005
	/s/    William K. Gerber
	William K. Gerber
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date: July 26, 2005
	/s/    Michael E. Debs
	Michael E. Debs
	Senior Vice President and Corporate Controller (Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release dated July 26, 2005

EX-99.1

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Exhibit 99.1

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

STRONG EARNINGS GROWTH FOR THE 2nd QUARTER OF 2005

TROY, MI (July 26, 2005)—Kelly Services, Inc., a global provider of staffing services, today announced record revenue and strong earnings growth for second quarter ended July 3, 2005.

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.

- more -

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“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:

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 www.kellyservices.com.

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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

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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

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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	%

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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.

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KELLY SERVICES, INC. AND SUBSIDIARIES

BALANCE SHEETS

(In thousands of dollars)

	July 3, 2005			January 2, 2005			June 27, 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

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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