1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended Commission File May 28, 1994 Number 1-8504 UNIFIRST CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2103460 (State of Incorporation) (IRS Employer Identification Number) 68 Jonspin Road Wilmington, Massachusetts 01887 (Address of principal executive offices) Registrant's telephone number, including area code: (508) 658-8888 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of outstanding shares of the registrant's Common Stock and Class B Common Stock as of July 1, 1994 were 7,884,594 and 12,626,014 respectively. 2 PART 1 - FINANCIAL INFORMATION FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES CONDENSED BALANCE SHEETS (unaudited)
The accompanying notes are an integral part of these condensed financial statements.May 28, August 28, May 29, 1994 1993* 1993 ------------- ------------- ------------- Assets Current assets: Cash $ 2,085,000 $ 3,656,000 $ 2,698,000 Receivables 31,716,000 24,849,000 26,048,000 Inventories 14,232,000 11,536,000 10,569,000 Rental merchandise in service 30,075,000 26,565,000 25,882,000 Prepaid expenses 116,000 115,000 113,000 ------------- ------------- ------------- Total current assets 78,224,000 66,721,000 65,310,000 ------------- ------------- ------------- Property and equipment: Land, buildings and leasehold improvements 98,730,000 93,347,000 92,275,000 Machinery and equipment 96,608,000 86,165,000 86,476,000 Motor vehicles 25,798,000 21,899,000 22,367,000 ------------- ------------- ------------- 221,136,000 201,411,000 201,118,000 Less - accumulated depreciation 85,737,000 75,617,000 78,170,000 ------------- ------------- ------------- 135,399,000 125,794,000 122,948,000 ------------- ------------- ------------- Other assets 29,224,000 26,549,000 27,352,000 ------------- ------------- ------------- $ 242,847,000 $ 219,064,000 $ 215,610,000 ============= ============= ============= Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term obligations $ 6,285,000 $ 6,055,000 $ 6,035,000 Notes payable 345,000 177,000 209,000 Accounts payable 10,488,000 10,624,000 9,637,000 Accrued liabilities 29,064,000 25,225,000 24,562,000 Accrued and deferred income taxes 4,396,000 5,399,000 6,446,000 ------------- ------------- ------------- Total current liabilities 50,578,000 47,480,000 46,889,000 ------------- ------------- ------------- Long-term obligations, net of current maturities 32,898,000 26,176,000 26,455,000 Deferred income taxes 14,099,000 12,685,000 13,120,000 ------------- ------------- ------------- Shareholders' equity: Preferred stock, $1.00 par value; 2,000,000 shares authorized, none issued -- -- -- Common stock, $.10 par value; 30,000,000 shares authorized, issued and outstanding 7,884,594 shares 788,000 787,000 775,000 Class B Common stock, $.10 par value; 20,000,000 shares authorized, issued and outstanding 12,626,014 shares 1,263,000 1,263,000 1,275,000 Capital surplus 7,039,000 7,008,000 6,846,000 Retained earnings 136,792,000 123,793,000 120,039,000 Cumulative translation adjustment (610,000) (128,000) 211,000 ------------- ------------- ------------- Total shareholders' equity 145,272,000 132,723,000 129,146,000 ------------- ------------- ------------- $ 242,847,000 $ 219,064,000 $ 215,610,000 ============= ============= ============= * Condensed from audited financial statements 3 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF INCOME (unaudited)
The accompanying notes are an integral part of these condensed financial statements.Thiry-nine Thiry-nine Thirteen Thirteen weeks ended weeks ended weeks ended weeks ended May 28, May 29, May 28, May 29, 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Revenues $237,307,000 $215,583,000 $ 83,106,000 $ 74,238,000 ------------ ------------ ------------ ------------ Costs and expenses: Operating costs 145,365,000 130,256,000 51,029,000 44,325,000 Selling and administrative expenses 54,157,000 50,241,000 19,353,000 17,367,000 Depreciation and amortization 13,191,000 12,219,000 4,503,000 4,077,000 ------------ ------------ ------------ ------------ 212,713,000 192,716,000 74,885,000 65,769,000 ------------ ------------ ------------ ------------ Income from operations 24,594,000 22,867,000 8,221,000 8,469,000 ------------ ------------ ------------ ------------ Interest expense (income): Interest expense 1,982,000 2,278,000 673,000 670,000 Interest income (162,000) (160,000) (23,000) (62,000) ------------ ------------ ------------ ------------ 1,820,000 2,118,000 650,000 608,000 ------------ ------------ ------------ ------------ Income before income taxes 22,774,000 20,749,000 7,571,000 7,861,000 Provision for income taxes 8,426,000 7,262,000 2,801,000 2,751,000 ------------ ------------ ------------ ------------ Net income $ 14,348,000 $ 13,487,000 $ 4,770,000 $ 5,110,000 ============ ============ ============ ============ Weighted average number of shares outstanding 20,504,246 20,435,042 20,509,122 20,493,594 ============ ============ ============ ============ Net income per share $0.70 $0.66 $0.23 $0.25 ============ ============ ============ ============ 4 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
The accompanying notes are an integral part of these condensed financial statements.Thirty-nine Thirty-nine weeks ended weeks ended May 28, May 29, 1994 1993 ------------ ------------ Cash flows from operating activities: Net Income $ 14,348,000 $ 13,487,000 Adjustments: Depreciation 11,053,000 10,081,000 Amortization of other assets 2,138,000 2,138,000 Receivables (6,937,000) (3,707,000) Inventories (2,727,000) 1,746,000 Rental merchandise in service (3,574,000) (2,213,000) Prepaid expenses -- 67,000 Accounts payable (308,000) 721,000 Accrued liabilities 3,886,000 7,296,000 Accrued and deferred income taxes (986,000) (640,000) Deferred income taxes 1,433,000 381,000 ------------ ------------ Net cash provided by operating activities 18,326,000 29,357,000 ------------ ------------ Cash flows from investing activities: Acquisition of businesses, net of working capital acquired (5,050,000) -- Capital expenditures (19,566,000) (12,893,000) Other assets, net (1,093,000) (132,000) ------------ ------------ Net cash used in investing activites (25,709,000) (13,025,000) ------------ ------------ Cash flows from financing activities: Increase (reduction) in debt 7,129,000 (15,883,000) Proceeds from exercise of stock options 32,000 445,000 Cash dividends paid or payable (1,349,000) (1,472,000) ------------ ------------ Net cash provided by (used in) financing activities 5,812,000 (16,910,000) ------------ ------------ Net decrease in cash (1,571,000) (578,000) Cash at beginning of period 3,656,000 3,276,000 ------------ ------------ Cash at end of period $ 2,085,000 $ 2,698,000 ============ ============ Supplemental disclosure of cash flow information: Interest paid $ 1,617,000 $ 1,791,000 Income taxes paid $ 8,015,000 $ 7,562,000 ============ ============ 5 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEKS ENDED MAY 28, 1994 1. These condensed financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the information furnished reflects all adjustments which are, in the opinion of management, necessary to a fair statement of results for the interim period. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes, thereto, included in the Company's latest annual report. 2. From time to time, the Company is subject to legal proceedings and claims arising from the conduct of their business operations, including personal injury, customer contract, employment claims and environmental matters. In the opinion of management, such proceedings and claims are not likely to result in losses which would have a material adverse effect upon the Company. 3. During 1993 the Company's shareholders voted to amend its Articles of Organization to increase the number of authorized shares of Common Stock from 20,000,000 to 30,000,000, and to authorize a new Class B Common Stock with 20,000,000 authorized shares. The Company offered to exchange, on a share-for-share basis, shares of Class B Common Stock for shares of Common Stock. 4. On November 18, 1993 the Company's Board of Directors declared a two-for- one stock split, be effected in the form of a stock dividend, on the Company's Common Stock and Class B Common Stock. The stock dividend was paid on January 19, 1994 to shareholders of record on January 5, 1994. All references to average number of shares outstanding, per share data and Shareholders' Equity section in these financial statements are after giving retroactive effect to the two-for-one split. 5. On November 1, 1993 the Company acquired all of the outstanding stock of Modern Coverall and Uniform Supply, Inc., a garment rental business located in Los Angeles, CA. 6. On February 28, 1994 the Company acquired the assets of Clean Services, Inc., a garment rental business located in Enid, OK. 6 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THIRTY-NINE WEEKS ENDED MAY 28, 1994 RESULTS OF OPERATIONS - - --------------------- Thirty-nine Weeks of Fiscal 1994 compared to Thirty-nine Weeks of Fiscal 1993 - - ----------------------------------------------------------------------------- Fiscal 1994 revenues for the thirty-nine weeks increased $21,724,000 or 10.1% over the thirty-nine weeks in fiscal 1993. This increase can be attributed to acquisitions (1.0%) and internal growth and modest price increases (9.1%). Income from operations as a percentage of revenue decreased to 10.4% in fiscal 1994 from 10.6% for the fiscal 1993 period. The decrease is primarily attributable to unfavorable comparative contribution results from the nuclear business. Net interest expense (interest expense less interest income) was $1,820,000 in fiscal 1994 as compared to $2,118,000 in fiscal 1993. The decrease is primarily attributable to lower average outstanding indebtedness in fiscal 1994. The provision for income taxes for the current period was 37.0% as compared to 35.0% for the corresponding 1993 period. The increase is due primarily to an increase in the statutory federal income tax rate affecting fiscal 1994. Thirteen Weeks ended May 28, 1994 compared to Thirteen Weeks ended May 29, 1993 - - ------------------------------------------------------------------------------- Fiscal 1994 third quarter revenues increased $8,868,000 or 11.9% over the fiscal 1993 third quarter. This increase can be attributed to acquisitions (1.6%) and internal growth and modest price increases (10.3%). Income from operations as a percentage of revenue decreased to 9.9% in fiscal 1994 from 11.4% for the fiscal 1993 period. The primary reason for the decrease is a reduced period-to-period contribution from the nuclear business. Net interest expense was $650,000 in fiscal 1994, comparable to $608,000 in fiscal 1993. The provision for income taxes for the current period was 37.0% as compared to 35.0% for the corresponding 1993 period. The increase is due primarily to an increase in the statutory federal income tax rate affecting fiscal 1994. 7 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) FOR THE THIRTY-NINE WEEKS ENDED MAY 28, 1994 CAPITAL RESOURCES AND LIQUIDITY - - ------------------------------- The Company believes that its ability to generate cash from operations will adequately cover its foreseeable capital requirements. EFFECTS OF INFLATION - - -------------------- Inflation has had the effect of increasing the reported amounts of the Company's revenues and costs. The Company uses the last-in, first-out (LIFO) method to value a significant portion of inventories. This method tends to reduce the amount of income due to inflation included in the Company's results of operations. The Company believes that, through increases in its prices, it has been able to recover increases in costs and expenses attributable to inflation. 8 PART II - OTHER INFORMATION FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES Item 1. Legal Proceedings - - -------------------------- Reference is made to Note 2 of notes to condensed financial statements and to the discussion under the heading Environmental Matters in the Company's Annual Report on Form 10-K for the fiscal year ended August 28, 1993. Item 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. UNIFIRST CORPORATION Ronald D. Croatti ----------------------- Ronald D. Croatti Vice Chairman and Chief Executive Officer Date: July 8, 1994 John B. Bartlett ----------------------- John B. Bartlett Senior Vice President and Chief Financial Officer