UniFirst Corporation (UNF) Q4 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter UniFirst Corporation Conference Call. [Operator Instructions] I would now like to turn the conference over to Steven Sintros, Chief Financial Officer. Please go ahead, sir.

Thank you, and welcome to the UniFirst Corporation Conference Call to review our fourth quarter and full year results for fiscal 2012 and to discuss our expectations going forward. I'm Steven Sintros, UniFirst's Chief Financial Officer. Joining me is Ronald Croatti, UniFirst President and Chief Executive Officer. This call will be on listen-only mode until we complete our prepared remarks. Now before I turn the call over to Ron for his comments, 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 factors, including, but not limited to, the continued availability of credit and the performance of the capital markets; the performance of acquisitions; fluctuations in the costs of materials, fuel and labor; and the outcome of pending and future litigation and environmental matters. I refer you to our discussion of these points 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.

Thank you, Steve. And welcome to our review of UniFirst fourth quarter and full year results for fiscal 2012. 2012, as we know, was the fourth consecutive year of worldwide economic instability and uncertainty. And as a result, it was, to say the least, a year filled with market challenges. But despite this continued adversity, I am happy to report that fiscal 2012 was another year of record financial results for UniFirst. Steve will be going over both the fourth quarter and full year numbers in detail, but here's a quick rundown of our full year performance. For fiscal 2012, UniFirst revenues were a new record, $1,256,000,000 a 10.8% increase from the 2011 $1,134,000,000. Net income also climbed to a new high at $95 million, a 24.2% from last year's $76.5 million. Once again, I'd like to thank our entire management team, our thousands of Team Partners throughout North America and Europe for their tremendous work all year long. Their individual and combined efforts contributed notably to our record-setting year in 2012 and helped UniFirst lead our industry in customer service and product quality. Our core laundry operations, which make up the lion's share of UniFirst business, reported 11.6% year-over-year revenue increase to $1,112,000,000 in 2012. The gain was primarily the result of steady growth throughout the year associated with increased consistency in the delivery, high quality customer service and customer satisfaction, as well as solid new sales from our professional field reps. Operating income for our laundry has increased by 26.1% to $133.3 million in 2012 when compared to 2011, largely due to improved operating leverage as a result of our strong growth. Meanwhile, our specialty garment business, which provides workwear, safety products, service to the nuclear cleanroom industries, reported essentially a flat revenue and a 12% operating income dip in 2012 from last year. UniTech, the nuclear arm of our specialty garment division, generated quality 2012 results in the U.S. market, in particular by capitalizing on several 10-year reactor maintenance shutdowns, which offered larger than normal servicing opportunities and also by converting lower disposable safety garment customers to our smarter lease and laundering service alternatives. Our nuclear team also showed modest growth in the European market, as well as direct sales, safety product programs in all markets served. The specialty segment was challenged in the Canadian market, however, due to the completion of a sizable nuclear reactor rebuild project in the fourth quarter, major accounts have generated significant revenues from this segment over the last couple of years. UniClean, the cleanroom division and Specialty Garments segment expanded their U.S. market presence in 2012 with the opening of a new West Coast operation and continued to add new service lines to the diversified offering of cleanroom business solutions. Once focused solely on laundry and processing, cleanroom garments today UniClean provides a wide variety of services for their niche customer base. And like our core laundry business, our first aid operations reported strong year-over-year increases in both revenues and operating income in 2012. First Aid revenues increased 21.7% and operating income improved a healthy 47.6% over 2011. Throughout the year, this segment capitalized on improved programs, sales opportunities associated with employment stabilization. They offered new lines of value-added products and services for their business customers, and they benefited from ongoing expansion of the industrial distribution channels, as well as from increased demand from over-the-counter private label products. So now we look forward to UniFirst's expected performance in fiscal 2013, and we do so with guarded confidence. We expect both our core laundry and our First Aid group to maintain positive growth trends throughout the coming year, while we anticipate our specialty garment business to continue with their challenges to replace the Canadian revenue I mentioned earlier in market conditions we cannot fully control. And when we speak of market conditions we cannot control, we are not optimistic about seeing any dramatic improvement over the next 12 months, given the volatile, economic and political contentious work tasks [ph]. Given the 2013 projects for continued high -- given the 2013 projections for continued high unemployment, slow-to-no job growth, lack of consumer confidence and high commodity and fuel costs worldwide, we expect if there are any market improvements at all in the coming year, they will be minimal at best. So we plan on succeeding in 2013 by effectively executing the detail laid out in our Vision 2020 strategic growth plan. This, of course, includes an unwavering commitment to service excellence, new sales efforts as key drivers for organic growth and we'll consider any possible business acquisitions to meet criteria as consistent with our long-term costs. Our customer service teams coast-to-coast will continue to focus on service certification programs to refine their skills to help UniFirst maintain the highest customer satisfaction levels possible. Our sales folks will continue to focus on a curriculum of prospecting and productivity training programs. We'll continue to benefit from our proven, consultive approach to selling new business, which is not always about making the sale today. Our national account organization, which now routinely goes up against increased and more aggressive competition, will continue to focus on relationship building, adding in new products and services to make good sense for our current national scale business customers, and they'll focus on value-based partnerships, selling to capitalize on new larger scale opportunities. On the corporate level, to help maintain our leadership position in product and service quality, we will continue to focus on expanding our ISO 9001:2008 certification programs as an integral component of our continuous improvement in quality insurance claims, and investing in emerging technologies to directly benefit our operational efficiencies and our customers. UniFirst has products, services and cost-effective business solutions that are necessary in today's marketplace, no matter the economic environment. Our Team Partners are proven experts in delivering true value to our end users. Together, we expect UniFirst to prosper in 2013, continue producing short and long-term results for our shareholders. We look forward to reporting to you on the company's progress in the quarters ahead, and now let me turn it over to Chief Financial Officer, Steve Sintros, for a more detailed review of our 2012 numbers.

Thanks, Ron. Revenues in the quarter were $312.4 million, up 7.4% from $290.9 million from the fourth quarter a year ago. Net income for the quarter was $22.5 million or $1.13 per diluted share compared to $18 million or $0.90 per diluted share reported in 2011. Revenues for the full year were $1.256 billion, up 10.8% from $1.134 billion in 2011. Net income per diluted share for the full year was $4.76 compared to $3.85 in the same period a year ago. Full year fiscal 2012 results include the positive effect of a settlement related to environmental litigation, which resulted in a $6.7 million pretax gain in our third quarter that was recorded as a reduction of selling and administrative expenses. Diluted earnings per share for the full year, adjusted to eliminate the effect of the gain, was $4.55, up 18.2% from 2011. Core laundry revenues grew 8.6% overall and 8.9% organically for the quarter compared to the fourth quarter of fiscal 2011. The calculation of organic growth excludes the impact of acquisitions, which contributed 0.1% and a slightly weaker Canadian dollar, which negatively impacted revenues 0.4%. Sequentially, core laundry revenue organic growth rates dropped from 10.9% during the third quarter of fiscal 2012. The decrease in sequential growth rates is due to several factors. During the quarter, we began to annualize the impact of certain price adjustments related to higher fabric costs a year ago. In addition, although the protective garment market remained strong, the growth in this product line is moderating. Also, additions versus reductions were slightly negative for the second consecutive quarter, providing a small drag against growth. Operating income for this segment increased 34.4% compared to a year ago. The operating margin for the core laundry business increased to 12.3% during the quarter, up from 9.9% in 2011. This increase in operating margin for this segment was due to the improved operating leverage as a result of the strong revenue growth. Production costs, depreciation, energy, as well as selling and administrative costs were lower as a percentage of revenues compared to a year ago. Energy costs for the quarter were 5.2% compared to 6% for the fourth quarter of 2011. Both fuel for our fleet of delivery vehicles, as well as natural gas costs were lower compared to the same quarter a year ago. This segment's results also benefited from a reduction in reserves for workers' compensation and other insurance-related liabilities of approximately $1.9 million, due to changes in actuarial estimates related to outstanding exposures. The positive impact of these items more than offset the effect of merchandise amortization, which continues to be higher as a percentage of revenues. The increase in merchandise costs during the quarter is primarily the result of continued growth in our Flame Resistant and High Visibility product lines. Revenues for the Specialty Garment segment, which consists of nuclear decontamination and cleanroom operations, were $19.7 million for the fourth quarter, down from $23.4 million in fiscal 2011. This segment had a loss from operations of $0.7 million in the quarter compared to operating income of $1.8 million in 2011. The decrease in revenues and profits in this segment were primarily the result of the completion of 2 large power reactor rebuild projects, as well as fewer power reactor outages during the quarter. As we have discussed previously, this segment's revenues and profits can fluctuate from quarter-to-quarter based on the seasonal timing of project, power reactor outage activity, as well as the mix of products and services we provide to our customers. First Aid segment revenues increased 35.5% to a record $11 million in the quarter compared to $8.1 million in the same quarter a year ago. Income from operations for this segment increased to a record $1.4 million from $0.4 million in 2011. The top and bottom line growth in this segment are the result of improved performances from both its pill packaging and wholesale distribution operations during the quarter. The effective income tax rate for the fourth quarter of fiscal 2012 was 36.5% compared to 35.8% in the fourth quarter of fiscal 2011. We expect our fiscal 2013 effective income tax rate to be between 38% and 38.5%. Our balance sheet and overall financial position continue to be very strong. At the end of the fourth quarter, the company had $120.1 million of cash and cash equivalents on hand, up from $48.8 million at the end of fiscal 2011. Of this amount, $52.5 million is in Canada and intended for investments outside of the United States. As of the fiscal year end, total debt was $104.7 million, and total debt as a percentage of capital was 10.5%, both down from $120.3 million and 13.1%, respectively, at the end of fiscal 2011. For the full year, cash provided from operating activities was $161.7 million, up 87.6% from $86.2 million in the same period a year ago. The increase is primarily due to higher net income as well as lower working capital cash outflows as anticipated. Capital expenditures for fiscal 2012 were $74.5 million. As we discussed in the prior quarter, higher capital expenditure levels are partially the result of costs related to our Unity 20/20 CRM project, which kicked off in our third quarter. We expect capital expenditures for fiscal 2013 to be between $85 million and $90 million. Of this total, approximately $15 million to $20 million is expected to be expended related to the CRM project. In addition, we continued to invest in planned updates, expansions and automations that will allow us to achieve our strategic objectives. Although we did not complete any acquisitions during our fourth quarter, we continue to evaluate targets as acquisitions remain an integral part of our plans to grow market share, as well as expand our overall operating margins. As always, we would like to take this opportunity to provide you with our outlook for the upcoming fiscal year. First, we would like to note that fiscal 2013 will be a 53-week year compared to a 52-week year in 50 2012. This nuance in our fiscal calendar will have the impact of increasing revenues and operating income approximately 2% compared to fiscal 2012. The extra week will fall in our fiscal fourth quarter. We project that our fiscal 2013 consolidated revenues will be between $1.325 billion and $1.338 billion. In addition, we estimate our diluted earnings per share for fiscal 2013 will be between $4.65 and $4.85. This guidance assumes core laundry growth rates to be between 7% and 8% during fiscal 2013. Just to be clear, these growth rates include the impact of the extra fiscal week. Full year fiscal 2012 operating margin for the core laundry operations was 11.4% when excluding the impact of the $6.7 million gain as I discussed earlier. The midpoint of our fiscal 2013 guidance assumes an operating margin for the core laundry operations, slightly above this adjusted fiscal 2012 margin, and operating income growth of approximately 9%. Also embedded in this guidance is a projected decline in the revenues and operating income of our Specialty Garments segment of approximately 10% and 20%, respectively, compared to fiscal 2012. The primary cause for this decline is the completion of reactor rebuild projects that bolstered this segment's results in fiscal 2012 and 2011, in addition to an unusually low outage schedule for fiscal 2013. The results of our nuclear business have always been volatile as a result of the sporadic nature of project-based work that supplements this segment's reoccurring business. We expect the outage activity, as well as further project-based work to pick back up in fiscal 2014 and beyond. This completes our prepared remarks, and we'll now be happy to answer any questions that you may have.

[Operator Instructions] Our first question comes from the line of Andrew Steinerman.

When thinking about the components of your core laundry growth, not including add stops, I can't help but thinking about the pathway of merchandise amortization, which has been a headwind for a while. It might, I'm guessing, even be kind of peaking here. How was merchandise amortization, which I surely realize is a luxurious problem to have, in the fourth quarter? And how does it help frame your 2013 guidance, especially given that you still think margins will be good?

Good question, Andrew. As we have talked about over the last couple of quarters, our merchandise amortization we did feel was peaking. We feel it has peaked. The fourth quarter had about a 1%, 1.1% headwind related to merchandise compared to the prior year. Our forecast for fiscal 2013 at the midpoint anyway, assumes relatively flat merchandise impact year-over-year. So it really -- we feel it has peaked, and we're starting to annualize the increases. And it should start to flatten out for us.

Right. And when you say merchandise instead of merchandise amortization, you've got to mean everything all-in will be flat for next year, even considering the kind of the commodities input into the garments, right?

Correct. It really is merchandise. It's really all rolled into that merchandise amortization number, but you're correct.

Our next question comes from the line of Nate Brochmann.

Just wanted to talk a little bit, I understand obviously the add-stop metric kind of little bit negative goes a little bit positive, so kind of hovering right around kind of flat and clearly, the anticipation isn't for anything better. But obviously, you guys are still putting up really good revenue numbers. Can you talk just a little bit about whether that's penetrating some customers or whether that's going out there and getting new customers on kind of the nonprogrammer side, and a little bit about just where the sales efforts are in driving those good numbers?

Nate, this is Ron. The sales efforts are consistent, we basically like to pursue the -- what we call the street business, the B and C type accounts. Again, that -- there's still opportunity in that with no programmers or people who purchase. And obviously, we convince them we have a better alternative. As far as the wearer reductions, it's pretty hard to pinpoint exactly where they're coming from. The only thing I can tell you is they're slightly negative last quarter, and they're slightly negative the first 6 weeks of this year. The only real positive signs we see is out of oil patch.

Okay. And then just a second question on pricing, how are you guys seeing pricing on that new business and then also if you could separate that with what you're seeing on renewals.

I think, Nate, basically you are pricing I think the -- all the competition is tightened up on pricing, particularly on the street business side. It's a little more aggressive on the National Account side. And I think everybody is trying to improve their margin. I guess that's my best answer.

Our next question comes from the line of Andrew Whitman.

Steve, just something on the inventory. It looks like the inventory was cash-additive, really, in the quarter despite obviously good growth rates. Just wanted to get your understanding or do a little more detail about what's happening there. Is that because we're seeing the cost of your merchandise going down or is that really just better inventory management or something else?

Yes, it's really the kind of leverage is off there. The first question we answered that the merchandise is really peaking. We've talked in the last couple of years that the higher merchandise we've been experiencing is partially due to the strong growth, but partially due kind of to the reinvestment in merchandise coming out of the recession where we were able to reutilize a lot of used garments and kind of rebuilding those inventory levels. When you look at our merchandise and service over the years, it really kind of cycles through different economic times. So when you look at that balance sheet amount and you're correct, from the third quarter to the fourth quarter, that merchandise and service balance sheet item decreased slightly, and that's really the signal that our -- the trend in our merchandise cost has kind of peaked and so that's consistent with what we're saying is our expectation for next year. I think what we always have to remember is that there are really 2 components of our merchandise needs, part of it is for new account sales and part of it is for replacement garments for our existing accounts. And that second piece really cycles during different economic times. So we've rode through the high cycle, and I think it's starting to turn now.

Okay. That's helpful. And just to kind of follow up on Nate's question, I was just wondering if you could characterize the growth. Was it mostly from competitive wins or was it new business that's in the market? I just wanted to get the composition of that, I know it's kind of been around 50-50 maybe 60-40 recently, but just understanding how that dynamic is playing out, I think, gives us a sense about the health of your end markets.

Andrew, I think the answer to that one is it hasn't changed significantly. It's about 60-40 at this point.

Okay. 60% with competitive win?

That's correct.

Okay. Is it -- and then I guess, Ron, a question for you. Lots of uncertainty with the election here in November and potentially tax rates going up for gains, dividends. The balance sheet is now in a cash surplus position. Obviously, you've got opportunity to invest in the business, but probably, I think even in your view that there's even more capacity after that. Does the year end or does the uncertainty in the election or the election at all have any impact about how you think about the timing and amount of your balance sheet cash today?

I would say we're always looking at that. We certainly have a couple of options with our cash. Obviously, first thing is acquisitions or what we consider is stock buyback at the right circumstances we would do that. So -- and like you say, it's uncertainty who's going to win this thing. The future of the direction and we have, in my view, 4 more years of Mr. Obama, is going to be a tough 4 years.

Yes, okay. Maybe I'll just finish up with one final question, Steve, just on the guidance and looking at energy. How should we think about the level of energy that's baked in there at the midpoint? Is that flat over -- on a year-over-year basis or how should we think about that?

When you look -- yes, when you look at the guidance, it actually is essentially flat, and that's kind of a mixture of fuel costs coming up a little bit, natural gas costs assuming that those remain relatively low, but in the guidance, in the midpoint, it is essentially flat.

Okay. And then just one other technical question, as we go into '14, are we back on the 51 weeks in '14?

Back to 52 in '14.

52 weeks, yes, factored into Jan '14. And that would again be a fourth quarter adjustment?

Yes, it'll be a fourth quarter, again about a 2% difference.

Our next question comes from the line of John Healy.

Ronald, I wanted to ask a little bit about the M&A environment. Could you talk to maybe the pipeline that you see out there, how active the market is and maybe qualitatively the types or size of properties that you see out there? And with that, just having a little bit of leverage on the balance sheet, what level of leverage would you feel comfortable taking the company up to pursue a, maybe a more sizable acquisition?

I think our leverage we're comfortable is 3:1 ratio, number one. But I think what we've seen is the pipeline is pretty full right now. The basic problem is still sellers' expectations, what they're looking for and I guess the other question is, how they fit into our organization in synergies and how quick the paybacks can be there. We've looked at a number of properties basically in that $5 million, $10 million range, and it comes back to sellers' expectations of what we think they're worth. There seems to be a disconnect still.

Got you. And then just a side question. The First Aid businesses has continued to do really well for you guys, and I wanted to ask kind of specifically, what's going on there? Has there been any realignments to the sales force? Has there been maybe some new products that have been introduced in the field? And how long -- what's that about -- what sort of opportunity do you think that business has in maybe over the next few years in terms of scaling up?

The sales force is run pretty much with a separate sales force. As part of our CRM projects, we want to get into more portals in online selling through our National Account type accounts. The sales force has done well. The distribution side of the business has also done well. In private labeling, we think there's still more opportunity with private labeling. So we really think that someday, don't hold me to the date, that could be a nice $100 million business down the road.

Our next question comes from the line of Chris McGinnis.

Just kind of a follow-up on that 60-40 that you talked about on the competitive landscape that you're winning business. Is that on larger accounts or larger, I guess, providers or would that be the smaller mom-and-pop providers that you're kind of taking that business from?

I'd say it's pretty much across the board.

All right. And then second, just on your growth in the quarter, is the larger percentage still come from the National Accounts and how much is that sort of weighted, if you would. And I know that may be a little too much of a question but...

No, no, we're basically -- we've said it numerous times, Chris, we're a street business company, we like the B and C type accounts, and it really comes -- our growth comes from the street side. Of all the companies, we're only about 12% National Accounts.

I think our comments, Chris, over the last year or so have indicated that part of our strong growth was coming from better-than-historic performance from our National Account arena, but as Ron mentioned, it's still only 12% of our business, which is a little bit lower than our competition. And so it's maybe providing a little bit of a disproportionate piece of the growth but not significant.

Our next question comes from the line of Andy Debes.

I guess first just to touch on the SG&A side. It continued to trend a little lower as a percent of sales in this quarter. Can you guys maybe just comment on how you've been driving that down, maybe give us a sense of the sustainability of those levels as we look to '13? And also maybe just in conjunction with that, you mentioned some spend levels in your outlook around the CRM system, maybe just an update on the progress there and potential timing, how we should think about that.

Sure. With respect to the SG&A costs, as we move into 2013, I think we see those flattening out somewhat. With the strong growth during the year, we've been able to leverage our infrastructure primarily on the G&A side. As we move into 2013 and continue to invest in sales, we think that those costs will keep pace with our revenue growth. On the CRM project, as we mentioned I think a couple of quarters ago, this is a long-term project, we'll really take up the better part of fiscal 2013 to continue to develop that system and look for some deployment in kind of the mid-2014 time frame. From a capital perspective, at this point, it's not really providing a significant drag on SG&A. As we move into fiscal 2013, the bulk of the costs related to that system are capitalizable as we mentioned with our CapEx guidance. As we get into 2014, there may be some deployment costs associated with the system that we can give you some more update on as we have more visibility. But for 2013, I wouldn't consider the project to impact SG&A significantly.

Okay. That's very helpful there. And then just one other question I wanted to follow up kind of on the -- a couple of the pricing questions going around, with pricing is what it is, is that all your customers are really sort of pushing back or talking on? Or have you guys felt any pushback on contract durations of late? And maybe, I guess, if so, can you just expand whether you feel there's any risk to pricing or customer churn going forward?

I think in these economic times, everybody is looking at pricing. It comes down with the level of the service and the quality of the service in retaining those accounts. I mean building a relationship is a key component of that. But in the B and C type accounts, that relationship and that route sales guy or the district manager's relationship with the entrepreneur is a key component of keeping the business and keeping the price. I'm not going to say that we don't have to cut the pricing occasionally to keep a piece of business, we do, but you can't raise the price of a customer you don't have. So you know, you may have to cut it and you work it back up. But it really comes down to the quality of your service, keeping those garments in good working order. Again, been I mentioned the National Account that we've seen more pricing issues in the National Account arena than we do in the street business.

And I think just to follow that up with the second part of your question about the tenure of the contract, we still put a large focus and compensate our sales folks on producing 5-year contracts, and I think we've done a pretty good job at sticking to that. That fits along with what Ron's talking about in building that relationship, improving the service level, so we can truly have that customer through that first renewal. And with the investments we make in the garments, it's really key to our business to have those long-term contracts, so I think we've still done a pretty good job in this environment keeping the tenure of our contracts.

[Operator Instructions] We have a follow-up question coming from the line of Andrew Whitman.

I figured since this is a fairly short call, I wanted to ask something, just kind of strategically, we've been hearing more out of our contacts in the industry about interest in linen. Linen historically really has not been much of UniFirst's strategy, but seems like there is an increased trend towards hotel and other hospitality-related outsourcing that's happening right now in the industry. This also is obviously happening in the health care providers, which I think historically has been perceived as relatively low margin, but some of the dynamics seem to be ramping up in those linen-related end markets. Ron, I just thought maybe a little perspective about your appetite to compete in that, your thoughts in the industry and if you're not doing it today, about maybe doing it tomorrow.

I think, Andrew, we are a garment company. I say this over and over. We have -- of the majors, we get the highest percentage of garment rental. We're at 65%, and that's always been our focus. The linen business is a little different business. We're not familiar with it to be upfront about it. Would we consider buying a linen company? We probably would down the road, but we would certainly have to pick up our knowledge in that business. But first and foremost, we preach and push and know how to sell clothes, job-fitted clothes. We've got more things on how to -- people aren't going to streak to work, that's my mentality. And so I think there's plenty of opportunity out there. There's a lot of companies that purchase clothes that give us the opportunity to change. Do we look at some of the other industries? Yes, we look at maybe the light medical, but that's probably the extent of it.

I think a key part of that question is what does that business mean to our production capabilities through our plants, and we're right now we're setup to efficiently process garments first and foremost. And so I think that's why Ron's comment is valid about a potential acquisition in that area down the road because I think to get into linen in a small way is inefficient through our facilities. But if you were to invest in it a little fuller, then you can make some money in that market, so it's something that we continue to keep our eye on if there are opportunities in that area.

That makes sense. And I guess maybe just kind of a follow-up strategic question, Ron. We've seen some of your competitors over the years increase the amount of ancillary products that are coming on the route truck. For most of the uniform companies, it seems like the legacy of paper towel, toilet paper, hand soaps in the bathroom has been fairly well established but how about broadening that? Also industry chatter, I think, is out there about people trying to do more in that arena. Kind of where are you on that strategic view? Have you tested it anywhere? And if so, what have your some of your results been or your appetite in that area?

I think going back we're, first and foremost, a garment company then we follow with the product, the mat product, those are our 2 big products. And it's kind of my belief that to give a quality service and good service, the more you get this route sales fellow to service other products, he's going to be distracted from giving the quality of services that he should be giving. We do, do some bathroom services. It's certainly not to the percentage of some of our competition. That's probably a good opportunity for us to even move our growth a little better if we push it, but we are a garment company and a mat company. We focus on strong customer retention, building that relationship, so I guess my answer to you is we like people to wear clothes.

Our next question comes from the line of Kevin Steinke.

Most of my questions have been answered but, Steve, correct me if I'm wrong but I believe in your prepared comments you referred to a little slower growth in the Flame Resistant area. Is that just a result of more difficult comps, as it sounds like the energy market still remained quite good for you.

Yes, that's correct, Kevin. It's still been fairly strong but we are starting to annualize some of the real extreme growth that we had a year ago. In talking to our local operators in those markets, it's still going pretty good. It's just starting to moderate a little bit, and that partially is impacting the growth.

Mr. Sintros, there are no further questions at this time.

Well, we'd like to thank all of you for your interest in UniFirst and say again that we're quite pleased with our fiscal 2020 -- 2012 financial results and are cautiously optimistic about 2013's outlook. We look forward to talking to you in January, when we'll be reporting on our first quarter of fiscal 2013. Thank you for the interest, and have a great day.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.