LRW Labor Ready

Labor Ready, Inc. (NYSE:LRW) reported revenue for the third quarter ended Sept. 30, 2005 increased 21.7 percent to $360.4 million compared to revenue of $296.1 million for the third quarter of 2004. Net income for the quarter was $21.8 million or $0.40 per diluted share, as compared to $15.6 million or $0.31 per diluted share for the third quarter of 2004. "Our record revenue for the 2005 third quarter reflects the significant attention management has given to executing our key business strategies," said Labor Ready CEO Joe Sambataro. "We continue to grow our top line along with our margins, and we are recruiting and retaining talented people as we expand our brands to offer our customers a broader array of services." Commenting on the impact of the recent hurricanes, Sambataro said, "Hurricanes Katrina and Rita had no material effect on our quarterly results, and our operations have resumed in the affected areas except for four branch locations in the greater New Orleans area." During the quarter, revenue from Labor Ready branches open 12 months or longer grew 8.7 percent over the same quarter a year ago. Labor Ready opened a total of six new branches and closed six branches during the quarter. Labor Ready currently operates 893 branches. CLP Resources, a leading skilled construction trades staffing firm acquired by Labor Ready in May 2005, provided 12.8 percent of Labor Ready's 21.7 percent year-over-year revenue growth during the quarter and made a positive contribution to Labor Ready's net income performance. According to Sambataro, the 40 percent net income growth for the quarter was driven primarily by higher revenue and greater gross margins. Gross profit as a percentage of revenue was 31.3 percent in the quarter as compared to 30.9 percent in the third quarter of 2004. "Labor Ready continues to benefit from lower overall workers' compensation expense which is attributable to our safety and risk management programs," said Sambataro. Labor Ready also updated its outlook for 2005 and provided guidance for the fourth quarter. Labor Ready currently estimates revenue for the year in the range of $1.225 billion to $1.230 billion, compared to 2004 revenues of $1.04 billion. Net income per share for the year is expected to be between $1.13 and $1.15, compared to $0.75 per share in 2004. For the fourth quarter of 2005, Labor Ready estimates revenue in the range of $325 million to $330 million and net income per share between $0.24 and $0.26. Management will discuss third quarter 2005 results on a conference call at 8:00 a.m. (PT), Thursday, Oct. 20, 2005. The conference call can be accessed on Labor Ready's web site at www.laborready.com. This news release contains forward-looking statements, such as statements about the ranges of revenues, gross margins and net income anticipated for future periods, improvements in safety and workers' compensation claims and costs, strategies for increasing revenue and net income, and other factors that may affect Labor Ready's financial results and operations in the future. Labor Ready's actual results are, however, subject to a number of risks, including without limitation the following: 1) national and global economic conditions; 2) Labor Ready's ability to continue to attract and retain customers and maintain profit margins in the face of new and existing competition; 3) potential new laws and regulations that could have a materially adverse effect on Labor Ready's operations and financial results; 4) significant labor disturbances which could disrupt industries Labor Ready serves; 5) increased costs and collateral requirements in connection with Labor Ready's insurance obligations, including workers' compensation insurance; 6) adverse safety and risk management experiences; 7) the adequacy of Labor Ready's financial reserves; 8) Labor Ready's continuing ability to comply with financial covenants in its lines of credit and other financing agreements; 9) Labor Ready's ability to attract and retain competent employees in key positions; 10) Labor Ready's ability to successfully complete and integrate the CLP Resources and other acquisitions that it may make from time to time; and 11) other risks described in Labor Ready's filings with the Securities and Exchange Commission, including its most recent Form 10-K and Form 10-Q filings. About Labor Ready Labor Ready is an international provider of temporary employees for manual labor, light industrial and skilled construction jobs, operating under the brand names of Labor Ready, Workforce, Spartan Staffing, and CLP Resources. Labor Ready's customers are primarily small- to mid-sized businesses in the transportation, warehousing, hospitality, landscaping, construction, light manufacturing, retail, wholesale, facilities and sanitation industries. Annually, Labor Ready serves approximately 300,000 customers and puts more than 600,000 people to work through its more than 890 branch locations in the United States, Canada, and the United Kingdom. For additional information, visit Labor Ready's website at www.laborready.com. -0- *T LABOR READY, INC. SUMMARY CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) Thirteen Weeks Thirty-nine Weeks Ended Ended Sept. 30, Oct. 1, Sept. 30, Oct. 1, 2005 2004 2005 2004 Revenue from services $360,445 $296,134 $898,869 $772,102 Cost of services 247,572 204,766 617,185 540,248 Gross profit 112,873 91,368 281,684 231,854 Selling, general and administrative expenses 76,491 62,635 202,158 179,391 Depreciation and amortization 2,469 2,200 6,864 6,539 Income from operations 33,913 26,533 72,662 45,924 Interest and other income (expense), net 1,421 (772) 2,607 (2,037) Income before tax expense 35,334 25,761 75,269 43,887 Income tax 13,542 10,189 28,677 17,457 Net income $21,792 $15,572 $46,592 $26,430 Net income per common share: Basic $0.41 $0.37 $1.00 $0.64 Diluted $0.40 $0.31 $0.89 $0.55 Weighted average shares outstanding: Basic 53,243 41,900 46,785 41,538 Diluted 54,275 52,583 53,546 52,190 LABOR READY, INC. SUMMARY CONSOLIDATED BALANCE SHEETS As of Sept. 30, Dec. 31, 2005 2004 Assets (Unaudited) Current assets Cash and cash equivalents $111,893 $128,817 Marketable securities 17,670 11,947 Accounts receivable, net 144,564 94,313 Other current assets 30,503 25,981 Total current assets 304,630 261,058 Property and equipment, net 25,914 25,174 Other assets 219,896 157,875 Total assets $550,440 $444,107 Liabilities and shareholders' equity Current liabilities $100,263 $76,508 Long-term liabilities 120,514 165,205 Total liabilities 220,777 241,713 Shareholders' equity 329,663 202,394 Total liabilities and shareholders' equity $550,440 $444,107 LABOR READY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS In Thousands (Unaudited) Thirty-nine Weeks Ended Sept. 30, Oct. 1, 2005 2004 Cash Flows from Operating activities: Net income $46,592 $26,430 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,273 7,120 Provision for doubtful accounts 5,921 6,214 Deferred income taxes (9,626) (3,959) Other operating activities 4,886 1,922 Changes in operating assets and liabilities, exclusive of business acquired: Accounts receivable (43,130) (42,182) Workers' compensation claims reserve 17,994 23,702 Income taxes 21,991 6,143 Other assets (6,810) (4,249) Other current liabilities 7,126 7,279 ----------- --------- Net cash provided by operating activities 52,217 28,420 ----------- --------- Cash Flows from Investing activities: Capital expenditures (4,208) (3,616) Purchases of marketable securities (32,931) (13,483) Maturities of marketable securities 27,219 22,738 Purchase of Spartan Staffing, Inc. - (9,890) Purchase of CLP, net of cash acquired (45,955) - Increase in restricted cash and other assets (18,338) (14,465) Other (135) (186) ----------- --------- Net cash used in investing activities (74,348) (18,902) ----------- --------- Cash Flows from Financing activities: Proceeds from sale of stock through options and employee benefit plans 7,262 5,305 Payments on debt (1,553) (2,012) Checks issued against future deposits - (870) ----------- --------- Net cash provided by financing activities 5,709 2,423 ----------- --------- Effect of exchange rates on cash (502) 411 ----------- --------- Net change in cash and cash equivalents (16,924) 12,352 Cash and cash equivalents, beginning of period 128,817 83,112 ----------- --------- Cash and cash equivalents, end of period $111,893 $95,464 =========== ========= *T