UniFirst Announces Financial Results For the Second Quarter of Fiscal 2022
Q2 2022 Financial Highlights
- Consolidated revenues for the second quarter increased 8.2% to
$486.7 million . - Operating income was
$22.6 million , a decrease of 44.4%. - The quarterly tax rate decreased to 19.0% compared to 22.7% in the prior year.
- Net income decreased to $18.5 million, or 43.4%.
- Diluted earnings per share decreased to
$0.97 from$1.71 in the prior year, or 43.3%.
The Company’s financial results for the second quarter of fiscal 2022 included
- Adjusted operating income was
$29.4 million . - Adjusted net income was
$23.5 million . - Adjusted diluted earnings per share was
$1.24 .
Segment Reporting Highlights
Core Laundry Operations
- Revenues for the quarter increased 8.7% to
$433.1 million . - Organic growth, which excludes the effect of acquisitions and fluctuations in the Canadian dollar, was 8.0%
- Operating margin decreased to 4.3% from 8.9%.
The costs incurred during the quarter related to the Key Initiatives, discussed above, were recorded to the Core Laundry Operations’ segment. Excluding these Key Initiative costs:
- Core Laundry adjusted operating margin was 5.9%. The decrease from prior year’s operating margin was primarily due to higher merchandise amortization, energy and travel costs as a percentage of revenues as well as increased costs to hire and retain employees due to the challenging employment environment.
Specialty Garments
- Revenues for the quarter were
$35.5 million , an increase of 0.9%. This increase was driven by growth in the cleanroom and European nuclear operations which was partially offset by higher direct sale activity in the prior year. - Operating margin decreased to 10.8% from 14.9% a year ago, primarily due to higher gross margin on its prior year direct sales as well as higher labor costs as a percentage of revenues.
- Specialty Garments consists of nuclear decontamination and cleanroom operations, and its results can vary significantly due to seasonality and the timing of reactor outages and projects.
Balance Sheet and Capital Allocation
- Cash, cash equivalents and short-term investments totaled
$425.9 million as ofFebruary 26, 2022 . - The Company had no long-term debt outstanding as of
February 26, 2022 . - Under its previously announced stock repurchase authorization, the Company repurchased 52,500 shares of common stock for
$10.0 million in the second quarter of fiscal 2022. As ofFebruary 26, 2022 , the Company has$87.3 million remaining under its current authorization. - Weighted average shares outstanding – Diluted for each of the second quarters of fiscal 2022 and fiscal 2021 were 19.0 million.
Financial Outlook
- Core Laundry Operations’ adjusted operating margin at the midpoint of the range is now 8.6%, which reflects continued pressure from the current inflationary environment including the recent surge in energy prices.
- Our adjusted tax rate for fiscal 2022 is 24.2%
- Adjusted diluted earnings per share is now expected to be between
$6.80 and$7.00 . - Guidance does not include the impact of any future share buybacks or potential tax reform.
- Guidance assumes a stable economic environment with no pandemic-related headwinds.”
See “Reconciliation of GAAP to Non-GAAP Financial Measures” below.
Conference Call Information
About
Headquartered in
Forward-Looking Statements Disclosure
This public announcement contains forward-looking statements within the meaning of the federal securities laws that reflect the Company’s current views with respect to future events and financial performance, including projected revenues, operating margin 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 “guidance,” “outlook,” “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” “strategy,” “objective,” “assume,” “strive,” 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, uncertainties caused by adverse economic conditions, including, without limitation, as a result of significant increases in inflation or extraordinary events or circumstances such as geopolitical conflicts like the conflict between
Investor Relations Contact
Shane O’Connor, Executive Vice President & CFO
UniFirst Corporation
978-658-8888
shane_oconnor@unifirst.com
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data) | Thirteen weeks ended |
Thirteen weeks ended |
Twenty-six weeks ended |
Twenty-six weeks ended |
||||||||||||
Revenues | $ | 486,696 | $ | 449,764 | $ | 972,860 | $ | 896,617 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues (1) | 324,816 | 289,455 | 634,946 | 565,255 | ||||||||||||
Selling and administrative expenses (1) | 112,406 | 93,329 | 216,794 | 182,032 | ||||||||||||
Depreciation and amortization | 26,861 | 26,287 | 53,717 | 52,595 | ||||||||||||
Total operating expenses | 464,083 | 409,071 | 905,457 | 799,882 | ||||||||||||
Operating income | 22,613 | 40,693 | 67,403 | 96,735 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest income, net | (751 | ) | (863 | ) | (1,399 | ) | (1,431 | ) | ||||||||
Other (income) expense, net | 594 | (584 | ) | 1,330 | 165 | |||||||||||
Total other income, net | (157 | ) | (1,447 | ) | (69 | ) | (1,266 | ) | ||||||||
Income before income taxes | 22,770 | 42,140 | 67,472 | 98,001 | ||||||||||||
Provision for income taxes | 4,319 | 9,555 | 15,316 | 23,520 | ||||||||||||
Net income | $ | 18,451 | $ | 32,585 | $ | 52,156 | $ | 74,481 | ||||||||
Income per share – Basic: | ||||||||||||||||
Common Stock | $ | 1.02 | $ | 1.80 | $ | 2.88 | $ | 4.10 | ||||||||
Class B Common Stock | $ | 0.81 | $ | 1.44 | $ | 2.30 | $ | 3.28 | ||||||||
Income per share – Diluted: | ||||||||||||||||
Common Stock | $ | 0.97 | $ | 1.71 | $ | 2.75 | $ | 3.91 | ||||||||
Income allocated to – Basic: | ||||||||||||||||
Common Stock | $ | 15,492 | $ | 27,349 | $ | 43,792 | $ | 62,520 | ||||||||
Class B Common Stock | $ | 2,959 | $ | 5,236 | $ | 8,364 | $ | 11,961 | ||||||||
Income allocated to – Diluted: | ||||||||||||||||
Common Stock | $ | 18,451 | $ | 32,585 | $ | 52,156 | $ | 74,481 | ||||||||
Weighted average shares outstanding – Basic: | ||||||||||||||||
Common Stock | 15,210 | 15,223 | 15,225 | 15,235 | ||||||||||||
Class B Common Stock | 3,635 | 3,643 | 3,635 | 3,643 | ||||||||||||
Weighted average shares outstanding – Diluted: | ||||||||||||||||
Common Stock | 18,967 | 19,037 | 18,999 | 19,032 |
(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) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash, cash equivalents and short-term investments | $ | 425,887 | $ | 512,868 | ||||
Receivables, net | 237,237 | 208,331 | ||||||
Inventories | 160,835 | 143,591 | ||||||
Rental merchandise in service | 196,690 | 181,531 | ||||||
Prepaid taxes | 9,475 | 16,580 | ||||||
Prepaid expenses and other current assets | 48,743 | 40,891 | ||||||
Total current assets | 1,078,867 | 1,103,792 | ||||||
Property, plant and equipment, net | 627,924 | 617,719 | ||||||
457,718 | 429,538 | |||||||
Customer contracts and other intangible assets, net | 90,221 | 84,638 | ||||||
Deferred income taxes | 565 | 580 | ||||||
Operating lease right-of-use assets, net | 51,237 | 42,115 | ||||||
Other assets | 106,064 | 102,683 | ||||||
Total assets | $ | 2,412,596 | $ | 2,381,065 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 84,517 | $ | 81,356 | ||||
Accrued liabilities | 151,743 | 159,578 | ||||||
Accrued taxes | — | 743 | ||||||
Operating lease liabilities, current | 13,791 | 12,993 | ||||||
Total current liabilities | 250,051 | 254,670 | ||||||
Long-term liabilities: | ||||||||
Accrued liabilities | 134,263 | 134,085 | ||||||
Accrued and deferred income taxes | 90,284 | 89,177 | ||||||
Operating lease liabilities | 39,023 | 30,181 | ||||||
Total liabilities | 513,621 | 508,113 | ||||||
Shareholders’ equity: | ||||||||
Common Stock | 1,521 | 1,524 | ||||||
Class B Common Stock | 363 | 364 | ||||||
Capital surplus | 90,006 | 89,257 | ||||||
Retained earnings | 1,833,579 | 1,806,643 | ||||||
Accumulated other comprehensive loss | (26,494 | ) | (24,836 | ) | ||||
Total shareholders’ equity | 1,898,975 | 1,872,952 | ||||||
Total liabilities and shareholders’ equity | $ | 2,412,596 | $ | 2,381,065 |
Detail of Operating Results
(Unaudited)
Revenues
(In thousands, except percentages) | Thirteen weeks ended |
Thirteen weeks ended |
Dollar Change |
Percent Change |
||||||||||||
Core Laundry Operations | $ | 433,056 | $ | 398,235 | 34,821 | 8.7 | % | |||||||||
Specialty Garments | 35,538 | 35,222 | 316 | 0.9 | % | |||||||||||
First Aid | 18,102 | 16,307 | 1,795 | 11.0 | % | |||||||||||
Consolidated total | $ | 486,696 | $ | 449,764 | $ | 36,932 | 8.2 | % |
(In thousands, except percentages) | Twenty-six weeks ended |
Twenty-six weeks ended |
Dollar Change |
Percent Change |
||||||||||||
Core Laundry Operations | $ | 861,902 | $ | 791,425 | $ | 70,477 | 8.9 | % | ||||||||
Specialty Garments | 75,022 | 73,356 | 1,666 | 2.3 | % | |||||||||||
First Aid | 35,936 | 31,836 | 4,100 | 12.9 | % | |||||||||||
Consolidated total | $ | 972,860 | $ | 896,617 | $ | 76,243 | 8.5 | % |
Operating Income
(In thousands, except percentages) | Thirteen weeks ended |
Thirteen weeks ended |
Dollar Change |
Percent Change |
||||||||||||
Core Laundry Operations | $ | 18,745 | $ | 35,366 | $ | (16,621 | ) | (47.0 | )% | |||||||
Specialty Garments | 3,850 | 5,234 | (1,384 | ) | (26.4 | )% | ||||||||||
First Aid | 18 | 93 | (75 | ) | (80.6 | )% | ||||||||||
Consolidated total | $ | 22,613 | $ | 40,693 | $ | (18,080 | ) | (44.4 | )% |
(In thousands, except percentages) | Twenty-six weeks ended |
Twenty-six weeks ended |
Dollar Change |
Percent Change |
||||||||||||
Core Laundry Operations | $ | 55,252 | $ | 84,236 | $ | (28,984 | ) | (34.4 | )% | |||||||
Specialty Garments | 12,479 | 12,393 | 86 | 0.7 | % | |||||||||||
First Aid | (328 | ) | 106 | (434 | ) | (409.4 | )% | |||||||||
Consolidated total | $ | 67,403 | $ | 96,735 | $ | (29,332 | ) | (30.3 | )% |
Operating Margin
Thirteen weeks ended |
Thirteen weeks ended |
|||||||
Core Laundry Operations | 4.3 | % | 8.9 | % | ||||
Specialty Garments | 10.8 | % | 14.9 | % | ||||
First Aid | 0.1 | % | 0.6 | % | ||||
Consolidated total | 4.6 | % | 9.0 | % |
Twenty-six weeks ended |
Twenty-six weeks ended |
|||||||
Core Laundry Operations | 6.4 | % | 10.6 | % | ||||
Specialty Garments | 16.6 | % | 16.9 | % | ||||
First Aid | (0.9 | )% | 0.3 | % | ||||
Consolidated total | 6.9 | % | 10.8 | % |
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) | Twenty-six weeks ended |
Twenty-six weeks ended |
||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 52,156 | $ | 74,481 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 53,717 | 52,595 | ||||||
Amortization of deferred financing costs | 82 | 56 | ||||||
Share-based compensation | 4,961 | 3,266 | ||||||
Accretion on environmental contingencies | 298 | 224 | ||||||
Accretion on asset retirement obligations | 491 | 492 | ||||||
Deferred income taxes | 1,733 | 847 | ||||||
Other | (6 | ) | 19 | |||||
Changes in assets and liabilities, net of acquisitions: | ||||||||
Receivables, less reserves | (27,855 | ) | (12,511 | ) | ||||
Inventories | (17,189 | ) | (4,287 | ) | ||||
Rental merchandise in service | (13,317 | ) | (338 | ) | ||||
Prepaid expenses and other current assets and Other assets | (3,926 | ) | 2,267 | |||||
Accounts payable | 5,357 | (1,923 | ) | |||||
Accrued liabilities | (16,928 | ) | 11,460 | |||||
Prepaid and accrued income taxes | 5,319 | 1,368 | ||||||
Net cash provided by operating activities | 44,893 | 128,016 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of businesses, net of cash acquired | (42,325 | ) | (7,018 | ) | ||||
Capital expenditures, including capitalization of software costs | (60,178 | ) | (66,855 | ) | ||||
Proceeds from sale of assets | 27 | 281 | ||||||
Net cash used in investing activities | (102,476 | ) | (73,592 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of share-based awards | 3 | 3 | ||||||
Taxes withheld and paid related to net share settlement of equity awards | (3,803 | ) | (2,643 | ) | ||||
Repurchase of Common Stock | (14,766 | ) | (9,534 | ) | ||||
Payment of cash dividends | (9,976 | ) | (9,069 | ) | ||||
Net cash used in financing activities | (28,542 | ) | (21,243 | ) | ||||
Effect of exchange rate changes | (856 | ) | 1,544 | |||||
Net increase (decrease) in cash, cash equivalents and short-term investments | (86,981 | ) | 34,725 | |||||
Cash, cash equivalents and short-term investments at beginning of period | 512,868 | 474,838 | ||||||
Cash, cash equivalents and short-term investments at end of period | $ | 425,887 | $ | 509,563 |
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 useful measure on which to evaluate and 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. A supplemental reconciliation of the Company’s consolidated operating income, consolidated net income and diluted earnings per share (“EPS”) on a GAAP basis to adjusted operating income, adjusted net income and adjusted diluted EPS on a non-GAAP basis is presented in the following table. 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 is also presented in the following table. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided below.
Thirteen weeks ended |
||||||||||||||||||||||||||||
Consolidated | Core Laundry Operations | |||||||||||||||||||||||||||
(In thousands, except percentages) | Revenue | Operating Income |
Net Income |
Diluted EPS |
Revenue | Operating Income |
Operating Margin |
|||||||||||||||||||||
As reported | $ | 486,696 | $ | 22,613 | $ | 18,451 | $ | 0.97 | $ | 433,056 | $ | 18,745 | 4.3 | % | ||||||||||||||
Key Initiatives | — | 6,739 | 5,080 | 0.27 | — | 6,739 | 1.6 | % | ||||||||||||||||||||
As adjusted | $ | 486,696 | $ | 29,352 | $ | 23,531 | $ | 1.24 | $ | 433,056 | $ | 25,484 | 5.9 | % |
Twenty-six weeks ended |
||||||||||||||||||||||||||||
Consolidated | Core Laundry Operations | |||||||||||||||||||||||||||
(In thousands, except percentages) | Revenue | Operating Income |
Net Income |
Diluted EPS |
Revenue | Operating Income |
Operating Margin |
|||||||||||||||||||||
As reported | $ | 972,860 | $ | 67,403 | $ | 52,156 | $ | 2.75 | $ | 861,902 | $ | 55,252 | 6.4 | % | ||||||||||||||
Key Initiatives | — | 12,661 | 9,543 | 0.50 | — | 12,661 | 1.5 | % | ||||||||||||||||||||
As adjusted | $ | 972,860 | $ | 80,064 | $ | 61,699 | $ | 3.25 | $ | 861,902 | $ | 67,913 | 7.9 | % |
Supplemental reconciliations of the Company’s fiscal 2022 financial outlook for consolidated operating income, consolidated net income, diluted earnings per share and operating margin on a GAAP basis to adjusted operating income, adjusted net income, adjusted diluted EPS and adjusted operating margin on a non-GAAP basis are presented in the following tables. In addition, a supplemental reconciliation of the fiscal 2022 financial outlook for 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 is also presented in the following table. Investors are encouraged to review the reconciliation of the outlook for these non-GAAP measures to the outlook for their most directly comparable GAAP financial measures, which are provided below. The Company’s outlook contains forward-looking statements and information. Actual results may differ materially. See “Forward-Looking Statements Disclosure.”
Fifty-two weeks ended |
||||||||||||||||||||||||
Consolidated | Core Laundry Operations | |||||||||||||||||||||||
(In thousands, except percentages and per share amounts) | Guidance - at the midpoint |
Key Initiative Costs |
Adjusted | Guidance - at the midpoint |
Key Initiative Costs |
Adjusted | ||||||||||||||||||
Revenues | $ | 1,973,500 | $ | — | $ | 1,973,500 | $ | 1,753,500 | $ | - | $ | 1,753,500 | ||||||||||||
Operating income | 142,275 | 30,000 | 172,275 | $ | 121,400 | $ | 30,000 | $ | 151,400 | |||||||||||||||
Operating margin | 7.2 | % | 1.5 | % | 8.7 | % | 6.9 | % | 1.7 | % | 8.6 | % | ||||||||||||
Income before income taxes | 143,075 | 30,000 | 173,075 | |||||||||||||||||||||
Provision for income taxes | 34,338 | 7,581 | 41,919 | |||||||||||||||||||||
Net income | $ | 108,737 | $ | 22,419 | $ | 131,156 | ||||||||||||||||||
Effective tax rate | 24.0 | % | 25.3 | % | 24.2 | % | ||||||||||||||||||
Diluted earnings per share: | Projected | Key Initiative Costs |
Adjusted | |||||||||||||||||||||
Low | $ | 5.62 | $ | 1.18 | $ | 6.80 | ||||||||||||||||||
High | $ | 5.82 | $ | 1.18 | $ | 7.00 |
Source: UniFirst Corporation