EXHIBIT 99.1

 

 

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[GRAPHIC]

 

2ND ANNUAL

LABOR READY ANALYST DAY

2004

 

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 and 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.

 

[GRAPHIC]

 



 

INTRODUCTION TO DIRECTORS

 

                  Robert Sullivan

Chairman

 

                  Tom McChesney

 

                  Gates McKibbin

 

                  Joe Sambataro

 

                  Carl Schafer

 

                  Bill Steele

 



 

MANAGEMENT TEAM

 

                  Joe Sambataro
CEO

 

                  Tim Adams
VP & General Counsel

 

                  Bob Breen
VP, Strategic Planning & Analysis

 

                  Steve Cooper
CFO

 

                  Yolanda Hubbard
VP, National Sales

 

                  John Hopkins
Regional VP, Western U.S. Operations

 

                  Gary North
Regional VP, Eastern U.S. and International Operations

 



 

2004 ANALYST PRESENTATION AGENDA

 

                  Labor Ready’s Business Model

 

                  Industry Trends

 

                  Key Business Strategies

 

                  Financial Review

 



 

Our Mission:
“We Put People to Work.”

 

                  Largest supplier of temporary manual labor in the U.S.

 

                  Nearly 600,000 people employed annually

 

                  821 branches throughout the U.S., Canada and the U.K.

 

[GRAPHIC]

 



 

DIVERSIFIED CUSTOMER BASE

 

                  Nearly 275,000 customers

 

                  Largest customer represents less than 2% of sales

 

                  Average yearly sales per customer of $3,000

 

                  Over 400 industry classifications

 

Sales by Industry

 

 

 

Construction & Landscaping

 

33

%

Manufacturing

 

20

%

Hospitality, Services & Other

 

20

%

Transportation

 

10

%

Wholesale

 

10

%

Retail

 

7

%

 



 

STRONG VALUE PROPOSITION

 

Attracting customers with:

 

                  Access to workers on short notice

 

                  National scale and multiple locations

 

                  Management of labor costs

 

                  Elimination of workers’ comp. and payroll tax administration

 

                  Web ordering & billing

 

                  100% Satisfaction Guarantee

 

Attracting workers with:

 

                  Flexibility

 

                  Work Today – Paid Today

 

                  Exposure to full-time employment opportunities

 

[GRAPHIC]

 



 

FRAGMENTED, GROWTH INDUSTRY

 

                  Staffing: $101 billion industry (a)

 

                  Industrial staffing: $17.6 billion (a)

 

                  Day labor market: $5 billion (b)

 

Day Labor Market Breakdown

 

[CHART]

 


(a)                                  Staffing Industry Analysts, 2004 Projection

(b)                                 Research estimates

 



 

20 YEAR 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 and NBER

 



 

FAVORABLE DEMOGRAPHIC TRENDS

 

                  Temporary Employment expected to be the 5th fastest growing industry over the next decade with nearly 1.8 million new jobs by 2012*

 

                  Unskilled Jobs expected to make up 70% of the top 20 fastest growing occupations*

 

                  Construction expected to be the only U.S. goods-producing industry with employment growth during the next 10 years*

 

TEMPORARY EMPLOYMENT
A GROWTH INDUSTRY

 

[CHART]

 


*  Source:  Bureau of Labor Statistics, 2012 Projections

 



 

KEY BUSINESS STRATEGIES

 

                  Grow current branch revenues and profits

 

                  Expand in smaller markets in the United States and Canada

 

                  Expand in the United Kingdom

 

                  Penetrate existing/new markets with additional brands and diversification of services

 

[GRAPHIC]

 



 

GROW CURRENT BRANCH REVENUES & PROFITS

 

                  Increase same-branch revenues

 

      Current branches at 50% of recruiting capacity

 

      National Accounts

 

                  Improve Branch Manager tenure

 

      Compensation tied to profits

 

      Enhanced training

 

      Mentoring and development

 

                  Pricing and cost controls

 



 

SMALL MARKET EXPANSION

 

                  Opened 21 in 2003 and 20 in 2004; currently operating 211 branches in smaller markets in the U.S. and Canada.

 

      Average population of 60,000

 

      At least 25 miles away from existing branch

 

                  Smaller market branch model with less cost

 

                  Similar sales volumes of medium and large markets

 

                  400 – 500 viable small markets in U.S. and Canada

 



 

2003-04 SMALL MARKET OPENINGS

 

[GRAPHIC]

 



 

UNITED KINGDOM EXPANSION

 

                  Estimated 100 - 125 locations available

 

                  Currently operating 50 branch locations

 

                  Leadership development

 

                  Expanded geographic reach for core business

 



 

UNITED KINGDOM EXPANSION

 

[GRAPHIC]

 



 

DIVERSIFY INTO RELATED SKILLED STAFFING VERTICALS

 

Market Segments

 

[CHART]

 

Rationale:

                  Common customer base

                  Channel synergies

                  Opportunity to create a growth platform

                  Opportunity to leverage corporate skills

 



 

ON DEMAND vs. LIGHT INDUSTRIAL

 

On Demand

 

Light Industrial

Short Assignments

 

Longer-term Assignments

Short Sales Cycle

 

Longer Sales Cycle

All Industries

 

Manufacturing, Warehousing & Transportation Focus

Dispatch Hall Recruiting

 

Newspaper & Telephone Recruiting

$6 - $7 Pay Rates, Daily Pay

 

$7 - $8 Pay Rates, Weekly Pay

$1 - $2 Million Annual Branch Sales Volumes

 

$2 - $3 Million Annual Branch Sales Volumes

30% Gross Margins

 

20%-25% Gross Margins

6-8% EBITDA Margins

 

6-8% EBITDA Margins

Small-Medium Clients

 

Small-Medium Clients

 



 

FINANCIAL REVIEW

 

                  Overview of revenue and profitability

 

                  Analysis of key business strategies

 

                  Investment highlights

 



 

LONG-TERM GROWTH

 

Annual Revenue and Operating Income

 

[CHART]

 


E - - Based on management guidance issued on September 13, 2004

 



 

MONTHLY SALES GROWTH TRENDS

 

Year over Year Sales Growth Rates

 

[CHART]

 



 

SALES GROWTH COMPONENTS

 

Same-store Growth

 

[CHART]

 

New/Acquired Store Growth

 

[CHART]

 



 

REGIONAL RESULTS

 

[GRAPHIC]

 



 

RECENT TRENDS IN TEMPORARY STAFFING

 

[GRAPHIC]

 


* Not seasonally adjusted.

 



 

CONSISTENT GROSS MARGINS

 

Gross Margins As a Percentage of Revenue

 

[CHART]

 


E - - Based on management guidance issued on September 13, 2004

 



 

GROSS MARGIN TRENDS

 

[CHART]

 


E - - Based on management guidance issued on September 13, 2004

 



 

SELLING, GENERAL & ADMIN. COSTS

 

Trailing four quarters as a percentage of revenue

 

[CHART]

 


E - - Based on management guidance issued on September 13, 2004

 



 

WORKERS’ COMPENSATION

 

Collateral Reconciliation:

 

 

 

FY 2002

 

FY 2003

 

Q2 2004

 

Outstanding Collateral

 

$

126.4

 

$

165.7

 

$

171.4

 

Less: Discount on Reserves

 

(17.8

)

(23.6

)

(27.9

)

Less: Insurance Company Cushion

 

(2.9

)

(6.2

)

(2.3

)

Less: Timing of Collateral Release

 

(5.3

)

(23.3

)

(29.3

)

Less: Upfront Posting

 

(14.5

)

(11.1

)

3.5

 

Workers Comp. Reserve

 

$

85.9

 

$

101.5

 

$

115.4

 

 

In millions.

 



 

LONG-TERM DEBT

 

                  $74 Million in long-term debt

 

                  $4 million in capital lease obligations

 

                  $70 million in convertible subordinated notes

 

                  6.25% interest rate

 

                  Matures June 2007

 

                  $7.26 conversion price (9.6 million shares)

 

                  Redeemable on or after June 20, 2005

 

Shares Short

 

[CHART]

 



 

FINANCIAL OUTLOOK

 

 

 

2001

 

2002

 

2003

 

2004
Forecast(E)

 

      Revenue

 

$

917

M

$

863

M

$

891

M

$1,030M – 1,035M

 

Growth

 

(-6

)%

(-6

)%

3

%

16%

 

 

 

 

 

 

 

 

 

 

 

      EPS

 

$

0.23

 

$

0.28

 

$

0.41

 

$0.64 - $0.67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Operating Income

 

$

14

M

$

21

M

$

32

M

$53M - $56M

 

Growth

 

(-15

)%

47

%

54

%

65% - 75%

 

 


(E) - - Based on management guidance issued on September 13, 2004

 



 

FOUR KEY BUSINESS STRATEGIES

 

1.              Grow current branch revenues and profits

 

2.              Expand into smaller markets

 

3.              Expand in the United Kingdom

 

4.              Diversification of services

 



 

BRANCH MATURITY DRIVES REVENUE

 

Branch Revenue and Maturity (2001 – 2003 Avg.)

 

[CHART]

 

Average branch age = 5.6 years

 



 

2005 Estimated Branch Revenue

 

[CHART]

 

Average branch age = 7 years

 



 

SALES PER BRANCH IS CLIMBING

 

Sales per Branch - Trailing 12 Months

 

[CHART]

 



 

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

%

 

 

 

 

 

 

 

 

Income from Operations

 

$

130,000

 

$

180,000

 

Operating Income Margin

 

12

%

14

%

 



 

OPERATING LEVERAGE DRIVES PROFITS

 

Earnings Per Share Sensitivity Analysis (a)

 

[CHART]

 


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

 



 

Q-3 AVG. U.S. WEEKLY SALES VOLUMES

 

[CHART]

 

Numbers within yellow columns represent the number of branches opened in 2004.

 



 

SMALL MARKETS – SALES RAMP UP

 

Small Market Revenue by Age of Office (2001-2003)

 

[CHART]

 



 

Q-3 AVG. WEEKLY SALES VOLUMES

 

[CHART]

 

Numbers within yellow columns represent the number of branches opened in 2004.

 



 

RECORD U.K. PROFITABILITY

 

 

 

July 2004 YTD

 

 

 

 

 

 

 

One Year
and Older
Offices

 

6 New
Offices

 

YTD All
Offices

 

FY
2004E

 

FY 2003

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

20,100

 

$

300

 

$

20,400

 

$

44,200

 

$

27,000

 

Branch Profit (Loss)

 

$

1,200

 

$

(400

)

$

800

 

$

2,700

 

$

-0-

 

 

In thousands of U.S. Dollars.

 



 

SPARTAN STAFFING ACQUISITION

 

                  A large profitable staffing agency in the Southeast (27 Branches)

 

                  Two divisions: Spartan Staffing and Workforce

 

                  $50 million in annual revenue

 

                  $9.8 Million Purchase Price

 

                  Accretive: Projected 2004 EBITDA of $2 Million

 

Spartan Staffing Sales Growth

 

[CHART]

 

[LOGO]

 



 

REVENUES

 

Consolidated Revenues

 

[CHART]

 

Average Sales per Branch

 

[CHART]

 

In thousands of U.S. Dollars

 


E - - Based on management guidance issued on September 13, 2004

 



 

PROFITABILITY

 

Consolidated Net Income %

 

[CHART]

 

Diluted Earnings per Share

 

[CHART]

 


E - - Based on management guidance issued on September 13, 2004

 



 

RETURN ON INVESTMENT

 

Return on Assets

 

[CHART]

 

Return on Invested Capital

 

[CHART]

 


E - - Based on management guidance issued on September 13, 2004

 



 

INVESTMENT HIGHLIGHTS

 

                  Market leader in fragmented industry

 

                  Large and growing market

 

                  Favorable demographic trends

 

                  Diverse customer base

 

                  Scalable and flexible model

 

                  Strong balance sheet

 

[GRAPHIC]

 

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