TrueBlue Inc (TBI) 2008 Q4 法說會逐字稿

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 2008 fourth quarter results, which were announced today. If you have not received a copy of this announcement, please contact [Theresa Birkland] at 1-800-610-8920, extension 8206, and a copy will be faxed to you.

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 2008 fourth quarter earnings results, which were announced after market close today. Please note that our press release and the accompanying income statement, balance sheet, cash flow statement and financial assumptions 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 operations in the future. 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 will now hand this call over to Steve Cooper.

Thank you, Stacey. And thank you for joining us today to discuss our fourth quarter results for 2008 and what our outlook is as we move into 2009.

Earlier today we reported a net loss of $46 million compared to net income of $14 million a year earlier. Included in our results this quarter was a goodwill and intangible asset impairment charge of $49 million net of tax. This impairment is related to a decline in the estimated cash flows from the acquisitions that we have completed over the past five years as we developed our niche approach to serving the blue collar labor markets.

Although the current cash flows have declined in this difficult economy, we remain positive about the five brands we are operating and our approach to serving our customers in these markets.

Excluding this impairment charge, net income would have been $3 million, or $0.08 per share. We had previously expected net income per share to be in the range of $0.10 to $0.14. Excluding this impairment charge, our results in net income were close to our expectations given a very challenging operating environment during the fourth quarter.

Our results during the quarter were impacted significantly by organic revenue declines of 28%, which were about 10 points worse than we had anticipated at the beginning of the quarter. Although we had seen our revenue trends declining throughout 2008, our trends worsened as we approached the holidays as many clients shut down their facilities for extended periods of time, and many shut down before Thanksgiving and did not start back up until after the first of the year.

We also saw consumer confidence erode, which had a large impact on our retail clients along with our distribution, transportation, and manufacturing clients. In addition, residential housing worsened slightly even from the declines we had already experienced.

As we moved through January in 2009, we saw things stabilize a bit. However, this still leaves us with steep organic revenue to clients compared to prior year. This decline we're experiencing is broad-based across most industry served and all geographies that we operate in.

The decline in organic revenue has resulted in significant deleveraging as the fourth quarter net income without impairment charge declined 72%. The deleveraging was only about 3:1 meaning was experienced 3 points of net income decline for each point of decline in organic revenue.

Although we are not pleased with the top line results, we are pleased with the ability to hold the deleveraging to these levels. We produced these results by responding quickly with several cost-cutting actions to help offset the declines in organic revenue and, most importantly, to ensure we are prepared to experience the positive leverage that comes quickly as these trends do turn around.

Some of the most significant actions taken during the quarter included closing 70 additional branches bringing our total closures for the year to 102 branches. Included in the 70 closed branches in the fourth quarter is the disposition of all 29 of our United Kingdom branches. After struggling for several years in the United Kingdom to bring our operations there to profitability, we were able to transfer the UK business to a new owner, which will eliminate further operating losses in the UK.

Acquisitions completed during the last 12 months contributed to a 13% increase in revenue during the quarter.

During the fourth quarter we also completed merging our new PMI branches acquired in April of 2008 into our Spartan brand. The merger will enable these branches to operate more efficiently during 2009 and provide a significant growth opportunity for us when the economic conditions improve. As we believe expanding this brand from our current branch count of 64 in seven states will be one of our greatest opportunities for a nationwide expansion.

As we begin 2009, we are continuing to approach controlling our cost structure much like we have done during 2008. Each month as we continue to analyze our trends and results, we will stay diligent in making the appropriate changes to our cost structure by closing underperforming branches and scaling management and support costs to match the demand for our services. We do this to ensure we stay financially strong and to help us be prepared to grow our brands when economic conditions turn.

Our sales and service teams are extremely focused on serving our current customers to help them balance their own cost structures, and we are proven to be great business partners for them during this time.

We have assembled a team that is tracking the projects that will be included in the economic stimulus plan being developed under President Obama's leadership. We will be ready to provide labor quickly for each project that the general contractor or subcontractor level. We believe this plan will provide several opportunities for our customers to ramp up their businesses quickly and, as in the past, we will be there to support each of our customers as they ramp up these projects.

As part of our strategy to grow revenue and income, we have broadened our niched approach to serving the blue collar labor markets. We are now operating five brands as follows -- Labor Ready, serving the general needs across most industries with staffing on demand out of 697 offices; Spartan Staffing, serving the longer-term staffing needs and onsite management of labor in the light manufacturing and distribution markets with 64 offices; COP resources serving the skilled construction trades with 77 offices; TLC serving the transportation markets with experienced truck drivers through 10 offices; PlaneTechs serving the aviation maintenance and manufacturing markets with experience aviation mechanics on a nationwide basis through one central office.

We believe that our niche approach to branding and going to market has set us aside as the leading provider of blue collar staffing. While the conditions are difficult in most of the niches we currently serve, we remain extremely positive about the long-term opportunities available to us and our ability to better serve the markets and customers we have identified.

We also have several new brands that I have mentioned here, that each have the ability to be expanded nationwide once we work through the downside of this economic cycle. We believe our competitors in each of these niches are struggling to keep their financial position strong. We have a strong financial position, and that will enable us to grow each of these businesses once the economy settles, and we look forward to the opportunity to participate in industry consolidation as smaller competitors struggle through this economic cycle.

At this time, I am going to turn the call over to CFO Derrek Gafford for further details on our operating and financial trends, and then we will open up the call for any questions you may have.

Thanks, Steve, and good afternoon. Let me start off by giving some background on the impairment charge. As a part of our annual review of goodwill and intangible assets, we booked an impairment charge of $61 million, which has an associated tax benefit of $11.7 million. This charge is related to our acquisition investments in CLP Resources, which includes the SSC acquisition; Spartan Staffing, which includes the PMI acquisition and, to a lesser extent, TLC.

The primary factor impacting these valuations is the expectation of lower future cash flows resulting from rapid contractions to our current and expected revenues from the current recession.

Now let's turn to the revenue trends for the quarter where I will add some follow-up commentary to Steve's overview.

The most significant trend this quarter was the deceleration we experienced in our monthly, year-over-year, same-branch revenue trends. The negative same-store revenue trend dropped from 20% in October to nearly 30% in December. This decline was not isolated to a particular brand, market, or geographic area.

Our same brands revenue trend in January this year was consistent with December, which we have incorporated into our Q1 2009 revenue expectation.

For the first quarter of 2009, we expect revenue in the range of $220 million to $230 million. This represents growth from acquisitions completed within the last 12 months of 5%, and a decline in organic revenue of about 35% resulting in a decrease in total revenue for Q1 this year of about 30% compared to the same quarter last year.

We expect net loss per diluted share for Q1 2009 to be $0.15 to $0.20. Keep in mind that seasonally the first quarter is our slowest revenue quarter producing a little over 20% of our total annual revenue for the year, whereas our third quarter produces nearly 30% of our annual revenue.

Now let's discuss the trends in gross margin. Our gross margin for the quarter was 29.3%, about 30 basis points higher than our expectation due to workers' compensation expense being slightly lower than expected.

I want to take a moment now to discuss our overall expectation for gross margin for 2009. Today in our 8-K, we provided a variety of assumptions, which included a gross margin estimate for 2009 of 28.5% to 29%. This is a reduction of about 100 basis points compared to 2008. Half of this reduction is related to the blending impact of acquisitions made in 2008 that have not hit their one-year anniversary. The other half is related to our expectation of continued pricing pressure as the staffing market continues to contract.

Our estimate for a gross margin for Q1 of 2009 is about 28% to 28.5%. Sales, general, and administrative expense as a percentage of revenue was 26.1% of this quarter, which was above our expectation of 25%, primarily due to a lower organic revenue base spread our fixed costs across.

I'd like to give a few points now that should be helpful in understanding our SG&A trends in 2008. Included in our SG&A during 2008 was $20 million of expense from acquisitions that had not yet annualized. Excluding this expense, 2008 SG&A declined by nearly $25 million compared to 2007.

Included in our SG&A for Q4 was $6 million of expense from acquisitions. Excluding acquisitions, Q4 SG&A declined by $14.5 million.

These cost reductions were largely driven by branch closures, reductions in field management costs, and reductions to a variety of program and support costs. To provide some perspective on these cost reductions, let me recap a couple of statistics that are key drivers of our cost structure.

During 2008, we reduced our branch count by about 100 locations, which represents a little over 10% of our 2007 ending branch count.

Excluding the impact of acquisitions, total employee count was reduced by 20% in 2008 compared to our employee count at the end of 2007.

We often get asked the question, "When do you stop cutting expenses?" The bottom line is the economy is getting smaller, our customers are getting smaller, and we, too, must continue to adapt and get smaller before we can grow. Until we see sustained improvement in organic revenue trends, we will stay in an aggressive cost-management state.

In regard to our expectation for the first quarter of 2009, we expect SG&A to be about 31% to 32% of revenue based on the revenue estimate provided today.

Net interest income was about $1.8 million lower than the same quarter last year due to lower yields on invested cash.

Depreciation and amortization was $1.3 million higher compared to Q4 last year due to the amortization of acquisition-related intangible assets and additional depreciation related to new information systems.

Our income tax rate for the quarter was a benefit of 16.8%, which is abnormally low from a historical perspective due to the proportionately low amount of tax benefit related to the impairment charge recorded this quarter. Excluding the impairment charge, our income tax rate for the quarter would have been about 41.2%, which is higher than our expectation of 38% due to certain true-up adjustments for prior-year tax returns made this quarter. We expect our Q1 2009 tax rate to be about 38%.

Let me touch on cash flows for a moment. Cash flow from operations for 2008 was $92 million, which helped bring our total cash balance to $108 million. Cash flow from operations was heavily driven by the deleveraging of our accounts receivable associated with the organic revenue decline.

In light of the overall uncertainty in the economy and credit markets, I'd like to provide some clarity regarding our liquidity. We have $26 million of borrowing availability on our $80 million credit facility. The existing borrowing is solely comprised of letters of credit. The main covenant on our facility is a debt-to-EBITDA ratio of 2.5. Our actual ratio on this covenant is 0.6.

I think it's also important to point out our approach in collateralizing our workers' compensation program. While many companies collateralize their work comp liabilities exclusively with letters of credit, we have set aside nearly two-thirds of our deductible work comp liability in restricted cash. Thus, the majority of our work comp payments are made from this restricted cash versus cash from operations.

In addition to helping preserve cash flow from operations, this approach helps maintain borrowing availability by minimizing outstanding letters of credit.

In regard to capital expenditures, we expect CapEx of about $5 million to $6 million for Q1 and about $14 million for all of 2009.

That's it for prepared remarks. We will now open the call for questions.

(Operator Instructions) Jim Janesky, Stifel Nicolaus.

Expectations for the first quarter, Derrek, that would be -- you would expect a 38% income tax benefit in the first quarter?

That's right.

Okay, and then the June and September quarters, obviously, progressively get better historically. Would you expect that you could return to positive cash flow and positive earnings per share in the June and September quarters?

Well, let me make a couple of comments on that. One, the comps do get easier as we get into the back half of the year, and that was actually the case during the back half of '08 as well compared to '07. So assuming there's not additional contractions in the economy, but there has certainly been a pattern of that over the last four quarters.

What would drive us to positive cash flow and some positive earnings is the seasonality perspective, particularly that I mentioned on -- related to third quarter where nearly 30% of our revenue for the year comes out of the third quarter. So it's important to note, when looking at the loss that we're forecasting for Q1, that we have -- it's our lowest revenue base for the year, and there's less revenue to spread the fixed cost across.

Okay. And when you gave the assumptions for 2009 in the 8-K, you have the reduction in SG&A for branch closures and incremental SG&A from 2008 acquisitions. That nets out to be about $15 million, but I would imagine there are other costs -- the cost cuts that you put in place means that SG&A, on an absolute dollar basis, will be down much more than that from '08 to '09. Is that a correct way to look at things here?

I think so. I mean, we've given you the broad brushstrokes in the 2009 assumptions that are going to get you most of the way there, meaning that we have said that related to branch closures that we did in 2008, there is $20 million of less SG&A that will be present in '09 for those '08 cost reductions from branch closures.

There is another $5 million from acquisitions so now we're at a net $15 million reduction. You will also see that we have put in what are, on average, what our variable SG&A is associated with same-branch revenue. So the degree to which in same-branch revenue is down, multiplying it by 6%, that will also give you cost reductions just related to variable expenses in the branch that come down as the same-branch revenue comes down.

The two other things that there will be cost reductions in place is we closed nearly 100 branches during '08, and we are not done for 2009. We will keep closing branches when we're in this type of revenue decline. So there will be more cost reductions there and overall there has probably been another $3 million to $5 million of program and support costs that we have cut out that will roll through '09.

So I think if you take all of those, mainly the ones in the 8-K but some of my color commentary here that should be enough to get you directionally correct on SG&A.

Okay, thanks. And then shifting gears just a little bit -- Steve, you talked about the potential for infrastructure -- revenue growth from infrastructure investments. Could you go into a little bit more detail what types of positions you could fill and any timing component to it?

I think that's the big question out there, is how fast is this going to flow and how much of it is truly going to be shovel-ready and how much of it is going some other direction. I think that's the debate that's taking place this week. So I wouldn't want to predict the timing and the full outflow of that stimulus package.

What I can say is that we are tracking what's in that bill, so far, and what degree is coming towards general contractors that do business in -- at the state level, the city level, the county level, of where we will be able to participate.

You know, there's this big question of how much it going to go to large infrastructure, which might be mainly union-driven, but it honestly appears that it's going to the smaller levels than that, and that we'll have the opportunity to participate quite a bit.

The type of work that we do is in skilled positions -- really can do anything in contracting, whether it be carpentry, cement work, steel work, and such. So I think that we'll be able to participate quite a bit in the smaller projects that are going to take place on a local basis.

Again, though, the big picture is how much and how fast the stimulus package rolls out. We don't know.

Mark Marcon, R.W. Baird.

I was wondering if you could talk a little bit about gross margin trends and what's impacting your projection? Also, if you could give us some color in terms of what the pay bill spread was during the fourth quarter -- how you see that going and what the impact was from the workers' comp accrual reversal during this past period and how you think that might unfold as we look at '09?

Sure. For 2009, you know, in broad brush strokes, we were expecting gross margin to be about 100 basis points lower than 2008. Half of that is just from the blending impact of acquisitions that we have made that have lower gross margins than our core business that have not yet anniversaried in a 12-month run rate.

The other 50 basis points is what I would refer to as more true gross margin slippage -- most of that from pricing pressure; maybe a slight tick from payroll taxes, but we're not expecting anything significant this year. The bottom line is that it continues to be a very competitive billing environment out there as staffing companies -- their revenues continue to shrink, and the market gets smaller.

So that's about our best direction on gross margin.

More specifically to your question on workers' comp -- workers' comp for the quarter this year -- excuse me -- for fourth quarter of 2008, was about 3.8%, and there were about 100 basis points related to work comp reductions in that 3.8%.

Okay, and the pay bill spread that you experienced in Q4?

Pay bill? Give me one second, Mark. Bill rate was an increase of about 2.3% for fourth quarter compared to fourth quarter of '07, and correspondingly, the pay rate increased about 3.2%.

Okay, and is there anything that is coming down the pike in terms of minimum wage increases, anything like that that we should be aware of or that you've taken into account? And to what extent can you -- I mean, obviously, it's a tough economy for everybody. Can you reduce your pay rates or are you assuming that you're going to reduce your pay rates in order to achieve these gross margins?

As far as minimum wage increases, there is another slate of minimum wage increases for 2009, however, I would say that they are, as far as materiality and magnitude and impact on us, they are almost identical to 2008, maybe slightly less as far as impact.

On the pay rate side, two-thirds of our revenue and our business is out of the Labor Ready brand. There is not much opportunity to reduce pay rates there. That's been something that we've attacked over the last couple of years in managing the margins very tightly, so as minimum wage increases have went up. Most of these pay rates are right on the margin, meaning that they have to go up. That's been one of the things that's been challenging for us in this competitive pricing environment, is we've got to pass these bill rate increases along as well.

That leads another third of our business, though, that is not on the margin where pay rates are above the minimum wage. So that is an area for us of focus in 2009 to see if we can get some more efficiencies out of that as the demand -- well, as the supply of temporary workers increases.

You know, Mark, a little color there is, from the customer's perspective, we've seen -- there are two things that I'll tie into what Derrek has talked about -- in the Labor Ready division where the pay rates are pretty close to as low as they can be, anyway. The amount of increase that we were able to work with our customers on equals -- has been equaling about the size of the minimum wage increase. So we've been getting the costs passed through, we just haven't been getting the margin on it the last year, and so that's been difficult. But we continue to believe we can get at least the costs passed through in '09. We haven't seen any sign that that's not true.

In this other third of our business that Derrek's talking about, we're seeing customers backing off a bit on how much control they're putting on us to control the pay rate. In tight markets, customers usually are very concerned that our pay rates match their permanent employee-based pay rates and, therefore, they put tight controls on staffing companies on what we're paying and what we're billing, also, because of that competitive pressure.

We've seen a little bit of relief there, that companies are starting to allow us to control those pay rates a little bit more in that other third of the business, especially in the skilled positions of both aviation and our skilled trades -- the contractors, the construction folks. But even within warehouses and distribution and manufacturing, we're starting to see it a bit. So I think that's a positive sign that we can control these margins this year just on that news there.

I'll jump back in the queue, but just one more question-- are you seeing any signs of light anywhere in terms of January? I mean, I know the headlines are dire --?

Well, I think the good news that I took out of January was there were a lot plant shutdowns heading into the holidays, and we were able to jump back to those levels before the holidays, and it felt pretty good, and we had two or three solid weeks at those levels.

So when we hit December, I'll tell you, it was concerning because you couldn't see the bottom and it was going so fast because of those shutdowns. It was not immaterial what happened in December. And to see it jump back, get people back to work and some of these facilities started back up was very encouraging. It's still very steep declines, but we did see some encouragement that it was not freefalling during the month of January like it was in December.

(Operator Instructions) Jeff Silber, BMO Capital Markets.

I just wanted to follow that up with the discussion regarding the Obama stimulus plan and, again, I know there's really no crystal ball out there, but it sounds like you're expecting the biggest impact, if any, to be in your Spartan brand. Is that accurate? And I'm just wondering if you think there might be any impact in your Labor Ready brand as well. Thanks.

It's probably not exactly the Spartan brand that's going to feel it first. It's most likely, it's CLP, where they are very focused on being able to mobilize skilled workers that deal with concrete, deal with carpentry, deal with heavier infrastructure type work. And so we believe that brand will be able to be mobilized quicker, which is good because they are in the state of California, the state of Texas, the state of Florida, those three large ones that are high on the list for getting money.

Spartan would get it down the road a bit. They are heavy in producing -- where they're heavy in the state of Indiana, where heavy manufacturing of autos and machinery are, so we would feel a little bit of fallout there. But I think the Labor Ready brand, in general, would benefit before Spartan. Maybe not to the same degree, but they would benefit faster because we have general laborers ready to go to work in every market across the United States. So I think the fact that we're broader, we can get impacted quicker there.

I'm sorry, I appreciate that clarification. I have to apologize, I don't have the press release in front of me, but I had a question about the UK disposition. Is the impact of that -- has that been done in the fourth quarter? Should we expect any benefit either in terms of cash inflow or any type of accounting charge, again, if that's not been done is it to be expected?

The disposition of the UK did provide about $1 million of benefit from an expense perspective in the fourth quarter to our P&L. However, I will point out that that benefit was largely washed out. We did increase our bad-debt reserve for -- our total bad-debt reserve for, really, all of our brands by a pretty good chunk, and we had a pretty good chunk of closing costs for US locations as well.

So that $1 million benefit from the UK was more than offset by additional bad-debt accrual and closing costs from US locations.

But it's all behind us, Jeff. There is no impact in Q1. It's all in Q4 numbers.

Paul Ginocchio, Deutsche Bank.

Back to the UK -- do you know the size of the losses from the UK operations in the fourth quarter? Or -- I'm sorry, in all of '08 or in the fourth quarter? And then, second, maybe -- again, maybe I missed this earlier, but just from the 4Q closures, how much of the cost impact was in the fourth quarter? If I missed it, I apologize, but what kind of an incremental benefit do you expect in the first quarter [versus the first] on the SG&A line from the holdup from the rolloff of the 4Q closures, thanks.

On the UK losses, we had about $6 million of loss in the year as a whole. In the third quarter, we had reserved closing some branches before we entered into this agreement to sell them. So some of the hit for the UK was in the third quarter. That $6 million definitely wasn't a run rate. We've been on a run rate of losing about $3 million per year, and then things worsened this summer, so we picked up pace, and we probably lost another $1 million or so by the time we got -- probably $2 million by the time we got these branches closed. It definitely -- the declines had steepened and been getting larger.

So we're pleased that we got that transaction behind us and, as we mentioned on the earlier question, it's all in the results of '08 for the UK. So -- there is some improvement in '09, going forward, because of that.

Now, on the other question of closing the -- how much is in the closing for those 70 branches, I'll let Derrek take that.

Yes, so of the 70 branches that we had closed, nearly 30 of those were in the UK. We talked about that there was about $1 million benefit overall to the P&L for that disposition.

On the flip side, we had a little over $400,000 of closing costs for US locations, and then we had about another $800,000 of bad debt accrual. So -- that's the reason I didn't really mention any of these in my script -- these three items we just talked about, they pretty much all washed themselves out.

And then on the SG&A line, how much of the 40 branch closures were recognized or realized in the fourth quarter and how much more are left to go into the first?

We are -- we're done. All of the branches that we've announced in the fourth quarter, those 70 or so locations, the expense for closing those have all been recognized.

Okay, great, and then on the SG&A savings, how much of the savings did you realize in the fourth quarter from the 40 closures -- 50%? Or was it front-end loaded in the quarter, back-end loaded? Thank you.

It was very back-end loaded. We disposed of the UK about a week and a half into December; a significant amount of our US closings were done also in December. So I think the best thing you can do here is go to our 8-K that gives you the estimate for SG&A reductions related to 2008 closures, and that will help you with your modeling.

(Operator Instructions) Mark Marcon, R.B. Baird.

The acquisitions are only supposed to contribute about 1% to revenue growth in 2009. Is that all going to be in the first quarter?

For the most part. We have one -- TLC, our truck driver division, anniversaries at the end of February, so that's all Q1. And then the PMI branches, which are about 40 branches of our Spartan division, they anniversary at the end of May.

It sounds like maybe PMI really slowed down a bit, huh, with the plant shutdowns?

Yes. The fourth quarter was tough on the state of Indiana and then the other -- we have two large states that we serve in our Spartan division -- one is Indiana -- that's primarily the PMI branches. And then Florida, which is primarily the Spartan branches, and I can't imagine two worst states to be in. So, yes, that division really suffered in the fourth quarter. That's in late December, in particular.

It doesn't sound like you're expecting that much out of them in the first quarter, either, though.

Yes, it's not ramping quickly in those two states. We're being pretty cautious. We hope that it provides a little more upside than we put in our forecast here that you pointed out, but it doesn't appear that the state of Indiana or the state of Florida have any bounce fast in them.

In terms of the -- as we look out a little bit, the comps do become a little bit easier as we start getting out to the second and third quarter. Are you assuming that maybe we've hit a little bit of stability? And I guess it's very difficult to say, but as you are planning things at this point and thinking about what you do on the expense side, is that how you are approaching things at this point? In other words, let's take what we've seen over the last few weeks in January and then use our traditional seasonal build from that point?

That's pretty close right there, and although we had seen declines starting in August/September of a pretty steep nature, they got really large in the fourth quarter in December. So as we say that January found stability, that's back -- that's based on pre-holiday. So the holidays even got worse than these trends, and so we're pleased that it bounced back a bit, but it didn't bounce back very far, and so we have to take what we've seen the last four weeks and cautiously forecast from there, and it's one of the reasons that we haven't stepped out there with annual guidance. Most of you would notice, hardly even given quarterly guidance, but we feel comfortable that we're far enough into the quarter and that things stabilized enough we can give you what we see for the quarter.

Where we go back half of the year is still a really wide open estimate right now, Mark, and I think that you are going to be able to pick a back half revenue target as easy as we are. So we're just going to give you the cost estimate here, and we'll go to work and drive that thing up as fast as we can, but the fourth quarter still is a big chunk for us to roll into our seasonal and our annual numbers.

And on the bad-debt side, you made some comments there. Are you -- I know you took up your reserve. How stressed are some of your clients at this point?

Well, if you take a look at our day sales outstanding, using traditional methods, it almost -- it's misrepresentative because it will actually look like day sales outstanding improved significantly in the fourth quarter, and it's because of the deceleration in the monthly comps.

Understood.

The bottom line is when you normalize for all of that in acquisitions, DSO picked up by about a day. So we haven't seen an increase in payments defaults. We've just seen a slight aging in the portfolio, so we're just being cautious both on the accrual for that and picking up the aggressiveness of our collections activities.

Okay, and what are you seeing in terms of your worker experience just in terms of accidents and things of that nature?

It's a pretty good year for us. Overall, accident trends dropped by about 5% this year compared to 2007.

Did those trends stay positive as it became apparent that things were getting worse economically?

Yes, they did. It's hard to isolate because we've got a lot of brands and a lot of geographic coverage. It's hard to tell how much the economy is impacting accident trends and how much it's our own efforts and turnover in our branches and all those things, but we haven't seen a significant change in the direction of the trend.

And then what about your competitors in terms of the mom and pops? I mean, they must be very stressed at this point. Are you seeing pockets where the competitive natures have eased at all? Or is it still too early in this downturn to see that?

You know, it's interesting -- there has been quite a dynamic shift between small and large business. A lot of small customers have just stopped using us, and the balance of our work -- let's call it our mix of business between small and large customers is leaning to larger customers, obviously, meaning that they were better capitalized; they were able to deal with this better while the smaller competitors deal with the smaller customer, so they're even getting hurt worse. Then the large customers are using this next phase of economic conditions, you know, once they're done with layoffs, the next place they go is price, and so the larger the customer we have, the more we're starting to feel there are RFPs out there, there's pricing pressure and such.

But your question was about how are the small competitors doing, and the answer is not well. And we have had many, many inquiries to figure out how we could do a partnership, either take over customer lists or buy them. Things are declining so rapidly, we've been very cautious the last 60 days to not jump into anything that we don't understand fully, but I believe the next six months is going to wash some of that out. We're going to get a better understanding of what some of those partnerships or total purchase of customer lists or just taking over the business on an earn-out would be our best avenue out.

I think they're going to increase -- those opportunities. I wasn't going to get too much blue sky in that area, but we're excited about some programs that we have and some reach-out programs, and some activity that's brewing there. I really need another three or six months to see some things fully settle so we know what we're stepping into, but directionally, you're right on point -- the moms and pops are suffering more than the larger staffing companies.

Jeff Silber, BMO Capital Markets.

Just a couple of quick numbers questions -- Derrek, I think you mentioned the monthly trends. I think you only gave October and December. Could we get November?

Yes, it was -- you know, I'm going to round here, Jeff. You can get them detailed -- they're listed in the 8-K.

Oh, I'm sorry, I'll just take a look then. How about the share count guidance for the current quarter?

Yes, we haven't listed it, but I don't -- I'm not expecting it to change much from where we ended -- at least from a diluted perspective -- I'm not expecting it to change materially from Q4.

Yes, we guided for the year as a whole in our 8-K of $43 million, and we ended the year just right around there. So -- the first quarter will be pretty close to the same.

Okay, great, and just one other trend-related question -- I'm just wondering if you can talk about trends from a state perspective either in terms of SUTA rates, workers' comp rates -- are you seeing any pressure there at all?

No, not any pressure there from a work comp perspective; not seeing anything significant from a SUTA perspective. You know, from a SUTA perspective, those rates generally have a pretty good tail to them, so the economy goes through its contractions, and the states have to assess where they are on their funds, and then things can change. So we might see some more of that in 2010, but, at this point, we're not expecting anything significant for 2009.

Paul Ginocchio, Deutsche Bank.

It may be a little bit early to ask this question, but where do you find the managers when you start to reopen offices? I was just wondering are you keeping tabs on the managers who are departing? Are you trying to shift those into other branches? I'm just trying to understand when you do want to ramp back up, which I know is a hopeful question, whenever that occurs, but where do you get the managers and how long does it take to ramp one? Thank you.

Well, the managers that have been dismissed from their current positions -- obviously, we first try to move them around to the offices that are going to remain in place, so we keep the cream of the crop around. So that's our first choice.

Come re-ramp time, we will just follow the same formula that we have been, and we have got a great recruiting program in place where we have a database full of those that are interested, and our methods of plan of attack there. It's not heavily on our mind right now because we've got a lot in '09 to work through, and by the time we hit expansion, let's say, at the soonest, we might -- let's see how '09 progresses. We might be looking to get into selective markets in 2010 or by the second half of 2010, something like that. That's so far away to keeping a list of those we've dismissed is probably not very optimistic. So we'll be at ground basis.

However, not only do we have a huge supply of temporary workers ready to go to work, the economy has put a lot of very good talent out there that we could put into our offices and our field management based on the data we have and the resumes we're receiving, we're not too concerned about that right now, and I don't think that's going to change in the next 18 months.

Right. Okay, maybe another way to ask it -- of the 40 branches you closed in the US, how many of those 40 managers did you keep?

I don't have that data here in front of me.

At this time, I would like to return the call back over to Mr. Steve Cooper for closing remarks.

We appreciate you being with us today and continue your interest in not only TrueBlue but in the staffing industry as a whole, and that we will keep you updated as the year proceeds. Thank you.

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