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
 
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