UniFirst Announces Financial Results for the Fourth Quarter and Full Year of Fiscal 2018
Operating income for the quarter was
Net income in the quarter was
The Company's adjusted net income in the quarter benefited from a lower tax rate in 2018 of 20.2% compared to 39.3% in the prior year period primarily due to the positive impact of the recent U.S. tax reform as well as other discrete adjustments mostly related to tax credits the Company recognized in the quarter. In addition, the Company's adjusted diluted earnings per share further benefited from the previously announced
Core Laundry revenues in the quarter were
Revenues from our Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were
Outlook
Mr. Sintros continued, “At this time, we expect our fiscal 2019 revenues to be between
Net income and earnings per share comparisons in fiscal 2019 will be significantly influenced by the impact of the tax reform transition in fiscal 2018, with next year's effective tax rate assumed to be approximately 26.0% compared to 12.5% in fiscal 2018. In addition, the Company's guidance for fiscal 2019 assumes an operating margin of 9.7% at the midpoint. The assumed decline in operating margin is primarily attributable to anticipated headwinds from payroll and payroll-related costs, merchandise, energy and depreciation expenses as a percentage of revenues.
Conference Call Information
About
Headquartered in
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,” “strategy,” “objective,” “assume,” 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, the performance and success of our Chief Executive Officer, uncertainties caused by adverse economic conditions and their impact on our customers’ businesses and workforce levels, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, our ability to maintain and grow Arrow Uniform’s customer base and enhance its operating margins, 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, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly 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 changes in federal or state laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding the impact of the recently passed U.S. tax reform on our business, results of operations and financial condition, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the negative effect on our business from sharply depressed oil and natural gas prices, the continuing increase in domestic healthcare costs, including the impact of the Affordable Care Act, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, instability in
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data) | Thirteen weeks ended August 25, 2018 |
Thirteen weeks ended August 26, 2017 |
Fifty-two weeks ended August 25, 2018 |
Fifty-two weeks ended August 26, 2017 |
||||||||||||
Revenues | $ | 434,063 | $ | 403,589 | $ | 1,696,489 | $ | 1,590,958 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues (1) | 270,528 | 249,720 | 1,056,724 | 993,589 | ||||||||||||
Selling and administrative expenses (1) | 96,219 | 85,023 | 360,727 | 342,407 | ||||||||||||
Impairment charge | — | 55,800 | — | 55,800 | ||||||||||||
Depreciation and amortization | 25,890 | 23,437 | 96,662 | 88,879 | ||||||||||||
Total operating expenses | 392,637 | 413,980 | 1,514,113 | 1,480,675 | ||||||||||||
Operating income (loss) | 41,426 | (10,391 | ) | 182,376 | 110,283 | |||||||||||
Other (income) expense: | ||||||||||||||||
Interest income, net | (1,648 | ) | (1,539 | ) | (5,543 | ) | (4,269 | ) | ||||||||
Other expense (income), net | 221 | (1,175 | ) | 673 | (571 | ) | ||||||||||
Total other income, net | (1,427 | ) | (2,714 | ) | (4,870 | ) | (4,840 | ) | ||||||||
Income (loss) before income taxes | 42,853 | (7,677 | ) | 187,246 | 115,123 | |||||||||||
Provision (benefit) for income taxes | 7,901 | (2,781 | ) | 23,351 | 44,927 | |||||||||||
Net income (loss) | $ | 34,952 | $ | (4,896 | ) | $ | 163,895 | $ | 70,196 | |||||||
Income (loss) per share – Basic: | ||||||||||||||||
Common Stock | $ | 1.90 | $ | (0.25 | ) | $ | 8.66 | $ | 3.63 | |||||||
Class B Common Stock | $ | 1.52 | $ | (0.20 | ) | $ | 6.91 | $ | 2.91 | |||||||
Income (loss) per share – Diluted: | ||||||||||||||||
Common Stock | $ | 1.81 | $ | (0.24 | ) | $ | 8.21 | $ | 3.44 | |||||||
Income (loss) allocated to – Basic: | ||||||||||||||||
Common Stock | $ | 29,312 | $ | (3,908 | ) | $ | 133,802 | $ | 55,903 | |||||||
Class B Common Stock | $ | 5,640 | $ | (978 | ) | $ | 30,093 | $ | 13,915 | |||||||
Income (loss) allocated to – Diluted: | ||||||||||||||||
Common Stock | $ | 34,952 | $ | (4,886 | ) | $ | 163,895 | $ | 69,837 | |||||||
Weighted average number of shares outstanding – Basic: | ||||||||||||||||
Common Stock | 15,429 | 15,402 | 15,454 | 15,382 | ||||||||||||
Class B Common Stock | 3,711 | 4,818 | 4,357 | 4,786 | ||||||||||||
Weighted average number of shares outstanding – Diluted: | ||||||||||||||||
Common Stock | 19,335 | 20,220 | 19,963 | 20,276 |
(1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) | August 25, 2018 |
August 26, 2017 |
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Assets | ||||||||
Current assets: | ||||||||
Cash, cash equivalents and short-term investments | $ | 270,512 | $ | 349,752 | ||||
Receivables, net | 200,797 | 187,174 | ||||||
Inventories | 90,176 | 79,068 | ||||||
Rental merchandise in service | 174,392 | 151,340 | ||||||
Prepaid taxes | 27,024 | 29,968 | ||||||
Prepaid expenses and other current assets | 21,899 | 16,924 | ||||||
Total current assets | 784,800 | 814,226 | ||||||
Property, plant and equipment, net | 559,576 | 525,115 | ||||||
Goodwill | 397,422 | 376,110 | ||||||
Customer contracts and other intangible assets, net |
70,904 | 71,744 | ||||||
Deferred income taxes | 425 | 394 | ||||||
Other assets | 30,259 | 31,539 | ||||||
$ | 1,843,386 | $ | 1,819,128 | |||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 73,500 | $ | 64,691 | ||||
Accrued liabilities | 124,225 | 112,236 | ||||||
Accrued taxes | 736 | 921 | ||||||
Total current liabilities | 198,461 | 177,848 | ||||||
Long-term liabilities: | ||||||||
Accrued liabilities | 105,888 | 106,736 | ||||||
Accrued and deferred income taxes | 74,070 | 81,352 | ||||||
Total long-term liabilities | 179,958 | 188,088 | ||||||
Shareholders’ equity: | ||||||||
Common Stock | 1,543 | 1,545 | ||||||
Class B Common Stock | 371 | 482 | ||||||
Capital surplus | 82,973 | 86,245 | ||||||
Retained earnings | 1,405,239 | 1,386,438 | ||||||
Accumulated other comprehensive loss | (25,159 | ) | (21,518 | ) | ||||
Total shareholders’ equity | 1,464,967 | 1,453,192 | ||||||
$ | 1,843,386 | $ | 1,819,128 |
Detail of Operating Results
(Unaudited)
Revenues
(In thousands, except percentages) | Thirteen weeks ended August 25, 2018 |
Thirteen weeks ended August 26, 2017 |
Dollar Change |
Percent Change |
|||||||||||
Core Laundry Operations | $ | 391,826 | $ | 364,827 | $ | 26,999 | 7.4 | % | |||||||
Specialty Garments | 28,981 | 24,020 | 4,961 | 20.7 | % | ||||||||||
First Aid | 13,256 | 14,742 | (1,486 | ) | (10.1 | )% | |||||||||
Consolidated total | $ | 434,063 | $ | 403,589 | $ | 30,474 | 7.6 | % |
(In thousands, except percentages) | Fifty-two weeks ended August 25, 2018 |
Fifty-two weeks ended August 26, 2017 |
Dollar Change |
Percent Change |
|||||||||||
Core Laundry Operations | $ | 1,523,648 | $ | 1,442,149 | $ | 81,499 | 5.7 | % | |||||||
Specialty Garments | 118,477 | 98,024 | 20,453 | 20.9 | % | ||||||||||
First Aid | 54,364 | 50,785 | 3,579 | 7.0 | % | ||||||||||
Consolidated total | $ | 1,696,489 | $ | 1,590,958 | $ | 105,531 | 6.6 | % |
Operating Income (Loss)
(In thousands, except percentages) | Thirteen weeks ended August 25, 2018 |
Thirteen weeks ended August 26, 2017 |
Dollar Change |
Percent Change |
|||||||||||
Core Laundry Operations | $ | 39,173 | $ | (13,887 | ) | $ | 53,060 | N/A | |||||||
Specialty Garments | 1,204 | 1,591 | (387 | ) | (24.3 | )% | |||||||||
First Aid | 1,049 | 1,905 | (856 | ) | (44.9 | )% | |||||||||
Consolidated total | $ | 41,426 | $ | (10,391 | ) | $ | 51,817 | N/A |
(In thousands, except percentages) | Fifty-two weeks ended August 25, 2018 |
Fifty-two weeks ended August 26, 2017 |
Dollar Change |
Percent Change |
|||||||||||
Core Laundry Operations | $ | 163,588 | $ | 96,307 | $ | 67,281 | 69.9 | % | |||||||
Specialty Garments | 14,070 | 9,018 | 5,052 | 56.0 | % | ||||||||||
First Aid | 4,718 | 4,958 | (240 | ) | (4.8 | )% | |||||||||
Consolidated total | $ | 182,376 | $ | 110,283 | $ | 72,093 | 65.4 | % | |||||||
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) |
Fifty-two weeks ended August 25, 2018 |
Fifty-two weeks ended August 26, 2017 |
||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 163,895 | $ | 70,196 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation | 83,376 | 76,073 | ||||||
Amortization of intangible assets | 13,286 | 12,806 | ||||||
Amortization of deferred financing costs | 112 | 112 | ||||||
Gain on sale of assets | (232 | ) | (567 | ) | ||||
Share-based compensation | 4,638 | 12,462 | ||||||
Accretion on environmental contingencies | 692 | 600 | ||||||
Accretion on asset retirement obligations | 935 | 853 | ||||||
Impairment charge | — | 55,800 | ||||||
Deferred income taxes | (7,861 | ) | 955 | |||||
Changes in assets and liabilities, net of acquisitions: | ||||||||
Receivables, less reserves | (12,420 | ) | (22,232 | ) | ||||
Inventories | (11,051 | ) | 1,865 | |||||
Rental merchandise in service | (21,572 | ) | (5,384 | ) | ||||
Prepaid expenses and other current assets and Other assets | (5,643 | ) | 12,903 | |||||
Accounts payable | 4,573 | 9,594 | ||||||
Accrued liabilities | 12,233 | 11,728 | ||||||
Prepaid and accrued income taxes | 5,112 | (19,490 | ) | |||||
Net cash provided by operating activities | 230,073 | 218,274 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of businesses, net of cash acquired | (42,665 | ) | (125,457 | ) | ||||
Capital expenditures | (112,747 | ) | (108,554 | ) | ||||
Proceeds from sale of assets | 1,777 | 876 | ||||||
Other | (263 | ) | 98 | |||||
Net cash used in investing activities | (153,898 | ) | (233,037 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of share-based awards, including excess tax benefits in fiscal 2017 | 461 | 3,102 | ||||||
Taxes withheld and paid related to net share settlement of equity awards | (3,180 | ) | (2,386 | ) | ||||
Repurchase of Common Stock | (146,011 | ) | — | |||||
Payment of cash dividends | (4,218 | ) | (2,898 | ) | ||||
Net cash used in financing activities | (152,948 | ) | (2,182 | ) | ||||
Effect of exchange rate changes | (2,467 | ) | 2,902 | |||||
Net decrease in cash, cash equivalents and short-term investments | (79,240 | ) | (14,043 | ) | ||||
Cash, cash equivalents and short-term investments at beginning of period | 349,752 | 363,795 | ||||||
Cash, cash equivalents and short-term investments at end of period | $ | 270,512 | $ | 349,752 | ||||
Reconciliation of GAAP to Non-GAAP Financial Measures
The Company reports its consolidated financial results in accordance with generally accepted accounting principles (“GAAP”). To supplement these consolidated financial results, management believes that certain non-GAAP operating results provide a more meaningful measure on which to compare the Company’s results of operations for the periods presented. The Company believes these non-GAAP results provide useful supplemental information regarding the Company’s performance to both management and investors by excluding certain non-recurring amounts that impact the comparability of the results. Supplemental reconciliations of consolidated operating income, net income and earnings per diluted share on a GAAP basis to adjusted operating income, net income and earnings per diluted share on a non-GAAP basis are presented in the following tables. In addition, Core Laundry Operations operating income and operating margin on a GAAP basis to adjusted operating income and adjusted operating margin on a non-GAAP basis are presented in the following tables. Investors are encouraged to review the reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided below.
Thirteen weeks ended August 25, 2018 | |||||||||||||||||||||||||||
Consolidated | Core Laundry Operations | ||||||||||||||||||||||||||
(In thousands, except percentages) | Revenue | Operating Income | Net Income | Diluted EPS |
Revenue | Operating Income | Operating Margin |
||||||||||||||||||||
As reported | $ | 434,063 | $ | 41,426 | $ | 34,952 | $ | 1.81 | $ | 391,826 | $ | 39,173 | 10.0 | % | |||||||||||||
One-time bonus | — | 7,171 | 4,972 | 0.25 | — | 7,171 | 1.8 | % | |||||||||||||||||||
As adjusted | $ | 434,063 | $ | 48,597 | $ | 39,924 | $ | 2.06 | $ | 391,826 | $ | 46,344 | 11.8 | % |
Thirteen weeks ended August 26, 2017 | |||||||||||||||||||||||||||
Consolidated | Core Laundry Operations | ||||||||||||||||||||||||||
(In thousands, except percentages) | Revenue | Operating (Loss) Income |
Net (Loss) Income |
Diluted EPS |
Revenue | Operating (Loss) Income |
Operating Margin |
||||||||||||||||||||
As reported | $ | 403,589 | $ | (10,391 | ) | $ | (4,896 | ) | $ | (0.24 | ) | $ | 364,827 | $ | (13,887 | ) | (3.8 | )% | |||||||||
Impairment charge | — | 55,800 | 34,144 | 1.68 | — | 55,800 | 15.3 | % | |||||||||||||||||||
As adjusted | $ | 403,589 | $ | 45,409 | $ | 29,248 | $ | 1.44 | $ | 364,827 | $ | 41,913 | 11.5 | % |
Fifty-two weeks ended August 25, 2018 | |||||||||||||||||||||||||||
Consolidated | Core Laundry Operations | ||||||||||||||||||||||||||
(In thousands, except percentages) | Revenue | Operating Income | Net Income | Diluted EPS |
Revenue | Operating Income | Operating Margin |
||||||||||||||||||||
As reported | $ | 1,696,489 | $ | 182,376 | $ | 163,895 | $ | 8.21 | $ | 1,523,648 | $ | 163,588 | 10.7 | % | |||||||||||||
Effect of tax reform (a) | — | — | (20,138 | ) | (1.01 | ) | — | — | — | % | |||||||||||||||||
One-time bonus | — | 7,171 | 4,972 | 0.25 | — | 7,171 | 0.5 | % | |||||||||||||||||||
As adjusted | $ | 1,696,489 | $ | 189,547 | $ | 148,729 | $ | 7.45 | $ | 1,523,648 | $ | 170,759 | 11.2 | % |
(a) The effect of tax reform, as presented, represents a one-time revaluation of our U.S. net deferred tax liabilities as well as a charge related to a one-time transition tax the Company will be subject to for the deemed repatriation of our foreign earnings. This does not include the benefit associated with the lower U.S. federal corporate income tax rates as of
Fifty-two weeks ended August 26, 2017 | |||||||||||||||||||||||||||
Consolidated | Core Laundry Operations | ||||||||||||||||||||||||||
(In thousands, except percentages) | Revenue | Operating Income |
Net Income |
Diluted EPS |
Revenue | Operating Income |
Operating Margin |
||||||||||||||||||||
As reported | $ | 1,590,958 | $ | 110,283 | $ | 70,196 | $ | 3.44 | $ | 1,442,149 | $ | 96,307 | 6.7 | % | |||||||||||||
Accelerated stock compensation expense (b) | — | 5,398 | 3,341 | 0.16 | — | 5,398 | 0.4 | % | |||||||||||||||||||
Impairment charge | — | 55,800 | 34,144 | 1.68 | — | 55,800 | 3.9 | % | |||||||||||||||||||
As adjusted | $ | 1,590,958 | $ | 171,481 | $ | 107,681 | $ | 5.28 | $ | 1,442,149 | $ | 157,505 | 10.9 | % |
(b) The accelerated stock compensation expense represents
CONTACT:
Phone: 978- 658-8888
Fax: 978-988-0659
Email: Shane_OConnor@UniFirst.com
Source: Unifirst Corp.