<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QA
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 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 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( ).
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 June 30, 1995 was 43,912,836.
As of June 30, 1995, the Registrant had 3,870,415 shares of Common Stock
and 854,082 shares of Preferred Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Page 1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LABOR READY INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1995
INDEX
Consolidated Statements of Financial Position
at June 30, 1995 and December 31, 1994 4-5
Consolidated Statement of Operations
for the Six Months and the Three Months
Ended June 30, 1995 and 1994 6
Consolidated Statement of Changes in Stockholders' Equity
for the Year Ended December 31, 1994 and the
Six Months Ended June 30, 1995 7
Consolidated Statement of Cash Flows
for the Six Months Ended June 30, 1995 and 1994
and the Three Months Ended June 30, 1995 and 1994 8-9
Page 2
LABOR READY, INC. Consolidated Statement of Financial Position at
June 30, 1995 and December 31, 1994 (Unaudited)
ASSETS
1995 1994
CURRENT ASSETS:
Cash and equivalents $ 106,551 $ 603,977
Workers' compensation deposits 1,130,575
Workers' compensation rent-a-captive
insurance assets 1,389,000
Accounts receivable, net of allowance
for doubtful accounts of $587,512
and $365,927, respectively 9,149,100 5,162,830
Workers' compensation credits
receivable 262,600 206,794
Prepaid expenses and other 478,196 348,814
Notes receivable 567,755
Deferred income tax 99,369 118,590
Total Current Assets 12,052,571 7,571,580
DEPRECIABLE ASSETS AND LAND:
Cost 2,841,198 1,071,070
Accumulated depreciation 385,545 244,497
Total Property and equipment 2,455,653 826,573
OTHER ASSETS:
Intangible assets, less amortization
of $94,010 and $69,020 166,441 191,431
Workers' compensation credits
receivable, less current portion 644,644 105,832
Deferred income tax 94,366 94,366
Other 160,065 122,194
Total Other Assets 1,065,516 513,823
TOTAL ASSETS $15,573,740 $8,911,976
Page 3
LABOR READY, INC. Consolidated Statement of Financial Position at
June 30, 1995 and December 31, 1994 (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
CURRENT LIABILITIES:
Accounts payable $ 1,560,608 $ 268,932
Accrued wages and benefits 1,201,973 390,607
Accrued taxes, other than income 652,134 430,880
Accrued interest 25,786 53,002
Accrued workers' compensation 334,186 708,869
Workers' compensation rent-a-
captive insurance liabilities 437,000
Income taxes payable 54,763 497,000
Note payable, accounts receivable
financing 5,053,395 3,160,580
Dividends payable 21,352 42,705
Current portion of long-term debt 338,276 78,291
Total Current Liabilities 9,679,473 5,630,866
LONG-TERM LIABILITIES:
Long-term debt, less current
maturaties 969,920 244,250
14% Convertible Debentures ________ 75,000
969,920 319,250
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value:
5,000,000 shares authorized;
issued and outstanding: 854,082
and 854,082 shares 854,082 854,082
Common stock, no par value:
25,000,000 shares authorized;
issued and outstanding:
3,870,415 and 3,314,729 shares 5,500,964 3,540,187
Cumulative foreign currency
transaction adjustment (17,103) (2,853)
Accumulated (deficit) (1,413,596) (1,429,556)
Total Stockholders' Equity 4,924,347 2,961,860
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $15,573,740 $8,911,976
Page 4
LABOR READY, INC. Consolidated Statement of Operations
For the Six Months and the Three Months
Ended June 30, 1995 and 1994 (Unaudited)
Six Months Ended Three Months Ended
1995 1994 1995 1994
REVENUES FROM SERVICES $32,367,336 $13,535,778 $19,749,584 $8,318,364
COST OF SALES 26,376,625 10,889,478 15,882,286 6,682,149
5,990,711 2,646,300 3,867,298 1,636,215
OPERATING EXPENSES 5,643,007 2,216,232 3,147,956 1,147,303
INCOME FROM OPERATIONS 347,704 430,068 719,342 488,912
OTHER INCOME (DEDUCTIONS) (291,171) (138,999) (126,785) (62,992)
INCOME BEFORE INCOME TAX 56,533 291,069 592,557 425,920
INCOME TAX PROVISION 19,221 98,591 201,469 98,591
NET INCOME (LOSS) $37,312 $192,478 $391,088 $327,329
EARNINGS (LOSS) PER COMMON
SHARE:
Net Income $.01 $.07 $.10 $.11
Weighted average shares
outstanding 3,996,193 2,602,874 3,998,082 2,602,874
Page 5
LABOR READY, INC. Consolidated Statement of Changes in
Stockholders' Equity For the Year
Ended December 31, 1994 and the Six
Months Ended June 30, 1995 (Unaudited)
Cumulative
Foreign
Currency
Common Stock Preferred Accumulated Translation
Shares Amount Stock (Deficit) Adjustment
Balance Dec. 31, 1993 2,602,874 2,135,764 1,003,088 (2,387,662)
Net income year ended
Dec. 31, 1994 851,805
Debentures converted 237,895 271,200
Common Stock issued
from private
placement 474,960 1,130,223
Preferred stock canceled (149,006) 149,006
Common Stock canceled
on lapsing
subscriptions (2,000) (2,000)
Common stock issued
for services 1,000 5,000
Foreign currency
translation $(2,853)
Preferred stock dividend (42,705)
Balance Dec. 31, 1994 3,314,729 3,540,187 854,082 (1,429,556) (2,853)
Net income (loss)
six months ended
June 30, 1995 37,312
Foreign currency
translation (14,250)
Debentures converted 58,595 75,000
Options exercised 12,000 27,000
Issued for debt 798 7,679
Common stock issued 69,998
for cash 9,333
Preferred stock dividend (21,352)
Common stock issued
from exercise
warrants 474,960 1,781,100
Balance June 30, 1995 3,870,415 $5,500,964 854,082 $(1,413,596) $(17,103)
Page 6
LABOR READY, INC. Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 and the
Three Months Ended June 30, 1995 and 1994 (Unaudited)
Six Months Ended Three Months Ended
1995 1994 1995 1994
CASH FLOWS FROM OPERATING ACTIVATES:
NET INCOME (LOSS):
Consolidated operations $37,312 $192,478 $391,088 $327,329
Adjustments to Reconcile Net
Loss to Net Cash Applied to
Operating Activities:
Depreciation & amortization1 66,038 59,591 85,614 36,582
Provision for doubtful account 221,615 (36,926)
Changes in Assets & Liabilities:
Account receivable (4,207,855) (1,441,848) (3,337,947)(1,121,842)
Worker compensation credits
receivable (594,618) (115,267) (594,618) (50,108)
Prepaid income taxes 16,469 16,469
Other current assets (177,949) (59,114)
Restricted cash and workers'
compensation deposits (258,425) 52,949
Prepaid expenses and other (167,253) 114,011
Accounts payable 1,291,676 512,635 567,145 340,561
Accrued wages and benefits 811,366 81,594 535,575 62,925
Accrued taxes, other than income221,254 177,612 (14,863) 125,548
Accrued interest (27,216) 3,801 (39,949) 4,264
Accrued workers' compensation 62,317 18,038 (168,865) 95,251
Income taxes payable (442,237) (109,989)
Change in deferred
income taxes 19,221 80,022 119,221 80,022
Net cash used in operating
activities (2,866,805) (592,824) (2,437,554) ( 142,113)
Page 7
LABOR READY, INC. Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 and the
Three Months Ended June 30, 1995 and 1994 (Unaudited)
Six Months Ended Three Months Ended
1995 1994 1995 1994
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (952,258) (325,182) (555,514) (239,166)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings on note
payable 1,892,815 981,158 2,032,830 579,830
Proceeds from issuance of
common stock 104,667 104,667
Proceeds from stock
subscriptions 5,050 3,439
Proceeds from warrants
exercised 1,213,345 659,049
Dividends paid (42,705) (50,154)
Borrowings on long-term debt 300,000 300,000
Payments on long-term debt (132,245) (25,657) (71,713) (6,065)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,335,887 910,397 3,024,843 577,204
EFFECT OF EXCHANGE RATES (14,250) (2,581)
NET INCREASE (DECREASE) IN
CASH & EQUIVALENTS: (497,426) (7,609) 29,194 195,925
CASH AND EQUIVALENTS:
BEGINNING OF PERIOD 603,977 229,259 77,357 25,725
END OF PERIOD $ 106,551 $221,650 $ 106,551 $ 221,650
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 440,959 $135,198 $ 289,306 $ 58,728
Income Taxes Paid $ 442,237 $ 192,237
Issuance of common stock
for conversion of
convertible debentures $ 75,000 $271,200 $ 271,200
Issuance common stock for
payment accounts payable $ 7,679 $ 7,679
Acquisition of Building and
Land in exchange of debt $ 817,900 $ 47,500 $ 817,900
Page 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company increased revenues from services to $32,367,336 from $13,535,778,
an increase of $18,831,558 or 139%. The Company had a net profit for the six
months ended June 30, 1995 of $37,312 vs. a net profit of $192,478 for the
same period a year earlier; a decrease of $155,166. The primary factor
creating the net decrease in profits was the fact that management expanded
operation in 1995 at a faster rate as compared to 1994.
The Company grew from fifty-one operating dispatch locations at December 31,
1994 to ninety-six operating locations at June 30, 1995, an increase of
forty-five operating dispatch locations for the six month period.
The Company grew from seventeen operating dispatch locations at December 31,
1993 to thirty operating locations at June 30, 1994, an increase of thirteen
operating dispatch locations the six 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 or a total
of $1,575,000 in 1995 and $325,000 in 1994 for the six months ended June 30,
1995 and 1994 respectively. It is estimated that two thirds of these costs
are attributed to cost of sales and one third to operating expenses.
Costs of sales increased as a percentage of sales from 80.4% in 1994 to 81.5%
in 1995, an increase of 1.1%. The primary components of the change in cost
of sales were from dispatch location management salaries and related
expenses, which increased as a percentage of sales from 9.7% in 1994 to
14.5% in 1995, an increase of 4.8%; workers compensation, which decreased
as a percentage of sales from 8.4% in 1994 to 3.9% in 1995, a decrease of
4.5%; and direct labor costs which increased as a percentage of sales from
53.5% in 1994 to 55.8% in 1995, an increase of 2.3%
Operating expenses increased from $2,216,232 to $5,643,007, an increase of
$3,426,775 or 155%. The largest increases came from contract and
professional fees which increased from $245,286 to $646,840 or $401,554
(164%) and auto and travel which increased from $161,273 to $454,472 or
$293,199 (182%). The professional fee increase was primarily due to
permanent management employee screening costs. The auto and travel increase
was primarily the result of new location openings and continued maintenance.
Sales increased for the comparable six months ended June 30 from $13,535,778
in 1994 to $32,367,336 in 1995, an increase of $18,831,550. The sales
increase came from two sources shown as follows:
Same dispatch location sales increase $ 3,406,554
New dispatch locations 15,424,996
Total increase $18,831,550
Page 9
Liquidity and Financial Condition
At June 30, 1995 the Company has $2,373,098 of working capital to finance its'
operations.
Accounts receivable as a percentage of the comparable previous years quarter
sales follow:
June 30 June 30
1995 1994
Comparable quarter sales $19,749,584 $8,318,364
Accounts receivable, net 9,149,100 3,348,684
Percentage 46% 40%
The Company is projecting, based on prior years quarterly sales trends, monthly
sales from $7,900,000 per month in July, 1995 to $12,900,000 per month in
September, 1995 and quarterly sales as follow:
Quarter Ended 1993 1994 1995
March 31 $2,479,281 $ 5,217,414 $12,617,752
June 30 3,564,912 8,318,364 19,749,584
September 30 4,545,822 12,099,977 29,000,000
December 31* 5,068,808 10,411,938 31,000,000
*1995 amounts are projected.
Management believes that it has adequate working capital to finance the
projected sales for the quarter ending September 30 and December 31, 1995.
Actual sales through the six months ended June 30, 1995, were $632,939 or
3% below the Company's projected sales for that period. The projections for
the quarters ended September 30 and December 31, 1995, have been reduced
accordingly.
To finance projected increases in sales and related overhead expenses the
Company is currently negotiating a private placement of long-term
subordinated debt financing in the amount of $10,000,000 of which
approximately $4,000,000 would be used as working capital to support current
operations and finance expected 1995 new location growth. The balance of
the funds would be used to finance self insurance and captive insurance
workers' compensation programs. There is no assurance that the private
placement will be completed.
A temporary increase in the accounts receivable operating line of credit to
$9,000,000 was completed in August 1995. The Company is in negotiations to
obtain a permanent operating line of credit of $10,000,000.
Page 10
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 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.
/s/ Glenn A. Welstad 8/10/95
By:__________________________ ______
Glenn A. Welstad Date
President
/s/ Glenn A. Welstad 8/10/95
By:__________________________ ______
Glenn A. Welstad Date
Principal Financial Officer
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S JUNE 30, 1995 UNAUDITED FINANCIAL STATEMENTS, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
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<NAME> LABOR READY, INC.
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