Trueblue, Inc. · NYSE:TBI
Trueblue — Labor Ready — Investor Presentation (November 2006)
56 slides from Trueblue's investor presentation, Nov 15, 2006
Slide 1: Nov. 15, 2006 Grand Hyatt Hotel, New York
Nov. 15, 2006 Grand Hyatt Hotel New York, NY
Slide 2: Safe Harbor Statement
Safe Harbor Statement Cautionary Note about Forward–Looking Statements Certain statements made by us in this presentation that are not historical facts or that relate to future plans, events or performances are forward–looking statements within the meaning of the federal securities laws. Our actual
Slide 3: Agenda
Agenda Introductions Industry and Market Review Brand Fundamentals Business Strategies Financial Update and Outlook 3
Slide 4: Introductions
Introductions Bob Sullivan Chairman Steve Cooper Gates McKibbin Joe Sambataro Directors Steve Cooper Chief Executive Officer Derrek Gafford Chief Financial Officer Bob Breen VP, Strategic Planning Stacey Burke Director of Communications Darren McCallon Director of Finance Management 4
Slide 5: We Put People to Work
“We Put People to Work.” The largest supplier of on–demand labor with branch locations in the U.S., Canada and the U.K. Supplier of light industrial labor to small and mid–size businesses with locations in Florida and other Southeastern states. Southeastern supplier of on–demand labor with locations
Slide 6: Investment Highlights
Investment Highlights Service leader in blue-collar staffing Favorable demographic trends Growth platforms in place for two specialty niches Industry-leading return on assets and equity Available capital to invest in additional growth platforms Significant share repurchase program Labor Ready is the
Slide 7: Strong Management Team
Strong Management Team 38 7 President – CLP Resources Noel Wheeler 8 8 Chief Information Officer Billie Otto 19 6 VP – Sales and Marketing Ed Nubel 3 3 VP – Human Resources Ric Mercuri 10 8 Senior VP – Operations Wayne Larkin 5 5 Chief Financial Officer Derrek Gafford 11 7 VP – Spartan Staffing Tim
Slide 8: Financial Highlights
Financidl Highlights
Slide 9: Consolidated Revenues
In millions/U.S. Dollars Consolidated Revenues +17% +18% +10% (E) 9 E - Based on management guidance issued on Nov. 15, 2006. 0 200 400 600 800 1000 1200 1400 1600 2004 2005 2006E
Slide 10: Net Income per Share
Net Income per Share E - Based on management guidance issued on Nov. 15, 2006. +83% +57% +13% (E) 10 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 2004 2005 2006E
Slide 11: Return On Assets
Return On Assets 8% 11% 12% (E) 11 E - Based on management guidance issued on Nov. 15, 2006. 0% 2% 4% 6% 8% 10% 12% 14% 2004 2005 2006E
Slide 12: Return On Equity
Return On Equity E - Based on management guidance issued on Nov. 15, 2006. 15% 20% 20% (E) 12 0% 5% 10% 15% 20% 25% 2004 2005 2006E
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Slide 14: Large and Growing Market
U.S. Temporary Help Breakdown Staffing Industry Analysts, 2006 Projection. Staffing Industry Analysts, 2006 Industrial Staffing Growth Assessment. Large and Growing Market U.S. staffing market: $131 billion industry (a) U.S. temporary help market: $94 billion (a) U.S. industrial temporary help: $26
Slide 15: Favorable Long-term Demographics
* Source: Bureau of Labor Statistics, 2014 Projections. Favorable Long-term Demographics Temporary Employment the fastest growing industry over the next decade with 1.6 million new jobs by 2014* Unskilled Jobs 23 of the top 30 fastest growing occupations* Construction the only U.S. goods– producing
Slide 16: Industrial Temporary Help
Staffing Industry Analysts, 2006 Industrial Staffing Growth Assessment. Figures represent estimated market total in billions. Industrial Temporary Help (a) Industrial: $26 billion, largest of any staffing segment (a) Robust growth of 6.4% per year expected over next decade (a) 16 Inspectors, testers
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Slide 18: Brand Overview
Brand Overview Small–Medium Customers Small–Medium Customers Small–Medium Customers Marketing Efforts Split 50/50 Between Customers and Workers Marketing Efforts Split 50/50 Between Customers and Workers 90% of Marketing Focused on Customers $12–$18 per Hour Wage Rate Weekly Pay $7–$8 per Hour Wage
Slide 19: On-Demand Labor
On-Demand Labor The largest supplier of on-demand manual labor with 829 branch locations in the U.S., Canada and the U.K. 19
Slide 20: On-Demand Labor: Estimated U.S. Market
Company research estimates. On-Demand Labor Estimated U.S. market: $6-7 billion (a) 20 Labor Ready & Workforce 20% Top 5 Competitors 10% Untapped Demand 30% Other Competitors 40%
Slide 21: On-Demand Labor: Value Proposition
On-Demand Labor Fast access to work and pay Minimal experience requirements Bridge to full-time employment Access to workers on short notice Convenience and flexibility Compliance and administration Value Proposition Value Proposition ~ 575,000 employees in 2005 Short employment span (130 hours per
Slide 22: On-Demand Labor 2006 Sales Trends by Geography
Southeast 175 Branches 22% of Sales YTD -2% Northeast 168 Branches 17% of Sales YTD +1% Northwest 53 Branches +9% of Sales YTD +15% Southwest 156 Branches 23% of Sales YT D +7% Canada 41 Branches 4% of Sales YTD +0% United Kingdom 49 Branches 3% of Sales YTD -1% South Central 78 Branches 11% of Sale
Slide 23: Light Industrial
Light Industrial Rapidly growing supplier of light industrial workers to small and mid–size businesses with 28 locations in Florida and other Southeastern states. 23
Slide 24: Light Industrial: Estimated U.S. Market
Light Industrial Estimated U.S. market: $9 billion (a) Staffing Industry Analysts 2006 Industrial Staffing Growth Assessment and company research estimates. 24 Spartan Staffing ~1% Other Competitors 38% Manpower, Adecco & Kelly 49% Top 5 Spartan Competitors 13%
Slide 25: Light Industrial: Value Proposition
Light Industrial Access to continuous employment Variety of assignments & projects Competitive pay and benefits Manage labor costs through volatility of seasons and projects Access to quality skilled workers Industry knowledge and experience Value Proposition Value Proposition ~6,000 workers in 2005
Slide 26: Light Industrial Sales Trends by Geography
Light Industrial Southeast 21 Branches 81% of Sales YTD +28% South Central 8 Branches 19% of Sales YTD +132% 2006 Sales Trends by Geography 26
Slide 27: Skilled Trades
Skilled Trades One of the nation’s largest suppliers of skilled trades construction staffing with 69 locations in 22 U.S. states. 27
Slide 28: Skilled Trades: Estimated U.S. Market
Skilled Trades Estimated U.S. market: $1.6 billion (a) Staffing Industry Analysts, 2006 Industrial Staffing Growth Assessment. Company research estimates. 28 CLP 9% Top 5 Competitors 22% Other Competitors 69%
Slide 29: Skilled Trades: Value Proposition
Skilled Trades Access to continuous employment Variety of assignments and projects Competitive pay and benefits Manage labor costs through volatility of seasons and projects Access to quality skilled workers Industry knowledge and experience Value Proposition Value Proposition ~ 10,000 employees in
Slide 30: Skilled Trades Sales Trends by Geography
Skilled Trades Southeast 12 Branches 5% of Sales YTD +120% Northeast 11 Branches 11% of Sales YTD +12% Northwest 7 Branches 11% of Sales YTD +29% Southwest 33 Branches 72% of Sales YTD +8% South Central 5 Branches 1% of Sales YTD +559% 2006 Sales Trends by Geography 30
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Slide 32: Key Business Strategies
Key Business Strategies Grow same branch revenues and profits Expand into new markets Diversify services and brands 3 2 1 32
Slide 33: Grow Same Branch Revenues & Profits
Grow Same Branch Revenues & Profits Sales Development & Customer Service Sales Culture and Accountability Customer Service Standards New Front-end System Employee Development Leadership Development Key for Growth Quality Employee Contact with Customers Enhanced Workforce Retaining High Quality Worke
Slide 34: Expand into New Markets
Expand into New Markets Opening 250 New Branches Over Next 5 Years Hold openings to 5% of base in any one year: Limits dilution to current earnings Keeps field management focused on growing our existing branches Avoids over–investment in the event of economic downturn Consistent approach to levels o
Slide 35: Expand into New Markets: Resource Allocation
Expand into New Markets Resource Allocation How We Decide Where to Expand Market potential and return on investment Human capital availability and readiness Speed to breakeven Track record of successful new branch expansion 35 2
Slide 36: Diversify Services and Brands
Diversify Services and Brands Strategic Anchors Blue Collar Growth Platform Service Leader 36 3
Slide 37: Acquisition Qualifiers
Diversify Services and Brands Acquisition Qualifiers Fits our strategic anchors Aligns with our values and operational structure Does not exceed our capacity to absorb financially or operationally; free of financial or legal difficulties Meets our return on investment requirements 37 3
Slide 38: Targeted Diversification
OVERLAP WITH LABOR READY CUSTOMERS OVERLAP WITH LABOR READY TEMPORARY EMPLOYEES LOW HIGH LOW HIGH Clerical Accounting IT Professional Engineering Heath Care Skilled Trades Light Industrial Event Staffing Transportation Staffing Job Training & Certification Financial Services Income Tax Preparation P
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Slide 40: Long-Term Growth
Annual Revenue and Operating Income (in $M) Revenue Operating Income No. of Branches 106 200 316 486 687 816 756 748 779 815 887 926 Long-Term Growth 40 E - Based on management guidance issued on Nov. 15, 2006. 0 200 400 600 800 1,000 1,200 1,400 1,600 1995 1996 1997 1998 1999 2000 2001 2002 2003 20
Slide 41: Monthly Sales Growth Trends
Monthly Sales Growth Trends 41 0% 5% 10% 15% 20% 25% Acquisition 12.0% 12.0% 14.0% 12.1% 11.7% < /font> 10.7% 11.7% 12.5% Organic 7.4% 10.7% 11.0% 8.5% 11.3% 10.9% 8.8% 9.5% 8.0% 4.3% 3.6% 3.6% 2.5% O '05 N D Jan '06 F M A M J J A S O 30%
Slide 42: Consistent Gross Margin
Consistent Gross Margin Gross Margin as a Percentage of Revenue 42 E - Based on management guidance issued on Nov. 15, 2006. 20% 22% 24% 26% 28% 30% 32% 34% Q-1 2004 Q-2 2004 2004 Q-4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006E Q-3
Slide 43: Selling, General & Admin. Costs
Selling, General & Admin. Costs Trailing four quarters as a percentage of revenue 43 E - Based on management guidance issued on Nov. 15, 2006. 20.0% 20.5% 21.0% 21.5% 22.0% 22.5% 23.0% 23.5% 24.0% 24.5% 25.0% Q-1 2004 Q-2 2004 Q-3 2004 Q-4 2004 Q-1 2005 Q-2 2005 Q-3 2005 Q-4 2005 Q-1 2006 Q-2 2006 Q
Slide 44: Net Income
Net Income Trailing four quarters as a percentage of revenue 44 E - Based on management guidance issued on Nov. 15, 2006. 0% 1% 2% 3% 4% 5% 6% Q-1 2004 Q-2 2004 Q-3 2004 Q-4 2004 Q-1 2005 Q-2 2005 Q-3 2005 Q-4 2005 Q-1 2006 Q-2 2006 Q-3 2006 Q-4 2006E
Slide 45: Key Business Strategies
Key Business Strategies Grow same branch revenues and profits Expand into new markets Diversify services and brands 3 2 1 45
Slide 46: Branch Profit Potential
BRANCH VOLUME Branch Profit Potential Revenue $1,500,000 $1,700,000 $200,000 Gross Profit 450,000 510,000 60,000 Gross Profit Margin 30.0% 30.0% 30.0% Branch Expenses 236,000 256,000 20,000 As a % of Revenue 15.7% 15.1% 10.0% Operating Income $214,000 $254,000 $40,000 Operating Income Margin 14.3% 1
Slide 47: Branch Maturity Drives Revenue
AVERAGE BRANCH AGE = 7.8 YEARS Revenue in $M % of Offices in 2006 $1.4 Million per Branch in 2006 Excludes closed locations and acquired locations from Spartan Staffing and CLP Resources. Branch Maturity Drives Revenue Branch Revenue and Maturity (2003 – 2005 Avg.) 47 1 $0 $200 $400 $600 $800 $1,000
Slide 48: Operating Leverage Drives Profits
(a) Earnings per share sensitivity analysis based on 900 branches, 31.0% gross profit margins, management’s estimates of fixed and variable expenses, regional and back office overhead and related assumptions, at varying levels of per office revenues. 2004 $1.3M Earnings per Share Assumption Average
Slide 49: New Branch Economics
New Branch Economics a Targeted branch-level profitability as a percentage of revenues in the fourth year of operation. Excludes regional and corporate costs, depreciation, amortization, interest and taxes. Capital Expenditure Costs $35,000 $50,000 $70,000 Revenue Expectations (in thousands) Gross M
Slide 50: On-Demand Labor New Branch Performance
On-Demand Labor New Locations Planned for 2007: 10–20 new Labor Ready and Workforce locations Throughout North America No new locations planned for UK in 2007 New Branch Performance (2005-2006) Sales Profit 50 2 0 100 200 300 400 500 600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 < /font> Branch A
Slide 51: Light Industrial New Branch Performance
Light Industrial New Locations Planned for 2007: 8-10 new locations Spread evenly throughout the year Sales Profit 51 2 New Branch Performance (2005-2006) 0 200 400 600 800 1000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Branch Age in Months Avg. TTM Sales ($000s) Class of 2006 (9 Branches) Class of
Slide 52: Skilled Trades New Branch Performance
Skilled Trades 12-15 new locations Spread evenly throughout the year New Locations Planned for 2007: Sales Profit* * Both the model and class of 2006 actual results include an $8,000 monthly allocation for the cost of a sales representative. 52 2 New Branch Performance (2005-2006) 0 200 400 600 800
Slide 53: 2006 Sales Breakdown by Brand
2006 Sales Breakdown by Brand 53 3 Spartan Staffing 3% CLP Resources 11% Labor Ready Workforce 86%
Slide 54: 2007 Financial Outlook
2007 Financial Outlook 2006 E 2007 Forecast E Revenues $1,353 - 1,356 $1,395 - $1,425 Organic Growth 5% - 6% 3% - 5% Acquisition Growth 4% - Total Revenue Growth 9 - 10% 3% - 5% Net Income $70 - $71 $73 - $75 Net Income Growth 12% - 14% 4% - 6% Net Income per Share $1.32–$1.34 $1.40 - $1.45 Capital
Slide 55: Strong Balance Sheet
Strong Balance Sheet Cash and investments $160M $176M Current ratio 3.4 3.2 Restricted cash $152M $153M Workers’ compensation reserve $185M $168M Long-term debt $ 1M $ 2M Shareholders’ equity $357M $349M Q3 2006 Q4 2005 55
Slide 56: Investment Highlights
Investment Highlights Service leader in blue-collar staffing Favorable demographic trends Growth platforms in place for two specialty niches Industry-leading return on assets and equity Available capital to invest in additional growth platforms Significant share repurchase program Labor Ready is the