<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
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 April 3, 1998
Commission File Number 0-23828
Labor Ready, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
Washington 91-1287341
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer
IdentificationNo.)
1016 S. 28th Street, Tacoma, Washington 98409
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(253) 383-9101
- --------------------------------------------------------------------------------
(Registrant's Telephone Number)
- --------------------------------------------------------------------------------
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: 18,505,002 shares of no par
value common stock were outstanding as of April 16, 1998.
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Page 1
<PAGE>
LABOR READY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets
April 3, 1998 and December 31, 1997. . . . . . . . . . 3
Consolidated Statements of Operations
Thirteen Weeks Ended April 3, 1998 and March 31, 1997. 5
Consolidated Statements of Cash Flows
Thirteen Weeks Ended April 3, 1998 and March 31, 1997. 6
Notes to Consolidated Financial Statements . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Page 2
<PAGE>
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LABOR READY, INC.
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS OF DOLLARS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
APRIL 3, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $17,880 $22,117
Accounts receivable, less allowance for doubtful accounts
of $2,963 and $2,851 . . . . . . . . . . . . . . . . . . . . . 37,150 36,614
Workers' compensation deposits and credits. . . . . . . . . . . 2,284 1,082
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . 3,567 2,660
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 2,150 3,144
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . 63,031 65,617
------- -------
PROPERTY AND EQUIPMENT:
Buildings and land. . . . . . . . . . . . . . . . . . . . . . . 4,611 4,448
Computers and software. . . . . . . . . . . . . . . . . . . . . 9,726 8,220
Cash dispensing machines. . . . . . . . . . . . . . . . . . . . 4,208 --
Furniture and equipment . . . . . . . . . . . . . . . . . . . . 521 497
------- -------
19,066 13,165
Less accumulated depreciation . . . . . . . . . . . . . . . . . 3,395 2,839
------- -------
Property and equipment, net. . . . . . . . . . . . . . . . . . 15,671 10,326
------- -------
OTHER ASSETS:
Intangible assets and other, less amortization of
$4,393 and $3,569. . . . . . . . . . . . . . . . . . . . . . . 3,341 3,076
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 2,320 1,212
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . 122 136
------- -------
Total other assets . . . . . . . . . . . . . . . . . . . . . . 5,783 4,424
------- -------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . $84,485 $80,367
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
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Page 3
<PAGE>
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LABOR READY, INC.
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS OF DOLLARS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
APRIL 3, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $3,378 $3,711
Accrued wages and benefits. . . . . . . . . . . . . . . . . . . . 3,821 4,080
Workers' compensation claims reserve - current portion. . . . . . 6,932 7,109
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . -- 875
Current maturities of long-term debt. . . . . . . . . . . . . . . 404 13
------- -------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 14,535 15,788
------- -------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities . . . . . . . . . . . . . 3,798 76
Workers' compensation claims reserve, less current portion. . . . 7,363 6,462
------- -------
Total long-term liabilities. . . . . . . . . . . . . . . . . . . 11,161 6,538
------- -------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 25,696 22,326
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $0.296 par value, 5,000 shares authorized;
2,883 shares issued and outstanding . . . . . . . . . . . . . . 854 854
Common stock, no par value, 25,000 shares authorized; 18,503
and 18,442 shares issued and outstanding. . . . . . . . . . . . 50,539 49,694
Cumulative other comprehensive income (expense):
Foreign currency translation adjustment.. . . . . . . . . . . . . (145) 86
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 7,541 7,407
------- -------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . 58,789 58,041
------- -------
Total liabilities and shareholders' equity . . . . . . . . . . . $84,485 $80,367
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
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Page 4
<PAGE>
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LABOR READY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS OF DOLLARS (EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------
APRIL 3, MARCH 31,
1998 1997
-------- ---------
<S> <C> <C>
Revenues from services . . . . . . . . . . . . . . . . $94,030 $51,714
Cost of services. . . . . . . . . . . . . . . . . 65,695 36,922
------- -------
Gross profit . . . . . . . . . . . . . . . . . . . . . 28,335 14,792
Selling, general and administrative . . . . . . . 26,913 15,383
Depreciation and amortization . . . . . . . . . . 1,380 929
------- -------
Income (loss) from operations. . . . . . . . . . . . . 42 (1,520)
Interest income, net . . . . . . . . . . . . . . . . . 208 162
------- -------
Income (loss) before income tax (provision) benefit. . 250 (1,358)
Income tax (provision) benefit . . . . . . . . . . . . (105) 565
------- -------
Net income (loss). . . . . . . . . . . . . . . . . . . $ 145 $ (793)
------- -------
------- -------
Net income (loss) per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . $0.01 $(0.04)
------- -------
------- -------
Diluted . . . . . . . . . . . . . . . . . . . . . $0.01 $(0.04)
------- -------
------- -------
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . 18,459 18,549
------- -------
------- -------
Diluted.. . . . . . . . . . . . . . . . . . . . . 19,001 18,549
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
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Page 5
<PAGE>
LABOR READY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS OF DOLLARS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------
APRIL 3, MARCH 31
1998 1997
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . $ 145 $ (793)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . 1,380 929
Provision for doubtful accounts . . . . . . . . . . 1,144 851
Deferred income taxes . . . . . . . . . . . . . . . (114) (670)
Changes in assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . (1,900) (3,351)
Workers' compensation deposits and credits. . . . . (1,206) (1,917)
Prepaid expenses and other. . . . . . . . . . . . . (908) 111
Accounts payable. . . . . . . . . . . . . . . . . . (228) (748)
Accrued wages and benefits. . . . . . . . . . . . . (260) (657)
Workers' compensation claims reserve. . . . . . . . 727 601
Income taxes payable. . . . . . . . . . . . . . . . (588) 70
------- -------
Net cash used in operating activities. . . . . . . . . (1,808) (5,574)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . (1,692) (1,379)
Increase (decrease) in restricted cash in
captive insurance subsidiary. . . . . . . . . . . 14 (727)
Additions to intangible assets and other. . . . . . . (1,087) (1,377)
------- -------
Net cash used in investing activities. . . . . . . . . (2,765) (3,483)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Checks issued against future deposits . . . . . . . -- 381
Proceeds from options and warrants exercised. . . . 343 8
Proceeds from sale of stock through Employee
Stock Purchase Plan . . . . . . . . . . . . . . . 100 28
Purchase and retirement of treasury stock . . . . . -- (529)
Payments on long-term debt and capital leases . . . (95) (4)
------- -------
Net cash provided by (used in) financing activities. . 348 (116)
Effect of exchange rates on cash . . . . . . . . . . . (12) (42)
------- -------
Net increase in cash and cash equivalents. . . . . . . (4,237) (9,215)
CASH AND CASH EQUIVALENTS, beginning of period . . . . 22,117 17,598
------- -------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . $17,880 $ 8,383
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
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Page 6
<PAGE>
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ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures usually
found in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Company's 1997 annual report on
Form 10-K. The accompanying consolidated financial statements reflect all
adjustments, including normal recurring adjustments, which in the opinion of
management, are necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented. Operating results
for the thirteen week period ended April 3, 1998 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1998.
NOTE 2. WORKERS' COMPENSATION
The Company provides workers' compensation insurance to its temporary
workers and regular employees. In Washington, Ohio and West Virginia, (the
monopolistic states), the Company is required to make payments into state
administered programs, at rates established by each state, based upon the job
classification of the insured workers and the previous claims experience of
the Company. The Washington program provides for a retroactive adjustment of
workers' compensation payments based upon actual claims experience. Upon
adjustment, overpayments to the program are returned to the Company and
underpayments, if any, are assessed. At April 3, 1998 and December 31, 1997,
the Company recorded workers' compensation credit receivables of $1.4 million
and $1.1 million and workers' compensation liabilities of $0.4 million and
$0.6 million related to the monopolistic states.
For workers' compensation claims originating in the remaining states (the
non-monopolistic states), the Company self-insures the deductible amount per
claim to a maximum aggregate stop-loss limit and has engaged a third party
administrator to manage the claims and related claims expense. The deductible
amount was $250,000 per claim to an aggregate maximum of approximately $5.0
million, $6.5 million and $19.0 million in 1995, 1996 and 1997, respectively.
In January 1998, the Company renewed its insurance program, the terms of which
included a reduction of the 1995 and 1996 aggregate maximums to $4.5 million and
$5.2 million, respectively. Additionally, for claims arising in 1998, the per
claim deductible was increased to $350,000 and the maximum aggregate stop-loss
limit was reduced from $11.60 to $10.41 per $100 of temporary worker payroll.
In 1997, the Company replaced its cash deposits required by the workers'
compensation program with irrevocable letters of credit totaling $15.9 million.
The letters of credit bear fees of .75% per year and are supported by an equal
amount of available borrowings on the Company's $30 million line-of-credit.
Accordingly, at December 31, 1997 and April 3, 1998, no borrowings were
outstanding on the line-of-credit, and $15.9 million was committed by the
letters of credit. During April 1998, the Company increased the letters of
credit to $18.1 million and has agreed to increase the letters of credit by a
further $3.7 million through June 1998.
The Company establishes provisions for future claim liabilities based upon
actuarial estimates of the future cost of claims and related expenses that have
been reported but not settled, and that have been incurred but not reported.
Adjustments to the claims reserve are charged or credited to expense in the
periods in which they occur. Included in the accompanying consolidated balance
sheet as of April 3, 1998 and December 31, 1997, are reserves for claims and
claim related expenses arising in non-monopolistic states of $13.9 million and
$12.9 million. The reserve for workers' compensation claims was computed using
a discount rate of 6.0% at April 3, 1998 and December 31, 1997.
Workers' compensation expense totaling $4.8 million and $3.0 million was
recorded as a component of cost of services in each of the quarters ended April
3, 1998 and March 31, 1997, respectively.
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Page 7
<PAGE>
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NOTE 2. WORKERS' COMPENSATION, CONTD.
The Company has formed a wholly-owned, off-shore captive, Labor Ready
Assurance Company ("Labor Ready Assurance"), for the management and payment of
workers' compensation claims and claim related expenses. Labor Ready Assurance
reinsures levels of coverage for losses in excess of the aggregate stop-loss
limits with unrelated insurance carriers. Funds are deposited with Labor Ready
Assurance for the payment of claims and claim related expenses, and annual
premiums are paid to Labor Ready Assurance based principally upon the cost of
reinsurance and other operating expenses. At April 3, 1998 and December 31,
1997, $122,000 and $136,000 remained on deposit with Labor Ready Assurance and
was recorded as restricted cash in the accompanying consolidated balance sheets.
The Company has established a risk management department at its corporate
headquarters to manage its insurers, third party administrators, and medical
service providers. To reduce wage-loss compensation claims, the Company has
established a "light duty", transitional return to work program. Workers in the
program are employed within the Company in the local dispatch office or on
customer assignments that require minimal physical exertion. The Company's
information system generates weekly workers' compensation loss minimization
reports for both corporate and dispatch office use. The Company has an on-line
connection with its third party administrator that allows the Company to
maintain visibility of all claims, manage their progress and generate required
management information.
NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARD
Certain pre-opening costs incurred to open new dispatch offices, including
salaries, recruiting, testing, training, lease and other related costs, are
capitalized and amortized using the straight-line method over two years. In
March 1998, the Accounting Standards Executive Committee (the "AcSEC") issued
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
("the Statement"). The Statement establishes new rules for the financial
reporting of start-up costs, and will require the Company to expense the cost of
establishing new dispatch offices as incurred and write off, as a cumulative
effect of adopting the Statement, any capitalized pre-opening costs in the first
quarter of the year adopted. The Statement is effective for years beginning
after December 31, 1998 and the Company will adopt it in the first quarter of
1999. The effect of adopting the Statement will be to recognize a non-operating
expense, net of tax, of approximately $1.8 million, plus any additional
pre-opening costs capitalized during the next three quarters ended December 31,
1998, net of amortization expense recognized during the period.
NOTE 4. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
--------------------
THIRTEEN WEEKS ENDED
--------------------
APRIL 3, MARCH 31,
1998 1997
-------- ---------
<S> <C> <C>
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . $ 125 $23
Income taxes. . . . . . . . . . . . . . . . . . . . . $ 815 $31
Non-cash investing and financing activities:
Tax effect of disqualifying dispositions on
options exercised . . . . . . . . . . . . . . . . . $ 287 --
Preferred stock dividends accrued . . . . . . . . . . $ 11 $11
Contribution of common stock to 401(k) plan . . . . . $ 116 --
Assets acquired with capital lease obligations. . . . $4,208 --
</TABLE>
NOTE 5. EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share", which replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income (loss), less preferred
stock dividends, by the weighted average number of common shares outstanding
during the year. Diluted earnings per share is computed by dividing net income
(loss), less preferred stock dividends, by the weighted average number of common
shares and common stock equivalents outstanding during the year. Common stock
equivalents for the Company include the dilutive effect of outstanding options,
except where their inclusion would be anti-dilutive.
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Page 8
<PAGE>
NOTE 5. EARNINGS PER SHARE, CONTD.
Basic and diluted earnings per share were calculated as follows (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
--------------------
THIRTEEN WEEKS ENDED
--------------------
APRIL 3, MARCH 31,
1998 1997
-------- ---------
<S> <C> <C>
Basic:
Net income (loss) . . . . . . . . . . . . . . . . . . . $145 $(793)
Less preferred stock dividends. . . . . . . . . . . . . (11) (11)
------ ------
Income (loss) allocable to common shareholders. . . . . $134 $(804)
------ ------
Weighted average shares outstanding . . . . . . . . . . 18,459 18,549
------ ------
Net income (loss) per share . . . . . . . . . . . . . . $0.01 $(0.04)
------ ------
Diluted:
Income (loss) allocable to common shareholders. . . $134 $(804)
------ ------
Weighted average shares outstanding . . . . . . . . 18,459 18,549
Plus options to purchase common stock outstanding
at end of period. . . . . . . . . . . . . . . . . 1,364 --
Less shares assumed repurchased . . . . . . . . . . (822) --
------ ------
Weighted average shares outstanding, including
dilutive effect of options. . . . . . . . . . . . 19,001 18,549
------ ------
Net income (loss) per share . . . . . . . . . . . . $0.01 $(0.04)
------ ------
------ ------
</TABLE>
NOTE 6. COMPREHENSIVE INCOME
The Company's comprehensive income is as follows (amounts in thousands):
<TABLE>
<CAPTION>
--------------------
THIRTEEN WEEKS ENDED
--------------------
APRIL 3, MARCH 31,
1998 1997
-------- ---------
<S> <C> <C>
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 145 $(793)
Other comprehensive income (expense), net of
income taxes of $93 and $17:
Foreign currency translation . . . . . . . . . . . (138) (25)
----- -----
Comprehensive income (loss) . . . . . . . . . . . . $ 7 $(818)
----- -----
----- -----
</TABLE>
NOTE 7. COMMITMENT
In December 1997, the Company entered into an agreement to lease 450
automated Cash Dispensing Machines ("CDMs") for installation in all of the
Company's dispatch offices. The fair market value of the CDMs at inception of
the lease is approximately $6.2 million. The lease is payable over 84 months
with an imputed interest rate of 9.0% and is secured by the CDMs. During the
three months ended April 3, 1998, the Company installed 302 CDMs in its dispatch
offices throughout the United States. Accordingly, the Company recorded assets
under capital lease and capital lease obligations totaling $4.2 million with
future minimum lease payments over the next 5 years of approximately $0.4
million per year. The Company anticipates installing CDMs at all of its
dispatch offices in the United States during 1998. Included as an exhibit to
this Form 10-Q is an example of a CDM lease, all such leases having
substantially identical terms and conditions.
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Page 9
<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain matters discussed in this Form 10-Q are forward-looking statements
within the meaning of the Private Litigation Reform Act of 1995, and as such,
may involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to, those set forth in Item 7 entitled Management's Discussion of
Financial Condition and Results of Operations in the Company's Form 10-K for the
year ended December 31, 1997. Although the Company believes the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be attained.
OVERVIEW
Labor Ready is a leading, national provider of temporary workers for manual
labor jobs. The Company's customers are primarily in the construction, freight
handling, warehousing, landscaping, light manufacturing, and other light
industrial industries. The Company has rapidly grown from eight dispatch
offices in 1991 to 420 dispatch offices at April 3, 1998. The Company's annual
revenues grew from approximately $6 million in 1991 to $335 million for the year
ended December 31, 1997. This revenue growth has been generated both by opening
new dispatch offices in markets throughout the U.S. and Canada and by continuing
to increase sales at existing dispatch offices.
The Company opened 104 dispatch offices during the first quarter of 1998
and expects to open at least 63 additional dispatch offices by June 30, 1998.
The Company expects the average cost of opening each new dispatch office in
1998 to be approximately $50,000. The cost of opening a new dispatch office
includes extensive management training, the installation of sophisticated
computer and other office systems and a Cash Dispensing Machine ("CDM").
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
generally bills its customers weekly. Consequently, the Company experiences
significant negative cash flow from operations and investment activities
during periods of high growth. The Company may continue to experience periods
of negative cash flow from operations and investment activities while it
rapidly opens dispatch offices and may 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. Further, 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 customer mix diversifies. From time to time
during peak periods, the Company experiences shortages of available temporary
workers. By July 1998, the Company expects to have completed the installation
of the CDMs in all of its dispatch offices. The CDMs provide the Company's
temporary workers with the option of receiving cash payment instead of a payroll
check. The Company believes this additional feature is unique among its direct
competitors and should increase the Company's ability to attract available
temporary workers.
Cost of services includes the wages and related payroll taxes of temporary
workers, workers' compensation expense, unemployment compensation insurance and
transportation. Cost of services as a percentage of revenues has historically
been affected by numerous factors, including the use of lower introductory rates
to attract new customers at new dispatch offices.
Temporary workers assigned to customers remain Labor Ready employees. Labor
Ready is responsible for the employee-related expenses of its temporary workers,
including workers' compensation coverage, unemployment compensation insurance,
and Medicare and Social Security taxes. 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 its 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 not material during any period presented
herein.
- -------------------------------------------------------------------------------
Page 10
<PAGE>
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain items in the Company's Consolidated Statements of Operations for the
periods indicated:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
APRIL 3, MARCH 31,
-------- ---------
1998 1997
-------- ---------
<S> <C> <C>
Revenues from services . . . . . . . . . . . . . . . . . 100.0% 100.0%
Cost of services . . . . . . . . . . . . . . . . . . . . (69.9) (71.4)
Selling, general and administrative expenses . . . . . . (28.6) (29.7)
Depreciation and amortization. . . . . . . . . . . . . . (1.5) (1.8)
Interest income, net . . . . . . . . . . . . . . . . . . 0.2 0.3
Income (loss) before tax (provision) benefit . . . . . . 0.3 (2.6)
Net income (loss). . . . . . . . . . . . . . . . . . . . 0.2 (1.5)
</TABLE>
THIRTEEN WEEKS ENDED APRIL 3, 1998 COMPARED TO THIRTEEN WEEKS ENDED
MARCH 31, 1997
DISPATCH OFFICES. The number of offices grew to 420 at April 3, 1998 from
316 locations at December 31, 1997, a net increase of 104 dispatch offices, or
32.9%. During the quarter ended March 31, 1997, the number of offices grew to
256 from 200 locations at December 31, 1996, a net increase of 56 dispatch
offices, or 28.0%. The Company estimates that its aggregate costs of opening
104 new dispatch offices in the first quarter of 1998 was approximately $5.2
million, an average of approximately $50,000 per dispatch office, compared to
aggregate costs of approximately $1.8 million, an average of approximately
$33,000 per dispatch office, to open 56 new stores in the first quarter of 1997.
The increase in per-store costs in 1998 was primarily the result of the addition
of a CDM to each dispatch office. Approximately $1.1 million of 1998 costs
includes dispatch office pre-opening costs such as salaries, recruiting,
testing, training, lease and other related costs, which are capitalized and
amortized using the straight-line method over two years. The remaining
approximately $4.1 million includes computer systems and other equipment related
costs, CDMs, and leasehold improvements.
REVENUES FROM SERVICES. Revenues from services increased to $94.0
million in the first quarter of 1998 as compared to $51.7 million in the first
quarter of 1997, an increase of $42.3 million or 81.8%. The increase in
revenues is due primarily to the increase in the number of dispatch offices
and continued increases in revenues from mature dispatch offices.
Additionally, the Company continues to consolidate its position in the
marketplace and build brand awareness, eliminating the need to discount
billing rates to attract new customers at new dispatch offices.
COST OF SERVICES. Cost of services increased to $65.7 million in the first
quarter of 1998 from $36.9 million in the first quarter of 1997, an increase of
$28.8 million or 77.9%. The increase in cost of services was due largely to the
81.8% increase in revenue from 1997 to 1998. Cost of services was 69.9% of
revenue in the first quarter of 1998 compared to 71.4% of revenue in the first
quarter of 1997. Cost of services as a percentage of revenues improved 1.5% as
compared to the first quarter of 1997 because the Company is generally no longer
required to use introductory lower rates to attract new customers in new
dispatch offices. Additionally, the Company's workers' compensation claims
experience continued to improve. Workers' compensation expense as a percentage
of sales improved from 5.8% in the first quarter of 1997 to 5.1% in the first
quarter of 1998.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $26.9 million in the first quarter of 1998 as
compared to $15.4 million in the first quarter of 1997, an increase of $11.5
million or 74.7%. The increase was largely due to an 81.8% increase in revenue
from 1997 to 1998. Selling, general and administrative expenses were 28.6% of
revenues in the first quarter of 1998 as compared to 29.7% of revenues in the
first quarter of 1997. The decrease in selling, general and administrative
expenses as a percentage of revenue in the first quarter of 1998 is due mainly
to economies of scale on fixed and semi-fixed dispatch office operating and
corporate administrative costs. The Company expects that selling, general and
administrative expenses as a percentage of revenues may fluctuate in future
periods as the Company from time to time upgrades its operating and
administrative capabilities to accommodate anticipated revenue and dispatch
office growth.
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DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense was $1.4 million in the first quarter of 1998 and $0.9 million in the
first quarter of 1997, an increase of $0.5 million or 48.5%. The increase in
depreciation and amortization expense is primarily the result of amortization
of dispatch office pre-opening costs as the Company continued its rapid
expansion by adding 116 stores in 1997 and 104 stores during the first quarter
of 1998. Additionally, the Company added approximately $4.0 million in
property and equipment during 1997 and $5.9 million in the first quarter of
1998. These additions primarily include information systems, CDMs and other
equipment for new dispatch offices and enhanced management information systems
hardware and software.
In March 1998, the Accounting Standards Executive Committee (the "AcSEC")
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("the Statement"). The Statement establishes new rules for the
financial reporting of start-up costs, and will require the Company to expense
the cost of establishing new dispatch offices as incurred and write off, as a
cumulative effect of adopting the Statement, any capitalized pre-opening costs
in the first quarter of the year adopted. The Statement is effective for years
beginning after December 31, 1998 and the Company will adopt it in the first
quarter of 1999. The effect of adopting the Statement will be to recognize a
non-operating expense, net of tax, of approximately $1.8 million, plus any
additional pre-opening costs capitalized during the next three quarters ended
December 31, 1998, net of amortization expense recognized during the period.
INTEREST INCOME, NET. Interest income, net of interest expense was $208,000
in the first quarter of 1998 compared to $162,000 in the first quarter of 1997,
an increase of $46,000 or 28.4%. The increase was the result of higher invested
cash balances in the first quarter of 1998 as compared to the first quarter of
1997. The increase was offset in part by an increase in interest expense from
$22,627 in 1997 to $104,348 in 1998 as the Company has recorded the acquisition
of the CDMs as a capital lease.
TAXES ON INCOME. Taxes on income increased to a provision of $0.1 million
in the first quarter of 1998 from a tax benefit of $0.6 million in the first
quarter of 1997, an increase of $0.7 million. The increase in taxes was due
to the increase in pretax income to $0.1 million in the first quarter of 1998
from a pretax loss of $1.4 million in the first quarter of 1997. The
Company's effective tax rate was 42.0% in the first quarter of 1998 as
compared to 41.6% in the first quarter of 1997. The principal difference
between the statutory income tax rate and the Company's effective income tax
rate result from state income taxes, certain non-deductible expenses and
non-taxable interest income.
The Company had a net deferred tax asset of approximately $4.5 million at
April 3, 1998, resulting primarily from workers' compensation claims reserves.
The Company has not established a valuation allowance against this net deferred
tax asset as management believes that it is more likely than not that the tax
benefits will be realized in the future based on the historical levels of
pre-tax income and expected future taxable income.
NET INCOME. Net income for the quarter ended April 3, 1998 increased to
$0.1 million from a 1997 first quarter net loss of $0.8 million, an increase
of $0.9 million. The increase was largely due to an 81.8% increase in
revenues in first quarter 1998 to $94.0 million from first quarter 1997
revenues of $51.7 million. Contributing to the increase in net income was a
decrease in cost of services as a percentage of revenues from 71.4% in first
quarter 1997 to 69.9% in the first quarter of 1998 and a decrease in selling,
general and administrative costs as a percentage of revenues from 29.7% in the
first quarter of 1997 to 28.6% in first quarter 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $1.8 million in the first quarter
of 1998 and $5.6 million in the first quarter of 1997. The decrease in cash
used in operations in 1998 as compared to 1997 is largely due to net income for
the quarter ended April 3, 1998, increases in non-cash expenses including
depreciation and amortization and the provision for doubtful accounts, and a
smaller increase in the Company's net deferred tax asset. Additionally, the net
change in assets and liabilities including accounts receivable, accounts
payable, accrued wages and benefits and workers' compensation deposits and
credits was smaller than in the first quarter of 1997. These changes were
offset by a decrease in income taxes payable and an increase in prepaid expenses
and other in first quarter 1998 as compared to first quarter 1997.
The Company used net cash in investing activities of $2.8 million in first
quarter 1998, and $3.5 million in the first quarter of 1997. The decrease in
cash used in investing activities in 1998 as compared to 1997 is due primarily
to the replacement of restricted cash held by the Company's captive insurance
subsidiary with letters of credit in December 1997. The Company's expenditures
for new dispatch office pre-opening costs declined to $1.1 million in first
quarter 1998 compared to $1.4 million in the first quarter of 1997 and was
approximately offset by an increase in the Company's capital expenditures from
$1.4 million in first quarter 1997 to $1.7 million in the first quarter of 1998.
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<PAGE>
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Net cash provided by (used in) financing activities was $348,000 in first
quarter 1998 and $(127,000) in first quarter 1997. The increase in cash
provided by financing activities in 1998 as compared to 1997 is due mainly to
the Company's sale of common stock on exercise of options and warrants and
through the Employee Stock Purchase Plan. Additionally, in the first quarter of
1997 the Company used cash of $529,000 to repurchase shares of its common stock
on the open market, a use of cash which was partially offset by an increase in
checks issued against future deposits of $381,000.
During 1997, the Company entered into a line-of-credit agreement with U.S.
Bank with interest at the bank's prime rate (8.5% at April 3, 1998). The
agreement allows the company to borrow up to the lesser of $30 million or 80% of
eligible accounts receivable, as defined by the bank. The line-of-credit is
secured primarily by the Company's accounts receivable and expires in June 1999.
The line-of-credit agreement requires that the Company maintain minimum net
worth and working capital amounts. The Company was in compliance with the
requirements at April 3, 1998.
As discussed further in Note 2 to the consolidated financial statements, in
1997 the Company replaced the cash deposits required by its workers'
compensation program with irrevocable letters of credit totaling $15.9 million.
The letters of credit bear fees of .75% and are supported by an equal amount of
available borrowings on the line-of-credit. Accordingly, at April 3, 1998, no
borrowings were outstanding on the line-of-credit, $15.9 million was committed
by the letters of credit and $14.1 million was available for borrowing. During
April 1998, the Company increased the letters of credit to $18.1 million and has
agreed to increase the letters of credit by a further $3.7 million through June
1998. During 1998, the Company expects to complete negotiations with its lender
to increase its line-of-credit to approximately $60 million on substantially the
same terms as its existing line-of-credit.
In December 1997, the Company entered into an agreement to lease 450
automated CDMs for installation in all of the Company's dispatch offices. The
fair market value of the CDMs at inception of the lease is approximately $6.2
million. The lease is payable over 84 months with an imputed interest rate of
9.0% and is secured by the CDMs. During the three months ended April 3, 1998,
the Company installed 302 CDMs in its dispatch offices throughout the United
States. Accordingly, the Company recorded assets under capital lease and
capital lease obligations totaling $4.2 million with future minimum lease
payments over the next 5 years of approximately $0.4 million per year. The
Company anticipates installing CDMs at all of its dispatch offices in the United
States during 1998. Included as an exhibit to this Form 10-Q is an example of a
CDM lease, all such leases having substantially identical terms and conditions.
Historically, the Company has financed its operations through cash
generated by external financing including term loans, lines-of-credit and a
common stock offering completed in 1996. The principal use of cash is to
finance the growth in receivables and the cost of opening new dispatch
offices. The Company may experience cash flow deficits from operations and
investing activities while the Company expands its operations, including the
acceleration of opening new dispatch offices. Management expects cash flow
deficits to be financed by profitable operations, the use of the Company's
line of credit, and may consider other equity or debt financings as necessary.
The Company analyzes acquisition opportunities from time to time and may
pursue acquisitions in certain circumstances. Any acquisitions the Company
enters into may require additional equity or debt financing.
INFORMATION PROCESSING SYSTEMS AND THE YEAR 2000
As the year 2000 approaches, there are uncertainties concerning whether
computer systems will properly recognize date-sensitive information when the
year changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or fail. Management believes that the year 2000
does not pose a significant operational problem for the Company's computer
systems. The Company has completed its assessment of its significant systems
and believes them to be year 2000 compliant. Management has not completed its
assessment of the systems of third parties with which it deals. While it is not
possible at this time to assess the effect of a third party's inability to
adequately address year 2000 issues, management does not believe the potential
problems associated with year 2000 will have a material effect on its financial
condition or results of operations.
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<PAGE>
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
THE FOLLOWING EXHIBITS ARE BEING FILED AS A PART OF THIS REPORT:
EXHIBIT NO. DESCRIPTION
10.9 Form of equipment lease and related schedules at
various dates Between the Company as lessor,
T&W Financial Corporation as Lessee and Diebold
Corporation as vendor.
27 Financial Data Schedule as of April 3, 1998 and March
31, 1997 and for each of the thirteen week periods
then ended.
(b) REPORTS ON FORM 8-K
On January 6, 1998, the Company filed a Report on Form 8-K, reporting
under Item 5, disclosing that the Company had declared a dividend of
one preferred share purchase right for each outstanding share of
common stock of the Company. The dividend was payable to shareholders
of record on February 2, 1998.
SIGNATURES
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 May 8, 1998
-------------------------------------------------- ------------------
Glenn A. Welstad Date
Chairman of the Board, Chief Executive
Officer and President
By: /s/ Joseph P. Sambataro, Jr. May 8, 1998
-------------------------------------------------- ------------------
Joseph P. Sambataro, Jr. Date
Executive Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
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Page 14
<PAGE>
<PAGE>
T & W
FINANCIAL SERVICES COMPANY, L.L.C. 6416 Pacific Hwy. E., Tacoma WA 98424
P.O. Box 3028, Federal Way, WA 98063 LEASE NUMBER: 1 11291901
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LESSEE: LABOR READY, INC.
ADDRESS: 1016 South 28th Street EQUIPMENT: 331 W. Main St. (store 295)
Tacoma, WA 98409 LOCATION: Durham NC 27701 (Durham County)
EQUIPMENT & VENDOR(S): SEE SCHEDULE "A" ATTACHED HERETO AND MADE A PART HEREOF
TERMS: 84 MONTHLY RENTALS OF $224.92 + APPLICABLE NC TAX OF 13.50 = 238.42
(U.S.) SECURITY DEPOSIT: $238.42
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TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessee hereby leases from Lessor, and Lessor leases to Lessee, the
personal property described above, together with any replacement parts,
additions, repairs or accessories now or hereafter incorporated in or affixed to
it (hereafter referred to as the "Equipment").
2. ACCEPTANCE OF EQUIPMENT. Lessee agrees to inspect the Equipment and to
execute an Acknowledgement and Acceptance of Equipment by Lessee notice as
provided by Lessor, after the Equipment has been delivered and after Lessee is
satisfied that the Equipment is satisfactory in every respect Lessee hereby
authorizes Lessor to insert in this Lease serial numbers or other identifying
data with respect to the Equipment.
- --------------------------------------------------------------------------------
3. DISCLAIMER OF WARRANTIES AND CLAIMS: LIMITATION OF REMEDIES. THERE ARE NO
WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by his
signature below as follows:
(a) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR
ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT
TO ANY CHARACTER-ISTICS OF THE EQUIPMENT;
(b) Lessee has fully inspected the Equipment which it has requested
Lessor to acquire and lease to Lessee, and the Equipment is in good condition
and to Lessee's complete satisfaction;
(c) Lessee leases the Equipment "as is" and with all faults;
(d) Lessee specifically acknowledges that the Equipment is leased to
Lessee soley for commercial or business purposes and not for personal, family,
household or agricultural purposes;
(e) If the Equipment is not properly installed, does not operate as
represented or warranted by the supplier or manufacturer, or is unsatisfactory
for any reason, regardless of cause or consequence, Lessee's only remedy, if
any, shall be against the suppiler or manufacturer of the Equipment and not
against Lessor;
(f) Provided Lessee is not in default under this Lease, Lessor assigns
to Lessee any warranties made by the supplier or the manufacturer of the
Equipment:
(g) LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL
DAMAGES AGAINST LESSOR; and
(h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY
OTHER OBLIGATION UNDER THIS LEASE.
4. CHOICE OF LAW, JURISDICTION AND VENUE. This Lease shall not be effective
until signed by Lessor at its principal place of business listed above, Tacoma,
WA, and shall be considered to have been made and shall be construed under the
laws of the State of Washington. Lessee agrees that should any legal action,
suit, or proceeding by initiated by any part to this Agreement with regard to or
arising out of this Lease, or the Equipmant covered hereby, such action shall be
brought only in the Superior Court of the State of Washington in and for Pierce
County and all parties consent to the jurisdiction of such Court as to all such
actions.
5. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the intent
of both parties to this Lease that it qualify as a statutory finance lease under
Article 2A of the Uniform Commercial Code. Lessee acknowledges and agrees that
Lessee has selected both: (1) the Equipment; and (2) the supplier from whom
Lessor is to purchase the Equipment. Lessee acknowledges that Lessor has not
participated in any way in Lessee's selection of the Equipment or of the
suppiler, and Lessor has not selected, manufactured, or supplied the Equipment.
<PAGE>
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE
LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND THAT
LESSEE SHOULD CONTACT THE SUPPLIER OF THE EQUIPMENT FOR A DESCRIPTION OF ANY
SUCH RIGHTS.
6. ASSIGNMENT BY LESSEE PROHIBITED. Lessee is expressly prohibited from making
any assignment of this Lease, subleasing the Equipment or any interest therein,
pledging or transferring the Lease, or otherwise disposing of the Equipment
covered hereby, in the absence of prior written consent of Lessor.
7. RENTAL PAYMENTS. Lessee agrees to pay rent in accordance with the terms
herein, the first monthly payment to be due on the 15TH DAY OF FEBRUARY, 1998,
and a like amount on the same day of each succeeding calendar month thereafter,
payments to be made at Lessor's address set forth above, or as otherwise
directed by Lessor.
(a) THIS LEASE IS NOT CANCELABLE OR TERMINABLE BY LESSEE.
(b) SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS WHICH ARE A PART
OF THIS LEASE.
(c) LESSEE UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER, NOR ANY
SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER IS AN AGENT OF LESSOR, NO
BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER
IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE ANO NO
REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE BROKER OR
SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, SHALL IN
ANY WAY AFFECT LESSEE'S DUTY TO PAY THE RENTALS AND TO PERFORM LESSEE'S
OBLIGATIONS SET FORTH IN THIS LEASE.
LESSEE ACKNOWLEDGES HAVING READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS LEASE, INCLUDING THE REVERSE SIDE HEREOF, AND AGREES TO BE
BOUND BY ALL OF THE TERMS AND PROVISIONS CONTAINED HEREIN UPON THE EXECUTION OF
THIS LEASE AGREEMENT OR EARLIER ACCEPTANCE OF THE LEASED EQUIPMENT.
LESSOR: T & W FINANCIAL SERVICES COMPANY L.L.C. LESSEE: LABOR READY, INC.
/s/ Michael Price DATE 1/15/98 /s/ Robert H. Sovern DATE 1/14/98
- ---------------------- --------- ---------------------------- ----------
Robert H. Sovern Assistant Treasurer
<PAGE>
8. COMMENCEMENT AND EXPIRATION. This lease shall commence upon Lessor's
acceptance of it. Lessor shall have no obligation to Lessee under this Lease if
the Equipment, for whatever reason, is not delivered to Lessee within 90 days
after Lessee signs this Lease. Lessor shall have no obligation to Lessee under
this Lease if Lessee fails to execute and deliver to Lessor an Acknowledgement
and Acceptance of Equipment by Lessee notice for the Equipment within 30 days
after the Equipment is delivered to Lessee. Unless earlier terminated or
cancelled by Lessor, this Lease shall expire upon the expiration of the number
of months (following Lessee's acceptance of the Equipment) set forth in "Term of
Lease" above.
9. SECURITY DEPOSIT. As security for the prompt and full payment of the
amounts due under this Lease, and Lessee's complete performance of all of its
obligations under this Lease, and any extension or renewal hereof, Lessee has
deposited with Lessor the security amount set forth in the section show as
"Security Deposit". In the event any default shall be made in the performance
of any of Lessee's obligations under this Lease, Lessor shall have the right,
but shall not be obligated, to apply the security deposit to the curing of such
default. Within 15 days after Lessor mails notice to Lessee that Lessor has
applied any portion of the security deposit to the curing of any default, Lessee
shall restore said security deposit to the full amount set forth above. On the
expiration or earlier termination of cancellation of this Lease, or any
extension or renewal hereof, provided Lessee has paid all of the rent called for
and fully performed all other provisions of this Lease, Lessor will return to
the Lessee any then remaining balance of said security deposit, without
interest. Said security deposit may be commingled with Lessor's other funds.
10. LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY. In the event
it is necessary to amend the terms of this Lease to reflect a change in one more
of the following conditions:
(a) Lessor's actual cost of procuring the Equipment, or
(b) Lessor's actual cost of providing the Equipment to Lessee, or
(c) A change in rental payments a result of (a) or (b) above, or
(d) Description of the Equipment;
Lessee agrees that any such amendment shall be described in a letter from Lessor
to Lessee, and unless within 15 days after the date of such letter Lessee
objects in writing to Lessor, this Lease shall be deemed amended and such
amendments shall be incorporated in this Lease herein as if originally set
forth.
Lessee grants to Lessor a specific power of attorney for Lessor to use as
follows: (1) Lessor may sign and file on Lessee's behalf any document Lessor
deems necessary to perfect or protect Lessor's interest in the Equipment or
pursuant to the Uniform Commercial Code; and (2) Lessor may sign, endorse or
negotiate for Lessor's benefit any instrument representing proceeds from any
policy of insurance covering the Equipment.
11. LOCATION. The Equipment shall be kept at the location specified above or,
if none is specified, at Lessee's address as set forth above and shall not be
removed without Lessor's prior written consent.
12. USE. Lessee shall use the Equipment in a careful manner, make all
necessary repairs at Lessee's expense, shall comply with all laws relating to
its possession, use, or maintenance, and shall not make any alterations,
additions or improvements to the Equipment without Lessor's prior written
consent. All additions, repairs or improvements made to the Equipment shall
belong to Lessor.
13. OWNERSHIP; PERSONALTY. The Equipment is, and shall remain, the property of
Lessor, and Lessee shall have no right, title, or interest in the Equipment
except as expressly set forth in this Lease. The Equipment shall remain
personal property even though installed in or attached to real property.
14. SURRENDER. By this Lease, Lessee acquires no ownership rights in the
Equipment, and has no option to purchase same. Upon the expiration, or earlier
termination or cancellation of this Lease, or in the event of default under
Paragraph 22 hereof, Lessee agrees to pay a termination fee of $150.00 and, at
its expense, shall return the equipment in good repair, ordinary wear and tear
resulting from proper use thereof alone expected, by delivering it, packed and
ready for shipment, to such place or carrier as Lessor may specify. In the
event Lessee fails to return the equipment to Lessor as directed, Lessor is
entitled to charge and Lessee shall be obligated to pay rent to Lessor at the
same rate provided herein, as a month-to-month lease, until the equipment is
return to Lessor.
15. RENEWAL. At the expiration of the Lease, Lessee shall return the Equipment
in accordance with Paragraph 14 hereof. At Lessor's option, this Lease may be
continued on a month-to-month basis until 30 days after Lessee returns the
Equipment to Lessor. In the event the Lease is so continued, Lessee shall be
assessed and agrees to pay a renewal fee of $150.00 and, in additon, shall pay
to Lessor rentals in the same periodic amounts indicated under "Amount of Each
Payment," above.
<PAGE>
16. LOSS AND DAMAGE. Lessee shall at all times after signing this Lease bear
the enire risk of loss, theft, damage or destruction of the Equipment from any
cause whatsoever, and no loss, theft, damage or destruction of the Equipment
shall relieve Lessee of the obligation to pay rent or to comply with any other
obligation under this Lease. In the event of damage to any part of the
Equipment, Lessee shall immediately place the same in good repair at Lessee's
expense. If Lessor determines that any part of the Equipment is lost, stolen,
destroyed, or damaged beyond repair, Lessee shall, at Lessee's option do one of
the following:
(a) Replace the same with like equipment in good repair, acceptable to
Lessor; or
(b) Pay Lessor in cash the following: (i) all amounts due by Lessee to
Lessor under this Lease up to the date of the Loss; (ii) the
accelerated balance of the total amounts due for the remaining term
of this Lease attributable to said item, discounted to present value
at a discount rate of 6% as of the date of loss; and , (iii) the
Lessor's estimate as of the time this Lease was entered into of
Lessor's residual interest in the Equipment discounted to present
value at a discount rate of 6%, as of the date of loss. Upon
Lessor's receipt of payment as set forth above, Lessee shall be
entitled to title to the Equipment without any warranties. If
insurance proceeds are used to fully comply with this subparagraph,
the balance of any such proceeds shall go to Lessee to compensate
for loss of use of the Equipment for the remaining term of the Lease.
17. INSURANCE; LIENS; TAXES. Lessee shall provide and maintain insurance
against loss, theft, damage, or destruction of the Equipment in an amount not
less than the full replacement value of the Equipment, with loss payable to
Lessor. Lessee also shall provide and maintain comprehensive general all-risk
liability insurance including but not limited to product liability coverage,
insuring Lessor and Lessee, with a severability of interest endorsement, or its
equivalent against any and all loss or liability for all damages, either to
persons or property or otherwise, which might result from or happen in
connection with the condition, use, or operation of the Equipment, with such
limits and with an insurer satisfactory to Lessor. Each policy shall expressly
provide that said insurance as to Lessor and its assigns shall not be
invalidated by any act, omission, or neglect of Lessee and cannot be cancelled
without 30 day's prior written notice to Lessor. As to each policy Lessee shall
furnish to Lessor a certificate of insurance from the insurer, which certificate
shall evidence the insurance coverage required by this paragraph. Lessor shall
have no obligation to ascertain the existance of or provide any insurance
coverage for the Equipment or for Lessee's benefit.
Lessee shall keep the Equipment free and clear of all levies, liens, and
encumbrances. Lessee shall pay all charges and taxes (local, state and federal)
which may now or hereafter upon the ownership, leasing, rental, sale, purchase,
possession, or use of the Equipment, excluding, however, all taxes on or
measured by Lessor's net income. If Lessee fails to procure or maintain said
insurance or to pay said charges or taxes. In that event, Lessor shall have the
right, but shall not be obligated, to effect such insurance, or pay such charges
or taxes, Lessor shall notify Lessee of such payment and Lessee shall repay to
Lessor the cost thereof within 15 days after such notice is mailed to Lessee.
18. INDEMNITY. Lessee shall idemnify Lessor against any claims, actions,
damages or liabilities, including all attorney fees, arising out of or connected
with Equipment, without limitation. Such indemnification shall survive the
expiration, cancellation, or termination of this Lease. Lessee waives any
immunity lessee may have under any industrial insurance act, with regard to
indemnification of Lessor.
19. ASSIGNMENT BY LESSOR. Any assignee of Lessor shall have all of the rights
but none of the obligations of Lessor under this Lease. Lessee shall recognize
and hereby consents to any assignment of this Lease by Lessor, and shall not
assert against the assignee any defense, conterclaim, or setoff that Lessee may
have against Lessor. Subject to the foregoing, this Lease inures to the benefit
of and is binding upon the heirs, devisees, personal representatives, survivors,
successors in interest, and assignes the parties hereto.
20. SERVICE/COLLECTION CHARGES. If Lessee shall fail to make any payment
required by this Lease within 10 days of the due date thereof, Lessee shall pay
Lessor a service charge of 10% of the amount due; provided, that no more than
one such service charge shall be imposed on any delinquent payment; and in
additon, Lessee agrees to pay all collection charges and other expenses incurred
by Lessor as a result of the failure to timely make any payments under the
Lease. Furthermore, should Lessee default under the Lease result in Lessor
accelerating all unpaid future rentals, Lessee agrees to pay to Lessor interest
on the accelerated amount, and any other amount due or to become due under the
Lease, from the due date thereof until paid at the rate of 18% per annum or the
maximum rate allowed by law.
<PAGE>
21. TIME OF ESSENCE. Time is of the essence, and this provision shall not be
impliedly waived by the acceptance on occasion of late or defective performance.
22. DEFAULT. Lessee shall be in default if:
(a) Lessee shall fail to make any payment due under the term of this
Lease for a period of 10 days from the due date thereof; or
(b) Lessee shall fail to observe, keep, or perform any provision of
this Lease, and such failure shall continue for a period of 10 days;
or
(c) Lessee has made any misleading or false statement in connection
with application for or performance of this Lease; or
(d) The equipment or any part thereof shall be subject to any lien,
levy, seizure, assignment, transfer, bulk transfer, encumbrance,
application, attachment, execution, sublease, or sale without prior
written consent of Lessor, or if Lessee shall abandon the Equipment or
permit any other entity or person to use the Equipment without the
prior written consent of the Lessor; or
(e) Lessee dies or ceases to exist; or
(f) Lessee defaults an any other agreement it has with Lessor; or
(g) Any guarantor of this Lease defaults on any obligation to Lessor
or any of the above listed events of default occur with respect to any
guarantor or any such guarantor files or has filed against it a
petition under the bankruptcy laws.
23. REMEDIES. If Lessee is in default, Lessor, with or without notice to
Lessee, shall have the right to exercise any one or more of the following
remedies, concurrently or separately, and without any election of remedies,
concurrently or separately, and without any election of remedies being deemed to
have been made:
(a) Lessor may enter upon Lessee's premises and without any court
order or other process of law may repossess and remove the Equipment,
or render the Equipment, or render the Equipment unusable without
removal, either with or without notice to Lessee. Lessee hereby
waives any trespass or right of action for damages by reason of such
entry, removal, or disabling. Any such repossession shall not
constitute a termination of this Lease unless Lessor so notifies
Lessee in writing;
(b) Lessor may require Lessee, at its expense, to return the Equipment
in good repair, ordinary wear and tear resulting from proper use
thereof alone excepted, by delivering it, packed and ready for
shipment, to such place or carrier as Lessor may specify;
(c) Lessor may cancel or terminate this Lease and may retain any and
all prior payments paid by Lessee;
(d) Lessor may declare all sums due and to become due under the Lease
immediately due and payable, including as to any or all items of
Equipment, without notice or demand to Lessee;
(e) Lessor may re-lease the Equipment, without notice to Lessee, to
any third party, upon such terms and conditions as Lessor alone shall
determine, or may sell the Equipment, without notice to Lessee at
private or public sale, at which sale Lessor may be the purchaser;
(f) Lessor may sue for and recover from Lessee the sum of all unpaid
rents and other payments due under this Lease then accrued, all
accelerated future payments due under this Lease discounted to their
present value at a discount rate of 6% as of the date of default, plus
Lessor's estimate at the time of Lease was entered into of Lessor's
residual interest in the Equipment, reduced to present value at a
discount rate of 6% as of the date of default, less the net proceeds
of disposition, if any, of the Equipment;
(g) To pursue any other remedy available at law, by statute or in
equity.
No right or remedy herein conferred upon or reserved to Lessor is exclusive of
any other right or remedy herein, or by law or by equity provided or permitted,
but shall be cumulative of every other right or remedy given herein or now or
hereafter existing by law or equity or by statute or otherwise, and may be
enforced concurrently therewith or from time to time. No single or partial
exercise by Lessor of any right or remedy shall preclude any other or further
exercise of any other right or remedy.
24. UCC FILING. Lessee authorizes Lessor to file financing statements in
accordance with the Uniform Commercial Code signed only by the Lessor or one
signed by Lessor as Lessee's Attorney-in-fact which Lessee hereby grants the
Lessor.
25. MULTIPLE LESSEES. Lessor may, with consent of any one of the Lessees
hereunder, modify, extend, or change any of the terms hereof without consent or
knowledge of the others, without in any way releasing, waiving, or impairing any
right granted to Lessor against the others. Lessees and each of them are
jointly and severally responsible and liable to Lessor under this Lease.
26. EXPENSE OF ENFORCEMENT. In the event of any legal action with respect to
this Lease, the prevailing party in any such action shall by entitled to
reasonable attorney fees, including attorney fees incurred at the trial level,
including action in bankruptcy court, on appeal or review, or incurred without
action, suits, or proceedings, together with all costs and expenses incurred in
pursuit thereof.
<PAGE>
27. ENTIRE AGREEMENT; NO ORAL MODIFICATIONS; NO WAIVER. This instrument
constitutes the entire agreement between Lessor and Lessee. No provision of the
lease shall be modified or rescinded unless in writing signed by a
representative of Lessor. Waiver by Lessor of any provision hereof in one
instance shall not constitute a waiver as to any other instance.
28. SEVERABILITY. This Lease is intended to constitute a valid and enforceable
legal instrument, and no provision of this Lease that may be deemed
unenforceable shall in any way invalidate any other provision or provisions
hereof, all of which shall remain in full force and effect.
<PAGE>
SCHEDULE "A"
This Schedule is to be attached to and become a part of Lease No. 11291901
---------------
dated 1/15/98
-----------
QUANTITY | DESCRIPTION OF EQUIPMENT
- --------------------------------------------------------------------------------
VENDOR 1: Diebold Incorporated
P.O. Box 8230
Canton OH 44711
(1) INTERBOLD 1064 1 SERIES FRONT LOAD LOBBY ATM
- --------------------------------------------------------------------------------
This Schedule is hereby verified correct and the undersigned Lessee acknowledges
receipt of a copy.
LESSOR: T & W FINANCIAL SERVICES COMPANY L.L.C LESSEE: LABOR READY, INC.
/s/ Michael Price /s/ Robert H. Sovern
--------------------------------------- --------------------------------
Robert H. Sovern Asst. Treasurer
<PAGE>
- --------------------------------------------------------------------------------
(1)Debtor(s) (Last Name First) and (2) Secured Party(ies) (Name(s) and
Address(es): Address(es):
Labor Ready, Inc. T&W Funding Company I, L.L.C.
331 W. Main Street Store #295 P.O. Box 3028
Durham, NC 27701
Federal Way, WA 98063
91-1766212
- --------------------------------------------------------------------------------
(3)(a) Collateral is or includes (4) Assignee(s) of Secured Party,
fixtures. Address(es):
(b) Timber, Minerals or Accounts
Subject to G.S. 25-9-103(5) are covered
(c) Crops Are Growing Or To Be
Grown*
On Real Property Described in Section (5).
If either block 3(a) or block 3(b)
applies describe real estate, including
record owner(s) in section (5).
- --------------------------------------------------------------------------------
(5) This Financing Statement Covers the Following types (or items) of Property
11291901 Filed with: Durham
This is a protective lease filing covering the following personal property:
Debtor/Lessee grants to Creditor/Lessor herein a security interest in the
specific equipment described herein together with any and all accessions
including, but not limited to, any repair or warranty exchanges, additions or
replacements to such property and any proceeds from the sale of the property.
Equipment: INTERBOLD 1064 1 SERIES FRONT LOAD LOBBY ATM Lease#11291901
*On Farm Collateral Filing, Name County Debtor Resides in
Products of the Collateral Are Also Covered. (Cannot be Filed unles County
is named.)
- --------------------------------------------------------------------------------
(6) Signatures: Debtor(s) Secured Party(ies) (or Assignees)
T & W Funding Company I, L.L.C.
/s/ Robert H. Sovern
- ------------------------------------ ----------------------------------------
Labor Ready, Inc.
(By)
(By) ------------------------------------
----------------------------------- Signature of Secured Party Pemlitted
(1) FILING OFFICER COPY - NUMERICAL in Lieu of Debtor's Signature
(1) Collateral is subject to Security
Interst in Another jurisdiction and
Collateral Is Brought Into This State
Debtor's Location Changed To This State
(2) For Other Situations See:
G. S.25-9-402 (2)
- --------------------------------------------------------------------------------
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA 91408-0275 Tel (818) 909-2200 UCC-1
- --------------------------------------------------------------------------------
Return Acknowledgement To:
Data File Services, Inc.
P.O. Box 275
Van Nuys
CA 91408-2750
<PAGE>
The UCC filing is pursuant to WASHINGTON UNIFORM COMMERCIAL CODE, Chapter 62A.9
RCW, to perfect a security Interest in the below named collateral
- --------------------------------------------------------------------------------
1. DEBTOR(S) (see instruction #2) 2. FOR OFFICE USE ONLY - DO
Debtor 1 NOT WRITE IN THIS BOX
PERSONAL (last, first,
middle name and address) SSN:_________
BUSINESS (legal business
name and address) FEIN:________
Debtor 2
SSN:_____________
FEIN: ___________
Labor Ready, Inc.
1016 S. 28th Street
Tacoma, WA 98409
TRADE NAME, DBA, AKA
- --------------------------------------------------------------------------------
3. SECURED PARTY(IES) (name and address) 4. ASSIGNEE(S) of SECURED PARTY(IES)
if applicable (name and address)
T&W Funding Company I, L.L.C.
P.O. Box 3028
Federal Way, WA 98063 91 -1766212
(name and address)
- --------------------------------------------------------------------------------
5. SECURED PARTY CONTACT PERSON:______________Phone: ______
- --------------------------------------------------------------------------------
6. CHECK ONLY IF APPLICABLE: (For definitions of TRANSMITTING UTILITY AND
PRODUCTS OF COLLATERAL, see instruction sheet.)
Debtor is a Transmitting Utility Products of Collateral are also covered
Filed With: WASHINGTON
- --------------------------------------------------------------------------------
7. THIS FINANCING STATEMENT covers the following collateral: (Attach
additional 8.5" x 11: sheet(s) if needed.)
This is a protective lease filing covering the following personal property:
Debtor/Lessee grants to Creditor/Lessor herein a security interest in the
specific equipment described herein together with any and all accessions
including, but not limited to, any repair or warranty exchanges, additions or
replacements to such property and any proceeds from the sale of the property.
Equipment: INTER-BOLD 1064 I SERIES FRONT LOAD LOBBY ATM
- --------------------------------------------------------------------------------
8. RETURN ACKNOWLEDGEMENT COPY TO: 9. File With
(name and address) UNIFORM COMMERCIAL CODE
Data File Services, Inc DEPARTMENT OF LICENSING
P.O. Box 275 P.O. BOX 9660
Van Nuys, CA 91408-275 Olympia, WA 98507-9660
800-331-3282 206-753-2523
818-909-4717
MAKE CHECKS PAYABLE TO THE
DEPARTMENT OF LICENSING
- --------------------------------------------------------------------------------
10. FOR OFFICE USE ONLY IMAGES TO BE
FILMED
- --------------------------------------------------------------------------------
11. If collateral is described below,
this statement may be signed by the 1.________________________________
Secured Party instead of the Debtor. ORIGINAL FILING NUMBER
Please check the appropriate box,
complete the adjacent lines and box 2.__________________________________
13, if collateria is: FILING OFFICE WHERE FILED
Already subject to a security 3.__________________________________
interest in another jurisdiction FORMER NAME OF DEBTOR(S)
when it ws brought into this
state or when the debtor's
location was changed to this
state. (complete adjacent lines 1
and 2)
SEE ATTACHED
proceeds of the original
collateral described above in
which a security interest was
perfected. (complete adjacent
lines 1 and 2) listed on a filing
which has lapsed. (complete
adjacent lines 1 and 2)
listed on a filing which has
lapsed. (complete adjacent lines
1 and 2)
acquired after a change of name,
identity, or corporate structure
of the debtor(s). (complete
adjacent line 1,2 and 3)
- --------------------------------------------------------------------------------
12. DEBTOR NAME(S) AND SIGNATURE(S): 13. SECURED PARTY NAME(S) AND
SIGNATURE(S) ARE REQUIRED IF BOX 11
Labor Ready, Inc. HAS BEEN COMPLETED.
_____________________________________ T & W Funding Company I, L.L.C.
TYPE NAME(S) OF DEBTOR(S); AS IT
APPEARS IN BOX 1. _____________________________________
/s/ Robert H. Sovern TYPE NAME(S) OF SECURED PARTY(IES) AS
___________________________________ IT APPEARS IN BOX 3 OR 4.
SIGNATURE(S) OF DEBTOR(S) _____________________________________
SIGNATURE(S) OF SECURED PARTY(IES)
___________________________________
SIGNATURE(S) OF DEBTOR(S) _____________________________________
SIGNATURE(S) OF SECURED PARTY(IES)
- --------------------------------------------------------------------------------
(1) FILING OFFICER - INDEX Prepared with UCC Direct for Window Data File
Services, Inc. P.O. Box 275, Van Nuys, CA 91480-0275
Tel (818) 909-2200
- --------------------------------------------------------------------------------
<PAGE>
DELIVERY & ACCEPTANCE
T & W 6416 Pacific Hwy. E. LEASE NUMBER: 11291901
FINANCIAL SERVICES COMPANY L.L.C. Tacoma, WA 98424
P.O. Box 3028
Federal Way, WA 98063 DATE OF LEASE: 1/15/98
- --------------------------------------------------------------------------------
LESSEE: LABOR READY, INC.
SEE SCHEDULE "A" ATTACHED HERETO AND MADE A PART HEREOF
ACKNOWLEDGEMENT AND ACCEPTANCE
OF EQUIPMENT BY LESSEE
Lessee hereby acknowledges that the Equipment described above has been received
in good condition and repair, has been properly installed, tested, and
inspected, and is operating satisfactorily in all respects for all of Lessee's
intended uses and purposes. Lessee hereby accepts unconditionally and
irrevocably the Equipment.
By signature below, Lessee specifically authorizes and requests Lessor to make
payment to the supplier of the Equipment. Lessee agrees that said Equipment has
not been delivered, installed, or accepted on a trial basis.
WITH THE DELIVERY OF THIS DOCUMENT TO LESSOR, LESSEE ACKNOWLEDGES AND AGREES
THAT LESSEE'S OBLIGATIONS TO LESSOR BECOME ABSOLUTE AND IRREVOCABLE AND LESSEE
SHALL BE FOREVER ESTOPPED FROM DENYING THE TRUTHFULNESS OF THE REPRESENTATIONS
MADE IN THIS DOCUMENT.
DATE OF ACCEPTANCE: LESSEE: LABOR READY, INC.
/s/ Robert H. Sovern
----------------------------------------
January 14, 1998 Robert H. Sovern Asst. Treasurer
- ----------------
IMPORTANT: THIS DOCUMENT HAS LEGAL
AND FINANCIAL CONSEQUENCES TO YOU.
DO NOT SIGN THIS DOCUMENT UNTIL YOU
HAVE ACTUALLY RECEIVED ALL OF THE
EQUIPMENT AND ARE COMPLETELY
SATISFIED WITH IT.
<PAGE>
INSURANCE AUTHORIZATION LETTER
T & W 6416 Pacific Hwy. E. LEASE NUMBER: 11291901
FINANCIAL SERVICES COMPANY L.L.C. Tacoma, WA 98424
P.O. Box 3028
Federal Way, WA 98063 DATE OF LEASE: 1/15/98
To: NAME________________________ For Office Use Only/Date:___________________
ADDRESS_____________________ Policy #:___________________________________
CITY/STATE/ZIP______________ Carrier:____________________________________
(AREA CODE) PHONE #_________ Expiration Date:____________________________
CONTACT PERSON______________
FROM: LABOR READY, INC.
1016 S. 28th St.
Tacoma WA 98409
We have entered into a lease agreement with T & W FINANCIAL SERVICES COMPANY
L.L.C. / FUNDING COMPANY I, L.L.C. or its Assignee for the following equipment,
with a value of $13,992.80.
SEE SCHEDULE "A" ATTACHED HERETO AND MADE A PART HEREOF
This equipment is located at: 331 W. MAIN ST. (STORE 295), DURHAM NC 27701.
This is a net lease and we are responsible for the insurance cost. Please see
that we have immediate coverage and notify Lessor at once in the form of a copy
of the insurance policy or a Certificate of Insurance. If the letter is sent,
please include therein the standard 10-day notice of cancellation clause.
xxx PHYSICAL DAMAGE: Insurance is to be provided for fire, theft, extended
coverage, vandalism and malicious mischief for the full value of the
equipment. Lessor is to be named as LOSS PAYEE. AS ITS INTEREST MAY
APPEAR.
LIABILITY: Coverage should be written with minimum limits of
S100,000/300,000 for BODILY INJURY and $50,000 PROPERTY DAMAGE.
Lessor is to be named as ADDITIONAL INSURED.
TITLED VEHICLE LIMITS: The minimum limits for EACH vehicle lease shall be:
Bodily Injury Rability per individual $500,000.00
Bodily Injury liability per accident $500,000.00
Property Damage liability $250,000.00
Fire, Theft and Comprehensive FULL
If you have any questions, please call T&W Leasing, Inc. Insurance Department at
1(206)922-5164.
Thank you.
/s/ Robert H. Sovern
- ---------------------------------
Robert H. Sovern Asst. Treasurer
<PAGE>
EXHIBIT "A"
T & W 6416 Pacific Hwy. E.
FINANCIAL SERVICES COMPANY L.L.C. Tacoma, WA 98424
P.O. Box 3028
Federal Way, WA 98063
Lessee guarantees to Lessor that the net sales proceeds from the sale of
the equipment at the end of the term of the Lease shall be $1.00. Lessor shall
use its best efforts to sell the equipment within sixty (60) days of the
termination of the Lease. The sale may be on any terms so long as Lessor acts in
good faith and in a commercially-reasonable manner, but so long as Lessor so
acts, it shall be conclusively presumed that the sales price is the fair market
value of the equipment and that the failure to realize the guaranteed residual
value is due to excessive use of the property or other cause, not anticipated
when the Lease was signed, and entitling the Lessor to additional rental. Under
this clause, if the net sales proceeds are less than the guaranteed residual
value, Lessee agrees to pay Lessor in cash, the difference within thirty (30)
days after the date of sale.
Attached to and made a part of that certain Equipment Lease Agreement dated
1/15/98 , between LABOR READY. INC., as Lessee, and T & W FINANCIAL SERVICES
COMPANY L.L.C., as Lessor.
LESSOR: T&W FINANCIAL SERVICES COMPANY L.L.C. LESSEE: LABOR READY, INC.
/s/ Michael Price /s/ Robert H. Sovern
- ------------------------------------- --------------------------------
Robert H. Sovern Asst. Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE APRIL 3,
1998 CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-03-1998
<CASH> 17,880
<SECURITIES> 0
<RECEIVABLES> 40,113
<ALLOWANCES> 2,963
<INVENTORY> 0
<CURRENT-ASSETS> 63,031
<PP&E> 19,066
<DEPRECIATION> 3,395
<TOTAL-ASSETS> 84,485
<CURRENT-LIABILITIES> 14,535
<BONDS> 86
0
854
<COMMON> 50,539
<OTHER-SE> 7,396
<TOTAL-LIABILITY-AND-EQUITY> 58,789
<SALES> 0
<TOTAL-REVENUES> 94,030
<CGS> 0
<TOTAL-COSTS> 65,695
<OTHER-EXPENSES> 27,153
<LOSS-PROVISION> 1,140
<INTEREST-EXPENSE> (208)
<INCOME-PRETAX> 250
<INCOME-TAX> 105
<INCOME-CONTINUING> 145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,383
<SECURITIES> 0
<RECEIVABLES> 24,911
<ALLOWANCES> 1,401
<INVENTORY> 0
<CURRENT-ASSETS> 43,704
<PP&E> 10,634
<DEPRECIATION> 1,806
<TOTAL-ASSETS> 63,083
<CURRENT-LIABILITIES> 11,092
<BONDS> 86
0
854
<COMMON> 49,321
<OTHER-SE> 78
<TOTAL-LIABILITY-AND-EQUITY> 50,253
<SALES> 0
<TOTAL-REVENUES> 51,714
<CGS> 0
<TOTAL-COSTS> 36,922
<OTHER-EXPENSES> 15,461
<LOSS-PROVISION> 851
<INTEREST-EXPENSE> (162)
<INCOME-PRETAX> (1,358)
<INCOME-TAX> 565
<INCOME-CONTINUING> (793)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (793)
<EPS-PRIMARY> (.04) <F1>
<EPS-DILUTED> (.04) <F1>
<FN>
<F1> Adjusted for the Company's 3 for 2 Stock Split Effective 10/24/97.
</FN>
</TABLE>
