UniFirst Announces Financial Results for The Second Quarter Of Fiscal 2012

UniFirst Corporation (NYSE: UNF) today announced results for its second quarter of fiscal 2012, which ended on February 25, 2012. Revenues for the quarter were $310.0 million, up 11.3% from $278.6 million for the second quarter a year ago. Net income was $19.2 million ($0.96 per diluted common share), compared to the second quarter of fiscal 2011 when net income was $16.3 million ($0.82 per diluted common share).

For the first six months, revenues were $623.0 million, up 12.9% from $551.7 million in the prior year. Net income was $45.0 million ($2.26 per diluted common share), compared to the first half of fiscal 2011 when net income was $40.0 million ($2.02 per diluted common share).

Core laundry revenues for the quarter were $277.2 million, up 12.3% from those reported in the same period in fiscal 2011. Excluding the effects of acquisitions and a slightly weaker Canadian dollar, core laundry revenues increased 11.2%. Income from operations for this segment grew 18.9% compared to the second quarter of fiscal 2011. As a percentage of revenues, income from operations also increased to 9.9% from 9.3% a year ago.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “We are very pleased with the quarterly results of our core laundry operations which account for approximately 89% of our consolidated revenues. The continuing impact of higher merchandise amortization as a percentage of revenues in this segment was more than offset by positive operating leverage produced by the strong top line growth.”

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $23.5 million for the second quarter of fiscal 2012 and fiscal 2011. Income from operations for this segment decreased to $2.6 million in the quarter compared to $3.7 million a year earlier. The decrease was due to higher costs of revenues in the quarter compared to a year ago.

The net income comparison for the quarter benefited from a decrease in net interest expense of $1.7 million from the second quarter of fiscal 2011. The decrease was due to the expiration of an interest rate swap in March 2011 and the payment of $75.0 million in private placement notes that came due in June 2011.

UniFirst continues to maintain a solid balance sheet and overall financial position. Cash and cash equivalents on hand at the end of the quarter totaled $59.3 million. Cash provided by operating activities for the first half of the year was $60.4 million, up 85.3% compared to the first half of fiscal 2011. In addition, the percentage of debt to total capital declined to 11.0% from 13.1% at the end of fiscal 2011.

On March 27, 2012, the Company entered into a settlement related to environmental litigation. As a result of the settlement, the Company expects to recognize a pre-tax gain in its fiscal third quarter of approximately $6.7 million. This gain is expected to positively impact earnings by approximately $0.21 per diluted common share and consists of amounts previously received but not recognized into income as well as amounts that the Company will receive in the third quarter.

Outlook

Mr. Croatti continued, “We continue to focus on driving results through solid execution of our sales and service fundamentals despite what continues to be a sluggish employment recovery. Based on the strength of our results for the first half of the year as well as our outlook for the second half, we are raising our full year fiscal 2012 guidance. We now project revenues to be between $1.235 billion and $1.245 billion and diluted earnings per share to be between $4.10 and $4.25. This guidance excludes the positive impact of the Company’s March 27, 2012 settlement of environmental litigation.”

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 11,000 Team Partners who serve more than 240,000 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 may contain forward looking statements that reflect the Company’s current views with respect to future events and financial performance. 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, 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 adverse 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, demand and prices for our products and services, rampant criminal activity and instability in Mexico where our principal garment manufacturing plants are located, 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 27, 2011 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 Twenty-six weeks ended
(In thousands, except per share data) February 25,2012 (2)       February 26,2011 (2) February 25,2012 (2)       February 26,2011 (2)
 
Revenues $ 309,959 $ 278,595 $ 622,984 $ 551,685
 
Operating expenses:
Cost of revenues (1) 201,437 176,233 396,576 339,468
Selling and administrative expenses (1) 61,197 58,614 120,321 113,797
Depreciation and amortization 16,489   16,075   32,897   31,577  
Total operating expenses 279,123   250,922   549,794   484,842  
 
Income from operations 30,836   27,673   73,190   66,843  
 
Other (income) expense:
Interest expense 555 2,202 1,128 4,405
Interest income (749

)

 
(654

)

 
(1,380

)

 
(1,236

)

 
Exchange rate (gain) loss (56

)

 
(219

)

 
571   (391

)

 
(250

)

 
1,329   319   2,778  
 
Income before income taxes 31,086 26,344 72,871 64,065
Provision for income taxes 11,890   10,067   27,873   24,024  
 
Net income $ 19,196   $ 16,277   $ 44,998   $ 40,041  
 
Income per share – Basic
Common Stock $ 1.01 $ 0.86 $ 2.38 $ 2.12
Class B Common Stock $ 0.81 $ 0.69 $ 1.90 $ 1.70
 
Income per share – Diluted
Common Stock $ 0.96 $ 0.82 $ 2.26 $ 2.02
 
Income allocated to – Basic
Common Stock $ 15,081 $ 12,750 $ 35,341 $ 31,356
Class B Common Stock $ 3,765 $ 3,218 $ 8,832 $ 7,921
 
Income allocated to – Diluted
Common Stock $ 18,863 $ 15,983 $ 44,213 $ 39,314
 
Weighted average number of shares outstanding – Basic
Common Stock 14,873 14,778 14,856 14,766
Class B Common Stock 4,640 4,661 4,640 4,662
 
Weighted average number of shares outstanding – Diluted
Common Stock 19,605 19,528 19,575 19,503
 
 

(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 25,2012 (1)

August 27,2011
Assets
Current assets:
Cash and cash equivalents $ 59,346 $ 48,812
Receivables, net 139,563 128,377
Inventories 77,539 76,460
Rental merchandise in service 136,523 126,536
Prepaid and deferred income taxes 7,298 11,358
Prepaid expenses 6,812 3,647
 
Total current assets 427,081 395,190
 
Property, plant and equipment:
Land, buildings and leasehold improvements 349,672 346,738
Machinery and equipment 408,275 393,530
Motor vehicles 136,075 129,762
 
894,022 870,030
Less - accumulated depreciation 493,313 474,963
400,709 395,067
 
Goodwill 288,119 288,249
Customer contracts and other intangible assets, net 55,518 60,905
Other assets 2,246 2,109
 
$ 1,173,673 $ 1,141,520
 
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt $ 4,565 $ 20,133
Accounts payable 54,198 56,064
Accrued liabilities 76,741 76,630
 
Total current liabilities 135,504 152,827
 
Long-term liabilities:
Long-term debt, net of current maturities 100,164 100,163
Accrued liabilities 42,011 39,698
Accrued and deferred income taxes 51,169 50,890
 
Total long-term liabilities 193,344 190,751
 
Shareholders' equity:
Common Stock 1,505 1,499
Class B Common Stock 488 488
Capital surplus 39,197 33,588
Retained earnings 796,108 752,530
Accumulated other comprehensive income 7,527 9,837
 
Total shareholders' equity 844,825 797,942
 
$ 1,173,673 $ 1,141,520
 
 

(1) Unaudited
                           
 
UniFirst Corporation and Subsidiaries
Detail of Operating Results
 
Revenues
 
Thirteen weeks ended
(In thousands, except percentages)       February 25,2012 (1) February 26,2011 (1) DollarChange PercentChange
 
Core Laundry Operations $ 277,247 $ 246,868 $ 30,379 12.3 %
Specialty Garments 23,501 23,516 (15 ) -0.1
First Aid 9,211 8,211 1,000 12.2
Consolidated total $ 309,959 $ 278,595 $ 31,364 11.3 %
 
Twenty-six weeks ended
(In thousands, except percentages)      

February 25,2012 (1)
February 26,2011 (1) DollarChange PercentChange
 
Core Laundry Operations $ 549,520 $ 485,559 $ 63,961 13.2 %
Specialty Garments 53,769 49,327 4,442 9
First Aid 19,695 16,799 2,896 17.2
Consolidated total $ 622,984 $ 551,685 $ 71,299 12.9 %
 
 
 
Income from Operations
 
Thirteen weeks ended
(In thousands, except percentages)       February 25,2012 (1) February 26,2011 (1) DollarChange PercentChange
 
Core Laundry Operations $ 27,449 $ 23,078 $ 4,371 18.9 %
Specialty Garments 2,576 3,728 (1,152 ) -30.9
First Aid 811 867 (56 ) -6.4
Consolidated total $ 30,836 $ 27,673 $ 3,163 11.4 %
 
Twenty-six weeks ended
(In thousands, except percentages)       February 25,2012 (1) February 26,2011 (1) DollarChange PercentChange
 
Core Laundry Operations $ 62,431 $ 57,492 $ 4,939 8.6 %
Specialty Garments 9,142 7,757 1,385 17.9
First Aid 1,617 1,594 23 1.5
Consolidated total $ 73,190 $ 66,843 $ 6,347 9.5 %
 
(1) Unaudited
         
 
UniFirst Corporation and Subsidiaries
Consolidated Statements of Cash Flows
 
Twenty-six weeks ended

(In thousands)
     

February 25,2012 (1)
   

February 26,2011 (1)
Cash flows from operating activities:  
Net income $ 44,998 $ 40,041
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 27,550 26,574
Amortization of intangible assets 5,347 5,003
Amortization of deferred financing costs 119 133
Share-based compensation 3,701 3,492
Accretion on environmental contingencies 316 341
Accretion on asset retirement obligations 316 295
Deferred income taxes 362 5,620
Changes in assets and liabilities, net of acquisitions:
Receivables (11,698 ) (17,538 )
Inventories (1,348 ) (10,602 )
Rental merchandise in service (10,246 ) (10,165 )
Prepaid expenses (3,169 ) (1,292 )
Accounts payable (1,699 ) (2,138 )
Accrued liabilities 1,891 3,798
Prepaid and accrued income taxes 4,006 (10,941 )
Net cash provided by operating activities 60,446 32,621
 
Cash flows from investing activities:
Acquisition of businesses - (16,326 )
Capital expenditures (34,275 ) (31,191 )
Other (464 ) 35
Net cash used in investing activities (34,739 ) (47,482 )
 
Cash flows from financing activities:
Proceeds from long-term obligations 38,910 -
Payments on long-term obligations (54,325 ) (1,102 )
Proceeds from exercise of Common Stock options 1,914 1,009
Payment of cash dividends (1,418 ) (1,414 )
Net cash used in financing activities (14,919 ) (1,507 )
 
Effect of exchange rate changes (254 ) 2,597
 
Net increase (decrease) in cash and cash equivalents 10,534 (13,771 )
Cash and cash equivalents at beginning of period 48,812 121,258
 
Cash and cash equivalents at end of period $ 59,346 $ 107,487
 
 

(1) Unaudited

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