unf20170328_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported)

March 29, 2017

 

 

UNIFIRST CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

 

Massachusetts

 

001-08504

 

04-2103460

(State or Other Jurisdiction of Incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

68 Jonspin Road, Wilmington, Massachusetts 01887

(Address of Principal Executive Offices) (Zip Code)

 

 

Registrant's telephone number, including area code: (978) 658-8888

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

[ ]

Written communications pursuant to Rule 425 under the Securities Act

(17 CFR 230.425)

   

[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

(17 CFR 240.14a-12)

   

[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

(17 CFR 240.14d-2(b))

   

[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

(17 CFR 240.13e-4(c))

 

 
 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On March 29, 2017, UniFirst Corporation (the “Company”) issued a press release ("Press Release") announcing financial results for the second quarter and first half of fiscal 2017, which ended on February 25, 2017. A copy of the Press Release is attached as Exhibit 99 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information in this Item 2.02, including the exhibit attached hereto, shall not be deemed “filed” for any purpose, including for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

 

Item 9.01.

Financial Statements and Exhibits.

   

(d) Exhibits

 
   

EXHIBIT NO.

DESCRIPTION

   

99

Press release of the Company dated March 29, 2017

 

 
 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

UNIFIRST CORPORATION

 

 

Date: March 29, 2017

By:

/s/ Ronald D. Croatti

 

Name:

Ronald D. Croatti

 

Title:

Chairman of the Board, Chief

Executive Officer and President

     
 

By:

/s/ Steven S. Sintros

 

Name:

Steven S. Sintros

 

Title:

Senior Vice President and Chief Financial Officer

 

 
 

 

 

EXHIBIT INDEX

 

 

EXHIBIT NO.

DESCRIPTION

   

99

Press release of the Company dated March 29, 2017

 

 

 

 

 

ex99.htm

Exhibit 99

 

 

 

 

UNIFIRST ANNOUNCES FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 2017

 

Wilmington, MA (March 29, 2017) -- UniFirst Corporation (NYSE: UNF) today announced results for its second quarter of fiscal 2017 which ended February 25, 2017. Revenues for the quarter were $391.4 million, up 7.8% from $363.1 million in the year ago period. Net income was $22.5 million ($1.10 per diluted share), down 4.2% from $23.5 million ($1.16 per diluted share) in the second quarter of fiscal 2016. Results for the second quarter of fiscal 2017 include the impact of the Company’s acquisition of Arrow Uniform (Arrow) which was completed in September 2016.

 

Core Laundry revenues in the quarter were $358.4 million, up 8.2% from those in the prior year’s second quarter. Adjusting for the estimated effect of acquisitions as well as a stronger Canadian dollar compared to a year ago, Core Laundry revenues grew 2.2%.

 

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “We are encouraged by the improvement during the second quarter of the Core Laundry Operations’ organic growth rate. Recent trends indicate that wearer levels at existing customers have stabilized after enduring two years of significant reductions in our North American energy-dependent markets. In addition, overall new sales as well as customer retention are also trending positively compared to the first half of 2016.”

 

Core Laundry operating income was $33.1 million during the quarter, an 8.5% decrease from the prior year. Its operating margin was 9.2%, down from 10.9% for the same period in fiscal 2016. The margin decline was primarily the result of higher selling and administrative expenses as a percentage of revenues. In addition, the estimated impact of the acquisition of Arrow decreased the Core Laundry operating margin by 0.6%.

 

Revenues from our Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, increased 6.5% in the quarter compared to the same period a year ago, and operating income was $2.1 million compared to $1.1 million in last year’s second quarter. The improvement in results during the quarter was driven by this segment’s US and Canadian nuclear operations. This segment’s results can vary significantly from period to period due to seasonality and the timing of reactor outages and projects.

 

UniFirst continues to maintain a strong balance sheet with no long-term debt and significant cash balances. Excluding the $119.9 million cash purchase price paid for the Arrow acquisition, cash and cash equivalents increased $69.6 million during the first half of the year. As of February 25, 2017, our cash and cash equivalents were $313.5 million.

 

 
 

 

 

Outlook

Mr. Croatti said, “During our last earnings call, we communicated that we expected full year revenues for fiscal 2017 would be between $1.550 billion and $1.565 billion and full year diluted earnings per share would be between $4.85 and $5.00. We now expect that our full year results will come in at the higher ends of these previously communicated ranges.

 

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

Headquartered 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 240 service locations, 300,000 customer locations, and 13,000 employee Team Partners, the company outfits nearly 2 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, contact UniFirst at 800.455.7654 or visit www.unifirst.com.

 

Forward Looking Statements

This 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 may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” or the negative versions thereof, and similar expressions and by the context in which they are used. Such forward looking statements are based upon our current expectations and speak only as of the date made. Such statements are highly dependent upon a variety of risks, uncertainties and other 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, our ability to maintain and grow Arrow’s customer base and enhance its operating margins, our ability to compete successfully without any significant degradation in our margin rates, uncertainties caused by the continuing adverse worldwide economic conditions and their impact on our customers’ businesses and workforce levels, 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, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the continuing increase in domestic healthcare costs, including the ultimate impact of the Affordable Care Act, our retention of customers and renewal of customer contracts, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the negative effect on our business from sharply depressed oil prices, fluctuation on our revenue and net income from our specialty garments segment, the effect of currency fluctuations on our results of operations and financial condition, rampant criminal activity and instability in Mexico where our principal garment manufacturing plants are located, the impact on our goodwill and intangibles that might result from adverse financial and economic changes, our ability to properly and efficiently design, construct, implement and operate our new customer relationship management (“CRM”) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, failure to comply with other state and federal regulations that might result in penalties or costs, seasonal and quarterly fluctuations in business levels, any loss of key management or other personnel, our dependence on third parties to supply us with raw materials, 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, demand and prices for our products and services, 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 our Annual Report on Form 10-K for the year ended August 27, 2016 and in our other filings with the Securities and Exchange Commission. We undertake 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

(Unaudited)

 

   

Thirteen

weeks ended

February 25,

   

Thirteen

weeks ended

February 27,

   

Twenty-six

weeks ended

February 25,

   

Twenty-six

weeks ended

February 27,

 

(In thousands, except per share data)

 

2017

   

2016

   

2017

   

2016

 
                                 

Revenues

  $ 391,427     $ 363,097     $ 777,535     $ 736,481  
                                 

Operating expenses:

                               

Cost of revenues (1)

    249,280       229,672       488,045       452,275  

Selling and administrative expenses (1)

    84,861       75,423       164,307       148,172  

Depreciation and amortization

    21,140       19,809       43,280       39,547  

Total operating expenses

    355,281       324,904       695,632       639,994  
                                 

Income from operations

    36,146       38,193       81,903       96,487  
                                 

Other (income) expense:

                               

Interest expense

    172       218       354       439  

Interest income

    (1,292

)

    (892

)

    (2,275

)

    (1,656

)

Foreign exchange (gain) loss

    (108

)

    (132

)

    386       347  

Total other (income) expense

    (1,228

)

    (806

)

    (1,535

)

    (870

)

                                 

Income before income taxes

    37,374       38,999       83,438       97,357  

Provision for income taxes

    14,858       15,501       32,708       37,969  
                                 

Net income

  $ 22,516     $ 23,498     $ 50,730     $ 59,388  
                                 

Income per share – Basic

                               

Common Stock

  $ 1.17     $ 1.23     $ 2.63     $ 3.10  

Class B Common Stock

  $ 0.93     $ 0.98     $ 2.10     $ 2.48  
                                 

Income per share – Diluted

                               

Common Stock

  $ 1.10     $ 1.16     $ 2.49     $ 2.94  
                                 

Income allocated to – Basic

                               

Common Stock

  $ 17,836     $ 18,691     $ 40,178     $ 47,232  

Class B Common Stock

  $ 4,518     $ 4,704     $ 10,184     $ 11,896  
                                 

Income allocated to – Diluted

                               

Common Stock

  $ 22,362     $ 23,401     $ 50,381     $ 59,141  
                                 

Weighted average number of shares outstanding – Basic

                               

Common Stock

    15,305       15,241       15,295       15,230  

Class B Common Stock

    4,846       4,795       4,846       4,795  
                                 

Weighted average number of shares outstanding – Diluted

                               

Common Stock

    20,263       20,138       20,250       20,127  

 

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

 

 
 

 

 

UniFirst Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands)

 

February 25,

2017

   

August 27,

2016

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 313,535     $ 363,795  

Receivables, net

    176,564       156,578  

Inventories

    71,493       78,887  

Rental merchandise in service

    144,603       138,105  

Prepaid taxes

    1,178       10,418  

Prepaid expenses and other current assets

    25,873       29,831  
                 

Total current assets

    733,246       777,614  
                 

Property, plant and equipment, net

    551,053       539,818  
                 

Goodwill

    371,773       320,641  

Customer contracts and other intangible assets, net

    75,887       38,664  

Deferred income taxes

    338       97  

Other assets

    29,250       25,173  
                 
    $ 1,761,547     $ 1,702,007  
                 

Liabilities and shareholders' equity

               

Current liabilities:

               

Accounts payable

  $ 55,250     $ 50,884  

Accrued liabilities

    104,785       100,782  

Accrued taxes

          969  
                 

Total current liabilities

    160,035       152,635  
                 

Long-term liabilities:

               

Accrued liabilities

    105,078       104,921  

Accrued and deferred income taxes

    79,038       79,670  
                 

Total long-term liabilities

    184,116       184,591  
                 

Shareholders' equity:

               

Common Stock

    1,546       1,542  

Class B Common Stock

    485       485  

Capital surplus

    77,668       72,561  

Retained earnings

    1,368,424       1,319,142  

Accumulated other comprehensive (loss) income

    (30,727

)

    (28,949

)

                 

Total shareholders' equity

    1,417,396       1,364,781  
                 
    $ 1,761,547     $ 1,702,007  

 

 
 

 

 

UniFirst Corporation and Subsidiaries

Detail of Operating Results

(Unaudited)

 

Revenues

 

   

Thirteen

weeks ended

February 25,

   

Thirteen

weeks ended

February 27,

   

 

 

Dollar

   

 

 

Percent

 

(In thousands, except percentages)

 

2017

   

2016

   

Change

   

Change

 
                                 

Core Laundry Operations

  $ 358,386     $ 331,365     $ 27,021       8.2

%

Specialty Garments

    21,787       20,451       1,336       6.5  

First Aid

    11,254       11,281       (27

)

    -0.2  

Consolidated total

  $ 391,427     $ 363,097     $ 28,330       7.8

%

 

   

Twenty-six

weeks ended

February 25,

   

Twenty-six

weeks ended

February 27,

   

 

 

Dollar

   

 

 

Percent

 

(In thousands, except percentages)

 

2017

   

2016

   

Change

   

Change

 
                                 

Core Laundry Operations

  $ 710,229     $ 666,402     $ 43,827       6.6

%

Specialty Garments

    44,143       47,221       (3,078

)

    -6.5  

First Aid

    23,163       22,858       305       1.3  

Consolidated total

  $ 777,535     $ 736,481     $ 41,054       5.6

%

 

 

Income from Operations

 

   

Thirteen

weeks ended

February 25,

   

Thirteen

weeks ended

February 27,

   

 

 

Dollar

   

 

 

Percent

 

(In thousands, except percentages)

 

2017

   

2016

   

Change

   

Change

 
                                 

Core Laundry Operations

  $ 33,059     $ 36,129     $ (3,070

)

    -8.5

%

Specialty Garments

    2,095       1,146       949       82.8  

First Aid

    992       918       74       8.0  

Consolidated total

  $ 36,146     $ 38,193     $ (2,047

)

    -5.4

%

 

   

Twenty-six

weeks ended

February 25,

   

Twenty-six

weeks ended

February 27,

   

 

 

Dollar

   

 

 

Percent

 

(In thousands, except percentages)

 

2017

   

2016

   

Change

   

Change

 
                                 

Core Laundry Operations

  $ 76,732     $ 89,101     $ (12,369

)

    -13.9

%

Specialty Garments

    3,246       5,432       (2,186

)

    -40.2  

First Aid

    1,925       1,954       (29

)

    -1.5  

Consolidated total

  $ 81,903     $ 96,487     $ (14,584

)

    -15.1

%

 

 
 

 

 

UniFirst Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

(In thousands)

 

Twenty-six

weeks ended

February 25,

2017

   

Twenty-six

weeks ended

February 27,

2016

 

Cash flows from operating activities:

                 

Net income

  $ 50,730     $ 59,388  

Adjustments to reconcile net income to cash provided by operating activities:

                 

Depreciation

    37,051       35,297  

Amortization of intangible assets

    6,229       4,250  

Amortization of deferred financing costs

    56       104  

Gain on sale of assets

    (517

)

     

Share-based compensation

    4,370       2,537  

Accretion on environmental contingencies

    300       334  

Accretion on asset retirement obligations

    423       398  

Deferred income taxes

    (1,346

)

    5,978  

Changes in assets and liabilities, net of acquisitions:

                 

Receivables

    (12,887

)

    (6,528

)

Inventories

    9,233       4,733  

Rental merchandise in service

    444       3,477  

Prepaid expenses and other current assets and Other assets

    7,471       (851

)

Accounts payable

    3,695       (79

)

Accrued liabilities

    704       1,574  

Prepaid and accrued income taxes

    8,793       (5,131

)

Net cash provided by operating activities

    114,749       105,481  
                   

Cash flows from investing activities:

                 

Acquisition of businesses, net of cash acquired

    (121,414

)

    (73

)

Capital expenditures

    (43,011

)

    (44,028

)

Proceeds from sale of assets

    826        

Other

    123       111  

Net cash used in investing activities

    (163,476

)

    (43,990

)

                   

Cash flows from financing activities:

                 

Payments on loans payable and long-term debt

          (1,046

)

Proceeds from exercise of Common Stock options, including excess tax benefits

    2,283       1,026  

Taxes withheld and paid related to net share settlement of equity awards

    (1,546

)

     

Payment of cash dividends

    (1,448

)

    (1,436

)

Net cash used in financing activities

    (711

)

    (1,456

)

                   

Effect of exchange rate changes on cash

    (822

)

    (1,596

)

                   

Net (decrease) increase in cash and cash equivalents

    (50,260

)

    58,439  

Cash and cash equivalents at beginning of period

    363,795       276,553  
                   

Cash and cash equivalents at end of period

  $ 313,535     $ 334,992