1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 27, 1994
Commission File 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Class which shares are traded
Common Stock,
$.10 par value per share New York Stock Exchange
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 preceding 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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definintive proxy or information
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
The number of outstanding shares of UniFirst Corporation Common Stock
and Class B Common Stock at November 14, 1994 were 7,884,644 and 12,625,964,
respectively, and the aggregate market value of these shares held by
non-affiliates of the Company on said date was $111,955,339 (based upon the
closing price of the Company's Common Stock on the New York Stock Exchange on
said date and assuming the market value of a share of Class B Common Stock
(which is generally non-transferable, but is convertible at any time into one
share of Common Stock) is identical to the market value of the Common Stock).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1994 Annual Report to Shareholders and the
Company's Proxy Statement for its 1995 Annual Meeting of Shareholders (which
will be filed with the Securities and Exchange Commission within 120 days after
the close of the 1994 fiscal year) are incorporated by reference into Parts II,
III, and IV hereof.
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ITEM 1. BUSINESS
- - -----------------
UniFirst is a leading company in the garment rental industry. The
Company's services consist principally of renting, cleaning, and delivering a
variety of industrial employment garments on a periodic basis, usually weekly.
The Company also decontaminates and cleans garments which may have been exposed
to radioactive materials. Customer billings are rendered and recorded as
revenues when services are performed.
The Company's principal business, since its inception, has been the
rental and servicing of industrial employment uniforms and protective clothing
(such shirts, pants, jackets, coveralls, jumpsuits, lab coats, smocks and
aprons) as well as industrial wiper towels, floor mats and other non-garment
items. The Company services its customers by picking up the soiled items on a
periodic basis, usually weekly, and delivering at the same time cleaned and
processed items.
Through the Company's services, customers are provided with uniforms
and protective work clothing for their employees without the necessity of
investing working capital, which is particularly advantageous to customers
whose worker turnover is high. The Company's centralized services, specialized
equipment and economies of scale generally allow it to be more cost effective
in providing garment services than the customers could be by themselves. In
order to better service its customers, the Company maintains a relatively
higher level of inventory of garments in stock than it believes customary in
the industry. Customers are given a broad selection of styles, colors, sizes,
fabrics and personalized emblems from which to choose. The Company's uniform
program is intended not only to upgrade the image of the customers, but also to
improve the effectiveness, morale, safety and satisfaction of their employees.
The Company services a wide variety of manufacturers, retailers and
service companies, including automobile dealers and service stations, bakeries,
transportation companies and agricultural processors. Substantially all of the
Company's rental services are provided pursuant to written contracts, primarily
for a term of three years. The Company services over 100,000 customer
locations in 44 states and Canada from 99 service locations and distribution
centers. For fiscal 1992, 1993 and 1994, the Company's garment rental
operations produced approximately 64%, 65% and 66%, respectively, of its
revenues, and non-garment rental items accounted for another 27%, 25% and 25%,
respectively, of its revenues, with no single customer accounting for more than
1% of total revenues in any year.
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The Company manufactures work pants and shirts for its garment rental
operations in its plants in Luquillo, Puerto Rico, and Cave City, Arkansas,
respectively. These plants produced approximately 43% of all employment
garments which the Company placed in service during both fiscal 1994 and 1993.
The Company is also in the specialized business of decontaminating and
cleaning work clothes which may have been exposed to radioactive materials.
The Company's customers in this market include the federal government, research
and development laboratories and utilities operating nuclear reactors. The
Company maintains decontamination facilities at the site of a conventional
cleaning plant in Massachusetts and has specialized facilities exclusively for
its nuclear decontamination operations in Mississippi, New Mexico, California,
Washington, Hawaii, Pennsylvania, South Carolina, Virginia, Georgia, Illinois
and Iowa.
MARKETING
The Company markets its services to potential customers through
approximately 230 trained sales representatives whose sole function is to
develop new sales by adding new accounts and who have no direct responsibility
for servicing customer accounts. Potential customers are contacted by
telephone and also through sales appointments. The Company has a
separately-staffed telemarketing program of approximately 30 people, designed
to provide broader and more efficient coverage by screening prospects for the
sales representatives.
The Company believes that customer service is the most important
element in developing and maintaining its market position. As of August 27,
1994, existing accounts were serviced by approximately 685 route salespersons
and 410 service support people who together are responsible for providing
prompt delivery service and ensuring expeditious handling of customer
requirements regarding billings, adjustments, garment repairs and other
matters. The Company's policy is to resolve all customer inquiries and
problems within 24 hours.
The Company believes that its distinction between sales and service
personnel, which allows the route salespersons to monitor and maximize existing
customer satisfaction while others promote an ongoing new business effort, is
an important part of its competitive strategy.
Customer service is enhanced by the Company's management information
systems, which provide instantaneous access to information on the customer
employees serviced by the Company. Available data includes the status of
customer orders, inventory availability, shipping information and personal data
regarding individual customer employees, including names, sizes, uniform styles
and colors.
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The Company's emphasis on customer service is reflected throughout the
Company's business. The Company believes that ownership of its own
manufacturing facilities increases its ability to control the quality of its
garments. The Company believes its industrial cleaning facilities are among
the most modern in the industry.
Expansion by the Company into new market areas is achieved through an
acquisition program and internal growth. Internal expansion normally results
from extending sales routes into new market areas and then servicing the new
accounts from one of the Company's existing facilities. Since internal
expansion is thus limited to contiguous areas, the Company also has an
acquisition program to permit it to expand more widely into new market areas.
The Company believes that acquisitions are an effective manner of expanding its
customer base and foresees this avenue as an important source of growth.
COMPETITION
The markets serviced by the Company are highly competitive. Although
the Company is one of the larger companies engaged in the business of renting
and cleaning employment garments, there are other firms in the industry which
are larger and have greater financial resources than the Company. The
principal methods of competition in the industry are quality of service and
price. The Company believes that its ability to compete effectively is due
primarily to the superior service and support systems which it provides to its
customers.
RAW MATERIALS
The Company obtained through its manufacturing operations approximately
43% of all garments which it placed in service during fiscal 1994, with other
items and the balance of garments being purchased from a variety of suppliers.
The Company has experienced no significant difficulty in obtaining any of its
raw materials or supplies.
EMPLOYEES
The Company employs approximately 5,500 persons, about 6% of whom are
represented by unions pursuant to 7 separate collective bargaining agreements.
The Company considers its employee relations to be satisfactory.
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EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Aldo A. Croatti 76 Chairman of the Board
Ronald D. Croatti 51 Vice Chairman of the Board and
Chief Executive Officer
Anthony F. DiFillippo 67 President
Robert L. Croatti 58 Executive Vice President
John B. Bartlett 53 Senior Vice President and
Chief Financial Officer
Cynthia Croatti Inello 39 Treasurer
Robert T. Citrano 50 Vice President, Support Services
Bruce P. Boynton 46 Vice President,
Canadian Operations
Aldo A. Croatti has been Chairman of the Board since the Company's
incorporation in 1950 and of certain of its predecessors since 1940.
Ronald D. Croatti has been Vice Chairman of the Board for more than the past
five years and Chief Executive Officer since September 1, 1991. Prior to
becoming CEO he was Chief Operating Officer for more than five years.
Anthony F. DiFillippo has been President for more than the past five years.
Robert L. Croatti has been Executive Vice President for more than the past five
years.
John B. Bartlett has been Senior Vice President and Chief Financial Officer for
more than the past five years.
Cynthia Croatti Inello has been Treasurer for more than the past five years.
Robert T. Citrano has been Vice President, Support Services for more than the
past five years.
Bruce P. Boynton has been Vice President, Canadian Operations for more than the
past five years.
Ronald D. Croatti, Anthony F. DiFillippo, Robert L. Croatti and Cynthia Croatti
Inello are a son, brother-in-law, nephew and daughter, respectively, of Aldo A.
Croatti.
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ENVIRONMENTAL MATTERS
All industrial laundries use and have to dispose of detergent waste
water and/or dry cleaning residues. The Company is aware of the environmental
concerns surrounding the disposal of these materials and has taken steps to
avoid their improper disposal. Although from time to time the Company is
subject to administrative and judicial proceedings involving environmental
matters, the Company does not foresee a material effect on its earnings or
competitive position in connection with such proceedings or its compliance with
federal, state and local provisions regulating the environment. The Company's
nuclear garment decontamination facilities are licensed by the Nuclear
Regulatory Commission or, in certain instances, by the applicable state agency.
The Company and several other unaffiliated parties have been identified
by the United States Environmental Protection Agency ("EPA") as having
contributed to the presence of hazardous substances in the ground water in
Woburn, Massachusetts. The Company has not incurred, and does not currently
anticipate incurring, expenses in connection therewith which would have a
material adverse effect on its financial position as a result thereof.
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ITEM 2. PROPERTIES
- - -------------------
At August 27, 1994 the Company owned or occupied 115 facilities
containing an aggregate of approximately 2.8 million square feet located in the
United States, Canada and Puerto Rico. The Company owns 70 of these
facilities containing approximately 2.3 million square feet.
The following chart summarizes certain information with respect to the
principal properties currently owned or leased by the Company.
LOCATION APPROXIMATE SQUARE FEET
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Executive Office & Distribution Center
Wilmington, MA 132,000
Rental Garment Servicing Facilities
Pittsburgh, PA 96,000
Springfield, MA 68,000
Washington, DC 57,000
Dallas, TX 55,000
Nashua, NH 54,000
Stratford, CT 54,000
Boston, MA 48,000
Houston, TX 48,000
Columbus, OH 45,000
Odessa, TX 45,000
Richmond, VA 45,000
Portland, ME 44,000
Harlingen, TX 42,000
Toronto, Ontario, Canada 41,000
Buffalo, NY 40,000
Lubbock, TX 40,000
Portland, OR 40,000
Tulsa, OK 40,000
Tampa, FL 39,000
Ocala, FL 38,000
Los Angeles, CA 37,000
Lebanon, NH 36,000
Uvalde, TX 36,000
Charlotte, NC 34,000
Corpus Christi, TX 34,000
Philadelphia, PA 34,000
San Antonio, TX 34,000
Albuquerque, NM 33,000
Amarillo, TX 33,000
Vancouver, British Columbia, Canada 33,000
Norfolk, VA 33,000
Cincinnati, OH 32,000
McAllen, TX 32,000
Baltimore, MD 30,000
Bangor, ME 30,000
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Garment Manufacturing Facilities
Cave City, AR 62,000
Luquillo, PR 44,000
Distribution Center & Emblem Mfg. Facility
Macon, GA 34,000
Nuclear Garment Decontamination Facilities
Royersford, PA 39,000
Richland, WA 37,000
The Company owns all the machinery and equipment used in its
operations. In the opinion of the Company, all of its facilities and its
production, cleaning and decontamination equipment have been well maintained,
are in good condition and are adequate for the Company's present needs.
The Company owns and leases a fleet of approximately 1,300 delivery
vans, trucks and other vehicles. The Company believes that these vehicles are
in good repair and are adequate for the Company's present needs.
ITEM 3. LEGAL PROCEEDINGS
- - --------------------------
From time to time the Company is subject to legal proceedings and
claims arising from the conduct of its business operations, including personal
injury, customer contract, employment claims and environmental matters as
described in Item 1 above. The Company maintains insurance coverage providing
indemnification against the majority of such claims and management does not
expect that any material loss to the Company will be sustained as a result
thereof.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
- - ----------------------------------------------------------
None
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- - --------------------------------------------------------------
STOCKHOLDER MATTERS
-------------------
See the section entitled "Common Stock Prices and Dividends Per Share"
which is incorporated herein by reference, as part of the Company's 1994 Annual
Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
- - --------------------------------
See the section entitled "Ten Year Financial Summary" which is
incorporated herein by reference, as part of the Company's 1994 Annual Report
to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - ------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
See the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which is incorporated herein by
reference, as part of the Company's 1994 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - ----------------------------------------------------
The financial statements and the accompanying notes, which are
incorporated herein by reference to the Company's 1994 Annual Report to
Shareholders, are indexed herein under Items 14(a)(1) and (2) of Part IV.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
- - --------------------------------------------------------------
Not applicable
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- - ---------------------------------------------------------
Incorporated by reference to the information provided under the caption
"Election of Directors" in the Company's Proxy Statement for its 1995 Annual
Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
- - --------------------------------
Incorporated by reference to the information provided under the caption
"Summary Compensation Table" in the Company's Proxy Statement for its 1995
Annual Meeting of Shareholders.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - ------------------------------------------------------------------------
Incorporated by reference to the information provided under the
captions "Election of Directors" and "Principal Shareholders" in the Company's
Proxy Statement for its 1995 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - --------------------------------------------------------
Incorporated by reference to the information provided under the caption
"Certain Transactions" in the Company's Proxy Statement for its 1995 Annual
Meeting of Shareholders.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
- - -------------------------------------------------------------
ON FORM 8-K
-----------
(a) The financial statements listed below are filed as part of
this report:
1. and 2. Financial Statements and
------------------------
Financial Statement Schedules.
------------------------------
The financial statements and financial statement schedules listed below
are incorporated herein by reference to the Company's 1994 Annual Report to
Shareholders.
Consolidated balance sheets as of August 27, 1994
and August 28, 1993
Consolidated statements of income for each of the
three years in the period ended August 27, 1994
Consolidated statements of shareholders' equity for
each of the three years in the period ended
August 27, 1994
Consolidated statements of cash flows for each of the
three years in the period ended August 27, 1994
Notes to consolidated financial statements
Report of independent public accountants
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The following additional schedules are filed herewith:
Report of independent public accountants on supplemental schedules to
the consolidated financial statements.
Schedule II -
Note receivable from related party.
Schedule V -
Property, plant and equipment for each of the three years in the
period ended August 27, 1994.
Schedule VI -
Accumulated depreciation and amortization for each of the three years
in the period ended August 27, 1994.
Schedule VIII -
Valuation and qualifying accounts and reserves for each of the three
years in the period ended August 27, 1994.
Schedule X -
Supplementary income statement information for each of the three
years in the period ended August 27, 1994.
Separate financial statements of the Company have been omitted because
the Company is primarily an operating company and all subsidiaries included in
the consolidated financial statements are totally held.
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
3. Exhibits. The exhibits listed the accompanying Exhibit Index are
filed as part of this report.
(b) During the three months ended August 27, 1994 the Company did not
file any reports on Form 8-K with the Securities and Exchange Commission.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UniFirst Corporation
By: Aldo A. Croatti
----------------------------------
Aldo A. Croatti
Chairman
Date: November 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
Aldo A. Croatti Chairman and Director November 23, 1994
- - --------------------
Aldo A. Croatti
Principal Executive
Ronald D. Croatti Officer and Director November 23, 1994
- - --------------------
Ronald D. Croatti
Principal Financial
Officer and Principal
John B. Bartlett Accounting Officer November 23, 1994
- - --------------------
John B. Bartlett
Anthony F. DiFillippo Director November 23, 1994
- - ---------------------
Anthony F. DiFillippo
Donald J. Evans Director November 23, 1994
- - --------------------
Donald J. Evans
Reynold L. Hoover Director November 23, 1994
- - --------------------
Reynold L. Hoover
Albert Cohen Director November 23, 1994
- - --------------------
Albert Cohen
13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL
SCHEDULES TO THE CONSOLIDATED FINANCIAL STATEMENTS
To UniFirst Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in this Form 10-K,
and have issued our report thereon dated November 1, 1994. Our report on the
consolidated financial statements includes an explanatory paragraph with
respect to the change in the method of accounting for income taxes, effective
September 1, 1991, as discussed in Note 3 to the consolidated financial
statements. Our audit was made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The supplemental
schedules to the consolidated financial statements listed as Item 14(a)(2) in
the Form 10-K are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These supplemental schedules have been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements
and, in our opinion, fairly state, in all material respects, the financial data
required to be set forth therein, in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 1, 1994
14
UNIFIRST CORPORATION AND SUBSIDIARIES
- - -------------------------------------
SCHEDULE II
- - -----------
NOTE RECEIVABLE FROM RELATED PARTY
- - ----------------------------------
Balance, Balance,
Beginning Amounts End of
Name of debtor of Period Additions Collected Period
- - -------------------------------------------------------------------------------------------------
For the year ended August 27, 1994
- - ----------------------------------
Anthony F. DiFillippo,
Company President $ 200,000 -- $ 200,000 --
===========================================================
For the year ended August 28, 1993
- - ----------------------------------
Anthony F. DiFillippo,
Company President -- $ 200,000 - $ 200,000
===========================================================
There was no activity for the year ended August 29, 1992
15
UNIFIRST CORPORATION AND SUBSIDIARIES
- - -------------------------------------
SCHEDULE V
- - ----------
PROPERTY, PLANT AND EQUIPMENT FOR EACH OF THE
- - ---------------------------------------------
THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994
- - -----------------------------------------------
Balance, Sales, Balance,
Beginning Additions, Retirements End of
Classification of Period at Cost and Other Period
- - ----------------------------------------------------------------------------------------------------
For the year ended August 27, 1994
- - ----------------------------------
Land, buildings and
leasehold improvements $ 93,347,000 $ 8,835,000 $ (808,000) $101,374,000
Machinery and equipment 86,165,000 14,990,000 (1,200,000) 99,955,000
Motor vehicles 21,899,000 5,193,000 (855,000) 26,237,000
-------------------------------------------------------------
$201,411,000 $29,018,000 $(2,863,000) $227,566,000
=============================================================
For the year ended August 28, 1993
- - ----------------------------------
Land, buildings and
leasehold improvements $ 88,831,000 $ 5,738,000 $(1,222,000) $ 93,347,000
Machinery and equipment 82,110,000 10,984,000 (6,929,000) 86,165,000
Motor vehicles 20,195,000 3,351,000 (1,647,000) 21,899,000
-------------------------------------------------------------
$191,136,000 $20,073,000 $(9,798,000) $201,411,000
=============================================================
For the year ended August 29, 1992
- - ----------------------------------
Land, buildings and
leasehold improvements $ 83,011,000 $ 6,070,000 $ (250,000) $ 88,831,000
Machinery and equipment 77,775,000 11,635,000 (7,300,000) 82,110,000
Motor vehicles 18,918,000 2,838,000 (1,561,000) 20,195,000
-------------------------------------------------------------
$179,704,000 $20,543,000 $(9,111,000) $191,136,000
=============================================================
16
UNIFIRST CORPORATION AND SUBSIDIARIES
- - -------------------------------------
SCHEDULE VI
- - -----------
ACCUMULATED DEPRECIATION AND AMORTIZATION FOR EACH OF
- - -----------------------------------------------------
THE THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994
- - ---------------------------------------------------
Additions
Balance, Charged to Sales, Balance,
Beginning Costs and Retirements End of
Classification of Period Expenses and Other Period
- - --------------------------------------------------------------------------------------------------
For the year ended August 27, 1994
- - ----------------------------------
Land, buildings and
leasehold improvements $18,409,000 $ 2,842,000 $ (296,000) $20,955,000
Machinery and equipment 43,625,000 8,960,000 (237,000) 52,348,000
Motor vehicles 13,583,000 3,236,000 (568,000) 16,251,000
------------------------------------------------------------
$75,617,000 $15,038,000 $(1,101,000) $89,554,000
============================================================
For the year ended August 28, 1993
- - ----------------------------------
Land, buildings and
leasehold improvements $16,228,000 $ 2,689,000 $ (508,000) $18,409,000
Machinery and equipment 41,724,000 8,184,000 (6,283,000) 43,625,000
Motor vehicles 12,505,000 2,725,000 (1,647,000) 13,583,000
------------------------------------------------------------
$70,457,000 $13,598,000 $(8,438,000) $75,617,000
============================================================
For the year ended August 29, 1992
- - ----------------------------------
Land, buildings and
leasehold improvements $13,790,000 $ 2,550,000 $ (112,000) $16,228,000
Machinery and equipment 40,537,000 7,822,000 (6,635,000) 41,724,000
Motor vehicles 11,847,000 2,222,000 (1,564,000) 12,505,000
------------------------------------------------------------
$66,174,000 $12,594,000 $(8,311,000) $70,457,000
============================================================
17
UNIFIRST CORPORATION AND SUBSIDIARIES
- - -------------------------------------
SCHEDULE VIII
- - -------------
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH
- - -------------------------------------------------------
OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994
- - ------------------------------------------------------
Balance, Charged to Charges for Balance,
Beginning Costs and Which Reserves End of
Description of Period Expenses Were Created Period
- - -------------------------------------------------------------------------------------------------
For the year ended August 27, 1994
- - ----------------------------------
Allowance for
doubtful accounts $440,000 $1,179,000 $(1,037,000) $ 582,000
=========================================================
For the year ended August 28, 1993
- - ----------------------------------
Allowance for
doubtful accounts $348,000 $1,030,000 $ (938,000) $ 440,000
=========================================================
For the year ended August 29, 1992
- - ----------------------------------
Allowance for
doubtful accounts $500,000 $1,102,000 $(1,254,000) $ 348,000
=========================================================
18
UNIFIRST CORPORATION AND SUBSIDIARIES
- - -------------------------------------
SCHEDULE X
- - ----------
SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR EACH
- - ---------------------------------------------------
OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994
- - ------------------------------------------------------
YEAR ENDED
--------------------------------------------
August 27, August 28, August 29,
Description 1994 1993 1992
- - ---------------------------------------------------------------------------
Maintenance and repairs $ 9,098,000 $ 8,181,000 $ 7,455,000
Depreciation and amortization
of other assets 17,912,000 16,454,000 15,999,000
Taxes, other than payroll
and income taxes 3,394,000 2,975,000 2,560,000
19
EXHIBIT INDEX
-------------
Description
-----------
3-A Restated Articles of Organization -- incorporated by reference to
Exhibit 3-A to the Company's Registration Statement on Form S-1
(No. 2-83051) -- and the Articles of Amendment dated January 12,
1988, a copy of which was filed on an exhibit to the Company's
Annual Report on Form 10-K for fiscal year ended August 27, 1988
-- and the Articles of Amendment dated January 21, 1993, a copy of
which was filed on an exhibit to the Company's Quarterly Report on
Form 10-Q for fiscal quarter ended February 27, 1993.
3-B By-laws -- incorporated by reference to Exhibit 3-B to the
Company's Annual Report on Form 10-K for fiscal year ended
August 31, 1991.
10-A UniFirst Corporation Profit Sharing Plan -- incorporated by
reference to Exhibit 10-A to the Company's Annual Report on Form
10-K for fiscal year ended August 26, 1989.
10-C Metropolitan Life Insurance Company Loan Agreement covering
issuance of $15,000,000 9-1/4% Senior Notes -- incorporated by
reference to Exhibit 10-F to the Company's Annual Report on Form
10-K for fiscal year ended August 29, 1987.
13 The Company's 1994 Annual Report to Shareholders (filed herewith
to the extent expressly incorporated by reference herein).
22 List of subsidiaries of the Company:
Interstate Nuclear Services Corp.
Interstate Uniform Manufacturing of Puerto Rico, Inc.
Superior Products & Equipment Co., Inc.
UniFirst Canada Ltd.
Texas Industrial Services, Inc.
U Two Corporation
UR Corporation
UniFirst Express, Inc.
Modern Coverall - Uniform Supply, Inc.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
1
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results
of Operations
UniFirst Corporation and Subsidiaries
Fiscal 1994 Compared with Fiscal 1993
In 1994 revenues increased $30.3 million or 10.5% over 1993. This increase can
be attributed to internal growth and modest price increases (9.2%) and
acquisitions (1.3%).
Income from operations increased to $32.5 million in 1994 from $30.7 million in
1993. As a percent of revenues, income from operations decreased to 10.2% in
1994 from 10.7% in 1993. The primary reasons for the decrease are unfavorable
comparative contribution results from the nuclear garment decontamination
business, start-up costs associated with a new emblem image process for our
customers and higher uniform merchandise costs in 1994.
During 1994, net interest expense (interest expense less interest income) was
$2.5 million as compared to $2.7 million in 1993. The decrease is primarily
attributable to lower average interest rates in fiscal 1994.
The Company's provision for income taxes was 37.0% for both years. Although
the rates were the same for both years, in 1994 the favorable impact of a new
corporate-owned life insurance program was offset by higher state income taxes.
Fiscal 1993 Compared with Fiscal 1992
In 1993 revenues increased $19.5 million or 7.3% over 1992. This increase was
generated primarily by internal growth and modest price increases.
Income from operations increased to $30.7 million in 1993 from $26.0 million in
1992. As a percent of revenues, income from operations increased to 10.7% in
1993 from 9.7% in 1992. The primary reasons for the increase are the result of
improved margin performances in 1993 from the core rental businesses and a $1.2
million (.4%) charge to operations in 1992 for the closing of the Company's
Pembroke, Ontario manufacturing plant.
During 1993, net interest expense (interest expense less interest income) was
$2.7 million as compared to $4.1 million in 1992. The decrease is attributable
to repayment of debt and lower interest rates in 1993.
The Company's provision for income taxes was 37.0% in 1993 and 34.5% in 1992.
The increase is due primarily to an increase in the statutory federal income
tax rate and higher state income taxes in 1993.
Liquidity and Capital Resources
The Company's balance sheet continued to strenghten in 1994. Net cash provided
by operating activities was $28.1 million in 1994 and totaled $98.7 million for
the three years ended August 27, 1994. These cash flows were used to fund
$61.5 million in capital expenditures to expand and update Company facilities.
Additionally, $19.6 million was used for acquisitions during this three year
period.
Shareholders' equity as a percent of total capital has increased from 67.1% at
August 31, 1991 to 78.2% at August 27, 1994, indicating the significant
improvement in the overall strength of the Company's balance sheet.
The Company had $4.1 million in cash and cash equivalents as well as a line of
credit to borrow an additional $31.1 million as of August 27, 1994. The
Company believes 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.
2
Ten-Year Financial Summary
UniFirst Corporation and Subsidiaries
Fiscal Year Ended August
(in thousands, except ratios
and per share amounts) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- - -------------------------------------------------------------------------------------------------------------------------
Summary of Operations
Revenues $318,039 $287,728 $268,190 $250,432 $226,682 $212,731 $196,296 $159,900 $114,235 $104,780
Income from
operations, before
depreciation and
amortization 50,369 47,199 42,010 38,562 38,749 35,768 32,207 28,161 21,425 15,734
Depreciation and
amortization 17,912 16,454 15,999 14,229 12,422 12,309 12,298 10,494 5,890 4,550
Income from
operations 32,457 30,745 26,011 24,333 26,327 23,459 19,909 17,667 15,535 11,184
Interest expense
(income), net 2,513 2,669 4,098 4,320 3,513 4,880 5,965 4,622 225 310
Other income -- -- -- -- -- -- -- 1,300 -- --
Provision for
income taxes 11,073 10,387 7,570 6,803 8,516 6,968 5,289 6,530 6,990 4,314
Income before extra-
ordinary item and
accounting change 18,871 17,689 14,343 13,210 14,298 11,611 8,655 7,815 8,320 6,082
Convertible debt
retirement -- -- (2,620) -- -- -- -- -- -- --
Accounting change -- -- 1,200 -- -- -- -- -- -- --
Net income 18,871 17,689 12,923 13,210 14,298 11,611 8,655 7,815 8,320 6,082
- - -------------------------------------------------------------------------------------------------------------------------
Financial Position at Year End
Total assets $250,160 $219,064 $212,097 $204,398 $189,411 $172,389 $171,010 $166,304 $97,145 $73,695
Long-term obligations and
convertible subordinated debt 41,602 32,231 47,641 52,032 53,134 53,735 66,476 69,505 22,209 7,926
Shareholders' equity 149,472 132,723 117,329 105,888 93,739 80,249 69,127 60,681 53,637 46,325
- - -------------------------------------------------------------------------------------------------------------------------
Financial Ratios
Income before extra-
ordinary item and
accounting change
as a % of revenues 5.9% 6.1% 5.3% 5.3% 6.3% 5.5% 4.4% 4.9% 7.3% 5.8%
Return on average
shareholders' equity 13.4% 14.1% 12.9% 13.2% 16.4% 15.6% 13.3% 13.7% 16.6% 15.0%
- - -------------------------------------------------------------------------------------------------------------------------
Per Share Data
Weighted average number
of shares outstanding 20,506 20,453 20,451 20,426 20,431 20,353 20,168 20,158 20,158 20,158
Revenues $15.51 $14.07 $13.11 $12.26 $11.09 $10.45 $9.73 $7.93 $5.67 $5.20
Income from
operations, before
depreciation and
amortization 2.46 2.31 2.05 1.89 1.90 1.76 1.60 1.40 1.07 0.78
Income before extra-
ordinary item and
accounting change
Primary 0.92 0.86 0.70 0.65 0.70 0.57 0.43 0.39 0.42 0.31
Fully diluted 0.92 0.86 0.67 0.63 0.67 0.56 0.43 0.39 -- --
Net income
Primary 0.92 0.86 0.63 0.65 0.70 0.57 0.43 0.39 0.42 0.31
Fully diluted 0.92 0.86 0.61 0.63 0.67 0.56 0.43 0.39 -- --
Shareholders' equity 7.29 6.49 5.74 5.18 4.59 3.94 3.43 3.01 2.66 2.30
Dividends
Common stock .10 .10 .06 .06 .06 .05 .05 .05 .05 .05
Class B common stock .08 .04 -- -- -- -- -- -- -- --
- - -------------------------------------------------------------------------------------------------------------------------
Per share amounts for all years have been restated to reflect a 2 for 1
stock split declared by the Board of Directors on November 18, 1993.
3
Consolidated Balance Sheets
UniFirst Corporation and Subsidiaries
August 27, August 28,
1994 1993
- - ----------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 4,120,000 $ 3,656,000
Receivables, less reserves of $582,000 in 1994 and $440,000 in 1993 30,044,000 24,849,000
Inventories 15,409,000 11,536,000
Rental merchandise in service 30,577,000 26,565,000
Prepaid expenses 109,000 115,000
- - ----------------------------------------------------------------------------------------------------------
Total current assets 80,259,000 66,721,000
- - ----------------------------------------------------------------------------------------------------------
Property and equipment:
Land, buildings and leasehold improvements 101,374,000 93,347,000
Machinery and equipment 99,955,000 86,165,000
Motor vehicles 26,237,000 21,899,000
- - ----------------------------------------------------------------------------------------------------------
227,566,000 201,411,000
Less - accumulated depreciation 89,554,000 75,617,000
- - ----------------------------------------------------------------------------------------------------------
138,012,000 125,794,000
- - ----------------------------------------------------------------------------------------------------------
Other assets 31,889,000 26,549,000
- - ----------------------------------------------------------------------------------------------------------
$250,160,000 $219,064,000
==========================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 6,874,000 $ 6,055,000
Notes payable 448,000 177,000
Accounts payable 12,246,000 10,624,000
Accrued liabilities 27,265,000 25,225,000
Accrued and deferred income taxes 5,469,000 5,399,000
- - ----------------------------------------------------------------------------------------------------------
Total current liabilities 52,302,000 47,480,000
- - ----------------------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 34,728,000 26,176,000
Deferred income taxes 13,658,000 12,685,000
- - ----------------------------------------------------------------------------------------------------------
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 7,884,644 shares in 1994 and 7,873,854 shares in 1993 788,000 787,000
Class B Common stock, $.10 par value; 20,000,000 shares authorized; issued
and outstanding 12,625,964 shares in 1994 and 12,627,954 in 1993 1,263,000 1,263,000
Capital surplus 7,042,000 7,008,000
Retained earnings 140,866,000 123,793,000
Cumulative translation adjustment (487,000) (128,000)
- - ----------------------------------------------------------------------------------------------------------
Total shareholders' equity 149,472,000 132,723,000
- - ----------------------------------------------------------------------------------------------------------
$250,160,000 $219,064,000
==========================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
4
Consolidated Statements of Income
UniFirst Corporation and Subsidiaries
Year Ended August 27, August 28, August 29,
1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------
Revenues $318,039,000 $287,728,000 $268,190,000
- - ----------------------------------------------------------------------------------------------------------------
Cost and expenses:
Operating costs 196,511,000 173,772,000 163,021,000
Selling and administrative expenses 71,159,000 66,757,000 63,159,000
Depreciation and amortization 17,912,000 16,454,000 15,999,000
- - ----------------------------------------------------------------------------------------------------------------
285,582,000 256,983,000 242,179,000
- - ----------------------------------------------------------------------------------------------------------------
Income from operations 32,457,000 30,745,000 26,011,000
- - ----------------------------------------------------------------------------------------------------------------
Interest expense (income):
Interest expense 2,726,000 2,889,000 4,331,000
Interest income (213,000) (220,000) (233,000)
- - ----------------------------------------------------------------------------------------------------------------
2,513,000 2,669,000 4,098,000
- - ----------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary item and accounting change 29,944,000 28,076,000 21,913,000
Provision for income taxes 11,073,000 10,387,000 7,570,000
- - ----------------------------------------------------------------------------------------------------------------
Income before extraordinary item and accounting change 18,871,000 17,689,000 14,343,000
Convertible debt retirement, net of tax -- -- (2,620,000)
Deferred income taxes accounting change -- -- 1,200,000
- - ----------------------------------------------------------------------------------------------------------------
Net income $ 18,871,000 $ 17,689,000 $ 12,923,000
================================================================================================================
Weighted average number of shares outstanding:
Primary 20,505,837 20,453,414 20,450,624
Fully diluted 20,505,837 20,453,414 22,274,192
================================================================================================================
Per share - Primary:
Income before extraordinary item and accounting change $0.92 $0.86 $0.70
Convertible debt retirement, net of tax -- -- (0.13)
Deferred income taxes accounting change -- -- 0.06
- - ----------------------------------------------------------------------------------------------------------------
Net income $0.92 $0.86 $0.63
================================================================================================================
Per share - Fully diluted:
Income before extraordinary item and accounting change $0.92 $0.86 $0.67
Convertible debt retirement, net of tax -- -- (0.12)
Deferred income taxes accounting change -- -- 0.06
- - ----------------------------------------------------------------------------------------------------------------
Net income $0.92 $0.86 $0.61
================================================================================================================
Dividends per share:
Common stock $0.10 $0.10 $0.06
Class B common stock $0.08 $0.04 --
=================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
5
Consolidated Statements of Shareholders' Equity
UniFirst Corporation and Subsidiaries
Class B Class B
Common Common Common Common Capital Retained Translation
Shares Shares Stock Stock Surplus Earnings Adjustment
- - ------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1991 20,341,008 -- $2,034,000 -- $6,199,000 $ 96,323,000 $1,332,000
Net income -- -- -- -- -- 12,923,000 --
Dividends -- -- -- -- -- (1,222,000) --
Stock options exercised 34,000 -- 4,000 -- 214,000 -- --
Translation adjustment -- -- -- -- -- -- (478,000)
- - ------------------------------------------------------------------------------------------------------------------------
Balance, August 29, 1992 20,375,008 -- 2,038,000 -- 6,413,000 108,024,000 854,000
Net income -- -- -- -- -- 17,689,000 --
Dividends -- -- -- -- -- (1,920,000) --
Stock options exercised 126,800 -- 12,000 -- 595,000 -- --
Exchange offer (12,627,954) 12,627,954 (1,263,000) $1,263,000 -- -- --
Translation adjustment -- -- -- -- -- -- (982,000)
- - ------------------------------------------------------------------------------------------------------------------------
Balance, August 28, 1993 7,873,854 12,627,954 787,000 1,263,000 7,008,000 123,793,000 (128,000)
Net income -- -- -- -- -- 18,871,000 --
Dividends -- -- -- -- -- (1,798,000) --
Stock options exercised 8,800 -- 1,000 -- 34,000 -- --
Shares converted 1,990 (1,990) -- -- -- -- --
Translation adjustment -- -- -- -- -- -- (359,000)
- - ------------------------------------------------------------------------------------------------------------------------
Balance, August 27, 1994 7,884,644 12,625,964 $ 788,000 $1,263,000 $7,042,000 $140,866,000 $ (487,000)
========================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
6
Consolidated Statements of Cash Flows
UniFirst Corporation and Subsidiaries
Year ended August 27, August 28, August 29,
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 18,871,000 $ 17,689,000 $ 12,923,000
Adjustments:
Convertible debt retirement, net of tax -- -- 2,620,000
Depreciation 15,038,000 13,598,000 12,594,000
Amortization of other assets 2,874,000 2,856,000 3,405,000
Receivables (5,246,000) (2,558,000) (2,572,000)
Inventories (3,904,000) 726,000 1,059,000
Rental merchandise in service (4,061,000) (2,927,000) 114,000
Prepaid expenses 6,000 62,000 576,000
Accounts payable 1,417,000 1,965,000 (1,235,000)
Accrued liabilities 2,075,000 8,000,000 3,920,000
Accrued and deferred income taxes 82,000 (1,677,000) (2,134,000)
Deferred income taxes 987,000 (42,000) 1,622,000
- - -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 28,139,000 37,692,000 32,892,000
- - -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses, net of working capital acquired (9,815,000) (1,124,000) (8,648,000)
Capital expenditures (24,730,000) (19,328,000) (17,396,000)
Other assets, net (1,016,000) 604,000 (1,018,000)
- - -----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (35,561,000) (19,848,000) (27,062,000)
- - -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Convertible debt retirement and prepayment premium -- -- (24,000,000)
Proceeds from debt financing -- -- 20,874,000
Increase (reduction) in debt 9,649,000 (16,151,000) (5,195,000)
Proceeds from exercise of stock options 35,000 607,000 218,000
Cash dividends paid or payable (1,798,000) (1,920,000) (1,222,000)
- - -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 7,886,000 (17,464,000) (9,325,000)
- - -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 464,000 380,000 (3,495,000)
Cash and cash equivalents at beginning of year 3,656,000 3,276,000 6,771,000
- - -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,120,000 $ 3,656,000 $ 3,276,000
============================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 2,775,000 $ 2,959,000 $ 4,446,000
Income taxes paid $ 10,030,000 $ 12,168,000 $ 6,914,000
============================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
7
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Other
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Intercompany balances and
transactions are eliminated in consolidation. The Company recognizes revenues
when the actual services are provided to customers.
Inventories
Inventories are stated at the lower of cost or market value. The Company uses
the last-in, first-out (LIFO) method to value a significant portion of its
inventories. Inventory valued on the LIFO method approximates $12,257,000 and
$8,492,000 at August 27, 1994 and August 28, 1993, respectively. The remaining
inventories are priced at the lower of first-in, first-out (FIFO) cost or
market. Had the Company used the FIFO accounting method, inventories would
have been approximately $816,000 and $776,000 higher at August 27, 1994 and
August 28, 1993, respectively.
Rental Merchandise in Service
Rental merchandise in service, stated at cost less amortization, is being
amortized on a straight-line basis over the estimated service lives (primarily
12 months) of the merchandise.
Property and Equipment
The Company provides for depreciation on the straight-line method based upon
the following estimated useful lives:
Buildings 30-40 years
Leasehold improvements Term of lease
Machinery and equipment 3-10 years
Motor vehicles 3-7 years
Other Assets
Covenants are amortized over the terms of the respective non-competition
agreements, which range from five to fifteen years. Customer contracts are
amortized over periods of up to seventeen years. Goodwill is amortized over
periods of up to forty years.
Net Income Per Common Share
Net income per common share is calculated on a primary basis using the weighted
average number of common and common equivalent shares outstanding during the
year. Common equivalent shares include the number of shares issuable under the
Company's stock option plan. Prior to the convertible debt retirement in the
fourth quarter of 1992, net income per share on a fully diluted basis also
assumed the conversion of the Company's convertible subordinated debt and the
elimination of the related interest expense, net of tax.
Cash Flow Disclosures
Cash and cash equivalents include cash in banks and bank short-term repurchase
agreements with maturities of less than ninety days.
2. ACQUISITIONS
During fiscal 1994, the Company acquired three industrial laundry businesses
for cash and notes amounting to $9,815,000. During fiscal 1993, the Company
acquired an industrial laundry business for $1,124,000. These acquisitions
have been accounted for as purchases and, accordingly, have been included on
the Company's consolidated statements of income since their respective
acquisition dates.
8
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
3. INCOME TAXES
The provision for income taxes consists of the following:
Year ended August 27, August 28, August 29,
1994 1993 1992
- - ---------------------------------------------------------------
Current:
Federal and Canada $ 8,479,000 $10,896,000 $6,464,000
State 1,609,000 2,322,000 403,000
- - ---------------------------------------------------------------
10,088,000 13,218,000 6,867,000
- - ---------------------------------------------------------------
Deferred:
Federal and Canada 828,000 (1,799,000) 534,000
State 157,000 (1,032,000) 169,000
- - ---------------------------------------------------------------
985,000 (2,831,000) 703,000
- - ---------------------------------------------------------------
$11,073,000 $10,387,000 $7,570,000
===============================================================
Deferred income taxes, resulting from timing differences between
financial and taxable income, consist of the following:
Year ended August 27, August 28, August 29,
1994 1993 1992
- - ---------------------------------------------------------------------------------
Rental merchandise in service $1,743,000 $ 1,150,000 $ (95,000)
Tax in excess of book depreciation 757,000 732,000 1,001,000
Accruals and other (1,515,000) (4,713,000) (203,000)
- - ---------------------------------------------------------------------------------
$ 985,000 $(2,831,000) $ 703,000
- - ---------------------------------------------------------------------------------
The following table reconciles the statutory federal income tax rate to
the effective overall income tax rate:
Year ended August 27, August 28, August 29,
1994 1993 1992
- - ---------------------------------------------------------------------------------------------
Statutory federal income tax rate 35.0% 34.7% 34.0%
Increase (decrease) from statutory rate resulting from:
Puerto Rico exempt income (1.9) (1.7) (1.5)
Corporate-Owned Life Insurance (1.2) -- --
State income taxes 3.5 2.7 1.6
Canadian income taxes 0.4 0.6 0.2
Federal income tax rate change on
cumulative temporary differences -- 1.5 --
Other 1.2 (0.8) 0.2
- - ---------------------------------------------------------------------------------------------
37.0% 37.0% 34.5%
=============================================================================================
9
Notes to Consolidated Financial Statements
Unfirst Corporation and Subsidiaries
3. INCOME TAXES (continued)
The Company has negotiated a tax exemption grant for its Puerto Rico
subsidiary under which the subsidiary is tax-exempt on 90% of its income
through 2001. The Company provides for anticipated tollgate taxes on the
repatriation of the subsidiary's accumulated earnings.
During the second quarter of fiscal 1992 the Company adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes", retroactive to September 1, 1991. The cumulative effect of this change
was an increase to net income of $1,200,000. The Company has elected not to
restate prior years' financial statements for the effects of this change.
The tax effect of items giving rise to the Company's deferred tax liabilities
are as follows:
August 27, August 28, August 29,
1994 1993 1992
- - ----------------------------------------------------------------------------------------
Rental merchandise in service $12,274,000 $10,766,000 $ 9,657,000
Tax in excess of book depreciation 12,494,000 11,887,000 12,742,000
Accruals and other (5,654,000) (5,450,000) (1,201,000)
- - ----------------------------------------------------------------------------------------
$19,114,000 $17,203,000 $21,198,000
========================================================================================
10
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
4. LONG-TERM OBLIGATIONS
Long-term obligations outstanding on the accompanying consolidated balance
sheets are shown in the following table:
August 27, August 28,
1994 1993
- - ---------------------------------------------------------------------------------------------------
Revolving credit agreement with two banks, interest rates of 5.25%
and 3.5% at August 27, 1994 and August 28, 1993 respectively $18,925,000 $11,150,000
Unsecured notes payable to an insurance company, average
interest rate of 9.0%, payments of $3,000,000 due semi-annually
thru February, 1997 15,000,000 21,000,000
Notes payable, interest from 7.0% - 7.25%, payable in various
installments thru 2004 4,286,000 --
Restrictive covenants and other, payable in various installments
thru 2002 3,391,000 81,000
- - ---------------------------------------------------------------------------------------------------
41,602,000 32,231,000
- - ---------------------------------------------------------------------------------------------------
Less - current maturities 6,874,000 6,055,000
- - ---------------------------------------------------------------------------------------------------
$34,728,000 $26,176,000
===================================================================================================
Aggregate current maturities of long-term obligations for each of the next five
years are $6,874,000, $6,700,000, $22,640,000, $731,000 and $749,000
respectively. At August 27, 1994 and August 28, 1993, the fair value of the
Company's outstanding debt approximates its carrying value.
The Company's revolving credit agreement runs through 1997. As of August 27,
1994, the maximum line of credit was $50,000,000.
In 1993 the Company entered into an interest rate swap agreement with a bank,
notional amount $10,000,000, maturing October 31, 1994. The Company pays a
fixed rate of 4.9% and receives a variable rate tied to the LIBOR rate. As of
August 27, 1994 the variable rate was 4.8125%.
On June 3, 1992 the Company exercised its option to retire $20,000,000 in
outstanding convertible debt and paid a prepayment premium. This amount,
$2,620,000, net of tax, was recorded as an extraordinary item.
Certain of the long-term obligations contain among other things, provisions
regarding net worth, working capital and dividends. Under the most restrictive
of these provisions, the Company is required to maintain minimum consolidated
tangible net worth of $96,347,000 as of August 27, 1994. Additionally, retained
earnings available for the payment of dividends was $98,424,000 at August 27,
1994. Certain notes payable arising from acquisitions are secured by assets of
the acquired company.
5. EMPLOYEE BENEFIT PLANS
The Company has combined 401(k) and profit sharing plans for all eligible
employees not under collective bargaining agreements. The amount of the
Company's contribution is determined at the discretion of the Company.
Contributions charged to income under the plan were $3,200,000 in 1994,
$3,000,000 in 1993, and $2,800,000 in 1992.
Some employees under collective bargaining agreements are covered by
union-sponsored multi-employer pension plans. Company contributions, generally
based upon hours worked, are in accordance with negotiated labor contracts.
Payments to the plans amounted to $176,000 in 1994, $280,000 in 1993, and
$208,000 in 1992. Information is not readily available for the Company to
determine its share of unfunded vested benefits, if any, under these plans.
11
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
6. OTHER ASSETS
Other assets on the accompanying consolidated balance sheets are shown in the
following table:
August 27, August 28,
1994 1993
- - ----------------------------------------------------------------------------
Customer contracts, covenants and other
assets arising from acquisitions $19,705,000 $17,624,000
Goodwill 10,308,000 7,622,000
Other 1,876,000 1,303,000
- - ----------------------------------------------------------------------------
$31,889,000 $26,549,000
============================================================================
7. ACCRUED LIABILITIES
Accrued liabilities on the accompanying consolidated balance sheets are shown
in the following table:
August 27, August 28,
1994 1993
- - ---------------------------------------------------------------------------
Insurance $11,457,000 $10,146,000
Payroll related 10,236,000 9,674,000
Other 5,572,000 5,405,000
- - ---------------------------------------------------------------------------
$27,265,000 $25,225,000
===========================================================================
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases certain buildings from independent parties. Total rent
expense on all leases was $1,581,000 in 1994, $1,637,000 in 1993 and $1,711,000
in 1992.
Annual minimum lease commitments for all years subsequent to August 27, 1994
are $1,401,000 in 1995, $930,000 in 1996, $602,000 in 1997, $428,000 in 1998 and
$242,000 in 1999.
Contingencies
The Company and its subsidiaries are 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.
As security for certain agreements, the Company had standby irrevocable bank
commercial letters of credit and mortgages of approximately $12,695,000 and
$14,952,000 outstanding as of August 27, 1994 and August 28, 1993, respectively.
12
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
9. COMMON STOCK OPTIONS
The Company had adopted an incentive stock option plan in April, 1983 and
reserved 800,000 shares of common stock for issue under the plan. Options
granted under the plan were at a price of not less than 100% of the fair market
value on the date of grant and expired ten years after the grant date. Options
for 250,000 shares at $3.50 per share and 168,000 shares at $3.64 per share
were granted in 1983 and 1984, respectively. During 1993 the plan expired.
10. SHAREHOLDERS' EQUITY
On November 18, 1993 the Company's Board of Directors declared a two-for-one
stock split, to 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 and per share data in these financial
statements reflect the effect of the two-for-one split.
During 1993 the Company's shareholders voted to amend its Articles of
Organization to increase the number of authorized common shares from
20,000,000 to 30,000,000, and to authorize a new Class B common stock with
20,000,000 authorized shares. The offer to exchange, on a share-for-share
basis, shares of Class B common stock for shares of common stock resulted in
12,627,954 shares of common stock being exchanged for shares of Class B common
stock.
The significant attributes of each type of stock are as follows:
Common stock -- Each share is entitled to one vote and is freely transferable.
Each share of common stock is entitled to a cash dividend equal to 125% of any
cash dividend paid on each share of Class B common stock.
Class B common stock -- Each share is entitled to ten votes and can be
converted to common stock on a share-for-share basis. Until converted to
common stock, however, Class B shares are not freely transferable.
Substantially all shares of Class B common stock are held by officers of the
Company.
13
Report of Independent Public Accountants
To the Board of Directors and Shareholders of UniFirst Corporation:
We have audited the accompanying consolidated balance sheets of UniFirst
Corporation (a Massachusetts corporation) and subsidiaries as of August 27,
1994 and August 28, 1993 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended August 27, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
UniFirst Corporation and subsidiaries as of August 27, 1994 and August 28, 1993
and the results of their operations and their cash flows for each of the three
years in the period ended August 27, 1994, in conformity with generally
accepted accounting principles.
As explained in Note 3 to the consolidated financial statements, effective
September 1, 1991, the Company changed its method of accounting for income
taxes.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 1, 1994
14
Quarterly Financial Data (Unaudited)
UniFirst Corporation and Subsidiaries
The following is a summary of the results of operations for each of the
quarters within the years ended August 27, 1994 and August 28, 1993.
(In thousands, except per share data)
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter
- - -----------------------------------------------------------------------------------
Revenues $78,107 $76,094 $83,106 $80,732
Income before income taxes 9,114 6,089 7,571 7,170
Net income 5,742 3,836 4,770 4,523
Weighted average shares outstanding 20,509 20,509 20,509 20,511
Net income per share $0.28 $0.19 $0.23 $0.22
===================================================================================
First Second Third Fourth
1993 Quarter Quarter Quarter Quarter
- - -----------------------------------------------------------------------------------
Revenues $71,708 $69,637 $74,238 $72,145
Income before income taxes 7,617 5,271 7,861 7,327
Net income 4,951 3,426 5,110 4,202
Weighted average shares outstanding 20,458 20,442 20,494 20,508
Net income per share $0.24 $0.17 $0.25 $0.20
===================================================================================
Common Stock Prices and Dividends Per Share
For the Years Ended August 27, 1994 and August 28, 1993
Price Per Share Dividends Per Share
Class B
1994 High Low Common Stock Common Stock
- - ------------------------------------------------------------------------------
First Quarter $17 1/4 $15 3/8 $0.020 $0.025
Second Quarter 17 3/8 15 1/4 0.020 0.025
Third Quarter 17 14 1/8 0.020 0.025
Fourth Quarter 16 3/8 11 5/8 0.020 0.025
==============================================================================
Price Per Share Dividends Per Share
Class B
1993 High Low Common Stock Common Stock
- - ------------------------------------------------------------------------------
First Quarter $12 7/8 $11 1/8 -- $0.025
Second Quarter 14 3/4 12 1/4 -- 0.025
Third Quarter 14 3/4 13 3/8 $0.020 0.025
Fourth Quarter 16 3/4 13 1/4 0.020 0.025
==============================================================================
The Company's common shares are traded on the New York Stock Exchange (NYSE
Symbol: UNF).
The approximate number of shareholders of record of the Company's common stock
and Class B common stock as of November 1, 1994 were 207 and 22 respectively.
1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated November 1, 1994 incorporated by reference or included
in this Form 10-K, into the Company's previously filed Registration
Statement File No. 33-13377.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 23, 1994
5
1,000
U.S. DOLLARS
YEAR
AUG-27-1994
AUG-29-1993
AUG-27-1994
1.
4,120
0
30,626
582
15,409
80,259
227,566
89,554
250,160
52,302
34,728
2,051
0
0
147,421
250,160
318,039
318,039
285,582
285,582
0
0
2,513
29,944
11,073
18,871
0
0
0
18,871
.92
0
