1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF_ THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended Commission File February 26, 1994 Number 1-8504 UNIFIRST CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2103460 (State of Incorporation) (IRS Employer Identification Number) 68 Jonspin Road Wilmington, Massachusetts 01887 (Address of principal executive offices) Registrant's telephone number, including area code: (508) 658-8888 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of outstanding shares of the registrant's Common Stock and Class B Common Stock as of April 4, 1994 were 7,883,154 and 12,627,454 respectively. 2 PART 1 - FINANCIAL INFORMATION FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES CONDENSED BALANCE SHEETS (unaudited)
The accompanying notes are an integral part of these condensed financial statements.February 26, August 28, February 27, 1994 1993* 1993 - ---------------------------------------------------------------------------------------- Assets Current assets: Cash $ 4,862,000 $ 3,656,000 $ 2,946,000 Receivables 28,378,000 24,849,000 25,462,000 Inventories 12,987,000 11,536,000 11,755,000 Rental merchandise in service 28,101,000 26,565,000 24,370,000 Prepaid expenses 106,000 115,000 268,000 - ---------------------------------------------------------------------------------------- Total current assets 74,434,000 66,721,000 64,801,000 - ---------------------------------------------------------------------------------------- Property and equipment: Land, buildings and leasehold improvements 97,454,000 93,347,000 90,406,000 Machinery and equipment 92,530,000 86,165,000 84,538,000 Motor vehicles 22,564,000 21,899,000 20,417,000 - ---------------------------------------------------------------------------------------- 212,548,000 201,411,000 195,361,000 Less - accumulated depreciation 81,769,000 75,617,000 76,099,000 - ---------------------------------------------------------------------------------------- 130,779,000 125,794,000 119,262,000 - ---------------------------------------------------------------------------------------- Other assets 29,154,000 26,549,000 27,878,000 - ---------------------------------------------------------------------------------------- $234,367,000 $219,064,000 $211,941,000 ======================================================================================== Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term obligations $ 6,116,000 $ 6,055,000 $ 6,038,000 Notes payable 428,000 177,000 195,000 Accounts payable 7,792,000 10,624,000 8,555,000 Accrued liabilities 25,078,000 25,225,000 20,119,000 Accrued and deferred income taxes 4,498,000 5,399,000 6,213,000 - ---------------------------------------------------------------------------------------- Total current liabilities 43,912,000 47,480,000 41,120,000 - ---------------------------------------------------------------------------------------- Long-term obligations, net of current maturities 35,653,000 26,176,000 32,785,000 Deferred income taxes 13,633,000 12,685,000 13,512,000 - ---------------------------------------------------------------------------------------- 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 7,874,354 shares 787,000 787,000 2,048,000 Class B Common stock, $.10 par value; 20,000,000 shares authorized, issued and outstanding 12,627,454 shares 1,263,000 1,263,000 -- Capital surplus 7,008,000 7,008,000 6,714,000 Retained earnings 132,472,000 123,793,000 115,379,000 Cumulative translation adjustment (361,000) (128,000) 383,000 - ---------------------------------------------------------------------------------------- Total shareholders' equity 141,169,000 132,723,000 124,524,000 - ---------------------------------------------------------------------------------------- $234,367,000 $219,064,000 $211,941,000 ======================================================================================== * Condensed from audited financial statements 3 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF INCOME (unaudited)
The accompanying notes are an integral part of these condensed financial statements.Twenty-six Twenty-six Thirteen Thirteen weeks ended weeks ended weeks ended weeks ended February 26, February 27, February 26, February 27, 1994 1993 1994 1993 - --------------------------------------------------------------------------------------------------- Revenues $154,201,000 $141,346,000 $76,094,000 $69,637,000 - --------------------------------------------------------------------------------------------------- Costs and expenses: Operating costs 94,337,000 85,931,000 48,265,000 43,237,000 Selling and administrative expenses 34,804,000 32,874,000 16,708,000 16,318,000 Depreciation and amortization 8,687,000 8,143,000 4,428,000 4,057,000 - --------------------------------------------------------------------------------------------------- 137,828,000 126,948,000 69,401,000 63,612,000 - --------------------------------------------------------------------------------------------------- Income from operations 16,373,000 14,398,000 6,693,000 6,025,000 - --------------------------------------------------------------------------------------------------- Interest expense (income): Interest expense 1,308,000 1,608,000 674,000 787,000 Interest income (138,000) (98,000) (70,000) (33,000) - --------------------------------------------------------------------------------------------------- 1,170,000 1,510,000 604,000 754,000 - --------------------------------------------------------------------------------------------------- Income before income taxes 15,203,000 12,888,000 6,089,000 5,271,000 Provision for income taxes 5,625,000 4,511,000 2,253,000 1,845,000 - --------------------------------------------------------------------------------------------------- Net income $ 9,578,000 $ 8,377,000 $ 3,836,000 $ 3,426,000 =================================================================================================== Weighted average number of shares outstanding 20,508,646 20,424,632 20,508,650 20,441,612 =================================================================================================== Net income per share $0.47 $0.41 $0.19 $0.17 =================================================================================================== 4 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
The accompanying notes are an integral part of these condensed financial statements.Twenty-six Twenty-six weeks ended weeks ended February 26, February 27, 1994 1993 - ----------------------------------------------------------------------------- Cash flows from operating activities: Net Income $ 9,578,000 $ 8,377,000 Adjustments: Depreciation 7,282,000 6,718,000 Amortization of other assets 1,405,000 1,425,000 Receivables (3,562,000) (3,097,000) Inventories (1,439,000) 589,000 Rental merchandise in service (1,568,000) (687,000) Prepaid expenses 10,000 (89,000) Accounts payable (3,130,000) (375,000) Accrued liabilities (124,000) 2,834,000 Accrued and deferred income taxes (893,000) (877,000) Deferred income taxes 956,000 767,000 - ----------------------------------------------------------------------------- Net cash provided by operating activities 8,515,000 15,585,000 - ----------------------------------------------------------------------------- Cash flows from investing activities: Acquisition of businesses, net of working capital acquired (4,000,000) -- Capital expenditures (11,702,000) (5,712,000) Other assets, net (501,000) 81,000 - ----------------------------------------------------------------------------- Net cash used in investing activites (16,203,000) (5,631,000) - ----------------------------------------------------------------------------- Cash flows from financing activities: Increase (reduction) in debt 9,793,000 (9,573,000) Proceeds from exercise of stock options -- 311,000 Cash dividends paid or payable (899,000) (1,022,000) - ----------------------------------------------------------------------------- Net cash provided by (used in) financing activities 8,894,000 (10,284,000) - ----------------------------------------------------------------------------- Net increase (decrease) in cash 1,206,000 (330,000) Cash at beginning of period 3,656,000 3,276,000 - ----------------------------------------------------------------------------- Cash at end of period $ 4,862,000 $ 2,946,000 ============================================================================= Supplemental disclosure of cash flow information: Interest paid $ 1,335,000 $ 1,663,000 Income taxes paid $ 5,579,000 $ 4,652,000 ============================================================================= 5 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS FOR THE TWENTY-SIX WEEKS ENDED FEBRUARY 26, 1994 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 Company. 3. During 1993 the Company's shareholders voted to amend its Articles of Organization to increase the number of authorized common shares from 20,000,000 to 30,000,000, and to authorize a new Class B common stock with 20,000,000 authorized shares. The Company offered to exchange, on a share-for-share basis, shares of Class B common stock for shares of common stock. 4. On November 18, 1993 the Company's Board of Directors declared a two-for-one stock split, to be effected in the form of a stock dividend, on the Company's Common Stock and Class B Common Stock. The stock dividend was paid on January 19, 1994 to shareholders of record on January 5, 1994. All references to average number of shares outstanding, per share data and Shareholders' Equity section in these financial statements are after giving retroactive effect to the two-for-one split. 5. On November 1, 1993 the Company acquired all of the outstanding stock of Modern Coverall and Uniform Supply, Inc., a garment rental business located in Los Angeles, CA. 6. On February 28, 1994 the Company acquired the assets of Clean Services, Inc., a garment rental business located in Enid, OK. 6 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE TWENTY-SIX WEEKS ENDED FEBRUARY 26, 1994 RESULTS OF OPERATIONS --------------------- Twenty-six Weeks of Fiscal 1994 compared to Twenty-six Weeks of --------------------------------------------------------------- Fiscal 1993 ----------- Fiscal 1994 revenues for the twenty-six weeks increased $12,855,000 or 9.1% over the twenty-six weeks in fiscal 1993. This increase can be attributed to an acquisition (.7%) and internal growth and modest price increases (8.4%). Income from operations as a percentage of revenue increased to 10.6% in fiscal 1994 from 10.2% in the fiscal 1993 period. The primary reason for the increase is the net result of a favorable contribution improvement from the core industrial rental business, offset by a less favorable comparative period result from the nuclear business. Net interest expense (interest expense less interest income) was $1,170,000 in fiscal 1994 as compared to $1,510,000 in fiscal 1993. The decrease is attributable to lower interest rates in fiscal 1994. The provision for income taxes for the current period was 37.0% as compared to 35.0% for the corresponding 1993 period. The increase is due primarily to an increase in the statutory federal income tax rate affecting fiscal 1994. Thirteen Weeks ended February 26, 1994 compared to Thirteen Weeks ----------------------------------------------------------------- ended February 27, 1993 ----------------------- Fiscal 1994 second quarter revenues increased $6,457,000 or 9.3% over the fiscal 1993 second quarter. This increase can be attributed to an acquisition (1.1%) and internal growth and modest price increases (8.2%). Income from operations as a percentage of revenue was 8.8% in fiscal 1994, comparable to 8.7% for the fiscal 1993 period. Improvement of 1.4% in selling and administrative expenses, primarily attributable to lower employee insurance related costs, was offset by a 1.3% increase in operating costs. The operating cost increase was due primarily to the nuclear business quarter-to-quarter results shortfall and the general severe weather conditions in the 1994 quarter. Net interest expense was $604,000 in fiscal 1994 as compared to $754,000 in fiscal 1993. The decrease is again attributable to lower interest rates in fiscal 1994. The provision for income taxes for the current period was 37.0% as compared to 35.0% for the corresponding 1993 period. The increase is due primarily to an increase in the statutory federal income tax rate affecting fiscal 1994. 7 FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) FOR THE TWENTY-SIX WEEKS ENDED FEBRUARY 26, 1994 CAPITAL RESOURCES AND LIQUIDITY ------------------------------- The Company believes that its ability to generate cash from operations will adequately cover its foreseeable capital requirements. EFFECTS OF INFLATION -------------------- Inflation has had the effect of increasing the reported amounts of the Company's revenues and costs. The Company uses the last-in, first-out (LIFO) method to value a significant portion of inventories. This method tends to reduce the amount of income due to inflation included in the Company's results of operations. The Company believes that, through increases in its prices, it has been able to recover increases in costs and expenses attributable to inflation. 8 PART II - OTHER INFORMATION FORM 10-Q UNIFIRST CORPORATION AND SUBSIDIARIES Item 1. Legal Proceedings - -------------------------- Reference is made to Note 2 of notes to condensed financial statements and to the discussion under the heading Environmental Matters in the Company's Annual Report on Form 10-K for the fiscal year ended August 28, 1993. Item 4. Submission of Matters to a Vote of Secured Holders - ----------------------------------------------------------- Registrant's Annual Meeting of Shareholders was held on January 11, 1994. Aldo A. Croatti and Albert Cohen were reelected to the Board of Directors. With respect to Mr. Croatti, 3,542,407 shares of Common Stock and 6,311,302 shares of Class B Common Stock were voted for his election and 63,016 shares of Common Stock were voted against his election. With respect to Mr. Cohen, 3,542,207 shares of Common Stock were voted for his election and 63,216 shares of Common Stock were voted against his election. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. UNIFIRST CORPORATION Ronald D. Croatti ----------------- Ronald D. Croatti Vice Chairman and Chief Executive Officer Date: April 12, 1994 John B. Bartlett ---------------- John B. Bartlett Senior Vice President and Chief Financial Officer