EX-99.1 2 dex991.htm PRESS RELEASE Press Release

5

 

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 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