UniFirst Corp (UNF) 2018 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the second quarter earnings conference call.

(Operator Instructions) .

As a reminder, this call is being recorded Wednesday, March 28, 2018.

I would now like to turn the call over to Mr. Steve Sintros, UniFirst President and Chief Executive Officer.

Please go ahead, sir.

Thank you, and good morning.

I'm Steven Sintros, UniFirst President and Chief Executive Officer.

Joining me today is Shane O'Connor, Senior Vice President and Chief Financial Officer.

I'd like to welcome you all to UniFirst Corporation's conference call to review our second quarter financial results for fiscal '18 and to discuss our expectations going forward.

(Operator Instructions)

But first, 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.

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

I'm happy to report our second quarter produced solid results for UniFirst and our shareholders.

Overall revenues for the quarter were an all-time high for the company at $419.3 million, up 7.1% from last year's second quarter.

Fully diluted earnings per share were $2.85 for the quarter compared to $1.10 per share that was reported a year ago.

I'd like to note that our current quarter earnings per share were significantly impacted by the recent U.S. Tax Reform, which Shane will provide further insight on in a few moments.

A better comparison to the prior year is operating income, which was up 16.1%.

All of our operating segments contributed positively to our second quarter results.

Our Core Laundry Operations reported record revenues of $379 million for the quarter, up 5.7% from the prior year.

Operating margins in the Core Laundry also showed improvements when compared to the second quarter of last year.

Our Specialty Garments segment, which delivers specialized nuclear decontamination and cleanroom products and services, exceeded our expectations, producing strong top and bottom line results for what is often a weaker quarter due to the seasonal scheduling of project-based work with nuclear power customers.

Results for our First Aid segment were also positive for the second quarter, particularly with the unit's top line performance, which came in ahead of our internal expectations.

Overall, we're pleased with the results of the second quarter.

As such, I would like to sincerely thank our thousands of team partners across North America, Central America and Europe for their continued commitments to our customers and our company and for all their hard work to help produce positive financial results for the quarter and the first half of the year.

Going forward, we'll be relying on our people to continue demonstrating their unwavering dedication to our customers and to exceeding their service expectations because we know that these are the minimum requirements to achieving our long-term growth goals.

And of course, we'll be challenging our sales organization to continue their year-over-year sales improvements to help drive our organic growth rates.

These efforts will be supported by continued investments in our people, technology and infrastructure and pursuit of our ultimate objective to be universally recognized as the top service provider in the industry.

In addition to our quarterly earnings, the company also announced this morning that as of the close of business yesterday, the company repurchased 1.105 million shares of Class B common stock and 73,000 shares of common stock for a combined $146 million in a private transaction with the Croatti family at a price of $124.

In addition, we announced we'll be raising our quarterly dividend to $0.1125 per share for common stock and $0.09 per share for Class B common stock, up from $0.0375 and $0.03 per share, respectively.

Both of these decisions were reviewed and approved as part of the Board of Directors' ongoing evaluation of UniFirst's capital allocation strategy.

This opportunity to repurchase shares from the Croatti family was evaluated by an independent special committee of the Board of Directors.

The sale of shares by the Croatti family was executed to provide liquidity as well as for estate and family financial planning following the passing of our former Chief Executive Officer, Ronald D. Croatti, last year.

The special committee determined that a repurchase of Croatti family shares at a discount to market was in the best interest of the company as it was accretive to earnings per share and addresses uncertainties that may have been created if the Croatti family has pursued other liquidity options.

The special committee undertook its evaluation with the assistance of Stifel Financial Corp.

and received an opinion from Stifel that -- to the effect that as of March 27, 2018, the per share price [and] cash to be paid was fair to the company from a financial point of view.

The entire Board of Directors approved the transaction upon the recommendation of the special committee, with the exception of Cynthia Croatti, who's affiliated with the selling shareholders and therefore abstained.

The willingness of the company to deploy its available capital, together with the Croatti family's desire for liquidity, aligned to create this opportunity to repurchase company stock at a price substantially discounted from market levels.

Based on the Croatti family's continued involvement with the company, including several family members that maintain high-level leadership positions, they were highly motivated in ensuring this was a positive transaction for the company.

Despite the completion of the stock purchase and the increase of our quarterly dividend, as I mentioned earlier, the primary focus for UniFirst continues to be ongoing investments in our people, our technologies and infrastructure to help fuel improvements in our products and services.

After this repurchase transaction, UniFirst still has over $200 million of cash and cash equivalents and short-term investments on hand.

When combined with our ability to generate future cash flows, including the forecasted benefit from recent Tax Reform and our borrowing capacity under the existing line of credit, UniFirst is well positioned to make these and other ongoing investments as well as take advantage of any business acquisition opportunities that make good business sense for us.

As we move forward, we will continue to evaluate the timing of these investments, our current balance sheet position and other capital allocation options to determine how best to manage the resources available to us.

And now I'll pass the call over to Shane, who will provide some additional details around our quarterly results as well as our outlook for the remainder of the year.

Thanks, Steve.

I'm pleased to report that our second quarter revenues set a new record for UniFirst at $419.3 million, up 7.1% from the same quarter in the prior year.

This solid top line performance was contributed to by each of our operating segments.

Operating income for the quarter was $42 million compared to $36.1 million in the same period a year ago, an increase of 16.1%.

Net income for the quarter was $58.4 million or $2.85 per diluted share, up from $22.5 million or $1.10 per diluted share reported in last year's second quarter.

The company's 2018 second quarter net income was significantly impacted by the U.S. Tax Cuts and Jobs Act, which was enacted on December 22, 2017.

Excluding the impact of the Tax Reform, which I will talk about in more depth in a moment, the company's net income would have been $28.3 million or $1.38 per diluted share, an increase of 25.5% over prior year.

Net income, excluding the impact of the Tax Reform, for the second quarter benefited from $1.5 million of excess tax benefits recognized during the quarter.

The outlook provided during our last earnings call did not include any such benefit for our second quarter or the remainder of the year.

As a reminder, in our first quarter of fiscal 2018, we adopted Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting.

Under this revised guidance, excess tax benefits and -- or [deficiencies] associated with employee share-based payments are now recognized directly to income tax expense or benefit in the income statement in the reporting period in which they occur.

As discussed, our second quarter's net income was significantly impacted by the recently passed U.S. Tax Reform legislation.

With the majority of our earnings generated within the United States, we have historically paid a high income tax rate.

With the new Tax Reform, as of January 1, 2018, the company will be subject to lower U.S. income tax rates.

These new rates require the company to remeasure its U.S. net deferred income tax liabilities in the second quarter of fiscal 2018.

Also, the company will be subject to a onetime toll tax for the deemed repatriation of its foreign earnings.

The net impact of the remeasurement of the net deferred tax liabilities, the onetime toll tax and the effect of the lower income tax rate on our earnings for the first half of the fiscal year resulted in a $30.1 million reduction to our provision for income taxes.

Our Core Laundry Operations, which make up approximately 90% of UniFirst total business, reported revenues for the quarter of $379 million, up 5.7% from the revenues achieved during last year's second quarter.

Organic revenue growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 5%.

During the quarter, we continued to benefit from solid new account sales as well as positive price adjustments and improved collections on merchandise recovery charges.

These positive drivers were partially offset by moderately higher lost accounts compared to a year ago.

Core Laundry operating income was $38.1 million for the quarter, a 15.2% increase from the operating income in the prior year period.

Core Laundry operating margin increased to 10% in the quarter, up from 9.2% for the same period a year ago.

This margin expansion was primarily the result of lower merchandise and other production-related costs as a percentage of revenues, as well as lower stock compensation expense compared to prior year's second quarter.

These favorable comparisons were offset by higher health care claims and other administrative payroll costs as a percentage of revenues compared to prior year.

In addition, energy costs were 4.4% of revenues in the second quarter of 2018, up slightly from 4.3% a year ago.

Revenues from our Specialty Garments segment, which delivers specialized nuclear decontamination and cleanroom products and services, increased 24% to $27 million in the second quarter of fiscal 2018.

This segment's operating income increased to $2.8 million, up from $2.1 million reported in prior year, or 33.6%.

As we've mentioned in past quarters, this segment's results can vary from period to period due to seasonality and the timing of nuclear reactor outages and projects that require our specialized services.

Increased revenues from this segment's Canadian and European customers as well as solid growth from the cleanroom division drove the strong results for the second -- in the second quarter as well as the first half of the fiscal year.

Our First Aid segment reported revenues and operating income of $13.3 million and $1.1 million, respectively, for the quarter compared to $11.3 million and $1 million for the same period in fiscal 2017.

The top line improvement was fueled by a strong performance of the segment's wholesale distribution business as well as the business acquisition made in the third quarter of fiscal 2017 that strengthened our presence in the Atlanta, Georgia market.

UniFirst continues to maintain a solid balance sheet and financial position.

At the end of the second quarter of 2018, cash, cash equivalents and short-term investments totaled $387.7 million, up from $349.8 million at the end of fiscal 2017.

Of our cash on hand at quarter-end, $55.2 million has been accumulated by our foreign subsidiaries and is intended for future investments outside the United States.

As Steve discussed earlier, yesterday, UniFirst repurchased 1.105 million shares of Class B common stock and 73,000 shares of common stock for a combined $146 million in a private transaction with the Croatti family shareholders.

After the transaction, the company's cash, cash equivalents and short-term investments were still well in excess of $200 million, and the company maintained over $170 million in borrowing capacity under its line of credit.

As a result, the company believes that this transaction will in no way impair its ability to continue making necessary investments in its business or limit its ability to pursue strategic acquisitions.

We continue to invest in capital projects that will help us meet our long-term strategic objectives, including new facility additions, expansions, updates and automation systems.

For the first half of fiscal 2018, capital expenditures totaled $56.7 million, and we now expect capital expenditures for the full fiscal year to be between $100 million and $110 million.

During the quarter, we also closed an acquisition of a 1-plant industrial laundry operation in the Memphis, Tennessee market.

We are excited about bringing this business into the UniFirst family and the additional opportunities that it will provide us in that part of the country.

Business acquisitions have historically been an integral part of our growth strategy, and we'll continue to seek out opportunities that make sense for us and support our long-term business objectives.

I'd now like to take this opportunity to provide an update on our outlook for fiscal 2018.

At this time, we expect our fiscal 2018 revenues to be between $1.66 billion and $1.67 billion.

This revised revenue guidance includes approximately $5 million in additional revenue in the second half of 2018 that is anticipated from the acquisition we closed during the quarter.

In addition, this top line outlook also includes an increase of approximately $7 million from our previously communicated guidance related to our Specialty Garments business due to the segment's strong second quarter performance as well as its revised forecast for the remainder of the fiscal year.

Full year diluted earnings per share is now expected to be between $7.45 and $7.65.

The revised diluted earnings per share guidance includes the impact of the Tax Reform as well as the $146 million share repurchase, which is anticipated to result in an estimated $0.15 increase to our 2018 earnings per share.

This outlook assumes an operating margin in our Core Laundry business for the second half of the year of 9.5% at the midpoint.

The decrease in margin compared to the second half of 2017, excluding the prior year impairment of our CRM project and the accelerated vesting of stock-based compensation related to the passing of our former CEO, Ron Croatti, is largely the result of the anticipated deceleration in organic growth in the second half of fiscal 2018 within our Core Laundry business and the related impact on our cost as a percentage of revenues.

As previously discussed, the company benefited from positive price adjustments and collections of merchandise recovery charges over the second half of fiscal 2017, making comparisons with the second half of this year more challenging.

In addition, employee wages continued to be impacted by the low unemployment environment.

As we continue to invest in our people and infrastructure, we anticipate higher payroll cost as a percentage of revenues.

Rising energy prices are also forecast to provide a headwind in the second half of the fiscal year.

Our outlook assumes an effective tax rate for the second half of fiscal 2018 of 27.5%.

However, this rate is dependent upon certain assumptions regarding fluctuations in our deferred tax balances over the remainder of this transitional year.

As a reminder, for fiscal 2018, our federal rate will be a blended rate due to the change in tax rates occurring during our fiscal year.

We expect that our effective tax rate for fiscal 2019 and thereafter to be in the 26% to 27% range.

This concludes our prepared remarks.

And we would now be happy to answer any questions that you may have.

(Operator Instructions) And our first question comes from the line of Andy Wittmann of Baird.

Guys, I thought I'd start -- I want to start with just digging into the guidance a little bit.

Obviously, there are some moving parts here.

So just as we look at the revenue guidance here, you pull out the $5 million from the acquisition, and it looks like it's fairly unchanged.

At least, it kind of compared in line with consensus from what you previously gave.

I guess I'd want your thoughts on that first.

And then I wanted to dig into the EPS, which is a little bit more complicated, the new EPS guidance.

When you pull out the first half results, and correct me if I'm wrong, we estimated around $0.50 of benefits for the second half of the year from Tax Reform -- or was it $0.15.

It looks like the EPS guidance is maybe a little bit below consensus, but I wanted to get your take, Steve and Shane, about what the second half EPS guidance importantly is implying here.

You guys highlighted, obviously, some factors there.

Some of those factors are the same factors that you cited earlier in the year.

But is it fair to assume that some of those factors got a little bit worse over the course of the last quarter?

Sorry for the long question.

That's okay.

Understandable.

This is Steve.

So I think your assumptions throughout what you -- your question were correct.

I think when you look at the revenue guidance over the remainder of the year, for the most part, other than the items we highlighted like the nuclear change in the Specialty Garments segment and the acquisition, are largely unchanged.

I think at the high end, they're a little bit more favorable on our Core Laundry business side.

So I think you're looking at it correctly there.

On the profit side, I think you're also correct.

On balance, the second half of the year, after adjusting for the new tax rates, are probably slightly behind what we had previously.

I wouldn't necessarily characterize it as factors that we anticipated being headwinds getting worse.

I think one thing that was a prevalent aspect of our results this quarter was that a number of areas' expenses ran a little bit lower than normal in some of the areas that they can be variable in terms of repair and maintenance, some of our other production expenses.

Health care costs, although they were higher than the prior year, were a little bit better than our expectations.

And some of that, we see potentially pushing out to the remainder of the year.

So some of what you're seeing, I think, is a shift to a little bit better results this quarter than anticipated [with] some things that we feel may end up in the back half in terms of the specific factors we're mentioning in terms of wage levels and so on, I think those remain consistent with our cautions from earlier in the year.

Okay.

I think that's helpful.

I think I'll leave that question there and move on to maybe my next question, which would be on CRM update.

Obviously, you guys have been kicking off a new process around that.

I was just hoping that you could give us an update on where you are and when you think you're going to have a direction -- more of a direction and a plan on Phase II here.

Yes, I think we're not ready this quarter to sort of get into the specifics of that outlook.

I think we've made good progress during the quarter along that path, and I think we're feeling confident on the path we're headed towards.

We probably will have more to say a quarter from now.

As that relates to our ongoing investments, I think we'll have more commentary there as well.

So I'd say it's been a positive quarter in terms of what we have found and what we're working towards, but no official announcement or direction right now.

Are you still carrying some embedded overhead that would be maybe a little bit unusual as a result of the processing of that plan here today?

It sounds like, coming out of the last couple quarters, that you've got people that know your business, that know computers, that were kind of that important nexus.

Does that still kind of run into the P&L right now in anticipation of another scale-up in that plan?

Yes, I would say yes.

I think the project team we had in place had certainly grown over the years and still remains in anticipation of kicking off this new initiative.

And so I think there is some overhang there, and trying to figure out where the balance is there will be part of our communication as we move forward.

Okay, fine.

And then maybe my last question, at least for now, is on the buyback.

I'd say quite beneficial to A shareholders and hopefully to B shareholders, too.

Are there any other further negotiations on a deal like that with the B holders that are ongoing?

Or is this one wrapped up for now and for the foreseeable future?

The latter.

This one is wrapped up for now and for the foreseeable future.

This really was an opportunity for the family for the first time in really almost 12 years now to have some liquidity.

But really, this is a onetime thing for the foreseeable future.

Our next question comes from the line of Andrew Steinerman from JPMorgan.

This is Judah hopping on for Andrew.

I was wondering if I could talk a little bit more about the margins.

Clearly, over the last year, as -- we've seen margins come down from where they were just a few years back, and you talked a little bit about some of the headwinds that are going to be in the second half that are going to keep at least Core Laundry margins at 9.5%.

So it's still a little bit further down.

Do you think we're at a bottom yet?

What do you think is the trajectory of those margins going forward?

And do you have some sort of medium-term or longer-term margin goal for the business?

I'd probably hesitate to say exactly where we are in the cycle, Judah, but we're certainly working to hold where they are and start to build them back.

I think one of the wildcard is some of these investments we're making in these technology products and some other things.

I think absent those items, we're still optimistic about our ability to have them start moving higher as we move over the next few years.

It really continues to be about improving the margins in some of those underperforming markets and regions through acquisitions and growth and some improvements there.

So I know that's a little bit of a punting on the question, but we're not really ready to say what it looks like for next year until we kind of get our investments in line and figure out where the trajectory of some of those costs are.

Understood.

As far as the top line organic revenue growth in Core Laundry, you certainly talked about the embedded deceleration inside of the guidance after a very strong first half.

Is that -- how much of that is just a function of your comps with the pricing that you've mentioned last year and some of the other benefits as opposed to maybe something you're seeing in the market that gives you reasons to -- for caution in the back half of your guidance?

It's really those items we mentioned.

When you look at our -- or actually performance in new sales growth, it's been very positive.

And from a retention standpoint, we talked about it being slightly higher or slightly worse this year from a lost accounts standpoint.

Some of that relates to a little bit of a larger account that we moved on from somewhat strategically earlier in the year.

But no, I wouldn't say there's anything in the market that's giving us cause.

I think the market environment is still relatively healthy and no real red flags there.

Our next question comes from the line of Tim Mulrooney of William Blair.

Did you -- Shane, did you say Core Laundry, you expect 9.5% for the full year or just for the second half of the year on the operating margin?

That operating margin at 9.5% is just for the second half of the year.

Okay, okay.

Just making sure.

And do you expect merchandise costs to continue to be a tailwind even as you enter the second half of the year?

It's more the other items, higher wage inflation, that kind of thing, that's really impacting that margin?

Yes, as it relates to our -- the benefit that we've gotten from our merchandise amortization compared to the first half of 2017, we incurred higher merchandise amortization costs in the first half of 2017, and a lot of that was driven by our Arrow acquisition.

And as the year went along, that higher merchandise within 2017 started to normalize effectively as we've put in our manufactured garments into that acquisition.

So as we take a look at the second half of 2018, we feel that, that benefit is effectively going to go away.

We might get a slight benefit in the second half but not to the same extent that we have in the last 2 quarters.

But wouldn't be driving a decline or wouldn't be a headwind, so to speak?

No, no.

Yes.

Okay, all right.

And then, Shane, one more for you.

What were energy costs as a percentage of sales this year and last year for the comparison?

Do you have that handy?

So are you talking...

I think it was 4.1% last quarter.

Last quarter?

Last quarter, in Q1 of '18, it was 4.1%.

Yes.

So do you have that for this quarter?

Yes.

Q2, it was 4.4%, up slightly.

4.4?

Yes, up slightly from 4.3% in the second quarter of 2017.

Got it.

And maybe one more, Steve.

How should we think about the dividend policy moving forward?

I mean, do you plan to raise it annually now?

At first, there's been a change here.

Should we think about it growing in line with a prespecified range like EPS growth?

Any thoughts there?

Yes, right now, we do not -- we have not adopted as part of this increase a formal dividend policy yet.

But it is something that we are going to be looking at going forward.

And I think all I'll say right now is we'll continue to look at it in the context of, like you're saying, our EPS performance, our free cash flow performance and other investments that may come along, whether it be other opportunities to buy back shares or do acquisitions.

So it'll really be looked at in the context of all of our other options.

But -- and I think the investor should view this as a change.

Obviously, we haven't made a move in the dividend in many, many years, and it's something we'll be actively taking a look at and looking, like you said, at potentially whether a formal policy makes more sense going forward.

Our next question comes from the line of Kevin Steinke of Barrington Research.

I don't believe you discussed uniform adds versus reductions by your customers.

I'm just wondering if you could give some color on how those are trending and if maybe you're getting any lift from that in this economy.

Yes, Kevin, we're really not seeing that.

Our adds versus reductions is part of the reason we didn't really mention it, is they're really trending very similarly to they were a year ago.

We sort of talked about in the past just a little bit of the way we internally account for some of that stuff.

Typically, when things are stable, and it's a little counterintuitive, but our adds/reductions run a little bit negative, and that's really where we are right now.

It's very similar compared to a year ago.

So we're not really seeing any significant pull from big adds -- big add hiring within our customer base.

I think that's a little bit of -- indicative of the economy and the low unemployment environment and the competition and the difficulty to define labor.

And we're seeing some of that on our side as well.

So no real big driver there from adds/reductions.

I think the one thing I will say a little bit is, we are starting to see a little bit of strength in that area in the West Texas market, where we're starting to get a little bit of a pull from energy again.

It's not as broad as what it was before.

It's a little bit narrower in that West Texas market, but we are seeing some benefit there.

Okay, that's helpful commentary.

On the Specialty Garments outlook, the $7 million increase, sounds like second quarter was ahead of your expectation, but that the revised forecast is also due to your outlook for the remainder of the year.

So are you expecting Specialty Garments to be stronger in the second half than you were previously?

I think slightly.

I think most of the benefit actually came in the second quarter.

Our third quarter was already projected to be very strong, and maybe on balance we ticked it up a little bit.

But a lot of the benefit was really in the second quarter.

Okay.

And regarding the Memphis acquisition, is this the type of acquisition that is in your pipeline and that you're mostly evaluating maybe these tuck-ins to improve performance in certain specific markets or maybe just the flavor of the overall acquisition pipeline as it stands today?

Certainly, we really like acquisitions like this one in Memphis.

That's not to say we wouldn't look at larger regional players of an Arrow size like last year or larger.

But it seems like the smaller ones like the Memphis size are the ones that are a little bit more regular in materializing, although, as we've talked about before, most of these are -- almost all of these are family businesses.

And Memphis was a good example of one that we've talked to many, many times over the years, and it finally was able to be executed.

So no, we do like these, and they're ones we'll we continue to go after.

Okay, we also have a follow-up question from the line of Andy Wittmann of Robert W. Baird.

Great.

I just thought it would be informative to check in on the consolidation that's happened here over the last year in the business and just get your sense of how that's affected really 2 things.

First off, one, the amount of new business in the market that might be open to changing hands as their providers have changed in the consolidation and your ability to capture that business.

I'd like to kind of hear how you think you've done on that and if those customers are out there to be had, as well as how maybe the pricing market today stands, if you believe that any of that could be attributed to some of the consolidation that's happened.

I think we continue to get some benefit from the consolidation.

Our new account sales are up over -- about 10% compared to prior year.

How much of that is from the consolidation is difficult to say.

I think customers, for the most part, are taking a wait-and-see approach.

I think our competitors are being diligent about the process they're going through in integrating the operations.

But on balance, it is creating some more uncertainty in the marketplace for customers that I think we've been able to take some advantage of.

I think, like when we do acquisitions, even smaller ones, we're patient in our approach in integration to make sure that the customers are taken care of and stabilized first and foremost, and I think our competitors are doing the same.

So I don't think it's been a dramatic change in the opportunities out there.

But on balance, it has created some.

In terms of the pricing environment, I think that, again, there are still many competitors out there and, in most large markets, options for our customers.

So by the nature of consolidation, do we think on balance over time the pricing could firm?

I think it could.

I don't think we're seeing anything dramatic yet.

And I think pricing, good pricing, comes from good customer service first and foremost.

And I think to the extent we're doing that, we'll be able to drive price and value to our customers.

But I don't think there's been a significant change, although I would say the environment from that side, because of maybe somewhat of the consolidation but also just the economy as customers feel better about their companies, usually that helps with pricing as well.

Great, that's helpful.

And I guess my last question here is just I want to hear a little bit about your -- the -- more innovation products that you're trying to go to market with.

This industry has changed a lot over the decades from a very dirty job economy to very -- not a dirty job economy, I guess.

And the employee base has changed of who's wearing uniforms today a lot.

Steve, as you've taken the reins here and had a chance to look at what you service your customers with and frankly your potential customers with, what have you noticed?

And what do you think -- and what have you done?

And what do you thank you might do as you look at your overall offering slate that could help you potentially enhance your growth rate?

I think our offerings have migrated over time, exactly like you said, from a more dirty, for lack of a better term, customer base to more offerings that are not just safety and protection from dirt but image and identity.

And that continues.

I think it's a relatively slow migration because as we're in contracts with customers, they get their employees in uniforms, they're not really quick to want to change their image and identity necessarily.

But there's a number of areas.

A lot of it comes down to the type of fabric, more of a comfort fit versus maybe the older-style garments.

And we are currently, without getting into the details, rolling out some product lines that provide more flexibility and comfort in some of the apparel that we're offering.

I think you're -- one of the changes that's already kind of come full bore is that more and more customers -- 10, 15 years ago, the amount of our customers in sort of a golf shirt look was really much, much lower.

And that is much more common now from businesses, even industrial businesses, going from more of a traditional work shirt to a golf shirt kind of image and identity.

And so we continue to look at the trends and try to roll out different products that keep us current with the marketplace for sure and try to give us a competitive advantage where we can get it.

(Operator Instructions) And we have no further questions at this time.

Okay, great.

I'd like to thank everyone for joining us today for a review of our second quarter financial results.

We look forward to speaking with you again in June when we expect to be reporting our third quarter results.

Thank you, and have a great day.

Ladies and gentlemen, that concludes the conference call for today.

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