UniFirst F1Q08 (Qtr End 11/24/07) Earnings Call Transcript

Jan. 3.08 | About: Unifirst Corporation (UNF)

UniFirst Corp. (NYSE:UNF)

F1Q08 Earnings Call

January 3, 2008 4:00 pm ET

Executives

Ronald D. Croatti - Chairman,Chief Executive Officer and President

Steve Sintros -Corporate Controller.

Analysts

David Long- William Blair

Ashwin Shirvaikar - Citigroup

Mike Schneider - Robert W. Baird

Kartik Mehta – FTN Midwest

Steve Balog - Cedar Creek Management

Operator

Welcome to the UniFirst Corporation first quarter earningsresults conference call. (OperatorInstructions) Now I’d like to turn the conference over to Mr. Steve Sintros,Corporate Controller. Please go ahead,sir.

Steve Sintros

Thank you and welcome to UniFirst’s conference call toreview our operating results for thefirst quarter of fiscal 2008 and to discuss our expectations goingforward. My name is Steven Sintros and Iam theCorporate Controller. Joining meis Ronald Croatti, UniFirst’s President and Chief Executive Officer. This call will beon a listen-only modeuntil we complete our prepared remarks.

Before I begin I would like to give abrief disclaimer. This conference callmay contain forward-looking statements that reflect thecompany’s current views with respect to future events and financial performance. These forward-looking statements aresubject to certain risks and uncertainties. The wordsanticipate, believe, and other expressions that may indicate future events andtrends identify forward-looking statements. Actual future results may differ materially from those anticipated,depending on a varietyof factors, including but not limited to performance of acquisitions,fluctuations in thecost of materials,fuel and labor, economic and other developments associated with theongoing war on terrorism, and theoutcome of pending and future litigation inenvironmental matters.

Now I will turn thecall over to Ronald Croatti for his comments.

Ronald D. Croatti

Thank you, Steve. Iwould like to welcome allof you for joining us for this review of our first quarter, afiscal period that produced record revenues and profits for our company. Steve will cover thedetails in afew minutes, but let mestart with a briefrecap.

Revenues for thefirst quarter of fiscal 2008 were arecord $247.3 million, an11.2% increase over the$222.4 million in thesame period a yearago. Themajor upside influence came from growth inour core laundries,with these operatings showing a12.5% increase. Internal growth andprice increases accounted for 8% of thelaundry’s operational increase.

Our specialty garments and first aid business which showedsolid revenue increases inlast year’s first quarter generated smaller increases inthis year’s first quarter. Specialtygarments showed a 0.4%revenue increase as compared to thesame period a yearago. TheUniTech business suffers from theeffects of certain utility customers rescheduling planned shut down periodswhich are times whenour garment cleaning and decontamination services arein priority demand, aswell as for some delayed revenue flowfrom new account installation. As we’venoted several times inthe past, thisbusiness is somewhat lumpy and ithas atendency to exhibit upsand downs. While showing reliable growthover the longterm, despite a flatinterval, we expect theunit to hit it’s revenue and profit targets for thefull year.

Our first aid business showed a2.1% revenue growth as compared to thesame period a yearago. This was about what we anticipatedbased on organizational operational changeswe are making. particularlyin regards to ourroutes service operations. We arealso in theprocess of shifting thenew business development focus of our Medique business to put moreconcentration on theinstitutional and wholesale distribution markets and we areplacing greater emphasis on securing third-party private labeling contracts forour private prestige packaging operation.

Thecombination of these initiatives with thetactical shifts itentailed have absorbed considerable time and energy during thequarter and resulted insome temporary dilution of sales numbers.

Net income for thequarter was a record$16.5 million, a 19.9%increase from the$13.7 million reported inthe first quarter lastyear. Earnings perdiluted common share were $0.85 as compared to last year’s first quarterearnings per dilutedcommon share of $0.71.

Thecore laundry businesswas the biggestcontributor to profit growth with results benefiting from lower merchandiseamortization as apercentage of revenue. Net income growthwas also aided by lower effective tax rates inthe quarter ascompared to the sameperiod a yearago.

Our corelaundry operations continue to drive thecompany’s growth and during thequarter we saw good results from both our professional sales and nationalaccounts selling teams. Our floor reps inparticular continue to benefit from thesales automation tools we’ve installed and experienced better contact andclosing ratios as aresult.

Even though we’ve held theline on pricing during thequarter, the number ofnew accounts closed was up as compared to thesame period a yearago. Part of this was due to increasedrep head count and lower turnover, but also resulted from smarter and moreefficient selling. Theaverage account size for new sales continues to trend up and our overallselling ratio held fairly steady, again reflecting efficiency improvements inthe selling process.

Weekly averages were up inall regions and we sawgood balanced product inour new business. Facility serviceproducts continue to growin importance as arevenue category. This category growthis further aided by results from our route sales team which did agood job of adding thesame items as new or expanding services atour current customers.

One thing we did seein thequarter, however, was anincrease in reductionsover our ad matrix for current accounts, indicating that we’re starting toexperience some softening inemployment and usage atcurrent accounts. While this doesn’tnecessarily raise acaution flag for thequarters ahead, itdoes support the factthat the overalleconomic conditions have slipped since our last quarterly report, and thatsimply means that there areuncertain times ahead which call for constant monitoring and careful management.

Most of theexperts don’t believe arecession is likely. Theconsensus does point to economic growth of only about 2% for 2008. That means thesoftening trend in theprivate sector jobs islikely to continue. Thelatest report from theBureau of Labor Statistics shows November unemployment unchangedat 4.7% but with sloweconomic growth and rising producer pricing, plus theongoing triple whammy of higher oil prices, lack of credit availability andslumping housing prices affecting consumers, we think both business andconsumer confidence is likely to slip further. That means that maintaining our first quarter revenue growth for thebalance of the yearmay be adifficult task.

Still, difficult conditions arenothing new to us and we feel that allour business units arepositioned to sustain momentum, even insluggish markets. Sobarring a seriousfurther deterioration of economic conditions, we remain optimistic that we canstay on track towards achieving our previous supply guidance targets. Inthat spirit, we look forward to thechallenges the yearwill present and to being able to report our progress to you each quarterahead.

Now to fill you inon our financial details, I’ll turn itback over to Steve.

Steve Sintros

Thanks, Ron. As Ron discussed, we had a very strong start to fiscal 2008. Consolidated revenues for the first quarter of 2008 were a record $247.3 million, an 11.2% increase over the first quarter of 2007. First quarter net income was $16.5 million or$0.85 per diluted common share compared to the first quarter of fiscal 2007 where netincome was $13.7 million or $0.71 per diluted common share.

The company’s performance was primarily driven by strong results for our core laundry operations which includes our U.S. and Canadian rental and cleaning business,our garment manufacturing business, and our distributions and corporateoperations.

Income fromoperations from our core laundry operations grew 26.1% from $22 million in the first quarter of 2007 to $27.7 million in 2008. As a percentage of revenues, income from operations from the core laundry increased from 11.1% in the first quarter of 2007 to 12.5% in the first quarter of 2008. The growth and profits in the core laundry operations was primarily the result of strong revenue growth. Revenues from the core laundry operations increased 12.5% in the first quarter of 2008. 8% of the growth was due to organic growth and priceincreases while 3.4% was due to acquisitions, primarily the acquisition of Western Uniform and TowelService, which was completed in September 2007. Fluctuations in the Canadian dollar exchange rate also accounted for 1.1% of the overall growth of the core laundry operation.

The increased profit margin of the core laundry operations primarily relates tolower merchandise cost as a percentage of revenues. In addition, production and administrativepayroll costs decreased as a percentage of revenues compared to the first quarter of fiscal 2007. These positive cost comparisons were partially offset by higherselling and healthcare related costs.

The first quarter revenues of our specialty garment business were upslightly from $17.2 million to $17.3 million; however, the income from operations of this segmentdeclined from $2.9 to $2.1 million. Thisdecline is due to higher merchandise costs associated with the number of new customer installations.

In addition, the company’s European operations were affected by a delay in a funding for a large decommissioning project. Certain other costs were also higher than in the higher period, but nothing that we view as an indicator of longer term profitabilityconcern and we’re still optimistic that the full year performance of this operatingsegment will contribute to both our overall revenue and profit growth.

For the first quarter of fiscal 2008, revenues fromour first aid segment increased 2.1% from $7.7 million to $7.9 million. The income from operations for this segment,however, decreased from $0.6 million in 2007 to breakeven in fiscal 2008. As Ron discussed, this segment is making operational and organizational changes which resulted in some additional costs and minor salesdisruptions in the near term.

In addition, this segment’s profitability decreased due to some inventorywrite offs as well as the sales mix that resulted in lower margin sales compared to the first quarter of fiscal 2007. We continue to believe that over the long term, this segment will be a valuable contributor to the company’s overall growth.

Consolidated depreciationand amortization was 5.2% of revenues for the first quarters of both fiscal 2008 and 2007and net interest expense increased from $2.9 million in the first quarter of fiscal 2007 to $3 million in fiscal 2008 but was down slightly as a percentage of revenues.

The provision for income taxes decreased from 39.3% in the first quarter of 2007 to 38.5% in fiscal 2008. On an ongoing basis we expect our income tax rate will be approximately 38.5% for the balance of fiscal 2008.

The financial position of UniFirst continues to be very strong. Merchandise and service increased from $86.1 million at August of 2007 to $93 million at November of 2007. This increase was primarily due to the acquisition of Western Uniform as well asincreases in safety merchandise and service, primarily flame resistant garments whichcontinues to be a high growth market for us.

Net property andequipment increased from $334.1 million at August of 2007 to $341.1 million at November of 2007 due to capital spending in the first quarter of $14.8 million. We now anticipate capital spending will be approximately $55 million in fiscal 2008.

We also expended $36.6million on acquisitions during the first quarter of fiscal 2008, the largest being Western Uniform which had itsheadquarters in Wichita, Kansas and serves customers throughout Kansas as well as partsof Oklahoma from a total of seven facilities. Wecontinue to work towards integrating Western Uniform’s locations intoUniFirst’s systems and processes. Asalways, UniFirst will continue to aggressively pursue other acquisitions thatwe believe will enhance our operation.

Total debt increasedfrom $206 million at August of 2007 to $234.5 million at November of 2007. Total debt as a percentage of capital also increased to31.2% at November 2007 from 29.3% at August of 2007. These increases were primarily due to the acquisition of Western Uniform.

Looking ahead,despite uncertain economic conditions, we feel the remainder of 2008 will produce solid resultsfor UniFirst. In our October call we communicated that ourpreliminary guidance for fiscal 2008 was that revenues will be between $980 million and $990 million andthat income per diluted common share will be between $2.60 and $2.70. At this time, our guidance for the year remains unchanged.

We would like againto call your attention to the fact that fiscal 2008 will be a 53 week year and these projections include an extra week of revenues and profits comparedto fiscal 2007. This extra week willfall in the company’s second fiscal quarter.

This concludes ourprepared remarks and we will now be pleased to answer any questions that you mayhave.

Question-and-AnswerSession

Operator

(Operator Instructions) Our first question comes from theline of David Lin with William Blair. Please go ahead.

David Lin - WilliamBlair

Can you provide alittle bit more coloron the 140 basis pointyear over year gain inthe laundry operatingmargins? How much ofit came from thereductions inmerchandise amortization, how much iscoming from automation improvements atthe Kentucky plant, therollout of handhelds, and how much can we expect this to continue throughout thebalance of the fiscalyear? Arewe eventually going tosee themerchandise amortization reductions start to dissipate alittle bit?

Steve Sintros

Ithink the bulk of thatimprovement was from themerchandise cost. There were somebenefits with respect to production, payroll, and administrative payroll. Again, I think your reference is agood one to some of theautomation. Butthe bulk ofit was from themerchandise. Some of this trend, I thinkwe would expect will start to turn atsome point during theyear. Atwhat point, it’s unclear. With thestrong growth that wehave, it is inevitablethat garments will begoing into service and that will start to ratchet back up again and that’s howthings have gone over thelast several years. Ittrends up and down andwe’re at agood point right now.

I don’t think it’ll allgo away during theyear. That really takes time for itto happen, sowe probably maintained some of that benefit, but to what extent it’s tough toput our finger on. Inaddition, we anticipate that thefuel will become alittle bit more of afactor as the yeargoes on. Itreally didn’t hurt ustoo much in thefirst quarter given our growth but we expect that tocontinue to be anuphill battle as theyear goes on.

David Lin - WilliamBlair

What is energy asa percent of revenuesnow, since you brought itup?

Steve Sintros

Thefuel and natural gastogether Is a littlebit under 4%, David.

David Lin - WilliamBlair

In thefirst quarter?

Steve Sintros

In thefirst quarter.

David Lin - WilliamBlair

You guys mentioned that you’re still expecting inthe specialty garmentsdivision to hit your targets infiscal 08. Does that mean thatyou expect margins inspecialty garments to behigher than the 7.6%achieved in fiscal2007?

Steve Sintros

I think itwould have to be for theremainder of the yearto get to thepoint where we can obviously beat last year’s numbers. Some of thethings that happened inthe first quarter weresome delay of certain work and I think certain one-time costs that we don’texpect to be atrend so ourmanagement there is pretty confident that they can meet their budgetgoals. I don’t think we’re quite asconfident as they arebut we still think that they can meet and beat their overall numbers from lastyear. I don’t know, Ron, if you want toadd anything.

Ronald D. Croatti

I think that’s totally right. I think itcenters back into theUK, their large decommissioning project started slightly and then thefunding was held back and we expect that funding to come through and thatrevenue will pick us up and improve that margin we’re doing inEurope.

David Lin - WilliamBlair

Ron,you mentioned the UK. Arethere any new developments with establishing aplant there?

Ronald D. Croatti

We arein theprocess of working on it. We’re inthe permittingprocess.

David Lin - WilliamBlair

Finally, I was alittle surprised that you didn’t raise your guidance atall. Isthere any particular quarter that you’re expecting alittle bit more weakness than wasoriginally thought?

Ronald D. Croatti

Normally our second quarter is our weakest quarter. TheUniTech division generally loses money during that quarter and I think I triedto mention it inmy comments. We’re seeing that shrinkageof our warehouse increasing and that’s aconcern for us. We just have to sellthat much more to try to make that up. We’re cautious on that side.

David Lin - WilliamBlair

You were alittle cautious last quarter but you seemed to power through itin thefirst quarter.

Ronald D. Croatti

We powered through it. Exactly what happened. We poweredthrough it with acouple of good sales.

Operator

Our next question comes from theline of Ashwin Shirvaikar - Citigroup. Please go ahead.

Ashwin Shirvaikar - Citigroup

Hi. Thanks for takingmy question and congratulations on afabulous quarter.

Steve Sintros

Thanks Ashwin.

Ashwin Shirvaikar - Citigroup

Does your CapEx include theproposed UKplant for UniTech that you talked about?

Ronald D. Croatti

Yes itdoes.

Ashwin Shirvaikar - Citigroup

Soyou do expect that tohappen this fiscal year.

Ronald D. Croatti

We hope so.

Ashwin Shirvaikar - Citigroup

Thenew client inspecialties, was that allthe decommissioningproject basically or is that thenew contract withcontinental Europe as well?

Ronald D. Croatti

It’s acombination of three things. It’s acombination of thedecommissioning and cleanup project atUK, it’sgetting more reactor sites which we addressed inthe UKwith British nuclear fuels, and we’re hoping that we can pick up asmall contract once again inFrance. That’s what theboys are telling uswhy they’re still optimistic.

Ashwin Shirvaikar - Citigroup

Mylast question is with regard to thefirst aid business. When doyou expect the reorganizationto be complete?

Ronald D. Croatti

I think we’ve taken thereorganization and moving thepeople around – it is prettymuch done. Itwill be done by theend of the month. It’s developing thesales team and changingthe concept of theway they were selling to getthe growth going thatwe’d like to get goingand that will take alittle longer. That’s going to takeanother six months atleast.

Ashwin Shirvaikar - Citigroup

Okay. Soanother six months ofthat and once that takes off, if that happens, what kind of margins should weexpect?

Ronald D. Croatti

I think we should expect thegrowth to get nearthat 8% to 10% range and we would expect themargins to return to where they were. Maybe even alittle better than where they were.

Operator

Our next question comes from theline of Mike Schneider with Robert W. Baird. Please go ahead.

Mike Schneider -Robert W. Baird

Happy New Year, guys.

Ronald D. Croatti

Happy New Year, Mike.

Mike Schneider - Robert W. Baird

Ron, maybe you could just go back to acomment that you said acouple nice wins helped you power through thedeterioration during thequarter. By that did you mean you signedor installed a couple bignational accounts this quarter?

Ronald D. Croatti

We have. We got theminstalled. We basically inked them lastquarter but we were able to take advantage of therevenue build up this particular quarter.

Mike Schneider - Robert W. Baird

Were they fully installed this quarter or will there besome incremental gain next quarter?

Ronald D. Croatti

They were pretty much fully installed this quarter.

Mike Schneider - Robert W. Baird

National accounts then as apercent of revenue now? Itmust be running at8% or 9%?

Ronald D. Croatti

You got it. You’reright there at about 8.5%range.

Mike Schneider - Robert W. Baird

Add stops to go back to that, themonthly trend, did itactually deteriorate through thequarter?

Ronald D. Croatti

Itdeteriorated through thequarter, Mike. I know you follow thosenumbers. We have seen adeterioration greater each month.

Mike Schneider - Robert W. Baird

How about since November? What have you seen through December?

Ronald D. Croatti

December was not good. This week is probably going to bethe worst week of theyear for us. People don’t lay off thelast two weeks of December and we expect apretty good sized hit this week. It’s aconcern of ours. Again, going back toour business, we do alot of street business, and alot of that street business was related to thehousing business, the airconditioner, theplumber, and soforth. They’re not replacing thesepeople. That’s what we’re seeing,although our Region 4, our Floridaregion, is the hardesthit. That’s pretty unusual because usually that builds up this time of year withall thesnowbirds going down there and that region’s hard hit for some reason.

Mike Schneider - Robert W. Baird

Sothen in terms of yourinitiatives on thesales force, it soundslike things areunfolding as you would have hoped interms of head count increases, turnover being down etc. I guess I’m still perplexed as to how theorganic growth, that 8%, was able to overcome thedeterioration in theadd stops. I presume new account salesmust be running near20% this quarter up from 15 last quarter?

Ronald D. Croatti

Not quite. We putthrough a pretty goodprice increase too probably near theend of September to compensate for theincrease we saw coming inthe fuel and oil sowe made a pretty heavyadjustment in that andthat helped us along and as you well know, thesales organization hasreported directly to meand I’ve been pounding sales like no tomorrow and we’re getting theresults.

Mike Schneider - Robert W. Baird

Pricing now, historically theindustry I guess ransomewhere just over 2% inthe last three to fiveyears have been running at1%. Doyou think you canreachieve that 2% to 3%rate?

Ronald D. Croatti

We could tell you we did better than 2% for thequarter.

Mike Schneider - Robert W. Baird

Okay and then theselling ratio, you mentioned inthe release thatselling costs were higher but yet you made thecomment in your preparedremarks that theselling ratio held flat during thequarter. Can you reconcile those? I imagine they’re different numbers.

Ronald D. Croatti

Well I think we look atit two differentways. We look atit as apercentage of sales and then we look atit as amultiple of new business that we write. I think you’ve heard memention this numerous times. What ourselling cost is andwhat our dressing costis and when we put those two together we use that to basically look atour acquisition cost. We think whatwe’re saying is that as apercentage of revenue theselling cost hasgone up but because our head count hasgone up, reps under management plus thebetter sales performance that we have been getting out of our people haslowered the ratio sofor every $1 of business that we’re writing, all-inis down slightly.

Mike Schneider - Robert W. Baird

On themerchandise costs, it’s been my experience, I’ve been following these companiesfor almost a decadenow, that is iforganic growth is accelerating, themerchandise costs as apercent of sales accelerates as well and then vice versa, you getrelief when organic growth is slowing down inthe laundrydivision. That didn’t happen thisquarter but we’ve seen itfor the last severalquarters that merchandise hasbeen favorable for youbecause the organicgrowth rate hasbeen decelerating. This quarter itaccelerated and yet itwas still aboost. Isthere something unusual about thenational accounts that were rolled out this quarter? Isthere something unusual about themix?

Ronald D. Croatti

No, not really. Ithink as long as youkeep writing more and more new business theamortization rates can stay inline but when you getless new business coming inthe door thatamortization rateclimbs.

Steve Sintros

I think there’s alittle bit of a lag aswell, Mike, and I think that’s partially why with our guidance we’re being alittle cautious because like you said, we had agood quarter writing new business and we don’t expect that that margin benefitfor the merchandise isgoing to be there allyear, especially to theextent that itwas.

Mike Schneider - Robert W. Baird

Okay. That’s helpful.That’s all I’ve gotfor now. Thank you guys and greatquarter again.

Steve Sintros

Thanks Mike.

Ronald D. Croatti

I guess I should add you guys areprobably wondering where John is. Mr.Bartlett is on vacation inEurope and hewill be returning nextweek.

Operator

(Operator Instructions) We have afollow up question from theline of Mr. Mike Schneider. Please goahead.

Mike Schneider - Robert W. Baird

Ron, just one final one. You mentioned that facility service products aregrowing in importanceas a percent ofrevenue. Doyou have some of those breakouts now given that thedivision has beengrowing?

Ronald D. Croatti

I don’t think we’ve ever put those out, Mike.

Mike Schneider - Robert W. Baird

Allright. Doyou care to give us aballpark?

Ronald D. Croatti

You know as apercentage of revenue I think we’re still strongest inthe garment. We’re over 60% garment.

Mike Schneider - Robert W. Baird

Okay. Thank youagain.

Operator

Our next question comes from theline of Kartik Mehta – FTN Midwest. Please go ahead.

Kartik Mehta – FTN Midwest

You talked alittle bit about theeconomy in Floridaslowing and you talked about maybe theadd stops weakening. Is itall related to housingor have you seen other sectors slow as well that is having animpact on that?

Ronald D. Croatti

I really can’t qualify it. All I can tellyou is some of theother companies have alarger national account than we doand maybe it’s more automobile related and maybe they’re not seeing it. Again, we’re thestreet business company. We doa lot of business withthe plumbers, theair conditioning guys,the electricians, and soforth down the lineand we see thatshrinkage happening inthere.

I think thehousing market in theFlorida area, thetrades down there arepretty slow. We don’t domuch restaurant business. Some of ourcompetitors do. We didn’t getthat pick up that we normally getwhen the snowbirds goto Florida. We actually had shrinkage down there thisyear where normally we geta pick up.

Kartik Mehta – FTN Midwest

Ron, theother thing you mentioned that I found interesting was you said you were ableto push a prettydecent price increase through. Is thisjust a normal priceincrease or was this because gasprices are going up,energy prices aregoing up?

Ronald D. Croatti

I think we pushed something through because we saw stuffcoming, gas going up,and we wanted to getahead of the curve.

Kartik Mehta – FTN Midwest

You would think inthis environment no attrition as aresult or normal attrition? Nothing out ofthe ordinary?

Ronald D. Croatti

Sofar it’s been normal. But these things taketime to react. To this point I’d sayit ‘s normal.

Kartik Mehta – FTN Midwest

Thank you very much.

Ronald D. Croatti

Allright.

Operator

Our next question comes from theline of Steve Balog with Cedar Creek Management. Please go ahead.

Steve Balog - CedarCreek Management

On that last point, I wascurious about this price increase and what push back or loss of clients you sawon that. Does that show up right awaywhen you go seesomebody or does ittake them a while, acouple of months for thecontract to roll out andfor them to look around for another vendor? Sowhen might we see theripple effect from that?

Ronald D. Croatti

I think it’s basically aripple effect. We basically follow ourrental agreements. Our rental agreementsare worded sothat we can put more specialty charges on I guess you would call it, and we’veimplemented a higherspecialty charge to anticipate thefuel going up which ithas, along with our normal price increases.

Steve Sintros

But also to answer your question, I think it’s hardest hitas far as customer push back right away but there is alag on it and we will seethe effects of thatover the next quarteror two, but at areduced rate.

Steve Balog - CedarCreek Management

Arethese special charges unusual for you all? I was under theimpression that one of your strategies was asimple bill, not a lotof nickel and diming on stuff.

Ronald D. Croatti

Well, our basic strategy is asimple bill, but we anticipate gasoline going at$3.50 a gallon and ournatural gas costs keepraising. We had to make amove and sobe it, really.

Steve Balog - CedarCreek Management

Doyou see anything fromcompetitors? Arethey following and everybody breathing asigh of relief that somebody took thefirst step? Or actually were you thefirst step or are you thesecond guy? What’s thecompetition look like?

Ronald D. Croatti

I really can’t answer that.

Operator

There areno further questions atthis time. I’ll turn thecall back to you, sir.

Ronald D. Croatti

Very good. Well, Icertainly appreciate you following thecompany and theinterest in thecompany and we look forward to talking to you next quarter and we areconfident that we will hit our numbers for theyear. As we keep moving along we willkeep the sales comingthrough the door andhopefully we can overcome theshrinkage problem that thecountry is experiencing with theeconomy. Thank you much.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!