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 2012 First Quarter Earnings Results, which were announced today. 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.

Thank you. Here with me today is TrueBlue's CEO and President, Steve Cooper; and CFO, Derrek Gafford. They will be discussing TrueBlue's 2012 Q1 earnings results, which were announced after market closed today. Please note that our press release and the accompanying financial schedules 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 the operations in the future. A reconciliation of any non-GAAP measures discussed today can be found in the Investors section of our website. 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'll now hand this call over to Steve Cooper.

Thank you, Stacey. Welcome, everyone. Today, we reported 2012 first quarter revenue grew 13% to $311 million, which produced $0.04 per share of net income, which is in line with our earlier guidance. Our operating margins expanded by 50 basis points compared to prior year first quarter. We expanded our operating margins by growing the revenue 13%, while holding gross margins consistent and running an efficient cost structure. Expanding our operating margin remains a high priority for our team. As we continue to grow revenue, we are focused on being diligent in appropriately pricing our business to get the highest possible gross margin at the highest possible revenue growth. This requires balancing opportunities for growth with our focus to increase our profitability. As we've expanded our opportunities with larger accounts over the past years, our total mix of gross margins has been lowered. To offset the lower mix of gross margins, we have been and remain diligent in lowering our cost structure. We have successfully lowered selling and administrative costs as a percentage of revenue during the same time period our gross margin mix has changed. As a result, we've expanded our operating margins. We remain focused and committed to driving operating leverage in our future results. Revenue continues to show strong growth as gross margins remained stable in 2012. In Q1, we grew revenue across most every industry group and geographic region. Residential construction remains a challenge. However, we are continuing to see commercial projects and energy-related construction projects show strong growth. We remain focused on our approach to building expertise in several industry vertical markets, along with driving our local market selling and delivery of services. This multipronged approach of building national and regional customer relationships, along with our strong capabilities of serving local customers, is the driving force behind our strong results. The one vertical market I just mentioned that is continuing to show extraordinary revenue results is clean energy. Similar to Q3 and Q4, this sector positively impacted our overall growth in Q1. We feel comfortable with our ability to sustain revenue growth from this sector throughout 2012. After Derrek reviews further operational and financial details, I will offer some additional remarks. Derrek?

Thanks, Steve. I'll start off today by covering our high-level first quarter results and expectations for the second quarter of 2012. Then we'll take a deeper dive and cover the key financial trends for Q1, the assumptions behind our Q2 estimates and finish off with a discussion of our balance sheet and cash flows. Any reference to our performance is based on a comparison to the same period a year ago, unless stated otherwise. Solid execution across the business produced strong results this quarter. We experienced consistent monthly revenue growth resulting in total revenue growth for the quarter of 13%, which was at the high end of our expectation. Diluted net income, up $0.04, was also near the high end of our expectation and was double the results in the same quarter last year. Looking forward to Q2 2012, we expect total revenue of $350 million to $360 million, representing growth of about 11%. We expect diluted net income per share of $0.22 to $0.27, which equals growth of about 25%. Now let's review some of the key financial trends in our Q1 results. Gross margin for the quarter of 25.5% was at the high end of our expectation and equivalent to Q1 last year. Q1 last year included our last receipt of HIRE Act credits, which impacted the comparability of our gross margin, as well as our overall profitability. Excluding the HIRE Act credits from Q1 2011, gross margin would have increased by about 40 basis points this quarter. This pro forma gross margin improvement is a great start for us considering the higher cost of services in our gross margin from both unemployment tax and minimum wage increases that went into effect at the beginning of this year. The pricing of our business continues to be a key…

Thank you, Derrek. We continue to pursue new value creating investment opportunities that will enable us to broaden the services we offer our customers, as well as increase our efficiency in putting people to work. As we build new capabilities and drive further efficiencies for our customers, we believe we will also provide higher returns for shareholders. There are 3 areas of strategic focus that we believe will continue to drive shareholder returns: One, our sales and service strategy; two, our technology strategy; and three, our people strategy. Let me first speak to our sales and service strategy. New capabilities and expanded market opportunities that we have built and invested in over the past few years have enabled us to serve more industries and broaden the partnerships we have created with several national and regional customers, and we remain confident in our vertical market strategy to drive growth with national, regional and the thousands of local customers that fit into one of these vertical market specialties. There are several components of our sales and service strategy that are fueling our success. First, we have industry-specific research and development for each major customer segment. Second, we have an industry-leading sales and marketing strategy. Third, we have a dedicated sales team for each market, and fourth, we have strong relationships with each of the vertical markets we serve, which has proven to expand our credibility in those segments on both the national and local level. And finally, we have a proven method of tying this success of serving national accounts to the local market performance. Our proven methods of customer service have made us a leader in selling and servicing large accounts, yet delivering the successful candidate in the local market. Technology is another driving strategic force for us. Last year, we…

[Operator Instructions] Your first question comes from the line of Paul Ginocchio with Deutsche Bank Securities.

Steve, just wondering what percent of your business now kind of falls under the vertical sales market strategy. What does it look like today versus, I don't know, a year ago?

We've actually aligned most of our revenue opportunities and all of our sales into one of these verticals. How much of it's being sold by a national team of vertical sales? That's probably ranging in the 40% range, somewhere in that category, and 60% being sold locally. But even the local market, we're teaching these local market teams about the vertical approach, and how to be connected and aligned with the expertise available in that customer's industry.

Great. And Derrek, if I can ask just a couple of kind of modeling questions. Revenue from your largest client, and then you talked about green energy being accretive to growth. Can we talk about construction, overall, how strong that was?

Sure. So revenue from our largest customer was about $29 million. And as far as construction goes, the -- I'd say, Paul, the trend's been very consistent with what we've been talking about over the last couple of quarters. Construction, overall, being quite strong, energy driving a good portion of that strength in construction, as well commercial construction. Residential is still on the weak side. It hasn't really bounced back yet, but commercial and the energy practice are doing really well.

I think you talked about all-in construction being up 40%. Does that sound -- is that sort of what it was in the first quarter?

Yes, that's about right. It's a little over 40%, about half of that coming from energy.

Your next question comes from the line of Sara Gubins with Bank of America Merrill Lynch.

Could you update us on what revenue from Boeing was in the quarter?

Yes, revenue from Boeing was a little under $39 million, or excuse me, under $30 million. I was -- that's what I was talking with Paul about is, close to $29 million [indiscernible].

Okay. And I'm wondering if you could talk about what you're seeing in the early part of April. The Q2 guidance suggests something of a slowdown but, obviously, you saw accelerating monthly trends through the first quarter.

Yes, so revenue growth for the first quarter was about 13%. Our guidance for Q2 is about 11%. So on a percentage basis, that is a step down from a couple points. I think really the main thing there is we're expecting less from Boeing, our largest customer. Boeing probably contributed about 1% to overall revenue growth in Q1, and we'd expect it to maybe be a drag by a couple points in Q2.

Okay. And then just last, are you seeing any particular varying trends in larger versus smaller clients?

It's been pretty consistent this quarter, Sara. I know there's been a variety of reports from EDP to other statistics out there on over the last couple of months on the disproportionate swing over to new jobs and small customers. But our -- between small customers and our larger customers, the growth rates have been still pretty consistent this quarter, haven't seen a lot of divergence there.

Your next question comes from the line of Jeff Silber with BMO Capital Markets.

There's been a lot of talk in the press about the warmer than expected weather in the first quarter helping out the economy overall. I was wondering if you thought that had any impact on your business in the quarter.

Yes, it did. And actually, this would be surprising to most of you, but it was actually negative impact. A year ago, we had a lot of snow removal, in the northeast especially, and then followed up by flood damage and flood recovery that happened in Q1. And so it's really too early in the year to be out mowing lawns and raking up leaves, and so you don't get to pick up anything from the warmer weather. We had a drag from the warmer weather, so probably a little bit backwards from what you might have expected. But as far as having a pickup for warmer weather, we didn't see an impact from that.

Okay. Actually, that was a surprising answer. On the SG&A side, you came in a little bit lighter than the guidance that you had provided. Was there any SG&A that was deferred from the first quarter into the second quarter?

No, [indiscernible] there. In the first quarter, it just doesn't take much to swing this SG&A percentage really, Jeff. If we're looking on SG&A as a percentage of revenue, a part of this was the revenue came in higher. And we're -- if you take the midpoint of our revenue guidance, SG&A would have been above the low end of this. And yes, you throw in maybe $0.5 million of cost and you're getting pretty close back to midpoint so it wasn't that far off. We just didn't feel like taking -- giving a lot of real estate on $0.5 million or so of less SG&A, and there wasn't any deferral there.

Okay, great. Just some numbers questions. The A-1 acquisition's been adding about a percentage point in growth the past few quarters. Was it the same this past quarter?

Yes, that's about right.

All right. And were there any branch openings or closings in the quarter?

Net closings of 3.

Okay. And then in 2012, what should we be modeling for stock-based comp and for capital spending for the year overall?

I think you can look at stock comp -- I wouldn't expect our patterns from last year to change much from a stock comp perspective. From a CapEx perspective, expect $3 million to $4 million a quarter and take the midpoint of that. I'd put you around $14 million or so for the year, CapEx.

Your next question comes from the line of Jim Janesky with Avondale Partners.

How far along are you, Steve, with the mobile application launch? And when would you expect that, that can have a positive effect on both the top end of the gross profit line?

Yes. Well, throughout most of our business, we've tested it. We've put some of it out there already, but the real value drivers probably won't hit until 2013, where we're really conducting more business through texting. Right now, it's more advertising, if you will, and job alerts and connecting with employees. So we'll see a more powerful impact in 2013. Later in '12, but we'll start be able to model that in for about the time we get into Q1 of next year.

Okay. And Derrek, if you mentioned this, I missed it. Did you talk about the trends of passing SUTA increases on to the customers? How was that work this year versus last year?

Yes. No, I didn't get into the specifics of it, Jim, but we're off to a really good start. Overall, we had some HIRE Act credits last year. If you excluded those from our comparison, gross margin was -- it would actually be up on a same comparison or on a comparison to same quarter a year ago. So really good start for us and that's a -- a big part of that is jumping out the gate strong here on the pass-through. So we think we've got pretty much all of that pass-through at the very beginning of the quarter. So we're really pleased with the start to the year.

So to the extent that you could get additional gross margin expansion as 2012 progresses, would that primarily come from mix, where Boeing and energy come in, and then how construction progresses? I mean building permits were surprisingly up recently. That's generally positive for your residential business, right?

Well, in general, a return of mix, both from small customers in general and specifically on residential construction, would be great mix enhancements to the business from a gross margin perspective. Those tend to be some of our most profitable relationships out there. As we go through the year, if you take out any one time or nonrecurring stuff out of the prior period, I think we're off to a good start here to have a few 20 to 40 basis points of gross margin expansion throughout the rest of the year, all things equal, just from the start we got this year or at the beginning of this quarter.

[Operator Instructions] Your next question comes from the line of Mark Marcon with Robert W. Baird.

Can you talk a little bit about the differences that you're seeing between the various brands that you operate under, give us a little bit of a feel for any differences in terms of those trends between Spartan versus core Labor Ready versus PlaneTechs, et cetera?

Well, in general, the core business is running pretty consistent with one another. We've pointed out here today that the energy business has been a leader for us and that the Boeing work was strong this quarter. So those 2 markets in those 2 categories were our strong points. Commercial construction has been strong. That's driving CLP to be a good leader for us. Labor Ready is picking up on a little bit of that, but CLP is picking up on a lot of it. Labor Ready serves a little bit more of the local and regional and the onesey-twosey business. Earlier question about small business drivers versus large business drivers, and this would answer that it's pretty consistent with -- in all material respects. So the differences between Spartan and Labor Ready are running pretty similar right now. I think that's the material stuff, Mark.

Okay. And with regards to Boeing, you said you expect a little bit less in terms of Q2. Can you quantify how much less you're expecting?

Well, I think Derrek pointed out that about 1% or 2% of revenue dropped in Q2. It would have held the same rate, so you can calculate the rate there. But with them projecting about $25 million a quarter as we finish 2011, Derrek just disclosed here today that it was $29 million. There was a little bit of a spike there, but long-term, that's been a big project. It lasted a little bit longer than Boeing wanted it to. We were fortunate, and we've been a big part of their success there on getting that thing moving. At this point in time, the project we're working on, it still has a pipeline to it and a run rate to it, but it's starting to work its way down. I know we've said that for a few quarters, but I think that the signal is that it's not a long-lasting project. Now the good news is, is PlaneTechs is selling a lot of work in new categories and we're looking for places to place those workers as they roll off that project. In our aviation business, we have quite a few unfilled orders. It's probably our largest category where we can't fill all the work that we could sell. So being able to place these workers as they roll off that project, we -- that's our success rate. So it doesn't necessarily mean all that revenue goes away. It might change. It might change which customer and what revenue and what mix it's at, but our goal is to place every one of those workers as they roll off those projects. So that will be our success driver, is how well we do that, Mark.

Steve, are those workers mobile? I mean, can they go to where the work will be?

Yes, they're already mobile. Most of them aren't from where that project's taking place, so they're already travelers and having them travel to a new location. That's kind of their lifestyle. So that's the answer.

Okay, great. So no concerns there in terms of that dropping off at all?

Well, that project's coming to an end, and our challenge as a team is to get those workers replaced -- placed on a different account where there's openings that we can't get placed. So making that transition and ensuring that the same quality of work that they want to do and the same type of work. So it's really working with the mechanic and selling them on the opportunity to go to this other client. So we do that well, we'll do okay.

Great. And can you talk a little bit more about the energy? You mentioned that you're fairly confident that it's going to stay in place through this year. What's the longer-term outlook? Are there other areas within energy to expand into?

Well, there are other areas and we're researching them rapidly. I think most people are well aware of the oil rush and the projects that are taking place in North Dakota. We're not chasing that, yet north of that, in Canada, we are chasing and we're quite excited about. Having those projects come to bear and us really being able to service them is one thing, but we're on top of it. The solar business that we've been so successful at, the -- some of the conditions that drove that business to boom here aren't in play, that being government-backed loans and tax credits. And we're not the financial, the government financial predictors of all of that, but there's some uncertainty around all of that. So we talk about the pipeline of projects that we understand and that gets us through '12, maybe through 12 months, but definitely, through 2012. Maybe as much as a year, but we don't have a forever-ending pipeline because of the fundamental drivers of what created that solar business for us aren't in play. But we have a very talented team. They sell these projects, they service them. They're a leader in it, and I believe that we can either follow those projects to other geographies or put those people to work on other projects. But that's our goal as we're -- we sell projects, we live and die by them. Let's live by them and let's get some more. So we're not pulling back on that. We're just being pretty open with you here, Mark, that we can see a year's worth of a pipeline here.

I appreciate that, you've always been very open. Talk also about any other verticals that might come along outside of the ones that we've talked about like, for example, in this past holiday season, retail was a pretty big surprise. Are there any other big initiatives that you're working on, aside from the ones that you've already mentioned?

Yes, our largest are in -- continue to be in aviation and energy. And then you've called out retail, and we did have some great success in Q4 with that and we've continued that success, and a couple large retail accounts happen to be some of our largest growing accounts right now. So we're pretty excited about that. And in my prepared remarks, I talked about this ability to take a national or regional account that we sell, but then you've got to drive it down to the local delivery. And our team has really done a great job in not only selling the account, securing the account, but ensuring that the order delivery gets handed to a local market person to do the recruiting and the placement. And if you don't have that entire pipeline put together, you can't pull this off. And this is where we can outshine others, in the fact that we have a national footprint. We've got a national team to be able to service nationally but deliver locally, and it's our sweet spot. And we're not going to take our eye off that sweet spot.

Right. And just a couple of quick numbers questions. Derrek, the D&A was up a little bit here this quarter. What's the expectations for the balance of the year?

Yes, we had a little bit of a spike up, a few very short lives [ph] purchases that we made. So depreciation of 4 points, they were close to $4.8 million. I think it'll be close to that. You may see it drop down as we move through the year because we had a little bit of a spike this quarter, but it'd be close to that.

Okay. And the interest income, we had a nice bump last quarter, went back to kind of the Q3 level. Is that kind what of you're thinking about for the balance of the year?

We had a couple of miscellaneous items this quarter. I expect it to bounce up another $150,000, $200,000 from what you saw this quarter as we move through the rest of the year.

Your next question comes from the line of Kevin McVeigh with Macquarie.

I wonder if you could just give us a little more color on kind of the larger client strategy and ultimately, over time, what percentage of revenue will be represented by large versus small to medium, and how that compares to the past?

It continued on some of the thoughts that we've delivered here today that we definitely have put more resources focused on larger accounts that are spread across more geographies. That seems to be an area that we can win in, where a more regional-based staffing firm doesn't have that resource to serve in multiple regions. And so getting into that sweet spot of being able to take orders on a national basis and then hand them to a local market is the strategy where we're well focused. The exact percentage and what that means and how you compare that to other staffing accounts gets a little bit dangerous, Kevin, because what we call a large account, is it based on the size of the clients' business or the size of the order flow? Is our cutoff the same as another one of -- somebody else you're following? The differences vary so broadly. I only can compare it to our past and say what we use to -- what we classify as a large account. Not many years ago, maybe 5, 6, was running 7% to 10% of our business, a large account. Well, at Labor Ready alone, that's running well over 20% now. And you throw in the energy business and Boeing and a few of these other brands, and you can quickly add up that 40-plus, maybe even 50-plus percentage of our business is coming from large accounts. And like I said, 5, 6 years ago, it was less than 10%. So -- and that's against our own definition, not against industry standards. But that's a mix change we've been dealing with. There are some pros that come from that, the consistency and work with other quality firms and the level of communication and understanding on what drives success. All of those things are good. Yet, you fall hard when one of them walks away. And so that's a new part of our business we're getting used to. Plus, they're pretty good negotiators and they understand the market flow better, and they want pricing based on volume. And so those things we've talked about here in our business. So our response to that is be diligent on what we -- on our pricing strategies, yet be very diligent on cost. And so that's where we're focused, is continuing to leverage this business up and find better ways to do it. And the key to that right now is technology. So we don't need to open more bricks and mortar, that we can actually expand more territory, be in more places, put people to work faster. And that's going to be our response to the national larger account presence. You can't really talk about one without the other. It's like yes, the growth in large accounts is good, but there's got to be a response to it. And so I think we'll work on both angles, Kevin.

Understood. And then, Derrek, any impacts from kind of -- if Boeing starts to kind of come down a little bit in Q2, what the impact is from a margin perspective on that?

I think that, that drop that we're talking about here from a gross margin and overall mix perspective won't have much impact on the blended gross margin. It's just not enough to talk about.

[Operator Instructions] Your next question comes from the line of Paul Ginocchio with Deutsche Bank Securities.

Hey, Steve, the business has changed quite a bit. I just wondered if we could look at the Labor Ready gross margin, excluding construction, and maybe go back to '06 when it was pretty good. And what's that -- I don't need exact, but what's that look like versus today if you can even compare it? Is that business' gross margin similar or has it gone down? And -- I'm just trying to understand how the core business, I mean, 5 years ago looks versus today.

Right, yes. It's hard, Paul, to ferret through that because construction accounts -- for the mix change of construction alone accounts for 3 or 4 points, probably, maybe 3 points in that brand. Then the large account thing you think would start dragging on it, and it did for a year or 2, but the last couple of years, our large account strategy has stabilized our margins pretty well. And these new accounts, even though they're large, we're selling them in about the major -- the average blend of the Labor Ready margins at this point in time, not much different. So I think things have stabilized at this point, even though you can look historically and say, yes, the Labor Ready margins did drop. They have come down for a couple of big -- a couple of reasons, large account focus and construction going away. But I think we're stable at this point in time, Paul.

And at this time, I'd like to turn the presentation back over to Mr. Steve Cooper for closing remarks.

Thank you. And we sure appreciate the questions, and we appreciate you joining us today. Your attention to questions are always appreciated. We look forward to reporting the results of Q2 to you as we continue to drive industry-leading growth and work on these strategies. Thank you.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect and have a great day.