TrueBlue, Inc. — FY 2013 Form 10-K
Reporting period: Fiscal year ended December 27, 2013 (52 weeks). The filing also reports fourth-quarter results; figures below are in U.S. dollars.
Business context and financial results
TrueBlue provides temporary blue-collar staffing through Labor Ready, Spartan Staffing, CLP Resources, PlaneTechs and Centerline Drivers. It served about 130,000 customers and placed approximately 375,000 temporary workers during 2013.
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | $1,668.9 million | $1,389.5 million |
| Revenue growth | 20.1% | 5.6% |
| Gross profit / gross margin | $442.3 million / 26.5% | $372.4 million / 26.8% |
| Operating income / operating margin | $59.6 million / 3.6% | $53.0 million / 3.8% |
| Net income | $44.9 million | $33.6 million |
| Diluted earnings per share | $1.11 | $0.84 |
| Cash from operating activities | $86.1 million | $52.3 million |
| Capital expenditures | $13.0 million | $17.8 million |
Fourth-quarter 2013 revenue was $449.0 million versus $344.6 million in Q4 2012; net income was $14.5 million versus $7.4 million. Q4 operating income was $21.2 million versus $10.4 million.
Liquidity, debt and balance sheet
- Cash, cash equivalents and marketable securities totaled $142.7 million at year-end; working capital was $235.0 million.
- TrueBlue had $32.0 million outstanding under its term loan, including $2.3 million due in 2014. The loan bears interest at one-month LIBOR plus 1.50%; its reported rate was 1.7% at year-end.
- The $80 million revolving facility had $74.0 million available after $6.0 million of letters of credit. Total reported liquidity under the facility definition was $198.5 million, well above the $12.0 million minimum; the company reported compliance with covenants.
- Restricted cash and investments were $154.6 million. Workers’ compensation collateral commitments were $165.9 million, and the discounted workers’ compensation reserve was $214.8 million.
Changes, outlook and risks
- Revenue growth reflected the MDT and The Work Connection acquisitions, as well as organic demand growth across geographies and industries, particularly construction. Growth and mix largely offset declining revenue from a large aviation project nearing completion.
- TrueBlue acquired MDT for $53.4 million, The Work Connection for $22.7 million and certain Crowley Transportation Services assets for $2.4 million. Acquisitions contributed to lower gross margins; gross margin declined 0.3 percentage points. SG&A included $7.4 million of acquisition and integration costs.
- Net income growth also benefited from a lower 26.3% effective tax rate, versus 38.4% in 2012, primarily reflecting the retroactive restoration of the federal Work Opportunity Tax Credit. This benefit is a notable factor in comparing earnings.
- Management’s 2014 priorities were organic revenue and gross-profit growth, operating-cost leverage, continued specialized sales and service investment, further technology deployment, and selective acquisitions. It expected no further non-recurring costs related to the 2013 acquisitions. No specific numerical earnings or revenue guidance was provided.
- Key exposures include economic cyclicality and seasonal demand, competitive limits on pricing, temporary-worker availability and wage costs, workers’ compensation claims and collateral needs, customer credit risk, and acquisition execution. A 5% change in cost of claims incurred was estimated to change workers’ compensation expense by about $8.8 million. PlaneTechs goodwill had only an estimated 19% fair-value cushion; a 3% reduction in its annual revenue-growth assumption, without offsetting cost changes, would indicate possible impairment.
- The company disclosed ordinary-course legal and regulatory proceedings and stated that recorded reserves were adequate and resolution was not expected to materially affect results or financial condition. It also noted former workers’ compensation insurers in liquidation and a $5.7 million valuation allowance against related receivables.
Investor verification priorities
- Separate acquired revenue from organic growth where possible; management said MDT’s results could not be accurately segregated after integration.
- Assess the sustainability of margins and earnings after acquisition costs and the Work Opportunity Tax Credit benefit.
- Track aviation-project runoff, construction demand, and the company’s ability to maintain pricing as labor and insurance costs change.
- Review workers’ compensation reserve development, insurer recoveries, collateral requirements, and sensitivity to claims trends.
- Monitor PlaneTechs performance and goodwill assumptions, as well as acquisition synergies and integration outcomes.
- Confirm liquidity, debt amortization and covenant compliance as working-capital needs and growth evolve.