UniFirst Corporation F1Q09 (Qtr End 11/30/08) Earnings Call Transcript

| About: UniFirst Corp. (UNF)

UniFirst Corporation (NYSE:UNF)

F1Q09 Earnings Call

January 7, 2009 4:00 pm ET

Executives

Steve S. Sintros - Corporate Comptroller

Ronald D. Croatti - President and Chief Executive Officer

John B. Bartlett - Chief Financial Officer, Senior Vice President

Analysts

John Healey - FTN Midwest Securities Corp.

Andrea Wirth - Robert W. Baird & Co., Inc.

Andrew Steinerman – J.P. Morgan

Ali Mohamed – Boston Partners

Operator

Good afternoon, thank you for standing by. At this time I would like to welcome everyone to the UniFirst Corporation First Quarter Earnings Conference Call. (Operator Instructions).

I would now like to turn the conference over to John Bartlett, Senior Vice President.

John Bartlett

Thank you and welcome to UniFirst Conference call to review our first quarter operating results for fiscal 2009 and to discuss our expectations going forward.

My name is John Bartlett and I am the Chief Financial Officer. Joining me are Ronald Croatti, UniFirst’s President and CEO, and Steve Sintros our Corporate Controller.

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

Today we released the results of our 2009 fiscal year. Revenues increased 6.2% to a record $62.3 million and our net income increased 14.5% to a record $18.9 million or $0.97 per share.

Ron Croatti and Steve Sintros will provide additional details regarding these results, but I can say that we are very pleased with our first quarter performance; however, I would like to stress that UniFirst is not immune to the challenging economy in which we operate.

Since November we have seen a significant increase in the shrinkage in our customer wares, as well as increased lost accounts. Nevertheless, we are cautiously optimistic that our full year results will still approximate the results we achieved in fiscal 2008, which we believe is both a testament to the recession resistant industry in which we operate and our hands on conservative management.

Now, before I turn the call over to Ron and Steve, 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, believes, and other 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 factors including, but not limited to, the continued availability of credit and the performance of the capital markets, performance of acquisitions, fluctuations in the cost of materials, fuel, and labor, economic and other developments associated with the ongoing war on terrorism, and the outcome of pending and future litigation and environmental matters.

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

Ron Croatti

Thank you John and welcome all of you who are joining us for the review of our first quarter and fiscal period that produces record revenues and profits for our company once again.

Steve will cover the details in a few minutes, but let me start with a brief recap.

Revenues for the first quarter of 2009 were $262.3 million, a 6.2% increase over the $247.3 million for the same period a year ago.

Income from operations increased 17% during the quarter as compared to 2008 and earnings per diluted share for the first quarter were up 14.5% to $0.97 as compared to 2008’s $0.85. Despite considerable economic pressure during the fiscal weeks of the quarter, our core laundry operations continue to drive our company’s growth, showing a 6.95 revenue increase as compared to the same period a year ago. Decreases in merchandise, amortization costs, payroll and payroll related costs, as a percentage of revenues, helped to boost our income level.

Our Specialty Garment business, which is our nuclear decontamination and cleaning business, continued an upward trend in growth for 2.8% gains in revenue for the comparable quarter in 2008, which also resulted in a modest increase of income from operations compared to last years first quarter.

Meanwhile our First Aid business, our revenues decreased by 7.4% as compared to 2008. In the first quarter this was due to the sales of the Quick Aid division and the negative effect of the economic downturn. We expect this division to continue to have challenges in ’09 as a result of the financial culture and climate and accompanying trend toward service cut backs in the marketplace.

In our Uniform business new sales from our professional field reps came in essentially flat, as compared to last year, due to the continued softening of the economy, which became particularly noticeable during the last weeks of the quarter. Likewise our national account sales were adversely affected by the unfavorable conditions.

To counter these ongoing challenges our reps had to work harder and more creatively, to achieve their first quarter numbers. Overall sales results were positively influenced by a slight elevation in sales rep head count.

Our sales team continued to reap the benefits associated with its unique productivity and automation tools that we implemented over the past couple of years. And, the new prospecting data base partnerships we put in place are offering more selling opportunities for us in the market. Additionally, our reps are targeting specific industries and have historically shown themselves to be less sensitive to troubled economics, and this is helping to bolster results also.

We continue to see a good balance coming from our facility service products, which reflects on our moderate improvement in root sales reps shown during the quarter by expanding the use of ancillary service products and services in our existing customer base.

Although we are generally pleased with our overall first quarter performance, we are feeling the pinch of the continued difficulties to the economy. Over the past several weeks we have seen substantial increases in account shrinkage and customer losses. Our growth rate is starting to see slight week-to-week declines. The bottom line is, when our customers businesses are adversely affected, we are affected too.

Most experts agree that the current economic condition will be with us throughout ‘09 and that means we want to be more careful with every facet of our operations. As a result, we have implemented a three-phase profit protection plan to aggressively cut spending and reduce overall costs on a company wide basis.

We are now in phase two of this plan. It calls for tougher spending restrictions and include across the board wage freezes for virtually all our team partners in fiscal 2009. Discretionary spending limits to only those efforts that directly add value to our customers. If our growth rate reversal continues we will be looking to further implement the next phase of our profit protection plan which institutes further cost control, including head count reductions.

All of these preventative measures are designed to protect both our near and long-term profits, as well as the interests of our shareholders. Difficult business conditions are nothing new to UniFirst. We have felt that all of our business units are strategically positioned to sustain reasonable performance levels in the current down turn.

Barring an event more significant erosion of the economy, we remain cautiously optimistic about achievement of our previously provided guidance. Like the rest of the business community, we don’t know exactly how the economy will track in 2009, but as we have in the past UniFirst will be prepared to meet the challenges ahead to come out even stronger on the other side.

Now for more financial details, I will turn it over to our Corporate Comptroller Steve Sintros

Steve Sintros

Thanks Ron. As Ron discussed, despite an increasingly challenging economy, we had a strong start to fiscal 2009. Consolidated revenues for the first quarter were $262.6 million, a 6.2% increase from the previous years first quarter of $247.3 million.

First quarter net incomes was $18.9 million, or $0.97 per diluted common share; a 14.5% increase from the first quarter of 2008 when net income was $16.5 million or $0.85 per share. This performance continues to be driven by strong results of our core laundry operations.

Revenues from the core laundry operations grew 6.9% in the first quarter compared to 2008. Revenues from the core laundry operations net of the impact of acquisitions and changes in foreign currency increased 6.6%.

Acquisitions accounted for 1.5% of the growth and the strengthening of the US dollar versus the Canadian dollar reduced revenues by 1.2% compared to the same quarter a year ago. Based on the current exchange rates we expect the growth rates of our core laundry operations to be negatively impacted by approximately 1.4% for the remainder of the fiscal year. Although we have been able to hold our growth thus far through this economic downturn, the already high headcount reduction rates in our ware base that we have seen over the last six to nine months accelerated significantly in November and December. These reductions will significantly challenge our ability to grow at the rates we have recently produced in future quarters.

Income from operations from our core laundry business was up 17.9% compared to the first quarter of 2008 and its operating margin increased from 12.4% in the first quarter of 2008 to 13.7% in the first quarter of 2009. The improvement is primarily due to lower merchandise amortization, as well as lower payroll costs as a percentage of revenues. The core laundry operating results in the first quarter was also helped by lower health care and workers compensation costs compared to fiscal 2008.

These costs can fluctuate from quarter to quarter, however we do not anticipate that this benefit will continue throughout the year. In addition, other production and administrative costs overall were lower as a percentage of revenues, as we have been challenging all non-essential expenditures in anticipation of growth slowing over the remainder of the year.

These benefits were partially offset by higher energy costs, as well as a $1.6 million accounting charge relating to our environmental obligations.

Accounting rules require that certain liabilities are discounted using a risk free interest rate. The company’s projected liabilities for environmental remediation are discounted in this manner, as disclosed in our quarterly filings.

Due to the significant drop in interest rates during the first fiscal quarter the company discounted its liability using a lower interest rate, resulting in this non-cash charge to earnings. Further reduction in these rates in the second quarter could result in additional non-cash charges.

Overall, our Specialty Garments and First Aid segments operating results were comparable to the first quarter of 2008. First quarter revenues of our Specialty Garments business is up 2.8%, from $17.3 million in the first quarter of 2008 to $17.7 million in the first quarter of 2009. Income from operations from this segment was up slightly as well.

Based on the planned timing of nuclear reactor outages we project that the third quarter of this fiscal year will be the strongest quarter for this division.

Revenues from the First Aid segment, as Ron mentioned, decreased 7.4%, from $7.9 million to $7.3 million. The majority of this decrease relates to a product line that was discontinued in the second quarter of fiscal 2008.

This segment continues to be challenged by economic conditions and an overall unwillingness of many businesses to add costs. We are working hard to bring the cost of this segment in line with these adjusted revenue levels, and we will continue to work on new strategies that will allow us to further take advantage of the cross-selling opportunities with our core laundry customer base.

On a consolidated basis depreciation and amortization was 5.2% of revenues for both the first quarters of fiscal 2009 and 2008.

Net interest expense decreased from $3.0 million in the first quarter of 2008 to $2.1 million in 2009 related to lower interest rates affecting our variable rate debt.

As discussed in our October 29 webcast, we have begun to show the impact of foreign exchange gains and losses as a component of other expense on our income statements. Previously these amounts were included in the selling and administrative expenses and have not been very significant. As these amounts are becoming larger due to the recent volatility of the US dollar, we feel that breaking out these gains or losses helps show a clearer picture of our operating results.

During the first quarter of fiscal 2009 we recognized foreign exchange losses totaling $0.9 million compared to foreign exchange gains of $0.5 million in the first quarter of 2008.

For the first quarter of 2009 our effective income tax rate was 39.7% compared to 38.5% in the first quarter of 2008. The increase in tax relates primarily to higher state income taxes as well as timing related to certain tax reserve items, as required by FIN 48.

For the full year, we expect out income tax rate will be between 39% and 39.5%. Our capital structure and cash flows continue to be very strong. Our cash flows from operations increased 3.6% to $26 million from an already strong $25.1 million in the first quarter of 2008.

Free cash flows decreased, however, as capital expenditures in the first quarter of 2009 were $20.5 million up from $14.8 million in fiscal 2008. The high level of capital expenditures during the first quarter was due primarily to the completion of various large building projects started last year, as well as a high percentage of projected annual vehicle purchases being completed during this quarter. We are aggressively challenging all capital requests from an ROI standpoint and wherever possible are cutting back on, or pushing out, any major new projects until we get further visibility as to the state of the economy.

Despite the high level of expenditures in the first quarter, we anticipate capital expenditures will be between $55 and $60 million for fiscal 2009.

Total debt decreased to $232.1 million at the end of the first quarter from $235.5 million at the end of the first quarter from $235.5 million at the end of 2008. Total debt as a percentage of capital decreased from 29.7% to 29.2% at the end of the first quarter.

We continue to be well in compliance with all of our financial covenants and under our debt agreement, and don’t have any significant debt maturing before 2011. We did not complete any significant acquisitions in the first quarter and in this environment we will scrutinize acquisition opportunity given more to ensuring that the valuations make sense. However, based on our overall financial strength, we are still well positioned to make further strategic acquisitions.

In our October call we communicated our preliminary guidance for fiscal 2009, which was that revenues would be between $1,000,000,000,015 and $ 1,000,000,000,045, and that income per diluted common share would be between $3.05 and $3.25; since that call the level of reductions in our ads versus stock metric have accelerated significantly. On a positive note, the cost of gasoline and natural gas has continued to decline since this original guidance was communicated.

Taking into account these additional factors, along with the results of our first quarter, we are leaving our full year guidance unchanged at this point in time.

As a reminder, both the revenue guidance and earnings guidance reflect one less week of operations in fiscal 2008 with a 53-week year for the company and 2009 will be a 52-week year. The extra week for fiscal 2008 was in our second quarter. The effect of one less workweek equates to a reduction of our revenues of approximately 2% of full year revenues. We are also reflecting in these estimates a decline in our consolidated revenues of a revised 1.4% based on the current strength of the US dollar.

This guidance continues to be highly dependant on certain conditions that have recently been very volatile and out of the company’s control. These conditions include overall unemployment rates, the cost of energy and other commodities, exchange rate fluctuations, as well as the cost of capital. A significant change in any of these factors could have a material impact on the guidance we have provided. We continue to closely monitor these factors and take the actions necessary for the company to stay on target with its short-term and long-term objectives.

We continue to implement stringent cost controls and challenge all capital projects. The goal is to make sure our cost structure is aligned with our revenues through this period of economic contraction that is currently indefinable with respect to its future length and depth. However, based on these steps we are currently taking, as well as our overall financial strength, we feel we are well positioned not only to weather this storm, but to take full advantage of opportunities that would be provided by an eventual economic recovery.

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

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from John Healey with FTN Midwest Securities Corp.

John Healey - FTN Midwest Securities Corp.

I wanted to get a little bit of color from you just about the quarter. Obviously your organic growth continues to be pretty amazing. I was hoping you could give us a little color on what drove the organic growth in the quarter. Maybe what key metrics were the most surprising to you, how strong they were?

It sounds like you are showing weakness and I am just trying to understand what is driving the growth right now.

Ronald Croatti

This is Ron. I will try to give you a rough answer to it. In September, if you will recall, energy prices were pretty high, gasoline and so forth and we were able to sustain a fairly decent price increase that was part of it. Our new sales have held up the entire quarter comparable to 2008. We have really seen a drop off in the new sales the last five weeks, I mean right up until today.

The shrinkage within our customer base was fairly typical for September. It accelerated a little bit in October and was greater in November and greater in December to the point where every week we had during the quarter we were positive growth and the last five weeks we are seeing the line cross the other way between the shrinkage in our base, our customer losses and our new business, the line is crossed.

So, that is our concern, but it really was a combination of good sales and we were able to get a little price along the way.

John Healey - FTN Midwest Securities Corp.

That is helpful. I also want to make sure I understand what you have mentioned there. Over the last five weeks have we seen organic growth rates and any of those weeks begin to be negative on the year-over-year [interposing].

Ronald Croatti

That is correct.

John Healey - FTN Midwest Securities Corp.

Or is that just kind of on the new sales?

Ronald Croatti

No, they are negative year-over-year.

John Bartlett

Well they are negative week-over-week now.

Ronald Croatti

To try to explain it to you, you know if the wearer base is negative and the customer is shrinking and the customer losses are negative, new business is appositive, but the negative is outweighing the positive.

John Healey - FTN Midwest Securities Corp.

Okay that’s helpful. Then when I think about you guys talking about your guidance, you said that ad stops is a little bit, organic growth is a little bit worse than maybe you thought, but you are getting the offsetting benefit on the energy side of things. Were you kind of reaffirming the earnings guidance or are you reaffirming both the revenue and the earnings guidance? I was a little confused on how those two metrics seem to be going in opposite directions and how both revenue and EPS can be kind of where we thought they were going to be three months ago.

Steve Sintros

I think we are reaffirming both guidance’s, the revenue of about $015 to $1.045 billion and the earnings per share of $3.05 to $3.25.

John Bartlett

We are really saying essentially we think we are going to be flat. I mean that is our best…

Steve Sintros

But to answer your question, I think the revenues in the first quarter were probably a little better than the first quarter that we had projected in our original guidance.

John Bartlett

But we don’t project the quarter alone.

Steve Sintros

But for the remainder of the year it is going to be a little worse, but we still think we will be able to fall within the guidance we projected from a revenue side, even though the growth is slipping a little bit, and then the energy, I think we will make up some of the shortfall on the profit side.

John Healey - FTN Midwest Securities Corp.

Okay that’s helpful too. Then just from an industry standpoint, there was a lot of discussion a few weeks back about how a lot of manufacturing facilities were shutting down for the holidays maybe a little bit earlier than they normally do. Have you seen the facilities open up as they normally do? Are you guys seeing some of your business not come back as quickly as you though? Is there any color you can give in regards to that?

Ronald Croatti

Well I think it’s only two days back from the holidays, so we really can’t give you any color. I mean there is no question a lot of businesses shut down for the two week period and it seemed fairly typical from ’08 to ’09. I mean we didn’t see any more than usual.

John Healey - FTN Midwest Securities Corp.

Okay that’s incredibly helpful. My last question is, if I remember your comments correctly from last quarter, you guys talked about being ready to make acquisitions potentially if the right ones came about to you. Do you have any color about the acquisition environment? For instance if you are seeing more properties come up for sale, if you are seeing prices for properties, as the environment is a little bit more stressed, become more attractive, do you have any thoughts there?

John Bartlett

I think because of the holidays we really haven’t had much activity, quite honestly, in the last couple months. I think people are kind of thinking about other things.

I think the real issue is that the sellers really haven’t adjusted to the market and so they are still looking or hoping to get the prices that they have traditionally gotten. We are still talking and are interested, but I think the price has to come down a little bit before we pull the trigger on anything significant.

Operator

Your next question comes from Andrea Wirth - Robert W. Baird & Co., Inc.

Andrea Wirth - Robert W. Baird & Co., Inc.

I just wanted to be clear, again, about what you are seeing and what we should expect for organic growth in the rental division. Based on just what you have seen in the last five weeks are you essentially seeing negative growth with it switching over, so we should essentially see growth go from 6.6 this quarter to negative next quarter, negative year-over-year growth? Am I understanding that correctly?

Steve Sintros

I think what we are talking about is each weeks revenues we are getting now are a little bit less than the prior week, so our week-over-week revenues have declined in the last probably eight or ten weeks. [Interposing]

Andrea Wirth - Robert W. Baird & Co., Inc.

Got it, so you are just saying sequentially they are [interposing]

John Bartlett

I think if you put it on a graph, we think we will have positive growth in the second quarter, but it will probably be significantly less than the first quarter and if that continues, which we don’t know whether it will or not, but if it continues to go downward the year-over-year growth will decline each quarter through the year.

I will have a better handle at the end of next quarter where it is going to go, and if it starts declining more rapidly than it will be worse.

Andrea Wirth - Robert W. Baird & Co., Inc.

Right, right, no fair enough. That makes sense.

I don’t know if you can give us somewhat of a sense, but I am just trying to understand the magnitude of the shift in kind of what you saw from November to December. Is this kind of a case where we should maybe expect growth rates to be cut in half, so maybe we would see something more along the lines of 3% growth next quarter, or is that even a little bit optimistic?

John Bartlett

I wouldn’t be surprised at that, but I think we are really guessing.

Steve Sintros

Just keep in mind too, next quarter too you lose the extra week and you continue to have the headwind from the FS so total growth next quarter probably or very well could be negative, because for the quarter it is about a 7% losing the extra week.

John Bartlett

It’s almost 8% for the week and its one thirteenth and plus the foreign exchange so it is likely that the quarter-over-quarter revenues will be negative.

Andrea Wirth - Robert W. Baird & Co., Inc.

Sure revenues will be, but if you look at just kind of the organic growth of the rental you probably should still see positive growth, at least given how conditions are right now?

Ronald Croatti

We hope so.

Steve Sintros

Correct, correct.

Andrea Wirth - Robert W. Baird & Co., Inc.

I guess, I don’t know if you have done this type of internal analysis, but if you kind of look at the guidance range, what type of unemployment rate are you generally assuming? At this point I know it’s kind of a crapshoot, but what are you kind of looking at, 8%?

Ronald Croatti

We really don’t, I think we’re really looking at our, what we think our revenues are going to do. That is kind of tied to an increase in unemployment I guess, but [interposing].

Steve Sintros

Kind of said another way, we look at these weekly net, are we positive for the week or negative. We mentioned for the last several weeks we have been negative after taking your new sales, less your reductions, less your lost accounts. So, we kind of have a number of scenarios we look at and how far up may that continue, is it going to get better or is it going to get worse, so we look at it that way. Assuming it stays the same as kind of the bad numbers from the last eight weeks that kind of assumes unemployment is going to continue to accelerate. It is indirectly factored into our scenarios, but not necessarily in that way.

Andrea Wirth - Robert W. Baird & Co., Inc.

Sure, Okay and then I just want to switch over to margins. That is a very impressive number. I want to say, according to my mile one of the best operating margin numbers I have seen since, it looks like, ’86. I was just wondering if you could talk a little bit about how the benefits broke out. It sounds like you got some great benefit on the merchandise cost side.

It sounds like you did get a little bit extra benefit from healthcare. I wonder if you could maybe try to quantify that? Then maybe on top of that, energy costs were higher, but did you get maybe a little bit of an additional bump just because maybe energy costs were coming down a little bit, but you still had some fuel surcharge benefit?

I am just trying to understand of this 13.1% margin how much of that is really sustainable? I guess at this point how much is just some one time benefits that might not remain?

Steve Sintros

To answer a couple of those pieces of that question, on the payroll related side and the healthcare and so on, that probably helped us about ½ point. Again, as I mentioned in my scripted remarks, we have had quarters in the past that those kind of costs have jumped up and down and helped us or hurt us, so that is not what I would necessarily consider a long-term sustainable benefit.

From the energy side it was somewhat higher than over the prior year and we do expect to get the benefit of that. I think your comment was a good one and I think, as Ron alluded to, if some of our annual price increases did go through when energy was a little higher there might have been some benefit of that, but that is part of what we are seeing in our shrinkage numbers, is some of that we are forced to back off as the costs have come down.

Maybe the timing during the quarter helped us a little bit, but again, we don’t anticipate that being fully sustainable, other than the fact that the energy on the other end is going to help us.

Andrea Wirth - Robert W. Baird & Co., Inc.

Right and obviously you have done a fantastic job with your cost structure in general. I am just trying to understand what kind of level is sustainable. I mean obviously borrowing depending on a huge decline in volumes overall that could happen, do you think a margin level kind of in the 12% range would be sustainable throughout the rest of ’09?

Ronald Croatti

We are looking at each other, Andrea. I think that might be a little strong.

Andrea Wirth - Robert W. Baird & Co., Inc.

That might be a little strong. Okay, fair enough.

Ronald Croatti

That is probably my best answer.

John Bartlett

I think it is going to be affected by the revenues probably as much as the cost side, because I think the costs are going to probably be what they are. They are relatively, I won’t say fixed, but a lot of them are fixed, and as the revenues come down obviously the margins get squeezed. So, we are really concerned where the revenues are and we are doing everything we can to control the costs.

The one big asset we have had is that the merchandise continues to benefit us and I think, hopefully that will continue, because as our revenues shrink and we are not putting on new customers we don’t have to spend as much on new garments; so that hopefully will continue to help us.

As revenues go down the delivery costs don’t change too much. It is not that easy to cut a route or a driver or things of that nature.

Andrea Wirth - Robert W. Baird & Co., Inc.

Definitely, fair enough. I have one last question on headcount. It sounds like your sales force headcount is up, but is the rest of your headcount maybe actually down? I know you haven’t done actually wholesale headcount reduction, but through attrition, things like that, is your headcount actually down when you look at kind of the operations side?

Ronald Croatti

I think on the operations side we have given them a difficult time on replacing anybody, so the headcount might be down slightly. The sales force is, as I said in my scripted statement, up slightly. At this point we are in our phase two and if things deteriorate significantly we will go to our phase three and we will make headcount reductions.

Andrea Wirth - Robert W. Baird & Co., Inc.

Got it, got it. Great thanks so much, fantastic quarter.

Operator

Your next question comes from Andrew Steinerman with J.P. Morgan.

Andrew Steinerman – J.P. Morgan

The last conference call, which goes back to the end of October, when asked about the underlying organic core growth within your revenue assumptions, you had indicated 2% to 4%. I wanted to get a sense of what do you think the underlying core organic growth would be in the revenue assumptions at this point. Even is you say that we are not sure, my question is of course revenues have deteriorated, how are you confident that you are able to maintain the general range of revenues at this point?

Steve Sintros

Well I think the 2% to 4% we gave in the last call, and again I mentioned that the guidance kind of assumes a number of different scenarios that we are trying to project out based on what’s going to happen with the economy and unemployment; I still think it is a fair range. I think the higher end of the range that we provide we might be a little less optimistic about being at the higher end than we were a quarter ago, but it was still a fairly broad range. Again, given significant further deterioration and so I think we still feel we can be within that range.

I think we have some scenarios that still allow us to be between that 2% and 4% organic for the year. Considering we were 6.6% for the first quarter, that really isn’t that positive for the remaining part of the year.

Andrew Steinerman – J.P. Morgan

I think you are saying the strong start really helps get you towards the goal of 2% to 4%.

Ronald Croatti

That is exactly what we are saying.

Steve Sintros

That is exactly right, yes.

Operator

Your next question comes from Ali Mohamed with Boston Partners.

Ali Mohamed – Boston Partners

You have a buy back authorization of other peoples values of their own businesses on the M&A side isn’t coming down. The market value of yours certainly did and you seem to be executing as well as we could have imagined. Do you have any comments on the buy back?

Ronald Croatti

We don’t have any buyback authorization right now. We had a brief conversation at our last board meeting and we are going to have a meeting next week, and we may discuss it again, but there is no authorization currently.

Ali Mohamed – Boston Partners

Okay, so you are going to be discussing it at the board meeting.

Ronald Croatti

I believe so.

Ali Mohamed – Boston Partners

Okay thank you.

Operator

Mr. Bartlett, there are no further questions at this time. I will turn the call back to you.

Ronald Croatti

This is Ron. I want to thank you all for coming to our webcast and having an interest in our company. I can assure you that we are pushing forward both on the revenue side and we have a good cost containment plan to reach to projections that we have put out there.

We look forward to talking to you next quarter and may things improve in the economy.

Thank you.

Operator

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation.

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