Summary

Unifirst Misses

Unifirst (UNF) reported 2nd Quarter February 2021 earnings of $1.71 per share on revenue of $449.8 million. The consensus earnings estimate was $1.67 per share on revenue of $446.4 million. The Earnings Whisper number was $1.73 per share. Revenue fell 3.2% compared to the same quarter a year ago.

The company said it expects fiscal 2021 earnings of $7.30 to $7.65 per share on revenue of $1.793 billion to $1.803 billion. The current consensus earnings estimate is $7.50 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 Second Quarter of Fiscal 2021

WILMINGTON, Mass., March 31, 2021 (GLOBE NEWSWIRE) -- UniFirst Corporation (NYSE: UNF) (the “Company,” “UniFirst” or “we”) today reported results for its second quarter ended February 27, 2021 as compared to the corresponding period in the prior fiscal year:

Q2 2021 Financial Highlights

Consolidated revenues for the second quarter decreased 3.2% to $449.8 million.
Operating income was $40.7 million, a decrease of 7.8%.
The quarterly tax rate decreased to 22.7% compared to 24.2% in the prior year.
Net income decreased to $32.6 million, or 6.0%.
Diluted earnings per share decreased to $1.71 from $1.82, or 6.0%.

Steven Sintros, UniFirst President and Chief Executive Officer, said, “During the quarter, our business and the economy continued to be impacted by the COVID-19 pandemic. In addition, our results were affected by the severe winter storms in Texas and the surrounding states during February. Taking into account these challenges, we are pleased with the solid results for our quarter. I want to thank our Team Partners again sincerely 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 3.4% to $398.2 million. This decrease was primarily due to the continued impact of the COVID-19 pandemic on our customers’ operations and wearer levels. In addition, severe winter storms in Texas and the surrounding states during February contributed to the decline.
Operating margin decreased to 8.9% from 9.3%. This segment’s profitability was negatively impacted by the pandemic-related decline in rental revenues on our cost structure, the impact of the severe winter storms in Texas and the surrounding states during February as well as higher healthcare claims costs. These items were partially offset by lower merchandise and travel-related costs.

Specialty Garments

Revenues for the quarter were $35.2 million, a decrease of 2.1%. This decrease was primarily due to decreased revenues from our U.S. and Canadian nuclear operations which were partially offset by higher direct sales in our cleanroom operations.
Operating margin increased to 14.9% from 12.9% a year ago. This increase was primarily due to a higher gross margin on direct sales as well as lower travel-related costs. These benefits were partially offset by higher payroll costs 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 $509.6 million as of February 27, 2021.
The Company had no long-term debt outstanding as of February 27, 2021.
Under its previously announced stock repurchase program, the Company repurchased 12,200 shares of common stock for a total of $2.3 million during its second fiscal quarter of 2021. As of February 27, 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 second quarter of fiscal 2021 and fiscal 2020 was 19.0 million and 19.1 million shares, respectively.

Financial Outlook

Mr. Sintros continued, “During the latter part of our second quarter, positive COVID-19 cases in the markets we serve declined sharply from the surge experienced over the holidays. This decline has created more stability in our operating environment even though economic activity continues to be at reduced levels including in the energy dependent markets that we service. Although the recent impacts of COVID-19 could continue to change at any time, this recent stability has improved our ability to project our results over the remainder of our fiscal year. At this time, we expect revenues for fiscal 2021 to be between $1.793 billion and $1.803 billion and fully diluted earnings per share to be between $7.30 and $7.65.”

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 February 27, 2021			Thirteen weeks ended February 29, 2020			Twenty-six weeks ended February 27, 2021			Twenty-six weeks ended February 29, 2020
Revenues	$	449,764		$	464,600		$	896,617		$	929,998

Operating expenses:
Cost of revenues (1)		289,455			301,422			565,255			590,738
Selling and administrative expenses (1)		93,329			93,080			182,032			183,608
Depreciation and amortization		26,287			25,971			52,595			51,430
Total operating expenses		409,071			420,473			799,882			825,776

Operating income		40,693			44,127			96,735			104,222

Other (income) expense:
Interest income, net		(863	)		(2,175	)		(1,431	)		(4,536	)
Other (income) expense, net		(584	)		539			165			1,067
Total other income, net		(1,447	)		(1,636	)		(1,266	)		(3,469	)

Income before income taxes		42,140			45,763			98,001			107,691
Provision for income taxes		9,555			11,083			23,520			24,769

Net income	$	32,585		$	34,680		$	74,481		$	82,922

Income per share – Basic:
Common Stock	$	1.80		$	1.90		$	4.10		$	4.55
Class B Common Stock	$	1.44		$	1.52		$	3.28		$	3.64

Income per share – Diluted:
Common Stock	$	1.71		$	1.82		$	3.91		$	4.34

Income allocated to – Basic:
Common Stock	$	27,349		$	29,129		$	62,520		$	69,654
Class B Common Stock	$	5,236		$	5,551		$	11,961		$	13,268

Income allocated to – Diluted:
Common Stock	$	32,585		$	34,680		$	74,481		$	82,922

Weighted average shares outstanding – Basic:
Common Stock		15,223			15,293			15,235			15,300
Class B Common Stock		3,643			3,643			3,643			3,643

Weighted average shares outstanding – Diluted:
Common Stock		19,037			19,105			19,032			19,114

(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)	February 27, 2021			August 29, 2020
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	509,563		$	474,838
Receivables, net		204,068			190,916
Inventories		110,701			106,269
Rental merchandise in service		155,410			154,278
Prepaid taxes		5,263			7,115
Prepaid expenses and other current assets		38,459			35,918

Total current assets		1,023,464			969,334

Property, plant and equipment, net		599,144			582,470
Goodwill		429,511			424,844
Customer contracts and other intangible assets, net		85,142			85,536
Deferred income taxes		543			522
Operating lease right-of-use assets, net		41,203			42,710
Other assets		96,751			93,611

Total assets	$	2,275,758		$	2,199,027

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	61,177		$	64,035
Accrued liabilities		152,171			132,965
Accrued taxes		—			527
Operating lease liabilities, current		12,783			12,569

Total current liabilities		226,131			210,096

Long-term liabilities:
Accrued liabilities		132,910			132,820
Accrued and deferred income taxes		87,229			85,721
Operating lease liabilities		28,378			29,261

Total liabilities		474,648			457,898

Shareholders’ equity:
Common Stock		1,523			1,525
Class B Common Stock		364			364
Capital surplus		86,979			86,645
Retained earnings		1,740,737			1,684,565
Accumulated other comprehensive loss		(28,493	)		(31,970	)

Total shareholders’ equity		1,801,110			1,741,129

Total liabilities and shareholders’ equity	$	2,275,758		$	2,199,027

Detail of Operating Results
(Unaudited)

Revenues

(In thousands, except percentages)	Thirteen weeks ended February 27, 2021		Thirteen weeks ended February 29, 2020		Dollar Change			Percent Change
Core Laundry Operations	$	398,235	$	412,192		(13,957	)		(3.4	)%
Specialty Garments		35,222		35,980		(758	)		(2.1	)%
First Aid		16,307		16,428		(121	)		(0.7	)%
Consolidated total	$	449,764	$	464,600	$	(14,836	)		(3.2	)%

(In thousands, except percentages)	Twenty-six weeks ended February 27, 2021		Twenty-six weeks ended February 29, 2020		Dollar Change			Percent Change

Core Laundry Operations	$	791,425	$	828,490	$	(37,065	)		(4.5	)%
Specialty Garments		73,356		69,382		3,974			5.7	%
First Aid		31,836		32,126		(290	)		(0.9	)%
Consolidated total	$	896,617	$	929,998	$	(33,381	)		(3.6	)%

Operating Income

(In thousands, except percentages)	Thirteen weeks ended February 27, 2021		Thirteen weeks ended February 29, 2020		Dollar Change			Percent Change
Core Laundry Operations	$	35,366	$	38,357	$	(2,991	)		(7.8	)%
Specialty Garments		5,234		4,627		607			13.1	%
First Aid		93		1,143		(1,050	)		(91.9	)%
Consolidated total	$	40,693	$	44,127	$	(3,434	)		(7.8	)%

(In thousands, except percentages)	Twenty-six weeks ended February 27, 2021		Twenty-six weeks ended February 29, 2020		Dollar Change			Percent Change
Core Laundry Operations	$	84,236	$	92,165	$	(7,929	)		(8.6	)%
Specialty Garments		12,393		9,506		2,887			30.4	%
First Aid		106		2,551		(2,445	)		(95.8	)%
Consolidated total	$	96,735	$	104,222	$	(7,487	)		(7.2	)%

Operating Margin

	Thirteen weeks ended February 27, 2021			Thirteen weeks ended February 29, 2020
Core Laundry Operations		8.9	%		9.3	%
Specialty Garments		14.9	%		12.9	%
First Aid		0.6	%		7.0	%
Consolidated total		9.0	%		9.5	%

	Twenty-six weeks ended February 27, 2021			Twenty-six weeks ended February 29, 2020
Core Laundry Operations		10.6	%		11.1	%
Specialty Garments		16.9	%		13.7	%
First Aid		0.3	%		7.9	%
Consolidated total		10.8	%		11.2	%

Consolidated Statements of Cash Flows
(Unaudited)

(In thousands)	Twenty-six weeks ended February 27, 2021			Twenty-six weeks ended February 29, 2020
Cash flows from operating activities:
Net income	$	74,481		$	82,922
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		52,595			51,430
Amortization of deferred financing costs		56			56
Share-based compensation		3,266			3,227
Accretion on environmental contingencies		224			269
Accretion on asset retirement obligations		492			463
Deferred income taxes		847			727
Other		19			16
Changes in assets and liabilities, net of acquisitions:
Receivables, less reserves		(12,511	)		(4,867	)
Inventories		(4,287	)		6,125
Rental merchandise in service		(338	)		6,839
Prepaid expenses and other current assets and Other assets		2,267			2,170
Accounts payable		(1,923	)		(5,815	)
Accrued liabilities		11,460			(1,752	)
Prepaid and accrued income taxes		1,368			(4,941	)
Net cash provided by operating activities		128,016			136,869

Cash flows from investing activities:
Acquisition of businesses, net of cash acquired		(7,018	)		(41,021	)
Capital expenditures, including capitalization of software costs		(66,855	)		(62,271	)
Proceeds from sale of assets		281			236
Net cash used in investing activities		(73,592	)		(103,056	)

Cash flows from financing activities:
Proceeds from exercise of share-based awards		3			75
Taxes withheld and paid related to net share settlement of equity awards		(2,643	)		(3,281	)
Repurchase of Common Stock		(9,534	)		(14,203	)
Payment of cash dividends		(9,069	)		(6,609	)
Net cash used in financing activities		(21,243	)		(24,018	)

Effect of exchange rate changes		1,544			187

Net increase in cash, cash equivalents and short-term investments		34,725			9,982
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	$	509,563		$	395,323

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

Source: UniFirst Corporation