TrueBlue, Inc. (TBI)

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TrueBlue, Inc. (TBI)

Q4 2008 Earnings Call Transcript

February 04, 2009 at 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

Jeffrey Silber - BMO Capital Markets

Presentation

Operator

Good day everyone and welcome to TrueBlue’s conference call. Today’s call is being recorded. Joining us today is TrueBlue’s CEO Steve Cooper and CFO Derrek Gafford. They will discuss TrueBlue’s 2008 fourth quarter results which were announced today. If you have not received a copy of this announcement, please contact Teresa Berkmann 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. Stacey Burke for the reading of the Safe Harbor. Please go ahead Ms. Burke.

Stacey Burke

Thank you. Here with me today is TrueBlue’s CEO and President, Steve Cooper, and CFO Derrek Gafford. They will be discussing TrueBlue’s 2008 fourth 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 this call over to Steve Cooper.

Steven C. Cooper

Thank you, Stacey. And thank you for joining us today to discuss our fourth quarter results for 2008 and what our outlook is as we move in to 2009. Earlier today, we reported a net loss of $46 million compared to net income of $ 14 million a year earlier. Included in our results this quarter was a goodwill and intangible asset impairment charge of $49 million net of tax. This impairment is related to a decline in the estimated cash flows from the acquisitions that we have completed over the past five years as we developed our niched approach to serving the blue collar labor markets. Although the current cash flows have declined in this difficult economy, we remain positive about the side brands we are operating and our approach to serving our customers in these markets.

Excluding this impairment charge, net income would have been $3 million or $0.08 per share. We have previously expected net income per share to be in the range of $0.10 to $0.14. Excluding this impairment charge, our results in net income were close to our expectations given a very challenging operating environment during the fourth quarter.

Our results during the quarter were impacted significantly by organic revenue declines of 28% which were about ten points worse than we had anticipated at the beginning of the quarter. Although we had seen our revenue trends declining throughout 2008, our trends worsened as we approached the holidays as many clients shut down their facilities for extended periods of time, and many shut down before thanksgiving and did not start back up until after the first of the year.

We also saw consumer confidence erode, which had a large impact on our retail clients along with our distribution, transportation and manufacturing clients. In addition, residential housing worsened slightly even from the declines we had already experienced.

As we moved through January in 2009, we saw things stabilize a bit. However, this still leaves us with steep organic revenue declines compared to prior year. This decline we are experiencing is broad based across most industries served and all geographies that we operate in. The decline in organic revenue has resulted in significant deleveraging as the fourth quarter net income without impairment charge declined 72 %. The deleveraging was only about a 3:1 meaning, we experienced 3 points of net income decline for each point of decline in organic revenue.

Although we are not pleased with the top line results, we are pleased with the ability to hold the deleveraging to these levels. We produced these results by responding quickly with several cost cutting actions, to help offset the declines in organic revenue. And most importantly, to ensure we are prepared to experience the positive leverage that comes quickly as these trends do turn around.

The most significant actions taken during the quarter included closing seventy additional branches, bringing our total closures for the year to 102 branches. Included in the 70 closed branches in the fourth quarter, is the disposition of all 29 of our United Kingdom branches. After struggling for several years in the United Kingdom to bring our operations there to profitability, we were able to transfer the UK business to a new owner which will eliminate further operating loss in the UK.

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