TrueBlue Reports Fiscal Second Quarter 2017 Results

07/31/2017

TACOMA, Wash.--(BUSINESS WIRE)-- TrueBlue, Inc. (NYSE:TBI) announced today its fiscal second quarter 2017 results.

Revenue was $610 million, a decrease of 9 percent, compared to revenue of $673 million in the fiscal second quarter of 2016. Excluding the previously disclosed reduction in the scope of services provided to the company's former largest customer, revenue declined by 5 percent. Net income per diluted share was $0.31 compared to a loss of $1.53 in the fiscal second quarter of 2016. Adjusted net income per diluted share1 was $0.42 compared to $0.54 in the fiscal second quarter of 2016.

“This quarter’s results were consistent with our expectations,” TrueBlue CEO Steve Cooper said. “Our strategic focus emphasizes pricing discipline over simply expanding market share. Combined with our reduction of operating expenses, this is the right approach given the modest demand environment.

“We are pleased with our expanding presence in high-growth, high-margin recruitment process outsourcing and productivity-based solutions. We are equally excited about our mobile strategy, which creates a competitively differentiated service offering to drive future growth.”

2017 Outlook

The company estimates revenue for the fiscal third quarter of 2017 will range from $645 million to $660 million. It also expects net income per diluted share will range from $0.46 to $0.51. Adjusted net income per diluted share1 is expected to be $0.55 to $0.60.

Management will discuss second quarter 2017 results on a webcast at 2 p.m. PT (5 p.m. ET), today, Monday, July 31. The webcast can be accessed on TrueBlue’s website: www.trueblue.com.

About TrueBlue:

TrueBlue (NYSE: TBI) is a leading provider of specialized workforce solutions that help clients create growth, improve efficiency and increase reliability. TrueBlue connected over 815,000 people with work during 2016 in a wide variety of industries through its PeopleReady segment offering industrial staffing services, PeopleManagement segment offering onsite workforce management and PeopleScout segment offering Recruitment Process Outsourcing (RPO) and Managed Service Provider (MSP) solutions. Learn more at www.trueblue.com.

1 See the financial statements accompanying the release and the company’s website for more information on non-GAAP terms.

Forward-looking Statements

This release contains forward-looking statements relating to our plans and expectations, all of which are subject to risks and uncertainties. Such statements are based on management’s expectations and assumptions as of the date of this release and involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. We presently consider the following to be among important factors that could cause actual results to differ materially from the company’s expectations: (1) national and global economic conditions, (2) our ability to attract and retain customers, (3) our ability to maintain profit margins, (4) new laws and regulations that could have a material effect on our operations or financial results, (5) our ability to successfully complete and integrate acquisitions. Other information regarding factors that could materially affect our results is included in our SEC filings, including the company's most recent reports on Forms 10-K and 10-Q, copies of which may be obtained by visiting our website at www.trueblue.com under the Investor Relations section or the SEC's website at www.sec.gov. We assume no duty to update or revise any forward-looking statements contained in this release.

 

TRUEBLUE, INC.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

   
13 Weeks Ended 26 Weeks Ended
Jul 2, 2017   Jun 24, 2016 Jul 2, 2017   Jun 24, 2016
Revenue from services $ 610,122 $ 672,612 $ 1,178,366 $ 1,318,592
Cost of services 454,842   502,688   883,657   998,156  
Gross profit 155,280 169,924 294,709 320,436
Selling, general and administrative expense 124,754 135,787 246,598 266,411
Depreciation and amortization 12,287 11,694 23,461 22,983
Goodwill and intangible asset impairment charge   99,269     99,269  
Income (loss) from operations 18,239 (76,826 ) 24,650 (68,227 )
Interest and other income (expense), net 155   (887 ) 229   (1,906 )
Income (loss) before tax expense 18,394 (77,713 ) 24,879 (70,133 )
Income tax expense (benefit) 5,260   (13,978 ) 7,071   (13,366 )
Net income (loss) $ 13,134   $ (63,735 ) $ 17,808   $ (56,767 )
 
Net income (loss) per common share:
Basic $ 0.32 $ (1.53 ) $ 0.43 $ (1.36 )
Diluted $ 0.31 $ (1.53 ) $ 0.43 $ (1.36 )
 
Weighted average shares outstanding:
Basic 41,579 41,688 41,608 41,595
Diluted 41,856 41,688 41,875 41,595
 

TRUEBLUE, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

     
Jul 2, 2017 Jan 1, 2017

Assets

Cash and cash equivalents $ 29,123 $ 34,970
Accounts receivable, net 337,058 352,606
Other current assets 28,524   40,227
Total current assets 394,705 427,803
Property and equipment, net 61,821 63,998
Restricted cash and investments 229,931 231,193
Goodwill and intangible assets, net 341,435 349,894
Other assets, net 50,981     57,557
Total assets $ 1,078,873   $ 1,130,445

 

Liabilities and shareholders' equity
Current portion of long-term debt $ 23,989 $ 2,267
Other current liabilities 206,818 248,868
Long-term debt, less current portion 87,204 135,362
Other long-term liabilities 227,288   218,769
Total liabilities 545,299 605,266
Shareholders' equity 533,574   525,179
Total liabilities and shareholders' equity $ 1,078,873   $ 1,130,445
 
 

TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

   
26 Weeks Ended
Jul 2, 2017   Jun 24, 2016
Cash flows from operating activities:
Net income (loss) $ 17,808 $ (56,767 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 23,461 22,983

Goodwill and intangible asset impairment charge

99,269
Provision for doubtful accounts 3,619 4,221
Stock-based compensation 5,146 6,042
Deferred income taxes 2,975 (21,404 )
Other operating activities 1,877 2,264
Changes in operating assets and liabilities, net of effects of acquisition of business:
Accounts receivable 11,925 116,112
Income tax receivable 8,828 11,238
Other assets 5,977 425
Accounts payable and other accrued expenses (13,181 ) 754
Accrued wages and benefits (4,560 ) (10,897 )
Workers’ compensation claims reserve 767 7,838
Other liabilities (580 ) 2,258  
Net cash provided by operating activities 64,062   184,336  
 
Cash flows from investing activities:
Capital expenditures (9,137 ) (11,430 )
Acquisition of business (71,863 )
Change in restricted cash and cash equivalents 8,829 (1,265 )
Purchases of restricted investments (20,712 ) (21,076 )
Maturities of restricted investments 13,546   8,416  
Net cash used in investing activities (7,474 ) (97,218 )
 
Cash flows from financing activities:
Purchases and retirement of common stock (15,530 )
Net proceeds from stock option exercises and employee stock purchase plans 858 840
Common stock repurchases for taxes upon vesting of restricted stock (2,873 ) (2,321 )
Net change in revolving credit facility (25,303 ) (94,186 )
Payments on debt (1,133 ) (1,133 )
Payment of contingent consideration at acquisition date fair value (18,300 )
Other   25  
Net cash used in financing activities (62,281 ) (96,775 )
Effect of exchange rate changes on cash and cash equivalents (154 ) 1,648  
Net change in cash and cash equivalents (5,847 ) (8,009 )
CASH AND CASH EQUIVALENTS, beginning of period 34,970   29,781  
CASH AND CASH EQUIVALENTS, end of period $ 29,123   $ 21,772  
 
           

TRUEBLUE, INC.
NON-GAAP RECONCILIATIONS
(Unaudited, in thousands, except for per share data)

 

1. RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME PER DILUTED SHARE

 
13 Weeks Ended
Jul 2, 2017   Jun 24, 2016

Q3 2017 Outlook*

Net income (loss) $ 13,134 $ (63,735 ) $ 19,000

$

21,100

Acquisition and integration costs (1) 2,319

 

Goodwill and intangible asset impairment charge (2) 99,269

 

Amortization of intangible assets of acquired businesses (3) 5,742 7,112

 

5,300

Tax effective of adjustments to net income (loss) (4) (1,608 ) (30,436 )

 

 

(1,500)

 

 

Adjust income taxes to normalized effective rate (5) 110   7,782  

 

   

     
Adjusted net income (6) $ 17,378   $ 22,311   $ 22,800    

   

$

25,000

 
Adjusted net income, per diluted share (6) $ 0.42 $ 0.54 $ 0.55

$

0.60

 
Diluted weighted average shares outstanding 41,856 41,880

 

41,500

 

* Totals may not sum due to rounding

 

2.  RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

 
  13 Weeks Ended  
Jul 2, 2017   Jun 24, 2016 Q3 2017 Outlook*
Net income (loss) $ 13,134 $ (63,735 ) $ 19,000 $ 21,100
Income tax expense (benefit) 5,260 (13,978 ) 7,400 8,200
Interest and other expense (income), net (155 ) 887

 

(200)

 

 

Depreciation and amortization 12,287   11,694  

 

12,200

     
EBITDA (7) 30,526 (65,132 ) 38,300 41,300
Acquisition and integration costs (1) 2,319

 

Goodwill and intangible asset impairment charge (2) 99,269

 

Work Opportunity Tax Credit processing fees (8) 16   351  

 

200

     
Adjusted EBITDA (7) $ 30,542   $ 36,807   $ 38,500     $ 41,500  
 

* Totals may not sum due to rounding

 

3.  RECONCILIATION OF U.S. GAAP REVENUE TO REVENUE EXCLUDING THE COMPANY'S FORMER LARGEST CUSTOMER

 

Due to a previously announced reduction in the scope of services with its former largest customer, the company is providing results excluding this customer to help investors assess the company's underlying results with prior periods.

 
  13 Weeks Ended
Jul 2, 2017   Jun 24, 2016
Revenue from services $ 610,122 $ 672,612
Former largest customer revenue (9) (7,572 ) (37,242 )
Revenue excluding former largest customer $ 602,550   $ 635,370  
 
 
(1)

 

Acquisition and integration costs relate to the acquisition of the recruitment process outsourcing business of Aon Hewitt, which was completed on January 4, 2016, and the acquisition of SIMOS, which was completed on December 1, 2015.
 
(2)

The goodwill and intangible asset impairment charge for the 13 weeks ended June 24, 2016, relate to our Staff Management | SMX, hrX, and PlaneTechs reporting units. The impairment charge of $99 million is equivalent to $80 million after tax or $1.91 per diluted share.

 
(3) Amortization of intangible assets of acquired businesses as well as accretion expense related to the SIMOS acquisition earn-out.
 
(4) Total tax effect of each of the adjustments to U.S. GAAP Net income (loss) per diluted share using the ongoing rate of 28%.
 
(5) Adjusts the effective income tax rate to the expected ongoing rate of 28%.
 
(6)

Adjusted net income and Adjusted net income per diluted share are non-GAAP financial measures, which exclude from Net income (loss) and Net income (loss) on a per diluted share basis, acquisition and integration costs, goodwill and intangible asset impairment charge, amortization of intangibles of acquired businesses as well as accretion expense related to acquisition earn-out, tax effect of each adjustment to U.S. GAAP Net income (loss), and adjust income taxes to the expected ongoing effective tax rate. Adjusted net income and Adjusted net income per diluted share are key measures used by management to assess performance and, in our opinion, enhance comparability and provide investors with useful insight into the underlying trends of the business. Adjusted net income and Adjusted net income per diluted share should not be considered measures of financial performance in isolation or as an alternative to net income (loss) or net income (loss) per diluted share in the Consolidated Statements of Operations in accordance with U.S. GAAP, and may not be comparable to similarly titled measures of other companies. Adjusted net income and Adjusted net income per diluted share previously excluded the third-party processing fees associated with generating Work Opportunity Tax Credits.

 

(7)

EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA excludes from Net income (loss) interest, taxes, depreciation and amortization. Adjusted EBITDA further excludes from EBITDA acquisition and integration costs, goodwill and intangible asset impairment charge, and Work Opportunity Tax Credit third-party processing fees. EBITDA and Adjusted EBITDA are key measures used by management to assess performance and, in our opinion, enhance comparability and provide investors with useful insight into the underlying trends of the business. EBITDA and Adjusted EBITDA should not be considered measures of financial performance in isolation or as an alternative to Income (loss) from operations in the Consolidated Statements of Operations in accordance with U.S. GAAP, and may not be comparable to similarly titled measures of other companies.

 
(8) These third-party processing fees are associated with generating the Work Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates and reduce our income taxes.
 
(9)

The revenue of our former largest customer.

 
 

TRUEBLUE, INC.
SEGMENT DATA
(Unaudited, in thousands)

 
  13 Weeks Ended
Jul 2, 2017   Jun 24, 2016

Revenue from services:

PeopleReady $ 370,712 $ 406,274
PeopleManagement 192,887 219,344
PeopleScout 46,523   46,994  
Total Company 610,122   672,612  
 

Adjusted EBITDA (1):

PeopleReady $ 19,170 $ 29,894
PeopleManagement 6,286 4,009
PeopleScout 10,129   11,328  
35,585 45,231
Corporate unallocated expense (2) (5,043 ) (8,424 )
Total company Adjusted EBITDA (1) 30,542 36,807
Acquisition and integration costs (3) (2,319 )

Goodwill and intangible asset impairment charge (4)

(99,269 )
Work Opportunity Tax Credit processing fees (5) (16 ) (351 )
EBITDA (1) 30,526 (65,132 )
Depreciation and amortization (12,287 ) (11,694 )
Interest and other income (expense), net 155   (887 )
Income (loss) before tax expense 18,394 (77,713 )
Income tax expense (benefit) (5,260 ) 13,978  
Net income (loss) $ 13,134   $ (63,735 )
 
 
(1)

EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA excludes from Net income (loss) interest, taxes, depreciation and amortization. Adjusted EBITDA further excludes from EBITDA acquisition and integration costs, goodwill and intangible asset impairment charge, and Work Opportunity Tax Credit third-party processing fees. EBITDA and Adjusted EBITDA are key measures used by management to assess performance and, in our opinion, enhance comparability and provide investors with useful insight into the underlying trends of the business. EBITDA and Adjusted EBITDA should not be considered measures of financial performance in isolation or as an alternative to Income (loss) from operations in the Consolidated Statements of Operations in accordance with U.S. GAAP, and may not be comparable to similarly titled measures of other companies.

 
(2) Beginning in the fourth quarter of 2016, we changed our methodology for allocating certain corporate costs to our segments, which decreased our corporate unallocated expenses. We have adjusted the prior year amounts to reflect this change for consistency purposes.
 
(3) Acquisition and integration costs relate to the acquisition of the recruitment process outsourcing business of Aon Hewitt, which was completed on January 4, 2016, and the acquisition of SIMOS, which was completed on December 1, 2015.
 
(4)

The goodwill and intangible asset impairment charge for the 13 weeks ended June 24, 2016, relate to our Staff Management | SMX, hrX, and PlaneTechs reporting units. The impairment charge of $99 million is equivalent to $80 million after tax or $1.91 per diluted share.

 
(5) These third-party processing fees are associated with generating the Work Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates and reduce our income taxes.
 
 

TRUEBLUE, INC.
SEGMENT EBITDA RECONCILIATION TO ADJUSTED EBITDA
(Unaudited, in thousands)

 
    13 Weeks Ended
Jul 2, 2017   Jun 24, 2016
PeopleReady   PeopleManagement   PeopleScout PeopleReady   PeopleManagement   PeopleScout
Segment EBITDA (1) $ 19,154 $ 6,286 $ 10,129 $ 29,543 $ (80,091 ) $ (3,841 )
Goodwill and intangible asset impairment charge (2) 84,100 15,169
Work Opportunity Tax Credit processing fees (3) 16       351      
Adjusted EBITDA (1) $ 19,170   $ 6,286   $ 10,129   $ 29,894   $ 4,009   $ 11,328  
 
 
(1)

Segment earnings before interest, taxes, depreciation and amortization ("Segment EBITDA") is a primary measure of segment performance. Segment EBITDA includes net sales to third parties, related cost of sales, and selling, general and administrative expenses directly attributable to the reportable segment together with certain allocated corporate general and administrative expenses. Segment EBITDA excludes unallocated corporate general and administrative expenses. Adjusted EBITDA by segment is a non-GAAP financial measure and further excludes acquisition/integration and other costs, goodwill and intangible asset impairment charge, and Work Opportunity Tax Credit third-party processing fees. Adjusted EBITDA by segment is a key measure used by management to assess performance and, in our opinion, enhances comparability and provides investors with useful insight into the underlying trends of the business. Adjusted EBITDA by segment should not be considered a measure of financial performance in isolation or as an alternative to Income (loss) from operations in the Consolidated Statements of Operations in accordance with U.S. GAAP, and may not be comparable to similarly titled measures of other companies.

 
(2) The goodwill and intangible asset impairment charge for the thirteen weeks ended June 24, 2016, relate to our Staff Management | SMX, hrX, and PlaneTechs reporting units. The impairment charge of $99 million is equivalent to $80 million after tax or $1.91 per diluted share.
 
(3) These third-party processing fees are associated with generating the Work Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates and reduce our income taxes.

Source: TrueBlue, Inc.

TrueBlue, Inc.

Derrek Gafford, 253-680-8214

EVP & CFO

IR CONTACT

Derrek Gafford

Chief Financial Officer

Phone: 1-253-680-8214

InvestorRelations@TrueBlue.com

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About TrueBlue

TrueBlue (NYSE: TBI) is a leading provider of specialized workforce solutions, helping clients improve growth and performance by providing staffing, workforce management, and recruitment process outsourcing solutions. The company’s specialized workforce solutions meet clients’ needs for a reliable, efficient workforce in a wide variety of industries. TrueBlue connects as many as 840,000 people to work each year.