Greetings and welcome to the Fourth Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Steven Sintros, President and Chief Executive Officer. Please go ahead.

Thank you, and good morning. I'm Steven Sintros, UniFirst’s President and Chief Executive Officer. Joining me today is Shane O'Connor, Senior Vice President and Chief Financial Officer. We'd like to welcome you to UniFirst Corporation's conference call to review our fourth quarter and year-end results for fiscal year 2019 and to discuss our expectations going forward. This call will be on a listen-only mode until we complete our prepared remarks. But first, a brief disclaimer. This conference call may contain forward-looking statements that reflect the company’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements. Actual future results may differ materially from those anticipated depending on a variety of risk factors. For more information, please refer to the discussion of these risk factors in our most recent 10-Q and 10-K filings with the Securities and Exchange Commission. I'm happy to report that UniFirst closed the year on a high note with revenues and profits coming in ahead of our expectations. Shane will go into the quarterly details shortly, but I wanted to take a minute and step back and recap our full year results, a year that I would characterize is one where the company made good progress toward our objectives and produced solid results well ahead of our original guidance. For the full year UniFirst set record highs for both revenues and profits. Annual revenues achieved another milestone this past year exceeding the $1.8 billion mark coming in at $1.809 billion, an increase of 6.7% over fiscal year 2018, 4.7% when excluding the impact of an extra week of operations due to our 53 week year fiscal calendar.…

Thanks Steve. Revenues in our fourth quarter of 2019 were $479.6 million, up 10.5% from $434.1 million a year ago. The fourth quarter of 2019 included an extra week of operations due to the timing of our fiscal calendar, which accounted for revenue growth of approximately 7.9% compared to the fourth quarter of prior year. Operating income for the fourth quarter increased to $58.9 million from $41.4 million in the prior year period and net income for the quarter increased to $46 million or $2.40 per diluted share from $35 million for $1.81 per diluted share. Operating income and net income in the fourth quarter of 2018 were affected by a onetime bonus to our employees of approximately $7.2 million to sharing the benefits received from the 2018 US Tax Reform. This bonus was recorded to selling and administrative expenses. Excluding the effect of the one-time bonus operating income increased 21.3% compared to prior years adjusted operating income and net income increased 15.2% from prior years adjusted net income of $39.9 million or $2.06 per diluted share. Our adjusted net income comparison was impacted by a lower quarterly tax rate in 2018 of 18.4% compared to 24.4% in 2019, primarily due to the positive impact of US tax reform in 2018 as well as other discrete adjustments recorded in prior year's fourth quarter mostly related to tax credits. Our core laundry operations which make up close to 90% of the UniFirst’s total business reported revenues for the fourth quarter of $431.5 million, up 10.1% from the fourth quarter of 2018. Core laundry organic growth which adjusts for the estimated effect of acquisitions, the extra week as well as the impact of a weaker Canadian dollar was 2.4%. During the quarter, our organic growth benefited from strong new account sales and…

[Operator Instructions] Our first question coming from the line of Andrew Steinerman with JPMorgan. Please proceed with your question.

In the guide of core laundry you obviously have a higher organic revenue growth assumption that in the fourth quarter and I think you mentioned it had to do with the timing of pricing adjustment. I think that might be the timing of when your annual pricing adjustments kick in. And so if you could talk about that with a little more detail of those pricing adjustments, when do they kick in and why should we be thinking about the outlook that's kind of higher organic?

Yes, Andrew. I think Shane covered it. He talked about the timing, the annual adjustments that were a little bit different in the timing this fourth quarter than they were last fourth quarter. So that really caused that year-over-year change and you saw it in the third year - third quarter comparisons as well. As we get into the next year we expect more kind of a normal timing and that should have us back around that 4% range in organic growth which is what we've been - what we really ran over the course of this full year. So we don't really look at it as in acceleration or deceleration of the organic growth just more of a return to a normal timing.

Right. And you're already into your fiscal year. So my, my question is, are you already seeing that level of organic growth in the numbers already?

Well, certainly from the visibility we have through September, we're online for that for sure.

Our next question coming from the line of Andrew Wittmann with Robert W. Baird. Please proceed with your question.

I guess on the margin side of guidance that's probably the area that people want to hear a little bit more about. It sounded like, Steve, that you mentioned that you've seen some flattening in some of the trends for some of your costs, but yet in the outlook you're saying, well, we don't expect that to continue. I guess what are you seeing in the business here today that makes you guide that way and if you could just talk a little bit more detail on some of those key items that influence the margin guidance in the Core Laundry segment, I think that would be helpful?

Sure. So as Shane mentioned, a couple of the larger benefits for this year on the healthcare side and workmen's comp side, we’re modeling particularly at the midpoint of our range being back to what we would consider a little bit more of a normal level, we feel this year may have been abnormally low. I think the higher end of our range indicate that there's upside there if we continue to perform well in those areas. But those aside when you get back to more of the core operating cost of the business, merchandise and payroll being the largest component. Shane mentioned merchandise would still be somewhat of a headwind next year based on the level of inputs that we've experienced so far this year, although we are seeing some flattening of the level of merchandise that we put in the fourth quarter which is encouraging. With respect to payroll cost and we didn't have any prepared remarks about this, but we did mention some last quarter, how we benefited from a little bit of levels of understaffing, particularly in the service area, but also somewhat in production and we're working to kind of build up those staffing levels to what we consider more optimal. We made some strides to that extent this quarter and that's another variable as we go into next year. It's been more of a dynamic environment in terms of staffing levels over the course of the last year or so. And our projections right now have that overall staffing coming up some. Some of it related to getting fully staffed and some of it related to growth-related ads. So we didn't mention payroll overall but that, that has the impact of being a little bit of a drag on the margins, but just one-tenth or two-tenth. The bigger piece is, I think Shane covered in terms of the payroll-related cost, as well as some of the cost related to the preparation of our system.

In the quarter, I think you also kind of mentioned that the extra week may have helped you cover some of your costs and at least in the fourth quarter helped, maybe gave you a little margin benefit there. How much of a benefit do you think the extra week was? I know there’s some estimation there but…

Every five or six years we have to answer that question. And it's a difficult one it could be two or three-tenths in the quarter you know and as we've talked about before, I mean, we certainly have an extra week of payroll costs and merchandise costs and depreciation all those regular costs. But things like utilities, rents and some other supplies that you sort of purchase on a normal schedule, you don't always get sort of that extra week's worth of costs. And so that does provide some margin improvement, it’s difficult to quantify but certainly - around the edges does kind of boost the quarter.

And then, just curious maybe my last question here, is as you look at the M&A environment out there, how active do you feel like you can be in fiscal 2020? I know this deal that you announced in Kansas City is actually pretty decent size franchise. I was wondering just seeing in those and just in general on the M&A front today, how you’re thinking about that, the opportunities ahead of you and the ability to execute in 2020?

Yes. I think, certainly, we’re poised to do that. I think, that it does seem like a decent environment where when the industry sees some of these happening, I think it, it perks up some of the interest of the sellers and again as we've talked about in the past, at their core, they're still family businesses that the family decisions drive the sales. But overall multiples have been - been healthy on these sales. And I think that’s getting sellers to take noticed and I do think there's opportunities for deals like Kansas City to continue to come up. I mean there's less, there's less out there than there was 10 years ago as you well know, but we do feel like the environment is reasonably healthy right now.

[Operator Instructions] Mr. Sintros, there are no further questions at this time. I will now turn the call back to you.

Okay. Well, I'd like to thank everyone for joining us today to review our fourth quarter and year-end results. We look forward to speaking with you again in January when we expect to be reporting on our first quarter performance for fiscal 2020, as well as our expectations for the remainder of the year. Thank you and have a great day.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.