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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 25, 2001
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)
Registrant's telephone number: (978) 658-8888
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Class which shares are traded
Common Stock,
$.10 par value per share New York Stock Exchange
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information incorporated
by reference in Part III of this Form 10-K or any amendment to this Form
10-K. [ ]
The number of outstanding shares of UniFirst Corporation Common Stock and Class
B Common Stock at November 16, 2001 were 8,988,034 and 10,232,344, respectively,
and the aggregate market value of these shares held by non-affiliates of the
Company on said date was $198,313,946 (based upon the closing price of the
Company's Common Stock on the New York Stock Exchange on said date and assuming
the market value of a share of Class B Common Stock (which is generally
non-transferable, but is convertible at any time into one share of Common Stock)
is identical to the market value of the Common Stock).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 2001 Annual Report to Shareholders and the Company's
Proxy Statement for its 2002 Annual Meeting of Shareholders (which will be filed
with the Securities and Exchange Commission within 120 days after the close of
the 2001 fiscal year) are incorporated by reference into Parts II, III and IV
hereof.
Page 2
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference are discussed in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference in this
Form 10-K.
ITEM 1. BUSINESS
GENERAL
UniFirst Corporation (the "Company") is one of the largest providers of
workplace uniforms and protective clothing in the United States. The Company
rents, manufactures and sells a wide range of uniforms and protective clothing,
including shirts, pants, jackets, coveralls, jumpsuits, lab coats, smocks and
aprons, and also rents industrial wiping products, floormats and other
non-garment items, including first aid cabinet services and other safety
supplies, to a variety of manufacturers, retailers and service companies. The
Company serves businesses of all sizes in numerous industry categories. Typical
customers include automobile service centers and dealers, delivery services,
food and general merchandise retailers, food processors and service operations,
light manufacturers, maintenance facilities, restaurants, service companies,
soft and durable goods wholesalers, transportation companies, and others who
require employee clothing for image, identification, protection or utility
purposes. At certain specialized facilities, the Company also decontaminates and
cleans work clothes that may have been exposed to radioactive materials and
services special cleanroom protective wear. Typical customers for these
specialized services include government agencies, research and development
laboratories, high technology companies and utilities operating nuclear
reactors. In fiscal 2001, the Company generated $556.4 million in revenue, of
which approximately 65% was from the rental of uniforms and protective clothing,
26% was from the rental of non-garment items, 7% was from garment
decontamination services, and 2% was from the direct sale of garments.
PRODUCTS AND SERVICES
The Company provides its customers with personalized workplace uniforms and
protective work clothing in a broad range of styles, colors, sizes and fabrics.
The Company's uniform products include shirts, pants, jackets, coveralls,
jumpsuits, smocks, aprons and specialized protective wear, such as garments for
use in radioactive and clean room environments and fire retardant garments. The
Company also offers non-garment items and services, such as industrial wiping
products, floormats and mop dust-control service and first aid cabinet services.
At certain specialized facilities, the Company also decontaminates and cleans
clothes which may have been exposed to radioactive materials and services
special cleanroom protective wear.
The Company offers its customers a range of garment service options, including
full-service rental programs in which garments are cleaned and serviced by the
Company and lease programs in which garments are cleaned and maintained by
individual employees, as well as purchase programs where customers may buy
garments and related items directly. As part of its rental business, the Company
picks up a customer's soiled uniforms or other items on a periodic basis
(usually weekly) and delivers at the same time cleaned and processed replacement
items. The Company's centralized services, specialized equipment and economies
of scale generally allow it to be more cost effective in providing garment
services than customers could be by themselves, particularly those customers
with high employee turnover rates. The Company's uniform programs are intended
not only to help its customers foster greater company identity, but to enhance
their corporate image and improve employee safety, productivity and morale. The
Company typically serves its customers pursuant to written service contracts
that range in duration from three to five years.
Page 3
CUSTOMERS
The Company serves businesses of all sizes in numerous industry categories.
Typical customers include automobile service centers and dealers, delivery
services, food and general merchandise retailers, food processors and service
operations, light manufacturers, maintenance facilities, restaurants, service
companies, soft and durable goods wholesalers, transportation companies, and
others who require employee clothing for image, identification, protection or
utility purposes. The Company currently services over 150,000 customer locations
in 45 states, Canada and Europe from approximately 150 service locations and
distribution centers. For each of fiscal 1999, 2000 and 2001, the Company's
garment rental operations produced approximately 65% of its revenues, while
non-garment rentals accounted for 26%, direct sales of garments accounted for
2%, and the specialized garment services business accounted for approximately 7%
of the Company's revenues during each such period. During the past five years,
no single customer accounted for more than 1% of total revenues in any year.
MARKETING AND CUSTOMER SERVICE
The Company employs more than 330 trained sales representatives whose sole
function is to market the Company's services to potential customers and develop
new accounts. The Company also utilizes its route salespeople to maximize sales
to existing customers, such as by offering garment rental customers the
opportunity to purchase non-garment items. Potential customers are contacted by
mail, by telephone and in-person. Sales representatives develop their
appointments through the use of an extensive, proprietary database of
pre-screened and qualified business prospects. This database is built through
responses to the Company's promotional initiatives, through contacts via its
World Wide Web site and trade shows, and through the selective use of purchased
lists. The Company also endeavors to elevate its brand identity through certain
advertising and promotional initiatives.
The Company believes that customer service is the most important element in
developing and maintaining its market position and that its emphasis on customer
service is reflected throughout its business. The Company serves its customers
through approximately 1,100 route salespersons, who generally interact on a
weekly basis with their accounts, and more than 750 service support people, who
are charged with expeditiously handling customer requirements regarding the
outfitting of new customer employees, garment repair and replacement, billing
inquiries and other matters. The Company's policy is to respond to all customer
inquiries and problems within 24 hours.
The Company's customer service function is supported by its fully-networked
management information systems, which provide Company personnel with access to
information on the status of customers' orders, inventory availability and
shipping information, as well as information regarding customers' individual
employees, including names, sizes, uniform styles and colors. The Company has a
national account sales group that targets larger customers with nationwide
operations for which the Company can serve as the primary supplier of garment
services. The Company currently employs twenty persons in its national account
sales organization.
Page 4
COMPETITION
The uniform rental and sales industry is highly competitive. The Company
believes that the top five companies in the uniform rental segment of the
industry currently generate over half of the industry's volume. The remainder of
the market, however, is divided among more than 600 smaller businesses, many of
which serve one or a limited number of markets or geographic service areas and
generate annual revenues of less than $1.0 million, and a small group of which
have revenues of up to approximately $200 million. Although the Company is one
of the larger companies engaged in the uniform rental and sales business, there
are other firms in the industry which are larger and have greater financial
resources than the Company. The Company's leading competitors include ARAMARK
Corporation, Cintas Corporation and G&K Services, Inc. In addition to its
traditional rental competitors, the Company may increasingly compete in the
future with businesses that focus on selling uniforms and other related items.
The principal methods of competition in the industry are quality of service and
price. The Company also competes with industry competitors for acquisitions,
which has the effect of increasing the price for acquisitions and reducing the
number of available acquisition candidates. The Company believes that its
ability to compete effectively is enhanced by the superior customer service and
support that it provides its customers.
MANUFACTURING AND SOURCING
The Company manufactured approximately 55% of all garments which it placed in
service during fiscal 2001. These were primarily work pants manufactured at its
plant in Ebano, San Luis Potosi, Mexico and shirts manufactured at its plant in
Cave City, Arkansas. During fiscal 2001 the Company closed its manufacturing
plants in Luquillo, Puerto Rico and Wilburton, Oklahoma, and began construction
of a manufacturing plant in Valles, San Luis Potosi, Mexico. The balance of the
garments used in its programs are purchased from a variety of industry
suppliers. While the Company currently acquires the raw materials with which it
produces its garments from a limited number of suppliers, the Company believes
that such materials are readily available from other sources. To date, the
Company has experienced no significant difficulty in obtaining any of its raw
materials or supplies.
EMPLOYEES
At August 25, 2001, the Company employed approximately 7,500 persons, about 6%
of whom are represented by unions pursuant to six separate collective bargaining
agreements. The Company considers its employee relations to be good.
Page 5
EXECUTIVE OFFICERS
The executive officers of the Company as of August 25th, 2001 were as
follows:
NAME AGE POSITION
---- --- --------
Aldo Croatti Deceased Chairman of the Board
Ronald D. Croatti 58 President and Chief Executive
Officer
Robert L. Croatti 65 Executive Vice President
Cynthia Croatti 46 Executive Vice President and
Treasurer
John B. Bartlett 60 Senior Vice President and
Chief Financial Officer
Bruce P. Boynton 53 Senior Vice President
Dennis G. Assad 56 Vice President, Sales
and Marketing
The principal occupation and positions for the past five years of the executive
officers named above are as follows:
Aldo Croatti had been Chairman of the Board since the Company's incorporation in
1950 and of certain of its predecessors since 1940. Mr. Croatti passed away on
October 4, 2001.
Ronald D. Croatti joined the Company in 1965. Mr. Croatti became Vice Chairman
of the Board in 1986 and has served as Chief Executive Officer since 1991 and
President since August 31, 1995. Mr. Croatti has overall responsibility for the
management of the Company.
Robert L. Croatti joined the Company in 1959. Mr. Croatti has served as
Executive Vice President since 1986 and had primary responsibility for
overseeing the rental operations of the Company. Mr. Croatti retired effective
August 31, 2001.
Cynthia Croatti joined the Company in 1980. Ms. Croatti has served as Executive
Vice President since January, 2001, and as Treasurer since 1982 and has primary
responsibility for overseeing the human resources and purchasing functions of
the Company.
John B. Bartlett joined the Company in 1977. Mr. Bartlett has served as Senior
Vice President and Chief Financial Officer since 1986 and has primary
responsibility for overseeing the financial functions of the Company, as well as
its information systems department.
Bruce P. Boynton joined the Company in 1976. Mr. Boynton has served as Senior
Vice President since January, 2001, is the chief operating officer for the
Company's Canadian operations and has primary responsibility for overseeing the
operations of certain regions in the United States.
Dennis G. Assad joined the Company in 1975. Mr. Assad has served as Vice
President, Sales and Marketing since 1995 and has primary responsibility for
overseeing the sales and marketing functions of the Company.
Ronald D. Croatti, Robert L. Croatti and Cynthia Croatti are a son, nephew and
daughter, respectively, of Aldo Croatti, who is now deceased.
Page 6
ENVIRONMENTAL MATTERS
The Company and its operations are subject to various federal, state and local
laws and regulations governing, among other things, the generation, handling,
storage, transportation, treatment and disposal of hazardous wastes and other
substances. In particular, industrial laundries use and must dispose of
detergent waste water and other residues. The Company is attentive to the
environmental concerns surrounding the disposal of these materials and has
through the years taken measures to avoid their improper disposal. In the past,
the Company has settled, or contributed to the settlement of, actions or claims
brought against the Company relating to the disposal of hazardous materials and
there can be no assurance that the Company will not have to expend material
amounts to remediate the consequences of any such disposal in the future.
Further, under environmental laws, an owner or lessee of real estate may be
liable for the costs of removal or remediation of certain hazardous or toxic
substances located on or in or emanating from such property, as well as related
costs of investigation and property damage. Such laws often impose liability
without regard to whether the owner or lessee knew of or was responsible for the
presence of such hazardous or toxic substances. There can be no assurances that
acquired or leased locations have been operated in compliance with environmental
laws and regulations or that future uses or conditions will not result in the
imposition of liability upon the Company under such laws or expose the Company
to third-party actions such as tort suits.
The Company's nuclear garment decontamination facilities are licensed by the
Nuclear Regulatory Commission, or in certain cases by the applicable state
agency, and are subject to regulation by federal, state and local authorities.
In recent years, there has been increased scrutiny and, in certain cases,
regulation of nuclear facilities or related services that have resulted in the
suspension of operations at certain nuclear facilities served by the Company or
disruptions of the Company's ability to service such facilities. There can be no
assurance that such increased scrutiny will not lead to the shut-down of such
facilities or otherwise cause material disruptions in the Company's garment
decontamination business.
Page 7
ITEM 2. PROPERTIES
At August 25, 2001, the Company owned or occupied 150 facilities containing an
aggregate of approximately 4.3 million square feet located in the United States,
Canada, Mexico, Germany and the Netherlands. These facilities include the
Company's 320,000 square foot Owensboro, Kentucky distribution center (which the
Company believes is one of the largest and most advanced garment distribution
facilities in the industry), and its many customer service locations. The
Company owns 92 of these facilities containing approximately 3.7 million square
feet. The Company believes its industrial laundry facilities are among the most
modern in the industry.
The Company owns substantially all of the machinery and equipment used in its
operations. In the opinion of the Company, all of its facilities and its
equipment have been well maintained, is in good condition and are adequate for
the Company's present needs. The Company also owns a fleet of approximately
2,000 delivery vans, trucks and other vehicles. The Company believes that these
vehicles are in good repair and are adequate for the Company's present needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is subject to legal proceedings and claims arising
from the conduct of its business operations, including personal injury, customer
contract, employment claims and environmental matters as described in Item 1
above. The Company maintains insurance coverage providing indemnification
against many of such claims and management does not expect that any material
loss to the Company will be sustained as a result thereof.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
Page 8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference to the information provided as part of the Company's
2001 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the information provided under the caption "Eleven
Year Financial Summary" in the Company's 2001 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference to the information provided under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 2001 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Incorporated by reference to the information provided under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 2001 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and the accompanying notes, which are incorporated
herein by reference to the Company's 2001 Annual Report to Shareholders, are
indexed herein under Items 14(a)(1) and (2) of Part IV.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable
Page 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated by reference to the information provided under the caption
"Election of Directors" in the Company's Proxy Statement for its 2002 Annual
Meeting of Shareholders. See also the information provided in Part I herein
under the caption "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the information provided under the captions
"Summary Compensation Table", "Option Grants with respect to Fiscal Year 2001",
"Option Exercises and Year-End Holdings" and "Supplemental Executive Retirement
Plan" in the Company's Proxy Statement for its 2002 Annual Meeting of
Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the information provided under the captions
"Election of Directors" and "Security Ownership of Management and Principal
Shareholders" in the Company's Proxy Statement for its 2002 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the information provided under the caption "Certain
Relationships and Related Transactions" in the Company's Proxy Statement for its
2002 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The financial statements listed below are filed as part of this report:
1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
The financial statements and financial statement schedules listed below are
incorporated herein by reference to the Company's 2001 Annual Report to
Shareholders.
Consolidated balance sheets as of August 25, 2001 and August 26, 2000
Consolidated statements of income for each of the three years in the period
ended August 25, 2001
Consolidated statements of shareholders' equity for each of the three years in
the period ended August 25, 2001
Consolidated statements of cash flows for each of the three years in the period
ended August 25, 2001
Notes to consolidated financial statements
Report of independent public accountants
Page 10
The following additional schedules are filed herewith:
Report of independent public accountants on supplemental schedule to the
consolidated financial statements.
Schedule II - Valuation and qualifying accounts and reserves for each of the
three years in the period ended August 25, 2001.
Separate financial statements of the Company have been omitted because the
Company is primarily an operating company and all subsidiaries included in the
consolidated financial statements are totally held.
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
3. EXHIBITS. The exhibits listed in the accompanying Exhibit Index are filed as
part of this report.
b) During the three months ended August 25, 2001 the Company did not file any
reports on Form 8-K with the Securities and Exchange Commission.
Page 11
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
By: /s/ Ronald D. Croatti
----------------
Ronald D. Croatti
President and Chief Executive Officer
Date: November 21, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Ronald D. Croatti Principal Executive November 21, 2001
- --------------------------- Officer and Director
Ronald D. Croatti
/s/ John B. Bartlett Principal Financial November 21, 2001
- ----------------------------- Officer and Principal
John B. Bartlett Accounting Officer
/s/ Cynthia Croatti Director November 21, 2001
- -----------------------------
Cynthia Croatti
/s/ Donald J. Evans Director November 21, 2001
- -----------------------------
Donald J. Evans
/s/ Albert Cohen Director November 21, 2001
- -----------------------------
Albert Cohen
/s/ Phillip L. Cohen Director November 21, 2001
- -----------------------------
Phillip L. Cohen
Page 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL
SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS
To UniFirst Corporation:
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in this Form 10-K,
and have issued our report thereon dated October 31, 2001. Our audit was made
for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplemental schedule to the consolidated
financial statements listed as Item 14(a)(2) in the Form 10-K is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This supplemental schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states, in all
material respects, the financial data required to be set forth therein, in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 31, 2001
Page 13
UNIFIRST CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH
OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 25, 2001
Balance, Charged to Charges for Balance,
Beginning Costs and Which Reserves End of
Description of Period Expenses Were Created Period
- ----------- ---------- ---------- -------------- ----------
FOR THE YEAR ENDED AUGUST 25, 2001
Allowance for doubtful accounts $3,110,000 $3,357,000 $(3,230,000) $3,237,000
========== ========== =========== ==========
FOR THE YEAR ENDED AUGUST 26, 2000
Allowance for doubtful accounts $2,979,000 $2,739,000 $(2,608,000) $3,110,000
========== ========== =========== ==========
FOR THE YEAR ENDED AUGUST 28, 1999
Allowance for doubtful accounts $1,529,000 $3,231,000 $(1,781,000) $2,979,000
========== ========== =========== ==========
Page 14
EXHIBIT INDEX
DESCRIPTION
3-A Restated Articles of Organization -- incorporated by reference to Exhibit
3-A to the Company's Registration Statement on Form S-1 (No. 2-83051) --
and the Articles of Amendment dated January 12, 1988, a copy of which was
filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal
year ended August 27, 1988 -- and the Articles of Amendment dated January
21, 1993, a copy of which was filed on an exhibit to the Company's
Quarterly Report on Form 10-Q for fiscal quarter ended February 27, 1993.
3-B By-laws -- incorporated by reference to Exhibit 3-B to the Company's Annual
Report on Form 10-K for fiscal year ended August 31, 1991.
10-A UniFirst Corporation Profit Sharing Plan -- incorporated by reference to
Exhibit 4.3 to the Company's Registration Statement on Form S-8 (number
33-60781) -- and the Amendment dated June 27, 1995, a copy of which was
filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal
year ended August 31, 1996.
10-D UniFirst Corporation 1996 Stock Incentive Plan, a copy of which was filed
on an exhibit to the Company's Annual Report on Form 10-K for fiscal year
ended August 31, 1996.
13 The Company's 2001 Annual Report to Shareholders (filed herewith to the
extent expressly incorporated by reference herein).
21 List of Subsidiaries
23 Consent of Arthur Andersen LLP