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UniFirst Announces Financial Results for the First Quarter of Fiscal 2021

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UniFirst Corp.
·12 min read
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WILMINGTON, Mass., Jan. 06, 2021 (GLOBE NEWSWIRE) -- UniFirst Corporation (NYSE: UNF) (the “Company”) today reported results for its first quarter ended November 28, 2020 as compared to the corresponding period in the prior fiscal year:

Q1 2021 Financial Highlights

  • Consolidated revenues for the first quarter decreased 4.0% to $446.9 million.

  • Operating income was $56.0 million, a decrease of 6.7%.

  • The quarterly tax rate increased to 25.0% compared to 22.1% in prior year.

  • Net income decreased to $41.9 million, or 13.2%.

  • Diluted earnings per share decreased to $2.20 from $2.52, or 12.7%.

Steven Sintros, UniFirst President and Chief Executive Officer, said, “Overall, we are pleased with our first quarter results which were achieved despite the impact that the COVID-19 pandemic continues to have on our business and the economy as a whole. As a Company, our top priorities continue to be the safety of our employee Team Partners as well as servicing our customers, many of whom are critical to keeping our communities up and running. I want to again sincerely thank our Team Partners for the tremendous effort they continue to put forth ensuring that they are taking care of each other and our customers during these challenging times. They truly continue to deliver in every way.”

Segment Reporting Highlights

Core Laundry Operations

  • Revenues for the quarter decreased 5.6% to $393.2 million. This decrease was primarily due to the continued impact of the COVID-19 pandemic on our customers’ operations and wearer levels.

  • Operating margin decreased to 12.4% from 12.9%. This segment’s profitability was negatively impacted by the decline in rental revenues on our cost structure, which was partially offset by lower travel-related, energy and healthcare costs during the quarter.

Specialty Garments

  • Revenues for the quarter were $38.1 million, an increase of 14.2%. This increase was primarily due to higher direct sales and project-related work in the U.S. and Canadian nuclear operations as well as growth in our cleanroom operations.

  • Operating margin increased to 18.8% from 14.6% a year ago. This increase was primarily due to lower production and delivery costs as a percentage of revenues as well as lower travel-related, energy and healthcare costs. These decreases were partially offset by higher merchandise expense as a percentage of revenues.

  • Specialty Garments consists of nuclear decontamination and cleanroom operations, and its results can vary significantly due to seasonality and the timing of reactor outages and projects.

Balance Sheet and Capital Allocation

  • Cash, cash equivalents and short-term investments totaled $473.0 million as of November 28, 2020.

  • The Company had no long-term debt outstanding as of November 28, 2020.

  • Under its previously announced stock repurchase program, the Company repurchased 41,000 shares of common stock for a total of $7.2 million during its first fiscal quarter of 2021. As of November 28, 2020, the Company had repurchased a total of 355,917 shares of common stock for a total of $59.5 million under the program.

  • Weighted average shares outstanding – Diluted for the first quarter of fiscal 2021 and fiscal 2020 was 19.0 million and 19.1 million shares, respectively.

Financial Outlook

Mr. Sintros continued, “At this time, our overall outlook in the quarters ahead remains uncertain. Recent increases in positive COVID-19 cases have caused certain states, provinces and municipalities to reimplement temporary restrictions on businesses. The impact of these or further restrictions as well as the potential positive impact of a broader vaccine distribution are currently difficult to project. As a result, we will not be providing further guidance at this time. Our solid balance sheet positions us well to meet the ongoing challenges presented by COVID-19 while continuing to invest in growth and strengthen our business.”

Conference Call Information

UniFirst will hold a conference call today at 9:00 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 260 service locations, over 300,000 customer locations, and 14,000-plus employee Team Partners, the Company outfits nearly 2 million workers each business day. For more information, contact UniFirst at 800.455.7654 or visit UniFirst.com.

Forward-Looking Statements Disclosure

This public announcement contains forward-looking statements within the meaning of the federal securities laws 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,” “strategy,” “objective,” “positions,” “assume,” “strive,” “maintain,” 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, uncertainties caused by adverse economic conditions, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, and their impact on our customers’ businesses and workforce levels, disruptions of our business and operations, including limitations on, or closures of, our facilities, or the business and operations of our customers or suppliers in connection with extraordinary events or circumstances such as the COVID-19 pandemic, uncertainties regarding our 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, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly 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, which such supply could be severely disrupted as a result of extraordinary events or circumstances such as the COVID-19 pandemic, any loss of key management or other personnel, increased costs as a result of any 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 negative effect on our business from sharply depressed oil and natural gas prices, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, the continuing increase in domestic healthcare costs, increased workers’ compensation claim costs, increased healthcare claim costs, including as a result of extraordinary events or circumstances such as the COVID-19 pandemic, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, political or other instability, supply chain disruption or infection among our employees in Mexico and Nicaragua where our principal garment manufacturing plants are located, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, our ability to properly and efficiently design, construct, implement and operate a new customer relationship management (“CRM”) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, additional professional and internal costs necessary for compliance with any changes in Securities and Exchange Commission, New York Stock Exchange and accounting rules, strikes and unemployment levels, our efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy, the impact of foreign trade policies and tariffs or other impositions on imported goods on our business, results of operations and financial condition, general economic conditions, our ability to successfully implement our business strategies and processes, including our capital allocation strategies and the other factors described under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended August 29, 2020, “Item 1.A. Risk Factors” and elsewhere in our Quarterly Reports on Form 10-Q 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 they are made.


Consolidated Statements of Income
(Unaudited)

(In thousands, except per share data)

Thirteen weeks ended November
28, 2020

Thirteen weeks ended November
30, 2019

Revenues

$

446,853

$

465,398

Operating expenses:

Cost of revenues (1)

275,800

289,316

Selling and administrative expenses (1)

88,703

90,528

Depreciation and amortization

26,308

25,459

Total operating expenses

390,811

405,303

Operating income

56,042

60,095

Other (income) expense:

Interest income, net

(568

)

(2,361

)

Other expense, net

749

528

Total other (income) expense, net

181

(1,833

)

Income before income taxes

55,861

61,928

Provision for income taxes

13,965

13,686

Net income

$

41,896

$

48,242

Income per share – Basic:

Common Stock

$

2.31

$

2.65

Class B Common Stock

$

1.85

$

2.12

Income per share – Diluted:

Common Stock

$

2.20

$

2.52

Income allocated to – Basic:

Common Stock

$

35,171

$

40,526

Class B Common Stock

$

6,725

$

7,716

Income allocated to – Diluted:

Common Stock

$

41,896

$

48,242

Weighted average shares outstanding – Basic:

Common Stock

15,247

15,308

Class B Common Stock

3,643

3,643

Weighted average shares outstanding – Diluted:

Common Stock

19,019

19,123

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


Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)

November 28, 2020

August 29, 2020

Assets

Current assets:

Cash, cash equivalents and short-term investments

$

473,010

$

474,838

Receivables, net

209,916

190,916

Inventories

104,525

106,269

Rental merchandise in service

155,100

154,278

Prepaid taxes

3,612

7,115

Prepaid expenses and other current assets

40,661

35,918

Total current assets

986,824

969,334

Property, plant and equipment, net

598,719

582,470

Goodwill

424,881

424,844

Customer contracts and other intangible assets, net

85,150

85,536

Deferred income taxes

522

522

Operating lease right-of-use assets, net

42,033

42,710

Other assets

96,031

93,611

Total assets

$

2,234,160

$

2,199,027

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

$

60,268

$

64,035

Accrued liabilities

138,693

132,965

Accrued taxes

527

Operating lease liabilities, current

12,731

12,569

Total current liabilities

211,692

210,096

Long-term liabilities:

Accrued liabilities

133,600

132,820

Accrued and deferred income taxes

86,642

85,721

Operating lease liabilities

28,874

29,261

Total liabilities

460,808

457,898

Shareholders’ equity:

Common Stock

1,522

1,525

Class B Common Stock

364

364

Capital surplus

87,210

86,645

Retained earnings

1,714,937

1,684,565

Accumulated other comprehensive loss

(30,681

)

(31,970

)

Total shareholders’ equity

1,773,352

1,741,129

Total liabilities and shareholders’ equity

$

2,234,160

$

2,199,027

Detail of Operating Results
(Unaudited)

Revenues

(In thousands, except percentages)

Thirteen weeks ended
November 28, 2020

Thirteen weeks ended
November 30, 2019

Dollar
Change

Percent
Change

Core Laundry Operations

393,190

416,298

(23,108

)

(5.6

)%

Specialty Garments

38,134

33,402

4,732

14.2

%

First Aid

15,529

15,698

(169

)

(1.1

)%

Consolidated total

$

446,853

$

465,398

$

(18,545

)

(4.0

)%

Operating Income

(In thousands, except percentages)

Thirteen weeks ended
November 28, 2020

Thirteen weeks ended
November 30, 2019

Dollar
Change

Percent
Change

Core Laundry Operations

$

48,870

$

53,808

$

(4,938

)

(9.2

)%

Specialty Garments

7,159

4,879

2,280

46.7

%

First Aid

13

1,408

(1,395

)

(99.1

)%

Consolidated total

$

56,042

$

60,095

$

(4,053

)

(6.7

)%

Operating Margin

Thirteen weeks ended November 28, 2020

Thirteen weeks ended November 30, 2019

Core Laundry Operations

12.4

%

12.9

%

Specialty Garments

18.8

%

14.6

%

First Aid

0.1

%

9.0

%

Consolidated total

12.5

%

12.9

%

Consolidated Statements of Cash Flows
(Unaudited)

(In thousands)

Thirteen weeks ended
November 28, 2020

Thirteen weeks ended
November 30, 2019

Cash flows from operating activities:

Net income

$

41,896

$

48,242

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

26,308

25,459

Amortization of deferred financing costs

28

28

Loss on sale of property, plant & equipment

5

Share-based compensation

1,622

1,575

Accretion on environmental contingencies

112

134

Accretion on asset retirement obligations

245

232

Deferred income taxes

242

245

Other

28

5

Changes in assets and liabilities, net of acquisitions:

Receivables, less reserves

(18,875

)

(12,771

)

Inventories

1,783

1,195

Rental merchandise in service

(684

)

1,370

Prepaid expenses and other current assets and Other assets

(2,812

)

(2,074

)

Accounts payable

(3,127

)

(5,031

)

Accrued liabilities

2,876

(2,678

)

Prepaid and accrued income taxes

3,094

(3,497

)

Net cash provided by operating activities

52,741

52,434

Cash flows from investing activities:

Acquisition of businesses, net of cash acquired

(603

)

(39,286

)

Capital expenditures, including capitalization of software costs

(41,836

)

(28,975

)

Proceeds from sale of assets

15

61

Net cash used in investing activities

(42,424

)

(68,200

)

Cash flows from financing activities:

Proceeds from exercise of share-based awards

1

74

Taxes withheld and paid related to net share settlement of equity awards

(834

)

(1,570

)

Repurchase of Common Stock

(7,216

)

(9,973

)

Payment of cash dividends

(4,541

)

(2,056

)

Net cash used in financing activities

(12,590

)

(13,525

)

Effect of exchange rate changes

445

538

Net decrease in cash, cash equivalents and short-term investments

(1,828

)

(28,753

)

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

474,838

385,341

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

$

473,010

$

356,588

Investor Relations Contact
Shane O’Connor, Executive Vice President & CFO
UniFirst Corporation
978-658-8888
shane_oconnor@unifirst.com