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UniFirst Announces Financial Results for the Second Quarter of Fiscal 2017

WILMINGTON, Mass., March 29, 2017 (GLOBE NEWSWIRE) -- UniFirst Corporation (NYSE:UNF) today announced results for its second quarter of fiscal 2017 which ended February 25, 2017. Revenues for the quarter were $391.4 million, up 7.8% from $363.1 million in the year ago period. Net income was $22.5 million ($1.10 per diluted share), down 4.2% from $23.5 million ($1.16 per diluted share) in the second quarter of fiscal 2016. Results for the second quarter of fiscal 2017 include the impact of the Company’s acquisition of Arrow Uniform (Arrow) which was completed in September 2016.

Core Laundry revenues in the quarter were $358.4 million, up 8.2% from those in the prior year’s second quarter. Adjusting for the estimated effect of acquisitions as well as a stronger Canadian dollar compared to a year ago, Core Laundry revenues grew 2.2%.

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, “We are encouraged by the improvement during the second quarter of the Core Laundry Operations’ organic growth rate. Recent trends indicate that wearer levels at existing customers have stabilized after enduring two years of significant reductions in our North American energy-dependent markets. In addition, overall new sales as well as customer retention are also trending positively compared to the first half of 2016.”

Core Laundry operating income was $33.1 million during the quarter, an 8.5% decrease from the prior year. Its operating margin was 9.2%, down from 10.9% for the same period in fiscal 2016. The margin decline was primarily the result of higher selling and administrative expenses as a percentage of revenues. In addition, the estimated impact of the acquisition of Arrow decreased the Core Laundry operating margin by 0.6%.

Revenues from our Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, increased 6.5% in the quarter compared to the same period a year ago, and operating income was $2.1 million compared to $1.1 million in last year’s second quarter. The improvement in results during the quarter was driven by this segment’s US and Canadian nuclear operations. This segment’s results can vary significantly from period to period due to seasonality and the timing of reactor outages and projects.

UniFirst continues to maintain a strong balance sheet with no long-term debt and significant cash balances. Excluding the $119.9 million cash purchase price paid for the Arrow acquisition, cash and cash equivalents increased $69.6 million during the first half of the year. As of February 25, 2017, our cash and cash equivalents were $313.5 million.

Outlook
Mr. Croatti said, “During our last earnings call, we communicated that we expected full year revenues for fiscal 2017 would be between $1.550 billion and $1.565 billion and full year diluted earnings per share would be between $4.85 and $5.00. We now expect that our full year results will come in at the higher ends of these previously communicated ranges.”

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
Headquartered in Wilmington, Mass., UniFirst Corporation is a North American leader in the supply and servicing of uniform and workwear programs, as well as the delivery of facility service programs. Together with its subsidiaries, the company also provides first aid and safety products, and manages specialized garment programs for the cleanroom and nuclear industries. UniFirst manufactures its own branded workwear, protective clothing, and floorcare products, and with 240 service locations, 300,000 customer locations, and 13,000 employee Team Partners, the company outfits nearly 2 million workers each business day. 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. For more information, contact UniFirst at 800.455.7654 or visit www.unifirst.com.

Forward Looking Statements
This public announcement contains forward looking statements that reflect the Company’s current views with respect to future events and financial performance, including projected revenues and earnings per share. Forward looking statements contained in this public announcement are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” or the negative versions thereof, and similar expressions and by the context in which they are used. Such forward looking statements are based upon our current expectations and speak only as of the date made. Such statements are highly dependent upon a variety of risks, uncertainties and other important factors that could cause actual results to differ materially from those reflected in such forward looking statements. Such factors include, but are not limited to, our ability to maintain and grow Arrow’s customer base and enhance its operating margins, our ability to compete successfully without any significant degradation in our margin rates, uncertainties caused by the continuing adverse worldwide economic conditions and their impact on our customers’ businesses and workforce levels, 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, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the continuing increase in domestic healthcare costs, including the ultimate impact of the Affordable Care Act, our retention of customers and renewal of customer contracts, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the negative effect on our business from sharply depressed oil prices, fluctuation on our revenue and net income from our specialty garments segment, the effect of currency fluctuations on our results of operations and financial condition, rampant criminal activity and instability in Mexico where our principal garment manufacturing plants are located, the impact on our goodwill and intangibles that might result from adverse financial and economic changes, our ability to properly and efficiently design, construct, implement and operate our new customer relationship management (“CRM”) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, failure to comply with other state and federal regulations that might result in penalties or costs, seasonal and quarterly fluctuations in business levels, any loss of key management or other personnel, our dependence on third parties to supply us with raw materials, 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, demand and prices for our products and services, 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 our Annual Report on Form 10-K for the year ended August 27, 2016 and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update any forward looking statements to reflect events or circumstances arising after the date on which such statements are made.

UniFirst Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

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(In thousands, except per share data) 2017 2016 2017 2016
Revenues $391,427 $363,097 $777,535 $736,481
Operating expenses:
Cost of revenues (1) 249,280 229,672 488,045 452,275
Selling and administrative expenses (1) 84,861 75,423 164,307 148,172
Depreciation and amortization 21,140 19,809 43,280 39,547
Total operating expenses 355,281 324,904 695,632 639,994
Income from operations 36,146 38,193 81,903 96,487
Other (income) expense:
Interest expense 172 218 354 439
Interest income (1,292) (892) (2,275) (1,656)
Foreign exchange (gain) loss (108) (132) 386 347
Total other (income) expense (1,228) (806) (1,535) (870)
Income before income taxes 37,374 38,999 83,438 97,357
Provision for income taxes 14,858 15,501 32,708 37,969
Net income $22,516 $23,498 $50,730 $59,388
Income per share – Basic
Common Stock $1.17 $ 1.23 $2.63 $3.10
Class B Common Stock $0.93 $ 0.98 $2.10 $2.48
Income per share – Diluted
Common Stock $1.10 $1.16 $2.49 $2.94
Income allocated to – Basic
Common Stock $17,836 $ 18,691 $40,178 $47,232
Class B Common Stock $4,518 $ 4,704 $10,184 $11,896
Income allocated to – Diluted
Common Stock $22,362 $23,401 $50,381 $59,141
Weighted average number of shares outstanding – Basic
Common Stock 15,305 15,241 15,295 15,230
Class B Common Stock 4,846 4,795 4,846 4,795
Weighted average number of shares outstanding – Diluted
Common Stock 20,263 20,138 20,250 20,127
(1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets.

UniFirst Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands) February 25,
2017
August 27,
2016
Assets
Current assets:
Cash and cash equivalents $313,535 $363,795
Receivables, net 176,564 156,578
Inventories 71,493 78,887
Rental merchandise in service 144,603 138,105
Prepaid taxes 1,178 10,418
Prepaid expenses and other current assets 25,873 29,831
Total current assets 733,246 777,614
Property, plant and equipment, net 551,053 539,818
Goodwill 371,773 320,641
Customer contracts and other intangible assets, net 75,887 38,664
Deferred income taxes 338 97
Other assets 29,250 25,173
$1,761,547 $1,702,007
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $55,250 $50,884
Accrued liabilities 104,785 100,782
Accrued taxes 969
Total current liabilities 160,035 152,635
Long-term liabilities:
Accrued liabilities 105,078 104,921
Accrued and deferred income taxes 79,038 79,670
Total long-term liabilities 184,116 184,591
Shareholders' equity:
Common Stock 1,546 1,542
Class B Common Stock 485 485
Capital surplus 77,668 72,561
Retained earnings 1,368,424 1,319,142
Accumulated other comprehensive (loss) income (30,727) (28,949)
Total shareholders' equity 1,417,396 1,364,781
$1,761,547 $1,702,007


UniFirst Corporation and Subsidiaries
Detail of Operating Results
(Unaudited)

Revenues

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Dollar




Percent
(In thousands, except percentages) 2017 2016 Change Change
Core Laundry Operations $358,386 $331,365 $27,021 8.2%
Specialty Garments 21,787 20,451 1,336 6.5
First Aid 11,254 11,281 (27)-0.2
Consolidated total $391,427 $363,097 $28,330 7.8%


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Dollar




Percent
(In thousands, except percentages) 2017 2016 Change Change
Core Laundry Operations $710,229 $666,402 $43,827 6.6%
Specialty Garments 44,143 47,221 (3,078)-6.5
First Aid 23,163 22,858 305 1.3
Consolidated total $777,535 $736,481 $41,054 5.6%

Income from Operations

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Dollar




Percent
(In thousands, except percentages) 2017 2016 Change Change
Core Laundry Operations $33,059 $36,129 $(3,070)-8.5%
Specialty Garments 2,095 1,146 949 82.8
First Aid 992 918 74 8.0
Consolidated total $36,146 $38,193 $(2,047)-5.4%


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Dollar




Percent
(In thousands, except percentages) 2017 2016 Change Change
Core Laundry Operations$76,732 $89,101 $(12,369)-13.9%
Specialty Garments 3,246 5,432 (2,186)-40.2
First Aid 1,925 1,954 (29)-1.5
Consolidated total$81,903 $96,487 $(14,584)-15.1%



UniFirst Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)



(In thousands)
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2016
Cash flows from operating activities:
Net income $50,730 $59,388
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 37,051 35,297
Amortization of intangible assets 6,229 4,250
Amortization of deferred financing costs 56 104
Gain on sale of assets (517)
Share-based compensation 4,370 2,537
Accretion on environmental contingencies 300 334
Accretion on asset retirement obligations 423 398
Deferred income taxes (1,346) 5,978
Changes in assets and liabilities, net of acquisitions:
Receivables (12,887) (6,528)
Inventories 9,233 4,733
Rental merchandise in service 444 3,477
Prepaid expenses and other current assets and Other assets 7,471 (851)
Accounts payable 3,695 (79)
Accrued liabilities 704 1,574
Prepaid and accrued income taxes 8,793 (5,131)
Net cash provided by operating activities 114,749 105,481
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (121,414) (73)
Capital expenditures (43,011) (44,028)
Proceeds from sale of assets 826
Other 123 111
Net cash used in investing activities (163,476) (43,990)
Cash flows from financing activities:
Payments on loans payable and long-term debt (1,046)
Proceeds from exercise of Common Stock options, including excess tax benefits 2,283 1,026
Taxes withheld and paid related to net share settlement of equity awards (1,546)
Payment of cash dividends (1,448) (1,436)
Net cash used in financing activities (711) (1,456)
Effect of exchange rate changes on cash (822) (1,596)
Net (decrease) increase in cash and cash equivalents (50,260) 58,439
Cash and cash equivalents at beginning of period 363,795 276,553
Cash and cash equivalents at end of period $313,535 $334,992


CONTACT: Steven S. Sintros, Senior Vice President & CFO UniFirst Corporation 68 Jonspin Road Wilmington, MA 01887 Phone: 978- 658-8888 Fax: 978-988-0659 Email: ssintros@UniFirst.com

Source:Unifirst Corp.