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
March 2, 1996 Number 1-8504
UNIFIRST CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2103460
(State of Incorporation) (IRS Employer ID Number)
68 Jonspin Road
Wilmington, Massachusetts 01887
(Address of principal executive offices)
Registrant's telephone number: (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 9, 1996 were 7,886,644 and 12,623,964 respectively.
2
PART 1 - FINANCIAL INFORMATION
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(unaudited)
March 2, August 26, February 25,
1996 1995* 1995
- -------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 5,942,000 $ 5,889,000 $ 5,344,000
Receivables 38,312,000 33,420,000 32,040,000
Inventories 17,431,000 16,484,000 17,014,000
Rental merchandise in service 33,516,000 32,731,000 32,409,000
Prepaid expenses 102,000 118,000 146,000
- -------------------------------------------------------------------------------------------------------------
Total current assets 95,303,000 88,642,000 86,953,000
- -------------------------------------------------------------------------------------------------------------
Property and equipment:
Land, buildings and leasehold improvements 116,152,000 111,148,000 105,940,000
Machinery and equipment 115,860,000 109,538,000 106,115,000
Motor vehicles 31,072,000 28,816,000 27,151,000
- -------------------------------------------------------------------------------------------------------------
263,084,000 249,502,000 239,206,000
Less - accumulated depreciation 108,618,000 101,428,000 97,784,000
- -------------------------------------------------------------------------------------------------------------
154,466,000 148,074,000 141,422,000
- -------------------------------------------------------------------------------------------------------------
Other assets 44,015,000 35,975,000 37,349,000
- -------------------------------------------------------------------------------------------------------------
$293,784,000 $272,691,000 $265,724,000
=============================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 1,046,000 $ 4,015,000 $ 6,759,000
Notes payable 353,000 882,000 --
Accounts payable 13,144,000 12,992,000 11,227,000
Accrued liabilities 40,131,000 35,370,000 33,739,000
Accrued and deferred income taxes 3,909,000 3,882,000 4,498,000
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 58,583,000 57,141,000 56,223,000
- -------------------------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 41,014,000 32,361,000 37,134,000
Deferred income taxes 14,981,000 14,593,000 14,542,000
- -------------------------------------------------------------------------------------------------------------
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
7,886,644 shares 789,000 789,000 788,000
Class B Common stock, $.10 par value; 20,000,000
shares authorized; issued and outstanding
12,623,964 shares 1,262,000 1,262,000 1,263,000
Capital surplus 7,078,000 7,078,000 7,042,000
Retained earnings 170,507,000 159,701,000 149,377,000
Cumulative translation adjustment (430,000) (234,000) (645,000)
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 179,206,000 168,596,000 157,825,000
- -------------------------------------------------------------------------------------------------------------
$293,784,000 $272,691,000 $265,724,000
=============================================================================================================
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(unaudited)
Twenty-seven Twenty-six Fourteen Thirteen
weeks ended weeks ended weeks ended weeks ended
March 2, February 25, March 2, February 25,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Revenues $196,238,000 $172,443,000 $100,825,000 $86,231,000
- -------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Operating costs 121,181,000 108,247,000 63,604,000 55,977,000
Selling and administrative expenses 45,660,000 38,756,000 23,907,000 18,880,000
Depreciation and amortization 9,999,000 9,529,000 5,093,000 4,752,000
- -------------------------------------------------------------------------------------------------------------------------
176,840,000 156,532,000 92,604,000 79,609,000
- -------------------------------------------------------------------------------------------------------------------------
Income from operations 19,398,000 15,911,000 8,221,000 6,622,000
- -------------------------------------------------------------------------------------------------------------------------
Interest expense (income):
Interest expense 1,240,000 1,535,000 574,000 745,000
Interest income (132,000) (101,000) (65,000) (56,000)
- -------------------------------------------------------------------------------------------------------------------------
1,108,000 1,434,000 509,000 689,000
- -------------------------------------------------------------------------------------------------------------------------
Income before income taxes 18,290,000 14,477,000 7,712,000 5,933,000
Provision for income taxes 6,584,000 5,067,000 2,776,000 2,077,000
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 11,706,000 $ 9,410,000 $ 4,936,000 $ 3,856,000
=========================================================================================================================
Weighted average number of shares outstanding 20,510,608 20,510,608 20,510,608 20,510,608
=========================================================================================================================
Net income per share $ 0.57 $ 0.46 $ 0.24 $ 0.19
=========================================================================================================================
The accompanying notes are an integral part of these condensed financial
statements.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Twenty-seven Twenty-six
weeks ended weeks ended
March 2, February 25,
1996 1995
- -----------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 11,706,000 $ 9,410,000
Adjustments:
Depreciation 8,338,000 7,955,000
Amortization of other assets 1,661,000 1,574,000
Receivables (4,254,000) (1,670,000)
Inventories (899,000) (1,520,000)
Rental merchandise in service 303,000 (955,000)
Prepaid expenses 16,000 81,000
Accounts payable 99,000 (1,322,000)
Accrued liabilities 4,690,000 6,364,000
Accrued and deferred income taxes 44,000 (1,074,000)
Deferred income taxes 395,000 861,000
- -----------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,099,000 19,704,000
- -----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (11,517,000) (6,614,000)
Capital expenditures (13,089,000) (11,149,000)
Other assets, net (1,712,000) (1,668,000)
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (26,318,000) (19,431,000)
- -----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in debt 12,598,000 5,825,000
Reduction of debt (7,427,000) (3,975,000)
Cash dividends paid or payable (899,000) (899,000)
- -----------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,272,000 951,000
- -----------------------------------------------------------------------------------------------
Net increase in cash 53,000 1,224,000
Cash at beginning of period 5,889,000 4,120,000
- -----------------------------------------------------------------------------------------------
Cash at end of period $ 5,942,000 $ 5,344,000
===============================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 1,283,000 $ 1,563,000
Income taxes paid $ 6,356,000 $ 5,292,000
===============================================================================================
The accompanying notes are an integral part of these condensed financial
statements.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE TWENTY-SEVEN WEEKS ENDED MARCH 2, 1996
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. In February, 1996 the Company acquired two uniform rental plants in
California from National Service Industries, Inc., a garment and linen rental
business headquartered in Atlanta, GA.
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE TWENTY-SEVEN WEEKS ENDED MARCH 2, 1996
RESULTS OF OPERATIONS
- ---------------------
Twenty-seven Weeks of Fiscal 1996 compared to Twenty-six Weeks of Fiscal 1995
- -----------------------------------------------------------------------------
Revenues for the first twenty-seven weeks of fiscal 1996 increased $23,795,000
or 13.8% over the first twenty-six weeks of fiscal 1995. This increase can be
attributed to an extra week of revenue (3.8%), acquisitions (1.0%), price
increases (1.0%) and growth from existing operations (8.0%).
Income from operations as a percentage of revenue increased to 9.9% in fiscal
1996 from 9.2% for the fiscal 1995 period. The main reason for the increase is
improved profit margins in the Company's primary rental business, principally
attributable to restructuring of the Company's service management structure and
telemarketing operations. Also, depreciation expense as a percent of revenues
improved .4% compared to the prior period.
Net interest expense (interest expense less interest income) was $1,108,000 in
fiscal 1996 as compared to $1,434,000 in fiscal 1995. The decrease is
attributable to lower average debt levels and lower interest rates in fiscal
1996.
The provision for income taxes for the current period was 36.0% as compared to
35.0% for the corresponding 1995 period. The increase in 1996 is due primarily
to higher state income taxes.
Fourteen Weeks ended March 2, 1996 compared to Thirteen Weeks ended
- -------------------------------------------------------------------
February 25, 1995
- -----------------
Fiscal 1996 second quarter revenues increased $14,594,000 or 16.9% over the
fiscal 1995 second quarter. This increase can be attributed to an extra week of
revenue (7.7%), acquisitions (.6%), price increases (1.0%) and growth from
existing operations (7.6%).
Income from operations as a percentage of revenue increased to 8.2% in fiscal
1996 from 7.7% for the fiscal 1995 period. The primary reason for the increase
is improved profit margins in our primary rental business as discussed above.
Also, depreciation expense as a percent of revenues improved .3% compared to the
prior period.
Net interest expense (interest expense less interest income) was $509,000 in
fiscal 1996 as compared to $689,000 in fiscal 1995. The decrease is attributable
to lower average debt levels and lower interest rates in fiscal 1996.
The provision for income taxes for the current period was 36.0% as compared to
35.0% for the corresponding 1995 period. The increase in 1996 is again due
primarily to higher state income taxes
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FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)
FOR THE TWENTY-SEVEN WEEKS ENDED MARCH 2, 1996
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the twenty-seven weeks ended March 2, 1996 net cash provided by operating
activities, $22,099,000, and additional borrowings of $12,598,000 were primarily
used for capital expenditures, $13,089,000, acquisition of businesses,
$11,517,000, debt repayment, $7,427,000 and dividends, $899,000.
Shareholders' equity as a percent of total capital was 81.0% at March 2, 1996,
indicating the overall strength of the Company's balance sheet. The Company had
$5,942,000 in cash and $18,325,000 available on its $50,000,000 line of credit
as of March 2, 1996. The Company believes 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 and
productivity improvements, it has been able to recover increases in costs and
expenses attributable to inflation.
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PART II - OTHER INFORMATION
FORM 10-Q
UNIFIRST CORPORATION AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Registrant's Annual Meeting of Shareholders was held on January 9, 1996. Ronald
D. Croatti and Donald J. Evans were reelected to the Board of Directors. With
respect to Mr. Croatti, 6,591,669 shares of Common Stock and 12,620,464 shares
of Class B Common Stock were voted for his election and 144,633 shares of Common
Stock were voted against his election. With respect to Mr. Evans, 6,360,069
shares of Common Stock and 12,620,464 shares of Class B Common Stock were voted
for his election and 376,233 shares of Common Stock were voted against his
election.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
UNIFIRST CORPORATION
/s/ RONALD D. CROATTI
--------------------------------
Ronald D. Croatti
Vice Chairman, President and
Chief Executive Officer
Date: April 16, 1996
/s/ JOHN B. BARTLETT
--------------------------------
John B. Bartlett
Senior Vice President
and Chief Financial Officer
5
1,000
U.S. DOLLARS
6-MOS
AUG-31-1996
AUG-27-1995
MAR-02-1996
1
5,942
0
38,912
600
17,431
95,303
263,084
108,618
293,784
58,583
41,014
2,051
0
0
177,155
293,784
196,238
196,238
176,840
176,840
0
0
1,108
18,290
6,584
11,706
0
0
0
11,706
0.57
0
