UniFirst Announces Fiscal 2013 Third Quarter Results

  UniFirst Announces Fiscal 2013 Third Quarter Results

Business Wire

WILMINGTON, Mass. -- June 26, 2013

UniFirst Corporation (NYSE: UNF) today announced results for its third fiscal
quarter ended May 25, 2013. Revenues were $335.8 million, up 4.6% from $320.9
million in the year ago period. Net income was $28.7 million ($1.43 per
diluted share), compared to $27.5 million ($1.37 per diluted share) reported
in the year ago period. The results of the third quarter of fiscal 2012
included the positive effect of a settlement related to environmental
litigation. The settlement resulted in a $6.7 million gain which was recorded
as a reduction of selling and administrative expenses. Diluted earnings per
share for the third quarter of fiscal 2012 adjusted to eliminate the effect of
the gain were $1.16. Current quarter diluted earnings per share increased
23.3% compared to the adjusted earnings from a year ago.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “We
are very pleased with our results which continue to demonstrate our ability to
grow our business and improve its profitability. Our strong operating results
and solid financial condition also allow us to continue making investments in
our infrastructure and technology that will improve our already high levels of
customer service and satisfaction.”

Third quarter revenues in the Core Laundry Operations were $297.7 million, up
5.9% from those reported in the prior year’s third quarter. This segment’s
income from operations increased 36.5% compared to the third quarter of fiscal
2012 when adjusted to exclude the impact of the $6.7 million gain referred to
above. Operating margin for the quarter was 13.6% compared to an operating
margin of 10.5% a year ago when adjusted to exclude the $6.7 million gain.
Increased profitability in this segment was primarily the result of improved
operating leverage that came with our revenue growth. Expenses related to
merchandise, payroll and energy were lower as a percentage of revenue compared
to the prior year. In addition, comparisons were positively impacted by
expenses incurred in the third quarter of fiscal 2012 related to the Company’s
initiative to update its CRM computer systems.

Revenues for the Specialty Garments segment, which consists of nuclear
decontamination and cleanroom operations, were $26.3 million, down 10.0% from
$29.3 million in the third quarter of fiscal 2012. This segment had income
from operations for the quarter of $3.6 million, down from $5.0 million in the
same quarter a year ago. The decline in revenue and profits was due primarily
to the absence of revenues from two large power reactor rebuild projects that
ended in the fourth quarter of fiscal 2012 as well as a lighter than expected
spring outage season.

UniFirst continues to maintain a solid balance sheet and financial position.
Cash and cash equivalents at the end of the quarter totaled $175.6 million, up
from $120.1 million at the end of fiscal 2012. Cash provided by operating
activities for the first nine months of the year was $139.5 million, up 30.6%
compared to $106.8 million for the first nine months of fiscal 2012. The
improved cash flows were primarily the result of higher earnings as well as
lower cash outflows related to working capital. At the end of the quarter,
total debt was $110.9 million, or 10.1% of total capital.

Outlook

Mr. Croatti continued, “We continue to expect full year revenues to be between
$1.344 billion and $1.354 billion. Due to the weaker than expected third
quarter results from our Specialty Garments segment as well as the fourth
quarter outlook for this segment, we are reducing and narrowing our full year
profit guidance to a range of $5.60 per share to $5.70 per share from the
previously communicated $5.65 per share to $5.80 per share. As a reminder, our
guidance includes one extra week of operations in our fiscal fourth quarter.”

Conference Call Information

UniFirst will hold a conference call today at 10:00 a.m. (ET) to discuss its
quarterly financial results, business highlights and outlook. A simultaneous
live webcast of the call will be available over the Internet and can be
accessed at www.unifirst.com.

About UniFirst Corporation

UniFirst Corporation is one of the largest providers of workplace uniforms,
protective clothing, and facility services products in North America. The
Company employs approximately 11,000 Team Partners who serve more than 240,000
customer locations in 45 U.S. states, Canada, and Europe from over 200
customer service, distribution, and manufacturing facilities. UniFirst is a
publicly held company traded on the New York Stock Exchange under the symbol
UNF and is a component of the Standard & Poor's 600 Small Cap Index.

Forward Looking Statements

This public announcement may contain forward looking statements that reflect
the Company’s current views with respect to future events and financial
performance. Forward looking statements contained in this public announcement
are subject to the safe harbor created by the Private Securities Litigation
Reform Act of 1995 and are highly dependent upon a variety of important
factors that could cause actual results to differ materially from those
reflected in such forward looking statements. Such factors include, but are
not limited to, uncertainties regarding the Company’s ability to consummate
and successfully integrate acquired businesses, uncertainties regarding any
existing or newly-discovered expenses and liabilities related to environmental
compliance and remediation, any adverse outcome of pending or future
contingencies or claims, the Company’s ability to compete successfully without
any significant degradation in its margin rates, seasonal fluctuations in
business levels, our ability to preserve positive labor relationships and
avoid becoming the target of corporate labor unionization campaigns that could
disrupt our business, the effect of currency fluctuations on our results of
operations and financial condition, our dependence on third parties to supply
us with raw materials, any loss of key management or other personnel,
increased costs as a result of any future changes in federal or state laws,
rules and regulations or governmental interpretation of such laws, rules and
regulations, uncertainties regarding the price levels of natural gas,
electricity, fuel and labor, the impact of adverse economic conditions and the
current tight credit markets on our customers and such customers’ workforce,
the level and duration of workforce reductions by our customers, the
continuing increase in domestic healthcare costs, demand and prices for our
products and services, rampant criminal activity and instability in Mexico
where our principal garment manufacturing plants are located, our ability to
properly and efficiently design, construct, implement and operate our new CRM
computer system, additional professional and internal costs necessary for
compliance with recent and proposed future changes in Securities and Exchange
Commission, New York Stock Exchange and accounting rules, strikes and
unemployment levels, the Company’s efforts to evaluate and potentially reduce
internal costs, economic and other developments associated with the war on
terrorism and its impact on the economy, general economic conditions and other
factors described under “Item 1A. Risk Factors” in the Company’s Annual Report
on Form 10-K for the year ended August 25, 2012 and in other filings with the
Securities and Exchange Commission. When used in this public announcement, the
words “anticipate,” “optimistic,” “believe,” “estimate,” “expect,” “intend,”
and similar expressions as they relate to the Company are included to identify
such forward looking statements. The Company undertakes no obligation to
update any forward looking statements to reflect events or circumstances
arising after the date on which such statements are made.

UniFirst Corporation and Subsidiaries
Consolidated Statements of Income

                     Thirteen weeks ended         Thirty-nine weeks ended
(In thousands,        May 25,        May 26,        May 25,         May 26,
except per share      2013 (2)      2012 (2)       2013 (2)       2012 (2)
data)
                                                                             
Revenues            $ 335,764      $ 320,931      $ 1,002,639     $ 943,915
                                                                             
Operating
expenses:
Cost of revenues      208,066        202,433        618,038         599,009
(1)
Selling and
administrative        64,786         59,108         194,891         179,429
expenses (1)
Depreciation and      17,115         16,718         51,065          49,615
amortization
Total operating       289,967        278,259        863,994         828,053
expenses
                                                                             
Income from           45,797         42,672         138,645         115,862
operations
                                                                             
Other (income)
expense:
Interest expense      464            511            1,324           1,639
Interest income       (781     )     (656     )     (2,472    )     (2,036   )
Exchange rate         283            457            321             1,028
loss
Total other           (34      )     312            (827      )     631
(income) expense
                                                                             
Income before         45,831         42,360         139,472         115,231
income taxes
Provision for         17,109         14,901         53,348          42,774
income taxes
                                                                             
Net income          $ 28,722       $ 27,459       $ 86,124        $ 72,457
                                                                             
Income per share
– Basic
Common Stock        $ 1.51         $ 1.45         $ 4.53          $ 3.83
Class B Common      $ 1.21         $ 1.16         $ 3.63          $ 3.06
Stock
                                                                             
Income per share
– Diluted
Common Stock        $ 1.43         $ 1.37         $ 4.29          $ 3.63
                                                                             
Income allocated
to – Basic
Common Stock        $ 22,638       $ 21,587       $ 67,793        $ 59,926
Class B Common      $ 5,647        $ 5,381        $ 16,880        $ 14,214
Stock
                                                                             
Income allocated
to – Diluted
Common Stock        $ 28,307       $ 26,993       $ 84,747        $ 71,205
                                                                             
Weighted average
number of shares
outstanding –
Basic
Common Stock          14,993         14,905         14,960          14,872
Class B Common        4,675          4,644          4,656           4,642
Stock
                                                                             
Weighted average
number of shares
outstanding –
Diluted
Common Stock          19,820         19,646         19,751          19,600
                                                                             

(1) Exclusive of depreciation on the Company’s property, plant and equipment
and amortization on its intangible assets

(2) Unaudited

UniFirst Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

                                                    May 25,         August 25,
(In thousands)                                             
                                                    2013 (1)        2012
Assets
Current assets:
Cash and cash equivalents                         $ 175,591       $ 120,123
Receivables, net                                    147,170         135,327
Inventories                                         72,355          75,420
Rental merchandise in service                       133,741         138,284
Prepaid and deferred income taxes                   12,813          12,785
Prepaid expenses                                    9,565           5,741
                                                                    
Total current assets                                551,235         487,680
                                                                    
Property, plant and equipment:
Land, buildings and leasehold                       373,530         355,568
improvements
Machinery and equipment                             461,576         425,274
Motor vehicles                                      153,411         141,370
                                                                    
Total property, plant and equipment                 988,517         922,212
Less - accumulated depreciation                     539,994         510,008
Total property, plant and equipment, net            448,523         412,204
                                                                    
Goodwill                                            288,620         288,137
Customer contracts and other intangible             43,976          50,531
assets, net
Other assets                                        2,428           1,982
                                                                    
Total assets                                      $ 1,334,782     $ 1,240,534
                                                                    
Liabilities and shareholders' equity
Current liabilities:
Loans payable and current maturities of           $ 110,716       $ 6,831
long-term debt
Accounts payable                                    55,531          52,340
Accrued liabilities                                 85,641          78,174
Accrued income taxes                                1,462           8,180
                                                                    
Total current liabilities                           253,350         145,525
                                                                    
Long-term liabilities:
Long-term debt, net of current maturities           155             100,155
Accrued liabilities                                 44,933          43,420
Accrued and deferred income taxes                   54,488          54,509
                                                                    
Total long-term liabilities                         99,576          198,084
                                                                    
Shareholders' equity:
Common Stock                                        1,512           1,506
Class B Common Stock                                487             488
Capital surplus                                     47,449          42,984
Retained earnings                                   928,661         844,676
Accumulated other comprehensive income              3,747           7,271
                                                                    
Total shareholders' equity                          981,856         896,925
                                                                    
Total liabilities and shareholders’               $ 1,334,782     $ 1,240,534
equity
                                                                    

(1) Unaudited

UniFirst Corporation and Subsidiaries
Detail of Operating Results

Revenues

                            Thirteen weeks ended               
(In thousands, except         May 25,     May 26,        Dollar     Percent
percentages)                  2013 (1)     2012 (1)       Change     Change
                                                                             
Core Laundry Operations     $ 297,729    $ 281,141      $ 16,588     5.9     %
Specialty Garments            26,327       29,263         (2,936 )   -10.0
First Aid                     11,708       10,527         1,181      11.2
Consolidated total          $ 335,764    $ 320,931      $ 14,833     4.6     %
                                                                             

                            Thirty-nine weeks ended             
(In thousands, except         May 25,       May 26,      Dollar     Percent
percentages)                  2013 (1)       2012 (1)     Change     Change
                                                                             
Core Laundry Operations     $ 893,918      $ 830,661    $ 63,257     7.6     %
Specialty Garments            76,804         83,032       (6,228 )   -7.5
First Aid                     31,917         30,222       1,695      5.6
Consolidated total          $ 1,002,639    $ 943,915    $ 58,724     6.2     %
                                                                             

Income from Operations

                            Thirteen weeks ended               
(In thousands, except         May 25,     May 26,        Dollar     Percent
percentages)                  2013 (1)     2012 (1)       Change     Change
                                                                             
Core Laundry Operations     $ 40,356     $ 36,275       $ 4,081      11.3    %
Specialty Garments            3,576        5,033          (1,457 )   -29.0
First Aid                     1,865        1,364          501        36.7
Consolidated total          $ 45,797     $ 42,672       $ 3,125      7.3     %
                                                                             

                            Thirty-nine weeks ended             
(In thousands, except         May 25,       May 26,      Dollar     Percent
percentages)                  2013 (1)       2012 (1)     Change     Change
                                                                             
Core Laundry Operations     $ 125,211      $ 98,706     $ 26,505     26.9    %
Specialty Garments            9,555          14,175       (4,620 )   -32.6
First Aid                     3,879          2,981        898        30.1
Consolidated total          $ 138,645      $ 115,862    $ 22,783     19.7    %

(1) Unaudited

UniFirst Corporation and Subsidiaries
Consolidated Statements of Cash Flows

Thirty-nine weeks ended                            May 25,         May 26,
                                                                
(In thousands)                                     2013 (1)        2012 (1)
Cash flows from operating activities:                          
Net income                                         $ 86,124        $ 72,457
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation                                         43,718          41,644
Amortization of intangible assets                    7,347           7,971
Amortization of deferred financing costs             178             178
Share-based compensation                             5,051           5,202
Accretion on environmental contingencies             407             474
Accretion on asset retirement obligations            497             473
Deferred income taxes                                79              362
Changes in assets and liabilities, net of
acquisitions:
Receivables                                          (12,099 )       (12,985 )
Inventories                                          3,070           (320    )
Rental merchandise in service                        4,332           (14,475 )
Prepaid expenses                                     (3,824  )       (4,870  )
Accounts payable                                     3,279           2,629
Accrued liabilities                                  8,255           2,411
Prepaid and accrued income taxes                     (6,914  )       5,666
Net cash provided by operating activities            139,500         106,817
                                                                             
Cash flows from investing activities:
Acquisition of businesses                            (1,953  )       -
Capital expenditures                                 (81,087 )       (59,325 )
Other                                                (185    )       (436    )
Net cash used in investing activities                (83,225 )       (59,761 )
                                                                             
Cash flows from financing activities:
Proceeds from loans payable and long-term            4,102           40,410
obligations
Payments on loans payable and long-term              (22     )       (55,845 )
obligations
Proceeds from exercise of Common Stock options       2,750           2,000
Taxes withheld and paid related to net share         (3,332  )       -
settlement of equity awards
Payment of cash dividends                            (2,138  )       (2,129  )
Net cash provided by (used in) financing             1,360           (15,564 )
activities
                                                                             
Effect of exchange rate changes                      (2,167  )       (1,483  )
                                                                             
Net increase in cash and cash equivalents            55,468          30,009
Cash and cash equivalents at beginning of            120,123         48,812
period
                                                                             
Cash and cash equivalents at end of period         $ 175,591       $ 78,821

(1) Unaudited

Contact:

UniFirst Corporation
Steven S. Sintros, 978-658-8888
Vice President & CFO
Fax: 978-988-0659
ssintros@UniFirst.com
 
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