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 November 29, 2003 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)(Zip Code) 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 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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ] The number of outstanding shares of UniFirst Corporation Common Stock and Class B Common Stock at January 5, 2004 were 9,010,979 and 10,175,144 respectively.
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UniFirst Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) NOVEMBER 29, AUGUST 30, NOVEMBER 30, (IN THOUSANDS, EXCEPT PER SHARE DATA) 2003 2003 2002 ---------------------------------------------------------------------- ------------ ---------- ------------ Assets Current assets: Cash and cash equivalents $ 7,988 $ 6,053 $ 484 Receivables, less reserves of $3,113, $2,611,and $2,953, respectively 77,627 57,941 63,384 Inventories 31,601 25,355 21,860 Rental merchandise in service 68,744 60,490 59,401 Prepaid and deferred tax assets 5,591 5,591 -- Prepaid expenses 515 407 586 --------- --------- --------- Total current assets 192,066 155,837 145,715 --------- --------- --------- Property and equipment: Land, buildings and leasehold improvements 234,483 221,487 214,182 Machinery and equipment 255,286 238,820 230,952 Motor vehicles 66,991 66,081 64,019 --------- --------- --------- 556,760 526,388 509,153 Less - accumulated depreciation 261,097 251,806 238,759 --------- --------- --------- 295,663 274,582 270,394 --------- --------- --------- Goodwill 180,263 62,608 61,535 Intangible assets, net 57,877 20,524 21,734 Other assets 4,164 1,036 2,332 --------- --------- --------- $ 730,033 $ 514,587 $ 501,710 ========= ========= ========= Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term obligations $ 1,673 $ 2,493 $ 2,710 Notes payable -- 104 1,299 Accounts payable 31,982 30,678 28,703 Accrued liabilities 71,528 53,670 55,389 Accrued and deferred income taxes 7,622 -- 2,015 --------- --------- --------- Total current liabilities 112,805 86,945 90,116 --------- --------- --------- Long-term obligations, net of current maturities 237,951 67,319 70,259 Deferred income taxes 33,727 24,943 27,004 --------- --------- --------- 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; shares issued 10,606,034, 10,599,359, and 10,555,109, respectively 1,061 1,060 1,055 Class B common stock, $.10 par value; 20,000,000 shares authorized; issued and outstanding 10,175,144, 10,175,144, and 10,205,144, respectively 1,018 1,018 1,021 Treasury stock, 1,595,055, 1,595,055, and 1,595,055 shares respectively, at cost (26,005) (26,005) (26,005) Capital surplus 12,789 12,693 12,519 Retained earnings 356,923 348,043 329,373 Accumulated other comprehensive loss (236) (1,429) (3,632) --------- --------- --------- Total shareholders' equity 345,550 335,380 314,331 --------- --------- --------- $ 730,033 $ 514,587 $ 501,710 ========= ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. 2
UniFirst Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Thirteen weeks Thirteen weeks ended ended November 29, November 30, (In thousands, except per share data) 2003 2002 - ----------------------------------------------------------- -------------- -------------- Revenues $ 180,898 $ 149,179 --------- --------- Cost and expenses: Operating costs 115,088 92,690 Selling and administrative expenses 36,827 31,899 Depreciation and amortization 11,028 9,884 --------- --------- 162,943 134,473 --------- --------- Income from operations 17,955 14,706 --------- --------- Other expense (income): Interest expense 3,242 1,094 Interest income (292) (268) Interest rate swap income (480) (209) --------- --------- 2,470 617 --------- --------- Income before income taxes 15,485 14,089 Provision for income taxes 5,962 5,424 --------- --------- Income before cumulative effect of accounting change 9,523 8,665 Cumulative effect of accounting change (net of income tax benefit of $1,404 in fiscal 2003) -- 2,242 --------- --------- Net income $ 9,523 $ 6,423 ========= ========= Weighted average number of shares outstanding - basic 19,184 19,218 --------- --------- Weighted average number of shares outstanding - diluted 19,249 19,271 --------- --------- Income per share - basic: Income before cumulative effect of accounting change, net $ 0.50 $ 0.45 Cumulative effect of accounting change, net -- (0.12) --------- --------- Net income per share $ 0.50 $ 0.33 ========= ========= Income per share - diluted: Income before cumulative effect of accounting change, net $ 0.49 $ 0.45 Cumulative effect of accounting change, net -- (0.12) --------- --------- Net income per share $ 0.49 $ 0.33 ========= ========= Cash dividends per share: Common stock $ 0.0375 $ 0.0375 ========= ========= Class B common stock $ 0.0300 $ 0.0300 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. 3
UniFirst Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Thirteen Thirteen weeks ended weeks ended November 29, November 30, (In thousands) 2003 2002 - -------------------------------------------------------------- ------------ ------------ Cash flows from operating activities: Net income $ 9,523 $ 6,423 Adjustments: Cumulative effect of accounting change, net -- 2,242 Depreciation 9,491 8,522 Amortization of intangible assets 1,537 1,362 Amortization of deferred financing costs 290 -- Accretion on asset retirement obligations 96 75 Interest rate swap income (480) (209) Changes in assets and liabilities, net of acquisitions: Receivables (10,327) (8,798) Inventories 3,098 2,947 Rental merchandise in service 4,390 (3,355) Prepaid expenses 947 (270) Accounts payable (3,427) 11,690 Accrued liabilities 2,139 (2,376) Accrued and deferred income taxes 5,671 1,964 --------- -------- Net cash provided by operating activities 22,948 20,217 --------- -------- Cash flows from investing activities: Acquisition of business (175,628) -- Capital expenditures (6,747) (8,998) Other (2,317) (1,167) --------- -------- Net cash used in investing activities (184,692) (10,165) --------- -------- Cash flows from financing activities: Increase in debt 177,293 104 Reduction of debt (9,590) (12,127) Deferred financing costs (3,478) -- Repurchase of common stock -- (1,249) Proceeds from exercise of common stock options 97 16 Cash dividends (643) (645) --------- -------- Net cash provided by (used in) financing activities 163,679 (13,901) --------- -------- Net increase (decrease) in cash and cash equivalents 1,935 (3,849) Cash and cash equivalents at beginning of period 6,053 4,333 --------- -------- Cash and cash equivalents at end of period $ 7,988 $ 484 ========= ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 4
UniFirst Corporation and Subsidiaries Notes to Condensed Consolidated Financial Statements For the Thirteen Weeks Ended November 29, 2003 (Amounts in thousands, except per share and common stock options data) 1. Summary Of Critical and Significant Accounting Policies Business Description UniFirst Corporation (the "Company") is a leading company in the garment service business. 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. It also services industrial wiper towels, floor mats and other non-garment items and provides first aid cabinet services and other safety supplies. The Company's UniTech subsidiary decontaminates and cleans, in separate facilities, garments which may have been exposed to radioactive materials. Interim Financial Information These condensed consolidated 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 (consisting only of normal recurring 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 consolidated financial statements be read in conjunction with the financial statements and the notes, thereto, included in the Company's latest annual report on Form 10-K. Results for an interim period are not indicative of any future interim periods or for an entire fiscal year. Principles of Consolidation 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. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date, while income and expense accounts are translated at average exchange rates during the year. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. There have been no changes in judgments or the method of determining estimates that had a material effect on our condensed consolidated financial statements for the periods presented. Fiscal Year The Company's fiscal year ends on the last Saturday in August. For financial reporting purposes, fiscal 2004 will have 52 weeks, as did fiscal 2003. Revenue Recognition and Allowance for Doubtful Accounts The Company recognizes revenue from rental operations in the period in which the services are provided. Direct sale revenue is recognized in the period in which the product is shipped. Judgments and estimates are used in determining the collectability of accounts receivable. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Material differences may 5
result in the amount and timing of bad debt expense recognition for any given period if management makes different judgments or utilizes different estimates. Inventories and Rental Merchandise in Service Inventories are stated at the lower of cost or market value, net of any reserve for excess and obsolete inventory. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. 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 $1.5 million higher at November 29, 2003, August 30, 2003 and November 30, 2002. Substantially all inventories represent finished goods. Rental merchandise in service is being amortized on a straight-line basis over the estimated service lives of the merchandise, which range from 6 to 24 months. In establishing estimated lives for merchandise in service, management considers historical experience and the intended use of the merchandise. Material differences may result in the amount and timing of operating profit for any period if management makes different judgments or utilizes different estimates. Property and Equipment Property and equipment are recorded at cost. 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 Expenditures for maintenance and repairs are expensed as incurred. Expenditures for renewals and betterments are capitalized. Goodwill and Other Intangible Assets Customer contracts are amortized over their estimated useful lives which have a weighted average life of approximately 15 years. Restrictive covenants are amortized over the terms of the respective non-competition agreements, which have a weighted average life of 7.5 years. In accordance with the provisions of Statement of Financial Accounting Standards "SFAS" No. 142, the Company does not amortize goodwill. Income Taxes The Company's policy of accounting for income taxes is in accordance with SFAS No. 109 - "Accounting for 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. The Company computes income tax expense by jurisdiction based on its operations in each jurisdiction. The Company is periodically reviewed by domestic and foreign tax authorities regarding the amount of taxes due. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, the Company records estimated reserves for probable exposures. Based on the Company's evaluation of current tax positions, the Company believes they have appropriately accrued for probable exposures. 6
Net Income Per Share Basic and diluted net income per share is calculated using the weighted average number of common and dilutive potential common shares outstanding during the year. The following table illustrates the amounts used in the denominator of the calculation: Thirteen Thirteen weeks ended weeks ended November 29, November 30, 2003 2002 ------------ ------------ Weighted average number of shares outstanding -- Basic 19,184 19,218 Add: effect of dilutive potential common shares - employee common stock options 65 53 ------ ------ Weighted average number of shares outstanding - Diluted 19,249 19,271 ------ ------ Stock Based Compensation The Company adopted an incentive stock option plan (the "Plan") in November, 1996 and reserved 150,000 shares of common stock for issue under the Plan. In January of 2002, the Company increased to 450,000 the number of shares of common stock reserved for issuance under the Plan. Options granted under the Plan, through May 31, 2003, are at a price equal to the fair market value of the Company's common stock on the date of grant. Options granted prior to fiscal 2003 are subject to a proportional four-year vesting schedule. Options generally become vested or exercisable after one year from date of grant and expire eight years from the grant date. Options granted in fiscal 2003 and fiscal 2004 are subject to a five-year cliff-vesting schedule under which options become vested or exercisable after five years from date of grant and expire ten years after the grant date. The Company uses the intrinsic value method to account for the plans under Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees," under which no compensation cost has been recognized related to Stock option grants. The Company has adopted the disclosure provisions of SFAS No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure". Had compensation cost for this plan been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts for the following periods: Thirteen Thirteen weeks ended weeks ended November 29, November 30, 2003 2002 ------------ ------------ Income before cumulative effect of accounting change $ 9,523 $ 8,665 Less: pro forma compensation expense, net of tax (48) (34) --------- --------- Pro forma income before cumulative effect of accounting change 9,475 8,631 Cumulative effect of accounting change, net of tax -- (2,242) --------- --------- Pro forma net income $ 9,475 $ 6,389 ========= ========= Basic net income per weighted average common share, as reported: Income before cumulative effect of accounting change $ 0.50 $ 0.45 Cumulative effect of accounting change, net of tax -- (0.12) --------- --------- Net income per share $ 0.50 $ 0.33 ========= ========= Basic net income per weighted average common share, pro forma: Pro forma income before cumulative effect of accounting change $ 0.49 $ 0.45 Cumulative effect of accounting change, net of tax -- (0.12) --------- --------- Pro forma net income per share $ 0.49 $ 0.33 ========= ========= Diluted net income per weighted average common share, as reported: Income before cumulative effect of accounting change $ 0.49 $ 0.45 Cumulative effect of accounting change, net of tax -- (0.12) --------- --------- Net income per share $ 0.49 $ 0.33 ========= ========= Diluted net income per weighted average common share, pro forma: Pro forma income before cumulative effect of accounting change $ 0.49 $ 0.45 Cumulative effect of accounting change, net of tax -- (0.12) --------- --------- Pro forma net income per share $ 0.49 $ 0.33 ========= ========= 7
Cash and Cash Equivalents Cash and cash equivalents include cash in banks and bank short-term investments with maturities of less than ninety days. Financial Instruments The Company's financial instruments, which may expose the Company to concentrations of credit risk, include cash and cash equivalents, receivables, accounts payable, notes payable and long-term obligations. Each of these financial instruments is recorded at cost, which approximates its fair value. Insurance The Company self-insures for certain obligations related to health, workers' compensation, vehicles and general liability programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company's estimates consider historical claims experience and other factors. The Company's liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company's ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period. Environmental and Other Contingencies The Company is subject to legal proceedings and claims arising from the conduct of their business operations, including environmental matters, personal injury, customer contract matters, employment claims. Accounting principles generally accepted in the United States require that a liability for contingencies be recorded when it is probable that a liability has occurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. The Company regularly consults with attorneys and outside consultants to ensure that all of the relevant facts and circumstances are considered, before a contingent liability is recorded. The Company records accruals for environmental and other contingencies based on enacted laws, regulatory orders or decrees, the Company's estimates of costs, insurance proceeds, participation by other parties and the timing of payments, and the input of outside consultants and attorneys. The estimated liability for environmental contingencies has been discounted using credit-adjusted risk-free rates of interest that range from approximately 4.0% to 5.0% over periods ranging from fifteen to thirty years. The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3% per year. Changes in enacted laws, regulatory orders or decrees, management's estimates of costs, insurance proceeds, participation by other parties and the timing of payments, and the input of outside consultants and attorneys could have a material impact on the amounts recorded for environmental and other contingent liabilities. Reclassifications Certain prior year amounts have been reclassified to conform with current year presentation. Comprehensive Income The components of comprehensive income for the thirteen week periods ended November 29, 2003 and November 30, 2002, respectively, were as follows: Thirteen weeks Thirteen weeks ended ended November 29, November 30, 2003 2002 -------------- -------------- Net income $ 9,523 $ 6,423 Other comprehensive income (loss): Foreign currency translation adjustments 1,193 (13) Change in fair value of derivative instruments, net -- 59 ------- ------- Comprehensive income $10,716 $ 6,469 ======= ======= 8
2. Acquisition/Revolving Senior Credit Facility On September 2, 2003 ("Closing Date"), the Company completed its acquisition of 100% of Textilease Corporation ("Textilease"). The purchase price of approximately $175.6 million in cash was financed as part of a new $285 million unsecured revolving credit agreement ("Credit Agreement"), with a syndicate of banks. The Credit Agreement, completed on the Closing Date, replaces the Company's previous $125 million unsecured revolving credit agreement and is due on the third anniversary of the Closing Date (September 2, 2006). Availability of credit requires compliance with financial and other covenants, including maximum leverage, minimum fixed charge coverage, and minimum tangible net worth, as defined in the Credit Agreement. Textilease, headquartered in Beltsville, Maryland, had fiscal year 2002 revenues of approximately $95 million. It services over 25,000 uniform and textile products customers from 12 locations in six southeastern states, and also services a wide range of large and small first-aid service customers from additional specialized facilities. Textilease's operating results have been included in the Company's consolidated operating results since September 2, 2003. The following is a summary of the Company's preliminary estimate of the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The Company has engaged a third party to appraise the fair value of the acquired tangible and intangible assets. The results of the appraisal report are preliminary at this time. The final results of the appraisal may differ from the preliminary estimate of the fair value of the acquired tangible and intangible assets. The Company is also completing its analysis of the fair values of the liabilities assumed in connection with the acquisition, including certain liabilities that qualify for recognition under Emerging Issues Task Force 95-3 "Recognition of Liabilities in connection with a Purchase Business Combination". The Company will finalize the purchase price allocation after it receives the final appraisal report, completes its analysis of assumed liabilities, and receives other relevant information relating to the acquisition. The final purchase price allocation may be significantly different than the Company's preliminary estimate as presented below. Assets: Current assets $ 31,938 Property and equipment 23,826 Goodwill 117,504 Intangible assets subject to amortization (estimated fifteen year weighted-average useful life): 35,469 --------- Total assets acquired $ 208,737 ========= Liabilities: Current liabilities $ 17,300 Deferred compensation 5,249 Deferred income taxes 8,555 Long-term debt 2,005 --------- Total liabilities assumed $ 33,109 --------- Net assets acquired $ 175,628 ========= The $117.5 million of goodwill will be assigned to our only reportable segment, that being the design, rental, cleaning and delivery of occupational garments, industrial wiper towels, floor mats and other non-garment items. None of the goodwill is expected to be deductible for income tax purposes. At the time of acquisition, management approved a plan to integrate certain Textilease facilities into existing operations. Included in the purchase price allocation is a restructuring charge of approximately $6.5 million, which includes approximately $3.1 million in severance-related costs for corporate and field employees and $3.4 million in facility closing and lease cancellation costs. Through November 29, 2003, the Company paid and charged $467 against this accrual for severance-related costs. The Company expects to incur substantially all of the remaining costs within twenty-four months of the acquisition date. Supplemental Pro Forma Information The unaudited pro forma combined condensed statement of income for the thirteen weeks ended November 30, 2002 gives effect to the acquisition of Textilease and related financing as if the Textilease acquisition and the related financing had occurred on August 31, 2002. The unaudited pro forma combined condensed statement of income for the thirteen weeks ended November 30, 2002, includes the unaudited condensed consolidated statement of income of UniFirst for the thirteen weeks ended November 30, 2002, and the unaudited statement of operations of Textilease for the three months ended December 31, 2002, and pro forma adjustments to reflect the Textilease acquisition and the related financing. Textilease previously had a fiscal year ending on December 31. The pro forma adjustments include additional interest expense of approximately $1,285 related to the debt used to finance the acquisition, additional depreciation and amortization of approximately $524 related to the estimated increase to the fair value of property and equipment and intangible assets and the related income tax effect of approximately $723. The unaudited pro forma combined condensed statement of income is not necessarily indicative of the financial results that would have occurred if the Textilease acquisition and the related financing had been consummated on August 31, 2002, nor are they necessarily indicative of the financial results which may be attained in the future. The pro forma statement of income is based upon available information and upon certain assumptions that UniFirst's management believes are reasonable. The Textilease acquisition is being accounted for using the purchase method of accounting. The allocation of the purchase price is preliminary. Final amounts could differ from those reflected in the pro forma statement of income, and such differences could be significant. Thirteen weeks Thirteen weeks Thirteen weeks ended ended ended November 29, November 30, November 30, 2003 2002 2002 (Actual) (Actual) (Pro Forma) Revenues $ 180,898 $ 149,179 $ 172,401 Income before extraordinary items and cumulative effect of accounting change $ 9,523 $ 8,665 $ 7,288 Cumulative effect of accounting change, net of tax -- 2,242 2,242 ----------- ----------- ----------- Net Income $ 9,523 $ 6,423 $ 5,046 =========== =========== =========== Net Income Per Share: Weighted average number of shares - basic 19,184 19,218 19,218 =========== =========== =========== Weighted average number of shares - diluted 19,249 19,271 19,271 =========== =========== =========== Net income per share --Basic Income before cumulative effect of accounting change $ 0.50 $ 0.45 $ 0.38 Cumulative effect of accounting change, net -- (0.12) (0.12) ----------- ----------- ----------- Net income per share - basic $ 0.50 $ 0.33 $ 0.26 =========== =========== =========== Net income per share -- Diluted Income before cumulative effect of accounting change $ 0.49 $ 0.45 $ 0.38 Cumulative effect of accounting change, net -- (0.12) (0.12) ----------- ----------- ----------- Net income per share - diluted $ 0.49 $ 0.33 $ 0.26 =========== =========== =========== 9
3. Asset Retirement Obligations Effective September 1, 2002, the Company adopted the provisions of SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 generally applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. Under the new accounting method, the Company now recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. As of September 1, 2002, the Company recognized as a liability the present value of the estimated future costs to decommission its nuclear laundry facilities in accordance with the provisions of SFAS No. 143. The adoption of SFAS No. 143 resulted in a cumulative charge of $2.2 million, net of tax benefit of $1.4 million, related to the change in accounting principle, the recognition of a discounted asset retirement obligation of $5.3 million, and an increase of $2.4 million to the gross carrying value of the related long-lived assets ($900,000, net of accumulated depreciation of $1.5 million). The Company will depreciate, on a straight-line basis, the amount added to property and equipment and recognize accretion expense in connection with the discounted liability over the various remaining lives which range from approximately one to thirty years. The estimated liability has been based on historical experience in decommissioning nuclear laundry facilities, estimated useful lives of the underlying assets, external vendor estimates as to the cost to decommission these assets in the future and federal and state regulatory requirements. The estimated current costs have been adjusted for the estimated impact of inflation at 3% per year. The liability has been discounted using credit-adjusted risk-free rates that range from approximately 3.00% - 7.25% over one to thirty years. Revisions to the liability could occur due to changes in the Company's estimated useful lives of the underlying assets, estimated dates of decommissioning, changes in decommissioning costs, changes in federal or state regulatory guidance on the decommissioning of such facilities, or other changes in estimates. Changes due to revised estimates will be recognized by increasing or decreasing the carrying amount of the liability and the carrying amount of the related long-lived asset. In fiscal year 2003, the Company began decommissioning one of the nuclear laundry facilities for which it had recognized an asset retirement obligation. Costs incurred in connection with the decommissioning for the thirteen weeks ended November 29, 2003 were approximately $278. As of November 29, 2003, the Company believes this current decommissioning project will be completed by the end of fiscal 2004. A reconciliation of the Company's liability for the year ended November 29, 2003, is as follows: Balance at August 30, 2003 $ 7,060 Accretion expense 96 Asset retirement costs incurred (278) ------- Balance at November 29, 2003 $ 6,878 ======= As of November 29, 2003, the $6.9 million asset retirement obligation is included in accrued liabilities in the accompanying condensed consolidated balance sheet. 10
4. Derivative Instruments and Hedging Activities The Company has entered into interest rate swap agreements to manage its exposure to movements in interest rates on its variable rate debt. The Company accounts for these agreements in accordance with SFAS No. 133, as amended, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). The swap agreements are cash flow hedges and are used to manage exposure to interest rate movement by effectively changing the variable rate to a fixed rate. Such instruments are matched with the underlying borrowings. SFAS No. 133 eliminates special hedge accounting if a swap agreement does not meet certain criteria, thus requiring the Company to reflect all changes in the fair value of the swap agreement in earnings in the period of change. In October 1999, the Company entered into an interest rate swap agreement, notional amount $40,000 ("the $40,000 SWAP"), maturing October 13, 2004. The Company pays a fixed rate of 6.38% and receives a variable rate tied to the three month LIBOR rate. As of August 30, 2003, the applicable variable rate was 1.11%. On October 15, 2002, the bank had the option to terminate the $40,000 SWAP without further obligation to make payments to the Company. The bank did not exercise this option. Because of the existence of this termination option, the $40,000 SWAP did not meet the required criteria to qualify as a cash flow hedge and use special hedge accounting, under SFAS No. 133. Accordingly, the Company has recorded, in the interest rate swap income line item of its consolidated statements of income, income of $480 and income of $209 for the thirteen weeks ended November 29, 2003 and the thirteen weeks ended November 30, 2002, respectively, for the changes in the fair value of $40,000 SWAP. In June 2001, the Company entered into a second interest rate swap agreement with a notional amount of $20,000 ("the $20,000 SWAP"), maturing June 5, 2003. The Company paid a fixed rate of 4.69% and received a variable rate tied to the three month LIBOR rate. At maturity, the applicable variable rate was 1.34%. The $20,000 SWAP met the required criteria as defined in SFAS No. 133 to use special hedge accounting. The Company recorded, through the other comprehensive loss section of shareholders' equity, income of $59, net of tax of $37 for the thirteen weeks ended November 30, 2002, for the change in the fair value in the $20,000 SWAP. Since the $20,000 SWAP matured on June 5, 2003, there was no change in fair value in the $20,000 SWAP recorded in the thirteen weeks ended November 29, 2003. 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FOR THE THIRTEEN WEEKS ENDED NOVEMBER 29, 2003 Critical Accounting Policies and Estimates The Company believes the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. There have been no changes in judgments or estimates that had a material effect on our condensed consolidated financial statements for the periods presented. Revenue Recognition and Allowance for Doubtful Accounts The Company recognizes revenue from rental operations in the period in which the services are provided. Direct sale revenue is recognized in the period in which the product is shipped. Judgments and estimates are used in determining the collectability of accounts receivable. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Material differences may result in the amount and timing of bad debt expense recognition for any given period if management makes different judgments or utilizes different estimates. Inventories and Rental Merchandise in Service Inventories are stated at the lower of cost or market value, net of any reserve for excess and obsolete inventory. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. The Company uses the last-in, first-out (LIFO) method to value a significant portion of its inventories. Substantially all inventories represent finished goods. Rental merchandise in service is being amortized on a straight-line basis over the estimated service lives of the merchandise, which range from 6 to 24 months. In establishing estimated lives for merchandise in service, management considers historical experience and the intended use of the merchandise. Material differences may result in the amount and timing of operating profit for any period if management makes different judgments or utilizes different estimates. Insurance The Company self-insures for certain obligations related to health, workers' compensation, vehicles and general liability programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company's estimates consider historical claim experience and other factors. The Company's liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company's ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period. 12
Environmental and Other Contingencies The Company is subject to legal proceedings and claims arising from the conduct of their business operations, including environmental matters, personal injury, customer contract matters, employment claims. Accounting principles generally accepted in the United States require that a liability for contingencies be recorded when it is probable that a liability has occurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. The Company regularly consults with attorneys and outside consultants to ensure that all of the relevant facts and circumstances are considered, before a contingent liability is recorded. The Company records accruals for environmental and other contingencies based on enacted laws, regulatory orders or decrees, the Company's estimates of costs, insurance proceeds, participation by other parties and the timing of payments, and the input of outside consultants and attorneys. The estimated liability for environmental contingencies has been discounted using credit-adjusted risk-free rates of interest that range from approximately 4.0% to 5.0% over periods ranging from fifteen to thirty years. The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3% per year. Changes in enacted laws, regulatory orders or decrees, management's estimates of costs, insurance proceeds, participation by other parties and the timing of payments, and the input of outside consultants and attorneys could have a material impact on the amounts recorded for environmental and other contingent liabilities. Income Taxes The Company's policy of accounting for income taxes is in accordance with SFAS No. 109 - "Accounting for 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. The Company computes income tax expense by jurisdiction based on its operations in each jurisdiction. The Company is periodically reviewed by domestic and foreign tax authorities regarding the amount of taxes due. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, the Company records estimated reserves for probable exposures, in accordance with SFAS No. 5 - "Accounting for Contingencies". Based on the Company's evaluation of current tax positions, the Company believes it has appropriately accrued for probable exposures. Asset Retirement Obligations Effective September 1, 2002, the Company adopted the provisions of SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 generally applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. Under the new accounting method, the Company now recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company will depreciate, on a straight-line basis, the amount added to property and equipment and recognize accretion expense in connection with the discounted liability over the various remaining lives which range from approximately one to thirty years. The estimated liability has been based on historical experience in decommissioning nuclear laundry facilities, estimated useful lives of the underlying assets, external vendor estimates as to the cost to decommission these assets in the future and federal and state regulatory requirements. The estimated current costs have been adjusted for the estimated impact of inflation at 3% per year. The liability has been discounted using credit-adjusted risk-free rates that range from approximately 3.00% - 7.25% over one to thirty years. Revisions to the liability could occur due to changes in the Company's estimated useful lives of the underlying assets, estimated dates of decommissioning, changes in decommissioning costs, changes in federal or state regulatory guidance on the decommissioning of such facilities, or other changes in estimates. Changes due to revised estimates will be recognized by increasing or decreasing the carrying amount of the liability and the carrying amount of the related long-lived asset. 13
Results of Operations Thirteen weeks ended November 29, 2003 Compared with Thirteen Weeks Ended November 30, 2002 Revenues. Revenues for the thirteen weeks ended November 29, 2003 increased 21.3% to $180.9 million as compared with $149.2 million for the thirteen weeks ended November 30, 2002. This increase can be attributed to acquisitions, primarily Textilease (16.3%), growth from existing operations and price increases in the core uniform rental business (5.1%), and growth from existing operations in the first aid business (0.1%), offset by decreased revenue from the UniTech garment services business (0.2%). Operating costs. Operating costs increased to $115.1 million for the thirteen weeks ended November 29, 2003 as compared with $92.7 million for the thirteen weeks ended November 30, 2002. As a percentage of revenues, operating costs increased to 63.6% from 62.1% for these periods. This increase is primarily due to increased merchandise amortization costs resulting from the Textilease acquisition, as well as generally higher production costs related to the Textilease laundries. Selling and administrative expenses. The Company's selling and administrative expenses increased to $36.8 million, or 20.4% of revenues, for the thirteen weeks ended November 29, 2003 as compared with $31.9 million, or 21.4% of revenues, for the thirteen weeks ended November 30, 2002. The increase in selling and administrative expenses was primarily related to the acquisition of Textilease. The decrease in selling and administrative expenses as a percent of revenues is primarily attributable to the closure of Textilease's corporate office as well as relatively fewer salespersons as a function of the combined operations. Depreciation and amortization. The Company's depreciation and amortization expense increased to $11.0 million, or 6.1% of revenues, for the thirteen weeks ended November 29, 2003, as compared with $9.9 million, or 6.6% of revenues, for the thirteen weeks ended November 30, 2002. The increase in depreciation and amortization expense was primarily related to the Textilease acquisition offset by certain intangible assets becoming fully amortized during fiscal 2003. The decrease in depreciation and amortization expense as a percent of revenues is due to relatively lower depreciation costs as a percentage of the increased revenue from the Textilease acquisition and certain intangible assets related to an acquisition in 1986 becoming fully amortized during fiscal 2003. Other expense (income). Net other expense (interest expense, interest rate swap income and interest income) was $2.5 million, or 1.4% of revenues, for the thirteen weeks ended November 29, 2003 as compared with $0.6 million, or 0.4% of revenues, for the thirteen weeks ended November 30, 2002. The increase in net other expense was a result of the increased debt due to the acquisition of Textilease, offset by an increase in the fair value of the $40,000 SWAP, which was $0.5 million of income for the thirteen weeks ended November 29, 2003 as compared with $0.2 million of income for the thirteen weeks ended November 30, 2002. Provision for Income Taxes. The Company's effective income tax rate was 38.5% for the thirteen weeks ended November 29, 2003 and the thirteen weeks ended November 30, 2002. Liquidity and Capital Resources Shareholders' equity at November 29, 2003 was $345.6 million, or 59% of the Company's total capitalization. Net cash provided by operating activities was $22.9 million in the thirteen weeks ended November 29, 2003 as compared to net cash provided by operating activities of $20.2 million in the thirteen weeks ended November 30, 2002. The increase is primarily related to the Company's increased profitability. These cash flows were used primarily to fund $6.7 million in capital expenditures to expand and update Company facilities as well as reduce outstanding debt by $9.6 million. The Company increased its debt by approximately $177.3 million in the thirteen weeks ended November 29, 2003, primarily to complete its acquisition of Textilease. As of November 29, 2003, the Company had $8.0 million in cash and cash equivalents and $30.1 million available under its $285.0 million unsecured line of credit with a syndicate of banks, net of outstanding borrowings of $234.8 million and standby irrevocable bank commercial letters of credit of $20.1 million. The Company believes its cash generated from operations and its borrowing capacity will adequately cover its foreseeable capital requirements. Seasonality Historically, the Company's revenues and operating results have varied from quarter to quarter and are expected to continue to fluctuate in the future. These fluctuations have been due to a number of factors, including: general economic conditions in the 14
Company's markets; the timing of acquisitions and of commencing start-up operations and related costs; the effectiveness of integrating acquired businesses and start-up operations; the timing of nuclear plant outages; capital expenditures; seasonal rental and purchasing patterns of the Company's customers; and price changes in response to competitive factors. In addition, the Company's operating results historically have been lower during the second and fourth fiscal quarters than during the other quarters of the fiscal year. The operating results for any historical quarter are not necessarily indicative of the results to be expected for an entire fiscal year or any other interim periods. 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. SAFE HARBOR FOR FORWARD LOOKING STATEMENTS Forward looking statements contained in this quarterly report are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors that could cause actual results to differ materially from those reflected in such forward looking statements. Such factors include uncertainties regarding the Company's ability to consummate and successfully integrate acquired businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the Company's ability to compete successfully without any significant degradation in its margin rates, seasonal fluctuations in business levels, uncertainties regarding the price levels of natural gas, electricity, fuel, and labor, the impact of negative economic conditions on the Company's customers and such customer's workforce, the continuing increase in domestic healthcare costs, demand and prices for the Company's products and services, the impact of interest rate variability upon the Company's interest rate swap arrangements, additional professional and internal costs necessary for compliance with recent and proposed future changes in Securities and Exchange Commission (including the Sarbanes-Oxley Act of 2002), New York Stock Exchange, and accounting rules, strikes and unemployment levels, the Company's efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy and general economic conditions. When used in this quarterly report, the words "intend," "anticipate," "believe," "estimate," and "expect" and similar expressions as they relate to the Company are included to identify such forward looking statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk Management has determined that all of the Company's foreign subsidiaries operate primarily in local currencies that represent the functional currencies of the subsidiaries. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date, while income and expense accounts are translated at average exchange rates during the year. As such, the Company's operating results are affected by fluctuations in the value of the U.S. dollar as compared to currencies in foreign countries, as a result of the Company's transactions in these foreign markets. The Company does not operate a hedging program to mitigate the effect of a significant rapid change in the value of the Canadian Dollar, Euro or Mexican Peso as compared to the U.S. dollar. If such a change did occur, the Company would have to take into account a currency exchange gain or loss in the amount of the change in the U.S. dollar denominated balance of the amounts outstanding at the time of such change. While the Company does not believe such a gain or loss is likely, and would not likely be material, there can be no assurance that such a loss would not have an adverse material effect on the Company's results of operations or financial condition. Interest Rate Risk The Company is exposed to market risk from changes in interest rates which may adversely affect its financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposures through its regular operating and financing activities. The Company is exposed to interest rate risk primarily through its borrowings under its $285 million unsecured line of credit with a syndicate of banks. Under the line of credit, the Company may borrow funds at variable interest rates based on the Eurodollar rate or the bank's money market rate, as selected by the Company. As of November 29, 2003, the Company's outstanding debt approximates its carrying value. The Company has entered into a $40 million interest rate swap agreement to manage its exposure to movements in interest rates on its variable rate debt. The swap agreement is a cash flow hedge and is used to manage exposure to interest rate movement by effectively changing 15
the variable rate to a fixed rate. Such instruments are matched with the underlying borrowings. The effective portion of the cash flow hedge is recorded within the other comprehensive loss section of shareholders' equity in the period of change in fair value. The ineffective portion of the cash flow hedge is charged to the Company's consolidated statement of income in the period of change in fair value. The Company is evaluating alternatives to manage its exposure to movements in interest rates on its variable rate debt related to the Credit Agreement. ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that material information relating to the Company required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In designing and evaluating the disclosure controls and procedures, the Company's management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. The Company currently is in the process of further reviewing and documenting its disclosure controls and procedures, and its internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the first quarter of fiscal year 2004 that have materially affected, or that are reasonably likely to materially affect our internal controls over financial reporting. Part II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: * 31.1 Rule 13a-14(a)/15d-14(a) certification of Ronald D. Croatti * 31.2 Rule 13a-14(a)/15d-14(a) certification of John B. Bartlett ** 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 ** 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 * Filed herewith ** Furnished herewith (b) Reports on Form 8-K: On September 17, 2003, the Company filed a Current Report on Form 8-K to report information pursuant to Item 2. Acquisition or Disposition of Assets in connection with the Company's completion on September 2, 2003 of its acquisition of the business and assets of Textilease Corporation. The Company attached as Exhibit 2.1 to the Current Report a Stock Purchase Agreement, dated as of July 17, 2003, by and among UniFirst Corporation and all of the stockholders of Textilease Corporation. On November 4, 2003, the Company furnished a Current Report on Form 8-K to report information pursuant to Item 12 - Results of Operations and Financial Condition. The Company attached as Exhibit 99.1 to the Current Report the Company's press release announcing financial results for the fiscal year ended August 30, 2003. 16
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 January 13, 2004 By: /s/ Ronald D. Croatti ----------------------- Ronald D. Croatti President and Chief Executive Officer UniFirst Corporation January 13, 2004 By: /s/ John B. Bartlett ---------------------- John B. Bartlett Senior Vice President and Chief Financial Officer EXHIBIT INDEX DESCRIPTION * 31.1 Rule 13a-14(a)/15d-14(a) certification of Ronald D. Croatti * 31.2 Rule 13a-14(a)/15d-14(a) certification of John B. Bartlett ** 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 ** 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 * Filed herewith ** Furnished herewith 17
Exhibit 31.1 I, Ronald D. Croatti, certify that: 1. I have reviewed this quarterly report on Form 10-Q of UniFirst Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant, and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the Registrant's internal control over financial reporting and; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: January 13, 2004 By: /s/ Ronald D. Croatti ------------------------------------------ Ronald D. Croatti, Chief Executive Officer (Principal Executive Officer) 18
Exhibit 31.2 I, John B. Bartlett, certify that: 1. I have reviewed this quarterly report on Form 10-Q of UniFirst Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant, and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the Registrant's internal control over financial reporting and; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: January 13, 2004 By: /s/ John B. Bartlett ------------------------------------------- John B. Bartlett, Chief Financial Officer (Principal Financial Officer) 19
Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned officer of UniFirst Corporation (the "Company") hereby certifies that the Company's quarterly report on Form 10-Q for the period ended November 29, 2003 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be part of the Report or "filed" for any purpose whatsoever. Date: January 13, 2004 By: /s/ Ronald D. Croatti ------------------------------------------ Ronald D. Croatti, Chief Executive Officer (Principal Executive Officer) 20
Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned officer of UniFirst Corporation (the "Company") hereby certifies that the Company's quarterly report on Form 10-Q for the period ended November 29, 2003 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be part of the Report or "filed" for any purpose whatsoever. Date: January 13, 2004 By: /s/ John B. Bartlett ------------------------------------------- John B. Bartlett, Chief Financial Officer (Principal Financial Officer) 21