UniFirst Announces Financial Results for the Third Quarter and First Nine Months of Fiscal 2014

WILMINGTON, Mass.--()--UniFirst Corporation (NYSE: UNF) today announced results for its fiscal 2014 third quarter, which ended May 31, 2014. Revenues were $352.2 million, up 4.9% from $335.8 million in the year ago period. Net income of $30.9 million ($1.53 per diluted share), was up 7.7% from $28.7 million ($1.43 per diluted share) reported in the year ago period.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “Overall we were pleased with our results for the quarter. We continue to get solid performances from our sales and service organizations in two areas that are integral to our success; selling new business and retaining existing customer relationships.”

Revenues in the Core Laundry Operations were $313.3 million, up 5.2% from those reported in the prior year’s third quarter. Excluding the negative impact of the weaker Canadian dollar as well as the positive effect of acquisitions, the Core Laundry Operations’ revenues grew 4.8%. This segment’s income from operations grew 10.3% compared to the third quarter of fiscal 2013 and its operating margin increased to 14.2% from 13.6% a year ago. Operating margins expanded primarily due to lower merchandise costs and other expenses related to our plant operations as a percentage of revenues. Those items were partially offset by higher healthcare claims and energy expense during the quarter as a percentage of revenues.

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $27.6 million, up 4.9% from $26.3 million in the third quarter of fiscal 2013. This increase was primarily the result of a higher number of power reactor outage projects in the United States and Canada compared to a year ago. This segment’s income from operations for the quarter increased to $4.0 million from $3.6 million in the comparable period in fiscal 2013. The stronger performance of the Specialty Garments segment was offset by a decrease in operating income from the Company’s First Aid segment.

UniFirst continues to maintain a solid balance sheet and financial position. We ended the quarter with essentially no long-term debt and cash and cash equivalents of $151.0 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, “Based on our results to date as well as our outlook for our fourth fiscal quarter, we now expect our full year revenues will be between $1.382 billion and $1.387 billion. We also expect full year EPS to be between $5.70 and $5.85 per share.”

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 fourth quarter of fiscal 2013 contained 14 weeks. 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 260,000 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 contains forward looking statements that reflect the Company’s current views with respect to future events and financial performance, including projected revenues and earnings per share. 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, including suits relating to the New England Compounding Center matter, 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 Thirty-nine weeks ended
May 31,   May 25, May 31,   May 25,
(In thousands, except per share data) 2014 (2) 2013 (2) 2014 (2) 2013 (2)
 
Revenues $ 352,238 $ 335,764 $ 1,042,909 $ 1,002,639
 
Operating expenses:
Cost of revenues (1) 216,644 208,066 640,341 618,038
Selling and administrative expenses (1) 67,996 64,786 203,478 194,891
Depreciation and amortization 18,109 17,115 53,237 51,065
Total operating expenses 302,749 289,967 897,056 863,994
 
Income from operations 49,489 45,797 145,853 138,645
 
Other (income) expense:
Interest expense 109 464 533 1,324
Interest income (773 ) (781 ) (2,415 ) (2,472 )
Exchange rate loss 39 283 41 321
Total other (income) expense (625 ) (34 ) (1,841 ) (827 )
 
Income before income taxes 50,114 45,831 147,694 139,472
Provision for income taxes 19,170 17,109 56,641 53,348
 
Net income $ 30,944 $ 28,722 $ 91,053 $ 86,124
 
Income per share – Basic
Common Stock $ 1.62 $ 1.51 $ 4.78 $ 4.53
Class B Common Stock $ 1.30 $ 1.21 $ 3.82 $ 3.63
 
Income per share – Diluted
Common Stock $ 1.53 $ 1.43 $ 4.52 $ 4.29
 
Income allocated to – Basic
Common Stock $ 24,493 $ 22,638 $ 71,971 $ 67,793
Class B Common Stock $ 6,127 $ 5,647 $ 17,962 $ 16,880
 
Income allocated to – Diluted
Common Stock $ 30,637 $ 28,307 $ 89,992 $ 84,747
 
Weighted average number of shares outstanding – Basic
Common Stock 15,102 14,993 15,069 14,960
Class B Common Stock 4,722 4,675 4,701 4,656
 
Weighted average number of shares outstanding – Diluted
Common Stock 19,977 19,820 19,921 19,751
 

(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

 
(In thousands) May 31,

2014 (1)

August 31,

2013

Assets
Current assets:
Cash and cash equivalents $ 151,021 $ 197,479
Receivables, net 153,723 142,217
Inventories 69,974 74,351
Rental merchandise in service 141,225 132,630
Prepaid and deferred income taxes 474 7,099
Prepaid expenses 9,727 7,618
 
Total current assets 526,144 561,394
 
Property, plant and equipment:
Land, buildings and leasehold improvements 391,067 376,222
Machinery and equipment 504,953 474,402
Motor vehicles 166,669 153,219
 
1,062,689 1,003,843
Less - accumulated depreciation 577,034 546,157
485,655 457,686
 
Goodwill 302,627 302,363
Customer contracts and other intangible assets, net 42,859 49,344
Deferred income taxes 1,387 1,417
Other assets 2,271 2,658
 
$ 1,360,943 $ 1,374,862
 
Liabilities and shareholders' equity
Current liabilities:
Loans payable and current maturities of long-term debt $ 9,334 $ 111,253
Accounts payable 42,724 54,221
Accrued liabilities 89,713 86,994
Accrued and deferred income taxes 12,722 12,506
 
Total current liabilities 154,493 264,974
 
Long-term liabilities:
Long-term debt, net of current maturities 155 155
Accrued liabilities 48,414 45,037
Accrued and deferred income taxes 51,005 51,298
 
Total long-term liabilities 99,574 96,490
 
Shareholders' equity:
Common Stock 1,518 1,513
Class B Common Stock 486 487
Capital surplus 58,089 51,445
Retained earnings 1,047,415 958,508
Accumulated other comprehensive (loss) income (632 ) 1,445
 
Total shareholders' equity 1,106,876 1,013,398
 
$ 1,360,943 $ 1,374,862
 

(1) Unaudited

     

UniFirst Corporation and Subsidiaries

Detail of Operating Results

 

Revenues

 
Thirteen weeks ended
May 31,   May 25, Dollar Percent
(In thousands, except percentages) 2014 (1) 2013 (1) Change Change
 
Core Laundry Operations $ 313,305 $ 297,729 $ 15,576 5.2 %
Specialty Garments 27,619 26,327 1,292 4.9
First Aid 11,314 11,708 (394 ) -3.4
Consolidated total $ 352,238 $ 335,764 $ 16,474 4.9 %
 
     
Thirty-nine weeks ended
May 31,   May 25, Dollar Percent
(In thousands, except percentages) 2014 (1) 2013 (1) Change Change
 
Core Laundry Operations $ 938,492 $ 893,918 $ 44,574 5.0 %
Specialty Garments 72,468 76,804 (4,336 ) -5.6
First Aid 31,949 31,917 32 0.1
Consolidated total $ 1,042,909 $ 1,002,639 $ 40,270 4.0 %
 
     

Income from Operations

 
Thirteen weeks ended
May 31,   May 25, Dollar Percent
(In thousands, except percentages) 2014 (1) 2013 (1) Change Change
 
Core Laundry Operations $ 44,498 $ 40,356 $ 4,142 10.3 %
Specialty Garments 3,992 3,576 416 11.6
First Aid 999 1,865 (866 ) -46.4
Consolidated total $ 49,489 $ 45,797 $ 3,692 8.1 %
 
   
Thirty-nine weeks ended
May 31,   May 25, Dollar Percent
(In thousands, except percentages) 2014 (1) 2013 (1) Change Change
 
Core Laundry Operations $ 136,313 $ 125,211 $ 11,102 8.9 %
Specialty Garments 7,063 9,555 (2,492 ) -26.1
First Aid 2,477 3,879 (1,402 ) -36.1
Consolidated total $ 145,853 $ 138,645 $ 7,208 5.2 %
 

(1) Unaudited

 

UniFirst Corporation and Subsidiaries

Consolidated Statements of Cash Flows

 
Thirty-nine weeks ended

(In thousands)

May 31,

2014 (1)

  May 25,

2013 (1)

Cash flows from operating activities:  
Net income $ 91,053 $ 86,124
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 46,432 43,718
Amortization of intangible assets 6,805 7,347
Amortization of deferred financing costs 156 178
Share-based compensation 4,541 5,051
Accretion on environmental contingencies 537 407
Accretion on asset retirement obligations 756 497
Deferred income taxes (134 ) 79
Changes in assets and liabilities, net of acquisitions:
Receivables (11,573 ) (12,099 )
Inventories 4,550 3,070
Rental merchandise in service (8,882 ) 4,332
Prepaid expenses (2,108 ) (3,824 )
Accounts payable (11,445 ) 3,279
Accrued liabilities 4,874 8,255
Prepaid and accrued income taxes 6,713 (6,914 )
Net cash provided by operating activities 132,275 139,500
 
Cash flows from investing activities:
Acquisition of businesses (841 ) (1,953 )
Capital expenditures (74,466 ) (81,087 )
Other 480 (185 )
Net cash used in investing activities (74,827 ) (83,225 )
 
Cash flows from financing activities:
Proceeds from loans payable and long-term debt 7,107 10,523
Payments on loans payable and long-term debt (109,383 ) (6,443 )
Proceeds from exercise of Common Stock options, including excess tax benefits 5,630 2,750
Taxes withheld and paid related to net share settlement of equity awards (3,527 ) (3,332 )
Payment of cash dividends (2,145 ) (2,138 )
Net cash (used in) provided by financing activities (102,318 ) 1,360
 
Effect of exchange rate changes (1,588 ) (2,167 )
 
Net (decrease) increase in cash and cash equivalents (46,458 ) 55,468
Cash and cash equivalents at beginning of period 197,479 120,123
 
Cash and cash equivalents at end of period $ 151,021 $ 175,591
 

(1) Unaudited

Contacts

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

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Contacts

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