TrueBlue, Inc. (TBI)

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TrueBlue, Inc. (TBI)

Q1 2008 Earnings Call

April 16, 2008 5:00 pm ET


Stacey Burke – Vice President of Corporate Communications

Steven C. Cooper – President and Chief Executive Officer

Derrek Gafford – Executive Vice President, Chief Financial Officer


TC Robillard – Bank of America Securities

Christine Woo – Morgan Stanley

Michael Carney – Coker & Palmer Inc.

Clinton Fendley – Davenport & Co.

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

Jeffrey Silber – BMO Capital Markets

Michel Morin – Merrill Lynch



Welcome to the Q1 2008 TrueBlue earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Stacey Burke.

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 first quarter earnings results which were announced after market close today. Please note that our press release, and the accompanying income statements, balance sheet, cash flow statement, and financial assumptions, are now available on our website at

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.

Though 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 materially differ 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 for joining us this afternoon to discuss our first quarter operating results for 2008 and give you a recap of our strategic progress. Earlier today we reported revenue increased 12% this quarter over the same quarter last year to $324 million. Earnings per share came in at $0.20 for Q1, and that is at the high end of our guidance of $0.18 to $0.20, compared the $0.21 we had a year ago.

Acquisitions fueled by revenue growth during the quarter contributed a 15% increase in revenue, while revenue in our [inaudible] operations was down about 3%. We lost about 3% of our revenue from the 58 branches we closed over the past four quarters. Excluding the impact of closed branches we came in about even with last year, which is an accomplishment in this tough operating environment.

Net income for the quarter of $8.8 million declined 15% as compared to a year ago. This decline was primarily allotted to three things. First, the unit net increase in the wages we pay to our workers continues to outpace the growth in the rates we charge our customers. This gap is primarily driven by the size and volume of minimum wage increases at both the federal and state levels over the past year. In addition we have seen an increase in the intensity of the pricing pressure applied by our customers and competitors.

We have closed this gap slightly over the past quarter and I’m pleased with the progress we’ve made and I’m hopeful that we’re going to continue to narrow this gap as we are focused on doing so. Despite the [inaudible] contributing to our decline in net income are the increased operating expenses we’re incurring to support the new platforms we have acquired recently. We have completed four significant acquisitions over the past year. We believe these current adjustments will raise significant cost leverage in the future as we build out these important platforms and complete our back office integration plans.

And the third item contributing toward our decline in net income is the higher amortization costs and lower interest income than a year ago after investing cash of more than $80 million in acquisitions and $150 million in share repurchases this past year.

The fundamentals and financial stability of our company remains sound. Earnings before interest, taxes, depreciation, and amortization improved compared to a year ago despite our decline in net income for the quarter and we continue to produce strong cash flows from our operating activities. We are not debt-prone and had $75 million in cash at the end of the quarter.

Derrek will discuss these items in more depth during his comments today. The operating environment continues to be challenging and economic conditions have surely had an impact on us this quarter. In ten and a half weeks we have maintained essentially flat same branch revenue growth for the past year.

Our trends were stronger during the first quarter, up until the middle of March. During the last two weeks of March and the first two weeks of April we have seen our same branch revenue decline about 8% to 10%, significantly off the trends we had experienced during the first ten weeks of the quarter and over the past year.

This step down in revenue has been broad-based across new geographies and does not correspond to one customer industry. We have provided guidance today that revenue for the second quarter will be in the range of $350 million to $355 million, basically flat with last year. We are projecting revenue growth from acquisitions during the second quarter of approximately 12%, offset by core operations experiencing revenue declines of about 12%.

Understanding that our customers have costs to control as their own demand and needs fluctuate is the primary driver of our business model. We are continuing to make investments in our people through more focused sales and customer service training.

This training is focused on developing stronger customer relationships and putting ourselves in our customers’ shoes to better serve their fluctuating needs. The scalability of our services is vital for our customers in volatile periods so they can control their labor costs efficiently as their business slows. That’s a big part of the value that we provide.

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