TrueBlue, Inc. (TBI) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2013 TrueBlue Earnings Conference Call. My name is Kim, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Stacey Burke. Please proceed.

Thank you and welcome. We appreciate everyone joining us for our call today. 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 from the forward-looking statements set forth in today's earnings press release, financial statements and presentation slides, which were filed in an 8-K today. Additional information concerning factors which could cause results to differ materially is also contained in the company's filings with the SEC, including our most recent Form 10-K. The discussion today also contains certain non-GAAP financial measures. Information relating to comparable GAAP financial measures may be found in the fourth quarter 2013 earnings release financial statements and presentation slides, all of which are posted on our website at www.trueblue.com. We encourage you to review that information in conjunction with today's discussion. Today's discussion will begin with TrueBlue's CEO and President, Steve Cooper; followed by TrueBlue's CFO, Derrek Gafford, who will review some key points related to the quarter's earnings. Once Derrek completes his remarks, we'll move to Q&A session. With that, let me turn the call over to TrueBlue's CEO, Steve Cooper.

Thank you, Stacey, and good morning, everyone. Today we reported 2013 fourth quarter revenue grew 30% to $449 million, which produced $0.36 per diluted share of net income. Both revenue and net income per share were above our previously disclosed expectations. Revenue was $15 million above our midpoint guidance which also was the primary factor of driving net income per share above our previous forecast. The additional revenue was spread across most of our business lines and locations. There was an extra surge in some holiday seasonal work that helped this additional revenue. This was a very successful quarter for us. After adjustment for certain nonrecurring acquisition costs, our Q4 EBITDA grew 80% as compared to a year earlier. We're continuing to experience strong organic growth across this business and the companies we acquired continue to exceed our expectations. Our teams' efforts resulted in a record year and I'm proud of what they've accomplished. At the beginning of the fourth quarter, we acquired substantially all the assets of The Work Connection, which expanded our light industrial staffing business into new geographies with strong sales and recruiting professionals joining us. Including The Work Connection, we completed 3 acquisitions during 2013, adding about $300 million of annualized revenue. All of these acquisitions have been fully integrated into our sales service and support units throughout our business lines. The combined business is performing very well, and we are encouraged that our approach to integrating acquired companies in the manner we did created great synergy, and our combined customers are receiving better service from our organization as a result. For 2014, we remain focused on producing strong organic growth through our specialized cells and service approach. We are pleased with the organic growth we are experiencing and our teams across all areas of our business, both geographically and by industry, are executing well, as we have seen these growth rates remain consistent throughout 2013. Seeing organic revenue growth at these rates and strong gross margins is the result of great execution by our teams. We also believe there are additional acquisitions that will help us further our strategies of providing easy access to blue collar workers that enhance our customers' productivity. Our balance sheet continues to remain strong, which provides us flexibility in funding further acquisitions. We've continued to stay focused on appropriately pricing new business and improving the lowest performing accounts through price increases or terminating their relationship if necessary. This was an important and successful strategy for us during 2013. We understand the importance of maintaining strong gross margins that reflect a specialization we bring to the marketplace. And we're pleased with our progress. We believe we are well prepared to handle the minimum wage increases that will go into effect during 2014. All have been well communicated and built into our pricing models for 2014. As we have previously stated, we expect long-term growth for blue-collar jobs, and we are positioned very well for continued growth through a combination of acquisitions and organic growth from our existing service lines. As shown in our guidance for Q1, we are optimistic with the opportunity to continue the trends we experienced in 2013. It is important to know that we had approximately $7 million of nonrecurring costs in 2013 related to acquiring and integrating the acquired companies in 2013. Our 2013 EBITDA, after adjustment to exclude these costs, was $87 million with a related margin at 5.2% which is consistent with 2012. In addition, our EBITDA margins expanded during the year by about 50 basis points after adjustment to exclude the loss of the Boeing work in 2013. As we move into 2014, we expect to see this expansion in our EBITDA margins continue, as shown in our Q1 guidance today. This comes as a result of the leverage gained from our core business growing strongly along with the synergy impact of these significant acquisitions. I'll turn the call over to our CFO, Derrek Gafford, for further analysis. Afterwards, I will make further comments regarding our growth opportunities. Derrek?

Thanks, Steve. I'll start off today with a high-level discussion of the quarter, including a summary of key factors driving our results. Then we'll drop into a deeper discussion of our business trends, including our expectations for the future. In my commentary, any reference to our performance is based on a comparison to the same period a year ago, unless stated otherwise. As Steve mentioned, diluted net income per share came in at $0.36 or about $0.03 above our midpoint expectation due to higher than anticipated revenue. We leveraged this revenue to growth to generate an 80% increase in adjusted EBITDA, expanding our adjusted EBITDA margin by 170 basis points. Now let's take a deeper look at this quarter's results starting with revenue. This was certainly a quarter of strong consistent growth. Revenue was nearly $15 million over our midpoint expectation and total revenue grew by 30%. We are particularly pleased with this growth due to its widespread reach across the business. We saw growth across most industries, customers and geographies, and our growth trends held throughout the quarter. Now, let's go to gross margin. Gross margin for the quarter was 30 basis points above our midpoint expectation due to favorable year-end payroll tax adjustments. Gross margin was 60 basis points lower than Q4 last year, mostly due to the blended impact of the businesses acquired in 2013. Now let's discuss sales, general and administrative expense. SG&A as a percentage of revenue was about 20 basis points higher than expected due to higher costs from the accelerated integration of the TWC acquisition and additional field bonus expense, as more individuals moved into a higher payout tier. Compared to Q4 last year, SG&A was up about $14 million, which breaks down into the following categories: an estimated $10 million for ongoing branch and field management expense that came with the MDT and TWC acquisitions; $1 million for the TWC integration cost; and about $3 million of costs in the rest of the business. Now let's switch gears and look at SG&A from a leverage perspective. This quarter's SG&A as a percentage of revenue was 210 basis points lower than Q4 last year as we leveraged additional revenue across our expense base and produced efficiencies through the integration of acquisitions. Depreciation and amortization expense was slightly higher and interest income was slightly lower than expected resulting in an unfavorable earnings per share impact of about $0.01. Now let's turn to our expectations for Q1 of 2014. Now before getting into the specific business trend expectations for Q1 2004 -- '14, I want to point out some big picture items that will help in understanding our expected results. First is our Q1 revenue growth expectation, which is lower than our Q4 revenue growth we discussed today. This decline is primarily due to the anniversary of the MDT acquisition made in Q1 2013. Second, is the impact of the worker opportunity tax credit on 2014, as it has not yet been renewed. This program has been renewed repeatedly in the past, but usually on a delayed retroactive basis. Until it is renewed, it'll be excluded from our income tax provision resulting in an effective income tax rate of about 40%. Third, is the impact of the worker opportunity tax credit on 2013 as it was renewed during January 2013 for the 2013 year, and renewed retroactively for 2012. The retroactive application for 2012 created a large benefit in our Q1 2013 income tax provision. Fourth, Q1 2013 had about $4 million of nonrecurring acquisition and integration costs related to MDT. Okay. Now for our expectations for Q1 2014. We expect revenue of $398 million to $408 million, representing growth of about 16%. Diluted earnings per share is expected to be flat to $0.05 per share, which is equivalent to nearly $7 million of adjusted EBITDA compared to about $2.5 million in Q1 2013. Here are a few remaining details on our expectations for Q1 2014. Gross margins should be 24.7% to 25.2%; SG&A as a percentage of revenue was expected to be 22.8% to 23.8%; and depreciation and amortization should be around $5.5 million. We are definitely optimistic about the future. Our specialized approach to sales and service clearly differentiates us in the marketplace and is delivering consistent organic growth across our business lines. We expect this growth, along with our strong operating leverage, to drive continued expansion in our EBITDA margin. Strategic acquisitions are also an important part of our growth strategy and we see a favorable supply of opportunities that complement our business. We plan to use our disciplined acquisition process and strong balance sheet to extend our track record in this area of delivering returns far above our cost of capital. That's it for my prepared remarks. I'll now turn the call back to Steve.

Thank you, Derrek. The current favorable economic climate allows us to continue to pursue further acquisitions while we also aggressively pursue organic growth through the execution of our strategies. I want to talk about both of those areas for a moment. Our main criteria for selecting acquisition opportunities continues to be, first, ensuring that fits our strategy; and second, can we get the expected ROI on the opportunity; and then third, can we integrate that targeted organization to ensure all our objectives are met, especially expanding the opportunities to better serve our customers and the jobseekers. As Derrek just mentioned, there seems to be adequate opportunities available for us to continue to seek growth through acquiring strong companies. We're even more encouraged by the opportunity to continue to grow our revenue organically. We're seeing our strategies for organic growth in 2 areas working very well. First, our sales and service strategy. It's expanded over the last few years to bring more focus to our customers industry specialization. We're in focus in growing our expertise in several industry markets as this is exactly what customers are asking for. Our sales and service approach uses a blend of centralized teams focused on national accounts along with our competency of continuing to sell and service in local markets. Our strategy to be more diverse in relation to our overall industry approach has helped us produce more consistent and sustainable results. Second, we have made great progress in implementing technology that is focused on recruitment, communication and assignment of our workforce to our customers. In the past, most of our workers have been recruited through our neighborhood branch locations. We have been investing in areas that we remain committed to and believe will drive further efficiencies in our business by eliminating our dependency on a high number of branch locations and enabling us to fill more orders through access to more workers using technology and innovative approaches. This is assisting us in centralizing common operations to a higher degree and communicating with our workforce through better use of innovative approaches, including mobile solutions. As we rely more on technology and innovative approaches to engage with our workforce, we are reducing our dependency on our high number of neighborhood branches. This will further reduce operating costs as a percentage of revenue, while giving us further access to more workers with a faster and more consistent fill rate for our customers. During 2013 we closed about 20 branches due to these efficiencies and we anticipate closing 10 to 15 in the first quarter of 2014. We do not yet have an estimate of how many branches will ultimately be closed as we need to carefully analyze the closings day by day and ensure we are not losing any opportunities to serve customers, while operating fewer branches. This is mainly happening in large markets, where we operate several branches. We are not pointing out of any markets with this approach. We are just executing our model differently based on the use of technology now available to us. A good indicator that we are making progress, we expect, is our average revenue per branch in 2008 was $1.65 million. In 2013, average revenue per branch had grown almost 40% to $2.3 million. We expect further productivity gains as we continue investing in process and technology that further reduces our dependency on our high number of branches. Sticking to our sales and service strategy of being specialized for our customers, along with our focus on driving our internal productivity, we will continue to provide outstanding returns for our shareholders. As we stated, we remain optimistic about the staffing industry. There are strong economic drivers along with continued regulation that make our industry an attractive solution for businesses that are growing and need help with workforce solutions. We will now open up the call for any questions that you may have.

[Operator Instructions] Your first question comes from the line of Sara Gubins from Bank of America Merrill Lynch.

I'm wondering if you're seeing any negative impact from weather so far this year?

Definitely. It's been short, though. We have bad weather every year in the winter and that falls on a different week every year. So the quarter as a whole, we're not anticipating a huge impact. There will be a slight impact, and that was in the -- our estimate of that impact was in the guidance today.

Okay. And then the $300 million that you added in annualized revenue run rate in 2013, how much did you actually get in 2013 versus how much comes in 2014?

About $200 million this -- for the 2013 year, Sara. The rest will roll into next year.

Okay. Could you tell us what the Boeing revenue was in the quarter? I'm guessing it's probably pretty small.

Yes. It was. Let me get that for you. It's about $5 million.

Okay. And do you think that's sort of the run rate to continue into next year or does that decline further?

It should be close to that amount.

Okay. The D&A you mentioned was about -- going to be about $5.5 million in the first quarter. I'm also wondering if you think that's sort of the right run rate?

Yes. I think that's up a -- a good rate to use for the rest of the year.

Okay, great. And then just last as you think about puts and takes in the margin, I think you talked about 50 basis points of adjusted EBITDA margin expansion in 2013 and optimism that you'll see more expansion in 2014. Do you sort of envision that being around that level of expansion or do you think we could see even more in 2014?

Well, here's what I would say on this, what I want to make sure, it's just clear when we're talking about the margin expansion. We've got -- we look at margin from a couple of aspects, gross margin. One is fundamental. So what's going on in our core business? And then layered over the top of that is the blended impact from any acquisitions that we have done. So as we head into 2014, just like we had it here in 2013, there's a certain amount of impact from that $100 million of revenue that you just asked about, Sara, from acquisition that rolls over into 2014. And that's probably about a headwind of, call it, maybe 80 basis points of just blended impact from the lower gross margin of those acquisitions. We're making good progress, though, of what we refer to as fundamental gross margin expansion. And I don't think we can offset all of that, but probably about 50 basis points of that. So gross margin, maybe about 30 basis points down. However, on an EBITDA basis, the bottom line here, we expect the adjusted EBITDA margin to continue to expand next year, 2014, very similar to what we saw here in 2013.

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

Steve, in your remarks you talked about how the company's prepared for increases in minimum wages. I was wondering if we can get a little bit more color. I don't know if there's an average price increase that you can give us that goes across the board? And if I remember correctly, also, the state of California not only raised the minimum wage last month, but they're doing it again in July. I'm just curious if you're confident you'll be able to pass through any price increases, accordingly, there or midyear?

Hi Paul, it's Derrek here. Oh, Jeff. Sorry. So for price increases this year, as far as cost that we need to pass along, I'll frame it 2 ways, we probably got about overall maybe 50 basis points of impact, assuming no action on our part, which -- that's not the case. We've incorporated all this into our billed rates. About those, call it, 30 basis points of that is effective here at the beginning of this year, and we're off to a very nice start of that as we have been in prior yeas and as reflected in our guidance. To your point here, California is taking up a $1 minimum wage increase here at the middle of this year. And that's about another 20 basis points on an overall company blended impact that we will need to pass through, and we're prepared to do that. I think we'll make very good progress on that.

Okay, great. You talked a little bit about Boeing, I know there was an article about a month or so ago about Boeing seeing maybe a surge in their temporary workforce. I'm wondering if you can comment on that if you'll be a part of that.

Yes, I won't comment anything really specific about -- too much here about Boeing. What I would say is I know which article you're referring to. It's not a big impact on our revenue estimate here, and there's nothing that I think needs to be folded in from your perspective here. It's a pretty small amount of revenue for us right now as an individual customer, and we're not expecting any changes from what we've talked about here today or what our run rate has been from Q4.

Okay, great. And just a couple numbers questions. What's your budget for capital expenditures this year?

I think $15 million is a good number to use going forward.

Okay, great. And you mentioned your guidance for income tax assuming that the WOTC is not renewed. If it is renewed, what would roughly be the corporate income tax rate?

35% would be a good rate to use if that passes.

The next question comes from the line of John Healy from North Coast Research.

I wanted to ask a little bit about the technology initiatives underway at the company. Derrek, I was hoping you can give us a little bit of an update in terms of, are you fully rolled out with all the texting technology that you wanted to get into the market, and maybe how you're seeing the revenue synergies relative to your original targets and just what we can expect in terms of maybe further rollouts and any sort of other technology initiatives you might be evaluating for the company in 2014 or '15?

Yes, thanks, John. I appreciate that. 2013 was a big year for us in implementing our texting, and it has been embraced across the company, but it is still picking up momentum. So people are really using the power of that to be able to communicate with their workforce without those workers checking in at the branch, and it's been a powerful -- a very powerful impact. Further technology really has to do with what other things need done in the branch to drive process out of the branch into a centralized location. Historically, all of our billing has been done branch by branch. All of our payroll's been done branch by branch, and, really, service calls, the customer calls, the local branch. And that's a big initiative to move those 3 things out of the branch this year which takes technology to do. So you can see us taking steps further of those branches only being needed to reduce or to recruit extra workers. We've also taken steps, though, to be able to attract workers online and have them apply online. And that initiative will pick up momentum during 2014 a lot. And I think when we get to the tail end of '14, we'll be able to give you a better indication of where we really think the branch count will end somewhere out in 2015 as we succeed on these technology improvements here in '14.

And I wanted to ask just maybe a little bit about your construction business, maybe how -- at the end of the year the size of that. And then kind of your thoughts on what to expect from a non-res recovery in 2014. Are you having positive conversations with your customers about this year? And maybe the split of your Construction business, maybe by res and non-res, just any color you can give us there.

I'll let Derrek grab those numbers and that split for you, and I'll just make a comment quickly while he's doing that. We're seeing this as a huge boost guide for us, this construction business. Since our peak back in 2006 or '07, this business has really fallen off and we've seen building permits come back and we're actively engaged with our customers. The interesting part is back in '06, it was really driven by res and new communities being built, and it was really being driven by the smaller contractor. Today, we have relationships with larger contractors both in the commercial space and the industrial space, and we still have the people in the local field that can build relationships with local contractors as this construction surges or does a hiccup [ph] here or there, like it has the last few years. I'm really happy with our industrial improvement. That's a category that we didn't even participate in 5, 6 years ago and now it's one of our strongest growth areas. So yes, we're bullish on construction, and let me have Derrek give those numbers to you, John.

So overall construction is about 30%. However, let me break that down for you. As Steve just mentioned, we have a growing industrial and energy practice that's pretty significant. That makes up about 7 or 8 points of that. So what you're left then with is, call it, 22% or 23% of our mix of business that's in residential and commercial side of the business.

Would res be larger than non-res, still, for you guys?

Yes. So that 23 points that I just mentioned that's split between residential and commercial, the commercial makes up about 3/4 of that 23%. So let's call it, 18%, 19% and the rest residential.

Okay, great. I just want to ask a big picture question about how you see 2014 and '15 and how you see the cycle playing out for your business. I mean when I think about what's going on with your company, that you've got the capacity being freed up to sell more at the local level. You've got these vertical specialists that are making some nice progress for you. Your Construction business has been later to recover. But as Steve said, there's some blue skies there and you have the uncertainty which may be a demand creator on the ECA. I mean are you of the view that, recently you've been seeing kind of mid-single-digit organic, that we could actually see maybe any [indiscernible] for the cycle was, or later in the cycle at the top line actually reaccelerates over the next 2 years or so? Or do you think that's a scenario that still too far off to think as likely here?

John, I think you laid out some categories that are very key, and they're all true from our perspective. First, starting with our ability to sell into more industries has been powerful, and we're continuing to select new industries as we go and aligning teams around those customers, and our customers are responding very well. So yes, that's a positive. The Construction business has not fully rebounded, and do we believe it'll grow from here? Yes, that's another key area for us. And then any regulation that comes on, whether it's these minimum wage increases that Derrek's talked about, or ECA, [ph] seem to create a little bit uncertainty in customers to add full-time workers, therefore, they turn to us. That's another plus. And where we are in the cycle's anybody's guess because it was such a big hit that we came through a few years ago. Is this a normal cycle or not? I think what we feel is a much like the headline news that we've seen is that outside of manufacturing, business is growing really well and manufacturing's not shrinking, other areas are just taking off. So I think that the trends net-net-net all add up to a bullish area for us, John.

Your next question comes from Randy Reece from Avondale Partners.

Did you give a number for your -- the amount of revenue you had for green energy construction?

No, we did not. Would you like me to give that right now?

Yes.

So this is a number for our, roughly, for energy and industrial together, which is mostly that, is a little over $30 million for Q4 '13.

So sequentially that picked up pretty nicely?

A little bit, yes.

Okay. You said that, that combined industrial and green energy. Is that the way you've been reporting it or at least discussing it in the past?

Yes, this is the same way we've been talking about it in the past. This category. So it's apples-to-apples, so what you and I have talked about in the past.

All right. The acquired businesses, you said in the news release that for the year they had performed better than expected. Was that also true in the fourth quarter?

Yes. We're just thrilled with the acquisitions that we've had this year for a variety of reasons. From a strategic perspective, they have done -- they've been a great asset to us in how we serve our customers better, our workers. We've certainly taken on some market growth here, but I think great from a strategic perspective. And we've picked up some -- we just have some wonderful people to have joined our team. From a revenue perspective, they have done very well. [indiscernible] virtually all of the revenue, which is very hard in this business. It's a very relationship-driven business. And then from an integration perspective, all of these acquisitions have been fully integrated anywhere from a short time span of 3 months to 5 months which -- and the synergies that we've realized from those have all met or exceeded our expectations. So all the way around has been a really good year for us.

It sounds like you have been carrying some redundant expense, but you're not just racing to get to an optimal level of operating leverage because you have some pretty complex things you're going through consolidating markets and consolidating offices. Is there a point on the horizon where we should expect you to be pointing to as far as getting to more of an optimized level of expense margins?

Yes, Randy. I appreciate that question. And as I've made in my prepared remarks or maybe I even answered or alluded to in one of the questions that 2014 is still a year of validating some of these assumptions we've made. We've seen it work in a few markets here and there, and we're confident about it, but we need to take one day at a time here as we consolidate these markets. It's an interesting thing because the culture of our labor-ready business is relying on those that live within the neighborhood in their local neighborhood around these branches. And now these methods are seeking a different worker in a different location and being able to both round them up through applying online, engaging with them online, maybe interviewing and getting them set for work and then communicating with them through text messages as we assign them the jobs and then we pay them electronically now. So it's quite a cultural change for us. We remain confident behind it. Yet we have to move our organization that direction without losing any of the revenue or the opportunities to serve and find new workers. So 2014 is going to be a -- continued validating assumptions by moving the strategy forward of closing 10 to 15 offices here in Q1 and then reporting back and seeing if that's -- we're still getting the success that we like. I do believe that by the time we get into -- the end of the summer of 2015, we'll be optimized. We're only 4 or 5, 6 quarters at the most away from being to that state with our current branch network that we want to be. So it's not go to take forever. We just don't want to lose the momentum we have.

[Operator Instructions] Your next question comes from the line of Ato Garrett from Deutsche Bank.

Can you talk a little bit about some of your regional growth rates just as we look at -- back at this, the weather impact, looking at December and January? I know you spoke a little bit earlier in the call. But just trying to contrast some of the -- looking at growth rates and areas like California and Texas and Florida versus the company overall.

Yes. Well, talking about the growth rates for Q4 and, I'll say, for really all of 2013, it's been a story of widespread growth. There hasn't been any significant things to really call out here on a regional perspective. And probably the most significant call out for Q4 was, as Steve mentioned, we did some -- had a pickup in seasonal work. But geographically, the growth's been quite widespread. Now I want to get to a more acute discussion of how things have looked this month from a weather perspective. As Steve mentioned, yes, there's been a few hits here and there. We usually have some bounce back, though, the following week. That is, if there's not another storm, which hasn't been the case here. So there may be a little bit of impact around these different pockets of bad weather, but I don't think it's a big story for us in this quarter.

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

You've mentioned you'd rationalized some revenue as a result of pricing in 2013. Any sense of how much that costs you from a top line perspective?

I don't think there's been much there. I would say there's been -- we're not shedding any big customers here because of pricing that has just gotten squeezed year after year. What's going on in our business right now from a pricing perspective is, one, just what we do every quarter in just running the business. It's just blocking and tackling on how we price new business that comes on and manage our existing business. So that's just a normal part of our management process. There's also been some pricing readjustments with some of the acquisition business that we had done. But again, that just falls into our normal management of the business. And so I don't think there's really much to call out here as far as a significant impact on the top line from managing that bill and pay rate business week in and week out.

As you think about, obviously, the penetration rates are popping up around all-time highs and they'll likely continue to go higher. How do you think about that versus the acquisition footprint, as you think about the upside in the cycle? And has that kind of -- given how strong the penetration rates had been, has that impacted your acquisition strategy at all, or is that pretty much as expected?

We think this is a very good window right now for acquisitions. While the penetration rate is certainly at -- had peaked at its high here in December, the incremental jobs that are being added each month, temp jobs compared to total jobs, that's still holding up very strong. We haven't seen a decline there. I think that speaks well for the industry. There's a lot of other things with the industry that we could talk about, but that's just coupled with where the economy is. We're not economists here, but we've grown well in a very moderate GDP environment. And we think this is a very good time to continue to pursue acquisitions, and we're very optimistic about it.

Your next question comes from the line of Mark Marcon from Robert W. Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Most of my questions have been answered, but just want to go back to the minimum wage. How long do you think it would take to pass along the wage increases?

Well, the wage increases that we're dealing with here with at the beginning of the year, Mark, I think we're going to get those largely passed all through this quarter. I mean, this is assuming they'll action on our part maybe 30 basis points of gross margins here that we're talking about. And if we look back to where we've been in prior years, it's in that same category. And I wouldn't say that this is easy because it is not. It is more understandable to customers than unemployment taxes because it's something that everyone sees across the whole landscape from our customer base versus where unemployment taxes are different customer by customer. So it's very easy for them to relate to, to make it easy. But this is still a very manageable area of cost increases that we've seen before. And the increases coming out in California are larger. But I think that's very doable for us, and I think we can largely get that passed through this year. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: So basically, if I'm interpreting your comments correctly, you'd basically take a 30 basis point hit initially, and then by the end of the year, you would anticipate buyback or...

No, no. I think we'll -- getting the increase passed through is a much easier part. Getting our markup on top of it passed through, that can take some time. However, I'll just go back to history here. Our history has been that we've largely got this passed through, including the margin during the time when the increase has gone through. And that's our plan this year. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Okay. And not that it's a high likelihood, but obviously the President made a proposal. If that were to go through, the $10.10, how do you think about that?

Well, that would be a strong increase. And if that proposal happened, it would concern me more about overall GDP growth than it would our ability to adjust quickly and move through this. Like Derrek just mentioned it, it might be tough to get a mark up on those steep increases but it's the most visible to the customer. So when you have that kind of visibility, it's much easier from our perspective, and we've got great communications plans to start market by market and led by those folks that are visiting with customers. So I'm confident in our process. I'd be more concerned about what that really does to the economy. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Same here. With regards to the competitive environment and the success that you've had, are you seeing any sort of changes at all?

Well, that's a broad question given the fact that we've diversified so far. As there's pockets of high competitiveness that some of the businesses -- looks commoditized; and our goal, our strategy is to organize ourselves and go to market in a way that we don't become a commodity, that we can hold our margins up and that we're organizing in a fashion and become leaders in those industries, so customers see us of having some expertise there. And in those categories, we're still doing really well. The more general commoditized areas of the business and a lot of companies, larger companies, walked away from commercial or light industrial years ago. And we're running to that space because it has very consistent gross margins. And we're finding that managing ourselves in that area is exciting. We're buying businesses in that space. We can get good returns on our cash investments. So the things that were becoming commoditized and stabilized and we're remaining specialized in those other areas. So overall, I like our approach to what we're doing. Your question about the competitive front is, it's still there, we better be sharp, and I think we are.

[Operator Instructions] Your next question comes from the line of Josh Vogel from Sidoti & Company. Josh Vogel - Sidoti & Company, LLC: Looking back at 2013, I see like 3 of the 4 quarters organic growth was in the mid-single-digit range. And given the strength we're seeing in particularly industrial, non-res, which are big pieces of your overall business now, can we expect to see organic revenue trends improve in 2014?

Well, we certainly could. I think that's a good estimate that you've just mentioned of our organic growth trends during 2013. The 5% to 7% is a good estimate for us. And as we've discussed before, those are general estimates. So don't use too much precision there. But it gives you some baseline as you started looking to next year and you're doing your own forecast. So as Steve talked about here earlier, there's still, we believe, quite a bit of upside here on the construction side. The commercial, let's call it just non-nonresidential growth that we have -- we've had here over the last couple of years has largely come outside of non-residential growth around housing developments, which is what it's generally -- which is generally propelled in the past. So as residential comes back, we believe that there's more growth both in residential and more growth on the non-res side. So we are patiently looking for that, and we've had good growth this year on the non-res side and we'll see what happens next year. Josh Vogel - Sidoti & Company, LLC: Okay. Now I know it's early in the game still, but do you have any metrics that maybe you could share with us with regard to the number of placements you've made through your mobile platform last year?

No, I don't have any of those with me right now. I could talk to you about that separately, but I don't have those numbers in front of me right now. It's a bit of an estimate because we do a lot of texting out there. And whether they chose to do it because of the text or whether they chose it because some other method we make some estimates there. But we can talk about it more.

Josh, that part of our business is approaching 100%. I'm really confident in what I'm seeing there. The next step is we found those workers in our neighborhood branch locations, though. And we signed them up on the texting because they came into the branch. The part that's really low is how many of those workers did we find online without a branch, and that's our big surge in 2014. We have to push that forward, and that's going to be an important metric for you to watch. That's the next important one. The fact that we have a big worker base, we're communicating with them through text messaging. The numbers are -- when we started this 2 years ago, our workers -- the number surged from about 50% or 60% how many had cellphones to 93% immediately. And that number is almost 100% now. We do not see a worker without a cellphone now. Very, very, very seldom. So that's not our big test. We know that piece works. The pay card works. At the end of the day, the texting at the front end of the day works. We're really working on what happens in the middle of the day right now, and that's finding new workers. And then as I mentioned earlier, the servicing that goes on in the middle of the day, the billing, the payroll and the service calls from customers and centralizing that is our next step and finding a workforce without a branch. So big task, exciting, we're well on our way, and I think 2014 is going to be a pivotal year for TrueBlue in these areas. Josh Vogel - Sidoti & Company, LLC: I missed what you said about -- if you gave out the branch count and how many closures do you expect in 2014?

Yes, we didn't forecast all the way through '14. We said that in Q1 there'll be 10 to 15. And then we need to analyze those and make some decisions. Is the strategy working? Are we still finding workers without those branches? How far can we press those boundaries? So yes, we've only talked about Q1. Josh Vogel - Sidoti & Company, LLC: And what was the total branch count at year-end?

Total branch count was 757 locations. That's 35 added from the TWC acquisition and 6 closures/consolidations.

This concludes our question-and-answer session. I will now turn the call back to Mr. Steve Cooper.

Yes, thank you. Thank you for joining us this morning for our analysis of the quarter and listening to our strategies to further improve the business. Have a great day out there.

This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.