Healthcare Services Group Inc (HCSG) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Healthcare Services Group Incorporated conference call. Today's call is being recorded.

During the course of the upcoming discussion, we may make reference to or state forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, "The exchange act", as amended. Such statements or references are not historical facts but rather based on current expectations, estimates and projections about our business and industry, our beliefs and assumptions. Words such as believes, anticipates, plans, expects, will, goal, and similar expressions are intended to identify forward-looking statements. The inclusion of forward-looking statements should not be regarded as a representation by us that any of our plans will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Such forward-looking information is also subject to various risks and uncertainties. Such risks and uncertainties include but are not limited to risks arising from our providing services exclusively to the healthcare industry, primarily providers of long-term care; credit and collection risks associated with (technical difficulty) industry; one client accounting for approximately 13% of revenues in the six-month period ending June 30, 2009; risks associated with our acquisition of Contract Environmental Services, Incorporated, including integration risks and costs or such business not achieving expected financial results or synergies, or failure to otherwise perform as expected; our claims experience related to workers compensation and general liability insurance; the effects of changes in interpretations of laws and regulations governing the industry, including state and local regulations pertaining to the taxability of our services; and the risk factors described in our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2008, and Part One under government regulation of clients, competition, service agreements, collections, and under Item 1-A, "Risk Factors".

Many of our clients' revenues are highly contingent on Medicare and Medicaid reimbursement funding rates, which Congress has affected through the enactment of a number of major laws during the past decade. These laws have significantly altered or threaten to alter overall government reimbursement funding rates and mechanisms.

In addition, the current economic crisis could adversely affect such funding. The overall effect of these laws and trends in the long-term care industry have affected and could adversely affect the liquidity of our clients, resulting in their inability to make payments to us on agreed-upon payment terms. These factors, in addition to delays in payments from clients, have resulted in, and could continue to result in significant additional bad debts in the near future.

Additionally, our operating results would be adversely effected if unexpected increases in the cost of labor and labor-related costs, material, supplies and equipment used in performing services could not be passed on to our clients. In addition, we believe that, to improve our financial performance, we must continue to obtain service agreements with new clients, provide new services to existing clients, achieve modest price increases on current service agreements with existing clients, and maintain internal cost-reduction strategies at our various operational levels.

Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and successfully executing projected growth strategies.

I would now like to turn the conference over to Mr. Daniel McCartney, CEO. Please go ahead, sir.

Thank you. I would like to thank everybody for joining us on our conference call.

Yesterday, we released our second-quarter results, and our 10-Q is scheduled to be filed by the beginning of next week.

Our revenues increased for the second quarter at 16% to $170.896 million. About 4% of the increase was due to CES and the acquisition we made during the quarter; about 12% of the growth was organic growth in our normal addition of facilities. Our net income was $7.815 million, or $0.18 a share, up 12%.

On the income statement, the direct costs were a little bit above 85.25%. The primary driver of the improvement was Food Service continued to improve as we added more properties, primarily in the Northeast, and they more consistently were able to spread out the operating costs of the district and regional management team that we had already been bearing the cost of over a broader amount of facilities.

CES margins really mirrored ours. They performed very well. We've done a good job on both ends in working together. The transaction has really gone very smoothly and contributed as well to the increased performance -- improved performance in the direct costs.

The SG&A was a little bit over 7.9%, but to adjust that, $700,000 in the expense in the SG&A is the increase in the deferred comp investment. So to compare apples to apples in the SG&A, you really should reduce the SG&A expense by about $700,000 and reduce our investment income by about $700,000.

The SG&A was still a little over 7.3%, which is higher than historically it had been. Primarily because of that was duplication of some of the administrative and overhead expense with the transition of some of CES' overhead and administrative expense being transitioned up to the corporate office. We fully expect that, by the third quarter, that the SG&A expense will be back down under 7% and closer to 6.75%, where it historically had been. So the earnings from operations were really $12.325 million, which you make the adjustments from the deferred comp.

Our balance sheet -- we still had over $77 million in cash and marketable securities. That's after a $12 million investment required for the CES acquisition. Our receivables were still below 60 days, really at 56 days. We increased the dividend for the 25th quarter consecutively to $0.19 a share.

So with that abbreviated overview, I will open our call up to questions.

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions). Michael Gallo, CL King.

Hi, good morning. A couple of questions -- do you have the breakdown, Dan, between the Food Service growth and the Housekeeping growth in the quarter?

The Food Service growth was probably over 20%, and the Housekeeping and Laundry growth was about 8% or 9%.

Okay. In terms of just where -- I think, at the time that you did the CES acquisition, you expected it would take about 90 days to rationalize the G&A. I mean, where are you on that front?

We are in good shape. We are doing it in a smooth and coordinated way with the CES guys, we fully expect it to be where it should be by the third quarter.

How much was the G&A that you think will be eliminated on an annualized basis?

I just backed in the estimate on what we were over, so I would say it was maybe 0.4%.

0.4% on the quarter?

Yes.

Okay. Then starting in Q3, you should get the majority of that and certainly all of it by Q4?

Yes.

Okay, great. Thanks a lot.

Rob Mains, Morgan Keegan.

Good morning, Dan. Three quick ones for you -- first of all, client retention during the quarter?

It was better than 90%.

Okay. How comfortable are you with, now that you've returned to organic growth in the double-digit range, how comfortable are you with being able to stay there?

I think we should be -- for us, it's really execution. You know, we feel confident that we have more consistency in the marketing, both at the grassroots level and the corporate type of account level. But for us, getting up there -- as long as the client retention stays at better than 90%, adding the new business is still the easier part.

What hurt us in 2008's growth was really the leaving to change that we just don't replace as quickly as we would like. The guys have been doing a consistent job, but it got more attention because of those two change we left in the first quarter of 2008 that needed us to incrementally build back up to get to the double digits, which we did. So we expect to be in that -- 10% to 15% is still where we feel most comfortable in the topline range. I know, for the second quarter, 16% is the growth. It is still manageable, but 10% to 15% is where we still internally target and that's where we expect to be able to sustain unless something unusual happens, like the first quarter of 2008.

Okay, fair enough. Then could you give us an update? You said that most of the Food Service growth in the quarter was in the Northeast. Could you give an update on the regions of the country and how comfortable you are, as of this date, of kind of stepping on the accelerator in terms of adding Food Services clients in the various regions? I assume that we are talking still about just existing housekeeping clients.

Yes. The Food Service in the Northeast is where the bulk of -- certainly the lion's share of the organic growth came from. The Southeast has improved its performance too, but a lot of that is with some of CES' food service clients which had contributed to the improved performance of the Food Service division as well. So I would say the Southeast is in pretty good shape.

We are going to collectively, with the CES guys, reassess the management team and see how quickly they could really expand with the Food Service guys internally in the Southeast as well.

I would still say the primary growth driver is going to continue to be the Northeast.

I would say the Midwest is still a little bit too inconsistent as far as management development but improving. And the Far West has continued to do a better job and really improved their performance, and the management development function quicker than I originally and still had anticipated. So I would say the next area, after the Southeast and Northeast Mid-Atlantic area that we are going to allow to grow, will probably be the Far West. Hopefully, by the end of the year, we will be in a good position to let some of the reins out for the Midwest as well. But we have to get the structure a little bit more stable.

Great, that's a good update. Thanks a lot.

Mitra Ramgopal, Sidoti.

Just a couple of questions. First, if you could just touch a little in terms of your customers and what you're seeing out there -- you did say DSOs remained stable and actually declined a little. Are you at all concerned with the reimbursement environment being a little less favorable, that it could be putting some of your customers under pressure?

You know, our opinion is our credit issues are still much more client-specific than anything in the aggregate, in spite of the attention, the publicity and the political tug-of-war that's going on as far as healthcare in general in the country.

But I guess our optimism comes from the fact that I think Medicare and Medicaid, the primary drivers -- I think, in Medicaid, the government, state and federal, already acknowledged they don't pay sufficiently to our type of clients to cover their costs as it is. So there is not a dispute any more, which you usually find. So the likelihood of that impacting when the government already acknowledges that they don't cover the cost is highly unlikely.

Medicare -- I think there will be some adjustments around the fringes that, even though it makes the 10% of the revenue, it's an important part of the revenue base and the lion's share of a lot of the clients' earnings after private pay patients. I think they will ultimately play around with the buckets and different utilization review kind of adjustments. But that's been going on really for the last ten years, and we don't expect anything draconian.

The uncertainty is always an issue, but for us, managing the credit and collection with our client base, it's really client-specific. Good operators in bad times are still able to function, pay their bills, and get by. Bad operators, even in good times, run into trouble. So we have to look at every client individually because we don't see any trends that are really impacting across the board like they did maybe in 1998 and '99.

So I would say we probably still leave more clients each year for credit concerns when a client gets beyond on the credit terms not in significant numbers but more clients every year the last seven or eight years, including 2009, than we did in the first 25 years of the Company's existence. We're going to continue to manage the credit that way. But we don't see any national trend or even state-by-state trend, and we have to manage the credit and the credit worthiness of the clients, facility by facility.

Thanks. Then just to touch on your ability to recruit personnel to expand your facilities base, given the unemployment rate, etc., is it becoming a little easier for you to attract qualified people to run the facilities?

Because our primary recruitment is still at the entry level management trainee position, that is still our approach. I think we have been able to get better candidates and have them get through the difficult times of the training and orientation more consistently because, as a company, we've become more well-known, more established. So the career paths at the entry level we can carve out and try to propose to the candidates, allow them to see, with a more credible endgame, where they want to be. Because we only promote from within the district, regional and divisional, management people have all gone through the same apprenticeship we are asking the new candidates to go through. So when they join the company at those early stages -- the fact that we've been doing it for 32 years; the fact that we are in 44 states; the fact that we are public and have a long track record; and most importantly, the fact that the management people that they are working with, being recruited and being trained by have gone through the same career path that we are proposing to them adds more credibility because that's still -- the early stages of the training program is still where we get the highest degree of turnover. That is really what it is intended to do, to be able to screen out those who may not be capable or willing to do all that's required in a very difficult industry.

But I think we've had better results, more stability in the management people, certainly in Food Service more recently, and always in Housekeeping and Laundry, because, as a company, we've stayed true to what we started to do. As our management depth has increased, I think we make a better choice for the candidates at those early stages of their career.

So I think the macro employment circumstances really don't impact our candidates as much as our company performing on a consistent basis and being looked at more favorably than they were maybe 10 or 15 years ago, especially in the newer areas.

Okay, thanks. Finally, looking at the gross margin, it was certainly the best you've seen in some time. Given that minimum wage is increasing in a lot of states, do you see an impact on your margin there, or are you able to easily pass that on?

Well, not easily, because they never want to give us the increases if they don't have too, even though our contract provides for it. But that's the way we've done business, whether they were federally or state-mandated increases, or even if the client gives an increase. The way our contracts and pricing are structured is we pass those increases to the customer. They know that; we've been doing it since the beginning. We continue to do it, whether the driving force or the increase was due to minimum wage increase or then doing it themselves.

But frankly, very few of the clients or the states really are to the degree where they are paying minimum wage. I mean, the competitive environment and the requirement for the facilities to recruit blue-collar workers, very few have been paying minimum wage as it is in the past.

So we expect to get the increases on where it affects us, like we have in the past, but it won't be as significant. Because we match the wage rates and benefits, I know it is a little counterintuitive, but the more the employees get paid, really the better it is for us.

Okay, thanks again.

Eric Gommel, Stifel Nicolaus.

Good morning, Dan. Just from an acquisition standpoint, I know you lead with organic growth, but are there opportunities in some of your other -- like the Far West and Midwest -- to maybe ramp-up the dietary business faster through an acquisition, or is there anything out there that you think about or look at?

I mean, I'm not saying we wouldn't, but all our forecasts and projections internally and our discussions externally are really not including acquisitions. If we find the right opportunity, like CES, where we think the management style meshes with ours, where we think we can work with them and it's good for them and good for us, and we can immerse it into our existing operations even though we are running it as a separate division, and we can buy it at the right price, that kind of makes sense.

There are very few, we think, acquisition opportunities that meet that criteria. We look at different circumstances and we don't spend a lot of time looking for acquisitions. There's really more than enough business for us to chase around for organic growth, but we would always look at the opportunities.

We find that, in Food Service especially, until we get the management depth throughout the country as strong as we want, the likelihood of us benefiting from management talent through an acquisition isn't that great because we really want to manage it our style. That's why getting to know the people is a very critical part of our good diligence, almost as important if not more than the financial reviews. So CES and Summit before fit that criteria, and that's what we look for.

So I wouldn't anticipate acquisitions being part, especially in Food Service, but there are pockets of privately-owned companies in particular markets in the Midwest and Far West that we would look at. But we don't really anticipate acquisitions being a real part of our expansion.

Okay. Then just my last question -- if you were to look at your customer profile today, maybe versus, I don't know, five or ten years ago, are the nursing home providers across -- span the spectrum of different types of providers? Do you have not for profits, for profits, big chains, little chains, or do you see a shift in -- do you see your portfolio of customers becoming more -- are more sophisticated providers? Or is there any trend that you're seeing their relative to maybe like skill utilization or the traditional long-term care model? I was just curious what you thought.

I would say, if you go back ten years, I would say the most significant change was an increase in the national chains. I used to say "public" but very few are public any more.

But if you broke out our client base now, I would say probably 35% of our clients are part of a large national chain. We don't do all of their business. We sell the services locally, property by property, but we've done more of their business once we've gotten our foot in the door really by execution and developing the relationship and forming the cost reductions and the consistency.

I would say another 35% are privately-owned chains in a particular market, anywhere from 3 to 15 facilities. I guess the other 25% or so are individual operators, mom-and-pop type operators, who are nonprofits, religious-type facilities and the like. But I would say the greater shift -- maybe ten years ago -- and I'm doing this from memory, which is the older I get isn't as good as it used to be -- but maybe 25% of our clients ten years ago where the large publicly-held chains where that has been the area that we've probably grown the most rapidly the last ten years.

Ryan Daniels, William Blair.

Just a couple of quick follow-ups -- I think most of the bigger questions have already been asked. But one thing I wanted to talk about was gross margins. I know this is the best gross margins you have seen in a couple of years and it sounded like, from your commentary, a lot of that was due to some of the improvements in the Food Services division.

But you've also talked in the past about some startup costs related to contracts, and as those costs would dissipate, that the gross margins would start to improve. So I'm curious if we saw that benefit as well, and that led to the improvement, or if there's still some juice there maybe to get the gross margins near the 15% level. Any thoughts you would have there?

I think the primary improvement -- and when the Q comes out, it will lay it out a little more dramatically -- but the primary driver for the improvement in the margins was the improvement in Food Service. It was really on two levels if you look at it.

The district and regional cost, which we've been supporting for a while now, is now being spread out as we add more properties without the need for more district and regional costs because, in our model, they were underutilized. If you remember, a district in our scheme of things should oversee 8 to 12 properties where, in Food Service, they were averaging 6 to 7 but we were eating full district cost.

(technical difficulty) six districts, and in Food Service, they were averaging three to for. So as the Northeast has been allowed to ramp up to the right complement of properties, the margins improve there.

Secondarily, the fact that commodity costs the last nine months have really plateaued has allowed us to get control of the food purchases in a more timely basis. We were able to, the last year, get the increases we needed as commodity costs kept increasing, but there was always a difficult timing issue. First of all, it was going up so rapidly that it seemed like, most of the time we were talking to our clients, we were asking for an increase to offset what was a justified and well-known increase in food costs but certainly the only you're talking to your customers asking them for more money isn't the way to enhance the relationship ultimately.

But now that has plateaued, we've got the food costs under 40% again -- in fact closer to 38% -- and it's not because we are buying any better. It's because now the price increase and the pricing has really caught up to a flattening of the increases we have been hit with from our providers.

Then the last -- I would say the fourth quarter of last year in particular and the first quarter of this year, we did have an unusual amount of new startups for Housekeeping and Laundry and Food. That is the most expensive time, when we have to replenish the inventory, add some additional equipment or wherever we think we need to get the inventory up to snuff. After we bear that cost the first 60 days of the opening, then it levels out. I think that also contributed to the improved profit margin -- because now the new business has been more uniformly added in the second quarter than it was really in the fourth quarter and first quarter of 2009.

Okay, great. That's really helpful color. Then one more quick follow-up on the Food side that came to mind during your commentary there -- you mentioned that food costs have come down to about 38%. I'm curious. As that vision grows, if you think you're going to have some leverage there on the purchasing side to maybe even drive that further downward with scale economies, or is that kind of a number we should think of in our models continuing at that sort of level going forward?

I still think that's the level. I mean, we always try to improve but if we can keep it at this level, we are really very happy.

We originally wrote down our cost components 60%/40%, 60% labor related and 40% food purchases. It got up to 41%; we got it as low as 38% maybe two years ago. If we could keep it at 38%, because of our national accounts with the bulk of our purchasing with US Food and Cisco and then being able to keep the dairy and produce vendors locally, not requiring us to get increases as frequently as they had the last two years, we are able to control it and we will be able to keep it at 38%. If we do that, we will be very happy.

Okay, perfect. Then just one final question, I guess a little bit of a twist to Mitra's question earlier. I'm curious if you're hearing from the salesforce or if it's your opinion that the macro environment might be helping you, whether it be the need for nursing homes to consider cost savings alternatives little bit more in this economy, or worries about healthcare reform pressuring their margins, so they are looking for ways to focus on core operations and kind of outsource non-core components of the business. Is that actually moving the needle for you guys at all, or has that not been a big piece of this accelerating organic growth that you're seeing?

I think the cost-containment environment they have is certainly getting more scrutiny and, because of the uncertainty, putting maybe a little bit more concerned on the providers than ever before. The tighter they get squeezed or anticipate getting squeezed, the more opportunities for outsourcing companies of all kinds, including ours, that in a cost-efficient way can come in and provide an alternative management tool, and most importantly for us and for them a fixed price and a fixed price that was lower than what they were operating before. Because, in this environment, as well as really the past 32 years, primarily that's what our customers make the decision on.

The price we contain was also cheaper than they were doing it themselves. Because it is outsourced, they know whatever departments they've outsourced -- housekeeping, laundry or food -- are going to hit their budget every month with no unfavorable variance because the risk is transferred to us. They get charged a flat amount. If it's over-budget, it is really on us, and it gives them the comfort there are no surprises on their operating performance. They can concentrate on the nursing department -- far and away their largest department -- and the patient mix, which is their lifeblood, rather than these support services that come up and surprise them.

So I think the cost-containment pressures they feel certainly open the door for outsourcing companies of all kinds, including ours. After we get our foot in the door, like with the national chains, you do what you say you'll do. You try to over-service the customer, if you can do that in the service business, and that enables us to expand.

I don't think -- it may be a little bit more focused on that because of the uncertainty, but they've always been in a cost-pressure and cost-containment environment with the decision-making. As we get more and more established, more well-known and outsourcing continues to become more accepted in the industry, it opens up that many more doors for us.

Okay, great. Thanks a lot, Dan.

James Terwilliger, Duncan-Williams.

Nice quarter. Most of my questions have been answered; I've got quick ones though.

The first one -- the Food Service jumped approximately 120%. My question here is did the increase in the commodity costs that we saw 6 to 12 months ago, did that drive some of your customers to maybe accelerate the thesis of potentially outsourcing that business in order to control costs?

In Food Service, frankly, the demand within our client base is still really greater than we can do. So those cost pressures certainly increased their interest in outsourcing more services, including food. But the constraint on the Food Service really has been our ability to manage it effectively more than a lack of opportunity within our base.

So it didn't create more opportunities. There's still more opportunities in our client base with Food Service than we could really pursue because of the management development constraints. So I think one of the things is our purchasing power has made us or will make us a more attractive alternative because I think, whether it is the national accounts, we can get better pricing than they can get, and they should be the beneficiary of some of that improved purchasing power.

The local produce and dairy guys are going to charge us and the local clients the same amount of money. If they are dropping off lettuce, eggs and milk, they are not going to give it to us cheaper than they were giving it to the facilities. So there's not enough juice for us to really show improved purchasing power in those regards. But I think, in the national accounts, we are able to do better. But I don't think that has been the driving force increasing the demand now. There is still more demand than we can really do in food-service.

Okay, thanks. My second question is how would you define the visibility regarding the backlog or the pipeline of potential new customers? Are you seeing any trend as it relates to the second half of '09 and into 2010?

No. I think the guys have been hitting their targets as far as leads and development of proposals. Because we are careful and screen the proposals before we deliver them and develop them to make sure there's bona fide interest and we have a real shot at it, it's an easier monitoring process than you would think if you were doing 2000 pieces of mail and getting a 2% response.

We close maybe 40% to 50% of the clients that we develop proposals for, so it's not as big a number because the proposal amount is where the screening --or decision is where the screening comes in. So the guys throughout the country have been hitting their targets for the most part. Then it becomes the luck of the draw, trying to close as many as possible and the timing of it.

But we are pretty confident, as far as new business is concerned, that we will add the right amount of properties. We are optimistic, barring some surprise, that the client retention will stay in the 90% range.

My last question, and I know you touched on this again, so I don't mean to beat a dead horse, but is there any legislation, either from the federal or state levels, as it relates to your customers? I know there's some discussions right now as it relates to the nonprofit status of some of these institutions. I know there was a proposed hospital tax in Mississippi as well. Is there anything out there that your customers are concerned about that is tangible and the federal or state legislation?

I don't think anything that will impact them, but until the legislation is completed and the conversation becomes less uncertain, they are always a little concerned about what the government -- I think 1997 and '98 changes are still fresh enough in a lot of operators' minds, although we think that is fresh enough in the government's mind, too, that nothing as draconian as the balance budget amendment fiasco that only lasted one year but caused a lot of pain in our client base, the industry and frankly for us, which really was the reason we changed our credit and collection policies. I think, until that happens, our clients are concerned, but I don't think there's anything specific they can point to to say, "And this is the legislation that we think is most concerning."

I think the Medicaid circumstance is more state driven, and that has always been the case. They have to lobby, state-by-state, to make sure each state's nuances don't impact them to any great degree. But I think they all -- all of the states have acknowledged don't pay the facilities enough, so they know there's not any savings there.

I think the Medicare is still the uncertainty. I think a lot of the things the government is trying to do is going to increase the private pay senses because a lot of the loopholes are closing -- are trying to address how families have transferred assets to make the residents Medicaid-eligible when maybe they had resources and 20 years ago they were private-pay patients which are more profitable for the providers.

So I don't think there's anything specific they can point to in the legislation. I think it's the uncertainty that causes concern. Since we've been through it in different ways for 32 years, the ebbs and flows of the political negotiations, we are more optimistic it won't be anything significant.

My last question is, on the CES acquisition, it looks like it is doing well. Would you say the majority of the risk associated with the acquisition integration, the integration of CES, would you say the majority of that risk is behind you at this time?

Yes, I think, as far as the acquisition is concerned, and now the risk is the same risk with all of our clients. They are at-will contracts, and we have to execute and perform. As long as we hold up our end, and I include CES' management because we are team now -- as long as we collectively hold up our end to the customers, there's no reason the relationship that CES had worked so hard to establish with their customers shouldn't continue with us.

What did the CES customer contracts look like? Is it a mutual termination with the majority of them?

Yes, they have short-term terminations and with some structural differences, they are really at-will contracts and very similar to ours.

All right. Thanks. That's all my questions, Dan. Thanks and congratulations on a good quarter.

Michael Gallo, CL King.

Just a quick follow-up -- I was wondering if you had any update on collections and the prior bankruptcy, whether they are going to reorganize the one from early -- that you left in '08.

We got there. They did put their reorganization plan together. It hasn't been approved by the court, but they are proposing a 50% payout over a period of time. As we collect it, we will reimburse whatever impact it has on the reserve, but we are not going to do it based on the approval of the plan.

Okay, great. Thanks.

At this time, we have no further questions. Mr. McCartney, I will turn the call back to you for additional or closing comments.

Okay. Again, I want to thank everybody for joining us. But as far as the quarter is concerned, in summary, I think the organic growth and the impact of the acquisition put us at 16% growth, 12% organic and 4% from the acquisition. I know it is a little higher than the 10% to 15% that we try to target, but it is still manageable. We expect to stay in that 10% to 15% going forward; that's still our target.

The SG&A we expect to come down as some of the overhead duplication is eliminated. We expect Food Service to continue in a controlled way to expand, and the margins to continue to improve, and Ultimately, if we've done the right names, ultimately mirror Housekeeping and Laundry's margins.

So all in all, the demand for our services has never been greater. We've never had better management people in the history of the Company. Our mission and challenge continues to be execution day in and day out more than anything else. But these are good times for us.

So thank you, and onward and upward.

Thank you. That does conclude today's conference. We thank you for your participation.