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LABOR READY®

Dependable Temporary Labor.

 

2003 ANALYST PRESENTATION
September 17, 2003
New York

 

We Put People to Work.

 



 

SAFE HARBOR STATEMENT

 

Cautionary Note about Forward-Looking Statements

 

Certain statements made by us in this presentation that are not historical facts or that relate to future plans, events or performances are forward-looking statements within the meaning of the federal securities laws. Our actual results may differ materially from those expressed in any forward-looking statements made by us.  Forward-looking statements involve a number of risks of uncertainties including, but not limited to, the risks described in the Company’s most recent 10-K and 10-Q filings.  All forward-looking statements are qualified by those risk factors.

 

[LOGO]

 



 

INTRODUCTION TO DIRECTORS

 

                  Robert Sullivan

Chairman

 

                  Mark Beatty

 

                  Tom McChesney

 

                  Gates McKibbin

 

                  Joe Sambataro

 

                  Carl Schafer

 

                  Bill Steele

 



 

MANAGEMENT TEAM

 

                  Tim Adams

General Counsel

 

                  Bob Breen

Director, Strategic Planning & Analysis

 

                  Rick Christmas

CIO

 

                  Steve Cooper

CFO

 

                  John Hopkins

Regional VP, Operations/West

 

                  Gary North

Regional VP, Operations/East & U.K.

 

                  Tom Stonich

VP Human Resources

 



 

2003 ANALYST PRESENTATION AGENDA

 

                  Overview

 

                  Industry Trends

 

                  Labor Ready Value Proposition

 

                  Company Goals & Strategies

 

                  Key Financial Metrics & Results

 



 

[LOGO]

Dependable Temporary Labor.

 

[GRAPHIC]

 

Labor Ready has 790 offices in the U.S.,
Canada and U.K.

 



 

TRENDS IN TEMPORARY STAFFING

 

U.S. Help Supply

 

[CHART]

 

Cycle Expansions and Contractions: (1) Economic expansion began in November 1982; (2) Economic contraction began in July 1990 and expansion began in March 1991; (3) Economic contraction began in March 2001.

 

Source:  Bureau of Labor Statistics non-seasonally adjusted employment growth for temporary help services (NAICS code 60561320) and total non-farm employment.

 



 

[GRAPHIC]

 

Recent reports on the U.S. economy have been optimistic…

 



 

2000—2003 OPERATING INCOME GROWTH

 

Annual Revenue and Operating Income

 

[CHART]

 



 

LABOR READY’S VALUE PROPOSITION

 

[GRAPHIC]

 

Workers:

 

                  Opportunity

 

                  Flexibility

 

                  Work Today – Paid Today

 

                  Bridge to Permanent Employment

 

                  Safety Training

 

We Put People To Work.

 

[LOGO]

 



 

[GRAPHIC]

 

Customer:

 

                  Flexibility

 

                  Eliminates workers’ compensation and payroll tax exposure

 

                  Reduces fixed costs

 

                  Quick fill of employment needs

 

                  Dependable, temporary labor

 



 

COMPANY GOALS & STRATEGIES

 

                  Improve branch profitability

 

                  Expand in smaller markets in U.S.

 

                  Expand in U.K.

 



 

BRANCH PROFITABILITY

 

                  Increase same-store sales

 

           Current branches at 50% of capacity

 

                  Branch Manager Compensation Program

 

                  Improve customer service

 

                  Deliver 30 % gross margins

 

                  Control costs

 



 

SMALLER MARKETS EXPANSION

 

                  Opened 25 new branches in U.S. and Canada in 2003

 

           Close to 300 markets available

 

                  Smaller market branch model

 

           Smaller footprint

 

           Different market criteria

 

           Zero impact on existing branches

 



 

U.K. EXPANSION

 

                  Opened 15 locations in 2003

 

                  Estimated 100 locations available

 

                  Currently operating 46 locations

 

                  Expanded geographic reach

 



 

FINANCIAL METRICS & RESULTS

 

                  Sales Trends

 

                  Smaller Market Branch Update

 

                  U.K. Update

 

                  Leverage in Current Operations

 

                  Current Year Estimates

 



 

SALES GROWTH TRENDS

 

Year over Year Sales Growth

 

[CHART]

 

Dec. 2002 and Jan. 2003 growth rates shown before year end cut off adjustments.

 



 

SALES GROWTH COMPONENTS

 

Same Store Growth

 

[CHART]

 

New Store Growth

 

[CHART]

 



 

REGIONAL RESULTS

 

[GRAPHIC]

 



 

SMALLER MARKET BRANCH OFFICES

 

                  Smaller markets

 

                  Lower cost model

 

                  25 offices so far

 

                  Close to 300 office potential for U.S. & Canada

 

                  These offices posted losses of $340,000 through August; we expect them to breakeven in 2003

 

2003 Cumulative Sales

 

[CHART]

 

[LOGO]

 



 

SMALLER MARKET OFFICE LOCATIONS

 

[GRAPHIC]

 

Current Locations

 



 

U. K. FINANCIAL SUMMARY

 

 

 

August 2003 YTD

 

 

 

 

 

 

 

One Year
and Older
Offices

 

15 New
Offices

 

YTD All
Offices

 

FY
2003E

 

FY 2002

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

14,400

 

$

800

 

$

15,200

 

$

30,600

 

$

23,200

 

 

 

 

 

 

 

 

 

 

 

 

 

Branch Profit
(Loss)

 

$

1,000

 

$

(1,100

)

$

(100

)

$

 

$

(600

)

 

in thousands



 

Current Locations

 

[GRAPHIC]

 



 

Current Locations

 

Planned Locations

 

[GRAPHIC]

 



 

Q-3 AVG. WEEKLY SALES VOLUMES

 

[CHART]

 

[LOGO]

 



 

KEY OPERATING METRICS

 

                  Gross margin trends

 

                  SG&A reduction

 

                  Branch Maturation

 



 

GROSS MARGIN TRENDS

 

[CHART]

 



 

SELLING, GENERAL & ADMIN. COSTS

 

Trailing four quarters as a percentage of sales

 

[CHART]

 



 

BRANCH MATURITY DRIVES REVENUE

 

Current Branch Revenue and Maturity

 

[CHART]

 

Average branch age = 5.1 years

 



 

Branch Revenue and Maturity Potential

 

[CHART]

 

Average branch age in 2005 = 6.9 years

 



 

BRANCH PROFIT POTENTIAL

 

 

 

Sensitivity analysis based on

 

 

 

 

 

 

 

Revenue

 

$

1,100,000

 

$

1,300,000

 

 

 

 

 

 

 

 

 

Gross Profit

 

330,000

 

390,000

 

Gross Profit Margin

 

30

%

30

%

 

 

 

 

 

 

Branch Expenses

 

200,000

 

210,000

 

As a% of Revenue

 

18

%

16

%

 

 

 

 

 

 

Operating Income

 

$

130,000

 

$

180,000

 

Operating Income Margin

 

12

%

14

%

 

[LOGO]

 



 

OPERATING LEVERAGE DRIVES PROFITS

 

Earnings Per Share Sensitivity Analysis (a)

 

[CHART]

 

Average Revenue per Branch ($ Millions)

 


(a)          Earnings per share sensitivity analysis based on 790 offices, 30% gross profit margin, management’s estimates of fixed and variable expenses, regional and back office overhead and related assumptions, at varying levels of per office revenues.

 



 

 

2003 EARNINGS ESTIMATES

 

 

 

2001

 

2002

 

2003
Forecast (a)

 

 

 

 

 

 

 

 

 

Revenue

 

$

917

M

$

863

M

$865-$875M

 

 

 

 

 

 

 

 

 

EPS

 

$

0.23

 

$

0.28

 

$0.36-$0.39

 

 

 

 

 

 

 

 

 

Operating Income

 

$

14

M

$

21

M

$

28

M

 


a) Based on management guidance issued on September 15, 2003

 

[LOGO]

 



 

INVESTMENT HIGHLIGHTS

 

                  Market leader in fragmented industry

 

                  Large and growing markets

 

                  Diverse customer base

 

                  Nearly 600,000 workers

 

                  Scalable and flexible model

 

                  Strong earnings potential

 

[GRAPHIC]

 

Labor Ready is poised to realize significant operating leverage
as it benefits from an economic recovery and the maturation of
its branch expansion program executed in the 1990s.