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): October 24, 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))

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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 nine-month periods ended October 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 October 24, 2006.

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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: October 24, 2006
	/s/ William K. Gerber
	William K. Gerber
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)
Date: October 24, 2006
	/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 October 24, 2006

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 41% INCREASE IN NET EARNINGS

FOR THE THIRD QUARTER OF 2006

TROY, MI (October 24, 2006) — Kelly Services, Inc., a global provider of staffing services, today announced record revenue and a 41% increase in net earnings for the third quarter ended October 1, 2006.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the third quarter of 2006 totaled $1.419 billion, a 5.5% increase compared to the $1.345 billion for the corresponding quarter in 2005. Revenue for the nine-month period totaled $4.195 billion, a 7.4% increase compared to the $3.906 billion for the first nine months of 2005.

Net earnings for the third quarter of 2006 totaled $17.8 million, a 40.6% increase compared to $12.7 million reported for the third quarter of 2005. Net earnings for the first nine months of 2006 totaled $39.0 million, a 50.5% increase compared to the $25.9 million earned in the comparable period of 2005.

Diluted earnings per share in the third quarter of 2006 were $0.49, an increase of 40.0% as compared to third quarter 2005 earnings of $0.35 per share. Diluted earnings per share for the first nine months of 2006 were $1.08, a 50.0% increase compared to the $0.72 per share earned last year.

Commenting on the results, Camden said, “We’re pleased that we delivered solid earnings performance despite a slowdown in the U.S. economy. Our PTSA and International segments delivered particularly strong profit increases.

“Our earnings before taxes grew by nearly 48% during the third quarter. However, our net earnings after taxes increased at a lower rate of 41%, because our tax rate was higher than last year. This was primarily due to the fact that legislation to retroactively extend Work Opportunity Credits for 2006 was not passed in the third quarter, as was originally expected. It is not unusual for the credits to be delayed, and we still believe that this legislation will be passed before year end.

“Revenue in our U.S. Commercial segment, which accounted for 44% of total sales, increased 1.0% year over year in the third quarter. Operating earnings totaled $32.5 million, an increase of 5.4% compared to last year.

“Revenue in our Professional, Technical, and Staffing Alternatives (PTSA) segment, which accounted for 20% of total sales, increased 0.9% year over year in the third quarter. Operating earnings totaled $20.8 million and increased 25.0% on a year over year basis.

“Revenue in our International segment, which accounted for 36% of total sales, increased 14.9% year over year in the third quarter. Operating earnings totaled $10.4 million, and increased 77.9% compared to last year.

“On a constant currency basis, International segment revenue increased 10.8% year over year in the third quarter. On a constant currency basis, total company revenue increased 4.2% year over year in the third quarter.

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“Corporate expenses totaled $38.5 million and increased 6.8% compared to last year. Operating earnings totaled $25.3 million, and increased 45.7% on a year over year basis.”

Mr. Camden concluded, “We expect fourth quarter 2006 earnings to be in the range of $0.46 to $0.51 per share, as compared to $0.37 per share in the fourth quarter of 2005. This guidance includes a tax rate of approximately 24%, which assumes legislation to retroactively extend Work Opportunity Credits to the beginning of 2006 will be signed during the fourth quarter. For the full year, we now forecast earnings between $1.54 and $1.59 per share.”

In conjunction with its third quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on October 24, 2006 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Telephone:

U.S.	1-866-269-9613
International	1-651-291-0900

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, 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 more than 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.

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KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

FOR THE 13 WEEKS ENDED OCTOBER 1, 2006 AND OCTOBER 2, 2005

(UNAUDITED)

(In thousands of dollars except per share data)

	2006			2005			Change			% Change
Revenue from services	$	1,418,804		$	1,344,644		$	74,160		5.5	%
Cost of services		1,180,207			1,126,466			53,741		4.8
Gross profit		238,597			218,178			20,419		9.4
Selling, general and administrative expenses		213,345			200,849			12,496		6.2
Earnings from operations		25,252			17,329			7,923		45.7
Other income, net		348			10			338		NM
Earnings before taxes		25,600			17,339			8,261		47.6
Income taxes		7,782			4,664			3,118		66.9
Net earnings	$	17,818		$	12,675		$	5,143		40.6	%
Basic earnings per share	$	0.49		$	0.35		$	0.14		40.0	%
Diluted earnings per share	$	0.49		$	0.35		$	0.14		40.0	%
STATISTICS:
Gross profit rate		16.8	%		16.2	%		0.6	%
Expenses as a % of revenue		15.0			14.9			0.1
% Return -  Earnings from operations		1.8			1.3			0.5
Earnings before taxes		1.8			1.3			0.5
Net earnings		1.3			0.9			0.4
Effective income tax rate		30.4	%		26.9	%		3.5	%
Average number of shares outstanding (thousands):
Basic		35,997			35,725
Diluted		36,225			36,006

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KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF EARNINGS

FOR THE 39 WEEKS ENDED OCTOBER 1, 2006 AND OCTOBER 2, 2005

(UNAUDITED)

(In thousands of dollars except per share data)

	2006			2005			Change			% Change
Revenue from services	$	4,195,302		$	3,905,883		$	289,419		7.4	%
Cost of services		3,507,120			3,269,519			237,601		7.3
Gross profit		688,182			636,364			51,818		8.1
Selling, general and administrative expenses		628,167			599,332			28,835		4.8
Earnings from operations		60,015			37,032			22,983		62.1
Other income (expense), net		853			(177)			1,030		NM
Earnings before taxes		60,868			36,855			24,013		65.2
Income taxes		21,819			10,909			10,910		100.0
Net earnings	$	39,049		$	25,946		$	13,103		50.5	%
Basic earnings per share	$	1.09		$	0.73		$	0.36		49.3	%
Diluted earnings per share	$	1.08		$	0.72		$	0.36		50.0	%
STATISTICS:
Gross profit rate		16.4	%		16.3	%		0.1	%
Expenses as a % of revenue		15.0			15.3			(0.3)
% Return -  Earnings from operations		1.4			0.9			0.5
Earnings before taxes		1.5			0.9			0.6
Net earnings		0.9			0.7			0.2
Effective income tax rate		35.8	%		29.6	%		6.2	%
Average number of shares outstanding (thousands):
Basic		35,937			35,619
Diluted		36,226			35,903

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KELLY SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In thousands of dollars)

	Third Quarter
	2006		2005		Change		% Change
Revenue from Services:
U.S. Commercial Staffing	$	625,241	$	619,324	$	5,917	1.0	%
PTSA		287,592		284,889		2,703	0.9
International		505,971		440,431		65,540	14.9
Consolidated Total	$	1,418,804	$	1,344,644	$	74,160	5.5	%
Earnings from Operations:
U.S. Commercial Staffing	$	32,531	$	30,866	$	1,665	5.4	%
PTSA		20,821		16,659		4,162	25.0
International		10,390		5,842		4,548	77.9
Corporate Expense		(38,490)		(36,038)		(2,452)	(6.8)
Consolidated Total	$	25,252	$	17,329	$	7,923	45.7	%
	September Year to Date
	2006		2005		Change		% Change
Revenue from Services:
U.S. Commercial Staffing	$	1,883,297	$	1,787,263	$	96,034	5.4	%
PTSA		879,190		838,275		40,915	4.9
International		1,432,815		1,280,345		152,470	11.9
Consolidated Total	$	4,195,302	$	3,905,883	$	289,419	7.4	%
Earnings from Operations:
U.S. Commercial Staffing	$	95,619	$	85,144	$	10,475	12.3	%
PTSA		58,644		47,467		11,177	23.5
International		18,889		9,819		9,070	92.4
Corporate Expense		(113,137)		(105,398)		(7,739)	(7.3)
Consolidated Total	$	60,015	$	37,032	$	22,983	62.1	%

Note:   Earnings from Operations for 2005 were reclassified to reflect the chargeback of payroll, billing and accounts receivable costs previously included in Corporate Expense to the U.S. Commercial, PTSA and International segments. This change did not affect Consolidated Total Earnings from Operations.

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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)

	Third Quarter
	2006		2005		Change		% Change
U.S. Commercial	$	625,241	$	619,324	$	5,917	1.0	%
PTSA		287,592		284,889		2,703	0.9
International - constant currency*		487,977		440,431		47,546	10.8
Revenue from services - constant currency		1,400,810		1,344,644		56,166	4.2	%
Foreign currency impact		17,994				17,994
Revenue from services	$	1,418,804	$	1,344,644	$	74,160	5.5	%
		September Year to Date
	2006		2005		Change		% Change
U.S. Commercial	$	1,883,297	$	1,787,263	$	96,034	5.4	%
PTSA		879,190		838,275		40,915	4.9
International - constant currency*		1,430,407		1,280,345		150,062	11.7
Revenue from services - constant currency		4,192,894		3,905,883		287,011	7.3	%
Foreign currency impact		2,408				2,408
Revenue from services	$	4,195,302	$	3,905,883	$	289,419	7.4	%

* 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

(UNAUDITED)

(In thousands of dollars)

	October 1, 2006		January 1, 2006		October 2, 2005
Current Assets
Cash and equivalents	$     77,493		$     63,699		$     59,286
Short-term investments	227		154		221
Trade accounts receivable, less allowances of $17,840, $16,648 and $17,320, respectively	878,336		803,812		811,583
Prepaid expenses and other current assets	44,849		47,434		47,032
Deferred taxes	34,693		33,805		37,702
Total current assets	1,035,598		948,904		955,824
Property and Equipment, Net	162,791		165,757		165,947
Noncurrent Deferred Taxes	23,128		22,088		18,353
Goodwill, Net	94,592		88,217		88,723
Other Assets	113,599		87,891		87,082
Total Assets	$1,429,708		$1,312,857		$1,315,929
Current Liabilities
Short-term borrowings	$     58,375		$     56,644		$     47,991
Accounts payable	125,213		110,411		111,246
Accrued payroll and related taxes	293,223		263,112		270,672
Accrued insurance	32,728		34,097		33,683
Income and other taxes	63,559		56,651		64,561
Total current liabilities	573,098		520,915		528,153
Noncurrent Liabilities
Accrued insurance	53,294		54,517		59,883
Accrued retirement benefits	63,641		57,443		56,024
Other long-term liabilities	15,238		7,939		8,236
Total noncurrent liabilities	132,173		119,899		124,143
Stockholders’ Equity
Common stock	40,116		40,116		40,116
Treasury stock	(86,665)		(90,919)		(91,666)
Paid-in capital	28,955		27,015		26,320
Earnings invested in the business	715,249		688,033		678,298
Accumulated other comprehensive income	26,782		7,798		10,565
Total stockholders’ equity	724,437		672,043		663,633
Total Liabilities and Stockholders’ Equity	$1,429,708		$1,312,857		$1,315,929
STATISTICS:
Working Capital	$   462,500		$   427,989		$   427,671
Current Ratio	1.8		1.8		1.8
Debt-to-capital %	7.5	%	7.8	%	6.7	%
Global Days Sales Outstanding
Quarter	56		53		55
Year-to-date	57		55		57

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KELLY SERVICES, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

FOR THE 39 WEEKS ENDED OCTOBER 1, 2006 AND OCTOBER 2, 2005

(UNAUDITED)

(In thousands of dollars)

	2006		2005
Cash flows from operating activities
Net earnings	$	39,049	$	25,946
Noncash adjustments:
Depreciation and amortization		30,949		31,709
Stock-based compensation		3,913		2,448
Increase in trade accounts receivable, net		(56,252)		(103,981)
Changes in other operating assets and liabilities		41,455		58,784
Net cash from operating activities		59,114		14,906
Cash flows from investing activities
Capital expenditures		(26,111)		(17,899)
(Increase) decrease in short-term investments		(73)		1,135
Increase in other assets		(468)		(8,422)
Acquisition of company, net of cash received		(4,531)		-
Investment in unconsolidated affiliates		-		(19,681)
Net cash from investing activities		(31,183)		(44,867)
Cash flows from financing activities
Net (decrease) increase in short-term borrowings		(289)		16,973
Dividend payments		(11,833)		(10,687)
Stock options and other stock sales		1,683		5,031
Other financing activities		(4,504)		1,168
Net cash from financing activities		(14,943)		12,485
Effect of exchange rates on cash and equivalents		806		(2,586)
Net change in cash and equivalents		13,794		(20,062)
Cash and equivalents at beginning of period		63,699		79,348
Cash and equivalents at end of period	$	77,493	$	59,286