1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File
November 29, 1997 Number 1-8504
UNIFIRST CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2103460
(State of Incorporation) (IRS Employer ID Number)
68 Jonspin Road
Wilmington, Massachusetts 01887
(Address of principal executive offices)
Registrant's telephone number: (978) 658-8888
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of outstanding shares of the registrant's Common Stock and Class B
Common Stock as of January 7, 1998 were 7,903,864 and 12,606,744 respectively.
2
PART 1 - FINANCIAL INFORMATION
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(unaudited)
November 29, August 30, November 30,
1997 1997* 1996
- -------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 4,189,000 $ 4,054,000 $ 3,636,000
Receivables 45,146,000 39,431,000 39,792,000
Inventories 19,464,000 19,497,000 17,925,000
Rental merchandise in service 40,673,000 40,013,000 39,746,000
Prepaid expenses 146,000 149,000 121,000
- -------------------------------------------------------------------------------------------------------------
Total current assets 109,618,000 103,144,000 101,220,000
- -------------------------------------------------------------------------------------------------------------
Property and equipment:
Land, buildings and leasehold improvements 141,715,000 137,281,000 123,730,000
Machinery and equipment 148,947,000 142,242,000 125,081,000
Motor vehicles 38,149,000 37,276,000 33,406,000
- -------------------------------------------------------------------------------------------------------------
328,811,000 316,799,000 282,217,000
Less - accumulated depreciation 133,287,000 128,532,000 117,543,000
- -------------------------------------------------------------------------------------------------------------
195,524,000 188,267,000 164,674,000
- -------------------------------------------------------------------------------------------------------------
Other assets 48,639,000 48,215,000 45,575,000
- -------------------------------------------------------------------------------------------------------------
$353,781,000 $339,626,000 $311,469,000
=============================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 1,045,000 $ 1,040,000 $ 1,063,000
Notes payable 2,820,000 3,213,000 2,705,000
Accounts payable 11,995,000 13,085,000 13,130,000
Accrued liabilities 47,231,000 45,637,000 38,942,000
Accrued and deferred income taxes 6,441,000 2,555,000 6,494,000
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 69,532,000 65,530,000 62,334,000
- -------------------------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 41,659,000 39,797,000 33,928,000
Deferred income taxes 17,440,000 17,107,000 16,713,000
- -------------------------------------------------------------------------------------------------------------
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
7,903,864 shares 790,000 790,000 789,000
Class B Common stock, $.10 par value; 20,000,000
shares authorized; issued and outstanding
12,606,744 shares 1,261,000 1,261,000 1,262,000
Capital surplus 7,078,000 7,078,000 7,078,000
Retained earnings 217,235,000 208,949,000 189,700,000
Cumulative translation adjustment (1,214,000) (886,000) (335,000)
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 225,150,000 217,192,000 198,494,000
- -------------------------------------------------------------------------------------------------------------
$353,781,000 $339,626,000 $311,469,000
=============================================================================================================
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(unaudited)
Thirteen Thirteen
weeks ended weeks ended
November 29, November 30,
1997 1996
- ------------------------------------------------------------------------------------------
Revenues $112,402,000 $103,976,000
- ------------------------------------------------------------------------------------------
Costs and expenses:
Operating costs 66,325,000 62,120,000
Selling and administrative expenses 25,397,000 23,520,000
Depreciation and amortization 6,308,000 5,547,000
- ------------------------------------------------------------------------------------------
98,030,000 91,187,000
- ------------------------------------------------------------------------------------------
Income from operations 14,372,000 12,789,000
- ------------------------------------------------------------------------------------------
Interest expense (income):
Interest expense 651,000 585,000
Interest income (70,000) (70,000)
- ------------------------------------------------------------------------------------------
581,000 515,000
- ------------------------------------------------------------------------------------------
Income before income taxes 13,791,000 12,274,000
Provision for income taxes 4,965,000 4,419,000
- ------------------------------------------------------------------------------------------
Net income $ 8,826,000 $ 7,855,000
==========================================================================================
Weighted average number of shares outstanding 20,510,608 20,510,608
==========================================================================================
Net income per share $ 0.43 $ 0.38
==========================================================================================
The accompanying notes are an integral part of these condensed financial
statements.
4
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Thirteen Thirteen
weeks ended weeks ended
November 29, November 30,
1997 1996
- ---------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 8,826,000 $ 7,855,000
Adjustments:
Depreciation 5,246,000 4,627,000
Amortization of other assets 1,062,000 920,000
Receivables (5,785,000) (3,138,000)
Inventories 26,000 (945,000)
Rental merchandise in service (720,000) (1,756,000)
Prepaid expenses 2,000 6,000
Accounts payable (1,096,000) 1,438,000
Accrued liabilities 1,624,000 1,561,000
Accrued and deferred income taxes 3,909,000 2,803,000
Deferred income taxes 348,000 309,000
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 13,442,000 13,680,000
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (12,765,000) (9,121,000)
Other assets, net (1,497,000) 618,000
- ---------------------------------------------------------------------------------------------------
Net cash used in investing activities (14,262,000) (8,503,000)
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in debt 2,124,000 --
Reduction of debt (629,000) (4,427,000)
Cash dividends paid or payable (540,000) (539,000)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 955,000 (4,966,000)
- ---------------------------------------------------------------------------------------------------
Net increase in cash 135,000 211,000
Cash at beginning of period 4,054,000 3,425,000
- ---------------------------------------------------------------------------------------------------
Cash at end of period $ 4,189,000 $ 3,636,000
===================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 643,000 $ 551,000
Income taxes paid $ 746,000 $ 1,291,000
===================================================================================================
The accompanying notes are an integral part of these condensed financial
statements.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 29, 1997
1. These condensed financial statements have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations; however, the Company believes that the
information furnished reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of results for the interim
period. It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes, thereto,
included in the Company's latest annual report.
2. From time to time, the Company is subject to legal proceedings and claims
arising from the conduct of their business operations, including personal
injury, customer contract, employment claims and environmental matters. In
the opinion of management, such proceedings and claims are not likely to
result in losses which would have a material adverse effect upon the
financial position or results of operations of the Company.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 29, 1997
RESULTS OF OPERATIONS
- ---------------------
Thirteen Weeks of Fiscal 1998 compared to Thirteen Weeks of Fiscal 1997
- -----------------------------------------------------------------------
Fiscal 1998 first quarter revenues increased $8,426,000 or 8.1% over the fiscal
1997 first quarter. This increase can be attributed to acquisitions (1.0%),
price increases (1.0%) and growth from existing operations (6.1%).
Income from operations as a percentage of revenue increased to 12.8% in fiscal
1998 from 12.3% for the fiscal 1997 period. The main reason for this increase is
the Company's continued focus on controlling costs.
Net interest expense (interest expense less interest income) was $581,000 in
fiscal 1998 as compared to $515,000 in fiscal 1997. The increase is attributable
to higher debt levels in fiscal 1998.
The Company's effective income tax rate was 36.0% in both periods.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the thirteen weeks ended November 29, 1997 net cash provided by operating
activities, $13,442,000, was primarily used for capital expenditures,
$12,765,000 and dividends, $540,000.
The Company had $4,189,000 in cash and $24,675,000 available on its $60,000,000
line of credit as of November 29, 1997. The Company believes its ability to
generate cash from operations will adequately cover its foreseeable capital
requirements.
Shareholders' equity at November 29, 1997 was $225.2 million, 84.1% of total
capitalization, indicating the overall strength of the Company's balance sheet.
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.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 29, 1997
(continued)
RECENT DEVELOPMENTS
- -------------------
The Company is currently considering for implementation in the fourth quarter
an increase in its amortization period for most garments placed in service from
12 months to 15 months, which is more consistent with their respective useful
life. Most of the Company's principal publicly-held competitors amortize their
garments over an average of 15 to 18 months.
Beginning in January 1998, the Company began testing its new 330,000 square foot
Owensboro, Kentucky distribution facility. The Company expects this facility to
be completed in late fiscal 1998 and to be fully operational by the end of
fiscal 1999. During this period, the Company expects to incur further start-up
costs and to begin expensing the costs of constructing this facility and its
operating overhead.
FORWARD LOOKING STATEMENTS
- --------------------------
This Report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934 that are subject to certain risks and uncertainties that could
cause actual results of differ materially from those projected in such
statements. Such risks and uncertainties include those relating to the timing
of the implementation, if any, of the above-described change in the Company's
amortization of its garments and the timing and operations of its new
Owensboro, Kentucky facility.
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PART II - OTHER INFORMATION
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
UNIFIRST CORPORATION
/s/ RONALD D. CROATTI
------------------------------
Ronald D. Croatti
Vice Chairman, President and
Chief Executive Officer
Date: January 13, 1998
/s/ JOHN B. BARTLETT
------------------------------
John B. Bartlett
Senior Vice President
and Chief Financial Officer
5
1,000
U.S. DOLLARS
3-MOS
AUG-29-1998
AUG-31-1997
NOV-29-1997
1
4,189
0
46,496
1,350
19,464
109,618
328,811
133,287
353,781
69,532
41,659
0
0
2,051
223,099
353,781
112,402
112,402
98,030
98,030
0
0
581
13,791
4,965
8,826
0
0
0
8,826
0.43
0
