Cintas Corporation
Q1 2009 Earnings Call Transcript

Published: 19 Sep 2008

[Operator:]

Welcome to the Cintas quarterly earnings results conference call. (Operator Instructions) At this time I’d like to turn the call over to Bale Gale, Senior Vice President of Finance and Chief Financial Officer.

[William C. Gale:]

Thank you for joining us this evening to discuss Cintas’ first quarter fiscal 2009 earnings results. Joining me this evening is Mike Thompson, Cintas’ Vice President and Treasurer. Cintas reported revenues and net income in line with its plan for the year. Revenues increased 5% on a comparable workday basis over the first quarter of last fiscal year to $1 billion. This year’s first quarter had one less workday than last year. Earnings per share were $0.51 this year, the same as last year’s first quarter. Net income was $78.6 million versus $81.1 million in last year’s first quarter. As Mike will explain shortly, in addition to the impact of one less workday in this year’s first quarter we experienced significantly higher costs for energy and other supplies such as hangers as well as weakness in both our customer base and with new prospect conversions. We saw slightly lower organic growth in all of our segments which we believe is an indication of economic weakness in the general economy. However we still did post an overall organic growth of almost 4% and as I stated earlier, we met our plan for the quarter. Our current guidance of revenues and earnings per share for the fiscal year ending May 31, 2009 remains unchanged and calls for total revenues of $4.1 billion to $4.2 billion and diluted earnings per share of $2.22 to $2.30. We believe the guidance remains appropriate given the current economic conditions and the potential impact of the recent weather events. As a result of the hurricanes we had several operations that while physical damage was minimal to the facilities, they either had no power or are still out of power. This has occurred at operations in Texas, Louisiana and even in the Midwest. We are also experiencing issues with providing services to our customers in these areas as they are not able to operate. At this time we are unable to quantify the impact on our results but we do not believe it will be material to the company in total. We will pursue business interruption insurance recovery according to our policies in effect. Our financial condition is very strong and we continue to generate strong operating cash flow and maintain conservative financial policies. During the quarter the company acquired about 900,000 shares of its common stock. We continue to have about $200 million available for additional Cintas share purchases under the amount authorized by our Board of Directors. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor from civil litigation for forward-looking statements. This conference call contains forward looking statements that reflect the company’s current view as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the SEC as well as in the press release issued today announcing Cintas’ first quarter fiscal 2009 results. I will now turn the call over to Mike Thompson who will discuss this quarter’s results in more detail and then we will be happy to answer your questions.

[Michael L. Thompson:]

Beginning with the income statement, total revenues were $1 billion for the quarter a 3.4% increase over the $969 million reported for the first quarter of last fiscal year. However as Bill mentioned, this year’s first quarter had one less workday than the first quarter of fiscal 2008. When adjusted for the one less workday, revenue growth was 5%. Total company internal growth was 3.9% for the quarter. As a reminder, the remaining three quarters of fiscal 2009 will each have 65 workdays which is the same number of workdays of each of the last three quarters of fiscal 2008. As such fiscal 2009 will have 260 workdays which is one less than the 261 workdays in fiscal 2008. The number of workdays in a quarter does have an impact on both revenue and income. We classify our businesses into four reportable operating segments

[Operator:]

(Operator Instructions) Our first question comes from Andrea Wirth - Robert W. Baird & Co., Inc.

[Andrea Wirth:]

I just wanted to start with the quarter itself. It looked like you were saying that you had met your own internal plans but with the high cost of fuel and hangers and also the new business piece starting to fall off, I’m just wondering what actually made up or was better than what you had expected in the quarter?

[William G. Gale:]

Andrea the energy costs and some of the commodity prices, if you recall we talked about in July that we had begun to experience in May and even into June, and we had pretty much built some of that into our plan. The new business really began to trail off I would tell you in the latter part of the quarter and we don’t know whether it’s just a short-term summer phenomenon or what but it is something that we’re going to really keep our eye on very closely. Now what we are doing to anticipate that we may continue to have these higher operating costs going forward and perhaps even slightly lower revenue is the company is very, very aggressive on looking at ways to reduce costs, maintaining a strict control over headcount additions, looking at ways to consolidate our purchasing power with our vendors, and I think we’ve done a lot of things to help offset some of this.

[Andrea Wirth:]

Just along those lines, when you look at the full-year guidance and given the fact that the new business is starting to trail off a bit and fuel prices I guess have come down a bit now as of late, what are your expectations? And have your revenue growth expectations changed and your actual energy costs changed in that guidance? I guess I’m just a little bit surprised that you’re able to hold that guidance flat just given the scenarios.

[William C. Gale:]

The energy costs, we feel pretty good that our plan is probably correct for that. We gave a guidance on revenue of between $4.1 billion and $4.2 billion so t hat right now we see no problem with meeting that guidance given that range. And obviously as we are at the lower end of that range we’ll have to be more aggressive on cost control and trying to maintain our margins. But as we’ve looked at our forecast for the rest of the year compared to our plan and what’s going on in the business, we feel pretty good about it. Now with that said, obviously with all the turmoil that seems to be going on right now I don’t know what impact that’s going to have on the general economy. We anticipated kind of a gradually improving economy as we went through our fiscal year. Hopefully that will still be the case and we’re expecting it to be the case be it a very modest improvement, but if we go into a deep recession obviously we’ll have to relook at that and monitor the results going forward. We don’t think that’s going to happen but there is that risk out there based on kind of the upheaval that seems to be going on right now.

[Andrea Wirth:]

And also along those lines, you had mentioned at least with the core uniform rental growth rate that you had thought the 3% to 3.5% rate was sustainable and actually you possibly thought you’d see some improvement actually throughout the year in that rate as new business does continue to pick up with projects continue to gain momentum. Is that still a possibility and does that kind of lean towards your comments about what happens with the overall economy or I’m just curious just what your thoughts are on the core rental business?

[William C. Gale:]

As you summarized, that is correct. We still believe that our core rental business will show modest and gradual improvement as we go throughout the rest of this year and I have no reason to believe that that won’t take place right now barring a very, very deep recession type environment.

[Andrea Wirth:]

Last question on the ad stops. I think you had mentioned on the last conference call that at least the last six weeks before the call the rate of deterioration seemed to stabilize. Is that still the case or are you starting to see a reacceleration in the rate of deterioration in those ad stops?

[William C. Gale:]

That’s still the case. We’re not seeing an improvement but we really didn’t see any significant deterioration.

[Operator:]

Our next question comes from Ashwin Shirvaikar - Citigroup/Smith Barney.

[Ashwin Shirvaikar:]

Nice performance eon the operating cash flow. But on a year-over-year basis that number did seem to be driven by the accrued liability and accrued comp lines. Is there anything unusual going on in those lines? What drives the fluctuation? And I guess what I’m trying to eventually quantify is the impact on operating profit due to maybe a lower bonus accrual or things like that.

[William G. Gale:]

I would tell you that there was nothing really that happened. The accrued liabilities thing is really offset by the taxes because of the item that Mike mentioned on the [VIVA]. The accrued compensation line is more the result of probably just the timing of when payrolls are made and how many days you have to accrue versus when payments are actually made. For example, August 29 this year was on a Friday and that’s our pay date so the accrual was probably down. But I would say there’s really no significant change in the cost elements of it. It’s just really more a matter of the switch on the [VIVA] between accrued liabilities and income taxes and then just the days on compensation.

[Michael L. Thompson:]

Just a little more color on that. At the end of May we certainly have a larger bonus accrual for year-end bonuses. At the end of August it’s a smaller buildup so the accrual is much lower.

[Ashwin Shirvaikar:]

Just to follow up on the prior question, to clarify, you are expecting modestly improving economy and were you also expecting the fuel prices to stay at the current level?

[William G. Gale:]

Our guidance pretty much assumes fuel prices at generally the current level that we experienced through the quarter within 10 to 20 basis points.

[Ashwin Shirvaikar:]

So where we are is really not a surprise?

[William C. Gale:]

No.

[Ashwin Shirvaikar:]

And you did say, just to confirm, that barring a very serious downturn you can make the numbers?

[William C. Gale:]

Yes.

[Ashwin Shirvaikar:]

If you could remind me what the profit contribution is as a percentage from the recycled paper sales in the document segment?

[William C. Gale:]

We don’t disclose that level of detail Ashwin. As Mike said, the contribution from the recycling of our paper from document shredding did decline in the quarter but that was again anticipated in our projections, in our plan.

[Ashwin Shirvaikar:]

And last question, M&A. I’m a little surprised you’re not maybe seeing more of a selling alignment by the smaller laundry owners.

[William C. Gale:]

We are not seeing that, not at prices that are reasonable.

[Operator:]

Our next question comes from Michel Morin - Merrill Lynch.

[Michel Morin:]

Sorry to come back to this but on the margin in the document management segment, if we look at things sequentially there is a 160 basis point decline. You didn’t say that it was entirely due to recycled paper?

[William C. Gale:]

No. It was energy also.

[Michel Morin:]

Was there also an impact from the one fewer day there?

[Michael L. Thompson:]

Yes. That’s true throughout all of our segments.

[Michel Morin:]

On the first aid/fire protection side, good performance there. I think over the last six months or so you had talked about having seen some impact from reduced kind of new commercial construction. Has that changed or what has allowed you to see an improvement there?

[Michael L. Thompson:]

It’s really that we have essentially gotten past a year. In fiscal 2008 we had each quarter that we’re comparing to a more difficult quarter in fiscal 07. We’ve now lapped that and then we’ve seen some improvement in our service component within the fire protection business.

[Michel Morin:]

So kind of the one-time part of that business is still under a little bit of pressure but at least you have easier comps?

[Michael L. Thompson:]

That’s right.

[Michel Morin:]

Is there anything that’s moving the needle from the profitability of that segment in terms of the new installations? Is there a meaningful difference in terms of driving the profitability, because you also have a nice bump up in profitability this quarter?

[William C. Gale:]

I think part of it is, a lot of this business came through acquisition and as you’re able to synthesize those acquired companies, put in our practices, look at opportunities for improving the margins of those acquired companies, you’re going to continue to see that happen.

[Michael L. Thompson:]

Improved purchasing power.

[Michel Morin:]

Finally, you mentioned the weather a couple of times and the impact of the hurricane. It sounded from your description that this might be a more severe impact than what you saw from Katrina, maybe because also you’ve got more population density. Am I thinking about that right?

[Michael L. Thompson:]

No. Again none of that impacted the quarter we’re reporting on; it all began for our second quarter. We just wanted to make sure that people understood we did have some weather issues. It was not as severe as Katrina. The issue with Katrina was many of those customers never came back. We don’t expect that to be the case here but there was an impact in that we had plants shut down for a period of time and still have a few of them down, especially down in the Southwest. But the damage in that part of the country is not as severe as during Katrina so we hope that it’s not as severe.

[Operator:]

Our next question comes from Gary Bisbee - Lehman Brothers.

[Gary Bisbee:]

I wondered if you could remind us. Every once in a while I feel like you’ve given us the rough breakdown of the energy costs, what percent comes from what. I’m just trying to think about with gas and diesel prices having likely fallen sequentially in the next quarter how much of a benefit sequentially that might be? Is it still like 40% of that number you give us is gas and diesel or is it a little different than that?

[Michael L. Thompson:]

For total company now it’s almost half that it’s delivery gas.

[Gary Bisbee:]

And the rest of it is mostly natural gas for the laundry plant but a portion of it energy costs?

[Michael L. Thompson:]

You’ve got a portion of electric there as well.

[Gary Bisbee:]

You talked about the new business being impacted by the economy. How did that trend during the quarter? Did that get worse throughout the quarter? And is that something that’s gotten worse as we’re early in the next quarter or was it just a modest downtick that’s sort of staying at that same level?

[William C. Gale:]

It was more of a downtick that began in August and kind of just was below our expectations in August and had carried a little bit into September but we only have like the first week of September at that level of detail.

[Gary Bisbee:]

Are you seeing any, given the continued challenges in the credit market, any issue at all with the commercial paper or your funding at all or has there been no problems to date?

[William C. Gale:]

The only issue we had was a one-day event. Well, two issues I’d say. Monday apparently it was pretty much impossible to get any commercial paper sold. We’ve seen a slight uptick in the rates. I guess we’ve gone from [RFCP] rates were running around 2.2%. They’re now up to about 2.8% but we’re able to sell our paper as things roll. Monday was about the only day that that did not happen but after that the market seemed to have stabilized.

[Michael L. Thompson:]

And with that we have certainly supporting under our credit agreement that we have support behind that.

[Gary Bisbee:]

Well, I guess I’ll take the blame then. It was the Lehman issue it sounds like.

[William C. Gale:]

It’s good to hear you’re on the call though Gary.

[Gary Bisbee:]

Yes. We’ll soon be Barclays Capital I think but we’re still in business or back in business I should say.

[William C. Gale:]

That’s good to hear.

[Gary Bisbee:]

Thank you. And one last question I’ll ask. You mentioned the cash in Canada again and specifically holding that for international acquisitions. Any update how you’re thinking about that? Is the document management business in Europe going well? Is that still an area you’d like to do more?

[William C. Gale:]

Yes. We’d like to do more there. As we mentioned in the last call, we’re looking at providing direct sale of uniforms to many of our US based companies as they expand outside of North America. We’re working with them on that. So yes, we’re working on a number of opportunities. Nothing that I can announce at this point but we feel that there are several good things going.

[Operator:]

Our next question comes from Greg Halter - Great Lakes Review.

[Greg Halter:]

Looking at the price side of things, is it still very difficult to get price through or are some of your competitors becoming less aggressive on their own pricing front?

[Michael L. Thompson:]

I would say it still continues to be difficult. We are still getting some price increases but not out of line of where they’ve been historically. But I’d say overall new business pricing continues to be pretty aggressive.

[Greg Halter:]

Bill, I think on the last call you had indicated that some parts of the country were still okay and others weren’t so good. I wondered if you could give us just a brief rundown and obviously I know it’s a big country and so forth, but I wondered how you’re doing in areas of the country as well as Canada. What’s good and what’s bad?

[William C. Gale:]

Canada’s pretty solid. I would tell you Canada looks good and that we really haven’t seen a lot of impact up there. Throughout the US I’m seeing generally the greatest weakness continuing to be in the Midwest and in the areas that really seem to be very sluggish like the Southeast now with Florida and all the problems that are going on out there. The West continues to be a little bit difficult to do business in. The Northeast has held up pretty well and the Northwest has been good. But it continues to be a Midwest issue primarily.

[Greg Halter:]

You mentioned the ERP implementation. Can you mention how long that will take, how you’re phasing it in, and then who’s system you’re using?

[William C. Gale:]

I do not want to disclose the system at this point. We’re still kind of in the early stages but it’s going to be a multi-year project. The way these things work is you pay a significant part up front so I don’t want everybody to think we’re going to be incurring big charges every quarter. But Phase 1 is a relatively safe phase in that we’re going to be looking at our financial systems and we would hope to have a conversion of that here within 12 months. And then we’ll phase in the other pieces of the business over the next couple of years.

[Greg Halter:]

Any idea on total costs for that implementation?

[William C. Gale:]

I’d rather not say at this time because you know how those things go. It varies. We’re still in the scoping phase and stuff so it’s hard for me to say that right now.

[Greg Halter:]

There was an interesting intriguing win last week relative to Unite and I wondered if you could speak about that?

[William C. Gale:]

Yes. I’m glad you brought that up Greg. What happened on the Unite Union front is that a federal appeals court basically sent back to a lower court and reaffirmed a ruling that Unite was going to be held liable for privacy violations impacting I think approximately 2,500 of our partners in the Northeast and has affirmed a penalty against Unite of about $5 million as well as asked the lower court to reconsider that punitive damages might be in order. So it was a win for our partners who filed this suit against Unite indicating that Unite did violate their privacy rights.

[Greg Halter:]

That sounds like it’s very favorable there. On the energy side, we’re hearing Cleveland as you know, here in Cincinnati and we did see the gasoline prices and diesel come down. Gas was down to maybe $3.50. Since the hurricane we’re back at about $4.00 which is our peak. So really there has not been much relief from gasoline prices here at least in the Midwest. I don’t know if you can speak to that relative to your business around the rest of the country.

[William C. Gale:]

I think that’s prevalent throughout the country Greg. Again, it is something that we kind of anticipated in our plan and when we gave you our guidance. We would hope that prices would come back down to where we saw they were coming or going to before the hurricanes hit. And that could present a little bit of an opportunity for us the rest of the year. It’s so hard to predict that. This whole oil market and gasoline and diesel and natural gas are just unbelievable and the volatility. So we’re prepared for it and I think our numbers anticipate a high degree of cost and maybe there’ll be a little upside opportunity if we can get a break here.

[Michael L. Thompson:]

I think Greg if you remember back in our year-end call, prices were just starting to come down and we thought there might be an opportunity going forward because the way we projected using May and June levels. But now as you indicated and we agree, the levels have come right back to those May and June levels.

[Greg Halter:]

One last one. I see that Wyndham Hotels is introducing green uniforms made out of recycled polyester fibers and I guess you guys are working on that. I wondered if you could comment on that initiative?

[William C. Gale:]

Certainly we’re working with our customers on a number of different things. That was one that Wyndham wanted to publicize. I believe that release may have just gone out by them. Green products and green servicing is a major point of several customers now, and to the extent we can help them with their initiatives we’re doing that. We’re also trying to do that internally with our own company. We’ve modified our wash chemicals to be more environmentally friendly. I think it’s important that we do be good corporate citizens and do what we can do to help in these situations. So we’re trying to do a lot in energy conservation which not only will help costs but obviously will also help minimize the use of energy. So I think every company needs to look at what they can do and see if they can do things that are economically beneficial.

[Greg Halter:]

And Wyndham I presume is a direct sale customer?

[William C. Gale:]

Yes. Obviously as a hotel chain, they primarily are purchase uniforms from us but this new product that we’ve developed with them or are developing with them potentially has the capability of being laundered more in an industrial process as opposed to in a dry cleaning process. That’s one of the things that we’re going for. So this could present more of a rental opportunity for us if we can get this thing rolling.

[Greg Halter:]

Any differential on the cost on this versus regular?

[William C. Gale:]

Greg, I really don’t know. I’m not familiar enough with the details of that.

[Operator:]

Our next question comes from Scott Schneeberger - Oppenheimer & Co.

[Scott Schneeberger:]

You said earlier in the call I believe that your bad debt you felt comfortable that you were conservatively reserved there. I saw DSOs creep up a bit. Could you just give us a feel of how confident you are there? What are you hearing from customers at 60, 90 day delinquents? How are those metrics tracking, just so we can get a better feel there?

[William C. Gale:]

As some of you know and I think you do, we are very, very conservative and we require starting to reserve for a receivable once it’s 30 days past due and once it gets 60 days past due we even reserve more to the point where as Mike said most of it is fully reserved at 90 days past due. And the whole reason we do that is to keep the focus of our operating people that are spread of course all over the country on the need to collect the money for the work that they’re performing. It is a focus that hopefully our operating people will do and we’ll continue to monitor the collections. What we have seen over the last couple of months is certainly a tendency on the part of many of our customers to just be slower in the payment of their receivables and as a result of that we are reserving accordingly. Now I will tell you that the vast majority of our customers are relatively small-type companies. We do not have any significant receivables sitting out there from a major customer that we need to worry about. That’s not the case. I think what you are seeing or what we are seeing is that all businesses today are doing everything they can to try to figure out how to conserve cash, how to reduce costs and they’re using their vendors to the extent they can to try to help finance a little bit of their business. Now we’ve got leverage on that and obviously we’re not going to allow a customer to continue to build up a receivable and provide services if they’re not paying. So I have no concerns that we’re going to see a significant increase in write-offs and I would hope that as things stabilize a bit we’ll get back to our more traditional 40-day DSO outstanding. I think this is hopefully just a temporary situation.

[Scott Schneeberger:]

Just more broadly for the upcoming quarter, any one-time items or things we should be thinking about that haven’t come up?

[William C. Gale:]

No. Not that I can foresee.

[Scott Schneeberger:]

Finally, if you could give us an update on the international initiatives that you have going and just any progress there; is that something you’re going to speed up or perhaps just your overall take currently?

[William C. Gale:]

As I mentioned earlier to the question, I’d say activity has picked up because we made the announcement that we were wanting to work with some of our North American customers especially in the hospitality industry to help them expand outside of North America, and we’re continuing to discuss a way to do that with them. We have picked up additional sales activity albeit it’s relatively insignificant to the total in Macao and Hong Kong as we service our gaming customers that have now built facilities in Macao. We also have looked at some opportunities in Latin America with regard to some direct sale efforts, and we’ve got some things going there. And we continue to evaluate acquisition opportunities in document management throughout the European area including the UK. At this point we have nothing to announce but we have people working on it, looking at things and we just want to be sure that we don’t make a bad investment. So as we always have been, we’re very cautious on that. But I’m hopeful that we will be able to expand a bit more outside of North America, that some of these things will come to fruition here in the not-too-distant future. With that said, keep in mind that we do not anticipate having a material or significant amount of revenue outside of North America in the near term. This is going to be a gradual build up. Some of it will be being pulled by our customers and others will be initiatives like we did when we bought the company in the Netherlands about a year ago.

[Michael L. Thompson:]

And likewise we don’t see a big infusion of capital. Most of this that we’re talking about are small businesses from a shredding standpoint or a direct sale business where it’s more sourcing.

[Operator:]

Our next question comes from Shawn Barnes - Edward Jones.

[Shawn Barnes:]

I was wondering, given the economic environment in combination with the sales force initiatives, have you seen a change in your mix of business in terms of your new business with customers from an industry perspective?

[Michael L. Thompson:]

We have seen a change in our mix of customers over time mainly as manufacturing companies have moved offshore. Certainly as we’ve sold more products and services across the breadth of our company, the uniform base is coming down but as far as mix within that there’s certainly more of a move to the service economy so to speak and consumer facing type customers. But not dramatic over the last six months to a year.

[William C. Gale:]

Shawn, I don’t think it’s any different. I think it’s kind of the trend that we’ve been seeing for the last four or five years probably.

[Shawn Barnes:]

You mentioned the headcount controls. I was just wondering if you could give us a little bit more color in terms of where you’re looking to really implement that plan?

[William C. Gale:]

We are looking across the board. We look at of course all of our G&A areas to make sure that what we are doing is of value to the company. So we’re looking at initiatives there. We’re doing things in our IT, information technology, area to improve productivity of our people and therefore reduce the overhead of G&A. The sales structure, I think we mentioned at the last call. The organizational structure we had in place for the new Project One Team initiative. We’ve reassessed that and tweaked that a bit such that we don’t need to have as much of a management structure as we once thought we would have. In all of our facilities, we’re evaluating the jobs that people are doing to make sure that they continue to add value to our customers. Nothing goes unturned. Everything is being looked at to ensure that it has value added and that it is something that the customer sees and is willing to pay for or meets compliance criteria that as a company we’re obligated to perform.

[Michael L. Thompson:]

And we’ve really seen that leverage across all areas. We haven’t seen just corporate overhead go down or delivery or what have you. We’ve seen some improvement in most of our labor lines because of that.

[Shawn Barnes:]

One last thing. I might have missed this in terms of housekeeping. In the direct business, what were the organic sales?

[William C. Gale:]

Organic growth for the uniform direct sale was the same as their growth which is 0.4%.

[Operator:]

Our next question comes from Michel Morin - Merrill Lynch.

[Michel Morin:]

On the DSO front, are we as close as the top or highest that you’ve ever seen at 44 days? It seems as though it might be. Am I right on that?

[William C. Gale:]

In probably the last couple of years Michel since you’ve been monitoring us, you probably are right we’re near the top. But I can recall back five or six or seven years ago it wasn’t unusual to have 44 or 48 days DSO.

[Michel Morin:]

So it potentially could stay or maybe even increase a little bit. And what about bad debt? When you look at the 20 basis point impact you just had overall in terms of where you’re reserved today, how does that compare to the worst of the last downturn?

[William C. Gale:]

I can’t recall exactly but I’d say it’s still better than it was probably in the last big downturn.

[Michel Morin:]

So it’s reasonable to think that these two things could still be a little bit of a drag if the economy remains a little bit soft here?

[William C. Gale:]

It could. Absolutely. If the economy remains soft or it gets very, very soft, it’s going to have an impact on us. But again I think we’re a little bit protected on that from many other companies in that we’re providing a service that is necessary and needed, and we often are able to use that as a clout to get paid before maybe some other people get paid.

[Michel Morin:]

Finally, in terms of the document management growth rate which organically it slowed from 30% to 25%, is this just the law of large numbers starting to impact you or was the economy a factor here?

[Michael L. Thompson:]

I think it’s mainly the paper price had an impact to some degree. We had one less workday. And then there is some law of big numbers. And again that business is not significantly large at this point in time. It’s certainly getting to be a larger business but you do have some fluctuations quarter-to-quarter that can occur. But I think when you take the other pieces into consideration, we still feel very positive on that business and believe that the growth rates in the mid-20s to maybe 30 are possible and sustainable.

[Michel Morin:]

And just to clarify, you said the workday.

[Michael L. Thompson:]

The workday would have been adjusted for.

[Operator:]

And it appears that that is all the questions that we have at this time, so I’ll turn the call back over to Mr. Gale for any additional or closing remarks.

[William C. Gale:]

Thank you again for joining us tonight and we appreciate your interest especially in light of this week’s upheaval in the markets. I just would leave you with a couple of thoughts. Cintas is generating a lot of strong cash, our businesses are very solid, and we’ve got a great balance sheet. So we’ll weather this upheaval very well and I hope all of you all are able to do the same. Thank you again. We look forward to speaking with you during the week of December 15 we anticipate when we report our second quarter results.