EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE:

 

LABOR READY ANNOUNCES RECORD SECOND QUARTER RESULTS

Net Income Increases 52 Percent on a 10 Percent Rise in Revenues

 

TACOMA, WA, July 20, 2005—Labor Ready, Inc. (NYSE: LRW) reported revenue for the second quarter ended July 1, 2005 increased 10.5 percent to $295.2 million compared to revenue of $267.1 million for the second quarter of 2004.  Net income for the quarter was $15.4 million or $0.30 per share, as compared to $10.1 million or $0.21 per share for the second quarter of 2004.

 

“We are pleased with the strong results we achieved during the quarter,” said Labor Ready President and CEO Joe Sambataro. “We grew net income during the quarter by more than 50 percent over last year through a combination of higher revenues, improved gross margins and lower workers’ compensation expenses.”

 

Labor Ready acquired CLP Resources, a leading skilled construction trades staffing firm operating 50 branches in 20 states, on May 27, 2005.  The newly acquired CLP Resources branches provided 5.0 percent of Labor Ready’s 10.5 percent year-over-year revenue growth during the quarter and made a positive contribution to Labor Ready’s net income performance.

 

During the quarter, revenue from Labor Ready branches open 12 months or longer grew 6.2 percent over the same quarter a year ago.  Labor Ready opened a total of nine new branches and closed one branch during the quarter and plans to open five additional branches during the second half of fiscal year 2005.  Labor Ready currently operates 892 branches including 50 branches acquired in the purchase of CLP Resources.

 

According to Sambataro, the 52 percent net income growth for the quarter was driven primarily by higher revenue and gross margins. Gross profit as a percentage of revenue was 31.4 percent in the quarter as compared to 29.9 percent in the second quarter of 2004.

 

“Our safety and risk management programs have continued to drive down workers’ compensation expense,” said Sambataro. “Adjustments by our actuary to workers’ compensation reserves established at the end of 2004 positively impacted gross margin by 60 basis points during the second quarter of 2005.”

 

On June 20, 2005, Labor Ready converted $70 million of Convertible Notes for approximately 9.6 million additional shares of Labor Ready Common Stock.  This will reduce Labor Ready’s pre-tax interest expense by approximately $2.2 million for the second half of fiscal year 2005. The Notes have been accounted for on an “as if converted” basis and included in the computation of diluted net income per share since their issuance in 2002.

 

Labor Ready also updated its outlook for 2005 and provided guidance for the third quarter. Labor Ready currently estimates revenue for the year in the range of $1.20 billion to $1.22 billion, compared to 2004 revenues of $1.04 billion. Net income per share for the year is expected to be

 

 

between $1.09 and $1.14, compared to $0.75 per share in 2004.  For the third quarter of 2005, Labor Ready estimates revenue in the range of $350 million to $355 million and net income per share between $0.37 and $0.39.

 

Management will discuss second quarter 2005 results on a conference call at 8:00 a.m. (PT) Thursday, July 21, 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) 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; 9) Labor Ready’s ability to successfully complete and integrate acquisitions that it may make from time to time; and 10) 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.

 

For more information, contact:

 

Steve Cooper, CFO

253-680-8213

 

Stacey Burke, Director of Corporate Communications

253-680-8291

 

 

LABOR READY, INC.

SUMMARY CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)

 

		Thirteen Weeks Ended						Twenty-six Weeks Ended
		July 1,			July 2,			July 1,			July 2,
		2005			2004			2005			2004
Revenue from services		$	295,208		$	267,056		$	538,424		$	475,968
Cost of services		202,535			187,297			369,613			335,482
Gross profit		92,673			79,759			168,811			140,486
Selling, general and administrative expenses		66,253			60,310			125,667			116,756
Depreciation and amortization		2,189			2,280			4,395			4,339
Income from operations		24,231			17,169			38,749			19,391
Interest and other income (expense), net		711			(260		)	1,186			(1,265		)
Income before tax expense		24,942			16,909			39,935			18,126
Income tax		9,498			6,781			15,135			7,268
Net income		$	15,444		$	10,128		$	24,800		$	10,858
Net income per common share:
Basic		$	0.35		$	0.24		$	0.57		$	0.26
Diluted		$	0.30		$	0.21		$	0.49		$	0.24
Weighted average shares outstanding:
Basic		44,611			41,503			43,557			41,356
Diluted		53,535			52,187			53,254			52,023

 

 

LABOR READY, INC.

SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		As of
		July 1,			December 31,
		2005			2004
Assets
Current assets
Cash and cash equivalents		$	104,048		$	128,817
Marketable securities		14,922			11,947
Accounts receivable, net		121,802			94,313
Other current assets		30,895			25,981
Total current assets		271,667			261,058
Property and equipment, net		29,051			25,174
Other assets		211,224			157,875
Total assets		$	511,942		$	444,107
Liabilities and shareholders’ equity
Current liabilities		$	91,161		$	76,508
Long-term liabilities		115,159			165,205
Total liabilities		206,320			241,713
Shareholders’ equity		305,622			202,394
Total liabilities and shareholders’ equity		$	511,942		$	444,107

 

 

LABOR READY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In Thousands

(Unaudited)

 

		Twenty-six Weeks Ended
		July 1,			July 2,
		2005			2004
Cash Flows from Operating activities:
Net income		$	24,800		$	10,858
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,749			4,725
Provision for doubtful accounts		3,180			3,508
Deferred income taxes		(5,604		)	(4,259		)
Other operating activities		3,290			1,639
Changes in operating assets and liabilities:
Accounts receivable		(17,627		)	(23,175		)
Workers’ compensation claims reserve		7,154			14,800
Income taxes		5,839			8,735
Other assets		173			(4,012		)
Other current liabilities		6,844			5,392
Net cash provided by operating activities		32,798			18,211
Cash Flows from Investing activities:
Purchases of marketable securities		(29,154		)	(13,660		)
Maturities of marketable securities		26,190			17,303
Capital expenditures		(2,744		)	(2,876		)
Other		36			(20		)
Purchase of Spartan Staffing					(9,890		)
Purchase of CLP, net of cash acquired		(45,892		)
Increase in restricted cash and other assets		(10,705		)	(1,441		)
Net cash used in investing activities		(62,269		)	(10,584		)
Cash Flows from Financing activities:
Proceeds from sale of stock through options and employee benefit plans		6,608			4,722
Payments on debt		(1,141		)	(1,304		)
Checks issued against future deposits		—			(4,197		)
Net cash provided by (used in) financing activities		5,467			(779		)
Effect of exchange rates on cash		(765		)	156
Net change in cash and cash equivalents		(24,769		)	7,004
Cash and cash equivalents, beginning of period		128,817			83,112
Cash and cash equivalents, end of period		$	104,048		$	90,116