UniFirst Corp (UNF) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the UniFirst Corporation Fourth Quarter Earnings Results Conference Call.

During the presentation, all participants will be in a listen-only mode.

Afterwards, we will conduct a question-and-answer session.

(Operator Instructions)

I would now like to turn the conference over to Steve Sintros, Chief Financial Officer.

Please go ahead, sir.

Thank you, and welcome to the UniFirst Corporation Conference Call to review our fourth quarter and full year operating results for fiscal 2009 and to discuss our expectations going forward.

I am Steven Sintros, UniFirst Chief Financial Officer.

Joining me is Ronald Croatti, UniFirst President and Chief Executive Officer.

This call will be on a listen-only mode until we complete our prepared remarks.

Now before I turn the call over to Ron, I would like to give a brief disclaimer.

This conference call may contain forward-looking statements that reflect the Company's current views with respect to future events and financial performance.

These forward-looking statements are subject to certain risks and uncertainties.

The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future results and trends, identify forward-looking statements.

Actual future results may differ materially from those anticipated, depending on a variety of factors, including but not limited to the continued availability of credit and the performance of capital markets, the performance of acquisitions, fluctuations in the cost of materials, fuel and labor and the outcome of pending and future litigation and environmental matters.

I refer you to the discussion of these points in our most recent filings with the Securities and Exchange Commission.

Now I turn the call over to Ron Croatti for his comments.

Thank you, Steve, and welcome to all who are joining us for the review of UniFirst's fourth quarter and full fiscal year for 2009 results.

Our numbers were released this morning.

I am happy to report that despite the recessionary conditions, skyrocketing unemployment rates that prevailed throughout the fiscal year, we were able to surpass the $1 billion revenue mark for the second year in a row.

Revenues came in at $1.013 billion, just slightly off the 2008 record of $1.023 billion.

However, when adjusting for the extra week of reporting last year, revenues increased 1%.

I am proud to report that UniFirst achieved record profits for the full fiscal year.

Net income for the year was $75.9 million or $3.92 per diluted common share, a 24.1% increase from the $61 million or $3.15 per diluted common share reported in 2008.

Core laundry revenues increased slightly on an even work week basis compared to fiscal 2008.

These results were driven by solid new account sales as well as route sales enhanced with ancillary products.

And despite increasing competitive price environment, some growth was attributed to positive price adjustments.

I'd personally like to thank each of the thousands of dedicated team partners who consistently believed in our systems and programs, made many tough adjustments, worked hard all year long to keep our customers number one through the roughest times.

All these efforts contributed to making 2009 a banner year for UniFirst, despite what was arguably one of the most harshest economic climates that our Company has ever faced.

During the fiscal year, national unemployment rates spiked more than 60% in the US, from about 6% to nearly 10%.

And in Canada, unemployment rose nearly 50% or around 6% to 9%.

Yet despite the drop in unemployment levels, which affected uniform demand, our professional sales force stepped up with new account sales off just 4% from 2008.

But again, I would like to note that 2008 had one extra selling week.

In reality on an equal-week basis, just 2% less.

Our year-long route sales efforts, which added supplementary services to our existing customer base, provided a steady revenue balance for us, coming in on par from last year.

These were both notable sales accomplishments, considering we were operating within a B2B market that became ever increasingly reluctant to buy as a result of their own economic uncertainty.

Ultimately, our results proved to be a true testament to the strength and resilience of our uniform rental business and to UniFirst's continued focus on new account sales and customer add-ons, based on offering true value propositions for the user.

In our specialty garment business, made up of nuclear and clean room operations, showed slight revenue gains from the full year over fiscal 2008.

In part, this improvement was due to high volume of planned nuclear power reactor outages, which required our specialized laundering and support services.

Expanding Europe and Canadian operations also contributed to the segment's improvement.

Our first aid business, which was particularly sensitive to downward economic pressures, showed a decline in revenue when compared to last year.

For the fourth quarter specifically, total company revenues were down 3.8% over the same period of fiscal 2008.

Net income for the quarter was $17.1 (sic - see press release) million or $0.88 per diluted common share, an increase of 38.6% from the fourth quarter of fiscal 2009.

Both revenues and profits for the quarter exceeded our expectations, as we began to see some signs of market stabilization and customer base.

Although unemployment environment remains weak, the level of customer wear reductions have decreased from the historic highs experienced earlier in our fiscal year.

During the year, numerous UniFirst customers were forced to reduce their workforce and many went out of business.

And so with many uniform wearers losing their jobs, our revenue and growth rates naturally trended downward.

The ongoing negative market conditions also led to more intense price competition, as some competitors began compromising price levels in an attempt to generate sales.

Despite these tough operational challenges, we never lost sight of our overriding business promise to maximize earnings and shareholder value.

We fully recognize the long-term importance of producing measurable profits and positive growth rates as well as a consistently strong cash flow.

This is why we are constantly focusing on strengthening our customer loyalties and growing our service base in unison, and is why we remain proactive approach to continuing aligning our overall business operations with current and anticipated market conditions.

Consistent with this proactive business philosophy, throughout the year, we emphasized the refocusing of Back to Basics business approach with everything that we do.

With this phrase as our mantra, we instituted a number of corporate directive aims and ensuring we provided the highest customer service levels, maximizing new account sales, reducing expenses on a Company-wide basis and solidly positioning ourselves to best take advantage of the market once the economy rebounds.

For example, we reemphasized a Back to Basics fiscal discipline to remind all team partners to always seek out the most economical and effective method while fulfilling our core objective of always exceeding customer expectations and meeting all our important customer retention goals.

When it came to our sales force, while others made cuts, we slightly increased our headcount and emphasized a Back to Basics selling approach to best communicate the value of our service to prospects and customers.

And all the while, our professional sales team continued targeting those industries that have historically demonstrated economic resilience during recessionary times.

We also added David Katz as the newest member of UniFirst's senior executive team.

In his role as Vice President of Sales and Marketing and consistent with our basic business goals to increase market share, he has worked closely with our national account division to grow the sales organization, implement new sales productivity and prospecting systems, to streamline the acquisition of larger scale, multi-site business accounts.

All our growth initiatives, along with our multilevel cost containment programs, lower energy expenses, favorable merchandising amortization, ultimately combined to rise UniFirst operating profits to an all-time high in 2009 and because our Back to Basics approach proved successful to minimize the negative impact of the '09 recession with respect to our core customer services and operations.

To our sales and growth efforts and to all our overall cost containment initiatives, we will continue to emphasize this strategy through fiscal 2010 and beyond.

Our specialty garment segment's operating income bounced back to $7.4 million for the full year, with both its nuclear and clean room units contributing solid profits.

The nuclear operations continued with its Canadian and European market expansion; completed construction of a new radiological armoring plant in the UK; added balance with an innovative tool and equipment decontamination service; the group also expanded its direct sales safety products offering during the year.

Likewise, our clean room service business expanded its US reach and continued to increase market share in the important pharmaceutical and medical device industries.

Going forward, we expect our specialty garment segment will carry on building its base of high tech and healthcare business customers and will remain solidly positioned to benefit from the growing global resurgence of nuclear power.

Our first aid business segment, as I alluded to earlier, was especially hard hit by the weak economy and high unemployment rate.

Many customers reduced their headcounts, which reflects the demand for safety products, while they sought to lower expenses by cutting back on their first aid cap and supply inventories.

To counter this, this segment outpaced service operations, widened its safety product offering and ramped up its sales training program.

In first aid, complementary safety wholesale supply division increased market share by leveraging its dominant position with the occupational health and over-the-counter market and by offering additional solutions to distributors.

Meanwhile, the segment's pill-packaging operation ramped up selling efforts to private label medication producers.

We feel first aid is poised to gain a stronger selling advantage in 2010, as it moves to expand its geographic footprint by levering its safety operations within select UniFirst laundry sites.

We recognize we won't see the bottom of the recession fall-out until there is a noticeable turnaround in national unemployment trends.

And because history has shown that economic recovery in our industry tends to lag behind national rebounds, we anticipate that even with positive economic growth returns, our customers will be hesitant to increase their payrolls.

Logically, such hiring delays will impact our financial performance going forward.

This means we must remain flexible, intently focused on helping our customers better compete and succeed in their own markets.

UniFirst offers proven products and services that are needed in the marketplace, no matter what the economic landscape looks like.

Our offers represent cost-effective solutions to real business needs that deliver bottom-line value to end users.

It is uncertain exactly how long it will take us to fully recover 2009 lost uniform wearers and ancillary service sales and return to our historically positive organic growth rate.

Nonetheless, given our strong overall financial state, we plan to combat these losses by steadily focusing on our new account sales growth and customer retention initiatives.

We will be doing this by continuing to invest significant resources and creating, communicating, selling and reselling the value of our core service.

We'll gain market share in the areas we serve and enter new markets and we'll continually aggressively target those industries most resilient and least likely to suffer business downturns.

We'll also remain committed to make considerable investments in our most valuable assets, our people, and the ongoing technological improvements related to all aspects of the business.

All of our investments will be calculated to help (inaudible) enhance our overall market position, and provide return to our shareholders while continuing to retain customers through service excellence and the delivery of value-based cost saving advantages.

And we'll maintain stringent cost controls that allow us to further develop our business, while eliminating nonessential spending.

Along with our dedicated team partners, I remain firmly convinced that UniFirst will emerge from the current recession an even stronger and more competitive company, one that will surely reinforce its well-earned reputation as an industry leader.

Thank you for your continued support.

I look forward to reporting to you on the progress of your company in the quarters ahead.

Now let me turn it over to UniFirst Chief Financial Officer and Vice President, Steve Sintros, for a detailed review of the numbers.

Thanks, Ron.

As Ron mentioned, revenues for the fourth quarter exceeded the Company's expectations at $241.5 million, a 3.8% decrease from the previous year's $251 million.

Fourth-quarter net income was $17 million or $0.88 per diluted common share, a 38.6% increase from the fourth quarter of fiscal 2008 when net income was $12.3 million or $0.63 per share.

Revenues from our core laundry operations decreased 4% in the fourth quarter as compared to 2008.

Organic growth was a negative 3.8%.

Revenues from the quarter were positively impacted 0.4% from acquisitions and negatively impacted 0.6% as a result of a weaker Canadian dollar.

Revenues also declined sequentially from the third quarter by 2.7% as the impact of wearer reductions in our third and fourth quarters continued to shrink our weekly revenue base.

Despite these challenges to our top line, income from operations from our core laundry business was up 31%.

The core laundry's operating margins increased from 9.3% in the fourth quarter of 2008 to 12.6% in the fourth quarter of 2009, as total expenses were down $15.5 million.

Similar to the first three quarters of the year, the decline in expenses was a result of lower energy, payroll and merchandise costs compared to 2008.

Total energy costs were 4.8% of core laundry revenues for the quarter, down over 3% from the same quarter a year ago.

The decrease was due to the historically high prices of natural gas and gasoline during the fourth quarter of 2008.

These costs have moderated during the year, causing this significant year-over-year benefit.

Overall payroll costs in the quarter were also lower than the prior year, due to the headcount reductions earlier this fiscal year.

Going forward, we will continue to adjust our direct labor costs to the volume being processed in each of our facilities, as well as to look to consolidate routes as necessary.

Merchandise amortization remains historically low, primarily due to the increased utilization of higher quality used garments received back from customers that have reduced headcounts.

Merchandise amortization was lower both compared to the fourth quarter of 2008 as well as compared to the third quarter of 2009.

Until our customers begin hiring again, the demand for new garments to be placed into service should remain low.

Decreases to our reserves for workers' compensation and auto liability claims, as well as lower travel costs, also contributed to the overall decrease in expenses.

Partially offsetting these cost benefits were higher healthcare and depreciation costs, as well as increases to our reserve for environmental contingencies.

During the quarter, we increased our reserve for environmental contingencies $3 million, primarily related to the investigation remediation of our former facility in Woburn, Massachusetts.

Our specialty garments segment also contributed to our growth in overall operating income during the quarter.

Quarterly income from operations for this segment increased to $0.9 million in the fourth quarter from $0.4 million in 2008.

For the full year, income from operations for this segment increased from $4.2 million in 2008 to $7.4 million in 2009.

Both the nuclear decontamination and clean room operations contributed to the improved profitability of this segment in both the quarterly and full-year periods.

We expect this segment to continue to improve its profitability in the upcoming year, as some of the transitional costs associated with opening its facility in the United Kingdom will not be incurred during fiscal 2010.

Fourth quarter revenues from the first aid segment decreased 4.4% from $7.5 million in 2008 to $7.2 million.

However, revenues from this segment have stabilized since the second quarter due to stronger sales to customers who had depleted inventory levels earlier in the year.

Income from operations from this segment was $0.7 million during the quarter compared to $0.5 million in the fourth quarter of 2008.

Due to the strengthening of the euro and pound against the US dollar, we recognized a small foreign currency gain during the fourth quarter compared to a $0.6 million loss a year ago.

In addition, net interest expense decreased from $2 million in the fourth quarter of 2008 to $1.7 million in 2009.

This decrease was primarily the result of lower debt balances outstanding during the quarter compared to a year ago.

Our effective tax rate was 38.3% for the quarter, compared to 36.2% in the fourth quarter of 2008.

The increase in effective tax rate for the quarter was due to certain reserve expirations under FIN 48 during the fourth quarter of 2008.

We expect our tax rate to be approximately 39% going forward.

During the fiscal year, our balance sheet continued to strengthen despite challenging economic conditions.

Due to the strong operating cash flows and limited acquisition activity, the company increased its cash and cash equivalents by $34.5 million to $60.2 million.

Total debt outstanding also decreased by $53.5 million to $182 million and total debt as a percentage of capital was 22.5% at year-end, down from 29.7% at the end of fiscal 2008.

Of the $60.2 million of total cash and cash equivalents on hand at year-end, almost $27 million is held in Canada and intended for future investments outside the United States.

Merchandise and service decreased 4.4% since the end of the third quarter and $20.9 million since the end of fiscal 2008.

I discussed earlier how lower demand for new garments and consequently, lower merchandise amortization, has improved our profitability.

A continued decline in merchandise in service on our balance sheet signals to us that our merchandise costs will remain low until customers begin adding more uniform wearers back to their workforces.

Accrued expenses increased by $12.2 million during the fiscal year, primarily due to increases to our reserves for environmental contingencies and profit sharing, as well as changes to the fair value of an interest rate swap.

The offset to the increase in interest rate swap liability is recorded in other comprehensive income in the equity section of the balance sheet.

Our cash flows from operations were $159.2 million for the full year, up 33% from $119.5 million during fiscal 2008.

Our strong cash flows from operations were the result of record net income as well as decreases in accounts receivable, inventories and merchandise in service.

Capital expenditures were $65.3 million for the full year, but only $9.9 million in the fourth quarter.

We continue to invest in plan automation and expansion that will position us to absorb future growth as well as improve the efficiency of our plan operations.

We expect capital expenditures for fiscal 2010 to be between $55 million and $65 million.

Free cash flows for fiscal 2009 were $93.9 million, up from $45.7 million in fiscal 2008.

During the year, free cash flows were primarily used to pay down debt as well as increase the Company's cash balances.

As of year-end, we have fully paid down our line of credit and have over $185 million in borrowing capacity.

Due to the economic landscape, we were very selective during the year with respect to acquisition targets, and as a result, only expended $4.7 million on acquisitions.

However, based on the continued strength of our balance sheet and our available borrowing capacity, we are well positioned to take advantage of opportunities as they arise.

As always, we will only participate in acquisitions we feel are at appropriate valuations and fit into our long-term strategic plans.

Looking ahead to fiscal 2010, we are encouraged that the rate of job losses in the economy has moderated, and we are seeing signs of stabilization in our customer base.

However, our weekly volume continued to sequentially decline throughout the fourth quarter, albeit it at reduced levels compared to the second and third quarter.

We are still experiencing higher than normal net wearer reductions in our accounts and the pricing environment remains extremely competitive.

Due to these factors as well as our expectation that employment conditions will remain weak in the near term, we are cautious with our outlook.

We currently project that our revenues for fiscal 2010 will be between $960 million and $990 million.

Based on these revenue assumptions, we project that our net income per diluted common share for fiscal 2010 will be between $2.70 and $3.

As we discussed in our third-quarter call, the projected decline in our revenues will push operating margins in fiscal 2010 lower than the historically high levels achieved during 2009.

Costs associated with our selling efforts, energy, healthcare and depreciation are all costs we project to be significantly higher in fiscal 2010.

In addition, other costs, such as certain payroll, production and facility costs, will increase as a percentage of revenues even though actual dollars will likely remain fixed.

Our earnings guidance for fiscal 2010 is highly dependent on the revenues we were able to achieve.

We are confident in our ability to sell new business and retain our existing customers.

However, employment levels and general economic conditions will be the key driver behind whether we are able to build off our revenues achieved in the fourth quarter or whether we will continue to shrink due to reduced wearers at our existing customers.

In addition to employment trends and general customer demand, our guidance is also highly dependent on other variables, such as the price of energy and other commodities, the costs and number of healthcare claims incurred by the Company as well as foreign currency fluctuation.

We believe there is still volatility in the economy that could cause one of these variables to change significantly from our projections.

This concludes our prepared remarks, and we are now pleased to answer any questions you may have.

Thank you.

(Operator Instructions).

Our first question comes from the line of Andrea Wirth with Robert W.

Baird.

Please proceed with your question.

Good morning, Ron and Steve.

Hi, Andrea.

Wondering if you could talk a little bit more about pricing.

It sounded like it's still fairly tough.

But are you seeing any signs of more rational pricing coming through in the industry, or in general, should we just consider that actually continuing to deteriorate?

I think, Andrea, we have seen pricing at the most competitive level that I have seen in my 40 years in this business.

I have seen no real change.

How about your own pricing?

Do we think about that as holding firm or have you had to essentially follow the industry, so to speak, and you are seeing your pricing at a low point as well?

I think that we have participated in the pricing market, maybe not as drastically as some of the others, but we have participated in it.

Okay.

Just wondering a little bit more about your cost side, one, just wondering if you can tell us where headcount is now?

I believe last quarter, it was down 8% or so.

How much more have you cut headcount and how much more room do you actually have before you really do start kind of cutting into muscle?

Well, yes, I think overall, our headcount is probably down slightly from the last time we talked.

We continued to manage our production labor to the volume and the facilities.

As Ron mentioned, we have not cut the sales force at all, and we did have some other, what I will call more administrative or corporate positions that were eliminated during the quarter.

To answer the question, Andrea, I think we will continue to cut production labor if the volume slips.

In addition, we continue to aggressively consolidate routes as we can, given the circumstances.

We are not planning on cutting sales.

From an administrative standpoint, we are getting to the point where it's going to become -- it's going to become more difficult to cut in that area compared to what we did in 2009, if we see more slippage.

Okay.

And then just wondering if you could give us a little bit more color on your expectations for margins?

Obviously they did come in sequentially, but were better -- they came in sequentially but were better than we were expecting.

Do you still expect margins to continue to decline sequentially from here or do you think we've kind of had enough actions that could at least help them hold steady, despite what we are seeing on the volume front?

Well, our guidance clearly indicates we expect margins to slip over the course of fiscal 2010 for a few different reasons.

Primarily, it really depends on the revenues as I mentioned.

But in the range of revenues that we projected, there are a number of costs that we expect to be up in fiscal 2010.

And as we just talked about, it is becoming increasingly difficult to make cuts on the headcount side without dipping too deep.

When you look at the selling costs that we incur and the fact we continue to expand our sales force, energy costs, we in our projection, we were assuming a slight increase in energy over our current position.

And then other costs such as depreciation and other fixed costs, will clearly be going up as a percentage of revenue, given our revenue guidance.

So if those things hold true, we expect that our margins will go down.

Now, how much really depends on where the revenues land, as well as where some of those things shake out with respect to energy and some of the other variable costs.

But we do expect the margins to go down.

I think you have to remember, which we mentioned in prior calls, that we were very proactive this year in the cost cutting that we did, which drove margins up in the short term.

We've tried to make that point over the last couple of quarters.

So I think we will have a little bit of readjusting going on with our margins.

But we are somewhat encouraged by what we are seeing in the customer base that things are stabilizing a little bit.

And then just a follow-up to that.

How do we think about merchandise costs from here?

It's been a positive, it's related to volumes being somewhat lower, at least, new adds being lower.

Do you expect actually merchandise costs to continue to benefit at a greater amount sequentially as we go forward or have we seen essentially the level of benefit at this point now that we're going to see?

Sequentially, it is starting to slow down and I think just the nature of it, we are going to start to annualize the benefit.

Next year in our projections, we have it still down over last year as a whole, but flatter as a percentage of revenue.

So I don't think we are going to see the margin benefit coming from merchandise.

And depending on where the adds and the customer demand start coming in, we are actually hopeful that later in the year, the merchandise will start to come back up as a signal that the demand is improving.

All right, great.

Thank you.

(Operator Instructions)

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

Please proceed with your question.

Good morning.

Good morning.

Hoping you guys could talk a little bit more just about the margins of the company, not so much in 2010, but just how you guys think about longer-term margin targets for the Company?

I was just hoping you could try to revisit those and once we get to a normalized environment, where you think those margins can be?

This is Ron.

I really think this year, we reacted quickly to the revenue drops and we got a little benefit from the energy and the merchandise.

I think under normal times, when the adds are there, that merchandise costs will come back up.

And I firmly believe that energy will be in that $100 a barrel range or $3 a gallon.

So I would think, our overall objective is about 11%.

Okay.

And then --

Under normal conditions, I would say.

Got you, that's great.

And just talk a little bit more about competition.

You seem, Ron, your remarks were pretty candid, things are the worst you have seen in 40 years.

Can you talk about where you see that coming from?

Is it independents that are trying to just hang on and they are willing to do business at any level?

Or is it players similar in size to yourself that are being competitive or private guys?

I am just trying to understand competitively where the pressures are coming from.

I think the pressures are from just about all over the country and it's from small guys, big guys, it makes no difference.

Everybody's trying to hang on to their revenues.

Okay.

And I guess you have seen no sign of that beginning to show stability.

I thought yesterday's comments by [Gene K] were a little bit optimistic in terms of what we have seen on pricing, but I guess you guys haven't seen that yet.

I think what we -- you have to understand on the pricing too, it is not just the competitors coming in and trying to cut price to gain market share.

It is a concept of to continue to sell in this environment, the expectations of the customers and what they are willing to pay given the fact they are trying to cut cost, it becomes a little more challenging to sell in that regard.

So I think that is affecting it as well.

But we continue to push price not only on new sales, but as we are allowed to do under our agreements and so we will continue to push price.

But as Ron said, it has just become very competitive just by the nature of the economy.

Okay.

Great.

And this is the last question, in your remarks, you kind of talked about focusing on new opportunities and improving attrition.

Can you just talk about those new opportunities as you see them?

How much of those are coming from programmers and how much of those are coming from non-programmers and maybe where that compares to maybe what you saw a year or so ago?

Oh, I think it has just been a general marketing shift away from traditional uniform wearers and we have gone into more light soil and medical areas and so forth.

We have had some shifts in our programs and our targets.

Okay, great.

Thank you, guys.

(Operator Instructions)

Our next question comes from the line of Chris McGinnis with Sidoti & Company.

Please proceed with your company.

Hey, good morning, guys, how are you?

Good morning.

Can we talk a little bit maybe about the state of the acquisition environment?

It seems obviously everyone has kind of slowed down their acquisitions.

But are you seeing maybe pricing of what the littler guys are looking for might be abating a little bit?

Well, I will answer that one.

What we have seen in the acquisition market is, it is just like the whole market.

People are still struggling to realize that the value of their asset has gone down.

They are still looking for the bigger number and it certainly hasn't changed, I will say that.

All right.

So I think that is part of the reason you have seen less acquisitions.

And I think the second reason is, for the companies that are buying, they have got to be strategic and fit in and reasonably priced and unless it's under that condition, it is not happening.

Right, right.

But I think in general, it is also an industry where even the smaller competitors generally are able to generate pretty strong cash flows and weather the storm in this type of environment.

And so it is not -- it is not like we are seeing a lot of situations of financially distressed companies needing to sell and I think it is causing those sellers to wait until their volumes come back a little bit.

Right, all right.

That makes sense.

Just in terms of modeling for next year, you talked about the D&A coming up; it increased sequentially in Q4.

Is that number more in line with what you think going forward, I guess, for next year?

Which number was that, Chris?

I missed what you said.

The depreciation.

Oh, depreciation.

I think it probably will rise a little bit more during next year from where it was in the fourth quarter.

We have had a couple big years of expenditures and we expect that to continue to increase somewhat.

All right.

And then I guess looking out, obviously you still have the gas benefit or the energy cost benefit in Q1.

Did you guys already model that into, obviously your assumptions for next year in the estimates?

Yes, for Q1, you can assume that the energy is pretty much modeled in at where we are today.

All right, so that is another good lag.

You still get the benefit in Q1 and then the pressures are going to start happening in the second to the remainder of the year, right?

Is that how you're seeing it?

I would have to look at the model, Chris.

I think it is probably a small benefit in the first quarter but not as significant, as it did start to come down during our first quarter of last year.

Got you, all right, all right.

All right.

Well, thank you very much.

I appreciate it.

(Operator Instructions)

And there are no further questions at this time.

Please continue with your presentation or closing remarks.

Well, we would like to thank all of you for continued interest in our Company.

We are happy to report favorable year-end results and especially pleased with taking into account the challenging economic environment in which our team partners performed.

We look forward to talking to you again on January 6, for a reporting on our first-quarter performance for fiscal 2010.

Thank you very much and have a great day.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your lines.