UniFirst Corporation ( UNF)

F4Q10 (Qtr End 08/28/10) Earnings Conference Call

October 19, 2010 10 AM ET


Steve Sintros – Chief Financial Officer and Vice President of Finance

Ron Croatti – Chairman, Chief Executive Officer and President


Andrew Steinman – JP Morgan

John Healey – North Coast Research

Justin Hott – Robert W. Baird

Chris McGinnis – Sidoti & Company


Operator: Ladies and gentlemen, thank you for standing by. Welcome to the UniFirst Q4 Earnings Results Conference Call. (Operator Instructions) I would now like to turn the conference over to Steve Sintros, Chief Financial Officer. Go ahead, sir.

Steve Sintros

Thank you, and welcome to the UniFirst Corporation conference call to review our Q4 results for fiscal 2010, and to discuss our expectations going forward. I’m Steve Sintros, UniFirst’s Chief Financial Officer. Joining me is Ron 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 costs of materials, fuel, and labor; and the outcome of future and pending litigation and environmental matters. I refer you to the discussion of these points in our most recent filings with the Securities and Exchange Commission.

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

Rob Croatti

Thank you, Steve, and welcome to all those joining us for the review of UniFirst’s Q4 and full fiscal year 2010 results. Our numbers were released this morning and I am happy to report they showed a year of record revenues and a record net income for UniFirst, despite the many business challenges associated with the high unemployment levels and slow economic recovery.

I want to sincerely thank our entire management team and our thousands of dedicated partners throughout North America and Europe for their tremendous efforts to increase our customer satisfaction and loyalty levels, contributing significantly to another record-setting fiscal year.

For the full year, revenues were $1.26 billion, a 1.2% increase from fiscal 2009, $1.13 billion; and net income was $76.4 million, up .7% from last year’s $75.9 million. Meanwhile, income per share decreased slightly in 2010, to $3.90 per diluted common share, a .5% decrease from the $3.92 per diluted common share that were reported in ‘09. All these results were ahead of expectations and guidance we provided during the year.

Our core laundry operations, which represent approximately 90% of our total business, reported decreasing revenues and operating income as compared to 2009, down .5% and 8.8% respectively. However, it should be noted that in spite of the tough economic times, the comparative revenue shortfall is among the lowest in the industry.

Our specialty garment business, made up of nuclear and cleanroom operations, saw net revenues and operating income records in 2010, bettering last year’s revenues by 21.6% and operating income by 88.7%. Our first-aid operations also saw positive growth in 2010 over 2009, with increases of 5.8% and an increase in operating income of 58.7%.

For the Q4 the company’s revenues were $255 million, a 5.6% increase over the same period in fiscal 2009. Net income was $17.3 million, or $0.87 per diluted common share, a slight increase over last year’s Q4. Steve will go over all the financial results in more details in a moment.

Employment levels and general economic conditions directly affect our core rental market and demand for UniFirst products and services, and throughout fiscal 2010 we witnessed national unemployment consistently near the 10% in both the US and Canada, causing widespread customer reductions in our uniform wears. We also lost many accounts due to business closings and decisions not to renew service agreements for financial reasons. And we observed a general lack of confidence, both in consumer spending and future market conditions, that caused many companies to delay longer-term purchase commitments and to postpone rehiring laid off workers.

Thankfully, as the year progressed, we saw progressive week-to-week decreases in the recession-related wear reductions and customer losses, although still not returning to pre-recession levels. This signals a long-awaited stabilization within our markets. And through it all, our company-wide commitment to service excellence, along with intensified, strategic selling efforts, led to another successful year at UniFirst.

As a result of our proactive steps, our uniform rental business showed a solid performance in 2010, with customer retention levels improving over 2009. And new business sales were also up over last year, helping our top line. The company’s overall sales advanced despite a particularly resistant prospect pool and overly aggressive pricing by competitors using price alone as a strategy to gain new business.

Our professional sales team continued to optimize our ongoing investments in sales productivity and prospecting technologies, and benefited from intense training programs that focused more on strategic selling during tough economic times. Our national accounts sales organization in particular contributed throughout the year, with a year-over-year improvement, signing several new large-scale customers as well as securing many important contract renewals. Group sales also showed a slight improvement from last year, adding more and more products and services into our existing customer accounts.

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