TrueBlue, Inc. (TBI)

TBI 
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TrueBlue, Inc. (TBI)

Q3 2008 Earnings Call

October 15, 2008 5:00 pm ET

Executives

Stacey Burke – Vice President of Corporate Communications

Steven C. Cooper – President and Chief Executive Officer

Derrek Gafford – Executive Vice President and Chief Financial Officer

Analysts

Paul Ginocchio - Deutsche Bank

Michelle Morin – Merrill Lynch

James Janesky - Stifel Nicolaus & Company, Inc.

T.C. Robillard - Banc of America Securities

Mark Marcon – Robert W. Baird & Co., Inc.

Ty Govatos – CL King

Presentation

Operator

Welcome to TrueBlue’s conference call. (Operator Instructions) Joining us today is TrueBlue’s CEO Steve Cooper and CFO Derrek Gafford. Today we will discuss TrueBlue’s 2008 third quarter results which were announced today. If you have not received a copy of this announcement, please contact Teresa Berkely at 1-800-610-8920 extension 8206 and a copy will be faxed to you.

At this time I would like to hand the call over to Ms. Stacy Burke for the reading of the Safe Harbor.

Stacey Burke

Here with me today is TrueBlue’s CEO and President, Steve Cooper, and CFO Derrek Gafford. They will be discussing TrueBlue’s 2008 third quarter earnings results which were announced after market closed today. Please note that our press release and the accompanying income statement, balance sheet, cash flow statement, and financial assumptions are now available on our website at www.TrueBlueInc.com. Before I hand you over to Steve I ask for your attention as I read the following Safe Harbor.

Please note that on this conference call management will reiterate forward looking statements contained in today’s press release. And may make or refer to additional forward looking statements relating to the company’s financial results and operations in the future. Although we believe the expectations reflected in these statements are reasonable, actual results may be materially different. Additional information concerning factors which could cause results to differ materially is contained in the press release and in the company’s filings with the Securities and Exchange Commission including our most recent forms 10-Q and 10-K. I will now hand the call over to Steve Cooper.

Steven C. Cooper

Thank you, Stacey. Thank you for joining us today to discuss our third quarter results for 2008. Earlier today we reported revenue declined 1% this quarter over prior year to $388 million, which was slightly below the expectations we had set at the beginning of the quarter of $390 million to $400 million. Net income per share came in at $0.38 compared to $0.51 a year ago and at the low end of our earlier expectations of $0.38 to $0.42.

As we ended our second quarter, our same branch revenue trends were declining at about 13 %. As the quota progressed revenue trends deteriorated and by the end of the third quarter same store sales were declining at almost a 17% rate. These trends are the result of an increasingly difficult operated environment due to the economic conditions that have continued to worsen over the recent months. These challenging conditions have surely had an impact on us again this quarter.

The worsening revenue trends over this past quarter have been broad based across most geographies and industries served. Acquisitions completed during the last 12 months fueled our revenue during the quarter by contributing a 16% increase in revenue. We implemented additional cost cuts during the quarter which has enabled us to hold our net income within our expected range despite the revenue being slightly below the low end of our expectations.

Several of the cost cuts have resulted in restructuring charges, such as lease terminations or severance payments which totaled about $2.8 million in the third quarter. In a few minutes, Derrek will review with you in detail our results and expectations for the next quarter. Our strategy to grow revenue and income has included broadening our niche approach to serving the blue collar labor market in the following ways. First, serving the general labor needs with our 759 Labor Ready branches.

Second, serving longer term staffing needs in the light industrial markets with our 71 combined Spartan staffing and PMI branches which will all be branded as Spartan staffing starting in 2009. Third, serving the skilled construction trades with 79 CLP resource branches. Fourth, serving the transportation markets with experienced truck drivers through our 10 TLC drivers offices.

And fifth, serving the aviation maintenance and manufacturing markets with experienced aviation mechanics through our Plane Techs operations. Through these most recent acquisitions, we have reduced our exposure to construction from over 40% just three years ago to about 30% on an ongoing basis. The acquisitions have reduced our exposure from 100% of our revenue in the Labor Ready brand to about 65% of our annual revenue going forward.

Reducing our exposure to construction and reducing our exposure to just one recruiting model will provide strength and protection for our investors through diversification. Our main focus at this time centers on the integration and the optimization of our current cost structure and maintaining a focused approach to keep costs in line with revenue across the company.

We believe that our niched approach to branding and going to market has set us aside as the leading provider of blue collar staffing and while the conditions are difficult and most of the niches we serve currently, we remain extremely positive about the long term opportunities available to us. We will continue to aggressively manage costs during these challenging times to control our results during the tough conditions and ensure we are ready to maximize our results coming out of the downturn.

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