SOURCE: Kelly Services, Inc.

April 22, 2008 07:30 ET

Kelly Services Reports 1st Quarter 2008 Results

TROY, MI--(Marketwire - April 22, 2008) - Kelly Services, Inc. (NASDAQ: KELYA) (NASDAQ: KELYB), a world leader in human resources solutions, today announced results for the first quarter of 2008.

Carl T. Camden, President and Chief Executive Officer, announced revenue for the first quarter of 2008 totaled $1.4 billion, a 3% increase compared to the corresponding quarter in 2007.

Earnings from operations for the first quarter of 2008 totaled $12.9 million, a 23% increase compared to $10.5 million reported for the first quarter of 2007. Included in earnings from operations in the first quarter of 2007 are $2.6 million of restructuring costs related to our UK operations.

Diluted earnings per share from continuing operations in the first quarter of 2008 were $0.23, an increase of 64% as compared to first quarter 2007 earnings of $0.14 per share. Included in first quarter 2007 diluted earnings is the $0.07 per share cost of the UK restructuring.

Commenting on the results, Camden said, "We're pleased that we delivered another quarter of solid, profitable results, despite the ongoing weak economic conditions and continued softness in the US staffing market. Our strategic commitment to diversify geographically, move into higher-margin, fee-based business, expand our professional and technical businesses, and improve operating margins, is proving its value.

"We have recently completed our organizational alignment to three regions -- the Americas, EMEA, and APAC. Commencing this quarter, we began the practice of separately reporting our Commercial and Professional and Technical financial results for each region. In addition, we've organized our Staffing Alternatives businesses under our global Outsourcing and Consulting Group."

Camden concluded, "We expect second quarter 2008 earnings from continuing operations to be in the range of $0.37 to $0.41 per share, compared to $0.41 per share from continuing operations in the second quarter of 2007. Included in the second quarter 2007 earnings from continuing operations was $.07 of UK restructuring costs, as well as a $0.07 benefit from a temporary change in French payroll tax law."

In conjunction with its first quarter earnings release, Kelly Services, Inc. will host a conference call at 9:00 a.m. (ET) on April 22, 2008 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Telephone:

U.S.             1-800-398-9397
International    1-612-332-0523

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) (NASDAQ: KELYB) is a world leader in human resources solutions headquartered in Troy, Michigan, offering temporary staffing services, outsourcing, vendor on-site and full-time placement. Kelly operates in 37 countries and territories. Kelly provides employment to more than 750,000 employees annually, with skills including office services, accounting, engineering, information technology, law, science, marketing, creative services, light industrial, education, and health care. Revenue in 2007 was $5.7 billion. Visit www.kellyservices.com.

                  KELLY SERVICES, INC. AND SUBSIDIARIES
                          STATEMENTS OF EARNINGS
          FOR THE 13 WEEKS ENDED MARCH 30, 2008 AND APRIL 1, 2007
                                (UNAUDITED)
              (In thousands of dollars except per share data)



                            2008         2007       Change       % Change
                        -----------  -----------  ----------   ----------
Revenue from services   $ 1,388,444  $ 1,350,858  $   37,586          2.8%

Cost of services          1,138,557    1,121,650      16,907          1.5
                        -----------  -----------  ----------   ----------

Gross profit                249,887      229,208      20,679          9.0

Selling, general and
 administrative
 expenses                   236,947      218,715      18,232          8.3
                        -----------  -----------  ----------   ----------

Earnings from operations     12,940       10,493       2,447         23.3

Other (expense) income,
 net                            (51)         673        (724)      (107.6)
                        -----------  -----------  ----------   ----------

Earnings from
 continuing operations
 before taxes                12,889       11,166       1,723         15.4

Income taxes                  4,898        5,908      (1,010)       (17.1)
                        -----------  -----------  ----------   ----------

Earnings from
 continuing operations        7,991        5,258       2,733         52.0

Earnings from
 discontinued
 operations, net of tax         238        6,657      (6,419)       (96.4)
                        -----------  -----------  ----------   ----------

Net earnings            $     8,229  $    11,915  $   (3,686)       (30.9)%
                        ===========  ===========  ==========   ==========

Basic earnings per
 share
  Earnings from
   continuing
   operations           $      0.23  $      0.14  $     0.09         64.3%
  Earnings from
   discontinued
   operations                  0.01         0.18       (0.17)       (94.4)
                        -----------  -----------  ----------   ----------
  Net earnings          $      0.24  $      0.33  $    (0.09)       (27.3)%
                        ===========  ===========  ==========   ==========

Diluted earnings per
 share
  Earnings from
   continuing
   operations           $      0.23  $      0.14  $     0.09         64.3%
  Earnings from
   discontinued
   operations                  0.01         0.18       (0.17)       (94.4)
                        -----------  -----------  ----------   ----------
  Net earnings          $      0.24  $      0.32  $    (0.08)       (25.0)%
                        ===========  ===========  ==========   ==========

STATISTICS:

Gross profit rate              18.0%        17.0%        1.0 %

Selling, general and
 administrative
 expenses:
  % of revenue                 17.1         16.2         0.9
  % of gross profit            94.8         95.4        (0.6)

% Return -  Earnings
 from operations                0.9          0.8         0.1
  Earnings from continuing
   operations before taxes      0.9          0.8         0.1
  Earnings from continuing
   operations                   0.6          0.4         0.2
  Net earnings                  0.6          0.9        (0.3)

Effective income tax
 rate                          38.0%        52.9%      (14.9)%

Average number of
 shares outstanding
 (thousands):
   Basic                     34,823       36,511
   Diluted                   34,955       36,898





                  KELLY SERVICES, INC. AND SUBSIDIARIES
                     RESULTS OF OPERATIONS BY SEGMENT
                                (UNAUDITED)
                        (In thousands of dollars)


                                          First Quarter
                            2008         2007       Change       % Change
                        -----------  -----------  -----------  ----------

Revenue from Services:
Americas Commercial     $   639,939  $   684,051  $   (44,112)       (6.4)%
Americas PT                 232,177      227,629        4,548         2.0
                        -----------  -----------  -----------  ----------
   Total Americas
    Commercial and PT       872,116      911,680      (39,564)       (4.3)

EMEA Commercial             321,909      297,439       24,470         8.2
EMEA PT                      43,787       36,116        7,671        21.2
                        -----------  -----------  -----------  ----------
   Total EMEA
    Commercial and PT       365,696      333,555       32,141         9.6

APAC Commercial              86,693       62,799       23,894        38.0
APAC PT                       8,486        4,599        3,887        84.5
                        -----------  -----------  -----------  ----------
   Total APAC
    Commercial and PT        95,179       67,398       27,781        41.2

OCG                          55,453       38,225       17,228        45.1
                        -----------  -----------  -----------  ----------

     Consolidated Total $ 1,388,444  $ 1,350,858  $    37,586         2.8%
                        ===========  ===========  ===========  ==========


Earnings from
 Operations:
Americas Commercial     $    22,195  $    23,107  $      (912)       (3.9)%
Americas PT                  14,103       13,552          551         4.1
                        -----------  -----------  -----------  ----------
   Total Americas
    Commercial and PT        36,298       36,659         (361)       (1.0)

EMEA Commercial              (1,579)      (4,468)       2,889        64.7
EMEA PT                       1,024          316          708       224.1
                        -----------  -----------  -----------  ----------
   Total EMEA
    Commercial and PT          (555)      (4,152)       3,597        86.6

APAC Commercial                  65          676         (611)      (90.4)
APAC PT                        (210)        (147)         (63)      (42.9)
                        -----------  -----------  -----------  ----------
   Total APAC
    Commercial and PT          (145)         529         (674)     (127.4)

OCG                           1,817          527        1,290       244.8

Corporate Expense           (24,475)     (23,070)      (1,405)       (6.1)
                        -----------  -----------  -----------  ----------

     Consolidated Total $    12,940  $    10,493  $     2,447        23.3%
                        ===========  ===========  ===========  ==========


Earnings from
 Operations (Excluding
 Restructuring
 Charges):
Americas Commercial     $    22,195  $    23,107  $      (912)       (3.9)%
Americas PT                  14,103       13,552          551         4.1
                        -----------  -----------  -----------  ----------
   Total Americas
    Commercial and PT        36,298       36,659         (361)       (1.0)

EMEA Commercial              (1,579)      (1,834)         255        13.9
EMEA PT                       1,024          316          708       224.1
                        -----------  -----------  -----------  ----------
   Total EMEA
    Commercial and PT          (555)      (1,518)         963        63.4

APAC Commercial                  65          676         (611)      (90.4)
APAC PT                        (210)        (147)         (63)      (42.9)
                        -----------  -----------  -----------  ----------
   Total APAC
    Commercial and PT          (145)         529         (674)     (127.4)

OCG                           1,817          527        1,290       244.8

Corporate Expense           (24,475)     (23,070)      (1,405)       (6.1)
                        -----------  -----------  -----------  ----------

     Consolidated Total $    12,940  $    13,127  $      (187)       (1.4)%





                   KELLY SERVICES, INC. AND SUBSIDIARIES
                    RECONCILIATION OF CONSTANT CURRENCY
            REVENUE FROM SERVICES TO REPORTED REVENUE FROM SERVICES
                              (UNAUDITED)
                        (In thousands of dollars)


                                          First Quarter
                            2008         2007       Change       % Change
                        ------------ ------------ -----------  ----------
Revenue from services -
 constant currency*:
Americas Commercial     $    631,311 $    684,051 $   (52,740)       (7.7)%
Americas PT                  231,742      227,629       4,113         1.8
                        ------------ ------------ -----------  ----------
  Total Americas
   Commercial and PT -
   constant currency*        863,053      911,680     (48,627)       (5.3)

EMEA Commercial              292,664      297,439      (4,775)       (1.6)
EMEA PT                       39,475       36,116       3,359         9.3
                        ------------ ------------ -----------  ----------
  Total EMEA Commercial
   and PT - constant
   currency*                 332,139      333,555      (1,416)       (0.4)

APAC Commercial               77,504       62,799      14,705        23.4
APAC PT                        7,518        4,599       2,919        63.5
                        ------------ ------------ -----------  ----------
  Total APAC Commercial
   and PT - constant
   currency*                  85,022       67,398      17,624        26.1

OCG                           54,339       38,225      16,114        42.2
                        ------------ ------------ -----------  ----------

  Total revenue from
   services - constant
   currency*               1,334,553    1,350,858     (16,305)       (1.2)%
Foreign currency impact       53,891                   53,891
                        ------------ ------------ -----------  ----------

  Revenue from services $  1,388,444 $  1,350,858 $    37,586         2.8%
                        ============ ============ ===========  ==========


  *  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
                    SUMMARY OF DISCONTINUED OPERATIONS
                                (UNAUDITED)
                        (In thousands of dollars)

                                                          First Quarter
                                                      ---------------------
                                                        2008       2007
                                                      ---------- ----------

Revenue from services                                 $        - $   14,777

Operating income from discontinued operations         $      385 $      798

Less:  Income taxes                                          147        307
                                                      ---------- ----------

Earnings from discontinued operations, net of tax            238        491
                                                      ---------- ----------

Gain on sale of discontinued operations                        -     10,153
Less:  Income taxes                                            -      3,987
                                                      ---------- ----------
Gain on sale of discontinued operations, net of tax            -      6,166
                                                      ---------- ----------

Discontinued operations, net of tax                   $      238 $    6,657
                                                      ========== ==========


Effective March 31, 2007, the Company sold Kelly Home Care ("KHC"), a
wholly owned subsidiary. Effective December 31, 2006, the Company sold
Kelly Staff Leasing ("KSL"), a wholly owned subsidiary. The operating
results for KHC and KSL, as well as the gain on the sale of KHC, have been
excluded from earnings from continuing operations.  This schedule provides
information on KHC's and KSL's results from operations for the first
quarter of 2008 and 2007, as well as the gain on the sale of KHC, all of
which are included as discontinued operations on the face of the
statements of earnings.





                  KELLY SERVICES, INC. AND SUBSIDIARIES
                              BALANCE SHEETS
                               (UNAUDITED)
                        (In thousands of dollars)


                                      March 30,   December 30,   April 1,
                                         2008         2007         2007
                                     -----------  -----------  -----------
Current Assets
   Cash and equivalents              $    87,933  $    92,817  $   120,829
   Trade accounts receivable, less
    allowances of $18,393, $18,172
    and $17,884, respectively            931,429      888,334      828,005
   Prepaid expenses and other
    current assets                        58,266       53,392       49,569
   Deferred taxes                         26,996       29,294       25,678
                                     -----------  -----------  -----------
    Total current assets               1,104,624    1,063,837    1,024,081

Property and Equipment, Net              175,587      178,019      168,230

Noncurrent Deferred Taxes                 43,171       43,436       35,731

Goodwill, Net                            145,134      147,168      121,207

Other Assets                             154,310      141,537      135,570

                                     -----------  -----------  -----------
Total Assets                         $ 1,622,826  $ 1,573,997  $ 1,484,819
                                     ===========  ===========  ===========

Current Liabilities
   Short-term borrowings             $    47,839  $    49,729  $    75,594
   Accounts payable                      218,296      171,471      135,382
   Accrued payroll and related taxes     275,852      270,575      266,039
   Accrued insurance                      22,609       23,696       24,203
   Income and other taxes                 60,681       69,779       56,580
                                     -----------  -----------  -----------
      Total current liabilities          625,277      585,250      557,798

Noncurrent Liabilities
   Long-term debt                         54,947       48,394            -
   Accrued insurance                      57,703       60,404       57,219
   Accrued retirement benefits            75,108       78,382       74,519
   Other long-term liabilities            16,209       13,338       21,293
                                     -----------  -----------  -----------

      Total noncurrent liabilities       203,967      200,518      153,031

Stockholders' Equity
   Common stock                           40,116       40,116       40,116
   Treasury stock                       (113,454)    (106,312)     (74,231)
   Paid-in capital                        34,488       34,500       33,205
   Earnings invested in the business     780,824      777,338      742,718
   Accumulated other comprehensive
    income                                51,608       42,587       32,182
                                     -----------  -----------  -----------
      Total stockholders' equity         793,582      788,229      773,990
                                     -----------  -----------  -----------

Total Liabilities and Stockholders'
 Equity                              $ 1,622,826  $ 1,573,997  $ 1,484,819
                                     ===========  ===========  ===========

                                     -----------  -----------  -----------

STATISTICS:
   Working Capital                   $   479,347  $   478,587  $   466,283
   Current Ratio                             1.8          1.8          1.8
   Debt-to-capital %                        11.5%        11.1%         8.9%
   Global Days Sales Outstanding              52           49           51





                  KELLY SERVICES, INC. AND SUBSIDIARIES
                         STATEMENTS OF CASH FLOWS
          FOR THE 13 WEEKS ENDED MARCH 30, 2008 AND APRIL 1, 2007
                               (UNAUDITED)
                        (In thousands of dollars)


                                                         2008       2007
                                                      ---------  ---------

Cash flows from operating activities
   Net earnings                                       $   8,229  $  11,915
   Noncash adjustments:
      Depreciation and amortization                      11,303     10,551
      Provision for bad debts                             1,451      1,961
      Stock-based compensation                            1,049        918
      Gain on sale of discontinued operations                 -     (6,166)
      Other, net                                            105       (262)
   Changes in operating assets and liabilities           (2,860)    (4,884)
                                                      ---------  ---------

      Net cash from operating activities                 19,277     14,033
                                                      ---------  ---------

Cash flows from investing activities
   Capital expenditures                                  (6,431)    (8,544)
   Acquisition of companies, net of cash received        (3,261)   (16,869)
   Proceeds from sale of discontinued operations              -     12,500
   Other investing activities                              (308)        13
                                                      ---------  ---------

      Net cash from investing activities                (10,000)   (12,900)
                                                      ---------  ---------

Cash flows from financing activities
   Net decrease in revolving line of credit              (4,263)    (1,857)
   Proceeds from debt                                         -      8,223
   Dividend payments                                     (4,743)    (4,633)
   Purchase of treasury stock                            (7,975)         -
   Stock options and other stock sales                       32      4,895
   Other financing activities                            (1,534)    (6,565)
                                                      ---------  ---------

      Net cash from financing activities                (18,483)        63
                                                      ---------  ---------

Effect of exchange rates on cash and equivalents          4,322      1,205
                                                      ---------  ---------

Net change in cash and equivalents                       (4,884)     2,401
Cash and equivalents at beginning of period              92,817    118,428
                                                      ---------  ---------


Cash and equivalents at end of period                 $  87,933  $ 120,829
                                                      =========  =========





                  KELLY SERVICES, INC. AND SUBSIDIARIES
                          REVENUE FROM SERVICES
                                (UNAUDITED)
                        (In thousands of dollars)


                                            First Quarter
                            ---------------------------------------------
                                                           % Change
                                                                 Constant
                               2008        2007         US$      Currency
                            ----------- ----------- ---------   ---------

Americas
   United States            $   820,740 $   852,272      (3.7)%      (3.7)%
   Canada                        61,839      59,444       4.0       (10.9)
   Puerto Rico                   18,843      18,753       0.5         0.5
   Mexico                        17,670      17,015       3.8         1.8
                            ----------- ----------- ---------   ---------
Total Americas                  919,092     947,484      (3.0)       (4.0)

EMEA
   United Kingdom               104,879     117,883     (11.0)      (12.1)
   France                        86,602      68,971      25.6         9.9
   Switzerland                   42,191      36,561      15.4         0.0
   Italy                         35,352      30,362      16.4         1.9
   Germany                       21,373      13,518      58.1        38.4
   Russia                        20,744      15,162      36.8        26.1
   Norway                        19,976      16,140      23.8         5.7
   Other                         40,458      35,339      14.5         0.4
                            ----------- ----------- ---------   ---------
Total EMEA                      371,575     333,936      11.3         1.0

APAC
   Australia                     35,700      29,301      21.8         5.9
   Singapore                     17,791      13,130      35.5        24.7
   Other                         44,286      27,007      64.0        48.0
                            ----------- ----------- ---------   ---------
Total APAC                       97,777      69,438      40.8        25.8

Total Kelly Services, Inc.  $ 1,388,444 $ 1,350,858       2.8 %      (1.2)%
                            =========== =========== =========   =========






                  KELLY SERVICES, INC. AND SUBSIDIARIES
                    RECONCILIATION OF NON-GAAP MEASURES
                                (UNAUDITED)
              (In thousands of dollars except per share data)



                                              First Quarter
                                ------------------------------------------
                                        2008                  2007
                                --------------------  --------------------
                                  Amount   Per Share    Amount   Per Share
                                ---------  ---------- ---------  ---------

Earnings from continuing
 operations                     $   7,991  $     0.23 $   5,258  $    0.14

    U.K. restructuring charge
     (1)                                -           -     2,634       0.07

                                ---------  ---------- ---------  ---------
Earnings from continuing
 operations excluding the U.K.
 restructuring charge           $   7,991  $     0.23 $   7,892  $    0.21
                                =========  ========== =========  =========


                                              First Quarter
                                ------------------------------------------
                                   2008                  2007    % Change
                                ---------             ---------  ---------
Selling, general and
 administrative expenses        $ 236,947             $ 218,715
   U.K. restructuring charge (1)        -                (2,634)
                                ---------             ---------
Selling, general and
 administrative expenses
 excluding the U.K.
 restructuring charge           $ 236,947             $ 216,081        9.7%
                                =========             =========  =========


Earnings from operations        $  12,940             $  10,493
   U.K. restructuring charge (1)        -                 2,634
                                ---------             ---------
Earnings from operations
 excluding the U.K. restructuring
 charge                         $  12,940             $  13,127     (1.4%)
                                =========             =========  =========


EMEA Commercial selling, general
 and administrative expenses    $  57,191             $  53,448
   U.K. restructuring charge (1)        -                (2,634)
                                ---------             ---------
EMEA Commercial selling, general
 and administrative expenses
 excluding the U.K. restructuring
 charge                         $  57,191             $  50,814       12.5%
                                =========             =========  =========


EMEA Commercial earnings from
 operations                     $  (1,579)            $  (4,468)
   U.K. restructuring charge (1)        -                 2,634
                                ---------             ---------
EMEA Commercial earnings from
 operations excluding the U.K.
 restructuring charge           $  (1,579)            $  (1,834)      13.9%
                                =========             =========  =========


EMEA Commercial and PT earnings
 from operations                $    (555)            $  (4,152)
   U.K. restructuring charge (1)        -                 2,634
                                ---------             ---------
EMEA Commercial and PT earnings
 from operations excluding the
 U.K. restructuring charge      $    (555)            $  (1,518)      63.4%
                                =========             =========  =========





                 KELLY SERVICES, INC. AND SUBSIDIARIES
                  RECONCILIATION OF NON-GAAP MEASURES
                            (UNAUDITED)
            (In thousands of dollars except per share data)

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the restructuring charge from prior year results is useful to understand the Company's fiscal 2008 financial performance and increases comparability. Specifically, Management believes that excluding this item allows for a more meaningful comparison of current period operating performance with the operating results of prior periods. These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company's financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company's financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

(1) The U.K. restructuring charge is comprised of facility exit costs associated with the closure of 22 branch locations and the accelerated depreciation of the leasehold improvements and personal property at the impacted locations.

Contact Information