UNF
$169.80
Unifirst
($.70)
(.41%)
Earnings Details
1st Quarter November 2017
Wednesday, January 3, 2018 8:00:49 AM
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Summary

Unifirst Beats

Unifirst (UNF) reported 1st Quarter November 2017 earnings of $1.60 per share on revenue of $415.8 million. The consensus earnings estimate was $1.41 per share on revenue of $406.5 million. The Earnings Whisper number was $1.45 per share. Revenue grew 7.7% on a year-over-year basis.

The company said it expects fiscal 2018 earnings of $5.10 to $5.30 per share on revenue of $1.630 billion to $1.650 billion. The company's previous guidance was earnings of $5.00 to $5.30 per share on revenue of $1.625 billion to $1.645 billion and the current consensus earnings estimate is $5.27 per share on revenue of $1.64 billion for the year ending August 31, 2018.

UniFirst Corp together with its subsidiaries is engaged in designing, manufacturing, personalizing, renting, cleaning, delivering and selling uniforms & protective clothing, including shirts, jackets, coveralls, lab coats and specialized protective wear.

Results
Reported Earnings
$1.60
Earnings Whisper
$1.45
Consensus Estimate
$1.41
Reported Revenue
$415.8 Mil
Revenue Estimate
$406.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

UniFirst Announces Financial Results for the First Quarter of Fiscal 2018

UniFirst Corporation (UNF) today announced results for its first quarter which ended November 25, 2017. Revenues for the quarter were $415.8 million, up 7.7% from $386.1 million in the same year ago period. Net income in the quarter was $34.2 million ($1.67 per diluted share), compared to net income of $28.2 million ($1.38 per diluted share) in the first quarter of fiscal 2017.

During our first quarter of fiscal 2018 we adopted Accounting Standards Update 2016-09 (ASU 2016-09), Improvements to Employee Share-Based Payment Accounting. Under ASU 2016-09, excess tax benefits and deficiencies associated with employee share-based payments are no longer recognized as additional paid-in capital on the balance sheet but instead recognized directly to income tax expense or benefit in the income statement in the reporting period in which they occur. The net benefit in our first quarter to fully diluted earnings per share from the adoption of ASU 2016-09 was $0.07. The full year 2018 outlook provided by the Company in its October 2017 earnings release did not include any expected benefit from this change in accounting.

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

Our Core Laundry Operations produced first quarter revenues of $373.8 million, up 6.2% from those in the first quarter of the prior year. Adjusting for the estimated effect of acquisitions, primarily from the September 2016 purchase of Arrow Uniform, as well as a stronger Canadian dollar, Core Laundry revenues grew 4.5%. Core Laundry operating income was $46.4 million during the quarter, a 6.1% increase from the first quarter of the prior year. The Core Laundry operating margin in the first quarter of 2018 was 12.4%, consistent with the same period a year ago. The operating margin comparison was positively impacted by lower merchandise costs as a percentage of revenues as well as lower stock compensation expense compared to the first quarter a year ago. These positive comparisons were offset by higher costs related to healthcare claims, service and administrative payroll and legal and environmental contingencies.

Revenues in the first quarter of fiscal 2018 for our Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $28.4 million, up 27.2% in the quarter compared to the same period a year ago. Operating income was $4.5 million compared to $1.2 million in the prior year first quarter. The year to year improvement was primarily due to increased outages and project-based activity in the US and Canada as well as gains from this segment’s European operations. This segment’s results can vary significantly due to seasonality and the timing of reactor outages and projects.

Our first quarter profit comparison to the prior period also benefited from Other Income which was $0.8 million higher than the same quarter a year ago, primarily the result of higher interest income.

UniFirst continues to maintain a strong balance sheet with no long-term debt and significant cash balances. Cash, cash equivalents and short-term investments increased $24.3 million to $374.0 million at the end of the first quarter of fiscal 2018.

Outlook

Mr. Sintros continued, "At this time, we expect that our fiscal 2018 revenues will be between $1.630 billion and $1.650 billion and full year diluted earnings per share will be between $5.10 and $5.30. This outlook includes the $0.07 per share impact of the adoption of ASU 2016-9 in our first quarter. Our outlook does not include any further tax benefits related to the adoption of this ASU for the remainder of the fiscal year. In addition, while we expect our future results to substantially benefit from the recent U.S. tax reform, our earnings per share guidance also does not reflect this impact as our analysis is preliminary."

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 (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, the anticipated impact of recent U.S. tax reform on our business, results of operations and financial condition, 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 26, 2017 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
Thirteen
weeks ended
weeks ended
November 25,
November 26,
2017
2016
Revenues
$
415,778
$
386,108
Operating expenses:
Cost of revenues (1)
253,650
238,765
Selling and administrative expenses (1)
87,510
79,446
Depreciation and amortization
22,707
22,140
Total operating expenses
363,867
340,351
Income from operations
51,911
45,757
Other (income) expense:
Interest income, net
(1,276
)
(801
)
Other expense, net
154
494
Total other income, net
(1,122
)
(307
)
Income before income taxes
53,033
46,064
Provision for income taxes
18,827
17,850
Net income
$
34,206
$
28,214
Income per share - Basic:
Common Stock
$
1.77
$
1.46
Class B Common Stock
$
1.42
$
1.17
Income per share - Diluted:
Common Stock
$
1.67
$
1.38
Income allocated to - Basic:
Common Stock
$
27,384
$
22,342
Class B Common Stock
$
6,822
$
5,668
Income allocated to - Diluted:
Common Stock
$
34,206
$
28,020
Weighted average number of shares outstanding - Basic:
Common Stock
15,462
15,285
Class B Common Stock
4,816
4,847
Weighted average number of shares outstanding - Diluted:
Common Stock
20,434
20,249

(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)
November 25,
August 26,
2017
2017
Assets
Current assets:
Cash, cash equivalents and short-term investments
$
374,036
$
349,752
Receivables, net
200,148
187,174
Inventories
81,972
79,068
Rental merchandise in service
151,354
151,340
Prepaid taxes
12,969
29,968
Prepaid expenses and other current assets
22,241
16,924
Total current assets
842,720
814,226
Property, plant and equipment, net
524,130
525,115
Goodwill
377,104
376,110
Customer contracts and other intangible assets, net
69,456
71,744
Deferred income taxes
407
394
Other assets
31,013
31,539
$
1,844,830
$
1,819,128
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
$
63,901
$
64,691
Accrued liabilities
104,099
112,236
Accrued taxes
--
921
Total current liabilities
168,000
177,848
Long-term liabilities:
Accrued liabilities
107,481
106,736
Accrued and deferred income taxes
83,741
81,352
Total long-term liabilities
191,222
188,088
Shareholders’ equity:
Common Stock
1,547
1,545
Class B Common Stock
482
482
Capital surplus
87,844
86,245
Retained earnings
1,419,180
1,386,438
Accumulated other comprehensive loss
(23,445
)
(21,518
)
Total shareholders’ equity
1,485,608
1,453,192
$
1,844,830
$
1,819,128

UniFirst Corporation and Subsidiaries

Detail of Operating Results

(Unaudited)

Revenues

(In thousands, except percentages)
Thirteen
Thirteen
Dollar
Percent
weeks ended
weeks ended
Change
Change
November 25,
November 26,
2017
2016
Core Laundry Operations
$
373,796
$
351,843
$
21,953
6.2
%
Specialty Garments
28,427
22,356
6,071
27.2 %
First Aid
13,555
11,909
1,646
13.8 %
Consolidated total
$
415,778
$
386,108
$
29,670
7.7
%

Income from Operations

(In thousands, except percentages)
Thirteen
Thirteen
Dollar
Percent
weeks ended
weeks ended
Change
Change
November 25,
November 26,
2017
2016
Core Laundry Operations
$
46,358
$
43,673
$
2,685
6.1
%
Specialty Garments
4,477
1,151
3,326
289.1 %
First Aid
1,076
933
143
15.3
%
Consolidated total
$
51,911
$
45,757
$
6,154
13.4
%

UniFirst Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)
Thirteen
Thirteen
weeks ended
weeks ended
November 25,
November 26,
2017
2016
Cash flows from operating activities:
Net income
$
34,206
$
28,214
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation
19,540
18,500
Amortization of intangible assets
3,167
3,640
Amortization of deferred financing costs
28
28
Share-based compensation
1,114
2,015
Accretion on environmental contingencies
173
150
Accretion on asset retirement obligations
240
205
Deferred income taxes
2,031
(746
)
Changes in assets and liabilities, net of acquisitions:
Receivables, less reserves
(12,879
)
(13,112
)
Inventories
(2,882
)
7,526
Rental merchandise in service
(82
)
152
Prepaid expenses and other current assets and Other assets
(4,901
)
9,288
Accounts payable
(1,092
)
(1,113
)
Accrued liabilities
(7,456
)
(8,837
)
Prepaid and accrued income taxes
16,420
17,589
Net cash provided by operating activities
47,627
63,499
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired
(2,671
)
(120,391
)
Capital expenditures
(19,033
)
(18,233
)
Other
318
281
Net cash used in investing activities
(21,386
)
(138,343
)
Cash flows from financing activities:
Proceeds from exercise of share-based awards, including excess tax benefits
267
929
Taxes withheld and paid related to net share settlement of equity awards
(522
)
(566
)
Payment of cash dividends
(726
)
(724
)
Net cash used in financing activities
(981
)
(361
)
Effect of exchange rate changes
(976
)
(2,471
)
Net increase (decrease) in cash, cash equivalents and short-term investments
24,284
(77,676
)
Cash, cash equivalents and short-term investments at beginning of period
349,752
363,795
Cash, cash equivalents and short-term investments at end of period
$
374,036
$
286,119

CONTACT: Steven S. Sintros, President & CEO

UniFirst Corporation

68 Jonspin Road

Wilmington, MA 01887

Phone: 978-658-8888

Fax: 978-988-0659

Email: ssintros@UniFirst.com

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