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

Thank you, and welcome to the UniFirst Corporation conference call to review our third quarter 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's President and Chief Executive Officer. Before I turn the call over to Ron, I would like to give a brief disclaimer. This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend and similar expressions that indicate future events and trends identify forward-looking statements. Actual 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. I'd like to welcome everyone joining us for the financial review for the UniFirst third quarter fiscal 2012. Steve will cover the details in a moment, but first, here's a recap. I am happy to report that despite a difficult economic environment for the fiscal period, UniFirst revenues for the third quarter of 2012 set a new record: $320.9 million, a 10.1% increase over the $291.6 million reported for the same period in 2011. The primary influences came from steady revenue growth from our core laundry operations and from our First Aid & Safety division, with each setting new revenue records for the quarter. Net income for the third quarter benefited from the strong revenue performance, also setting a new UniFirst record at $27.5 million, a 49% increase over the $18.4 million reported a year ago. These results include the impact of a $6.7 million gain recognized by the company during the quarter as the result of some environmental litigation settlement. Steve will provide you with more details. As many of you know, our core laundry operations make up the majority of UniFirst's total business. Our laundry has improved revenues by 11.5% and operating income, excluding the impact of the $6.7 million gain, by 31.4% over 2011 third quarter. Our Specialty Garments segment, which includes nuclear cleaning operations, reported a 4.3% third quarter revenue dip from the same period in 2011, as well as 11.5% decline in operating income when compared to last year. And like our core laundry, our First Aid & Safety segment reported solid revenue and operating income increases for the quarter, reporting 17.7% and 44.7% improvements, respectively, when compared to the same quarter in 2011. We are very pleased with the results of our third quarter and our first 9 months of fiscal…

Thanks, Ron. Revenues for the quarter, as Ron discussed, were $320.9 million, up 10.1% from $291.6 million for the third quarter a year ago. Net income was $27.5 million, or $1.37 per diluted common share, compared to the third quarter of fiscal 2011 when net income was $18.4 million or $0.93 per diluted common share. The results from the third quarter include the impact of a settlement the company entered into in March 2012 related to environmental litigation. This settlement resulted in a $6.7 million gain, which was recorded as a reduction to selling and administrative expense. The gain positively impacted earnings by diluted common share by $0.21 and consists of amounts previously received but not recognized into income, as well as amounts the company received in the third quarter. Excluding this gain, net income was $23.2 million or $1.16 per diluted common share, up 26.1% from the prior year. Core laundry revenues grew 11.5% overall and 10.9% organically for the quarter. The calculation of organic growth, as always, excludes the impact of acquisitions, which contributed 0.9% and a slightly weaker Canadian dollar, which negatively impacted revenues 0.3%. Core laundry revenues continue to benefit from strong local and national account sales. In addition, certain annual price adjustments, as well as the overall improvement in the pricing environment, contributed to the revenue growth during the year. Wearer additions versus reductions were slightly negative during the quarter but slightly positive year-to-date. Our revenues also continue to benefit from strong growth in our flame resistant and high visibility product lines, in addition to higher charges for lost and damaged merchandise and higher garment make up and emblem charges compared to a year ago. Excluding the impact of the $6.7 million gain, the operating margin for the core laundry operations increased to 10.5% during…

[Operator Instructions] And now our first question comes from the line of John Healy.

This is actually Matt Madej calling in for John Healey. I was hoping maybe you guys could give us your thoughts on what you're thinking about growth opportunities. Where are you seeing the biggest contributors of growth, and where do you see the largest potential?

All right. Matt, this is Ron. Basically, I think we've been experiencing some great growth in the energy sector, and we're also experiencing some growth in the healthcare sector. And I would think that the healthcare sector will continue. The energy sector, with oil dropping, could be questionable long-term, but healthcare will always be a good growth opportunity for the company.

Okay, great. And then just a quick follow-up to that. In terms of flame resistant garments, where do you guys think we are in terms of industry adoption, and how do you guys think about the growth potential for that garment type?

Well, I think -- this is Ron, again, Matt. I think the growth potential is out there as long as the oil prices are high. I think part of the issue is a lot of the gas, or natural gas opportunities, with gas being low, right now they're punching the wells but they're really not extruding the natural gas because of the recent rate. I think the natural gas prices will eventually come up and that will still provide a good opportunity.

Our next question comes from the line of Chris McGinnis.

I just wanted to ask, just the growth that you are seeing, can you just maybe dig into that a little bit more? I know you don't want to comment on pricing itself, but maybe can you put in a couple buckets of what's the main drivers in maybe ancillary services? If you could just dig a little bit deeper into that.

Yes, Chris, this is Steve. I mean, we've been talking over the course of the year. It's really been the accumulation of really a number of things: our large -- strong local account sales, strong national account sales. Clearly, we've been doing more on the national account side over the last 12 months to 24 months, really, than we have previously. It's hard to really pinpoint to say local account sales is the biggest piece versus national accounts versus pricing versus flame resistant garments, because it's really all of those things in accumulation of them. Ron, I don't know if you want to add to that, but it's really been all those things.

No, I think Steve's right on. There's not one big thing, it's a lot of little things just moving along.

But I'll just to add to that, Chris, we talked about, and we're kind of foreshadowing this with a little bit lower growth expectations in the fourth quarter, that some of the impact of the price adjustments that came out of the higher cotton prices a year ago starting to annualize and are going to make comparisons a little tougher.

Sure, understood. Can you just maybe talk a little bit about the price environment with the seemingly -- the economy itself maybe slowing here, how is the price being perceived and the ability to pass that on right now?

This is Ron, Chris. Basically, we've seen pricing stabilize at the local level. I think the national account level is still pretty competitive, but most companies right now, they absorb the price increase we put through last fall. And things seem to be running very well.

I think you hit the nail on the head though. As long as the economy stays stable, that will continue. If we start to fall back down, like we did a few years ago, that's when things became more challenging on the price side.

Sure. And then just lastly, can you just maybe talk about new accounts in the quarter, how much of a percent that was of the growth.

We don't break out the different pieces, Chris, but like we said it was a contributing factor. New accounts is always the largest contributing factor to our growth, and I'd say it's similar to what its been in the past, but we're not going to get down into the details.

Sure. Sorry, I meant just what was up year-over-year? Was it -- usually you give like a 40% or 50% number, typically.

I'm sorry. Yes, new account growth was at similar levels to what it was a year ago.

Our next question comes from the line of Justin Hauke.

I guess I wanted to ask -- the last couple of questions have been about the revenue side, but on the profit side, even adjusted for the gain this quarter, your operating margins were above 11%. And seemingly, I think that's against still a pretty tough headwind from your garment costs. And I guess just trying to think about as we look into '13, how your margin trends can look, especially as some of that amortization hit falls off?

Yes, I don't think we're ready to really guide specifically, but we'll give you some directional information. It's our goal to get the margin back to 13%, coming through these periods of high amortization, and we're really trending towards that. And I think that will continue. I think the merchandise will start to moderate and continue to moderate through 2013. What energy prices do and some of those other things, will clearly have an impact as well, but I think we feel pretty good about being able to hold the margins where they are and maybe even improve them a little bit if the merchandise continues to fall.

What was the -- last quarter, I think it was a 250 basis point year-over-year headwind, what was it this quarter?

It was about 1.7% this quarter, but trending down.

I'm sorry?

It's trending down.

Trending down, okay. And then I guess my other question, and I feel like we ask this every quarter but I'm going to ask it again, just on the balance sheet, you're essentially at a net cash position here. I think this was your strongest free cash flow quarter in several years. Just any thoughts there on kind of what you're thinking, anything new versus the past?

I think, Justin, what we've seen in the last couple of months is a pick up in acquisitions. So I think we'll be spending some money on some acquisitions in the short-term. As far as anything else, I think we're just looking at acquisitions, that's what we're building towards.

Our next question comes from the line of Joe Box.

I just wanted to actually follow-up on Justin's question. So in terms of acquisitions, it sounds like you might be willing to do something that is adjacent to the core laundry business. Can you maybe just expand on that and note or just comment on some of the potential deals that you're seeing out there without being too specific?

Yes, I don't think we were specifically making a comment to that effect. I think we have seen -- I think Ron's comment was more to say that we're seeing a pick up of acquisition activity and interest from sellers in the laundry business. So his comment wasn't particular to ancillary or adjacent industries, although we always do kind of keep our eyes open for adjacent industries. So I'm not sure if his comment was specifically towards that. I don't know if you want to add to that, Ron.

No, no. It's focused towards the laundry business.

Okay, great. That clarification is helpful. Steve, you mentioned that there was a lower adequate metric in the quarter. I guess, was that change driven by any weakness in the energy market due to lower energy prices or has the weakness been more broad based?

More broad based. What I will say is that in previous quarters, some of the areas that caused us to be positive was related to energy, and some of that slowed down a little. Energy -- our energy markets are still positive but maybe not to the extent that they were 6 months ago.

What are your customers saying in terms of future hiring in this market?

I think we're finding our customers being very conservative.

Okay, fair enough. Just a question on your CRM system. Can you maybe just give us any color on implementation costs and timing of the rollout? And then Ron, earlier you mentioned some benefits that would be for the customer, but can you just comment on any potential savings that might be generated for UniFirst or any revenue growth opportunity?

Sure, this is Steve. We mentioned in the last webcast that the overall cost of the project was in the $30 million to $35 million range, and that they would be incurred throughout fiscal 2013 and into early 2014. And it's really that kind of early to mid 2014 timeframe when we'd be working on the deployment of the technology. As far as the benefits go, as you mentioned, Ron mentioned some for the customer. There's a number of administrative and kind of time-saving type improvements that will come from the further integrated system and help with overall administrative costs and the flow of information. So I think there's some hard savings we're targeting on the internal costs side. That combined with, I think, benefits to the customers and the potential to improve overall customer service, hopefully reduce customer turn. You know it's really where we're targeting the return from the system.

Okay. And then obviously earlier you were mentioning a 13% margin target, would this system potentially put you north of that 13% target?

I'm not sure when the 13% margin target came up. I think, longer-term, I think that's something we will shoot toward, we may have referenced that in the past. I think this system will help achieve that, yes. I think it's going to provide us a foundation for the next 5 to 10 years to leverage the business as well as we can. Obviously, there's a number of other things that need to happen to achieve that level of margin, including taking some of our underperforming operations and adding market share and density to those markets, either through acquisition or additional sales, to get the margins in those parts of the country or markets up toward our average. And I think that will naturally help the margin, but the system will provide us the foundation.

Our next question comes from the line of Andrew Steinerman.

This is Molly McGarrett for Andrew. Going back to merchandise amortization, it looks like it's decelerating, or the growth is decelerating year-over-year. I was wondering when you'd expect that to stabilize. Whether we could expect that in the fourth quarter or not until beginning of fiscal '13.

I guess it depends on what you mean by stabilize. We're starting to look at 2013 and see what our merchandise projections are. In the fourth quarter, it will still be year-over-year headwind. My estimation is, at some point next year, that will completely flatten out. But I'm not ready to say exactly what that point is yet.

Okay. And then I'm not sure if you parsed it out this way, but looking at the impact of the flame resistant, the higher cost garments you're putting in place, if you remove those garments from the merchandise costs, would there still be a headwind? I'm just trying to get a sense of what their impact is on merchandise growth, overall.

Yes, right now that is making up the bulk of the headwind during the quarter.

[Operator Instructions] Our next question comes from the line of Kevin Steinke.

Steve, I think last quarter you talked about SG&A as a percent of revenue trending back towards the 20% type level in the near-term as it did this quarter, and is that kind of your expectation for fiscal 2013, as well as the spending on the CRM system progresses, or any more color on the SG&A front?

Yes, I think that's a pretty good level where we're at right now. I think we'll try to hold that level. There will be some costs along the way related to the CRM project, but I think my comments still hold.

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

All right. We'd like to thank you, all, again for the interest in our company and look forward to speaking to you in the fall when we're reporting our UniFirst fourth quarter and our full year results for fiscal 2012. Thank you 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 lines.