UNF UniFirst Corp

UniFirst Corporation (NYSE: UNF) today announced results for its fiscal 2015 third quarter ended May 30, 2015. Revenues were $365.6 million, up 3.8% from $352.2 million in the year ago period. Net income was $32.5 million ($1.61 per diluted share), up 5.0% compared to $30.9 million ($1.53 per diluted share) reported a year ago.

Ronald D. Croatti, UniFirst President and Chief Executive Officer, said, “Our growth continued to be limited by macroeconomic factors including headcount reductions at many of our energy related customers as well as weaker foreign currency exchange rates adversely affecting our Canadian and European operations. Despite these challenges, we are pleased with the results of our third quarter and will continue to focus on factors within our control.”

Revenues in the Core Laundry Operations were $327.8 million, up 4.6% from those reported in the prior year’s third quarter. Adjusting for the effects of acquisitions and a weaker Canadian dollar, revenue grew 4.7%. This segment’s income from operations increased 5.5% compared to the third quarter of fiscal 2014, while the operating margin increased slightly to 14.3% from 14.2% a year ago. The margin benefited from lower energy costs during the quarter which were offset partially by higher merchandise costs and administrative expenses as a percentage of revenues.

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $25.9 million, down 6.4% from $27.6 million in the third quarter of fiscal 2014. This decrease in revenues was due primarily to the impact of a weaker Canadian dollar and Euro. This segment reported income from operations of $4.0 million in both the current quarter and last year’s fiscal third quarter. In addition, the Company’s First Aid segment continued to produce strong top and bottom line results.

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 $235.7 million, up from $191.8 million at the end of fiscal 2014.

OutlookMr. Croatti continued, “Based primarily on the effect of these macroeconomic factors, we expect our growth rate to continue to decline in the fourth quarter. As a result, we believe that full year fiscal 2015 revenues will be between $1.452 billion and $1.458 billion. We also believe that full year diluted EPS will be between $5.90 and $6.00. As a reminder, this EPS range includes the impact of the $3.6 million environmental charge incurred during our second 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, 275,000 customer locations, and 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, 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 SubsidiariesConsolidated Statements of Income

          (In thousands, except per share data)  

Thirteenweeks endedMay 30,2015 (2)

Thirteenweeks endedMay 31,2014 (2)

Thirty-nineweeks endedMay 30,2015 (2)

Thirty-nineweeks endedMay 31,2014 (2)

  Revenues $ 365,574 $ 352,238 $ 1,097,397 $ 1,042,909   Operating expenses: Cost of revenues (1) 221,995 216,644 665,222 640,341 Selling and administrative expenses (1) 72,205 67,996 221,832 203,478 Depreciation and amortization 19,022 18,109 55,851 53,237 Total operating expenses 313,222 302,749 942,905 897,056   Income from operations 52,352 49,489 154,492 145,853   Other (income) expense: Interest expense 221 109 648 533 Interest income (784 ) (773 ) (2,532 ) (2,415 ) Foreign exchange loss 72 39 1,323 41 Total other (income) expense (491 ) (625 ) (561 ) (1,841 )   Income before income taxes 52,843 50,114 155,053 147,694 Provision for income taxes 20,344 19,170 59,695 56,641   Net income $ 32,499 $ 30,944 $ 95,358 $ 91,053   Income per share – Basic Common Stock $ 1.70 $ 1.62 $ 4.99 $ 4.78 Class B Common Stock $ 1.36 $ 1.30 $ 3.99 $ 3.82   Income per share – Diluted Common Stock $ 1.61 $ 1.53 $ 4.72 $ 4.52   Income allocated to – Basic Common Stock $ 25,817 $ 24,493 $ 75,650 $ 71,971 Class B Common Stock $ 6,483 $ 6,127 $ 18,954 $ 17,962   Income allocated to – Diluted Common Stock $ 32,310 $ 30,637 $ 94,644 $ 89,992   Weighted average number of shares outstanding – Basic Common Stock 15,207 15,102 15,173 15,069 Class B Common Stock 4,773 4,722 4,752 4,701   Weighted average number of shares outstanding – Diluted Common Stock 20,118 19,977 20,057 19,921  

(1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets(2) Unaudited

 

UniFirst Corporation and SubsidiariesCondensed Consolidated Balance Sheets

    (In thousands) May 30,

2015 (1)

August 30,

2014

Assets Current assets: Cash and cash equivalents $ 235,672 $ 191,769 Receivables, net 157,871 152,523 Inventories 83,897 78,858 Rental merchandise in service 144,535 146,449 Prepaid and deferred income taxes 5,336 13,342 Prepaid expenses and other current assets 16,523 6,349   Total current assets 643,834 589,290   Property, plant and equipment: Land, buildings and leasehold improvements 400,236 393,584 Machinery and equipment 534,916 512,842 Motor vehicles 192,466 166,573   1,127,618 1,072,999 Less - accumulated depreciation 612,137 586,717 515,481 486,282   Goodwill 313,670 303,648 Customer contracts and other intangible assets, net 40,316 41,477 Deferred income taxes 1,237 1,403 Other assets 3,070 2,061   $ 1,517,608 $ 1,424,161   Liabilities and shareholders' equity Current liabilities: Loans payable and current maturities of long-term debt $ 3,376 $ 7,704 Accounts payable 56,542 59,177 Accrued liabilities 105,996 100,818 Accrued and deferred income taxes 22,991 23,342   Total current liabilities 188,905 191,041   Long-term liabilities: Long-term debt, net of current maturities — 155 Accrued liabilities 57,419 50,235 Accrued and deferred income taxes 54,569 48,271   Total long-term liabilities 111,988 98,661   Shareholders' equity: Common Stock 1,525 1,519 Class B Common Stock 485 486 Capital surplus 66,912 59,415 Retained earnings 1,168,777 1,075,572 Accumulated other comprehensive (loss) income (20,984 ) (2,533 )   Total shareholders' equity 1,216,715 1,134,459   $ 1,517,608 $ 1,424,161  

(1) Unaudited

 

UniFirst Corporation and SubsidiariesDetail of Operating Results

 

Revenues

          (In thousands, except percentages)  

Thirteenweeks endedMay 30,2015 (1)

Thirteenweeks endedMay 31,2014 (1)

DollarChange

PercentChange

  Core Laundry Operations $ 327,770 $ 313,305 $ 14,465 4.6 % Specialty Garments 25,854 27,619 (1,765 ) -6.4 First Aid 11,950 11,314 636 5.6 Consolidated total $ 365,574 $ 352,238 $ 13,336 3.8 %  

(In thousands, except percentages)

   

Thirty-nineweeks endedMay 30,2015 (1)

 

Thirty-nineweeks endedMay 31,2014 (1)

 

DollarChange

 

PercentChange

  Core Laundry Operations $ 995,685 $ 938,492 $ 57,193 6.1 % Specialty Garments 66,991 72,468 (5,477 ) -7.6 First Aid 34,721 31,949 2,772 8.7 Consolidated total $ 1,097,397 $ 1,042,909 $ 54,488 5.2 %    

Income from Operations

            (In thousands, except percentages)  

Thirteenweeks endedMay 30,2015 (1)

Thirteenweeks endedMay 31,2014 (1)

DollarChange

PercentChange

  Core Laundry Operations $ 46,934 $ 44,498 $ 2,436 5.5 % Specialty Garments 4,032 3,992 40 1.0 First Aid 1,386 999 387 38.7 Consolidated total $ 52,352 $ 49,489 $ 2,863 5.8 %   (In thousands, except percentages)    

Thirty-nineweeks endedMay 30,2015 (1)

 

Thirty-nineweeks endedMay 31,2014 (1)

 

DollarChange

 

PercentChange

  Core Laundry Operations $ 144,731 $ 136,313 $ 8,418 6.2 % Specialty Garments 5,865 7,063 (1,198 ) -17.0 First Aid 3,896 2,477 1,419 57.3 Consolidated total $ 154,492 $ 145,853 $ 8,639 5.9 %  

(1) Unaudited

 

UniFirst Corporation and SubsidiariesConsolidated Statements of Cash Flows

 

 

(In thousands)

Thirty-nineweeks endedMay 30,2015 (1)

 

Thirty-nineweeks endedMay 31,2014 (1)

Cash flows from operating activities:   Net income $ 95,358 $ 91,053 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 49,270 46,432 Amortization of intangible assets 6,581 6,805 Amortization of deferred financing costs 156 156 Share-based compensation 4,413 4,541 Accretion on environmental contingencies 452 537 Accretion on asset retirement obligations 503 756 Deferred income taxes 6,668 (134 ) Changes in assets and liabilities, net of acquisitions: Receivables (9,463 ) (11,573 ) Inventories (5,714 ) 4,550 Rental merchandise in service 1,417 (8,882 ) Prepaid expenses and other current assets (7,812 ) (2,108 ) Accounts payable (2,106 ) (11,445 ) Accrued liabilities 10,283 4,874 Prepaid and accrued income taxes 8,408 6,713 Net cash provided by operating activities 158,414 132,275   Cash flows from investing activities: Acquisition of businesses (19,815 ) (841 ) Capital expenditures (82,272 ) (74,466 ) Other (1,160 ) 480 Net cash used in investing activities (103,247 ) (74,827 )   Cash flows from financing activities: Proceeds from loans payable and long-term debt 5,401 7,107 Payments on loans payable and long-term debt (9,580 ) (109,383 ) Proceeds from exercise of Common Stock options, including excess tax benefits 8,055 5,630 Taxes withheld and paid related to net share settlement of equity awards (5,002 ) (3,527 ) Payment of cash dividends (2,151 ) (2,145 ) Net cash used in financing activities (3,277 ) (102,318 )   Effect of exchange rate changes on cash (7,987 ) (1,588 )   Net increase (decrease) in cash and cash equivalents 43,903 (46,458 ) Cash and cash equivalents at beginning of period 191,769 197,479   Cash and cash equivalents at end of period $ 235,672 $ 151,021  

(1) Unaudited

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