Ladies and gentlemen, good morning and welcome to Kelly Services second quarter earnings conference call. (Operator Instructions) I would now like to turn the meeting over to your host, Mr. Carl Camden, President and CEO. Sir, you may begin.

Good morning, everyone. Welcome to Kelly Services 2013 Q2 conference call. And with me on the call today is Patricia Little, our CFO. Let me remind you that any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on the call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. Turning now to Kelly's second quarter results. I'm pleased to report that our performance was in line with our expectations in this persistently sluggish economic environment. Revenue was flat year-over-year, excluding restructuring and impairment charges, we held our expenses flat amidst making targeted investments in our long-term growth, and we achieved in adjusted operating profit of $19 million. Our gross profit rate for the quarter was 16.1%, down from the 16.3% reported in the second quarter of 2012. Kelly's adjusted second quarter earnings from continuing operations were $0.33 per share compared to adjusted earnings of $0.34 per share for the same period last year. Now, let's take a closer look at our second quarter performance in each of our business segments beginning with the Americas. We continue to experience soft revenue demand in the Americas, as customers remain cautious about the economic environment. Combined staffing revenue for the region was down roughly 2% year-over-year for the second quarter, a slight improvement from the 3% year-over-year decline in the first quarter. Americas commercial revenue was down 3% year-over-year for the second quarter. This compares to the 5% decrease we reported in Q1. Light industrial was once again flat compared to the same period last year, while office clerical was…

Thank you, Carl. Revenue totaled $1.4 billion, flat compared to the second quarter last year and up 4% sequentially. Worldwide, our fees were down 2% year-over-year and up 4% sequentially. Our gross profit rate was 16.1%, down 20 basis points compared to the second quarter of last year. On a sequential basis, our gross profit rate was down 40 basis points, primarily due to the OCG cost of services in advance of revenue. During the second quarter we recorded restructuring charges of $810,000 and impairment charges of $1.7 million as a result of our decision to exit our executive placement business in Germany. Excluding restructuring and impairment charges, expenses were flat year-over-year. As I noted last quarter, we recorded a $3 million charge in the first quarter due to an unclaimed property settlement. Absence this charge, expenses were down 2% sequentially and as a result of our continued efforts in controlling expenses, we were able to offset the investments we have been making in PT, centralization and technology. Excluding the restructuring and impairment charges, earnings from operations were $18.9 million compared to 2012 adjusted earnings of $21.6 million. Income tax expense for the second quarter was $4.8 million compared to an expense of $8.3 million in 2012. Our tax rate was 32% for the quarter, 28% excluding restructuring and impairment charges, which were not cash deductible. That compares to a rate of 39% last year, when work opportunity credits were not available for most new hires. Diluted earnings per share from continuing operations, excluding restructuring and impairment charges for the second quarter of 2013, totaled $0.33 per share compared to $0.34 in 2012. Looking ahead to the third quarter of 2013, we expect revenue to be flat-to-up 2% on a year-over-year basis, flat sequentially. We expect continued pressure on the…

Thank you, Patricia. Our second quarter results demonstrate Kelly's ongoing progress in three strategic areas that we believe are key to our long-term success. Our OCG segment continues to deliver strong revenue and fee results and the investment we're making to support key OCG clients will serve to further strengthen our talent supply chain capabilities for years to come, including developing scalable, repeatable delivery methods to drive efficiency across our solutions. We continue to pursue higher margin professional and technical staffing solutions to meet the growing demand in the higher skilled talent space. And we believe our success from OCG will create a better awareness for Kelly's PT capabilities. And finally, we continue to keep a close eye on expenses, making strategic targeted investments that support our long-term growth, while delivering an operating profit in the face of flat revenue. This progress confirms that Kelly's strategy is responding the secular trends in the labor force, trends that require holistic higher-end workforce solutions larger companies and highly skilled professional technical talent performance of all sizes. We're also especially pleased with the progress we've seen in our EMEA region this quarter, as they continue successfully to execute, despite the recessionary conditions there. Still, while we're pleased with Kelly's second quarter results, we know that they reflect in economy that is far short of full recovery. The slow and uneven growth trends we saw in 2012 remain with us. And although, we have experienced modest job growth thus far in 2013, the improvement in temporary employment in the U.S., as reported by the BLS, has primarily been driven by hiring in the construction, retail and hospitality sectors, areas which we're not generally engaged in. As such, staffing revenues remain constrained and there is still significant pressure on margins and direct hire fees. Looking ahead, we expect the current trends in the U.S. labor market will continue and true signs of momentum will remain elusive. The one year reprieve in the Affordable Care Act employers mandate is unlikely to lessen the anxiety of U.S. companies. Compliance will still be extremely complex and uncertainty over the impact to 2014's individual mandate will continue to dampen hiring. For our part, Kelly is moving ahead with our work towards ACA compliance. We're confirming with staffing industry groups, working with vendors to develop ACA compliant plans, updating our internal IT systems and developing financial models, communication plans, and support strategies to ensure that we're prepared. This concludes today's report. Patricia and I will now be happy to answer your questions. Operator, the call can now to be opened.

(Operator Instructions) And now we'll go to Tobey Sommer with SunTrust.

Carl, I had a question for you about the OCG segment and I guess, sort of, the contingent workforce outsourcing element, how do you think about the opportunity for that business and the growth there to help drive growth in the staffing businesses?

You have a mixed set of customer expectations. We have some CWO practices where there is an expectation that we'll do no staffing. And we have other CWO customers where there is an expectation, we'll take all that we can acquire and do. So it's not an even answer. In general, owning the customer strategic relationship will generally provide you better opportunities to acquire staffing revenue over the future, but I see the size of those opportunities to be an overstated by some and misunderstood by many. It's more of the relationship, the strategic relationship that you have with the customer that's important, than it is the fact that you have the particular CWO contract. I think in the long run, it's a significant advantage for the firms that have control of the customers' talent supply chain strategy.

Within OCG, how much, sort of, maybe, think of it as, customer spend are you shepherding at this point?

I'm looking around the table to see if that's the number, let's say, close to $5 billion.

And then asking just one last question on that, then I'll, kind of, get back in the queue soon. The customer that you were, kind of, ramping for in the quarter that suppressed the profitability, we probably see better operating margins within OCG headed into 3Q?

If not, I would be unhappy.

Yes. But still the little piece of it is in the third quarter, but overall it will be the big impact that was in the second.

My last question, I'll get back in the queue. Are you involved in executive search in other markets, now that you have exited Germany?

We have executive search in several markets and particularly in the APAC region.

And next we'll next go to Ty Govatos with TG Research.

Couple of questions. I was surprise that the SG&A was down so much sequentially, and Patricia, I tried fast, but my fingers didn't move fast enough. Could you go through some of the guidance numbers again?

Yes, I will. We basically said that it would be up 1% to 3% for the third quarter, whether you do the math year-over-year or sequentially. That's inclusive of the investments that we continue to make in the areas we're investing in PT, OCG, large customers, centralization and technology.

And gross profits?

What we said about gross profits is that they will be pretty flat sequentially.

You are referring to margins, right?

I'm sorry, said it again?

Referring to margins?

Yes. Gross profit margins.

And you think the SG&A will be up 1% to 3% sequentially?

Yes.

From the second Q?

Yes. Whether you do the second Q to third quarter, or third quarter to last year, it's somewhere in that range.

And why the dip because if I remember right, you were looking for flat sequentially Q1 to Q2 and it was down pretty sharply?

Well, we really focused in the second quarter on expense control. We'll continue to do that. As I look ahead though, some of the things that we were doing in APAC, in particular, and EMEA I don't see necessarily having being able to continue with that pace, for the amount of change.

And that we do have a follow-up from Tobey Sommer.

Could you walk us through now what your expectations may be, I know, it's a little bit early, but for work opportunity credits for next year. Is there certain legislation that you are already monitoring or do we need to sit tight and wait for something to develop in the legislature?

My long experience with the U.S. government, the work opportunity credit is always held till the end because it's a negotiating chip that people were able to put on the table to offset something else by saying, look, how good we're being for business or look, how good we're being for employment and the only expectation I have is that nothing will be done until the last minute, because that's been my experience now for, certainly, for like a long time.

Well, plus with all the discussion about corporate tax reform, I think that that will just lead to even more uncertainty and then therefore lack of actions. So I wouldn't be surprised if it was another cliffhanger or beyond.

You are as good as we are. What do you expect?

Well, I was hoping for a revelation here?

Well, you are not getting.

It's not happening.

Excluding that, if for example, we don't get to a situation where we start out '14 and it's not in place, Patricia, what would be a ballpark tax rate in the absence of Work Opportunity Tax Credits?

In the absence of having them at all?

Yes, for example, if we started the year and we were just talking about the year without that in place, what would the tax rate look like?

Upper 30.

And then on DSOs up a day, is that just a customer mix or a particular timing issue. Could you give us a little bit of color as to what drove that and see, if you expect it to revert?

It's an interesting thing. I'm not sure it will revert, because the biggest change that we're seeing is that our large customers are paying slower, although still within their terms. So what we see them doing is they used to be paying a little bit in advance of their terms and now they are really carefully maximizing that. I'm also surprised by the number of customers, large customers that we have that really play the end of their quarter and seem to slowdown especially at that period of time. So what's going to sit on their balance sheet as cash is not going to sit on our balance sheet as cash.

And then, Carl, the investment that you're making in the branch structure to facilitate more regional and local sales. How do you feel about that at this stage and when would be a, kind of, more reasonable timeframe to be able to judge the outcome of those investments more fully?

I think Toby, what we're really more focused on is the consolidation of our service delivery especially for the large accounts and to centralized hub. So you hear us talking about centralization, and we and others in the industry are slowly shifting away from, too quickly shifting away from our branch-based model of a lot of that service into a centralized model. What you have though, are branch is left behind with more capacity than they had before, as that business has moved, as the large accounts business has moved out and that, of course, takes sometime to refill up that capacity with local business. And so it's not so much an investment in branch in a brick-and-mortar structure to drive more local business, as it is a refocusing of the branches on the local business structure. And that takes a while to play out, a year or so. It tends to be our experience.

So would that be a year from now or a lesser time, because you began the initiative a while back?

Yes. We began the initiative a while back, so it's less than a year for some branches, but it's still new to other branches. So the clock has just started ticking and some work is still to be done on centralizing and pulling some of that business out of the branch network.

And my question, it has to do with Europe and some of the margin pressures there. Would some of those other global players in the midst of branch consolidations and, kind of, reducing their costs structures very significantly, do you see an opportunity for any stability in margins at this point or are we probably still in a compression phase in Europe for the foreseeable future?

Are you talking gross margins or operating margins?

Gross margins.

For us, I'm not certain that we're seeing a downward trend in the margins of any particular contract. But we have been talking about a shift in mix, as the larger accounts have become a bigger proportion of our mix. So it's not that contract that used to be 22% and then it got renewed at 20%. That's not really what's taking place. It's that the larger corporate or global accounts for us are becoming a larger proportion of our business. And then in particular, driving some of the GP rate down would be, the commentary we had about a significant reduction and the placement-oriented type of fees in terms of the conversion of workers or the direct hire of workers in Europe. Again, Western Europe still, although, maybe stabilize and still on recessionary environment and you don't see a lot of firm hiring in that environment. So I would say the greatest downward pressure for us has been on the fee side and then secondarily on the mix, but not much towards a revision downward of pricing contracts.

And we do have a question from Josh Vogel with Sidoti & Company. Josh Vogel - Sidoti & Company: First question, I know you have exited some markets and/or not including some revenue from certain countries in APAC, but it looks like the year-over-year and sequential trends seem a lot weaker in the PT front versus commercial. And I was wondering if you could just talk to the overall demand trends, the nature of the commercial work there and why that business seems to be outperforming relative to PT?

Again, I'm not certain that it so much an outperforming. And again, like you said, we are washing out the effects of, what we're consolidating and in countries that we've exited. And I would not use Kelly at all as an indicator for what's taking place in big chunks of Asia on the PT or commercial size, given our presence. Again for us, we are much more responsive to changes in demand from a handful of customers rising or falling than we are to general trends in the region. So I'm pretty hesitant to give you a commentary as to what I think are the macro up or down pressures on PT and commercial.

And the fact that we're deconsolidating the joint venture does have a lot of impact, because that was primarily PT based. So when you look at the PT numbers in the release, those are not adjusted for that deconsolidation. Josh Vogel - Sidoti & Company: Now with EMEA, I know France is one of your largest markets there, I know you saw a better result in Q2. And based Q2 and what you're seeing for Q3, do you think that's a beginning of the steady recovery there?

No. I see nothing and wearing any of the hats that I wear arguing that Europe is now on the edge of a recovery, I would argue that'd be a downward slope in the recession. And I can make a case that things have stabilized at a lower point for both the industry and for what passes for GDP growth there. But I for sure, would not want to be, saying the recovery is coming profit. I am not certain yet what the timing of that is going to be. Josh Vogel - Sidoti & Company: And lastly with OCG, I know it's breakeven on an adjusted basis. And there is some residual ramp costs and ongoing investments there, but should we expect that unit to be profitable in Q3 or breakeven again or running around breakeven?

I have a stronger expectation that it would be profitable in Q3.

Mr. Camden, no additional questions in queue.

Great. Thank you, all.