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 31, 1996
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 18, 1996 were 7,888,864 and 12,621,744,
respectively, and the aggregate market value of these shares held by
non-affiliates of the Company on said date was $204,104,708 (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 1996 Annual Report to Shareholders and the
Company's Proxy Statement for its 1997 Annual Meeting of Shareholders (which
will be filed with the Securities and Exchange Commission within 120 days after
the close of the 1996 fiscal year) are incorporated by reference into Parts II,
III and IV hereof.
2
Page 2
ITEM 1. BUSINESS
- -----------------
UniFirst is a leading company in the garment rental industry. The Company's
services consist principally of manufacturing, renting, cleaning, and delivering
a variety of industrial employment garments on a periodic basis, usually weekly.
The Company also decontaminates and cleans, in separate facilities, 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 as
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 personalized
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 five years. The Company services over 100,000 customer locations
in 44 states and Canada from 109 service locations and distribution centers. For
fiscal 1994, 1995 and 1996, the Company's garment rental operations produced
approximately 66%, 67% and 67%, respectively, of its revenues, and non-garment
rental items and sales accounted for another 25%, 25% and 26% of its revenues in
each of those years, with no single customer accounting for more than 1% of
total revenues in any year.
3
Page 3
The Company manufactures work pants and shirts for its garment rental
operations in its plants in Luquillo, Puerto Rico and Cave City, Arkansas,
respectively. In 1996 the Company began manufacturing other items, primarily
jackets, at a third plant in Wilburton, Oklahoma. These plants produced
approximately 53% of all employment garments which the Company placed in service
during fiscal 1996. In 1995, the Company's manufacturing level was
approximately 49%.
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 government agencies, research and
development laboratories and utilities operating nuclear reactors. The Company
operates 11 decontamination facilities, located in Massachusetts, New Mexico,
California, Washington, Hawaii, Pennsylvania, South Carolina, Virginia, Georgia,
Illinois and the Netherlands. For fiscal 1994, 1995 and 1996, the Company's
nuclear garment services business produced approximately 9%, 8% and 7%,
respectively, of its revenues.
MARKETING
The Company markets its services to potential customers through
approximately 265 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 mail, by
telephone and in-person. Sales representatives develop their own appointments
through the use of an extensive proprietary database of pre-screened and
qualified business prospects.
The Company believes that customer service is the most important element in
developing and maintaining its market position. As of August 31, 1996, existing
accounts were serviced by approximately 850 route salespersons and 470 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.
4
Page 4
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 53%
of all garments which it placed in service during fiscal 1996, 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 6,600 persons, about 6% of whom are
represented by unions pursuant to 6 separate collective bargaining agreements.
The Company considers its employee relations to be satisfactory.
5
Page 5
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Aldo A. Croatti 78 Chairman of the Board
Ronald D. Croatti 53 Vice Chairman of the Board,
President and Chief Executive
Officer
Robert L. Croatti 60 Executive Vice President
John B. Bartlett 55 Senior Vice President and
Chief Financial Officer
Cynthia Croatti 41 Treasurer
Bruce P. Boynton 48 Vice President,
Canadian Operations
Dennis G. Assad 51 Vice President,
Sales and Marketing
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 and Chief Executive
Officer for more than the past five years and President since August 31, 1995.
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 has been Treasurer for more than the past five years.
Bruce P. Boynton has been Vice President, Canadian Operations for more than the
past five years.
Dennis G. Assad has been Vice President, Sales and Marketing since August 31,
1995. Prior to that he was a Regional General Manager of the Company for more
than five years.
Ronald D. Croatti, Robert L. Croatti and Cynthia Croatti are a son, nephew and
daughter, respectively, of Aldo A. Croatti.
6
Page 6
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 or results of operations as a result thereof.
7
Page 7
ITEM 2. PROPERTIES
- -------------------
At August 31, 1996 the Company owned or occupied 123 facilities containing
an aggregate of approximately 3.1 million square feet located in the United
States, Canada, Puerto Rico and the Netherlands. The Company owns 71 of these
facilities containing approximately 2.4 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
-------- -----------------------
Executive Office & Distribution Center
Wilmington, MA 132,000
Rental Garment Servicing Facilities
Pittsburgh, PA 96,000
Ontario, CA 90,000
Springfield, MA 68,000
Washington, DC 57,000
Dallas, TX 55,000
Nashua, NH 54,000
Stratford, CT 54,000
Miami, FL 50,000
Boston, MA 48,000
Houston, TX 48,000
Corpus Christi, TX 46,000
Tampa, FL 46,000
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
Ocala, FL 38,000
Los Angeles, CA 37,000
Lebanon, NH 36,000
Uvalde, TX 36,000
Vancouver, British Columbia, Canada 35,000
Charlotte, NC 34,000
Philadelphia, PA 34,000
San Antonio, TX 34,000
Albuquerque, NM 33,000
Amarillo, TX 33,000
Norfolk, VA 33,000
Cincinnati, OH 32,000
McAllen, TX 32,000
Baltimore, MD 30,000
Bangor, ME 30,000
8
Page 8
Garment Manufacturing Facilities
Cave City, AR 62,000
Luquillo, PR 44,000
Distribution Center
Macon, GA 39,000
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 1,500 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
9
Page 9
PART II
-------
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 1996 Annual
Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
See the section entitled "Eleven Year Financial Summary" which is
incorporated herein by reference, as part of the Company's 1996 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 1996 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 1996 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 1997 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 1997
Annual Meeting of Shareholders.
10
Page 10
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 1997 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 1997 Annual
Meeting of Shareholders.
PART IV
-------
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 1996 Annual Report to
Shareholders.
Consolidated balance sheets as of August 31, 1996 and August 26, 1995
Consolidated statements of income for each of the three years in the period
ended August 31, 1996
Consolidated statements of shareholders' equity for each of the three years in
the period ended August 31, 1996
Consolidated statements of cash flows for each of the three years in the period
ended August 31, 1996
Notes to consolidated financial statements
Report of independent public accountants
11
Page 11
The following additional schedules are filed herewith:
Report of independent public accountants on supplemental schedule to the
consolidated financial statements.
Schedule II -
Valuation and qualifying accounts and reserves for each of the three
years in the period ended August 31, 1996.
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 in the accompanying Exhibit Index are
filed as part of this report.
(b) During the three months ended August 31, 1996 the Company did not file
any reports on Form 8-K with the Securities and Exchange Commission.
12
Page 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 27, 1996
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 27, 1996
- -----------------------
Aldo A. Croatti
Principal Executive
Ronald D. Croatti Officer and Director November 27, 1996
- -----------------------
Ronald D. Croatti
Principal Financial
Officer and Principal
John B. Bartlett Accounting Officer November 27, 1996
- -----------------------
John B. Bartlett
Cynthia Croatti Director November 27, 1996
- -----------------------
Cynthia Croatti
Donald J. Evans Director November 27, 1996
- -----------------------
Donald J. Evans
Reynold L. Hoover Director November 27, 1996
- -----------------------
Reynold L. Hoover
Albert Cohen Director November 27, 1996
- -----------------------
Albert Cohen
13
Page 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL
SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Shareholders of 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 4, 1996. Our audit was made for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The supplemental schedule to the consolidated financial
statements listed as Item 14(a)(2) in this Form 10-K is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This supplemental schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states, 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 4, 1996
14
Page 14
UNIFIRST CORPORATION AND SUBSIDIARIES
- -------------------------------------
SCHEDULE II
- -----------
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH
- -------------------------------------------------------
OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 31, 1996
- ------------------------------------------------------
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 31, 1996
- ----------------------------------
Allowance for
doubtful accounts $734,000 $1,850,000 $(1,741,000) $843,000
=========================================================
For the year ended August 26, 1995
- ----------------------------------
Allowance for
doubtful accounts $582,000 $1,335,000 $(1,183,000) $734,000
=========================================================
For the year ended August 27, 1994
- ----------------------------------
Allowance for
doubtful accounts $440,000 $1,179,000 $(1,037,000) $582,000
=========================================================
15
Page 15
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 4.3 to the Company's Registration Statement on Form S-8 (number
33-60781) -- and the Amendment dated June 27, 1995 filed herewith.
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.
10-D UniFirst Corporation 1996 Stock Incentive Plan filed herewith.
13 The Company's 1996 Annual Report to Shareholders (filed herewith to the
extent expressly incorporated by reference herein).
22 List of Subsidiaries
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
1
Exhibit 10-A
AMENDMENT
UNIFIRST CORPORATION PROFIT SHARING PLAN
- --------------------------------------------------------------------------------
WHEREAS, UniFirst Corporation ("UniFirst") sponsors the UniFirst
Corporation Profit Sharing Plan (the "Plan"); and
WHEREAS, assets of the Plan are held in two trusts, one of which is
designated as the Participant-Directed trust and the other as the
Trustee-Managed Trust; and
WHEREAS, the Trustees of the Trustee-Managed Trust (who serve as the Plan
Administrator and are hereafter referred to as the "Plan Administrator") are
empowered to direct the special Trustee of the Participant-Directed Trust as to
the way in which UniFirst Common Stock ("UniFirst Common Stock") held in the
Participant-Directed Trust will be voted; and
WHEREAS, the Plan provides in [Section]10A.11 that the Plan Administrator
may establish procedures under which participants and beneficiaries (hereafter
collectively referred to as "Participants") may give directions as to the manner
in which UniFirst Common Stock held in their accounts in the
Participant-Directed Trust will be voted; and
WHEREAS, on or about July 1, 1995, the Plan will permit Participants to
purchase shares of UniFirst Common Stock for their accounts in the
Participant-Directed Trust; and
WHEREAS, the Plan Administrator wishes to adopt an amendment establishing
procedures for Participant voting instructions with respect to such securities.
NOW THEREFORE, the following [Section]10A.12 is added to the Plan,
effective July 1, 1995:
10A.12 PARTICIPANT DIRECTION.
1. The following procedure is implemented pursuant to [Section]10A.11.
The procedure applies with respect to all shares of Unifirst Common Stock held
by the Participant-Directed Trust during such times as the shares are considered
registration-type securities within the meaning of Code [Section]409(e)(2).
2. Whenever an issue arises which calls for a vote of holders of Unifirst
Common Stock, each Participant shall be entitled to direct the manner in which
the shares allocated to his or her account in the Participant-Directed Trust are
to be voted.
1
2
3. It is intended that the voting procedure be confidential and that the Plan
Administrator, and any and all other persons, not be informed of the names and
voting instructions of individual Participants (such information to be kept
specifically, but without limitation, from officers, directors, or other
employees at UniFirst) and that the Plan Administrator may only have access to
the overall results of any vote, with specific information as to the number of
affirmative, negative and abstaining votes on any issue. To this end, the Plan
Administrator may employ agents (including the Trustee of the
Participant-Directed Trust or an agent or affiliate of it) to solicit proxies
from Participants, to maintain the results on a confidential basis, and to
communicate such results on a confidential basis so that the UniFirst Common
Shares in the Participant-Directed Trust may be voted by the Trustee of that
Trust accordingly.
4. Participant directions must be provided on proxy cards properly returnable
to the designated confidential agent of the Plan Administrator appointed for
that purpose. For shares for which no proxy statement is returned by a
Participant, it will be deemed that the Participant has directed that the shares
are not to be voted.
5. To the extent that the Trustee of the Trustee-Directed Trust votes in
accordance with the Participant votes tabulated by the agent of the Plan
Administrator, it shall be fully protected and shall be deemed to have acted in
accordance with the voting instructions of the Plan Administrator.
6. In the event of a tender offer for the Shares of UniFirst Common Stock,
Participants shall be offered comparable confidential rights to accept or reject
the tender offer.
IN WITNESS WHEREOF, this Amendment has been executed on the 27th day of
June, 1995.
For the Trustees of
the Trustee-Managed Trust:
Ronald D. Croatti
--------------------------
Ronald D. Croatti, Trustee
2
1
EXHIBIT 10-D
UNIFIRST CORPORATION
1996 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS.
The name of the plan is the UniFirst Corporation 1996 Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to encourage and enable the personnel
of UniFirst Corporation (the "Company") and its Subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business, to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards", except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Unrestricted Stock Awards and Performance Share Awards.
"Award Agreement" means the agreement executed and delivered by the
Company and the recipient of an Award.
"Board" means the Board of Directors of the Company.
"Cause" means for purposes of the Plan a determination of the Board
that the employee should be dismissed as a result of (i) serious and
willful misconduct that is injurious to the Company; (ii) the employee's
conviction of (whether or not such conviction is subject to appeal), or
entry of a plea of guilty or nolo contendere to, any crime or offense
involving fraud, personal dishonesty or moral turpitude or which
constitutes a felony in the jurisdiction involved; or (iii) the employee's
continuing repeated willful failure or refusal to perform such employee's
duties to the Company.
"Change of Control" is defined in Section 14.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means a Committee of the Board referred to in Section 2 if
one shall have been appointed to administer the Plan; otherwise "Committee"
means the Board.
"Disability" means disability as set forth in Section 22(e)(3) of the
Code.
"Effective Date" is defined in Section 16.
"Fair Market Value" on any given date means the last sale price at
which Stock is traded on such date or, if no Stock is traded on such date,
the most recent date on which Stock was traded, as reflected on the New
York Stock Exchange or, if applicable, any other national stock exchange on
which the Stock is traded.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
1
2
"Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries in accordance with the retirement policies of
the Company and its Subsidiaries then in effect.
"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Performance Share Award" means an Award granted pursuant to Section
9(a).
"Restricted Stock Award" means an Award granted pursuant to Section
7(a).
"Stock" means the Common Stock, $0.10 par value, of the Company,
subject to adjustment pursuant to Section 3.
"Stock Appreciation Right" means an Award granted pursuant to Section
6(a).
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning
with the Company if each of the corporations or entities (other than the
last corporation or entity in the unbroken chain) owns stock or other
interests possessing 50% or more of the total combined voting power of all
classes of stock or other interests in one of the other corporations or
entities in the chain.
"Unrestricted Stock Award" means an Award granted pursuant to Section
8.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS, ETC.
(a) Committee. The Plan shall be administered by the Board, unless the
Board shall have appointed the Compensation Committee to administer the Plan. It
is presently contemplated that the Board, and not the Compensation Committee,
will administer the Plan.
(b) Powers of Committee. The Committee shall have the authority to grant
Awards consistent with the terms of the Plan, including the authority at any
time:
(i) to select the officers and other employees of the Company and its
Subsidiaries to whom Awards may from time to time be granted (collectively
the "participants" and individually a "participant");
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock, Unrestricted Stock and Performance Shares, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and
participants, and to approve the form of Award Agreements;
(v) to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the participant and whether and
to what extent the Company shall pay or credit amounts equal to interest
(at rates determined by the Committee) or dividends or deemed dividends on
such deferrals;
(vi) to accelerate the exercisability or vesting of all or any portion
of any Award;
(vii) subject to the provisions of Section 5(a)(ii), to extend the
period in which Stock Options may be exercised; and
2
3
(viii) to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as it
shall deem advisable; to interpret the terms and provisions of the Plan and
any Award (including related Award Agreements); to make all determinations
it deems advisable for the administration of the Plan; to decide all
disputes arising in connection with the Plan; and to otherwise supervise
the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION.
(a) Shares Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 150,000. For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan. Subject to such overall
limitation, shares may be issued up to such maximum number pursuant to any type
or types of Award, including Incentive Stock Options. Shares issued under the
Plan may be authorized but unissued shares or shares reacquired by the Company.
Upon the exercise of a Stock Appreciation Right settled in stock, the right to
purchase an equal number of shares of Stock covered by a related Stock Option,
if any, shall be deemed to have been surrendered and will no longer be
exercisable, and said number of shares shall no longer be available under the
Plan.
(b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, the
Committee shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options or Stock Appreciation Rights that can be granted to any one
individual participant, (iii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, and (iv) the price for
each share subject to any then outstanding Stock Options and Stock Appreciation
Rights under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of Stock Options and Stock Appreciation
Rights) as to which such Stock Options and Stock Appreciation Rights remain
exercisable. The adjustment by the Committee shall be final, binding and
conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Committee in its discretion may make
a cash payment in lieu of fractional shares.
(c) Mergers. Upon consummation of a consolidation or merger or sale of
all or substantially all of the assets of the Company in which outstanding
shares of Stock are exchanged for securities, cash or other property of an
unrelated corporation or business entity or in the event of a liquidation of the
Company (in each case, a "Transaction"), the Board, or the board of directors of
any corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding Stock Options
and Stock Appreciation Rights: (i) provide that such Stock Options and Stock
Appreciation Rights shall be assumed or equivalent options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon
written notice to the optionees, provide that all unexercised Stock Options and
Stock Appreciation Rights will terminate immediately prior to the consummation
of the Transaction unless exercised by the optionee within a specified period
following the date of such notice, and/or (iii) in the event of a business
combination under the terms of which holders of the Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the business combination, make or
3
4
provide for a cash payment equal to the difference between (A) the value (as
determined by the Committee) of the consideration payable per share of Stock
pursuant to the business combination (the "Merger Price") times the number of
shares of Stock subject to such outstanding Stock Options and Stock Appreciation
Rights (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such outstanding Stock
Options and Stock Appreciation Rights in exchange for the termination of such
Stock Options and Stock Appreciation Rights. In the event Stock Options and
Stock Appreciation Rights will terminate upon the consummation of the
Transaction, each optionee shall be permitted, within a specified period
determined by the Committee, to exercise all non-vested Stock Options and Stock
Appreciation Rights, subject to the consummation of the Transaction.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
SECTION 4. ELIGIBILITY.
Participants in the Plan may be such officers and other employees of the
Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries and who
are selected from time to time by the Committee, in its sole discretion.
SECTION 5. STOCK OPTIONS.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. To the extent that any option does not qualify
as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after November 5,
2006.
(a) Stock Options Granted to Officers and Other Employees. The Committee,
in its discretion, may grant Stock Options to officers and other employees of
the Company or any Subsidiary. Stock Options granted to such participants
pursuant to this Section 6(a) shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(i) Exercise Price. The per share exercise price of a Stock Option
shall be determined by the Committee at the time of grant but shall be, in
the case of Incentive Stock Options, not less than 100% of Fair Market
Value on the date of grant. If a participant owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such participant, the option price shall be not less
than 110% of Fair Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Incentive Stock Option shall be exercisable more than
ten years after the date the option is granted. If a participant owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or
4
5
parent corporation and an Incentive Stock Option is granted to such
participant, the term of such option shall be no more than five years from
the date of grant.
(iii) Exercisability; Rights of a Shareholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. An optionee shall have the rights of a shareholder only as to shares
acquired upon the exercise of a Stock Option and not as to unexercised
Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan, if permitted by the Committee, in
its discretion and that have been beneficially owned by the optionee for
at least six months. Such surrendered shares shall be valued at Fair
Market Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the option purchase price; provided that in the
event the optionee chooses to pay the option purchase price as so
provided, the optionee and the broker shall comply with such procedures
and enter into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection. The delivery of
certificates representing shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(v) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Stock Options shall be exercisable, during
the optionee's lifetime, only by the optionee. Notwithstanding the
foregoing, the Committee may permit the optionee to transfer, without
consideration for the transfer, his Non-Qualified Stock Options to members,
of his immediate family, or to trusts for the benefit of such family
members, and to partnerships in which such family members are the only
partners, provided that the transferee agrees in writing with the Company
to be bound by all of the terms and conditions of this Plan and the
applicable option agreement.
(vi) Termination by Death. If any optionee's employment by the
Company and its Subsidiaries terminates by reason of death, the Stock
Option may thereafter be exercised, to the extent exercisable at the date
of death, by the legal representative or legatee of the optionee, for a
period of one year (or such shorter period as the Committee shall specify
at the time of grant or such longer period as the Committee shall specify
at any time) from the date of death, or until the expiration of the stated
term of the Option, if earlier.
(vii) Termination by Reason of Disability or Normal Retirement.
(A) Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries has terminated by reason of Disability may
thereafter be exercised, to the extent it was exercisable at the time of
such termination, for a period of one year (or such shorter period as
the
5
6
Committee shall specify at the time of grant or such longer period as
the Committee shall specify at any time) from the date of such
termination of employment, or until the expiration of the stated term of
the Option, if earlier.
(B) (1) Any Non-Qualified Stock Option held by an optionee whose
employment by the Company and its Subsidiaries has terminated by reason
of Normal Retirement may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of one year
(or such shorter period as the Committee shall specify at the time of
grant or such longer period as the Committee shall specify at any time)
from the date of such termination of employment, or until the expiration
of the stated term of the Option, if earlier.
(2) Any Incentive Stock Option held by an optionee whose employment
by the Company and its Subsidiaries has terminated by reason of Normal
Retirement may thereafter be exercised, to the extent it was exercisable
at the time of such termination, for a period of three months (or such
shorter period as the Committee shall specify at the time of grant or
such longer period as the Committee shall specify at any time) from the
date of such termination of employment, or until the expiration of the
stated term of the Option, if earlier.
(C) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability or Normal Retirement.
(D) Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during a period provided in this Section
5(a)(vii) for the exercise of a Non-Qualified Stock Option (or during
the final year of such period if longer than one year), shall extend
such period for one year following death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(viii) Termination for Cause. If any optionee's employment by the
Company and its Subsidiaries has been terminated for Cause, any Stock
Option held by such optionee shall immediately terminate and be of no
further force and effect; provided, however, that the Committee may, in its
sole discretion, provide that such stock option can be exercised for a
period of up to three months from the date of termination of employment or
until the expiration of the stated term of the Option, if earlier.
(ix) Other Termination. Unless otherwise determined by the
Committee, if an optionee's employment by the Company and its Subsidiaries
terminates for any reason other than death, Disability, Normal Retirement
or for Cause, any Stock Option held by such optionee may thereafter be
exercised, to the extent it was exercisable on the date of termination of
employment, for a period of three months (or such shorter period as the
Committee shall specify at the time of grant or such longer period as the
Committee shall specify at any time) from the date of termination of
employment or until the expiration of the stated term of the Option, if
earlier.
(x) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options granted under this Plan
and any other plan of the Company or its Subsidiaries become exercisable
for the first time by an optionee during any calendar year shall not exceed
$100,000.
(xi) No Restrictions on Shares Issued Upon Exercise. Shares of Stock
issued upon exercise of a Stock Option shall be free of all restrictions
under the Plan, except as otherwise provided in this Plan.
(b) Reload Options. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an Option and paying the
6
7
purchase price by the delivery of a number of shares of Stock in accordance with
Section 5(a)(iv)(B) hereof would automatically be granted an additional Option
(with an exercise price equal to the Fair Market Value of the Stock on the date
the additional Option is granted and with the same expiration date as the
original Option being exercised, and with such other terms as the Committee may
provide) to purchase that number of shares of Stock equal to the number
delivered to pay the purchase price in connection with the exercise of the
original Option.
SECTION 6. STOCK APPRECIATION RIGHTS; DISCRETIONARY PAYMENTS.
(a) Nature of Stock Appreciation Right. A Stock Appreciation Right is an
Award entitling the recipient to receive an amount in cash or shares of Stock
(or in a form of payment permitted under Section 6(e) below) or a combination
thereof having a value equal to (or if the Committee shall so determine at time
of grant, less than) the excess of the Fair Market Value of a share of Stock on
the date of exercise over the exercise price per share set by the Committee at
the time of grant (or over the option exercise price per share, if the Stock
Appreciation Right was granted in tandem with a Stock Option) multiplied by the
number of shares with respect to which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment.
(b) Grant and Exercise of Stock Appreciation Rights. The Committee, in
its discretion, may grant Stock Appreciation Rights to any officers or other
employees of the Company or any Subsidiary in tandem with, or independently of,
any Stock Option granted pursuant to Section 5(a) of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, at the
Committee's discretion, a Stock Appreciation Right granted with respect to less
than the full number of shares covered by a related Stock Option shall only so
terminate if and to the extent that the number of shares covered by the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by such Stock Appreciation Right.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Stock Options
shall be exercisable at such time or times and to the extent that the
related Stock Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Stock Option shall be surrendered.
(iii) Stock Appreciation Rights granted in tandem with a Stock Option
shall be transferable only when and to the extent that the underlying Stock
Option would be transferable. Stock Appreciation Rights not granted in
tandem with a Stock Option shall not be transferable otherwise than by will
or the laws of descent or distribution. All Stock Appreciation Rights shall
be exercisable during the participant's lifetime only by the participant or
the participant's legal representative.
(d) No Restrictions on Shares Issued Upon Exercise. Shares of Stock
issued upon exercise of a Stock Appreciation Right shall be free of all
restrictions under the Plan, except as otherwise provided in this Plan.
7
8
SECTION 7. RESTRICTED STOCK AWARDS.
(a) Nature of Restricted Stock Award. The Committee, in its discretion,
may grant Restricted Stock Awards to any officers or other employees of the
Company or any Subsidiary. A Restricted Stock Award is an Award entitling the
recipient to acquire, at no cost or for a purchase price determined by the
Committee, shares of Stock subject to such restrictions and conditions as the
Committee may determine at the time of grant ("Restricted Stock"). Conditions
may be based on continuing employment and/or achievement of pre-established
performance goals and objectives. With the consent of an employee, a Restricted
Stock Award may be granted to such employee by the Committee in lieu of any
compensation otherwise due to such employee.
(b) Award Agreement. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the award date by making payment to the Company
by certified or bank check or other instrument or form of payment acceptable to
the Committee in an amount equal to the specified purchase price, if any, of the
shares covered by the Award and by executing and delivering to the Company a
Restricted Stock Award Agreement in such form as the Committee shall determine.
(c) Rights as a Shareholder. Upon complying with Section 7(b) above, such
participant shall have all the rights of a shareholder with respect to the
Restricted Stock including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 7 and subject to such other conditions contained in
the Restricted Stock Award Agreement. Unless the Committee shall otherwise
determine, certificates evidencing shares of Restricted Stock shall remain in
the possession of the Company until such shares are vested as provided in
Section 7(e) below.
(d) Restrictions. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries for any reason (including death, Disability, Normal
Retirement and for Cause), the Company shall have the right, at the discretion
of the Committee, to repurchase shares of Restricted Stock with respect to which
conditions have not lapsed at their purchase price, or to require forfeiture of
such shares to the Company if acquired at no cost, from the participant or the
participant's legal representative. The Company must exercise such right of
repurchase or forfeiture not later than the 90th day following such termination
of employment (unless otherwise specified in the Restricted Stock Award
Agreement).
(e) Vesting of Restricted Stock. The Committee at the time of grant shall
specify the date or dates and/or the attainment of performance goals, objectives
and other conditions on which the non-transferability of the Restricted Stock
and the Company's right of repurchase or forfeiture shall lapse. Subsequent to
such date or dates and/or the attainment of such pre-established goals,
objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed vested. The
Committee at any time may accelerate such date or dates and otherwise waive or,
subject to Section 12, amend any conditions of the Award.
(f) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
Award Agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
8
9
SECTION 8. UNRESTRICTED STOCK AWARDS.
(a) Grant or Sale of Unrestricted Stock. The Committee may, in its
discretion, grant (or sell at a purchase price determined by the Committee) to
any officers or other employees of the Company or any Subsidiary shares of Stock
free of any restrictions under the Plan ("Unrestricted Stock").
(b) Restrictions on Transfers. The right to receive Unrestricted Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered, other
than by will or the laws of descent and distribution.
SECTION 9. PERFORMANCE SHARE AWARDS.
(a) Nature of Performance Shares. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee, in its discretion, may grant
Performance Share Awards to any officers or other employees of the Company or
any Subsidiary, including those who qualify for awards under other performance
plans of the Company. The Committee shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to such Award; provided, however,
that the Committee may rely on the performance goals and other standards
applicable to other performance-based plans of the Company in setting the
standards for Performance Share Awards under the Plan. The Committee may make
Performance Share Awards independently of or in connection with the granting of
any other Award under the Plan.
(b) Restrictions on Transfer. Performance Share Awards and all rights
with respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) Rights as a Shareholder. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in the performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
any time prior to termination of employment, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment by the Company and its Subsidiaries for any reason
(including death, Disability, Normal Retirement and for Cause or without Cause).
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment by the Company and its Subsidiaries, the Committee may
in its sole discretion accelerate, waive or, subject to Section 12, amend any or
all of the goals, restrictions or conditions imposed under any Performance Share
Award.
SECTION 10. TAX WITHHOLDING.
(a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, all Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Shares. Subject to the approval of the Committee, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from
9
10
shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due, or (ii) transferring to the Company
shares of Stock owned by the participant with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due.
SECTION 11. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another;
(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
SECTION 12. AMENDMENTS AND TERMINATION.
The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. If and to the extent determined
by the Committee to be required by the Code to ensure that Incentive Stock
Options granted under the Plan are qualified under Section 422 of the Code, Plan
amendments shall be subject to approval by the Company stockholders entitled to
vote at a meeting of stockholders.
SECTION 13. STATUS OF PLAN.
With respect to the portion of any Award which has not been exercised and
any payments in cash, stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
SECTION 14. CHANGE OF CONTROL PROVISIONS.
Upon the occurrence of a Change of Control as defined in this Section 14:
(a) Each Stock Option, Stock Appreciation Right and Performance Share
Award shall automatically become fully exercisable, unless the Committee
shall otherwise expressly provide at the time of grant.
(b) Restrictions and conditions on Awards of Restricted Stock shall
automatically be deemed waived, and the recipients of such Awards shall
become entitled to receipt of the Stock subject to such Awards.
(c) To the extent Section 14(a) hereof is not applicable to any Stock
Options, Stock Appreciation Rights or Performance Share Awards, the
Committee may at any time prior to or after a Change of Control accelerate
the exercisability of any Stock Options, Stock Appreciation Rights and
Performance Share Awards to the extent it shall in its sole discretion
determine.
10
11
(d) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) persons who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of
the Company subsequent to the date hereof whose election or nomination
for election was approved by a vote of at least a majority of the
Incumbent Directors shall, for purposes of this Plan, be considered an
Incumbent Director; or
(ii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 50% of the
voting stock of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C)
any plan or proposal for the liquidation or dissolution of the Company;
SECTION 15. GENERAL PROVISIONS.
(a) No Distribution, Compliance with Legal Requirements. The Committee
may require each person acquiring shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. No shares of Stock shall be issued
pursuant to an Award until all applicable securities laws and other legal and
stock exchange requirements have been satisfied. The Committee may require the
placing of such stop-orders and restrictive legends on certificates for Stock
and Awards as it deems appropriate.
(b) Delivery of Stock Certificates. Delivery of Stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally applicable or applicable
only in specific cases. Neither the adoption of the Plan nor the grant of any
Award to any employee shall confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon approval by a majority of votes cast
by the holders of the shares of the Common Stock and Class B Common Stock of the
Company, voting together as a single class, at a meeting of stockholders at
which a quorum is present. Subject to such approval by the stockholders, and to
the requirement that no Stock may be issued hereunder prior to such approval,
Stock Options and other Awards may be granted hereunder on and after adoption of
the Plan by the Board.
SECTION 17. GOVERNING LAW.
This Plan shall be governed by Massachusetts law except to the extent such
law is preempted by federal law.
11
1
Exhibit 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations
UniFirst Corporation and Subsidiaries
Fiscal 1996 Compared with Fiscal 1995
In 1996 revenues increased $36.8 million or 10.4% over 1995. This increase can
be attributed to an extra week of revenue (1.9%), acquisitions (1.7%), price
increases (1.0%) and growth from existing operations (5.8%).
Income from operations increased to $40.9 million in 1996 from $34.5 million in
1995. As a percent of revenues, income from operations increased to 10.4% in
1996 from 9.7% in 1995. The main reason for the increase is improved profit
margins in the Company's conventional uniform rental business, principally
attributable to lower uniform merchandise costs. The Company also achieved
comparative improvements from a restructuring of its service management and
teleresources operations and contribution from its Canadian operations improved.
Offsetting these advances were lower contributions from the Company's nuclear
garment services business.
During 1996, net interest expense (interest expense less interest income) was
$2.4 million as compared to $2.8 million in 1995. The decrease is attributable
to lower average debt levels and lower interest rates during fiscal 1996.
The Company's effective income tax rate was 36.0% in 1996 and 35.0% in 1995. The
increase is due primarily to reduced benefits from corporate-owned life
insurance and higher state income taxes.
Fiscal 1995 Compared with Fiscal 1994
In 1995 revenues increased $37.0 million or 11.6% over 1994. This increase can
be attributed to acquisitions (2.3%), price increases (1.0%) and growth from
existing operations (8.3%).
Income from operations increased to $34.5 million in 1995 from $32.5 million in
1994. As a percent of revenues, income from operations decreased to 9.7% in 1995
from 10.2% in 1994. The primary reason for the decrease is the impact of higher
uniform merchandise costs, which as a percent of revenues increased .8% over the
prior year. This increase is due to additional new garments placed in service
for new customers as well as higher replacement costs for existing customers.
The Company also experienced comparatively higher expenses in the operation of
its distribution centers and in the corporate-owned life insurance program
costs, offset in part by improvements in employee related costs, primarily
health insurance. Also, depreciation expense as a percent of revenues improved
.2% compared to the prior year, and the Company's operating margins in Canada
and in the nuclear garment services business showed improvement.
During 1995, net interest expense (interest expense less interest income) was
$2.8 million as compared to $2.5 million in 1994. The increase is attributable
to higher average debt levels during fiscal 1995.
The Company's effective income tax rate was 35.0% in 1995 and 37.0% in 1994. The
decrease is due primarily to the favorable impact of a corporate-owned life
insurance program.
1
2
Management's Discussion and Analysis of Financial
Condition and Results of Operations -- (Continued)
Unifirst Corporation and Subsidiaries
Liquidity and Capital Resources
Shareholders' equity at August 31, 1996 was $191.1 million, 82.9% of total
capitalization, indicating the overall strength of the Company's balance sheet.
Net cash provided by operating activities was $41.5 million in 1996 and totaled
$113.8 million for the three years ended August 31, 1996. These cash flows were
used primarily to fund $76.3 million in capital expenditures to expand and
update Company facilities. Additionally, $28.6 million was used for acquisitions
during this three year period.
The Company had $3.4 million in cash and cash equivalents as well as a line of
credit to borrow an additional $29.5 million as of August 31, 1996. 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 and
productivity improvements, it has been able to recover increases in costs and
expenses attributable to inflation.
2
3
Eleven Year Financial Summary
UniFirst Corporation and Subsidiaries
(Continued on next page)
Fiscal Year Ended August
(in thousands, except ratios
and per share amounts) 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
Summary of Operations
Revenues $391,794 $355,041 $318,039 $287,728 $268,190 $250,432 $226,682 $212,731
Income from
operations, before
depreciation and
amortization 61,729 53,725 50,369 47,199 42,010 38,562 38,749 35,768
Depreciation and
amortization 20,814 19,194 17,912 16,454 15,999 14,229 12,422 12,309
Income from
operations 40,915 34,531 32,457 30,745 26,011 24,333 26,327 23,459
Interest expense
(income), net 2,398 2,787 2,513 2,669 4,098 4,320 3,513 4,880
Other income -- -- -- -- -- -- -- --
Provision for
income taxes 13,855 11,110 11,073 10,387 7,570 6,803 8,516 6,968
Net income 24,662 20,634 18,871 17,689 14,343 * 13,210 14,298 11,611
- ------------------------------------------------------------------------------------------------------------------------------
Financial Position at Year End
Total assets $302,378 $272,691 $250,160 $219,064 $212,097 $204,398 $189,411 $172,389
Long-term obligations 39,365 36,376 41,602 32,231 47,641 52,032 53,134 53,735
Shareholders' equity 191,109 168,596 149,472 132,723 117,329 105,888 93,739 80,249
- ------------------------------------------------------------------------------------------------------------------------------
Financial Ratios
Net income
as a % of revenues 6.3% 5.8% 5.9% 6.1% 5.3% 5.3% 6.3% 5.5%
Return on average
shareholders' equity 13.7% 13.0% 13.4% 14.1% 12.9% 13.2% 16.4% 15.6%
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 20,511 20,511 20,506 20,453 20,451 20,426 20,431 20,353
- ------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Revenues $ 19.10 $ 17.31 $ 15.51 $ 14.07 $ 13.11 $ 12.26 $ 11.09 $ 10.45
Income from
operations, before
depreciation and
amortization 3.01 2.62 2.46 2.31 2.05 1.89 1.90 1.76
Net income
Primary 1.20 1.01 0.92 0.86 0.70 0.65 0.70 0.57
Fully diluted 1.20 1.01 0.92 0.86 0.67 0.63 0.67 0.56
Shareholders' equity 9.32 8.22 7.29 6.49 5.74 5.18 4.59 3.94
Dividends
Common stock .11 .10 .10 .10 .06 .06 .06 .05
Class B common stock .09 .08 .08 .04 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Per share amounts for all years have been restated to reflect a two-for-one stock split declared by the Board of Directors on
November 18, 1993.
* Amount reflects income before extraordinary item and accounting change. Net income was $12,923.
3
4
Eleven Year Financial Summary (Continued)
UniFirst Corporation and Subsidiaries
Fiscal Year Ended August
(in thousands, except ratios
and per share amounts) 1988 1987 1986
- ----------------------------------------------------------------------
Summary of Operations
Revenues $196,296 $159,900 $114,235
Income from
operations, before
depreciation and
amortization 32,207 28,161 21,425
Depreciation and
amortization 12,298 10,494 5,890
Income from
operations 19,909 17,667 15,535
Interest expense
(income), net 5,965 4,622 225
Other income -- 1,300 --
Provision for
income taxes 5,289 6,530 6,990
Net income 8,655 7,815 8,320
- ----------------------------------------------------------------------
Financial Position at Year End
Total assets $171,010 $166,304 $ 97,145
Long-term obligations 66,476 69,505 22,209
Shareholders' equity 69,127 60,681 53,637
- ----------------------------------------------------------------------
Financial Ratios
Net income
as a % of revenues 4.4% 4.9% 7.3%
Return on average
shareholders' equity 13.3% 13.7% 16.6%
- ----------------------------------------------------------------------
Weighted average number
of shares outstanding 20,168 20,158 20,158
- ----------------------------------------------------------------------
Per Share Data
Revenues $ 9.73 $ 7.93 $ 5.67
Income from
operations, before
depreciation and
amortization 1.60 1.40 1.07
Net income
Primary 0.43 0.39 0.42
Fully diluted 0.43 0.39 --
Shareholders' equity 3.43 3.01 2.66
Dividends
Common stock .05 .05 .05
Class B common stock -- -- --
- ----------------------------------------------------------------------
Per share amounts for all years have been restated to reflect a two-for-one
stock split declared by the Board of Directors on November 18, 1993.
4
5
Consolidated Balance Sheets
UniFirst Corporation and Subsidiaries
August 31, August 26,
1996 1995
- ---------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 3,425,000 $ 5,889,000
Receivables, less reserves of $843,000 in 1996
and $734,000 in 1995 36,634,000 33,420,000
Inventories 17,053,000 16,484,000
Rental merchandise in service 37,973,000 32,731,000
Prepaid expenses 127,000 118,000
- ---------------------------------------------------------------------------------------------
Total current assets 95,212,000 88,642,000
- ---------------------------------------------------------------------------------------------
Property and equipment:
Land, buildings and leasehold improvements 119,346,000 111,148,000
Machinery and equipment 120,671,000 109,538,000
Motor vehicles 33,278,000 28,816,000
- ---------------------------------------------------------------------------------------------
273,295,000 249,502,000
Less - accumulated depreciation 113,191,000 101,428,000
- ---------------------------------------------------------------------------------------------
160,104,000 148,074,000
- ---------------------------------------------------------------------------------------------
Other assets 47,062,000 35,975,000
- ---------------------------------------------------------------------------------------------
$302,378,000 $272,691,000
=============================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 1,058,000 $ 4,015,000
Notes payable 2,757,000 882,000
Accounts payable 11,697,000 12,992,000
Accrued liabilities 37,371,000 35,370,000
Accrued and deferred income taxes 3,679,000 3,882,000
- ---------------------------------------------------------------------------------------------
Total current liabilities 56,562,000 57,141,000
- ---------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 38,307,000 32,361,000
Deferred income taxes 16,400,000 14,593,000
- ---------------------------------------------------------------------------------------------
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 7,886,664
shares in 1996 and 7,886,644 shares in 1995 789,000 789,000
Class B Common stock, $.10 par value; 20,000,000
shares authorized; issued and outstanding 12,623,944
shares in 1996 and 12,623,964 shares in 1995 1,262,000 1,262,000
Capital surplus 7,078,000 7,078,000
Retained earnings 182,384,000 159,701,000
Cumulative translation adjustment (404,000) (234,000)
- ---------------------------------------------------------------------------------------------
Total shareholders' equity 191,109,000 168,596,000
- ---------------------------------------------------------------------------------------------
$302,378,000 $272,691,000
=============================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
5
6
Consolidated Statements of Income
UniFirst Corporation and Subsidiaries
Year Ended August 31, August 26, August 27,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
Revenues $391,794,000 $355,041,000 $318,039,000
- ---------------------------------------------------------------------------------------------------
Cost and expenses:
Operating costs 240,672,000 222,205,000 196,511,000
Selling and administrative expenses 89,393,000 79,111,000 71,159,000
Depreciation and amortization 20,814,000 19,194,000 17,912,000
- ---------------------------------------------------------------------------------------------------
350,879,000 320,510,000 285,582,000
- ---------------------------------------------------------------------------------------------------
Income from operations 40,915,000 34,531,000 32,457,000
- ---------------------------------------------------------------------------------------------------
Interest expense (income):
Interest expense 2,659,000 2,963,000 2,726,000
Interest income (261,000) (176,000) (213,000)
- ---------------------------------------------------------------------------------------------------
2,398,000 2,787,000 2,513,000
- ---------------------------------------------------------------------------------------------------
Income before income taxes 38,517,000 31,744,000 29,944,000
Provision for income taxes 13,855,000 11,110,000 11,073,000
- ---------------------------------------------------------------------------------------------------
Net income $ 24,662,000 $ 20,634,000 $ 18,871,000
===================================================================================================
Weighted average number of shares outstanding 20,510,608 20,510,608 20,505,837
===================================================================================================
Net income per share $ 1.20 $ 1.01 $ 0.92
===================================================================================================
Dividends per share:
Common stock $ 0.11 $ 0.10 $ 0.10
Class B common stock $ 0.09 $ 0.08 $ 0.08
===================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
6
7
Consolidated Statements of Shareholders' Equity
UniFirst Corporation and Subsidiaries
Class B Class B Cumulative
Common Common Common Common Capital Retained Translation
Shares Shares Stock Stock Surplus Earnings Adjustment
- ---------------------------------------------------------------------------------------------------------------------------------
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)
Net income -- -- -- -- -- 20,634,000 --
Dividends -- -- -- -- -- (1,799,000) --
Other -- -- -- -- 36,000 -- --
Shares converted 2,000 (2,000) 1,000 (1,000) -- -- --
Translation adjustment -- -- -- -- -- -- 253,000
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, August 26, 1995 7,886,644 12,623,964 789,000 1,262,000 7,078,000 159,701,000 (234,000)
Net income -- -- -- -- -- 24,662,000 --
Dividends -- -- -- -- -- (1,979,000) --
Shares converted 20 (20) -- -- -- -- --
Translation adjustment -- -- -- -- -- -- (170,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1996 7,886,664 12,623,944 $789,000 $1,262,000 $7,078,000 $182,384,000 $(404,000)
=================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
7
8
Consolidated Statements of Cash Flows
UniFirst Corporation and Subsidiaries
Year ended August 31, August 26, August 27,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 24,662,000 $ 20,634,000 $ 18,871,000
Adjustments:
Depreciation 17,339,000 15,960,000 15,038,000
Amortization of other assets 3,475,000 3,234,000 2,874,000
Receivables (2,272,000) (2,935,000) (4,502,000)
Inventories (370,000) (938,000) (3,781,000)
Rental merchandise in service (3,523,000) (1,198,000) (2,861,000)
Prepaid expenses (9,000) 15,000 10,000
Accounts payable (1,331,000) 476,000 1,126,000
Accrued liabilities 1,906,000 7,967,000 1,902,000
Accrued and deferred income taxes (191,000) (1,572,000) 82,000
Deferred income taxes 1,812,000 899,000 987,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 41,498,000 42,542,000 29,746,000
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (18,245,000) (7,226,000) (3,086,000)
Capital expenditures (27,182,000) (24,409,000) (24,729,000)
Other assets, net (1,432,000) (1,575,000) (999,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (46,859,000) (33,210,000) (28,814,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in debt 12,762,000 4,079,000 7,353,000
Reduction of debt (7,886,000) (9,879,000) (6,058,000)
Proceeds from exercise of stock options and other -- 36,000 35,000
Cash dividends paid or payable (1,979,000) (1,799,000) (1,798,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 2,897,000 (7,563,000) (468,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,464,000) 1,769,000 464,000
Cash and cash equivalents at beginning of year 5,889,000 4,120,000 3,656,000
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 3,425,000 $ 5,889,000 $ 4,120,000
=================================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 2,691,000 $ 3,010,000 $ 2,775,000
Income taxes paid $ 12,439,000 $ 11,712,000 $ 10,030,000
=================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
8
9
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
UniFirst Corporation is a leading company in the garment service industry. The
Company designs, manufactures, personalizes, rents, cleans, delivers and sells a
variety of superior quality occupational garments, career apparel and imagewear
programs to businesses of all kinds. The Company also decontaminates and cleans,
in separate facilities, garments which may have been exposed to radioactive
materials.
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.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Fiscal Year
The Company's fiscal year ends on the last Saturday in August. For financial
reporting purposes, fiscal 1996 was a 53 week year, while fiscal 1995 and 1994
had 52 weeks.
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. Had the Company used the first-in, first-out (FIFO) accounting
method, inventories would have been approximately $1,195,000 and $1,060,000
higher at August 31, 1996 and August 26, 1995, 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 on the
following estimated useful lives:
Buildings 30-40 years
Leasehold improvements Term of lease
Machinery and equipment 3-10 years
Motor vehicles 3-5 years
9
10
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other Assets
Customer contracts are amortized over periods of up to seventeen years.
Restrictive covenants are amortized over the terms of the respective
non-competition agreements, which range from five to fifteen years. Goodwill is
amortized over periods of up to forty years.
Income Taxes
Deferred income taxes are provided for temporary differences between amounts
recognized for income tax and financial reporting purposes at currently enacted
tax rates.
Net Income Per Common Share
Net income per share is calculated 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.
Cash Flow Disclosures
Cash and cash equivalents include cash in banks and bank short-term investments
with maturities of less than ninety days.
2. ACQUISITIONS
Information relating to the acquisitions of industrial laundry businesses which were
accounted for as purchases is as follows:
Year ended August 31, August 26, August 27,
1996 1995 1994
- -------------------------------------------------------------------------------------------
Fair market value of assets acquired $18,360,000 $8,688,000 $11,904,000
Liabilities assumed or created 115,000 1,462,000 8,818,000
----------------------------------------
Acquisition of businesses, net of cash acquired $18,245,000 $7,226,000 $ 3,086,000
========================================
The results of operations of these acquisitions have been included on the Company's
consolidated financial statements since their respective acquisition dates. None of these
acquisitions were significant in relation to the Company's consolidated financial statements
and therefore pro forma financial information has not been presented.
10
11
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
3. INCOME TAXES
The provision for income taxes consists of the following:
Year ended August 31, August 26, August 27,
1996 1995 1994
- --------------------------------------------------------------------------------------
Current:
Federal and Foreign $ 8,615,000 $10,597,000 $ 8,479,000
State 2,584,000 1,818,000 1,609,000
- --------------------------------------------------------------------------------------
11,199,000 12,415,000 10,088,000
- --------------------------------------------------------------------------------------
Deferred:
Federal and Foreign 2,295,000 (1,516,000) 828,000
State 361,000 211,000 157,000
- --------------------------------------------------------------------------------------
2,656,000 (1,305,000) 985,000
- --------------------------------------------------------------------------------------
$13,855,000 $11,110,000 $11,073,000
======================================================================================
The following table reconciles the statutory federal income tax rate to the effective overall
income tax rate:
Year ended August 31, August 26, August 27,
1996 1995 1994
- -----------------------------------------------------------------------------------------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) from statutory rate resulting from:
Puerto Rico exempt income (2.3) (2.1) (1.9)
Corporate-Owned Life Insurance (2.0) (2.6) (1.2)
State income taxes 4.0 3.7 3.5
Foreign income taxes 0.7 0.3 0.4
Other 0.6 0.7 1.2
- -----------------------------------------------------------------------------------------------
36.0% 35.0% 37.0%
===============================================================================================
The Company's Puerto Rico subsidiary's income is 90% exempt from Puerto Rico income taxes
through 2001. The Company provides for anticipated tollgate taxes on the repatriation of the
subsidiary's accumulated earnings.
The tax effect of items giving rise to the Company's net deferred tax liabilities are as
follows:
August 31, August 26, August 27,
1996 1995 1994
- -----------------------------------------------------------------------------------------
Rental merchandise in service $13,814,000 $12,626,000 $12,274,000
Tax in excess of book depreciation 14,836,000 12,906,000 12,494,000
Accruals and other (7,819,000) (7,248,000) (5,654,000)
- -----------------------------------------------------------------------------------------
$20,831,000 $18,284,000 $19,114,000
=========================================================================================
11
12
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
4. LONG-TERM OBLIGATIONS
Long-term obligations outstanding on the accompanying consolidated balance sheets
are as follows:
August 31, August 26,
1996 1995
- ----------------------------------------------------------------------------------
Unsecured revolving credit agreement with two banks,
interest rates of 5.75% and 6.25%, respectively $30,525,000 $21,875,000
Notes payable, interest from 5.2% - 8.25%, payable
in various installments through 2005 5,252,000 4,095,000
Amounts due for restrictive covenants and other,
payable in various installments through 2005 3,588,000 4,406,000
Unsecured note payable to an insurance company,
paid in 1996 -- 6,000,000
- ----------------------------------------------------------------------------------
39,365,000 36,376,000
- ----------------------------------------------------------------------------------
Less - current maturities 1,058,000 4,015,000
- ----------------------------------------------------------------------------------
$38,307,000 $32,361,000
==================================================================================
Aggregate current maturities of long-term obligations for each of the next five
years are $1,058,000, $1,017,000, $1,039,000, $31,290,000, $862,000 and
$4,099,000 thereafter.
The Company's unsecured revolving credit agreement runs through December 31,
1999. As of August 31, 1996, the maximum line of credit was $60,000,000.
In 1996 the Company entered into an interest rate swap agreement with a bank,
notional amount $15,000,000, maturing December 12, 1998. The Company pays a
fixed rate of 5.53% and receives a variable rate tied to the LIBOR rate. As of
August 31, 1996 the variable rate was 5.56%.
Certain of the long-term obligations contain among other things, provisions
regarding net worth and debt coverage. Under the most restrictive of these
provisions, the Company was required to maintain minimum consolidated tangible
net worth of $118,995,000 as of August 31, 1996. Certain notes payable are
guaranteed or secured by assets of the Company.
As of August 31, 1996 and August 26, 1995, the fair market values of the
Company's outstanding debt and swap agreement approximate their carrying value.
12
13
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
5. EMPLOYEE BENEFIT PLANS
The Company has a profit sharing plan with a 401(k) feature 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 expense under the plan were $4,184,000 in 1996,
$3,508,000 in 1995, and $3,200,000 in 1994.
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 $221,000 in 1996, $156,000 in 1995, and
$176,000 in 1994. Information is not readily available for the Company to
determine its share of unfunded vested benefits, if any, under these plans.
6. OTHER ASSETS
Other assets on the accompanying consolidated balance sheets are as follows:
August 31, August 26,
1996 1995
- ----------------------------------------------------------------------------------------
Customer contracts, restrictive covenants and other assets
arising from acquisitions, less accumulated amortization
of $18,884,000 and $15,906,000, respectively $22,697,000 $19,774,000
Goodwill, less accumulated amortization
of $2,876,000 and $2,391,000, respectively 21,250,000 14,259,000
Other 3,115,000 1,942,000
- ----------------------------------------------------------------------------------------
$47,062,000 $35,975,000
========================================================================================
7. ACCRUED LIABILITIES
Accrued liabilities on the accompanying consolidated balance sheets are as
follows:
August 31, August 26,
1996 1995
- ---------------------------------------------
Insurance $16,100,000 $14,100,000
Payroll related 13,254,000 12,231,000
Other 8,017,000 9,039,000
- ---------------------------------------------
$37,371,000 $35,370,000
=============================================
13
14
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases certain buildings from independent parties. Total rent
expense on all leases was $2,108,000 in 1996, $1,867,000 in 1995 and $1,581,000
in 1994.
Annual minimum lease commitments for all years subsequent to August 31, 1996 are
$1,952,000 in 1997, $1,463,000 in 1998, $886,000 in 1999, $365,000 in 2000,
$179,000 in 2001 and $146,000 thereafter.
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 financial position or
results of operations of the Company.
As security for certain agreements, the Company had standby irrevocable bank
commercial letters of credit and mortgages of $16,332,000 and $15,730,000
outstanding as of August 31, 1996 and August 26, 1995, respectively.
9. COMMON STOCK OPTIONS
The Company 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. 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. 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.
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.
14
15
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 31, 1996
and August 26, 1995 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended August 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 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 financial statements referred to above present fairly, in
all material respects, the financial position of UniFirst Corporation and
subsidiaries as of August 31, 1996 and August 26, 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 4, 1996
15
16
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 31, 1996 and August 26, 1995.
(In thousands, except per share amounts)
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------
Revenues $95,413 $100,825 $98,554 $97,002
Income before income taxes 10,578 7,712 10,313 9,914
Net income 6,770 4,936 6,600 6,356
Weighted average shares outstanding 20,511 20,511 20,511 20,511
Net income per share $ 0.33 $ 0.24 $ 0.32 $ 0.31
========================================================================================================
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------
Revenues $86,212 $ 86,231 $92,600 $89,998
Income before income taxes 8,544 5,933 8,872 8,395
Net income 5,554 3,856 5,767 5,457
Weighted average shares outstanding 20,511 20,511 20,511 20,511
Net income per share $ 0.27 $ 0.19 $ 0.28 $ 0.27
========================================================================================================
Common Stock Prices and Dividends Per Share
For the Years Ended August 31, 1996 and August 26, 1995:
Price Per Share Dividends Per Share
Class B
1996 High Low Common Stock Common Stock
- -------------------------------------------------------------------------------------
First Quarter $15 5/8 $13 1/2 $0.020 $0.025
Second Quarter 19 1/2 15 1/8 0.020 0.025
Third Quarter 25 1/4 17 7/8 0.024 0.030
Fourth Quarter 23 19 1/4 0.024 0.030
=====================================================================================
Price Per Share Dividends Per Share
Class B
1995 High Low Common Stock Common Stock
- -------------------------------------------------------------------------------------
First Quarter $13 5/8 $11 1/4 $0.020 $0.025
Second Quarter 13 1/8 11 1/8 0.020 0.025
Third Quarter 12 1/4 11 1/4 0.020 0.025
Fourth Quarter 14 3/8 12 1/8 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 4, 1996 were 181 and 19 respectively.
16
1
Exhibit 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
Tennessee Uniform and Towel Service, Inc.
Euro Nuclear Services B.V.
1
Page 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated November 4, 1996 incorporated by reference or included in this
Form 10-K, into the Company's previously filed Registration Statement File No.
33-60781.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 27, 1996
5
1,000
U.S. DOLLARS
YEAR
AUG-31-1996
AUG-27-1995
AUG-31-1996
1
3,425
0
37,477
843
17,053
95,212
273,295
113,191
302,378
56,562
38,307
2,051
0
0
189,058
302,378
391,794
391,794
350,879
350,879
0
0
2,398
38,517
13,855
24,662
0
0
0
24,662
1.20
0
