Kelly Services
Annual Report 2004

Plain-text annual report

I N G T H E W O R L D F F A T S Kelly Services 2004 SUMMARY ANNUAL REPORT 999 West Big Beaver Road Troy, Michigan 48084-4782 (248) 362-4444 www.kellyservices.com T A B L E O F C O N T E N T S Corporate Profile . . . . . . . . . . . . . . . . . . . . . . . . 2 Vision, Mission, Shared Values, Quality Policy Financial Highlights . . . . . . . . . . . . . . . . . . . . . . 3 Letter to Stockholders . . . . . . . . . . . . . . . . . . . . . 4 Corporate Ethics: Kelly Services’ Lobbying Helps Close Corporate-Layoffs Loophole . . . . 8 Staffing the World . . . . . . . . . . . . . . . . . . . . . . 10 Directors & Officers . . . . . . . . . . . . . . . . . . . . . 12 Summary Financials . . . . . . . . . . . . . . . . . . . . . 15 Stockholders’ Information . . . . . . . . . . . . . . . . 28 SUMMARY ANNUAL REPORT This is a summary annual report. Complete financial statements—including Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Notes to Financial Statements—are contained in Kelly Services’ Annual Report on Form 10-K. That report, along with a copy of our Code of Business Conduct and Ethics, is available on our Company’s website, www.kellyservices.com, or through our Investor Relations office. Please see page 28 for contact information. Our success was achieved by remaining true to our commitment to ethics, innovative solutions, and quality service for our customers in 27 countries throughout the world. TERENCE E. ADDERLEY Chairman and Chief Executive Officer C O R P O R A T E P R O F I L E S T A F F I N G T H E W O R L D Kelly Services, Inc., was established in 1946 by William Russell Kelly, the founder of the modern temporary help industry. Today, Kelly® is a leading global provider of staffing services. Over the past 58 years, Kelly’s range of staffing solutions has grown steadily to match the needs of our global customers. Kelly temporary employees work in a wide variety of businesses and disciplines, including office services, finance, engineering, law, science, healthcare, information technology, marketing, call centers, light industrial, homecare, and education. Last year, the company operated 2,600 offices and assigned over 700,000 employees in 27 countries. Sales in 2004 totaled $4.98 billion. Kelly Services is headquartered in Troy, Michigan, U.S.A. Our Vision: To be the world’s best staffing services company and to be recognized as the best. M I S S I O N To serve our customers, employees, shareholders, and society by providing a broad range of staffing services and products. To achieve our Mission: >> We will develop innovative staffing services which meet the needs of our customers and contribute to their success. >> We will foster an environment which stimulates professional excellence and encourages contribution by all employees. >> We will provide our shareholders a fair return on their investment. >> We will demonstrate good corporate citizenship through the ethical conduct of our business. S H A R E D V A L U E S >> Integrity, Honesty, and Ethical Behavior >> Commitment to Quality and Customer Satisfaction >> Dedication to Service and Personal Responsiveness >> Professional Excellence and High Performance >> Innovation, Creativity, and Open-Mindedness >> Employee Participation, Contribution, and Teamwork >> Diversity, Individual Dignity, and Mutual Respect >> Growth, Profitability, and Industry Leadership Q U A L I T Y P O L I C Y We are committed to quality and to the processes, measurement, and continuous improvement which are the foundations of quality management. Quality is a basic business principle for Kelly Services. Quality means providing our internal and external customers innovative services and products that meet or exceed their expectations. Quality improvement is the job of every Kelly Services employee. 2 K E L L Y S E R V I C E S F I N A N C I A L H I G H L I G H T S $4.98 $2.43 $4.3 $4.3 $4.0 $4.1 s r a l l o d f o s n o i l l i b S E C I V R E S M O R F E U N E V E R E R A H S R E P S G N I N R A E D E T U L I D $.46 $.52 $.62 $.14 00 01 02 03 04 00 01 02 03 04 (In thousands of dollars, except per share items) 2004 2003 CHANGE Revenue From Services Earnings Before Income Taxes Income Taxes Net Earnings Basic Earnings Per Share Diluted Earnings Per Share Dividends Per Share Working Capital Stockholders’ Equity Total Assets $ 4,984,051 34,632 12,502 22,130 .63 .62 .40 408,293 654,310 1,247,368 $ 4,325,155 8,660 3,550 5,110 .14 .14 .40 374,355 613,633 1,137,737 15.2% 299.9% 252.2% 333.1% 350.0% 342.9% 0.0% 9.1% 6.6% 9.6% 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 3 L E T T E R T O S T O C K H O L D E R S Terence E. Adderley Chairman and Chief Executive Officer (right) Carl T. Camden President and Chief Operating Officer (left) 2004 was a very good year for Kelly Services. We returned to double-digit sales growth. Set a new sales record. Gained market share. Controlled expenses. Improved operating efficiencies. Quadrupled earnings. And continued to invest for the longer term. 2004 was also a very good year for the U.S. and global economies. The U.S. economy showed steady gains. Over two million new jobs were created with more than 10% of those jobs in temporary staffing. The global economy grew at its fastest rate in nearly 30 years, and employment improved throughout the world. In many countries, temporary employment grew faster than general employment. Our sales have always been a good concurrent indicator. Our business does very well when the economy is recovering and growing, and slows down dramatically during a recession. Simply put, the nature of our business is to help other companies handle their peaks and valleys. MEASURING OUR PROGRESS To maintain our momentum and capitalize on the economic recovery, we set three key performance goals for 2004: It is important to realize that the staffing industry is closely linked to the economy. >> Grow sales faster than the industry average. 4 K E L L Y S E R V I C E S >> Hold our controllable expenses to roughly >> Expanding our global branch network. half the rate of sales growth. >> Increase earnings at a rate considerably faster than sales. We are pleased to report that we were successful in achieving all three of these performance objectives during the year. We had record sales of $4.984 billion for 2004—a year-over-year increase of 15.2%. This exceeded the previous record set in 2003 by $659 million. Controllable expenses grew at less than half the rate of sales growth. As a result, expenses as a percent of sales declined from 15.9% to 15.3%. Earnings in 2004 were $22.1 million, more than four times the $5.1 million earned in 2003. Diluted earnings per share were $.62, a solid improvement over the $.14 earned in 2003. STRATEGIC GROWTH PLAN With the recession behind us in 2004, we reactivated the Company’s strategic growth plan that we put on hold nearly four years ago. This ongoing plan includes: >> Adding additional countries. >> Increasing our product lines. >> Improving productivity, quality, and customer service to premier global and local companies. Working within that plan in 2004, we: >> Added 100 branches, about a third each in U.S. Commercial, PTSA, and International. >> Started operations in Hungary and forged strategic alliances in Japan. >> Launched five additional PTSA businesses internationally. >> Selected PeopleSoft to be the foundation for our back-office system. These accomplishments expanded our base of business. Given the strength of the economy and our 2004 results, we expect to be able to support both strong earnings growth as well as faster implementation of our strategic growth plan. Sales improved dramatically in all three of our business segments—U.S. Commercial, Professional Technical & Staffing Alternatives, and International. 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 5 Kelly’s innovative staffing solutions and experience continue to create lasting value for our customers, employees, and stockholders. THE FUTURE OF STAFFING In last year’s annual report, we discussed our long-term optimism for the temporary staffing industry. That perspective has not changed. The global economy requires a large and increasing pool of highly skilled, technically proficient employees. However demand threatens to outstrip supply over the next few years. North America, Europe, and Japan are already facing the beginning of a skilled labor shortage. Employees are seeking more flexibility, mobility, and personal satisfaction in their work. The nature of work itself is changing. Project employment is on the rise. Job life cycles are shorter. Today’s employers are operating in a more global and competitive environment. They must respond quickly to fluctuating demand for products and services. As a result, companies need greater flexibility in the location and quantity of labor. OUR COMPETITIVE ADVANTAGE Kelly is a leader in the temporary staffing industry. A Fortune 500 Company with nearly $5 billion in annual sales, and $1 billion in assets. 2,600 offices in 27 countries—all company owned and operated. More than 700,000 temporary employees working in a wide range of positions. And a customer list that reads like a “Who’s Who” in business, including 90% of the Fortune 500. The breadth and quality of our services are unmatched, and our ability to satisfy customer needs is readily acknowledged. But, there is more to our Company than these facts and figures. Without a solid heritage and strong business ethics, Kelly could not have been so successful. SUTA DUMPING For example, in last year’s report, we talked about our efforts to close a tax scheme called “SUTA dumping,” which some companies used to avoid paying their fair share of unemployment taxes. We are pleased to report that last year a federal bill, making the practice illegal, was unanimously passed by Congress and signed by President George W. Bush. In the pages that follow, you can read a reprint 6 K E L L Y S E R V I C E S of an article from the Wall Street Journal highlighting our effort. RECOGNIZING LEADERSHIP During the year, we were pleased to have Donald R. Parfet join our Board of Directors. Founder and managing director of Apjohn Group, LLC, Mr. Parfet brings extensive experience in international business and the health care industry to Kelly Services. We named Catherine J. King Senior Vice President in our U.S. Commercial division, and in January of 2005, Daniel T. Lis became Senior Vice President, General Counsel and Corporate Secretary. In closing, we want to recognize all of our customers, employees, stockholders, and board of directors who continually demonstrate their support and commitment to our Company. Kelly is at the center of a major transition in the world of work: a growing shortage of skilled workers, an evolution in the workforce, and a highly competitive world market. Our innovative staffing solutions and experience continue to create lasting value for our customers, employees, and stockholders. As we move forward, you may be assured we will do our best to continue to earn your trust and confidence. These are exciting times for our Company. Terence E. Adderley Chairman and Chief Executive Officer Carl T. Camden President and Chief Operating Officer 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 7 C O R P O R A T E E T H I C S Reprinted from the August 4, 2004, edition of the Wall Street Journal Kelly Services’ Lobbying Helps Close Corporate-Layoffs Loophole BY MICHAEL SCHROEDER In a rare display of a corporation lobbying to close a corporate tax loophole, Kelly Services Inc. is helping to end a practice that shaved many companies’ tax bills and cost state treasuries more than $1 billion over the past decade. President Bush is expected to sign legislation this month to outlaw the tax dodge, which allowed companies to slash the taxes they pay to state unemployment trust funds. Kelly, a Troy, Mich., staffing-services agency, put together the federal and state lobbying campaign to outlaw the tax dodge, arguing that it improperly enriched competitors and short-changed state governments. The firm also became an informal adviser to state governments that wanted to crack down on the practice through administrative means. Kelly benefited from the post-Enron Corp. environment in Washington, where lawmakers are eager to demonstrate they can be tough on corporate wrongdoing, and accounting firms and consultants are reluctant to fight publicly for tax- avoidance schemes, even ones that are legal in some states. At issue is the State Unemployment Tax Act, or SUTA, a federal law that along with another statute directs each state to set up unemployment funds with taxes collected from employers. The unemployment taxes that each state levies vary, but generally a company with a high layoff rate during economic downturns, such as Kelly, pays about 4% of taxable employee wages a year; companies with little turnover can pay less than 1%. States use the revenue to pay unemployment benefits. Accounting firms such as Deloitte & Touche LLP have advised companies in some states to take advantage of a loophole, through a scheme called SUTA dumping. Transferring employees from one unit that has experienced sizable layoffs to a new unit with no layoff history, could reduce a firm’s unemployment-tax bill. Over time, the first unit would be eliminated, and with it the high turnover rate that boosted unemployment taxes. Deloitte didn’t comment on the matter. The Securities and Exchange Commission is looking at SUTA dumping as part of its investigation into accounting issues at Switzerland’s Adecco SA, the world’s largest temporary-staffing firm, according to people familiar with the probe. The SEC is examining whether Adecco’s U.S. unit used the practice illegally to misrepresent its financial statements, these people say. An Adecco spokeswoman declined to comment. The SEC wouldn’t confirm or deny the investigation. Peter Moffitt, vice president of Barnett Associates Inc., a Garden City, N.Y., unemployment-tax planning firm, argues that legislation to shut down SUTA dumping could stifle legitimate company reorganizations and mergers where SUTA tax planning comes into play, and will create a costly paperwork-compliance burden for states. But he says he backed out of a debate with a Kelly executive at a national conference on unemployment in St. Louis, Mo., in May because he feared being tarred as a tax-dodger. “We were a voice crying in the desert,” he says. Although SUTA dumping started about a decade ago, Kelly Services says it didn’t affect business much during the ‘90s boom. But when layoffs began to rise during the 2001 recession, Kelly’s president, Carl Camden, worried that competitors were using the tax edge to underbid Kelly for contracts. Mr. Camden says he rejected proposals by accountants that could have slashed the company’s unemployment taxes by $30 million because Kelly considered the practice unethical. A letter to Kelly’s chief executive in late 2001 from accounting firm Arthur Andersen LLP, particularly offended the company. In the letter, 8 K E L L Y S E R V I C E S Andersen chastised a Kelly vice president for violating the staffing company’s “fiduciary responsibility to your shareholders” by refusing to engage in SUTA dumping, according to Mr. Camden. Rather than try its hand at SUTA dumping to save on unemployment taxes, Kelly decided to lobby to outlaw the tax loophole. (Andersen collapsed after it was criminally charged for its role in the Enron scandal.) If the practice were outlawed, Kelly figures, unemployment trust funds would be replenished from all companies having to pay their fair share, and states might be able to lower unemployment- tax rates. The campaign started in Feb. 2002, when Kelly Vice President Matt Harvill gave a 90- minute presentation to a half-dozen Labor Department officials in Washington, detailing how companies were evading unemployment taxes, in many cases illegally. Within four months, the Labor Department issued an advisory to the states to be on the lookout for unemployment-tax abusers. Kelly also pushed for federal legislation to outlaw SUTA dumping. Kelly’s Washington lobbying firm, Piper Rudnick LLP, set up a dozen meetings with lawmakers or their staff members, where Kelly officials explained the issue and suggested legislative changes. Last year, Kelly paid Piper Rudnick $80,000. In addition, Kelly enlisted Strategic Services on Unemployment and Workers Compensation, a Washington trade group known as UWC, to advise lawmakers on the legislation. At a House Ways and Means subcommittee hearing in mid-2003, Kelly executives and a North Carolina official testified about SUTA abuses. The Government Accountability Office, a research arm of Congress, also testified that a preliminary report showed 14 states had identified a total of $120 million in lost tax revenue from dumping. Overall, the Labor Department estimates, SUTA dumping may be costing state coffers more than $1 billion annually. “It was so outrageously wrong, that it became overwhelmingly apparent that something had to be done,” says Rep. Wally Herger, the California Dodgeball How the State Unemployment Tax Act dodge works: A company with a history of significant layoffs creates a new corporate entity or buys a small company with no layoff history. It transfers employees from the old company into the new company, qualifying for a lower tax rate. Unemployment–Tax Rates BEFORE About 4% of taxable wages AFTER About 1% of taxable wages The original company is eliminated over time, and with it the high turnover rate that has boosted unemployment taxes. Republican who is chairman of the subcommittee. He credits Kelly for alerting him to the problem. Kelly redoubled efforts to help states learn how to detect SUTA dumping and to encourage them to pass legislation barring the practice. After Kelly’s president, Mr. Camden, spoke at an August 2003 national conference for state unemployment- insurance tax officers, a dozen states called Kelly for help. Oregon invited Kelly officials to meet with its tax department to discuss legislation. Opposition to the federal bill was muted. The National Association of Professional Employer Organizations, quietly approached the subcommittee to ask, “How can we keep this from passing this year,” according to a Capitol Hill staffer. Nothing can be done, the group was told. Milan Yager, Napeo’s executive vice president, says he had questions about the original bill’s language, but that his organization supported passage. On July 14, the House unanimously passed its bill. Two ideological opposites, Sens. Don Nickles (R., Okla.) and Ted Kennedy (D., Mass.), introduced the same House bill language, which also passed the Senate unanimously a week later. President Bush is expected to sign the law, which requires states to pass legislation prohibiting SUTA dumping, into law within two weeks. Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved. 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 9 S T A F F I N G T H E W O R L D 1953 sales exceed $1 million 1973 sales exceed $100 million 1986 sales exceed $1 billion 1 9 4 0 1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1984 The Kelly green comes to Ireland 1964 Office opens in Puerto Rico 1972 Kelly enters Europe with office in Paris, France 1988 Kelly moves down under to Australia 1946 William Russell Kelly founded modern temporary staffing industry with first office in Detroit, Michigan 1958 Kelly establishes first international office in Canada 1973 London, England, welcomes Kelly Services 1979 Kelly covers the U.S. with offices in all 50 states A U S T R A L I A B E L G I U M C A N A D A D E N M A R K F R A N C E G E R M A N Y H U N G A R Y I R E L A N D I TA LY N E T H E R L A N D S R U S S I A T H A I L A N D N E W Z E A L A N D S I N G A P O R E UNITED KINGDOM H O N G K O N G L U X E M B O U R G N O R W AY S PA I N U N I T E D S TAT E S I N D I A M A L AY S I A P H I L I P P I N E S S W E D E N I N D O N E S I A M E X I C O P U E R T O R I C O S W I T Z E R L A N D 10 K E L L Y S E R V I C E S 1994 sales exceed $2 billion 1996 sales exceed $3 billion 1998 sales exceed $4 billion 2004 sales hit record $4.98 billion 1 9 9 0 1990 Global presence expands with offices in Denmark, Mexico, Netherlands, and New Zealand 1993 An office opens in Norway 1994 Switzerland joins Kelly’s international family 1996 Kelly celebrates 50th anniversary Kelly is first to place a temporary employee in Italy Company expands to Russia, Luxembourg, and Spain 1998 Offices open in Belgium and Germany 2 0 0 0 2000 Pacific-Rim nations Malaysia, Philippines, and Singapore welcome Kelly Services 2001 Additional offices open in Hong Kong, India, Indonesia, and Thailand 1999 Kelly establishes office in Sweden 2004 Kelly’s presence grows to 27 countries with new office in Hungary U.S. COMMERCIAL Kelly Office Services Kelly Marketing Services Kelly Light Industrial Services Kelly Electronic Assembly Services ˙ Kelly Educational Staffing® KellyConnect® KellyDirect® KellySelect® PROFESSIONAL, TECHNICAL & STAFFING ALTERNATIVES PROFESSIONAL & TECHNICAL Kelly Scientific Resources® Kelly Healthcare Resources® Kelly Home Care Services™ Kelly Automotive Services Group® Kelly Engineering Resources® Kelly IT Resources® Kelly Law Registry® Kelly Financial Resources® Kelly FedSecure™ STAFFING ALTERNATIVES Kelly Management Services® Kelly Staff Leasing® Kelly HR Consulting® Kelly HRfirst® Kelly Vendor Management Solutions™ INTERNATIONAL KellyAssess® Kelly MultiHire® 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 11 D I R E C T O R S & O F F I C E R S B O A R D O F D I R E C T O R S Maureen A. Fay, O.P., Ph.D. President Emeritus University of Detroit Mercy Verne G. Istock Retired Chairman/ President Bank One Corporation Terence E. Adderley Chairman and Chief Executive Officer Carl T. Camden President and Chief Operating Officer Jane E. Dutton William Russell Kelly Professor of Business Administration University of Michigan B. Joseph White President University of Illinois N E W D I R E C T O R E L E C T E D This year, we welcomed Donald R. Parfet to our Board of Directors. Mr. Parfet brings extensive experience in international business and health care to his position as a Kelly Director. He is founder and managing director of Apjohn Group, LLC, a business development firm that specializes in creating commercial opportunities in the life sciences industries and a former senior vice president at Pharmacia. Donald R. Parfet Managing Director Apjohn Group, LLC Parfet also serves as a trustee of the W.E. Upjohn Institute for Employment Research, trustee of Biacore International, Chair of the Kalamazoo College Board of Trustees, and trustee and past Chairman of Bronson Healthcare Group. He earned his BA in economics from the University of Arizona and holds an MBA from the University of Michigan. 12 K E L L Y S E R V I C E S S E N I O R O F F I C E R S Terence E. Adderley Chairman and Chief Executive Officer Carl T. Camden President and Chief Operating Officer Michael L. Durik Executive Vice President and Chief Administrative Officer William K. Gerber Executive Vice President and Chief Financial Officer James H. Bradley Senior Vice President, Administration Joan M. Brancheau Senior Vice President, Strategic Customer Relations George S. Corona Senior Vice President and Division General Manager Allison M. Everett Senior Vice President and Chief Information Officer Carol J. Johnson Senior Vice President, Global Sales Catherine J. King Senior Vice President and Division General Manager Rolf E. Kleiner Senior Vice President, International Daniel T. Lis Senior Vice President, General Counsel and Corporate Secretary Michael S. Morrow Senior Vice President, Marketing Larry J. Seyfarth Senior Vice President and General Manager, Technical Services Group James A. Tanchon Senior Vice President, Solutions Group Bernard Tommasini Senior Vice President and Regional General Manager, Western Europe Dana M. Warren Senior Vice President, Service Andrew R. Watt Senior Vice President, PTSA Michael S. Webster Senior Vice President and Division General Manager 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 13 O F F I C E R S Leif Agnéus Bonnie D. Huber Steven S. Armstrong Thomas P. Huizenga D. Craig Atkinson Brian C. Ault Christopher Bell Pamela M. Berklich Matthew W. Igel Venson J. Jennings Christopher P. Jock Christopher Kelly Kathleen M. Bienkowski Donald P. Kingston Paul A. Bordonaro Barry L. Brown Jane M. Brown Jeanine E. Burgen Eileen M. Candels MaryAnn Carey David A. Charlip Cheryl F. Courier Michael E. Debs John P. Drew Shaun M. Fracassi Karin W. French Sandra W. Galac Jacqueline B. Galan Jean-Claude Gallois Carolyn Gatesman Sergio Gomez Gregory J. Kohl Gregory S. Kruger Susan C. Laminack Jack L. Langenberg Stig Lauvsland John W. Lichtenberg Wilma I. Lopez Robert J. Lyons Thomas H. Manceor Michael M. Martini Timothy G. McAward Timothy T. McClain James D. McIntire Jody M. McLeod Jonathan D. Means Carla A. Perrotta Richard A. Piske Peter W. Quigley Antonina M. Ramsey Nicholas F. Regaldi Diane E. Reynolds Marc J. Riou Ingrid A. Roberts Rodger J. Rooney Diane E. Rubin-White Lori L. Sakorafis Virginia A. Scaduto Teresa E. Setting Dhirendra Shantilal Debra S. Sheehan Allen J. Sowers J. Leon Stanek Michelle C. Steffes Richard G. Struble Kristin W. Supancich Michael J. Tilley Thomas L. Totte Andrew P. Trestrail Thomas J. Catalano Nicole M. Lewis Candace L. Lewandowski Lynn G. Schwartz W. Edward Meisenheimer Tami A. Troxell Ekaterina Gorokhova Lisa R. Miller Heidi L. Hanes Matthew L. Harvill John W. Healy Terrence T. Murphy John J. O’Connor Michael F. Orsini Christine M. Hoebermann Carolyn J. Palmer Josefa Vidal Richard F. Wallace Barbara A. Wilson Larry D. Worthen 14 K E L L Y S E R V I C E S S U M M A R Y F I N A N C I A L S S U M M A R Y F I N A N C I A L S Management’s Report on Internal Control Over Financial Reporting . . . . 17 Eleven Year Financial Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Summary Statements of Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Summary Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Summary Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Summary Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . 24 Report of Independent Registered Public Accounting Firm . . . . . . . . . . . 25 Selected Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . 26 Common Stock Price Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 15 F O R W A R D - L O O K I N G S T A T E M E N T S Certain statements contained in this Summary Annual Report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include statements that are predictive in nature; depend upon or refer to future events or conditions; or include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or variations or negatives thereof, or by similar or comparable words or phrases. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future Company actions, that may be provided by management are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company; and economic and market factors in the countries in which the Company does business, among other things. These statements are not guarantees of future performance, and the Company has no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company’s actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, competitive market pressures including pricing, changing market and economic conditions, material changes in demand from large corporate customers, availability of temporary workers with appropriate skills required by customers, increases in wages paid to temporary workers, liabilities for client and employee actions, foreign currency fluctuations, changes in laws and regulations (including federal, state, and international tax laws), the Company’s ability to effectively implement and manage its information technology programs, and the ability of the Company to successfully expand into new markets and service lines. Certain risk factors are discussed more fully in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. 16 K E L L Y S E R V I C E S M A N A G E M E N T ’ S R E P O R T O N I N T E R N A L C O N T R O L O V E R F I N A N C I A L R E P O R T I N G The management of Kelly Services, Inc. (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f ) or 15d-15(f ) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: >> Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; >> Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; >> Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of January 2, 2005. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, management determined that, as of January 2, 2005, the Company’s internal control over financial reporting was effective based on those criteria. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of January 2, 2005, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page 25. 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 17 E L E V E N Y E A R F I N A N C I A L S U M M A R Y Kelly Services, Inc. and Subsidiaries Operating Results (In millions of dollars) Revenue from services Cost of services Gross profit Selling, general and administrative expenses (5) Earnings from operations Interest (expense) income, net Earnings before taxes Income taxes Net earnings Dividends Summary of total taxes (3) Financial Position (In millions of dollars) Current assets Current liabilities Working capital Net property and equipment Total assets Stockholders’ equity Capital expenditures Depreciation and amortization Goodwill amortization (6) Common Stock Data (4) Earnings per share Basic Diluted Dividends per share: Classes A and B Stockholders’ equity (book value) per share Stock price per share: Class A at year end Compound Annual Growth Rates (1) 5 Year 10 Year 1 Year 2004(2) 2003 8.2% 8.7 5.6 7.5 (9.1) N/A (9.9) (10.4) (9.7) (6.2) 7.4 5.6% 11.5 1.5 9.9 6.9 4.3 6.8 8.7 N/A (9.0)% (9.1) (5.4) 4.9 0.9 4.1% 4.8 0.8 4.2 (24.4) (29.0) (24.8) (26.6) (23.6) (16.2) 3.6 4.8% 6.0 3.4 (0.8) 3.8 2.4 (14.3) 4.0 N/A 15.2% 15.4 14.6 10.9 306.2 1,018.2 299.9 252.2 333.1 (0.7) 18.8 12.7% 15.9 9.1 (4.4) 9.6 6.6 17.6 (7.7) N/A $ 4,984.1 4,185.5 798.5 763.0 35.5 (0.9) 34.6 12.5 22.1 14.0 503.3 $ 891.9 483.6 408.3 179.8 1,247.4 654.3 35.6 44.1 0.0 (23.3)% (23.5) (15.9) 2.6 3.7 350.0% 342.9 0.0 4.4 9.7 $ .63 .62 .40 18.43 30.18 $ 4,325.2 3,628.5 696.6 687.9 8.7 (0.1) 8.7 3.6 5.1 14.1 423.8 $ $ 791.7 417.3 374.4 188.1 1,137.7 613.6 30.2 47.8 0.0 .14 .14 .40 17.65 27.52 Number of common shares outstanding at year end (thousands) Average number of shares outstanding (thousands) Basic Diluted Stock splits Financial Ratios (1) Return on revenues Return on average assets Return on average stockholders’ equity Effective tax rate Current assets to current liabilities (current ratio) Price earnings ratio at year end 35,504 34,772 35,115 35,461 — 35,289 35,355 — 0.4% 1.9% 3.5% 36.1% 1.8 48.7 0.1% 0.5% 0.8% 41.0% 1.9 196.6 (1) Growth rates and financial ratios calculated based on data rounded to thousands. (2) Fiscal year included 53 weeks. (3) Consists of payroll taxes and federal, state, and local taxes. (4) Shares consist of Class A and B common stock adjusted for all stock splits. (5) For 1999, 1998 and 1997, includes Year 2000 expenses of $11 million, $8 million and $1 million, respectively. (6) Goodwill amortization amounts are also included in the depreciation and amortization line item above. Note: Certain prior year amounts have been reclassified to conform with the current presentation. 18 K E L L Y S E R V I C E S 2002 2001 2000 1999 (2) 1998 1997 1996 1995 1994 $ 4,056.9 3,364.2 692.7 662.3 30.4 0.4 30.8 12.2 18.6 14.3 392.7 $ $ 719.4 367.2 352.2 202.3 1,072.1 619.1 33.4 45.4 0.0 .52 .52 .40 17.42 24.72 $ 4,005.9 3,308.0 697.9 669.9 28.0 (0.4) 27.6 11.0 16.5 30.4 385.3 $ $ 670.2 348.2 322.0 212.0 1,039.4 607.2 42.5 44.4 2.7 .46 .46 .85 16.93 22.06 $ 4,250.7 3,458.4 792.3 655.2 137.1 (0.4) 145.3 58.1 87.2 35.3 445.8 $ $ 721.1 384.8 336.2 201.1 1,089.6 623.5 54.2 39.5 2.0 2.44 2.43 .99 17.45 23.63 $ 4,076.3 3,310.3 766.0 622.1 143.9 (0.2) 143.7 58.6 85.1 34.0 421.1 $ $ 706.3 361.6 344.7 187.0 1,033.7 582.4 76.7 36.2 1.8 2.37 2.36 .95 16.23 25.13 $ 3,882.0 3,150.7 731.3 590.7 140.6 3.0 143.6 58.9 84.7 34.2 416.2 $ 3,625.2 2,943.8 681.3 545.5 135.8 1.2 137.0 56.2 80.8 33.2 388.2 $ 3,115.4 2,502.6 612.8 491.8 121.0 1.9 122.9 49.9 73.0 31.6 339.7 $ 2,586.7 2,045.3 541.4 435.1 106.3 7.0 113.3 43.8 69.5 29.6 283.5 $ $ 690.9 344.1 346.8 146.4 964.2 537.8 59.1 28.9 1.5 2.24 2.23 .91 15.02 31.75 $ $ 745.8 334.8 411.0 112.7 967.2 559.8 39.7 28.3 1.5 2.12 2.12 .87 14.67 29.25 $ $ 640.4 262.0 378.4 97.7 838.9 516.9 36.5 26.1 1.1 1.92 1.91 .83 13.58 27.50 $ $ 544.9 191.1 353.8 84.4 718.7 476.1 34.0 22.7 0.9 1.83 1.83 .78 12.52 27.75 $ 2,273.3 1,810.3 463.0 370.9 92.1 6.4 98.5 37.4 61.1 26.6 246.4 $ $ 515.1 163.2 351.9 70.2 642.4 431.5 18.4 19.1 0.7 1.61 1.61 .70 11.37 27.50 35,529 35,868 35,739 35,874 35,807 38,163 38,059 38,015 37,963 35,724 35,900 — 35,829 35,930 — 35,721 35,843 — 35,854 36,030 — 37,745 37,945 — 38,099 38,191 — 38,043 38,133 — 37,993 38,057 — 37,956 38,005 — 0.5% 1.8% 3.0% 39.6% 2.0 47.5 0.4% 1.6% 2.7% 40.0% 1.9 48.0 2.1% 8.2% 14.5% 40.0% 1.9 9.7 2.1% 8.5% 15.2% 40.8% 2.0 10.6 2.2% 8.8% 15.4% 41.0% 2.0 14.2 2.2% 8.9% 15.0% 41.0% 2.2 13.8 2.3% 9.4% 14.7% 40.6% 2.4 14.4 2.7% 10.2% 15.3% 38.7% 2.9 15.2 2.7% 10.3% 14.9% 38.0% 3.2 17.1 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 19 S U M M A R Y S T A T E M E N T S O F E A R N I N G S Kelly Services, Inc. and Subsidiaries 2004 (1) 2003 2002 (In thousands of dollars except per share items) Revenue from services $ 4,984,051 $ 4,325,155 $ 4,056,945 Cost of services Gross profit Selling, general and administrative expenses Earnings from operations Interest (expense) income, net Earnings before taxes Income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends per share 4,185,545 3,628,524 3,364,219 798,506 763,013 35,493 (861) 34,632 12,502 22,130 .63 .62 .40 $ $ $ $ 696,631 692,726 687,894 662,334 8,737 (77) 8,660 3,550 5,110 .14 .14 $ $ $ $ .40 30,392 362 30,754 12,185 18,569 .52 .52 .40 $ $ $ $ Average shares outstanding (thousands): Basic Diluted 35,115 35,461 35,289 35,355 35,724 35,900 (1) Fiscal year included 53 weeks. Notes to Financial Statements can be found in the Company’s 2004 Form 10-K. 20 K E L L Y S E R V I C E S S U M M A R Y S T A T E M E N T S O F C A S H F L O W S Kelly Services, Inc. and Subsidiaries Cash flows from operating activities Net earnings Noncash adjustments: Depreciation and amortization Deferred income taxes Changes in operating assets and liabilities Net cash from operating activities Cash flows from investing activities Capital expenditures Short-term investments Increase in other assets Net cash from investing activities Cash flows from financing activities (Decrease) increase in short-term borrowings Dividend payments Exercise of stock options and other Purchase of treasury stock Net cash from financing activities Effect of exchange rates on cash and equivalents Net change in cash and equivalents Cash and equivalents at beginning of year 2004 (1) 2003 2002 (In thousands of dollars) $ 22,130 $ 5,110 $ 18,569 44,137 (9,611) 2,704 59,360 (35,556) 105 (736) (36,187) (8,188) (14,043) 8,422 (3) (13,812) 1,815 11,176 76,378 47,795 2,936 (25,248) 30,593 (30,222) 142 (2,487) (32,567) 10,280 (14,143) 3,865 (26,149) (26,147) 3,563 (24,558) 100,936 45,428 6,590 19,019 89,606 (33,406) 31 (3,476) (36,851) (11,723) (14,293) 991 (13,216) (38,241) 2,961 17,475 83,461 Cash and equivalents at end of year $ 87,554 $ 76,378 $ 100,936 (1) Fiscal year included 53 weeks. Notes to Financial Statements can be found in the Company’s 2004 Form 10-K. 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 21 S U M M A R Y B A L A N C E S H E E T S Kelly Services, Inc. and Subsidiaries ASSETS Current Assets 2004 2003 2002 (In thousands of dollars) Cash and equivalents $ 87,554 $ 76,378 $ 100,936 Short-term investments 1,288 457 599 Trade accounts receivable, less allowances of $16,228, $14,983 and $12,533, respectively 727,366 658,090 567,517 Prepaid expenses and other current assets Deferred taxes 40,736 34,967 31,784 26,387 24,962 23,916 Total current assets 891,911 791,671 719,355 Property and Equipment Land and buildings 58,236 57,543 57,111 Equipment, furniture and leasehold improvements 301,458 302,938 295,536 Accumulated depreciation (179,908) (172,359) (150,315) Net property and equipment 179,786 188,122 202,332 Noncurrent Deferred Taxes Goodwill, Net Other Assets Total Assets 17,960 94,652 63,059 14,606 21,065 85,788 80,260 57,550 49,121 $ 1,247,368 $ 1,137,737 $ 1,072,133 Notes to Financial Statements can be found in the Company’s 2004 Form 10-K. 22 K E L L Y S E R V I C E S LIABILITIES AND STOCKHOLDERS’ EQUITY 2004 2003 2002 (In thousands of dollars) Current Liabilities Short-term borrowings Accounts payable Accrued payroll and related taxes Accrued insurance Income and other taxes Total current liabilities Noncurrent Liabilities Accrued insurance Accrued retirement benefits Total noncurrent liabilities Stockholders’ Equity Capital stock, $1.00 par value Class A common stock, shares issued 36,619,693 at 2004 and 36,619,148 at 2003 and 2002 Class B common stock, shares issued 3,496,173 at 2004 and 3,496,718 at 2003 and 2002 Treasury stock, at cost Class A common stock, 4,588,739 shares at 2004, 5,319,995 shares at 2003 and 4,567,975 shares at 2002 Class B common stock, 23,575 shares at 2004, 23,475 shares at 2003 and 18,875 shares at 2002 Paid-in capital Earnings invested in the business Accumulated other comprehensive income Total stockholders’ equity $ 34,289 $ 39,190 $ 24,770 102,264 246,061 33,165 67,839 483,618 58,548 50,892 109,440 36,620 3,496 92,265 200,503 36,016 49,342 85,310 181,585 27,912 47,617 417,316 367,194 58,763 48,025 106,788 45,540 40,335 85,875 36,619 36,619 3,497 3,497 (97,067) (112,535) (91,648) (626) 22,530 664,813 24,544 654,310 (623) 19,096 656,726 10,853 613,633 (511) 17,902 665,759 (12,554) 619,064 Total Liabilities and Stockholders’ Equity $ 1,247,368 $ 1,137,737 $ 1,072,133 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 23 S U M M A R Y S T A T E M E N T S O F S T O C K H O L D E R S ’ E Q U I T Y Kelly Services, Inc. and Subsidiaries Capital Stock Class A common stock Balance at beginning of year Conversions from Class B Balance at end of year Class B common stock Balance at beginning of year Conversions to Class A Balance at end of year Treasury Stock Class A common stock Balance at beginning of year Exercise of stock options, restricted stock awards and other Treasury stock issued for acquisition Purchase of treasury stock Balance at end of year Class B common stock Balance at beginning of year Purchase of treasury stock Balance at end of year Paid-in Capital Balance at beginning of year Exercise of stock options, restricted stock awards and other Treasury stock issued for acquisition Balance at end of year Earnings Invested in the Business Balance at beginning of year Net earnings Dividends Balance at end of year Accumulated Other Comprehensive Income Balance at beginning of year Foreign currency translation adjustments, net of tax Unrealized gains on investments, net of tax Balance at end of year 2004 (1) 2003 2002 (In thousands of dollars) $ 36,619 1 36,620 $ 3,497 (1) 3,496 36,619 — 36,619 3,497 — 3,497 $ 36,609 10 36,619 3,507 (10) 3,497 (112,535) (91,648) (81,721) 15,468 — — (97,067) (623) (3) (626) 19,096 3,434 — 22,530 656,726 22,130 (14,043) 664,813 10,853 13,433 258 24,544 5,150 — (26,037) (112,535) (511) (112) (623) 17,902 1,194 — 19,096 665,759 5,110 (14,143) 656,726 (12,554) 23,407 — 10,853 613,633 5,110 23,407 — 28,517 2,381 832 (13,140) (91,648) (435) (76) (511) 17,035 699 168 17,902 661,483 18,569 (14,293) 665,759 (29,323) 16,769 — (12,554) 619,064 18,569 16,769 — 35,338 $ $ $ Stockholders’ Equity at End of Year $ 654,310 Comprehensive Income Net earnings Foreign currency translation adjustments, net of tax Unrealized gains on investments, net of tax Comprehensive income $ $ 22,130 13,433 258 35,821 $ $ $ (1) Fiscal year included 53 weeks. Notes to Financial Statements can be found in the Company’s 2004 Form 10-K. 24 K E L L Y S E R V I C E S R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M To the Stockholders and Board of Directors of Kelly Services, Inc. We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Kelly Services, Inc. as of January 2, 2005, December 28, 2003 and December 29, 2002, and for each of the three years in the period ended January 2, 2005, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of January 2, 2005 and the effectiveness of the Company’s internal control over financial reporting as of January 2, 2005; and in our report dated February 18, 2005, we expressed unqualified opinions thereon. Our report and the consolidated financial statements (not presented herein) appear in the Company’s Annual Report on Form 10-K for the year ended January 2, 2005. Summary consolidated financial statements In our opinion, the information set forth in the accompanying summary consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Internal control over financial reporting Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing on page 17 of the 2004 summary annual report, that the Company maintained effective internal control over financial reporting as of January 2, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Detroit, Michigan February 18, 2005 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 25 S E L E C T E D Q U A R T E R L Y F I N A N C I A L D A T A ( U N A U D I T E D ) Kelly Services, Inc. and Subsidiaries Revenue from services (1) 2004 2003 2002 Cost of services (1) 2004 2003 2002 Gross profit 2004 2003 2002 Selling, general and administrative expenses 2004 2003 2002 Net earnings 2004 2003 2002 Basic earnings per share (2) 2004 2003 2002 Diluted earnings per share (2) 2004 2003 2002 Dividends per share 2004 2003 2002 First Quarter Second Quarter Third Quarter Fourth Quarter Year (In thousands of dollars except per share items) $ 1,158,811 $ 1,224,464 $ 1,244,854 $ 1,355,922 $ 4,984,051 1,003,397 936,613 1,059,517 1,014,841 1,097,268 1,057,290 1,164,973 1,048,201 4,325,155 4,056,945 975,455 837,845 777,653 1,026,382 1,042,486 1,141,222 887,113 844,625 924,661 875,028 978,905 866,913 4,185,545 3,628,524 3,364,219 183,356 165,552 158,960 198,082 172,404 170,216 202,368 172,607 182,262 214,700 186,068 181,288 798,506 696,631 692,726 181,342 165,162 157,774 189,404 169,955 163,741 189,908 169,898 171,547 202,359 182,879 169,272 763,013 687,894 662,334 1,065 310 796 5,047 1,484 3,935 7,372 1,504 6,505 8,646 1,812 7,333 22,130 5,110 18,569 .03 .01 .02 .03 .01 .02 .10 .10 .10 .14 .04 .11 .14 .04 .11 .10 .10 .10 .21 .04 .18 .21 .04 .18 .10 .10 .10 .24 .05 .21 .24 .05 .21 .10 .10 .10 .63 .14 .52 .62 .14 .52 .40 .40 .40 (1) As discussed in Note 1 to the financial statements, the Company changed its method of reporting revenue for Kelly Staff Leasing. This change did not impact gross profit or net earnings. Revenue from services and cost of services adjustments for the first, second, third and fourth quarters of 2002 were $63.4 million, $62.1 million, $65.4 million and $75.6 million, respectively. Notes to Financial Statements can be found in the Company’s 2004 Form 10-K. (2) Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year. 26 K E L L Y S E R V I C E S C O M M O N S T O C K P R I C E I N F O R M A T I O N Kelly Services, Inc. and Subsidiaries First Quarter Second Quarter Third Quarter Fourth Quarter Year 2004 Class A common High Low Final Class B common High Low Final 2003 Class A common High Low Final Class B common High Low Final 2002 Class A common High Low Final Class B common High Low Final $ 30.99 27.17 28.52 $ 32.25 27.05 28.95 $ 29.80 25.26 27.16 $ 31.27 25.86 30.18 $ 32.25 25.26 30.18 31.50 27.25 29.10 25.64 19.01 22.00 26.41 19.68 22.48 28.68 21.33 28.23 27.00 21.00 27.00 32.74 26.50 29.55 25.90 21.31 24.60 26.35 21.87 25.01 29.50 23.60 27.01 28.78 23.50 23.50 29.42 25.53 27.29 27.26 23.30 25.27 27.49 24.04 26.31 27.37 19.80 21.84 27.89 20.50 20.70 31.00 26.00 30.50 29.70 24.20 27.52 29.63 25.75 27.92 25.75 17.86 24.72 26.99 18.90 25.75 32.74 25.53 30.50 29.70 19.01 27.52 29.63 19.68 27.92 29.50 17.86 24.72 28.78 18.90 25.75 2 0 0 4 S U M M A R Y A N N U A L R E P O R T 27 S T O C K H O L D E R S ’ I N F O R M A T I O N Kelly Services, Inc. Corporate Headquarters 999 West Big Beaver Road Troy, Michigan 48084-4782 U.S.A. (248) 362-4444 www.kellyservices.com Investor Relations Contact James M. Polehna Director, Investor Relations Kelly Services, Inc. 999 West Big Beaver Road Troy, Michigan 48084-4782 U.S.A. (248) 244-4586 Annual Meeting The Annual Meeting of Stockholders will be held on May 4, 2005, at 11:00 a.m. Eastern Daylight Time, at the Corporate Headquarters of the Company. All stockholders are invited to attend. Stock Transfer Agent & Registrar Mellon Investor Services, LLC P.O. Box 3315 South Hackensack, NJ 07606-3315 For assistance with transfers of stock to another name, lost or destroyed stock certificates, lost dividend checks, direct deposit of dividends, consolidation of accounts, or changes of address, please contact Mellon at: Toll Free (U.S. and Canada): TDD for Hearing Impaired: Foreign Stockholders: TDD Foreign Stockholders: (866) 249-2607 (800) 231-5469 (201) 329-8660 (201) 329-8354 Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP 400 Renaissance Center Detroit, Michigan 48243-1507 Financial Reports for Stockholders Stockholders, security analysts, and interested investors may obtain additional copies of this summary annual report, the Company’s quarterly reports, the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K, and copies of the Company’s Code of Business Conduct and Ethics, without charge, by addressing requests to the director of Investor Relations. This information can also be found at the Kelly Services website. Dividend Reinvestment and Direct Stock Purchase Plan Registered stockholders can purchase additional shares of Kelly’s Class A common stock through Kelly’s Dividend Reinvestment and Direct Stock Purchase Plan. Initial purchases of Kelly’s Class A common stock can also be made through this Plan. Participation is voluntary and allows for automatic reinvestment of cash dividends, direct cash investments, and safekeeping of stock certificates. For more information about this service, visit our website: www.kellyservices.com and select Investor Relations or contact Investor Relations at Kelly. Stock Listings Kelly Services Class A and Class B common stock trade on the Nasdaq Stock MarketSM under the symbols: KELYA and KELYB. You may also visit their website, www.melloninvestor.com/isd, or contact Kelly’s director of Investor Relations. Recycled Recyclable © 2005 Kelly Services, Inc. 28 K E L L Y S E R V I C E S T A B L E O F C O N T E N T S Corporate Profile . . . . . . . . . . . . . . . . . . . . . . . . 2 Vision, Mission, Shared Values, Quality Policy Financial Highlights . . . . . . . . . . . . . . . . . . . . . . 3 Letter to Stockholders . . . . . . . . . . . . . . . . . . . . . 4 Corporate Ethics: Kelly Services’ Lobbying Helps Close Corporate-Layoffs Loophole . . . . 8 Staffing the World . . . . . . . . . . . . . . . . . . . . . . 10 Directors & Officers . . . . . . . . . . . . . . . . . . . . . 12 Summary Financials . . . . . . . . . . . . . . . . . . . . . 15 Stockholders’ Information . . . . . . . . . . . . . . . . 28 SUMMARY ANNUAL REPORT This is a summary annual report. Complete financial statements—including Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Notes to Financial Statements—are contained in Kelly Services’ Annual Report on Form 10-K. That report, along with a copy of our Code of Business Conduct and Ethics, is available on our Company’s website, www.kellyservices.com, or through our Investor Relations office. Please see page 28 for contact information. I N G T H E W O R L D F F A T S Kelly Services 2004 SUMMARY ANNUAL REPORT 999 West Big Beaver Road Troy, Michigan 48084-4782 (248) 362-4444 www.kellyservices.com 

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