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