UNF UniFirst Corp

UniFirst Corporation (NYSE: UNF) today announced results for its fiscal 2015 second quarter ended February 28, 2015. Revenues were $361.5 million, up 5.1% from $344.0 million in the year ago period. Net income was $25.4 million ($1.26 per diluted share), compared to $25.6 million ($1.27 per diluted share) reported a year ago. The current quarter’s results were limited by a $3.6 million charge to selling and administrative expenses related to an increase in the Company’s environmental contingency reserves. Excluding the effect of this item, net income would have been $27.7 million ($1.37 per diluted share), an increase of 7.8% from the prior year.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “Our solid quarterly results reflect a continued focus on maximizing the output of our professional sales and service organizations. Although Core Laundry revenues have begun to be challenged by headcount reductions at many of our energy related customers, we will continue to focus on actions within our control such as providing superior service and value to our customer base.”

Revenues in the Core Laundry Operations were $332.1 million, up 6.0% from those reported in the prior year’s second quarter. Adjusting for the effects of acquisitions and a weaker Canadian dollar, revenues grew 6.1%. Excluding the environmental charge discussed above, this segment’s income from operations increased 12.9% compared to the second quarter of fiscal 2014, while the adjusted operating margin expanded to 13.4% from 12.6% a year ago. The margin improvement was due primarily to lower energy costs during the quarter.

The increase to the Company’s environmental contingency reserves was mainly due to additional costs the Company expects to incur associated with a planned municipal project that is near one of our environmental sites. To a lesser extent, the Company’s reserves also were increased due to the effect of lower interest rates on the discounting of its environmental liabilities.

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $18.7 million, down 8.6% from $20.4 million in the second quarter of fiscal 2014. This decrease was primarily the result of reduced power reactor business in North America compared to a year ago as well as the impact of foreign currency. As a result of the revenue decline, this segment reported a loss from operations for the quarter of $0.4 million compared to income from operations of $0.3 million in the prior year quarter.

Current quarter profits were also limited by foreign exchange rate losses of $0.9 million compared to $0.2 million a year ago due to the weakening of the Canadian dollar and Euro against the US dollar.

UniFirst continues to maintain a solid balance sheet with no long term debt and increasing cash balances. Cash and cash equivalents at the end of the quarter totaled $231.5 million, up from $191.8 million at end of fiscal 2014.

OutlookMr. Croatti continued, “As a result of the weaker Canadian dollar as well as the negative impact that the low price of oil is having on portions of our customer base, we now believe that full year fiscal 2015 revenues will be at the lower end of our previously communicated range of $1.450 billion to $1.470 billion. We also believe that full year diluted EPS will be between $5.65 and $5.85 per share. This EPS range has been lowered from our previously communicated guidance primarily to reflect the impact of the environmental charge taken during the quarter.”

Conference Call InformationUniFirst 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 CorporationHeadquartered in Wilmington, Mass., UniFirst Corporation is a North American leader in the supply and servicing of uniform and workwear programs, as well as the delivery of facility service programs. Together with its subsidiaries, the company also provides first aid and safety products, and manages specialized garment programs for the cleanroom and nuclear industries. UniFirst manufactures its own branded workwear, protective clothing, and floorcare products, and with over 225 service locations, 260,000 customer locations, and approximately 12,000 employee Team Partners, the company outfits more than 1.5 million workers each business day. 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. For more information visit www.unifirst.com.

Forward Looking StatementsThis 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 30, 2014 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

 

(In thousands, except per share data)    

Thirteenweeks endedFebruary 28,2015 (2)

 

Thirteenweeks endedMarch 1,2014 (2)

 

 

Twenty-sixweeks endedFebruary 28,2015 (2)

 

 

Twenty-sixweeks endedMarch 1,2014 (2)

  Revenues $ 361,462 $ 343,967 $ 731,823 $ 690,671   Operating expenses: Cost of revenues (1) 223,874 215,560 443,227 423,697 Selling and administrative expenses (1) 77,245 69,853 149,627 135,482 Depreciation and amortization 18,792 17,830 36,829 35,128 Total operating expenses 319,911 303,243 629,683 594,307   Income from operations 41,551 40,724 102,140 96,364   Other (income) expense: Interest expense 239 216 427 424 Interest income (944 ) (877 ) (1,748 ) (1,642 ) Foreign exchange loss 880 161 1,251 2 Total other (income) expense 175 (500 ) (70 ) (1,216 )   Income before income taxes 41,376 41,224 102,210 97,580 Provision for income taxes 15,930 15,577 39,351 37,471   Net income $ 25,446 $ 25,647 $ 62,859 $ 60,109   Income per share – Basic Common Stock $ 1.33 $ 1.34 $ 3.29 $ 3.15 Class B Common Stock $ 1.06 $ 1.08 $ 2.63 $ 2.52   Income per share – Diluted Common Stock $ 1.26 $ 1.27 $ 3.11 $ 2.98   Income allocated to – Basic Common Stock $ 20,182 $ 20,267 $ 49,834 $ 47,479 Class B Common Stock $ 5,041 $ 5,041 $ 12,472 $ 11,836   Income allocated to – Diluted Common Stock $ 25,235 $ 25,326 $ 62,335 $ 59,357   Weighted average number of shares outstanding – Basic Common Stock 15,185 15,077 15,156 15,053 Class B Common Stock 4,741 4,687 4,741 4,690   Weighted average number of shares outstanding – Diluted Common Stock 20,065 19,924 20,028 19,897  

(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) February 28,

2015 (1)

August 30,

2014

Assets Current assets: Cash and cash equivalents $ 231,461 $ 191,769 Receivables, net 159,102 152,523 Inventories 84,817 78,858 Rental merchandise in service 144,839 146,449 Prepaid and deferred income taxes 3,188 13,342 Prepaid expenses and other current assets 15,979 6,349   Total current assets 639,386 589,290   Property, plant and equipment: Land, buildings and leasehold improvements 397,004 393,584 Machinery and equipment 529,849 512,842 Motor vehicles 171,049 166,573   1,097,902 1,072,999 Less - accumulated depreciation 602,732 586,717 495,170 486,282   Goodwill 310,909 303,648 Customer contracts and other intangible assets, net 41,449 41,477 Deferred income taxes 1,235 1,403 Other assets 2,418 2,061   $ 1,490,567 $ 1,424,161   Liabilities and shareholders' equity Current liabilities: Loans payable and current maturities of long-term debt $ 5,637 $ 7,704 Accounts payable 57,241 59,177 Accrued liabilities 107,847 100,818 Accrued and deferred income taxes 22,964 23,342   Total current liabilities 193,689 191,041   Long-term liabilities: Long-term debt, net of current maturities — 155 Accrued liabilities 56,899 50,235 Accrued and deferred income taxes 54,516 48,271   Total long-term liabilities 111,415 98,661   Shareholders' equity: Common Stock 1,528 1,519 Class B Common Stock 486 486 Capital surplus 67,788 59,415 Retained earnings 1,136,996 1,075,572 Accumulated other comprehensive (loss) income (21,335 ) (2,533 )   Total shareholders' equity 1,185,463 1,134,459   $ 1,490,567 $ 1,424,161  

(1) Unaudited

 

UniFirst Corporation and SubsidiariesDetail of Operating Results

 

Revenues

             

(In thousands, except percentages)

 

Thirteenweeks endedFebruary 28,2015 (1)

 

Thirteenweeks endedMarch 1,2014 (1)

 

DollarChange

 

PercentChange

  Core Laundry Operations $ 332,068 $ 313,181 $ 18,887 6.0 % Specialty Garments 18,661 20,406 (1,745 ) -8.6 First Aid 10,733 10,380 353 3.4 Consolidated total $ 361,462 $ 343,967 $ 17,495 5.1 % (In thousands, except percentages)    

Twenty-sixweeks endedFebruary 28,2015 (1)

   

 

Twenty-sixweeks endedMarch 1,2014 (1)

   

 

DollarChange

 

 

PercentChange

  Core Laundry Operations $ 667,915 $ 625,187 $ 42,728 6.8 % Specialty Garments 41,137 44,849 (3,712 ) -8.3 First Aid 22,771 20,635 2,136 10.4 Consolidated total $ 731,823 $ 690,671 $ 41,152 6.0 %  

Income from Operations

            (In thousands, except percentages)

 

Thirteenweeks endedFebruary 28,2015 (1)

Thirteenweeks endedMarch 1,2014 (1)

 

DollarChange

 

PercentChange

  Core Laundry Operations $ 40,924 $ 39,443 $ 1,481 3.8 % Specialty Garments (435 ) 312 (747 ) -239.1 First Aid 1,062 969 93 9.5 Consolidated total $ 41,551 $ 40,724 $ 827 2.0 % (In thousands, except percentages)    

 

Twenty-sixweeks endedFebruary 28,2015 (1)

   

 

Twenty-sixweeks endedMarch 1,2014 (1)

   

 

 

DollarChange

 

 

PercentChange

  Core Laundry Operations $ 97,797 $ 91,815 $ 5,982 6.5 % Specialty Garments 1,833 3,071 (1,238 ) -40.3 First Aid 2,510 1,478 1,032 69.8 Consolidated total $ 102,140 $ 96,364 $ 5,776 6.0 %  

(1) Unaudited

     

UniFirst Corporation and Subsidiaries

Consolidated Statements of Cash Flows

   

(In thousands)

 

Twenty-sixweeks endedFebruary 28,2015 (1)

 

Twenty-sixweeks endedMarch 1,2014 (1)

Cash flows from operating activities:   Net income $ 62,859 $ 60,109 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 32,495 30,465 Amortization of intangible assets 4,334 4,663 Amortization of deferred financing costs 104 104 Share-based compensation 3,369 3,388 Accretion on environmental contingencies 302 358 Accretion on asset retirement obligations 316 362 Deferred income taxes 7,040 (190 ) Changes in assets and liabilities, net of acquisitions: Receivables (11,048 ) (9,545 ) Inventories (6,578 ) 5,173 Rental merchandise in service 718 (4,960 ) Prepaid expenses and other current assets (7,187 ) (1,504 ) Accounts payable (1,384 ) 4,340 Accrued liabilities 11,605 6,248 Prepaid and accrued income taxes 10,092 10,094 Net cash provided by operating activities 107,037 109,105   Cash flows from investing activities: Acquisition of businesses (15,086 ) (681 ) Capital expenditures (45,542 ) (44,087 ) Other (202 ) 401 Net cash used in investing activities (60,830 ) (44,367 )   Cash flows from financing activities: Proceeds from loans payable and long-term debt 4,937 4,927 Payments on loans payable and long-term debt (6,887 ) (107,620 ) Proceeds from exercise of Common Stock options, including excess tax benefits 4,975 2,005 Payment of cash dividends (1,433 ) (1,428 ) Net cash provided by (used in) financing activities 1,592 (102,116 )   Effect of exchange rate changes on cash (8,107 ) (2,859 )   Net increase (decrease) in cash and cash equivalents 39,692 (40,237 ) Cash and cash equivalents at beginning of period 191,769 197,479   Cash and cash equivalents at end of period $ 231,461 $ 157,242

(1) Unaudited

UniFirst CorporationSteven S. Sintros, 978- 658-8888Senior Vice President & CFOssintros@UniFirst.com