UniFirst Announces Fiscal 2013 Third Quarter Results

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UniFirst Announces Fiscal 2013 Third Quarter Results

WILMINGTON, Mass.--(BUSINESS WIRE)-- UniFirst Corporation (NYS: UNF) today announced results for its third fiscal quarter ended May 25, 2013. Revenues were $335.8 million, up 4.6% from $320.9 million in the year ago period. Net income was $28.7 million ($1.43 per diluted share), compared to $27.5 million ($1.37 per diluted share) reported in the year ago period. The results of the third quarter of fiscal 2012 included the positive effect of a settlement related to environmental litigation. The settlement resulted in a $6.7 million gain which was recorded as a reduction of selling and administrative expenses. Diluted earnings per share for the third quarter of fiscal 2012 adjusted to eliminate the effect of the gain were $1.16. Current quarter diluted earnings per share increased 23.3% compared to the adjusted earnings from a year ago.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, "We are very pleased with our results which continue to demonstrate our ability to grow our business and improve its profitability. Our strong operating results and solid financial condition also allow us to continue making investments in our infrastructure and technology that will improve our already high levels of customer service and satisfaction."

Third quarter revenues in the Core Laundry Operations were $297.7 million, up 5.9% from those reported in the prior year's third quarter. This segment's income from operations increased 36.5% compared to the third quarter of fiscal 2012 when adjusted to exclude the impact of the $6.7 million gain referred to above. Operating margin for the quarter was 13.6% compared to an operating margin of 10.5% a year ago when adjusted to exclude the $6.7 million gain. Increased profitability in this segment was primarily the result of improved operating leverage that came with our revenue growth. Expenses related to merchandise, payroll and energy were lower as a percentage of revenue compared to the prior year. In addition, comparisons were positively impacted by expenses incurred in the third quarter of fiscal 2012 related to the Company's initiative to update its CRM computer systems.

Revenues for the Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $26.3 million, down 10.0% from $29.3 million in the third quarter of fiscal 2012. This segment had income from operations for the quarter of $3.6 million, down from $5.0 million in the same quarter a year ago. The decline in revenue and profits was due primarily to the absence of revenues from two large power reactor rebuild projects that ended in the fourth quarter of fiscal 2012 as well as a lighter than expected spring outage season.

UniFirst continues to maintain a solid balance sheet and financial position. Cash and cash equivalents at the end of the quarter totaled $175.6 million, up from $120.1 million at the end of fiscal 2012. Cash provided by operating activities for the first nine months of the year was $139.5 million, up 30.6% compared to $106.8 million for the first nine months of fiscal 2012. The improved cash flows were primarily the result of higher earnings as well as lower cash outflows related to working capital. At the end of the quarter, total debt was $110.9 million, or 10.1% of total capital.


Mr. Croatti continued, "We continue to expect full year revenues to be between $1.344 billion and $1.354 billion. Due to the weaker than expected third quarter results from our Specialty Garments segment as well as the fourth quarter outlook for this segment, we are reducing and narrowing our full year profit guidance to a range of $5.60 per share to $5.70 per share from the previously communicated $5.65 per share to $5.80 per share. As a reminder, our guidance includes one extra week of operations in our fiscal fourth quarter."

Conference Call Information

UniFirst will hold a conference call today at 10:00 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

UniFirst Corporation is one of the largest providers of workplace uniforms, protective clothing, and facility services products in North America. The Company employs approximately 11,000 Team Partners who serve more than 240,000 customer locations in 45 U.S. states, Canada, and Europe from over 200 customer service, distribution, and manufacturing facilities. UniFirst is a publicly held company traded on the New York Stock Exchange under the symbol UNF and is a component of the Standard & Poor's 600 Small Cap Index.

Forward Looking Statements

This public announcement may contain forward looking statements that reflect the Company's current views with respect to future events and financial performance. 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 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, but are not limited to, 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, any adverse outcome of pending or future contingencies or claims, the Company's ability to compete successfully without any significant degradation in its margin rates, seasonal 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 future changes in federal or state laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the impact of adverse economic conditions and the current tight credit markets on our customers and such customers' workforce, the level and duration of workforce reductions by our customers, the continuing increase in domestic healthcare costs, demand and prices for our products and services, rampant criminal activity and instability in Mexico where our principal garment manufacturing plants are located, our ability to properly and efficiently design, construct, implement and operate our new CRM computer system, additional professional and internal costs necessary for compliance with recent and proposed future changes in Securities and Exchange Commission, 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, general economic conditions and other factors described under "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended August 25, 2012 and in other filings with the Securities and Exchange Commission. When used in this public announcement, the words "anticipate," "optimistic," "believe," "estimate," "expect," "intend," and similar expressions as they relate to the Company are included to identify such forward looking statements. The Company undertakes no obligation to update any forward looking statements to reflect events or circumstances arising after the date on which such statements are made.

UniFirst Corporation and Subsidiaries
Consolidated Statements of Income

  Thirteen weeks ended   Thirty-nine weeks ended
(In thousands, except per share data) May 25,
2013 (2)
  May 26,
2012 (2)
May 25,
2013 (2)
  May 26,
2012 (2)
Revenues $ 335,764 $ 320,931 $ 1,002,639 $ 943,915
Operating expenses:
Cost of revenues (1) 208,066 202,433 618,038 599,009
Selling and administrative expenses (1) 64,786 59,108 194,891 179,429
Depreciation and amortization 17,115 16,718 51,065 49,615
Total operating expenses 289,967 278,259 863,994 828,053
Income from operations 45,797 42,672 138,645 115,862
Other (income) expense:
Interest expense 464 511 1,324 1,639
Interest income (781 ) (656 ) (2,472 ) (2,036 )
Exchange rate loss 283 457 321 1,028
Total other (income) expense (34 ) 312 (827 ) 631
Income before income taxes 45,831 42,360 139,472 115,231
Provision for income taxes 17,109 14,901 53,348 42,774
Net income $ 28,722 $ 27,459 $ 86,124 $ 72,457
Income per share - Basic
Common Stock $ 1.51 $ 1.45 $ 4.53 $ 3.83
Class B Common Stock $ 1.21 $ 1.16 $ 3.63 $ 3.06
Income per share - Diluted
Common Stock $ 1.43 $ 1.37 $ 4.29 $ 3.63
Income allocated to - Basic
Common Stock $ 22,638 $ 21,587 $ 67,793 $ 59,926
Class B Common Stock $ 5,647 $ 5,381 $ 16,880 $ 14,214
Income allocated to - Diluted
Common Stock $ 28,307 $ 26,993 $ 84,747 $ 71,205
Weighted average number of shares outstanding - Basic
Common Stock 14,993 14,905 14,960 14,872
Class B Common Stock 4,675 4,644 4,656 4,642
Weighted average number of shares outstanding - Diluted
Common Stock 19,820 19,646 19,751 19,600

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

(2) Unaudited

UniFirst Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

(In thousands)         May 25,

2013 (1)

    August 25,


Current assets:
Cash and cash equivalents $ 175,591 $ 120,123
Receivables, net 147,170 135,327
Inventories 72,355 75,420
Rental merchandise in service 133,741 138,284
Prepaid and deferred income taxes 12,813 12,785
Prepaid expenses 9,565 5,741
Total current assets 551,235 487,680
Property, plant and equipment:
Land, buildings and leasehold improvements 373,530 355,568
Machinery and equipment 461,576 425,274
Motor vehicles 153,411 141,370
Total property, plant and equipment 988,517 922,212
Less - accumulated depreciation 539,994 510,008
Total property, plant and equipment, net 448,523 412,204
Goodwill 288,620 288,137
Customer contracts and other intangible assets, net 43,976 50,531
Other assets 2,428 1,982
Total assets $ 1,334,782 $ 1,240,534
Liabilities and shareholders' equity
Current liabilities:
Loans payable and current maturities of long-term debt $ 110,716 $ 6,831
Accounts payable 55,531 52,340
Accrued liabilities 85,641 78,174
Accrued income taxes 1,462 8,180
Total current liabilities 253,350 145,525
Long-term liabilities:
Long-term debt, net of current maturities 155 100,155
Accrued liabilities 44,933 43,420
Accrued and deferred income taxes 54,488 54,509
Total long-term liabilities 99,576 198,084
Shareholders' equity:
Common Stock 1,512 1,506
Class B Common Stock 487 488
Capital surplus 47,449 42,984
Retained earnings 928,661 844,676
Accumulated other comprehensive income 3,747 7,271
Total shareholders' equity 981,856 896,925
Total liabilities and shareholders' equity $ 1,334,782 $ 1,240,534
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