TrueBlue Inc (TBI) 2011 Q4 法說會逐字稿

Good day, everyone, and welcome to TruBlue's conference call. (Operator Instructions). Joining us today is TruBlue's CEO Steve Cooper and CFO Derrek Gafford. They will discuss TruBlue's 2011 fourth quarter earnings results, which were announced today. At this time, I would like to hand the call over to Ms. Stacey Burke for the reading of the Safe Harbor. Please go ahead, Ms. Burke.

Thank you. Here with me today is TruBlue's CEO and President, Steve Cooper, and CFO Derrek Gafford. They will be discussing TruBlue's 2011 Q4 earnings result which were announced after market closed today. Please note that slides providing additional background on our Q4 results were included in our 8-K filing. The Company's press release, the accompanying financial schedules and Q4 results slides are now available on our website at www.trublueinc.com.

Before I hand you over to Steve, I ask for your attention as I read the following Safe Harbor. Please note 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 related to the Company's financial results in future. Although we believe the expectations reflected in these statements are reasonable, actual results may be material different. Additional information concerning factors that could cause results to differ materially is contained in the press realization and in the Company's filings with the Securities and Exchange Commission, including 10-Q and 10-K.

I'll now hand this call over to TrueBlue's CEO, Steve Cooper.

Thank you, Stacey. Hello, everyone.

Today we reported 2011 fourth quarter revenue grew 12% to $350 million, which produced $0.19 per share of net income, which is above the high end of our earlier estimate. Income from operations grew more than 90%, expanding our operating margin by 130 basis points compared to prior year fourth quarter.

For 2011 as a whole, we expanded our operating margins 110 basis points to 3.6% by growing revenue by 15% while holding gross margins in line with 2010 and running an efficient cost structure. Expanding our operating margin remains a high priority for our team. As we continue to grow revenue, we are focused on being diligent in appropriately pricing our business to get the highest possible gross margin at the highest possible revenue growth. This requires balancing opportunities for growth with our focus to expand our profitability.

As we have expanded our opportunities with larger accounts over the past few years, our total mix of gross margins has been lowered. To balance the lower mix of gross margins, we have been and remain diligent in lowering our cost structure. We have successfully lowered selling and administrative costs as a percentage of revenue during the same time period our gross margin mix has changed. As a result, we have expanded our operating margins. We remain focused and committed to driving operating levering in our future results.

Revenue continues to show strong growth, and gross margins also look strong here in the beginning of 2012. In Q4 we grew revenue across to almost every industry group and geographic region. Construction remains a challenge outside of our services related to clean energy projects. Residential construction continues to decline, even off very low numbers. We see some bright spots in commercial projects and believe this will be an area of growth in 2012.

We also remain focused on our approach to building expertise in several industry vertical markets, along with driving our local market selling and delivery of services. This multi-focus of building national and regional relationships, along with our strong capability of serving local customers is the driving force behind our strong results.

The one vertical market that I just mentioned that is showing extraordinary revenue results is clean energy. We have organized and unleashed resources to supply labor to both solar and wind clean energy projects. Similar to Q3, this sector positively impacted our overall growth in Q4. We feel comfortable with our able to sustain revenue growth from this sector throughout 2012.

I'm also pleased to report our return on equity for 2011 was 10%. This is a result of delivering outstanding operating results and the execution of our share repurchase program. In 2011, we purchased about 4.5 million shares, or about 10% of the outstanding shares at an average price of $12.75. Providing a consistent return on equity remains a high priority.

After Derrek reviews further operational and financial details, I will offer some additional remarks. Derrek?

Thank you, Steve.

I'll start off today with some high level comments on our fourth quarter results and our expectations for the first quarter of 2012. Then we'll cover the key financial trends for Q4, key assumptions in our Q1 estimates, and finish off with a discussion on our balance sheet and cash flows. Any reference to our performance is based on a compares to the same period to a year ago unless stated otherwise.

The fourth quarter of 2011 was a solid quarter for us. Total revenue growth was 12%, and on a comparable 13-week basis was 22%. Diluted net income of $0.19 per share was about $0.04 above the midpoint of our $0.12 to $0.17 expectation. $0.03 of this out-performance of due to $10 million of higher than expected revenue and $0.01 due to a lower than expected tax rate.

Looking forward to Q1 2012, we expect total revenue to $300 million to $310 million, representing growth of about 11%. Keep in mind, Q1 is historically our lowest revenue quarter due to the seasonal nature of our business. We expected diluted net income per share of zero to $0.05.

Now let's review some of the key financial trends for Q4. Our gross margin for the quarter was 22 -- excuse me -- was 26.2% as expected, and 10basis points lower than Q4 last year. In comparison with Q4 last year, gross margin was impacted by 40 basis points from two items.

First is the mix impact this year for an increase in energy-related construction revenue, which carries a lower gross margin than our blended Company average. We also benefited from HIRE Act credits in Q4 last year. Excluding the 40 basis points of impact from these two items, gross margin in Q4 of 2011 would have improved by 30 basis points. The improvement is from continued momentum and successfully pricing our business. Our team is doing an outstanding job of obtaining quality bill rates from customers, based own our specialized and differentiated services.

Now let's discuss sales, general and administrative expense. SG&A is a percentage of revenue was 21.9%for the quarter as expected, which is 110 basis points lower than Q4 last year. On a dollar basis, SG&A increased about $5 million compared to Q4 last year due to variable SG&A associated with the $40 million of revenue growth,additional employee related investments made in Q3 and Q2 of 2011, and other miscellaneous items.

Operating income this quarter improved by 130 basis points due to the strong operational levering in our business, as we spread additional revenue across our largely fixed cost structure. Our effective income tax rate of 33% this quarter was lower than expected due to a windfall benefit and certain deductible expenses.

Let's cover a few cash flow and balance sheet items. 2011 cash flow from operations was $31 million, or about $10 million less than 2010 cash flow from operations. The drop in 2011 cash flow from operations was primarily due to a $50 million increase in accounts receivable during 2011. About half of the increase in accounts receivable was due to an increase in days sales outstanding, and the rest due to the increase in revenue.

DSO was six days higher in Q4 2011 compared to the same quarter a year ago. The increase was due to a higher mix of large customers in 2011 that have longer payment terms, and a historically low prior period comparison.

We finished 2011 with nearly $110 million of cash, down from nearly $165 million in 2010. The decline in cash was largely due to the increase in accounts receivable discussed earlier and the purchase of over $55 million of common stock.

Now let's take a closer look at the key assumptions in our Q1 net income estimate. For 2012 certain unemployment tax and minimum wage increases would have a negative impact to our gross margin of about 40 basis points, assuming no action on our part. However, we have made significant progress incorporating these costs in our bill rates and expect to recover 100% of these costs in Q1.

We expect gross margin in Q1 of 25% to 25.5%, which is in line with Q1 2011 after excluding the 40 basis points of HIRE Act credits received that quarter. As a point of reference, Q1 2011 was the last quarter we received any HIRE Act credits. First quarter SG&A as a percentage of revenue is expected to be about 23.5% to 24.5%, based on the revenue estimate provided today.

We have expect an effective income tax rate for 2012 of 42% to 45%, higherthan our normalized 2011 income tax rate of 39% due to the expire ration of the Work Opportunity Tax Credit program at the end of 2011. This program provided employers with income tax credits for hiring certain disadvantage individuals as by defined by the federal government. This program has been renewed repeatedly in the past and even reinstated several times on a retroactive basis. However, we cannot give any assurance the program will be renewed, and it will be excluded from our income tax estimate unless legislation is enacted to renew it.

Let's cover a few remaining expectations for Q1 2012. We expect about $3 million to $4 million of CapEx, and diluted shares outstanding should be around 40 million.

I'll conclude with a few final comments on 2011. We maintained a balanced focus on revenue, pricing, and cost management last year. We did not sacrifice pricing to obtain revenue growth. 2011 gross margin was in line with 2010, and we experienced increasingly positive trends during the back half of 2011, which is providing nice gross margin momentum in 2012.

We continue to invest in strategies and initiatives to drive revenue growth, which paid off very well for us. Our cost structure is more efficient than ever. SG&A as a percentage of revenue was 21.5% in 2011, or 250 basis points lower than 2007 or 2008. Our strategy in financial trends position us well to win in the marketplace and deliver solid results for our shareholders in 2012.

I'll now turn the call back to Steve.

Thank you, Derrek.

We continue to pursue new value creating investment opportunities that will enable us to broaden the services we offer our customers, as well as increase our efficiency in putting people to work. Since 2006 we have invested more than $100 million in acquiring companies with broader capabilities that would enable us to grow beyond our initial core. This is not only resulted in broadening our capabilities and the industries we serve, it has added significant talent to our sales, service, and leadership teams.

As we build new capabilities and drive further efficiencies for our customers, we believe we will also provide higher returns for our shareholders. Last year we began working with technology that is focused on mobile recruitment and workforce management solutions. Let me give you a picture of how we intend to use mobile technology in our operations.

In 2011, we put more than 300,000 individual people to work. Many of these workers were recruited based on our neighborhood branch locations. For many of our customers requests we do not have the ability to recruit and fill job openings outside of that neighborhood recruiting model. We believe mobile recruitment solutions, particularly texting on basic feature phones, can open up new methods of recruiting and filling job openings.

We have found that while less than 30% of our current workforce uses the Internet daily, more than 90% routinely use their cell phone to text. We currently reach most of our job candidates when they visit our neighborhood branch locations or we call them on the telephone. We see an opportunity to identify and reach the right candidates using text messages. Once we identify and screen candidates, we see an opportunity to dispatch our workforce through text messaging, and ultimately we can reported their time and attendance with the same technology. Electronic pay will also allow us to complete the entire transaction --recruitment, dispatch, and pay -- without the dependence on our branch network as it is currently structured. This will free up our employees to focus on sales and service delivery. It will also allow us to recruit from a broader candidate pool.

We plan to use -- begin using this technology in part of our operations in the second quarter of 2012 and to be using it enterprise-wide by the end of 2012. We are excited about all of the possibilities and look forward to sharing with you the positive impact on both our customers and our workforce. Early feedback has been that the technology improves their overall experience with TruBlue.

Other new capabilities and expanded market opportunities that we have built and invested in over the past few years have also enabled us to serve more industries and broaden the partnerships we have created with several national and regional customers, and we remain confident in our vertical market strategy to drive growth with national, regional, and the thousands of local customers that fit into one of these vertical market specialties.

There's several components to our vertical market strategy that are fueling our success. First, we have industry specific research and development for each major customer segment. Second, we have an industry leading sales and marketing strategy. Third, we have a dedicated sales team for each vertical market. And fourth, we have stronger relationships within each of the vertical markets we serve, which is proven to expand our credibility in those segments on both a national and local level.

Our talented teams are tuned into their markets. They have been able to anticipate and react to opportunities and challenges better than anyone. We remain committed to our development and retention of our talent. We continue to recruit and develop our talent in all aspects of selling and serving customers. We know that the value we create for our customers and shareholders is directly proportional to the quality of our employees. We will continue to make the appropriate focused investments in our people. We have a growing talent pool that is committed to helping us change the world by putting people to work.

The combination of our outstanding team members company-wide and the addition of technology to deprive productivity for customers and efficiencies for us will continue to drive us into being the lead provider of blue collar staffing.

I'll now open up the call to any questions you may have.

(Operator Instructions). Your first question comes from the line of Paul Ginocchio with Deutsche Bank. Please proceed.

Thanks for taking my question. I've got a few housekeeping questions. Can you talk about construction trends in the first quarter, and in particular residential construction? Talk about maybe what revenue from your largest customer, what that was in the first quarter? And again, then just worker's comp expense, if there was any write-backs in the quarter? Thanks.

Yes, hi, Paul. Welcome to the call.

Hi, Derrek.

The construction grew pretty nicely for us in two areas. First is commercial construction, so think maybe a better term would be to call it traditional non-residential type of construction, and grew a nice double digit growth for us there. I'll carve off the energy related part of the growth. That made up over a third of our comparable revenue growth for the quarter, so that was growing very nicely as well.

As Steve alluded to earlier, residential is still dragging off with low numbers, so we're not seeing any growth on the residential side. Worker's comp for the quarter was 3.9%, and there was about 85 basis points of reversal included in there.

Was there one more part to your question, Paul, that I missed?

Just the large -- your largest account, what was the revenue from that?

The revenue from our largest account was about $30 million for the quarter.

That's above where it's been, at the higher end of the range? Is there any way -- is that the new normal, or you still think it's more $25 million?

We wish it was a new normal. That was a couple million, $2 million, $3 million step up from last quarter, and I would consider that more of extra project work and some additional intensity on the manufacturing process to get some more through put, so I won't consider that a new normal.

Great. And then if I could just have a final one, and I'll turn it back over. The pass-through of this [SUDA], you got 100% already. Is that because you have it in most of your contracts now? Obviously unemployment is quite high, just wondering how you were able to get it through even in the first quarter. So congratulations also.

Actually, most of our relationships with our customers are not contractual obligations, and where they are most of the time the amount of that is allowed in those contracts is just costs. It doesn't include a mark-up on top of that. So this is very broad-based efforts throughout all of our operations, and really it's a discussion with almost every customer, and a very rigorous process leading up to the beginning of the year, and just an outstanding effort on the execution side from our operating team.

It's not -- again, it's nothing to really do with labor scarcity, is it?

We've still got pretty good sized demand -- or supply of workers in our operations. I don't think that's the case on the blue collar side of staffing, so I can't speak for everyone else. I can only speak from what we're seeing.

Thank you.

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

Hi, thanks, good afternoon. I was wondering if you could talk about the overall tone of customers headed into the year? And I ask because the top line guidance looks like it suggests continued sequential slowdown of quite a bit on the strong weekly comparable trends from the fourth quarter. SoI'm wondering if you're see some sort of a change in the tone early in the year?

Yes, thanks, Sara. It's not significant at this point. Most of that trend change that you're picking up on from Q4 to Q1 was related to retail sales for the most part, that we had a really strong fourth quarter that held us up, and especially on some national accounts in the retail area that held us up really strongly there. And with -- come January and those accounts not being serviced, some of that fall-off is there.

Overall, there's probably been a little bit of softening over the summer, but most of that showed up in the fourth quarter trends [outs] -- some of the large accounts. First, Paul brought up a couple of million dollars from the largest account, we've talked about the energy, now the retail and holiday sales that kept us strong through Q4.

Other than that, the day in and day out of blocking and tackling done by our branches at the local level has been fairly stable. We're not showing signs of it going either directions at this point in time, but that's what -- those key things are what's driving most of the trend change from Q4 to Q1.

Okay, thank you. Turning margins, as you look at the various puts and takes around 2012, do you think that slight gross margin expansion in 2012 is possible?

Yes, I think that is possible. We've come out of January pretty strong on our gross margins. One of our better years of being prepared in the first month of the year, which gives us some strength to build from, from there. We've been doing the right things with our customers, making sure that we're stay in the right pockets of need with them, and when we show our specialty and the expertise that we bring, we're going to be able to hold those margins pretty strong.

Do I think they're going to improve dramatically? No, I just think about the traction of where we've been. So we're not looking for great improvement, we're just looking for strong stability. Now with that said, we've talked a lot about residential construction, and it's showing no signs at this point in time of improvement. However, I think the fundamental drivers of residential construction -- there will be some movement by the time we get late into 2012 and definitely into 2013.

That industry will bring better gross margins, and it will bring demand, of which we are prepared for, given the fact of the way we recruit and where we're located and our ability to take that work on. So we're excited about that, and yes, that will bring expanding gross margins.

Okay, great. And then just last question on SG&A. If I'm look at the guidance correctly, it suggests that SG&A could be up as a percent of revenue and that you could see some nice growth on a year-over-year basis in SG&A. Can you talk about what's driving that?

Yes, I think the thing to keep in mind when we're looking at say year-over-year SG&A growth in Q1 versus where we are in Q4, that Q4 of 2011, we're comparing a 13-week period back to a 14-week period in 2010. So to put some prospective on the SG&A, in the third quarter 2011 grew at 14%. On the face of the financials in Q4 of this year, it's 7%, but if you normalize that for the difference in the number of weeks, it's probably closer to 12%. And our guidance in Q1 of 2011 is somewhere around 10% SG&A growth. So from a growth prospective it's tapering down.

Okay, thank you.

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

Yes, Steve, your comment about a bit of a potential sequential slowdown from December to March, I'm trying to kind of justify that with the numbers, because last year you slowed down sequentially between December and theMarch quarter by about 12%, yet the upper end of your guidance suggests that you're only going to be down sequentially by 11% in the March quarter. So that -- with the strong holiday sales, it sounds like the core business is actually accelerating a bit. Is that the best way to look at it, or am I not looking at it correctly?

Well, I think it's just more justification that, yes, thing are fairly stable, Jim. We're just trying to give guidance down the middle here. With the big three things that we talked about, our largest account, the energy business and the retail, that tells some of the shift. The things that you're bring up get us within a range, and to get more specific than that, we're trying to out-guess how the springs is going to take off here. So,yes, we're not overly concerned, it's just that we're not throwing out -- we're not being overly optimistic with compared to how Q3 and Q4 performed.

Okay, fair enough. Your CapEx guidance, Derrek, if I recall, was somewhere in the $2 million to $4 million range, and you came in over $6 million for -- or was that kind of -- was the $6.5 million for the year where you expect to be?

So CapEx, Jim, for 2011 was about $10 million, and for Q1 of next year, I'm talking about a range of $2 million to $4 million, just knowing that we had a few purchases that didn't quite make it into 2011 that are going to creep into 2012. So that bumps the number up a little bit, and I would expect we'll be talking about a range of $2 million to $4 million for each quarter going forward.

You're right, I'm sorry, it was about $6.5 million at the end of the third quarter, so it did come up at about $10 million, the upper end of your expectations?

Yes, it came in about $10 million for the year.

Is that -- I mean, is this investments in the mobile technology that Steve was talking about, or is there other investments that you continue to do?

Yes, it's partially around that. I mean, the vast majority of all of this is really technology focused. Some of that is focused on the mobile technology, and some of it is also focused on other technologies that are front end systems to serve customers better, provide better information to our branches, and get a little better through put here, as well as hopefully open up some more opportunities with customers.

Okay. Then, Steve, you called out the retail sales as the reason for the upside. To what extent was -- we've had obviously a very mild winter throughout the United States. To what extent did that help your revenues in the fourth quarter?

I don't think it was all that much. It didn't hurt us, and it helped us stay on those energy projects, which are outside business, but without residential construction driving our business, we're not as open and volatile based on weather patterns. So it didn't really give us a shot in the arm. There are certain pockets of our business that are relying on snow removal, so I would like to see it snow a bit more, but overall it all equals out, Jim, and the weather hasn't been driving our business positive or negative.

Okay, thank you.

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

Thank you so much. Steve, you talked a bit about your work in the clean energy sector. You've obviously been focused on that for a while. You've done extremely well there. I'm just curious if you can talk about the competitive landscape. Are there folks in your area starting to [gear in] on that sector as well?

Well, we've got a good head start on major project, so that helps us, and we've proven that we know how to make these projects more productive, so that also helps us. And that it comes back to that credibility word. And with the experience that we've gained over the last 12 to 18 months as we entered this field, we have a nice head start there. Will there be others that say they can put people out? Absolutely. This is a competitive environment when you're running a staffing business, so I'd be remiss to not recognize that.

However, we like the position we're in. We -- that industry is somewhat dependent on tax credits. I mean, I'll throw that out there. So ourgrowth is dependent on our customers growing. Their growth is dependent on investors wanting to make investments in the solar and wind business. And so there's some dependent see that needs to be brought up. That's more a driver than competition.

Okay, that's actually very helpful. I appreciate that. Derrek, I actually have a few numbers questions. What was the impact of the A1 staffing acquisition in the quarter?

A1's been running maybe a point of revenue growth for us, Jeff.

Okay, great. And were there any branch openings or closings in the quarter?

We had a net decrease in the branch count of six.

Are there any plans going forward to consolidate or close any more branches?

We are always looking at ways to more efficiently run the branch network out there, but we don't have any major plans. What you saw from us this quarter is just some fine-tuning, just as we fine-tune a lot of things in the business.

Okay, great. And just then this one small one. The interest in other the line was a bit higher than trend in prior quarters. Was there something specific in the quarter that happened, and will that be continuing in 2012?

I think most of it -- that's made up of two parts, Jeff. One part is our interest revenue, so we put a trust in place with some of our cash that we have for collateral for workers comp, and that cash has gotten for the most part fully loaded into investments, so not all of that was loaded into securities. So that's a piece of it that's driving it more, because that's giving us a better return than we had when we had it sitting at an insurance company.

The second piece is we renegotiated our credit facility in the third quarter, and we have less costs on our letters of credit outstanding. So the two of those together is bringing in a little bit better interest revenue on a net basis.

One no one-time items in theory, it's just something you're continuing?

Yes, nothing big there.

Okay, that's wonderful. All right, thanks so much.

(Operator Instructions). your next question comes from the line of Mark Marcon with Robert W. Baird. Please proceed.

Good afternoon, and great year. I was wondering if you could talk a little bit more about the strategy in terms of penetrate something of these verticals? Was the retail -- [the results] that you saw on the retail side, was that a function of some of those efforts, and should we expect it to continue in the fourth quarter of 2012?

Yes, absolutely. That was a direct result of efforts by our vertical marketing team that has put together both playbooks and strategies to drive not only in the industry itself, but specific customers.

And one of the things that's difficult to do is when you're servicing a national account, it's all filled at the local level. Building those bridges between those that sell it the national level and those that actually fill it at the local level, not only on our side of the business but the customer side. So getting the word out and teaching a given national or regional account how to buy from us has been part of our success factor. So we go in, and we teach our branches, and we give them a great understanding of how to go to the job or to the customer's local site with all of the contact information, and give them the exact protocol of how to start placing orders and doing business with us.

Early on -- a year, two, three years ago; over that period of time -- as we started penetrating any given industry, the weakness that always popped out was on the customer side, their communications not being strong enough to get the word down at the local level of how to buy. So within that retail industry in the fourth quarter of 2011, we had one customer that we put a game plan together on, and we got the communications out to our staff, and our staff then was calling on that customer, and kaboom, growth started happening. We barely put a small toe in the water on that account and how big that can be. On that account, yes, you'll see growth, and you'll see that continue as we prepare for the holidays in 2012.

And there will be more, because with great execution and the success and the wins, that team is quickly putting together game plans, playbooks for other accounts and all the verticals that we're in. We're learning and we're applying it, and yes, we'll see more growth.

That's great to see. What inning would you say we're in? Like what percentage of the placements are now coming from some of these national accounts due to these efforts that you've put into place?

We've moved that needle a long way. The exact transaction that I just told you, I couldn't give you a percentage, but on a global basis of accounts that are being handled and sold by a more regional/national looking group but being executed locally, it's close to a quarter of our business now that's being sold by regional and national players and delivered locally.

And that's up from -- what would you say the comparable amount was a year ago?

I don't have that number in front of me, but if I went back about four years ago, it would have been closer to 10% or 12%, so it's doubled.

Yes, I remember it at that point. And then how much of that would you say is coming out some of the vertical -- some of the more specialized brands that you have? Obviously, PlaneTechs is a core example, relative to core Labour Ready.

Right. Most everything that I just visited with you about is about Labour Ready. It's taking our general staffing branches and our general staffing process and applying it to this vertical approach. So most of the success and most of the wins are taking all of the successes -- yes, we learned a lot of these from our specialty brands of how they approach their own industry, but as we apply it to our general labor provider, that's where the success and the win is really coming from. The numbers I quoted you were all about Labour Ready.

That's great. In terms of the texting and that rollout, should we anticipate that the investments are going to step up in the second quarter, or how should we think about that?

The bulk of the investment is behind us the last six months. There might be -- or there will continue to be increased investments in technology, but we're planning -- for these CapEx numbers that Derrek has given you, it's heavily focused on technology, but we're pacing ourselves through it, and there will be another $10 million or $12 million invested during 2012, getting this successfully role out. But it includes so many components, of all the way from how we recruit, how we dispatch, how we manage the payout, and we're looking for great success there.

It's going to be exciting as we get through the year, and we see how those transactions build. The success stories we've had so far are really amazing, where we've been able to dispatch workers based on location, because we know where their cell phone is, and we know where the job site is, and we're able to complete a transaction within 15 minutes, and have a very satisfied customer and a satisfied worker. We throw on that the electronic pay, where they don't need to come back and pick their paycheck up, and we're going have a home run here.

And so -- it first benefits the customer. They get their job done quicker. It benefits the workforce second in the fact that more people are able to go to work for us, because they don't need -- they're not dependent on waiting in our branch for a job. We can contact them wherever they are.

And then thirdly, it is going benefit the efficiencies for the shareholder. It's hard to quantify that right now, and that's why we're not coming out with that. I just wanted to make the investors aware of what we're doing, what our strategies are, but there will be an impact positively on the efficiencies of our business as we learn how to place more people with the same branch network or less in the future. And one of the driving metrics that I watch closely and that we are driving towards is revenue per employee. These technologies and -- these enabling technologies that we're putting into play are going to help us move that revenue per employee up very, very fast, which you could do the math and know that, that will drive efficiencies.

Sounds extremely promising. Want to follow-up later on that. In terms of the contribution from retail, when you mentioned -- can you give us a quantification of how big that was?

How big the industry was, or how much of the growth came from that?

How much of the growth came from that?

It's not as big as our industry -- as our energy business, but it provided somewhere in the category of $4 million to $5 million of growth for us.

Incremental in terms of going from --

A year ago.

Okay, great. And then the energy business, how much was that up?

That's close to -- up to $25 million, which is pretty close to last quarter.

Yes. And how much was it a year ago?

Well, it was just a couple million dollars. We were just getting started.

Steve, do you think that those people are transferable to -- there's obviously well-known factors that could impact long-term demand in terms of solar and wind, but that kind of model, can it be transferred say to natural gas or oil shale or what have you?

We have worked a bit in that, mostly in the refinery business, the shut down business, but not in the consistent business. It's a little bit different, but we're working that angle to see. We haven't had this huge success there yet, Mark. Those are more traditionally run businesses, but we're working in those industries and trying to understand what the cust -- what would benefit the customer best there.

Those aren't the same exact people that would transfer, but definitely our process is what's most important. It's about the way we work with the customer to understand their needs and fill their needs, and be able to supply the labor at the right time and the right place. And so that's the big thing. There's just more traditional methods of getting labor to those more traditional energy fields.

Got it. And then Boeing -- I'm sorry, I shouldn't have mentioned the name. What are your expectations with regards to them for the full year?

I think that we've peaked with our business with Boeing.

You said that a long time ago.

I know, I know. You can watch the news, you know what's going on with that 787, and they're having success, they're moving forward. Yet they're still working on warranty work, and we're going to continue to support them on that. It's not a forever project, but we're there for them, and we've proved out to be a good partner. On the production side of that business, we're not a very -- it's not a very big piece of our business any more of actually producing the plane. It's mostly on the warranty side. So you can tell when the problem slow down on the plane, our business will slow down.

Got it. So basically -- but as you look towards the first quarter, first half, basically going back to the run rate that you were previously assuming?

I think for Q1 we're in the $25 million range, and I think that's a peak though, and I think it's going to gradually start going down from there.

Lastly, tax rate for the full year? Is the WOTC going impact the whole year in terms of keeping us up at this 42%, 43% rate?

Hi, Mark. Yes, until -- unless, I guess I should say, because we don't know for sure if WOTC will be renewed or not -- that 42% to 45% will hold up. The difference between that and our run rate -- normalized run rate from last year is pulling out those credits that we would get if that was in place during 2012. That's the difference between the two.

Got it. Thank you.

Thanks, mark.

(Operator Instructions). Your next question comes from the line of Kevin McVeigh with Macquarie.

Hi, guys. This is actually Derek Sbrogna for Kevin McVeigh. Thanks for taking my questions. You guys touched on the trends for 2012, but I was wondering if you could more broadly you could comment on the trends you're seeing in the beginning in this recovery and maybe how that compares to previous recoveries?

Well, first we're not -- the beginning of this recovery is over. We're definitely mid-innings on this recovery, and it was not housing driven. So the largest differences are when we've entered manufacturing recessions in the past, they -- over the past 20 years or so when we've gone through small dips, they've been driven by other things other than the long-term housing and credit bubble that we're up against.

So that's the largest driver, is the bounces back factor of the real estate markets is going to be slower. It's been quite some time. There's plenty of comparisons out there to other markets that went through this same thing, and how long it took them. And I think we have some driving factors in our economy that help this thing bounce. We have a growing population here, and manufacturing seems to be growing here in the US, and maybe some of the factors that took manufacturing to China are balancing at this point in time. And those are the things that are going to turn the housing market around also, because we need to get people back to work, and we're showing signs of that.

The fact that we're adding 250,000 plus private job is good. Some would say, well isn't that competing for the staffing industry. I say absolutely not. It drives a strong economy, gets those folks back to work, and one of the things that they're going start dreaming about really fast is a new house and being able to get into a home. And this will sustain our economy and take us forward. So I'm not -- I don't have my head in the sand about uncertain and unpredictability about the economy, but I'm bullish on North America, on what we can accomplish and where we are.

But the focus of your question was about the comparability about previous recessions to this one we just came out of, and there's not much to compare. They look a lot different. The mix of our own internal business looks a lot different than it did pre-recession, and forever more we'll be changed to be stronger. I look forward to the day we're serving residential accounts at a high level and we have our core business that we've now built and is sustainable.

Okay, great. Thanks, guys.

Your next question comes from the line of Paul Ginocchio with Deutsche Bank. Please proceed.

Thanks for taking a follow-up. Just on construction back. What's the all-in growth for energy, res and non-res? Is it around 25% of revenue in the fourth quarter and for the year?

So the all-in growth number for construction for the fourth quarter of 2011 is about 40%, Paul, largely being driven by the energy piece. I do not have the mix for quarter. We tend to look at this on a TTM basis, and construction was up roughly a quarter of the total Company mix on an annual basis.

So that's up a few points from last year, but your gross margin -- or your workers comp continues to sort of be stable. Would that -- the higher exposure to construction, shouldn't that mean that workers comp goes higher?

These energy projects, they are very safe projects. Compared to where construction was before in our mix, when we were talking about -- particularly on the residential side, those are smaller employers, often one, two, three day jobs. The energy jobs are very professionally run by pretty sophisticated customers that are longer duration, so people are not -- they're not new on the site everyday. And secondly, we've done a nice job -- again, our team has in 2011 -- on bringing our accident rate down. So this increase in the mix of construction has not had an impact on workers comp rate.

Okay. And then if I could just ask about incremental margins. The question you get asked about a lot. It was good, it was the 12% incremental EBITDA margin on revenues in 2011, about the same as it was in 2010. Does that creep higher going forward now that gross margins are expanding? Shouldn't it?

Oh yes, it would absolutely help the incremental margin. We turned in on the face this quarter about 13% incremental operating margin. You're quoting EBITDA. We're going to be close here. If you adjust this quarter's results -- remember that we had some mix impacts on our gross margins that are working against us and the HIRE Act credits from the prior year -- we'd be close to 15%. SoI think at a higher incremental operating margin with -- as gross margin increase year-over-year, we don't have those gross margin headwinds -- is an absolutely doable event.

Okay. And just finally on depreciation and amortization. It seems like it's trending a little higher despite a pretty low CapEx level. Was there accelerated depreciation this year?

It's trended down a little bit during the year, but if you kind of look back, maybe four, five, six quarters, it's about the same there. I think it's really had more to do with the mix of assets that we've had, and we have been invest in some shorter term information technology assets, versus internally developed software that has a longer life. So these are shorter lives that has brought it up. Towards the back half of 2011 we invested -- did some nice investments in our branch network. Since most of our branches have 90-day leases, we end up deteriorating can faster. So it's just a mix issue and the lives of the assets.

Great, thanks. And you think it's going to be flat to down in 2012, roughly?

I think taking a look at first quarter of next year, you're looking at a little over $4.5 million in depreciation and amortization, and that's a fairly decent run rate. It might step up a little from there.

Thank you.

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

Well, thank you. Thank you for your questions, and thank you for joining us today. Your attention and your questions are very much appreciated. We look forward to reporting the results of Q1 as we continue to drive industry-leading growth and profitability. Our excitement is growing as well.

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