<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 June 30, 1996
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 check mark 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 ( )
- --------------------------------------------------------------------------------
The aggregate market value of the voting stock held by non-affiliates of
the registrant, on August 9, 1996 was $192,424,829.
- --------------------------------------------------------------------------------
As of August 9, 1996, the Registrant had 11,349,308 shares of Common
Stock outstanding.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE: NONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 1
<PAGE>
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LABOR READY INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
INDEX
Consolidated Balance Sheets
at June 30, 1996 and December 31, 1995. . . . . . . . . . . . . . . . . 3-4
Consolidated Statements of Operations
for the Six Months and the Three Months
Ended June 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and 1995
and the Three Months Ended June 30, 1996 and 1995 . . . . . . . . . . . 6-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 8-9
- --------------------------------------------------------------------------------
Page 2
<PAGE>
- --------------------------------------------------------------------------------
LABOR READY, INC. Consolidated Balance Sheets at June 30, 1996 (Unaudited) and
December 31, 1995 (Audited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $30,407,485 $ 5,359,113
Workers' compensation deposits and credits 3,744,183 1,886,644
Accounts receivable, net of allowance for doubtful accounts
of $1,180,473 and $868,607, respectively 16,660,549 12,182,806
Prepaid expenses and other 908,391 602,052
Deferred income tax 1,029,000 698,930
----------- -------------
Total Current Assets 52,749,608 20,729,545
----------- -------------
PROPERTY AND EQUIPMENT:
Cost 5,285,370 3,542,071
Accumulated depreciation 989,020 690,648
----------- -------------
Total Property and Equipment 4,296,350 2,851,423
----------- -------------
OTHER ASSETS:
Intangible assets, less amortization of $119,237 and
$114,588 925,745 962,632
Workers' compensation deposits and credits, less current
portion 3,305,509 1,427,905
Deferred income tax 100,000 16,477
Other 167,681 193,653
----------- -------------
Total Other Assets 4,498,935 2,600,667
----------- -------------
TOTAL ASSETS $61,544,893 $26,181,635
----------- -------------
----------- -------------
</TABLE>
See accompanying notes to consolidated financial statements
- --------------------------------------------------------------------------------
Page 3
<PAGE>
- --------------------------------------------------------------------------------
LABOR READY, INC. Consolidated Balance Sheets at June 30, 1996 (Unaudited) and
December 31, 1995 (Audited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Checks issued against future deposits $ 1,130,934 $ 514,842
Accounts payable 1,647,314 1,118,081
Accrued wages and related expenses 2,338,870 1,588,147
Workers' compensation claims 3,421,348 1,943,338
Income taxes payable 82,172 1,161,000
Note payable 0 1,591,206
Current maturities of long-term debt 41,605 39,117
----------- -------------
Total Current Liabilities 8,662,243 7,955,731
----------- -------------
LONG-TERM LIABILITIES
Long-term debt, less current maturities 932,073 953,937
Subordinated debt, less unamortized discount of $1,167,229
and $1,259,377 8,832,771 8,740,623
----------- -------------
Total Long-Term Liabilities 9,764,844 9,694,560
----------- -------------
Total Liabilities 18,427,087 17,650,291
----------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $0.444 par value, 5,000,000 shares
authorized; issued and outstanding 1,921,685 854,082 854,082
Common stock, no par value, 25,000,000 shares authorized,
issued and outstanding 11,342,450 and 8,818,700 shares 41,623,233 7,116,422
Cumulative foreign currency translation adjustment (28,524) (28,707)
Retained earnings 669,015 589,547
----------- -------------
Total Shareholders' Equity 43,117,806 8,531,344
----------- -------------
Total Liabilities and Shareholders' Equity $61,544,893 $26,181,635
----------- -------------
----------- -------------
</TABLE>
See accompanying notes to consolidated financial statements
- --------------------------------------------------------------------------------
Page 4
<PAGE>
- --------------------------------------------------------------------------------
LABOR READY, INC. Consolidated Statements of Operations
For the Six Months and the Three Months
Ended June 30, 1996 and 1995 (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------ ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues from services $62,124,854 $32,367,336 $36,030,930 $19,749,584
Cost of services 51,417,371 26,376,625 29,209,913 15,882,286
Selling, general & administrative 9,784,610 5,643,007 5,284,291 3,147,956
Interest and other, net 762,053 291,171 326,582 126,785
----------- ----------- ----------- -----------
Income before taxes on income 160,820 56,533 1,210,144 592,557
Taxes on income 60,000 19,221 424,000 201,469
----------- ----------- ----------- -----------
Net income $ 100,820 $ 37,312 $ 786,144 $ 391,088
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per common share:
Net income per share $ .01 $ .00 $ .08 $ .04
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average common shares
outstanding 9,731,778 8,991,434 10,078,452 8,995,685
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
- --------------------------------------------------------------------------------
Page 5
<PAGE>
- --------------------------------------------------------------------------------
LABOR READY, INC. Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and 1995
and the Three Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------ ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income: $ 100,820 $ 37,312 $ 786,144 $ 391,088
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation & amortization 395,766 166,038 223,068 85,614
Provision for doubtful accounts,
net 435,245 221,615 125,248 (36,926)
Deferred income taxes (413,593) 19,221 (488,000) 119,221
Changes in Assets & Liabilities:
Accounts receivable (4,912,988) (4,207,855) (5,149,754) (3,337,947)
Workers' compensation deposits and
credits (3,735,143) (853,043) (2,752,048) (541,669)
Prepaid expenses and other (280,367) (167,253) (6,596) 114,081
Accounts payable 529,233 1,291,676 333,939 567,075
Accrued wages and benefits 750,723 811,366 880,765 535,575
Accrued interest 0 (27,216) 0 (39,949)
Accrued taxes, other than income 0 221,254 0 (14,863)
Accrued workers' compensation
claims 1,478,010 62,317 1,369,579 (168,865)
Income taxes payable (1,078,828) (442,237) 82,172 (109,989)
----------- ----------- ----------- -----------
Net cash used in operating activities (6,731,122) (2,866,805) (4,595,483) (2,437,554)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,743,299) (952,258) (891,129) (555,514)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on note payable, net (1,591,206) 0 (1,428,158) 0
Borrowings on note payable, net 0 1,892,815 0 2,032,840
Checks issued against future
deposits 616,092 0 244,101 0
Proceeds from issuance of common
stock 33,713,478 104,667 33,713,478 104,667
Proceeds from warrants exercised 420,120 1,213,345 420,120 659,049
Proceeds from options exercised 373,213 0 0 0
Borrowings on long-term debt 0 300,000 0 300,000
Payments on long-term debt (19,376) (132,245) (9,867) (71,713)
Dividends (21,352) (42,705) (10,676) 0
Debt Issue Costs 31,641 0 0 0
----------- ----------- ----------- -----------
Net cash provided by financing
activities 33,522,610 3,335,887 32,928,998 3,024,843
----------- ----------- ----------- -----------
Effect of exchange rates 183 (14,250) 5,320 (2,581)
----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements
- --------------------------------------------------------------------------------
Page 6
<PAGE>
- --------------------------------------------------------------------------------
Net increase (decrease) in cash &
equivalents: $25,048,372 $ (497,426) $27,447,706 $ 29,194
Cash and cash equivalents, beginning of
period 5,359,113 603,977 2,959,779 77,357
----------- ----------- ----------- -----------
Cash and cash equivalents, end of
period $30,407,485 $ 106,551 $30,407,485 $ 106,551
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- ------------------
1996 1995 1996 1995
------ ------- ------ -------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Income Taxes Paid $1,552,420 $ 440,959 $ 569,105 $ 289,306
Interest Paid $ 965,097 $ 442,237 $ 458,661 $ 192,237
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock for conversion of
convertible debentures $ 0 $ 75,000 $ 0 $ 0
Issuance of common stock for payment accounts
payable $ 0 $ 7,679 $ 0 $ 0
Property in exchange of debt $ 0 $ 817,900 $ 0 $ 0
</TABLE>
See accompanying notes to consolidated financial statements
- --------------------------------------------------------------------------------
Page 7
<PAGE>
- --------------------------------------------------------------------------------
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES. The accompanying unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These financial
statements should be read in conjunction with the financial statements
and related notes included in the Company's 1995 Form 10-K. In the
opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended June
30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
2. PROPERTIES. In May 1996, the Company agreed, subject to the approval of
the Board of Directors and certain of the Company's lenders, to purchase
a 44,000 square foot building with an adjacent 10,000 square foot print
shop, located in Tacoma, Washington to accommodate the Company's
continuing expansion. In June 1996, the necessary approvals were
obtained, and on July 19, 1996, management successfully completed the
acquisition of the land, building and equipment for $1,350,000. No new
or additional financing was necessary for this capital purchase due to
the recent completion of the Company's stock offering (see note 3).
3. COMMON STOCK. In June 1996, the Company sold, through an underwritten
public offering, 1,950,000 (1,300,000 pre-split) common shares, at
$15.23 ($22.85 pre-split) per share. An additional 292,500 (195,000
pre-split) common shares were sold pursuant to an underwriters
over-allotment option.
The net proceeds from the offering are being used to fund opening of new
dispatch offices, purchase of an office building in Tacoma, Wa., payment
of short-term debt, prepayment of senior subordinated debt and for
working capital and other general corporate purposes.
Surplus funds are currently invested in short-term, interest bearing
instruments, including government obligations and money market
instruments.
In July 1996, the Company's Board of Directors approved a
three-for-two common stock dividend. This common stock dividend was
effected in the form of three shares of common stock issued for every
two shares of common stock outstanding, effective for shareholders of
record on July 31, 1996. All applicable share and per share data
have been adjusted for the common stock dividend.
4. PREFERRED STOCK. In July 1996, the Company's Board of Directors
approved a three-for-two preferred stock dividend. This preferred
stock dividend was effected in the form of three shares of preferred
stock issued for every two shares of preferred stock outstanding,
effective for shareholders of record on July 31, 1996. All applicable
share and per share data have been adjusted for the preferred stock
dividend.
- --------------------------------------------------------------------------------
Page 8
<PAGE>
- --------------------------------------------------------------------------------
5. WORKERS' COMPENSATION. In 1996, the Company deposited an additional
$5.4 million with a foreign off-shore company for the payment of
workers' compensation claims and related expenses on claims originating
in the Non-monopolistic states. At June 30, 1996, $6.0 million
remained on deposit for the payment of future non-monopolistic claims
and related expenses and is recorded as workers' compensation deposits
and credits. Estimated incurred losses and related settlement and
administration expenses to be paid from those deposits of $2.6 million
are recorded as current workers' compensation claims payable at June
30, 1996. Additional workers' compensation liabilities for amounts
owed to the monopolistic states at June 30, 1996, totaled $536,000.
Workers' compensation expense of $3.4 million was recorded as a
component of the cost of services for the six months ended
June 30, 1996.
6. SUBSEQUENT EVENT. On August 6, 1996, the Company notified the
holders of the Company's $10,000,000 13% Senior Subordinated Notes of
its intent to prepay in full the outstanding debt obligation as of
September 5, 1996. This 30 day notice was given as per the terms of
the original subordinated note agreement. The approximate pre-tax
effect of this early extinguishment of debt is $1,929,000. This charge
to income will be reflected in the Company's consolidated statement of
income as an extraordinary item, net of the tax benefit.
- --------------------------------------------------------------------------------
Page 9
<PAGE>
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Labor Ready is a leading, national provider of temporary workers for manual
labor jobs. The Company's customers are primarily in construction, freight
handling, warehousing, landscaping, light manufacturing, and other light
industrial businesses. The Company has rapidly grown from eight dispatch
offices in 1991 to 169 dispatch offices at June 30, 1996. Substantially all of
the growth in dispatch offices was achieved by opening Company-owned locations
rather than through acquisitions.
In 1995, the Company opened 57 new dispatch offices at an average cost of
approximately $35,000 per dispatch office. The Company expects the average cost
of opening new dispatch offices to continue to increase due to more extensive
management training and the installation of more sophisticated computer and
other office systems. Further, once open, the Company invests significant
amounts of additional cash into the operations of new dispatch offices until
they begin to generate sufficient revenue to cover their operating costs,
generally in two to six months. The Company pays its temporary workers on a
daily basis, and bills its customers on a weekly basis. Consequently, the
Company experiences negative cash flow from operations and
investment activities during periods of high growth, which also adversely
impacts the Company's overall profitability. The Company expects to continue to
experience periods of negative cash flow from operations and investment
activities while it rapidly opens dispatch offices and expects to require
additional sources of working capital in order to continue to grow.
Many of the Company's customers are construction and landscaping
businesses, which are significantly affected by the weather. Construction and
landscaping businesses and, to a lesser degree, other customer businesses
typically increase activity in spring, summer and early fall months and decrease
activity in late fall and winter months. Inclement weather can slow
construction and landscaping activities in such periods. As a result, the
Company has generally experienced a significant increase in temporary labor
demand in the spring, summer and early fall months, and lower demand in the late
fall and winter months.
Depending upon location, new dispatch offices initially target the
construction industry for potential customers. As dispatch offices mature, the
customer base broadens and the mix of work diversifies. The Company may
discount its rates when it enters a new market to attract customers. From time
to time during peak periods, the Company experiences shortages of available
temporary workers.
Cost of services primarily includes wages and related payroll expenses of
temporary workers and dispatch office employees, general managers, district
managers and area directors, including workers' compensation insurance, medicare
and social security taxes, but does not include dispatch offices lease expenses.
The Company's cost of services as a percentage of revenues has fluctuated
significantly in recent periods and it expects significant fluctuations to
continue in future periods as the Company continues its rapid growth. Cost of
services as a percentage of revenues is affected by numerous factors, including
salaries of new supervisory personnel hired under new management organizational
- --------------------------------------------------------------------------------
Page 10
<PAGE>
- --------------------------------------------------------------------------------
structures, the hiring of large numbers of general managers prior to dispatch
office openings, the use of lower introductory rates to attract new customers
at new dispatch offices, and the relatively lower revenues generated by new
dispatch offices prior to reaching maturity.
Temporary workers assigned to customers remain Labor Ready employees.
Labor Ready is responsible for employee-related expenses of its temporary
workers, including workers' compensation, unemployment compensation insurance,
medicare and social security taxes and general payroll expenses. The Company
does not provide health, dental, disability or life insurance to its temporary
workers. Generally, the Company bills its customers for the hours worked by the
temporary workers assigned to the customer. Because the Company pays its
temporary workers only for the hours actually worked, wages for the Company's
temporary workers are a variable cost that increases or decreases directly in
proportion to revenue.
The Company has one franchisee which operates five dispatch offices. The
Company does not intend to grant additional franchises. Royalty revenues from
the franchised dispatch offices are included in revenues from services and were
not material during any period presented herein.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
DISPATCH OFFICES. The Company grew from 106 locations at December 31, 1995
to 169 locations at June 30, 1996, an increase of 63 locations for the six month
period. The Company opened 42 dispatch offices during the second quarter of
1996 compared to 27 dispatch offices during the second quarter of 1995.
REVENUES FROM SERVICES. The Company's revenues from services increased to
$62.1 million for the six months ended June 30, 1996 compared to $32.3 million
for the six months ended June 30, 1995, an increase of $29.8 million or 91.87%.
This increase resulted primarily from increases in revenues from dispatch
offices open for the full period.
COST OF SERVICES. Cost of services increased to $51.4 million for the six
months ended June 30, 1996 compared to $26.4 million for the six months ended
June 30, 1995, an increase of $25 million or 94.7%, reflecting the additional
wages and salaries paid to temporary workers, additional management personnel,
and related payroll and operating expenses. As a percentage of revenues, cost of
services increased to 82.8% for the six months ended June 30, 1996 from 81.5%
for the six months ended June 30, 1995, an increase of 1.3%. Cost of services
increased due to several factors, including higher workers' compensation costs,
increased salary costs for branch managers in training, longer training periods
for new management personnel and for additional supervisory personnel hired
under new management organizational structures. The Company expects significant
continuing fluctuations in cost of services as the Company pursues further
aggressive growth.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses increased to $9.8 million for the six months ended June
30, 1996 compared to $5.6 million for the year earlier period, an increase of
$4.2 million or 75%. As a percentage of revenues from services, selling,
general, and administrative expenses decreased to 15.8% for the six months
- --------------------------------------------------------------------------------
Page 11
<PAGE>
- --------------------------------------------------------------------------------
ended June 30, 1996 from 17.3% for the six months ended June 30, 1995, a
decrease of 1.5%. This decrease is primarily the result of selling, general
and administrative expenses increasing at a slower rate than the increase in
revenues from services.
INTEREST AND OTHER EXPENSES. Interest and other expenses increased to
approximately $762,000 for the six months ended June 30, 1996 compared to
approximately $291,000 for the six month period ended June 30, 1995, an increase
of approximately $471,000 or 162%, reflecting primarily higher borrowing
amounts, the relatively higher interest costs of the $10 million principal
amount of subordinated debt issued in October 1995 and certain prepayment
penalties incurred in paying off the Company's prior lender. Interest expense
is expected to decline substantially in future periods after the Company pays
off outstanding debt in the third quarter. As a percentage of revenues, interest
and other expenses increased to 1.2% for the six months ended June 30, 1996 from
1% for the six months ended June 30, 1995.
TAXES ON INCOME. The Company recorded taxes on income of approximately
$60,000 for the six months ended June 30, 1996 compared to taxes on income of
approximately $19,000 for the six months ended June 30, 1995.
NET INCOME. The Company recorded income from operations of approximately
$101,000 for the six months ended June 30, 1996 compared to approximately
$37,000 for the six months ended June 30, 1995, an increase of approximately
$64,000 or 170%.
LIQUIDITY AND CAPITAL RESOURCES. In June 1996 the Company completed a
common stock offering of 2,242,500 (1,495,000 pre-split) shares resulting in
net proceeds to the Company of approximately $33.6 million. The proceeds are
to be used for the payment of short-term debt, fund the Company's expansion
plans through 1998, the purchase of an office building in Tacoma, prepayment
of the Company's $10 million 13% Senior Subordinated Notes, and for other
working capital needs.
In the second quarter of 1996, the Company utilized significant amounts
of cash to open 42 dispatch offices. During the second quarter of 1996 and
1995, the Company used net cash in operating and investing activities of
approximately $4.6 million and $2.4 million, respectively, an increase of
92%, reflecting primarily increases in workers' compensation deposits and a
reduction in accounts payable. Management anticipates that cash flow deficits
from operating and investing activities will continue while the Company adds
substantial numbers of new dispatch offices. Management expects to finance
such cash flow deficits with the proceeds from its recent common stock
offering.
In October 1995, the Company completed a private financing of $10.0
million principal amount of 13.0% Senior Subordinated Notes (the "Notes").
Under the terms of the Notes, which require principal payments to begin in
1998 and which mature in 2002, the Company pledged its remaining assets as
collateral and issued warrants (the "Financing Warrants") to the purchasers
of the Notes. The Financing Warrants entitle the holders thereof to purchase
1,023,552 (682,368 pre-split) shares of common stock of the Company at an
exercise price of $7.78 ($11.67 pre-split) per share, and are exercisable at
any time prior to the date the Notes are paid in full. The Company intends to
prepay the Notes on September 5, 1996. As a result, the approximate pre-tax
effect of this early extinguishment of debt is $1,929,000 for expenses
capitalized in connection with issuance of the Notes. This charge to
income will be reflected in the Company's Consolidated Statement of Income as
an extraordinary item, net of the tax benefit.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
- --------------------------------------------------------------------------------
In March 1996, the Company obtained a new revolving credit facility from
U.S. Bank of Washington which provides for borrowing of up to $10.0 million
secured by eligible accounts receivable. The U.S. Bank revolving credit
facility bears interest at a rate of prime plus 1/4%. In June 1996, the Company
paid the outstanding balance of $5,058,000 with proceeds from its common stock
offering.
In 1995, the Company opened 57 new dispatch offices at an average cost
of approximately $35,000. Once opened, the Company invests significant
amounts of additional cash into the operations of new dispatch offices until
they begin to generate sufficient revenues to cover their operating costs,
generally two to six months. Since December 31, 1995, the Company opened 63
new dispatch offices at an estimated cost of $3.5 million, of which $2.3
million was incurred in connection with opening 42 new locations in the
second quarter. Further, the Company pays its temporary personnel on a daily
basis, and bills its customers on a weekly basis. Since the Company plans to
open a total of 94 dispatch offices in 1996, and 100 dispatch offices in
1997, the Company expects to experience cash flow deficits from operations
and investing activities in 1996 and 1997. The Company intends to finance
opening and operating costs of new dispatch offices with the proceeds from
its recent common stock offering and debt financings. With such funds, and
depending on its results of operations and other factors, the Company expects
to have the financial resources necessary to reach its goal of operating 300
dispatch offices by the end of 1997. To the extent that the Company's
resources are not sufficient to finance new dispatch offices, or are not
sufficient to open all currently targeted dispatch offices, the Company would
either seek additional capital through debt financings or scale back its
expansion plans.
PART II - OTHER INFORMATION
Not applicable.
- --------------------------------------------------------------------------------
Page 13
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
The unaudited interim financial statements furnished by management
reflect all adjustments which are, in the opinion 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.
REGISTRANT: LABOR READY, INC.
By: /s/ Glenn A. Welstad 8/09/96
-------------------- -------
Glenn A. Welstad Date
Principal Executive Officer
By: /s/ Ralph E. Peterson 8/09/96
--------------------- -------
Ralph E. Peterson Date
Principal Financial Officer
- --------------------------------------------------------------------------------
Page 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 30,407,485
<SECURITIES> 0
<RECEIVABLES> 16,660,549
<ALLOWANCES> 1,180,473
<INVENTORY> 0
<CURRENT-ASSETS> 52,749,608
<PP&E> 5,285,370
<DEPRECIATION> 989,020
<TOTAL-ASSETS> 61,544,893
<CURRENT-LIABILITIES> 8,662,243
<BONDS> 9,764,844
0
854,082
<COMMON> 41,623,233
<OTHER-SE> (28,524)
<TOTAL-LIABILITY-AND-EQUITY> 61,544,893
<SALES> 62,124,854
<TOTAL-REVENUES> 62,124,854
<CGS> 51,417,371
<TOTAL-COSTS> 9,784,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 762,053
<INCOME-PRETAX> 160,820
<INCOME-TAX> 60,000
<INCOME-CONTINUING> 100,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,820
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
