UniFirst Announces Fiscal 2013 Second Quarter Results

UniFirst Corporation (NYSE: UNF) today announced results for its second fiscal quarter, which ended February 23, 2013. Revenues were $334.3 million, up 7.9% from $310.0 million in the year ago period. Net income was $26.6 million ($1.33 per diluted share), up 38.8% compared to $19.2 million ($0.96 per diluted share) reported in the year ago period.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “Our excellent results for the first half of the year are due to strong execution in all facets of our operations. We are very pleased with these results, particularly as we have been faced with a challenging economic environment. Businesses remain hesitant to add new costs, including new employees who are potential wearers of our uniforms.”

Second quarter revenues in the Core Laundry Operations were $301.6 million, up 8.8% from those reported in the prior year’s second quarter. Excluding the effect of acquisitions and a stronger Canadian dollar, revenues grew 8.3%. Revenues in this segment were positively affected in the period by the impact of a customer related specialty merchandise buyout that added approximately 0.8% to the organic growth. This segment’s income from operations increased 46.9% year to year and its operating margin expanded to 13.4% from 9.9%. Excluding the impact of the merchandise buyout discussed above, this segment’s second quarter operating margin would have been 12.9% and diluted earnings per share would have been $1.27. Increased profitability in this segment was primarily the result of improved operating leverage that came with our strong revenue growth. Expenses related to merchandise, energy, payroll and other costs related to our plant operations were all lower as a percentage of revenue compared to the prior year.

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $22.6 million, down 3.9% from $23.5 million in the second quarter of fiscal 2012. This segment had income from operations for the quarter of $1.3 million down from $2.6 million in the same quarter a year ago. These results were impacted by a weaker than anticipated performance from this segment’s European operations as well as the completion of two large projects in the latter part of fiscal 2012.

UniFirst continues to maintain a solid balance sheet and financial position. Cash and cash equivalents at the end of the quarter totaled $163.3 million, up from $120.1 million at the end of fiscal 2012. Cash provided by operating activities for the first half of the year was $92.5 million, up 53.1% compared to $60.4 million for the first half of fiscal 2012. The improved cash flows were primarily the result of higher earnings as well as lower cash outflows related to working capital. At the end of the quarter, total debt was $110.8 million, or 10.4% of total capital.

Outlook

Mr. Croatti continued, “Based on the strength of the first half and our current outlook for the remainder of the year, we are increasing our previously communicated guidance. We project our fiscal 2013 revenues to be between $1.344 billion and $1.354 billion and diluted earnings per share to be between $5.65 and $5.80. Our guidance assumes no further deterioration of the U.S. economy and also includes one extra week of operations in our fourth quarter due to the timing of our fiscal calendar.”

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, 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 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, our ability to properly and efficiently design, construct, implement and operate our new CRM computer system, 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 25, 2012 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
February 23,   February 25, February 23,     February 25,
(In thousands, except per share data) 2013 (2) 2012 (2) 2013 (2) 2012 (2)
 
Revenues $ 334,306 $ 309,959 $ 666,875 $ 622,984
 
Operating expenses:
Cost of revenues (1) 208,421 201,437 409,972 396,576
Selling and administrative expenses (1) 65,817 61,197 130,105 120,321
Depreciation and amortization 17,179   16,489   33,950   32,897  
Total operating expenses 291,417   279,123   574,027   549,794  
 
Income from operations 42,889   30,836   92,848   73,190  
 
Other (income) expense:
Interest expense 400 555 860 1,128
Interest income (924 ) (749 ) (1,691

)

 
(1,380

)

 
Exchange rate loss (gain) 198   (56

)

 
38   571  
(326

)

 
(250

)

 
(793

)

 
319  
 
Income before income taxes 43,215 31,086 93,641 72,871
Provision for income taxes 16,573   11,890   36,239   27,873  
 
Net income $ 26,642   $ 19,196   $ 57,402   $ 44,998  
 
Income per share – Basic
Common Stock $ 1.40 $ 1.01 $ 3.02 $ 2.38
Class B Common Stock $ 1.12 $ 0.81 $ 2.42 $ 1.90
 
Income per share – Diluted
Common Stock $ 1.33 $ 0.96 $ 2.86 $ 2.26
 
Income allocated to – Basic
Common Stock $ 20,963 $ 15,081 $ 45,155 $ 35,341
Class B Common Stock $ 5,209 $ 3,765 $ 11,233 $ 8,832
 
Income allocated to – Diluted
Common Stock $ 26,196 $ 18,863 $ 56,440 $ 44,213
 
Weighted average number of shares outstanding – Basic
Common Stock 14,962 14,873 14,943 14,856
Class B Common Stock 4,647 4,640 4,647 4,640
 
Weighted average number of shares outstanding – Diluted
Common Stock 19,747 19,605 19,714 19,575

(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 23,2013 (1)

August 25,2012
Assets
Current assets:
Cash and cash equivalents $ 163,279 $ 120,123
Receivables, net 146,368 135,327
Inventories 74,386 75,420
Rental merchandise in service 129,697 138,284
Prepaid and deferred income taxes 12,785 12,785
Prepaid expenses 8,143 5,741
 
Total current assets 534,658 487,680
 
Property, plant and equipment:
Land, buildings and leasehold improvements 369,819 355,568
Machinery and equipment 450,767 425,274
Motor vehicles 145,090 141,370
 
965,676 922,212
Less - accumulated depreciation 532,500 510,008
433,176 412,204
 
Goodwill 288,674 288,137
Customer contracts and other intangible assets, net 46,101 50,531
Other assets 2,412 1,982
 
$ 1,305,021 $ 1,240,534
 
Liabilities and shareholders' equity
Current liabilities:
Loans payable and current maturities of long-term debt $ 110,686 $ 6,831
Accounts payable 49,055 52,340
Accrued liabilities 84,252 78,174
Accrued income taxes 5,621 8,180
 
Total current liabilities 249,614 145,525
 
Long-term liabilities:
Long-term debt, net of current maturities 155 100,155
Accrued liabilities 44,230 43,420
Accrued and deferred income taxes 54,725 54,509
 
Total long-term liabilities 99,110 198,084
 
Shareholders' equity:
Common Stock 1,512 1,506
Class B Common Stock 488 488
Capital surplus 48,814 42,984
Retained earnings 900,652 844,676
Accumulated other comprehensive income 4,831 7,271
 
Total shareholders' equity 956,297 896,925
 
$ 1,305,021 $ 1,240,534

(1) Unaudited
 
UniFirst Corporation and Subsidiaries
Detail of Operating Results
             
Revenues
 
Thirteen weeks ended
February 23, February 25, Dollar Percent
(In thousands, except percentages) 2013 (1) 2012 (1) Change Change
 
Core Laundry Operations $ 301,629 $ 277,247 $ 24,382 8.8 %
Specialty Garments 22,593 23,501 (908 ) -3.9
First Aid 10,084   9,211   873 9.5
Consolidated total $ 334,306   $ 309,959   $ 24,347 7.9 %
 
Twenty-six weeks ended
February 23, February 25, Dollar Percent
(In thousands, except percentages) 2013 (1) 2012 (1) Change Change
 
Core Laundry Operations $ 596,189 $ 549,520 $ 46,669 8.5 %
Specialty Garments 50,477 53,769 (3,292 ) -6.1
First Aid 20,209   19,695   514 2.6
Consolidated total $ 666,875   $ 622,984   $ 43,891 7.0 %
 
 

Income from Operations
 

 
Thirteen weeks ended
February 23, February 25, Dollar Percent
(In thousands, except percentages) 2013 (1) 2012 (1) Change Change
 
Core Laundry Operations $ 40,327 $ 27,449 $ 12,878 46.9 %
Specialty Garments 1,275 2,576 (1,301 ) -50.5
First Aid 1,287   811   476 58.8
Consolidated total $ 42,889   $ 30,836   $ 12,053 39.1 %
 
Twenty-six weeks ended
February 23, February 25, Dollar Percent
(In thousands, except percentages) 2013 (1) 2012 (1) Change Change
 
Core Laundry Operations $ 84,855 $ 62,431 $ 22,424 35.9 %
Specialty Garments 5,979 9,142 (3,163 ) -34.6
First Aid 2,014   1,617   397 24.6
Consolidated total $ 92,848   $ 73,190   $ 19,658 26.9 %
 

(1) Unaudited
 

UniFirst Corporation and Subsidiaries

Consolidated Statements of Cash Flows
     
Twenty-six weeks ended

(In thousands)
   

February 23,2013 (1)
   

February 25,2012 (1)
Cash flows from operating activities:
Net income $ 57,402 $ 44,998
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 29,000 27,550
Amortization of intangible assets 4,950 5,347
Amortization of deferred financing costs 119 119
Share-based compensation 3,697 3,701
Accretion on environmental contingencies 271 316
Accretion on asset retirement obligations 331 316
Deferred income taxes 77 362
Changes in assets and liabilities, net of acquisitions:
Receivables (11,194 ) (11,698 )
Inventories 1,108 (1,348 )
Rental merchandise in service 8,461 (10,246 )
Prepaid expenses (2,402 ) (3,169 )
Accounts payable (3,236 ) (1,699 )
Accrued liabilities 6,414 1,891
Prepaid and accrued income taxes (2,480 ) 4,006
Net cash provided by operating activities 92,518 60,446
 
Cash flows from investing activities:
Acquisition of businesses (1,550 )
Capital expenditures (50,756 ) (34,275 )
Other (72 ) (464 )
Net cash used in investing activities (52,378 ) (34,739 )
 
Cash flows from financing activities:
Proceeds from loans payable and long-term debt 4,054 38,910
Payments on loans payable and long-term debt (14 ) (54,325 )
Proceeds from exercise of Common Stock options 2,140 1,914
Payment of cash dividends (1,424 ) (1,418 )
Net cash provided by (used in) financing activities 4,756 (14,919 )
 
Effect of exchange rate changes (1,740 ) (254 )
 
Net increase in cash and cash equivalents 43,156 10,534
Cash and cash equivalents at beginning of period 120,123 48,812
 
Cash and cash equivalents at end of period $ 163,279 $ 59,346

(1) Unaudited

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