UniFirst Corporation
Q2 2015 Earnings Call Transcript

Published: 30 Mar 2016

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter Earnings Call. During the presentation, all participates will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session [Operator Instructions] Now I would like to turn the conference over to Steven Sintros, Chief Financial Officer. Please go ahead.

[Steven S. Sintros:]

Thank you and welcome to the UniFirst Corporation conference call to review our second quarter results for fiscal 2016 and to discuss our expectations going forward. I'm Steven Sintros, UniFirst's Chief Financial Officer. Joining me today 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. I refer you to the discussion of these risk factors in our most recent 10-K filing with the Securities and Exchange Commission. Now, I will turn the call over to Ron Croatti for his comments.

[Ronald D. Croatti:]

Thanks, Steve. I would like to welcome everyone on the line joining us for this review our UniFirst's second quarter and the six-month year-to-date financial results for fiscal year 2016. Steve will be covering all the details, but first I would like to provide you with a brief overview of our performance. UniFirst revenues for the second quarter of fiscal 2016 were at $363.1 million, an increase of 0.5% from the $361.5 million reported for the second quarter in 2015. However, if we remove the negative impact of foreign currency fluctuation related to continues weaker Canadian dollar, quarterly revenues were up 1.6%. Six months year-to-date revenues were $736.5 million, 8.6% increase over the 2015 mid-year mark. Net income for the quarter was $23.5 million and 7.7% decline from the $25.4 million net income reported for the same period a year ago. And similarly, net income for the first six month for the year fell short of the 2015 mid-year mark by 5.5%. Our core laundry operations, which make up about 90% of UniFirst's total business reported 8.2% decline in revenue and 11.7% decline in operating income when compared to last year's second quarter. Unfortunately, despite once again we reported solid new sales results from the second quarter. Our laundries also continue to experience significant weekly uniform wearer losses and loss counts and our energy depended markets as well as those industries that support them. Lion’s share of those losses were a direct result of lower energy prices worldwide and continued concentration in Texas and energy related markets in the U.S. as well as Western Canada. In fact, the wearer losses accelerated in the second quarter from with the first quarter. these setbacks have been especially challenging for us, as we benefited from holding particularly strong market positions in these areas in recent years. As we mentioned in the past, these losses have accumulative effect on our recurring revenue and have a negative impact on our adds over reduction metric. All effecting the top and bottom line of both our core laundries and our company. Adding to the second quarter headwinds the continued weakness of the Canadian dollar versus the U.S. dollar, as well as the significant spike in the quarterly healthcare cost from our employee team partners provided significant financial challenges from our primary visits. On the plus side, our specialty garments segment, which is our specialized nuclear and clean room unit reported solid gains for the quarter in both revenue and operating income when compared to the same period in 2015. And our first aid and safety segment also reported solid financial results for the second quarter. Despite also being negatively impacted by pullbacks in the energy market. So as we look ahead to later half of 2016, we remain optimistic that our team partners will again rise to the main challenges that have they always done allowing us to ultimately report solid financial results for fiscal year 2016. We also hope that recent oil price that been trending higher around the world brings some stabilization to the energy related uniform wearer losses allowing us to spend less time managing the deficit and to once again focus our full attention on executing our short and long-term growth plans and bring returns to all our UniFirst shareholders. We also are hopeful that solid national job gains we saw in February were not an anomaly but a single of positive trends to ultimately translate into ongoing organic uniform demand increases. So we are watching the national employment situation very closely in the coming months in anticipation of capitalizing on additional sales opportunities. As always we will be counting on our field and national accounts sales team to intensify our efforts and continue to improve the business result through innovate sales programs, skills training and professional consultant selling. We will ensure that our local operations throughout North America and Europe continue to performing as efficiently as possible and controlling costs in these areas, but never to the point of sacrificing service levels to our customers. And of course, we expect our service teams from cost-to-cost remain focused on each and every customer striving to ensure every one of the unique business needs is being met and every expectations being exceeded in order to make them customers for life. With that I will turn it back over to Chief Financial Officer, Steve Sintros for all the details here for second quarter and six months results as well as our expectations for the remainder of the year.

[Steven S. Sintros:]

Thank you, Ron. Revenues for the quarter were $363.1 million, up 0.5% from $361.5 million in the year ago period. Net income was $23.5 million or $1.16 per diluted share, down 7.7% from $25.4 million or a $1.26 per diluted share in the second quarter of fiscal 2015. As a reminder, the results in the second quarter of fiscal 2015 included a $3.6 million charge to selling and administrative expenses to increase the company's environment contingency reserves. Excluding the effect of this item, net income for the second quarter a year ago would have been $27.7 million or $1.37 per diluted share. In addition the comparison of net income to the prior year was impacted by higher effective tax rate in the current quarter compared to a year ago. The effective income tax rate in the current quarter was 39.7% compared to 38.5% a year ago. This increase is due to a change in the mix of jurisdictional earnings primarily related to a reduction in expected profits in our Canadian operations, which has a roller tax rate than our U.S. operations. We now expect our effected income tax rate for the full-year to be approximately 39%. Core laundry revenues in the quarter were $331.4 million, down 0.2% from those reported in the prior year's second quarter. Adjusting for the effects of acquisitions and a weaker Canadian dollar, revenues grew 0.5% for this segment. The weaker Canadian dollar negatively affected our core laundry operations' growth rate by 1% compared to the second quarter of 2015. As Ron mentioned, our growth during the second quarter continue to be impacted by the loss of uniform wearers and customers in energy dependent markets in the United States and Canada. In fact, during the quarter uniform wearers reductions have accelerated from levels experienced in our first quarter and were slightly higher than any quarter during fiscal 2015. This is a signal to us that we may not yet have hit the bottom of this economic cycle, as it relates to the impact that lower energy prices are having on our customer base. We continue to sell solid amount of new business lagging slightly behind where our new sales were a year ago at this time. Excluding the environmental charge in the second quarter of fiscal 2015 I discussed earlier, our core laundry operating margin decreased to 10.9% from an adjusted operating margin of 13.4% year ago. The largest driver of the margin decline was significantly higher healthcare claims during the quarter compared to a year ago, which impacted our margin by full 1%. In particular, a much higher number of large claims which we define as claims greater than $50,000 drove these costs higher. Merchandize as well as many of our other costs were also higher than the prior year, which negative impacted the margin further due to the lack of top-line growth in this segment. Bad debt expense was also higher during the quarter primarily due to concerns regarding amounts owed by energy and energy related companies many of which are experiencing financial difficulties. These items were partially offset by lower energy expenses during the quarter compared to a year ago. Energy costs decreased during the quarter to 3.9% of revenues compared to 4.6% a year ago due to lower fuel costs for our fleet of delivery vehicles as well as lower natural gas costs for our production facilities. Revenues for our specialty garment segment, which consists of our nuclear decontamination and clean room operations were $20.5 million, up 9.6% $18.7 million in the second quarter of fiscal 2015. Due primarily to the improved revenue performance, this segment's income from operations increased to $1.1 million in the current quarter a loss of $0.4 million in the last year's comparable period. As a reminder, results from our specialty garment segment can vary significantly from quarter-to-quarter due to seasonality as well as timing of reactor outages and related projects. We continue to expect that this segment’s results for the full-year will meet our original expectations with revenues coming in about 5% higher than the full fiscal 2015 and the segment’s operating margin coming in at approximately 10%. Our First Aid segment reported revenues of $11.3 million in the second quarter up 5.1% from the same quarter a year ago, and operating income from this segment decreased to $0.9 million compared to $1.1 million in the second quarter of fiscal 2015. UniFirst continues to maintain a solid balance sheet and financial position. Cash and cash equivalents at the end of the quarter totaled $335 million, up from $276.6 million at the end of fiscal 2015. Cash provided by operating activities year-to-date was $105.5 million down slightly from $107 million a year ago. Although lower net income impacted cash flow levels, they benefited as anticipated from a lower demand for inventory and merchandizing service which is typical for our Company in times of slower growth. Year-to-date, we utilized $44 million on capital expenditures. We continue to invest in new facility additions, expansions and automation that will help us meet our long-term strategic objectives. We continue to expect capital expenditures for fiscal 2015 to be approximately $100 million. Although we do not close in sizeable acquisition so far this year, we continue to look for good acquisition target as acquisitions remain an integral part of our overall growth strategy. Of our cash on hand at quarter end, $56.2 million has been accumulated by our foreign subsidiary and is intended for future investments outside the United States. We also continue to have significant capacity under our existing bank line of credit to fund potential acquisitions or other capital allocation options. Although our line of credit expires shortly, we are in the process of renewing the line to ensure we maintain our financial flexibility. With top-line growth and challenge, we will continue to vigilantly focus on cost controls and as a result, we are optimistic about our ability to continue generating significant free cash flows and ultimately deliver value to our shareholders. As reflected in our press release earlier today, we’ve adjusted our full-year guidance downwards to reflect the continued impact of the struggling energy dependent markets on our customers that we service across the country. This new guidance also reflects the higher than anticipated healthcare claims incurred in the first-half of the fiscal year, as well as the higher effective income tax rate. We now believe that full-year fiscal 2016 revenues will be between $1.455 billion and $1.467 billion and that our full-year diluted EPS will be between $5.45 and $5.65. This guidance particularly at the lower levels does allow for some further deterioration in our wearer base as we continue to experience these reductions at much higher than normal levels. This guidance also assumes a more modest increase in healthcare claims in the balance of the year compared to the second half of fiscal 2016. This completes our prepared remarks, and we will now be happy to answer any questions that you may have.

[Operator:]

Thank you [Operator Instructions] and our first question comes from the line of Andrew Wittmann from Robert W. Baird & Company. Please proceed.

[Andrew Wittmann:]

Hi guys, good morning. I was hoping you could help us understand in a little bit more detail the impact of the energy business. Steve, can you talk about what that meant to the top-line, the energy headwinds that you saw in the quarter? How much of a hit to growth that was?

[Steven S. Sintros:]

Sure. It's a very difficult thing to quantify accurately Andrew, but our estimates would have our growth - organic growth being about 3% if not for the reductions we've experienced over the last several quarters that all sort of accumulate to impact this quarter's growth. So that's probably the best estimate we can give to the top-line impact at this point.

[Andrew Wittmann:]

Okay, thank you for that. And just given that 3% growth rate-ish, can you talk about - you mentioned, I think, account losses in the prepared remarks. Obviously that was a little bit new, I thought. The fact that add stops were negative is not. Can you talk about that I count losses? Was that energy patch related, too and can you just talk about how your overall retention rate is affecting that growth rate? Do you feel like retention is a factor that your growth rate isn't maybe closer to the peer levels because of retention?

[Steven S. Sintros:]

I wouldn't say that the delta is made up by retention. We will say that the higher lost account is partially energy patch related. Non-energy patch related they are probably wanting a little bit higher than last year. Last year was on average a little bit of better than average year for our retention and this year even excluding energy patch it's probably a little bit worse. I don’t think there is any particular trend necessarily there, but in different years it tends to run a little bit higher or lower, but we are not that far off the median to say that that's a significant driver of the gap.

[Andrew Wittmann:]

Okay. Maybe one other question then focusing on the top-line. You mentioned good sales force productivity I guess - or new accounts sales or you mentioned that overall sales was good. I guess the question there is how good? Over the last couple years there were points where we were at record levels. I don't expect that's the case today, but where are sales? Are new sales production - are we down 5%, 10% year-over-year? I'm just kind of curious as to how the other sales trends are going?

[Ronald D. Croatti:]

Alright Andrew, this is Ron. New sales are down about 3%.

[Andrew Wittmann:]

Got you. Sorry, I have a lot of questions here. I'll do one more now and then probably jump back in queue to give some help to other people here. Can you give us some details then on the healthcare costs? The 100 basis points seems like a lot. It seems like it was kind of lumpy; you are expecting it to moderate. Is there anything structurally going on in the healthcare costs that you are seeing? Or do you think this is really a one-quarter issue that's more likely to normalize?

[Steven S. Sintros:]

Just a little background there which we talked about probably year ago at this time, about year half ago, at the beginning of our fiscal 2015 we've made some changes to one of our health plans in to becoming compliance with the Affordable Care Act. Part of that change was taking one of our lower cost plans and providing uncapped coverage where as previously that coverage was capped. The Affordable Care Act doesn’t not allow for capped plans, and so if you remember, we were concerned that the uncapping of that plan would cause some larger claims to sprinkle through our experience during fiscal 2015. Now during fiscal 2015, we did not see a significant increase in those large claims, although we did experience some. In the first quarter this year, we had some increase but not too dramatic. Really in the second quarter and as I alluded to in my comments, the increase really the delta from a year ago was solely related to a handful or maybe more than handful large claims and so we expect that to moderate to what extent we are not really sure. In our guidance, we have built in sort of a more modest increase in the second half of the year and we do expect these large type claims to come and go from time-to-time but not to sort of hit the way they did in our second quarter. So we certainly are optimistic that this is more of an anomaly, but it's something we are closely watching.

[Andrew Wittmann:]

Okay, thanks. I will yield the floor and queue back in later.

[Operator:]

Thank you. And our next question comes from the line of Joe Box with KeyBanc. Please proceed.

[Joe Box:]

Hey guys. So Steve can you maybe just help us bridge the $0.15 gap between the new guidance and the old guidance? I'm coming up with about $0.10 of headwind from claims. It sounds like maybe there's a little bit of that that bleeds into the back half of the year. Also coming up with about $0.03 from tax. So, how much of that is going to continue in the back half? And then how much incremental headwind are we thinking from oil and gas? And is there a positive impact from FX? Thanks..

[Steven S. Sintros:]

Sure so I think you are on the right track there, it's about $0.04 on the tax rate. The healthcare depending on where we come in later in the year, but really even just from the impact so far this year it’s probably about $0.06 or so compared to our expectation. And then the delta there is really related to what I would call worse than expected performance in the energy market during the second quarter. As we came into the second quarter, we were sort of cautiously optimistic that those reductions maybe moderating, as we mentioned in our comments that did not happen and they sort of picked back up during the quarter so that revenue short fall will translating to some profit headwinds as well. So it's really those three pieces are the significant drivers of the changing guidance.

[Joe Box:]

And then just remind me, on the FX side, what were you guys modeling last quarter versus this quarter?

[Steve S. Sintros:]

Yes, during the quarter the FX dropped more significantly and anticipated, but it did rebound and so as far as the FX goes, not a real significant driver and the change of full-year guidance.

[Joe Box:]

Okay, appreciate that. And then given the step down that you allude to in the oil and gas sector, how should we think about the core uniform margin cadence maybe as we move through the next 12 months to 18 months? Curious if there's really any levers out there that you can pull to maybe drive some margin improvement in that business. Or are we basically just looking at the revenue headwinds and maybe some of the merchandise amortization expense offsetting some of those levers?

[Steve S. Sintros:]

I think you hit it on the head, but it really depends on when we sort to get to the bottom of the cycle here and when we can start to stabilize the volume levels and start to return back to growth and have our new sales sort of take hold and start that growth again. Another three to six months sort of reductions at the levels we have had, will give me one answer to your question whereas if they sort of stabilize in the next couple of months, it will be a much different answer. The merchandize as you said, should continue to come in line if we continue to see softer wearer levels. And then I think from there it really depends on where we can get the growth rates back to, given the reductions.

[Joe Box:]

I appreciate that. And then maybe just one last one on the oil and gas sector. If you look at the actual number of energy employees that are coming out of the market that's hitting your add quit, relative to maybe the contagion effect, the hotel employees, the manufacturing employees, the people that support the energy market. Have you noticed any sort of a change in that mix as we start to move maybe into the later innings of this energy contraction?

[Steve S. Sintros:]

I think I would say and the best way for us to look at it is sort of geographically and I think we were seeing more of our heavy impact in the peer oil and energy market like West Taxes and so on earlier on this cycle and I think we are starting to see the impacts spread out a little bit more which I think is the effect that you are speaking to that is sort of trickling down to the other industry. So I think we are probably further along in this cycle and as Ron alluded to, if energy can pick back up and break and sustain $40, I think some of these companies may stabilize. But if it trickles down in the low 30s there may be other shoes to drop from some of these companies that have to make further cuts.

[Joe Box:]

Got it, thanks guys.

[Steve S. Sintros:]

Thank you.

[Operator:]

Thank you. And the next question comes from the line of Chris McGinnis with Sidoti & Company.

[Christopher McGinnis:]

Good morning, thanks for taking my questions. I think it's just two questions, one to follow-up on the energy. I guess the worsening kind of trend, was that through the quarter? Was it materially worse exiting the quarter? Can you maybe just talk about that a little bit more, how it played out?

[Steve S. Sintros:]

Sure, yes, I wouldn’t say that it's different materially during the quarter Chris, it probably picked up in the January timeframe and has continued right through the end of the quarter.

[Christopher McGinnis:]

Alright. And then just second, I know it's not too much of a concern but just on the lost accounts, is pricing playing an effect, just maybe due to the energy related markets and people fighting for share? Is that starting to come about?

[Steve S. Sintros:]

I think so, I don’t think it's anything, any dramatic change in trends. There are always some losses to competitive pressures and maybe those who have picked up a little bit, but I think it's just sort of a down year to exacerbate the issues with the energy.

[Christopher McGinnis:]

Sure, alright. Thanks for taking my questions.

[Operator:]

Thank you. And the next question comes from the line of Kevin Steinke with Barrington Research. Please proceed.

[Kevin Steinke:]

Good morning, Kevin Steinke, Barrington Research. The modest decline in new account sales that you talked about, 3%, would you tie that to the energy markets as well?

[Steve S. Sintros:]

Well, I think not specifically Kevin, but there is certainly is some impact. When you look at the sales that we sold last year and the year before, there was certainly energy companies in that mix that were not selling business of now. I think Ron if you want to add to that.

[Ronald D. Croatti:]

No, I think Steve is absolutely correct. Our primarily two regions in the oil business are West Texas area and New Mexico and Oklahoma and then Edmonton and the sales in those areas have really dropped off and that’s the impact.

[Kevin Steinke:]

Okay, okay. It makes sense.

[Ronald D. Croatti:]

It's hard to you guys to relate, if you got a Midland, Texas, and Odessa, Texas, there is a recession down there.

[Kevin Steinke:]

Yes, okay, got it. Outside of energy, do you feel like you are still getting your fair share of no programmer new account wins and expanding the market in that sense?

[Ronald D. Croatti:]

I think as I've said before we were about a 60/40 split on 60% competitive and 40% no programmer and those ratios have basically stayed intact.

[Kevin Steinke:]

Okay. Okay, good. So I think, Steve, last time you were talking about maybe - on the last call, talking about core laundry organic growth picking up just a little bit in the second half of 2016 as maybe it lapped some more difficult comps. Is that still what you are assuming for core laundry or has that outlook changed a little bit given the greater wearer reductions?

[Steve S. Sintros:]

Kevin I would say has changed a little bit in the model sort of at the mid-point, you will see or you should see some incremental improvements in the third quarter and fourth quarter, but it's more muted compared to what we were projecting earlier in the year and that and like you said that's because of the continued reductions. So right now, I think our organic growth for the core laundry was a 0.5% in the second quarter and sort of at the mid-point of our guidance. I think it assumes about 1% organic for the second half of the year and sort of growing, but again some of that is dependent on these reductions slowing at some point and that's why the lower end of our range has reflect some more reductions coming out of the numbers.

[Kevin Steinke:]

Alright and what about the core laundry operating margin assumption for the year? I think you are talking about 13% on the last call. Has that changed?

[Steve S. Sintros:]

Sort of at the mid-point of the range, it's a little short of that at this point and that's again largely due to healthcare situation.

[Kevin Steinke:]

Alright, fair enough. That's all I had. Thank you.

[Operator:]

[Operator Instructions] The next question comes from the line of Andrew Wittmann with Robert Baird. Pleaser proceed.

[Andrew Wittmann:]

So Steve, you mentioned garments had a year-over-your impact on margins. Can you quantify that for us? And then specifically maybe address or comment on the impact of garments that went in service but are no longer in service and have no attached revenue to them effect, as well as the effect of new garments going into service for areas that are growing?

[Steve S. Sintros:]

Yes. I think your overall question is around merchandize amortization and that headwind was about a 0.5% percent in the quarter, it’s certainly very difficult to quantify, but certainly there is an impact of garments coming out and aren’t going back into service. We draw the analogy to 2009, in that recessionary which was a broader recession, we had a lot of garments coming out in a broad range of styles and types that we could more easily redeploy. Since most of the garments coming out in this cycle are specific flame resisting garments, those can't be as easily deployed and there is certainly a excess of garments in merchandize and service that are out of service that continue to amortize. We will work our way through that cycle over the next months or so and you should start to see some drop in the merchandize. Now I will say, we do continue to put in merchandize for new accounts and other customers and some of our merchandize headwinds came from a couple of larger national accounts that went through image changes during the year that we needed to make some reinvestments of garment into. So we would probably been seeing a little bit more of a help on the merchandize side if not for some of those confusions of garments.

[Andrew Wittmann:]

Got you. Does that mean then that you are having to amortize the old garments as well as the new garments or just that you had to buy them all new garments, and so your overall merchandise line item just went up because they are new garments instead of old garments?

[Steve S. Sintros:]

That's correct. So the old image is sort of working its way through and as we readdressed it, it's sort of drives the increase, because there is more new garments in the account.

[Andrew Wittmann:]

Okay. On CRM implementation, I guess we would like a status update on where we are on that. Are we still going live early in the next fiscal year? And any update that you have on the costs associated with that when it goes live in terms of depreciation, SG&A costs associated with the rollout? I think an overall status update on that would be helpful.

[Steve S. Sintros:]

Sure. The CRM project continues to move along, we continue to make solid progress, at this point it will not be early in the fiscal year probably closer to the second half, but at this point I hesitate to give you an exact time line as we continue to move along here. The financial numbers that I've given previously which was in that $8 million to $9 million depreciation range are still holding. So right now, it's not as much of an issue that the cost expectations are changing significantly, it's more of a time issue as we continue to work through with the testing of the systems.

[Andrew Wittmann:]

Got you. SG&A costs associated with that in terms of transition cost, consultants, training that will be borne as you get closer to that implementation date as well?

[Steve S. Sintros:]

We haven’t finalized those projections and we’ll provide those as we get closer to that point.

[Andrew Wittmann:]

Okay. My last question is for Ron. Ron, with the balance sheet here over the last couple of quarters, you talked about interest in doing a share buyback. We haven't seen it yet. Wondering, in your mind, what is preventing you from implementing that or how you're thinking on the potential buyback is evolving.

[Ronald D. Croatti:]

I think it's coming down, we want to be opportunistic in this whole deal and keep in mind that our number one thing is to use the money for acquisitions.

[Andrew Wittmann:]

Okay. So is that suggesting that the buyback is not on the table at the moment and that there are acquisitions? Last quarter it sounded like you had a little bit more conviction, a little bit more desire to do the buyback. Here it sounds like not really there. I was wondering, is there a change from what you were thinking last quarter?

[Steve S. Sintros:]

I don’t think there is a change Andrew, I think we have seen a little bit of an uptick in acquisition activity and targets that seem like they may become available. But I don’t our overall strategy changes, it's still acquisitions first and I think that we’ll continue to evaluate the buyback and I think we can’t tell you whether that’s eminent or coming three or six months from now, but it's something that we acknowledge is next in line and something we have to continue to consider.

[Andrew Wittmann:]

Okay. Thanks guys.

[Steve S. Sintros:]

Thank you.

[Operator:]

Thank you. The next question comes from the line of Kevin Steinke from Barrington Research. Please proceed.

[Kevin Steinke:]

Hi, just one follow-up question. You talked about wearer reductions being incorporated into your guidance. Just wondering what the level of reductions are that you are assuming. Are you assuming that the levels that you experienced in the second quarter continue maybe on the low end of that range, and some improvement on the high-end? Just put some kind of a range around the wearer reductions you are expecting there.

[Steve S. Sintros:]

That’s probably fair Kevin. I think at the high end of the range certainly it expects some moderation here over the next quarter or so. And at the low end, at the levels that we experienced in the second quarter we would probably be pushing the low end of those went right through the end of the year, but yes it sort of a more status quo gets you to the lower end of the range.

[Kevin Steinke:]

Alright. Thank you for taking the follow-up.

[Steve S. Sintros:]

Thank you.

[Operator:]

Thank you and gentlemen, there are no further questions at this time.

[Ronald D. Croatti:]

Alright we would like to thank everyone for joining us to review UniFirst’s latest financial results for fiscal 2016. We look forward to updating you again in June when we are reporting our third quarter numbers. Thank you and have a great day.

[Operator:]

Thank you. 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.