unf-8k_20200108.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 8, 2020

 

UNIFIRST CORPORATION

(Exact name of Registrant as Specified in Its Charter)

 

 

Massachusetts

001-08504

04-2103460

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

68 Jonspin Road, Wilmington, Massachusetts 01887

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (978) 658-8888

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.10 par value per share

UNF

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On January 8, 2020, UniFirst Corporation (the “Company”) issued a press release ("Press Release") announcing financial results for the first quarter of fiscal 2020, which ended on November 30, 2019. A copy of the Press Release is attached as Exhibit 99 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information in this Item 2.02, including the exhibit attached hereto, shall not be deemed “filed” for any purpose, including for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit

Number

 

Description

99

 

Press release of the Company dated January 8, 2020

 

 

 

 

 

 

 


 

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 by the undersigned thereunto duly authorized.

 

 

 

UNIFIRST CORPORATION

 

 

 

 

Date: January 8, 2020

 

By:

/s/ Steven S. Sintros

 

 

 

Steven S. Sintros

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

By:

/s/ Shane O’Connor

 

 

 

Shane O’Connor

 

 

 

Senior Vice President and Chief Financial Officer

 

 

unf-ex99_6.htm

 

 

Exhibit 99

 

Investor Relations Contact

Shane O’Connor, Senior Vice President & CFO

UniFirst Corporation

978-658-8888

shane_oconnor@unifirst.com

 

FOR IMMEDIATE RELEASE

 

UNIFIRST ANNOUNCES FINANCIAL RESULTS FOR THE FIRST QUARTER OF FISCAL 2020

Wilmington, MA – January 8, 2020 – UniFirst Corporation (NYSE: UNF) (the “Company”) today reported results for its first quarter ended November 30, 2019 as compared to the corresponding period in the prior fiscal year:

Q1 2020 Financial Highlights

 

Consolidated revenues for the first quarter increased 6.1% to $465.4 million.

 

Operating income was $60.1 million, an increase of 19.2%.

 

The effective tax rate for the quarter decreased to 22.1% from 26.2%.

 

Net income in the quarter increased to $48.2 million from $38.3 million, or 25.9%.

 

Diluted earnings per share increased to $2.52 from $1.99, or 26.6%.

 

Steven Sintros, UniFirst President and Chief Executive Officer, said, “We are pleased with the results of our first quarter which showed solid top and bottom line growth.  As always, I would like to thank our thousands of employee Team Partners for their efforts as we continue to strive for profitable growth while providing the highest quality service to our customers.”

Segment Reporting Highlights

Core Laundry Operations

 

Revenues for the quarter increased 6.6% to $416.3 million.

 

Organic growth, which excludes the effect of acquisitions as well as fluctuations in the Canadian dollar, was 6.0% and benefited by approximately 0.7% from the impact of certain revenue adjustments related to reserves as well as the timing of revenues around the Thanksgiving holiday.

 

Operating margin increased to 12.9% from 11.5%. This increase was primarily due to lower energy, selling payroll and depreciation and amortization as a percentage of revenues as well as the effect of the revenue adjustments discussed above. In addition, several other costs trended favorably as a percentage of revenues due to the strong revenue growth in the quarter.  These benefits were partially offset by an unfavorable comparison with prior year due to a $3.0 million pre-tax gain ($0.11 per diluted share) from the settlement of environmental litigation recognized in the first quarter of 2019.

Specialty Garments

 

Revenues for the quarter were $33.4 million, a decrease of 3.0%. This decrease was primarily due to decreased outage activity in the US and Canadian nuclear operations which was partially offset by strong growth in the cleanroom operations.

 

Operating margin increased to 14.6% from 13.0%. This increase was primarily due to lower merchandise and production payroll costs as a percentage of revenues partially offset by higher casualty claims expense as a percentage of revenues.

 

Specialty Garments consists of nuclear decontamination and cleanroom operations and its results can vary significantly due to seasonality and the timing of reactor outages and projects.

Capital Allocation

 

Cash, cash equivalents and short-term investments totaled $356.6 million as of November 30, 2019.

 

The Company had no long-term debt outstanding as of November 30, 2019.

 

Under its previously announced stock repurchase program, the Company repurchased 50,600 shares of common stock for a total of $10.0 million during its first fiscal quarter of 2020.

 

Weighted average shares outstanding – Diluted decreased 0.9% to 19.1 million shares.


 

 

 

Financial Outlook

 

Mr. Sintros continued, “At this time, we believe that our revenues for fiscal 2020 will be between $1.860 billion and $1.872 billion and full year diluted earnings per share to be between $7.60 and $7.92.  We have reduced the high end of our previously provided revenue outlook partially due to reduced business activity and wearer levels in the energy dependent markets that we service.  This guidance does not assume any significant further deterioration in the energy sector or the overall economy.   As a reminder, our fiscal 2020 will contain one less week compared to fiscal 2019.”

 

Conference Call Information

UniFirst will hold a conference call today at 9:00 a.m. (ET) to discuss its quarterly financial results, business highlights and outlook. A simultaneous live webcast of the call will be available over the Internet and can be accessed at www.unifirst.com.

About UniFirst Corporation

Headquartered in Wilmington, Mass., UniFirst Corporation (NYSE: UNF) is a North American leader in the supply and servicing of uniform and workwear programs, as well as the delivery of facility service programs. Together with its subsidiaries, the company also provides first aid and safety products, and manages specialized garment programs for the cleanroom and nuclear industries. UniFirst manufactures its own branded workwear, protective clothing, and floorcare products; and with 260 service locations, over 300,000 customer locations, and 14,000-plus employee Team Partners, the company outfits nearly 2 million workers each business day. For more information, contact UniFirst at 800.455.7654 or visit UniFirst.com.

Forward-Looking Statements Disclosure

This public announcement contains forward-looking statements that reflect the Company’s current views with respect to future events and financial performance, including projected revenues and earnings per share. Forward-looking statements contained in this public announcement are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” “strategy,” “objective,” “assume,” or the negative versions thereof, and similar expressions and by the context in which they are used. Such forward-looking statements are based upon our current expectations and speak only as of the date made. Such statements are highly dependent upon a variety of risks, uncertainties and other important factors that could cause actual results to differ materially from those reflected in such forward-looking statements. Such factors include, but are not limited to, the performance and success of our Chief Executive Officer, uncertainties caused by adverse economic conditions and their impact on our customers’ businesses and workforce levels, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, any adverse outcome of pending or future contingencies or claims, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly fluctuations in business levels, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the effect of currency fluctuations on our results of operations and financial condition, our dependence on third parties to supply us with raw materials, any loss of key management or other personnel, increased costs as a result of any changes in federal or state laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding the impact of the recently passed U.S. tax reform on our business, results of operations and financial condition, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the negative effect on our business from sharply depressed oil and natural gas prices, the continuing increase in domestic healthcare costs, including the impact of the Affordable Care Act, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, instability in Mexico and Nicaragua where our principal garment manufacturing plants are located, our ability to properly and efficiently design, construct, implement and operate a new customer relationship management (CRM) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, additional professional and internal costs necessary for compliance with any changes in Securities and Exchange Commission, New York Stock Exchange and accounting rules, strikes and unemployment levels, our efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy, general economic conditions, our ability to successfully implement our business strategies and processes, including our capital allocation strategies, and other factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2019 and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.


 

 

Consolidated Statements of Income

(Unaudited)

 

(In thousands, except per share data)

 

Thirteen weeks ended November 30, 2019

 

 

Thirteen weeks ended November 24, 2018

 

Revenues

 

$

465,398

 

 

$

438,550

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues (1)

 

 

289,316

 

 

 

277,049

 

Selling and administrative expenses (1)

 

 

90,528

 

 

 

85,959

 

Depreciation and amortization

 

 

25,459

 

 

 

25,116

 

Total operating expenses

 

 

405,303

 

 

 

388,124

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

60,095

 

 

 

50,426

 

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

 

 

 

 

 

 

Interest income, net

 

 

(2,361

)

 

 

(1,705

)

Other expense, net

 

 

528

 

 

 

172

 

Total other income, net

 

 

(1,833

)

 

 

(1,533

)

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

61,928

 

 

 

51,959

 

Provision for income taxes

 

 

13,686

 

 

 

13,639

 

 

 

 

 

 

 

 

 

 

Net income

 

$

48,242

 

 

$

38,320

 

 

 

 

 

 

 

 

 

 

Income per share – Basic:

 

 

 

 

 

 

 

 

Common Stock

 

$

2.65

 

 

$

2.08

 

Class B Common Stock

 

$

2.12

 

 

$

1.67

 

 

 

 

 

 

 

 

 

 

Income per share – Diluted:

 

 

 

 

 

 

 

 

Common Stock

 

$

2.52

 

 

$

1.99

 

 

 

 

 

 

 

 

 

 

Income allocated to – Basic:

 

 

 

 

 

 

 

 

Common Stock

 

$

40,526

 

 

$

32,137

 

Class B Common Stock

 

$

7,716

 

 

$

6,183

 

 

 

 

 

 

 

 

 

 

Income allocated to – Diluted:

 

 

 

 

 

 

 

 

Common Stock

 

$

48,242

 

 

$

38,320

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – Basic:

 

 

 

 

 

 

 

 

Common Stock

 

 

15,308

 

 

 

15,432

 

Class B Common Stock

 

 

3,643

 

 

 

3,710

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – Diluted:

 

 

 

 

 

 

 

 

Common Stock

 

 

19,123

 

 

 

19,302

 

 

(1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets.


 

 

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands)

 

November 30, 2019

 

 

August 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

356,588

 

 

$

385,341

 

Receivables, net

 

 

217,884

 

 

 

203,457

 

Inventories

 

 

99,794

 

 

 

100,916

 

Rental merchandise in service

 

 

184,889

 

 

 

184,318

 

Prepaid taxes

 

 

7,465

 

 

 

4,060

 

Prepaid expenses and other current assets

 

 

35,837

 

 

 

35,699

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

902,457

 

 

 

913,791

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

574,394

 

 

 

574,509

 

Goodwill

 

 

424,545

 

 

 

401,178

 

Customer contracts and other intangible assets, net

 

 

87,512

 

 

 

72,720

 

Deferred income taxes

 

 

474

 

 

 

448

 

Operating lease, right-of-use assets, net

 

 

47,739

 

 

 

 

Other assets

 

 

86,464

 

 

 

84,674

 

 

 

$

2,123,585

 

 

$

2,047,320

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

71,416

 

 

$

77,918

 

Accrued liabilities

 

 

114,203

 

 

 

111,721

 

Accrued taxes

 

 

 

 

 

205

 

Operating lease liabilities, current

 

 

12,013

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

197,632

 

 

 

189,844

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Accrued liabilities

 

 

117,363

 

 

 

117,074

 

Accrued and deferred income taxes

 

 

98,963

 

 

 

99,172

 

Operating lease liabilities

 

 

33,619

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

447,577

 

 

 

406,090

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common Stock

 

 

1,530

 

 

 

1,533

 

Class B Common Stock

 

 

364

 

 

 

364

 

Capital surplus

 

 

84,749

 

 

 

84,946

 

Retained earnings

 

 

1,622,069

 

 

 

1,588,075

 

Accumulated other comprehensive loss

 

 

(32,704

)

 

 

(33,688

)

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

 

1,676,008

 

 

 

1,641,230

 

 

 

 

 

 

 

 

 

 

 

 

$

2,123,585

 

 

$

2,047,320

 

 


 

 

Detail of Operating Results

(Unaudited)

 

Revenues

 

(In thousands, except percentages)

 

Thirteen weeks ended November 30, 2019

 

 

Thirteen weeks ended November 24, 2018

 

 

Dollar

Change

 

 

Percent

Change

 

Core Laundry Operations

 

$

416,298

 

 

$

390,477

 

 

$

25,821

 

 

 

6.6

%

Specialty Garments

 

 

33,402

 

 

 

34,448

 

 

 

(1,046

)

 

 

(3.0

)%

First Aid

 

 

15,698

 

 

 

13,625

 

 

 

2,073

 

 

 

15.2

%

Consolidated total

 

$

465,398

 

 

$

438,550

 

 

$

26,848

 

 

 

6.1

%

 

 

 

Operating Income

 

(In thousands, except percentages)

 

Thirteen weeks ended November 30, 2019

 

 

Thirteen weeks ended November 24, 2018

 

 

Dollar

Change

 

 

Percent

Change

 

Core Laundry Operations

 

$

53,808

 

 

$

44,782

 

 

$

9,026

 

 

 

20.2

%

Specialty Garments

 

 

4,879

 

 

 

4,470

 

 

 

409

 

 

 

9.1

%

First Aid

 

 

1,408

 

 

 

1,174

 

 

 

234

 

 

 

19.9

%

Consolidated total

 

$

60,095

 

 

$

50,426

 

 

$

9,669

 

 

 

19.2

%

 

 

Operating Margin

 

 

 

Thirteen

weeks ended

November 30, 2019

 

 

Thirteen weeks ended November 24, 2018

 

 

 

 

 

Core Laundry Operations

 

 

12.9

%

 

 

11.5

%

 

 

 

 

Specialty Garments

 

 

14.6

%

 

 

13.0

%

 

 

 

 

First Aid

 

 

9.0

%

 

 

8.6

%

 

 

 

 

Consolidated total

 

 

12.9

%

 

 

11.5

%

 

 

 

 


 

 

Consolidated Statements of Cash Flows

(Unaudited)

 

(In thousands)

 

Thirteen weeks ended November 30, 2019

 

 

Thirteen weeks ended November 24, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

48,242

 

 

$

38,320

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

25,459

 

 

 

25,116

 

Amortization of deferred financing costs

 

 

28

 

 

 

28

 

Share-based compensation

 

 

1,575

 

 

 

1,182

 

Accretion on environmental contingencies

 

 

134

 

 

 

189

 

Accretion on asset retirement obligations

 

 

232

 

 

 

220

 

Deferred income taxes

 

 

245

 

 

 

(497

)

Other

 

 

5

 

 

 

(19

)

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Receivables, less reserves

 

 

(12,771

)

 

 

(12,165

)

Inventories

 

 

1,195

 

 

 

(1,061

)

Rental merchandise in service

 

 

1,370

 

 

 

(4,513

)

Prepaid expenses and other current assets and Other assets

 

 

(2,074

)

 

 

(6,884

)

Accounts payable

 

 

(5,031

)

 

 

(1,264

)

Accrued liabilities

 

 

(2,678

)

 

 

(19,651

)

Prepaid and accrued income taxes

 

 

(3,497

)

 

 

13,256

 

Net cash provided by operating activities

 

 

52,434

 

 

 

32,257

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

 

(39,286

)

 

 

 

Capital expenditures, including capitalization of software costs

 

 

(28,975

)

 

 

(23,285

)

Proceeds from sale of assets

 

 

61

 

 

 

90

 

Other

 

 

 

 

 

33

 

Net cash used in investing activities

 

 

(68,200

)

 

 

(23,162

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of share-based awards

 

 

74

 

 

 

 

Taxes withheld and paid related to net share settlement of equity awards

 

 

(1,570

)

 

 

(140

)

Repurchase of Common Stock

 

 

(9,973

)

 

 

 

Payment of cash dividends

 

 

(2,056

)

 

 

(2,070

)

Net cash used in financing activities

 

 

(13,525

)

 

 

(2,210

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes

 

 

538

 

 

 

(861

)

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash, cash equivalents and short-term investments

 

 

(28,753

)

 

 

6,024

 

Cash, cash equivalents and short-term investments at beginning of period

 

 

385,341

 

 

 

270,512

 

Cash, cash equivalents and short-term investments at end of period

 

$

356,588

 

 

$

276,536