LRW Labor Ready

Labor Ready, Inc. (NYSE:LRW) reported revenue for the third quarter ended Sept. 29, 2006 increased 4 percent to $374.1 million compared to revenue of $360.4 million for the third quarter of 2005. Net income for the quarter increased 14 percent to $24.8 million or $0.48 per diluted share, as compared to $21.8 million or $0.40 per diluted share for the third quarter of 2005. Revenue for the quarter from branch offices open 12 months or longer grew 2 percent. �While we have felt the effect of a slowing residential housing market over the past two quarters, its impact has stabilized, and we have continued to produce solid growth in the other industries we serve,� said Labor Ready CEO Steve Cooper. Gross profit as a percentage of revenue improved 100 basis points compared to the same quarter a year ago as a result of lower workers� compensation costs and continued strong pricing controls. �Our safety programs continue to produce industry-leading reductions in claim frequency,� said Cooper. According to Cooper, claim frequency has decreased approximately 15 percent year-to-date in comparison with the same period last year and is down over 40 percent since the beginning of 2003. The company opened a total of eight new branch offices and closed five during the quarter. It plans to open two additional branch offices in the fourth quarter. The company currently operates 926 branch offices. �We are pleased with the strategic fit and financial results of our two acquired companies, CLP Resources and Spartan Staffing. We will continue to explore acquisitions, focusing on service leaders within blue-collar staffing,� added Cooper. During the quarter the company repurchased half a million of its outstanding shares for $8 million, leaving $42 million available for future purchases under the current repurchase program approved by its Board of Directors. For the fourth quarter of 2006, Labor Ready estimates revenue in the range of $342 million to $345 million and net income per diluted share between $.29 and $.31. Management will discuss third quarter 2006 results on a conference call at 8 a.m. (PT) Thursday, Oct. 19, 2006. 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) the adequacy of Labor Ready�s financial reserves; 7) Labor Ready�s continuing ability to comply with financial covenants in its lines of credit and other financing agreements; 8) Labor Ready�s ability to attract and retain competent employees in key positions or to find temporary employees or skilled trade workers to fulfill the needs of our customers; 9) Labor Ready�s ability to successfully complete and integrate acquisitions that it may make from time to time; 10) execute strategies for acquired companies; 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 trades, 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 construction, warehousing, hospitality, landscaping, transportation, 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 925 branch offices in the United States, Canada, and the United Kingdom. For additional information, visit Labor Ready�s website at www.laborready.com. LABOR READY, INC. SUMMARY CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) � Thirteen Weeks Ended Thirty-nine Weeks Ended Sept. 29, Sept. 30, Sept. 29, Sept. 30, 2006� 2005� 2006� 2005� � Revenue from services $ 374,126� $ 360,445� $1,010,970� $ 898,869� Cost of services 253,262� 247,572� 687,738� 617,185� Gross profit 120,864� 112,873� 323,232� 281,684� Selling, general and administrative expenses 81,790� 76,491� 235,523� 202,158� Depreciation and amortization 2,441� 2,469� 7,909� 6,864� Income from operations 36,633� 33,913� 79,800� 72,662� Interest and other income, net 3,018� 1,421� 8,765� 2,607� Income before tax expense 39,651� 35,334� 88,565� 75,269� Income tax 14,823� 13,542� 33,655� 28,677� Net income $ 24,828� $ 21,792� $ 54,910� $ 46,592� � Net income per common share: Basic $ 0.48� $ 0.41� $ 1.04� $ 1.00� Diluted $ 0.48� $ 0.40� $ 1.03� $ 0.89� � Weighted average shares outstanding: Basic 51,690� 53,243� 52,882� 46,785� Diluted 52,009� 54,275� 53,361� 53,546� LABOR READY, INC. SUMMARY CONSOLIDATED BALANCE SHEETS � As of Sept. 30, Dec. 30, 2006� 2005� (Unaudited) Assets Current assets Cash and cash equivalents $ 65,031� $ 82,155� Marketable securities 95,190� 93,510� Accounts receivable, net 143,880� 121,959� Other current assets 31,669� 21,039� Total current assets 335,770� 318,663� Property and equipment, net 30,527� 26,615� Other assets 226,911� 226,798� Total assets $ 593,208� $ 572,076� � Liabilities and shareholders' equity Current liabilities $ 99,052� $ 100,014� Long-term liabilities 137,192� 123,464� Total liabilities 236,244� 223,478� Shareholders' equity 356,964� 348,598� Total liabilities and shareholders' equity $ 593,208� $ 572,076� LABOR READY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS In Thousands (Unaudited) � Thirty-nine Weeks Ended Sept. 29, Sept. 30, 2006� 2005� Cash Flows from Operating activities: Net income $ 54,910� $ 46,592� Adjustments to reconcile net income to net cash provided by operating activities: � Depreciation and amortization 7,909� 6,864� Provision for doubtful accounts 5,445� 5,921� Deferred income taxes (8,993) (9,626) Stock-based compensation 5,129� 1,027� Excess tax benefits from stock-based compensation (3,741) -� Tax benefit on stock options -� 3,742� Other operating activities 423� 117� Changes in operating assets and liabilities, exclusive of business acquired: � Accounts receivable (27,366) (43,130) Income tax 5,798� 21,991� Other assets (6,559) (6,401) Accounts payable (3,708) 4,204� Accrued wages and benefits 529� 3,072� Workers' compensation claims reserve 17,568� 17,994� Other current liabilities (38) (150) Net cash provided by operating activities 47,306� 52,217� � Cash Flows from Investing activities: Capital expenditures (10,141) (4,208) Maturities of marketable securities 57,771� 71,715� Purchases of marketable securities (59,410) (58,200) Increase in restricted cash and other assets 284� (18,338) Purchase of CLP Holdings Corp., net of cash acquired -� (45,955) Other (167) (135) Net cash used in investing activities (11,663) (55,121) � Cash Flows from Financing activities: Purchase and retirement of common stock (59,865) -� Net proceeds from sale of stock through options and employee benefit plans 3,385� 7,262� Excess tax benefits from stock-based compensation 3,741� -� Payments on debt (1,013) (1,553) Net cash (used in) provided by financing activities (53,752) 5,709� � Effect of exchange rates on cash 985� (502) � Net change in cash and cash equivalents (17,124) 2,303� � Cash and cash equivalents, beginning of period 82,155� 87,555� Cash and cash equivalents, end of period $ 65,031� $ 89,858� Labor Ready, Inc. (NYSE:LRW) reported revenue for the third quarter ended Sept. 29, 2006 increased 4 percent to $374.1 million compared to revenue of $360.4 million for the third quarter of 2005. Net income for the quarter increased 14 percent to $24.8 million or $0.48 per diluted share, as compared to $21.8 million or $0.40 per diluted share for the third quarter of 2005. Revenue for the quarter from branch offices open 12 months or longer grew 2 percent. "While we have felt the effect of a slowing residential housing market over the past two quarters, its impact has stabilized, and we have continued to produce solid growth in the other industries we serve," said Labor Ready CEO Steve Cooper. Gross profit as a percentage of revenue improved 100 basis points compared to the same quarter a year ago as a result of lower workers' compensation costs and continued strong pricing controls. "Our safety programs continue to produce industry-leading reductions in claim frequency," said Cooper. According to Cooper, claim frequency has decreased approximately 15 percent year-to-date in comparison with the same period last year and is down over 40 percent since the beginning of 2003. The company opened a total of eight new branch offices and closed five during the quarter. It plans to open two additional branch offices in the fourth quarter. The company currently operates 926 branch offices. "We are pleased with the strategic fit and financial results of our two acquired companies, CLP Resources and Spartan Staffing. We will continue to explore acquisitions, focusing on service leaders within blue-collar staffing," added Cooper. During the quarter the company repurchased half a million of its outstanding shares for $8 million, leaving $42 million available for future purchases under the current repurchase program approved by its Board of Directors. For the fourth quarter of 2006, Labor Ready estimates revenue in the range of $342 million to $345 million and net income per diluted share between $.29 and $.31. Management will discuss third quarter 2006 results on a conference call at 8 a.m. (PT) Thursday, Oct. 19, 2006. 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) the adequacy of Labor Ready's financial reserves; 7) Labor Ready's continuing ability to comply with financial covenants in its lines of credit and other financing agreements; 8) Labor Ready's ability to attract and retain competent employees in key positions or to find temporary employees or skilled trade workers to fulfill the needs of our customers; 9) Labor Ready's ability to successfully complete and integrate acquisitions that it may make from time to time; 10) execute strategies for acquired companies; 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 trades, 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 construction, warehousing, hospitality, landscaping, transportation, 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 925 branch offices 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 Ended Thirty-nine Weeks Ended Sept. 29, Sept. 30, Sept. 29, Sept. 30, 2006 2005 2006 2005 Revenue from services $374,126 $360,445 $1,010,970 $898,869 Cost of services 253,262 247,572 687,738 617,185 Gross profit 120,864 112,873 323,232 281,684 Selling, general and administrative expenses 81,790 76,491 235,523 202,158 Depreciation and amortization 2,441 2,469 7,909 6,864 Income from operations 36,633 33,913 79,800 72,662 Interest and other income, net 3,018 1,421 8,765 2,607 Income before tax expense 39,651 35,334 88,565 75,269 Income tax 14,823 13,542 33,655 28,677 Net income $24,828 $21,792 $54,910 $46,592 Net income per common share: Basic $0.48 $0.41 $1.04 $1.00 Diluted $0.48 $0.40 $1.03 $0.89 Weighted average shares outstanding: Basic 51,690 53,243 52,882 46,785 Diluted 52,009 54,275 53,361 53,546 *T -0- *T LABOR READY, INC. SUMMARY CONSOLIDATED BALANCE SHEETS As of Sept. 30, Dec. 30, 2006 2005 (Unaudited) Assets Current assets Cash and cash equivalents $65,031 $82,155 Marketable securities 95,190 93,510 Accounts receivable, net 143,880 121,959 Other current assets 31,669 21,039 Total current assets 335,770 318,663 Property and equipment, net 30,527 26,615 Other assets 226,911 226,798 Total assets $593,208 $572,076 Liabilities and shareholders' equity Current liabilities $99,052 $100,014 Long-term liabilities 137,192 123,464 Total liabilities 236,244 223,478 Shareholders' equity 356,964 348,598 Total liabilities and shareholders' equity $593,208 $572,076 *T -0- *T LABOR READY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS In Thousands (Unaudited) Thirty-nine Weeks Ended Sept. 29, Sept. 30, 2006 2005 Cash Flows from Operating activities: Net income $54,910 $46,592 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,909 6,864 Provision for doubtful accounts 5,445 5,921 Deferred income taxes (8,993) (9,626) Stock-based compensation 5,129 1,027 Excess tax benefits from stock-based compensation (3,741) - Tax benefit on stock options - 3,742 Other operating activities 423 117 Changes in operating assets and liabilities, exclusive of business acquired: Accounts receivable (27,366) (43,130) Income tax 5,798 21,991 Other assets (6,559) (6,401) Accounts payable (3,708) 4,204 Accrued wages and benefits 529 3,072 Workers' compensation claims reserve 17,568 17,994 Other current liabilities (38) (150) ------------------------------------- Net cash provided by operating activities 47,306 52,217 ------------------------------------- Cash Flows from Investing activities: Capital expenditures (10,141) (4,208) Maturities of marketable securities 57,771 71,715 Purchases of marketable securities (59,410) (58,200) Increase in restricted cash and other assets 284 (18,338) Purchase of CLP Holdings Corp., net of cash acquired - (45,955) Other (167) (135) ------------------------------------- Net cash used in investing activities (11,663) (55,121) ------------------------------------- Cash Flows from Financing activities: Purchase and retirement of common stock (59,865) - Net proceeds from sale of stock through options and employee benefit plans 3,385 7,262 Excess tax benefits from stock-based compensation 3,741 - Payments on debt (1,013) (1,553) ------------------------------------- Net cash (used in) provided by financing activities (53,752) 5,709 ------------------------------------- Effect of exchange rates on cash 985 (502) ------------------------------------- Net change in cash and cash equivalents (17,124) 2,303 Cash and cash equivalents, beginning of period 82,155 87,555 ------------------------------------- Cash and cash equivalents, end of period $65,031 $89,858 ===================================== *T