Trueblue, Inc. · NYSE:TBI
Trueblue — Labor Ready — Investor Day (November 2005)
56 slides from Trueblue's investor day presentation, Nov 16, 2005
Slide 1: Labor Ready Analyst Day
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: Introduction to Directors
Introduction to Directors Bob Sullivan Chairman Keith Grinstein Gates McKibbin Joe Sambataro Bill Steele
Slide 4: Management Team
Management Team Joe Sambataro Derrek Gafford CEO VP, Finance Steve Cooper Yolanda Hubbard President & CFO VP, National Sales & Marketing Bob Breen Wayne Larkin VP, Strategic Planning Regional VP, Operations Chris Burger Gary North Regional VP, Operations Regional VP, Operations Jim Defebaugh Billie
Slide 5: "We Put People to Work."
“We Put People to Work.” More than 600,000 people employed annually 797 BRANCHES. AICLe 53 BRANCHES 21 BRANCHES e SPARTAN STAFFING {1B BRANCHES The largest supplier of on-demand manual labor with branch locations in the U.S., Canada and the U.K. One of the largest companies focusing exclusively on s
Slide 6: Investment Highlights
Investment Highlights ¢ Market leader in fragmented industry ° Large and growing market ° Favorable demographic trends » Diverse customer base * Scalable and flexible model ° Significant capacity for operating margin expansion ¢ Strong management and controls Labor Ready is realizing significant ope
Slide 7: Consolidated Revenues
Consolidated Revenues In milionstUS. Dollars $1,400 $1,200 $1,000 +3% $800 $600 $400 $200 $0 18% © +17% 2003 2004 2005E - Based onmanagement guidance issued on Nov 16,2005
Slide 8: Average Sales per Branch
Average Sales per Bran In thousands!US. Dollars $1,400 $1,300 $1,200 +0% $1,100 ‘$1,000 $900 $800 +6% (©) +13% 2003 2004 2005E, - Based onmanagement guidance issued on Nov 16,2005
Slide 9: Consolidated Net Income %
Consolidated Net Income % 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2.0% 5.0% €) 3.5% 2003 2004 2005 - Based onmanagement guidance issued on Nov 16,2005
Slide 10: Diluted Earnings per Share
luted Earni $1.20 $1.00 $0.80 $0.60 +46% $0.40 $0.20 $0.00 +83% 2003 2004 2008E - Based onmanagement guidance issued on Nov 16,2005
Slide 11: Return on Assets
12% (©) 10% 9% 5% 2003 2004 2005E - Based onmanagement guidance issued on Nov 16,2005
Slide 12: Return On Equity
eturn On Equity 20% 19% €) 18% es 15% 14% 12% 10% 8% 8% 6% 4% 2% 0% 2003 2004 2005E - Based onmanagement guidance issued on Nov 16,2005
Slide 13: Growth Industry
th In y ° US. staffing market: $131 billion industry @ ¢ U.S. industrial staffing: $22 billion @ Estimated U.S. on-demand labor market: $6-$7 billion () On Demand Labor Market Breakdown Labor Ready Tops nd ‘Competitors ~ as 10% Untapped Demand 30% (@) Stang Industry Analyte, 2006 Projection Other (©
Slide 14: Diversified Customer Base
ified C mer Base Div ¢ More than 300,000 customers — Largest customer represents less than 2% of sales — Average yearly sales per customer of $3,900 — More than 400 industry classifications Sales by Industry in 2005 Construction & Landscaping 39% Manufacturing 18% ssa Hospitality, Services & Other 1
Slide 15: Branch Office Model
Branch Office Model ¢ Matching customer and worker needs Branch Office Work Site Branch Office + Recruit workers + Work performed + Workers exchange + Screen and test = Customer signs time card for pay + Assign work Uso Gate + Provide safety equipment and training
Slide 16: Strong Value Proposition
Strong Value Proposition Attracting customers with: — Outsource the recruiting, screening and hiring of workers — Eliminate hiring and layoff costs — Access to workers on short notice — Management of labor costs — National scale and multiple locations — 100% Satisfaction Guarantee e Attracting worke
Slide 17: Branch Expansion
Branch Expansion * Quickly developed branch footprint ° Acquired 25 branches in 2004; and 50 in 2005 ° Opening approximately 45 new locations in 2006 (5% of base) 1000 00 200 700 Number of sé Branch Offices 500 400 00 200 10 0 1995 "1996 "1997 "19881999" 2000” 2001 2002 2003 2004” 2005" 2005
Slide 18: Temporary Employee Ratio
atio Temporary Employee * Temporary employees make up a small but growing share of total employment in the U.S. 3.5% Temporary employees as a percentage of 0.5% total U.S. employment 85 '86 "87 ‘88 89 ‘OO ‘91 92 3 4 ‘95 96 B7 98 “99 00 ‘D1 02 03 OF OS * Source: Bureau of Labor Statistics
Slide 19: Construction Employment Growth
Construction Employment Growth Construction Employment Growth [/ 39% of Sales] (Year over year growth in total permanent employees) 12% 8% 4% FN lis _ Mitts. al 000K TT" 4% -8%: cece cereCCrecececeser: BPS RRS S ERS ERATE RAGE RIE ‘Source: Bureau of Labor Statistics. Measured an a trailing 12 month
Slide 20: Manufacturing Employment Growth
nufacturing Employment Growt Manufacturing Employment Growth [_ 18% of Sales] (Year over year growth in total permanent employees) 12% 8% 4%: 12%: Cee eee eee ee eee eee ee ee eee SSR GPSS FS SSS FPESEFEES FEES S ‘Source: Bureau of Labor Statistics. Measured on a tailing 12 month basis. Not seasonal
Slide 21: Transportation Employment Growth
Transportation Employment Growth Transportation Employment Growth [9% of Sates | (Year over year growth in total permanent employees) 12% 8% 4%: —.A _~-sit ll 7 4% (istics Measured on a traling 12 month basis. Net seasonally adjusted
Slide 22: Wholesale Employment Growth
Wholesale Employment Growth Wholesale Trade Employment Growth [9% of Sates | (Year over year growth in total permanent employees) 12% 8% 12% Bsss8seqeqsesgssss 8s esses essays 8 Sess Ss s 58S SS 8S Fs § 8 5 gees 3 623 FFSRFFEBSESSSEREESERBIS ‘Source: Bureau of Labor Statistics, Measured on a tailing
Slide 23: Retail Employment Growth
tail Employment Grow Retail Employment Growth [8% of sais | (Year over year oronthin otal permanent empoyees) 12% 8% 4% owt! -4% 0% 12% Seeseeggessgsseges5aeges ESS RS ER Reese ese EES EES SE PSs GPSFFPSFFPS ERPS FERS ‘Source: Bureau of Labor Statistics. Measured an a taiing 12 month basis. Not seas
Slide 24: Help Supply Employment Growth
Help Supply Employment Growth Help Supply Employment Growth (Year over year growth in total employees) 12% T%4} ll j 2%} } PATA lo 0000 Tm ]] 1 -3% | 8% 13% l 18% Besse se5ggseesseese8 sees ee 8 BESS SS SSS SSS SS SB FE $2383 623 FFSRFFEBSESSSEREESERBIS ‘Source: Bureau of Labor Statistics. Measured
Slide 25: Favorable Demographic Trends
Favorable Demographic Trends Temporary Employment expected to be the fifth fastest growing industry over the next decade with nearly 1.8 million new jobs by 2012* Unskilled Jobs expected to make up 70% of the top 20 fastest growing occupations* Construction expected to be the only U.S. goods— produc
Slide 26: Business Strategies and Financial Update
Business Strategies and Financial Update
Slide 27: Key Business Strategies
Key Business Strategies Gg Grow same branch revenues and profits fag Expand into new markets a Diversify services and brands
Slide 28: Grow Same Branch Revenues & Profits
Grow Same Branch Revenues & Profits * Sales — Branches currently at 50% of optimal capacity — Comprehensive sales training launched in 2005 — CRM System deployed in 2005 — New sales force incentive plan slated for 2006 » Customer Service — Improved tenure rates of branch teams — Expanded customer ca
Slide 29: Regional Results
Regional Results des acquired location Northwest —J 53 Branches 8% of Sales YTD +16% Southwest 186 Branches 23% of Sales YTD +11% Canada ~ 37 Branches Midwest “vg 4% of Sales 109 Branches Se VTP H10% 11% of Sales ay | Pan ys YTD-1% een Northeast 169 Branches 17% of Sales YTD +10% Southeast 149 Branc
Slide 30: Branch Profit Potential
Branch Profit Potential SENSITIVITY ANALYSIS BASED ON Revenue $1,400,000 $1,600,000 + $1,800,000 Gross Profit 420,000 480,000 540,000 Gross Profit Margin 30.0% 30.0% 30.0% Branch Expenses 216,000 230,000 244,000 As a % of Revenue 18.4% 14.4% 13.6% Operating Income $204,000 $250,000 $296,000 Operatin
Slide 31: Targeted Incremental Profit %
Targeted Incremental Profit % Percentage of Incremental Same Branch Sales Revenue 100% Gross Profit 30% Variable Operating Costs* 14% Income before Taxes 16% Net Income after Taxes 10% ‘id copmate oot se percep tinct eon. 2005E Net Income After Taxes Is Expected to be 5.0% as Based on anager guidanc
Slide 32: Branch Maturity Drives Revenue
Branch Maturity Drives Revenue Branch Revenue and Maturity (2002 — 2004 Avg.) $1.4 Million Revenue in $ 1 2¥ts, 36. 4¥Is, SY. 6Yrs, 7YIS. SYS. SYN. 10+¥Is AVERAGE BRANCH AGE = 68 YEARS. cuts atest tom spat Sng andi? Recs, BRD
Slide 33: Operating Leverage Drives Profits
Operating Leverage Drives Pr Earnings Per Share Sensitivity Analysis (a) 5 $250 5 $200 3 2 $150 6 2 $100 = $050 a $0.00 al $11 $12 $13 $14 $15 $16 $17 $18 $19 $20 Average Revenue per Branch ($ Millions) (si ey nd aii Gi i a, wa tad wld Variable expenses, regional and back office overhead and related
Slide 34: Expand into New Markets
Expand into New Markets ¢ Holding New Branch Openings to 5% of Base — Limits dilution to current earnings — Modest number of new branch openings keeps field management focused on growing our existing branches — Avoids over-investment in the event of economic downturn — Consistent approach to levels
Slide 35: Expand into New Markets
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
Slide 36: Brand Distinctions
Brand Distinctions SPARTAN Hicup STAFFING’ ON DEMAND LIGHT INDUSTRIAL, SKILLED TRADES Short Assignments, Longer Assignments Longer Assignments All Industries Manufacturing & Warehousing Construction $6-$7 per Hour Wage Rate $7-$8 per Hour Wage Rate $12-$18 per Hour Wage Rate Daily Pay ‘Weebly Pay ‘W
Slide 37: New Branch Economics
New Branch Eco icant e TABOR READY | SPARTAN HIclLP SIAN $35,000 $50,000 $70,000 Capital Expenditure Costs Revenue Expectations (in thousands) ae $2900 i] ~-l all Gross Margins 30-32% 22-24% 28-30% Initial Expense Structure $12,000 per Mo. $15,000 per Mo. $25,000 per Mo. Targeted Breakeven Period 12
Slide 38: Labor Ready Expansion Plan
6 Labor Ready Expansion Pla ° 20-25 New Labor Ready Locations ¢ Disbursed throughout North America » No New Locations Planned for UK in 2006
Slide 39: 2006 Spartan Expansion Plans
2006 Spartan Expansion Plans * 10 New locations in 2006 SPARTAN + Areas of Expansion Focus: pee — Adjacent Markets Existing Locations No Presence
Slide 40: 2006 CLP Expansion Plans
2006 CLP Expansion Plans * 12 New Locations in 2006 ° Areas of Expansion Focus: — Texas and Florida |__| Existing Locations {0 2008 Expansion Area No Presence 2006 Expansion Focus By
Slide 41: Diversify Services & Brands
Diversify Services & Brands « Rationale — Common customer base — Leverage recruiting resources — Channel synergies — Opportunity to create a growth platform — Opportunity to leverage management and systems * Constraints — Fit and culture — Financial capital / investment return — Human capital — Spee
Slide 42: Significant Growth Opportunities
Significant Growth Opportunities ° Available Through Diversification Executing a strategy to build the dominant national provider in the fragmented temporary light industrial and skilled trades staffing industries, serving small- and mid- sized companies. Recruiting Potential in Labor Ready’s Cross-
Slide 43: Targeted Diversification
Targeted Diversification Payroll Processing HIGH Hospitality Staffing PEO Services Clerical Accounting Job Training & iT Certification Professional | Enaneenng Financial Services ° income Tax Preparation S| teat care LOW HIGH
Slide 44: Spartan Acquisition
rtan — Acquired April 1, 2004 — 2003 Revenues of $50 Million — 2003 Cash Flow* of $2.3 Million — $9.8 Million Purchase Price — Accretive: Projected 2005 Cash Flow* of $3.9 Million @ SPARTAN STAFFING® up Acquisitio $80 $70 $60 $50 $40 $30 $20 $10 $0 2008 23 2008 $6 2008 $39
Slide 45: CLP Resources Acquisition
P Resources Acquisition CLP Resources Sales Growth — Acquired May 27, 2005 25% — 2004 Revenues of $114 Million Rresnequisaion — 2004 Cash Flow* of $7.5 Million — $46 Million Purchase Price —Accretive: Projected 2005 mm Cash Flow* of $6.5 Million 10% 4 HIcLP a] | mT a a ao a a a 04 04 Od Od 050505.
Slide 46: Speed of Integration
Speed of Integration Integration Phases 1. Culture 2. Policies and Systems 3. Cross Selling and Employee Referrals
Slide 47: Financial Highlights
Financial Highlights ¢ Improving revenue and profitability ° Strong gross margins * Controlled operating costs * Significant operating leverage ° Strong balance sheet
Slide 48: Long-Term Growth
Long-Term Growth Annual Revenue and Operating Income (in $M) id it % 1.200 & 2 ae $ 5 co 60 o Zz 2 401 30 20 38 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006E No. ofBranches 106 200 316 496 687 816756748 «779818895, - Based onmanagement guidance issued on Nov 16,2005
Slide 49: Quarterly Sales Growth Trends
ly Sales Growth Trends 25 9h peso See SS ee 20% 4 ----yee----- J) ----------------------- =F coo 2 2 2 8 ee 10% + i ae 4 -------- ee 5% | -- E 0% Sep. Jan Tofu lo |e] als Acquistion Growh| 6% [7% | 7% [7% | 7% | 7% | om | om | om | 13% | tom | am | Toe imOrgaricGrowh | 9% | 13% [ 10% | 15% | 12% | 1
Slide 50: Consistent Gross Margin
Consistent Gross Margin ° Gross Margin as a Percentage of Revenue a1 @2 02 @4 a1 a2 @3 a4 at a2 a aw 2003 2003 2003 ©2003 © 2004 ©2004 2004 2004 2005 2005 ©2005 © 2005E - Based onmanagement guidance issued on Nov 16,2005
Slide 51: Selling, General & Admin. Costs
Selling, General & Admin. Cos ° Trailing four quarters as a percentage of revenue 26% 25% 24% 23% 22% 21% 20% a1 a2 @3 a4 a1 @2 a3 a4 a1 a2 a3 a4 2003 ©2003 2003 2003 2004 ©2004-2004 «04 «005-2005 «2005 © —2005E - Based onmanagement guidance issued on Nov 16,2005
Slide 52: Net Income
Net Income ° Trailing four quarters as a percentage of revenue 5% 4% 3% 2% 1% 0% a1 a2 a3 a4 a1 @2 as oa a1 a2 @3 a4 2003 2003-2003» 2008 «2004 «2004 «2004-2004 2005 «2005-2005 | 2005E - Based onmanagement guidance issued on Nov 16,2005
Slide 53: 2005E Net Income Growth
20055 Net Income Growth 60% Conversion of Bond —>| t ™\ 50% CLP Acquisition >} Improvements in 40% Gross Margins . Prior Year Workers" 54-57% 30% Comp. Reductions 8 - 9% Growth \_ Net Income a 2005E 20% Growth 8% Same Branch 10% Revenue Growth 0% ait | 2005E Net Income Growth % - Based onmanagement
Slide 54: Strong Balance Sheet
Strong Balance Sheet Q3 2005 Q4 2004 Cash and investments $130M $141M Current ratio 3.0 3.2 Restricted cash $147M $129M Workers’ compensation reserve $168M $136M Long term debt $ 2M $ 73M Shareholders’ equity $330M $202M
Slide 55: Financial Outlook
Financial Outlook 2003 2004 2005 2006 Forecast Revenues $891 $1044 |$1,225- 1,230 | $1,370- $1,390 Organic Growth 3% 12% 9- 10% 7% - 9%. Acquisition Growth 0% 5% 8% 4% Total Revenue Growth 3% 17% 17 - 18% 11% - 13% Net Income $18 $39 $59 - $60 $71 - $74 Net Income Growth 51% 107% 54 - 57% 18% - 23%
Slide 56: Searchable text section of graphics shown above
Searchable text section of graphics shown above L abor Ready Analyst Day [GRAPHIC] LABOR READY WE PUT PEOPLE TO WORK Sa fe 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