<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
Commission File number 0-23828
Labor Ready, Inc.
(Exact Name of Registrant as specified in its charter)
Washington 91-1287341
(State of Incorporation) (Federal I.R.S. No.)
2156 Pacific Avenue, Tacoma, Washington 98402
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number 206-383-9101
Securities registered pursuant to Section 12(b) or 12(g) of the Act:
Common Stock, No Par Value
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-Q or any amendment to this Form 10-Q. (X).
The aggregate market value of the voting stock held by nonaffiliates
of the registrant on September 30, 1995 was $51,407,874.
As of September 30, 1995, the Registrant had 3,878,415 shares of Common
Stock and 854,082 shares of Preferred Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I - FINANCIAL INFORMATION
Item 1- Financial Statements
LABOR READY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Consolidated Statements of Financial Position
at September 30, 1995 and December 31, 1994 FS1 - FS2
Consolidated Statement of Operations
for the Nine Months and the Three Months
Ended September 30, 1995 and 1994 FS3
Consolidated Statement of Cash Flows
for the Nine Months Ended September 30, 1995 and 1994 FS4 - FS5
Page 2
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LABOR READY, INC. Consolidated Statement of Financial Position
at September 30, 1995 and December 31, 1994
ASSETS
1995 1994
CURRENT ASSETS:
Cash and equivalents $ 848,524 $ 603,977
Workmen's compensation deposits 1,130,575
Accounts receivable, net of
allowance for doubtful
accounts of $558,059
and $365,927 14,223,147 5,162,830
Workers, compensation
credits receivable 262,600 206,794
Prepaid expenses and other 680,426 348,814
Notes receivable 228,800
Deferred income tax 118,590 118,590
---------- ---------
Total Current Assets 16,362,087 7,571,580
---------- ---------
DEPRECIABLE ASSETS AND LAND:
Cost 3,026,218 1,071,070
Accumulated depreciation 505,695 244,497
--------- ---------
Total Property and equipment 2,520,523 826,573
--------- ---------
WORKER'S COMPENSATION
RENT-A-CAPTIVE ASSETS 1,769,648
---------
OTHER ASSETS:
Intangible assets, less amortization
of $92,723 and $69,020 182,846 191,431
Workers, compensation credits
receivable, less current
portion 382,044 105,832
Deferred income tax 175,145 94,366
Other 140,779 122,194
------- -------
Total Other Assets 880,813 513,823
-------- --------
TOTAL ASSETS $21,533,071 $8,911,976
=========== ==========
Page 3 (FS1)
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LABOR READY, INC. Consolidated Statement of Financial Position
at September 30, 1995 and December 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
CURRENT LIABILITIES:
Accounts payable $ 645,349 $ 268,932
Accrued wages and benefits 1,464,499 390,607
Accrued taxes, other than
income 1,104,766 430,880
Accrued interest 75,234 53,002
Accrued workmens' compensation 625,926 708,869
Income taxes payable 936,027 497,000
Note payable, accounts receivable
financing 7,731,789 3,160,580
Dividends payable 32,028 42,705
Current portion of long-term
debt 339,071 78,291
---------- ---------
Total Current Liabilities 12,954,689 5,630,866
---------- ---------
LONG-TERM LIABILITIES:
Long-term debt, less current
maturities 959,754 244,250
14% Convertible debentures 75,000
--------- ---------
Total Long Term Liabilities 959,754 319,250
--------- ---------
WORKER'S COMPENSATION
RENT-A-CAPTIVE LIABILITIES 1,204,316
---------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value:
5,000,000 shares authorized;
Issued and outstanding 854,082 854,082
Common stock, no par value:
25,000,000 shares authorized;
Issued and outstanding:
3,878,415 and 3,314,729
shares 5,518,964 3,540,187
Cumulative foreign currency
translation adjustment (5,438) (2,853)
Accumulated earnings (deficit) 46,705 (1,429,556)
---------- ----------
Total Stockholders' Equity 6,414,312 2,961,860
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $21,533,071 $8,911,976
=========== ==========
Page 4 (FS2)
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LABOR READY, INC. Consolidated Statement of Operations for
the Nine Months and the Three Months
Ended September 30, 1995 and 1994
Nine Months Ended Three Months Ended
1995 1994 1995 1994
REVENUES $63,240,036 $25,635,755 $30,872,700 $12,099,977
COST OF REVENUES 51,066,172 20,298,766 24,689,547 9,409,288
---------- ---------- ---------- ---------
12,173,864 5,336,989 6,183,153 2,690,689
OPERATING EXPENSES 9,158,043 4,133,823 3,515,036 1,917,591
--------- --------- --------- ---------
INCOME FROM
OPERATIONS 3,015,821 1,203,166 2,668,117 773,098
OTHER (DEDUCTIONS) (659,121) (272,018) (367,950) (133,019)
---------- --------- ---------- ---------
INCOME BEFORE
INCOME TAX 2,356,700 931,148 2,300,167 640,079
INCOME TAX PROVISION 848,412 316,590 829,191 217,989
---------- --------- ---------- ---------
NET INCOME $1,508,288 $ 614,558 $1,470,976 $ 422,090
========== ========= ========== =========
EARNINGS PER COMMON
SHARE:Net Income $ .37 $ .21 $ .36 $ .14
========== ========= ========== =========
Weighted average
shares outstanding 4,014,182 2,715,771 4,054,215 2,944,074
========== ========= ========= =========
Page 5 (FS3)
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LABOR READY, INC. Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994
Nine Months Ended
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS):
Consolidated operations $1,508,288 $ 614,558
Adjustments to Reconcile Net
Income to Net Cash Applied to
Operating Activities:
Depreciation & amortization 284,901 89,386
Provision for doubtful account 192,132
Changes in Assets & Liabilities:
Account receivable (9,252,449) (3,754,618)
Worker's compensation credits
receivable (332,018) (112,774)
Prepaid income taxes 9,308
Other current assets (472,659)
Restricted cash and worker's
compensation deposits 1,130,575
Prepaid expenses and other (357,635)
Accounts payable 376,417 193,069
Accrued wages and benefits 1,073,892 (51,105)
Accrued taxes, other than income 673,886 444,552
Accrued interest 22,232 59,026
Accrued workmens' compensation (82,943) 454,704
Income taxes payable 439,027 298,160
Change in deferred
income taxes (80,779)
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (4,404,474) (2,228,392)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net investment rent-a-captive (565,332)
Capital expenditures (1,137,248) (375,419)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,702,580) (375,419)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on note payable 4,571,209 2,567,634
Proceeds from issuance of common stock 114,998 473,350
Proceeds from stock subscriptions 51,708
Proceeds from warrants exercised 1,552,300
Dividends paid (42,705) (50,154)
Borrowings on long-term debt 300,000
Payments on long-term debt (141,616) (150,854)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,354,186 2,891,684
--------- ---------
EFFECT OF EXCHANGE RATES (2,585)
---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 244,547 287,873
CASH AND EQUIVALENTS:
BEGINNING OF PERIOD 603,977 229,259
--------- ---------
END OF PERIOD $ 848,524 $ 517,132
========= =========
Page 6 (FS4)
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LABOR READY, INC. Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 798,260 $ 219,992
Income Taxes Paid $ 490,164
Issuance of common stock for conversion
of convertible debentures $ 75,000
Issuance common stock for
payment accounts payable $ 7,679
Acquisition of Building and
Land in exchange of debt $ 817,900 $ 47,500
Page 7 (FS5)
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations. The Company increased revenues from services to
$63,240,036 from $25,635,755, for the nine months ended September 30, 1995
compared to the nine months ended September 30, 1994. This represents an
increase of $37,604,281 or 147%. The sales increase came from an increase
in same store sales, and from opening new locations, as indicated below:
Same store sales increase $ 5,952,364
New locations 31,651,917
-----------
Total increase $37,604,281
===========
The increase in revenues also resulted in an increase in net profit for the
nine months ended September 30, 1995 of $1,508,288 compared to a net profit of
$614,558 for the same period a year earlier. This represents an increase of
$893,730 or 145%. The increase in net profits is primarily the result of a
high level of growth in revenues. The high levels of growth have required that
the Company continue to incur corresponding levels of operating expenses.
Consequently, as a percentage of revenues, net profit has stayed relatively
constant at 2.4% of revenues for the nine months ended September 30, 1995 and
1994. Management anticipates high levels of growth through 1996, and expects
that net profits as a percentage of revenues will remain relatively constant
during this period.
The Company grew from fifty-one operating dispatch locations at December 31,
1994 to one hundred operating locations at September 30, 1995, an increase of
forty-nine operating dispatch locations for the nine month period.
Opening costs for new dispatch locations; which are expensed, are estimated to
have averaged $35,000 per location in 1995 and $25,000 in 1994. In the
aggregate, a total of $1,715,000 was expended on new location openings for the
nine months ended September 30, 1995, compared to $625,000 for the nine months
ended September 30, 1994. The Company estimates that two thirds of these new
location opening costs are included in cost of sales and one third of these
new location opening costs are classified as operating expenses.
Cost of revenues increased to $51,066,172 for the nine months ended September
30, 1995 from $20,298,766 for the same period in 1994, an increase of
$30,767,406 or 152%. Cost of revenues as a percentage of revenues increased to
80.7% for the nine months ended September 30, 1995, from 79.2% for the nine
months ended September 30, 1994, an increase of 1.5%. This increase is
primarily the result of an increase in labor costs.
Operating expenses increased from $4,133,823 to $9,158,043, an increase of
$5,024,220 or 122%. As a percentage of revenues, operating expenses decreased
to 14.5% for the nine months ended September 30, 1995, from 16.1% for the same
period a year earlier. This percentage decrease in operating expenses
partially offset the percentage increase on cost of revenues, and resulted
primarily from more efficient administrative operations.
Page 8
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Liquidity and Financial Condition. At September 30, 1995 the Company had
$3,407,398 of working capital to finance its operations.
Accounts receivable as a percentage of the previous quarters sales has
remained relatively static as a result of the Company's ongoing accounts
receivable collection practices. The Company continues to experience a low
rate of uncollectible accounts and expects that accounts receivable as a
percentage of sales will remain relatively steady in coming periods. A
comparison of accounts receivable as a percentage of revenues for the nine
month periods ending on September 30, 1995 and 1994, respectively, follows:
September 30 September 30
1995 1994
Comparable quarter sales $30,872,700 $12,099,977
Accounts receivable, net 14,223,147 5,661,454
Percentage 46% 47%
Management intends to open an estimated one hundred new dispatch locations
by the end of 1996. To finance these projected new locations and related
increases in selling and overhead expenses, the Company recently completed
a private placement financing of long-term subordinated debt in the amount
of $10,000,000.
A temporary increase in the accounts receivable operating line of credit to
$9,000,000 was completed in August 1995. In connection with the private
placement debt financing, the accounts receivable operating line of credit
was reduced to $5,000,000, and the term was extended through June of 1996.
Page 9
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of matters to a vote of Security Holders.
None
Item 5. Other information.
None
Item 6. Exhibits and Reports on Form 8-K.
None
SIGNATURES
The unaudited interim financial statements furnished by management reflect
all adjustments which are, in the position of management, necessary for a
fair presentation of financial position and results of operation.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LABOR READY, INC.
Registrant
By : /s/ Glenn Welstad 11/9/95
--------------------------------
Glenn A. Welstad Date
President
Chief Executive Officer
Acting Chief Financial Officer
Page 10
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 1994 AUDITED FINANCIAL STATEMENTS AND ITS SEPTEMBER 30, 1995 UNAUDITED
FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000768899
<NAME> LABOR READY, INC.
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