- 1 -
                          Index to Exhibits on page 13
                                           

                                  UNITED STATES        
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1996

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934




                          Commission File Number 0-1088


                              KELLY SERVICES, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                 DELAWARE                                    38-1510762
     ---------------------------------                  -------------------
       (State or other jurisdiction                      (I.R.S. Employer
     of incorporation or organization)                  Identification No.)


                 999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
                 ----------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)


                                 (810) 362-4444
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was 
required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.  Yes  X      No
                                        ----       ----
At August 2, 1996, 34,473,121 shares of Class A and 3,583,605 shares of Class B 
common stock of the Registrant were outstanding.

                           
                            - 2 -


            KELLY SERVICES, INC. AND SUBSIDIARIES



                                                        Page
                                                       Number
                                                       ------

PART I.  FINANCIAL INFORMATION

      Statements of Earnings                               3

      Balance Sheets                                       4

      Statements of Stockholders' Equity                   5

      Statements of Cash Flows                             6

      Management's Discussion and
        Analysis of Results of
        Operations and Financial
        Condition                                          7



PART II.  OTHER INFORMATION                               10

      Signature                                           12

      Index to Exhibits Required by
        Item 601, Regulation S-K                          13



                                                
                                                 - 3 -


                                  KELLY SERVICES, INC. AND SUBSIDIARIES

                                         STATEMENTS OF EARNINGS
                                               (UNAUDITED)
                            (In thousands of dollars except per share items)

13 Weeks Ended 26 Weeks Ended ------------------------------ ------------------------------ June 30, 1996 July 2, 1995 June 30, 1996 July 2, 1995 ------------- ------------- ------------- ------------- Sales of services $804,262 $652,417 $1,538,193 $1,273,102 Cost of services 652,007 519,739 1,248,252 1,018,406 -------- -------- ---------- ---------- Gross profit 152,255 132,678 289,941 254,696 Selling, general and administrative expenses 124,259 107,789 241,997 212,094 -------- -------- ---------- ---------- Earnings from operations 27,996 24,889 47,944 42,602 Interest income 1,142 2,321 2,687 4,710 -------- -------- ---------- ---------- Earnings before income taxes 29,138 27,210 50,631 47,312 -------- -------- ---------- ---------- Income taxes: Federal 9,270 8,505 16,055 14,895 State and other 2,420 2,045 4,225 3,495 -------- -------- ---------- ---------- Total income taxes 11,690 10,550 20,280 18,390 -------- -------- ---------- ---------- Net earnings $ 17,448 $ 16,660 $ 30,351 $ 28,922 ======== ======== ========== ========== Earnings per share $.46 $.44 $.80 $.76 Dividends per share $.21 $.20 $.41 $.38 Average shares outstanding (thousands) 38,041 37,987 38,029 37,977
- 4 - KELLY SERVICES, INC. AND SUBSIDIARIES BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1995 (UNAUDITED) (In thousands of dollars) ASSETS 1996 1995 - ------ ------------ ------------ CURRENT ASSETS: Cash and equivalents $ 16,278 $ 52,811 Short-term investments 62,455 74,737 Accounts receivable, less allowances of $10,505 and $6,950, respectively 487,312 397,534 Prepaid expenses and other current assets 38,474 33,520 --------- --------- Total current assets 604,519 558,602 PROPERTY AND EQUIPMENT: Land and buildings 35,187 35,153 Equipment, furniture and leasehold improvements 121,099 113,521 Accumulated depreciation (73,835) (64,286) --------- --------- Total property and equipment 82,451 84,388 INTANGIBLES AND OTHER ASSETS 79,622 75,697 --------- --------- TOTAL ASSETS $766,592 $718,687 ========= ========= LIABILITIES & STOCKHOLDERS' EQUITY - ---------------------------------- CURRENT LIABILITIES: Accounts payable $ 77,554 $ 53,013 Payroll and related taxes 135,697 118,996 Accrued insurance 51,224 51,309 Income and other taxes 12,781 19,265 --------- --------- Total current liabilities 277,256 242,583 --------- --------- STOCKHOLDERS' EQUITY: Capital stock, $1 par value 40,116 40,116 Treasury stock, 2,060 shares in 1996 and 2,101 shares in 1995, respectively, at cost (6,205) (6,327) Paid-in capital 8,194 7,215 Earnings invested in the business 447,231 435,100 --------- --------- Total stockholders' equity 489,336 476,104 --------- --------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $766,592 $718,687 ========= =========
- 5 - KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands of dollars)
13 Weeks Ended 26 Weeks Ended ---------------------------- ----------------------------- June 30, 1996 July 2, 1995 June 30, 1996 July 2, 1995 ------------ ------------ ------------ ------------ Capital Stock Class A common stock Balance at beginning of period $ 36,512 $ 36,510 $ 36,512 $ 36,507 Conversions from Class B 15 1 15 4 --------- --------- --------- --------- Balance at end of period 36,527 36,511 36,527 36,511 Class B common stock Balance at beginning of period 3,604 3,606 3,604 3,609 Conversions to Class A (15) (1) (15) (4) --------- --------- --------- --------- Balance at end of period 3,589 3,605 3,589 3,605 Treasury Stock Balance at beginning of period (6,314) (6,216) (6,327) (6,186) Exercise of stock options 50 -- 59 (30) Restricted stock awards 59 35 63 35 --------- --------- --------- --------- Balance at end of period (6,205) (6,181) (6,205) (6,181) Paid-in Capital Balance at beginning of period 7,324 6,210 7,215 5,868 Exercise of stock options 390 131 462 473 Restricted stock awards 480 297 517 297 --------- --------- --------- --------- Balance at end of period 8,194 6,638 8,194 6,638 Earnings Invested in the Business Balance at beginning of period 439,103 402,592 435,100 391,718 Net earnings 17,448 16,660 30,351 28,922 Cash dividends (7,991) (7,599) (15,594) (14,433) Equity adjustment for foreign currency translation (cumulative charge of $505 in 1996 and credit of $3,425 in 1995) (1,329) (613) (2,626) 4,833 --------- --------- --------- --------- Balance at end of period 447,231 411,040 447,231 411,040 --------- --------- --------- --------- Stockholders' Equity at end of period $489,336 $451,613 $489,336 $451,613 ========= ========= ========= =========
- 6 - KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE 26 WEEKS ENDED JUNE 30, 1996 AND JULY 2, 1995 (In thousands of dollars) 1996 1995 ---------- ---------- Cash flows from operating activities: Net earnings $30,351 $28,922 Noncash adjustments: Depreciation and amortization 12,911 10,619 Changes in certain working capital components (61,221) (21,891) -------- -------- Net cash from operating activities (17,959) 17,650 -------- -------- Cash flows from investing activities: Capital expenditures (10,053) (14,907) Proceeds from sales and maturities of short-term investments 561,375 613,074 Purchases of short-term investments (549,093) (584,739) Increase in intangibles and other assets (6,310) (15,664) -------- -------- Net cash from investing activities (4,081) (2,236) -------- -------- Cash flows from financing activities: Dividend payments (15,594) (14,433) Exercise of stock options and restricted stock awards 1,101 775 -------- -------- Net cash from financing activities (14,493) (13,658) -------- -------- Net change in cash and equivalents (36,533) 1,756 Cash and equivalents at beginning of period 52,811 49,207 -------- -------- Cash and equivalents at end of period $16,278 $50,963 ======== ========
- 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations: Second Quarter Sales of services in the second quarter of 1996 were $804,262,000, an increase of 23.3% from the same period in 1995. Domestic sales grew in excess of 20%, and reflects growth in the staffing business and significant expansion in our staff leasing services. International sales continued to grow at double digit rates. Cost of services, consisting of payroll and related costs of employees assigned to customers, increased 25.4% in the second quarter as compared to the same period in 1995. Average hourly wage rates and related costs from U.S. operations have increased from 1995 at a rate somewhat higher than the general inflation rate due to a tightening labor market. Gross profit of $152,255,000 was 14.8% higher than 1995, while the Company-wide gross profit rates declined from 20.3% in 1995 to 18.9% in 1996. Growth in the staff leasing business, with its inherently lower margins, along with the upward pressure on wage rates noted above and growth of sales with our very large customers, where contracts require special pricing and additional implementation costs, all had the effect of reducing the consolidated gross profit rate. Selling, general and administrative expenses were $124,259,000 in the second quarter, an increase of 15.3% over the same period in 1995. As a percent of sales, the spending rate averaged 15.5%, compared to 16.5% in last year's second quarter. Earnings before income taxes were $29,138,000, an increase of 7.1%, compared to pretax earnings of $27,210,000 for the same period in 1995. The pretax margin was 3.6%, a .6 percentage point decrease from the second quarter of 1995. Lower interest income represented .2 percentage point of the decline while the net of the lower gross margin rate and lower expense spending rate accounted for the remaining .4 percentage point of the decrease. Income taxes were 40.1% of pretax income. This was 1.3 percentage point over the applicable tax rate for the second quarter of 1995 due to increased state tax rates, reduced tax-exempt income and the expiration of tax credits against federal income tax liability earned through the targeted jobs tax credit program. - 8 - Net earnings were $17,448,000 in the second quarter of 1996, an increase of 4.7% over the second quarter of 1995. Earnings per share were $.46 compared to the $.44 in the same period last year. Year-to-Date Sales of services totaled $1,538,193,000 during the first six months of 1996, an increase of 20.8% over 1995. This increase reflects continued growth in the volume of domestic and international sales. Cost of services of $1,248,252,000 was 22.6% higher than last year, reflecting domestic and international volume growth and increases in payroll costs due to a tightening U.S. labor market. Gross profit increased 13.8% in 1996 due to strong increased sales volume, but at lower gross profit rates on sales. The gross profit rate was 18.8% for the first six months of 1996 compared to 20.0% for 1995. This decline reflects competitive constraints on price increases in U.S. service lines, growth of sales with our very large customers and higher volume growth in the staff leasing business. Selling, general and administrative expenses of $241,997,000 were 14.1% higher than last year. The spending rate was 15.7% of sales, 1.0 percentage point below last year's rate. Expenses continue to be closely monitored in response to tightening margins in both U.S. and overseas markets. Earnings before taxes were $50,631,000, an increase of 7.0% over 1995. These earnings averaged a pretax margin of 3.3%, or .4 percentage point decrease over 1995. Lower interest income accounts for half of this decline, and the net of lower gross margin rates, offset by a decreased expense spending rate, accounted for the remainder. Income taxes were 40.1% of pretax earnings and were 1.2 percentage point higher than last year's first half income tax rate. The absence of the targeted jobs tax credit, increased state and local rates and increased foreign tax rates account for this change. Net earnings were $30,351,000, or 4.9% higher than the first six months of 1995. Earnings per share were $.80 compared to $.76 last year. - 9 - Financial Condition Assets totaled $766,592,000 at June 30, 1996, an increase of 6.7% over the $718,687,000 at December 31, 1995. Working capital increased $11,244,000 during the six-month period. The components of working capital, notably accounts receivable, have changed due to increased business activity. The current ratio was 2.2 at June 30, 1996, a decline of .1 percentage point since December 31, 1995. The quarterly dividend rate applicable to Class A and Class B shares outstanding was increased to $.21 per share in the second quarter of 1996. This compares to a dividend rate of $.20 per share in the second quarter of 1995. Management believes the financial condition of the Company continues to be strong, which enables it to fund working capital requirements and long-term growth opportunities from internal resources. -------------------------------------------------------------- Companies for which this report is filed are: Kelly Services, Inc. and its subsidiaries, Kelly Assisted Living Services, Inc., Kelly Properties, Inc., Kelly Professional and Technical Services, Inc., Kelly Services (Canada), Ltd., Les Services Kelly (Quebec) Inc., Lenore Simpson Personnel, Ltd., Societe Services Kelly, Kelly Professional Services (France), Inc., Kelly Services (UK), Ltd., Kelly Services (Ireland), Ltd., Kelly Services (Australia), Ltd., Kelly Services (New Zealand), Ltd., Kelly Services (Nederland), B.V., Kelly Services of Denmark, Inc., OK Personnel Service Holding SA, Kelly de Mexico, S.A. de C.V., Kelly Services Norge A.S., KSI Acquisition Corp., Kelly Pinpoint, Inc., Your Staff, Inc., The Wallace Law Registry, Inc., Kelly Services France S.A., Bourse Du Travail Temporaire 2000, Kelly Formation S.A.R.L. and Kelly Services Luxembourg S.A.R.L. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the period in this filing. - 10 - PART II. OTHER INFORMATION Item 1. Legal Proceedings. ------------------ Reference is made to Item 3, Legal Proceedings, of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and to the description therein of the proposed imposition by the Internal Revenue Service of an accumulated earnings tax in connection with an audit of the Company's consolidated federal tax liability for the years 1988, 1989 and 1990. As disclosed in Item 1, Legal Proceedings, of the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996, this assessment was waived in its entirety by the Internal Revenue Service in April, 1996. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The annual meeting of stockholders of registrant was held May 21, 1996. (b) The nominees for director, as listed in the Company's proxy statement dated April 22, 1996, were elected. The directors whose terms of office continued after the meeting are also listed in the proxy statement. (c) A brief description and the results of the matters voted upon at the meeting follow. (1) Election of the following directors: Shares Voted Shares Voted "For" "Withhold" ------------ ------------ W. R. Kelly 3,494,348 3,730 B. J. White 3,494,247 3,831 (2) Approval of amendment to the Certificate of Incorporation to increase the size of the Board of Directors: Shares voted "For" 3,428,489 Shares voted "Against" 54,742 Shares voted "Abstain" 14,847 - 11 - Item 4. Submission of Matters to a Vote of Security Holders (continued). --------------------------------------------------- (3) Approval of Amended and Restated Performance Incentive Plan including performance-based criteria for performance awards for senior executive officers: Shares voted "For" 3,449,750 Shares voted "Against" 9,156 Shares voted "Abstain" 14,470 (4) Ratification of the selection of Price Waterhouse LLP as the Company's independent auditors: Shares voted "For" 3,494,051 Shares voted "Against" 1,800 Shares voted "Abstain" 2,227 Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) See Index to Exhibits required by Item 601, Regulation S-K, set forth on page 13 of this filing. (b) No reports on Form 8-K were filed during the quarter for which this report is filed. - 12 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KELLY SERVICES, INC. Date: August 13, 1996 /s/ P. K. Geiger P. K. Geiger Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) - 13 - INDEX TO EXHIBITS REQUIRED BY ITEM 601, REGULATION S-K --------------------- Exhibit No. Description Document - ------- ----------- -------- 3.1 Certificate of Amendment of Certificate of Incorporation dated June 14, 1996 and filed with the Secretary of State, State of Delaware, on June 20, 1996. (Reference is made to Exhibit A to the Definitive Proxy for the fiscal year ended December 31, 1995, filed with the Commission in April, 1996, which is incorporated herein by reference.) 3.2 Complete copy of the Certificate of Incorporation, 2 as amended. 4 Rights of security holders are defined in Articles Fourth, Fifth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth and Fifteenth of the Certificate of Incorporation, Exhibit 3.2. 27 Financial Data Schedule 3
                           
                            - 1 -

                          COMPOSITE
                CERTIFICATE OF INCORPORATION
                             OF
                    KELLY SERVICES, INC.

                        ARTICLE FIRST
          The name of the corporation is Kelly Services,
Inc.

                        ARTICLE SECOND
          Its principal office in the State of Delaware is
located at No. 100 West Tenth Street, in the City of 
Wilmington, County of New Castle.  The name and address of 
its resident agent is The Corporation Trust Company, No. 100 
West Tenth Street, Wilmington, Delaware.

                        ARTICLE THIRD
          The nature of the business, or objects or purposes
to be transacted, promoted, or carried on are:
          To furnish office, clerical, supervisory and
consultant services.
          To manufacture, purchase or otherwise acquire,
invest in, own, mortgage, pledge, sell, assign and transfer
or otherwise dispose of, trade, deal in and deal with goods,
wares and merchandise and personal property of every class
and description.
          To acquire, and pay for in cash, stock or bonds of
this corporation or otherwise, the good will, rights, assets
and property, and to undertake or assume the whole or any
part of the obligations or liabilities of any person, firm, 
association or corporation.
          To acquire, hold, use, sell, assign, lease, grant
licenses in respect of, mortgage or otherwise dispose of
letters patent of the United States or any foreign country,
patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade
names, relating to or useful in connection with any business
of this corporation.
          To acquire by purchase, subscription or otherwise,
and to receive, hold, own, guarantee, sell, assign,
exchange, transfer, mortgage, pledge or otherwise dispose of
or deal in and with any of the shares of the capital stock,
or any voting trust certificates in respect of the shares of

                           
                            - 2 -

capital stock, scrip, warrants, rights, bonds, debentures,
notes, trust receipts, and other securities, obligations,
choses in action and evidences of indebtedness or interest
issued or created by any corporations, joint stock
companies, syndicates, associations, firms, trusts or 
persons, public or private, or by the government of the
United States of America, or by any foreign government, or
by any state, territory, province, municipality or other 
political subdivision or by any governmental agency, and as 
owner thereof to possess and exercise all the rights, powers 
and privileges of ownership, including the right to execute 
consents and vote thereon, and to do any and all acts and 
things necessary or advisable for the preservation, 
protection, improvement and enhancement in value thereof.
          To enter into, make and perform contracts of every 
kind and description with any person, firm, association, 
corporation, municipality, county, state, body politic or 
government or colony or dependency thereof.
          To borrow or raise moneys for any of the purposes 
of the corporation and, from time to time, without limit as 
to amount to draw, make, accept, endorse, execute and issue 
promissory notes, drafts, bills of exchange, warrants, 
bonds, debentures and other negotiable or non-negotiable 
instruments and evidences of indebtedness, and to secure the 
payment of any thereof and of the interest thereon by 
mortgage upon or pledge, conveyance or assignment in trust 
of the whole or any part of the property of the corporation, 
whether at the time owned or thereafter acquired, and to 
sell, pledge or otherwise dispose of such bonds or other 
obligations of the corporation for its corporate purposes.
          To loan to any person, firm, or corporation any of 
its surplus funds, either with or without security.
          To purchase, hold, sell and transfer the shares of 
its own capital stock; provided it shall not use its funds 
or property for the purchase of its own shares of capital 
stock when such use would cause any impairment of its 
capital except as otherwise permitted by law, and provided 
further that shares of its own capital stock belonging to it 
shall not be voted upon directly or indirectly.
          To operate a private trade school and business 
school in the State of Michigan after obtaining the 
necessary license for such operation for the instruction of 
students in various office skills, including, but not by way 
of limitation, instruction in the use of various office 
equipment and machines.

                           
                            - 3 -

          To have one or more offices, to carry on all or 
any of its operations and business and without restriction 
or limit as to amount to purchase or otherwise acquire, 
hold, own, mortgage, sell, convey, or otherwise dispose of 
real and personal property of every class and description in 
any of the States, Districts, Territories or Colonies of the 
United States, and in any and all foreign countries, subject 
to the laws of such State, District, Territory, Colony or 
Country.
          In general, to carry on any other business in 
connection with the foregoing, and to have and exercise all 
the powers conferred by the laws of Delaware upon 
corporations formed under the General Corporation Law of the 
State of Delaware, and to do any or all of the things 
hereinbefore set forth to the same extent as natural persons 
might or could do.
          The objects and purposes specified in the 
foregoing clauses shall, except where otherwise expressed, 
be in nowise limited or restricted by reference to, or 
inference from, the terms of any other clause in this 
certificate of incorporation, but the objects and purposes 
specified in each of the foregoing clauses of this article 
shall be regarded as independent objects and purposes.

                       ARTICLE FOURTH
                         Division A
          (a)  The total number of shares of stock which the 
corporation shall have authority to issue is 110,000,000 
shares, the par value of each of the shares is $1.00, 
amounting in the aggregate to $110,000,000, and the shares 
are divided into two classes consisting of 100,000,000 
shares of Class A Common Stock and 10,000,000 shares of 
Class B Common Stock.
          (b)  Each of the 7,021,879 issued shares of Common 
Stock of the Corporation is hereby reclassified and changed 
into one and one-half (1-1/2) shares of Class A Common Stock 
and one-half (1/2) share of Class B Common Stock, provided 
that no fractional shares of Class A Common Stock or Class B 
Common Stock shall be issued, but in the case of each holder 
of issued Common Stock who would otherwise be entitled to a 
fractional share of Class A Common Stock and Class B Common 
Stock, the fractional shares shall be combined into a whole 
share of Class B Common Stock.

                           
                            - 4 - 

                         Division B                         
          The designations, preferences and relative, 
participating, optional or other special rights and the 
qualifications, limitations or restrictions in respect of 
the shares of each class are as follows:
          (a)  Dividends.  Holders of the Class A Common 
               ---------
Stock and the Class B Common Stock shall be entitled to 
receive dividends, out of funds legally available therefor, 
when and as declared by the Board of Directors, subject only 
to the limitations that (1) no cash dividend payable on the 
shares of the Class B Common Stock shall be declared unless 
the Board of Directors shall concurrently declare a cash 
dividend on the shares of the Class A Common Stock at a rate 
which is not less than the rate of the cash dividend payable 
on the shares of the Class B Common Stock (but a cash 
dividend may be declared on the Class A Common Stock without 
declaring a cash dividend on the Class B Common Stock), and 
(2) no dividend payable in shares of the Class B Common 
Stock shall be declared on the Class A Common Stock (but a 
dividend payable in shares of Class A Common Stock may be 
declared on the Class A Common Stock or the Class B Common 
Stock and a dividend payable in shares of Class B Common 
Stock may be declared on the Class B Common Stock).
          (b)  Voting Rights.  Except on matters where their
               ------------- 
vote is required by Delaware law, the holders of the Class A 
Common Stock shall not be entitled to vote on any matter 
coming before any meeting of stockholders.  The holders of 
the Class B Common Stock shall be entitled to one vote per 
share upon each matter coming before any meeting of 
stockholders.
          (c)  Conversion of Class B Common Stock.
               -----------------------------------
               1.  Shares of Class B Common Stock shall be 
convertible, at the option of the respective holders 
thereof, at any time, into fully paid and non-assessable 
shares of Class A Common Stock on the basis of one share of 
Class A Common Stock for each share of Class B Common Stock.
               2.  No payment or adjustment with respect to 
dividends on shares of the Class A Common Stock or on the 
Class B Common Stock shall be made in connection with any 
conversion of shares of Class B Common Stock into shares of 
Class A Common Stock.

                           
                            - 5 - 

               3.  The holders of a certificate or 
certificates for Class B Common Stock, in order to effect the 
conversion of shares represented thereby, shall 
surrender the certificate or certificates to the corporation 
or to the Transfer Agent for the shares of the Class B 
Common Stock, with request for conversion.  If the shares of 
the Class A Common Stock issuable upon conversion are to be 
issued in a name other than that in which the shares of the 
Class B Common Stock to be converted are registered, the 
certificate or certificates shall be duly endorsed for 
transfer or accompanied by a duly executed stock transfer 
power, and shall also be accompanied by the necessary stock 
transfer stamps or equivalent funds.
               Upon surrender of the certificate or 
certificates, the corporation shall issue and deliver or 
cause to be issued and delivered to the person entitled 
thereto a certificate or certificates for the number of full 
shares of the Class A Common Stock issuable upon conversion.  
The corporation shall pay all original issue taxes, if any, 
payable upon the issue of shares of the Class A Common Stock 
issued upon any conversion.
               The conversion shall be deemed to have been 
effected on the date of the surrender of the certificate or 
certificates of shares of the Class B Common Stock, and the 
person in whose name the certificate or certificates of the 
shares of the Class A Common Stock issuable upon conversion 
are to be issued shall be deemed to be the holder of record 
of the shares as of that date.
               4.  If there should be any capital 
reorganization or any reclassification of the Class A Common 
Stock, the shares of the Class B Common Stock shall 
thereafter have the right to be converted into the number of 
shares of stock or other securities or property of the 
corporation to which outstanding shares of the Class A 
Common Stock would have been entitled upon the effective 
date of the reorganization or reclassification.  The Board 
of Directors shall make an appropriate adjustment in the 
application of the provisions of this paragraph (c) with 
respect to the conversion rights of the holders of the 
shares of the Class B Common Stock after the reorganization 
or reclassification, to the end that the provisions shall be 
applicable, as nearly as reasonably may be, in respect to 
any shares or other securities or property thereafter 
issuable or deliverable upon the conversion of shares of the 

                           
                            - 6 -

Class B Common Stock.  The provisions of this sub-paragraph 
shall not apply to a reorganization or reclassification 
involving merely a subdivision or combination of outstanding 
shares of the Class A Common Stock.
               5.  In case the corporation shall be 
consolidated with or merged into any other corporation or 
shall sell or transfer its property and business as or 
substantially as an entirety, then the stock or other 
securities or other property, including cash, issuable or 
deliverable in connection with such consolidation, merger or 
sale in respect of each share of the Class A Common Stock 
then outstanding, shall thereafter, for the purposes of the 
conversion rights of the Class B Common Stock, be deemed the 
equivalent of one share of Class A Common Stock.  Upon the 
exercise of conversion rights, holders of Class B Common 
Stock shall be entitled to receive on an equivalent basis 
and at the same rate and on the other terms and conditions 
set forth in this paragraph (c), the stock or other 
securities or property, including cash, deemed to be the 
equivalent of Class A Common Stock.  Lawful provisions to 
this effect shall be made a part of and condition to the 
consolidation, merger or sale.
               6.  In case the corporation shall propose (i) 
to effect any reclassification of the Class A Common Stock 
or any capital reorganization involving a change in the 
Class A Common Stock, other than a reclassification or 
reorganization involving merely a subdivision or combination 
of outstanding shares of the Class A Common Stock, or (ii) 
to consolidate with or merger into another corporation, or 
to sell or transfer its property and business as or 
substantially as an entirety, then, in each such case, the 
corporation shall file with each Transfer Agent for the 
shares of the Class B Common Stock and shall mail to the 
holders of record of the shares at their respective 
addresses then appearing on the records of the corporation a 
statement, signed by an officer of the corporation, with 
respect to the proposed action, the statement to be so filed 
and mailed at least 30 days prior to the record date for 
holders of the Class A Common Stock for the purposes 
thereof.  The statement shall set forth such facts with 
respect to the proposed action as shall be reasonably 
necessary to inform each Transfer Agent for the shares of 
the Class B Common Stock and the holders of those shares as 
to the effect of the action upon the conversion rights of 
the holders.

                           
                            - 7 -

               7.  The corporation shall at all times have 
authorized but unissued, or in its treasury, a number of 
shares of the Class A Common Stock sufficient for the 
conversion of all shares of the Class B Common Stock from 
time to time outstanding.
               8.  In case the shares of the Class A Common 
Stock or the Class B Common Stock at any time outstanding 
shall, by reclassification or otherwise, be subdivided into 
a greater number of shares or combined into a lesser number 
of shares, the shares of Class B Common Stock or Class A 
Common Stock, respectively, then outstanding shall, at the 
same time, be subdivided or combined, as the case may be, on 
the same basis.
          (d)  Preemptive Rights.  Holders of the Class A 
               -----------------
Common Stock shall have no preemptive right to subscribe to 
any securities issued by the corporation.  Holders of the 
Class B Common Stock shall have the preemptive right to 
subscribe to additional shares of Class B Common Stock, or 
any other voting stock or any security convertible into 
Class B Common Stock or other voting stock, hereafter issued 
by the corporation.
          (e)  Liquidation Preferences.
               -----------------------
               1.  In the event of dissolution, liquidation 
or winding up of the corporation, whether voluntary or 
involuntary, holders of the Class A Common Stock and of the 
Class B Common Stock shall be entitled to payment out of the 
assets of the corporation ratably in accordance with the 
number of shares held by them respectively.
               2.  Neither a consolidation nor a merger of 
the corporation with or into any other corporation, nor a 
merger of any other corporation into the corporation, nor 
the purchase or other acquisition by the corporation of all 
or a part of the outstanding shares of any class or classes 
of its stock, nor the sale or transfer of the property and 
business of the corporation, as or substantially as an 
entirety, shall be considered a dissolution, liquidation or 
winding up of the corporation within the meaning of the 
foregoing provisions.

                           
                            - 8 -

                        ARTICLE FIFTH
          The business, property and affairs of this 
corporation shall be managed by a Board of Directors 
consisting of no fewer than five (5) and no more than nine 
(9) members, the exact number to be determined from time to 
time by resolution of the Board of Directors.  The directors 
shall be classified with respect to the term for which they 
shall severally hold office by dividing them into three 
classes, as nearly equal in number as may be, the classes to 
hold office for successive terms of three years, 
respectively, but all directors of the corporation shall 
hold office until their successors are elected and 
qualified.  The Board of Directors may exercise all such 
powers of the corporation and do all such lawful acts and 
things as are not by statute or by the Certificate of 
Incorporation or by the by-laws directed or required to be 
exercised or done by the stockholders.

          Newly created directorships resulting from any 
increase in the authorized number of directors and vacancies 
in the Board of Directors from death, resignation, 
retirement, disqualification, removal from office or other 
cause, shall be filled by a majority vote of the directors 
then in office, and directors so chosen shall hold office 
for a term expiring at the annual meeting at which the term 
of the class to which they shall have been elected expires.  
No decrease in the number of directors constituting the 
Board of Directors shall shorten the term of any incumbent 
director.

          Any director, or the entire Board of Directors, 
may be removed at any time, but only for cause.  The 
affirmative vote of the holders of 75% of the voting power 
of all of the stock of this corporation entitled to vote in 
elections of directors shall be required to remove a 
director from office.  The stockholders of the corporation 
are expressly prohibited from cumulating their votes in any 
election of directors of the corporation.

                        ARTICLE SIXTH
          The names and places of residence of the 
incorporators are as follows:
          NAMES                         RESIDENCES
          L. E. Gray                    Wilmington, Delaware
          S. M. Brown                   Wilmington, Delaware
          A. D. Atwell                  Wilmington, Delaware

                           
                            - 9 -

                       ARTICLE SEVENTH
          By-laws of the corporation may be adopted, amended 
or repealed by the affirmative vote of a majority of the 
total number of directors or by the affirmative vote of the 
holders of 75% of the voting power of all of the stock of 
this corporation entitled to vote in elections of directors.  
The by-laws may contain any provision for the regulation and 
management of the affairs of the corporation and the rights 
or powers of its stockholders, directors, officers, or 
employees not inconsistent with the laws of the State of 
Delaware.

                       ARTICLE EIGHTH
          (a)  Except as set forth in paragraph (d) of this 
Article, the affirmative vote of the holders of 75% of the 
voting power of all of the stock of this corporation 
entitled to vote in elections of directors shall be 
required:
               (i)    for a merger or consolidation of this 
          corporation or any subsidiary thereof with or into 
          any other corporation, or
               (ii)   for any sale or lease of all or any 
          substantial part of the assets of this corporation 
          or any subsidiary thereof to any other 
          corporation, person or other entity, or
               (iii)  for any sale or lease to this 
          corporation or any subsidiary thereof of any 
          assets (except assets having an aggregate fair 
          market value of less than $5,000,000) in exchange 
          for voting securities (or securities convertible 
          into voting securities or options, warrants or 
          rights to purchase voting securities or securities 
          convertible into voting securities) of this 
          corporation or any subsidiary by any other 
          corporation, person or other entity,
if as of the record date for the determination of 
stockholders entitled to notice thereof and to vote thereon 
the other corporation, person or other entity which is party 
to the transaction is the beneficial owner, directly or 
indirectly, of 5% or more in number of shares of the 
outstanding shares of any class of stock of this corporation 
entitled to vote in elections of directors.

                           
                           - 10 -

          (b)  For purposes of this Article, any 
corporation, person or other entity shall be deemed to be 
the beneficial owner of any shares of stock of this 
corporation,
               (i)   which it owns directly, whether or not 
          of record; or
               (ii)  which it has the right to acquire 
          pursuant to any agreement or understanding or upon 
          exercise of conversion rights, warrants or options 
          or otherwise, whether or not presently 
          exercisable; or
               (iii) which are beneficially owned, directly 
          or indirectly (including shares deemed to be owned 
          through application of clause (ii) above) by an 
          "affiliate" or "associate" as those terms are 
          defined herein; or
              (iv)  which are beneficially owned, directly 
          or indirectly by any other corporation, person or 
          entity (including any shares which the other 
          corporation, person or entity has the right to 
          acquire pursuant to any agreement or understanding 
          or upon exercise of conversion rights, warrants or 
          options or otherwise, whether or not presently 
          exercisable) with which it or its "affiliates" or 
          "associates" has any agreement or arrangement or 
          understanding for the purpose of acquiring, 
          holding, voting or disposing of stock of this 
          corporation.
          For the purpose of this Article EIGHTH, the 
outstanding shares of stock of this corporation shall 
include shares deemed owned through the application of 
clauses (b)(ii), (iii) and (iv) above, but shall not include 
any other shares which may be issuable pursuant to any 
agreement or upon exercise of conversion rights, warrants, 
options or otherwise.
          For the purposes of this Article EIGHTH, the term 
"affiliate" shall mean any person that directly, or 
indirectly through one or more intermediaries, controls, or 
is controlled by, or is under common control with, the 
corporation, person or other entity.  The term "control" 
(including the terms "controlling," "controlled by" and 
"under common control with") means the possession, directly 

                           
                           - 11 -

or indirectly, of the power to direct or cause the direction 
of the management and policies of the corporation, person or 
other entity, whether through the ownership of voting 
securities, by contract, or otherwise.
          For the purposes of this Article EIGHTH, the term 
"associate" shall mean (1) any corporation or organization 
(other than this corporation or a majority-owned subsidiary 
of this corporation) of which the corporation, person or 
other entity is an officer or partner or is, directly or 
indirectly, the beneficial owner of 10% or more of any class 
of equity securities; (2) any trust or other estate in which 
the corporation, person or other entity has a substantial 
beneficial interest or as to which the corporation, person 
or other entity serves as a trustee or in a similar 
fiduciary capacity; and (3) any relative or spouse of a 
person, or any relative of a spouse, who has the same home 
as the person or who is a director or officer of this 
corporation or any of its subsidiaries.
          (c)  The Board of Directors shall have the power 
and duty to determine for the purpose of this Article EIGHTH 
on the basis of information known to the Board of Directors 
of this corporation, whether
               (i)  the other corporation, person or other 
          entity beneficially owns more than 5% in number of 
          shares of the outstanding shares of any class of 
          stock of this corporation entitled to vote in 
          elections of directors;
               (ii)  a corporation, person or other entity 
          is an "affiliate" or "associate" (as defined in 
          paragraph (b) above) of another; and
               (iii) the assets being acquired by this 
          corporation, or any subsidiary thereof, have an 
          aggregate fair market value of less than 
          $5,000,000.
          Any such determination shall be conclusive and 
binding for all purposes of this Article EIGHTH.
          (d)  The provisions of this Article EIGHTH shall 
not apply to any merger or other transaction referred to in 
this Article EIGHTH with any corporation, person or other 
entity if (1) the Board of Directors of this corporation has 
approved a memorandum of understanding with the other 
corporation, person or other entity with respect to the 

                           
                           - 12 -

transaction prior to the time that the other corporation, 
person or other entity shall have become a beneficial owner 
of more than 5% in number of shares of the outstanding 
shares of stock of any class of this corporation entitled to 
vote in elections of directors; or (2) the transaction is 
otherwise approved by the Board of Directors of this 
corporation, provided that a majority of the members of the 
Board of Directors voting for the approval of the 
transaction were duly elected and acting members of the 
Board of Directors prior to the time that the other 
corporation, person or other entity shall have become a 
beneficial owner of more than 5% in number of shares of the 
outstanding shares of stock of any class of this corporation 
entitled to vote in elections of directors.  In addition, 
the provisions of this Article EIGHTH shall not apply to any 
merger or other transaction referred to in this Article 
EIGHTH with a subsidiary (which terms shall mean a 
corporation of which a majority of the outstanding shares of 
stock entitled to vote in elections of directors is owned by 
this corporation directly, and/or indirectly through one or 
more other subsidiaries).

                        ARTICLE NINTH
          In furtherance and not in limitation of the powers 
conferred by statute, the Board of Directors is expressly 
authorized:
          To fix the amount to be reserved as working 
capital over and above its capital stock paid in, to 
authorize and cause to be executed mortgages and liens upon 
the real and personal property of this corporation.
          From time to time to determine whether and to what 
extent, and at what times and places, and under what 
conditions and regulations, the accounts and books of this 
corporation (other than the stock ledger), or any of them, 
shall be open to inspection of stockholders; and no 
stockholder shall have any right of inspecting any account, 
book or document of this corporation except as conferred by 
statute unless authorized by a resolution of the 
stockholders or directors.
          By resolution or resolutions, passed by a majority 
of the whole board to designate one or more committees, each 
committee to consist of two or more of the directors of the 
corporation, which, to the extent provided in said 
resolution or resolutions, or in the by-laws of this 

                           
                           - 13 -

corporation, shall have and may exercise the powers of the 
Board of Directors in the management of the business and 
affairs of this corporation, and may have power to authorize 
the sale of this corporation to be affixed to all papers 
which may require it.  The Committee or committees shall 
have the name or names as may be stated in the by-laws of 
this corporation or as may be determined from time to time 
by resolution adopted by the Board of Directors.
          This corporation may, in its by-laws confer powers 
upon its directors in addition to the foregoing, and in 
addition to the powers and authorities expressly conferred 
upon them by the statute.
          Both stockholders and directors shall have power, 
if the by-laws so provide, to hold their meetings and to 
have one or more offices within or without the State of 
Delaware, and to keep the books of this corporation (subject 
to the provisions of the statutes), outside of the State of 
Delaware at such places as may be from time to time 
designated by the Board of Directors.

                        ARTICLE TENTH
          Whenever a compromise or arrangement is proposed 
between this corporation and its creditors or any class of 
them and/or between this corporation and its stockholders or 
any class of them, any court of equitable jurisdiction 
within the State of Delaware may, on the application in a 
summary way of this corporation or of any creditor or 
stockholder thereof, or on the application of any receiver 
or receivers appointed for this corporation under the 
provisions of Section 3883 of the Revised Code of 1915 of 
said State, or on the application of trustees in dissolution 
or of any receiver or receivers appointed for this 
corporation under the provisions of Section 43 of the 
General Corporation Law of the State of Delaware, order a 
meeting of the creditors or class of creditors, and/or of 
the stockholders or class of stockholders of this 
corporation, as the case may be, to be summoned in such 
manner as the said Court directs.  If a majority in number 
representing three-fourths in value of the creditors or 
class of creditors, and/or of the stockholders or class of 
stockholders of this corporation, as the case may be, agree 
to any compromise or arrangement and to any reorganization 
of this corporation as consequence of such compromise or 
arrangement, the said compromise or arrangement and the said 
reorganization shall, if sanctioned by the Court to which 

                           
                           - 14 -

the said application has been made, be binding on all the 
creditors or class of creditors, and/or on all the 
stockholders or class of stockholders, of this corporation, 
as the case may be, and also on this corporation.

                      ARTICLE ELEVENTH
          The Board of Directors of this corporation, when 
evaluating any offer of another party to (a) make a tender 
or exchange offer for any equity security of this 
corporation; (b) merge or consolidate this corporation with 
another corporation; or (c) purchase or otherwise acquire 
all or substantially all of the properties and assets of 
this corporation, shall, in connection with the exercise of 
its judgment in determining what is in the best interest of 
this corporation and its stockholders, give due 
consideration to such factors as the Board of Directors 
determined to be relevant, including without limitation, the 
social, legal, and economic effects of the proposed 
transaction upon employees, customers, suppliers, and other 
affected persons, firms and corporations and on the 
communities in which this corporation and its subsidiaries 
operate or are located.

                      ARTICLE TWELFTH
          No action required or permitted to be taken at any 
annual or special meeting of the stockholders of this 
corporation may be taken without a meeting and the power of 
stockholders to consent in writing, without a meeting, to 
the taking of any action is specifically denied.

                        ARTICLE THIRTEENTH
          No director of the corporation shall be personally 
liable to the corporation or its stockholders for monetary 
damages for breach of fiduciary duty by such director as a 
director; provided, however, that this Article THIRTEENTH 
shall not eliminate or limit liability (i) for any breach of 
the director's duty of loyalty to the corporation or its 
stockholders, (ii) for acts or omissions not in good faith 
or which involve intentional misconduct or a knowing 
violation of law, (iii) under section 174 of the Delaware 
General Corporation Law, or (iv) for any transaction from 
which the director derived an improper personal benefit.  
The foregoing provisions of this Article THIRTEENTH shall 

                           
                           - 15 -

not eliminate the liability of a director for any act or 
omission occurring prior to the date on which this Article 
THIRTEENTH becomes effective.  No amendment or repeal of 
this Article THIRTEENTH shall apply to or have any effect on 
the liability or alleged liability of any director of the 
corporation for or with respect to any acts or omissions of 
such director occurring prior to such amendment or repeal.

                     ARTICLE FOURTEENTH
          Special meetings of the stockholders of this 
corporation for any purpose or purposes may be called at any 
time by the Board of Directors or by a committee of the 
Board of Directors which has been duly designated by the 
Board of Directors and whose powers and authority, as 
provided in a resolution of the Board of Directors or in the 
by-laws of this corporation, include the power to call such 
meetings, but such special meetings may not be called by any 
other person or persons.

                      ARTICLE FIFTEENTH
          This corporation reserves the right to amend, 
alter, change or repeal any provision contained in this 
Certificate of Incorporation, in the manner now or hereafter 
prescribed by statute, and all rights conferred upon 
stockholders herein are granted subject to this reservation.  
Notwithstanding any other provision of the Certificate of 
Incorporation or the by-laws of this corporation (and in 
addition to any other vote that may be required by law, this 
Certificate of Incorporation, or by the by-laws of this 
corporation), the affirmative vote of the holders of 75% of 
the voting power of all stock of this corporation entitled 
to vote in elections of directors shall be required to 
amend, alter, change, or repeal Article FIFTH, SEVENTH, 
EIGHTH, NINTH, ELEVENTH, TWELFTH, THIRTEENTH, FOURTEENTH and 
FIFTEENTH of this Certificate of Incorporation.

                           
                           - 16 -

          WE, THE UNDERSIGNED, being each of the 
incorporators hereinbefore named for the purpose of forming 
a corporation in pursuance of the General Corporation Law of 
the State of Delaware, do make this certificate, hereby 
declaring and certifying that the facts herein stated are 
true, and accordingly have hereunto set our hands and seals 
this 26th day of August, A. D. 1952.


                           s/     L.E. Gray        (SEAL)
                           ------------------------------

                           s/     S.M. Brown       (SEAL)
                           ------------------------------

                           s/     A.D. Atwell      (SEAL)
                           ------------------------------



As Amended June 20, 1996


 

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATON EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 6-MOS DEC-29-1996 JUN-30-1996 16,278 62,455 497,817 10,505 0 604,519 156,286 73,835 766,592 277,256 0 0 0 40,116 449,220 766,592 0 1,538,193 0 1,248,252 0 0 0 50,631 20,280 30,351 0 0 0 30,351 .80 0