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
February 25, 1995 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 April 4, 1995 were 7,886,644 and 12,623,964 respectively.
2
PART 1 - FINANCIAL INFORMATION
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(unaudited)
February 25, August 27, February 26,
1995 1994* 1994
- --------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 5,344,000 $ 4,120,000 $ 4,862,000
Receivables 32,040,000 30,044,000 28,378,000
Inventories 17,014,000 15,409,000 12,987,000
Rental merchandise in service 32,409,000 30,577,000 28,101,000
Prepaid expenses 146,000 109,000 106,000
- --------------------------------------------------------------------------------------------------
Total current assets 86,953,000 80,259,000 74,434,000
- --------------------------------------------------------------------------------------------------
Property and equipment:
Land, buildings and leasehold improvements 105,940,000 101,374,000 97,454,000
Machinery and equipment 106,115,000 99,955,000 92,530,000
Motor vehicles 27,151,000 26,237,000 22,564,000
- --------------------------------------------------------------------------------------------------
239,206,000 227,566,000 212,548,000
Less - accumulated depreciation 97,784,000 89,554,000 81,769,000
- --------------------------------------------------------------------------------------------------
141,422,000 138,012,000 130,779,000
- --------------------------------------------------------------------------------------------------
Other assets 37,349,000 31,889,000 29,154,000
- --------------------------------------------------------------------------------------------------
$ 265,724,000 $250,160,000 $ 234,367,000
==================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 6,759,000 $ 6,874,000 $ 6,116,000
Notes payable -- 448,000 428,000
Accounts payable 11,227,000 12,246,000 7,792,000
Accrued liabilities 33,739,000 27,265,000 25,078,000
Accrued and deferred income taxes 4,498,000 5,469,000 4,498,000
- --------------------------------------------------------------------------------------------------
Total current liabilities 56,223,000 52,302,000 43,912,000
- --------------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 37,134,000 34,728,000 35,653,000
Deferred income taxes 14,542,000 13,658,000 13,633,000
- --------------------------------------------------------------------------------------------------
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
7,886,644 shares 788,000 788,000 787,000
Class B Common stock, $.10 par value; 20,000,000
shares authorized; issued and outstanding
12,623,964 shares 1,263,000 1,263,000 1,263,000
Capital surplus 7,042,000 7,042,000 7,008,000
Retained earnings 149,377,000 140,866,000 132,472,000
Cumulative translation adjustment (645,000) (487,000) (361,000)
- --------------------------------------------------------------------------------------------------
Total shareholders' equity 157,825,000 149,472,000 141,169,000
- --------------------------------------------------------------------------------------------------
$ 265,724,000 $250,160,000 $ 234,367,000
==================================================================================================
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(unaudited)
Twenty-six Twenty-six Thirteen Thirteen
weeks ended weeks ended weeks ended weeks ended
February 25, February 26, February 25, February 26,
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------
Revenues $172,443,000 $154,201,000 $ 86,231,000 $ 76,094,000
- ------------------------------------------------------------------------------------------------------------
Costs and expenses:
Operating costs 108,247,000 94,337,000 55,977,000 48,265,000
Selling and administrative expenses 38,756,000 34,804,000 18,880,000 16,708,000
Depreciation and amortization 9,529,000 8,687,000 4,752,000 4,428,000
- ------------------------------------------------------------------------------------------------------------
156,532,000 137,828,000 79,609,000 69,401,000
- ------------------------------------------------------------------------------------------------------------
Income from operations 15,911,000 16,373,000 6,622,000 6,693,000
- ------------------------------------------------------------------------------------------------------------
Interest expense (income):
Interest expense 1,535,000 1,308,000 745,000 674,000
Interest income (101,000) (138,000) (56,000) (70,000)
- ------------------------------------------------------------------------------------------------------------
1,434,000 1,170,000 689,000 604,000
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 14,477,000 15,203,000 5,933,000 6,089,000
Provision for income taxes 5,067,000 5,625,000 2,077,000 2,253,000
- ------------------------------------------------------------------------------------------------------------
Net income $ 9,410,000 $ 9,578,000 $ 3,856,000 $ 3,836,000
============================================================================================================
Weighted average number of shares outstanding 20,510,608 20,508,646 20,510,608 20,508,650
============================================================================================================
Net income per share $0.46 $0.47 $0.19 $0.19
============================================================================================================
The accompanying notes are an integral part of these condensed
financial statements.
4
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Twenty-six Twenty-six
weeks ended weeks ended
February 25, February 26,
1995 1994
- -------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 9,410,000 $ 9,578,000
Adjustments:
Depreciation 7,955,000 7,282,000
Amortization of other assets 1,574,000 1,405,000
Receivables (1,670,000) (3,191,000)
Inventories (1,520,000) (1,439,000)
Rental merchandise in service (955,000) (1,186,000)
Prepaid expenses 81,000 10,000
Accounts payable (1,322,000) (3,245,000)
Accrued liabilities 6,364,000 (194,000)
Accrued and deferred income taxes (1,074,000) (893,000)
Deferred income taxes 861,000 956,000
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 19,704,000 9,083,000
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (6,614,000) (4,625,000)
Capital expenditures (11,149,000) (11,280,000)
Other assets, net (1,668,000) (537,000)
- -------------------------------------------------------------------------------------------------
Net cash used in investing activites (19,431,000) (16,442,000)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in debt 5,825,000 12,516,000
Reduction of debt (3,975,000) (3,052,000)
Cash dividends paid or payable (899,000) (899,000)
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities 951,000 8,565,000
- -------------------------------------------------------------------------------------------------
Net increase in cash 1,224,000 1,206,000
Cash at beginning of period 4,120,000 3,656,000
- -------------------------------------------------------------------------------------------------
Cash at end of period $ 5,344,000 $ 4,862,000
=================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 1,563,000 $ 1,335,000
Income taxes paid $ 5,292,000 $ 5,579,000
=================================================================================================
The accompanying notes are an integral part of these condensed
financial statements.
5
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED FEBRUARY 25, 1995
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 finanacial 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, 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.
5. On November 1, 1994 the Company acquired all of the outstanding stock of
Tennessee Uniform & Towel Service, Inc., a garment rental business located
in Nashville, TN.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE TWENTY-SIX WEEKS ENDED FEBRUARY 25, 1995
RESULTS OF OPERATIONS
- ---------------------
Twenty-six Weeks of Fiscal 1995 compared to Twenty-six Weeks of Fiscal 1994
- ---------------------------------------------------------------------------
Fiscal 1995 revenues for the twenty-six weeks increased $18,242,000 or 11.8%
over the twenty-six weeks in fiscal 1994. This increase can be attributed to
acquisitions (2.6%), price increases (1.1%) and growth from existing operations
(8.1%).
Income from operations as a percentage of revenue decreased to 9.2% in fiscal
1995 from 10.6% for the fiscal 1994 period. The primary reason for the
decrease is the impact of higher uniform merchandise costs. Merchandise cost as
a percent of revenues increased 1.4% over the prior year. Additionally, in the
first half of the year the Company experienced comparatively higher expenses in
the operation of its distribution centers and in the new corporate-owned life
insurance program. Offsetting these increases were improvements in employee
related costs, primarily workers' compensation and health insurance.
Net interest expense (interest expense less interest income) was $1,434,000
in fiscal 1995 as compared to $1,170,000 in fiscal 1994. The increase is
attributable to increased debt levels and higher interest rates in fiscal 1995.
The provision for income taxes for the current period was 35.0% as compared
to 37.0% for the corresponding 1994 period. The decrease in 1995 is due
primarily to the favorable impact of a corporate-owned life insurance program
and proportionally more tax-exempt income from Puerto Rico.
Thirteen Weeks ended February 25, 1995 compared to Thirteen Weeks ended
- -----------------------------------------------------------------------
February 26, 1994
- -----------------
Fiscal 1995 second quarter revenues increased $10,137,000 or 13.3% over the
fiscal 1994 second quarter. This increase can be attributed to acquisitions
(2.8%), price increases (1.1%) and growth from existing operations (9.4%).
Income from operations as a percentage of revenue decreased to 7.7% in fiscal
1995 from 8.8% for the fiscal 1994 period. The primary reason for the decrease
is the result of higher uniform merchandise costs, with merchandise cost as a
percent of revenues increasing 1.4% over the prior year's second quarter. The
nuclear garment services business showed improvement in a quarter to quarter
comparison, and depreciation expense as a percent of revenues improved .3%
compared to the prior year period.
Net interest expense (interest expense less interest income) was $689,000
in fiscal 1995 as compared to $604,000 in fiscal 1994. The increase is
attributable to increased debt levels and higher interest rates in fiscal 1995.
The provision for income taxes for the current period was 35.0% as compared
to 37.0% for the corresponding 1994 period. The decrease in 1995 is due
primarily to the favorable impact of a corporate-owned life insurance program
and proportionally more tax-exempt income from Puerto Rico.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)
FOR THE TWENTY-SIX WEEKS ENDED FEBRUARY 25, 1995
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the twenty-six weeks ended February 25, 1995 net cash provided by
operating activities, $19,704,000, and additional borrowings of $5,825,000 were
primarily used for capital expenditures, $11,149,000, acquisition of
businesses, $6,614,000, debt repayment, $3,975,000 and dividends, $899,000.
Shareholders' equity as a precent of total capital has increased from 71.1% at
August 29, 1992 to 78.2% at February 25, 1995, indicating the improvement in
the overall strength of the Company's balance sheet.
The Company had $5,344,000 in cash and $26,250,000 available on its $50,000,000
line of credit as of February 25, 1995. 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.
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 27, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
Registrant's Annual Meeting of Shareholders was held on January 10, 1995.
Cynthia Croatti Inello and Reynold L. Hoover were elected and reelected,
respectively, to the Board of Directors. With respect to Ms. Inello, 6,724,040
shares of Common Stock and 12,625,964 shares of Class B Common Stock were
voted for her election and 17,240 shares of Common Stock were voted against
her election. With respect to Mr. Hoover, 6,722,520 shares of Common Stock
were voted for his election and 18,760 shares Common Stock were voted against
his election.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(27) Financial Data Schedule
(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: April 11, 1995
John B. Bartlett
---------------------------
John B. Bartlett
Senior Vice President
and Chief Financial Officer
5
1,000
U.S. DOLLARS
6-MOS
AUG-26-1995
AUG-28-1994
FEB-25-1995
1.
5,344
0
32,540
500
17,014
86,953
239,206
97,784
265,724
56,223
37,134
2,051
0
0
155,774
265,724
172,443
172,443
156,532
156,532
0
0
1,434
14,477
5,067
9,410
0
0
0
9,410
0.46
0
