UniFirst Announces Financial Results for the Second Quarter and First Half of Fiscal 2014

  UniFirst Announces Financial Results for the Second Quarter and First Half   of Fiscal 2014  Business Wire  WILMINGTON, Mass. -- April 2, 2014  UniFirst Corporation (NYSE: UNF) today announced results for its fiscal 2014 second quarter, which ended March 1, 2014. Revenues were $344.0 million, up 2.9% from $334.3 million in the year ago period. Net income of $25.6 million ($1.27 per diluted share), was down from $26.6 million ($1.33 per diluted share) reported in the year ago period. Revenue and profit comparisons were affected by a customer related specialty merchandise buyout in the year ago second quarter. Excluding the effect of this buyout, overall revenues would have increased 3.6% and fully diluted earnings per share would have been $1.27 for both quarterly periods.  Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “We were pleased that our core laundry business continued to produce solid results despite being challenged by several external factors during the quarter. These items included a weaker Canadian exchange rate, higher energy prices and a difficult winter season.”  Revenues in the Core Laundry Operations were $313.2 million, up 3.8% from those reported in the prior year’s second quarter. Excluding the negative impact of the weaker Canadian dollar and the specialty merchandise buyout, as well as the positive effect of acquisitions, the Core Laundry Operations’ revenues grew 4.3%.  This segment’s operating income grew 2.1% compared to adjusted operating income from the second quarter of fiscal 2013 and its operating margin was 12.6% compared to an adjusted operating margin of 12.9% a year ago. Adjusted operating income and operating margin for the second quarter of fiscal 2013 exclude the impact of the customer related specialty merchandise buyout. Narrower operating margins were primarily due to higher costs related to our plant operations, energy, depreciation and bad debt expense as a percentage of revenues. In addition, the quarter was also impacted by higher legal and environmental costs compared to the prior year. These higher costs were partially offset by lower health care claims expense during the quarter.  Revenues for the Specialty Garments’ segment, which consists of nuclear decontamination and cleanroom operations, were $20.4 million, down 9.7% from $22.6 million in the second quarter of fiscal 2013. This decrease was primarily the result of fewer power reactor outage projects in the United States and Canada compared to a year ago. This segment’s income from operations for the quarter fell to $0.3 million from $1.3 million in the comparable period in fiscal 2013.  UniFirst continues to maintain a solid balance sheet and financial position. Cash provided by operating activities year to date was $109.1 million, up 17.9% compared to $92.5 million for the first half of fiscal 2013. The improved cash flows were primarily the result of higher earnings as well as the timing of income tax payments compared to the prior year. We ended the period with essentially no long term debt and cash and cash equivalent balances of $157.2 million, down from $197.5 million at the end of fiscal 2013. This decrease was due to the Company’s repayment of $100.0 million in private placement notes that came due in September 2013.  Outlook  Mr. Croatti concluded, “Despite the negative impact of the weaker Canadian dollar, we continue to believe that our full year revenues will be between $1.372 billion and $1.385 billion. We currently expect full year EPS to be between $5.60 and $5.75 per share. Our revised outlook for the remainder of the year reflects lower expectations for our Specialty Garments and First Aid segments as well as an assumption that the recent decline in the value of the Canadian dollar and higher energy prices will continue to influence our results.”  As a reminder, fiscal 2014 will be a 52 week year for the Company compared to fiscal 2013, which was a 53 week year. The negative comparison of one less week of operations will have the impact of reducing our year over year revenues by approximately 2.0% and our fourth quarter revenues by approximately 7.1%.  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 11,500 Team Partners who serve more than 250,000 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 turbulent 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, including the ultimate impact of the Affordable Care Act, 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, interruptions or failures of our information technology systems, including as a result of cyber-attacks, 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 31, 2013 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          Twenty-six weeks ended                                      February                     February (In thousands,         March 1,       23,            March 1,       23, except per share       2014 (2)       2013 (2)       2014 (2)       2013 (2) data)                                                                               Revenues             $ 343,967      $ 334,306      $ 690,671      $ 666,875                                                                               Operating expenses: Cost of revenues       215,560        208,421        423,697        409,972 (1) Selling and administrative         69,853         65,817         135,482        130,105 expenses (1) Depreciation and       17,830         17,179         35,128         33,950 amortization Total operating        303,243        291,417        594,307        574,027 expenses                                                                               Income from            40,724         42,889         96,364         92,848 operations                                                                               Other (income) expense: Interest expense       216            400            424            860 Interest income        (877     )     (924     )     (1,642   )     (1,691   ) Exchange rate loss     161            198            2              38 Total other            (500     )     (326     )     (1,216   )     (793     ) (income) expense                                                                               Income before          41,224         43,215         97,580         93,641 income taxes Provision for          15,577         16,573         37,471         36,239 income taxes                                                                               Net income           $ 25,647       $ 26,642       $ 60,109       $ 57,402                                                                               Income per share – Basic Common Stock         $ 1.34         $ 1.40         $ 3.15         $ 3.02 Class B Common       $ 1.08         $ 1.12         $ 2.52         $ 2.42 Stock                                                                               Income per share – Diluted Common Stock         $ 1.27         $ 1.33         $ 2.98         $ 2.86                                                                               Income allocated to – Basic Common Stock         $ 20,267       $ 20,963       $ 47,479       $ 45,155 Class B Common       $ 5,041        $ 5,209        $ 11,836       $ 11,233 Stock                                                                               Income allocated to – Diluted Common Stock         $ 25,326       $ 26,196       $ 59,357       $ 56,440                                                                               Weighted average number of shares outstanding – Basic Common Stock           15,077         14,962         15,053         14,943 Class B Common         4,687          4,647          4,690          4,647 Stock                                                                               Weighted average number of shares outstanding – Diluted Common Stock           19,924         19,747         19,897         19,714  (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                                                                                                                            March 1,      August 31, (In thousands)                                                       2014 (1)      2013 Assets Current assets: Cash and cash equivalents                           $ 157,242     $ 197,479 Receivables, net                                      151,344       142,217 Inventories                                           69,385        74,351 Rental merchandise in service                         137,031       132,630 Prepaid and deferred income taxes                     —             7,099 Prepaid expenses                                      9,119         7,618                                                                      Total current assets                                  524,121       561,394                                                                      Property, plant and equipment: Land, buildings and leasehold improvements            386,513       376,222 Machinery and equipment                               494,804       474,402 Motor vehicles                                        158,030       153,219                                                                                                                            1,039,347     1,003,843 Less - accumulated depreciation                       568,539       546,157                                                       470,808       457,686                                                                      Goodwill                                              302,518       302,363 Customer contracts and other intangible assets,       44,908        49,344 net Deferred income taxes                                 1,362         1,417 Other assets                                          2,270         2,658                                                                                                                          $ 1,345,987   $ 1,374,862                                                                      Liabilities and shareholders' equity Current liabilities: Loans payable and current maturities of             $ 8,913       $ 111,253 long-term debt Accounts payable                                      58,406        54,221 Accrued liabilities                                   91,901        86,994 Accrued and deferred income taxes                     14,207        12,506                                                                      Total current liabilities                             173,427       264,974                                                                      Long-term liabilities: Long-term debt, net of current maturities             155           155 Accrued liabilities                                   46,989        45,037 Accrued and deferred income taxes                     52,361        51,298                                                                      Total long-term liabilities                           99,505        96,490                                                                      Shareholders' equity: Common Stock                                          1,521         1,513 Class B Common Stock                                  487           487 Capital surplus                                       56,831        51,445 Retained earnings                                     1,017,186     958,508 Accumulated other comprehensive (loss) income         (2,970    )   1,445                                                                      Total shareholders' equity                            1,073,055     1,013,398                                                                                                                          $ 1,345,987   $ 1,374,862                                                                      (1) Unaudited  UniFirst Corporation and Subsidiaries Detail of Operating Results  Revenues                                                                                       Thirteen weeks ended                               March 1,    February 23,     Dollar   Percent (In thousands, except         2014 (1)     2013 (1)         Change   Change percentages)                                                                               Core Laundry Operations     $ 313,181    $ 301,629        $ 11,552   3.8     % Specialty Garments            20,406       22,593           (2,187 ) -9.7 First Aid                     10,380       10,084           296      2.9 Consolidated total          $ 343,967    $ 334,306        $ 9,661    2.9     %                                                                                                             Twenty-six weeks ended                                   March 1,    February 23,     Dollar   Percent (In thousands, except         2014 (1)     2013 (1)         Change   Change percentages)                                                                               Core Laundry Operations     $ 625,187    $ 596,189        $ 28,998   4.9     % Specialty Garments            44,849       50,477           (5,628 ) -11.1 First Aid                     20,635       20,209           426      2.1 Consolidated total          $ 690,671    $ 666,875        $ 23,796   3.6     %                                                                                Income from Operations                                                                                                                                                                                                                            Thirteen weeks ended                               March 1,    February 23,     Dollar   Percent (In thousands, except         2014 (1)     2013 (1)         Change   Change percentages)                                                                               Core Laundry Operations     $ 39,443     $ 40,327         $ (884   ) -2.2    % Specialty Garments            312          1,275            (963   ) -75.5 First Aid                     969          1,287            (318   ) -24.7 Consolidated total          $ 40,724     $ 42,889         $ (2,165 ) -5.0    %                                                                                                            Twenty-six weeks ended                                   March 1,     February 23,     Dollar   Percent (In thousands, except        2014 (1)      2013 (1)         Change   Change percentages)                                                                               Core Laundry Operations    $ 91,815      $ 84,855         $ 6,960    8.2     % Specialty Garments           3,071         5,979            (2,908 ) -48.6 First Aid                    1,478         2,014            (536   ) -26.6 Consolidated total         $ 96,364      $ 92,848         $ 3,516    3.8     %                                                                                (1) Unaudited  UniFirst Corporation and Subsidiaries Consolidated Statements of Cash Flows                                                                                                                                       Twenty-six weeks ended                               March 1,     February 23,  (In thousands)                                       2014 (1)     2013 (1) Cash flows from operating activities:              Net income                                           $ 60,109     $  57,402 Adjustments to reconcile net income to cash provided by operating activities: Depreciation                                           30,465        29,000 Amortization of intangible assets                      4,663         4,950 Amortization of deferred financing costs               104           119 Share-based compensation                               3,388         3,697 Accretion on environmental contingencies               358           271 Accretion on asset retirement obligations              362           331 Deferred income taxes                                  (190     )    77 Changes in assets and liabilities, net of acquisitions: Receivables                                            (9,545   )    (11,194 ) Inventories                                            5,173         1,108 Rental merchandise in service                          (4,960   )    8,461 Prepaid expenses                                       (1,504   )    (2,402  ) Accounts payable                                       4,340         (3,236  ) Accrued liabilities                                    6,248         6,414 Prepaid and accrued income taxes                       10,094        (2,480  ) Net cash provided by operating activities              109,105       92,518                                                                               Cash flows from investing activities: Acquisition of businesses                              (681     )    (1,550  ) Capital expenditures                                   (44,087  )    (50,756 ) Other                                                  401           (72     ) Net cash used in investing activities                  (44,367  )    (52,378 )                                                                               Cash flows from financing activities: Proceeds from loans payable and long-term debt         4,927         7,046 Payments on loans payable and long-term debt           (107,620 )    (3,006  ) Proceeds from exercise of Common Stock options         2,005         2,140 Payment of cash dividends                              (1,428   )    (1,424  ) Net cash (used in) provided by financing               (102,116 )    4,756 activities                                                                               Effect of exchange rate changes                        (2,859   )    (1,740  )                                                                               Net (decrease) increase in cash and cash               (40,237  )    43,156 equivalents Cash and cash equivalents at beginning of period       197,479       120,123                                                                               Cash and cash equivalents at end of period           $ 157,242    $  163,279  (1) Unaudited  Contact:  UniFirst Corporation Steven S. Sintros, 978-658-8888 Vice President & CFO ssintros@UniFirst.com