Resources Connection Inc (RGP) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Resources Global Professionals Q4 2014 earnings conference call. (Operator Instructions) As reminder, this conference is being recorded.

I would now like to introduce your host for today's program, Kate Duchene, Chief Legal Officer. You may begin.

Thank you, operator. Good afternoon, everyone, and thank you for participating today. Joining me on this call are Don Murray, Executive Chairman; Tony Cherbak, Chief Executive Officer; Tracy Stephens, Chief Operating Officer; and Nate Franke, our Chief Financial Officer.

During this call will be providing you with comments on our results for the fourth quarter of fiscal year 2014. By now you should have a copy of today's press release. If you need a copy and are unable to access via our website, please call Patricia Marquez 714-430-6314 and she will be happy to fax a copy to you.

Before introducing Tony, I would like to read an important announcement about certain statements that we may make during this call. Specifically, we may make forward-looking statements. In other words, statements regarding future events or future financial performance of the Company. We wish to caution you that such statements are just predictions and actual events or results may differ materially.

We refer you to our 10-K report for the year ended May 25, 2013, for a discussion of some of the risks, uncertainties, and other factors such as seasonal and economic conditions that may cause our business, results of operations, and financial condition to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made during this call.

I will now turn the call over to Tony Cherbak, our Chief Executive Officer.

Thanks, Kate. Good afternoon and welcome to Resources Global fourth-quarter conference call. I'm going to start by giving you a brief overview of fourth-quarter and year-end operating results.

Total revenue for the fourth quarter was $156.8 million, up 11.8% from our fourth quarter a year ago and 18.2% on a sequential basis. As we have previously noted, our fourth quarter was comprised of 14 weeks versus the typical 13 weeks. Excluding the 14th week revenues, our quarter and sequential growth rates were 4.9% and 10.8%, respectively.

For the year revenue increased 2% to $567.2 million versus $556.3 million last year. Including the extra week in fiscal 2014, revenue was up about $1.1 million in comparison to 2013.

During the fourth quarter we recorded a charge of approximately $2 million, or $0.05 a share, to reduce personnel in certain of our European offices. Of the total, approximately $300,000 was recorded in cost of services and $1.7 million in SG&A depending on whether the person impacted was an employed consultant or front office personnel. The $300,000 charged to cost of services reduced our fourth-quarter gross margin by 20 basis points.

Fourth-quarter gross margin, including the 20 basis point impact from the European severance charge, was 38.9%, representing a 290 basis point improvement from the third quarter and was the same as the fourth quarter a year ago.

During the fourth quarter our SG&A costs were $46.2 million which includes $1.7 million of the aforementioned severance costs. Excluding this cost, fourth-quarter SG&A was $44.5 million, or $2.2 million higher than the comparable quarter a year ago. This increase primarily results from the extra week during the fourth quarter of fiscal 2014.

As Nate will discuss, a portion of the severance charge we anticipated to record in Q4 should be recorded over the next couple of quarters as we resolve the remaining contingencies with respect to the individuals affected.

During the fourth quarter, we generated cash flow from operations and adjusted EBITDA of $18.4 million and $16.4 million, respectively. For the quarter, our pretax income was $13.5 million. Based upon an effective tax rate of 49.1%, our fourth-quarter GAAP net income was $6.9 million, or $0.18 a share, inclusive of the $0.05 per share impact of the severance charge. Excluding the severance charge, net income per share was $0.23.

During fiscal 2014, we returned $40.2 million of capital to shareholders in the form of dividends and share repurchases.

Now on to revenue trends. As we reported in early April, weekly revenues during the first four weeks of the fourth quarter averaged $11.4 million. For the remaining non-holiday weeks of the quarter, weekly revenues ranged from $11.2 million to $11.5 million.

As we have discussed the past couple of quarters, we continue to see improving demand for our services, particularly in the US. On a comparable 13-week basis, US revenue was up 7.7% quarter over quarter, Asia Pac's revenue increased 2.2% quarter over quarter, and Europe's fourth-quarter revenue declined by 11.8% quarter over quarter.

To reverse Europe's revenue contraction, we continue to provide support on several fronts from instituting programs to stimulate new cross-border revenue to providing US specialist assistance in areas like supply chain and information management. After taking out a fairly significant level of cost with the personnel reductions in the fourth quarter, we are hopeful to see improvement in our European operations in the latter half of fiscal 2015.

During the first six weeks of our first quarter of 2015, our weekly revenues totaled $66.4 million, about 7.8% higher than the compare period in the first quarter a year ago.

Additionally, I am pleased to announce that Tanja Cebula, who previously oversaw our Western region, has agreed to take on a new role as our Chief Innovation Officer. In this role Tanja will work with our senior field leadership and practice area subject matter experts to bring focus to scaling new and existing business ideas to accelerate revenue growth.

With that I will now turn the call over to Nate for a detailed review of our financial results.

Thanks Tony. As mentioned, total revenues for the quarter were $156.8 million, up 11.8% quarter-over-quarter and 18.2% sequentially. On a constant currency basis, the quarter-over-quarter increase was 11.6% and the sequential increase was 18%.

For the 2014 fiscal year, revenues were $567.2 million versus $556.3 million in fiscal 2013. Our fiscal 2014 fourth quarter and year consisted of 14 weeks and 53 weeks versus 13 weeks and 52 weeks in fiscal 2013. Revenues during the 14th week of our fourth-quarter, which included the Memorial Day holiday in the US, were $9.8 million split 80% in the US and 20% internationally.

The following geographic revenue data utilizes Q4 fiscal 2014 revenues for 14 weeks compared to the prior quarters comprising 13 weeks. For the fourth quarter, revenues in the US were $124.3 million, up 14.8% quarter-over-quarter and 20.2% sequentially. For the fourth quarter, total revenues internationally were $32.5 million, up 1.9% quarter-over-quarter and up 10.9% sequentially.

International revenue accounted for approximately 21% of total revenues for the quarter versus 22% in the third quarter of fiscal 2014 and 23% in the prior-year quarter. Europe's fourth-quarter revenues decreased 6.4% quarter-over-quarter and increased 1.6% sequentially, while the Asia Pacific region saw fourth-quarter revenues increased 9.8% quarter-over-quarter and 26.3% sequentially.

On a constant currency basis, total international revenue increased 0.9% quarter-over-quarter and 9.9% sequentially. On a quarter-over-quarter basis, the US dollar was weaker against the major currencies in Europe and stronger against the Asia Pacific currencies. As a result, on a constant currency basis, Europe's quarter-over-quarter revenue decrease was 10.3% while Asia Pacific's quarter-over-quarter revenue would have increased 13%.

As Tony detailed, on a comparable quarter-over-quarter 13-week basis, US revenue was up 7.7%, Asia Pacific's revenue increased 2.2%, and Europe's fourth-quarter revenue declined 11.8%.

Let me now discuss early revenue trends for the first quarter of fiscal 2015. Weekly revenues for the first six weeks of the quarter, which included the Fourth of July holiday, aggregate to approximately $66.4 million, which is approximately 7.8% higher than the comparable period last year.

On a weekly basis, they were $11.4 million, $11.3 million, $11.6 million, $11.5 million, $9.3 million, and $11.2 million. The fifth week included the Fourth of July holiday. In thinking about the remainder of the quarter, it is important to remember that we generally lose about 5% of weekly revenue due to vacations taken by consultants in the US and Europe during the mid-July through August timeframe.

Using 95% of the non-holiday weekly average achieved during the first five non-holiday weeks of the quarter, the weekly revenue computed for the remaining seven weeks of the first quarter would be about $10.8 million per week, which yields first-quarter revenue of approximately $142 million. This computation is purely mathematical and does not consider potential increases or decreases in weekly run rates over the balance of the quarter.

Labor Day will fall in our second quarter, similar to fiscal 2014.

Now I will discuss gross margins. Gross margin for the fourth quarter was 38.9%, the same as the year-ago quarter and up from 36% in the third quarter. The 290 basis point increase in sequential gross margin stems primarily from fewer US holidays during the fourth quarter, the reduced impact of FICA taxes and improvement in bill pay spreads.

As Tony mentioned, during the fourth quarter we recorded a severance charge, a portion of which reduced our gross margin by approximately $300,000 or 20 basis points.

Excluding reimbursable expenses, our fourth-quarter gross margin was 39.5% which compares to 39.7% in the fourth quarter a year ago. The average rounded billing rate for the quarter was approximately $125, the same as in the third quarter and down from $128 a year ago. The average rounded pay rate for the fourth quarter was approximately $63, down from $64 in the third quarter and a year ago.

Please remember these hourly rates are derived based upon prevailing exchange rates during each period given. For the first quarter we would expect gross margin to approximate the fourth quarter percentage of 38.9%. For the fourth quarter, gross margin in the US was 40.1% and our international gross margin was 34.2%. Our consolidated gross margin for fiscal 2014 was 38.1% compared to 38.5% in fiscal 2015.

Now for headcount. For the fourth quarter the average consultant FTE count was 2,309. This compares to 2,233 in the previous quarter and 2,217 in the year-ago quarter. Quarter-end consultant headcount was 2,401 versus 2,208 a year ago. Total headcount of the company was 3,113 at quarter end.

Selling, general, and administrative expenses for the fourth quarter were $46.2 million, or 29.5% of revenue, versus $42.3 million, or 30.2% of revenue, a year ago. As Tony mentioned, our fourth-quarter fiscal 2014 SG&A includes $1.7 million of severance charges related to European personnel. Excluding the severance charge, fourth-quarter SG&A was at$44.5 million, approximately $2.9 million higher than third quarter. The increase primarily stems from the extra week in the quarter.

Excluding the impact of the severance charge, we believe SG&A expenses in the fourth quarter will approximate $43.7 million. During the first quarter, the sequential decline in SG&A stemming from the extra week in the fourth quarter and savings from European actions are offset in part by an increase in marketing cost, including a global clients service meeting held in June, an increase in FICA taxes and other costs associated with annual incentive compensation paid in July, and headcount reductions where we are -- headcount additions where we are experiencing significant growth.

For modeling purposes, the remaining severance charge of $800,000 could be split evenly between the first and second quarter, but will ultimately be dependent on timing associated with the individuals being impacted.

Stock compensation expense was $1.16, or 1% of total revenues, the same as the third quarter and down from $1.7 million in the fourth quarter of fiscal 2013. We would anticipate quarterly stock compensation to approximate the fourth-quarter amount in the upcoming quarters.

At the end of the fourth quarter, our office count was 68, 45 domestic and 23 international. Related to other components of our financial statements, depreciation and amortization was $1.3 million for the quarter, about the same as last quarter. We would expect depreciation and amortization expense for the upcoming two quarters to approximate $1.3 million per quarter and decline to approximately $1 million in the third and fourth quarters.

Our adjusted EBITDA or cash flow margin, which we defined as EBITDA before stock compensation, was 10.5% in the fourth quarter, a 470 basis point increase from 5.8% in the third quarter and a 60 basis point increase from the year-ago quarter. For fiscal 2014 our adjusted EBITDA percentage was 8.8%, down from 9.6% in fiscal 2013.

During the fourth quarter, on a GAAP basis, we recorded a provision for income taxes of $6.6 million on pretax income of $13.5 million, representing an effective tax rate of approximately 49.1%. Our fourth-quarter effective tax rate was less than anticipated due to the lower-than-expected severance charge recorded in Europe. Excluding the severance charge, for which we recorded no tax benefits, the fourth-quarter effective tax rate would have been 42.9%.

Our fiscal 2014 effective tax rate was 47.9% and continues to be impacted by our current inability to offset income in tax jurisdictions in which we are profitable with losses in tax jurisdictions in which we are not. Our cash tax rate continues to approximate 42%.

For the first quarter of fiscal 2015, we anticipate a tax rate approximating 48%, excluding the impact of the residual European severance charges. Our GAAP tax rate for each of the upcoming quarters is difficult to predict and could be volatile as the rate will be dependent on several factors, including the mix of operating results between our US and foreign locations, each of which are taxed or benefited at different statutory rates and the offset of the tax benefit of foreign losses in certain locations by valuation allowances.

In summary, our GAAP per-share income during the fourth quarter was $0.18, including the $0.05 impact of the previously-mentioned severance charges. Excluding severance charges, per-share income was $0.23. For fiscal 2014, our GAAP per-share income was $0.51, slightly better than the GAAP per-share income in fiscal 2013 of $0.50.

Now, I will turn to the balance sheet. Cash and investments at the end of the fourth quarter were $114.3 million, up $7 million from the third quarter. The increase results from cash generated from operations during the fourth quarter of $18.4 million offset in part by share repurchases and dividends totaling approximately $10.7 million and capital expenditures of approximately $623,000 during the quarter.

For fiscal 2015, we anticipate capital expenditures of approximately $2 million, of which about $500,000 should occur in the first quarter. For fiscal 2014, we generated cash flow from operations of $32 million.

During the fourth quarter we repurchased approximately 601,000 shares of our common stock at an aggregate cost of $8 million, or $13.23 per share. During fiscal 2014, we repurchased a total of 2.2 million shares at an aggregate cost of $29.6 million or $13.19 per share. The shares' purchase represent 5.6% of our outstanding shares as of the beginning of fiscal 2014.

Our current stock buyback program has approximately $43 million remaining. We will continue to return cash to shareholders through our regular quarterly dividend and share repurchases while maintaining a balance between the capital requirements of growing our business and fiscal prudence. Our shares outstanding at the end of the fourth quarter were approximately 38.2 million.

Receivables at quarter end were approximately $90.3 million compared to $89 million at the end of the third quarter. Days of revenue outstanding were approximately 56 days versus 59 days in the third quarter and 55 days in the comparable quarter a year ago.

Now I would like to turn the call over to Don for some closing thoughts.

Thank you, Nate. As we have commented during the past couple of quarters, we continue to see improving demand for our services in the US. During the fourth quarter this was reflected in our quarter-over-quarter US growth rate of 7.7% on a comparable 13-week basis. And as we begin fiscal 2015 we continue to see clients commence new initiatives and expand current ones.

Let me share a few examples. Recently, we commenced IT security, governance, and vendor risk assessment initiatives at a large healthcare organization. In June, we were engaged by a large financial institution to help them establish a regulatory program office to help manage their regulatory compliance efforts.

A global financial system transformation initiative, which we began work in the first half of fiscal 2014, has now grown to approximately 40 consultants globally. We are pleased our focus on maintaining long-term client relationships continues to pay off.

We will continue to focus efforts to improve our operating results in Europe. Our global platform is of vital importance to us while serving our Fortune 500 client base. For example, we would not have won the previously mentioned financial system transformation engagement without our global footprint.

From our cash generating standpoint, our business remains strong. As Nate detailed, the cash generated from our operations in fiscal 2014 and 2013 allowed us to return over $83.9 million to shareholders during the two-year period. Our Board of Directors will evaluate an increase to our dividend at our upcoming Board meeting.

I also anticipate we will continue our trend of share repurchases in fiscal 2015. And as we enter 2015, our clients provide a solid foundation for growth as economic uncertainty continues to abate, hopefully.

Related to our clients, I am pleased to report the following statistics for fiscal 2014. Client continuity remains outstanding. During our fiscal 2014 we served all of our top 50 clients from fiscal 2013 and 2012. In fiscal 2014, we served 225 clients exceeding $500,000 in fees compared to 216 served at this level in fiscal 2013.

During fiscal 2014 our top 50 clients represented 38% of total revenue, while 50% of our revenues came from 89 clients. Our loyal client following is reflective of our client service approach and the quality of the work performed by our consultants.

Our largest client for the year was approximately 1.7% of revenue. And for fiscal 2014, 96% of our top 50 clients used more than one service line. 76% of those top 50 clients used three or more service lines, so this service line penetration reflects the diversity of relationships we have within our client organizations.

This concludes our prepared remarks and we'd be happy to answer your questions at this time.

(Operator Instructions) Jeff Silber, BMO Capital Markets.

Thank you so much. In looking at your office count, it looks like it is down about five offices on a year-over-year basis, a couple in the US and three outside the US. Are you happy with your office footprint platform as it stands? Do we think we will see anymore culling?

And then on the flipside, as revenues continue to grow, do you think there are any areas that you might be adding offices in? Thanks.

Jeff, we do not have any plans to close any other offices. Generally the offices that we have closed have been when leases have come up and we have been able to consolidate the operations with an office nearby.

I would say when we have a client need that usually dictates the opening of a new office, but right now we don't see really any change in that game plan for the time being.

Okay. I don't know if you have given out this information beforehand, but some of the other companies in your space give us some guide in terms of incremental margins when you get incremental revenues. Is there a goal that the Company has a mind?

Well, Jeff, longer term -- the long-term goal of the company is to continue to work to try to achieve a 15% EBITDA margin. Our view obviously is that has not changed as a goal. Obviously, the timeline to get there from where we were five, six years ago has elongated.

But we continue to work towards that goal. There are investments that we will make along the way. We are seeing certain practice offices really starting to grow at a nice space so we are starting to add people to those.

But we don't necessarily have a definitive quarter-to-quarter margin. We tend to be optimistic when we find people or have client situations in a particular area.

All right. And in Europe are there any areas that are doing better than others or are you just seeing weakness all across the board?

No, there is a couple of offices that are doing well. Like our UK office, which we used to have a lot of problems with, that seems to have straightened itself out. We have added some new people and that has helped.

And, surprisingly enough, our little Italian office, who is probably operating in the worst economy in all of Europe, is doing quite well. They grew over 60% last year.

So those two offices doing well. We have got a lot of work to do in front of us for Europe, but we plan to -- we are trying to help them with bringing some of our specialist capabilities to Europe, like in IM and supply chain that I talked about a little bit earlier, and we are looking at a couple of key hires on the business development front. We are hoping that probably in the latter part of 2015 we will start to see some improvement.

All right, that is great to hear. Then just a quick numbers question. Did you give revenues for Europe and Asia Pac?

I think we gave revenue increases. Let me get those for you. For the 14 weeks, the revenues in Europe were $19 million and Asia Pac was $10.1 million.

Okay, great. Thank you so much.

Kevin McVeigh, Macquarie.

Great, thanks. So it looks like from a gross margin perspective sequentially you are going to be flat, which, if I have it right, it typically steps down. Is there anything -- is it kind of better pricing or better healthcare costs that are driving kind of that flat sequential trend? Or am I just not thinking about that right?

You are thinking about it right, but I would tell you there is really two components. One, if you look to Q1 that we are currently in versus last year, we do have one less holiday and that is because Memorial Day fell into our fourth quarter. But the other half of the forecasted improvement is improvement in bill pay spreads.

And, Nate, is that just a better economy? Because it sounds like bill rates were down year on year. Is that right?

Yes, but there was an improvement and that is about half of going from Q1 a year ago to Q1 2015.

Got it. Then just kind of more of a high-level question. If I looked into 2016 -- and I am not looking for specific guidance. But assuming kind of a $600 million run rate business, we peaked at close to $800 million back in 2007.

As you think about that delta, what has really driven the lack of meaningful revenue uptick through this cycle? Is it more client-centric or the type of work you are doing? What is driving kind of the lackluster revenue growth over the course of this upcycle?

So if you look at -- what I would tell you is if you look at the Fortune 500 as you look back over the last couple of years, they all remain our clients but they have all been operating in what I would call a very constrained SG&A where they have deferred projects. They have been reluctant to spend as they fight with their own top-line issues.

As I think we have commented over the last couple of quarters, we are seeing that starting to change and that is why I think you are, especially in the US, you are starting to see that growth curve pickup. Many cases, these companies they -- some of these initiatives they can't defer forever. That is especially true in the regulatory environment, but we are seeing that and other initiatives, too, encompassing some of the things Don had commented around just around risk management and those types of things.

Are you seeing anything in terms of a meaningful way for the Volcker Rule? I know we talked about that in the past.

I would tell you in our financial services vertical, kind of the Volcker Rule or all of the Dodd, the various elements of Dodd-Frank, which we kind of label this whole regulatory compliance area, we are seeing good demand in that area.

And it is really -- Kevin, it is really more than just the Dodd-Frank rule. It is just all regulatory compliance has been a real boon for us, so we expect great things in 2015 from that business.

Got it. And then -- you know what, I am good for now. Okay, thank you.

Mark Marcon, Robert W. Baird.

Good afternoon. I apologize, I missed a portion of the initial comments, so I can come back offline on these, but would you mind repeating just what the constant currency growth rates were in the various geographies outside of the US?

Sure. So on a constant currency basis, the international revenue increased 9/10 of a percent quarter over quarter and 9.9% sequentially. Then on a quarter-over-quarter basis, Europe was down 10.3% and Asia-Pac was up 13%.

And Europe being down 10.3%, is that adjusted for the -- is that a 13 versus 13 week or is that the 14 (multiple speakers)?

Those are 14 versus 13 GAAP -- not that constant currency is GAAP, but it is computed on a GAAP basis. On a 13-week basis, Europe was down 15.8% and Asia Pac would have been 5.4%.

Up 5.4%?

Yes.

Okay. Thank you. And with regards to -- so when we think about the European ops, you have taken some actions over there. What sort of savings should we end up getting from those actions when we think about the annualized savings?

We put in our formal comments I think in the third quarter we said that the overall savings will be approximately $4 million. Now there will be some reinvestment there so it won't be the entire $4 million, but we will have to reinvest some of that into the operations for certain key positions. But it will be the bulk of it.

Okay, great. Then with regards to the -- just staying on Europe and you made the comments with regards to the UK and Italy, are the other areas, even though they are not showing growth, are they showing signs of stabilization?

We would -- I think to sum up Europe, we have done the easy work now which is -- it is not easy actually doing it, but it is easier than what we have to do. What we have to do now is grow the practice.

Our Chief Operating Officer has been, as I said before, has been working significantly in this area. We have done a great evaluation of all the talent over there. We know the places that we have to fill in with additional talent and that is what we are just trying to work on.

So it depends, Mark, area by area, but right now we are in the mode of trying to grow those practices and to help them where we can from the US operations, where we can give them advice and loan them some of our expertise in the various different areas like IT and supply chain.

Okay, great. Then with regards to the US, it was nice to see the commentary with regards to the broadening of the revenue trends. Can you talk a little bit about whether that is coming from a few key clients across the country, or are you seeing just a much healthier attitude among all of your clients?

I would just tell you just relative to industries, we are doing really good in healthcare, technology, financials, pharma, energy. It is across all of those areas, so it is pretty broad.

And just to give you an idea of the magnitude of the US operations, we had 26 clients in Q4 that generated fees of over a million dollars. So it is pretty broad-based. It is very broad industry based and we are just very pleased to see the traction across many different initiatives.

That's great. And can you talk about just the practices? I know we operate as one firm, but when we think about finance and accounting versus [RAS] versus IM, can we talk a little bit about how the split is now?

You are talking about our service lines, right?

Right.

And so every service line in 2014 grew with the exception of accounting and finance and it was only down by 1%. But since it is such a big piece of our business, you can see where the increases in the other service lines kind of offset the decrease in finance and accounting so that we didn't have too much growth in 2014. But we are certainly expecting to reverse that trend in 2015.

Can you give us a breakout in terms of the percentage of revenue that is coming from those service lines at this point, roughly?

As we have talked about in the past, finance and accounting is roughly 50% of our business. Information management is about 20%. Supply chain and the balance of the service lines range from 4% to 8%.

Great.

Except legal, legal is a little bit smaller. But legal grew significantly in 2014.

How much did that grow?

40%.

And what is that up to now?

We don't give out the absolute dollars of the individual practices.

Okay. But that is -- so basically, I mean 50% of your business is growing quite nicely at this point?

Yes.

And F&A is basically stabilizing?

It is stabilizing, but we anticipate one big event that occurred on the regulatory front being the finalization of the revenue recognition standard could give that a big boost in 2015 and beyond. We have seen a lot -- we have seen preliminary interest from a lot of companies wanting to talk to us about how the revenue recognition standards impact their business.

Which specific provision are you referring to there?

Well, there was a -- basically we have been waiting for a new revenue recognition standard that has kind of been in the works for several years and it got finalized in Q4, I believe. So it affects all companies starting in 2017, but the provisions are such that companies might need to retrospectively restate their results so that they have comparability with the new standards.

You know, when a public company has a five-year table of disclosure in its 10-K. We believe that a lot of these big public companies are starting out to look at it and we are ready to help them.

Great. Then with regards to the US in terms of the -- that nice growth that you are seeing, would you say that your competitors are also seeing that growth? Or do you think there is any market share gains that you might be getting?

Mark, I guess it's hard to say. I think we are clearly seeing in each of our clients the demand environment improving. Maybe we could talk in a couple of weeks as some of our competitors announce their June 30 quarter.

We continue to win work. Just in the past three or four weeks we have won several engagements from where we competed against the Big Four, but again it is always hard to judge on a broad basis.

Great. Then just going to the gross margin, was there any positive impact just in terms of some of the healthcare costs being spread out a little bit in terms of 14 weeks? We have had -- if I go back to some of the prior years where we've had 14 weeks, we have had some gross margin benefit from that. Did that impact at all?

Not in the case of healthcare and kind of payroll. Those are almost paid on either a biweekly or a weekly basis.

Okay, great. So it sounds like even --

In terms of 14 -- in terms of what you are saying that 14-week leverage, it didn't really come from healthcare.

Okay. Great, thank you.

(Operator Instructions) Jeff Volshteyn, JPMorgan.

Hi, this is Jeff for Andrew. Just quick housekeeping question, is there a way to estimate the impact of the 14th week for EBIT and EPS? Just so we have comparable EPS numbers.

You know what, what you could probably do on a broad basis is I think what we said was that 14-week total revenue was $9.8 million. So I think you could just use the percentages of the various line items that would probably get you what I would just label a reasonable approximation. We have not done that.

Okay, thank you.

You bet.

Thank you. I would now like to turn the call back over to Don for closing remarks.

We would like to thank you very much our investors and our analysts for their interest in Resources and we look forward to talking to you with our first-quarter results. Thanks.