UniFirst Corporation (UNF)

F3Q10 (Qtr End 05/29/10) Earnings Call Transcript

June 30, 2010 10:00 am ET

Executives

Steve Sintros – VP, Finance and CFO

Ronald Croatti – Chairman, President and CEO

Analysts

Chris McGinnis – Sidoti & Company

Andrea Wirth – Robert W. Baird

William Lee – JP Morgan

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the third quarter earnings results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator instructions) I would now like to turn the conference over to Steve Sintros, Chief Financial Officer. Please go ahead, sir.

Steve Sintros

Thank you and welcome to the UniFirst Corporation conference call to review our third quarter results for fiscal 2010 and to discuss our expectations going forward. I’m Steven Sintros, UniFirst’s Chief Financial Officer. Joining me is Ronald Croatti, UniFirst’s President and Chief Executive Officer. This call will be on a listen-only mode until we complete our prepared remarks.

Now, before I turn the call over to Ron, I would like to give a brief disclaimer. This conference call may contain forward-looking statements that reflect the company’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend and similar expressions that indicate future events and trends identify forward-looking statements.

Actual future results may differ materially from those anticipated, depending on a variety of factors including, but not limited to, volatility in employment levels and general economic conditions; the continued availability of credit; the performance of acquisitions; fluctuations in the cost of materials, fuel, and labor; and the outcome of pending and future litigation and environmental matters. I refer you to our discussion of these points in our most recent filings with the Securities and Exchange Commission.

Now I will turn the call over to Ron Croatti for his comments.

Ronald Croatti

Thank you, Steve. I’d like to welcome all of you who are joining us for the review of UniFirst financial results for the third quarter of fiscal 2010. Steve will be covering the details in a few minutes, but let me start with a brief recap. Revenues for the third quarter were $261.2 million, a 3.6% increase compared with the same period of fiscal 2009, with all business operations contributing to the topline gain.

Our core laundry operations continued to drive overall company performance, achieving a revenue increase 1.8% over last year’s third quarter, but it was our Specialty Garments business that provides uniform and ancillary services for the nuclear cleanroom industry had a particular strong quarter with a 22% revenue increase as compared quarter-to-quarter basis last year to the Specialty group recording setting performance can be credited to a combination of existing account growth, including improved activities with the Canadian customers, safety supply sales, and positive results with the European operations.

Revenues from our First Aid business were also up, delivering a 6.6% increase over the same quarter in fiscal 2009. Although this segment’s Green Guard operation, which installs service and services first aid cabinets, continued to be hard hit by the recessionary environment. Its unique operation, which private labels had supplies over-the-counter medication for resale, continued to grow with retail market and was responsible for most of the segment’s improvement.

Net income for the quarter was $19.3 million, an 11% decrease when compared to the third quarter of fiscal 2009. However, net income year-to-date was in line with the same record-level period of last year. Our core laundry operations continued to stabilize during the quarter in the dramatic uniform wear loss we experienced throughout the recession. Although our uniform losses were still greater than they had in the third quarter, despite this negative metrics, our core laundries drove the company’s positive performance with new sales coming in ahead of the same period last year.

In our core business, we continued to focus on sales and service fundamentals, as well as productivity improvements, with the increased number of corporate training programs being delivered to more team partners through our new highly effective video conferencing network. Via this network, our management teams are also receiving more in-depth instructions in sales and service techniques, consistently becoming (inaudible) in both of these critical areas. All of our training efforts are designed to increase overall sales productivity, reinforce our consistently higher customer service levels, and provide clear career path opportunities for our team partners.

Several key measurements we used to track professional sales are now validating the efforts of our ramped up training efforts, including more strategic and more targeted selling by our teams, which has an increased overall sales productivity over last year. Unfortunately, our new accounts and customer retention pricing continue to be negatively impacted by competitive pressures and overly cautious business decision-makers. Our reps are countering by finding more prospects willing to make their uniform program choices based on overall value versus per wear line item costs.

In the service area, our customer retention rates have been climbing steadily each quarter of fiscal 2010, illustrating that our back-to-basics approach to servicing our customers, as we would like to be serviced, is having a measurable positive effect. And we are continuing to implement new customer routing technologies companywide. This provides us with significant return on our investment.

These programs direct our thousands of service delivery vehicles to consistently follow the most efficient geographic routing plans. Drive times are always minimized and never overloaded although allowing for more face-to-face times serving customers. Overall, we were pleased with the results during our first three quarters of 2010, but we continue to proceed with fiscal caution and strict companywide cost controls.

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