Labor Ready Reports Fourth Quarter 2006 Results

  
    
  
  
    
      Labor Ready, Inc. (NYSE: LRW) today reported revenue for the fourth 
      quarter ended Dec. 29, 2006 of $338.1 million, an increase of .3 percent 
      from $337.2 million for the fourth quarter of 2005. Net income for the 
      fourth quarter of $21.6 million, or $0.42 per diluted share, increased 
      from $15.4 million, or $0.28 per diluted share, during the same quarter 
      a year ago.
    
    
      Included in net income for the fourth quarter is $.02 per diluted share 
      resulting from retroactive approval of the Work Opportunity tax credit 
      and $.06 from the resolution of other tax matters which were accrued in 
      earlier periods. Excluding the tax related items of $.08 per diluted 
      share, net income would have been $17.4 million, an increase of 13 
      percent over the same quarter a year ago.
    
    
      “Several of our operating markets have 
      experienced revenue declines from a slowing economic environment,” 
      said Labor Ready CEO Steve Cooper. “While we 
      are focused on selling into multiple industries, the downward trends in 
      new home construction experienced during the third and fourth quarters 
      of 2006 have expanded to other industries and continued into the first 
      quarter of 2007.”
    
    
      Cooper continued, “Although we expect a 
      decline in revenue during the first half of 2007, we are as confident as 
      ever that the fundamental demand for our services is sound, and we are 
      just working through cyclical adjustments in the labor markets, 
      particularly construction.”
    
    
      Revenue for the quarter from branches open 12 months or longer declined 
      2.2 percent over the comparable period a year ago, while branches opened 
      in the past 12 months contributed growth of 2.7 percent.
    
    
      Gross profit as a percentage of revenue remained strong at 32.6 percent, 
      equal to the same quarter a year ago. The strong gross margin is a 
      result of controlled workers' compensation costs along with 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 approximately 40 percent since the 
      beginning of 2003.
    
    
      During the quarter the company repurchased 1.6 million of its 
      outstanding shares for $29 million. In 2006, the company repurchased a 
      total of 4.2 million of its outstanding shares for $89 million.
    
    
      Labor Ready opened two new branches and closed 16 branches during the 
      quarter resulting in 912 branches in operation at the end of 2006. The 
      closures were concentrated in the United States and consolidated 
      underperforming branches. The company opened 50 new branch locations in 
      2006, including 24 Labor Ready branches, 16 CLP Resources branches, and 
      10 Spartan Staffing branches. For 2007, the company is reducing the 
      number of new branch locations to 20 from its previous estimate of 40.
    
    
      For the first quarter of 2007, Labor Ready estimates revenue in the 
      range of $280 million to $285 million, with net income per diluted share 
      for the quarter in the range of $.14 to $.16. Revenue for the year 2007 
      is estimated to be in the range of $1.34 billion to $1.36 billion and 
      net income per diluted share in the range of $1.25 to $1.30.
    
    
      Management will discuss fourth quarter 2006 results on a conference call 
      at 2 pm (PT), Wednesday Jan. 31, 2007. The conference call can be 
      accessed on Labor Ready’s web site: 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) Labor Ready’s ability to 
      timely 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, Labour 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 more than 300,000 customers and 
      puts approximately 600,000 people to work through its more than 900 
      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 data
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          Thirteen Weeks Ended
        
        
        
        
          Fiscal Years Ended
        
      
      
        
        
        
          
            Dec. 29,
          
        
        
        
        
          
            Dec. 30,
          
        
        
        
        
          
            Dec. 29,
          
        
        
        
        
          
            Dec. 30,
          
        
      
      
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
          (unaudited)
        
        
        
        
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenue from services
        
        
          $
        
        
          338,148 
        
        
        
        
          $
        
        
          337,201 
        
        
        
        
          $
        
        
          1,349,118 
        
        
        
        
          $
        
        
          1,236,070 
        
      
      
        
          Cost of services
        
        
        
        
          228,035 
        
        
        
        
        
        
          227,263 
        
        
        
        
        
        
          915,773 
        
        
        
        
        
        
          844,448 
        
      
      
        
          Gross profit
        
        
        
        
          110,113 
        
        
        
        
        
        
          109,938 
        
        
        
        
        
        
          433,345 
        
        
        
        
        
        
          391,622 
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          83,158 
        
        
        
        
        
        
          84,302 
        
        
        
        
        
        
          318,681 
        
        
        
        
        
        
          286,460 
        
      
      
        
          Depreciation and amortization
        
        
        
        
          2,455 
        
        
        
        
        
        
          2,739 
        
        
        
        
        
        
          10,364 
        
        
        
        
        
        
          9,603 
        
      
      
        
          Income from operations
        
        
        
        
          24,500 
        
        
        
        
        
        
          22,897 
        
        
        
        
        
        
          104,300 
        
        
        
        
        
        
          95,559 
        
      
      
        
          Interest and other income, net
        
        
        
        
          3,108 
        
        
        
        
        
        
          2,029 
        
        
        
        
        
        
          11,873 
        
        
        
        
        
        
          4,636 
        
      
      
        
          Income before tax expense
        
        
        
        
          27,608 
        
        
        
        
        
        
          24,926 
        
        
        
        
        
        
          116,173 
        
        
        
        
        
        
          100,195 
        
      
      
        
          Income tax
        
        
        
        
          6,046 
        
        
        
        
        
        
          9,497 
        
        
        
        
        
        
          39,701 
        
        
        
        
        
        
          38,174 
        
      
      
        
          Net income
        
        
          $
        
        
          21,562 
        
        
        
        
          $
        
        
          15,429 
        
        
        
        
          $
        
        
          76,472 
        
        
        
        
          $
        
        
          62,021 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income per common share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
          $
        
        
          0.42 
        
        
        
        
          $
        
        
          0.29 
        
        
        
        
          $
        
        
          1.46 
        
        
        
        
          $
        
        
          1.28 
        
      
      
        
          Diluted
        
        
          $
        
        
          0.42 
        
        
        
        
          $
        
        
          0.28 
        
        
        
        
          $
        
        
          1.45 
        
        
        
        
          $
        
        
          1.18 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares outstanding:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          51,026 
        
        
        
        
        
        
          53,327 
        
        
        
        
        
        
          52,418 
        
        
        
        
        
        
          48,421 
        
      
      
        
          Diluted
        
        
        
        
          51,327 
        
        
        
        
        
        
          54,148 
        
        
        
        
        
        
          52,853 
        
        
        
        
        
        
          53,793 
        
      
    
    
      
        
          LABOR READY, INC.
        
      
      
        
          SUMMARY CONSOLIDATED BALANCE SHEETS
        
      
      
        
          In Thousands
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          
            Dec. 29,
          
        
        
        
        
          
            Dec. 30,
          
        
      
      
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
          Assets
        
        
        
        
        
        
        
        
        
      
      
        
          Current assets
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          107,944 
        
        
        
        
          $
        
        
          82,155 
        
      
      
        
          Marketable securities
        
        
        
        
        
        
          91,510 
        
        
        
        
        
        
          93,510 
        
      
      
        
          Accounts receivable, net
        
        
        
        
        
        
          120,173 
        
        
        
        
        
        
          121,959 
        
      
      
        
          Other current assets
        
        
        
        
        
        
          20,131 
        
        
        
        
        
        
          21,039 
        
      
      
        
          Total current assets
        
        
        
        
        
        
          339,758 
        
        
        
        
        
        
          318,663 
        
      
      
        
          Property and equipment, net
        
        
        
        
        
        
          31,949 
        
        
        
        
        
        
          26,615 
        
      
      
        
          Other assets
        
        
        
        
        
        
          220,599 
        
        
        
        
        
        
          226,798 
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          592,306 
        
        
        
        
          $
        
        
          572,076 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Liabilities and shareholders' equity
        
        
        
        
        
        
        
        
        
      
      
        
          Current liabilities
        
        
        
        
          $
        
        
          101,385 
        
        
        
        
          $
        
        
          100,014 
        
      
      
        
          Long-term liabilities
        
        
        
        
        
        
          138,403 
        
        
        
        
        
        
          123,464 
        
      
      
        
          Total liabilities
        
        
        
        
        
        
          239,788 
        
        
        
        
        
        
          223,478 
        
      
      
        
          Shareholders' equity
        
        
        
        
        
        
          352,518 
        
        
        
        
        
        
          348,598 
        
      
      
        
          Total liabilities and shareholders' equity
        
        
          $
        
        
          592,306 
        
        
        
        
          $
        
        
          572,076 
        
      
    
    
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LABOR READY, INC.
        
      
      
        
          CONSOLIDATED STATEMENTS OF CASH FLOWS
        
      
      
        
          In Thousands
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Fiscal Years Ended
        
      
      
        
        
        
        
        
        
        
        
        
          
            Dec. 29,
          
        
        
        
        
          
            Dec. 30,
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
          Cash Flows from Operating activities:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Net income
        
        
        
        
        
        
        
        
          $
        
        
          76,472 
        
        
        
        
          $
        
        
          62,021 
        
      
      
        
          Adjustments to reconcile net income to
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          net cash provided by operating activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Depreciation and amortization
        
        
        
        
        
        
        
        
        
        
          10,364 
        
        
        
        
        
        
          10,087 
        
      
      
        
          Provision for doubtful accounts
        
        
        
        
        
        
        
        
        
        
          7,215 
        
        
        
        
        
        
          9,569 
        
      
      
        
          Deferred income taxes
        
        
        
        
        
        
        
        
        
        
          (3,169)
        
        
        
        
        
        
          (658)
        
      
      
        
          Stock-based compensation
        
        
        
        
        
        
        
        
        
        
          6,377 
        
        
        
        
        
        
          1,517 
        
      
      
        
          Excess tax benefits from stock-based compensation
        
        
        
        
        
        
        
        
          (3,527)
        
        
        
        
        
        
          - 
        
      
      
        
          Tax benefit on stock options
        
        
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          6,031 
        
      
      
        
          Other operating activities
        
        
        
        
        
        
        
        
        
        
          56 
        
        
        
        
        
        
          270 
        
      
      
        
          Changes in operating assets and liabilities, exclusive of business 
          acquired:
        
        
        
        
        
        
        
      
      
        
        
        
        
        
           
        
      
      
        
          Accounts receivable
        
        
        
        
        
        
        
        
        
        
          (5,429)
        
        
        
        
        
        
          (24,173)
        
      
      
        
          Income taxes
        
        
        
        
        
        
        
        
        
        
          4,797 
        
        
        
        
        
        
          12,314 
        
      
      
        
          Other assets
        
        
        
        
        
        
        
        
        
        
          (2,677)
        
        
        
        
        
        
          (4,808)
        
      
      
        
          Accounts payable
        
        
        
        
        
        
        
        
        
        
          (3,068)
        
        
        
        
        
        
          9,838 
        
      
      
        
          Accrued wages and benefits
        
        
        
        
        
        
        
        
        
        
          (798)
        
        
        
        
        
        
          5,406 
        
      
      
        
          Workers' compensation claims reserve
        
        
        
        
        
        
        
        
        
        
          21,576 
        
        
        
        
        
        
          18,253 
        
      
      
        
          Other current liabilities
        
        
        
        
        
        
        
        
           
        
        
          (38)
        
        
        
        
           
        
        
          (225)
        
      
      
        
          Net cash provided by operating activities
        
        
        
        
        
        
           
        
        
          108,151 
        
        
        
        
           
        
        
          105,442 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash Flows from Investing activities:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Capital expenditures
        
        
        
        
        
        
        
        
        
        
          (13,007)
        
        
        
        
        
        
          (5,260)
        
      
      
        
          Maturities of marketable securities
        
        
        
        
        
        
        
        
        
        
          90,301 
        
        
        
        
        
        
          84,014 
        
      
      
        
          Purchases of marketable securities
        
        
        
        
        
        
        
        
        
        
          (88,266)
        
        
        
        
        
        
          (124,317)
        
      
      
        
          Increase (decrease) in restricted cash and other assets
        
        
        
        
          8,948 
        
        
        
        
        
        
          (24,072)
        
      
      
        
          Purchase of CLP Holdings Corp., net of cash acquired
        
        
        
        
          - 
        
        
        
        
        
        
          (45,963)
        
      
      
        
          Other
        
        
        
        
        
        
        
        
           
        
        
          214 
        
        
        
        
           
        
        
          (301)
        
      
      
        
          Net cash used in investing activities
        
        
        
        
        
        
        
        
           
        
        
          (1,810)
        
        
        
        
           
        
        
          (115,899)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash Flows from Financing activities:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Purchase and retirement of common stock
        
        
        
        
        
        
        
        
          (88,744)
        
        
        
        
        
        
          - 
        
      
      
        
          Net proceeds from sale of stock through options
        
        
        
        
        
        
        
        
        
      
      
        
          and employee benefit plans
        
        
        
        
        
        
        
        
        
        
          5,293 
        
        
        
        
        
        
          8,649 
        
      
      
        
          Excess tax benefits from stock-based compensation
        
        
        
        
          3,527 
        
        
        
        
        
        
          - 
        
      
      
        
          Payments on debt
        
        
        
        
        
        
        
        
           
        
        
          (1,212)
        
        
        
        
           
        
        
          (2,327)
        
      
      
        
          Net cash provided by (used in) financing activities
        
        
           
        
        
          (81,136)
        
        
        
        
           
        
        
          6,322 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Effect of exchange rates on cash
        
        
        
        
        
        
        
        
           
        
        
          584 
        
        
        
        
           
        
        
          (1,265)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net change in cash and cash equivalents
        
        
        
        
        
        
        
        
          25,789 
        
        
        
        
        
        
          (5,400)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash and cash equivalents, beginning of year
        
        
        
        
        
        
           
        
        
          82,155 
        
        
        
        
           
        
        
          87,555 
        
      
      
        
          Cash and cash equivalents, end of year
        
        
        
        
        
        
          $
        
        
          107,944 
        
        
        
        
          $
        
        
          82,155