Summary

Unifirst Beats

Unifirst (UNF) reported 3rd Quarter May 2021 earnings of $2.21 per share on revenue of $464.3 million. The consensus earnings estimate was $1.84 per share on revenue of $454.4 million. The Earnings Whisper number was $1.94 per share. Revenue grew 4.2% on a year-over-year basis.

The company said it expects fiscal 2021 earnings of $7.80 to $8.00 per share on revenue of $1.81 billion to $1.817 billion. The company's previous guidance was earnings of $7.30 to $7.65 per share on revenue of $1.793 billion to $1.803 billion and the current consensus earnings estimate is $7.64 per share on revenue of $1.80 billion for the year ending August 31, 2021.

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.

Earnings Release

UniFirst Announces Financial Results for the Third Quarter of Fiscal 2021

WILMINGTON, Mass., June 30, 2021 (GLOBE NEWSWIRE) -- UniFirst Corporation (NYSE: UNF) (the “Company,” “UniFirst” or “we”) today reported results for its third quarter ended May 29, 2021 as compared to the corresponding period in the prior fiscal year:

Q3 2021 Financial Highlights

Consolidated revenues for the third quarter increased 4.2% to $464.3 million.
Operating income was $54.2 million, an increase of 95.5%.
The quarterly tax rate increased to 22.9% compared to 21.8% in the prior year.
Net income increased to $42.0 million, or 97.4%.
Diluted earnings per share increased to $2.21 from $1.12, or 97.3%.

Steven Sintros, UniFirst President and Chief Executive Officer, said, “For over a year, our Team Partners have continued to put forth tremendous efforts in the face of the many obstacles created by the pandemic. They have worked extremely hard to take care of each other and our customers during these challenging times and I want to personally thank them for their extraordinary performance.”

Segment Reporting Highlights

Core Laundry Operations

Revenues for the quarter increased 5.3% to $409.0 million primarily driven by the COVID-19 pandemic significantly impacting our customers’ operations and wearer levels in the prior year comparable period. This increase was partially offset by a large direct sale of $20.1 million also in the prior year.
Operating margin increased to 11.2% from 5.1%. The increase was primarily driven by several items affecting our prior year comparable period, including the impact of the decline in rental revenues on our cost structure, higher cost of revenues related to the large $20.1 million direct sale, higher bad debt expense and additional costs the Company incurred responding to the COVID-19 pandemic.

Specialty Garments

Revenues for the quarter were $38.2 million, an increase of 5.7%. This increase was primarily due to growth in our cleanroom operations as well as growth in European nuclear operations.
Operating margin increased to 21.7% from 17.6% a year ago. This increase was primarily due to lower merchandise costs and bad debt expense as percentage of revenue as well as costs incurred in the prior year responding to the COVID-19 pandemic. These benefits were partially offset by higher healthcare and payroll-related costs as a percentage of revenue.
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 $535.0 million as of May 29, 2021.
The Company had no long-term debt outstanding as of May 29, 2021.
In the third fiscal quarter of 2021, the Company did not purchase any shares of common stock under its previously announced $100.0 million stock repurchase program. As of May 29, 2021, the Company had repurchased a total of 368,117 shares of common stock for a total of $61.8 million under the program.
Weighted average shares outstanding – Diluted for the third quarter of fiscal 2021 and fiscal 2020 were 19.1 million and 19.0 million shares, respectively.

Financial Outlook

Mr. Sintros continued, “Based on our results to date as well as our outlook for the remainder of the year, we now expect our revenues for fiscal 2021 to be between $1.810 billion and $1.817 billion and fully diluted earnings per share to be between $7.80 and $8.00. Increased business activity from a recovering economy is a welcome sight. However, as we look forward to fiscal 2022, we do expect our margins to be pressured by the current inflationary environment as well as a rebound of certain costs that trended lower during the pandemic.”

Conference Call Information

UniFirst Corporation 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,” “assume,” “strive,” 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 May 29, 2021			Thirteen weeks ended May 30, 2020			Thirty-nine weeks ended May 29, 2021			Thirty-nine weeks ended May 30, 2020
Revenues	$	464,323		$	445,518		$	1,360,940		$	1,375,516

Operating expenses:
Cost of revenues (1)		286,605			303,223			851,860			893,961
Selling and administrative expenses (1)		96,976			88,405			279,008			272,013
Depreciation and amortization		26,583			26,182			79,178			77,612
Total operating expenses		410,164			417,810			1,210,046			1,243,586

Operating income		54,159			27,708			150,894			131,930

Other (income) expense:
Interest income, net		(671	)		(1,054	)		(2,102	)		(5,590	)
Other expense, net		348			1,556			513			2,623
Total other (income) expense, net		(323	)		502			(1,589	)		(2,967	)

Income before income taxes		54,482			27,206			152,483			134,897
Provision for income taxes		12,466			5,921			35,986			30,690

Net income	$	42,016		$	21,285		$	116,497		$	104,207

Income per share – Basic:
Common Stock	$	2.31		$	1.17		$	6.42		$	5.73
Class B Common Stock	$	1.85		$	0.94		$	5.13		$	4.58

Income per share – Diluted:
Common Stock	$	2.21		$	1.12		$	6.12		$	5.46

Income allocated to – Basic:
Common Stock	$	35,270		$	17,871		$	97,792		$	87,519
Class B Common Stock	$	6,746		$	3,414		$	18,705		$	16,688

Income allocated to – Diluted:
Common Stock	$	42,016		$	21,285		$	116,497		$	104,207

Weighted average shares outstanding – Basic:
Common Stock		15,238			15,255			15,238			15,285
Class B Common Stock		3,643			3,643			3,643			3,643

Weighted average shares outstanding – Diluted:
Common Stock		19,051			18,995			19,041			19,074

(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)	May 29, 2021			August 29, 2020
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	535,005		$	474,838
Receivables, net		200,136			190,916
Inventories		120,337			106,269
Rental merchandise in service		168,234			154,278
Prepaid taxes		9,264			7,115
Prepaid expenses and other current assets		37,171			35,918

Total current assets		1,070,147			969,334

Property, plant and equipment, net		606,663			582,470
Goodwill		429,762			424,844
Customer contracts and other intangible assets, net		85,910			85,536
Deferred income taxes		553			522
Operating lease right-of-use assets, net		40,423			42,710
Other assets		102,463			93,611

Total assets	$	2,335,921		$	2,199,027

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	69,553		$	64,035
Accrued liabilities		155,729			132,965
Accrued taxes		—			527
Operating lease liabilities, current		13,002			12,569

Total current liabilities		238,284			210,096

Long-term liabilities:
Accrued liabilities		133,417			132,820
Accrued and deferred income taxes		91,066			85,721
Operating lease liabilities		27,955			29,261

Total liabilities		490,722			457,898

Shareholders’ equity:
Common Stock		1,524			1,525
Class B Common Stock		364			364
Capital surplus		87,545			86,645
Retained earnings		1,778,212			1,684,565
Accumulated other comprehensive loss		(22,446	)		(31,970	)

Total shareholders’ equity		1,845,199			1,741,129

Total liabilities and shareholders’ equity	$	2,335,921		$	2,199,027

Detail of Operating Results
(Unaudited)

Revenues

(In thousands, except percentages)	Thirteen weeks ended May 29, 2021		Thirteen weeks ended May 30, 2020		Dollar Change			Percent Change
Core Laundry Operations	$	409,031	$	388,411		20,620			5.3	%
Specialty Garments		38,236		36,163		2,073			5.7	%
First Aid		17,056		20,944		(3,888	)		(18.6	)%
Consolidated total	$	464,323	$	445,518	$	18,805			4.2	%

(In thousands, except percentages)	Thirty-nine weeks ended May 29, 2021		Thirty-nine weeks ended May 30, 2020		Dollar Change			Percent Change

Core Laundry Operations	$	1,200,456	$	1,216,901	$	(16,445	)		(1.4	)%
Specialty Garments		111,592		105,545		6,047			5.7	%
First Aid		48,892		53,070		(4,178	)		(7.9	)%
Consolidated total	$	1,360,940	$	1,375,516	$	(14,576	)		(1.1	)%

Operating Income

(In thousands, except percentages)	Thirteen weeks ended May 29, 2021		Thirteen weeks ended May 30, 2020		Dollar Change			Percent Change
Core Laundry Operations	$	45,634	$	19,691	$	25,943			131.8	%
Specialty Garments		8,300		6,380		1,920			30.1	%
First Aid		225		1,637		(1,412	)		(86.3	)%
Consolidated total	$	54,159	$	27,708	$	26,451			95.5	%

(In thousands, except percentages)	Thirty-nine weeks ended May 29, 2021		Thirty-nine weeks ended May 30, 2020		Dollar Change			Percent Change
Core Laundry Operations	$	129,870	$	111,856	$	18,014			16.1	%
Specialty Garments		20,693		15,886		4,807			30.3	%
First Aid		331		4,188		(3,857	)		(92.1	)%
Consolidated total	$	150,894	$	131,930	$	18,964			14.4	%

Operating Margin

	Thirteen weeks ended May 29, 2021			Thirteen weeks ended May 30, 2020
Core Laundry Operations		11.2	%		5.1	%
Specialty Garments		21.7	%		17.6	%
First Aid		1.3	%		7.8	%
Consolidated total		11.7	%		6.2	%

	Thirty-nine weeks ended May 29, 2021			Thirty-nine weeks ended May 30, 2020
Core Laundry Operations		10.8	%		9.2	%
Specialty Garments		18.5	%		15.1	%
First Aid		0.7	%		7.9	%
Consolidated total		11.1	%		9.6	%

Consolidated Statements of Cash Flows
(Unaudited)

(In thousands)	Thirty-nine weeks ended May 29, 2021			Thirty-nine weeks ended May 30, 2020
Cash flows from operating activities:
Net income	$	116,497		$	104,207
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		79,178			77,612
Amortization of deferred financing costs		85			84
Share-based compensation		5,193			4,617
Accretion on environmental contingencies		336			403
Accretion on asset retirement obligations		740			694
Deferred income taxes		2,025			81
Other		(199	)		36
Changes in assets and liabilities, net of acquisitions:
Receivables, less reserves		(7,657	)		4,517
Inventories		(13,871	)		(3,570	)
Rental merchandise in service		(12,169	)		23,900
Prepaid expenses and other current assets and Other assets		5,433			3,669
Accounts payable		4,019			(17,846	)
Accrued liabilities		11,636			5,246
Prepaid and accrued income taxes		(3,723	)		1,782
Net cash provided by operating activities		187,523			205,432

Cash flows from investing activities:
Acquisition of businesses, net of cash acquired		(7,128	)		(41,098	)
Capital expenditures, including capitalization of software costs		(96,645	)		(91,155	)
Proceeds from sale of assets		551			261
Net cash used in investing activities		(103,222	)		(131,992	)

Cash flows from financing activities:
Payment of deferred financing costs		(822	)		—
Proceeds from exercise of share-based awards		3			75
Taxes withheld and paid related to net share settlement of equity awards		(4,003	)		(3,423	)
Repurchase of Common Stock		(9,534	)		(21,745	)
Payment of cash dividends		(13,610	)		(11,159	)
Net cash used in financing activities		(27,966	)		(36,252	)

Effect of exchange rate changes		3,832			(1,276	)

Net increase in cash, cash equivalents and short-term investments		60,167			35,912
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	$	535,005		$	421,253

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

Source: UniFirst Corporation