UniFirst Corp (UNF) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the second-quarter earnings 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.

Thank you and welcome to the UniFirst Corporation conference call to review our second-quarter results for fiscal 2013 and to discuss our expectations going forward.

I'm Steven Sintros, UniFirst's Chief Financial Officer.

Joining me is Ronald Croatti, UniFirst's 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 events and trends identify forward-looking statements.

Actual future results may differ materially from those anticipated depending on a variety of risk 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 legal and environmental matters.

I refer you to our discussion of these points in our most recent 10-K and 10-Q filings with the Securities and Exchange Commission.

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

Thanks, Steve and welcome, everyone, for joining us for the review of UniFirst's second-quarter and six-month financial results for fiscal 2013.

I'll be providing a brief overview of our performance and I'll turn it back to Steve, who will go over it in all the details.

I am happy to report the Company revenue for the second quarter of fiscal 2013 set another new record for UniFirst at $334.3 million, a 7.9% increase over the $310 million reported for the same period in 2012.

Six-month year-to-date revenue were also a new UniFirst record, coming in at $666.9 million, a 7% increase over last year's midyear mark.

Net income for the second quarter and year-to-date were also new UniFirst records.

Second-quarter net income was $26.6 million, a 38.8% increase over the same quarter a year ago.

And net income for half a year was $57.4 million, a 27.6% increase from the same six-month period in fiscal 2012.

Our Core Laundry Operations, as the name suggests, is UniFirst's core business.

As such, this segment led the Company's performance during the second quarter with revenues and operating income increasing by 8.8% and 46.9%, respectively, over the 2012 second quarter.

These gains were primarily the result of solid new account sales and customer retention, the positive impact of pricing and collection of extra charges and ongoing improvements in operational efficiencies at our processing plants.

Our Specialty Garments segment, which includes specialized nuclear and cleanroom operations, reported a 3.9% dip in revenue, a 50.5% decline in operating income when comparing to the second quarter to the same period in 2012.

But as mentioned in previous webcasts, much of this dropback was anticipated due to the cyclical nature of the nuclear-related business.

This segment's European operation was also negatively impacted year-over-year as a result of the German [garments] shutting down several of their nuclear power reactors.

That said, we expect this segment to be further challenged throughout the remainder of the fiscal year.

But also expect some improvements in the spring when a greater number of reactor shutdown projects are scheduled to begin in the US.

The cleanroom division of Specialty Garments is supporting this segment's effort by continuing to make gains within their businesses, having now solidified their service presence in most major markets for the industries they serve, including their new West Coast operation.

Our First Aid and Safety segment once again reported solid growth for the second quarter, increasing their top line by 9.5% and improving operational income by 58.8% when compared to the same quarter in 2012.

This segment has continued with sequential growth trends, primarily driven by the industrial distributor partnerships, which are now offering more of the segment's productlines to more business customers than ever before.

Additionally, the First Aid group's broad-based business continues to rebound from the economic downturn.

And the pharmaceutical packaging and wholesale operations continued to grow by providing private-label OTC medications to an increased number of retail chain stores and specialty distributors.

I am pleased with UniFirst's to date performance and proud of our lengthy track record of annual growth, consistent Company growth that continues even through the volatile market conditions over the past six years.

And as we look ahead, we expect UniFirst to report another solid year of growth in 2013.

We do, however, anticipate our growth rate to slow down some, down to mid-single digits for the remainder of the year.

But again, we do fully expect 2013 to be another successful year for UniFirst and its shareholders.

But it is no secret how our success continues to be accomplished.

Our success has always been and remains about our dedicated family of Team Partners throughout North America and abroad, all working for their customers and doing so with absolute and real commitment to delivering the highest level of service satisfaction.

So for the balance of the year and coming years, we know our thousands of Team Partners will continue to bring their best to work each and every day and they will continue doing so following our founding core business values that are the heart of UniFirst's corporate culture.

These core business values are maintaining a customer focus at all times, maintaining a respect to others, both internally and externally, and maintaining a commitment to quality in everything that we do and consistent with our core commitment to providing customers with the highest-quality business service available is our Unity 20/20 development project that we mentioned in previous webcasts.

This important initiative is currently overhauling our Company's entire CRM and service IT systems.

Ultimately, Unity 20/20 will improve our overall efficiencies and capabilities in all our service operations, technologically and operational improvements that promise to further differentiate UniFirst from competitors when it comes to service excellence and it will help us become the universal recognized true service leader in the uniform and textile industry.

As far as new sales go, we have historically counted on both our professional field and national account sales organization to drive organic growth and will continue to do so moving forward.

We will continue investing in our sales team to further sharpen their prospecting and selling skills in order for them to target the right prospects and the right consultive manner and more effectively communicate what we call the UniFirst Difference.

This is what differentiates us and our service from our competition.

So by remaining committed to our customers, by continuing to do business based on our founding core values, by our sales and service teams effectively communicating UniFirst differentiation in the markets we serve and by establishing cost control programs, we assure short and long-term gains for our customers, our employees and, of course, our shareholders.

And with that, I will turn it back over to Chief Financial Officer, Steve Sintros, for more details.

Thank you, Ron.

As Ron mentioned, second-quarter revenues were $334.3 million, up 7.9% from $310 million a year ago.

Net income for the quarter was $26.6 million or $1.33 for diluted share, up 38.8% compared to $19.2 million, or $0.96 per diluted share recorded in the second quarter of fiscal 2012.

Revenues in the Core Laundry Operations were $301.6 million, up 8.8% from those reported in the prior year's second quarter.

Excluding the effect of acquisitions and a stronger Canadian dollar, revenues grew 8.3%.

Revenues in this segment were positively affected by the impact of a customer-related specialty merchandise buyout that added approximately 0.8% to the organic growth.

The Company's revenues continued to benefit from solid new account sales.

In addition, certain annual price adjustments, as well as higher collections of merchandise recovery charges, also contributed to the revenue growth during the quarter.

Wearer additions versus reductions were negative in the second quarter, as well as year-to-date.

This segment's income from operations increased 46.9% year-to-year and its operating margin expanded to 13.4% from 9.9% a year earlier.

Excluding the impact of the merchandise buyout, this segment's operating margin would have been 12.9% in the second quarter and diluted earnings per share would have been $1.27.

Increased profitability was primarily the result of improved operating leverage that came with our strong revenue growth.

Expenses related to merchandise, payroll and other costs related to our plant operations were all lower as a percentage of revenue compared to the prior year.

Better operating results from some of our historically underperforming locations also contributed to this segment's improved operating margins for the quarter.

It continues to be a primary focus of ours to improve the results of these underperforming locations.

Lower energy costs as a percentage of revenues also contributed to the segment's improved operating margin.

Energy costs for the quarter were 5.2% compared to 5.7% a year ago.

Both fuel for our fleet of delivery vehicles, as well as natural gas costs for our facilities, were lower compared to the same quarter a year ago as a percentage of revenues.

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $22.6 million for the quarter, down 3.9% from $23.5 million in the second quarter of fiscal 2012.

This segment had income from operations for the quarter of $1.3 million, down from $2.6 million in the same quarter a year ago.

Year-to-date, this segment's revenues and operating income are down 6.1% and 34.6%, respectively.

This decline is primarily due to weaker results from this segment's European operations due to the shutdown of several nuclear power reactors in Germany.

In addition, the completion of two major projects in the latter part of fiscal 2012 has also negatively impacted comparisons for this segment's US operations.

First Aid segment revenues increased 9.5% to $10.1 million in the quarter compared to $9.2 million in the same quarter a year ago.

Income from operations for this segment increased to $1.3 million from $0.8 million in 2012.

In our last earnings call, we mentioned how the results of this segment were negatively impacted by the timing of certain orders from its pill packaging operation.

The fulfillment of these orders during the second quarter also contributed to the strong results.

The effective income tax rate for the quarter was 38.4% compared to 38.3% for the second quarter of fiscal 2012.

We expect our full-year fiscal 2013 effective income tax rate to be approximately 38%.

Our balance sheet and overall financial position continued to be very strong.

At the end of the second quarter, the Company had $163.3 million of cash and cash equivalents on hand, up from $120.1 million at the end of fiscal 2012.

Of this amount, $58.1 million has been accumulated by our foreign subsidiaries and is intended for future investments outside the United States.

As of the quarter-end, total debt was $110.8 million and total debt as a percentage of capital was 10.4%.

For the first six months of the year, cash provided from operating activities was $92.5 million, up 53.1% from $60.4 million for the same period a year ago.

The increase was primarily due to higher net income, as well as lower cash outflows related to working capital, primarily driven by the impact of moderating merchandise and service investments.

Capital expenditures for the first half of fiscal 2013 were $50.8 million.

The higher capital expenditure level is partially a result of costs related to our Unity 20/20 CRM systems project.

Year-to-date, we have capitalized $11.2 million related to this project.

In addition, this year's expenditures to date include the purchase of a building for a new laundry plant in the first quarter, as well as costs related to two plant reconstruction projects.

We continue to expect capital expenditures for fiscal 2013 to be approximately $90 million.

We continue to invest in plant updates, expansions in automation that will allow us to achieve our long-term, strategic objectives.

We also continue to look for acquisition targets as acquisitions remain an integral part of our overall growth strategy.

Due to the strength of our second-quarter and year-to-date results, as well as our current outlook, we are raising our full-year guidance.

We currently project that our revenues for fiscal 2013 will be between $1.344 billion and $1.354 billion.

We also project that our income per diluted common share for fiscal 2013 will be between $5.65 and $5.80.

We'd like to remind you that fiscal 2013 will be a 53-week year compared to 52 weeks in fiscal 2012.

This nuance in our fiscal calendar will have the impact of increasing revenues and operating income for the full year approximately 2% compared to fiscal 2012.

The extra week will fall in our fourth fiscal quarter.

As we have previously discussed, our operating results have benefited from significant improvements in some of our historically underperforming laundry plants.

These gains, as well as strong execution in our plant operations, as well as in the collection of merchandise recovery charges, have helped our overall margins.

In addition, our need to infuse new merchandise into our customer base has continued to moderate, which has also contributed to our strong results and outlook for the remainder of the year.

However, lower merchandise needs is also a sign that growth is moderating.

We expect our Core Laundry Operations to grow approximately 5% over the second half of the year.

We are still seeing businesses reluctant to add new cost, including headcounts.

Our quarterly and year-to-date adds versus reductions metric were negative.

In addition, difficult year-over-year comparisons with respect to growth in the protective garment market, national accounts, as well as pricing and higher collections of merchandise recovery charges, are all contributing to the projected decline in growth rates.

As we look past this fiscal year, we anticipate mid-single digit top-line growth to be a reality absent further improvement in the overall economic landscape or more significant acquisition activity.

In addition, deployment and other transition costs, as well as the eventual depreciation of our Unity 20/20 investment, will pressure margins going forward.

We also continue to evaluate the impact that the Affordable Care Act will have on our overall cost structure in future years.

We look forward to updating you regarding these items in upcoming quarters.

This completes our prepared remarks and we will now be happy to answer any questions that you might have.

(Operator Instructions).

Justin Hauke, Robert W. Baird.

Good morning, guys.

So I guess I just wanted to ask on the guidance, I understand the difficult comps you are highlighting for the back half of the year, but did you say that you are expecting 5% growth for the Core Laundry segment in the second half?

I guess if that is the case, does that include with the benefit of the extra work week?

That 5% -- and maybe I didn't clarify this, Justin, is organic growth over the second half of the year.

So it --.

Organic?

So it does not include the impact of the extra week.

Okay, so on a total basis, I guess, is that -- 7%, 8% is what the expectation is with the 2% benefit from the extra week?

Exactly, because the 2% is really about a 4% benefit over the second half, so it is a little more than that, including the extra week.

Got it.

Okay.

Okay, and then I guess, on the merchandise cost benefit, you mentioned that there was a little bit of a benefit this quarter.

I think last quarter, it was flat.

Can you quantify what the impact was on the margin from lower merchandise costs?

Justin, you're right.

It was flat last quarter.

It was in that 6/10, 7/10 of a percent this quarter, so it really started to accelerate a little bit faster than we anticipated, the benefit, as those inputs of merchandise have moderated.

And would you expect a similar run rate for the balance of the year or is that going to continue to improve?

I think that is probably similar to what we can expect over the next quarter or two.

It may improve a little bit.

Okay.

And then I guess just one more.

Last quarter, actually for the last couple of quarters, I think you have been talking more about doing some of these test runs with new products on kind of a trial basis to see if customers want it and then if they do, you can add it to their invoice.

I guess just an update on maybe the adoption rate of some of those test runs and how that is contributing to the top line today.

I guess, Justin -- this is Ron -- we are still in the test phase with the chemical at this point.

So it really had no significant impact to this point, but we certainly do like the product.

Okay, great.

Well, I will get back in queue and maybe come back in a few minutes if there is more.

Thank you.

Chris McGinnis, Sidoti & Co.

Morning, thanks for taking my questions.

Just on the gross margin improvement, how much of it is the merchandise recovery you have talked about?

Well, the merchandise recovery charges are part of our revenue growth, so it would be hard to say how much impact that has really had, but we called it out because we have done a better job executing it over the last year, year and a half, and it is impacting it.

But in response to the prior question, I kind of had noted that, in that 6/10, 7/10 range is the benefit of our overall merchandise costs.

The recovery is really more a function of pricing and overall growth.

All right, thank you.

I guess just in terms of the add stop and the addition of current customers adding employees, maybe just talk about what you are seeing.

Are you scared about the economy at this point?

Obviously, a competitor came out a couple weeks ago and mentioned that it's the first time they saw a pickup and saw some strength exiting the quarter.

Can you maybe just comment against that?

This is Ron again.

We haven't seen that.

We expected to see it with the housing improvement, but we -- the wallboard people, the electricians and the plumbers and so forth really haven't jumped back in.

I think a lot of the jobs are in that service type environment food industry, which we do not play much in those markets.

We haven't seen it in manufacturing or dealership, so we are kind of hoping and waiting here.

We would love to see it positive.

That is all I can tell you.

Sure.

And then just lastly, obviously, a small acquisition in the quarter, but has the acquisition market opened up at all?

I think we are starting to see a little bit more activity, so I think we are optimistic that we will hopefully be able to shake some things loose going forward here, but we are out there looking for sure.

Great, thank you.

I will jump back in queue.

John Healy, Northcoast Research.

Good morning, guys.

I wanted to ask a little bit, Steve, about the margin trajectory of the Company going forward.

It sounded like you've kind of given us some expectations that there are some headwinds that will present themselves in 2014.

And just wanted to talk a little bit about how to expect the Unity 20/20 investment to kind of hit the P&L for next year.

Could you kind of remind us in terms of the overall spend and how that layers into the cost structure and at what point?

Sure, no problem, John.

The Unity 20/20 project, we had sent the signal, it is an approximately $40 million investment.

We are probably about halfway through, at this point, of the project plan.

Ultimate deployment of this system, the timing isn't completely nailed in stone yet, but we are probably looking more toward the second half of next year.

So when that project and that investment ultimately starts to depreciate, there will be in the neighborhood of $6 million of depreciation related to that investment, depending on useful lives and so on and so forth that all haven't been quite nailed down yet.

But I think you can expect something in that range.

But again, that is more likely not to hit until the second half of next year and then there will be some, and, to be honest, we haven't fully quantified them yet, but some transition costs as we go out to deploy this across the country and train our workforce on the new system.

That will be more one-time costs that are in the later part of next year.

So hopefully that gives you a little bit of color as we move toward year-end and have a little bit more visibility than that, we can probably clarify it.

That is helpful.

I wanted to ask just a bigger picture question, though, regarding the margins.

When you and Ron think about the business, kind of zooming up to about $1.3 billion, $1.4 billion revenue company today, let's call yourselves a $1.5 billion revenue company a year or two from now, what sort of operating margin level do you think you guys can aspire to given the state of the business today?

It's a good question, John.

I think we have made a lot of improvements over the last couple years in some of the areas that we have talked about.

And not to say there aren't other opportunities available to us and as we add marketshare and route density in certain markets, we will have improvements.

That being said, I think when you look at the margins that we are going to end the year at, the guidance assumes that the year will end up in the 13.5% to 14% margin range.

That is a pretty healthy margin for this business.

There are competitors that do better than that and have more scale than us and so I think there are still things to aspire to, but I think we do have concerns about some of the reinvestment that needs to happen in technology that we are talking about, some of the healthcare headwinds, as well as just some of the other ability to kind of continue the improvements that we have made over the last couple of years.

And so I know that is somewhat punting on the question, but I think we've gotten the margin up very quickly here and we will continue to try to move it along, but it's going to be incrementally harder to make the improvements we have made over the last two or three years.

Fair enough.

And just one final question on the competitive environment.

Any update in terms of how does the competitive environment feel.

Are you seeing more intensity out there or does it seem pretty normal compared to what you always encounter?

I think we are seeing more competitive, particularly in the national account arena.

I think the pricing structure -- I am sure you're going to ask that the next question.

I think the pricing on the smaller business has come up a little bit, but I think it is as competitive as it always has been in the national account arena.

Great.

Thank you, guys.

Andy Debes, KeyBanc Capital Markets.

Hey, good morning, guys.

Nice quarter.

Thank you.

Steve, first, I just wanted to kind of dig into the SG&A really quick.

We actually saw it tick up a bit year-over-year last quarter.

This quarter, it looked relatively flat.

Can you maybe just comment on some of the moving pieces there and maybe update us on your expectations for the SG&A leverage in the remainder of the year given you expect a slowdown in top line?

Yes, that is probably going to come up a little bit over the remainder of the year.

There were some moving pieces up and down in the first couple quarters, but nothing from a real trending perspective that is worth noting.

We do expect it to come up a little bit over the course of the year.

One thing that we are focused on is continuing to staff up our salesforce.

It is something that is always a focus to continue to recruit and grow the salesforce.

And I think this year, to be honest, we have lagged that effort a little bit and we are trying to recover and get that headcount up to where we need it to be.

But also we want to make sure we make the right hires.

So I think we can expect that line to come up a little bit over the course of the second half of the year.

Okay, great.

Maybe just to dig in -- we've talked about the Core business, but on the Specialty business side, down about 6% this year so far.

I think your initial guide was being down roughly 10% on the top line and I know Ron mentioned some moving pieces here.

Just kind of curious what the net shakes out or how your new outlook maybe looks for the rest of the year in the Specialty business?

Yes, I think, to be honest, I think the top line has probably done a little bit better than we expected coming into the year, but due to the mix, we have always talked about how this business has a number of different pieces.

They have a much smaller customer base and different projects can have different profitability levels.

They do a number of direct sales, which tend to be a little bit lower margin than the core processing business.

And so I think that is some of what you are seeing.

I think for the year, I think our estimates, probably from the beginning of the year, we expect probably to come in line pretty close by the end of the year.

Maybe a little bit better on the top-line perspective, but somewhat similar on the profit perspective.

So no real changes.

I think they are expecting a fairly healthy spring outage season, so the third quarter should be pretty decent for that segment.

And I think they have some good stuff coming along looking into next year.

Some of what we have seen on the weakness has just been projects pushing out, which happens from time to time with this segment.

Okay, and just wanted to -- I apologize if I missed this in the beginning.

I actually got cut off, but with this Specialty merchandise buyout in the quarter, roughly $0.06, pretty significant, can you maybe just give us a little color there on what was going on and if we are to assume that that is truly one time in nature?

Yes, that really related to a single account, which was what I will call a smaller national account.

That contract was up.

We had a segment of the company as opposed to the whole business and they decided to move that segment of the business into a direct purchase program with another company.

And so as a result, they had specialty merchandise, which means it was garments that were unique to them, that were required to be bought out as part of their kind of leaving the program.

And so that is what that buyout related to.

And we have those from time to time, but usually on a smaller scale.

This was one we felt it was worth calling out.

Sure.

Okay, thanks.

I will hop back in queue.

Nate Brochmann, William Blair.

Hi, this is Diana Rashkow in for Nate Brochmann.

Wanted to ask about the underperforming plants and where you are in the process of working on those.

It seems like you have made decent progress and have seen some really nice benefits from that in terms of margin.

How much more do you think there is to go on that front?

As we mentioned numerous times, the plants operate on a bell curve and there is -- we will continue to see improvement, maybe not at the pace we saw this last quarter.

We did put a little more automation in than normal that helped us along.

But I guess the answer to you, we think there is still a lot of opportunity and a lot of room for us to continue to move those operations along.

And I guess just to add to that, and balance it out a little bit, as Ron said, they do operate on a bell curve and so although you do make improvements in the underperforming locations, the ones that are on the higher end of that, it does continue to be challenging to, at times, maintain that high level of profitability because those are typically in areas that we have high marketshare, but also that we get more significant competitive threats.

So there is a balance to that, but I think I agree, as Ron said, there still is opportunities in the weaker performers to move the whole scale a little bit to the right.

Okay.

Makes sense.

Thank you.

And then in terms of the mix of no programmers and programmers, has that continued to be fairly balanced this past quarter?

Yes, it has been fairly balanced, about a 60/40 split right now.

Okay.

And then also just kind of in terms of the mix, how has the balance been with national accounts?

I think the balance has leveled off a little bit.

I think over the last couple years, we have mentioned we have done a little bit better in national accounts and we still continue to sell some nice accounts, but I think the balance is probably a little more stabilized at this point.

We are still in about that 12% of our overall business in what we categorize anyway as national accounts.

Okay, I appreciate you taking my questions.

Thank you.

Molly McGarrett, JPMorgan.

Hi, I was just hoping you could elaborate a bit more on the add metrics.

What do you think needs to happen in terms of the job-to-job environment, the labor market for that to move back into positive territory?

Is there a benchmark level of headcount adds, or how do you all think of that?

That's a good question.

I guess we really look at business segments more than anything -- the automobile segments, the manufacturing, the home construction industries, the drivers of the economy -- and we haven't really seen a lot of pickup in those areas.

So I think a lot of the jobs coming in, as I mentioned earlier, are service-related, hospitality and we are not really in those markets, so we really haven't seen much of it.

And a lot of the jobs that are being created are government jobs now.

With the government financial cuts, there will be some of those going out the door, but we are really looking for a stronger housing market, I would guess a little stronger in the manufacturing side.

I think what is also impacting right now our recent weakness in the add reductions is we had quite a bit of strength in the last few years in certain parts of the country.

We talked about oil and gas exploration.

Even though we have run kind of flattish or negative throughout the last couple years on add reductions, part of that was some strength in that part of the country offsetting maybe further negative activity in other regions.

And so we are seeing, I think, some moderation of the wearer levels in other regions, but we are not getting as much strength as maybe we did a year ago in those Texas markets.

So there is kind of a mix issue there, too.

But I agree with Ron; I think we are looking for more definitive growth in some of the markets that we do business in.

Got it.

Thanks very much.

Kevin Steinke, Barrington Research.

Good morning.

So you talked about the expected deceleration in Core Laundry organic growth to 5% in the second half of this year.

Although you did do 7.5% in the second quarter, excluding the specialty merchandise buyout and also raised your revenue guidance.

So I am assuming that the organic growth in the quarter was a bit ahead of your expectations and if so, what in particular drove that?

I think it is really -- in my prepared remarks, the number of areas that we have talked about, doing a little bit better job from a pricing perspective in collection of some of our merchandise recovery charges, the FR strength has still been there.

But you look at the areas we have talked about over the last five or six quarters that have helped our growth rates be what they are, we are starting to annualize some of those periods of real strength.

And so it was really almost a year ago now that we have talked about whether it is national accounts or the protective garment market or some of these better pricing and better collection of extra charges that have helped our top line and we are just starting in the third quarter to kind of annualize some of those strong periods.

So it is really a year-over-year timing issue with respect to those areas.

So hopefully that helps kind of understand a little bit what we are seeing.

That doesn't mean we are not seeing still solid results in those areas; we are just starting to annualize some pretty strong periods.

Okay.

No, that makes sense.

So it sounds like the expected deceleration perhaps is more related to these difficult comparisons as opposed to new account sales.

Do you still feel good about your ability to generate solid new account sales in this environment as you have been doing?

Yes, I think we are fairly comfortable on the sales organization.

I think Steve put it right on the head there; it is really a comp comparison.

Okay.

Well, thanks for all the color; appreciate it.

There are no further questions on the phone lines at this time.

We would like to thank you all again for your interest in our Company and look forward to speaking with you in June when we will be reporting UniFirst's third-quarter results for fiscal 2013.

Thank you 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.