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8-K - 8-K - UNIFIRST CORPa4q17coverpage.htm
Exhibit 99

 
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For Immediate Release
UniFirst Corporation
68 Jonspin Road
Wilmington, MA 01887
Phone: 978- 658-8888
Fax: 978-988-0659
Email: ssintros@UniFirst.com
 
 
 
 
 
 
 
October 18, 2017
 
 
CONTACT: Steven S. Sintros, President & CEO
 
 
 



UNIFIRST ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR OF FISCAL 2017

Wilmington, MA (October 18, 2017) -- UniFirst Corporation (NYSE: UNF) today announced results for its fourth quarter and full year ended August 26, 2017. Revenues for the quarter were $403.6 million, up 10.9% from $363.8 million in the same year ago period and full year revenues were $1.591 billion, up 8.4% from $1.468 billion in fiscal 2016.

Net loss in the quarter was $4.9 million ($(0.24) per diluted share), compared to net income of $35.5 million ($1.74 per diluted share) in the fourth quarter of fiscal 2016. Net income for the full year was $70.2 million ($3.44 per diluted share) compared to $125.0 million ($6.17 per diluted share) in the prior year. The results reported today include the negative effect of the previously announced asset impairment charge which is discussed below.

Adjusted net income for the quarter was $29.2 million ($1.44 per diluted share) up 13.4% compared to adjusted net income for the fourth quarter of fiscal 2016 which was $25.8 million ($1.27 per diluted share). Adjusted net income for the full year was $107.7 million ($5.28 per diluted share) down 6.6% from adjusted net income of $115.3 million ($5.69 per diluted share) in fiscal 2016. See table for reconciliation to adjusted results.

Adjusted net income for the fiscal 2017 fourth quarter and annual period exclude a $55.8 million ($34.1 million after-tax) impairment charge related to the Company's ongoing Customer Relationship Management (CRM) systems project. The Company announced in September 2017 that it had determined it was no longer probable that the current version of the CRM system being developed would be completed and placed into service and as a result an impairment of capitalized costs would be required. Adjusted results from the prior year fourth quarter and full year exclude the impact of a gain recognized in that period related to a settlement of environmental litigation.

Steven S. Sintros, UniFirst President and Chief Executive Officer said, “We are pleased with the overall results of our fourth quarter. With our Core Laundry Operations leading the way, all of our operating segments contributed to the positive results.”

The Core Laundry Operations produced fourth quarter revenues of $364.8 million, up 10.0% from those in the prior year. Adjusting for the estimated effect of acquisitions, primarily those from the September 2016 purchase of Arrow Uniform, Core Laundry revenues grew 4.6%. Core Laundry adjusted operating income was $41.9 million during the quarter, a 9.4% increase from the prior year adjusted total (see reconciliation for details). The Core Laundry adjusted operating margin in the fourth quarter of 2017 was 11.5%, down slightly from the adjusted operating margin of 11.6% in the year ago period. The comparison of adjusted operating income and operating margins was positively impacted by lower expense due to a $3.5 million charge taken in the prior year to increase the Company's environmental reserves. In addition, the margins also benefited from lower stock compensation expense as well as lower merchandise costs as a percentage of revenues.  These positive comparisons were offset by higher levels of claims for healthcare, workers' compensation and auto liability as well as the impact of the Arrow Uniform acquisition.

Revenues in the fourth quarter of 2017 for our Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations,were $24.0 million, up 20.4% in the quarter compared to the same period a year ago. Operating income was $1.6 million compared to $1.2 million in the prior year fourth quarter. The year to year improvement was due to increased outages and project-based activity in the US and Canada. This segment’s results can vary significantly due to seasonality and the timing of reactor outages and projects.

Revenues in the fourth quarter of 2017 for our First Aid segment were $14.7 million, an increase of 22.2% compared to the same period in fiscal 2016, and operating income was $1.9 million compared to $1.4 million from the fourth quarter of fiscal 2016. The improvement in the results was due to a strong performance from this segment's wholesale distribution business and a small acquisition completed in the third quarter of fiscal 2017.

Our fourth quarter profit comparison to the prior year also benefited from Other Income which was $2.2 million higher than same quarter a year ago, primarily the result of higher interest income and foreign exchange gains.

UniFirst continues to maintain a strong balance sheet with no long-term debt and significant cash balances. Excluding the $118.7 million cash purchase price paid for the Arrow acquisition, cash, cash equivalents and short-term investments increased $104.7 million during fiscal 2017, and our cash, cash equivalents and short-term investments were $349.8 million at the end of fiscal 2017.




Outlook
Mr. Sintros continued, “At this time, we expect that our fiscal 2018 revenues will be between $1.625 billion and $1.645 billion and full year diluted earnings per share will be between $5.00 and $5.30. As we move through fiscal 2018, we expect to continue to make investments in our people, processes and technology which will help us achieve our primary objective of being recognized as the top service provider in our industry."

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 (NYSE: UNF) 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 250 service locations, over 300,000 customer locations, and 14,000 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, the performance and success of our new Chief Executive Officer, our ability to efficiently design, construct, and implement a new customer relationship management (“CRM”) computer system, 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 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, 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)    
 
 (In thousands, except per share data)
 
Thirteen
weeks ended
August 26,
2017
 
Thirteen
weeks ended
August 27,
2016
 
Fifty-two
weeks ended
August 26,
2017

Fifty-two
weeks ended
August 27,
2016
 
 
 
 
 
 
 
 





 
Revenues
 
$
403,589

 
$
363,766

 
$
1,590,958


$
1,468,046

 
 
 


 


 





 
Operating expenses:
 

 

 
 

 
 
Cost of revenues (1)
 
249,720

 
223,220

 
993,589


900,427

 
Selling and administrative expenses (1)
 
85,023

 
62,134

 
342,407


284,847

 
Impairment charge
 
55,800

 

 
55,800



 
Depreciation and amortization
 
23,437

 
21,656

 
88,879


81,612

 
Total operating expenses
 
413,980

 
307,010

 
1,480,675


1,266,886

 
 
 


 


 





 
(Loss) income from operations
 
(10,391
)
 
56,756

 
110,283


201,160

 
 
 


 


 





 
Other (income) expense:
 
 
 
 
 
 

 
 
Interest income, net
 
(1,539
)
 
(635
)
 
(4,269
)

(2,543
)
 
Other (income) expense, net
 
(1,175
)
 
76

 
(571
)

332

 
Total other income, net
 
(2,714
)
 
(559
)
 
(4,840
)

(2,211
)
 
 
 


 


 





 
(Loss) income before income taxes
 
(7,677
)
 
57,315

 
115,123


203,371

 
(Benefit) provision for income taxes
 
(2,781
)
 
21,821

 
44,927


78,345

 

 


 


 





 
Net (loss) income
 
$
(4,896
)
 
$
35,494

 
$
70,196


$
125,026

 
 
 


 


 





 
(Loss) income per share – Basic:
 
 
 
 
 
 

 
 
Common Stock
 
$
(0.25
)
 
$
1.84

 
$
3.63


$
6.51

 
Class B Common Stock
 
$
(0.20
)
 
$
1.47

 
$
2.91


$
5.21

 

 

 

 



 
(Loss) income per share – Diluted:
 

 
 
 
 

 
 
Common Stock
 
$
(0.24
)
 
$
1.74

 
$
3.44


$
6.17

 

 

 

 



 
(Loss) income allocated to – Basic:
 

 
 
 
 

 
 
Common Stock
 
$
(3,908
)
 
$
28,097

 
$
55,903


$
99,282

 
Class B Common Stock
 
$
(978
)
 
$
7,139

 
$
13,915


$
25,093

 

 

 

 



 
(Loss) income allocated to – Diluted:
 

 
 
 
 

 
 
Common Stock
 
$
(4,886
)
 
$
35,250

 
$
69,837


$
124,409

 
 
 

 

 



 
Weighted average number of shares outstanding – Basic:
 

 
 
 
 

 
 
Common Stock
 
15,402

 
15,268

 
15,382


15,245

 
Class B Common Stock
 
4,818

 
4,850

 
4,786


4,816

 
 
 

 

 



 
Weighted average number of shares outstanding – Diluted:
 

 
 
 
 

 
 
Common Stock
 
20,220

 
20,223

 
20,276


20,154


(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)
 
August 26,
2017
 
August 27,
2016
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash, cash equivalents and short-term investments
 
$
349,752

 
$
363,795

Receivables, net
 
187,174

 
156,578

Inventories
 
79,068

 
78,887

Rental merchandise in service
 
151,340

 
138,105

Prepaid taxes
 
29,968

 
10,418

Prepaid expenses and other current assets
 
16,924

 
29,831

 
 
 
 
 
Total current assets
 
814,226

 
777,614

 
 
 
 
 
Property, plant and equipment, net
 
525,115

 
539,818

Goodwill
 
376,110

 
320,641

Customer contracts and other intangible assets, net

 
71,744

 
38,664

Deferred income taxes
 
394

 
97

Other assets
 
31,539

 
25,173

 
 
 
 
 
 
 
$
1,819,128

 
$
1,702,007

 
 
 
 
 
Liabilities and shareholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
64,691

 
$
50,884

Accrued liabilities
 
112,236

 
100,782

Accrued taxes
 
921

 
969

 
 
 
 
 
Total current liabilities
 
177,848

 
152,635

 
 
 
 
 
Long-term liabilities:
 
 
 
 
Accrued liabilities
 
106,736

 
104,921

Accrued and deferred income taxes
 
81,352

 
79,670

 
 
 
 
 
Total long-term liabilities
 
188,088

 
184,591

 
 
 
 
 
Shareholders’ equity:
 
 
 
 
Common Stock
 
1,545

 
1,542

Class B Common Stock
 
482

 
485

Capital surplus
 
86,245

 
72,561

Retained earnings
 
1,386,438

 
1,319,142

Accumulated other comprehensive loss
 
(21,518
)
 
(28,949
)
 
 
 
 
 
Total shareholders’ equity
 
1,453,192

 
1,364,781

 
 


 


 
 
$
1,819,128

 
$
1,702,007





UniFirst Corporation and Subsidiaries
Detail of Operating Results
(Unaudited)

Revenues

(In thousands, except percentages)
 
Thirteen
weeks ended
August 26,
2017
 
Thirteen
weeks ended
August 27,
2016
 
Dollar
Change
 
Percent
Change
 
 
 
 
 
 
 
 
 
Core Laundry Operations
 
$
364,827

 
$
331,749

 
$
33,078

 
10.0
%
Specialty Garments
 
24,020

 
19,955

 
4,065

 
20.4
%
First Aid
 
14,742

 
12,062

 
2,680

 
22.2
%
Consolidated total
 
$
403,589

 
$
363,766

 
$
39,823

 
10.9
%

(In thousands, except percentages)
 
Fifty-two
weeks ended
August 26,
2017
 
Fifty-two
weeks ended
August 27,
2016

Dollar
Change

Percent
Change

 


 


 


 


Core Laundry Operations
 
$
1,442,149

 
$
1,329,375

 
$
112,774

 
8.5
%
Specialty Garments
 
98,024

 
91,257

 
6,767

 
7.4
%
First Aid
 
50,785

 
47,414

 
3,371

 
7.1
%
Consolidated total
 
$
1,590,958

 
$
1,468,046

 
$
122,912

 
8.4
%


(Loss) income from Operations

(In thousands, except percentages)
 
Thirteen
weeks ended
August 26,
2017
 
Thirteen
weeks ended
August 27,
2016
 
Dollar
Change
 
Percent
Change
 
 


 


 


 


Core Laundry Operations
 
$
(13,887
)
 
$
54,189

 
$
(68,076
)
 
(125.6
)%
Specialty Garments
 
1,591

 
1,213

 
378

 
31.1
 %
First Aid
 
1,905

 
1,354

 
551

 
40.7
 %
Consolidated total
 
$
(10,391
)
 
$
56,756

 
$
(67,147
)
 
(118.3
)%

(In thousands, except percentages)
 
Fifty-two
weeks ended
August 26,
2017
 
Fifty-two
weeks ended
August 27,
2016
 
Dollar
Change
 
Percent
Change
 
 


 


 


 


Core Laundry Operations
 
$
96,307

 
$
186,074

 
$
(89,767
)
 
(48.2
)%
Specialty Garments
 
9,018

 
10,204

 
(1,186
)
 
(11.6
)%
First Aid
 
4,958

 
4,882

 
76

 
1.6
 %
Consolidated total
 
$
110,283

 
$
201,160

 
$
(90,877
)
 
(45.2
)%




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

(In thousands)
 
Fifty-two
weeks ended
August 26,
2017
 
Fifty-two
weeks ended
August 27,
2016
Cash flows from operating activities:
 
 
 
 
Net income
 
$
70,196

 
$
125,026

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation
 
76,073

 
72,983

Amortization of intangible assets
 
12,806

 
8,629

Amortization of deferred financing costs
 
112

 
184

Gain on sale of assets
 
(567
)
 

Share-based compensation
 
12,462

 
5,628

Accretion on environmental contingencies
 
600

 
669

Accretion on asset retirement obligations
 
853

 
826

Impairment charge
 
55,800

 

Deferred income taxes
 
955

 
9,899

Changes in assets and liabilities, net of acquisitions:
 

 
 
Receivables, less reserves
 
(22,232
)
 
(3,949
)
Inventories
 
1,865

 
1,467

Rental merchandise in service
 
(5,384
)
 
3,945

Prepaid expenses and other current assets and Other assets
 
12,903

 
(38,443
)
Accounts payable
 
9,594

 
49

Accrued liabilities
 
11,728

 
31,954

Prepaid and accrued income taxes
 
(19,490
)
 
(11,231
)
Net cash provided by operating activities
 
218,274

 
207,636

 
 
 
 
 
Cash flows from investing activities:
 

 
 
Acquisition of businesses, net of cash acquired
 
(125,457
)
 
(16,583
)
Capital expenditures
 
(108,554
)
 
(98,235
)
Proceeds from sale of assets
 
876

 

Other
 
98

 
149

Net cash used in investing activities
 
(233,037
)
 
(114,669
)

 

 

Cash flows from financing activities:
 
 
 
 
Payments on loans payable and long-term debt
 

 
(1,301
)
Payment of deferred financing costs
 

 
(813
)
Proceeds from exercise of share-based awards, including excess tax benefits
 
3,102

 
5,313

Taxes withheld and paid related to net share settlement of equity awards
 
(2,386
)
 
(5,965
)
Payment of cash dividends
 
(2,898
)
 
(2,878
)
Net cash used in financing activities
 
(2,182
)
 
(5,644
)

 


 


Effect of exchange rate changes
 
2,902

 
(81
)

 


 


Net (decrease) increase in cash, cash equivalents and short-term investments
 
(14,043
)
 
87,242

Cash, cash equivalents and short-term investments at beginning of period
 
363,795

 
276,553


 


 


Cash, cash equivalents and short-term investments at end of period
 
$
349,752

 
$
363,795





UniFirst Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures

The Company reports its consolidated financial results in accordance with generally accepted accounting principles (“GAAP”). To supplement these consolidated financial results, management believes that certain non-GAAP operating results provide a more meaningful measure on which to compare the Company’s results of operations for the periods presented. The Company believes these non-GAAP results provide useful supplemental information regarding the Company’s performance to both management and investors by excluding certain non-recurring amounts that impact the comparability of the results. Supplemental reconciliations of consolidated operating (loss) income, net (loss) income and earnings per diluted share on a GAAP basis to adjusted operating income, net income and earnings per diluted share on a non-GAAP basis are presented in the following tables. In addition, Core Laundry Operations operating (loss) income and operating margin on a GAAP basis to adjusted operating income and adjusted operating margin on a non-GAAP basis are presented in the following tables. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided below.
 
 
Thirteen weeks ended August 26, 2017
 
 
Consolidated
 
Core Laundry Operations
(In thousands, except percentages)
 
Revenue
 
Operating
(Loss) Income
 
Net (Loss)
Income
 
Diluted
EPS
 
Revenue
 
Operating (Loss)
Income
 
Operating
Margin
As reported
 
$
403,589

 
$
(10,391
)
 
$
(4,896
)
 
$
(0.24
)
 
$
364,827

 
$
(13,887
)
 
(3.8
)%
Impairment charge
 

 
55,800

 
34,144

 
1.68

 

 
55,800

 
15.3
 %
As adjusted
 
$
403,589

 
$
45,409

 
$
29,248

 
$
1.44

 
$
364,827

 
$
41,913

 
11.5
 %

 
 
Thirteen weeks ended August 27, 2016
 
 
Consolidated
 
Core Laundry Operations
(In thousands, except percentages)
 
Revenue
 
Operating Income
 
Net Income
 
Diluted
EPS
 
Revenue
 
Operating Income
 
Operating
Margin
As reported
 
$
363,766

 
$
56,756

 
$
35,494

 
$
1.74

 
$
331,749

 
$
54,189

 
16.3
 %
Settlement of environmental litigation
 

 
(15,861
)
 
(9,691
)
 
(0.48
)
 

 
(15,861
)
 
(4.8
)%
As adjusted
 
$
363,766

 
$
40,895

 
$
25,803

 
$
1.27

 
$
331,749

 
$
38,328

 
11.6
 %

 
 
Fifty-two weeks ended August 26, 2017
 
 
Consolidated
 
Core Laundry Operations
(In thousands, except percentages)
 
Revenue
 
Operating
Income
 
Net
Income
 
Diluted
EPS
 
Revenue
 
Operating
Income
 
Operating
Margin
As reported
 
$
1,590,958

 
$
110,283

 
$
70,196

 
$
3.44

 
$
1,442,149

 
$
96,307

 
6.7
%
Accelerated stock compensation expense
 

 
5,398

 
3,341

 
0.16

 

 
5,398

 
0.4
%
Impairment charge
 

 
55,800

 
34,144

 
1.68

 

 
55,800

 
3.9
%
As adjusted
 
$
1,590,958

 
$
171,481

 
$
107,681

 
$
5.28

 
$
1,442,149

 
$
157,505

 
10.9
%

 
 
Fifty-two weeks ended August 27, 2016
 
 
Consolidated
 
Core Laundry Operations
(In thousands, except percentages)
 
Revenue
 
Operating Income
 
Net Income
 
Diluted
EPS
 
Revenue
 
Operating Income
 
Operating
Margin
As reported
 
$
1,468,046

 
$
201,160

 
$
125,026

 
$
6.17

 
$
1,329,375

 
$
186,074

 
14.0
 %
Settlement of environmental litigation
 

 
(15,861
)
 
(9,691
)
 
(0.48
)
 

 
(15,861
)
 
(1.2
)%
As adjusted
 
$
1,468,046

 
$
185,299

 
$
115,335

 
$
5.69

 
$
1,329,375

 
$
170,213

 
12.8
 %

These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, GAAP and may be different from non-GAAP measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.